Coca-Cola’s bottler buys PanamCo
January 17
Mexican Coke bottler Coca-Cola FEMSA is buying Panamerican Beverages, Latin America’s largest bottler of Coca-Cola. The deal, under which FEMSA will pay US$2.72 billion as well as taking US$880 million of debt, will create the world’s largest Coca-Cola bottler outside the United States with estimated revenue of US$4.6 billion and a projected volume of 1.9 billion unit cases, second only to the Atlanta-based parent company. It is the largest-ever cross-border M&A deal involving two US-listed Latin American issuers.
The merged company is expected to have leadership positions in many Latin American markets, notably Guatemala, Nicaragua, Costa Rica, Panama, Colombia, Venezuela, Brazil and Argentina. FEMSA chairman Jose Antonio Fernandez claims the deal will yield "important synergies and great potential for major productivity gains and growth opportunities".
The deal is expected to close in the second half of 2003, but it will require antitrust clearance in a number of jurisdictions including the US, Brazil and Mexico. Overlaps and post-merger dominance are expected to raise some significant antitrust issues, although the competition specialists involved declined to comment on possible divestitures. Coca-Cola FEMSA’s US antitrust advisors are Cleary, Gottlieb, Steen & Hamilton, where associates Brian Byrne, Stéphanie Hallouët and Sean Corey are responsible for Hart-Scott-Rodino filings. Cravath, Swaine & Moore is advising Panamco; partners John Beerbower and Robin Landis there will be assisted by associate Jacqueline Bos.
Tozzini, Freire, Teixeira e Silva Advogados is acting as joint counsel counsel in Brazil, where partner Marcelo Procópio Calliari leads associates Bruno Lembi Neto and Rogério Domene in dealings with the Brazilian enforcer.
Ricardo Hernandez, a competition partner at Castañeda y Asociados, will provide counsel to both parties in Mexico.

EC refers Leroy Merlin/Brico back to three national enforcers
January 17
DIY retailer Leroy Merlin’s acquisition of Brico stores has been sent by DG Comp back to the national competition enforcers of France, Spain and Portugal. It is the first time that three national agencies have taken over a merger investigation from the Commission.
In a statement explaining the unprecedented decision, DG Comp says it referred the deal because of "the purely local nature of the problems posed".
The move has been welcomed by competition specialists, who have described it as logical — for although the Commission could have reviewed the deal itself, the affected markets are those for national retail sales. Article 9 referrals such as these are expected to become increasingly common with the decentralization of merger control, though some lawyers do not see as this as a simple matter of subsidiarity. Explains Tom Ottervanger (Allen & Overy, Amsterdam): "Referrals of merger reviews will in future be a two-way process, not only from the Commission to the Member States but also from the Member States to the Commission." Ottervanger is advising Royal Vendex, the selling party, along with his associate Derik Arts.
Advising Leroy Merlin on its acquisition in France is Valérie Ledoux, a partner in the Paris law firm Racine. She will also be advising on the Portuguese competition process. In Spain the DIY retailer has retained Garrigues Abogados. Competition partner Lluis Cases and his associate Javier Menor there are undertaking the merger review, which is expected to take until April. The Tribunal de Defensa de la Competencia will examine the deal for two months before making a non-binding recommendation to the ministry of economy, which will have a further month to decide whether to approve the deal and if so whether to impose remedies. No-one involved with the deal was prepared to comment on the possibility of divestitures being required. However, the Commission notes in its statement that "in Spain, Brico and Leroy Merlin together account for almost all sales of DIY products by large specialised stores."
Leroy Merlin does not operate in Portugal, although it does have a retail licence. It has undertaken not to open a branch in one affected local market, the town of Sintra outside Lisbon.
The case is the first that the Portuguese authority has requested under Article 9, and the move led one observer to describe the future as "unpredictable". The deal is expected to have a significant impact on the French market, as the merged group would leapfrog Castorama to become the market leader.

Canada’s biggest technology computer firms get together
January 17
Canadian computer services company Cognicase has accepted a friendly takeover bid of for C$328.9 million in cash and stock from fellow Montreal-based information technology specialist CGI. The deal closed on 13 January. The offer follows a hostile bid from CGI on 6 December of C$313.3 million. In response, Cognicase threatened to use a ‘poison pill’ defence and seek a better offer. The higher bid has persuaded the National Bank of Canada, a 15 per cent shareholder, to sell its stake.
CGI is Canada’s biggest computer-services company, and the purchase will boost its revenues to C$3 billion. Cognicase is the second-largest information technology solutions provider in Canada.
CGI is believed to be eager to expand in the US to compete against companies such as IBM. The purchase gives CGI access to Cognicase clients including the National Bank of Canada and the New York City government.
The Canadian Commissioner of Competition has issued an advance ruling certificate indicating that no competition problems are foreseen and that there will be no challenge on competition grounds during the next three years.
Madelaine Renaud of McCarthy Tétrault led the competition team for CGI, assisted by associate Rui Baroo. Ogilvy Renault was retained by Cognicase’s vice-president for legal affairs, Benoît Dube. Partner Denis Gascon and associate Michael Hassan worked on competition matters.
Yahoo! buys Inktomi
January 17
California-based Internet company Yahoo! is to buy Inktomi, a web search provider, for US$235 million. The deal, which is subject to stockholder and competition approval, is expected to be completed in the first quarter of 2003.
Yahoo! is the number one global Internet brand and is available in 13 languages. Inktomi is the leading provider of Original Equipment Manufacturer (OEM) web search and paid inclusion services, and its customers including Amazon.com, Ebay, Lycos/HotBot, MSN and WalMart.com.
The deal is seen as a bid to break into the profitable paid searches market; Inktomi has 10 million paid URLs in its database, half of which produce recurring income. David Peterschmidt, Inktomi’s chairman and CEO, says that the deal "brings us closer to achieving our mutual goal of making the Inktomi-Yahoo! search offering the standard bearer for searching on the web".
Skadden, Arps, Slate, Meagher & Flom is representing both sides on competition issues. Davis Polk & Wardwell is dealing with the corporate side of the case for Yahoo!. Competition counsel for Yahoo! is partner Alex Chang and associate Neil Sirota, of Skadden’s Palo Alto office.
Inktomi is retaining a Skadden Arps team led by New York partner Michael Weiner. He is being assisted by counsel Brian Mohr and associate Christopher Meyer.

German toll joint venture goes to phase II
January 17
A Daimler Chrysler and Deutsche Telekom joint venture has gone to a phase II investigation. The joint venture, Toll Collect AG, was created to operate a toll-collecting system for heavy goods vehicles on German motorways. Daimler Chrysler, Deutsche Telekom and Cofiroute SA, a French motorway operator, won a government tender to install and operate a toll-collecting system for loaded lorries of over 12 tonnes.
Daimler Chrysler and Deutsche Telekom will each own a 45 per cent stake in the venture with Cofiroute owning the remaining 10 per cent.
The joint venture will install tollgates necessary for the non-automated toll collection as well as controlling bridges over the motorways.
The Commission is not concerned about the possibility of Toll Collect AG impeding competition in the toll-collecting market but rather with the potential competition issues arising from the ‘value added service’ application included in the system. This will provide motorists with navigation aids and information on traffic flows and thus have a potentially anti-competitive effect on the telematics market, in which Daimler Chrysler is already active. The transaction could deliver a significant segment of this emerging market.
Klaus Becher and Stefan Lechler, general counsel at Daimler Chrysler and Deutsche Telekom respectively, have retained Clifford Chance in Düsseldorf to represent both companies in merger notifications. Deutsche Telecom has been a client of Clifford Chance for 10 years; competition partner Joachim Schuetze there is leading the team, assisted by Albrecht von Graevenitz. French motor operator Cofiroute SA is being advised by CMS Hasche Sigle in Stuttgart, where competition partner Harald Kahlenberg is advising with the assistance of Kathrin Eisele.
Lawyers working on the deal are quietly confident about the chances of getting clearance from the Commission. Commitments already been given to the Commission under the initial investigation include to provide non-discriminatory access to the market and, in the event of any disputes, improved arbitration proceedings. Under Article 7, the joint venture has already been granted an exemption from the Commission’s prohibition on implementing the joint venture before clearance is given.

NMa clears Carlyle/Casema
January 17
The Netherlands Competition Authority (NMa) has cleared the acquisition of the cable television operator Casema by a venture capital consortium made up of Carlyle, Providence Equity Partners and GMT Communocations Partners. In its statement the agency explains that as the acquiring parties have no cable or media activities in Europe, the deal does "not result in the emergence or strengthening of a dominant position".
The acquisition marks the end of the troubled French media company’s attempts to sell Casema. Liberty Media was expected to buy the company earlier this year, but withdrew after the NMa launched a further investigation into the deal. France Telecom, which owns Casema, will receive Euro665 million from the consortium for the sale, significantly less than the Euro750 million offered by Liberty. For its part France Telecom received a Euro9 billion bail-out from the French government in December 2002 to help it to service its Euro70 billion debt.
Acting for the buying consortium, Allen & Overy competition partner Tom Ottervanger and his associate Pepijn van Ginneken have obtained clearance for the deal without a phase II-style investigation, since there are no overlaps between the companies. France Telecom took competition advice from Jaap Feenstra, a partner in Nautadutilh’s Rotterdam office. No economists were used.
Case Arg Ambev Marval

Argentinean enforcer approves Ambev/Quilmes
January 17
The Argentinean competition body has approved the merger between local beer maker Cervecería y Maltería Quilmes SA (Quilmes) and Brazilian brewing company Cia de Bebidas das Americas SA (Ambev) following months of legal wrangling. The two companies announced the decision on January 14.
The merger looked in doubt for months after rival Cervercería Argentina SA Isenbeck requested a more active role in the competition approval process. On October 29, the Federal Court of Appeals for Civil and Commercial Matters in Buenos Aires rejected Isenbeck’se complaint, allowing the process to resume.
Under the terms of the deal, Ambev will pay US$346.4 million for class A shares in Quinsa, the holding which controls Quilmes, and give the company control of roughly US$250 million worth of assets in Argentina, Bolivia, Paraguay and Uruguay for new Quinsa Class B shares.
The approval does come with a few conditions, however, since it was shown that the companies’ brands would together command about 80 per cent of the market. Within the next year, the companies must sell the licence for production of the Heineken brand, and for the Bieckert, Palermo and Norte brands and recipes. They must also give the buyer access to their distribution network for the brands for seven years.
Dutch brewer Heineken NV says it still plans to contest the merger. It has requested an injunction against the merger and brought the matter before an international arbitration panel. A hearing will be held before the end of January 17, with a ruling soon after.
Heineken has offered to match Ambev’s offer for a 37.5 per cent stake in Quilmes. It already has a 15 per cent stake in a joint venture with Quilmes International Bermuda Ltd (QIB).
Quilmes however appears happy matters as they stand. Quinsa’s chief executive officer, Agustín Garcia Mansilla, says: "While it is true that we would have preferred to avoid having to give up any of our brands, the conditions required were within the scope of what we expected for a transaction of this type."
Partner Fernando Aranovich, of Marval, O´Farrell & Mairal, led the competition team for both AmBev and Quilmes. He was joined by partner Alberto C Cappagli and of counsel Jorge Perez Delgado.
Ricardo U Siri, in-house counsel to Quilmes, was also involved in the case.

INDECOPI rules against insurance companies
January 17
Peru’s enforcement body - the Antitrust Practices Committee of Peru’s National Institute for the Defence of Competition and Protection of Intellectual Property Rights, ‘INDECOPI’ - has ruled against several Peruvian insurance companies following an investigation of the market for car insurance. The decision was taken just before Christmas.
Car insurance was recently introduced in Peru, causing some controversy: transport unions called for strikes pointing to the increased costs for their members.
The insurance companies in question have been represented by Amadeo Vallejo, an economics and mathematics specialist, to demonstrate their commercial risks in entering an untested market. Sources say that Vallejo is the only specialist with the requisite qualifications to conduct such an analysis.
The INDECOPI investigation says in itsruling that between July 2001 and April 2002 the market exhibited parallel prices.
The companies affected are Interseguro Compañía de Seguros Vida SA; Wiese Aetna Compañía de Seguros ; El Pacífico Compañía de Seguros y Reaseguros; Mapfre Perú Compañía de Seguros y Reaseguros; Royal & Sun Alliance Seguros; Generali Perú Compañía de Seguros y Reaseguros; Sul América Seguros y Reaseguros SA; La Positiva Seguros y Reaseguros; Rímac Internacional Compañía de Seguros y Reaseguros ; and Peruvian Insurance Companies Association (APESEG).
Sources say the companies are planning to appeal to the INDECOPI’s Competition Defence Court. A key feature of the appeal may be INDECOPI’s failure to release a technical report in time for the companies to respond.
Juan Diego De Vinatea, of Hernandez & Rosselló, has been coordinating the companies’ defence. He has worked closely with partner Raúl Barrios, of Barrios Fuentes Urquiaga Abogados, and Juan José Cauvi, of Payet, Rey, Cauvi.
Hernandez & Rosselló represented Sul América with a team led by partner Rosa Bueno and including associates Luz Israel, for regulatory matters, and De Vinatea, for insurance matters, as well as economist Carlos Carrillo for the economic and financial analysis.
Generali and Wiese Aetna was advised by Estudio Ferrero Abogados through partner Augusto Ferrero and associate Piercechi.
Partners Barrios and Alberto Montezuma of Barrios Fuentes Urquiaga Abogados advised Royal & Sun Alliance.
Interseguro Compañía de Seguros Vida SA used Estudio Bellido Saco-Vertiz & Bellido Abogados as its external counsel, where partner Jaime Ñato led the work.
The firm of Estudio Llona & Bustamante has advised La Positiva Seguros y Reaseguros through partner Fanny Aguirre.
The three remaining companies affected - Rímac Internacional, El Pacífico and Mapfre — were advised by Payet, Rey, Cauvi, where the team washeaded by partner Cauvi. He was assisted by associates Jorge Lazarte and Diego Roda.
INDECOPI’s chief adviser on the matter was technical secretary Jocelyn Olaechea.

Commission will appeal against Tetra Laval
January 10
The European Commission says that it will appeal to the European Court of Justice over the annulment of its Tetra Laval merger prohibition.
The Court of First Instance overturned the Commission’s decision to block a merger between the European packaging manufacturers last October. The judgement criticised the Commission, pointing to a lack of "precise examination, supported by convincing evidence". The Commission’s decision predicted anti-competitive effects arising in 2005 as a result of the behaviour of the merged companies.

In its statement, the Commission is to challenge the annulment on three points:

• Burden of Proof. The Commission says that the Court has imposed a disproportionate standard of proof on its merger team. It further says the Court should confine itself to an administrative role and "not substitute its view of the case for that of the Commission."

• Leveraging Theory. Here the Commission says that a requirement to consider the deterrent effect of national law and Article 82 on the merged parties is "inconsistent". The Court of First Instance suggested that national laws would keep the merged parties on the straight and narrow.

• Behavioural Commitments. The Commission also objects to the Court’s requirement to consider behavioural solutions in such mergers. It says that the Merger Regulation is intended to avoid the need for complex supervision of the behaviour of merging parties.

Sources in Brussels say that the Commission is sending a message to the Court that it will "stick to its guns", as one lawyer put it. The issues of leveraging and behavioural commitments are pertinent to another merger decision under appeal, GE/Honeywell, in which a decision is due later this year.
If the Tetra appeal is not fast-tracked, the European Court of Justice decision will be made in two to three years.
Many expect the Court’s decision to survive the Commission’s renewed attack. "I would be shocked if it changed the outcome and resulted in an annulment," said one source close to events.
The Commission has decided against appealing Schneider/Legrand, also blocked by the Court of First Instance in 2001, as that judgement is primarily concerned with facts and procedure. CFI judgements may only be appealed to the ECJ on matters of law.
The Commission blocked the $1.54 billion acquisition of French packaging and plastic bottle manufacturer Sidel by Swedish packaging company Tetra Laval in 2001. Tetra Pak was represented in its successful appeal by Alexandre Vandencasteele and Denis Waelbroeck, of Ashurst Morris Crisp in Brussels; and Andreas Weitbrecht of Latham & Watkins. Competition partners Eric Mahr and Sven Völcker, and associates Vlenia Ariano, Flavio Distefano, Arrun Rattan and Deirdre Waters of Wilmer Cutler & Pickering (Andreas Weitbrecht’s former firm) are also advising Tetra.

Dutch Competition Authority hands out record fines
January 10
The Netherlands Competition Authority (NMa) has handed out its largest ever set of fines to five mobile operators. The fines total EUROS 88 million. The agency says that the companies colluded over the fees they pay to mobile subscription dealers and also exchanged commercially sensitive information about prepaid packages.
KPN was fined EUROS 31.3 million; Vodaphone EUROS 24 million; Ben EUROS 15.2 million; Dutchtone EUROS 11.5 million; and O2 EUROS 6 million. The fines reflect the differing sizes of turnover of the companies, although the agency explains that Ben and Vodaphone took the initiative in the collusion, and so their fines are higher.
According to the NMa, the mobile operators decided at a meeting in June 2001 decided to coordinate their behaviour. As a result the price of a combined mobile phone and subscription rose.
All five companies are expected to appeal against the ruling on the substantive issues of the case and against the size of the fines, which sources say is disproportionate to any effect on competition. Payment of the fines would be suspended until the case has been finally resolved, although the companies must pay interest on the fine while the case is being reviewed. The appeals might take as long as three years. KPN acknowledges in its response to the decision that one ex-employee participated in a meeting with other operators to discuss reducing the dealers’ fees, but maintains that this had only a minimal effect on competition. It claims that although the dealers’ fees were reduced, coordination was limited to the timing of the cuts.
The unprecedented fines are in accord with the strict guidelines on cartels recently issued by the agency. Nonetheless, there has been speculation among Dutch competition specialists that the fines emanate from political criticism of the NMa’s effectiveness against cartels. The case is the first since a parliamentary enquiry into the construction sector found that bid-rigging and price-fixing are commonplace, and had hitherto been undetected by the NMa. The record fine was announced two days before the director general AW Kist left the agency. Some sources say Kist had a desire to ‘go out with a bang’.
KPN has retained Allen & Overy for its appeal; partners Sander van der Voorde and Paul Glazener are advising, while Houthoff Buruma partner Weyer VerLoren van Themaat is standing by for Ben. Bird & Bird’s competition group is advising Dutchtone: partners Pauline Kuipers and Marjolein Geus are in charge of the matter, assisted by associate Liselotte van Wyngaarden. Clifford Chance partner Geerd van der Klist and his associate Helena Verhagen will handle Vodaphone’s appeal, while O2’s counsel is De Brauw Blackstone Westbroek. Partner Martijn Snoep and associate Simone Jansen are working on the matter.

CSC buys DynCorp
January 10
Computer Sciences Corporation is to acquire the employee-owned information technology and outsourcing company DynCorp. The deal, which DynCorp CEO and president Paul Lombardi describes as a "perfect match", values DynCorp at $950 million.
Founded in 1959, CSC has grown into one of the leading US technology companies: its revenues for the 12 months up to October 2002 were $11.4 billion. It is a supplier to every agency in the U.S. government. The merger will make it one of the top 10 US government contractors, with revenue derived from the contracts of around $6 billion.
DynCorp provides military technical support services, while CSC works across all areas of defence. The deal marks a further concentration of the US defence technology sector, following Northrop Grumann’s $12 billion acquisition of TRW receiving DoJ antitrust approval earlier this month.
CSC has retained Gibson Dunn & Crutcher for its competition work; Of Counsel Sandy Pfunder is in charge of the Hart-Scott-Rodino filing, while Dyncorp in-house counsel Montgomery Hougen will undertake the company’s antitrust work without external assistance. No competition economists will be used.

Cadbury Schweppes secures Adams Chewing gum company
January 10
Cadbury Schweppes has agreed to buy Adams Chewing Company from Pfizer for $4.2 billion, it was announced this week.
Cadbury Schweppes will now become joint leader with Nestle in overall confectionary and become number two in chewing gum with a 27 per cent market share.
Included in the deal are four "power" brands, which represent 70 per cent of Adams’s sales. Those brands are Halls medicated confectionary, Trident sugar free gum, Dentyne Ice gum and the Bubbas bubblegum range.
Cadbury Schweppes is also expected to gain access to major new markets, especially in Latin America.
Representing Cadbury Schweppes in the deal is a team from Slaughter and May. Competition partner William Sibree and associate Martin Ostberg are advising.
Pzifer’s assistant general counsel Bernard Kent has retained Clifford Chance to advise. The competition team there comprises competition partners Marleen Van Kerckhove and Charles Van Sasse-Van Ysselt. Ninette Dodoo is assisting.
Filings are expected to be made in the US, Canada, Mexico and Brazil. In Europe the deal lacks a Community dimension so there will be no ECMR filing made. There will, however, be filings made in the UK, Spain, Portugal, Germany, Ireland and Greece.
Cadbury faced rival bids from Nestle and Kraft Foods. Kraft is thought to have offered a low bid, while Nestle did not regard Adams as an essential asset. This acquisition follows Cadbury’s thwarted effort to acquire Hershey earlier this year. Hershey had been a potential bidder for the Adams Chewing Gum Company in the initial stages.
Pzifer put the Adams business up for sale earlier this summer along with its Schick shaving division. It acquired both businesses in 2000 from Warner- Lambert. The businesses were put up for auction following a 2-year bar on resale.

Canadian cartel case closes with Nippon fine
January 10
The Canadian Competition Bureau has imposed a fine of $100,000 on Nippon Gohsei for fixing prices and sharing markets in the food preservative industry. The Japanese company admitted to participating in meetings between 1979 and 1996 concerning the sale of sorbates to the Canadian market. Sorbates are chemical preservatives that are primarily used as mould inhibitors in high moisture and sugar foods such as dairy products and baked goods. Total sales of sorbates in Canada in the relevant period amounted to $37 million: Nippon’s share of this was $250 000, as it only entered the Canadian market in 1989. This factor plus Nippon’s willingness to co-operate resulted in the comparatively low fine. Other parties in the cartel have incurred penalties of up to $2.5 million.
The Bureau’s investigation of sorbates began in 1998 and has led to the conviction of five international companies over the last three years, and fines totalling $7.49 million. The other companies convicted of involvement in the cartel are Ueno Fine Chemicals, of Japan, Daicel Chemical Industries, Ltd., of Japan, Hoechst AG, of Germany, and Eastman Chemical Company, of the United States.
"The numerous convictions obtained in this international conspiracy case send a strong message that the Competition Bureau will not hesitate to thoroughly investigate and prosecute this type of anti-competitive behaviour," says Richard Taylor, Deputy Commissioner of Competition.
With this decision, the Canadian investigation is concluded: "Nippon is simply pleased to have the case behind them" says Randall Hughes, counsel for Nippon. Hughes is a partner at Fraser Milner Casgrain LLP. He and Susan Paul have been acting for Nippon Gohsei in the Canadian investigation.

Buyer of Scottish newspapers gains from need for swift approval
January 10
SMG has agreed to sell its publishing business to Gannett UK for £216 million. The deal includes three of Glasgow’s leading newspapers, The Herald, Sunday Herald and Evening Times, 11 specialist consumer and business-to-business magazines titles and an online business. The acquisition has been referred to the UK competition authorities for an in-depth review, as is required for all sales of newspapers that have a circulation over 500,000. The Competition Commission will present its findings by March 10th 2003, with a report to be published at a later date.
SMG would like approval of the sale by June, to coincide with a renegotiation of its £400 million debt. Fears of a regulatory delay are thought to have influenced SMG’s choice of buyer. The fate of Glasgow’s newspapers has attracted the attention of Scottish politicians, who were worried that SMG might sell to the Barclay brothers who own The Scotsman, Edinburgh Evening News and Scotland on Sunday. The brothers are thought to have offered as much as £230 million for these titles. Gannett does not own any Scottish titles, although through its subsidiary Newsquest it owns 15 daily newspapers in the rest of the UK.
Herbert Smith has been acting for both parties on competition issues. Gannett retained a team from the firm’s Brussels office led by Craig Pouncey, with associates Samantha Carter and Ruth McAuley assisting. London partner Stephen Wisking, assisted by Andre Pretorius, acted for SMG.

FTC clears Baxter/Wyeth deal
January 10
Baxter’s acquisition of the Wyeth Corporation’s injectable drugs business has received conditional antitrust clearance from the FTC, pending public comment on its consent order.
The FTC found considerable overlaps between the two businesses and concluded that the merged entity would have significant market power. The five worst affected markets were for the anaesthetic propofol; the antiemetic metoclopramide; the surgical blocking agent vecuronium; for injectable iron replacement therapies; and for another blocking agent, pancuronium. The market for vecuronium produced a Herfindahl-Hirschman Index score of 3598, double the threshold of 1800 for significant market power, the FTC says, while the post-merger market for metoclopramide produced a score of no less than 3852. The levels of market concentration were exacerbated by the obstacles to market entry.
The consent order requires Baxter to divest all of Wyeth’s assets in the propofol market, to end a co-marketing agreement with Watson Pharmaceuticals for injectable iron replacement therapies by March 2004 and to end its interests in pancuronium, vecuronium and metoclopramide.
Baxter used the Chicago office of the law firm Bell Boyd & Lloyd to represent it before the FTC. Pamela Taylor and Michael Sennett made the filing. Gary Roberts of Charles River Associates in Washington DC gave competition economics advice. Wyeth in-house counsel Jason Smith undertook the company’s antitrust work.
Baxter, which markets pharmaceuticals under licence from third party manufacturers, is paying $305 million in cash for Wyeth’s business as well as assuming $11 million of debt, on 2001 sales of $264 million.

The Commission reaches Euro1 billion in fines for 2002
January 10
Following three decisions before Christmas, the Commission has passed the Euros 1 billion mark for fines imposed on cartels in 2002.
The three decisions handed down involve a specialty graphites cartel, an Italian concrete reinforcing bar cartel and a flavour-enhancer cartel.
In the graphites matter, seven specialty graphite companies have been fined a total of Euro 60.6 million.
The companies were SGL Carbon AG of Germany, Carbone-Lorraine SA of France, Japanese firms Ibiden Co Ltd, Tokai Carbon Co Ltd, Toyo Tanso Co Ltd and Nippon Steel Chemical Co Ltd as well as American company GrafTech International and Dutch company Intech EDM ltd.
Representing Intech EDM is a team from Gleiss Lutz Hootz Hirsch in Stuttgart. Competition partner Matthias Karl is leading the team along with partner Christian Steinle.
SGL Carbon AG is being advised by Freshfields Bruckhaus Deringer. Competition partners Martin Klusmann and Vanessa Turner are advising and senior associate Frederick Wiemar is assisting them. Four Japanese companies, Ibiden Co, Tokai Carbon Co, Toyo Tanso and Nippon Steel Chemical Co Ltd were found to be involved in the cartel. Legal counsel at Ibiden Co, Yasuo Monore, retained the firm Dorsey & Whitney in Brussels. Partner Maurice Byrne is being assisted by associates Veronique Paillarse and Billy Brophy. Tokai Carbon Co retained partner Gerwin Van Gerven from Linklaters in Brussels to advise them. He was assisted by associate Thomas Franchoo. Toyo Tanso was advised by a team from Van Bael & Bellis in Brussels. Competition partner Jean-Francois Bellis was assisted by senior associate Stephanie Reinart and associate Denis Sougne.
Dal & Veldekens in Brussels advised Nippon Steel Chemical & NSCC Techno Carbon Co Ltd. The partner leading the team was David Luff. Le Carbone Lorraine SA of France retained Allen & Overy in Brussels. Competition partner Michael Reynolds and Sarah Biontino are advising.
Finally, US company Graftech International Ltd was advised by a team from Squire, Sanders & Dempsey in Brussels. Partners Brian Hartnett and associate Rebecca O’ Donnell are leading the team at that firm.
In the Italian cartel, members were fined Euros 85 million by the Commission for ‘organising the market’ in concrete reinforcing bars between 1989 and 2000. The Commission concluded that eight companies fixed the size extras to be added to the base price for products. Reinforcing bars are sold in twenty diameters ranging from 5 to 40 mm. The cartel members also fixed the base price and agreed on standard terms of payment. Between 1995 and 2000 they limited production and sales. The eight companies fined are Riva Accioio, the ringleader, which received the top fine of Euros 26.90 milion; Siderpotenza (controlled by Lucchini SpA) Euros 16.14 million; Feralpi Siderurgica and Valsabbia Investmetni Euros 10.25 million each and Alfa Acciai, Leali SpA and Acciaierie e Ferriere Leali Luigi SpA (the last now in liquidation)
An interesting part of this investigation, sources say, was the application of Article 65 (5) of the ECSC Treaty, which has since lapsed. Under this provision, Federacciai, the Italian Trade Association, which was also in the cartel escaped penalty.
Riva Acciaio SpA , is appealing against the Commission’s imposed fine, is being represented by a team from Bonelli Erede Pappalardo Studio Legale in Brussels. The lead partner there is Massimo Merola, who is being assisted by junior partner Maurizio Pappalardo and asssociate Frederick Martin. Siderpotenza and Federacciai are being advised by Chiomenti Studio Legale. The lead partner there is Gian-Luca Bellotti. If it decides to appeal Siderpotenza will exploit the fact that the Steel Treaty has no legal basis in a December 2002 decision, sources say.
Feralpi Siderugica SpA is being advised by Gian-Michele Roberti from Studio Legale Roberti in Rome.
Alfa Acciai and Valsabbia are being advised by Gianni Origoni Grippo & Partners (Linklaters). The lead partner is Denis Fosselard. He is being assisted by associate Gennaro D’Andria.
The third set of fines relate to three companies active in the production of nucleic acid, which is made from glucose and is used in the food industry to add flavour to foods.
According to evidence, the three companies operated a cartel for nine years until 1998 during which they agreed to fix ‘target’ prices, implement price increases, allocate customers and exchange information on sales figures.
The companies who colluded were Takeda, Ajinomote Co Inc of Japan and South Korean companies Cheil Jedang Corp and Daesang Corp.
Takeda, which blew the whistle on the cartel and under leniency received no fine, was represented by a team from Simmons & Simmons in Brussels. The team comprised partners Tony Woodgate and Conor Maguire. They were assisted by Nathalie Dreyfuss.
Van Bael & Bellis is advising Daesang. Competition partner Jean-Francois Bellis is in charge and he is being assisted by senior associate Stephanie Reinart. Daesang received a 50 per cent reduction in its fine as it informed the Commission about the infringing practices and disclosed additional information.

Commission probes FA Premier League
January 10
DG Comp is to examine the joint selling of media rights to football matches by the English Premier League. The Brussels enforcer has sent a statement of objections to the Premier League, which has until March 2003 to respond.
The investigation is merely the latest in the Commission’s history of scrutinizing such joint selling in European markets. It previously examined the Premier League in June 2001, and has also conducted investigations in Spain and Italy. In its statement, the Commission describes joint selling as "tantamount to price-fixing", saying that it could only be acceptable if the breach of competition law secured a "legitimate goal", such as benefiting fans.
The Premier League counters that it will respond to the statement of objections within the two and a half month timeframe, and looks forward to "a full and productive dialogue, in order for the Commission to fully appreciate the pro-competitive nature" of its tendering system. It argues that the process is open, since it allows all relevant parties to be involved and has six different rights packages. Denton Wilde Sapte competition partner Polly Weitzman and her associate Angelique Bret are advising the Premier League on a process that could take up to 18 months.

NBC acquires Bravo from Cablevision
January 10
NBC has agreed to acquire Bravo from New York- based Cablevision for $1.25 billion, following what some commentators have called a "calm year" in media and telecommunications M&A.
Under the deal NBC’s parent company General Electric exchanged 53.2 million shares worth $672 million of Cablevision Class A stock that it already owns. Bravo reaches 68 million homes in the US.
In reports, Universal Studios and Universal Music are said to be available for sale. General Electric’s Hughes Electronics is also back on the market following the DoJ’s decision to block a merger with Echostar. Speaking about the next year, Alex Yemenidjian, chairman-CEO at MGM, has predicted, "We’ll see all the deals in 2003 that didn’t happen in 2002."
The deal does not include the remainder of Cablevision’s Rainbow holdings, the company’s television programming arm that controls Bravo. Rainbow holdings also includes the Independent Film Channel and its IFC Entertainment subsidiary AMC, WE: Women’s entertainment and other national and regional services.
General Electric was represented by Shearman & Sterling in New York. Competition partner Laurence Bambino and associate Edward Park advised.
Sullivan & Cromwell represented Cablevision, the biggest cable company in the US. Antitrust litigation partner Yvonne Quinn advised.
Filings were made in the US only.

Philips and Sony combine to acquire InterTrust
January 10
InterTrust Technologies Corporation has agreed to be acquired by Fidelio Acquisition Company, a company formed by Sony Corporation of America, a subsidiary of Sony Corporation, Royal Philips Electronics and certain other investors. Fidelio will acquire all of InterTrust’s stock for $453 million.
InterTrust is a leading holder of intellectual property in digital rights management. The company holds 26 US patents and has 85 patents pending. Its portfolio covers software and hardware technologies that use digital rights management.
Sony Corporation’s in-house team on the matter consisted of executive vice president and general counsel Nicole Seligman and vice president Mark Khalil. They retained the firm of Katten Muchin Zavis Roseman in New York for antitrust advice. The lead partner was James Calder. He was assisted by associates Jonathan Faust and Richard Julie. In Europe, Sony was represented by Lovells in London. The partners who worked on the deal were Lesley Ainsworth, Philip Collins and Tom McQuail.
Representing InterTrust in the transaction has been a team from Skadden Arps Slate Meagher & Flom in Brussels. Competition partner Henry Huser led the team and he is being assisted by associate Nick Peristerakis. In the US, Alec Chang, from the firm’s Palo Alto office advised.
Howrey Simon Arnold & White did the work for Philips in-house counsel Peter Plompen. Competition partners James Rill and Mark Schechter advised.
The Boston Consultancy Group also advised on strategy in relation to digital rights management.
The transaction has also been cleared in Europe. The European Commission found that the markets investigated "must be viewed as nascent as DRM is a developing technology. "
The Hart Scott Rodino deadline expired on January 2.

Cendant Acquires Budget Rent a Car
December 20
The Canadian Competition Bureau has resolved competition concerns surrounding Cendant Corporation’s acquisition of the Canadian operations of Budget.
The Bureau has obtained binding undertakings from Cendant Corporation, the US parent company of Avis.
To preserve competition and maintain the independence of Budget’s Canadian franchisees, the undertakings include restrictions on the sharing of competitively sensitive information between Budget and Avis, which Cendant also owns.
Skadden Arps Slate Meagher & Flom is representing Cendant/Avis in the US. From the New York office, antitrust partner Michael Weiner is leading the case, aided by counsel Jill Ross. In Canada, Blake Cassels & Graydon of Toronto is advising. Competition partner Cal Goldman and counsel Crystal Witterick are advising.
Budget’s in-house counsel Bob Aprati has retained a team from Stikeman Elliott in Canada. Competition partner Lawson Hunter QC is the lead partner. Susan Hutton and Kim Alexander-Cook from the Ottawa office are assisting him. Budget’s US antitrust counsel was partner Bill Blumenthal, and associates Peter Todaro and Kathryn Walsh of King & Spalding in Washington.
This acquisition is part of Cendant Corporation’s purchase of all of the assets of Budget Group Inc. Budget is the third-largest car and truck rental company in the United States. The transaction does not include Budget Group’s Europe, Middle East or African operations and franchises. It does include Budget operations and franchises in the Americas, Caribbean, Australia and New Zealand and rights to franchises in Asia. Cendant already operates in the same regions through Avis.
Lawson Hunter says the deal raised interesting issues about how to factor in the role of independent franchisees of Budget. These franchisees are chiefly at airports. Hunter noted that no consent order had been required.

Commission meets commercial timeframe on Nycomed
December 20
DG Comp has cleared the acquisition of European pharmaceutical company Nycomed by a venture capital consortium composed of Credit Suisse First Boston, Blackstone Capital and NIB Capital. Neither the buyers nor the selling party Nordic Capital have disclosed the deal price, but it is rumoured to be over EUROS 1 billion, making it one of the largest private equity deals ever undertaken in Denmark.
The transaction is not thought to have raised significant competition concerns, as the overlaps between the two companies are limited. Credit Suisse has share holdings in a number of contract drug manufacturers that operate in markets in which Nycomed’s proprietary pharmaceuticals are sold. A source close to the matter describes it as "pretty clean". It was passed under an "informal expedited procedure". The European Commission has been praised for the speed with which it handled the matter: it cleared the deal in just 28 days. Had the investigation gone on a further four days the tightly timed deal would have been cancelled, sources say. This has been taken by some competition specialists as a sign of increasing sensitivity on the part of the Commission to the commercial needs of acquiring parties.
Blackstone retained Simpson Thacher & Bartlett partner David Vann and his associate Ethan Litwin for competition advice. Vann is based in London. Weil Gotshal & Manges London partner Douglas Nave and his associates Juliet Enser and Dennis Oswell represented Credit Suisse First Boston, while Nycomed took competition advice from Slaughter and May. Partner Laura Carstensen and her associate Douglas Lahnborg undertook the work. No competition economists were retained by any of the parties.

Puerto Rico opposes Wal-Mart/Amigo
December 20
Wal-Mart’s acquisition of the Puerto Rican supermarket chain has hit unexpected local opposition. Superior court judge Milagros Rivera Guadarrama has ceded to a Puerto Rico justice department request to freeze the deal pending a full trial before a federal court. A ruling is expected before the end of 2002. The US Federal Trade Commission, which has jurisdiction over Puerto Rico due to its status within the US commonwealth, cleared the deal subject to a consent decree filed on November 29^th that required Wal-Mart to divest four stores to a new market entrant.
The deal will substantially reduce competition and possibly create a monopoly, the justice department argues. It also says that there is a need to "balance Puerto Rican and foreign capital" in its home market. Rival supermarket operators claim that the deal, valued at around $225 million, would give Wal-Mart a market share in the region of 40 per cent, while others believe it would lead to heavy redundancies. Local politicians are all arrayed against the deal.
Wal-Mart meanwhile accuses the justice department of subjecting it to special criteria. "We feel … a very different measurement is being used from what has been used in past … transactions," says a company spokesman. The company says that part of the judge’s ruling, which requires local purchasing of supplies and that employees may not be sacked, breaks a clause of the US constitution on interstate commerce.
The Puerto Rican justice department’s suit is almost without parallel in the history of relations between the FTC and state attorneys general, and without precedent in Puerto Rico, sources close to the deal say. In 1990, the attorney general of California filed suit against the FTC’s settlement of a merger involving the supermarket chain American Stores. In that earlier case the Supreme Court upheld the right of the state to appeal a federal ruling, and the matter ended with the Californian attorney general obtaining further divestitures.
Wal-Mart in-house counsel Joseph Boyle retained partner Peter Standish and associate Fiona Schaeffer of Weil Gotshal & Manges for the work with the FTC. In Puerto Rico, Armando Llorens-Sar, a special counsel with local firm McConnell Valdes, handled the initial negotiations with the justice department, while one of the litigation partners in that firm, Ruben Nigaglioni, will be the trial counsel.

Credit Agricole to snare Credit Lyonnais
December 20
French retail bank Credit Agricole is to buy its national rival Credit Lyonnais. The friendly takeover bid values Lyonnais at some EUROS 20 billion.
The announcement of the deal, which still requires approval from the board of Credit Lyonnais, will put to an end weeks of sparring between Agricole and BNP Paribas for control of Credit Lyonnais. BNP can still make a counter-bid, but industry analysts think it unlikely.
The Agricole-Lyonnais combination would have a 28 percent slice of the French retail banking market, with 20 million retail customers, 9,200 branches and $337 billion in total assets under management. Agricole expects the deal to close no later than the third quarter of 2003.
In spite of easily surpassing the threshold for the EU merger regulation, it will be notified with the French Competition Authority (DGCCRF) because over 66 per cent of turnover is within France. Other jurisdictions where notifications are expected include Germany, although as yet no final list has been compiled. The deal is not expected to receive intense scrutiny, since in spite of its size there are not thought to be many overlaps; while Credit Lyonnais is present in many of the major cities, Agricole’s business is predominantly rural. Clearance is expected by the end of January.
Credit Agricole has retained two firms for its competition work, Clifford Chance and Bredin Prat: partner Hughes Calvet is leading Bredin Prat associate Olivier Billard, while Claude Lazarus of Clifford Chance is also advising. Cleary Gottlieb Steen & Hamilton is advising Credit Lyonnais: partners Francois Brunet and Antoine Winckler are in charge of the matter, aided by associate Frederique Billard.

Commission focuses on state aid to airlines
December 20
The European Commission has announced a series of moves against state aid to airlines. On December 11, the Commission announced progress on three investigations, into Olympic Airlines, Ryanair and small regional carrier Intermediación Aérea SL (Intermed).
The Commission has ordered Olympic to return EUROS41 million to the Greek government. This figure represents only a portion of the full sum of EUROS 194 that the Commission says the airline has illegally received. The Greek government undertook to stop supplying the airline with aid in 1998, following an earlier EC investigation.
Last November, Loyola de Palacio, EU transport commissioner, said that the EU’s aviation sector is rife with loss-making flag carriers. The Greek government says it is intending to appeal against the ruling, calling the decision "arbitrary" and "unsustainable". Sources close to Olympic say "an appeal stands a good chance of success as the final decision is not well written."
Howrey Simon Arnold & White has been working on the case on behalf of Olympic since September. Paris Anestis and Trevor Soames, who have worked with Olympic on state aid work since 1996, are leading the competition team. Stephen Mavroghenis, Bruno Lebrun, Stamatis Drakakakis, Michael Schedl and Sarah Jordan are assisting them. Anestis says that negotiating the lesser sum has been critical. "Our aim was ensure that Olympic would be able to continue business as usual following the decision".
At the same time, the Commission revealed it is investigating Ryanair over state aid. A formal enquiry has been opened into the advantages granted to Ryanair by the Walloon Region and by the South Charleroi airport in Brussels. These include a reduced landing fee; lower ground-handling prices; easier access to new routes and the provision of office space; and a joint promotion and advertising enterprise.
The low-cost airline has reacted to this announcement by launching an additional 200,000 seats to Brussels Charlerloi for EUROS 9.99. Ryanair says it welcomed any investigation by the EU commission. "These arrangements are non-exclusive and open to any other airline that wished to invest on a like for like basis," a spokesman for the company explains in a statement. Ryanair’s head of regulatory affairs Jim Callaghan has retained regular counsel A & L Goodbody for competition advice. Dublin competition partner Vincent Power is leading the team with assistance from Denise Casey and Dorit McCann.

E.ON/Ruhrgas suffers further setback
December 20
The Düsseldorf Higher Regional Court dealt the E.On/Ruhrgas merger a setback by indicating that it will oppose the merger when it makes its final decision next year. Earlier this week, the court, the Oberlandesgericht, reaffirmed an injunction from August that halts the deal until a full ruling can be made. A full ruling is expected in February. Competition specialists see the maintenance of the injunction as a prelude to a decision unfavourable to E.On. The court is due to decide whether the German government’s intervention in favour of the deal is legal. The Federal Cartel Office opposed the deal last January. The case represents the first time that the government has overturned an FCO decision since 1989.
Reacting to the ruling, E.On says it will "take full advantage of the legal options available to implement the takeover of Ruhrgas". In many circles, this is seen as an indication that the company is preparing to go to the German Supreme Court in Karlsruhe in an effort to save the EUROS10 billion deal. The European Commission has no jurisdiction over the merger, as two-thirds of the combined sales are in Germany. E.On has already spent EUROS6 billion acquiring a 38.4% stake in Ruhrgas. The deal, if approved, would create a gas and electricity entity with EUROS93 billion in sales. Freshfields Bruckhaus Deringer is representing E.On, with Düsseldorf partners Cornelis Canenbley and Gerhard Wiedemann in charge of the file, assisted by Tobias Klose. The German government is believed to favour creating a strong domestic power company on national security grounds.

German Government reprimanded over WestLB state aid
December 20
The European Court of Justice has found Germany guilty of repeatedly failing to comply with a Commission decision on state aid. The case arises out of the German Federal Government’s failure to seek restitution of the state aid given to WestLB between 1992 and 1998. The aid occurred as the transfer of a public-law bank, the WfA, to WestLB, in 1991. The Federal Association of Private German Banks lodged a complaint with the European Commission, citing the generous terms of the deal.
The Commission has said on two occasions that any attempt to repay the aid as shares is unacceptable. The figure at issue is EUROS 808 million. The German government is being advised in these proceedings by a team at Clifford Chance in Düsseldorf. Partner Holger Wissel and associate Jörg Witting are in charge of the matter.

Finnish investor group buys limestone producer
December 20
A Finnish private equity consortium is buying Nordkalk Corp, Europe's third-largest producer of limestone products. The consortium is led by Ahlström Capital and includes certain funds managed by CapMan Capital Management, as well as 11 other Finnish and Swedish institutional investors. The group, NK-Holding Oy Ab, is to pay EUROS 270 million in cash and debt. Nordkalk is owned by Partek Corp, a unit of Helsinki-based elevator and escalator producer Kone Corp. Nordkalk employs 1,300 people and operates at 30 locations in Finland, Sweden, Poland and Estonia. Filings are being made in Estonia, and Poland and with the EC in Brussels. The NK-Holding side has retained a team from Borenius & Kemppinen. Associate Asko Lindqvist is leading work on the competition filing. He is reporting to Jyrki Tähtinen, the corporate partner in charge of the deal. They have been assisted in local due diligence and competition filings by Marta Sendrowicz and Urszula Kondracka at Baker & McKenzie in Warsaw, and by Karina Paatsi at Luiga & Mugu in Tallinn. Roschier Holmberg acted as counsel to the vendor Partek Corporation. The main team there have been partners Tomas Lindholm and Tom Schubert and associate Mika Paavilainen.
Nordkalk reported an operating profit of EUROS 24.1 million on sales of EUROS 215.9 million in 2001. NK-Holding will hold the investment for three to five years while preparing it for a public listing. "Nordkalk is in a strong development phase", says Björn Mattsson, Chairman of the Board of Directors of NK-Holding. The sale requires regulatory approval and should close in early 2003. No problems are expected with the filings, as none of the investors have any related interests in the industry.

Brazilian agency objects to Nestlé deal
December 20
The Brazilian Secretariat of Economic Law (SDE) has issued a legal opinion suggesting that antitrust authority CADE should block Nestlé Brasil Ltda/Chocolates.. In February, NBL purchased CGS for US$250 million, after the latter had been put up for sale in the middle of last year.
SDE issued its opinion on December 11. Competitors Kraft Foods and Cadbury Schweppes will be delighted. They have called for CADE to block the sale. If the deal goes ahead, Nestlé would have a market share of 56 per cent.
Kraft owns Lacta, the leading manufacturer of chocolate in Brazil, which it bought in 1996. NBL, Lacta and Garoto together account for 90 per cent of all sales of chocolate in the country, according to market researcher AC Nielsen.
Says José Del Chiaro Ferreira da Rosa, of Advocâcia José Del Chiaro, which is representing Kraft (an objector to the deal): "The secretariat accepted all of [our] arguments, concluding that the transaction would give Nestlé a dominant position in the majority of the relevant markets, such as tablets and in-box praline, and a monopoly in the market of Liquid Chocolate Covering."
Nestlé and Garoto had signed an agreement with CADE prior to the purchase, called the ‘Agreement on Preservation and Reversibility of the Transaction’. This establishes that they would have to keep their assets, brands and distribution systems separate until after CADE’s decision.
Should CADE not approve the acquisition, the existence of this agreement would prevent NBL from arguing that selling Garoto would damage its company. If this occurs, it would be the first time that CADE had had the opportunity of enforcing this type of agreement.
Advocâcia José Del Chiaro is representing Kraft in the case, through a team led by partner Del Chiaro Ferreira da Rosa. He was joined by partners Paula Guedes Vilela and Tatiana Lins Cruz, and associates Camila Leal Calais and René D’Elboux. Economic advisers Mario Possas and Jorge Fagundes also assisted them.
Cadbury Stani do Brasil Produtos Alimentícios Ltda, which is also contesting the transaction, is represented by Machado, Meyer, Sendacz and Opice, through associates Tito Amaral de Andrade and Adriana Giannini.
Nestlé and Garoto are represented by Magalhães, Ferraz, Prado, Lino e Bruna, through partner Tércio Sampaio Ferraz Jr, and associates Fabio Francisco Beraldi and Márcio de Carvalho Silveira Bueno.
For the transaction, Partner Moacir Zilbovicius and associates Rodrigo Figueiredo Nascimento and Paula Vieira de Oliveira of Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados acted for the controlling shareholders of Chocolates Garoto SA. Associate Andrea Bazzo Lauletta of the same firm advised on tax matters, while Paulo Sergio Raga provided Garoto with in-house advice.
Also for the transaction, Nestlé was assisted by an in-house team led by Humberto Maccabelli Filho and Obedi Neves.

DoJ clears Northrop Grumman/TRW
December 13
The antitrust division of the Department of Justice has given conditional clearance to the merger between US defence manufacturers Northrop Grumman and TRW. The merger has now been completed.
The US$12.2 billion transaction will see Northrop’s satellite manufacturing operations combined with TRW’s satellite component business. The European Commission cleared the deal on October 16 after a Phase I investigation, having found that it "did not give rise to any competition concerns" because most of the two companies’ business is with the US government.

Under the terms of the US clearance, the antitrust division’s consent decree requires the company to:

• choose the payloads for its satellites in a non-discriminatory manner;
• make its satellite payloads available to competitors; and
• enable the US government to choose between different suppliers.

Furthermore, the Secretary of the Air Force has power to ensure compliance with the decree. The secretary will be able to ask the Department of Justice to seek civil penalties of up to US$10 million for violations of the decree.
Northrop is one of only two US companies that design and produce reconnaissance satellites, while TRW is one of a handful of satellite component makers. In its statement, the DoJ explains that without the restrictions imposed by its consent decree the merger "would have resulted in a vertical combination that would have substantially lessened competition in the development and sale of reconnaissance satellites".
US defence procurement rules allow contractors to choose component suppliers. The department feared that this vertical integration would lead to Northrop choosing TRW components to the detriment of its competitors. Sources close to the deal say it has raised interesting parallels with the proposed GE/Honeywell merger, and the DoJ’s opposition has been taken as indicative of continuing convergence between the US and EU enforcers. "It’s as if the DoJ is playing catch-up with the Europeans on the theory of bundling," said one insider.
Northrop Grumman has used a team from Gibson Dunn & Crutcher for its US competition work. Partners James Loftis, Robert Metzger and Michael Denger and associates Joshua Lipton, David Moskowitz and Andrew Klein represented the company before the DoJ. Steven Salop of Charles River Associates advised on economics questions, particularly those relating to industrial organisation. In Europe Freshfields Bruckhaus Deringer was retained. Partner Andrew Renshaw and associates Mark Reysen, Daniel Harrison and Ilkka Leppihalme undertook the work. No economic advice was required in Europe. Skadden Arps Slate Meagher & Flom was counsel to TRW in the US and Europe. Partner Neal Stoll and associates Ian John, Linda Wong-Cenedella, John Mcleod, Amanda Rykoff and Jeff Beyer and counsel Brian Mohr advised, assisted in the early stages by Philip Nelson of Economists Inc. Brussels partner James Venit and his associate Ingrid Vandenborre did the work before the European Commission.

Carlyle to buy stake in QinetiQ
December 13
The venture capital firm Carlyle Group is to acquire a 33.8 per cent stake in the British government’s defence and technology research company QinetiQ. The stake is valued at approximately £500 million.
The deal, under which Carlyle becomes the ‘strategic partner’ of the British Ministry of Defence, is part of the public-private partnership between the government and business under which QinetiQ will ultimately become a fully private company. The MoD currently holds a 62.5 per cent share, which it expects to sell within the next five years, most likely through a stock market flotation according to Carlyle’s statement. The remaining 3.7 per cent of the shares will be held by Carlyle to be made available to employees. In spite of its smaller stake, Carlyle will have control of the company in most matters, though the government retains special rights in connection with national security matters.
One source describes the transaction as an "amicable divorce". It should allow QinetiQ to increase its customer base, which is currently dominated by the ministry, to become a global player. The Merger Task Force at DG Comp is currently looking at the deal, which was notified on December 4. Although it is expected to clear by mid-January in a Phase I, it is by no means plain sailing, sources say. The vast bulk of QinetiQ’s business is with its owner, the MoD, which creates difficulties in defining "external". However, sources close to the deal believe the Commission will accept the argument that QinetiQ’s trade with the government can be counted as conventional turnover, thereby giving DG Comp jurisdiction. The deal is expected to be notified in one other jurisdiction, but the parties have declined to specify where.
The Carlyle group is using Linklaters to make the merger filing in Brussels. Competition partner Wolfgang Deselaers is in charge, leading associates Peter
Citron, Eckart Wagner and Viktor Bottka. No competition economists have been retained. Partner John Osbourne and associate Michael Bryceland in Clifford Chance’s London office are giving general competition counsel to the company, while Michael Papadakis is advising on public procurement issues. Simmons & Simmons is acting for the MoD; partner Jenny Block and associates Morven Hadden and Peter Broadhurst from the London office are advising, while Conor Maguire in Brussels is also involved. Acting for QinetiQ is Herbert Smith. Associates Tim Briggs and Ray Cahill are assisting partner Dorothy Livingstone.

DG Comp imposes second-highest fines on ‘plasterboard’ cartellists
December 13
The European Commission has fined four companies a total of Euro478 million for their alleged participation in a cartel in the market for the building material plasterboard — the second-biggest fine in EC cartel enforcement history.
The Commission alleges that for six years Lafarge, BPB, and Gebrüder Knauf Westdeutsche operated a cartel to fix prices that originated in a meeting between BPB and Knauf executives in London in 1992. Lafarge joined the group later that year, while Gyproc Benelux joined in 1996. According to the Commission, the conspirators took various actions to maintain prices, including sharing information on price increases and sending data on sales forces to directors at their home addresses. Turnover for 1997 in the European plasterboard market was Euro1.2 billion.
Commissioner Monti says that the arrangement will have affected an enormous number of consumers, describing the building industry as "the pulse of the economy".
The fine is the largest of 2002, and is surpassed only by the Euro855 million total fine imposed on the members of the vitamins cartel in 2001. The overall fine breaks down as: Lafarge Euro249.6 million, BPB Euro138.6 million, Knauf Euro85.8 million and Gyproc Benelux Euro4.3 million.
BPB and Gyproc have both received leniency reductions (of 30 and 40 per cent respectively) on the strength of information provided between the start of the investigation in November 1998 and the issuing of the statement of objections in April 2001.
The Commission says Lafarge’s fine reflects its greater size: its turnover is five times that of Knauf and BPB. It also outsells Gyproc.
Two of the companies have had previous brushes with the European anti-cartel team. In 1994 Lafarge was fined Ecus 22.87 million for its participation in a cement cartel. The same year BPB was fined when one of its subsidiaries was discovered to be part of the cartonboard cartel.
Several of the defendents have reacted angrily to the Commission’s finding, Knauf in-house counsel Jörg Schanow calling the allegations "incredible and false". The company has retained a team from Freshfields Bruckhaus Deringer to represent it in its appeal to he Court of First Instance against the both the finding and the size of the fine. Partner Martin Klusmann and associates Axel Kallmeyer, Frederick Wiemer and Holger Stappert will lead the matter.
BPB also denies participating in the cartel and describes the level of the fine as "wholly inappropriate and disproportionately high", claiming that the Commission lacks evidence to substantiate its claims. Director Bob Heard says that the plasterboard market was "very competitive" during the 1990s, and that prices in fact fell in the relevant period. The company also says the Commission was not entitled to consider the record of its subsidiary as an "aggravating factor".
BPB has retained competition partner Alex Nourry to lead a team from Clifford Chance in the appeal against the finding and the size of the fine.
Lafarge will be represented by Henri Lesguillons of Jeantet et Associés for the proceedings before the Court of First Instance. Lesguillons represented Lefarge during the Commission administrative proceedings. The Lafarge advisory team will be strengthened by Antoine Winckler and François Brunet of Cleary Gottlieb Steen & Hamilton for the appeal. Economists Thomas Hoehn and Andreas Groen of PricewaterhouseCoopers are providing economic support to the Lafarge team.
Gypoc has retained Jean-François Bellis of Brussels boutique Van Bael & Bellis.
The appeal is expected to take up to three years.

France Telecom aid under the spotlight
December 13
The European Commission is examining the terms of a Euro9 billion loan made by the French government to France Telecom to enable the company to reduce its Euro70 billion debt.
The French government, which is a majority shareholder in France Telecom, has given what it described as a ‘shareholder advance’ on a forthcoming Euro15 billion capital increase. The 18-month loan will help tide France telecom over during an impending cash crisis it is likely to face over the next 12 months.
France Telecom will have Euro6 billion in cash reserves by the end of this year. However, in 2003 the company is faced with making debt repayments of Euro15 billion. In 2004 repayments will be Euro15 billion, and in 2005 Euro20 billion. Without a loan, the company will be in serious financial trouble by June 2003.
The Commission has the power to block state aid to companies and has in the past blocked debt guarantees agreed by German states with state-owned banks.
The French government has not notified this bail-out of the beleaguered telecoms company to the Commission, so Brussels has two months to consider whether it has jurisdiction under Article 22. A key issue is whether the interest rate at which the money is borrowed constitutes a market rate. The rate charged will be based on that for France Telecom’s four most liquid bonds, reportedly now 5.9 per cent.
Among those who have written to the Commission complaining about the French government’s loan are Bouygues Telecom, KPN of the Netherlands, Italia Telecom, Cegetel and BT’s O2.
Competition partner Didier Théophile of Darrois Villey Malloit Brochier is representing Bouygues Telecom in its complaint. He is being assisted by associates Natalie Lobel and Sandrine Perrotet. "This is a test case," says Theophile. "It will be interesting to see what fellow-Frenchman Claude Chêne [Deputy Director-General with special responsibility for state aid at the European Commission] will make of it." It will be the biggest debt-related state aid case to date according to Theophile — four times the amount in Credit Union.
France Telecom has retained Gide Loyrette Nouel in Paris for advice. Competition partner Frederick Nouel there is leading the team.
A decision by the Commission is expected before Christmas.

Gaz de France cleared of abuse of dominant position
December 13
Gaz de France and two other companies — its subsidiary Gazinox, which distributes metallic flexible tubes used for gas-powered appliances, and Le Boa, a manufacturer of similar tubes — have been cleared by the French Competition Council of abusing a dominant position. The case was decided on November 14.
It was alleged that Le Boa and Gazinox put pressure on competitors to increase prices while Gaz de France was using its clout to favour its subsidiary to their detriment.
The Council has held that the objections that were notified were unfounded. It decided that Gaz de France did not have a collective dominant position in the market for metallic tubes and that, in any case, no abuse had occurred.
The behaviour of Gaz de France did not constitute a restriction of competition, said the Council, noting that at the time when Gaz de France was promoting the use of Gazinox products, these were the only ones available on the market, and it had subsequently promoted all available products. The Council took the view there is no per se prohibition on a public utility recommending products.
Marie-Paule Vincens, in-house counsel at Gaz de France, retained competition partner Jacque-Philippe Gunther of Freshfields Bruckhaus Deringer for advice. He was assisted by associate David Tayar.
DS Avocats in Paris advised Gazinox. Competition partner Didier Bruere-Dawson led the team there, assisted by associate Etienne de Crepy. Le Boa was represented by the firm of Hertslet Wolfer Bissinger Heintz in Paris, where partner Dominique Heintz led the team.

 Telepiù/Stream goes to Phase II
December 13
The European Commission has decided to commence a Phase II investigation of the proposed acquisition by News Corporation of the Italian pay-TV company Telepiù. Following the deal NewsCorp plans to merge with Stream, its own Italian pay-TV operation.
The Commission has stated that the investigation will help to further analyse the impact of the merger in Italy and to establish whether the commitments already given by NewsCorp will address concerns that the merger would create a monopoly in the sector.
Stream and Telepiù are the only pay-TV operators in Italy.
The proposed transaction will be the ‘mirror deal’ of an agreement aborted earlier this year under which Telepiù would have bought Stream. The transaction did not meet the turnover thresholds triggering Commission jurisdiction, and it was cleared in May by the Italian authorities.
The parties have submitted a package of undertakings identical to those imposed by the Italian authority as conditions for clearance.
Remedies include renouncing exclusivity rights over movies and sports programmes.
A Phase II investigation is also needed, according to the Commission, to allow additional time to investigate the potential side-effects of the transaction on certain telecommunications-related markets.
Representing Telepiù is a team from Cleary Gottlieb Steen & Hamilton in Rome, where competition partner Mario Sirgusa is being assisted by associates Matteo Beretta and Guiseppe Scassellati.
NewsCorp is being represented by Studio Legale Associato (formerly Studio Legale Roberti) in Brussels. Partner Gian-Michele Roberti is leading the team, assisted by associates Guido Bellitti, Marco Serpone and Manfredi De Vita. Professor Duccio Regoli, partner of studio Legale Mazzoni e Associati, is also involved. Allen & Overy in London is advising NewsCorp, competition partners John Wotton and Alistair Lindsay being assisted by associate Antonio Bavasso.
A decision is expected by April 2003.

FTC clears Wal-Mart to expand in Puerto Rica
December 6
The US Federal Trade Commission has given conditional clearance to Wal-Mart’s acquisition of the Puerto Rican supermarket chain Amigo. Under the terms of the consent order, which Wal-Mart will not oppose, the US retailer must divest four Amigo stores to new market entrant Supermercados Maximo.
Wal-Mart already has nine Wal-Mart stores, a ‘supercenter’ and eight Sam’s Clubs in Puerto Rico. The US$225 million deal will see it take 32 of Amigo’s 36 outlets. The San Juan-based retailer is the largest supermarket chain in Puerto Rico, with 2001 sales of around US$542 million.
In its complaint, the FTC explains that had the merger been consummated without conditions, Wal-Mart would have been more likely to enjoy unilateral market power, to raise prices or ignore price cuts from competitors. The divestiture of the four stores in question will eliminate the competitive overlap in the market that caused particular concern.
There are only 250 supermarkets in the whole of Puerto Rico, a fact which prompted the FTC to adopt a new market definition encompassing ‘club stores’ — retail outlets that charge a fee for membership but enable purchasers to buy goods more cheaply. These are commonly used by Puerto Ricans buying in bulk in a single weekly or fortnightly shopping trip. Explains FTC Director of Competition Joe Simons: "In this investigation, Wal-Mart’s supercenters and club stores do compete directly. While this is the first supermarket investigation in which the Commission has included club stores in the market definition, it does not indicate a change in policy — it underscores the fact that the Commission conducts merger investigations on a case-by-case basis."
Wal-Mart in-house counsel Joseph Boyle retained a team from Weil Gotshal & Manges to submit its filing; partner Peter Standish and associate Fiona Schaeffer were in charge. Bingham McCutcheon antitrust partner Bill Berkowitz advised Amigo.

Qantas and Air NZ announce alliance
December 6
Antipodean flag carriers Qantas and Air New Zealand have announced an alliance deal under which the ‘flying kangaroo’, as Qantas is affectionately known, will pay US$276.5 million for a 22.5 per cent stake in its local rival.
Competition lawyers must now persuade the Australian Competition and Consumer Commission and the New Zealand Commerce Commission that the public benefits of the tie-up outweigh its anti-competitive effects. Applications for clearance will be filed at both agencies on December 9. A lawyer working on the case said: "In time applications will be made in other jurisdictions" — but chose not to elaborate.
If the deal is approved, Qantas and its partners will have an international market share of 93 per cent of trans-Tasman flights and 64 per cent of Australia-US flights.
The reactions from the Australian and New Zealand competition watchdogs are marked by a difference in style.
ACCC chairman Allan Fels expressed strong reservations telling ABC television that it "looked obvious" that the alliance would substantially reduce competition on the trans-Tasman route.
"Today’s announcement appears to include strong elements of anti-competitive arrangements, including price-fixing and route-sharing," says his organisations press release.
Meanwhile NZCC chairman John Belgrave largely demured when asked his initial reaction. He confined himself to noting that the deal "clearly raises competition implications," before saying that the Commission prefers not to comment on applications until they have been filed.
The ACCC and NZCC say they will collaborate closely on the case. Competition lawyers retained by the airlines expect both to make the same decision, at the same time. ACCC mergers commissioner Ross Jones says the agencies have already agreed on an "identical framework" for their inquiry, and that the parties have accepted protocols to ensure identical time-frames and free exchange of all information. GCR understands that the same economist’s report (to be prepared by Henry Ergas of Network Economics Consulting Group) will be used by both agencies.
Virgin Blue, the airline partly owned by Richard Branson, is expected to object to the deal, and might threaten to abandon attempts to enter the trans-Tasman market if the deal is cleared, it has been suggested.
The deal may prove crucial to the survival of Air NZ, which has been haemorrhaging money in recent months and needs a capital injection to upgrade its fleet. Attempts by Singapore Airlines to increase its shareholding in Air NZ were scuttled last year by the New Zealand government, which refused to raise the country’s foreign ownership ceiling. If the alliance with Qantas is approved, the New Zealand government’s shareholding in Air NZ will be diluted from its current 82 per cent to 64 per cent.
Qantas has turned to Blake Dawson Waldron for competition advice in Australia and to Minter Ellison Rudd Watts in New Zealand. In charge of the filings at Blake Dawson is Qantas’s regular competition advisor, Sydney partner Aldo Nicotra. At Minter, partner Andrew Peterson is working from Auckland on the formalities.
Air New Zealand is being advised by Australian firm Freehills, and by Bell Gully in New Zealand. Freehills partner Michael Gray is working with lawyers Danielle Rutgers and Amanda Eggleton on the ACCC application from Sydney. At Bell Gully, Auckland partner Phil Taylor is leading the competition team assisted by partner Roger Partridge and solicitor Torrin Crowther.

OFT shows toy cartel no mercy
December 6
Gotcha.
The UK’s competition enforcer has announced its largest ever cartel result — imposing a substantial fine on Hasbro. The toymaker has been ordered to pay £4.95 million for illegal price-fixing in the first half of 2001. The figure includes a reduction of 45 per cent arranged under the OFT’s leniency programme. The company could have been fined up to £9 million. However, the Office says that Hasbro "asked for [leniency] at an early stage of the investigation and cooperated fully".
The case represents the OFT’s first ‘big’ success in the cartel area. The UK enforcer was criticised earlier this year in GCR’s Rating the Enforcers for detecting only small arrangements.
The OFT has a second investigaton underway of arrangements between Hasbro and Argos and Littlewoods.
Ten distributors that took part in the illegal arrangement have escaped penalty. The OFT has ruled that Hasbro imposed its prices on them, and they had no choice but to accept.
Hasbro says it will seek a further reduction in the fine. In a statement, the maker of Scrabble and Harry Potter merchandise says that it is "surprised and disappointed" at the outcome of the investigation. "Hasbro believes that such activities had no significant effect on competitiveness within its small network of distributors or on consumers. We are therefore planning to appeal," its statement says. Under the OFT’s guidelines, companies are punished in proportion to their turnover as well as to the seriousness of the offence.
Hasbro was advised in this matter by a team from Denton Wilde Sapte, where partners Polly Weitzman and Jonathan Tatton were assisted by associates Rona Bar-Isaac, Simon Carmel and Martin Smith.

Commission finds cartel in smallest market yet
December 6
DG Comp has adopted a ruling that pharmaceutical companies Merck KgaA, Aventis Pharma and Rhône-Poulenc Biochemie fixed prices and shares in the market for methylglucamine between 1990 and 1999.
The market is worth around Euro3.1 million a year, making it the smallest in which the Commission has adopted a cartel decision.
Aventis Pharma and Rhône-Poulenc Biochemie are both owned by the Aventis group, so have been treated as one. They have been fined Euro2.85 million.
The three companies control the worldwide supply of methylglucamine, a chemical used in x-ray analysis. Since two of the companies are owned by the same parent group, the Commission has viewed it as a de facto duopoly. The investigation began in September 2000 after Merck disclosed the existence of the cartel to the Commission as part of its cooperation with the vitamins cartel investigation. In the methylglucamine cartel, the Commission says that Merck received 100 per cent immunity, while Aventis had its fine reduced by 40 per cent.
Aventis in-house counsel Valérie Thomas, Arthur Muratyan and Thomas Kühlhorn retained a team from Jones Day Reavis & Pogue’s Brussels office, where partner Bernard Amory and associates Francesca Marchini-Camia and Macha Eliad were in charge of the case. Merck was advised by a team from Freshfields Bruckhaus Deringer; partners Frank Montag and Thomas Wessely and associate Claire Kroener handled the work there.

Eni buys Fortum Petroleum
December 6
The Finnish oil company Fortum is to merge its Norwegian subsidiary Fortum Petroleum with Eni, a part of the Italian conglomerate Agip. The deal, under which Eni will pay US$1.078 billion to acquire full control of Fortum, is expected to close in the first quarter of 2003.
The acquired company posted revenues for 2001 of US$295 million and earnings before tax of US$92 million. Eni will gain control of stakes in a number of key Norwegian oil fields, notably the Asgard field, a new discovery that is expected to be one of the principal sources of supply over the next 20 to 30 years. Vittorio Mincato, the chief executive officer of Eni, commented: "The acquisition of Fortum Petroleum strengthens Eni’s presence in Norway, where our production will rise by more than 40 per cent in 2003."
The acquisition will be notified to DG Comp, but is not expected to raise significant competition concerns. The companies are reviewing an expedited clearance procedure as an option, and do not expect scrutiny beyond a phase I investigation. The petroleum market is highly competitive at the moment owing to the presence of global operators such as ExxonMobil, Shell and BP, and, at the regional level, companies such as StatOil and Norsk Hydro.
Eni’s in-house counsel Marco Bollini has retained Norton Rose for competition advice. Brussels partner Ricardo Celli and associates Andrea Gagliardi and Christian Riis-Madsen will make the filings before the Commission, while Norwegians Arntzen de Besche are acting for Fortum. Partner Jan Jansen is leading a team at the firm that includes associates Rune Olav Padersen and Espen Pihlstrom.

Interbrew moves for Brauergilde Hannover
December 6
The global brewing conglomerate Interbrew has agreed with the German city of Hanover to acquire local brewer Brauergilde Hannover. The deal, valued at Euro523 million, is expected to close by December 18, pending competition clearance.
The sale to Interbrew, the world’s third-largest brewer with a portfolio of brands that includes Stella Artois and Rolling Rock, aroused serious opposition in Hanover, where the city government holds a 10 per cent stake in Brauergilde. Officials are worried about potential job losses, brewery closures and the disappearance of one or more of the German brewer’s smaller brands. As in other acquisitions, Interbrew has met and overcome local concerns.
The deal requires clearance from DG Comp because in 2001 Brauergilde’s turnover was Euro271 million, triggering the EC merger review threshold of Euro250 million. The parties do not expect scrutiny beyond a phase I investigation however, though sources say there is some uncertainty concerning market definition.
The Commission has hitherto kept its options open regarding the beer market, which can be sliced several ways — by region, by premium or discount stock, or by on-trade sales (bars and restaurants) against off-trade sales (for consumption off the premises).
Linklaters is advising Interbrew on its filing. Brussels partners Anne Federle and Bernard van de Walle de Ghelcke and associates Anne McGregor and Silke Brammer are working on the matter. Brauergilde has retained Ralf Stoetzel of the German firm Goehmann Wrede Haas Kappus & Hartmann.

HSBC to acquire Household
December 2
HSBC is to spend US$15 billion to buy Household, the largest American consumer finance bank. The merger is by some margin the largest in its sector this year.
The deal is also the second largest of the year by value, behind Pfizer's U$60 billion acquisition of Pharmacia, and the largest US cross-border transaction.
There has been some scepticism about the merits of the deal among financiers, who question the logic of combining HSBC’s premium lending business with Household’s consumer roots. However, some investors believe HSBC is getting good value from the acquisition, since Household’s stock has been at a seven-year low after paying to settle charges of predatory lending. HSBC US general counsel Paul Lee describes the deal as "opportunistic", explaining that it gives the bank "a unique and well-established franchise in Household". The deal is expected to close by the end of the first quarter of 2003. If it falls through, HSBC will be liable for a termination fee of US$550 million.
In spite of the size of the transaction, the competition requirements have been described in the media as straightforward. Although lawyers working on the matter have declined to make detailed comment, an HSR filing will be made in the United States, and filings are expected in Europe and in HSBC’s Hong Kong base.
HSBC is using its regular outside counsel Norton Rose for competition and corporate work in Europe and Hong Kong. Partner Martin Coleman and his associate Jenny Stevens will coordinate from the London office, while corporate finance partner David Stannard will be in charge in Hong Kong. In the US, Cleary Gottlieb Steen & Hamilton will undertake the corporate side of the deal, but Milbank Tweed Hadley & McCloy will make the HSR filing. Winthrop Brown is the partner in charge at Milbank, and he will be assisted by associate Naomi Beard and of counsel Charles Westland. Household has continued its association with outside counsel Wachtell Lipton Rosen & Katz; Household was one of the first Wachtell clients to benefit from the ‘poison pill’ defence. Antitrust associate David Schwartz is advising.
In 1999 HSBC bought Republic New York Corp for US$9.5 billion, entering the European market with its Euro11 billion acquisition of Credit Commercial de France, and on November 26 2002 completed its purchase of the largest Mexican retail bank, Grupo Financiero Bital, for US$1.14 billion.

First transatlantic alliance cleared
December 2
The European Commission has closed its six-year investigation into the Lufthansa/SAS/United Airlines alliance after securing commitments from the parties and the German government. In a statement, DG Comp says that "the airlines successfully addressed concerns about reduced competition on a number of routes between Frankfurt and US destinations." The decision may set a precedent for the way in which the Commission assesses the competitive impact of transatlantic alliances in the aviation sector.
It was back in 1998, after two years of investigation, that the Commission informed the parties of its initial conclusion that the proposed arrangement raised serious competition concerns.
The case was a high-profile matter at the time, drawing several pronouncements by then-Commissioner Karel van Miert. At the recent oral hearing, the parties demonstrated that they face competition, both from similar non-stop services and from services offered through hubs.
A source says this is the first case in which the Commission has accepted that competition of this general type exists between alliances, agreeing that direct services between Frankfurt and Chicago, Los Angeles, San Francisco and Washington were subject to competition from indirect services. However, the Commission rejected the suggestion that services from competing regional and international hubs constituted valid alternatives.
Trevor Soames and Geert Goeteyn, formerly of Norton Rose and now at Howrey Simon Arnold and White’s Brussels office, represented United Airlines at the oral hearing and subsequent proceedings. United’s in-house team handling the matter consisted of Michael Whitaker, vice-president for international and regulatory affairs, John Moss, managing director for international and regulatory affairs, and Conor McAuliffe, director of EU affairs.
John Kallaugher and Jean-Pol Poitras, formerly of Wilmer Cutler & Pickering and now with Latham Watkins, and James Venit, formerly at Wilmer and now with Skadden Arps Slate Meagher & Flom, acted for Lufthansa, in close cooperation with Lufthansa’s internal team, which Ulrich Schulte Strathaus, vice president for international affairs, led with assistance from Thomas Kropp, vice president for European and government affairs, and Jan-Philippe Goertz, manager for international and government affairs.
SAS’s external counsel was John Boyce of Slaughter and May’s London office. He was replaced by Morten Koffman of Kromann Reumert owing to circumstances unconnected with the case. Hans Ollongren, vice president for corporate communications and external affairs, Owe Lowenborg, director of EU and public affairs, and Sanne Weidner, legal counsel for EU and public affairs, completed the SAS team handling the case internally. The case is in some regards a sign of the times in Brussels: John Boyce is the only member of the advisory team still at the firm he was with when the matter started.

Liberty Media rebuffed in Europe — again
December 2
Liberty Media has withdrawn its bid to buy the Dutch cable operator Casema from France Telecom amid clearance concerns. The collapse of the deal, valued at Euro750 million when it was announced in August, makes it the second time this year that John Malone’s acquisitive US company has run into competition hurdles.
The termination of the deal follows an announcement from the NMA, the Dutch competition enforcer, that it would hold an in-depth, phase two style investigation into the merger; in a statement the agency explained that the takeover could result in the creation of a dominant position. Liberty controls UPC, which has approximately 40 per cent of Dutch cable connections. Had the merger been consummated, Liberty’s cable holding would have grown to 60 per cent, leaving Essent Kablecom its nearest competitor at 25 per cent.
However, a source close to the deal claims that Liberty withdrew from the deal for non-competition reasons, insisting: "We relished the challenge of a further investigation."
The Dutch cable market is made up of local monopolies, with every area having one exclusive supplier of cable services. It is thought that Liberty could have defended the deal by arguing that it is impossible to enhance dominance if a monopoly already exists.
In October 2002 Liberty dropped a bid to acquire cable networks owned by Deutsche Telekom. The company had at that stage already failed on one occasion to satisfy the Bundeskartellamt, the German competition enforcer, concerning the deal.
Under the original contract with Casema, the companies were free to end their agreement if the deal was not closed by October 31 2002. A Liberty spokesman explained that, in spite of discussions, the parties "were unable to come to terms on a new agreement".
Liberty Media was represented by its usual European competition counsel Denton Wilde Sapte partner Suyong Kim and associates Angelique Bret and Rona Bar-Isaac supervised the deal from London, while Stibbe was in charge in the Netherlands. Partner Henk Post and associates Ami Kaykho and Naboth van den Broek undertook the merger filings. Partner Martijn van Empel also assisted on the deal. Nauta Dutilh advised France Telecom on competition. Partners Marc van der Woude and Jaap Feenstra in Brussels led associates Valerie Landes and Judith Lichtenberg.

GUS to acquire Homebase
December 2
GUS, the owner of UK high street business Argos, is to buy Homebase from its venture capital owners. Homebase is a home improvement superstore business that competes with the likes of B&Q and Do-it-all.
It has some 272 stores around the UK and plans to open a further 30 in the next three years. Acquiring the chain should boost Argos’s annual sales to £6 billion and its profits to £340 million. The deal has caused consternation among the finance community, however, as neither side took advice from investment bankers. In a statement, a GUS spokesman explained: "Given that the deal was funded from existing banking facilities and we had capabilities in-house, the need was only for lawyers and accountants."
GUS’s competition counsel, Linklaters, has notified the deal to the Office of Fair Trading. It is open for comment until December 5 2002, and the deadline for consideration is December 19, although this can be put back 15 working days at the agency’s discretion. There is thought to be little chance of that happening, however, as the presence of market leader B&Q and second-placed Focus Wickes makes the sector highly competitive.
Linklaters competition partner Tony Morris is handling the case, assisted by associates Catherine MacLynn and John Schmidt. Permira, the venture capital firm selling Homebase, is taking competition advice from Clifford Chance, where partner Alex Nourry and associate Alexandra Kamerling are undertaking the work.