General Court annuls air cargo cartel decision

The General Court has delivered 13 judgments overturning the European Commission’s 2010 decision in the airfreight cartel.  In a rare series of rulings the General Court has annulled fines totalling EUR790 million imposed for price fixing in the air cargo sector.

The General Court found that the Commission’s original decision was flawed due to fundamental discrepancies in the evidence presented by the Commission and the grounds for imposing the level of fines that it did.  The Commission built its case around the concept of a single and continuous infringement (SCI) across all routes in which all of the carriers operated.  However, the operative part of the decision contained four separate infringements which were based on different time periods, different categories of routes and different inculpated carriers.

The General Court found that the internal contradictions in the Commission decision infringed the carriers’ rights of defence and prevented the Court from exercising its judicial review powers.

The Commission has often used the SCI concept when attributing liability for a complex cartel involving multiple parties and across different time periods, including in its decisions in its removal services and bathroom fittings cases.  The General Court’s judgments emphasise that the Commission needs to break down the different fact scenarios and justify its decision in a clear and equivocal fashion. 

For some time the Commission’s rather sloppy approach to a SCI has been a matter of concern as it effectively reverses the burden of proof by putting the onus on the investigated party to displace the inference of a cartel.  If the rulings inject more rigour in the Commission’s approach they can be welcomed from the perspective of defendants.

Meanwhile, private litigation arising from the alleged air cargo cartel continues.  Debates about the significance of the General Court’s judgments for those proceedings will no doubt ensue.  In England the claims technically began as standalone claims but with the Commission’s 2010 decision they became follow-on.  Effectively, the claims are now standalone until the Commission issues a definitive new decision which may require some amendments to pleadings and put some limits on disclosure. 

Sources:

Case T-9/11 - Air Canada v Commission (ECLI:EU:T:2015:994)

Case T-28/11 - Koninklijke Luchtvaart Maatschappij v Commission (ECLI:EU:T:2015:995)

Case T-36/11 - Japan Airlines v Commission (ECLI:EU:T:2015:992)

Case T-38/11 - Cathay Pacific Airways v Commission (ECLI:EU:T:2015:985)

Case T-39/11 - Cargolux Airlines v Commission (ECLI:EU:T:2015:991)

Case T-40/11 - Latam Airlines Group and Lan Cargo v Commission (ECLI:EU:T:2015:986)

Case T-43/11 - Singapore Airlines and Singapore Airlines Cargo PTE v Commission (ECLI:EU:T:2015:989)

Case T-46/11 - Deutsche Lufthansa and Others v Commission (ECLI:EU:T:2015:987)

Case T-48/11 - British Airways v Commission (ECLI:EU:T:2015:988)

Case T-56/11 - SAS Cargo Group and Others v Commission (ECLI:EU:T:2015:990)

Case T-62/11 - Air France-KLM v Commission (ECLI:EU:T:2015:996)

Case T-63/11 - Air France v Commission (ECLI:EU:T:2015:993)

Case T-67/11 - Martinair Holland v Commission (ECLI:EU:T:2015:984)

Hong Kong’s Competition Law now in Force

For a time, Hong Kong had long remained one of the few advanced economies without a general competition law.  All this changed on 14 December 2015 with the coming into force of the Competition Ordinance (CO), Hong Kong’s new industry-wide competition law

The CO draws heavily on other competition laws including those of the European Union, United States and United Kingdom.  Businesses internationally whose activities and investments in or affecting Hong King will need to keep abreast of the developments as the law and enforcement practice are developing.

The CO is based around three main “rules”: The First Conduct Rule, The Second Conduct Rule and the Merger Rule, regulating, respectively, anti-competitive agreements, abuse of substantial market power and mergers in the telecommunications sector.

In the new regime, while the Competition Commission will have the power to apply the CO to all sectors of the economy, the Competition Commission and the Communications Authority will have concurrent jurisdiction to apply the CO in relation to the practices of undertakings in the telecommunications and broadcasting sector.  The powers of the authorities to investigate and enforce the CO are broad and include the power to require an undertaking to provide documents or information and conduct unannounced inspections of premises (‘dawn raids’) under warrant.

The First Conduct Rule identifies four categories of “serious anti-competitive conduct”: price fixing; market sharing (allocation of customers, sales, territories or markets); output limitation and bid rigging.  The Competition Commission does not have the power to determine whether a breach of the substantive provisions of the CO has occurred.  It may issue an infringement notice where it suspects that an undertaking has breached the First Conduct Rule involving serious anti-competitive conduct.  In other cases it is required to issue a warning notice affording the undertaking an opportunity to admit the breach and enter into commitments to remedy its unlawful conduct.  If the undertaking does not enter into the commitments or the breach is continuing the Competition Commission may bring proceedings before the Tribunal. 

A business or any person who is found by the Tribunal to be in violation of the CO may face a range of penalties including a financial penalty of up to 10% of annual turnover "obtained in Hong Kong" for each year of infringement, up to a maximum of three years.

The Competition Commission has already been active in developing its policies and procedures and in competition advocacy.  It has launched a market study into oil pricing and completed a study of the building management market.  It has also urged the Government to open up the electricity market.

It seems that businesses are already taking note of the changes.  For example, the Travel Industry Council pledged to rescind its guidance on ticketing pricing.  The construction and petrol retailing sectors are also believed to be targets for enforcement.

Businesses that are familiar with UK, EU and other international competition laws are well-placed to manage their competition law risk and to take account of the opportunities presented by the new competition law regime in Hong Kong.  In anticipation of the changes, many businesses have been reviewing existing agreements and commercial practices for compliance with the CO and developing competition compliance programmes. 

Parties who consider that they have been harmed by the anti-competitive practices of their suppliers, customers or competitors might consider making a complaint to the Competition Commission who may investigate the matter. Parties who consider that their arrangements have efficiency benefits may want to apply to the Competition Commission to determine the applicability of the exclusions or exemptions set out in the CO to a particular agreement or type of agreement.

https://www.compcomm.hk/en/media/press/files/Competition_Ordinance_Comes_into_Full_Effect_Today_EN.pdf

Biggest Indian cartel fine quashed

After three years of litigation, India’s Competition Appellate Tribunal (Compat) has struck down a 61 billion rupee (EUR 836 million) fine imposed on members of an alleged cartel by the Competition Commission of India (CCI).

On 20 June 2012 the CCI issued an order finding that eleven cement companies and the Cement Manufacturers Association (CMA) had infringed the Indian competition law prohibition of anti-competitive agreements contained in section 3 of the Indian Competition Act 2002.  According to the CCI, the cement companies conspired to reduce or restrict their cement output in order to create a situation of short supply, thereby increasing prices.  The CCI also maintained that the companies frequently engaged with one another at events and meetings of the CMA, where the industry association allegedly provided a means for the cement manufacturers to exchange commercially sensitive information which facilitated parallel pricing, limits on production and market sharing.

The CCI relied entirely on indirect evidence (i.e. circumstantial evidence including parallel price increases) which the CCI used to support a finding of infringement by deduction or inference.  The penalties imposed by the CCI remain in aggregate the largest fines imposed by the CCI since it gained competition law powers in 2009 and are considerable by any standards. 

Compat has remitted the case to the CCI with an order to reconsider it and take a new decision within three months.  Compat’s ruling is interesting because it contains no real substantive discussion of the merits of the case.  It is highly critical of the conduct of Ashok Chawla, CCI’s Chairman since 2012.  Compat found that Chawla did not attend the hearings during the administrative proceedings but still approved the order imposing fines.  Endorsing the investigated companies’ submissions that the CCI violated their rights of defence, Compat was persuaded that the CCI’s decision was tainted with procedural irregularity amounting to the denial of a fair hearing. 

Compat has urged the CCI to develop protocols to ensure compliance with the principles of natural justice.  The judgment is likely to have a resonating effect on the many ongoing procedures before the CCI and will no doubt focus attention on due process and transparency.

It remains to be seen whether CCI will maintain its original theory of harm or whether it will moderate its approach to the calculation of fines.  Compat did not opine on the magnitude of the fine and to date there remain no guidelines from the CCI or under statute on the appropriate level of the fine for breaches of India’s competition law.