A new leniency notice from the European Commission (EC) came into force on December 08, 2006, which aims to increase transparency and clarify what is required from leniency applicants.Among the changes, the notice increases the leniency threshold. It also details more precisely the type of information and documents that companies applying for immunity must provide. According to the notice, evidence requiring little or no corroboration will result in a greater reduction in fines.
Under the new guidelines, the obligation of continuous co-operation applies not only to immunity applicants, but also to those seeking fine reductions. Immunity applicants can now reserve their place in the queue by way of a marker system, which gives them more time to reach the leniency threshold. The notice also introduces a procedure to prevent applicants’ statements to the Commission being made available in civil damages claims.
(Global Competition Review, 08.12.06)
Record Cartel Fines set to Grow
Further rulings this month could see the European Commission (EC) total cartel fines for the year surpass €2bn. In the year 2006, DG Comp has already imposed a record €1.843bn in cartel fines.
Some competition lawyers said that the rise in fines reflects well on the EC’s leniency policy, as the majority of the authority’s cartel decisions result from leniency applications.According to officials, there is a possibility of cartel fines reaching €2bn before the end of 2006, but that it is impossible to confirm a figure.
(Global Competition Review, 07.12.06)
Spain and EC Clash
DG Comp has accused Spain of violating European Competition Law. The Commission announced that remedies imposed by Spain’s energy regulator violate European Treaty rules on free movement of capital, freedom of establishment and free movement of goods.
Spain’s conditions require Endesa to divest one third of its national generating capacity if the tie-up with E.On is to proceed. DG Comp first objected to the remedies in August, accusing the Spanish Government of ‘arbitrary discrimination’ against E.On, in a letter that was leaked to the press. Then in September, the Commission ordered Spain to modify the conditions.
DG Comp says that Spain has failed to comply with this order, and the infringement of European merger regulation continues. Spain’s enforcement authorities now have until December 13 to respond to DG Comp’s complaint. The Commission may then issue a final decision, ordering Spain to remove the conditions.
(Global Competition Review, 29.11.06)
E.On Faces Interference Fine
The European Commission (EC) has charged German energy company E.On Energie with interfering in an antitrust probe. According to the DG Comp officials, the company had broken an official seal, which was put in place to secure documents overnight following a dawn raid.
E.On has denied the charges and requested an oral hearing to present its defence. E.On could now face a fine of up to one percent of its annual turnover. In 2005, the company reported sales of €56.4bn.DG Comp raided the offices of the German energy company in May 2006, as part of a European-wide probe into the energy sector. The Commission is expected to introduce legislation to loosen the grip of incumbent energy suppliers on national networks. It will issue its final report on January 10, 2007.
(Global Competition Review, 27.11.06)
Get Ready for Change
The European Commission (EC) will introduce tougher merger rules because the changes to merger regulations were needed to overcome competition barriers in the European markets.The Commission had already undertaken a sector review on national champions, and the results would be made public in January 2007. The Article 86, which lets the Commission take legal action against a member state, is on the agenda.
The European businesses, only by becoming more competitive would be able to stay abreast of future rivals in China and India. For this, there is need to ensure merger control to be properly enforced particularly in the energy and telecom sectors.The Commission has to be careful that national takeovers do not hinder an integrated European market.
(Global Competition Review, 24.11.06)
DG Comp Smashes Bitumen Cartel
The European Commission has fined seven bitumen suppliers and six construction companies.Bitumen, a by-product of fuel production, is used to make asphalt. On September 13, 2006, the Commission fined the conspirators €267mn. The Commission took account of the limited size of the market which was worth €62mn in 2002, when it calculated the fines, as well as the eight-year duration of the cartel. Other factors it considered included late entries or early exits from the cartel, and the size of each of the conspirators.
Bitumen supplier Shell received the largest fine, of €108mn. This included a 50 percent mark-up for repeat behaviour, and another 50 percent mark-up for “playing an instigating role”.According to the Commission, the conspiracy ran from 1994 until 2002, and covered the entire market for bitumen used in road construction in the Netherlands. The six construction companies regularly met a delegation from the bitumen suppliers in order to fix the prices they would invoice to asphalt production plants.
(Global Competition Review, 13.09.06)
Amendments to the Competition Act in Estonia
The amendments to the Competition Act, in Estonia, came into effect on July 01, 2006. It focused on the regulation concerning the control of concentrations and abolished the possibility for undertakings to apply for individual exemptions to their arrangements under Section 6 of the Act.
The amendments were implemented in order to harmonise Estonian Law with the relevant European Union (EU) regulations, as well as to resolve certain issues that arose during the use of the Act in administrative practice.Before the amendments, the Act required the parties to a concentration to notify the Competition Board within one week of the conclusion of an agreement establishing the acquisition of control or a merger.
(International Law Office, 16.11.06)
Paris’s Court of Appeal has rejected an appeal by three mobile telephone operators against a record fine imposed on them by French Competition Council.The Court agreed that Orange France, SFR and Bouygues Télécom were guilty of cartel activity, and supported the level of penalty imposed. They were fined a total of €534 million by the council in 2005 for exchanging confidential client information, and forming non-competitive agreements to maintain their market shares. The fines were: Orange France, €256mn; SFR, €220mn; and Bouygues Télécom, €58mn.
An investigation was launched after consumer groups drew attention to similarities in the companies’ pricing policies, and to their market shares, which had remained almost unchanged between 1997 and 2003.
(Global Competition Review, 12.12.06)
Follow Germany, Lawyers tell French Enforcers
Competition specialists have responded to a report by French Finance Committee by calling for a complete restructuring of the country’s enforcement machinery. In a review of the financial challenges facing France’s Competition Council, the committee proposed emulating Germany’s system, where all competition enforcement functions fall to one authority.
Competition law enforcement powers in France are split between the Competition Council, which oversees litigation and delivers antitrust rulings, and the Directorate for Competition, Consumer Affairs and Fraud Prevention, which handles investigations. The Ministry of Finance has the final say on mergers. Although such reforms would create a more independent and cohesive authority, the subject is a sensitive one in France. According to the sources, not only would the merger lead to job losses, but it would also result in a struggle for supremacy between France’s two authorities to decide which one remains. The Committee published its report on October 12, 2006.
(Global Competition Review, 22.11.06)
Competition Law
Competition specialists have responded to a report by France’s Finance Committee by calling for a complete restructuring of the country’s enforcement machinery. In a review of the financial challenges facing France’s Competition Council, the committee proposed emulating Germany’s system, where all competition enforcement functions fall to one authority.
Competition law enforcement powers in France are split between the Competition Council, which oversees litigation and delivers antitrust rulings, and the Directorate for Competition, Consumer Affairs and Fraud Prevention, which handles investigations. The Ministry of Finance has the final say on mergers.Although such reforms would create a more independent and cohesive authority, the subject is a sensitive one in France. According to the sources, not only would the merger lead to job losses, but it would also result in a struggle for supremacy between France’s two authorities to decide which one remains. The France Finance Committee published its report on October 12, 2006.
(Global Competition Review, 22.11.06)
Germany’s Federal Cartel Office will soon have the power to regulate the country’s electricity market. Under the new law, which was announced on November 29, 2006, and enters into force in 2007, the Office will have the power to halt ‘excessive pricing’ in the market for energy generation, as this constitutes an abuse of dominant position.
The new powers will give the Office scope for encouraging competition. For example, it will provide easier access to the electricity grid for new market entrants. But German competition specialists have warned that enforcing low electricity prices on the market may prove to be a disincentive for third parties that are considering opening a power station.The new legislation would extend only to 2012.
(Global Competition Review, 04.12.06)
Greek Competition Commission has cleared GlaxoSmithKline of abuse of dominance after pharmaceutical wholesalers challenged the company’s quota system. On September 05, 2006, the Commission ruled that normal competitive provisions do not apply in the European pharmaceutical market because national governments set prices. According to the Commission, GlaxoSmithKline has the right to limit supplies of drugs to protect its commercial interests. Drug prices vary across the continent, making pharmaceutical companies vulnerable to parallel importers.
GlaxoSmithKline began limiting drug sales to wholesalers in Greece, in 2000. It supplied a specified quantity to meet the needs of patients plus a buffer amount. In 2003, wholesalers reported GlaxoSmithKline to Greek Competition Commission. The Commission referred the case to the European Court of Justice, which issued an opinion in favour of GlaxoSmithKline in 2004. In June 2006, the Court ruled it did not have jurisdiction to rule on the complaints and sent the case back to the Commission. According to the Court, the Commission cannot refer questions for a preliminary ruling since it is neither a tribunal nor a court.
(Global Competition Review, 15.09.06)
The Netherlands Competition Authority has expressed its concerns about the new Single European Payment Area (SEPA), according to the Financial Sector Monitor 2006. The SEPA – a system that will allow identical payment procedures without surcharges for bank customers in all member states – will become operational in 2008.
The authority said that increased price agreements and market sharing could jeopardise the ‘promising potential’ of a cheaper, more efficient, user-friendly and competitive payment transaction in a single European market.The Financial Sector Monitor – the NMa’s annual sector report – also revealed that competition is growing in the Dutch PIN payments market. Prices for PIN payments, which are charged by banks to retailers, have dropped, and more retailers are switching providers, the report found. The Financial Sector Monitor was launched in 2003 with the support of the country’s Ministry of Finance.
(Global Competition Review, 20.12.06)
Portugal’s Competition Authority has published a draft recommendation on how to boost competitiveness in the public notary market. This is open to public comment until October 26, 2006. Proposed changes include ending limits on the volume of work public notaries can do and where they can do it, eliminating the need for licences, and letting notaries advertise. Notaries will also be able to manage more than one office.
Other suggestions include abolishing the Compensation Fund, which all notaries contribute to in order to pay a minimum salary to notaries who cannot cover their own costs, and dropping a maximum price for services rendered in competition with lawyers and chambers of commerce.
(Global Competition Review, 04.10.06)
Portugal Publishes Leniency draft
Portugal’s Competition Authority has published a draft notice for the country’s new leniency programme, in line with other European countries and with DG Comp. The draft procedures and leniency application form are open to public comment until September 28, 2006. Portugal’s Parliament introduced the leniency programme in May 2006. It provides total immunity for the first company to bring evidence of price-fixing to the authority. There is also a 50 percent reduction available for the second company to come forward, provided it cooperates with any ensuing investigation. Cartel members providing evidence of involvement in a separate cartel may also receive a reduced fine.
The new Law stipulates that leniency applicants should identify members of a company’s board of directors who are complicit in the cartel activity, as well as identifying the company itself. The Authority has also put a marker system in place, whereby applicants have 15 days to complete their leniency request, once they have notified the authority of their involvement in a cartel. Portugal’s Parliament passed the Bill after the Government argued that cartels have a strong damaging effect on consumers and social welfare. The leniency Law will reduce the damage that cartels inflict on consumers and the national economy.
(Global Competition Review, 06.09.06)
CAT Grants More Power to OFT
The UK’s Competition Appeal Tribunal (CAT) has granted new freedoms to the Office of Fair Trading (OFT), dismissing an appeal against the office’s decision to close a competition investigation. The decision will come as ‘welcome relief’ to the office, which has been forced to devote precious resources to defending appeals in cases where it has not pursued a complaint. The tribunal’s judgement makes it clear that the office has the discretion to prioritise cases. A decision not to pursue a particular complaint because it’s not an ‘administrative priority’ does not in itself constitute an act which can be challenged before the court.
In February 2006, the office closed its investigation of an alleged boycott in the supply of celebrity merchandise. Complainant Casting Book claimed that this constituted a non-infringement decision on behalf of the office and sought to appeal the decision before the Competition Tribunal. On December 15, 2006, the tribunal ruled that the appeal was inadmissible.
(Global Competition Review, 19.12.06)
An Open Door for Damages
For the first time in the UK, a victim of conduct, found by regulators to be anticompetitive will be awarded damages. According to competition lawyers, a little-publicised decision, in November 2006, by the Competition Appeal Tribunal to order a £2m interim payment to Healthcare at Home paves the way for a final damages award within months.
The UK healthcare provider is claiming that it suffered as a result of a pricing policy – in effect a margin squeeze – pursued by US biotech company Genzyme. The only caveat is that two parties could settle the matter out of court first. Such an award, say lawyers, would be extremely significant because of the public desire by regulators, both in the UK and Europe, to encourage private enforcement actions in the competition field. The Healthcare at Home/Genzyme case sends a clear signal to companies in breach of competition rules that victims of anti-competitive practices will be able to recover damages.
(The Financial Times,15.12.06)
OFT Hints at BAA Referral
The UK’s Office of Fair Trading (OFT) will refer BAA Airports to the country’s Competition Commission for an in-depth investigation. The OFT put out a press release detailing the results of a market study. The study found that BAA enjoys a near monopoly in the Southeast of England, where it handles 90 percent of passenger journeys. The OFT also found ‘evidence of poor customer satisfaction’, and raised concerns about the efficiency of any investment at airports in the Southeast of England without competition present.
The study also noted that competition between independently owned airports, such as Liverpool and Manchester, improves value for customers. BAA’s Glasgow airport, which faces competition from Prestwick, has had the largest price decreases of BAA’s Scottish airports. The Office would reach a final decision on February 08, 2007.
(Global Competition Review, 12.12.06)
UK Commission Clears Merger
The UK’s Competition Commission is on the verge of clearing a merger after finding only minor competition problems. According to the Commission, SvitzerWijsmuller’s purchase of rival Adsteam Marine would harm competition in Liverpool’s harbour towage services market. The deal would bring together the two largest providers of harbour and customer terminal towage in the UK.
A provisional investigation has found that the US$544mn deal would only reduce competition in Liverpool, after the Commission accepted that there is not a national harbour towage services market. The Commission would reach a final decision on February 14, 2007. Australia’s Competition and Consumer Commission cleared the deal in July 2006.
(Global Competition Review, 11.12.06)
Changes Afoot for Canadian Telecoms
Canada’s Ministry of Industry has proposed changing the country’s Competition Act to protect telecoms consumers.The proposed amendments would allow the Competition Tribunal to issue up to US$15mn in administrative fines to telecommunication service providers that abuse their dominant market position.
But commentators have questioned the constitutionality of allowing fines for abuse of dominance, as this is a civil matter, not a criminal one. According to Canada’s Competition Bureau, “certain characteristics of the telecommunications industry warrant special consideration.” Distinguishing anticompetitive from pro-competitive conduct in the telecommunications industry may be very difficult, which would make the prospect of ordering fines of up to US$15mn all the more inappropriate. Canada’s House of Commons will now discuss the proposals.
(Global Competition Review, 09.12.06)
UK Airports Face Major Change
UK airports are facing major upheavals, as the Office of Fair Trading (OFT) prepares to refer the sector to the Competition Commission for a full investigation. The British Airports Authority (BAA) came under fire from airlines for cross-subsidising – channelling funds from one airport into another. Airline operators are now urging the Commission to break up BAA’s monopoly of London’s airports.
The Office found that UK airports group BAA controls a large share of airports in London, Scotland and the greater Manchester area. The Commission has the power to remove single ownership of the three London airports – Heathrow, Gatwick and Stansted are all under BAA’s control. BAA has the right to appeal any referral to the Competition Commission.The OFT pledged to announce its findings on the airport sector before the end of 2006.
(Global Competition Review, 07.12.06)
Sectoral Regulations and Institutions
The Office of Fair Trading (OFT) is investigating the country’s largest airports operator, British Airports Authority (BAA), in order to break its monopoly of London airports. Its findings are expected by the end of the 2006.The Committee, comprising 11 members of the Parliament examines ways of streamlining price control reviews of the airports sector. The Competition Commission acts only as a final check on the process instead of playing an advisory role to the Civil Aviation Authority (CAA). The CAA reviews airport prices every five years, and before setting these limits, it must refer its decisions to the Commission.
But the Committee blamed this system for delaying the overall review, and recommended that the Authority review its own decisions by following standard regulatory procedures. The Committee also asked whether the system is a more effective check on abuse of dominance than standard competition law.
(Global Competition Review, 22.11.06)
Backseat for UK Watchdog
The Office of Fair Trading (OFT) is investigating the country’s largest airports operator, British Airports Authority (BAA), in order to break its monopoly of London airports. Its findings are expected by the end of the 2006.The Committee, comprising 11 members of the Parliament examines ways of streamlining price control reviews of the airports sector. The Competition Commission acts only as a final check on the process instead of playing an advisory role to the Civil Aviation Authority (CAA). The CAA reviews airport prices every five years, and before setting these limits, it must refer its decisions to the Commission.
But the Committee blamed this system for delaying the overall review, and recommended that the Authority review its own decisions by following standard regulatory procedures. The Committee also asked whether the system is a more effective check on abuse of dominance than standard competition law.
(Global Competition Review, 22.11.06)
Ireland’s Competition Authority has called for a shake-up of the country’s legal services market, which it says is ‘permeated with unnecessary and disproportionate restrictions on competition’.The Authority made 29 recommendations in a final report on competition in the country’s legal profession. They include a new legal services bill, which would establish an independent Legal Services Commission.
According to the Authority, this would remedy a perceived conflict of interest of the Law Society and the Bar Council, which ‘has resulted in rules and practices that serve the interests of the legal profession rather than those of the consumers’.The establishment of a Legal Services Commission would bring the regulation of the legal profession into line with best international practice and with other professions in Ireland.
(Global Competition Review, 13.12.06)
Ireland Clears Forestry Acquisition
Ireland’s Competition Authority has unconditionally cleared forestry company Coillte’s acquisition of Weyerhaeuser Europe. On November 10, 2006, the authority decided that no horizontal overlap existed between the companies’ activities. The authority launched an in-depth investigation of the deal in September, following complaints that Coillte’s takeover of a medium-density fibreboard plant in southern Ireland would hurt competition in the country’s forestry sector.
Coillte has run into the authority before. In 1998, the authority blocked its acquisition of Ireland’s largest sawmill, Balcas. Ireland’s merger control rules have changed since then the country’s existing Competition Act came into force in 2002.
(Global Competition Review, 17.11.06)