CMA final report in legal services market study

The Competition and Markets Authority has published its final report in its market study into the supply of legal services in England and Wales. The CMA finds that competition in the supply of legal services is not working well, concluding that information issues inhibit the ability of consumers and small business to make informed choices about price, quality and service.

The CMA has undertaken a wide review of the current regulatory regime for legal services.  The legislative framework for the regulation of legal services in England and Wales is set out in the Legal Services Act 2007 (LSA).  Under the LSA, only individuals and businesses authorised by an "Approved Regulator" (AR) or those exempt from the requirement to be authorised are entitled to provide reserved legal activities.  The six reserved legal activities are: the exercise of a right of audience, the conduct of litigation, reserved instrument activities, probate activities, notarial activities and the administration of oaths. The CMA finds that the current system is not sufficiently flexible to apply proportionate risk-based regulation and recommends that the Ministry of Justice reviews the current legal framework to make it more flexible.

The CMA makes a number of recommendations to the ARs urging them to improve the transparency of price and service information to enable buyers of legal services to make comparisons. 

The CMA has also found certain issues relating to unauthorised providers.  Providers that are not authorised and regulated under any legal sector or other specific legislation can provide legal services as a significant focus of their work.  Unregulated legal services providers operate outside the areas of reserved legal activities under the LSA for example, in will writing and estate administration, family, intellectual property, and employment law.  The CMA has recommended that the Ministry of Justice examine whether to extend protection afforded under existing redress schemes to clients using unauthorised providers.

Legal Services Market Study Final Report, 15 December 2016

European Commission fines battery cartel EUR166 million

The European Commission has fined Sony, Panasonic, and Sanyo a total of EUR166 million for colluding to increase their prices and exchanging commercially sensitive information on future bids in the rechargeable lithium-ion battery market. 

Rechargeable lithium-ion batteries are used in portable devices including virtually all laptops and mobile phones. The Commission found that the cartel affected prices in Europe, although most of the illegal activity took place in Asia.

Samsung was fined EUR58 million but obtained complete immunity as the leniency applicant.  Panasonic, having bought Sanyo in 2012, is liable for both its own fine of EUR40million and Sanyo’s EUR97 million fine.  Sony is accountable for a EUR30million fine. 

All parties received a 10 per cent reduction in their fines under the settlement procedure. The case is the 22nd cartel investigation to date that has been subject to the Commission’s settlement procedure, first introduced in May 2010. 

The US Department of Justice fined Sanyo USD10.7million in 2012 for a cartel involving lithium-ion batteries.

The decision brings the total tally of fines imposed by the Commission so far in 2016 to EUR3.7 billion (in large part due to the EUR2.93 billion penalty imposed in the trucks cartel).

Source: Commission press release IP/16/4356

European Commission clears Microsoft-LinkedIn merger and dismisses data concerns

European Commission clears Microsoft-LinkedIn merger and dismisses data concerns

The European Commission has given its conditional approval to Microsoft’s acquisition of LinkedIn at Phase I. It has largely rejected big data competition concerns raised by competitor, Salesforce.

The Commission’s clearance is subject to commitments by Microsoft not to compel computer manufacturers that use the Microsoft operating system to pre-install a LinkedIn application. Microsoft also commits to allow consumers to remove such an application if computer manufacturers install it and to continue offering LinkedIn’s competitors the option to purchase interoperability functions with Microsoft Office on a non-discriminatory basis.

LinkedIn’s main competitors in the EU include Viadeo, XING and GoldenLine which are professional networking sites in, respectively, France, Germany and Poland.

LinkedIn currently does not have an add-in for Microsoft’s Windows 10.

The Commission dismissed concerns that the combination would distort competition in online advertising and in the market for customer relationship management.  The Commission considered whether Microsoft would be in a position to foreclose competitors by refusing them access to LinkedIn’s user database but concluded that this was not essential to compete on the market. In this market, the main competitors are Salesforce, Oracle and SAP.

The Commission has shown that it will not necessarily rush to a negative conclusion where a company that has market power acquires another business, if it is satisfied that the transaction does not harm competition.

Commission press release: Microsoft / LinkedIn (COMP/M M.8124) Commission press release IP/16/4284

CMA announces first disqualification of director for price fixing

The Competition and Markets Authority has announced a disqualification of a company director found to have infringed competition law. This is the first time that the CMA has used its powers under the Company Directors Disqualification Act to disqualify a director of a company that infringed competition law.

In August 2016 the CMA found that Trod had infringed competition law by agreeing with a competing online seller that the parties would not undercut each others’ prices for posts and other goods sold on Amazon’s websites.  The CMA fined Trod £163,371.

The CMA considers that Daniel Aston the managing director of Trod contributed to the breach of competition law which makes him unfit to be a company director.  As such, the CMA has exercised its powers to seek a disqualification undertaking from him not to act as a director of any UK company for five years.

Disqualification is a serious tool in the CMA’s armoury to deal with competition law breaches and five years is a considerable period. It is not the longest period of ban and the CMA could have sought a ban of up to 15 years. What is more interesting perhaps is the question about whether the sanction was proportionate in this case and whether the case will set a precedent for similar enforcement action against individuals in the future.

Source: CMA press release 1 December 2016

Ofcom seeks European Commission approval for BT/ Openreach separation

Ofcom has announced that it will notify the European Commission of proposals to partially separate BT Group from Openreach, its internet infrastructure subsidiary.  But it stops short of the full structural separation that is being urged by BT’s competitors and consumers.

National regulatory authorities including Ofcom must conduct a national and European consultation on their proposed regulatory measures.  European Commission directorate general for communications DG Connect can recommend that they amend or even withdraw the planned measures.

Ofcom believes that an overhaul of the relationship between BT Group and Openreach would bring greater regulatory certainty and that once it is independent from BT, Openreach would be better placed to invest in its broadband network.

Ofcom’s July statement had said that Openreach would become a separate company from BT with an independent board. Ofcom’s latest statement maintains its position that a full structural separation could entail materially greater costs and risks than a partial one and could affect BT’s pension scheme.

The proposals have not been well received by BT’s rivals who are continuing to press for a full structural separation.  It may be asked how the current proposals would bring about a change in BT’s behaviour in a manner that enables other entities to set up their own networks.  Inspiration might alternatively be drawn from other jurisdictions where the focus has been on incentivising other operators to invest in their own new fibre networks such as by allowing them access to the incumbent’s infrastructure on regulated terms. 

Source: https://www.ofcom.org.uk/consultations-and-statements/category-1/strengthening-openreachs-independence

FCA has competition concerns in asset management

The FCA has published its interim report in its asset management market study.

The FCA says that the study raises a number of concerns about whether the asset management sector is driving value for investors as there is limited price competition for actively managed funds. 

The FCA has proposed a package of remedies that would increase transparency and help investors identify the best funds and prices. Most of the remedies relate to governance and price transparency and if implemented would entail changes in the way that asset management firms market and sell their products.

The FCA has also proposed making what would be its first ever market investigation reference to the Competition and Markets Authority over what it views as competition concerns in a relatively concentrated investment consultancy market. 

The FCA is consulting on both its proposed remedies and its provisional decision to refer investment consultancy services to the CMA.

The FCA asks for comments to be sent to assetmanagementmarketstudy@fca.org.uk by 20 February 2017. It intends to publish a final report and remedies in 2017.

Source:  https://www.fca.org.uk/publications/market-studies/asset-management-market-study

Court of Appeal dismisses competition defence in Premier League case

The Court of Appeal has dismissed an appeal against a judgment in favour of the Football Association Premier League (FAPL) relating to the commercial use of foreign bought domestic decoder cards.

The defendant in this case was a pub landlord who used a decoder card which he had bought from a Danish reseller which was a licensed FAPL broadcaster for domestic purposes.  As a result, the reseller’s customers were not authorised to use the cards for commercial purposes such as a broadcast from a public house in the case of the defendant.

The Court of Appeal held that the restriction on the use of the cards for domestic or commercial purposes did not amount to an infringement of competition law.  The Court of Appeal also rejected the claim that the restriction on the use of the cards for domestic purposes was caused by territorial restrictions on the use of the cards.

The defendant relied on EU case law that had held that national legislation which prohibited the importation of foreign decoding devices was a restriction on the freedom to provide services under Article 56 of the TFEU (joined cases C-403/08 and C-429/08 Football Association Premier League Ltd and others v QC Leisure and others; Murphy v Media Protection Services Ltd).  However, the Court of Appeal held that the right on which FAPL relied in this case – the delimitation on the use of the cards for domestic purposes – was not of itself a restriction on competition between Member States.

The Court of Appeal also dismissed the argument that the defendant should be ordered to pay the difference between the commercial and domestic licensing rates as this would amount to a retrospective licence of the copyright works.

The Football Association Premier League Ltd v Luxton [2016] EWCA Civ 1097 (09 November 2016)