Global Trends 2016.indd

2016
Global Trends
Monitor
www.parr-global.com
1
TABLE OF CONTENTS
INTRODUCTION ................................. 3
UNITED STATES .....................................4-13
BRAZIL ......................................................14-16
THE EUROPEAN UNION ......................17-29
AUSTRALIA .............................................30-31
CHINA ........................................................32-37
HONG KONG ............................................38-40
INDIA .........................................................41-42
INDONESIA .............................................43-44
JAPAN ......................................................45-46
MALAYSIA ...............................................47
MYANMAR ..............................................48-49
PHILIPPINES ..........................................50-51
SINGAPORE ............................................52-53
SOUTH KOREA .......................................54-55
TAIWAN ...................................................56-57
ASEAN ......................................................58-59
OUR GLOBAL NETWORK ....................60-61
About PaRR
PaRR is the leading provider of news, analysis and
data on the issues impacting the global competition
landscape. Part of the Mergermarket Group,
we provide advisors, corporates and investors
with forward-looking intelligence, global news
aggregation and database tools / analytics.
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INTRODUCTION
Dear reader,
Welcome to this year’s edition of PaRR’s Global Trends Monitor.
It’s been a busy year for antitrust regulators across the globe. From Tokyo Electron’s
failed merger with Applied Materials; Google’s ongoing issues with search and Android;
to Qualcomm’s patent licensing agreements — competition agencies around the world
have not shied away from asking companies the tough regulatory questions.
Be it Washington, Brussels or Beijing, companies are now more than ever exposed to
the “slings and arrows” of regulatory risk. With this in mind, PaRR’s global team sat
down with the key competition regulators and top legal minds across the Americas,
Asia and Europe to assess the most notable developments in 2015 and shine a light on
enforcement priorities for the coming year.
In our 2015 report, we noted that the EU’s new competition chief Margrethe Vestager
would take a strong stance on state aid and tax avoidance. Our retrospective of her first
year shows these were not idle words, as Apple and Amazon learned only too well. This
year, we take a special look at calls to make Europe’s national competition authorities
more effective enforcers.
In 2016, Hong Kong’s competition law will become a reality and the commission’s
chairwoman told PaRR she has no intention to “pussyfoot” around with it comes to
enforcement. In China, there is still uncertainty as to how the economic downturn will
affect the regulatory landscape, but an array of regulators will press ahead this year
with revisions to the nation’s intellectual property guidelines.
In the US, 2015 saw the antitrust agencies and merging parties facing off in court several
times in what was a particularly litigious year for deal-makers. Along with cartels in auto
parts and shipping, financial benchmark manipulation resulted in massive settlements
with the Department of Justice. Looking ahead, the closely watched LIBOR litigation is
awaiting a significant ruling that will have broad industry implications.
We hope you find our report useful and, as always, we welcome your feedback.
Raymond Barrett
Managing Editor
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UNITED STATES
DEPARTMENT OF JUSTICE
Merger Control
High-profile mergers are at the top of the
Department of Justice (DoJ) Antitrust
Division’s agenda this year, according to a
senior government official.
A trend of giant corporate deals has been
under way since 2014, and the official said the
merger frenzy is expected to continue in 2016.
DoJ attorneys are currently reviewing the
USD 120bn beer merger between SABMiller
and Anheuser-Busch InBev, the second
biggest M&A deal of 2015 and the fourth
largest on record.
Other major transactions under investigation
this year by the division include Time
Warner Cable/Charter Communications,
Baker Hughes/Halliburton and two big
health insurance deals, Cigna/Anthem and
Humana/Aetna.
“The number of just enormous deals is really
a striking change [over the past couple
years],” the official said.
M&A volume in the US rose to USD 1.96tn in
2015, a 40% increase from the previous year
and the highest level since Mergermarket
began keeping records in 2001. The number
of US-based deals totaled 5,018 in 2015,
down 4% from the prior year.
Highlights
The Antitrust Division won a number of
victories in the merger arena in 2015.
The government official pointed to five
transactions in particular.
The list includes the GE Appliances/
Electrolux appliance deal, the sole merger
challenge by the agency that actually
went to trial last year. The DoJ said the
transaction would lead to higher prices for
cooking appliances. The court proceeding
ended in December without a verdict after
the surprise decision by GE executives to
walk away from the USD 3.3bn deal.
Although the DoJ cleared the merger
between Whirlpool and Maytag in 2006,
the agency decided to take GE/Electrolux
to court. Agency attorneys look at each
new deal carefully, the official said, so it is
wrong to think they are going to do exactly
same thing they did before. Moreover, the
investigation in Maytag/Whirlpool focused
on a different product – washing machines,
not cooktops or stoves.
Also on the agency’s list of accomplishments
last year was the Screenvision/National
CineMedia transaction, which the DoJ
had sued to block in late 2014. The cinema
advertising companies abandoned the USD
375m deal in March 2015, four weeks before
the trial was set to begin.
The DoJ’s most dramatic victory of last year
4
occurred the following month. After having
reportedly spent millions in lobbying for its
USD 45bn merger with Time Warner Cable,
Following a 19-month-long investigation by
the agency, the semiconductor equipment
makers called off the USD 9.4bn deal in April.
Comcast dropped its bid following opposition
from regulators at both the DoJ and the
Federal Communications Commission.
Regulators worried the merger would
hinder the development of next-generation
technology. The case was unusual, the
government official said, in that a fear of a
loss of innovation is not often the primary
reason regulators oppose a transaction.
The way the Antitrust Division attorneys
looked at the Comcast deal was a surprise
– they focused on the national broadband
market rather than local cable markets, the
government official said. “When we looked
at it, we realized that the area that we were
really concerned about was broadband, and
the ability of the merged firm to kind of be a
choke point for edge providers,” the official
said. “The definition of the markets changes
as the markets evolve.”
Finally, DoJ attorneys’ concerns about the
Bumble Bee Foods/Chicken of the Sea deal
drove the packaged tuna makers to give
up their USD 1.5bn proposed transaction in
December. The agency said the companies
should have known that the market was
“not functioning competitively,” and the
merger would make it worse. PaRR reported
last summer that the DoJ had launched
a criminal antitrust investigation of the
packaged seafood industry.
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Another deal on the list was Applied
Materials/ Tokyo Electron, which ran into
trouble when the companies’ divestiture
proposal was shot down by DoJ attorneys.
In recent years, the Antitrust Division has
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annually issued between 20 and 30 requests
for additional information, commonly known
as a “second request.”
International Cooperation
Agency regulators have been coordinating
merger reviews with numerous foreign
antitrust authorities for a while now, and
that will continue to be the case this year.
DoJ antitrust attorneys have been doing
more with their Chinese counterparts,
for example. “We had a very successful
cooperation with them, from our perspective,
on the Applied Materials/Tokyo Electron
matter,” the official said. DoJ attorneys also
worked closely with Korean and German
authorities on the deal.
The cooperation with China has grown each
year as the country’s merger review process
has developed, the official explained.
Last year, the division worked together with
nearly 20 different foreign authorities on
more than 20 merger investigations, most of
which were not made public.
Human Resources
Hiring for the DoJ Antitrust Division is
expected to slow in 2016 following a recent
hiring spree. The division brought 87
attorneys and 109 paralegals on board over
the past two years after a hiring freeze was
lifted in October 2013. The total number of
attorneys now stands at 346 and the number
of paralegals at 153.
“We’ve gotten to about full capacity again,”
the government official said. “We’re going
to be spending this year integrating,
training and bringing those new folks into
the division and making sure everybody’s
getting up to speed.”
Criminal Enforcement
The DoJ’s massive investigation into pricefixing among Japanese auto parts companies
has begun to wind down, which means the
agency will be able to devote additional
resources to criminal probes in other sectors.
A government official predicted that
the department will focus its efforts on
investigations into the financial sector,
including real estate bidding auctions.
The DoJ is also likely to focus its attention
on prosecuting individuals — a policy
outlined in September 2015 by Deputy
Attorney General Sally Quillian Yates.
“We’re taking the … guidance very
seriously, and we’re incorporating it into
our work,” the government official told
PaRR.
The Antitrust Division’s focus on individuals
is not new. For instance, DoJ statistics show
that in FY15 — which ended 30 September
— the DoJ prosecuted 66 individuals for
antitrust violations. That compares with 44
individuals who were prosecuted in FY14.
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In 2015, the DoJ also adopted a new policy of
granting leniency on a case-by-case basis
for companies that develop strict antitrust
compliance programs.
In September, Kayaba Industry agreed
to plead guilty and pay a USD 62m fine
for conspiring to fix the prices of shock
absorbers. Under sentencing guidelines, the
company could have been fined as much as
USD 207.36m.
New Cartels
The past year has seen the DoJ announce
prosecutions in several new areas — with
the promise of additional charges in the future.
In April 2015, the DoJ announced that
an individual would plead guilty to fixing
the price of posters sold online through
Amazon Marketplace. David Topkins
and his co-conspirators allegedly used a
computer algorithm to coordinate prices.
Topkins agreed to pay a USD 20,000 fine and
cooperate with the DoJ e-commerce probe.
In December, charges were filed against
Daniel William Aston and his company, Trod
Ltd., for similar allegations.
In October, Frank Reichl, a former executive
at General Chemical, pleaded guilty to
criminal antitrust charges in connection
with the sale of liquid aluminum sulfate —
a water treatment material used by cities.
Reichl’s company had previously been given
amnesty in exchange for its cooperation with
the investigation. The DoJ said hundreds
of cities may have been victimized by the
conspiracy.
In December, the DoJ announced that
Bradley N. Davis, president of Brandenburger
& Davis, and his firm would plead guilty to
charges that they conspired to eliminate
competition in the heir location industry.
Earlier this year, similar charges were filed
against another individual, Richard Blake Jr.
Auto Parts
The DoJ’s probe into price-fixing among
Japanese auto parts companies continued in
2015. The agency announced the prosecution
of six companies and 10 individuals in
connection with the investigation, which has
blossomed into the largest criminal antitrust
probe in DoJ history.
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By the end of last year, 38 companies and 58
executives had been prosecuted for fixing
the prices of auto parts, with fines totaling
more than USD 2.5bn.
Several of the individuals charged in
connection with the probe remain fugitives.
The government official said the DoJ will
continue to focus on attempting to extradite
those individuals. “I don’t know whether
we’ll be successful, but we’re going to work
at that,” the official said.
antitrust and fraud cases against individuals
in northern California and the southeastern
US in connection with bid rigging at real estate
auctions. In 2015, seven cases were filed in
the southeastern US, alleging that individuals
agreed not to bid against one another at public
real estate foreclosure auctions.
The same number of cases was filed against
individuals in northern California. Some 75
people have been charged in connection
with that investigation.
Financial Sector
The DoJ announced in 2015 that several
major banks had agreed to plead guilty in
connection with allegations that they had
manipulated the price of US dollars and
euros in foreign currency exchanges.
Citicorp, JPMorgan Chase, Barclays and
The Royal Bank of Scotland agreed to plead
guilty to those charges and agreed to pay
more than USD 2.5bn.
UBS agreed to plead guilty to manipulating
the London Interbank Offered Rate (Libor)
and other benchmark interest rates. DB
Group Services (UK) Limited agreed to plead
guilty to similar charges.
And a federal jury in November convicted
two former Rabobank derivative traders
for fixing Libor rates. Two other Rabobank
employees were charged as well.
Real Estate Bid Rigging
The Antitrust Division has filed criminal
FEDERAL TRADE
COMMISSION
The last 12 months marked another busy year
for the Federal Trade Commission (FTC) as it
sought to combat anticompetitive behavior and
to advance pro-competitive policies, senior
figures at the agency told this news service.
FTC
Chairwoman
Edith
Ramirez,
Commissioner Julie Brill, Commissioner
Maureen Ohlhausen, Commissioner Terrell
McSweeny and Bureau of Competition
Director Deborah Feinstein all touched
on various highlights in their comments to
PaRR for this report.
Recapping the year, Ramirez noted that
the FTC “successfully challenged Sysco’s
proposed merger with its main food
distribution rival, US Foods, entered into a
landmark USD 1.2bn settlement to resolve
pay-for-delay charges against branded drug
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maker Cephalon, and obtained our third
Supreme Court victory in as many years in
the North Carolina Dental case addressing
the state action doctrine, to cite just a few
examples.”
As Feinstein pointed out, the US Foods/Sysco
transaction was a complex matter which
“involved disputes on product and geographic
market definition, competitive effects, entry,
efficiencies and the adequacy of the fix.”
The FTC’s success in winning a preliminary
injunction to stop the deal “makes clear the
soundness of our analytical approach to
mergers – and will greatly benefit the numerous
consumers who buy food at restaurants,
colleges and the like,” Feinstein added.
Brill praised FTC staff, which successfully
articulated to the court why the parties’
proposed fix in US Foods/Sysco fell short.
“I think it is significant that the FTC has
pursued
numerous
anticompetitive
mergers — including several outright
challenges in court — as well as continued
investigations and litigation in ‘pay-for-delay’
pharmaceutical deals and other conduct
cases simultaneously,” she said.
Healthcare and Policy Work
In the arena of anticompetitive conduct,
the Cephalon reverse payment case
represented a huge win for the agency. “Our
USD 1.2bn disgorgement and significant
injunctive relief against reverse patent
settlement agreements will have a longlasting effect in preventing such violations
in the future,” Feinstein said.
Like Ramirez, Ohlhausen stressed the
importance of the NC Dental case. The
FTC’s victory “not only is going to have a
significant impact on competitor-dominated
state boards, but will also hopefully trigger a
reevaluation by the states of their many anticonsumer regulations in the occupational
licensing area,” Ohlhausen said.
It is clear the FTC has remained heavily
involved in the healthcare sector. The
commission challenged three proposed
hospital mergers last year, and it obtained
a significant victory in the Ninth Circuit
by blocking St. Luke’s Health System’s
acquisition of the Saltzer physician
practice.
Even the FTC’s unsuccessful cases – such
as its attempt to thwart Steris’ acquisition of
Synergy Health – “demonstrated the FTC’s
continued willingness to bring potential
competition cases where they threaten
consumers,” McSweeny noted.
Last but not least, the FTC undertook
advocacy efforts in areas such as
occupational licensing proposals and state
“certificate of need” laws dealing with
the supply of health care services. There
was also, for the first time in its 100-year
history, a bipartisan statement from the
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commission to guide enforcement of
the FTC’s Section 5 “unfair methods of
competition” authority.
Priorities For 2016
Looking ahead, some of the FTC officials cited
specific areas of interest and opportunity.
Ohlhausen, for example, said it is important
to replace former commissioner Joshua
Wright, who departed the agency last year.
Another priority is multi-agency cooperation
and convergence, particularly where
overlaps exist between antitrust and IP.
On the merger enforcement front, the FTC
has committed to challenging transactions
including Staples’ proposed acquisition of
Office Depot as well as several proposed
hospital deals.
And on the policy side, the commission
will continue to examine patent assertion
entities, the sharing economy, and merger
remedies. The FTC’s 6(b) study on merger
remedies will likely provide a “key data
point” for discussions about enforcement,
McSweeny said.
It is going to be another busy year for the FTC.
“In short,” Ramirez said, “we will continue
our vigorous enforcement of the antitrust
laws in healthcare, retail, and other key
sectors, and will continue to invest in
research and studies to help guide future
enforcement and policy work.”
CIVIL LITIGATION
The past year in antitrust civil litigation
foreshadows what lawyers should expect in
2016, with billion-dollar settlements in several
areas, including financial benchmark class
actions, pharmaceutical “reverse-payment”
cases, and big strides forward for college
athletes.
Market Benchmark and Financial
Services Antitrust
Plaintiffs’ attorneys anticipate more
multibillion-dollar settlements this year
in cases accusing traders at the world’s
biggest banks of conspiring to manipulate
benchmark interest and exchange rates,
as well as prices for precious metals and
commodities.
In October 2015, Bank of America, Barclays,
BNP Paribas, Citi, Goldman Sachs, HSBC,
JPMorgan, Royal Bank of Scotland and UBS
asked the court to grant preliminary approval
to settlements with class plaintiffs totaling
more than USD 2bn in the Forex Antitrust
Litigation. In September, 14 bank defendants
agreed to a USD 1.865bn settlement in the
Credit Default Swaps Antitrust Litigation.
Many trillions of dollars in daily transactions,
from sophisticated financial derivatives to
consumer home mortgages, are pegged to
benchmarks such as Libor which are set
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Our USD 1.2bn disgorgement and significant
injunctive relief against reverse patent settlement
agreements will have a long-lasting effect in
preventing such violations in the future.
Deborah Feinstein, Bureau of Competition Director
by groups of the world’s largest banks. The
financial benchmark cases have struck a
chord with the public over reports of illegally
collusive conduct among the banks’ trading
units in the past decade.
A key issue before the courts, and central to
the Libor appeal now before the US Second
Circuit Court of Appeals, is whether this
conduct violates antitrust laws. So far, trial
judges have been divided over whether the
banks’ organically “collaborative” process
in setting various benchmarks crosses the
line into old-fashioned illegal price-fixing.
Plaintiffs have run through most of the major
financial benchmarks, such as Libor, Euribor,
Forex and US Treasury bills. Observers
expect to see more information come out
in Forex, more litigation over commodity
benchmarks, while plaintiffs may have bond
benchmarks in their sights in 2016.
Antitrust lawyers also are watching for
the Second Circuit’s decision in the DoJ’s
successful anti-steering case against
American Express (AmEx). A district
judge found last February that the rules in
AmEx contracts that ban merchants from
“steering” customers to lower payment
options violated antitrust laws. However,
the Second Circuit panel hearing the appeal
took issue with key elements of that ruling.
Sports Antitrust Actions Heat Up
Last year also saw a jump in athletes,
fans and lower-paid employees of sports
organizations using antitrust laws to try
to get their share of the big money that
television and other media have showered
on amateur and professional sports.
Most notable among these are the three
sets of cases in which college athletes are
challenging National Collegiate Athletic
Association rules restricting various forms
of compensation. Lawyers say the early
success in these cases shows that equity
sharing is on the way for amateur college
athletes, and that schools already are
planning for that future.
In January 2016, Major League Baseball
(MLB), Comcast and DirecTV settled a fan
class action challenging baseball’s antitrust
exemption vis-à-vis its broadcast licensing
system. The National Hockey League, also a
party to that action, settled with fans in June.
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Fans also have targeted the National Football
League (NFL) and DirecTV over similar
practices relating to televised football games.
clarify standards for the reach that the
Foreign Trade Antitrust Improvements Act
(FTAIA) gives civil plaintiffs.
MLB’s antitrust exemption last year struck out
San Jose’s action over franchise relocation,
as well as minor league players’ allegations
in another case over alleged restrictions on
pay and player mobility. But a former MLB
scout is currently challenging the league’s
alleged suppression of MLB employees’
mobility, salaries and benefits in federal
court. And a group of rodeo stars is suing to
break loose from and compete with their own
sanctioning organization.
The FTAIA exempts the application of the
Sherman Act to conduct that takes place
entirely outside US borders. But it also says
that such conduct may give rise to antitrust
liability if it involves “import commerce” or
has a “direct, substantial, and reasonably
foreseeable effect” on domestic commerce
and that effect “gives rise to” a Sherman Act
claim.
Auto Parts Case Expands;
FTAIA In Components Actions
Despite an FTC report in January of a
decrease in so-called “reverse-payment”
or “pay-for-delay” deals, lawyers anticipate
significant developments this year in the
case law in this area. Lawyers who practice
in this area say that 2016 will see important
rulings further defining the parameters of
settlements between brands and generic
drugmakers.
The massive global price-fixing conspiracy
over automobile parts took a dramatic turn
in December 2015, when a class of US auto
buyers suing Japanese auto parts companies
for price-fixing alleged that one company —
Denso — coordinated cartel activities for
18 separate vehicle parts. This claim further
complicates the biggest antitrust case in US
history, combining the already more than 100
defendants in ways that potentially exposes
their lawyers to conflicts of interest and
could result in even more astronomical civil
damages.
Antitrust lawyers—and judges—involved
in the various electronic component cases
in the Northern District of California would
like to see the US Supreme Court (SCOTUS)
Pharmaceutical Antitrust
Developments
These deals, which involve brands settling
drug patent litigation with generics and
getting the generics to delay market entry,
are the focus of FTC v Actavis, a seminal 2013
SCOTUS opinion. In Actavis, SCOTUS held
that such deals could violate antitrust laws,
but left it to the lower courts to determine the
when and how.
Lawyers say it is likely that Cephalon, the
second post-Actavis reverse-payment
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case scheduled for trial, will settle. The
FTC component of Cephalon settled for
USD 1.2bn last May. Nexium, the first postActavis case decided by a jury, ended in
a defense win in December 2014 and has
been appealed to the First Circuit.
Last year, rulings out of the trial courts
tended to favor defendants (Nexium,
Wellbutrin), while courts of appeals leaned
toward plaintiffs (Lamictal, Cipro). At least
two federal courts of appeal are expected to
rule this year on the nature of the payment
(Loestrin in the First Circuit, Wellbutrin and
Lipitor/Effexor in the Third Circuit).
In addition, antitrust lawyers expect
developments in so-called “producthopping” cases. These occur when a drug
company allegedly abuses regulatory
procedures to extend its legal monopoly by
“forcing” patients that use a prescription
brand to “hop” to a successor preparation.
In a major 2015 case, the New York attorney
general won an injunction affirmed by the
First Circuit against Forest Laboratories
and Actavis, targeting this practice over
the Alzheimer’s drug Namenda. The parties
later settled the case.
conspired with publishers to raise the price of
e-books, and the USD 450m penalty imposed.
Apple claims that the “per se” rule does not
apply to a horizontal conspiracy to impose
retail price maintenance on retailers. If
SCOTUS ultimately agrees with Apple, the
company will have a chance to defend its
price-fixing scheme. This would be a major
shift in the law, since SCOTUS has not
accepted a justification for hard-core pricefixing since at least US v. Socony-Vacuum
Oil Company, a 1940 SCOTUS decision
widely cited for the proposition that pricefixing is illegal per se.
And the antitrust and class action bar are
still waiting to see if SCOTUS will tackle
the issue of so-called “uninjured plaintiffs.”
Uninjured class members — people included
in a litigation class who did not suffer the
actual damages the class claims — is a
“hot button” issue with the antitrust defense
bar. This issue has also been taken up by
pro-business advocacy groups, such as the
US Chamber of Commerce, which often file
friend-of-the-court briefs with SCOTUS and
the federal appellate courts
SCOTUS Outlook For 2016
Lawyers watching the Apple eBooks
situation say that it will be a very big deal
if SCOTUS decides to take that case. In
June 2015, the Second Circuit affirmed the
trial court’s ruling for the DoJ that Apple
13
BRAZIL
The Brazilian competition authority’s priority
for 2016 is the fight against bid-rigging
schemes to win public contracts, the
agency’s president, Vinicius de Carvalho,
told PaRR.
The cartel-fighting focus of the Conselho
Administrativo de Defensa Economica
(CADE) encompasses both an effort to
reduce the backlog of old cases and to start
new proceedings, Carvalho said. In 2015, the
agency’s General Superintendent’s Office
started 244 new administrative proceedings,
including cartel and conduct cases.
According to Carvalho, the fight against cartels
has produced significant results in Brazil,
creating deterrence incentives for companies
and having a positive impact on public coffers,
as well as benefiting the public in general.
Record Fines and a Smaller Budget
Carvalho made a point of emphasizing
that the total amount of fines collected by
CADE under cease-and-desist agreements
(locally known as TCCs) and other types of
settlements has increased from BRL 45m
(USD 11.2m) in 2012, when he took over
CADE’s presidency, to BRL 524m in 2015.
Two such settlements were reached in a
cartel investigation in the Brazilian market
for ball bearings, which are mostly used in
the automotive industry. On 29 July, JTEKT
Corporation, JTEKT Automotiva do Brasil
and Koyo Rolamentos do Brasil, in addition
to two individuals related to the companies,
settled with CADE for BRL 3.1m (USD
794,000), while Schaeffler Brasil and INAHolding Schaeffler settled for BRL 60.6m
(USD 15.5m). The companies signed ceaseand-desist agreements under which they
both acknowledged the conduct and agreed
to cease it.
The highest amount collected by CADE prior
to 2015 was BRL 169m in 2014. This stands in
contrast with the decrease in the agency’s
budget for 2016, which has dropped to BRL
20m from the BRL 22m received in 2015.
According to Carvalho, the reduced budget
will mostly affect the number of raids the
agency can conduct. The smaller budget will
not affect ongoing investigations, for which
evidence has already been collected.
In addition to the budget issue, Carvalho
mentioned a structural problem: a lack of
personnel to investigate cases. CADE’s
president expects the issue to be resolved
by the creation of a specific career path for
CADE officials, a proposal introduced in a
bill which Congress is expected to vote on
in 1H16.
Improving Efficiency
CADE’s other priority for 2016 is to improve
its efficiency on conduct cases. Carvalho
told PaRR that CADE intends to expedite
14
proceedings as well as improve the quality
of its investigations. Carvalho cited CADE’s
new settlement policy, which calls for
increased cooperation from companies
under investigation, as one of the measures
which the agency has adopted to improve
efficiency. As companies are now required
to produce stronger evidence to settle a
case in the beginning of an investigation, this
cooperation also expedites the proceeding,
as less time is needed for the investigations
to be conducted.
To expedite some proceedings, CADE has
also resorted to splitting them into two
separate cases, one targeting the implicated
individuals and the other the implicated
companies, Carvalho said. This measure was
adopted in the investigation of an alleged bidrigging scheme to win subway and railway
public contracts in several Brazilian states, a
proceeding that was initiated when Siemens
reported the alleged cartel to CADE in 2013.
With regards to this case, Carvalho said that the
General Superintendent’s Office (SG) intends
to conclude the investigations and refer the
case to CADE’s tribunal already in 2016.
Merger Reviews
A total of 404 mergers were filed with CADE
in 2015, down from the 425 mergers filed in
2014. CADE has reviewed a total of 386 merger
filings in 2015, of which 368 were approved
unconditionally, seven were approved with
restrictions and one was blocked.
Of the deals that were approved with
restrictions in 2015, one of the most significant
was the joint venture between multinational
pharmaceutical companies GlaxoSmithKline
and Novartis. CADE’s approval of the deal on
25 February was conditional upon the signing
of a Merger Control Agreement under which
the parties agreed to sell assets related to
GSK’s anti-smoking products in Brazil.
Another major deal that CADE approved
with restrictions last year was the
acquisition of UK-based Rexam by USbased Ball. To eliminate competition
concerns, the approval of the transaction
was conditional upon the sale of factories
and related tangible and intangible assets.
On 9 December, the companies signed an
agreement that stipulated the sale of the
assets and the transfer of contracts to their
buyer. Additionally, Ball and Rexam agreed
to enter contracts for the supply of lids with
the buyer.
CADE’s SG has also challenged some
mergers in 2015 which are still awaiting a final
decision by the agency’s tribunal. One of the
most high profile is Halliburton’s proposed
acquisition of Baker Hughes, which was
challenged by the SG on 4 December. The
SG found that the unconditional approval
of the deal could result in price increases
in several markets and in a reduction in
incentives to innovate, therefore affecting
the Brazilian oil and gas market. The case is
now pending a tribunal decision.
15
Three economic sectors in Brazil are seen
as being among the most problematic from
a competition perspective: petrochemicals,
infrastructure and cement, according to
Carvalho. Sectors in which there is a very
high market concentration tend to generate
competition concerns whenever a new
merger is filed.
Carvalho added that courts have ruled in favor
of CADE’s decisions in 73% of the cases over
the past four years. In Brazil, the antitrust
agency’s decisions can be appealed in court.
According to Carvalho, the fact that courts
usually agree with CADE’s rulings is another
important mechanism for the deterrence of
antitrust behavior, as it prompts companies
to seek settlements rather than engage in
legal battles.
The Brazilian competition authority’s
priority for 2016 is the fight against
bid-rigging schemes to win public contracts.
Vinicius de Carvalho, Agency President
16
THE EUROPEAN UNION
EC—DIRECTORATE GENERAL
FOR COMPETITION
Margrethe Vestager’s high profile in her
first full year as the European Commission’s
competition commissioner has contrasted
with the relative chaos and uncertainty
affecting the rest of the European Union’s
executive, blighted by financial woes and
political divisions exacerbated by Europe’s
migration crisis.
A mark of the confidence of the EC competition
watchdog can be seen in its recent threat to
investigate the UK government’s controversial
tax settlement with Google. This follows a
series of probes against member states using
state aid rules (see below). Tax is one of the
strict competences reserved by the member
states under the EU treaties: to challenge
the bloc’s most eurosceptic member on
the issue before it stages a referendum on
EU membership demonstrates Vestager’s
confidence in both herself and the body she
leads.
Indeed, the former Danish finance minister
has been keen in her first year to emphasise
that her position as head of the European
competition authority is a political one, but
her role as figurehead of the authority should
not be overstated. Beneath the political
superstructure of the commission, the
bureaucratic substructure remains critical
to its operation, not to mention influential.
So the midyear replacement of the former
director general of the watchdog –
Alexander Italianer – with German Johannes
Laitenberger, was a significant shift too.
Dutchman Italianer’s promotion to secretary
general of the EC as a whole was a mark
of the esteem with which the competition
department is held in the EC. Whilst
Laitenberger’s appointment also signalled
a resetting of the EC bureaucracy. Between
1968 and 2002, the post had come to be seen
as a German fixture, one reason why Germans
never provided a commissioner. Directors
general Italianer and Philip Lowe, a Briton,
bucked this trend over the past 15 years.
The Return Of State Aid
Although cartels continue to roll in, the
landmark of the new commissioner’s first
year in office came in the unlikely guise of
state aid intervention. In an attempt to take
significant action in response to the financial
scandal revealed in November 2014 on
confidential information about Luxembourg’s
tax rulings with multinational companies, the
competition watchdog used state aid control
tools to tackle selective tax advantages.
Major ongoing cases include McDonald’s,
Apple and Amazon. These cases are highly
controversial, pitching major corporations
and member states’ treasuries against the
EU executive in a relatively untested field.
They are also providing a focus for media
17
attention. Although an official told PaRR
that DG COMP does not foresee any major
personnel or structural changes to its
operations during 2016, it is widely known
in Brussels that the state aid department
within DG COMP has also been considerably
beefed up to cater to the new phenomenon.
Digital Markets and Energy
Remain Priorities
Vestager and her team frequently emphasise
the key difference between the generally
self-contained
National
Competition
Authorities (NCAs) and DG COMP, which
forms part of an executive with broader
political policy objectives. “Competition
enforcement should neither take place in a
vacuum nor should it ignore changing social
and economic conditions,” as one senior
official put it to PaRR. Thus Vestager’s key
decisions have reflected the core current
goals of the EU executive with its Digital
Single Market and Energy Union strategies.
Territorial restrictions in online markets
and digital content remained one of the
main enforcement priorities during 2015,
reflecting the EC’s digital policy objectives.
The commission launched a sector inquiry
into e-commerce which targeted territorial
restrictions in online distribution. In the field
of media, potential territorial restrictions in
licensing agreements between film studios
and providers of pay-TV services also came
under scrutiny.
The online distribution of goods and content
was also the focal point of investigations
concerning vertical agreements. Investigations
into online shopping restrictions in consumer
electronics continued throughout 2015. In
the publishing sector, the EC opened a formal
investigation into the distribution of e-books by
Amazon.
As regards abuses of dominance, the trends
which prevailed in previous years continued in
2015, with investigations in the digital and the
energy sectors amongst the most prominent.
The most eye-catching initiatives came with
the ongoing investigations into Google’s
search practices, since the EC opened
up a new front of investigation into the
search giant’s conduct through its mobile
operating system, Android. The watchdog
also opened formal proceedings in July
and sent a statement of (SO) objections in
18
December to examine Qualcomm’s conduct
of baseband chipsets – which process core
communication functions in smartphones,
tablets and other mobile broadband devices
– relating to potential predatory pricing.
Nonetheless, the Google case remains
the commission’s headline action, with
comparisons increasingly drawn between
the watchdog’s 10-year struggle with tech
giant Microsoft.
In the energy sector, antitrust investigations
concerned unilateral practices, of which an
investigation into Russian giant Gazprom
investigation was the highlight. In April 2015,
the watchdog sent Gazprom an SO alleging
abuses of dominant position in its centralEuropean and EU gas markets. The cases
of Bulgarian Energy Holding (BEH) and its
subsidiaries in the electricity and gas markets
also address an alleged abuse of dominant
position. The commission sent an SO to BEH
and the two subsidiaries in March 2015 and
accepted BEH commitments in December
2015 to end competition restrictions on
Bulgaria’s wholesale electricity market.
In 2015, out of all new (non-cartel) cases,
about half were launched on complaints
and the other half were initiated by the
commission ex-officio.
In 2015, two commitments decisions were
adopted. In May, the EC adopted a decision
firming commitments offered by Air FranceKLM, Alitalia and Delta, members of the
SkyTeam airline alliance. And in December,
it adopted the decision related to BEH
mentioned above.
Settlement cases accounted for a significant
proportion of cartel decisions adopted in 2015,
with the watchdog adopting two settlement
decisions against all of the participants in
the cartels concerning Parking Heaters (17
June) and Blocktrains (15 July). In total, five
cartel decisions were taken (in addition to the
cases mentioned, two prohibition decisions
were taken on Retail Food Packaging
and Optical Disc Drives). In February, the
commission adopted a prohibition decision
against one of the parties in the Yen interest
rate derivatives case, which is a hybrid
case (the commission had previously taken
a decision in December 2013 involving a
number of major banks that decided to settle
the case).
Cartels Remain A Priority Despite
Record Low Fines
The EC imposed lower cartel fines in
2015 than in any year since at least 2003.
Companies shared a total of EUR 364.5m over
the 12-month period – less than a quarter as
much as in any of the past three years. At
the other end of the spectrum, 2007, 2008
and 2010 all saw totals in excess of EUR 2bn.
The official figures follow a recent statistical
analysis by PaRR that found antitrust fines
were 86% lower in the first year of Vestager’s
tenure than in the first 12 months of her
predecessor, Joaquin Almunia.
19
This belied the fact that Vestager continued
to prioritise fighting cartels over the course
of her first full year in office. The commission
adopted hardcore cartel decisions on
the financial markets (Yen Interest Rate
Derivatives) and the previously mentioned
Parking Heaters case in the automotive
industry. Other sectors probed and fined
included basic industries (Retail Food
Packaging), the Blocktrains transport case
mentioned above, and the ITC sector (Optical
Disk Drives). SOs were sent to diverse sectors
including electrolytic capacitors (IT sector),
car battery recycling (manufacturing), and
canned mushrooms (food). Of the new
cartel cases initiated during 2015, 88% were
prompted by leniency and 12% were initiated
by the commission ex-officio.
Merger Notifications A Sign Of
Underlying Recovery?
The number of merger notifications rose in 2015
by 11% on the preceding year to 337, reflecting
indications that M&A activity is recovering
in Europe and could be linked to a general
increase in economic activity following the
financial crisis.
Many merger notifications occurred in the basic
industries and manufacturing sectors. Energy,
environment and transport were other sectors
where a significant number of the notifications
took place. Although still significant, the IT,
telecoms and financial services sectors saw a
slightly lower number of filings.
The majority of interventions in merger cases
in 2015 – typically including Phase I and
Phase II remedies as well as prohibitions
and abandonments in Phase II – occurred in
the pharmaceutical and telecoms sectors.
Overall, these accounted for 46% of all
interventions in 2015 and reflect some recent
trends in the European economy.
“These trends include the consolidation of
the telecoms industry that is occurring across
Europe, together with a merger wave in the
pharma sector explained by the fact that many
pharma companies face an end-of-patent
term for existing drugs and have therefore
chosen to invest in biotech companies in
order to rebuild their portfolio of drugs under
patent,” an EU official told PaRR.
These sectors are followed by the
manufacture of food products, passenger
transport, and chemicals. Around a quarter
(23%) of merger interventions fall into a
broader category of other manufactured
industrial goods.
International Cooperation
An EU official told PaRR that DG COMP
expects that a pending survey for the period
of 2014-2015 will confirm a continuing trend
of increasing international cooperation.
Cooperation with third-country agencies
took place in 48% of all decisions adopted in
the period 2010-2011; the proportion grew to
62% in the period 2012-2013.
Whereas cooperation with US agencies
20
represents 36% of overall cooperation, the
surveys show that nowadays cooperation
extends well beyond the most common partners
and includes agencies on all continents.
In many cases, cooperation is based on
bilateral cooperation agreements (ie, with the
US, Canada, Japan, Korea and Switzerland)
or on memoranda of understanding (ie, with
Brazil, China, India, and Russia). However,
cooperation also takes place without
agreements or MoUs (eg, with South Africa,
Australia and Israel). Moreover, when
cooperation takes place, it often involves
several partners at the same time.
Relationship With The National
Authorities, Member States
In November 2015, the commission launched
a consultation seeking input from the public
on how to empower national competition
authorities (NCAs) to be more effective
enforcers. The NCAs have taken 85% of the
decisions enforcing EU antitrust rules since
2004, but Vestager believes there is room for
improvement. “Some national authorities
have told me they don’t have all the powers
they need. If so, then once our public
consultation is finished, I’m willing to propose
legislation to fix those problems,” Vestager
said when launching the consultation.
The announcement proved prescient from
the perspective of the independence of
the NCAs from their respective central
governments. In January 2016, the Hellenic
Competition Commission denounced Greek
government proposals designed to place the
country’s competition authority under the
direct control of a minister as an attack on
the body’s independence. The development
came a week after the head of Poland’s
competition authority, Adam Jasser, was
dismissed from his post by Prime Minister
Beata Szydlo.
Vestager has acknowledged that any
legislative measures to ensure the
independence and effectiveness of NCAs
might be controversial, but there is increasing
pressure on the commission to act on the
issue, which is likely to inject more urgency
into the consultation during 2016.
EU member states are required to implement
the Damages Directive by 27 December of
this year and the EC will continue to monitor
this process. The majority of countries
are on track, and five (Denmark, Finland,
the Netherlands, Norway, Sweden) have
already launched public consultations on
draft implementing measures.
The EC expects the directive to improve the
rate of private damages since such claims
remain concentrated within a handful
of jurisdictions and have produced few
damages awards so far, although some
cases have settled. Whilst the directive
is expected to improve the situation, the
watchdog is hoping further improvements
can be achieved through member states
implementing the commission’s 2013
Collective Redress Recommendation. The
effects of this recommendation will be
21
report in mid-2016. As regards the sharing
economy, the commission’s recent Single
Market Strategy pledged to develop a
European agenda for the collaborative
economy, including guidance on how
existing EU law applies to collaborative
economy business models. The commission
recently sought views by means of a public
consultation so as to better understand
the social and economic role of platforms,
market trends, the dynamics of platform
development, and the various business
models which rely on internet platforms.
formally reviewed by mid-2017, a process
likely to be ongoing informally during 2016.
In parallel to specific case investigations, the
commission is actively engaging with member
states so as to ensure a full implementation
of the State Aid Modernisation reform that
was recently completed. This will achieve
better compliance, more transparency, and
a better evaluation of subsidy programmes.
Policy
The authority’s enforcement work will
continue to focus on telecoms and digital
markets during 2016. Current commission
priorities in this area include the Google,
Qualcomm and e-books cases, the
e-commerce sector inquiry for which the
commission plans to publish a preliminary
In the telecoms sector, the commission
will seek to ensure that the planned
2016 review of the Telecoms Regulatory
Framework maintains and develops open
and competitive mobile and fixed telecoms
networks. In parallel, a number of ongoing
proposed mergers in the telecoms sector will
give rise to careful examination of whether
such tie-ups might weaken competition.
On energy, the EC has key ongoing antitrust
investigations into Gazprom and ethanol
benchmarks and continues to monitor the
implementation of commitments given by
BEH. Scrutiny of mergers is also a factor,
however.
“The Energy Union also entails a thorough
monitoring of mergers, as the trend
towards investments into European energy
infrastructure by investment companies
continues,” an EU official told PaRR.
The commission will continue with its state
22
aid sector inquiry on so called “capacity
mechanisms” – essentially the means by
which member states ensure a secure
supply of electricity. “The results of this
enquiry are expected in 2016 and will feed
into the commission’s initiatives on market
design of the electricity market,” according
to an EU official. At the same time, the EC
will apply its Energy and Environmental State
Aid Guidelines to monitor public subsidies
in the sector and direct these towards the
facilitation of renewable energies.
state aid control will aim at preserving
financial stability while minimising the cost
to European taxpayers; and the reflection
on potential actions to empower National
Competition Authorities to be more effective
enforcers alongside the commission.
Other important work streams concern the
payment sector, where the EC is monitoring
implementation of the Payment Services
Directive and the Regulation on Multilateral
Interchange Fees; the banking sector, where
Record-High Antitrust Fines In France
And Spain:
NATIONAL COMPETITION
AUTHORITIES
French and Spanish antitrust enforcers
celebrated a formidable year for fines in
2015, both surpassing their all-time records
after bringing in penalties totaling EUR 1.2bn
and EUR 537.3m, respectively.
The French Autorité de la Concurrence
racked up the bulk of its total in two decisions
handed down just days before Christmas,
fining 20 parcel delivery companies EUR
672.3m for a cartel and then ordering mobile
network Orange to pay EUR 350m for abuse
of dominance.
Meanwhile, Spain’s Comisión Nacional de
los Mercados y la Competencia (CNMC)
scored its biggest success with EUR 171m in
fines against 21 carmakers for exchanging
commercially sensitive information. Nearly
all of the agency’s sanctions (94%) were for
hardcore cartels. Eduardo Prieto Kessler,
the CNMC’s director of competition, told
23
PaRR that the agency’s “intense” activity in
2015 was unlikely to be repeated this year.
The French total came from nine decisions,
of which four were for cartels and four for
abuses, and one, for EUR 0.3m, for a breach
of commitments. The Autorité chief Bruno
Lasserre told PaRR his top priority is abuse
of dominance cases, especially those in the
regulated sectors, and in particular telecoms.
The German Bundeskartellamt (BKartA)
levied a comparatively sedate EUR 190m
against antitrust infringers last year, after a
frenetic 2014 where penalties climbed to EUR
1bn. The unfortunate recipients of last year’s
sanctions – the biggest of which, at EUR
151m, was for resale price maintenance in
the grocery sector – included 37 companies
and 24 individuals.
BKartA’s president, Andreas Mundt, told
PaRR his agency’s caseload had shot up
in the past 10 years, adding that officials
undertook 18 dawn raids at a total of 88
company premises in 2015.
In Italy, the Autorità Garante della
Concorrenza e del Mercato (AGCM)
recorded EUR 238m in fines for 2015. The
heaviest penalties, imposed on 22 December
but not publicised until the new year, went
to companies who were fined EUR 113m
for a conspiracy to rig tenders for school
cleaning contracts. Elsewhere, bidders who
colluded in tenders for motor fleet insurance
and concessions to run motorway service
station restaurants were handed penalties
of EUR 29m and EUR 13m, respectively.
Meanwhile, in the UK, whose antitrust
authorities have long been less interventionist
than their continental counterparts, the
Competition and Markets Authority (CMA)
levied just two fines totaling GBP 1.1m (EUR
1.4m), against a trade body for eye doctors,
a number of estate agents, and a local
newspaper publisher.
Leniency Remains A Struggle For Italy
When it comes to uncovering corporate
wrongdoing, Italy continues to struggle
to make its leniency system attractive,
with just 14% of cartel cases triggered by
whistleblowers last year – compared to 57%
by complaints. The AGCM started 30% of its
antitrust investigations ex officio.
Authority chairman Giovanni Pitruzzella, who
has previously told PaRR that fear of criminal
prosecution among senior managers and
board members at Italian companies was
putting off potential applicants, said differing
rules across Europe created a patchwork of
varying incentives.
The AGCM favours the creation of an EUwide system for leniency, he said.
The picture is different in other jurisdictions.
More than half of all hardcore cartel
inquiries were triggered by information from
leniency applicants in Germany and France.
Spain, the Netherlands and the UK declined
to disclose their figures to PaRR.
24
Alongside leniency, BKartA receives
numerous tip-offs about alleged antitrust
violations
through
its
anonymous
whistleblowing system, which has been in
place since June 2012.
Special Focus On Bid-Rigging
Bid-rigging features high on the agendas of
the Italian, Spanish and German watchdogs,
all three agencies told PaRR.
In addition to a high-profile probe into the
alleged manipulation of an auction for TV
rights for professional football matches
– in which Italian police are mounting a
parallel criminal inquiry – the AGCM last
year scrutinised tenders in the railway and
sewage treatment sectors, and uncovered
collusion among military contractors bidding
to carry out maintenance on navy warships.
Prieto Kessler, the CNMC’s director of
competition, said Spanish officials are
training public authorities to improve tender
design and detect bid rigging. Last year, the
agency fined 39 waste collection companies
EUR 98.2m for a host of collusive behavior,
which included rigging bids in tenders. The
UK launched a similar training programme
for government procurement officials,
which makes use of online e-courses, in
January of this year.
Meanwhile, Germany’s BKartA, together
with public prosecutors, has set up a “bid-
rigging network” aimed to ramp up the joint
investigation of collusion in tenders.
M&A Activity Rising
Rising M&A activity has given an inevitable
boost to merger notifications. France’s
Autorité dealt with 249 requests for
prenotification talks, and 218 actual filings
last year, up from 232 and 192 in 2014.
Italy’s AGCM tackled 51 notifications in 2015,
up from 45 a year earlier. Seven of last year’s
reviews went to Phase II. The authority is
witnessing consolidation in the utilities,
commercial distribution and media sectors
in particular, said Giovanni Pitruzzella, head
of the agency.
Germany processed approximately 1,100
filings in 2015 – slightly less than the year
before (1,188).
The UK closed 74 merger reviews last year,
a small rise compared to the 71 in 2014.
Under the British “voluntary notification”
system, parties are not obliged to make a
filing even if their deal crosses notification
thresholds. Last year, 72% notified
voluntarily, while in 28% of cases (21 in
total), the CMA initiated a review based on
its own market intelligence.
Both Germany and France are experiencing
a spike in food retail sector deals, with both
overseeing major supermarket mergers
– for example, between Germany’s Edeka
25
and Tengelmann, and in the latter, the
tie-up between Auchan and Systeme U.
Looking Ahead: Big Data And Digital
Economy
The competition implications of “big data”
are increasingly featuring in the public
pronouncements of European antitrust
authorities, and are the subject of a joint
research project announced in November
by the French and German agencies.
Autorité President Bruno Lasserre said his
officials will build their expertise, both on big
data and “data-fuelled services” in general,
during 2016. Top officials from the CMA and
EC have also recently chimed in unison
about the topic’s importance.
BKartA has also set up a “task force” for internet
platforms, with a view to tackling the “multiple
and complex issues” that the authority faces
in these “dynamic” markets, agency head
Andreas Mundt said. Lasserre echoes that the
French see digital platforms as a top area of
interest, with challenges that “permeate most
segments of competition policy”.
“The hot topic of the moment is where to
draw the line between too much regulation
and too much laissez-faire,” Lasserre added.
“My view is that competition enforcement
is doing fine as it is. The online economy
has a formidable pro-competitive potential,
and this alone should justify some caution
against any attempt to change the rules, for
fear of curbing that trend.”
Spain’s CNMC set up two working groups
last year, one to look at competition issues
in supermarket distribution, and the other
to report on the “sharing economy”, which
includes disruptive businesses like Uber and
AirBnB.
The agency’s head of competition, Prieto
Kessler, told PaRR the CNMC is gauging what
action it needs to take in online markets, in
part by keeping a close watch on the work
done by other authorities. Spanish officials
are also preparing to publish a report on
digital business models.
The CNMC is also keen to make greater
use of its power to impose administrative
fines on individuals involved in any kind of
antitrust infringement, under a law passed in
2007 but seldom used, said Kessler. Although
the agency recognises their “high deterrent”
potential, he added that the measure would
need to be tested in court because of
The online economy has a formidable
pro-competitive potential, and this alone
should justify some caution against any
attempt to change the rules, for fear of
curbing that trend.”.
Autorité President Bruno Lasserre
26
ambiguity over what fine limits apply.
In the Netherlands, the Authority for
Consumers and Markets (ACM) has singled
out the country’s harbours, especially the
Port of Rotterdam, as a top area for scrutiny
in the coming two years. Dutch officials
are also planning to closely monitor the
healthcare and energy sectors, plus state
interference in the free market.
Thanks to new duties of oversight included in
economic reforms passed last year, French
officials also expect to closely monitor legal
professions, which include both lawyers
and notaries. The authority has already
been scrutinising the rules under which
would-be practitioners are admitted to the
professions, and is in the process of creating
a new unit to deal with the issue. The agency
also cites transport, telecoms, media and
pharmaceuticals as priorities going forward.
infringement decisions in 2015 targeted: real
estate agents and eye surgeons. The CMA
will pursue “more enforcement cases and
more compliance messaging”, it says. Other
areas of focus for British officials include the
online sector, consumer products, business
inputs, and construction.
“To enhance deterrence we try to have a
mix of cases by size - cases involving major
corporates in large markets, which grab the
headlines, but also cases in smaller, more
local, markets to demonstrate that even
smaller markets are not beyond the reach of
competition law,” the CMA spokesperson said.
Policy
Across the Channel, the UK’s CMA expects to
continue its recent focus on pharmaceuticals.
Last year, its investigators sent an SO to
Pfizer for setting allegedly excessive prices
for an epilepsy drug, and in December the
watchdog launched a separate pharma
sector probe. “While we do not intend to
focus on this sector exclusively in 2016, we
expect such cases to remain an important
part of our abuse of dominance work for the
foreseeable future,” a spokesperson said.
Two big EU policy drives in motion this
year look set to change the day-to-day
enforcement of antitrust law across the
28-member bloc. National governments
have until late December this year to finish
transposing the Antitrust Damages Directive
into domestic statute books, in a move that
officials hope will pave the way for a sharp
upturn in private litigation. Meanwhile, the EC
is preparing proposals to boost the powers
of national competition authorities over
fears that a mish-mash of rules is allowing
infringing companies to escape justice in
some jurisdictions. No timetable has been
set for the next stage of the process.
The authority also says it will also work on
informing small businesses of competition
risks in the industries that its two
When it comes to the powers of national
authorities, the heads of the German,
French and Italian agencies all flagged
27
discrepancies in the fining systems of
different authorities.
BKartA chief Andreas Mundt highlighted
the “considerable shortcomings” of German
fining rules, which he said had sometimes
allowed antitrust infringers to sidestep
sanctions through corporate restructuring.
“The German government is currently
reviewing the law with a view to a possible
amendment,” he said, adding that they
would welcome fresh EU law on fining
parent companies in groups.
Mundt was echoed by France’s Lasserre,
who attacked the “divergent” fining regimes
currently in place across Europe, which he
called “a cause for worry”. “One and the
same case may lead to a financial penalty
25 times larger in one national jurisdiction
compared to another,” he said. Pitruzzella
added that Italy’s AGCM had repeatedly
called for greater uniformity in fining criteria
in the past.
Among upcoming reforms to national
competition rules, Germany is planning
a ninth amendment to the country’s
competition statute. The most eye-catching
proposal is to add elements such as deal
value to BKartA’s notification criteria for
mergers. The move has been sparked by
concerns that some large tie-ups between
loss-making tech startups, such as
Facebook’s 2014 acquisition of Whatsapp,
can evade scrutiny entirely despite having
the potential to cause competition problems.
Other planned amendments would change
rules on parental liability for subsidiaries
involved in cartels, and introduce new media
plurality regulations, and changes to the
country’s private damages system.
Spain’s CNMC, meanwhile, plans to publish
fresh dawn raid guidelines towards the
beginning of 2016, and also plans to release
a report tracking the impact of the country’s
leniency programme, which has been in
existence for eight years.
The Belgian competition authority is
preparing to release new leniency guidelines.
Key changes included in a draft version
included allowing individual whistleblowers
to receive immunity from cartel fines of up
to EUR 10,000 regardless of whether others
have already approached the agency.
Settlements Popular in France and
Germany
Both the French and German authorities
report a growing eagerness among
companies to settle by accepting a reduced
penalty in exchange for admitting liability in
antitrust probes.
In France, five settlement decisions were
adopted in cartel inquiries last year –
representing more than half of the fining
decisions in 2015.
“To the best of my knowledge, the Autorité
is the agency in Europe that has entered into
the largest number of settlements,” Lasserre
said. A new settlement procedure introduced
28
last year is expected to speed up cases and
cut the cost of dealing with appeals against
infringement decisions, he added.
Both of the CMA’s infringement decisions
from 2015 involved settlement agreements
with the companies under investigation.
Spain and Italy, meanwhile, are unable to
settle cases under their existing powers.
International Cooperation Growing
Strongly
Amid the usual flurry of cross-border
assistance, BKartA last year executed
five dawn raids on behalf of the EC and an
unnamed national competition authority.
The CMA said it “regularly” assisted foreign
counterparts with cartel investigations in
2015, for example, accompanying UK police
and US FBI agents on a raid of an e-retailer’s
premises late in the year in an investigation
into price-fixing on the Amazon Marketplace.
Officials liaised with foreign agencies in
10 merger reviews, including cases that
necessitated cooperation with authorities
in the US, Ireland, Canada, South Africa,
Germany, and the Netherlands. Spain’s
CNMC cooperated with overseas agencies
in three antitrust investigations last year
and four merger reviews. The French Autorité
cooperated with seven foreign counterparts
on 14 occasions, while Italy’s AGCM said it
worked on investigations with five agencies.
BKartA also worked closely on mergers
with the US Federal Trade Commission and
Department of Justice, as well as the UK,
Polish, Spanish and Austrian agencies.
29
AUSTRALIA
The Australian Competition and Consumer
Commission (ACCC) plans to initiate its first
criminal cartel case in 2016. The agency saw
a surge in leniency applications in 2014 after
announcing it would ramp up enforcement
activity in criminal cases.
ACCC Chairman Rod Sims said work on
high-profile merger cases will continue this
year, while the commission will forge ahead
with policy priorities such as its market
competitiveness inquiry into the agricultural
sector.
Sims’ five-year term will end in July. It is up
to the Australian government whether he
will be appointed to another term. For his
part, Sims said he would accept a second
term as the nation’s top antitrust enforcer.
The ACCC hopes its first criminal cartel
action will move forward, although details
of the cases were not made public.
Currently, the ACCC is investigating about
10 cartel cases across various sectors. The
companies involved are based in Australia
with some high-profile corporations under
investigation.
“We are very confident that we will start
with at least one case this year,” said Sims.
Remedy Considerations For Mega
Deals A ‘Complicated Process’
Phase II merger reviews handled by the
ACCC with Statement of Issues (SOIs)
released are at an all-time high. Eight SOIs
were issued from July to November 2015.
Halliburton’s potential merger with Baker
Hughes and Recall’s deal with Iron Mountain
are two global deals being closely watched
by the regulator. There is the potential for
significant competitive harm in Australia in
both cases, according to the ACCC.
ACCC is working closely with US and
European regulators on the Baker Hughes/
Halliburton deal.
The ACCC considers the merger of Recall, an
Australian document management services
company, with US-based Iron Mountain
to be of concern because it will make the
sector less competitive.
“Remedies may not always be available
for merger transactions, which the ACCC
believes are anticompetitive,” said Sims.
“While the consideration of remedies in both
merger cases is on the table, in such large
transactions, consideration can become a
very complicated process,” he said.
Agricultural Enforcement Priorities
The ACCC will carry out the government’s goals
of building up its agricultural enforcement
and engagement unit over the next four
years with a budget of AUD 11.4m. Currently,
the unit has approximately 10 staff members.
The ACCC has appointed a new commissioner
to look after agricultural issues.
30
This is a result of the government’s
Agricultural Competitiveness White Paper
of July 2015. The ACCC mandate includes
conducting market studies and investigation
of competition and unfair trading issues in
the sector.
The enforcer will also be completing a
12-month study of the East Coast gas
market by the end of April, according to
Sims. This is an ACCC inquiry looking at
the competitiveness of wholesale gas
prices and the structure of the upstream,
processing, transportation, storage and
marketing segments of the gas industry.
Formal Merger Review Process With
Harper Review
“No matter who leads the ACCC”, Sims said,
the agency will be busy this year with the
implementation of Harper Review changes,
a sweeping set of competition reforms
published in March 2015. One of the most
important Harper Review recommendations
was the introduction of a better formal
merger review process.
Currently, the majority of applicants use
the informal process. “[A formal merger
review process] will give parties to a merger
transaction a real alternative,” Sims said.
31
CHINA
China anticipates another year of active
enforcement of the Anti-monopoly Law (AML).
Increased experience and confidence among
Chinese antitrust regulators and judges, as
well as businesses’ growing familiarity with
the AML, will likely result in more varied
applications of the law.
The antitrust community expects enforcement
activity to become more “normalized,” with
regulators taking action in relevant cases
regardless of sector or type of companies.
Still, some sectors may be more closely
scrutinized than others, especially those
undergoing structural reforms. And this
year, the technology, pharmaceutical,
medical device, automobile, transportation,
telecommunication and banking sectors may
appear on regulators’ radar.
“Regulators will certainly focus on sectors
where anticompetitive behaviors are most
rampant and those with [a] large impact on
people’s livelihood,” said Shi Jianzhong, an
advisor to the Anti-Monopoly Commission
under China’s State Council.
Shi identified the pharmaceutical sector
as an area that will garner regulatory
attention, with recent liberalization causing
irregularities such as abnormal price hikes
for certain drugs.
Role Of Antitrust Enforcement In
Economic Downturn
The year will see China continue to confront
a softening economy as it transitions from
low-end manufacturing and export-led
growth to an economy built on advanced
technology, innovation and domestic
consumption. It is against this backdrop
that regulators and academics say China’s
antitrust enforcement can play a meaningful
role.
Zhang Handong, director general of
the National Development and Reform
Commission’s (NDRC) Price Supervision
and Anti-monopoly Bureau, recently said
antitrust enforcement will be an effective
way to resolve overcapacity, boost structural
reform and deal with uncompetitive “zombie
enterprises.”
Zhang said local protectionist and
preferential policies make it difficult
to shutter inefficient manufacturing
enterprises — the main contributors to
overcapacity. The solution, he said, is
to tackle the issue from the supply side,
establish a fair and competitive atmosphere
and ensure the survival of the fittest.
Huang Yong, an advisor to the State
Council’s Anti-Monopoly Commission, said
overcapacity was often caused by past
state actions but the government can no
longer intervene to correct it. The “new
thinking,” he said, is to introduce the concept
of competition policy. In other words,
state-owned enterprises and government
agencies may increasingly be subject to
AML enforcement.
32
Normalized antitrust enforcement and a fair
competition review system are two tools the
NDRC plans to use to resolve overcapacity,
according to Zhang.
Last year saw several “administrative
monopoly” cases carried out by the NDRC
and the State Administration for Industry
and Commerce (SAIC).
A fair competition review system is expected
to be established by the NDRC, the country’s
economic planning body, this year to ensure
government policies comply with the AML.
The mechanism, which may be launched this
June, would subject pending government
policies to an antitrust evaluation prior to
implementation.
China’s fair competition policy review system
may require each government agency to
self-examine existing policy. Currently, the
NDRC reviews new policies before they
are formally released.
The NDRC would likely seek consultation
from antitrust lawyers and other experts on
how a given policy could affect competition,
said Ding Liang, a partner with Deheng Law
Offices.
Meanwhile, antitrust probes can give
industry and government agencies some
insight into which types of conduct breach
the AML and under what circumstances
they may be eligible for exemption.
During business downturns, for example,
companies are inclined to huddle together
and cooperate closely to endure the
unfavorable
conditions.
Government
agencies, meanwhile, may also attempt
to stimulate the economy by enacting
preferential policies or providing state
subsidies. Such practices by industry
and government may be exempted under
Article 15 of the AML, which makes certain
exceptions during times of economic
distress.
Huang Yong urged antitrust enforcement
authorities to make careful assessments
before granting exemptions to “crisis
cartels” – as business groupings during hard
times are known – noting that excessive use
of exemptions could harm the credibility of
the authority and be viewed as a form of
government subsidy for industry.
New Antitrust Guidelines, Measures
To Kick In
After the NDRC’s highly publicized decision
against Qualcomm in February 2015,
China’s antitrust regulators appeared to
adopt a lower profile. However, the three
enforcement agencies – the NDRC, the SAIC
and the Ministry of Commerce (MOFCOM) –
have not curtailed activity; on the contrary,
they shifted staff and resources to work on
legislative projects.
The NDRC, for example, drafted antitrust
guidelines covering intellectual property
rights, the auto industry, exemptions,
leniency, commitments and fine calculation
that are expected to be submitted to the
33
State Council for final review in June
and eventually adopted by all antitrust
enforcement agencies.
Once implemented, the new guidelines could
drive more investigations.
“In 2015 the agencies spent a lot of time
drafting the guidelines,” said Adrian Emch,
a partner at Hogan Lovells. “In 2016 with the
guidelines published, they will devote more
time to enforcement.”
Francois Renard, a Hong Kong-based lawyer
with Allen & Overy, said he expects Chinese
regulators to ramp up activity on several
fronts, from the way they go after violators
and process cases, to the manner in which
they communicate with targets, in terms of
discovery and taking depositions.
“It’s a positive development,” Renard said.
“Being active in proceedings shows that
they come into an investigation with an open
mind, instead of a pre-set position.”
Guidelines on intellectual property rights and
the auto industry will be especially helpful
as the NDRC and the SAIC build cases about
standard-essential patents and auto parts
distribution.
Cases arising from IPR infringement may also
increase as a result of the new guidelines,
said Zhang Xin of East & Concord Partners.
Some foreign companies have already filed
patent abuse suits in China to secure a more
preferential royalty rate, following Huawei vs
InterDigital and a related NDRC investigation
of InterDigital.
Although the NDRC has yet to publish
draft guidelines on exemptions, leniency
and commitments, it is believed their
introduction will see an increase in
suspended investigations and applications
for exemptions. Antitrust experts are already
weighing in on the subject of exemptions;
discussing situations that would support their
application and those that would conflict
with Article 15 of the AML, which outlines
circumstances under which businesses may
be granted an exemption.
Antitrust Compliance Service
Demands Boom
Once the antitrust guidelines come into
effect, the demand for compliance training at
corporates – including multinationals, SOEs
and privately held corporations in China – is
expected to spike, representing a significant
opportunity for law firms. Certain sectors,
especially the auto industry and segments
with heightened IPR concerns, are certain
to give the guidelines their fullest attention.
Meanwhile, Chinese companies, perhaps
less familiar with the concepts being
propounded, will require compliance training
and counsel to help them address potential
and ongoing antitrust investigations.
“Nowadays [we are] already very busy,”
said Zhan Hao, partner at Anjie Law Firm.
Many Chinese state-owned enterprises
34
especially insurance companies are inviting
lawyers to conduct antitrust compliance
training, following the Hubei Administration
for Industry and Commerce’s (AIC) penalty
decision on 12 insurers’ co-insurance
agreements at the end of last year, Zhan
revealed.
Within the past several months, Chongqing
Qingyang Pharmaceutical was fined by
Chongqing AIC for refusal-to-trade and then
fined again by the NDRC for cartel activity.
Moreover, a group of insurance companies
was fined by Hubei AIC and then fined again
by the Jiangxi AIC for illegal co-insurance
agreements.
For large Chinese companies, especially
those with nationwide operations, it is now
apparent they could face investigations
by more than one agency and in multiple
jurisdictions. Companies are advised to
consult counsel on strategies to mitigate
attendant risks and access leniency regimes.
IPR Antitrust Guidelines Take Shape
China’s IPR antitrust guidelines are being
drafted in a process that will see four separate
versions, authored by the NDRC, MOFCOM,
SAIC and State Intellectual Property Office
(SIPO) – submitted to the Antimonopoly
Commission (AMC) of the State Council. The
AMC will consolidate the various versions
into one definitive IPR guideline.
The process has been fraught, revealing
some tensions between the powerful state
agencies. And it remains to be seen if they
will accept the final consolidated version
from the AMC or if they will interpret and
enforce the guidelines in different ways.
Unlike the auto industry, IPR in China is not
mature, said Huang, adding that it is still
hard to say if the IPR antitrust guidelines
will come out this year as some outstanding
issues require further study. As an example,
Huang cites the issue of ensuring the IPR
antitrust guidelines and China’s national IPR
strategy are not contradictory.
More Rights Protection Through
Antitrust Litigation
The past seven years have seen a gradual
increase in antitrust litigation in China, with
the exception of an abrupt increase in the
number of cases in 2012, according to Wang
Yanfang, a chief justice of the No.3 Civil
Tribunal of the Supreme People’s Court (SPC).
Most cases concerned abuse of dominance
or monopolistic agreements. The plaintiffs
included upstream and downstream
corporates, competitors, consumers, and
individual professionals such as lawyers.
The SPC issued opinions in three antitrustrelated cases including Qihoo vs Tencent,
Masimo vs Mindray, and the suit against the
Guangdong Football Association. China’s
courts have shown the ability to handle
complex AML cases in difficult areas such
as the internet, IPR and administrative power
35
The ruling in Masimo vs Mindray
may see more antitrust cases tried in China.
abuse.
The ruling in Masimo vs Mindray may see
more antitrust cases tried in China. The
justices ruled that a contractual agreement
to adjudicate disputes in a foreign jurisdiction
can be set aside, and the matter heard in a
Chinese court, if it can be shown that the
alleged anticompetitive conduct occurred in
China.
Wang Yanfang said the SPC is concerned
with whether the alleged conduct restricts
or eliminates competition in China’s
domestic market and the SPC attaches
great importance to maintaining order in the
market.
Plaintiffs must meet a high burden of proof
in China, which makes it difficult to win
judgements. They have a greater chance
of prevailing in administrative abuse of
power cases, where the burden is reduced
thanks to the AML’s provision that licensed
administrative agencies and state-owned
companies engaged in monopoly industries
such as public utilities hold dominant
positions.
This year may see more privately held
companies and individuals filing civil suits to
protect their economic interests, especially
in cases where it is alleged that an SOE
or government agency is impeding their
progress in the market. There have been a
few rulings for plaintiffs in administrative
abuse of power cases, but it remains to be
seen if the rulings will be upheld by higher
courts and if the cases represent a shift from
past practice.
MOFCOM Expects More Streamlined
Process, New DG
MOFCOM is in the process of revising
its Review Measures for Concentration
of Undertakings and Filing Measures for
Concentration of Undertakings. The latter,
once completed, is expected to bring
more clarity on such threshold issues as
the concept of “control” and revenue
calculation, said Susan Ning, a partner at
King & Wood Mallesons.
Attorneys expect MOFCOM to step up
enforcement actions against failures to
make notifications.
36
With consolidation seen as contributing to
the economic rebalance, more M&A deals
are expected this year, though it remains to be
seen whether the clarity in “merger control”
will help reduce filings with MOFCOM.
There is little doubt, however, that MOFCOM
is trying to review cases from a more
objective competition perspective and is
less influenced by industrial policy. More
international exchanges and coordination
with other jurisdictions is also anticipated
in 2016, with a good number of MoUs having
been signed with other jurisdictions last
year, said Zhang Xin.
MOFCOM will see a new director general
installed after the recent retirement of
Shang Ming. It is unclear if the new head will
move to change MOFCOM’s merger review
process. Last year, with the leadership
transition pending, the ministry was fairly
relaxed in reviewing cases and only imposed
remedies on two occasions.
37
HONG KONG
The Hong Kong business community is
anxiously awaiting the first case to be
taken up by the Competition Commission
after competition law came into effect on
14 December 2015, following almost two
decades of deliberations.
city, for instance, is good at importing talent
from abroad. The authority has recruited
competition law experts from Canada,
Australia, the EU and Ireland to apply
international standards to the Hong Kong
agency.
Aided by a staff of 50, the 14 commission
members face a heavy caseload, with
hundreds of complaints and queries.
Issues of note include one block exemption
application pertaining to the liner shipping
sector and market studies into the petroleum
and building maintenance sectors.
Making the task even more daunting and
adding a degree of uncertainty is the
imminent expiration of the first term of the
commissioners, set to end on 30 April 2016.
While it will be some time before Hong
Kong’s antitrust authority commences
international cartel investigations on its own,
the authority has no intention to “pussyfoot”
around if evidence of competition violations
is forthcoming, Wu told PaRR.
Since 1997, the year the former British
colony was handed over to China, there has
been a growing perception that Hong Kong’s
international profile has diminished. In the
initial phase of setting up the new competition
authority, Commission Chairperson Anna
Wu had the unenviable task of reminding
the global business community that Hong
Kong retains a high degree of autonomy
and remains a common law-based society
and that the authority is no different from
international competition authorities in
Europe, Australia or the US.
In addition, Hong Kong enjoys some
advantages over other emerging competition
law regimes in Southeast Asia. The island
As one of Asia’s foremost financial services
hubs, Hong Kong is regarded as a prime
destination for cartelists to hold strategic
meetings. The Taiwan Fair Trade Commission
recently found that seven electronic
capacitor producers held “market study
meetings” and “cost up meetings” in Japan,
while Hong Kong was the selected venue for
“sales manager meetings”.
The commission will likely go after lowhanging fruit by approaching companies
that have settled global cartel cases in the
EU and US and suggest that settling with the
authority may benefit them in the future.
In Singapore, a regional market rival that
shares some characteristics with Hong
Kong, the authority in the city-state has
contacted firms targeted in global cartel
investigations and “encouraged” them to
file for leniency.
38
Agency’s Power:
In Hong Kong, the Competition Tribunal
supersedes the Competition Commission
when it comes to decisions on fines. This has
fed doubts over whether the commission has
the power to take on Hong Kong’s tycoons
and have a positive impact on the market —
widely viewed as an oligopolistic economic
environment.
While the commission appears to be taking
a page from Singapore’s playbook by
positioning itself as a “friendly, engaging and
helpful business partner” to Hong Kong’s
business community, Wu cautioned that its
primary role is to enforce the law.
“Hopefully we will be seen as being fair and
transparent when we use our discretionary
powers proportionate to the seriousness of
the breach,” Wu said.
Though lacking the power to decide on fines,
the commission can recommend that no fines
be imposed and call for a reduced penalty. It
also has the power to issue warning notices
and opt for settlement.
First Target Anxiety
Wu and Commission CEO Stanley Wong
acknowledged that cases of bid-rigging and
price-fixing will be given priority, especially
those involving products with a great impact
on the broader Hong Kong market.
The agency has received enquiries and
complaints across many industries, from
hospitality, shipping, construction and gold
to real estate and property management. But
the commission has yet to name the target of
its first case.
Hong Kong’s antitrust authority has
received numerous queries on resale
price maintenance (RPM), brought on by
dramatic cuts in the price of sports shoes
and electronics since the competition law
came into effect, said Rasul Butt, executive
director of public affairs at the commission.
RPM agreements are quite common in
Hong Kong and antitrust lawyers fear that
the authority may pursue RPM to calm
nerves rattled by the deep price cuts. The
commission views RPM as anticompetitive
conduct.
Regarding the block exemption for liner
shipping, there is a perception that a
rejection by the commission could trigger
enforcement activity, given that the industry
application would include information on
what could be viewed as anticompetitive
conduct.
The commission plans to release preliminary
findings of its market studies into the petrol
and building maintenance sectors in the first
quarter of the year amid expectations that
the two could be targets for enforcement.
Though the market studies look at data
gathered prior to the implementation of
the competition law on 14 December – the
analysis may help the authority home in on
targets, Wu said.
39
A number of apartment owners petitioned
the agency to investigate whether bidrigging was distorting building maintenance
fees before the law came into force. This is
a “serious problem” and there is “no way
the commission can just drop it”, Wu said,
expressing hope that insiders will come
forward with evidence and that some players
will apply for leniency.
The studies’ findings may not point to a
violation of conduct rule, according to Butt.
They could, however, highlight the need for a
change in government policy, he added.
40
INDIA
The Competition Commission of India (CCI)
stepped into 2016 with a new chairperson,
emerging from a year marked by a surge in
M&A filings, policy changes, and a growing
discord with its own appellate tribunal.
Former bureaucrat Devender Sikri, who
took over as the new chief in January, has
his work cut out for him. As his predecessor
Ashok Chawla said before he signed off, the
regulatory regime in India is only “half-built”.
In the seventh year of enforcement, since
its inception in May 2009, the agency’s
ride continues to be rocky. It will have to
work more closely with the Competition
Appellate Tribunal (COMPAT) on conflicting
perspectives.
Principles Of Natural Justice A Bone
Of Contention
a former high court judge, as a member
of the CCI may help reduce the number of
challenges its decisions face on “natural
justice” grounds.
The tribunal is likely to scrutinize all of its
penalty decisions as the Supreme Court,
which is the ultimate ruling authority on
antitrust cases, can overturn orders, citing
merit and technical reasons. COMPAT
members will not want to be caught out,
lawyers told PaRR.
The CCI’s failure to heed the principles of
natural justice and due process is partly why
the regulator has been unable to recover
close to 90% of the fines it has imposed
after courts or the appellate tribunal ruled
against them.
Regulatory Clarity On Penalties
Under fire lately for allegedly violating the
principles of natural justice during decisionmaking, the CCI has seen COMPAT set
aside several antitrust orders based on the
“one-who-hears-must-decide”
concept.
For instance, in December 2015, the tribunal
overturned a CCI order from 20 June 2012
against the cement industry because former
chief Chawla signed the order despite not
attending three related hearings.
COMPAT has also pointed to a need for
spelling out clear reasons, including
mitigating and aggravating factors, to
impose penalties.
In a media interview later, Chawla stressed
that the structure of a judicial system and that
of a regulatory framework were different.
In time, the CCI will need to publish guidelines
on various enforcement aspects, based on
its own experience and best international
practices, to help improve enforcement
The appointment of Gian Parkash Mittal,
PaRR has learned that the competition
authority is likely to issue guidelines on the
matter in 2016 or 2017. Terming it very much
warranted, the legal fraternity said there
needs to be a clear link between a penalty
and the related conduct.
41
predictability.
Merger control will be another focus area
as “innocuous” combinations give way
to complex deals in the relatively nascent
yet challenging fields of e-commerce,
app-based services, and technology with
intellectual property rights.
The agency has revised its M&A rules
and filing procedures to make the process
easier. The CCI, which has so far reviewed
more than 300 filings, hit a record high in
December with 29 merger-related decisions.
to investigate and penalize companies that
are found to have violated competition
regulations.
Given the rising number of such cases, it
may seek an amendment to the law, enabling
settlements.
Meanwhile, the CCI continues to be
challenged by a staff crunch, especially
in its crucial investigative arm, and a lack
of financial autonomy. Additionally, it will
still have to grapple with its poor penalty
recovery rates.
On the policy front, the regulator plans
greater involvement in the economic
legislation process of the central and state
governments, and will conduct an initial
assessment of their financial laws and bills
to prevent any anticompetitive provision
from sneaking in.
Among the pending cases involving
multinationals the CCI has carried into the
New Year are investigations into Google and
Ericsson over suspected abuse of dominance
and unfair licensing terms, respectively.
Is Technology The Achilles Heel?
The CCI is also battling with technology as
some high-tech cases prove to be complex
for the relatively inexperienced and young
agency, especially when understanding how
new technologies can redefine markets,
and thereby impact market power. More
importantly, since India does not allow for
settlements, it is necessary for the agency
42
INDONESIA
A presidential review slated for next month
may finally give teeth to the country’s
15-year-old Commission for the Supervision
of Business Competition (KPPU) through
beefed up penalties and enforcement
powers.
The Indonesian parliament has reportedly
made great strides in its work on certain
amendments to the country’s competition
law, said former competition chief Nawir
Messi.
June is the most optimistic timeline for the
amendment to be passed into law.
Once the changes are in place, market
players will have to pay close attention to
antitrust regulations as the amendments
are likely to include a 20-fold increase in
penalties for cartel conduct. The commission
will also have the power to launch dawn
raids and accept leniency applications. For
now, not having the authority to conduct
raids has somewhat clipped its wings as
investigations take a long time to complete.
There is also a proposal to introduce a
pre-merger filing regime for mergers and
acquisitions.
Chairman Nawir said these powers will
help the KPPU deliver on its commitments
toward preventing or taking action against
anticompetitive conduct in the crucial
sectors of education, energy, finance, food,
healthcare and logistics.
Eye On Staple Foods
As a first step, the KPPU has already been
asked by the president and his deputy,
Jusuf Kalla, to address some long-standing
issues concerning abuse of dominance
and collusive oligopolies in the staple foods
sector. The authority has begun antitrust
hearings on salt and chicken companies
over alleged manipulation of supplies and
influencing prices.
This is in addition to a beef cartel case which
is at the final stage of regulatory hearings –
a decision is expected by the end of June.
Continuing its mission to oversee sectors
that are vital to the general public, the nine
KPPU commissioners have begun monitoring
the pharmaceutical and financial services
markets as well.
There is also talk of transforming the regulator
into a full-fledged government body.
ASEAN Integration
The leaders of the Ministry of Administrative
and Bureaucratic Reform and the Ministery
of Trade have have met with KPPU Chair
Syarkawi Rauf to express their support for
the regulator’s proposed makeover. Former
2016 also saw the ASEAN Economic
Community’s 10 member states begin to
lower trade barriers and ease foreign labor
laws. According to Messi, more overseas
companies setting up shop in Indonesia,
43
and vice-versa, could be both a challenge
and an opportunity for the antitrust
authority. ASEAN is made up of Brunei,
Cambodia, Indonesia, Lao, Malaysia,
Myanmar, the Philippines, Singapore,
Thailand, and Vietnam.
Greater competition from foreign firms
will hopefully weed out some of the
anticompetitive practices that are deeply
entrenched in certain sectors, he said.
An expanded economy also means that
the KPPU has to take into account global
factors when formulating its market
definitions. On the flip side, this may make
the country more vulnerable to international
cartels, something that the KPPU has not
come across as yet.
44
JAPAN
The Japan Fair Trade Commission (JFTC) is
set to amend the Antimonopoly Act (AMA)
this year, introducing a commitments system
in accordance with the Trans-PacificPartnership (TPP) agreement.
The commitments system, an alternative resolution mechanism for lighter
infringements of the AMA, will kick in
when Japan signs the TPP.
Once parliament gives its approval,
expected by the end of March, the Cabinet
Legislation Bureau will work with the JFTC
to determine when the system will come
into effect.
The commitments system under the AMA
will be applied to antitrust violations such as
private monopolization, “abuse of superior
bargaining position” and unfair trade
practices. The system will not be applied to
serious cartel behavior for offenses such as
price-fixing.
Under the commitments system, the targets
of antitrust investigations can propose
remedial actions to resolve the matter with
regulators. If the regulator agrees to the
proposal, no further administrative action
will be taken.
By adopting an EU-style commitments
system, the JFTC would be able to resolve
cases quickly without having to prove the
illegality of the conduct.
Companies would benefit from the system
by avoiding antitrust fines and a protracted
legal battle.
New System For Fines
The JFTC has established a study group in
February to look at adopting a discretionary
surcharge system. JFTC Chairman Kazuyuki
Sugimoto told PaRR that a discretionary
system was necessary to provide greater
incentives to those who cooperate in
investigations. “The current system is
rigid because the fine levels are fixed,”
said Sugimoto. A discretionary system is
expected to improve efficiencies in the
handling of cases.
The JFTC has been studying the feasibility
of a discretionary system internally since last
year, using the EU as a model. This study on
a discretionary system was triggered from
suggestions made by a government study
group, which wrapped up in December 2014.
Attorney-Client Privilege
The issue of attorney-client privilege is set
to receive attention in this year’s review
of regulatory procedures. Industry groups
such as the influential Japan Business
Federation and lawmakers from the ruling
Liberal Democratic Party (LDP) have voiced
concern that communications between
client and counsel lack strong protections in
Japan.
45
The current system is rigid because
the fine levels are fixed
JFTC Chairman Kazuyuki Sugimoto
Members of the LDP Research Commission
on Market Competitiveness Policy urged
the JFTC to continue discussions on the
implementation of attorney-client privilege.
The JFTC said it is open to such discussions.
Sugimoto said the issue of attorney-client
privilege has been a difficult one. The
current system does not offer incentives for
suspects to cooperate in investigations, the
chairman said.
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MALAYSIA
The Malaysia Competition Commission’s
(MyCC) new new chief has said his
agency will play an important role in the
country’s Wawasan 2020 development plan
by protecting consumers from unethical
business practices and improving business
efficiency.
Abu Samah Shabudin, who had previously
served as a director with the Ministry
of Domestic Trade, Cooperatives and
Consumerism, was named chief executive
officer in November 2015, following his
predecessor’s abrupt resignation after less
than a year at the helm.
Conceptualized by former premier Mahathir
Mohamad, the Wawasan roadmap aims
to help Malaysia evolve into a developed,
industrialized nation by the year 2020.
The pas