EU/UK Competition Law Newsletter – December 2010

December 1, 2010

European Commission shows no mercy to air cargo surcharge cartelists

On Nov. 9, 2010, the European Commission fined 11 air cargo carriers nearly EUR800 million for a six year worldwide price-fixing cartel. This involved coordinated fuel and security surcharges and the refusal to pay a commission on these surcharges to freight forwarders. Particular difficulties of the industry (in this case increasing fuel prices and security costs) were, as always, not accepted as a justification. In addition the claims of all five carriers arguing an inability to pay their fines were rejected. However, the case does demonstrate once again the importance of considering the Commission’s leniency programme if a cartel is discovered (all companies but one benefitted from a reduction for cooperation with the Commission) and of ensuring that a company’s compliance programme works; SAS’s fine was increased by 50% for recidivism as it had been fined for another cartel in 2001.

UK regulator investigates minority stake under merger rules

The UK Office of Fair Trading (OFT) recently announced that it has started a merger investigation into Ryanair’s acquisition of a minority shareholding in fellow Irish airline Aer Lingus. The stake arose out of Ryanair’s public bid for Aer Lingus, which was launched in October 2006 and prohibited by the European Commission under EU merger control law, with this decision being upheld on appeal. Ryanair was not required by the Commission to divest its stake (currently around 30%), potentially giving the OFT separate jurisdiction under UK merger control law. The case serves as a reminder that UK merger control can apply to small stakes (and certainly to stakes lower than those relevant at EU level). For more information on the EU merger review of the Ryanair bid, see our European Aviation Law Briefing (Q3 2010).

UK regulator identifies compliance success as a reason for closing “hub and spoke” cartel case

On Nov. 18, 2010, the UK Office of Fair Trading closed on grounds of “administrative priority” and without reaching any conclusion as to a competition law infringement, a price fixing investigation involving retailers and suppliers in the UK grocery sector. The investigation concerned suspected “hub and spoke” retail price coordination, in which a retailer passes confidential pricing information to a supplier, who in turn passes it to another competing retailer. There have been similar cases in the UK in recent years in which fines have been imposed. The OFT indicated that one reason for the closure was the apparent positive influence of competition compliance initiatives across the sector.

Think carefully about remedies before making an acquisition

The European Commission, in common with other regulators, is careful to try to ensure that any remedies it imposes as a condition for approval of a merger or acquisition will produce genuine competition from the business which is the subject of the remedy. This may mean that the remedy has to cover business areas wider than just the activities found to be problematic from a competition law point of view. An example of this was provided on Nov. 17, 2010, when the Commission approved the acquisition by Unilever of the household and body care businesses of Sara Lee. In its investigation, the Commission found competition concerns due to overlaps between the parties in the sale of deodorants in a number of EU countries. The remedy was however not limited to a deodorant brand in those countries. In order to deal with the Commission’s concerns, Unilever agreed to sell the “Sanex” brand in full across Europe, including deodorants, shower and bath products. In the words of the Commission, this “preserved the integrity of the Sanex brand”.

Additional EU/UK competition law news coverage can be found in our news section.

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