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• On November 8, the European Commission re-adopted a decision on a cartel in the steel beams sector, and fined Arcelor Luxembourg SA (formerly Arbed SA), Arcelor International SA (formerly TradeArbed SA), and Arcelor Profil Luxembourg SA (formerly ProfilArbed SA) a total of €10 million for allegedly participating in a cartel in steel beams, in violation of Article 65 of the European Coal and Steel Community (ECSC) Treaty, and Article 81 of the EC Treaty.  The Commission alleged that the companies fixed prices, allocated quotas, and exchanged confidential information in the steel beams industry covering the whole of the European Single Market between 1988 and 1991.  The re-adoption follows a judgment of October 2, 2003, by the European Court of Justice, where the Court annulled the European Court of First Instance’s judgment and, on procedural grounds, the Commission decision, insofar as it concerned Arbed SA. In fixing the fine, the Commission took into account the size of the EC market for the product in 1990, the last complete year of the infringement, the duration of the cartel, and the size of the firms involved.  Under normal circumstances, the fine would have been at least €20 million, plus an increase for the duration.  However, the Commission considered that it had already taken a position on the amount of the fine for Arbed SA in its 1994 decision, which the Court of First Instance reduced to €10 million in its March 11,1999, ruling.

   

• On November 16, the European Court of First Instance (CFI) dismissed an appeal by Peróxidos Orgánicos (PO) against a fining decision of the European Commission for its alleged participation in an illegal cartel in the organic peroxides sector.  The CFI dismissed the appellant's claims that the Commission was time barred from imposing a penalty, and had been treated unequally by the Commission.  In December 2003, the Commission imposed fines totaling €70 million on a number of companies for their alleged participation in a price-fixing, and market-sharing cartel in the European market for organic peroxides. PO was fined €0.5 million for its alleged role in a sub-arrangement by which the cartel was implemented in Spain.  The Commission began its investigations in April 2000, following a leniency application by one of the cartel participants, and sent formal requests for information to the main cartel participants (not PO) early in 2002.  Formal proceedings were launched, and a statement of objections was served on PO on 17 June 2003.  PO lodged an action with the CFI claiming that the proceedings against it were time barred as its participation in the cartel had ended more than five years before the first actions were taken by the Commission. The CFI held that there was no evidence from the other alleged cartel participants that PO had ceased its involvement at the beginning of 1997, or had stated its intention to cease involvement.  On the contrary, the CFI held that the Commission's evidence showed that the PO continued to participate after January 1997. In addition, PO neither told its corporate shareholders nor the other participants of its alleged intention to distance itself from the alleged cartel.  The CFI held that PO's arguments that the other participants knew of its withdrawal and continued without it were mere assertions, which were not backed by the evidence of the other parties.  Similarly, the CFI dismissed explanations provided by PO as to how the cartel continued to have information relating to its sales data, and market share despite its alleged withdrawal.  Currently, the EC limitation periods for the imposition of fines and periodic penalties are set out in Regulation 1/2003. Under Article 25 of Regulation 1/2003, the limitation periods for fines, and periodic penalties, are 3 years for infringements relating to the provision of information or the conduct of investigations, and 5 years for all other infringements.

   

• On November 23, the UK's Office of Fair Trading ("OFT") held that an agreement between 50 of the UK's fee-paying independent schools to exchange detailed fee information was in breach of competition law. The OFT alleged that the schools concerned exchanged confidential information relating to their intended fee levels for boarding and day pupils through a survey known as the 'Sevenoaks Surveys' compiled for the academic years 2001-02 to 2003-04. The OFT's decision follows the announcement in May that the schools concerned had admitted exchanging information regarding their intended fee levels in breach of competition law.  The admission was made as part of an agreed resolution of an OFT investigation between the OFT and the schools.  The schools did not, however, make any admission that the agreement had any effect upon fees, and the OFT's decision did not make any such finding. With one exception, each school must pay a penalty of £10,000, reduced in the case of six of the schools by up to 50 per cent for leniency. The relatively low fine for each school reflects the exceptional circumstances of the case, including the fact that all the schools will make payments totaling £3 million into an educational charitable trust designed to benefit the pupils who attended the schools during the relevant academic years, and the schools' charitable status.  It is the first time the OFT has imposed penalties on charities, and sends out a message that competition law applies to all businesses enjoying charitable status, who should not assume the OFT will in future accept the payment of a relatively low penalty as appropriate.  John Fingleton, OFT Chief Executive, said: "The penalties imposed on the schools and the contributions that they will make to the charitable trust, represent a fair and proportionate outcome to this case, given the parties' charitable status and their acceptance that there has been a competition law infringement.  This is the first case where the OFT has imposed penalties as part of an agreed resolution, and demonstrates our willingness to consider innovative solutions in appropriate cases".

   

• On November 20, it was reported that the Korean Fair Trade Commission ("KFTC") fined 10 petrochemical companies KRW200bn, its largest-ever fine, for allegedly colluding to set the price of plastic products over a 20 year period. The KFTC alleged that the cartel participants had manipulated prices, and production quantities of polyethylene, and hard polyethylene since the late 1970s. The KFTC also alleged that the cartel participants drove up prices of their products when oil prices increases, but failed to lower them when oil prices decreased.

   

• On November 23, the European Commission confirmed that Microsoft had submitted a revised version of the Technical Documentation with a view to meeting the requirements of the Commission’s March 2004 Decision.  That Decision ordered Microsoft, among other things, to disclose, and license complete and accurate interface documentation which would allow non-Microsoft work group servers to achieve full interoperability with Windows PCs and servers.  The Decision required Microsoft to supply the relevant complete and accurate interface documentation within four months (i.e. July 2004).  In December 2004, the European Court of First Instance rejected a request from Microsoft to suspend the application of the March 2004 Decision. Microsoft subsequently committed to, and missed a number of deadlines for delivering complete and accurate specifications. The Commission decided on July 12, 2006, that should Microsoft continue to fail to comply with its obligations to (i) provide complete and accurate Technical Documentation of the interface information, and (ii) make that information available to licensees at a reasonable and non-discriminatory price, the amount of the daily penalty payment to which Microsoft could be subject would be increased from up to €2 million to up to €3 million per day with effect from July 31, 2006.

   

• On November 22, the European Commission confirmed sending a Statement of Objections to E.ON Energie AG alleging that the company had, intentionally or at least negligently, broken an official seal fixed by Commission officials on an office door to secure documents found in the course of an unannounced inspection carried out in May 2006.  The purpose of the inspection was to investigate suspected restrictions of competition and/or abusive behavior on the German electricity market.  The Statement of Objection is only a preliminary statement of the Commission’s position, and does not prejudge the final outcome of the investigation. Under Regulation (EC) 1/2003, the Commission has the power to seal any business premises, books or records for the period, and to the extent necessary for the inspection.  Where a seal is broken intentionally or negligently, the Commission may impose on the company responsible a fine of up to 1% of the total turnover in the preceding business year.

   

• On November 15, the Australian Competition and Consumer Commission ("ACCC") issued for public comment a draft guide to the formal merger clearance process (including the process for reviewing ACCC's clearance determinations), and the new merger authorization process.  Under the new merger clearance process, parties can apply to the ACCC for clearance in respect of proposed acquisitions of shares or assets.  If a clearance is granted by the ACCC, then Section 50 of the Trade Practices Act 1974, which prohibits anti-competitive acquisitions of shares or assets, does not prevent the acquisition in accordance with the clearance.  ACCC determinations in relation to merger clearance applications can be reviewed by the Australian Competition Tribunal.  Under the new merger authorization process, parties seeking authorization of proposed acquisitions that might be anti-competitive but which can be conferred protection from application of Section 50 on public benefit grounds, must now make such applications directly to the Tribunal. The ACCC has stated that the guidelines are designed to provide guidance to the business community, their advisers, and the public generally.  It outlines the approach that the ACCC proposes to take in assessing applications for formal clearance, and the requirements on applicants for merger clearances.  It also outlines the legislative requirements on parties wishing to apply to the Tribunal for authorization of proposed mergers, and acquisitions.

   

• On November 28, the Australian Competition and Consumer Commission revoked an authorization granted to the South Australian Mixed Business Association in 1979 which enabled it to publish, and circulate a price guide suggesting retail prices for grocery items to members.

   

• SAMBA has since changed its name to the State Retailers Association of South Australia which has continued to publish the price guide. ACCC Chairman, Mr. Graeme Samuel said, "While some members were likely to value the guide, and the assistance it provided in setting retail prices, it did not result in a public benefit that would outweigh the anti-competitive detriments from a reduction in price competition.  Price guidance by trade associations is less likely to raise competition concerns where they involve a 'bottom up' approach and identify various operating costs but which allow members to individually determine margins and set prices". The ACCC stated that this was not the case with the SRA's price guide.

Authored By:

Neil Ray

(415) 774-3269

nray@sheppardmullin.com