European Anti-Trust Law

Competition Commission Seeks to Increase Competition in Payment Protection Insurance Market

2008-11-25T06:18:00.001-08:00

In June 2008, the Competition Commission concluded, after an investigation, distributors of payment protection insurance (PPI) in the UK face little or no competition when selling PPI to their customers. The Commission published a report November 13 that listed its proposed remedies to increase competition in the market.

PPI covers borrowers in the event they are unable to make payments on loans, credit cards, or mortgages because of accident, sickness, or unemployment. PPI has been under scrutiny since 2005, when a consumer group referred a complaint about PPI to the Office of Fair Trading. The OFT referred the case to the Commission in February 2007. The OFT found that only 20 percent of PPI premiums are ever paid out in claims, while 82 percent of car insurance premiums are paid out in claims.

The Commission noted that the vast majority of PPI policies are sold at the same time as a consumer takes out a loan or other credit. Many consumers are unaware they can purchase PPI from other providers. Consumers rarely shop around to compare terms, conditions and prices for PPI and rarely switch PPI providers. The Commission found that the ‘point-of-sale’ advantage makes it hard for consumers to locate other PPI companies and leads to a lack of competition and high prices in the PPI market.

The Commission recommended several measures which it thinks will be effective in increasing competition in the PPI market. The most drastic measure was a ban on the sale of PPI by a distributor to a consumer within 14 days of the distributor extending credit to the consumer. Under the plan, the consumer could contact the distributor 24 hours after the sale if he wanted to purchase PPI. The Commission determined this ban will give the consumer more opportunity to shop around for PPI, and will eliminate the point-of-sale advantage.

The Commission called for advertising for PPI to be made clearer. The Commission also recommended a ban on single-premium PPI policies, where consumers pay for the insurance upfront, because it’s difficult for consumers to switch policies and compare costs with other PPI policies.

The Association of British Insurers criticized the new plan harshly, stating that it would result in financial hardships for individuals and families who failed to purchase PPI and found themselves unable to make repayments on a loan. The British Bankers Association claimed it was wrong to encourage people to borrow money without a back-up in place.

However, many consumer groups were pleased with the recommendations. One group recently warned that banks were pushing PPI to consumers who mistakenly thought they were required to purchase it. Another problem is the insurance is frequently sold to consumers who could never make a claim on it, like the self-employed or employees on short-term contracts. The Financial Ombudsman reported that about one-fourth of the complaints it receives each week are about PPI.

The Commission is inviting interested parties to contact it with comments and concerns about the proposed plan before December 4. The final report is scheduled to be released in mid-January 2009.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Soccer Fans File Complaint with Office of Fair Trading Over Ticketing Issues

2008-11-25T06:17:00.000-08:00

Manchester United, a professional soccer team in Great Britain, has been reported to the Office of Fair Trading by the Manchester United Supporters Trust (MUST), which claims to represent 34,000 fans of Manchester United. MUST claims that the team has breached its statutory and legal obligations to its season ticket holders.

The main complaint of MUST is Manchester United’s Automatic Cup Scheme for season ticket holders. The plan requires season ticket holders to purchase tickets for cup games without knowing who the opposition will be, the price of the tickets, or how many tickets they will have to pay for. Season ticket holders are required to purchase the tickets, whether they will be able to attend the games or not, or else they will not be allowed to renew their season tickets.

MUST also complains that the ACS is balanced in the club’s favor. MUST claims that season ticket holders are obligated to pay for the tickets to the cup games against the less desirable teams, while being denied tickets to the more popular cup games against European teams later in the season. In addition, it claims, teams sometimes use younger teams during cup matches, which forces fans to purchase tickets to watch inferior players.

MUST argues this scheme violates the Competition Act 1998, Part II, Section 18(2), which prohibits companies from abusing a dominant position in the market. MUST also alleges this violates the Unfair Terms in Consumer Contract Regulations 1999, which renders ineffective any contract terms that are unfair to consumers.

MUST is also unhappy with the rise in ticket prices. Since 2005, when a new owner, Malcolm Glazer, took over the team, season tickets have increased by an average of almost 60 percent. Tickets for individual games have risen as much as 41 percent. As an example, MUST notes that a season ticket that would have cost £532 in 2004-2005 now costs £912 before cup matches are factored in.

MUST claims that Glazer broke a pledge he made to the fans before he purchased the team that he would not raise ticket prices. The fans allege this pricing scheme is in violation of the Competition Act 1998, Part II, Section 18(2)(a), which states that conduct may be considered to be an abuse of a dominant market position if the conduct imposes unfair purchase prices or trading conditions.

MUST requested the OFT investigate the way in which the new pricing scheme has been introduced. MUST acknowledged that although prices do rise over time, because Manchester United has a dominant market position and there is no reasonable substitute available, its practices violate consumer protection laws.

The OFT stated that it had received the complaint and will review it before deciding whether to go forward. There is no set timetable for completing an investigation.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Office of Fair Trading Refers Software Company Merger to Competition Commission

2008-11-25T06:16:00.002-08:00

The U.K.’s Office of Fair Trading referred the completed acquisition of IBS OpenSystems by Capita Group to the Competition Commission for further review, after an investigation revealed possible anti-trust problems with the deal. Capita, one of the U.K.’s largest support services companies, agreed in June 2008 to buy IBS, a software company.

The OFT is concerned about competition in the supply of revenue and benefits software services to consumers. Currently, Capita, IBS, and Northgate Information Solutions are the only three successful companies providing such software in the U.K. The OFT reasoned that if IBS is removed from the market, there will only be two companies providing such services, which will result in less competition and higher prices. The OFT observed that the possibility of a new company entering the market would be unlikely. During its inquiry, the OFT also found that customers in the market were very concerned about the effect of a merger on competition.

In general, the OFT has a duty to refer any merger situation that has or will result in a lessening of competition for goods or services within any market in the U.K. to the Competition Commission for further review. Markets of £10 million or less are generally considered too small to justify a referral to the Competition Commission. Such inquiries fall under the de minimis exception to the duty to refer. The total market for such software services in the U.K. is around £20 million.

Capita argued that although the total market may now be around £20 million, the limited value of the contracts that are coming up for renewal in 2008 means that the market is much smaller. Therefore, it claimed, the OFT should not refer the case to the Competition Commission under the de minimis exception.

The OFT dismissed this argument, finding that given the uncertainty around the number and value of the contracts for which parties could compete in the future, and the extent and duration of competition concerns that the merger will create, a further investigation by the Competition Commission is justified.

The OFT recently cleared a similar merger in the same market. Northgate Information Solutions, one of the three competitors in the market with Capita and IBS, recently acquired Anite Public Sector Holdings, another supplier in the software market. The OFT found that this merger did not remove a supplier of software to local consumers from the market.

Capita stated it would cooperate with the Competition Commission during its inquiry.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Merger of Giant Breweries Approved by EU and U.S. Regulators with Conditions

2008-11-25T06:16:00.001-08:00

The U.S. Department of Justice and the Office of Fair Trading approved the acquisition of Anheuser-Busch by Belgian brewery InBev. However, the Department of Justice required InBev to sell its interest in LaBatt Brewing in the U.S.

Anheuser-Busch controls nearly half of the United States beer market, while InBev is strong in Western Europe and Latin America. Anheuser makes Budweiser, the U.S.’s most popular beer. Its 2007 revenue was $16.6 billion. InBev is the world’s second-largest brewer. Its 2007 sales were €14.4 billion. InBev makes Stella Artois, Becks, Bass and Labatt Blue beers.

The Department of Justice found that the transaction, as originally proposed, would have led to higher prices for beer in the Rochester, Syracuse, and Buffalo, New York metropolitan areas. Anheuser-Busch and InBev make the two most popular beers in those cities, and the proposed merger would have resulted in higher prices to beer drinkers in those areas. In the vast majority of markets for beer in the U.S., InBev brand beers account for less than two percent of the beer market and engage in very limited competition with Anheuser-Busch.

A final consent judgment regarding the acquisition was filed in U.S. District Court for the District of Columbia on November 17. The judgment requires LaBatt, a partially owned subsidiary of InBev based out of Toronto, to grant a perpetual and exclusive license to brew, market, distribute and sell the Labatt beer brands in the U.S. to an independent third party. LaBatt Brewing in Canada will be allowed to brew and supply LaBatt brand beers to the U.S. licensee for three years.

The German Federal Cartel Office formally approved the merger on August 20. The Office of Fair Trading, which was the primary European regulator involved, announced on November 18 that it was approving the deal. Initially, the OFT was concerned that after the merger, the consolidated company would have a market share of between 25 and 50 percent in various beer markets in the EU. The OFT feared the lack of competition would make it easier for the company to raise prices for consumers.

However, after an investigation, the OFT found that the Budweiser and Stella Artois brands both have loyal customers who generally do not prefer the other brand, so they are not close competitors. In addition, retail chains, bars, pubs and restaurants who sell beer were unconcerned about the merger. Evidence also showed that there are other competing premium lagers that would keep prices in check.

The deal, which was worth $52 billion, created the world’s largest brewer, which will be called Anheuser-Busch InBev. The acquisition was the largest cash acquisition in history.
The combined company will be one of the five largest consumer products companies in the world. InBev has promised that Anheuser’s headquarters will remain in St. Louis, Missouri and that none of its breweries would be closed as a result of the merger. InBev wants to complete the acquisition as soon as possible, and the deal could close as early as the end of the month.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

European Commission Investigates Cartels in Cement Industry

2008-11-25T06:15:00.002-08:00

On November 4 and 5, the European Commission raided the offices of several major European cement companies on suspicion of cartel activities. The companies under investigation include Lafarge of France, the world’s largest cement maker, Holcim of Switzerland, the world’s second-largest cement maker, and German companies HeidelbergCement and Dyckerhoff, as well as a company in Mexico.

The Commission stated that it had “reason to believe” that the companies involved may have broken Articles 81 and 82 of the EC Treaty, which prohibit price-fixing cartels and monopolies. The investigation hopes to uncover evidence of coordinated price movements, discriminatory pricing and market sharing. However, no formal charges have been filed against the companies.

The Commission’s first step when suspecting anti-trust violations is a surprise inspection of the companies involved. The Commission has no deadline to complete its investigation, but the timeline usually depends on the complexity of the case and the cooperation of the companies involved.

In 1994, an investigation into anti-trust practices in the cement industry resulted in fines for 42 companies, including Lafarge. The companies involved were accused of dividing the cement market among themselves and sharing information. In 2000, a European Union court reduced their fines from €248 million to €108 million. Additionally, in 2002 Lafarge was €250 million for its involvement in a plasterboard cartel. In 2003, Germany fined cement companies €660 million for anti-trust violations. Because the cement market has been consolidated over the past 20 years, anti-trust regulators and industry watchdogs are watchful of anti-trust violations.

In addition to the penalties from anti-trust regulators imposed on the cement industry, cement companies also face challenges from others active in the cement industry. In Germany, Cartel Damage Claims filed suit against Heidelberg, Lafarge, and others, seeking millions in damages on behalf of 35 companies damaged by an alleged cement cartel that began in the 1970s.

If any of the companies involved in the current investigation are found to be repeat offenders of the anti-trust laws, they could face heavy increased fines. The Commission’s ability to fine anti-trust violators has increased in recent years. In addition, Neelie Kroes, the current Competition Commissioner, has made a crackdown on cartels a priority during the past four years. In recent years, the EU has been giving amnesty to the first company to come forward with evidence of a cartel, which has resulted in the exposure of many cartels.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

European Commission Gives Glass Cartel Biggest Price-Fixing Fine in History

2008-11-25T06:15:00.001-08:00

The European Commission imposed a record fine of almost €1.4 billion on four manufacturers of automobile glass, finding they operated a cartel and shared commercial secrets for five years. The Commission fined Great Britain’s Pilkington (€370 million), Japan’s Asahi/AGC (€113.5 million), Belgium’s Soliver (€4.4 million), and France’s Saint-Gobain (€896 million). The fine issued to Saint-Gobain was the largest the Commission has ever awarded a company before.

The Commission received an anonymous tip about the cartel and began a three-year investigation. In 2005, the Commission raided the offices of several car glass producers in Europe. After the raid, Asahi helped the Commission with its investigation, and had its fine cut in half as a result.

The Commission’s investigation found the cartel cheated the car industry from 1998 to 2003. Senior managers of companies involved in the cartel discussed the supply limits of car glass for new cars and renegotiated ongoing contracts during secret meetings at airports and hotels across Europe. The cartel also rigged prices for windscreens, sidelights, rear windows, and sunroofs in new European cars.

The cartel controlled 90 percent of the glass used in new cars, as well as for original replacement glass. The cartel operated in the European Economic Area, which includes all countries in the European Union plus Liechtenstein, Iceland, and Norway.

Soliver only joined a portion of the secret meetings, so its fine was significantly lower than the other companies involved. The Commission increased the fine for Saint-Gobain because it had participated in cartels in 1984 and 1988 in Italy and Belgium. Saint-Gobain’s fine represents 95 percent of the company’s annual glass sales in Europe. Saint-Gobain plans to appeal, and complained that it had only set aside €520 million for the fine. The company also noted that it offered training each year for thousands of its managers in competition rules.

However, the Commission noted Saint-Gobain’s annual sales are €43 billion, and the Commission has the authority to fine companies up to 10 percent of global turnover for every year they broke the law. The Commission says it set the fines in this case so high because of the large size of the market and the seriousness of the case.

In addition to the fines, the Commission urged businesses or individuals that have suffered from the cartel to seek damages from the companies in court. The money collected from the fines goes into the EU’s budget and is primarily spent on farm subsidies and research.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

European Commission Objects to Merger of Mining Companies

2008-11-11T06:19:00.000-08:00

On November 4, the European Commission issued a statement of objections to the proposed merger of the Australian mining company BHP Billiton and Rio Tinto. The content of the statement of objections was not released by the Commission or the companies.

In February, BHP Billiton, the world’s largest mining company, made a hostile offer for smaller rival Rio Tinto. The offer was for 3.4 shares of BHP Billiton stock for each Rio Tinto share. In addition, BHP Billiton would assume $40 billion of Rio Tinto’s debt. Rio Tinto rejected the offer as too low. The companies are now waiting for the Commission to approve the deal before approaching shareholders.

Typically, the Commission will not block a merger. However, the Commission can push hard for concessions to be made in order for the deal to go through, and it has done so in recent mining mergers. One proposed remedy is a divestment of assets by the combined company. Another suggestion to obtain Commission approval is for BHP Billiton to commit to selling a certain amount of its iron ore on the stock market on a contract basis, and to make its price-setting mechanisms transparent.

The merger of BHP Billiton and Rio Tinto would combine the world’s second- and third-largest miners of iron ore and allow them to overtake Companhia Vale do Rio Doce, the world’s largest producer of iron ore. BHP Billiton wants to buy Rio Tinto to cut costs and obtain a larger share of the metal markets. The combined companies would have sales of $100 billion a year.

However, European steelmakers object to the merger, saying it would give the merged company a market share of almost 40 percent of the seaborne iron ore market. Seaborne iron ore is the raw material that is used to make steel. Both companies have iron ore mining operations in western Australia. Other parties opposed to the deal have pointed out that the combined company would also have a dominant market position in the aluminum and uranium ores markets, as well as coking coal.

The Commission started its review of the deal on September 29 and is due to make a decision by January 15. If the deal is completed, it will be one of the largest corporate takeovers in history. Anti-trust regulators in Australia, the U.S., Canada and South Africa have given permission for the merger.

However, anti-trust regulators in Japan have also expressed reservations about the deal. The companies involved have not sought permission for the merger from the Japanese government, but the government is demanding information on the deal because of pressure from auto-makers who are worried about the price of steel.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Competition Commission Finds Airport Owners Acted Against Public Interest

2008-11-11T06:18:00.000-08:00

The Competition Commission published a report on November 4 finding that British Airport Authority (BAA), which owns seven airports in the UK, has acted against the public interest in its management of Stansted Airport. The Commission investigated Stansted for six months at the request of the Civil Aviation Authority (CAA).

In its report, the Commission found that the airport failed to consult adequately with the airlines about its planned expansion, failed to manage the security waiting process, and overcharged cargo aircraft for landing. The Commission noted that it had received furious criticism about the quality of service at Stansted since 2002.

The Commission has investigated problems with British airports in the past, which it blames on a lack of competition in the ownership of airports. The Commission previously recommended that BAA should sell three of its airports to increase competition.

Ryanair, an airline that operates routes across Europe and North Africa, complained to the Commission about the costs of using the UK’s airports, with Stansted as its main concern. Ryanair is grounding 15 airplanes at Stansted this winter because the airport’s fee structure hurts the airline’s profitability. In its report, the Commission did not agree with Ryanair that the airport’s costs were excessive for airlines, and found that the airport had not operated against the public interest with regard to airport charges.

The report recommended that the CAA require BAA to take three actions: (1) improve the consultation process with the individual airlines; (2) introduce a service quality rebate scheme under which BAA will be forced to pay airlines for poor performance; and (3) offer off-peak discounts on landing charges for the largest cargo aircraft.

The Commission recognized that the introduction of extra security measures in 2006 caused problems, but still thought BAA did not do enough to meet the needs of its customers. CAA statistics show that 78 percent of flights from Stansted took off within 15 minutes of their scheduled departure time. The average delay was just under 15 minutes.

The Commission’s report also recommended landing fees be set significantly below BAA’s expectations. The Commission ruled that fees could rise from £ 6.34 per passenger to £ 7.05 over the next five years.

The BAA expressed disappointment in the Commission’s report, claiming that the Commission had failed to reflect large elements of the cost in operating Stansted Airport over the next five years and beyond in its assessment.

The CAA will consider the recommendations before making its final decision in March 2009. It must decide on the five year price cap regime for Stansted, as well as imposing remedies in areas where BAA has acted against the public interest.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

British Video on Demand Service Responds to Competition Inquiry

2008-11-11T06:17:00.000-08:00

In October, the backers of Kangaroo, a video on demand service, published an updated submission to the UK’s Competition Commission, responding to the Commission’s ongoing investigation of competition concerns with the video on demand (VOD) project.

In November 2007, three British companies announced a joint venture that would create a VOD service called Kangaroo. Kangaroo would provide an internet-based service to enable users to view and own audiovisual material, sell internet advertising space, and syndicate content to third party VOD service providers. The three companies involved are: BBCW, a subsidiary of the British Broadcasting Corporation, which is primarily involved in the commercial exploitation of content produced by the BBC; Channel 4 Television Corporation, a publicly owned corporation which operates several channels; and ITV plc, which is active in the audiovisual market. The companies submitted their plans for Kangaroo to the Office of Fair Trading in April 2008.

The OFT found the venture did raise competition concerns, and referred the case to the Competition Commission. The OFT noted that after the transaction, the VOD activities of the three companies involved will no longer be distinct. In particular, the companies’ activities will overlap in the area of “catch-up” television, which is content made available via VOD within a window of zero to 30 days after its initial broadcast on television. Kangaroo will account for more than 25 percent of catch-up hours available on VOD in the UK. The OFT was also concerned about that the lack of competition for VOD services would result in increased costs for consumers.

In its newly released submission to the Commission, Kangaroo claimed there were serious misconceptions about Kangaroo’s effect on competition. Kangaroo pointed out that the competition concerns “centre on the argument that the parties have strong market positions in respect of rights over UK TV content and that UK TV content is unique… Both of these propositions are misconceived.”

Specifically, Kangaroo argued it would not have unfair access to VOD rights, because they would be separate from television show rights. In addition, the strength in the television market of the three companies involved in the venture would not apply, since a lot of UK television content, such as sports, news, soap operas and talent shows would not be suitable for VOD.

Kangaroo noted it would not drive up prices for consumers, because 90 percent of Kangaroo’s content will be free. Kangaroo also claimed that it only expected to get about 10 percent of UK VOD revenue by 2012. It observed that it faces significant competition from Amazon’s Lovefilm, Sky, Virgin Media, Microsoft, and Tesco.

The Competition Commission is currently investigating Kangaroo and is expected to rule on the project in February 2009.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

UK’s Business Secretary Approves Huge Bank Merger

2008-11-11T06:16:00.000-08:00

The UK’s secretary of state for business, Peter Mandelson, granted approval on October 31 to the proposed merger of Lloyds TSB Group and Halifax Bank of Scotland (HBOS), two major British banks.

On September 18, Lloyds announced it was preparing to take over HBOS, Britain’s largest mortgage lender, for £ 12 billion. The HBOS share price had been steadily decreasing for almost a year. HBOS overextended itself with a heavy focus on sales and raising funds to lend to customers. When lending between banks slowed recently, HBOS faced a huge problem.

The merger will create a banking giant that will control about 25 percent of British accounts, 28 percent of home loans and £ 400 billion in savings deposits, or about 50 percent of the savings market. Normally this merger would raise competition issues. However, the government changed the law to allow the merger to take place in the interest of maintaining the stability of the British financial system. The takeover will create the largest ever British bank.

The OFT released its report to Mandelson on October 24, outlining its concerns with the merger. The OFT was particularly concerned that the merger would result in a substantial lessening of competition for mortgages, personal accounts, and banking services for small and medium sized businesses.

The OFT took into consideration the views of the Financial Services Authority, the Bank of England, and the Treasury, as well as other stakeholders. The OFT noted that most parties agreed that the merger would support financial stability, and was therefore in the public’s best interest.

The OFT’s report on competition issues was binding. Therefore, any anti-competitive outcome identified by the OFT is treated as being adverse to the public interest, unless it is justified by one or more relevant public interest considerations. The UK’s secretary of state for business found that the stability of the UK financial system outweighed the OFT’s competition concerns, and decided not to refer the case to the Competition Commission. He asked the OFT to “continue to keep the relevant markets under review in order to protect the interests of UK consumers and the British economy.”

The shareholders will vote on the merger in the third week of November. If the merger is approved, Lloyds expects to complete the transaction and capital raising by January. The government is injecting £ 17 billion in capital into the banks, which is contingent on the transaction going forward.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Office of Fair Trading Approves Airline Merger after Competition Concerns Alleviated

2008-10-30T06:51:00.001-07:00

On October 24, the Office of Fair Trading announced that it would approve the acquisition of VLM Airlines by the Air France-KLM group, after they worked out a deal to increase competition on a popular route.

Air France-KLM, which is the parent company of KLM Royal Dutch Airlines, sought to acquire VLM airlines, one of Europe’s leading regional carriers catering primarily to business travelers. The Office of Fair Trading expressed concerns that the merger would substantially lessen competition in the route between London City Airport and Amsterdam Schipol Airport, particularly for business travelers. Passengers spend over £ 50 million flying on that particular route each year.

The OFT was concerned about the competition on that particular route for three reasons. First, the route could be considered a separate market, since enough business passengers like the ease of that route, especially when compared against using Heathrow or other London airports. The second concern was that the merging parties are each other’s closest competitors on the route, with a combined share per week of 70 to 80 percent of both seat capacity and number of flights. The airlines could have decided to cut flights on that route in order to drive up fairs. Finally, there was concern that another airline couldn’t compensate for the lost competition on that route, because of airport capacity restraints. In particular, new players to the airports could not obtain key peak time take-off and landing spots.

To address these issues, Air France-KLM offered a “slot divestment” which would make peak time airport slots on the London City Airport to Amsterdam Schipol Airport route that were previously used by Air France-KLM available to a new entrant to the market. In exchange, the OFT agreed it would not refer the matter to the Competition Commission, but insisted on the right to approve the new entrant up front before making a final decision. “A key lesson from abroad is that an incumbent airline’s offer to make slots available does not guarantee that a competitor would take up the offer and enter onto the route and so some past airline merger remedies failed to achieve their goal of restoring competition,” the OFT reasoned.

The OFT gave approval to the transfer of some of the slots on that route to the UK’s Eastern Airlines. Eastern proposes to offer eight daily services on weekdays, with four flights at peak times. Eastern will begin offering those flights in January 2009.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Competition Commission Approves Norwegian Firm’s Bid for Gas Stations

2008-10-30T06:50:00.000-07:00

The European Commission approved the proposed acquisition of ConocoPhillips’ network of 274 Jet fuel stations in Scandinavia by StatoilHydro of Norway.

StatoilHydro is an integrated oil and gas company that is active in the exploration and production of natural gas and crude oil. StatoilHydro also refines and sells gas and other oil derivatives. The company operates networks of gas stations in Scandinavia under the Statoil, Hydro, and Uno-X brands. Jet Scandinavia, the company being acquired, operates stations under the Jet brand.

In March, StatoilHydro notified the Commission of the purchase of Jet Denmark, Jet Sweden and Jet Norway, all part of Jet Scandinavia. Although Norway is not part of the EU, the entire transaction was subject to approval by the Commission under the European Economic Area agreement. Norway is a part of the European Economic Area, which includes the 27 members of the EU, plus Iceland, Norway and Liechtenstein.

The Commission began an in-depth review of the proposed acquisition in May 2008. The Commission noted concerns that the two companies overlapped in the market for retail motor fuels, and that competition might be affected.

The Commission also had concerns about Jet’s disappearance from the market, since Jet was the most efficient low-cost operator in both Norway and Sweden. In addition, Jet had a strong brand and a track record of undercutting competitors’ prices.

Following an investigation, the Commission recently released its findings that the proposed transaction as originally planned would raise serious competition concerns in Norway and Sweden, and would reinforce the oligopolistic structure of the Norwegian market. StatoilHydro’s position as the largest provider of motor fuels in Norway would be strengthened. In addition, in Sweden StatoilHydro is already the market’s largest supplier of motor fuels. By obtaining one of its largest competitors, Jet, the combined company’s market share would have been almost double the share of the next largest competitor.

In order to gain approval for the transaction, StatoilHydro agreed to sell 40 stations operating under the Jet brand in Norway, and 158 stations in Sweden operating under the Jet, Hydro, or Uno-X brands. Following this agreement, the Commission found that the transaction would not affect competition in the European Economic Area or any substantial part of it.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Gatwick Airport for Sale in Early November Due to Competition Concerns

2008-10-30T06:49:00.000-07:00

Gatwick Airport, located in London, will be up for sale in less than a month due to competition concerns raised several months ago in a preliminary investigation by the Competition Commission.

In March 2007, the UK’s Office of Fair Trading made a reference to the Competition Commission regarding the supply of airport services in the UK. In August 2008, the UK’s Competition Commission issued a report finding competition problems existed with each of the seven airports in the UK owned by British Airport Authority (BAA), a subsidiary of Spain’s Ferrovial. These competition problems caused adverse consequences for passengers and airlines.

The Commission noted that these problems became evident in several ways, including BAA’s lack of responsiveness to customer needs and a lack of initiative in planning. The Commission found that the lack of airline capacity, and in particular runway space, is a direct result of a lack of competition, although it admitted that government policies and planning regimes also played a role. In addition, the Commission observed that when compared to regional airlines, BAA is slow to develop new routes, lower prices and respond to consumers’ needs.

In its report, the Commission announced that BAA should sell two of its three London airports (Gatwick, Heathrow and Stansted) and one of its two Scottish airports (Edinburgh and Glasgow). The Commission was seeking advice on which three airports should be sold and will release its final report in the first quarter of 2009. The Commission noted that because of its own guidelines, Heathrow was not likely to be recommended for sale, unless the sale of Gatwick or Stansted was impractical or ineffective. The report also recommended changes to the regulatory system that governs the airports.

In response to the report, BAA announced that although it disagreed with the report’s conclusions, it was putting Gatwick up for sale in November. Gatwick is London’s second-largest airport, the world’s busiest single-runway airport and served 35 million customers in 2007. BAA hoped to hold on to Stansted, as well as Heathrow. BAA will send an information memorandum to interested buyers in the first half of November. BAA hopes to sell Gatwick for around £ 3 billion.

Anonymous sources say that Citigroup and the Vancouver Airport Authority are planning a joint £ 2 billion pound bid for Gatwick. Many potential buyers have already expressed an interest, including Virgin Atlantic airlines, Goldman Sachs and Deutsche Bank. Five or six consortiums are expected to emerge soon to bid on the airport. Sources close to BAA said the selling process would take at least a year.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

OFT Issues SO Accusing Recruitment Agencies of Breaching Competition Act

2008-10-30T06:48:00.001-07:00

On October 21, the UK’s Office of Fair Trading issued a Statement of Objections, alleging that eight recruitment agencies breached the Competition Act of 1998.

The agencies involved are: A Warwick Associates, Beresford Blake Thomas, CDI AndersElite, Eden Brown, Fusion People, Hays Specialist Recruitment, Henry Recruitment, and Hill McGlynn Associates.

The OFT found that the agencies had breached the Chapter 1 prohibition of the Competition Act. The Chapter 1 prohibition governs all anti-competitive agreements and practices that have the object or effect of preventing, restricting or distorting trade or competition in the UK.

Specifically, the OFT found that the recruiting agencies, many with offices in the north, engaged in a collective boycott by agreeing to withdraw from entering into contracts with a particular intermediary to supply employment candidates to UK construction companies. In addition, it found that the companies participated in price fixing by agreeing to fix fee rates for supplying employment candidates to intermediaries and UK construction companies. The OFT decided there was one overall infringement. The activities occurred from late 2004 until sometime between the end of 2005 and the beginning of 2006. The exact duration of each agency’s involvement varies. The OFT began investigating in May 2006.

The OFT will further investigate to decide if the law has been violated once it reviews each party’s responses to the SO. The parties involved have until January 9, 2009 to respond. One company representative spoke out, claiming the allegation indicated the occurrence of a purely technical breach of the law, that customers did not suffer and the company did not profit from the alleged actions taken.

Randstad, the world’s third largest staffing firm, acquired two of the recruiting agencies, Hill McGlynn Associates and Beresford Blake Thomas, this year as part of a £ 3 billion deal.

The OFT could choose to fine each of the agencies involved up to 10 percent of their global revenue in the affected market. The OFT’s chief executive, John Fingleton, showed that the OFT was taking the investigation very seriously, commenting that “for a market to work well, companies should compete to supply services and set prices independently. If we find evidence of anti-competitive activity we will use the appropriate powers to punish the companies involved. If proven, the alleged practices in this case would amount to a serious breach of the law.”

This investigation follows another large investigation by the OFT into the construction industry, which involved 112 builders and was focused on cover pricing, a practice in which construction firms secretly agreed on the prices they would submit during a tender process.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

OFT Issues New Guidance for News Suppliers

2008-10-30T06:47:00.000-07:00

The UK’s Office of Fair Trading ruled on October 22 that its rules governing magazine and newspaper distribution could be relaxed, and that it would not pass its review to the Competition Commission.

In 2006, the National Federation of Retail Newsagents made a request to the OFT to refer the magazine and newspaper distribution sector to the Competition Commission. The OFT reviewed the current practices and issued three publications.

The first publication provides guidance to help publishers, distributors and wholesalers discern for themselves whether newspaper and magazine distribution agreements comply with the Competition Act, which is the major source of competition policy in the UK. These distribution agreements provide “absolute territorial protection”, which grants wholesalers exclusive territories in which other wholesalers are prevented from selling to retailers.

For the sale of newspapers, the publication sets out several factors that may show that the distribution agreements benefit from their exemption under the Competition Act. However, magazines are much less time-sensitive than newspapers, which means there may be a greater scope for competition to develop in the distribution of magazines. The OFT recommended that the parties review their distribution agreements, taking into account the guidance provided in the publication.

The second publication issued by the OFT reviewed the National Newspapers Code of Practice, which was introduced in 1994 following concerns that wholesalers were refusing to supply new retail outlets if they considered an area was already adequately served. The Code requires wholesalers to supply all new retailers who agreed to minimum weekly purchases of newspapers. The review found that changes have taken place in the market since 1994, and greater commercial incentives to supply new retail outlets now exist. Therefore, the OFT recommended to the Secretary of State for Business Enterprise and Regulatory Reform, Lord Mandelson, that newspaper wholesalers should not be required to abide by the Code.

Finally, in its third publication, the OFT has temporarily decided not to refer the newspaper and magazine supply sector to the Competition Commission. Although the OFT found that certain factors met the statutory test to be referred, it ruled to exercise its discretion not to make a reference. One reason the OFT decided not to make a referral was it found that positive developments in the newspaper and magazine distribution market would most likely occur once the parties involved reviewed their distribution agreements. The OFT will come to a final decision regarding referral to the Competition Commission in early 2009.

The Periodical Publishers Association, the trade body of the publishers’ industry, welcomed the OFT’s protection for newspapers, but it argued that many magazines, particularly weekly magazines, were also time sensitive and therefore deserved protection as well.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

OFT Gives Approval for Grocery Chain Takeover

2008-10-28T09:06:00.000-07:00

The UK’s Office of Fair Trading gave the Co-operative Group, one of the world’s largest consumer-owned businesses, permission to acquire the Somerfield chain of 900 supermarkets and convenience stores.

In its analysis of the acquisition, the OFT undertook one of the largest consumer surveys in merger history. It surveyed 40,000 UK consumers about their grocery shopping preferences in areas where the Co-operative and Somerfield are present. After analyzing the extensive evidence, the OFT found that the merger would not give rise to competition concerns at a national level.

In its approval of the £ 1.6 billion takeover, the OFT stipulated that the Co-operative will be expected to sell at least 126 stores in local areas in which the OFT found competition concerns to exist. In those areas, the Co-operative and Somerfield compete closely against each other. Under the proposed acquisition, the Co-operative would replace a Somerfield supermarket with a Co-operative store in an area in which one of the few other competing stores is a regional co-operative, which is linked to the Co-operative through membership in the same buying group.

The OFT is satisfied the Co-operative will be able to find buyers for most of the stores, but in the event there are no buyers for some stores, the parties agreed to find buyers up-front for the OFT to approve before agreeing to a final deal. The OFT will consult publicly on the suitability of proposed buyers for the stores, as well as on other aspects of the proposed divestment.

The sale of the 126 stores is expected to be the largest every in UK merger and competition history. However, the OFT is not concerned that the divestment of those stores will create any new competition concerns at the national level, since the divestment package represents only a small percentage of total grocery stores in the UK, and it will be divided among multiple buyers.

After the acquisition, the Co-operative will be the UK’s fifth largest grocery retailer, behind Tesco, Asda, Sainsbury’s, and Morrisons, with an eight percent share of the market and sales of around £ 8 billion annually. The OFT noted that after the acquisition, the Co-operative will be stronger against the big four grocery chains, which will result in increased competition and would not result in coordination between the grocery retailers.

In a statement, the Co-operative said it “welcomes this afternoon’s announcement by the Office of Fair Trading which, subject to us addressing a small number of local competition issues, clears the way for the creation of a stronger fifth player in the grocery market. This is good news for consumers and good for competition.”

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Fine on Graphite Cartel Upheld by European Court

2008-10-28T09:05:00.000-07:00

On October 8, the European Court of First Instance upheld the European Commission’s ruling that imposed a 96 million euro fine on a group of carbon and graphite makers for forming a cartel.

An investigation by the European Commission, which began in 2001, found that six companies had colluded in carbon and graphite markets, which are mainly used to transfer electricity to and in electrical motors. Applications include carbon brushes, electric shavers, vacuum cleaners, and current collectors which power trains. In December 2003, the EC imposed the fine. One of the six companies received immunity from fines for being the first to notify the EC of the illegal cartel.

The companies appealed the fines. In the appeal, the companies did not claim that no cartel existed. Instead, they focused on the amounts of the fines. Two companies argued that the fines should be reduced because the effects of the cartel, especially on car manufacturers, had been minimal relative to buying power. A third company argued its fine should be reduced because it notified the EC that certain documents were destroyed by a fellow member of the cartel, which had applied for immunity in the case.

The Court disagreed, finding that a cartel existed and the EC had stayed within its margin of discretion in determining the size of the fines. The Court rejected the argument that the effects of the cartel had been minimal, finding that the cartel did have an impact on the market. The Court noted that the EC classified each company as small, medium or large, taking into account each company’s turnover, and did not violate the principles of equal treatment and proportionality in determining the size of the fine.

The Court also dismissed the claim that fines against one company should be reduced because it notified the EC of the destruction of documents by the company that had been granted immunity. The Court found that the company that destroyed the documents did so well before applying for immunity, and brought very extensive evidence of the cartel to the EC.

The Court also found that the EC investigation had uncovered that the cartel held more than 140 meetings, which they called summits, to decide price increases for products, as well as for large individual customers. The cartel also plotted how to ward off competition by undercutting any rivals left in the business. The summits provided strategic direction and solved problems, while the detailed price arrangements were discussed in ‘technical’ meetings. None of the companies involved disputed these facts. In fact, some of the companies involved were also involved in two other cartels during the same time period.

The cartel operated across the entire European Economic Area, which consists of the EU plus Liechtenstein, Iceland and Norway. The cartel operated between 1988 and 1999 and controlled 93 percent of the European market for carbon and graphite. The European carbon and graphite market is valued at around 290 million euros per year.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Coca-Cola and Commission Reach Agreement: The 2004 Settlement in Detail

2008-10-28T09:03:00.000-07:00

In 2004, American-based Coca-Cola reached an agreement with the European Commission over business conduct spanning the European continent. The settlement followed an intensive five-year anti-trust investigation, provoked by complaints from Coca-Cola’s chief rival, Pepsi, into alleged anti-trust commercial behavior. The settlement was drafted in consultation with competitors.

The settlement stands as a landmark as one of the first cases in which the Commission opted to negotiate an agreement in lieu of lavish financial penalties. The accord between the European Commission and Coca-Cola, which operates in all EU countries, shut down two similar anti-trust investigations in France and Spain.

Coca-Cola is alleged to have undermined competition by requiring retailers to sign exclusivity agreements that forbid the latter from selling products by rivals such as Pepsi. Coca-Cola is also alleged to have abused its dominant market share by offering “rebates” for retailers that carried the whole Coca-Cola line of products, and providing retailers with additional rebates for adherence to purchasing agreements.

At the time of the settlement, Coca-Cola dominated approximately half of the European market with some £17 billion in annual sales. Its dominance was especially striking in Belgium, where it controlled 68 percent of the market compared to Pepsi’s 5 percent. Other European markets were nearly as striking, such as France, where Coke held 60 percent of the carbonated beverage market and Pepsi boasted just 5 percent.

The settlement heralded an end to exclusivity contracts and anti-competitive rebate programs. Retailers were empowered to use up to 20 percent of Coca-Cola refrigerators to stock products from rivals instead of less popular products in the Coca-Cola name. And, retailers were no longer forced to group all Coca-Cola products together.

Although the European Commission preferred to find an agreeable settlement in consultation with Coca-Cola and its competitors rather than levy fines against the company, the Commission may impose financial penalties if Coca-Cola is found to have violated any of the key settlement provisions.

The Commission believes that the settlement has resulted in greater choice for consumers and genuine competition in the European market. The Commission’s chief regulator, Mario Monti, said of the settlement that consumers would be enabled to purchase drinks “on the basis of price and personal preferences, rather than pick up a Coca-Cola product because it’s the only one on offer.”

The settlement marked the end of what was then the Commission’s longest-running anti-trust investigation. The agreement is binding in all European Union countries.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Price Fixing Probe Against Six Scottish Dairies Dropped

2008-10-22T05:31:00.002-07:00

After a seven-year investigation, the UK’s Office of Fair Trading dropped a case pending against six Scottish dairies accused of price fixing. The OFT ruled there was a lack of evidence in the case.

The OFT began investigating in June 2000 after complaints of price-fixing in the milk industry from Express Dairies, which was later sold to Arla, a rival to the dairies under investigation. In 2002, the OFT found the complaints were unfounded. Express Dairies appealed, and the OFT began another investigation in July 2003. That case was closed and was later reopened in September 2006.

In 2006, the OFT released a Statement of Objections, which provisionally found the dairies had engaged in price fixing and market sharing. The OFT’s SO indicated that between 2000 and 2003, the dairies shared price information, coordinated a series of price increases, and colluded over plans to not compete for each other’s customers. The allegations related to the “middle ground” market for milk in Scotland, which includes customers such as schools, small stores, hotels and cafes, but excludes major supermarkets.

However, after continuing investigations, including the dairies’ responses to the SO, the OFT found there was not sufficient evidence to proceed to an infringement decision as set out in the original SO. The OFT noted that continuing with the investigation was an improper use of resources.

The dairies being investigated claimed Arla had entered the milk market in Scotland, found it was already being sufficiently served, so decided to hurt the competition by filing a complaint with the OFT. Arla also filed a £ 15 million suit with the Court of Session, which remains unsettled.

The largest independent dairy in Scotland, Graham’s Dairy, noted that since the investigation is over, it can now proceed with a £ 1 million investment program in new product development. The program had previously been put on hold while the investigation was ongoing. The dairy noted that it spent over £ 500,000 in legal fees during the course of the investigation. The other dairies involved also had significant legal fees. The heads of two of the dairies felt they had been vindicated, but expressed a desire for the OFT to provide more closure by commenting on the quality of the claims.

The OFT observed that although this investigation is complete, it is unconnected to an ongoing investigation into collusion between certain UK dairy processors and certain large supermarkets, which is still continuing.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

European Commission Fines Banana Suppliers for Operating Price Cartel

2008-10-22T05:31:00.001-07:00

The European Commission fined banana importers Dole and Weichert € 60.3 million for participating in a cartel between 2000 and 2002, in violation of the European Commission Treaty’s ban on cartels and restrictive practices.

The Commission found that Dole, Chiquita, and Weichert (which sells Del Monte bananas) coordinated the setting of quotation prices for bananas in eight EU Member States: Austria, Belgium, Denmark, Finland, Germany, Luxembourg, The Netherlands and Sweden. In 2002, the combined retail value of bananas sold in those Member States totaled around € 2.5 billion.

The EC opened an investigation in April 2005, after Chiquita applied for immunity as a whistle-blower under the EC’s 2002 Leniency Notice. The Notice grants immunity from fines to the first member of a cartel to inform the Commission of an undetected cartel by providing the Commission with enough information to allow an inspection on the premises of the suspected companies.

The EC then carried out surprise inspections at the premises of several banana importers. The EC discovered that between 2000 and 2002, each Thursday the banana importers in question would announce their price for bananas for the following week in the eight Member States. On many occasions, the companies would call each other, usually the day before they set their prices. During the calls, the companies would discuss their pricing intentions and how they saw the prices evolving. The companies denied they were sharing sensitive information, instead claiming they were required to share trade data under the EU’s system of setting import duties and volumes.

Dole, which is the world’s largest producer of fresh fruit and vegetables, was fined € 45.6 million. Weichert was fined € 14.7 million. Chiquita avoided a fine of € 83 million because it provided information that enabled the EC to open the investigation. The fines on Dole and Weichert were originally higher, but were reduced because of specific circumstances of the case, including the regulatory regime that existed in the banana market at the time of the violations.

In addition, Weichert’s fine was reduced by 10 percent because it did not participate in part of the cartel. Del Monte was held jointly and severally liable for Weichert’s fine, since it controlled Weichert at the time of the cartel. However, Del Monte claimed it was not responsible for Weichert’s conduct because it held only a “noncontrolling financial interest” in the company.

Any person or firm who was affected by the banana cartel can go to court to seek any damages which resulted from the cartel.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

American Industrial Equipment Company Manitowoc Cleared by U.S. to Buy U.K.’s Enodis PLC

2008-10-22T05:30:00.002-07:00

Industrial equipment company Manitowoc Co. got approval October 8 from the U.S. Justice Department’s Antitrust Division to buy Enodis PLC of the United Kingdom.

In late September, the companies received clearance from the European Commission to proceed with the deal, as long as Manitowoc agreed to sell Enodis’s ice-making machine business in the European Economic Area. The Justice Department concurred in October that the sale of the ice-making machine business in the U.S. was also key to its approval of the $2.1 billion deal.

Enodis produces commercial food and beverage such as fryers, grills and refrigerators. Manitowoc is active in several sectors, including ice making machines, beverage dispensers and refrigeration equipment. In 2007, Manitowoc sold about $152 million of commercial ice machines and Endodis sold about $153 million of the same.

The European Commission was concerned about the parties’ overlap in the areas of commercial ice machines and beverage dispensers. The EC’s initial investigation found that the acquisition would raise competition concerns in a number of member states. After the acquisition, the EC found, the merged company would have a very large market share in relation to the three types of ice making machines: self-contained cubers, modular cubers and flake machines. All other competitors to the combined company would have substantially lower market shares.

The EC was also concerned about certain non-ice businesses of Enodis located in Italy that are operated under the Tecnomac and Icematic brands. Manitowoc agreed to sell these production facilities as well.

The EC ruled that with the divestiture of the ice-making machine businesses and the production facilities in Italy, the proposed transaction would not significantly impede effective competition in the EEA or any substantial part of it.

The U.S. was concerned about the parties’ overlap in the area of commercial cube ice machines. The acquisition would create a company with about 70 percent of the U.S. market for commercial ice cube machines, which are used by fast food franchises like McDonald’s and Burger King. The acquisition would also cut the number of companies selling such machines from three to two.

The Justice Department noted that without the divestiture of the ice machine business, U.S. purchasers of commercial ice cube machines would have faced higher prices and reduced quality and innovation. However, with the sale of the ice machine business, the merger was found not to violate anti-trust provisions. Government approval of the merger is subject to final court approval.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

EDF May Sell British Energy Power Station to Clear Competition Hurdles

2008-10-22T05:30:00.001-07:00

EDF, the main electricity generation and distribution company in France, is considering the sale of British Energy’s sole coal-fired power station in order to avoid competition problems in its takeover of British Energy.

EDF, which is over 80 percent owned by the French government and is the world’s largest nuclear power provider, recently purchased British Energy for 12.5 billion pounds ($23.1 billion). EDF also supplies gas, electricity, and associated services to more than 38 million customers in France and Britain, as well as several other countries in Europe. British Energy is the UK’s largest electricity generator, owning eight nuclear plants and one coal-fired plant.

The deal still has to be approved by the EU, as well as British Energy’s shareholders, but EDF is confident it will be approved quickly. British Energy’s board has already recommended the deal to its shareholders. EDF is considering possible scenarios to smooth the way for the deal with anti-trust regulators. Critics say the acquisition will give the French government a monopoly on Britain’s electricity markets.

One solution proposed by EDF would be the sale of British Energy’s coal-fired power station in Eggborough, North Yorkshire. The plant is one of the UK’s biggest electricity generators. EDF believes that selling it would avoid the need for a phase two inquiry into the deal by the European Commission, which handles anti-trust regulatory matters. A phase two inquiry could take months.

The sale would settle worries that the deal would limit competition and drive up prices. Coal-fired power stations offer energy companies greater control over pricing because, unlike nuclear plants, coal-fired plants have greater flexibility on generating capacity. EDF already owns two other large coal-fired plants and one gas-fired plant in Britain.

Because the British government stressed it wanted more players in the nuclear power industry, EDF has also agreed to sell British Energy-owned land to other potential nuclear operators at some specific sites under certain circumstances, depending mainly on receiving planning consents from the British government to build four new nuclear reactors. This land sale is expected to accelerate development of new nuclear power stations in the UK by making attractive sites available to at least one other potential operator.

The owner of British Gas is also expected to acquire a 25 percent stake in British Energy from EDF at a later date. This move is anticipated to benefit British Gas by reducing its risk and exposure to volatile wholesale gas prices, as well as allowing it to invest in nuclear power plants.

The acquisition is expected to clear competition and regulatory hurdles, as well as shareholder approval, in late 2008 or early 2009.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

European Union Rules Slovakian Law which Remonopolized Postal Services Is Illegal

2008-10-22T05:29:00.001-07:00

The European Union (EU) ruled on October 8 that a Slovakian law that reserved the right to deliver hybrid mail to the incumbent postal operator, Slovenska Posta, infringed on anti-trust laws.

Hybrid mail is a specific type of mail, in which the content is electronically transferred from the sender to the postal service operator, who prints, envelopes, sorts and delivers the postal items. Hybrid mail is important to companies who regularly send large amounts of mail, such as invoices.

In the Slovak Republic, the delivery of hybrid mail was open to competition and several private companies were active in that sector. In February 2008, the Slovak Republic amended its postal laws, reserving the delivery of hybrid mail to Slovenska Posta. Private operators were prevented from sending hybrid mail, and therefore suffered financial losses.

The Slovak Republic, upon notification of the investigation of the amended postal laws, argued the new laws were necessary in order to fund the universal postal service under the third postal directive. The third postal directive set the clock ticking for abolishing postal service monopolies in the EU. The Slovak Republic also claimed that the only part of the services of the hybrid mail companies that were affected by the new laws were the delivery portion of the service. The hybrid mail companies were still free, it claimed, to print, fill the envelopes and sort the mail, just not deliver it.

The EU dismissed the Republic’s claims, finding that the remonopolization of the hybrid mail services harmed consumers and businesses, as well as risked losing advances already achieved.

The European Court of Justice had previously ruled that the extension of a statutory monopoly into neighboring but competitive markets is incompatible with Articles 82 (concerning the abuse of dominant market positions) and 86 (anti-trust rules) of the European Commission Treaty. The EU’s postal directive allows monopolies if that is the only way in which to maintain service, but that would not apply in this case since there had previously been a competitive market. The EC found that neither the Slovak Republic nor Slovenska Posta had been able to demonstrate that the reservation of hybrid mail services was necessary to finance the universal postal service.

The European Commission’s decision is directly binding on the country. The Slovak Republic could decide to appeal the decision to a European court in Luxembourg, but in the meantime has one month to inform the Commission of any measures taken to enable the hybrid mail market’s reopening to competitors.

The EU’s decision comes in the wake of a long battle by the EU to open up mail services to competition in member states. This is due to happen by 2011, but there are concerns that some countries are backsliding.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

Porsche Makes Gains in Controlling Volkswagen Stock

2008-10-20T04:38:00.000-07:00

Earlier this month, Porsche increased its standing as the dominant shareholder of Volkswagen, Europe’s largest auto-maker, from 31 to 35.14%. Porsche’s increased holdings guarantees the firm a “permanent majority at the VW general assembly,” and it intends to eventually control in excess of 50% of Volkswagen stock.

The structure of German securities law enables Porsche’s 35% holding to subordinate Volkwsagen to an “effective” unit of Porsche, despite the fact that Porsche is the smaller of the two auto-makers. Indeed, Porsche employs roughly 11,000 workers and manufactures approximately 100,000 vehicles, compared to Volkswagen’s 300,000 strong workforce and six million annual new cars.

Porsche is also required by statute to submit a formal offer to acquire Audi AG, a Volkswagen subsidiary. The mandatory offer must be filed with the German Federal Agency for Financial Services Supervision by mid-October.

Porsche faces additional challenges to its interest in taking an increasingly dominant role in Volkswagen over the coming months and years. Government entities seek to maintain a sizeable minority in the company and some executive officials in Volkswagen are resistant to further Porsche control.

The German state of Lower Saxony control a combined 20% of Volkswagen stock. A special law guarantees Lower Saxony veto power in Volkswagen matters, effectively functioning as a blocking minority in the Volkswagen general assembly. However, the law has recently come under fire by the European Commission’s anti-trust regulatory body, the European Commission. Regulators have sought to undo the law on the basis that it unlawfully restricts the free flow of capital and is thus anti-competitive. The European Court of Justice ruled to strike it down last October, but the ruling is on appeal.

Trade unions are extremely powerful in Volkswagen, and they are insistent that the special suite of Volkswagen laws, including government ownership and labor policy, remain on the books. Shortly after Porsche acquired the additional shares earlier this month, union official organized a 40,000-strong worker walk-out to demonstrate their intent to see that Volkswagen maintains its commitment to working with organized labor. Furthermore, Volkswagen’s works committee has an express interest in limiting Porsche’s influence of VW and is actively seeking to maintain its operational control.

Additionally, VW recently unveiled new codes of conduct which state that employees only need to share VW information with Porsche as it relates to necessary financial information. Porsche may be provided information outside of the guidelines – about troubles facing Volkswagen, for instance – but may be required to provide additional compensation or concessions, according to the German magazine Capital.

Porsche first acquired a 20% interest in Volkswagen three years ago and hopes to acquire 50% control in the foreseeable future.

Porsche is among the world’s most profitable car design and manufacturing firms, and analysts predict that further consolidation with Volkswagen and Audi will permit even more flexibility and efficiency in production in emerging areas such as hybrid engines.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.

European Commission Issues Fines Totaling 676 Million Euros for Paraffin Cartel

2008-10-12T13:48:00.000-07:00

The European Commission has issued a fine of totaling £676 against nine petrochemical giants for a price-fixing cartel affecting the prices of paraffin wax throughout the European Economic Area. Sasol, the world’s largest producer of fuel coming from coal, faced the stiffest penalties; other cartel members include energy giants ExxonMobil, MOL, Repsol, Shell, RWE, ENI, Hansen & Rosenthal, MOL, Repsol, Tudapetrol and Total.

This represents the fourth-largest fine the Commission has handed down for anti-trust violations. Its size is due in part to the breadth of commercial impact, duration of the violations and size of the colluding firms.

Paraffin wax is derived from petrochemicals and used in a variety of products available at the retail level, from chewing gum to rocket fuel, and crayons to wax for surfboards.

The Commission’s top agent said in a statement: “There is probably not a household or company in Europe that has not bought products affected by this ‘paraffin mafia’ cartel, with all that implies in terms of paying over the odds, higher costs and economic damage.”

Executives at the firms were well aware that the cartel membership and activity was illegal, according to the Commission.

The single largest fine, £318.3 million, was issued to Sasol. Sasol faced the stiffest penalties because it was the leader of an illegal price-fixing cartel, according to Commission. The cartel fixed prices of paraffin and slack wax from 1992 until 2005, and the Commission’s evidence says that the cartel met regularly to fix prices, and allocate markets and customers.

Sasol cooperated with investigators, which qualified it as part of the Commission’s leniency program. Under its regulations, cartel members who come forward with evidence of anti-competitive behavior face reduced financial penalties. The Commission has the power to levy fines up to 10% of a firm’s global sales. In this case, Sasol’s fines were reduced from £636 million due to its cooperation.

Shell was granted immunity from fines because it first approached the Commission with information of an illegal parrafin anti-competition cartel. It’s fine may have reached £98 million.

The Commission imposed the largest fine on Sasol Wax Gmbh, based in Hamburg. The parent firm said that the fine would be shared among Sasol Wax Gmbh and several of its other divisions, including Sasol Wax International AG, Sasol Holding in Germany Gmbh and Sasol Limited.

Individuals and corporations who were affected by the artificially inflated prices are entitled to seek damages in the national courts of European Union countries.

About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.