Competition Law: INFORMATION, UPDATES AND ANALYSIS, Mar 2015
European Commission fines broker ICAP plc (‘ICAP’) € 14.9 million for participation in several cartels in Yen interest rate derivatives sector
February 04, 2015
The European Commission fined the UK based broker ICAP € 14 960 000 in accordance with point 37 of the European Commission’s 2006 Guidelines on fines, for having breached EU antitrust rules by facilitating several cartels in the sector of Yen Interest Rate Derivatives (‘YIRD’). The European Commission’s investigation uncovered that ICAP facilitated six of the seven cartels in the YIRD sector through various actions that contributed to the anticompetitive objectives pursued by the cartelists, and in particular, by:
disseminating misleading information to certain Japanese Yen London Interbank Offered Rate (‘JPY LIBOR’) panel banks, which were veiled as ‘predictions’ or ‘expectations’ of where the JPY LIBOR rates would be set. This misleading information was aimed at influencing certain panel banks that did not participate in these infringements to submit JPY LIBOR rates in line with the adjusted ‘predictions’ or ‘expectations’; using its contacts with several JPY LIBOR panel banks that did not participate in the infringements, with the aim of influencing their JPY LIBOR submissions; and serving as a communications channel between a trader of Citigroup and a trader of Royal Bank of Scotland Group plc and thereby enabling the anticompetitive practices between them. Interest rate derivatives are financial products which are used by banks or companies for managing the risk of interest rate fluctuations. These products are traded worldwide and play a key role in the global economy. They derive their value from the level of a benchmark interest rate, such as the LIBOR which is used for various currencies including the JPY.
Republic of India (comprising pronouncements on anti-competitive agreements, abuse of dominant position)
M/s Swastik Stevedores Private Ltd. (‘Informant’) v. M/s Dumper Owner’s Association and Ors. (‘Opposite Party’) [Case No. 42 of 2012]
The Informant filed a complaint under Section 19(1)(a) of the Competition Act 2002 (‘Act’) against the Opposite Party alleging contravention of Section 3 and 4 of the Act. Competition Commission of India in consonance with the Director General report held that the Opposite Party is indulged in the practice of determining the rates of the provision of dumper services for intra-port transport operations within the Paradip Port restricted area, which amounts to determination of sale price of the services of dumpers which is in violation of the provisions of Section 3 (1) read with Section 3(3)(a) of the Act. Furthermore, the Competition Commission of India in exercise of the power under Section 27(b) of the Act imposed penalty on the Opposite Party at the rate of 8% of their average turnover for the last three preceding financial years.
Bharat Garage (‘Informant’) v. Indian Oil Corporation Ltd. and Ors. (‘Opposite Parties’) [Case No. 87 of 2014]
The Informant, a partnership firm, alleged contravention of Sections 3 and 4 of Competition Act (‘Act’) by Indian Oil Corporation Limited (‘OP-1’) and Mahanagar Gas Limited (‘OP-2’). The Informant was primarily aggrieved by the agreement dated 12.09.2002 with OP-1 which allegedly contravenes the provisions of Section 3 of the Act. The Informant alleged that the agreement dated 12/09/2002 purportedly continues to operate after its extension and another agreement dated 04/02/2009 executed between the Opposite Parties contravenes the provisions of the Act since OP-1 has made misleading claims in the said agreement. It was submitted that OP-2 was supplying CNG directly to many other dealers but deprived the Informant of the same. The Informant also alleged that OP-1 and OP-2 are working as a cartel and denying it direct supply of CNG from OP-2. The Informant alleged that the agreement dated 12/09/2002 executed between OP-1 and OP-2 is anti- competitive and limits the production/ supply of CNG and causes an appreciable adverse effect on the competition. Thus, OP-1 and OP-2 are alleged to have abused their dominant position and caused appreciable adverse effect on competition. The Competition Commission of India on perusing the material placed on record noted that the grievances of the Informant pertain to the charging of commission by OP-1, issue regarding the termination of agreement between Informant and OP-1, non-supply of CNG directly to it by OP-2 and misleading claims made by OP-1 as regards ownership of the site, in the 2002 agreement. All these issues, prima facie, do not point to any activities/conduct contravening provisions of Section 3 or 4 of the Act. The agreement in question is an agreement between OP-1 and OP-2 whereby OP-1 would be selling the product of the OP-2 through its outlets. It is not exclusive in nature, thus such an agreement does not seem to be anti-competitive in nature. In this regard, Competition Commission of India stated that ordinarily a cartel exists between firms at the same level of production and not between an upstream and downstream firm as is the case in the instant matter.
M/s Shivam Enterprises (‘Informant’) v. Kiratpur Sahib Truck Operators Co-operative Transport Society Ltd. (‘Opposite Parties’) [Case No. 43 of 2013]
The Informant, who alleged contravention of Section 3 and 4 by the Opposite Parties, stated that the Opposite Parties allows only the trucks owned by its members to engage in freight transport of goods from Kiratpur region. The Informant alleged that the members of Opposite Parties have been forcibly obstructing the Informant on various occasions in executing its contract of transportation for providing freight transport services to M/s Ambuja Cements Ltd. to transport cement from their warehouse in Kiratpur region for distribution in the State of Punjab. As per the Informant, the members of OP 1 i.e. the truck owners do not communicate directly with the individual customers who avail the freight transportation services. The Informant further stated that the freight rates fixed by OP 1 and its members are listed according to distance for which a consignment has to be transported. The rates quoted are usually inflexible and cannot be negotiated. According to the Informant, non-members of OP 1 are prohibited from operating within the area covering fifty (50) villages which falls within the territory of OP 1. The same practice is followed by some other transport associations/ unions.
The DG, on a detailed analysis of the factors enumerated in Section 19(4) of the Act, reached the conclusion that OP 1 is a dominant enterprise in the relevant market for freight transport in the Kiratpur region. The Competition Commission of India also noted that in the statement made before the DG by Shri Bhupinder Singh, member of OP 1, it was admitted that Beli society has only two trucks and does not have any business contract. This aspect further strengthens the conclusion reached by the DG on the issue of dominance. In view of this, the Competition Commission of India concurred with the finding of the DG on the issue of dominance of OP 1 in the relevant market. So far the contravention of the provisions of Section 3 of the Act is concerned, it was noted by the DG that OP 2 i.e. the truck owners through the platform of OP 1 are limiting and controlling the provision of services in the market by ensuring that there are no new entrants in the market who can compete with them. Furthermore, it was concluded by the DG that OP 2 is also in violation of the provisions of Section 3(3)(a) of the Act as the members which are competing enterprises have agreed with each other to fix prices for supply of services of freight transport by trucks in Kiratpur region under the garb of a co-operative society i.e. OP 1. Accordingly, the Competition Commission of India agrees with the conclusions of the DG on the point of contravention of the provisions of Section 3(3)(a) read with Section 3(1) of the Act by the Opposite Parties. In view of the findings recorded by the Competition Commission of India, OP 1 has been directed to cease and desist from indulging in the acts/ conduct which have been found to be in contravention of the provisions of the Act in this order. Furthermore, in terms of the provisions contained in Section 27(b) of the Act, the Competition Commission of India imposed such penalty on contravening parties of 10% of the average of the turnover for the last three preceding financial years, upon each of such person or enterprises which are parties to such agreements or abuse.
M/s GHCL Limited (‘Informant’) v. M/s Coal India Limited and Ors. (‘Opposite Parties’) [Case No. 08 of 2014]
In this case, the issues essentially emanated out of the alleged unfair and discriminatory treatment meted out by Opposite Parties to small consumers like the Informant who require coal for captive power plants. Allegedly, such buyers were forced to sign Memorandum of Understanding which diluted the obligations assumed by Opposite Parties under Letter of Assurances/ Fuel Supply Agreements. On a careful perusal of the information, the report of the DG and the replies/ objections filed and submissions made by the parties, the Competition Commission of India was of the opinion that relevant market may be taken as ‘production and supply of non-coking coal to thermal power producers including captive power plants in India’. The Competition Commission of India found no merit in the objections raised by the Opposite Parties on the issue of delineation and determination of the relevant market and determination of the dominance of the Opposite Parties therein on the basis that the DG had kept on adding categories to the previously defined relevant markets. In the light of present statutory regime, it could not be disputed that CIL and its subsidiaries enjoyed a near monopoly status as on that date and notwithstanding the manner of delineation of relevant market, it continued to enjoy such status in the market. On the third issue, the Competition Commission of India was of the opinion that assessment of quality of coal had to be a necessary part of all the FSAs irrespective of the size of the buyers. Resultantly, the Competition Commission of India , in agreement with the DG, was of opinion that the Opposite Parties have imposed unfair and discriminatory conditions relating to quality, sampling & analysis, stones and oversized coal upon the Informant in contravention of the provisions of Section 4(2)(a)(i) of the Competition Act, 2002 (‘Act’). The Competition Commission of India in view of the findings, directed the Opposite Parties to cease and desist from indulging in the conduct which had been found to be in contravention of the provisions of the Act, and further ordered them to take remedial steps in light of the observations and findings recorded in the order within a period of 60 days from the receipt of the Order.
United States of America
The FTC puts conditions on Novartis AG’s proposed acquisition of GlaxoSmithKline’s oncology drugs
February 23, 2015
Novartis AG (‘Novartis’) has agreed to divest all assets related to its BRAF and MEK inhibitor drugs, currently in development, to Boulder, Colorado-based Array BioPharma Inc. (‘Array BioPharma’) to settle charges that Novartis’s $16 billion acquisition of GlaxoSmithKline Pharmaceuticals Limited (‘GSK’)’s portfolio of cancer-treatment drugs would likely be anticompetitive. According to the complaint, Novartis and GSK are two of a small number of companies with either a BRAF or MEK inhibitor currently on the market or in development, and two of only three companies marketing or developing a BRAF/MEK combination product to treat melanoma. If the acquisition goes forward as proposed, Novartis would likely delay or terminate development of both its BRAF and MEK inhibitors, as well as the combination product. For that reason, Novartis’s acquisition of GSK’s portfolio of cancer-treatment drugs would likely cause significant competitive harm in the U.S. markets for both the BRAF and MEK inhibitors, ultimately raising prices for consumers and depriving them of potentially superior products. Under the terms of the proposed consent agreement, Novartis is required to provide transitional services to Array BioPharma to ensure that development of the BRAF and MEK inhibitors continues uninterrupted and that competition in BRAF and MEK inhibitor markets is not reduced.
The FTC challenges proposed merger of Sysco Corporation (‘Sysco’) and US Foods
February 19, 2015
The FTC has filed an administrative complaint charging that the proposed merger of Sysco and US Foods would violate the antitrust laws by significantly reducing competition nationwide and in 32 local markets for broadline foodservice distribution services. The FTC alleges that if the merger goes forward as proposed, foodservice customers, including restaurants, hospitals, hotels, and schools, would likely face higher prices and diminished service than would be the case but for the merger. Sysco and US Foods are by far the largest broadline foodservice distributors in the United States. According to the FTC complaint, a combined Sysco and US Foods would account for 75% of the national market for broadline distribution services.
The FTC puts conditions on Sun Pharmaceutical Industries Limited’s (‘Sun’) proposed acquisition of Ranbaxy Laboratories Limited (‘Ranbaxy’)
January 30, 2015
Sun and Ranbaxy have agreed to divest Ranbaxy’s interests in generic minocycline tablets in order to settle the FTC charges that Sun’s $4 billion proposed acquisition of Ranbaxy would likely be anticompetitive. Torrent Pharmaceuticals Limited (‘Torrent’), a global drug company based in India that markets generic drugs in the United States, will acquire the divested assets. According to the FTC’s complaint, the proposed merger would likely harm future competition by reducing the number of suppliers in the U.S. markets for three dosage strengths (50 mg, 75 mg, and 100 mg) of generic minocycline tablets. Ranbaxy is currently one of three suppliers of the products, while Sun is one of only a limited number of firms likely to sell generic minocycline tablets in the United States in the near future. Sun’s entry likely would have resulted in significantly lower prices for these drugs. Under the proposed settlement, Sun and Ranbaxy must also sell Ranbaxy’s generic minocycline capsule assets to Torrent, to enable Torrent to achieve regulatory approval for a change in ingredient suppliers for its minocycline tablets as quickly as Ranbaxy would have been able to do in the absence of the deal. In addition, Sun and Ranbaxy must supply generic minocycline tablets and capsules to Torrent until the company establishes its own manufacturing infrastructure. The FTC has appointed an interim monitor to ensure that Torrent receives the support it needs from Sun and Ranbaxy during the divestiture process.
The FTC approves final order barring Blue Rhino, AmeriGas Cylinder Exchange (‘AmeriGas’) from restraining competition
January 9, 2015
The FTC has approved final orders settling charges that Blue Rhino and AmeriGas, the two leading suppliers of propane exchange tanks, illegally colluded to push Walmart Stores Inc., a key customer, to accept a reduction in the amount of propane in exchange tanks. Under the settlements, each company is barred from agreeing with competitors to modify fill levels or otherwise fix the prices of exchange tanks, and from coordinating communications to customers. The FTC’s administrative complaint alleges that, together, Blue Rhino and AmeriGas controlled approximately 80 percent of the market for wholesale propane exchange tanks in the United States.
Republic of India
Notice u/s 6 (2) of the Competition Act, 2002 given by Kotak Mahindra Bank Limited and ING Vysya Bank Limited
February 12, 2015
The Competition Commission of India has approved the proposed combination filed by Kotak Mahindra Bank Limited (‘Kotak’) and ING Vysya Bank Limited (‘ING Vysya’) in December 2014. The proposed combination is a merger of ING Vysya into Kotak under a scheme of amalgamation (‘Merger Scheme’). The Merger Scheme provides that for every 1000 shares held by the shareholders of ING Vysya, 725 shares of Kotak will be allotted to the shareholders of ING Vysya. Kotak and ING Vysya are engaged in the provision of banking services. In addition, there is a horizontal overlap in other services provided by the parties, namely, (i) investment advisory services; (ii) portfolio management services; and (iii) securities depository services, in which the parties are present either by themselves or through their subsidiaries.
In this regard, Competition Commission of India noted that the market share of the parties in any of the relevant markets is insignificant. Further, the presence of large players, such as State Bank of India, Punjab National Bank, HDFC Limited, ICICI Bank, etc. in these markets would also act as a competitive constraint to the parties. It was also observed that since ING Vysya does not have significant market share in any of the said relevant markets, the proposed combination would not result in the removal of a significant competitor. With regard to investment advisory services, securities depository services and portfolio management services, it was observed that the market shares of the parties are insignificant in comparison to the other larger players present in the markets. There are large number of competitors, including banks and entities registered with the Securities and Exchange Board of India present in these markets.
The Commission was of the opinion that the proposed combination is not likely to have an appreciable adverse effect on competition in India and therefore, the Commission approved the same under Section 31(1) of the Act.
United Kingdom (UK)
Competition and Market Authority (‘CMA’)
Anticipated acquisition by esure Group plc of the remaining 50% of Gocompare.com Holdings Limited’s share capital
February 23, 2015
The CMA has cleared the anticipated acquisition by esure Group plc (‘esure’) of the remaining 50% of Gocompare.com Holdings Limited’s (‘Gocompare’) share capital. The CMA has observed that esure and Gocompare operate in different markets within the insurance industry and there are no horizontal overlaps between their activities. While esure provides insurance policies, Gocompare is a price comparison website (‘PCW’) and provides customers with insurance quotes, earning commissions from insurance providers when customers purchase policies from providers’ websites as a result of its introduction. The CMA has assessed the impact of the Merger on the national upstream markets for the supply of private motor insurance (‘PMI’) and home insurance; and the national downstream markets for PCW services related to the distribution of PMI and home insurance.
The CMA opines that Merger does not give rise to a realistic prospect of a substantial lessening of competition as a result of vertical effects.
The CMA has decided that ZOLL Circulation’s acquisition of Philips’ InnerCool temperature management solutions business does not qualify for investigation under the merger provisions of the Enterprise Act 2002.
February 5, 2015
Zoll Medical Corporation, parent of Zoll Circulation (‘Zoll’) acquired the Philips InnerCool temperature management solutions business (‘Target’) on 21 November 2014 (‘Merger’). The CMA received a complaint on 8 December and began an own-initiative assessment of the Merger on 12 December 2014 under the mergers provisions of the Enterprise Act 2002. On the basis of the information available to it from the Parties and third parties, the CMA has decided that the Merger does not qualify for investigation under the Enterprise Act 2002, because neither the turnover test nor the share of supply test in Section 23 of the Enterprise Act 2002 is met. A relevant merger situation has therefore not been created.
Breedon has sold its Tom’s Forest asphalt plant to Lafarge Tarmac, a purchaser approved by the CMA.
February 26, 2015
Following its inquiry into Breedon’s acquisition of a package of assets from Aggregate Industries in 2014, the CMA required Breedon to sell an asphalt plant in the Aberdeen area and a ready-mix concrete (‘RMX’) plant in the Peterhead area to an operator approved by the CMA. Breedon would also have faced a price control for asphalt produced in the Inverness area if it continued to occupy and operate the asphalt plants at both Daviot and Mid Lairgs. However it ceased to occupy or operate the asphalt plant at Mid Lairgs in 2014, and so the potential price control remedy is not necessary. Breedon and Aggregate Industries were previously competitors for many of these products across north-east Scotland and we found that asphalt customers in Aberdeen and Inverness, as well as RMX customers in Peterhead, could face higher prices due to the loss of competition and lack of alternative suppliers. Breedon sold the Peterhead RMX plant to Leiths earlier this year. The CMA assessed and approved both Leiths and Lafarge Tarmac as appropriate purchasers of these sites.
The CMA has cleared the completed acquisition by WD-40 Company Limited of the business and assets of GT 85 Limited.
February 3, 2015
On 4 September 2014, WD-40 Company Limited (‘WD-40 UK’) acquired the business and assets of GT 85 Limited (‘GT85’) (‘Merger’). The companies overlap in the wholesale supply of maintenance products in the UK. WD-40 UK supplies multi-purpose and speciality maintenance products under the brands WD-40 and 3-IN-ONE, and GT85 supplies multi-purpose maintenance products under the GT85 and SG85 brands. The CMA has assessed the impact of the Merger in the markets for the wholesale supply of multi-purpose maintenance products for (i) bike uses in the UK; (ii) automotive uses in the UK; and (iii) industrial uses in the UK, as well as the wholesale supply of multi-purpose and function-specific maintenance products for bike uses in the UK. With regard to the wholesale supply of multi-purpose maintenance products for bike uses in the UK, although the CMA estimates that the parties have a significant combined share of supply of 65% to 75%, the increment is small, at 0% to 10%. On balance, the CMA considers that the parties’ internal documents and third party comments indicate that the parties are not close competitors in this area, and that there are numerous other competing multi-purpose bike maintenance products in the market to constrain the parties post-Merger. The CMA considers that GT85 is a weak constraint on WD-40 UK in the areas of the supply of multi-purpose maintenance products for automotive uses and for industrial uses, as only 13% and 9% of its approximately £1.1million sales are being made into the ‘automotive’ sales channel and ‘industrial’ sales channel respectively, according to data provided by WD-40 UK. The Merger has not been referred under Section 22(1) of the Enterprise Act 2002.
European Union (‘EU’)
European Commission clears acquisition of joint control over NYK Ports LLC by Macquarie Infrastructure and NYK Americas
January 27, 2015
The European Commission has approved under the EU Merger Regulation the acquisition of joint control over NYK Ports LCC of Japan by Macquarie Infrastructure Partners III, L.P. and NYK Group Americas Inc., both of the United States. Macquarie Infrastructure is a fund investing mainly in infrastructure in the United States and Canada. NYK Americas offers marine transportation and global logistics services in North America. NYK Ports is a terminal operator providing stevedoring services in the United States and Canada. The European Commission concluded that the proposed acquisition would not raise competition concerns, in particular because NYK Ports have no activities in the European Economic Area.
The European Commission clears acquisition of joint control over PT Hitachi Construction Machinery Finance Indonesia by Hitachi Group and Itochu Group
January 27, 2015
The European Commission has approved under the EU Merger Regulation the acquisition of joint control over PT Hitachi Construction Machinery Finance Indonesia (‘joint venture’), by Hitachi Group of Japan and Itochu Corporation of Japan (‘Itochu Group’). Hitachi Group manufactures construction machinery with a focus on hydraulic excavators and sells wheel loaders and off-road dump trucks worldwide. Itochu Group trades globally goods in various industries such as textile, machinery, energy, etc. and is also active in insurance, logistics services, construction and finance. The joint venture provides financial services to end-customers and dealers in relation to the purchase of construction machineries and trucks in Indonesia. The European Commission concluded that the proposed acquisition would not raise competition concerns because the joint venture has no activities in the European Economic Area.
European Commission clears creation of a joint venture by National Grid and Elia
January 30, 2015
The European Commission has approved under the EU Merger Regulation the creation of a joint venture, Nemo of the UK, by the transmission system operators of the UK, National Grid, and of Belgium, Elia. Nemo will develop, construct and operate an electricity transmission interconnector between Great Britain and Belgium. The European Commission concluded that the proposed transaction would not raise competition concerns, because there are no overlaps between the parties’ activities and none of the parties are active in the wholesale or retail supply of electricity.
European Commission clears acquisition of DBRS by TCGFS II and Warburg Pincus in financial services sector
February 17, 2015
The European Commission has approved under the EU Merger Regulation the acquisition of DBRS Holdings Limited of Canada by TCG Financial Services II, L.P. belonging to the Carlyle Group L.P. and Warburg Pincus LLC, both of the USA. Carlyle is a global alternative asset manager. Warburg Pincus is a global private equity firm. DBRS provides credit rating opinions across a broad range of companies, governments and structured finance products on a global basis. The European Commission concluded that the proposed acquisition would raise no competition concerns because of the companies’ moderate combined market shares on the markets concerned.
European Commission clears Daimler and Kamaz joint venture in the Russian and Belarussian automotive sector
February 24, 2015
The European Commission has approved under the EU Merger Regulation the creation of a joint venture by Daimler AG, of Germany, and Kamaz OJSC, of Russia. Daimler is active in the development, manufacture and distribution of automotive products mainly passenger cars, trucks, vans and buses. Kamaz is active in the production of trucks, trailers, tractors, chassis, engines, power units, and multifunctional armoured vehicles. The joint venture will be active in the production of light-duty and heavy-duty trucks and in the welding and painting of truck cabins. The European Commission’s investigation found that the proposed acquisition will not raise any competition concerns, because the joint venture will only be active in Russia and Belarus.
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.
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Doc ID: CL/03/15