Edward E Whitacre, Jr, Chairman and Chief Executive Officer of SBC Communications Inc, describes why the competition driving merger mania in the telecommunications sector benefits everyone

Following last year’s problems with the weather further south, the venue of the 10th annual joint conference of the IBA’s Communications Law and Antitrust and Trade Law Committees moved up to Dublin, which delegates reached unhindered for two days of high-quality talk. Sebastian O’Meara was in attendance

Telecoms featured prominently at the ABA Section of Antitrust Spring Meeting in Washington DC.

Sebastian O’Meara reports

The telecoms industry in the US is in ferment, and not surprisingly is the focus of much discussion in Congress. Sebastian O'Meara attended a recent hearing before the Subcommittee on Antitrust, Business Rights and Competition of the Senate Judiciary Committee

Andrew D Lipman and Jonathan D Draluck of Swidler Berlin Shereff Friedman, Washington DC, look at the different approaches taken by US competition regulators to telecoms mergers as they pursue the common goal of greater competition in the sector

Alan Gunderson, Joseph Monteiro and Gerald C Robertson*of the Canadian Competition Bureau and Coordination and Services, Industry Canada, look at how the CCB has used regulatory intervention to pursue competition policy goals in the telecommunications industry

The charm of Treviso, in the heart of Italy’s entrepreneurial northeast, ensured a solid turnout for the fourth annual antitrust conference held there, this year entitled Antitrust Between EC Law and National Law. Superb organisation and cuisine, and a very high standard of debate, kept delegates interested. Sebastian O’Meara picks out the highlights

Since his appointment as Chairman of the Autorità Garante della Concorrenza del Mercato, the Italian antitrust authority, Giuseppe Tesauro has built up an enviable reputation both in Italy and abroad. Sebastian O’Meara spoke to him in Treviso

At the ABA Section of Antitrust Law Spring Meeting in Washington DC a number of sessions, fortunately few in the pre-breakfast slot, stood out from the rest by adopting an international perspective. Sebastian O’Meara and Maija Pesola report

James F Rill and Sarah E Bauers of Collier, Shannon, Rill & Scott PLLC, Washington DC, report on the progress of the government-sponsored advisory committee set up to make recommendations on the future direction of US global competition policy

At the International Cartels Conference in Berlin, senior regulators aired their views on how to react to the current wave of global megamergers.

As we went to press, the Microsoft trial was due to resume, with the software giant expected to highlight recent changes in the industry - notably the marriage of AOL and browser rival Netscape - to show that there is in fact healthy competition in the industry.

The Federal Communications Commission remains under fire on Capitol Hill, this time facing stinging criticism from Senator John McCain (R, Arizona).

Toys ‘R’ Us Inc has reached a US$40.5 million cash-and-merchandise settlement with attorneys general from 44 states, but says this will have no impact on its pending appeal of a Federal Trade Commission antitrust suit.

Shareholders of Exxon Corp and Mobil Corp have overwhelmingly approved their planned US$81.2 billion merger to set up the world’s largest oil company.

Mega deal stalls

Following the Justice Department’s recent antitrust suit against American Airlines, commuter airline Air- Tran is lodging a complaint with the DoT and the DoJ about what it sees as unfair competition by its much bigger rival Delta.

EU Competition Commissioner Karel van Miert has said welcomes the decision by Coca-Cola Co to abandon its plans to buy the international drinks business of Cadbury Schweppes PLC.

Telecoms merger

The Italian antitrust authority, the Autorità Garante della Concorrenza del Mercato, is launching a probe into the country’s dominant pay-TV provider, Telepiù, to determine whether it controls too large a share of soccer broadcasting rights to allow fair competition.

Italy’s antitrust authority has cleared the proposed acquisition by Germany’s Mannesmann AG of Olivetti’s stake in the Italian fixedline telephone operator Infostrada, part of a larger deal in which Olivetti will sell its current Italian telecommunications holdings to the German company.

The UK’s Competition Commission is investigating the activities of the country’s leading ice cream manufacturers, saying it believes there are both scale and complex monopolies in the industry.

Japan’s Fair Trade Commission says it has found no evidence that the country’s flat glass market is violating any international antitrust rules following an investigation of the industry - despite accusations, primarily from the US, of breaches in antitrust regulations and import access.

A merger between Clifford Chance and New York-based Rogers & Wells is set to create a formidable transatlantic competition presence.

Awaiting full confirmation of the merger with Rogers & Wells, the Clifford Chance competition group continues to develop.

The head of Gide Loyrette Nouel’s Brussels office, Olivier D’Ormesson, is leaving the firm to join the Linklaters & Alliance competition team in Brussels. The date of D’Ormesson’s move has yet to be finalised but is expected within the next month. He is expected to be bringing at least one associate from his team to Linklaters. D’Ormesson’s departure comes as the latest in a series of moves by French lawyers to large Anglo-Saxon firms.

Jeantet & Associés is planning to consolidate its position as a leading French firm by opening an office in London before the end of the year.

Six European law firms have announced plans for a merger which would create one of the largest legal groups in the world.

Dutch law firms Houthoff and Buruma Maris have merged to create the fifth-largest law firm in the Netherlands.

Merger mania among Italian law firms is growing. Following the merger of law firms Erede, Bonelli and Pappalardo, Carnelutti and Croze Radice & Associati announced in April that they would be joining to form Italy’s largest law firm - an entity with 30 partners and approximately 150 lawyers.

One of Germany’s leading competition lawyers, Ferdinand Hermanns, is to join German firm Boesebeck Droste as partner on July 1.

Eight lawyers from Frankfurt law firm Fiedler & Forster joined Coudert Brothers in March to create a Frankfurt office for the firm.

David Broomhall and Rod Carlton were named as partners on May 1, bringing the number in the Freshfields EU/competition team up to 18.

The senior management of London Economics is leaving in a major reorganisation at the consultancy.

Increased telecommunications work in Brussels has resulted in two opposing trends among firms - the creation of highly specialised niche practices, and ‘going large’ on a pan-European scale.

Following the en-masse resignation of the European Commission on March 16, speculation about who who will succeed Karel van Miert as the next EU Competition Commissioner has been growing.

US telecoms giant AT&T has launched an unsolicited US$54 billion bid for one of the world’s leading broadband communications companies, MediaOne.

AT&T is to acquire IBM’s Global Network business in a cash transaction worth US$5 billion.

British Telecommunications and AT&T have announced that they are to acquire a 30 per cent share in Japan Telecom in a deal estimated to be worth US$1.2 billion.

The United States Department of Justice has filed an antitrust suit against American Airlines for alleged predatory behaviour on routes out of its Dallas hub.

Swiss pharmaceutical company Hoffmann LaRoche agreed to plead guilty to leading a world-wide conspiracy to raise and fix vitamin prices, and is to pay the highest ever fine levied by the Department of Justice in a criminal case - US$500 million.

The newly merged oil giant BP Amoco is to expand further with the acquisition of Atlantic Richfield Co (Arco) in a stock deal valued at US$26.8 billion.

The Competition Commission has launched an inquiry into the £24 billion-a-year new car market in the UK.

The UK Competition Commission has launched a 12-month enquiry into claims of profiteering by the UK’s biggest supermarket groups.

A merger between French pharmaceuticals firm Rhône-Poulenc and Hoechst of Germany will create the largest pharmaceuticals and agrochemical company in the world, with annual sales estimated at US$20 billion.

US insurance firm Aetna Inc is to acquire Prudential Insurance company’s healthcare business for US$1 billion.

Coca-Cola is continuing its discussions with French antitrust authorities for clearance of its US$825 million proposal to acquire Orangina from Pernod Ricard SA.

The proposed £1.3 billion merger between US defence companies BF Goodrich and Coltec is still pending five months after its announcement, following concerted efforts by rivals Allied- Signal Inc and Crane Co to block the deal.

The European Commission has begun legal proceedings against Daimler- Chrysler for breach of the European competition laws.

In February the European Commission cleared the acquisition of joint control in Spanish pubisher Unidad Editorial SA by Recoletos Compain Editorial.

Alstom and ABB, the French and Swiss- Swedish engineering groups, are to pool their power generation business in a new jointly-held company which will have combined sales of 10 billion euros.

Leading shipping firm Maersk is to merge with South African Marine lines.

The prosecution of YPF for anticompetitive practices has sent a signal to industry in general that the Argentine government is serious about competition policy.

Osvaldo J Marzorati
Allende & Brea
Buenos Aires

Part XIC of the Trade Practices Act 1974 establishes an access regime which allows third parties to gain access to services that are necessary inputs in providing telecommunication services to endusers. Under the regime, the ACCC can declare carriage services and services which facilitate the supply of carriage services. These services are known as ‘eligible services’. The ACCC is in the process of conducting a number of public inquiries into whether to declare certain eligible services under Part XIC of the Act. Should the ACCC make the declarations, the rules and regulatory processes in Part XIC of the Act will apply to the eligible services covered by its decisions.

Ian McGill/Jenny Zaverdinos
Allen Allen & Hemsley
Sydney

In principle, the reform, which will enter into force in late October 1999, is welcome. However, it is unlikely that it will enable the authorities to dedicate more time to restrictive practices as the new single concentration threshold may well result in more concentrations being notified (although unofficial sources indicate that the new turnover threshold may be shortly increased). Also, the usefulness to the regulatory bodies, markets and practitioners of some of the reforms is questionable. For example, the time period within which the Council is to take stage two decisions is far from clear and this may lead to serious confusion. Moreover, it is uncertain at the time of writing whether a simplified merger notification form is to be introduced for a concentration where market shares do not exceed 25 per cent. If it is not, this is likely to give rise to an unnecessary administrative burden on undertakings. Finally, the advent of a governmental review will introduce an unwelcome political dimension to merger control.

Vincent Dirckx
Freshfields Deringer
Brussels

The Competition Bureau has released draft guidelines on its Cooperating Parties Program as well as guidelines on software labelling. The Bureau has also continued its string of recent successes in criminal enforcement, obtaining a record fine against deceptive telemarketers.

John F Clifford and Jeffrey P Roode
McMillan Binch
Toronto

The Czech government wishes to increase competition in the telecommunications sector and will hold a tender to select a third mobile telephone operator in the Czech Republic.

Jirí Balastík
Kocian Solc Balastík
Prague

The exemption of telecoms agreements on the joint exploitation of antennas from the provisions of Section 6 of the Competition Act will be a boost for the industry.

Jan-Erik Svensson
Gorrissen Federspiel Kierkegaard
Copenhagen

Articles 85 (1) and 86 (new 81 (1) and 82) are already applied in parallel by the Commission, some national authorities and national courts. The additional concurrent jurisdiction in relation to Article 85 (3) (new 81 (3)) is considered by the Commission beneficial to competition as national authorities are better placed to assess restrictions of competition in their markets and procedures before national courts are faster and can result in damages for victims of anticompetitive practices.

However, it remains to be seen whether enforcement of EU competition rules will generally improve when in the hands of national authorities and courts. The risk of different standards being applied is a real one. As a practical matter, this reform cannot begin until the seven Member States that have not yet done so have empowered their competition authorities to apply Community law.

Maya Barr
Freshfields Deringer
Brussels

In a widely-publicised case, Finland’s Competition Authority has found that a dominant electricity wholesaler’s long-term supply agreements with downstream retailers did not constitute an abuse of a dominant market position because the agreements contained price conciliation clauses and the wholesaler had voluntarily applied the clauses.

The case was decided solely on the basis of Finnish competition law as it concerned potential anti-competition effects on the Finnish wholesale market for electricity only.

Christian Wik and Päivi Vasankari
Roschier-Holmberg & Waselius
Helsinki

In its decision, the Conseil d’Etat implicitly accorded Interbrew the status of an ‘interested party’ despite the fact that under the EC merger regime it would only have been a ‘third party’ entitled to a hearing. The decision will no doubt result in most conditional ministerial merger decisions (and negative decisions, although the Orangina/Coca-Cola case should remain exceptional) being challenged by competitors before the Conseil d’Etat on the basis of their right of defence.

Jacques-Philippe Gunther and Nicolas Charbit
Freshfields
Paris

Under the previous practice of the FCO, remedies were possible both prior to merger clearance and in the form of undertakings to be implemented post-clearance. The latter undertakings were usually in the form of a contract concluded between the merging parties and the FCO. However, the FCO was very reluctant to accept such undertakings, as enforcement can be difficult after a merger is fully implemented.

The new rules under the amended ARC expressly provide for the possibility of imposing conditions in connection with a clearance decision (Section 40, paragraph 3 of the amended ARC), thereby encouraging the FCO to approve transactions notified on the basis of structural conditions. As before, the conditions must have an effect on the structure of the market - behavioural remedies alone are not accepted by the FCO.

August-Carel Maske
Deringer, Tessin, Herrmann & Sedemund
Berlin

The first stage of the liberalisation of Italy’s postal services is running into difficulties, with both the Italian Competition Authority and the European Commission questioning the compatibility of the draft implementing decree with the European Postal Services Directive. In addition, private operators are concerned by the extent of the services reserved to the state monopoly, which leaves them with limited scope to compete. The Italian Government is coming under growing pressure to modify the terms of the draft decree as it undergoes review before Parliament. The contention surrounding postal services liberalisation illustrates the difficulties of opening up to competition services which have historically been the exclusive preserve of the state.

Salvatore Lamarca and Anneli Howard
Freshfields
Milan

The new Communications and Multimedia Act is important for competition in the crowded telecoms sector and, because it includes specifically procompetitive provisions, perhaps also for the Malaysian economy generally.

Christopher Lee
Kuala Lumpur

The FCC is currently relying on concentration indices as the main focus of merger analysis. This is wrong, both legally and theoretically; the FCC’s index calculation guidelines have introduced an illegal interpretation of the Competition Statute.

Gabriel Castañeda
Castañeda y Asociados
Mexico City

Complaints have been made to the Dutch Competition Authority that PTT Post abused its dominant position in the market for post office boxes by introducing charges for these services. The Authority pulled out all the stops in its investigation of the potential abuse, which included an analysis of PTT Post’s costs and profits, an analysis of the prices in other geographical areas and undertakings for PTT Post regarding the treatment of potential competing suppliers and the notification any future price increases to the Authority. The Dutch Competition Authority cooperated on the case with OPTA, the Independent Post & Telecommunications Authority, which has stated that the new pricing is not cross-subsidised. The Authority subsequently approved the new pricing by PTT Post.

Pepjin van Ginneken
Loeff Claeys Verbeke
Amsterdam

In its decision to reject a power company’s claim that the national electricity grid was overcharging it in breach of an ancient common law principle, the New Zealand High Court has upheld the interpretation that common law control over monopoly pricing has been superceded by sector-specific statutes.

Anne Callinan
Simpson Grierson
Auckland

Since it came into force in November 1996, much has been written in Panama about Law 29 on Free Competition, but so far no company has been penalised for anticompetitive practices. This may change in the near future as the Comisión de Libre Competencia y Asuntos del Consumidor prepares to fight the first competition case ever brought to court in Panamanian history.

Monique van Oers
CLICAC
Panama

The provisions of Law 21/1996 are largely inspired by European regulations. The privatisation programme in Romania has led to a significant increase of the Council’s caseload. Nevertheless, it has to deal with modern competition issues such as energy and telecommunications within the context of major restructuring in the industrial and banking sectors, as required by the IMF. The communication of the turnover figures is critical as they provide the basis for calculating the authorisation tax, which is fixed at 0.1 per cent of the aggregate turnover of the parties involved. Set out in the published decision, this tax also reveals the parties’ turnover.

Thomas J Pommera
Jeantet & Associés
Paris

Although the procedure used to enact the reform is open to criticism, the reform itself is generally welcome. The previous system of voluntary notification did not function properly and resulted in very few competitively significant transactions being notified and investigated by the Spanish competition authorities. The introduction of undertakings seems a pragmatic way of clearing mergers which impose no major obstacles to the maintenance of effective competition. Making the procedure more transparent and the express reference in the Decree to a 'guidance' procedure before the SDC are also welcome. However, the retention of market shares as one of the alternative thresholds for jurisdiction in a compulsory notification regime is not in line with other European merger control regimes, under which market share thresholds, because of the difficulty of defining markets and the legal uncertainty that this creates, are rarely used, or, as in Belgium, have recently been dropped. Finally, in order to avoid confusion the new definition of 'concentrations' should have been accompanied by a definition of 'control'.

Francisco Cantos
Freshfields
Madrid

The Market Court has recently passed judgment in a number of cases containing interesting issues from a competition law point of view. Unfortunately, the judgments show a marked reluctance on the part of the Court to provide useful legal guidance as regards the interpretation of the Competition Act.

Johan Coyet and Jesper Alwall
Mannheimer Swartling
Stockholm

In a recent decision, the Swiss Competition Commission has provided a clearer idea of just how much failure to comply with the filing procedures for a merger subject to notification can cost.

Manuel Bianchi
Lenz & Staehelin
Geneva

The amendments to the Fair Trade Law, Taiwan’s ‘economic constitution’, have streamlined certain aspects of procedure and, in general, reinforced its applicability to all actions with a competition dimension

Annie Yu and Lawrence S Liu
Lee & Li
Taipei

Having at last adopted an approach to competition law based on the EU regime, officials must feel thwarted by the European Commission’s recent White Paper proposals to reform its own competition policy. The government’s aim of minimising the work of the OFT by relying on European exemptions may come unstuck. The Act may not be too long in force before amendments are required. In the meantime, while the prohibitions are not yet in force, businesses should keep a wary eye open for developments.

Gina Jennings
Freshfields
London

The action against Blackstone and its partner highlights the important responsibility that an individual assumes when certifying the completeness of an HSR filing. The individual must be satisfied that an adequate search has been undertaken for all potential 4(c) documents. In addition, the Director of the FTC’s Bureau of Competition, William Baer, was at pains recently to make it clear that the FTC can be expected to take action even if there has not been reckless disregard or intentional omission of 4(c) documents. Baer also noted that he received a lot of ’thank you’ calls from corporate counsel following the announcement of the Blackstone settlement, because they had been having trouble getting their clients to take their 4(c) obligations seriously.

Ronan P Harty
Davis Polk & Wardwell
New York City

With this decision, the Antitrust Agency has introduced gretaer competition to the Venezuelan soda ash dense market.

Gustavo J Reyna and Faustino Flamarique
d’Empaire Reyna Bermúdez & Asociados
Caracas

The increased regulation of franchising seems at odds with foreign direct investment, something Asia needs now more than ever. Whatever the explanation, franchisors must now maintain a close watch on Asia.

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