In February 2011, China’s State Administration for Industry and Commerce (“SAIC”) issued its first enforcement decision since China’s Anti-Monopoly Law (“AML”) came into force in August 2008. The case indicates that the SAIC will actively enforce the AML, and provides guidance on how the investigation process will work.
The SAIC is primarily responsible for the enforcement of non-price related infringements of the AML, but may delegate its authority, including its investigative powers, to provincial Administration for Industry and Commerce (“AIC”) bodies. In this case, the AIC of Jiangsu Province brought an action against the Concrete Committee of the Association of Construction Materials (“Association”), and sixteen of its members (who were manufacturers of premixed concrete). The Jiangsu AIC found that the Association had violated the prohibition against industry associations who “organise” business operators to engage in monopoly conduct. In this regard, the Association had organised for competing concrete manufacturers to enter into an agreement that restricted competition in the premixed concrete industry. The agreement prohibited members from entering into concrete sales agreements without first seeking the Association’s approval. The Jiangsu AIC ordered an injunction against the Association and fined it RMB 200,000.
The Jiangsu AIC also found that the sixteen manufacturers who had entered into the agreements were in breach of the prohibition against agreements that divide up the sales market or raw materials procurement market, and ordered them to cease the conduct and imposed fines on five of them.
On 18 January 2011, the European Commission (EC) launched its investigation into anticompetitive practices in Europe’s truck sector with dawn raids at the premises of several truck companies, including Volvo, Daimler and MAN. The EC has confirmed that it is investigating suspected violations of the EU’s rules prohibiting cartels, restrictive business practices and abuse of dominance.
The EC’s investigation follows similar scrutiny of the truck sector by competition regulators in the UK. In September 2010, the UK’s Office of Fair Trading launched parallel civil and criminal investigations into alleged price fixing among truck manufacturers. Whilst seemingly unrelated to these investigations, ACCC succeeded in Federal Court proceedings in November 2009 against two truck retailers and three individuals for price fixing and market sharing in relation to the sale of trucks.
In our December edition, we discussed the conviction of former Morgan Crucible CEO Ian Norris, for instigating a conspiracy to obstruct a federal grand jury investigation into price fixing. On 11 February 2011, the US Court of Appeals (Third Circuit) rejected Norris’ appeal, with the opinion for its decision released on 23 March 2011.
The Court’s decision is particularly significant in relation to the scope of client legal privilege, holding that the District Court did not err in permitting the trial testimony of Morgan Crucible’s former external counsel against Norris. The Court found that Norris failed to establish that the counsel’s testimony invaded any individual attorney-client privilege. In effect, as the lawyer was representing the company rather than Norris as an individual, and Morgan Crucible had waived privilege, his testimony could be used against Norris. In this respect, the decision is likely to have significant ramifications to the way that internal investigations are conducted.
The Court of Appeal also:
In these respects, the decision is important as it shows that the fact that a foreign executive is unfamiliar with the US’s grand jury process will be irrelevant in prosecutions for obstruction of justice.
We expect this should be the last in a long line for judgments regarding the former CEO’s involvement in Morgan Crucible’s price fixing contraventions.
On 7 January 2011, the Dutch Supreme Court held that a fine issued by the Netherlands Competition Authority against a company for anti-competitive conduct cannot be deducted from the company’s annual taxable income.
The case concerned a fine of approximately €168,000.00 against a company (not identified in the court documents) and one of its subsidiaries for alleged involvement in a cartel in the construction industry between 1998 and 2001. In reaching its decision, the Court held that a fine for anti-competitive conduct under the Dutch Competition Act is intended to be punitive in nature and that it cannot be divided into a punitive, non-deductible component and a non-punitive component.
A similar case concerning the deductibility of a competition fine issued by the European Commission, against a Dutch company is currently before the Court.
The US Federal Trade Commission ("FTC") has increased the merger thresholds that determine whether merging parties are required to notify the FTC and the US Department of Justice's antitrust division of transactions under the Hart-Scott-Rodino Act ("HSR Act"). The thresholds were lowered during the global financial crisis, as a result of the contraction of the US economy, and the current increase returns the thresholds to pre-2010 levels.
In a similar vein, as from 12 February 2011, the Minister of Industry in Canada has increased the Canadian merger review thresholds. Mergers and acquisitions in Canada that exceed the thresholds set out in the Competition Act must be notified to and reviewed by the Competition Bureau prior to closing.
In addition to revising the thresholds, the Commissioner of Competition announced on 24 February 2011, that the Competition Bureau will undertake “moderate revisions” to the Canadian Merger Guidelines, following roundtable consultations with foreign agencies and primarily being driven by the recent changes to the US Horizontal Merger Guidelines. The Bureau intends to publish the revised guidelines shortly for consultation.
The foreign investment review threshold for direct investments by WTO-nation investors into Canada has also been increased. The notification and review provisions in this area are complex with different standards applying depending on the nationality of the investor, whether the investment is direct or indirect and the industry or sector in which the investment is being made.
On 16 March 2011, the Department of Business, Innovation and Skills launched its formal consultation on the merger of the competition and merger investigation functions of the Office of Fair Trading (OFT) with the UK Competition Commission to create a single competition and markets authority responsible for merger regulation and market investigations.
Currently, the OFT obtains and reviews information in relation to mergers and undertakes market studies. The OFT then decides whether to refer the merger to the Competition Commission for further investigation into its effect on competition. The Competition Commission receives references from a number of other public authorities, including sector regulators, in relation to proposed mergers and then undertakes its own analysis of the relevant market before producing an independent assessment.
While the government claims that the merger will enhance effectiveness and efficiency by creating a simpler structure (the current process can take months or even years), practitioners are divided:
A few issues remain to be determined in relation to the operation of the new regime, such as how to ensure the objectivity and fairness of the second phase of the examination and how best to continue to incorporate the Competition Commission’s panel of experts into the process. Consideration of the proposed merger has led to broader discussions about the effectiveness of the system itself, including the lengthiness of OFT’s reviews and whether there ought to be a mandatory filing system. Assuming that the merger goes ahead, it provides a valuable opportunity to reassess and more efficiently implement the OFT and Competition Commission’s investigative and analytical functions. Submissions are due by 13 June 2011.
While the details of the combination of the two authorities are being finalised, on 25 March 2011 the OFT and Competition Commission issued a quick guide outlining the merger review process, to complement the Merger Assessment Guidelines issued in September 2010.
Sarah Crouch, Agatha Moczulski, Kate Fazio, Bianca Friedman, Jerome Martin, Caroline Wong, James Russell, Kim de Kock, Peta Stevenson