UK flexes its criminal enforcement muscle
In a move that signals that UK criminal cartel enforcement is set to increase, Peter Nigel Snee appeared on 27 January 2014 at Westminster Magistrates’ Court to face charges under the UK’s criminal cartel offence. Mr Snee has been charged under section 188 of the Enterprise Act 2002 with “dishonestly agreeing with others to divide customers, fix prices and rig bids between 2004 and 2012 in respect of the supply in the UK of galvanised steel tanks for water storage”. In addition to the charges against Mr Snee, the UK’s Office of Fair Trading (“OFT”) is also conducting a related civil investigation into whether businesses have infringed the provisions of the UK’s Competition Act 1998. This case is an important reminder that the UK competition authorities are determined to pursue criminal cases where appropriate. The charges against Mr Snee come a few months before new legislation will enter into force in the UK, which is designed to make it easier for criminal charges to be brought for competition law infringements. It also follows the announcement in December 2013 that Lee Craddock will take on the role of Director of Criminal Enforcement at the new Competition and Markets Authority (the “CMA”, which will assume the powers of the OFT and the Competition Commission on 1 April 2014). This new legislation, and the general drive to increase prosecutions in the UK, creates increased compliance risks for companies and individuals active in the UK. The current UK cartel offence Cartel activity was criminalised for the first time in the UK in 2003 with the introduction of the cartel offence by section 188 of the Enterprise Act 2002 (“EA02”). As it currently stands, the offence is committed only when an individual dishonestly agrees with one or more other individuals to make or implement, or cause to be made or implemented, one or more of the prescribed “hard-core” activities, which comprise price fixing, limiting production or supply, market sharing, and bid rigging. Individuals convicted of this offence face up to five years imprisonment and/or an unlimited fine. There has yet to be a successful criminal cartel prosecution brought in the UK. Three convictions were secured in the Marine Hoses case, with jail terms of between 20 months and 2.5 years being imposed along with confiscation and director disqualification orders. However, the OFT had a limited role in bringing those prosecutions, and the convictions (secured after guilty pleas had been entered by the accused) piggy-backed on the US criminal case. A second high profile criminal cartel prosecution brought by the OFT in the British Airways/Virgin Atlantic passenger fuel surcharge case collapsed in the early stages of trial. The revised UK cartel offence As a result of this poor enforcement record, the UK government has taken steps to make it easier for prosecutions to be brought under the cartel offence. With the introduction of the Enterprise and Regulatory Reform Act 2013 (the “ERRA”), the newly created CMA will be the primary enforcer of both civil and criminal UK competition law. Significantly, the ERRA also amends EA02 to remove the requirement to prove dishonesty when prosecuting the cartel offence, with a view to making prosecutions easier – this change will come into effect on 1 April 2014. The removal of the requirement to prove dishonesty was controversial, and various exclusions and defences to the offence have been introduced. ● Section 188A EA02 provides that an individual will not have committed an offence: − where arrangements affect the supply of a product or service, customers are given the relevant information about those arrangements before entering into agreements for the supply to them of those products or services; − in relation to bid-rigging arrangements, where the person requesting the bids is provided with relevant information about the arrangement; or − if details of arrangements are published in a specified manner (precise details of which will be set out in secondary legislation) before they are implemented. UK flexes its criminal enforcement muscleACER Quarterly October 2013 – January 2014 3 ● Section 188A(3) EA02 provides that an individual will not commit an offence if the agreement is made in order to comply with a legal requirement. ● Section 188B EA02 creates three new defences to the cartel offence, which are: − where, at the time of making the agreement, there is no intention to conceal the nature of the arrangements from customers; − where, at the time of the making of the agreement, there is no intention to conceal the nature of the arrangements from the CMA; and − where the defendant, before the making of the agreement, took reasonable steps to ensure that the nature of the arrangements would be disclosed to professional legal advisers for the purposes of obtaining advice about them before their making or their implementation (the “Legal Advice Defence”). In September 2013, the CMA published for consultation prosecution guidance explaining the principles to be applied in determining, in any case, whether proceedings for the cartel offence should be instituted. Although this draft guidance (which is expected to be finalised soon) provides some clarification, there still remains minimal guidance on the types of cases likely to be prosecuted under the widened offence. The scope of the exclusions and defences also remains unclear. For example, while the guidance clarifies that the Legal Advice Defence is intended to cover in-house and external lawyers qualified in the UK as well as lawyers qualified in foreign jurisdictions with an “equivalent legal qualification”, no guidance is provided on the meaning of “equivalent qualification” or what information needs to be provided to the adviser in order to satisfy the defence. The revised cartel offence will come into force on 1 April 2014, and applies only to conduct occurring after that date. As a result, it could be some time before the full impact of the revised cartel offence becomes clear. However, it is clear that increased prosecution activity can be expected in the UK. Criminal cartel enforcement outlook Individuals now face a more aggressive criminal cartel enforcement landscape in the UK. This is a global trend. For example, Belgium and Denmark have recently adopted enhanced penalties for individuals involved in collusion. In 2013, in South Korea as many as 22 individuals were indicted in a single bid rigging investigation. In the US, the Antitrust Division had another big year of criminal enforcement with 28 individuals sentenced to prison for antitrust violations in 2013. The consequences of this tougher criminal enforcement landscape for business are significant. This is not limited to potentially greater exposure for individuals working for a company. For companies themselves, there is a heightened risk of whistle blowing by individuals on their corporate boards, and of criminal cases running parallel with civil investigations which will impact on the way in which evidence is gathered and the way in which proceedings are dealt with. n Christopher Hutton Partner, London T +44 20 7296 2402 christopher.hutton@hoganlovells.com4 ACER Quarterly October 2013 – January 2014ACER Quarterly October 2013 – January 2014 5 One year since the filing of the lawsuit, and 18 months since the merger closed, a U.S. federal judge declared on 8 January 2014 that Bazaarvoice violated Section 7 of the Clayton Act by acquiring its main rival, PowerReviews. The U.S. Department of Justice (DOJ) challenged the US$168 million deal even though PowerReviews was too small to require an HSR pre-merger notification filing with the federal antitrust enforcers. This ruling by Judge William H. Orrick underscores that even non-HSR reportable, consummated mergers are subject to close scrutiny and may be found to violate the antitrust laws. The case now moves to the remedy phase, where the DOJ can seek an order to unwind the merger. The government argued that the merger would lead to higher prices and less innovation in the market for product ratings and review platforms used by e-commerce websites. Unlike in most merger challenges, the DOJ did not rely on a heavily concentrated market or high market shares. Instead, it focused on the closeness of competition between the merging parties, claiming that other actual and potential competitors provided an insufficient check on the combined firm. The opinion in Bazaarvoice demonstrates the important role that pre-merger documents (especially those explaining the rationale behind an acquisition) play in the analysis of potential anticompetitive harm. Judge Orrick, while careful to note that “intent is not an element of a Section 7 violation,” cited at length documentary evidence describing PowerReviews as Bazaarvoice’s “fiercest competitor” and containing employee opinions that the transaction would “enable the combined company to ‘avoid margin erosion’ caused by ‘tactical knife-fighting over competitive deals.’” U.S. v. Bazaarvoice, Case No. 13-cv-00133- WHO, at 21, 29 (8 January 2014). Although Bazaarvoice offered alternate explanations for the transaction at trial, the court gave great weight to these pre-merger statements and found that “Bazaarvoice wanted to buy PowerReviews to use its enhanced market power” to avoid competition in pricing and innovation. Id. at 41. The court’s focus on pre-merger opinion and intent is in stark contrast to its treatment of testimony that Bazaarvoice offered from current, former, and potential customers who believed that the acquisition had not and would not harm them. While the court observed that the customers were “credible” sources of information on their need for, use of, and substitutability of the relevant product, and their past responses to price increases in those products, Judge Orrick also found that their “testimony on the impact and likely effect of the merger was speculative at best….” Id. at 116. The court held that as “customers were not privy to most of the evidence presented to the court [and] many customers had paid little or no attention to the merger,” their opinions on the actual effects of the merger were “entitled to virtually no weight.” Id. at 116, 138. In other words, customer testimony does not outweigh documents and economic evidence showing a likely anticompetitive effect. The key takeaways for corporate counsel are the following: ● The federal antitrust enforcers will not ignore consummated, non-reportable transactions that substantially lessen competition ● Bad documents describing intense competition or market power can be difficult to overcome ● Closeness of competition can be at least as harmful as high market shares and concentration ● Parties to transactions in technology markets cannot expect to avoid enforcement simply by claiming that they operate in a “dynamic” market. n Judge rules non-reportable, consummated merger violates U.S. antitrust law Joseph G. Krauss Partner, Washington, D.C. T +1 202 637 5832 joseph.krauss@hoganlovells.com John Robert “Robby” Robertson Partner, Washington, D.C. T +1 202 637 5774 robby.robertson@hoganlovells.com6 ACER Quarterly October 2013 – January 2014 On 5 December 2013, the European Commission published a package of measures to reduce the administrative burden of EU merger control, which apply as of 1 January 2014. The package extends the scope of the simplified procedure for non-problematic cases. This means that more transactions may be notified using the Short Form CO, which will reduce the burden notwithstanding the fact the “Short” Form CO is still a fairly lengthy document. The European Commission considers that its changes could allow up to 60-70% of all notified mergers to qualify for review under the simplified procedure, which is about 10% more than today. The European Commission has also introduced various amendments to all its notification forms, aimed at streamlining the information which notifying parties are required to provide in these forms. The changes are welcome news for business and should reduce the workload and costs involved in seeking clearance for most transactions which require notification to the European Commission but do not raise competition law issues. What is the simplified procedure? A simplified procedure was introduced by the European Commission in 2000 for the assessment of transactions which are not expected to raise significant competition concerns. The simplified procedure is in principle available for certain categories of transactions, although its use always requires the consent of the Commission which should not automatically be assumed. Under this procedure transactions can be notified using a Short Form CO, which involves the provision of less extensive information than the standard notification form, the Form CO. The simplified merger procedure may also lead to a quicker review process. The European Commission states that it “will endeavour” to adopt a short-form decision as soon as practicable after 15 working days (it generally has a total of 25 working days to decide whether to grant approval or open a Phase II in-depth investigation). Expansion of scope for simplified procedure Before 1 January 2014, the simplified procedure was available in cases where the parties’ combined market shares was below 15% for horizontal overlaps and 25% for vertical relationships, and for joint ventures, which had no, or de minimis, actual or foreseen activities within the European Economic Area (EEA). Effective from 1 January 2014, the Commission has increased the market share limits and added a new category of transaction that may benefit from the simplified procedure. The European Commission’s Notice on a simplified procedure for the treatment of certain concentrations under Council Regulation (EC) No 139/2004 (the “Notice”), has thus been amended so that it covers: (i) Transactions where parties’ combined markets shares are below 20% for horizontal overlaps and below 30% for vertical relationships. (ii) Joint ventures which have no, or de minimis, actual or foreseen activities within the European Economic Area (EEA). A turnover and asset transfer test of less than EUR100 million is used to determine this. (iii) Horizontal mergers which lead to only small increments in market shares. This applies where the combined horizontal market shares are less than 50% and the increment (“delta”) of the HerfindahlHirschman Index (“HHI”) resulting from the transaction is below 150. On this last point, however, the European Commission notes in the revised Short Form CO that it will “decide on a case-by-case basis whether, under the particular circumstances of the case at hand, the increase in market concentration level indicated by the HHI delta is such that a Short Form CO can be accepted. The Commission is less likely to accept a Short Form CO if any of the special circumstances mentioned in the Commission’s guidelines on the assessment of horizontal mergers are present; for instance – but not limited to – where the market is already concentrated, in the case of a concentration that eliminates an important competitive force, in the case of a concentration between two important innovators, or in the case of a concentration involving a firm that has promising pipeline products”. EU merger control – New measures aimed to reduce administrative burdenACER Quarterly October 2013 – January 2014 7 Amendments to merger notification forms The European Commission has introduced a number of amendments to all the notification forms, namely the Form CO, the Short Form CO, and Form RS (the form in which parties can request a referral back to one or more EU member states or for the European Commission to consider the case rather than individual EU member states). Amendments to the Form CO include: ● The definition of “affected markets” has been revised in accordance with the proposed new Notice. Parties now only have to submit detailed information for “affected markets” where there are horizontal overlaps of more than 20% (previously 15%) and vertical overlaps of more than 30% (previously 25%). The form no longer requires detailed information about each affected market to be provided for the EEA territory, for the EU, for EFTA and for each Member State. The information must, however, be provided for “all relevant product and geographic markets, as well as plausible alternative relevant product and geographic markets”. ● Further guidance regarding the possibility to request waivers from providing certain information. The Form highlights the specific categories of information in the form that the parties may want to seek a waiver from providing. These include (i) a list of all other undertakings which are active in affected markets in which the undertakings hold individually or collectively 10% or more of the voting rights, issued share capital or other securities; (ii) acquisitions made during the last three years by group undertakings active in affected markets; (iii) analyses, reports, studies, surveys, presentations and any comparable documents for the purpose of assessing or analysing the transaction; (iv) analyses, reports, studies, surveys and any comparable documents of the last two years for the purposes of assessing any of the affected markets; (v) identification of all affected markets, including all plausible alternative market definitions; (vi) estimate of the total size of the market in terms of sales value and volume; (vii) estimate of the total EU-wide and EEA-wide capacity for the last three years; (viii) details of the most important cooperative agreements engaged in by the parties to the transaction in the affected markets; and (ix) details of trade associations in the affected markets. ● A request for a description of quantitative economic data. The new form asks the parties to briefly describe the data that each of the parties “collects and stores in the ordinary course of it business operations” in cases where quantitative economic analysis for the affected markets is likely to be useful. It notes that this information is not required for the Form CO to be considered complete, but that “given the statutory deadlines for Union merger control, notifying parties are encouraged to provide such descriptions as early as possible in cases and for the markets in which quantitative analysis is likely to be useful”. ● Encouragement to submit together with the Form CO a list of those jurisdictions outside the EEA where the transaction is subject to merger control clearance before closing, as well as waivers of confidentiality that would enable the European Commission to share information with other competition authorities outside the EEA about the transaction. ● Additional supporting documentation. The new Form adds some additional requirements for supporting documentation. These requirements have fortunately been reduced as compared with the draft package which was published for consultation earlier this year. The new Form requests: “copies of the following documents prepared by or for or received by any member(s)of the board of management, the board of directors, or the supervisory board, as applicable in the light of the corporate governance structure, or the other person(s) exercising similar functions (or to whom such functions have been delegated or entrusted), or the shareholders’ meeting: (i) minutes of the meetings of the board of management, board of directors, supervisory board and shareholders’ meeting at which the transaction has been discussed, or excerpts of those minutes relating to the discussion of the transaction; 8 ACER Quarterly October 2013 – January 2014 (ii) analyses, reports, studies, surveys, presentations and any comparable documents for the purpose of assessing or analysing the concentration with respect to its rationale (including documents where the transaction is discussed in relation to potential alternative acquisitions), market shares, competitive conditions, competitors (actual and potential), potential for sales growth conditions; (iii) analyses, reports, studies, surveys and any comparable documents from the last two years for the purpose of assessing any of the affected markets with respect to market shares, competitive conditions, competitors (actual and potential) and/ or potential for sales growth or expansion into other product or geographic markets.” ● Alternative market definitions. The new Form states that, when presenting relevant product and geographic markets, the parties must submit, in addition to any product and geographic market definitions they consider relevant, all plausible alternative product and geographic market definitions. The new Form explains that plausible alternatives can be identified on the basis of previous Commission decisions and judgments of the Union Courts and (in particular where there are no Commission or Court precedents) by reference to industry reports, market studies and the notifying parties’ internal documents. ● Other markets in which the notified operation may have a significant impact. The new Form continues to require information regarding these markets, but has amended the market share thresholds for when this information may be required as follows: from 25% to 20% for markets in which the parties are potential competitors; from 25% to 30% for markets where the other party holds important IP rights; and from 25 % to 30% for neighbouring markets. Amendments to the Short Form CO include: ● Reportable markets. The new Short Form CO clarifies that market definition information and market information are only required if the transaction gives rise to “reportable markets”. The definition of “reportable markets” has been modified to clarify that, in the case of acquisition of joint control in a joint venture, the relevant test applies to the joint venture and at least one of the acquiring parties. The test also applies only to activities in the EEA territory, meaning that if the parties are active in worldwide markets but not in the EEA, there will be no reportable markets. These changes essentially mean that extra-territorial joint ventures can now be notified using an abbreviated version of the Short Form CO, or as the European Commission terms it in its accompanying press release in a “super-simplified notification”. ● Additional supporting documentation. For the first time, the new Short Form CO requires production of the following internal documents analysing the transaction, although only if there are reportable markets in the EEA: “copies of all presentations prepared by or for or received by any members of the board of management, or the board of directors, or the supervisory board, as applicable in the light of the corporate governance structure, or the other person(s) exercising similar functions (or to whom such functions have been delegated or entrusted), or the shareholders’ meeting analysing the notified concentration.” ● Pre-notification contacts. The new Short Form CO explains that there may be no need for pre-notification contacts where there are no horizontal or vertical overlaps. Conclusion Whilst the package is a welcome cut in red tape for EU merger clearance, it is yet to be seen whether in practice the initiative will radically reduce overall information requirements and expenses. The European Commission retains a wide discretion whether to accept information waiver requests, and to revert to a full notification process. Extra-territorial joint ventures that have no actual or foreseeable effects within the EEA still require notification. This is because under the current EU Merger Regulation, the turnover thresholds can be met solely on the basis of two joint-controlling parent companies’ turnover. This is the case, irrespective of the geographic location of the joint venture, its size and whether the joint venture could raise competition concerns within the EEA. The European Commission has chosen not to tackle the issue at this stage by amending the turnover thresholds of the EU Merger Regulation. Instead, it has chosen to reform around ACER Quarterly October 2013 – January 2014 9 the edges by maintaining the notification requirement but reducing the quantity of information that is required in the notification form for these transactions. These transactions can now be notified using an abbreviated Short Form, which is called by the Commission in its accompanying press release to the package a “super-simplified notification”. This essentially requires a description of the transaction, business activities and turnover of the parties without a description of markets or the provision of supporting documentation. n Peter Citron Of Counsel, Brussels T +32 2 505 0905 peter.citron@hoganlovells.com10 ACER Quarterly October 2013 – January 2014 On 16 December 2013, the Federal Trade Commission (FTC) announced that two nonprofit professional associations have agreed to eliminate provisions in their codes of ethics that limited competition among their members in order to settle litigation brought by the FTC. The first settlement involves the Music Teachers National Association, Inc. (MTNA), which represents more than 20,000 music teachers nationwide. The FTC’s complaint alleged that MTNA and its members constrained competition in violation of the antitrust laws through an ethics provision requiring that each “teacher…respect the integrity of other teacher’s studios and…not actively recruit students from another studio.” The second settlement involves the California Association of Legal Support Professionals (CALSPro), which represents companies and individuals that provide legal support services in California. The FTC alleged that CALSPro violated the antitrust laws through propagation of an ethical code that impaired its members from competing with one another on price, restricted certain competitive advertising techniques, and constrained its members’ ability to offer employment to another member’s employees. Specifically, CALSPro’s code of ethics stated: (1) “It is unethical to cut the rates you normally and customarily charge when soliciting business from a member firm’s client”; (2) “It is not ethical to...speak disparagingly of another member”; and (3) “It is unethical to contact an employee of another member firm to offer him employment with your firm without first advising the member of your intent.” The proposed orders settling these charges require both organizations to modify their ethical codes to eliminate the identified prohibitions on competition. In the case of MTNA, the order also mandates that the organization disassociate from and refuse to accept as affiliates any organizations that restrict member competition in: (1) the solicitation of teaching work; (2) advertising or publishing the prices or terms of sales of teaching services; and (3) any other aspect of pricing, including the offering of free or discounted services. The proposed orders further require that both organizations implement stringent antitrust compliance programs, including in-person annual antitrust training for board of directors, officers, and employees and antitrust compliance presentations at annual association meetings. These investigations and settlements reflect the FTC’s long standing focus on restraints of competition that are incorporated into the ethics codes of trade associations. The FTC acknowledges that professional associations like MTNA and CALSPro typically serve many important and pro competitive functions, including adopting rules governing the conduct of their members that benefit competition and consumers. But, it also warned that because trade organizations are by nature collaborations among competitors, the commission and courts have long been concerned with anticompetitive restraints imposed by such organizations under the guise of codes of ethical conduct. While the FTC does not prohibit associations from adopting ethical codes designed to protect the public, these rules and guidelines may be considered unlawful if they are “unreasonable restraints of trade” without a “legitimate business rationale.” The FTC is particularly likely to take action when these codes implicate traditional “hard core” violations of the antitrust laws, such as price fixing, bid rigging, and the division of geographic or product markets. Associations should take care to avoid such restraints when they draft or revise their ethical codes, and it would be prudent to review existing codes on a periodic basis for compliance with the antitrust laws. n FTC requires modification of trade association ethical rules Joseph G. Krauss Partner, Washington, D.C. T +1 202 637 5832 joseph.krauss@hoganlovells.com Wesley Carson Associate, Washington, D.C. T +1 202 637 2870 wesley.carson@hoganlovells.comACER Quarterly October 2013 – January 2014 11 Resale price maintenance in France On October 10, 2013, the Paris Court of Appeals confirmed a landmark decision of the French Competition Authority condemning three leading manufacturers active in the dog and cat food sector to a EUR 35.3 million fine for having imposed resale prices and territorial restrictions on their distributors in France during five years. Between 2004 and 2008, two of these manufacturers directly negotiated the resale prices of the pet food products with specialist retailers (pet shops, farmers, and vets), even though these retailers purchased their products from wholesalers. The wholesalers were therefore not free to set their own prices, preventing them from gaining competitive prices. This recent decision of the Paris Court of Appeals illustrates the particular attention the French authorities are paying to the issue of minimum or fixed resale price maintenance (“RPM”). For this purpose, they can rely on two co-existing sets of rules prohibiting minimum RPM: those applicable to unfair commercial practices and those based on competition law. Prohibition of minimum RPM on the grounds of competition law Article L.420-1 of the French Commercial Code (“FCC”) – equivalent to Article 101 TFEU – prohibits agreements intended to prevent prices from being determined by the free play of the market by artificially encouraging price increases. Insofar as it can distort competition, RPM can fall within the scope of this provision. In order to assess whether a RPM agreement is anticompetitive, the French Competition Authority adopts a case-by-case approach, making a distinction between minimum and fixed resale prices, on the one hand, and maximum or recommended sale prices, on the other hand. Absolute prohibition of minimum resale price maintenance In principle, minimum RPM falls within the scope of Article L.420-1 FCC as a vertical anticompetitive practice. However, and by exception, Article L. 420-1 FCC does not apply to minimum RPM practices resulting from a legislative or regulatory provision (Article L.420-4-I-1 FCC). For instance, Law No 81-766 of August 10, 1981 relating to book prices has turned the imposition of retail prices by publishers into an obligation. This law is subject to a restrictive interpretation. Where this legal exception does not apply, the Competition Authority condemns any clear contractual provision between manufacturers and retailers formalizing a minimum resale price-fixing agreement, in application of Article L.420-1 FCC. For instance, these contractual clauses can cover provisions whereby the distributor expressly undertakes to respect the recommended prices. The mere presence of this clause is sufficient to characterize the agreement as anticompetitive, even if it is not implemented. Contractual clauses fixing the margin of the distributor or clauses fixing the maximum level of reductions that the distributor can grant to consumers also amount to anticompetitive minimum RPM. Authorization of maximum or recommended prices, provided they do not actually amount to minimum RPM As opposed to minimum resale price maintenance, the French Competition Authority and French Courts do not consider maximum and recommended prices as hardcore restrictions. The mere recommendation or suggestion of a resale price is not, as such, prohibited, provided that it does not result in binding resale prices imposed on distributors: the distributor must remain free to price at the level it wishes to. Where there is not a clear contractual clause demonstrating the existence of a minimum resale price agreement, the Competition Authority checks whether the following three indicators are in place: ● manufacturers communicated recommended retail prices to their retailers; ● manufacturers monitored retailers’ compliance with the recommended retail prices and set up a retail sale price control system; and ● retailers applied the recommended retail prices. For instance, the French Competition Authority referred to these criteria to condemn five manufacturers and three distributors active in the toys distribution sector for having entered into vertical resale price fixing agreements. This decision of December 2007 was confirmed by the French Supreme Court in April 2010.12 ACER Quarterly October 2013 – January 2014 In this case, the Competition Authority found there to be an anticompetitive vertical agreement on the basis of the following elements: ● retail prices recommended by the manufacturers had been communicated to the retailers through pre-printed Christmas catalogues; ● the distributors had actively participated in monitoring practices, increasing retail sale prices for “problematic toys.” In particular, one of the distributors had set up a promotional campaign claiming that it would refund ten times the price difference if customers could find certain toys cheaper elsewhere. This distributor thereby encouraged consumers to monitor prices on its behalf. Then, using information obtained when reimbursing consumers, the distributor systematically asked its suppliers to ensure that lower prices were not offered to its competitors. For this purpose, the distributor circulated to the suppliers a list of “price troubles,” called “letter to Father Christmas,” requesting its suppliers to ask its competitors applying lower prices to raise their prices; ● last, retailers had applied the recommended retailed prices as several documents collected during the investigation demonstrated that prices recommended by the suppliers in the Christmas catalogues were substantially applied by the distributors. In this respect, it is worth noting that the Competition Authority considers that where 80 percent of the prices applied by a distributor actually amount to the recommended retail prices, the distributor is deemed to have applied the recommended prices. If 80 percent of the prices are not recommended prices, further analysis of the price dispersion may still allow the Competition Authority to evidence an implementation of the recommended prices. As a result, the Competition Authority imposed a EUR 37 million fine on the toys suppliers and distributors concerned. No exemption for minimum resale prices In light of French case law, minimum resale price maintenance does not benefit from an exemption, either on the basis of the vertical block exemption or on the basis of an individual exemption. No application of the vertical block exemption The French Competition Authority refers to the EU Vertical Block Exemption Regulation (VBER) n°330/2010, which grants a safe harbour for vertical agreements, provided that the market shares of the supplier and the distributor do not exceed 30 percent of the relevant market on which they sell or purchase the contract goods or services. The benefit of the block exemption does not, however, extend to agreements containing a “hardcore” restriction of competition and both case law and Article 4 of the VBER qualify the agreements having as their direct object the observation of a minimum resale price level by the buyer as a “hardcore” restriction. No individual exemption in practice Where the VBER does not apply, recommended resale prices may in theory benefit from an individual exemption on the grounds of L. 420-4-I-2° FCC, if the parties can demonstrate that the agreement: ● contributes to improving the production or distribution of goods or to promoting technical or economic progress; ● allows consumers a fair share of the resulting benefit; ● does not impose restrictions which are not indispensable to these objectives; and ● does not afford the parties the possibility of eliminating competition. These cumulative conditions are equivalent to those of Article 101, paragraph 3, TFEU. Minimum RPM agreements are unlikely to fulfill the conditions for an individual exemption According to the European Commission’s Guidelines on vertical restraints, minimum RPM generally facilitates anticompetitive practices between suppliers by enhancing price transparency on the market, thereby making it easier to detect whether a supplier deviates from a collusive equilibrium by cutting prices.ACER Quarterly October 2013 – January 2014 13 RPM may also facilitate collusion between distributors by eliminating intra-brand price competition. In particular, RPM can result in price increases as distributors are prevented from lowering their sales price for a particular brand, thereby reducing pressure on the manufacturer’s margins. RPM may also reduce inter-brand competition. The increased margin that RPM may offer distributors can indeed entice them to favor a particular brand over rival brands when advising customers (even where such advice is not in the interest of these customers) or not to sell these rival brands at all. Last, RPM can reduce dynamism and innovation at the distribution level. By preventing price competition between different distributors, RPM may prevent more efficient retailers or price discounters from entering the market. For the above reasons, minimum RPM agreements are unlikely to fulfill the conditions for an individual exemption. This has been confirmed in French case law. Justifications for minimum RPM rejected by the competition authority In cases where they have considered that the recommended prices were, in fact, imposed prices on the basis of the criteria referred to above, the Competition Authority and French Courts have never accepted any justification of resale price maintenance to date, either practical or founded on efficiency gains. For instance, the Competition Authority has considered that the following arguments were not acceptable justifications: ● RPM would enable the fixing of a “fair price” for consumers, maintenance of competitiveness, and prevention of an overproduction crisis; ● imposing prices to franchisees would be a “way of disclosing a low cost price policy;” ● RPM would be justified by the “uncertainty relating to parity of currencies;” ● there exists a “concern of guaranteeing a sufficient and constant quality of the services performed” by the members of the network;” ● there are situations peculiar to luxury products and brand image; and ● the need to maintain local shops as well as training and information of retailers in country areas. In these cases, the Competition Authority recalled that the “fair price” is the one established on a competitive market and that the parties had not demonstrated that these objectives could not have been obtained without imposing a minimum RPM. It is therefore very difficult to obtain an individual exemption in case of minimum RPM, whatever the RPM is direct or indirect. This means that the risk of fines is very important in case of minimum RPM. Sanctions in cases of minimum RPM Minimum RPM might trigger different types of sanctions for companies, in particular heavy fines and criminal penalties. ● Heavy fines: Pursuant to Article L. 464-2 FCC, a company which is party to an anticompetitive agreement may incur a fine of up to 10 percent of its consolidated global annual tax-free turnover. According to French case law, even if they are less serious than cartels, RPM practices are “serious by nature because their consequence is to confiscate, for the benefit of the authors of the infraction, the benefits which the consumer has the right to expect from intra-brand competition on the retail market.” In certain cases, the Competition Authority only imposes sanctions on the sole manufacturer with a leading role, and not upon distributors that only partially contributed to the retail price-fixing practice. However in some cases, the Competition Authority not only fined the manufacturers, but also some distributors. This was the case in the luxury perfumes case where 13 suppliers and 3 distributors were fined EUR 45.4 million (which is the heaviest fine ever imposed in France for RPM practices).14 ACER Quarterly October 2013 – January 2014 The following graph summarizes the main fines imposed by the Competition Authority over the last ten years for RPM: 3,870 5,000 14,400 45,400 300 580 800 37,000 2,000 1,340 35,322 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 1 2 3 4 5 6 7 8 9 10 11 1. School calculators sector (03-D-45, 25 Sept. 2003) 2. Dog food market (05-D-32, 22 June 2005) 3. Video cassettes for children (05-D-70, 19 Dec. 2005) 4. Luxury perfume sector (06-D-04, 13 March 2006) 5. French market for two-wheel spark plugs (06-D-22, 21 July 2006) 6. Cycle and cycle products distribution (06-D-37, 7 Dec. 2006) 7. Games consoles and video games sector (07-D-06, 28 Feb. 2007) 8. Sector of toy distribution (07-D-50, 20 December 2007) 9. Agri-supply industries (08-D-20, 1 Oct. 2008) 10. Toy and fancy goods sector (11-D-19, 15 Dec. 2011) 11. Sale of dry dog and cat food in specialist retail (12-D-10, 20 March 2012) K€ ● Criminal penalties: Article L. 420-6 of the Commercial Code provides that “any natural person who fraudulently takes a personal and decisive part in the conception, organization or implementation of the practices referred to in articles L. 420-1 and L. 420-2, shall be punished by a prison sentence of four years and a fine of €75,000.” However, criminal sanctions have not been applied in cases relating to minimum RPM practices to date. Prohibition of minimum RPM on the grounds of unfair commercial practices French law is characterized by the co-existence of two sets of rules prohibiting minimum RPM. Along with Article L.420-1 FCC prohibiting anticompetitive practices, Article L. 442-5 FCC also provides that it is illegal “for any person to impose, directly or indirectly, a minimum price for the resale of a product or a service, or to impose a minimum profit margin.” In application of this provision, minimum RPM is deemed to be restrictive per se, whatever the effect of the practice on competition. The negative impact of this restrictive practice will therefore be deemed proven without any effect-based assessment on the relevant market. For instance, the French Supreme Court confirmed that a supplier who had refused to deliver a product to a reseller because its resale price was too low had, thereby, aimed at imposing a minimum resale price to its distributor, in violation of Article L. 442-5 of the French Commercial Code. Any person imposing a direct or indirect minimal resale price incurs a criminal fine up to EUR 15,000. However, the number of condemnations on this ground remains quite limited. Conclusion The French authorities take a very strict approach to RPM, focusing on prices, despite the fact that competition also takes place with respect to quality of service, brand image, supplies, etc. In this respect, the Leegin decision handed down by the U.S. Supreme Court on June 28, 2007 could potentially open the way to an evolution of the Competition Authority’s decision-making practice as regards justifications based on efficiency gains that may be linked to minimum RPM. However, the mere fact that a specific provision prohibits minimum RPM as an unfair commercial practice, whatever the efficiency gains on the market, appears to be a barrier to an evolution of French case law. Manufacturers and wholesalers should therefore be very careful to avoid such practices with their retailers in France. n Charles Saumon Senior Associate, Paris T +33 1 5367 4702 charles.saumon@hoganlovells.comACER Quarterly October 2013 – January 2014 15 On 14 January 2014, the New York Attorney General (AG) announced a settlement with MPHJ Technology Investments, LLC related to the patent assertion entity’s (PAE’s) licensing demands. At least three other state attorneys general have publically assailed the tactics of MPHJ, which allegedly demands royalty payments from small- and medium-sized businesses that use everyday technologies like a scanner connected to a computer network. Vermont, Nebraska, and Minnesota have tried to stop MPHJ from operating in their states. New York’s latest move ramps up the pressure not just on MPHJ, but on all so-called “patent trolls,” going so far as to provide general guidelines for patent assertion behavior. The key provisions of New York’s guidelines are as follows: ● patent holders (including their lawyer “mouthpieces”) must make “serious, good-faith efforts” to determine whether alleged infringers actually infringe a patent; ● allegations of infringement must include “material information,” including “reasonable detail” on the basis for the claim; ● licensing demands must state the basis for the proposed payment; ● the “true identify” of the patent holder must be made transparent; and ● these restrictions must travel with the patents upon transfer or assignment. According to New York, MPHJ’s threatening letters exploit flaws in the patent system by purchasing patents of questionable validity and then seeking payments that are significant, but not large enough to justify the extraordinary expenses associated with patent litigation. The AG alleged that MPHJ’s conduct constituted “repeated deceptive acts” under Section 63(12) of the New York Executive Law, which provides that “[w]henever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply, in the name of the people of the state of New York, to the supreme court of the state of New York, on notice of five days, for an order enjoining the continuance of such business activity or of any fraudulent or illegal acts [and] directing restitution and damages….” The settlement will allow businesses in the state of New York to void their licenses with MPHJ and receive a full refund of any payments made. It also bars MPHJ from further contact with previously targeted small businesses. More importantly, this settlement gives further momentum to efforts to combat the “abusive” tactics of some PAEs, which in the past year have come under increasing scrutiny from the federal antitrust enforcers, bi-partisan members of Congress, the White House, and to a lesser extent (so far), private plaintiffs. Companies targeted with patent infringement claims and licensing demands by aggressive PAEs may find support in the New York AG’s guidelines, which could become a template for other states, the Department of Justice, the Federal Trade Commission, and even private plaintiffs. n New York AG settles with “patent troll” targeting end-users of patented technologies Charles E. Dickinson Associate, Washington, D.C. T +1 202 637 3208 charles.dickinson@hoganlovells.com Logan M. Breed Partner, Washington, D.C. T +1 202 637 6407 logan.breed@hoganlovells.com16 ACER Quarterly October 2013 – January 2014ACER Quarterly October 2013 – January 2014 17 On 21 November 2013, the European Commission signed a Memorandum of Understanding (“MoU”) with the Competition Commission of India. A copy has just been published on the European Commission’s website. The aim of the MoU is to further strengthen cooperation between the two parties in the area of antitrust enforcement. This MoU forms part of a wider and ever increasing web of international agreements between antitrust authorities. India already has in place a MoU with the US Department of Justice (DoJ) and the Federal Trade Commission (FTC). The EU has concluded bilateral cooperation agreements/ MoUs on antitrust matters with an extensive list of countries, including China (see Hogan Lovells alert here), US, Canada, Japan, India, South Korea, and Switzerland. Key provisions of the MoU are as follows. ● Exchange of information. Both parties acknowledge that it will be in “their mutual interest” to exchange non-confidential information with regard to competition policy, operational issues, multilateral competition initiatives (such as interaction with the ICN and OECD), competition advocacy, and technical cooperation activities. ● Coordination of enforcement activities. The MoU states that: “Should the Sides pursue enforcement activities concerning the same or related cases they will endeavour to coordinate their enforcement activities, where this is possible”. ● Mutual assistance. There are a number of provisions which deal with the possibility to request the other party to take enforcement action in its jurisdiction. These are as follows. 6. If one of the Sides believes that anti-competitive actions carried out on the territory of the other Side adversely affect competition on the territory of the first Side, it may request that the other Side initiates appropriate enforcement activities as per their applicable competition law. 7. The requested Side will consider the possibility of initiating enforcement activities or expanding on-going enforcement activities with respect to the anti-competitive actions, identified by the requesting Side, in accordance with the requirements of its legislation and will inform the other Side about the results of such consideration. 8. Nothing in this Memorandum of Understanding will limit the discretion of the requested Side to decide whether to undertake enforcement activities with respect to the anti-competitive actions identified in the request, or will preclude the requesting Side from withdrawing its request. ● Avoidance of conflicts. The MoU provides a mechanism to avoid conflicts if one authority’s enforcement activity may affect the other in its own enforcement activity. It is too early to tell how the key clauses of the MoU will be applied in practice and whether it will be a “game changer”. However, the MoU certainly signals a clear intent for increased cooperation on antitrust matters between the EU and India. With increasing cooperation and coordination between antitrust authorities worldwide now a reality, the risk of cartel detection has never been higher. n Cooperation between the EU and India on antitrust matters Peter Citron Of Counsel, Brussels T +32 2 505 0905 peter.citron@hoganlovells.com18 ACER Quarterly October 2013 – January 2014 As in the United States, China has more than one antitrust agency. In fact, it has three: the Ministry of Commerce, the State Administration for Industry and Commerce, and the National Development and Reform Commission. During 2013, the most active one among the three was the NDRC. The NDRC is the successor of the former Planning Ministry from the Mao era. It is often called the “mini State Council” – the State Council is China’s cabinet – given its political clout, and the plethora of sectors and policies it is responsible for. The NDRC had been active throughout the year, but it was really around and after the fifth anniversary of the Anti-Monopoly Law – China’s main antitrust statute – in August 2013 that the NDRC stepped up enforcement and began to make headlines on a regular basis. Here is a brief survey of three recent cases. Baby milk formula cases. On 7 August 2013, the NDRC imposed fines totalling about $110 million on six foreign-owned infant formula companies. The fines imposed are the largest of their kind in the history of Chinese antitrust enforcement. The NDRC found that the baby formula manufacturers had imposed minimum resale prices on their distributors, either contractually or through other means, such as suspension or termination of supplies, financial penalties, and rebate cancellation. The NDRC’s decision included no specific legal explanation as to why the imposition of price floors was illegal, suggesting that the agency considered the practice to be per se illegal. River sand case. On 4 September 2013, a local office of the NDRC in Guangdong Province challenged the pricing practices of two river sand companies on antitrust grounds. The two companies, owned by the same individual, reportedly engaged in excessive pricing and hoarding supplies, which the agency found constituted an abuse of dominance. As part of its case, the NDRC first needed to prove dominance. It did so by defining the relevant market extremely narrowly. It held that the relevant geographic market was one of 10 districts in Shaoguan, a small city, by China’s standards, of 2.8 million inhabitants in the South of China, where the two companies had a market share of over 75 percent. As benchmarks for finding the companies’ prices to be excessive, the NDRC compared the companies’ price increase (54.4 percent) with the increase in costs (more than 20 percent), and also compared their price levels with those prevalent in other river sand markets. As for the hoarding allegation, the NDRC noted that river sand is normally sold shortly after extraction and that the storage cycle is generally shorter than two years. In the agency’s view, the companies’ hoarding practice led to an artificial scarcity in supply and strong price fluctuations. Hainan and Yunnan tourism case. On 29 September 2013, the NDRC issued its decision to impose sanctions on 39 companies in the tourism industry for three types of anti-competitive practices. ● Artificially inflating prices before discounting. The conduct the NDRC objected to was that gift shops in two major tourist destinations (Sanya and Lijiang) offered local specialty products at a high mark-up, to which they would later apply a discount of around 15 to 25 percent. The marked-up prices were as much as 100 times the cost price to the retailer. ● Cartel activities. The NDRC also challenged cartel conduct in both Sanya and Lijiang. In Sanya, the NDRC revealed that three of the only four large gift shops in the city met on numerous occasions to agree on prices and discounts for crystals, and divided up the market among themselves. In mid-2012, the three companies entered into a written “industry self-discipline agreement,” and even opened a joint bank account in which each of them made a payment that served as a deposit to ensure that it would not deviate from the agreed prices and market shares. The NDRC held this conduct to be market partitioning between competitors, in breach of the AML. In Lijiang, the NDRC found eight travel agencies to have engaged in price-fixing of hotel rooms, and meal vouchers. The companies reportedly met 24 times in 2011 and 2012 and entered into a written contract that fixed prices and discounts and allocated specific market shares to each of the participants. Snapshot of recent Chinese antitrust enforcement actionACER Quarterly October 2013 – January 2014 19 ● “Zero/below-cost group fee.” The NDRC further challenged the so-called “zero/below-cost group fee” practice by tour operators in Sanya. With this practice tour operators charge their customers a price for a tour that is below cost, but then receive commissions from the shops visited on the tour, often using pressure tactics to ensure the tourists purchase items within the designated shops. NDRC stated that this practice infringed the Price Law. The three recent decisions show that the NDRC has become more assertive in its antitrust enforcement. In many cases in 2013, the NDRC appears to have been focused on consumer products such as baby milk formula and holiday tours. However, companies in other sectors should not be lulled into a false sense of security. Indeed, two high tech companies – InterDigital Corp. and Qualcomm Inc. – reported becoming the target of NDRC investigations towards the end of 2013. After the Third Plenum of the new leaders of China’s communist party in November, the voices urging the NDRC to reform itself – or even disband – have become louder. It is very possible that the agency will make most of its role as antitrust enforcer to stay in the game and show its “reformist” face by bringing antitrust cases. If so, we may have seen only the beginning of the NDRC’s assertive antitrust agenda. n Adrian Emch Partner, Beijing T +86 10 6582 9510 adrian.emch@hoganlovells.com20 ACER Quarterly October 2013 – January 2014 EU Interest rate derivatives fines On 4 December 2013, the European Commission announced that it has fined eight international banks a total of EUR1.71 billion for participating in illegal cartels in markets for financial derivatives covering the EEA. The Commission reached two separate decisions using the cartel settlement procedure. One decision relates to collusion by four banks in relation to interest rate derivatives denominated in the Euro currency (EURIBOR). The second decision involves seven separate bilateral infringements involving six companies relating to interest rate derivatives denominated in Japanese Yen (JPY LIBOR). Barclays and UBS received complete immunity from fines under the Commission’s 2006 Leniency Notice. North Sea shrimp fines On 27 November 2013, the European Commission fined a number of North Sea shrimp traders a total of EUR28.7 million for the operation of an illegal price-fixing cartel. One company received full immunity from fines. The Commission found that the companies agreed to fix prices and share sales volumes of North Sea shrimps in Belgium, France, Germany and the Netherlands. The food sector has been identified as a priority sector for both EU member state competition authorities and the Commission in order to ensure that food markets work for suppliers and consumers. The Commission states that it has carried out a number of investigations concerning food products and is working with other European competition authorities to implement the specific competition rules applying to agricultural and fisheries products following the reform of the common agriculture and fisheries policies. The Commission is also addressing concerns expressed about the possible deterioration of choice and innovation in food products and has launched a comprehensive study to assess the evolution and drivers of choice and innovation. The results of this study will be published in 2014. n France Opinion on the French pharmaceutical sector On 19 December 2013, following several months of public consultation and a vast sector inquiry, the French Competition Authority issued a non-binding opinion on the competitive functioning of the pharmaceutical distribution sector. This opinion calls for a stimulation of competition at all levels of the medicinal distribution chain: (i) at the upstream level, boosting innovation and promoting the development of generic medicines, (ii) at the intermediate level, strengthening the role of wholesalers and further developing the parallel trade of drugs within the European Union, and (iii) at the downstream level, partially opening up to competition with respect to over-the-counter drugs. Fine for failure to notify a merger On 20 December 2013, the French Competition Authority imposed a fine of €4 million on the French wine broker and producer Castel group for having failed to notify the acquisition of six subsidiaries of Burgundy’s Patriarche group in spring 2011. Disclosed a few months later by a third party, the acquisition was finally cleared by the Authority in July 2012. The Authority, which had not ruled out the potential imposition of penalties at the time of the clearance, came back to the specific issue of failure to notify in its decision dated 20 December 2013. Reminding the importance of merger control, the Authority stressed the seriousness of the case and inflicted the third and highest fine for failure to notify. n Italy ICA launches new Vademecum on bid-rigging In October 2013, the Italian Competition Authority (ICA) issued a ‘Vademecum’ (based on the 2009 OECD Guidelines) for fighting bid-rigging in public procurement. The paper is part of the recently launched initiative to assist contracting entities/ authorities in identifying (and reporting to the ICA) behavioural anomalies with the aim of helping contractors to identify suspect conduct leading to competition distortions, such as the absence of bids or the submission of a single bid. Abuse of dominance investigation in pharmaceutical sector In December 2013, the ICA opened an abuse of dominance investigation into pharmaceutical company Industria Chimica Emiliana, the leading world producer of cholic acid, an ingredient in ursodeoxycholic acid (UCDA) which is used in drugs to treat liver disease. It supplies the product to various UCDA manufacturers including its own subsidiary Prodotti Chimici e Alimentari and an independent company, RGR. The latter complained that Industria Chimica was abusing Round-up of recent developmentsACER Quarterly October 2013 – January 2014 21 its dominant position by increasing prices, shortening the time period in which it could pay, reducing the available quantities of cholic acid, refusing to supply, and by targeting RGR’s clients by offering prices that RGR could not afford due to the high costs demanded by Industria Chimica. Sports nutrition investigation In November 2013, the ICA opened an investigation into sports nutrition company, Enervit, for the application of alleged restrictive conditions, including retail price maintenance, on retailers. According to the notice of initiation of proceedings, Enervit allegedly restricted competition by imposing minimum resale prices, territorial restrictions and non-compete obligations on retailers and wholesalers. In particular, the ICA is examining a distribution agreement between Enervit and online pharmacy Enerzona. Enervit allegedly established a minimum price for branded products and instructed the retailer not to sell Enervit products outside of Italy. n Poland Fine decrease on appeal In December 2013, the Polish Competition Court reduced the fines imposed by the Polish Competition Authority (“PCA”) on certain cement producers in Poland for market sharing. The total fines of Euro 100 million which had been set at the maximum permissible under Polish law (10% of revenue) were reduced to Euro 82 million. This case shows that the Polish Competition Court is able to reduce fines even in hard core cartel cases and that it may not always agree with the rigid penal policy of the Polish Competition Authority. Coordinated investigation of specialist products for coal mining In December 2013, the PCA fined a number of producers of coal mining equipment Euro 4.4 million. It found that the producers had participated in an agreement which restricted competition on the market of the sale of the chemical products used in coal mining. The PCA stated that the agreement consisted in: i) setting of the tenders, ii) direct price-fixing of the chemical products used in coal mining, and iii) setting the market shares in particular groups of the concerned products. During its investigation, the PCA cooperated with multiple institutions, including the prosecutor’s office and the Internal Security Agency. This case shows the extent to which the Polish authorities may cooperate in their investigation of anti-competitive collusion, in particular bid rigging. n South Africa Exclusive lease agreements Shoprite recently filed an urgent application for an interdict in the Western Cape High Court, challenging the legality of a Massmart store in the CapeGate Centre competing directly against its outlet in the same mall. Shoprite’s legal challenge is based on an exclusivity agreement it has with the landlord. Massmart responded by claiming that the exclusivity provision prevented competition. The High Court granted an interim interdict pending the outcome of an investigation by the Competition Commission. Some indication of the attitude of the competition authorities appears from two recent judgments of the Competition Tribunal in relation to mergers of retail letting businesses. The Tribunal considered whether an exclusivity clause in the lease between a landlord and an anchor tenant in the mall had the effect of preventing small businesses from accessing premises in the mall concerned. The mergers were approved subject to a condition that the merging parties negotiate in good faith with a view to reaching an agreement to remove the exclusivity clause. The costs of competition litigation In the merger between Pioneer Hi Bred International Inc and Pannar Seed (Pty) Ltd, the Competition Commission applied to the Constitutional Court for leave to appeal a costs order granted against it by the Competition Appeal Court (“CAC”). The Court had to consider the powers of the CAC to award costs against the Commission when it litigates in the course of its duties in terms of the Competition Act. The Court held that the Tribunal was not empowered to make adverse cost awards against the Commission in any circumstances and the CAC, as an appeal court, therefore did not have the authority to award costs in respect of Tribunal proceedings. In considering the CAC’s discretion to award costs in its own proceedings, the Court held that while the CAC is statutorily empowered to award costs in respect of its own proceedings, the rule applicable in civil litigation, to the effect that “the costs follow the result”, would not apply. The requirement in the Act that costs orders 22 ACER Quarterly October 2013 – January 2014 were to be made “according to the requirements of … fairness” meant that costs would only be awarded against the Commission where its conduct was “unreasonable, frivolous or vexatious”. Confidentiality claims in merger proceedings Section 44 of the Competition Act 89 of 1998 provides that any person submitting information to the Competition Commission may claim confidentiality over such information. In terms of the Act, the Commission is bound by any such claim. In some recent matters, however, the Commission’s attitude towards such claims is has raised cause for concern, with instances of confidential information included in merger filings being included in versions of the Tribunal’s findings made available to the public, or merger filings being made available to the Minister of Trade and Industry without the consent of the merging parties. The Commission, when challenged, has claimed that such conduct is “standard practice.” Practitioners are seeking to clarify with the Commission why this has become standard practice and will seek guidelines as to how confidential information will be protected in an attempt to provide certainty and security to their clients. n Spain Football fines On 28 November 2013, the Spanish National Commission on Markets and Competition (Comisión Nacional de los Mercados y la Competencia, the “NCMC”) imposed fines of around €15 million on, amongst others, the two main Spanish football clubs (Real Madrid and Fútbol Club Barcelona) and broadcasting operator Mediapro for not abiding by a previous decision of the extinct National Competition Commission (“NCC”). In particular, the sanctioned entities infringed the obligation set out in the NCC’s Decision of 14 April 2010 which prohibited them from entering into broadcasting agreements for the Spanish League and Cup football competitions with a duration of more than 3 years. According to the NCMC, this obligation prevails over Spanish sector-specific media regulation which allows football broadcasting agreements for a maximum duration of 4 years. These fines demonstrate that the recently created NCMC intends to match its predecessor (the NCC) in terms of the severity of its fines. Information exchange fines On 2 January 2014, the NCMC imposed fines totaling €3.1 million on car rental companies active at thirtyone Spanish airports (including Madrid and Barcelona), as well as on the Spanish public commercial entity responsible for operating national airports (AENA). The alleged anti-competitive conduct consisted of information exchange by which the car rental companies could have coordinated between 1996 and 2012 their strategic behavior at Spanish airports. In addition, the NCMC also held liable the Spanish public commercial entity (AENA) for its collaboration with the infringing companies. In this case, the NCMC treated as a restriction of competition “by object” information exchange which did not relate to future prices or quantities (i.e. the most sensitive kind of information exchanges), but rather data on turnover, number of contracts and certain commercial conditions exchanged with an age and frequency of one month. This position could be explained by the fact that the Council of the NCMC (i.e. its decision-making body) considered that the information exchange was a ‘single and continuous infringement’ with the car hire cartel case which was opened in October 2011 and led to sanctions in July 2013 (See Case S/0380/11 Coches de Alquiler). n UK Claims other than for breach of statutory duty On 12 November 2013, the Court of Appeal handed down its judgment on the appeal by IMI plc and its group companies (“IMI”) against the decision of the High Court in relation to a follow-on damages action brought by Newson Holding Limited and its fellow group companies (“Newson”). The damages action was brought in connection with a European Commission decision of 3 September 2004, which held that IMI and others had been involved in a cartel concerned with the price-fixing and market-sharing in the EEA market for copper water, heating and gas tubes. The Court of Appeal held that Roth J was correct to find that following a Commission decision, section 47A allowed for claims other than for breach of statutory duty to be brought in the English courts. However, Arden LJ held that the High Court was wrong in this case to conclude that the claim of conspiracy not ACER Quarterly October 2013 – January 2014 23 struck out met the requirements of section 47A and the corresponding case-law. Arden LJ provided the following reasoning: 1. section 47A does permit a claimant to bring a conspiracy claim provided that all of the ingredients of the cause of action can be established by infringement findings in the relevant Commission decision; 2. an essential ingredient of the tort of conspiracy is an intent to injure; and 3. in this instance, the Commission had found that IMI had intended to distort competition but not that IMI had the requisite intent to injure Newson. Arden LJ reinforced her reasoning with regards to this third point by stating that “it does not follow in this case that Newson Group would inevitably suffer loss. That would not be so if they were able to pass on the price increase to their customers.” This judgment provides further confirmation that claims other than for breach of statutory duty, are available under section 47A provided that the elements of that claim can be found in the Commission’s decision. Whilst the requisite intent to injure for a conspiracy claim was not found in this case, if a Commission decision demonstrates the cartel had the necessary intent to injure particular potential claimants, a conspiracy claim may be more fruitful in the future. Eurotunnel/SeaFrance judgment On 4 December 2013, the Competition Appeal Tribunal (CAT) handed down its ruling on the applications by Groupe Eurotunnel SA (GET) and Société Coopérative de Production SeaFrance SA (SCOP) for review of the Competition Commission’s (CC) decision on the acquisition by GET of certain assets of SeaFrance SA (SeaFrance). The CAT quashed the decision on the single ground that the CC had erred in its consideration of whether GET had acquired an “enterprise” for the purposes of the Enterprise Act 2002 (the Act) and therefore whether or not it had jurisdiction over the transaction. All other arguments were either dismissed or otherwise deemed immaterial to the outcome of the decision on the facts. GET had contended that the CC’s procedures in general were in breach of the rules of natural justice on the basis of the recent decisions in Al Rawi [2011] UKSC 34 and Bank Mellat (No 2) [2013] UKSC 39. However, the CAT held that the CC’s general approach could not be criticised and that it had provided the “gist” of the case that had to be answered by GET, as was required by the case law on procedural fairness. The CAT stated that the principles outlined in BMI Healthcare ([2013] CAT 24) in relation to the duty to consult in market investigations applied with equal force to the duty to consult in the present context. As to procedural fairness, the decision is a general endorsement of the CC’s current procedures. The judgment confirms that the Al Rawi and Bank Mellat cases have little application in the context of CC investigations and that procedural fairness is context specific, as was decided in relation to market investigations in BMI Healthcare. Although CC investigations will generally involve detailed disclosure to provide the “gist” of the case, this does not amount to complete disclosure. n24 ACER Quarterly October 2013 – January 2014 2013 saw an intense period of activity by the two main antitrust enforcement agencies in China – the National Development and Reform Commission (“NDRC”) and the State Administration for Industry and Commerce (“SAIC”). This activity included the application of the authorities’ recent new powers to dawn raid companies suspected of infringing Chinese antitrust law. For example, in June 2013, NDRC dawn raided several international suppliers of infant formula in China. Companies active in China now face an increasingly aggressive antitrust enforcement landscape. On 13 January 2014, Hogan Lovells organised a seminar in its Beijing office on dawn raid defence best practice for its Sino-Global Legal Alliance (SGLA). SGLA is the first transnational legal alliance in China, and consists of Hogan Lovells and 19 top-tier regional PRC firms. SGLA has a presence in Beijing, Changsha, Chengdu, Chongqing, Dalian, Guangzhou, Hong Kong, Jinan, Kunming, Lanzhou, Shanghai, Shenyang, Shenzhen, Tianjin, Wuhan, Xi’an and Xiamen. The seminar looked at some of the key trends emerging in the global dawn raid landscape, including those emerging from the bribery and corruption field. We looked closely at the European Commission’s competition dawn raid practice, and discussed parallels/differences with China. To prompt discussion and reflection, a mock dawn raid was conducted on delegates in the room. A number of key global trends were identified and discussed, including the following. IT search Antitrust authorities across the world are using increasingly sophisticated IT search software and tools. We discussed the detail of how inspectors approach IT search, what a company’s IT staff will be required to do, and best practice for dealing with these searches to avoid business disruption, ensure that only relevant documentation is taken, and avoid the risk of being fined for obstruction. Privilege There are a number of different approaches to privilege across the world. Whilst the Chinese authorities do not generally recognise the notion of legal privilege, the European Commission recognises that communications with independent, external, European Economic Areaqualified lawyers are protected by legal professional privilege. Some EU member States extend privilege to communications with in-house lawyers. In the seminar we reviewed a number of sample documents and their treatment under the differing privilege regimes across the world. Obstruction Antitrust agencies are increasingly issuing fines and fine uplifts for any obstruction of a dawn raid – whether it involves document destruction, interference with IT search, delayed entry, refusal to answer questions, or breach of seals. The seminar discussed best practice for ensuring that a company avoids being fined for obstruction. Internal and external communication A dawn raid necessitates effective internal and external communication. The seminar examined a number of communication case studies, and discussed best practice. Waiting for legal advisors In some jurisdictions, the inspectors may be willing to wait a short amount of time before starting an inspection until the arrival of internal or external lawyers. The seminar discussed the advantages of seeking legal advice on a raid in different jurisdictions. On-the spot questioning Inspectors have the power the ask questions to any staff during an inspection. In the EU there are certain limited rights not to self-incriminate, whilst in China there are no similar rights. In China, the situation can be quite different. The seminar worked through a number of case studies and best practice in responding to questions raised on a dawn raid. Antitrust dawn raid defence in China SGLA seminar, Beijing – 13 January 2014 ACER Quarterly October 2013 – January 2014 25 Relevance The seminar looked in detail at the type of entry paperwork that the European Commission uses as a basis for a dawn raid, and how companies can ensure that a dawn raid is limited to the scope identified in this paperwork. The seminar discussed the practicalities of ensuring that a dawn raid remains within scope. Wider use of dawn raids Antitrust agencies across the world are increasingly using the dawn raid as their key investigation tool and to investigate a wider range of suspicions. Dawn raids are not just used to investigate cartels. For example, NDRC took assertive investigative measures in the baby milk formula case, which was about resale price maintenance. In addition, the Chinese authorities reportedly searched offices looking for evidence of practices amounting to abuse of dominance. In Europe, the European Commission has even used a dawn raid to start a sector inquiry into pharmaceuticals. n Adrian Emch Partner, Beijing T +86 10 6582 9510 adrian.emch@hoganlovells.com Peter Citron Of Counsel, Brussels T +32 2 505 0905 peter.citron@hoganlovells.com26 ACER Quarterly October 3013 – January 2014 Competition and EU law planner The Competition and EU law Planner is a service and publication entirely free of charge. For further details please contact us at: www.eucompetitionevents.comACER Quarterly October 2013 – January 2014 27 We have developed a customizable competition law compliance e – learning, testing and risk management programme, providing awareness level training for all company employees. COMPETE is based on state – of – the – art, tried and tested online training solutions with high customer satisfaction. The 75 minute, learner paced, electronic multi-media programme allows a company to deliver awareness level training for all employees, including those whose roles may put them into a position that places the company at a heightened risk of a competition law infringement. The programme can be customized to reflect the identity of the company, including branding, sector and company specific case studies and content. The programme is available in a variety of languages, including French, German, Spanish, Italian, Polish and Portuguese. Key features of COMPETE ● Easily navigable ● Opening teaser ‘story’ brings the program to life ● Interactive training techniques ● Practical scenarios present learners with real life situations ● Focused case law summaries provide real life examples ● Practical guidelines available for learners to print ● Expandable “learn more” sections providing richer content ● Talking heads provide additional narrative excerpts adding to the multi – media experience and authenticity of content ● Q&A test at the end of the course with feedback on the answers ● Options for filtered business reports and tracking systems. We would be happy to discuss your needs in more detail and to arrange a demonstration. To find out more contact: COMPETE – competition law compliance e-learning Peter Citron Of Counsel, Brussels T +32 2 505 0905 peter.citron@hoganlovells.com Suyong Kim Partner, London T +44 20 7296 2301 suyong.kim@hoganlovells.com Janet McDavid Partner, Washington, D.C. T +1 202 637 8780 janet.mcdavid@hoganlovells.com28 ACER Quarterly October 2013 – January 2014 The Competition Commission in South Africa is investigating mergers, collusion and monopolistic practices affecting the supply of essential products and commodities more aggressively than ever before. Substantial fines and damages claims are a real possibility. Hogan Lovells’ competition law team in South Africa has extensive experience in helping clients identify and deal with the risks, provide advice on complying with prevailing competition constraints and conditions, as well as defending clients against potential exposure. Competition law is also a basis for investigating unlawful practices and our team assists clients in launching and prosecuting such investigations that might affect their interests before the Competition Commission and Tribunal. Mergers and acquisitions can also be subject to scrutiny by the competition authorities. A properly prepared notification is key to achieving approval and avoiding delays or even prohibition of the transaction. We have extensive experience in the compilation of merger notifications and interactions with the authorities to ensure speedy approval. This has included advising on merger notification requirements in the Common Market for Eastern and Southern Africa (COMESA) as well as other African countries. We advise on a wide range of leading edge behavioural and investigatory work. Our approach is practical and commercial. We work alongside our clients in their day to day businesses to ensure that their commercial strategies and agreements meet the requirements of competition law and we steer them through investigations when these arise. Some of our recent matters: ● Advising South Africa’s leading fixed line telecoms service provider in relation to a major transaction regarding the disposal of its internet service provider business. The transaction required us to give advice with respect to the merger notification requirements in COMESA as well as Mauritius, Zimbabwe, Zambia, Namibia, Tanzania, Kenya, Uganda, Nigeria, Ghana and Côte d’Ivoire. ● Acting for parties in recent investigations by the Competition Commission into the maize and flour milling industry, glass industry, and wholesale and retail of bicycles. ● Acting for the South African Sugar Competition defending a complaint brought before the competition authorities in Namibia. ● Advising an international beauty house on the implications of competition law in relation to its proposed repositioning of their brand in South Africa. nIn a move that signals that UK criminal cartel enforcement is set to increase, Peter Nigel Snee appeared on 27 January 2014 at Westminster Magistrates’ Court to face charges under the UK’s criminal cartel offence. Mr Snee has been charged under section 188 of the Enterprise Act 2002 with “dishonestly agreeing with others to divide customers, fix prices and rig bids between 2004 and 2012 in respect of the supply in the UK of galvanised steel tanks for water storage”. In addition to the charges against Mr Snee, the UK’s Office of Fair Trading (“OFT”) is also conducting a related civil investigation into whether businesses have infringed the provisions of the UK’s Competition Act 1998. This case is an important reminder that the UK competition authorities are determined to pursue criminal cases where appropriate. The charges against Mr Snee come a few months before new legislation will enter into force in the UK, which is designed to make it easier for criminal charges to be brought for competition law infringements. It also follows the announcement in December 2013 that Lee Craddock will take on the role of Director of Criminal Enforcement at the new Competition and Markets Authority (the “CMA”, which will assume the powers of the OFT and the Competition Commission on 1 April 2014). This new legislation, and the general drive to increase prosecutions in the UK, creates increased compliance risks for companies and individuals active in the UK. The current UK cartel offence Cartel activity was criminalised for the first time in the UK in 2003 with the introduction of the cartel offence by section 188 of the Enterprise Act 2002 (“EA02”). As it currently stands, the offence is committed only when an individual dishonestly agrees with one or more other individuals to make or implement, or cause to be made or implemented, one or more of the prescribed “hard-core” activities, which comprise price fixing, limiting production or supply, market sharing, and bid rigging. Individuals convicted of this offence face up to five years imprisonment and/or an unlimited fine. There has yet to be a successful criminal cartel prosecution brought in the UK. Three convictions were secured in the Marine Hoses case, with jail terms of between 20 months and 2.5 years being imposed along with confiscation and director disqualification orders. However, the OFT had a limited role in bringing those prosecutions, and the convictions (secured after guilty pleas had been entered by the accused) piggy-backed on the US criminal case. A second high profile criminal cartel prosecution brought by the OFT in the British Airways/Virgin Atlantic passenger fuel surcharge case collapsed in the early stages of trial. The revised UK cartel offence As a result of this poor enforcement record, the UK government has taken steps to make it easier for prosecutions to be brought under the cartel offence. With the introduction of the Enterprise and Regulatory Reform Act 2013 (the “ERRA”), the newly created CMA will be the primary enforcer of both civil and criminal UK competition law. Significantly, the ERRA also amends EA02 to remove the requirement to prove dishonesty when prosecuting the cartel offence, with a view to making prosecutions easier – this change will come into effect on 1 April 2014. The removal of the requirement to prove dishonesty was controversial, and various exclusions and defences to the offence have been introduced. ● Section 188A EA02 provides that an individual will not have committed an offence: − where arrangements affect the supply of a product or service, customers are given the relevant information about those arrangements before entering into agreements for the supply to them of those products or services; − in relation to bid-rigging arrangements, where the person requesting the bids is provided with relevant information about the arrangement; or − if details of arrangements are published in a specified manner (precise details of which will be set out in secondary legislation) before they are implemented. UK flexes its criminal enforcement muscleACER Quarterly October 2013 – January 2014 3 ● Section 188A(3) EA02 provides that an individual will not commit an offence if the agreement is made in order to comply with a legal requirement. ● Section 188B EA02 creates three new defences to the cartel offence, which are: − where, at the time of making the agreement, there is no intention to conceal the nature of the arrangements from customers; − where, at the time of the making of the agreement, there is no intention to conceal the nature of the arrangements from the CMA; and − where the defendant, before the making of the agreement, took reasonable steps to ensure that the nature of the arrangements would be disclosed to professional legal advisers for the purposes of obtaining advice about them before their making or their implementation (the “Legal Advice Defence”). In September 2013, the CMA published for consultation prosecution guidance explaining the principles to be applied in determining, in any case, whether proceedings for the cartel offence should be instituted. Although this draft guidance (which is expected to be finalised soon) provides some clarification, there still remains minimal guidance on the types of cases likely to be prosecuted under the widened offence. The scope of the exclusions and defences also remains unclear. For example, while the guidance clarifies that the Legal Advice Defence is intended to cover in-house and external lawyers qualified in the UK as well as lawyers qualified in foreign jurisdictions with an “equivalent legal qualification”, no guidance is provided on the meaning of “equivalent qualification” or what information needs to be provided to the adviser in order to satisfy the defence. The revised cartel offence will come into force on 1 April 2014, and applies only to conduct occurring after that date. As a result, it could be some time before the full impact of the revised cartel offence becomes clear. However, it is clear that increased prosecution activity can be expected in the UK. Criminal cartel enforcement outlook Individuals now face a more aggressive criminal cartel enforcement landscape in the UK. This is a global trend. For example, Belgium and Denmark have recently adopted enhanced penalties for individuals involved in collusion. In 2013, in South Korea as many as 22 individuals were indicted in a single bid rigging investigation. In the US, the Antitrust Division had another big year of criminal enforcement with 28 individuals sentenced to prison for antitrust violations in 2013. The consequences of this tougher criminal enforcement landscape for business are significant. This is not limited to potentially greater exposure for individuals working for a company. For companies themselves, there is a heightened risk of whistle blowing by individuals on their corporate boards, and of criminal cases running parallel with civil investigations which will impact on the way in which evidence is gathered and the way in which proceedings are dealt with. n Christopher Hutton Partner, London T +44 20 7296 2402 christopher.hutton@hoganlovells.com4 ACER Quarterly October 2013 – January 2014ACER Quarterly October 2013 – January 2014 5 One year since the filing of the lawsuit, and 18 months since the merger closed, a U.S. federal judge declared on 8 January 2014 that Bazaarvoice violated Section 7 of the Clayton Act by acquiring its main rival, PowerReviews. The U.S. Department of Justice (DOJ) challenged the US$168 million deal even though PowerReviews was too small to require an HSR pre-merger notification filing with the federal antitrust enforcers. This ruling by Judge William H. Orrick underscores that even non-HSR reportable, consummated mergers are subject to close scrutiny and may be found to violate the antitrust laws. The case now moves to the remedy phase, where the DOJ can seek an order to unwind the merger. The government argued that the merger would lead to higher prices and less innovation in the market for product ratings and review platforms used by e-commerce websites. Unlike in most merger challenges, the DOJ did not rely on a heavily concentrated market or high market shares. Instead, it focused on the closeness of competition between the merging parties, claiming that other actual and potential competitors provided an insufficient check on the combined firm. The opinion in Bazaarvoice demonstrates the important role that pre-merger documents (especially those explaining the rationale behind an acquisition) play in the analysis of potential anticompetitive harm. Judge Orrick, while careful to note that “intent is not an element of a Section 7 violation,” cited at length documentary evidence describing PowerReviews as Bazaarvoice’s “fiercest competitor” and containing employee opinions that the transaction would “enable the combined company to ‘avoid margin erosion’ caused by ‘tactical knife-fighting over competitive deals.’” U.S. v. Bazaarvoice, Case No. 13-cv-00133- WHO, at 21, 29 (8 January 2014). Although Bazaarvoice offered alternate explanations for the transaction at trial, the court gave great weight to these pre-merger statements and found that “Bazaarvoice wanted to buy PowerReviews to use its enhanced market power” to avoid competition in pricing and innovation. Id. at 41. The court’s focus on pre-merger opinion and intent is in stark contrast to its treatment of testimony that Bazaarvoice offered from current, former, and potential customers who believed that the acquisition had not and would not harm them. While the court observed that the customers were “credible” sources of information on their need for, use of, and substitutability of the relevant product, and their past responses to price increases in those products, Judge Orrick also found that their “testimony on the impact and likely effect of the merger was speculative at best….” Id. at 116. The court held that as “customers were not privy to most of the evidence presented to the court [and] many customers had paid little or no attention to the merger,” their opinions on the actual effects of the merger were “entitled to virtually no weight.” Id. at 116, 138. In other words, customer testimony does not outweigh documents and economic evidence showing a likely anticompetitive effect. The key takeaways for corporate counsel are the following: ● The federal antitrust enforcers will not ignore consummated, non-reportable transactions that substantially lessen competition ● Bad documents describing intense competition or market power can be difficult to overcome ● Closeness of competition can be at least as harmful as high market shares and concentration ● Parties to transactions in technology markets cannot expect to avoid enforcement simply by claiming that they operate in a “dynamic” market. n Judge rules non-reportable, consummated merger violates U.S. antitrust law Joseph G. Krauss Partner, Washington, D.C. T +1 202 637 5832 joseph.krauss@hoganlovells.com John Robert “Robby” Robertson Partner, Washington, D.C. T +1 202 637 5774 robby.robertson@hoganlovells.com6 ACER Quarterly October 2013 – January 2014 On 5 December 2013, the European Commission published a package of measures to reduce the administrative burden of EU merger control, which apply as of 1 January 2014. The package extends the scope of the simplified procedure for non-problematic cases. This means that more transactions may be notified using the Short Form CO, which will reduce the burden notwithstanding the fact the “Short” Form CO is still a fairly lengthy document. The European Commission considers that its changes could allow up to 60-70% of all notified mergers to qualify for review under the simplified procedure, which is about 10% more than today. The European Commission has also introduced various amendments to all its notification forms, aimed at streamlining the information which notifying parties are required to provide in these forms. The changes are welcome news for business and should reduce the workload and costs involved in seeking clearance for most transactions which require notification to the European Commission but do not raise competition law issues. What is the simplified procedure? A simplified procedure was introduced by the European Commission in 2000 for the assessment of transactions which are not expected to raise significant competition concerns. The simplified procedure is in principle available for certain categories of transactions, although its use always requires the consent of the Commission which should not automatically be assumed. Under this procedure transactions can be notified using a Short Form CO, which involves the provision of less extensive information than the standard notification form, the Form CO. The simplified merger procedure may also lead to a quicker review process. The European Commission states that it “will endeavour” to adopt a short-form decision as soon as practicable after 15 working days (it generally has a total of 25 working days to decide whether to grant approval or open a Phase II in-depth investigation). Expansion of scope for simplified procedure Before 1 January 2014, the simplified procedure was available in cases where the parties’ combined market shares was below 15% for horizontal overlaps and 25% for vertical relationships, and for joint ventures, which had no, or de minimis, actual or foreseen activities within the European Economic Area (EEA). Effective from 1 January 2014, the Commission has increased the market share limits and added a new category of transaction that may benefit from the simplified procedure. The European Commission’s Notice on a simplified procedure for the treatment of certain concentrations under Council Regulation (EC) No 139/2004 (the “Notice”), has thus been amended so that it covers: (i) Transactions where parties’ combined markets shares are below 20% for horizontal overlaps and below 30% for vertical relationships. (ii) Joint ventures which have no, or de minimis, actual or foreseen activities within the European Economic Area (EEA). A turnover and asset transfer test of less than EUR100 million is used to determine this. (iii) Horizontal mergers which lead to only small increments in market shares. This applies where the combined horizontal market shares are less than 50% and the increment (“delta”) of the HerfindahlHirschman Index (“HHI”) resulting from the transaction is below 150. On this last point, however, the European Commission notes in the revised Short Form CO that it will “decide on a case-by-case basis whether, under the particular circumstances of the case at hand, the increase in market concentration level indicated by the HHI delta is such that a Short Form CO can be accepted. The Commission is less likely to accept a Short Form CO if any of the special circumstances mentioned in the Commission’s guidelines on the assessment of horizontal mergers are present; for instance – but not limited to – where the market is already concentrated, in the case of a concentration that eliminates an important competitive force, in the case of a concentration between two important innovators, or in the case of a concentration involving a firm that has promising pipeline products”. EU merger control – New measures aimed to reduce administrative burdenACER Quarterly October 2013 – January 2014 7 Amendments to merger notification forms The European Commission has introduced a number of amendments to all the notification forms, namely the Form CO, the Short Form CO, and Form RS (the form in which parties can request a referral back to one or more EU member states or for the European Commission to consider the case rather than individual EU member states). Amendments to the Form CO include: ● The definition of “affected markets” has been revised in accordance with the proposed new Notice. Parties now only have to submit detailed information for “affected markets” where there are horizontal overlaps of more than 20% (previously 15%) and vertical overlaps of more than 30% (previously 25%). The form no longer requires detailed information about each affected market to be provided for the EEA territory, for the EU, for EFTA and for each Member State. The information must, however, be provided for “all relevant product and geographic markets, as well as plausible alternative relevant product and geographic markets”. ● Further guidance regarding the possibility to request waivers from providing certain information. The Form highlights the specific categories of information in the form that the parties may want to seek a waiver from providing. These include (i) a list of all other undertakings which are active in affected markets in which the undertakings hold individually or collectively 10% or more of the voting rights, issued share capital or other securities; (ii) acquisitions made during the last three years by group undertakings active in affected markets; (iii) analyses, reports, studies, surveys, presentations and any comparable documents for the purpose of assessing or analysing the transaction; (iv) analyses, reports, studies, surveys and any comparable documents of the last two years for the purposes of assessing any of the affected markets; (v) identification of all affected markets, including all plausible alternative market definitions; (vi) estimate of the total size of the market in terms of sales value and volume; (vii) estimate of the total EU-wide and EEA-wide capacity for the last three years; (viii) details of the most important cooperative agreements engaged in by the parties to the transaction in the affected markets; and (ix) details of trade associations in the affected markets. ● A request for a description of quantitative economic data. The new form asks the parties to briefly describe the data that each of the parties “collects and stores in the ordinary course of it business operations” in cases where quantitative economic analysis for the affected markets is likely to be useful. It notes that this information is not required for the Form CO to be considered complete, but that “given the statutory deadlines for Union merger control, notifying parties are encouraged to provide such descriptions as early as possible in cases and for the markets in which quantitative analysis is likely to be useful”. ● Encouragement to submit together with the Form CO a list of those jurisdictions outside the EEA where the transaction is subject to merger control clearance before closing, as well as waivers of confidentiality that would enable the European Commission to share information with other competition authorities outside the EEA about the transaction. ● Additional supporting documentation. The new Form adds some additional requirements for supporting documentation. These requirements have fortunately been reduced as compared with the draft package which was published for consultation earlier this year. The new Form requests: “copies of the following documents prepared by or for or received by any member(s)of the board of management, the board of directors, or the supervisory board, as applicable in the light of the corporate governance structure, or the other person(s) exercising similar functions (or to whom such functions have been delegated or entrusted), or the shareholders’ meeting: (i) minutes of the meetings of the board of management, board of directors, supervisory board and shareholders’ meeting at which the transaction has been discussed, or excerpts of those minutes relating to the discussion of the transaction; 8 ACER Quarterly October 2013 – January 2014 (ii) analyses, reports, studies, surveys, presentations and any comparable documents for the purpose of assessing or analysing the concentration with respect to its rationale (including documents where the transaction is discussed in relation to potential alternative acquisitions), market shares, competitive conditions, competitors (actual and potential), potential for sales growth conditions; (iii) analyses, reports, studies, surveys and any comparable documents from the last two years for the purpose of assessing any of the affected markets with respect to market shares, competitive conditions, competitors (actual and potential) and/ or potential for sales growth or expansion into other product or geographic markets.” ● Alternative market definitions. The new Form states that, when presenting relevant product and geographic markets, the parties must submit, in addition to any product and geographic market definitions they consider relevant, all plausible alternative product and geographic market definitions. The new Form explains that plausible alternatives can be identified on the basis of previous Commission decisions and judgments of the Union Courts and (in particular where there are no Commission or Court precedents) by reference to industry reports, market studies and the notifying parties’ internal documents. ● Other markets in which the notified operation may have a significant impact. The new Form continues to require information regarding these markets, but has amended the market share thresholds for when this information may be required as follows: from 25% to 20% for markets in which the parties are potential competitors; from 25% to 30% for markets where the other party holds important IP rights; and from 25 % to 30% for neighbouring markets. Amendments to the Short Form CO include: ● Reportable markets. The new Short Form CO clarifies that market definition information and market information are only required if the transaction gives rise to “reportable markets”. The definition of “reportable markets” has been modified to clarify that, in the case of acquisition of joint control in a joint venture, the relevant test applies to the joint venture and at least one of the acquiring parties. The test also applies only to activities in the EEA territory, meaning that if the parties are active in worldwide markets but not in the EEA, there will be no reportable markets. These changes essentially mean that extra-territorial joint ventures can now be notified using an abbreviated version of the Short Form CO, or as the European Commission terms it in its accompanying press release in a “super-simplified notification”. ● Additional supporting documentation. For the first time, the new Short Form CO requires production of the following internal documents analysing the transaction, although only if there are reportable markets in the EEA: “copies of all presentations prepared by or for or received by any members of the board of management, or the board of directors, or the supervisory board, as applicable in the light of the corporate governance structure, or the other person(s) exercising similar functions (or to whom such functions have been delegated or entrusted), or the shareholders’ meeting analysing the notified concentration.” ● Pre-notification contacts. The new Short Form CO explains that there may be no need for pre-notification contacts where there are no horizontal or vertical overlaps. Conclusion Whilst the package is a welcome cut in red tape for EU merger clearance, it is yet to be seen whether in practice the initiative will radically reduce overall information requirements and expenses. The European Commission retains a wide discretion whether to accept information waiver requests, and to revert to a full notification process. Extra-territorial joint ventures that have no actual or foreseeable effects within the EEA still require notification. This is because under the current EU Merger Regulation, the turnover thresholds can be met solely on the basis of two joint-controlling parent companies’ turnover. This is the case, irrespective of the geographic location of the joint venture, its size and whether the joint venture could raise competition concerns within the EEA. The European Commission has chosen not to tackle the issue at this stage by amending the turnover thresholds of the EU Merger Regulation. Instead, it has chosen to reform around ACER Quarterly October 2013 – January 2014 9 the edges by maintaining the notification requirement but reducing the quantity of information that is required in the notification form for these transactions. These transactions can now be notified using an abbreviated Short Form, which is called by the Commission in its accompanying press release to the package a “super-simplified notification”. This essentially requires a description of the transaction, business activities and turnover of the parties without a description of markets or the provision of supporting documentation. n Peter Citron Of Counsel, Brussels T +32 2 505 0905 peter.citron@hoganlovells.com10 ACER Quarterly October 2013 – January 2014 On 16 December 2013, the Federal Trade Commission (FTC) announced that two nonprofit professional associations have agreed to eliminate provisions in their codes of ethics that limited competition among their members in order to settle litigation brought by the FTC. The first settlement involves the Music Teachers National Association, Inc. (MTNA), which represents more than 20,000 music teachers nationwide. The FTC’s complaint alleged that MTNA and its members constrained competition in violation of the antitrust laws through an ethics provision requiring that each “teacher…respect the integrity of other teacher’s studios and…not actively recruit students from another studio.” The second settlement involves the California Association of Legal Support Professionals (CALSPro), which represents companies and individuals that provide legal support services in California. The FTC alleged that CALSPro violated the antitrust laws through propagation of an ethical code that impaired its members from competing with one another on price, restricted certain competitive advertising techniques, and constrained its members’ ability to offer employment to another member’s employees. Specifically, CALSPro’s code of ethics stated: (1) “It is unethical to cut the rates you normally and customarily charge when soliciting business from a member firm’s client”; (2) “It is not ethical to...speak disparagingly of another member”; and (3) “It is unethical to contact an employee of another member firm to offer him employment with your firm without first advising the member of your intent.” The proposed orders settling these charges require both organizations to modify their ethical codes to eliminate the identified prohibitions on competition. In the case of MTNA, the order also mandates that the organization disassociate from and refuse to accept as affiliates any organizations that restrict member competition in: (1) the solicitation of teaching work; (2) advertising or publishing the prices or terms of sales of teaching services; and (3) any other aspect of pricing, including the offering of free or discounted services. The proposed orders further require that both organizations implement stringent antitrust compliance programs, including in-person annual antitrust training for board of directors, officers, and employees and antitrust compliance presentations at annual association meetings. These investigations and settlements reflect the FTC’s long standing focus on restraints of competition that are incorporated into the ethics codes of trade associations. The FTC acknowledges that professional associations like MTNA and CALSPro typically serve many important and pro competitive functions, including adopting rules governing the conduct of their members that benefit competition and consumers. But, it also warned that because trade organizations are by nature collaborations among competitors, the commission and courts have long been concerned with anticompetitive restraints imposed by such organizations under the guise of codes of ethical conduct. While the FTC does not prohibit associations from adopting ethical codes designed to protect the public, these rules and guidelines may be considered unlawful if they are “unreasonable restraints of trade” without a “legitimate business rationale.” The FTC is particularly likely to take action when these codes implicate traditional “hard core” violations of the antitrust laws, such as price fixing, bid rigging, and the division of geographic or product markets. Associations should take care to avoid such restraints when they draft or revise their ethical codes, and it would be prudent to review existing codes on a periodic basis for compliance with the antitrust laws. n FTC requires modification of trade association ethical rules Joseph G. Krauss Partner, Washington, D.C. T +1 202 637 5832 joseph.krauss@hoganlovells.com Wesley Carson Associate, Washington, D.C. T +1 202 637 2870 wesley.carson@hoganlovells.comACER Quarterly October 2013 – January 2014 11 Resale price maintenance in France On October 10, 2013, the Paris Court of Appeals confirmed a landmark decision of the French Competition Authority condemning three leading manufacturers active in the dog and cat food sector to a EUR 35.3 million fine for having imposed resale prices and territorial restrictions on their distributors in France during five years. Between 2004 and 2008, two of these manufacturers directly negotiated the resale prices of the pet food products with specialist retailers (pet shops, farmers, and vets), even though these retailers purchased their products from wholesalers. The wholesalers were therefore not free to set their own prices, preventing them from gaining competitive prices. This recent decision of the Paris Court of Appeals illustrates the particular attention the French authorities are paying to the issue of minimum or fixed resale price maintenance (“RPM”). For this purpose, they can rely on two co-existing sets of rules prohibiting minimum RPM: those applicable to unfair commercial practices and those based on competition law. Prohibition of minimum RPM on the grounds of competition law Article L.420-1 of the French Commercial Code (“FCC”) – equivalent to Article 101 TFEU – prohibits agreements intended to prevent prices from being determined by the free play of the market by artificially encouraging price increases. Insofar as it can distort competition, RPM can fall within the scope of this provision. In order to assess whether a RPM agreement is anticompetitive, the French Competition Authority adopts a case-by-case approach, making a distinction between minimum and fixed resale prices, on the one hand, and maximum or recommended sale prices, on the other hand. Absolute prohibition of minimum resale price maintenance In principle, minimum RPM falls within the scope of Article L.420-1 FCC as a vertical anticompetitive practice. However, and by exception, Article L. 420-1 FCC does not apply to minimum RPM practices resulting from a legislative or regulatory provision (Article L.420-4-I-1 FCC). For instance, Law No 81-766 of August 10, 1981 relating to book prices has turned the imposition of retail prices by publishers into an obligation. This law is subject to a restrictive interpretation. Where this legal exception does not apply, the Competition Authority condemns any clear contractual provision between manufacturers and retailers formalizing a minimum resale price-fixing agreement, in application of Article L.420-1 FCC. For instance, these contractual clauses can cover provisions whereby the distributor expressly undertakes to respect the recommended prices. The mere presence of this clause is sufficient to characterize the agreement as anticompetitive, even if it is not implemented. Contractual clauses fixing the margin of the distributor or clauses fixing the maximum level of reductions that the distributor can grant to consumers also amount to anticompetitive minimum RPM. Authorization of maximum or recommended prices, provided they do not actually amount to minimum RPM As opposed to minimum resale price maintenance, the French Competition Authority and French Courts do not consider maximum and recommended prices as hardcore restrictions. The mere recommendation or suggestion of a resale price is not, as such, prohibited, provided that it does not result in binding resale prices imposed on distributors: the distributor must remain free to price at the level it wishes to. Where there is not a clear contractual clause demonstrating the existence of a minimum resale price agreement, the Competition Authority checks whether the following three indicators are in place: ● manufacturers communicated recommended retail prices to their retailers; ● manufacturers monitored retailers’ compliance with the recommended retail prices and set up a retail sale price control system; and ● retailers applied the recommended retail prices. For instance, the French Competition Authority referred to these criteria to condemn five manufacturers and three distributors active in the toys distribution sector for having entered into vertical resale price fixing agreements. This decision of December 2007 was confirmed by the French Supreme Court in April 2010.12 ACER Quarterly October 2013 – January 2014 In this case, the Competition Authority found there to be an anticompetitive vertical agreement on the basis of the following elements: ● retail prices recommended by the manufacturers had been communicated to the retailers through pre-printed Christmas catalogues; ● the distributors had actively participated in monitoring practices, increasing retail sale prices for “problematic toys.” In particular, one of the distributors had set up a promotional campaign claiming that it would refund ten times the price difference if customers could find certain toys cheaper elsewhere. This distributor thereby encouraged consumers to monitor prices on its behalf. Then, using information obtained when reimbursing consumers, the distributor systematically asked its suppliers to ensure that lower prices were not offered to its competitors. For this purpose, the distributor circulated to the suppliers a list of “price troubles,” called “letter to Father Christmas,” requesting its suppliers to ask its competitors applying lower prices to raise their prices; ● last, retailers had applied the recommended retailed prices as several documents collected during the investigation demonstrated that prices recommended by the suppliers in the Christmas catalogues were substantially applied by the distributors. In this respect, it is worth noting that the Competition Authority considers that where 80 percent of the prices applied by a distributor actually amount to the recommended retail prices, the distributor is deemed to have applied the recommended prices. If 80 percent of the prices are not recommended prices, further analysis of the price dispersion may still allow the Competition Authority to evidence an implementation of the recommended prices. As a result, the Competition Authority imposed a EUR 37 million fine on the toys suppliers and distributors concerned. No exemption for minimum resale prices In light of French case law, minimum resale price maintenance does not benefit from an exemption, either on the basis of the vertical block exemption or on the basis of an individual exemption. No application of the vertical block exemption The French Competition Authority refers to the EU Vertical Block Exemption Regulation (VBER) n°330/2010, which grants a safe harbour for vertical agreements, provided that the market shares of the supplier and the distributor do not exceed 30 percent of the relevant market on which they sell or purchase the contract goods or services. The benefit of the block exemption does not, however, extend to agreements containing a “hardcore” restriction of competition and both case law and Article 4 of the VBER qualify the agreements having as their direct object the observation of a minimum resale price level by the buyer as a “hardcore” restriction. No individual exemption in practice Where the VBER does not apply, recommended resale prices may in theory benefit from an individual exemption on the grounds of L. 420-4-I-2° FCC, if the parties can demonstrate that the agreement: ● contributes to improving the production or distribution of goods or to promoting technical or economic progress; ● allows consumers a fair share of the resulting benefit; ● does not impose restrictions which are not indispensable to these objectives; and ● does not afford the parties the possibility of eliminating competition. These cumulative conditions are equivalent to those of Article 101, paragraph 3, TFEU. Minimum RPM agreements are unlikely to fulfill the conditions for an individual exemption According to the European Commission’s Guidelines on vertical restraints, minimum RPM generally facilitates anticompetitive practices between suppliers by enhancing price transparency on the market, thereby making it easier to detect whether a supplier deviates from a collusive equilibrium by cutting prices.ACER Quarterly October 2013 – January 2014 13 RPM may also facilitate collusion between distributors by eliminating intra-brand price competition. In particular, RPM can result in price increases as distributors are prevented from lowering their sales price for a particular brand, thereby reducing pressure on the manufacturer’s margins. RPM may also reduce inter-brand competition. The increased margin that RPM may offer distributors can indeed entice them to favor a particular brand over rival brands when advising customers (even where such advice is not in the interest of these customers) or not to sell these rival brands at all. Last, RPM can reduce dynamism and innovation at the distribution level. By preventing price competition between different distributors, RPM may prevent more efficient retailers or price discounters from entering the market. For the above reasons, minimum RPM agreements are unlikely to fulfill the conditions for an individual exemption. This has been confirmed in French case law. Justifications for minimum RPM rejected by the competition authority In cases where they have considered that the recommended prices were, in fact, imposed prices on the basis of the criteria referred to above, the Competition Authority and French Courts have never accepted any justification of resale price maintenance to date, either practical or founded on efficiency gains. For instance, the Competition Authority has considered that the following arguments were not acceptable justifications: ● RPM would enable the fixing of a “fair price” for consumers, maintenance of competitiveness, and prevention of an overproduction crisis; ● imposing prices to franchisees would be a “way of disclosing a low cost price policy;” ● RPM would be justified by the “uncertainty relating to parity of currencies;” ● there exists a “concern of guaranteeing a sufficient and constant quality of the services performed” by the members of the network;” ● there are situations peculiar to luxury products and brand image; and ● the need to maintain local shops as well as training and information of retailers in country areas. In these cases, the Competition Authority recalled that the “fair price” is the one established on a competitive market and that the parties had not demonstrated that these objectives could not have been obtained without imposing a minimum RPM. It is therefore very difficult to obtain an individual exemption in case of minimum RPM, whatever the RPM is direct or indirect. This means that the risk of fines is very important in case of minimum RPM. Sanctions in cases of minimum RPM Minimum RPM might trigger different types of sanctions for companies, in particular heavy fines and criminal penalties. ● Heavy fines: Pursuant to Article L. 464-2 FCC, a company which is party to an anticompetitive agreement may incur a fine of up to 10 percent of its consolidated global annual tax-free turnover. According to French case law, even if they are less serious than cartels, RPM practices are “serious by nature because their consequence is to confiscate, for the benefit of the authors of the infraction, the benefits which the consumer has the right to expect from intra-brand competition on the retail market.” In certain cases, the Competition Authority only imposes sanctions on the sole manufacturer with a leading role, and not upon distributors that only partially contributed to the retail price-fixing practice. However in some cases, the Competition Authority not only fined the manufacturers, but also some distributors. This was the case in the luxury perfumes case where 13 suppliers and 3 distributors were fined EUR 45.4 million (which is the heaviest fine ever imposed in France for RPM practices).14 ACER Quarterly October 2013 – January 2014 The following graph summarizes the main fines imposed by the Competition Authority over the last ten years for RPM: 3,870 5,000 14,400 45,400 300 580 800 37,000 2,000 1,340 35,322 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 1 2 3 4 5 6 7 8 9 10 11 1. School calculators sector (03-D-45, 25 Sept. 2003) 2. Dog food market (05-D-32, 22 June 2005) 3. Video cassettes for children (05-D-70, 19 Dec. 2005) 4. Luxury perfume sector (06-D-04, 13 March 2006) 5. French market for two-wheel spark plugs (06-D-22, 21 July 2006) 6. Cycle and cycle products distribution (06-D-37, 7 Dec. 2006) 7. Games consoles and video games sector (07-D-06, 28 Feb. 2007) 8. Sector of toy distribution (07-D-50, 20 December 2007) 9. Agri-supply industries (08-D-20, 1 Oct. 2008) 10. Toy and fancy goods sector (11-D-19, 15 Dec. 2011) 11. Sale of dry dog and cat food in specialist retail (12-D-10, 20 March 2012) K€ ● Criminal penalties: Article L. 420-6 of the Commercial Code provides that “any natural person who fraudulently takes a personal and decisive part in the conception, organization or implementation of the practices referred to in articles L. 420-1 and L. 420-2, shall be punished by a prison sentence of four years and a fine of €75,000.” However, criminal sanctions have not been applied in cases relating to minimum RPM practices to date. Prohibition of minimum RPM on the grounds of unfair commercial practices French law is characterized by the co-existence of two sets of rules prohibiting minimum RPM. Along with Article L.420-1 FCC prohibiting anticompetitive practices, Article L. 442-5 FCC also provides that it is illegal “for any person to impose, directly or indirectly, a minimum price for the resale of a product or a service, or to impose a minimum profit margin.” In application of this provision, minimum RPM is deemed to be restrictive per se, whatever the effect of the practice on competition. The negative impact of this restrictive practice will therefore be deemed proven without any effect-based assessment on the relevant market. For instance, the French Supreme Court confirmed that a supplier who had refused to deliver a product to a reseller because its resale price was too low had, thereby, aimed at imposing a minimum resale price to its distributor, in violation of Article L. 442-5 of the French Commercial Code. Any person imposing a direct or indirect minimal resale price incurs a criminal fine up to EUR 15,000. However, the number of condemnations on this ground remains quite limited. Conclusion The French authorities take a very strict approach to RPM, focusing on prices, despite the fact that competition also takes place with respect to quality of service, brand image, supplies, etc. In this respect, the Leegin decision handed down by the U.S. Supreme Court on June 28, 2007 could potentially open the way to an evolution of the Competition Authority’s decision-making practice as regards justifications based on efficiency gains that may be linked to minimum RPM. However, the mere fact that a specific provision prohibits minimum RPM as an unfair commercial practice, whatever the efficiency gains on the market, appears to be a barrier to an evolution of French case law. Manufacturers and wholesalers should therefore be very careful to avoid such practices with their retailers in France. n Charles Saumon Senior Associate, Paris T +33 1 5367 4702 charles.saumon@hoganlovells.comACER Quarterly October 2013 – January 2014 15 On 14 January 2014, the New York Attorney General (AG) announced a settlement with MPHJ Technology Investments, LLC related to the patent assertion entity’s (PAE’s) licensing demands. At least three other state attorneys general have publically assailed the tactics of MPHJ, which allegedly demands royalty payments from small- and medium-sized businesses that use everyday technologies like a scanner connected to a computer network. Vermont, Nebraska, and Minnesota have tried to stop MPHJ from operating in their states. New York’s latest move ramps up the pressure not just on MPHJ, but on all so-called “patent trolls,” going so far as to provide general guidelines for patent assertion behavior. The key provisions of New York’s guidelines are as follows: ● patent holders (including their lawyer “mouthpieces”) must make “serious, good-faith efforts” to determine whether alleged infringers actually infringe a patent; ● allegations of infringement must include “material information,” including “reasonable detail” on the basis for the claim; ● licensing demands must state the basis for the proposed payment; ● the “true identify” of the patent holder must be made transparent; and ● these restrictions must travel with the patents upon transfer or assignment. According to New York, MPHJ’s threatening letters exploit flaws in the patent system by purchasing patents of questionable validity and then seeking payments that are significant, but not large enough to justify the extraordinary expenses associated with patent litigation. The AG alleged that MPHJ’s conduct constituted “repeated deceptive acts” under Section 63(12) of the New York Executive Law, which provides that “[w]henever any person shall engage in repeated fraudulent or illegal acts or otherwise demonstrate persistent fraud or illegality in the carrying on, conducting or transaction of business, the attorney general may apply, in the name of the people of the state of New York, to the supreme court of the state of New York, on notice of five days, for an order enjoining the continuance of such business activity or of any fraudulent or illegal acts [and] directing restitution and damages….” The settlement will allow businesses in the state of New York to void their licenses with MPHJ and receive a full refund of any payments made. It also bars MPHJ from further contact with previously targeted small businesses. More importantly, this settlement gives further momentum to efforts to combat the “abusive” tactics of some PAEs, which in the past year have come under increasing scrutiny from the federal antitrust enforcers, bi-partisan members of Congress, the White House, and to a lesser extent (so far), private plaintiffs. Companies targeted with patent infringement claims and licensing demands by aggressive PAEs may find support in the New York AG’s guidelines, which could become a template for other states, the Department of Justice, the Federal Trade Commission, and even private plaintiffs. n New York AG settles with “patent troll” targeting end-users of patented technologies Charles E. Dickinson Associate, Washington, D.C. T +1 202 637 3208 charles.dickinson@hoganlovells.com Logan M. Breed Partner, Washington, D.C. T +1 202 637 6407 logan.breed@hoganlovells.com16 ACER Quarterly October 2013 – January 2014ACER Quarterly October 2013 – January 2014 17 On 21 November 2013, the European Commission signed a Memorandum of Understanding (“MoU”) with the Competition Commission of India. A copy has just been published on the European Commission’s website. The aim of the MoU is to further strengthen cooperation between the two parties in the area of antitrust enforcement. This MoU forms part of a wider and ever increasing web of international agreements between antitrust authorities. India already has in place a MoU with the US Department of Justice (DoJ) and the Federal Trade Commission (FTC). The EU has concluded bilateral cooperation agreements/ MoUs on antitrust matters with an extensive list of countries, including China (see Hogan Lovells alert here), US, Canada, Japan, India, South Korea, and Switzerland. Key provisions of the MoU are as follows. ● Exchange of information. Both parties acknowledge that it will be in “their mutual interest” to exchange non-confidential information with regard to competition policy, operational issues, multilateral competition initiatives (such as interaction with the ICN and OECD), competition advocacy, and technical cooperation activities. ● Coordination of enforcement activities. The MoU states that: “Should the Sides pursue enforcement activities concerning the same or related cases they will endeavour to coordinate their enforcement activities, where this is possible”. ● Mutual assistance. There are a number of provisions which deal with the possibility to request the other party to take enforcement action in its jurisdiction. These are as follows. 6. If one of the Sides believes that anti-competitive actions carried out on the territory of the other Side adversely affect competition on the territory of the first Side, it may request that the other Side initiates appropriate enforcement activities as per their applicable competition law. 7. The requested Side will consider the possibility of initiating enforcement activities or expanding on-going enforcement activities with respect to the anti-competitive actions, identified by the requesting Side, in accordance with the requirements of its legislation and will inform the other Side about the results of such consideration. 8. Nothing in this Memorandum of Understanding will limit the discretion of the requested Side to decide whether to undertake enforcement activities with respect to the anti-competitive actions identified in the request, or will preclude the requesting Side from withdrawing its request. ● Avoidance of conflicts. The MoU provides a mechanism to avoid conflicts if one authority’s enforcement activity may affect the other in its own enforcement activity. It is too early to tell how the key clauses of the MoU will be applied in practice and whether it will be a “game changer”. However, the MoU certainly signals a clear intent for increased cooperation on antitrust matters between the EU and India. With increasing cooperation and coordination between antitrust authorities worldwide now a reality, the risk of cartel detection has never been higher. n Cooperation between the EU and India on antitrust matters Peter Citron Of Counsel, Brussels T +32 2 505 0905 peter.citron@hoganlovells.com18 ACER Quarterly October 2013 – January 2014 As in the United States, China has more than one antitrust agency. In fact, it has three: the Ministry of Commerce, the State Administration for Industry and Commerce, and the National Development and Reform Commission. During 2013, the most active one among the three was the NDRC. The NDRC is the successor of the former Planning Ministry from the Mao era. It is often called the “mini State Council” – the State Council is China’s cabinet – given its political clout, and the plethora of sectors and policies it is responsible for. The NDRC had been active throughout the year, but it was really around and after the fifth anniversary of the Anti-Monopoly Law – China’s main antitrust statute – in August 2013 that the NDRC stepped up enforcement and began to make headlines on a regular basis. Here is a brief survey of three recent cases. Baby milk formula cases. On 7 August 2013, the NDRC imposed fines totalling about $110 million on six foreign-owned infant formula companies. The fines imposed are the largest of their kind in the history of Chinese antitrust enforcement. The NDRC found that the baby formula manufacturers had imposed minimum resale prices on their distributors, either contractually or through other means, such as suspension or termination of supplies, financial penalties, and rebate cancellation. The NDRC’s decision included no specific legal explanation as to why the imposition of price floors was illegal, suggesting that the agency considered the practice to be per se illegal. River sand case. On 4 September 2013, a local office of the NDRC in Guangdong Province challenged the pricing practices of two river sand companies on antitrust grounds. The two companies, owned by the same individual, reportedly engaged in excessive pricing and hoarding supplies, which the agency found constituted an abuse of dominance. As part of its case, the NDRC first needed to prove dominance. It did so by defining the relevant market extremely narrowly. It held that the relevant geographic market was one of 10 districts in Shaoguan, a small city, by China’s standards, of 2.8 million inhabitants in the South of China, where the two companies had a market share of over 75 percent. As benchmarks for finding the companies’ prices to be excessive, the NDRC compared the companies’ price increase (54.4 percent) with the increase in costs (more than 20 percent), and also compared their price levels with those prevalent in other river sand markets. As for the hoarding allegation, the NDRC noted that river sand is normally sold shortly after extraction and that the storage cycle is generally shorter than two years. In the agency’s view, the companies’ hoarding practice led to an artificial scarcity in supply and strong price fluctuations. Hainan and Yunnan tourism case. On 29 September 2013, the NDRC issued its decision to impose sanctions on 39 companies in the tourism industry for three types of anti-competitive practices. ● Artificially inflating prices before discounting. The conduct the NDRC objected to was that gift shops in two major tourist destinations (Sanya and Lijiang) offered local specialty products at a high mark-up, to which they would later apply a discount of around 15 to 25 percent. The marked-up prices were as much as 100 times the cost price to the retailer. ● Cartel activities. The NDRC also challenged cartel conduct in both Sanya and Lijiang. In Sanya, the NDRC revealed that three of the only four large gift shops in the city met on numerous occasions to agree on prices and discounts for crystals, and divided up the market among themselves. In mid-2012, the three companies entered into a written “industry self-discipline agreement,” and even opened a joint bank account in which each of them made a payment that served as a deposit to ensure that it would not deviate from the agreed prices and market shares. The NDRC held this conduct to be market partitioning between competitors, in breach of the AML. In Lijiang, the NDRC found eight travel agencies to have engaged in price-fixing of hotel rooms, and meal vouchers. The companies reportedly met 24 times in 2011 and 2012 and entered into a written contract that fixed prices and discounts and allocated specific market shares to each of the participants. Snapshot of recent Chinese antitrust enforcement actionACER Quarterly October 2013 – January 2014 19 ● “Zero/below-cost group fee.” The NDRC further challenged the so-called “zero/below-cost group fee” practice by tour operators in Sanya. With this practice tour operators charge their customers a price for a tour that is below cost, but then receive commissions from the shops visited on the tour, often using pressure tactics to ensure the tourists purchase items within the designated shops. NDRC stated that this practice infringed the Price Law. The three recent decisions show that the NDRC has become more assertive in its antitrust enforcement. In many cases in 2013, the NDRC appears to have been focused on consumer products such as baby milk formula and holiday tours. However, companies in other sectors should not be lulled into a false sense of security. Indeed, two high tech companies – InterDigital Corp. and Qualcomm Inc. – reported becoming the target of NDRC investigations towards the end of 2013. After the Third Plenum of the new leaders of China’s communist party in November, the voices urging the NDRC to reform itself – or even disband – have become louder. It is very possible that the agency will make most of its role as antitrust enforcer to stay in the game and show its “reformist” face by bringing antitrust cases. If so, we may have seen only the beginning of the NDRC’s assertive antitrust agenda. n Adrian Emch Partner, Beijing T +86 10 6582 9510 adrian.emch@hoganlovells.com20 ACER Quarterly October 2013 – January 2014 EU Interest rate derivatives fines On 4 December 2013, the European Commission announced that it has fined eight international banks a total of EUR1.71 billion for participating in illegal cartels in markets for financial derivatives covering the EEA. The Commission reached two separate decisions using the cartel settlement procedure. One decision relates to collusion by four banks in relation to interest rate derivatives denominated in the Euro currency (EURIBOR). The second decision involves seven separate bilateral infringements involving six companies relating to interest rate derivatives denominated in Japanese Yen (JPY LIBOR). Barclays and UBS received complete immunity from fines under the Commission’s 2006 Leniency Notice. North Sea shrimp fines On 27 November 2013, the European Commission fined a number of North Sea shrimp traders a total of EUR28.7 million for the operation of an illegal price-fixing cartel. One company received full immunity from fines. The Commission found that the companies agreed to fix prices and share sales volumes of North Sea shrimps in Belgium, France, Germany and the Netherlands. The food sector has been identified as a priority sector for both EU member state competition authorities and the Commission in order to ensure that food markets work for suppliers and consumers. The Commission states that it has carried out a number of investigations concerning food products and is working with other European competition authorities to implement the specific competition rules applying to agricultural and fisheries products following the reform of the common agriculture and fisheries policies. The Commission is also addressing concerns expressed about the possible deterioration of choice and innovation in food products and has launched a comprehensive study to assess the evolution and drivers of choice and innovation. The results of this study will be published in 2014. n France Opinion on the French pharmaceutical sector On 19 December 2013, following several months of public consultation and a vast sector inquiry, the French Competition Authority issued a non-binding opinion on the competitive functioning of the pharmaceutical distribution sector. This opinion calls for a stimulation of competition at all levels of the medicinal distribution chain: (i) at the upstream level, boosting innovation and promoting the development of generic medicines, (ii) at the intermediate level, strengthening the role of wholesalers and further developing the parallel trade of drugs within the European Union, and (iii) at the downstream level, partially opening up to competition with respect to over-the-counter drugs. Fine for failure to notify a merger On 20 December 2013, the French Competition Authority imposed a fine of €4 million on the French wine broker and producer Castel group for having failed to notify the acquisition of six subsidiaries of Burgundy’s Patriarche group in spring 2011. Disclosed a few months later by a third party, the acquisition was finally cleared by the Authority in July 2012. The Authority, which had not ruled out the potential imposition of penalties at the time of the clearance, came back to the specific issue of failure to notify in its decision dated 20 December 2013. Reminding the importance of merger control, the Authority stressed the seriousness of the case and inflicted the third and highest fine for failure to notify. n Italy ICA launches new Vademecum on bid-rigging In October 2013, the Italian Competition Authority (ICA) issued a ‘Vademecum’ (based on the 2009 OECD Guidelines) for fighting bid-rigging in public procurement. The paper is part of the recently launched initiative to assist contracting entities/ authorities in identifying (and reporting to the ICA) behavioural anomalies with the aim of helping contractors to identify suspect conduct leading to competition distortions, such as the absence of bids or the submission of a single bid. Abuse of dominance investigation in pharmaceutical sector In December 2013, the ICA opened an abuse of dominance investigation into pharmaceutical company Industria Chimica Emiliana, the leading world producer of cholic acid, an ingredient in ursodeoxycholic acid (UCDA) which is used in drugs to treat liver disease. It supplies the product to various UCDA manufacturers including its own subsidiary Prodotti Chimici e Alimentari and an independent company, RGR. The latter complained that Industria Chimica was abusing Round-up of recent developmentsACER Quarterly October 2013 – January 2014 21 its dominant position by increasing prices, shortening the time period in which it could pay, reducing the available quantities of cholic acid, refusing to supply, and by targeting RGR’s clients by offering prices that RGR could not afford due to the high costs demanded by Industria Chimica. Sports nutrition investigation In November 2013, the ICA opened an investigation into sports nutrition company, Enervit, for the application of alleged restrictive conditions, including retail price maintenance, on retailers. According to the notice of initiation of proceedings, Enervit allegedly restricted competition by imposing minimum resale prices, territorial restrictions and non-compete obligations on retailers and wholesalers. In particular, the ICA is examining a distribution agreement between Enervit and online pharmacy Enerzona. Enervit allegedly established a minimum price for branded products and instructed the retailer not to sell Enervit products outside of Italy. n Poland Fine decrease on appeal In December 2013, the Polish Competition Court reduced the fines imposed by the Polish Competition Authority (“PCA”) on certain cement producers in Poland for market sharing. The total fines of Euro 100 million which had been set at the maximum permissible under Polish law (10% of revenue) were reduced to Euro 82 million. This case shows that the Polish Competition Court is able to reduce fines even in hard core cartel cases and that it may not always agree with the rigid penal policy of the Polish Competition Authority. Coordinated investigation of specialist products for coal mining In December 2013, the PCA fined a number of producers of coal mining equipment Euro 4.4 million. It found that the producers had participated in an agreement which restricted competition on the market of the sale of the chemical products used in coal mining. The PCA stated that the agreement consisted in: i) setting of the tenders, ii) direct price-fixing of the chemical products used in coal mining, and iii) setting the market shares in particular groups of the concerned products. During its investigation, the PCA cooperated with multiple institutions, including the prosecutor’s office and the Internal Security Agency. This case shows the extent to which the Polish authorities may cooperate in their investigation of anti-competitive collusion, in particular bid rigging. n South Africa Exclusive lease agreements Shoprite recently filed an urgent application for an interdict in the Western Cape High Court, challenging the legality of a Massmart store in the CapeGate Centre competing directly against its outlet in the same mall. Shoprite’s legal challenge is based on an exclusivity agreement it has with the landlord. Massmart responded by claiming that the exclusivity provision prevented competition. The High Court granted an interim interdict pending the outcome of an investigation by the Competition Commission. Some indication of the attitude of the competition authorities appears from two recent judgments of the Competition Tribunal in relation to mergers of retail letting businesses. The Tribunal considered whether an exclusivity clause in the lease between a landlord and an anchor tenant in the mall had the effect of preventing small businesses from accessing premises in the mall concerned. The mergers were approved subject to a condition that the merging parties negotiate in good faith with a view to reaching an agreement to remove the exclusivity clause. The costs of competition litigation In the merger between Pioneer Hi Bred International Inc and Pannar Seed (Pty) Ltd, the Competition Commission applied to the Constitutional Court for leave to appeal a costs order granted against it by the Competition Appeal Court (“CAC”). The Court had to consider the powers of the CAC to award costs against the Commission when it litigates in the course of its duties in terms of the Competition Act. The Court held that the Tribunal was not empowered to make adverse cost awards against the Commission in any circumstances and the CAC, as an appeal court, therefore did not have the authority to award costs in respect of Tribunal proceedings. In considering the CAC’s discretion to award costs in its own proceedings, the Court held that while the CAC is statutorily empowered to award costs in respect of its own proceedings, the rule applicable in civil litigation, to the effect that “the costs follow the result”, would not apply. The requirement in the Act that costs orders 22 ACER Quarterly October 2013 – January 2014 were to be made “according to the requirements of … fairness” meant that costs would only be awarded against the Commission where its conduct was “unreasonable, frivolous or vexatious”. Confidentiality claims in merger proceedings Section 44 of the Competition Act 89 of 1998 provides that any person submitting information to the Competition Commission may claim confidentiality over such information. In terms of the Act, the Commission is bound by any such claim. In some recent matters, however, the Commission’s attitude towards such claims is has raised cause for concern, with instances of confidential information included in merger filings being included in versions of the Tribunal’s findings made available to the public, or merger filings being made available to the Minister of Trade and Industry without the consent of the merging parties. The Commission, when challenged, has claimed that such conduct is “standard practice.” Practitioners are seeking to clarify with the Commission why this has become standard practice and will seek guidelines as to how confidential information will be protected in an attempt to provide certainty and security to their clients. n Spain Football fines On 28 November 2013, the Spanish National Commission on Markets and Competition (Comisión Nacional de los Mercados y la Competencia, the “NCMC”) imposed fines of around €15 million on, amongst others, the two main Spanish football clubs (Real Madrid and Fútbol Club Barcelona) and broadcasting operator Mediapro for not abiding by a previous decision of the extinct National Competition Commission (“NCC”). In particular, the sanctioned entities infringed the obligation set out in the NCC’s Decision of 14 April 2010 which prohibited them from entering into broadcasting agreements for the Spanish League and Cup football competitions with a duration of more than 3 years. According to the NCMC, this obligation prevails over Spanish sector-specific media regulation which allows football broadcasting agreements for a maximum duration of 4 years. These fines demonstrate that the recently created NCMC intends to match its predecessor (the NCC) in terms of the severity of its fines. Information exchange fines On 2 January 2014, the NCMC imposed fines totaling €3.1 million on car rental companies active at thirtyone Spanish airports (including Madrid and Barcelona), as well as on the Spanish public commercial entity responsible for operating national airports (AENA). The alleged anti-competitive conduct consisted of information exchange by which the car rental companies could have coordinated between 1996 and 2012 their strategic behavior at Spanish airports. In addition, the NCMC also held liable the Spanish public commercial entity (AENA) for its collaboration with the infringing companies. In this case, the NCMC treated as a restriction of competition “by object” information exchange which did not relate to future prices or quantities (i.e. the most sensitive kind of information exchanges), but rather data on turnover, number of contracts and certain commercial conditions exchanged with an age and frequency of one month. This position could be explained by the fact that the Council of the NCMC (i.e. its decision-making body) considered that the information exchange was a ‘single and continuous infringement’ with the car hire cartel case which was opened in October 2011 and led to sanctions in July 2013 (See Case S/0380/11 Coches de Alquiler). n UK Claims other than for breach of statutory duty On 12 November 2013, the Court of Appeal handed down its judgment on the appeal by IMI plc and its group companies (“IMI”) against the decision of the High Court in relation to a follow-on damages action brought by Newson Holding Limited and its fellow group companies (“Newson”). The damages action was brought in connection with a European Commission decision of 3 September 2004, which held that IMI and others had been involved in a cartel concerned with the price-fixing and market-sharing in the EEA market for copper water, heating and gas tubes. The Court of Appeal held that Roth J was correct to find that following a Commission decision, section 47A allowed for claims other than for breach of statutory duty to be brought in the English courts. However, Arden LJ held that the High Court was wrong in this case to conclude that the claim of conspiracy not ACER Quarterly October 2013 – January 2014 23 struck out met the requirements of section 47A and the corresponding case-law. Arden LJ provided the following reasoning: 1. section 47A does permit a claimant to bring a conspiracy claim provided that all of the ingredients of the cause of action can be established by infringement findings in the relevant Commission decision; 2. an essential ingredient of the tort of conspiracy is an intent to injure; and 3. in this instance, the Commission had found that IMI had intended to distort competition but not that IMI had the requisite intent to injure Newson. Arden LJ reinforced her reasoning with regards to this third point by stating that “it does not follow in this case that Newson Group would inevitably suffer loss. That would not be so if they were able to pass on the price increase to their customers.” This judgment provides further confirmation that claims other than for breach of statutory duty, are available under section 47A provided that the elements of that claim can be found in the Commission’s decision. Whilst the requisite intent to injure for a conspiracy claim was not found in this case, if a Commission decision demonstrates the cartel had the necessary intent to injure particular potential claimants, a conspiracy claim may be more fruitful in the future. Eurotunnel/SeaFrance judgment On 4 December 2013, the Competition Appeal Tribunal (CAT) handed down its ruling on the applications by Groupe Eurotunnel SA (GET) and Société Coopérative de Production SeaFrance SA (SCOP) for review of the Competition Commission’s (CC) decision on the acquisition by GET of certain assets of SeaFrance SA (SeaFrance). The CAT quashed the decision on the single ground that the CC had erred in its consideration of whether GET had acquired an “enterprise” for the purposes of the Enterprise Act 2002 (the Act) and therefore whether or not it had jurisdiction over the transaction. All other arguments were either dismissed or otherwise deemed immaterial to the outcome of the decision on the facts. GET had contended that the CC’s procedures in general were in breach of the rules of natural justice on the basis of the recent decisions in Al Rawi [2011] UKSC 34 and Bank Mellat (No 2) [2013] UKSC 39. However, the CAT held that the CC’s general approach could not be criticised and that it had provided the “gist” of the case that had to be answered by GET, as was required by the case law on procedural fairness. The CAT stated that the principles outlined in BMI Healthcare ([2013] CAT 24) in relation to the duty to consult in market investigations applied with equal force to the duty to consult in the present context. As to procedural fairness, the decision is a general endorsement of the CC’s current procedures. The judgment confirms that the Al Rawi and Bank Mellat cases have little application in the context of CC investigations and that procedural fairness is context specific, as was decided in relation to market investigations in BMI Healthcare. Although CC investigations will generally involve detailed disclosure to provide the “gist” of the case, this does not amount to complete disclosure. n24 ACER Quarterly October 2013 – January 2014 2013 saw an intense period of activity by the two main antitrust enforcement agencies in China – the National Development and Reform Commission (“NDRC”) and the State Administration for Industry and Commerce (“SAIC”). This activity included the application of the authorities’ recent new powers to dawn raid companies suspected of infringing Chinese antitrust law. For example, in June 2013, NDRC dawn raided several international suppliers of infant formula in China. Companies active in China now face an increasingly aggressive antitrust enforcement landscape. On 13 January 2014, Hogan Lovells organised a seminar in its Beijing office on dawn raid defence best practice for its Sino-Global Legal Alliance (SGLA). SGLA is the first transnational legal alliance in China, and consists of Hogan Lovells and 19 top-tier regional PRC firms. SGLA has a presence in Beijing, Changsha, Chengdu, Chongqing, Dalian, Guangzhou, Hong Kong, Jinan, Kunming, Lanzhou, Shanghai, Shenyang, Shenzhen, Tianjin, Wuhan, Xi’an and Xiamen. The seminar looked at some of the key trends emerging in the global dawn raid landscape, including those emerging from the bribery and corruption field. We looked closely at the European Commission’s competition dawn raid practice, and discussed parallels/differences with China. To prompt discussion and reflection, a mock dawn raid was conducted on delegates in the room. A number of key global trends were identified and discussed, including the following. IT search Antitrust authorities across the world are using increasingly sophisticated IT search software and tools. We discussed the detail of how inspectors approach IT search, what a company’s IT staff will be required to do, and best practice for dealing with these searches to avoid business disruption, ensure that only relevant documentation is taken, and avoid the risk of being fined for obstruction. Privilege There are a number of different approaches to privilege across the world. Whilst the Chinese authorities do not generally recognise the notion of legal privilege, the European Commission recognises that communications with independent, external, European Economic Areaqualified lawyers are protected by legal professional privilege. Some EU member States extend privilege to communications with in-house lawyers. In the seminar we reviewed a number of sample documents and their treatment under the differing privilege regimes across the world. Obstruction Antitrust agencies are increasingly issuing fines and fine uplifts for any obstruction of a dawn raid – whether it involves document destruction, interference with IT search, delayed entry, refusal to answer questions, or breach of seals. The seminar discussed best practice for ensuring that a company avoids being fined for obstruction. Internal and external communication A dawn raid necessitates effective internal and external communication. The seminar examined a number of communication case studies, and discussed best practice. Waiting for legal advisors In some jurisdictions, the inspectors may be willing to wait a short amount of time before starting an inspection until the arrival of internal or external lawyers. The seminar discussed the advantages of seeking legal advice on a raid in different jurisdictions. On-the spot questioning Inspectors have the power the ask questions to any staff during an inspection. In the EU there are certain limited rights not to self-incriminate, whilst in China there are no similar rights. In China, the situation can be quite different. The seminar worked through a number of case studies and best practice in responding to questions raised on a dawn raid. Antitrust dawn raid defence in China SGLA seminar, Beijing – 13 January 2014 ACER Quarterly October 2013 – January 2014 25 Relevance The seminar looked in detail at the type of entry paperwork that the European Commission uses as a basis for a dawn raid, and how companies can ensure that a dawn raid is limited to the scope identified in this paperwork. The seminar discussed the practicalities of ensuring that a dawn raid remains within scope. Wider use of dawn raids Antitrust agencies across the world are increasingly using the dawn raid as their key investigation tool and to investigate a wider range of suspicions. Dawn raids are not just used to investigate cartels. For example, NDRC took assertive investigative measures in the baby milk formula case, which was about resale price maintenance. In addition, the Chinese authorities reportedly searched offices looking for evidence of practices amounting to abuse of dominance. In Europe, the European Commission has even used a dawn raid to start a sector inquiry into pharmaceuticals. n Adrian Emch Partner, Beijing T +86 10 6582 9510 adrian.emch@hoganlovells.com Peter Citron Of Counsel, Brussels T +32 2 505 0905 peter.citron@hoganlovells.com26 ACER Quarterly October 3013 – January 2014 Competition and EU law planner The Competition and EU law Planner is a service and publication entirely free of charge. For further details please contact us at: www.eucompetitionevents.comACER Quarterly October 2013 – January 2014 27 We have developed a customizable competition law compliance e – learning, testing and risk management programme, providing awareness level training for all company employees. COMPETE is based on state – of – the – art, tried and tested online training solutions with high customer satisfaction. The 75 minute, learner paced, electronic multi-media programme allows a company to deliver awareness level training for all employees, including those whose roles may put them into a position that places the company at a heightened risk of a competition law infringement. The programme can be customized to reflect the identity of the company, including branding, sector and company specific case studies and content. The programme is available in a variety of languages, including French, German, Spanish, Italian, Polish and Portuguese. Key features of COMPETE ● Easily navigable ● Opening teaser ‘story’ brings the program to life ● Interactive training techniques ● Practical scenarios present learners with real life situations ● Focused case law summaries provide real life examples ● Practical guidelines available for learners to print ● Expandable “learn more” sections providing richer content ● Talking heads provide additional narrative excerpts adding to the multi – media experience and authenticity of content ● Q&A test at the end of the course with feedback on the answers ● Options for filtered business reports and tracking systems. We would be happy to discuss your needs in more detail and to arrange a demonstration. To find out more contact: COMPETE – competition law compliance e-learning Peter Citron Of Counsel, Brussels T +32 2 505 0905 peter.citron@hoganlovells.com Suyong Kim Partner, London T +44 20 7296 2301 suyong.kim@hoganlovells.com Janet McDavid Partner, Washington, D.C. T +1 202 637 8780 janet.mcdavid@hoganlovells.com28 ACER Quarterly October 2013 – January 2014 The Competition Commission in South Africa is investigating mergers, collusion and monopolistic practices affecting the supply of essential products and commodities more aggressively than ever before. Substantial fines and damages claims are a real possibility. Hogan Lovells’ competition law team in South Africa has extensive experience in helping clients identify and deal with the risks, provide advice on complying with prevailing competition constraints and conditions, as well as defending clients against potential exposure. Competition law is also a basis for investigating unlawful practices and our team assists clients in launching and prosecuting such investigations that might affect their interests before the Competition Commission and Tribunal. Mergers and acquisitions can also be subject to scrutiny by the competition authorities. A properly prepared notification is key to achieving approval and avoiding delays or even prohibition of the transaction. We have extensive experience in the compilation of merger notifications and interactions with the authorities to ensure speedy approval. This has included advising on merger notification requirements in the Common Market for Eastern and Southern Africa (COMESA) as well as other African countries. We advise on a wide range of leading edge behavioural and investigatory work. Our approach is practical and commercial. We work alongside our clients in their day to day businesses to ensure that their commercial strategies and agreements meet the requirements of competition law and we steer them through investigations when these arise. Some of our recent matters: ● Advising South Africa’s leading fixed line telecoms service provider in relation to a major transaction regarding the disposal of its internet service provider business. The transaction required us to give advice with respect to the merger notification requirements in COMESA as well as Mauritius, Zimbabwe, Zambia, Namibia, Tanzania, Kenya, Uganda, Nigeria, Ghana and Côte d’Ivoire. ● Acting for parties in recent investigations by the Competition Commission into the maize and flour milling industry, glass industry, and wholesale and retail of bicycles. ● Acting for the South African Sugar Competition defending a complaint brought before the competition authorities in Namibia. ● Advising an international beauty house on the implications of competition law in relation to its proposed repositioning of their brand in South Africa. n
