Canadian COMPETITION LAW

October 18, 2010

We are pleased to provide this global competition law update from our friends at the leading Singapore firm Rajah & Tann LLP.

ASIA

Antitrust enforcement continues to beef up in the region with landmark decisions being issued in various jurisdictions and highest fines ever imposed in Australia and Indonesia.

Cases

The Competition Commission Of Singapore (‘CCS’) Rules That Recommended Fee Guidelines Violate Competition Law

On 18 August 2010, the CCS issued a landmark decision that fee recommendations or fee guidelines by professional and trade associations are in nature in violation of the Competition Act. The CCS decision resulted from an application filed by the Singapore Medical Association (‘SMA’) in 2009. The SMA application sought clarification from the CCS as to whether the Guidelines on Fees (the ‘GOF’) for medical practitioners breached Section 34 of the Competition Act, or, if it could benefit from the Net Economic Benefit (‘NEB’) exclusion. Although the traditional CCS’ stance was that recommended minimum fees by professional or trade associations are only likely to be a violation, this decision suggests that such recommendations are, in fact, illegal and may expose both the association and its members to monetary penalties. What emerges from this decision is that professional or trade associations with such guidelines and/or recommendations on fees should immediately review and amend or withdraw the guidelines to avoid being penalised.

CCS Clears Merger In Dialysis Services In Singapore

On 14 July 2010, the CCS cleared the proposed acquisition of Asia Renal Care (‘ARC’), a provider of dialysis services in Singapore, by Fresenius Medical Care (‘FMC’), an integrated worldwide provider of dialysis products and services. Noting that the transaction will not lead to a significant change in the existing structure of the market for the provision of haemodialysis (‘HD’) treatments in Singapore and that the barriers to entry in this market are low, the CCS concluded that no anticompetitive horizontal effects would result from the transaction. With regards to vertical integration, the CCS concluded that FMC’s competitors in the HD products market would not be prevented from supplying their products in Singapore, at the very least to HD service providers that are not linked to FMC. The CCS, therefore, concluded, in Phase I, that the merger would not lead to a substantial lessening of competition in Singapore. Rajah & Tann LLP’s Competition & Antitrust Practice handled the clearance of the transaction.

19 Insurers Fined In Vietnam For Agreeing On Motor Insurance Premiums

In July 2010, the Vietnam Competition Council (‘Council’) fined 19 non-life insurance companies a total of VND1.7 billion (S$116,352) for agreeing on the calculation of motor vehicle insurance premiums. At a conference organized by the Vietnam Association of Insurance in September 2008, senior representatives of 15 of these non-life insurance companies agreed to execute an agreement on ‘Cooperation Among Insurance Companies In Motor Insurance’ (‘Agreement’), which notably included a clause on the ‘Rates of Premium in Motor Insurance’. Four other non-life insurance companies eventually joined in the Agreement at a later date. Under the Agreement, the 19 non-life insurance companies agreed to calculate the premiums to be charged for various types of motor vehicle insurances using a unified formula. The Council decided that the Agreement which fixed the premium rates was in violation of the Vietnam Law on Competition and, therefore, penalised each participating company an amount equal to 0.025% of its total sales for the 2007 financial year. It is relevant to note that in determining the amount of the financial penalties imposed, the Council took into account both the fact that this case was the ‘first competition restriction agreement violation handled in Vietnam’ and the cooperation of most of the non-life insurance companies with the investigation.

Drug Manufacturers Pfizer And Dexa Heavily Fined In Indonesia

On 27 September 2010, the Indonesian competition regulator (‘KPPU’) imposed a record fine of IDR 25 billion on PT Pfizer Indonesia and IDR 20 billion (S$3 million) on PT Dexa Medica for fixing the price of amlodipine tablets, a drug used to treat high blood pressure, in Indonesia. According to news publications, the two companies entered into a cartel arrangement and sold their respective drugs at an artificially high price. According to the KPPU, Pfizer sold its drug Norvask 14.6 times higher than the average international price, while PT Dexa Medica sold its drug Tensivak 13.6 times higher than the average international price. In addition to the monetary fine, the KKPU also required the two companies to reduce the prices on their respective drugs hypertensive by 65% for Pfizer and 60% for Dexa.

KPPU Fines Four Construction Companies For Bid Rigging And Issues A Warning To The Committee Supervising The Tender Process

In a tender for land clearing and development of the Muaro Bungo Airport in Jambi Province, the KPPU on 30 July 2010 found that PT Bungo Pantai Bersaudara, PT Paesa Pasindo Engineering, PT Riyah Permata Anugrah and PT Bintang Selatan Agung colluded to allow PT Bungo Pantai Bersaudara to win the tender. In its decision, the KPPU noted the similarities in the tender documents submitted by the four defendants such as the price offered and even the typo mistakes in the documents. On that basis, the companies were found guilty for bid rigging and were fined a total of IDR 1.8 billion (S$265,000). Interestingly, the KPPU also issued a warning to the head of the Tender Committee for its negligence, as it appeared that the Committee of Goods and Services Procurement for the Muaro Bungo Airport Jambi Province had ignored the fact that the bidding documents amongst the four defendants were similar and that there was only a small difference in tender prices. The KPPU, however, found that the Tender Committee was not a part of the conspiracy and the oversight was only due to the limited time available to evaluate the tender documents.

KPPU Recommends Dissolving The Indonesian Cement Association

On 18 August 2010, the KPPU concluded its investigation on an alleged price-fixing cartel between eight cement producers in Indonesia by deciding that there was insufficient evidence to show the existence of a cartel. The case resulted from an investigation initiated by the KPPU on its own motion. In its decision, the KPPU provided useful parameters that should be met to prove the existence of a cartel, viz parallel pricing, excessive pricing, production and marketing arrangements and excessive profit. Importantly, the KPPU also made a recommendation to the Government of Indonesia to dissolve the Indonesian Cement Association (‘Association’). The KPPU’s view is that the Association has the potential to facilitate price fixing as well as other anticompetitive arrangements between its members particularly those on production and marketing. In addition, the KPPU also recommended the Government to set a maximum retail price for cement, in order to protect consumers from excessive pricing.

Australian Court Fines Baxter Almost A$5 Million For Abuse Of Market Power

On 26 August 2010, The Full Federal Court of Australia imposed a penalty of A$4.9 million on Baxter Healthcare Pty Limited (‘Baxter’) for violations of section 46 (taking advantage of market power) and section 47 (exclusive dealing) of the Trade Practices Act 1974 (‘TPA’). The Australian Competition and Consumer Commission (‘ACCC’) commenced proceedings against Baxter in 2002, in relation to tenders lodged and won by Baxter for the supply of sterile fluids and peritoneal dialysis products to the State Purchasing Authority (‘Authority’), alleging misuse of market power and exclusive dealing. Baxter who was dominant in the sterile fluid market offered to supply sterile fluids at discounted prices, so long as the Authority also acquired from Baxter all peritoneal dialysis products. In August 2007, the High Court held that Baxter was not subject to Crown immunity, and in August 2008, a majority of the Full Federal Court found that Baxter had contravened the Act, but did not make a ruling as to the appropriate penalty at that point. In addition to the fine, Baxter was also ordered to pay the ACCC’s costs of the proceedings at first instance and on appeal to the Full Court.

Australian Taxi Industry Giant Fined A$15 Million

On 24 September 2010, the Federal Court in Melbourne ordered taxi-fare payment company Cabcharge to pay A$15 million in penalties and costs for misusing its market power. This is the highest penalty ever imposed in Australia for a violation to Section 46 of the Trade Practices Act, which prohibits abuses by dominant players. Cabcharge is the dominant supplier of EFTPOS terminals in taxis and charges passengers a 10% service fee to process payments by credit card, debit card or its branded charge card. The ACCC has alleged that Cabcharge used its market power in the provision of non-cash taxi fare payment processing services and taxi specific payment products by refusing to allow its charge card to be processed on alternative terminals. The Federal Court of Melbourne also found that Cabcharge had been using predatory pricing to hobble three taxi-meter rivals. In addition to a A$14 million fine and the reimbursement of A$1 million of the ACCC’s legal fees, the Federal Court also put Cabcharge in a probation about future conduct.

Appeal By The Competition Commission Of India Upheld In The Supreme Court – No Need For Prior Hearing When Conducting Investigations

On 9 September 2010, the Supreme Court of India ruled in favour of the Competition Commission of India (‘CCI’) allowing it to conduct probes and investigate market conduct without the need to hold any preliminary hearing. The appeal resulted from a complaint filed by Jindal Steel (JSPL) alleging that an exclusive agreement, of an anti-competitive nature, was in place between Indian Railways and the Steel Authority of India Limited. The CCI investigation was delayed as the Steel Authority of India secured a stay from the Competition Appellate Tribunal. The Tribunal held that the CCI must conduct a preliminary hearing before ordering a probe or initiating any investigation, which the CCI had not done. The CCI, however, succeeded in its appeal to the country’s apex court by arguing that the CCI practice was in-line with international norms and standards as well as other tribunals within India. Accepting the CCI position, the Supreme Court held that there is no need to hold preliminary hearings and that orders issued by the CCI for such investigations and also held that probes cannot be appealed to the Competition Appellate Tribunal.

Legislation / Regulation

Indonesia Issues Regulations On Notification Of Mergers And Acquisitions

In July 2010, the Indonesian Government finally issued Government Regulation No 57 Year 2010 on the Merger, Consolidation and Acquisition which may result in Monopolistic Practices and Unfair Business Competition (‘Regulation’). The Regulation makes it mandatory for a merged entity to notify the merger within 30 days after the merger has become legally effective where certain thresholds are met (assets of the merged entity amount to more than IDR 2.5 trillion (S$368 million) for non-banks and IDR 20 trillion (S$2.9 billion) for banks / financial institutions, or the turnover of the merged entity amounts to more than IDR 5 trillion (S$736 million) for non-banks). These figures include the assets or turnovers of the merged entity as well as the assets or turnovers of all the companies that control or are under the control of the merged entity. Businesses that fail to report the merger within the prescribed deadline will be fined IDR 1 billion (S$147,000) for each day that the filing is not made, to a maximum amount of IDR 25 billion (S$3.68 million). The Government Regulation No 57 Year 2010 still allows the parties that are planning a merger to consult the KPPU before implementing it, if one of the thresholds above is likely to be crossed.

Singapore Consults On Liner Shipping Block Exemption

In July 2006, the Block Exemption Order (‘BEO’), that exempts certain liner shipping agreements from the application of the Section 34 prohibition, was issued for a period up to 31 December 2010. Having reviewed the advantages / disadvantages of this exemption, the CCS has made a recommendation to the Minister that the block exemption be extended for another five years ie until 31 December 2015. The CCS is also proposing certain minor changes to the information on liner shipping agreements that must be filed with CCS in order to fulfil the requirements of the block exemption. To illustrate, parties will be required to disclose the list of the other jurisdictions in which the agreement has been filed. The CCS is currently seeking public feedback on this proposed recommendation and will accept comments until 4 October 2010.

Hong Kong Published Competition Bill

On 2 July 2010, the Hong Kong Government gazetted the Competition Bill (the ‘Bill’), making Hong Kong the latest amongst Asian countries to introduce competition laws. The Bill prohibits agreements and conduct having as their object or effect the prevention, restriction or distortion of competition in Hong Kong. Further, mergers which would substantially lessen competition in Hong Kong are also prohibited under the Bill. The intention, however, is to have the merger provisions applicable only to parties holding a carrier licenses granted by the Telecommunications Authority. The Bill also provides for judicial enforcement of competition rules: both an independent Competition Commission (‘Commission’), with wide investigative powers, and a Competition Tribunal (‘Tribunal’), to adjudicate on competition cases, will be established. Under the proposed law, the Broadcasting Authority and the Telecommunications Authority will have concurrent jurisdiction with the Commission to investigate competition matters in the broadcasting and telecommunications sectors. The Bill also includes provisions on the disqualification of directors where the Tribunal has determined that the company has contravened a competition rule and it considers the director concerned to be unfit for managing a company due to his personal conduct. Interestingly enough, private action may be taken not only against a person who has contravened the competition law, but also against the person who aids, abets, procures or induces the contravention of the competition law.

New Zealand’s Commerce Commission Issues Guidelines On Deterring Bid Rigging

In September 2010, the New Zealand’s Commerce Commission issued three related guidelines – Guidelines on How To Recognise Bid Rigging, Guidelines on How To Deter Bid Rigging and Guidelines For Procurers – How To Recognise and Deter Bid Rigging, to assist purchasers in both the public and private sectors in recognising and deterring bid rigging. The guidelines suggest looking for suspicious bidding patterns which include: a pattern of winning bidders, for example, the bid being won in a sequence such as A, B, C, A, B, C, or particular bidders always winning contracts of a particular type or size; a bidder that bids relatively high in some tenders but then relatively low in other similar tenders; and a bidder that never wins but keeps on bidding. The guidelines also suggest looking for suspicious bidding behaviour where likely bidders don’t submit a bid, bids that are suddenly withdrawn, submitted bids have suspicious pricing or contain identical wording, particularly if the wording is unusual.

EUROPE

Europe has been very active in the enforcement of competition laws, both at the national level as well as at the EU level. Some of the recent investigations show that large companies that can exercise ample commercial muscle are not above the law and are being taken to task for engaging in anti-competitive behaviour. For instance, IBM is currently being investigated by the European Commission (‘EC’) for a possible abuse of dominance for the sale of its mainframe hardware and software. On the other hand, the UK competition regulator recently conducted dawn raids on the premises of Mercedes-Benz and also arrested the Managing Director of its UK operations.

Cases

European Commission (‘EC’) Investigates IBM For Possible Abuse Of Dominance

On 26 July 2010, the EC decided to initiate a formal investigation against IBM Corporation to determine whether IBM has abused its dominance. The EC’s investigation is based on two separate potential infringements by IBM, both in the market for mainframes. The first potential infringement arises out of a complaint by developers of emulator software and concerns bundling by IBM of its mainframe software (operating system) to the sale of its mainframe hardware. The other potential infringement arises out of the EC’s own initiative and looks at whether IBM discriminates between competing suppliers of maintenance services for IBM mainframes. In particular, the EC is investigating whether IBM has undertaken conduct that may prevent new entrants from entering the market for maintenance services by delaying or restricting access to those spare parts which are solely provided by IBM. The start of an investigation does not mean that a firm case against IBM has been made out and the EC will need to adduce sufficient evidence before it can issue its decision.

EC Closes Its Investigation In Apple’s iPhone Policy

In Spring 2010, the EC started a preliminary investigation into Apple’s business practices with regards to its iPhone. Specifically, the EC was concerned by the ‘country of purchase’ rule, which prevented consumers having bought an iPhone in a EU country from getting repairs services outside the country of purchase. Another practice investigated by the EC was Apple’s requirement that independent developers of iPhone’s applications only use Apple’s native programming tools and approved languages, to the possible detriment of third-party layers. Apple’s announcements that it had removed these restrictions on development tools for iPhone’s applications and would no longer enforce the ‘country of purchase’ rule led the EC to close its investigation into the matter.

Spain Fines Wine Makers For Artificial Increase In Prices

On 29 July 2010, the Spanish competition authority (‘CNC’) placed a total fine of EUR 6.723 million (S$12 million) on nine makers of the Jerez wine (Sherry) in Spain along with their association, the FEDEJEREZ and the regulatory board for that designation of origin. The CNC found that, in response to the drop in demand for Jerez wine both domestically and internationally, the wine producers colluded to decrease the output of the Sherry wine, thereby increasing prices. The CNC also found that the artificial increase in prices attracted more producers to enter this business thereby increasing the number of market players and creating another downward pressure on prices which was immediately addressed by the cartel participants agreeing to limit the production of Jerez wine. The cartel, which was in existence from 2001 to 2008, came to light when one of the participants applied to the CNC for leniency.

Europe-Wide Dawn Raids On Makers Of Polyurethane Foam

In late July 2010, the European Commission (‘EC’) conducted dawn raids on leading manufacturers of polyurethane foam in various countries within the European Union, including Austria and Belgium. Although the EC has not disclosed the identities of the companies being investigated, Recticel SA has confirmed that its headquarters in Belgium, along with its offices in the UK and Austria were raided by the EC. The EC believes that the companies concerned may have been party to a cartel in contravention of Article 101 of the Treaty of the Functioning of the European Union. The investigation came about after similar investigations were initiated in the United – States by the Department of Justice.

Marine Insurance Sector Not Covered By Block Exemption Commission Opens Probe

On 26 August 2010, the EC publicly announced that it has opened a formal probe into certain agreements in the marine insurance sector. In particular, the EC is investigating whether certain provisions in the claim-sharing and joint re-insurance agreements operated by the P&I Clubs, is contrary to EU competition law. In its investigation, the EC will evaluate whether certain clauses in the International Group Agreement and Pooling Agreement will restrict competition between various P&I Clubs and prevent access to the market for other mutual P&I clubs and commercial insurers. It should be noted that these arrangements do not benefit from the block exemption for the insurance sector in the EU as the market shares of the parties are well above the thresholds set out in the block exemption for benefiting from it.

EU General Court Confirms That An Undertaking Can Be Part Of A Cartel And Fined Even If Not Active In The Market Concerned

On 8 September 2010, the European General Court confirmed the EC decision in the Deltafina Case that an undertaking can be penalised for its participation in a cartel even if it is not active in the market affected by the cartel. The General Court’s decision also clarified the criteria for establishing when an undertaking can be considered to be a leader of the cartel. This is important because if determined to be a cartel leader, the EC can impose a higher fine. The judgement by the General Court arises from an appeal by Deltafina against a 2004 decision by the EC that four tobacco processors in Spain and Deltafina, a tobacco processor in Italy, had participated in a cartel to fix purchase prices and quantities on the Spanish raw tobacco market between 1996 and 2001. The EC imposed a total fine of €20 million on the five companies for their role in the cartel, with the largest fine, €11.88 million, imposed on Deltafina for being the leader of the cartel. Deltafina appealed against the EC’s decision. Deltafina’s two major arguments were that it was unjustifiably fined as it was not operating in the Spanish raw tobacco market and, in any event, was not the cartel leader. The General Court held that the fact that Deltafina was not present in the relevant market does not preclude it from being penalised for infringement on that market, as ‘an undertaking may infringe the prohibition laid down in Article 81(1) EC where the purpose of its conduct, as coordinated with that of other undertakings, is to restrict competition on a specific relevant market within the common market, and that does not mean that the undertaking has to be active on that relevant market itself’. On deciding whether Deltafina was a leader of the cartel, the General Court held that in order to be characterised as cartel leader, ‘the undertaking in question must have represented a significant driving force in the cartel and borne individual and specific liability for the operation of the cartel’, which was not established in this case.

Communications With In-House Lawyers Not Privileged For Competition Violations In Europe

On 14 September 2010, the European Court of Justice (‘ECJ’) issued its long awaited decision in what is known as the ‘Akzo case’. It ruled that for violations of competition law, communications with internal, ie in-house, lawyers are not covered by legal professional privilege. It is important to note that the issue in the Akzo case was not whether the legal privilege protection should apply to all in-house lawyers but whether it applies to an in-house lawyer who is enrolled as a member of a Bar or Law Society. The ECJ ruled against granting privilege in such circumstances as the employment contract between a lawyer and his client removes the element of independence that is required for legal professional privilege to apply. As a consequence of this judgment, the EC can seize or require the production of communications with in-house lawyers when investigating breaches of competition laws. The position in Singapore is different as the CCS guidelines provide that communications with in-house lawyers, in addition to lawyers in private practice including foreign lawyers, as being protected by legal privilege.

Mercedes-Benz’s Managing Director Arrested In The UK

On 17 September 2010, the Office of Fair Trading (‘OFT’) in the UK raided the premises of Mercedes-Benz in Tongwell, Milton Keynes, which is owned by Daimler, for suspected cartel activity. The OFT believes that Mercedes-Benz took part in a price fixing cartel along with other manufacturers of commercial vehicles and to that extent it has also requested information from Scania, the Swedish manufacturer, and MAN, a German vehicle manufacturer. The Managing Director of Mercedes-Benz’s UK division was also arrested as a part of the investigation, although he was later released on bail. The current investigation has been brought under the Enterprise Act, under which criminal charges can be filed, as well as the Competition Act. Criminal charges under the Enterprise Act are rare in the UK.

France Fines Eleven Banks A Total Of €384.9 Million For Fees On Cheque Transactions

On 20 September 2010, the French Autorité de la Concurrence (‘Authority’) imposed fines totalling €384.9 million on eleven banks for colluding on fees charged to customers for processing cheque transactions. The Authority found that the eleven banks colluded between January 2002 and July 2007 for fixing the fee on cheques that are exchanged in France. In addition, the authority also held that the banks colluded on the fees for the related service of cancellation of cleared operations, which continued to date. The banks were fined €381.1 million for the first infringement and €3.8 million for the second infringement, totalling €384.9 million.

Legislation / Regulation

OFT And Competition Commission Issue Joint Merger Guidance For The First Time

On 16 September 2010, the OFT and the Competition Commission (‘CC’) of the UK published their first joint Merger Assessment Guidelines (‘MAG’). So far, the guidance available for merging companies was available from the two authorities separately and in various documents. The MAG is expected to assist merging companies, and their lawyers, by providing clarity on the manner in which the competition regulators will assess their application. The MAG has revised and expanded on the guidance that was previously contained in several publications issued by the two regulators. The MAG sets out the questions the CC and OFT will ask when assessing merger applications including the definition of ‘relevant merger situation’, ‘substantial lessening of competition’ as well as the criteria and methodology applied when performing the review.

AMERICAS

Competition law is being heavily implemented in all parts of the world and the American continent is certainly no exception. The US Federal Trade Commission (‘FTC’) recently settled with Intel with respect to charges that it was abusing its dominance by bundling its products and retaliating against customers that use competing products. The Intel investigation was prompted by a European decision which scrutinised similar practices in the EU. A second investigation, also in the technology industry, has an employment angle to it. The US Department of Justice (‘DOJ’) investigated, negotiated and recently settled with six large technology companies (Google, Adobe, Pixar etc) on claims that they had entered into non-poaching agreements with each other. The DOJ held such agreements to be anti-competitive as they restricted competition between employers and harmed skilled employees who were looking to change their jobs.

Cases

FTC Settles With Intel Over Charges Of Bundling, Retaliation And Other Abuses Of Dominance

On 4 August 2010, the FTC settled with Intel its charges for illegally stifling competition in the market for computer chips. The FTC investigation into Intel was for conduct that was similar to that pursued by the European Union that led to more than one billion US dollars in fines. The FTC charges were settled as Intel agreed to terms that will promote competition in the market for computer chips and not hinder free competition in the future. In particular, the settlement covers various Intel products such as Central Processing Units, Graphics Processors and chipsets and prohibits Intel from restricting competition by bundling its products, offering additional benefits for those customers who only use Intel products and retaliating against customers who buy non-Intel products. The settlement agreement also requires Intel to, amongst others, modify intellectual property with NVidia and AMD to allow them from merging or acquiring other parties easily and to provide graphics card manufacturers access to Intel’s chipset architecture through PCI Express. The settlement agreement will be open for public consultation for 30 days before it is finalized.

Another Executive Jailed For Fixing Prices Of TFT-LCD, Travel Ban On Others

On 4 August 2010, a fourth executive from Chi Mei Optoelectronics pleaded guilty to price fixing in the TFT-LCD market and has agreed to serve jail time in the US. The DOJ placed only one charge on Mr Chen-Lung Kuo in the US District Court for San Francisco – that of suppressing and eliminating competition by fixing prices of the TFT-LCD panel sales. In this cartel arrangement, Chi Mei participated through Mr Kuo (Vice-President for Sales And Marketing). According to the plea agreement, which is pending Court approval, Mr Chen has agreed to pay US$35,000, serve 9 months in jail and cooperate with the authorities as they continue their investigation. In a related investigation, the CEO and Vice Chairman of AU Optronics (another cartel participant) are prohibited from leaving the US until the investigation and proceeding against them is complete. The ban on travel could last for six months to one year and was issued by the US District Court for Northern California. It prevents the two executives from travelling outside the Northern District of California without the Court’s permission.

On-Going Investigation Into Price Fixing In Air Transportation Sector Results In More Indictments

On 26 August 2010, a grand jury in New York returned an indictment against two executives of Asiana Airlines Inc for the charge of price fixing with several other airlines of passenger fares between US and Korea. According to the DOJ, the cartel involved fixing certain components of the price of economy class air tickets between certain US cities and Korea from January 2000 to February 2006. Both executives are vice presidents of Asiana Airlines. According to the DOJ’s investigation, a total of 16 airlines are found to have colluded to fix prices in the air transportation industry and it has imposed fines totalling US$1.6 billion to date. It should be noted that all executives that pled guilty to the charges were required to serve time in prison.

United – Continental Merger Approved Subject To Divestment

On 27 August 2010, the DOJ announced that it is closing its internal investigation, and granting the application, for a merger between United and Continental airlines. The proposed merger is aimed at combining the two airlines complementary networks within the US, which included certain overlapping routes between the airlines. The largest of such routes were between United’s hub airports in various cities within the US and the Continental’s hub at Newark Liberty Airport in New Jersey. Since Continental has a high market share at Newark airport and the number of take-off and landing slots is limited, the DOJ expressed concern that the proposed merger may restrict competition for flights to and from Newark. In order to secure clearance for its merger, United and Continental entered into an agreement to sell some take-off and landing slots to a low cost carrier – Southwest airlines. The DOJ took the view that since Southwest currently does not serve Newark airport, this move will allow a new entrant to exercise competitive pressure on the parties post-merger and is expected to benefit customers significantly. Just a month before, the merger was also cleared by the European Commission.

Novartis Given The Green To Acquire Alcon, Subject To Divestment Of Certain Drug

On 1 September 2010, the FTC granted permission for the acquisition of Alcon by Novartis after imposing a requirement to sell off the injectable miotics wing to a competitor – Bausch & Lomb. Novartis is a global pharmaceutical company that specialises in the development, production, distribution and marketing of medical products. In particular, Novartis supplies ocular lubricants, injectable miotics and anti-allergens. Alcon, on the other hand, is a global pharmaceutical company that focuses on eye care and is active in the area of ophthalmic and miotic pharmaceuticals. In its investigation, the FTC found that Novartis and Alcon were the only two producers of injectable miotics in the US and customers were benefitting from the direct competition between the two producers. As the merger would eliminate competition for the sale of injectable miotics, the settlement requires Novartis to sell its rights and assets related to its injectable miotics product to Bausch & Lomb within 10 days of consummating the merger and also provide transitional services, including third-party manufacturing services and technical assistance, to B&L to ensure that it thrives as a viable competitor. Note that, in May 2010, the merger was cleared by the Competition Commission of Singapore, without conditions.

Agreements To Not Poach Employees Under Scrutiny

On 24 September 2010, the DOJ announced that it has reached a settlement agreement with six multinational technology companies – Adobe Systems, Apple, Google, Intel, Intuit and Pixar. Unlike other antitrust cases that involve fixing product prices or abusing dominance, this matter involved technology companies agreeing to not poach each others’ employees. The companies had entered into non-solicitation agreements whereby they would not hire each others’ employees for a particular duration. The DOJ viewed these agreements as being anti-competitive as they restricted competition between employers for skilled employees and reduced the incentives available. Since the high technology sector generally has a strong demand for skilled employees, a non-solicitation agreement would restrict competition without providing any precompetitive effects. The DOJ investigation will come to an end once the settlement receives Court approval.

AFRICA

Price fixing in the aviation and travel industries have kept regulators busy. The Competition Commission of Mauritius, for instance, issued a report that the Mauritius Association of IATA Travel Agents, an association consisting of 25 travel agents, breached competition law by entering into collusive agreements with Air Mauritius. In South Africa, the decision in the air cargo fuel surcharge case should be issued soon.

Cases

Air Mauritius And Travel Agents Associations Agreed On Service Level Fee

On 3 August 2010, the Competition Commission of Mauritius (’CCM’) issued its investigation report regarding an agreement between Air Mauritius and the Mauritius Association of IATA Travel Agents (‘MAITA’). The CCM found that both parties have breached the Competition Act 2007 (‘Act’), which came into force late last year, by jointly agreeing on the service fee charged for various categories of tickets. Although Air Mauritius and MAITA entered into this agreement prior to the establishment of the Act, the CCM found that this agreement continued to affect the ticket prices on certain destinations even after the Act came into force. Air Mauritius and MAITA have been given the chance to present their defences before the CCM issues its final decision.

Airlines Face Price Fixing Allegation In South Africa

On 28 July 2010, the South Africa Competition Commission (‘Commission’) referred the case of price fixing in the cargo carriage market against eight airlines to the Competition Tribunal for decision on the fine. The Commission initiated the investigation in 2006, after receiving a leniency application from Lufthansa, who admitted that members of IATA agreed on various surcharges and price increases since 1996.  The Commission recommended that the Tribunal impose penalty of 10% of the annual turnover of each of the eight airlines involved, which include Singapore Airlines, British Airways, KLM-Air France and South Africa Cargo. Lufthansa was granted conditional immunity by the Commission for its cooperation in the investigation and prosecution process.

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