European Union (‘EU’) – European Competition Commission (‘Commission’)
Gazprom imposed with binding impositions by the EC for preventing inter alia, cross- border flow of gas
May 24, 2018
Gazprom is a leading Russian company dealing exclusively in the natural gas market. It has operations in eastern and central Europe as well. In the European operations, the Commission found that it had imposed various territorial restrictions in the supply agreements with wholesalers and some industrial customers in 8-member states of the EC (Bulagaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania and Slovakia). The overall strategy to partition gas markets along national borders enabled Gazprom to charge higher gas prices in five member states (Bulgaria, Estonia, Latvia, Lituania and Poland). In the five regions it was observed that Gazprom’s restrictions to trade also included export bans and other measures that prevented cross-border flow of gas. The fact that Gazprom abused its dominant market position by making the supply of gas dependent on obtaining unrelated commitments from wholesalers concerning gas transport infrastructure resulted in artificial barriers to trade between Member States of the EU and also resulted in higher gas prices. The restrictions also included export bans and clauses requiring the purchased gas to be used in a specific territory (destination clauses). The Commission in regard to these practices laid down certain rules that Gazprom is required to follow. These restrictions, inter alia, include;
- The elimination of all contractual barriers of free flow of gas.
- Obligation to facilitate flows to and from isolated markets.
- Ensuring a structured process in competitive pricing.
- No leveraging of dominance in gas supply.
Article 9 of the EU’s anti-trust regulation empowers the Commission to impose legally binding commitments on parties in order to maintain healthy competition in the relevant market. The obligations imposed on Gazprom are under Article 9 and if the company violates the legally binding commitments, the Commission can impose a fine of up to 10% of the company’s worldwide turnover, without having to prove an infringement of EU antitrust rules. The obligations imposed on Gazprom will be in operation for eight years.
United States of America (‘US’) - Federal Trade Commission (‘FTC’) and Supreme Court
American Express for the win after multiyear battle
June 6, 2018
The Supreme Court of the United States of America, ruled in favour of American Express (‘Amex’) after a multiyear battle. Amex had various anti-steering provisions in the agreements it had with merchants. Due to the anti-steering clauses, a merchant could not sway a consumer to use another credit-card facility by offering any incentives. Amex was also said to have a very high merchant fee wherein there were reports of merchants increasing their prices offered to consumers so as to recover this cost. In October 2010, several States (hereinafter together referred to as, ’plaintiffs’) sued Amex, claiming that its anti-steering provisions violate §1 of the Sherman Act, 1890. They claimed that the “non-discrimination provisions” in its contracts with merchants created an unreasonable restraint of trade. This practice was also a staple with other credit-card companies like Visa and MasterCard who were also defendants in the case however, they entered into consent judgments, wherein according to their consent agreements, they agreed to remove such provisions from their contracts with merchants. After a 7-week trial, the District Court agreed that Amex’s anti-steering provisions violate §1 of the Sherman Act,1890. The District Court was of the opinion that the credit-card market should be treated as two separates markets—one for merchants and one for cardholders. Evaluating the effects on the merchant side of the market, the District Court found that Amex’s anti-steering provisions are anti-competitive because they result in higher merchant fees. However, the Court of Appeals for the Second Circuit reversed the order as passed by the District Court in favour of Amex. The Court of Appeals concluded that the credit-card market is one market, not two and anti-steering provisions as prevalent in Amex’s contracts did not give rise to any anti-competitive practices. The Court of Appeals while evaluating the same regarded the credit card market as a whole and did not agree with the District Court in that regard. A writ of Certiorari was subsequently admitted by the Supreme Court wherein while coming to a conclusion the Supreme Court analysed the impact of the two-sided transactions of the credit card industry and whether the credit-card industry is in fact one market or not. The majority judgment upheld the order of the Court of Appeal stating that such clauses in contracts provided healthy competition in the credit-card industry and would encourage other credit-card companies to provide more lucrative rewards to consumers and merchants alike. The majority judgement was also of the view that the credit-card market could not be said to be separate markets and they were complimentary to one another. However, the dissenting judgement stated that anti-trust law should not club two complementary products. The dissenting judgement also stated that if the Amex merchant fees were so high that merchants successfully induced their customers to use other cards, Amex could very easily lower such fees or provide more incentives to consumers in the form of rewards and cashbacks. The dissenting judgement categorically stated that the fact that Amex had to demand contractual protection from price competition, was against the Sherman Act. Amex, however, can continue using anti-steering clauses in the agreements with various merchants.
India – Competition Commission of India (‘CCI’), Competition Act, 2002 (‘Act’)
CCI busts Pune Municipal Corporation Contractors for bid rigging
May 1, 2018
An information was filed by Nagrik Chetna Munch, an NGO of alert citizen-activists through its President Retd. Major General S.C.N Jatar (‘Informant’) under Section 19(1)(a) of the Act against Fortified Security Solutions (‘FSS’), Ecoman Enviro Solutions Pvt Ltd. (‘EES Ltd’) and Pune Municipal Corporation (‘PMC’). Tenders regarding “Design, Supply, Installation, Commissioning, Operation and Maintenance of Municipal Organic and Inorganic Solid Waste Processing Plant(s)” were floated during the period from December 2014 to March 2015. The informant alleged that prima facie, the tenders appeared to involve anti-competitive practices in contravention of the provisions of section 3 of the Act. Subsequently, after perusing the information, the CCI was of the view that the case involved bid rigging and/ or collusive bidding in violation of section 3(3) read with section 3(1) of the Act and directed the Director General (‘DG’) to investigate into the same. The DG, consequently, added four entities i.e Lahs Green India Pvt Ltd. (‘LGI Ltd’), Sanjay Agencies (‘SA’), Mahalaxmi Steels (‘MS’) and Raghunath Industry Pvt Ltd. (‘RIP Ltd’). The CCI, thereafter, took suo moto cognizance of two other cases under section 19 of the Act based on the disclosure by firms under Section 46 of the Act read with the Competition Commission of India (Lesser Penalty) Regulations, 2009 (‘Lesser Penalty Regulations’). While in one case, the tenders pertained to the financial year 2013-14, in other case the tender pertained to financial year 2014-15. The CCI was of the opinion that there had been bid rigging/ collusive bidding in the Tender nos. 21 and 29 of 2013 and Tender no. 59 of 2014 floated by Pune Municipal Corporation for Solid Waste Processing Plant(s), in contravention of Section 3(3)(d) read with Section 3(1) of the Act by way of submitting proxy/ cover bids. The CCI directed the parties in the three cases to cease and desist from indulging in anti-competitive conduct in the future. The CCI after granting reduction in the penalty amount as per section 46 of the Act, fined FSS, ESS, LGI, SA, MS, RIP Ltd in the amount of INR 13,07,240/-, INR 33,90,500/-, INR 21,00,258/-, INR 90,63,874/-, INR 1,68,10,166/-, and INR 30,54,943/-. In regard to the ‘cartelization’ in Tender Nos. 21 and 28 of 2013 of Pune Municipal Corporation for Solid Waste Processing the CCI fined Saara Traders Private Limited, EES, FSS, RIP Ltd a sum of INR 23,22,631/-, INR 33,00,078/-, INR 11,00,541/- and INR 26,40,940/-. Under section 46 of the Act, all the officers were granted reductions in the same ratios as their respective entities. The CCI also noted that PMC had failed to detect cartelization on its own tenders and had not exercised due diligence while scrutinizing the bid documents.
CCI finds no violation of competition laws by Indian Sugar Mills and Ors
May 11, 2018
The India Glycols Ltd. (‘Informant’) is a company under the Companies Act, 1956 who is engaged in the manufacturing and marketing of ethanol-based chemicals. The Informant is dependent on the supply of ethanol which is a by-product of sugar mills. The Indian Sugar Mills Association (‘ISMA’, ‘OP-1’) is an industrial association and is recognised by both the Central and the State Governments, as the central apex organization to voice the cause of the sugar industry in the country. National Federation of Cooperative Sugar Factories Ltd (‘NFCSF’, ‘OP-2’) is an association of cooperative sugar factories which is owned and managed by sugarcane farmers. It is deemed to be a cooperative society under the Multi-State Cooperative Societies Act, 2002. Indian Oil Corporation Ltd.(‘OP-03’), Hindustan Petroleum Corporation Ltd.(‘OP-4’) and Bharat Petroleum Corporation Ltd.(‘OP-5’) are public sector oil marketing companies (‘PSU OMCs’) (hereinafter, together referred to as ‘OPs’). The Informant was aggrieved at the mandatory Ethanol Blending Programme (‘EBP’) promulgated by the Ministry of Petroleum and Natural Gas (‘MoPNG’) vide its notification dated January 02, 2013 whereby the PSU OMCs were directed to sell only petrol blended with ethanol with percentage of ethanol upto 10%. Subsequent to the information received by the CCI, the CCI directed the DG to investigate the conduct of the OPs in violation of the Act and also investigate the role of the persons who, at the relevant time, were responsible for the conduct of the OPs so as to fix the responsibility of such persons under section 48 of the Act. Accordingly, the DG conducted the investigation and submitted its report to the CCI. The DG investigation report held that OP-1 was not an ‘enterprise’ for the purposes of section 2 (h) of the Act at all. Hence, OP-1 could not have been a dominant ‘enterprise’ in making supply of ethanol to the PSU OMCs and there was no question of OP-1 abusing its dominant position by demanding higher price for ethanol which may be in violation of Section 4 (2) (a) and 4 (2) (e) of the Act. The DG also examined whether information to the end consumers in respect of data of blending of petrol and ethanol and generated benefits and fuel efficiency achieved was available in public domain and whether PSU OMCs had provided the aforesaid information to the end consumers and/or made it available in public domain. In this regard, the DG noted that though the PSU OMCs had not directly informed the end consumers about the data of blended petrol, and generated benefits of blending and fuel efficiency achieved, information in this respect was easily available in public domain through statements and data provided by the concerned Ministries before the Lok Sabha. The DG also noted that the particular issue did relate to competition laws. The DG also stated that the EBP policy did not control the production level of the sugar mills/ distilleries. In regard to the investigation conducted by the DG, the CCI stated that a policy or pricing strategy of the Government could not be examined in abstract by the CCI unless the same fell within the framework of the Act and was of the opinion that the approach adopted by the DG in examining the issues was not warranted as policy formulation was the prerogative of the Government and not the CCI. The CCI also noted that a Writ was also pending adjudication in the Delhi High Court and the CCI was of the opinion that the Informant was resorting to forum shopping. The investigation by the DG also revealed that the sugar mills were independently taking decisions on their production mix and its utilisation including ethanol and such decisions were market driven rather than being based on government policies. In regard to whether the PSU OMCs were providing information to the end consumers, the in-depth investigation revealed that the PSU OMCs had not directly informed end consumers about the data of blended petrol and benefits of blending and fuel efficiency achieved and the same was generally available in the public domain through statements and data provided by the concerned Minister before the Lok Sabha. Hence, the CCI was of the opinion that no case of contravention of the provisions of the Act could be made out against the OPs.
European Union (‘EU’) – European Competition Commission (‘Commission’)
Green Flag for acquisition of General Electric Industrial Solutions by ABB
June 1, 2018
General Electric Industrial Solutions (‘GEIS’) is a division of the General Electric Company of USA, and is active in the design, manufacture and sale of low and medium-voltage electrical products and also provides solutions for industrial, commercial and residential applications. Asea Brown Boveri Ltd (‘ABB’), headquartered in Switzerland, is active in power and automation technologies and serves customers in utilities, industry, transport and infrastructure. On investigation into the proposed acquisition, the Commission was of the opinion that the transaction raised no significant concerns in overlapping markets in the European Economic Area (‘EEA’) as the merged entity would continue facing effective competition from a number of large-scale rivals and it was also noted that products in these markets were generally homogeneous and therefore interchangeable between competing brands. The Commission also found that the merged entity would not have the ability to foreclose competitors as alternative suppliers would still continue to operate in the market. The Commission also noted that the markets where the merging companies were active were at different levels of the supply chain and the merger would not lessen the competition in the relevant market. Subsequently, the Commission concluded that the transaction would raise no competition concerns in the relevant markets within the EEA and accepted the same.
United Kingdom (‘UK’) – Competition and Market Authority (‘CMA’)
Merger between metal recycling companies likely to reduce competition in relevant market
June 1, 2018
European Metal Recycling (‘EMR’) is a global scrap metal company, founded in 1994 and is headquartered in the UK. Metal & Waste Recycling Limited (‘MWR’) is also a company headquartered in the UK and is in the business of recycling of ferrous and non-ferrous metals. The merger between EMR and MWR (‘proposed combination’) was not accepted by the CMA as during the detailed investigation into the proposed combination, the commission found that EMR is the biggest metal recycler in the UK and MWR was a strong rival in London, in the South East for shredder feed, and in the West Midlands and North East when buying scrap from large industrial suppliers. The investigation also revealed that MWR is also a strong competitor in the sale of high quality new production steel to mills across the UK. The CMA noted that while there were local competitors for buying and recycling metals in the South East and London, in the West Midlands and North East, their combined strength was enough to cause a substantial loss of competition in those areas. The CMA provisionally found that it is unlikely that without any change in the proposed combination the suppliers and customers in the relevant market would not be significantly affected by the merger. The CMA, thereby, invited comments on provisional findings and possible remedies which, inter alia included selling parts of the merged company so as to maintain healthy competition in the relevant market.
Republic of India – Competition Commission of India (‘CCI’) Competition Act, 2002 (‘Act’)
CCI approves the acquisition of Monsanto by Bayer subject to modifications
June 20, 2018
Bayer Aktiengesellschaft (‘Bayer’) is a German stock corporation and a life sciences company with competencies in the areas of health care and agriculture. The activities of Bayer are carried out in three main divisions’ viz. pharmaceuticals, consumer health, and crop sciences. Monsanto Company (‘Monsanto’) is an agrochemical, agricultural biotechnology corporation and is a prominent supplier of agricultural products. CCI had received the notice in August, 2017 regarding the proposed acquisition of Monsanto by Bayer. Subsequently, investigation by the CCI revealed that the proposed acquisition by CCI would most likely have an appreciable adverse effect in the relevant market. However, CCI was of the opinion that certain modifications to the proposed acquisition would address the concerns. The remedies imposed by the CCI included, inter alia, divestment of the Bayer’s Crop traits of cotton yarn business, hybrid seeds of vegetables business and the Glufosinate ammonium business to an independent entity which would meet the parameters set by CCI. The other remedy included divestment of the shareholding of Monsanto in Maharashtra Hybrid Seed Company Limited (26%), to an independent entity as per the parameter set by the CCI. Accordingly, CCI approved the proposed combination under Section 31(7) of the Act, subject to the binding commitment by the parties. Consequent to the proposed combination, Bayer is bound by the remedies for a stipulated period of seven years by the CCI. These included, inter alia, that the Combined Entity has to grant access to Indian agro-climatic data, free of charge to Government of India and its institutions. The Combined Entity would also be prohibited from any activity which would potentially have the effect of exclusion of any competitor in the relevant market. Further, the Combined Entity would also be barred from imposing, directly or indirectly, commercial dealings capable of causing exclusivity in the sales channel for supply of agricultural products. The principles as followed under the Indian jurisprudence on fair, reasonable, and non-discriminatory (‘FRAND’) licensing would have to be strictly adhered to by the combined entity in regard to (a) existing Indian agro-climatic data owned and used by the Combined Entity for its digital applications commercialized in India; (b) commercialized digital farming platform(s) of the Combined Entity for supplying/selling agricultural inputs to agricultural producers in India; and (c) digital farming applications of the Combined Entity, commercialized in India, on subscription basis. The Combined Entity would also have to follow FRAND terms in relation to non-exclusive licensing of Genetically Modified (‘GM’) traits in the future. The Combined Entity would in case of launch of any new GM / non-GM traits in India have to ensure that there would be non-exclusive licensing in case of such product. The CCI also mandated that all contact details to facilitate the implementation of remedies ordered by the CCI would be made available by Bayer on it’s website. Consequently, CCI is of the opinion that the remedies will strengthen the agricultural input suppliers in India, by enabling innovation and launch of new products for the benefit of the farmers.
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Doc ID: CL/27/18