Worldwide: Competition News Bulletin - April 2018

Last Updated: 3 April 2018
Article by Vaish Associates Advocates

I. CARTELS AND ANTI-COMPETITIVE AGREEMENTS

INDIA

Competition Commission of India ("CCI") imposes penalty on Jet Airways, IndiGo Airlines and Spicejet for fixing fuel surcharge rates

By way of an order dated March 7, 2018, the CCI has imposed a cumulative penalty of approx. INR 54 Crores on Jet Airways (India) Ltd ('Jet Airways'), InterGlobe Aviation Limited ('IndiGo Airlines') and SpiceJet Limited ('SpiceJet') ("OPs")for fixing fuel surcharge rates for cargo transportation.

Background of the case - Previously vide order dated November 17, 2015 in the same case and over the same allegation, the CCIhad imposed a cumulative penalty of INR 257.91 Crores on the OPs.

However, on appeal, the Competition Appellate Tribunal ("COMPAT") vide common order dated April 18, 2016 had overturned the CCI's decision and remanded the matter back for reconsideration on the technical ground that the CCI while disagreeing with the DG Report, had not notified the parties and afforded an opportunity to the OPs to file their replies/objections.

Subsequently, the DG Report was reconsidered by the CCI and the OPs directed vide order dated February 8, 2017 to give reasons as to why they should not be held in contravention of Section 3(1) read with Section 3(3) (a) of the Act.

Brief of allegations - The crux of the allegations were that the OPs connived to introduce a 'Fuel Surcharge' (FSC) w.e.f May 15, 2008 for transporting cargo for the period 2008-2013. It was further alleged that FSC has been increased by almost the same rate and from almost the same date and that the increase did not correspond with an increase in the fuel prices. It was alleged that even when fuel prices declined substantially, the Airlines acting in concert have uniformly increased the FSC.

CCI's findings - It was observed that in the year 2008, Jet Airways, Indigo Airlines and Spicejet had implemented FSC on the same date at a uniform rate of INR 5 per kg. Further, for the time period April- June 2011, the OPs increased the FSC rate by the same amount i.e. INR 9 per kg. It was also noted that Indigo and Spicejet had effected the increase in FSC on the very same date. Likewise, in June 2012 and September 2012, time lag of just few days was observed in the dates of implementation of revised FSC. Again, in November 2012, it was noted that Jet Airways and Indigo had increased FSC rate on the very same date.

The CCI reasoned that the increment of FSC rates by the OPs on the same date or a nearby date was reflective of some sort of understanding amongst OPs. Since the fixing of the FSC rate indirectly determined the rates of air cargo transport, the parties were held to bein violation of Section 3 (3) (a) of the Act.However, in a departure from its previous order in the same case, the CCI imposed penalty only on the 'relevant turnover' which was considered as the revenue generated from air cargo transport services.

(Source: CCI decision dated March 7, 2018; for full text see CCI website)

For further details please see http://competitionlawyer.in/861-2/

2. CCI directs investigation against Honda Motorcycle and Scooter Private Ltd (Honda) for imposition of vertical restraints on its dealers and for abuse of dominant position

The CCI by its order dated March 14, 2018 has directed the Director General ("DG") to investigate allegations of imposition of vertical restraints by Honda and abuse of dominant position in the market for manufacture and sale of scooters in India. The DG was directed to conduct a detailed investigation after the CCI arrived at a prima facie finding that the condition imposed by CCI of(i) mandatory purchase of accessories and merchandise items (ii) forceful billing of slow movies vehicles (iii) compulsory deduction of advertising expenses (iv) restriction on insurance and finance options (v) making purchase of Annual Maintenance Contract (AMC), Extended Warranty (EW), Road Side Warranties (RSA) contingent upon purchase of booklets from Corporate India Warranties (I) private Ltd. and (vi) termination of dealership without prior notice and refusal for stock was in violation of Section 4 (2)(a)(i), Section 4(2)(a)(ii) and Section 4(2)(d) of the Act. The CCI further held that mandatory requirement imposed on its dealers by Honda to procure certain items like oil and consumables from designated sources, Honda's implementation of a resale price maintenance including monitoring of maximum permissible discount level through discount control mechanism, levy of penalty for non-compliance amounts to unreasonable imposition of vertical restraints in violation of Section 3(4) of the Act.

(Source: CCI decision dated 14 March, 2018; for full text see CCI website)

INTERNATIONAL

1. European Union: European Commission ("EC") imposes penalty of €395 million on maritime car carriers for cartelization

On February 21, 2018, the EC announced that it has adopted a decision under the cartel settlement procedure and fined maritime car carriers a total of € 395 million. The companies involved in the cartel , namely, CSAV (Chile), 'K" Line, MOL and NYK (Japan) and WWL-EUKOR (Norway/Sweden), participated in a cartel between October 2006 and September 2012 in the market for deep sea transport of new cars, trucks and other large vehicles on various routes between Europe and other continents. The carriers agreed to maintain the status quo in the market and to respect each other's traditional business on certain routes or with certain customers, by quoting artificially high prices or not quoting at all in tenders issued by vehicle manufacturers. The cartel affected both European car importers and final customers, as imported vehicles were sold within the European Economic Area (EEA), and European vehicle manufacturers, as their vehicles were exported outside the EEA. The EC investigation was initiated on an immunity (leniency) application submitted by MOL. In determining the fines, the EC took into account the sales value on the intercontinental routes to and from the EEA achieved by the cartel participants for the transport services. While MOL received full immunity under the EC's 2006 leniency notice, CSAV (25% reduction), "K" Line (50% reduction), NYK (20% reduction) and WWL-EUKOR (20% reduction) benefited from reductions of their fines for their cooperation with the EC.

(Source: European Commission press release dated February 21, 2018)

2. European Union: EC imposes penalty of € 76 million on spark plug manufacturers in cartel settlement

On February 21, 2018, the EC announced that it had imposed a combined penalty of € 76 million on Bosch, Denso and NGK for participating in a cartel concerning the supplies of spark plugs to car manufacturers in the EEA from 2000 to 2011. The EC adopted its decision under the cartel settlement procedure. The EC found that the three companies participated in a cartel between 2000 and 2011 in the supply of spark plugs to car manufacturers in the European Economic Area (EEA), which was aimed at maintaining the existing status quo in the spark plugs industry in the EEA.

According to the EC, the three companies exchanged commercially sensitive information and in some instances agreed on the prices to be quoted to certain customers, the share of supplies to specific customers and the respect of historical supply rights. This coordination took place through bilateral contacts between Bosch and NGK, and between Denso and NGK.

The EC investigation was initiated on an immunity (leniency) application filed by Denso, which received full immunity from fines under the Leniency Notice. NGK and Bosch received a reduction of 42% and 28% on the fines imposed on them The Commission imposed fines of over € 45.8 million on Bosch and € 30.2 million on NGK. In determining the fines, the EC took into account the companies' sales generated in the EEA from the supply of spark plugs to car manufacturers with production facilities in the EEA.

(Source: European Commission press release dated 21 February 2018)

3. United Kingdom: The Competition and Markets Authority (CMA) imposes penalty of £3.4m on household coal and BBQ supplier cartel

The CMA has imposed penalty on CPL and Fuel Express (suppliers of bagged household fuels, including coal and fire log, and charcoal for barbecues) for rigging supply tenders floated by Tesco and Sainsbury's. Under the bid-rigging arrangement, it was agreed that one of the customers would submit a higher bid that was designed to lose – so that the existing supplier could retain 'its' customer. While implementing the arrangement, the parties also exchanged competitively-sensitive pricing information.

(Source: CMA press release dated March 02, 2018)

4. United States: BNP Paribas USA Inc. pleads guilty to antitrust conspiracy

Following an investigation by the antitrust division of the Department of Justice (DOJ), BNP Paribas USA Inc. pleaded guilty to conspiracy involving manipulation of prices on an electronic FX trading platform. The conspiracy involved creation of non-bona fide trades, coordination of bids and offers on that platform and agreements on currency prices to quote specific customers, among other conduct. BNPP USA is the sixth major bank to plead guilty as a result of the department's ongoing investigation into antitrust and fraud crimes in the FX market. On May 20, 2015, four major banks – Citicorp, JP Morgan Chase & Co., Barclays PLC and The Royal Bank of Scotland plc – pleaded guilty at the parent level and agreed to pay collectively more than $2.5 billion in criminal fines for their participation in an antitrust conspiracy to manipulate the price of U.S. dollars and euros exchanged in the FX market. A fifth bank, UBS AG, pleaded guilty to manipulating the London Interbank Offered Rate (LIBOR) and other benchmark interest rates and agreed to pay a $203 million criminal penalty, after breaching its December 2012 non-prosecution agreement resolving the LIBOR investigation.

(Source: Department of Justice press release dated 26 January 2018)

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© 2018, Vaish Associates Advocates,
All rights reserved
Advocates, 1st & 11th Floors, Mohan Dev Building 13, Tolstoy Marg New Delhi-110001 (India).

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