UK: Highlights of Recent Developments in Competition Law

Last Updated: 3 May 2002

European Union

Bans on multi-disciplinary partnerships are legal, despite being anti-competitive

The European Court of Justice recently confirmed that the Dutch Bar Association’s ban on multi-disciplinary partnerships between accountants and lawyers is compatible with the EC Treaty. The ECJ held that despite being restrictive of competition, the measures safeguard the professional standards of the legal profession, including the duty to act for clients in complete independence and in their sole interests; the duty to avoid all risks of a conflict of interests and the duty to observe strict professional secrecy. The ECJ noted that the accountancy profession in the Netherlands was not subject to the same levels of professional conduct as the legal profession and permitted the Dutch Bar to maintain its ban, though MDPs are permitted in a number of other member states where accountants have similar professional conduct requirements to the legal profession.

Amongst other things, the decision confirms that the legal profession is subject to EC competition law, as the ECJ considered that its professional bodies are “associations of undertakings”.

Banking - Negative clearance granted to Rules and Regulations governing Visa payment cards
Visa International 10/11/2001 OJ L293/24

In January 1982 Visa International notified the Rules and Regulations governing the Visa International Payment Card. After an initial investigation the Commission issued a comfort letter on the 29 April 1985 and closed its file. The file was reopened and the comfort letter withdrawn in December 1992 following a complaint by the British Retail Consortium against the “multi-lateral interchange fee” in the Visa International Payment Scheme. This Complaint was subsequently followed up by a complaint on Eurocommerce, a retail wholesale and international trade representation in the Community concerning various aspects of the scheme.

Following detailed examination of the Visa Rules and Regulations, the Commission concluded that whilst they clearly give rise to an effect on trade between Member States, the Visa Rules and Regulations do not restrict or distort competition. On that basis, it granted a negative clearance.

The decision is of interest in its assessment of the relevant market. Visa argued that the relevant product market comprises all consumer payment instruments, (i.e. all types of payment cards, cheques and cash) and that the relevant geographical market was moving towards a Community-wide or even world-wide market in the light of global e-commence on the Internet and the introduction of the Euro.

The Commission was not convinced by Visa’s view that the relevant market comprises all consumer means of payment and concluded that at its widest the relevant product market would be payment cards. However the Commission left open the possibility that the market definition may be even more narrowly defined, drawing a distinction between cards used internationally and cards used only within one Member State.

As to relevant geographical market, the Commission found that the relevant market to be taken into account relating to payment card schemes is still national. The markets for issuing and acquiring payment cards remain basically national markets and even for international payment card systems, the conditions for issuing and acquiring are not yet sufficiently homogeneous between the different Member States to conclude that the geographical market had now broadened to the European Union.

Co-Contractor’s right to damages for breach of Competition Rules confirmed
Crehan-v-Courage Judgment 20 September 2001

In a landmark judgment the European Court of Justice has confirmed that EC law requires that national law must provide a remedy in damages for breach of EC Competition Law and that this right must extend to include a party to an infringing agreement, provided that the party seeking the damages did not have a “significant responsibility” for the unlawful agreement.

EC Commission fines Vitamin Cartel £530 million
Press Release 21 November 2001

The EC Commission has fined eight companies a total of € 855.22 million (£530 million) for participating in a market-sharing and price-fixing cartel for vitamin products. One of the cartel members, Hoffman La Roche, was given the highest fine yet levied against a single undertaking: € 462 million (£286 million). The huge fines underline the EC Commission’s commitment to crack down on unlawful cartels.

UK Competition Law

Competition Appeals Tribunal confirms first decision imposing fines under Competition Act 1998 for pricing abuse in pharmaceutical industry
Napp Pharmaceuticals Judgment 16 January 2002

Napp produces painkillers for the terminally ill, holding 90% of the UK market. The DGFT (Director General of Fair Trading) found that Napp’s practice of charging a discounted price to hospitals, sometimes only one tenth of the prices charged to the NHS for prescriptions, constituted an abuse of a dominant position and imposed a fine of £3.21 million.

The DGFT found that the strategy was designed to enable Napp to capture the hospital market, where price sensitivity was high, in order to dominate the NHS prescription market through the “follow-on effects which occurred because GPs tend to prescribe for patients who had been discharged from hospital the same drugs as were prescribed in hospital”. Napp appealed the decision to the Competition Appeals Tribunal which has rejected the Appeal, but reduced the fine to £2.2 million.

Competition Appeals Tribunal returns newspaper case to the DGFT for re-examination of the market definition
Aberdeen Journals Limited
Competition Appeals Tribunal Decision 19 March 2002

In his second judgment decision, the DGFT found that Aberdeen Journals Limited (“AJL”) had been guilty of predatory pricing and fined AJL £1.328 million.

AJL publishes a free weekly and a paid-for daily newspaper in the Aberdeen area and faced a new entry by the Aberdeen and District Independent. The DGFT found that AJL was dominant in the Aberdeen area with 70% of the market and that it had abused that dominant position by charging below-average variable cost for its newspaper for a three-month period with the intent to exclude the Aberdeen and District Independent from its market.

AJC appealed and in a recent surprise decision the Competition Appeals Tribunal found the treatment of the market definition to have been inadequate. It passed the case back to the DGFT for re-examination, without commenting on the merits of the case.

Further Details on Enterprise Bill Announced
Press Release 28 November 2001

The consultation process announced in the Government’s July 2001 White Paper in relation to its proposals for strengthening Competition Law enforcement has been completed. The Bill is expected shortly and will include the following:

  • Criminal penalties of up to five years imprisonment for directors and senior employees who engage in price fixing, market sharing and bid rigging.
  • The Competition Commission Appeals Tribunal will be able to hear claims for damages in competition cases brought both by individuals and consumer groups.
  • The professions will become fully subject to the Competition Rules.
  • Decisions on whether to prohibit mergers will be dealt with by the Competition Commission on competition grounds, with the Secretary of State only having a role in cases raising issues of nationalsecurity.

DGFT issues draft guidelines on the application of the Competition Act to Intellectual Property Rights
December 2001

The Director General of Fair Trading (DGFT) has published Draft Guidelines outlining its view of the application of the Competition Act to Intellectual Property licensing arrangements. As might be expected, the DGFT has indicated that he will adopt the sameapproach as is applied in relation to European Competition law on Intellectual Property licensing. Pricing restrictions and market sharing arrangements entered into between parties to IP licences are likely to be caught by the Act, as will a post-termination use ban where the IP right is no longer in existence. On the other hand, restrictions on sub-licensing and the imposition of quality control and minimum quantities obligations will be acceptable under Chapter I.

Where the licensor has a dominant position, then tying or bundling may be an abuse under the Chapter II prohibition where the licensor is only willing to grant a licence in respect of one IP right on condition that the licensee also agrees to buy another product or service which is not covered by that right.

The Guidelines have been published for consultation and provide a useful outline of what restrictions are likely to be acceptable in the Intellectual Property field.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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