Author
Sam Porter  
Solicitor
Lisa Huett  
Partner
T +61 3 9643 4163

Sydney
Vishal Ahuja  
Sharon Henrick  

Melbourne
Amanda Bodger  
Caroline Coops  
Lisa Huett  
Renae Lattey  
Andrew Monotti  
Roger Featherston  

31 May 2008

International News

Jail for Qantas price fixing executive

Qantas’ former vice president of freight for the Americas, Bruce McCaffrey, will serve 8 months jail and pay a US$20,000 fine under a plea agreement with the US Department of Justice (DOJ). McCaffrey is charged with conspiring to fix prices for international air cargo shipments, which in the US attracts a maximum penalty of 10 years imprisonment and a maximum US$1 million fine.

The DOJ alleges that McCaffrey participated in meetings in which he agreed to fix international air cargo rates with competitors’ employees. He is the first individual to be charged as part of the DOJ’s investigation into the air transportation industry, which has ensnared Qantas and three other airlines for their involvement in the price fixing cartel.

Qantas, Japan Airlines, British Airways and Korean Air Lines have already pleaded guilty, under separate plea agreements, after being charged for their involvement in the cartel. Each has been sentenced to pay criminal fines of between US$61 and 300 million. McCaffrey was one of five employees exempted from Qantas’ plea agreement.

UK grocery review released

The United Kingdom Competition Commission released its final report on its inquiry into grocery retailing in April 2008. The inquiry was charged with investigating whether the UK grocery market was delivering optimal consumer outcomes. Although the market is “in many respects … delivering a good deal”, the Commission concluded that it should take action to improve competition in the grocery market. The Commission’s findings focus on:

Competition in local markets

In a significant number of local areas, the Commission found that larger grocery stores face limited competition. In response, the Commission:

  • recommended that planning authorities implement a competition test in determining whether to allow the development of new grocery stores with a net sales area over 1,000m2, and
  • will implement measures to prevent larger grocery retailers using and enforcing restrictive covenants and exclusivity arrangements in those areas to promote entry into those markets by new competitors.

Supply chain practices

To deter larger retailers from anticompetitive supply chain practices with their suppliers, the Commission:

  • decided to establish a new Groceries Supply Code of Practice, and
  • recommended that an independent ombudsman be established to oversee compliance with, and enforce, the Code.

The UK Office of Fair Trading is separately inquiring into price fixing behaviour in the groceries retailing market. Its investigation is ongoing.

European Commission releases White Paper on damages actions

The European Commission released its White Paper on damages for breach of the European Community (EC) antitrust rules, and a related staff working paper, in April 2008. According to the Commission, “victims of … antitrust infringements only rarely obtain reparation of the harm suffered” from breaches of the EC antitrust rules, despite the guaranteed right to compensation under the EC Treaty.

The Paper proposes policies and measures to improve the effectiveness of antitrust damages actions in the EC, including:

  • allowing opt-in collective actions and representative actions for collective redress
  • assessing damages on a compensatory basis, ensuring victims receive full compensation (including lost profits and interest) for the real value of the loss suffered
  • unifying the discovery rules by implementing a minimum level of disclosure across the European Community, to ensure victims have access to the key evidence necessary to prosecute damages actions.

Interested parties may make submissions on the Paper, which are due by 15 July 2008. The Commission will consider the submissions when formulating its final position on damages actions.

International Competition Network holds 7th annual conference

The International Competition Network (ICN) held its seventh annual conference in April 2008. Conference participants comprised over 500 delegates from over 70 national competition agencies. At the conference, ICN members adopted new recommended practices for merger analysis, which emphasise that:

  • competition agencies should intervene only in mergers that are likely to substantially harm competition
  • market share analyses provide useful initial guidance, but are generally not conclusive measures, for determining the effect of a merger on competition
  • barriers to entry and expansion are an integral part of the merger analysis framework.

The delegates also adopted new recommended practices for competition agency powers, highlighting the need for independent, well-resourced competition agencies with appropriate investigative tools and the ability to seek sanctions for breaches of competition law.