Author
Jeremy Davey  
Solicitor

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Lisa Huett  
Partner
T +61 3 9643 4163

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Sydney
Vishal Ahuja  
Be conscious that there is a new immunity policy for cartel conduct. Ensure that your corporation has an effective, up to date trade practices compliance program. Sharon Henrick  
Be conscious that there is a new immunity policy for cartel conduct. Ensure that your corporation has an effective, up to date trade practices compliance program.

Melbourne
Amanda Bodger  
Be conscious that there is a new immunity policy for cartel conduct. Ensure that your corporation has an effective, up to date trade practices compliance program. Caroline Coops  
Be conscious that there is a new immunity policy for cartel conduct. Ensure that your corporation has an effective, up to date trade practices compliance program. Lisa Huett  
Be conscious that there is a new immunity policy for cartel conduct. Ensure that your corporation has an effective, up to date trade practices compliance program. Renae Lattey  
Be conscious that there is a new immunity policy for cartel conduct. Ensure that your corporation has an effective, up to date trade practices compliance program. Andrew Monotti  
Be conscious that there is a new immunity policy for cartel conduct. Ensure that your corporation has an effective, up to date trade practices compliance program. Roger Featherston   Be conscious that there is a new immunity policy for cartel conduct. Ensure that your corporation has an effective, up to date trade practices compliance program.

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Canada likely to reform competition regime

The October re-election of the Canadian conservative party has increased the likelihood of upcoming changes to Canada’s competition regime. The changes were suggested in June 2008, in a report issued by the Competition Policy Review Panel.

Canadian Prime Minister Stephen Harper has previously endorsed many of the Panel’s findings, suggesting a number of changes to the Competition Act including:

• creation of a new non-criminal regime with lower evidentiary thresholds for less serious anticompetitive conduct
• introduction of new powers allowing the Competition Tribunal to freeze assets and order that companies pay restitution to victims of deceptive marketing
• increased criminal penalties for cartel participation from C$10m and 5 years imprisonment to C$25m and 14 years imprisonment
• increased penalties for obstructing Competition Bureau investigations, and
• increased penalties for deceptive marketing conduct.

The proposed changes have not yet been introduced to the Canadian Parliament.

BHP bows out of Rio Tinto merger mid EC investigation

On November 26 2008 BHP announced it would abandon its proposed $135 billion take over of Rio Tinto as a result of the global economic crisis.

As the merger was under investigation by the European Commission (EC), BHP cannot itself officially call off the bid. It is expected that BHP will refuse to divest its iron ore assets, one of the anticipated conditions to the merger being approved.

In a press release issued in July as the EC commenced investigation into the merger, it noted that the merger would result in ‘very high’ levels of market concentration for iron ore and metallurgical coal, two major steelmaking components. The EC said that there was “a serious risk that the planned takeover could have a negative impact on the outcome of price negotiations with steel customers”.

Commentators suggest that the divestment of iron ore assets would have been a pre-condition to satisfying the EC’s concerns over market concentration. A failure to divest will therefore force the EC’s hand in blocking the merger.

Yahoo!-Google advertising agreement abandoned

Google and Yahoo! have jettisoned their plans for a joint advertising deal after the US Department of Justice (DOJ) indicated that it would file an antitrust suit if the deal went ahead.

The deal would have enabled Yahoo! to replace a large proportion of its search results with paid search results provided by Google. The DOJ’s investigation found that the agreement would result in Google and Yahoo! becoming “collaborators rather than competitors for a significant portion of their search advertising business”.

The investigation found that internet search advertising was a distinct market, and that Google and Yahoo! were the top competitors in that market with a combined market share of over 90%.

iPhone exclusivity developments in United States and France

In the United States the ongoing class action against Apple and AT&T moved one step closer to trial, with the U.S. Federal Court rejecting most parts of an application to have the claim struck down.

The original action was filed in October 2007, claiming that Apple and AT&T agreed prior to the iPhone’s release that it would not be unlockable, and would be forced to use applications that generated revenue for the two companies. It is further claimed that Apple falsely told customers that unlocking the phone would void its warranty and released updates that deliberately destroyed unlocked phones or phones with third-party software. AT&T is also accused of charging unreasonable ‘service termination fees’ to customers who changed providers.

Judge James Ware found that the allegations, if true, would give rise to “a claim for a violation of the federal antitrust laws and other consumer protection laws”. The trial is scheduled for a case management conference in late November, with the parties required to provide a plan for the discovery of relevant documents.

Apple’s preference for exclusive arrangements has also attracted European attention. In France, where the iPhone is only available on the Orange network, the French competition watchdog is in the process of investigating a complaint from Bouygues Telecom, one of Orange’s competitors. Bouygues has requested that the Conseil de la Concurrence impose interim measures to promote competition. The Conseil’s investigation commenced in early October and a preliminary decision is expected within three months.

OFT, EC hand down record cartel penalties

The UK Office of Fair Trading (OFT) has imposed its largest ever cartel fine, agreeing to accept a total of £132m from tobacco manufacturer Gallaher and five retailers. The agreed amount included a reduction for admission of liability, and investigations continue into manufacturer Imperial Tobacco and five more retailers.

The OFT also secured its first criminal convictions in another matter, with three businessmen sentenced to between 2.5 and 3 years imprisonment after pleading guilty to participating in a cartel for the supply of marine hose. The cartel members engaged in market allocation, restrictions on supply, bid rigging and price fixing. Two of the men are appealing the severity of their sentence.

The EC has also handed down a record fine, imposing penalties totalling €1.3 billion on four suppliers of car glass. The fine is the EC’s largest ever imposed on a cartel, and the €896m penalty on Saint-Gobain is the largest ever imposed by the EC on a single company. As a repeat offender, Saint-Gobain’s fine was increased by 60%. Asahi, another member of the cartel, had its fine reduced by 50% for cooperating fully.

The cartel members held regular discussions to agree on the allocation of supply and to keep market share as stable as possible. The EC described the cartel as ‘a very serious infringement of EC Treaty antitrust rules’.

UK energy regulator completes competition study, puts industry ‘on notice’

Ofgem, the UK gas and electricity competition regulator, has found that the UK energy industry is ‘failing to deliver the benefits of competition to the entire market’.

Ofgem’s seven-month study found that there was no cartel among energy providers, and that consumers were aware of their ability to switch providers if dissatisfied with price or service. However, Ofgem was critical of a number of aspects of the industry and suggested measures to improve consumer benefit, including:

• measures to ban unfair price differences, including differences between payment methods (examples include the differences between direct debit rates and prepayment or standard credit)
• tougher rules on doorstep selling
• more transparency in financial reporting
• new requirements on suppliers to provide information to help consumers to get the best deal

Ofgem also proposed to introduce measures to combat unfair contract terms in the small business supply market, and to remove barriers to entry in the wholesale market.

Ofgem stated that it will ‘refer the market to the Competition Commission’ if the energy industry fails to improve its practices.

European Parliament aims for major telecommunications reform

The European Parliament has adopted a legislative report addressing issues of telecommunications access, consumer rights and privacy. The Parliament issued a press release setting out a list of aims, including:

• expanding the requirement that providers make ‘universal services’ available to everyone at an affordable price, with the addition of mobile phone and broadband to the list of universal services
• strengthening the requirement that providers give customers easy access to certain information, such as restrictions on content or equipment use, client and after-sales services, payment methods and charges for number portability or for terminating a contract
• introducing a new requirement stating that number transfers to a new provider should be completed in one day
• ‘harmonising’ the maximum length of telecommunication service contracts at 24 months, while allowing subscribers to cancel the contract after 12 months
• preventing EU member states from imposing any mandatory technical requirements on telecommunications devices in a way that unjustifiably restrains competition, and
• introducing mandatory notification of privacy and security breaches to users and national regulators.

The Parliament’s adoption of the report allows these aims to be incorporated into future draft legislation.