Canadian COMPETITION LAW

May 5, 2011

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

ASIA

The first third of 2011 has seen a lot of activities from competition regulators, with various investigations launched across the region. In Singapore, the Competition Appeal Board issued its very first decisions on the appeals lodged against the first price-fixing case decided by the Competition Commission of Singapore, substantially reducing the amount of the fines imposed on the various appellants. On the regulatory front, the Chairman and most of the members of the Malaysia Competition Commission have been appointed whilst the Competition Commission of India set out the merger regime that will apply in India in a few months time.

Cases

Singapore First Competition Appeal Board Decisions

By two decisions dated 28 February 2011 and published on 24 March 2011, the Competition Appeal Board of Singapore (‘CAB’) substantially reduced the fines imposed on 3 November 2009 on six express bus companies by the Competition Commission of Singapore (‘CCS’). Rajah & Tann’s Competition and Antitrust Practice acted for four of the appellants and managed to have the financial penalties imposed on them by over 40%. Whilst the CAB upheld the CCS decision on the liability of the undertakings for their participation in two price-fixing agreements, the CAB agreed with the Appellants that the financial penalties imposed on them had been wrongly evaluated by the CCS, which had not used a proper market definition in that regard. The CAB further reviewed the amount of the financial penalties in light of the relevant markets affected by the infringements.

Two Airline Alliance Agreements Notified To The Competition Commission Of Singapore (‘CCS’)

In 13 January 2011, All Nippon Airways, Continental Airlines and United Airlines applied to the CCS for a decision that their proposed JV agreement would not breach the Competition Act. Under the JV agreement, the 3 airlines agreed to cooperate on a number of transpacific routes, by jointly setting rates, schedules and capacity. This notification follows on the heels of another recent notification on 6 December 2010, regarding an alliance agreement between Japan Airlines and American Airlines also for the closer integration of their transpacific passenger air services. In the two instances, parties argue that the planned alliances would result in Net Economic Benefit and, therefore, are exempt from the prohibition of anti-competitive agreements. On 7 April, the CCS has cleared Japan Airlines and American Airlines’ alliance on the grounds of Net Economic Benefit. The CCS has yet to issue a decision on All Nippon Airways, Continental Airlines and United Airlines’ application. Notifications regarding airlines alliances are not new in Singapore: in 2006, the CCS issued two Decisions, both of which were handled by Rajah & Tann, on such agreements, one regarding a co-operation between Qantas and Orangestar, and the other between Qantas and British Airways; both were approved on the basis that they resulted in a Net Economic Benefit to Singapore.

China’s State Administration Of Industry And Commerce (‘SAIC’) Takes Action Against Concrete Manufacturers For Market Sharing

In February 2011, the SAIC released publicly its enforcement decision against 16 concrete manufacturers and a trade association (‘Association’) in Lianyugang City for having entered a monopoly agreement in breach of the Anti-Monopoly Law (‘AML’). In this case, the SAIC delegated its power to the Jiangsu Administration for Industry and Commerce (‘JAIC’) pursuant to the AML and its procedural regulations. The JAIC found that the Association had facilitated the coordination of its members to enter into an agreement prohibiting them from dealing with construction companies without first informing the Association. The agreement also allocated market shares to the 16 members for the purposes of dividing the market in Lianyugang City, and provided for penalties on the members for non-compliance.  The JAIC fined the Association RMB 200,000 and ordered it to cease its infringing conduct. The cooperation of the Association was taken into account in determining the fine. Five of the manufacturers were also fined an undisclosed sum.

Huodong Submits Complaint Against Baidu For An Alleged Violation China’s Anti-Monopoly Law

In February 2011, Huodong, a Chinese internet search engine often likened to China’s Wikipedia, has filed a complaint with the SAIC against Baidu for abuse of dominance. Huodong claimed that Baidu had lowered the ranking of, or removed Huodong completely from Baidu’s online search results, such as to promote Baidu’s own ‘wiki’ services. Hudong proposed that Baidu be fined RMB 790 million and that it divest its online search engine from its other services. A similar action by Renren in 2009 against Baidu had failed because it failed to, inter alia, establish Baidu’s dominance.

Vietnam Air Petrol Company (Vinapco) Loses Appeal In Hanoi Court

In 2009, Vinapco was fined VND 3.3 billion by the Vietnam Competition Council for abusing its dominant position by refusing to continue to supply fuel to Jetstar Pacific Airlines with no objective justification. Vincapo appealed to the Hanoi’s People Court, on the grounds that, inter alia, in determining the penalty only its revenue from fuel supply (and not gross revenue) should have been taken into account. However, in early January 2011, the Court rejected the appeal, stating that the amount was fair and ordered Vinapco to pay the VND 3.3 billion fine.

Australia Allows Virgin Blue-Etihad Alliance

The Australian Competition and Consumer Commission (‘ACCC’), which is the primary enforcer of the Australian Competition and Consumer Act 2010 (‘CCA’) has granted authorisation for an alliance between Virgin Blue and Etihad Airways for five years. The airlines have agreed to cooperate on the pricing and the scheduling of services across their networks. However, they will not share revenue under the alliance. The key consideration for the ACCC in granting the authorisation was that the airlines were neither actual or likely potential competitors on any routes. Consequently, the alliance was unlikely to result in any anti-competitive detriment.

Federal Court Of Australia Fines Paper Price Fixing Club

On 28 February 2011, the Federal Court ordered Singapore based Asia Pulp & Paper Co Ltd (‘APP’) and a related Indonesian Company, PT Indah Kiat Pulp and Paper Tbk (‘Indah’) to pay penalties totalling AUD 4.2 million for fixing the price of photocopy paper and uncoated woodfree paper between 2000 and 2004. This follows a proceedings commenced by the ACCC in December 2006 against a number of foreign and local corporations and individuals.  APP was ordered to pay AUD 3.4 million and Indah was required to pay AUD 800,000 after admitting to their involvement in the so-called AAA Club meetings. According to the judge, the meeting ‘involved systematic, sophisticated and long-running cartel arrangements between the participants’. Earlier in January 2010, the Federal Court had already imposed fines totalling AUD 4 million on APRIL Fine Paper Trading Pte Ltd, another Singapore-based company, and APRIL Fine Paper Trading Australia Pty Ltd. Although none of the meetings occurred in Australia, the companies involved gave effect to their arrangements in their Australian pricing, which was enough to trigger the application of Australian competition laws.

ACCC To Oppose Acquisition Of P & N Beverages By Asahi

On 9 March 2011, the ACCC announced that it would oppose the proposed acquisition by Asahi Holdings (Australia) Pty Ltd (‘Asahi’) of P & N Beverages Australian Pty Ltd (‘P & N’). Asahi owns Schweppes Australia Pty Ltd, the second largest manufacturer of carbonated soft drinks and the largest manufacturer of cordial in Australia. P & N is the third largest manufacturer of carbonated soft drinks and cordial in Australia. Given that Asahi and P & N are vigorous competitors in the market for carbonated soft drinks and cordials, the ACCC is concerned that the proposed acquisition would remove P & N from the market, leaving Asahi and Coca-Cole Amtil as the only significant competitors. Further, although there are other major competitors in the cordial market, P & N has been successful in growing its market share through discounting and product innovation. Consequently, the removal of P & N would result in the lost of competitive constraint for Asahi’s cordial, allowing it to increase its price to the detriment of consumers.

ACCC Accepts Court Enforceable Undertakings From Dragon

The ACCC has accepted court enforceable undertakings from Dragon Alliance South Pacific Pty Ltd (‘Dragon’) after it admitted to engaging in resale price maintenance. Between August 2009 and December 2010, Dragon sent a copy of its online trading terms to four online retailers, prohibiting them from selling Dragon’s ski goggles, motorcross goggles and ski goggles below specified prices. The undertakings include (a) not restricting any retailers of Dragon products from setting its own prices for a period of three years, (b) sending a letter to each online retailer highlighting the concerns raised by the ACCC and replacing the agreement, and (c) establishing and implementing trade practices compliance training for its staff.

Thailand Office Of The Auditor General (‘OAG’) To Seek Clarification

The OAG investigation is seeking clarifications from CAT Telecom, the information and communications technology (‘ICT’) minister and the TOT Plc Board following concerns that the deal between True Corporation and Hutchison and the 3G network expansion bid requirements run afoul of the Trade Competition Act 1999 (‘Act’). The OAG states the True-Hutch contract seemed to be designed only for one bidder, while shutting out all others. This investigation follows complaints that the preliminary screening process for the 3G auction lacked transparency, where Ericsson of Sweden and ZTE of China were disqualified with no reasons given. The OAG had earlier sent a letter to the CAT Board and ICT minister asking why the state telecom enterprise hastily signed the contract with True without first determining a frequency price or laying out clear details. However, no answers were received and thus, another letter will be sent.

Competition Commission of Pakistan (CCP) Raids Associations In The Ghee And Oil Sectors

In February, the CCP raided the offices of the Pakistan Vanaspati Manufacturers Association (‘PVMA’) and Pakistan Edible Oil Refiners Association (‘PEORA’) as part of an investigation into an alleged price-fixing of ghee and cooking oil. The CCP decided to investigate the matter further to a Competition Assessment Study conducted by the CCP in the sector and CCP’s findings that each price increase in the sector was generally reported by newspapers as a ‘collective decision of all manufacturers or their association’.

Two Price-Fixing Decisions Issued By The Indonesian Competition Authority (‘KPPU’) Annulled By The Court

In February, the Central Jakarta District Court (‘Court’) annulled KPPU’s decision that 21 national palm oil producers had entered into a cartel arrangement in relation to both bulk and packed cooking oil within Indonesia. The Court decided that KPPU could not use indirect evidence such as similar price movement to accuse producers of infringing Indonesia Competition Law, as indirect evidence is generally not accepted under Indonesian Criminal Law and should, therefore, not be admitted in competition cases either. The KPPU has decided to appeal the decision on the basis that, most of the time, anti-competitive can only be established through indirect evidence. Hence, a prohibition from using such evidence will put competition law enforcement at risks.

The Court also annulled the decision by KPPU that 9 airlines had colluded to fix the price of a fuel surcharge. The Court found insufficient evidence of price-fixing and also highlighted that objective reasons could explain parallel movements in the fuel surcharge imposed by the 9 airlines on their customers. The fact that all the airlines bought their fuel from the same company was one of those.

KPPU Fines Oil And Gas Companies For Bid-Rigging

On 5 January 2011, KPPU fined Indonesian oil companies, PT Pertamina (‘Pertamina’), PT Medco Energi Internasional (‘Medco’) and PT Medco E&P Tomori Sulawesi (‘MEPTS’), and Mitsubishi Corporation from Japan (‘Mitsubishi’) a total of IDR31 billion for conspiring to ensure that Mitsubishi would emerge as the winner of a competitive tender for the Donggi-Senoro LNG Project in Sulawesi (‘Project’). Interestingly, the fines were imposed both on the tenderees, Pertamina, Medco and MEPTS and the bidder, Mitsubishi.

Competition Commission Of India (‘CCI’) Finds In Favour Of Indiabulls Financial Services Limited (‘IFLS’)

On 22 March 2011 the CCI decided upon a complaint by Yashoda Hospital and Research Centre Ltd against IFLS alleging that IFLS’ practice of charging foreclosure rates and pre-payment penalties contravened the Competition Act. In particular, Yashoda Hospital argued that IFLS’ practices contravened Section 3 and/or Section 4 of the Competition Act. The complaint alleged that the levies and charges prevented borrowers from switching over to other banks and financial institutions offering lower rates, as borrowers would have to pay to IFLS to switch. The Director-General (‘DG’) was charged with the investigation. After reviewing various Supreme Court decisions, prevalent international practices as well as guidelines issued by the Reserve Bank of India, the DG came to the conclusion that the real motive behind the levies and charges is (a) to deter or limit competition among banks / financial institutions (b) to create a barrier for the existing customers who wish to switch over and (c) to enhance fee based incomes. Next, the DG defined the relevant market as that for the provision of mortgage/ housing / home loans in India and found that IFLS had a market share of only 4.88%. Given the low market shares and the resulting lack of market power, the DG found that no abuse of dominance was possible in this case. In other words, there was no violation of Section 4. The CCI agreed with the DG’s findings on this front. However, the CCI disagreed with the DG’s findings with regards to the Section 3 violation (anti-competitive agreements) as no evidence and/or proof of any anti-competitive agreement or collusion was presented by the DG.

CCI Launches Investigation Into Honda, Hyundai And Volkswagen

In March 2011, the CCI started an investigation into the practices of three international car manufacturers relating to the method of sale and the prices of their spare parts. In particular, the CCI appears to be investigating whether the car manufacturers have engaged in any anti-competitive practices by restricting the sale of their spare parts to authorized service centres only and sometimes requiring customers to get their vehicles repaired at the authorized service centres. However, there is no official statement on the status of this investigation at this point in time.

Legislation / Regulation

China Introduces New Competition Law Regulations

In early January, China’s National Development and Reform Commission (‘NDRC’), as well as the SAIC, each issued a set of regulations which further clarify the way they will interpret and apply the Anti-Monopoly Law (‘AML’) with respect to anti-competitive agreements and abuse of dominance, and provide illustrations of the types of conduct that would amount to an infringement of the AML. Notably, the new regulations also set out the details of their leniency regimes, i.e. the conditions under which immunity or a reduction of fines can be granted to undertakings disclosing the existence of a cartel or providing information thereof. The regulations took effect on 1 February 2011. For more information, please refer to our February 2011 Client Update which deals with the new regulations in more detail.

Appointments To The Malaysian Competition Commission (‘MCC’)

The Chairman and five members of the MCC have been appointed by the Malaysia Prime Minister. The four members representing the Government, however, remain to be appointed. Former Chief Judge of Malaya and Pro-Chancellor of the University of Malaya, Tan Sri Siti Norma Yaakob was appointed Chairman of the MCC whilst the five members, who have been selected for their knowledge and expertise in commerce, economics, law, or competition and consumer protection are as follows: (i) Datuk Dr Michael Yeoh, the Chief Executive of the Asian Strategy and Leadership Institute and a member of the National Economic Consultative Council, (ii) Datuk Dr Sothi Rachagan, Vice President of the Nilai International College, (iii) Mr Ragunath Kesavan, the Malaysian Bar Council immediate past President, (iv) Professor Datin Dr Hasnah Haron, Dean of the Graduate School of Business, Universiti Sains Malaysia (USM), and (v) Businessman Abd Malek Ahmad.

The MCC is the enforcement body of the Malaysian Competition Act, which will be in force on 1 January 2012. The first task of the MCC will be to issue Guidelines setting out the way the MCC will interpret and implement the Competition Act.

New Legislation For Anti-Competitive Conduct In Australia

On 1 January 2011, the Trade Practices Act 1974 (‘TPA’), which notably used to govern all anti-competitive conduct in Australia, became the Australian Competition and Consumer Act 2010 (‘CCA’). The core competition law provisions, which were previously in the TPA are contained in Part IV of the CCA. Apart from the original provisions in the TPA, additional prohibitions have been created in relation to anti-competitive conduct in the telecommunications industry and a regime for access to essential facilities has been created, which are in Part IIIA of the CCA. The regime is now expedited, following criticisms by access seekers that under the previous regime, the declaration process was too long and susceptible to abuse by infrastructure owners.

India Introduces Merger Control Regime

On 4 March 2011 the Government of India notified Sections 5 and 6 of the Competition Act. However, these sections will be implemented only from 1 June 2011. Under India’s merger regime, a merger and/or acquisition becomes notifiable within 30 days of certain ‘trigger-events’ such as when the transaction receives approval by the board of directors of the enterprises concerned or when an agreement, or other document, for acquisition is executed. Unlike Singapore, where merger clearances are voluntary, India has a system of mandatory notification ie if a merger qualifies for notification based on certain thresholds as set out below, it must be notified to the Competition Commission of India. However, by another notification also dated 4 March 2011, the Government of India has exempted certain enterprises from the ambit of Section 5 for a period of 5 years. This exemption applies to an enterprise if its control, shares, voting rights or assets are being acquired and if it has assets not exceeding 250 crores (S$70.5 million) in value. The CCI has also released draft merger guidelines that, once finalized, will help business to better understand their obligations and the requirements under India’s Competition Act. The draft merger guidelines are currently undergoing public consultation.

EUROPE

Heavy fines continued to be imposed in various cartel cases whilst a number of raids have been carried out by the European Commission (‘EC’) and/or national competition authorities throughout Europe. Interesting decisions have also been published by various European competition authorities in relation to information exchanges between competitors, either directly or indirectly through third parties like trade associations for instance. On the regulatory front, the EC Horizontal Guidelines which set out how the EC assesses agreements between competitors under the prohibition of anti-competitive agreements have been published in the Official Journal.

Cases

Airlines Cooperation Agreements / Mergers Under European Commission (‘EC’) Scrutiny

The EC has started investigations into the code-share agreements entered into between Lufthansa and Turkish Airlines on the one hand and between TAP Portugal and Brussels Airlines on the other hand. Whilst the EC generally found that code-share agreements result in overall benefits to consumers, the EC is concerned that this might not always be the case. In particular, the EC is worried that the code-share agreements under investigation, which enable the airlines to sell seats on each others’ flights on routes where both companies operate their own flights between their own hub, i.e. ‘parallel hub-to-hub code-sharing’ may distort competition on routes where the carriers should, normally, be competing. On another note, the EC blocked the merger between the two main Greek carriers, Aegean Airlines and Olympic Air, as the merger would have resulted in a quasi-monopoly on the Greek air transport market, with no likely new entrant being able to exert any realistic competitive pressure on the merged entity.

Investigations Launched By The EC In Multiple Sectors

Over the last four months, the EC has started investigations in a number of diverse industries, including, inter alia:

The bank industry: on 29 April 2011, the EC has opened two investigations in relation to the Credit Default Swaps (‘CDS’), which are ‘derivatives originally created to provide protection against the risk of default’. One of the investigations relates to a possible anti-competitive agreement or collective abuse of dominance between the 16 most important CDS’s dealers (which are 16 banks) to only provide the financial information on CDS to one designated provider of such information to the market, Markit. The other investigation seeks to assert whether there is an anti-competitive agreement in place between 9 banks (including, Barclays Bank, Citigroup. Credit Suisse Group, Deutsche Bank. Goldman Sachs Group, Bank of America Corp.) to only use one designated company, ICE, as a clearing house, making it difficult for other clearing house to enter the market.

The telecoms industry: in January 2011, the EC has started an investigation into a possible agreement between the Spanish and the Portuguese main telecoms companies, i.e. Telefonica S.A. and Portugal Telecom SGPS S.A. The two operators co-owned Vivo, a telecom joint-venture in Brazil, until 2010, when Telefonica acquired Portugal Telecom’s stake in Vivo to become the sole controller of Vivo. The EC believes that the SPA between the two operators in relation to Vivo included an agreement that each operator would not compete in the other’s national market.

The pharmaceutical industry: the EC is investigating the agreement between two pharmaceutical companies, Teva and Cephalon to settle their patent infringement disputes. The EC regularly monitors patent settlements entered into between pharmaceutical companies which hold patent rights on medicine they have originated (the ‘originator companies’) and pharmaceutical companies which develop competing generic drugs (the ‘generic companies’). Such settlements tend to include an agreement by the generic company (which allegedly infringed the originator’s patent’s rights) not to commercialize the generic medicine before an agreed period of time.

The e-books publishing sector and the truck industry were raided by the EC on suspected anti-competitive agreements. In the two instances, the raids carried out by the EC follow similar investigations carried out in the United Kingdom by the Office of Fair Trading (‘OFT’). At this stage, there are no detail on the exact scope of the investigation.

Fines Of Close To €270Million Imposed By The EC On 17 Producers Of Prestressing Steel

On 4 April 2011, the EC fined 17 producers of prestressing steel, i.e. steel wires used with concrete by the construction industry to make, foundations, bridges or balconies. The EC unveiled that for almost twenty-years, the producers fixed individual quotas and prices, shared markets and allocated customers through a system of ‘national co-ordinators and bilateral contacts’. The EC found evidence of more than 550 cartel meetings. These meetings often took place on the fringe of official trade meetings, all over Europe.

Washing Powder Producers Fined Over €315Million By The EC

Procter&Gamble and Unilever were fined for fixing the prices of power detergents used in washing machines for over three years. Henkel, the third party to the cartel escaped any financial penalty as it disclosed the cartel to the EC and, therefore, benefited from full immunity under the EC’s leniency programme.

UK OFT Holds Information Exchange Between Insurers Through The Use Of A Market Analysis Tool Anti-Competitive

On 13 January 2011, seven insurance companies and two IT software and service providers had provisionally agreed to limit the data they exchange between them due to competition law concerns raised by the OFT. An OFT investigation had identified a risk of price coordination among motor insurers utilising a specialised market analysis tool called ’Whatif? Private Motor’, which allowed insurers to access pricing information supplied by other competing insurers in addition to information they supplied to brokers. As a form of settlement, the companies agreed to only have access, via the analysis tool, to anonymous, aggregated and current (rather than future) pricing information. The OFT will monitor the effect of the undertakings proposed by the insurance companies.

UK OFT Fines RBS GBP28.59 Million For Providing Sensitive Commercial Information To A Competitor

In January 2011, the OFT issued a decision that Royal Bank of Scotland (‘RBS’) and Barclays Bank had engaged in anticompetitive practices in relation to the pricing of loan products to large professional services firms. Further to a leniency application filed by Barclays, the OFT found out that some individuals in RBS’s Professional Practices Coverage Team had informally disclosed specific confidential and commercially sensitive future pricing information to their counterparts at Barclays and that Barclays used this information for the pricing of its own financial products. The information was provided essentially during social, client or industry events. Barclays benefited from immunity of fines whilst RBS was imposed a fine of GBP28.59 million.

Spanish Antitrust Regulator (‘CNC’) Imposes A Total Fine Of Over €50million On Hair Care Companies And The Spanish Perfumery And Cosmetics Association (‘STANPA’)

Further to a leniency application filed by Henkel, the CNC found that for almost twenty years, the companies, all members of the STANPA, had exchanged very detailed information on individual prices and quantity of professional haircare products, under the aegis of their trade association, STANPA. The CNC concluded that such exchange of detailed current and future information allowed the members of the association to get a precise picture of the current and future strategies of their competitors, thereby appreciably distorting competition in the market. STANPA was imposed a fine of €900,000, whilst L’Oréal España was imposed a fine of €23,201,000. Henkel was granted immunity under the Leniency programme in place in Spain.

Legislation / Regulation

EU Publishes Revised Guidelines On The Assessment Of Agreements Between Competitors (‘Horizontal Guidelines’)

In its revamped ‘Guidelines on the applicability of the Article 101 of the TFEU to horizontal co-operation agreement’ (‘EC Horizontal Guidelines’), which were published on 14 January 2011, the EC dedicates a whole chapter to information exchange between competitors. In issuing the new set of Horizontal Guidelines, the EC highlighted that this is ‘the first Commission document to give clear and comprehensive guidance on how to assess the compatibility of information exchanges with EU competition law and will therefore play a significant practical role for businesses and their legal advisors’. Notably, the Horizontal Guidelines expands on the factors the EC takes into account in deciding whether an information exchange between competitors is pro- or anti-competitive,  namely: (i) The market structure, (ii) The nature of the information exchanged – including whether the information is already in the public domain, whether the information is individual or aggregated, and whether the data is historic, recent or future, (iii) The way the information is shared and in particular whether the information is shared with customers, and (iv)  The frequency of the exchange of information.

AFRICA

Cases

South Africa Competition Appeal Court Overturns Competition Tribunal’s Ruling In Of Netstar (Pty) Ltd And Others Vs Competition Commission South Africa And One Other

Altech Netstar (‘Altech’) has successfully appealed the Competition Tribunal’s (‘Tribunal’) ruling that Altech contravened Section 4(1)(a) of the Competition Act No. 89 of 1998 (‘Act’) which prohibits anti-competitive agreements or concerted practices between undertakings. The Competition Commission’s (‘Commission’) alleged that Altech had engaged in anti-competitive conduct in the vehicle tracking industry. Altech had joined a Vehicle Security Association’s (‘VESA’) sub-committee which handled stolen vehicle recovery (‘SVR’). To become a member of this sub-committee, providers of SVR devices had to adhere to certain standards and criteria implemented by the sub-committee with respect to their tracking device. One of the criteria was a ‘performance criteria’, which required that the SVR supplier have 3,000 customers before he could become a member of, and be accredited by, VESA. Subsequently, the South African Insurance Association (‘SAIA’) decided that insurance policies would only apply where vehicles were equipped with SVR devices accredited by VESA. As a result, newcomers were allegedly impeded from entering the industry as, in particular, they would not be able to meet the performance criteria. The initial complaint against Altech by the Commission was upheld by the Tribunal. Subsequently, the Competition Appeal Court (‘CAC’) overturned the ruling on appeal and held that there was no infringement of Section 4(1)(a) of the Act as the Commission did not produce any evidence to show that the standards had impeded any potential entrant into the market. In consequence, the CAC set aside the Tribunal’s ruling with costs.

AMERICAS

Cases

Executives Of Iowa-Ready Mix Concrete Faces Jailed

On 8 February 2011, two executives of ready-mix concrete companies in Iowa were sentenced for their participation in price fixing conspiracies in violation of the Sherman Act. The conspiracies related to the bidding and sale of ready-mix concrete in Iowa and neighbouring states. Mr Steven Keith VandeBrake, the former sales manager of GCC Alliance Concrete Inc and President of Alliance Concrete Inc, was sentenced to imprisonment for 48 months and was also ordered to pay a criminal fine of US$829,715.85. Steven was charged with three counts of felony as he was allegedly involved in three separate conspiracies with three separate buyers. In particular, Steven was found to have engaged in discussions with competitors on bids for selling ready-mix concrete and submitting rigged bids at collusive, noncompetitive prices in Iowa. Steven was also found to have accepted payments for selling ready-mix concrete at predetermined prices and to have discussed and agreed on annual price lists. Mr Kent Robert Stewart, president of Northwest Ready Mix and Great Lakes Concrete, was charged with one count of felony for conspiring with Steven for the bidding and sale of concrete. He was sentenced to imprisonment for a total of one year and a day and was ordered to pay a criminal fine of US$83,427.09.The third executive, Mr Chad Van Zee, president of Van Zee enterprises, pleaded guilty to his charges and is currently awaiting sentencing.

Another Water Freight Company Bites The Dust

On 24 February 2011 another company involved in the water freight services cartel has agreed to plead guilty for its role in fixing prices in the coastal water freight transportation industry. Other members of this conspiracy were taken to task in previous years, including the imprisonment of Mr Peter Baci, who in January 2009 was sentenced to 4 years imprisonment and a US$20,000 fine. The conspiracy involved the fixing of prices for water freight services from 2002 to 2008 between US and Puerto Rico. The investigation, which began in 2008 with the service of search warrants and a grand jury subpoena on Horizon Lines ended in a settlement offer of US$45 million. If accepted by the Court, Horizon Lines will be paying this amount over a period of 5 years. Reports suggest that Horizon Lines has also entered into a settlement agreement with the government of Puerto Rico and the indirect purchasers of its services. The indirect purchasers claim, in a private action, that they were subjected to higher prices and inflated rates for the importation of goods into Puerto Rico and that these higher prices were a direct result of the price fixing conspiracy. The settlement amount is to the tune of $1.8 million and is subject to court approval. Market reports show that Horizon Lines posted a total loss of US$52 million in light of the antitrust investigation and resulting private actions.

Texas Hospital Settles With US Department Of Justice In An Investigation For Monopolistic Behaviour

On 25 February 2011, the US DOJ reached a settlement with the United Regional Health Care System of Wichita, Texas in an investigation concerning a traditional unilateral conduct by a dominant entity. The dominant entity, United Regional, is a private nonprofit corporation engaged in the provision of inpatient and outpatient medical services in Wichita, Texas. Based on market studies conducted by the DOJ, United Regional’s market share for acute-care inpatient hospital services was approximately 90% and its market share for outpatient surgical services was more than 65%. The high market shares, the fact that certain procedures, such as cardiac surgery, obstetrics and high-level trauma care, were only provided by United Regional and that its per day rate for inpatient hospital services sold to health insurers was 70% higher than its competitors raised serious antitrust concerns. The DOJ found that United Regional harmed its competitors by using its dominant position in the market. In particular, it prohibited health insurers from contracting with United Regional’s competitors. If the insurers did contract with United Regional’s rivals they were retaliated against by having to pay higher rates. The settlement agreement with the DOJ is aimed at eliminating these issues as it requires United Regional to no longer place any prohibitions on insurers and to not retaliate against insurers if they do contract with rivals. The settlement agreement will become enforceable once it is accepted by the Court.

Canada Brings Divestiture In Novartis – Alcon Merger To A Close

On 10 March 2011, the Canadian Competition Bureau has brought the divestiture process in the Novartis-Alcon acquisition to a close. In this transaction, Novartis acquired a majority control, of about 77%, in Alcon in a two step purchase agreement with Nestlé. The Canadian Competition Bureau, after consulting with its US and European counterparts, approved the merger subject to certain conditions. These conditions arose as the acquisition was held as being likely to result in a substantial lessening of competition for the supply of certain products, viz injectable miotics, ocular conjunctivitis drugs and multi-purpose solution contact lens cleaners. In order to eliminate these anti-competitive concerns, the Bureau approved Laboratoires Théa SAS as the acquirer of Solocare Aqua (a multi-purpose solution contact lens cleaner) and Zaditor (an ophthalmic anti-allergy agent), while Bausch & Lomb has already been approved as the acquirer for Micohol (an injectable miotic). The acquirers will take over the assets as well as all relevant licenses for these products. The divestiture is expected to close by 31 March 2011.

MAURITIUS

Cases

Mauritius Competition Commission Investigates Provision Of Phone And Internet Services As A ‘Bundled Package’

On 21 February 2011, the Mauritius Competition Commission (‘MCC’) announced that it is investigating the provision of high-speed internet access, TV, international calls and other services as a ‘bundled package’ by Mauritius Telecom. This investigation is being carried out under the monopoly provisions, ie Section 46, of the Competition Act. Mauritius Telecom, which is a group of companies comprising Mauritius Telecom Ltd and four subsidiaries, claims to be the primary provider of voice, mobile, Internet and data communications services in Mauritius. Under Section 46(1) of the Competition Act, a monopoly situation exists if 30 per cent or more of any goods or services are supplied, or acquired on the market, by one enterprise. This is a very low threshold for monopoly power when compared with other jurisdictions. However, under Section 46(2) a monopoly situation will only be taken to task if the MCC has reasonable grounds to believe that the monopolistic enterprise has ‘the object or effect of preventing, restricting or distorting competition’. If the MCC finds a violation in this case, it can only require Mauritius Telecom to sell a portion of its assets or businesses, or require behavioural changes. Financial penalties under the Act are limited to anti-competitive agreements between competitors.

For more regulatory law updates follow me on Twitter: @CanadaAttorney

Comments are closed.