The IG is comprised of 13 worldwide “protection and indemnity” clubs of ship owners, which together provide insurance to approximately 93 percent of ocean ships.

The Commission is concerned that certain provisions in the IG’s marine-insurance agreements may restrict competition by blocking commercial insurers or other mutual P&I insurers from the relevant market by restricting access to ship owners.  The Commission stated that it “fears that the provisions at stake in the agreements … may harm ship owners and the insurers that are not members of the IG.”

The provisions at issue involve claim-sharing and joint-reinsurance agreements as well as rules which govern the contractual relationships between the clubs and their members. 

The probe follows the recent expiration of a 10-year antitrust exemption enjoyed by the P&I agreements under European Union regulations.  Although the EU in April again created certain antitrust exceptions for the insurance industry, the P&I agreements were not included among them because their market share rises far above the 20-25 percent maximum provided for by EU competition regulations.

In response to the investigation, the IG stated that “there have been no relevant or material changes to the arrangements or in the market for P&I cover” since regulators last reviewed the agreements in 1999. 

The Commission launched the investigation on its own initiative, even though there have been no complaints regarding these agreements.  There is currently no deadline for completing the investigation.

The Guidelines, originally adopted in 1968 and previously revised in 1992, “outline the principal analytical techniques, practices and the enforcement policy of the [DOJ and FTC] with respect to mergers . . . involving actual or potential competitors . . . under the antitrust laws.”  

The revision process, started in September 2009, involved a series of workshops, public comment and proposed refinements.  The result is a set of revamped Guidelines that differ from the 1992 version in several ways.  In general, they reflect a more tolerant approach to mergers, stressing the need to “avoid unnecessary interference with . . . competitively beneficial” mergers; raising the concentration thresholds (HHI’s) that warrant further scrutiny of a merger; and explicitly clarifying that coordinated effects can, in fact, be legal.    

The revised guidelines also include several new features.   One, “Evidence of Adverse Competitive Effects,” identifies evidence helpful in evaluating mergers.  It includes effects of consummated mergers; direct comparisons to events such as mergers, exit, expansion or entry that have occurred in the relevant market; competition between the merging firms; and a merger’s impact on “disruptive” firms that benefit consumers, e.g., through price cutting or innovation.  Other additions include discussions of how the agencies evaluate monopsony power, mergers of competing buyers, and partial acquisitions. 

The 2010 Merger Guidelines replace the 1992 Guidelines.  They do not, however, replace the agencies’ Commentary on the Guidelines issued in 2006.  Nor do they replace the Bank Merger Competitive Review guidelines developed in 1995.

After reciting well-known statistics about the broad decline of print media (revenue declines, staffing cuts, the proliferation of competing new media), the Draft discussed proposals for two antitrust exemptions aimed at supporting the newspaper industry.

One proposal would allow news organizations to collaborate in erecting “pay walls” that would require consumers to pay for online content.  This proposal is based on the notion that pay walls simply won’t be effective unless they are erected “industry-wide.”  Similarly, the second proposal would allow news organizations to jointly agree on ways to get news aggregators – i.e., Google and other search engines and news services – to pay for the use of online content.

While the Draft reviews both the pros and cons of each proposal, the tone is lukewarm.  Despite some calls for legislation to allow news organizations to experiment with “innovative content distribution and cost saving arrangements,” the Draft acknowledges that these calls have largely dissipated.

Similarly, Congress’s previous experiment with antitrust immunity in the newspaper business, the 1970 Newspaper Preservation Act aimed at allowing coordination between competing newspapers in certain markets, was widely criticized as unsuccessful.

The Draft also acknowledges some compelling comments in opposition to the proposals.  These include the observation that easing the antitrust laws would put small, emerging media companies at a disadvantage.  Barriers to entry into media have never been lower, and the likely beneficiaries of the proposals might just turn out to be the already highly-consolidated, old-media news publishers.  Perhaps most powerful in opposition to the proposals is the report that at least two existing collaborations have been reviewed by the DOJ (one concerning tracking online content, the other platforms for monetizing news content) and deemed to pass muster under the antitrust laws.

Last week Google recently released its own comments on the workshop and the Draft, arguing that the problems of the news industry are “business problems, not legal problems.”  Google insists that it sends 4 billion clicks per month to news publishers, and it is up to the publishers to decide how to interact with (and monetize) those visitors.  Google called on news organizations to work within the antitrust laws to create payment schemes to benefit from their online content without price-fixing, “rather than seeking immunity for anticompetitive behavior.”

The immunity allows the members of the so-called Oneworld Alliance – including British Airlines, American Airlines, and Iberia of Spain – to coordinate on prices, capacity, and service.  The U.S. approval follows on the heels of a similar grant from the European Commission the week before.

Both the U.S. and the E.U. have conditioned immunity on the Oneworld Alliance members’ giving up coveted takeoff and landing positions at Heathrow airport for flights departing to the United States.  But the airlines seem to believe that this sacrifice will be worth the advantage they will gain from partnering with one another.  The Oneworld Alliance will compete against two other global competitors that already have antitrust immunity – Star Alliance (made up of Lufthansa and United/Continental, who have announced a merger) and SkyTeam (made up of Delta Air Lines and Air France-KLM.)

These global partnerships are changing the face of airline competition.  Rather than one airline competing against the others serving the same region, these global alliances will compete against one another.  This will particularly impact corporate travel buyers, who tend to negotiate with the alliances.  Proponents of these ventures argue that forging an alliance, and gaining global reach, keeps the airlines competitive with what business travelers need.

Of course, this means that airlines left without global partners may be at a distinct disadvantage, as critics of the U.S. and E.U.’s actions would be quick to point out.  Virgin Atlantic’s Richard Branson, for example, has been an outspoken critic of the Oneworld Alliance.  Virgin Atlantic has no global partners.

Judge Anita B. Brody of the U.S. District Court for the Eastern District of Pennsylvania ordered the plaintiffs to rebrief their motion by September 30 in light of the U.S. Court of Appeals for the Third Circuit’s ruling a day earlier in a price-fixing class action against diamond company De Beers SA.

A day before Judge Brody’s ruling, the Third Circuit vacated a $295 million settlement in the De Beers case, Sullivan v. DB Investments Inc.  The Third Circuit held that the district court failed to properly ascertain whether class certification was appropriate.  In vacating the De Beers settlement, the appeals court found that the lower court had not addressed differences among the state laws at issue in the case.

The De Beers ruling could have significant implications for the plaintiffs in the Flonase antitrust litigation because they are seeking the certification of multiple classes based on various state and federal laws.  Each of the potential classes seeks to represent individuals and entities that purchased Flonase or its generic equivalent from May 19, 2004, until the full effects of generic competition had been felt.

The court had previously allowed the plaintiffs to proceed with allegations that Glaxo SmithKline (formed by the merger of Glaxo Wellcome and SmithKline Beecham in 2000) caused them to overpay for Flonase by repeatedly filing sham citizen petitions that stalled the entry of generic nasal sprays into the market.  Citizen petitions can be filed with the FDA while approval of a generic drug is pending to express concerns about a product or request that the FDA take administrative action.  Congress passed a law in 2007 permitting the FDA to summarily dismiss citizen petitions to stop drug companies from abusing the process to extend monopolies.

Judge Brody’s ruling temporarily denying class certification may turn out to be only a hiccup in plaintiffs’ quest for class certification.  That said, in seeking class certification, the plaintiffs will need to fully address the differences among the various state and federal laws at issue or risk certification being denied yet again.  Until they achieve the requested class certification, it is the plaintiffs who cannot breath easy.

China’s National Development and Reform Commission (“NDRC”) of China has levied fines and administrative penalties against more than 20 producers of rice noodles.  This enforcement action represents the first application of Article 13 of China’s Anti-Monopoly Law against a price-fixing cartel.  According to media reports, the local Guangxi counterpart of the NRDC led the enforcement efforts.

The cartel involved competing rice noodle producers in the cities of Nanning and Liuzhou.  The first cartel began in November of 2009 in the city of Nanning and continued until January 2010.  During that time, competitors held a series of meetings that led 18 noodle producers to agree to increase prices of rice noodles. Soon thereafter, a second cartel formed in the nearby city of Liuzhou that lead 15 noodle producers to reach agreement to raise prices.  After consumer protests, the NRDC began its investigation, which eventually resulted in publication of China’s first public infringement decision under the Chinese Anti-Monopoly Law on March 30, 2010. 

The fines ranged from 100,000 RMB (approximately $14,700 U.S. dollars) to 800,000 RMB (approximately $117,800 U.S. dollars).  Reports have also indicated that some producers took advantage of China’s leniency program and only received warnings.  China’s Price Law also played a role as local enforcement agencies restored rice noodle prices to pre-cartel levels.

In response to a letter from Senate Judiciary Committee Chairman Patrick Leahy seeking the FTC’s position on such collaboration, FTC Chairman Jon Leibowitz wrote that “[a]lthough we must always be watchful when competitors collaborate, industry efforts to work with Federal officials and provide expertise to combat this ecological disaster are unlikely to raise concerns under the antitrust laws, and we would be unlikely to challenge such an effort.”  Chairman Leibowitz added that the “impact of the oil spill appears likely to be an enormous tragedy for the people and economy of the Gulf and we would like to help any way that we can.”

The issue of collaboration among energy companies was raised because BP officials have acknowledged that they were not technologically prepared to deal with a disaster such as the one now unfolding in the Gulf of Mexico.  A number of BP’s competitors, including ExxonMobile, Royal Dutch Shell and Chevron, have provided support to BP and government officials to help get the oil leak under control.

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.

The heads of these agencies, Assistant Attorney General for Antitrust Christine Varney and Federal Trade Commission Chair Jon Leibowitz will testify.  The hearing is scheduled for June 9, 2010, at 2 p.m. in room 226 of the Dirksen Senate Office Building.    

A general oversight hearing allows the Subcommittee to consider the overall performance of the agencies without reference to a particular topic or piece of legislation.  Members of the Subcommittee are free to ask the witnesses questions about any matter within the purview of their respective agencies.  The House and Senate Judiciary Committees usually hold such a hearing about once a year.         

More information on the hearing can be found on the Senate Judiciary Committee website.

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.