EU DEVELOPMENTS
Intel Fined €1.06 Billion For Abusive Practices
After an investigation on-going for nearly a decade, the European Commission (the "Commission), has imposed a fine of €1.06 billion (approx. £948m) on Intel Corporation ("Intel") for abusing its dominant position in the market for x86 Computer Processing Units ("CPU"). According to the Commission, that market is worth €22 billion worldwide per year.
This is by far the largest fine imposed on a single company by the Commission for anti-competitive conduct. The previous record single fine - €896 million - was imposed on France's Saint-Gobain for its role in the car glass cartel last year. In addition, Intel has been ordered to terminate any current illegal conduct and to refrain from such conduct in future. The Commission has noted that it will monitor Intel's compliance with that order closely.
Intel has stated that it takes "strong exception" to the Commission's decision and announced its intention to appeal to the Court of First Instance. The US Chamber of Commerce has also raised concerns regarding the trend of imposing very large penalty fines and lack of transparency in the Commission's fining process.
See Community Week Alert of 13 May 2009 for further information on the decision.
Commission Gathers Intelligence On Food Retail Sector
The European Commission ("the Commission") has turned its attention to how foodstuffs are priced and how the food supply chain works in Europe. The move follows on from a report produced last December by the Commission on 'Food Prices in Europe' which expressed concern over the effect of food prices on inflation and the need to target practices that were harming the market.
The report noted that the sector may not be functioning effectively, potentially leading to unjustifiably high food prices for consumers. It also cautioned that the negative economic conditions in the industry could create a heightened risk of anti-competitive practices. In the report the Commission recommended greater regulatory scrutiny (at both Commission and national level) of the competitive environment throughout the food industry in the EU. In the longer term, it also proposed that the European Council revisit the matter in December 2009.
In the recent weeks, it is understood that the Commission has been holding meetings with stakeholders and associations in order to gain intelligence on the food retail sector generally and on how the food supply chain works (including the use of exclusive supply agreements, buying alliances and single branding obligations). At this stage the move appears to be more of a general fact finding exercise as opposed to action focussed on any specific competition concerns. The move will however better inform the Commission so that it is better placed to act should it seek to take any action in the future.
At a national level the Dutch competition authority has also focussed on the sector - recently launching a fact finding study into food prices in order to improve its understanding of pricing throughout the food supply chain. A research group is to conduct the study which will look at prices in the Netherlands as well as other EU countries. The results of that study are due by the end of June 2009.
UK DEVELOPMENTS
OFT Proposes Revisions To Market Studies Guidance
The OFT is consulting on revised market studies guidance. Market studies are considered by the OFT as a powerful and effective tool for investigating market wide problems, linking both the OFT's competition and consumer work. Market studies focus on whether there are problems that are causing detriment to consumers and, if there are, how those problems might be addressed.
The existing OFT market studies guidance was published in November 2004 and will continue to form the backbone of the proposed revised guidance. The proposed guidance will pick up on new policies and procedures, in particular reflecting the OFT's prioritisation principles and aims to provide greater clarity around when and how such studies are undertaken.
In order to reflect the OFT's prioritisation principles, before commencing a study, the OFT states that it will consider whether the benefits of such a study will outweigh the costs and disruption to businesses which could result in increased costs to the consumer.
Another proposed new feature is that there is no longer to be a distinction drawn between short studies (taking 3 - 6 months) and full studies (taking around a year) with the OFT to be able to make a decision on the length and detail of an investigation based on the complexity of the particular market - subject to project management principles.
The consultation period is open until 4 August 2009.
GERMAN DEVELOPMENTS
Following Fuel Sector Enquiry, German Federal Cartel Office Prohibits Total From Acquiring 59 OMV Petrol Stations
The German Federal Cartel Office ("BKartA") has taken first measures following its fuel sector enquiry, launched in May 2008 and has prohibited Total Deutschland GmbH, Berlin ("Total") from taking over the East German petrol station network of OMV Deutschland GmbH, Burghausen ("OMV").
The BKartA stated in its case summary, which was published on 14 May 2009, that such concentration is expected to strengthen the dominant positions held by Total together with Shell, Aral/BP, ConocoPhillips/Jet and ExxonMobil/Esso in the sale of diesel and Otto fuel in the relevant regional petrol station markets. Total's takeover of the OMV network would increase the market share of the dominant oligopoly from 80 to 85%, as well as eliminate one of its strongest competitors.
An interim result of the fuel sector enquiry confirmed that the prevailing high vertical and horizontal concentration in the fuel sector have a significant restraining effect on competition. The high supply side concentration together with high transparency on the market have led to the companies monitoring the prices of competitors and developing patterns within a uniform pricing strategy without the need for collusion or coordination. The members of the oligopoly are interlinked through collective refineries, pipelines and tank farms and are interdependent by ways of fuel exchange. External competitors, which consist mainly of the fragmented medium-sized mineral oil sector, are in turn dependent on the oligopoly members for its upstream supplies.
Apart from this merger which has been prohibited, the BKartA is currently examining the acquisition of the petrol stations of medium-sized Lomo and Honsel by Shell Deutschland Oil GmbH, Hamburg. The second phase of these merger proceedings have commenced. The time limit for both decisions expires on 9 June 2009.
FRENCH DEVELOPMENTS
French Minister Of The Economy Finds 'Control' Despite Low Shareholding
On 27 April 2009, the French Minister of the Economy (the "Minister") issued a decision clearing the acquisition by the Bertrand Distribution group ("Bertrand Distribution") of subsidiaries of the company Anheuser-Busch Inbev ("Inbev"), a world leader in the beer industry. Through this operation, Bertrand Distribution, active in the wholesale market for beverages and particularly the sale of beers to coffee shops, hotels and restaurants, acquired the Inbev subsidiaries which manage the beer retailing activities in France.
Prima facie, the operation should be analysed as the acquisition of sole control of the subsidiaries by Bertrand Distribution. However the operation has been defined by the Minister as the acquisition of joint control of the target companies by Bertrand Distribution and Inbev.
The key-element leading to this conclusion was, as part of the divesture of shares, the signing of a commercial agreement between Bertrand Distribution and Inbev giving Inbev decisive influence over the target companies.
According to this long-term agreement of 10-15 years, Inbev retains a decisive influence over the commercial policy and the day-to-day management of the divested subsidiaries. This decisive influence is due to the fact that Inbev will be the (almost) exclusive supplier to the divested subsidiaries, the existence of a quota clause and the holding by Inbev of a veto power which allows it to protect the agreement from any change of control of the target companies.
This is the first time that the Minister has considered that the retention of such a low shareholding in a company (in this case one share) can give rise to decisive influence allowing the exercise of a sole or joint control.
SPANISH DEVELOPMENTS
SCA Seeks Further Liberalisation Of The Services Sector
The Spanish Competition Authority ("SCA") has recently published a report appraising the Government's draft bill on free access and exercise of service activities (the "Draft Bill"). This report was made using the powers of consultation granted to the SCA under the Law for the Defence of Competition 15/2007 ("Law 15/2007") in terms of which the Spanish government consults the SCA in relation to draft legislation which may affect competition.
The Draft Bill represents the Spanish Government's implementation of the EU Services Directive 123/2006, which is required to be implemented by 28 December 2009. The Draft Bill serves as an "umbrella law", a first step towards the later implementation of around 46 Spanish national laws and 7000 regional acts.
In its report, the SCA applauds the ambitious approach of the Draft Bill. However, the SCA also advocates the abolition of almost all existing exclusions from and exceptions to the liberalisation of the service sector. Further, the SCA points out that any authorisation that are required for and exceptions to the free exercise of a service activity in Spain should respect the principles of non-discrimination, necessity, proportionality and free competition.
The SCA urges that the ambitious objectives of the Draft Bill should be reflected in the further implementation of sectoral legislation at a national and regional level. The SCA also warns that, should the need arise during the implementation period of such legislation it will employ its new power under Law 15/2007 to bring actions before the Courts against administrative acts and regulations which obstruct effective competition.
In addition, the SCA expresses particular concern regarding the implementation of the EU Services Directive in two specific sectors: the law governing professional associations and Spanish Commerce Law. Although the SCA supported the freedom to join professional associations, the Draft Bill endorses compulsory membership. Although this does not go as far as it had wanted, the SCA still considers this development to be an advance to the current state of affairs given that, for the first time, compulsory membership will be established by law; previously professional associations were free to set the their membership requirements at their own discretion.
As regards the SCA's primary criticisms of Spanish Commerce Law, these are levelled against: (i) the prior authorisation required from regional government authorities to establish malls or large shopping centres; (ii) government regulation of sales periods; and (iii) the prohibition against the sale of non-financial goods in financial establishments.
ITALIAN DEVELOPMENTS
ICA Opens Five Investigations Into Possible Abuses In Relation To Gas And Electricity Distribution
The Italian Competition Authority ("ICA") has recently launched five distinct investigations against suspected abuses of individual dominant positions held in the local markets of distribution of gas and electricity to domestic clients and small companies.
At its meeting on 7 May, the ICA launched two investigations into the local subsidiaries of the groups Iride and Hera, whereas, at its meeting on 29 April, the ICA launched three investigations into the local subsidiaries of Italgas, Acea Distribuzione and A2A Reti Gas/A2A Reti Elettriche and into their respective parent companies Eni, Acea and A2A.
All the above investigations have been launched on the basis of complaints filed by Sorgenia, a new entrant which denounced similar illicit conducts, aimed at preventing its entry into the above liberalized local markets.
According to the complainant, the incumbents unreasonably delayed and obstructed the technical procedural steps required to allow the switching of clients to the new competitor, thus eventually harming the clients' right of choice among different suppliers and among more competitive prices.
The premises of the local subsidiaries under investigation have been raided at the same time. All the relevant proceedings are to be closed by 30 June 2010, although this is subject to possible extensions.
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