Banks in the European Payments Council (EPC) are being probed by the antitrust department of the European Commission (EC) as a result of Payment Network AG’s complaint that it was locked out of the process to set the standard for streamlining payments systems in Europe.

EPC members include banks such as Lloyds TSB, Citibank, Barclays, UBS, HSBC Holdings Plc and Deutsche Bank AG.

The EPC is the “decision-making and coordination body of the European banking industry in relation to payments” that was formed to implement a Single Euro Payments Area (SEPA).  SEPA is a “European Union integration initiative in the area of payments” involving standards and practices aimed at a Single Market for payments in Europe. 

According to the EPC, the group must answer an EC request for information about the “cooperation of banks and payment institutions for designing rules and standards for e-payment services.”  The investigation was sparked after Payment Network AG accused the EPC of excluding it from the standard-setting process altogether, after several requests last year from Payment Network to become involved in the creation of a draft standard and logo were ignored by the EPC.

If Payment Network is excluded from the proposed SEPA standards, it would be unable to display the proposed SEPA logo used by rivals, which could be a big competitive disadvantage if consumers believed its network was not secure.

The EPC claims it is receiving “diverging messages” from regulators who are asking for accelerated adoption of common standards to ease payments made in Euros, but at the same time scrutinizing the decisions made by the group in the name of competition.

Although three rivals of IBM have dropped their complaints that IBM illegally tied its mainframe hardware to its operating system, the computer giant is not out of regulatory woods yet.

Both the U.S. Department of Justice (DOJ) and the European Commission maintain ongoing antitrust investigations – sparked by the complaints – into a possible monopoly IBM holds in the mainframe computer market.

In a filing with the U.S. Securities and Exchange Commission (SEC), IBM stated that two providers of IBM compatible emulator software, Neon Enterprise Software LLC and T3 Technologies Inc., have withdrawn their complaints filed with the European Commission.

Turbo Hercules SAS, a company providing similar products, has also dropped all complaints against IBM.  IBM has stated that the settlements did not involve any monetary compensation.

In addition to dropping their European Commission complaints, Neon and T3 are also dropping their antitrust lawsuits filed against IBM in the U.S.

The three companies that had lodged complaints against IBM were providers of emulator software used on mainframe computers.  This technology allows mainframe operating systems and applications to run Windows, Linux, Mac OS, or Solaris as the host environment, thereby bypassing the need for IBM’s proprietary mainframe software. 

The withdrawal of the complaints has not ended the regulatory scrutiny, however.  Neither the DOJ nor the European Commission has concluded its antitrust investigation of IBM.

These investigations came as the result of numerous complaints filed by mainframe emulator software producers.  While the complaints have been withdrawn, the DOJ has requested the documents pursuant to the settled cases.

The European Commission is investigating whether luxury watch manufacturers have suppressed competition by refusing to provide spare parts to independent repairers.

While the Commission has not identified any specific companies, the Swatch Group, parent company of such brands as Omega and Breguet, has identified itself as one of the subjects.  Swatch has said it is confident regarding the outcome of the inquiry.

The probe comes as the result of a complaint filed by the Confederation of Watch and Clock Repairers’ Associations (“CEAHR”) in 2002.  The EU Regulatory Commission initially rejected the complaint because of insufficient community interest, but a 2010 ruling from the General Court in Luxembourg overturned this decision.

CEAHR claims that watch manufacturers’ refusal to provide spare parts to independent watchmakers is harming competition by driving these artisans out of business.  According to CEAHR, consumers are being harmed because manufacturers often refuse to accommodate unique customer requests and carry out repairs without the input of the customer.  CEAHR says that such a restraint on competition enables manufacturers to charge artificially high prices.

Two major players in the automotive manufacturing industry, Sweden’s Autoliv and Michigan’s TRW, are under investigation by the antitrust divisions of both the U.S. Department of Justice (“DOJ”) and the European Commission (“EU”). 

Both companies are multi-billion dollar corporations that supply safety systems, such as seatbelts, airbags and steering wheels, to automakers.  Autoliv and TRW each operate on a global scale, employing thousands of people worldwide. 

The EU recently conducted surprise visits to Autoliv and TRW manufacturing facilities in Germany.  A spokesman for the Commission said that there “is reason to believe that the companies concerned may have violated EU antitrust rules that prohibit cartels and restrictive business practices.” 

In the U.S., the DOJ is overseeing a similar investigation and has subpoenaed documents from both TRW and Autoliv. 

In keeping with their policies, neither agency has provided details of these ongoing investigations.

Apple may be facing an antitrust probe in India due to a consumer complaint urging India’s Competition Commission to investigate whether Apple violated competition laws by partnering with two of India’s largest mobile phone operators to sell the iPhone 4.  

Apple chose two of India’s major carriers – Bharti Airtel and Aircel – as partners to sell Apple’s most recent iPhone model, the iPhone 4, which was unveiled in India on May 27, 2011.  Previously, Apple partnered with Bharti Airtel and Vodafone Essar Ltd. for earlier iPhone models, the iPhone 3G and 3GS.  No consumer complaints were filed in connection with the partnerships for the earlier models.

The iPhone 4 partnerships essentially block rival carriers from selling the iPhone 4 and theoretically may encourage Bharti Airtel and Aircel to artificially increase prices if they face no competition from rival carriers.  India’s antitrust laws bar agreements that are “likely to cause an appreciable adverse effect on competition within India.”

Apple’s practice of partnering with one or two carriers is common in other markets, including other Asian markets. Apple typically partners with only one carrier in other Asian markets and two carriers in the U.S.  In the U.S., Apple initially partnered with AT&T for all iPhone products, adding Verizon as a partner in February 2011 (while maintaining its partnership with AT&T). 

In June, Apple began selling an “unlocked” version of the iPhone 4 in the U.S., meaning that consumers could purchase the iPhone directly from Apple – at list price – and use the phone with other GSM-compatible carriers, such as T-Mobile.

Apple claims that the iPhone 4s sold in India are similarly “unlocked,” allowing consumers to choose among a variety of GSM-compatible carriers or switch carriers at any time. 

As of yet, the Competition Commission has not committed to investigating Apple, saying only that the agency “may examine the complaint to see if [Apple] is violating any law.”

The U.S. Federal Trade Commission (“FTC”) and Department of Justice (“DOJ”) plan to sign a memorandum of understanding with China’s three antitrust enforcement agencies, signaling the first formal pact of cooperation between U.S. and Chinese regulators. 

This deal comes on the heels of China’s sweeping antitrust reform, a policy it developed with advice from foreign agencies like the FTC.  The growing number of countries with antitrust laws and agencies, combined with the increasingly global profile of corporations, has made international cooperation extremely important.  Moreover, multi-jurisdiction, transnational antitrust investigations are now common, meaning that different agencies often have overlapping authority. 

A formal memorandum of understanding facilitates agencies’ ability to share information, especially confidential documents.  The FTC hopes this deal will bring international antitrust policy one step closer to a convergent set of global standards with consistent enforcement. 

The U.S. shares similar agreements with a handful of other countries (Russia, Japan, Israel, and the E.U.) and intends to actively pursue new deals, especially with developing countries like India.

A justice of the British Columbia Supreme Court has ruled that an alleged worldwide diamond cartel led by rough diamond seller De Beers had sufficient anticompetitive impact on Canadian consumers to enable a price-fixing class action to survive a motion to dismiss at the pleading stage.

The plaintiff alleges that De Beers and the other defendants sought to eliminate competition in the sale of gem grade diamonds in British Columbia, Canada, and elsewhere, by fixing the price of gem grade diamonds and allocating the market for gem grade diamonds.

De Beers had argued that the court lacked jurisdiction of the claims in Fairhurst v. Anglo American PLC because only one of the defendants did any business in British Columbia.  And all defendants traded only in rough diamonds, not the gem grade diamonds purchased by consumers like the plaintiff.  De Beers argued that the defendants were far higher in the “diamond pipeline.”  In the words of its expert, “any connection between the Defendant’s sales of rough diamonds on the one hand and the Plaintiff, other Proposed Class Members and any diamond jewelry purchases made in British Columbia on the other hand, is remote in the extreme.”

Madam Justice B.J. Brown, however, concluded that De Beers was not only higher in the “diamond pipeline”– it more or less owned the pipeline.  The court noted that De Beers was long the largest producer of rough diamonds in the world, acted historically as the “diamond industry custodian,” and “possessed a degree of monopoly power in the rough diamond market for over a century.”

Drawing upon jurisdictional authority to hold foreign manufacturers liable for knowingly sending hazardous products into the stream of commerce in Canada, the court ruled that a “tortious conspiracy” such as the alleged worldwide diamond cartel is said to occur wherever damage from the conspiracy is suffered:  “The defendants do not suggest that ‘their’ diamonds were not sold in British Columbia.  The diamonds arrived in British Columbia in the ordinary course of De Beers’ business, and the defendants knew or ought to have known that the product would be sold in British Columbia.”

The court deemed allegations of a diamond cartel whose aim was to “creat[e] an overcharge” that would necessarily harm consumers was sufficient to give the court jurisdiction at this stage in the litigation.

MasterCard is discovering that Dutch competition authorities may be serious in their goal to increase competition in the payments market by encouraging banks not to go “steady” with MasterCard.

MasterCard is reporting in its 10-Q report that the Netherlands Competition Authority is challenging its co-branding and co-residency rules, which restrain banks from expanding their relationships with other payment systems.

According to MasterCard, the co-branding rules at issue can prohibit “financial institutions licensed by MasterCard from placing other payment systems’ brands on MasterCard cards.”  The challenged co-residency rules can prohibit “financial institutions from encoding other payment systems’ applications on the electronic ‘chip’ in MasterCard cards.”  A hearing on the matter was held on April 14, 2011.

This challenge comes after the Netherlands Competition Authority released its Vision Document on the Payments Market in December 2010.  In that statement, the Dutch authorities expressed the view that they would “like to see banks conclude contracts with payment systems other than MasterCard.”

Britain’s Office of Fair Trading (“OFT”) will announce this month whether it is investigating market dominance of the “Big Four” accounting firms – Deloitte LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP and KPMG LLP.

The investigation would follow a House of Lords Economic Affairs Committee report entitled “Auditors: Market concentration and their role,” released in late March criticizing the big four auditors for their lack of oversight and their failure to warn regulators before the financial crash.

In that report, the Committee calls for a competition probe of the large auditors and dominance in the market.  According to the Committee, 99 out of the FTSE 100 companies (and 240 of the FTSE 250 companies) were audited by the Big Four.  The Committee noted concerns about “competition, choice, quality and conflict of interest.”

The OFT previously made submissions to the Committee and to the European Commission regarding competition in the audit market.  An OFT probe would likely include bank loan covenants that require borrowers to use the big four auditors.

The European Commission (“EC”) is commencing two antitrust investigations of the market for credit default swaps (“CDS”).

The EC investigations follow a similar investigation by the United States two years ago.  CDS, often vilified as a prime catalyst of the global financial crisis, are financial instruments that provide investors with protection in the event the subject entity defaults on payments.  For this reason, CDS are often seen as insurance against default – buyers pay money in exchange for a payoff if the reference entity (a third party) defaults on an independent credit instrument.  The CDS market is a multi-trillion-dollar industry.

The two EC investigations are described by the Commission in a press release as follows: (1) “whether 16 investment banks and Markit, the leading provider of financial information in the CDS market, have colluded and/or may hold and abuse a dominant position in order to control the financial information on CDS”; and (2) “whether preferential tariffs granted by ICE [Clear Europe, the leading clearing house for CDS,] to [nine] banks have the effect of locking them in the ICE system to the detriment of competitors.”

At its core, the EC’s first investigation concerns the fact that Markit maintains exclusive possession of invaluable daily market information, including information on prices and indices.  An emphasis is placed on probing Markit’s agreements with the entities that provide the market information and possible concerted conduct to determine whether competition in the financial information market is stifled.

The second investigation centers on certain preferential-treatment provisions in contracts between nine CDS dealers and ICE Clear Europe.  The principal concerns are (1) whether these preferential provisions make entry into the clearing-house market unreasonably challenging, thereby limiting competition and choice; and (2) whether the agreements contain fee arrangements that unfairly advantage these nine CDS dealers to the detriment of other CDS dealers.

Although some critics find this move unnecessarily duplicative given the recent regulatory efforts to improve transparency in the CDS market, the EC appears steadfast in its investigation.  As stated in its press release, “[t]he Commission’s antitrust tools are complementary to these regulatory measures . . . .”  The common purpose of both efforts is to improve fairness in this particularly opaque market setting.