Competition Law: INFORMATION, UPDATES AND ANALYSIS, July 2016
United States of America – Federal Trade Commission (‘FTC’)
FTC approves ProMedica Health System Inc. divestiture of St. Luke Hospital dated June 24, 2016
FTC has approved ProMedica Health System Inc.’s (‘ProMedica’) divestiture of its former rival, St. Luke’s Hospital (‘St. Luke’). The acquisition of St. Luke by ProMedica in August 2010 was held to be anticompetitive and likely to substantially lessen competition and increase prices for general acute-care inpatient hospital services and inpatient obstetric services sold to commercial health plans in Lucas County, Ohio by FTC in 2012. The ruling was upheld by the U.S. Court of Appeals for the Sixth Circuit. In terms of the order ProMedica is required to divest St. Luke Hospital to an FTC-approved buyer. The divestiture will ensure that St. Luke’s operates as an independent, standalone community hospital serving in the Toledo, Ohio area.
United Kingdom – Competition and Markets Authority (‘CMA’)
CMA imposes fine of £2,298,820 on ITW Limited for engaging in resale price maintenance in internet sale of Foster commercial refrigerators dated May 24, 2016
After CMA issued a formal complaint against ITW Limited in January 2016, the company admitted to have engaged in resale price maintenance (‘RPM’) in internet sales of its Foster commercial refrigerators from 2012 to 2014. RPM is vertical price-fixing in which a supplier restricts the ability of a dealer to determine the price at which it will resell the supplier’s products, for instance by requiring the dealer to sell at a particular price or only above a minimum price. RPM is illegal because it restricts dealers from setting their prices independently to attract more customers. CMA found that Foster Refrigerator, a division of ITW Limited had been operating a ‘minimum advertised price’ policy and threatened dealers with sanctions including threats to charge them higher cost prices for Foster products or stopping supply, if they advertised below the minimum price. CMA found that Foster Refrigerator’s ‘minimum advertised price’ policy constituted RPM because by restricting the price at which its goods were advertised online it prevented dealers from offering discounted prices online, reducing competition across online and ‘bricks and mortar’ sales, and denying buyers the benefit of lower prices for Foster’s commercial refrigerators. CMA found a clear link between the advertised price and the resale price when Foster’s commercial refrigerators were purchased online.
CMA imposes fines of £786,668 on Ultra Finishing Ltd. for engaging in RPM dated May 10, 2016
Ultra Finishing Ltd. (‘Ultra’) which is engaged in the business of supplying bathroom fittings in the UK was fined by CMA for engaging in RPM in respect of internet sales of its Hudson Reed and Ultra branded products during the years 2012-2014. CMA found that in February 2012 Ultra introduced trading guidelines relating to the online sales of its Hudson Reed and Ultra branded products. The trading guidelines contained a recommendation that the online prices should not be lower than 25% off in-store recommended retail price for Hudson Reed or Ultra branded product. Although it was stated that the recommendation was not legally binding, the evidence showed that the key objective of Ultra’s online trading guidelines was to prevent resellers from selling or advertising Hudson Reed or Ultra branded products online below the ‘recommended’ online price. Further evidence showed that at least some of Ultra’s resellers/ distributors understood that trading within Ultra’s guidelines encompassed a requirement to price Hudson Reed and Ultra branded products online at or above the ‘recommended’ online price. Ultra regularly monitored the website of the resellers to confirm that they were not advertising/selling Hudson Reed or Ultra branded products online below the recommended price. Further, Ultra threatened and/or took the following enforcement action(s) if it found that resellers were selling or advertising Hudson Reed or Ultra branded products online below the recommended price: (i) temporarily or permanently reducing the resellers’ wholesale terms of supply; (ii) temporarily or permanently ceasing supply of Hudson Reed or Ultra branded products; and/or (iii) withdrawing a reseller’s right to use images of Hudson Reed or Ultra branded products. The quantum of fine was reduced by CMA in recognition of: efficiencies resulting from Ultra admitting its infringement and commitment of Ultra to ensure compliance of competition law within its business.
European Union – European Competition Commission (‘EC’)
EC fines Pometon S.p.A 6.2 million Euros for participation in steel abrasives cartel dated 25 May, 2016
The EC upon a detailed investigation found that Italian abrasives producer Pometon S.p.A (‘Pometon’) breached antitrust rules by participating in a cartel to coordinate steel abrasives prices in Europe for almost four years. The EC has found that for almost 4 years, Pometon participated in a cartel and had contacts on a bilateral and multilateral basis to coordinate prices of steel abrasives in the whole European Economic Area (EEA).The cartel concerned steel abrasives, which are loose steel particles used for cleaning or enhancing metal surfaces in the steel, automotive, metallurgy and petrochemical industries. They are also used for cutting hard stones such as granite and marble. Metal scrap, which is the main raw material for steel abrasives, is characterised by sharp price fluctuations as well as significant price differences between the EEA countries. To compensate for such fluctuations, the cartel participants set up together a specific surcharge (called the “scrap surcharge” or “scrap cost variance (SCV)”) based on a common formula. In addition, the cartelists agreed not to compete against each other on price with respect to individual customers.
Republic of India- Competition Commission of India (‘CCI’)
CCI dismisses complaint against M/s Bennett Coleman and Company Limited, CCI Case No. 35/2016 dated 02 June, 2016
The Informant alleged that the Opposite Party (‘OP’), M/s Benett Coleman and Company Limited which publishes ‘The Times of India’ made available the Mumbai edition of ‘The Times of India’ in a combo offer with ‘Mumbai Mirror’ or ‘The Economic Times’ or ‘Maharashtra Times’ at a selling price of INR 7. It was alleged that in the combo offer, the newspaper vendors in Mumbai are selling the ‘Times of India’ only with the ‘Mumbai Mirror’ and refusing to sell ‘The Times of India’ along with ‘The Economic Times’ or ‘Maharashtra Times’ stating that they sell as per the supply made by OP. The Informant alleged that the said act of the OP amounts to their support to the errant newspaper vendors who are refusing to sell the said newspaper as per the said offer and compelling the buyers to buy the unwanted newspaper in violation of Section 4(2)(a)(i) of the Competition Act, 2002 (‘Act’). The CCI observed that all newspapers available in the combo offer including ‘Times of India’, ‘Mumbai Mirror’, ‘The Economic Times’ and ‘Maharashtra Times’ are also available separately at their respective selling prices in Mumbai and therefore the consumers have the choice to either purchase the newspapers in the combo offer or to purchase each newspaper separately. Further, the CCI noted that if some vendors are not providing ‘The Economic Times’ or ‘Maharashtra Times’ along with ‘Times of India’ in the combo offer, then it cannot be said that the OP is responsible for the conduct of the vendors. In view of the same, the matter was closed under Section 26(2) of the Act.
CCI dismisses complaint against Nissan Motors, CCI Case No. 46/2016 dated 07 June, 2016
The crux of the allegations pertained to issues with the Nissan Micra car like unusual sound, defective engine etc. which the Informant had purchased from OP-1 who is the authorised dealer of the car manufacturer, Nissan i.e OP-2. The Informant is essentially aggrieved that his grievances with regard to deficiency in services on part of the OPs were not attended satisfactorily despite raising them several times and that further damage to the car was caused by the OPs’ negligent handling. The CCI observed that for making out a contravention of Section 4 of the Competition Act, 2002 (‘Act’), the dominant enterprise has to be shown to have abused such position in the relevant market. The CCI also noted that the grievances made by the Informant essentially pertain to alleged deficiency in services and that none of the abusive instances as alleged in the information comes within the purview of Section 4(2) of the Act.
United States of America (‘US’) - Federal Trade Commission (‘FTC’)
Ball Corporation to divest eight Aluminium Can Plants to Ardagh Group S.A. as a condition of acquiring Rexam PLC dated June 28, 2016
In order to settle FTC charges that the proposed acquisition of Rexam PLC by Ball Corporation worth $8.4 billion would likely be anticompetitive, Ball Corporation has agreed to sell to Ardagh Group S.A., eight U.S. aluminium can plants and associated assets. Colorado based Ball Corporation and United Kingdom based Rexam PLC are the first and second largest manufacturers of aluminium beverage cans in both the United States and the world. The complaint alleges that the acquisition if consummated is likely to substantially lessen competition in at least three regional markets in the US: south/southeast; midwest and west coast by; (i) eliminating direct and substantial competition between Ball Corporation and Rexam PLC; (ii) increasing the likelihood of Ball Corporation unilaterally exercising market power; and (iii) increasing likelihood of coordinated interaction among two remaining independent producers of aluminium beverage cans thereby resulting in higher prices, reduced quality, selection, service, and innovation. Under the terms of the consent agreement, Ball Corporation and Rexam PLC are required to divest eight aluminium can plants and related assets to Ardagh Group S.A., one of the world’s largest producers of glass bottles for the beverage industry and metal cans for the food industry.
Cement Manufacturers Heidelberg Cement AG and Italcementi S.p.A. to Divest U.S. Assets as a condition of merger dated June 17, 2016
In order to settle FTC charges that the proposed $4.2 billion merger of German cement producer Heidelberg Cement AG (‘Heidelberg’) and Italian cement producer Italcementi S.p.A. (‘Italcementi’) (collectively, ‘Parties’) would likely violate antitrust laws, the Parties have agreed to divest a cement plant in Martinsburg, WV and up to 11 cement distribution terminals in six other states to an FTC approved buyer. According to the FTC, Heidelberg and Italcementi are the second and fourth largest producers of cement in the world. In the United States, the Parties compete through their respective U.S. subsidiaries; Lehigh Hanson and Essroc Cement Corp., to sell Portland cement which is an essential ingredient in making concrete. The Complaint alleges that the merger as proposed would harm competition for Portland cement in five metropolitan areas: Baltimore-Washington, DC; Richmond, Virginia; Virginia Beach-Norfolk-Newport News, Virginia; Syracuse, New York; and Indianapolis, Indiana. The Complaint alleges that in each of these markets the merger as originally proposed would have reduced the number of competitively significant suppliers from three to two. The Complaint also alleges that if the Parties are merged as proposed, the merged firm would be more likely to unilaterally raise prices in these markets and that it would be easier for the remaining firms to coordinate successfully to raise prices. As a result, cement customers in these markets would likely face higher prices.
Republic of India – Competition Commission of India (‘CCI’)
CCI approves notice of acquisition given by Future Consumer Enterprise Limited, C-2016/03/384 dated 11 May, 2016
The combination pertains to the acquisition of the consumer products division business (‘CPD Business’) of Grasim Industries Limited (‘Grasim’) by Future Consumer Enterprise Limited (‘Acquirer’). For the purpose of the proposed combination, the Acquirer and Grasim have entered into a Business Transfer Agreement (‘BTA’) on 22 May, 2015. The CCI observed that the combination relates to the CPD Business, which is a segment of the overall FMCG industry. The CCI noted that the parties are engaged in the manufacture and sale of skin care, baby care and home care wet wipes as well as sanitizers. On undertaking a competitive analysis, the CCI noted that the market shares of the parties are insignificant and there are other significant players in the CPD business like Johnson and Johnson Private Limited, Kimberly Clark Lever Private Limited, 3M India Limited etc. which would provide a competitive constraint to the Parties.
CCI approves merger of Tyco International PLC. Ltd. with Johnson Controls Inc, C-2016/02/376 dated 01 June, 2016
The combination is structured as a reverse triangular merger and contemplates the following steps (i) Tyco International PLC. (‘Tyco’) newly incorporated indirectly wholly-owned subsidiary, Jagara Merger Sub LLC will merge with and into Johnson Controls, Inc (‘JCL’) with JCL surviving as an indirectly wholly-owned subsidiary of Tyco; (ii) Tyco will be renamed ‘Johnson Controls plc’ and its shares will be listed on the New York Stock Exchange (‘NYSE’) under JCL’s current ticker symbol; (iii) Pursuant to the consummation of the aforesaid steps of the proposed combination, shareholders of JCL will own majority of the merged entity’s shares (56%) and the remaining shares (44%) will be held by Tyco’s shareholders. The CCI during the course of the analysis, noted that the proposed combination is in the form of an amalgamation and not an acquisition as initially noted by the CCI. The competition analysis was undertaken on the markets wherein the operations of the parties overlapped i.e electronic security systems (‘ES systems’) and fire detection and alarm systems. It was observed that with regard to ES systems, the combined market share of the parties was less than 10% and that the parties faced significant competitive pressure from its competitors. Similarly in the fire detection and alarm systems market, the combined market share of the parties were found to be less than 5% and it was observed that the presence of competitors would pose significant competitive pressure on the parties. Evaluating the vertical relationship, it was observed that even though there is some degree of vertical integration between the parties at the global level, there is no overlap between the parties’ in the relevant market in India. Accordingly, it was observed that the combination shall not have an appreciable adverse effect on competition in India.
United Kingdom (‘UK’) – Competition and Market Authority (‘CMA’)
Peninsula Business Services Group Limited/ Croner Group Limited Merger Inquiry dated May 09, 2016
Peninsula Business Services Group Limited (‘Peninsula’) acquired Croner Group Limited (‘Croner’) (‘Merger’) on 10.12.2015. Peninsula and Croner are together referred to as the (‘Parties’). CMA noticed that the Parties overlap in the supply of tax fee protection insurance, employment law (‘EL’), human resources (‘HR’) and health and safety (‘HS’) consultancy services. The Parties and their competitors supply, tax free protection insurance to and through accountancy practices and EL, HR and HS consultancy services on a fixed fee. In the market for supply of tax fee protection insurance CMA found the Parties to be close competitors. On the other hand in the supply of EL, HR and HS consultancy services the Parties were found to be differentiated competitors. CMA found that post-merger the Parties will face significant pressure from several competitors in supply of tax free protection insurance, EL, HR and HS consultancy services. CMA believed that these constraints are sufficient to ensure that the Merger does not give rise to a realistic prospect of a substantial lessening of competition as a result of horizontal effects in the supply of tax fee protection insurance, EL, HR and HS consultancy services. The Merger was therefore not referred under section 22(1) of the Enterprise Act 2002.
Severn Trent Plc/United Utilities Group Plc Merger Inquiry dated May 03, 2016
CMA assessed the impact of the proposed merger of Severn Trent Plc (‘Severn’) and United Utilities Group Plc (‘United’) (collectively, ‘Parties’) (‘Merger’). The Parties which are engaged in supply of non-household (‘NHH’) (small and medium sized enterprises, large user customers and multi-site customers) retail water and sewerage business, had agreed to merge, in preparation of the opening of the English NHH retail water and sewerage sector to full competition from April 2017. Currently the Parties supply a range of NHH customers within their regulated regional monopolies but do not (with very limited exception in relation to certain customers) compete to supply retail water and sewerage services to NHH customers. After appreciation of the evidence CMA was of the opinion that there are sufficient constraints to ensure that the Merger does not give rise to a realistic prospect of a substantial lessening of competition as a result of horizontal unilateral effects. CMA was of the opinion that the current shares of supply was of limited relevance as ahead of reform in April 2017 they are not reflective of competition for the supply of retail water and sewerage services. The evidence from third parties and internal documents indicated that the Parties have the potential to be close competitors, but not uniquely close. A significant number of other suppliers indicated that they would be active in targeting all types of NHH customers after reform in April 2017 in England and were not concerned by the Merger.
European Union (‘EU’)- – European Competition Commission (‘EC’)
EC approves acquisition of Italcementi by Heidelberg Cement, M. 7774 dated 26 May, 2016
The proposed combination involved Heidelberg Cement AG (Germany) acquiring control of the whole of Italcementi S.p.A (Italy) by way of acquisition of shares. Heidelberg Cement AG and Italcementi S.p.A are collectively referred to as ‘Parties’. Both the Parties are global producers of cement, aggregates, ready-mix concrete, white cement and other related products. It was observed that the Parties activities in grey cement substantially overlap in Belgium and to a lesser extend in Southern Italy. There are also cross-border overlaps between their grey cement activities in Germany/France and in Bulgaria/Romania. The Parties’ activities in aggregates and ready-mix concrete mainly overlap in Belgium and Northern Spain whereas their white cement activities overlap primarily in Belgium, France and Austria. The competitive analysis was confined to Belgium and adjacent areas. It was noted that the merged entity would have held market shares above 50% in Belgium and the adjacent regions and concerns were raised as to whether the remaining suppliers in these markets would be able to exercise a sufficient competitive constraint on the merged entity.
These concerns were removed when Heidelberg Cement offered commitments to divest the entire business of Italcementi in Belgium centered around its subsidiary Compagnie des Ciements Belges S.A. The commitments having addressed potential competition concerns, the merger was subsequently approved by the EC.
EC prohibits Hutchison’s proposed acquisition of Telefonica UK dated 11 May, 2016
The proposed acquisition would have combined Telefonica Europe PLC’s (‘Telefonica’) UK’s “O2” and CK Hutchison Holdings Ltd’s (‘Hutchison’) 3G UK’s “Three”, thereby creating a new market leader in the UK mobile market. The proposed acquisition would have removed an important competitor, leaving only two mobile network operators, Vodafone and BT’s Everything Everywhere (EE) to challenge the merged entity. The EC held that the proposed combination in addition to significantly reducing competition would likely have resulted in higher prices for mobile services in the UK and less choice for consumers. Further, it was also observed that the takeover would also likely have a negative impact on the quality of service for UK customers by hampering the development of mobile network infrastructure in the UK. It was finally noted that the takeover would have reduced the number of mobile network operators willing to host other mobile operators on their networks. Even though Hutchinson proposed remedies to offset the competition concerns raised, the EC concluded that the proposed remedies would not have been able to prevent the likely negative impact on prices, quality of service and network innovation in the UK mobile sector as a result of the takeover and therefore, the decision was taken to block the proposed transaction to protect UK customers and businesses.
The information in this private circulation is not legal advice and should not be treated as such. The information is taken from public domain and is purely for private and non- commercial purposes. We do not represent that the information is correct, accurate, complete or non- misleading.
This disclaimer will be governed by and construed in accordance with laws of India, and any disputes relating to this disclaimer will be subject to the exclusive jurisdiction of the courts of the Republic of India.
Doc ID: CL/15/16