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.

Mexico’s Federal Competition Commission has whacked Telcel – Mexico’s largest mobile phone provider – with a $1 billion fine for using “substantial market power” to unfairly increase its competitors’ costs.

According to the Commission, Telcel charged its competitors interconnection fees for calls terminating on its network that were higher than fees paid for calls made within Telcel’s network.

The fine constitutes roughly 10% of Telcel’s assets, the largest permitted under Mexican law for repeat offenses.  The Commission’s 3-2 vote in favor of the fine follows an investigation of charges filed in 2006 by Telcel’s smaller competitors, including Axtel, Alestra, Marcatel, Megacable, Protel, and Telefonica.  Under the ruling, Telcel has 30 days to provide the Commission with a plan to ensure that Telcel ceases its anticompetitive practice.

Telcel is owned by one of the world’s largest mobile phone providers, America Movil, which in turn is controlled by Carlos Slim, purportedly the wealthiest person in the world.  Telcel has stated that it will seek reconsideration by the Commission and may also seek relief in the courts.

The European Commission is engaging in a little spring cleaning as it opens the window on how the European Union calculates fines, and cleans up a price-fixing cartel of laundry detergent producers.

The EU’s drive for greater transparency in how it sets fines was announced by Competition Commissioner Joaquin Almunia, who revealed that the Commission will be adding a section on fines in its Statement of Objections, which is sent to companies under investigation.  This new section will “indicate … the elements for the calculation of the fine such as the value of the cartelized sales – which is a critical factor – but also, for example, an indication of the gravity” and whether they have breached rules previously, he said.

The announcement comes in the wake of criticism from businesses that the fines are too high, especially in difficult economic times.  Almunia said the change should “open a channel for dialogue with the parties and will give them a better idea, at an early stage, of the size of the fines” they are facing. 

“In the last few years, we have been refining our fining guidelines to achieve optimal deterrence – which is our ultimate goal – and we will continue do to so,” he said.  Almunia defended the high fines by saying, “Our fines must remain large, because companies need to understand that cartels do not pay.”

The announcement came a day after the Commission fined two household products companies – US-based Procter & Gamble Co. and British-Dutch company Unilever NV – a total of $456 million as part of a settlement for fixing prices of laundry detergent powder in eight European Union countries.

Germany’s Henkel AG, one of the leading producers of laundry detergent in Europe, blew the whistle on the cartel in 2008 when it detected the conduct during an internal audit.  Henkel got immunity and was not fined because it informed regulators of the price fixing. 

In a press conference, Almunia said the cartel began when the companies, through a trade association, began an environmental initiative which focused on methods to reduce the weight of detergent powders and reduce packaging waste.  “They agreed to protect their respective market shares, they agreed also not to decrease prices when decreasing the size of the packages, and afterwards they even agreed on a price increase,” Almunia said.

The cartel operated from January 2002 until March 2005, and affected the price of laundry detergents in supermarkets in Belgium, France, Germany, Greece, Italy, the Netherlands, Portugal and Spain. 

As part of the Settlement, both Unilever and Procter & Gamble admitted that they participated in the cartel in exchange for a 10 percent reduction in fines.  The fines were also reduced as part of the Commission’s leniency program because both companies cooperated with the investigation.

The European Commission, which can fine companies as much as 10 percent of global yearly sales, imposed 12 billion Euros in fines from 2005 to 2010.  In 2010 alone, the Commission imposed fines of 3 billion Euros in the seven cartel decisions it made.  The Commission is currently investigating more than 25 cartel cases.

The European Commission may use antitrust law to enforce new “net neutrality” rules, according to an administrator who has directed both antitrust and telecommunications regulation for the 27-country European Union.

New EU rules on non-discrimination by Internet service providers go into effect on May 25, 2011 and, like the rules enacted last year by the U.S. Federal Communications Commission, they represent a compromise that appears to satisfy neither ISPs nor “open Internet” advocates – the two vocal sides of the net neutrality debate.

In a speech on April 19, Neelie Kroes, the European Commissioner for Digital Agenda, suggested that the European Commission may also use antitrust law to enforce net neutrality.  Kroes was, until 2010, the Commissioner for Competition, tasked with enforcing EU antitrust law.

Although there is no generally accepted definition of net neutrality, specific ISP policies and actions are often included.  In Europe, many mobile Internet providers and some wired providers block their customers from making voice-over-Internet-Protocol phone calls using services like Skype which compete with wired and wireless phone companies.  Also, as in the U.S., some European ISPs have proposed charging popular websites for “priority” access to their networks.  

The upcoming May 25 telecom rules, which are based on a 2009 EU directive, require that ISPs allow all Internet users to “access and distribute information or run applications and services of their choice” in a way “that ensures open and neutral Internet principles are respected in practice.”  The rules are vague, though, and leave tricky questions of definition and implementation to the member countries.

In what many commentators described as a wait-and-see attitude, Kroes proposes to pay close attention to ISPs’ compliance with the new rules for six months before considering further measures.  She did suggest that antitrust enforcement could work alongside telecom regulation where blocking or “traffic-shaping” policies distorted competition.  Such behavior by ISPs could theoretically favor content and services that are allied with, or vertically integrated with, the ISP, at the expense of independent competitors.

While telecom regulation and antitrust law address the same goal – promoting competition – enforcement mechanisms may be very different in speed, expense, and political difficulty.  In the U.S., the Supreme Court’s 2006 Trinko decision largely precludes antitrust suits against problematic conduct that is also a violation of FCC rules.   In the EU, where “competition” and telecom regulation both flow from the European Commission’s broad regulatory mandate, Kroes’s announcement suggests that regulators will bring both to bear.