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FAQ about recent competition and antitrust law developments with practical relevance in the world

Q: What kind of Legal changes happen around the competition world?


A: Australia and New Zealand: A co-operation agreement between national competition authorities

The competition authorities of Australia and New Zealand - the Australian Competition and Consumer Commission and the New Zealand Commerce Commission - have signed a new co-operation agreement. Under this, they will provide investigative assistance to each other, and share between each other information that each has compulsorily acquired from parties.

Austria: Greater transparency in competition decisions

On 1 March 2013, amendments to Austria’s Cartel Act came into force. These include a measure allowing for greater transparency, and a more effective body of precedent: Austria’s Cartel Court will now have to publish its decisions on competition law infringements.

Canada: Merger control: “Preventing” competition

Canada’s merger control rules allow mergers and acquisitions to be challenged if they are likely to “prevent or lessen competition substantially”. In February 2013, Canada’s Federal Court of Appeal, giving reasons for its prohibition of an acquisition in Commissioner of Competition v Tervita, upheld the first ever decision by Canada’s competition authorities to find that an acquisition substantially “prevents” competition. The acquirer operated the only two secure landfill sites in a region. It proposed to acquire another site, which appeared to be not for landfill but for “buyer remediation”; however, Canada’s Competition Tribunal (and then the Federal Court of Appeal) found that the buyer remediation use would have failed, and the site would ultimately have been used as landfill in competition with the acquirer’s existing two landfill sites. The acquisition of this third potential landfill site would therefore be a total prevention of competition in the sector.

France: Life sciences: Inquiry into medicine distribution

In February 2013, the French Competition Authority announced its launch of a sector inquiry into competition in the distribution chain for medicinal products - i.e. from pharmaceutical laboratories through wholesale distributors to dispensing pharmacists. The inquiry was triggered by developments favouring an increase in competition in the distribution of medicines - namely the authorities’ support for generic medicines, and the opening up of online sales of medicine or products. The French Competition Authority is expected to issue its preliminary conclusions in summer 2013, and its final conclusions at the end of the year.

Q:65306;Can merger parties, when they succeed in overturning a competition prohibition on appeal, recover damages?

 A:  In many jurisdictions, parties to an M&A transaction whose transaction is blocked or prohibited by a competition authority following a merger control review, may appeal against the authority’s decision. For example, under the EU Merger Regulation, parties to a merger that has been prohibited by the European Commission may appeal to the EU General Court. From time to time, such appeals are successful.

In practical terms, however, the well-known difficulty of the appeal procedure is the length of time it takes. For example, in January 2001 the European Commission blocked Schneider Electric’s proposal to acquire Legrand; the EU’s General Court overturned that decision on appeal, but not until October 2002 - 19 months later. M&A markets are usually fast-moving, and by the time a prohibition is overturned on appeal, it is often too late for the parties to proceed with the transaction, even though they are now legally vindicated in doing so.

However, in certain circumstances, even if the parties cannot proceed with their transaction, they may, if their appeal succeeds in overturning the competition authority’s prohibition, be entitled to recover damages for the losses they have sustained as a result of the (unlawful) prohibition. Under EU law, Article 340 of the Treaty on the Functioning of the EU creates the principle that the European Union is obliged to “make good any damage caused by its institutions”. This provision has been used by merger parties whose merger prohibitions have been overturned on appeal - successfully in the case of the electrical equipment manufacturer Schneider4, which claimed some €2 million in terms of costs on legal, tax and banking consultants who assisted it on its proposed merger with its competitor Legrand, and unsuccessfully in the case of the tour operator Airtours which had succeeded in overturning on appeal the European Commission’s blocking of its proposed acquisition of its competitor First Choice5.

It was made clear in the EU General Court’s judgments on Schneider and Airtours that the illegality of the European Commission’s merger prohibition decision does not automatically ensure a right to damages. In order to win damages, the parties must show that the prohibition decision was not just unlawful, but showed a “grave and manifest disregard by the Commission of the limits to which it is subject”.6

Now, in 2013, a German court has indicated that there is a similarly high burden of proof in obtaining damages when a merger prohibition by the German competition authority, the Bundeskartellamt, has prohibited a merger and that prohibition is overturned on appeal. In April 2007, the Bundeskartellamt had prohibited the proposed acquisition by the hearing aid manufacturer Sonova of its competitor GN Resound. After a series of appeals, in 2010, the German Supreme Court annulled the Bundeskartellamt’s prohibition decision. But, as so often, it was too late, and the transaction was never completed. The parties sought €1.1 billion in damages from the Bundeskartellamt, but in a judgment of 26 February 2013, Cologne’s Regional Court refused to grant damages, stating that damages could only be granted if the Bundeskartellamt members concerned had acted illegally through intent or negligence, and the parties had failed to show this.

Q: How are mergers between state-owned entities treated by competition authorities?

A: Recent pronouncements by competition authorities in Britain and Canada have highlighted a particularly difficult issue faced by authorities across the globe when they apply merger control rules: how to deal with transactions that involve mergers between state-owned entities?

Three questions in particular arise:

• First, is a state-owned entity an “undertaking” or “enterprise” that falls to be assessed under competition rules on merger control?

• Second, if state-owned entities are enterprises, whose turnover needs to be counted when assessing whether jurisdictional thresholds are met? Is the relevant turnover that of the whole government, or just the division of government which has specific responsibility for the entity concerned?

• Third, how are the effects on competition assessed? In particular, if two state-owned entities “merge”, does that matter, given that they were already both under common control (by the state) and so, arguably, nothing has changed? Conversely, if a business is acquired by the state, and the state already has interests in entities in the same market, should one be concerned about an increase in the state’s market share in that market?

Q: Can security of supply be a justification for anti-competitive agreements?


A: A South African Competition Tribunal judgment suggests a tolerant approach.

Competition authorities are traditionally reluctant to recognise “crisis management” as a justification excusing restrictive agreements between competitors. In 2008, for example, the EU Court of Justice ruled that an agreement between the 10 main beef producers in the Republic of Ireland to co-ordinate their presence in - or absence from - the market, so as to address overcapacity in the industry, was a serious infringement of the EU prohibition on anti-competitive agreements25. In a subsequent hearing of the case before the Irish High Court the European Commission intervened to state that it was of the strong view that “crisis cartels” generally cannot be justified, although there could be exceptional circumstances where a co-ordinated approach to addressing overcapacity might be justified (where the overcapacity was long-term and structural, rather than merely cyclical, and market conditions were not likely to result in reductions of overcapacity): see Competition World, July 2012 “‘Crisis cartels’ - Can an economic downturn ever excuse anti-competitive practices?”.

Now, in the context of energy security, South Africa’s Competition Tribunal has suggested a more lenient approach to sector “crisis management”. The oil companies who are members of the South African Petroleum Industry Association had entered into a series of co-operation agreements and practices to ensure stability and continuity of liquid fuel supply to various industries. This “crisis cartel” involved co-ordination over fuel supply lines and production shut downs, and was intended to avoid a repetition of the fuel crisis of 2005 in South Africa.

In October 2011, South Africa’s Competition Commission granted the participating oil companies an exemption from the prohibition on anti-competitive agreements in South Africa’s Competition Act. A smaller competitor, an oil importer called Gas2Liquids which was not party to the agreement, appealed to the Competition Tribunal against this exemption, on the grounds that it was harmful to competition and, in particular, excluded smaller competitors. However, in late January 2013, South Africa’s Competition Tribunal announced its rejection of the appeal, upholding the exemption.

In practical terms, there are various potential implications of this. It might represent a signal (which might be picked up by other competition authorities in the world) that fuel security justifies a more tolerant exemption regime to co-ordination between competitors in the energy sector. On the other hand, it might be regarded as an example of the South African competition authorities’ particular approach, in which broader “public interest” issues are allowed to trump “pure” competition considerations perhaps more often than in other competition jurisdictions. See, for example, the greater emphasis on public interest criteria in its approach to merger control (Competition World, January 2013, “South Africa: Public interest in merger reviews”).

Q: What about new rules to Mobile telecoms competition


A:  A France’s Competition Authority acts just protect MVNOs. In an era when mobile telecoms operators are seeking mergers and acquisitions to achieve sector consolidation, competition authorities are grappling with ways of ensuring that the sector remains sufficiently competitive. In 2011-12, intervention by the US Department of Justice resulted in the abandonment of a proposed “four-to-three” merger between two of the US’s main mobile network operators, AT&T and T-Mobile; and in December 2012 the European Commission allowed a “four-to-three” merger in Austria between Hutchison and Orange Austria, but subject to conditions aimed at facilitating new market entry (Competition World, January 2013, “Technology: Mobile telecoms M&A - A greenish light from Brussels”). 

Now France’s Competition Authority has intervened to ensure the maintenance of retail competition in mobile telecoms by protecting and promoting the position of MVNOs - that is, so-called “mobile virtual network operators” which, while not necessarily owning their own networks and spectrum, obtain wholesale access to the networks and spectrum of mobile network operators, and then sell mobile telecoms services at retail level in competition with the mobile network operators.

In 2008, the French Competition Authority had secured commitments from a number of France’s mobile network operators:

• not to restrict the commercial freedom of MVNOs

• to welcome full MVNOs into their network

• to accede to any reasonable request for access to their network, and at reasonable rates.

Now, in January 2013, the French Competition Authority has issued a new opinion26 expressing concerns that MVNOs in France “are experiencing difficulties in establishing their presence in all the market sectors” and risk “being marginalised”. The Authority has therefore insisted that the commitments given in 2002 be applied thoroughly, before the launch in France of the first 4G (fourth-generation) mobile services, enabling MVNOs to make 4G offers within the same timeframes as the mobile network operators. The Authority insisted that mobile network operators should not set up any “technical or pricing barrier” to MVNOs competing without disadvantage against the mobile network operators.

In practical terms, it could well be in the interests of mobile network operators to comply with such requirements. The stronger that MVNOs are, the more competitive the market, and the more willing competition authorities may be to allow consolidation between network operators.

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