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2 The views and opinions expressed herein are those of the authors of each respective contribution. The 2009 Year in Review is not, and should not be relied upon, as legal advice. Copyright 2009 American Bar Association. All rights reserved.

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5 Message from the Committee Chairs The past decade has witnessed dramatic growth in the global breadth and scope of the practice of competition law. There are currently more than 100 countries with significant competition legislation and that number seems to be increasing every year. Many nations, including India, Russia, China, Greece and others, are making or proposing major amendments to their competition laws. The goal of the International Antitrust Law Committee is to reflect and promote this globalization trend. The Committee is comprised of members from around the world, making up an international network of competition/antitrust practitioners and government officials. We take a leading role in policy development, frequently providing comments and input to assist competition agencies and government officials worldwide in the formulation and enforcement of their competition laws. One of our Committee's principal functions is to keep our Committee and Section members informed about significant international competition law developments. We do this through regular reports on our Committee listserv, brown bags and teleconferences and presentations at the Section's Spring and Fall meetings. Another major component of our outreach effort is our annual analysis and summary of key antitrust developments in jurisdictions around the world. We do this through two vehicles: the International Section's comprehensive "Year in Review" publication and through our Committee's own Year in Review monograph, the 2009 edition of which you are now reading. The "Year in Review" requires substantial time and effort on the part of the contributors and editors. We are indebted to our 2009 editors Susana Cabrera (Vice Chair of the International Antitrust Committee), Konstantin Jörgens and Álvaro González of Garrigues, Madrid, Spain and all of the authors for their excellent contributions to this project. Given the substantial lead time required to prepare this publication, we are already looking ahead to the 2010 edition. The 2009 Year in Review covers 43 jurisdictions. Our goal is to increase that level of participation even further. We would encourage all those who might be interested in contributing to this publication to contact us. You can also visit the International Antitrust Law Committee's website at for more information about this and other of our activities. Fiona Schaeffer Weil, Gotshal & Manges LLP fiona.schaeffer@weil.com David Schwartz Wachtell, Lipton, Rosen & Krantz daschwartz@wlrk.com 5

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7 Editors Note The 2009 edition of the International Antitrust Law Committee's "Year in Review" was edited by Susana Cabrera, Konstantin Jörgens and Álvaro González of Garrigues, Madrid, Spain with the invaluable assistance of Andrew Read (English revision) and the Garrigues Marketing Department, in particular César Caldevilla who was instrumental in designing the layout. The contributions in the 2009 edition of the "Year in Review" identify key competition law developments over the past calendar year, and linking them to developments in earlier years, where appropriate. We are particularly proud that we were able to expand the coverage of this unique publication to 43 jurisdictions, making it the most comprehensive monograph of its kind. As always, the "Year in Review" publication also requires a great deal of work on the part of our contributors. We would like to thank all of them for the care, time and effort they have devoted to this publication. It has been a pleasure to work with you. We hope that this publication will prove helpful to colleagues around the world that are involved in, and affected by developments in competition law internationally. Susana Cabrera Konstantin Jörgens Álvaro González Garrigues Garrigues Garrigues susana.cabrera@garrigues.com konstantin.joergens@garrigues.com alvaro.gonzalez@garrigues.com 7

8 Authors ARGENTINA Brons & Salas María José Rodriguez Macías and Alfredo Rovira AUSTRALIA Minter Ellison Paul Schoff, Jackie Mortensen and Jing Chua AUSTRIA Freshfields Bruckhaus Deringer LLP Dr. Axel Reidlinger and Dr. Heinrich Kühnert BELGIUM Latham & Watkins LLP Bruno Lebrun and Thibault Balthazar BRAZIL Lanna Peixoto Advogados Bruno L. Peixoto CAMBODIA-LAOS-VIETNAM DFDL Mekong David Fruitman, Sar Vathana, Aristotle David and Nguyen Huong Giang CANADA Davies Ward Phillips & Vineberg LLP Mark Katz, Elisa Kearney and Jim Dinning CHILE Carey y Cía. Claudio Lizana, Marcos Ríos, Lorena Pavic and Juan Coeymans CHINA Jones Day Peter Wang and Yizhe Zhang COLOMBIA Gómez Pinzón Zuleta Abogados S.A. Mauricio Jaramillo EGYPT Al Kamel Law Office Bassinthe Abou El Fadl and Mohamed Hashish EUROPEAN UNION Covington & Burling LLP Gunnar Wolf and Michael Clancy FINLAND Asianajotoimisto Mercatoria Oy Attorneys-at-Law Toni Huopalainen FRANCE Cleary Gottlieb Steen & Hamilton LLP François Brunet and Eric Paroche GERMANY Latham & Watkins LLP Susanne Zuehlke and Dr. Jan Philipp Komossa GREECE Kyriakides Georgopoulos & Daniolos Issaias Law Firm Anastasia Dritsa and Thomas Amorgianiotis HUNGARY KNP Law Nagy Koppany Varga and Partners Kornelia Nagy-Koppany INDIA Amarchand & Mangaldas & Suresh A. Shroff & Co. Pallavi S. Shroff and Harman Singh Sandhu IRELAND McCann FitzGerald Gerald FitzGerald, Damian Collins and Philip Andrews ISRAEL Epstein Chomsky Osnat & Co. Eytan Epstein, Tamar Dolev-Green and Hila Rosen-Glickstein ITALY Gianni, Origoni, Grippo & Partners Law Firm Alberto Pera and Valentina Caticchio JAPAN Anderson Mori & Tomotsune Shigeyoshi Ezaki and Vassili Moussis KOREA Kim & Chang Youngjin Jung, Jung Seo and Tae-Kyu Kang MEXICO SAI Consultores, S.C. Lucía Ojeda NETHERLANDS Freshfields Bruckhaus Deringer LLP Winfred Knibbeler and Nima Lorjé NEW ZEALAND Russell McVeagh Andrew Peterson and Troy Pilkington NORWAY Advokatfirmaet Haavind AS Trygve Norum and Gaute Sletten PERU Estudio Rubio, Leguía, Normand & Asociados S.R.L Oscar Arrús POLAND Garrigues Carlos Rapallo PORTUGAL Cuatrecasas, Gonçalves, Pereira António Vitorino and Stéphanie Sá Silva RUSSIA Alrud Law Firm Vassily Rudomino SERBIA World Bank / KTH University Olga Cvetkovic and Marija Marosan SINGAPORE Drew & Napier LLC Lim Chong Kin, Ng Ee-Kia and Scott Clements SOUTH AFRICA Deneys Reitz Inc. Heather Irvine SPAIN Garrigues Susana Cabrera, Konstantin Jörgens and Álvaro González SWEDEN Advokatfirman Vinge KB Per Karlsson and Emma Dufva SWITZERLAND CMS von Erlach Henrici Ltd. Dr. Patrick Sommer, Stefan Brunnschweiler and Dr. Clemens von Zedtwitz TAIWAN Jones Day John C. Lin TURKEY Luther Karasek Köksal Consulting AS Selin Beceni UKRAINE Vasil Kisil & Partners Denis Lysenko and Mariya Nizhnik UNITED KINGDOM SJ Berwin LLP Stephen Kon, Dr. Gordon Christian and Jai Bhakar UNITED STATES Weil, Gotshal & Manges Claire Webb and Ausra O. Pumputis VENEZUELA Torres, Plaz & Araujo Juan Domingo Alfonzo, Luis Mariano Rodríguez and Ana Carolina González 8

9 Index Argentina 11 Australia 15 Austria 19 Belgium 23 Brazil 27 Cambodia-Laos-Vietnam 31 Canada 35 Chile 39 China 43 Colombia 49 Egypt 53 European Union 57 Finland 61 France 65 Germany 71 Greece 75 Hungary 79 India 81 Ireland 87 Israel 93 Italy 97 Korea 105 Mexico 109 Netherlands 113 New Zealand 117 Norway 121 Peru 125 Poland 129 Portugal 131 Russia 133 Serbia 137 Singapore 141 South Africa 145 Spain 149 Sweden 155 Switzerland 157 Taiwan 161 Turkey 163 Ukraine 165 United Kingdom 167 United States 171 Venezuela 177 Japan 101 9

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11 Argentina María José Rodriguez Macías and Alfredo Rovira Legislative Developments Appointments On July 29, 2009, the Argentine President issued Decree No. 993/ appointing a new Executive Officer of the Argentine Antitrust Commission ( AAC ). The AAC is formed by a President and four members, two lawyers and two economists. This appointment was intended to fill the position of one of the economists. Another position (also an economist) remains vacant. Antitrust Law No. 25,156 (the AL ), which has been in force since 1999, provides for the creation of the Argentine Antitrust Tribunal (the Tribunal ), with the authority to apply and enforce the AL. Since the Tribunal has not been set up yet, all antitrust-related proceedings continue to be handled by the AAC in accordance with the provisions of the previous legislation. Bill intended to approve an antitrust cooperation agreement between Argentina and Brazil On July 15, 2009, the Executive Branch introduced a Bill 2 in the Argentine Congress intended to approve the Agreement between Argentina and Brazil for cooperation between both countries antitrust authorities in the application of their antitrust laws (the Agreement ). 3 By virtue of this Agreement, both countries aim to promote cooperation between their antitrust authorities by exchanging information on antitrust investigations, merger control proceedings and any other relevant activity. More specifically, the parties agree to keep one another informed about the following: (i) the activities are significant for the other country in the application of its laws; (ii) in the event of anti-competitive practices, the entire activity or a significant portion thereof affects the territory of the other country; (iii) in the event of merger control proceedings in which one or more of the parties involved or a company controlling one or more of the parties to a transaction is a company organized or formed under the laws of the other country; (iv) a conduct being investigated, prosecuted or approved by the other country; and (v) the request relates to information located in the other country s territory. Each party remains subject to confidentiality obligations in its jurisdiction. The Agreement also contemplates the possibility of informing the authorities of the other MERCOSUR countries (Paraguay and Uruguay) about ongoing investigations into anti-competitive practices. Mergers In August 2009, 4 the AAC approved Telefónica s acquisition of control over Telecom Italia, subject to conditions. The decision ordered Telecom Italia to divest its equity interests, assets and rights in Sofora Telecomunicaciones (company through which it controls Telecom de Argentina) within one year. The AAC expressed at all times its concern about the extremely negative effects of the transaction on competition in the telecommunications market as well as the possibility of the development of convergent markets. In addition, the ACC stated that the team-up of two of the most important competitors in the Argentine market was extremely dangerous for progress and general economic welfare. 1 Boletín Oficial de la República Argentina [Official Gazette], July 29, 2009 First Section, available in Spanish at 2 Official Dossier, No. PE 163/09, available in Spanish at 3 This Agreement was signed in Buenos Aires on October 16, 2003, available in Spanish at 4 Decision No. 483, August 25, 2009, available in Spanish at 11

12 DEVELOPMENTS IN ARGENTINA This decision was preceded by a series of injunctions granted by the AAC, 5 which laid down a procedure for monitoring and controlling the companies in the Telecom de Argentina Group and their controlling entities and included a prohibition on the exercise of any voting rights by Telefónica and its partners in the target companies. These injunctions evidence the AAC s concern that the parties may engage in gun-jumping, despite the fact that the AL states that a notified transaction shall have no effects until it is authorized. Telefónica successfully appealed against these injunctions, the Court holding, inter alia, that the AAC had acted ultra vires by performing the tasks of a court that had never been set up. Thus, the ACC had "unlawfully exceeded its powers, since it did not argue, nor could it try to argue, that the aim of the decision was the protection of the market (a duty vested in the Antitrust Commission)". On September 4, 2009 the AAC ordered an audit to monitor compliance with the conditions imposed on the merger of Multicanal and Cablevision, taking into account the conditions laid down in an earlier opinion of the Federal Broadcasting Committee 6 ( Comfer ) and its own conditional approval decision of December 7, The purpose of this audit was to determine whether the conditions under which the merger was approved had been met. The AAC concluded that the commitment had been breached and issued a decision 8 suspending the authorization. An appeal against this decision is pending. On December 22, 2008, almost two years after the notifiable transaction took place, the AAC issued a decision approving the merger between Advent and IMC, 9 while imposing fines on both companies. The AL provides that the fine for late filing may be up to AR$1,000,000 (approximately US$256,000) per day, although in this case the fine was significantly reduced because the ACC applied the criminal law principle in dubio pro reo, giving both parties the benefit of the doubt. The parties had made reference to their transaction in another proceeding in which they had requested to be exempted from submitting a notification. Although such request was not made in the manner required by the applicable law (in the form of an advisory opinion), it was taken into account for computing the time period in question, which was then just fifteen days. The ACC also considered the parties uncertainty as to whether the transaction should be notified or not and the fact that the transaction did not lead to competition concerns. Ultimately, the ACC imposed a fine of AR$6,500 (approximately US$1,600) per day. According to this new interpretation, the request for exemption from mandatory notification made without the formalities required by the AL may have the same effects as a request for an advisory opinion. The ACC gave its opinion on the applicability of one of the exemptions from mandatory notification set forth in Section 10 of the AL 10 which provides that economic concentrations exceeding the legal threshold are exempt from the mandatory notice when the amount of the transaction and the value of the assets located in the Argentine Republic that are absorbed, acquired, transferred or controlled do not exceed, considered separately, AR$20,000,000 (approximately US$5,000,000), unless during the prior twelve-month period transactions have taken place which globally exceed such amount or AR$60,000,000 (approximately USS$15,300,000) during the last thirty-six months, provided always that in both cases the same market is involved. Traditionally, in global transactions the AAC has examined the financial statements of Argentine companies, as well as the estimates made by the parties to the transaction, to determine whether or not the AR$20,000,000 (approximately US$5,000,000) threshold has been exceeded. In this case, the parties requested an exemption from the obligation to file on the grounds that the financial statements of the Argentine subsidiary showed that the value of its assets was less than AR$20,000,000 (approximately US$5,000,000). In addition, the parties reported to the ACC 5 Injunctions No. 43/09, March 30, 2009, No. 44/09, April 3, 2009 and No. 64/09, May 26, 2009, available in Spanish at Decision No. 577, September 4, The Comfer had ordered Cablevisión, as surviving company, to refrain from altering the provision of services and/or the intended use of the assets assigned to the provision thereof in respect of all licensed services subject to the merger. 7 Decision No. 257, December 7, 2007, available in Spanish at 8 Decision No. 1011, December 4, 2009, available in Spanish at 9 International Mail Corporation and Advent International Corporation notice under section 8 of Law , Dossier No. S01: / See Advisory Opinion No. 166 available in Spanish at 12

13 DEVELOPMENTS IN ARGENTINA that they were not able to determine the local price of the transaction that was being conducted by the Chilean controlling entities. The AAC resolved that, in view of the parties inability to define the price of the transaction in Argentina, the aggregate amount thereof would be taken into account and that such amount exceeded the exemption threshold. Therefore, an exemption could not be granted. Abuses of a Dominant Position On October 21, 2008 the AAC rejected an accusation made by Baro Gas against Repsol YPF Gas on the grounds that YPF Gas refused to continue supplying liquefied gas after appointing a new exclusive distributor (a competitor of Baro Gas) in the City of San Nicolás. 11 Baro Gas argued that YPF Gas offered to sell it liquefied gas through a new distributor rather than directly as it had done in the past and also prevented it from purchasing gas from other companies. In the opinion of the complainant, the acts of YPF Gas clearly evidenced an abuse of its dominant position. The AAC evaluated the potential existence of a cartel formed by YPF Gas and other gas producers to refuse sales. However, as a result of various investigations, the ACC concluded that on many occasions Baro Gas had purchased liquefied gas from other companies outside the City of San Nicolás. It was also ascertained that Baro Gas owed money to YPF Gas and that this might have been the reason why the latter had ceased to use the former as a distributor. The AAC therefore adhered to the criterion previously applied in similar cases by rejecting issues concerning commercial disputes that did not come within the scope of antitrust law. Court Decisions On September 16, 2009, the first court judgment, concerning damages for antitrust conduct, was given since the AL became effective. 12 Section 51 of the AL provides that any person suffering loss as a result of an antitrust infringement may file suit for damages. In this case, the AAC had imposed a fine 13 upon an oil company, YPF (Yacimientos Petrolíferos Fiscales), for increasing the price of liquefied petroleum gas, a market in which YPF occupied a dominant position. Auto Gas S.A., a liquefied gas distribution company sued YPF on the basis that YPF s abuse of its dominant position had led to: (i) an unlawful price increase and (ii) a decrease in the amount of LPG marketed by Auto Gas S.A. Furthermore, Auto Gas asserted in its complaint that after four years of market abuse by YPF, it was no longer able to sell LPG, and, therefore, it was forced to sell its LPG fractionation business to Shell Capsa. However, as regards the price increase, the Court determined that such increase had been passed on to final consumers, who were therefore the ones that had suffered loss as a result of YPF s behavior, not the LPG distributors. The Court finally decided to accept 30% of the amount claimed. As regards lost profits arising from the reduction in the supply of LPG marketed by Auto Gas due to YPF s practices, the Court took note of the accounting experts report referring to the financial statements of the company, which showed that lost profits amounted to 15% of the amount claimed, due to the relation between product cost and the financial cost of their marketing. Ultimately, the Judge ordered YPF to pay $13,094,457 to Auto Gas as damages, plus court costs and lawyers fees. 11 Decision No. 603, October 21, 2008, Baro Gas v. Repsol YPF. 12 National Commercial Judge of First Instance, No. 14, Secretary 27, September 16, 2009 Auto Gas S.A. v/ YPF S.A./ ordinary. 13 SACC Decision No. 314, March 19, Brons & Salas Maipu 1210, 5 floor, City of Buenos Aires - Argentina

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15 Australia Paul Schoff, Jackie Mortensen and Jing Chua Legislative Developments On June 15, 2009, the Australian Parliament passed the much anticipated Trade Practices Amendment (Cartel Conduct and Other Measures) Bill Most of the operative provisions of the Trade Practices Amendment (Cartel Conduct and Other Measures) Act 2009 (the Cartel Act ) took effect from July 24, The Cartel Act introduces into the Trade Practices Act 1974 (Cth) (the TPA ) two new criminal offences 2 and two recast civil prohibitions 3 on making or giving effect to a contract, arrangement or understanding that contains a cartel provision. Cartel provisions are those which fix prices, restrict outputs in the production and supply chain, allocate customers, suppliers or territories (market sharing) or rig bids. 4 Individuals found guilty of engaging in cartel conduct could face up to 10 years imprisonment, 5 while individuals and corporations also face the possibility of significant monetary penalties. 6 The cartel provisions also have potentially significant consequences for international cartel investigations and prosecutions. The Cartel Act removes the references to a market in the cartel offence provisions so parties that make or give effect to a cartel provision need only be, or would otherwise be, but for the cartel provisions, in competition with each other (cf. in competition with each other in a market). 7 By removing the requirement for the parties to be in competition with each other in a market, (defined in section 4E as a market in Australia ) the required nexus to Australia for the cartel provisions is removed and the courts may look beyond Australia to determine whether parties to a contract, arrangement or understanding are in competition. The consequences of the removal of the concept of market has yet to be tested in Australia. The Cartel Act also includes a narrow joint venture defence with respect to the cartel provisions. 8 These provisions have been criticised for being too narrow, in particular because the defence applies to contracts but does not apply to arrangements or understandings, and does not expressly apply to joint venturers who acquire inputs for joint venture activity. On May 7, 2009, the Government released a second discussion paper on its proposal to introduce into the TPA a specific prohibition against creeping acquisitions in the merger context. 9 The second discussion paper considered the submissions and responses provided by stakeholders and interested parties to the Government s first discussion paper released in September In its second discussion paper, the Government proposed the following 1 Trade Practices Amendment (Cartel Conduct and Other Measures) Act (No. 59 of 2009) No. GN 26, July 8, 2009, available at 2 See Trade Practices Act 1974 (Cth), sections 44ZZRF and 44ZZRG. 3 Ibid, Sections 44ZZRJ and 44ZZRK. 4 Ibid, Section 44ZZRD. 5 Ibid, (Cth), section Ibid, Sections, 44ZZRF, 44ZZRG, 44ZZRJ and 44ZZRK. Individuals who commit criminal offences face fines of up to AUD$220,000 (approximately US$195,000) and corporations face fines up to the greater of: (i) AUD$10 million (approximately US$8.9 million), (ii) three times the value of the benefit attributable to the cartel as a whole, or (iii) where the value cannot be determined, 10% of the corporation s annual turnover. Contraventions of the civil cartel prohibition carries the same pecuniary penalty for corporations and a penalty of up to AUD$500,000 (approximately US$443,000) for individuals. 7 Ibid, Section 44ZZRD (4). 8 Ibid, Sections 44ZZRO and 44ZZRP. The civil and criminal cartel provisions will not apply to joint ventures where (i) the cartel provision is for the purposes of a joint venture, (ii) the joint venture provisions are found in a contract, or an alternative arrangement which each party intended to be a contract and reasonably believed was a contract (but not to arrangements and understandings), (iii) the joint venture is for the production and/or supply of goods and services, (but not the acquisition of goods and services), and (iv) the joint venture is carried on jointly by the parties to the contract (or in the case of a body corporate, by a body corporate formed for the purpose of enabling those parties to carry on the joint venture activity). 9 Copies of the second discussion paper and the submissions received are available at Creeping acquisitions generally describes conduct that comprises the accumulated effect of a number of small individual transactions which, when considered in isolation at the time that each transaction occurred, would not breach section 50 of the TPA, but when combined, could be considered to have an adverse effect on competition. 10 Copies of the first discussion paper and the submissions received are available at 15

16 DEVELOPMENTS IN AuSTrALIA two models to deal with creeping acquisitions: (i) a substantial market power model which would prohibit a firm from making an acquisition if it already has a substantial degree of power in a market, and the acquisition would have the effect, or be likely to have the effect, of enhancing that corporation's substantial market power in that market; and (ii) a declaration model in which the application of the suggested substantial market power model would be triggered for a set period of time in certain restricted circumstances as declared by the Minister (for example, for certain declared industries or corporations). At the end of 2009, the Government had not published its views or issued draft legislation further to the second discussion paper, although it is expected to do so in early On January 8, 2009, the Government released a discussion paper on the adequacy of the current interpretation of the meaning of understanding in relation to section 45 of the TPA to capture anti-competitive conduct. 11 Section 45 prohibits a corporation from making or giving effect to a provision of a contract, arrangement or understanding that restricts dealings or substantially lessens competition. The Government did not publish its views on the submissions received or issue draft legislation further to the discussion paper in Mergers The Australian Competition and Consumer Commission (the ACCC ) has, like other international regulators, had to consider mergers driven by the global financial crisis. Although the ACCC has not released comprehensive formal guidelines, 12 its recent acceptance of the failing firm counterfactual 13 offers guidance as to which matters and evidence will be relevant in obtaining merger clearance based on such an approach. For Australia, it appears that to establish an effective failing firm counterfactual mere speculation of failure will not be enough independently evaluated, hard evidence (for example administrators reports, business plans and financial statements) of imminent danger of failure is necessary; and there must be no alternative positive outcome for competition. Cartels and other Anticompetitive Practices In February 2009, the Federal Court ordered Société Air France, Koninklijke Luchtvaart Maatschappij NV and Martinair Holland NV to pay fines of AUD$16 million (approximately US$14 million) for breaching the price fixing provisions of the TPA. 14 The penalties combined with those ordered against Qantas and British Airways in 2008 bring the total pecuniary penalties ordered to date against these airlines in respect of alleged cartels in the air cargo industry to AUD$41 million (approximately US$36 million). In late 2008 and continuing through to 2009, the ACCC commenced proceedings against four other airlines for alleged price fixing contraventions in relation to fuel surcharges applying to the international carriage of air cargo. 15 The ACCC has now brought a total of ten proceedings against airlines for alleged price fixing in the air cargo industry. In addition to the proceedings commenced by the ACCC in the air cargo industry, the ACCC also commenced civil proceedings in 2009 against truck retailers and their 11 A copy of the discussion paper and the submissions received are available at 12 The ACCC s new Merger Guidelines offer some guidance as to the way in which the ACCC is likely to approach a failing firm merger. In contrast, in December 2008, the UK Office of Fair Trading ( OFT ) released guidelines outlining its position regarding acquisitions of failing firms. 13 In October 2008, the ACCC considered the acquisition of Tamar Valley Power Station by Aurora Energy. Although it did not explicitly make reference to a failing firm counterfactual, the ACCC examined the acquisition having regard to the counterfactual that without the acquisition the construction and commissioning of the power station would be delayed or terminated. See In December 2008, the ACCC did not oppose the acquisition of BankWest by the Commonwealth Bank. The ACCC considered a counterfactual under which BankWest would continue to operate as an independent player but not as the competitive force it once was, and concluded that the proposed acquisition was unlikely to substantially lessen competition in the relevant national retail market. See In February 2009, the ACCC did not oppose a proposed acquisition of Hans Continental Smallgoods by Primo, after having closely examined a failing firm counterfactual, February 18, 2009, see 14 The parties consented to the remedies sought, including penalties, injunctions and costs. Société Air France & Koninklijke Luchtvaart Maatschappij NV (KLM) paid AUD$6 million (approximately US$5.3 million), Martinair Holland NV, AUD$5 million and Cargolux International Airlines S.A. paid AUD$5 million (approximately US$4.4 million), see 15 In December 2008, the ACCC commenced proceedings against Singapore Airlines Cargo Pte Ltd. See ACCC News Release available at In April 2009, the ACCC commenced proceedings against Cathay Pacific Airways Ltd. See ACCC News Release available at In August 2009, the ACCC commenced proceedings against Emirates. See ACCC News Release available at In September 2009, the ACCC commenced proceedings against PT Garuda Indonesia Ltd. See ACCC Media Release available at 16

17 DEVELOPMENTS IN AuSTrALIA respective sale managers for alleged price fixing and market sharing; 16 an American-based company for alleged cartel behaviour in the international military defence training systems industry; 17 and a number of karting clubs for alleged contraventions of the Competition Code of New South Wales. 18 Significant fines were also imposed on participants in a joint venture that managed motor vehicle unloading terminals and associated infrastructure. The parties admitted that the conduct had the likely effect of substantially reducing competition in contravention of section 45(2) of the TPA and the participants were ordered to pay fines of AUD$1.9 million (approximately US$1.7 million). 19 In August 2009, Amcor Limited (Amcor) announced that it had reached final agreement in relation to its Federal Court dispute with Cadbury Schweppes Pty Ltd (Cadbury). Cadbury had alleged that Amcor had engaged in anticompetitive conduct in the period up to December 2004 with Visy Industries Australia Pty Ltd (Visy). 20 Cadbury had sought more than AUD$235 million (approximately US$208 million) from Amcor. The final settlement amount is confidential. The proceedings were commenced by Cadbury following a penalty of AUD$36 million (approximately US$32 million) that had been ordered against the Visy Board Pty Ltd by the Federal Court in proceedings brought by the ACCC in December Amcor had been granted immunity from these proceedings after providing information and evidence to the ACCC. The immunity policy does not protect corporations or individuals from civil proceedings. This enabled Cadbury to commence its proceedings against Amcor. Amcor and Visy are also subject to a class action for the alleged cartel arrangement. Abuses of a Dominant Position On June 26, 2009, the ACCC commenced legal proceedings against Cabcharge Australia Limited for alleged breaches of the misuse of market power provisions of the TPA and for allegedly entering into an arrangement for the purpose or with the likely effect of substantially lessening competition in a market in relation to conduct in the Australian taxi industry. The ACCC is seeking pecuniary penalties. The hearing has been listed for October The ACCC instituted Federal Court proceedings against Vanderfield Pty Ltd, Sci-Fleet Motors Pty Ltd and their respective sale managers, for alleged price fixing and market sharing in contravention of section 45 of the TPA, July 2009, available at 17 The ACCC instituted proceedings against DRS, C3 Systems, for alleged cartel behaviour in the international military defence training systems industry, in breach of section 45 of the TPA. The ACCC alleged that a market sharing agreement was made between DRS and another company whereby DRS would withdraw from a proposed procurement of an air combat manoeuvring instrumentation system by the Commonwealth of Australia, June 2009, available at 18 The ACCC instituted proceedings against Australian Karting Association (NSW) Inc and various AKA clubs. The ACCC alleged that an agreement was made in 2008 between the AKA and AKA clubs that minimum fees would be charged for the hire of kart circuits to non-aka operators, with all negotiations for circuit hire to be conducted by the AKA, June 2009, available at 19 See Australian Competition and Consumer Commission v PRK Corporation Pty Ltd [2009] FCA 715 available at 20 See Amcor Media Release, August 7, 2009 available at Minter Ellison Aurora Place, 88 Phillip Street Sydney New South Wales, 2000 Australia

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19 Austria Dr. Axel Reidlinger and Dr. Heinrich Kühnert Legislative Developments While certain revisions to the antitrust regime introduced in 2006 (in particular, the leniency rules) are currently ongoing, there are no concrete plans for new legislation in Austria. Mergers In line with the international trend, the Austrian Federal Competition Authority (the FCA ) has received considerably fewer merger filings than previously as a result of the financial and economic crisis. Total filings are down by more than 20% compared to 2008, and by almost 40% compared to 2007 levels. 1 At the same time, Phase II requests have remained steady: as of October 2009, the FCA had sent seven cases to the Cartel Court for in-depth review of the merger. No substantive decision in a merger case has been published in Cartels and other Anticompetitive Practices On March 25, 2009, the Austrian Supreme Court confirmed the 1.9 million (approximately US$2.65 million) fine imposed on a participant in the industrial chemicals cartel. 2 In line with previous case law, the Supreme Court held that the Cartel Court was not bound by the Federal Competition Authority s application for the imposition of fines, except as to the maximum amount of the fine. 3 This ruling coupled with the limited guidance provided by the Cartel Act (which lists the criteria relevant to the setting of the fine in a single paragraph), 4 means that the Cartel Court has considerable discretion when setting fines. Also in 2009, a lengthy dispute between the Austrian competition authorities and German magazine publishers came one step closer to its conclusion. The authorities brought an action in the Cartel Court in January 2007, arguing that the arrangements between a German magazine publisher and its exclusive Austrian magazine wholesaler (which involved, in particular, retail price maintenance and a prohibition on cross-selling among distributors) were restrictive of competition. In an interim judgment, the Cartel Court held that the arrangements in question were anticompetitive, but reserved its decision on whether the arrangements were justified by efficiencies for its final judgment. 5 Both the publisher and the wholesaler appealed, arguing primarily that antitrust law was inapplicable to the relationship in question, due to the commercial agents privilege being applicable: since magazine distributors were entitled to return unsold magazines, the wholesaler did not bear any significant business risk. The Supreme Court rejected both appeals, holding that the commercial agents privilege only applied where the distributor bore no, or only a negligible, business risk. This included risks linked to the sale of goods and risks linked to investments specific to the market. In the case at hand, the right to return unsold magazines eliminated some risk, but did not change the fact that the wholesaler had made substantial investments in the distribution system. The Supreme Court therefore held that the arrangements between magazine publishers and wholesalers were subject to the antitrust rules. 6 1 As published on the FCA s website, available in German at 2 See ABA, 2008 Antitrust Year in Review, p Austrian Supreme Court, Decision No. 16 Ok 4/09, March 25, 2009, available at 4 Sec. 30 of the Cartel Act lists the following criteria: duration and gravity of the infringement, enrichment resulting from the infringement, degree of fault, economic capacity of the infringer, and cooperation in the uncovering of the infringement. 5 Austrian Cartel Court, Decision 26 Kt 17, 18, 27, 28/07, January 27, 2009, [not published.yet]. 6 Austrian Supreme Court, Decision No. 16 Ok 6/09, July 15, 2009, available at Austrian Supreme Court, Decision No. 16 Ok 10/09, December 1, 2009, available at _000/JJT_ _OGH0002_0160OK00010_ _000.html 19

20 DEVELOPMENTS IN AUSTRIA Abuses of a Dominant Position 2009 saw a partial victory for alternative telecommunications providers against the Austrian telecom incumbent, Telekom Austria. The competitors brought an action in the Cartel Court for cessation of a bundled offer, by Telekom Austria, of fixed and mobile telephony and broadband internet access to retail customers, arguing that Telekom Austria s price for wholesale broadband access made it impossible for them to compete with the offer (margin squeeze). While the offer had expired before the action was brought, customer contracts based on the offer continued in force, since they had been concluded for an indefinite period of time. Giving judgment at first instance, the Cartel Court rejected the application, arguing that cessation could not be ordered, since the offer in dispute had expired. 7 The applicant s appeal was upheld by the Supreme Court, which held that in view of the purpose of the law, which is to maintain competition, the Cartel Court had the power to order the cessation of infringements that had already been terminated, as long as the infringements still had effects. The Supreme Court therefore remanded the case to the Cartel Court for further consideration of the substantive issues. 8 The Supreme Court s decision however includes some interesting obiter dicta as to the content of the cessation order to be made by the Cartel Court should the applicants be successful. According to the Supreme Court, the Cartel Court could require both the dissolution of contracts with customers who switched to Telekom Austria, and a prohibition on concluding new contracts with such customers for a limited period of time. The Supreme Court s decision thus affords significant discretion to the Cartel Court in bringing infringements to an end. In another decision regarding an abuse of a dominant position, the Supreme Cartel Court clarified the scope for bringing challenges to the Cartel Court s finding on market definition. The case involved a dispute between two shopping centers, with the applicant arguing that the defendant s radius clause, which excluded its lessees from opening shops in other shopping centers within a certain radius around its premises, constituted an abuse of a dominant position. The Cartel Court rejected the application. Based on an opinion provided by a court-appointed expert, leasing space in shopping centers and leasing space in inner city shopping areas ( high street ) were found to be part of the same market. This excluded a dominant position on the part of the defendant. 9 On appeal, the applicant challenged the methodology applied in the expert opinion and in the Cartel Court s judgment: in a survey that was central to his findings, the expert had asked retailers to state whether they wanted to expand by opening new shops in (i) shopping centers, (ii) inner city shopping areas, or (iii) power centers. Multiple replies were possible. The applicant maintained that expansion into both shopping centers and inner city shopping areas did not necessarily indicate substitutability, but could also reflect the fact that a presence in both locations was complementary. In its decision, the Supreme Court reiterated its established case law, pursuant to which appeals in antitrust matters lie on points of law only, while findings of fact cannot be challenged. It then proceeded to state that errors of methodology amounted to errors of law, which could be challenged in appeals proceedings. Errors in the application of a correct methodology, however, could not be brought before the Supreme Court. In applying these principles to the case, the Supreme Court found that the expert had committed a methodological error, as his survey could have led to complementary products being regarded as substitutable. The court therefore annulled the decision and remanded the case to the Cartel Court for further investigation. 10 Court Decisions In another case involving the use of a radius clause by a shopping center, the Austrian Supreme Court clarified the scope of preliminary injunctions under Austrian antitrust law. In its decision at first instance, the Cartel Court had 7 Austrian Cartel Court, Decision No. 29 Kt 5, 6/08, June 26, 2008, [not published yet]. 8 Austrian Supreme Court, Decision No. 16 Ok 13/08, January 19, 2009, available in German at 9 Austrian Cartel Court, Decision No. 25 Kt 34/07, July 30, 2008, [not published yet]. 10 Austrian Supreme Court, Decision No. 16 Ok 14/08, March 25, 2009, available in German at 20

21 DEVELOPMENTS IN AUSTRIA rejected the application for interim relief inter alia on the grounds that an order not to enforce the radius clause would pre-empt the substantive decision, since it would allow the applicant center to conclude lease contracts with the respondent s lessees which otherwise would have violated the radius clause. 11 The Supreme Court affirmed the decision on other grounds, but disagreed with the Cartel Court s assessment of the scope of preliminary injunctions. Recognizing that it was in the very nature of preliminary injunctions that their effects could not be fully reversed, the Supreme Court reasoned that, while the courts were barred from granting preliminary injunctions that would be capable of giving rise to irreparable consequences for the respondent, merely temporary harm did not prevent preliminary injunctions from being granted. In the case at hand, the Supreme Court found that the effects of an injunction would merely have been temporary. It was up to the respondent s lessees to decide whether to enter into a lease contract with the applicant on the mere basis of a preliminary injunction. 12 While the Supreme Court s decision allows the Cartel Court quite considerable discretion when granting preliminary injunctions, applicants continue to face a serious evidentiary hurdle, since pursuant to the Austrian Cartel Act, the applicant is required to plausibly demonstrate that the conditions for ordering the cessation of an infringement are met. Since antitrust matters often involve complex issues of fact, this evidentiary burden will often prove difficult to meet. 11 Austrian Cartel Court, Decision No. 25 Kt 35, 36/08, October 23, 2008, [not published yet]. 12 Austrian Supreme Court, Decision No. 16 Ok 1/09, March 25, 2009, available in German at Freshfields Bruckhaus Deringer LLP Seilergasse Vienna - Austria

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23 Belgium Bruno Lebrun and Thibault Balthazar Legislative Developments 2009 was characterized by some amendments to the Protection of Economic Competition Act passed in 2006 (the Competition Act ) and by a series of interesting legislative proposals. The Courts also clarified the calculation of fines for antitrust infringements. The Competition Act was amended on May 6, Most of the amendments are purely procedural but some may have a significant practical impact. First of all, the Competition Service, whose main task is to investigate cases, was renamed the Directorate-General for Competition. Several changes were also introduced in relation to the staffing of the Belgian Competition Authority. Secondly, the existence of strong indications of anticompetitive practices is no longer a prerequisite for the Minister of Economy to request the College of Prosecutors ( Auditorat/Auditoraat ) to open an investigation. The latter can be opened purely upon the Minister s request. Thirdly, the College of Prosecutors may now dismiss a complaint relating to anticompetitive practices based on policy priorities and available resources. Under the previous system, complaints could be dismissed only if they were inadmissible or manifestly unfounded. The decision to close a case based on policy reasons was taken for the first time on September 18, 2009 in relation to a complaint for abuse of a dominant position (margin squeeze) brought against Belgacom in 2002 by a series of competitors. 2 In that decision, the College of Prosecutors mentioned the factors that it took into account in assessing its priorities, such as consumer interest, economic importance and interest in the case, considering the tasks and resources of the Belgian Competition Authority. Fourthly, as regards merger control, the Belgian Competition Council (the Council ) can now impose periodic penalty payments, in addition to fines, for implementing reportable transactions before clearance (gun jumping). Finally, the amended Competition Act codifies the previous practice and provides that the five-year limitation period starts from the day that the infringement ceases to exist. In addition, a new draft was also presented by the Belgian Government to Parliament to introduce class actions for mass damages claims, 3 which would give the Court of Appeal jurisdiction to decide on such matters. As a derogation from the fundamental principal of the Belgian Judicial Code that a claim is admissible only if it is filed by a person having a direct personal interest, the Bill provides that those suffering loss can be represented by a person authorized to act on their behalf. The Bill also contains an opt-out rule, which means that all persons affected by the mass damage are supposed to be a party to the class action, except if they expressly request otherwise. If the parties reach an amicable settlement, this will simply be ratified by the Court of Appeal. In terms of enforcement, the Belgian Government requested the Directorate General for Competition to investigate the possibility of introducing criminal sanctions for hardcore antitrust infringements. This follows a recommendation by the OECD in its 2009 Economic Survey of Belgium to criminalize hardcore cartels. A public consultation was launched in October 2009 by the Directorate General for Competition but no Bill has been published yet. 1 See Articles 142 to 156 of the Act of May 6, 2009, containing miscellaneous provisions, published in the Official Journal, May 19, 2009, p The Belgian Official Journal is available in French, Flemish and German at 2 Decision No P/K-22-AUD, September 18, 2009, case CONC-P/K-02/0057, Codenet, Colt Telecom, Versatel and WorldCom against Belgacom. Decisions of the Belgian Competition Council are available at 3 Please note that other Bills, aimed at introducing class actions into Belgian law, were also presented by members of Parliament. These may differ in certain aspects from the Bill presented by the Belgian Government. 23

24 DEVELOPMENTS IN BELgIuM Mergers As mentioned in the 2008 contribution, one of the objectives of the Competition Act is to promote stronger enforcement against restrictive practices and, as a corollary, to limit the time spent on merger reviews, notably by raising notification thresholds. The number of reported mergers has decreased from 20 in 2007 to five in All concentrations in 2009 were filed and cleared under the simplified procedure, except the acquisition of exclusive control by Publigas over Fluxys (cleared on May 18, 2009) which arose as a result of Suez s commitments in the decision of the European Commission in the Suez/Gaz de France merger. 4 Cartels and other Anticompetitive Practices No cartel decisions were reported in 2009 but some cartel cases continued to be investigated. A series of dawn raids was also conducted in various sectors, such as electricity wholesale or the fruit and vegetable sector. In non-cartel cases, the Council issued an interesting decision with respect to pharmaceutical parallel trade in the Bofar case. Bofar is a pharmaceuticals wholesaler which does not sell products in the Belgian market; instead, it purchases pharmaceuticals in Belgium with the purpose of reselling them in EU Member States where they are more expensive. As pharmaceutical companies refused to supply Bofar, Bofar lodged a complaint with the Council alleging both a concerted practice between the pharmaceutical companies to eliminate parallel trade (breach of Article 81 (now 101) EC 5 and Article 2 of the Competition Act) and an abuse of a dominant position resulting from the refusal to supply (breach of Article 82 (now 102) EC 6 and Article 3 of the Competition Act). In his decision dated March 26, 2008, 7 the Competition Prosecutor General dismissed the request for interim measures on the basis that a prima facie infringement of the Competition Act was not established 8 and considered that the refusal to supply was not the result of a concerted practice, since their methods of supplying exporters differed significantly and were introduced separately over a long period of time. The Competition Prosecutor ruled that the refusal to supply as such is not sufficient to prove an abuse of a dominant position because the goal of excluding competitors or strengthening a market position and the absence of any objective justification also need to be established. On April 25, 2008, Bofar appealed that decision but its appeal was dismissed by the President of the Council, 9 who mainly relied on the Syfait II judgment of the European Court of Justice 10 (ECJ), passed after the challenged decision. The facts in the present case differ from those in Syfait II where the wholesaler was operating in both the domestic and export markets. In Syfait II, the ECJ ruled that a dominant pharmaceutical company was entitled to take steps that were reasonable and proportionate to the need to protect its own commercial interests, even if it breached Article 82 (now 102) EC when it ceased to honor the ordinary orders of an existing customer solely because that customer, in addition to supplying the domestic market, also exported part of the quantities ordered to other Member States with higher prices. In its decision, the President of the Council made clear that the normal order test set forth in Syfait II did not apply since it was only relevant when the wholesaler operated in both the domestic and export markets and Bofar did not operate in the domestic market. In the present case, it was impossible to assess whether the orders were disproportionate to the quantities sold in the domestic market since Bofar only exported the products. In his assessment, the President of the Council also took into account other considerations, such as the risk of shortage that may result from parallel exports and the absence of 4 Decision No C/C-09, May 18, 2009, CONC-C/C-08/0028: Publigaz SCRL / Fluxys SA - CONC-C/C-09/0005: Publigaz SCRL / Fluxys SA 5 Now Article 101 of the Treaty on the Functioning of the European Union. 6 Now Article 102 of the Treaty on the Functioning of the European Union. 7 Decision 2008-V/M-12-AUD, March 26, 2008, case MEDE-V/M-07/0038: Bofar v Alcon- Couvreur NV, Astrazeneca NV, Bayer NV, Biogen Idec Belgium NV, Boehringer Ingelheim Comm.v, Bristol Myers Squibb Belgium, Janssen- Cilag Belgium, Pfizer NV and Serono Benelux BV. 8 The Competition Prosecutor General ruled that Article 62 of the Competition Act requires the following cumulative conditions to be met for an interim measure to be granted: the applicant must have a direct and immediate interest; a prima facie infringement of the Competition Act must be established and there must be an urgent need to avoid a situation which could cause a serious, imminent and irreparable harm to the company affected. 9 Decision No V/M-04, April 2, 2009, case MEDE - V/M-07/ Beroep van Bofar nv bij de voorzitter van de Raad voord de Mededinging tegen Beslissing nr V/M-12- AUD, March 26, See Joined Cases C-468/06 to C-478/06, Sot. Lélos kai Sia EE and others v. GlaxoSmithKline AEVE Farmkeftikon Proönton Judgment, September 16, 2008, ECR, I

25 DEVELOPMENTS IN BELgIuM discrimination between Bofar as a wholesaler-exporter and the wholesaler distributors, since the difference in treatment between the two was objectively justified. The dismissal of the appeal means that the request for interim measures is definitively rejected. The decision on the merits of the case is currently pending. Abuses of a Dominant Position On May 26, 2009, the Council imposed a fine of 66.3 million (approximately US$47.08 million), the largest fine ever imposed, on Proximus (Belgacom mobile) for abuse of its dominant position in the market for mobile telecommunications services in 2004 and This case followed a complaint by Base, one of Proximus s main competitors, that Proximus had committed several exclusionary practices, in particular in the market for business customers. In its decision, the Council decided that Proximus held a dominant position in the Belgian market for mobile telephony between 2002 and 2005 and also had a significant market position in the business customers with specific needs segment. Proximus s market position was further strengthened by additional factors such as the possibility of it using the network of retail shops (téléboutiques) of its parent company, Belgacom. Following the finding of dominant position, the Council assessed Proximus s commercial strategy for professional customers with specific telecommunications needs such as large corporations and public authorities. The Council found that Proximus had abused its dominant position, as its commercial strategy vis-à-vis some large customers amounted to a margin squeeze. A margin squeeze is usually defined as a pricing strategy resulting in negative or insufficient margin between, on the one hand, the prices charged to end-consumers and, on the other hand, the wholesale prices it applies to its competitors for similar services. In particular, the Council ruled that in 2004 and 2005 there was a negative margin between the prices for on-net communications (i.e. between two customers on Proximus s network) and the termination rates charged to competitors for off-net calls from their network to the Proximus network. As a consequence, the competitors were not in a position to offer prices for communications towards the Proximus network which were cheaper or similar to those that Proximus could offer. Proximus appealed this decision on several grounds, including the fact that the impact on the market was not properly assessed. The appeal is pending. Court Decisions An abuse of a dominant position case, which dated back to 1999, 12 gave rise to two interesting decisions concerning fines in antitrust cases, one of the Brussels Court of Appeal 13 and the other of the Antwerp Court of Appeal. In a decision dated January 21, 1999, the Council found that Honda, Suzuki, Yamaha and Kawasaki had abused their dominant position in the market for issuing conformity certificates for their own-brand motorcycles by requiring official dealers to be involved in issuing such certificates. Honda, which was fined 743,680 (approximately US$505,630), a record fine at that time, raised a series of arguments against the 1999 decision. In particular, it argued that the Council had breached its defense rights by failing to provide any reasoning as to how the fine was calculated. In its interim judgment of February 2, 2009, the Brussels Court of Appeal agreed with Honda s argument regarding the method for calculating the fine but dismissed all other pleas. Based on the 2004 fining guidelines and the case law of the ECJ, the Brussels Court ruled that Honda had no opportunity to exercise its defense rights as the Council had not indicated how the fine was calculated. It therefore ordered the proceedings to be reopened to give the parties the opportunity to comment on the method of calculating fines. The Antwerp Court of Appeal also ruled on the 1999 decision with respect to the possibility of Suzuki treating the 247,893 antitrust fine (approximately US$168,543) as a deductible professional cost. Suzuki deducted the amount of the fine (based on Article 49 of the Income Tax Code) in its 1999 tax declaration which related to the Decision No P/K-10, May 26, 2009, Case CONC-P/K-05/0065 Base/BMB. 12 Decision No. 99-RPR-1, January 21, 1999 published in the Belgian Official Journal, March 13, Brussels Court of Appeal Judgment, February 2, 2009, 18th Chamber, Cases 2005/MR/3 and 2005/MR/4. 25

26 DEVELOPMENTS IN BELgIuM fiscal year. The Tax Authority declared this illegal under Article 53.6 of the Income Tax Code, which provides that fines cannot be treated as deductible professional costs. The Tax Authority found that this provision applied whether or not the fine was administrative or criminal in nature. The Antwerp Court disagreed with the Tax Authority, holding that Article 53.6 of the Income Tax Code applied only to criminal fines and not to administrative fines, such as the one imposed in the present case. In the Court s view, this was not affected by the fact that an administrative fine could be defined as a criminal fine within the meaning of Article 6 of the European Convention on Human Rights, since the fine in question was not imposed under Belgian criminal law. The Court further considered that there was a sufficient link between the fine and Suzuki s professional activities and it could, therefore, be treated as a deductible professional cost. Latham & Watkins LLP Boulevard du Régent, Brussels (Belgium) +32 (0) (0)

27 Brazil Bruno L. Peixoto Legislative Developments Mergers The Senate has continued to debate a Bill 1 already approved by the House of Representatives which might substantially change Brazilian antitrust enforcement by merging the antitrust regulatory powers of the Secretariat for Economic Law (the SDE ) and the Secretariat for Economic Monitoring (the SEAE ) into one single antitrust agency, the Administrative Council for Economic Defense (the CADE ). With regard to merger control, the Bill would abolish the market share threshold, make ex ante notification mandatory and lay down a simplified procedure for promptly clearing transactions unlikely to produce anticompetitive effects. Substantial changes to the regulation of unilateral and collusive practices are not expected. Nevertheless, senators have yet to agree on whether the CADE should require a confession from the infringing party in cases involving anticompetitive conduct before it can issue consent orders, especially in cartel cases. Merger control being based on a post-merger notification system, CADE issued hold separate orders and executed agreements with several merging parties (agreements for preserving the merger reversibility), blocking the implementation of a series of transactions which resulted in substantial market shares and had prima facie potential anticompetitive effects. In the most significant case, the CADE required Brazil s leading food processors, Perdigao and Sadia, to enter into a hold-separate agreement, freezing the merger to create the world s largest exporter of processed meat: Brasil Foods. 3 The agreement was aimed at restricting integration and information sharing among the companies and to prevent the merging parties from taking irreversible measures to implement the transaction before the review was concluded. It allowed, however, for the financial restructuring of Sadia, which had been in trouble since the beginning of the financial crisis in In the meantime, the SDE sought to introduce further transparency to the proceedings involving its antitrust department and to improve the leniency program by issuing a new draft regulation for public consultation. 2 With respect to the leniency program, the draft regulation aims to provide guidance and predictability for potential applicants. Thus, it clarifies the procedures for oral leniency applications and establishes specific rules concerning the opportunity for an applicant to place a marker (being the first to self-report) in cases in which it is considering filing an application but does not yet possess sufficient information and documentation to secure immunity. Furthermore, the CADE imposed behavioral and structural remedies in a number of transactions, including the acquisition by Coca-Cola of Leao Junior, the leading Brazilian iced tea producer. 4 Taking the view that the acquisition would create a quasi-duopoly in Brazil and that the resulting unilateral exercise of market power could not be deterred by new entry due to important market barriers (including the high costs of establishing an efficient distribution system, brand loyalty, and incumbents portfolio power), the CADE ordered Coca-Cola to terminate a joint venture with Nestlé and transfer all its operations related to the production and marketing of iced-teas. The remedy was adopted with the aim of promoting competition and at the same time preserving the merger-specific efficiencies. 1 Legislative Bill from the House of Representatives n. 6 of 2009, available in Portuguese at 2 [Not yet listed in reporter]. See Joint Comments of the ABA Sections of Antitrust Law, International Law, and Criminal Justice submitted on September 28, 2009, available at 3 Perdigao S.A. and Sadia S.A., CADE Concentration Review No / , agreement for preserving the reversibility of the operation, executed on June 8, 2009, available in Portuguese at 4 Recofarma Industria do Amazonas Ltda. [Coca-Cola Group] and Leao Junior S.A., CADE Concentration Review No / , June 17, 2009, available in Portuguese at 27

28 DEVELOPMENTS IN brazil In addition, the CADE made approval of several transactions subject to the modification of non-compete clauses, requiring parties to limit the scope of ancillary restraints to the seller s geographical markets and, as a general rule, to a period of not more than five years. 5 Cartels and other Anticompetitive Practices Having made anti-cartel enforcement its priority, the SDE initiated several new investigations in industries as diverse as dredging and marine engineering, chocolate production and information technology. Joining the US Department of Justice and the EU Directorate General Competition in the international anti-cartel enforcement network, it raided several producers of refrigeration compressors in the states of Sao Paulo and Santa Catarina in an unprecedented simultaneous and coordinated operation by those authorities. 6 The targets had allegedly fixed prices and shared sensitive commercial information through s, phone calls, and meetings in hotels and restaurants. The inspections were triggered by a leniency agreement. The SDE also enhanced cooperation with the federal police, the public prosecutor s office, and state authorities. Moreover, it devoted substantial efforts to fighting bidrigging, promoting its leniency program, and taking action against trade associations which had allegedly fostered or monitored collusive schemes. The CADE sanctioned consent orders concerning cartel investigations in different industries, including refrigeration compressors, marine hose, and flexible plastic packing industries. In the consent order regarding the investigation of cartelization by producers of compressors for refrigeration, Whirlpool agreed to pay 100 million reais (approximately US$56.5 million) in fines in exchange for providing confidential information and not challenging in court the raids conducted by the SDE. 7 In order to approve a consent order, CADE has required applicants to cease the relevant conduct, pay a fine no lower than 1% of the company s gross turnover in the fiscal year before the initiation of the administrative proceeding and, in most cases, agree to implement an extensive antitrust compliance program. Moreover, in cases in which the investigation was triggered by a leniency application, parties seeking a consent order must also admit their participation in the collusive scheme to the extent that it concerned the Brazilian market. Once a consent order is granted, the administrative proceeding against the executing party is stayed and then terminated once it has been verified that the company has complied with its obligations. Abuses of a Dominant Position CADE fined AmBev, the Brazilian division of Anheuser-Busch InBev, the world s largest brewer, for adopting a loyalty program of non-linear pricing and discounts which allegedly induced exclusivity and/or the acquisition of target quantities in the downstream market. 8 CADE argued that as a result of AmBev s dominance, the program could potentially lessen competition by raising rivals costs and foreclosing the markets. Thus, it imposed a fine of 1.5% of the company s gross turnover in Brazil (approximately US$186 million), a record fine in a single-firm conduct case. However, the decision was immediately stayed following an action filed by AmBev before a federal judge in Brasilia. 9 AmBev argued that the CADE had failed to demonstrate effective harm to competition and consumer welfare and that the SDE had violated its constitutional and procedural rights during the inspections conducted in the company s headquarters. Court Decisions In Nestlé Garoto v. CADE, 10 the Federal Court of Appeals for the 1st Region quashed a CADE decision blocking the 2004 acquisition of Garoto, the third largest chocolate producer in the country, by Nestlé, the leading producer. The Court ruled that the CADE should have reviewed new facts raised by the appellants in a petition to have the case reheard. The CADE had found that the merger substantially increased horizontal concentration and would not face sufficient competition. The CADE has indicated that it will appeal to the Superior Court of Justice. 5 See CADE Interpretative Rule # 5, December 9, 2009, available in Portuguese at 6 See SDE Press Release, February 18, 2009, available in Portuguese at 0BC8DAF63DB2}&params=itemID={37FDC97E A400-ABB1E29D1AD0};&UIPartUID={2218FAF C-A9E3-E780D3E67DFE} 7 CADE procedure n /09, September 30, 2009 available in Portuguese at 8 CADE Administrative Proceeding No / , July 24, 2009, available in Portuguese at 9 AmBev v. CADE, 16th Federal Court of the Federal District, action No , 2009, available in Portuguese at 10 Nestlé-Garoto v. CADE, Federal Court of Appeals for the 1st Region, action No , available in Portuguese at 28

29 DEVELOPMENTS IN brazil In BCN Bradesco v. CADE, the Superior Court of Justice started to review a decision by the Federal Court of Appeals which confirmed a CADE decision that transactions in the banking and financial industry must also be subjected to antitrust scrutiny. Previously, the Administration had interpreted Brazilian banking law as providing that such operations should be submitted solely to the Central Bank. While a panel is still considering the matter, one of the judges has already voted, stating that the law did not allow the CADE to review mergers in the financial industry. It should be noted that Congress is considering a bill to clarify the matter, empowering the CADE to review such transactions. Federal Courts and the Superior Court of Justice have reiterated that the SDE may examine documents and files seized in dawn raids concerning cartels even if they include potentially unrelated confidential data regarding business strategy and product development, provided that the documents and files are not disclosed to third parties and the administrative proceeding remains confidential until the merits of the actions challenging the validity of the raids are reviewed. With regard to private enforcement, Vale, the world s largest iron ore mining company, has settled an action brought by CSN, a leading steel company. 11 CSN had claimed that Vale was a quasi-monopolist in Brazil and had refused to deal and unilaterally terminated a long-term commercial relation with CSN, impairing the firm s ability to compete effectively. With respect to cartel cases, a number of recovery actions were filed against steel producers ArcelorMittal, Barra Mansa and Gerdau for sharing out customers, resale price maintenance and price fixing as regards steel rebars used in the civil construction industry for concrete reinforcement, following a ruling by the CADE. 12 The actions were brought by independent steel distributors who had been allocated among the producers and allegedly harmed by (i) price squeezes resulting from the combination of cartel prices in the upstream market and resale price maintenance downstream, and (ii) a boycott and price discrimination caused by the defendants establishing their own distribution system. In addition, associations of construction companies filed the first antitrust collective action in Brazil s legal history, 13 seeking injunctive relief against allegedly recidivistic and continuous overcharging as well as claiming for damages, including loss of profit. Another major collective action for injunctive relief and damages attributable to cartelization was filed by associations of hospitals against suppliers of medical gas. 14 Following an investigation, the SDE recommended that White Martins Ltda, Air Liquide Brasil Ltda, AGA SA and Air Products Brasil Ltda be fined 30% of their gross turnover for market division and bid rigging in the medical gas market, as well as for vertical restraints aimed at sustaining the collusive scheme. 11 Civil Court of Rio de Janeiro, Case n August, 14, 2009, available in Portuguese at 12 CADE, Administrative Process n / , September 5, 2005, available in Portuguese at 13 Sinduscons v. Steel Rebar Producers, 13h Federal Court of the Federal District, action No , 2009, available in Portuguese at 14 Association of Hospitals v. Medical Gas Producers, 28th Civil Court of Belo Horizonte, State of Minas Gerais action No , September 25, 2009, available in Portuguese at Lanna Peixoto Advogados Av. Roque Petroni Jr. 999, 13th floor Sao Paulo, SP, Brazil

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31 Cambodia-Laos-Vietnam David Fruitman, Sar Vathana, Aristotle David and Nguyen Huong Giang INTRODUCTION While antitrust laws in Cambodia, Laos and Vietnam are evolving differently, they share a number of common features. Each of these countries is still in transition towards a market economy and each is still in the process of implementing the necessary legislative framework to support such change. Further, the three countries face significant legal, economic and social challenges which absorb substantial legislative and regulatory resources. Finally, with competition law not being a regulatory priority, each country faces the additional challenge of a business environment that is largely unaware of its implications. As such, while Vietnam has clearly taken the lead, all three countries are still in a relatively early stage of developing efficient antitrust regulation. However, there has been significant progress over the past year, including the distribution of an English language draft competition law in Cambodia and a significant competition decision by the Vietnam Competition Council (the VCC ). CAMBODIA Legislative Developments The Kingdom of Cambodia does not currently have antitrust legislation per se. However, the Constitution of Cambodia contains various provisions relating to antitrust law and supports the enactment of such legislation. 1 In addition, the Law on Marks, Trade Names and Acts of Unfair Competition regulates certain unfair competitive practices. 2 As part of its accession to the World Trade Organization, Cambodia committed itself to various reforms, including the enactment of a competition law which was scheduled to enter into force on January 1, At the time of writing, a draft is still being reviewed by the Ministry of Commerce with technical assistance from UNCTAD and other international parties. A Ministry official indicated that the draft law is now expected to be finalized and submitted to the National Assembly in mid The 2009 English language draft, which has had limited public circulation, addresses economic concentrations, abuses of dominance and various forms of coordinated behavior. In its current form, the draft raises a number of concerns including the exclusion of significant industries from the application of antitrust regulation (e.g. telecommunications, banking, agriculture) the inclusion of non-competition related matters (e.g. mandatory invoicing of all commercial transactions); substantive issues regarding the enforcement of certain antitrust infringements (e.g. dominance appears to be imprecisely defined as an undertaking having more customers than others in the market ); and the fact that the regulator is intended to combine both investigative and adjudicative powers. It is hoped that the many areas of the Law which require clarification will be addressed in future drafts. LAOS Legislative Developments In Laos People s Democratic Republic, the Decree on Trade Competition was issued on February 4, 2004 and became effective on August 1, The Decree is to be implemented by the Ministry of Industry and Commerce and the Trade Competition Commission. However, the latter has not yet been set up and the Ministry has 1 Constitution (1993) (Cambodia), as amended March 4, 1999, available at See Article 56: The Kingdom of Cambodia shall adopt market economy system. The preparation and process of this economic system shall be determined by law. 2 See Articles 22 and 23 of Royal Decree No. NS/RKM/0202/06, February 7, 2002, available at TrademarCompet1.pdf 3 Royal Decree No. 15/PMO (Laos), February 4, 2004, worldbank.org%2fintcomplegaldb%2feastasiaandpacific%2f %2flaocompetitionlaw.pdf& rct=j&q=lao+decree+trade+competition+2004&ei=svt6s7m9ktwgkqx_46t6cg&usg=afqjcnfvztz- TEl9z3r8Q-8wqHn2sZTFdQ 31

32 DEVELOPMENTS IN CaMbODIa-LaOS-VIETNaM confirmed that there have been no cases since the Decree was issued. The Ministry has indicated that it is expecting a decree on consumer protection to be issued in mid VIETNAM Legislative Developments The antitrust legislation in force in the Socialist Republic of Vietnam is the Competition Law (the Law ) which took effect on July 1, The Law is fairly comprehensive and addresses economic concentrations and unfair practices, as well as restrictive practices. In addition to the Law itself, detailed implementation guidelines have been produced dealing with issues relating to the VCC and the Competition Administration Department (the VCAD ), while also providing further details on the provisions of the Law. In broad terms, the Law establishes the VCC, which is responsible for deciding on competition law complaints, whereas the VCAD is the investigatory branch with the power to review economic concentrations and exemption applications and to sanction anticompetitive conduct. A primary focus of the VCAD continues to be on improving resources, together with advocacy and consultancy activities designed to increase competition law awareness. The perception is that there is significantly more work required in these areas. The VCAD has participated in numerous local and international competition-related conferences, workshops and seminars over the past year involving businesses, academics, lawyers and government officials. The VCAD has also continued its involvement with antitrust regulators in other jurisdictions both with respect to cooperation and receiving support. It has also been active in promoting the antitrust agenda through the Association of Southeast Asian Nations ( ASEAN ) and has set up a competition training center for its staff. Pursuant to its stated desire to increase awareness, the VCAD launched a newsletter and has regularly updated its website this year. 5 However, it has remained difficult to obtain information on investigations and cases, so that much of the information below has been obtained from public sources. Cartels and other Anticompetitive Practices Over the past year, the VCAD has announced its intention to focus on multi-level marketing and appears to have opened investigations with respect to a number of highprofile matters, including publicly announced industry-wide pricing agreements. Perhaps most significantly, on April 14, 2009, the VCC, after holding its first hearing in a competition infringement matter, found that the Vietnam Air Petrol Company ( Vinapco ) had abused its monopoly position. In addition to imposing a fine of approximately VND3.37 billion (approximately US$180,000), the VCC appeared to approve the recommendations of Jetstar Pacific Airlines ( Jetstar ) that Vinapco be split off from its parent company, Vietnam Airlines, that regulators pay careful attention to its operations and that other firms be allowed to sell jet fuel, thereby eliminating Vinapco s monopoly. Vinapco was formed in 1993 to supply jet fuel to Vietnam Airlines and has maintained a monopoly position in the supply of jet fuel to all airlines operating in Vietnam since then. On December 31, 2007, Vinapco and a predecessor of Jetstar signed a contract for the supply of jet fuel for The pumping fee for one ton of fuel was set at VND593,000 (approximately US$32) per ton. On March 20, 2008, Vinapco unilaterally attempted to increase the pumping fee to VND750,000 (approximately US$40) per ton, arguing that this was necessary due to global price fluctuations. When Pacific refused to accept the increase, Vinapco cut off its supplies. Vinapco s actions allegedly delayed some 30 flights and affected more than 5,000 passengers and Vinapco was quickly ordered by the Minister of Transport to resume supplying Pacific despite the price dispute. Within a few days of the incident, on its own initiative, the VCAD opened a preliminary investigation and sought information from Vinapco, Pacific and other relevant 4 Order No. 27/2004/QH11, December 3, 2004, available at 5 Available at 32

33 DEVELOPMENTS IN CaMbODIa-LaOS-VIETNaM parties. Having found sufficient cause for an official investigation, the matter was eventually submitted to the VCC. In its decision, the VCC determined that Vinapco s actions violated Clauses 2 and 3 of Article 14 of the Competition Law which deals with abuse of monopoly position. The maximum fine under these provisions is 10% of Vinapco s revenue from the financial year immediately preceding the year the conduct occurred. A VCC official was quoted as saying that this would have been approximately VND70 billion (approximately US$3,750,000), significantly higher than the fine actually imposed, and therefore the relatively small fine should be interpreted as a warning to Vinapco. On appeal, the VCC upheld the fine as imposed, but ruled against separating Vinapco from Vietnam Airlines. However, recognizing the need for greater competition, the VCC suggested that the government work to ensure that an approved competitor, an affiliate of state run Petrolimex, be quickly established. DFDL Mekong 45 Suramarit Boulevard PO Box 7 Phnom Penh - Cambodia +855 (0) (0)

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35 Canada Mark Katz, Elisa Kearney and Jim Dinning Legislative and Administrative Developments On March 12, 2009, the Canadian Parliament passed legislation incorporating significant amendments to Canada s Competition Act (the Act ). 1 The amendments were part of an extensive legislative package designed to implement the Canadian government s 2009 budget and economic stimulus measures. A summary of the key amendments is provided below. Merger review The Act s merger review process has been amended so that it is much more closely aligned with the US procedures under the Hart-Scott-Rodino Antitrust Improvements Act. Thus, a notifiable transaction may not be completed until the expiry (or early termination) of a 30-day waiting period following notification. Before the expiry of this 30-day period, if issues remain that it wishes to investigate, the Competition Bureau (the Bureau ) may issue a supplementary request for information, in which case the proposed transaction may not be completed until 30 days after the requested information is provided to the Bureau. Additionally, the transaction size threshold for pre-merger notification has been increased. Now, transactions will not be notifiable if the book value of the target s assets in Canada, or its annual gross revenues from sales in or from Canada, do not exceed CDN$70 million (approximately US$68.1 million) (up from the previous CDN$50 million (approximately US$48.6 million) threshold). This threshold amount will increase in subsequent years according to a formula that is tied to changes in the inflation rate. Finally, the period within which the Bureau can challenge transactions post-closing has been reduced from three years to one year. Cartels Effective March 12, 2010 the amendments will repeal the Act s existing conspiracy offence and replace it with a per se criminal prohibition against agreements between competitors to fix prices, affect production or supply levels of a product, or allocate sales, customers or territories. Unlike the current conspiracy provision, the new offence will not require proof that the conspiracy, if implemented, would prevent or lessen competition unduly. However, liability can be avoided if the agreement is ancillary to a broader agreement that does not contravene the new conspiracy offence and is necessary for giving effect to the objective of that broader agreement. Maximum penalties under the new offence are 14 years imprisonment and a CDN$25 million (approximately US$24 million) fine per count, up from the current maximums of five years and CDN$10 million (approximately US$9.7 million) per count. Also effective March 12, 2010, all other agreements between competitors that have the effect of substantially lessening or preventing competition will be dealt with under a new civil provision. The Bureau will be able to apply to the Competition Tribunal (the Tribunal ) under this new provision for an order to remedy the effects of such agreements. Increased penalties / expanded offences Additional amendments were also enacted to expand the scope of certain offences or increase their penalties. These include (i) granting the Tribunal the power to order an administrative monetary penalty of up to CDN$10 million (approximately US$9.6 million) for contravention of the abuse of dominance provisions and up to CDN$15 million (approximately US$14.4 million) for subsequent contraventions; (ii) increasing the maximum penalties for misleading advertising and obstruction of a Bureau investigation; and (iii) expanding the bid-rigging offence 1 Bill C-10, Budget Implementation Act, 2009, 2d Sess. 40th Parl., 2009, available at 35

36 DEVELOPMENTS IN CaNaDa to include a prohibition against persons agreeing to withdraw their already-submitted bids. Pricing matters The amendments repealed the Act s price discrimination, predatory pricing and promotional allowance offences. However, conduct that could formerly be addressed under these provisions may still form the basis of an application under the Act's abuse of dominance provisions. The price maintenance offence was also repealed, but replaced with a similar civil provision under which the Bureau can apply to the Tribunal for relief in situations where the price maintenance conduct is having or is likely to have an adverse effect on competition in a market. Private parties are also entitled to apply to the Tribunal for remedies under this new provision. Administrative developments On August 5, 2009, Melanie Aitken was appointed as Commissioner of Competition ( Commissioner ) for a fiveyear term. As Commissioner, Ms. Aitken will be the head of the Bureau and have the statutory responsibility for administering and enforcing the Act. In addition to aiming to ensure the effective, transparent and efficient implementation of the amendments to the Act, Ms. Aitken has stated that one of her priorities as Commissioner will be to bring forward responsible cases to clarify the law 2. As a result, an increased number of cases are expected to be brought in the coming years. Cartels and other Anticompetitive Practices Draft guidelines On December 23, 2009, the Bureau issued its final Competitor Collaboration Guidelines (the Collaboration Guidelines ), 3 which describe the Bureau s general approach to assessing competitor collaborations under the Act's new amended provisions relating to agreements among competitors. The Collaboration Guidelines set out the Bureau s view that the new criminal conspiracy offence will apply only to categories of agreements that are so likely to harm competition and to have no pro-competitive benefits that they are deserving of prosecution without a detailed inquiry into their actual competitive effects. With this in mind, the Collaboration Guidelines provide examples of types of ancillary restraints that the Bureau will generally not assess under the new criminal offence, although they may be subject to review under the new civil provision. These include non-compete clauses found in an employment agreement; agreements to abstain from making material changes to a business pending consummation of a merger; and non-compete obligations between the parent undertakings and a joint venture where such obligations correspond only to the products, services and territories covered by the joint venture agreement. It should be noted that the Collaboration Guidelines do not have the force of law and are not binding on the courts or private plaintiffs. For example, private parties will still be free to bring claims for the commission of criminal offence with respect to all forms of agreements, even those that the Bureau may decide not to pursue as criminal offences as an enforcement matter. Pleas Guilty pleas continued to be made following an investigation into price fixing in the retail gasoline market in the province of Quebec. Between March and December 2009, eight individuals and two companies pleaded guilty for their roles in the alleged conspiracy. 4 Since charges were first laid in June 2008, ten individuals and six companies have pleaded guilty, with fines totalling over CDN$2.7 million (approximately US$2.6 million). Of the ten individuals who have pleaded guilty, six have been sentenced to terms of imprisonment totalling 54 months. 5 Also in 2009, five air cargo carriers, Qantas, Air France, KLM, Martinair and British Airways pleaded guilty for their roles in an air cargo cartel affecting Canada. 6 Total fines imposed on the companies exceeded CDN$14.6 million (approximately US$14 million). 2 Melanie L. Aitken, Commissioner of Competition, Speech at the Canadian Bar Association, Competition Law Section, Annual Conference, Gatineau, Quebec, Canada, September 25, 2009, available at 3 Competition Bureau, Competitor Collaboration Guidelines, December 23, 2009, available at 4 Press Release, Competition Bureau, More Guilty Pleas in Quebec Gasoline Cartel Case, March 17, 2009, available at Press Release, Competition Bureau, Sixth Individual Pleads Guilty in Quebec Gasoline Cartel Case, March 30, 2009, available at Press Release, Competition Bureau, Three More Guilty Please in Quebec Gasoline Cartel Case, May 21, 2009, available at Press Release, Competition Bureau, Individual Sentenced in Quebec Price-Fixing Cartel, August 31, 2009, available at Press Release, Competition Bureau, Ninth Individual Sentenced in Quebec Price-Fixing Cartel, October 23, 2009, available at and Press Release, Competition Bureau, Tenth Individual Sentenced in Quebec Price-Fixing Cartel, December 7, 2009, available at 5 Press Release, Competition Bureau, Tenth Individual Sentenced in Quebec Price-Fixing Cartel, id. 6 Press Release, Competition Bureau, British Airways Pleads Guilty in Air Cargo Price-fixing Conspiracy, October 30, 2009, available at 36

37 DEVELOPMENTS IN CaNaDa Abuses of a Dominant Position In January 2009, the Bureau released its draft Updated Enforcement Guidelines on the Abuse of Dominance Provisions 7 (the Draft Abuse Guidelines ). 8 The Draft Abuse Guidelines expand upon the Bureau's previous Enforcement Guidelines on the Abuse of Dominance Provisions 9 and potentially signal more aggressive enforcement by the Bureau in this area. Notably, the Draft Abuse Guidelines indicate a shift in the Bureau s approach to joint dominance and state that the Bureau will now consider the abuse of dominance provisions of the Act to apply where two or more firms engage in similar anticompetitive practices and together hold market power based on their collective share of the market, barriers to entry or expansion, and other factors. Indeed, on June 16, 2009, the Bureau announced that it had entered into a consent agreement with two commercial waste collection firms, Waste Services (CA) Inc. and Waste Management of Canada Corp., to resolve issues raised by contracts that each company used with its respective customers on Vancouver Island (British Columbia). 10 Specifically, the allegation was that the two companies jointly engaged in an abuse of a dominant position by using long-term contracts and restrictive terms to lock in customers and exclude competitors. In line with the Bureau's more aggressive approach under the Draft Abuse Guidelines, neither the Bureau's press release nor the consent agreement indicate that the Bureau found any agreement or understanding between the companies with respect to the challenged conduct. Court Decisions On September 28, 2009, the Ontario Superior Court of Justice issued the first decision by a Canadian court in a contested case certifying a price-fixing class action on behalf of a class which includes indirect purchasers. The case, Irving Paper Limited et al. v. Atofina Chemicals Inc. et al., 11 concerns a class action claim on behalf of all persons in Canada (excluding the defendants) who purchased hydrogen peroxide, products containing hydrogen peroxide or products using hydrogen peroxide in Canada between January 1, 1994 and January 5, The Act allows persons who have suffered loss or damage as a result of a contravention of the Act s criminal provisions to sue for damages. Previous cases 12 involving price-fixing claims by indirect purchasers had denied class certification on the ground that the plaintiffs had failed to adduce sufficient evidence to support a methodology for calculating harm on a class-wide basis. In those cases, the defendants had successfully argued that there was insufficient evidence that the increased price had been passed through to each indirect purchaser. Shortly thereafter, in November 2009, the British Columbia Court of Appeal certified a price-fixing class action on behalf of a consolidated class of direct and indirect purchasers. 13 The action was brought on behalf of all persons in British Columbia who purchased computer memory chips known as "DRAM" (dynamic random access memory) or products containing DRAM, either directly from the manufacturers or indirectly from intermediaries, during the class period. If unchanged on appeal, the decisions could significantly broaden the scope in Canada for indirect purchaser pricefixing class actions. It could also mean that class action law in Canada will be inconsistent with U.S. federal law, which bars indirect purchasers from making damages claims. Davies Ward Phillips & Vineberg LLP 44th Floor 1 First Canadian Place Toronto, ON M5X 1B1 - Canada See Sections 78 and 79 of the Competition Act. 8 Competition Bureau, Updated Enforcement Guidelines on the Abuse of Dominance Provisions, Sections 78 and 79 of the Competition Act (Draft for Public Consultation), January 2009, available at 9 Competition Bureau, Enforcement Guidelines on the Abuse of Dominance Provisions, July 2001, available at 10 Press Release, Competition Bureau, Competition Bureau Cracks Down on Joint Abuse of Dominance by Waste Companies, June 16, 2009, available at 11 [2009] O.J. No See, e.g., Chadha v Bayer Inc. (2003), 223 D.L.R. (4th) Pro-Sys Consultants Ltd. v. Infineon Technologies AG et al., 2009 BCCA

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39 Chile Claudio Lizana, Marcos Ríos, Lorena Pavic and Juan E. Coeymans Legislative Developments After more than three years of discussion in the Chilean Congress, one of the most important amendments to the Chilean Antitrust Law 1 was finally approved. 2 This reform took effect on October 12, 2009, in the midst of a heated public debate about the fight against cartel activity with a view to reinforcing enforcement under the Antitrust Law regarding collusive behavior. The new legislation grants greater investigative powers to the Antitrust Attorney General (the agency in charge of prosecuting antitrust infringements), by putting in place far-reaching instruments for the detection of cartels, such as dawn raids, access to private or public-owned areas, registration and seizure of objects and documents, interception of communications and requesting companies' records of transmitted or received communications. The amendment also introduces a new leniency program aimed at facilitating cartel detection and punishment. The leniency mechanism affords full fine immunity to the first cartel member that provides significant information leading to collusion being shown and cartel members being identified, and a reduction of up to 50% of the fine for subsequent informers that provide additional information. The amendment raises the maximum fine for cartels up to approximately US$24,000,000 and the prescription period for horizontal agreements is increased from two to five years. Additionally, the independence and impartiality of the Antitrust Court and its members is reinforced by increasing the members exclusive commitment to the Court as well as their salaries. Finally, it is worth noting that the Congress is currently discussing a new Bill 3 that would establish the criminal liability of individuals involved in collusive behavior, with punishments including imprisonment ranging from 541 days to 5 years. Mergers In December 2009, the Antitrust Court approved (subject to conditions) a consultation request filed by Soquimich and Anagra seeking the approval of a merger that would result in the creation of a new fertilizer distribution company in Chile. 4 During the proceedings, the Antitrust Attorney General stated that the operation would increase both the risk of abuse of a dominant position by the merged entity and the likelihood of coordination among competitors, and that, contrary to the parties claims, no clear cost synergies or efficiency gains could be expected. The Antitrust Court asked the two companies to specify whether the potential efficiency gains derived from the operation could be passed on to consumers and, if so, how this would take place in practice. The final decision of the Antitrust Court did not elaborate on the existence of efficiency gains, but set out four conditions aiming to remove the competition concerns. It was appealed to the Supreme Court by the National Agricultural Society Trade Association and Cosayach Nitratos S.A., whose judgment is still pending. Since it is not obligatory under Chilean Antitrust Law to give prior notice of a horizontal concentration or to make any filing seeking approval, the case represents the most important decision since January 2008, when the Antitrust Court refused for the first time to approve a notified merger. 5 1 Law Decree No. 211 of 1973, Law for the Defense of Free Competition, available in Spanish at 2 Law No published in the Official Gazette of July 13, 2009 amending Law Decree No. 211 of 1973 available in Spanish at 3 Bill No , April 2, 2009 (Chile) proposing to impose penalties for crimes against free competition, available in Spanish at 4 Decision No. 31/2009, December 9, 2009, Anagra and Soquimich Voluntary Consultation, available at 5 Decision No. 24/2008, January 31, 2008, S.A.C.I Falabella and Distribución y Servicio D&S S.A. Voluntary Consultation, January 31, 2008, available in Spanish at 39

40 DEVELOPMENTS IN CHILE Cartels and other Anticompetitive Practices In December 2008, the Antitrust Attorney General filed a claim against the three main pharmaceutical companies (Salcobrand, Cruz Verde and FASA) for conspiracy to increase the prices of 222 products, which was supposedly meant to bring an end to a lengthy price war between the retail pharmacy chains. 6 The alleged price-fixing agreement in the pharmaceutical market caused enraged reactions from consumers and triggered political responses from government and congressmen (including several Bills proposing criminal liability for collusive behavior in sensitive markets). The case took an abrupt turn in March 2009, when FASA admitted the allegations and reached a settlement with the Antitrust Attorney General, while Salcobrand and Cruz Verde continued to insist on their innocence. Although at the time of the settlement the Chilean Antitrust Law did not include a leniency mechanism for cartel cases, the Antitrust Court approved the agreement by which FASA was released from all charges and received a substantial fine reduction, being fined US$1 million instead of the US$15 million initially demanded. The final decision regarding Salcobrand and Cruz Verde is still pending before the Chilean Antitrust Court. Cruz Verde appealed the Antitrust Court s decision to the Supreme Court on the grounds that the agreement between the Antitrust Attorney General and FASA was not a permitted judicial settlement but was instead a covert leniency agreement that was not allowed under the Law. However, the Supreme Court held that the settlement fulfilled all the requirements for it to be legally enforceable. 7 In two other claims filed by the Antitrust Attorney General, collusive behavior in public bidding processes were examined. In September 2008, more than 34 advertising agencies were alleged to have engaged in practices tending to create barriers to free competition in an advertising bidding process called by Metro S.A., the state company that manages the Santiago subway. 8 The companies, all members of the Chilean Association of Advertising Agencies (ACHP), allegedly entered into agreements aimed at boycotting certain bidding process called by Metro S.A. in order to impose preferential terms and conditions (such as a reduction in the number of bidders and financial compensation for losers) and facilitate market allocation. In addition, in October 2009, several radio broadcasting holdings and stations were alleged to have entered into a number of agreements intended to eliminate competition in a public bidding process called by the telecommunication authority for the allocation of radio spectrums. 9 Both cases, still pending a decision being issued, are in line with one of the legislative amendments in effect since October 12, 2009, which expressly described collusion in bidding processes as a naked restraint of free competition. Abuses of a Dominant Position In July 2009, the Antitrust Court unanimously ruled against the sanitary companies Essal, Essbio, Aguas Andinas and Aguas Nuevo Sur Maule 10 for unjustified and abusive charges and conditions imposed upon consumers (located outside the concession area). The decision, which resolves the claims filed by both the Antitrust Attorney General and the construction company Independencia Ltda., ruled that the abusive charges and requirements imposed by the sanitary companies restricted free competition, due to their dominant position in the market. The Court fined the defendants more than US$1,000,000 and proposed a legislative amendment by which sanitary companies described as essential facilities should be forced to supply interconnections to other sanitary companies, subject to a fixed-rate system. 6 Antitrust Attorney General Claim No , April 1, 2009, Antitrust Attorney General v Farmacias Ahumada S.A. and others, available in Spanish at 7 See Supreme Court Ruling, August 31, 2009, available at 8 Antitrust Attorney General Claim No , September 30, 2008, Antitrust Attorney General v ACHAP A.G. and others, available at 9 Antitrust Attorney General Claim No , October 7, 2009, Antitrust Attorney General v Radio Valparaíso Limitada and others, available at 10 Antitrust Court Decision No. 85/2009, July 2, 2009, Constructora e Inmobiliaria Independencia Limitada and Aguas Nuevo Sur Maule, available at 40

41 DEVELOPMENTS IN CHILE Carey y Cía. Miraflores 222, 24th floor Santiago Centro Santiago - Chile

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43 China Peter Wang and Yizhe Zhang Legislative Developments China s new Anti-Monopoly Law (the AML ) came into force on August 1, The AML is administered and enforced by several authorities: the Anti-Monopoly Law Enforcement Authority (the AMEA ), which is responsible for day-to-day enforcement, and the Anti-Monopoly Commission (the AMC ), which formulates competition policy and coordinates the enforcement activities of the AMEA. The functions of the AMEA are in turn shared by three government agencies: the Ministry of Commerce (the MOFCOM ), responsible for merger review and the dayto-day work of the AMC; the State Administration for Industry and Commerce (the SAIC ), responsible for nonprice related monopoly agreements, abuses of dominance and administrative abuses; and the National Development and Reform Commission (the NDRC ), responsible for price-related conduct, including price-fixing cartels. During the AML s first year in force, the AMC and the AMEA have made significant progress in both implementing and enforcing the law. Several implementation regulations and guidelines under the AML have been issued, including: (i) the State Council Regulation on Notification Thresholds for Concentrations of Undertakings (the Notification Thresholds Regulation ); 2 (ii) the SAIC Procedural Rules regarding Investigation and Handling of Cases relating to Monopoly Agreement and Abuse of Dominant Market Position (the SAIC Procedural Rules ); 3 (iii) the SAIC Procedural Rules regarding Prohibition of Abuse of Administrative Power to Eliminate or Restrict Competition; 4 (iv) Rules on Turnover Calculation for Notification of Concentration of Financial Undertakings; 5 (v) the AMC s Guidelines on the Definition of the Relevant Market; 6 (vi) the MOFCOM Rules on the Notification of Concentration between Undertakings; 7 and (vii) the MOFCOM Rules on the Review of Concentration between Undertakings. 8 In addition, a wide variety of substantive and procedural draft rules have been published for public comments and are expected to become law in the near future, including: (i) the Draft NDRC Anti-Price Monopoly Rules; 9 (ii) the Draft SAIC Rules on Prohibition of Monopoly Agreement; 10 (iii) the Draft SAIC Rules on Prohibition of Abuse of Dominant Market Position; 11 (iv) the Draft MOFCOM Provisional Measures on the Investigation and Handling of Concentrations between Undertakings not Notified in Accordance with the Law; 12 (v) the Draft MOFCOM Provisional Measures on the Collection of Evidence for Suspected Monopolistic Concentrations between Undertakings not Reaching the Notification Threshold; 13 and (vi) the Draft MOFCOM Provisional Measures on the Investigation and Handling of Concentrations between 1 Anti-Monopoly Law of China, enacted on August 30, 2007, Order of the President of the People s Republic of China (No.68), available at 2 Provisions of the State Council on Thresholds for Prior Notification of Concentrations of Undertakings promulgated by the State Council and effective August 3, 2008, available at 3 Procedure Rules regarding Investigation and Handling of Cases relating to Monopoly Agreement and Abuse of Dominant Market Position, promulgated by the SAIC, June 5, 2009, effective July 1, 2009, available in Chinese at 4 Procedural Rules regarding Prohibition of Abuse of Administrative Power for the Purpose of Eliminating or Restricting Competition, promulgated by the SAIC, June 5, 2009, effective July 1, 2009, available at 5 Turnover Calculation Method for Financial Undertakings Concentration promulgated by the MOFCOM, PBC, CBRC, CSRC and CIRC on July 15, 2009, effective August 15, 2009, available in Chinese at 6 Guidelines to the Definition of the Relevant Market promulgated by the State Council AMC, May 24, 2009, effective May 24, 2009, available in Chinese at 7 MOFCOM Rules on the Notification of Concentration between Undertakings, November 21, 2009, effective January 1, 2010, available in Chinese at 8 MOFCOM Rules on the Review of Concentration between Undertakings ( MOFCOM Review Rules ), November 24, 2009, effective January 1, 2010, available in Chinese at 9 NDRC Rules on Anti-Price Monopoly (draft for commentary) released by NDRC, August 12, 2009, available in Chinese at 10 SAIC Rules on Prohibition of Monopoly Agreement (draft for comments) released by the SAIC, April 27, 2009, available in Chinese at 11 SAIC Rules on Prohibition of Abuse of Dominant Market Position (draft for comments) released by the SAIC, April 27, 2009, available in Chinese at 12 Draft Provisional Measures on the Investigation and Handling of Concentrations between Undertakings not Notified in Accordance with the Law released by MOFCOM, January 19, 2009, available in Chinese at 13 Draft Provisional Measures on the Collection of Evidence for Suspected Monopolistic Concentrations between Undertakings not Reaching the Notification Thresholds released by MOFCOM, January 19, 2009, available in Chinese at 43

44 DEVELOPMENTS IN ChINa Undertakings not reaching the Notification Thresholds. 14 The extent of these implementation regulations and draft rules suggest that the new law will be aggressively enforced. Mergers In 2009, MOFCOM formally accepted 87 antitrust filings and took decisions relating to In addition, there is an unknown number of filings that MOFCOM has not acknowledged as complete. MOFCOM blocked one transaction, Coca-Cola s proposed acquisition of Huiyuan, 16 and conditionally approved five other transactions: InBev-Anheuser-Busch, 17 Mitsubishi-Lucite, 18 GM-Delphi 19 and Pfizer-Wyeth 20 and Panasonic- Sanyo. 21 These six cases comprise the complete set of published merger decisions issued by MOFCOM, because only decisions prohibiting transactions or attaching conditions must be published under the AML. Prohibitions and conditional clearances thus appear to represent around 10% of MOFCOM s merger decisions. The percentage of merger cases going into the second-phase review is not publicly available, but generally can be expected to be above 10%, because although some cases enter into a second phase they are ultimately approved without conditions being attached. Except for the Coca-Cola transaction, where the proposed target was a Hong Kong-listed company with substantial business activities in mainland China, the other five conditionally approved transactions were all offshore transactions not focused on China. These decisions demonstrate MOFCOM s openness to broader theories of anticompetitive effects and its somewhat more interventionist approach when compared to other more established antitrust jurisdictions. They also provide insights into MOFCOM's developing merger review practices and procedures. MOFCOM s review procedures remain relatively non-transparent and unpredictable. For example, the AML provides that the initial (first-phase) review period will take up to 30 days, but parties must plan for additional time for MOF- COM to review and accept the filing as complete before the 30-day clock begins to run. However, in practice this pre-acceptance process may take weeks or even months, depending on the availability of MOFCOM antimonopoly staff, the complexity of the issues involved, and other factors. During this time, MOFCOM may make multiple requests for additional information. For example, MOFCOM s merger decisions revealed that the pre-filing process took one and a half months in InBev-Anheuser-Busch, two months (i.e. double the official 30-day initial review period) in Coca-Cola-Huiyuan and nearly four months in Panasonic/Sanyo. In addition, a potential second-phase review may take up to 90 additional days (extendable by a further 60 days), if MOFCOM has concerns about the competitive effects of the proposed transaction. All in all, the review may take up to 180 days in addition to the prefiling process. In total, the Panasonic/Sanyo case took over nine months, including the pre-acceptance process. The six MOFCOM merger decisions published to date do shed considerable light on MOFCOM s review processes and analysis. First, they show MOFCOM s growing willingness to become more transparent. The first decision - Inbev - contained only a conclusion and a statement of the conditions imposed, but over time MOFCOM has gradually started to include in its decisions explanations of its views on market definition, the parties market shares, and its theories of competitive harm. Second, they evidence MOFCOM s increasing sophistication. For example, MOFCOM analyzed foreclosure effects in the downstream market in Mitsubishi/Lucite and discussed the increase of HHI and difficulties of market entry in Pfizer/Wyeth. Third, they suggest that concerns unrelated to traditional competition analysis, 14 Draft Provisional Measures on the Investigation and Handling of Concentrations between Undertakings not reaching the Notification Thresholds released by MOFCOM, February 6, 2009, available in Chinese at 15 Speech by Madam Ma Xiuhong at the first National Commerce Department Meeting on the Enforcement of the AML, January 6-7, 2010, available in Chinese at 16 Ministry of Commerce Announcement [2009] No. 22, Coca-cola Decision, March 18, 2009, available in Chinese at 17 Ministry of Commerce Announcement [2008] No. 95, Inbev Decision, November 18, 2008, available in Chinese at 18 Ministry of Commerce Announcement [2009] No. 28, Mitsubishi/Lucite Decision, April 24, 2009, available in Chinese at 19 Ministry of Commerce Announcement [2009] No. 76, GM/Delphi Decision, September 28, 2009, available in Chinese at 20 Ministry of Commerce Announcement [2009] No. 77, Pfizer/Wyeth Decision, September 29, 2009, available in Chinese at 21 Ministry of Commerce Announcement [2009] No. 82 Panasonic-Sanyo Decision, October 30, 2009, available in Chinese at 44

45 DEVELOPMENTS IN ChINa such as the protection of domestic competitors, may play an important role in the review process and even in MOF- COM s decisions. For example, the Coca-Cola Decision found that the transaction would squeeze out small and medium sized juice producers in China, and restrain local producers from participating in the juice beverage market or their ability for proprietary innovation. The GM/Delphi decision was reported to be prompted by complaints from local car manufacturers and trade associations. 22 Finally, in line with international practice, MOFCOM generally appears to be more interested in structural remedies, involving divesture of capacity or Chinese businesses, than behavioral remedies because of the difficulty of monitoring compliance with the latter. In particular, MOFCOM s Decision in Pfizer/Wyeth shows that it intends to follow international practice in ordering remedies, such as the appointment of a trustee, the preservation of the viability and competitiveness of the divested business, and the sale of the divested business to a third party approved by MOF- COM. In Panasonic/Sanyo, MOFCOM ordered extraterritorial divestures as remedies. However, it is unknown whether it has established any rules on monitoring compliance with conditions. MOFCOM also ordered the divesture of related IP rights in Pfizer/Wyeth and required the licensing of related intellectual property ( IP ) rights at the request of the buyer in Panasonic/Sanyo. This is consistent with both the MOFCOM Review Rules, which include granting access to infrastructure and licensing of key IP as available remedies 23, and with MOFCOM s existing review process, during which questions about IP and IP-related barriers are frequently raised. Cartels and other Anticompetitive Practices According to the new SAIC Procedural Rules, 24 the national-level SAIC is responsible for investigating and handling cases with a nationwide impact, along with other cases in which it may want to exercise discretionary jurisdiction. Provincial Administrations of Industry and Commerce ( Provincial AICs, the comparable provinciallevel departments under the SAIC s supervisory authority) may be authorized to investigate and handle alleged monopolistic conduct occurring solely or principally in their administrative regions. Compared to the blanket authorization given to Provincial AICs in earlier drafts of the Procedural Rules, the SAIC appears to have moved towards centralizing its authority: the new rules provide for delegation to Provincial AICs only on a case-by-case basis. The Rules also specify that before Provincial AICs may make final decisions regarding suspensions or terminations of investigations or the imposing of administrative penalties, they must first report such decisions to the SAIC. To date, no formal government enforcement actions against anticompetitive practices have been formally confirmed, although an SAIC official disclosed at an international AML seminar that over 50 complaints had been received by the SAIC. 25 Further, no formal investigations have been initiated by the NDRC despite rumors of investigations into an airfare price cartel. 26 Court Decisions Intermediate level courts have jurisdiction over antitrust litigation. Administrative litigation matters will be tried by the Administrative Court within the applicable people s courts and civil litigation will be tried by the IP Court within the people s courts. 27 On December 22, 2008, the Shanghai No. 2 Intermediate Court announced the establishment of a new Specialist AML Panel comprising a specialist combined panel of judges dedicated to hearing AML lawsuits and related actions. 28 It is also reported that the Supreme People s Court of China is drafting judicial guidelines on civil litigation under the AML Antitrust Investigation into the Acquisition of Delphi by General Motors, September 22, 2009, available in Chinese at 23/HTML_UVV2RWP3AKAV_3.html 23 MOFCOM Rules on the Review of Concentrations between Undertakings supra note 8, art Supra footnote See Speech by Mr. Sang Lin, director of the AML Enforcement Bureau of SAIC, at the 6th International Symposium on Competition Law and Policy on July , Beijing. See also Press Release, SAIC Refines the Anti-Monopoly Enforcement Rules, available in Chinese at 26 See Press Release, Travelsky Being Investigated by NDRC and Facing Huge Fines for Price Cartel, available in Chinese at 27 Notice on Study and Adjudication of the AML by the Supreme People s Court, promulgated by the Supreme People s Court, July 28, 2008, effective on the same day, available in Chinese at also Hierarchical Jurisdiction over Cases of the First Instance of IPR Civil Disputes, promulgated by Beijing High People s Court, June 3, 2008, effective on the same day, available at 28 The Shanghai No. 2 Intermediate Court announced the establishment of a new Specialized AML Panel, December 22, 2008, available in Chinese at 29 Seminar on Civil Litigation under the AML was held, July 11, 2009, available in Chinese at 45

46 DEVELOPMENTS IN ChINa Private litigants have seized the opportunity to bring lawsuits under the new AML. In some cases, the plaintiffs are competitors, although they are mostly academics or public interest advocates claiming to represent consumers. Several cases have been reported in the press, and include lawsuits against: (i) a state-owned telecom company in Beijing for abuse of dominance; (ii) an insurance association in Chongqing for price fixing; (iii) the General Administration of Quality Supervision, Inspection and Quarantine ( AQSIQ, a department of the central government) for administrative monopoly; (iv) Baidu, an online search engine, for abuse of dominance and (v) Shengda, for abuse of a dominant position in the online literature market. The case against AQSIQ was dismissed on the basis that it was time-barred, even though the cause of action did not exist before the AML became effective in August 2008, 30 while the case against the Chongqing Insurance Association was withdrawn by the plaintiff after the defendant immediately adopted revised Articles of Association addressing the issues under the AML raised by the claimant. 31 As for the case against China Mobile, it started life in a Beijing district court before being transferred to an intermediate (higher-level) court and ultimately withdrawn by the plaintiff after the defendant agreed to pay the plaintiff a bonus of RMB Although these cases did not generate judgments providing insights into the courts interpretation of the AML s substantive provisions, they can be seen as fulfilling the goals of the statute in the sense that the defendants voluntarily abandoned their allegedly anticompetitive conduct after being sued. The judgment of the Shanghai No.1 Intermediate People s Court in Shanda-Sursen, 33 the first under the AML, provides an indication of how Chinese courts will weigh evidence to decide whether a defendant has a dominant market position, when considering allegations of abuse of a dominant position. The case suggests that Chinese courts will be cautious about relying on news reports and parties own statements about market dominance, especially when the latter can be considered to be marketing or puffery. The court found a lack of dominance partly because there was no proof that the defendants market share exceeded the applicable threshold and thus did not trigger the presumption of dominance under Article 19. Also, the court appeared open to possible justifications for such alleged abuses of dominance, such as protecting the defendants copyrights of novels published on its website. The second judgment under the AML was given by the Beijing No.1 Intermediate People s Court in Baidu. 34 As in Shanda, the Court (a) reiterated that the AML does not prohibit a dominant market position itself, only conduct that constitutes abuse of such position; (b) required a high level of proof of the existence of a dominant market position; and (c) appeared open to considering practical commercial justifications for the alleged abusive conduct. On its face, the AML appears to focus on administrative enforcement, with only one provision, article 50, addressing potential civil litigation. However, the Chinese courts may be required to play a more active role in AML enforcement given the increasing popularity of private antitrust claims. Compared to MOFCOM s fairly rigorous enforcement to date of the concentration provisions of the AML, thus far the Chinese courts have appeared to take a relatively conservative approach in their application of the AML, placing a high burden of proof on claimants and a relatively lower burden on defendants regarding issues such as the existence of a dominant position and valid justifications for allegedly abusive conduct. 30 See Press Release, The Court Decides not to Accept the AQSIQ Monopoly Case, available in Chinese at 31 See Press Release, The Insurance Company Amended the Rules, and the Plaintiff in Chongqing s First Anti-Monopoly Case Withdrew the Lawsuit, available in Chinese at 32 See Press Release, China Mobile Uses RMB 1000 to Reconcile with the Plaintiff, available in Chinese at 33 Judgment of the Shanghai No. 1 Intermediate People s Court, dated October 23, 2009 [not yet listed] 34 Online Broadcasting of Trial of the Baidu Case, transcripts available in Chinese at 46

47 DEVELOPMENTS IN ChINa Jones Day China World Tower 1 No.1 Jianguomenwai Avenue Beijing China

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49 Colombia Mauricio Jaramillo Legislative Developments On July 2009 the Colombian Congress approved Law 1340 of 2009, the new Competition Act (the New Act ), 1 which amends various provisions concerning antitrust and merger control regulation, including anticompetitive practices, such as notification proceedings, time periods, notification to third parties and penalties for non-compliance with the rules. The main changes are explained below. Institutional aspects Under the New Act, the Superintendence of Industry and Commerce (the SIC ) will be the only antitrust authority in Colombia, which means that it has exclusive jurisdiction to review mergers and other transactions falling within the scope of the New Act. However, the Superintendence for Financial Affairs and the Air Transport Authority remain competent to review certain transactions in the banking and aviation sector, respectively. Mergers As regards the thresholds, the New Act establishes that any transaction between companies active in the same market and which involves a merger or any other type of acquisition of control, is subject to merger control rules, provided that (i) in the fiscal year prior to the proposed transaction, the parties, either individually or jointly, had a turnover that exceeded the threshold established by the SIC, 2 or (ii) at the end of the fiscal year prior to the proposed transaction, the parties had individually or jointly owned assets that exceeded the amount that the SIC establishes. At the time of writing, the SIC has not indicated the amount in legal minimum legal wages, which means that the old thresholds remain in force. 3 Under the New Act, in the event that the parties to the transaction meet either of the above thresholds but have a joint market share of less than 20% of the relevant market, the proposed operation will be deemed to be authorized by the SIC. In this case, the parties have to submit a notice or report to the SIC with a description of the transaction. Although to date the SIC has not indicated what kind of information needs to be submitted, it is reasonable to believe that it should include a description of the parties to the transaction, a definition of the relevant market and evidence of the parties market shares. As regards the time periods for review, the New Act introduces several changes. It sets forth an initial one month pre-evaluation period for proceedings that meet the above-mentioned thresholds and do not pose competition concerns and a lengthier procedure of three additional months for those transactions that require an in-depth investigation. In theory, this means that transactions not raising concerns should be approved within a month from notification but in practice the SIC uses this month to conduct a preliminary study rather than to clear unproblematic transactions. The SIC is able to request additional information from the parties to the transaction in order to complement, clarify or explain the information provided. An important innovation introduced by Law 1340 is the obligation to publish in a nationwide newspaper a notice of the proposed transaction in order to allow third parties to file information related to the SIC s examination. At present, online publication of this notice is not allowed. Moreover, the parties may propose remedies aimed at removing competition concerns and securing clearance of the transaction in question. 1 Law 1340 of July 24, 2009 enacting new regulations for the protection of competition, published in the Official Gazette No. 47,420, July 24, 2009 available in Spanish at 2 This is calculated by multiplying the monthly statutory minimum wage by a number decided on by the SIC. 3 The thresholds are as follows: a) if the parties turnover in Colombia exceeds 100,000 minimum legal wages (approximately US$24 million); or b) if the value of the parties assets in Colombia exceed 100,000 minimum legal wages (approximately. US$24 million). 49

50 DEVELOPMENTS IN colombia Anticompetitive Practices Regarding anticompetitive practices, the New Act sets forth leniency provisions based on similar programs in other jurisdictions, whereby parties that incur in an infringement may be able to benefit from total or partial immunity provided that they cooperate with the antitrust authority by providing evidence and information regarding the infringement. 4 However, these provisions do not apply to the instigator of the illegal conduct. The SIC will grant immunity on the basis of whether the degree of cooperation and in particular the nature of the information provided is sufficient to prove the existence of the conduct allegedly in breach. Cooperation shall also relate to information on the involvement of other parties to the infringement and is still possible even when the authority has already commenced the investigation. It is also possible for an investigation to be terminated before the SIC makes a finding on the infringement and starts to collect evidence. The party then needs to offer the commitment to the SIC which allows the latter to conclude that the conduct under investigation will be stopped or modified. The SIC can either accept or reject such commitments. If it decides to accept them, it will close the file without reaching a decision on the merits or imposing any fines. In addition, the New Act 5 establishes the following fines for non-compliance: (i) fines of up to 100,000 minimum wages (approximately US$26 million) may be imposed upon each of the companies involved, or if the amount is superior, up to 150% of the revenue derived from noncompliance. Among the factors that determine the amount of the fine, the following are of note: the impact of the anti-competitive conduct on the market; the dimension of the market affected; the benefit obtained by the infringer; the market share of the infringer; and the assets of the infringer; (ii) personal fines of up to 2,000 minimum wages (approximately US$523,000) may be imposed upon any natural person that might have authorized, facilitated, carried out or tolerated the infringement. implemented before clearance where it is determined that the proposed transaction produces anti-competitive effects; (iii) the proposed transaction was vetoed; or (iv) the conditions attached to the approval were breached by the parties. Mergers Since the enactment of the new Act, there have been no merger control decisions. This is because the New Act came into force on July 24, 2009 and the SIC takes approximately 5-6 months to review the transactions submitted. Cartels and other Anticompetitive Practices In a case concerning the cement market, the SIC fined the Mexican firm Cemex, the Swiss company Holcim and the Colombian firm Argos and their legal representatives for anticompetitive practices. 6 The authority found that during the second semester of 2005, the companies had engaged in price fixing and market sharing in the cement market. In particular, it found evidence that the parties had exchanged secret and sensitive information in order to fix prices in meetings attended by the legal representatives of Argos, Holcim and Cemex and other company officers. The companies were fined a total of COP$2,769,000,000 pesos (approximately US$1,384,500), while individual fines imposed on the legal representatives totaled COP$414 million pesos (approximately US$200,000). Abuses of a Dominant Position Colombia s Telecommunications Regulation Commission (CRT) determined that Comcel, owned by Mexican telephony provider America Móvil, held a dominant position due to its 65% market share in the outgoing voice market. 7 Finding that Comcel had abused its dominant position, the CRT ordered it to lower its rates for calls to other networks (off-net rates). Furthermore, the competition authority may dismantle a merger where: (i) it was not notified at all although the transaction meets the thresholds; (ii) the merger was The assessment revealed that Comcel enjoys 65-70% of revenue and traffic in the outgoing voice market, and that over 90% of calls are made within the same network. The 4 The leniency program is not restricted to cartels and covers any type of anticompetitive practice. 5 See articles 25 and 26 of the New Act. 6 SIC Decision No , December 4, CRT Decision 2262,

51 DEVELOPMENTS IN colombia authority concluded that the critical evidence showing that Comcel had abused its dominant position was the huge difference between the cost of calls to other operators compared to Comcel-to-Comcel calls. This discouraged users from calling other operators. Gómez Pinzón Zuleta Abogados S.A. Calle 67 No Oficina 1204 Bogotá - Colombia +57 (1) (1)

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53 Egypt Bassinthe Abou El Fadl and Mohamed Hashish Legislative Developments Law No. 190 of 2008 amended Law No. 3 of 2005 on the Protection of Competition and the Prohibition of Monopolistic Practices (the Competition Act ). 1 In doing so, it increased certain fines for anti-competitive practices (see below). The amendments modify merger control regulations by stipulating that any entity having a capital exceeding EGP100,000,000 (approximately US$550,000,000) according to its most recent financial statements must notify the Egyptian Competition Authority (the ECA ) of any of the following: the acquisition of new assets, property rights, shares, or companies, or in the event of mergers or the formation of new companies, or joint ventures (see below).. The amendments also introduce a criminal fine of between EGP20,000 and EGP200,000 (approximately US$110,000- US$1,100,000) for the submission of fraudulent documents or data to the ECA. Amended Article 26 grants the competent courts the ability to exempt the infringing party that reports a violation from up to half of the fine. Concerning future developments, the Chairwoman of the ECA indicated on more than one occasion that new amendments will be presented to the legislative bodies. These include the introduction of a merger control mechanism, which would give the ECA the power to clear or block mergers before implementation, as opposed to the current system of post-merger notification. 2 In addition, the Ministry of Trade and Industry is currently preparing a draft proposing to give the ECA new executive powers so that it can sanction any firm that violates the Prime Ministerial Decrees concerning the application of fixed market prices. 3 Mergers As noted above, any entity whose annual turnover in the most recent financial statements exceeds EGP100,000,000 (approximatelyus$550,000,000) shall notify the ECA upon their acquisition of assets, property, usufruct rights, shares or, the establishment of mergers, amalgamations, appropriations, or joint management by two or more persons. The threshold only takes the acquirer s turnover into account. The relevant turnover refers to all revenue included in the financial statements of the last financial year. Notification is now compulsory when the above threshold is met. However, there is no prohibition on the completion of the transaction prior to filing. The Authority does not perform clearances because the Competition Act only requires notification post-transaction. The statutory deadline for mandatory notification is thirty days after the transaction giving rise to the concentration. The Law indicates that a firm(s) must notify the ECA upon making their acquisition. This may be understood to indicate that only the acquirer is responsible for notification. The documents that must be presented to the ECA on its standard notification form are listed in Article 45 of the Executive Regulation and include: (i) the name of the notifying firm and other firms involved, their nationalities, administration centres and the headquarters of their 1 Law No.3 of 2005, promulgating the Law on the Protection of Competition and the Prohibition of Monopolistic Practices and its Executive Regulation, both enacted by Prime Ministerial Decree No of 2005, February 15, 2005, available in Egyptian Arabic at and See interview with Mrs. Mona Yassin, Chairwoman of the Egyptian Competition Authority, Al Shorouq newspaper, May 16, 2009, available in Egyptian Arabic at 3 See Mohamed Hossam, Amendments to the Law Prohibiting Monopolistic Practices grant the ECA the Right to Punish Violators, August 23, 2009, available in Egyptian Arabic at 53

54 DEVELOPMENTS IN EGYPT activities; 4 (ii) the notified legal provision, its date and the legal position arising from it; and (iii) the licences and approvals obtained. The latest amendments to the Competition Act stipulate that failure to notify is punishable with a fine of EGP10,000-EGP100,000 (approximately US$55,000 US$550,000). The fine would be levied on the acquiring party as it is the one responsible for filing a notification. Failure to notify does not cause the cancellation or annulment of the merger/acquisition, since notification takes place after the merger or acquisition in question has been implemented. There is no mention of the geographic scope of the merger control regime. Consequently, it may be taken to extend to acts engaged in abroad provided they are capable of having an effect on competition in Egypt. Cartels and other Anticompetitive Practices Agreements or contracts entered into between competing firms in any relevant market are prohibited if their purpose is to: (i) increase, decrease or fix products sale or purchase prices; (ii) divide product markets or allocate them on the basis of, inter alia, geographical areas, type of customers, goods or market shares; (iii) coordinate in order to participate, or refrain from participating, in tenders, auctions, negotiations and other procurement procedures; or (iv) restrict production, distribution, or marketing of goods or services. This includes restricting product type or size or limiting the availability thereof. 5 The Competition Act adopted a per se rule in addressing horizontal agreements and contracts between competing firms in which the agreement in itself is considered a violation and not the result of such agreement. What matters is proving the existence of a contract or an agreement, not the outcome. Agreements or contracts between a firm and any of its suppliers or clients Agreements or contracts between a firm and any of its suppliers or clients (vertical relations) are prohibited if they are considered anticompetitive due to their intention to restrict competition. The ECA evaluates whether or not the agreement or contract between a firm and any of its suppliers or clients would restrict competition on a case-by-case basis, taking into account the following factors: (i) the effect of the agreement on competition in the market; (ii) whether the agreement or contract benefits consumers; (iii) considerations relating to preserving the quality of the product, its reputation, safety, and security requirements, in a manner that does not harm competition; and (iv) the extent of compliance with the conditions of the agreement or contract with established commercial customs regarding the activity in question. 6 Consequences of engaging in the above-mentioned anticompetitive practices Upon establishing that a breach has taken place of any of the provisions of Articles 6 and 7 concerning horizontal and vertical cartels, the ECA will order the infringing party to rectify the situation within a specified time. Failure to comply will result in the agreement or contract in breach of Articles 6 and 7 of this Law being considered void. The Board of the ECA may issue a decision ordering the prohibited practice to be stopped immediately or after the said period of time has lapsed without the infringing firm rectifying the situation. This applies without prejudice to any liability arising in relation to such breaches. 7 As indicated, under the amended Competition Act, and without prejudice to more severe fines laid down in any other legislation, any natural or legal person that violates the provisions of Article 6 and 7 of the Act shall be fined EGP100, ,000,000 (approximately US$550,000- US$1,650,000,000). In the event of recidivism, the minimum and maximum fine limits are doubled. 4 Notification Form on the Egyptian Competition Authority s website, available in Egyptian Arabic at 5 Article 6 of Law No.3 of 2005 Promulgating the Law on the Protection of Competition and the Prohibition of Monopolistic Practices and Articles 10 and 11 of its Executive Regulations, available at 6 See Article 7 of the Law No.3 of 2005, promulgating the Law on the Protection of Competition and the Prohibition of Monopolistic Practices. See also Article 12 of its Executive Regulation, available at 7 Egyptian Competition Authority Annual Report , available at 54

55 DEVELOPMENTS IN EGYPT According to Article 25 of Law No. 3 of 2005, the person(s) responsible for the management of the legal entity in breach will be subject to the same fines if it is shown that he/she had actual knowledge of the breach and if his/her default on assuming the duties of his office as the responsible manager contributed to the breach. Where any of the crimes mentioned in Articles 6 and 7 of the Act are committed, the court may exempt any firm in breach that informs the ECA of the violation and provides supporting evidence. Criminal lawsuits, or any procedure taken therein, shall not be initiated in relation to acts violating the provisions of the Competition Act, unless a request from the Competent Minister or the person delegated by him is made. As per Article 21 of the said Law, the Competent Minister, or the person delegated by him, may settle the case with regard to any violation before a final judgment is given, in return for the payment of an amount not less than double the minimum fine and not exceeding double its maximum. The settlement would then serve as a waiver of the criminal lawsuit filing request. Abuses of a Dominant Position Definition of dominance Under Article 4 of Law No. 3 of 2005 on the Protection of Competition and the Prohibition of Monopolistic Practices and Article 7 of its Executive Regulations issued by Prime Ministerial Decree No. 3 of 2005, dominance is defined as the ability of a firm with a market share exceeding twenty five per cent of the relevant market to have an effective impact on the prices of the products or on the quantity supplied thereof in the relevant market, without competitors being able to limit its effective impact on prices or the quantity of the products supplied in the relevant market. Abuse of dominance Abuse of dominance is governed and prohibited by Article 8 of the Competition Act and Article 13 of its Executive Regulations and occurs when a firm with a dominant position engages in any of the following conduct: (i) not manufacturing, producing or distributing a specific product, whether totally or partially, for a certain period of time, thus causing a restriction on competition; (ii) refusing to deal with any firm, thereby restricting the latter s freedom to enter or leave the relevant market at any time; (iii) engaging in any act that limits the distribution of a specific product on the basis of geographic areas, distribution centers, clients, seasons or periods of time between the dominant firm and any of its suppliers or clients; (iv) imposing conditions on the entry into a sale or purchase agreement of a product, the acceptance of obligations or products unrelated by their very nature or by commercial custom to the original transaction or agreement; (v) discriminating between sellers or buyers having similar commercial positions in sale or purchase prices or in transactions, in a manner that decreases their ability to compete with one another or leads to some of them being expelled from the market; (vi) compelling a supplier not to deal with competitors; (vii) selling products below marginal cost or average variable cost; (viii) obliging firms dealing with it not to permit a competitor to have access to their utilities or services, despite this being economically viable; or (ix) refraining, whether totally or partially, from producing or providing a product that is scarce in the market when its production or supply is economically possible. It is important to note that the size of the firm is not a violation in itself. Companies may need to grow in order to achieve lower production costs and thus be able to compete more effectively. The Competition Act is only concerned with situations where a firm in a dominant position engages in conduct that may harm its clients, suppliers or competitors. For example, a complaint was filed by Egypt Chemicals Company against Trust Chemicals Company because the latter was alleged to have sold liquid chlorine and sodium hypochlorite hydrochloride acid below cost. The Board of the ECA concluded that the accused company enjoyed a dominant position in the relevant market. However, the examination did not reveal that the company was in fact selling the products in question at prices below actual or average variable costs. Therefore, it was not considered that the company had violated Article 8 of the Competition Act. 8 8 Egyptian Competition Authority Annual Report p. 23. Complaint No. 2 Filed by Egypt Chemicals Company vs. Trust Chemicals Company, June 26, 2006, available at 55

56 DEVELOPMENTS IN EGYPT Under Article 22 of the Competition Act, as amended, a firm that abuses its dominant position in the relevant market will be fined EGP100,000-EGP300,000 (approximately US$18,518-US$55,555). In the event of recidivism, these minimum and maximum limits are doubled. The above provisions do not apply to public utilities managed by the Egyptian Government in accordance with Article 9 of the Competition Act and Article 14 of its Executive Regulations. Furthermore, under Article 9 of the Competition Act and Article 15 of its Executive Regulations, the ECA may, upon the request of any company managing a public utility, exempt it from some or all of the aforementioned provisions if this is in the public interest or to attain benefits for consumers that outweigh the effects of restricting the freedom of competition. Significant legal information Egypt is a contracting state of the Common Market for Eastern and Southern Africa (the COMESA ). This means that it must comply with all the provisions of the COMESA Treaty including, but not limited to, the provisions of Article 55 concerning competition. The ECA is a member of the International Competition Network (the ICN ), which is considered an important factor in enhancing and maintaining competition policies and regulations in Egypt. Court Decisions To date, the ECA has issued only 9 decisions. Of these, only one, a high profile case concerning the cement sector, was appealed before the ordinary courts. On October 2, 2007 the Board of the ECA found that various cement-producing companies had engaged in anti-competitive practices in breach of Article 6 of the Competition Act and submitted a report stating its findings and recommendations to the competent Minister. On October 4, 2007, the Minister referred the report to the public prosecutor and, following an extensive investigation, a highly publicized trial took place in which twenty executives from nine companies were found to have engaged in price-fixing and market sharing. Nine cement companies were fined a total of EGP200,000,000 (approximately US$1,100,000,000), while the executives involved were each fined EGP10,000,000 (approximately US$550,000,000) with immediate effect. This judgment has subsequently been upheld by the Court of Appeal. 9 Egyptian Competition Authority (ECA) Annual Report page 30. A request for Study No. 1 Minister of Trade and Industry, July 16, 2006, available at 10 Ibid. 11 See Geoffrey Craig, Lawmakers Soften Antitrust Provisions, [DATE. August 2008], available at 12 See Sherine El Madany, 20 Egyptian Cement Executives Found Guilty of Price Fixing, August 25, 2008, available at Al Kamel Law Office 16 Nabil El Wakad st, Dokki, Giza - Egypt

57 European Union Gunnar Wolf and Michael Clancy Like other competition authorities around the world, in 2009 the European Commission faced the difficulties of enforcing the competition rules at a time of severe economic crisis, particularly with respect to government intervention in the banking and other sectors. 1 In other areas, such as cartel enforcement or merger review, the Commission made it repeatedly clear that the best way out of the crisis was through rigorous enforcement of the competition rules. 2 Legislative Developments In 2009, the Commission reviewed a number of existing regulations and guidelines as part of their renewal process. 3 In particular, the Commission conducted a review and consultation regarding its rules on vertical agreements, scheduled to expire in May While its proposed draft envisages relatively minor changes to the existing rules, substantial debate took place, particularly on restrictions placed on Internet sales 5 and buyers market power. 6 In addition, the Commission launched public consultations on the new legal framework for motor vehicle distribution and after-sales services rules for the motor vehicle sector 7 as well as its new draft Insurance Block Exemption Regulation, 8 and finished its review of the exemption for liner shipping consortia. 9 Its attempt to boost private enforcement stumbled in the home stretch, when the draft directive was taken off the agenda for a meeting of Commissioners allegedly due to resistance from Commission President Barroso and some Members of the European Parliament. 10 The end of 2009 marked the close of the tenure of Neelie Kroes as Competition Commissioner. She will be replaced by Joaquín Almunia, formerly the Commissioner responsible for Economic and Monetary Affairs. Additionally, as of December 1, 2009, the Treaty of Lisbon entered into force, resulting in the renumbering of Articles 81 and 82 EC to Articles 101 and 102 TFEU respectively, although the text of these Articles remained unchanged. Mergers As a result of the slowing down of economic activity, the total number of merger cases dealt with by the European 1 This contribution does not deal with State aid issues and the Commission s enforcement practice vis-à-vis anticompetitive measures by the Member States. For an overview of the European Commission s approach, see DG Competition s dedicated economic crisis webpage, available at 2 See, e.g. Philip Lowe, Director General DG Competition, Keeping Markets working effectively: Europe s challenge in recessionary times, speech given in Brno, Czech Republic, May 14, 2009, available at Commissioner Neelie Kroes, European Commissioner for Competition Policy Antitrust and State Aid Control The Lessons Learned, speech at the 36th Annual Conference on International Antitrust Law and Policy, Fordham University, September 24, 2009, available at 3 The Commission also published two reports on the procedural working of its enforcement practice, which overall draw positive conclusions, point to a limited number of areas for improvement, and leave open whether and how existing rules should be amended. These were (i) a report on Council Regulation 1/2003, which eliminated the previous notification system and created the European Network of Competition Authorities; see Press Release, April 30, 2009, Antitrust: Commission adopts report on functioning of key antitrust Regulation, available at and (ii) a report on the operation of Regulation No 139/2004; see Press Release, June 18, 2009, Mergers: Merger Regulation contributes to more efficient merger control in EU available at 4 Consultation documents and submissions are available at the Commission s website: Public consultations - Review of the competition rules applicable to vertical agreements, available at 5 The debate about the rules for online sales pitched luxury brand makers against online platforms, see, e.g., The Register, ebay fights for right to sell luxury stuff in EU, September 17, 2009, available at 6 Press Release, July 28, 2009, Antitrust: Commission launches public consultation on review of competition rules for distribution sector, available at The draft also deals with certain distribution forms, such as category management agreements and upfront access payments, for the first time. 7 Press Release, Antitrust: Commission launches public consultation on review of competition rules for motor vehicle sector, available at The Commission proposes that the general vertical rules should apply to motor vehicle distribution agreements, but that the markets for repair, maintenance, and service parts continue to need further special rules. In order to facilitate the switch to the new rules, the current block exemption should be extended for three more years. For more details, see 8 See Public consultations: Review of the competition rules applicable to agreements in the insurance sector, available at 9 Press Release, September 28, 2009, Antitrust: Commission adopts new Block Exemption Regulation for liner shipping consortia, available at 10 European Voice, Kroes hopeful of deal on compensation claims Commissioner s plans face mounting opposition over fears of a wave of US-style' class actions, October 10, 2009, available at 57

58 DEVELOPMENTS IN THE EurOPEaN union Commission decreased significantly in 2009 compared to the crest of the merger wave in Of the five secondphase reviews that the Commission initiated in 2009, Oracle s acquisition of Sun Microsystems stands out. Despite earlier unconditional clearance by the US authorities, the European Commission decided to pursue a second-phase review, leading to a brief trans-atlantic dispute reminiscent of the 2001 GE/Honeywell case. Nevertheless, following public pledges by Oracle concerning its commitment to Sun s open-source database software, the Commission unconditionally cleared the transaction. 12 In one of the rare cases of a violation of the standstill obligation, the Commission fined Belgian energy company Electrabel 20 million (approximately US$28 million) for acquiring control over CNR, France's second largest electricity producer, in December 2003 without obtaining the Commission s prior approval. In the Commission s view, Electrabel was a sophisticated company with sufficient knowledge of its filing obligations, and even if it had had doubts about whether its acquisition of not more than 50% of the shares in CNR amounted to control under the EU merger regulation, it should not have waited until 2007 before approaching the Commission. Electrabel has appealed. 13 Cartels and other Anticompetitive Practices The Commission continued the trend of imposing high fines for anti-competitive behavior. In addition to the 1.06 billion fine imposed on Intel, discussed in Section D, the Commission imposed a billion fine on E.ON and GDF Suez ( 553 million each) (approximately US$771 million) for their involvement in a market-sharing agreement concerning the supply of gas into Germany and France. 14 New fines were also imposed on companies in the following sectors: marine hose million (approximately US$183 million); 15 reagents - 61 million (approximately US$85 million); 16 power transformers million (approximately US$94 million); 17 and plastic additives million (approximately US$241 million). 18 The Commission was able to launch or continue investigations into companies in the following sectors: bananas; cathode ray tubes; cement; LCD panels; special glass; North Sea shrimp; heat stabilizers; compressors; prestressing steel; power cable; and smart card chips. The Commission was able to launch or continue investigations into companies in the following sectors: bananas; 19 cathode ray tubes; 20 cement; 21 LCD panels; 22 special glass; 23 North Sea shrimp; 24 heat stabilizers; 25 compressors; 26 prestressing steel; 27 power cable; 28 and smart card chips In 2007, a record 402 cases were notified to the Commission. After a drop in merger activity towards the end of the year, 347 and 259 cases were notified in 2008 and 2009 respectively. See the Commission s merger control statistics, available at 12 Press Release, January 21, 2010, Merger: Commission clears Oracle's proposed acquisition of Sun Microsystems, available at 13 See Pending Case T-332/09 Electrabel v. Commission, available at 14 See Press Release, July 8, 2009, Antitrust: Commission fines, available at 15 Press Release, January 28, 2009, Antitrust: Commission fines marine hose producers 131 million for market sharing and price-fixing cartel, available at 16 Press Release, July 22, 2009, Antitrust: Commission fines suppliers of calcium carbide and magnesium based reagents over 61 million for price fixing and market sharing cartel, available at 17 Press Release, October 7, 2009, Antitrust: Commission fines producers of power transformers 67.6 million for market sharing cartel, available at 18 Press Release, November 11, 2009, Antitrust: Commission fines plastic additives producers 173 million for price fixing and market sharing cartels, available at 19 Press Release, December 17, 2009, Antitrust: Commission confirms sending Statement of Objections to alleged participants in bananas cartel in Southern Europe, available at 20 Press Release, November 26, 2009, Antitrust: Commission confirms sending Statement of Objections to alleged participants in TV and computer monitor tubes cartels, available at 21 Press Release, September 23, 2009, Antitrust: Commission carries out unannounced inspections in the cement and related products sector available at 22 Press Release, July 13, 2009, Antitrust: Commission confirms sending Statement of Objections to alleged participants in LCD panels cartel available at 23 Press Release, July 3, 2009, Antitrust: Commission confirms unannounced inspections in the special glass sector, available at 24 Press Release, March 31, 2009, Antitrust: Commission confirms unannounced inspections in the North Sea shrimps sector, available at 25 Press Release, March 23, 2009, Antitrust: Commission confirms sending Statement of Objections to alleged participants in heat stabilisers cartel, available at 26 Press Release, February 18, 2009, Antitrust: Commission confirms inspections in the industry for compressors for refrigeration, available at 27 Press Release, February 5, 2009, Antitrust: Commission confirms sending Statement of Objections to alleged participants in prestressing steel cartel, available at 28 Press Release, February 3, 2009, Antitrust: Commission confirms inspections in high voltage power cable sector, available at 29 Press Release, January 7, 2009, Antitrust: Commission confirms inspections in the smart card chip sector, available at 58

59 DEVELOPMENTS IN THE EurOPEaN union The Commission s ability to impose increasingly larger fines was further strengthened by its victory in the Akzo Nobel case 30 before the European Court of Justice ( ECJ ). In this case, Akzo Nobel challenged whether the Commission could attribute liability to a group s parent company for the anticompetitive actions of its subsidiary (which significantly increased the level of fines imposed). In its judgment, the Court largely rejected Akzo Nobel s arguments, and confirmed that the Commission can presume that a wholly-owned subsidiary is liable for the acts of its subsidiaries. This judgment confirms the importance of implementing effective compliance programs throughout corporate groups, particularly as the Court confirmed in a separate judgment that one meeting amongst competitors can be sufficient to constitute concerted action in violation of EC competition law. 31 The Commission also published its final report on its inquiry into the pharmaceutical sector, finding, inter alia, that the entry of generic drugs has been delayed due to the actions of originator companies and the regulatory framework. 32 In light of the report, the Commission has intensified its scrutiny of the sector, and has subsequently launched investigations into the market for generic products in several EU Member States. Abuses of a Dominant Position The high-technology industry remains one of the Commission s main battlegrounds for enforcing the abuse of dominance rules. While the Commission s decade-long struggle with Microsoft appears set to come to an end, 33 Intel was recently fined a record 1.06 billion (approximately US$1.48 billion) for abusing its dominant position in the x86 CPU market for implementing a series of conditional rebates and taking other measures aimed at preventing or delaying the launch of computers based on competing products. 34 Having already unsuccessfully complained about procedural errors at an earlier stage, 35 Intel has now appealed the decision on substantive and procedural grounds. 36 The Commission brought some of its ongoing investigations against other high-technology companies to an end. It accepted commitments by Rambus to lower its memory chip royalties and ended the investigation for alleged patent ambush. 37 The Commission also closed its formal proceedings against Qualcomm for charging unreasonably high royalties for technology that was included in the European 3G standard. 38 However, other cases appear to be in the pipeline also saw a fair amount of enforcement activity in industries characterized by former monopolies, many of which had also been the subject of earlier Commission sector inquiries Case C-97/08 P, Akzo Nobel a.o. v. Comm n, [not yet reported in E.C.R.], available at 31 Case C-8/08, T-Mobile Netherlands a.o. v. Commission, [not yet reported], available at 32 European Commission, Final Report on the competition inquiry into the pharmaceutical sector, July 8, 2009, available at 33 Press Release, December 16, 2009, Antitrust: Commission accepts Microsoft commitments to give users browser choice, available at See also 34 Press Release, May 13, 2009, Antitrust: Commission imposes fine of 1.06 bn on Intel for abuse of dominant position; orders Intel to cease illegal practices, available at For key and other documents, see the Commission s dedicated website: 35 See Order of the Court of First Instance of January 27, 2009 in Case T-459/08 R Intel v Commission [not yet reported in E.C.R.], available at 36 Intel News Release, EC Ruling: Statement by Intel President and CEO Paul Otellini, available at The case is pending as Case T-286/09, Intel v. Commission, see also 37 Press Release, 9 December, 2009, Antitrust: Commission accepts commitments from Rambus lowering memory chip royalty rates, available at The Commission also convinced the IP licensing company IPCom to give a public pledge to grant irrevocable licences on fair, reasonable and non-discriminatory terms to patents that IPCom had acquired and which are essential for various standards set by the European Telecommunications Standard Institute and Universal Mobile Telecommunications System, see Press Release, 10 December, 2009, Antitrust: Commission welcomes IPCom's public FRAND declaration, available at 38 Press Release, 24 November, 2009, Antitrust: Commission closes formal proceedings against Qualcomm, available at 39 Press Release, 19 November, 2009, Antitrust: Commission confirms sending Statement of Objection to Standard & Poor s, available at Press Release, 10 November, 2009, Antitrust: Commission opens formal proceedings against Thompson Reuters concerning use of Reuters Instrument Codes, available at Given the company s position in the online search and advertising market and the initial skirmishes at Member State level, it would seem to be just a question of time before the Commission investigates Google. 40 E.g., Press Release, October 6, 2009, Antitrust: Commission market tests commitments proposed by Svenska Kraftnät concerning Swedish electricity transmission market available at August 6, 2009, Commission accepts commitments by Greece to ensure fair access to Greek lignite deposits, available at December 3, 2009, Antitrust: Commission accepts commitments by GDF Suez to boost competition in French gas market, available at April 27, 2009, Commission opens formal proceedings against telecoms incumbents Telekomunikacja Polska and Slovak Telekom, available at 59

60 DEVELOPMENTS IN THE EurOPEaN union How the Community Courts will approach the Commission s practice in abuse of dominance cases in the coming years should prove interesting. Under the new guidance on exclusionary abuses, 41 the Commission has pledged itself to apply an economic-effects based approach. When reviewing complex economic assessments by the Commission, however, the Community Courts have granted the Commission a broad discretion, merely examining whether it complied with the relevant procedural rules, established the facts correctly, and did not commit a manifest error when assessing the facts. 42 Time will tell how far they are willing to extend this limited judicial review and entertain economics-based arguments raised by litigants. Court Decisions In July 2009, the ECJ partly set aside the judgment of the Court of First Instance ( CFI ) in Schneider/Legrand and further restricted the already limited prospects of damages claims against the Commission for unlawful merger control decisions. 43 While the ECJ upheld the claim for the costs Schneider had incurred as a result of the resumption of the merger review investigation following the annulment of the Commission s decision, it rejected the CFI s finding with respect to alleged loss suffered and argued that the direct cause of Schneider s loss was its decision to sell Legrand prematurely rather than the Commission s unlawful decision. In October 2009, the ECJ examined whether a pharmaceutical company may implement a dual-pricing system, under which it charges its wholesalers one price for drugs sold in the local market for resale under the national healthcare reimbursement rules and another price for the same drugs sold elsewhere, including in other EU Member States. 44 In its judgment, the ECJ confirmed that such a system has the object of restricting parallel trade, but it also upheld the lower court s judgment that the Commission is required to consider the evidence presented by the pharmaceutical company, including that which shows that parallel trade reduces the amount of research and development. 41 Guidance on the Commission s enforcement priorities in applying Article 82 to abusive exclusionary conduct by dominant undertakings, available at 42 See, e.g., the approach taken by the Courts recent judgments upholding Commission abuse of dominance decisions: Press Release, September 9, 2009, The Court of First instance dismisses the action brought against the Commission s decision finding that Clearstream unlawfully refused to provide certain financial services to Euroclear, available at and April 2, 2009, The Court dismisses France Télécom s appeal regarding abuse of its dominant position on the French Internet access market, available at 43 See Case C-440/07 P, Commission v. Schneider Electric, [not yet reported in E.C.R.], available at 44 Joined Cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06 P, GlaxoSmithKline Services v. Commission, [not yet reported in E.C.R.],, available at Covington & Burling LLP Avenue des Arts, Brussels - Belgium

61 Finland Toni Huopalainen Legislative Developments Last year s OECD publication on Guidelines for Fighting Bid Rigging in Public Procurement 1 has triggered much interest in Finland, leading to guidelines being published by the Finnish Competition Authority (the FCA ) and seminars held at various levels, notably with the participation of public procurement units. There have been no other important legislative developments. Mergers In Finland, a concentration must be notified to the FCA if the combined turnover of the undertakings concerned exceeds 350 million (approximately US$474.8 million) and at least two of the parties to the acquisition have a turnover of at least 20 million (US$27.1 million) in Finland. Up to December 13, 2009, the FCA received 12 merger notifications, all of which were cleared unconditionally. Cartels and other Anticompetitive Practices 2009 was remarkable and in many respects marked a landmark year in Finnish domestic antitrust surveillance. The Finnish Office of Free Competition, now known as the Finnish Competition Authority, 2 was established in 1988 but lacked the will and/or the means to enforce the Finnish Competition Act, which was enacted in On September 29, 2009, the Finnish Supreme Administrative Court (the FSAC ) applied the Finnish Competition Act for the first time in line with the stricter EC law principles and imposed heavy fines in a case involving domestic antitrust infringements. 4 The FSAC found that a handful of domestic undertakings active in the asphalt market had engaged in price fixing and market sharing and imposed record fines of million (approximately US$110 million); the listed construction company Lemminkäinen Oyj was fined 68 million (approximately US$90.5 million), 5% of its global group-wide turnover for the previous financial year (2008). According to the Director General of the FCA, Mr. Juhani Jokinen, the level of fines, much higher than in any previous domestic antitrust decision in Finland, marked the beginning of a new battle against cartels in Finland. As Mr. Jokinen put it, we are [now] talking of percentages and not fractions of percentages as before, 5 thereby breaking with a long-established practice of imposing modest fines for domestic price fixing and market sharing. The FSAC decision is also remarkable when it is considered that the fine imposed on Lemminkäinen Oyj exceeded the company s net turnover by 4 million (approximately US$5.33 million). The Court did not accept the argument commonly relied on by Finnish firms in the past that a high fine would lower profitability, harm jobs and negatively affect Finnish competiveness in export markets. Instead, it expressly declared that Finland had to follow EC legal practice and emphasized the importance of the fining policy in order to ensure the proper functioning of the market economy. While high-profile Finnish companies (UPM, 6 Outokumpu, 7 Kemira 8 and M-Real 9 ) have constantly been involved in various European Commission 1 Guidelines for Fighting Bid Rigging in Public Procurement, available at 2 The Finnish Competition Authority s website is available at 3 Finnish Competition Act, /480, published in the Statute Book of Finland, May 27, 1992, Sheet 480, available at 4 Decision KHO, 2009:83; September 29, 2009, Asphalt. The decisions of the Finnish Administrative Court, many of which also are translated into English, are available at 5 See interview with the Director General, Mr. Juhani Jokinen published in Finnish in the Keskisuomalainen newspaper on September 20, Commission Decision, November 30, 2005, case COMP/38.354, Industrial Bags; and Court of First Instance, Case T-53/06, published in Official Journal 2006-C-86, available at 7 Judgment of the Court of First Instance, May 6, 2009, Case T 122/04, available at 8 Commission Decision, May 3, 2006, Case COMP/F/C , case Hydrogen Peroxide and Perborate, published in Official Journal 2006 L Court of First Instance T-126/02, April 26, 2007, M-real Zanders v. Commission. See Press release Memo/07/155, April 26, 2007 Commission welcomes Court of First Instance judgment in carbonless paper cartel case. 61

62 DEVELOPMENTS IN finland investigations, this has not been matched at the domestic level. This is due to a mixture of cultural and political factors, particularly the consensus-driven method of taking decisions and the emphasis on exports which led to public authorities treating Finnish companies with kid gloves as far as compliance with competition law domestically was concerned. In another significant case, the Finnish Marketing Court 10 ruled that between 1997 and 2004 the economic cooperative Metsäliitto and the forestry companies Stora Enso Oyj and UPM-Kymmene Oyj had engaged in price cooperation and exchanged information on pricing when acquiring round timber as raw material (Round Timber). The Marketing Court fully agreed with the FCA s finding that this was a serious infringement and fined the companies concerned a total of 51 million (approximately US$60 million) (Stora Enso was fined 30 million (approximately US$40 million) and Metsäliitto 21 million (approximately US$28 million). UPM-Kymmene Oyj obtained fine immunity because it had informed the FCA of the existence of the cartel as well as the contents of the unlawful behavior, while Metsäliitto s fine was reduced by 30% for having cooperated with the FCA. Round Timber is the second time that the Marketing Court has applied the leniency system, the first time being earlier in 2009 in the car spare parts wholesale case. 11 The Asphalt and Round Timber rulings have opened up the possibility of many potential damages actions. Section 18a of the Finnish Competition Act obliges an undertaking found liable of willfully or negligently restricting competition or abusing a dominant position to compensate the damage caused to another business. Such damages cover compensation for direct expenses, lost profit and other direct or indirect forms of loss caused by the competition restriction. Following Asphalt, several claims have already been filed. Those entitled to damages, besides undertakings in direct dealings with the wrongdoing entrepreneur concerned, include foreclosed competitors and individual customers and consumers that have suffered from unfair trading conditions. The Asphalt case will give rise to dozens of potential claims, mainly by municipalities, as well as paving and infrastructure companies. Round Timber also has the potential to generate several thousands of cases, since ordinary private individuals acting in the pursuit of economic gain - i.e. with a business purpose - will be potential claimants. For example, in ,000 direct round timber transactions were conducted in Finland alone. 12 Finland recently enacted legislation on class actions 13 although this legislation only comes into play in pure consumer disputes and expressly refers to the competences of the Finnish Consumer Ombudsman, who has the sole competence to bring an action in cases in which a large group of consumers have a private dispute in the same matter against the same defendant. It is therefore to be expected that forthcoming damages claims will be structured as traditional bundled claims, which will also open up several possible defenses e.g. on legal forum etc. Abuses of a Dominant Position Even though the structure of the Finnish economy is such that many companies hold a dominant position, so far proven abuses have either been minor or local in nature compared to cartel cases. On June 4, 2009 the Marketing Court fined Suomen Numeropalvelu Oy ( SNOY ) for an abuse of a dominant position regarding the sales of subscriber information to manufacturers of phone books. SNOY is the only company operating throughout Finland. The case concerned SNOY s refusal to deliver information on subscribers to Eniro Finland Oy on data protection grounds. 10 Finnish Marketing Court, Decision 614/2009, November 30, 2009, available at Note that FCA decisions are first appealed to the Finnish Marketing Court. 11 Finnish Marketing Court, Case 216/06 KR, Oy Arwidson Ab, HL Group Oy, Koivunen Oy, Kaha Oy and Örum Oy Ab, February 20, 2009, available in Finnish at 12 See Paper and Wood Insight by the Finnish Confederation of Forest Industries, available at In Round Timber there had been price collusion between 1997 and The number of transactions affected is huge, as is the number of those indirectly affected. Arguably, potential and actual effects can also be felt not only in neighboring countries, but more or less wherever Finnish paper and forestry products are marketed and sold /444, published in the Statute Book of Finland, April 13, 2007 Sheet

63 DEVELOPMENTS IN finland The Market Court ruled that Eniro Finland Oy was fully dependent on the receipt of the information from SNOY and that the latter s refusal to supply amounted to an abuse of a dominant position. The practice also had the effect of narrowing the choices available to the consumer regarding the availability of phone number data. Data protection arguments were thus overruled by competition law arguments. Asianajotoimisto Mercatoria Oy Attorneys-at-Law World Trade Center P.O. Box 800, Aleksanterinkatu 17 FI Helsinki - Finland

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65 France François Brunet and Eric Paroche Legislative Developments French competition law has undergone some significant changes in the review period. On March 2, 2009, the French Competition Authority (the Authority ), which replaced the former French Competition Council, began executing its regulatory functions, in line with the Law on the modernization of the economy, which came into force on August 4, 2008, 1 and the Order of November 13, 2008 concerning the modernization of competition regulation. 2 The Authority now has quasi-exclusive jurisdiction to enforce competition law in France. The primary powers retained by the French Ministry of the Economy are (i) the power to request the Authority to carry out a phase-two investigation with respect to a merger transaction authorized by the Authority in phase one; (ii) the power to overrule, for general interest purposes, a negative phasetwo decision; and (iii) the power to enforce settlements in response to anti-competitive practices affecting a market of a local dimension in France. On December 16, 2009, the Authority published new Merger Control Guidelines (the Guidelines ). 3 These Guidelines were implemented on January 1, 2010, replacing those published by the French Ministry of the Economy (DGCCRF) in 2004 and last updated in The Guidelines continue to rely on EC regulations and case law, in particular as regards the assessment of competition issues 5 and the role of economic analysis in the assessment of mergers. 6 Furthermore, in accordance with the Consolidated Jurisdictional Notice published by the European Commission in 2008, the Guidelines refine the notion of concentration, address specific questions such as interim and interrelated transactions, 7 and give more detail on the Authority s approach to ancillary restraints that are directly related and necessary to concentrations, in particular when such ancillary restraints give rise to uncertainty. 8 The Guidelines also address several issues brought to the fore by the financial crisis and thereby build on the most recent decisional practice of the Authority, particularly as regards commitments. Thus, the Authority considers that a behavioral commitment can be considered a substitute for a structural remedy, either on a temporary or permanent basis, where the finding of a suitable purchaser proves very difficult (see the decision Caisse d Epargne and Banque Populaire of June 22, 2009 described in the next section). 9 Mergers Between March 2, 2009 and December 31, 2009, the Authority issued 88 clearance decisions, 10 three of which were subject to commitments. On June 22, 2009, the Authority issued a phase-one decision clearing the merger between French-based mutual banks Caisse d Epargne and Banque Populaire. 11 The Authority found that the concentration would hinder competition on Reunion Island, a French overseas territory, because the combined market share exceeded 40% in two 1 Law No on the modernization of the economy of August 4, 2008, JORF [Official Gazette] No.181 of August 5, 2008, p available in French at 2 Order No of November 13, 2008 relative to the modernization of the regulation of competition, JORF [Official Gazette] No. 265 of November 14, 2008, p available in French at 3 Merger Control Guidelines of the French Competition Authority Version of December 16, 2009, available in French at 4 Merger Control Guidelines of the French Ministry of the Economy (DGCCRF) Version of April 30, 2007, available in English at 5 See, for instance, paragraphs of the Guidelines. 6 Paras and of the Guidelines. 7 Paras of the Guidelines. 8 Paras of the Guidelines. 9 Paras 551of the Guidelines. 10 All of these were phase-one decisions. 11 Decision No. 09-DCC-016, June 22, 2009, on the merger of the Banque Populaire and Caisse d'epargne groups, available in French at 65

66 DEVELOPMENTS IN france retail banking segments and three corporate banking segments. In particular, the Authority pointed out that five local areas would be adversely affected, since the new group would account for close to 50% of the local branches. Finally, the Authority considered that, in the context of the recent financial crisis, barriers to entry in the Reunion Island s banking sector (a small market, subject to the peculiarities of an island economy) would remain high. Since the parties would have struggled to find a suitable purchaser in the event of any remedy requiring divestments, the Authority accepted the parties commitment to keep their respective Reunion Island branch networks strictly separate from a legal and operational perspective for five years. The Authority deemed this commitment to be credible, substantial and verifiable, and it was satisfied that this behavioral remedy would bring about the same result as a divestiture by preventing any coordination of the new group s commercial policy on Reunion Island. However, if the new group failed to implement these commitments, or if the Authority deemed them to be ineffective in the light of the mid-term reports prepared by a monitoring trustee, Banque Populaire Caisse d Epargne would have to divest its banking assets on Reunion Island. Cartels and other Anticompetitive Practices On February 2, 2009, the Authority fined Manpower, Adecco and VediorBis 94.4 million (approximately US$121 million) for exchanging price information concerning key accounts within the French market for temporary employment services, 12 thereby confirming the growing trend for increasing antitrust fines in France. Adecco and VediorBis opted for a negotiated settlement procedure, 13 and undertook to (i) organize internal compliance training sessions on competition law for executives and employees; (ii) establish an internal whistleblowing policy enabling employees to report anticompetitive practices on an anonymous basis, and (iii) appoint an independent, external consultant to assess whether the calls for tenders in which the company had participated during the year complied with the competition rules. The Authority considered these commitments to be strong incentives for Adecco and VediorBis to comply with the regulations, and reduced their fines by 25%. By contrast, Manpower did not settle and has appealed to the Paris Court of Appeals alleging that sporadic and limited exchanges of information could not amount to a concerted practice and be fined as severely as a cartel. Abuses of a Dominant Position On February 5, 2009, following the filing of a complaint by three online travel agencies, the Authority imposed a fine on the French incumbent rail operator SNCF, and the world s biggest online travel agency Expedia, of 5 million and 500,000 respectively (approximately US$6.4 million and US$640,000). 14 The Authority found that SNCF had abused its dominant position in the market for the sale of train tickets. Firstly, SNCF required online travel agencies to purchase IT licenses at inflated prices to access SNCF s computerized reservation system (essential for retrieving information relating to schedules, seat availability and fares). Secondly, the Authority held that SNCF had imposed technical restrictions on online travel agencies to prevent them from selling train tickets under the same conditions as its subsidiary company Agence voyages-sncf.com, i.e. online travel agencies had no access to the self-printed ticket option nor could they make available promotional or lastminute offers. In addition, the Authority found that SNCF and Expedia had entered into an anticompetitive agreement, namely the joint venture between them established in September The Authority noted that the mailing of joint commercial newsletters, and the larger share of advertisement fees attributed to the travel services of voyages-scf.com website, gave Expedia a substantial competitive advantage over other online travel agencies. SNCF did not dispute any of these findings and offered substantial commitments to ensure a level playing field in the market for the online sale of train tickets, undertaking to reduce significantly the price of the IT license and to 12 Decision No. 09-D-05, February 2, 2009, on practices in the temporary employment sector, available in French at 13 See Article L of the French Commercial Code. 14 Decision No. 09-D-06, February 5, 2009, on practices carried out by the SNCF and Expedia Inc. in the online travel sales sector, available in French at 66

67 DEVELOPMENTS IN france allow other online travel agencies to use the same direct connection system as voyages-sncf.com. SNCF also undertook to negotiate the development of an alternative booking system with booking engines, which the Authority welcomed in the light of the liberalization of international railway passenger transport. Online travel agencies will be able to offer their customers promotional tickets and also the option of self-printed tickets under the same conditions as voyages-sncf.com. In the longer term, SNCF undertook to provide access, on a non-discriminatory basis, to nonpaper rail tickets. SNCF will also apply the same compensation terms to train ticket sales, irrespective of whether Agence voyages-sncf.com, or any other online travel agency, carries out the sale. The Authority considered that the extensive nature of SNCF s commitments was likely to remove current and future competitive concerns. Although SNCF s practices were deemed to be serious (considering their duration, their exclusionary nature and the emerging character of the market) the Authority fined it the relatively modest amount of 5 million (i.e % of turnover), given the substantial commitments paving the way for the opening up of the French railway market in Court Decisions Distribution of the iphone in France On February 4, 2009, the Paris Court of Appeals confirmed the interim measures granted by the Authority imposing a suspension of Orange s exclusive right to distribute Apple s iphone in France. 15 Orange is the mobile phone subsidiary of France Télécom, which is the incumbent operator in the French telecommunications sector. Following a complaint by the mobile phone operator Bouygues Telecom, the Authority found that Orange s exclusivity was likely to have an adverse effect on competition (due to the scope and duration of the agreement) and risked seriously and immediately damaging competition in the mobile phone sector. Pending a decision on the merits of the case, the Authority suspended Orange s exclusivity for the current iphone and reduced its exclusivity to three months for future models. 16 Apple and Orange appealed the interim order, but the Paris Court of Appeals dismissed their claims while confirming the Authority s analysis. Firstly, the Court held that the exclusive agreements could not benefit from the European Commission s Block Exemption Regulation on Vertical Restraints (which allowed for certain sales restrictions on particular types of distribution agreements) because they contained hard-core restrictions on cross-supplies between distributors, 17 and on sales to end-users by members of a selective distribution system. 18 Secondly, the Court held that such exclusive agreements were likely to have an adverse effect on competition. The long-term exclusivity granted to Orange, in conjunction with the reputational advantage gained from Apple s position in the market for digital music players, was deemed to confer on Orange a substantial competitive advantage. The Court noted further that the exclusive arrangements would reduce the already low level of competition in the mobile telephone market where (i) there are only three mobile phone operators, (ii) the sale of handsets is usually bundled with the signing of longterm contracts, and (iii) switching costs are particularly high. Additionally, the Court emphasized the risk of market foreclosure flowing from the cumulative effect of such agreements, particularly if the two other mobile companies entered into similarly exclusive arrangements (as SFR, Orange s main competitor, did with Blackberry). Thirdly, the Court considered that such anticompetitive effects were not offset by efficiency gains. Orange s argument that it was entitled to compensation for the investment arising from the launch of the iphone in France, and its claim that exclusivity would foster lower prices for consumers was rejected out of hand by the Court, for whom there was a demonstrable disparity between the investments made by Orange and the revenues generated as a consequence of exclusivity. By way of evidence, the Court relied on the offering of discounts to customers, irrespective of exclusivity. 15 Paris Court of Appeals, February 4, 2009, 1e ch., R.G. No. 2008/23828 and 2009/00003, available in French at 16 Interim Measures Decision No. 08-MC-01, December 17, 2008, on practices engaged in by Orange and Apple for iphone sales in France and Paris Court of Appeals, February 4, 2009, 1e ch., R.G. No. 2008/23828 and 2009/00003, available in French at 17 See Article 4(d) of the Commission Regulation (EC) No. 2790/1999 on the application of Article 81(3) of the Treaty to categories of vertical agreements and concerted practices, Official Journal L 336, , p See Article 4(c), Ibid. 67

68 DEVELOPMENTS IN france Finally, the Court held that the restriction of competition had serious and immediate consequences for the mobile phone sector, for the following reasons: (i) sales of the iphone in France are currently (and likely to remain) significant in volume, given the iphone s worldwide success and French consumers tendency to renew their handsets; (ii) exclusivity allowed Orange to attract new customers who were otherwise locked into existing subscriptions through long-term contracts; (iii) current customers have limited incentives to switch to another mobile phone operator, since current iphone and ipod customers are still charged to migrate their music library to a format without Digital Rights Management. The Court considered, therefore, that the interim measures granted by the Authority were justified and proportionate, since the specific investments made by Orange for the launch of Apple s iphone in France had been largely recouped. Orange appealed the judgment to the French Supreme Court, but on November 3, 2009, Orange and Apple both made commitments to the Authority within the framework of the procedure on the merits. Apple committed not to enter into contracts containing exclusivity clauses with mobile phone operators, or wholesalers, for the distribution of the iphone unless exclusivity was limited strictly to three-month terms. Orange undertook not to claim exclusivity on the distribution of the current iphone, and to cease introducing exclusivity clauses exceeding three months in distribution contracts for future models. Accordingly, Orange committed to rectify all its agreements and contracts with Apple and iphone distributors. These three-year commitments have been submitted to a market test, and depending on the results, the Authority will decide whether they are sufficient to resolve the competition issues and to bring this litigation to a close. Luxury perfumes On November 10, 2009, the Paris Court of Appeals annulled a decision by the Authority 19 fining producers of luxury perfumes a total of 46.2 million (approximately US$69.2 million) for entering into alleged vertical agreements with a number of well-known retailers. 20 The Court held that the long delay of six years between the commencement of the investigation in 1999, which began without any of the companies being informed, and the sending of the statement of objections in 2005, prevented the companies from preserving various pieces of potentially exculpatory evidence. Level of fines in the context of the current economic crisis On September 29, 2009, in a case where six plywood manufacturers were fined for price arrangements, 21 the Paris Court of Appeals refused to grant a general reduction in fines for firms who had suffered solely from declining revenues in the context of the current economic crisis, and lowered fines for two companies only, one of which was in receivership and the other in liquidation. 22 Admissibility of evidence On April 29, 2009, the Paris Court of Appeals allowed as admissible evidence audio recordings (secretly made by the claimant) of conversations with representatives of suppliers and distributors in a vertical price agreement case. 23 The Paris Court of Appeals upheld the decision of the Authority, arguing that the appellant s defense rights had not been violated Paris Court of Appeals, November 10, 2009, Pôle 5 ch. 5-7, R.G. No. 2008/18277, available in French at 20 Decision No. 06-D-04, March 13, 2006, on practices observed in the luxury perfume sector, available in French at 21 Decision No. 08-D-12, May 21, 2008, on practices carried out in the plywood sector, available in French at 22 Paris Court of Appeals, September 29, 2009, Pôle 5 ch. 5-7, R.G. No. 2008/12495, available in French at 23 Decision No. 05-D-66, December 5, 2005, on a complaint by the SARL Avantage about practices carried out in the consumer electronics industry, available in French at 24 Paris Court of Appeals, April 29, 2009, 1e ch., R.G. No. 2008/11907, available in French at 68

69 DEVELOPMENTS IN france Cleary Gottlieb Steen & Hamilton LLP 12, rue de Tilsitt Paris - France

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71 Germany Susanne Zuehlke and Dr. Jan Philipp Komossa Legislative Developments A new domestic turnover threshold for merger notifications to the Federal Cartel Office (the FCO ) was introduced in the year in review. Since March 25, 2009, transactions require prior notification to the FCO if, during the previous financial year, the parties have combined global revenue of more than 500 million (approximately US$735 million), at least one party has revenue in Germany of more than 25 million (approximately US$37 million), and the new requirement one other party has revenue in Germany of more than 5 million (approximately US$7.4 million). 1 The new threshold has already led to a significant decrease in merger notifications in Germany. 2 Pursuant to an Amendment of the Foreign Trade Act and the Foreign Trade Ordinance which came into force on April 24, 2009, investors from countries outside the EU and the EFTA may be prohibited from acquiring, directly or indirectly, more than 25% of the voting rights in a German entity if the acquisition poses a serious danger to public policy or the security of the Federal Republic of Germany. 3 However, according to the German legislator s explanation, the terms public policy and security are to be construed narrowly. The German Government forecasts that only about ten transactions per year will be affected, pointing to the rare and exceptional circumstances in which the new law applies. Mergers In 2009, the FCO continued to impose substantial fines for violating the stand-still obligation. Thus, on February 13, 2009, it fined the publishing house Druck und Verlagshaus Frankfurt am Main GmbH 4.13 million (approximately US$6.1 million) for failure to notify the acquisition of the publishing company Frankfurter Stadtanzeiger GmbH in The FCO learned about the violation in the context of another merger control proceeding concerning a subsequent sale of the initially acquired publisher. In July 2009, the FCO published the interim results of the fuel sector inquiry 4 launched in 2008, finding that high levels of vertical and horizontal concentration exist in the fuel sector and pose a major obstacle to further competition. The first measure taken by the FCO following the inquiry was to prohibit the proposed takeover of 59 OMV petrol stations by Total Deutschland, because it considered that the transaction would have strengthened an existing oligopoly. 5 Other notable transactions reviewed by the FCO in 2009 include a major airline merger (cleared), a merger between two sugar producers (cleared subject to conditions) and a proposed merger between two holding companies in the hospital sector (prohibited). 6 On September 14, 2009 the FCO announced the launch of a sectoral inquiry into the district heating sector. 7 Cartels and other Anticompetitive Practices In December 2009, the FCO imposed fines totaling approximately million (approximately US$235 million) on three coffee roasting companies and six employees for price fixing. 8 According to the FCO s information, a discussion group made up of the directors and sales managers of the coffee roasters existed from at least early 2000 until the companies were searched by the FCO in July The aim of the discussion group was to maintain the price architecture of the companies final sales prices and special offer prices for their major roasted 1 See Sec. 35, para. 1, Act against Restraints on Competition. 2 Based on discussions with officials at the FCO. Detailed figures are not yet available. 3 See Sec. 7, paras 1 and 2 no. 6 Foreign Trade Act ( Außenwirtschaftsgesetz ) and Sec. 53 Foreign Trade Ordinance ( Außenwirtschaftsverordnung ). 4 FCO Press Release, July 2, 2009, available at 5 Total Deutschland GmbH / Honsel Mineralölvertriebs GmbH, B8-175/08, April 29, 2009, available at 6 Air Berlin / TUIFly, B9-56/09, September 8, 2009; Nordzucker AG / Danisco Sugar A/S, B2-46/08, February 17, 2009; Gesundheit Nordhessen / Gesundheitsholding Werra-Meissner- Kreis, B3-215/08, June 18, 2009, available in German at 7 FCO Press Release, September 14, 2009, available at 71

72 DEVELOPMENTS IN GERMANY coffee products (filter coffee, also at times whole bean products, espresso and coffee pads). To achieve this aim, the coffee roasters allegedly agreed on the level, extent, date of announcement and implementation of the planned price increases. In July, the FCO imposed fines totaling million (approximately US$58.4 million) on several companies in the mortar sector. 9 Nine companies, and as many senior executives, were accused of having participated in an anticompetitive agreement related to set-up fees for dry mortar silos in Germany. The agreement was implemented at the beginning of In the proceedings, the FCO applied new fining guidelines 10 issued in 2006 following a statutory increase in the level of fines. Following these guidelines, the calculation of the fines was based on the companies turnover from sales of mortar, as well as their revenue from the set-up fee, in order to take sufficient account of the economic significance of the agreements. In the case of two companies belonging to corporate groups with an annual turnover of more than 1 billion (approximately US$1.47 billion), the FCO significantly raised the fines to enhance the deterrent effect of the decision. In April 2009, the FCO imposed fines totaling 41.4 million (approximately US$61 million) on Westfalen AG and Propan Rheingas GmbH & Co. KG. 11 The companies allegedly restrained competition in the market for tank and bottled gas through customer protection agreements and accompanying price agreements, at least from 1997 until a dawn raid in May In the course of the year, the FCO focused much of its efforts on analyzing vertical relations, as evidenced by three important decisions on resale price maintenance. First, in April the FCO fined Microsoft Deutschland GmbH 9 million (approximately US$13.2 million) 12 for allegedly influencing the resale price of a software package in an anticompetitive manner. The product in question ( Office Home & Student 2007 ) was heavily advertised in the autumn of 2008 in stationary retail outlets. Amongst others, a nationwide retailer advertised the product with financial support from Microsoft. Even before the launch of the advertising campaign in mid-october 2008, Microsoft employees and the retailer in question had agreed on at least two occasions on the resale price of the product. Microsoft accepted the fine. In September 2009, the FCO fined the leading company in the German contact lens market CIBA Vision Vertriebs GmbH 11.5 million (approximately US$16.9 million). 13 Apart from anticompetitive agreements on the exclusion of internet trading and, in particular, the prevention of ebay trade in certain contact lenses, the alleged offences include so-called price management measures. CIBA Vision operated a surveillance and intervention system, with several persons employed to monitor and control retailers sales prices online. If the resale prices of individual retailers were at a certain level below the non-binding recommended retail price, CIBA Vision staff would contact them to try in many cases successfully to induce them to increase their prices. CIBA Vision accepted the fine. Finally, in October, the FCO imposed a fine of 4.2 million (approximately US$6.2 million) on Phonak GmbH, 14 one of the leading German manufacturers of hearing aids. A hearing aid retailer had published online prices for all manufacturers hearing aids, yet the prices for Phonak hearing aids were in some cases clearly below the minimum price level applied in the market until then. As a result, other hearing aid retailers from across Germany complained to Phonak GmbH about these lower prices. Phonak reacted by refusing to sell to the retailer in question, thus successfully inducing it to raise its resale prices. Under German law, it is not illegal for the supplier to provide retailers with a recommended resale price. However, in the cases described above, the FCO considered that contacts by the supplier with the retailer aimed at influencing (partially successfully) pricing decisions by the latter amounted to illegal agreements or concerted practices. In cases where it can be proved that the retailer follows the recommended price after such contacts, the current practice will make it very difficult for companies to defend such follow-up contacts. In addition, in these cases the FCO will also look carefully for signs of horizontal cooperation between manufacturers or retailers. 8 FCO Press Release, December 21, 2009, available at 9 FCO Press Release, July 3, 2009, available at 10 Notice no. 38/2006 on the imposition of fines under Section 81 (4) sentence 2 of the German Restraints of Competition Act (GWB) against undertakings and associations of undertakings (Guidelines on the setting of fines), September 15, 2006, available at 11 FCO Press Release, April 15, 2009, available at 12 FCO Press Release, April 8, 2009, available at 13 CIBA Vision Vertriebs GmbH, B3-123/08, September 25, 2009, available in German at 14 Phonak GmbH, B3-69/08, October 14, 2009, available in German at 72

73 DEVELOPMENTS IN GERMANY Finally, the FCO imposed fines totaling approximately 1.2 million (approximately US$1.8 million) on various pharmacists associations which had repeatedly called on their members to desist from purchasing products from the pharmaceutical wholesaler Gehe after the latter s parent company Celesio - had taken over DocMorris in April Such a call to boycott purchases violates competition law if it is made with the purpose of hindering another company unfairly, i.e. without any objective justification. In the FCO s view, this was the case here as the boycott was meant to harm Celesio/Gehe in order to protect the incumbent pharmacists from emerging competition. Abuses of a Dominant Position In September 2009, the FCO initiated abuse of dominance proceedings with respect to price structures in the supply of electricity for night storage heating and electric heat pumps. It considered that there are virtually no alternative suppliers in this market, thus preventing customers from switching suppliers. 16 On September 16, 2009, the FCO ordered a local gas supplier, GAG Ahrensburg, to stop charging excessive concession fees and to repay said fees. 17 Concession fees are agreed charges levied on gas grid operators for the right to use local transport routes. Such fees account for a considerable proportion of the gas procurement costs charged to end customers. On the expiry of a concession contract in 2006, the municipality of Ahrensburg took over the local gas distribution network and reclassified all previous special-contract customers as tariff customers, thereby increasing revenues from concession fees six-fold. The FCO announced a further examination of the abusive practices of German municipalities and local suppliers in the sector and that further proceedings would follow, if necessary. Court Decisions In an order dated April 7, 2009, the German Supreme Court confirmed that actions based on bundled damages claims assigned to a single plaintiff are permissible under German law. 18 The decision is likely to boost private antitrust damages actions in Germany although many critical issues concerning such actions remain to be resolved. The substantive analysis in this case, which relates to an action brought by CDC against members of a cement cartel, is still pending before the Regional Court Düsseldorf. In March 2009, the CDC brought another action against the alleged members of the hydrogene peroxide cartel in a German court. According to press reports, Degussa, the leniency applicant in this case, has already agreed terms with the CDC in what appears to be the first settlement of its kind. 19 Apart from this development on collective actions, private companies continue to bring antitrust damages claims in German courts on a frequent basis. 20 In a notable judgment issued on June 26, 2009, the Higher Regional Court of Düsseldorf reviewed the fines imposed by the FCO on five cement manufacturers for concluding quota agreements for a minimum ten-year period and significantly reduced the fines imposed by the FCO from 649 million (approximately US$955 million) to million (approximately US$483 million) FCO Press Release, July 2, 2009, available at 16 FCO Press Release, September 24, 2009, available at 17 GAG Gasversorgung Ahrensberg GmbH, B10 55/08, September 16, 2009, available in German at 18 Federal Supreme Court Order, April 7, 2009, Case KZR 42/08, available in German at 19 See mlex note: Degussa settles CDC s hydrogen peroxide damage claim available at 20 See e.g. the recent appellate judgment of the Kammergericht Berlin, October 1, 2009, Case 2 U 10/03 Kart, available at related to a follow-on claim concerning a Berlin transport cement cartel which existed between 1995 and 1998 and was fined by the FCO on October 25, The plaintiff was a construction company and the defendant was a Berlin-based supplier of transport cement whose managing director was fined for his involvement in the cartel. The court awarded approximately 650,000 in damages. 21 Higher Regional Court Düsseldorf Decision, June 26, 2009, Case VI-Kart 1-9/07 [not yet published]. Latham & Watkins LLP Boulevard du Régent, B-1000 Brussels - Belgium

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75 Greece Anastasia Dritsa and Thomas Amorgianiotis Legislative Developments In September, the Greek Parliament enacted Act 3784/2009 on the Review of Provisions of Act 703/77 on the control of monopolies and oligopolies and the protection of free competition (the new Act ). 1 The new Act has been in effect since September 7, 2009 and constitutes an amendment of Act 703/77 on the Protection of Free Competition (the Hellenic Competition Act ). The purpose of this amendment is to accelerate the review periods by the Hellenic Competition Commission (the HCC ), to align Greek competition law with that existing at European Union level and to limit the workload of the HCC in order to allow it to focus on more serious violations of competition law, namely cartels and abuses of a dominant position. A summary of the key amendments is provided below. Institutional and procedural aspects The new Act has modified the composition of the HCC with a view to reducing the total number of members, as well as those sitting in its sessions, and issuing decisions more quickly. In particular, HCC members have been reduced from 11 to 9, of whom five are full-time (the Chairman and four Commissioners) and four part-time. In addition, the new Act creates the position of the Rapporteur, who is also a Commissioner. At the procedural level, the new Act has introduced shorter time limits for the authority s investigation. In particular, the statement of objections of the Directorate General of the HCC (the DG ) must be submitted to the plenary session of the Commission or to the relevant session, within 90 days from the day the case is assigned to the DG. Said time limit may be extended by up to 30 days at the request of the Rapporteur. As far as mergers are concerned, the time limit for the submission of a statement of objections is 45 days from the date of notification of the case. This may be extended by up to 15 days, again at the request of the competent Rapporteur. Finally, the new Act has introduced a deadline of six months for the completion of the infringement procedure to run from the date the case is assigned to the Commission until the HCC s final decision. In exceptional circumstances, the HCC may extend said time limit by up to two months. Merger control As regards merger control, it is now possible for the undertakings concerned to offer remedies, i.e. commitments that eliminate competition concerns. The remedies need to be notified within 15 days from when the participating undertakings are informed of the commencement of a phase-two investigation. Under the previous regime, such remedies could only be imposed by the HCC rather than offered by the parties. In addition to the above, where a merger clearance is made subject to conditions, the HCC now has the right to impose a fine of up to 10% of the total turnover of the merging parties in the event of non-compliance with the conditions offered. Further, the HCC may also dismantle the merged entity. 2 Finally, in the event of an illegal merger, the HCC has the right to take interim measures in order to preserve competitive conditions in the market concerned. Anticompetitive practices / abuse of a dominant position Under the new Act, the HCC is no longer competent to exempt anticompetitive agreements where pro-competitive effects compensate the restrictive effects. 3 By abolishing individual exemptions, the new Act has introduced the selfassessment system contained in EC Regulation 1/2003 ( exemption by law ), although it has not abolished the 1 See Official Government Gazette 137/A published on August 7, See Article 4(e) (4) of Act 703/77. 3 Ibid, Articles 1 (1) and 1(3). 75

76 DEVELOPMENTS IN greece obligation to notify under article 21 of the Hellenic Competition Act. As far as commitment decisions are concerned, the new Act has retained the right granted to the HCC to accept commitments offered by the undertakings, although it now clarifies that filing for a commitment decision does not imply proof or confession of an infringement. The new Act has also abolished the provision dealing with the abuse of economic dependence between undertakings and their customers or suppliers. This provision now forms part of the Unfair Competition Act 4 which comes within the jurisdiction of the civil courts. In addition, under the previous law, the Minister of Development had the right to withdraw the application or to amend the behavioural or structural measures proposed by the HCC in the aftermath of an investigation in the pertinent economic sector ( sectoral inquiry ). Pursuant to the new Act, this right of intervention has now been abolished. Sanctions and leniency policy The new Act gives the HCC the right to impose a fine of up to 10% of the total turnover of the company s concerned for non-compliance with a previous decision of the HCC. In addition, the HCC may fine associations of undertakings based on the total annual turnover of their members. These fines can be as high as 15% of their total turnover. With respect to criminal sanctions, the new Act has introduced a minimum prison sentence of six months (maximum five years) for managers or employees who, individually or as representatives of undertakings, engage in collusive practices with competitors under Article 1 of the Hellenic Competition Act or Article 81 EC (now 101 TFEU). In addition, it increases the fines that may be imposed on said individuals to between 15,000 and 150,000 (approximately US$21,000 - US$212,200) 5 The new Act has also increased possible prison sentences from three months to a minimum of six months and possible fines to between 10,000 and 50,000 (approximately US$14,000 - US$70,700) for those individuals who in any way obstruct the HCC inspections or refuse to supply information or delay the provision thereof to the HCC, or who provide false information. Furthermore, the new Act provides for the issuance of an HCC decision which will set out the terms and conditions for granting total immunity and/or a reduction (leniency) of fines for those undertakings which contribute significantly to the discovery of a cartel. In this respect, where an undertaking complies with the requirements, the new Act provides for immunity from criminal sanctions for company executives as well as acquittal from liability for the company as a whole. 6 The main features of the Greek leniency program follow those of the EU leniency program. Mergers On May 29, 2009 the HCC issued a decision approving the concentration between the companies Public Power Corporation ( PCC ) and Halyvourgiki. 7 The transaction involved the formation of a joint venture active in the construction and operation of two combined cycle natural gas fired units. The concentration was approved subject to conditions. On January 8, 2009, following an investigation into the coastal shipping sector, the HCC imposed a fine of 3,742,000 (approximately US$5,300,000) on Sea Star Capital for failure to disclose the concentration with Anek Lines. The HCC further imposed a 75,000 (approximately US$106,000) fine for failure to answer fully and promptly the questions of the Directorate-General for Competition. The HCC stressed that every company acquiring controlling stakes in companies is obliged to notify this fact to the Regulator. Cartels and other Anticompetitive Practices Resale price maintenance On March 19, 2009, by a unanimous decision, the HCC fined Fiat Auto Hellas million (approximately US$13508 million) for resale price maintenance in distribution contracts in 1994, 1997, 1999 and 2000 in 4 See Article 18 (a) of the Unfair Competition Act 146/1914 published in the Official Government Gazette 21/A/ published on January 27, Under the previous law the pecuniary penalty ranged from 3,000 to 30,000 (US$4,200 - US$42,400). 6 See Article 17 (5) of the New Act and Articles 29 (1) and 30 (1) of Act 703/77. 7 Decision No. 446/V/2009, May 15, 2009 published in the Official Government Gazette 1675/B/ available in Greek at 76

77 DEVELOPMENTS IN greece breach of Article 1 of the Hellenic Competition Act and Article 81 EC (now 101 TFEU). 8 On July 23, 2009, again without any dissenting votes, the HCC issued an infringement decision against both publishers and wholesalers of foreign language educational books, namely the companies Burlington and Efstathiadis Group S.A. for infringement of Article 1 of the Hellenic Competition Act and Article 81(1) EC (now 101 TFEU). 9 The companies were found to have colluded on indirect resale price maintenance in the market for foreign language educational books and were fined a total of million (approximately US$9.357 million). Prohibition of parallel trade On March 29, 2009, the HCC issued its first decision in relation to the detergent sector, 10 imposing a fine of 6,946 million (approximately US$9.817 million) on Unilever Hellas for having inserted a clause prohibiting parallel trade into its contracts with 8 supermarkets in the period. According to the decision, the supermarkets had violated Article 1 of the Hellenic Competition Act and Article 81 EC (now 101 TFEU) and were fined a total of approximately 1.1 million (approximately US$1.5 million). On July 23, 2009, the HCC unanimously found that the companies Burlington, Pearson, Apollon and Efstathiadis Group had infringed article 1 of the Hellenic Competition Act as well as Article 81 (1) EC (now 101 TFEU) by restricting passive sales, imposing a total fine of 8,528,000 (approximately US$12,052,000). 11 Discrimination - foreclosure of the market On January 28, 2009, the HCC issued a decision regarding the complaint lodged by Sarlis Container Lines et al against the Piraeus Port Authority and the Mediterranean Shipping Company for potential infringement of articles 1 and 2 of Act 703/77 and Articles 81 and 82 EC (now 101 and 102 TFEU) as a result of their contract for transhipment cargo. 12 The HCC decided by a majority vote that Article 1(1) of Act 703/77 and Article 81 EC had indeed been violated as a result of a vertical agreement which contained discriminatory terms in favour of MSC, resulting in the foreclosure of the specific market and high barriers to entry being imposed. The total fine imposed on Piraeus Port Authority amounted to 1.28 million (approximately US$1.8 million), while Mediterranean Shipping Company was fined the same amount. Abuses of a Dominant Position On February 12, 2009, the HCC fined dairy and food producer Nestlé almost 30 million (approximately US$ 42.4 million) for abusing its dominant position in the country s instant coffee market. 13 The abuse consisted of applying abusive terms of transaction (imposition of target and loyalty rebates, prohibition of parallel trade, prohibition of parallel promotions of other competing products, imposition of exclusive supply terms and imposition of non-compete obligations on distributors) in trade with supermarkets, restaurants, cafeterias and distributors. In addition, the HCC found that Nestlé had infringed Article 1 of the Hellenic Competition Act and Article 81 EC (now 101 TFEU) by prohibiting parallel imports of certain products by specific supermarket chains as well as by prohibiting the passive sales of its distributors in specific territories. On July 22, 2009, the HCC issued a unanimous decision against Apollon and Efstathiadis Group, wholesalers of foreign language educational books, imposing a total fine of 4,880,921 for infringement of Article 2 of the Hellenic Competition Act as well as Article 82 EC, for abuse of their collective dominant position in the relevant market. 14 The two companies were found to have collectively abused their dominant position in the market for the wholesale trading and distribution of foreign language educational books by imposing standard and unfair commercial terms on their customers (wholesalers and retailers). Court Decisions The Athens Administrative Court of Appeals decided on an appeal concerning an infringement decision by the HCC against three Greek refineries, namely those owned by Motor Oil Hellas, Hellenic Petroleum and Petrola Hellas 8 Decision No. 437/V/2009, March 19, 2009 published in the Official Government Gazette 810/B/ , available in Greek at 9 Decision No. 455/V/2009, July 23, 2009, published in the Official Government Gazette 1691/B/ , available in Greek at 10 Decision No. 441/V/2009, March 27, 2009, published in the Official Government Gazette 821/B/ , available in Greek at 11 Decision No. 455/V/2009 July 23, 2009 published in the Official Government Gazette 1691/B/ , available in Greek at 12 Decision No. 428/V/2009, January 28, 2009, published in the Official Government Gazette 189/B/ , available in Greek at 13 Decision No. 434/V/2009, February 12, 2009, published in the Official Government Gazette 319/B/ , available in Greek 14 Decision No. 452/V/2009, July 22, 2009, published in the Official Government Gazette 1572/B/ , available in Greek at 77

78 DEVELOPMENTS IN greece for coordinated practices consisting in the fixing of jet fuel sales prices in Greece. Following complaints by IATA, the HCC concluded an investigation by fining the above companies 9.4 million (approximately US$13.3 million). The Athens Administrative Court of Appeals issued a decision 15 in which it confirmed the violation of article (1) of the Hellenic Competition Act for price-fixing practices but, at the same time, it annulled the disciplinary measures imposed on the companies on the basis that the HCC applied legislation that came into force after the infringement in question had taken place. The Athens Administrative Court of Appeals therefore annulled the disciplinary measures and reduced the fine. The companies have appealed to the Council of State. 15 Athens Administrative Court, Decision No. 3695, December 4, Kyriakides Georgopoulos & Daniolos Issaias Law Firm 28, Dimitriou Soutsou Str. GR Athens - Greece

79 Hungary Kornelia Nagy-Koppany Legislative Developments The Hungarian Competition Act 1 was amended on October 1, 2009 to bring it into line with the 2004 reform of the General Rules of Administrative Proceedings and Services. The main changes concern the calculation of deadlines, which was changed from business days to calendar days and in some cases from days to months. Mergers Among the mergers authorized by the Economic Competition Office (the ECO ), the most significant included the merger between Strabag SE and Cemex Austria AG, both active in the construction industry. 2 The merger was approved subject to Cemex Austria AG divesting its transport concrete plant prior to the merger in order to reduce its dominant position in the concrete transportation market (their joint dominant position amounted approximately to 90%). In another decision, the ECO authorized Shell Hungary Trading Company Ltd, to rent the Tesco hypermarket gas stations for a period of fifteen years. 3 The ECO also authorized the setting up of Samsung LED Co. Ltd., a joint venture between Samsung Electronics Co. Ltd., and Samsung Elektro-Mechanical Co. Ltd. 4 Cartels and other Anticompetitive Practices In January 2009, the ECO imposed a fine of nearly HUF3,000,000, (approximately US$15,465,512.00) on three road construction companies found to have entered into a cartel. Between 2002 and 2006, the companies fixed bidding prices on local public procurement tenders pertaining to road and bridge construction works. 5 A fourth company was exempted from liability on the ground that it cooperated with the ECO during the investigation and assisted in exposing the infringements. The proceeding was terminated in relation to a fifth company, whose involvement in the cartel was not supported by any evidence. The ECO imposed a fine of HUF70,000, (approximately US$360,862.00) on Johnson & Johnson s Hungarian subsidiary, Johnson & Johnson Kft., for unfair manipulation of consumer decisions pertaining to the advertising of various cosmetic and child care products. 6 Similarly, the Hungarian subsidiary of L Oréal, L Oréal Hungary Cosmetics Kft., was fined HUF150,000, (approximately US$773,276.00) for unfair manipulation of consumer decisions pertaining to the advertising of cosmetic products. 7 In addition to these fines, the ECO ordered the termination of the infringement in respect of the misleading packaging and labeling of some of the products within a three to six month period. Abuses of a Dominant Position On January 15, 2010 the Competition Council terminated the procedure against CIB Bank Zrt, a Hungarian subsidiary of Intensa Sanpaolo S.p.A.. The bank was accused of abusing its dominant position in doubling the bank handling fee charges between by unilaterally modifying certain state subsidized mortgageloan agreements concluded for the purposes of residential housing purchases. As a result, the Council obliged the bank to honor the original mortgage contract terms, reimburse the additional charge and pay handling fees to its customers. In addition, it had to notify the individuals whose mortgage contracts were still in force of the Council s decision. 8 1 Act LVII of 1996 on the Prohibition of Unfair Trading Practices and Unfair Competition, published in the official journal Magyar Közlöny in volume 1996/56 (July 10), the consolidated text of the Act last updated in November 2009 is available in English at 2 Decision No. Vj-146/2008/68, February 9, 2009, available in Hungarian at 3 Decision No. Vj-17/2009/34, April 8, 2009, available in Hungarian at 4 Decision No.Vj-33/2009/6, March 30, 2009, available in Hungarian at 5 Decision No. Vj-130/2006/239, January 29, 2009, available in Hungarian at 6 Decision No. Vj-56/2008/46, March 10, 2009, available in Hungarian at 7 Decision No. Vj-116/2007/101, February 18, 2009, available in Hungarian at 8 Order No. Vj-181/2007/25, January 15, 2010, available in Hungarian at 79

80 DEVELOPMENTS IN HuNgary Court Decisions In November 2008, the Metropolitan Chartered Court of Appeal ruled that the ECO should not use the Notice on the Method of Setting Fines in Cases of Unfair Manipulation of Consumer Decisions The judgment of the Court is not binding on the ECO per se; however, the ECO will take it into account, since the Court has exclusive competence for appeals against its decisions. The ECO repealed its Notice on the Method of Setting Fines in Antitrust Cases on May 18, On September 23, 2009, the Metropolitan Chartered Court of Appeal confirmed an earlier ECO decision against an insurance cartel in which Allianz Hungaria Insurance Co. Ltd., Generali-Providencia Private Insurance Ltd., and the Hungarian Association of Automobile Dealers concluded an agreement on the hourly labor rates offered to car dealerships, while Allianz and Generali-Providencia concluded separate agreements with Magyar Peugeot Márkakereskedők Biztosítási Alkusz Kft, Magyar Opelkereskedők Bróker Kft, and Porsche Biztosítási Alkusz Kft influencing the conduct of these undertakings in a manner which was deemed to restrict competition. 12 The total fine imposed by the Court was almost HUF6,800,000, (approximately US$35,055,160.00). Lastly, on March 18, 2009, the Supreme Court confirmed the initial ECO decision imposing a fine of HUF10,000, (approximately US$51,552.00) on OTP Bank Nyrt, a private limited company, for unfair manipulation of consumer decisions concerning a personal credit procedure. The product, which was only available as a CHF-based credit, was advertised without referring to this restriction or to the fact that the credit could only be paid into a current account This is a document without statutory force issued jointly by the president of the ECO and the president of the Competition Council to provide information about the conditions of imposing fines, available in Hungarian at See Notice No. 2/2003 on the Method of Setting Fines in Antitrust Cases as amended by Notice No. 2/2005, May 18, 2009, available at 10 Judgment No. 2.Kf /2008/15, dated November 27, 2008, available in Hungarian at 11 See Notice No. 1/2009 of the President of the Hungarian Competition Authority and the Chair of the Competition Council of the Hungarian Competition Authority on the repeal of Notice No. 2/2003 on the Method of Setting Fines in Antitrust Cases as amended by Notice No. 2/2005, May 18, 2009, available at 12 Judgment No. 2. Kf /2009/14, September 23, 2009, available in Hungarian at 13 Judgment of the Supreme Court, March 18, 2009, available in Hungarian at KNP Law Nagy Koppany Varga and Partners Mahart Haz, 6th Floor Vigado Utca Budapest - Hungary

81 India Pallavi S. Shroff and Harman Singh Sandhu Legislative Developments More than seven years after it was enacted, the Competition Act 2002 (the Act ) entered into force on May 20, However, only the provisions dealing with anticompetitive agreements (section 3) and abuse of dominance (section 4) have come into effect. The Act replaces the Monopolies and Restrictive Trade Practices Act, 1969 (the MRTP Act ), which was repealed as of September 1, 2009 and, with effect from October 14, 2009, all cases pending before the Monopolies & Restrictive Trade Practices Commission (the MRTPC ) pertaining to monopolistic or restrictive trade practices or unfair trade practice were transferred to the Competition Appellate Tribunal (the CAT ). Further, with effect from September 1, 2009, all pending investigations and proceedings by the Director General under the MRTP Act relating to monopolistic/restrictive trade practices have been transferred to the Competition Commission of India (the CCI ) for investigations/ proceedings in any manner it deems appropriate. It is anticipated that the provisions of the Act relating to merger control (currently not in force) will take effect in the first quarter of Regulatory set up The Act is administered and enforced by the CCI, which is assisted by the Director General (the DG ) appointed under the Act to carry out investigations into any alleged anti-competitive activities. The chairman of the CCI is Mr. Dhanendra Kumar, a former executive director of the World Bank. The CCI has six other members, all of whom are former bureaucrats. The CAT is the appellate authority established under the Act and can hear appeals against the decisions, directions and orders issued by the CCI. The chairman of the CAT is Justice Arijit Pasayat, a retired judge of the Supreme Court of India. Appeals against CAT decisions lie directly to the Supreme Court of India, the highest court in the country. The CCI has the power to initiate an investigation on its own initiative or on the basis of information provided by any person or consumer association, or following a referral from the Indian central government, state governments or statutory authorities. 2 Whilst conducting an investigation, the CCI has the power to order any person to produce books or documents relating to his trade or other information in his possession in relation to his trade under investigation. 3 Further, the DG also has significant search and seizure powers, including dawn raids on official and residential premises of the persons believed to be involved in anti-competitive behavior. 4 Since the provisions of the Act relating to merger control have yet to be brought into effect this will probably take place in April this overview is limited to the provisions concerning anti-competitive agreements and abuse of dominance practices. Horizontal and vertical agreements The Act provides that an agreement, arrangement or understanding entered into by an enterprise or person, in respect of the production, supply, distribution, storage, acquisition or control of goods, or the provision of services, which causes, or is likely to cause, an appreciable adverse effect on competition within the relevant market in India is void. 5 The Act neither defines the term appreciable adverse effect nor provides any de minimis exemptions for transactions, which may be relied upon by the parties in their self-assessment. Further, the Act does not require 1 Notification numbers 770, 771 and 772 issued by the Government of India, published in the Official Gazette of India of May 15, The Competition Act 2002 as amended by the Competition (Amendment) Act 2007 is available at 2 See Section 19(1) of the Act. 3 Id. Section 36(4). 4 Id. Section 41(3). 5 Id. Sections 3(1), 3(2) and 2(b). 81

82 DEVELOPMENTS IN INDIa parties to notify their agreements to the CCI for prior clearance nor does it provide for any mechanism for seeking informal guidance. In particular, it is not clear whether the creation of any joint venture would be subject to mandatory pre-notification under the merger control rules. Horizontal agreements on price collusion, output limitation or market/customer sharing, and bid-ridding 6 are presumed to cause an appreciable adverse effect on competition in India. However, the above presumption is rebuttable, if it can be shown that the relevant horizontal agreement under investigation is in fact pro-competitive and does not cause an appreciable adverse effect on competition in India. In particular, in relation to horizontal agreements by way of joint ventures which fall within the scope of section 3(3) of the Act, the presumption of appreciable adverse effect does not apply if the parties are able to prove that the agreement is a joint venture that increases efficiency in production, distribution, supply, storage, acquisition or control of goods or provisions of services. The Act does not specify the nature of efficiencies which will be considered by the CCI in its assessment or how such efficiencies will be measured. Other horizontal joint venture agreements which do not fall within the scope of section 3(3) will be analyzed under the rule of reason approach and on the basis of the factors given in section 19(3) of the Act. The Act also applies to vertical agreements 7 (i.e. tie-in arrangements, exclusive supply agreements, exclusive distribution agreements, agreements involving refusals to deal and resale price maintenance agreements) which are considered anti-competitive and thus void only if they are found to cause, or be likely to cause, an appreciable adverse effect on competition in India. 8 Similarly, vertical joint venture agreements will also be treated like any other vertical agreement and assessed to determine whether they cause or are likely to cause an appreciable adverse effect on competition in India. As regards joint ventures in general, the Act does not distinguish between full-function and non-full function joint ventures. Therefore, in the absence of guidance from the CCI, it is not clear whether the merger control provisions will be applicable to full-function joint ventures. Leniency In the case of cartels, the Act provides for the imposition of a lesser fine on any cartel member who makes a full, true and vital disclosure in relation to the existence and/or operation of an alleged cartel agreement. 9 The first firm applying for leniency may be granted up to 100% fine immunity; the second applicant, up to 50% and the third applicant(s), up to 30% provided that such disclosure is made before an investigation report by the DG has been received by the CCI. Further, the CCI has the power to revoke an order granting leniency and restore the original fine if it is satisfied that the leniency applicant has breached any condition attached when leniency is granted, given false evidence or not made a vital disclosure or ceased to co-operate before the completion of the proceedings. 10 Extra-territorial scope The Act is likely to have a significant impact on multinational businesses and foreign and cross-border transactions due to its extra-territorial application. The CCI has jurisdiction to investigate agreements, abuses of a dominant position or combinations (which includes mergers, acquisitions or amalgamations) if it has, or is likely to have, an appreciable adverse effect on competition within the relevant market in India, even where 11 such agreement is entered into outside India; any party to the agreement or enterprise abusing its dominant position is outside India; the combination takes place outside India; a party to the combination is outside India; or any other matter or practice or action arising as a result of the agreement, abuse of dominant position or combination is outside India. Abuse of dominance Section 4 of the Act prohibits abuse of a dominant position by any enterprise or group. 12 An enterprise is regarded as being in a dominant position if it is able to operate independently of the competitive forces prevailing in the relevant market in India, or affect its competitors or 6 Id. Section 3(3). 7 Id. Section 3(4). 8 Id. Section 3(4). 9 Id. Section The manner and extent of the reduction of penalties are provided under the Competition Commission of India (Lesser Penalty) Regulations, Id. Section Group is defined as where two or more enterprises directly or indirectly are in a position to exercise twenty six percent or more of the voting rights or appoint more than fifty percent of the members of the board of directors or control the management or affairs of the other enterprise. 82

83 DEVELOPMENTS IN INDIa consumers in its favor. However, the Act does not specify any bright-line market share thresholds for determining the dominant position of an enterprise. The CCI can take into account relevant factors like market share, entry barriers, countervailing buyer power, size and resources of the enterprise, etc. when assessing dominance. 13 Once it is established that an enterprise or group is dominant, the Act does not contemplate any further effectsbased analysis in determining whether there has been an abuse of dominant position. If the dominant enterprise is found to be indulging in practices such as tying and/or bundling, refusing market access in any manner, leveraging its market position in one relevant market to enter into or protect another relevant market, imposing unfair or discriminatory terms or conditions for sale of goods or provision of services, restricting output or limiting technical or scientific development, the dominant enterprise will be considered to be abusing its dominant position. The Act provides for a very limited defense in relation to the imposition of unfair or discriminatory prices or conditions of purchases or sales of goods or provision of services, in that enterprises may adopt such practices if they are imposing such conditions/prices to meet competition. 14 Increased fines In a significant departure from the previous legislation (i.e. the MRTP Act), the Act provides for severe fines for the violation of its provisions. Further, non-compliance with the orders of the CCI or the CAT can lead to criminal sanctions in addition to fines. The CCI can impose fines of up to 10% of the average turnover for the previous three financial years on each party to the anti-competitive agreement or practice. Further, in the case of cartels, the CCI can impose on each participant in the cartel a penalty equivalent to the higher of either three times its profits or 10% of its turnover, for each year such agreement continues. The CCI can also order the parties to an agreement or practice to discontinue or not to re-enter into the agreement or to modify the agreement in a specified manner. Further, apart from being able to issue cease-and-desist orders and impose fines of up to 10% of the average turnover as described above, the CCI can order dominant enterprises to be broken up to prevent abuse of a dominant position. 15 Implementing regulations The CCI has issued a number of regulations to date to assist in its implementation of the Act 16 since it took full effect on May 20, These regulations are briefly described below. The CCI (General) Regulations govern the conduct of proceedings before the CCI. Among others, they provide rules on filing submissions, the powers and functions of the Secretary, information requests, summoning witnesses, gathering evidence, sanctions and protecting confidentiality. As per the regulations, none of the proceedings before the CCI are open to the public and, where requested by the parties, documents are treated as confidential. The CCI (Determination of Cost of Production) Regulations specify the procedure for determining the cost of production by the CCI and/or the DG, as the case may be. The regulations provide that costs may be defined with reference to total cost, total variable cost, total avoidable cost, average avoidable cost, long-run average incremental cost and the market value. In relation to predatory pricing, the regulations provide that cost shall be taken to mean the average variable cost as a substitute for marginal cost. However, the CCI may consider any other method of measuring costs depending on the industry, market and technology used after recording its reasons for doing so. The CCI may also engage the services of the expert(s) of its choice at the expense of the enterprise, if the latter disputes the costs arrived at by the CCI. 13 Id. Section 19(4). 14 Id. Section 4(2). 15 Id. Section The text of these regulations is available at 83

84 DEVELOPMENTS IN INDIa The CCI (Meeting for Transaction of Business) Regulations lay down the procedure for calling ordinary and special meetings by the CCI in the conduct of inquiries or investigations. The CCI (Lesser Penalty) Regulations, set forth the leniency procedure. The regulations provide the requirements that must be fulfilled by a leniency applicant in fairly detailed manner. For example, the leniency applicant will have to provide details of the duration of the cartel; goods and services involved; names of the parties involved; geographic scope of the cartel; and estimated volumes affected by the cartel, among other information. The identity of the applicant and the information obtained from it are treated confidentially. The CCI (Engagement of Experts and Professionals) Regulations empower the CCI to engage professional experts as it may deem fit to assist in its investigations. Experts are chosen through the selection board set up by the CCI. Cartels and other Anticompetitive Practices At the date of writing, no formal decisions of the CCI have been reported. Currently, the following complaints are being investigated. On May 26, 2009, the first formal complaint was filed by the Multiplex Association of India against three associations of television and film producers relating to a dispute over revenue sharing for the screening of Bollywood films in multiplex cinemas in India. 17 The complainants alleged that the film producers formed a cartel which was anti-competitive and thus harmful to consumer welfare. Although the parties to the dispute have now settled the issue between them, the CCI is still investigating the allegations of cartelization. The CCI recently sent notices to the film producers asking them to explain their conduct following a report from the DG. The CCI s final decision in this case is expected soon. The Consumer Online Foundation, a consumer association, filed a complaint with the CCI against Directto-Home ( DTH ) service providers for limiting competition by not offering interoperable set-top boxes to consumers. The CCI started an investigation by issuing a notice to the DTH service providers. 18 The CCI has also issued a notice to Kingfisher Airlines Ltd. and Jet Airways (India) Ltd. in respect of a code-sharing agreement between them. 19 It has been alleged that the agreement, which is between two of the country s largest private airlines, is likely to reduce competition on important flight slots, thereby causing significant harm to consumers. The airlines have challenged the jurisdiction of the CCI before the Bombay High Court on the ground that the MRTPC is already investigating the agreement and that the agreement was signed before the CCI became operational on May 20, In August 2009, Mr. Neeraj Malhotra (a consumer) filed a complaint against major banks, including HDFC Bank, HDFC, Deutsche Postbank Home Finance and LIC Housing Finance, concerning pre-payment penalties imposed by such banks/housing loan companies. The CCI initiated an investigation and the DG issued a report on pre-payment charges levied by Indian banks on loans. The report is said to indicate that the CCI declared such prepayments to be anti-competitive and the banks were found to have acted as cartels. 20 In November 2009, Jindal Steel and Power Ltd. filed a complaint against the state-run Steel Authority of India Ltd for entering into an exclusive agreement with Indian Railways for the supply of products, which JSPL alleged to be an anti-competitive agreement under Section 3 of the 17 Case No. 1/2009 see Press Release, The Hindu Business, Multiplex Association Approaches Competition Commission Against Producers, available at 18 Case No. 2/ Case No. 4/2009 ; see Press Release, Business Standard, Code Sharing Pact Between Jet, Kingfisher Under CCI Scanner, Press trust of India, August 21, 2009, available at 20 Case No. 5/2009 ; see Press Release, Banks Under CCI Scanner For Pre-payment Penalty On Home Loans, Press Trust of India, November 2, 2009, available at 84

85 DEVELOPMENTS IN INDIa Act. The CCI ordered an investigation by the DG into the matter. 21 However, the Steel Authority of India appealed to the CAT against the CCI order initiating the investigation and the proceedings are currently stayed. Abuses of a Dominant Position the currency derivative market and (i) refused market access to a competitor by denying MCX-SX s promoter, Financial Technologies (India) Limited, the access codes necessary to develop software for the currency derivative market segment. 22 In November 2009, MCX Stock Exchange (MCX-SX) filed a complaint against the National Stock Exchange (NSE) alleging that NSE had (i) engaged in predatory pricing in 21 JSPL files complaint against railways with CCI; Press Trust of India, November 9, 2009, available at 22 MCX-SX Files Complaint Against NSE with CCI; Economic Times, December 4, 2009, available at Amarchand & Mangaldas & Suresh A. Shroff & Co. Amarchand Towers 216 Okhla Industrial Estate - Phase 3 New Delhi India / /

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87 Ireland Gerald FitzGerald, Damian Collins and Philip Andrews Legislative Developments The general review of the Competition Act, 2002 (the Act or the 2002 Act ), 1 which was initiated by the Minister for Enterprise, Trade and Employment (the Minister ) in November 2007, has not yet been completed. It is expected now that amending legislation will be published in 2010, but will not be enacted until In January 2009, the Minister published the Report of the Advisory Group on Media Mergers. 2 This Group had been appointed in March 2008 to examine the provisions of the 2002 Act relating to media mergers and, in particular, the criteria by reference to which the Minister, as opposed to the Competition Authority, reviews media mergers. 3 Among the principal recommendations in the Report were: (i) a statutory definition of media plurality (referring both to ownership and content); (ii) procedures for the collection and periodic publication of information relating to media plurality; (iii) the publication of Guidelines relating to the application of the relevant criteria by the Minister and the establishment of a Consultative Panel to advise the Minister in relation to specific media mergers. It is expected that at least some of these recommendations will be incorporated in the amending legislation due to be enacted in In September 2009, the Authority published a Notice providing guidance on the competition law issues which arise where collective action is taken by pharmacists regarding the fees to be paid to them for operating a Statefunded drugs-dispensing scheme. 4 The Notice sets out the Authority s interpretation of Irish and EC competition law regarding the permissible forms of involvement of pharmacists in the fee-setting process. It makes it clear that the collective negotiation of fees by a representative body would amount to unacceptable collusion between competitors, while acknowledging that consultation by Health Service Executives ( HSE ) with such a body and communication and discussion of the outcome of the consultation with its members would be permissible provided that the final decision on the level of fees were taken unilaterally by the HSE and not in agreement with the pharmacists. On a practical level, it recommends the use of the messenger model 5 as a mechanism for facilitating such consultations and the determination by the HSE of the fees and other terms and conditions to be offered to the pharmacists. Mergers Fewer mergers were notified to the Authority in 2009, with only 27 filings during the year (compared to 38 in 2008). All merger cases decided in 2009 were cleared unconditionally except in Metro/Herald AM, 6 where clearance was made subject to compliance by the parties with behavioural undertakings relating to the operation of the merged business. The case involved the merger of two independent free newspapers through the acquisition of joint control by two leading Irish newspaper publishers and the closure of one of the free titles. The Competition Authority had concerns about the ability of the jointly- 1 Competition Act 2002, No. 14/2002, available at as amended by Competition (Amendment) Act 2006, No. 4 of 2006, available at 2 See Advisory Group on Media Mergers, Report to the Tánaiste and Minster for Enterprise, Trade and Employment, Mary Coughlan T.D., available at 3 Section 24 of the Act contains special provisions relating to media mergers. If the Authority clears a media merger, with or without conditions, then the Minister must review the merger by reference to specified criteria relating to the preservation of diversity of opinion and plurality of ownership in the media in Ireland. The Minister may then approve the merger, with or without conditions, or prohibit it by reference to (but only to) the specified criteria. 4 See the Competition Authority, Notice in Respect of Collective Action in the Community Pharmacy Sector, Decision No. N/09/001, September 23, 2009, available at 5 The messenger model operates as follows. A third party, the messenger, ascertains from each pharmacist, the level of fees that he/she would require from the HSE in order to provide the relevant service. (Communications with the messenger must, however, be confidential so that no pharmacist knows what fees any other pharmacist requires in order to participate). The messenger provides the resulting data to the HSE so that it can devise a fee scale. The pharmacists may then, individually, accept or reject the HSE s terms. 6 Determination in Merger Notification M/09/13 Metro/Herald AM, November 6, 2009, available at: 87

88 DEVELOPMENTS IN IRELAND owned free newspaper to compete with the parents independently-owned newspapers in the market for display newspaper advertising. It also had concerns that the jointly-owned entity would result in coordination (in particular, through the exchange of commercially sensitive information) between the parents themselves and between the parents and the jointly-owned free newspaper. These issues were addressed by commitments designed to protect the independent management of the jointly-owned newspaper and to restrict access by the parents or their nominee directors to commercially sensitive information relating to the operation of the jointly-owned free newspaper. Cartels and other Anticompetitive Practices Pay-TV decision and guidance In August 2009, the Authority published a decision setting out its conclusions regarding the application of the 2002 Act to pay-tv exclusivity agreements between developers of apartment blocks and providers of pay-tv infrastructure and services. 7 At the same time, it published a Guidance Note explaining the relevant competition law issues to apartment residents. 8 The Decision followed an investigation of a large number of complaints from apartment-block residents who, due to exclusivity agreements, could not change their pay- TV providers. Noting that, where such agreements provide for the exclusive usage of a service provider s infrastructure, competition concerns could sometimes arise, the Authority applied a proportionality test and said that where the service exclusivity period did not exceed that required to recoup the cost of the infrastructure provision, the agreements would not be regarded as anti-competitive. In its view, exclusivity periods of up to two years would meet this test. First person jailed for cartel offence In November 2009, the owner of a Citroen motor dealership was jailed for 28 days for failing to pay a fine of 80,000 (approximately US$108,800) which had been imposed on him for his participation in a price-fixing cartel between Citroen car dealers. While suspended sentences have been imposed in other cartel cases, this is the first case in which a cartel participant has actually served time in jail. Abuses of a Dominant Position Retail sector import and distribution sector On June 30, 2009, the Authority published a report on the retail-related import and distribution sector 9 addressing the problem that retailers in the Republic of Ireland were not lowering the prices of goods imported from the UK. 10 The Report examined competition in the grocery, clothing and pharmaceutical trades and noted significant differences between the structure of competition in each of them. For example, in the grocery trade, consumer pressure has caused some large grocery retailers to reduce prices by importing directly from foreign suppliers. The seasonality of the clothing market, limited buyer power and some inflexibility in switching between sources of supply constrains the ability of many clothing retailers to respond quickly to currency movements. In pharmaceuticals, the fact that almost 80% of the value of all medicine sales is recouped from the State and that wholesalers and retailers are restricted from importing medicines directly limits the responsiveness of pharmacy retailers to consumer pressure. The Authority nonetheless concluded that, where possible, retailers and suppliers were generally responding to consumer behavior and cited, as an example, the fact that grocery prices had fallen by over 2% between January and May Grocery sector proposals In August 2009, the Minister published a Consultation Paper inviting submissions in relation to the possible adoption of a Code of Practice for Grocery Goods Undertakings. 11 Expressing concern about imbalances in the relationship between suppliers and retailers of grocery goods, the Paper stated that the Minister intended to introduce a Code of Practice modelled on the proposed new Groceries Supply Code of Conduct recommended by the UK s Competition Commission. On October 5, 2009, the Authority published its response to the Consultation Paper in which it argued against the 7 See Decision of The Competition Authority, Case COM/06/06, August 14, 2009, available at 8 See The Competition Authority, Pay-TV exclusivity in apartment developments Guidance to residents, August 2009, available at 9 See The Competition Authority, Retail-related Import and Distribution Study, May 2009, available at 10 In a report published in December 2008, Forfas, Ireland's national policy advisory body for enterprise and science, concluded that the failure of the strong euro to translate into lower import costs may indicate a lack of competition in the import, distribution and retail sectors. 11 See The Department of Enterprise, Trade and Employment, Press Release, Tánaiste Launches Public Consultation on Code of Practice for doing Business in the Grocery Goods Sector, August 11, 2009, available at 88

89 DEVELOPMENTS IN IRELAND introduction of such a Code on a number of different grounds. 12 It referred to its own Retail-related Import and Distribution Study, 13 pointing out that conditions in the Irish grocery trade differed from those in the UK, the strength of some buyers in the Irish market may have proconsumer benefits and the introduction of the proposed Code could restrict the flexibility of supply chains and retailers ability to reduce prices. It also noted that the UK Supermarket Codes of Practice adopted to date had been largely ineffective because of suppliers unwillingness to use the Codes to challenge retailer conduct, proposing instead the amendment of the 2002 Act to increase the incentives for private parties to pursue damages actions. Closure of investigation into Ryanair s alleged abuse of dominance The Authority investigated Ryanair s alleged predatory practices on the Cork/Dublin route. Following an assessment of the transport options on the route, the Authority was not convinced that Ryanair was dominant in the relevant market for the time period examined. 14 Since it was unnecessary to determine whether Ryanair s conduct amounted to a predatory abuse of a dominant position, the Authority closed the investigation. Court Decisions High Court annulment of Competition Authority merger decision On March 19, 2009, the High Court annulled, for the first time, a merger prohibition decision of the Authority on the ground that it was vitiated by material error. 15 The case was also the first appeal under the 2002 Act challenging a merger decision of the Authority. On April 7, 2009, the Authority announced that it was appealing the High Court s ruling to the Supreme Court. 16 The background to the case is that, on August 28, 2008, following a five month in-depth review, the Authority prohibited the merger of two of Ireland s leading food companies, Kerry Group plc and Breeo Foods Limited. 17 This was only the Authority s third prohibition decision under the 2002 Act and was based on a finding that the merger would substantially lessen competition in three product markets: rashers (i.e., uncooked bacon), nonpoultry cooked meats and processed cheese. The High Court found that the Authority s decision was fundamentally flawed, particularly because it had seriously underestimated the potential for countervailing buyer power to constrain price increases by the merged entity. 18 The Court was particularly critical of the Authority s assessment of the evidence in the case. 19 The High Court s annulment of the Authority s decision left the parties free to complete the transaction, which they did. The Authority did not seek an injunction to prevent the parties from doing this pending the outcome of its appeal to the Supreme Court. Trade association price freeze condemned by Irish High Court In July 2009, the High Court required two trade associations representing some 5,500 publicans to abandon recommendations to their members to observe a one year price freeze on the price of drinks in their pubs. 20 The associations advertised the recommendations as a proconsumer response to the worsening economic conditions, pointing out that their members remained free to decide their own prices and that the initiative was therefore not anti-competitive. However, in settlement of earlier proceedings taken by the Authority, the associations had undertaken to the High Court not to make recommendations to their members on the prices 12 See The Competition Authority, Code of Practice for Grocery Goods Undertakings, Consultation Paper Submission S/09/003, September 2009, available at 13 See 4.1 above. 14 See The Competition Authority, Alleged predation by Ryanair in relation to transport on the Cork Dublin route, July 2009, available at 15 Rye Investments Ltd -v- Competition Authority, [2009] IEHC 140, March 16, 2009, (HC), (Ir.), available at 16 See The Competition Authority, Press Release, Competition Authority appeals to the Supreme Court on Kerry Foods decision, April 7, 2009, available at 17 Determination in Merger Notification M/08/009 Kerry/Breeo, Competition Authority, August 28, 2008, available at 18 Rye Investments Ltd v Competition Authority, [2009] IEHC 140, (Ir.), para. 9.63, available at 19 Id. at paras and The Competition Authority v The Licensed Vintners Association & Ors, Unreported, Judge McKechnie, July 24, 2009 (HC) (Ir.) (1997 No P), available at 89

90 DEVELOPMENTS IN IRELAND earned on the sale of alcoholic drinks. 21 The Authority therefore initiated fresh High Court proceedings challenging the recommendations on the grounds that they involved a breach of the earlier undertakings and amounted to price-fixing. While the Court did not rule on the price-fixing issue, it did find that the associations were in contempt of court for breach of the earlier undertakings not to recommend prices. The associations therefore apologised to the Court, withdrew their price freeze recommendations and advised their members to remove all publicity materials from their pubs. Irish Court lays down guidelines on sentencing in cartel cases In July 2009, the Central Criminal Court, Ireland s most important criminal court, handed down, for the first time, detailed written guidance on sentencing in cartel cases. 22 The case related to a well-organised, long-term price-fixing cartel operated by Citroën car dealers in Ireland through a body called the Citroën Dealers Association. The defendant in the case, Patrick Duffy, was the Treasurer of the Association. He pleaded guilty to the price-fixing offence and was fined approximately 50,000 (approximately US$68,000) and given a nine-month suspended sentence. The Court made it clear however that Mr Duffy s sentence was suspended only because in two previous cases involving members of the same cartel, prison sentences had been suspended by a lower court. The Duffy case gave the Court the opportunity to deliver a judgment giving guidance on the future sentencing of persons convicted of cartel offences. First, the judgment accepted that deterrence has an important role to play in relation to such offences. Second, the judgment clarified that typical pleas in mitigation (including the absence of previous convictions, the out-of character nature of the conduct and the unlikelihood of recidivism) will not generally be available to those convicted of competition law offences. Third, the Court confirmed that the following factors were relevant in sentencing cartel offenders: (i) the duration of the offences; (ii) the degree of culpability of the defendant; (iii) whether the defendant s conduct breached company compliance guidelines. Possible mitigating factors would include whether the defendant participated in the cartel under duress. The judgment also confirmed that the courts may grant leniency to cartel participants who cooperate with the Authority s investigation even if they do not benefit from its immunity program (which is generally available only to the first applicant). However, guilty pleas may not, in themselves, be sufficient to reduce the risk of custodial sentences being imposed. Supreme Court refers BIDS case back to High Court In the 2008 Year in Review, it was noted that the European Court of Justice (the ECJ ) had decided, in November 2008, that an agreement between the ten principal beef and veal processors in Ireland that required, among other things, a reduction in the order of 25% in processing capacity, had as its object the prevention, restriction or distortion of competition within the meaning of Article 101(1) of the Treaty on the Functioning of the European Union. 23 The matter had been referred by the Irish Supreme Court to the ECJ for a preliminary ruling on this issue. On November 3, 2009, the Supreme Court referred the case back to the High Court for determination of the question as to whether the prohibition of anti-competitive agreements in Article 101(1) should be declared inapplicable on the grounds that the agreement fulfils the conditions for exemption under Article 101(3). 24 This issue remains to be determined by the High Court. Local authorities found to have infringed the Competition Act On December 21, 2009, the High Court found, inter alia, that four local authorities in the greater Dublin area had infringed the Competition Act, 2002 when varying a waste management plan for that area. 25 The effect of the variation was to reserve to the local authorities the right to collect or to arrange the collection of waste in their areas, the intention being that collection should be undertaken by a single operator in a given area. An existing private waste management company, Panda Waste Services, which feared exclusion from the market as a result of the 21 Terms of Settlement, The Competition Authority v The Licensed Vintners Association & Ors, December 17, 2003 (HC) (Ir.) (1997 No P), available at 22 Director of Public Prosecutions (DPP) v Patrick Duffy and Duffy Motors (Newbridge) Limited, [2009] 2 LRM 301, (HC), (Ir.), available at dee4565ecf2c80256e7e b/7edd63f6621aa d ff?opendocument 23 Formerly Article 81(1) of the EC Treaty. See: Case C-209/07, Competition Authority v. Beef Industry Development Society Ltd and Barry Brothers (Carrigmore) Meats Ltd. (November 20, 2008), available at 24 Formerly Article 81(3) of the EC Treaty. See: Competition Authority -v- Beef Industry Developments Society Limited & anor [2009] IESC Nurendale Limited (trading as Panda Waste Services) v Dublin City Council & Others, December 21, 2009 [not yet reported] 90

91 DEVELOPMENTS IN IRELAND variation, challenged it on a number of grounds. As well as accepting Panda s competition law arguments, the High Court found that the variation was unlawful because it was ultra vires the statutory powers of the local authorities and because its adoption was vitiated by bias and prejudgment on the part of the relevant officials. The Court found that the local authorities were undertakings and that the variation of the waste management plan constituted an anti-competitive agreement between the authorities which did not satisfy the conditions for exemption in the legislation. It also found that the authorities were individually dominant in their respective areas and collectively dominant in the greater Dublin area and that the adoption of the variation constituted the abuse of a dominant position for which there was no objective justification McCann FitzGerald Riverside One Sir John Rogerson s Quay Dublin 2 - Ireland

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93 Israel Eytan Epstein, Tamar Dolev-Green and Hila Rosen-Glickstein Legislative Developments Regulatory developments In view of the recent financial crisis and its effect on the economy, in September 2009, the Antitrust General Director published for public consultation a draft statement concerning the Israeli Antitrust Authority s (the IAA ) approach to the failing firm doctrine, 1 which may allow mergers to proceed in certain circumstances provided that the target is in serious financial difficulties. It should be noted that while the failing firm doctrine has long been recognized in Israel, it has rarely been implemented. A final statement was published at the beginning of Cooperation among institutional investors In the light of the recent economic crisis, in November 2008 the General Director released a public statement entitled "Cooperation among institutional investors with regard to changing the terms of Corporate Bonds" (the Statement ). 3 The Statement noted the need for cooperation between institutional investors in order to discuss risk levels of corporations which have issued bonds (debentures) and to agree on amendments to the terms of repayments with the issuers of such bonds. The Statement sets forth basic rules for such collaboration between institutional investors, who serve as the representatives of the bondholders, and the issuing corporation, in which they are exposed to information that is not disclosed to the public. The statement permits such cooperation, subject to a series of conditions. In March 2009, the General Director introduced clarifications to the Statement, 4 indicating that it does not determine an exclusive type of cooperation between institutional investors and issuing companies, but only grants a safe harbor to those investors who cooperate according to the terms listed therein. The provisions of the Institutional Investors public statement expired on December 31, 2009 and have not been extended. Mergers In August 2009 the Supreme Court vetoed a merger between Bezeq, the Israel Telecommunication Company Ltd. ( Bezeq ) and DBS Satellite Services Ltd. ( Yes ), bringing to an end the continuous attempts of the parties in recent years to obtain approval for a transaction which would have increased Bezeq s shareholding in Yes from 49.78% to 58.36%. 5 In Israel, the acquisition of a shareholding of more than 50% is subject to mandatory notification. Bezeq is the national telecommunication incumbent and also operates, inter alia, in the market for multinational television through its subsidiary, Yes. The General Director prohibited the transaction on the basis that it could lead to serious competition problems in the multi-channel television market. That decision was overturned on appeal by the Antitrust Tribunal, which approved the merger subject to conditions. 6 Ultimately, the Supreme Court blocked the merger, taking the view that it would eliminate a potential competitor from the multichannel TV market. 1 Opinion 1/09: Failing Firm Doctrine, publication No , published on September 22, 2009 available in Hebrew at 2 Opinion 1/10: Failing Firm Doctrine, publication No , published on January 25, 2010, available in Hebrew at 3 Opinion 1/08: Cooperation among Institutional Investors with Regard to Changing the Terms of Corporate Bonds, publication No E, given on November 11, The English version is available at 4 Clarification to Opinion by the Antitrust General Director: Cooperation among Institutional Investors with Regard to Changing the Terms of Corporate Bonds, publication No , given on March 23, 2009, available in Hebrew at 5 Civil Appeals 2082/09, 2414/09 Eurocom D.B.S. Ltd. et al. v. Bezeq The Israel Telecommunication Corp., Ltd., August 20, 2009, publication No , available in Hebrew at 6 Antitrust 706/07 Bezeq The Israel Telecommunication Corp., Ltd v. The Antitrust Commissioner and Eurocom D.B.S. Ltd, February 3, 2009, publication No , available at 93

94 DEVELOPMENTS IN ISRAEL From a horizontal perspective, the concern was that Bezeq s acquisition of control in Yes would preclude any potential future entry of Bezeq into the relevant market as a third competitor. The Supreme Court found that it was likely that in the near future, Bezeq would, but for the transaction, enter the multichannel TV market as a third competitor by introducing new broadcasting technology, IPTV, which would also constitute a third broadcasting infrastructure. From a vertical perspective, the concern was that Bezeq, in control of Yes, which currently uses a satellite infrastructure, would supply Yes with the new IPTV infrastructure, making outside entry very difficult and costly, thus foreclosing the market to potential newcomers. The Supreme Court rejected the Antitrust Tribunal's finding regarding Bezeq s disincentive to invest in IPTV infrastructure and referred to Bezeq s own documents as evidence of its intent to invest in such infrastructure, regardless of the merger with Yes. The Supreme Court also ruled that the Antitrust Tribunal was not authorized to impose conditions where, according to its own decision, the merger did not raise serious competition concerns. 7 The question of whether it may impose conditions with the agreement of the parties (as was the case here) was left undecided. In Prinir / Miloz, the first case of its kind, the General Director sought to separate an alleged merger between Prinir (Hadas 1987) Limited ( Prinir ) and Miloz (1989) Limited ( Miloz ) by submitting an application to the Antitrust Tribunal. 8 In April 2009 The Tribunal ruled that the transaction raised substantial competitive concerns. 9 Prinir produces tomato-based products while Miloz processes, produces and markets tomato-based products as well as citrus products. In September 2006, Bogofen Limited, a company in which Prinir holds 24.8% of the shares, purchased the entire share capital of Miloz before merging their operations. This transaction was not notified to the General Director, although the latter considered it as a notifiable transaction which would give rise to significant competition concerns. The Antitrust Tribunal first addressed the question of whether the transaction would have anticompetitive effects. The Tribunal found that the market was highly concentrated, and naturally would become more concentrated as a result of the transaction. The Tribunal further identified high barriers to entry (among others, those relating to marketing and brand recognition) and expressed doubt as to whether a new entity or existing entity could or would enter or expand within the market. It concluded that it was reasonable to suppose that the transaction would cause significant competitive harm to competition. The second issue to be decided, namely whether the transaction actually constituted a merger, is still being considered. Cartels and other Anticompetitive Practices On 26 April 2009 the General Director ruled that Israel's five largest banks Bank Hapoalim, Bank Leumi, Israel Discount Bank, Bank Mizrachi, and the First International Bank of Israel (hereinafter the Banks ) had entered into restrictive arrangements via the repeated exchanges of information regarding present and future bank fees charged to customers beginning in the early 1990s until the commencement of the IAA s investigation in 2004 (the Decision ). 10 This information, which included non-public data, was taken into account by the Banks while setting their fees policies and enabled them to align themselves with respect to fees. The Director considered this conduct as per se infringements. 7 The Antitrust Tribunal did not deny the existence of anticompetitive concerns, but found that these had also existed before the merger, due to Bezeq s large pre-merger shareholding in Yes. 8 Section 25 of the Antitrust Law authorizes the Antitrust Tribunal to order the divestiture of merged companies in the event that, pursuant to an application of the General Director, the Tribunal believes that there is a reasonable likelihood that, as a result of a corporate merger made contrary to the provisions of the Antitrust Law, competition in the relevant market would be significantly harmed or the public's interest would be injured in respect of any of the following: products' prices, quality, quantity or regularity and terms of supply. 9 Antitrust 704/07 The Antitrust General Director v. Prinir (Hadas 1987) Ltd, Bogopan Ltd, Jacob Cheskalla and Miloz (1989) Ltd., given on 05/04/2009, publication No , available in Hebrew at 10 Determination according to Paragraph 43 (a) (1) of the Restrictive Trade Practices Law, 1988, In re: Restrictive Agreements between Bank HaPoalim, Bank Leumi, Bank Discount, United Mizrachi Bank and the International bank of Israel regarding the exchange of information relating to commissions, given on April 26, 2009, publication No , available at 11 For example: Tel Aviv District Court, Civil File 19230/06, Sharnoa Computerised Machines Tel Aviv Ltd v. Bank Hapoalim Ltd, Bank Leumi Israel Ltd and Bank Discount Ltd, approved as a class action on January 21, 2008, published in Nevo: Class Action (Tel Aviv) 1714/08. 94

95 DEVELOPMENTS IN ISRAEL The Director acted on the basis of Section 43 of the Antitrust Law under which a declaration of the General Director that a given practice constitutes a restrictive arrangement constitutes prima facie evidence in any legal proceedings, thus making it easier for potential claimants to bring damages lawsuits against the Banks. Since the commencement of the IAA s investigation in 2004 and by the time the Decision was given, several class actions have already been brought against the Banks, concerning coordination of prices and/or exchange of information. 11 The Decision was followed by the submission of a further motion to certify as a class action a claim for 1 billion New Israeli Shekels (approximately US$270 million) against all five Banks Class Action (Tel Aviv) 1463/09. Epstein Chomsky Osnat & Co. Rubinstein House 20 Lincoln Street Tel Aviv, Israel

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97 Italy Alberto Pera and Valentina Caticchio Legislative Developments In July 2009, new rules came into force in Italy concerning class actions brought by consumers and final users who are the victims of unfair trade practices or anti-competitive conduct. Under the new rules, collective damages actions may be brought either by individual class members or by associations empowered by them or committees of which they are members for claims based on breaches of competition law. 1 It should be noted that while such actions may be brought before the competent Italian courts from January 1, 2010, damages may be claimed in respect of infringements committed after August 15, In June 2009, pursuant to the Council of State (the CoS ) decision of March 2009 in Lidl (see below), the Italian Competition Authority (the ICA ) amended the pre-merger Notification Form 2 which now expressly states that a concentration does not arise in cases where, cumulatively, the transaction consists merely in the acquisition of a commercial license and the vendor is not prevented either by an agreement between the parties or a decision of a public entity from continuing the commercial activity that was covered by the transferred license. 3 Mergers In March 2009, the ICA cleared the takeover by Istituto Centrale delle Banche Popolari Italiane ( ICBPI ) of SI Holding, after formally accepting the commitments presented by acquiring company. According to the ICA, the measures imposed were intended to prevent the takeover from creating a dominant position in various segments of credit card marketing (issuance, signing up retailers and computerized processing of international cards used in Italy). In particular, the measures ensured transparent economic conditions and the unbundling of the services offered by ICBPI, thus giving banks a choice, provided certain parameters for pricing policy so as to restrain the merged company's market strength, guaranteed transparent methods of selection when choosing an IT service provider; and eliminated links with the main IT processing competitor. 4 As from July 27, 2009, the prior notification thresholds for mergers and acquisitions have been raised by the ICA to (i) 461 million (approximately US$642.5 million) for the aggregate national turnover of all the undertakings involved in the operation, and to (ii) 46 million (approximately US$64 million) for the national turnover of the acquired or merged undertaking. 5 Cartels and other Anticompetitive Practices Cartels Since late 2008, the ICA has imposed sanctions in the following six cartel cases. In December 2008, the ICA imposed a total fine of 1.6 million (approximately US$2.2 million) on a number of Italian banks in relation to anti-competitive arrangements consisting in coordinating tendering for the provision of the general cashier service ( servizio di cassa generale ) of the Istituto Nazionale Assicurazione Infortuni sul Lavoro (the INAIL ). 6 In January 2009, the ICA imposed a total fine of around 1.3 million (approximately US$1.8 million) on Terminal 1 See article 140-bis of the Consumer Code (Legislative Decree No. 206 of September 6, 2005, published in the Official Gazette No. 235 of October 8, 2005), as amended by Article 49 of Law No. 99 of July 23, 2009, published in the Official Gazette No. 176 of July 31, In particular, said amendments concern Section A, 2, point d) of the ICA pre-merger Notification Form. 3 ICA, June 18, 2009, Decision No , Modifiche alle modalità per la comunicazione di un'operazione di concentrazione fra imprese, available in Italian at 4 ICA, March 26, 2009, Decision No.19689, in Case C9817, Istituto Centrale delle Banche Popolari Italiane/Si Holding, available in Italian at 5 This threshold increase, provided by Section 16 of the Italian Competition Act, is based on the increase in the GDP price deflator index which the General Report on the Economic Situation in Italy indicated as 2.84% in ICA, December 11, 2008, Decision No , in Case I686, Inail/Affidamento servizio di cassa, available in Italian at 97

98 DEVELOPMENTS IN ITaLY Darsena Toscana S.r.l. and Sintermar S.p.A. for coordinating pricing policies in the market for container handling services in ports. 7 In February 2009, the ICA imposed a total fine of 12.5 million (approximately US$17.4 million) on 26 Italian pasta producers (accounting for some 90% of the domestic market) and the two relevant trade associations. According to the ICA, the purpose of the agreement was to coordinate price increases imposed by producers on distributors. 8 In April 2009, the ICA imposed total fines of around 13.3 million (approximately US$18.5 million) on two anticompetitive arrangements in the lead battery recycling industry respectively carried out by Cobat, a consortium of producers and recycling companies which originally held the exclusive rights to collect and recycle lead batteries (through adoption of a number of contractual provisions), on the one hand, and the recycling companies together with their industry association (through arrangement of a market share allocation system), on the other. According to the ICA, both arrangements were aimed at maintaining the status quo in the market and at avoiding the development of alternative means of supplying the service of collection and recycling of used lead batteries to the detriment of battery manufacturers who have had to pay high costs for scrap lead. 9 Furthermore, in 2009 the ICA fined two professional associations for anticompetitive agreements. Thus, in October 2009 the Association of Medical and Dental Surgeons of the Province of Bolzano was fined 5,000 (approximately US$6,900) for an anticompetitive agreement obstructing the efforts of a consumer advocacy group to facilitate price comparisons for different types of dental services, 10 while in December 2009, the Soccer League was fined around 100,000 (approximately US$139,370) for preventing broadcasters from acquiring rights to the 2007/2008 Seria B Championship games. 11 In addition to the above cases, in September 2009 the ICA closed an investigation into possible anticompetitive agreements between Christie s International S.a. (Italian branch), Sotheby s Italia S.r.l. and the Association A.N.C.A. (Associazione Nazionale delle Case d'aste) in the market for the sale of goods and treasure through public auction, having found no evidence of any anti-competitive conduct. 12 Finally, among cartel cases which are currently pending before the ICA, it is worth highlighting the ICA investigation into the suspected anti-competitive behavior (in particular, exchange of sensitive information and coordination of resale prices to end clients) of major cosmetics and toiletry retailers. It should be noted that dawn raids into alleged anti-competitive conduct in the retail sector for detergents and/or personal care items have been simultaneously conducted by the EC Commission and a number of national competition authorities. 13 Commitments cases In 2009, the ICA resolved the following antitrust cases through acceptance of commitments (the cases in question have therefore been closed by the ICA without any finding that a violation of competition law exists and without fines being imposed on the companies involved). In April 2009, the ICA formally accepted the commitments proposed by the ABI association and the PattiChiari consortium during an investigation into possible anti-competitive conduct in the payment services market. Following the ICA decision, ABI had to cut interbank costs for checks and PattiChiari had to reduce clearing times for making available customers funds. 14 In May 2009, the ICA formally accepted the commitments proposed by FVH S.p.A., Liquigas S.p.A., Quiris S.a.p.A., Butangas S.p.A. e I.PE.M. Industria Petroli Meridionale S.p.A. during an investigation into possible anti-competitive behavior in relation to a joint-venture agreement in the GPL trading and logistics market. According to the ICA, said agreement raised antitrust concerns related to potential risks of third party foreclosure and coordination between the parties in the downstream market of GPL sales to end 7 ICA, January 29, 2009, Decision No , in Case I685, Costa Container Lines/Sintermar-Terminal Darsena Toscana, available in Italian at 8 ICA, February 25, 2009, Decision No , in case I694, Listino Prezzi Della Pasta, available in Italian at 9 ICA, April 29, 2009, Decision No , in case I697, Riciclaggio delle batterie esauste, available in Italian at 10 ICA, October 7, 2009, Decision No , in Case I706, Ordine dei medici chirurghi e degli odontoiatri della provincia di Bolzano, available in Italian at 11 ICA, December 16, 2009, Decision No , in case A403, Lega Calcio/Chievo Verona, available in Italian at 12 ICA, September 23, 2009, Decision No , in case I705, Case d asta, available in Italian at 13 See ICA pending case I701 - Vendita al dettaglio di prodotti cosmetici, available in Italian at 14 ICA, April 9, 2009, Decision No.19726, in Case I704, Assegni Mav-Commissioni Interbancarie, available in Italian at 98

99 DEVELOPMENTS IN ITaLY consumers. Thus, the commitments focused on removing the non-compete agreement entered into by the parties and on changes to the joint venture governance rules in order to avoid exchanges of sensitive information between the joint venture and the parties. 15 In June 2009, the ICA formally accepted the commitments proposed by ACI - Automobile Club d Italia, a public entity under Italian law. The ICA investigation concerned possible anticompetitive agreements among ACI members in the automotive sporting events management market. ACI was also investigated by the ICA for possible abusive conduct in the sporting competitions management market, where it holds an institutional role, since it is the only automotive sports federation recognized under the national sports regulations. 16 Furthermore, during 2009 the ICA closed two cases after accepting commitments. The first case related to a possible anticompetitive agreement among major carriers in the market for sea passenger transport services in the ports of Naples and Salerno (October 2009), 17 while the second concerned possible anticompetitive conduct by the Italian Psychological Association involving the coordination of professional fees in the market for psychologists services in Italy (December 2009). 18 Abuses of a Dominant Position In 2009 there was only one ICA decision concerning abuse of a dominant position. In October 2009, Cantieri del Mediterraneo S.p.A. was fined 285,000 (approximately US$397,200) for abuse in the market for dry dock supply services in the port of Naples. 19 Among the pending cases, it is worth highlighting the investigation opened in August 2009 into an alleged abuse by Google Italy regarding the provision of online search services. 20 The ICA is examining whether Google Italy s conduct in exploiting its dominant position in online search services could adversely affect proper competition in the online advertising market, with the further effect of consolidating its position as an intermediary in the sale of online advertising. In September 2009, the investigation was extended to include the US-based parent company, Google Inc. In 2009 the ICA closed the following abuse cases after accepting commitments: (i) alleged abuse of a dominant position by Rete Ferroviaria Italiana in the national market for access to essential maintenance facilities for high speed railway passenger transport services (October 2009); 21 (ii) possible abusive conduct by some ENEL Group companies aimed at restricting the retail electric power market for non-residential customers (December 2009); 22 and (iii) possible abuse of a dominant position by Poste Italiane S.p.A. in the collection and payment services sector (December 2009). 23 Court Decisions In March 2009, the CoS stated that the mere acquisition of a commercial license does not automatically constitute a concentration under the Italian Competition Act, since, in order for a transaction to be deemed to be a concentration, it must give rise to a permanent change in the control of an undertaking or parts thereof. Indeed, according to the CoS, an acquisition of exclusively commercial licenses without including any further economic assets only concerns goods (i.e. licenses) which have an economic value, but mere licenses do not constitute an undertaking or a part of an undertaking' in the sense of a business to which market turnover can be clearly attributed. 24 In April 2009, the Lazio Regional Administrative Court quashed the decision on anti-competitive conduct in which the ICA had previously rendered binding the commitments proposed by some motorway management companies. 25 According to the Court, the commitments were deemed not to be proportionate to the scope of antitrust regulation, under which measures imposed by the ICA aimed at 15 ICA, May 20, 2009, Decision No.19886, in Case I707, FVH-Liquigas-Butangas-Quiris/I.Pe.M, available in Italian at 16 ICA, June 11, 2009, Decision No.19946, in Case A396, Gargano Corse/Aci, available in Italian at 17 ICA, October 15, 2009, Decision No , in Case I689, Organizzazione servizi marittimi nel golfo di Napoli, available in Italian at 18 ICA, December 22, 2009, Decision No , in Case I716, Ordine Nazionale Psicologi-Restrizioni deontologiche sulla determinazione dei compensi, available in Italian at 19 ICA, October 28, 2009, Decision No , in Case A405 - La Nuova Meccanica Navale/Cantieri Del Mediterraneo, available in Italian at 20 ICA, August 26, 2009, Decision No.20224, in Case A420 - Fieg - Federazione Italiana Editori Giornali /Google, available in Italian at 21 ICA, October 22, 2009, Decision No , in Case A409, NTV/RFI- Accesso al nodo di Napoli, available in Italian at 22 ICA, December 10, 2009, Decision No , in Case A410, Exergia/ENEL-Servizio di salvaguardia, available in Italian at 23 ICA, December 16, 2009, Decision No , in Case A414, Poste Italiane-Aumento commissione bollettini c/c, available in Italian at 24 See CoS Judgment No of March , Lidl, which quashed the first instance ruling of Lazio Regional Administrative Court (Judgment No of January ) and the ICA's initial decision (Decision No of May 10, 2007, in Case C8094, Lidl Italia/Rami D azienda), available in Italian at 25 ICA, October 23, 2008, Decision No , in Case A391, Servizi di soccorso autostradale, available in Italian at 99

100 DEVELOPMENTS IN ITaLY closing investigations without ultimately deciding on the existence of a breach of competition law need to be strictly addressed to resolving the antitrust concerns raised during the investigation. Indeed, the Court highlighted the fact that the ICA does not have the task of regulating the market and measures which are imposed on companies involved in a merger case do not have to represent an indirect way of regulating market dynamics See Lazio Regional Administrative Court Judgment No. 4994, May 8, 2009, available in Italian at Gianni, Origoni, Grippo & Partners Law Firm Via delle Quattro Fontane Roma - Italy

101 Japan Shigeyoshi Ezaki and Vassili Moussis Legislative Developments On June 3, 2009, the Japanese Diet amended the Anti- Monopoly Act (the AMA ) by passing a revised Anti-Monopoly Act (the Revised AMA ). 1 Most of the provisions of the Revised AMA came into force on January 1, The most important amendments are summarized below. Private monopolization There are two types of so-called private monopolization under the AMA; the exclusionary abuse type and the control type. After an amendment of the AMA in 2005, the control type became subject to surcharges (i.e. administrative fines which are calculated based on a certain percentage, in this case essentially 10% of the company s total sales of goods or services in the relevant market during the relevant period which is fixed at a maximum of three years). The Revised AMA makes the exclusionary type of private monopolization subject to surcharges, which amount to 6% of the company s total sales of goods or services in the relevant market during the relevant period, which is fixed at a maximum of three years. Cartels and leniency The Revised AMA increased by 50% the fine imposed on the ringleader in serious anticompetitive conduct (e.g. cartels or bid rigging). Between 2006, when the leniency program was introduced, and March 2009, 264 applications for leniency were made. Given the significant impact of the leniency program, the Revised AMA increased the number of whistle-blowers that may obtain immunity or fine reductions from three to five. If successful, the first applicant will obtain immunity from all fines, the second applicant will obtain a 50% reduction and the third to fifth applicants will receive a 30 % reduction. Once the investigation has formally started, only three applicants may receive a fine reduction, and at that stage the reduction in the fine will be 30 % for all three applicants. Equally important is that the Revised AMA introduces the possibility of joint applications for leniency by companies belonging to the same corporate group. Joint applicants will benefit from the same fine reduction provisions. Furthermore, under the previous AMA regime, an unfair trade practice ( UTP ) could be subject to a cease-anddesist order, but not to a fine. However, because of the need to strengthen enforcement against UTPs, the Revised AMA establishes fines for five of the 16 categories of UTPs specified in the Designation of Unfair Trade Practices. 2 These are: (i) certain types of concerted refusal to trade (limited to refusal of supply); (ii) certain types of discriminatory pricing; (iii) certain types of unreasonably low price sales; (iv) resale price restriction; and (v) certain types of abuse of a dominant position, the definitions of which are included in the Revised AMA. Regarding (i) to (iv), a surcharge will be imposed if the relevant activity in the same category is repeated within a 10-year period. The surcharge amounts to 3% of the company s total sales of goods or services in the relevant market during the relevant period, which is fixed at a maximum of three years. On the other hand, a firm may be fined for abuse of a dominant bargaining position even in connection with a first-time infringement, as long as it is considered to be a continuous activity. The surcharge rate is fixed at 1% of turnover.furthermore, under the Revised AMA, the statutory period of limitation for the Japan Fair Trade Commission (the JFTC ) to issue a cease-and-desist order and impose fines is five years (previously three years). 1 Act on Prohibition of Private Monopolization and Maintenance of Fair Trade, Act No. 54, April 14, JFTC Public Notice No. 15, June 18, 1982, available at 101

102 DEVELOPMENTS IN japan Mergers According to the Revised AMA, stock acquisitions require prior notification if certain thresholds are satisfied. 3 Under the new regime, the acquirer may not execute the acquisition of the shares in question until after the expiry of a 30-day waiting period (or a shorter period if permitted by the JFTC), which commences on the date of acceptance of the notification by the JFTC. A prior notification is required if a share acquisition will result in the acquirer holding post-transaction a shareholding ratio which exceeds the thresholds of 20% or 50% which is a simplification of the previous regime which had three thresholds of 10%, 25% and 50%. The filing thresholds are applicable to both foreign and Japanese companies. The filing thresholds for share acquisitions under the Revised AMA are as follows. The aggregate domestic sales of the acquiring company and of all its group companies within the same combined business group must exceed 20 billion (approximately US$222 million). The aggregate domestic sales of the target company and its subsidiaries must exceed 5 billion (approximately US$55 million). Different thresholds apply to business transfers (i.e. asset transactions). Domestic sales are defined as the total value of goods or services supplied in Japan in the last fiscal year. 4 According to the Merger Rules, 5 domestic sales include the value of sales attained through directly importing into Japan even where a company has no physical presence in Japan. The combined business group consists of all of the subsidiaries of the ultimate parent company. It should be noted that a company will be considered to be a subsidiary not only when more than 50% of the voting rights of the corporation are held by another company, but also if its management is controlled by the other company, 6 which may also occur in cases where a company has less than 40% of the voting rights. The concept of control used to decide the scope of subsidiaries is in line with that used to define group companies under the Ordinance for the Enforcement of Companies Act. 7 Although the JFTC expects that less domestic transactions will be notifiable under the Revised AMA, it is highly likely that more foreign-to-foreign transactions will reach the notification thresholds in Japan. Mergers In July 2009, Kirin Holdings and Suntory Holdings announced their planned consolidation which would create an entity with very high market shares in the beverages sector in Japan. This high profile case is now subject to lengthy JFTC informal prior consultation proceedings. Cartels and other Anticompetitive Practices On November 11, 2008, the JFTC filed criminal charges against three steel companies alleging that they had formed a price-fixing cartel related to the sale of galvanized steel. Those charges led to the JFTC fining the companies 15,507,180,000 (approximately US$172 million), the second largest fine ever imposed by it. In addition, the court also imposed (pecuniary) criminal sanctions on the companies, and the relevant company officers were given suspended jail sentences. In September 2009, the JFTC issued a cease-and-desist order against Qualcomm Inc., alleging that Qualcomm had coerced the Japanese manufacturers of a subscriber unit into concluding a license agreement concerning intellectual property rights relating to CDMA Wireless Telecommunication and that such manufacturers were restricted from charging license fees etc. or taking legal action against Qualcomm based upon their intellectual property rights. The JFTC held that such practices unjustly restricted the manufacturers business activities In October 2009, the JFTC took action against an international cartel of manufacturers of cathode ray tubes for television, issuing a cease-and-desist order and imposing a fine of 3,322,240,000 (approximately US$37 million) on the five companies, including, for the first time, foreign companies. 3 See Article 10, paragraphs 2-10 of the Revised AMA. 4 See Article 10, paragraph 2 of the Revised AMA. 5 The JFTC s Rules on Applications for Approval, Reporting, Notification, etc. Pursuant to Articles 9 through 16 of the Act on Prohibition of Private Monopolization and Maintenance of Fair Trade published by the JFTC on October 23, 2009 which came into force on January 1, See Article 10, paragraph 6 of the Revised AMA. 7 Ordinance for the Enforcement of Companies Act (Ordinance of the Ministry of Justice No. 12 of February 7, 2006). See: 102

103 DEVELOPMENTS IN japan Abuses of a Dominant Position In June 2009, the JFTC investigated agreements between the major Japanese convenience store, Seven-Eleven Japan Co., and its franchisees and found that Seven-Eleven s practice of discouraging discounts constituted an abuse of a dominant position. The JFTC issued a cease-and-desist order forcing Seven-Eleven to stop the unfair restrictions. On September 29, 2009, seven franchisees filed a lawsuit with the Tokyo High Court, seeking about 200 million (approximately US$2.2 million) in damages for loss of profits caused by these unfair restrictions. Court Decisions On February 18, 2009, the Supreme Court rejected Yamato Transport s appeal against a Tokyo High Court ruling 8 that dismissed its complaint alleging that Japan Post s service (the parcel delivery service in a tie-up with the convenience store chain Lawson Inc.) imposes unreasonably low price sales. The latter is defined as without proper justification, supplying a commodity or service continuously at a price which is excessively below cost incurred in the said supply, or otherwise unjustly supplying a commodity or service at a low price, thereby tending to cause difficulties to the business activities of other entrepreneurs. The lower courts had ruled that cost in this context means the sum of the cost of production or purchase plus general operating expenses (such as selling and administrative expenses) and that Japan Post did not charge prices below cost. 8 The Financial and Business Law Precedents No. 1282, January 15, Anderson Mori & Tomotsune Izumi Garden Tower 6-1, Roppongi 1-chome Minato-ku, Tokyo Japan

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105 Korea Youngjin Jung, Jung Seo and Tae-Kyu Kang Legislative Developments Amendment to Leniency Program In order to attract more leniency applications and to enhance cooperation in cartel investigations, the Korea Fair Trade Commission (the KFTC ) amended the leniency program, which was introduced in 1997, effective as of May 19, The amendments allowed joint leniency applications by two or more companies (i) if the applicants are affiliated companies in a group or (ii) if the applicants are parties to either a corporate spin-off or a business transfer, provided that they have not participated together in the concerted act under review. The date on which the applicant must cease its involvement in the concerted act was also moved forward from before the Commission s final decision to immediately after applying for leniency. In addition, the second applicant can now take the place of the first applicant not only when the latter fails to meet the conditions required to be granted leniency but also when it voluntarily withdraws its application or its leniency status is lifted. In the past, the second applicant could only claim the first applicant s place when the latter failed to satisfy the requirements for obtaining leniency. In 2008, 48% of all investigated cases were triggered by a leniency application. There are no statistics yet for Partial amendment to the criteria for abuse of market dominance The KFTC amended various criteria for abuse of market dominance provided under Article 3 (prohibition of abuse of market dominance) Section 2 and Article 5 (types of and criteria for abuse of market dominance) Section 6 of the Monopoly Regulation and the Fair Trade Act. 2 More specifically, an amendment was made to the previous wording ( the act of bringing a patent infringement action to sabotage a competitor s business knowing that the competitor did not infringe any of the challenging company s patents ) by broadening the types of potential suits based on IT rights ( the act of sabotaging a competitor s business by abusing patent infringement actions, patent nullification actions, or other intellectual property-related judicial or administrative proceedings ). The amended leniency program now also sanctions the act of making market entry of a potential competitor difficult by abusing patent infringement actions, patent nullification actions, or other judicial or administrative proceedings relating to intellectual property rights as a new type of improper interference with the market entry of a potential competitor. Mergers Decision to disallow Lotte s acquisition of Paradise duty free shops On October 6, 2009, the KFTC refused to give Hotel Lotte Co. Ltd. clearance to acquire its competitor, Paradise Duty Free Shops, on the basis that the acquisition may effectively restrict competition in the duty-free market in Busan and the Gyeongnam Province. 3 This was the fifth merger prohibition in the KFTC s history. Lotte Hotel, Inc is a leading duty-free shop chain. The KFTC took the view that within the relevant market of duty-free shops, a distinction could be made between shops at airports, in cities, on the Internet and on-board. It determined that online duty-free sales would not come within the relevant product market because of the different service environment, range of products being offered and 1 Fair Trade Commission Notification No , May 19, 2009, available in Korean at 2 Fair Trade Commission Notification No , October 6, 2009, available in Korean at 3 Press Release, October 8, 2009, Decision to Disapprove Lotte Hotel s acquisition of Paradise group s duty free shops available in Korean at 105

106 DEVELOPMENTS IN KOREA a low sale ratio (only 4% of all duty free sales). Similarly, on-board duty free shops would also belong to a different market because their product selections and customer profile are significantly different. As to anti-competitive effects, the KFTC found that the proposed acquisition would result in a monopoly for Lotte, giving it a 97.4% market share in the Busan/Kyung- Nam Province region. This would potentially produce anti-competitive effects, since new entry to the market was virtually impossible due to the Customs Service s strict requirements for opening a duty free-shop in the domestic market. The case shows that the KFTC does not accept business consolidation at any price and is determined to oppose transactions that could result in anti-competitive effects. Cartels and Other Anticompetitive Practices Cease-and-Desist order and fines imposed on liquefied petroleum gas suppliers price cartel On December 2, 2009, the KFTC issued a cease-and-desist order prohibiting information-sharing and imposed a record fine of KRW668.9 billion (approximately US$557.4 million) on six domestic LPG suppliers for participating in a price-fixing cartel for liquefied petroleum gas ( LPG ), in particular propane and butane, from 2003 to It also referred the cartel members to the Prosecutors Office for criminal prosecution, except for those who applied for leniency. 4 The first applicant received a 100% fine reduction and the second applicant, a 50% reduction. Abuses of a Dominant Position Qualcomm fined for abuse of a dominant position regarding modem chips On July 23, 2009, the KFTC issued a cease-and-desist order and imposed a fine of KRW260 billion (approximately US$216.7 million) on Qualcomm for abuse of its dominant position by engaging in royalty discrimination and conditional rebates. 5 Holding a monopoly in CDMA source technology with a market share of 99.4% (as of 2008) of the Korean market for CDMA modem chips, Qualcomm was found to charge excessively high royalties for a license granted to cell phone manufacturers using modem chips produced by Qualcomm s competitors. It also offered the manufacturers rebates on CDMA modem chips and RF chips if they sourced most of their chip demand from Qualcomm. Finally, it allegedly entered into telecommunications technology licensing agreements with cell phone manufacturers under which it was to receive 50% of the existing royalties in order to prevent competitors such as VIA (Taiwan) and EoNex (Korea) from entering the market, even after the patents for the licensed technology had expired or become ineffective. The KFTC prohibited Qualcomm from (i) charging excessively high royalties to handset makers for their purchase of non-qualcomm modem chips; (ii) granting rebates to handset makers on condition that their purchase of Qualcomm modem chips/rf chips exceeded a level that would result in its competitors being excluded from the market; 6 and (iii) any unfair act to enable it to receive patent royalties for its technology even after the patent in question had expired or become invalid. Through this case, and the Intel case in 2008, the KFTC showed its intent to enforce strictly Korean antitrust law against large-scale multinational corporations operating in the Korean market. Court Decisions On October 17, 2000 the KFTC ordered five major oil companies in Korea to pay fines of KRW 190 billion (approximately US$158.3 million) for bid rigging when bidding for the Korean military oil procurement. The Korean government also filed a civil action for damages in 2001 and the Korean District Court ordered the oil companies to pay the Korean government damages of KRW81 billion (approximately US$67.5 million) plus an additional overdue penalty amount on the damages on January 23, Press Release, December 2, 2009, Tough corrective measures against LPG price cartel of the Fair Trade Commission, available in Korean at 5 Press Release, July 23, 2009, Corrective orders for Qualcomm s abuse of market dominance regarding modem chips, available in Korean at 6 This remedy is just to prohibit unreasonably discriminative royalties or conditional rebates, not to ban non-discriminatory technology royalty discounts or modem chip discounts with no exclusionary effect. 106

107 DEVELOPMENTS IN KOREA On appeal lodged by the oil companies, the Korean High Court examined the method of calculating the difference of the price between the winning bid price and the bid price that would have existed but for the collusion amongst the oil companies. The lower court had used multiple regression analysis to assess the effect of the collusion on the winning bid price independently of other economic factors that affected the bid price. The Korean High Court rejected the lower court s approach, holding that this would lead to a high risk of the loss caused being underestimated, since an econometrics-based approach could be subjectively applied depending on the party making the assessment. The Korean High Court also drew attention to the lack of sanctions deterring anti-competitive activity, such as the U.S. policy of imposing treble damages, which significantly reduces collusive practices. Therefore, the Korean High Court found in favor of the government by choosing the standard price of the Mean of Platts Singapore and adding an amount for expenses to determine what would have been the fair bid price and then compared this to the winning bid price during the three years in which collusion took place. Based on this method, the Korean High Court awarded higher damages of KRW131 billion (approximately US$109.1 million) plus a penalty for late payment of KRW65 billion (approximately US$54.1 million) on December 30, Kim & Chang Seyang Building, 223 Naeja-dong, Jongno-gu, Seoul , - Korea ~3 107

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109 Mexico Lucía Ojeda Legislative Developments In the period , four Bills were presented before the Mexican Congress in order to amend: (i) the Federal Law on Economic Competition (the FLEC ); (ii) the Federal Criminal Code; (iii) the Federal Law on Consumer Protection and the Federal Law to Promote Activities Performed by Civil Organizations; and (iv) the Constitution. The first Bill aims to increase fines for the performance of monopolistic practices, simplify merger notification procedures, and widen the powers of the Federal Competition Commission (the FCC ) regarding precautionary measures and inspections. 1 The second Bill proposes introducing amendments to the Federal Criminal Code in order to sanction per se antitrust violations as a criminal offence. 2 The third Bill aims to empower the Procuraduría Federal del Consumidor ( PROFECO ) to file complaints relating to violations of the FCC on behalf of consumers who are victims of antitrust infringements (class actions). 3 The fourth Bill proposes amending Article 17 of the Constitution in order to allow secondary legislation to regulate class actions in several matters. Although the first version of this Bill limited the use of collective actions to health, financial, and consumer issues, last December 10, 2009, the Senate approved a new version that does not limit the use of collective actions to certain areas or to certain administrative authorities. This proposal has been passed to the Chamber of Deputies for its approval. 4 Finally, in his message to the Mexican people regarding the presentation of his 2010 Economic Project, President Felipe Calderón announced that a new Bill will be presented before the Mexican Congress during 2010 in order to pave the way for the FCC to enforce more effectively antitrust regulation and guarantee free competition in Mexico. 5 Mergers In the first semester of 2009, the FCC reviewed 73 concentrations, which represented 28% of all cases examined in that period. Of the 73 concentrations reviewed: (i) 36 were cleared; (ii) one file was closed because the parties decided not to proceed with the merger; (iii) two were not cleared, and (iv) the remaining 34 were corporate restructurings, which benefited from the notice procedure laid down in the FLEC s Regulations. The most significant concentrations during the first semester of this year were Mexichem/Cydsa and GM de México/GrupoCinemex. In Mexichem/Cydsa (MXC), the FCC initially prohibited the acquisitions by Mexichem, 6 a major operator in the Latin American chemical industry, of two companies owned by CYDSA: Policyd, a PVC manufacturer, and REX Plastic, a plastic tube producer. However, the transactions were finally cleared by the FCC subject to the fulfillment of several conditions that would guarantee that the transactions would have no harmful effects on the relevant markets. 7 In GM de 1 Bill introduced by Senator Santiago Creel Miranda, published in the Senate s Official Gazette on April 21, 2009, available in Spanish at 2 Bill introduced by Senator Juan Bueno Torio, published in the Senate s Official Gazette on July 2, 2008, available in Spanish at 3 Bill introduced by Senator Juan Bueno Torio, published in the Senate s Official Gazette on March 11, 2009, available in Spanish at 4 Bill introduced by Senator Jesús Murillo Karam, published in the Senate s Official Gazette on February 08, 2008, available in Spanish at 5 Available in Spanish at 6 See decisions published by the FCC under Files CNT and CNT on May 19 and May 27, 2009, respectively, available in Spanish at and 7 See decisions published by the FCC under files RA and RA on October 1st, 2009 available in Spanish at and 109

110 DEVELOPMENTS IN MEXICO México/GrupoCinemex, the FCC cleared the acquisition by GM de México, 8 which holds a stake in MM Cinemas, of shares in GrupoCinemex, sustaining that the acquisition would not affect the competition conditions in the movies market. Cartels and other Anticompetitive Practices In 2009, eight investigations were initiated for alleged per se conducts; four of them under article 33 Bis 3 of the FLEC (leniency program), 9 one ex officio, and the remaining three following third party complaints. The markets involved were: (i) the production, distribution and marketing of cathode ray tubes ( CRTs ) in Mexican territory; 10 (ii) the production, distribution and marketing of hermetic compressors in Mexican territory; 11 (iii) the production, distribution and marketing of crystal panels and components (complementary to the CRTs investigation); 12 (iv) the production, distribution and marketing of optical disc readers in Mexican territory; 13 (v) the production, distribution and marketing of livestock products; 14 (vi) the provision of ground tourist transportation services in Mazatlán, Sinaloa; 15 (vii) the provision of passenger sea transportation services in Quintana Roo; 16 and (viii) the acceptance of grocery coupons in Mexican territory. 17 In addition, in June 2009, the FCC decided to sanction two Mexican railway companies, Ferrocarril Mexicano, S.A. de C.V. ( Ferromex ) and Ferrosur, S.A. de C.V. ( Ferrosur ), together with their respective holding companies, 18 for abusive practices regarding the exchange of information in relation to price fixing for their services. This is the first case in Mexico in which the FCC has fined all operators involved in the unlawful behaviour the maximum amount (approximately US$7,760,000 each). 19 The decision was appealed to the Federal Tax and Administrative Tribunal last July 2009, and is still being reviewed by the Tribunal. Later, in July 2009, the FCC decided to sanction 33 firms operating in the real estate market in Chapala, once again for price-fixing practices. It is worth mentioning that this is the first investigation initiated and sanctioned under the leniency program that became part of the FLEC in Abuses of a Dominant Position The FCC initiated two investigations for alleged relative monopolistic practices, consisting in exclusivity agreements and predatory prices. Both investigations were started following third-party complaints and are still ongoing. The markets involved were carbonated beverages (refreshments/sodas) 21 and salted snacks. 22 Court Decisions In January 2009, a long-disputed case on the creation of a joint venture in the supermarket sector was closed. In September 2000 the FCC had decided that a joint venture between various supermarket chains concerning the joint issuance of food coupons could have a negative impact on the competition conditions of the relevant market. 23 In particular, the FCC considered at the time that the vertical integration of these activities into one company could lead to foreclosure problems vis-à-vis competitors. The FCC ordered the demerger of the joint venture and also imposed a fine of 45.5 million pesos (approximately US$3.5 million). 8 See Press Release FCC, December 16, 2008 available in Spanish at 9 See Art. 33 bis 3 of the Federal Law on Economic Competition, published in the Federal Official Gazette ( DOF ) on April 25, 2006, available in Spanish at 10 FCC File IO , DOF, August 5, 2009 available in Spanish at 11 FCC File IO , DOF, June 18, 2009, available in Spanish at 12 FCC File IO , DOF, July 3, 2009, available in Spanish at 13 FCC File IO , DOF, October 7, 2009 available in Spanish at 14 FCC File IO , DOF, December 17th, 2009, available in Spanish at 15 FCC File DE , DOF, July 15th, 2009, available in Spanish at 16 FCC File DE , DOF, October 10th, 2009, available in Spanish at 17 FCC File DE , DOF, October 23, 2009, available in Spanish at 18 Grupo Carso, S.A.B de C.V., Grupo México, S.A. de C.V., and Sinca Inbursa, S.A. de C.V. 19 See decision published by the FCC under file IO on January 22, 2009, available in Spanish at 20 Available in Spanish at 21 File DE , available in Spanish at 22 File DE , available in Spanish at 23 FCC files DE and RA Prestaciones Universales / Prestaciones Mexicanas / Almacenes Aurrerá / Gigante / Grupo Comercial Chedraui, available in Spanish at 110

111 DEVELOPMENTS IN MEXICO The parties appealed to the Mexican Federal Courts alleging that the Mexican antitrust authority was not competent to order divestment. The case was decided in 2006 by the Mexican Supreme Court of Justice, weich essentially ruled that the FCC did have such power. 24 In January 2009, one of the parties, Prestaciones Universales, notified the FCC of the compliance with all of the conditions ordered by the FCC, including the payment of all fines imposed. Other As anticipated, 2009 saw intense activity by the FCC in the telecommunications market, including a series of decisions on findings of dominance. Dominant operators are subject to certain obligations on price and tariffs, quality and reporting, compliance with which is monitored by the Telecommunications Commission ( COFTEL ). In July 2009, the FCC issued a preliminary decision finding Telmex to be the dominant operator in the markets for local transit and leasing of dedicated transmission links. 25 Regarding local transit, the FCC confirmed that Telmex is dominant in 191 local service areas. At present, Telmex is the only operator who offers local transit services. With regard to the leasing of dedicated transmission links, the FCC confirmed its preliminary decision determining that Telmex also has a dominant position in the transmission links of international long-distance calls and interconnection services, as well as in local dedicated transmission links in 97 cities and domestic long-distance dedicated transmission links that connect 97 pairs of cities nationwide. 26 In October 2009, the FCC issued a second decision finding that Telmex has substantial power in the public switched voice transit market through a public telecommunications network for fixed local services that provides long-distance services to other authorized telecommunications networks See FCC Press Release , January 25, 2009, available in Spanish at 25 See the FCC s preliminary decision, October 1, 2009, available in Spanish at 26 See the FCC decision October 1, 2009, regarding File DC , available in Spanish at 27 DOF, October 14, 2009 available in Spanish at SAI Consultores, S.C. Edificio Plaza Reforma Prolongación Paseo de la Reforma Santa Fé Peña Blanca México, D.F. - México

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113 The Netherlands Winfred Knibbeler and Nima Lorjé Legislative Developments In September 2009, the Minister of Economic Affairs issued new fining guidelines, new leniency guidelines and new guidelines on cooperation between contractors in the context of joint bids. The new fining guidelines 1 replace the 2007 guidelines of the Dutch Competition Authority (the NMa ) and entered into force on October 1, Infringements which were committed prior to this date still fall within the scope of the 2007 fining guidelines. The 2007 fining guidelines did not just apply to infringements on the rules of the Dutch Competition Act (the DCA ) and Article 81 and 82 of the EC Treaty (now 101 and 102 TFEU), but also to infringements of provisions of the Railway Act, the Air Transport Act and other legislation. Although the 2009 fining guidelines contain provisions on infringements of the Gas Act and the Electricity Act, they do not provide guidance on the fining procedure for breaches of provisions of the other Acts. New fining guidelines for these other Acts will follow later. The 2009 fining guidelines include the possibility of the NMa increasing the basic amount of the fine by 25% for very serious infringements (e.g. price-fixing agreements) and by 100% for recidivism. In addition, the multiplier which is used to reflect the seriousness of the infringement has been increased from 3 to a maximum of 5. The 2007 leniency guidelines have been replaced by the 2009 guidelines of the Ministry of Economic Affairs on the decrease of fines in cartel cases. 2 However, the content of the new guidelines does not materially differ from the 2007 leniency guidelines. On January 1, 2009 the general exemption for combination agreements between undertakings to bid for a tender and execute the assignment expired. The new guidelines no longer contain an exemption but explain how contractors should self-assess whether their agreements infringe competition rules or are eligible under the exception of the cartel prohibition or may be caught by the de minimis rule. 3 Mergers In the vertical merger between AMC, a university hospital located in Amsterdam, and VZA, inter alia an ambulance service in the Amsterdam area, the NMa examined whether it was possible for AMC to influence the destination of patients transported by VZA, and whether it had any incentive to do so. 4 The NMa concluded that ambulance staff had to decide the hospital to which an individual patient would be transported on the basis of protocols. While it was possible to deviate from the protocol in particular cases, this was the personal responsibility of the ambulance staff. Secondly, the NMa found that most patients did not enter the hospital via the ambulance service. Therefore, influencing the patient stream via ambulance services which was the concern expressed by the national healthcare authority (NZa) - would only add an insignificant amount of income to AMC s revenue which did not outweigh the risks (e.g. damage to reputation, losing the ambulance transport license, etc). In another case involving the hospital sector, the NMa conditionally cleared the merger between two hospitals, Ziekenhuis Walcheren and Oosterscheldeziekenhuizen, in a second-phase decision. 5 The merger would create an 80-90% market share in the market for short-term and 1 Beleidsregels van de Minister van Economische Zaken voor het opleggen van bestuurlijke boetes door de NMa 2009, Stcrt. 2009, (Policy Rules of the Minister of Economic Affairs on the imposition of administrative fines by the NMa 2009), available at: tcm pdf 2 Beleidsregels van de Minister van Economische Zaken tot vermindering van bestuurlijke boetes betreffende kartels, Stcrt. 2009, (Policy Rules of the Minister of Economic Affairs on the reduction of administrative fines in respect of cartels), informal English translation available at: tcm pdf. 3 See Articles 6 (3) and 7 od the DCA. 4 Decision NMa, July 24, 2009, AMC VZA, Case No. 6704, availble in Dutch at 5 Decision NMa, March 25, 2009, Ziekenhuis Walcheren Oosterscheldeziekenhuizen, Case No. 6424, available at 113

114 DEVELOPMENTS IN THE NETHErLaNDS longer-term generic hospital care, and would not face potential entrants or sufficient competition. The merging parties invoked efficiencies that only the combined entity would be able to offer more and better services (e.g. sub-specialism), together with cost savings and better working circumstances which would ultimately benefit the patients. In addition, the parties relied on a failing-firm defense, stating that neither of the two hospitals would be able to guarantee sufficient quality of health care on its own. The NMa was, however, not convinced that prices would not be unjustifiably increased after the merger, and that the claimed improvements in quality would actually take place. The parties offered commitments (inter alia maximum prices for specific services, commitments on quality improvements and a commitment to facilitate entrants against market prices), which were sufficient for the NMa to clear the transaction. Cartels and other Anticompetitive Practices In Ooms Avenhorn B.V, the NMa confirmed a previous judgment of the Supreme Court, 6 holding that the statutory interest for fines started running 13 weeks after the decision imposing the fine was served on the defendant. Lodging an appeal against the NMa decision only suspends the obligation to pay the fine until the final decision on appeal has been given but does not stop statutory interest from running. 7 Another case, Kazerne II, 8 was one of four decisions in which the NMa fined several painting companies for bid rigging and (following the Treuhand 9 judgment of the European Court of First Instance) for setting up a calculation agency to facilitate the cartel. 10 In Kazerne II, the NMa attributed liability to several parent companies on the basis that under European competition law, a parent company can be held liable for the conduct of its subsidiary where the former can exert decisive influence over the latter. In the case at hand, the NMa applied the rebuttable presumption that the parent company exerts decisive influence where the subsidiary is wholly owned. In addition, in a decision of November 12, 2009, the NMa imposed fines of over 3 million (approximately US$4.2 million) on producers of sodium hypochlorite, a chemical which is commonly used for swimming pools. 11 The NMa imposed the fines because it found that the producers had infringed the Competition Act by agreeing not to acquire each other s customers and agreeing on market sharing in several meetings in the period from 1998 until In another decision of August 5, 2009, the NMa fined a soft drink producer 468, (approximately US$661,400) for providing incorrect and incomplete information in a merger control procedure, 13 the first time that the NMa has taken this course of action in a merger control procedure since the statutory fines were increased in Furthermore, in two separate decisions, the NMa fined two former executives for not cooperating with an investigation. 14 The two executives invoked the right to remain silent 15 but the NMa ruled that such right did not apply to former employees and fined them both 150,000 (approximately US$212,000). 16 Abuses of a Dominant Position In VKP vs. GasTerra, the NMa investigated whether the Dutch gas wholesaler GasTerra had abused its dominant position. 17 The NMa first acknowledged that charging prices above cost prices is not in itself an abuse. An independent economics expert performed a benchmark test so that the NMa could estimate (hypothetical) competitive benchmark prices for the products and services delivered by GasTerra for the period and examined whether or not the observed prices charged by GasTerra exceeded the estimated benchmark prices. From the model, it appeared that GasTerra s prices were on average 4-6% higher then the benchmark prices. The NMa did not, however, consider this to be excessive pricing and also took a certain margin of error into account Judgement of the Supreme Court, July 11, 2008, NEA vs. State of the Netherlands, LJN: BD2778, available in Dutch at 7 Decision NMa, April 22, 2009, Ooms NMa, case no. 2873, available in Dutch at 8 Decision NMa, June 5, 2009, Kazerne II, case no. 6431, available in Dutch at 9 Decision of the Court of First Instance of the European Communities, July 8, 2008, case T-99/04, available at 10 Decision NMa, June 5, 2009, Kazerne II, Case No. 6431; Decision of the NMa, June 5, 2009, Kazerne I, Case No. 6429; Decision of the NMa, August 21, 2009, De Tongelreep, Case No and Decision of the NMa, August 21, 2009, Meiveld, Case No. 6430, all available in Dutch at 11 Decision NMa, 12 November 2009, Distributeurs van Natriumhypochloriet, Case No. 6091, available in Dutch at 12 This amounted to 0.22% of the company s local turnover. Since October 2007, the statutory maximum fine amounts to 450,000 euro or 1% of the turnover of the undertaking, whichever is more. 13 Decision NMa, 5 August 2009, Refresco, case No. 6687, available in Dutch at 14 Decision NMa, July 9, 2009, [x], Case No and Decision of the NMa, July 9, 2009, [x], Case No. 6622, all available in Dutch at 15 See Article 53 of the DCA. 16 The statutory maximum fine which can be imposed on individuals is 450,000 (approximately US$636,000). 17 Decision NMa, June 26, 2009, VKP GasTerra, Case No. 5968, available in Dutch at 18 The NMa did not decide whether GasTerra was dominant because it did not consider the company to have engaged in abusive practices. 114

115 DEVELOPMENTS IN THE NETHErLaNDS Court Decisions In 2009, the Dutch courts reached three interesting decisions. These addressed questions like whether the court has to apply the cartel prohibition ex officio, whether the NMa has to translate its file for foreign defendants and whether the NMa can make use of transcriptions of phone taps which it acquired from the Department of Justice. In Gemeente Heerlen vs. Whizz Croissanterie, the Municipality of Heerlen had violated an exclusivity provision in its agreement with Whizz croissanterie. 19 During the procedure, the Municipality tried to invoke the nullity of the cartel prohibition (Article 6(2) DCA) but raised its allegations too late in the procedure and without producing any evidence in support. The Court of First Instance therefore rejected the argument. On appeal the Municipality submitted that the court should have applied Article 6 of the DCA ex officio. The Supreme Court clarified, however, that the cartel prohibition contained in Article 6 DCA is not a public order provision which has to be applied ex officio by the court. In the second case, the NMa had fined a defendant which was domiciled in Germany. 20 The German defendant had appealed against the NMa fine, claiming inter alia that its right to a fair trial had been breached 21 on the basis that the proceeding should have been conducted in German and not in Dutch. The NMa had only translated the Statement of Objections, a few documents on which it based its decision and the decision itself into German, although it had provided the defendant with a free translator during the oral hearings. The Tribunal for Trade and Industry reiterated that Article 6 of the ECHR is not limited to court actions and also applies to administrative proceedings. This means that a defendant must be able to understand the allegations made against him in the proceeding so that he can build an effective defense. There is, however, no obligation to translate all written documents in the NMa file. In the case at hand, the Tribunal found that the German defendant could not build an effective defense because it was not aware of all of the relevant documents in the file. According to the Tribunal, the NMa should have provided the defendant with at least a translated index of the NMa file so that it could decide which documents were needed for its defense and should be translated. Hence, the NMa had violated the German defendant s right to a fair trial. In a case brought against several construction companies, 22 the NMa intended to use information acquired via telephone taps to prove the existence of price-fixing agreements. The NMa had obtained transcripts of the telephone taps, which were recorded for a criminal investigation, from the Public Prosecutor. Janssen de Jong Groep B.V. (one of the construction companies) argued in a summary proceeding before the Hague District Court that the NMa was not authorized to use the transcripts. The Court reiterated that the rules on the right to privacy and family life permitted the Public Prosecutor to share transcripts of telephone taps with third parties if a statutory basis for this exists and it is necessary to protect an important public interest. 23 The Court considered the statutory purposes of the Competition Act to be an important public interest and, on the basis that the interest of the NMa as an enforcement agency should prevail over the right to privacy of Janssen de Jong Groep B.V., it dismissed the appeal. 19 Decision of the Supreme Court, January 16, 2009, Gemeente Heerlen vs. Whizz Croissanterie, LJN: BG3582, available in Dutch at 20 Decision of the The Trade and Industry Appeals Tribunal, January 19, 2009, Landesvereinigung der Erzeugerorganisationen für Nordseekrabben- und Küstenfischer an der schleswigholsteinischen Westküste vs. NMa, LJN: BH0436, available at 21 See Article 6 of the European Convention of Human Rights and Fundamental Freedoms ( ECHR ), available at 22 Decision of the The Hague District Court, June 26, 2009, Janssen de Jong Groep B.V. vs. the State of the Netherlands, LJN: BJ0047, available at 23 See Article 39 of Act on data of the Department of Justice in criminal procedures ( Wet Justitiele strafvordelijke gegevens ) and Article 8 ECHR. Freshfields Bruckhaus Deringer LLP P.O. box AG Amsterdam - The Netherlands

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117 New Zealand Andrew Peterson and Troy Pilkington Legislative Developments New chairman Although there have not been any substantive amendments to the Commerce Act 1986 (the Commerce Act ) in the past year, a significant development occurred in March 2009 when the New Zealand Commerce Commission (the NZCC ) announced that Dr. Mark Berry would be replacing long serving Chair, Paula Rebstock. Ms. Rebstock s tenure had been considered in some quarters to be marked by the NZCC taking a more aggressive stance towards ensuring compliance with the Commerce Act. It was predicted that under the leadership of Dr. Berry, the NZCC would move towards earlier engagement with business regarding investigations to achieve pragmatic outcomes in order to minimise the current high costs of investigations rather than consistently adopting an adversarial role. Nevertheless, to date it appears that the NZCC s aggressive stance towards prosecuting cartels and increasing level of penalties has continued in much the same manner as before. Indeed, the most recent indications are that New Zealand may be far closer to implementing criminalisation of cartel conduct than previously thought. It is thought that the Government may soon commence public consultation to evaluate how the country ought to criminalise cartel behaviour. The criminalisation of cartel conduct in Australia is expected to provide impetus for the introduction of a similar regime in New Zealand. New bill on cooperation with international competition regulators As outlined in last year s submission, Parliament, under the previous Labour-led Government, had introduced the Commerce Commission (International Cooperation and Fees) Bill (the Cooperation Bill ) to extend the scope of the Commission s powers of cooperation with other international competition regulators. 1 More specifically, the Cooperation Bill intends to provide the NZCC with the ability to provide investigative assistance and compulsorily acquired information to overseas regulators, subject to specified safeguards and the principle of reciprocity. It had been intended that Parliament would consider the Bill during 2009, although with the establishment of the new centre-right Government it appears that the reading of this Bill has not been made an immediate priority. For its part, the NZCC has maintained its impetus for the Bill during 2009 by requesting submissions on whether it ought to include the Telecommunications Act 2001 within its ambit so that the NZCC can share information in its capacity as the regulator of the telecommunications industry. Merger review In November 2008 the NZCC released the Mergers and Acquisitions Clearance Process Guidelines (the Merger Guidelines ). These Guidelines set out the NZCC s procedural approach to merger filings and commit the NZCC to determining applications for clearance within an average of 40 working days of registration of the application. 2 The Merger Guidelines are intended to help achieve robust and timely decisions by providing information about the application process and the kind of information the NZCC requires, as well as indicative timelines. Although there is currently no specific defence or exception in the Commerce Act which permits a competitor to acquire or merge with a failing firm, given the current difficult economic conditions, the NZCC announced its intention to create a targeted set of guidelines that will be applied to clearance applications where one of the parties (usually the target) is failing or under financial stress. Accordingly, in October 2009 the NZCC released its Supplementary Guidelines on Failing 1 Commerce Commission (International Corporation and Fees) Bill. To see the full text of the bill, refer to the New Zealand Parliament website, available at 2 The Merger Guidelines are available at 117

118 DEVELOPMENTS IN NEw ZEaLaND Firms, 3 designed to assist businesses and their legal representatives by explaining how it will assess claims that a target firm is failing, as well as outlining the types of supporting evidence that may be required. The Supplementary Guidelines do not suggest that the NZCC intends to relax its previous approach; rather, it must still be satisfied that the merger will not result in a substantial lessening of competition. They state that situations where firms face declining sales or profits, or where the earnings rate is significantly below the shareholders expectations, would, in isolation, be unlikely to satisfy the Commission that the firm is truly failing. 4 The Supplementary Guidelines also suggest that merger parties should provide complete and robust evidence that a firm is actually failing in order for the NZCC to make a timely determination. The NZCC s clearance of Fletcher Building to acquire certain masonry assets from Stevenson Group in February 2009 is a recent example where the NZCC cleared the transaction on the basis there was no real prospect of a third party either acquiring the masonry division as a going concern or acquiring the masonry assets on closure and using them to compete in the relevant markets. 5 The NZCC may grant an authorisation for an acquisition or business practice which might otherwise give rise to a substantial lessening of competition, if it is satisfied that the transaction or business practice is likely to result in net public benefits. In the past, merger parties have been reluctant to submit themselves to the authorisation process as it was considered a costly and time consuming process. To address these concerns, in June 2009, the NZCC published guidelines for a new streamlined process for merger authorisations (the Streamlined Process ), 6 which applies to acquisitions that meet certain indicative criteria and require decisions to be made within 40 working days (which is comparable to the standard clearance process). Essentially, the Streamlined Process is intended to apply to transactions that have clear public benefits and a relatively limited impact on competition. Leniency Program On September 3, 2009 the NZCC released its draft revised leniency policy guidelines on cartel conduct (the Draft Revised Leniency Policy ) for public comment. 7 Following international practice, the Draft Revised Leniency Policy proposes to introduce a marker system and an amnesty plus initiative, both designed to incentivise the disclosure of cartel conduct to the NZCC. The NZCC is currently receiving submissions on the Draft Revised Leniency Policy and it is expected that after reviewing the submissions they will be adopted during The expected increase in detection of cartels in Australia as a result of their move to criminalise cartel conduct will likely lead to more applications for leniency in New Zealand, with a corresponding increase in enforcement activity. Mergers All eight clearance applications considered by the NZCC in 2009 were cleared. During this period there were no applications for the authorization of a merger on public benefit grounds. The past year has been notable for the lack of merger activity due to the current economic climate and resulted in the lowest number of applications to the NZCC for many years. Cartels and other Anticompetitive Practices During 2009, the NZCC reached settlements with various parties in its proceedings against Visa, MasterCard and a number of retail banks under sections 27 and 30 of the Commerce Act (Commerce Commission v. Cards NZ Limited & Ors) (the Interchange Proceedings ). 8 This case concerned the multilateral interchange fee system used by Visa and MasterCard s credit card schemes. The NZCC alleged that the scheme rules substantially lessened competition and fixed prices by artificially inflating the cost to retailers of accepting credit cards and ultimately raising prices paid by all consumers. 3 Merger and Acquisitions: Supplementary Guidelines on Failing Firms available at 4 See paragraph Commerce Commission Decision 663, February 13, 2009, Fletcher Building Limited and Stevenson Group Limited, available at 6 The Commerce Commission s guidelines to the Streamlined Authorisation Process are available at 7 The current Leniency Policy is available at The Draft Leniency Policy and Process Guidelines are available at 8 High Court at Auckland CIV

119 DEVELOPMENTS IN NEw ZEaLaND In the settlements, Visa, MasterCard and the retail banks agreed to pay the NZCC costs and change the way the scheme rules apply in New Zealand. However, no party accepted any liability for the alleged price fixing nor was any penalty paid. Visa and MasterCard paid the NZCC costs of NZ$2.6 million and NZ$3 million respectively (approximately US$1.84 million and US$2.12 million). The terms of the settlement enables retailers to pass on costs associated with credit cards to the consumers that use them through surcharges. Although there have not yet been any formal moves towards criminalisation of cartel conduct in New Zealand, the Commission and the Government have made it clear that this issue is on the agenda. 9 It is likely that a Discussion Document will be released for comment by the Ministry of Economic Development early in Abuses of a Dominant Position On February 25, 2009, the NZCC announced its intention to review the enforcement framework relating to single firm conduct and section 36 of the Commerce Act (which prohibits taking advantage of market power for certain anticompetitive purposes). The role of section 36 is considered to be particularly important in New Zealand because, due to the small size of the country, many of New Zealand s markets are highly concentrated by international standards. However, in late 2009 the NZCC announced that it no longer intended to complete this review. The review could, in part, be considered to be motivated by the NZCC's desired to increase its enforcement ability in relation to single firm conduct following a number of significant defeats for the NZCC in section 36 proceedings. Equally, the termination of the review could be a reflection of the NZCC's successes in 2009 in bringing section 36 proceedings, as outlined below. The NZCC may consider that these successes indicate an altered jurisdictional approach to section 36 without the need for legislative review, although on their face the 2009 cases do not materially alter the legal tests for finding a contravention of section 36. On October 9, 2009, in Commerce Commission v. Telecom Corporation of New Zealand Limited And Anor 10 the High Court found that Telecom (Telecom Corporation of New Zealand and Telecom New Zealand Limited) used its substantial market power to prevent and deter competition in markets involving high-speed data transmission in contravention of section 36 of the Commerce Act. This was the first successful prosecution under section 36 of the Commerce Act in almost two decades. In addition, on October 30, 2009 the Supreme Court granted leave to the Commission to appeal the decision in Commerce Commission v. Telecom Corporation of New Zealand Limited & Anor 11 on the grounds that the Court of Appeal erred in applying the section 36 counterfactual test. As the current Supreme Court judges significantly overlap with the Court of Appeal bench that was overturned by the Privy Council in CHH v. Commerce Commission 12 on the question of the application of the counterfactual test, it will be interesting to see how the Supreme Court approaches these important questions in Court Decisions In December 2008, the NZCC s section 30 (price fixing) proceedings in relation to the gas insulated switchgear industry resulted in the High Court imposing a NZ$1,050,000 (approximately US$740,000) penalty on Schneider Electric SA after the company admitted participating in a price-fixing and bid-rigging cartel (Commerce Commission v. Alstom Holdings SA). 13 This was the first case in New Zealand to come before the court as a result of a leniency application. High Court proceedings are continuing against the other corporate defendants in the case, Alstom and Siemens. The March 2009 Court of Appeal ruling in Harris v. Commerce Commission 14 appears to extend the New Zealand courts extra-territorial jurisdiction over overseas residents alleged to have breached the Commerce Act. According to the Harris decision, it now appears that New Zealand courts will have jurisdiction for any specific act or 9 For example see: Jail good idea for cartels, says Key. August 18, 2009, The New Zealand Herald, available at 10 High Court at Auckland CIV , 9 October 2009, available at %20High%20Court%20Judgment%20Datatails%2013%20October% pdf 11 High Court at Auckland CIV , 18 April 2008, available at 12 [2004] UKPC 37, available at 13 [2009] NZCCLR 22, available at 14 [2009] NZCA 84, available at %20Court%20of%20Appeal%20judgment,%2018%20March% pdf 119

120 DEVELOPMENTS IN NEw ZEaLaND omission that results in a party entering into, consenting to, or authorizing an anti-competitive understanding that is directed at a New Zealand market and is ultimately implemented in New Zealand. This would seem to make the extra-territorial application of the Commerce Act similar to the US effects doctrine. Harris is being appealed to the New Zealand Supreme Court. A recent Supreme Court decision has confirmed that the NZCC cannot use its compulsory information requests (section 98 notices) to go fishing for information. In AstraZeneca Ltd v. Commerce Commission, 15 the Supreme Court concluded that the Commission s purpose in issuing a section 98 notice must be the investigation of some activity which may be unlawful under the Commerce Act. 16 Therefore, any section 98 notice must be founded on a reasonable belief that there may be undiscovered facts that could give rise to a contravention of the Commerce Act. The NZCC cannot issue a section 98 notice in the absence of such a reasonable belief and the Commission is certainly not entitled to proceed on the basis that it can issue a notice first and then have its power to do so judged retrospectively by what it might find. 17 The case of Commerce Commission v. Aerolíneas Argentinas SA 18 in January 2009 is a reminder that if the NZCC does issue a section 98 notice it is important that it is complied with fully and in a timely manner. As part of an investigation into allegations of cartel conduct in the air-cargo services industry, the NZCC issued a section 98 notice to Aerolíneas Argentinas requesting information to be provided by mid- November The required documents were not provided until April 2008 and the NZCC brought criminal proceedings for non-compliance with a section 98 notice. Aerolíneas Argentinas was convicted and fined NZ$11,000 (approximately US$7,700). 15 [2009] NZSC 92, available at 16 See Para See Para District Court at Auckland CRI , January 21, 2009, per Judge Aitken. Russell McVeagh Vero Centre 48 Shortland Street PO Box 8 - Auckland 1140 New Zealand

121 Norway Trygve Norum and Gaute Sletten Legislative Developments On January 1, 2009, a new Regulation entered into force within the field of merger control. The Regulation is limited to providing detailed rules regarding the engagement of administrators that the Norwegian Competition Authority (the NCA ) may appoint to oversee the implementation of remedies by the parties in cases of merger approvals subject to conditions. 1 On July 1, 2009, the application of the Norwegian Competition Act (the Act or the Competition Act ) 2 was extended to the Svalbard territory (with the exception of certain provisions regulating relations with the EEA Agreement). Svalbard is an archipelago under Norwegian sovereignty in the northern Arctic. 3 On March 13, 2009, the NCA adopted a Regulation on exempting certain types of securities transactions from the prohibition on executing a transaction before clearance is obtained ( Standstill Obligation ). 4 The Regulation provides that a public bid, or a series of transactions in securities admitted to trading on a regulated market such as the Oslo Stock Exchange and Oslo Axess, may be implemented as provided by the Securities Trading Act, notwithstanding the fact that suspension is the general rule under Article 19 of the Competition Act. 5 The Regulation entered into force on April 1, On September 9, 2009, the Ministry of Government Administration and Reform, which is responsible for competition policy in Norway, adopted a Regulation requiring internet portals to make it possible for anyone to post residential property advertisements on nondiscriminatory conditions. Following the new Regulation, anyone, including the private seller, may post advertisements for residential properties on internet portals without having to go through an estate agent. The Regulation entered into force on January 1, Mergers On May 28, 2009, the NCA prohibited a merger between Validus and Sunkost. The parties to the merger had overlapping activities at the wholesale and retail level of the specialized health food market for food supplements/natural cosmetics/hygiene. The NCA found that the reduced competition would probably lead to higher prices and limited choice of goods to the detriment of consumers. If the acquisition had been approved, Validus would have gained control over the most substantial part of wholesale trade in the market. 7 On January 30, 2009, the NCA imposed a fine of NOK150,000 (approximately US$26,000) on ship brokers RS Platou ASA for violating the standstill obligation on the grounds that the takeover of Glitnir Securities AS was implemented after the merger was notified, but before the 1 Press Release, Norwegian Competition Authority, Forskrift om forvalter vedtatt, September 18, 2008, available at 2 Lov om konkurranse mellom foretak og kontroll med foretakssammenslutninger (konkurranseloven), March 5, 2004, Norsk Lovtidend 2004 hefte 4,, available in Norwegian at 3 Press Release, Norwegian Ministry of Government Administration and Reform, Konkurranselov også på Svalbard, June 25, 2008, available at 4 Forskrift om delvis unntak fra gjennomføringsforbudet i konkurranseloven 19 første ledd for visse typer erverv av verdipapirer, March 9, 2009, Norsk Lovtidend 2009 hefte 3 s 497, available at 5 Press Release, Norwegian Competition Authority, Regulation adopted on partial exception from the rule on suspension of concentrations, March 18, 2009, available at 6 Press Release, Norwegian Competition Authority, Internet portals must open for private sellers, September 10, 2009, available at 7 Press Release, Norwegian Competition Authority, The Norwegian Competition Authority forbids merger between Validus and Sunkost, June 5, 2009, available at 121

122 DEVELOPMENTS IN NORWAY merger was approved by the NCA. This was the first fine imposed by the NCA after the Act was amended to include a standstill obligation for notifiable concentrations effective from July 1, On November 26, 2009, the NCA imposed a fine of NOK100,000 (approximately US$17,000) on law firm Steenstrup Stordrange DA for violating the standstill obligation in regard to the takeover of the law firm DLA Piper Bergen DA. The acquisition was implemented before the merger was notified to the NCA, and therefore in breach of the standstill obligation. 9 Cartels and other Anticompetitive Practices On March 13, 2009, the NCA imposed a fine of NOK300,000 (approximately US$55,000) on Taxi Midt-Norge AS for illegal bid rigging in connection with the submission of a bid for patient transport in the Nord-Trøndelag region in All the licensed taxis within this region were affiliated to Taxi Midt-Norge AS, and thus the bid from Taxi Midt-Norge AS constituted illegal cooperation between the parties. 10 On June 30, 2009, the NCA fined Norges Turbileierforbund, a trade organisation in the bus chartering sector, NOK400,000 (approximately US$72,000). On several occasions, Norges Turbileierforbund had encouraged its members to increase the prices of their services and the NCA found that this behaviour constituted a breach of Article 10 of the Act (illegal cooperation). 11 On July 13, 2009, the NCA imposed fines on Grunnarbeid AS Gran and Ekran AS of NOK5 million (approximately US$900,500) and NOK2 million (approximately US$360,000) respectively for illegal bid rigging in connection with the submission of bids to rehabilitate five bridges in the Nord- Trøndelag region in On November 10, 2009, the NCA conducted a dawn raid at the premises of a number of wholesalers of heating, ventilation and sanitation products, and at the premises of the trade organization for the wholesalers. The purpose of the dawn raid was to acquire information relevant to the investigation regarding possible anticompetitive practice within the business sector. The NCA s investigations have not yet been concluded. 13 Court Decisions On March 17, 2009, the Hålogaland Court of Appeal ruled in Lødingen Stenindustri AS vs. Mesta Stein AS that an agreement between Lødingen Stenindustri AS and Mesta Stein AS granting Mesta an exclusive right to extract gravel from an estate in the county of Lødingen amounted to an illegal horizontal agreement limiting competition. 14 On March 25, 2009, the Oslo District Court ruled in TINE BA vs. the NCA on the NCA s decision to impose a fine of NOK45 million (approximately US$8.1 million) on TINE BA in According to the appealed decision, TINE BA had abused its dominant position by negotiating (or attempting to negotiate) exclusive supply arrangements with Norwegian grocery chains for the supply of certain types of cheese, and by seeking to exclude Synnøve Finden, its main competitor in Norway. The Oslo District Court found that the evidence did not support the NCA s conclusions, and ruled that TINE BA had not infringed the Competition Act. 15 The NCA has appealed the Court s ruling and the hearing is expected to take place before the Borgarting Court of Appeal in Press Release, Norwegian Competition Authority, First administrative fine for violating the implementation prohibition, February 9, 2009, available at 9 Press Release, Norwegian Competition Authority, NOK fine for breaching the prohibition of implementation, November 27, 2009, available at 10 See NCA Case No. 2009/7, March 13, 2009, available at leggelse-av-overtredelsesgebyr/ 11 See NCA Case No. 2009/15, June 30, 2009, available at 12 See NCA Case No. 2009/17, July 13, 2009, available at 13 Press Release, Norwegian Competition Authority, Bevissikring hos VVS-grossister, November 16, 2009, available at 14 See Case LH , March 17, 2009, available at (subscription needed). 15 Press Release, Norwegian Competition Authority, Tine cleared in the Oslo District Court, March 25, 2009, available at 16 Press Release, Norwegian Competition Authority, The Norwegian Competition Authority appeals the Tine decision, April 28, 2009, available at 122

123 DEVELOPMENTS IN NORWAY Advokatfirmaet Haavind AS P.O. Box 359 Sentrum N-0101 Oslo - Norway

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125 Peru Oscar Arrús Legislative Developments After the two statutes that were enacted in 2008 (the Anticompetitive Conduct Law and the Unlawful Competition Law), 1 there were no legislative developments regarding antitrust regulation in However, it is worth mentioning that a draft Bill for a Unified Consumer Code has recently been prepared by a Commission specifically created for this purpose. This Code intends to consolidate all consumer protection regulations and will set forth the main guidelines in this regard. The President of the Commission in charge of reviewing the draft Unified Consumer Code recently stated that the draft Bill will be delivered in February to the Executive for further review. The Commission is reviewing hundreds of contributions, suggestions and observations submitted by public entities and private parties. 2 At the same time, the Consumer Defense Commission of the Congress is working on new draft legislation, so that the different projects can be compared. 3 Mergers Under Peruvian law, the National Institute for the Defense of Competition and Intellectual Property ( INDECOPI ) has no jurisdiction to enforce merger control rules. The only exception to this is provided by the Electricity Sector Anti- Oligopoly Law, 4 which grants INDECOPI the power to examine concentrations in the electricity sector. On April 21, 2009, Enel S.P.A. ( Enel ), the Italian electricity supplier, requested clearance from the Free Competition Commission of INDECOPI (the Commission ) for the acquisition of exclusive control of Endesa S.A., the Spanish supplier which controls the Peruvian companies Edegel S.A.A., Empresa Eléctrica de Piura S.A. and Edelnor S.A.A. On July 16, 2009, 5 the Commission authorized the transaction, considering that the operation (i) would ultimately benefit consumers and other users of electricity and (ii) would not impede free competition in the Peruvian energy market. Cartels and other Anticompetitive Practices An important anticompetitive practices case 6 arose in the context of a public bid relating to the implementation of a social assistance program organized by the Municipal District of Perené, located in the Department of Junín in Central Peru. In this case, the general manager of Insumos Mantaro S.R.L. ( Insumos Mantaro ), a company bidding for a contract to supply milk and rice products, tried to persuade the commission in charge of the public bid to award it the contract by offering a stake in the earnings of Insumos Mantaro. Following an antitrust investigation, INDECOPI concluded that these kickbacks did not constitute an anticompetitive practice or any other antitrust infringement, although they could give rise to criminal liability. 1 The Anticompetitive Conduct Law (Legislative Decree No. 1034, available in Spanish at was published on June, 25, 2008 (Legislative Decree No. 1044, available in Spanish at published on June 26, 2008, both in the official Peruvian gazette El Peruano. 2 Available in Spanish at 3 Article published in the Peruvian newspaper Gestión on February 4, Law No published on November 19, 1997 in the official Peruvian gazette El Peruano, available in Spanish at 5 Decision /CLC-INDECOPI, July 16, 2009 issued by the Free Competition Commission of INDECOPI, available in Spanish at 6 This case arose in connection with Public Bid No CE-MDP organized by the Municipal District of Perené. 125

126 DEVELOPMENTS IN PERU Abuses of a Dominant Position In 2009, the Commission decided two important cases of abuse of dominance. First, in Corporación Centro Cerámico S.A.C. ( Centro Cerámico ) vs. Cerámica San Lorenzo S.A.C. ( San Lorenzo ), Centro Cerámico accused San Lorenzo of abusing its dominant position, in particular by refusing to deal and engaging in discriminatory practices. In its decision of March 4, 2009, 7 the Commission could not find any proof of San Lorenzo s dominant position. Since Centro Cerámico could turn to other suppliers, San Lorenzo s products were not considered to be an essential input. Accordingly, the Commission did not view San Lorenzo s refusal to deal as an abuse of a dominant position and rejected the complaint. Second, through Decision No INDECOPI/CLC dated May 14, 2009, 8 in proceedings against Alejandro Chávez Gurmendi, Jorge Petrozzi Molfino and Manuel Lavado Carrillo, the Commission found that Pilot Station S.A. ( Pilot ) had abused its dominant position, inter alia by entering into exclusivity agreements with all the dock pilots that were available in the port terminal of Callao and refusing, without good reason, to train applicants to be dock pilots. The company allegedly initiated frivolous administrative and judicial proceedings against dock pilots who resigned from Pilot and refused to provide the piloting service. Pilot s appeal was rejected. In addition, Pilot s board members at the time of the practices (Alejandro Chávez Gurmendi, Jorge Petrozzi Molfino and Manuel Lavado Carrillo) were found to be personally liable for certain of the alleged acts. Although the exclusivity agreements had been entered into before they took office, they had failed to terminate them. 9 In addition, the Commission fined each of the directors up to S/3,550 (approximately US$1,267). Court Decisions The Decision issued by the INDECOPI Competition Defense Tribunal (the Tribunal ) dated February 24, was the most important decision in 2009 and concerns collusive practices in the sodium hypochlorite market. Given its importance for the market, this decision was granted the status of precedent, thus requiring all future similar cases to take into consideration its reasoning. Quimpac S.A. ( Quimpac ), which enjoys a monopoly in the production and marketing of sodium hypochlorite, entered into an exclusivity agreement with Clorox del Perú S.A. ( Clorox ) pursuant to which Quimpac could only sell sodium hypochlorite to Clorox. Clorox used only 20% of the sodium hypochlorite itself, selling the remaining 80% to other operators in the market at a higher price. Thus, Group Multipurpose S.R.L. ( Gromul ) and Dispra E.I.R.L. ( Dispra ) accused Quimpac and Clorox of engaging in anticompetitive acts contrary to Legislative Decree No Vertical collusive practices typically have two elements: (i) the act in question must be performed by two or more independent economic agents located at different levels of the production chain; and (ii) one of those carrying out the act must hold a dominant position in one of the production chain s markets. In addition, the object or effect of vertical collusive practices must be to restrict, hinder or simulate free competition. A vertical collusive practice is restrictive by object when the object of the terms and conditions of the agreement expressly restrict free competition, while it is restrictive by effect when the result of implementing an agreement is to hinder the competitive process, even though this is not its stated purpose. 7 Decision /ST-CLC-INDECOPI, March 4, 2009 issued by the Free Competition Commission of INDECOPI, available in Spanish at 8 Decision No INDECOPI/CLC dated May 14, 2009 issued by the Free Competition Commission of INDECOPI, available in Spanish at 9 This decision formed part of Decision INDECOPI/CLC, May 14, 2009 issued by the Commission. 10 Decision /SC1-INDECOPI, February 24, 2009 issued by the INDECOPI Competition Defense Tribunal. 11 Legislative Decree No. 701, which was in force at the time the proceeding was initiated, was published in the official Peruvian gazette El Peruano on November 7, 1991 and was repealed by Legislative Decree No

127 DEVELOPMENTS IN PERU In this sense, vertical collusive practices are relative prohibitions because in order to be considered to be an infraction, not only is the performance of the acts required, but also evidence or foreseeability (certain and imminent) of the negative effects of said acts on competition and consumer welfare. The Tribunal therefore established that in order to determine the legality or illegality of a vertical collusive practice, it is necessary to: determine whether any of the parties has a dominant position in the relevant market; establish the existence of the restrictive agreement which the entities concerned are alleged to have entered into; consider both the restrictions and the possible competitive efficiencies arising from the vertical collusive practice being analyzed; if the restrictions on competition outweigh the efficiencies, determine whether the vertical collusive practice effectively had either a negative result or it can be foreseen that it would have a certain negative effect on free competition and consumer welfare (which amounts to an effect on the general economic interest). If these effects cannot be proved, the vertical collusive practice cannot be declared as an infraction, even if it may have had the object or effect of restricting free competition. Accordingly, the Tribunal found that Quimpac and Clorox had engaged in collusive acts, fining each company the sum of S/289,254 (approximately US$96,000). Estudio Rubio, Leguía, Normand & Asociados S.R.L Av. Dos de Mayo 1321, San Isidro, Lima 27, - Perú

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129 Poland Carlos Rapallo Legislative Developments Antitrust law in Poland is governed by the Competition and Consumer Protection Act. 1 There have been four minor amendments in the last year. The Local Authorities Workers Act 2 focuses on institutional aspects of the office of the Commissioner for Consumer Rights. He or she reports to the staroste (the chief officer at the local county government level) and not to the city council, as was the case prior to the amendment. Secondly, the Civil Service Act 3 sets out a detailed procedure for electing the President of the Office of Competition and Consumer Protection (the OCCP ), while in the Freedom of Economic Activity Act 4 a new section was added which regulates the notion of control in merger control proceedings before the President of the OCCP. Finally, the Provisions Introducing the Public Finance Act 5 includes some amendments to the Competition and Consumer Protection Act explaining its connection to the new Public Finance Act that came into force on January 1, Mergers 2009 saw a decrease in merger cases in Poland. Worthy of note are the merger in the newspaper market between Gazeta Prawna and Dziennik Polska Europa Świat, 6 which was cleared without conditions being attached, and the acquisition of the Silver Screen by Multikino in the cinema multiplex market. 7 In the latter case, clearance was made conditional on Multikino not purchasing any other multiplex cinema for as long as it has any rights relating to any other multiplex cinema located elsewhere in Poland. Multikino belongs to ITI Holdings, which is the owner of 14 complexes in major Polish cities. As a consequence of the merger, it added five cinemas to its portfolios. One transaction that was not cleared was the proposed acquisition of Gellwe by the Norwegian company Rieber Foods Polska. 8 The deal, which concerned the dessert supply market, was prohibited on the grounds that the transaction would significantly restrict competition in the whipped cream, powdered milk, dessert icing, baking powder, vanilla sugar, sodium bicarbonate and dessert flavors segments. The authority took the view that Rieber would obtain a dominant position in each of the above segments, which the OCCP considered to be distinct markets. The bank sector witnessed several mergers in The most hotly-debated merger decisions include Fortis Bank and the Dominet Bank, 9 (July 31, 2009) and BPH with GE Money Bank (December 31, 2009). In July 2009 American International Group, Inc. (AIG), Bank Polska and Santander Consumer Bank decided to merge their business activities. The transaction is subject to the approval of the Financial Supervisory Commission and other relevant regulatory bodies being obtained. 1 The Competition and Consumer Protection Act of February 16, 2007, Journal of Laws 2007, No. 50, 331, available in English at 2 Local Authorities Workers Act of November 21, 2008, Journal of Laws No. 2008, 223, 1458, available in Polish at Civil Service Act of November 21, 2008, Journal of Laws No. 2008, 227, 1505, available in Polish at 4 Freedom of Economic Activity Act of July 2, 2004, Journal of Laws 2004, No. 173, 1808, available in English at 5 Provisions Introducing the Public Finance Act of August 27, 2009, Journal of Laws 2009, No. 157, 1241, available in Polish at 6 Case DKK-51/2009, August 4, 2009, available in Polish at 7 Case DKK-49/2008 of June 19, 2008, available in Polish at 8 Case DKK-68/2009 of October 8, 2009 available in Polish at 9 Case DAR-6/2007 of February 27, 2007 available in Polish at 129

130 DEVELOPMENTS IN POLAND Cartels and other Anticompetitive Practices An important case concerned Plannja, 10 a company that sells roof covers. Following initial indications of the existence of anticompetitive conduct, the President of the OCCP initiated ex officio proceedings against Plannja, investigating Plannja s distribution network. The OCCP found that Plannja had fixed prices with 9 contractors for the resale of products to the final consumer and fined Plannja PLN100,000 (approximately US$34,000). In Koral & Żabka, 11 the supplier Koral and its retailer Żabka fixed prices for the sale of ice creams to the final consumer. Given the magnitude of the infringement, OCCP imposed a fine of PLN1 million (approximately US$345,000). In addition, OCCP has also initiated antitrust proceedings against the telecommunications operators P4 and Polkomtel 12 for engaging in collusive practices for the provision of roaming services. The investigation was triggered after it became known that P4 purchased roaming services exclusively from Polkomtel. Abuses of a Dominant Position One of the highest fines ever PLN60 million (approximately US$20,700,000) was imposed on PKP Cargo, 13 the largest railway hauler company in Poland. The OCCP found that contractors of PKP Cargo who ordered the same amount of products to be carried were treated differently, with more favorable terms with substantial discounts being offered to the companies which only used PKP s services. The MPK-Łódź ( MPK )1 4 case drew the attention of the OCCP to the problem of abuses of a dominant position in the local government sector. The company, MPK Łódź, which was formed by the local city council, was in charge of over 1,000 bus stations located in the Łódź area and every entrepreneur who wished to use bus stations operated by it was forced to conclude an agreement with it. The OCCP found that MPK imposed unreasonable contractual terms, including the imposition of costs for cleaning bus stops on the different routes, and fined it PLN290,000 (approximately US$100,000). Court Decisions Under Polish law, the decisions of the President of the OCCP may be appealed to the Court of Competition and Consumer Protection ( CCCP ), which was set up as a specialist division (division XVII) of the District Court of Warsaw. An appeal has to be lodged with the President of the OCCP, who is obliged to transfer the case without delay to the CCCP. He also has the right to change his decision in full or in part. The decision of the OCCP can also be appealed to the Court of Appeals, there being a further right of appeal to the Supreme Court. In the past year, several appeals against decisions of the OCCP came before the CCCP, many of which related to the banking and tourism sectors. Recently, much publicity was given to cases concerning an unlawful clause in contracts between Polish universities and their students. 15 In one case brought against the Warsaw School of Economics, 16 the OCCP President decided that the university had included unlawful clauses in its contracts which infringed collective consumer interests and fined it PLN270,000 (approximately US$93,000). Garrigues Emilii Plater 53, Warsaw Poland Case RWR-42/2008 of September 15, 2008, available in Polish at 11 Case RKT-107/2008 of December 31, 2008, available in Polish at 12 Case DKK-94/2008 of December 5, 2008 available in Polish at 13 Case DOK-3/2009 of July 7, 2009, available in Polish at 14 Case RŁO 11/2009 of August 7, 2009 available in Polish at 15 Case RWA-29/2008 of September 8, 2008, available in Polish at 16 Case RWA-12/2009 of July 28, 2009, available in Polish at 130

131 Portugal António Vitorino and Stéphanie Sá Silva Mergers On January 14, 2009, the Portuguese Competition Authority (the PCA ) terminated the proceedings concerning the acquisition by Petróleos de Portugal Petrogal, S.A. ( Petrogal ), of the exclusive exploitation rights over a group of assets composed of eight highway service stations. The rights were formerly owned by Carrefour Portugal Sociedade de Exploração de Centros Comerciais, S.A., and were subsequently acquired by the Sonae Group. 1 Petrogal is a wholly-owned subsidiary of Galp Energia SGPS, S.A., a vertically integrated group active in the import, storage, refining, distribution and marketing of fuels in the national market. The evidence gathered during the first phase of the investigation notably market shares, pricing policies and market structure indicated that the concentration was likely to create or strengthen a dominant position threatening to impede significantly competition in part of the market for the retail fuel distribution for road transport. Therefore, on August 26, 2008, the PCA decided to initiate an in-depth investigation. A few months later, facing the probability of a veto, the parties decided to withdraw their notification and abandon the concentration. Accordingly, the PCA declared the proceedings to be terminated under the terms of Article 112(1) of the Portuguese Code of Administrative Procedure. 2 On December 14, 2005, in one of its first prohibition decisions, the PCA had already decided to oppose a concentration whereby Galp would acquire service stations owned by Esso. 3 Abuses of a Dominant Position On December 16, 2008, a complaint was filed against Zon Multimédia Serviços de Telecomunicações e Multimédia, S.G.P.S., S.A. (hereinafter ZON ), for abuse of a dominant position within the meaning of Article 6 of the Portuguese Competition Act 4 and Article 82 of the EC Treaty. This complaint concerned the promotional campaign myzoncard launched by ZON, which consisted in offering TV Cabo s customers a loyalty card (the myzoncard) granting free cinema tickets in movie theatres belonging to or managed by ZON Lusomundo Cinemas, S.A. (hereinafter Lusomundo ). Both these companies, TV Cabo and Lusomundo, are part of the ZON Group. Following the opening of an inquiry, the PCA considered that, in view of ZON Group s dominant position in the relevant markets of cinema exhibition and subscription television, the myzoncard campaign entailed a serious risk of excluding actual and potential competitors, which was likely to cause imminent, serious and irreparable or almost irreparable damage to competition or to third parties interests. Accordingly, on January 6, 2009, the PCA ordered the immediate suspension of the promotional campaign myzoncard for a period of ninety days. 5 This was the first interim measure ever imposed on an undertaking since the establishment of the PCA in Since then, however, ZON has launched two alternative promotional campaigns, which are now also being investigated by the PCA. On September 2, 2009, the PCA declared that Portugal Telecom S.G.P.S., S.A. ( PT ), PT Comunicações, S.A. ( PTC ), ZON Multimédia, Serviços de Telecomunicações 1 PCA, Case Ccent. 16/2008, January 15, 2009 Galp/Postos de Abastecimento, Notice No. 2/2009, available in Portuguese at 2 Portuguese Code of Administrative Procedure adopted by the Decree-Law No. 442/91, of 15 November 1991, amended by Decree-Law No. 6/96, of 31 January 1996, and Decree-Law No. 18/2008, of 29 January 2008, available in Portuguese at 3 PCA, Case No. 45/2004 Petrogal/Esso, Notice No. 13/2005, December 14, 2005, available in Portuguese at 4 Law No. 18/2003, of June 11, 2003 published in Diário da República [Official Government Gazette] No. 134 (Series I-A), June 11, 2003, available in Portuguese at 5 PCA, Case No. PRC 12/08, Notice No. 1/2009, January 6, 2009, available in Portuguese at 131

132 DEVELOPMENTS IN PORTUGAL e Multimédia, S.G.P.S, S.A. ( ZON ), and ZON TV CABO Portugal, S.A. ( TV Cabo ) had engaged in an abuse of a dominant position in the wholesale and retail markets for broadband access, in breach of Article 6 of the Portuguese Competition Act and Article 82 of the EC Treaty. 6 This is the third time that the PT Group has been found to have committed an abuse of a dominant position. 7 At the time of the infringement, these companies were all part of the PT Group. 8 The PCA considered that the PT Group enjoyed a monopoly in the wholesale market for broadband access and held a dominant position in the retail market for broadband access, with a market share of more than 70%. Furthermore, the PCA established that the PT Group had abused this dominant position, finding three different types of abusive behavior to have taken place. First, taking advantage of its dominant position in both the wholesale and retail markets for broadband access, the PT Group had fixed wholesale prices that were so much higher than retail prices that retail operators were prevented from effectively competing with retail undertakings which were part of the PT Group (an abuse commonly known as a margin squeeze or artificial and unfair price fixing). Furthermore, within the scope of the wholesale market for broadband access, the PT Group applied discriminatory conditions on retail competitors, thereby favoring retail undertakings which were part of the PT Group. Finally, the two types of abusive conduct described above resulted in the limitation of the production, distribution, technical development and investment, therefore harming competition and consumers. In the light of these abuses, the undertakings concerned were fined 53,062,000 (approximately US$72,000,000), the highest fine ever imposed by the PCA, and it was ordered that an extract of the ruling be published in the II Series of the Diário da República (the Government Gazette) and in a national newspaper. Regrettably, however, the delay between the infringement and the adoption of a decision by the PCA (six years) somewhat undermined its effectiveness, in particular the deterrent nature of the fine imposed. Court Decisions On January 26, 2009, the Constitutional Court ruled on the investigative powers of the PCA, within the meaning of Article 17 of the Portuguese Competition Act. 9 Inspections carried out by the PCA have been questioned in several previous proceedings, on the grounds that this Authority was not in possession of a judge s order, but only of a search warrant issued by a public prosecutor. This matter was finally brought before the Constitutional Court, which clarified that the registered office of a company was not entitled to the same level of protection of privacy as the house of an individual. Therefore, unlike the situation with house searches, the carrying out of inspections on the premises of a company did not require a prior authorization from a judge, only a search warrant issued by a public prosecutor. This decision followed other case law developments in the field of the powers of the PCA. Thus, in 2008, the Lisbon Court of Commerce had already ruled on issues concerning the principle of fair process and effective defense, and professional privilege. 6 PCA, Case No. PRC 01/04, Notice No. 16/2009, September 2, 2009, available in Portuguese at 7 The two first decisions against the PT Group were adopted by the PCA on August 1, 2007 and on September 1, 2008, for refusal to grant access to its underground cabling networks and for the adoption and implementation of a discriminatory rebate system in the wholesale markets for circuit leasing, respectively. 8 On November 7, 2007, the PT Group was split up: ZON and TV Cabo are now part of the ZON Group, while PT and PTC are still part of the PT Group. 9 Constitutional Court, Case No. 397/08, Ruling No. 593/2008, January 26, 2009, available in Portuguese at Cuatrecasas, Gonçalves, Pereira Praça Marquês de Pombal 2 (e 1-8º) Lisboa - Portugal

133 Russia Vassily Rudomino Legislative Developments In July 2009 the Federal Law on Protection of Competition (the Competition Act ) 1 and the Code of Administrative Offenses underwent significant changes. 2 In addition, at the end of October 2009 amendments to Article 178 of the Criminal Code providing for criminal liability for violation of the antitrust legislation came into effect. 3 The amendments introduced are known as the Second Antimonopoly Package. The Second Antimonopoly Package covers all areas of antitrust legislation, such as mergers, cartels, restrictive agreements and dominance. The main goal of the amendments is to reinforce liability for antitrust infringements, find a way out of the lack of state control of economic concentrations (mergers), reduce state supervision over small and medium-sized companies and reinforce the control of those entities which have a dominant position. Further, due to the very low thresholds, many transactions that the FAS had not initially intended to review were subject to antitrust clearance. In particular, the amendments extend the scope of the Competition Act to agreements and/or actions executed outside Russia, and increase the powers of FAS officials to enforce antitrust legislation. The FAS is now vested with the authority to carry out both scheduled and unscheduled inspections and to review cases involving violation of the antitrust legislation, irrespective of where the offence was committed or where the culprit is domiciled. In addition, the FAS is entitled to refuse clearance of a proposed transaction if the information contained in the application or the documents attached thereto and submitted to the FAS by the applicant is misleading or the information required by the Competition Act has not been provided, despite having been requested by the FAS. The amendments also extend the limitation period for breach of the Competition Act from one to three years, and provide for administrative fines for participating in restrictive agreements or practices (including coordinated behaviour) as well as criminal liability (including up to seven years imprisonment for top managers of the offending company and fines of up to RUR1 million (approximately US$32,000) for material violation of the Competition Act). The most important provisions in the key areas are described below. Mergers The transactions which are subject to merger control include mergers, joint ventures, share and asset purchases, acquisitions of indirect control or functions of executive corporate bodies and, in general, any other transactions that have or may have an influence on competition in Russia. Any agreement or other action executed by Russian and/or foreign legal entities may fall within the scope of the merger control rules if such agreements or actions are concluded or conducted in relation to the shares/rights/assets of a company conducting business within Russian territory or may influence competition in Russia. A foreign company may be considered to be conducting business in Russia even if it does not have assets or subsidiaries in the country, but has revenues from the sale of goods, services or works to Russian consumers (for instance, the supply of goods via distributors or under license agreements). 1 Federal Law On Protection of Competition No. 135-FZ of July 26, 2006 (as amended), initially published in the Russian Gazette No. 162, July, 27, 2006, available in Russian at 2 Code of Administrative Offenses of the Russian Federation No.195-FZ, of December 30, 2001 (as amended) initially published in the Russian Gazette No. 256, December 31, 2001, available in Russian at 3 Criminal Code of the Russian Federation No.245-FZ of June 13, 1996 (as amended), initially published in the Russian Gazette No.113, June 18, 1996, No. 114, June 19, 1996, No. 115, June 20, 1996, No. 118, June 25, 1996, available in Russian at 133

134 DEVELOPMENTS IN RUSSIA Merger control is exercised in two forms: preliminary approval of a transaction and post-transaction notification. The Competition Act excludes the pre-transaction filing requirement for transactions within a group of companies (intra-group transactions), i.e. the FAS need only be notified of the implementation of the transaction (within 45 days thereof). This exemption covers transactions between (i) companies within a group where one company holds at least a 50% stake in the other (i.e. a parent company and its subsidiary); (ii) companies coming within the same group on the other grounds stipulated in the Competition Act where said group was disclosed to the FAS one month prior to implementation of the transaction in question. Two amendments have been made to the merger threshold. Thus, preliminary approval is required if (i) the aggregate book value on a worldwide basis of all companies within the acquirer s group and the target s group exceeds RUR7 billion (approximately US$222 million); 4 or the aggregate turnover on a worldwide basis of all companies within the acquirer's group and the target's group exceeds RUR10 billion (approximately US$318 million) and (ii) the aggregate book value on a worldwide basis of all companies within the target's group exceeds RUR250 million (approximately US$8 million) or (iii) the acquirer or the target (another company in the same group) is included in the Register of Economic Undertakings with a market share of more than 35% in a given commodity market. Post-transaction notification is required if (i) the aggregate book value on a worldwide basis of all companies within the acquirer's group and the target's group exceeds RUR400 million (approximately US$13 million) or (ii) the aggregate turnover on a worldwide basis of all companies within the acquirer's group and the target's group exceeds RUR400 million (approximately US$13 million) and the aggregate book value on a worldwide basis of all companies within the target's group exceeds RUR60 million (approximately US$2 million). In addition, the new provisions extend the list of documents and information to be submitted to the FAS when filing a notification. Particularly, the list of required information now includes information about the ultimate (beneficial) owners of the acquirer. The FAS may order structural or behavioural remedies if it finds that the transaction leads, or may lead, to the restriction of competition in Russia. The FAS may also impose a fine on the acquirer of up to RUR500,000 (approximately US$16,000) for procedural infringements of the Competition Act. If the FAS finds that the unauthorized implementation of the transaction has led, or may lead, to restriction of competition in Russia, it may file a lawsuit asking the court to declare the transaction void, although this rarely happens. Cartels and other anticompetitive practices The Competition Act prohibits various types of anticompetitive practices, including restrictive agreements, concerted practices, coordinated behavior and other actions,including per se prohibitions (actions which are conclusively presumed to be an unreasonable restraint of trade and thus anticompetitive) such as the fixing or maintenance of prices. Vertical restrictions are not per se prohibitions, except those agreements which lead to the fixing of resale prices and/or agreements which prohibit selling competitor s goods. The actions which lead, or may lead, to the restriction of competition may be allowed by the FAS if the positive economic effects outweigh the restrictive effects. In addition, according to the Block Exceptions approved by the Decree of the Government of Russia on July 16, 2009, 5 restrictive agreements are exempted provided that (i) goods are sold to two or more purchasers and the seller has a market share of less than 35% or the goods are sold to one purchaser whose market share is less than 35%; (ii) the seller and purchaser are not competitors in the market where goods are acquired or they are competitors but they act as distributor and retailer, respectively, (iii) a purchaser does not produce the same type of goods as determined in the agreement between the seller and the buyer. The execution of and participation in restrictive agreements, concerted or other coordinated practices are 4 These thresholds apply to commercial entities. The thresholds for financial institutions are different, being determined by the Russian Government. 5 The Decree of the Government of Russia on July 16, 2009 No. 583, published in the Russian Gazette No. 134, July, 23, 2009, available in Russian at 134

135 DEVELOPMENTS IN RUSSIA subject to turnover fines of 1-15% of the company s turnover in the market where the violation occurred. 6 In these cases the minimum fine is less than RUR100,000 (about US$3,100). Amended Article 178 of the Russian Criminal Code imposes criminal liability fines of up to RUR1 million (about US$32,000) and up to seven years imprisonment for prevention, restriction and elimination of competition by executing restrictive agreements and concerted practices, repeated abuses of a dominant position resulting in fixing or maintaining monopolistically high or low prices, the refusal without good cause to enter into a contract or deviation thereof, restricting market access, if such actions have caused significant damage to citizens, companies and the state or involved excessive profitmaking. Nowadays companies taking part in restrictive agreements or concerted practices can participate in the leniency program, under which companies that voluntarily report to the antitrust authority that they have entered into (but not implemented) anticompetitive agreements, and give evidence about the cartel, are given full immunity from administrative liability. Previously, all companies which participated in a cartel and approached the FAS were able to take advantage of the leniency program. Now, following the amendments to the Code of Administrative Offenses, 7 only the first company notifying the FAS is relieved of liability for participating in restrictive agreements and concerted practices. Other cartel members will face turnover fines, and from the end of October 2008 criminal liability may be imposed on the top managers of the offending companies. Around 500 companies took advantage of the leniency program in its first year, including financial companies, leading food manufacturers, large retail chains and leading players in telecommunication markets, as well as regional companies, bakery plants in several regions, wood-processing companies and manufacturers of cash-register equipment. Abuses of dominance The Competition Act decreases the market share required to define a firm as dominant. Thus, the FAS may declare dominant an undertaking with less than a 35% market share (but a greater share than other undertakings), provided that such undertaking is able to influence competition, and other requirements are met. 8 The actions that are considered to amount to an abuse of a dominant position include, inter alia, the imposition of excessive prices, predatory prices, unreasonable terms and conditions as well as price discrimination and the refusal to supply. Mergers In September 2009, the FAS refused to approve the transaction implemented by Russian and Cyprus companies, finding the notification to be incomplete because the parties did not submit information on the beneficial owners of the acquirer (the Cyprus company). 9 In August 2009, the FAS rejected the application of merger control rules to a number of companies domiciled in Estonia. The applicants did not submit all of the documents required and the FAS felt unable to review the transaction and its potential influence on competition in the particular market in Russia. Cartels and other Anticompetitive Practices The FAS recently intervened in the pricing policy in the monopolized wholesale and retail markets for oil and gas products. For instance, in the last year the FAS has initiated around 150 antitrust cases related to the fuel-and-energy sector, imposing fines totaling RUR6 billion (US$192 million). In particular, the FAS found that the largest vertically integrated companies fixed monopolistically high prices in the wholesale markets for oil products. Having investigated the cases, the FAS imposed the following fines: RUR1,356 million (approximately US$43,392,000) on Gazprom Neft JSC; RUR1,112 million (approximately US$35,840,000) on TNK- BP Holding OJSC; RUR1,509 million (approximately US$48,288,000) on Rosneft Oil Company OJSC; and RUR1,443 million (US$46,176,000) on LUKOIL OJSC. 6 In accordance with the amendments made to Article of the Code of Administrative Offenses of Russia 7 Federal Law of the Russian Federation On making amendments to the Code of Administrative Offenses of the Russian Federation and other legislative acts of the Russian Federation No.1160-FZ, of July 17, 2009 published in the Russian Gazette No. 133, July 22, 2009, available in Russian at 8 Previously a company was considered dominant if it had a market share of more than 35%. 9 FAS Press Release, September 14, 2009, available in Russian at 135

136 DEVELOPMENTS IN RUSSIA The FAS also fined one of the largest operators in the wholesale market for oil products in several regions RUR25,269,836 (approximately US$808,000) for concerted practices. The FAS established that Gazpromneft-Kuzbass CJSC and Tomsknefteproduct VNK OJSC maintained the same price level and simultaneously increased retail prices for motor petrol and diesel fuel on the local Tomsk retail market for oil products. On June 3, 2009 the Federal Arbitration Court of the Moscow District upheld the FAS s decision. 10 Abuses of a Dominant Position In November 2009 the FAS found that Lukoil OJSC and a number of companies in its group had abused their dominant position in the wholesale markets for motor petrol, diesel fuel and aviation kerosene. In particular, Lukoil OJSC had abused its dominant position by withdrawing goods from circulation, which led to an increase in wholesale prices in the market for oil products, and by creating discriminatory conditions in selling oil products to individual counteragents. The FAS fined the offending companies RUR6,545,638,923 (approximately US$226 million). 11 Court Decisions Public data on antitrust court cases shows that the FAS and its regional offices have won 82% of legal proceedings against antitrust violators. But on September 29, 2009 the Federal Arbitration Court of the West-Siberian District dismissed an appeal brought by the FAS against the judgments of both the Court of the First Instance and the Appeal Court concerning its FAS decision on TNK-BP Holding OJSC. In autumn 2008 the FAS found that TNK-BP Holding OJSC had abused its dominant position in the markets for motor petrol and aviation kerosene by fixing monopolistically high prices for wholesale buyers of oil products which are neither economically nor technologically justified. The courts ruled that this decision was invalid. The FAS has appealed to the Supreme Commercial Court of the Russian Federation. 12 According to the recent ruling of the Supreme Commercial Court of the Russian Federation sitting in plenary session, those whose rights are violated by the anticompetitive actions of other entities can submit claims to both the courts and the antitrust authorities. Previously, injured parties could only submit claims to the FAS which could then open an investigation. In May 2009 the Federal Commercial Court for the Moscow region ordered Apatit OJSC, which holds a dominant position in the apatite market, to pay damages of almost RUR2 billion (approximately US$64 million) to the purchaser of the goods concerned. The case was brought following a purchaser s complaint to the FAS. The Court found that Apatit OJSC fixed different prices for the same commodity and that this practice violated the purchaser s rights. As a result, it ordered Apatit OJSC to repay the price difference in question. 10 FAS Press Release, September 8, 2009, available at 11 FAS Press Release, November 5, 2009, available at 12 FAS Press Release, September 29, 2009, available at Alrud Law Firm 2 nd floor 17 Skakovaya street, Moscow Russia

137 Serbia Olga Cvetkovic and Marija Marosan Legislative Developments 2009 brought the most important legislative developments in the short history of Serbian competition law. In July 2009, the Serbian Parliament adopted the new Law on the Protection of Competition (the New Law ) 1 which entered into force on November 1, The adoption of the New Law was long expected as its draft underwent several stages of revision and public consultations in late 2008 and early The most significant changes introduced by the New Law relate to procedural issues and the authority of the Commission for the Protection of Competition (the Commission ). According to the New Law, the Commission is vested with the authority to impose fines directly on undertakings. 2 The procedure for collecting such fines is the same as with tax debt collection and is aimed at making the procedure easier and more efficient. The Commission has also been given a number of additional procedural powers, such as dawn raids, direct injunctions, sealing premises, etc. All of these procedural mechanisms are expected to significantly strengthen and improve the enforcement of competition law in Serbia. Among other things, the Commission may now issue an order to unwind a prohibited merger and impose structural remedies to address the distortions created by anticompetitive behavior. Finally, the appellate process has been changed and the Administrative Court has now been given jurisdiction to carry out the final review of the Commission s decisions. The New Law will raise the threshold for mandatory merger notifications, which has been very low to date. Thus, an undertaking will have to notify a merger if the combined worldwide annual turnover of all undertakings concerned exceeds 100 million (approximately US$ 149 million) and the annual income in Serbia of at least one of the parties exceeds 10 million (approximately US$ 14.9 million); or the total annual turnover in Serbia of at least two parties exceeds 20 million (approximately US$29 million). The new thresholds are expected to substantially decrease the Commission s merger control workload and enable its staff to dedicate their time to more serious infringements. Mergers As noted above, the antitrust legislation in place until November 2009 set the threshold for mandatory merger notifications very low. 3 As a result, in the first half of 2009 alone, the Commission issued around 70 merger control decisions, 4 all but one of which, Lufthansa/Austrian Airlines ( AA ), 5 were approved without conditions. In Lufthansa/Austrian Airlines, the Commission examined eight different routes between Belgrade and eight other European cities. In one case (the Belgrade Vienna route), the Commission found that the merger would significantly constrain competition. It cleared the transaction subject to the commitment that the parties would keep in force AA s code-sharing agreement with JAT Airways on the Belgrade Vienna route. In addition, the parties undertook not to raise prices on the route, except if this was as a result of increased costs and subject to approval being 1 Law on the Protection of Competition, published in the Official Gazette of No. 51/09, July 17, 2009 available in Serbian at 2 The former legislation (Law on the Protection of Competition published in the Official Gazette No.79/05) authorizes the Commission to determine whether the prohibited anticompetitive behavior happened, annul anticompetitive provisions of the agreement and then transfer the case to the misdemeanor courts with jurisdiction for misdemeanors. 3 The request for approval of a merger had to be submitted to the Commission if the combined annual income in Serbia of all parties to the transaction exceeded an amount in CSD equivalent to 10 million (approximately US$14.9 million), or if the combined worldwide income of the parties exceeded 50 million (approximately US$74.7 million) and at least one of the parties is registered in Serbia. 4 Commission for the Protection of Competition, List of Decisions available in Serbian at 5 Commission for the Protection of Competition, Decision no. 6/ /09, July 17, 2009 available in Serbian at 137

138 DEVELOPMENTS IN SERBIA given by the Commission. The remedies will apply until the first transitional phase of the Multilateral Agreement on the Liberalization of International Air Transportation comes into force. Cartels and other Anticompetitive Practices In the course of 2009, the Commission found anticompetitive agreements to exist in three cases. First, in Karate Federation of Serbia ( KFS ) and BMA d.o.o. ( BMA ), 6 the agreement between BMA, the exclusive importer of Adidas protective gear, and KFS contained provisions which obliged karate athletes to use exclusively Adidas gear during KFS competitions. The Commission considered one distinct market for the supply of World Karate Federation ( WKF ) approved protective gear to exist, to be distinguished from gear without WKF approval. It also found that while the KFS was entitled to oblige athletes to use WKF-approved gear during its competitions, it could not limit this to one specific brand (in this case, Adidas). The Commission struck out the provisions of the agreement which obliged the use of a single brand and ordered KFS to publish on its web page and in at least one national newspaper that athletes are free to use any brand of WKFapproved protective equipment during KFS-organized competitions. automobile/vehicle insurance limited competition in the insurance market. By applying this insurance premium, the ASI and its eleven members acted contrary to competition law. Therefore, the Commission annulled the ASI s decision. 9 However, although more than two million policy holders were affected by the ASI s decision, the most recent changes in the insurance legislation had enabled the ASI to set the minimum amounts of the premium. Thus, under Article 108 of the Law on traffic compulsory insurance (the Law ), in force since October 12, 2009, insurance companies are obliged to jointly set insurance terms, conditions and premiums. The Law provides that this provision will cease to exist on the ninetieth day of Serbian accession to the EU. After the Law entered into force, the Commission issued a legal opinion, which advised that this controversial provision should be changed immediately. 10 Abuses of a Dominant Position In the case of Danube Food Groups BV ( DFG ), DFG was found to have abused its dominant position in the market for the purchase of untreated milk by unfairly dictating contractual terms to Serbian small dairy farmers. 11 The DFG case was decided by the Commission in 2008 and the same decision was reiterated in its repeat procedure in However, the remedial measures imposed on DFG in 2008 have not become effective yet as further review of this decision by the courts is still possible. In the second case, Panonijabus d.o.o and Niš-ekspres a.d., 7 the agreement in question related to the cooperation between different bus service providers on the Serbia Berlin route. The Commission concluded that the parties had sought to coordinate their behavior in different areas and annulled the entire agreement. 8 In the third case, the Commission concluded that the decision of the Association of Serbian Insurers (the ASI ) on the minimum amount of the premium for Abuse of a dominant position was also found to exist in the case of Eki Transfers d.o.o. ( Eki Transfers ) and Tenfore d.o.o. ( Tenfore ), companies that are Western Union s agents in Serbia. The abuse consisted of restrictive provisions in contracts concluded with 24 out of 32 banks in Serbia. The provisions required loyalty during the contractual term and for 3-18 months thereafter. In addition, Eki Transfers contracts contained penalty clauses for breaching the loyalty provisions. 6 Commission for the Protection of Competition, Decision No. 4/ /09-07, May 8, 2009 available in Serbian at 7 Commission for the Protection of Competition, Press Release, dated October 20, 2009 available in Serbian at 8 Commission for the Protection of Competition, Decision No. 4/ /09-39, October 2, 2009 available in Serbian at %20135.%20sednica.pdf 9 Commission for the Protection of Competition, Decision No. 4/ /09-83, October 21, 2009 available in Serbian at %20136.%20sednica.pdf 10 Commission for the Protection of Competition, Legal Opinion No. 1/ /09-01, November 5, 2009 available in Serbian at 11 Commission for the Protection of Competition, Decision [number of decision omitted], May 29, 2009 available in Serbian at 138

139 DEVELOPMENTS IN SERBIA These provisions created significant entry barriers in the Serbian market for fast international money transfers, thus restricting the choice available to users of this service. As a result, the Commission ordered Eki Transfer and Tenfore to annul the restrictive provisions Commission for the Protection of Competition, Decision No. 5/ /10-1, January 12, 2010 available in Serbian at Olga Cvetkovic of World Bank Marija Marosan of KTH University ocvetkovic@worldbank.org marosan@kth.se Belgrade - Serbia

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141 Singapore Lim Chong Kin, Ng Ee-Kia and Scott Clements Legislative and Administrative Developments On January 12, 2009, the Competition Commission of Singapore (the CCS ) introduced a revised leniency program for parties involved in cartels and other arrangements which might give rise to an infringement of section 34 of the Singapore Competition Act (Cap.50B) (the Act ). 1 Whilst a leniency program already existed in Singapore, the revisions introduced two specific changes to the regime, namely a marker system and a leniency plus system. The marker system was introduced to preserve the position of the first applicant for leniency, where that applicant might require time to gather the necessary information and evidence to support its leniency application. Under the previous leniency program, the first applicant for leniency could qualify for total immunity from prosecution or a reduction of up to 100 percent of the financial penalty in relation to involvement in a cartel, only for as long as it had provided the required information and evidence to support its application. By contrast, the marker system preserves the position of the first applicant for a specified period of time, even where a second leniency applicant meets all the evidentiary requirements before it. The leniency plus system is designed to encourage cartel members who are under investigation for cartel activity to provide information on their involvement in a separate cartel. It is not necessary for the undertaking to be in receipt of leniency for the first cartel to qualify under the leniency plus system. If the CCS is satisfied that the evidence relates to a separate cartel activity and the undertaking would qualify for total immunity from or a reduction of up to 100 percent of the financial penalties in relation to its activities in the second cartel, it would grant the cartel member a further reduction in the financial penalty in relation to the first cartel. The changes, which were published in the Singapore Government Gazette on January 8, 2009, are encapsulated within the CCS s revised Guidelines on Lenient Treatment for Undertakings Coming Forward with Information on Cartel Activity Cases Mergers On September 15, 2009, in National Oilwell Varco ( NOV ) / South Seas Inspection ( SSI ) the CCS cleared NOV s acquisition of 100% of the shares in SSI as well as a related asset acquisition in Brazil (specifically, the acquisition of certain assets by Varco International Do Brasil Equipamentos E Servicios Ltda from South Seas International Ltda). It was submitted by the parties that the relevant markets for consideration were as follows: oil country tubular goods and non-destructive testing inspection services; systems and components used in oil and gas drilling and production; and installation services of systems and components used in oil and gas drilling and production on offshore rigs and drill ships. In clearing the notification, the CCS publicly announced that the proposed acquisition, if put into effect, would not infringe section 54 of the Act. 3 On July 20, 2009, Greif International Holding B.V. ( Greif ) and GEP Asia Holdings Pte Ltd ( GEP ) jointly applied to the CCS for clearance in respect of the creation of a joint venture company called Greif Eastern Packaging Pte Ltd ( Greif Eastern ). The parties submitted that the relevant market in this case was for the supply of rigid industrial packaging products in Singapore and Malaysia. The parties manufacture and sell steel drums, bitumen drums and steel pails of various capacities as well as being active in 1 Competition Act (Cap. 50B, 2006 Rev. Ed. Sing.), s The Guideline is available at 3 Case No. CCS 400/004/09 ( September 15, 2009), available at: 141

142 DEVELOPMENTS IN SINGAPORE lithographic printing. On August 31, 2009, the CCS announced that it had not reached a conclusion as to whether the merger would raise competition concerns, based on information furnished during the phase-one review. The CCS continued to state that it would proceed to assess the arrangement under a phase-two review, requiring the parties to submit further information relating to the arrangement, and ultimately engaging in a more thorough analysis on behalf of the CCS. The phase-two review is still ongoing. 4 On March 23, 2009, the CCS cleared the joint notification by GSK Trading Services Limited ( GSK ) and UCB SA ( UCB ) for GSK to acquire from UCB certain rights to distribute and market selected pharmaceutical products. In the notification, the parties submitted that the relevant market was the supply of pharmaceutical products in Singapore. The CCS determined that the merger would not infringe section 54 of the Act, based primarily on the fact that there were low barriers to entry in relation to the products in question, and also a high degree of countervailing market power. 5 Cartels and other Anticompetitive Practices Infringement decision issued against 16 express coach operators and a bus association On November 3, 2009, the CCS issued an infringement decision 6 against 16 express coach operators operating services between Singapore, Malaysia and Southern Thailand and a bus association. The CCS determined that section 34 of the Competition Act 7 had been infringed through the parties entering into two separate arrangements that (i) established minimum selling prices ( MSP ) of certain coach tickets sold; and (ii) imposed agreed fuel and insurance surcharges ( FIC ). The parties were fined between SGD$10,000 (approximately US$7,150) and SGD$518,000 (approximately US$370,400), with the total fines imposed on all parties amounting to SGD$1.69 million (approximately US$1.20 million). The infringement decision followed the CCS s Proposed Infringement Decision ( PID ), which had been issued on June 16, 2009, and which had allowed the parties to make representations to the CCS on the finding of the existence of an infringement and the level of the proposed fines. Proposed infringement decision issued against Sistic.com for an alleged abuse of dominance On December 15, 2009, the CCS publicly announced 8 that it had issued a PID against Sistic.com Pte Ltd ( Sistic ), alleging that Sistic had engaged in conduct amounting to an abuse of a dominant position contrary to section 47 of the Competition Act. 9 Sistic is the largest ticketing service and solution provider in Singapore, selling tickets for more than 90 percent of all events staged in Singapore. The conduct in question concerns 17 exclusive or restrictive arrangements between Sistic and various event organizers in Singapore, which restrict the ability of those event organizers to use alternative ticketing service providers. Sistic also has further similar arrangements with The Esplanade Co. Ltd and The Singapore Sports Council, in relation to two of the largest event venues in Singapore, namely the Esplanade Theatre and the Singapore Indoor Stadium. Sistic has been given until February 9, 2010 to make representations to the CCS in relation to the PID. Notification for decision on Singapore Medical Association fee guidelines On February 5, 2009, the Singapore Medical Association (the SMA ) submitted a Notification for Decision to the CCS (the Notification ) regarding its set of Guidelines for Fees for Doctors in Private Practice in Singapore (the GOF ). The GOF recommended a range of fees (e.g. fees for consultations, prescriptions, medical reports, surgery, and doctor s court appearances) for medical services and procedures in Singapore, but this was withdrawn in 2007 by the SMA of its own accord in order to avoid any potential competition concerns under the Act. The Notification seeks a Decision from the CCS in relation to the compatibility of the GOF with Singapore s competition rules General information relating to the notification is available at 5 Case No. CCS 400/002/09 (23 March 2009) available at EFED6CF174E1/24031/GSK_UCB_GD_090323RedactedParties.pdf. 6 Case No. CCS 500/003/08 (3 November 2009), available at 7 Competition Act (Cap. 50B, 2006 Rev. Ed. Sing.), s CCS Media Release (December 15, 2009), available at 9 Competition Act (Cap. 50B, 2006 Rev. Ed. Sing.), s Case No. CCS 400/001/09. General information about the notification available at 142

143 DEVELOPMENTS IN SINGAPORE According to the SMA, the purpose of the GOF was to safeguard the interests of patients through greater transparency of medical fees, thus reducing the information asymmetry between patients and medical practitioners. The SMA claims that the GOF would not breach the Competition Act as it gives rise to net economic benefits and public interest considerations. The matter is currently being reviewed by the CCS. Drew & Napier LLC 20 Raffles Place #18-00 Ocean Towers Singapore

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145 South Africa Heather Irvine Legislative Developments Competition Amendment Act 2009 Significant amendments to the Competition Act, 1998 (the Act ) were assented to by the President of the Republic of South Africa on August 28, The Competition Amendment Act, 2009 proposes four major amendments. First, individual directors and managers who are personally responsible for - or who even knowingly acquiesce - in the fixing of prices and trading conditions, market division or collusive tendering may be fined up to R500,000 (approximately US$66,050) or imprisoned for up to 10 years. This sanction will apply to a director, or any person engaged or purporting to be engaged in a firm in a position having management authority within the firm, who either caused the firm to engage in a prohibited practice, or who knowingly acquiesced in such practice in contravention of this section of the Act, by having actual knowledge of the firm s conduct. At the same time, the Act will allow individuals to seek leniency. Second, the Competition Commission (the Commission or the CC ) will be able to investigate whether firms are participating in a complex monopoly and, if so, to apply to the Competition Tribunal (the Tribunal or the CT ) for an order to mitigate the effects of this conduct. The third amendment empowers the CC to conduct formal inquiries into the general state of competition in South African markets. Finally, the Act clarifies the precise jurisdiction of the Commission and industry regulators such as the Independent Communications Authority of South Africa (the ICASA ). These amendments will bolster the powers of the CC to investigate and prosecute prohibited practices by companies operating in South Africa and will enable the CC to play a more proactive role in combating cartels and restrictive practices engaged in by companies in highly concentrated industries. New monetary thresholds On April 1, 2009, the monetary thresholds for the filing of merger transactions having an effect in South Africa and the filing fees payable to the Commission for merger reviews were increased. An operation having an effect in South Africa will now be notifiable as an intermediate merger if the turnover or asset value of the target firm is at least R80 million (approximately US$10.56 million) (up from R30 million (approximately US$3.96 million)), and the assets or turnover of the target and acquiring firms together amount to more than R560 million (approximately US$73.98 million) (up from R200 million (approximately US$26.42 million)). In addition, a transaction will be notified as a large merger if the turnover or assets of the target firm exceeds R190 million (approximately US$25.1 million) (previously R100 million (approximately US$13.21 million)) and the assets or turnover of the target and acquiring firms together amount to more than R6.6 billion (approximately US$ million) or more (previously R3.5 billion) (approximately US$ million). The CC may still require parties to notify so-called small mergers (mergers falling below these thresholds) if the transaction raises any competition law or public interest concerns. A new guideline on the notification of small mergers was published early in Filing fees were increased for intermediate mergers from R75,000 to R100,000 (approximately US$9,907 to US$13,210), and for large mergers from R250,000 to R350,000 (approximately US$33,025 to US$46,235). 1 Competition Amendment Act 2009, published in the Government Gazette No Vol. 530 of August 28, 2009, available at 2 See Guideline on the Notification of Small Mergers, available at the Competition Commission website: 145

146 DEVELOPMENTS IN SOUTH AFRICA Mergers According to the websites of the CC and the CT, significantly fewer intermediate and large mergers transactions were notified than in the same period last year, mainly as a result of the global recession. The vast majority of these transactions were approved by the competition authorities, mostly without conditions, although a number of transactions were approved subject to conditions intended to ameliorate the effect of the transaction on employment in South Africa. However, the CC prohibited the proposed intermediate merger between Masscash Holdings (Pty) Ltd and Finro Enterprises (Pty) Ltd (trading as Finro Cash & Carry) on the basis that it would substantially prevent and/or lessen competition in the market for the wholesaling of grocery products in the Port Elizabeth region and surrounding areas. 3 The Commission also prohibited an intermediate merger between Much Asphalt (Pty) Ltd (a subsidiary of listed South African construction company Murray and Roberts Holdings Ltd), Gauteng Asphalt (Pty) Ltd, Road Seal Properties (Pty) Ltd (manufacturers and suppliers of hot and cold asphalt products used in the construction of roads) and Road Seal (Pty) Ltd (a customer of Gauteng Asphalt involved in paving selected surfaces including pavements, driveways, roads, urban streets, freeways, runways, race tracks and bus lanes using asphalt). The Commission found that barriers to entry in the relevant markets were high, that construction companies have limited countervailing power and, most importantly, that a degree of coordination already existed between competitors in the industry. Despite objections by South African trade unions, the CT unconditionally approved the large merger between Vodacom Group Plc and Vodacom Group (Pty) Ltd, in which Vodafone acquired a further 15% of the issued share capital of the South African mobile telephony operator, Vodacom. Cartels and other Anticompetitive Practices The Commission intensified its efforts to detect and prosecute cartels in 2009, with a number of high profile investigations. Several of these resulted from applications for leniency in terms of the Commission s Corporate Leniency Policy (the CLP ). Sasol Gas applied for leniency in relation to a cartel supplying piped gas. As a result, the Competition Commission initiated an investigation into alleged market allocation and/or price fixing by Egoli Gas (Pty) Ltd, Spring Lights Gas (Pty) Ltd, and Coal Energy and Power Resources Ltd. 4 DPI Plastics applied for leniency in relation to a pipe product cartel. The Commission referred a complaint to the Tribunal regarding anti-competitive conduct by suppliers of polyvinylchloride (PVC) and high density polyethylene (HDPE) pipe products. 5 RSC, a subsidiary of Murray & Roberts Steel, applied for leniency in relation to its participation in a cartel supplying bolts used to support roofs and walls in underground mines. In September, the Commission referred a complaint to the Tribunal for adjudication in which it alleged that Aveng (Africa) Ltd trading as Duraset, RSC Ekusasa Mining (Pty) Ltd, Dywidag- Systems International (Pty) Ltd and Videx Wire Products (Pty) Ltd engaged in market allocation in contravention of section 4(1)(b) of the Act. 6 The CC also initiated a number of its own investigations in These included investigations into anti-competitive conduct in the South African construction sector (particularly involving collusive tendering) 7 and the petroleum value chain, 8 price fixing by bicycle retailers 9 and practices engaged in by the major South African supermarket chains, Pick n Pay, Shoprite/Checkers, Woolworths and Spar, as well as the major wholesaler-retailers, Massmart and Metcash See CC Press Release, May 25, 2009, Competition Commission blocks Masscash and Finro merger, available at 4 Available at 5 Available at 6 Available at 7 See CC Press Release, September 1, 2009 Competition Commission requests fines for steel companies and initiates construction sector investigation, available at 8 See CC Press Release, January 19, 2009 Competition Commission initiates complaints in piped gas and petroleum products available at 9 See CC Press Release, March 5, 2009, Competition Commission uncovers bike retailer cartel, available at 10 See CC Press Release, June , Competition Commission to probe the supermarket industry, available at 146

147 DEVELOPMENTS IN SOUTH AFRICA The CT confirmed a number of consent orders in which companies agreed to pay substantial administrative penalties for contraventions of the Act, including agreements in which Sasol Chemical Industries Limited agreed to pay an administrative penalty of R250,680,000 (approximately US$33.11 million) (representing 8% turnover of the Sasol Nitro Division) for contravening the restrictions on price fixing and market division set out in Section 4(1)(b) of the Act, and Aveng (Africa) Limited agreed to pay an administrative penalty of R46,277,000 (approximately US$6.1million) and admitted that its Infraset division had engaged in price fixing, market division and collusive tendering in the markets for concrete pipes and culverts in Gauteng, KwaZulu-Natal and the Western Cape in contravention of sections 4(1)(b) of the Act. 11 The Commission conducted a number of search and seizure operations in 2009, including dawn raids of the premises of the cement companies Pretoria Portland Cement Limited ( PPC ), Lafarge Industries South Africa, Afrisam Consortium, and Natal Portland Cement Cimpor. PPC applied for leniency shortly thereafter and admitted that the four cement producers had engaged in market division. The Commission granted PPC conditional leniency from prosecution. Abuses of a Dominant Position / Court Decisions Several important cases dealing with abuses of dominance were decided in Cigarette manufacturer JT International South Africa and the Commission referred a complaint to the Tribunal alleging abuses of dominance by BATSA (a wholly-owned subsidiary of British American Tobacco plc) related to its retailer incentive programmes and agreements with selected cigarette retailers, which they alleged contravened the prohibitions on exclusionary acts by dominant firms set out in sections 8(c), and 8(d) (i) of the Act. The Tribunal dismissed these complaints on the basis that neither the Commission nor BATSA were able to demonstrate that these agreements gave rise to any anti-competitive effects, either in the form of direct consumer harm, or significant foreclosure. 13 The Competition Appeal Court ( CAC ) heard its first case relating to margin squeeze in November, when it upheld a finding by the CT that Senwes (a vertically integrated firm that operates both as a silo owner storing grain for itself and third parties, and a trader of grain) had abused its dominance by offering famers a storage discount and inducing them not to sell their grain to its rival traders. In February 2009, the Tribunal found that Senwes owned a near monopoly in silo capacity in its area (a crucial area of grain production for the country), and that it had raised storage costs for rival traders in the Senwes area. This margin squeeze resulted in higher prices of grain for mills, which was passed on to consumers. This conduct had also made these traders less competitive in making offers to buy grain from farmers for the late season, which in turn had meant that farmers got lower prices for their crops. The Tribunal held that this amounted to a contravention of the restriction on exclusionary acts by dominant firms contained in section 8(c) of the Act, but did not contravene section 8(d) or the prohibition on price discrimination set out in section 9(1) of the Act. Senwes appealed the Tribunal s finding of the existence of a margin squeeze on the basis that this case was not pleaded by the Commission in its referral, and that no doctrine of margin squeeze exists in South African law. The Commission cross-appealed the Tribunal s finding that the evidence did not establish that Senwes had also contravened other sections of the Act, including the price discrimination provision contained in section 9. The CAC rejected the Commission s cross-appeal, but upheld the Tribunal s finding that Senwes had engaged in a margin squeeze and confirmed that this concept forms part of the exclusionary conduct prohibited by section 8(c) of the Act /CR/May05 and 24/CR/Feb09 available at and 12 Under section 8 of the Act, a dominant firm is prohibited from charging an excessive price to the detriment of consumers (section 8(a)); refusing to give a competitor access to an essential facility (section 8(b)); and engaging in any exclusionary act if the anti-competitive effect of that act outweighs technological, efficiency or other pro-competitive gains (section 8(c)). An exclusionary act is defined as an act that impedes or prevents a firm entering into, or expanding within, a market. The following exclusionary acts are furthermore specifically prohibited by section 8(d), unless the dominant firm can prove that the efficiency, technological or other pro-competitive gains outweigh the anti-competitive effects of such conduct: requiring or inducing a supplier or customer not to deal with a competitor; refusing to supply scarce goods to a competitor, when such supply is economically feasible; selling goods or services on condition that the buyer purchases separate goods or services unrelated to the object of the contract, or forcing a buyer to accept a condition unrelated to the object of the contract (known as tying or bundling ); selling goods or services below their marginal or average variable cost (known as predatory pricing ); or buying up a scarce supply of intermediate goods or resources required by a competitor /CR/Jun05, available at 147

148 DEVELOPMENTS IN SOUTH AFRICA However, a first time contravention of this section does not attract a fine and so a penalty was imposed on Senwes. 14 South African flat steel producer, ArcelorMittal SA ( Mittal ), formerly called Iscor, entered into a confidential settlement agreement with gold miner Harmony in relation to its complaint that Mittal contravened the prohibition on excessive pricing by a dominant firm set out in section 8(a) of the Act. 15 The Tribunal had imposed an administrative penalty of R million (approximately US$91.39 million) (or 5.5% of Mittal s 2003 turnover), and ordered various behavioral remedies designed to restore competition to the market. Mittal appealed to the CAC, which found that the Tribunal had erred in law in its interpretation of section 8(a) and referred the case back to the Tribunal for reconsideration. 16 As a result, considerable uncertainty about the nature and scope of the prohibition on excessive pricing set out in section 8(a) remains. 14 Under section 59 of the Act, only price fixing, market division, collusive tendering, resale price maintenance, excessive pricing, refusing to give a competitor access to an essential facility and the exclusionary acts specified in section 8(d) of the Act are subject to a fine for a first time offense. 15 See Media Releases, available at the Competition Tribunal website: 16 See 70/CAC/Apr07, available at Deneys Reitz Inc Maude Street Sandton 2196 South Africa +27 (0) (0)

149 Spain Susana Cabrera, Konstantin Jörgens and Álvaro González Legislative Developments Last February 9, 2009 the National Competition Commission (the NCC ) issued the Communication on the quantification of fines for violations of Articles 1, 2 and 3 of the Spanish Competition Law 15/2007 (the LDC ) and Articles 81 and 82 of the EC Treaty (the Communication ). 1 Like the Fining Guidelines of the European Commission on which it is largely modeled, the main aim of the Communication is to set out the way in which the NCC will calculate fines for breaches of competition law, providing greater transparency and objectivity while increasing their deterrent effect and promoting legal certainty for economic operators. The approach is similar to that used by the European Commission: a base amount is determined, to which an adjustment factor is applied according to any aggravating and mitigating circumstances that exist. The resulting amount is adapted to the limits provided in the LDC and to the unjust enrichment of the perpetrator as a result of the violation. The base amount will increase in line with the duration of the infringement, but, unlike under the EC guidelines, the relative weight of each additional year of infringement decreases. The Communication is to apply generally, although in exceptional cases the CNC may find it necessary to apply other criteria, provided that there is sufficient reason for doing so. In an attempt to foster better regulatory policy, Royal Decree 1083/2009 regulating the legislative impact analysis report came into force on July 3, Its main objective is to implement a new mandatory, comprehensive and rigorous regulatory impact assessment of all new legislative initiatives taken by competent bodies of the federal government. This will also require an assessment of the potential impact on competition of new regulations. Mergers In 2009, 67 transactions were notified to the Directorate of Investigation (the DI ) of the NCC. 3 Only three of these transactions, were referred to an in-depth second-phase investigation and one was approved in the first phase subject to commitments. These decisions are examined below. In July 2009 the NCC approved the acquisition by Orona of control over part of the assets of Omega Elevator. 4 Clearance was granted in the first phase, albeit subject to a series of commitments, including the possibility for former Omega clients of rescinding their maintenance contracts. The decision is particularly interesting because of its procedural issues. This is the first case in which it has been discussed whether the transaction could be executed in relation to those parts of it located out of Spain. Indeed, the CNC has been asked to waive the suspension on implementation of those parts of the transaction and the DI noted in its proposed decision with respect to that request that: (i) in its opinion, the suspension obligation also affected assets located abroad; and (ii) it proposed waiving the obligation with respect thereto. However, the Council decided that no declaration on this point was necessary, since it concerned taking control of a business that did not operate in Spain. The Council s decision here is novel and would suggest that the suspension obligation laid down in the LDC for merger 1 Communication of the National Competition Commission on the quantification of fines for violations of Articles 1, 2 and 3 of the Spanish Competition Law (Ley 15/2007, de 3 de Julio, de Defensa de la Competencia) and Articles 81 and 82 of the EC Treaty, available in Spanish at 2 Published in Boletín Oficial de Estado [Spanish Official Gazette], July 18, 2009 available at 3 Merger Control Decisions are available at under Resoluciones y Expedientes Ámbito de Concentraciones. Due to the economic crisis, notifications dropped significantly compared to the previous year, with 85 filings. 4 NCC Decision, July 2, 2009, Case C/0150/09, Orona/Activos de Omega, available in Spanish at 149

150 DEVELOPMENTS IN SPAIN operations notified in Spain would not extend to those assets located outside Spain that did not generate economic activity within Spanish territory. One of the largest transactions in Spain in 2008/2009 was the acquisition of Unión Fenosa ( UF ) by Gas Natural ( GN ) in the gas sector. This merger concluded a series of attempts by GN to acquire control over a Spanish electricity utility. Both companies are active in the production and retail marketing of natural gas and electricity, being especially close competitors in the gas and electricity retail and distribution supply market. The NCC found that the transaction reinforced Gas Natural s market power in the Spanish gas market, including the wholesale and retail supply of natural gas, given that it would eliminate Unión Fenosa as a vertically integrated competitor. The transaction was cleared by the NCC s Council in February subject to approval of the commitments presented by Gas Natural, which included divestitures aimed at reducing the impact of the disappearance of UF as an independent competitor and remedies to reduce GN s links with other competitors. 5 The decision is important because it shows that in its assessment of the commitments the NCC is determined to apply the principles of proportionality and minimum intervention. While commitments must avoid the restrictive effects deriving from the specific operation, the NCC does not require them to redefine the structure of companies or the markets in order to resolve pre-existing competition problems or those that are unconnected to the operation. Another significant case was the Decision of the NCC Council of June 2009 concerning a merger in the periodicals and newspaper distribution sector in the Madrid Autonomous Region. 6 This was the first merger approved in the second phase and made exclusively subject to compliance with behavioral commitments under the new LDC. The merged entity is now the leader in the market for the wholesale distribution of periodicals and newspapers in both the Madrid Autonomous Region and nationally with a significant market share, especially in the daily press (non-foreign) distribution sector in the Madrid Autonomous Region. A package of commitments was offered to remove the competition concerns; essentially these ensured that the new distributor of newspapers and periodicals would maintain the current sales and service terms and conditions for a long period of time, both with respect to client publishers and retail sales outlets. Regarding the audiovisual diffusion sector, the NCC conditionally approved the acquisition of Axión and Teledifusión Madrid by the telecommunications infrastructure and services operator Abertis Telecom. 7 After the oral hearing, the NCC decided to join both concentration cases, and concluded that the merger was capable of hindering effective competition by eliminating Abertis main competitors both nationally and regionally (throughout the Autonomous Regions of Madrid and Andalusia). According to the decision, while the mergers would have brought no significant economic benefits for consumers, the commitments offered by Abertis to solve the competition problems were inadequate. The NCC thus decided to approve the acquisition on condition that Abertis would (i) offer full wholesale services of TV signal transport and distribution across the affected regions; (ii) provide access to each of the broadcast centers in these two regions, via interconnection and placement of equipment; (iii) provide access to Axion s radio signal broadcast centers located throughout the national territory; and (iv) offer unilateral termination rights for Axion and TDM contract holders, while future contracts signed with Abertis would be for a maximum of five years. Given these strict conditions, Abertis decided to abandon the transaction. Cartels and other Anticompetitive Practices In 2009, a total of 89 decisions were adopted in cases involving anticompetitive practices. 8 There was a significant increase in the number of investigations initiated by the NCC based on suspected market sharing and price fixing, companies being targeted in industries such as cement and concrete, mussel production, metal packaging, sherry, 5 NCC Decision, February 11, 2009, Case C-0098/08 Gas Natural/Unión Fenosa, available in Spanish at 6 NCC Decision, June 10, 2009, Case C-0119/08 Distrirutas/SigloXXI/Gelesa/Logintegral, available in Spanish at 7 NCC Joint Decisions, July 16, 2009, Cases C-0110/08 Abertis/Axion and C-0084/08 Tradia/Teledifusión Madrid, available in Spanish at 8 Anticompetitive practice decisions are available at under Resoluciones y Expedientes Ámbito de Conductas. This a slightly higher number than the previous year, when 86 decisions were adopted. 150

151 DEVELOPMENTS IN SPAIN elevators, fluid pumps, high voltage power cables, motorbike distribution or thoroughbred racehorses. 9 Notably, the premises of UNESA (the Spanish Electricity Industry Association) were also dawn raided due to suspicions of anticompetitive practices (see below). 10 Regarding cartels, the NCC fined the insurance companies Asefa, Mapfre Empresas/Mapfre Re, Casser, Suiza/Swiss Re, Scor and Münchener a total of million (approximately US$172.1 million), the highest fine ever imposed in Spain, for fixing minimum price levels of 10- year building insurance policies between 2002 to In its decision, the NCC considered that, to avoid the effect of decreasing prices due to the rapid growth of the building industry and increased competition, the largest insurers Asefa and Mapfre Empresas and the three largest reinsurers in Spain Scor, Suiza and Münchener reached a minimum price agreement, which set out parameters for fixing premiums for 10-year building insurance, intended to be applied not only by themselves but by the entire insurance market. The reinsurers therefore agreed to include the minimum price agreement in the reinsurance contracts as compulsory terms for insurers, which resulted in complete uniformity in the premiums proposed by the various insurers operating in that market and in the elimination of competition. The NCC also fined a business association (ANESCO) and three trade unions (CETM, CIG and LAB) for an alleged breach of competition law, 12 consisting in the signature and implementation of the sectoral collective bargaining agreement entitled IV Agreement for the regulation of Labor Relations in the Port Work Sector. The NCC found that this Agreement, which applied to labor relations between undertakings and their employees in commercial ports throughout Spanish territory, contained provisions extending their application to other undertakings and nonport workers, thus preventing or obstructing them from entering the market for ancillary services in ports. Specifically, the restriction on competition would affect the activities connected to the transit, deposit, loading, unloading, and transfer of goods carried on in the ports. The fines totaled almost 1.1 million (approximately US$1.57 million). The NCC also fined different associations belonging to the food sector for having allegedly made collective recommendations contrary to the LDC whose objective was to facilitate the passing on to the final consumer of the price increases in the raw materials used to make their products. 13 Fines amounting to around 1.48 million (approximately US$2.15 million) were imposed. In November 2009 the NCC finally adopted its Decision 14 in a case initiated against UNESA for bringing an action for judicial review of a Ministerial Order that imposed an obligation on all electricity distributors to allow suppliers to have unconditional access to their data on customers included in the Information System on Points of Supply. UNESA had appealed against the Order on the grounds that it contravened the data protection provisions. 15 Despite the highly unusual nature of the allegation, the Decision did not clarify how the bringing of an appeal by an association could breach competition rules in light of the fact that, as in other countries, private operators have a constitutional right to bring proceedings to determine the compatibility of administrative provisions with the law. Without ruling out the possibility that the right to effective access to the courts could amount to an anticompetitive practice, the Decision merely stated that the Council of the NCC did not consider it necessary to decide whether UNESA s conduct could be defined as constituting an infringement. Nevertheless, the NCC ruled that there was evidence to suggest that the facts analyzed pointed to a prior understanding among the electricity company members of UNESA, whose purpose would have been to establish a joint strategy of obstructing or restricting competition in the electricity market, and asked the DI to study the possibility of initiating a sanctions procedure in this regard. While the Decision did not find UNESA liable 9 Press Releases are available at 10 NCC Press release, November 6, 2009, available at 11 NCC Decision, November 12, 2009, Case S/0037/08 Compañías de Seguro Decenal, available at 12 NCC Decision, September 24, 2009, Case 2805/07 Empresas Estibadoras, available at 13 NCC Decisions, September 24, 2009, Case S/0046/09 Pan de Asturias; September 28, 2009, Case S/0055/08 Inprovo, September 29, 2009, Case S/0044/08 Propollo and October 14, 2009, Case S/0053/08 Fiab y Asociados y Ceopán. See NCC Press Release, October 15, 2009 available at 14 NCC Decision, November 2, 2009, Case S/0051/08 Unesa, available in Spanish at 15 UNESA considered the data contained in databases to be personal in nature and, therefore, the prior consent of consumers for the transfer of such information was required. 151

152 DEVELOPMENTS IN SPAIN for bringing the action for judicial review, three days after it was adopted, the DI carried out a search of UNESA s main offices. Abuses of a Dominant Position Closely related to the above-mentioned merger case, the NCC found that Abertis Telecom had abused its dominant position in the market for the transport and transmission of terrestrial (digital or analogue) public-service TV signals in Spain. The investigation was triggered by a complaint filed by network operator Axión. The NCC took the view that Abertis had harmed its customers (i.e., broadcasters Sogecable, Telecinco, Antena 3, Net TV and Veo TV) by charging them, without any objective justification, heavy penalties for the early termination of contracts signed in 2006 and by entering into excessively long contracts with some of these broadcasters to prevent them from marketing their services and entering the market. Further, the NCC considered abusive the discounts which Abertis granted to its clients in 2006 on condition that their orders covered audiovisual distribution in all territories concerned, in order to impede the entry of newcomers in some of these territories. When determining the amount of the 22.6 million (approximately US$32.4 million) fine, the NCC considered the fact that the relevant market had been liberalized precisely to allow newcomers to enter the market and consequently improve consumer welfare to be an aggravating factor. Other important cases concerned the electricity sector. Thus, the NCC Council adopted five decisions 16 fining five electricity companies (Endesa, Iberdrola, Unión Fenosa, Electra de Viesgo and Hidrocantábrico) a total of 36.6 million (approximately US$52.4 million) for abuse of a dominant position in the distribution market which obstructed competition in the electricity supply market. All five cases were the result of the complaint by Céntrica Energía, according to which the distribution companies impeded Céntricas s supply activity by refusing complete and unconditional access to the Supply Points Information System (SIPS). Another important case concerned the abuse of a dominant position by Gas Natural Distribution. 17 The NCC Council fined it 492,000 (approximately US$705,600) for its treatment of Gas Alicante (Endesa Group distributor), which involved delaying and unjustifiably refusing access to its gas distribution network in two municipalities of Alicante. The decision forms part of the NCC s energetic attempts to give practical effect to the liberalizing legislation in the energy sector. Court Decisions In recent months, questions have been raised about the conduct of inspections by the DI. More specifically, several hair product companies, including Colgate Palmolive and L Oréal, as well as the Spanish Cosmetic Toiletry and Perfumery Association (STANPA), 18 filed separate appeals challenging the DI s conduct during its inspections of their offices to check for the possible existence of prohibited agreements. The Council of the NCC dismissed the appellants arguments and the DI saw its disputed conduct endorsed and its inspection powers confirmed. Nevertheless, a number of the decisions mentioned were appealed to the National Appellate Court (the Court ), which annulled in part the inspections and stated that the inspectors of the DI had exceeded the limits of their search warrants when conducting the dawn raid at STANPA s offices in June The inspectors were found to have violated STANPA s fundamental right to the inviolability of its premises by not following the search criteria during the inspection regarding identifying documents strictly related to the subject matter of the inspection. The DI seized entire hard drives which included information unrelated to the purpose of the search. Moreover, the ruling established that the search criteria used by the NCC must be disclosed beforehand in order to allow the investigated company to verify whether the officials are acting within their powers. 16 NCC Press Releases, April 27, 2009, available at and April 6, 2009, available at 17 NCC Press Release, March 27, 2009 available at: 18 NCC Decisions, October 3, 2008 Cases R/0004/08 Colgate Palmolive España, R/0005/08 L Oréal and R/0006/08 STANPA, available at Ruling of the Sixth Division of the Audiencia Nacional [National Appellate Court] of September 30,

153 DEVELOPMENTS IN SPAIN The Court obliged the NCC to return all information unrelated to the investigations. However, it did not declare the entire inspection null and void because it considered valid the data seized in relation to the market and the aim of the investigations. Consequently, the ruling allowed the NCC to use the relevant evidence to continue with its case and it could therefore initiate an infringement proceeding against STANPA in the future. However, the Court rejected claims that the DI inspectors violated employees rights to personal privacy and private communication and considered that the fact that the NCC gathered personal data during the inspection did not represent in itself a violation of fundamental rights. Such information would have to be considered unrelated to the subject-matter of the investigations and, therefore, to form part of the violation of the fundamental right to the inviolability of premises. Finally, the Court also rejected claims that the inspectors had violated attorney-client privilege. Without examining the matter in detail, the Court applied the case law of the Spanish Constitutional Court and found that the inspectors actions did not deprive STANPA of legal protection. The CNC may now appeal against this judgment on a point of law to the Spanish Supreme Court. Garrigues Hermosilla, Madrid - Spain

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155 Sweden Per Karlsson and Emma Dufva Legislative Developments The most notable legislative development is Sweden in 2009 concerns the ongoing liberalization of Swedish pharmacies. The reform is intended to liberalize the rules on ownership and operation of pharmacies in Sweden in order to increase their number, by allowing operators other than the state-run Apoteket AB (which holds a monopoly in the market) to sell prescription and non-prescription drugs. The Government submitted its proposal on the reregulation of the pharmacy market to the Swedish Parliament at the beginning of and the re-regulated market opened up for competition on July 1, The privatization of a larger number of pharmacies previously owned by Apoteket AB is currently in its final phase. Four parties have entered into agreements regarding the acquisition of eight pharmacy clusters offered for sale. Mergers In GlaxoSmithKline/AstraZeneca, 2 the Swedish Competition Authority (the SCA ) approved the acquisition by GlaxoSmithKline of a portfolio of drugs from AstraZeneca in April AstraZeneca s leading Swedish brand Alvedon and GlaxoSmithKline s Panodil (known in many other countries as Panodol) are both based on paracetamol and the combination of these brands would create a monopoly in over-the-counter paracetamol-based painkillers. Although the SCA initiated an in-depth investigation, it ultimately approved the transaction without conditions, taking into account countervailing factors such as the significant efficiencies associated with the concentration and the forthcoming liberalization of the Swedish pharmacy market, which it found would intensify competition among existing companies and induce entry to the market. Cartels and other Anticompetitive Practices In May 2009 the Market Court published its judgment in the Asphalt Cartel, the largest cartel case to be investigated and come to court in Sweden. 3 In 2007, the Stockholm District Court imposed fines of approximately SEK460 million (approximately US$65 million) on nine asphalt companies for long-term price coordination in connection with tendering for asphalt coating projects and market sharing. 4 The District Court found that although the companies had not concluded a general agreement concerning coordination of tenders etc, they had entered into anticompetitive agreements on several occasions. A number of contracts had been allocated between the companies. The companies had decided who would win various tenders relating to coating, and had agreed with other companies that these would not compete in certain tenders in exchange for compensation. Five of the companies appealed to the Market Court (as did the Competition Authority), which upheld the essential parts of the District Court s judgment but adjusted the fines for some of the companies. The Market Court imposed fines amounting to approximately SEK500 million (approximately US$70 million) on eight companies, while a ninth firm was found not liable. Abuses of a Dominant Position In TeliaSonera/Tele2 the Stockholm District Court submitted a request to the European Court of Justice ( ECJ ) for a preliminary ruling. 5 The SCA brought proceedings against 1 See Government Proposal, available at 2 Swedish Competition Authority Decision, Case 706/2008, April 3, 2009, GlaxoSmithKline./.AstraZeneca Tika, available at aspx 3 Market Court Judgment No. MD 2009:11, May 28, 2009, NCC AB et al./.swedish Competition Authority et vice versa, available in Swedish at 4 Stockholm District Court Ruling No. T , July 10, 2007, KKV./.Kvalitetsasfalt i Mellansverige AB et al.. 5 Case C-52/09, Konkurrensverket vs TeliaSonera Sverige AB, Reference for a preliminary ruling from the Tingsrätt Stockholm (Sweden), lodged on February 6,

156 DEVELOPMENTS IN SWEDEN TeliaSonera Sverige AB claiming an administrative fine of SEK144 million (approximately US$20 million) on the basis that the largest telecommunications operator in Sweden, TeliaSonera Sverige AB, had engaged in margin squeeze with respect to its rivals, including Tele2 Sverige AB. According to the questions referred to the ECJ in February 2009, the District Court sought clarification of the conditions under which there is an infringement under Article 82 EC, where a different price has been charged by a vertically integrated dominant undertaking for the sale of input ADSL products to competitors on the wholesale market than the price charged by the same undertaking itself on the end-user market. In Dansk AMP/OMX, 6 an investigation with respect to an alleged abuse of dominance by OMX AB in relation to its trade system was closed by the SCA in March OMX is active in the development and provision of systems for trading with financial instruments in stock exchanges and the operation of such stock exchanges. Following a complaint filed by Dansk AMP A/S against OMX concerning the latter s refusal to admit shares in Danish companies to listing in its trade system, the SCA analyzed the national financial market in relation to stock exchanges, including an assessment of alternative electronic trading systems and platforms in Sweden. In the market for fully integrated trading systems for stock trading in Sweden (which the SCA considered relevant although it did not ultimately define a relevant market), OMX was presumed to hold a dominant position, and barriers to entry were found to be high. Nevertheless, the SCA recognized that alternative trading systems, although not as established in Sweden as OMX s, would gain ground and that OMX was likely to face increasing competition. While the investigation was ongoing, OMX signed a new agreement with the company in question (Aktie Torget) and amended its conditions for listing shares to allow shares of foreign companies to be listed as long as they are registered with VPC (now Euroclear Sweden AB) or equivalent, and trade is executed in the Swedish currency. The same limitations apply, for example, on the Stockholm and Copenhagen Stock Exchanges. This, in combination with the current developments in the financial markets, led the SCA to the conclusion that further investigation was unnecessary. 6 Swedish Competition Authority Decision, Case 310/2007, February 25, 2009, available in Swedish at Advokatfirman Vinge KB Box 1703, SE Stockholm - Sweden

157 Switzerland Dr. Patrick Sommer, Stefan Brunnschweiler and Dr. Clemens von Zedtwitz Legislative and Administrative Developments Review of the ACart The Swiss Federal Council (the SFC ) submitted a report to the Swiss Parliament in January 2009 evaluating the effectiveness of Switzerland s Federal Act on Cartels and Other Restraints on Competition (the ACart ). 1 The report found the new legal instruments (leniency program, dawn raids, and the opposition proceeding) to be useful. However, it also stated that in certain specific areas, international best practices have not been achieved yet. These areas include the institutional organization of the competition authorities, international cooperation, merger control, the treatment of vertical restraints, civil actions against cartels, and whether sanctions should be applied to natural persons. 2 Introduction of presidential system in the Competition Commission Effective February 1, 2009, the Swiss Competition Commission (the ComCo ) introduced a presidential system to replace the previous three chambers, each one in charge of a particular industrial sector. ComCo now takes its decisions in a plenary session of its 12 members 3 led by its president, assisted by the vice-president. The remaining 10 members are independent experts - usually law and economics lecturers and representatives of interest groups. 4 The organization of ComCo remains the subject of ongoing debate. In particular, it is believed that the inclusion of representatives from interest groups will impair ComCo s independence. Changes in the Competition Commission s merger control practice By notice of March 25, 2009, ComCo announced three changes in its merger control practice. 5 First, joint ventures that are neither active nor achieve any turnover in Switzerland (and, thus, have no impact on the Swiss market), are not subject to the notification duties even if the partners of the joint venture exceed the turnover thresholds in Switzerland. Second, mergers that consist of several consecutive parts with separate closings may be treated as one single merger if the time period between the implementation of the transaction agreement that leads to joint control and the establishing of sole control does not exceed one year (formerly three years). Third, the turnover achieved with a product will be allocated to the country where the product is delivered (i.e. where the respective company competes for the customer). It is irrelevant for the geographic allocation of turnover where the recipient of the invoice is domiciled or where the invoice is issued. This new practice is particularly important for commodity trading companies domiciled in Switzerland. However, it only applies to products. For services, different rules may apply. 6 Mergers On September 17, 2009, ComCo approved the merger between the Swiss publishers Edipresse and Tamedia without conditions. After a second-stage assessment, ComCo found that the merger did not deteriorate further the market conditions and considered that in the long run there was no room for the two free French-language dailies 1 An unofficial English translation of the ACart is available at 2 SFC Report, March 25, 2009, available in German at an English summary of the Report is available at 3 See the amendments to the procedural rules of ComCo, December 15, 2008, available in German, French and Italian at 4 See Organisation chart of ComCo, available at 5 Notice of ComCo, March 25, 2009, available in German, French and Italian at 6 See e.g. with respect to banking services the Merger Notification and Procedures Template at section 4.L., available at 157

158 DEVELOPMENTS IN SWITZERLAND 20 minutes and Le Matin Bleu. Since Le Matin Bleu would have disappeared from the market even without the merger and no other publisher was interested in buying it, ComCo came to the conclusion that the requirements of the failing firm doctrine were met. 7 On September 25, 2009, ComCo approved the merger of the early morning newspaper distribution organisations of Swiss Post, NZZ Group and Tamedia, provided that the merged entity was owned and controlled solely by Swiss Post. ComCo came to the conclusion that Swiss Post s, NZZ s and Tamedia s intended joint control of the distribution organisation would risk foreclosing the markets for early morning newspaper distribution services in Switzerland. 8 On December 28, 2009, ComCo announced that it would conduct an in-depth investigation into the planned merger between Orange, an affiliate of France Télécom, and Sunrise, an affiliate of Tele Danmark Communications. The merger had been announced by the two companies on November 25, The envisaged merger would reduce the number of significant players in the Swiss telecom market to two. However, the merger would also create a serious competitor (holding a 40% market share) for market leader Swisscom (whose market share is 60%). ComCo will investigate the likely market effects of the merger, including a potential collective dominance by Swisscom and the new entity. Cartels and other Anticompetitive Practices ComCo imposed sanctions on the companies Felco and Landi (both active in the industrial cutting tools sector). Felco had agreed with its reseller Landi on fixed resale prices for certain products. In the course of the investigation, Felco and Landi agreed with the Secretariat on an amicable settlement under Article 29 ACart. The amicable settlement led to simpler and shorter proceedings and to a reduced fine against Felco and Landi. ComCo approved the settlement on May 25, Felco/Landi is the first case in which sanctions have been imposed for retail price fixing, which is considered by Article 5 para. 4 ACart to be particularly harmful to competition. 9 On July 6, 2009, ComCo imposed sanctions of more than CHF1.24 million (approximately US$1.19 million) on seven undertakings active in the Bernese electrical installation market for bid rigging in private and public tenders for electrical equipment. The undertakings reached an amicable settlement and therefore obtained fine reductions. An eighth undertaking, being the leniency applicant, was not fined. This is the first amicable settlement reached in a case concerning a horizontal cartel. 10 On November 2, 2009, ComCo imposed sanctions of CHF5.7 million (approximately US$5.5 million) on Pfizer, Ely Lilly and Bayer for fixing the prices of Cialis, Levitra and Viagra in the market for erectile dysfunction drugs. Cialis, Levitra and Viagra are so called hors-list drugs, i.e. their prices are not set by the State. Since their prices can be set by the producers, they are subject to the ACart. Pfizer, Ely Lilly and Bayer recommended retail prices for the sales to end consumers. However, given the high level of adherence by distributors, ComCo came to the conclusion that these price recommendations constituted a price-fixing agreement. 11 On December 8, 2009, ComCo announced that it had fined Gaba CHF4.8 million (approximately US$4.6 million) for the prohibition of imports of dental care products ( Elmex ) into Switzerland. Gaba is part of the Colgate- Palmolive group and a manufacturer of dental care products. Gebro is one of Gaba s foreign independent manufacturers and distributors. In 1982 Gaba and Gebro signed a licensing contract, which prohibited the licensee Gebro from selling the licensed Elmex products into Switzerland. Gebro was fined only CHF10,000 (approximately US$9,600), since it did not benefit from the illicit clause ComCo Press Release, September 17, 2009, WEKO genehmigt Übernahme des Schweizergeschäfts von Edipresse durch Tamedia, available in German, French and Italian at 8 Tamedia s acquisition of a controlling stake in "search.ch" from Swiss Post, that took place at the same time and that was also considered by ComCo, was cleared without conditions. See Press Release, ComCo, WEKO genehmigt Zusammenlegung der Frühzustellung der Post, der NZZ-Gruppe und der Tamedia unter Bedingungen, available in German, French and Italian at 9 ComCo Press Release, June 2, 2009, WEKO sanktioniert vertikale Preisabrede, available in German, French and Italian at 10 ComCo Press Release July 14, 2009, WEKO auferlegt bernischen Elektroinstallateuren Geldbussen, available in German, French and Italian at 11 ComCo Press Release, November 27, 2009, Die WEKO büsst drei Pharmaunternehmen wegen Festlegung von Wiederverkaufspreisen available in German, French and Italian at 12 ComCo Press Release, December 8, 2009, WEKO sanktioniert Gaba wegen Parallelimportverbot für Elmex-Zahnpasta available in German, French and Italian at -service.admin.ch/nsbsubscriber/message/de/attachments/30591/63146/17648/pm_gaba_091208_d.pdf 158

159 DEVELOPMENTS IN SWITZERLAND ComCo also launched several investigations in In particular, ComCo investigated whether ETA, part of the Swatch Group, had abused a dominant position in the market for movement blanks 13 and whether several undertakings active in the road construction and civil engineering market in the Zurich and Argovia cantons had rigged bids in public tenders. 14 ComCo also decided to investigate (for a second time) the Domestic Multilateral Interchange Fees (the DMIF ) applicable to the four-party credit card payment systems (Visa and Mastercard systems). 15 ComCo had already investigated the DMIF in late The investigation led to an amicable settlement on December 5, 2005, which was, however, limited to four years. 16 Abuses of a Dominant Position On October 19, 2009, ComCo imposed a fine of CHF220 million (approximately US$211 million) on Swisscom for price-squeezing in the high-speed broadband internet market. ComCo concluded that Swisscom had unfairly overcharged competing companies for ADSL-services until the end of December Competitors such as Bluewin, Sunrise, VTX or Green depended on Swisscom for such services, yet ComCo found that the costs charged by the former state-owned company for the ADSL services were too high for the competitors to sell their own ADSLservices to end-consumers (margin squeeze). 17 Court Decisions On October 28, 2008, the Swiss Federal Supreme Court adopted a decision that addressed the issue of the attorneyclient privilege of in-house counsel (Panalpina vs. ComCo). 18 Although in that case the Federal Supreme Court did not grant attorney-client privilege to in-house counsel, it did suggest that this could be allowed in future court rulings. The aforementioned decision has thus somewhat qualified the traditional view that in-house counsel are not covered by any privilege; the picture will only become clearer through a future court decision or new legislation ComCo Press Release, September 15, 2009, WEKO eröffnet Untersuchung gegen ETA Manufacture Horlogère Suisse SA, available in German, French and Italian at 14 ComCo Press Release, June 6, 2009, WEKO eröffnet Untersuchung im Bereich des Strassen- und Tiefbaus, available in German, French and Italian at 15 ComCo Press Release, July 16, 2009, WEKO eröffnet Untersuchung im Bereich der Kreditkarten, available in German, French and Italian at 16 ComCo, Law and Policy on Competition 2006 at 65, available in German at 17 ComCo Press Release, November 5, 2009, WEKO büsst Swisscom mit CHF220 Millionen, available in German, French and Italian at ComCo had already fined Swisscom CHF333 million (approximately US$319 million) in 2007 for abusing its dominant position in the Swiss mobile phone market (charging of excessive termination fee). Swisscom has appealed ComCo s decision. The case is still pending. 18 BGE 1B_101/2008, available in German at 19 A new act dealing with this issue (the Unternehmensjuristengesetz ) is under discussion in the Swiss legislation process. CMS von Erlach Henrici Ltd. Dreikönigstrasse 7 Postfach CH-8022 Zürich - Switzerland

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161 Taiwan John C. Lin Legislative Developments In October 2009, Shiow-Ming Wu, Acting Chair of the Taiwan s Fair Trade Commission (the Commission ), reported to Parliament that the Commission had prepared a preliminary draft Bill to amend the Fair Trade Law. 1 The proposed amendments, among other things, aim to: (i) introduce a leniency program to exempt certain joint research and development activities from the prohibition against concerted actions and to increase the associated administrative penalties for violations; (ii) give the Commission search and seizure powers to strengthen antitrust enforcement and investigations; and (iii) differentiate better the various types of violations and their respective administrative penalties. 2 Mergers Largely due to the global financial and economic crisis, 2009 saw a decrease in the number of mergers and acquisitions in Taiwan. In 2009 the Commission reviewed filings for a total of 57 mergers. Of these, 20 were allowed to proceed, two were prohibited, and the rest either remain ongoing or fell below the filing thresholds. One notable decision by the Commission in 2009 involved Unipresident Enterprises ( Unipresident ), a multinational food conglomerate, and Weilih Food ( Weilih ), another prominent player in Taiwan s food industry. Unipresident and Weilih are the first and second largest instant noodles manufacturers in Taiwan. Together, they account for almost 70% of Taiwan s instant noodles market. In 2007, Unipresident acquired 31.84% of Weilih, after the latter s long (ten years) and difficult restructuring, with an option to acquire a further stake to gain a majority shareholding. In 2008, Unipresident sought approval from the Commission to increase its holding in Weilih to over one third (the threshold for compulsory combination filing). After finding that Unipresident and Weilih were direct competitors in the instant noodles market and that the remedies proposed by Unipresident did not outweigh the anti-competitive effects of the proposed combination, the Commission refused to grant approval. 3 Following the Commission s prohibition, Unipresident did not acquire a further stake in Weilih. Instead, in October 2008 it acquired half of the board seats (including the position of Chairman) through a resolution passed at Weilih s shareholders meeting. Soon after, the Commission launched an investigation into whether Unipresident had gained direct or indirect control of the management of, or personnel appointment and removal rights in, another business enterprise. Known as the management control clause, this is one of the five types of combination defined in the Fair Trade Law requiring the Commission s prior approval. 4 The Commission found that, based on the quorum and voting thresholds set in Weilih s bylaws, by controlling half of the Weilih board, Unipresident practically had veto rights over all board decisions and could therefore influence Weilih s material management decisions. 5 The Commission interprets the management control clause widely and considers it sufficient for a company to have, whether directly or indirectly, de facto substantial 1 The Fair Trade Law, passed on February 4, 1991, came into force on February 4, 1992, and was last amended on February 6, 2002, available at It is Taiwan s primary competition legislation addressing issues such as monopolistic conduct, combinations (merger control) and concerted actions (cartels) as well as other fair trading issues, such as false advertising and multi-level marketing. 2 See Commission Report to the Legislature on Policy Execution and Budgets for 2010, available in Chinese The Commission has had several internal discussions over the last few years regarding proposed amendments to the Fair Trade Law, but none of these resulted in draft legislation being submitted to Parliament for consideration. 3 Commission Decision Gong-Chie-Tzu No , September 10, 2008, available in Chinese at 4 See Article 6 of the Fair Trade Law. 5 Commission Decision Gong-Chu-Tzu No , February 24, 2009, page 8, available in Chinese at 161

162 DEVELOPMENTS IN TAIWAN influence over another firm s material management decisions. 6 Substantial influence may be exercised through factors such as financial dependency, information sharing and other governance rights (including veto rights). 7 Ultimately, the Commission fined Unipresident NT$500,000 (approximately US$15,400) and ordered it to reduce its seats on the Weilih board to a number where it did not have substantial control. 8 Unipresident brought an administrative appeal against the Commission s decision but was unsuccessful. 9 This case shows that the Commission now takes a broader view of the management control clause under the Fair Trade Law and now considers veto rights (in addition to affirmative control) as one of the important factors contributing to substantial control under the management control clause. It remains to be seen whether Unipresident will appeal to the administrative courts. Cartels and other Anticompetitive Practices In 2009, the Commission issued a total of 18 administrative decisions against anticompetitive conduct and 183 decisions against unfair trading practices. 10 The Philips case mentioned in Section D is the most significant abuse case in The overwhelming majority of cases under the Fair Trade Law concern false advertising, which are concerned more with fair trading than antitrust practices. Abuses of a Dominant Position The most noteworthy case was the latest development in an almost ten-year long battle between Taiwan s CD-R manufacturers and the CD-R patent holders Philips, Sony and Taiyo Yuden. These three patent holders collectively control much of the CD-R technology and had formulated a package licensing arrangement for all licensees and potential licensees wishing to enter the CD-R market. The Commission first found in 2001 that the three patent holders formed a monopoly within the definition contained in the Fair Trade Law and certain conduct in relation to their package license arrangement constituted an abuse of a dominant position under the Fair Trade Law. 11 After an eight-year long administrative appeal proceedings, in June 2009 the Supreme Administrative Court finally remanded the case back to the Commission for re-investigation. 12 The Commission re-investigated and, in October 2009, again found Philips, Sony and Taiyo Yuden to have abused their collective dominant market position in violation of the Fair Trade Law, fining them NT$3,500,000 (approximately US$10,700), NT$1,000,000 (approximately US$30,700) and NT$500,000 (approximately US$15,350) respectively, as well as ordering each of them to cease all those package license arrangements that amounted to abuses of their dominant position. 13 Philips Sony and Taiyo Yuden have again appealed this latest Commission decision, and the case is now pending before the Appeals Committee of the Executive Yuan. 6 Id. at page 7. 7 Id. 8 Id. 9 Executive Yuan Decision Yuan-Tai-Sui-Tzu No , December 7, 2009, available in Chinese at 10 See Statistics published by the Commission, available in Chinese at 11 Commission Decision Gong-Chu-Tzu No , January 20, 2001, available in Chinese at 12 Supreme Administrative Court Judgment Pan-Tzu No , June 18, Commission Decision Gong-Chu-Tzu No , October 29, 2009, available in Chinese at Jones Day 8F, No. 2 Tun Hwa S. Rd., Sec. 2 Taipei Taiwan, R.O.C

163 Turkey Selin Beceni Legislative Developments In 2009, two new regulations entered into force that modified the Protection of Competition Act No First, the Regulation on Fines to be Imposed in Cases of Agreements, Concerted Practices and Decisions Limiting Competition and Abuse of Dominance 2 sets out the method for the calculation of fines to be imposed on undertakings and groups of undertakings as well as their managers and employees engaging in anticompetitive practices. Secondly, the Regulation Regarding Active Cooperation for Detecting Cartels 3 is the first step towards a leniency program, which is similar to the EU leniency program. Mergers A series of international transactions were approved without conditions attached, 4 including Wyeth Inc./Pfizer Inc., 5 Chrysler LLC/Fiat S.p.A., 6 Austrian Airlines AG/Deutsche Lufthansa AG, 7 and Siemens AG/Fujitsu Limited. 8 Cartels and other Anticompetitive Practices In Turk Telekom Inc., Turkish Telecommunication A.Ş. ( Turk Telekom ) allegedly enticed its customers to subscribe to fixed-line telephones in order to receive the ADSL service. 9 Only a fixed-line telephone customer could contract the ADSL service. Although no formal proceedings were brought against Turk Telekom under Act. No. 4054, the company was required to offer ADSL services in unbundled form and obtain approval of its offer, including the tariff charged to customers, from the Information Technologies and Communication Authority ( ITCA ). On October 6, 2009, the Competition Authority issued a communication stating that the decision of the ITCA was still pending. The Pol-Pet Petroleum Products Tourism Accommodation / Recreation Facilities Co. Ltd. 10 case is of importance because it sets out principles for the use of usufruct rights in the petroleum sector. Turkish law prohibits non-compete obligations for periods exceeding five years. However, the agreements between petroleum producers and their dealers gave the latter a 15-year usufruct right relating to the property of the gas station. Given that this was construed by the Competition Authority as amounting to a de facto noncompete obligation imposed on dealers, the Competition Authority limited the duration of the right to five years. This also applies to personal rights or rights in rem, such as loan agreements, equipment agreements, and long-term leasing agreements: if any of these agreements concluded by the producer and the dealer has a duration of 15 years, this may lead to breach of the five-year limitation rule, even though the usufruct right only has a duration of five years, since the agreements are considered as an inseparable whole. Where such agreements exist, the exemption conditions granted by Communication No. 2002/2 shall be removed when their duration exceeds five years. Agreements concluded before (the date on which the transition period ended to ensure compliance with 1 Protection of Competition Act, No.4054, issued on December 7, 1994, published in the Official Gazette No of December 13, 1994, available in Turkish at 2 Regulation on Fines to Apply in Cases of Agreements, Concerted Practices and Decisions Limiting Competition, and Abuses of a Dominant Position, issued and effective on February 15, 2009, published in the Official Gazette No of February 15, 2009, available in Turkish at 3 Regulation on Active Cooperation for Detecting Cartels, issued and effective on February 15, 2009, published in the Official Gazette No of February 15, 2009, available in Turkish at 4 Decisions are available in English at 5 Decision No / Wyeth Inc. - Pfizer Inc., July 15, Decision No / Chrysler LLC - Fiat S.p.A., July 1, Decision No / Austrian Airlines AG - Deutsche Lufthansa AG, April 13, Decision No /3-3 Siemens AG - Fujitsu Limited, January 8, Decision No / Turk Telekom Inc., February 18, 2009, available at 10 Decision No / Pol-Pet Petroleum Products Tourism Accommodation and Recreation Facilities Co. Ltd, March 3, 2009, available at 163

164 DEVELOPMENTS IN TURKEY Communication no 2002/2 on block exemption of vertical restrictions) and whose duration exceed five years shall benefit from the exemption until September 18, 2010 according to the reducing to the maximum limit principle applied by the Competition Authority. After the relevant date, the exemption will be withdrawn. This also applied to the agreement in the case at hand. Abuses of a Dominant Position In its decision, 11 the Competition Authority decided to impose an administrative fine of 12,394, YTL (approximately US$ 8,200,000) on Turk Telekom, for abusing its dominant position in the market for broadband internet access services. The decision was published on June 17, Turk Telekom and TTNET, being identified as a single economic unit due to their organic and commercial links, were found to be in a dominant position in the wholesale and retail broadband internet access markets; and were fined for price squeezing practices. This is one of the most significant decisions relating to abuses of a dominant position and follows the approach of the European Commission in price squeezing and predatory pricing cases. The decision is also significant because the fines imposed on Turk Telekom and TTNET have been assessed on the basis of these two undertakings total turnover amounts in the relevant market, whereas one could have expected that the authority would have used their total annual turnover just as a starting point, which would have made the fine even higher. Court Decisions 2009 saw one of the few cases in which a court has overturned a decision of the Competition Authority. On March 10, 2008, the Authority decided to grant conditional clearance for the acquisition of Bağımsız Gazeteciler Yayıncılık (Independent Journalists Publishing), the publisher of Vatan Gazetesi (Vatan Newspaper), one of the best-known newspapers in Turkey, and Kemer Yayıncılık ve Gazetecilik (Kemer Journalism and Publishing) by Doğan Gazetecilik A.Ş. (Doğan Journalism Inc.), one of the leading groups in the media sector. The conditions imposed on Doğan Gazetecilik included the obligation to transfer the Vatan Gazetesi brand and license to a third party with no connection to the Doğan Group within two years of the approval of the Competition Authority. Doğan Gazetecilik brought proceedings for the judicial review of the Authority s decision before the Council of State, seeking the annulment of the conditions imposed and a stay of execution. The 13th Chamber of the Council of State granted the stay of execution sought by Doğan Gazetecilik. In response, the Competition Authority appealed but in its plenary session of February 13, 2009, the Administrative Law Division of the Council of State rejected the appeal and annulled the conditions attached to the authorization. 11 Decision No / , November 18, 2009, available in Turkish at Luther Karasek Köksal Consulting AS Maslak Mah, Bilim Sokak, No.5, Sun Plaza - K.12, 34398, Sisli/Istanbul Turkey

165 Ukraine Denis Lysenko and Mariya Nizhnik Legislative Developments In Spring 2009 the Ukrainian Parliament passed amendments to the Economic Competition Act aimed at altering merger clearance thresholds. 1 The draft legislation proposes quadrupling the existing turnover thresholds, which are currently among the lowest in any jurisdiction with antitrust legislation, including members of the Commonwealth of Independent States (CIS). Ukrainian merger clearance would be required if the following conditions are met: (i) the worldwide total asset value or aggregate sales turnover in the last financial year, by all parties to the transaction, exceeded an amount equivalent to approximately US$68 million based on the exchange rate of the National Bank of Ukraine effective on the last day of such financial year and the total asset value or aggregate sales turnover in Ukraine of at least two parties exceeded an amount equivalent to approximately US$5.4 million; or (ii) the total asset value or aggregate sales turnover in Ukraine of at least one party to the transaction exceeded an amount equivalent to approximately US$68 million based on the exchange rate of the NBU effective on the last day of such financial year and the worldwide total asset value or aggregated sales turnover during the last financial year, by any other party to the transaction, exceeded an amount equivalent to approximately US$68 million. The draft does not envisage any changes in respect of market share thresholds. Thus, Ukrainian merger clearance continues to be required if any party to the transaction has a market share of 35% or more or both parties have a combined market share of 35% or more in the relevant market in the Ukrainian territory. The proposed amendments, which aim to improve the investment climate in Ukraine, take into account the recommendations of both the OECD and the European Commission and it is expected that they will come into force in the first half of Other legislative initiatives currently being considered either by the Anti-Monopoly Committee (the AMC ) or in Parliament concern (i) the gathering of evidence and defense rights in antitrust investigations, 2 (ii) state aid, and (iii) criminal liability for anticompetitive concerted actions. 3 Mergers At the end of 2008, the AMC publicly announced that one of its key tasks for 2009 would be to detect antitrust infringements in already completed M&A transactions and declared its intention to review past transactions in order to check compliance with merger control legislation. In line with this, the AMC has already initiated several investigations involving not only local companies but also subsidiaries of international players with a presence in Ukraine. A number of affected companies have already received information requests from the AMC and some have even been fined for their alleged infringements. Companies have responded by setting up compliance programs to mitigate risks. During 2009 the AMC cleared a number of acquisitions by Energy Standard Fund (Cyprus) of well-known Ukrainian incumbents, including ZaporozhTransformator and super (Ukrainian and CIS leaders in transformer equipment manufacturing); Lugansk Energy Interconnection Company and Operation electric network enterprise Central energetic company (one of the largest electricity suppliers in Ukraine); Ukrrechflot Shipping Company and Sevmorzavod (major Ukrainian shipbuilding and shipping firms); Sumy Frunze NPO (one of leading machine-building complexes in Europe manufacturing equipment for oil, gas and chemical industries) and Drill Collars and Kellys Plant and others. Regardless of the monopoly held by each of the targets, all transactions were cleared without conditions being attached. 4 1 Draft Economic Competition Act, available in Ukrainian at 2 Draft Law # 3575, December 29, 2008, available in Ukrainian at 3 Draft Law # 3577, December 29, 2008, available in Ukrainian at 4 See Anti-Monopoly Committee of Ukraine Website, Information on decisions and orders issued by AMC, available in Ukrainian at and 165

166 DEVELOPMENTS IN UKRAINE Cartels and other Anticompetitive Practices In 2009, the AMC decided a series of price-fixing cases, 5 mostly involving oil and other petroleum products, pharmaceuticals, farm and food products (grain, sugar, milk), telecommunication services, and certain types of minerals. In a bid-rigging case, the AMC found that three companies in the metallurgy sector fixed the results of a tender called by the state enterprise National Nuclear Energy Generating Company Energoatom ( NNEGC ENERGOATOM ) for the procurement of pipeline fittings and spare parts for four Ukrainian nuclear power plants. Among others irregularities, the companies agreed among themselves to coordinate participation conditions, ensuring that in the event of one of them being awarded the deal they would sell overpriced products to NNEGC ENERGOATOM. As concluded by the AMC, such concerted actions resulted in excessive expenditure of public funds of UAH9.9 million (approximately US$1,240,000). 6 The three companies were fined UAH1,600,000 (approximately US$120,000) in November In view of the flu pandemic in Ukraine, the pharmaceutical market became a focus of the AMC investigations. In particular, in autumn 2009 the AMC initiated a number of cases against producers, suppliers and sellers of anti-flu medicines triggered by allegations of excessive prices. As a result, the AMC sanctioned a network of 67 chemists for overcharging for antiflu medication (chains possessing up to 300 pharmacies) and fined major pharmaceutical companies, including Liky Plus, LLC and Chernobil-Dopomoga, LLC for monopoly abuse in the respective markets. Abuses of a Dominant Position At the beginning of 2009, the AMC imposed a fine of UAH1 million (approximately US$125,000) on Optima Trade for abuse of its dominant position in the retail petrol and diesel fuel markets in three regions. 8 In February 2008, Optima Trade terminated its agreement to sell fuel through JSC Ukrnafta s filling stations without cause. Under the agreement, Optima Trade fixed prices and established other terms and conditions for the sale of oil products through JSC Ukrnafta s chain. Given Optima Trade s dominant position, such termination resulted in a 13% increase in the retail prices of oil products in various regional markets. 9 In April 2009, the AMC fined three aviation fuel filling companies and the Boryspil Airport the unprecedented amount of UAH265 million (approximately US$33 million). The fine was imposed for abuse of a dominant position through charging an excessive price for aviation fuel and the provision of specialist services at the airport near Kyiv. 10 Another important decision concerned abuse of a dominant position in the cable casting provision market by Volia Cable, a Kyiv-based TV company, and two subsidiaries companies, Kyiv Telecommunications Networks and IVK by fixing monopoly prices. In addition to fining each company UAH1 million (approximately US$125,000), the AMC ordered that the schedule rates be reduced to economically justified levels within two months Article 6 of the Economic Competition Act, as amended in 2005, provides, in conjunction with article 3, that where firms take similar actions or omissions in the market without having objective reasons for such actions or omissions and these result in the elimination of competition in the respective market, this constitutes an anticompetitive concerted practice. 6 Id. 7 AMC Press Release, November 18, 2009, available in Ukrainian at 8 AMC Press Release, February 4, 2009, available in Ukrainian at 9 Id. 10 AMC Press Release, April 28, 2009, available in Ukrainian at 11 AMC Press Release, July 6, 2009, available in Ukrainian at Vasil Kisil & Partners 17/52A Bogdana Khmelnytskogo St. Kyiv Ukraine

167 United Kingdom Stephen Kon, Dr. Gordon Christian and Jai Bhakar Legislative Developments In one of the few legislative developments in UK competition law in 2009, the Enterprise Act 2002 (Merger Fees) (Amendment) Order 2009, which doubles the currently applicable merger fees, came into force on October 1, The fees are payable to the Office of Fair Trading (the OFT ) on filing to recover the costs of the regulatory consideration of mergers. The merger fees will increase from 15,000 to 30,000 for mergers where the business acquired generates a UK turnover of less than 20 million (approximately US$32 million), from 30,000 to 60,000 where the UK turnover is between 20 million and 70 million (approximately US$32 million and US$112 million) and from 45,000 to 90,000 where the UK turnover exceeds 70 million 2 (approximately US$112 million). The new fee levels will apply to all mergers where the parties involved in the merger cease to be distinct enterprises after October 1, Mergers In June 2009, the OFT published the final version of its new jurisdictional and procedural guidance on mergers, replacing existing OFT guidance. 3 According to the OFT, the guidance has been updated to reflect its practices since the Enterprise Act 2002 came into force. The guidance deals with a number of important issues, such as the types of transactions and levels of control that can give rise to jurisdiction for the OFT to review a merger, the circumstances in which merging parties may wish to (voluntarily) notify a transaction to the OFT and how the OFT deals with and assesses possible first-phase remedies. On October 1, 2009, the OFT launched a consultation on revised guidance concerning exceptions to its duty to refer certain mergers to the Competition Commission (the CC ). 4 The most common exception, and one which the OFT has used on several occasions recently, is the de minimis exception, which provides that in limited circumstances (essentially where the relevant market is smaller than 10 million and no significant competition issues arise), the OFT can use its discretion and not refer a merger to the CC as the merger affects a market of insufficient importance to justify a reference. The OFT is currently considering comments made by interested parties on the revised guidance, and intends to publish the final version guidance shortly. On June 16, 2009, feeding into the UK Government s Digital Britain review, 5 the OFT published its report on the local and regional media merger regime in the UK. The OFT report, which particularly focuses on whether the local and regional newspaper merger regime is fit for purpose, recognized that this industry is facing long-term structural changes. Advertising revenues are steadily declining as advertisers who would traditionally use the local and regional press increasingly migrate to the online space. However, the OFT review concluded that the current media merger regime, which is broadly the same for newspapers as it is for other industries, is well placed to take into account developments, such as competition from the Internet, because it is evidence-based and capable of reflecting market realities. The regime is also flexible in that it can take account of valid failing firm arguments, as well as efficiencies and any other benefits to customers brought about through a merger. The OFT has therefore recommended that no legislative changes to the media merger regime are currently needed. 1 The Enterprise Act 2002 (Merger Fees) (Amendment) Order 2009, available at si2009/uksi_ _en_1 2 OFT Merger Fee Statement (September 2009), available at 3 OFT Press Release, June 30, 2009, OFT publishes revised guidance on Merger jurisdiction and procedure, available at 4 OFT Press Release, October 1, 2009, OFT consults on exceptions to duty to refer, available at 5 OFT Press Release, June 16, 2009, OFT publishes review of media merger regime, available at 167

168 DEVELOPMENTS IN UNITED KINGDOM Cartels and other Anticompetitive Practices After a long inquiry into the most complex single case investigated by the OFT to date, on September 30, 2009 the OFT fined 103 construction companies a total of million (approximately US$207 million) for rigging bids for building work between 2000 and The OFT found that the construction firms involved in the cartel had manipulated approximately 200 tender processes for building projects worth more than 200 million (approximately US$319 million). The bid-rigging was carried out mainly through the practice of cover pricing, which is where competing bidders in a tender process agree that one or more of the bidders will put in artificially high tender prices which will not win the tender but will create the misleading impression of competition for the contract. The OFT also used its announcement to issue further guidance to procurers of construction services as to how to minimise the risk of future tenders being distorted by bid-rigging activities. On September 30, 2009, the OFT fined six companies in the construction recruitment sector million (approximately US$63 million) for engaging in anticompetitive behavior. 7 The total level of fines before reductions for leniency were taken into account was 173 million (approximately US$ 276 million). In 2003, a new market entrant called Parc began competing in the construction recruitment market with a new business model, namely to act as an intermediary between construction companies and different construction recruitment agencies for the supply of candidates. Instead of competing with Parc, the recruitment agencies formed a cartel, referred to as the Construction Recruitment Forum. This forum met five times between 2004 and 2006, and as a result the recruitment companies agreed to boycott Parc and also cooperated on the fees they would charge to both the intermediaries and the agencies customers. In August 2008, the OFT announced that it was starting criminal proceedings under the Enterprise Act 2002 against four former British Airway s executives: Martin George, Andrew Crawley, Ian Burns and Alan Burnett. It is alleged that these four executives participated in a cartel between British Airways and Virgin Atlantic that fixed prices for fuel surcharges on long haul passenger flights 8 and that between July 1, 2004 and April 20, 2006 they agreed with named executives of Virgin Atlantic to dishonestly make or implement arrangements that facilitated the cartel. Virgin Atlantic secured immunity from prosecution for its executives. At a pre-trial hearing which took place on July 13, 2009, the four British Airways executives pleaded not guilty to the criminal charges. If found guilty, they face up to five years in prison, unlimited fines, director disqualification orders and confiscation of any assets unlawfully gained. The trial is scheduled to start at Southwark Crown Court on April 12, Ian Norris is the former CEO of Morgan Crucible, an engineering company. In the United States, Mr. Norris is alleged to have been engaged, between 1989 and 2000, in a conspiracy to fix, maintain and coordinate the price for the supply of carbon, contrary to section 1 of the Sherman Act Mr. Norris is also alleged to have obstructed the investigation into the cartel (from April 1999 to August 2001) by the US Department of Justice (the DOJ ) and a federal grand jury. On December 31, 2004, at the request of the US government, a request warrant was issued in England, after which extradition papers were served. Since that time, Mr. Norris has fought extradition through a series of appeals in the UK courts. In relation to the US price fixing charges, on March 12, 2008, the UK s highest court, the House of Lords (as it then was) found that the price fixing charges did not constitute an extraditable offence under the Extradition Act 2003 as pricefixing was not, in itself, a criminal offence in the UK at the relevant time. 10 In relation to the obstruction of justice charges, the High Court held that such charges amounted to an extraditable offence in their own right (being broadly equivalent to attempting to pervert the course of justice). The High Court also ruled that extraditing Mr. Norris would not breach his right to respect for his private and family life under the European Convention of Human Rights. In relation 6 OFT Press Release, September 22, 2009, Construction firms fined for illegal bid-rigging, available at 7 OFT Press Release, September 30, 2009, OFT fines recruitment agencies for a collective boycott and price fixing cartel, available at 8 OFT Press Release, August 7, 2008, OFT announces criminal charges in airline fuel surcharges cartel case, available at 9 OFT Enforcement and Regulation update, available at 10 See Ian Norris v The Government of the USA and the Secretary of State for the Home Department ([2009] EWHC 995) High Court, Divisional Court, judgment of May 15, 2009, available at 168

169 DEVELOPMENTS IN UNITED KINGDOM to this latter point, Mr. Norris appealed against the High Court s judgment. A hearing took place on November 30, 2009 before the UK Supreme Court, 11 and judgment is yet to be handed down. Abuses of a Dominant Position Since the OFT s Chapter II decision in the Cardiff Bus case in November 2008, 12 there have been no further Chapter II decisions from the OFT. The few developments that have occurred concern sectoral regulators. On January 20, 2009, the Office of Gas and Electricity Markets ( Ofgem ) announced that it had opened an investigation into alleged breaches of the Chapter II prohibition by the electricity distribution company Electricity North West Limited ( ENW ). 13 Ofgem is investigating allegations that the terms imposed by ENW on independent networks connecting to ENW s pre-existing network may be foreclosing the market to competitors in the area in which ENW is the incumbent distribution network operator. Court Decisions On April 8, 2009, the High Court ruled against the inclusion of a representative element in the claim for damages brought by Emerald Suppliers Limited and Southern Glass House Produce Limited (the Claimants ) in relation to losses caused by certain alleged anti-competitive practices by British Airways. The Claimants allege that British Airways illegally inflated prices for the air freight services used by the Claimants to import cut flowers from abroad. The Claimants sought a declaration that damages are, in principle, recoverable from British Airways, both on their own behalf and also on behalf of all other parties who may have purchased (directly or indirectly) air freight services at prices inflated by the anti-competitive practices. Following British Airways application, the High Court agreed to have the representative element of the claim struck out and to limit the declaration to the Claimants right to claim damages only. This is because the High Court considered that, at present, it is impossible to say with any degree of certainty that a given person is a member of the class the Claimants purport to represent, and some members of the class may not have suffered any damage, as the loss may have been passed on to their customers. The Claimants have filed an appeal with the Court of Appeal against this decision. The Court of Appeal is scheduled to hear the appeal on March 2, The CC s final report into the UK groceries market was published in April The report concluded that action was needed to improve competition in a number of highly concentrated local markets, and therefore included a recommendation for the inclusion of a competition test in planning decisions on larger grocery stores. 15 Essentially, in certain circumstances the competition test would prevent supermarkets groceries developments, including extensions to existing stores, by retailers with a strong presence in a local area, to make competing developments from rival retailers easier. Tesco appealed the CC s recommendation to the Competition Appeal Tribunal (the CAT ) on June 30, On March 4, 2009, the CAT upheld Tesco s appeal against the competition test on two grounds. First, the CC had not properly assessed the economic costs of the competition test. Secondly, the CC had failed sufficiently to address the competition test s proportionality and effectiveness. Although the CAT did not conclude that the competition test would necessarily be ineffective or unreasonable, it remitted the matter back to the CC for further consideration, particularly on the costs and benefits of the competition test. It is expected that the CAT s judgment in this case will require the CC to give more careful consideration to the effectiveness, proportionality and likely costs and benefits of remedies put forward. On October 2, 2009, after reconsidering the issue, the CC formally re-recommended to the Department of Communities and Local Government and the devolved administrations in Scotland, Wales and Northern Ireland that they take the necessary steps to introduce a competition test in planning decisions concerning larger grocery stores, albeit with an exception for certain store extensions. 11 Supreme Court case detail summary, available at 12 OFT Press Release, November 18, 2008, Cardiff bus engaged in predatory conduct against competitor, OFT decides, available at 13 Ofgem Press Release, January 20, 2009, Ofgem Opens Investigation into Electricity Network Company, available at 14 Her Majesty s Court Service, case tracker, available at 15 CC Press Release, April 30, 2008, Groceries Market Investigation - Final Report, available at 169

170 DEVELOPMENTS IN UNITED KINGDOM In its final report on BAA s ownership of seven UK airports (including Heathrow, Gatwick and Stansted) published on March 19, 2009, the CC ruled that as a result of significant competition issues identified, BAA must sell Gatwick Airport, Stansted Airport and one of Edinburgh or Glasgow Airports. 16 This is the first time that the CC has imposed structural remedies following a market investigation. BAA has appealed the CC s decision to the CAT on two separate grounds, namely apparent bias and proportionality. 17 In relation to the first ground, BAA emphasised that this is a case of apparent bias, not actual bias. BAA submitted that the CC s decision is unlawful due to the participation of a member of the inquiry panel having links to an undertaking interested in acquiring airports that BAA is required to sell. In relation to the second ground, BAA submitted that in assessing the proportionality of the divestiture remedies, the CC failed to take account, or carry out an assessment, of material considerations relating to the costs of divestiture, particularly in the context of the current financial and economic environment. On this basis, BAA asked the CAT to quash the CC s decision regarding divestiture of Gatwick Airport, Stansted Airport and one of Edinburgh or Glasgow Airports. On 21 December 2009, the CAT handed down its judgment, 18 upholding BAA s claim that the market investigation was tainted by apparent bias. One of the members of the CC's investigation group had links with the owners of Manchester Airport, who were involved in the investigation and were also potential bidders for airport assets to be divested by Gatwick. The CAT concluded that a fairminded and informed observer would conclude that the deliberations, the thinking and the ultimate outcome of the market investigation were affected by apparent bias. The CAT, however, rejected BAA's argument that the CC had failed to have regard to the principles of proportionality in fixing the time periods for the divestment of three airports. The CAT has not quashed the CC s final report but awaits confirmation from the parties as to whether they have agreed on next steps. If not, the CAT will hear submissions on appropriate relief in due course. 16 CC Press Release, March 19, 2009, BAA ordered to sell three airports, available at 17 Competition Appeal Tribunal, Summary of Application Under section 179 of the Enterprise Act 2002, Case Number 1110/6/8/09, 22 May 2009, available at 18 Competition Appeals Tribunal, BAA v Competition Commission, case 1110/6/8/09, judgment, available at SJ Berwin LLP 10 Queen Street Place London EC4R 1BE United Kingdom +44 (0) (0)

171 United States Claire Webb and Ausra O. Pumputis Legislative and Administrative Developments Political shift brings tougher enforcement Signaling a more aggressive approach to the enforcement of single firm conduct under the Obama Administration, in May 2009 the Antitrust Division of the Department of Justice (the DOJ ) withdrew its report regarding Section 2 of the Sherman Act ( Competition and Monopoly: Single Firm Conduct Under Section 2 of the Sherman Act ), 1 which was issued in September 2008 under the Bush Administration. According to Christine A. Varney, the new Assistant Attorney General for Antitrust at the DOJ, the Report raised many hurdles to Government Antitrust enforcement and had lost sight of an ultimate goal of antitrust laws the protection of consumer welfare. 2 Ms. Varney has expressed particular interest in exploring vertical theories and other new areas of civil enforcement, such as those arising in high-tech and Internet-based markets. 3 The DOJ s recent investigations of Google and IBM 4 and the FTC s commencement of an administrative action against Intel Corporation demonstrate the increasingly aggressive enforcement of antitrust laws by both antitrust agencies in this area. 5 The DOJ s creation of a citizen complaint center which accepts reports of potential collusive conduct and fraud in connection with the American Recovery and Reinvestment Act of 2009 (the Stimulus Package ) may foreshadow a growing use of innovative means to identify anticompetitive conduct. 6 Another area of interest for the DOJ and the Federal Trade Commission (the FTC ) has been health care, with the FTC bringing several enforcement actions in this sector, 7 and the DOJ having joined the FTC in criticizing reverse payment settlements in pharmaceutical patent disputes. 8 Changes to FTC procedures and DOJ/FTC merger guidelines In April, the FTC amended Parts 3 and 4 of its Rules of Practice to expedite the administrative review of mergers. These amendments enhance the FTC s ability to obtain preliminary injunctions preventing the consummation of challenged transactions. 9 The FTC and DOJ have announced their intention to revise their joint Merger Guidelines to more accurately reflect today s business and legal environment and provide clear guidance to businesses by increasing enforcement transparency, especially in the areas of market definition, market concentration and competitive effects U.S. Dept of Justice, Competition and Monopoly: Single Firm Conduct under Section 2 of the Sherman Act (2008), available at 2 Christine Varney, Asst. Atty Gen., U.S. Dept of Justice, Antitrust Div., Remarks as Prepared for the U.S. Chamber of Commerce: Vigorous Antitrust Enforcement in This Challenging Era (May 12, 2009) available at 3 Idem. 4 See e.g., Statement of Interest of the U.S. Regarding Proposed Class Settlement, The Authors Guild, Inc. v. Google, Inc., No. 05 Civ. 8136, available at see also DOJ Targets IBM with Antitrust Investigation (Oct. 8, 2009), available at 5 FTC Press Release, FTC Challenges Intel s Dominance of Worldwide Microprocessor Markets, December 16, 2009, available at 6 See Dept. of Justice website, available at 7 See e.g., CSL Limited and Cerberus-Plasma Holdings (Talecris) (motion for preliminary injunction filed May 29, 2009) available at Inverness Medical Innovations, Inc. (consent order issued January 23, 2009) available at Bristol-Meyers Squibb Judgment (imposing $2.1M civil penalty on March 30, 2009) available at Watson Pharmaceuticals (complaint filed on January 27, 2009 for anticompetitive reverse payment in Hatch Waxman context) available at Independent Physician Associates Medical Group, Inc. dlba AllCare IPA (consent order issued February 2, 2009) available at Teva/Barr Pharmaceuticals (consent order issued February 9, 2009) available at King Pharmaceuticals / Alpharma (consent order issued February 2, 2009) available at Getinge AB/Datascope (consent order issued March 9, 2009) available at Thoratec/HeartWare (complaint filed on July 30,2009) available at Alta Bates Medical Group (consent order issued July 14, 2009) available at 8 Brief for the United States in Response to the Court s Invitation, Arkansas Carpenters Health and Welfare Fund v. Bayer AG, No (2d Cir. July 6, 2009), available at 9 FTC Press Release, FTC Issues Final Rules Amending Parts 3 and 4 of the Agency s Rules of Practice, April 27, 2009, available at (2009), 16 C.F.R. Part 3 and 4 available at 10 Dept. of Justice and Fed. Trade Comm. to Hold Workshops Concerning Horizontal Merger Guidelines, September 22, 2009, available at see also 171

172 DEVELOPMENTS IN UNITED STATES Mergers This year, several consummated, non-reportable deals were challenged and there was a continued focus on the health care industry. The FTC challenged Carilion Clinic s US$20 million completed acquisition of two outpatient medical clinics in Virginia. Carilion agreed to divest both clinics. 11 The FTC also investigated Scott & White s consummated acquisition of King s Daughters Hospital in Temple, Texas, but did not challenge the transaction because of King s Daughters precarious financial condition and Scott & White s position as the only viable acquirer. 12 The DOJ sued to unwind Microsemi s US$25 million acquisition of Semicoa (a manufacturer of semiconductor devices used in military and space programs), resulting in Microsemi agreeing to divest all of the Semicoa assets it acquired in July The FTC has also challenged Lubrizol Corporation s 2007 acquisition of the oxidate assets (chemical rust inhibitors) of the Lockhart Company. 14 Despite the aggressive enforcement trends of both agencies and the DOJ s increased interest in the technology sector, the DOJ terminated the waiting period under the Hart-Scott Rodino Act (the HSR ) without conditions, clearing Oracle s US$7.4 billion acquisition of Sun Microsystems. 15 Likewise, despite very vocal opposition from pharmacies and pharmacists, the FTC cleared Pfizer Inc. s US$68 billion acquisition of Wyeth Inc., requiring divestitures only in the overlapping animal health business. 16 The Agencies required divestitures in a number of acquisitions. For example, the FTC required Merck to divest its interest in its animal health joint venture and Schering-Plough to sell assets related to nausea and vomiting drugs before Schering-Plough could complete its proposed US$41.1 billion acquisition of Merck. 17 Dow Chemicals had to divest its acrylic business assets in order to consummate its US$18.8 billion proposed acquisition of Rohm & Haas. 18 Meanwhile, K+S AG was required to sell certain salt assets in Maine and Connecticut before it could acquire Morton Salt from Dow/Rohm in a $1.7 billion transaction, thereby becoming the world s largest salt producer. 19 Other notable transactions which were cleared with consent orders include Panasonic/Sanyo (batteries); 20 Watson/Arrow (generic pharmaceutical drugs); 21 Hexion/Huntsman (epoxy resins); 22 BASF/Ciba Holdings (high performance pigments) 23 Getinge AB/Datascope Corporation (endoscopic vessel harvesting devices); 24 and AT&T/Centennial Communications Corporation (mobile wireless communications). 25 After a long, twenty-seven month battle, the FTC finally approved a consent agreement requiring Whole Foods supermarkets to divest a significant portion of the Wild Oats assets. Whole Foods had acquired the assets in August 2007 after a district court had denied the FTC s request for a preliminary injunction to block the merger - but before the Court of Appeals had reversed the district court s decision. 26 Following the serious questions standard used by the Court of Appeals in Whole Foods in determining whether the FTC should be granted a preliminary injunction, a district court granted the FTC a 11 FTC Press Release, Commission Order Restores Competition Eliminated by Carilion Clinic s Acquisition of Two Outpatient Clinics, October 7, 2009, available at 12 FTC Press Release, Bureau of Competition Director Issues Statement on FTC s Closure of its Investigation of Consummated Hospital Merger in Temple, Texas, December 23, 2009, available at 13 Press Release, Dept. of Justice, Justice Department Reaches Settlement with Microsemi Corp., August 20, 2009, available at 14 FTC Press Release, Commission Approves Final Consent Order in Matter of Lubrizol Corporation and Lockhart Company, April 10, 2009, available at 15 Oracle Press Release, U.S. Dept. of Justice Approves Oracle Acquisition of Sun, August 20, 2009, available at 16 Pfizer Gets FTC Blessing to Buy Wyeth, October 15, 2009, available at 17 FTC Press Release, FTC Order Restores Competition Lost Through Schering-Plough s Acquisition of Merck, October 29, 2009, available at 18 FTC Press Release, Commission Approves Final Consent Order in Matter of Dow Chemical and Rohm & Haas Company, April 3, 2009, available at 19 FTC Press Release, FTC Order Preserves Competition for Road Salt Sales to Local Governments in Maine and Connecticut (2009), available at 20 FTC Press Release, FTC Order Sets Competition for Panasonic s Acquisition of Sanyo, November 24, 2009, available at 21 FTC Press Release, FTC Order Ensures Future Competition for Parkinson s and Chemotherapy Drugs That Watson s Acquisition of Arrow Would Have Eliminated, December 2, 2009, available at 22 FTC Press Release, FTC Intervenes in Hexion s Proposed Acquisition of Huntsman Corp. (2008), available at 23 FTC Press Release, FTC Intervenes in BASF s Proposed $5.1 Billion Acquisition of Ciba Holding Inc. (2009), available at 24 FTC Press Release, Commission Approves Final Consent Order in Matter of Getinge AB and Datascope Corp., March 13, 2009, available at 25 See [Proposed] Final Judgment, U.S. v. AT&T Inc. and Centennial Comm. Corp., No (D.D.C. 2009), available at 26 FTC Press Release, FTC Consent Order Settles Charges that Whole Foods Acquisition of Rival Wild Oats was Anticompetitive (March 6, 2009), available at 172

173 DEVELOPMENTS IN UNITED STATES preliminary injunction to block the US$1.4 billion merger of CCC Information Services, Inc. and Mitchell International, Inc. the FTC s first preliminary injunction victory in seven years. 27 The victory resulted in the abandonment of the merger. Since the CCC/Mitchell decision, the FTC has challenged several other mergers, including Thoratec/HeartWare (left ventricular devices) 28 and Talecris Biotherapeutics/CSL (plasma-derivative protein therapies), 29 which have resulted in the abandonment of the merger plans. Cartels and other Anticompetitive Practices Criminal enforcement Criminal antitrust penalties, both fines and prison terms, significantly increased in U.S. criminal antitrust fines exceeded US$1 billion in 2009 which is more than the aggregate amount of fines from years 2000 to The DOJ is seeking longer jail sentences, including against foreign defendants and individuals who agree to enter into guilty pleas. For example, a shipping executive who had agreed to plead guilty to participating in a conspiracy to suppress and eliminate competition in the U.S.-Puerto Rico shipping lane was sentenced to 48 months, the longest prison term imposed on an individual in the U.S. for a single antitrust charge. 31 The DOJ obtained further criminal plea agreements, including large fines for corporations and fines and prison sentences for culpable executives, in several major on-going cartel investigations. The DOJ s investigation into a conspiracy to fix rates for international air cargo shipments (which began in 2007) has resulted in guilty pleas from a total of fifteen airlines and four executives. The airlines have already paid or agreed to pay over US$1.6 billion in criminal fines (the highest fines ever imposed in a single antitrust investigation) while several executives have been imprisoned. 32 The on-going price-fixing investigation into liquid crystal display (LCD) panels (which began in 2006) remained active and generated additional guilty pleas, fines, and indictments in There has also been an active investigation into the cathode ray tubes (CRT) industry which led to the DOJ issuing its first indictment in February The global investigation of price-fixing in the marine hose industry also brought additional guilty pleas in Other criminal antitrust investigations in 2009 include a closer examination of Home Depot, which resulted in prison sentences for several employees who had participated in a vendor kickback scheme. 36 Civil and private enforcement Several companies and individuals were charged by the FTC for failing to comply with duties to disclose information or to conform to a consent order. Failure to disclose a Hatch Waxman reverse payment settlement in connection with the drug Plavix resulted in a $2.1 million penalty for Bristol- Meyers, 37 while a failure to provide notice (as required by the Hart-Scott Rodino Antitrust Act) of the acquisition of shares led to a $1.4 million civil penalty for John C. Malone, CEO and Chairman of Discovery Holding Company. 38 Aspen Tech s failure to divest certain assets (related to simulation software) required by a 2004 consent order prompted the FTC to bring an enforcement action against Aspen Tech 27 FTC v. CCC Holdings et al., No , D.D.C. March 9, FTC Press Release, FTC Challenges Thoratec s Proposed Acquisition of HeartWare International, July 30, 2009, available at 29 FTC Press Release, FTC Authorizes Suit to Stop CSL s Proposed $3.1 Billion Acquisition of Talecris Biotherapeutics, May 27, 2009, available at 30 Dept. of Justice Report, Sherman Act Violations Yielding a Corporate Fine of $10 Million or More, May 22, 2009, available at 31 Dept. of Justice Press Release, Former Shipping Executive Sentenced to 48 Months in Jail for His Role in Antitrust Conspiracy, January 30, 2009, available at 32 Dept. of Justice Press Release, Three International Airline Companies Agree to Plead Guilty to Price Fixing on Air Cargo Shipments, April 9, 2009, available at 33 Dept. of Justice Press Release, Hitachi Executive Indicted for His Role in LCD Price Fixing Conspiracy, March 31, 2009, available at 34 Dept. of Justice Press Release, Former Executive Indicted for His Role in Two Cathode Ray Tube Price-Fixing Conspiracies, February 10, 2009, available at 35 Dept. of Justice Press Release, Subsidiaries of Swedish Company, Trelleborg AB, Agree to Plea Guilty and Pay $11 Million in Criminal Fees, April 20, 2009, available at 36 Dept. of Justice Press Release, Two Former Home Depot Employees Sentenced to Prison for Participating in Vendor Kickback Scheme, April 2, 2009, available at 37 FTC Press Release, Bristol-Meyers Squibb to Pay $2.1 Million Penalty for Failure to Disclose Agreement Involving Substantial Payments to Delay Entry of a Generic Version of the Drug Plavix, March 31, 2009, available at 38 FTC Press Release, FTC Obtains $1.4 Million Civil Penalty for Premerger Filing Violations, June 23, 2009, available at 173

174 DEVELOPMENTS IN UNITED STATES which was settled only after Aspen Tech agreed to comply with a modified consent order which contained additional obligations, including oversight by a FTC-approved monitor. 39 The FTC also settled two charges against trade and independent practice associations which engaged in collective price sharing and/or fixing. The National Association of Music Merchants, a trade association with more than 9,000 members nationwide, was charged with enabling and encouraging the exchange of competitively sensitive information among its members. 40 The Alta Bates Medical Group, an independent practice association in California with 600 physicians, faced charges for fixing prices charged to health care insurers. 41 The FTC has prohibited Alta Bates from collectively negotiating fee-for-service reimbursements. Abuses of a Dominant Position In the only antitrust matter on its docket, the Supreme Court ruled in favor of a private antitrust defendant (for the tenth consecutive time in the past five years) and rejected a price-squeezing claim in Pacific Bell Telephone Co. v. linkline Communications, Inc. 42 The plaintiffs (who were independent internet service providers) alleged that AT&T had engaged in a price squeeze by setting a high wholesale price for digital subscriber line (DSL) transport services and a low retail price for DSL Internet services to customers. The Court held that in the absence of an antitrust duty to deal, AT&T (which was both a retail competitor and a wholesale supplier of DSL service) was under no duty to sell wholesale services to its competitors at any particular price. The plaintiffs sought leave to amend their Complaint to bring a predatory pricing claim, and the Court remanded the case to allow the District Court to determine whether plaintiffs could state such a claim. The Court warned, however, that if AT&T could bankrupt the plaintiffs by refusing to deal altogether, the plaintiffs must demonstrate why the law prevents AT&T from putting them out of business by pricing them out of the market. 43 The linkline decision means that an antitrust price squeeze claim will not exist if the firm that is alleged to be squeezing its rivals has no antitrust duty to deal with them at the wholesale level. Plaintiffs who cannot show a duty to deal will need to satisfy the requirements under Brooke Group Ltd. v. Brown & Williamson Tobacco Corp 44 that the defendant engaged in predatory pricing at the retail level. Court Decisions In Nitro Distributing, Inc. v. Alticor, Inc., 45 the Eighth Circuit reiterated the distinction between vertical and horizontal agreements in dual distribution arrangements. The case involved former distributors of Amway s products who brought a claim under 1 of the Sherman Act alleging that Amway (and certain affiliates) had entered into a per se unlawful horizontal market division with various independent Amway distributors with whom it actually competed as a vertically integrated distributor. The Eighth Circuit held that although as a factual matter, some horizontal overlap between Amway and the distributors existed, Amway s conduct was more properly characterized as vertical in nature when considered in context- the mere fact that a supplier maintains its own proprietary distribution network in competition with distributor or dealer customers does not necessitate the conclusion that an agreement between the supplier and its independent distributors is horizontal in nature. A district court provided insights into the permissible degree of information exchange during merger negotiations with a competitor in Omnicare, Inc. v. UnitedHealth Group, Inc. 46 The court determined that UnitedHealth and PacifiCare had not improperly exchanged competitively sensitive material in a manner that supported an inference of conspiracy because the parties did not share any detailed price data or specific pricing strategies, but rather only 39 FTC Press Release, FTC Adds Requirements to 2004 Order to Restore Competition in Process Simulation Software Markets, July 6, 2009, available at 40 FTC Press Release, National Association of Music Merchants Settles FTC Charges of Illegaly Restraining Competition, March 4, 2009, available at 41 FTC Press Release, FTC Settles Price-Fixing Charges Against San Francisco Area Doctors Group, June 4, 2009, available at S. Ct (2009). 43 Id. at U.S. 209 (1993) E.3d 417 (8th Cir. 2009) F. Supp. 2d 945 (N.D. Ill. 2009). 174

175 DEVELOPMENTS IN UNITED STATES shared aggregated pricing data among high level executives for due diligence purposes. The U.S. Supreme Court has granted certiorari in American Needle v. NFL and Stolt-Nielsen v. AnimalFeeds. In American Needle, the Supreme Court will consider whether the National Football League is a single entity and therefore exempt from antitrust scrutiny under Section 1 of the Sherman Act. 47 The issue to be decided in Stolt-Nielsen is whether imposing class arbitration on parties whose arbitration clauses are silent on that issue is consistent with the Federal Arbitration Act Supreme Court Docket, American Needle v. National Football League, No , available at 48 Supreme Court Docket, Stolt-Nielsen v. AnimalFeeds, No , available at Weil, Gotshal & Manges Fifth Avenue New York, New York United States

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177 Venezuela Juan Domingo Alfonzo, Luis Mariano Rodríguez and Ana Carolina González Legislative Developments There are rumors that a reform of the 1992 Law to Promote and Protect the Exercise of Free Competition (the Law ) is under way. 1 However, neither a revised draft law has been published yet nor are there any indications on the scope and content of such reform. The most recent draft law was made public in 2007, but was later withdrawn. Mergers During 2009, the agency only issued one merger decision. On September 14, 2009, after an extended review of the request submitted by Nestlé Venezuela, S.A. ( Nestlé ) to buy the Venezuelan company Chocolates el Rey, C.A., the Superintendence for the Promotion and Protection of Free Competition (the Superintendence ), decided, by means of Decision No. SPPLC/ that the merger could put Nestlé in a monopoly position and prohibited the transaction. In this case the Superintendency identified three relevant markets: i) chocolate flavoured dairy modifiers in Venezuela ii) ingredients for restoring in Venezuela; and iii) ingredients for final consumers in Venezuela. The agency s concluded that: (i) Nestle had a dominant position in the market for final consumers market with a market share of 69%; (ii) the alleged efficiency gains related to the possibility of Chocolates El Rey increasing production would not benefit the consumer but the company itself; (iii) as a consequence of the transaction, there would be an increased risk of exclusionary practices; and (iv) the transaction would probably exclude other competitors from essential raw material supplies (cacao). Cartels and other Anticompetitive Practices Fevacu-Procompetencia vs. Visa Inc. and others. Following similar investigations in Europe, the US and some Latin American Countries like Peru and Colombia, the Superintendence initiated an administrative procedure to investigate the credit card services provided by almost all banks in Venezuela. The Superintendence subsequently extended the investigation to the Venezuelan Chamber of Credit Cards, the Bank Association of Venezuela and The National Bank Chamber, as well as the main credit card operators (Visa Inc, International, Master Card Inc. International, American Express and Diners Club). 3 Concerning the banks and Visa Inc, International, Master Card Inc. International, American Express and Diners Club, the investigation focused on possibly excessive discount rates that businesses pay to banks because of the usage of a credit card by a consumer. It is to note that during the investigation, the Central Bank of Venezuela established the maximum percentage of the discount rate, 4 taking into consideration the economic sector in which the credit card is used. The Superintendence also examined whether banks and credit card operators collusively divide markets or geographical areas to impose a higher discount rates. Concerning the Venezuelan Chamber of Credit Cards, the Bank Association of Venezuela and the National Bank Chamber, the investigation tried to determine whether these entities have issued recommendations, resolutions or decisions on how their members should determine the discount rates that are paid by the business to banks. 1 Official Gazette No , January 13, 1992, available in Spanish at 2 Decision No SPPLC/ , September 14, Nestle Venezuela vs. Chocolates El Rey, available in Spanish at 3 Decision SPPLC/ , This Decision orders the beginning of the procedure to investigate anticompetitive practices. No information has been made public because the procedure is still ongoing. 4 See Decision of the Central Bank of Venezuela. 177

178 DEVELOPMENTS IN VENEZUELA In their reply, the banks alleged that each bank would have an internal procedure to determine the fee, based on the characteristics of the business, volume of sales, type of business, relationship with the bank, etc. which would not be agreed upon or otherwise coordinated with other banks. The investigation phase ended on February 18, 2009 and as yet no decision has been issued. Avavit and Travel Agencies vs. Various Airlines In November 2008, the Superintendence ruled in the case concerning the travel agents complaint against airlines for curbing their commissions. 5 On May 30, 2006, the Venezuelan Association of Travel Agencies ( Avavit ) and a group of travel agencies had filed a complaint against more than a dozen major international airlines, including American Airlines, Continental Airlines, Iberia and Lufthansa, alleging participating in a cartel 6 and abusive practices 7 by reducing the commissions paid to travel agents for issuing air tickets. 8 In particular, the travel agents alleged that by reducing the fees paid to the travel agencies, the airlines would exclude the small and medium-sized travel agencies from the market. In addition, since travel agencies would depend economically on the business with airlines, the reduction of fees would constitute an abuse of a dominant position. The reduction of travel agency fees would be the result of concerted action by the airlines (cartel). It was also alleged that the IATA was a mechanism used by the airlines to transmit to each other information about prices and fees paid to the travel agencies for their services of selling tickets. The airlines essentially replied that they would lack the alleged market power towards travel agencies. Rather, they would depend on travel agents in order to be able to distribute their tickets. Apart from the fact that they never engaged in concerted behavior to reduce the commission of travel agents, travel agents would receive other types of remuneration from airlines which the complaint did not disclose. After a lengthy investigation, 9 the Superintendence ultimately ruled in favor of the travel agents and stated that the traditional point of origin/point of destination ( O&D ) approach in the airline travel market would also apply to the sale of airlines tickets. It found that the airlines operated a cartel that aimed to reduce travel agents fees, which would exclude small and medium-sized travel agents from the market. 10 In 2009, the airlines appealed the ruling (which involved the imposition of a fine). A decision on this appeal is still pending. 5 Decision SPPLC/ , November 3, Avavit,Tomaca Tours, C.A., Alitour, C.A., Internacional Agencia De Viajes, C.A., Viajes Suevia, C.A., Transmundial, C.A., El Faro Agencia De Viajes, Tur-V-Special Tours, C.A., Agencia De Viajes y Turismo Halcón, C.A., Viajes Andari, C.A., Agencia de Viajes y Turismo Afortunada Tours, C.A., y Adrián Tours, C.A. vs. Amercan Ailines, Continental Airlines, Iberia, Aserca Airlines, Aeropostal, Lufthansa, Taca, Avianca, Varig, Alitalia, Air France, Mexicana de Aviación, Copa Airlines, Delta Airlines, Lan Airlines, TAP, Air Canada, Aerolíneas Argentinas, Lloyd Aereo Boliviano, Air Europa, Rutaca and Avior, available at 6 See Article 10 of the Law. Agreements, decisions, collective recommendations or concerted activities are prohibited if they: (i) fix, directly or indirectly, prices or other conditions essential to the sale or provision of goods or services; (ii) limit production, distribution, and the technical or technological development of investments; (iii) divide markets, geographical areas, supply sectors, or supply sources between competitors; (iv) impose unequal conditions, within any commercial or service transaction, for identical supplies provided that disadvantage one customer over another; and (v) attach, to any contract, ancillary conditions that because of their nature or because of their accepted commercial use, exhibit no relation to the objective of the contract. 7 See Article 13 of the Law. Abuse on the part of one or several persons subject to this Law who hold a dominant position in all or part of the national market is prohibited, and in particular the following conduct is prohibited: (i) price discrimination and other conditions of sales of services; (ii) unjustified limitations of production, distribution, or technical or technological development, harmful to firms or consumers; (iii) the unjustified refusal to meet the demand of goods and services; (iv) the imposition, in business and service relations, of unequal conditions for equivalent goods and services that disadvantage some competitors over others; (v) attach, to any contract, ancillary conditions that because of their nature or because of their accepted commercial use, exhibit no relation to the objective of the contract. 8 Article 6 of the Law prohibits acts or conduct of agents, not specifically protected by law, that wilfully impede or obstruct the entry or exit of firms, goods or services into any or all areas of the market. 9 Decision SPPLC/ , August 11, This Decision is the opening act of the process that concluded with Decision No , in it, the Superintendence determines that there is enough evidence to presume that American Airlines, Continental Airlines, Iberia, Aserca Airlines, Aeropostal, Lufthansa, Taca, Avianca, Varig, Alitalia, Air France, Mexicana de Aviación,, Copa Airlines, Delta Airlines, Lan Airlines, TAP, Air Canada, Aerolíneas Argentinas, Air Europa, Rutarca and Avior are engaging in conduct that is prohibited by articles 6, 10 and 13 of the Law to Promote and Protect the Exercise of Free Competition. 10 Decision SPPLC/ , November 3, 2008.AVAVIT vs. Líneas Aéreas, available in Spanish at 178

179 DEVELOPMENTS IN VENEZUELA Torres, Plaz & Araujo Campo Alegre Urbanization. Francisco de Miranda Avenue. Torre Europa. Pisos 2 y 6. Distrito Capital Caracas - Venezuela

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Summary 715 SUMMARY. Minimum Legal Fee Schedule. Loser Pays Statute. Prohibition Against Legal Advertising / Soliciting of Pro bono

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