Five banks fined for their role in foreign exchange trading cartels
On 16 May 2019, in two settlement decisions, the European Commission ("EC") has fined Barclays, RBS, Citigroup, JPMorgan and MUFG 1.07 billion EUR for participating in two foreign exchange spot trading cartels (see EC press release here).
“Foreign exchange spot-trading activities are one of the largest markets in the world, worth billions of euros every day,” said Margrethe Vestager, European competition commissioner. “These cartel decisions send a clear message that the Commission will not tolerate collusive behaviour in any sector of the financial markets.”
Description of the cartel
Foreign Exchange, or “Forex”, refers to the trading of currencies. When companies (e.g., pension funds, hedge funds, major companies and other banks) exchange large amounts of a certain currency against another, they usually do so through a Forex trader. Forex spot order transactions are meant to be executed on the same day at the prevailing exchange rate.
The EC identified two separate cartels of traders, i.e., “Three Way Banana Split” and “Essex Express”, that used online chat rooms to share information about customers’ orders, prices, their open risk positions and other details of current or planned trading activities in order to manipulate the Spot Foreign Exchange market for 11 currencies (i.e., Euro, British Pound, Japanese Yen, Swiss Franc, US, Canadian, New Zealand and Australian Dollars, and Danish, Swedish and Norwegian crowns). Most of the traders knew each other on a personal basis (e.g., one chatroom was called Essex Express ‘n the Jimmy because all the traders except one called “James” lived in Essex and met on a train to London).
Occasionally they also coordinated their trading strategies, for example through a practice called ‘standing down’ whereby some of the group would temporarily stop trading to avoid interfering with others.
- Under the EC's 2006 Leniency Notice (see here):UBS received full immunity for revealing the existence of the cartels, thereby avoiding a €285m fine.
- In the Three Way Banana Split and the Essex Express infringements, banks involved benefited from reductions of their fines from 10% to 50% for their cooperation with the EC investigation. The highest fine was imposed on Citigroup with an amount of €311m, followed by RBS with €249m, JPMorgan at €229m and Barclays at €210m.
- Only the MUFG Bank (formerly Bank of Tokyo-Mitsubishi) did not apply for leniency. The fine imposed on MUFG amounted €70m. In addition, under the EC's 2008 Settlement Notice (see here), the EC applied a reduction of 10% to the fines imposed on the companies in view of their acknowledgement of participation in the cartels.
Australia's competition regulator cracks down on misleading and anticompetitive conduct by airlines
In May 2019, Australia's competition regulator, the Australian Competition and Consumer Commission (ACCC), secured two significant victories in the Federal Court against airlines, one for misleading conduct against Jetstar Airways Pty Ltd (Jetstar) in relation to its refund practices, and one for anticompetitive conduct against PT Garuda Indonesia (Garuda) in relation to colluding on freight charges. Penalties of AUD$1.95 million and AUD$19 million, respectively, were awarded against the airlines. These decisions make clear the extent to which Australia's competition and consumer laws can apply to international businesses' practices and conduct.
ACCC v Jetstar
The case against Jetstar concerned a number of representations that Jetstar had made to consumers about its refund policy, in particular, that:
(a) certain discounted fares were not eligible for a refund if the flight had been cancelled or delayed between April 2017 and March 2018; and
(b) consumers could only get a refund if they decided to purchase a more expensive fare.
The ACCC had alleged that these representations were false or misleading for the purposes of the Australian Consumer Law (ACL) on the basis that they sought to exclude, restrict or modify the operation of a number of the statutory consumer guarantees. In particular, the ACCC alleged that the representations concerning consumers' limited refund rights (described above) contravened the right for consumers to seek a range of remedies (including, in certain circumstances, refunds and compensation for reasonably foreseeable losses) where there has been a failure to comply with a consumer guarantee.
The Federal Court agreed with the ACCC, finding that Jetstar had breached the ACL and ordered it to pay AUD$1.95m in penalties. In late 2018, the ACCC was also successful in obtaining court-enforceable undertakings from other airlines on the same issue, including Qantas, Tiger Airways and Virgin, which required them to amend their refund policies and practices comply with the consumer guarantee obligations under the ACL.
This decision is of relevance to international airlines as it makes clear the ACL applies to refund policies for international flights departing Australia. They also apply to international flights to Australia where they are booked through the Australian website of an airline. Read more about the judgement here.
ACCC v Garuda
The case against Garuda concerned its participation in a global air cartel which had been colluding on fees and surcharges for air freight services. The action against Garuda followed court action being taken against a total of 14 airlines, including Air New Zealand, Qantas, Singapore Airlines and Cathay Pacific, in relation to the anticompetitive conduct.
The Federal Court found that, between 2003 and 2006, Garuda had made and given effect to price-fixing agreements in relation to security and fuel surcharges, in addition to a customs fee from Indonesia. The Court ordered that Garuda pay AUD$15m in penalties in relation to the conduct, and then ordered that it pay an additional $4 million for imposing insurance and fuel surcharges from Hong Kong. The penalties payable by Garuda to the regulator totalled AUD$19m in total. Read more about the judgement here.
Both decisions were handed down on 30 May 2019. These two recent actions are a continuation of the ACCC's ongoing commitment to cracking down on illegal and anticompetitive behaviour engaged in by airlines.
Belgian Competition Authority approved acquisition of De Vijver Media by Telenet
On 13 May 2019 the Belgian Competition Authority ("BCA") conditionally approved Telenet's acquisition of sole control over De Vijver Media, after a referral by the European Commission ("EC"). The deal was originally notified to the EC on 4 October 2018. The EC already investigated Telenet's acquisition of joint control over De Vijver in 2015.
De Vijver is a media company. It has a number of subsidiaries including SBS Belgium which broadcasts Dutch-language free-to-air TV channels "Vier", "Vijf" and "Zes", the content producer Woestijnvis and the advertising agency SBS Sale Belgium. Telenet operates a cable network in Flanders and parts of Brussels, and also operates a number of Pay-TV channels. As a result of this transaction Telenet becomes a fully vertically integrated media and broadcasting company.
The BCA imposed several commitments in particular an obligation to provide FRAND access to De Vijver's channels, commitments related to the ranking of channels in the digital guide of Telenet, commitments regarding distribution fees, obligations on access of TV channels to Telenet's digital platform and to audience data. As a final commitment Telenet has to provide broadcasters access to data gathered by its platform in order to allow them to target advertising on the set-top boxes of Telenet's customers. This commitment is noteworthy since the EC already investigated concerns about the potentially chilling effect of the transaction on innovation in targeted advertising technologies during its review of the joint venture in 2015. At the time these concerns were dismissed by the EC because it had doubts on the feasibility, technical and commercial features of targeted advertising, but now the BCA has taken them on board.
Agrofert is allowed to take over United Bakeries only under conditions
On 23 May 2019, the Czech Office for the Protection of Competition (“UOHS”) issued a decision approving AGROFERT a.s. ("AGROFERT") to take sole control over UB HOLDING a.s. and its subsidiary UNITED BAKERIES a.s., subject to a number of structural commitments which were accepted by the party to the proceedings in order to maintain effective competition. The decision already came into force.
The expansion of AGROFERT's activities in the wholesale market of fresh bread, bread products and other fresh bakery products, would result in a substantial market share (over 50% of the market), undermining the possibility to exert sufficient competitive pressure on AGROFERT.
In order to eliminate the UOHS’s concerns of distortion of competition, AGROFERT accepted structural commitments consisting of an obligation to sell off several production plants of the merging parties. The divestiture will result in substantial reduction of acquirer’s market shares in the markets affected by the concentration and creation of a new undertaking or strengthening one of the existing competitors, which will create a real competitive pressure on the merged entity and thereby the competition maintains effective.
Danish Competition Authority establishes center for digital platforms
On 1 May 2019, the Danish Competition Authority ("DCA") increased its focus on digital platforms by establishing a new center for this matter. The DCA has found it necessary to establish this center as digital platforms play an increasing role in trade with goods and services. The purpose of the center is two-folded:
1) to strengthen the enforcement of the competition rules towards digital platforms, and
2) to complete analysis to ensure efficient legislation.
These analyses will include studies of how the behavior of the platform affects the consumer, growth conditions for smaller companies and the consumer's possibilities to navigate safely in the digital markets.
The initiative to put aside funds for the center was made by the Danish Government based on a paper of the Danish Disruption Advisory regarding digital platforms and fair competition.
The center shall among others enforce competition rules on digital platforms, prepare competition analyses of digital platforms and enforce business users’ rights in relation to the P2B-regulation. Furthermore, the center aims to be the focal point for DCA's analysis of big data, machine learning, artificial intelligence and algorithms, and the usage of these.
Please find the press release (in Danish only) here.
€ 900,000 fine for dawn raid obstruction
On 22 May 2019, the French Competition Authority (“FCA”) imposed a EUR 900,000 fine on Akka Technologies (“AT”) for dawn raid obstruction, a first for the FCA.
Since 2008, the FCA can impose a fine of up to 1% of a company’s highest worldwide turnover for obstructing its investigations. The FCA already applied this provision in 2017 by imposing a fine of 30 million EUR on Brenntag for failure to respond to FCA's requests for information (more information here).
In the case at hand, the FCA found that several AT’s employees hindered the proper conduct of the dawn raids carried out in AT’s premises on 8 November 2018 by:
i. breaching a seal (an AT employee opened an office door that had been sealed by the FCA’s investigators in the morning);
ii. altering the functioning of a mailbox (one of AT’s employee withdrew one of his colleagues from an email chain, while his computer was being inspected).
In support of its decision, the FCA specified that the offence of obstruction covers all conducts which deliberately or negligently tend to obstruct or delay the investigations carried out by the FCA and constitutes as such a very serious offence as it may prevent the FCA from identifying, proving and sanctioning competition law infringements.
AT has already indicated its intention to appeal the FCA’s decision, arguing that the breach of seals and the alteration of a mailbox functioning do not constitute an obstruction within the meaning of the French Commercial Code.
Meanwhile, the FCA is pursuing the investigation on the substance of the case.
Consumer protection – German Federal Cartel Office launches sector inquiry into online user reviews
In its press release of 29 May 2019 the German Federal Cartel Office ("FCO") announced the launch of another customer protection related sector inquiry into online user reviews.
In view of the FCO’s new competences regarding consumer protection which were implemented in the German Act against Restraints of Competition (reported in our May edition- see here) the German Competition Authority now further extends its activities in the area of consumer protection. The FCO’s attention, thereby, will now focus on online user review systems and on potential manipulations connected thereto.
The sector inquiry was triggered by investigations and media reports which repeatedly pointed out that in many cases user reviews in the internet are not authentic, i.e. computer-generated or written by users paid for giving their review without this being made transparent to the online customers. In the FCO’s view consumers could be misled to making wrong purchase decisions triggered by manipulated non-authentic reviews which could violate consumer rights.
Against this background Andreas Mundt, president of the FCO, emphasized that besides prices, user ratings are the most important decision criterion for consumers when buying online. Mundt also stressed that there are indications that user ratings are often falsified or manipulated, so that the primary objective of the sector inquiry would therefore be to find out which review systems are particularly susceptible of manipulation and to what extent there may be violations of consumer rights.
In the coming months, the FCO will conduct oral and written interviews with numerous operators of internet portals that offer user ratings and/or services relating to user ratings. Once the investigations have been completed, the results will be presented to the public in a report.
The FCO’s press release can be found here (in German and English).
Draft report on sector inquiry regarding card acquiring services
On 15 May 2019, the Hungarian Competition Authority (“GVH”) published the draft of the investigative report on its sector inquiry regarding payment card acquiring services in Hungary (the “Draft Report”) investigating the period between 2013 and 2018. The GVH initiated the sector inquiry in January 2017, because of indications from the market and the National Bank of Hungary (“MNB”) that payment card acquiring service providers restructured the fees and commission system for card payments to the disadvantage of smaller retailers and merchants following the entry into effect of the Regulation (EU) 2015/751 on interchange fees for card-based payment transactions and the preceding corresponding Hungarian legislation.
The main findings of the Draft Report can be summarized as follows:
- the payment card acquiring service market is very concentrated in Hungary with OTP Bank having by far the largest market share resulting in an oligopolistic market with a few recent new entrants;
- the number of retailers accepting payment cards increased by 76% since 2013 (with the help of the POS roll-out program of the Hungarian Ministry of Finance), and in terms of the number of transactions per payment card, Hungary is closing the gap with the EU average;
- the introduction of the statutory maximum for interchange fees in 2014 resulted in an overall decreasing fee burden on retailers;
- although the decrease of the fees was the largest for small retailers, the cost of card payments remain the highest for these retailers in proportion to the volume of card payment transactions;
- value based fees slightly tended downwards, while fees based on the number of transactions increased, the latter forming a barrier to the spread of accepting payment cards.
As a conclusion, the GVH did not find market distortions that would require the launch of an investigation. Nevertheless, the GVH identified problems on the card acquiring market that also influence competition, and made the following recommendations to the stakeholders, the financial supervisory authority (being MNB) and the legislator:
- extend the POS roll-out program to retailers with quarterly revenues of HUF 1-2.5 million (previously only available under quarterly revenues of HUF 1 million);
- consider tax incentives to increase the penetration of payment card acceptance;
- facilitate online contracting between the retailer and the acquirer;
- launch awareness campaigns incentivizing retailers to accept card and online payments;
- acquirers should reconsider their fee structures in order not to put a disproportionate burden on small retailers;
- acquirers should adopt an active sales strategy for card acquiring services;
- acquirers should speed up the clearing of transactions.
Still no rest for Google in Europe: AGCM launched an investigation against the tech giant for an alleged abuse of dominant position
On 8 May 2019, the Italian Competition Authority ("AGCM") opened an investigation against Alphabet Inc., Google LLC and Google Italy S.r.l. (indicated together as Google) to ascertain an alleged abuse of a dominant position in breach of Article 102 TFEU.
Google, via the Android operating system, holds a dominant position in the market of operating systems for smart devices and allegedly refused to integrate the app "Enel X Recharge”, developed by Enel (the Italian multinational energy company that is active in the sectors of electricity generation and distribution), to provide end-users with information and services for recharging electric car batteries, into the Android Auto app settings.
Android Auto allows owners of Android smartphones toF easily and safely use certain apps and mobile phone features when driving a vehicle. Therefore, the exclusion of the app Enel X Recharge from Android Auto is likely to reduce the usefulness of this app by end-users and restrict their ability to exploit the benefit of the app, including booking re-charging columns.
According to the AGCM's allegations, Google has an interest in defending and strengthening the business model of its Google Maps app, which offers a wide range of services to end-users, including information on the location of columns for re-charging electric cars. Google Maps also represents a point of access to end-users as well as to the data stream generated by their activities.
The investigation shall be concluded by 30 May 2020.
For more information please see the press release and the Decisions of the AGCM in Italian here.
34 textbook publishers and their association fined with nearly € 34 million for coordination of commercial strategies
On 30 May 2019, the Spanish Competition Authority ("CNMC") imposed a total fine of 33.88 million EUR on the National Association of Text Books and Teaching Materials Publishers ("ANELE") and 34 publishing houses for the application of a mechanism to restrict trade policies and commercial conditions on the market of non-university textbooks.
As a result of a complaint submitted by another company active in this market, the CNMC has identified two separate practices breaching Article 1 of the Spanish Competition Act ("LDC") and Article 101 TFEU, which constitute two infringements by object:
- Agreements and concerted practices for the development and application of a Code of Conduct with the aim of restricting competition on the prescription of textbooks by the education centres. Since 2012, the publishers agreed to eliminate promotional tools used to make its offers more attractive, including discounts, donations, teacher training courses or the delivery of ICT materials to these centres. A "Supervisory committee" chaired by ANELE was in charge of the enforcement of the provisions set out in the Code.
- Agreements on fixing prices and other commercial conditions in relation to digital textbooks reached by ANELE and ten publishers between 2014 and 2017. Particularly, among other conducts, the publishers agreed on the minimum price and the limitation of the duration of digital licenses.
ANELE has publically announced its intention to appeal the CNMC's decision before the National High Court on the grounds that the rules provided by the industry's Code of Conduct are needed to prevent unethical behaviours, such as bribery and corruption, which might influence the decision of educational centres to prescribe certain textbooks.
Interestingly, according to ANELE, these practises are contained in similar Codes of Best Practices approved in other countries (such as Italy or the U.S.A.), and they are based on the recommendations of international organizations like the UNESCO's International Institute for Educational Planning (IIEP).
For more information, please find the CNMC's final decision here (in Spanish).
Dutch court provides guidance on FRAND license negotiations (Philips v Asus)
On 7 May 2019, the The Hague Court of Appeal ("Court of Appeal") ruled against electronics company Asus in a patent dispute with electronics company Philips. The Court of Appeal found that Philips' patent was valid and had been infringed by Asus. The manufacturer had argued that Philips abused its dominant position ex Article 102 TFEU by not licensing the patent, which is essential for a third-generation mobile standard (UMTS/LTE Standard), under Fair, Reasonable and Non-Discriminatory (FRAND) conditions to Asus.
The Court of Appeal first of all considered that Philips was under no obligation to disclose its patent application as an SEP prior to the finalization of the standard, as Asus argued. The ETSI IPR Policy and ETSI Guidelines mention that the SEP qualification should be disclosed “as soon as feasible” and “in a timely fashion”. However, according to the Court of Appeal, a reasonable interpretation is that this should be done shortly after the standard is finalized and it has become clear what technology is included. The Court of Appeal pointed out that the ETSI standards are not designed to be open standards free of IP rights (as was the case in the Commission's Rambus decision), but designed to achieve technically optimal solutions and any user of the ETSI standards should thus expect having to pay royalties.
Secondly, the Dutch court discussed the steps set out in the Court of Justice of the EU's ("CJEU") Huawei v ZTE ruling. According to the Dutch Court of Appeal, these steps should not be considered as strict requirements but rather as guidelines. If the SEP holder has not exactly followed each of the steps as set out in the Huawei v ZTE ruling, this should not immediately and necessarily imply that enforcing its SEP constitutes an abuse of a dominant position. The CJEU rather provided guidelines for good faith negotiations between the parties about a license. Thereby, the factual circumstances of the case must be taken into account.
In this case, the Court of Appeal held that Asus was not a 'willing licensee'. For example, Philips had informed Asus of its UMTS patent portfolio in 2013 and several meetings took place in Taiwan, always at the initiative of Philips. Philips explained the infringements, but Asus never had a technically qualified person present at the meetings and never provided a (technical) response. According to the Court of Appeal, Asus did not show any interest in a license, avoided a discussion on license terms, did not ask about Philips’ license agreements with others and never got in touch with Philips after any of the meetings. After Philips sent a proposal for a standard license agreement and received neither a response nor counter proposal, Philips started the infringement proceedings. The court concluded that Asus was thus engaged in “hold-out.” According to the Court of Appeal, Huawei v ZTE does not require the SEP owner to always specify why an offer is FRAND but – in contrast with the German Orange-Book case law – to undertake the main step of making a FRAND license proposal before enforcing the SEP. The argument of Asus that Philips' offer did not exactly meet the requirements of Huawei v ZTE were therefore rejected. As a result, Philips was free to seek an injunction against Asus, the court said, which injunction has now also been granted by the Court against Asus. The ruling can be appealed before the Dutch Supreme Court.
Provisional finding of market sharing by four pharmaceutical companies
In recent years, the UK CMA has focussed many of its investigations on the pharmaceutical sector. This is partly due to the fact that in the UK, the National Health Service is a public funded body which bears most of the cost of the majority of medicines. Therefore, going after anti-competitive behaviour in this sector arguably leads to clear benefits for UK tax payers who fund the NHS. The latest example of this focus came on 23 May 2019, when the CMA provisionally concluded that four pharmaceutical companies who manufacture and/or supply the anti-nausea and dizziness drug Prochlorperazine, took part in market sharing arrangements.
The CMA alleges that the overarching agreement between the companies was implemented through two separate agreements, one between Alliance Pharmaceuticals and Focus, and one between Focus, Lexon and Medreich. Alliance Pharmaceuticals agreed to supply Prochlorperazine exclusively to Focus. Focus then paid Lexon a share of the profits it earned on the onward sales of Alliance Pharmaceuticals’ Prochlorperazine. Lexon, in turn, shared these payments with Medreich. In its press release, the CMA stated that before entering into this arrangement Lexon and Medreich had discussed launching a jointly developed Prochlorperazine. The arrangement could therefore have been entered into in order to prevent rivals from entering the market.
The CMA alleges that each agreement contravenes UK competition law which prohibits anti-competitive arrangements including market sharing under Chapter I of the Competition Act 1998. The CMA's provisional findings are set out in a statement of objection on which the parties will now have an opportunity to respond