Worldwide: EU & Competition Round-Up (December 2008)

Last Updated: 2 December 2008
Article by Cyrus Mehta and Rachel Bickler

UK COMPETITION

OFT Clears Stella Artois/Budweiser Merger

After a lengthy investigation, the Office of Fair Trading (OFT) gave its approval to the acquisition by InBev (Belgium) of the US's largest brewer, Anheuser-Busch. The deal is one of the largest cash acquisitions in corporate history and secures InBev's position as global leader in the beer market. The OFT's initial investigation disclosed that InBev's ownership of the Stella Artois and Beck brands made it the leading supplier of premium lager in the UK. The acquisition of the Budweiser brand would further increase its market share. The investigation indicates that the deal was unlikely to raise competition concerns in the off-trade market (i.e. retail sales through shops, supermarkets and specialist outlets) where the barriers to market for rival brands are low. The OFT took a closer look however at the impact on the on-trade channel (i.e. pub, bar and restaurants), where the parties represent over 50% of sales of premium lager. Nevertheless, it was apparent that the majority of the UK's on-trade market comprises sales of draught beer where the parties do not have overlapping interests since Budweiser is sold only in bottles. Although InBev and Anheuser-Busch do compete for sales of bottle beer and "fridge shelf space" in the on-trade market, the OFT concluded Budweiser and Beck's are not considered close substitutes by consumers.

Follow-On Damages Claim In Coal Haulage Market

On 17 November 2008, the Competition Appeal Tribunal (CAT) confirmed that Enron Coal (Enron), a company in liquidation since 2002, is seeking damages from English, Welsh and Scottish Railway Limited (EWS). This claim follows from the 2006 decision by the Office of Rail Regulation that EWS had abused its dominant position in the market for coal haulage by rail, in breach of both national competition law and Article 82 of the EC Treaty. EWS was found to have formed exclusive agreements with industrial coal users from 1996 until 2005, and engaged in predatory pricing for 18 months from July 2002. Accordingly, EWS was fined £4m. Enron are now seeking damages in the CAT for the loss suffered by EWS imposing additional costs in relation to coal haulage, and preventing Enron from obtaining new business or extending business. Enron is seeking damages and lost profit, restitutionary damages, an account of profits, interest, costs and further relief.

Cardiff Bus Guilty Of Predatory Pricing

The Office of Fair Trading (OFT) has found that Cardiff Bus, a bus service operated by Cardiff Council, abused its dominant position by charging below cost prices. In 2004, Cardiff Bus introduced a low-cost bus service to compete with a "no frills" service offered by 2 Travel, a new-entrant to the market. When 2 Travel had gone out of business in 2005, Cardiff Bus removed its low-cost service altogether. On 18 November 2008, the OFT found that Cardiff Bus had been the only significant provider of bus services in the area and the dominant player in the market. By dropping its prices to a loss making level in order to evict the new competitor from the market, Cardiff Bus had abused its dominant position. Under the Competition Act 1998, there is limited immunity from fines for such abuse where the market effected or the turnover of the undertaking concerned is not substantial, although the OFT does have discretion to waive the immunity and impose fines where appropriate. In this instance the OFT held that the conduct was of minor significance and decided not to fine Cardiff Bus. Nevertheless, third parties that have suffered a loss as a result of Cardiff Bus's anti-competitive conduct may still bring a claim for damages. Interestingly, this is the first finding of an abuse of dominance by the OFT since 2003.

Marine Hose Directors Receive Reduction In Prison Sentences

The UK Court of Appeal (CoA) has reduced the prison sentences of three directors imprisoned earlier this year in the first successful prosecutions for cartel offences under the Enterprise Act 2002. The three directors, who had been arrested by the Department of Justice in the USA, negotiated a plea bargain that would allow them to be returned to the UK provided they pleaded guilty to participating in the marine hose cartel. A director of PW Consulting and two directors of Dunlop Oil & Marine were sentenced to 36, 36 and 30 months in prison by the Crown Court in June 2008. On 14 November 2008, the CoA reduced these prison terms. The CoA explained that it would have reduced the sentences still further to take into account the directors' co-operation in the investigation and their loss of livelihood, however it had been constrained by the sentences imposed by the USA officials as a result of the plea bargains. The Directors concerned will now serve between 20-30 months.

British Airways Executives In Magistrates' Court

Four executives of British Airways appeared in court on 12 November 2008 on charges of colluding with Virgin Atlantic to fix the prices of passenger fuel surcharges on long-haul flights. The executives are charged with the cartel offence under the Enterprise Act 2002. If they are found guilty of the offence they could face a maximum of five years in prison, disqualification from acting as a director and personal fines. The executives were not required to enter a plea at this stage but the case has been transferred to Southwark Crown Court for a trial by jury. British Airways and Virgin Atlantic have already agreed a settlement in the USA, and offered to pay damages to any customers who purchased flights between July 2004 and April 2006.

EU COMPETITION

Commission Imposes Record Fines On Cartel Participants

On 12 November 2008, the European Commission (Commission) imposed fines in excess of €1.3bn on Asahi (Japan), Pilkington (UK), Saint-Gobain (France) and Soliver (Belgium), for their participation in a car glass cartel. During 1998-2003, the companies held regular discussions involving the allocation of tenders for supplies of glass for car manufacture. During the discussions the companies exchanged commercially lucrative and confidential information. Not only did the Commission impose the largest fine to date for a single cartel, but they also imposed the largest cartel fine for a single company. Saint-Gobain's fine was increased by 60% to €896m, due to its prior involvement in two glass cartels (one in 1984 and another in 1988). Pilkington was fined €370m and Soliver just over €4m. Asahi received a 50% reduction in its fine to reflect its co-operation with the Commission during the investigations. On 17 November 2008, it was reported that the companies intend to appeal the Commission's decision.

Surprise Inspections In The Biomedical Analysis Market

On 12 and 13 November 2008, the European Commission (Commission) carried out unannounced inspections at the premises of a business association and enterprise, both active in the biomedical analysis market in France. The inspections, which follow a complaint from clinical laboratory Labco, are a preliminary stage of the Commission's investigations into possible illegal restrictive practices in breach of Articles 81 and/or 82 of the EC Treaty. According to French newspaper Les Echos, the premises of the Order des pharmaciens (France's National Order of Pharmacists) have been subject to a number of searches. The duration of the investigation is dependant on the complexity of the case and the co-operation of those involved.

Application Of Competition Law To Compulsory Insurance Scheme

Advocate General Mazák (the AG) has given his Opinion on whether a body providing insurance against accidents at work and occupational diseases is an "undertaking" for the purposes of EC competition law. Case C-350/07 came before the European Court of Justice (ECJ) on a preliminary reference from a court in Saxony (Germany). The background to the case is that the insurance body concerned, MMB provided statutory occupational accident insurance company to a private company, Kattner. In November 2004, Kattner decided to cancel its affiliation with MMB on the basis that it had decided to obtain private insurance. MMB advised Kattner it could not opt out of the affiliation. Kattner appealed the decision claiming that compulsory affiliation breaches EC competition law. One issue referred to the ECJ was whether MMB is an "undertaking" under Articles 81 & 82 EC. In his Opinion the AG's took the view that a body operating a social security scheme based on the principle of solidarity would not be an "undertaking" where certain elements of the scheme are subject to State supervision. The AG also took the view that the compulsory affiliation of certain employers to insurance associations operating such social security schemes did not breach the EC Treaty rules on free movement of services.

ECJ Rules On Agreement To Reduce Capacity

The European Court of Justice (ECJ) has given its ruling on the question of whether an agreement between Irish beef processors to reduce processing capacity may amount to a restrictive practice in breach of Article 81(1) EC. Case C-209/07 came before the ECJ on a preliminary ruling from the Irish Supreme Court. The background was that, following concerns in 2002 about overcapacity in the Irish beef market, the 10 largest processors formed the Beef Industry Development Society (BIDS). BIDS formed a rationalisation plan to reduce capacity by 25%. Under the plan, BIDS would offer a standard contract to processors exiting the market to whom a compensation payment was made from a fund created by a levy on members of BIDS remaining in business. The Irish Competition Authority challenged the scheme on the basis that it breached Article 81(1) EC and the issue eventually went before the Irish Supreme Court. The ECJ concluded that the standard form agreement to reduce capacity would fall within the scope of Article 81(1) EC as it involves co-ordination of behaviour on the market and limits independent action. The ECJ did not rule out that the crisis in the sector may be relevant for consideration of whether the Agreement might benefit from exemption under Article 81(3) EC, but this did not affect the analysis of whether it fell within the scope of Article 81(1) EC.

Advocate General Recommends Reduction Of Fines In Citric Acid Cartel

n 6 November 2008, Advocate General Mengozzi (the AG) gave his Opinion on an appeal brought before the European Court of Justice (ECJ) by Archer Daniels Midland Co (ADM). In 2001, the European Commission (Commission) fined ADM and four other companies a total of €135.2m for their participation in an illegal price-fixing cartel in the citric acid sector. The Commission found that between March 1991 and May 1995, the companies met regularly and allocated specific sales quotas, fixed target prices, exchanged customer information and eliminated price discounts. Furthermore, the companies took concerted action to prevent imports from China. The Court of First Instance (CFI) dismissed ADM's appeal against its fine of €36.7m in 2006. ADM lodged an appeal with the ECJ citing errors in the CFI's judgment, in particular in relation to ADM's role as a ringleader in the cartel and its assessment of the impact of the cartel on the market. The AG recommends ADM's fine to be reduced to €29.4m on the basis that insufficient evidence had been produced to demonstrate that ADM was the ringleader. The AG also raised concerns regarding the level of factual information set out in the statement of objections. He highlighted that the right of defence requires a sufficient level of information to enable the accused to be aware of the case against it. However, in other respects, the AG recommends upholding the Commission's decision and dismissing much of the rest of the appeal, in particular with regard to the impact of the cartel on the market.

Commission Approves Acquisition Of ILOG By IBM

On 10 November 2008, the European Commission (Commission) cleared the acquisition of ILOG S.A., a French company active in the development of computer software, by US company International Business Machines Corporation (IBM). IBM is a worldwide company active in the development, production and marketing of various IT solutions. Following an investigation, the Commission confirmed that although there were some horizontal overlaps in the parties respective activities with regard to the application development and deployment of software and supply chain management applications, these overlaps were limited and the merged company would continue to face strong competition. Furthermore, the vertical and conglomerate links between ILOG and IBM would not impede competition, as the merged company would not have the ability to restrict access to ILOG's products.

PROCUREMENT

ECJ Ruling In Coditel Case

On 13 November 2008, the European Court of Justice (ECJ) gave its ruling in the Coditel case (C-324/07) following a preliminary reference from a Belgian court. The Coditel case concerned the award of a services concession for television cable network services by a local authority to an inter-municipal co-operative society. Unlike public contracts, service concessions fall outside the scope of the Public Procurement Directive (2004/18/EC), however a challenge was taken on the question of whether the EC rules on free movement and the general principles of European law required the contract to go out to an open tender. The central issue was whether the contract could be treated as an "in house" arrangement not requiring an open tender, in accordance with the test the ECJ has established under earlier case law (notably the Teckal case C-107/98). Under this test, it had to be demonstrated that the level of control exercised by the local authorities over the concessionaire was equivalent to that which it exercised over its own departments and whether the concessionaire would carry out the essential part of its activities with the controlling authority or authorities. In this instance, it was clear that the second limb of the test was met so the real issue was one of "control". The ECJ held that where a number of public authorities own a concessionaire to whom they entrust the performance of a public service task, the control that they exercise over that entity may be exercised jointly. Having considered the facts of the case, the Court concluded that the level of control required was met in this instance.

Italian Tramway Contract Constitutes "Works Contract"

In 2002 the Municipality of L'Aquila in Italy launched a tender procedure for the design realisation and management of a tramway. The intention being that the Municipality would award a works concession. However, having received no bids, the Municipality awarded the contract to the construction group CGRT. Under the contract between the Municipality and CGRT, the tramway concessionaire that would eventually run the tramway would enter into a service agreement with the Municipality and also pay CGRT a periodic payment for the right to exploit the tramway. Following complaints, the Commission took an action before the European Court of Justice (ECJ) over the question of whether the contract between the Municipality and CGRT was wrongly categorised as a public works concession and should have been treated as a public works contract under the procurement rules. On 13 November 2008, the ECJ held (in Case C-437/07) that, since CGRT did not assume any of the risks associated with the exploitation of the tramway, the contract constituted a "public works contract". Consequently, the contract should have been tendered in accordance with the procurement rules and the "public financing" procedure the Municipality had used did not fulfil its obligations under those rules.

STATE AID

France Ordered To Recover Illegal Tax Aid

The French Government has failed to convince the European Court of Justice (ECJ) that it was unable to recover illegal aid provided under a tax exemption scheme. In 2003, the European Commission (Commission) decided that a provision in the French General Tax Code, which provided a two year exemption from corporation tax for companies acquiring firms in difficulty was incompatible with the rules on State aid under the EC Treaty. The Commission's decision required the French Government to identify the principal companies benefiting from the scheme and to seek recovery of the aid. Although the principal beneficiaries were identified, by 2006 no recovery orders were issued and the Commission initiated an infringement action before the ECJ. On 13 November 2008 (in Case C-214/07), the ECJ confirmed the Commission's decision and rejected France's defence that it was not possible to obtain recovery. The ECJ pointed out that the Commission had not complained that France had not sought recovery from beneficiaries that had ceased trading but only with regard to companies that were still trading.

Recapitalisation Of ING Approved

The Commission has approved an emergency recapitalisation scheme for the Dutch financial group, ING in recognition of the fact that loss of confidence in the institution would have had a serious impact on the Dutch economy. The Dutch authorities now have six months to submit a restructuring plan that will ensure the Group's long-term viability.

Rescue Aid For Italian Regional Air Carrier

Alpi Eagles SpA, a regional air carrier based in the Veneto region of Italy will be granted a €17m loan to recommence flight operations following approval by the European Commission of a notified rescue scheme. The aid will not only help secure jobs for the 150 staff working for the company but also maintain transport links for the region. However, rescue aid is only a temporary solution. Within six months the company will either have to be restructured, liquidated or be able to operate without the benefit of a publicly guaranteed loan.

Commission Seeks Penalties Against Greece Over Aid For Airline

After years of wrangling over State aid to Olympic Airways, the European Commission (Commission) has taken Greece to court again to force recovery of the aid. On 12 May 2005, the European Court of Justice (ECJ), in Case C-415/03, confirmed that certain aid provided to the airline was unlawful and should be recovered. The Commission alleges that this aid was never recovered and launched a further action before the ECJ to enforce the earlier Judgment. On 12 November 2008, there was a hearing before the ECJ (Case C-369/07) at which the Commission argued that the ECJ should impose a daily penalty for every day that Greece has failed to comply with the ECJ's 2005 Judgment. The Greek authorities claim that the aid has been fully recovered and that further action is unnecessary. This case is the first time that an action has been taken under Article 228 of the EC Treaty to impose penalties on a Member State for failure to comply with competition or State aid rules. A ruling on the case is expected next year.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.