Posted on May 3, 2006 by Sheppard Mullin
- On March 6, Mr. J. P. Lambe, Chairman of Ireland's Connacht Oil Promotion Federation was given a six-month suspended sentence by Dublin's Circuit Criminal Court, and ordered to pay a €15,000 (US$18,000) fine over his involvement in a home-heating oil cartel. This is the first criminal conviction for a cartel offence in Europe. Judge Katherine said Mr. Lambe had participated fully in this criminal activity, and was an experienced businessman. She noted that, "[W]ithout his talent, acumen and knowledge, this kind of distortion could probably not have functioned at any significant level." The court heard that, as a result of the cartel's price fixing, customers were paying perhaps 10% more than they would have otherwise, and lost a total of €4.4 million (US$5.3m). A total of twelve companies have been convicted for involvement in the cartel.
- On April 12, the European Commission published a preliminary report which claimed that European businesses and consumers do not benefit from a fully competitive Internal Market in payment cards. The European payment cards industry is sizeable, and provides the means for a significant part of consumer payments in Europe. A total of 23 billion card payments are made annually in the EU with an overall value of €1.35 billion (US$1.6 billion). The report, based on responses from market participants, claims several potential barriers to entry into payment card markets, such as technical obstacles and practices by banks and networks that may raise costs for entrants. The industry, consumers and other interested parties have ten weeks (until June 21, 2006) to submit their views and comments on the Commission's preliminary findings. If the preliminary findings are borne out by this consultation, the Commission will consider action under EC Treaty antitrust rules in individual cases.
- On March 21, the French National Assembly passed legislation which would require Apple to disclose information concerning its anti-copying technology for songs downloaded with iTunes. This would allow competing music players to play songs downloaded with iTunes. The copyright legislation, which will now go to the French upper house, also imposes the concept of “interoperability” on Apple’s rivals. The French law is a response to worries that the exclusive relationship between iPod and iTunes raised potential competition concerns. Apple responded by saying that the proposed law was “state-sponsored piracy,” and, “If this happens, legal music sales will plummet just when legitimate alternatives to piracy are winning over customers.”
- On April 5, the Financial Times reported that the UK's Serious Fraud Office had launched formal criminal proceedings against five generic drugs companies over the alleged price-fixing of medicines supplied to the National Health Service ("NHS"). Nine individuals will also be charged. Losses to the NHS resulting from the alleged price-fixing are alleged to be approximately £150m (US$262m) in a separate, but related, civil action already under way at the High Court in London. Philip Lewis, SFO assistant director, and the controller in charge of the drugs investigation, stated that the case was likely to have "a significant impact on the business culture of this country."
- On April 5, Qualcomm, a leading developer and innovator of Code Division Multiple Access, and other advanced wireless technologies, reported that the Korean offices of Qualcomm Korea, were visited on April 4 by officials of the Korean Fair Trade Commission ("KFTC") seeking information about the business dealings between Qualcomm and the three other companies. Qualcomm stated that the inquiry may be related to communications to the KFTC from a small Korean company with respect to Qualcomm 's distribution of mobile video software solutions that can be used in connection with Qualcomm 's chipsets for wireless phones. The KFTC has not said that the inquiry is related in any way to complaints lodged with the European Commission last year by six companies based outside of Korea.
- On March 30, the Canadian Competition Bureau concluded its examinations of high gasoline prices following Hurricane Katrina and allegations by independent retailers of predation and margin squeezing in the Canadian gasoline industry. Richard J. Taylor, Deputy Commissioner of Competition, Civil Matters Branch, stated: “We have found no evidence of a national conspiracy to fix gasoline prices. Severe damage to North American refining capacity caused by Hurricane Katrina forced gasoline prices to spike in September 2005. This dramatic reduction in supply forced wholesale prices to jump, resulting in higher prices at the pumps.” The Bureau also found no evidence that pricing resulted from an attempt by a group of majors to discipline or eliminate the independent retailers in Ontario and New Brunswick, either through predation or margin squeezing.
- On April 4, the European Commission sent letters of formal notice to 17 Member States for failure to follow or apply the EU gas and electricity directives in liberalizing their energy markets. In the Commission’s view, "[T]he sustainable, competitive and secure supply of energy will not be possible without open, competitive energy markets that enable European companies to compete Europe-wide rather than just being national champions." The Commission identified various concerns such as: the lack of legal unbundling and insufficient managerial separation between electricity and gas transmission and distribution system operators; discriminatory third-party access to networks and insufficiently transparent tariffs; and, the preferential access given in the case of certain long-standing electricity or gas contracts.
- On April 7, the New Zealand High Court imposed record penalties on Koppers Arch Wood Protection (NZ) Limited, and its Australian parent company, Koppers Arch Investments Pty Limited, after the companies admitted participating in a cartel in the wood preservative chemicals industry between 1998 and 2002. The affected part of the industry was worth an estimated NZ$35 million in 2002 (US$21m). The total penalty imposed on the Koppers Arch companies is more than double the previous highest penalty for cartel behavior in New Zealand. The NZ$3.6 million (US$2.2m) comprised NZ$2.85 million (US$1.75m) for price-fixing, and NZ$750,000 (US$461,000) for attempts to exclude a new entrant competitor from the market. $100,000 in costs is also payable to the Commission. Commerce Commission, Chair Paula Rebstock, stated: "This record penalty is a tremendous result and should make others think twice before engaging in this kind of illegal behavior."
- On April 5, it was reported that Finish paper-manufacturer, Stora Enso, had received a letter from the Finnish Competition Authority ("FCA") concerning alleged price collaboration in raw wood procurement in Finland between 1997-2004. For two years, the FCA has been investigating possible cartel behavior between three paper manufacturers - Stora Enso, Metsaeliitto, and UPM Kymmene - following information provided by UPM Kymmene under a leniency application. Following submissions by the companies under investigation, the FCA can refer its findings to the Finnish Market Court, where the companies can be fined up to 10% of their annual turnover.
- On March 30, New Zealand's ANZ National Bank Limited, pleaded guilty in Auckland District Court to forty-five charges of breaching New Zealand's Fair Trading Act by failing to properly disclose fees charged for overseas currency transactions on its credit cards. New Zealand's Fair Trading Act provides for accurate information to be given to consumers, and in sentencing, Judge Hubble said that, [T]here is even more of an obligation [for financial organizations] to ensure that there is openness and frank disclosure, particularly in relation to fees." ANZ National Bank was fined a total of NZ$1.325 million (US$0.8m), and agreed to pay NZ$10 million (US$6.2m) in refunds to customers who made foreign currency transactions on their credit cards. The fine is the highest ever imposed under New Zealand's Fair Trading Act.
- On March 17, the Australian Competition and Consumer Commission ("ACCC") published a consumer guide to cartel conduct. Mr. Graeme Samuel, Chairman of the ACC stated, "Cartels are a scourge on our economy. They can cause prices to be inflated for many goods and services that people buy everyday. Even when the victim of a cartel is a government department or another business, the higher costs will be passed on to taxpayers and consumers." The publication provides information about the four different types of cartel conduct: price fixing, market sharing, bid rigging, and output controls. Mr. Samuel also noted that by their very nature, cartels are secretive agreements ,and they can be difficult to detect: "The ACCC receives tip-offs from firms wishing to take advantage of the ACCC's Immunity Policy, but consumers can also play a role in the fight against cartels." He told consumers to watch out for: prices, discounts or rebates at a number of competitors all suddenly changing to be similar or identical; a sudden, unexplained rise in prices across a number of companies in an area; or, suppliers charging different amounts for a product in different geographic areas.
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