Price Increase Announcements Can Be Anticompetitive
Two recent cases in the EU demonstrate that, particularly in concentrated markets, companies need to be very careful when making public price increase announcements.
On 21 November, the Dutch competition authority (ACM) said that it had identified competition law concerns about public statements by mobile operators concerning planned price increases or reductions in commercial conditions for consumers, where these statements were not based on a final decision. The three major providers in the Netherlands have therefore made a commitment to ACM that they will refrain from making such statements in public to avoid any risk of illegal collusive behaviour in the future. They will incorporate this into their compliance programs and give it “special attention” in employee training workshops.
On the next day, the European Commission (EC) announced that it has opened a formal competition law investigation into container liner shipping companies, which is based on very similar issues. The concern is that the companies (which are not named) have been making public price increase announcements via press releases and in the trade press (covering the amount and date of increases), which again may amount to illegal price signalling.
Although these types of cases are rare in the EU, it is clear that if similar practices are used in other sectors, then the same issue could arise. Companies should take note for their internal audits and compliance programmes.
European Commission Adopts New Support Rules for Films and Other Audio-visual Works
On 14 November 2013, the EC issued new rules on state support in the EU to films and other audio-visual works. The rules establish the criteria which EU member states will have to satisfy in order to have their support for such activities approved by the EC.
The new rules cover not only production activities, but also post-production, distribution and promotion of movies and other audio-visual works, as well as other related activities such as script writing. Recognizing that this sector is different from others, under the rules states are still allowed to impose territorial spending conditions on beneficiaries of audio-visual aid measures. This “is justified by the promotion of cultural diversity which requires the preservation of the resources and know-how of the industry at national or local level.”
The new rules will be of interest to all operators in the sector, whether these be potential recipients of aid or those who are concerned about aid granted to a competitor.
UK Competition Commission Blocks NHS Hospitals Merger
In a case that will be of interest to anyone considering transactions in the sector, wherever located, on 17 October 2013, the UK Competition Commission (CC) blocked a hospitals merger. This was the proposed merger between The Royal Bournemouth and Christchurch Hospitals NHS Foundation Trust and Poole Hospital NHS Foundation Trust.
Foundation trusts are independent organizations within the state-run and funded UK NHS (National Health Service) which have a significant degree of autonomy in managing their affairs. UK regulators are required by law to review mergers involving foundation trusts. The CC is the UK’s second-stage regulator, including for mergers.
The CC took the view that the merger would damage patients’ interests by eliminating competition and choice across a wide range of elective specialties, together accounting for about a third of the clinical revenues of each hospital. It considered whether the merger would provide specific benefits for patients which would outweigh the harm from the loss of competition and choice. In this regard, the hospitals said that the merger would allow them to reconfigure their accident and emergency services; to build a new maternity hospital; to set up a ‘hub and spoke’ arrangement for specialised haematology services; and to provide better consultant cover in cardiology at Poole.
Rather strangely, given the amount of effort that will have been expended on this by the parties and their advisers, the CC found that there “simply [wasn’t] enough detail in the hospitals’ plans for us to conclude that any of the claimed benefits are likely to materialise.” The UK Office of Fair Trading, the CC and sector regulator Monitor published on the same day a statement on their approach to hospital mergers, which looks to be an attempt to mollify resulting concerns in the sector about the case, not least as to the length of the investigation.
Additional European competition law news coverage can be found in our news section.