ACER Quarterly October 2013 – January 2014

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 [email protected] 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 [email protected] John Robert “Robby” Robertson Partner, Washington, D.C. T +1 202 637 5774 [email protected] 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 [email protected] 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 [email protected] Wesley Carson Associate, Washington, D.C. T +1 202 637 2870 [email protected] 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 [email protected] 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 [email protected] Logan M. Breed Partner, Washington, D.C. T +1 202 637 6407 [email protected] 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 [email protected] 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 [email protected] 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 [email protected] Peter Citron Of Counsel, Brussels T +32 2 505 0905 [email protected] 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 [email protected] Suyong Kim Partner, London T +44 20 7296 2301 [email protected] Janet McDavid Partner, Washington, D.C. T +1 202 637 8780 [email protected] 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 [email protected] 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 [email protected] John Robert “Robby” Robertson Partner, Washington, D.C. T +1 202 637 5774 [email protected] 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 [email protected] 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 [email protected] Wesley Carson Associate, Washington, D.C. T +1 202 637 2870 [email protected] 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 [email protected] 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 [email protected] Logan M. Breed Partner, Washington, D.C. T +1 202 637 6407 [email protected] 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 [email protected] 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 [email protected] 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 [email protected] Peter Citron Of Counsel, Brussels T +32 2 505 0905 [email protected] 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 [email protected] Suyong Kim Partner, London T +44 20 7296 2301 [email protected] Janet McDavid Partner, Washington, D.C. T +1 202 637 8780 [email protected] 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