The cartel consisted of Knauf Gips KG, France’s Lafarge SA, Britain’s BPB Plc, and Belgium’s Gyproc Benelux.  The decision upholds part of the European Commission’s November 27, 2002, total fine of 478.32 million euros (approximately $605 million) imposed on the four companies. 

The fines stem from the cartel’s price-fixing of plasterboard for builders in Germany, Britain, France, Belgium, the Netherlands and Luxembourg between 1992 and 1998.  The Commission found that the companies implemented their cartel through a clandestine system that exchanged information and monitored the market to avoid competition.

A few weeks ago, on June 17, 2010, the ECJ upheld a fine of 249.6 million euros (approximately $300 million) against Lafarge for its role in the cartel.  As part of that decision, the ECJ found that the Commission had correctly doubled the fine against Lafarge based on Lafarge’s prior infringement of competition laws.

The B.C. Court of Appeal’s earlier decision certifying a class of direct and indirect purchasers of DRAMs (semiconductor memory chips also known as “dynamic random access memory”) remains therefore the definitive pronouncement on the law on class certifications in competition cases in Canada.  As previously discussed, the B.C. Court of Appeal’s decision lowered somewhat the threshold for class certification –allowing plaintiffs at the certification stage to show a “credible and plausible methodology” for addressing damages on a class-wide basis and finding that the certification judge had erred when he subjected plaintiff’s expert to “rigorous scrutiny.”

The B.C. Court of Appeal had found that it could be possible for plaintiffs to prove that the manufacturers benefitted from their wrongful conduct, and thus prove liability on a class-wide basis as a common issue.  The Court of Appeal had noted that guilty pleas to the conspiracy charges in the United States and manufacturers’ agreements to pay fines calculated as a function of the gross pecuniary gain they derived from the crime amounted to “admissions that they engaged in the wrongful conduct alleged by the appellant and that they obtained an unlawful benefit from that conduct.”

Time will tell whether the decision will result in more competition class action proceedings in Canada – a country where there have been very few contested competition class action certification hearings to date.

Bundeskartellamt President Andreas Mundt spoke strongly about the need for antitrust regulation, saying that “cartels … are highly damaging to society and therefore have to be rigorously prosecuted” and noting that “coordinated price increases for consumer goods such as coffee have a direct impact on consumers’ wallets,”

The Bundeskartellamt is  assessing a fine for the German Coffee Association (GCA) and 10 employees.  The eight coffee roasters (Tchibo GmbH, Kraft Foods Außer Haus Service GmbH, J.J. Darboven GmbH & Co. KG, Melitta SystemService GmbH & Co. Kommanditgesellschaft, Luigi Lavazza Deutschland GmbH, Seeberger KG, Segafredo Zanetti Deutschland GmbH and Gebr. Westhoff GmbH & Co. KG) include local units of two U.S. companies, Kraft Foods Inc. and Luigi Lavazza SpA. 

According to the Bundeskartellamt’s investigation, from at least 1997 through mid-2008, a group of directors and sales managers at the roasters within the GCA coordinated price hikes and cuts – but mostly hikes – for roasted coffee supplied to restaurants, caterers, hotels, vending machine companies and other bulk consumers.

The Bundeskartellamt has a Leniency Programme, which allows for fines to be waived or reduced for cartel members who report price-fixing or cooperate.  It was a leniency filing from cartel member Alois Dallmayr Kaffee OHG that triggered the Bundeskartellamt’s investigation in the first place, and it has escaped a fine as a result.  Two other coffee makers – Melitta and Darboven – cooperated with the investigation and have apparently received reduced penalties as a result, though the amount of the fines for each cartel member have not been released.  The GCA has admitted liability and said it regretted the infringement in a separate statement.

German law allows the Bundeskartellamt  to fine member companies up to 10 percent of their revenues from the previous fiscal year if they uncover a cartel in the course of an investigation.  With the potential for such a mammoth fine, it is not surprising that six of the companies and their employees have already agreed to settle the regulator’s claims instead of fighting. 

This week’s activity is part of increased scrutiny the Bundeskartellamt has placed on the coffee industry in Germany in recent years.  Though this investigation has only been underway since 2009, the Bundeskartellamt already fined three of the coffee roasters (Tchibo, Melitta and Alois Dallmayr) and six of their employees approximately 159.5 million euros in December based on a similar price-fixing cartel in the retail sector that allegedly ran from early 2000 until July 2008.  A separate investigation into cappuccino makers based on similar price-fixing suspicions remains underway, and is expected to be completed soon.

Direct purchasers of shell eggs and egg products filed this class action in 2008 against several egg producers alleging that they participated in an industry wide price-fixing conspiracy.  They also allege that several egg trade associations, including United Egg Producers and United States Egg Marketers, coordinated the conspiracy.  The plaintiffs claim that the defendants conspired to restrict the egg supply through hen reductions, cage space requirements and exporting eggs at a loss which allegedly raised the price of eggs and egg products.

The plaintiffs previously settled with Sparboe Farms.  Remaining defendants include other egg producers such as Cal-Maine Foods Inc., Michael Foods Inc., and Rose Acre Farms.

The current settlement covers all direct purchasers of eggs and egg products since 2000 and is awaiting approval by the court.

It seems that the U.S. Department of Justice might agree.  According to the New York Times, the DOJ is investigating Apple for using its successful iTunes online music store to muscle Amazon out of the way.

According to the Times, Amazon annoyed Apple by offering promotions to music labels in exchange for an exclusive window to sell those labels’ new songs.  In response, Apple withdrew its own marketing support for the songs that Amazon highlighted.  According to Billboard magazine, which broke word of Apple’s practices in March, one music executive described Apple’s response as: “They are . . . diverting their energy from ‘let’s make this machine better’ to ‘let’s protect what we got.’” 

That’s precisely the sort of attitude that attracts antitrust enforcers, especially when it comes from an industry leader.  And in the world of music sales, no other company is even close to Apple.  According to the Times, Apple has 69 percent of the market for online music sales, compared to 8 percent for Amazon, which is the number two in the market.  Indeed, Apple is also the largest music distributer over any platform, surpassing WalMart two years ago.   According to the Times, Apple now has over 25 percent of the entire music sales market.

As Apple has grown, it has triggered an increasing amount of antitrust scrutiny.  Earlier this month, reports emerged that DOJ or the Federal Trade Commission may investigate Apple for prohibiting writers of programs for its iPhone, iPod, and iPad line from using third-party software to create their applications.  It is also possible that DOJ is investigating Apple and other companies (including Google) for agreeing not to poach each others’ employees.  And last year, the FTC criticized Apple for having Google CEO Eric Schmidt serve on its board, which led soon after to Schmidt’s departure from Apple.

This is not the first time that the government has taken a hard look at online music prices.  In 2006, DOJ started a similar probe of record labels, for trying to raise the change the price of music sales on Apple’s iTunes.  Ultimately, Apple last year introduced more flexible pricing for iTunes music than it initially offered.

The timing for the antitrust story about Apple seems right on the money: on May 26, 2010, Apple became the largest technology company in the world, surpassing Microsoft.  And we all know what happened between DOJ and Microsoft.

The Senate has approved an amendment to its financial reform bill that curtails the power of the card issuers in significant ways, including requiring that the “interchange fees” charged by banks on fees on debit card transactions be “reasonable and proportional to the actual” costs of processing those transactions, and permitting merchants to offer discounts for cash payments.  Whether those limits are enacted into law, however, remains to be seen since the Senate bill must still be reconciled with the House financial reform bill – which does not contain the amendment.

Interchange fees are set by the credit card networks (Visa, MasterCard, Discover and American Express) to banks that issue those networks’ branded cards.  When a merchant accepts a credit or debit card, it loses a small percentage of each purchase price to the issuer through this fee.  For Visa and MasterCard transactions, which dominate the credit and debit markets, the fees vary from 1.5 to 2 percent of the price for credit card purchases and are approximately 0.75 percent for an average debit card purchase.  These little fees add up to big money: they totaled an estimated $48 billion in 2008.

Merchants have lobbied Congress to limit or eliminate interchange fees for years.  And a federal merchants’ putative class action in New York claims that Visa’s and MasterCard’s interchange fees result from price-fixing in violation of Section One of the Sherman Act.  According to the plaintiffs, Visa and MasterCard set their interchange rates through collusion with their member banks, which compete with each other: that is, price-fixing by competitors with the networks as facilitators.

The Senate has now given the merchants a major win by adopting an amendment by Senator Richard Durbin (D – Ill.) to the financial reform bill.  That amendment passed by a solid bipartisan vote of 64-33 despite fierce lobbying by Visa and MasterCard.

Durbin’s amendment would reform the debit card interchange system in two ways.  First, it would require debit card interchange fees to be “reasonable and proportional” to the issuers’ actual costs.  This provision addresses complaints that interchange fees, while purportedly compensating card-issuing banks for their transaction costs, in fact has steadily climbed out of proportion to such actual costs.  And the networks have continued to raise those rates in the United States at the same time as they have lowered them abroad in the face of foreign regulatory pressure, further fueling complaints that they are higher here than necessary.

Second, the amendment would direct the Federal Reserve System’s Board of Governors to establish standards for assessing whether interchange rates meet the “reasonable and proportional” standard described above.

Small issuers – those with less than $10 billion in assets – are exempt from both provisions above.  This “small bank” exception reportedly would exempt 99 percent of all banks and credit unions.  Thus in effect the interchange provisions of the Durbin amendment would affect only the largest issuers, which make the most money off these fees; 80 percent of the interchange revenue in 2008 went to just ten large banks.

The Durbin amendment would also go beyond interchange to address a trio of practices that have riled merchants for years.  Networks would have to let merchants offer discounts to encourage the use of particular card brands.  For example, Visa could not forbid a supermarket from offering discounts for the use of Discover credit cards (or the signature debit cards of Discover’s subsidiary Pulse).

Networks would also be forced to allow merchants to offer discounts to encourage the use of particular payment forms.  Thus MasterCard would have to allow a store to give discounts for customers paying with cash or check rather than plastic.  And networks would have to allow merchants to set “floor” and “ceiling” limits if they chose.  This is important to merchants because some sales, particularly low-dollar-amount ones, do not yield enough revenue to make them profitable after the merchant pays the interchange fee. 

So what next?  The House of Representatives has not added any provisions like the Durbin amendment to its financial services reform bill.  For the amendment to become law, therefore, it would have to survive the upcoming conference committee in which House and Senate representatives reconcile their different versions of the reform legislation.  It is too early to tell how Durbin’s amendment might fare in that battle.  But for now, merchants are relishing the first major victory that they have had on this issue – whether in court or in Congress – in years.

The NCAA’s rule requires schools to review students’ eligibility for athletic scholarships every year, up to a maximum of five years of eligibility – automatic multi-year scholarships are not allowed.  The NCAA’s ban on multi-year athletic scholarships arguably restrains competition among NCAA colleges and universities for the best players.  The concern is that given the with millions in ticket and television revenues at stake – the ban on multi-year scholarships could be a significant restraint of trade in violation of Section 1 of the Sherman Act.

The NCAA has responded that scholarships are a “merit” award and annual review helps to guarantee that scholarships in each year go to the students who most deserve them.  The five-year maximum, they said, corresponds to a student’s maximum eligibility to participate in college sports under NCAA’s ambit.  The Justice Department has not commented publicly on the investigation.

NCAA is no stranger to investigations and suits under Section 1.  It has contended with many antitrust challenges to its detailed rules about scholarships, coaching salaries, and other areas from the mid-1980s to today.  In 2008, NCAA settled an antitrust class action brought by a class of about 13,000 college football and basketball players.  The players argued that the organization’s cap on scholarship amounts – which forced many players on full scholarships to pay about $2,500 a year in out of pocket costs – amounted to a maximum price-fixing agreement among NCAA member schools.  The organization agreed to pay students back for the expenses they incurred and raise the maximum scholarship going forward.

Section 1 suits against NCAA highlight the conflict between the group’s mission to maintain the amateur status of student athletes and the enormous commercial pressure placed on colleges and universities to field the best teams possible.  As in other Section 1 suits where “rule of reason” analysis is used, NCAA’s rules tend to be upheld when they relate most closely to legitimate goals apart from restricting competition – in the NCAA’s case, preserving amateurism and differentiating college from professional sports as an entertainment product.  By this rationale, scholarship rules for students are often upheld, while caps on coaches’ salaries have been struck down as unlawful restraints on trade.

The decision in Stolt-Nielsen S.A. et al. v. Animalfeeds Int’l Corp., No. 08-1198 (April 27, 2010), delivered by Justice Alito, reversed a panel decision by the U.S. Court of Appeals for the Second Circuit, which had confirmed an arbitration panel’s ruling which allowed Animalfeeds to pursue class arbitration against several shipping companies over alleged price-fixing.  The Supreme Court called the panel’s ruling “fundamentally at war” with the principle that arbitration is a matter of consent.

Justice Ruth Bader Ginsburg dissented from the majority opinion, joined by Justices John Paul Stevens and Stephen Breyer, writing that she would have dismissed the petition as improvidently granted, and if she had to reach the merits, she would have adhered to the Federal Arbitration Act’s strict limitations on judicial review of arbitral awards and affirmed the Second Circuit.

As it is highly unlikely – especially after this decision – that any arbitration agreement would explicitly permit class arbitration, the ruling may well be a death blow for class action arbitrations.

While in recent years the conservative-leaning high court has been favorable toward arbitration, it has also been notably hostile toward class actions as a procedural mechanism.  In this case, its hostility toward class actions appears to have trumped its general approval of arbitration as an acceptable means of resolving disputes.

Furthermore, the decision largely validated the enforceability of class action waivers, rejecting the view of some courts that have found such waivers unconscionable because they effectively preclude consumers from vindicating small-dollar claims.

Only time will tell how far-reaching the impact of this decision will be, including what will happen to the hundreds of pending class arbitration proceedings as defending parties begin using this decision to challenge claims.  However, it seems likely that class actions will continue to fare poorly in cases that reach the high court.

The proposed revisions would continue the long term trend of antitrust authorities exercising more flexibility and discretion in analyzing individual mergers.  The revised Guidelines signal a willingness by antitrust enforcers to be expansive in considering evidence of competitive effects, and a disinclination to rigidly apply traditional tests such as market definition.

Interested parties have until May 20, 2010, to provide comments on the proposed revised Guidelines.

The Guidelines, which were issued in 1992 and revised in 1997, outline the two agencies’ antitrust enforcement policy in reviewing horizontal mergers.  The proposed revisions to the Guidelines are intended to reflect the agencies’ experience and their current approach to merger review.  The revisions are also informed by a series of public workshops the two agencies have held

The proposed revised Guidelines include a new Section 2 on “Evidence of Adverse Competitive Effects,” which discusses types of evidence and sources of evidence the agencies will turn to in assessing the likely competitive effects of mergers. For instance, evidence of post-merger price increase or other changes adverse to customers is given substantial weight by the agencies – if these changes are anticompetitive effects resulting from the merger they can be dispositive for the agencies.  A consummated merger can be anticompetitive even if price increases or other changes adverse to customers are not felt – the merged firm may be aware of the possibility of post-merger antitrust review and purposefully moderating its conduct.

The proposed Guidelines explain in Section 4 that market definition (which is traditionally used to assess the competitive impact of the merger) is not an end in and of itself – it is a tool to assess the effects of a merger.  The agencies do not need to start their analysis with market definition.  Some of the tools they use do not rely on market definition – even though the agencies’ analysis will necessarily include an evaluation of competitive alternatives available. 

The proposed Guidelines also:

•   Update market concentration levels indicative of a highly concentrated market in Section 5;

•   Discuss how the agencies evaluate unilateral effects resulting from the elimination of competition between two firms in Section 6;

•   Discuss how agencies evaluate coordinated effects – including whether the merger affects the ability of multiple firms in the market to raise their prices and whether there is evidence that a market is vulnerable to coordinated conduct in Section 7; and

•   Provide more guidance on when entry by other firms is considered timely, likely and sufficient to counteract the anti-competitive effects of the merger in Section 9.

The rules clamp down on what the EC considers to be permissive distribution agreements that have arisen on occasion between goods manufacturers and resellers, and update regulations adopted prior to the massive growth in the last 10 years in commerce over the Internet.

The new rules are primarily aimed at facilitating online sales, which play a critical role in generating economic growth and integration across borders.  The rules allow manufacturers a relatively free hand in deciding their methods of selling goods in the European market as long as they have less than a 30 percent market share.  However, fixing resale prices remains restricted as harmful to competition. 

The revised rules are a result of several influences, according to press reports, that included heavy lobbying from luxury and online goods companies.

Luxury goods manufacturers in particular have been concerned with the cost of maintaining their brand image, and the EC took into account some of their arguments in fashioning the updated regulations.  For instance, some luxury goods manufacturers will be allowed to insist that their goods be sold online only by retailers that also have “bricks and mortar” stores.  Thus, purely online retailers such as Amazon and eBay would be unable to sell these goods directly.

Some industry observers have commented that this lobbying led to a more “watered down” version of the antitrust sales regulations that would have resulted otherwise.  Also, the new EU-wide rules will open up online sales by ensuring that manufacturers cannot discriminate against online shops when setting up their distribution networks.