High Court grants interim injunction against Telefónica in abuse of dominance case

The High Court has ordered Telefónica to continue to deal with Packet Media pending resolution of a dispute between them raising a claim of abuse of dominance on the part of Telefónica.

Telefónica (trading as O2 in the UK) provides Packet Media with O2 SIM chips which are used in the mobile gateway system that Packet Media provides to its customers and which allows callers from landlines to make calls to mobiles using mobile networks. Such calls are typically cheaper than landlines originated calls to mobiles.  The gateways use multiple mobile phone SIMs as part of call origination.

Packet Media claims that Telefónica’s threat to disconnect over 2000 SIMs, despite them being supplied by an O2 authorised reseller, amounts to the refusal to grant access to an essential facility and, as such, is an abuse of dominance.

An interim injunction was granted pending trial with the judge stating that “the course that is likely to cause the least irremediable prejudice is that which involves maintenance of the present status quo”.

The injunction was granted despite there being a dispute between the parties as to the relevant market. Packet Media amended its claim to state that the relevant market was the markets for wholesale provision of access to call and SMS origination on the mobile networks on which both parties operate in the UK.

Injunctions of this nature are rare but have been granted in previous cases.  In 2013, the High Court ordered Barclays to continue to provide banking services to money transfer service provider Dahabshill pending a full trial.

Probably this is not the end of the matter and Telefónica will apply to discharge the injunction.

Packet Media Ltd v Telefonica UK Ltd [2015] EWHC 2235 (Ch)

Competition Commission of India warns companies of sanctions for incomplete provision of information in merger filings

India’s Competition Commission (CCI) has found that Japanese Bank Sumitomo Mitsui infringed Indian merger control regulations by not disclosing assets it holds in India, but decided not to impose a penalty.

Sumitomo Mitsui acquired 2.77 per cent of Reliance Capital in 2014 in a deal reported to be worth 3.71 billion rupees (EUR53 million).

The transaction required clearance from the CCI, which found that Sumitomo had failed to inform it of its interest in Ambit Investment Advisors which competes with Reliance Capital.

Following a hearing on 16 July, the CCI has decided not to impose a fine.  The reasons why the facts and circumstances in this case did not in the CCI’s view justify imposing a fine are not clear.  However, the CCI used the opportunity to send a strong message to companies that it was their responsibility to provide full disclosure.  It therefore cannot be expected that the CCI will be as lenient in future cases of failure to supply complete and accurate information in merger proceedings.

The CCI can impose penalties of 5 to 10 million rupees (EUR 72,000 to EUR 144,000) or require the filing to be re-submitted where it finds that the supporting information is incomplete or misleading. 

In contrast, under the EU Merger Regulation the European Commission can impose fines of up to 1 per cent of worldwide group turnover for a number of procedural infringements including providing incorrect or misleading information in a merger filing or a response to a request for information or failing to supply information within the period fixed by the Commission.  The failure to supply full information can result in an extension of the time period in which the Commission must reach a decision on whether to open proceedings, or can result in rejection of the notification.  The Commission may also revoke a merger clearance decision if the decision is based on incorrect information for which one of the undertakings is responsible or where it has been obtained by deceit.

For merging companies the significance of providing full information as part of the merger filing process goes beyond the risk of financial penalties and delays.  They will want to be satisfied that the clearance is final and cannot later be reopened because the authority believes that the factual basis on which it took its decision was incorrect.

 

Hong Kong's Competition Law - one step closer

The Hong Kong Competition Commission (Competition Commission) has published its final guidelines on the Competition Ordinance which will come into effect on 14 December 2015. The guidelines cover the First Conduct Rule (on anticompetitive agreements), the Second Conduct Rule (on abuse of market power) and the Merger Rule (which regulates mergers in the telecommunications sector).  The Competition Commission also explains how it will handle complaints, conduct investigations and consider applications for exemptions and exclusions. 

The new competition law contains many borrowings from established competition laws, notably the EU, US and Australian regimes.  However, there are some noteworthy features which indicate that the legislature and the Competition Commission have sought to adopt a rather idiosyncratic approach in certain areas. 

The Competition Commission has not set out any indicative market share thresholds for either a finding of substantial market power or for vertical agreements that might be caught by the First Conduct Rule.  The absence of any ‘bright line’ safe harbours is based on the view that such thresholds would be unworkable given the structure of the local economy. 

There are specific exemptions for SMEs whose conduct will not infringe the First Conduct Rule where the businesses engaging in the practices have a combined turnover in Hong Kong of less than HK$200 million.  The Second Conduct Rule does not apply to businesses with local turnover of less than HK$40 million.  However, serious infringements including price fixing, market sharing, output limitation and bid rigging will not benefit from exemption.   

Private actions can only be brought after the Competition Tribunal has ruled that there has been a violation following an application by the Competition Commission for the imposition of a fine or an order to stop the infringing practices.  However, the Government is understood to be considering the need for a standalone action in the years after implementation.

Hong Kong does not have general merger control at present outside the telecommunications sector.  However, the need for industry-wide merger control is expected to be revisited in a few 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 using very similar powers to those in the UK under the Enterprise Act 2002.  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 has pledged to rescind its guidance on ticketing pricing before the Ordinance comes into effect. 

The Competition Commission has not yet published its leniency policy or its statement of enforcement priorities, although these are expected in the coming months.  Consumer facing industries such as healthcare and leisure are expected to be priorities.  Many of the Competition Commission’s officials have a background in consumer law enforcement.   

The test of the new law will be how it is interpreted and applied and against the specific features of Hong Kong’s market policy.  Not surprisingly the shipping industry has urged that a rigid application could have serious implications for its sustainability by banning cooperative arrangements that have been acceptable up to now but which would violate the First Conduct Rule unless exempted. 

When the new rules come into effect Hong Kong will be the last developed economy to adopt an industry wide competition law joining most of its neighbours such as mainland China, Indonesia, Japan, Malaysia, South Korea, Taiwan, and Thailand.  Although North Korea does not have one…