Client Update November 2007

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1 Highlights ASIA PACIFIC...1 Singapore...1 Indonesia...2 Japan...2 South-Korea Australia EUROPE European Union NORTH AMERICA...4 United-States...4 CONCLUDING WORDS...5 Law Bites November 2007 We are pleased to circulate our monthly review of recent developments in competition law from around the world. 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. ASIA PACIFIC Singapore The Commission of Singapore ( CCS ) issued a decision that the acquisition by Kraft Foods Global Inc. of the worldwide biscuit, snacks and cereals business of Danone will not substantially lessen competition in Singapore. In its decision, the CCS held that the relevant product market to be for the sale of biscuits, which would be wider than Singapore. [Editor s Note: the European Commission ( EC ) which was notified of this acquisition had also cleared this merger, subject to certain commitments given by the parties to alleviate competition concerns in various countries in Europe. This suggests that the EC views the geographical markets in this case to be national in scope, which differs from the wider approach taken in Singapore (see European Union on pages 3 and 4)]. The CCS has extended the Phase 1 review of the merger between Reuters Group and Thomson Corporation, both global providers of information products. Interested third parties were rerquested to submit their comments before 19 November [Editor s Note: As highlighted in our previous issue, this merger had proceeded to a Phase II review in Europe and is still under review in the United States. The merger procedure in Singapore also allows for CCS to proceed to a Phase II review where a merger raises competition issues that require a further assessment or to stop the clock under Phase I in order to assess commitments, if any, offered by the Parties to alleviate identified competition concerns]. 1

2 Contacts Kala Anandarajah Partner Direct: (65) Facsimile: (65) kala.anandarajah Andrew Ong Consultant Direct: (65) Facsimile: (65) andrew.c.ong Dominique Lombardi Foreign Lawyer Direct: (65) Facsimile: (65) dominique.lombardi Indonesia The Business Supervisory Commission ( KPPU ) imposed a fine of S$3.8 million each on Temasek Holdings and eight of its subsidiaries (loosely the Temasek Group ) for violations of Indonesian competition law. According to the KPPU, Temasek Holdings, through its indirect shareholdings in the two Indonesian mobile operators, Indosat and Telkomsel, has restricted competition in the cellular market in Indonesia by restraining the growth of Indosat on the one hand and by allowing Telkomsel to fix excessive prices on the other hand. Specifically, the KPPU found that the Temasek Group violated the competition law provisions Article 27 and Article 17. Article 27, which relates to share ownership, prevents entrepreneurs from holding majority shares in several firms engaged in the same business sector in the same relevant market where these firms jointly control 50% (fifty percent) or more of the relevant market. Ariticle 17, which relates to monopoly, prevents entrepreneurs from controlling any production and/or marketing of goods and/or services that can cause monopolistic practices and/or unfair business competition. In addition to the fines, Temasek Holdings and its subsidiaries have been ordered by the KPPU to divest their shares either in Telkomsel or in Indosat within two years following the entry into force of the decision and under specific conditions. Finally, the decision by KPPU also requires Telkomsel to reduce its prices by at least 15%. Japan Please feel free also to contact the Knowledge & Risk Management Group at eoasis The Japan Fair Trade Commission ( JFTC ) raided the cathode-ray tube ( CRT ) manufacturing operations of Matsushita and Samsung in relation to a global investigation into alleged price-fixing and control activities by the major CRT manufacturers. This cartel was simultaneously investigated by the Japanese, South-Korean, Taiwanese and European competition authorities (see European Union on pages 3 and 4). 2

3 South-Korea Abuses Of Dominance The Korean Fair Trade Commission ( KFTC ) imposed a fine of more than S$200,000 on GMarket, the largest online shopping mall in Korea. The KFTC found that GMarket tried to drive one of its competitors out of the market by forcing seven of GMarket s suppliers to terminate their supply contracts with this competitor. The KFTC imposed a combined fine of more than S$9 million on Hyundai Motors and its sister company Kia Motors for unfairly forcing their subcontractors to cut the prices of parts used in some of their models without offering compensation. Australia The Federal Court of Australia imposed a penalty of over S$1.1 million on certain individuals and companies involved in a price-fixing agreement in relation to abalone harvested from the central abalone fishery zone in Victoria. Quota holders and others, who had created Australian Abalone Pty Ltd to market their catch, agreed to fix a premium price to be charged for the supply of abalone to processor customers. Further, the agreement provided that only customers nominated by Australian Abalone could be supplied by the quota holders. EUROPE European Union The EC imposed combined fines of more than EUR486 million (S$1 billion) on Asahi, Guardian, Pilkington and Saint-Gobain for coordinating price increases and other commercial conditions relating to the supply of flat glass. Evidence of the cartel includes several meetings in restaurants and hotels in different European countries. During these meetings Asahi, Guardian, Pilkington and Saint-Gobain discussed and agreed on the level and timing of price increases (including which undertaking was to lead the price increase), target prices, minimum prices and exchanged sensitive commercial information. The EC imposed a fine close to EUR75 million (S$160 million) on 3

4 Sony, Fuji and Maxwell for fixing the prices of professional videotapes in Europe. Professional videotapes are videotapes essentially sold to TV stations and independent producers of TV programmes and advertising films. Further, one of Sony s employees had refused to answer to questions by the investigation team and another had shredded documents during a surprise inspection of Sony s premises. As a consequence, Sony s fine was increased by 30% for obstructing the EC investigation. The EC carried out raids at the premises of various manufacturers of CRT. The EC suspects that these manufacturers have entered into anti-competitive agreements in violation of the prohibition of cartels. Similar raids were also conducted in Japan by the JFTC a few days later (see Japan on page 2). The EC cleared the proposed acquisition by Kraft of Danone s biscuit business subject to the divestiture by Kraft of a range of Spanish biscuit brands, as well as one of its production facilities in Spain, and the divestiture of one Hungarian chocolate bar brand. Note that the decision by the EC in this case suggests a definition of the relevant markets which differs from the one adopted by the CCS (see Singapore on page 1). The EC has proceeded to a Phase II review of the merger between Google and DoubleClick. The EC is worried that the merger will affect competition in the markets for intermediation and ad serving in online advertising. NORTH AMERICA United-States Two executives of a French manufacturer of marine hose agreed to plead guilty, serve 14 months in jail and pay a fine in relation to their role in rigging bids, fixing prices and allocating markets with respect to marine hose in United-States and elsewhere. Marine hose is used to transfer oil between tankers and storage facilities. In May 2007, (see Law Bites May 2007), raids were conducted by various competition authorities around the world, including Japan, France, Italy, UK and US. Qantas Airways Ltd agreed to plead guilty and pay a US$61 million fine in relation to its participation in a cartel to fix prices for international air cargo shipments. Earlier this year, British Airways and Korean Air Lines pleaded guilty and paid US$300 million fines each 4

5 for their participation in the cartel (see Law Bites August 2007). The Federal Trade Commission ( FTC ) challenged the proposed acquisition of Organon BioSciences by Schering-Plough on the basis that it would impair competition for the manufacture of three poultry vaccines. The companies agreed to divest the rights and the assets needed to develop, manufacture and market these vaccines to a third party, in order to get the nod by the FTC. Note that this operation was cleared without commitments in Australia, whilst the EC approved the merger subject to substantial divestitures in relation to a dozen of veterinary products. 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 2, or contact the & Trade Law Team at competitionlaw, and we would be happy to assist you. Rajah & Tann 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 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 or the Knowledge & Risk Management Group at eoasis. 5