INTERNATIONAL HIGHLIGHTS
- On September 29, the European Commission adopted draft amendments to its Notice on Immunity from Fines and Reduction of Fines in Cartel Cases (the 2002 Leniency Notice). The proposed amendments take stock of issues that have arisen during the four years of application of the 2002 notice, and are in line with the European Competition Network’s (ECN) Model Leniency Program. These developments move towards a one stop leniency shop by harmonizing the procedure and requirements for leniency applications, to make it easier for companies to apply for leniency when it is not clear which authority will take the case forward. The changes to the Commission’s Notice also introduce a marker system, and clarify the information an applicant needs to provide to benefit from immunity as well as the conditions for immunity and reduction of fines. European Competition Commissioner, Neelie Kroes, said, “Cartels do severe damage to the European economy, and are serious violations of the competition rules. Effective action against cartels requires heavy sanctions to punish and deter and incentives to participants to report cartels. My colleagues in the ECN share my concerns about potential shortcomings in the current system and we are joining forces to deliver a European one stop shop model. The Commission Leniency Notice is a formidable and successful tool to detect and terminate cartels. These changes will make it even more effective”.
- On September 28, the European Commission launched a public consultation on a draft set of guidelines that clarifies the Commission’s current practice with regard to jurisdictional issues in merger control. The new draft Notice consolidates the existing texts and adapts them in the light of recent judgments of the European courts, of the new EU Merger Regulation adopted in 2004, and of the Commission’s case practice. The overall aim of the new Notice will be to give more precise and user-friendly guidance to parties involved in a merger, takeover or joint venture to establish whether the Commission is competent for an envisaged transaction and so whether a concentration must be notified to the Commission for clearance. The public consultation will be open until December 1, and the Commission has invited all interested parties to submit their observations within this time-frame.
- On September 20, the European Commission fined 30 companies a total of €314.7 million for allegedly participating in a copper fittings cartel, in violation of the EC Treaty’s ban on restrictive business practices (Article 81). Between 1988 and 2004, the Commission alleged that the companies fixed prices, discounts and rebates, agreed on mechanisms to coordinate price increases, allocated customers and exchanged commercially important and confidential information. Four companies had their fines increased by 60% because they allegedly continued their illegal arrangements after the Commission’s initial inspections. The investigation was prompted by an application for leniency lodged in January 2001 under the 1996 Leniency Notice. Subsequently, the Commission carried out unannounced inspections. Later, the Commission issued requests for information which triggered applications for reduction of fines by several undertakings. Competition Commissioner, Neelie Kroes, said, “We will not tolerate cartels and will take all measures to stamp them out. We will not only punish firms severely for cartel behavior, but also increase the fines for flagrantly continuing after a Commission dawn raid and for providing wrong or misleading information”.
- On September 11, the Attorney General of Canada laid criminal charges of obstruction and destruction of documents against a ventilation company employee in Laval, Quebec with respect to an ongoing Competition Bureau investigation. Joël Perreault, an appraiser with Les Entreprises Promécanic Ltée., was charged under Sections 64 and 65 of Canada's Competition Act with obstructing the course of an investigation and destroying documents during the execution of a search warrant at Promécanic. The Bureau alleges that between February 22 and March 1, 2006, Mr. Perreault removed and destroyed pages from his agenda that contained information relevant to the Competition Bureau’s investigation. The Competition Act contains provisions which protect the integrity of investigations and proceedings. Penalties for obstruction include a maximum fine of $5,000 or two years in prison, or both. In the case of destruction of documents, the penalties are a maximum fine of $25,000 or two years in prison, or both.
- On September 27, the European Court of First Instance (CFI) dismissed appeals by Archer Daniels Midland Co (ADM) and Jungbunzlauer AG (JBL) against a decision of the European Commission which fined them for participation in an alleged illegal price-fixing cartel in the citric acid sector. The CFI upheld the fines imposed by the Commission. In particular, the CFI rejected the appellants' reliance on the principle of ne bis in idem to claim that account should have been given to the fines imposed in the US or Canada. The CFI held that the aim of the US and Canadian laws is to protect competition in their markets, while the aim of the EU rules are to protect competition in the EU. Thus, the CFI held that the appellants failed to demonstrate that the Commission breached the principle of fairness by not taking into account related fines previously imposed in other jurisdictions. Further, the CFI dismissed claims that the fine had no deterrent effect because the conduct had already been sanctioned outside the EEA. The CFI held that the Commission is entitled to decide the level of fines in order to reinforce their deterrent effect. The object of deterrence relates to the conduct of undertakings within the EU or EEA. Therefore, the deterrent effect cannot be assessed by reference to the particular situation of the fined company.
- On September 13, the European Commission held that 8 suppliers and 6 purchasers of road bitumen in The Netherlands allegedly participated in a cartel from 1994 to 2002 to fix prices in violation of the EC Treaty competition rules’ ban on restrictive business practices (Article 81). A total of 14 companies were fined a total of €266 million. The bitumen suppliers and construction companies allegedly fixed the gross price of all road pavement bitumen sold in the Netherlands, and allegedly agreed uniform minimum rebates for the construction companies that were cartel members, and a smaller maximum rebate for all other road builders. The Commission held that this restricted price competition, and disadvantaged smaller road building companies. Two companies had their fine increased as they allegedly began, and led the cartel. A third company's fine was also increased for being a repeat offender. A fourth company's fine was also increased for allegedly having tried to obstruct the Commission’s investigation. Bitumen, a by-product of fuel production, is mainly used to make asphalt, binding other road surfacing materials together. This cartel covered all bitumen used for road construction in the Netherlands, a market valued around €62 million in 2002.
- On September 22, Barton Mines Corporation and Barton International Inc, two US companies operating in Australia, were ordered to pay penalties totaling AU$1.525 million by the Australian Federal Court after they admitted entering into an illegal market sharing arrangement for the supply of alluvial garnet in Australia. Alluvial garnet is a mineral used as an abrasive in the preparation of surfaces. The Federal Court declared that the two companies breached Section 45 of the Trade Practices Act by entering into a market sharing agreement by which the companies agreed to restrictions in relation to the geographic territories into which each would be permitted to supply alluvial garnet. Australian Competition and Consumer Commission Chairman, Mr. Graeme Samuel, commented, "This is a significant penalty for a contravention of Part IV of the Trade Practices Act which should serve as a warning to other companies which may try to collude and allocate markets between them. Whilst the Barton companies are overseas companies, when they are operating in Australia they are subject to the Act". Mr. Samuel added that, "The ACCC will apply the cartel provisions of the Act just as vigorously to foreign companies as it will to home grown cartel participants".
- On September 21, the French Competition Council endorsed the principle of consumer class actions for damages arising from anticompetitive conduct. The Conseil de la Concurrence stated that class actions can compensate the losses suffered by consumers "by restoring the balance of power between powerful companies, which are often large groups, and consumers, which are by nature isolated". Moreover, "[P]rivate actions, in general, and class action mechanisms, in particular, can contribute to strengthen deterrence in making the victim, and notably the consumer, a real player, and an ally of public authorities in the fight against anticompetitive practices". However, the French competition authority also stated that it would ensure that civil suits brought by consumers did not undermine its leniency program by "guarantee[ing] the confidentiality of the declarations made by the companies which benefit from leniency, so that they cannot be used in a civil procedure".
- On September 15, Ms Neelie Kroes, European Competition Commission, gave a speech to The Council on Foreign Relations in New York on developments in antitrust policy in the EU, and the US. She discussed recent developments in three particular areas – cartels, unilateral conduct, and private damages action. With respect to cartels, she explained that the Commission had created a dedicated cartel Directorate of around 60 officials, and had proposed new guidelines on fines would subject repeat offenders to a 100% fine increase. Despite significant differences in the legislation governing unilateral conduct, Ms. Kroes noted that US and EU enforcement approaches are convergent in a number of respects, for example, the competition rules are designed to protect competition not competitors, and large companies have a right to compete, and dominance alone is not itself a problem. She acknowledged that the EU is far behind the US in private damages actions but that the Commission had launched a Green Paper on private damages to discuss a number of fundamental issues. Ms. Kroes concluded by noting that the competition systems in the EU and US have more similarities than differences.
- On September 22, the Canadian Competition Bureau published an Information Bulletin on Merger Remedies in Canada. The Bulletin provides guidance to businesses and legal counsel on the objectives and general principles applied by the Bureau when it seeks, designs, and implements remedies to resolve competition concerns arising from proposed transactions.
To facilitate negotiated settlements between merging parties and the Competition Bureau, an outline of a consent agreement is included as an appendix to the Bulletin.
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