South African enforcer opposes SAB/Rheem Crown
November 22
The South African Competition Commission has opposed the vertical merger between Coleus Packaging, a subsidiary of South African Breweries, and bottle top manufacturer Rheem Crown. The Commission will recommend that the senior body, the Competition Tribunal, prohibit the merger after a second phase examination.
The deal would unite two businesses that are already intimately connected: SAB is Rheem’s largest customer for bottle tops, with 70 per cent of sales and a "sole supplier" agreement. Rheem holds 90 per cent of the South African market, with one competitor, MCG. In a statement, the Commission says that the deal would foreclose MCG’s operations, since it would be precluded from obtaining custom from SAB or any of its subsidiaries. "This could cause MCG to exit the crown market, and in turn cause Rheem to obtain monopoly status," says Nkonzo Hlatshwayo, manager of the Commission’s Mergers & Acquisition division.
The division considers that SAB’s competitors will be deterred from buying bottle tops from a competitor by the prospect of giving away sensitive product information,  so creating a ‘monopolistic position’. Sources familiar with the deal say such concerns are difficult to address with structural remedies.
SAB in-house team Richard Chance and Mashinka Fourie have retained Bowman Gilfillan as competition counsel. Daryl Dingley and Anna Govender are advising. Luigi Matteucci of Highveld Steel & Vanadium is working with Elise van Biljon of Tabacks Attorneys on Rheem’s competition work. Barrister David Unterhalter SC will represent the companies before the Competition Tribunal. No pre-hearing date has yet been allocated for the case.

UK Competition Commission overrules Oftel
November 22
French-owned Freeserve has persuaded the Competition Commision’s Appeal Tribunal to reverse a ruling of the UK telecoms regulator, Oftel.
The Tribunal’s decision reinstates a complaint by the French firm against British Telecom for abuse of dominance.
It is the first time that the special UK competition appeal body has overruled an industrys watchdog.
Freeserve is objecting to BT’s cuts in the wholesale market for broadband services by BT, cuts that Oftel earlier found were explained sufficiently by changes in its cost structure.
Having decided that Oftel erred in reaching that conclusion, the Competition Commission will now consider whether to return the case to Oftel or to hear the matter itself.
UK competition specialists have praised the ruling for establishing legal certainty about the competence of the Tribunal over the sector regulators.
A source familiar with the case says: "This ruling clearly establishes the primacy of the Commission on competition matters."
The case is set for a two-day hearing in January. If the Commission asserts jurisdiction to itself and subsequently finds BT in breach, it can order the company to stop abusing its dominance, fine it and even award damages to Freeserve.
Freeserve accuses BT of using "cross-subsidy, discrimination, and predatory pricing". Among its allegations is the accusation that Btopenworld, BT’sinternet service provision unit, received advance warning of a cut in wholesale broadband prices from BT Wholesale.
Freeserve’s general counsel David Melville and its regulatory counsel Simon Persoff have retained Baker & McKenzie for competition advice. Partner Robbie Downing there is being assisted by senior associate Keith Jones. Nick Green QC of Brick Court Chambers and James Flynn have represented Freeserve at the Competition Commission Appeals Tribunal. As an intervening party, BT in-house counsel Paolo Palmigiano has retained Gerald Barling QC and Kelyn Bacon of Brick Court for tribunal work, while John Turner of Monckton Chambers represents Oftel’s in-house lawyer Clive Gordon.

DoJ and DG Comp clear 3G patent platforms
November 22
The US Department of Justice and the European Commission have simultaneously approved agreements between telecommunications providers to share patents for third generation mobile phones.
The platforms are expected to accelerate the completion of the 3G mobile technology.
The approval has not come without a price. The DoJ has insisted on five separate platforms, rather than one, a situation described by the departing Assistant Attorney General Charles James as ensuring "the platforms arrangements do not limit competition among substitutable … technologies, or create an opportunity for collusion among licensees."
Under a voluntary scheme, companies with any interest in the new technology can submit patents to an independent "platform evaluator", which will decides whether the patent is essential. All patents holders participate in a "maximum cumulative royalty scheme", whereby the platform sets an overall figure payable that is then divided between the members. This differs from a classic patent pool. It is expected to reduce the costs for companies wishing to enter the market. To counteract the possibility of collusion, licensors and licensees remain free to negotiate a licence independently.
The EU and US agency teams working on this matter collaborated extensively, according to sources. Both agencies have been praised for their sensitivity to commercial realities, particularly DG Comp, which issued a "negative clearance" - seen as a more robust form of approval than a reversible block exemption. Ky Ewing, antitrust Of Counsel at Vinson & Elkins, was in charge of the DoJ work for the telephone companies, among whom were Bosch, Cegetel, Korea Telecom, Mitsubishi and Siemens. Alan Hoffman, senior international counsel at Alcatel, negotiated the Commission clearance. Vinson & Elkins’s antitrust group has a longstanding relationship with Alcatel.

EC approves liner conference agreement
November 22
The long and tortuous story of the Trans-Atlantic Conference Agreements appears finally at an end. The European Commission has granted an exemption from EU competition rules to the conference, enabling it to cooperate on the setting of rates.
The approved conference, known as "revised TACA", is the third attempt by the Atlantic liners to secure exemption since the introduction of competition rules to the shipping industry in 1987. The Commission prohibited an agreement in 1994 and another in 1998. In 1998, it fined the members EUROS 273 million, a record at the time. The revised TACA cooperative has waited three years for this approval; it notified the in 1999.
European exporters keenly oppose any sanctioning of the liners’ right to collude on capacity and prices.
A 2002 OECD report described the justification for such conferences as "weak or non-existent". Under the new scheme, however, the liners can fix capacity only to meet short-term fluctuations in demand. It forbids simultaneous price increases. Moreover, while the conference will publish ‘official’ rates, members will be free to deviate from these through confidential discounts to clients.
The exemption has been hailed as creating legal certainty for the liners. John Pheasant, one of two Lovells’ partners who represented the seven liner companies, describes it as a "milestone" for the industry. The Commission is expected to use the exemption as a model for applying competition to the liner market.
The conference, whose members included P&O Nedlloyd, AP Moller Maersk Sealand and Hapag-Lloyd, used Lovells’ competition group. Working with Pheasant were partner Matthew Levitt and associate Kirstie Nicholson.

Airline alliance cleared by OFT
November 22
The UK Office of Fair Trading has cleared the transatlantic alliance between United Airlines and 'bmi' british midland. The alliance, already cleared by the US agencies, must now await the outcome of US-UK negotiations on 'open skies'.
The OFT rather than Europe's DG Comp has led the inquiry because routes to third countries are involved, meaning that no national authorities have the final say. In a statement, the OFT explained that its approval comes in spite of the likelihood of the agreement’s infringing article 81 (1) of the EC treaty. The OFT said it was granting exemption because the agreement would create consumer benefits, in the form of "seamless service": more routes, more connections and lower fares.
bmi says the alliance - which will also include Austrian Airlines, Lauda Air, Lufthansa and Scandanavian Airline Systems - will enable "price, schedule and route coordination".
Tony Davis, who was director of regulatory affairs when the deal was signed (he is now managing director of bmi baby), and general counsel Tim Bye ran the in-house work for bmi.
For United, the case was handled by Conor McAuliffe, the airline’s ‘director of EU affairs’.
All three - McAuliffe, Davis and Bye — are reported to have been "heavily involved" in representations to the authorities.
The two airlines used a team from Norton Rose as external advisors on the notification. The composition of this team changed during the case.
Initially, Trevor Soames, Geert Goeteyn and Stephen Dolan handled the matter for the firm. John Cook of Norton Rose took over as responsible partner towards the end of the proceedings, following the departure of Geert Goeteyn and Trevor Soames to Howrey Simon Arnold & White.
On the US Department of Transport and DoJ clearance, partner Bruce Rabinovitz of Wilmer, Cutler & Pickering's DC office led a team that included partner Jeff Manley, counsel Jim Campbell, and associates David Heffernan and Ed Cox. Wilmer Cutler worked on behalf of United Airlines. Bmi, meanwhile, was represented by partners Marshall Sinick and Robert Papkin of Squire, Sanders and Dempsey's DC office, while SAS retained Michael Goldman of Silverberg, Goldman & Bikoff.

US agencies clear AT&T/Comcast
November 15
The Federal Communications Commission has given conditional approval to a merger between cable and Internet providers AT&T and Comcast. The Commission, which has joint jurisdiction over the deal with the DoJ, says that the merger is likely to spur investment, result in cost savings, and "have a positive impact on the deployment of broadband services", a long-term FCC goal. The DoJ has simultaneously closed its investigation.
The deal combines the largest and the third-largest players in the US market, and many consumer groups argued that this would have a profound anti-competitive effect. The Commission has imposed remedies to allay these concerns; in particular, the subsidiary Time Warner Entertainment is put into an independent "irrevocable trust" on the day the merger closes, and completely divested within five-and-a-half years. This will reduce the company’s multi-channel subscriber base from 38 million — a market share of 41 per cent — to 27 million (29 per cent).
Chairman Michael Powell says in a statement that the benefits of the deal are considerable and the potential harm "negligible", and that the merger "serves the public interest, convenience and necessity".
The FCC reasoned that as many local cable arrangements already constitute monopolies the competition dynamics of the industry would change little following the deal. Commissioner Michael Copps provided the one dissenting statement. He said: "The sheer economic power created by this mega-combination, and the opportunities for abuse … outweigh the very limited public interest benefits."
Comcast in-house counsel Stanley Wang and Arthur Block retained David Polk & Wardwell for the DoJ antitrust work. Partners Arthur Burke, Arthur Golden and Ronan Harty were in charge. The FCC filings were undertaken by antitrust partner Richard Metzger of Lawler Metzger & Milkman and James Casserly of Mintz Levin Cohn Ferris Glovsky and Popeo. Daniel Rubinfield and Howard Shelanski of LECG gave competition economics advice.
Mark Rosenblum and Larry Lafaro of AT&T retained Wachtell Lipton Rosen & Katz. Partner Ilene Knable Gotts and associate Damien Didden were responsible for the DoJ antitrust advice, while Sidley Austin Brown & Wood partner David Lawson and associates Frederick Beckner and Mark Raven did the FCC work, along with Mike Hammer of Wilkie Farr & Gallagher. Janusz Ordover of New York University advised on competition economics.

Hands off privileged documents, ACCC told
November 15
In a long-awaited decision affirming the importance of legal professional privilege, Australia’s highest court has denied the Australian Competition and Consumer Commission access to confidential legal documents.
The ruling is considered a significant setback for the competition watchdog.
The ACCC was seeking access in the case popularly known as Daniels to all liquor licensing documents from Coles Myer and Woolworths in order to investigate allegations that the retailers tried to restrict competition in liquor sales market.
The seven High Court judges said in a unanimous decision that it was "far from obvious that the retention of legal professional privilege would significantly impair the ACCC’s functions".
Had the ACCC been allowed to access privileged material, Australia’s IAEAA treaty with the United States could have meant confidential legal advice passed to agencies across the Pacific, lawyers say.
The ruling also allows waste disposal company Daniels Corporation to withhold privileged documents from the ACCC. (Coles Myer and Woolworths piggy-backed their High Court application to an appeal made by Daniels in a separate case on the same issue.)
Gaire Blunt, head of the Allens Arthur Robinson competition group in Sydney, says the decision will allow lawyers to advise clients openly without fear that such advice will be used against them in court by the ACCC. If the ACCC can get their hands on a letter from a lawyer saying there is a risk of breaching the law, they could later use that in cross-examination to say to a company ‘You were warned’, he says.
ACCC chairman Allan Fels told GCR that the ACCC did not want unlimited access to all legal documents but was keen to prevent companies from abusing the privilege doctrine. "We feel a company should not be able to hide behind the argument that they got legal advice saying certain behaviour was OK without the ACCC being able to confirm the facts on which it was provided."
The implications of the case extend beyond Australia. Says Julian Joshua, former head of EU cartel enforcement and now partner at Howrey Simon Arnold & White in Brussels, says: "In a global antitrust case being compelled to hand over a document in Australia has important ramifications for privilege in other jurisdictions. Some US circuits interpret any giving up a document even under compulsion as removing its protection." Such documents would thereby become ‘discoverable’ in US treble-damages actions.
The decision "takes away the ACCC’s ability to engage in fishing expeditions," a lawyer close to the case says.
ACCC Commissioner Sitesh Bhojani has downplayed the ruling’s significance. He told ABC radio that the High Court’s decision would not have a major impact on the ACCC’s enforcement activities.
Woolworths turned for advice to Clayton Utz, where Sydney partner Michael Corrigan worked with senior associate Kirsten Webb.
Coles Myer retained Allens Arthur Robinson; partners Fiona Crosbie and Tim Bednall there worked with lawyer Bashi Kumar from the firm’s Sydney office.
Woolworths and Coles Myer briefed Sydney barrister Steven Gageler SC, who appeared in the High Court with junior P R Whitford. J C Sheahan SC appeared with junior P J Renehan for the ACCC.
In a separate High Court hearing, Daniels was represented by Melbourne firm Meerken & Apel. Partner Isaac Apel and associate David Pringle there worked on the file. Daniels briefed Neil Young QC, of the Melbourne bar, supported by junior counsel Simon Marks.
The ACCC was represented in the High Court by A Robertson SC, assisted by J C Sheahan SC. Counsel were briefed by law firm Corrs Chambers Westgarth.
Meanwhile, the Australian Federal Government has extended the Dawson Committee’s review of the country’s competition regime by two months. The Committee will now report by January 2003.

ACCC says yes to Foxtel-Optus
November 15
The Australian Competition and Consumer Commission has approved the A$1.3 billion content-sharing alliance between Foxtel and Optus, Australia’s two pay-TV operators, after a lengthy review.
The deal was presented by the operators as a last-ditch effort to make the Australian pay-TV industry sustainable in the face of high programming costs and a shortfall of subscribers.
The ACCC has now agreed to the proposal. Chairman Allan Fels says: "We are not confident the industry would continue to be extremely strong in the years ahead, taking account of the Optus position and the possibility of the reduced competition that there might be in the years to come if this deal did not occur."
Foxtel will now take over Optus’s programming liabilities and Optus will effectively become a reseller for Foxtel, allowing Optus to refocus on its (more profitable) data and mobile services. Foxtel has said it would spend around A$1 billion upgrading its network to digital.
Telstra, Australia’s incumbent telephone operator and 50 per cent shareholder in Foxtel, has been given the all clear in a separate deal to bundle Foxtel with its Internet and telephone services.
The deal’s approval was months in the offing and required Foxtel and Optus to present the ACCC with 12 undertakings after the deal was rejected in its initial form in June.
Foxtel boss Kim Williams says those undertakings were the most comprehensive ever presented to the ACCC.
The ACCC had received over 50 submissions from parties responding to the undertakings.
Opponents of the deal included John Fairfax Holdings, Network Seven and Network Ten. Fairfax argued the undertakings were "inherently inadequate" in terms of addressing its competition concerns, and called on the government to conduct a review of the pay-TV sector and introduce legislation to address its structure.
Foxtel turned to Allens Arthur Robinson for advice. Partner Louise Castle led the Allens team; Jacqui Downes, a senior associate, and lawyer Jennifer Meale worked with her on competition issues from the firm’s Sydney office. (Allens corporate partners Richard Alcock and Andrew Clarke were also closely involved in the matter.) During negotiations, Allens worked at times with Gilbert & Tobin, advisers to Kerry Packer’s Publishing and Broadcasting Limited (a 25 per cent shareholder in Foxtel). At G&T, partner Gina Cass-Gottlieb worked with partner Liza Carver on competition issues.
Telstra (which has a 50 per cent stake in Foxtel) turned to long-time advisers Mallesons Stephen Jaques. Competition partner Roger Featherston led the Mallesons team, assisted by senior associate Sharon Henrick and lawyer Val McKay. Partner Trish Henry and senior associate Martyn Taylor were also involved, working on access agreements on behalf of Telstra. (Mallesons corporate partners Luke Waterson and David Walsh were also heavily involved in the deal.)
Optus was advised by Atanaskovic Hartnell, where partners John Atanaskovic and Danny Simmons worked on the dossier assisted by associate Linda Morris, who left the firm during the deal’s early stages.
Henry Ergas, of Network Economic Consulting Group, was the leading economist involved in the deal, advising Foxtel on a range of pricing issues.
Welcoming the decision, the chief executive of Telstra, Ziggy Switkowski, said: "Today may well be written up in the history of the media as the official beginning of the digital entertainment era in Australia".

Logica and CMG to merge
November 15
UK-based Logica and Netherlands-based CMG are seeking to merge, in a bid to create a messaging services ‘powerhouse’. The merged business will be worth US$1.2 billion, making LogicaCMG the second largest IT services company in Europe.
With few overlaps in terms of customers, the deal is expected to clear competition review easily.
Only four customers, Vodafone, Shell, Network railway and the Dutch Ministry of Defence count as significant shared customers.
Both companies face increased competition in the text messaging market from the likes of Nokia and Ericsson, which now write their own phone texting software. Analysts view the merger as a defensive step.
LogicaCMG will enjoy a solid position in the UK and Benelux markets which, together, will make up 60 per cent of combined group sales. To preserve CMG’s Dutch background, the merged businesses will be listed in London and on Euronext Amsterdam.
Logica’s in-house counsel coordinating the transaction is Lawrence Guedes. He has retained Freshfields Bruckhaus Deringer in Brussels for competition advice. Competition partner John Davies there is leading the team, assisted by Ann-Marie Galvin and Robert Wells
CMG is represented by Linklaters in London, where competition partner Gavin Robert is leading the team with associates Paula Riedel and Bruce Kilpatrick.
A phase one notification was made to the European Commission on November 8. Further notifications are expected in East Europe and Asia.

DoJ fines member of new cartel
November 15
The US Department of Justice has fined Morganite Inc, a US-based engineering company, for participating in an international price-fixing cartel. The fine, of US$10 million, is the maximum penalty under the Sherman Act.
The DoJ has also fined the company’s UK based parent company, Morgan Crucible Company plc, for obstruction of justice.
Morgan Crucible admitted to its part in the conspiracy. According to a DoJ statement, the company was guilty of witness tampering and was also charged with destroying documents.
Morgan Crucible will pay US$1 million for its part in the conspiracy.

The investigation uncovered a price-fixing cartel in the markets for four types of electrical carbon products:

• current collectors sold to certain transit and private customers;
• carbon brushes sold to certain original equipment manufacturers for automative applications;
• carbon brushes sold to certain original equipment manufacturers for battery electric vehicle applications; and
• Carbon brushes sold to certain transit authorities.

The Morgan Crucible Company plc is one of the world’s leading specialist engineering companies, operating in five product sectors — electrical carbon, engineered carbon, magnetics, technical ceramics and insulating ceramics. The conspiracy began in 1990 and continued until at least 2000.
Representing both the Morgan Crucible Company plc and Morganite Inc in the investigation is a team from Sullivan & Cromwell’s London and New York offices. Competition partners Robert Osgood and Robert Wirenga at the London office are handling the file. The head of the white-collar criminal defence group at Sullivan & Cromwell in New York, Samuel Seymour, is assisting them.
According to the charge sheet, the conspirators participated in meetings and conversations in Europe, Mexico and Canada in which discussed prices of products sold in the United States and other undisclosed countries. Agreement was reached to charge prices at certain levels. In addition, conspirators discussed price quotations they were offering certain customers so as to avoid stepping on each other’s toes.
The DoJ is refusing to disclose any of the other parties involved in the conspiracy. The matter is also under investigation in Europe.

Bain Capital to buy Trespaphan
November 15
Venture capital firm Bain has announced its third chemicals acquisition. The Boston-based company will pay Euro200 million for Trespaphan, the polypropylene business owned by Celanese.
The deal is the latest in a series of sorties recently into the European chemicals market: on November 4 Bain bought the basic chemicals operation of French specialty chemicals company Rhodia SA in a deal valued at Euro150 million, having announced its acquisition of the Israeli business Dor Chemicals for Euro200 million on the previous day.
In spite of its relatively low value, the latest purchase will require competition clearance from DG Comp as it affects multiple jurisdictions. However, a source close to the deal believes that an expedited clearance may be possible if the Commission accepts the proposed market definition. The companies do not expect scrutiny to go beyond a phase one investigation, which was described as a "worst case scenario". Notifications are also being considered in Mexico and Brazil.
Ashurst Morris Crisp is acting for Bain Capital. Competition partner Ute Zinsmeister of the firm’s Brussels office is leading the work, with Matthew Hall and Max Lienemeyer. Ashurst is also undertaking the corporate work on the deal. Celanese has retained Shearman & Sterling for its competition work: partner Hans-Jürgen Meyer-Lindemann and associate Jens-Olrik Murach are advising. No competition economists are being used.

Monti unveils reform package
November 8
Mario Monti finally set out details of the reform package he will announce officially in December. Speaking at the European Commission’s own merger control event in Brussels this week, Monti unveiled previously unreleased information, and filled in aspects of things only hinted at a week earlier, when he appeared at Fordham.

The full package is as follows:

1. No change of substantive test:

Instead a paragraph will be added to the existing text on dominance to make it clear that, in the merger context, mergers in oligopolistic situations are caught.

2. A new notice on how dominance is assessed in horizontal mergers.

3. A later notice on how dominance is assessed in vertical and conglomerate mergers.

4. Explicit recognition of efficiencies:

The burden of proof for efficiencies will be on the parties. Efficiencies will have to be "specific, timely, and verifiable". It is unlikely that efficiencies will ever be relevant in a merger to monopoly or quasi-monopoly. Monti quoted article 2 (1) b of the current merger regulation as the basis for admitting explicit consideration of efficiency factors: "the Commission shall take into account … technical and economic progress provided that it is to consumers’ advantage and does not form an obstacle to competition."

5. A chief economist and accelerated recruitment of industrial economists by the Commission:

DG Comp will also more regularly use outside consultants to conduct econometric studies, Monti says.

6. Devil’s advocate panels:

Members will be drawn from "throughout the Directorate-General and from other relevant services". Philip Lowe will create a unit to support the panel system.

7. Improved rights of defence:

a) Parties will have access to the file ‘against’ them at the onset of Phase Two. b) The Commission will provide an opportunity for parties to confront ‘complaining’ third parties in a meeting to be held "in good time" before the Statement of Objections. c) Merger parties will be offered ‘state of play’ meetings at ‘decisive’ points in the procedure. Monti furthermore promised more on-going discussion of cases with senior Commission officials.

8. Resources for the Hearing Officers:

The hearing officers Serge Durande and Karen Williams will be given A-grade officials for the first time. They may also begin to offer their opinion on substantive aspects of the case.

9. A consumer liaison unit:

To help poorly resourced consumer organisations participate in the process fully.

10. Time added to Phase Two:

Either the merger parties or DG Comp will be able to request an extra four weeks in the timetable if a matter represents "a complex Phase Two". The parties will have to approve the Commission’s version of this request. On submitting a remedy offer, a three-week window will activate, to allow for proper negotiation and research of its details.

11. A deputy director general for mergers:

A new deputy director general for mergers will provide support and oversight to the MTF. The holder will ensure teams have all the resources that they require and also keep pressure on them to collect evidence of sufficient quality. Philip Lowe will perform the function initially.

12. Simplified article 9 and article 22 procedure

The EC has abandoned its idea of expanding the ‘one-stop shop’ to all mergers affecting three Member States. A modified — i.e. optional version — of this "three plus idea" has also been shelved. Articles 9 and 22 will become mirror images. The Commission will gain the right to initiate a referral or to suggest one. Parties will have the option of discussion allocation at a pre-notification meeting.

The package is the culmination of a review process launched in January, with a Green Paper.
The EC has recently had two merger decisions overturned by the Court of First Instance — Schneider/Legrand, and Tetra/Laval. A third decision — ‘Airtours’ — was overturned in August. Although Airtours was a decision by Monti’s predecessor, the more recent cases were decided under Monti’s watch.
Speaking at Fordham soon after the second appeal loss, Monti said it had been "a tough week". Back on his home turf, and introducing the reform package, he said the judgements had been a blessing and had not come too late to affect the reform process’s results. The Commission had "intensified" its thinking in certain areas as a result of the judgements.
Monti even thanked the Court for clarifying the standard of evidence it expects. He also pointed out that the Court had agreed with the case teams on many points (e.g. the effect on the main markets, in Schneider, and the fact that conglomerate mergers are covered by the EU’s merger regulation, in Tetra). The Commission, he said, is still deciding whether it will file appeals.
Reaction outside the conference immediately afterwards was positive. Those GCR spoke to were routinely approving.
"It’s the first time I’ve heard the reform package set out in full like that. I was impressed," said Lynda Martin-Alegi from Baker & McKenzie.
"It was very comprehensive," said Eric Mahr of Wilmer Cutler & Pickering. "They have taken on board a lot of the comments made throughout the course of the year."
Alec Burnside of Linklaters said: "There’s been a big change in attitude from even six months ago. I think that’s almost more important than the actual details."
The point raised by some as a concern was the loss of the opportunity to expand the one-stop-shop.
Said one source, who spoke for several: "Moving to a case by case, buddy-buddy system of allocation is worse than what we’ve got."
"I’d rather they do nothing than do that, " he added.
Such sentiments were supported in the session itself on the one-stop-shop and jurisdiction. All five commentators — including two members of national authorities, and the chief in-house counsel for Nestlé - wished aloud that the Commission would revisit the question of jurisdiction.
The conference will end at 5pm on Friday November 8^th. Philip Lowe will give the final speech.

DoJ moves to block Echostar/DirecTV
November 8
The US Department of Justice has filed suit to block the proposed merger in the United States between Echostar and Hughes Electronics, the owner of DirecTV. The deal, which the DoJ describes in a statement as creating a "monopoly" in areas without cable TV, would concentrate the market for multi-channel video programming distribution services from three companies to two.
This is the second regulatory rebuff the merger has received: on October 10, the Federal Communications Commission opposed it on the grounds that it would not serve "the public interest, convenience, or necessity". The FCC’s view echoes criticisms made by Robert Lande of the American Antitrust Institute, who recently argued that the merger would not only "eliminate meaningful price competition" resulting from the presence of three competitors in a market, but would also reduce the diversity of programming.
Faced with the FCC’s opposition, the companies attempted to restructure the transaction to remedy its anti-competitive effects. Nevertheless, the DoJ says that there can be no sufficient replacement for the "vigourous competition" between the two companies. At the time of writing of, Echostar is awaiting the result of its request for an expedited trial. If it its requestis not granted, the deal, which was originally valued at US$26 billion and would have combined Echostar’s 7.5 million satellite subscribers with DirectTV’s 10.9 million, appears dead.
Weil Gotshal & Manges represented GM, Hughes and DirecTV on the antitrust matters with the DoJ. Partners Peter Standish and Ira Millstein led the work, with associates Jakub Lerner, Alan Kusinitz, Fiona Schaeffer and Adam Hemlock. Latham & Watkins’ antitrust counsel, including San Francisco partners Tom Rosch, Karen Silverman and Daniel Wall and associate Gabriel Gregg, assisted Hughes and DirecTV in connection with the Hart-Scott-Rodino Act process. A team from Boies Schiller & Flexner was also involved; partners David Boies, Donald Flexner, Robert Silver, Christopher Boies, John Cove, Steve Holtzman and Richard Feinstein were all retained by Echostar for the DoJ work at different points, along with associates Chris Green, Kieran Ringgenberg and Margaret Wu.
Latham & Watkins represented Hughes Electronics and DirecTV before the FCC; its team consisted of Washington, DC partners Gary Epstein, Jim Barker John Janka and Teresa Baer, with associates Alex Hoehn-Saric, Art Landerholm and Elizabeth Park. Pantelis Michalopoulos of Steptoe & Johnson’s Washington office was also involved.

DoJ/Microsoft settlement approved
November 8
Microsoft’s battle with the US government and various states has finally been consigned to a chapter in corporate history. The Washington DC district court has overruled the non-settling states that dissented from the original settlement in favour of the DoJ and the Washington-based tech firm. The states have 30 days to appeal the decision, although it is thought unlikely that they will continue their fight.
The decision has been widely seen as an endorsement of antitrust division head Charles James. James Rill, co-chair of Howrey Simon Arnold & White’s antitrust practice and a former Assistant Attorney General of the Antitrust Division, describes it as "vindication" for the departing James.
However, the decision has provoked barbed criticism from Microsoft opponents. Robert Bork, of the group ProComp that represents Microsoft competitors and others, says "Never before has there been a case where liability was so thoroughly established, and never before has there been a case where the Justice Department agreed to a remedy that did almost nothing of what the law and the Court of Appeals required." Jon von Tetzchner, chief executive officer of Opera Software describes the settlement as business as usual: "It isn’t very much of a settlement at all. Microsoft was found guilty. There were no real remedies, no actual punishment."
The company itself describes the settlement as "tough but fair". In-house counsel Horacio Gutierrez points out that the remedies go beyond the original scope of the case, which focused on the Internet browser Explorer, to cover ‘middleware’ such as Media Player and Outlook Express. The forward-looking decree imposes various requirements to enforce interoperability between Microsoft products and those of its competitors, ensuring that consumers can pick and choose between different products. "The decree’s unity of remedies provides much-wanted certainty. Microsoft will fully comply with both the letter and the spirit of the decree," says Gutierrez.
Attention is now expected to shift to DG Comp’s investigations, which focus on later events: the design of Windows to favour its server software and the bundling of Media Player. The District Court’s decision has a bearing on the first of the two charges, as one of the remedies requires Microsoft to license its PC-server communications protocols.
Sullivan & Cromwell handled the non-settling states remedy proceeding. Partners John Warden, Steven Holley, Michael Lacovara and Richard Pepperman and associates Stephanie Wheeler and Bradley Smith undertook the work, along with Daniel Webb and Bruce Braun of Winston & Strawn, Chicago.
The original agreement between the DoJ and the nine settling states in November 2001 was negotiated by David Heiner of Microsoft’s law and corporate affairs department with Holley of Sullivan & Cromwell and Charles Rule of Fried Frank Harris Shriver & Jacobsen’s Washington, DC office.
Sullivan & Cromwell handled the Tunney Act proceeding, with Richard Urowsky, Warden, Holley and Pepperman in charge. David Evans of NERA’s Chicago office gave competition economics advice.

Nintendo dealt record fine
November 8
The European Commission has imposed a surprisingly large fine on Japan’s Nintendo for trying to affect distribution of its computer consoles and games across Europe during the 1990s.
A fine of Euro149 million, considered by some commentators to be disproportionate to the offence, was imposed by the Commission on the electronic games manufacturer. Seven of Nintendo’s official distributors in Europe were also fined: John Menzies plc in the UK, Concentra in Portugal, Linea in Italy, Bergdala of Sweden, the Greek unit of Japan’s Itochu and the Belgian unit of Germany’s CD-Contact Data. Of these, John Menzies and Itochu attracted the stiffest penalties. "It appears to be somewhat of a lottery at present at the Commission," commented one lawyer.
The games company cooperated extensively with the Commission in its investigations from December 1997. Indeed, early on in the enquiry Nintendo went as far as voluntarily paying compensatory damages to aggrieved parties.
In its statement the Commission defended the amount imposed, saying: "The fine on Nintendo alone was calculated at Euro149 million to reflect its size in the market concerned, the fact that it was a driving force behind the illicit behaviour and also because it continued with the infringement even after it knew the investigation was going on."
The Commission’s investigation showed that between 1991 and 1998 price differences within the European Economic Area were significant. The UK usually had the lowest prices by far, which encouraged traders to re-export cheap goods to the higher-priced countries. The most striking price difference were recorded in early 1996, when some Nintendo products were up to 65 per cent cheaper in the UK than elsewhere.
The fine may send a mixed message to companies that do cooperate with the Commission. "On the one hand," says one lawyer, "the Commission is banging the drum and giving credit to companies who cooperate. But how much would Nintendo’s fine have been without cooperation?"
Nintendo Europe’s in-house counsel is Matthew Hill in Germany. Lovells in London has been retained for advice in the matter. Competition partner John Pheasant there is lead counsel, and he is being assisted by senior associates Ciara Kennedy-Loest and Sean-Paul Brankin.
John Menzies plc’s in-house counsel, Eric Mullholland, has retained a team from Peachy & Co in London. Partner David Wilson is leading the team there.
"An appeal is highly probable," said John Pheasant from Lovells.

EU defence merger cleared
November 8
The creation of Roxel, a new missile propulsion joint venture between the UK’s BAE Systems, the European Aeronautic Defence and Space (EADS) and France’s SNPE has been approved by the European Commission
In July, BAE, EADS, Italy’s Finmeccanica and SNPE signed an agreement to form a new missile propulsion joint venture that would merge the activities of BAE’s Royal Ordnance defence rocket motors division with CELERG (a joint venture between EADS and SNPE). Under the agreement, Roxel is to be owned equally by missile manufacturer MBDA and SNPE. MBDA itself was created by the merger of the missile businesses of BAE, EADs and Finnmeccanica.According to MBDA, the merger of the missile propulsion businesses of BAE in Britain and CELERG in France will "create a very balanced company that will be a supplier to MBDA and other companies".
Both BAE and CELERG already produce the majority of propulsion systems for MBDA missiles. BAE supplies the propulsion for the Advanced Short-Range Air-to Air Missile, Sea Skua anti-ship missile and Rapier and Seawolf air defence missiles, as well as the Starstreak air defence missiles produced by France’s Thales. Celerg, meanwhile, provides the propulsion for ASMP’s air-launched nuclear missile Exconet and for AS 15 TT anti-ship missiles Aster 15 and30, Roland air defence missiles and Mistral air defence missile.
"There are different technologies in this field, which is good in that RO has invested more in some and CELERG has specialised in others. So they are very complementary," says Fabrice Bregier, CEO at MBDA. "I think it will help us develop new technologies to make sure these technologies will remain in Europe and to be the nucleus for further consolidation."
MBDA is the second-largest guided missile company in the world after Raytheon in the US. The company competes for missile programmes with EU contractors such as Thales in France and Saab Bofors Dynamics in Sweden, and the US companies Raytheon, Boeing and Lockheed Martin. In the rocket motors field, the main contractors are Royal Ordnance in the UK, Celerg, Bayern Chemie and Protac in Germany, and ATK and ARC in the US. All of these are suppliers to MBDA. The other companies in this area are Fiatavavio in Italy, Nammo Raufoss in Norway and Snecma of France.
The new company will have around 800 employees and major facilities in Somerset, England and Le Plessis-Robinson in France.
MBDA is already working with Thales under a new missile-seeking team agreement which was also signed in July.
The Commission has also recently authorised
BAE Systems’ in-house counsel, Mark Serfozo, has retained Slaughter and May in London for advice in competition matters. Competition partners Malcolm Nicholson and Douglas Lahnborg are advising there. The deal necessitated an extremely detailed phase one assessment of market definitions by the European Commission, according to competition lawyers working on it.
Head of mergers and acquisitions at EADS Marwan Lahoud is coordinating the transaction Cleary Gottlieb Steen & Hamilton in Brussels has been retained by EADS. The competition team there is being led by partner Antoine Winckler and associates Jérôme Broecke and Gaëlle Bontinck.
Further national security investigations are being carried out by the UK’s Office of Fair Trading in connection with the deal. There is no deadline to this investigation.

Arteva pays US$28.5 million cartel fine
November 8
Luxembourg-based Polyester manufacturer Arteva will plead guilty to price fixing and customer allocation and has agreed with the US Department of Justice to pay a fine of US$28.5 million. In addition, one of its former executives, director of textile staples Troy Stanley, will plead guilty to suppressing competition during the period September 1999 to January 2001. Stanley will pay a fine of US$20,000 and serve eight months in jail.
The case is not the first to be brought in the polyester industry: on September 13 2002, Robert Dutton of, US-based Nan Ya plastics was indicted for price fixing. His trial is expected to take place early in 2003.
Although Arteva is not seeking leniency under the DoJ’s corporate leniency policy, the company has provided "substantial assistance", and the department will accordingly press for a reduction in fines. A DoJ spokesman declined to comment on future prosecutions in the sector.
In a statement, Arteva in-house counsel Mary Wilson says: "The employee’s actions were wrong, and undermine our company’s core values." The company is appointing a vice president with responsibility for compliance and a new training programme and is installing an internal ‘ethics hotline’ for worried employees.
Wilson retained Gibson Dunn & Crutcher for competition advice. Partners Gary Spratling, in San Francisco and James Loftis, in DC handled the case, with associate Danielle Moskowitz.
Wilson retained Gibson Dunn & Crutcher for competition advice. Partners Gary Spratling, in SanFrancisco and James Loftis, in DC handled the case, with associate Danielle Moskowitz. 

EU reaps aftermath of appeals
November 1
French electrical goods manufacturer Schneider will decide in the next few weeks whether to seek damages from the European Commission following the reversal of DG Comp’s veto of the company’s merger with Legrand. A spokesman for the company said legal action was still "a technical possibility". Schneider has until December 10 to make up its mind, after which its agreement to sell Legrand to the venture capital consortium KKR/Wendel will lapse.
The precedents for attempts to prove institutional liability are not very encouraging, says a source familiar with the Schneider case: "The standard of proof for such an action is high, and it would be difficult to establish a causal link. One would have to show that the prohibition was obviously wrong and due to an identifiable error." A spokesman for Schneider said that the company will keep its options open, hinting that any decision on damages will depend on whether it concludes the merger.
Meanwhile, Tetra Pak will now proceed with its merger with Sidel after the Court of First Instance again overturned DG Comp’s original decision. In a statement, Tetra chairman Göran Grosskopf said: "We’re hoping for a fast process with the Commission so that we can welcome Sidel as an additional member within the Tetra Laval group."
The CFI judgment in Tetra Pak is the third reversal of a DG Comp merger veto in five months, coming on the heels of the Airtours ruling in June and the Schneider decision. The language of the CFI’s latest ruling is particularly damning, describing the initial verdict as "based on insufficient evidence and … [containing] errors of assessment". Crucially, the CFI disagreed with the Commission’s analysis of the future effects of the merger, though DG Comp was not refuted on all points: the court rejected Tetra’s argument concerning infringement of rights of access to the file.
In a statement made after the CFI’s decision on Schneider, Commissioner Monti acknowledged his disappointment and announced the appointment of Philip Lowe as Deputy Director General for Merger Control. He said that this reflected the need for "closer senior management supervision of the Merger Task Force". Monti emphasized the positive aspects of the rulings, noting that the CFI upheld the principle that future conglomerate effects must be considered.
All eyes will now turn to the Commission’s merger regulation reform process and its results later this year. Many are curious to see if any late additions will be made to the package. One Brussels insider describing recent events said "a week like this only happens once every ten years."
In the proceeding before the Commission, Wilmer Cutler & Pickering and Latham & Watkins represented Tetra Laval. Wilmer Cutler partners Thomas Mueller, Sven Volcker and Erik Mahr handled the procedure, assisted by associates Axel Gutermuth, Deirdre Waters, Pablo Charro and Ylenia Ariano. Latham & Watkins partner Andreas Weitbrecht also advised. In the subsequent proceeding before the Court of First Instance, Alexander Vandencasteele and Denis Waelbroek of Ashurst Morris Crisp joined the Tetra Laval legal team. Lexecon advised on competition economics, chairman Bill Bishop, Penelope Papandropoulos and Ian Small making up the team along with Bob Stillman of Lexecon Inc in Chicago. Professor Damian Nevin of Geneva University acted as an economic consultant on the case.

US clears both cruise liner bids
November 1
The US Federal Trade Commission has given the go-ahead to both bids in the 'Cruise Liner War'.
The FTC announced it was closing its investigation of the bid by Carnival Corporation, and another by Royal Caribbean. The target of each bid is the UK-based business, P&O Princess Cruises.
The FTC broke with tradition by, for once, setting out reasons for stopping a merger investigation without enforcement action. It provided a statement of six pages. In such contexts, US lawyers are usually wondering exactly why the agency has changed its initially unfavourable view of a transaction. A source describes the FTC's explanation as "a model of transparency".
It is unusual for the FTC to find no anti-competitive effects in a merger where all the players have - ostensibly - high market shares.
The FTC cleared the deal three to two - the dissenting Commissioners were Sheila Anthony and Mozelle Thompson.
"I think the agency is trying to send a number of messages to the bar," says this source.
The statement makes much of the diligence with which the FTC team has explored price and reservation data in the case, in some cases going back two or more years.
Another source comments: "I think the agency wants the bar to understand the depth of the analysis they undertook."
Joseph Simons, the director of the bureau of competition at the FTC, has now spoken publicly on the deal. He used the occasion of an address to the Golden State Antitrust and Unfair Competition Law Institute to give further reasons for the decision. A copy of the speech is available on the FTC's website. Simons says that the decision represents "no departure from past practice … despite relatively high HHIs and the four-to-three nature of the transaction".
One of the issues throughout both sides of the Atlantic has been the question of the market, and whether cruise operators trade in the market for cruises, or holidays, or variants thereof.
Since the FTC's decision, arrangements between the target company and its two would-be acquirers have changed.
On October 25^th, P&O Princess put out the following statement: "The board of P&O Princess welcomes the announcement today from Carnival of its commitment to make an offer of a dualistic company combination." It said it was sending full details of Carnival’s offer to its shareholders "shortly". Carnival’s announcement mentions several preconditions.
Advisers
The following teams have been working on the matter.
The target company P&O Princess Cruises was demerged from P&O, one of Freshfields Bruckhaus Deringer's longest standing clients, in 2000; Freshfields in fact wrote P&O's deed of constitution, back in the 19^th century.
Freshfields Bruckhaus Deringer and Sullivan & Cromwell have advised on the matter.
Partner Rachel Brandenburger led the Freshfields Bruckhaus Deringer London-Brussels-Washington team, composed of partners Alan Ryan and Paul Yde and associates Alasdair Balfour, Michael Jaspers, Rafique Bachour, Emily Smith, Dean Hunt, and Jason Campbell.
Richard Urowsky (competition partner) led the Sullivan & Cromwell team that advocated the deal before the FTC for P&O Princess. His team was composed of competition partner Margaret Pfeiffer and Thomas Leuba (special counsel), with assistance from associate Adam Paris.
P&O Princess supplied the FTC with economic analysis prepared by Professor Robert Pindyck of MIT and Steve Herscovici of the Analysis Group. The pairing is one that the Sullivan & Cromwell competition group has used before. In Europe, P&O Princess used economic advice prepared by Derek Ridyard and a team from RBB Economics.
For Carnival Corporation, Hogan & Hartson worked on the US part of the clearance. The firm has also played the role of international coordinator, organising filings wherever required. In the end, this turned out to be: US, EU, Brazil and Canada. The Brussels office oversaw the 'rest of the world filings' - with the team consisting of Catriona Hatton (partner) and Mariabruna Fimognari (counsel).
Back in DC, Janet McDavid (partner) and Joseph Krauss (partner) advocated the matter at FTC. The partners were assisted by associates Lynda Marshall and Craig Cronheim.
Carnival supplied the FTC with economic analysis by Meg Gerin-Calvert of Economists Inc and Januz Ordover of NYU, whom McDavid and Co have used several times before. Two papers by Cento Veljanovski, created for the European Commission, were also furnished to the US agency.
The law firm team worked closely with Arnoldo Perez (general counsel and secretary), Martha Dezayas (assistant general counsel) and Ricardo Miguez (assistant general counsel) from Carnival Corporation throughout.
Carnival has used Hogan & Hartson's antitrust department on other work.
The remaining suitor, Royal Caribbean, has been represented on the US leg of the clearance process by Davis Polk & Wardwell. Partner Paul Bartel led the competition work.
In Europe, Royal Caribbean was supplied with economics briefs by Alan Overd of Lexecon.
Davis Polk & Wardwell has also supplied M&A advice to Royal Caribbean.
In Europe, the rival bids took separate paths. Carnival's was reviewed by the European Commission; Royal Caribbean's went to the UK Competition Commission.
The advisers working for the suitor on those clearances (both were cleared, though Carnival's EC bid raised a Statement of Objections from DG Comp) are covered in previous Global Competiton Review stories. Some of the firms involved include Herbert Smith and Shearman & Sterling (representing Carnival Corporation), and Slaughter and May and Latham & Watkins (representing Royal Caribbean).
The US notifications raised an interesting question for the two bidders: how hard to oppose the other deal? Agencies frequently take a 'clear one, clear both' view, sources say. It is easy therefore for any objection to rebound.

FTC challenges Vlasic/Claussen merger
November 1
The US Federal Trade Commission has challenged the proposed acquisition of the Claussen Pickle Company by Pinnacle, a subsidiary of the venture capital firm Hicks, Muse, Tate & Furst. Hicks, Muse already owns Vlasic Pickle, and the proposed combination has been described by the FTC as combining "the dominant firm in the market [Claussen] with its most significant competitor."
The initial deal would have added Vlasic’s declining market share of between 2 and 3 per cent to Claussen’s 86 per cent, leading one source familiar with the case to say that it would have almost no effect on competition: "There are thirteen little guys now, and there will be at least twelve little guys after the transaction." The FTC counters that Vlasic is the leading supplier of substitutable shelf-stable pickles, which act as a competitive constraint on Claussen’s dominance in the market for refrigerated pickles. The combination of the two would reduce competition and force up prices, particularly as the market depends on brand equity, the cost of which acts as a barrier to entry.
The FTC’s opposition is the latest in a sequence of challenges brought against mergers involving branded goods in the retail sector. It opposed the merger of Nestlé and Ralston Purina, only issuing a consent decree in February 2002, and similarly challenged the Vivendi/Diageo deal, which included the rum brands Malibu and Captain Morgan.
Unconfirmed reports in the media and from sources familiar with the deal suggest that the companies may now withdraw in the face of the FTC’s opposition. If so, it will be one of the first deals to be challenged and subsequently withdrawn since the formation in August 2002 of the FTC’s merger litigation task force under Michael Cowie. One source explained to GCR that this would make the case "a high-profile success for the Commission, and in particular for the new unit".
Pinnacle retained Vinson & Elkins competition partner Neil Imus, who was assisted by associate Dionne Lomax and of counsel Ky Ewing. Stephen Stockum, senior president of Glassman Oliver, provided competition economics advice. Deborah Feinstein, competition partner at Arnold & Porter, acted for Claussen, assisted by her associate Julie Goshorn.

Powergen buys TXU Europe businesses
November 1
Powergen has bought TXU’s electrical/gas retailing business and a number of power stations for £1.37 billion.
TXU is the leading energy retailer in the US with 2.7 million customers and a ranking of 58th in the Fortune 100 list. In the UK it is the third-largest supplier of energy and electricity with 5.5 million domestic energy accounts and 4 million customers.
Freshfields Bruckhaus Deringer’s London office is handling the corporate side of the transaction on behalf of Powergen.
TXU is being advised by a team from Herbert Smith on the corporate side of the transaction; partner Stephen Gale is leading the team at the London-based firm.
Powergen was acquired by E.ON last April, providing a platform for the German-based utilities company in the UK.
TXU Europe, which was sliding into insolvency, will be saved by this deal, which will also allow its other European interests to stay afloat. The deal was allowed a derogation from Article 7 EC merger regulations and was given the go-ahead before regulatory approval.
This is an unusual occurrence and has only happened in a handful of cases, according to Nick Spearing, competition lawyer at Freshfields Bruckhaus Deringer, who is the lead partner representing Powergen. A derogation was given in the merger of EdF and London Electricity in 1999 as EdF was the only potential bidder caught by the merger regulation.
Sara Vaughan, director of the regulatory and sustainment development group at Powergen, is coordinating filings. The deal is being filed in Brussels, for which Freshfields Bruckhaus Deringer in London has been retained. Competition partner Nick Spearing there is being assisted by competition lawyer Sebastian McMicheal and trainee Beatrix Immenkamp.
The TXU legal team was not involved in competition filings.

Commission fines Sotheby’s
November 1
The fine art auction house Sotheby’s has been fined Euro20.4 million by the European Commission for forming a cartel with Christie’s, its only major rival. Christie’s benefited from full leniency as it was the first of the two to ‘blow the whistle’.
Sotheby’s fine is just the latest in a series of payouts the auction houses have had to make, recently receiving a joint fine of over US$500 million to settle third-party actions brought against them in the United States.
The latest fine represents 6 per cent of Sotheby’s global turnover, minus a 40 per cent reduction for the company’s cooperation with the inquiry. A source close to the case says the percentage was typical of the Commission’s increasingly punitive attitude to cartels, saying that it was "indicative of a climb towards the maximum fine of 10 per cent of turnover". In spite of the size of the penalty, Sotheby’s is not expected to appeal, as this could result in the leniency benefits it has already won being forfeited.
Sotheby’s in-house counsel Tom Christopherson retained Freshfields Bruckhaus Deringer for the defence; partner Paul Lomas led associates Janet Whitaker and Nicholas Long, while Stephenson Harwood competition partner Anthony Mair advised Christie’s, assisted by associate Aoife Power.

Schneider/Legrand overturned
October 25
The Court of First Instance has overturned the European Commission’s decision prohibiting the merger between French electrical goods manufacturers Schneider Electric and Legrand.
Sources say the decision is characterised by thoroughness, despite being made under the ‘expedited procedure’.
Once again, the Court has shown itself willing to revisit the facts of a case.
In the ruling, released on October 22, the Court criticised both the case team’s economic analysis and its treatment of the parties’ rights of defence.
This is the second time a Commission decision on a merger has been overturned; the first was in Airtours, handed down in August. After Airtours, Mario Monti issued a statement reminding everyone he had inherited the decision from his predecessor; Schneider/Legrand, however, was decided during his incumbancy.
The Commission is believed to be stunned by the Court’s decision. Says a source: "It expected to lose one appeal this week - but it didn’t expect it to be this one."
With a third reversal likely on Friday (in Tetrapak), the decision has unleashed a wave of speculation about how the Commission will respond. All the cases under appeal emanated from different heads of unit within the Merger Task Force.
"I hope DG Comp rises to the challenge," says a Brussels lawyer "and doesn’t respond by retreating into its shell." The decision made front-page news in the Financial Times and International Herald Tribune. "This is pretty serious," says DG Comp’s former spokesman, Michael Tscherny, now working at Gplus.
Of the three appeals underway, Schneider’s has been followed the least closely within the Brussels competition community, chiefly perhaps because the proceedings have been in French.
The Commission could, in fact, meet the Court’s criticisms swiftly, if it wanted to sources say. Changes to internal procedure do not require amendments of the law - only changes to the test or timetable require that. Furthermore, the Commission is in the middle, as it happens, of a top-to-bottom review of its merger control process.
In September Mario Monti trailed various steps that would meet some of the Court’s criticisms; for example, he proposed the appointment of a ‘chief economist’ to DG Comp who might have a power of veto, and ‘shadow’ panels to scrutinise the work of case teams and keep ambitious case handlers in check. Monti has also given thought to holding a mini-hearing early in Phase Two. Full details of these measures have yet to be worked out
"I think what the Court is saying is that we didn’t spell out the reasons clearly enough," says Amelia Torres, spokesperson for Monti.
But doubts remain as to whether internal changes can ever go far enough, and many think that the EC is now destined to abandon the administrative procedure. The only question for them is: when?
The EU system continues to compare badly to that of the US in the minds of those who have experienced both. "If you’ve ever done a matter in both Brussels and Washington, the Washington part feels completely different," says a source.
Crucial to the US system is the threat of immediate litigation if the agency reaches a negative conclusion. But abandoning the administrative procedure would be a big step for the EU; if competition law were to be removed from the Commission’s exclusive control, it would surely have to move ‘as a piece’ - that is, Article 81 and 82 investigations included. "I don’t know if the Commission is ready to take that step yet," comments a Brussels practitioner.
Therefore the Commission is likely to press ahead with internal changes designed to prevent excesses by the middle management tier, who, critics say, see 'big' cases as a way to advance their own careers.
Others point out that very few cases per year have led to problems. "We are talking at most about a handful of Phase Twos per year," says a Brussels source.
Says Rachel Brandenburger of Freshfields Bruckhaus Deringer: "These decisions present challenges for the Commission. And the current review of the Merger Regulation provides a good opportunity for tackling them."
Schneider Electric has been represented in its appeal by a team from Allen & Overy in Brussels. Competition partners Jacques Steenbergen and Francis Herbert from Brussels led the work, aided by associate Marc Pittie of the Paris office.
The company also submitted economics briefings prepared by Professor Len Waverman, director of the 'centre for the network economy' at the London Business School, and Ciara McSorley of NERA in London. A press release for NERA says that Waverman and McSorley’s work on the effects of the merger outside France had played a key role in the Court’s decision to overturn the prohibition. "It shows our strength in depth" says Mark Williams, now co-head of NERA in Europe. McSorley was the sole economist with NERA in London who didn't depart earlier this year to join a rival firm.
Allen & Overy worked on the competition aspects only of the original deal. The Parisian firm Darrois Villey Maillot Brochier gave Schneider corporate advice. Since then Darrois Villey has decided to set up its own competition department.
A team from Bredin Prat represented Legrand in the appeal. Competition partners Robert Saint-Esteban, Hugues Calvet in Paris and associates Chantal Momege (Brussels), Margali Russelot and François de la Ferre also worked on the matter.

Stop press
Tetra Laval also overturned - Friday
This morning the Court of First Instance also overruled the EC's prohibition of Tetra-Laval/Sidel.
The court finds the EC's reasoning in the case faulty. The case team based its Tetra-Laval/Sidel decision on a bundling theory. A similar theory would later became the centrepiece of GE/Honeywell, now itself the subject of appeal.
The Court did not find that the party's rights of defence had been infringed.

Commission clears Northrop Grumann/TRW merger
October 25
US aerospace company Northrop Grumann has obtained competition clearance in the EU for its merger with TRW. The deal, valued at US$13 billion, will see the third and eighth-largest US defence contractors come together to form a group that, hopes Northrop, will compete with the likes of Lockheed Martin and Boeing.
Giving the merger the green light, DG Comp acknowledged that the deal creates overlaps in the military aircraft, satellite systems and communication components sectors. But in spite of these concerns the merger was only subjected to phase one scrutiny in view of the fact that the merged entity faces competition from numerous European companies such as EADS, Thales and BAE Systems. The Commission cooperated on the investigation with the US Department of Justice, whose own probe is expected to close within the year.
In the US, possible anti-competitive effects are causing more worry, so much so that the Pentagon itself is getting involved. Both Northrop and TRW are suppliers of crucial sensors, and there is a fear that the merged company could control its rivals’ access to key technologies. Says a Pentagon insider: "Northrop-TRW could keep sensor technologies from competitors, undermining competition. However, if Northrop agrees to supply infra-red, electro-optical and synthetic radar sensors to all its rivals, that would go a long way towards resolving concerns."
Global Competition Review will dedicate its February/March 2003 issue to the defence industry.
Northrop Grumman’s director of legal operations, Wolf von Kumberg, instructed Freshfields Bruckhaus Deringer for its European competition work. Partners Andrew Renshaw and Marc Reysen led the work, assisted by associates Daniel Harrison, Casandra Viñuela, Ilkka Leppihalme and Tamara Dini. Skadden Arps Slate Meagher & Flom was retained by TRW. Partner James Venit worked on the EU and worldwide competition aspects of the transaction, assisted by associates Ingrid van den Borre, Frédéric Depoortere, Luca Preta and Dominique Speekenbrink.

Finnish Authority gives Lannen Tehtaat/Avena conditional clearance
October 25
A merger between animal feed producers Lannen Tehtaat and Avena Limited has finally received a conditional approval from the Finnish Competition Authority. It is the first Finnish merger of 2002 to receive an in-depth, phase two-style investigation and to involve divestments.
The actual exchange of shares will now not take place until Avena has been split into two companies. This is one of the remedies required by the FCA, and is designed to keep the subsidiary Avena Siilot, Finland's largest grain handling and storage company, out of Lannen Tehtaat’s hands. Under the FCA’s other condition, Lannen Tehtaat must guarantee that the beet pulp created as a by-product of its sugar production is made available to other producers.
In a statement, the FCA explained that had it passed the deal unconditionally, the merged company would have been the sole producer of domestic sugar beet, would have had a dominant position in the market for mineral feed manufacture and would have had a jointly dominant position in a number of important markets with its competitor Raisio Yhtyma. As it is, the company says that the merger will make it the country’s leading producer of industrial feed and a major player in the grain sector.
The director of the FCA’s merger unit, Juhani Jokinen, led its investigation. He was assisted by a four-person team consisting of senior research officers Jaana Hautala, Tiina Saarinen and Miika Oksanen and research officer Paivi Kalliomaki. The firm of Krogerus & Co was responsible for Lannen Tehtaat’s merger filings; partner Raimo Luoma and associate Pia Nyholm were in charge of competition work there. Associate Tuija Hartikainen of Luostarinen Mettälä Räikkönen advised Avena on competition matters.

Sports broadcasting exemption overruled — again
October 25
The European Court of First Instance has annulled the exemption from competition laws granted to the European Broadcasting Union by DG Comp. The agreement among members of the Union on sharing television broadcasting rights did not guarantee competitors sufficient access to transmission rights for sporting events, according to the CFI judgment issued in October 2002.
This is the second time that such a ruling has been made: in July 1996 the Court of First Instance annulled an earlier exemption and the EBU was forced to adopt new sub-licensing provisions offering wider opportunities for non-members to broadcast.
The latest ruling throws the arrangements for various high-profile sporting events into question, most notably the 2004 Olympic Games and the European football championships, also being held in 2004. Broadcasting rights for these and other events are held under the terms of EBU agreements. One source involved in the case told GCR that unless there is a fresh exemption the EBU may be dissolved.
EBU president Arne Wessberg says that the CFI’s decision "does not challenge the basic principle that the EBU may acquire sports rights on behalf of its members". At the time of the Treaty of Amsterdam, the EBU obtained a declaration from the representatives of the Member States that it would be exempted from the Treaty’s provisions with regard to public interest obligations.
The EBU can contest the ruling; an appeal could take as long as 18 months.
Of the four broadcasters contesting the exemption, Metropole Television was represented by competition partner Didier Théophile of Darrois Villey Maillot Brochier in Paris; Antena 3 was represented by partner Emiliano Garayar of Gomez Acebo & Pombo’s Madrid office, assisted by associate Anna Garcia; Portugese broadcaster Gestevision Telecinco was represented by Santiago Munoz Machado, a professor at Madrid University; and Sociedade Independente de Comunicação used Carlos Botelho Moniz of Botelho Moniz, Magalhães Cardoso, Marques Mendez & Ruiz. Denis Waelbroeck of Ashurst Morris Crisp’s Brussels office advised the EBU.

Canadian Bureau fines vitamins cartel
October 25
The Canadian Competition Bureau has imposed fines totalling C$3.875 million on members of a cartel which conspired to fix prices and allocate market shares for vitamin B3 products sold in bulk in Canada.
Degussa AG of Germany, Lonza AG of Switzerland, Nepera Inc and Reilly Industries of the US pleaded guilty to participating in an international conspiracy concerning the vitamin niacin. Meetings of the cartel were held outside Canada and lasted from January 1992 until March 1998.
"These criminal cartels have forced Canadian consumers to pay higher prices for their everyday staples," said Raymond Pierce, Deputy Commissioner of Competition.
Degussa AG was ordered to pay a total of C$2.5 million as its volume of sales was greater than the others. However, having cooperated with the Bureau and pleaded guilty, it benefited from a leniency deal, though the amount involved was not disclosed. Lonza AG was fined a total of C$1.1 million. Nepera Inc and Reilly Industries were fined C$240,000 and C$35,000 respectively.
The total amount of fines imposed by Canadian courts since 1998 comes to C$95.5 million.
Degussa retained the services of McCarthy Tétrault in Toronto for its defence. The lead counsel advising was Paul Morrison; he was assisted by partner John Brown and by associates Linda Shin and Genevive Currie.
Swiss-based Lonza was advised by a team led by partner Donald Affleck of Kelly Affleck Greene in Toronto.
Reilly Industries was advised by partner Christopher Osborne of Osborne Badley in Toronto.
On the same day that the Bureau disclosed the existence of the cartel, it announced that a former senior executive of Hoffmann-La Roche, Dr Kuno Sommer, was to be fined C$150,000 for his role in multiple conspiracies to fix prices and allocate market shares for 10 bulk vitamins and food additive products sold in Canada. As a result of his involvement, eight companies and two individuals have been convicted and fined in 1998 and 2000 in relation to bulk vitamins, according to the Bureau. Partner Bill Vanveen and associate François Baril of Gowling Lafleur Henderson in Toronto represented Mr Sommer.

Treble damages awarded in ‘beds war’
October 25
Making one of the largest antitrust awards this year, a federal jury in the US has returned a US$173.6 million verdict in favour of San Antonio, Texas based specialty hospital bed-maker Kinetic Concepts Inc. Under Federal antitrust law, the sum will automatically be trebled, taking the total amount to more than US$520 million.
The jury found the defendant, Hill-Rom Inc, guilty of employing illegal tactics in an effort to drive its competitor from the market for high-tech hospital beds.
The fine will represent about one-half of Hill-Rom’s annual net revenue and about a quarter of the annual net revenue of its parent company.
US District Judge Biery still has to rule on Kinetic Concept’s request for an order prohibiting Hill-Rom from engaging in further anti-competitive conduct.
The verdict represents the latest twist in the long-running battle between Hill-Rom and Kinetic Concepts, which rank number one and number two respectively in the market for specialised hospital beds. According to its lawyers, Kinetic Concepts "has scored a string of victories over the past decade in the bed wars".
Hill-Rom dominates the market for standard-issue hospital beds, with a market share estimated at over 90 per cent.
Kinetic Concepts competes with Hill-Rom in the market for specialty beds.
Hill-Rom was accused of tying-in its customers, of exclusive dealing, and bundling. In particular, it was accused of providing discounts on the rental fees for standard hospital beds which were conditional on hospitals agreeing to Hill-Rom being the sole supplier of other specialty beds. The hospitals were locked into long-term contracts of three to five years
To keep down the cost of renting or purchasing equipment, most US hospitals have banded together in purchasing groups known as GPOs. Although individual hospitals are free to reject the deals negotiated by their GPOs and hire equipment of their own choice, they do so at the cost of losing the group discount.
The antitrust team representing Kinetic Concepts consists of competition lawyers Laurence Macon, Rebecca Simmons, Karen Guide, David Kinder and Pamela St John from Akin Gump Strauss Hauer & Feld’s San Antonio office.
The defending attorneys are Ricardo Cedillo of San Antonio firm Cedillo & Mendoza and Robin Hartmann of Haynes & Boone. It is extremely rare for cases in which treble damages are at stake to result in a jury verdict: usually one side caves in. Commented Simmons on her win: "Hill-Rom just misjudged its case."
Hill-Rom will ask Judge Biery to overturn the jury’s verdict, its lawyers say. If that fails, the firm of Boies Schiller & Flexner, with antitrust lawyer Donald Flexner advising, has been retained to handle an appeal before the Fifth US Circuit Court of Appeals.

Timken to acquire Torrington
October 25
Timken, a maker of precision metal products, is to buy Ingersoll-Rand’s subsidiary Torrington, a global producer of needle rollers, ball-bearings and motion control components, it has been announced. The deal values Torrington at approximately US$840 million.
The acquisition will make Timken the world’s third-largest ball-bearing company, with annual revenues of US$3.6 billion and pole position in the markets for tapered roller bearings and alloy steel.
The proposed acquisition is expected to receive intense scrutiny from competition authorities, partly because of recent controversy regarding anti-competitive behaviour in the ball-bearings industry. In September 2002 the French Conseil de la Concurrence imposed fines totalling Euro19 million on participants in a cartel to fix the price of ball-bearings. Neither Timken nor Ingersoll-Rand were implicated.
Timken has retained Jones Day Reavis & Pogue for its European work, both corporate and competition. Partner Greg Olsen of the firm’s London office will be responsible for obtaining clearance from DG Comp, while Carsten Gromotke of the Frankfurt office is the partner in charge of other European filings. Jones Day is still finalising its review of the jurisdictions that will require filings, although a spokesperson did say that the merging parties’ operations are largely complementary and are therefore unlikely to raise many horizontal issues. The firm would not say whether competition economists had been retained.
In the US, Joseph Winterscheid of McDermott Will & Emery, a former competition partner in Jones Day’s Washington office, will make the HSR filings. Jones Day is undertaking the US corporate work. Howrey Simon Arnold & White is advising Torrington on competition issues; partners Scott Flick and James Rill at the firm are leading a global team.

Canadian Competition Bureau fines US brewer
October 18
Following an investigation into the brewing sector in Quebec province, the Canadian Competition Bureau has fined the Stroh Brewery Company (Quebec) Ltd C$250,000 for illegally maintaining prices. The Detroit-based brewer pleaded guilty to the charges.
The fine is the largest imposed to date in a price maintenance case in Canada, where the last similar case resulting in a fine was R v Royal Page in the 1990s.
The Bureau’s investigation, which began in August 2001, established that Stroh set prices for bottled beer sold by the pack in convenience stores and other retail outlets throughout Quebec, and retailers were consequently unable to discount Stroh products.
"This is not an unusual case," said Randy Hughes, one of the lawyers representing Stroh. "The Commissioner got evidence in the form of language violating the price maintenance regulations."
Representing Stroh Brewery (Quebec) Ltd was a team from Frasner Milner Casgrain in Canada. Leading the team were competition partners Randy Hughes and Richard Scott, both from the firm’s Toronto office. They were assisted by associates Matthew Hibbert, from the Toronto office, and Pascale Dionne-Bourassa and Annie Riendeau from the firm’s Montreal office.
Frasner Milner Casgrain recently opened an office in New York, the firm’s first international presence. For the time being the office will serve as a representative office and there will be no practising US lawyers. Randy Hughes will head the firm’s competition group in both Canada and in New York.

Freeview to launch in October
October 18
Freeview, the new UK digital terrestrial television service, will be able to meet its launch date of October 30 following a decision by regulators.
After a fast-tracked process, the Independent Television Commission awarded a bundle of multiplex licences to a consortium consisting of the BBC and Crown Castle, an independent communications company.
The BBC and Crown Castle put in a joint bid for three DTT multiplex licences. The licence for multiplex B was awarded to the BBC and the licences for multiplexes C and D were awarded to Crown Castle.
Sky and other broadcasters such as UKTV, EMAP and MTV will be supplying programming for transmission on the three multiplexes.
Freeview is a free service available to anyone who buys a set-top adaptor box, which retails at around £100.
In-house counsel at Crown Castle is Angela Dennehy; she has retained a team from Norton Rose to advise in competition matters. Competition partner Martin Coleman is leading this team, assisted by associates Grant Murray and Jenny Stevens.
Coleman says that the main concern from a competition/regulatory point of view was convincing the competition and telecom authorities that the arrangement between the BBC and Crown Castle would not have an adverse effect on competition.
Freeview is designed to fill the void left by ITV Digital and will include up to 30 free-to-air digital TV channels, which it is hoped will help persuade UK viewers to become the world’s first to switch en masse to digital.
At BskyB in-house team at the company is handling competition matters, according to spokesman Michael Rhodes.
The BBC is seeking competition advice from Denton Wilde & Sapte. At the BBC, Jane Vizard is coordinating the work on the deal. Partner Suyong Kim, assisted by Rona Bar-Isaac, is leading the team at Denton Wilde Sapte.

Italian Authority unhappy with Edizone/Autostrade
October 18
The Italian Competition Authority has begun proceedings against Edizone Holding and Autostrade, alleging that the two companies have failed to comply with the conditions laid down by the Authority two years ago.
The Italian Authority cleared the proposed acquisition of Autostrade (the parent company of Autogrill) by Edizone Holding subject to the divestiture of a number of motorway restaurant licences to one or more third parties in 1999.
The conditions imposed also required the appointment of an independent trustee to design and supervise the divestiture process.
Concern that Autostrade and Edizone had not complied with the conditions arose while the Authority was investigating another Autogriil merger concentration.
When the merger was approved by the Italian Competition Authority two years ago, the Authority insisted that an independent third party be placed between Autostrade and Autogrill to ensure that the awarding of franchises was conducted impartially.
Edizone has interests in Autogrill, and it was believed that discrimination would occur in relation to other competitors.
According to its press release, the Italian Competition Authority has documents showing that Autostrade took part in designing the tenders and the tendering procedures which should have been delegated to an independent party. Furthermore, Autogrill was kept informed of the details adopted for the tendering process, placing it in an advantageous position, the Authority says.
The companies deny the Authority's contentions.
Representing Edizone Holding in the new investigation is a team from Bonelli Erede Pappalardo in Rome. Leading the team is partner Massimo Merola. He is being assisted by fellow partners Maurizio Pappalardo and Claudio Tesauro and associate Adele Sodano.
Representing Autostrade was partner Gian-Michele Roberti of Studio Legale Roberti in Rome.
A decision is expected to be made by the Italian Competition Authority by the end of the year, according to Claudio Tesauro. The Authority has 90 days to conclude any further investigation.

Carlton/Granada will merge
October 18
It was announced this week that the UK’s two largest independent broadcasters, Carlton and Granada, will merge.
The companies have made attempts to merge several times before, but the plans were always abandoned on the advice of competition lawyers.
This time, to allay regulatory concerns about the companies’ 55 per cent share of the TV advertising market, the deal entails the spin-off of Carlton’s advertising sales house into a separate entity rather than merging it with Granada. Exact proposals, however, are expected to be hammered out during consultations with bodies such as the OFT.
The merger is being framed as a ‘pre-conditional offer’ that is still subject to regulatory approval. This means that companies are not under pressure to submit a prospectus to shareholders within 28 days, and therefore have more time to consult with the Office of Fair Trading and the Independent Television Commission on the structure of the deal.
ITV is the UK’s second major terrestrial channel and the main competitor the BBC. Granada and Carlton between them own the bulk of the ITV licences. ITV is famous for such programmes as 'Who wants to be a Millionaire?', and 'Coronotion Street'.
Granada and Carlton have both stayed with the advisors who have worked on previous merger negotiations.
The in-house counsel at Granada, Kyla Mullins, has retained Lovells to advise in competition matters. Competition partner Simon Polito is leading the team there; he is being assisted by associate Paul Stone.
Carlton is once more using Slaughter and May, where competition partner Laura Carstensen is advising. She is being assisted by Claire Jeffs and Polly Wotton.
The Office of Fair Trading and the Competition Commission are expected to spend around eight months looking at the deal. The timetable could coincide with the passage of the communications bill.

Microsoft off-the-hook in New Zealand
October 18
Microsoft’s new method of selling business software — the ‘software assurance programme’— is causing the company some antitrust headaches.
News has reached GCR of a complaint about the assurance programme to the New Zealand Commerce Commission. The Commission has in fact announced it will not investigate the complaint. However, the very fact of the complaint itself, and others now surfacing, doesn't bode well.
The ‘software assurance’ regime, which began worldwide on August 1, links software upgrades to a ‘subscription’ model.
The New Zealand proceeding arose after Infraserv, a New Zealand company, lodged a complaint with the New Zealand Commerce Commission stating that the so-called ‘software-as-a-service’ model would be a "chilling factor on both competition and entry into the market for at least the next four years". Infraserv was joined by several companies in lodging a complaint with the New Zealand Commission.
The New Zealand Commission has now informed Microsoft that it will not be take these complaints further. It says that following submissions from the complainant and Microsoft, it finds "no evidence that would support a finding that Microsoft has introduced SA [software assurance] in order to lock in its customers".
The software assurance agreement requires users with more than 250 personal computers to purchase a fixed-term subscription of two years. Subscribers are then entitled to all updates during its term — although there is no guarantee that any upgrade will transpire.
Infraserv instructed Craig Horrocks of Auckland firm Clendon Feeney to prepare its complaint.
Horrocks says he and his client were prepared for such a decision. "The purpose of the filing was to get users to understand that they were going to lose significant and valuable upgrade rights. I wanted to increase awareness of a critical change that has devalued the investment people made in software."
Research indicates that Microsoft was represented in this matter by Lindsay Jones of Chapman Tripp, though the firm refused to confirm its involvement.
But the New Zealand complaint is not a lone instance.
In the UK, a a consortium representing some of the UK's biggest names, the Infrastructure Forum, has filed a complaint on behalf of its members.
The forum has sent a letter to Patricia Hewitt, the minister responsible for competition in the UK, asking the government to refer Microsoft to the Office of Fair Trading. "Investigations show [we] are facing an average 94 per cent increase in licensing costs across the membership," says David Roberts, chief executive of Infrastructure Forum.
The Forum’s members include GlaxoSmith Kline, Prudential and Cadbury Schweppes, and it has filed a complaint in which they insist that signing such agreements will cost UK business US$1.3 billion. The letter was sent on September 24. The Ministry as yet has made no comment.
Microsoft officials say the new pricing policy is intended to simplify the upkeep of software and only 20 per cent of "volume licence customers" will see an increase in their costs; 80 per cent will save money or stay the same.
"We are concerned about what customers are saying and take it very seriously," a spokesperson says. "But at this point, we don’t have any plans to change it."

Proctor & Gamble win misleading advertising case in Venezuela
October 18
ProCompetencia, the Venezuelan antitrust agency, has dismissed a complaint filed by Kraft de Venezuela against Procter & Gamble de Venezuela (PGV) concerning the advertising of a powder drink, NutriStar. The agency announced its decision on September 30.
The product, which contains various nutrients, was launched by PGV in 2000 accompanied by an advertising campaign in which a child’s dreams of travelling in space, playing basketball and being a superhero were depicted. On January 10 Kraft formally complained to ProCompetencia that the advertisement contained exaggerated and misleading statements.
On February 28 ProCompetencia began an investigation in the course of which it commissioned a report from nutrition experts at the Venezuelan Institute of Scientific Investigations (IVIC).
Caterina Balasso, an associate at Baumeister & Brewer acting for Kraft, explained her client’s position to LATIN LAWYER. "The advertisement for Nutristar claims that clinical studies were performed on it, and on children, the results of which bear out the beneficial properties claimed for it," she began.
"However, as scientific experts brought in by PGV admitted, no studies were specifically carried out on the product. The studies they mentioned were performed in Africa on anaemic children and using a different product. Consumers were not made aware of this by the advertisement.
"Since the statements made by P&G in promoting Nutristar did not give consumers all the relevant information concerning the claimed properties of the product, the decision, if upheld, would dilute the standards for false or misleading in antitrust cases."
In the end, the agency itself concluded that "the statements, which attribute properties, characteristics and consequences to the consumption of NutriStar and its ingredient Creciplus that help children grow taller, stronger and more intelligent, are supported by scientific evidence."
During the proceedings, seen as the most important competition case analysed by ProCompetencia so far in 2002, a number of issues concerning free competition and advertising arose, and the agency’s rulings have implications that reach beyond this particular case.
The agency confirmed the scope of the antitrust rules in these areas, stating that "it is important to promote and not limit the mechanisms through which advertisers make available to the consumer objective or subjective information that may affect his/her purchase decision, provided such information complies with the principles of truthfulness and fair competition, that is, that such information does not mislead the consumer and does not adversely affect the purchaser."
D’Empaire Reyna Bermúdez Abogados represented Procter & Gamble before ProCompetencia through partners Gustavo J Reyna and Faustino Flamarique and associate José Frías.
Kraft was represented by Baumeister & Brewer partner Allan Brewer Carías and associates Balasso and Marianela Zubillaga.

Molson passes Brazilian test
October 11
Canadian brewer Molson Inc has received a green light from Brazil’s hard-to-please antitrust authorities for its takeover of the brewer Cervejarias Kaiser.
Molson became the second biggest brewer in Brazil on announcement of the US$765 million deal in March.
The deal entered the three-step merger clearance process in early April. It received clearance from the Administrative Council for Economic Defence (CADE) on September 11.
Sources close to the deal say that a potential sticking point was Molson's ownership of another Brazilian beer brand, Bavaria. Molson purchased this brand in November 2000 from AmBev, agreeing at that time to use AmBev's distribution network for the next four years. As a precaution towards securing clearance, Molson told CADE it would no longer distribute Bavaria through AmBev.
Marie Giguere (senior vice-president, general counsel and secretary of Molson) used Advocacia José Del Chiaro for advice on the notification. José Del Chiaro, Paula Guedes Vilela and Tatiana Lins Cruz of that firm worked on the matter.
Kaiser's in-house counsel Rogerio Felippe da Silva co-ordinating much of the local work. The deal parties also consulted partner Luis Leonardo Cantidiano of Motta, Fernandes Rocha Advogados in Sao Paulo. Economics advice was provided by Jorge Fagundes, of Possas e Associados.
In Canada, Molson has been advised by Fasken Martineau DuMoulin; Stikeman Elliott has advised Kaiser.

OFT re-instates fine on Aberdeen Journals
October 11
The Office of Fair Trading in the UK has completed its reworking of the Aberdeen Journals case, which centres on the Scottish newspaper group Northcliffe Newspapers, co-owned by the Daily Mail and General Trust Group.
The OFT has accused Aberdeen Journals of abusing its dominant position.
It has again imposed a penalty of £1,328,040 re-instating an earlier decision in the case.
That decision was successfully challenged by the newspaper group, in March this year, in an appeal to the Competition Commission Appeal Tribunal. The Tribunal said the OFT had failed to define the market properly. It was an embarrassing defeat for the Office, which is run by one of the UK's top economists. It marked the second time the OFT had been overturned by the Appeals Tribunal in as many months. The Tribunal re-submitted the case to OFT to be done again.
The new decision takes a slightly different tack from the first decision, finding the management of Aberdeen Journals in breach of the rules on lawful pricing.
In a statement, the OFT says, "Aberdeen Journals has deliberately incurred losses on the Aberdeen Herald & Post". Such action was seen as an attempt to drive Aberdeen & District Independent, its only rival in the relevant market, out of business.
The lead OFT caseworker on the matter, Becket McGrath says that establishing price transparency was the hardest part of the analysis. "In negotiating prices, some advertisers can negotiate big discounts," he suggests.
He says the OFT has used a more thorough economic analysis to support its case. For example monthly revenues and volumes were tracked across the four major newspapers, Aberdeen Herald and Post and the Aberdeen and District Independent.
On its own the economics data is inconclusive. The OFT has therefore turned to behavioural evidence that Aberdeen Newspapers Ltd ran running its low-price advertising at a loss.
According to Craig Pouncey competition partner at Herbert Smith who is representing Aberdeen Journals the new decision is no more convincing than the first: " Needless to say, appeals will be filed". Any appeal must be lodged by November 16.
Aberdeen Journals is represented by a team from Herbert Smith in Brussels - where partner Craig Pouncey and associate Veronica Roberts have worked on the case. They have instructed Nicholas Greene QC and Fergus Randolph, both of Brick court Chambers. Aberdeen Independent Ltd is using the UK firm of Shoosmiths - where litigation partner John Hill is working with competition partner Andrew Pickin on the matter.

Ebay/PayPal merger faces obstacle
October 11
The merger between eBay, the leading on-line auction company, and PayPal, faces legal opposition by a group of shareholders.
The deal, which is valued at US$1.5 billion, obtained competition clearance from the antitrust division of the US Department of Justice on August 20. It was then voted for by PayPals's shareholders on October 4.
In the interim, however Six shareholder lawsuits have been filed, including one by America’s third-largest credit card company, First USA Bank (a subsidiary of Bank One), which threaten the deal.
First USA Bank says that PayPal is violating its patents on the ‘cardless payment system’. This allows computer users to make financial transactions without having to re-enter their account details.
The remaining suits concern the price paid, and the stock options being provided to PayPal executives. They have now been consolidated into a single action.
The eBay offer valued PayPal at an 18 per cent premium. Under the terms announced, PayPal chief executive Elon Musk will receive nearly $148 million-worth of eBay stock, while Michael Moritz, a director, and his investment firm, Sequoia Capital, will collect about $111 million-worth.
A spokesperson for the company says the shareholder lawsuit is "without merit", saying that the litigation is no hurdle to closing the transaction.
The company expects the deal to close early in the fourth quarter.
No date has yet been set for the shareholder's case. The Delaware Chancery Court was unable to provide GCR with any information about it either.
A team from Hogan & Hartson in Washington DC represented eBay on the original transaction. Antitrust partner Christine Varney led the team, assisted by associate Jill Kraus.
PayPal has retained the services of Kirkland & Ellis in Washington DC in connection with deal and litigation. Partners Mark Kovner and Pamela Aeurbach and associate Colin Kass advised on antitrust issues. Litigation partner Thomas Kuhns is defending the company against the shareholder suits.
Corporate litigator Joseph Rosenthal, of Rosenthal, Monhait, Gross & Goddess, is representing the shareholders.
At the PayPal shareholders meeting on October 4, which voted to accept the offer, the concerns mentioned in the lawsuits were unmentioned.

French ball bearing cartel fined
October 4
The French competition authority,the Conseil de la Concurrence, has fined a group of ball bearing manufacturers for participating in a price-fixing agreement. The fines, totalling just over Euro19 million, include the sixth and seventh largest fines ever imposed by the French authorities. The most serious offenders received substantial fines: Swedish firm SKF (Euro7.9 million), French SNR Roulements (Euro6.6 million) and the German INA Roulements (Euro4 million ). Three other cartellists received lesser fines: NSK France (Euro320,000), Koyo France (Euro162,000) and FAG (Euro32,000).
Leniency for cartel offenders was only introduced in France this year, too late for this batch of defendants. The discrepancies in the level of fines is explained by the fact that the Conseil calculates them on the basis of the size of the company and the seriousness of the offence, the damage caused to the economy, whether the company was a leader or a follower and if it had a history of cartel offences. In this case, the largest fines were calculated at between 3 and 10 per cent of global turnover before tax, although the Conseil was unwilling to specify at precisely what percentage.
A source close to one of the defendants that received a lesser fine says that the sanctions signal a shift in policy towards prosecution of ‘per se’ violations rather than enforcement based on the economic effects of the cartel. "This decision is symptomatic of a new zeal against price-fixing. Companies can now expect very severe sanctions for even the most marginal participation in a cartel," says the source. "The Conseil does not take mitigating circumstances into account; a company must be whiter than white."
Although no specific plans have yet been announced, it is expected that some of the companies will appeal against the amount of the fines, given their near-record levels.
SNR Roulements has retained competition partner Joseph Vogel of Cabinet Vogel et Vogel for its defence, while partner Jean-Louis Fourgoux of Cabinet Fourgoux et Associés is representing INA Roulements. Emmanuel Amiot is defending NSK France, and Dominique Brault, an associate at Cabinet Coudert Frères, is acting for Koyo France. FAG France is being represented by partner Jean Leygonie of De Pardieu Brocas Maffei & Leygonie, and Loraine Donnedieu de Vabres, a partner at Cabinet Jeantet et Associés, is representing SKF. The Conseil de la Concurrence team was led by Marie-Dominique Hagelsteen, chair of the Conseil, who was assisted by vice-chairs Micheline Pasturel and Philippe Nasse, members Jean-Pierre Bidaud and André Gauron, and Jacques Ripotot.

Allfirst to merge with M&T
October 4
Allied Irish Banks is to merge its US-based unit Allfirst Financial with New York-based bank M&T. The deal is valued at US$3.1 billion and will create a new entity with combined pro forma assets of US$49 billion and 700 branches. Under the terms of the deal, AIB will receive a 22.5 per cent stake in M&T and will be represented on the board and various committees of M&T.
Industry watchers have described the deal as a good exit for the Irish bank from a subsidiary that had plunged it into controversy. In February 2002, Allfirst currency dealer John Rusnak turned himself in to the FBI under suspicion of defrauding the bank of US$750 million by generating false foreign exchange transactions. AIB is believed to have written off the entire US$750 million as bad debt.
The merger is still subject to approval from the shareholders of both companies, and is expected to require regulatory clearance in Ireland and from the DoJ in the US.
AIB has retained A&L Goodbody for competition advice in Ireland; partner Vincent Power will be assisted by associates Alan McCarthy, Anna-Marie Curran, Denise Casey and Dorit McCann. Wachtell Lipton Rosen & Katz is advising AIB in the US, with partner David O’Neill in charge. Partner Mike Mierzewski of Arnold & Porter’s Washington office is leading a team of advisors to M&T. Both firms are also undertaking the clients’ corporate work. It is thought that competition economists will not be used.
Arnold & Porter declined to comment on the likelihood of a second request.