There were no earthquakes in Central Italy this year to greet delegates to the IBA Section on Business Law’s Second Annual Competition Seminar in Fiesole, on the hills above Florence, but GCR’s own inaugural cocktail party left delegates in high spirits for the day’s business on Friday. Sebastian O’Meara reports on what is becoming an increasingly important autumn date for the international antitrust practitioner.

‘No liberalisation without regulation’ emerged as the theme of the conference on Competition, Liberalisation and State Monopolies hosted by the University of Liège on November 5 and 6 1998, reports Maija Pesola.

On the twenty-fifth anniversary of its inception, the Fordham conference in New York drew a high turnout of delegates and an impressive list of speakers. Sebastian O’Meara was there.

The WTO working group on trade and competition policy has come to the end of its initial two-year mandate leaving many issues on the table in terms of the future development of cooperation in this field. Sebastian O’Meara spoke to the group’s chairman, Frédéric Jenny

The setting up of a committee to look at international competition issues is a first in the 60-year history of the US Justice Department’s Antitrust Division, and its findings are expected to influence policy into the 21st century. Maija Pesola reports

High-profile cases and a planned change in the law are putting competition policy in the spotlight in Argentina, as Sebastian O’Meara reports.

The recently-appointed head of the Argentine competition authority is faced with a domestic economy in which concentration appears to be growing apace. Here he explains to Global Competition Review why he is optimistic about antitrust enforcement in this once largely state-run economy.

At the Fordham conference, Argentina’s record on the development of competition policy came under fire (see Conference Report, page 13). But when Sebastian O’Meara spoke in Buenos Aires to the new head of Argentina’s National Commission for the Defence of Competition, he found him in no mood to take the criticism lying down.

Ky P Ewing, Jr of Vinson & Elkins LLP, Washington, DC, considers the historical and procedural factors behind the contrasting approaches being taken in the two key antitrust trials now in court in the United States

The Canadian government’s eagerly-awaited report on the financial services industry is out. Peter Franklyn, partner of Osler Hoskin & Harcourt, Toronto, assesses the recommendations

Dr Peter Crowther of Norton Rose, London, addresses some market definition problems arising from DGIV’s investigation into mobile telephony pricing.

Dirk Schroeder of Oppenhoff & Rädler (Linklaters & Alliance), Cologne, looks at some of the issues raised by the EU Commission’s recent follow-up paper on vertical restraints, including how far the proposals imply a loss of legal certainty1

As the Microsoft trial rumbles on we canvass the opinions of the professionals - the readers of the Global Competition Review.

US Federal Trade Commission (FTC) Chairman Robert Pitofsky says global agreement is not an impossible dream, even though a worldwide code isn’t feasible yet.

As its tussle with the Justice Department continues in Washington, Microsoft has won a reprieve in its second largest market, Japan.

The European Commission has cleared the planned merger between two of the world’s largest paper pulp producers, Sweden’s Stora AB and Finland’s Enso OY, on condition that Enso sells its Elopak production unit.

Siebe and BTR announce a US$15.6 billion merger

In the midst of continuing political turmoil, Indonesia has started talks on establishing a new anti-monopoly law, which would aim to cap the national market share of an individual company at 30 per cent.

The European Commission imposed a fine of Ecu 39.6 million (US$44.7 million) on British Sugar for coordinating prices of white granulated sugar with another UK sugar producer, Tate & Lyle, and two sugar distributors.

The European Commission has confirmed it is investigating alleged cartel activities by five European gas buyers following a complaint by a North Sea gas producer.

The UK’s Office of Fair Trading (OFT) has been explaining the changes the new Competition Act will bring as part of a concerted campaign to educate British business.

International cartels are keeping US companies locked out of foreign markets, according to three leading US executives testifying before the Senate subcommittee on antitrust, business rights and competition.

The chief executive of ABB Asea Brown Boveri has taken the unusual step of telling managers of the Swiss/Swedish engineering conglomerate to keep on the right side of the law.

Progress towards the proposed alliance between British Airways and American Airlines is being delayed by transatlantic friction, and the Department of Transportation has indefinitely postponed hearings that had been set for October 26.

The US Justice Department has filed to block the largest waste collection and disposal firm in the US, Waste Management Inc, from acquiring its large regional rival, Eastern Environmental Services Inc.

EU Competition Commissioner Karel van Miert has warned that he is closely monitoring the strategic alliance between the London and Frankfurt stock exchanges, unveiled in July, after several parties approached him with concerns about the potentially dominant position the alliance might hold.

After a year of negotiation, EU industry ministers have agreed unanimously to boost the Commission’s policing powers in state aid cases.

The Commission has confirmed that current state aid regulations can be used against Member States who offer unfair tax breaks to companies operating in their territory.

The EU Commission is planning to reopen its enquiry into state aid at the Warnow Werft shipyard in Germany, owned by Kvaerner AS of Norway.

With the findings of the Commission’s initial inquiry due as we went to press, reports from Brussels suggest that the Commission is likely to launch a second phase investigation of the proposed US$11 billion joint venture between British Telecom and AT&T.

The US Federal Communications Commission (FCC) has unanimously denied BellSouth’s application to provide long-distance service in Louisiana.

The FCC has announced that Telmex/Sprint, a joint venture between Sprint and Telmex of Mexico, may be engaging in anticompetitive conduct in charging excessively high rates for completing long-distance calls from other US carriers.

As the DoJ’s suit alleging anticompetitive practices by Visa and Mastercard rumbles on, the two credit card giants are also facing another antitrust case in which several top US retailers are accusing them of using their market power to force acceptance of their debit cards.

Northwest Airlines and Continental Airlines have decided to go ahead with their alliance despite objections raised by the DoJ.

Germany’s Federal Cartel Office has slapped a fine of Dm2.5 million on Italian clothing manufacturer Benetton SpA for failing to ensure that its distributors did not impose prices on retail outlets.

A US senator has called on the Justice Department to investigate the plans of Barnes & Noble to purchase the world’s largest book distributor.

A Chinese student has started an original form of protest against high internet use charges in his country.

The FTC has announced a revision of its policy concerning public disclosure of its non-merger investigations.

As the year draws to an end, GCR called around the competition departments of the leading Brussels law firms to find out how their practices had changed over the last year.

On November 5 Freshfields Deringer formed an association with leading Austrian firm Wolf Theiss & Partners, thereby formalising the long history of cooperation between Freshfields, Deringer Tessin Herrmann & Sedemend and Wolf Theiss.

A new Canadian law firm was created when the merger of Ontario and British Columbia-based Fraser & Beatty and Alberta-based Milner Fenerty went ahead on October 20.

The US firm has moved its practice in Washington, DC to new premises following the arrival of associate Deirdre Hay, who joins the firm from Preston Gates and Ellis.

Following the defection of Simon Baxter to Clifford Chance, Phillip Ruttley has joined the firm’s London competition practise from Garrett & Co. He was formerly UN legal advisor on development aid and an EC adviser at the UK Treasury.

British AmericanTobacco (BAT), Richemont and Rembrant have agreed on the terms of a £13Bn merger between BAT and Rothmans International.

America Online is set to acquire Internet firm Netscape Communications Corp in a $4.28 billion stock swap.

UK telecommunications company Vodaphone Group plc is to merge with the world’s largest wireless company Airtouch Communications in a stock deal valued at around $56 billion.

The Coca Cola Company is set to acquire Cadbury Schweppes’s beverage brands in more than 120 countries around the world, in a $1.9 million deal.

The proposed Bank of Montreal/Royal Bank of Canada and Toronto Dominion Bank/Canadian Imperial Bank of Commerce (CIBC) mergers were cancelled in December following a decision by Canadian Finance Minister Paul Martin to reject the two deals.

Swedish drug maker Astra AB has announced a $35 billion merger with British pharmaceuticals company Zeneca Group plc to create one of the five largest global pharmaceuticals firms.

Cargill, the largest grain trading company in the world is to buy the grain division of rival company Continental Grain. The financial terms of the deal have not been disclosed.

UK firms Siebe PLC and BTR PLC are planning a £3.42 billion merger to create the largest automation firm in the world.

The European Commission has cleared plans for a consortium made up of National Express, SNCF, SNCB and British Airways to take over the management of the Eurostar (UK) highspeed passenger rail business from London and Continental Railways and the UK Government.

The UK Department of Trade and Industry (DTI) and European Commission Merger Task Force are debating over which institution will investigate the competition aspects of the £1.92 bn acquisition of London Electricity by Electricite de France (EDF).

The European Commission has cleared a $5.8 billion merger between US-based companies Newell Co and Rubbermaid Inc., both active in the consumer products sector.

Simon Baxter of Clifford Chance is also advising General Electric Co’s GE Medical Systems in its $100 million purchase of nuclear medicine and magnetic resonance imaging businesses from Israeli firm Elscint Ltd.

Lucas Varity sold its heavy vehicle braking system to US firm Meritor in a multi-jurisdictional transaction which involved merger clearances in the US, Germany, France and the UK.

Scottish Power PLC has announced that it is to merge with United States firm PacifiCorp to create one of the ten largest utilities in the world, with a stock market value estimated at $19.6 billion.

The world’s largest privately owned independent transmission company, National Grid Group PLC is to acquire New England Electric System (NEES) for $3.2 billion.

In a case brought before the United States District Court for the Northern District of Illinois a number of drug manufactures and drug wholesalers, including Johnson & Johnson, Ciba- Geigy Corp, Sandoz, Forest Laboratories, GD Searle, Cardinal Distribution, Whitmire Distribution Corp, Amerisource, Bindley Western Corp, Bergen Brunswig Corp and McKesson Corp were accused of price fixing of brand name prescriptions.

The ACCC recently released its Final Decision on the access arrangements for certain Victorian natural gas transmission systems. The access arrangements were submitted to the ACCC for its approval in accordance with the requirements of the Victorian Third Party Access Code for Natural Gas Pipeline Systems. The ACCC has refused to approve the access arrangements and has listed a number of amendments that are required to be incorporated in the revised access arrangements before granting approval.

Gaire Blunt and Jenny Zaverdinos
Allen Allen & Hemsley
Sydney

Belgium has decided to opt for a rapid opening of its electricity market, choosing not to use the one-year extension of the implementation period allowed under the Directive to enable it to take into account its specific institutional structure. Indeed, as a result of the federalisation of Belgium, the regional aspects of energy policy (such as local transport and distribution on low voltage electricity grids and rational use of energy sources) are within the jurisdiction of the Regions. However, the federal government retains jurisdiction over matters which require national implementation for technical and economic reasons. It appears that this institutional aspect has not prevented Belgium from implementing an ambitious White Paper.

Florence Melchior
Freshfields Deringer
Brussels

Faced with the problem of aggressive price-cutting by car retailers, the government has decided on a tough response in the form of price regulation. Although the measure is understandable in light of the financial crisis, it remains to be seen whether it will be effective. Less burdensome instruments are also available that would not undermine foreign investors’ confidence, such as more stringent enforcement of the antitrust provisions contained in the Pricing Law

Andreas Diem and Francesco M Slerno
Gleiss Lutz Hootz
Shanghai

The Danish Competition Council has reversed its decision on Aalborg Portland A/S and has accepted new criteria by which Danish lorry owners set haulage charges.

Jan-Erik Svensson
Gorrissen Federspiel Kierkegaard
Copenhagen

On 20 October, a majority of Member States opposed the Public Television State Aid Guidelines, expressing their preference for a case-by-case approach. The Commission now intends to consult private broadcasters. The Commission, which is apparently split on the issue, is expected to decide before the end of the year whether to adopt the Guidelines. It will be interesting to see if DGIV succeeds in convincing the rest of the Commission to do so. Things will become even more complex with convergence of the telecommunications, media and information technology sectors. The Commission’s 1997 Green Paper on Convergence provides that if state funds were used by public broadcasters to leverage and crosssubsidise their new activities, such practices would be subject to the rules on competition and on the freedom to provide services.

Maya Barr
Freshfields Deringer
Brussels

The merger guidelines correspond to a large extent to the relevant EC rules. The first cases have been notified to the FCA.

Christian Wik and Ilkka Aalto-Setälä
Roschier-Holmberg & Waselius Attorneys Ltd
Helsinki

This judgment follows on from the Heli-Inter decision (Cons. conc. September 3 1996, CA Paris September 9 1997), in which the Conseil de la Concurrence and the Paris Court of Appeal applied the EC doctrine of essential facilities to infrastructure in the context of national law. This latest judgment, by applying the notion to a service and by introducing the term ‘facility’, previously unknown in French jurisprudence, represents a logical evolution of this innovative case-law approach.

Nicolas Charbit
Freshfields
Paris

The Budeskartellamt’s decision marks a further step on the road towards concentration in the German free TV market. Although Bertelsmann and Kirch were unsuccessful in their plans to jointly dominate the growing pay-TV market, it is doubtful whether the current structure of the free TV market allows for real competition in any case, especially since the Kirch Group is also a leading provider of movies and TV entertainment programmes in Germany.

Philipp Cotta
Deringer Tessin Herrmann & Sedemund
Berlin

The new provision should allow competition in local markets to be assessed by national competition authorities, which are best placed to perform this role, thereby sparing the (limited) resources of the Merger Task Force.

However, it could result in practice in the Merger Regulation’s existing turnover jurisdictional test being replaced by a test under which competence is allocated either to the Commission or the national authorities according to the geographical dimension of the market affected by the transaction.

This would also decrease legal certainty regarding the approval deadlines, which in case of referral might be significantly longer than the one month normally required for a ‘first phase’ approval by the Commission. In fact, on top of the six weeks in which the Commission has to decide whether to refer the transaction, there would be the added national deadlines for approval (in Italy, up to 75 days).

Salvatore Lamarca
Freshfields
Milan

The Commerce Commission has recently upheld Telecom New Zealand’s response to the entry of a competitor into the local telephony market, where lower prices were offered solely in the target area and not elsewhere throughout New Zealand. The Commission concluded that Telecom was only 'meeting competition' and that this did not constitute an abuse of a dominant position or substantially lessen competition. The finding that Telecom was still pricing above average incremental cost (being the appropriate measure of cost submitted by Telecom) was critical in the Commission’s conclusions.

David Moorman
Simpson Grierson
Auckland

Last September, Panama adopted an implementing Regulation to facilitate the application of Title I (Monopoly) of Law 29 of 1996 on free competition. Most interesting from a substantive view is its further regulation of monopolistic practices and in particular its elaboration of the rule of reason, which can be applied to relative monopolistic practices.

Monique van Oers
Comisión de Libre Competencia y Asuntos del Consumidor
Panama City

A dispute has existed for some time between the President of the Office for the Protection of Competition and Consumers and the Antimonopoly Court concerning the duration of the time limit within which proceedings regarding fines for failure to notify a proposed merger must be initiated.

Malgorzata Posluszna
Wardynski & Partners
Warsaw

The aim of Decree-Law 140/98 was largely to clarify certain doubts arising out of the application of the prior statute. In fact, as regards the prohibition of discriminatory practices and the refusal to sell, it specifies that they only refer to relations between entrepreneurs.

With regard to sale at a loss, it clarifies the concept of actual price of purchase, as well as forbidding the sale at a loss to consumers and not only to entrepreneurs. Finally, it introduces a new provision forbidding abusive contractual practices which was motivated by concern over one-sided contractual relations arising mostly in the context of large-scale distribution.

Diogo Coutinho de Gouveia
Marques Mendes Advogados
Lisbon

The decision was eagerly awaited, as the case was seen as a test of the credibility of the government’s antitrust enforcement policy. The merger was strongly backed by the Ministry of Agriculture, which is keen to create a strong Spanish sugar manufacturer able to compete with other European producers. Notwithstanding the political pressures for an ‘industrial’ approach, the government, by taking on board most of the TDC’s recommendations, has demonstrated its commitment to the enforcement of competiton law.

Koldo Loidi
Freshfields
Madrid

The Competition Commission has allowed a merger to be consummated before the first stage investigation procedure was completed, ie before the one-month waiting period provided under Article 32 of the Act on Cartels had elapsed. The Commission has shed some light on the ‘important reason’ requirement for early consummation. Furthermore, the merger notification form has recently been published, allowing for standard format filing.

Marcel Meinhardt
Lenz & Staehelin
Zurich

These concerns fell outside the MMC’s terms of reference, and so they were unable to follow them up. However, Mrs Beckett’s decision makes it clear that the Director General of Fair Trading will be considering whether to make another reference to the MMC on these issues, and will be writing to BEW and other parties in the industry setting out his concerns and inviting their comments. It states that the Director General considers that 'BEW might be willing to offer undertakings to address the wider concerns.' We may therefore shortly expect another UK round of the ‘ice cream wars’.

Howard Cartlidge
Freshfields
London

Reacting to the Commission’s order - which upheld the October 1997 findings of an Federal Trade Commission Administrative Law Judge - an attorney for Toys ‘R’ Us was reported as stating that the toys retailer was 'disappointed but not surprised that the agency has upheld its own charge.' The attorney added that Toys ‘R’ Us intends to appeal the FTC’s Order in federal court. Toys ‘R’ Us has 650 stores in the United States and another 300 stores in other countries.

Ronan P Harty
Davis Polk & Wardwell
New York City

The court was sympathetic to Mitsubishi’s plight, concluding: 'While we understand Mitsubishi’s concern that dealerships in Illinois are too easily categorised as statutory franchisees, that is a concern appropriately raised to either the Illinois legislature or Illinois Attorney General.'

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