According to press reports, three agencies and a governing Anti-Monopoly Commission will comprise China’s competition enforcement regime when the country’s long-awaited Anti-Monopoly Law takes effect on 1 August.  It has been reported that enforcement duties will be split between the Ministry of Commerce, the National Development and Reform Commission and the State Administration for Industry and Commerce.  The regulatory regime would mirror predictions from competition specialists and would incorporate the three governmental bodies that have been most active in training and workshops leading up to the law’s enactment. According to press reports, the Commerce Ministry would become home to the country’s merger control unit.  The other two agencies would handle behavioral issues, including pricing and non-pricing-related abuse of dominance cases, respectively.  The structure may also be the result of a compromise between the three agencies, as all three were rumored to be jockeying for position during discussions of how to implement the law. Competition specialists say that while the arrangement may end any struggle over which body should enforce the law, the three-tiered structure could also result in delays and uncertainty when developing enforcement standards.

On July 24, the European Commission launched a public consultation on the functioning of the Council Regulation (1/2003) that sets out the rules for the Commission’s enforcement of EU Treaty antitrust rules. This Regulation, which took effect on May 1, 2004, also entrusts national competition authorities and courts with the role of applying the EU antitrust rules, meaning that there is wide-spread enforcement of the same set of rules to prosecute cartels and other anti-competitive practices throughout Europe.  The EC is looking for views on all aspects of its implementation in practice.  Regulation 1/2003 was the result of the most comprehensive reform of antitrust procedures since 1962.  Its key objectives are more effective enforcement of EC antitrust rules in the interests of consumers and businesses, while bringing about a more level playing field and reducing red tape for companies operating in Europe.  The EC will use the results of the consultation to prepare the report on the functioning of Regulation 1/2003, which should be presented to the European Parliament and the Council by May 1, 2009. Interested parties are invited to submit their comments by 30 September 2008.  Regulation 1/2003 was a landmark reform, amounting to the most far-reaching overhaul of the EU antitrust procedures in more than 40 years. Regulation 1/2003 is the legal basis of the Commission’s investigation powers. It enables the EC to impose fines for violations of EU antitrust law and to exchange information and coordinate enforcement action with national competition authorities.

On July 25, a District Judge at London’s City of Westminster Magistrates Court ruled that Mr. Ian Norris (former chief executive of Morgan Crucible) can be extradited to the US to face obstruction of justice charges.  In March 2008, the UK’s House of Lords ruled that charges relating to alleged price-fixing, in the context of a cartel, between 1989 and 2000 did not give rise to an extraditable offence as price-fixing was not, in itself, a criminal offence in the UK at the time.  However, the House of Lords 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 District Judge ruled that, even though the price-fixing charges had been thrown out, the remaining obstruction charges are distinct and substantial offences which merit prosecution. Under the UK’s Extradition Act 2003, the UK’s Home Secretary has 60 days to decide whether to approve extradition.  That decision can then be appealed.

On July 17, the South African Competition Commission (SACC) announced that it had received a Corporate Leniency Policy (CLP) application pursuant to raids it had conducted at Cape Town Iron and Steel Works, Highveld and the South African Iron and Steel Institute (“SAISI”) in June. The raids were conducted as part of an investigation into allegations of price fixing and exclusive dealing in the steel industry.  The SACC stated that according to information submitted by the leniency applicant, discussions and meetings allegedly took place between the parties and agreements were allegedly reached to fix prices, exchange price lists and fix discounts.  The information received by the SACC also indicates that parties allegedly allocated customers by agreeing on which customers to supply for various long steel products, and shared commercially sensitive information through SAISI.  The information submitted to the SACC further suggests that the alleged conduct affected the allocation of work to some major construction projects in the country.

On July 23, the European Commission published the details of a tender for the provision of a study on the quantification of damages caused by competition law infringements. In its White Paper on damages actions, the EC stated that it intended to draw up a framework with pragmatic, non-binding guidance for the quantification of damages in antitrust cases.  The EC recognizes that both courts and the damaged parties may lack the specialized expertise to conduct the necessary economic analysis.  In order to assist the EC in preparing such guidance, it is now commissioning a study on this issue.  In particular, the EC is seeking a study which identifies possible ways to facilitate the identification and quantification of damages caused by competition law infringements and which will enable the EC to provide national courts with an accessible framework that will assist those courts in taking informed decisions.  The study should, therefore, set out and explain the relevant parameters and applicable economic models and it should also identify possible presumptions, proxies, grounds for estimation and other practical methods which would facilitate the quantification of harm caused by competition law breaches. On this basis, the study should ultimately suggest a possible framework for the quantification of damages which could be provided to national courts.

On August 1, Singapore’s Competition Commission (CSS) announced that it advised the Singapore School Transport Association to withdraw price recommendations made to its members.  In response to rising fuel costs, the Association allegedly advised its members to increase the price of scheduled school bus services from S$5 to S$15 per month.  "CCS holds the view that price recommendations or guidelines tend to restrict independent pricing decisions.  The circulation of such recommended prices by a trade association, even if it is non-binding, is likely to prompt industry players to cluster their prices around, if not exactly matching, the recommended prices. This is not helpful to free competition".  School bus operators in Singapore are selected by school committees based on several criteria, including fares.  The CSS stated this showed a competitive process existed and that there was no need for any price guidelines to be issued.

On July 16, the EC adopted an antitrust decision prohibiting 24 European collecting societies from restricting competition by limiting their ability to offer their services to authors and commercial users outside their domestic territory.  However, the decision allows collecting societies to maintain their current system of bi-lateral agreements and to keep their right to set levels of royalty payments due within their domestic territory.  The alleged prohibited practices consist of clauses in the reciprocal representation agreements concluded by members of CISAC (the "International Confederation of Societies of Authors and Composers") as well as other concerted practices between those collecting societies.  The practices allegedly infringe rules on restrictive business practices (Article 81 of the EC Treaty and Article 53 of the EEA Agreement). The EC Decision requires the collecting societies to end these alleged infringements by modifying their agreements and practices, but does not impose fines.  The removal of these restrictions will allow authors to choose which collecting society manages their copyright (e.g. on the basis of quality of service, efficiency of collection and level of management fees deducted).  It will also make it easier for users to obtain licenses for broadcasting music over the internet, by cable and by satellite in several countries from a single collection society of their choice.

On July 29, South Africa’s Competition Commissioner, Mr. Shan Ramburuth, told the Parliamentary Committee on Trade and Industry that proposed reforms to the country’s competition laws could actually weaken the competition enforcement regime.  In particular, he raised concerns about the criminalization of cartel behavior and the lack of clarity in the proposed amendments which she said could leave the authorities facing constitutional challenges that would detract from effective cartel enforcement.  Under the draft law, which was released in May, guilty individuals would face penalties of up to 500,000 rand (€40,000) and up to 10 years in prison.  Mr. Ramburuth stated that although he is in favor of tougher cartel sanctions, he believes higher administrative fines would be a more effective solution than criminalizing anti-competitive behavior.  He also says that if the bill was implemented, businesses would be less likely to apply for leniency or enter into settlement agreements.  "By criminalizing anti-competitive behavior and making individuals personally liable, company directors would be far less willing to reach consent agreements with competition authorities".  He added that the recent cartel convictions in the bread, scrap metal and pharmaceutical industries, had come in the form of admissions contained in consent orders, and that the bread and pharmaceutical cases also relied on information in exchange for corporate leniency.  It is likely that the South African Parliament will consider the concerns raised by the competition authorities before it finalizes legislation in September.

On July 10, the European Court of Justice (ECJ) handed down its judgment on the appeal by Bertelsmann AG and Sony Corporation against the judgment of the Court of First Instance (CFI) which annulled the European Commission’s 2004 decision to approve the creation of a joint venture between Sony and Bertelsmann Music Group (BMG) under Article 8(2) of the old EC Merger Regulation (Regulation 4064/89).  The ECJ set aside the CFI judgment on the basis that the CFI made a number of errors law, although it rejected the appellants’ arguments that there is a general presumption that a notified concentration is compatible with the common market and that an approval decision can never be annulled for inadequate reasoning.  The ECJ found that the CFI placed too much reliance on the conclusions in the EC’s Statement of Objections.  Further, the CFI placed too high an investigatory standard on the EC and erred in relying on confidential documents which the Commission could not have relied on.  The CFI also misconstrued the legal criteria applying to a collective dominant position: it failed to analyze market transparency in the light of a plausible theory of tacit co-ordination.  Finally, the CFI erred in finding that the EC had failed to provide an adequate statement of reasons. The ECJ has referred the case back to the CFI for reconsideration.  This judgment provides useful guidance on the role of the Statement of Objections in merger cases and the EC’s duties in the conduct of its investigation following issuance of the statement of objections.

Authored by:

Neil Ray

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