Canadian COMPETITION LAW

January 7, 2011

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

ASIA

Antitrust enforcement continues to strengthen in the region with Indonesia issuing more decisions under the new merger regime and the Competition Commission of India announcing that it has received more than 130 cases and some of them have been or are still being investigated. On the regulatory front, Singapore extended for another five years the block exemption for certain forms of liner shipping agreements.

Cases

The Indonesian Competition Regulator (‘KPPU’) Confirms That The Formation Of Indonesia’s Largest Petrochemical Giant Is Not Caught Under The Merger Regime

Whilst the merger between petrochemical companies PT Tri Polyta Indonesia Tbk (‘TPIA’) and PT Chandra Asri into PT Chandra Asri Petrochemical led to the formation of the largest petrochemical giant in Indonesia, it did not require clearance from the KPPU. This is because the merger regime progressively implemented in 2009 and 2010 in Indonesia, which requires certain mergers to be notified to the KPPU, does not apply to mergers between enterprises of the same Group, such as sister companies. As TPIA and PT Chandra Asri were both under the control of PT Barito Pacifik Tbk, the merger, therefore, did not have to be notified to the KPPU.

KPPU Clears Unilever Acquisition Of Sara Lee Body Care Indonesia

In October 2010, the KPPU cleared Unilever’s parent company’s proposed acquisition of control over Sara Lee’s personal care business in Indonesia. Whilst the KPPU had, at first, expressed concerns in view of the substantial market share the merged entity would have in the roll-on deodorants and the men’s hair style cream markets respectively, after an in-depth investigation of the deal, the KPPU did not oppose the merger. The investigation notably showed that entry barriers in these markets were low enough to maintain competitive pressure on the merged entity and that the risk of anti-competitive practices between remaining players was low.

The Australian Competition And Consumer Commission (‘ACCC’) Opposed The Acquisition Of Franklins Supermarkets (‘Franklins’) By Metcash Trading Limited (‘Metcash’)

Metcash is Australia’s largest wholesaling and distribution company servicing independent grocery retailers across Australia while Franklins supplies 88 Franklins branded stores, which are either company-owned or franchisees, throughout NSW. Importantly, Franklins had, a few years ago, established its own distribution and logistics capabilities and buying team after terminating its supply arrangements with Metcash. The ACCC, therefore, considered that Franklins, like Metcash, was a wholesale supplier of grocery items and, in fact, Metcash’s only competitor in the grocery wholesaling to independent supermarkets in NSW. The ACCC, therefore, concluded that the merger would lead to a substantial lessening of competition in this market by creating a monopoly. The ACCC’s review also showed that there was little prospect for new entrants, with high fixed costs making it difficult to operate a wholesale network profitably. In addition, the ACCC found that whilst large supermarkets chains imposed competitive constraints at the retail level, they did not at a wholesale level. On that basis, the ACCC opposed the merger.

The ACCC Clears The Proposed Acquisition Of ASX Limited (‘ASX’) By Singapore Exchange Limited (‘SGX)

After extensive inquiries, the ACCC has cleared the acquisition of ASX by SGX, as the merger was held not to lead to a substantial lessening of competition in any relevant market. The ACCC found that ASX and SGX competed in a very limited way for listing services and were not competitors for trading, clearing or settlement services in Australia. The main concerns investigated related to the potential deterrent effect the merger would have on the plans of Chi-X Australia Pty Ltd or Chi-East to offer an offshore ‘dark pool’ listing ASX listed securities, taking into account the fact that Chi-East is a 50-50 joint venture between SGX and Chi-X Global. The ACCC found, however, that ‘the extent to which Chi-East and the ASX would compete in relation to dark pool trading services is limited [as] dark pools located offshore are unlikely to compete with dark pools located in Australia’.

The ACCC Not Convinced That Exclusive Pilotage Agreement Delivers The Public Benefits Claimed

On 3 December 2010, the ACCC issued a determination denying authorization for an exclusive pilotage services agreement at the Port of Brisbane. Under the agreement, Maritime Safety Queensland (‘MSQ’) was required to acquire all pilotage services at the port from Brisbane Marine Pilots Pty Ltd (‘BMP’) until 31 December 2013. While the preference at most ports around the world is to have a single party supplying pilotage services, the ACCC was not convinced that such agreement would deliver the public benefits BMP claimed. The ACCC noted that even if MSQ wanted BMP as the sole supplier, it was possible to do so without the need for an exclusive agreement that would forecloses any possibility of competition for a fixed period of time.

The Japan Fair Trade Commission (‘JFTC’) Penalizes Participants In Offshore Works Bid

On 9 November 2010, the JFTC under the provisions of the Antimonopoly Act fined 27 participants bidding for offshore works for the Kagoshima prefecture a total of ¥1440.54 million.  The companies had agreed to designate which company or specific joint-venture will eventually win the bids for the offshore works. The companies cooperated in order to also ensure that each bid was won at the price that was decided by the ‘successful’ bidder who communicated it to all the parties beforehand. As such, the other participants in the bid-rigging scheme would quote higher than the price communicated to them by the party designated to win the tender.

Manufacturers And Distributors Of Electric Wires Fined By The JFTC For Bid-Rigging

On 18 November 2010, the JFTC issued cease and desist orders and fines amounting to a total of ¥10.838170 billion to Yazaki Corporation (‘Yazaki’), Fujikura Dia Cable Ltd (‘Fujikura’) and four other companies. These companies, involved in the sales of electric wires for construction and distribution in Japan, fixed the price of electric wires for construction and distribution by using common basic price lists, common copper price fluctuations and common discount rates. In addition to the fines, the JFTC imposed on Yazaki and Fujikara an obligation to implement a compliance programme, including regular training of the staff involved in sales activities.

The Director-General Of The Competition Commission Of India (‘CCI’) Issued A Report That India’s National Stock Exchange Abused Its Dominant Position

In November 2010, the Director-General of the CCI, the investigating arm of the CCI, issued its report into alleged abuses of dominance by the National Stock Exchange (‘NSE’). NSE is currently the largest and most diversified exchange in India. The CCI started probing NSE after MCX-SX (a competitor) lodged a complaint against NSE alleging predatory pricing. The report concludes that NSE abused its dominant position in the exchange market through, inter alia, engaging in predatory pricing by waiving transaction fee in the currency futures market. Under India’s competition regime, the CCI can make an order of remedy and/or fine NSE for its violation.

Airline Fined For Not Furnishing Information Sought During CCI Investigations

On 22 November 2010, the CCI fined Kingfisher Airlines Rs.1 crore (about S$287,000) for its refusal to provide information sought by the CCI in its investigation on the proposed strategic agreement dated August 2009 between Kingfisher Airlines and Jet Airways. The CCI started investigations after a complaint that this agreement was anti-competitive. The scope of the agreement included code-sharing on flights, joint fuel management, cross-selling of flight inventories using a common global distribution platform and cross-utilization of crew on similar aircraft types. Whilst Kingfisher Airlines eventually submitted the information required by the CCI, the latter nevertheless decided that the penalty for non-compliance was still due.

No Anti-Competitive Practices In The Retail Home Loan Market In India

On 2 December 2010, the CCI made a decision regarding allegations against Deustche Post Bank Home Finance, HDFC Limited, HDFC Bank Limited and LIC Housing Finance Limited for abuse of dominance and anti-competitive agreements in the retail home loan market. The alleger claimed that the higher charges imposed on customers for foreclosure of home loans prevented the borrowers from shifting to loans at a lower interest rate provided elsewhere. The CCI found that there was no abuse of dominance because there were many competitors in the market and no institution could be deemed dominant. Without any institution having a dominant position, there could be no abuse that violated the competition rule. The CCI also found that there was a lack of evidence to show any conscious or collusive decision by the institutions with regards to uniform practice of higher charges.

Legislation / Regulation

Singapore Extends Liner Shipping Block Exemption For Five More Years

On 16 December 2010, the Minister of Trade and Industry issued the Competition (Block Exemption For Liner Shipping Agreements) (Amendment) Order 2010, which extends the current Block Exemption Order (‘BEO’) for the same for an additional period of five years. This follows a recommendation by the CCS that after taking into account, inter alia, ‘local considerations such as Singapore’s market conditions and status as a transshipment hub, the implications of international developments in the maritime industry on the Singapore economy and the regulatory regimes of its major trade partners, the global nature of the shipping trade’, liner shipping agreements do bring out Net Economic Benefit which justified its recommendation to the Minister to extend the BEO for another five-year period.

EUROPE

In Europe, worldwide cartels such as the ones between LCD panel producers or between international airlines have finally been decided upon at the European Commission (‘EC’) level with heavy fines being imposed. On the dominance front, the practices of Google are being investigated further to various complaints by, inter alia, providers of search services both at the EC and at national level. On the regulatory side, the EC has updated its regulations in relation to R&D agreements and specialisation agreements between competitors, and, more significantly has adopted new Guidelines for the assessment of horizontal agreements.

Cases

EC Fines Six LCD Panel Producers Close To €650 Million For Price-Fixing Cartel

In December 2010, the EC fined Samsung Electronics and LG Display of Korea and Taiwanese firms AU Optronics, Chimei InnoLux Corporation, Chunghwa Picture Tubes and HannStar Display Corporation a total of €648,925,000 for operating a LCD display cartel that lasted from October 2001 to February 2006. The cartel members met a total of 60 times mainly in hotels in Taiwan and agreed on prices (including price ranges and minimum prices), exchanged information on future production planning, capacity utilization, pricing and other commercial decisions. Investigations by the EC revealed that all companies knew of their wrongdoing and took steps to conceal the venue and results of these meetings. Samsung Electronics received full immunity under the Commission’s 2002 Leniency Notice as it brought the cartel to the Commission’s attention. Note that the cartel has been investigated in other jurisdictions as well, with, in particular, some of the former executives of the companies involved n this worldwide cartel criminally charged by the Department of Justice in the United States.

EC Fined And Issued Instruction To Stop Conduct Of An Association Of Undertakings For The First Time

In December 2010, the Ordre national des pharmaciens (“ONP”) and its relevant governing bodies were fined €5 million for imposing minimum prices on the French market for clinical laboratory tests resulting in prices of clinical laboratory tests in France becoming two to three times higher than in the rest of the European Union. The ONP is a professional body to which the French government had delegated the responsibility of ensuring that pharmacists comply with their professional duties and ONP has powers to keep a list of licenced pharmacists. ONP systematically used or threatened to use its disciplinary powers against pharmacists that did not follow its instructions of both maintaining minimum prices and prohibiting discounts over 10%. These actions were specifically targeted at members associated with groups of laboratory with the aim of impeding the laboratories’ growth. The EC deemed ONP and its governing bodies as an association of undertakings within the meaning of EU competition law because members (ie pharmacists) of ONP are engaged in economic activity where they have full autonomy to make decisions. This case has also raised concerns regarding the possible financial liability of the members of the ONP since under Regulation NO. 1/2003 the EC can fine both the undertaking and the association.

Eleven Air Cargo Carriers Fined €799 million By The EC For Price-Fixing

Cartelists includes numerous renown airlines including Air Canada, Air Frame-KLM, British Airways, Cathay Pacific, Cargolux, Japan Airlines, LAN Chile, Martinair, SAS, Singapore Airlines and Qantas. The cartel arrangement consisted of numerous alleged contacts between airlines, bilaterally or multilaterally, covering flights to and within the European Economic Area. The various airlines started contacting each other with a view to discuss fuel surcharges but also ended up introducing a security surcharge and an agreement not to pay a commission on surcharges to the freight forwarders. This worldwide cartel was not only investigated by the EC but also by other competition authorities like Korea, New Zealand, United States and Canada. Note that Lufthansa (and its subsidiary Swiss) received full immunity as they were the ones who disclosed the cartel to the EC, whilst Singapore Airlines was fined €74 800 000.

EC Carries Unannounced Inspections In Pharmaceutical Sector

On 30 November 2010, the EC and other relevant officials from national competition authorities carried out unannounced inspections at the premises of a number of companies active in the pharmaceutical sector. The EC believed that the companies might have acted individually or jointly, notably to delay generic entry for certain medicine in violation of the prohibition of anti-competitive agreements.

EC Probes Google For Possible Antitrust Violations

On 30 November 2010, the EC announced that it would start investigation of Google’s alleged antitrust violation. Google’s internet search engine provide for both unpaid and sponsored search results. There was an allegation that Google lowered the ranking of unpaid search results of competing services and accorded preferential placement to the results of its own search services in a bid to shut competitors out. Other allegations include Google influencing the likelihood of certain advertisement on its website, the imposition of exclusivity obligations on advertising partners and suspected restrictions on online advertising campaign data on competing online advertising platforms. There is no legal deadline for the EC’s investigation.

EC Reviews Mergers By Private Equity Firms

From October to December 2010, several proposed acquisitions by various private equity firms were notified to the EC under the EC Merger Regime. Such acquisitions included, among others:

French retailer Picard by Lion Capital, which involved a vertical relationship in the frozen food market;

Autopista Trados M-45 by Finavias and Abertis, which involved the market for toll motorway;

RBS Worldpay by Advent International Corporation and Bain Capital Investors, which involved the market for merchant payment processing services; and

Wittur by Triton and DSM Special Products by Sun Capital, which involved a vertical relationship in the market for car doors.

Whilst these mergers have been cleared, it is important to highlight again that investments by private equity firms may result in anti-competitive effects where the target is active in a market in, or downstream the one in, which the private equity firm already holds interests.

The Italian Competition Authority (‘AGCM’) Imposes A Fine €81 Million On 15 Cosmetics Companies And The Association Centromarca

On 15 December 2010, the AGCM imposed a fine of €81 million on a number of companies involved in the cosmetics products business, including inter alia Unilever Italia Holdings, Colgate-Palmolive, Procter&Gamble, Reckitt Benckiser Holdings (Italia), Sara Lee Household & Body Care Italy, L’Oreal Italia, Beiersdorf, Johnson & Johnson, Glaxosmithkline Consumer Healthcare, and on Centromarca, the Italian Association of brand-names companies. The AGCM found that between 2000 and 2007 at the very least, the companies coordinated the increases of their listed prices as set out in the annual listings sent to super and hyper- markets and exchanged continuous information not only on the prices of each type of products (soaps, toothpastes, creams etc) but also on the terms and conditions negotiated with the distributors. The exchange of information happened both during meetings organized by Centromarca and through direct contacts between competitors. The AGCM also imposed a fine of €17,100 on the association Centromarca for its role in providing organisational support to the cartel. Henkel, who disclosed the cartel to the AGCM, got immunity from financial penalty.

Reckitt Benckiser Admits It Abused Its Dominance And Agreed With The UK Office Of Fair Trading (‘OFT’) To The Payment Of A Fine Of £10.2 Million

Further to a Statement of Objections issued by the OFT on 23 February 2010, Reckitt Benckiser, the producer of Gaviscon medicine admitted to using anti-competitive means to prevent producers of generic medicine from having their products prescribed by GPs. According to the OFT, ‘where a branded medicine’s patent has expired and a ‘generic name’ has been assigned to it, GPs can use their prescribing software to search for the brand and then provide patients with an ‘open’ prescription that lists its generic name. Pharmacies that receive these prescriptions can choose whether to dispense the relevant brand or equivalent but cheaper generic medicines’.  However, the OFT found that Reckitt Benckiser removed ‘NHS packs of Gaviscon Original Liquid from the NHS prescription channel after the product’s patent had expired but before the publication of the generic name for it, so that more prescriptions would be issued for its alternative product, Gaviscon Advance Liquid. Pharmacies that receive prescriptions for Gaviscon Advance Liquid must dispense it, as it is patent protected and there are no generic equivalent medicines’. By admitting the facts thus allowing the OFT to swiftly close the case, Reckitt Benckiser benefited of a reduced penalty.

The French Competition Authority (‘Autorité’) Issued An Advice On Google’s Position And How To Address The Concerns Raised By Various Stakeholders In Relation To Google Practices

On 14 December 2010, the Autorité issued its opinion in relation to competition in the online advertising sector, as requested by the French Minister for the Economy, Finance and Employment. At stake was the question of a possible implementation of a sectoral regulation, called for by various stakeholders complaining about Google’s conduct. The advice was issued as part of the consultative mission of the Autorité, and as such, does not contain any ruling on any specific conduct looked into. In its advice, the Autorité concludes that search-engine related advertising is a relevant product market and that Google is dominant in this market, highlighting, however, that this dominant position is not in itself blameworthy and ‘results from a great deal of innovation, supported by significant and continuous investments’. The Autorité further identified which practices could amount to an abuse and how such practices should be analysed in order to decide whether they in fact do violate competition laws. The practices listed include: the imposition of exclusivity clauses, the manipulation of search results’ ranking, the discriminative application of the rules pertaining to ads’ content etc. In each case, the Autorité provides guidance on how these should be dealt with.

Legislation / Regulation

EC Issues New Horizontal Guidelines

On 14 December 2010, the EC issued its revised Guidelines on the applicability of Article 101 of the TFEU to horizontal co-operation agreements (‘Horizontal Guidelines’). Noticeably, the Horizontal Guidelines include an entire chapter dedicated to the competitive assessment of information exchanges between competitors.

AMERICAS

In the States, a number of mergers have been challenged by the Federal Trade Commission (‘FTC’) and eventually were cleared subject to divestiture commitments or behavioural remedies such as the putting into place of China Walls. On its end, the Department Of Justice (‘DOJ’) successfully challenged Most-Favoured Nation Clauses.

Cases

Japanese Electronics Company Pleaded Guilty For Price-Fixing In Canada

On 3 November 2010, Panasonic Corporation (’Panasonic’) was fined C$1.5 million by the Federal Court after pleading guilty to a criminal charge of fixing the price of hermetic refrigeration compressors sold in Canada and elsewhere. Investigations by the Competition Bureau revealed that, in 2005, Panasonic, Embraco North America Inc. (‘Embraco’) and other competitors exchanged information on the price of their products, production capacities and other market intelligence. Specifically, Embraco and Panasonic agreed on increasing the price of the products sold to one of their customer in Canada. Embraco had also pleaded guilty earlier this year and was similarly fined. Since March 2010, the penalties for an agreement to fix prices, allocate markets or restrict output have increased to a maximum fine of C$25 million and up to 14 years imprisonment (compared to Panasonic’s time of offence where the maximum fine was up to C$10 million and up to 5 years imprisonment).

Agreement Reached Between The Canada Competition Bureau (‘CCB’) And The Canadian Real Estate Association (‘CREA’)

On 24 October 2010, the CCB obtained the agreement of the CREA’s members that they will amend their rules by removing those having anti-competitive object / effect. This agreement comes after the Commissioner of Competition challenged the rules imposed by CREA on real estate agents. Such rules, for instance, prevented real estate agents from offering their customers the option of simply paying a fee for an agent to list a home on the Multiple Listing Service (‘MLS’) system, a system used for most of the real estate transactions in Canada. Rather, customers wanting to list a property on MLS had to also purchase a set of additional services from a real estate agent, such as the presentation of offers and negotiation of a final deal. The agreement reached in October, inter alia, enables customers in Canada to sell their home and pay only for the services they select. It also allows real estate agents to offer new innovative services to their customers.

The US Federal Trade Commission (‘FTC’) Approved The Coca-Cola Company (‘TCCC’) Acquisition Of Coca-Cola Enterprises Inc (‘CCE’) And Further Licence Agreement Between TCCC And Its Competitor Dr Pepper Snapple Group (‘DPSG’) Subject To Conditions

On 5 November 2010, the charges that the acquisition by TCCC of CCE, TCCC’s largest bottler in the US and yet independent from TCCC was anti-competitive were settled with the FTC. Before the merger, CCE also distributed DPSG’s carbonated soft drinks in a number of states. TCCC and DPSG had, therefore, entered into an agreement providing for the newly created entity resulting from the merger, Coca-Cola Refreshments USA, Inc. (‘CCR’) to acquire an exclusive right to sell and distribute Dr Pepper and Canada Dry carbonated soft drinks brands in CCE’s territories. The FTC was concerned that this license agreement will give TCCC’s access to commercially sensitive confidential information that would substantially limit competition in the carbonated soft drinks market. In particular, the FTC feared that with the elimination of direct competition between TCCC and DPSG, there was an increased likelihood that TCCC will influence the price of DPSG’s products and also an increased likelihood of TCCC and DPSG coordinating their conduct. The settlement reached with the FTC provides that Coca-Cola will set up a ‘firewall’ to ensure that its ownership of CCE does not give certain Coca-Cola employees access to commercially sensitive confidential Dr Pepper Snapple marketing information and brand plans. The FTC has appointed a monitor to ensure the agreement reached between TCCC and the FTC is effectively implemented.

Acquisition Of Clinical Laboratory Testing Company Challenged By FTC

On 1 December 2010, a complaint was lodged against LabCorp of America’s $57.5 million acquisition of rival clinical laboratory testing company, Westcliff Medical Laboratories (‘Westcliff’). There were allegations that after the merger, the merged entity would be in dominant position and this would lead to higher prices and lower quality in the Southern California market for the sale of clinical laboratory testing services to physician groups. Prior to merger, Westcliff had been an aggressive and direct competitor of LabCorp. The FTC alleged that post-merger, it is more likely that LabCorp and the other sole competitor would increase their prices. Furthermore, it is unlikely that there will be new entrants in the Southern California market that would restore the pre-merger level of competition. .

FTC Approved Various Mergers Subject To Divestments

On 22 October 2010, the FTC approved a final order that required Air Products to sell 15 air separation units and related bulk liquid gas assets owned and operated by Airgas, upon acquisition. The divestment removed the FTC’s concern that the merger would be anticompetitive in the US market for certain industrial gases.

On 16 November 2010, the FTC approved Fidelity National Financial’s proposal to sell rights to Michigan Title Planning Assets to Data Trace Information Services, Inc. as a remedy for an anti-competitive merger in 2008, which reduced competition in the markets for real estate title information services.

On 10 November 2010, in view of its acquisition of Prime Outlets Acquisition Company, LLC, the FTC required Simon Property Group, Inc. to divest property and modify tenant leases as part of a settlement designed to preserve outlet center competition.

On 15 November 2010, 15 psychiatric facilities were required to be sold as a condition of Universal Health Services, Inc.’s $3.1 billion acquisition of Psychiatric Solutions, Inc in a bid to promote competition in the health care markets. According to the FTC, the original acquisition would combine two of the largest competitors in three local markets for the provision of acute inpatient psychiatric services, resulting in a substantial reduction in competition.

Former New York City Hospital Purchasing Official Pleads Guilty To Bid Rigging And Fraud Conspiracies

On 2 December 2010, Mario Perciavalle, a former associate director of plant services at Mount Sinai Medical Center and School of Medicine in New York (‘Mount Sinai’), pleaded guilty to bid rigging and fraud conspiracies. The charges related to contracts for maintenance and insulation work performed at Mount Sinai. Perciavalle submitted intentionally high, non-competitive bids on maintenance and insulation services contracts at Mount Sinai between June 2004 and September 2005. He was also charged for awarding work at Mount Sinai to a fellow co-conspirator and received cash-backs between March 2003 and September 2005. Including Perciavalle, ten individuals and three companies have pleaded guilty so far to charges arising out of this investigation.

Former President Of New Jersey Manufacturer And Distributor Of Food Service Equipment Hardware Charged For Allocating Customers

On 2 November 2010, Thomas E. Carr was charged with participating in a conspiracy to allocate customers for the sale of food service equipment hardware in the United States. Carr and other conspirators agreed through meetings, telephone and email discussions to allocate customers of food service equipment hardware, not compete for another’s protected customers, submitting intentionally high prices or bids to certain customers; and to exchange information on prices to customers so as not to undercut each other. He was charged for violation of the Sherman Act, and faces a maximum penalty of 10 years imprisonment and $1 million fine.

Amex, MasterCard And Visa To Remove Anti-Competitive Rules

On 4 October 2010, the US Department Of Justice (‘DOJ’) announced that it would be challenging rules that American Express, MasterCard and Visa had in place, which prevented merchants from offering consumer discounts, rewards and information about card costs to encourage consumers to use lower-cost payment methods, resulting in consumers paying more for their purchases. Merchant fees are charged in the form of ‘swipe fee’ each time a credit card is used and this cost is passed onto customers in the form of higher retail prices. MasterCard and Visa had offered a proposed settlement, inter alia, to offer consumers some form of rebate or discount when using a particular credit card network so as to reduce card acceptance costs and retail prices. American Express has chosen not to settle with the DOJ.

US DOJ Reached A Settlement With Lucasfilm On Non-Compete

In December 2010, the DOJ announced that it has reached a settlement with Lucasfilm which prevents Lucasfilm from entering into agreements with competitors not to poach their employees. The DOJ had found that Lucasfilm and Pixar had agreed ‘not to cold call each other’s employees; to notify each other when making an offer to an employee of the other company; and, when offering a position to the other company’s employee, not to counteroffer with compensation above the initial offer’. According to the DOJ, the agreement eliminated important forms of competition to attract highly skilled employees and, more importantly, significantly diminished competition to the detriment of affected employees who were likely to be deprived of information and access to better job opportunities.

US DOJ Challenges Most-Favoured Nation (‘MFN’) Clauses

On 18 October 2010, the DOJ filed a civil antitrust lawsuit against Blue Cross Blue Shield of Michigan (‘BCBSM’) alleging that provisions of its agreements regarding hospital prices prevented other insurers from entering the marketplace and discouraged discounting.  With the operation of the MFN clauses, hospitals can charge BCBSM no more than they charge BCBSM’s competitors. The DOJ alleged that this resulted in a reduction of completion in the market for sale of healthcare insurance and that BCBSM agreed to raise the prices that it pays certain hospitals so as to obtain the MFN clauses.

On 29 November 2010, the DOJ required GrafTech International Ltd (‘GrafTech’), to make significant modifications to its supply agreement with ConocoPhilips Company (‘Conoco’), along with reporting and firewall obligations in order to proceed with its proposed acquisition of Seadrift Coke LP (‘Seadrift’). GrafTech is a major producer of graphite electrodes and both Conoco and Seadrift are producers of petroleum needle coke, which is an important input in the production of graphite electrode. The Conoco-GrafTech supply agreement included MFN provisions and also a right for GrafTech to audit the books, records and documents of Conoco. The DOJ alleges that this could incentivize the exchange of contemporaneous, customer-specific pricing information between Conoco and Seadrift post-acquisition. Therefore, the proposed settlement requires GrafTech to remove the audit rights and MFN pricing supply from its agreement with Conoco, and not include them in future supply agreements. Further, Graftech is precluded from sharing confidential Conoco information with Seadrift employees and also not share Seadrift information with Conoco. Under the same agreement, Seadrift is prevented from sharing confidential customer information with GrafTech.

Legislation / Regulation

Mexico’s Senate Approved Bill To Increase Penalties In Antitrust Cases

In particular, the Bill plans to increase the level of financial penalties up to 10% of a company turnover from a maximum of 80 million pesos under the current law. In addition, the Bill criminalizes collusion.

AFRICA

Cases

Competition Commission Of South Africa (‘CCSA’) Carried Out Raids For Suspicion Of Anti-Competitive Acts

On 11 November 2010, the CCSA raided the premises of J.H. Retief Transport CC, Cape Express (Pty) Ltd, Patrick Removal (Pty) Ltd and Sifikile Transport CC, all companies active in the provision of furniture removal services. The companies are suspected of price-fixing, market allocation and bid-rigging.

On 18 November 2010, the CCSA also raided the premises of H.Pistorius & Co (Pty) Ltd, Kalkor (Pty), Fertilizer Association of South Africa and Grassland Ondernemings (Pty) Ltd in relation to its investigation into retail price maintenance, price-fixing and market allocation in the agricultural lime market.

CCSA Settles Polymers Collusion Case

On 14 December 2010, CCSA reached a settlement of R111 million with Sasol Polymers (‘Sasol’). In 2007, Sasol and Safripol (Pty) Ltd (‘Safripol‘) were charged with engaging in collusive conduct and excessive pricing. They implemented a supply agreement that included the operation of the pricing formula and the exchange of information relating to the pricing of polymers (material required for manufacture of plastic products). Safripol admitted to the offences and agreed to pay a fine of R16.5 million. However, Sasol only admitted, and was fined for, its collusive conduct whilst contesting the excessive pricing charge.

Seed Merger Prohibited In South Africa

On 8 December 2010, the CCSA prohibited the merger between Pioneer Hi-Bred International (‘Pioneer‘) (a US based multinational seed producer), and Panner Seed (‘Panner‘) (a local seed company). The seed market in South Africa has three major players including Panner and Pioneer. The merging parties claimed that the merger would lead to technological efficiency and pro-competitive gains. However, the CCSA was not convinced as maize is a staple food in South Africa and higher levels of concentration in the seed market may dis-incentivise local innovation while increasing the possibility of price increment, which will be detrimental to consumers and farmers.

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