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Dawn raids on gas market
In October, the European Commission carried out raids in several member states in connection with suspicions that exclusionary behaviour in the form of excessive pricing, obstruction of network access, market partitioning and the creation of barriers to switching suppliers is taking place in the gas market.
The European Commission is investigating the European Payments Council (EPC), a group of European banks which is involved in the development of standards and practices for payments over the internet. The Commission is concerned that e-payments providers who not members of the EPC may face barriers to entry to the market.
Individuals and companies fined for German wood products cartel
German wood manufacturers Glunz, Pfleiderer and Kronoply have been fined a total of 42 million Euros. Ten individuals have also been fined for participation in a cartel in the market for particleboard and other engineered wood. It is thought that the majority of the companies involved took advantage of settlement and leniency opportunities.
Canal Plus finds out that it is not 'fine' to
fail to implement competition remedies in full
The French competition regulator has withdrawn its clearance of Canal Plus' merger with rival TV company TPS, requiring Canal Plus to re-notify the merger within one month, and imposing a fine of €30 million for failure to fully implement merger remedies which were a condition of the clearance. In particular, Canal Plus's failure to make channels and content available to distribution companies, particularly internet providers, went to the heart of the remedies.
Fine for financial investors in Austria
The Austrian Cartel Court recently imposed a €200,000 fine against a private equity company active in the motor vehicle sector for failure to observe obligations for the clearance of a transaction by the Austrian competition authorities. This can be dangerous territory for investors since, in Austria, apart from the fines, the whole transaction may be deemed ineffective if the notifiable concentration is implemented prior to clearance or not notified at all.
BAA to sell Edinburgh Airport
The Competition Commission recently accepted final undertakings from BAA in respect of the remedies package imposed following the BAA market investigation. BAA have chosen to sell Edinburgh Airport rather than Glasgow Airport, and are said to be preparing for the sale and hoping to find a buyer by summer 2012.
This is not the end of the line for the long running story as proceedings continue before the Competition Appeal Tribunal to determine whether there has been a material change of circumstance which would affect the Competition Commission's decision that Stansted Airport must also be divested.
A market investigation by the UK Competition Commission can be the beginning of a long and complex process with significant consequences for businesses. The precursor to a market investigation is a market study by the OFT. Currently, the OFT is engaged in market studies into: aggregates; dentistry; organic waste; and private healthcare.
Audit market investigation kicks off
On 21 October, the OFT announced that following consultation, it had decided to refer to the market for the supply of statutory audit services to the Competition Commission for further investigation. As part of the consultation process the OFT held discussions with various audit service providers, customers and regulatory bodies. The OFT found that in 2010 99% of fees paid by FTSE 100 companies for the services of auditors were paid to one of the "big four" audit firms, PwC, KPMG, Deloitte and Ernst & Young with the average annual switching rate sitting at a miniscule 2.3%.
Although the Competition Commission's work may overlap with work being undertaken by the European Commission to reform the audit market, the OFT believes that the parallel investigation is necessary and worthwhile. It has said that the Competition Commission may be able to make useful inputs to the EU legislative process and will also be able to look specifically at UK concerns outwith the Commission's remit.
In addition to its potential to affect the business of the big four audit firms, the market investigation may present opportunities for small and mid-tier firms who are looking to break into the audit market.
On 30 November 2011 the European Commission published proposals for a Regulation on the quality of audits of public-interest ethics and a Directive to enhance the single market for statutory audits. The Commission hopes to encourage new players to enter the top stage of the audit market by introducing European certification of audit firms' capacity to undertake audits of large listed entitites.
Motor insurers deal with OFT scrutiny
Two aspects of the motor insurance market are currently under scrutiny by the OFT. It appears that an investigation into the potential exchange of pricing data may be coming to a close, while recent increases in motor insurance premiums are coming under scrutiny.
Following an initial investigation focussed on the potential exchange of pricing data between several insurers via a subscription analysis tool, and consultation with the parties, the OFT has proposed that the data which can be exchanged via the analysis tool should be no less than six months old. The OFT considered that this commitment (which is less restrictive than its initial proposal which would have required that data should be no less than 36 months old) will encourage new and small competitors to enter the market to the benefit of consumers. It has also proposed that price information exchanged should be anonymous, aggregated across at least five insurers and should not concern the future pricing intentions of insurers.
The OFT has also called for evidence on private motor insurance premiums. This call is a consequence of findings that premiums appear to have risen substantially in recent years. Indeed, in the year ending 31 March 2011, premiums may have gone up by around forty percent. The OFT is looking for an explanation for this increase and is keen to address any competition issues raised. It is expected to publish its findings in December 2011.
Ryanair's hopes fly again
Ryanair's acquisition of shares in Aer Lingus continues to meet resistance from the competition authorities. In 2006, Ryanair, launched a public bid for the entire share capital of Aer Lingus. The takeover was prohibited by the European Commission, but appealed by Ryanair to the General Court of the EU, which finally decided against the merger in July 2010. The General Court also heard that the European Commission was not entitled to consider Ryanair's minorty stake in Aer Lingus.
In September 2010, the OFT launched its own investigation into the minority shareholding, which Ryanair increased to 28.9% in 2008. In January of this year, Ryanair challenged the OFT's investigation in the Competition Appeal Tribunal claiming that the OFT, which had not taken action while the matter was before the EU courts, was now out of time to investigate. The Tribunal gave the OFT a green light to continue the investigation, which was due to be concluded by the end of November 2011. On 15 November, Ryanair was granted permission to bring an appeal, and ten days later the Court of Appeal ordered the OFT to suspend its investigation. This case highlights that even long after a shareholding is acquired the authorities can still review the matter for competition concerns.
Who's to blame?
The Supreme Court has refused to consider an application by the administrators of Enron Coal Services Limited to clarify how the Competition Appeal Tribunal should treat issues of causation in follow-on damages actions. The case concerned a finding by the Office of the Rail Regulator that English, Welsh and Scottish Railways had abused a dominant position on the rail haulage market. Enron had failed to persuade the Tribunal and the Court of Appeal that the ORR's finding could be relied on to show that Enron's loss of a coal supply contract was caused by EWS's abusive behaviour.
The Supreme Court has been reluctant to interfere with decisions in competition cases. It will consider only cases which raise a point of law which is of general public importance. The OFT had supported Enron's application for an appeal, on the basis that the existing Court of Appeal decision "may create uncertainty and confusion for potential claimants in follow-on actions". The decision means that claimants in follow on damages actions will have to identify precisely the findings on which they rely and may have more work to do to prove that they suffered loss as a result of a Defendents anti-competitive conduct.
ECJ football judgment equalises broadcast territories
The European Court of Justice has issued a ruling which may change how the broadcasting rights to English Premier League Football are licensed within the EU, and may have wider implications for all media rights holders. Football Association Premier League Ltd ("FAPL") sells exclusive licences to broadcast its football matches within particular territories, so that only one broadcaster can sell the satellite decoders used to watch the matches in any one part of the world.
Publican Karen Murphy bought a Greek satellite decoder at a fraction of the cost of buying a fully authorised subscription from BSkyB, using it to show Premier League matches in her pub. As well as paying less for the service, she was able to show matches live during the FAPL's closed transmission times (FAPL does not allow live broadcast of Saturday 3pm in the UK).
Ms Murphy was prosecuted under the Copyright, Designs and Patents Act 1988 on a charge that she had "dishonestly received a programme included in a broadcasting service provided from a place in the United Kingdom with intent to avoid payment of any charge applicable to the reception of the programme". She appealed on the grounds that the conviction breached both the EU principle of free movement of goods, and the EU competition rules. She claimed that the practice of forcing exclusivity in the sale of decoders in any given country limited her choice as a consumer, and breached EU competition rules. FAPL claimed that as copyright holders for the footage, they have the right to limit cross-border trade in order to enforce the closed transmission times in the UK. They also claimed that any restriction of competition could be justified.
The ECJ found that it was not presented with any possible reason that the contractual restrictions imposed by the FAPL were not anti-competitive nor any circumstance in which they would not have anti-competitive effects. It did uphold some of FAPL's copyright claim. This ruling could apply beyond the realm of sports broadcasting and may have far-reaching consequences in regard to other forms of entertainment with cross-EU appeal.
Insurers warned of anti-trust action
The EU Justice Commissioner Viviane Reding, recently sent out a warning to insurance bosses that the European Commission will not hesitate to enforce anti-trust legislation if insurers use a recent ECJ ruling banning discrimination on insurance premiums as an excuse to raise prices by an excessive amount. In the Test-Achats case, the ECJ judges found that a European Council Directive on the principle of equal treatment for men and women in the access to and supply of goods and services should apply to insurance premiums.
In a meeting with industry leaders, the Justice Commissioner made it clear that there would be no backtracking on the directive and modifying it would be extremely unlikely. The industry sector remains concerned that other similar plans will not come into force in the future pertaining to age or disability discrimination.
We only let you drink it when it's ready
On 15 of September 2011 the EU's General Court annulled a €31.66m fine imposed on Koninklijke Grolsch NV for its participation in a cartel on the Dutch beer market. The Court held that the Commission treated the parent company, Koninklijke Grolsh NV, and the Grolsch group as one undertaking without making reference to the economic, organisational or legal links between the parent and subsidiary company. The Commission failed to explain its reasons for its determination of the legal person responsible for the infringement, thus rebutting the presumption that the parent company actually exercised crucial influence over the conduct of its subsidiary.
The Commission may impose fines of up to ten percent of an undertaking's global turnover for participation in a cartel. For this reason, the attribution of liability to a parent company can make an important difference to the level of fines imposed, meaning that the Commission is as keen to establish that parent companies are liable for subsidiaries as accused companies are to ensure that the liability is restricted to subsidiaries.
Tobacco case fines
In a ruling on 9 September 2011, the General Court confirmed the Commission's decision to impose fines of €30 million on Deltafina and €24 million on Alliance One International for participation in the Italian raw tobacco cartel. In Deltafina's case, this was the first time the Commission did not grant full immunity after an undertaking had been the first to reveal to the Commission the existence of a cartel.
The Commission's 2002 Leniency notice states that it is only where conduct of the undertaking demonstrates a genuine spirit of cooperation that a reduction in fines will be granted. Deltafina had infringed this by disclosing to its competitors that it had applied to the Commission for immunity, before the Commission had an opportunity to carry out its investigation.
Commission defends whistleblowers
Competition Authorities and Courts across the EU have been grappling with the question of whether documents submitted by whistleblowers under cartel leniency programmes may be disclosed to claimants in damages actions. Firstly, in Pfleiderer (Case C-360/09), the German court referred to the Court of Justice the question of whether documents submitted to the German leniency programme could be disclosed to damages claimants. The Court held that it should be for national courts to decide what level of disclosure was appropriate in a particular case to ensure a balance between protection for documents received under leniency procedures and the right to claim damages.
The Court of Justice is expected to consider the issue for a second time when it hears a reference from the Austrian Courts in relation to a claim by Donau Chemie (Case C-536/11) against the members of a print chemicals cartel. The Court has been asked to rule on whether Austrian rules preventing disclosure are compatible with EU Law.
In the UK, similar issues have been raised in National Grid Gas v ABB Ltd which has recently been before the English High Court. The claimants in that case are applying for disclosure of information from the European Commission's leniency programme. The Commission has strongly resisted disclosure on the basis that it would undermine its leniency programme, and the judge has decided to review the sensitive information before ruling.
Fines for Taiwanese milk manufacturers
The Fair Trade Commission in Taiwan has fined the 3 largest milk manufacturers in Taiwan on the basis that they have been involved in illegal price fixing. The 3 companies fined (Uni-President Enterprises Corp, Wei Chuan Foods Corp and Kuang Chuan Dairy Corp) contribute 80% of the country's milk supply. Suspicions arose after a price hike in coffee drinks containing milk sold at franchise convenience stores in the country led to a public outcry which the stores explained had followed from an increase in fresh milk prices.
Guilty or go
US competition authorities appear to be using immigration laws to encourage non-US businessmen to cooperate with antitrust investigations and tender guilty pleas in order to avoid being refused entry to the US. Recently, it has emerged that in exchange for cooperation and a guilty plea in an antitrust investigation, the US Government has been willing to grant an exemption from the ten year ban on entering the US which is usually imposed on foreigners following a felony conviction. This offer has clearly proved tempting; there have been fifty business men imprisoned for competition offences since 1999, and only one trial. US competition authorities argue that this process helps to hold non-US businessmen to the same standards as their US counterparts. However, the alternative view is that the pressure of prohibiting entry to the US effectively deprives non-US businessmen of the right to a trial before a jury.
USA and China joining forces to fight cartels
China's three antitrust agencies (the Ministry of Commerce, the National Development and Reform Commission and the State Administration for Industry and Commerce) have signed up to a cooperation agreement with the USA's Federal Trade Commission. The agreement comes as China celebrates just three years of having competition law.
A similar agreement is already in existence between the US authorities and the European antitrust enforcers. In future, these agreements may lead to information sharing between authorities in the EU, US and China, although the prospect of joint enforcement action still seems some distance away.
Some commentators have suggested that the agreement will increase the transparency of anti-trust decisions taken by the Chinese authorities. If this proves to be true it may help allay fears that China uses competition law as a means to protect its domestic interests.
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This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.