ABA Section of Antitrust Law International Committee March 2015 ...

AMERICAN BAR ASSOCIATION

ABA Section of Antitrust Law │ International Committee March 2015 │ 2015, Vol. 1

The International Antitrust Bulletin is pub-lished four times a year by the American Bar Association Section of Antitrust Law Interna-tional Committee. The views expressed in the International Antitrust Bulletin are the au-thors’ only and not necessarily those of the American Bar Association, the Section of Antitrust Law or the International Committee. If you wish to comment on the contents of the International Antitrust Bulletin, please write to the American Bar Association, Sec-tion of Antitrust Law, 321 North Clark Street, Chicago, IL 60654-7598.

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IN THIS ISSUE

What In The World Did I Miss? A summary of the world’s major competition law developments in the past quarter.

Africa ................................................................................................................................................... 2

Asia ...................................................................................................................................................... 4

Australasia ........................................................................................................................................... 5

Europe ................................................................................................................................................. 7

North America ................................................................................................................................... 8

South America .................................................................................................................................. 10

Asia

The CCI Comes of Age – Orders Divestitures for the First Time in a Merger .................... 12 Suhail A. Nathani & Gauri Chhabra

The FSS Order and the CCI’s Questionable Due Process ....................................................... 14 Kalyani Singh

Europe

Spanish Supreme Court Judgment Clarifies Rules for Calculation of Antitrust Fines ......... 16 Andrew Ward & Javier Arana

North America

Key International Tools Used to Investigate Cartels and Enforce The Sherman ................ 18 Act Abroad

Mark Krotoski

South America

Argentine Congress Passes First Major Amendment to the Antitrust Law Since 1999 ...... 21 Miguel Del Pino & Santiago Del Rio

Ecuadorean Superintendent for the Control of Market Power’s New Fines, ....................... 23 Industry Regulations and Developments in Merger Control

Luis Marín

Gun Jumping in Brazil .................................................................................................................... 25 Amadeu Ribeiro & Frederico Donas

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Krisztian Katona [email protected] Assistant Editor Jane Antonio [email protected] International Committee Leadership

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International Committee │ ABA Section of Antitrust Law March 2015 │ 2015 Vol. 1

AMERICAN BAR ASSOCIATION 2

What In The World Did I Miss?

Botswana

February 11, 2015 — The Competition Authority of Botswana is currently seeking to improve the Botswana merger notification filing process. On February 11, 2015 the Competition Authority engaged in discussions with representatives of merging parties to address the merger notification, merger assessment and merger determination processes. These discussions were aimed at decreas-ing the time taken to assess mergers by the Competition Authority. http://africanantitrust.com/2015/02/25/botswana-authority-seeks-to-improve-merger-notification-process

COMESA

March 5, 2015 — The new Common Market for Eastern and Southern Africa (COMESA) Court of Justice Building was officially inaugurated in Khartoum by Vice President of the Republic of Sudan His Excellency Dr. Hassabo Mohammed Abd El-Rahman. The Court was established un-

der the COMESA Treaty to ensure the rule of law in the interpretation and application of the COMESA Treaty. Former Acting Chief Justice of Zambia, Justice Lombe Chibesakunda, was elected to be the new Judge President for the COMESA Court of Justice. www.comesa.int/index.php?option=com_content&view=article&id=1443:comesa-court-gets-new-judge-president&catid=5:latest-news&Itemid=41; www.comesa.int/index.php?option=com_content&view=article&id=1446:comesa-court-of-justice-inaugurated-in-sudan&catid=5:latest-news&Itemid=41

Ethiopia

February 3, 2015 — In March 2014, Ethiopia adopted a new Trade Competition and Consumer Protection Proclamation. At the re-quest of the Ethiopian Government, UNCTAD will assist the Ethiopian Trade Competition and Consumer Protection Authority to implement the new competition and consumer protection laws. The project will be funded by the Grand Duchy of Luxembourg. http://unctad.org/en/pages/newsdetails.aspx?OriginalVersionID=922&Sitemap_x0020_Taxonomy=UNCTAD%20Home

Kenya

February 12, 2015 — Kenya is currently at risk of losing preferential access to the European Union markets next year, which will ex-pose the country’s exporters of flowers, fish, fruits and vegetables to high tariffs and logistical problems. Lodewijk Briët, the Europe-an Union Ambassador, has indicated that the bloc will remove Kenya from the preferential list again if the East African Community fails to ratify the new Economic Partnership Agreements. The removal of Kenya from the list would result in Kenya accessing the European Union market under the Generalised System of Preferences, resulting in an increase in tariffs of up to 15 percent. http://africanantitrust.com/2015/02/26/eu-gives-kenya-until-october-1-to-sign-partnership-agreement/

March 2, 2015 — Kenya will continue to preclude sugar imports from neighboring states until April 2015 as industry regulators await the resolution by the COMESA. Accordingly, Kenya’s sugar market will remain controlled until COMESA ministers make a final de-cision over an appeal that Kenya has lodged with COMESA to have safeguards extended for another two years. www.businessdailyafrica.com/Kenya-to-lock-out-Comesa-sugar-imports-till-April/-/539546/2640590/-/11o2a2d/-/index.html

Malawi

February 12, 2015 — Airtel Malawi Limited, a mobile phone and telecommunication services company, has lost its appeal against the decision of the Competition and Fair Trading Commission (Commission) regarding its application for authorization of an exclusive distribution arrangement. Airtel applied to the Commission for the authorization of an exclusive dealership agreement with its distrib-utors in respect of the sale of its recharge vouchers and other products. Because Airtel’s exclusive dealership agreement with its dis-tributors contained a clause that required the Distribution Sales Accountants to be employed exclusively to undertake Airtel’s sales activities, the Commission refused its approval. Airtel filed an appeal before the High Court Commercial Division against the Com-mission’s order that required the company to remove or amend the clause at issue. The High Court upheld the decision of the Com-mission and found the justification for the rejection of Airtel’s application for the approval of the distributorship agreement to be reasonable. http://africanantitrust.com/2015/02/26/mobile-phone-provider-loses-antitrust-appeal

Africa

John Oxenham is a Co-Founder and Director of Nortons Inc. in Sandton.




Mozambique

February 13, 2015 — A new competition law regulation has been made public and is now in force in Mozambique. The new regulation enhances the enforcement of competition law in Mozam-bique and provides clarity on numerous aspects of competition law, such as merger control pro-ceedings and the leniency program. www.vda.pt/xms/files/Newsletters/2015/Flash_VdAtlas_-_Mozambique_-_Competiton___EU_-_New_developments_in_Mozambican_Competition_Law.pdf

South Africa

February 24, 2015 — The South African Competition Commission has referred a case of indirect price fixing and market division against Natal Portland Cement (NPC) to the South African Com-petition Tribunal. The referral follows the Commission’s investigation into collusion amongst NPC, Pretoria Portland Cement Company (PPC), Lafarge Industries South Africa (Lafarge) and

AfriSam Consortium (AfriSam). AfriSam and Lafarge settled with the Commission and agreed to pay an administrative penalty while PPC was granted conditional leniency under the Commission’s corporate leniency policy. NPC, however, has not settled with the Commission. www.compcom.co.za/wp-content/uploads/2014/07/Commission-refers-a-case-of-collusion-against-Natal-Portland-Cement-Cimpor-Pty-Ltd.pdf

Zambia

February 18, 2015 — The Competition and Consumer Protection Commission (CCPC) has warned schools against engaging in unfair trading practices by forcing parents to buy uniforms from a particular supplier. The CCPC has indicated that schools may only estab-lish a general standard regarding the type, shade and color of uniforms and must allow parents to purchase uniforms from any source at competitive prices. This is similar to a concern raised by the South African Competition Commission in 2014 in relation to the growing trend of exclusive long-term agreements to supply school wear entered into between clothing manufacturers and schools. www.lusakatimes.com/2015/02/18/school-authorities-warned-not-force-parents-buy-uniforms-schools; www.compcom.co.za/wp-content/uploads/2014/07/Commission-concerned-about-exclusive-school-wear-agreements.pdf

Africa

John Oxenham is a Co-Founder and Director of Nortons Inc. in Sandton.




China

China’s SAIC Plans to Finalize IP Guidelines in 2015, February 9, 2015 — An SAIC (State Ad-ministration for Industry and Commerce) official reportedly stated that the SAIC plans (hopes) to release its long-awaited IP Guidelines this year. As recently as July 2014, the American Bar Associ-ation’s Section of Antitrust Law, Section of Intellectual Property Law, and Section of International Law submitted their joint comments on the 8th Draft of the SAIC’s Rules on Prohibiting Abuse of Intellectual Property Rights to Eliminate or Restrict Competition. It remains to be seen if the new IP Guidelines will indeed be released this year. In light of the NDRC’s recent findings against Qualcomm, the final version of the SAIC’s IP Guidelines will surely garner the utmost attention from around the globe. http://app.parr-global.com/intelligence/view/1217431

China’s NDRC Fines Qualcomm for Abuse of Dominance, February 10, 2015 — Concluding its 15-month long investigation of Qualcomm’s allegedly abusive patent licensing practices, China’s

NDRC (National Development and Reform Commission) imposed a fine of approximately US$ 975 million and various corrective measures on Qualcomm. www.qualcomm.com/news/releases/2015/02/09/qualcomm-and-chinas-national-development-and-reform-commission-reach ; http://app.parr-global.com/intelligence/view/1217871

India

India Dismisses Dealer Complaint Against Volkswagen for Lack of Market Power, February 12, 2015 — The CCI (Competition Commission of India) dismissed an Indian dealer’s anticompetitive conduct complaint that Volkswagen Group Sales India Pvt Ltd, Volkswagen’s Indian unit, abused its dominant position to enforce unfair trade terms and unlawfully terminated the dealership. Not-ing that Volkswagen has a negligible share of the passenger automobile market in India, the CCI concluded that Volkswagen was not a dominant player and thus cannot abuse the dominance it does not possess. www.financialexpress.com/article/industry/automobiles/cci-dismisses-charges-of-market-abuse-against-vw/42273/

Japan

Japan’s JFTC to Face Biggest Challenge in Its History, February 13, 2015 — The JFTC is busy at work revising its implementing reg-ulations in the wake of the recently enacted revisions to Japan’s antitrust laws. Included among them are various procedural revisions to improve due process and transparency. The JFTC’s Secretary General reportedly said that 2015 might be “a period for the biggest challenge ever since JFTC was founded.” http://app.parr-global.com/intelligence/view/1219427

Korea

After China, Back to Korea – The KFTC Eyes on Qualcomm…Again, February 12, 2015 — Immediately after the announcement of the NDRC’s almost US$ 1 billion fine and other correctives measures against Qualcomm for its allegedly anticompetitive licensing practices, Korea’s KFTC is also reportedly looking into Qualcomm’s practices again. www.reuters.com/article/2015/02/12/qualcomm-southkorea-idUSL4N0VM01D20150212 ; http://globalcompetitionreview.com/news/article/37989/qualcomm-back-korea-crosshairs/

Korean Prosecutors to Ramp Up Investigations of Conglomerates’ Abuses, March 12, 2015 — The Fair Trade and Taxation Depart-ment, a newly created unit within the Seoul Central District Prosecutors’ Office, is poised to strengthen its criminal antitrust enforce-ment program. One of the initial targets appears to be suspected abuses of a dominant or superior trading position by Korean con-glomerates and other large companies. Notably, under Article 23 of Korea’s Monopoly Regulation and Fair Trade Act, a business does not need market power to run the risk of violating the ban on abuse of a superior trading position. http://app.parr-global.com/intelligence/view/1229729

Asia

Cecil Chung is Senior Foreign Counsel and Vice Chair of the Antitrust Group & Head of Interna-tional Antitrust in the Seoul office of Yulchon LLC.




Australia

February 19, 2015 — The ACCC announced its compliance and enforcement policies for 2015 in the latest edition of its Compliance and Enforcement Policy publication. The Chairman of the ACCC, Rod Sims, announced that detecting and deterring cartel activity in government procure-ment will be a specific focus for 2015. 2015 has also been earmarked as the year in which the ACCC will begin a new program of industry sector reviews. These reviews enable the ACCC to identify risks to consumers and the competitive process in the selected industry sectors that re-quire intervention. Mr Sims confirmed that the ACCC is currently reviewing the debt collection and private health insurance sectors. www.accc.gov.au/media-release/accc-announces-priorities-and-strives-for-tougher-penalties

Indonesia

January 7, 2015 — The Indonesian Business Competition Supervisory Commission (KPPU) found that six tire manufacturers (PT Bridgestone Tire Indonesia, PT Summi Rubber Indonesia, PT Gajah Tunggal, PT Goodyear Indonesia, PT Elangperdana Tyre Indus-try and PT Industri Karet Delhi) had violated Article 5(1) and Article 11 of Law No. 5 of 1999. These Articles prohibit monopolistic practices and unfair business competition. The KPPU concluded that the six tire manufacturers had engaged in cartel and price fixing activities. As a result, the KPPU imposed a fine of IDR 25 billion (US$1.9 million) on each of the manufacturers. This is the maxi-mum fine that can be imposed for a breach of Indonesian competition law. http://eng.kppu.go.id/?p=3152

February 4, 2015 — The KPPU announced its decision in Case No. 17/KPPU-L/2014 to sanction three enterprises found to have entered into a bid rigging arrangement regarding the procurement of building developments in the Dompu Region in the Nusa Tenggara Barat Province. The KPPU found that PT Gaung Nusa Persada, PT Satria Multi Guna and PT Mas Merce Sari cooperated in the preparation of bidding documents, based on similarities in the description and formatting of their project implementation methodologies, as well as similarities in the price offered under their bids. The KPPU imposed a penalty of IDR 332 million on PT Gaung Nusa Persada, as the holder of the winning bid, and a one-year ban on the three enterprises from contributing bids in other public procurement opportunities for building development in the Dompu Region. http://eng.kppu.go.id/?p=3190

Malaysia

March 3, 2015 — The Malaysian Competition Commission (MyCC) announced its decision finding that 15 enterprises had engaged in anti-competitive conduct by agreeing to increase the prices of confectionary and bakery products by 10 to 15 percent starting De-cember 1, 2013. Such conduct was found to have contravened section 4(2)(a) of the Competition Act 2010 and resulted in a total fi-nancial penalty of RM247,730 on the contravening enterprises. http://mycc.gov.my/wp-content/uploads/2014/05/News-Release-MyCC-issues-final-decision-againts-24-confection-and-bakery-products-producers-for-price-fixing_02032015RV.pdf

March 6, 2015 — The MyCC announced its decision, finding that 25 ice manufacturers had contravened section 4(2)(a) of the Com-petition Act 2010 by entering into an agreement with the object to fix the selling price of edible tube ice and block ice in Kuala Lum-pur. The manufacturers were found to have agreed to increase the price of edible tube ice by RM0.50 per bag and the price of block ice by RM2.50 per big block, starting from January 1, 2014. The MyCC imposed financial penalties, ranging from RM1,200 to RM106,000, on all 25 of the contravening manufacturers. http://mycc.gov.my/wp-content/uploads/2014/05/News-Release-Fines-imposed-on-ice-manufacturers-paid-to-MyCC_06032015-final.pdf

March 10, 2015 — The MyCC issued letters to four professional bodies requiring them to dismantle their fee schedules in order to “uphold the spirit of competition law.” The MyCC is of the view that fee schedules fixed by professional bodies, which are not fixed pursuant to a law, are contrary to the Competition Act 2010. The MyCC has allowed each of the professional bodies 30 days to dis-mantle their fee schedules, with the Malaysian Institute of Arbitrators having already dismantled their fee schedule. http://mycc.gov.my/wp-content/uploads/2015/01/News-Release-MyCC-tells-professional-bodies-to-dismantle-scale-of-fees_10032015.pdf

Australasia

Linda Evans is a Partner in the Sydney office of Clayton Utz.




New Zealand

February 17, 2015 — The New Zealand Commerce Commission (NZCC) reached a NZ$2.97 million settlement with Westpac in relation to its marketing, promotion and sale of interest rate swaps to rural customers between 2005 and 2012. Under the settlement, Westpac will make availa-ble a total of $2.47 million for the 38 eligible customers who registered their complaints with the Commission. Westpac will also pay NZ$250,000 towards the Commission’s costs and another NZ$250,000 to Rural Support Trusts. www.comcom.govt.nz/the-commission/media-centre/media-releases/detail/2015/commission-settles-with-westpac-over-interest-rate-swaps

Philippines

January 7, 2015 — The National Bureau of Investigation filed criminal charges under the Anti-Graft and Corrupt Practices Act against 119 individuals for cartel conduct in the garlic industry. The country’s Agriculture Secretary, Proceso Alcala, and former Director of the Bureau of Plant Industry, Clarito Barron, are two of several officials facing allegations of corruption that allegedly allowed a single garlic importer to corner 75 percent of the market and increase prices by close to 100 per-cent in a year. http://globalcompetitionreview.com/news/article/37761/top-level-corruption-allegations-plague-huge-philippines-garlic-cartel-probe

Singapore

February 16, 2015 — The Competition Commission of Singapore (CCS) cleared the proposed joint venture between Airbus Services Asia Pacific Pte Ltd and Singapore Airlines Limited, for Airbus aircraft pilot training services in the Asia-Pacific region. Clearance was given on the basis that the joint venture would not substantially lessen competition in the markets for the provision of Airbus aircraft pilot training services and Full Flight Simulators software and data packages for Airbus aircraft. The CCS noted that the joint venture would increase competition in the market for the provision of Airbus aircraft pilot training services as the joint venture would consti-tute an additional entrant into the market. It also noted that there are a number of competitors in the region from which customers could choose from and that, furthermore, these customers have significant countervailing buyer power. www.ccs.gov.sg/media-and-publications/media-releases/ccs-clears-proposed-jv-between-airbus-asia-and-sia

February 17, 2015 — The CCS announced that it has cleared the proposed merger between China CNR Corporation Limited and CSR Corporation Limited. Both parties are involved in the supply of metro trains for the Mass Rapid Transit (MRT) System in Singa-pore. The CCS cleared the merger on the basis that it would not result in a substantial lessening of competition in the market for the supply of metro trains for Singapore's MRT system. The reasons for this conclusion include that the incremental increase in market shares arising from the merger would be small and that there is evidence of competition from other globally active metro train manu-facturers that could supply metro trains to Singapore. www.ccs.gov.sg/media-and-publications/media-releases/ccs-clears-proposed-merger-between-cnr-csr

Australasia

Linda Evans is a Partner in the Sydney office of Clayton Utz.




European Union

European Commission Signals Change of Direction on Minority Shareholdings, March 12, 2015 — In a speech delivered in Brussels, Competition Commissioner Margrethe Vestager indicated that the European Commission intended to give more time to the process of determining what approach would be taken to the treatment of minority acquisitions under EU merger control rules. The Commission originally published its White Paper on minority shareholdings and other pro-posed changes to the EU Merger Regulation in July 2014, and appeared to be set on a course to-wards introducing a “hybrid” system of notification for acquisitions of minority shareholdings. The Commissioner now appears to be signaling that more time is needed in order to assess wheth-er the previous proposals in the White Paper are sufficiently proportionate to the “enforcement gap” that exists for minority acquisitions. http://ec.europa.eu/commission/2014-2019/vestager/announcements/thoughts-merger-reform-and-market-definition_en

France

French Competition Authority Consults on Proposed Changes to Leniency Program, February 27, 2015 — The French competition authority launched a consultation on proposed changes to its leniency program. France’s existing leniency program was originally in-troduced in 2006 and updated in 2012 in order to align with the EU model adopted across various Member States. This latest round of proposed changes would include more detailed guidance on the different ways in which leniency can be obtained, how and when applications can be made, and related procedural changes. The French authority’s consultation period ended on March 20 and the authority is expected to publish further information on the proposed changes shortly. www.autoritedelaconcurrence.fr/user/standard.php?id_rub=606&id_article=2510

Russia

Russian Parliament Approves Changes to Antitrust Law, February 25, 2015 — The Russian State Duma approved changes to Article 178 of the Criminal Code. These changes relate to criminal liability for involvement in cartels. Under the changes, there will be no longer be criminal prosecution for repeated abuses of dominance, and there will be a special procedure for opening criminal cases in dominance cases. The Russian parliament’s stated intention is to create a more integrated approach and clearer rules for criminal lia-bility in antitrust cases. http://en.fas.gov.ru/news/news_34242.html

Sweden

New Antitrust-Raid Law Proposed in Sweden, March 5, 2015 — The Swedish government has issued proposals for amendments to the law on dawn raids. The amendments will grant the competition authority more powers on copying and seizing hard drives and financial statements. The amendments are expected to enter into force in January 2016. The competition authority currently has more limited powers to conduct dawn raids, especially regarding electronic data collection. www.regeringen.se/sb/d/19820/a/255207

United Kingdom

CMA UK Seeks views on Redress in Competition Cases, March 2, 2015 — The UK Competition and Markets Authority (CMA) launched a consultation seeking input on its proposed guidelines on approval of redress schemes in competition cases. This new pow-er of redress was granted to the CMA under the Consumer Rights Act 2015, which is expected to enter into force in October 2015. The new guidance is intended to make clear how parties can provide redress, and how companies and individuals who have suffered harm from competition law infringements can receive redress. www.gov.uk/government/news/cma-consults-on-redress-in-competition-cases

Europe

David Cardwell is a Senior Associate in the Brus-sels office of Baker Botts L.L.P.




Canada

February 4, 2015 — The Ontario Superior Court of Justice ruled that parties accused of price fix-ing (Nestle and Mars) have a right to obtain information proffered by immunity and leniency ap-plicants (Cadbury and Hershey) to the Canadian Competition Bureau (CCB) during the course of a price-fixing investigation of the chocolate confectionary industry. The court rejected claims that disclosure should be prohibited on the grounds of solicitor-client privilege or settlement privilege. The court found that solicitor-client privilege has been waived once Cadbury and Hershey provid-ed the information to an adverse party, such as the CCB. Settlement privilege also does not pro-hibit disclosure because (1) the immunity/leniency applicants provided the information with knowledge that the prosecutor would rely on some or all of the information for the purposes of criminal prosecution and signed agreements that state the information may eventually be disclosed to defendants, (2) the information was not being sought for use against Cadbury or Hershey, and

(3) prosecutors are obligated by law to provide the defense with all relevant information to protect the defendants’ constitutional right to “make full answer and defense.” http://kluwercompetitionlawblog.com/2015/02/09/canadian-court-clarifies-competition-bureau-disclosure-obligations-in-cartel-prosecutions/ ; www.law360.com/articles/620307/nestle-wins-access-to-hershey-leniency-filing-in-canada

February 7, 2015 — Due to the automatic indexing mechanism set out in Canada’s Competition Act, the pre-merger notification transaction-size threshold increased from C$82 million in 2014 to C$86 million. Under the revised thresholds, when the target’s assets in Canada or revenues from sales in or from Canada generated from those assets exceed C$86 million, and when the combined Cana-dian assets or revenues of the parties and their respective affiliates in, from or into Canada exceed C$400 million, the CCB must gen-erally be given advance notice of the proposed transaction. www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03872.html

March 13, 2015 — The CCB reached an agreement with Medtronic that requires the company to amend warranty terms relating to use of its insulin pumps for diabetic patients with non-Medtronic equipment. According to the CCB, Medtronic is Canada’s largest supplier of insulin pumps and its warranty for its popular Minimed Paradigm Veo insulin pump would be voided if non-Medtronic products were used with the Veo. The CCB contended that this provision limited the ability of Canadian customers to procure lower cost insulin reservoir and infusion sets from rival suppliers and limited the choices available to diabetes patients who depend on those products. According to the terms of Medtronic’s agreement with the CCB, the warranty will only be voided in the future if damage results from the use of non-Medtronic products with the Veo. www.competitionbureau.gc.ca/eic/site/cb-bc.nsf/eng/03887.html

Mexico

February 16, 2015 — The Mexican Federal Economic Competition Commission (CFCE) has launched an investigation regarding the allocation of take-off and landing slots at the International Airport of Mexico City. The investigation is the CFCE’s first use of new powers granted under Mexico’s revamped Federal Law of Economic Competition (published on July 2014) to investigate whether there are barriers to competition or a lack of access to “essential inputs” that are limiting competition. The new law permits the CFCE to impose structural or behavioral remedies, including setting access prices, to eliminate any barriers to competition. http://globalcompetitionreview.com/news/article/38037/mexico-looks-airport-slots-first-barriers-competition-investigation/

United States

February 2, 2015 — The U.S. Department of Justice (DOJ) issued a business review letter stating that it did not intend to challenge a proposal by the Institute of Electrical and Electronic Engineers, Inc. (IEEE) to update the IEEE Standards Association patent poli-cy. The updated IEEE policy clarified the commitments patent holders voluntarily make regarding the licensing of patent claims es-sential to IEEE standards on “reasonable and non-discriminatory” (RAND) terms including the availability of injunctive relief, the meaning of a reasonable licensing rate, permissible requests for reciprocal licensing, and the production levels to which the commit-ment applies. The DOJ noted that it had no present intention to challenge the proposed amendment because the revised terms were

North America

Jonathan Gowdy is a Partner in the Washington office of Morrison Foerster.




“consistent with U.S. case law,” did not reduce the incentive to innovate, and had the added bene-fit of “facilitating licensing negotiations, mitigating hold up and royalty stacking, and promoting competition among technologies for inclusion in standards.” www.justice.gov/atr/public/press_releases/2015/311475.htm

February 18, 2015 — Following a seven week trial, a federal district court in the Eastern District of New York determined that the Non-Discrimination Provisions (NDPs) in American Express’s contracts with merchants were anticompetitive restraints of trade that violated Section 1 of the Sherman Act under the “rule of reason” test. Even though American Express only accounted for 26.4% of general purpose credit and charge card purchases in the U.S., the court found that it had market power. In addition, the court determined that the NPDs resulted in higher prices for mer-chants and their consumers by preventing merchants from steering customers to credit card net-works willing to charge lower fees. https://nrf.com/sites/default/files/Interchange-2015-AmexRuling.pdf

February 25, 2015 — The Supreme Court of the United States held that a state licensing board regulating dentists did not enjoy state action antitrust immunity. The dental board in North Carolina had issued cease-and-desist letters to non-dentists providing teeth whitening services claiming that the non-dentists were engaged in the unlicensed practice of dentistry, which was a criminal offense. Since the dental board was comprised of a group of active market participants and its actions were not actively supervised by any state officials, the Court held that the mere fact that the board had been designated a state agency did not confer antitrust immunity on potentially anticompetitive concerted actions taken by the board. While the analysis of whether the state is actively supervising the conduct at issue is flexible and depends on all the circumstances of the case, the Court noted that immunity will generally not be available unless a state official has reviewed the substance of any anticompetitive decision and had the power to veto or modify the particular decisions to ensure it is in accord with state policy. See, N. Carolina Bd. of Dental Examiners v. F.T.C, 135 S. Ct. 1101 (2015).

North America

Jonathan Gowdy is a Partner in the Washington office of Morrison Foerster.




Brazil

January 3, 2015 — The new rules on the submission of collaborative agreements to the Administrative Council for Economic Defense (CADE) became effective in January 2015. The mandatory submission of such agreements to the CADE was already set forth in the new Brazilian antitrust law, which had entered into force on May 29, 2012. The new rules aim at providing additional clarity by establishing the types of agreements that shall be considered “collaborative” in nature, and therefore subject to the CADE’s pre-merger control. Pursuant to Resolution No. 10/2014, an agreement shall be considered “collaborative” if it lasts for more than two years, and the following additional conditions are met: (i) the agreement gives rise to a horizontal overlap between the contracting parties or their respective groups, and their combined market share is equal to or in excess of 20%; or (ii) the agreement gives rise to a vertical link between the contract-ing parties or their respective groups, and one of them has a market share of at least 30% in one of the mar-kets affected by the agreement, provided that (a) the agreement contains a profit/loss sharing provision, or (b) the agreement contains exclusivity obligations. Agreements lasting less than two years that meet the

thresholds above may be also subject to the CADE’s pre-merger control if, upon renewal, the two-year period is reached or exceeded.

January 29, 2015 — The CADE cleared with restrictions the acquisition by Continental Aktiengesellschaft of the control over Veyance Technolo-gies Inc. Both companies manufacture auto parts, rubber products, hoses, industrial equipment, among other products. To mitigate competition concerns in the markets for heavyweight steel conveyor belts and air springs (in both markets the combined market share of the parties exceeds 50%) the parties entered into a Merger Control Agreement with the CADE. Pursuant to the Merger Control Agreement, the parties committed themselves: (i) to divest Veyance’s plant located in San Luis Potosi, in Mexico, which produces air springs; and (ii) to divest the heavyweight steel conveyor belts’ factory in São Paulo, which also belongs to Veyance. http://cade.gov.br/Default.aspx?da6ebc4ca57b919267d466fe57f9

January 29 & February 12, 2015 — The number of settlement agreements entered into with CADE has been steadily increasing over time. The CADE’s Tribunal approved eight settlement agreements in the first two judgment sessions of 2015. On January 29, 2015, the CADE executed a settlement agreement with Rede D’Or São Luiz S/A, one of the targets of a cartel investigation in the market for medical and hospital services in the Federal District. By means of the settlement agreement, Rede D’Or São Luiz S.A. is required to pay a monetary contribution of BRL4 million. On February 12, 2015, the CADE’s Tribunal approved six settlement agreements. Four settlement agreements were executed in the context of two cartel investigations in the market for tubes for colored images for televisions and in the market for tubes for colored displays for computer moni-tors. LG Electronics, Inc. and LG Electronics do Brasil Ltda. executed two settlement agreements with the CADE in which they commit to collect BRL17 million as monetary contributions. Two other settlements were executed among the CADE and Koninklijke Philips NV, Philips do Brasil Ltda., LP Displays International BV, LP Displays International Limited, and five individuals. The settling parties are required to pay a total mone-tary contribution in the amount of BRL24.3 million. The CADE also entered into a settlement agreement with CEVA Logistics Holding BV, CE-VA Logistics Ltd., and an individual in the context of a cartel investigation involving the market for freight forwarding services. The settling parties in this case are required to pay a monetary contribution in the amount of approximately BRL9.7 million. Lastly, the CADE entered into a settle-ment agreement with Samsung Semiconductor Inc., Samsung Electronics Co., Ltd. and six individuals in the context of a cartel investigation in-volving the market for dynamic random access memory. The settling parties in this case are required to pay BRL2 million as monetary contribu-tion. http://cade.gov.br/Default.aspx?cb7f8f9a6abf54df2a17283c0a4b ; http://cade.gov.br/Default.aspx?1225f50312071de6330053e172db

February 13, 2015 — The CADE’s General Superintendent launched three car-parts cartel probes. The affected markets are the following: (i) the Brazilian market for car thermal system, (ii) the Brazilian market for widescreen-wipers, and (iii) the Brazilian and international markets for clutch-facing. At least 11 companies and 51 individuals are targets of these cartel probes. According to the General Superintendent, there is evidence showing that the companies had discussions aimed at fixing prices and commercial conditions, allocating requests for quotation, and sharing sensi-tive information. http://cade.gov.br/Default.aspx?1225f50312071de6330053e17dc0

February 25, 2015 — The CADE’s Tribunal imposed a total fine of BRL13.5 million against one individual and the following companies due to their involvement in the marine hoses cartel: Flexomarine S/A, Flexomarine Empreendimentos e Participações Ltda., Pagé Indústria de Artefatos de Borracha Ltda. The CADE’s Tribunal also decided to dismiss the case in relation to Goodyear do Brasil Produtos de Borracha Ltda. and four individuals, as there was no evidence that they were involved in the conduct under investigation. The charges against Sumitomo Rubber Industries Ltda., Hewitt Robbins and an individual were time-barred and thus the investigation involving them was terminated. http://cade.gov.br/Default.aspx?1225f50312071de6330053e17cdf

March 11, 2015 — The CADE’s Tribunal approved a new regulation governing the practice of consultations under which any interested party may request the CADE’s guidance on the application of the Brazilian Competition Law. According to the new regulation, the consultation may have

South America

Michelle Marques Machado is a Senior Associ-ate in the São Paulo office of Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados.

Amadeu Ribeiro is a Partner in the New York office of Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados.




one of the following purposes: (i) the CADE’s guidance on the application of the Brazilian Competition Law and/or of the CADE’s rules governing the merger review process in the context of a given transaction or a well-defined hypothetical; (ii) the CADE’s guidance on the legality of any act, agreement, business strat-egy or conduct of any kind that has already been initiated by the interested party; (iii) the CADE’s guidance on the legality of any act, agreement, business strategy or conduct of any kind that has not been initiated by the interested party yet. The CADE’s Tribunal shall issue its opinion within 120 days starting from the date a Reporting Commissioner is appointed to issue a final decision on the consultation. The fine decision shall be binding for five years on both the CADE’s Tribunal and the interested party. The new regulation will enter into force in the coming weeks as soon as it is published in the Brazilian Official Gazette. www.cade.gov.br/Default.aspx?98ab7a8f61b64dd6231023310f32

March 11, 2015 — The CADE’s Tribunal imposed a fine of BRL26.5 million against Telemar Norte Leste S/A for abuse of dominant position in the telecommunication market. The CADE’s Tribunal found that Telemar unduly took advantage of sensitive customer information to avoid competition. Due to legal obli-gations regarding the interconnection of telecommunications networks, Telemar had access to customers’

calls to the call center of its competitor Vésper. Telemar used such information to offer specific service plans to those customers, thereby prevent-ing them from switching to Vésper. According to the CADE’s Tribunal, Telemar would have created undue and unjustified difficulties to Vésper’s operations in the market for fixed telephony by abusing its dominant position. The infringement would have taken place in the 2000s. www.cade.gov.br/Default.aspx?f246d424fd13e929fd4b1c280449

Chile

January 30, 2015 — The Fiscalia Nacional Economica (FNE) extended until February 28, 2015 the deadline to provide comments on the Guide-lines on Leniency in Cartel Cases. The new guidelines will replace the prior 2009 guidance materials. According to the FNE, the main purposes of the new guidelines are, among others: (i) to soften and facilitate the leniency proposal application; (i) to unify the requirements for one to be enti-tled to and granted immunity; and (iii) to give certainty and publicity to the criteria adopted by the FNE in the context of the Leniency Program. www.fne.gob.cl/2015/01/30/fiscalia-nacional-economica-extiende-hasta-el-28-de-febrero-consulta-publica-sobre-nueva-guia-de-delacion-compensada-2/#more-72293

February 23, 2015 — The FNE has asked the Chilean Competition Tribunal (TLDC) to start an Expediente de Recomendación Normativa (ERN) to propose changes in the securities market aimed at enhancing competition in the securities brokerage segment. By means of the ERN, the TLDC will gather the opinion of interested parties, and then propose to the President (through the Ministry of Finance) amendments to the relevant laws and regulations, which may ultimately be converted into a draft bill. www.fne.gob.cl/2015/02/23/tdlc-inicia-expediente-de-recomendacion-normativa-en-el-mercado-bursatil-a-solicitud-de-la-fne/#more-72392

Colombia

January 28, 2015 — On October 14, 2014, the Superintendent of Industry and Commerce (SIC) submitted its primer on the Application of Com-petition Rules to Trade Associations and Trade Unions. Upon receipt of comments from trade associations, academics and certain companies, the SIC issued a revised version of its primer on January 28, 2015. www.sic.gov.co/drupal/noticias/superindustria-publica-respuestas-a-comentarios-frente-al-proyecto-de-cartilla-sobre-la-aplicacion-de-las-normas-de-competencia

January 28, 2015 — The SIC has filed a statement of objections against eight surveillance companies for an alleged cartel in 252 public bids. The targets of the investigation are the following: (i) Guardianes; (ii) Starcoop; (iii) Cobasec; (iv) Centinel; (v) Expertos; (vi) Insevig; (vii) Sejarpi; and (viii) Security Management Group. At least 149 companies would have been affected by the cartel, which lasted from 2010 until 2012. www.sic.gov.co/drupal/noticias/fiscalia-general-y-superintendencia-de-industria-y-comercio-revelan-existencia-de-presunto-cartel-de-la-vigilancia-y-seguridad-privada

Ecuador

February 3, 2015 — The Superintendent of Market Power Control issued Guidelines on Best Practices for the Commercialization of Vehicles. www.scpm.gob.ec/superintendencia-de-control-del-poder-de-mercado-presenta-el-proyecto-del-manual-de-buenas-practicas-comerciales-para-vehiculos

El Salvador

January 15, 2015 — El Salvador’s Competition Superintendent issued new thresholds for (i) the mandatory submission of transactions to the pre-merger control system and (ii) the imposition of fines. www.sc.gob.sv/pages.php?Id=1566

South America

Michelle Marques Machado is a Senior Associ-ate in the São Paulo office of Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados.




The CCI Comes of Age – Orders Divestitures for the First Time in a Merger

Suhail A. Nathani & Gauri Chhabra Economic Laws Practice (ELP) (India)

Introduction

The Indian competition authority, the Competition Com-mission of India (CCI), recently issued an important order di-recting divestitures for the first time in a merger transaction. The merger involved two large pharmaceutical companies en-gaged in the manufacture of branded generic drugs. While granting conditional approval to the merger of Ranbaxy Labora-tories Limited (Ranbaxy) into Sun Pharmaceutical Industries Limited (Sun Pharma), the CCI directed the parties to divest seven of their products to minimize adverse effects that could be caused by the merger.1

The CCI has the authority to review combinations and de-clare transactions having an adverse effect on competition as void. Apart from approving the combination, the CCI has the power to suggest modifications in the form of behavioral and structural commitments. The CCI so far has approved all com-binations unconditionally and within the initial 30-day review period (Phase-I investigation).2 In the pharmaceutical space, although the CCI has closely reviewed strategic transactions and ordered behavioral commitments,3 this is the first time that the CCI (i) directed a transaction for a detailed Phase-II investiga-tion;4 (ii) invited comments from third parties by way of public scrutiny affected by the transaction; and (iii) ordered structural changes to the transaction, laying detailed guidelines for imple-menting the divestiture.

Sun Pharma/Ranbaxy Merger

The merger of Ranbaxy into Sun Pharma will create India’s largest generic pharmaceutical manufacturer.5 Given the sub-stantial overlaps existing between the parties, the CCI formed a prima facie view that the transaction is likely to cause an adverse effect on competition and for the first time referred the transac-tion for a detailed “Phase II” investigation. The parties were required to publish details relating to the transaction in the newspapers and on their respective websites, inviting persons affected or likely to be affected by the transaction, including competitors, customers and third parties, to submit objections to the CCI.6 The parties were then required to respond to the objections to the CCI.

While the parties to the transaction determined the relevant market based on the pharmaceutical classification given by the All India Organization of Chemists and Druggists, the CCI de-fined the market based on the molecule level of drugs. The CCI was of the view that since generic pharmaceutical companies compete on brands with same molecules and not on group clas-sifications and that pharmaceutical drugs within the same group

may not be substitutable in terms of the intended use, action by the underlying molecule, contra-indications, and side effects, formulations based on the same active pharmaceutical ingredi-ents formed part of the same relevant market. The relevant geo-graphic market was considered to be India, given the parties pan-India presence.

In order to determine the effect of the transaction, the CCI identified forty-nine products where the parties had horizontal overlaps and two products where Sun Pharma was an existing player while Ranbaxy had pipeline products, each constituting a separate market in itself. After analyzing all the products, the CCI identified seven products where the parties had substantial market shares (over 40%), with limited or only one market play-er, and as to which there were minimal competitive constraints. It directed the parties to divest the products, to minimize the adverse effect likely to be caused by the transaction.7

The CCI laid detailed guidelines in relation to time-lines for completion of the divestiture, in order to preserve marketability and competitiveness of the products to be divested, and for selection of a purchaser for these products. Its objective was to ensure creation of a “viable, effective, independent and long term competitor” in the market.8 The CCI is also reported to appoint an independent agency (one of the big four accounting firms)9 to supervise and monitor the divestment process, includ-ing overseeing management, reviewing and assessing potential purchasers, proposing measures, submitting monthly reports on the progress of the divestiture and submitting a report to the CCI containing its recommendations on the divestiture. Alt-hough the parties are required to divest the identified seven products, in case they fail to reach an agreement with the pur-chaser or purchasers in the first six months from the date of order, the CCI has identified alternative products which would then have to be divested.

Interestingly, the CCI will review the sale and purchase agreement and only after its approval will the divestment be complete. The parties’ right to acquire direct or indirect control over whole or part of the products to be divested is restricted for a period of 5 years.

Conclusion

The CCI’s maiden attempt to direct structural changes in a transaction is laudable. Although it has been reported that the products directed to be divested constitute less than 1% of each parties’ total annual revenue and that such divestiture is unlikely to affect the parties in any major way,10 this order shows that the CCI has come of age and will not shy away from aggressive



steps to minimize potential anticompetitive effects caused by a transaction.

1 Combination Registration No. C-2014/05/170, order dated Dec. 5, 2014. For a description of the order, see Competition Comm’n of India, Com-mission Approves the Proposed Merger between Sun Pharma and Ranbaxy Laboratories Limited subject to Modification (C-2014/05/170), in FAIR PLAY 12-13 (Oct.-Dec. 2014), available at www.cci.gov.in/Newsletter/nl11.pdf.

2 Once notification is filed with the CCI, the CCI is required to assess whether a combination will cause an appreciable adverse effect on competi-tion in India, and it must issue a prima facie opinion within 30 days of receipt of the notification (Phase I investigation). If the CCI is of the opinion that the combination is likely to cause or will cause an appreciable adverse effect on competition in India, it may refer the combination for a detailed investigation, which may extend up to 210 days from the date of filing of the notification (Phase II investigation).

3 See Orchid/Hospira (C-2012/09/79), Mylan/Agila Specialties (C-2013/04/116), and Torrent Pharmaceuticals/Elder Pharmaceuticals (C-2014/01/148).

4 For description of a Phase II investigation, see supra note 2. 5 Aman Shah & Zeba Siddiqui, CCI Clears Sun Pharma- Ranbaxy deal, REU-

TERS, Dec. 9, 2014, available at http://in.reuters.com/article/2014/12/09/ranbaxy-lab-sun-pharma-regulator-idINKBN0JM1AY20141209.

6 Section 29(2) of the Competition Act, 2002, read with Regulation 22 of the Combination Regulations, requires the parties to publish details in Form IV, provided in Schedule II, Combination Regulations.

7 The CCI has directed Sun Pharma to divest all products containing Tamsulosin + Telterodine which are currently marketed and supplied under the Tamlet brand name; and all products containing Leuprorelin which are currently marketed and supplied under the Lupride brand name. The CCI directed Ranbaxy to divest (i) all products containing Terlipresslin which are currently marketed and supplied under the Terlibax brand name; (ii) all prod-ucts containing Rosuvastatin + Ezetimibe which are currently marketed and supplied under the Rosuvas EZ brand name; (iii) all products containing Olanzapine + Fluoxetine which are currently marketed and supplied under the Olanex F brand name; (iv) all products containing Levosulpiride + Esomepra-zole which are currently marketed and supplied under the Raciper L brand name; (v) all products containing Olmesartan + Amlodipine + Hydroclorthia-zide which are currently marketed and supplied under the Triolvance brand name.

8 Supra note 1, ¶ 39. 9 Based on newspaper reports, the CCI is planning to appoint one of the

big four accounting firms as independent agencies to supervise the divestiture process. See Navadha Pandey & Richa Mishra, One of Big 4 to Oversee Drug Di-vestment by Sun-Pharma, THE HINDU BUSINESS LINE, Dec. 9, 2014, available at www.thehindubusinessline.com/companies/one-of-big-4-to-oversee-drug-divestment-by-sunranbaxy/article6676913.ece.

10 See Shishir Asthana, CCI Rider Likely to have Insignificant Impact on Sun Pharma-Ranbaxy, BUSINESS STANDARD, Dec. 9, 2014, available at www.business-standard.com/article/companies/cci-rider-likely-to-have-insignificant-impact-on-sun-pharma-ranbaxy-114120900560_1.html.

Suhail A. Nathani is a Partner in the Mumbai office of Economic Laws Practice (ELP).

Gauri Chhabra is a Senior Associate in the Mum-bai office of Economic Laws Practice (ELP).



The FSS Order and the CCI’s Questionable Due Process

Kalyani Singh Luthra & Luthra Law Offices (India)

On January 13, 2015, the Competition Commission of India (CCI) issued an order exonerating ACI Worldwide (ACI) of allega-tions relating to anticompetitive practices.1 The order is illustrative of procedural issues present in enforcement of the Competition Act, 2002 (Act)2 and their potential due process implications.

Background

The order was issued in response to a complaint filed by Fi-nancial Software and Systems Private Limited (FSS)—a former distributor of ACI—alleging abuse of dominance by ACI in rela-tion to its software, BASE24. BASE24 is a transaction processing switch software (Electronic Fund Transfer (EFT) Switch), typically used by banks, which enables an ATM or POS terminal to com-municate with the relevant bank’s core banking network.

The complaint focused on ACI’s conduct of restricting banks, with installed BASE24 software (ACI Banks), from employing cus-tomization and modification services of providers of their own choice. By adopting these restrictive practices, ACI was, according to FSS, abusing its dominance and also imposing vertical restraints akin to a tie-in arrangement, refusal to deal and exclusive dealing.

On receipt of the complaint, the CCI directed the Office of the Director General (DG)—the investigative arm of the CCI—to conduct a detailed investigation. While the investigation was still pending, the CCI entered an interim injunction against ACI which prohibited it from imposing the alleged conditions pending com-pletion of the investigation. On appeal, the Competition Appellate Tribunal (COMPAT) confirmed the injunction but also set a dead-line for the CCI to issue a final order.3

Subsequently, the DG arrived at the conclusion that ACI had indeed abused its dominance and imposed anticompetitive vertical restraints on ACI Banks in contravention of Sections 4 and 3(4) of the Act.4 After assessing the DG report, the CCI rejected these findings and held that there was no infringement by ACI. CCI’s conclusion was premised on market definition and analysis of the vertical agreements.

Market Definition and the Consequent Lack of Dominance

According to the DG, two markets were relevant: (1) upstream market for EFT Switch/switch software in India where ACI was primarily active; and (2) downstream market for provision of ser-vices in respect of customization and modification of EFT soft-ware (professional services) in India where ACI was active along with other players like FSS. The DG concluded that ACI was dom-inant in the upstream market and, on account of that dominance, was indulging in abusive conduct in the downstream market.

ACI argued before the CCI that the DG had not properly de-fined the relevant market. The CCI found that, while analyzing the

upstream market, the DG had incorrectly limited its assessment to EFT switch software that performed the function of authenticating transactions. The CCI noted that EFT switch software also per-formed the function of routing transactions and that software with this functionality was not taken into consideration:

. . . [B]y narrowing the market to EFT Switches used by banks’ core banking network to authenticate alone in the assessment of dominance the DG has further sliced the market and pigeonholed it to the segment of the market in which the Opposing Parties operate. The Commission is of the view that the relevant market defined is wider than EFY Switch/ switch software used by banks alone. It is the market for EFT Switch/ switch software in India irre-spective of the features of the EFT Switch that are used by the customer.5

ACI was not dominant in this broader market. The CCI’s lack of dominance conclusion appears to be based more on rejection of findings made by the DG than on an independent assessment of ACI’s conduct in this broader market. The CCI failed, for example, to undertake any assessment of ACI’s share in this broader seg-ment.6 Similarly, the CCI also noted that there were other players in the market, but the order was silent on any comprehensive anal-ysis to determine the size or importance of these competitors.7

This analysis led the CCI to conclude that ACI was not domi-nant in the broader upstream market and that, consequently, Sec-tion 4 was not applicable.8

The Unconventional Notion of Vertical Agreements

Regarding the allegation of vertical restraints, the CCI noted that the arrangement between ACI and ACI Banks was not a verti-cal agreement, since ACI Banks were buyers/consumers and not a part of the production chain.9 CCI’s interpretation of vertical agreements has resulted in an unconventional concept, where there are no “vertical links” between two enterprises if the buyer is the final purchaser of the product.

Here, it is important to note that, unlike competition legisla-tion in other jurisdictions, the Act separately provides for vertical agreements under Section 3(4). This may explain the somewhat circumscribed definition of vertical agreements. Notwithstanding this limited application, the CCI, while taking this approach in pre-vious cases, has nevertheless assessed the effect of such arrange-ments within the general ambit of agreements under Section 3(1).10

In line with its decisional practice, the CCI—contrary to the DG report—held the agreement fell outside the scope of Section 3(4). While rejecting the DG’s findings on account of the form of arrangement, the CCI failed, however, to consider the effect of the alleged restrictions under the wider scope of Section 3(1).



CCI’s Untoward Procedural Posture

Even though the CCI’s decision was based on rejection of DG’s report, the CCI’s observations made in the course of its anal-ysis invited a supplementary investigation. The Act empowers the CCI to call for supplementary investigations if the evidence is in-conclusive,11 and, in previous cases, the CCI has used this power in such scenarios.12

A case for supplementary investigation was further reinforced by the fact that this was also a case where, during the course of the investigation, CCI had granted interim relief in favor of the com-plainant—relief generally reserved for exceptional cases.13

One would have expected the CCI to give an opportunity to the parties to rebut/substantiate its findings. Undoubtedly, the CCI has the prerogative to arrive at its own independent assessment, but the indeterminate conclusions underpinning the CCI’s final decision run counter to the principles of natural justice which the CCI is obligated to observe.14

A conclusion that the CCI’s ruling is contrary to the principles of natural justice finds support in a recent COMPAT decision in which the appellate tribunal reversed the CCI’s order for failure to observe the principles of natural justice. The case considered con-duct of the Board of Cricket Control of India (BCCI), which the CCI had held to be abusive and thus an infringement of Section 4. In this case, the CCI had arrived at a market definition different from the one delineated by the DG. The COMPAT observed that if the CCI wanted to differ from the DG on the issue of the rele-vant market, it should give notice for an opportunity of hearing to the appellant. No notice was given. The COMPAT held that the CCI’s market definition was vitiated due to violation of principles of natural justice.15 The COMPAT also rejected the CCI’s findings relating to the dominance, as it had relied on “legally unsustaina-ble” information downloaded from the internet and other material without giving BCCI the right to defend itself.16

The outcome in the instant case may in part be attributed to time constraints imposed on the CCI to make its decision. This explanation notwithstanding, the implications of the decision are troubling because of a procedural anomaly in the current legislative framework. The right to appeal against CCI’s decisions is expressly provided for in the Act, and the right is limited to those orders which are expressly mentioned in the Act.17 While most final or-ders of the CCI are appealable,18 an order under Section 26(8)—where the CCI enters an order disagreeing with the conclusion of a DG report and finds no evidence of anticompetitive conduct—is not.19 The only current remedy available in such a case is to ap-proach the court under a writ. Unfortunately, the CCI’s order falls under this category.

Conclusion

This was the first case pertaining to the payment sector ad-dressed by the CCI. Given the complexity and intricacies involved in the operation and economics of the payment sector, one would have expected this case to elicit a more sector-specific debate. In-stead, the order raises serious questions about procedural fairness.

Regarding the allegation of abuse of dominance, the obvious step, based on the CCI’s findings, would have been to reassess the market to definitively ascertain ACI’s position. With respect to the allegation of vertical restraints, which would have fallen within the scope of Section 3(1), the CCI’s findings logically called for a rein-vestigation instead of dismissal.

The approach taken by the CCI in this case—particularly in light of the procedural loopholes present in the Act—not only un-dermines the principles of natural justice, but it also creates sub-stantive risks of false negatives in the enforcement of competition law in India.

1 Fin. Software & Sys. Private Ltd. v. ACI Worldwide Solutions Private

Ltd., Case No. 52/2013 (CCI Jan. 13, 2015), available at www.cci.gov.in/May2011/OrderOfCommission/266/52-2013.pdf [hereinafter Order].

2 The Competition Act, 2002, No. 12 of 2003, available at www.cci.gov.in/images/media/competition_act/act2002.pdf?phpMyAdmin=QuqXb-8V2yTtoq617iR6-k2VA8d [hereinafter Act].

3 ACI Worldwide Solutions Pvt. Ltd. v. Competition Comm’n, Appeal No. 12 of 2014.

4 Section 4 of the Act prohibits abuse of dominance, while § 3(4) pro-hibits vertical agreements that have or are likely to have an appreciable adverse effect on competition.

5 Order, supra note 1, ¶ 10.50. 6 Id., ¶ 10.51. 7 Id. 8 Id., ¶ 10.54. 9 Id., ¶ 10.67. 10 Kini v. Dr. L.H. Hiranandani Hosp., Case No. 39/2012. 11 Act, supra note 2, § 26. 12 FICCI - Multiplex Ass’n v. United Producers/Distribs. Forum, Case

No. 1/2009. 13 Competition Comm’n v. Steel Auth. of India Ltd., (2010) 10 SCC 744. 14 Act, supra note 2, § 36(1). 15 Bd. of Control for Cricket in India v. Competition Comm’n, Appeal

No.17 of 2013, ¶ 24. 16 Id., ¶ 26-27. 17 Act, supra note 2, § 53(A)(1)(a). 18 These refer to orders passed under §§ 26(2), 26(6) and 27. Sections 26

(2) and 26(6) of the Act empower the CCI to close a matter if it believes that there is no prima facie case or, if after considering objections and suggestions made by the parties, it agrees with the DG report that there is no contraven-tion. Section 27 of the Act entails orders entered subsequent to a finding of infringement.

19 M/s Jindal Steel & Power Ltd. v. Competition Comm’n, Appeal No. 45/2012 (against order passed by the CCI in Case No. 22/2011).

Kalyani Singh is an Associate in the Delhi office of Luthra & Luthra Law Offices.



Spanish Supreme Court Judgment Clarifies Rules for Calculation of Antitrust Fines

Andrew Ward & Javier Arana Cuatrecasas, Gonçalves Pereira (Spain)

In an important judgment issued on January 29, 2015, the Spanish Supreme Court clarified the legal limits relating to fines for antitrust infractions under Spanish law and the basis on which such fines should be set in the future.

Spanish Law on Fines for Competition Infringements

Under the Spanish Law for the Defense of Competition (LDC), as in EU law and in many EU jurisdictions, the maxi-mum fine that may be imposed for competition law infractions is 10% of the total annual turnover of the undertaking con-cerned.

The LDC itself sets out a number of criteria to be taken into account in setting fines and, in February 2009, the Spanish National Competition Commission (CNC, now part of the Na-tional Competition and Markets Commission, or CNMC) pub-lished a Communication on the Quantification of Sanctions (the CNC Fines Notice) in which it explained how it would apply those criteria.

Specifically, the CNC Fines Notice sets out a method of calculation under which the amount of the fine is calculated applying percentages of the value of the affected sales, applying a weighted coefficient to account for the duration of the con-duct, and adjusting by applying mitigating and aggravating cir-cumstances. The CNC Fines Notice also applies a “leveling threshold” to ensure that it does not exceed 10% of total turno-ver. In this latter respect, the approach of the CNC Fines No-tice is identical to that applied under EU law.

The Appeal Leading to the Supreme Court Judgment

In December 2011, the CNC imposed a fine of €1,184,000 on BCN, a freight forwarding company, for alleged cartel con-duct (case Transitarios 2). In determining the amount of the fine, the CNC appeared (although the decision did not expressly acknowledge this) to have applied the CNC Fines Notice and, specifically, the “leveling threshold” of 10% of turnover.

That decision was appealed to the Audiencia Nacional which, in June 2013, annulled the CNC’s decision on the fine stating that:

The Spanish Constitution requires that the 10% limit not be applied as a “leveling threshold” but rather as the upper limit of the “scale of penalties.” That upper limit can only be applied to the most serious infringe-ments, and proportionately lesser penalties must be applied to lesser offences.

In order to ensure that the penalty is proportionate, the “turnover” to be taken into account when applying the 10% limit for the calculation of the fine should be in-terpreted as referring to the “turnover in the market directly or indirectly affected by the infraction.”

The New Criteria Established by the Supreme Court

The Supreme Court, in its judgment of January 29, upheld the Audiencia Nacional’s judgment in relation to the first point. The Supreme Court expressly found that Spain was not bound to follow EU law as to the amount of the penalty and that, in-deed, the Spanish Constitution required the LDC to establish a maximum possible penalty to be applied for the most serious infringement. Since there are no other relevant provisions in this respect, the 10% turnover limit must therefore be interpret-ed as the maximum sanction, to be applied in the most serious cases. The Supreme Court therefore rejected the “leveling threshold” approach and declared that the CNC Fines Notice was, in this respect, contrary to Spanish law. (In this regard, the Supreme Court’s ruling is in line with the doctrine of the Ger-man Bundesgerichtshof since 2013, making Spain the second Member State to find that the method of calculating fines ap-plied by the EU would be incompatible with its internal consti-tution.)

However, the Supreme Court reversed the Audiencia Nacional on the second point, determining that on the basis of the drafting of the statute and related materials, the turnover to be taken into account in calculating the upper limit is the total turnover of the undertaking and not just the turnover on the “affected market.”

The CNMC’s New Approach

The Supreme Court’s judgment of January 29 has been con-firmed by several similar judgments in the past weeks, and there have already been decisions by both the Audiencia Nacional and the CNMC taking the new doctrine into account.

In particular, a recent CNMC decision, Industrias Lácteas 2, sets out an elaborate explanation of the calculation of the fines that provides an indication of how the CNMC intends to com-ply with the Supreme Court’s judgment. Specifically, the CNMC (i) determines the general gravity (i.e., X%) of the conduct with-in the 0-10% scale according to its “general or global fac-tors” (such as total market shares, characteristics of the affected market, duration and effects of the conduct, and the existence of enforcement mechanisms within the cartel); (ii) adjusts the general percentage arrived at for each company depending on



their relative participation; and (iii) attempts to ensure that the resulting fines are at least proportionate to the illicit profit ob-tained by each company (estimated as 10% of affected sales ).

Reception and Future Challenges

The Supreme Court’s judgment is welcomed since it clari-fies an area of uncertainty and allays concerns as to the deter-rent effect of antitrust penalties.

First, the judgment clarifies the uncertainty created by the different approaches of the CNMC and Audiencia Nacional. The Audiencia Nacional had reduced fines in a large number of appeals since March 2013. In almost all of those cases the CNC or CNMC had, in turn, appealed to the Supreme Court and in the meantime continued to apply the CNC Fines Notice (leading to further appeals).

Second, the judgment signals an end to a controversy that had to an extent divided the CNMC and the Audiencia Nacion-al, with members of both the Audiencia Nacional and the CNMC frequently issuing dissenting judgments and opinions.

Third, the judgment allays concerns as to the deterrent ef-fect of antitrust penalties. The application of the Audiencia Nacional’s interpretation of relevant turnover had led to fines reduced significantly (by 95% in some cases), resulting in fine levels that some commentators believed no longer had a suffi-cient deterrent effect.

On the other hand, the Supreme Court’s judgment creates a significant challenge for both courts and authorities going for-ward as they seek a method for setting fines that is predictable, effective, and proportionate within the framework set out by the Supreme Court, particularly taking account the significant differences in size between participants engaged in antitrust in-fractions. In this regard, the new calculation method set out by the CNMC in Industrias Lácteas 2, by taking as a starting point a percentage of total turnover, appears to result in significantly higher total fines for large undertakings (and much greater dif-ferences in the amounts of the fines imposed on the largest and smallest undertakings in a given infringement).

Andrew Ward is Partner in the Madrid office of Cuatrecasas, Gonçalves Pereira.

Javier Arana is an Associate in the Madrid office of Cuatrecasas, Gonçalves Pereira.



Key International Tools Used to Investigate Cartels and Enforce The Sherman Act Abroad

Mark Krotoski Morgan Lewis & Bockius LLP (United States)

During the past two decades, the Antitrust Division of the U.S. Department of Justice has successfully prosecuted and en-forced violations of the Sherman Act outside the United States. Generally, the “era” of “international anti-cartel enforcement” for the Division has been said to have commenced “in earnest in 1996 with the prosecution of the international lysine cartel.”1

The Division uses a variety of law enforcement tools to investigate cartel activity around the world. This article provides an overview of several of these tools. While the Division does not typically reveal whether any of these tools are used in a par-ticular case, it has highlighted the availability of these tools in a variety of forums.

Red Notice International Arrest Warrants

The Division enhances the chances of arresting a fugitive on international travel through a Red Notice. In 2001, it “adopted a policy of placing indicted fugitives on a ‘Red Notice’ list maintained by INTERPOL” to lodge “a request that the subject be arrested, with a view toward extradition.”2

A Red Notice is essentially “an international arrest war-rant.”3 The International Criminal Police Organization (INTERPOL) includes about 190 countries which assist each other on law enforcement issues.4

The Red Notice process can be vital to extraditing execu-tives who may not know whether an outstanding arrest warrant has been issued. For example, last year, the Division successful-ly extradited an Italian national who was arrested on a sealed indictment during his international travel through Germany based on the extradition treaty between the U.S. and Germany.5

Extradition

Since 2010, the Division has extradited four executives, including two last year.6 While questions may arise on whether extradition may be available in a particular case (such as whether there is a dual criminality provision which allows an individual to be extradited based on an offense that is subject to criminal penalties in both countries), the Division has indicated its in-creasing interest in using the extradition process where possible. The United States presently has extradition treaties with more than 100 countries.7

Border Watch

A border watch alerts the Division when a designated indi-vidual travels to the United States. Under this program, which has been used by the Division since the mid-1990s, the Division

receives notice once an identified individual is at the U.S. bor-der.

With this information, Division prosecutors can “move quickly to interview, subpoena, and, if necessary, detain aliens before they have an opportunity to leave the country.”8 This tool provides access to evidence that may otherwise be difficult to obtain abroad.

Immigration Memorandum of Understanding (MOU)

Since 1996, an MOU between the Division and the Immi-gration and Naturalization Service9 provides an avenue to deter-mine the immigration status of a foreign national who elects to enter the U.S. to cooperate and enter a guilty plea.10 The early use of the MOU process was described as “instrumental in se-curing the first guilty pleas by foreign nationals and obtaining their cooperation.”11 This immigration relief is referenced in the Division’s model individual plea agreement.12

Providing Foreign-Located Evidence Under Cooperation Obligations

Some of the most significant evidence obtained by the Di-vision results from the cooperation obligations of leniency ap-plicants or companies and individuals who enter plea agree-ments. Leniency applicants are required to “report[] the wrong-doing with candor and completeness and provide[] full, continu-ing and complete cooperation to the Division throughout the investigation.”13 During the early stages of an investigation, leni-ency applicants may provide specific, direct cartel evidence from abroad that would otherwise be difficult for the Division to obtain.

As the case matures and convictions are entered, every company or individual who signs a plea agreement or applies for leniency must fully cooperate in the ongoing investigation. One requirement of this cooperation is to provide foreign-located evidence upon the request of the Division. For example, under the standard corporate plea agreement, companies must produce “all documents, including claimed personal documents, and other materials, wherever located, not protected under the at-torney-client privilege or the work-product doctrine, [(and with translations into English),] that are requested by attorneys and agents of the United States in connection with any Federal Pro-ceeding.”14 Under these terms, the Division requests and ob-tains any relevant evidence regardless of form, including digital evidence.

The Division can request that the cooperating corporation use its “best efforts” to produce foreign-located witnesses, in-



cluding current and former directors, officers, and employees at the company’s expense.15 The model corporate plea agreement includes a “safe passage” provision to enable foreign witnesses to travel to the United States for interviews.16 Without these provisions, some of this evidence would be beyond the reach of the Division or could be cumbersome to obtain through other international law enforcement channels.

Mutual Legal Assistance Treaty (MLAT) Requests

When necessary, the Division uses the MLAT process to request and obtain evidence in other countries.17 An MLAT is a treaty that allows for cooperation in or assistance with criminal investigations or proceedings.18 For example, the Division may ask another country to assist with the execution of search war-rants, interviews, or obtaining records under the terms of the applicable treaty. While the Division does not often publicize its use of MLATs, this tool has been useful to obtain evidence in antitrust criminal cases.19

Another significant feature of the MLAT process is that it can be used to request a tolling of the statute of limitations to allow time to obtain evidence from another country. Prosecu-tors may submit an ex parte application for a court order sus-pending the limitations period.20

Bilateral Antitrust Mutual Assistance Agreements

Under the International Antitrust Assistance Act of 1994,21 the Division and the Federal Trade Commission enter into bi-lateral antitrust mutual assistance agreements with foreign gov-ernments. The agreements require the countries to use their investigative powers (such as subpoenas) to obtain evidence for use by foreign antitrust authorities.22

Jointly Coordinated Law Enforcement Actions

The Antitrust Division also pursues joint enforcement ac-tions with foreign competition agencies. For example, this may include the simultaneous execution of search warrants in multi-ple jurisdictions to obtain evidence.23

These coordinated efforts allow each agency to separately complete its investigation without interfering with one another. Coordinated dawn raids also provide a powerful tool to maxim-ize the collection of evidence when an investigation goes overt and minimize the possible destruction or removal of evidence in multiple jurisdictions.

Conclusion

This overview highlights a variety of tools that the Division has available to investigate and prosecute cartel activity abroad. Many of these tools may be used in combination. With increas-ing success, the Division has used these tools to extend the reach of the Sherman Act as part of its international enforce-ment efforts over the past two decades.

1 Scott Hammond, Dep. Ass’t Att’y Gen., Antitrust Div., U.S. Dep’t of

Justice, Charting New Waters in International Cartel Prosecutions 1-2 (Mar. 2,

2006) [hereinafter Charting New Waters], available at www.justice.gov/atr/public/speeches/214861.pdf.

2 Scott Hammond, Dep. Ass’t Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, An Update of the Antitrust Division’s Criminal Enforcement Program 3 (Nov. 16, 2005), www.justice.gov/atr/public/speeches/213247.pdf.

3 U.S. DEP’T OF JUSTICE, CRIMINAL RESOURCE MANUAL 611, available at www. jus t i ce .gov/usao/eousa/fo ia_read ing_room/usam/t i t l e9/crm00611.htm. For more on Red and other types of Notices, see Notices, IN-TERPOL, available at www.interpol.int/INTERPOL-expertise/Notices.

4 INTERPOL, ANNUAL REPORT: CONNECTING POLICE FOR A SAFER WORLD 5 (2011), avai lable at www.interpol. int/content/download/14590/102326/version/4/file/INTERPOL Annual Report 2011_EN_LR.pdf (noting 190 member countries in 2011). See also Overview, INTERPOL, available at www.interpol.int/About-INTERPOL/Overview, and for a list of member countries, see World, INTERPOL, available at www.interpol.int/Member-countries/World.

5 Press Release, U.S. Dep’t of Justice, First Ever Extradition On Anti-trust Charge (Apr. 4, 2014), available at www.justice.gov/atr/public/press_releases/2014/304888.pdf.

6 See id.; Press Release, U.S. Dep’t of Justice, Canadian Executive Extra-dited on Major Fraud Charges (Nov. 17, 2014), available at www.justice.gov/atr/public/press_releases/2014/309928.pdf; Press Release, U.S. Dep’t of Justice, Owner Of Insulation Service Company Pleads Guilty To Million Dol-lar Bid-Rigging And Fraud Conspiracies (July 11, 2012), available at www.justice.gov/atr/public/press_releases/2012/285024.pdf; Press Release, U.S. Dep’t of Justice, Former CEO Of The Morgan Crucible Co. Found Guilty Of Conspiracy To Obstruct Justice (July 27, 2010), available at www.justice.gov/atr/public/press_releases/2010/260826.pdf; see generally Mark Krotoski, Extradition in International Antitrust Enforcement Cases, ANTI-

TRUST SOURCE (forthcoming Apr. 2015) (summarizing the four prior extradi-tions).

7 See U.S. DEP’T OF STATE, TREATIES IN FORCE: A LIST OF TREATIES AND OTHER INTERNATIONAL AGREEMENTS OF THE UNITED STATES IN FORCE ON JANUARY 1, 2013, available at www.state.gov/documents/organization/218912.pdf (listing treaties with each country including extradi-tion treaties); see also 18 U.S.C. § 3181 note (listing countries with bilateral extradition agreements with the United States).

8 Gary Spratling, Dep. Ass’t Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Are The Recent Titanic Fines in Antitrust Cases Just The Tip of the Iceberg? 10 (Mar. 6, 1998) [hereinafter Tip of the Iceberg], available at www.justice.gov/atr/public/speeches/212581.pdf; see also Charting New Wa-ters, supra note 1, at 7-8 (summarizing use of Border Watches).

9 Memorandum of Understanding between the Antitrust Division and the Immigration and Naturalization Service (Mar. 15, 1996), available at www.justice.gov/atr/public/criminal/9951.pdf. The program is now overseen by the Department of Homeland Security.

10 Tip of the Iceberg, supra note 8, at 9 (explaining MOU role); Gary Spratling, Dep. Ass’t Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Negoti-ating the Waters of International Cartel Prosecutions 12-14 (Mar. 4, 1999), available at www.justice.gov/atr/public/speeches/2275.pdf (explaining MOU) [hereinafter Negotiating the Waters]; Gary Spratling, Dep. Ass’t Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Criminal Antitrust Enforcement Against International Cartels (Feb. 21, 1997), available at www.justice.gov/atr/public/speeches/1056.pdf (explaining MOU).

11 Scott Hammond, Dep. Ass’t Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, Roundtable Conference with Enforcement Officials, ANTITRUST SOURCE, Apr. 2009, at 10, available at www.americanbar.org/content/dam/aba/publishing/antitrust_source/Apr09_FullSource.authcheckdam.pdf.

12 U.S. Dep’t of Justice, Antitrust Div., Model Annotated Individual Plea Agreement ¶ 16 (Feb. 18, 2014), available at www.justice.gov/atr/public/criminal/302600.pdf.

13 U.S. DEP’T OF JUSTICE, ANTITRUST DIV., CORPORATE LENIENCY POLICY (Aug. 1993) (third condition), available at www.justice.gov/atr/public/guidelines/0091.htm.



14 U.S. Dep’t of Justice, Antitrust Div., Model Annotated Corporate Plea Agreement ¶ 14(a) (Dec. 20, 2013), available at www.justice.gov/atr/public/criminal/302601.pdf (emphasis added) (making foreign-located witnesses available).

15 Id. ¶¶ 13(b), 13(c), 14(b) & n.27. 16 Id. ¶ 17 (safe passage paragraph); see also Negotiating the Waters, supra

note 10, at 7 (describing safe passage policy). 17 U.S. DEP’T OF JUSTICE, ANTITRUST DIV., ANTITRUST DIV. MANUAL

VII-32 (Bilateral Mutual Legal Assistance Treaties) (5th ed. 2014), available at www.justice.gov/atr/public/divisionmanual/chapter7.pdf; CRIMINAL RE-SOURCE MANUAL, supra note 3, at 276; U.S. DEP’T OF STATE, 7 FOREIGN AFFAIRS MANUAL § 962.1 (Mutual Legal Assistance in Criminal Matters Trea-ties), available at www.state.gov/documents/organization/86744.pdf; see general-ly Mary Ellen Warlow, Director, Office of Int’l Affairs, U.S. Dep’t of Justice, Before Senate Comm. on Foreign Relations, Concerning Law Enforcement Treaties (Nov. 15, 2005), available at www.state.gov/documents/organization/87297.pdf (describing the benefits of MLATs).

18 U.S. DEP’T OF STATE, INTERNATIONAL NARCOTICS CONTROL STRATEGY REPORT: VOLUME II MONEY LAUNDERING AND FINANCIAL CRIMES 21-22 (Mar. 2014), available at www.state.gov/documents/organization/222880.pdf.

19 See generally Anne Bingaman, Ass’t Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, U.S. Antitrust Policies in World Trade (May 16, 1994), availa-

ble at www.justice.gov/atr/public/speeches/0111.pdf (“The U.S.-Canada MLAT has been invoked several times by antitrust agencies in both countries since it came into force in 1990. As both we and our Canadian counterparts have stressed, the MLAT has been of enormous help in allowing the two anti-trust agencies to locate and obtain evidence situated in the other's country.”).

20 18 U.S. Code § 3292; see also United States v. Lyttle, 667 F.3d 220, 224 (2d Cir. 2012) (describing process).

21 Pub. L. No. 103-438, 108 Stat. 4597 (Nov. 2, 1994) (codified at 15 U.S.C. §§ 6201-12).

22 For a list of current bilateral agreements, see International Competition and Consumer Protection Cooperation Agreements, U.S. FED. TRADE COMM’N, available at www.ftc.gov/policy/international/international-cooperation-agreements. See generally Anne Bingaman, Ass’t Att’y Gen., Antitrust Div., U.S. Dep’t of Justice, International Cooperation and the Future of U.S. Antitrust Enforce-ment (May 16, 1996), available at www.justice.gov/atr/public/speeches/0656.pdf (noting history and role of IAEAA).

23 See, e.g., Press Release, Japan Fair Trade Comm’n, Cease and Desist Order and Surcharge Payment Order against Marine Hose Manufacturers (Feb. 22, 2008), available at www.jftc.go.jp/en/pressreleases/yearly-2008/feb/individual_000147.html (noting “investigations in the Marine Hose sector were commenced simultaneously in May 2007 by competition authorities including the United States Department of Justice, the European Commission and the JFTC”).

Mark Krotoski is a Partner, Antitrust Practice Group, Morgan, Lewis & Bockius. Previously, he served as Assistant Chief in the National Criminal Enforcement Section for the Antitrust Division. All case infor-mation is based upon publicly available sources.



Argentine Congress Passes First Major Amendment to the Antitrust Law Since 1999

Miguel Del Pino & Santiago Del Rio Marval O'Farrell & Mairal (Argentina)

Introduction

On September 17, 2014, the Argentine Congress passed Law No. 26,993, amending Law No. 25,156, the Antitrust Law. This new legislation, the “Consumer Relationships Conflict Res-olution System” (the Amendment Law),1 also provided for (i) the creation of a preliminary system by means of which con-sumers could request a settlement with companies as regards their complaints, (ii) the incorporation of a new branch within the Judicial Power, called the National Courts on Consumer Relations, and (iii) amendment of Law No. 24,240, the Consum-er Defense Law.

This analysis will focus on the changes to the Antitrust Law, which have clarified certain issues that have surrounded it ever since its enactment in 1999, while pointing out new ques-tions arising from the Amendment Law.

The Disappearance of the Antitrust Tribunal and the Splitting of Powers

Over the last 15 years, there have been challenges as to which body would be the enforcer of the Antitrust Law. This can be traced back to the original plan for implementation of the Antitrust Law. The Antitrust Law created the National Tri-bunal for the Defense of Competition (the Antitrust Tribunal), within the Ministry of Economy, to serve as the ultimate anti-trust regulator in Argentina. The Antitrust Tribunal would be composed of seven members, with a minimum of two attorneys and two accounting professionals on its staff.

However, the Antitrust Tribunal was never created. The Supreme Court, by means of two cases,2 continued in effect the two-tier regulatory system that had been set out by the previous Antitrust Law, Law No. 22,262. Under this system, the National Commission for the Defense of Competition (the Antitrust Commission) was to perform technical reviews on mergers and investigations and issue recommendations to the Secretary of Domestic Trade in the Ministry of Economy (the Secretary of Trade), who would have ultimate authority.

This two-tier regulatory system generated a new series of challenges as regards which of the two authorities had the pow-ers invested by the Antitrust Law in the Antitrust Tribunal un-der former Section 24. The Amendment Law has now eliminat-ed any Antitrust Tribunal and provides for a system that resem-bles the regulatory framework, approved by the Supreme Court, that has been in place for years.

Pursuant to the new Section 17, the “Executive Power will determine the enforcement authority of this law.” It is im-

portant to bear in mind that this text was modified when being analyzed in Congress, since the original draft expressly stated that the Secretary of Trade would be the enforcement authority. It remains to be seen which authority the Executive Power will appoint, i.e., whether it will be the Secretary of Trade or another body. For purposes of this discussion, we will refer to the au-thority as the Enforcement Authority. All references in the An-titrust Law as regards the Antitrust Tribunal will now have to be deemed to refer to the Enforcement Authority, pursuant to new Section 21. Pursuant to new Section 19, the Enforcement Au-thority “will be assisted” by the Antitrust Commission.

The powers invested in the Enforcement Authority and the Antitrust Commission have now been clearly allocated pursuant to provisions in Sections 18 and Section 20, the latter of which sets out for the Antitrust Commission a series of investigational but no resolution powers. As such, its role as assistant to the Enforcement Authority is now clearly underlined.

Since Section 21 sets out that all references to the Antitrust Tribunal will be considered as pertaining to the Enforcement Authority, certain issues currently being analyzed by the Anti-trust Commission will now have to be addressed by the En-forcement Authority. One of the most important of these is review of merger control cases. Under the current structure, the Antitrust Commission reviews a case, and the Secretary of Trade issues the final opinion. While the Enforcement Authori-ty can delegate tasks to the Antitrust Commission, new merger control filings should be addressed to both authorities in order to avoid problems as regards lack of notification, pending issu-ance of clear rules by both bodies. Similar considerations should apply when making a claim of anticompetitive conduct. While Section 20 provides that the Antitrust Commission can issue an opinion on antitrust matters, the investigatory body would now be the Enforcement Authority if no delegation were made to the Antitrust Commission.

Appeals: Solve et repete on Fines, Shorter Terms, and New Court of Appeals

Under the original drafting of the Antitrust Law, Section 52 provided that appeals from the imposition of sanctions had a stay of execution. For other orders, such as a cease and desist order, an order rejecting or conditioning approval of a merger, or an order dismissing a claim of anticompetitive conduct, there was no stay of execution.

Under the Amendment Law, Section 52 now makes no dis-tinction among types of orders. A stay is available from an order imposing sanctions only if the amount of the fine is first depos-



ited as security, as new Section 53 provides: “In all cases, in or-der to file the appeal against the administrative resolution that imposed a sanction of fine, the amount of the fine will have to be deposited in the name of the authority that set it out and the receipt for said deposit must be filed with the appeal, without which it will be considered as rejected, unless said performance could generate an irreparable harm to the appealing party.”

This new procedure is a solve et repete system, by means of which the appeal will only be granted if the amount of the fine has been posted as security, unless “irreparable harm” can be shown. No guidelines or parameters have been established for what constitutes irreparable harm. Bearing in mind current in-flationary rates in Argentina and normal delays in review of cas-es by the Judicial Power, it remains to be seen whether parties will file for a preliminary injunction in order to avoid payment of a sum which could lose a substantial part of its value during the pendency of a successful appeal.

The Amendment Law has also shortened the time for filing an appeal. Under prior Section 53, a party had fifteen working days within which to file an appeal, but this has now been re-duced to ten working days.

The Amendment Law has now settled another important issue: which Court of Appeals has jurisdiction? Over the last decade, there has been discussion as to whether an appeal should be heard by the Federal Court of Appeals on Civil and Commercial Matters or the National Court of Appeals on Crim-inal Economic Matters, and both appellate bodies have issued orders on matters arising from the Antitrust Law. Pursuant to new Section 53, “…the enforcement authority will send the appeal with its answer to the National Court of Appeals on Consumer Relations or the applicable Court of Appeals…” (the latter reference is made regarding Courts of Appeals beyond the scope of the City of Buenos Aires).

The National Court of Appeals on Consumer Relations is also created by means of the Amendment Law. It will have two panels of three judges each and will serve as reviewing body for appeals from “administrative sanctions” imposed under the An-titrust Law, the Consumer Defense Law, and Commercial Prac-tices Law No. 22,802, among other functions set by Section 45 of the Amendment Law.

From Criminal to Administrative: Changes to the Proce-dural Law

Finally, the Amendment Law includes a radical change as regards the supplementary procedural law. While the Antitrust Law has a series of procedural provisions of its own, former Section 56 set out that in cases not foreseen by the Antitrust

Law, the provisions of the Criminal Procedural Code were to be applied. Section 57 specified that the provisions of Law No. 19,549, the Administrative Procedural Law, were not applicable to the Antitrust Law.

Under new Section 56, the Administrative Procedural Law will be applicable to those cases not set out in the Antitrust Law, which would point towards a decriminalization of the An-titrust Law and its re-interpretation as an economic instrument for the State.

The implementation of the Administrative Procedural Law also raises a series of questions that will most likely have to be analyzed over time. In particular, it remains to be seen how Sec-tion 28 of the Administrative Procedural Law (namely, the pro-tection against delay from the State) would be applicable as re-gards the widely-known delays in merger control proceedings. Merger review was originally set to have a duration of 45 work-ing days, but cases are now averaging more than two years for completion.

Conclusion

The Amendment Law has not carried out any changes to the interpretation of anticompetitive conduct, nor has it set up a leniency program such as the one filed in a bill for Congress by the Antitrust Commission. Nor has it addressed the thresholds for notification or the delays in merger control proceedings. The amendments to the Antitrust Law mainly address adminis-trative and procedural issues that have been raised ever since its creation, such as the enforcing authority and applicable court of appeals. The Amendment Law has clarified issues while trigger-ing new questions and challenges—such as who will be the En-forcing Authority, what will be the exact role of the Antitrust Commission, what will be the rules that regulate the solve et repete provision, or how will the enforcement of the Administrative Procedural Law impact otherwise lengthy antitrust proceedings.

1 Titled Sistema de Resolucion de Conflictos en las Relaciones de Con-sumo, the law can be found at www.infoleg.gob.ar/infolegInternet/verNorma.do;jsessionid=74E4B4D016F81DBBA23C528ED97A9A7A?id=235275 .

2 Sentences issued by the Supreme Court in In re Credit Suisse First Boston Private Equity Argentina II (S.C.C. 1216 L. XLI), and Recreativos Franco s/ apel. resol. CNDC (SC, R.1172, L. XII).

Miguel Del Pino is a Partner in the Buenos Aires and New York offices of Marval, O’Farrell & Mairal.

Santiago Del Rio is an Associate in the Buenos Aires and New York offices of Marval, O’Farrell & Mairal.



Ecuadorean Superintendent for the Control of Market Power’s New Fines, Industry Regulations and Developments in Merger Control

Luis Marín Pérez Bustamante & Ponce (Ecuador)

Several key developments have occurred in the recent months concerning antitrust/competition regulation in Ecua-dor. The Ecuadorean Superintendent for the Control of Market Power (SCMP) has imposed a series of new fines, issued indus-try-specific regulations, and reviewed several notable mergers. The head of the SCMP, Mr. Pedro Paez, was appointed in 2012, and his first couple of years in office were characterized with a preference for operators to voluntarily offer cease and desist commitments. Following this period, we have now seen a series of fines to operators in the local market, reaching an aggregate amount of approximately US$138,500,000. Industry-specific regulations are underway for the pharmaceuticals, car dealers, and direct-selling companies, while supermarkets are now under strict control with the enactment of a sector specific regulation covering their activity.

During the first couple of years of practice, the SCMP com-menced several market investigations, including investigations into the pharmaceutical industry, and inquiries into several other industries. During those investigations, the SCMP publicly urged companies to voluntarily appear before the agency and execute cease and desist commitments. Those that offered com-mitments would agree to cease their conduct and repair any potential effects and damages that the conduct caused on the relevant market and consumers. According to publicly available information, eight companies,1 mostly in the food industry, exe-cuted such agreements. Some of the agreements related to mis-leading advertising, the use of genetically modified organisms, and the use of the term “light” on certain goods.

In 2014, the SCMP was busy with the enactment of internal regulations. These regulations include: the Regulations of the Control Powers of the Authority Code of Ethics; Organic Stat-ute on Process-based Organizational Management; Guidelines for Procedural Administrative Management; Guidelines for the Treatment of Privileged Information; Guidelines on Cease and Desist Commitments; Special Guidelines for Searches and In-spections; Chain of Custody Regulation; and Special Guidelines for Application of Precautionary Measures. The new regulatory framework clarifies several issues encountered by the regulator during the initial phases of its operation, and seeks to clarify certain underdeveloped aspects of Ecuador’s competition law. The SCMP also issued an industry-specific mandatory regula-tion, entitled “Manual of fair practices between Supermarkets and their suppliers,” relating to supermarkets, their relations with suppliers, and the protection of consumers. This regulation provides for strict control of supermarkets in Ecuador, particu-larly in terms of their relations with suppliers. One of the inter-

esting features of this regulation is the fixing of deadlines for payments based on volume of sales. Following the enactment of the supermarket regulation, the SCMP published draft regula-tions for the pharmaceutical industry, car dealers, and direct-selling companies. These industries were asked to participate in the drafting of the regulations and in seminars discussing their contents and rationale.

In the context of this regulatory activity, on December 24, 2014 the Regulation Board, a separate and independent regula-tory body created by the competition law, issued Resolution 004, which ordered the regulator to submit any future sector-wide regulation for approval by the Regulation Board and its permanent Secretariat. This decision will govern future regula-tions, and those that were not enacted yet, such as the regula-tions for the pharmaceutical industry, car dealers, and direct-selling companies, which will still be drafted by the SCMP, but subject to approval by the Regulation board.

The SCMP premiered its fining powers by imposing a very substantial US$138,000,000 fine on the multinational telecom operator of the Claro brand in Ecuador. The case involved al-leged abuse of market power through the unjustified imposition of exclusivity arrangements with the owners of land where tele-com masts were installed. Appealed for judicial review, this case is currently ongoing. The operator was required to pay a 50% bond on the amount of the fine for filing the appeal. The SCMP later imposed a substantial US$143,000 fine on a multinational nutrition, health and wellness company for purported lack of cooperation with an investigation caused by the submission of encrypted information, which was allegedly inaccessible to the regulator.

More recently, the SCMP continued to display its fining powers by imposing an aggregate US$122,000 in fines on ten banana export companies, and US$20,400 on a local bank for alleged late or incomplete submission of information, viewed as an infringement of the duty to cooperate provided for in the law. Two weeks after the fine on the banana operators, the SCMP reversed its decision ex officio, basing the reversal on pro-portionality issues, and requested a new report on the character-istics of each operator in order to determine the fines on a case-by-case basis. The application of the fines is nevertheless based on a regulation, which provides a strict mathematical formula for the amount of the fine, depending on the number of days of delay. In the author’s opinion, the SCMP did not conduct a proper legal assessment of the relevant characteristics of each case, of any potential extenuating circumstances, nor an analysis of the impact caused by the delay on the investigation. The



SCMP’s reversal of the fines, however, provides hope that it will in the future perform an analysis of the relevant facts, circum-stances and characteristics of each operator before imposing fines for alleged lack of cooperation, and that it will base its fines on the relevant provisions of the law, which contemplate mitigating circumstances as a factor in determining fine calcula-tions.

In addition to the above fines, the Deputy Superintendent for Unfair Competition has issued several decisions in cases regarding advertising activities. For example, it recently imposed a US$248,000 fine on a food company for misleading advertis-ing, a US$79,000 fine on a detergent company for untested comparative advertising, and a US$33,000 on a local TV-advertising company for false representation of the benefits of advertised goods.

With respect to merger control, the Deputy Supertinten-dent has been very active in reviewing and approving transac-tions subject to its control. Notifications have been filed relating to the animal feed, insurance, food and beverage, financial, con-tainer liner shipping, television broadcast, oxygen production, bananas, cement, and steel industries. Of these, two transactions were approved with conditions, and two were denied. One of

the denied transactions was recently reversed on appeal, signal-ing the SCMP’s openness to objective review. One of the major issues with merger control filings in Ecuador has been the eight-day term from the date of execution of the agreement, fixed by the law, to submit filings. Still considered a new jurisdiction in terms of global multi-jurisdictional filing practice, this deadline has become a nightmare for competition counsel worldwide, who in most cases have to file in Ecuador far ahead of any oth-er jurisdiction in order to comply with the deadline. Strict for-mal requirements have caused several filings to be delayed and reform may be merited in this area considering that the deadline negatively affects the notifying entities, which are the parties with the most interest in the completion of filings and in the commencement and approval of transactions. It may therefore be unnecessary to impose such a strict deadline which has caused notifying parties to be faced with the decision to either submit complete filings within the deadline, with the risk that filings will be withdrawn or even denied if deemed incomplete, or to face fines for late filing which can represent up to 8% of the annual turnover of the notifying entities.

1 www.scpm.gob.ec/compromisos-de-cese

Luis Marín is an Associate in the Quito office of Pérez Bustamante & Ponce.



Gun Jumping in Brazil

Amadeu Ribeiro & Frederico Donas Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados (Brazil)

Introduction

On May 29, 2015, the new Brazilian Competition Law (Law No. 12,529/2011) and its pre-merger control regime will reach their third year of implementation. Under this new regime, transactions that meet the applicable merger filing thresholds cannot be consummated before they are cleared by CADE, the Brazilian competition authority.

The new regime has greater effects on how transactions are done in Brazil, as failure to comply with this standstill obligation exposes parties to heavy fines, formal investigation into their behavior prior to obtaining merger clearance in Brazil, and po-tential remedies in order to have acts implemented in violation of the standstill obligation declared null and void.

Despite CADE’s attempt to provide some guidance in the new merger regulation, there is still debate on what actually can be viewed as gun jumping in Brazil. The recent experience shows that the Brazilian authority is generally moving towards the international practice on the subject.

Gun Jumping Under the Brazilian Competition Law

Pursuant to the Brazilian Competition Law, a given transac-tion will be subject to mandatory filing with CADE whenever it (i) amounts to an “economic concentration” under the Brazilian law, (ii) has actual or potential effects in Brazil, and (iii) meets the applicable turnover thresholds.

As in other suspensory jurisdictions, the parties cannot close a reportable transaction until they get the necessary clear-ance decision from CADE. Failure to comply with this standstill obligation exposes the parties to fines ranging from R$60,000 to R$60 million. When calculating the applicable fines, CADE shall consider the size of the parties and groups involved in the transaction, if the parties acted in bad faith, and if the transac-tion raises competitive concerns. The parties are also exposed to potential investigation into their behavior prior to obtaining CADE’s approval, and CADE may seek judicial remedies to have acts implemented in violation of the standstill obligation declared null and void.

CADE’s regulations do not specifically determine what constitutes gun jumping, generally stating that “the parties must keep their physical structures and competitive conditions un-changed until CADE’s final review, being prohibited, amongst others, any transfer of assets and any type of influence from one party over the other, as well as the exchange of competitive sen-sitive information that is not strictly necessary for the execution of the formal binding agreement between the parties.”

The First Gun Jumping Cases in Brazil

Since the enactment of the Brazilian Competition Law, CADE has ruled on four cases in which it discussed the law on gun jumping. CADE’s decisions provide some guidance on per-missible and prohibited conduct prior to the completion of a transaction. CADE’s position seems to be generally in line with other jurisdictions, including the US and Europe.

CADE ruled on the first gun jumping case in Brazil on Au-gust 28, 2013. The case concerned the assignment of rights and obligations held by the Brazilian state-owned oil company Petrobras in a concession agreement for the exploration, devel-opment, and production of oil and gas in a block located in the Santos basin to the Brazilian private oil company OGX Petró-leo e Gás S/A.1 CADE concluded that the parties had taken steps to prematurely close the transaction, having therefore en-gaged in gun jumping. OGX and CADE reached a settlement under which OGX agreed to pay R$3 million in fines.

This case shed some light on what type of pre-merger coor-dination may be considered as gun jumping. The payment of the entire purchase price in advance, coupled with the participa-tion of the buyer as a consultant in the day-to-day business of the target asset, and the attribution of operational costs to the buyer following the execution of the agreement, were consid-ered by CADE as important factors in determining that the par-ties had violated the standstill obligation set forth by the Brazili-an pre-merger control regime.

CADE reached similar conclusions in the decisions issued in connection with the acquisition by UTC Oléo e Gás S/A of the equity interest held by Potióleo S/A and Aurizônia Petróleo S/A in consortia formed to explore pre-salt oil & gas conces-sions.2 In addition to the advance payment of the price, the ab-sence of a contractual clause conditioning the closing of the transaction upon CADE’s clearance was considered to be a de-termining factor in finding a gun jumping violation, as it meant that all provisions in the agreements had immediate effect. The parties also reached a settlement with CADE to pay R$60,000 in fines.

On May 14, 2014, auto manufacturer Fiat S.p.A. reached a settlement agreement with CADE to close its investigation re-garding the premature implementation of the acquisition of an additional stake in Chrysler Group LLC that was previously held by VEBA.3 The Fiat Group already exercised control over Chrysler prior to the transaction, and therefore was already re-



sponsible for Chrysler’s business decisions. This fact was taken into account by CADE to decide not to seek judicial remedies to have the implementation acts declared null and void. Fiat paid R$600,000 in fines.

CADE dismissed two other cases after careful review of the possibility that the parties may have taken steps to prematurely close the transactions. The first case concerned a partnership between Petrobras and Total E&P to explore oil and gas in the Pelotas Basin.4 CADE was concerned with meetings held by the parties prior to the clearance of the transaction, but the parties were able to prove that the purpose of the meetings was to dis-cuss environmental licensing, and not to engage in premerger coordination.

The second case concerned CBC and Taurus, two Brazilian gun manufacturers. CBC notified CADE of its plan to acquire up to 18% of Taurus’ voting shares.5 However, CBC had addi-tionally agreed to raise its stake to 52% through a series of stock offerings by Taurus in which it acted as the main subscriber, and even paid the full price of this additional stake. CADE dis-missed the violation based on a broad interpretation of the rule allowing that acquisitions of shares in the stock exchange be closed before CADE’s clearance, provided that the buyer does not exercise any political rights attached to the shares.

Conclusion

Gun jumping is an evolving area of antitrust enforcement in Brazil, and so far it has generally followed international best practice. Merging parties and counsel should also take into ac-count CADE’s decisions in this area in order to avoid any act that may be viewed as an attempt to prematurely implement the reportable transaction.

This care should be taken starting with the drafting of the transaction documents. In addition to conditions precedent clauses that include CADE’s clearance, clauses that regulate a target company’s conduct between the signing and closing dates must be carefully drafted. Such clauses must require that the target company will conduct its business in the ordinary course and guarantee that competition conditions among the parties will remain unaltered.

The interaction between the parties between signing and closing must be limited to the strictly necessary to reach the final agreement and guarantee the economic value of the busi-ness being acquired, with the exchange of sensitive information being restricted to the extent necessary. These procedures are usually aligned with the international practice, without any par-ticular innovation arising from the Brazilian merger control re-gime.

With respect to the advance payment of the purchase price, the parties must carefully consider the justification for such an advance payment, and be prepared to explain to the authority that the mechanism does not constitute an attempt to start the implementation of the deal prior to obtaining CADE’s clear-ance decision.

1 Case No. 08700.005775/2013-19 (OGX Petróleo e Gás S/A and Pe-tróleo Brasileiro S/A).

2 Case No. 08700.008292/2013-76 (Potióleo S/A and UTC Óleo e Gás S/A) and Case No. 08700.008289/2013-52 (Aurizônia Petróleo S/A and UTC Óleo e Gás S/A). Both cases were adjudicated on Feb. 5, 2014.

3 Case No. 08700.002285/2014-41 (Fiat S.p.A. and Chrysler Group LLC).

4 Case No. 08700.007899/2013-39 (Petróleo Brasileiro S/A and Total E&P do Brasil Ltda.). Decision issued on Apr. 9, 2014.

Frederico Donas is a Senior Associate in the Brasília office of Mattos Filho, Veiga Filho, Marrey Jr. e Quiroga Advogados.


ABA Section of Antitrust Law International Committee March 2015 ...

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