Competition Law: INFORMATION, UPDATES AND ANALYSIS, Jan 2016
European Union (‘EU’) – European Competition Commission (‘European Commission’)
European Commissions legally binds Bulgarian Energy Holding to its commitments addressing competition concerns, dated 10 December, 2015.
The European Commission had opened formal proceedings to investigate if Bulgarian Energy Holding (‘BEH’) is abusing its dominant market position in the wholesale electricity market in Bulgaria. BEH is a state owned company inter alia engaged in electricity generation, supply and transmission. The European Commission had concerns that BEH may have abused its dominant position by selling electricity at freely negotiated prices i.e. non-regulated prices in breach of EU antitrust rules (Article 102 of the Treaty on the Functioning of the European Union – TFEU). The European Commission also investigated clauses in the electricity supply contracts executed between BEH production subsidiaries and third parties which imposed territorial restrictions on resale of the electricity bought from BEH. To address the concerns of the European Commission, BEH made certain commitments which were market tested by the European Commission. The European Commission found that the commitments made by BEH addressed its competition concerns. Article 9 of the EU’s Antitrust Regulation (Regulation 1/2003) (‘Article 9’) permits the European Commission to conclude antitrust proceedings by making commitments offered by a company, legally binding on it. The European Commission therefore made the following commitments made by BEH, binding on BEH and its subsidiaries:
- BEH shall set up a power exchange with the assistance of an independent third party and transfer control of the ownership of the new power exchange to the Bulgarian Ministry of Finance. Power exchanges ensure anonymous trading of electricity (i.e. the seller cannot trace the electricity it sells). This prevents the seller from enforcing territorial restrictions on resale.
- BEH will offer minimum stipulated volumes of electricity on the Bulgarian power exchange for a period of five years. These volumes will be put for sale in the day-ahead market, with a maximum price based on the marginal costs of BEH’s production subsidiaries. The volumes offered will vary on an hour-by-hour basis, in line with the pattern of consumption of electricity in Bulgaria.
If BEH violates the commitments which have been made legally binding, the European Commission can in terms of Article 9 impose a fine of up to 10% of BEH’s worldwide turnover, without having to find an infringement of the antitrust rules.
United States of America – Federal Trade Commission
FTC requires companies to sell generic tablets used to treat ulcers, thyroid to preserve competition, dated 10 November, 2015.
FTC has approved a final order settling charges that the $8 billion merger between pharmaceutical companies, Endo International plc (‘Endo’) and Par Pharmaceuticals, Inc. (‘Par’) would likely be anticompetitive. FTC had concerns that the acquisition would combine the two most significant suppliers in the market for generic glycopyrrolate tablets (used with other drugs to treat certain types of ulcers) and generic methimazole tablets (used to treat the body’s production of excess thyroid hormone). The result of which could likely be higher prices for consumers. The order requires Endo to sell its U.S. rights and assets for generic glycopyrrolate tablets and generic methimazole tablets to New Jersey-based generic drug marketer Rising Pharmaceuticals (‘Rising’). Under the order Endo is required to supply Rising with the divested products for two years, while it transfers the manufacturing technology to Rising’s chosen third-party manufacturer. Endo is also required to provide technical assistance, training, and other transitional services to help Rising establish manufacturing capabilities.
Rug Accessory Marketer settles FTC charges of approaching competitor to coordinate prices, dated 7 December, 2015
FTC has approved a final order settling charges that Step N Grip, LLC, (‘Step N Grip’) a company that sells rug accessories designed to keep rugs from curling at the corners, illegally invited its closest competitor to collude on prices. Step N Grip like its closest competitor sells most of its inventory on Amazon.com. According to the complaint earlier in 2015, Step N Grip and its closest competitor reduced prices to compete with each other and gain sales. After a week, Step N grip approached the competitor proposing that the two companies agree to fix and raise the prices of the rug accessories. The competitor reported the invitation to collude to FTC. The FTC found that Step N Grip’s invitation to collude was an unfair method of competition that violated Section 5 of the Federal Trade Commission Act (‘FTC Act’). Under the FTC order, Step N Grip is required to stop communicating with its competitors about prices, and it is barred from entering into, participating in, inviting, or soliciting an agreement with any competitor to divide markets, to allocate customers, or to fix prices; and from urging any competitor to raise, fix, or maintain its price or rate levels or limit or reduce service. The order shall be in operation for twenty years.
Republic of India – Competition Commission of India (‘CCI’)
Express Industry Council of India v. Jet Airways (India) Ltd. and Ors.[Case No. 30 of 2013] dated 17 November, 2015
On finding prima facie merit in the allegations made by the Informant, Express Industry Council of India, that Jet Airways (India) Limited, InterGlobe Aviation Limited, Spice Jet Limited, Air India Limited and Go Airlines (India) Limited (‘Opposite Parties’/’OPs’) were indulging in cartelization in the determination of fuel surcharge (‘FSC’) on the cargo being transported by the OPs, the CCI initiated a detailed investigation into the matter. It was alleged that the OPs on numerous occasions since 2008, had identically raised the FSC charges, that too from almost the same dates, thus establishing the concerted conduct of the OPs. The Director General (‘DG’) after conducting a detailed investigation cleared the parties of any cartel like conduct. However, the CCI drew an adverse inference since the Opposite Parties were not able to adduce evidence on their contentions on the determination of FSC rates. The CCI observed that the fact that FSC was hiked by the airlines despite no upward movement in Aircraft Turbine Fuel (‘ATF’) was a clear indication of concerted action. It was also noted that Jet Airways, Indigo and Spice Jet hiked their FSCs at approximately the same time. It was held that the coordinated action by the parties was suggestive of prior information exchange and accordingly a penalty amounting to 1% of the average turnover was imposed on Jet Airways, IndiGo and Spice Jet for the years 2010-11 to 2012-13. Air India and Indi Go were found not guilty of any anti-competitive conduct and exonerated by the CCI.
Mr. P. K. Krishnan v. Mr. Paul Madavana, Divisional Sales Manager, M/s Alkem Laboratories Limited and Ors. [Case No. 28 of 2014] dated 01 December, 2015
The information was filed pursuant to OP-2, Alkem Laboratories’s rejection of the Informant’s application for appointment as its stockist and for refusal to supply pharmaceutical drugs to the Informant as he failed to obtain a “No Objection Certificate‟ (‘NOC’) from OP-3, All Kerala Chemists and Druggists Association. Upon conducting a detailed investigation, it was observed by the CCI that OP-2’s refusal to supply drugs to the Informant was at the behest of OP-3. However, the CCI observed that this cannot absolve OP-2 from any liability under the Act as OP-2 had the option to approach the CCI. It was held that the denial of supply of pharmaceutical was against the express directions of the CCI and such denial of supply to unauthorized stockists by various pharmaceutical companies like OP-2 appreciably and adversely affects the competition in the market. Thereafter the CCI issued a cease and desist order against OP-2’s and OP-3’s office bearers and also imposed a penalty of INR 4,35,778/- on OP3, calculated at the rate of 10 % of the turnover of OP 3 for the financial years 2011-12 to 2013-14. A penalty of INR 7,463.10 lakh amounting to 3% of the turnover of OP-3 was also imposed. Further, penalty was also imposed on the office bearers of OP-2 and OP-3 in terms of Section 48 of the Act.
Shri Raghavendra Singh v. Reliance Industries Ltd. [Case No. 91 of 2015]- dated 17 November, 2015
The Informant alleged that that the OP, taking advantage of its dominant position in the petroleum refining and marketing sector, has distorted competition in the domestic market by exporting refined petroleum at international prices. The Informant also alleged that by exporting substantial quantities of refined petroleum and petroleum products, OP has acted in contravention of policy directives of the Government of India. The relevant market was defined by the CCI as the market for ‘retail sale of petroleum products in India’. It was noted by the CCI that the public sector oil marketing undertakings (IOCL, BPCL & HPCL) have the largest presence (94.44%) in terms of total number of retail outlets spread across all states and union territories in India and that private sector has a meagre presence of only (5.56%) in terms of number of retail outlets selling petroleum products in India. The CCI opined that OP does not have significant presence in the relevant market and therefore, OP is not dominant in the relevant market. Hence, there existed no case against the OP for contravention of the provisions of Section 4 of the Act.
United States of America (‘US’)- Federal Trade Commission (‘FTC’)
FTC charges proposed acquisition of Office Depot Inc. by Staples, Inc. Dated 7 December, 2015
FTC filed a complaint charging that Framingham, Massachusetts based Staples, Inc.’s (‘Staples’) proposed $6.3 billion acquisition of Boca Raton, Florida based Office Depot, Inc. (‘Office’) would violate the antitrust laws. According to the complaint, Staples, the world’s largest seller of office products and services and Office are each other’s closest competitors in the sale of consumable office supplies to large business customers. The acquisition would significantly reduce competition nationwide in the relevant market in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18, and is an unfair method of competition in violation of Section 5 of the FTC Act, as amended, 15 U.S.C. § 45. The complaint states that the proposed acquisition would lead to higher prices and reduced quality of the office supplies. The complaint also asserts that entry or expansion into the market – by other office supplies vendors, manufacturers, wholesalers, or online retailers. – would not be timely, likely, or sufficient to counteract the anticompetitive effects of the acquisition. The FTC issued notice to the companies to show cause why an order should not be passed requiring the companies to cease and desist from the violations of law charged in the complaint.
Republic of India
The Competition Commission of India (CCI) is likely to take the final decision in the $4 billion Sun Pharma-Ranbaxy deal by the end of this month, the fair trade watchdog’s chairman, Ashok Chawla, has said.
This deal in the pharma space is also the first M&A transaction to have gone through public scrutiny amid concerns of adverse impact on fair competition in the market. The Sun Pharma-Ranbaxy transaction, which would create the country’s largest pharmaceutical company, had come under close scrutiny of CCI after it was found prima-facie that the “combination is likely to have an appreciable adverse effect on competition”.
United Kingdom (‘UK’) – Competition and Market Authority (‘CMA’)
Nikkei / Financial Times Group merger inquiry dated 16 November, 2015
The CMA has cleared the merger of Nikkei with Financial Times Group. It was observed that the commercial activities of the parties overlap in the supply of publications, including newspapers and magazines, in the UK and the supply of data services for financial markets to UK customers. The CMA, has, therefore assessed the impact of the merger in the market supply of newspapers and magazines, and data services in the UK. The CMA observed that the merger would not result in a substantial lessening of competition (‘SLC’) as the parties offer highly differentiated products and Nikkei, a Japanese media organisation, has a limited presence in the UK.
Betfair Group / Paddy Power merger inquiry dated 29 December, 2015
The parties to the transaction provide various types of gambling services to customers. These services broadly fall into two categories: ‘betting’ and ‘gaming’. Paddy Power sells its gambling products both through online and through its network of betting shops, whereas Betfair is only active online. Betfair also provides business-to-business (B2B) services, including the supply of betting exchange data to other gambling operators. The CMA assessed the impact of the merger in relation to the supply of online betting and online gaming services in the United Kingdom (UK). In relation to the supply of online fixed odds betting, it was observed that the Parties would face competitive constraints from a number of alternative providers of online fixed odds betting services. In relation to the supply of online gaming services, the CMA considered that post-merger, the Parties’ combined share of supply will be relatively low and at least three competitors will have a higher or similar share of supply to the merged entity. In addition, third party responses indicated that the Parties compete, but that they are not particularly close competitors and hence do not give rise to the prospect of a SLC.
European Union (‘EU’) – European Competition Commission (‘European Commission’)
European Commission clears joint venture between Goldman Sachs and the Wellcome Trust for purpose built student accommodation in UK, dated 22 December, 2015
The European Commission has approved under the EU Merger Regulation the creation of a joint venture, by the United Kingdom Companies; The Goldman Sachs Group, Inc. and The Wellcome Trust Limited. The joint venture would combine the relevant Goldman Sachs and Wellcome Trust student accommodation businesses in the UK, branded “Prodigy Living” and “iQ Student” respectively. The Commission concluded that the proposed acquisition would raise no competition concerns, because of its limited impact on the market structure. The transaction was examined under the simplified merger review procedure.
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Doc ID: CL/12/16