CMA gives provisional clearance to SSE-Npower merger

The Competition and Markets Authority has provisionally cleared the combination of SSE and Npower, unconditionally and following a Phase II review.

The merger combines the supply activities of SSE Retail and Npower but does not extend to other aspects such as energy and distribution.

The second stage probe was launched on the basis of concerns that the transaction would lead to price increases in standard variable tariffs.  However, the CMA does not consider that such concerns are substantiated as the parties are not closest competitors.  This finding is interesting in light of the CMA’s 2014-2016 energy market reference which found that customers on standard variable tariffs were less likely to switch.  During the merger review the CMA found that the proportion of customers on such tariffs has now decreased. Those that do switch were found not to switch between the merging parties.

In the 2017-2018 period the CMA has cleared five transactions at Phase II without remedies.  Two transactions have been cleared with structural commitments. 

Against this background, merging parties in high value more complex deals may well consider that it is in their interests to fast-track to Phase II where the issues can be looked at more closely.  They will have to weigh up the costs and the benefits of trying to secure faster clearance at Phase I potentially subject to remedies against taking their chances with Phase II, where they may come through without remedies.  The CMA is expected to issue its final report by 22 October 2018.

Ofcom fines Royal Mail £50 million for abuse of dominance

Ofcom fines Royal Mail £50 million for abuse of dominance

Ofcom has found that Royal Mail has breached the Chapter II prohibition of the Competition Act and Article 102 TFEU through unlawful discrimination against rival postal delivery operators.

Ofcom launched its investigation in 2014 after a complaint from Whistl, a provider of bulk mail services, concerning a proposed change in Royal Mail’s wholesale access prices.  Whistl was planning to build its own delivery network but relied on Royal Mail to deliver business letters that it collected and sorted.

The proposed pricing structure meant that if the firm wanted to begin bulk delivery itself in certain regions, it would have to pay Royal Mail 1.2 per cent more per letter than those firms who used Royal Mail to deliver mail across the UK.  Ofcom considered that Royal Mail had used its quasi-monopoly position as a provider of delivery services to sanction operators who entered into competition with it.

Royal Mail and Whistl had asked Ofcom to consider the case using Ofcom’s sector regulatory powers but Ofcom instead decided to use its competition powers.

The £50 million fine is the largest fine to be imposed by Ofcom.

Royal Mail has said that it will appeal against the decision.

Meanwhile, Royal Mail is embroiled in antitrust litigation itself through a follow-on action arising out of the European Commission’s July 2016 decision against the EEA trucks cartel.  It is seeking some £270 million in damages against DAF Trucks undertakings as a result of the overcharge it allegedly paid for trucks.

Ofcom press release, 14 August 2018

Public interest immunity material cannot be disclosed on an application to challenge a warrant

The Court of Appeal has allowed an appeal by the Competition and Markets Authority (CMA) against a High Court ruling that required the CMA to disclose evidence that was not protected by public interest immunity (PII) to a party seeking to vary a warrant granted to the CMA under section 28 of the Competition Act 1998.

The warrant in question relates to the CMA’s investigation of possible infringements of competition law by Concordia International RX.

The High Court had held that a judge on an application to challenge a warrant could not take into account material protected by PII even where the judge who issued the warrant had properly taken it into account.  The High Court ruled that PII issues should be addressed at the initial ex parte hearing and that a confidentiality ring could not be used to disclose PII material.

In light of the Supreme Court judgment in Haralambous in January 2018, Concordia accepted that the CMA can use PII material to support its case for a warrant. 

The Court of Appeal departed from the High Court and ruled that the appropriate time for the court to rule definitively on PII is when the application is made by the subject of the warrant for it to be set aside or varied.  The Court of Appeal confirmed that the use of a confidentiality ring in relation to the challenging of warrants in competition cases has no place in relation to PII material.

It is now for the CMA to make submissions to the High Court that the evidence it relied on to obtain the warrant qualifies for PII protection.  The High Court will decide whether the grant of the warrant was correct.  This will determine whether the CMA can continue to rely on the material in its ongoing investigation without disclosing it.

The Competition and Markets Authority v Concordia International RX (UK) [2018] EWCA Civ 1881

High Court refuses judicial review of Ofcom’s ‘fit and proper’ decision in Fox-Sky merger

 

The High Court has dismissed an application for judicial review of Ofcom’s decision that a proposed merger between Fox and Sky would result in Sky not being a fit and proper person to hold its broadcasting licences.

The transaction would result in Fox obtaining 100% of Sky and takes place against allegations of impropriety against Fox. Ofcom found that the conduct alleged of Fox represented a significant corporate failure but that there was insufficient evidence to conclude that, after the merger, Sky would be unfit to hold its broadcasting licences.

The High Court found no error of law in applying the fit and proper test, which was a matter for Ofcom’s judgment. Ofcom must be satisfied that its decision was necessary and proportionate to the interference with freedom of speech that would be a consequence of licence revocation. This is a high threshold and the High Court ruled that it was not irrational to adopt such a standard when deciding whether to revoke a licence of a broadcaster whose businesses depended on the statutory permission.

The High Court also found that it would not lightly interfere with Ofcom’s regulatory judgment. Sky and Fox had shown that they were fit and proper to hold broadcasting licences for several years and Ofcom was not satisfied that there was sufficient evidence to show that Sky would not comply with broadcasting regulation after the merger. The High Court rejected the claim that Ofcom did not give sufficient weight to Fox’s corporate failures as a predicator of future failings. It also dismissed the claim that Ofcom had taken insufficient account of findings while James Murdoch was chairman of Sky in 2012.

The decision is a reminder of the high threshold for judicial review and where significant latitude is afforded to the specialist regulator.

Avaaz Foundation, R (On the Application Of) v The Office of Communications (Ofcom) [2018] EWHC 1973 (Admin), 27 July 2018. (Supperstone J)

Data Privacy: An Indian and international perspective

Data privacy has risen up the Boardroom agenda for businesses internationally, with concerns such as cybercrime, data theft and scams to name but a few.  New legislation such as the General Data Protection Regulation in the EU has focused the minds of individuals on their rights to protection against unwarranted intrusions into their privacy.

But the issues go beyond Facebook.  Policy-makers, legislators and regulators are still grappling with how to address data privacy concerns where protection for fundamental rights faces different cultural norms and expectations. 

In India, the nuclear family and other cultural factors which have traditionally blunted calls for greater privacy protection have given way to urbanisation and changing expectations. The growth of the internet and digitisation have fuelled the demand for greater protection of personal space.  The Supreme Court has asserted that the right to privacy is a fundamental right.

Against this background, the Government of India has set up a Committee of Experts under the chairmanship of former Supreme Court judge Shri B N Srikrishna. The final draft of The Personal Data Protection Bill, 2018 alongside the Expert Committee report was submitted to the government on 27 July 2018.  This represents a significant milestone in India’s data privacy journey as it seeks to strike a balance between the challenges and opportunities of the digital era and the need for privacy protection. 

Join me in New Delhi on 24 August 2018 when I will be speaking about data privacy and related areas of compliance and risk management against the emerging contexts.

Home page:  https://sites.google.com/creactos.com/srab

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Data Protection Framework for India

https://www.dsci.in/content/data-protection-framework-india

PSR Market Review: Card services

The Payment Systems Regulator (PSR) is proposing to conduct a market review into card acquiring services.  It seeks comments on its consultation on the draft terms of reference by 14 September.

The PSR finds that in the UK in 2017, 13.2 billion payments were made by debit card and 3.1 billion payments by credit card.

If merchants are to accept payments by card, they need to purchase card acquiring services and the costs they pay may be passed on to customers in the prices they charge.

The PSR wants to be satisfied that the market for card acquiring services is working well for merchants and ultimately benefits consumers.

Comments on the PSR’s consultation can be made here.

Reflections on Google after Android

Reflections on Google after Android

The European Commission has now issued its decision in the latest abuse of dominance investigation into Google’s business practices.  The Commission has imposed a record EUR 4.3 billion fine on Google attracting headlines worldwide.  Two days on from the decision, a few early themes are developing.

The theories of harm that the Commission has settled on are much closer to established case law.  The Commission finds that Google has acted abusively by unlawfully (1) tying its Search and Chrome browser applications by requiring smartphone manufacturers to pre-install these on Android devices if they also want to offer Google’s Play Store, (2) offering financial incentives to those manufacturers to exclusively pre-install Google Search, and (3) hindering the development of rival Android systems.

The fine represents a much higher percentage of worldwide turnover than in other cases and is larger than the EUR 2.4 billion penalty imposed just a year ago in the Commission’s Google Shopping investigation.  This is not surprising given the size of the relevant markets and the scope of the Commission’s findings in Android.

Google has understandably refuted the Commission’s case.  It says that the Commission failed to take sufficient account of competition from Apple’s iOS.  While there may be competition between Android and Apple at the retail level, this appears to miss the point.  The issue at stake in this case is whether Google had sufficient market power over smartphone manufacturers at the stage of pre-installation of apps and where important technology choices are set.  Apple does not license its iOS to manufacturers.

Questions remain as to the effectiveness of remedial measures and what form they will take.  To ask Google to stop the practices that the Commission has found to be infringing may not go far enough for some complainants.  It is not clear whether other apps might be in scope.

Although the Commission’s decision has settled the latest stage in this three-year long probe, there remain questions as to whether the outcome will deliver what rivals have been seeking in terms of levelling the competitive playing field.   The Commission launched its investigation in 2015, but significant complaints were made before then.  

The challenge for regulatory intervention in a technology environment is getting the right balance.  Consumers have grown accustomed to using Google services as default options.   The Commission faces no easy task in trying to overcome consumer acceptance of those products and services over the years.  Whether this is as a result of superior products and services - or as a result of the practices that the Commission has found to be problematic - depends on whether you are ‘pro-Google’ or not.  And views can be quite diametrically opposed.

https://www.bbc.co.uk/news/technology-44858238

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