COMESA, European Union, Germany, Israel, Italy, South Korea and United Kingdom

COMESA (Common Market for Eastern and Southern Africa): First merger clearances

In our January 2013 issue ( Competition World, January 2013, "Special feature – Competition developments in Africa"), we reported on the establishment of a new region-wide competition regime for Eastern and Southern Africa, under the aegis of COMESA, the Common Market for Eastern and Southern Africa. The member states of COMESA are, currently, Burundi, Comoros, the Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.

At the end of August 2013, COMESA's Competition Commission announced its first clearances of mergers – first, a merger between the electronics companies Philips and Funai and, second, a merger between the Indian pharmaceuticals manufacturer Cipla and Cipla Medpro of South Africa.

Also in July 2013, COMESA published its Competition Rules, setting out procedures under the prohibitions on anti-competitive agreements and conduct and the merger control rules.

European Union: Proposed changes to the EU Merger Regulation

At the end of June 2013, the European Commission launched a consultation on proposals to change the EU Merger Regulation, which provides for competition scrutiny by the European Commission of mergers and acquisitions, and full-function joint ventures, where the parties' turnover (revenues) meet certain thresholds specified in the Regulation.

The main proposals are that:

  • It should be easier for acquisitions of minority shareholdings to come within the scope of the EU Merger Regulation. Currently, an acquisition is reviewable only if it confers "decisive influence" over the target – meaning either majority control (legally or in practice) or veto rights over strategic commercial matters such as the target's budget and business plan. By contrast, other competition regimes have lower criteria: in Germany, an acquisition of a 25 per cent shareholding is notifiable; and in the UK an acquisition of "material influence" is reviewable, which can include acquisitions of shareholdings below 20 per cent.
  • It should be easier for parties to ask the European Commission to look at mergers that do not meet the EU Merger Regulation turnover thresholds: at present, even if a merger does not meet the EU Merger Regulation thresholds, the parties are entitled to request the European Commission to take jurisdiction over the merger if it would otherwise be reviewable by the national competition authorities in at least three EU Member States. This is to allow parties to benefit from the "one-stop shop" of the EU Merger Regulation, and avoid the complexities and burdens of having to make multiple notifications within the EU. However, the process for benefiting from this is quite cumbersome; in order to request that the European Commission takes jurisdiction in such cases, the parties first have to make a "reasoned submission" to the European Commission, and there is a delay of three weeks before the European Commission can begin examining the case, during which a national competition authority of a Member State can object to the Commission taking jurisdiction. The new proposals suggest ways of simplifying this process, by allowing merger parties to notify such cases directly to the European Commission (while preserving for national competition authorities the right to oppose the European Commission having jurisdiction).

Germany: New competition law in force

On June 30, 2013, amendments to Germany's Competition Act came into force. The main changes are:

  • In merger control, the criterion for assessing mergers moves from whether the merger "creates or strengthens a dominant position" to the new test of whether it "significantly impedes effective competition" (with the creation of dominance being just one incidence of that). This puts Germany's merger control in line with the EU Merger Regulation test.
  • Also in merger control, an exception to the prohibition on completing a merger pending German clearance has been introduced, such that this prohibition should not prevent the implementation of public takeover bids so long as the relevant voting rights are not exercised until the German competition authority grants clearance. This, too, is in line with the EU Merger Regulation's provisions.
  • For the prohibition on abuse of a dominant position, the presumption of single market dominance increases from a market share of one-third to a market share of 40 per cent.
  • For the private enforcement of competition law, it will now be open to consumer protection associations, as well as the affected parties, to take proceedings for injunctive relief. Damages claims will, however, still be limited to affected parties.

Israel: Amendments to strengthen the competition law

In July 2013, Israel's ministerial committee on legislative affairs unanimously approved a series of proposed changes to Israel's competition law, which will have the effect of giving the legislation more "bite". Key changes include:

  • Airline mergers and alliances will now be subject to Israeli competition law, even if none of the parties is an Israeli airline.
  • In competition litigation, it will be possible for claimants (plaintiffs) to substantiate their claims in court by invoking earlier rulings by Israel's competition authority.
  • Also in competition litigation, it will be possible for claimants to obtain triple damages if a competition infringement is found.
  • Infringements of agreed orders or rulings of Israel's competition tribunal will be subject to enforcement as criminal offences.

Italy: Applying the new merger control thresholds to joint ventures

In a previous issue of Competition World, we reported on changes to Italy's competition laws ( Competition World, January 2013, "In brief: Italy – competition law reforms"). Those changes included a change to the Italian merger control thresholds, under which the thresholds for (a) the Italian aggregate turnover of all the parties, and (b) the Italian turnover of the target only, became cumulative rather than alternative requirements before Italian merger control can apply.

In August 2013, the Italian Competition Authority issued a Communication aimed at clarifying the scope of threshold (b) – i.e. on the national turnover of the target – in the context of joint ventures. It said one should count the turnover attributable to all businesses contributed by both parents to the joint venture (including businesses contributed at any time in the previous two years).

This contrasts with the UK's treatment of the target turnover thresholds in the context of joint ventures. Under UK merger control, the target's UK turnover threshold is measured by looking at the turnover attributable to the businesses contributed to the joint venture by the parent companies but not counting the business contributed whose turnover is of the highest value. Thus, in the UK, where there are two parents to the JV, one has regard to the turnover of the businesses contributed by just one parent, the one contributing the business with the lower turnover.

South Korea: New fining methodology under competition law

In June 2013, Korea's competition authority, the Fair Trade Commission, announced changes to its fining methodology. Under the new methodology, the Commission will apply a points-based system to assess the gravity of a competition law infringement. Infringements will be categorised as "very serious", "serious" or "moderately serious". Although the new provisions do not change the maximum fine (which cannot exceed 10 per cent of an undertaking's annual turnover), they are expected to result in increased fines for the most serious anti-competitive arrangements, in particular bid-rigging. The new provisions took effect on June 17, 2013.

South Korea: Strengthening the criminal offence

In June 2013, South Korea's competition authority, the Fair Trade Commission, announced that the country's competition legislation had been amended to allow the public prosecutor to instigate criminal proceedings for competition law infringements without the need for a formal complaint from the Commission. Prosecutions can now be instigated on the public prosecutor's own initiative, or following complaints by the Fair Trade Commission or by other authorities.

United Kingdom: Government gives a "strategic steer" to the new competition authority

As part of the preparation for Britain's new competition regime coming into effect in spring 2014, the UK Government in July published a draft of a "strategic steer" to the new competition authority, the Competition and Markets Authority (or CMA, which will amalgamate the two pre-existing competition authorities, the Office of Fair Trading and the Competition Commission). The draft "strategic steer" recommends that competition should be harnessed to "support the return to strong and sustained growth" in the British economy and, in this context, recommends that the CMA should assess those sectors where enhanced competition could contribute to faster growth, citing as examples:

  • "knowledge intensive" sectors
  • financial services
  • infrastructure sectors including energy.

The new CMA will not be bound to comply with the Government's "strategic steer", and the Government draft was at pains to stress that the steer should "avoid being perceived as compromising the independence of the CMA". Nevertheless, it is unlikely that the CMA would ignore the strategic steer altogether, and the document therefore provides a useful indication of some of the areas on which the CMA is likely to focus its attention.

United Kingdom: Government and Competition Appeal Tribunal at odds over the right to appeal against competition authority decisions

A controversy has arisen in the UK over Government proposals to "streamline" appeals against competition authority decisions. At present, when the UK competition authority makes a decision as to whether there is an infringement of the UK or EU prohibitions on anti-competitive agreements or abuse of dominance, the parties affected have the right to a "full merits" appeal against that decision to a specialist judicial body, the Competition Appeal Tribunal. Under this, the Tribunal can review any aspect of the competition authority's findings, factual or legal.

In June 2013, the UK Government initiated a consultation on proposals for "streamlining" regulatory and competition appeals53 which included a proposal that appeals on decisions as to whether there is a competition law infringement should be narrowed to more limited or "focused" grounds – essentially, procedural irregularities or illegality – rather than all aspects of the merits.

Then, in late August 2013, the appeal body itself, the Competition Appeal Tribunal, submitted its response to the Government's proposals. It is an unusually outspoken response, refreshingly free of diplomatic niceties: according to the Tribunal, the Government has made "no case at all" for "altering or reformulating the standard of review in competition appeals"54.

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53UK Department for Business, Innovation and Skills, Streamlining Regulatory and Competition Appeals: Consultation on Options for Reform, June 19, 2013.
54UK Competition Appeal Tribunal, response to Government consultation on "Streamlining regulatory and competition appeals", August 23, 2013. Norton Rose Fulbright has also submitted a response to the consultation, which may be viewed here.

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