Sebastian O’Meara braved the storm of the century to join other bedraggled delegates in Athens for the IBA’s 9th annual seminar on Telecommunication Services and Competition Law in Europe, which looked, among other topics, at the Internet and strategic alliances

At the ABA’s 46th annual spring meeting in Washington DC, the International Committee convened to discuss the jurisdictional and substantive law conflicts in the Boeing/McDonnell merger. The dust has now settled on the deal - which was finally cleared by the European Commission in July last year - allowing the chair, Mark Warner, to bring together a panel consisting of some of the leading participants in the deal to look at the implications of the case. While the agenda looked forward, some speakers took the chance to vent their frustration at what happened. Callum Campbell reports

45 competition lawyers under 45

Adopting legislation is one thing; implementing it is often another. Dennis Oswell of Morgan, Lewis & Bockius, looks at how central and eastern European countries are applying antitrust rules in an environment often unfavourable to true competition

Economic analysis is an increasingly important part of EC competition law. But, says Doris Hildebrand of European Legal & Marketing Consultants of Brüggen, Germany, its application in this area is misleading and confused Economic analysis is being applied in an increasingly sophisticated way to EC competition law. In particular, the Commission’s policy shift towards greater recognition of the significance of economics within the context of competition issues marks a kind of revolution.

The interplay between intellectual property law and antitrust law has increasingly compelled the interest of US antitrust authorities. John E Daniel of Kramer, Levin, Naftalis & Frankel, New York, considers what the Antitrust Division has been thinking and doing about crosslicensing and patent pooling - practices that have hitherto attracted little attention

Introducing Global Competition Review’s survey of the World’s leading competition economists, Kevin J Arquit and Richard Wolfram of Rogers & Wells, New York set out what they believe is required of a competition economist in an antitrust case and how he or she can best work with counsel to produce winning arguments

There is an increasing need to bring the specialist skills and knowledge of the economist to bear in competition cases. To aid competition lawyers and corporate counsel in identifying experienced experts in the economics of competition, GCR conducted an international survey on competition economists. The criteria for inclusion (see box, below) were stringent, and those who met them are listed below. Research by Maija Pesola and Jon Cowie

What should competition officials do about Microsoft? Mary Coleman and James Langenfeld* of LEGC, Inc believe that competition regulations should only be applied to high tecnology sectors with caution

What will Joel Klein do next? That was the big question as GCR went to press, with Antitrust Department staffers and Microsoft lawyers, led by William H Neukom, huddled in Washington in what were termed 'settlement talks' aimed at averting a looming landmark action against the software giant.

In the opposing camp, Robert Bork, the former Reagan nominee for the Supreme Court and leading US antitrust scholar, announced that he had been hired by Netscape Communications Corporation to advise on legal strategy.

GTE has sued in US federal court to block the proposed merger between WorldCom and MCI, which GTE tried to acquire last November.

As Karel van Miert prepared to announce the European Commission’s conditions for approving alliances between British Airways and American Airlines, Lufthansa and United Airlines, and Delta Air Lines, Swissair, Austrian Airlines and Sabena, the US Assistant Aviation Secretary, Charles Hunnicutt, said that Washington strongly opposed plans to limit flights on certain routes to curtail the power of the alliances.

Lufthansa chief executive Jürgen Weber vowed that the German airline would resort to legal action to fight what he called the 'irrational and ideologically-based' proposals of the European Commission to limit the power of proposed airline alliances.

Following the announcement by Northwest and Continental of a grand partnership in January (currently being investigated by the Justice Department), American Airlines and US Airways have announced more limited links.

While its wider investigation of Intel rumbles on, the Federal Trade Commission (FTC) has cleared Intel Corp’s proposed acquisition of Digital Equipment Corp’s microprocessor business - provided Digital licenses its Alpha chip technology to at least three competitors, Samsung Electronics, Advanced Micro Devices and IBM.

European Competition Commissioner Karel van Miert has called on the World Trade Organisation (WTO) to set up a framework of rules for international competition policy.

At the American Bar Association’s spring meeting in Washington DC, William Baer delivered his third report as Director of the FTC’s Bureau of Competition.

In his speech to the American Bar Association, William Baer also hailed growing cooperation with foreign competition authorities.

President Clinton made a rare public comment on antitrust issues when asked about the latest wave of US airline agreements.

The Monopolies and Mergers Commission has asked us to point out a number of inaccuracies in the transcript of our interview with its Chairman, Derek Morris (GCR April/May issue, page 10). In particular:

Henry L Huser has joined Barry Hawk as Skadden’s second resident Brussels partner.

George S Carey, former senior deputy director of the FTC’s Bureau of Competition, has become a partner in the Washington DC office of Cleary Gottlieb Steen & Hamilton.

Thomas Mueller, an antitrust partner previously resident in Wilmer, Cutler & Pickering’s Washington DC office, is joining the firm’s practice in Brussels.

Gilchrist joins Pünder, Volhard, Weber & Axster

After three years of discussions, the German Bundestag has approved a revised cartel law bringing German law into line with European legislation.

The Australian Competition and Consumer Commission has issued its discussion paper on the declaration of local telecommunications services.

Vietnam has started work on implementing the unfair competition provisions of the new Commercial Law passed last year. A working group set up in January under the auspices of the Ministry of Trade has begun to draw up detailed regulations on the basis of Articles 8.2 and 9 of the Law.

The government of Zimbabwe has announced the formation of the country’s first antitrust enforcement body, to be called the Industry and Trade Competition Commission.

Peter Allport is the new head of the New Zealand Commerce Commission.

The UK’s Office of Fair Trading has referred alleged route-sharing and fare-fixing agreements between local bus operators in northern England to the Restrictive Practices court.

Richard G Parker, who has spent a significant part of his practice representing clients in antitrust proceedings before the Federal Trade Commission, has been recruited by Bill Baer as the new Senior Deputy Director of the FTC’s Bureau of Competition to replace George S Carey.

Delegates to the annual meeting of the Global Forum on Competition and Trade Policy in Rio de Janeiro in May were keen to hear whether keynote speaker Gesner Oliveira would be confirmed as President of CADE for a second two-year term.

A September court date has been set for the Department of Justice’s attempt to block the US$8.3 billion takeover of Northrop Grumman Corp by Lockheed Martin Corp - despite warnings from Northrop that the delay could kill the deal.

PepsiCo Inc, the maker of Pepsi-Cola, has filed its first antitrust lawsuit against Coca- Cola Co in the US District Court in New York, accusing its larger rival of using its market power to keep Pepsi out of restaurants and fast food outlets in the United States.

The European Commission has cleared the acquisition of the UK’s BTR Packaging by Owens-Illinois Inc of the US after the companies agreed to shed all the glasscontainer business carried out by BTR Packaging, a unit of BTR plc, through its subsidiary, Rockware Group, at its four plants.

Just three months after Royal Bank of Canada and Bank of Montreal unveiled their merger deal (see GCR Feb/Mar 1998), Canada’s largest bank, Canadian Imperial Bank of Commerce, announced plans to merge with the fifth-largest, Toronto-Dominion Bank, which would result in the creation of the ninth-largest bank in North America.

EU Competition Commissioner Karel van Miert has had two important broadcasting cases on his agenda that are seen as critical to the future of digital television in Europe: British Interactive Broadcasting, a joint venture of British Sky Broadcasting and British Telecom in home shopping and banking, and in Germany the proposed digital TV alliance between erstwhile rivals Kirch Gruppe and Bertelsmann AG alongside Deutsche Telekom, whose cable network is to carry the service.

National Foods Limited appears to have convinced the ACCC to provide clearance to its proposed acquisition of Pauls Limited without the need for it to make its usual market enquiries. In accepting a courtenforceable divestiture undertaking from National Foods to address its competition concerns, the ACCC relied on its understanding of the dairy industry. It will be interesting to see whether this case will pave the way for other proposed mergers to proceed with a similar level of cooperation from the ACCC.

Gaire Blunt/ Jenny Zaverdinos
Allen Allen & Hemsley
Sydney

The number of merger decisions that have been published, and therefore that have formally been taken, has dramatically decreased over the years. To give some indication, there were 42 published decisions in 1994 and only 19 in 1997. According to reliable sources, 18 mergers were ‘informally’ cleared in 1996 and 37 in 1997.

However, the apparent downturn in merger decisions has not, so far, resulted in an upturn in restrictive practices-related decisions. The number of restrictive practices-related decisions taken in 1997 was not a significant increase on the number taken in 1996

Vincent Dirckx
Freshfields Deringer
Brussels

The Danish Competition Council has started publishing annual reports on competition policy, reporting essential decisions and discussing various Competition Law topics.

Jan-Erik Svensson
Gorrissen Federspiel Kierkegaard
Copenhagen

Despite the evidential difficulties involved, the ECJ’s acceptance that the concept of collective dominance applies in Merger Regulation cases is an important step in ensuring the preservation of competition in highlyconcentrated markets. It is clear from the judgment that the evidential burden on the Commission to prove that a collective dominant position exists is high and the ECJ will not be easily satisfied that a situation of collective dominance has been proved by the Commission to exist.

Alexandra Poch
Freshfields Deringer
Brussels

Under the new law, the CSA may well only be able to oppose a merger or acquisition on the grounds that such would adversely affect the plurality and freedom of information, but not in respect of general competition matters. The Communication blurs the distinction between plurality/freedom of information on the one hand and competition on the other. By failing to allocate competence clearly in relation to competition matters, this draft law succeeds merely in perpetuating the confusion in relation to division of competence between the CSA and Minister of the Economy.

Nicholas Charbit/ Isabelle MacElhone
Freshfields
Paris

There is currently no legislative history or legal commentary available to explain why the 'independence' requirement was not built into the merger control provisions in a uniform manner. The Competition Office has applied the law to the letter without regard to the resulting logical inconsistency. In this writer’s view, however, the apparent distinction drawn by the Competition Act between the second form of business concentration (acquisition of control) and the first and third forms (mergers and formation of a joint venture) is not compelling.

Intra-group immunity should be accorded consistently to all forms of business concentrations defined by the Competition Act since such intra-group consolidations (no matter what their form) are not a problem area the Competition Act seeks (or should seek) to prevent.

Adam Mattyus
Bruckhaus Westrick Heller Löber
Budapest

The Authority’s report is an interesting example of the divergences of view which can exist between regulators dealing with the same case. It has to be said that the minority report appears to give a more considered view of the potential effects of the merger per se than the report of the majority. If the Authority had been allowed more time to analyse the complex issues which arose in the case, it might have been possible for the differences of opinion between the Authority members to have been resolved. In any event, the Minister’s decision to prohibit the merger has dealt a major blow to Coillte’s strategic development which, ironically, was entirely consistent with the government’s strategy for the forestry sector in Ireland

Gerald FitzGerald
McCann FitzGerald
Dublin

Parallel behaviour on prices can be very lucrative in this sector where, because of the essential nature of pharmaceuticals, demand is very stable. More often than not, demand is determined by the doctor who prescribes the medicine rather than by the consumer. The problem of proving parallel conduct has always been a topical issue in competition law. In the absence of hard evidence pointing to contact between undertakings, it is likely that the Authority will rely on the Dyestuff case, in which the ECJ stated that price increases which are very similar in timing and rate of price change cannot be explained by independent market forces.

Salvatore Lamarca
Freshfields
Milan

The problems identified in the Government discussion document on the reform package are certainly not unique to the electricity industry. A similar package of reforms may well be initiated in the gas industry, while the Commerce Commission has been active in obtaining settlements from various regional councils involved in the provision of water and wastewater services, such that maintenance and connection services are to be separated.

Competitors of the dominant telecommunications player continue to push for greater regulatory control, having been largely unsuccessful in the courts. One can only speculate on whether the contemplated reforms will achieve the desired ends.

David Moorman
Simpson Grierson
Auckland

The draft bill on competition law is being revisited by the government. It appears that the government is backtracking on its initial proposals. The new proposals, which would maintain the TDC’s current independent status, are more in line with the trend at EU level to reinforce the independence of the competition authorities.

On merger control, there exists a general consensus that changing the current voluntary regime to a compulsory one is a change for the better. However, maintaining the market share threshold as a test for jurisdiction, even if accompanied by guidelines on market definition, will create legal uncertainty among the business community. Other aspects of the proposed reform are welcome and necessary.

Francisco Cantos
Freshfields
Madrid

The MMC’s PacifiCorp report and the decision by Margaret Beckett not to refer Texas’s bid for Eastern to the MMC has clarified that foreign bids for RECs are not expected to raise regulatory concerns. This would not necessarily be the case in deals involving increased vertical integration in the industry, or common ownership of two or more RECs.

Attention is now focusing on the proposal to separate the licensing of distribution and supply, whilst other players in the industry, notably PowerGen and ScottishPower, are reported to be setting their sights on expansion through deals in the US.

Alex Potter
Freshfields
London

The FTC settlement in the Intel/Digital matter continues the US antitrust enforcement agencies’ activist stance in the area of intellectual property rights. The agencies will closely examine the transfer of such rights between significant competitors, particularly where the transfer results from an out-of-court resolution of intellectual property litigation. As a result, parties should structure such arrangements so as to ensure that they do not unreasonably restrict opportunities and incentives for product and technological innovation.

Ronan P Harty
Davis Polk & Wardwell
New York

The process surrounding the promulgation of the draft Code also is troubling: the original public comment period was only two weeks. Nevertheless, the International Franchise Association and other interested parties submitted critical comments, and the Ministry has now agreed to redraft the proposed Code. However, the revision will not be published for additional comments and is likely to be enacted into law later this year.

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