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End of endive cartel
Farmers, unions and farmers' associations have been fined €4 million by the Authorité de la Concurrence, the French Competition Authority (FCA), for price-fixing in the sale of endives. The cartel began in 1998 and is said to have involved virtually every endive producer in France, although the effect of the cartel was mitigated by the strong bargaining powers of grocers. Despite coming under criticism by the former French President Nicolas Sarkozy, the decision serves as a reminder that the food sector is a focus for the EC. As discussed in our March Update 2012, the EC recently announced the creation of an internal task force to review competition in the food sector, while the OFT issued guidance on competition law's application to farmers in November 2011.
Click here for the OFT guideance document.
Greek competition authority gets its teeth into the food and drinks sector
The Hellenic Competition Commission (HCC) has fined Tasty Foods (a subsidiary of PepsiCo) €16.2 million for anti-competitive behaviour. Tasty Foods produces and distributes salty snacks in Greece, most notably under the brand Lay's. Following a complaint from rival company, Coca Cola, the HCC found that, from 2000 until 2008, Tasty Foods had implemented a policy of "extraordinary intensity" to exclude its competitors' access to smaller outlets, limiting their possibility for growth. Tasty Foods' behaviour took the form of exclusivity agreements, requiring only its products to be displayed in cabinets. Rebates were conditional upon the retailer's commitment that all or a substantial part of the available shelf space was available to Tasty Foods' products.
Coca Cola is facing an HCC investigation of its own. Coca Cola's subsidiary, Coca-Cola Hellenic Bottling Company (CCHBC) was dawn raided in early February on suspicion of anticompetitive behaviour. CCHBC was fined €2.9 million in 2002 in relation to its discount and rebates practices which was then followed by a further fine of €9 million for a failure to comply with the HCC's original decision. CCHBC manufactures and distributes Coca Cola branded products to twenty-six countries worldwide. These investigations suggest that the food and drinks sector is a key target for the HCC.
When friends become foes
Siemens and rival Areva entered into a joint venture (JV) in the nuclear sector. Following Areva's acquisition of sole control of the JV, Siemens was left in a difficult position as a result of a 'non-compete' clause in the agreement which in practice prevents Siemens from competing with Areva's engineering business in the civil nuclear sector.
Although the EC cleared both the original JV and also Areva's sole control of the JV, the EC opened an investigation into the agreement and has concluded that a non-compete clause for 3 years after the JV had ended is excessive. The EC's investigation is surprising given that an arbitration before the International Chamber of Commerce (ICC) has already ordered Siemens to pay €648 million in respect of its breach of contractual obligations to Areva, while also limiting the non-compete clause's duration to 4 years. In the parties' commitments made to the EC (which if accepted will end the EC's investigation) they intend to limit to the clause's effect to 3 years, bringing the clause to an end this year. In any case, Siemens has revealed that it is withdrawing from the nuclear industry, making any settlement seem somewhat redundant.
Air cargo damages actions take flight
Agility, a Swiss-based global logistics company, has launched an action in the English High Court for damages against several companies held liable by an EC Decision for their involvement in an air freight cartel. Actions have also been initiated against the same cartel in the Netherlands and New York.
All the actions lodged have faced their fair share of turbulence. The legality of the Dutch action was unsuccessfully challenged on the grounds that a "special purpose vehicle" was used to gather claims against the claimants. However, the action has now been stayed on the grounds that appeals against the EC's infringement decision have not yet been decided.
In December 2011, a class action in New York faced a considerable set-back when the court refused to order the defendants to disclose a confidential version of the EC's infringement decision. Although the case is ongoing, several of the defendants have settled with the claimants, with two settlements being reached after the court's non-disclosure decision. The combined total of settlement payments in this action is understood now to exceed $500 million (£315 million).
Disputes over preliminary legal issues are becoming increasingly common in private damages claims (see our previous February 2012 Update). Whilst there has been a massive increase in the number of claims, there remains huge uncertainty about many key legal issues and out of court settlements remain the norm.
Agility itself has recently come under the EC's spotlight through participation in two different price-fixing cartels, incurring a combined fine of almost €5 million.
Joint venture, joint responsibility
Two chemical companies found liable for the anticompetitive behaviour of their joint venture have had their fines upheld by the General Court. In the infringement decision, the EC held both Dow and DuPont liable for their JV's involvement in a chloroprene rubber cartel which lasted for at least nine years. Both companies disputed their liability on the grounds that their JV could not be viewed as part of the same economic unit of two distinct companies. However, the EC argued that both companies exercised "decisive influence" over the JV. The EC noted that senior employees from both companies worked at the JV, both companies held veto rights and both participated in the activities of the JV's Members' Committee. Despite arguments that both companies had distanced themselves from the JV's day-to-day functioning, the General Court held that the influence both companies continued to exercise over the JV was sufficient to warrant joint and several liability for its actions.
In April, both companies appealed the decisions of the General Court to the Court of Justice of the European Union (CJEU).
Are leniency materials immune from disclosure?
The logic behind the leniency program is that a company granted leniency will be in a better position than if the application had not been made. In turn, the competition authority can punish anticompetitive behaviour that may otherwise go undetected. However, recent moves by parties seeking the disclosure of leniency materials to boost private damages claims against those who have infringed competition law have the potential to put the success of leniency programs in jeopardy. We have previously discussed the uncertainty caused by CJEU's decision in Pfleiderer with respect to the disclosure of leniency materials before Member State's national courts.
The issue also extends to settlement negotiations. The EC's decision to write to a Canadian Court advising it not to disclose information gathered during its settlement negotiations of the DRAM's cartel, is a strong indication that information gathered during the settlement process will be treated, at least by the EC, in a similar way to the disclosure of information gathered from leniency. The DRAM cartel was the first cartel to be resolved using the EC's settlement process. The parties received a 10% discount from their fine in return for admitting their role in the cartel and receiving an expedited decision. The move will be unwelcome news for third parties seeking to take private damages claims against cartelists who have taken advantage of the settlement process.
Gaining access to documents obtained by the EC as part of the leniency process is not only a problem for third parties seeking damages as a recent case before the General Court has shown. Henkel, a member of the detergents cartel received full immunity from fines from the EC in April 2011, as it was the first company to blow the whistle. The French competition authorities opened a separate investigation into the matter and made a requested to the EC for disclosure of the relevant documents in the EC's file. The requested was rejected by the EC. Thereafter, the French competition authorities awarded leniency to a fellow cartelist, Unilever, as it was the first to blow the whistle rather than Henkel in the French case. As such Henkel did not receive as significant a reduction in fine as it would have done from the French competition authorities, had it been the first whistle-blower. Late last year, Henkel launched a legal challenge against the EC on the grounds that if the EC had not rejected a request by the French competition authority for the relevant documents, then the French competition authority would not have deemed Unilever to be the whistle-blower. Henkel then raised a further challenge against the EC for declining to disclose materials under EU transparency laws.
In response to such uncertain case law and the risk that this uncertainty will cause, cartelists may think twice about cooperating with the EC. Commissioner Joaquín Almunia has announced that the EC is planning to adopt legislation in 2012 which will ensure that leniency documents will not be disclosed to damage claimants. There is a balancing act to be struck between the rights of cartel victims to take private actions against cartelists and the protection of the leniency programme and the right to not self-incriminate. In a UK context, the judgment of Mr Justice Roth in the National Grid case in the High Court, dealing with similar points, is a helpful precedent for the future.
The man from Del Monte says no to fine
Fresh Del Monte Produce (Del Monte) is currently challenging an EC Decision before the General Court which held it partly liable for its distributor, Internationale Fruchtimport Gesellschaft Weichect & Co's (Weichect) involvement in a cartel. In 2008 the EC held that Weichect had infringed competition law by coordinating quotation prices for bananas imported to eight Member States in Northern Europe. The Decision found that Del Monte exercised decisive influence over Weichet as a result of its 80% shareholding in the company and so the companies were both found to be jointly liable for €14.7 million (with Chiquita fined €0, after a 100% reduction of its €83.2 million liability, and Dole fined €45.6 million).
Del Monte is disputing that it exercised decisive influence over Weichect. Despite its share holdings, Del Monte is arguing that it had limited scope to influence Weichet. Indeed, Del Monte's position is that it simply had a distribution agreement with Weichet and merely exercised a passive right to veto in Weichet's decisions. Del Monte also produced evidence that it was unable to influence Weichect into raising its prices. The EC is arguing that Del Monte had extended rights over Weichect's behaviour which entitled it to frequent information from Weichet and had considerable sway in important business decisions.
The General Court has allowed Weichect to intervene in the case despite the fact that it did not exercise its own right of appeal against the EC's decision within the required time limit. The case is ongoing.
UBS blows several whistles
UBS, the Swiss based investment bank, has taken the bold move to blow the whistle on the alleged manipulation of benchmark interest rates by several banks.
This is the latest chapter in a long running saga that started in March 2011 when it came to light that regulators in the UK and US (with the latter apparently taking a more senior role) were investigating an alleged manipulation of the Libor Dollar rate. The investigation was later extended to the Tibor (the Tokyo equivalent) and Euribor (the Eurozone equivalent), thus bringing in EU and Japanese regulators.
The various Libor, Tibor and Euribor rates are set by a panel of banks that are asked at what rate they could borrow funds (in different currencies over differing periods of time) as if they hypothetically were to do so at 11am that day. The high and low extremes of this micro-survey are then discarded and the average is taken as the official rate for that day.
The data that the banks provide is publicly available, but crucially for the rates to work the banks need to answer the question honestly. As the data is publically available, a struggling bank (that will need to pay higher rates than its competitors) is incentivised to play down the fact that it is struggling because it may self perpetuate. This reason, amplified by the financial crisis, has led to increased calls for reform to the calculations.
Initial concerns were based around whether the banks acted alone to manipulate the rates to their own advantage, but it seems to be alleged that banks may have been acting together to "fix" these rates.
The Swiss competition authorities announced on 3 February 2012 that they were investigating allegations of manipulation to market conditions for derivative products after a tip off from a leniency applicant. It later emerged that the tip off had come from UBS. The investigation is looking to allegations that derivative traders working for a number of financial institutions might have manipulated their submissions and coordinated their behaviour thereby influencing the Libor and Tibor in their favour. It also appears to be alleged that such traders might have colluded to manipulate the difference in the ask price/bid price spread based on these rates to the detriment of their clients.
Since February, the Canadian Competition Bureau has also been looking into the setting of the Libor Yen rate, and whether it constituted "activities contrary to the conspiracy provision of the Competition Act" following another tip off from UBS. Then, on 28 February 2012, the EC confirmed that it was also investigating banks active in the derivative markets linked to Libor and Euribor who might have breached antitrust rules.
The calculation of the rate for the day involves a "topping and tailing" of the extremes of the input data in order to avoid the possibility of a bank unilaterally skewing the results. However, if more than the top and bottom 25% act together they could, together, potentially distort the rates on the market.
As the information relied upon is in the public domain, the authorities may find it hard to demonstrate collusion between the parties involved. The evidence available however may be supported by UBS's cooperation (and revelations made by the disgruntled former RBS employee Tan Chi Min).
Canada turns up the gas on harsher sentences for individuals
Canadian courts have made it clear that they will not tolerate anti-competitive practices and have imposed a fine on an individual guilty of such practices.
The Québec Superior Court (the Court) sentenced an individual, Donald Darby, for his part in a petrol station cartel after he had pleaded guilty to conspiring to fix the price of petrol at the pumps. Mr Darby had never been convicted of a crime before, he was fully cooperative, and pleaded guilty early in the proceedings. He was not the ring leader of the cartel. The Court also recognised that there was no risk of him re-offending. On these grounds Mr Darby requested an unconditional discharge of the conviction (meaning he would not technically be convicted of anything) and offered to donate the maximum fine he faced (CAD$10,000.00) to charity. It appears that he was mainly concerned with the negative impact on his reputation and ongoing business.
However, on grounds of public interest and the need to discourage others from engaging in such activities, the Court decided that a punishment was needed. The Court said "[the punishment] cannot amount to a mere slap on the wrist" and that it must "hurt financially". On that basis Mr Darby was fined CAD$10,000.00 personally (the maximum recommended by the prosecution).
If you think your business may be affected by any of the above, or if you have any other questions, please contact:
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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.