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ANTITRUST & COMPETITION LAW CORNER  
COMPETITION LAW UPDATE (JULY-DECEMBER 2010)

INDIA
Landmark SC judgment backing CCI probes: The Supreme Court of India was seized of an appeal filed by the Competition Commission of India (CCI) on the question as to whether an appeal can be filed and entertained by the Appellate Tribunal against CCI’s prima facie order of instituting an enquiry and referring the matter for investigation to the Director General, CCI (DG).  The appeal arose from an order passed by the Competition Appellate Tribunal (CAT) whereby it held that:
  1. an appeal can be filed against  the prima facie order by the CCI to institute an Inquiry  into anti competitive agreements/abuse of dominance under section 26(1) of the Competition Act, 2002;

  2. the CCI is not entitled to be impleaded as a party  and to be  heard in such appeal before the CAT; and

  3. the prima facie order has to be reasoned/speaking one.
The appeal was disposed of on 9th September, 2010.  The SC, in its order emanating from the first appeal under the Competition Act, 2002, has ruled as under:
  1. an appeal shall lie only against such directions, decisions or orders passed by CCI before the CAT which have been specifically made appealable. The prima facie view and issuing direction to the DG would not be an order appealable under Section 53A of the Act;
  2. Neither any statutory duty is cast on the Commission to issue notice or grant hearing, nor any party can claim as a matter of right, notice, and/or hearing at the stage of formation of opinion that a prima facie case exists for issuance of a direction to the DG to cause an investigation to be made into the matter.
  3. Commission being an expert body, its views would be of appropriate assistance to the Tribunal and ,therefore, in inquiries initiated suo moto, the Commission is necessary party and in all other cases, it will be a proper party in the proceedings before CAT;
  4. A temporary restraint order in terms of Section 33 of the Act can only be passed by the Commission when it has formed prima facie opinion and directed investigation to DG in terms of Section 26(1) of the Act. It may issue an order temporarily restraining the party from carrying on such, until the conclusion of such enquiry or until further orders without giving notice to the party, where it deems necessary. This power has to be exercised by the Commission sparingly and under compelling and exceptional circumstances.  Wherever during the course of inquiry the Commission exercises its jurisdiction to pass interim orders, it should pass a final order in that behalf as expeditiously as possible and in any case not later than 60 days;
  5. The Commission, in consonance with the settled principles of administrative jurisprudence, is expected to record at least some reason even while forming a prima facie view.  However, while passing directions and orders dealing with the rights of the parties in its adjudicatory and determinative capacity, it is required of the Commission to pass speaking orders, upon due application of mind, responding to all the contentions raised before it by the rival parties; and
  6. that till framing of definite time frame for completion of investigation, inquiry and final disposal of the matters pending, the Commission shall form prima facie order in a period shorter than 60 days (as envisaged at present) and that the DG will submit investigation report within the time given and in all cases not later than 45 days from the date of passing of directions in terms of Section 26(1) of the Act.
In the wake of order ibid, the CCI has since amended its General Regulations on 20th October, 2010.
CCI probing complaints against realtors: According to media reports, the CCI is presently examining 11 complaints against various real estate majors pertaining to anti-competitive practices. Of the 11 cases, at least five complaints are against only of the key players for its various housing projects. The complaints allege violation of Sections 3  and 4 of the Competition Act, 2002, (Act) which prohibits anti-competitive agreements and abuse of dominant position, respectively. The CCI is probing into the companies involved in the housing finance scam, which led inter-alia to the arrest of top official of LIC Housing Finance. The Central Bureau of Investigation had earlier booked the officials for allegedly colluding with loan arranger Money Matters and overlooking regulatory guidelines for granting approvals, for their individual monetary gains.
CCI to approve bulk of M&A proposals in a month: The Competition watchdog has been quoted in the press stating that it would try to approve 95-96% of the merger & acquisition proposals within a month of the filing.  Sections 5 and 6 of the Competition Act, 2002 empower the CCI to approve (ex ante) high voltage takeovers and mergers, which could have a bearing on competition in the market.  As on date, these provisions relating to this compartment of law, are not in force.
According to DG, CCI, NSE has abused its dominant position: The investigation, carried out by the investigative arm of the CCI, the Director General (DG) has reached the finding that NSE has violated Sections 4(2) (a) (ii), and 4 (2) (e) read with Section 4 (1) of the Act. The press reports suggest that the DG has recommended several remedial measures which could lead to the division of NSE into more than one entity so that competition is fostered in the country's stock exchange business. The Commission received a complaint from MCX Stock Exchange (MCX-SX) relating to the NSE's way of functioning to kill competition and abuse its dominant position as a stock exchange.

The detailed investigation inter-alia relates to NSE's abuse of dominant position, its predatory pricing strategy for various trading segments (equity, derivatives, Gold ETF, debt market etc), charging or waiver of transaction fees aimed at eliminating competition and also its move to kill competition through waiver of fee for data supplied to vendors (like Reuters).

Since NSE has violated several provisions in the Act,  the CCI may consider taking remedial steps under Sections 27 and 28 of the Act. Under Section 28, if the Commission feels fit, it can order the division of NSE into more than one company. Under Section 27, the Commission can order an entity to change the way it does business using its dominant position which may harm competitors. As the further proceedings are in progress, the final order in this matter is yet to be given.
Appellate tribunal stays CCI’s Rs 1-cr penalty on Kingfisher: The Competition Appellate Tribunal (COMPAT or Tribunal) has imposed a stay order on the CCI’s move to impose a fine of Rs 1 crore on Kingfisher Airlines for not furnishing all details pertaining to an anti-competition case pending with the CCI. The Tribunal has directed the CCI not to recover the fine amount from the airline company until the matter comes up for hearing on January 20, 2011.

New national competition policy on the anvil: Speaking at a conference on “Global Competition Law” organised by the Centre for Law, Economics and Society, the former Corporate Affairs Minister Salman Khurshid said that India would soon have a national competition policy that defines the larger landscape within which the country’s competition laws would function. The policy would be prepared in consultation with the Planning Commission and the Prime Minister’s Office. The larger policy framework would be essential after the Ministry amended the current competition law to turn merger and acquisition scrutiny more industry-friendly. The Centre is also expected to introduce the amendment to the competition law and also notify the merger & acquisition rules under Section 5 and 6 of the Act soon. Moreover, Law Minister Veerappa Moily said that the “competition policy” should address the concerns of the small and medium industries on the impact of competition laws on their businesses. Incidentally, the Planning Commission had in 2007 commissioned a working group to prepare a report on the Competition Policy. The Group, headed by a former member of the CCI, had made its recommendations for a comprehensive policy framework based on international practices. One of the terms of reference for the Group was to recommend ways of enhancing the role of competition and competitive markets in the government’s policymaking at the central and state levels and to advise on the most effective and workable institutional mechanism for a synergised relationship between sectoral regulators and CCI.

Competition policy should be reworked: At the recently concluded UN summit on trade and development, the Chairman of the CCI said that competition policy followed in various nations needs to be reworked so that it protects the common man's interest in times of economic crises. CCI’s chairperson who has been elected as the vice-president at the UNCTAD Conference held in Geneva said that during these times (of economic crises), it is the common man who is affected the most, and therefore, competition policies have to be reviewed and re-oriented to ensure the interest of the common man. The meet reviewed the multilaterally agreed equitable principles and rules for the control of Restrictive Business Practices. Besides preventing cartels, competition law tries to ensure that there are no entry barriers in an economy.

'Guzaarish' escapes ban in Bihar, Jharkhand: CCI paved the way for exhibition of Aishwarya Rai - Hrithik Roshan starrer 'Guzaarish' in the northern states of Bihar and Jharkhand where the exhibitors' association had threatened to ban the film. The exhibitors had threatened to ban the film in about six States including Bihar, Jharkhand on dispute over payment. An interim order restraining the Bihar Jharkhand Motion Cine Association from banning exhibition of the film Guzaarish was handed down by the CCI. The order was passed on the basis of a complaint filed by producer of the film, UTV Motion Pictures under Section 4 of the Act, which pertains to abuse of dominant position.

Banks within rights to levy prepayment penalty: The CCI in its first order held that the levy of a penalty by banks and housing finance companies for prepayment of home loans does not amount to abuse of dominant position. The CCI quashed borrowers’ hopes of abolishing the practice. The complaint was filed over such charge being levied by Deutsche Post Bank Home Finance Ltd. The CCI ruled that banks and housing finance companies were not violating competition laws by charging the prepayment penalty. The levy, according to the CCI, neither amounts to an anti-competitive agreement, nor abuse of dominant position. The CCI in it’s order stated that “It is evident from our analysis and determination of these issues earlier in the order that there is a vibrant market in provision of home loans, with the number of service providers and the variety in products growing consistently and continuously over a period of years.”

The CCI has held that there is no agreement among the various banks or housing finance companies and nor is there any uniform practice being followed by them. These institutions argued before the CCI that removal of such prepayment penalty would result in a higher lending risk for bankers and could further result in an asset-liability mismatch. At present, most banks charge a prepayment penalty of around 1-2% in the event of a customer opting to close a home loan prematurely. Banks do this with a view to cover the interest loss due to prepayment of the loan.

Interestingly, the order is not unanimous and is passed by 4:2 majority. Any person aggrieved with the order passed by the CCI has liberty to file an appeal in the COMPAT. The CCI is yet to deliver its order relating to penalty imposed  by banks in the prepayment of car loans.

Amendments in General Regulation governing Enquiries by the CCI: In the wake of the Supreme Court order in the matter of CCI v. Steel Authority of India, highlighting the need for time bound investigations, the CCI has amended its General Regulations on October 20, 2010which now provide that :
  1. On formation of opinion as to existence of prima facie case, the directions to undertake investigation shall be communicated to DG within seven days who will furnish Investigation Report within 60 days.  It may get further extension of time of 45 days and further time of 45 days to furnish supplementary report from such directions.

  2. The report by Director General shall be placed before the Commission within seven days for further orders. If the DG finds no contravention, the Secretary shall convey the directions of the Commission for inviting objections or suggestions, to be filed within fifteen days from the Government/Statutory Authority or from the parties concerned, as the case may be, on such report of the Director General. On consideration of the objections or suggestions, the Commission may direct further investigations by the DG or by an authorized officer of the Commission. On receipt of the report of the DG on further investigation or report of the authorized officer on further inquiries, the Secretary shall, with the approval of the Chairperson, fix the meeting of the Commission within seven days for consideration thereof, and

  3. Where in a case an interim order under Section 33 of the Act has been passed, a final order, as far as possible, shall be passed by the Commission, within ninety days from the date of interim order.
ASIA (EXCLUDING INDIA)

Japanese regulator approves Google-Yahoo Japan alliance: The Japan Fair Trade Commission (JFTC) has approved the planned tie-up between global internet giant Google Inc and Japan's most popular website Yahoo Japan Corp, dismissing Microsoft Inc's concerns that the deal would hinder competition. JFTC ruled the alliance would have no immediate problem with Japan's anti-monopoly law. The JFTC initiated review of the tie-up upon requests from the US software giant Microsoft Corp and Japan's Rakuten Inc, a major online shopping site. Google had struck the deal with Yahoo Japan earlier in July to provide the latter with search results and related advertising.

Probe into Japan’s multi-billion dollar social gaming industry: Tokyo-based mobile gaming heavyweight DeNA was recently investigated by the JFTC over antitrust issues. It has been alleged that DeNA, (which has recently acquired American smart phone game maker ngmoco) pressured the Japanese mobile game developers to release titles exclusively on Mobage-town (its mobile social gaming community) – and to not provide games on rival GREE‘s mobile platform. The JFTC’s conducted a spot inspection of DeNA’s headquarters and the outcome is awaited.

Indonesian Antitrust Authorities Are Evaluating Temasek Assets for Seizure: Indonesia’s anti-monopoly agency is evaluating Temasek Holdings Pte’s assets in the country and has stated that the government has the right to seize them if a court-imposed fine remains unpaid. The Singapore state-owned investment company lost its final appeal in the Supreme Court for violating antitrust laws. A fine of 150 billion rupiah ($17 million), which includes 15 billion rupiah for each of 10 Temasek-linked companies, including the holding company was imposed upon them. The antitrust watchdog is at present inventorying Temasek’s assets and will seize the assets in 2011 if the fine isn’t paid. The Temasek case has caused uncertainty and may cool foreign investors’ appetite for Indonesian assets in the short-term. The Indonesian competition regulator KPPU has held that Temasek has breached antitrust laws by using indirect stakes in PT Telekomunikasi Selular, known as Telkomsel, and PT Indosat, the country’s top two mobile-phone service providers, to fix prices.

Singapore Consults On Liner Shipping Block Exemption : In July 2006, the Block Exemption Order (‘BEO’), that exempts certain liner shipping agreements from the application of the Section 34 prohibition, was issued for a period up to 31 December 2010. Having reviewed the advantages/disadvantages of this exemption, the Competition Commission of Singapore (CCS) has made a recommendation to the Minister that the block exemption should be extended for another five years until 31 December 2015. The CCS has also proposed certain minor changes to the information on liner shipping agreements that must be filed with CCS in order to fulfill the requirements of the block exemption. To illustrate, parties will be required to disclose the list of the other jurisdictions in which the agreement has been filed..

CCS Clears Merger in Dialysis Services in Singapore: The CCS has cleared the proposed acquisition of Asia Renal Care (‘ARC’), a provider of dialysis services in Singapore, by Fresenius Medical Care (‘FMC’), an integrated worldwide provider of dialysis products and services. Noting that the transaction will not lead to a significant change in the existing structure of the market for the provision of haemodialysis (‘HD’) treatments in Singapore and that the barriers to entry in this market are low, the CCS concluded that no anticompetitive horizontal effects would result from the transaction. With regards to vertical integration, the CCS concluded that FMC’s competitors in the HD products market would not be prevented from supplying their products in Singapore, at the very least to HD service providers that are not linked to FMC. The CCS, therefore, concluded, in Phase I, that the merger would not lead to a substantial lessening of competition in Singapore.

KFTC Closed Review on Rio Tinto-BHP Billiton Joint Venture: The Korea Fair Trade Commission (KFTC) decided to close its review on a plan to establish a Rio Tinto- BHP Billiton joint venture for co-production of iron ore after the concerned companies withdrew notification for the transaction. The KFTC received a notification on December 28, 2009 on an agreement to establish a joint venture for co-production of iron ore between Rio Tinto and BHP Billiton, the world’s second- and third-largest iron ore producers, and had since conducted merger review on the proposed joint venture. For the purposes of the same, the KFTC received supplementary information from the concerned companies and collected opinions from interested parties both home and abroad. It further conducted economic analysis on competitive effect of the proposed joint venture. Its examination found that the proposed joint venture could cause anticompetitive effect in production and sales of iron ore lumps and fines in the worldwide seaborne market. On October 1, the case examiner submitted the Examination Report which included such finding to the KFTC’s full committee and served it to the concerned companies with a request to present opinions on the Examination Report. BHP Billiton and Rio Tinto announced their agreement to drop the joint venture plan on October 18 reasoning that this transaction was unlikely to obtain the necessary approvals to allow the deal to close which has resulted in both parties agreeing to terminate the agreement and on October 19, 2010, an official request was submitted to the KFTC to withdrawing the notification.

EUROPEAN UNION

Commission clears Unilever's proposed acquisition of Sara Lee Household and Body Care business, subject to conditions: The European Commission (EC) has cleared the planned acquisition by the Anglo-Dutch consumer goods company Unilever of the body and laundry care businesses of Sara Lee Corp of the US, subject to certain conditions. The Commission's in-depth investigation, confirmed competition concerns in a number of deodorants markets. The Commission's decision is conditional upon full compliance with the commitments.

Unilever supplies a wide range of branded consumer goods. In the personal care sector where there were overlaps with Sara Lee, it is particularly strong in deodorants with its leading brands Axe, Dove and Rexona, present all across Europe. Sara Lee supplies deodorants under the Sanex brand in a number of European countries. Its personal care business also includes other brands such as Radox, Duschdas, Badedas or Monsavon. The Commission's in-depth investigation has shown that the merger would give Unilever a very strong leadership position in a number of deodorants markets by combining the parties' brands, most notably Sanex with Dove and with Rexona which presently compete against each other. The Commission found that the affected areas would be Belgium, The Netherlands, Denmark, the United Kingdom, Ireland, Spain and Portugal where by clearing this merger tan important competitive force would be removed which would lead to a price increase. The merging parties made the commitment to divest Sara Lee's Sanex brand and related business in Europe. This offers a clear and workable remedy, sufficient to restore competition in all markets where the Commission had concerns.

Commission probes allegations of antitrust violations by Google: The EC has decided to open an antitrust investigation into allegations that Google Inc. has abused a dominant position in online search, in violation of European Union rules (Article 102). The opening of formal proceedings follows complaints by search service providers about unfavorable treatment of their services in Google's unpaid and sponsored search results coupled with an alleged preferential placement of Google's own services. This initiation of proceedings does not imply proof of any infringement, it only signifies the beginning of an in-depth investigation of the case. Google's internet search engine provides for two types of results when people are searching for information. These are unpaid search results, which are sometimes also referred to as "natural", "organic" or "algorithmic" search results, and third party advertisements shown at the top and at the right hand side of Google's search results page (so-called paid search results or sponsored links). The Commission will investigate whether Google has abused a dominant market position in online search by allegedly lowering the ranking of unpaid search results of competing services which are specialised in providing users with specific online content such as price comparisons (so-called vertical search services) and thus according preferential placement to the results of its own vertical search services in order to shut out competing services. The Commission will also look into allegations that Google lowered the 'Quality Score' for sponsored links of competing vertical search services. The Quality Score is one of the factors that determine the price paid to Google by advertisers. The Commission's probe will additionally focus on allegations that Google imposes exclusivity obligations on advertising partners, preventing them from placing certain types of competing ads on their web sites, as well as on computer and software vendors, with the aim of shutting out competing search tools. Finally, it will investigate suspected restrictions on the portability of online advertising campaign data to competing online advertising platforms.

Commission approves acquisition of Alpha Flight Group by Dnata: The EC has approved the acquisition of sole control of the in-flight catering services provider Alpha Flight Group by Dnata which is part of the Emirates group. The Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it. Dnata is part of the Emirates group which also comprises the Emirates airline. The Emirates group is wholly owned by the government-owned Investment Corporation of Dubai ("ICD"). Dnata provides airline services, including passenger handling, cargo handling, ramp, maintenance and other technical services for airlines worldwide. Alpha Flight Group is active in the supply of in-flight catering services to international airlines. The proposed transaction will give Dnata sole control over Alpha Flight Group. There are no horizontal overlaps between the parties' activities. However, the operation will result in a vertical relationship as Alpha's supply of in-flight catering services is an input for Emirates' airline services. The Commission has examined the effects of the proposed acquisition and concluded that there is no risk of vertical foreclosure following the transaction, given the existence of alternatives for catering services at each affected airport and the small share of Emirates in the total demand for in-flight catering services.

Commission approves the acquisition of Motorola's mobile network business by Nokia Siemens Networks: The EC has cleared the acquisition of Motorola Network Business (MNB) of the US by Nokia Siemens Networks B.V. (NSN) of The Netherlands. After examining the operation, the Commission concluded that the transaction would not significantly impede effective competition in the EEA or any substantial part of it. NSN provides mobile and fixed network infrastructure, communications and networks service platforms, as well as professional services to operators and service providers. MNB designs, manufactures, sells and installs mobile network systems for mobile service providers. The Commission assessed the impact of the proposed transaction on the mobile network equipment sector and related services in the EEA. The Commission’s investigation revealed that the parties' product portfolios are largely complementary and that MNB has a limited presence in the EEA. Furthermore, the Commission reached the finding that the combined entity would continue to face a number of large and effective competitors. Finally, the markets for mobile network equipment are bidding markets with sophisticated buyers. The Commission therefore concluded that the concentration will not give rise to any competition concerns. Even though the transaction did not meet the thresholds of the Merger Regulation, it was referred to the Commission for review following a request from the merging parties.

Commission opens antitrust proceedings against a number of cement manufacturers: The EC has opened anti-trust proceedings against a number of cement manufacturers for suspected breaches of EU rules banning restrictive business practices (Article 101). The Commission intends to investigate in particular possible import/export restrictions, market sharing and price coordination in the markets for cement and related products in Austria, Belgium, the Czech Republic, France, Germany, Italy, Luxembourg, The Netherlands, Spain, and the UK. The preliminary assessment has shown that the Commission should pursue this investigation as a matter of priority. The Commission has carried out inspections on two occasions in this regard in different regions. The Commission will investigate indications that the companies acted to restrict trade flows in the EEA, including restrictions of imports into the EEA from countries outside the EEA, market sharing, price coordination and connected anticompetitive practices in the markets for cement and related products.

The products concerned are, in addition to cement, cement-based products (e.g. ready mix concrete) and other materials used to produce cement-based products (e.g. clinker, aggregates, blast-furnace slag, granulated blast-furnace slag, ground granulated blast-furnace slag, fly ash). There is no legal deadline to complete inquiries into anticompetitive conduct. Their duration depends on a number of factors, including the complexity of each case, the extent to which the undertakings concerned co-operate with the Commission and the exercise of the rights of defence.

Commission fines six LCD panel producers €648 million for price fixing cartel: The EC has fined six LCD panel producers a total of €648,925,000 for operating a cartel between October 2001 and February 2006 which harmed European buyers of television sets, computers and other products that use the key Liquid Crystal Display component. The six producers are Samsung Electronics and LG Display of Korea and Taiwanese firms AU Optronics, Chimei InnoLux Corporation, Chunghwa Picture Tubes and HannStar Display Corporation. Samsung Electronics received full immunity from fines under the Commission's leniency programme, as it was the first to provide information about the cartel. LCD panels are the main component of thin, flat screens used in televisions, computer monitors and electronic notebooks.

During the four years, the companies agreed on various aspects such prices, including price ranges and minimum prices, exchanged information on future production planning, capacity utilisation, pricing and other commercial conditions. The cartel members held monthly multilateral meetings and further bilateral meetings. In total they met around 60 times mainly in hotels in Taiwan for what they called "the Crystal meetings". These agreements had a direct impact on customers in the EEA because the vast majority of televisions, computer monitors and notebooks incorporating those LCD panels and sold in the EEA comes from Asia.

The investigation demonstrates that the companies were aware of violating competition rules and took steps to conceal the venue and results of the meetings. Documents were procured which requested everybody "to take care of security/confidentiality matters and to limit written communication". The Commission faced the companies with a Statement of Objections on May 2009 on which they had the opportunity to comment and be heard and after which the Commission reduced the proven duration of the infringement by four months.

Commission clears proposed acquisition of DSM Special Products by equity investor Sun Capital: The EC has approved the proposed acquisition of DSM Special Products (DSP) and DSM IP Assets (DSM IP) of The Netherlands by Sun Capital Partners (SCP), a private equity investment firm of the US. After examining the operation, the Commission was of the view that the transaction would not significantly impede effective competition in the EEA or any substantial part of it. One of SCP’s subsidiaries controls Emerald Kalama Chemicals, a US based company active in the production of benzoic acid, sodium benzoate, benzyl alcohol and benzaldehyde. Kalama also produces derivates of some of these chemicals as well as certain other fatty aldehydes (downstream products). These products are used in a variety of applications, such as food, pharmaceutical, healthcare or agrochemical applications. DSP and DSM IP are part of DSM Netherlands, both are wholly owned subsidiaries of Royal DSM. DSP produces benzaldehyde, benzoic acid, benzyl alcohol, and sodium benzoate. DSM IP is the owner of certain intellectual property rights.

The proposed transaction has certain horizontal overlaps on the markets for benzoic acid, sodium benzoate benzaldehyde and benzyl alcohol which would have effects on a number of vertical markets, such as.
  1. the upstream market for benzoic acid and the markets for potassium benzoate, benzyl benzoate and benzoate plasticizers downstream; and

  2. the upstream market for benzaldehyde and its downstream derivatives, i.e. amyl and hexyl cinnamic aldehyde, methyl cinnamic aldehyde and cinnamic aldehyde, mainly used in flavour and flagrance industries
The Commission’s examination showed that the overlaps are not significant and are unlikely to lead to competition concerns. Regarding the vertical links, the Commission concluded that the merged entity will have no or limited ability and incentives to close off the markets involved, since alternatives and credible suppliers will remain in the markets after the transaction and cleared the acquisition.

Commission approves proposed acquisition of certain businesses of German car industry supplier Karmann by Volkswagen: The EC has approved the proposed acquisition of certain businesses of the German car manufacturer supplier Karmann by Volkswagen (VW), which is controlled by Porsche Automobil Holding SE. The Commission concluded that the proposed transaction would not significantly impede competition in the EEA or any substantial part of it. VW is active worldwide in the development, production and sale of passenger cars, light commercial vehicles, car components as well as the manufacturing of buses and commercial vehicles. Its main brands are Volkswagen, Audi, Bentley, Bugatti, Lamborghini, Porsche, Scania, SEAT, Skoda and Volkswagen Nutzfahrzeuge.Karmann is currently under insolvency administration. Under the proposed transaction, Volkswagen would acquire the following Karman businesses: car and components development, contract manufacturing, plant engineering and the development and production of equipments and tools. As Karmann acts as a supplier to the car industry, the transaction mainly leads to vertical links. Given the presence of other considerable suppliers and the moderate market share of Karmann, the Commission concluded that car manufacturers will continue to have sufficient alternative suppliers after the transaction.

SOUTH AFRICA

Pioneer to pay nearly R1bn in penalties: In furtherance of the fine of R195,7m imposed on Pioneer Foods, it has also agreed to the following:
  1. R250m fine;

  2. R250m contribution was to a newly created incubator fund for small agro businesses; and

  3. An agreement to reduce its gross profit margin on flour and bread products to the tune of R160m.

The deal would allow Pioneer to clean the slate, and would close all the allegations of collusion and price-fixing against it. This order is a model for future antitrust settlement agreements. This agreement not only resulted in a penalty but also included price adjustment for the benefit of consumers and a fund to promote competition in the agro processing industry. The company has undertaken to co-operate fully with, and give information to, the commission as it investigates outstanding cases that involved the company.

Maximum penalty for South African pre-cast cartel: The South African Competition Tribunal has fined ZAR 22.9 million (US$ 3.2 million) to two concrete pipe manufacturers who pleaded guilty for participating in a price-fixing cartel that was started in 1973. Southern Pipeline Contractors (SPC) was fined ZAR 16.8 million (US$ 2.3 million – maximum penalty) and Conrite Walls' penalty was ZAR 6.1 million (US$ 0.8 million), representing 10% and 8% of their respective annual revenues in 2006. SPC (who participated in the cartel for 13 years) and Conrite Walls had previously admitted to being part of the "Rocla" cartel, but disputed the maximum 10% of turnover penalty that the Competition Commission had asked the Tribunal to impose on them.

The Conrite Company was fined lesser amount as it reflected lesser involvement. The judgment followed a year-long investigation by the Competition Commission into the concrete pipes industry which lead to it uncovering a cartel that had operated from 1973 to 2007.Nine companies operated in the cartel, dubbed the "Rocla cartel" after Rocla, a subsidiary of one of South African contractor company Murray & Roberts, blew the whistle in December 2007. As a result of coming forwards and implicating itself and the other cartel members, Rocla was granted conditional leniency by the Commission.

Sasol fined R111m in polymers case: JSE-listed energy and chemicals group Sasol have moved to settle a case of collusive behavior by one of its units with South Africa's competition authorities. Sasol Polymers, a division of Sasol Chemical Industries, reached a settlement with the Competition Commission in which it admitted that a supply agreement between it and Safripol had resulted in indirect price fixing of polypropylene while still denying the charge of finding that it had also charged excessive prices for polypropylene and propylene to its local customers in line with import parity pricing. Polypropylene is a plastics polymer used by plastics converters to manufacture a wide range of products. The company agreed to pay a penalty of R111,7m representing 3% of its 2009 total annual turnover derived from polypropylene products.This polymers matter was initiated in 2007 following concerns raised by the Department of Trade and Industry about polymer pricing.

Commission prohibits merger of seed firms: The Competition Commission prohibited the proposed merger between Pioneer Hi-Bred International, a US-based multinational seed producer controlled by DuPont, and the locally based Pannar Seed. The commission was of the view that it would substantially prevent or lessen competition in the maize seed market in SA. The local market has three major companies, the merging parties and the multinational Monsanto. Even though Pioneer and Pannar both claimed that it would lead to technological efficiency and pro-competitive gains from combining their germplasm, and introducing breeding technologies but the Commission found these benefits unconvincing and unlikely to outweigh the anti competitive harm which the merger might cause as the market is highly concentrated.

UNITED STATES OF AMERICA

Intel settled the antitrust suit: The Federal Trade Commission (FTC) brought an antitrust case against Intel last year. The major allegation against Intel was that the company had illegally stifled competition in the processor market. Specifically, Intel threatened PC makers (including Dell, Hewlett-Packard, and IBM) who wanted to source processors from AMD and after restraining them from doing so, Intel even rewarded them for remaining loyal to Intel. The settlement had prohibited Intel from making such threats and offering such rewards in return for exclusivity .The settlement also imposes certain restrictions on Intel in order to ensure that markets remain competitive which would involve Intel would altering its intellectual property licensing agreements with AMD, NVIDIA, and Via, for allowing companies greater freedom to collaborate or merge without risking a suit from Intel for patent infringement.

Sixth manufacturer admits to LCD price fixing: The Sixth manufacturer of LCD screens has admitted to have been a part of the cartel operation to drive up the price of such screens. Taiwanese manufacturer Chi Mei Optoelectronics has admitted to taking part in the scam. The company has agreed to pay US$220 million in damages. According to FBI the conspiracy was carried out by agreeing during meetings, conversations, and communications to charge prices of TFT-LCD panels at certain pre-determined levels and issuing price quotations in accordance with the agreements reached. Chi Mei exchanged information on sales of TFT-LCD panels for the purpose of monitoring and enforcing adherence to the agreed-upon prices. By this estimate it is proved that the global LCD market was worth US$70 billion.

All Nippon Airways Co. Ltd.(ANA) agrees to plead guilty to Price Fixing: All Nippon Airways Co. Ltd. (ANA) agreed to plead guilty and is ready to pay a $73 million criminal fine for its role in two separate conspiracies to fix prices in the air transportation industry. Japan-based ANA had engaged in a conspiracy to fix one or more components of cargo rates charged for international air cargo shipments from April 1, 2000, until Feb. 14, 2006. They are also charged with engaging in a conspiracy to fix unpublished passenger fares on tickets purchased in the United States. According to ANA such conspiracies were carried out during meetings and other communications on certain components of the cargo rates that were to be charged for shipments on routes between the United States and Japan, and also on unpublished passenger fares to be charged on tickets purchased in the United States. They had been charged with two counts of price fixing in violation of the Sherman Act, under which maximum fine for corporations is $100 million for each violation committed after June 22, 2004, and $10 million for violations committed before that date.

Adobe’s complaint was prompted by Apple’s policy: U.S. antitrust authorities are considering investigation of Apple Inc. on a complaint by Adobe Systems Inc. According to Adobe, Apple is stifling competition by banning developers from using Adobe’s products to create applications for iPhones and iPads. The complaint was triggered when discussions were being held between the Justice Department and the Federal Trade Commission over which agency should review the allegations of anticompetitive behavior. Neither agency has decided whether it would open an investigation. Adobe generally makes development tools for software makers to write applications that run on a variety of mobile phones and other handheld devices.

Google gets the green signal on AdMob buy: Google Inc has won U.S. approval for buying mobile advertising rival AdMob, after months of delay. FTC’s main concern is that two top mobile advertising networks are combining, but Apple Inc's entry into the market would mitigate the effects of the Google/AdMob powerhouse. FTC made a statement in this regard which is "The decision was a difficult one because both the parties are the two leading mobile advertising networks currently, and that the commission was concerned about the loss of head-to-head competition between them.

American Express, Credit Card Networks Sued in Antitrust Case:  The Department of Justice has filed an antitrust lawsuit against Visa, MasterCard and American Express, alleging imposed by the three credit card networks stop merchants from offering consumers discounts or rewards for using other, less expensive forms of payments. When consumers use a credit card to make a purchase, the card networks and financial institutions that issue the card charge the retailer a fee, typically, 1% to 3% of the price. According to Consumers the fees charged leads to higher prices, even for consumers who pay with cash.

United and Continental Said to Agree to Merge:  The DOJ has closed internal investigation, and granting the application, for a merger between United and Continental airlines. The proposed merger is aimed at combining the two airlines complementary networks within the US, which included certain overlapping routes between the airlines. The largest of such routes were between United’s hub airports in various cities within the US and the Continental’s hub at Newark Liberty Airport in New Jersey. Since Continental has a high market share at Newark airport and the number of take-off and landing slots is limited, the DOJ expressed concern that the proposed merger may restrict competition for flights to and from Newark. In order to secure clearance for its merger, United and Continental entered into an agreement to sell some take-off and landing slots to a low cost carrier – Southwest airlines. The DOJ took the view that since Southwest currently does not serve Newark airport, this move will allow a new entrant to exercise competitive pressure on the parties post-merger and is expected to benefit customers significantly. Just a month before, the merger was also cleared by the European Commission.

AUSTRALIA

ACCC clears proposed acquisition of ASX by Singapore Exchange: The Australian Competition and Consumer Commission (ACCC) would not oppose the proposed acquisition of ASX Limited (ASX) by Singapore Exchange Limited (SGX).The ACCC reviewed the proposed acquisition under section 50 of the Trade Practices Act 1974, which prohibits mergers that would have the effect of substantially lessening competition in a market. The investigation focused on whether the proposed acquisition would deter the entry of Chi-X Australia Pty Ltd (CXA) or Chi-East, because of a joint venture agreement which SGX has with Chi-X Global (CXG). CXG's wholly owned subsidiary CXA plans to establish a lit trading venue in Australia which would compete with ASX.  All buy and sell orders are transparent on a "lit pool". After extensive inquiries with a range of market participants, the ACCC concluded that the proposed acquisition was unlikely to result in a substantial lessening of competition.

ACCC issues draft decision to authorise Virgin Blue-Etihad alliance: The ACCC has issued a draft determination proposing to grant authorization for an alliance between Virgin Blue and Etihad (the Alliance). Under the Alliance, Virgin Blue and Etihad have agreed to cooperate on joint pricing and scheduling of services across their networks. The Alliance will also add capacity between Australia and Abu Dhabi. This is likely to promote competition and result in benefits for Australian consumers through new international services and increased online connections. Since there are no overlapping routes, the ACCC is of the view that the Alliance is unlikely to result in any public detriment.

ACCC not to oppose pharmaceutical acquisition: The ACCC will not oppose the proposed acquisition of Sigma Pharmaceuticals Limited's Pharmaceutical Division by Aspen Pharmacare Holdings Limited on the pre-condition that Aspen is provides an undertaking to sell certain brands to address the ACCC's competition concerns. The ACCC is satisfied, taking into account the divestiture undertaking by Aspen to sell certain pharmaceutical brands, that the proposed acquisition is unlikely to substantially lessen competition. In Australia, Aspen and Sigma's Pharmaceutical Division compete in a number of pharmaceutical markets, including in the supply of various prescription generic medicines and over-the-counter pharmaceutical products. The ACCC conducted an extensive review to assess the impact of this transaction on customers of pharmaceutical products, such as the Federal, State and Territory governments, pharmacists and patients etc. The proposed acquisition would remove the only competitor to Aspen in a number of pharmaceutical markets. Without the proposed divestitures, Aspen would become the sole supplier in these pharmaceutical markets. Therefore, with the above undertaking the ACCC has ensured that competition would not be affected negatively and Aspen will sell other brands as well.

ACCC in bid to block purchase of Franklins: The ACCC filed an application with the Federal Court seeking an injunction against the proposed $215 million Metcash & Franklins deal. The ACCC has alleged that the acquisition would substantially lessen competition in the NSW wholesale grocery sector as Metcash would close down Franklins' wholesale operation. It also has a wholesale division that supplies not only the company-owned stores but also 10 franchisee stores trading under the Franklins banner. Metcash plans to close down Franklins' wholesale division and sell off the company-owned supermarkets to independent operators, who will then be supplied by its own IGAD wholesale business. But the ACCC is claiming that Franklins' wholesale division acts as a competitive constraint on Metcash, having previously prompted the company to offer supermarket operators a 1.2 per cent rebate to retain their business after Franklins began trying to poach wholesale customers in the ACT and NSW. Metcash has agreed to hold off on the acquisition until the hearings in the Federal Court begin in February.

Black & White Cabs to pay $120,000 penalties, costs for unlawful conduct: The Federal Court in Melbourne has ordered that Black and White Cabs Pty Ltd has to pay $120,000 penalty because it required some taxi operators as part of a sub-lease agreement to exclusively use the Cabcharge Payment System when processing electronic payments. Black and White Cabs admitted to the third line forcing contraventions for a period of three months in 2009, involving 14 operators running 23 taxis. Black and White Cabs and the ACCC jointly submitted agreed penalties and other orders to the court for consideration. The following order was passed:
  1. Imposition a penalty of $110,000 (payable in 3 installments over two years)

  2. Restrained Black and White Cabs from engaging in similar conduct for a period of 5 years

  3. Black and White Cabs to send letters to all of its affiliated taxi operators regarding its unlawful conduct

  4. Black and White Cabs to implement a trade practices compliance program, and

  5. Black and White Cabs to pay a contribution of $10,000 towards the ACCC’s costs.
The penalty of $120,000 incorporated a discount for a plea before trial. The conduct was for a period of three months in 2009. He also noted that this decision follows shortly after the conclusion in late September of ACCC proceedings against Cabcharge Australia Limited for misuse of market power where penalties of $14 million were imposed together with other orders.

CANADA

Embraco North America Inc. Pleads Guilty to Price-Fixing Conspiracy: Embraco North America Inc. was fined $1.5 million by the Federal Court after pleading guilty to criminal charges that it fixed the price of hermetic refrigeration compressors sold to a household refrigerator and freezer manufacturer in Canada. The Competition Bureau's investigation revealed that, between January and December 2005, Embraco conspired with its competitors to fix the price of hermetic refrigeration compressors sold in Canada and elsewhere. Under the Competition Act, an agreement between competitors to fix prices, allocate markets or restrict output in Canada is a criminal offence. The price-fixing conduct in question occurred under the previous conspiracy provision, and penalties at that time were capped at fines of up to $10 million and prison terms of up to five years, or a combination of both. The Competition Bureau ensures that Canadians prosper from the benefits of a competitive marketplace, driving innovative products and services at competitive prices and such acts are punished.

Cargolux Pleads Guilty in Air Cargo Price-fixing Conspiracy: The Competition Bureau fined Cargolux Airlines International S.A. an amount totaling to $2.5 million as it pleaded guilty in Federal Court for its role in an air cargo cartel affecting Canada. The company has itself admitted of its engagement in a conspiracy to fix air cargo fuel surcharges for international air cargo transportation services from Canada between April 2002 and February 2006. Cargolux's penalty brings the total fines in the Bureau's air cargo investigation to more than $17 million. Following amendments to the Competition Act that came into force in March 2010, penalties for violations of the conspiracy provision include fines of up to $25 million and prison terms of up to 14 years, or a combination of both. At the time of the price-fixing conduct in question, penalties were capped at fines of up to $10 million and prison terms of up to five years, or a combination of both.

Competition Bureau Requires Whirlpool to Reimburse Customers for Misleading Rebate Program: Whirlpool Canada LP (Whirlpool) that manufactures appliances was asked to take immediate steps to address the Bureau's conclusion that Whirlpool engaged in a misleading mail-in rebate promotion. To address these concerns, nearly 400 customers whose mail-in rebates were rejected will be reimbursed up to $2000 each by Whirlpool, depending on their purchases. Hundreds of consumers were denied their rebate on the stated basis that they purchased appliances at Whirlpool dealers who were not "participating" in the promotion. Businesses are encouraged to consult the Enforcement Guidelines on Consumer Rebate Promotions, which describe the Bureau's approach to interpreting the false or misleading representations provisions of the Competition Act, the Consumer Packaging and Labelling Act, and the Textile Labelling Act in the area of consumer rebate promotions. While the Guidelines deal with rebate promotions, the principles outlined in the document are relevant to other types of promotions as well.

Competition Bureau Challenges Visa and MasterCard’s Anti-competitive Rules: The Competition Bureau filed an application with the Competition Tribunal, to strike down the restrictive and anti-competitive rules that Visa and MasterCard impose on merchants who accept their credit cards. The Commissioner alleged that these rules have effectively eliminated competition between Visa and MasterCard for merchants' acceptance of their credit cards, resulting in increased costs to businesses and, ultimately, consumers. Merchants in Canada pay an estimated $5 billion annually in hidden credit card fees.The anti-competitive restraints on merchants result in higher prices for all consumers, whether they pay by cash, cheque, debit or credit, because merchants pass along some or all of the high costs they are forced to pay as a result of Visa's and MasterCard's anti-competitive rules. The rules challenged by the Bureau prohibit merchants from encouraging consumers to consider lower cost payment options like cash or debit, and prohibit merchants from applying a surcharge to a purchase on a high cost card. Canadian merchants that accept Visa and MasterCard credit cards must pay a fee ranging between 1.5 and 3 percent or more of each purchase, nearly twice as much as their counterparts pay in Europe, New Zealand and Australia, but slightly less than in the United States. By contrast, the card acceptance and processing fee paid by merchants in the case of an Interac debit transaction is a flat fee of approximately 12 cents, regardless of the value of the purchase.

Charges Laid in Residential Construction Bid-Rigging Scheme in Montreal: The Competition Bureau has laid criminal charges against eight companies and five individuals accused of rigging bids for private sector ventilation contracts for residential highrise buildings in the Montreal area. The Bureau uncovered evidence indicating that several companies specializing in ventilation, air conditioning and heating services, secretly coordinated their bids in order to pre-determine the winners of the contracts, while blocking out honest competitors. The investigation found evidence of criminal activity in five competitive bidding processes between 2003 and 2005, for contracts worth approximately $8 million. The contracts relate to the supply and installation of ventilation and/or air conditioning systems in residential highrise construction projects in the greater Montreal region. Under the Competition Act, it is a criminal offence for two or more bidders, in response to a call for bids or tenders, to agree that one party will refrain from bidding, withdraw a submitted bid, or agree among themselves on bids submitted, without informing the person calling for the bids of this agreement. Penalties for bid-rigging include a fine at the discretion of the court and/or a prison sentence of up to 14 years.
G.R. BHATIA is the Partner & Head of the Competition Law Team and KANIKA CHAUDHARY is an Associate in the Competition Law Practice Team at Luthra & Luthra Law Offices at its New Delhi office.
 
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