December 6, 2013

Microsoft No Longer Has An X On The Back Of Its Box For Antitrust Enforcers

By Jean Kim

The European Commission (the “EC”), as expected, has approved Microsoft’s proposed acquisition of Nokia’s handset devices business, demonstrating that antitrust enforcers no longer view the operating system Goliath of the 1990s as a tempting target.

The European approval was the last remaining regulatory hurdle for the parties to go forward with the $7.2 billion acquisition.  The FTC granted “early termination” approval last week, which means that it will take no action to block the merger.

These relatively easy approvals by U.S. and European regulators are consistent with the similar ease with which Microsoft’s acquisition of Skype (worth $8.5 billion) sailed through U.S. and EC merger review in 2011.  Antitrust enforcers apparently are not concerned with Nokia’s 3% share of the smartphone market going to Microsoft, particularly when Apple and Samsung together account for almost 50% of worldwide smartphone sales in 2013.

Microsoft, after emerging in 2011 from a decade of oversight by the U. S. Department of Justice following the settlement of the DOJ’s 1998 antitrust suit, has truly entered a new era.  Antitrust enforcers have turned their gaze to bigger fish like Google and Apple, and no longer have a knee-jerk reaction to Microsoft’s every move in tech markets.

The EC has not completely withdrawn its scrutiny of Microsoft, however.  As late as March of this year, the EC fined Microsoft $730 million for breaching its five-year commitment to give customers a choice of browser in connection with the upgrade of its Windows 7 operating system.  This penalty was in addition to the more than 1.6 billion euros in fines that the EC had already levied on Microsoft over the last decade.

But Microsoft’s commitment with the EC expires in 2014 (unless extended), and Microsoft may well be left unfettered to pursue an acquisition strategy aimed at making it more competitive in a technological world that is no longer dominated by the personal computer.  Microsoft certainly has the funds for a shopping spree with its $77 billion war chest.

With the rollout of Surface tablets, and Xbox’s healthy 30% plus share of the console market, the Nokia acquisition will round out Microsoft’s portfolio and give it a foothold in three device markets where it can deploy and unify its Windows platform.

– Edited by Gary J. Malone

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Categories: Antitrust Enforcement, International Competition Issues

    December 5, 2013

    Europeans Evolving Toward More Plaintiff-Friendly Private Damages Action Rules

     A View from Constantine Cannon’s London Office

    By James Ashe-Taylor and Julia Schaefer

    The governing institutions of the European Union are moving ahead with proposals that could enable consumers and businesses victimized by antitrust violations to have a better chance at recovering damages from cartel members.

    Earlier this week, ministers from all 28 member states of the EU agreed at a meeting of the Council of the European Union to push ahead with a legislative proposal which seeks to facilitate damages claims by victims of antitrust violations and to allow them to receive full compensation.  Competition Commissioner Joaquín Almunia has called this effort a “milestone in the evolution of competition law enforcement in the EU.”

    The European Commission (the EU’s executive arm) published the legislative proposal to revise rules governing antitrust damages actions under member states’ national law on June 11, 2013.  The Council (one of the EU’s two legislative bodies) has now authorized its Presidency to start negotiations with the European Parliament (the other legislative body) to agree to revisions in the legislative proposal.

    The legislative proposals are designed to remedy defects in private enforcement, an area which Mr. Almunia described as “ineffective” and “uneven.”  Currently, victims of antitrust violations face high procedural hurdles in seeking relief, particularly under national discovery rules.  These often require a detailed description of specific relevant documents before discovery is permitted, an evidentiary obstacle few victims are able to overcome.

    Similarly, the discoverability of leniency documents is often uncertain and determined only on a case-by-case basis.  The EU proposals aim to clarify this area of law, in order to give greater protection and certainty to whistleblowers, while at the same time upholding victims’ ability to access all relevant information.

    The divergent rules and procedures across the EU member states have encouraged forum shopping for the courts with the most plaintiff-friendly procedural rules.  This has meant that the vast majority of damages actions have been brought in the British, Dutch and German courts.  The Commission considers this to be contrary to the single market principle.  It has also pointed out that forum shopping is a luxury available only to large corporations.

    According to Mr. Almunia, the new proposals are about making recovery of compensation by ordinary European citizens and small businesses a reality.

    The proposals would also preserve the competition authorities’ power to punish and deter anticompetitive practices.

    The EU’s enforcement of its competition laws remains a priority.  As discussed on this blog yesterday, the EU has just imposed a new record level of fines against global banks in the Libor and Euribor benchmark manipulation investigations.

    While the legislative proposals would bring European private antitrust damages actions a few steps closer to the American model, they would not make the full leap.  Unlike in the U.S., where victims of antitrust violations are able to seek triple damages from cartelists as a deterrent, the EU’s proposals are aimed only at compensating for the harm suffered.  Punishment, according to the Commission, should remain the exclusive realm of the competition authorities.  Moreover, the EU currently does not have a class action regime, which would facilitate damages actions by consumers and small businesses.  But on June 11, 2013 the Commission adopted a set of common non-binding principles for collective redress mechanisms in member states, which recommend limited opt-in class action-style laws.

    The adoption of a “common approach” by the Council is a positive step toward finalizing the legislative proposal before May 2014, when new elections are held for the European Parliament.  Under the EU’s “ordinary legislative procedure,” the Council will have to reach agreement with the Parliament on the Commission’s proposed legislation.  However, disagreement remains on key aspects of the proposals, such as discovery rules and protection for whistleblowers.  In addition, political conflicts in the Parliament have led to a month-long postponement of the first reading of the proposal until January of next year.

    Despite these roadblocks, there is strong pressure within the Parliament and the Council to complete the legislative passage of this directive before April.  Once adopted, the member states would have two years in which to implement the directive into national law.

    Additional information about bringing private actions for antitrust damages in the EU can be obtained by contacting James Ashe-Taylor or Julia Schaefer in Constantine Cannon’s London office.  

    Edited by Gary J. Malone

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    Categories: Antitrust Legislation, International Competition Issues

      December 4, 2013

      Whistle-Blowing Banks Escape Record Fines EU Imposes In Rate-Fixing Investigation

      By Gary J. Malone

      The record fines imposed by the European Union today as part of its settlement with eight global financial institutions for fixing benchmark interest rates highlight both the risks of collusion and the rewards of coming clean.

      Although the EU fined the group of financial institutions a record total of 1.7 billion euros (about $2.3 billion), two of the participants in the cartels—UBS and Barclays—escaped any fines because they alerted the European officials to the wrongdoing.

      The financial institutions settled charges that they fixed rates for the London interbank offered rate (“Libor”) in the Japanese yen and the euro interbank offered rate (“Euribor”) in euros.  Four of these financial institutions—Barclays, Deutsche Bank, RBS and Société Générale—conspired to fix interest rate derivatives in the euro.  Six of them—UBS, RBS, Deutsche Bank, Citigroup, JPMorgan and broker RP Martin—participated in cartels that fixed interest rate derivatives in the yen.  Pursuant to the Commission’s cartel settlement procedure, the companies’ fines were reduced by 10% for agreeing to settle.

      The Europeans’ investigation follows related investigations into conspiracies to fix the Libor rate by U.S., British and Swiss regulators that led to five financial institutions, including Barclays, RBS and UBS, admitting wrongdoing and agreeing to pay more than $3 billion.

      In announcing the settlement, Joaquín Almunia, the EU’s competition commissioner, stated that “What is shocking about the LIBOR and EURIBOR scandals is not only the manipulation of benchmarks, which is being tackled by financial regulators worldwide, but also the collusion between banks who are supposed to be competing with each other.”

      The banks’ settlement with the EU marks the first time that Citigroup and JPMorgan, will pay penalties in the rate-fixing investigations.  Citigroup, which will pay 70 million euros in fines, avoided fines of an additional 55 million euros because it cooperated with the European investigation.

      The international expansion of investigations into international conspiracies to fix benchmark interest rates is not surprising.  Competitors that collude to eliminate competition put themselves at the mercy of not just the multiple regulators that police competition around the world, but also of their co-conspirators when their interests diverge.

      As soon as members of a price-fixing conspiracy suspect that cartel activities may be revealed, there can be a race to prosecutors’ doors to get a deal avoiding civil fines or even criminal penalties.  After the first whistle-blower reveals the existence of a cartel, however, the next conspirator through the door has to reveal some new wrongdoing in order to get a deal.  If that conspirator is aware of any related cartels, they are likely to be revealed to the prosecutors, who will then start new investigations.

      After that point, all the other conspirators may soon come to realize that their elaborate cartels were really interlocking houses of cards that could not survive even one defection.

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      Categories: Antitrust Enforcement, International Competition Issues

        November 27, 2013

        Cargo Shipping Companies’ Price Signaling Could Run Aground In EU Probe

        By Jeffrey I. Shinder

        The steady stream of cartel investigations and lawsuits on both sides of the Atlantic in recent months highlights the need for vigilant antitrust enforcement to protect consumer welfare, despite the views of those, like the Wall Street Journal editorial page, who question the wisdom of antitrust law.

        These alleged cartels range from the apparently venal manipulations of the financial services industry, where pure greed and opaque markets have resulted in the Libor, Euribor, and foreign exchange market investigations, to claimed conspiracies of expedience in stagnant or depressed industries, where the protagonists are alleged to have colluded to manage supply and “maintain” price in the face of weak demand.  Given the slow growth that has plagued the industrialized world in recent years, we almost certainly will be hearing about more such cartels.  Rigorous antitrust enforcement is often the only check against consumers suffering massive overcharges in numerous, even critical, industries.

        At the end of last week, European Union (“EU”) regulators disclosed yet another significant investigation with their announcement of an inquiry into whether 14 of the world’s major container shipping companies—including the two leading firms of Danish shipping group A.P. Moller-Maersk A/S and Swiss-based MSC Mediterranean Shipping Company S.A.—have been coordinating price hikes on European routes dating back to 2009.

        This new investigation follows raids on some of these companies two years ago by the European Commission (the “Commission”).  According to the Commission, major shipping companies have been using press releases on their websites to signal impending price increases to each other.  While such signaling, standing alone, would be insufficient to support an antitrust violation in the United States, it could be found to violate EU law if it has resulted in higher prices and harm to competition.  However, the targets of the investigation undoubtedly will argue that their price increases were necessitated by competition in the industry and that their conduct reflected individual, and lawful, conduct that did not harm competition.

        Notably, this investigation is taking place against the backdrop of separate U.S. and EU regulatory scrutiny of the planned “P3” vessel-sharing alliance among Maersk, MSC and France’s CMA CGM S.A.  The alliance would purportedly address persistent overcapacity and declining freight rates through an agreement to share ships and engage in related cooperative operating activities, under a common management, while retaining individual commercial status and control of consignments.

        Last month, the three shipping companies filed their proposed agreement with the U.S. Federal Maritime Commission (“FMC”) under the U.S. Shipping Act of 1984.  The FMC is taking public comments on the agreements until November 29, 2013.  If the FMC declines to enjoin the alliance or require additional information, the agreement will become effective on December 8, 2013.  While that would confer antitrust immunity under U.S. law on the alliance, in this instance such immunity is not available under EU competition law.

        Although EU law does exempt certain agreements among shipping companies from Article 101(1) of the Treaty on the Functioning of the European Union, the proposed alliance does not meet the requirements of that exemption.  Thus, even if the alliance survives FMC scrutiny, which is not a given, it may receive a rougher ride in the EU.

        Moreover, while the Commission claims that its price-signaling investigation is separate from its ongoing review of the P3 alliance, the cartel investigation could conceivably influence the Commission’s willingness to approve the alliance.  It would not be surprising if the price-signaling investigation causes the Commission to impose additional restrictions on the alliance, even if it is approved.

        Given the significance of the shipping industry to the global economy, the progress of these regulatory efforts in Brussels is well worth watching.

        Edited by Gary J. Malone

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        Categories: Antitrust and Price Fixing, Antitrust Litigation, International Competition Issues

          October 16, 2013

          Feds Streamline Confidentiality Waiver For International Antitrust Investigations

          The U.S. Department of Justice Antitrust Division and the Federal Trade Commission (“FTC”) have announced that they are issuing a new joint model waiver of confidentiality designed to facilitate international antitrust investigations.

          The Antitrust Division and the FTC often ask individuals and companies involved in civil investigations to permit the agencies to share confidential information provided in the investigation to foreign antitrust enforcers that are investigating the same matter.  According to a press release from the Antitrust Division and the FTC, the revised “model waiver is designed to streamline the waiver process to significantly reduce the burden on individuals and companies, as well as to reduce the agencies’ time and resources involved in negotiating waivers.”

          One of the most important revisions in the model waiver is its treatment of privileged information by the federal agencies.  According to the press release, the waiver “provides the terms on which an individual or company agrees to waive statutory confidentiality protections to the agency that originally received the company’s confidential information.”  The press release also states that the revised model waiver “reflects both agencies’ recent experience with waivers, incorporating updated language and provisions.”

          In updating the waiver, the Antitrust Division and the FTC are attempting to improve cooperation in international antitrust investigations as well as protect confidential information.  The agencies stated that “by permitting cooperating agencies to discuss and otherwise exchange the individual’s or the company’s confidential information, a waiver enables agencies to make more informed, consistent decisions and coordinate more effectively often expediting the review.”

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          Categories: Antitrust Enforcement, International Competition Issues

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