Competition Law: INFORMATION; UPDATES AND ANALYSIS, Nov 2014

United Kingdom (UK)

Merger: Anticipated acquisition by EVO Business Supplies Limited (part of Endless which also controls Vasanta Group) of Office2Office plc
November 14 2014

Vasanta Group Limited (Vasanta) and Office2Office plc (O2O), together the ‘Parties’ are in the business of providing a range of business services (including office stationery) through the wholesale and contract stationery route. The anticipated transaction (the Merger) entailed the acquisition of O2O by Evo Business Supplies Limited (EVO) a wholly owned subsidiary of Endless LLP (Endless) who in turn controls Vasanta.

The Competition and Markets Authority of UK (CMA) considered whether it was or may be the case that the anticipated merger involving the acquisition of O2O by Evo resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation resulted, or was expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

The CMA observed that the Parties overlapped in the supply of business services both as wholesalers and contract stationers. Since O2O is not a traditional wholesaler, there was a limited overlap at the wholesale level. The CMA further considered that the

Parties’ combined shares of supply in the contract stationer channel in the UK are moderate and that they face several competitors, including two with a greater share of supply. There was no evidence that the Parties are closer competitors than their respective shares of supply would suggest. The CMA therefore found that the Merger would not give rise to a realistic prospect of a substantial lessening of competition as a result of horizontal unilateral effects in relation to the supply of business supplies in neither the wholesale nor the contract stationery channel.



European Union

Antitrust: Commission fines smart card chips producers € 138 million for cartel
September 03, 2014

Facts:

The European Commission (‘Commission’) has found that Infineon, Philips, Samsung and Renesas coordinated their market behaviour for smart card chips in the European Economic Area (‘EEA’), in breach of EU rules that prohibit cartels. The companies involved in the cartel colluded through a network of bilateral contacts in order to determine their respective responses to customers’ requests to lower prices. They discussed and exchanged sensitive commercial information on pricing, customers, contract negotiations, production capacity or capacity utilisation and their future market conduct. Collusion of this type breaches Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’) and Article 53 of the Agreement on the EEA, which prohibit cartels and restrictive business practices.

Order:

The Commission imposed fines totalling € 138 048 000. The fines were set on the basis of the Commission’s 2006 Guidelines taking into account the serious nature of the infringement, its geographic scope (i.e. the entire EEA) and the duration of each company’s participation in the infringement.

Antitrust: Commission fines Slovak Telekom and its parent, Deutsche Telekom, for abusive conduct in Slovak broadband market
October 15, 2014

Facts:

Slovak Telekom, the telecom operator in Slovakia, offers fixed broadband services over its legacy metallic telephone networks and over fibre networks. In June 2005, the Slovak telecommunications regulator (‘TUSR’) obliged Slovak Telekom to give access to the local loops within its legacy telephone network.  In August 2005, Slovak Telekom published conditions under which it would allow alternative operators to access its unbundled local loops (‘ULL’). These conditions were such as to render the access unacceptable. In particular, Slovak Telekom unjustifiably withheld network information necessary for the unbundling of the local loops, unilaterally reduced the scope of its regulatory obligation to unbundle and set other unfair terms and conditions in relation to each of the steps needed to obtain access (e.g. collocation, qualification, forecasting, repairs and bank guarantees). This delayed or prevented the entry of alternative operators into the retail broadband services market in Slovakia and amounts to a refusal to grant access.  Furthermore, Slovak Telekom set the prices for access to its local loops and its retail prices at levels which would force competitors to incur losses if they wanted to sell broadband services to retail customers at retail prices matching those offered by Slovak Telekom (a so-called “margin squeeze”). Under such conditions alternative operators could not viably enter the Slovak market. Both types of behaviour constitute abuses of Slovak Telekom’s dominant position, prohibited by Article 102 of the Treaty on the Functioning of the European Union (‘TFEU’).

Deutsche Telekom is a majority shareholder of Slovak Telekom, holding 51% of its shares. The Commission’s investigation revealed that Deutsche Telekom did indeed exercise decisive influence notably through overlaps in senior management personnel and by influencing the decision-making process at Slovak Telekom. Under EU antitrust rules, parent companies exercising such decisive influence are liable for infringements committed by their subsidiaries.

Order:

The European Commission has imposed a fine of € 38 838 000 on Slovak Telekom and Deutsche Telekom, for having pursued during more than five years an abusive strategy to shut out competitors from the Slovak market for broadband services, in breach of EU antitrust rules.



Republic of India (comprising pronouncements on anti-competitive agreements, abuse of dominant position)

Indian Sugar Mills Association and Ors. v Indian Jute Mills Association and Ors. (MANU/CO/0092/2014)

The present information under section 19(1)(a) of the Competition Act, 2002 was filed by Indian Sugar Mills Association, National Federation of Co-operative Sugar Factories Ltd. and All India Flat Tape Manufacturers Association (collectively ‘Informants’) against Indian Jute Mills Association (IJMA) and Gunny Trade Association (GTA) (‘Opposite Parties’) respectively alleging an anti-competitive agreement between the members of IJMA and GTA with respect to fixing of sale price of jute packaging material by issuing of Daily Price Bulletin (DPB) by GTA for jute bags for the members of IJMA and the GTA to follow.

The Commission found itself in agreement with the findings of the Directorate General (DG) regarding the existence of a tacit agreement by way of action in concert by the members of GTA under the aegis of GTA to determine and control the price by publication of GTA, DPB and as the transacted prices were followed by the members of the GTA and IJMA the Commission held the impugned acts/conduct of IJMA and GTA to be in contravention of the provisions of section 3(3)(a)/ 3(3)(b) read with section 3(1) of the Act. The Commission issued a cease and desist order against the associations and imposed a penalty on IJMA and GTA @ 5% of the average turnover of the last three years. The Commission also imposed penalties on the persons who were members of the Executive Committee of IJMA and the Executive Committee and the DPB Sub-Committee of GTA @ 5% of the average income of the last three financial years.

The Commission also noted that the provisions of the Jute Packaging Materials (Compulsory Use in Packaging Commodities) Act, 1987 placing statutory requirement on the sugar mills to undertake sugar packaging using jute bags only, was against the principle of competitive neutrality as the entities manufacturing matching products were denied market access. Such a policy further not only restricted the choice of customers like sugar mills but it also led to escalating the cost which is ultimately borne by the end-consumers. Accordingly, the Commission expects the Government of India to re-assess the current market situation for removing the market distortions arising out of such policy.

In re: Collective boycott/refusal to deal by the Chemists & Druggists Association, Goa (CDAG), M/s Glenmark Company and M/s Wockhardt Ltd. (MANU/CO/0086/2014)

M/s Varca Druggist & Chemists and others had filed an information with the then Director General (Investigations & Registrations), Monopolies and Restrictive Trade Practices Commission against Chemists & Druggists Association, Goa, (‘CDAG’ / the ‘Opposite Party No. 1)’) for its alleged anti-competitive practices. After repeal of the Monopolies and Restrictive Trade Practices Act, 1969, the said case was transferred to Competition Commission of India. The Commission passed an order under Section 27 of the Competition Act on 11.06.2012. Subsequently, the Commission was informed by Mr. Mario Vaz (the ‘Informant’) that CDAG had not complied with the above said order of the Commission and was restraining pharmaceutical companies such as M/s Glenmark Pharmaceuticals Limited (‘Opposite Party No. 2’) and M/s Wockhardt Limited (‘Opposite Party No. 3’) from doing business with his company. It was alleged that under the guidance of CDAG, all stockists of the Opposite Party No. 3 appeared to have formed a cartel and stopped receiving goods from the Opposite Party No. 3 so as to compel it to stop dealing with the Informant. It was also alleged that under the influence of CDAG, the Opposite Party No. 2 and the Opposite Party No. 3 stopped supplies to the Informant.

Commission observed that CDAG clearly disregarded the Commission’s order dated 11.06.2012 and indulged in anti-competitive conduct. By forcing pharma companies to discontinue supply through non-authorized stockist like the Informant, it continued to carry on its anti-competitive practices. Further, it forced pharmaceutical companies like M/s Glenmark Pharmaceuticals Limited and M/s Wockhardt Limited to follow its mandate by threatening the other stockists in Goa to stop taking supplies or suspend receiving supplies from them till such time they stopped supplies to the informant. The Commission directed CDAG to seize and desist from indulging in the anti-competitive practices and imposed a penalty of INR 10,62,062/-, calculated at the rate of 10% of the average receipts of CDAG for three financial years.

Shri Bijay Poddar v M/s Coal India Limited and its subsidiaries, (MANU/CO/0087/2014)

Shri Bijay Poddar (‘Informant’) alleged that the terms and condition of Spot e-Auction Scheme 2007 (‘the Scheme’) introduced by M/s Coal India Limited and its subsidiaries (‘Opposite Parties’) were in contravention of the provisions of the Competition Act.  Informant further alleged that the forfeiture clause under the Scheme is arbitrary and illegal and in abuse of monopolistic power enjoyed by the Opposite Parties.

The Commission observed that the stipulations provided in clause 9.2 of the Scheme is in contravention of the provisions of Section 4(2)(a)(i) of the Competition Act whereby a buyer is saddled with penalty by way of forfeiture of EMD for non-lifting of coal after successful participation in the e-Auction without any  corresponding liability upon Opposite Parties for failure to deliver coal in respect of accepted bids. Such arrangement in the Scheme was noted to be a result of market power exercised by the Opposite Parties. Accordingly, the Commission held the Opposite Parties to be in contravention of the provisions of Section 4(2)(a)(i) of the Competition Act for imposing unfair conditions upon the bidders under the Scheme. Apart from issuing a cease and desist order, the Commission ordered modification of the terms and conditions of the Scheme suitably.

M/s Sai Wardha Power Company Ltd. v M/s Western Coalfields Ltd.

The information under Section 19(1)(a) of the Competition Act, 2002 (‘Competition Act’) was filed by M/s. Sai Wardha Power Company Ltd. (‘the Informant’) against M/s. Western Coalfields Ltd. and M/s. Coal India Ltd. (collectively, ‘the Opposite Parties’) alleging contravention of the provisions of Section 4 of the Competition Act. In order to procure the supply of coal for its power plant, the Informant after having obtained linkage and letter of assurance on cost plus basis from the Opposite Parties, had entered into three Fuel Supply Agreements (‘FSAs’) for supply of coal from three different identified cost plus coal mines under the control of the Opposite Parties.  The Informant stated that the Opposite Parties enjoy virtual monopoly over production and supply of coal in India. The Informant alleged that the Opposite Parties, by abusing its dominant position, had forced the Informant to enter into one sided, anti-competitive FSAs under which the Informant had no bargaining power or power to negotiate whatsoever and in the absence of any alternative option for procurement of coal, the Informant was compelled to accept the dictated terms and conditions stipulated in the FSAs.

The Commission established that the Opposite Parties operate independently of market forces and enjoy undisputed dominance in the relevant market of “production and supply of non- coking coal to the thermal power producers in India”. The Commission further held the Opposite Parties to be in contravention of the provisions of section 4(2)(a)(i) of the Competition Act for imposing unfair conditions in FSAs with the power producers for supply of non-coking coal. Commission directed the Opposite Parties to cease and desist from indulging in the conduct found to be in contravention of the provisions of the Competition Act and to make necessary modifications in FSAs in light of the observations and findings recorded by it.

M/s HT Media Limited Informant v M/s Super Cassettes Industries Limited, (MANU/CO/0080/2014]

M/s. HT Media Limited (‘the informant’) filed information under Section 19(1) (a) of the Competition Act, 2002 (‘Competition Act’) against M/s. Super Cassettes Industries Limited (‘the Opposite Party’) alleging inter alia contravention of Sections 3 and 4 of the Competition Act.

The Informant, a leading media companies had launched an FM radio channel called Fever 104. Opposite Party is engaged in manufacture, production and publication of music and videos. The Informant alleged that the Opposite Party has abused its dominant position by (i) charging excessive amount as license fees/royalty from the Informant for grant of rights for the broadcast of the Opposite Party’s music content on Fever 104 radio station; (ii) imposing minimum commitment charges (‘MCC’) to be paid to the Opposite Party per month irrespective of actual needle hour of broadcast of the Opposite Party’s music content by the Informant and (iii) making conclusion of licensing arrangements with the Opposite Party subject to the acceptance of license fees and MCC imposed by them. The Informant alleged that such imposition of exorbitant license fees and MCC by the Opposite Party is an unfair condition imposed by it for granting license to broadcast its music content on radio under the Competition Act which limits and restricts the right of the Informant to broadcast its music content of other music companies/composers thereby limiting the choice of music for the end consumers to only the opposite party’s music content and results in denial of market access for other music companies (publishers, copyright societies etc.) with less market share and bargaining power.

Commission held opposite party to be in contravention of Section 4(2)(a)(i) of the Competition Act. The Commission directed opposite party to cease and desist from formulating and imposing the unfair condition of MCC in its agreements and to suitably modify such unfair conditions within 3 months of the date of receipt of the Order. The Commission also imposed penalty at the rate of 8% of average turnover of the last three years of the Opposite Party amounting to INR 2,83,28,000.



United States of America

Prevention of fraudulent, deceptive, and unfair business practices:

AT&T Mobility LLC (Mobile Data Service)
October 28 2014              

The Federal Trade Commission has filed a federal court complaint against AT&T Mobility, LLC, charging that the company misled millions of its smartphone customers by charging them for “unlimited” data plans while reducing their data speeds, in some cases by nearly 90 percent. The complaint alleged that, even as unlimited plan consumers renewed their contracts, the company still failed to inform them of the throttling program. When customers cancelled their contracts after being throttled, AT&T charged those customers early termination fees, which typically amounts to hundreds of dollars. The complaint was filed in the U.S. District Court for the Northern District of California, San Francisco Division.

Unfair Trade Practices:

Worldwide Info Services, Inc.
 November 13 2014

A settlement obtained by the Federal Trade Commission and the Office of the Florida Attorney General permanently shut down an Orlando-based operation that bilked seniors by using pre-recorded robocalls to sell them supposedly free medical alert systems.

According to the joint agency complaint, announced in January, the defendants violated the FTC Act, the Commission’s Telemarketing Sales Rule (TSR), and Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) by blasting robocalls to senior citizens falsely stating that they were eligible to receive a free medical alert system that was bought for them by a friend, family member, or acquaintance. Many of the consumers who received the defendants’ calls were elderly, live alone, and have limited or fixed incomes.

The settlement order banned the defendants from making robocalls, prohibited other telemarketing activities, and barred them from making misrepresentations related to the sale of any product or service.

Abuse of Dominant Position:

In the Matter of AmeriGas and Blue Rhino
November 7 2014

After the Federal Trade Commission issued an administrative complaint against Ferrellgas Partners, L.P and Ferrellgas, L.P. (doing business as Blue Rhino) and UGI Corporation and AmeriGas Partners, L.P. (doing business as AmeriGas Cylinder Exchange), alleging that they illegally coordinated on reducing the amount of propane in their tanks sold to a key customer, the two leading suppliers of propane exchange tanks, agreed to settle FTC charges. Under the proposed settlements, each company was barred from agreeing with competitors to modify fill levels or otherwise fix the prices of exchange tanks, and from coordinating communications to customers.

Deborah Feinstein, Director of the FTC’s Bureau of Competition commenting on the settlement stated the “…the antitrust laws do not permit private agreements to avoid competition. Agreements between competitors to limit any dimension of competition can harm consumers through higher prices or lower quality.”



Republic of India

Merger:

The Competition Commission of India (CCI) is likely to take the final decision in the $4 billion Sun Pharma-Ranbaxy deal by the end of this month, the fair trade watchdog’s chairman, Ashok Chawla, has said.

This deal in the pharma space is also the first M&A transaction to have gone through public scrutiny amid concerns of adverse impact on fair competition in the market. The Sun Pharma-Ranbaxy transaction, which would create the country’s largest pharmaceutical company, had come under close scrutiny of CCI after it was found prima-facie that the “combination is likely to have an appreciable adverse effect on competition”.



United Kingdom (UK)

The Competition and Markets Authority (CMA) provisionally announced its plans to carry out a full market investigation in July, and will now proceed following support from “most respondents” to its consultation. The investigation will also consider whether commitments made by banks providing services to small and medium-sized enterprises (SMEs) following a 2002 report by former regulator the Competition Commission continue to be effective, according to the announcement.

The CMA said that it was concerned about the low numbers of customers shopping around and switching current account providers; and how difficult it was for customers to compare products, particularly given the complexity of overdraft charges on personal current accounts. Continuing barriers to entry and expansion restricting the ability of smaller and newer providers to develop their businesses were also a continuing concern, as well as limited movement over time in the market shares held by the four largest banks. These control 77% of the personal current account market and 85% of the business current account market, according to the CMA.

The market reference group will be appointed shortly, and would publish a timetable for the various stages of its investigation, the CMA said in its announcement.

Republic of India

Merger:

The Competition Commission of India (CCI) is likely to take the final decision in the $4 billion Sun Pharma-Ranbaxy deal by the end of this month, the fair trade watchdog’s chairman, Ashok Chawla, has said.

This deal in the pharma space is also the first M&A transaction to have gone through public scrutiny amid concerns of adverse impact on fair competition in the market. The Sun Pharma-Ranbaxy transaction, which would create the country’s largest pharmaceutical company, had come under close scrutiny of CCI after it was found prima-facie that the “combination is likely to have an appreciable adverse effect on competition”.



European Union (‘EU’)

Mergers: Commission approves acquisition of several of Rockwood’s chemical businesses by Huntsman, subject to conditions
September 10 2014

European Commission has cleared the proposed acquisition by Huntsman Corporation of a number of chemical businesses held by Rockwood Specialties Group, Inc. – both United States companies. The clearance is conditional upon the divestment of Huntsman’s TR52 business. TR52 is Huntsman’s main titanium dioxide grade used for printing ink applications (such as printing inks used in flexible packaging). The Commission had concerns that the transaction, as originally notified, would have enabled the merged entity to raise prices of titanium dioxide for printing ink applications in the European Economic Area (EEA). The commitments offered by Huntsman address these concerns.

Mergers: Commission approves acquisition of Holcim assets by Cemex in the building materials sector
September 9, 2014

European Commission has cleared under the EU Merger Regulation the proposed acquisition of the Spanish operations of the Swiss building materials group Holcim (“Holcim assets”) by its Mexican rival Cemex. Cemex and Holcim are global suppliers of cement and other building materials. The Holcim assets comprise plants and quarries dedicated to the production and supply of cement, aggregates, ready-mix concrete and mortar in Spain. The Commission concluded that the acquisition would not raise competition concerns since the merged entity will continue to face sufficient competition from its rivals in all markets concerned. The Cemex/Holcim assets transaction does not meet the turnover thresholds of the EU Merger Regulation. However, following a referral request from Spain, the Commission agreed to assess the transaction related to Spain.

Mergers: Commission approves acquisition of WhatsApp by Facebook
October 3, 2014

The European Commission has authorised  the proposed acquisition of WhatsApp Inc. by Facebook, Inc., both of the United States. Facebook (via Facebook Messenger) and WhatsApp both offer applications for smartphones which allow consumers to communicate by sending text, photo, voice and video messages. The Commission found that Facebook Messenger and WhatsApp are not close competitors and that consumers would continue to have a wide choice of alternative consumer communications apps after the transaction. Although consumer communications apps are characterised by network effects, the investigation showed that the merged entity would continue to face sufficient competition after the merger.



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The information in this private circulation is not legal advice and should not be treated as such. The information is taken from public domain and is purely for private and non- commercial purposes. We do not represent that the information is correct, accurate, complete or non- misleading.

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Doc ID: CL/11/14

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