OFT offers financial incentives for information regarding cartel activity

The OFT has today announced a policy under which it will pay financial incentives of up to £100,000 in return for information which helps it to identify and take action against illegal cartels. Read more.

See also here.

Microsoft fined for 1.5 billion EUR tomorrow?

“Feb. 25 (Bloomberg) — European Union regulators may fine Microsoft Corp. for failing to comply with a 2004 antitrust order to charge “reasonable” fees for patent licenses on operating system software, three people familiar with the matter said.

The fine may be announced as soon as Feb. 27, said the people, who declined to be identified because the decision isn’t public. Microsoft said in a Jan. 24 U.S. regulatory filing that the penalty may be as much as 1.5 billion euros ($2.2 billion).” See more.

 It would be  miassive fine, but let’s wait until tomorrow.

European Parliament calling for an investigation of large supermarkets

Several members of the European Parliament called (1) ”upon DG Competition to investigate the impacts that concentration of the EU supermarket sector is having on small businesses, suppliers, workers and consumers and, in particular, to assess any abuses of buying power which may follow from such concentration”. Moreover they requested  (2) “the Commission to propose appropriate measures, including regulation, to protect consumers, workers and producers from any abuse of dominant position or negative impacts identified in the course of this investigation”. See here.

Although the members of parliament (MEPs) recognised that not all of the Member States have legislation on large retailers, they asked for the above mentioned actions. Moreover they even got to worry that “squeezes on suppliers have negative knock-on effects on both quality of employment and environmental protection”.

Probably some of these concerns have a solid foundation supported by evidence, but the issue might get complicated. DG Competition is not like the Office of Fair Trading or the Hungarian NCA, the Gazdasági Versnyhivatal. DG Comp is not responsible for enforcing consumer protection legislation. So the first request above would have been better placed if it was addressed to either the European Commission  or to an other DG that might be more concerned about consumer protection instead of consumer welfare. Moreover regarding the first request, abusing buyer power seem to be a concern in EU competition law only if it is an abuse of a dominant position (that has a special meaning in competition law) or if it can somehow fit into the other provisions on competition.

Regarding the second request the core of the problem is the same, namely that it is hard to see on which relevant markets might large retailers be in a dominant position according to Article 82 (some special circumstances might come up and support maybe regional dominance somewhere).

And lastly, environment protection and quality of employment are legitimate concerns, but not under competition law (environment protection could have relevance, but only limited, but the case for employment protection is more weak).

Hungary does have a legislation on large retailers, the Act on Trade. Although the NCA was concerned and opposed the legislation at the time of adoption, but nevertheless it  became responsible for enforcing it. In principle the act prohibits the abuse of significant market power but that is not equated with a dominant position in the competition act. There is a procedure ongoing against TESCO under the Act on Trade for a suspected abuse of significant market power.

Change of business model by Microsoft

Earlier this year I wrote that a Hungarian leading figure of Microsoft told a smaller audience that Microsoft wanted to change its business model. (See here.)

26Econ.com writes the followings on the blog:

“Yesterday I went to a law and economics conference about intellectual property. It was co-sponsored by Microsoft, and one thing that surprised me was that two of the seven papers presented were about open source. I also found the attitude of the Microsoft people at the conference to be refreshing. They were open-minded and willing to discuss, without pushing their point of view too hard. Somehow I’d expected Microsoft to be less human. I was pleasantly surprised.” See here.

Things start to happen, it seems.

Recently on Global Competition Policy(GCP) – Pharma dawn raids, etc.

The EC’s Sector Inquiry on Pharmaceuticals By: Luc Gyselen February 14th, 2008 Since the entry into force of Regulation 1/2003 on May 1, 2004, the Commission has already launched four comprehensive sector inquiries on the basis of Article 17. Why have sector inquiries become so fashionable?

Comment on the EC’s Pharmaceutical Dawn Raids By: Susan Creighton & Scott Russell February 14th, 2008 That the EC has a keen interest in understanding the pharmaceutical industry’s competitive dynamics is hardly exceptional. But the way in which the inquiry commenced has left many wondering why the need for such extreme measures.

The EC’s Investigation into the Pharmaceutical Sector: Trouble Ahead at the IP/Competition Intersection? By: David Hull February 7th, 2008 The Commission’s sector-wide investigation moves competition law to the center of the generics debate and raises thorny issues on the relationship between the competition and IP rules.

The EC Sector Inquiry Regarding Pharmaceuticals: Some Thoughts from a U.S. Perspective By: Kent Bernard February 6th, 2008 When a major competition authority such as the European Commission launches an inquiry into a sector of the economy with no suggestion of specific wrongdoing, it raises a couple of intriguing points.

Non-contractual liability of the European Community in competition matters: The aftermath of the CFI judgment of 11 July 2007 in Case T-351/03, Schneider v. Commission By: Aitor Montesa Lloreda February 5th, 2008 Schneider III has made real a possibility which was only theoretical before: that the Commission can be held responsible for damages caused by its wrongful decisions in competition.

Leniency and vertical agreements

E-Competition at Concurrences writes: 

“The Hungarian Competition Authority invokes cartel rules and leniency policy with regard to an exclusive distribution agreement in the healthcare sector (Kortex/Olympus)

On 18 December 2007, the Hungarian Competition Authority (“GVH”) fined Kortex Mérnöki Iroda Kft. (“Kortex”), a company specialised in the construction of hospitals and the distribution of medical equipment, HUF 77m (approximately € 300,000) for concluding an anti-competitive agreement with Olympus Hungary Kft. (“Olympus Kft.”), the distributor of Olympus medical devices in Hungary. At the same time, the GVH exonerated Olympus Kft. from paying a fine under its leniency policy. The decision raised questions about the delimitation between horizontal and vertical agreements.” … For more click here.

Report by the House of Lords – Full unbundling supported

The Single Market: Wallflower or Dancing Partner? Inquiry into the European Commission’s Review of the Single Market

The report also examined unbundling in the energy sector.

” A number of our witnesses supported the findings of the European Commission’s Energy Sector Inquiry. In particular, the Office of Gas and Electricity Markets (Ofgem) and Centrica drew attention to a range of significant problems, highlighted in the Inquiry, that were preventing effective competition emerging. These included: market concentration; collusion between incumbents to share markets; vertical integration; lack of access to infrastructure; lack of or delayed investment; and a lack of market transparency that is preventing new entrants from assessing the scope for profitable entry.

…

The Commission has proposed a 3rd package of energy legislation. A number of witnesses, including Ofgem, the former DTI and HM Treasury, support the need for further legislation, particularly to mandate ownership unbundling, as discussed in more detail below (paragraphs 86–89). However, the view was not shared by all. Some respondents cautioned against the enactment of new laws before reviewing, and ensuring compliance with, existing legislation.

…

With the exception of Gaz de France (Q 178), all respondents were in favour of a greater separation of transmission and supply interests. The majority favoured full ownership unbundling, including National Grid who have direct experience of both models in the UK. National Grid argue that the ownership unbundling method has delivered significant benefits in the UK in terms of levels of investment, removing network congestion, nondiscriminatory third party access, reliability and transparency. National Grid cautioned against promotion of the ISO model for which they point out there is limited precedent within gas markets.

…

Having considered the evidence, we are of the opinion that full ownership unbundling more satisfactorily removes the incentives for discriminatory and uncompetitive behaviour by the network operator. To deliver just some of the benefits of ownership unbundling, the ISO model requires a level of regulation and monitoring which simply is not in place in a number of Member States.”

Pandora’s Box was opened last September

I think Eleanor Fox can write very soon her next artice titled: We protect competition, you protect competitors II. …. 

“Opera, a Norwegian developer of web-browsers, filed a complaint against Microsoft with the European Commission (the “Commission“) claiming Microsoft is abusing its dominant position by tying its browser, Internet Explorer, to the Windows operating system and by hindering interoperability by not following accepted Web standards. The developer asked the Commission to require Microsoft to unbundle Internet Explorer from Windows and/or carry alternative browsers pre-installed on the desktop and require Microsoft to follow fundamental and open Web standards accepted by the Web-authoring communities. Opera thinks that its requested remedies gives consumers greater freedom and flexibility while, at the same time, ensuring that the Web further develops into a platform for innovation.” The Antitrust Lawyer Blog

“InformationWeek reports that the House might hold a hearing on the antitrust implications (if any) of a potential Microsoft acquisition of Yahoo.

“Microsoft’s bid to acquire Yahoo is certainly one of the largest technology mergers we’ve seen and presents important issues regarding the competitive landscape of the Internet,” said Judiciary chairman John Conyers Jr., D-Mich., and ranking Republican Lamar Smith, R-Texas, in a joint statement released Friday. The Judiciary Committee’s Task Force on Antitrust and Competition Policy will give the proposed deal “a careful examination” at a hearing slated for this coming Friday, the statement said. The committee will hear from experts — as yet unidentified — who will weigh in “on whether this proposed consolidation works to further or undermine the fundamental principles of a competitive Internet.”

Alos, the Department of Justice’s antitrust division “would be interested in looking at the competitive effects of the transaction.” – On Antitrust Review

And you can read many more on the Internet, plus there are already some complaints at the Commission.

Decisions I do not like to read

The European Commission published its decision on the Schering-Plough Corporation and Organon BioSciences N.V. acquisition. The concentration concerns human health products and animal health products, where both parties are active. The Commission stated that the concentration gives rise to horizontal overlaps between the activities of Schering-Plough and Organon BS for the manufacture and marketing of vaccines and pharmaceuticals in the animal health sector. There are overlaps in over 40 products markets, in several EEA countries for each product. The decision first examines the definition of the relevant markets for human health and the competitive assessment of the proposed transaction in the human health sector (Section A), and then the relevant market definition for vaccines and pharmaceuticals in the animal health sector and the competitive assessment of the transaction are examined market by market (Section B).

The Commission accepted commitments and let the acquisition go on.

The reason I do not like such decisions is that – although thorough examination of the competitive conditions, etc. is necessary – such decisions are too complex and long for anybody to read. Of course not counting those in the sector and those who hav advised the clients.

Merger proposal of MOL and OMV, the two regional heavy-weight players

From the Section 1.2 of Form CO:  

COMP/M. 4799 – OMV / MOL – SECTION 1.2

Description of the concentration

This Form CO concerns the proposed combination of OMV Aktiengesellschaft, Vienna/Austria (“OMV”), and MOL Hungarian Oil and Gas plc, Budapest/Hungary(“MOL”), hereinafter referred to as the “Transaction”. Currently, OMV is holding  merely a non-controlling 20.2% minority interest in MOL. OMV is a publicly listed, integrated oil and gas company. OMV has two major shareholders, which are  Österreichische Industrieholding AG, Vienna/Austria (“ÖIAG”), and International Petroleum Investment Company, Abu Dhabi/UnitedArab Emirates (“IPIC”), holding 31.5% and 17.6% of OMV’s outstanding voting securities respectively. ÖIAG is the Austrian Republic’s investment and privatization agency (and a mere holding company). IPIC is an investment company which is wholly owned by the Emirate of Abu Dhabi.

MOL is a publicly listed and integrated oil and gas company with a strong focus on Central and Eastern Europe. The undertakings concerned are active in the following sectors:

- OMV: Exploration, production and refining of crude oil; distribution of refined oil products; petrochemicals; natural gas (predominately in Austria).

- MOL: Exploration, production and refining of crude oil; distribution of refined oil products; petrochemicals; exploration/production and transmission of natural gas (in Hungary).