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• On February 7, the UK's Office of Fair Trading decided not to refer the anticipated acquisition by Boots plc of Alliance UniChem plc to the UK's Competition Commission provided that satisfactory undertakings to address the competition concerns arising from the supply of retail pharmacy services in certain localities in the UK are given. If the parties do not give such undertakings, then the transaction will be referred. Vincent Smith, OFT Competition Enforcement Director stated: "This merger raises the realistic prospect of a substantial lessening of competition in around 100 local areas where competition would either be eliminated altogether or reduced….However, Boots has offered divestment undertakings for all of these areas and the OFT is satisfied that these will address its concerns."

• On February 7, the European Commission announced that it had opened formal proceedings against the International Confederation of Societies of Authors and Composers ("CISAC"), and its individual national collecting society members, and had sent them Statements of Objections alleging that certain parts of the CISC model contract and its implementation in the European Economic Area infringe Article 81(1) of the EC Treaty. The model contract and its duplicates at bilateral level concern the collective management of copyright for every category of exploitation, for example, the broadcasting of music in a bar, a night club or via internet. The Statement of Objections concern only certain relatively new forms of copyright exploitation: internet, satellite transmission and cable retransmission of music. The Commission considers that certain aspects of the agreements with respect to these new forms of copyright exploitation might infringe the EC Treaty's prohibition of restrictive business practices (Article 81).

• On February 2, the UK's The Times newspaper reported that a ruling in a case before the European Court of Justice will make it easier for consumers to sue companies allegedly of price-fixing. The preliminary opinion of Advocate General Leendert Geelhoed in a case involving Italian insurers and policy holders who paid up to 20% more as a result of alleged price fixing by the companies, has suggested that those who paid the higher premiums have a legal right to sue for damages. Although the Advocate General's opinion is not binding on the Court, judgments often follow his opinion. The European Courts have previously upheld the legal right of consumers to sue for losses resulting from anti-competitive behavior. However, there has not to date been a successful precedent, and claimants are often deterred by the large litigation costs involved in launching an action. However, the European Commission is currently considering how to facilitate actions for damages caused by violations of EC Treaty competition rules, and published a Green Paper for public consultation last December.

• On February 1, the European Commission announced that Competition Commissioner, Neelie Kroes, met with Lakshmi N. Mittal, Chairman of the Board of Directors and Chief Executive Officer of Mittal Steel, in Brussels. Mr. Mittal explained his plans to launch a takeover bid for Luxembourg steel company, Arcelor. This proposed hostile takeover is generating certain political opposition, in particular in France, and the meeting, therefore, attracted massive media interest. A Commission statement noted that Mrs. Kroes had explained that the planned concentration would "probably" have to be notified to the Commission under the EC Merger Regulation. Following such a notification, the Commission would then assess whether there is likely to be any adverse impact on effective competition within the EU.

• On February 1, the President of the Court of First Instance ("CFI") dismissed the application for interim measures brought by Spanish energy company, Endesa, in its appeal against a decision of the European Commission finding that the public bid by its rival, Gas Natural SDG, to acquire Endesa, did not give rise to a concentration with a European Community dimension for the purposes of the EC Merger Regulation. Endesa had sought a temporary injunction from the CFI in an attempt to delay its takeover by Gas Natural, and argued that the Commission did not accurately calculate the combined parties' turnovers in the EU. Interim measures are only granted under EU law in urgent cases where it is necessary to avoid serious and irreparable harm to the applicant's interests. The President of the CFI held that any harm to Endesa remained hypothetical because it is still dependent on the making, and success of, Gas Nutural's public bid which has not yet been successfully completed.

• On January 31, EU Competition Commissioner, Neelie Kroes, reportedly sent a warning letter to Poland with respect to the country's attempt to block a merger between two Polish banks - UniCredit and HVB to form the largest bank by assets, and second largest by number of current accounts in Poland. The deal was notified to, and approved by, the Commission. The Polish Government is seeking to block deal based on UniCredit's breach of a prior privatization commitment. It responded by filing an appeal against the Commission's decision with the European Court of First Instance. Poland maintains that the European Commission, in assessing the impact of the merger on the Polish market, incorrectly defined certain product segments, and the impact of the merger on competitive conditions in Poland. It is only the second time a Member State has challenged a Commission merger ruling. A spokesman for the Commission said: "The Polish government had every chance to intervene at the time, but it didn't. Moreover, the Polish competition authority had the right to request the partial referral of the case to Warsaw - but it didn't."

• On January 26, various business newspapers reported that the latest draft of an antitrust law for China had prompted concern amongst business leaders and antitrust experts at the annual meeting of the World Economic Forum in Davis. The Wall Street Journal reported that western companies were most concerned that the law would allow for "trumped-up antitrust charges to chip away at their profitable patents." The draft contains regulations to ban intellectual property abuses, but does not include any interpretive guidelines. Also, paragraphs restricting governmental powers to impede competition have been eliminated from the draft law prompting fears that the new law might invite antitrust policies which protect state monopolies.

• On January 25, Microsoft issued a press statement announcing that it has decided to license all the Windows Server source code for the technologies covered by the European Commission's landmark antitrust decision in March 2004 decision. Microsoft considers that this "voluntary move" goes "far beyond" the terms of the European Commission's decision, and the legal obligations on it to provide technical specifications of its protocols. It stated that the proposed licenses will give software developers the ability to view the Windows source code in order to understand how to develop interoperable products. However, licensees will not be able to copy Microsoft's source code. In response, the European Commission stated that it will study Microsoft's announcement carefully once it has received full details. In December 2005, the Commission announced that it had sent Microsoft a statement of objections alleging non-compliance with the interoperability remedy and threatening to impose daily penalty payments. The decision as to whether Microsoft has fully and accurately complied with the 2004 decision rests with the Commission.

• On January 24, the European Commission cleared the proposed €3.1 billion acquisition of Reebok International Ltd ("Reebok") by adidas-Salomon AG ("adidas") of Germany. The Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area or any substantial part of it. The Commission's market investigation revealed that adidas and Reebok have slightly different brand and pricing positions. adidas is perceived as a professional, technically oriented brand with strong European roots. Reebok predominantly targets young people and women, is more a "leisure" brand, and has a stronger presence in American sports that are not excessively popular in Europe. Partly due to its different heritage, Reebok's image on the European markets is weaker than those of adidas or the worldwide leader Nike. Also, in terms of pricing, adidas is positioned in the medium to high price points, while Reebok is stronger in the low to medium price points.

• On January 20, Belgium telecom operator, Belgacom, confirmed that the offices of its mobile subsidiary, Proximus, had been raided by Belgium's antitrust authority following a complaint from rival mobile operators, BASE and Mobistar. It was reported that allegations concern Proximus's pricing policy towards its business customers. Proximus is alleged to have engaged in predatory pricing by selling to these customers at "unreasonably low prices", thus allegedly "falsifying competition."

• On January 18, the UK's Office of Fair Trading was heavily criticized by the House of Common's Public Accounts Committee as a "meek organization" that is too slow, too cautious, and fails to use its powers effectively. The Committee summoned the heads of the competition and consumer enforcement divisions following a report by the National Audit Office which criticized the OFT's investigations as too lengthy, too secretive with respect to the companies that it was investigating, and served by few well-qualified staff. John Fingleton, OFT Chief Executive, said that many cases took a long time to investigate because of the "litigation mentality" among businesses making them reluctant to provide information.

• On January 14, it was reported that the French antitrust authority, the Conseil de la Concurrence, issued a record amount of fines during 2005. In total, fines adding up to €754m (approx. $900m) were imposed on companies, representing a substantial increase over 2004's total of €45.9 ($55m). The fines imposed on three French mobile phone operators who were found guilty of allegedly price-fixing last November which totaled €534 ($638m), accounted for the largest share of last year's fines.

• On January 9, the Canadian Competition Bureau announced that Cascades Fine Papers Group Inc., Domtar Inc. and Unisource Canada, Inc., had each pleaded guilty in the Superior Court of Justice in Toronto to two counts of conspiring to lessen competition contrary to Section 45 of the Canadian Competition Act. Each company was sentenced to record fines of $12.5 million for their alleged part in the domestic conspiracy of carbonless sheets. A prohibition order was issued against the companies, and key personnel involved in the conspiracy will be removed from their positions in the paper merchant business. Sheridan Scott, Commissioner of Competition, said "Conspiracies of this nature destroy competition by interfering with private markets and hurt both business and consumers…These record fines reflect the serious nature of this criminal behavior and put corporate executives and employees on notice that they are accountable for their actions."

Authored by:
Neil Ray
415-774-3269
nray@sheppardmullin.com