Sebastian O’Meara reports from Rio de Janeiro on the IBA Section on Business Law’s 2nd Latin American Regional Conference and two important seminars on competition policy

The Canadian parliament is set to approve major amendments to Canada’s Competition Act this autumn. Sebastian O’Meara looks at the implications of Bill C-20 and considers whether it goes far enough

Elizabeth McKnight, partner at Herbert Smith, London, welcomes government proposals for reform of Britain’s legislation governing utilities but cautions against introducing change for change’s sake

R Shyam Khemani and Gerald E Meyerman of the Private Sector Development Department at the World Bank, Washington DC, believe that East Asia’s economies urgently need coherent antitrust strategies

Professor Leigh Hancher of the University of Tilburg, the Netherlands, and of counsel at Kennedy Van der Laan, Amsterdam, looks at recent developments in Article 92 and cross-subsidisation case law

More exposed than ever to global market forces, China is developing its own anti-dumping regime. Robert J Cowling of Ogilvy Renault, Montreal, assesses the current legislation

W Todd Miller of Baker & Miller, Washington DC, says little was resolved by the WTO’s decision in the Japanese film case, which has highlighted the difficulties of ruling on cross-border antitrust disputes

Almudena Arpón de Mendívil of Gómez-Acebo & Pombo, Madrid, details the competition measures to be applied in the run-up to full liberalisation of Spanish telecommunications in December

Venezuela has often led the way for the rest of Latin America in many areas of business and commerce. Now Ignacio De León, Superintendent at competition agency Pro-Competencia, is shaking up the Latin American antitrust establishment with some innovative thinking. Sebastian O’Meara spoke to him at the IBA’s Latin American regional conference in Rio de Janeiro

Tom Hoehn of LECG, Brussels, looks at how the unique structure of one the world’s most lucrative industries has enabled it to avoid the full force of competition law - until now

The European Commission has finally approved the planned alliance between British Airways and American Airlines.

The Commission also approved the alliance between United, Lufthansa and SAS, which has been operating since 1996 as the Star Alliance and has already won regulatory approval in the US.

Also on the Commission’s agenda is competition on the Rome to Milan route, with many of Alitalia’s competitors complaining loudly about the impact of a plan to transfer nearly all flights to Malpensa airport in the autumn.

A report published by the UK’s Civil Aviation Authority on the first five years of Europe’s single aviation market has revealed a substantial increase in competition in the skies over Europe.

The US Department of Justice (DoJ) has cleared American Airlines’ proposed acquisition of around 8.5 per cent of Aerolineas Argentinas after American agreed to restructure the deal.

Lockheed Martin and Northrop Grumman have called off their planned US$11 billion merger ahead of a scheduled September trial date for the DoJ’s attempt to block the merger.

The largest telecoms group in the United States, AT&T, announced plans to buy the country’s largest cable TV company, Telecommunications Inc, for a mammoth US$45.5 billion.

A month after the DoJ launched a broad antitrust suit against Microsoft, a Washington appeals court accepted Microsoft’s argument that bundling its browser software into Widows constituted a technological improvement for consumers - a decision that opened the way for a subdued retail launch of Windows 98.

Chip-maker Intel has rejected the Federal Trade Commission (FTC)’s accusations that it applied monopoly power to limit competition, denying it had used unfair tactics in its relations with computer companies.

The European Commission and the French government have reached agreement over state aid to the French state-owned bank Crédit Lyonnais - four years after the Commission began investigating the case.

The European Commission has prohibited the proposed digital television deal between Kirch, Bertelsmann and Deutsche Telekom after a last-minute compromise was rejected by Bertelsmann.

British television broadcaster BSkyB, whose interactive television venture has already attracted Commission scrutiny, is facing a further inquiry over its plans to provide its multi-channel television service to cable operators in the UK.

The UK Department of Trade has given the Monopolies and Mergers Commission more time to conclude its inquiry into the acquisition by Ladbrokes of the Coral betting assets of Bass.

Italian antitrust regulators are investigating Coca-Cola Co following complaints from PepsiCo Inc that it is blocking Pepsi’s access to beverage wholesalers by rewarding them for stocking exclusively Coca-Cola products.

In an innovative move seen as foreshadowing the introduction of the European single currency, the German and Dutch national railways are to merge their freight operations in response to growing demand for international services.

The US Department of Justice has cleared the Aluminium Company of America’s US$3.8 billion buyout of Alumax Inc after Alcoa agreed to sell its aluminium cast plate operations.

Brazil has taken steps to open its oil sector to competition by ending the monopoly on oil exploration and production held by the state oil company, Petrobras.

Canadian oil companies Petro- Canada and Ultramar Diamond Shamrock have agreed to shelve their joint venture arrangements following a five-month investigation by Canada’s Competition Bureau.

Japan’s Ministry of International Trade and Industry has come out in favour of foreign takeovers of Japanese firms as a means of making the economy more competitive.

New Zealand’s Minister of Consumer Affairs, Roby McDonald, has proposed a change to the Fair Trading Act to effectively extend the limitation period for civil cases under the Act.

In testimony before the Senate Judiciary Committee, FTC Chairman Robert Pitofsky cited globalisation, deregulation and technological change as among factors contributing to the largest corporate merger wave since the 1980s.

Testifying before the House Committee on the Judiciary, William J Baer, Director of the FTC’s Bureau of Competition, called on the Committee to uphold the agency’s competition and consumer protection jurisdiction over non-bank providers of financial services as the industry goes through dramatic changes.

The Director General of the UK’s Office of Fair Trading (OFT), John Bridgeman, has reminded British industry of the need to plan for compliance with the provisions of the Competition Bill currently before Parliament.

UK Trade and Industry Secretary Margaret Beckett has dismissed criticism of her perceived ‘anti-merger’ approach to competition policy as 'confused and simplistic'.

Ashurst Morris Crisp has announced a strategic alliance with Italian firm Negri-Clementi Montironi & Soci, the former Milan practice of the US firm Graham & James.

On July 1 the Pünder Group pan- European federation lost two members with the departure of Belgian firm Coppens van Ommeslaghe & Faurès and Zurich-based Stoffel & Partner.

The Brussels office of Freshfields Deringer has been abuzz with the arrival of a former Director-General for external relations of the European Commission.

The plans of Seagram’s president and CEO to turn the venerable drinks company into an entertainment colossus continue with the announcement that Seagram’s Universal Studios arm is spending US$10.6 billion to acquire PolyGram NV - creating the world’s largest music company.

The European Commission has decided to clear the acquisition of the British firm Courtaulds plc by Akzo Nobel NV of the Netherlands, subject to commitments by the two firms to divest their interests in aerospace coatings and sealants, thus eliminating any overlap in these markets.

The EU Commission has formally cleared the notified merger between Price Waterhouse and Coopers & Lybrand following a full investigation centred on the risk of dominance in the market for audit and accounting services to large companies.

Air France has lost out in a European court battle with some of its competitors, who claimed that the Commission had failed to justify its 1994 approval of Fr20 billion in state aid to the beleaguered national carrier.

The European Court of First Instance has largely upheld the fines levied by the Commission on 19 companies involved in a cartel in the cartonboard market - one company has had its fine annulled completely, while others have seen small reductions, the total fines imposed being reduced from Ecu 131.75 million to Ecu 120.33 million.

The European Commission has authorised the takeover by the French stateowned company Snecma, specialised in jet engines, of Messier Dowty, which was jointly controlled with the UK company IT Group.

The European Commission recently cleared the US$37 billion merger between MCI Communications and WorldCom, followed a few days later by the US Department of Justice. Both decisions specify that the companies must divest MCI’s Internet assets to an approved buyer, the idea being to ensure the buyer provides effective competition to the merged company. Britain’s Cable and Wireless plc agreed to buy both MCI’s wholesale Internet assets and, more recently, the retail side of the business.

The NCC is currently undertaking a review of Sections 51 (2) and 52 (3) of the Trade Practices Act 1974 (Cth). These sections provide certain exemptions from the competition laws contained in Part IV of the Act. The exemptions will only be retained if the benefits to the community as a whole outweigh the costs, and if the objectives of the Act cannot be achieved more efficiently through other means.

Gaire Blunt/Jenny Zaverdinos
Allen Allen & Hemsley
Sydney

The Commission’s investigation is a totally new experience for Austrian banks. It is the first time they have been subject to such antitrust proceedings. The Commission's move came at a very sensitive time, namely one week before Austria took over the presidency in the European Union.

Richard Wolf
Wolf Theiss & Partners
Vienna

It would seem that the notification of a concentration must be filed within one week of (i) the official announcement of the public bid by the Finance and Banking Commission in the case of public bids made in Belgium or (ii) the publication in the press in the case of public bids made abroad. This can lead to differences with regard to the time when the notification must be lodged.

For example, in Belgium the public bid must be announced by the Finance and Banking Commission no later than 14 days before the bid is launched, whereas in the UK the earliest date for a press announcement is 28 days prior to the publication of the formal offer document.

Anne-Françoise Meeus and Sybille Pringot
Freshfields Deringer
Brussels

Canadian antitrust enforcers continue their efforts to ensure international cooperation in competition law investigations by finalising a cooperation agreement with the EU. An example of the need for international cooperation was highlighted by the record C$16 million fine obtained by the Competition Bureau against Archer Daniels Midland in connection with an international food additives conspiracy. The Competition Bureau is also pleased with a recent Supreme Court ruling confirming that Canadian officials are not required to obtain a search warrant before asking for investigative assistance from foreign governments in criminal matters.

John F Clifford and Jeffrey P Roode
McMillan Binch
Toronto

China has enacted rules against price cartels, selling below cost and price discrimination. A price cartel seems to be illegal only if the participants intend to control the market price. Selling below cost and price discrimination are illegal even in the absence of a dominant position or a restrictive effect on competition.

Andreas Diem and Rosanna Grosso
Gleiss Lutz Hootz Hirsch
Shanghai

The changes to the 1991 Act now being prepared will generally bring Czech competition law more closely into line with European law. In particular, the unsatisfactory treatment of de minimis principles in the current legislation should be substantially addressed by abolishing the requirement for clearance from the authorities as a precondition of the effectiveness of agreements falling within their scope.

Jiri Balastík
Kocian Solc Balastik
Prague

The transition period under the Competition Act for the notification of agreements entered into before 1998 expired on June 30 1998.

Jan-Erik Svensson
Gorrissen Federspiel Kierkegaard
Copenhagen

The principle of the extraterritorial ambit of Article 85 and its applicability to export bans from non-EU territories has already been confirmed by the Commission and the Court (e.g. Campari; although the Court did not refer to any precedents). This case sets out, however, potentially useful guidelines on the circumstances in which such prohibitions might actually affect competition and trade within the EU.

Maya Barr
Freshfields Deringer
Brussels

The new Finnish merger control regime is to be welcomed. The legislating bodies as well as the competition authorities seem to have taken a realistic approach and have said that concentrations generally have a positive impact on the market, and that prohibitions would only be applied in exceptional cases. Moreover, the regime lays down that where possible conditions are to be imposed as the initial response in rectifying any competition concerns in preference to outright prohibition. In practice, the investigation of a concentration may be very lengthy. The maximum period would be nine months, which would be likely cause significant difficulties for the parties involved. This problem arises from the fact that the OFC is not empowered to block a merger as such, only to request that this be done by the Competition Council, which will carry out its own investigation. Neither the detailed notices nor the notification form have as yet been published. They are expected to correspond with the relevant EC rules to a large extent.

Christian Wik and Satu Relander
Roschier-Holmberg & Waselius
Helsinki

The decision, awarding damages for a breach of competition law, is a precedent in France. Interim measures are the normal means of putting a stop to anti-competitive behaviour and damages are usually only regarded as a further option.

This is why cases are normally brought before the competition authorities even though they have no power to award damages.

Depending on the circumstances of the case, this strategy may now need to be reviewed.

Nicolas Charbit
Freshfields
Paris

The two main goals of the reform of the ARC, which has been publicly debated for over two years, were the simplification of its complicated rules and harmonisation with EU competition law. Some of the new rules will certainly make life easier for competition lawyers and regulators as a number of provisions, in particular in respect of merger control, become simpler and clearer. Also, the new domestic turnover threshold (Dm50 million) and revised de minimis exemptions will remove the requirement formally to notify a significant number of mergers (especially foreign mergers) which have no impact on competition in Germany. However, it is doubtful whether the second goal of the reform, ie the harmonisation of German competition law with European standards, can in fact be achieved, as a number of conceptual peculiarities of German competition law, such as the treatment of vertical restraints, the remaining exemption from the cartel prohibition and the comprehensive list of events constituting a merger for merger control purposes remain in place.

Philipp Cotta
Freshfields

The decision serves to clarify the meaning of the ‘market’ and the role of the Competition Office regarding products on the market. The Council confirmed that the Competition Ofiice has jurisdiction over the products in the market. However, the Council indicated that a product is only on the market if a wide range of consumers has access to it. A certain group of consumers who possess special knowledge of the product cannot be defined as the market. In this case, a group of industry professionals, namely veterinarians, did not constitute the market and therefore the Competition Office had no jurisdiction.

Adam Mattyus
Bruckhaus Westrick Heller Löber
Budapest

The introduction of full telecoms liberalisation in Ireland on December 1 1998 is a radical move by the Irish government which is clearly intended to encourage as much competition as possible in the market. The expectation is that this will result in a wide range of competing services becoming available to both business and residential users. It is also expected that the quality of telecommunications services on offer to high-tech industry in Ireland will improve rapidly. The acceleration of the liberalisation programme poses a major challenge to the ODTR, which will be responsible for ensuring that the necessary regulatory measures are in put in place within the next few months. These measures will include rules designed to pre-empt the abuse of its dominant position by the incumbent operator as well as rules designed to facilitate the entry of new competitors.

Gerald FitzGerald
McCann FitzGerald
Dublin

The current rules relating to the professions were drawn up at the beginning of this century and were meant to protect the public from excessive fees and unethical and unprofessional behaviour. In the present social and economic context, these tasks should be left to market forces. The government is currently adopting new rules regulating the professions. This new legislation regulating access to the profession and the scope of activity of professional associations and their regulating bodies will necessarily have to take into account the new economic realities and the need to open up the professions to competition.

Salvatore Lamarca
Freshfields
Milan

The findings of the expert group recommending a new 'incentiveoriented competition analyses' has prompted the Norwegian Competition Authority to propose that work on revision of the Norwegian Competition Act of 1993 begin. The new method is thought to be more effective in identifying areas where there might be insufficient competition and a better tool for assessing competition policy measures. It remains to be seen whether this will be enough to convince the government of the need to initiate revision. There are, however, other reasons for such revision such as bringing the Norwegian Competition law further into harmony with EEC/EEA competition law and enabling the Norwegian Competition Authority to enforce EEC/EEA as well as Norwegian competition law.

Jonas W Myhre
Hjort Law Office DA
Oslo

There is some concern about the need to clarify the jurisdictional line dividing the powers of the industryspecific regulators from those of the national competition authorities.

To avoid the inconsistent application of competition laws and overlapping jurisdictions, the Spanish government has decided not to grant industry-specific regulators decision-making powers in relation to restrictive trade practices and merger control.

However, the CMT is empowered to adopt decisions which are binding on companies in areas adjacent to, and one might say overlapping with, competition law.

Whether the Spanish system works in practice will depend largely on the extent of cooperation, coordination and exchange of information between the newly-created industry specific regulators and the national competition authorities.

Francisco Cantos
Freshfields
Madrid

Measures to liberalise the petroleum industry continue in line with Taiwan’s competition policy

Lawrence S Liu and Annie Yu
Lee and Li Attorneys-at-Law
Taipei

The guidelines are aimed at ‘business’ rather than lawyers. Because the legislation is based on EU law, many of the guidelines take on the unenviable task of summarising existing EU jurisprudence for a commercial audience. Unsurprisingly, some guidelines are more helpful in this regard than others. The OFT has also published a daunting list of guidelines currently in the pipeline. Not only does the OFT have its work cut out but business will have some reading to do.

Gina Jennings
Freshfields
London

It remains to be seen what impact the appeals court’s decision will have on the broad new antitrust case that the Justice Department has filed against Microsoft. A key allegation in that case is that Microsoft is illegally ‘bundling’ Internet Explorer with its new Windows 98 platform. Following the appellate court ruling, the Department issued a statement saying that it remains 'confident that the evidence... will demonstrate that Microsoft's conduct has violated federal antitrust law'. However, a former senior Department official was quoted as saying that the appellate court decision 'cuts the legs out from under the... Department on their new case. It is potentially devastating.' The government’s case, which will be heard by the same judge whose injunction the appeals court overturned, is scheduled to go to trial in early September.

Ronan P Harty
Davis Polk & Wardwell
New York City

The proposed Umbrella Block Exemption unfortunately does not recognise that franchising is uniquely pro-competive, in that it promotes the development of SMEs and permits SMEs to compete at a level at which they otherwise would be unable to do so. While the current franchise block exemption accounts for this fact, the proposal fails to do so and treats franchising as a mere conglomeration of vertical restraints. As a result, the proposed Umbrella Block Exemption may be unduly harsh in its application to franchising. Moreover, franchisors may be reluctant to take advantage of the market share thresholds that are embedded in the proposal because the definition of markets and calculation of market shares are not well developed in the context of franchising in the EU.

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