Wintry conditions threatened to wreak havoc with the American Bar Association’s Advanced International Antitrust Workshop in Washington DC, but most delegates made it to the Carlton Hotel for two very successful days of high-level discussion. Sebastian O’Meara reports

1998 was a record year for mergers in the United States - and a record workload for regulators. Sebastian O’Meara spoke to the Director of the Federal Trade Commission’s Competition Bureau, William Baer

GCR asked some leading US antitrust lawyers for their reflections on the year that was

Is there a difference between market access and market contestability? Shanker Singham of Steel, Hector & Davis, Miami, considers the question of how to deal with anti-competitive legislation

J William Rowley QC and John F Clifford of McMillan Binch, Toronto, who acted for Royal Bank of Canada in its proposed merger with Bank of Montreal, examine the crucial role of the Canadian Competition Bureau in halting the mergers of leading banks

'Let’s make an imaginary corporate megadeal!' suggested the Wall Street Journal to its readers in December, dreaming up a series of market-leading corporations with names such as American United Airlines, Citylynch financial services, Pferck pharmaceuticals, Poke soft drinks and, of course, the mother of all imaginary über-mergers, Intelsoft (market capitalisation over US$500 billion).

Title: Solicitor, BP Amoco Legal, responsible for EC and competition work
Company: BP Amoco
Age: 33

Previous employment

1988-91 Clifford Chance
1991-95 BP Oil Legal Group

Title: Senior Legal Counsel, Head of International EU Competition Group
Company: Shell International (Royal Dutch/ Shell Group)
Age: 38

Previous employment

1985-88 Linklaters
1988-90 RTZ
1990-92 Bell Gully (New Zealand)

US firm AirTouch Communications is to merge with the UK’s Vodafone in a stock deal valued at US$56 billion following a bidding war between Bell Atlantic and Vodafone.

Banco Santander and BCH - respectively the largest and fourth largest Spanish banks in terms of assets - have announced a merger that would create the country’s largest bank in terms of capitalisation, giving it a 25 per cent share of the national market.

Three major mergers have been announced in the European pharmaceuticals industry.

The start of the Federal Trade Commission (FTC)’s suit against Intel was put back two weeks to give both parties more time to prepare the case after Intel delayed the production of documents requested by the FTC.

In what is being seen as a setback for both state regulators and regional Bell operating companies (RBOCs), the US Supreme Court has voted to return authority over the implementation of the 1996 Telecommunications Act to the Federal Communications Commission (FCC).

The US Supreme Court has refused to hear an appeal from three regional Bell operating companies who claim they are being unfairly excluded from the long-distance telephony market.

Concern for consumers is at the top of the Federal Communications Commission’s agenda for 1999, claims chairman William Kennard, but he says he will use competition rather than regulation to bring the benefits of the communications revolution to residential users.

William Kennard may see a rosy future for US telecoms, but some in Congress are less sanguine.

The Illinois Commerce Commission has been holding hearings to determine whether the proposed US$61 billion merger between SBC and Ameritech is in the best interests of consumers in the state.

AT&T and Tele-Communications Inc have filed suit in the US District Court in Portland against the city of Portland and Multnomah county following the two municipalities’ rejection a request by the companies for the local TCI cable franchise to be transferred to AT&T.

Competition among oil companies is delivering cheaper gasoline prices to motorists, according to figures released by the American Automobile Association. The organisation says the average price of gas at the pump fell 19.3 cents per gallon in December, while US Energy Information Administration figures indicate average crude oil prices fell by 16.6 cents over the same period to an alltime low in real terms.

The US Federal Trade Commission has approved BP’s proposed merger with Amoco, but imposed conditions on the merging parties. The two companies are to divest a number of gasoline stations, mainly in the southern United States, as well as nine petroleum product terminals.

The US Federal Trade Commission is reported to have asked Exxon and Mobil for more information on the proposed US$75 billion merger between the two oil companies, prompting speculation that they may be forced to sell a number of gas stations as a condition of approval in the US.

Europe’s Competition Commissioner, Karel van Miert, has warned that the EU may consider curbs on mergers in the oil and telecoms sectors.

The Australian Competition and Consumer Commission (ACCC) has threatened telecoms operator Telstra with a fine of A$30 million and penalties of A$3 million a day unless it changes the way it deals with customers who opt to use rival carriers for their local calls.

The Japan Fair Trade Commission (JFTC) is reported to be keeping a close eye on domestic steel producers to ensure there is no collusion over export volumes and prices in response to threatened US trade sanctions.

According to the official China Daily, the Chinese authorities have renewed their ban on the provision of independent Internet phone and fax services, reversing the recent decision by a court in Fujian province allowing local entrepreneurs to offer these services on the Internet.

Indonesia is drawing up new antitrust legislation designed to overcome the legacy of the Suharto era, following pressure from the World Bank and the IMF.

Schön Nolte and Gaedertz merged on January 1 to create the fourth largest law firm in Germany, following the termination of Schön Nolte’s association with Finkelnburg & Clemm.

Schön Nolte’s former partner firm, Finkelnburg & Clemm, pursued its own new direction in a merger with German firm Feddersen Laule Scherberge & Ohle Hansen Ewerwahn announced on January 1.

Economic consultants LECG have moved offices in both London and Brussels due to rapid expansion.

Cristoforo Osti

Allen & Overy has extended its presence to Thailand following a merger with local firm MPS & Associates on November 1 last year.

Clifford Chance’s Thailand office expects to complete its merger with Bangkok-based law firm Wirot International by mid-February.

Washington DC firm Hogan & Hartson opened a New York office on November 30 last year, bringing the number of cities the firm operates in to 14.

If the US$75 billion merger of Exxon & Mobil goes through, it would be the largest industrial merger in history, creating a firm with a market capitalisation of US$242 billion.

Deutsche Bank is to buy Banker’s Trust, the eighth-largest US bank, for US$9.2 billion, creating a global financial services firm with over US$800 billion in assets.

US firm Snyder Communications Inc acquired German direct marketing company MKM Marketinginstitut GmbH in a transaction valued at US$59.5 million.

The Stockholm District Court has quashed a 1995 decision by the Competition Authority rejecting an application for negative clearance from Svenska Petroleum Institutet, the trade organisation for Swedish oil companies, to set up an information exchange system covering monthly updates on member companies’ sales of various oil products in Sweden.

The New Zealand Commerce Commission has given clearance for the acqusition of the gas retailing business of Enerco New Zealand Limited by Contact Energy, a state-owned wholesale and retail electricity and natural gas enterprise.

Owens Illinois, a US-based major packaging producer, has successfully cleared its recent acquisition of a majority of shares in a Polish glass manufacturer, Huta Antoninek.

In the last issue of GCR, our report on the BP/Amoco merger contained an inaccuracy.

From July 1 1997, the ACCC assumed the primary role for competition and economic regulation of telecommunications services and has not hesitated to use its new powers. The ACCC set out certain allegations against Telstra Corporation Ltd in relation to its local call transfer process in two competition notices. A competition notice is the method by which the ACCC sets out a contravention of the competition rule, which prohibits a carrier or carriage service provider from engaging in anti-competitive conduct. The ACCC took the view that Telstra had not modified its conduct as described in the competition notices and instituted proceedings against it.

Gaire Blunt and Jenny Zaverdinos
Allen Allen & Hemsley
Sydney

The Competition Bureau was thwarted in its attempt to obtain an injunction preventing the completion of the acquisition by one propane company of a competitor as the Competition Tribunal, in the first such case it has decided, imposed relatively high evidentiary standards. The package of amendments to the Competition Act received a setback when Canada’s Senate rejected the Bill in its current form.

John F Clifford and Jeffrey P Roode
McMillan Binch
Toronto

The Competition Council’s investigation will be ground breaking in that it will set standards both for the division of responsibility between the public prosecutor and the Competition Council and for the level of any fines imposed

Karen Dyekjær-Hansen
Gorrissen Federspiel Kirkegaard
Copenhagen

On the basis of the ECJ case law, it appears that third parties’ right to challenge the Commission’s decisions under Article 173 depends on their involvement in the administrative procedure before the Commission as complainants or by making their views heard during the procedure. This does not appear to be changed by the ECJ Kruidvat judgment. Third parties not sufficiently individually concerned to apply for annulment could possibly apply to intervene in relevant proceedings before the CFI if they can establish an 'interest in the result of the case' (CFI rules of procedure), which must be, however, 'a direct interest in the ruling on the specific act whose annulment is sought' rather than 'only an indirect interest in the result of the case by reason of similarities of their situation and that of one of the parties' (CFI’s order rejecting YSLP’s application).

Maya Barr
Freshfields Deringer
Brussels

The decision of the Supreme Administrative Court condemning an abusive discount system applied by a dominant company shows the importance attached by the authorities to abusive pricing by dominant companies. Of significance is the fact that fines were imposed, which has occurred only a few times since the entry into force of the Competition Act in 1992.

An interesting feature of the case is how Article 86 of the EC Treaty was applied by the different authorities. The Competition Council referred to Article 86, stating that the abuse could not be considered minor given that the conduct constituted an infringement under the EC competition rules, but based its decision solely on the Competition Act. The Supreme Administrative Court, on the other hand, based its decision directly both on the Competition Act and Article 86.

Christian Wik and Satu Relander
Roschier-Holmberg & Waselius
Helsinki

Any absolute territorial protection under exclusive distribution agreements will clearly be prohibited regardless of their geographical scope. This decision by the French Competition Council, inspired by Community law, is likely to be extended to all distribution systems, including selective distribution, agency, and franchising.

Nicolas Charbit
Freshfields
Paris

The German food industry has been complaining for some time about the growing purchasing power of the large retailers, but the latest reform of Germany’s antitrust law does not address the question of how it can be effectively controlled. However, the Metro case demonstrates the Bundeskartellamt’s determination to take a stand on this issue.

Philipp Cotta
Deringer Tessin Herrmann & Sedemund
Berlin

When approved, the decree will continue the liberalisation of utility markets, which started with telecommunications and is expected to continue with gas. In addition to sector-specific rules and the action of the independent sector authorities, competition rules, which apply horizontally, will continue to play a key role in guaranteeing access to the market and free service provision.

Salvatore Lamarca
Freshfields
Milan

The Ministry has proposed additional disclosure requirements to facilitate effective competition in the telecoms sector. While the existing regime has broadly met its objectives, the dominant telecoms player is expected to be required to disclose more specific information as to its costs and methodology for calculations.

David Moorman
Simpson Grierson
Auckland

By its decision of September 10 1998, the Norwegian PT has taken a bold step towards the liberalisation and opening up to competion of the mobile telephony market. However, there are doubts as to whether the step is perhaps too bold and is illfounded.

In any event, the case raises several important questions both at the national and EU/EEA level, including: whether operators will be willing to invest in, and/or technically improve, new infrastructure if any operator may demand access; whether any operator being able to sell SIM-cards to customers should have unlimited access to parts of the incumbent’s networks and services, no matter what added value this operator might offer compared to the owner of the infrastructure; and whether such access will necessarily be to the benefit of ordinary customers in terms of quality and price.

Jonas W Myhre
Hjort Law Office DA
Oslo/Brussels

In January 1999 CLICAC adopted the Guidelines on the Control of Economic Concentrations. The Guidelines set out the methodology CLICAC applies when assessing the compatibility of concentrations with Law 29/96. The economic analysis is the same as that employed before the adoption of the Guidelines.

However, with their formal adoption and publication, CLICAC has made its decision-making more transparent.

Monique van Oers
CLICAC
Panama

Recent amendments to the section of the Counteracting Monopolistic Practices Act which deals with merger control enacted recently by the Polish Parliament limit the scope of the supervision of mergers by the President of the Office for the Protection of Competition and Consumers.

Malgorzata Posluszna
Wardynski & Partners
Warsaw

The new Competition Act 1998, part of which is already in force and the rest of which is expected to come into force in July 1999, will have a profound effect on competition law in South Africa. Based partly on EU competition law, the new Act will prohibit certain practices and abuse of dominance in the market. It also introduces far-reaching provisions for merger control.

Edward M Southey and Nicole Sacks
Webber Wentzel Bowens
Johannesburg

Competition law is affecting more and more sectors of the Spanish economy, including sophisticated capital markets transactions such as securitisations. Industry-specific watchdogs in the telecommunications and electricity sectors are proving themselves to be independent entities, genuinely seeking within their powers to ensure that effective competition is maintained within their industries. Although the Spanish government has given the green light to the securitisation, the transaction may have to be postponed until the European Commission has decided whether to authorise the transaction under the EU state aid rules.

Francisco Cantos
Freshfields
Madrid

The new Competition Law entered into force on July 1 1996. Since then, the practices of undertakings having a dominant position have been ruled abusive by the Competition Commission in three cases, the decision on the latest of which has been published recently. The test applied by the Competition Commission is twofold. Acts of undertakings dominating the market will be regarded as unlawful if they adversely impact on competitors or trading partners and to the extent that the harm to competitors or trading partners is not justified by legitimate and compelling business reasons.

Manuel Bianchi
Lenz & Staehelin
Geneva

The Court ultimately rejected Gemmell’s argument that the beer tie breached Article 85, so its conclusions in respect of voidness and illegality were strictly obiter. However, there have recently been two High Court judgments which have followed the Court of Appeal’s reasoning, so it appears clear that the statements in Gibbs Mew may be treated as authoritative. Following the introduction of the new UK Competition Act 1998, the construction of which will be guided by English law judgments on corresponding matters of EC law, it would also appear that the courts are likely to take the same attitude towards contracts which breach the Act’s Chapter I prohibition, which mirrors Article 85.

Beverley Blakeney
Freshfields
London

There has already been considerable speculation that the Supreme Court’s decision in Discon may, in the words of one commentator, '[undercut] recent FTC and DoJ thinking in related areas and [may bolster] defenses against claims in many situations that have fomented private antitrust litigation in recent years.' For example, the decision clearly undercuts attempts to broaden the per se boycott rule beyond the rather narrow boundaries of a horizontal conspiracy. The decision may also call into question recent efforts by the government antitrust agencies to base their antitrust investigations more on a presumption of harm rather than actual proof of damage to the competitive process. We can certainly expect considerable argument and numerous lower court decisions concerning the exact imeaning and implications of Discon.

Ronan P Harty
Davis, Polk & Wardwell
New York City

In drafting arbitration clauses, franchisers and others should be aware that (1) non-binding arbitration clauses are governed by the Federal Arbitration Act to the same extent as binding arbitration clauses, and (2) unless the arbitration provision explicitly states that the arbitration process shall be governed by the procedural laws of a certain state, federal courts will follow the Federal Arbitration Act rather than state laws governing arbitration procedures.

Philip F Zeidman
Rudnick, Wolfe, Epstien & Zeidman
Washington DC