Competition Law: INFORMATION, UPDATES AND ANALYSIS, May 2018
United Kingdom (‘UK’) – Competition and Market Authority (‘CMA’)
The CMA imposes fine of £370,084 on Five Real Estates Agents
March 2, 2018
Abbott and Frost Estate Agents Limited, Gary Berryman Estate Agents Ltd (parent company – Warne Investments Limited), Reenslade Taylor Hunt, Saxons PS Limited and West Coast Property Services (UK) Limited and Annagram Estates Limited (hereinafter, together referred to as ‘the Parties’) were found to be in breach of the Competition Act, 1998 for formation of a cartel. The statement of objections was issued by the Commission in response to the parties fixing their minimum commission rates at 1.5 per cent as this practice would allow the agents to make more money in Somerset. The investigation by the CMA revealed that the cartel had been formed in early 2014. During the in-depth investigation, inter alia, the CMA recovered emails from the parties stating that they would not compete with each other and they would ensure that the minimum fee agreement between them was being implemented by each party. The anti-competitive practices of the estate agents denied home owners in the Somerset area good deals on the sale of their properties. Annagram Estates Limited had not been fined for partaking in anti-competitive practices as it had confessed under the CMA leniency policy and provided the CMA with vital information and co-operation. The parties, excluding the Annagram Estates Limited, were fined a total of £370,084 for formation of a cartel that created an adverse effect on the real estate market and prejudiced home-owners in Somerset.
European Union (‘EU’) – European Competition Commission (‘Commission’)
Altice fined € 125 for breaching EU Merger Control Rules and taking over PT Portugal before merger approval
April 24, 2018
The Commission mandates that every company follow the EU Merger Control system to ensure that there is fair competition in the market. According to the EU merger rules, merging entities are required to get cleared by the Commission after notifying the Commission of planned mergers of Union dimension. The period after the notification of the merger and pending investigation is known as the ‘Standstill Obligation’. The companies are required to not take any action in regard to the merger during that period, so that there is no irreparable negative impact of transactions on the market, pending the outcome of the Commission’s investigation. In the instant case, Altice had been given conditionally clearance on April 20, 2015 in regard to its intention of acquiring PT Portugal, subject to the divestment of Altice’s businesses in Portugal at the time, Oni and Cabovisão. The Commission had various concerns regarding the implementation of the acquisition and issued a Statement of Objections in May, 2017 to Altice. During the investigation, the Commission noted that the purchase agreement between Altice and PT Portugal allowed Altice, inter alia, veto rights in ordinary business and Altice had already exercised decisive influence over aspects of PT Portugal’s business prior to clearance by the Commission. The Commission also noted that Altice had taken over various segments of ordinary business even prior to the notification of acquisition. As Altice had clearly breached the EU Merger Regulations, the Commission imposed a fine of €124.5 million on Altice.
Eight Capacitator Manufacturers fined € 256 for participating in a Cartel
March 21, 2018
A capacitor is a device that is used to store electric charge and is a vital component of many electronic devices. The Commission conducted an in-depth investigation into the activities of the Japanese capacitator manufacturers, Elna Co. Ltd. (‘Elna’), Hitachi Chemical Co Ltd (‘Hitachi’), Holy Stone Enterprise Co Ltd. (‘Holy Stone’), Matsuo Co Ltd. (‘Matsuo’), NEC Tokin Co Ltd (‘NT’), Nichicon Co Ltd. (‘Nichicon’), Nippon Chemi-Con Co Ltd. (‘Nippon’), Rubycon Co Ltd. (‘Rubycon’) (hereinafter, together referred to as ‘the parties’). The investigation was under Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’) and Article 53 of the EEA Agreement which prohibit cartels and other restrictive business practices. The Commission’s investigation started in 2014 after an immunity application under the Commission Leniency Notice was submitted by Panasonic Co Ltd (‘Panasonic’). The Commission issued a Statement of Objections on November 4, 2015, followed by several letters of facts and carried out an oral hearing in September 2016. The investigation revealed that from the year 1998 to 2012, the parties had participated in multilateral meetings and engaged in bilateral or trilateral contacts to exchange commercially sensitive information. Even though the meetings between the parties took place in Japan, the implementation of anti-competitive practices was global including the European Economic Area (‘EEA’). The investigation also revealed that the parties had been well aware of that the practices undertaken by them were anti-competitive in nature as during the investigation, various emails, letters etc were recovered by the Commission, which had been exchanged between the parties with instructions to conceal the same. Consequently, the Commission was of the opinion that the parties had participated in anti-competitive practices that had affected the relevant market in the EEA. However, the Commission granted reductions to certain parties while imposing penalties, in accordance to the EU’s 2006 Leniency Notice; Panasonic subsidiary company Sanyo Electric Co (100 per cent reduction for revealing the existence of the cartel to the Commission), Hitachi Chemical (35 per cent, €18,476,000), Rubycon (30 per cent for submitting compelling evidence during the period of 1998 to August 2003, the same period was excluded,€ 28,424,000), Elna (15 per cent, € 18,162,000) and NEC Tokin (15 per cent, € 16,445,000) for their co-operation to the Commission. The remaining parties were not given any reductions; Matsuo Electric (€ 824,000), Nichicon (€ 72,901,000), Nippon (€ 97,921,000), Holy Stone (€ 782,000).
India – Competition Commission of India (‘CCI’) Competition Act, 2002 (‘Act’)
CCI finds Association of Indian Dry Cell Manufacturers and its primary members guilty of cartelization in respect of Zinc carbon dry cell batteries market in India
April 19, 2018
The Association of Indian Dry Cell Manufacturers (‘AIDCM’) is a non-registered association of dry cell manufacturers. The three primary members of AIDCM were Eveready Industries India Ltd (‘OP-1’) Indo National Ltd. (‘OP-2’) and Panasonic Energy India Company Limited (‘OP-3’) (hereinafter, referred to as ‘OPs’). OP-3, a subsidiary of the Panasonic Corporation, Japan filed an application under Regulation 5 of the Competition Commission of India (Lesser Penalty) Regulations, 2009 (‘Lesser Penalty Regulations’) read with Section 46 of the Competition Act, 2002 (‘Act’) (‘Lesser Penalty Application’). According, to the application, OP-1, OP-2 and OP-3 had formed a cartel and were in contravention of the provisions of Section 3(3) read with Section 3(1) of the Act. OP-3 had become aware of the cartel through its Competition Compliance Program and subsequently filed the application, which had revealed the modus operandi of the OPs. The application stated that the employees of the parties inter alia would exchange price sensitive information and that they took coordinated steps to ensure that there were no price wars amongst themselves. On receiving the application, the CCI took suo moto cognizance of the matter and directed the Director General (‘-’) to conduct an investigation into the matter and submit a report. The DG was also directed to conduct an investigation into the personnel in-charge and responsible for the conduct of the OPs, irrespective of the time frame mentioned in the information. Pursuant to the search warrant issued by the Chief Metropolitan Magistrate Delhi, the DG seized various incriminating documents and material from the operation premises of the OPs. Subsequently, OP-1 and OP-2 filed Lesser Penalty Applications. The DG found other evidence of contacts and communications amongst OPs through e-mails, fax and even meetings, which showed coordination amongst the Manufacturers to increase prices in not only in 2010 but in 2013, 2014 and 2015 as well. The DG concluded that OPs had indulged in anticompetitive agreement/ conduct and concerted practices, in the domestic dry cell battery market of zinc carbon batteries, during the period 20 May 2009 to 23 August, 2016 and thereby contravened the provisions of Section 3(3)(a), 3(3)(b) and 3(3)(c) read with Section 3(1) of the Act during that time. The evidence collected during investigation by the DG revealed that the price coordination agreement amongst the OPs was not limited to deciding and implementing increase in MRP of zinc-carbon dry cell batteries alone but extended to include monitoring and controlling of prices at all levels so as to exclude ‘price competition’ in the entire distribution chain of zinc-carbon dry cell batteries. The emails, as recovered from the OPs, revealed that they also had an understanding based on allocation of products based on geographical area and that the AIDCM had become a platform for the parties to not only share common concerns but coordinate their actions in terms of pricing. The CCI on perusal of the investigation report and the submissions made by the OPs came to the conclusion that that the individuals of the OPs frequently discussed price sensitive information wherein OP-1 would increase the price of the zinc-carbon dry cell batteries, through a press release and the OP-2 and OP-3 would also increase the price of the batteries on the pretext of following the market leader. The same modus operandi was followed for various years from 2010 to 2015. The CCI was of the opinion that the OPs had indulged in anti-competitive practices. The AIDCM had submitted that it had no role to play in the pricing of the zinc- carbon dry cell batteries; however, the CCI was of the opinion that the AIDCM had become a platform for cartelization by the OPs and that evidence collected by the DG revealed the same. CCI was of the opinion that it was a clear indicator of the effectiveness of the cartel arrangement comparison of the market shares of OPs for the past six years i.e. from 2010-11 to 2015-16 based on their sales of zinc carbon dry cell batteries shows that market share of each of the OPs remained stable over these years. Consequently, the CCI imposed a penalty on OP-1 and OP-2 but due to the lesser penalty applications and information provided, granted a reduction of 30 percent and 20 per cent of the total penalty imposed. OP-1 and OP-2 had a final penalty amount of INR 171.55 crores and INR 42.6 crores, respectively. The CCI also stated that AIDCM had been a facilitator of the cartelization and hence imposed a penalty of INR 1, 85,450. The individuals who were in the position of responsibility of the OPs during the period were also given a reduction in their penalty as per the reduction awarded to the OPs. The CCI granted hundred percent reduction in penalty to OP-3 and its officials under section 46 of the Act, for providing important information and co-operation extended in conjunction with the value addition provided to the CCI.
CCI imposes penalty of 3 per cent of average turnover on Jet Air ways, Indigo Airlines and SpiceJet Ltd for anti-competitive practices
March 7, 2018
An information was filed under Section 19(1) (a) of the Act by Express Industry Council of India (‘Informant’) against Jet Airways (India) Ltd. (‘OP-1’), IndiGo Airlines (‘OP-2’), SpiceJet Ltd. (‘OP-3’), Air India Ltd. (‘OP-4’) and Go Airlines (India) Ltd. (‘OP-5’) (hereinafter, together referred to as ‘OPs’/ ‘the Airlines’) alleging, inter alia, collusion in fixing of Fuel Surcharge (‘FSC’) rates for cargo transportation by the domestic airlines and thereby contravening the provisions of Section 3 of the Act. It was averred in the information, that in May 2008, OPs connived to introduce a levy of FSC for transporting cargo. It was alleged by the informant that there was no legal provision under which such FSC could have been levied by the Airlines but they did so in the pretext of mitigating the volatility of fuel prices. It has been further stated that the fact of levying FSC at a uniform rate from the same date itself constitutes an act of cartelization covered under Section 3 of the Act. However, it was observed that even when there was a fall in fuel prices, the FSC did not have any change and that such increase in FSC was detrimental to the interests of freight companies and consumers at large. The Airlines sought to explain the revision of FSC affected in a close timeframe by pointing out that the time gap in respect of each revision by each airline varied and that levy of FSC was an insignificant to the overall revenue. No minutes of meeting regarding any discussion had been produced by any of the OPs to justify the changes in FSC. However, the CCI noted that nearly 20-30% of the freight revenue was from FSC, which was a significant portion of overall revenue. The CCI was of the opinion that even though the time frame for changing the FSC was not systematic between the OPs, it was not always necessary that cartels would operate in a symmetric, syncretic and aesthetic way all the time as it was likely that attempts would be made by the participants to hide the coordinated behaviour and it would only be on a few occasions when the authorities would be able to gather evidence of the entire concerted behaviour. The OPs also raised similar points regarding the fact that the DG Report had also stated that there was no evidence ‘confirming exchange of information’ regarding prices between OPs. The OP-1 submitted that the order passed by the CCI contained no evidence to show that there was an agreement between the parties which can be proved beyond reasonable doubt. However, the CCI after perusing the material on record and examining the contentions raised by the OPs was of the opinion that the definition of an ‘agreement’ could be construed through sufficiency of evidence on the basis of benchmark of preponderance of probabilities. The CCI was of the opinion that OP-1, OP-2 and OP3 had acted in a concerted manner in fixing and revising the FSC rates and thereby contravened the provisions of Section 3(1) read with Section 3(3) (a) of the Act. Accordingly, OP-1, OP-2 and OP-3 were directed to cease and desist from indulging in the acts/ conduct which has been found to be in contravention of the provisions of the Act. The CCI however, did not proceed against OP-4 and OP-5 as OP-5 gave its cargo belly space to third party vendors to undertake cargo functions and had no control over commercial/ economic aspects of cargo operations done by its vendors. The CCI noted that in the case of OP-4 that when there was a substantial decline in the fuel costs, the fuel surcharge was withdrawn and that OP-4 was not in contravention of the Act. The CCI imposed a penalty on OP-1 to OP-3 at the rate of 3 % of their average turnover earned from levy of FSC on the volume of cargo handled during the last three financial years based on the financial statements filed by them. Accordingly, a sum of INR 39.81 crore on OP-1, INR 9.45 crore on OP-2, INR 5.10 crore on OP-3 were imposed for their impugned conduct which has been held to be in contravention of the provisions of Section 3(1) read with Section 3(3)(a) of the Act. The order was passed by CCI pursuant to the directions issued by the erstwhile Competition Appellate Tribunal remanding the matter back while setting aside the original order of CCI.
United States of America (‘US’) - Federal Trade Commission (‘FTC’)
The rights to 10 generic medications to be divested by Imapax Laboratories Inc. and Ameal Pharmaceuticals, as condition of merger by FTC
April 27, 2018
Amneal Pharmaceuticals Inc. (‘Amneal’) is an integrated specialty pharmaceutical company, which was founded in 2002. Impax Laboratories (‘Impax’) was founded in 1995 and had various products in the generic and specialty pharmaceuticals (hereinafter, together referred to as ‘the parties’). The administrative complaint issued by the Commission required the parties to divest Impax’s rights and assets for 10 products to three other companies, as part of a settlement, resolving charges that Amneal’s $1.45 billion acquisition of an equity share in Impax likely would be anticompetitive. According to the complaint, in the U.S market, seven generic products would be affected namely: aspirin and dipyridamole extended-release capsules, an antiplatelet therapy used to reduce the risk of stroke, azelastine nasal spray, a treatment for seasonal allergies, diclofenac sodium and misoprostol delayed release tablets, a pain relief treatment that minimizes gastrointestinal side effects, erythromycin tablets, an antibiotic, fluocinonide-E cream, methylphenidate hydrochloride and olopatadine hydrochloride nasal sprays. The complaint also stated that the US markets would also be affected by the acquisition in three other generic products i.e., desipramine hydrochloride tablets, a tricyclic antidepressant; ezetimibe and simvastatin immediate release tablets, a treatment to improve cholesterol and lower triglycerides; and felbamate tablets, used to treat epileptic convulsions. In the US, the process of drug development and FDA approval is a lengthy, time consuming process. In this regard the complaint stated that it would take atleast two years before a competitor could enter the relevant market. In order to maintain healthy competition in the market, Perrigo Company Plc would acquire Impax’s rights to two products that it had partnered with Impax to develop, manufacture, and sell. Perrigo Company Plc is a leading global healthcare supplier that develops, manufactures and distributes healthcare products. It was also stated in the settlement that G&W Laboratories would acquire Impax’s marketing rights to one product that G&W manufactures for Impax. Under the terms of the settlement, Amneal would acquire the rights and assets for generic aspirin and dipyridamole ER capsules, generic diclofenac sodium and misoprostol delayed release tablets, generic erythromycin tablets, generic methylphenidate hydrochloride extended release tablets, generic desipramine hydrochloride tablets, generic ezetimibe and simvastatin immediate release tablets and generic felbamate tablet. The FTC accepted the merger, subject to the conditions set in the settlement.
Republic of India – Competition Commission of India (‘CCI’) Competition Act, 2002 (‘Act’)
CCI accepts acquisition of Binani Cement Limited by Rajputana Properties Private Limited
Mach 7, 2018
Rajputana Properties Private Limited (‘Acquirer’) is a wholly owned subsidiary of Dalmia Cement (Bharat) Limited (‘Dalmia Group’). Pursuant to Resolution Application dated 12th February, 2018 filed under Insolvency and Bankruptcy Code, 2016 (‘IBC’), for consideration of the committee of creditors (‘CoC’), a notice under sub-section (2) of Section 6 of the Act was filed by the Acquirer. The proposed combination related to the acquisition by the Acquirer of 80 percent of the equity shares of Binani Cement Limited (‘BCL’) (‘Proposed Combination’). According to the Proposed Combination, IDBI Bank Limited (‘IDBI’) would acquire the remaining 20 per cent of the equity shareholding of BCL. It was submitted by the Acquirer that following would be carried out before the Proposed Combination: (i) the shareholding in the Acquirer would be divided among Dalmia, India Resurgence Fund (‘Fund’) and Piramal Glass Private Limited (‘PGPL’); (ii) The Entity managing the Fund, would become a joint venture between Piramal Enterprise Limited (‘PEL’) and group entity of Bain Capital Credit, LP (‘BCC’).
According, to Regulation 14 of the Act, the Acquirer must provide certain information, inter alia, regarding horizontal overlap and vertical relationship between the activities of the Parties, to the CCI. Dalmia Group is engaged in manufacture of grey cement and has 11 cement plants, located in eight states namely, Orissa, West Bengal, Jharkhand, Karnataka, Assam, Tamil Nadu, Meghalaya. Binani is a subsidiary of Binani Industries Limited and has cement plants in Rajasthan. Binani is, inter alia, also engaged in the production and sale of grey cement, white port land cement and other varieties of cement. Binani has installed capacity of 6.25 MTPA for the production of grey cement. The CCI noted that since, both the parties were in the process of manufacture of grey cement there was a horizontal overlap in that segment of the market. However, the minor overlap in sale of grey cement present in the state of Maharashtra was such that the combined market shares of the Parties, post the Proposed Combination, would be in the range of 0-5 percent, with an increment of about 1 percent. The Acquirer had also submitted that there was no vertical relationship between the Parties. With respect to the presence of Fund, PEL and BCC in the business of manufacture and sale of grey cement in India, the CCI noted that neither the said entities were engaged in the production and sale of grey cement nor the portfolio companies of Fund, PEL and BCC were engaged in the production or supply of grey cement, in India. It was also observed that PGPL was not engaged in the business of manufacture and sale of grey cement in India. Thus, the CCI noted that there was no overlap or vertical relationship, directly or indirectly, between Fund, PEL, BCC and PGPL, and the Acquirer. On perusal of the facts on record, the CCI was of the opinion that the acquisition would not have an appreciable adverse effect on competition in India and approved the Proposed Combination.
CCI approves proposed combination of Capital First with IDFC Bank
March 7, 2018
The CCI has approved the amalgamation of the entire business of Capital First Limited (‘CFL’), Capital First Home Finance Limited (‘CFHFL’), Capital First Securities Limited (‘CFSL’) (collectively referred to as ‘Capital First’) into IDFC Bank Limited (‘IDBI Bank’) pursuant to which IDFC Bank will be the resultant entity (‘Proposed Combination’). The notice received by the CCI on February 5, 2018 was filed by Capital First, pursuant to the Board Resolution passed by the respective Boards of Capital First and IDFC Bank on 13th January, 2018 and execution of an Implementation Agreement (‘Implementation Agreement’) entered into between CFL and IDFC Bank on 13th January, 2018. Capital First, a Non-Banking Financial Corporation (‘NBFC’) registered with Reserve Bank of India, is engaged in providing retail loans including long term loans, business loans, personal loans, vehicle loans and consumer durable loans to MSMEs and retail consumers. IDFC Bank has its headquarters in Mumbai and is one of the leading banks in India. The CCI observed that horizontal overlap between the Parties exists in the following product segments – MSME loans, vehicle loans, personal loans, corporate loans, and distribution of insurance products. The CCI noted that there was significant presence of competitors such as IDBI Bank, ICICI Bank, Axis Bank etc. and other NBFCs such as Bajaj Finance, PNB Housing Finance, DHFL etc in the relevant market and in each of the overlapping segments between the parties, the combined market share of the Parties was in the range of 0-5 percent. Hence, the CCI was of the opinion that the Proposed Combination was not likely to have appreciable adverse effect on competition in India and therefore, the CCI approved the same under sub-section (1) of Section 31 of the Act.
European Union (‘EU’) – European Competition Commission (‘Commission’)
The Commission approves Bayer’s acquisition of Monsanto, subject to conditions
March 21, 2018
Monsanto Corporation (‘Monsanto’) and Bayer Corporation (‘Bayer’) are both very significant producers of agriculture related products in various countries. Monsanto, headquartered in the US, is an agriculture company which produces seeds for Broadacres crops, fruits and vegetables as well as plant biotechnology traits. Monsanto is the world’s largest supplier of seeds and also sells glyphosate, which is the most used pesticide worldwide to control weeds. Bayer is the second largest supplier of pesticides worldwide, with a predominant presence in Europe. The proposed acquisition of Monsanto by Bayer would create the world’s largest integrated pesticides and seeds company. The merged entity would hold both the largest portfolio of pesticides products and the strongest global market positions in seeds and traits, making it the largest integrated company in the industry. As part of its in-depth investigation, the Commission had assessed more than 2,000 different product markets and reviewed 2.7 million internal documents. The investigation revealed that there was overlap in certain segments of the agriculture market. In order to address the Commission’s competition concerns, a set of commitments was offered by Bayer which included, inter alia, Bayer’s commitment to divest its entire vegetable seed business, including its R&D organization, to a suitable buyer currently not active in vegetable seeds. The commitment, however, did not mention a specific buyer. The horizontal overlaps between the parties in the market segment of Broadacres and seeds were accommodated as Bayer had committed to divest to BASF SE almost the entirety of its global Broadacres seeds and trait business, including its R&D organisation. To address the Commission’s concerns in seed treatments to protect against nematode worms, the parties have also committed to divest to BASF SE, Monsanto’s nematode seed treatment assets. This would enable BASF SE to replicate the competitive constraint, which Monsanto would have exerted on Bayer absent the merger. Bayer has committed to licence a copy of its worldwide current offering and pipeline on digital agriculture to BASF SE, maintaining competition by allowing BASF SE to replicate Bayer’s position in digital agriculture in the European Economic Area (‘EEA’). In response to the commitments offered by Bayer, the European Commission approved the acquisition of Monsanto by Bayer.
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Doc ID: CL/26/18