The new Director of the Federal Trade Commission’s Bureau of Competition, who recently took over from Bill Baer, spoke in Washington to Sebastian O’Meara about the challenges of being the new kid on the block and what he sees as the outstanding antitrust issues in the US

David Samuels looks at how Europe’s booming multi-billion dollar sports industry is responding to the encroachment of competition law criteria and considers why the sector nonetheless remains a special case

The 1999 conference of the International Bar Association’s Section on Business Law drew a record turnout to Barcelona from around the world, with a particularly strong Latin American presence. Sebastian O’Meara and Maija Pesola report on the best of the antitrust session

The 26th annual conference at the Fordham Corporate Law Institute has become a victim of its own success, attendance this year stretching the capacity of the conference hall. The theme for the Europeans was the Modernisation White Paper, for the Americans cartel enforcement, and the common ground the need to foster a competition culture. By Maija Pesola

The IBA’s annual competition conference in Fiesole in the hills above Florence once again proved the indispensible autumn date for antitrust practitioners. Sebastian O’Meara sampled the lively discussion on offer - and some of the finest food to be found on the entire conference circuit.

With Judge Jackson’s initial Findings of Fact on the Microsoft trial now in, we asked leading antitrust practitioners for their assessment of developments so far, the likely outcome and the implications of the case for the IT industry

Izzet M Sinan of Morgan, Lewis & Bockius, Brussels warns that the difficulties of adjusting to the proposed changes to the rules governing EC competition law should not be underestimated

Tim Kennish and Janet Bolton of Osler Hoskin & Harcourt, Toronto, on the approach the Competition Bureau is likely take to the proposed takeover of Canada Trust by Toronto-Dominion Bank in the light of last year’s blocked bank mergers

Title: Executive Vice President and General Counsel
Age: 56
Previous employment: 1968-1978 Arter & Hadden, Cleveland, Ohio

Four European law firms, Dibb Lupton Alsop of the UK, Ginestie Paley-Vincent & Associés in France, Brugueras Garcia-Bragado, Molinero and Asociados in Spain and Price & Partners in Belgium, are launching an international partnership, DLA & Partners.

News and Developments: Americas

Herbert Smith’s reputation for competition and trade law has been boosted by recent announcements that both the former European Commissioner for Trade, Sir Leon Brittan, and Jeantet & Associés competition partner Claude Lazarus are to join the firm in the new year. Brittan joins as a consultant to the firm, while Lazarus will take a partnership role in the Paris office. He will be accompanies by a team of three associates.

The Allen & Overy competition practice is to gain at least 10 lawyers as the firm merges with the international practice of 500- lawyer Loeff Claeys Verbeke. Tom Ottervanger, head of the Loeff Claeys Brussels team, and two of his associates will join the firm in Brussels, while in Amsterdam a team of lawyers led by Paul Glazener will add considerable weight to Allen & Overy’s Netherlands practice.

Washington DC-based Covington & Burling merged with New York firm Howard Smith & Levin on October 1. The deal was a radical departure for Covington & Burling, which has only ever taken on eight lateral hires in its 80-year history.

Chicago firm Rudnick & Wolfe and Baltimore-based Piper & Marbury joined forces in October in the largest merger between equal-sized law firms in US history. The new law firm, to be called Piper Marbury Rudnick & Wolfe LLP, has over 750 lawyers and offices in eight cities in the United States. In terms of the antitrust practice, the combined firm will have 26 attorneys working mainly from the Washington, DC and Baltimore offices.

Chicago firm Rudnick & Wolfe and Baltimore-based Piper & Marbury joined forces in October in the largest merger between equal-sized law firms in US history. The new law firm, to be called Piper Marbury Rudnick & Wolfe LLP, has over 750 lawyers and offices in eight cities in the United States. In terms of the antitrust practice, the combined firm will have 26 attorneys working mainly from the Washington, DC and Baltimore offices.

Coudert Brothers is widening the scope of its competition practice through a merger with German law firm Schuermann & Partners and Belgian law firm Coppens Van Ommenslaghe & Faurès. The firm is also building competition capability in London under the leadership of partner Alistair Gorrie.

The former head of the Legal and Economic Secretariat of the Swedish Competition Authority, Kenny Carlsson, has joined Stockholm- based law firm Gernandt & Danielsson. Carlsson, who has been with the Swedish Competition Authority since 1992, will head Gernandt & Danielsson’s competition practice.

UK Law firms Denton Hall and Wilde Sapte are to merge with effect from February 1 2000. The merged firm, to be called Denton Wilde Sapte, is to have a combined competition team of 15 lawyers.

UK firm Lovell White Durrant has joined the trend for Anglo-German law firm mergers, announcing plans to merge with Frankfurtbased Boesebeck Droste. The merger will not only create the fourth-largest law firm in Europe, with 2,128 lawyers, but will create a credible pan-European competition practice. Boesebeck Droste has 14 competiton lawyers, practising competition law accross Germany and in Brussels. The Lovell White practice consists of 30 lawyers located mainly in Brussels and London.

The energy group of Boston-based economic consultancy Charles River Associates has been considerably strengthened by two high-level appointments. José Alberro, a former director of the Mexican national gas and petrochemicals company PEMEX, has joined the firm’s Palo Alto office as vice president, and Ian Moncrieff, who was formerly the head of the Arthur D Little global natural gas practice, has joined the CRA Boston office, also at vice president level. Both appointments were effective from the beginning of November.

Norwegian law firm Bugge Arentz- Hansen & Rasmussen (BAHR) has added new strength to its competition practice in the form of Helge Stemshaug. Stemshaug, a former Director of the Centre for European Law in Oslo, has spent the last two years at the Norwegian Competition Authority.

Atlanta-based law firm King & Spalding has elected Jeffrey Cashdan to the partnership.

Israeli antitrust lawyers expect block exemptions to be in force soon following a parliamentary vote at the end of November. The exemptions are eagerly awaited by Israeli practitioners, many of whom complain that the country’s restrictive practices law gives the Antitrust Authority too much discretion.

The UK’s largest telccommunications operator, Vodaphone AirTouch, has launched a 124-billion-euro hostile bid for German telcoms group Mannesmann.

Eight Austrian banks which collectively account for over half of Austrian deposits and lending have been accused by the European Commission of jointly setting interest rates and commission fees.

DaimlerChrysler Aerospace AG and Aérospatiale Matra SA are planning a £6.76 billion merger which would create the world’s third-largest aerospace company after Boeing Co and Lockheed Martin of the US.

MCI WorldCom Inc is to acquire Sprint Corp for US$115 billion in the largest industrial takeover in history. The combined company, which is to be called WorldCom, will merge the second and third largest long-distance carriers in the United States, and it is estimated that the firm will have over 30 million customers and control 30 per cent of the long-distance market. The deal requires approval by both the Department of Justice and the Federal Communications Commission.

Vodaphone Airtouch is to merge with Bell Atlantic, creating a new company valued at over US$70 billlion.

Vodaphone Airtouch is to merge with Bell Atlantic, creating a new company valued at over US$70 billlion.

AT&T Wireless has launched a joint venture with US rural telephone company Dobson Communications corporation to buy American Cellular Corporation for US$2.3 billion.

South African Breweries, which controls 98 per cent of the South African Beer market, is to acquire the Czech Republic’s largest brewer, Pilsner Urquell, for US$629, creating the world’s third largest breweries group.

The two largest operators of radio stations in America, Clear Channel Communications and AMFM, are to merge in a deal valued at US$17.4 billion. The merged entity will be the clear market leader with control over 8,300 radio stations across the United States. The deal is subject to approval by the FCC and it is expected that the two operators will divest 125 stations in order to gain approval for the transaction.

Japan’s Fair Trade Commission has ordered five leading incinerator companies to stop their practices of bid-rigging on orders from local governments. The JFTC alleges that the five companies, Mitsubishi Heavy Industries Ltd, NKK Corp, Kawasaki Heavy Industries, Hitachi Zosen Corp and Takuma Co rigged bids on contracts for stoker incinerators ordered by local governments between 1994 and 1998.

United International Pictures, a film distribution company owned jointly by Paramount Pictures Corporation, Universal Studios and Metro-Goldwyn- Mayer, has been granted a renewed exemption under Article 81 (3) of the EC Treaty.

The European Commission has launched an enquiry into the acquisition of Swedish industrial gases producer AGA by German company Linde. The two firms, which both produce air gases, carbon dioxide, hydrogen and some speciality gases, are respectively number five and six in this sector. The Commission’s concerns focus on the strong position which Linde will obtain in Germany, the Netherlands and Austria. In addition to EU notification, the transaction needs to be approved by competition regulators in the USA, Poland, the Czech Republic, Hungary and Romania.

French tobacco company Seïta and Tabacalera of Spain are to merge. The Spanish government, which still has some influence over the recently privatised Tabacalera, is said to be in favour of the deal. The French state still holds 5 per cent of Seïta. If the deal is successful, the new group, called Altandis, will be the world’s largest cigar maker and fourth-largest in the cigarette industry.

A three-way merger between a Swedish, Norwegian and Finnish insurance company is to create the largest non-life insurance company in the Nordic market. Skandia of Sweden and Storebrand of Norway are merging in February 2000, and Pohjola is due to join the group in June. The merged group will have around 20 per cent of the Nordic insurance market, but the European Commission believes the deal will have only minor effects on competition.

The acquisition of Spanish brewery Cruzcampo by Heineken has become the first cased referred to the Spanish competition authority by the European Commission as Heineken already owns the El Aquilar brewery in Spain. The Spanish beer market is the third largest in Europe.

United Biscuits has sold its £190 million frozen and chilled foods business to Heinz. The decision marks a drive by United to return to its core biscuits and snack food businesses initiated by chief executive Leslie van de Walle, who took over the company in May. Meanwhile, Heinz is trying to expand its share of the frozen foods industry, which is currently worth about £603 million in the UK.

Delta Air Lines’ acquisition of regional carrier Comair looks set to go ahead, as the two firms have agreed to eliminate the US$50 million termination fee that would have been payable to Delta if Comair had broken off the agreement.

ASDA Stores Ltd has made a formal complaint to OFTEL concerning three mobile phone operators, BT Cellnet, Vodphone and Orange, over proposed increases in the wholesale price of prepay packages.

Finnish bank Leonia and insurer Sampo have merged to create a national champion in the bancassurance sector. Following the merger, 57 per cent of shares are now held by Sampo shareholders and 43 per cent by the Finnish government.

The United States Court of Appeal for the Fourth Circuit granted a summary judgment in favour of the appellees in an antitrust suit brought by Merck- Medco Managed Care. Merck-Medco had brought the suit under Section 1 of the Sherman Act, alleging that a number of pharmacies in Maryland, led by Rite Aid, had collectively refused to participate in a network of pharmacies that Merck-Medco was setting up as part of a plan to provide pharmacy benefits to state employees. The court found, however, that the defendants had not engaged in anything which was inconsistent with normal business practice, and that none of the pharmacies had refused to negotiate with Merck- Medco.

New regulations on the merger and division of foreign investment enterprises contain, for the first time, stipulations on merger control.

Ulrike Glueck
Gleiss Lutz Hootz Hirsch
Shanghai

In a recent judgment, the Federal Court of Australia held that the ACCC’s allegations of misuse of market power against Boral Ltd and its subsidiary Boral Besser Masonry Ltd were unfounded. The Court held that Boral’s subsidiary did not have a substantial degree of market power in the relevant market. The case is an example of a narrow market definition argued by the ACCC being struck down in favour of a more appropriate wider-market definition. It also emphasises that the Court is more interested in the relationship between market definition and market power rather than market definition itself.

Gaire Blunt/Jenny Zaverdinos /Stephanie Wee
Allen Allen & Hemsley
Sydney

Although a 'meeting of minds' within the meaning of Belgian contract law is unlikely to be required, 'draft agreement' should probably be understood as a document which at least includes a certain level of understanding between the parties, ie a document which shows a common approach to the terms of a possible final agreement and the structure of the transaction. In other words, a document, however it is entitled, which is already reasonably elaborated and drafted at a relatively advanced stage of the negotiations. Regarding the declaration requirement, it is to be hoped that the Competition Council will restrict its scope to ancillary restrictions.

Vincent Dirckx
Freshfields Deringer
Brussels

The ordered suspension of Competition Bureau Review of an airline industry restructuring expires, and a full review is now expected.

John F Clifford
McMillan Binch
Toronto

By issuing the new decrees, the Government has demonstrated its commitment to making competition policy part of its overall economic strategy.

Alfonso Miranda
Centre for Competition Law Studies
Bogota

The Competition Council has prohibited a number of horizontal agreements among six of Denmark’s nine asphalt producers.

Jan-Erik Svensson
Gorrissen Federspiel Kierkegaard
Copenhagen

The Telia/Telenor decision - which is the first case under the EC Merger Regulation involving two incumbent EU telecoms operators - reflects the Commission’s shift towards greater reliance on competition law in this sector.

The Commission stated that this is unlikely to be the last time such commitments are to be required to resolve competition issues. Indeed, in line with the 1998 cable review the 1999 communications review recognises that urgent action is required to increase competition in the local loop, welcomes the national trend towards requiring incumbents to unbundle their local loop and provides that the Commission will use recommendations and, in specific cases, general competition rules, to encourage local loop unbundling throughout the EU.

Maya Barr
Freshfields Deringer
Brussels

With the application of the test of perfect substitutability to the definition of the market for pharmaceutical products, manufacturers owning patents which confer a monopoly may find themselves in a position of automatic dominance. They should therefore be particularly vigilant when implementing their commercial strategy and, in particular, their pricing policy.

Jacques-Philippe Gunther and Cyrille Couadou
Freshfields
Paris

Prices below cost are a major issue, especially in the food retail sector. With the introduction of the new explicit prohibition on sales below cost price, the position of smaller retailers should in theory be strengthened. Despite this explicit prohibition, it has proved difficult for the competition authorities to calculate cost prices. Moreover, it is often argued that a pricing-belowcost strategy may be necessary to match competitors’ prices, in which case it might be even more difficult to prove the anti-competitive objectives of such a strategy. Accordingly, there are doubts about whether the new prohibition will in practice improve the position of retailers claiming that they are being obstructed by competitors selling below cost price.

August-Carel Maske
Deringer Tessin Herrmann & Sedemund
Berlin

This recent case shows that the Hungarian Competition Office is continuing to see the value of market concentration.

Adám Máttyus
Bruckhaus Westrick Heller Löber
Budapest

The recommendations in the Report are designed to streamline the administration of Irish competition law and encourage effective enforcement. They do not, however, propose radical structural reforms such as those contained in the European Commission’s proposals for the modernisation of EC competition law. It is expected that the Group will take account of these proposals when its final report on Irish competition and merger legislation is published early in the new year. This may result in more radical proposals than those contained in this interim report.

Gerald FitzGerald
McCann Fitzgerald
Dublin

The investigation is set to be completed by May 11 2000. However, it appears that the Authority has no more evidence of a conspiracy between the oil companies this time than it did in 1996.

A vertical price-fixing agreement is not considered by the Authority to infringe Article 2 of the Italian Antitrust Law per se. Only if the oil producers entered into an agreement leading to a stabilisation of market shares in the upstream oil distribution market in Italy would such an agreement be considered illegal by the Authority.

Moreover, it is even more difficult for the Authority to find evidence of a horizontal agreement between the oil producers. In particular, it is very difficult to ascertain if competitors’ behaviour in an oligopolistic market is the result of rational decisionmaking by the competitors or of a conspiracy. This is particularly true in the oil distribution market in Italy, given its transparency, the oligopolistic equilibrium and the relevant State regulations.

Luciano Vasques
Freshfields
Rome

SEP has been in long-term control of the only Dutch electricity network with cross-border connections, thus controlling the transmission of electricity from abroad. When SEP made its offer to Hydro of transmission services conditional, the Norwegian company filed a complaint with the Competition Authority. In its analysis, the Competition Authority scrutinised the relationship between the competition rules and the Electricity Act. It found that SEP had commited a serious abuse and subsequently imposed a fine.

Pepijn van Ginneken
Loeff Claeys Verbeke
Amsterdam

New Zealand’s competition watchdog is prosecuting three oil companies for price fixing.

Elizabeth Welson and Marc Cropper
Simpson Grierson
Wellington

Panama’s Competition and Consumer Affairs Commission recently considered the issue of relative monopolistic practices in the case of exclusive advertising clauses allegedly stipulated by a newspaper.

Ricardo Salcedo
CLICAC
Panama City

This was a sensitive decision as it affected two leading companies in economic sectors which the Government is currently trying to liberalise. It was also a landmark decision as, for the first time, the Government prohibited part of a corporate alliance under the Spanish merger control rules. Although they operate in different sectors, the Government decided that the close collaboration between these companies could give them a competitive advantage over their rivals.

Electricity will probably be one of the main sectors analysed when the competition authorities look into the recently announced merger between Banco Bilbao Vizcaya and Argentaria, as, under the criteria set out in the Government’s decision regarding the merger between Banco Santander and Banco Central Hispanoamericano, Banco Bilbao Vizcaya has a significant shareholding in Iberdrola and Argentaria has a significant shareholding in Endesa, two competing companies in this sector.

Koldo Loidi
Freshfields
Madrid

In an important case dealing with the camera spare-part market, the Swiss Competition Commission did not prohibit Minolta’s refusal to supply independent photo camera repair companies. In its rationale the Swiss Competition Commission took into consideration in particular that the market for cameras is highly competitive and that customers could switch to another make if spare-part prices were increased too sharply.

Marcel Meinhardt
Lenz & Staehelin
Zurich

A further OFT policy objective is to facilitate the detection of cartels by encouraging members of cartels to come forward with evidence of the existence and activities of a cartel.

This approach is similar to that outlined in the European Commission’s 1996 Leniency Notice and the US Department of Justice’s corporate leniency policy for whistleblowers. Lenient treatment ranges from complete immunity for a participating undertaking which comes forward first to provide evidence of the existence of a cartel, to a reduction in fines of up to 50 per cent for undertakings which come forward after an investigation has commenced. Following the same line as the Leniency Notice, the OFT imposes the onerous requirement of maintaining continuous and complete cooperation throughout the investigation in order to benefit from the immunity or reduction.

Renella Reumerman
Freshfields
London

Commenting on Judge Jackson’s findings of fact in the government’s monopolisation case, the general counsel of Microsoft stated that the findings represented 'only one step in an ongoing legal process that has many steps remaining'. William H Neukom went on to note his company’s belief that 'the American legal system will ultimately affirm Microsoft’s position, and conclude that Microsoft’s innovations have brought tremendous benefits to millions of people'.

Ronan P Harty
Davis Polk & Wardwell
New York City

In weighing the factors that are relevant in deciding whether to grant a stay of the US action, the US court observed that 'notions of international comity are at an apex when parties inject themselves into the economy of another nation for profit, particularly one as close as Great Britain, and then try to extricate themselves from its jurisdiction.'

Philip F Zeidman and Steven B Feirman
Piper Marbury Rudnick & Wolfe
Washington, DC