Client Update July 2008

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1 Highlights ASIA...1 Indonesia...1 Korea...1 AUSTRALIA...2 Australia...2 EUROPE...2 The European Union...2 Germany...4 United Kingdom...5 THE AMERICAS...5 Canada...5 United States...6 AFRICA...8 Law Bites June 2008 We are pleased to circulate our latest review of recent developments in competition law from around the world. This review covers developments in June The purpose of this review by the Rajah & Tann Law Team is to highlight key developments in competition law globally that, in our view, could be of interest in the Singapore context. Please note that this is not an exhaustive overview of all the cases or new legislations that are developing worldwide, nor are the summaries comprehensive. Please do not hesitate to contact the Law Team at if you would like more information. ASIA Indonesia Six mobile communications operators have been found guilty of fixing the price for text message services (ie SMS) from the year 2004 until April The six operators found guilty by the Business Supervisory Commission are Excelcomindo Pratama ( XL ), PT Telekomunikasi Seluler ( Telkomsel ), PT Telekomunikasi Indonesia, Bakrie Telecom, Mobile-8 Telecom and Smart Telecom. XL and Telkomsel received the heaviest fines because the former was the most active in terms of ensuring other cartel members follow the agreement while the latter benefited the most from the practice as it had the most customers. Korea Abuse Of Dominance The Korean Fair Trade Commission ( KFTC ) has ordered that Intel pay a fine of about US$26 million for abusing its dominant position by offering rebates to South Korean PC makers in return for not buying microprocessors from rival Advanced Micro Devices ( AMD ). Intel and AMD both manufacture the central processing unit chips for personal computers and servers. The KFTC was of the view that the rebates had hurt market competition, and further that South Korean consumers had to buy PCs at higher prices as South Korean PC makers were forced to buy Intel's pricier CPU. 1

2 South Africa... 8 CONCLUDING WORDS... 8 [Editor s Note: Intel s business practices in the US are also the subject of an investigation. Please refer to the section on US below at page 6.] AUSTRALIA Australia Abuse Of Dominance The Australian and Consumer Commission ( ACCC ) has issued a draft notice proposing to revoke a notification lodged by ebay International A.G. Under the notification, ebay (a leading supplier of online marketplace) proposed to mandate the use of PayPal (a supplier of online payment services), a subsidiary company of ebay, for almost all transactions on the ebay site. The ACCC is concerned that the notified conduct will allow ebay to use its market power in the supply of online marketplaces to substantially lessen competition in the market in which PayPal operates. While the ACCC acknowledges that having PayPal as the only payment provider has the potential to deliver some benefits to users, the ACCC takes the view that consumers are in the best position to decide which payment method is most suitable for them. After ebay and interested parties have submitted responses to the draft notice, the ACCC will decide whether to issue a final notice revoking the notification. EUROPE The European Union Please feel free also to contact the Knowledge & Risk Management Group at eoasis@rajahtann.com. The European Commission ( EC ) has imposed a combined fine of 79,070,000 on a cartel for allocating sales volumes and fixing prices for sodium chlorate, which is used in the pulp and paper industry to produce a bleaching agent. The cartel had held regular meetings to discuss prices and volumes, exchange sensitive commercial information and follow up the implementation of their illegal agreements. The cartel comprised of the following companies: EKA Chemicals, Akzo Nobel, Finnish Chemicals, Erikem Luxembourg, Arkema France, Elf Aquitaine, Aragonesas Industrias y Energia and Uralita. As Akzo Nobel and its subsidiary EKA Chemicals were the first to provide information to the EC about the cartel, they received full immunity from fines. On the other hand, the fine imposed on Arkema France was increased by 90% because it had participated in three cartels before this. 2

3 Contacts Kala Anandarajah Partner Direct: (65) Facsimile: (65) Andrew Ong Consultant Direct: (65) Facsimile: (65) Dominique Lombardi Foreign Lawyer Direct: (65) Facsimile: (65) [Editor s Note: Under Singapore Laws, subject to certain conditions, a member of a cartel will be granted full immunity from financial penalties if it is the first to provide the Commission of Singapore ( CCS ) with evidence of the cartel activity before an investigation has commenced. The CCS also has the power to increase the fines imposed on a cartel member if it had participated in other cartels.] The EC has commenced a formal investigation into whether Sanofi- Aventis SA had illegally obstructed an unannounced on site inspection of its premises in January The EC had, during the inspection, identified certain documents which were relevant for its competition sector inquiry. However, Sanofi-Aventis SA refused to let the EC officials examine and take a copy of the documents unless a search warrant was produced. [Editor s Note: The CCS has similar powers under the Singapore Act (Cap 50B) to enter premises without a warrant and require the production of any document which relates to any matter relevant to the investigation. The CCS is also entitled to take copies of any document which is produced.] The EC has filed cases with the High Court in Brussels seeking compensation from lifts companies Otis, KONE, Schindler and ThyssenKrupp for damages suffered from inflated prices for the installation and maintenance of lifts and escalators for its own buildings and those of other EU institutions. In 2007, these companies were fined a total of 992 million by the EC for operating illegal cartels in several countries. [Editor s Note: Under Singapore Laws, a party who has suffered any loss or damage directly as a result of an agreement found anti-competitive by CCS has, similarly, a right of private action against the undertakings that participated to the said agreement.] Mergers The EC has approved the proposed takeover of the Reflex paper production mill in Germany, which manufactures a range of specialty papers, by paper manufacturer Arjowiggins, one of the world's largest manufacturers of specialty paper, subject to commitments by Arjowiggins to divest the carbonless paper businesses at the Reflex paper mill. In December 2007, the EC had commenced an in-depth investigation into the proposed takeover because of concerns that it 3

4 would significantly impede effective competition, particularly on the market for carbonless paper. The EC concluded that as a result of these commitments, customers would be protected from higher prices and / or reduced supplies, and therefore approved the merger. The EC has approved the proposed acquisition of the Norwegian company Trolltech, a supplier of software development tools, by the Finnish company Nokia, which is mainly active in the development and supply of mobile handsets. While the activities of Nokia and Trolltech do not overlap horizontally, they are vertically related, as Trolltech's products can be used in the development of software for mobile handsets. However, the EC s investigation showed that Trolltech's products have a limited market presence and that Nokia's competitors would have several credible alternatives to Trolltech's products, if, after the transaction Nokia were to decide to no longer supply Trolltech's products to rival handset manufacturers. Therefore, the EC concluded that the merger would not significantly impede effective competition. [Editor s Note: Similarly, Singapore Laws is not only concerned with the lessening of competition arising from mergers between competitors (ie horizontal mergers), but also the lessening of competition arising from mergers between parties active at various levels of the production or distribution chain (ie vertical mergers).] The EC has approved the proposed acquisition of Yves Saint Laurent Beauté by L'Oréal. Both merger parties are from France, active in the development, production and sale of luxury cosmetics (in particular make-up and perfume), and sell their products worldwide. The EC found that the merged entity would still face strong competition from effective, international cosmetics manufacturers, such as Estée Lauder, LVMH or Chanel, such that the merger would not significantly impede effective competition in the relevant markets. Germany Abuse Of Dominance The Bundeskartellamt has initiated an inquiry into the state of competition in the markets for petrol and diesel fuel to assess whether the fuel markets in Germany are functioning properly. The inquiry was launched following numerous complaints, and in particular from independent filling station operators who accused the large fuel companies of applying margin squeezes by charging wholesale supply prices that are higher than the respective retail charges at filling stations. 4

5 [Editor s Note: Margin squeezing, under Singapore Laws, is an abuse of dominance prohibited under the Singapore Act (Cap 50B).] United Kingdom The UK Commission ( UK CC ) has published its provisional findings on the sale of Payment Protection Insurance ( PPI ). PPI covers repayments on credit products if the borrower is unable to do so due to loss of earnings as a result of accident, sickness, unemployment or death. The UK CC found that companies face little or no competition when selling PPI to their credit customers. To increase competition in the PPI market, the UK CC has published a notice of possible remedies to address the adverse effects on competition. The UK CC will issue a final report after hearing views from all interested parties. Three UK businessmen pleaded guilty to and were sentenced to imprisonment for dishonestly participating in a cartel to allocate markets and customers, restrict supplies, fix prices and rig bids for the supply of marine hose and ancillary equipment in the UK. Marine hose is used by the oil and defence industries for transporting oil between tankers and storage facilities. The cartel was a global one and involved all the major manufacturers of marine hose worldwide. All three were imprisoned between two and a half (2½) to three (3) years, and were also disqualified from acting as company directors for periods of between five (5) and seven (7) years. Evidence of the cartel arrangements were both obtained through searches at the businessmen s offices and homes, and also from a cartel meeting that was covertly recorded by US authorities. [Editor s Notes: This is the first criminal prosecution by the OFT since criminal prosecution powers were given to it, and signals the seriousness with which UK law views cartel behaviour.] THE AMERICAS Canada The Bureau announced that criminal charges have been laid today against 13 individuals and 11 companies accused of fixing the price of gasoline at the pump in Quebec. The Court has imposed fines totalling just over CAD $2 million against the companies which pleaded guilty. The Bureau had found evidence that gas 5

6 retailers in the markets phoned each other and agreed on the price they would charge customers for gasoline. To obtain the necessary evidence to prove the cartel, the Bureau used several investigative tools, including wiretaps and searches and its Immunity Program. Under the Immunity Program, the first party to disclose to the Bureau an offence that has not been detected or to provide evidence leading to the filing of charges may receive immunity from criminal prosecution. In addition, parties that cooperate with the Bureau in their investigations may benefit from reduced penalties. [Editor s Note: Price-fixing conspiracies are by nature difficult to detect. Therefore, leniency programs granting benefits to the whistleblowing cartel member in exchange for their cooperation to uncover the cartel is an effective method to gather evidence of cartel activity. Similarly in Singapore, a cartel member who whistle-blows on the cartel may be granted immunity or reductions in financial penalties.] United States The Home City Ice Company, a packaged-ice manufacturer with multiple locations throughout the United States, pleaded guilty to participating in a conspiracy to suppress and eliminate competition by allocating packaged-ice customers and territories in Detroit and Michigan. Packaged ice is marketed as high-grade ice for consumption and is sold in varying size bags and blocks. According to the charges, The Home City Ice Company and its co-conspirators had exchanged information during meetings and conversations for the purpose of monitoring and enforcing adherence to the said agreements. [Editor s Note: An agreement between competitors to allocate customers and territories will similarly infringe The Singapore Act.] American Express has reached an agreement with MasterCard Inc. to drop a lawsuit seeking monetary damages for the lost business opportunity that resulted from the illegal conspiracy to boycott American Express in the United States. This settlement agreement with MasterCard arose out of a lawsuit against MasterCard and Visa alleging that MasterCard and Visa had imposed rules on its bank customers that limited American Express s ability to expand during the 1990s and early 2000s. Under the terms of the agreement, MasterCard will pay American Express up to US$1.8 billion. 6

7 [Editor s Note: (1) The imposition of an obligation on an undertaking not to trade with another undertaking can be a violation of the Singapore Act (Cap 50B). (2) This settlement with MasterCard follows an earlier agreement with Visa in November 2007 to settle similar claims for up to US$2.25 billion The combined antitrust settlement is the largest in US history.] Abuse Of Dominance The US Federal Trade Commission ( US FTC ) alleges that Intel Corporation, the world s largest manufacturer of microprocessors, had abused its dominant position in the microprocessor market. Some of its customers hold important rival patents on microprocessor and related technologies. The US FTC alleged that when these customers sought to enforce those patents against Intel, Intel retaliated by cutting off the customers access to the technical information necessary to develop computer systems based on Intel microprocessors and threatening to cut off the supply of microprocessors. The US FTC alleged that by its actions, Intel had sought to injure the customer until that customer surrendered the patent licenses Intel desired. The US FTC also alleges that these actions have hurt the sales and profitability of the targeted customers, and threatened to have an even more significant, long-term impact on their computer systems businesses absent settlement agreements. [Editor s Note: On Intel, please also refer to Korea above under Abuse Of Dominance at page 1.] Mergers The proposed merger between Inova Health System and Prince William Health System was abandoned by parties following a preliminary district court hearing where the US FTC had disclosed evidence in support of its case that the merger would have violated antitrust laws. Among other things, the FTC alleged that the merger would be anticompetitive and would result in higher health care costs for Northern Virginia consumers. The merger parties cited the reason for the abandonment to be that the challenge by the US FTC threatened to prolong completion of the merger by as much as two (2) years, which both health systems believe is not in the best interest of the communities they serve. 7

8 AFRICA South Africa The Commission is investigating into alleged price fixing and exclusive dealing in the steel industry, and had pursuant to its investigation raided the premises of two steel manufacturers, namely Cape Town Iron and Steel Works (Pty) Ltd and Highveld Steel and Vanadium Corporation Ltd, and the premises of the South African Iron and Steel Institute, an association of steel manufacturers based in Pretoria. The aim of the investigation is to establish whether the ability of steel manufacturers to charge and maintain high prices is due to collusive conduct. The Commission is also concerned about the impact that a lack of transparency in price setting in the steel industry has on downstream activities. This is because steel products are intermediate goods and is a major contributor to the input costs of various downstream sectors, such as building and construction. CONCLUDING WORDS If you would like more information on the above, please contact Kala Anandarajah, Andrew Ong or Dominique Lombardi whose contact details appear on the left of page 3, or contact the & Trade Law Team at competitionlaw@rajahtann.com, and we would be happy to assist you. Rajah & Tann LLP is one of the largest law firms in Singapore, with a representative office in Shanghai. It is a full service firm and given its alliances, is able to tap into resources in a number of countries. Rajah & Tann LLP is firmly committed to the provision of high quality legal services. It places strong emphasis on promptness, accessibility and reliability in dealings with clients. At the same time, the firm strives towards a practical yet creative approach in dealing with business and commercial problems. The information contained in this Update is correct to the best of our knowledge and belief at the time of writing. The contents of the above are intended to provide a general guide to the subject matter and should not be treated as a substitute for specific professional advice for any particular course of action as the information above may not necessarily suit your specific business and operational requirements. It is to your advantage to seek legal advice for your specific situation. In this regard, you may call the lawyer you normally deal with in Rajah & Tann LLP or the Knowledge & Risk Management Group at eoasis@rajahtann.com. 8