Commission blocks proposed merger between Deutsche Börse and London Stock Exchange

The European Commission has prohibited outright the proposed merger between Deutsche Börse (DB) and London Stock Exchange (LSE).  The proposed tie-up would have combined the German, UK and Italian exchanges, and several of the largest European clearing houses.  It would have created the largest European exchange operator by some margin.

In the Phase I investigation, the Commission identified competition concerns in several markets, including clearing, derivatives, repurchasing agreements, German stocks, and exchange traded products.

In the Phase II investigation, the parties offered to sell French clearing house LCH.Clearnet to Euronext.  However, this was not sufficient to placate the Commission’s concerns and it instead said that LSE should sell fixed income trading platform MTS. The parties refused and instead offered behavioural remedies.

This is the third attempt by both companies to create a combination of this type since 2000.  In 2012 the Commission blocked a merger between NYSE Euronext and Deutsche Börse because it would create a near-monopoly in European financial derivatives worldwide.

The latest attempt is another where acceptable remedies could not be found but raises a question about the timetabling of commitments as well as their substantive scope.  Vestager said that the remedies package was put forward with very little time for market testing.  Inevitably, behavioural elements will require more detailed probing over more clear-cut structural solutions.  It remains to be seen whether the deal could have been salvaged with more time for review of remedies.

Deutsche Borse/ London Stock Exchange Group (M.7995) Commission press release IP/17/789

Hong Kong Competition Commission brings first enforcement case

Hong Kong’s Competition Commission has started proceedings in the Competition Tribunal against five IT companies - including a subsidiary of BT - for alleged bid rigging.

The action represents the first formal enforcement proceedings under Hong Kong’s new competition legislation which came into force in December 2015.

The Commission maintains that BT Hong Kong, Nutanix, SiS International, Innovix Distribution and Tech-21 contravened Hong Kong’s prohibition of restrictive agreements contained in the First Conduct Rule of the Competition Ordinance by filing ‘dummy bids’ in a tender organised by the Hong Kong Young Women’s Christian Association.  The tender concerned the supply and installation of a new IT server system.

Hong Kong has opted for a judicial enforcement model in that the Commission investigates and brings proceedings before the Tribunal which decides if there is a breach of the relevant rules. 

The Commission is seeking remedies including financial penalties which can be up to 10% of the companies’ turnover for each year of the alleged infringement and a declaration that each party breached the First Conduct Rule.

The case marks the first significant enforcement case. Up to now some smaller cases have been resolved through informal warning letters.  It provides an opportunity for the Tribunal to clarify the interpretation of the Ordinance and may provide useful guidance on the meaning of key concepts in the legislation, as well as on procedure.

The outcome of this case will be important in securing the legitimacy of the new regime.  In the earlier stages of competition enforcement there is understandably a public expectation to secure ‘wins’.  At the same time the Commission will tarnish its reputation if it pursues cases which do not stand up to judicial scrutiny before the Tribunal. 

Source: Competition Commission press release, Competition Commission takes bid-rigging case to Competition Tribunal

https://www.compcomm.hk/en/media/press/files/20170323_Competition_Commission_takes_bid_rigging_case_to_Competition_Tribunal_e.pdf

Court of Justice rules on publication of leniency information in cartel decisions

The European Court of Justice has clarified the scope of publication of leniency information in the European Commission’s public cartel decisions and the role of the Hearing Officer in conducting reviews of claims for redaction.  The scope of publication of sensitive information in the Commission’s cartel decisions is increasingly important in the context of private actions for damages in the national courts.

Evonik Degussa appealed against a General Court judgment that upheld the Hearing Officer’s refusal to grant confidential treatment to leniency information in the decision in the hydrogen peroxide cartel.  Evonik objected to the proposed release of information that it supplied to the Commission about its business relations in support of its leniency application.  Evonik claimed that it had supplied the information in the expectation that it would not be disclosed publicly.

The Court drew a distinction between the publication of verbatim quotations of information from documents that a leniency applicant may provide in support of its application – and verbatim quotation from the application itself.  The former can be published subject to compliance with the protection of business secrets, professional secrecy and other confidential information, whereas the latter must not be published under any circumstances.   However, the Hearing Officer must examine any objection based on a ground arising from rules or principles of EU law relied on by the interested party in order to claim protection.

The case is likely to require a redefinition in the role of the Hearing Officer now that it is confirmed that a claim for redaction of sensitive material is not limited to the technicalities of the concept of business secrets or professional secrecy and may be based on claims such as legitimate expectations.

Case C-126/15 P - Evonik Degussa v Commission, judgment of 14 March 2017

Court of Justice rejects Samsung appeal in cathode ray tubes cartel

The European Court of Justice has dismissed appeals by Samsung SDI and Samsung SDI (Malaysia) (together, Samsung) against the General Court's judgment on the Commission's 2012 cartel decisions concerning two types of cathode ray tubes (colour picture tube (CPT) and colour display tube (CDT)).

The Court of Justice has rejected arguments that the fine imposed by the Commission should be reduced because it was calculated by reference to sales made outside the EEA.  The Court of Justice confirmed that the value of sales as set out in the Commission’s 2006 Finding Guidelines covers sales made on the market affected by the cartel regardless of whether those sales were actually affected by the cartel.  The Court observed that accepting Samsung’s contention that sales outside the EEA should be excluded from the fine calculation would allow companies to reduce fines based on the location of where the sales were concluded.  It noted also a finding by the General Court that negotiations in Korea affected sales in Europe and were delivered between European warehouses.

The Court of Justice also rejected an argument that the Commission had breached the principle of equal treatment based on a criticism of the Commission’s finding that Samsung SDI had ended its involvement in the cartel after the other participants and that it was effectively being fined for a cartel in which it was the only participant.

Source: Case C-615/15 P - Samsung SDI and Samsung SDI (Malaysia), judgment of 9 March 2017

CMA objections to Actavis and Concordia over ‘pay for delay’

The Competition and Markets Authority has issued a statement of objections alleging that Concordia and Actavis UK entered into anti-competitive agreements whereby Actavis UK incentivised Concordia not to enter the market with its own version of hydrocortisone tablets. The statement of objections finds that between January 2013 and June 2016 the companies infringed Chapter I of the UK Competition Act 1998/ Article 101 TFEU and that Actavis UK abused its dominant position contrary to Chapter II/ Article 102 TFEU.

The statement of objections is also addressed to Cinven, the ultimate parent company of Concordia and to Allergan plc which the CMA provisionally considers is jointly and severally liable as the ultimate parent company of Actavis UK and which formed part of the Actavis UK undertaking for a part of the relevant period.

The pharmaceutical sector remains a focus for the CMA’s antitrust enforcement.  The statement of objections is separate from another investigation where the CMA is alleging that Actavis UK infringed UK competition law by charging excessive prices to the NHS for hydrocortisone tablets.

The CMA has also fined a number of pharmaceutical companies including GlaxoSmithKline a total of £45 million for anti-competitive agreements and practices in relation to the anti-depressant drug paroxetine.

Source: CMA press release 3 March 2017

CMA investigation into provision of products/services to the construction industry

The Competition and Markets Authority has announced that it has opened an investigation into suspected anticompetitive activity in the supply of products and/or services to the UK construction industry.

The CMA has stated that it is investigating suspected breaches of the Chapter I prohibition and/or Article 101 TFEU but it has provided no further information on its website and has not disclosed the names of the parties concerned.  No further details are provided as to the nature of the products concerned.

The CMA expects to take a decision on whether or not to proceed with the investigation in July 2017.  It is currently gathering information and analysing the information it has obtained.