Office of Fair Trading Approves Airline Merger after Competition Concerns Alleviated

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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.

OFT Has Announced Discovery of Compelling Evidence Following Dawn Raids in UK Grocer Investigation

The United Kingdom’s Office of Fair Trading has collected evidence offering “reasonable grounds to suspect” UK grocery retailers and suppliers of sharing pricing data and colluding in cartel-like behavior. Those under investigation include the “Big Four” UK grocers Asda, Tesco, J Sainsbury, and Wm Morrison, in addition to supplier Proctor & Gamble.

The OFT’s statements have come in the form of a letters mailed to companies implicated in its largest anti-trust investigation. Earlier this year, the office conducted dawn raids on more than 20 of the United Kingdom’s supermarkets and their suppliers. Allegations of anti-competitive conduct is nothing new to Asda, Tesco, J Sainsbury and Wm Morrison, generally considered the “Big Four” UK grocers. In addition, the OFT has requested relevant information from manufacturing giants including Unilever, Procter & Gamble, Nestlé, Cadbury, Mars, Coca-Cola Enterprises and GlaxosmithKline.

This investigation was prompted by evidence uncovered by a separate investigation the European Union’s Competition Commission initiated two years ago.

The European Union’s Competition Commission focused on the Big Four during an investigation that lasted from 2006 until earlier this year. The Commission examined whether the supermarket chains set uncompetitive prices, wielded significant control over the market in a manner inconsistent with consumer protection, and purchased and sold land in a deliberately anti-competitive manner.

In response, the firms launched more than 50 distinct initiatives aimed at undermining the Commission’s investigation. Each week, the companies unveiled a new action that Commission officials have stated were pre-emptive strikes against the investigation, from charity programs to energy efficiency improvements. It was reported that the Commission had been considering the appointment of an independent ombudsman to permanently supervise the chains’ conduct.

The Commission announced that it would no longer proceed with its investigation earlier this year. However, it uncovered a series of e-mails that “might raise issues of co-ordination” that it shared with the OFT.

The OFT has previously investigated these firms for anti-commercial conduct. A looking into price-fixing of dairy between 2002 and 2003 led to fines of some €116 split between the Big Four and massive, factory-like dairies.

The OFT has not served an official Statement of Objections with the companies and may not do so until 2009, if at all. If it ultimately issues financial penalties, the Office has the authority to impose fines of up to 10 percent of the grocers’ annual worldwide sales. Wal-Mart, owner of the Asda chain, may be granted partial or complete immunity for early and consistent cooperation with the investigation; the other three firms may also seek to participate in the OFT’s leniency program.

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.

MasterCard Settles Latest Anti-Trust Charges

In June, 2008, MasterCard settled an anti-trust lawsuit with its rival, American Express, and has agreed to pay it $1.8 billion. The anti-competition suit was initiated in 2004. This is the latest in a series of fines MasterCard has faced for anti-competitive conduct stretching back as far as 1998.

American Express brought charges MasterCard, Visa and several banks that the two had business relationships with. The suit quickly followed a 2004 United States Supreme Court ruling that MasterCard and Visa had been unlawfully prohibiting their member banks from providing services, including the issuing of credit cards, to competitors such as American Express. Visa settled the suit for some $2.25 billion under the condition that charges against its member banks were dropped, and the total that American Express has collected from both MasterCard and Visa is in excess of $4 billion, one of the largest settlements in corporate history. Settlement has yet to be reached with rival Discover Network.

MasterCard has also been subjected to anti-trust investigations in Europe. The firm issues about 45% of all cards in the European Economic Area under its MasterCard or Maestro logos, and has faced several bouts of allegations that it is in violation of the European Commission’s Treaty (Article 81), which governs unfair business practices and competition.

The European Commission has charged MasterCard with unfairly restricting commercial competition between banks on several occasions, which led to increased consumer costs, higher profits for participating banks, and little or no improved efficiencies. The most recent accusations were in 2006, when the Commission filed a statement of objections alleging that MasterCard unfairly predetermined and implemented minimum “interchange” prices, which retailers were required to pay to banks that issued the credit and debit cards each time a customer paid with MasterCard and Maestro-branded cards for retail purchases.

The Commission found the intercharge fees to lead to an unfair restriction of competition, siphoning “abnormal” and “excessive” profits to participating banks at the expense of consumers and retailers. The allegedly excessive interchange fees were also the subject of a 2003 Statement of Objections the Commission forwarded to MasterCard. The Commission’s chief has accused MasterCard and rival Visa of deliberately running a “closed shop” that resulted in “outrageous” profits.

The Commission estimated that MasterCard’s interchange fees led to more than 70% of the service charges facing merchants each time they ran a card in Belgium in 2002, and 60% in Italy the following year. Similar patterns were present throughout the European Economic Area.

MasterCard was ordered to make its intercharge fee program more equitable, and reduced them by more than half at the beginning of 2008. The fees are now set at €0.05 for each transaction, along with a surcharge of 0.2-0.3 percent.

The Commission also has the power to level fines against anti-competitive firms, which can be set at up to 10% of a company’s annual profits.

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.

Lloyds Granted Partial Anti-trust Immunity in Take-over of Failing Rival, HBOS

As central banks scramble to provide emergency funds and increase liquidity in financial markets around the world, the British government has arranged a deal to save one of its largest mortgage lenders. Based upon arrangements spearheaded by the Brown administration, Lloyds TBS Group has agreed to purchase the mortgage lender HBOS Plc. at a price of €12 billion. HBOS was at risk of collapse and the move is seen as a rescue plan that is likely to shore up an institution that has truly global affects.

Blessings from the Brown administration include suspension of key competition rules put in place just a few years ago to avoid precisely this sort of political interference in the free market. The UK’s 2002 Enterprise Act contains a provision that permits officials to waive anti-trust requirements “in certain public interest cases.” The seriousness of financial conditions does not guarantee that the deal will escape review from all competition regulators, however.

Great Britain’s Office of Fair Trading is expected to scrutinize the deal to determine whether or not it is in the best interest of consumers. Specifically, among its chief tasks will be to determine whether the combined bank will be large enough to unfairly abuse its dominant position to artificially control competition in the British lending market, including but not limited to home mortgages.

If shareholders approve the deal, the combined bank will reach massive proportions with nearly one third of the British mortgage market and a quarter of the Kingdom’s savings accounts. The combined entity will boast more than 3,000 branch locations, about 700 more than its nearest competitors. Shareholders will receive .83 shares of Lloyds shares for each single they held in HBOS stock.

Great Britain’s Office of Fair Trading is a government watchdog charged with ensuring consumer protection, including the power to investigate proposed mergers and halt them if consumers protections are deemed inadequate.

The OFT will need to attempt to balance concerns of ensuring robust competition, and hence consumer protection, against financial stability in the marketplace. In 2001, the OFT blocked a Lloyd’s takeover of another UK banking institution, Abbey, due to the potential for an “adverse impact on consumer choice.”

The European Commission, charged with responsibilities including scrutinizing mergers of European institutions, is not likely to have jurisdiction over this deal due to the domestic nature of both Lloyds ad HBOS.

HBOS’s stocks have lost more than half their value in recent weeks.

The OFT is currently in the midst of an investigation into the British banking sector over bank charges.

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.

Sony, Fuji and Hitachi Maxwell face fines for Videotape Cartel Based on Levels of Involvement and Cooperation

The European Commission imposed fines totaling €74 Million on Sony Corp., Hitachi Maxwell Ltd. and Fujifilm Holding Corp. in November 2007. The companies have admitted to violating Article 81 of the EC Treaty, which governs restrictive business practices and cartels, between 1999-2002. The three are believed to have operated an illegal price-fixing cartel, artificially inflating prices of their professional videotapes across Europe. The three media conglomerates had a combined share of 85% of the European market during the time in question.

The Commission raided the companies’ European offices in May 2002, and based its financial penalties on evidence that the corporations illegally worked together to fix prices on professional videotapes used by corporate and independent television stations, producers, advertisers and other industry entities. The companies met to discuss anti-competitive initiatives on at least 11 occasions. They agreed to set and then implement illegal prices in tandem based on agreements made during at least three of the meetings, according to the Commission. When they did not set price increases, they relied on other means of price stabilization. The companies also exchanged sensitive industry information, and monitored one another to ensure compliance with cartel decisions.

Prices for the two most popular formats of professional videotape, Betacam SP and Digital Betacam, generate sales in excess of €115 annually.

The heaviest fine was imposed on Sony, reaching €47.2 million, because it failed to cooperate with the Commission’s investigation and did not admit to wrongdoing until after receiving the Commission’s official Statement of Objections. A Sony employee is alleged to have shredded documents during the raid, and another is accused of refusing to answer investigators’ questions. Sony’s penalty was increased by 40% to punish its failure to cooperate fully in the Commission’s investigation.

Fujifilm and Hitachi Maxwell are said to have fully complied with the investigation, going so far as supplying additional evidence that filled out details of the cartels’ behavior. As a result, Fujifilm’s fine was reduced 40%, to €13.2 million, and Hitachi Maxwell’s was reduced by 20% to €14.4. European Commission fines are based on the level of culpability of alleged anti-trust violators, and are set at a level that rewards a colluder’s relative level of cooperation.

The Commission has encouraged individuals and corporations who may have suffered from the illegal behavior between 1999 and 2002 to seek private damages from the companies.

This case marked the first time that the Commission used powers granted to it in 2006 to impose relative fines based on the culpability of each offender, and the economic significance of the anti-competitive behavior to consumers in the European Economic Area.

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 and Australian Regulators May Intervene in BHP’s Proposed Take-Over of Rio Tinto

BHP Billiton is seeking a hostile take-over of Rio Tinto. If successful, the merger will create the world’s largest mining conglomerate. However, European and Australian commissions suspect that the combined entity may wield undue monopolistic influence over the supply and price of iron ore on the world’s market and may violate anti-trust regulations.

Iron ore is a central component in the production of steel. BHP and Rio Tinto are the world’s second and third largest iron ore producers, and a combined entity would control an estimated 35% of the global iron ore supply.

The European Commission initiated a phase-one investigation in July. Based on initial findings that raised “serious doubts” about how the proposed merger may affect competition in the European market, the Commission has now moved on to a 90-day, phase II investigation. BHP asked for a twenty-day extension on the ruling, which is now due on December 9.

The European Commission’s ruling is believed to be the most likely to disrupt the bid, as European steel producers source a significant portion of their iron ore from holdings from regions under control of BHP and Rio.

The Australian Competition and Consumer Commission has issued a preliminary nine-page statement of issues that also raises anti-trust concerns. The ACCC is preparing a more detailed investigation about the potential effect of a merger between the two, which will be issued by October 1.

The ACCC said in a statement that “[t]o the extent the proposed acquisition lessens competition in the global seaborne supply of iron ore, it would be likely to have the effect of increasing global iron ore prices.” If the merger moves forward, there will still be alternative iron ore suppliers, but the ACCC is doubtful that they will have the capacity to supply enough ore to counteract the possible effect of a merged BHP-Rio Tinto conglomerate. Vale, a Brazilian corporation, is presently the world’s largest producer of iron ore.

Finally, China is concerned about how a BHP take-over of Rio Tinto will influences its domestic steel production, which helps fuel the country’s remarkable urban infrastructure development.

United States regulators have already given approval for the bid.

Market regulators have not expressed concern over other commodities the two firms share in common, such as coal, gold, copper, uranium, bauxite or alumina.

Rio Tinto has indicated that it believes BHP’s $175 Billion hostile take-over bid $142 does not properly value Rio’s holdings.

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.

Alitalia Invites Anti-Trust Speculation Amid Bankruptcy and Merger Proceedings

Alitalia, the state-owned flagship air carrier of Italy with hubs in Rome and Milan, has filed for bankruptcy protection. Market observers believe that protection from creditors is essential as the airline shapes a reconstruction plan around combining various parts of its operation with rival carriers.

Alitalia may merge with Italy’s second-largest carrier, Air One; the combined fleet would dominate the Italian market with a share of around 60 percent. However, Air France has expressed interest in buying a minority share in the airline, and Italian officials are also talking with Germany’s Lufthansa. British Airways is also rumored to have expressed interest in Alitalia.

Italian officials have already pronounced a special decree that suspends anti-trust and merger regulations to help Alitalia restructure. Watchdogs with the European Commission have may be more hesitant to allow an international expressed concern over the latest in a string of moves favorable to Alitalia. European officials will require that any future moves to save the air carrier must conform to international standards and benefit workers.

The European Commission is currently investigating Alitalia over the latest in a series of infusions of capitol from the Italian government, which may give it an unfair advantage in the marketplace.

Alitalia is also under investigation by the European Commission as a member of the so-called SkyTeam. The Commission may levy siginificant fines on airlines in the alliance, including Alitalia, Air France, Delta, Northwest and others, because they are not acting as true competitors in the marketplace.

Alitalia is expected to have lost €600 million this year notwithstanding state financial assistance, which is in accord with a long history of financial losses. The carrier has lose some €3.7 billion in just the last decade. Its complicated financial picture is exacerbated by difficulty in crafting solutions that meet the needs of all relevant crediting, political, governmental and labor parties. Because the European Union forbids the Italian government from offering further financial assistance, and the latest round of merger talks with Air France-KLM broke down earlier this year, Alitalia is seeking protection from creditors combined with restructuring.

One possible Alitalia bail out envisions the carrier splitting into two separate firms. The first will carry all of the company’s debt. The second component will merge with a profitable rival air carrier. The new entity will gain all of Alitalia’s landing rights, pilots and various physical holdings, a generous infusion of capital, and new management.

Alitalia is expected to offer uninterrupted service as restructuring proceeds.

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.

Fines Levied on Imperial Tobacco, Gallaher, and Five UK Cigarette Retailers

An Office of Fair Trading investigation into price fixing resulting in fines totaling £132 million for Imperial Tobacco, Gallaher and five tobacco retailers, ASDA, First Quench, One Stop Stores, Somerfield, and TM Retail, this past July. Six other corporations are implicated, but dispute the OFT’s findings.

Imperial is the world’s fourth-largest tobacco producer and the UK’s second largest. It is behind many popular cigarette lines, including Lamber & Butler, John Player Special and Superkings, and boasts a distribution license for Malborough. Gallaher is the largest tobacco producer in the Kingdom, behind brands such as Benson & Hedges, and was acquired by Japan Tobacco in 2007. The two together account for nearly 85% of the Kingdom’s cigarette and tobacco product sales, and each the two conglomerates possess substantial international market share.

OFT officials have concluded that cartel was responsible for a large tobacco price fixing operation. Cartel members are alleged to have raised prices cooperatively according to a pre-ordained schedule and fee, and to have minimized competition among the retailers.

Gallaher was hit with the largest fine, £93 million. The OFT is authorized to impose fines up to 10 percent of a cartel member’s annual profits.

J Sainsbury, a sixth corporation involved in the cartel, is receiving reduced fines as part of the Kingdom’s leniency program. Corporations who acknowledge involvement in a cartel and provide full cooperation with an anti-trust investigation may see fines reduced up to 10 percent. The European Commission offers a similar program for inter-state anti-trust involvement.

The cartel’s anti-competitive commercial behavior is believed to have distorted prices for cigarettes in the UK, which are among the highest in the world. The cost for a pack of 20 cigarettes commonly costs around £5. Taxes make up much of the cost, but tobacco remains a lucrative market as profit margins are estimated at approximately 50 percent.

The investigation was originally spurred by evidence that Imperial’s Rizla tobacco rolling papers were being sold at anti-competitive prices. Other tobacco manufacturers including British American Tobacco were investigated for a vertical price fixing agreement but have not been implicated in the final report.

The Office of Fair Trading is the United Kingdom’s premiere competition improprieties regulator, and has been responsible for dozens of successful investigations in previous years. Its reach has recently seen sustained growth in both breadth of investigative authority and the ability to pursue punitive measures. It is increasingly cooperating with international anti-trust bodies. Executives responsible for the conduct of cartel members in the now face the additional penalty of criminal proceedings under the UK’s Enterprise Act.

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.

UPS Seeks to Acquire Major European Rival TNT NV

United Postal Service intends to buy up TNT NV, Europe’s number two express delivery service. The deal is estimated at roughly €20 million, although the companies have not made any public statements.

The potential acquisition is the latest of a serious of rumors that UPS, or its American competitor FedEx, is seeking to buy out the Amsterdam-based company. FedEx was reported to have secured the deal as recent as July.

If successful, UPS’s share of the European market will surge from 10 to 25 percent. This would make it Europe’s number one package handler, followed by the Germany-based DHL at 22 percent and FedEx at five percent. The deal represents UPS gaining an even larger lead in the world market, and reducing the number of its serious competitors from three to just two.

Although the European deal is unlikely to result in significant anti-trust concerns, UPS is currently in talks with DHL over delivery in the United States. DHL is interested in outsourcing its American air cargo delivery to UPS, potentially making the German company a $1 billion annual customer of its rival. This would reduce market competition and anti-trust concerns may be raised, particularly if UPS also gains dominance among European and transatlantic infrastructure.

The UPS-DHL deal is believed to be for a ten-year term, and to represent DHL’s best prospect to return to profitability.

The acquisition of TNT NV would prove to be UPS’s largest take-over to date. TNT operates in more than 200 countries, employs nearly 160,000 workers, and brought in revenues of €11 million in 2007. TNT NV’s express delivery services are perhaps the most efficient in Europe, and has a track record of rising profits despite worldwide economic downturns.

Industry experts believe that FedEx has more to gain by a buy-out of TNT NV, as it would make provide it with much-needed market share in relation to its competitors in the European market, but that UPS can make a more lucrative offer to TNT NV shareholders.

UPS seeks to gain TNT NV’s full complement of and air road delivery system with the acquisition, which experts believe is the most efficient of the continent’s networks. This is an especially attractive proposition, given rising fuel costs and UPS’s relatively modest European ground infrastructure. However, there is overlap among the companies’ services and physical holdings, and UPS stands to gain little by acquiring TNT NV’s non-express operations.

TNT NV also has a substantial delivery network in China, where UPS is making significant investments.

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.

Visa Fined 10.2 Million Euroes for Unlawfully Excluding Competitor in European Credit Network

The European Commission fined Visa €10.2 million for anti-competitive conduct that spanned more than six years, from March 2000 until September 2006. The Commission found that Visa, which controls roughly 60 percent of the European credit market, restricted Morgan Stanley from membership in its European network with discrimination.

The Commission ruled Visa’s exclusion of Morgan Stanley undercut competition in the entire market, with negative consequences to both consumers and merchants. First, Morgan Stanley was unable to offer Visa-branded credit cards to European consumers. Many merchants were also unable to contract with Morgan Stanley for an alternative to Visa’s credit card acceptance services. Because Visa and Mastercard services are often provided as a package to merchants, Visa’s conduct also affected Morgan Stanley’s participation in the broader financial network.

Morgan Stanley owned Discover during the time in question, although they are now separate firms. Discover did not and does not presently compete with Visa in the European market. The Commission believes that it is highly unlikely that Discover will ever enter into the European market, as doing so successfully is probably only possible with a substantial investment at a time when a credit system is in its infancy. Because the international credit market is highly concentrated, Visa’s exclusion of Morgan Stanley may stifled Morgan Stanley’s ability to compete with Visa in the US market.

The Commission is charged with enforcing many of the European Union’s Treaties, including a ban on restrictive business practices. Visa’s refusal to admit Morgan Stanley was found to be both unjustified and discriminatory.

The Commission rejected Visa’s major arguments. First, it held that even if the market gained any efficiencies by excluding Morgan Stanley, which was not proven, such potential efficiencies would not justify the cost of losing market innovations, nor reducing in the amount of services available to consumers and merchants.

Visa also argued that Morgan Stanley was excluded in part because of the need to protect confidential information. The Commission ruled that Visa failed to supply evidence which demonstrated such a risk that Morgan Stanley even would gain access to confidential information. It also ruled that any potential loss to confidentiality could have been mitigated by less severe means.

Finally, the Commission held that although there is a long-standing rule permitting market participants to exclude competitors from their system under most conditions, but that Visa’s anticompetitive behavior was unlawful because of the discriminatory application. Visa had previously admitted firms that competed with Visa other markets, such as Citigroup (Diners’ Club).

Discover is now a member of Visa’s European network.

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.

Microsoft Vows to Investigate Potential Anti-Trust Concerns Surrounding Google’s New Chrome Program

Google may face charges of anti-competitive behavior over its new internet browser, Chrome. Microsoft has vowed to carefully analyze and monitor the way in which Chrome and Google’s other popular services, especially online search, inter-relate.

Microsoft, still reeling from anti-trust challenges of its own, wants to ensure that Google’s software and online services are not set up to prefer Google’s other services over those from other vendors. Microsoft faced stiff penalties for tying its Windows platform with its own software in a way that stifled competition from other software and online service vendors, and wants to ensure that Google also complies with the spirit of the regulation.

Google faces additional anti-trust concerns as it charges ahead with an ad-sharing agreement with internet powerhouse Yahoo. Yahoo is expected to incorporate Google’s advertising in its search results beginning in October. However, combining the two will create an alliance that accounts for some 80 percent of search-based advertising in the United States. Anti-trust regulators are still reviewing the plan. Yahoo recently rejected a take-over bid from Microsoft valued at $47.5 billion.

Google and Microsoft are chief rivals in software, search, advertisement, and browser markets. Google dominates the online search and advertisement markets at about the same level that Microsoft dominates the browser market. Chrome is the latest in a line of free online software programs Google is offering to consumers, alongside programs that manage word processing, spreadsheets, presentations and more.

Chrome is available for free download on the internet. It is based on open source code, which means it is free and and available for anyone to analyze or improve – including competitors. Analysts believe that Chrome is more adept at handling complex applications and is less likely to crash than other browsers. It offered tabs browsing where each tab runs completely independently of the others. If one tab crashes, the others are unaffected.

Microsoft has just launched new features for Internet Explorer 8 as part of its campaign to maintain market dominance. The company claims that Internet Explorer, which is used by 60% of consumers who browse the web, is a more secure application than Chrome. The second most popular browser is presently Firefox, developed and run by the non-profit Mozilla Foundation, which has a cooperative agreement with Google. Chrome has recently displaced Apple’s Opera as the third-most popular internet browser.

Microsoft’s Internet Explorer has been losing ground to other browsers since the enforcement of competition regulations in regions around the world. Microsoft previously packaged Internet Explorer with sale of its popular Windows platform, but market regulators demanded a greater degree of separation between the software program and operating system. In addition, Microsoft has paid hefty fees and been required to add a substantial amount of information to rivals about how to ensure their software programs function when run in Windows.

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 Competition Commission Orders BAA Monopology to Divest in British Airports

The British Competition Commission is soliciting feedback on a preliminary report that calls for the partial dismantling of BAA’s monopolistic control of British airports. The Commission is calling for BAA to sell two of its three London metro airports and one of its two Scottish airports.

According to the Commission, BAA accounts for 60% of passenger travel in Great Britain, and 90% around London. The Commission insist that the lack of competition has led to poor service and a delay in critical infrastructure development.

BAA is likely to hold onto Heathrow in London, the world’s largest airport in terms of international passenger travel. The report states that the Commission is “unlikely to require the divestiture of Heathrow unless the sale of Gatwick or Stansted is likely to be impractical or ineffective.”

Hochtief, Germany’s largest construction firm, has already expressed interest in purchasing Gatwick. Manchester Airports Group, the second-largest airport operator in Great Britain, would like to acquire either Gatwick or Stansted, or both.

Putting Gatwick and Stansted into the hands of new owners is not expected to result in substantial changes in competition among the airports in the near term. A five-year pricing deal among the airports is expected to remain in place. However, airline carriers may choose to divert a greater level of air traffic to Stansted of Gatwick if the owners promise substantial investments in infrastructure, or a reduction in landing fees.

The Commission is also inviting comment on which Scottish airport – Edinburgh or Glasgow – should be sold to a separate operator. A sell-off of either is expected to lead to greater competition among the two airports, resulting in less expensive travel options for passengers. Because the Glasgow infrastructure supports more long-haul flights, experts expect to see greater investment in Edinburgh’s long-haul capacity in the years ahead to remain competitive.

BAA has faced criticism over its lethargic management for many years. The air-traveling public often complain of delays and overcrowding. At Heathrow, nearly one in three flights is delayed; last year, 68 million passengers traveled through Heathrow’s terminals even though they were designed to accommodate just 45 million passengers annually. In a 2007 customer experience survey by the Airports Council International on the world’s 101 airports, Stansted came in at 74. Gatwick was ranked 75 and Heathrow, 90 of 101.

The Competition Commission is confident that service will improve after BAA’s monopolistic control is dismantled. It is report follows a 17-month investigation into the airport market, and was spurred by an earlier investigation by the UK’s Office of Fair Trading.

A final version of the report is expected in March 2009, with an auction that takes place before 2010.

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 Airways, American Airlines and Iberia Seek Anti-Trust Immunity for New Cooperative Venture

British Airways Plc, American Airlines and the Spanish carrier Iberia are seeking immunity from anti-trust laws in the United States and Europe on a proposed joint venture that is likely to involve revenue sharing, price fixing and intra-coordination of schedules, sales and capacities. If permitted, the collaboration will effect flights as far afield as Mexico and Norway.

Two of the three, BA and American, applied for immunity with a similar project in 2001 and were rejected. Despite the addition of a third carrier, executives express confidence in their plan because of changes in the market.

The trio’s initiative is coasting on the tail winds of a new arrangement between the United States and the European Union named “Open Skies.” US flights were previously required to land at London’s Heathrow airport, but the new program permits airlines to fly their planes from any city within the EU to any city in the US, as well as the converse. Executives say that, because carriers now have more fee choice, anti-trust regulators will exercise a lower level of scrutiny when reviewing cooperative ventures.

However, industry experts believe that BA’s current control of more than 40% of available slots at Heathrow will cause concern for market regulators. It is believed that anti-trust officials will require BA to surrender at least 10 pairs of slots per day in exchange for anti-trust immunity, but BA has publicly announced that it would refuse such a compromise.

BA and Iberia are also in private talks about an all-share merger between the two, although they have not made any plans public.

The British Competition Commission recently proposed the partial breakup of BAA, a monopolistic airport operator in the United Kingdom, which suggests that regulators will still scrutinize any operation that reduces competition among air carriers.

The carriers plan may prove well-grounded when considered in light of other inter-carrier alliances, including the Star Alliance (joining Lufthansa from Germany and United Airlines) and a joint operating agreement between Air France and Delta Air Lines. Industry experts predict that, despite anti-trust concerns, concentration among carriers is likely to continue in the near-term future.

Other airlines are also considering future alliances, including a cooperative agreement between Austrian Airlines and Turkish Airlines.

The proposed venture between BA, American and Iberia comes at a time when airlines are facing a myriad of changes in domestic and international markets. As consumers shop for increased convenience and travel options, governments insist on evolving security measures. In response to shareholder demands and the skyrocketing price of fuels, some carriers have begun to charge additional fees for carry-on and booked luggage. With increasing environmental concerns on the horizon, cooperative ventures that seek to cut cost and meet constituent demands may prove a profitable venture – if anti-trust regulators give their 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.

EC raids European offices of US food Giants Cargill and Bunge for Possible Anti-Trust Violations

The European Commission conducted surprise raids on Cargill, Bunge LTD, and multiple grain distributors in two European countries in July. Cargill is the world’s largest agribusiness firm and the second-largest private company in the United States. The Commission suspects Cargill, Bunge and additional unnamed companies of fixing prices of grain. The grains in question are used for both human and non-human animal consumption.

The Commission does not announce the names of firms during ongoing investigations, but Cargill and Bunge publicly admitted that the Commission visited its Italian offices. Cargill is headquartered in Minneapolis and Bunge in White Plains, New York.

The raids come at a time when the prices of many grains, including wheat, corn, soybean and rice, are at an all time high across continents. Prices have rose steadily during the last six years due to a variety of reasons, including increased demand and production difficulties related to climatic events.

Cargill’s revenues were $88.3 billion in 2007 and recently announced a 67% jump in profits for the fourth quarter of fiscal year 2008. The firm is well known for aggressive expansion in operations across world markets. Cargill boasts more than 158,000 employees in 66 countries, and has successfully integrated operations vertically – from production to distribution – and horizontally – through industries involving cows, pigs, and turkeys – to be one of the world’s largest transnational corporations.

Bunge is a major player in the agribusiness, including processing and selling grains and seeds. Bunge is also a major player in fertilizer markets. It recently announced year-end earnings of 60% for fiscal year 2008, including a quadruple jump in earnings during the second quarter.

Ongoing concerns of food security and costs are likely continue, and surging profits for Cargill and Bunge are excepted through at least 2009. The two firms, along with competitors Archer Daniels Midland, Monsanto, and Dreyfus, account for 80% of the world’s production and trade of grains.

A Commission statement on the recent raids indicate that a larger investigation may be forthcoming: “Surprise inspections are a preliminary step in investigations into suspected cartels.” In at least one previous anti-trust investigation, the European Commission targeted just a few firm headquarters in hopes that the raids will unearth evidence of a larger cartel operation.

These raids may also indicate that one of the firms has approached the European Commission with evidence of anti-competitive conduct. The Commission’s leniency program provides a significant reduction in future fines to firms who voluntarily and fully cooperate with an investigation and prosecution.

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.

Budweiser’s New Owner Previously Involved in Illegal European Beer Cartel

In 2007, The European Commission concluded a multi-year investigation against top European beer producers InBev, Heineken, and Grolsch, in addition to a smaller brewer, Bavaria. Fines were levied against the breweries based on evidence that they were engaged in an illegal cartel in the Netherlands between 1994 and 1999. The combined fine the Commission imposed reached nearly €274M. InBev escaped financial penalty because it came forward with key evidence and willingly cooperated with the Commission’s leniency program.

InBev recently confirmed its role as the world’s largest producer of beer by expanding its global market share through purchasing the iconic American Anheuser Busch and its subsidiary companies, including Budweiser.

Investigations began after InBev, at the time Interbrew, provided information of cartel collusion in 1999. This admission was offered within the procedure for the European Commission’s leniency program, which authorizes the Commission to reduce fines for companies that cooperative fully in the its anti-trust work.

The European Commission raided the firms’ headquarters in 2000. After InBev came forward, the Commission’s multi-year investigation unearthed evidence that the firms worked together to fix prices, discuss and allocate individual customers, coordinate rebates, and exchange confidential industry information.

Evidence included handwritten notes which documented prices that the breweries agreed upon charging. The Commission believes that senior management at each company, including board members, were responsible for initiating and maintaining the cartel. They met in public locations and used code words, which suggests that they were fully cognizant that they were engaging in illegal, anti-commercial behavior.

The Commission believes that the cartel’s operation directly and artificially inflated beer prices in the Netherlands, from grocery stores to cafes and hotels to restaurants.
The European Commission has previously fined European breweries for anti-trust violations on several occasions. The first case was in 2001 and involved Interbrew and Danone. They were fined for price fixing, sharing market information, and exchanging industry information in the Belgium market. The combined fine reached €91m. Additionally, Heineken and Kronenbourg were fined €2.5m for anti-trust violations in France in 2004.

Citizens may seek private damages for the most recent tortious acts in the Netherlands, but punitive damages are generally unavailable in the country. Dutch courts may estimate damages if actual figures are difficult or impossible to calculate. The Dutch Civil Procedure Act was amended in 2004 to permit civil remedies for breaches of European Commission regulations concerning anti-trust.

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.

Copyright Case Frees up Music Royalty and Broadcasting Market Throughout Europe

The European Commission recently ruled on a landmark copyright case involving music royalties and broadcast licenses throughout the continent. Its decision will free up options for how European musicians may collect their royalties, and gives media companies more choices in how they obtain licenses for broadcasting music by satellite, cable, or internet.

The ruling states that the actions of 24 so-called copyright collecting societies, in the business of collecting and then distributing royalties when an artist’s music is broadcast, were in violation of European anti-trust law.

The Commission’s ruling says that musicians may now sign with the society of their choosing, and must be permitted to move from one to another. They were previously required to contract with a society within their national borders, which offered little freedom to choose which society to work with. The situation was then exacerbated by a common contract clause, insisted on by societies, that forbid musicians from moving from one society to another. Such clauses and border restrictions are now to be phased out throughout the Union.

The ruling also stipulates that societies must offer broadcasters the ability to obtain multi-territorial licenses in any one of the 27 European nations. The new pan-European licenses are to be available for every broadcast medium.

Finally, this decision has extended copyrights on live musical performances from 50 years to a lifespan of 95.

The ruling comes five years after broadcaster RTL and internet group Music Choice first filed a complaint against the anti-competitive behavior of the societies. The societies have until mid-October to revise their policies.

The Commission sees this verdict as a positive step towards reducing monopolistic behavior in the European music business. Musicians will now have greater flexibility in choosing which society it chooses to contract with, which is likely to increase competition within the market. Competition is expected to stimulate specialized services that differ in quality, efficiency, and cost. It may also lead to an increase in specialized services for broadcasters seeking licenses.

The Commission’s competition commissioner, Neeliei Kroes, said: “This decision will benefit cultural diversity by encouraging collecting societies to offer composers and lyricists a better deal in terms of collecting the money to which they are entitled.”

Several organizations representing musicians have rallied against the Commission’s decision, saying that it will result in less creative output, diversity, and income for musicians. Because smaller and medium sized societies may no longer rely on the rule requiring artists to contract with societies in their own country, it is likely that much of their market share will be attacked by large societies which are expected move quickly to dominate the pan-European market. This, in turn, may affect the way in which new artists enter the scene, as larger societies may prefer more established and profitable artists.

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 Again Fines Microsoft for Anti-Trust Violations; Microsoft’s Appeals

The European Commission fined Microsoft a record €899 in February, 2008, for failure to comply with earlier rulings related to its commercial conduct in Europe. Microsoft has appealed the fine. The punitive fine is based on the conclusion that Microsoft did not provide reasonable access to information on the interoperability of Windows and software written by rival companies between 2004 and 2007, and unlawfully tied Windows Media Player to the operating environment over the same period.

The latest fine is in addition to a fine of €497m levied in 2004 for the same conduct, which Microsoft unsuccessfully appealed.

Microsoft was investigated by the Commission following complaints lodged as early as 1993. Novell, Sun Microsystems and other firms have insisted that Microsoft was exploiting its position of dominance, as the purveyor of Windows, by refusing to share information critical to ensuring that software written by other companies would operate in tandem with Windows.

The Commission announced its first Statement of Objections against Microsoft in August, 2000. It stated that Microsoft’s failure to provide a full disclosure of how Windows can interface with software written by rival vendors was deliberately anti-competitive and contrary to European law. A second Statement of Objections was filed in August, 2001, which, besides confirming and expanding the previous Statement, documented that Microsoft interwove its Media Player within the operating system so as to make competing software uncompetitive. A third Statement of Objections was issued in August, 2003, which confirmed the earlier allegations with additional evidence.

The Commission made a decision in 2004 after hearing from relevant parties. Its ruling upheld the Statements of Objection, and concluded that Microsoft’s behavior in Europe was in violation of Article 82 of the European Commission Treaty. Specifically, it stated that Microsoft did not accurately and adequately disclose interface documentation, which it is required to do in return for a reasonable price, and that it must begin to within 120 days. The ruling also required Microsoft to begin producing a version of Windows that did not include Windows Media Player within 90 days.

The Commission’s intent was to benefit consumers by stimulating a competitive environment which includes meaningful competition.

Microsoft appealed the March 2004 ruling by filing an action for annulment with the European Court of First Instance in June, 2004. The firm claimed that it should not have to implement the remedies prior to the conclusion of the appellate process. The same day, the Commission voluntarily postponed the time-line for implementation of the remedies until a determination was made whether or not such a course could result in serious damages to Microsoft. The Court came back with a decision in December, 2004, stating that Microsoft failed to demonstrate the potential harm necessary to stay implementation.

In its 2007 ruling, the Court upheld the Commission’s initial decision on both claims of interoperability and Windows Media Player. It also upheld the €497m fine.

The Commission’s 2008 fine is based on Microsoft’s refusal to implement the details of the Commission’s ruling between 2004 and 2007.

Since October, 2007, Microsoft has complied with the Commission’s order, including posting interoperability information on its website. It remains unclear if Microsoft is required to update the information, and at what interval and specificity.

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.

Bulgarian Bread and Chicken Producers Hit Fines for Cartel Involvement

Bulgaria has fallen in sync with European anti-trust regulators by stepping up its investigation of cartels. Their latest moves come against agri-business firms that dominate several food sectors.

Bulgaria’s Committee for the Protection of Competition has just fined three baker’s and confectioner’s associations for cartel involvement. This action comes on the heels of fines issued against 26 egg and poultry corporations throughout the country for similar infractions.

The Committee first began investigating firms in the cereal sector after the price of breads rose substantially in 2007. It has since stated that the associations regularly forecasted and recommended what price should be imposed upon producers beginning as early as 2003. This coordinated, anti-competitive behavior is in violation of well established free market principles.

The Committee operated a similar investigation against chicken and egg producers at the same time. This investigation also began after a sizeable increase in the companies’ prices for chickens and eggs in August, 2007. The companies are alleged to have fixed prices and set the volume of chicken production, as well as operated a joint plan to control the applied prices and volume of egg production. Executives of one of the organizations fined, Stara Zagora, are said to have made market forecasts and issued recommendations for the timing of specified price increases.

The Bulgarian chicken and egg companies were fined a total of 293,000 levs (€146,000; US $239,000) for the anti-competitive conduct.

Prices for eggs and chickens fell dramatically between 2002 and 2007. During this period, industry officials met with greater frequency and are alleged to have focused on setting minimum prices.

The Bulgarian fines part of a larger effort throughout the European Union to protect citizens from unfair business practices, particularly in industries that have wide-ranging impacts on citizens. The European Commission recently raided the offices of several traders and distributors of cereal and other agricultural products suspected of price fixing. The products in question are used as food for both human and non-human consumption.

As with the Bulgarian investigations in agricultural products, the broader European raids follow a dramatic increases in grain, approximating a 50% increase across the board last year alone. Prices for corn, wheat and soybeans are now at record highs.

The Commission does not publicly name the companies it is targeting until investigations are complete, but their recent move signals that they are willing to bust any anti-competitive commercial behavior, even against the world’s most powerful transnational firms.
Anti-competitive conduct across Europe has been put under increasing scrutiny in recent years. Market enforcers hope to deter future cartel involvement and provide a remedy to citizens affected by unfair prices.

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 Escalator and Elevator Industry for Illegal Cartel

The European Commission is taking the unprecedented step of seeking private damages from an illegal cartel that it fined a record £992 million for anti-trust violations in the escalator and elevator industry. The Commission as well as European Union facilities have contracts with corporations in the cartel, and the Commission is seeking damages due to the anti-competitive conduct. The amount of damages sought by the Commission has not been definitively stated but it has been reported the final award may be up to 10 million Euro. The cases have been filed in the Tribunal de Commerce in Brussels.

The Commission’s decision to both act as market regulator and seek private enforcement sends a signal that it is serious about its goal of protecting the European Union marketplace from anti-competitive business behavior.

Like the Sherman Act in the United States, European law prohibits agreements in restraint of trade and abuses of dominant position. These Community competition rules are directly applicable by the national courts of Member States. In contrast to the United States, however, in Europe private antitrust actions for damages have traditionally played a limited role in the enforcement of the Community competition rules, which has been primarily accomplished by the European Commission acting in its regulatory role. In fact, in its recent White Paper on Damages Actions for Breach of EC Antitrust Rules, the Commission estimates that “the amount of compensation these victims are foregoing is in the range of several billion Euros a year”.

The Commission’s private legal action is calculated to encourage affected citizens to file their own suits, and to provide an additional deterrent to anti-competitive commercial behavior. Because many of the cartels also risk substantial fines and private damages in the United States, the higher fines and increasing potential for private damages in the EU makes anti-competitive commercial behavior more costly than ever.
The EU is also considering additional private suits against cartels. One such case is against a cartel that unlawfully manipulated the cost of furniture shipping costs, which affected European diplomats.

The Commission is also increasing its coordination with other international authorities, including the United States Department of Justice. This multi-jurisdictional approach increases the likelihood of early detection and harm reduction in commercial anti-trust operations.

BACKGROUND
European Commission Treaty rules forbid anti-competitive business practices (Article 81). In February, 2007, the Commission imposed fines on 18 subsidiaries of four major European corporations that knowingly entered into an illegal escalator and elevator cartel. The restrictive practices spanned Belgium, Germany, Luxemburg and the Netherlands. The Commission’s €992 million ($1.5 billion) fine is the largest ever imposed in a European anti-trust case. None of the companies contested the Commission’s evidence or requested an oral hearing, although the decision is currently pending appeal before the Court of First Instance of the European Communities.

The Commission based its action on evidence that 18 subsidiary companies of Otis, KONE, Schindler, and ThyssenKrupp unlawfully fixed prices and froze market shares by exchanging confidential industry information, rigging projects, and allocating tenders and other contracts.
Escalators and elevators are a staple of many commercial, residential and industrial buildings, and the cartel’s actions manipulated the prices of construction and maintenance throughout the European Union. Because maintenance on existing escalators and elevators is often conducted by the company who manufactured and installed the original equipment, the effects of this market distortion will continue for decades.

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.