Antitrust Lawyer Blog Commentary on Current Developments

Articles Posted in International Highlights

On June 17, 2014, the Ministry of Commerce (“MOFCOM”) blocked the proposed P3 Network shipping alliance between Denmark’s AP Maller-Maersk (“Maersk”), Switzerland’s Mediterranean Shipping Company (“MSC”), and France’s CMA CGM (“CMA CGM”).

This is MOFCOM’s second block since it started conducting merger reviews approximately six years ago.  This is the first time that MOFCOM blocked a transaction between foreign firms.

Background

On September 5, 2014, following a public comment period, the Federal Trade Commission (“FTC”) has approved a final order settling charges that Actavis plc (“Actavis”)’s acquisition of Forest Laboratories (“Forest”), Inc. would likely be anticompetitive. Under the proposed order, the two companies agreed to divest four drugs in order to preserve competition in those markets.

On July 1, 2014, Actavis announced that it has completed the acquisition of Forest in a cash and equity transaction currently valued at approximately $28 billion. The combination creates one of the world’s fastest-growing specialty pharmaceutical companies, with annual revenues of more than $15 billion anticipated for 2015.

On a pro forma combined basis for full year 2014, the combined company will have an approximately $2 billion CNS franchise; Gastroenterology (GI) and Women’s Health franchises valued at approximately $1 billion each; a Cardiovascular franchise that generates approximately $500 million; and Urology and Dermatology/Established Brand franchises approaching $500 million a year in sales each.

On July 11, 2014, Germany’s association of booksellers announced that European Union (“EU”) officials contacted them regarding its dispute with Amazon.com. The booksellers have already asked German antitrust authorities to investigate Amazon, alleging that the online retailer is delaying the shipment of one of its member, Bonnier AG’s books over a dispute on the price of the publisher’s e-books.

Amazon, in response, stated that Bonnier AG wanted Amazon to charge prices for its e-books that would have been higher than its hard-copy books. According to Amazon, their regular course of action is to charge lower prices for e-books compared to the hard copies. Amazon has been caught in similar disputes, including one with French publisher Hachette Book Group. Amazon is thought to be attempting to boost its margins in its e-books division by negotiating lower prices from publishers.

Similar cases may give prediction to Amazon’s course of action in the face of antitrust investigation. In 2012, Apple Inc. and four publishers changed the pricing model for e-books in Europe in the face of scrutiny from EU antitrust authorities. They were suspected to have conspired to keep Amazon from charging less for e-books.

On June 12, 2014, the European General Court handed down a ruling that rejected Intel’s appeal to have its $1.44 billion fine overturned.

In 2009, the European Commission (“EC”) concluded that Intel engaged in anticompetitive practices.  According to the EC, Intel’s alleged anticompetitive behavior included giving rebates to PC makers Dell, Hewlett-Packard, NEC and Lenovo to discourage them from using computer chips made by its rival Advanced Micro Devices. Intel was also alleged to have paid German retail chain Media Saturn Holdings to only stock computers that use Intel chips.

While the $1.44 billion fine is a record fine by the EC, European competition officials say it is a mild amount given that the EC could have exacted a fine as high as 10% of Intel’s turnover in 2008.  The fine only represents 4.15% of Intel’s 2008 turnover.

On May 29, 2014, Russia’s Federal Antimonopoly Service (“FAS”), the country’s top antitrust regulator, has lowered the fine levied on Severnoi Company for its part in a cartel operating in the Norwegian salmon supply sector, according to Russian newspaper Kommersant.

The fine was lowered after SK Retail, part of the Severnoi company group, told the FAS that it acquired fish that had already been imported from Norway, and therefore did not benefit from neither the existence of the cartel nor limited competition.

The fine was reportedly lowered from 43 roubles (approximately $1.3 million) to 100,000 roubles (approximately $3,000). The FAS reportedly initiated the antitrust case in July 2013, while the fine was initially levied in December 2013.

On May 27, 2014, Hitoshi Hirano, an executive of car heater panel manufacturer Tokai Rika, was indicted to fix the price of auto parts with other Japanese parts manufacturers.

In addition, Mr. Hirano was charged with persuading company employees to destroy records that would reveal the conspiracy. According to the indictment, Mr. Hirano learned of a Department of Justice (“DOJ”) raid in February 2012, and the same month he encouraged his employees to destroy potentially incriminating documents.

Executives and company employees must understand that the destruction of documents during and prior to a government investigation will only cause more legal problems.  Because of technology advancements, the government will learn of the destruction because hitting the delete button is not the end of the document.  The document still exists somewhere.  The proliferation of electronic data storage means that an attempt to destroy documents is much more complicated than it used to be.  A potential evidence destroyer must canvass emails, hard-drives, cloud storage spaces as well as the traditional paper copies. Those who are not thorough enough usually make a bad situation worse, as is the case of Mr. Hirano and Tokai Rikai.  

On May 29, 2014, Brazilian antitrust agency, Conselho Administrativo de Defesa Econômica (“CADE”) maintained a record fine of 3.1 billion Brazilian reais (around $1.4 billion), on top of mandatory asset divestitures, against the members of a long-running cement and concrete cartel that has allegedly inflated the price of cement and concrete products by as much as 20% over decades. In addition, several trade associations and individuals who acted as the “coordinators” of the cartel face separate criminal charges, which may entail prison sentences.

The companies involved were Votorantim Cimentos, Cimpor, InterCement, Itabira Agro Industrial, Holcim, and Itambe, which were convicted. Lafarge settled with CADE in November 20007 for 43m Brazilian reais ($19.5 million). Cimpor attempted to settle with CADE on two occasions, once on the eve of the trial against the cartelists, but failed to reach an agreement with CADE.

According to CADE, the defendants have for decades promoted consolidation, verticalization and forged cross-ownership structures combining cement and concrete assets as a means to reduce competition in both markets as well as eliminate rivals. CADE gathered the bulk of its evidence against the cartelists in a dawn raid dating back to February 2007. The oldest piece of evidence dated back to 1987, according to CADE.

On May 29, South Korea’s  Yonhap news agency reported that the country’s Prosecutor’s Office has seized documents from the Korea Rail Network Authority (“KR”), to investigate bribery and irregular supply relationships by three to four rail part manufacturers that provided supplies to KR.

In addition, some rail parts manufacturers are being accused of counterfeiting certificates of quality for parts supplied to KR.

Finally, KR officials stand accused by the Board of Audit and Inspection of overlooking the bid-rigging conducted by construction companies in the railway building tenders for a new project that will create a new link between Wonju and Gangneung provinces.

On May 28, 2014, the Financial Times (“FT”) reported that junior employees and sale staff of GlaxoSmithKline (“GSK”) China is suing their management over unreimbursed “bribes” paid, at the management’s behest, to hospitals and doctors.

In the allegations put forth by the employees, the management of GSK China directed staff to purchase fake receipts to cover up the cost of the bribes paid. In some instances, managers’ bribe directives were sent over personal emails, while junior employees were instructed to take out expenses (on the bribes) on behalf of their managers. All this was done to boost the sale of GSK drugs. These employees were also warned to not implicate their managers in any inquiries.

In March, disgruntled GSK China employees sent 25 representatives to GSK’s China headquarters in Shanghai, demanding reimbursements amounting to thousands of dollars per employee. They also accused the management of threatening them with denied bonuses and dismissal for the bribes, despite simply following the orders of their superiors.

On April 29, 2014, the European Commission (“EC”) announced that it has reached a legally-binding agreement with Samsung on standard essential patent (“SEP”) injunctions. According to the terms of the agreement, Samsung “will not seek injunctions” in the EU on the basis of its SEPs for smartphones and tablets against licensees who sign up to a specified licensing framework.

The reason the EC reached this agreement with Samsung is because SEPs give their owners significant market power, since it is not possible to manufacture products that comply with a certain standard without obtaining licensing for the SEPs. As a result, the EU requires SEP owners to issue licenses based on fair, reasonable and non-discriminatory (“FRAND”) terms. An SEP owner, such as Samsung, can use injunctions to stop other companies from gaining access to the SEP and thus restricting competition, so the EC is interested to limiting injunctions only to instances where companies seeking SEP licenses is unwilling to do so on FRAND terms.

Samsung agreed to the following terms in this agreement with the EC: