International Highlights
On March 12, the UK's House of Lords (HoL) allowed an appeal by Ian Norris, former chief executive of the Morgan Crucible Group, against a decision of the High Court which had held that dishonest price-fixing is capable of amounting to the English common law offence of conspiracy to defraud and so is an extradition offence. The HoL remitted the case to a district judge to assess whether it would be proportional to grant an extradition request in relation to the secondary offences regarding Mr. Norris' alleged obstruction of the US criminal investigation into the cartel. The HoL held that in order for an offence to be committed, aggravating factors such as dishonesty, misrepresentation, fraud or violence must also be present and noted that there had never been a successful prosecution for being a party to, or giving effect to, a price-fixing agreement without the presence of such aggravating features. The HoL also considered the history of legislation dealing with agreements in restraint of trade. It considered that, historically, cartel agreements were not, of themselves, necessarily considered to act against the public interest. Although participation in a cartel could, in some cases, be penalized by civil remedies, it could not give rise to criminal sanctions. The HoL considered that the system of regulation whereby restrictive agreements were registrable appeared to have represented a regulatory, non-criminal code to deal with cartel agreements. It was, therefore, unlikely that Parliament could have intended that there should be an extra-statutory system involving criminal sanctions running alongside the regulatory system. However, the HoL disagreed with Mr. Norris's arguments that these offences were not extradition offences under the Extradition Act because it was not an offence under English law for him to conspire to obstruct a criminal investigation into price-fixing being carried out by a grand jury in Pennsylvania. The HoL held that price-fixing could have been combined with other elements that may have led to various offences, such as fraud. The exact outcome of an investigation could not have been determined when it was in progress. The fact that the investigation resulted in a charge of price-fixing alone was no reason to hold that it would not have been an offence under English law to obstruct the progress of an equivalent investigation by the appropriate body in the UK.
On March 28, in an opening speech to the Spring Meeting of the ABA's Antitrust Section, EC Competition Commissioner Neelie Kroes rejected US perceptions that European competition policies are anti-business. She argued that, although they have a different historical background, EU and US competition policies share the same goal of achieving competitive markets. She also highlighted some EU policy innovations, including the White Paper on private damages actions which the Commission will publish during April 2008. She explained the context of the EU and the development of EU competition policy, which has sought to merge 27 different economies, on a consensual basis within a comparatively short time scale. The complications arising from the nature of the EU does not mean that the Commission is anti-business or that its cases are decided on anything other than their merits. Commissioner Kroes considers that the EU and US systems are actually very similar. She stated that although they may not "tread the same path at the same pace", they are "heading in the same direction". She described how the EU and US have similar starting points and are working towards the same goal: competitive markets as a basis for prosperity. She added that both jurisdictions believe that competition, not competition policy, makes markets work and regulation should not be excessive.
On March 11, the European Commission announced that it has decided under Article 8(1) of the EC Merger Regulation to approve the proposed acquisition of the online advertising technology company DoubleClick, by Google. In November 2007, the EC opened an in-depth investigation into the merger. It was concerned that the merger could raise competition concerns in the markets for intermediation and ad serving in online. The EC's investigation found that Google and DoubleClick were not exerting major competitive constraints on each other's activities and could not be considered as competitors at the moment. Even if DoubleClick could become an effective competitor in online intermediation services, the Commission considered that it was likely that other competitors would exert sufficient competitive pressure following the merger. The Commission, therefore, considered that the elimination of DoubleClick as a potential competitor would not have an adverse impact on competition in the online intermediation advertising services market.
On March 11, the Japanese government authorities decided to submit a draft amendment to the Anti-monopoly Act to the Diet. The key points of the draft amendment are (i) the range of conduct for which the JFTC may impose surcharges will be extended to include, inter alia, misrepresentations, exclusionary types of private monopolizations and abuses of superior bargaining positions, and (ii) certain aspects of the current notification system for merger reviews will be revised, including the pre-notification system for share acquisitions.
On March 18, the European Commission announced that it is to conduct a joint research project with the US Department of Transportation (DOT) into transatlantic air services. The project will consider the growth of airline alliances, and their effect on competition. It will also look at the possible changes in the role of airline alliances following the EU-US Air Transport Agreement which was agreed in draft in March 2007 and is expected to be applied from the end of March 2008, pending ratification. The Commission states that the agreement is expected to enhance competition by allowing EU or US airlines to serve any routes between Europe and the US, and calls for the Commission and the DOT to develop a common understanding of trends in the airline industry in order to promote compatible approaches on competition issues. It is intended that the project will allow the Commission and DOT to cooperate more effectively based on a common understanding of competition in transatlantic markets and inform public discussions on the future of air transport.
The New Zealand High Court recently imposed penalties against a number of defendants involved in an alleged cartel in the wood preservative chemicals industry. These chemicals are used by millers, timber treatment operators and in wood product businesses. The NZ Commerce Commission alleged that two corporations together with their senior executives were parties to an overarching understanding that they would maintain market share, avoid unrestrained competition, and keep prices above their competitive level. They alleged that price information was shared which resulted in uniform and simultaneous price rises, agreements to avoid direct price competition in bids for, or sales to, specific customers or agreeing to non-competitive bids for supply to ensure buyers remained purchasers from existing suppliers. It was also alleged that following the attempted entry of a new competitor into the market, the two companies' executives also agreed to restrict the supply of chemicals and blending services to the new entrant and implemented that understanding including by exerting commercial pressure on suppliers not to meet the new company's orders. Section 27 of the NZ Commerce Act 1986 prohibits contracts, arrangements or understandings that have the purpose, or have or are likely to have the effect, of substantially lessening competition in a market. Under Section 80 of the Act, an individual who breaches Section 27 can be liable to a pecuniary penalty not exceeding NZ$500,000, and in the case of a body corporate, the greater of NZ$10,000,000 or three times the value of any commercial gain resulting from the contravention, or if the commercial gain cannot be readily ascertained, 10% of the turnover of the body corporate and all of its interconnected bodies corporate.
In two decisions on February 28 and March 14, the Norwegian Competition Authority (NCA) imposed fines of NOK1.6 million (approximately €200,000) and NOK1.3 million (approximately €162,500) respectively on two chemical for their alleged infringement of the Norwegian Competition Act. The two companies are competitors in the market for technical acetic acid which is used in the fishing industry and in the oil and gas industry. They were alleged to have participated in illegal market-sharing and collaboration. In its assessment of the fines, the NCA emphasized that market-sharing is one of the most serious infringements of the Norwegian Competition Act and that the alleged infringements occurred in a market with few operators. The two particular companies together handled approximately all the technical acetic acid that is distributed/sold in the Norwegian market.
The Head of the Russian Federal Antimonopoly Service (FAS), Igor Artemyev, warned that the FAS will seek higher penalties for breaches of antimonopoly legislation. Changes in the method of calculating penalties could lead to fines increasing two fold. At present, penalties (within the 1-15% range) have generally been set at about 3-5% of turnover. Under the new proposals, average fines would be between 7-8% of turnover. Accordingly, Igor Artemeyev has warned that fines for anti-competitive behavior could double. He has also warned that the period for companies to become accustomed to the penalties that can be imposed under Russian anti-monopoly law has now expired. The fact that the law has been breached for the first time will no longer be an attenuating circumstance. In addition, the FAS intends in the coming months to provide for an extension of the limitation period for imposing fines for anti-competitive behavior (if the damage caused exceeds RBL 1 million) from five to six years.
On March 26, the Netherlands Competition Authority (NMa) stated that it would like to receive any concrete complaints and signals which internet entrepreneurs have (such as sales prices compulsorily imposed by manufacturers and discriminating conditions for internet shops), substantiated by as many background documents as possible (letters, e-mails, telephone notes). The NMa will then be able to assess whether these complaints provide sufficient ground for an inquiry. The NMa is looking for internet retailers that wish to complain that manufacturers force them to charge higher sales prices for the products that they sell following a survey of internet retailers by the Dutch distant selling organization, Nederlandse Thuiswinkel Organisatie (NTO), which showed that manufacturers are trying to prescribe the prices for internet retailers so that they are required to set higher prices than ordinary shops.
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