EU/UK Competition Law Newsletter – January 2013

January 2, 2013

“Textbook cartel” Fined by the European Commission

On 5 December 2012, the European Commission (EC) fined seven companies a total of EUR1.5 billion for participating in cartels in the cathode ray tubes sector. This was the largest total fine on a cartel in the history of the EU. The largest individual company fine (more than EUR700 million) was imposed on Philips, while Chungwa escaped entirely as it was the whistleblower.

When announcing the fine, the EC commented that it included “all the worst kinds of anticompetitive behaviour that are strictly forbidden to companies doing business in Europe”; it was a “textbook cartel”. These activities included: price fixing, market sharing, customer allocation, capacity and output coordination and exchanges of commercially sensitive information. The cartelists also monitored the implementation of the cartel, including by auditing compliance with capacity restrictions by plant visits.

This case sends a strong message, yet again, that the risks from being involved in a cartel which affects the EU are as great as ever. It doesn’t matter that the products in question are in decline; the EC commented that “the cartelists were trying to address the decline of the CRT market in a collusive way, to the detriment of consumers”. However, whistleblowing can protect you and it is essential that companies have a suitable competition law compliance programme in place, both to stop and to detect infringements.

Ignore Merger Control at Your Peril

On 12 December 2012, the EU’s second highest court (European General Court (GC)) upheld a fine of EUR20 million imposed by the EC in 2009 on Electrabel for acquiring control of Compagnie Nationale du Rhône without obtaining pre-approval as required under EU merger control law. The shareholding which was acquired was a minority stake, but still one which gave rise to control under the relevant rules.

This case, and similar cases at national level in the EU and elsewhere, provides a reminder that merger control must always be taken seriously when an acquisition (including of a minority stake) or joint venture is being considered. It is dangerous to ignore these rules, even where, as in this case, no substantive competition issues arise.

Warning on Collusion Concerning Retail Prices and MFN Clauses

Apple and four international publishers have reached an agreement with the EC to deal with concerns that they had colluded in a strategy to raise the retail prices for e-books. The EC’s decision, adopted on 13 December 2012, explains that in January 2010, Apple and the four publishers jointly switched to agency contracts that all contained the same key terms, with the result that retailers became sales agents for publishers who wanted to sell directly to consumers. Under this agency model, the publishers determined the retail prices for e-books according to pricing rules in the agency contracts.

Those pricing rules included an unusual retail price “most favoured nation” (MFN) clause, maximum retail price grids and the same 30% commission payable to Apple. They were designed in a way that resulted in higher retail prices than those offered by certain major retailers at the time.

The parties escaped a fine by agreeing to amend their contractual arrangements. However, this is a fact-specific case, and with this decision in place, similar arrangements in other industries can expect to be more harshly treated if there is collusion between competitors.

No Discrimination on the Basis of Nationality in the EU

In an unusual case, the EC announced on 11 December 2012 that it is investigating whether the Romanian power exchange operator OPCOM has abused its dominant position by discriminating against companies on the basis of their nationality. OPCOM is the only power exchange in Romania and hence, the EC appears to consider, may be dominant in this activity in Romania.

The potential breach of competition law by OPCOM involves requiring that all participants on the spot markets on the power exchange hold a Romanian value added tax (VAT) registration and consequently are established in Romania.

This is a reminder to dominant companies and companies which deal with them that it can be illegal for a dominant company in the EU to treat parties differently without an objective reason, whether this treatment is based on nationality or another reason.

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

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