• On June 24, the French newspaper, Le Figaro, reported that the French financial markets regulator, Autorité des Marches Financiers (AMF), was investigating allegations of insider dealing by members of the European Competition Commission regarding Alcan Inc.’s acquisition of Pechiney in 2003. A spokesman for the European Commission commented, “There’s an inquiry going on by the French authorities on possible insider trading. In the Commission’s view, the suspicions are not founded.” The Commission is reported to have provided AMF with the names of seven EU Commission officials, who were informed of the bid before the deal was made public in July 2003. While it is routine for companies to contact competition officials at the European Commission to discuss the potential antitrust issues associated with a proposed acquisition, this is the first reported investigation of insider dealing accusations against Commission competition officials in over 3,500 merger cases.

• On June 24, the European Commission cleared the proposed acquisition of Allied Domecq plc by Pernod Ricard SA. The Commission’s clearance is conditional on the sale by Pernod Ricard of the Scotch whisky brands “Glen Grant”, “Old Smuggler” and “Braemer” and the Portuguese brandy brands “1920” and “CR&F”. It is also conditional upon the termination of certain distribution agreements relating to the ‘”Tullamore Dew” Irish whiskey brand and, for Portugal only, distribution of “Moët & Chandon” Champagne. In the light of these commitments, the Commission concluded that the transaction would not significantly impede effective competition. Competition Commissioner, Ms. Neelie Kroes, stated, “Whilst this transaction strengthens Pernod Ricard’s general position in the wines and spirits sector, the proposed remedies will reduce the direct overlaps, and, therefore, maintain effective competition on all affected markets.”

• On June 22, the European Commission accepted legally binding commitments from Coca-Cola concerning its distribution of carbonated soft drinks. The commitments are an attempt by the Commission to increase European consumer choice in shops and pubs by, for example, preventing Coca-Cola from entering into exclusive agreements, offering retailers target or growth rebates, or forcing them to take less popular products with its stronger brands. European Competition Commissioner, Ms. Neelie Kroes, commented, “This decision will benefit consumers by improving competition in the markets for carbonated soft drinks in Europe. Thanks to the Commission’s decision, consumers will be able to choose from a larger range of fizzy drinks at competitive prices.”

• On June 22, OFCOM, the UK’s Communications Regulator, accepted legally binding commitments from British Telecom plc, to set up a new, and operationally separate business unit, provisionally entitled Access Services, to provide network services on equal conditions to all retailer providers of UK telecommunication services. By offering these undertakings, BT avoids a reference by OFCOM to the UK’s Competition Commission, and a detailed antitrust investigation, which was widely predicted to require the formal break-up of the company. The Financial Times reported that many rival operators approve of this structural separation arrangement in favor of a protracted antitrust investigation, and also suggested that OFCOM’s solution serve as a model for providing non-discriminatory telecommunications access in other countries.

• On June 21, the Italian Competition Authority adopted its first interim measures decision based on EU competition law against Merck & Co, Inc., the US pharmaceuticals company, by ordering the company to license the production of imipenem cilastatina (an active ingredient in an antibiotic called Tienam, used for the treatment of particularly serous infections, most often contracted in hospitals) for export sales. Although Merck has a patent for Tienam in Italy, the patent has expired in all other European countries. The decision follows an investigation opened in February 2005, following Merck’s alleged refusal to grant a license for the Italian production and export of the active ingredient for the manufacture of generic drugs in other European countries.

• On June 20, it was reported that Bo Vesterdorf, head of the European Court of First Instance (“CFI”), had proposed changing the composition of the court set to hear Microsoft’s appeal against the European Commission’s landmark antitrust ruling last year. Mr. Versterdorf has supposedly suggested that the case be transferred from the current five member panel headed by Judge Hubert Legal, to the CFI’s Grand Chamber panel, which includes heads of the CFI’s other chambers, and four senior judges. The move to change the composition of the court comes following comments published by Judge Legal in a French antitrust journal, where it was reported he wrote that the CFI’s law clerks saw themselves as “ayatollahs of free enterprise”, and held undue influence on some of the judges. The move to extend the number of judges may delay the hearing of Microsoft’s appeal, which was scheduled for mid-2006.

• On June 14, German antitrust officials raided the offices of four leading domestic airlines companies following allegations that the companies had colluded to end contracts with various travel agents based on the level of their commission fees. The German Cartel Office, the Bundeskartellamt, was assisted in its search operation by staff of the criminal investigation departments of the respective German Länders. Although the Bundeskartellamt did not name the four airlines, TUI AG, Thomas Cook AG, Air Berlin, and Lufttransport Unternehmen GmbH all later confirmed that their respective offices had been raided, and rejected the accusations. The Bundeskartellamt’s suspicion is based on several tip-offs from travel agencies affected, and on reports in the specialist press. The travel agencies fear that the aim of the letters of termination, which were sent off at the same time, is to jointly cancel or reduce the commission paid to them for the sale of charter flights as from November 1, 2005.

• On June 10, Humax Pty Ltd was fined AU$150,000 by the Australian Federal Court after the company admitted that it attempted to induce a number of small retailers not to sell Humax high-definition digital set top boxes at a price less than $599.00, in breach of the resale price maintenance provisions of the Australian Trade Practices Act. In determining the appropriate penalty to recommend to the court, the ACCC noted Humax’s cooperation in resolving the case, and avoiding the expenses and time of a full trial. Ms Sylvan, Australian Competition and Consumer Commission, Acting Chair, stated: “Following the ACCC first raising the issue with Humax, the company offered to undertake trade practices training for its staff. The company also willingly agreed to court orders requiring the company to undertake compliance training. The ACCC also recognizes that the conduct occurred for a short duration of only four days.”

• On June 8, the European Commission sent a statement of objections detailing antitrust concerns to a number of synthetic rubber producers accused of operating a cartel. The Commission declined to confirm which companies were involved in the inquiry, which concerns alleged price-fixing in butadiene, a synthetic rubber used in the manufacture of flooring, car tires and shoes. The companies now have two months to respond to the Commission’s antitrust concerns.

• On June 7, the European Commission outlined a comprehensive five year reform of state aid policy which is aimed to promote European growth, and jobs. In particular, the Commission intends to use the EC Treaty’s state aid rules to encourage Member States to focus government financial aid on improving the competitiveness of EU industry, and creating sustainable jobs, by investing in R D, innovation and risk capital for small firms. The Commission also aims to rationalize the procedurally complex rules, so that they are clearer and less government aid has to be notified, and cleared by the Commission.

• On June 6, the European Commission announced that it would market test new proposals it had received from Microsoft outlining how the company intended to implement the Commission’s antitrust decision. The Commission’s decision required Microsoft to disclose interface documentation which would allow non-Microsoft work group servers to achieve interoperability with Windows PCs and servers. The Commission noted that Microsoft had recognized the need to enhance the options available to recipients by creating a range of packages of information from which they could choose according to their needs. Furthermore, there will be a category of interoperability information that will be royalty-free.

• On June 3, the European Commission raided the offices of major fruit companies in Belgium, Ireland, Germany and the UK, and later confirmed that it is conducting an investigation into producers and distributors of bananas and pineapples for possible cartel activity. The same day, Chiquita Brands International announced that the European Commission had granted the company immunity from any fines related to the conduct that it had uncovered following an internal compliance program, which had revealed that certain of its employees had shared pricing and volume information over many years with competitors in Europe, and may have engaged in other conduct, in violation of the European competition laws. The company stated that it had promptly stopped the conduct and, after consultation with the board of directors, notified the European Commission. The company’s antitrust immunity is conditioned, among other things, on the company’s continued cooperation with the Commission’s investigation.

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