Commission probes credit default swaps market

The Commission has opened two investigations relating to possible breaches of Articles 101 and 102 of the Treaty on the Functioning of the European Union (the TFEU) in the credit default swaps (CDS) market. CDS are financial instruments intended to protect investors if a company/State they have invested in defaults on their payments, and can also be used as speculative tools.

The first investigation relates to whether, through agreements, concerted practices or the abuse of a collective dominant position, the 16 investment banks that deal in the CDS market and Markit (the leading provider of financial information on CDS), have conspired to control the access to financial information on CDS, thereby restricting access to the valuable raw data by other information service providers.  

In the second investigation, the Commission will assess agreements between 9 of the 16 CDS dealers involved in the first investigation and ICE Clear Europe (ICE). These agreements were concluded at the time of the sale by the dealers of a company called The Clearing Corporation to ICE and contain clauses such as preferential fees and profit sharing, and create an incentive for CDS dealers to use ICE as a clearing house, rather than any other entity. If this is the case, other clearing houses are likely to have difficulties successfully entering the market and other CDS players have no real choice where to clear their transactions. Similarly, the Commission will analyse ICE’s fee structure to determine whether ICE is giving an unfair advantage to the 9 CDS dealers discriminating against the other CDS dealers, which could potentially constitute an abuse of a dominant position by ICE under Article 102 TFEU. 11/509, May 2011

Commission carries out dawn raids in container liner shipping sector

The Commission has confirmed that it has carried out dawn raids on companies in the container liner shipping industry.  

The inspections are part of an investigation into alleged breaches of Articles 101 and 102 of the TFEU, which prohibit cartels, restrictive business practices and the abuse of a dominant market position. 11/307, 17 May 2011

Commission market tests Standard & Poor's commitments on international securities identification numbers

In November 2009, the Commission sent a Statement of Objections to Standard & Poor’s (S&P) alleging S&P were charging abusive prices for International Security Identification Numbers (ISIN) that had been issued in the USA and were being distributed in the European Economic Area. The Commission took the view that the prices were potentially abusive because they did not comply with certain principles set by the International Organisation for Standardisation (ISO), which the Commission regarded as a benchmark for fair prices.  

S&P has proposed to offer commitments (under Article 9 of Council Regulation 1/2003, also known as the Modernisation Regulation) to resolve the investigation, by amending its pricing policy for the use of US ISINs in Europe, which should decrease the cost of utilising ISINs from the USA. S&P also commits to distribute ISIN records separately from other “added value information” (S&P had submitted the “added value information” was the reason for higher prices despite the fact that users only needed the ISIN number and minimum descriptive data - together referred to as an ISIN Record - to identify a security).

Breach of seal during an inspection - Suez Environnement and Lyonnaise des Eaux

The Commission has imposed a fine of EUR 8 million on Suez Environnement and its subsidiary Lyonnaise des Eaux (LDE) (together the Companies) for breaching an official seal placed by Commission officials at the premises of LDE during a ‘dawn raid’ relating to an investigation into collusive tendering in the water and waste water markets (the investigation is ongoing). An LDE employee indicated that they had unintentionally breached the seal.

The Commission regards the breaching of a seal to be a serious competition law infringement which undermines the effectiveness of inspections, but when setting the level of the fine in this case, it took into account the immediate constructive cooperation of the companies (which included the provision of more information to the Commission than the companies were obliged to give).

E.ON

In 2008, and relating to a different case, the Commission fined E.ON Energie AG (E.ON) EUR 38 million for breaking a seal affixed at E.ON’s premises during an unannounced inspection. In dismissing an appeal by E.ON against the fine, the General Court (GC) stated that the Commission is not required to prove how the seal was broken, whether anyone entered the sealed room, or if any information was removed. On 6 May 2011, details were published of an appeal by E.ON to the European Court of Justice (ECJ) challenging the GC’s judgment.

IP 11/632, 24 May 2011

Commission confirms dawn raids in the engines sector

The Commission has confirmed that it has carried out dawn raids on companies active in the manufacturing, supply and distribution of piston engines which are mainly used for industrial applications.  

The inspections are part of an investigation into alleged anti-competitive practices in breach of Article 101 of the TFEU. 11/355, 27 May 2011  

UK

OFT publishes first decision of Procedural Adjudicator

The OFT has published the first decision of its Procedural Adjudicator – the OFT official who hears disputes that arise between case teams and parties in relation to procedural matters.

As we reported in our March bulletin, the Procedural Adjudicator has the power to review decisions made by case teams about submission deadlines, disclosure requests, applications for redactions of confidential information from files/documents and other significant procedural issues that may arise during the course of a Competition Act investigation.

In this case, the Adjudicator rejected an application by Sports Direct International for early access to an information request sent to a third party. The Procedural Adjudicator concluded that the OFT was under no positive duty to provide such access and that the case team’s decision was reasonable.  

The OFT began a year-long trial of the Procedural Adjudicator in March 2011 to provide a swift, efficient and cost-effective mechanism for resolving disputes on procedural matters. 19 May 2011

UK rail regulator consults on access to freight sites

The Office of Rail Regulation (the ORR) has begun a consultation into whether the control of freight sites by rail operators acts as a barrier to competition.

The ORR consultation sets out the ORR’s belief that mechanisms that were put in place when the rail industry was privatised may not be working effectively. However, the ORR also states that it would not be “proportionate” to refer the matter to the CC at present, and notes that during the course of a public study carried out into access to rail freight sites in Great Britain (between September 2010 and February 2011), the ORR observed more examples of positive transactions than negative and found no material evidence of harm by way of business lost.

The ORR has invited all parties to participate in the consultation and the deadline for responding is Friday 29 July 2011. 9 May 2011