Merger control
1. Are mergers and acquisitions subject to merger control in your jurisdiction? If so, what is the regulatory framework and what authorities are responsible for merger control?
EU
Regulatory framework
Regulation (EC) 139/2004 on the control of concentrations between undertakings (Merger Regulation) regulates the EU merger control regime.
Regulatory authority
The European Commission (Commission) is responsible for EU merger control
Certain Commission decisions can be appealed to the General Court.
India
Regulatory framework
The provisions of the Competition Act 2002, as amended (Competition Act), which regulate mergers and acquisitions (which qualify as combinations requiring investigation), have been implemented with effect from 1 June 2011
On 4 March 2011, the government published a series of notifications (Notifications). These set out the merger control provisions (sections 5 and 6, Competition Act), raised the asset and turnover thresholds in the Competition Act, and contained certain exemptions (exercising its powers under section 54 of the Competition Act
In addition, on 11 May 2011 the Competition Commission of India (Commission) issued final regulations governing merger control in India (Combination Regulations).
(The provisions of the Competition Act relating to restrictive agreements and abuse of dominance came into force on 20 May 2009
A combination must be pre-notified to the Commission (sections 5 and 6, Competition Act). The Commission can also inquire into a combination on its own initiative for a one-year period after the conclusion of a relevant transaction. A combination is void if it causes, or is likely to cause, an appreciable adverse effect on competition in a relevant market in India ( Competition Act specifically exempts certain combinations from the pre-merger notification requirements where they involve share subscriptions, financing facilities or any acquisitions by public financial institutions, foreign institutional investors, banks or venture capital funds under a loan or an investment agreement.
However, details of these acquisitions must be notified in Form III within seven days of the acquisition
Regulatory authority
The Competition Act is enforced by the Commission established under the Competition Act. The Office of the Director General (DG) carries out investigations to assist the Commission.
UK (England and Wales)
Regulatory framework
The Enterprise Act 2002 regulates the UK merger control regime.
Regulatory authority
Currently, the Office of Fair Trading (OFT) conducts initial Phase 1 examinations of mergers. If the OFT concludes the transaction is, or may be, a "relevant merger situation" that may lead to a "substantial lessening of competition" in the UK market(s) concerned, it must refer the transaction to the Competition Commission (CC) for a fuller Phase 2 investigation and final determination, subject to very limited exceptions . The UK government has indicated its intention to amalgamate the OFT and the CC into a single Competition and Markets Authority in the next few years
Certain OFT and CC decisions can be appealed to the Competition Appeal Tribunal (CAT)
Guidance documents
In recent years new guidance documents have been issued on:
- Procedure. The OFT's jurisdictional and procedural mergers guidance (June 2009).
- Substantive assessment. The OFT/CC joint merger assessment guidelines (September 2010), which aim to provide greater clarity on how the competitive impact of mergers is assessed by the OFT and the CC. The guidelines revise and expand on previous guidance contained in separate publications issued by the OFT and the CC.
United States
Regulatory framework
Mergers and acquisitions are governed primarily by section 7 of the Clayton Act (15 USC § 18), which prohibits transactions that may substantially lessen competition or tend to create a monopoly.
Regulatory authority
The Department of Justice's Antitrust Division (DOJ) and the Federal Trade Commission (FTC) are primarily responsible for enforcing the federal anti-trust laws. State attorneys general (AGs) can also challenge mergers under federal and state anti-trust laws.
The Hart-Scott-Rodino Act (15 USC § 18a) (HSR Act) requires that transactions meeting specific size-of-party and size-of-transaction thresholds be notified to the federal agencies before closing and not close until certain statutory waiting periods have elapsed or been terminated. However, even transactions which do not require HSR notification are subject to review under section 7 of the Clayton Act and other anti-trust laws.
Triggering events/thresholds
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Triggering events
A transaction requires notification to the Commission if it constitutes a concentration and has a Community dimension (see below, Thresholds).
A concentration is deemed to arise where a change of control on a lasting basis results from, for example:
- The merger of two or more previously independent undertakings.
- The acquisition, by one undertaking, of direct or indirect control of another undertaking(s) (for example, by purchase of securities or assets).
Control is defined as the possibility of exercising decisive influence on an undertaking, for example by owning the assets or rights/contracts that confer decisive influence on the composition of the organs of an undertaking.
The creation of a joint venture performing on a lasting basis all the functions of an autonomous economic entity (a full-function joint venture) is also considered as a concentration.
Thresholds
A concentration has a Community dimension where either of the following thresholds are met:
Threshold one. The following two conditions are met:
- The combined worldwide turnover of the undertakings is more than EUR5 billion (as at 1 December 2011, US$1 was about EUR0.7).
- The EU-wide turnover of each of the undertakings is more than EUR250 million.
Threshold two. All the following are met:
- The combined worldwide turnover of the undertakings is more than EUR2.5 billion.
- In each of at least three member states, the combined turnover of the undertakings is more than EUR100 million.
- In each of these three member states, the turnover of each of the undertakings is more than EUR25 million.
- The EU-wide turnover of each of the undertakings is more than EUR100 million.
As an exception to both sets of thresholds, if each of the undertakings achieves more than two-thirds of its EU-wide turnover within one and the same member state, the transaction will not have a Community dimension.
India
Law stated as at 01-Dec-2011
Triggering events
For the purposes of the Competition Act:
- Combinations are the acquisition of one or more enterprises by one or more enterprises or persons, or a merger or amalgamation of enterprises, that cross the prescribed financial thresholds (see below, Thresholds).
- Acquisition means acquiring (directly or indirectly), or agreeing to acquire, an enterprise's shares, voting rights or assets, or control over an enterprise's management or assets.
Thresholds
Combinations must be pre-notified to the Commission if any of the following financial thresholds apply (section 5, Competition Act):
- The acquirer and acquired enterprise in the combination jointly have (or the enterprise remaining after the combination would have) one or more of the following:
- Indian assets worth more than INR15 billion (as at 1 December 2011, US$1 was about INR52.2) or turnover in India of more than INR45 billion;
- worldwide assets (wherever situated) worth more than US$750 million, including assets worth at least INR7.5 billion in India; or
- worldwide turnover of more than US$2.25 billion including at least INR22.5 billion in India.
- The group or entity, to which the target or merged entity will belong after the combination, has, or will have, one or more of the following:
- Indian assets worth more than INR60 billion or turnover in India of more than INR180 billion;
- worldwide assets (wherever situated) of more than US$3 billion including assets worth at least INR7.5 billion in India; or
- worldwide turnover of more than US$9 billion including at least INR22.5 billion in India.
In determining whether the thresholds are met, the rate of conversion of foreign exchange currencies into INR or US$ is based on the average spot rate of the last six months quoted by the Reserve Bank of India from the date on which the triggering event occurred (see Question 3, Timing).
The following are exempt from the pre-notification requirement (Notifications):
- Transactions where the target (including its subsidiaries, units or divisions) being acquired has either:
- assets in India of less than INR2.5 billion; or
- turnover in India of less than INR7.5 billion.
Where the target exceeds both of these, the parties to the transaction must consider whether the transaction meets the cumulative jurisdictional thresholds for pre-notification outlined above. - Groups exercising less than 50% of the voting rights in the other enterprise, even if they meet the threshold requirements for pre-notification set out in section 5 of the Competition Act (see above).The Commission has not yet clarified whether this only exempts certain enterprises (where less than 50% voting rights are held) within a group from being included in the threshold calculations, or if it amends the definition of "group" for the purposes of the merger control regime altogether.
In addition, the Combination Regulations also list certain categories of transactions, which the Commission believes are "ordinarily" not likely to cause an appreciable adverse effect on competition in India and, therefore, do not "normally" require notification. These categories include:
- Non-controlling share acquisitions of not more than 15% of the total shares or voting rights for investment purposes or in the ordinary course of business.
- Acquisitions of shares or voting rights where the acquirer already holds more than 50% in the target (except when going from joint to sole control).
- Asset acquisitions for investment purposes or in the ordinary course of business, not leading to control of the enterprise whose assets are being acquired (except where the assets represent substantial business operations of a particular location/product/service of the vendor).
- Acquisition of current assets (such as stock-in-trade and raw materials) in the ordinary course of business.
- Acquisition of shares pursuant to bonus issues, stock splits or consolidation of face value of shares or subscription to rights issues (to the extent of their entitled proportion), not leading to acquisition of control.
- Acquisition by underwriters/stock brokers in the ordinary course of business for underwriting/stock broking.
- Intra-group acquisitions.
- Amended or renewed tender offers.
- Purely offshore transactions taking place outside India with "insignificant local nexus and effect" on markets in India.
UK (England and Wales)
A transaction is a relevant merger situation if a triggering event occurs and one of the thresholds is met.
Triggering events
A transaction is a triggering event if it causes two or more enterprises to cease being distinct. This occurs if the transaction leads to any of the following levels of control (including moving from one level to another):
- Controlling interest (acquisition of majority voting rights over the target).
- Ability to exercise control over policy (a large minority interest enabling effective control over the target).
- Ability to exercise material influence (that is, to require the target's management to consider the acquirer's interests). This can arise, for example, with minority board representation or a voting interest as low as 10% to 15%.
Thresholds
A triggering event must satisfy either of these two tests:
- The turnover test. The target's UK turnover exceeds GB£70 million (as at 1 December 2012, US$1 was about GB£0.6).
- The 25% share of supply test. The transaction results in the creation of, or increase in, a 25% or more combined share of sales in (or in a substantial part of) the UK, of goods or services of a particular description.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Triggering events
The HSR Act applies to:
- Mergers.
- Consolidations.
- Acquisitions of voting securities, non-corporate interests and certain assets.
- Formations of joint ventures and partnerships.
- Acquisitions of certain exclusive licences.
Thresholds
A transaction must be notified to the DOJ and FTC if:
- The value of the transaction exceeds US$68.2 million (as at 1 December 2011, US$1 was about EUR0.8) but is less than US$272.8 million and if:
- one party has US$136.4 million or more in annual net sales or total assets; and
- the other party has US$13.6 million or more in annual net sales or total assets.
- The value of the transaction exceeds US$272.8 million.
The size of the transaction includes the value of voting securities and non-corporate interests, and in some circumstances the assets of the target held by the acquiring party prior to and as a result of the transaction.
The size of the parties is determined by the annual net sales or total assets of the ultimate parent entity of each party to the transaction.
These thresholds are revised annually to adjust for inflation.
Exemptions
The following transactions are exempt from notification:
- Acquisitions of certain goods and real estate in the ordinary course of business.
- Certain transactions made only for investment if the acquiring party holds 10% or less after the acquisition of the acquired party's voting shares.
- Intra-person transactions (transactions where the same party controls the acquiring entity and at least one of the acquired entities).
- Transactions involving foreign firms.
- Acquisitions by certain government entities.
- Acquisitions subject to review by other government agencies.
- Formation of unincorporated entities where no acquiring party obtains control.
Notification
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Mandatory or voluntary
Notification of a concentration with a Community dimension is mandatory.
Timing
Concentrations with a Community dimension must be notified to the Commission before they are implemented. This is generally referred to as the standstill obligation.
A concentration can be notified to the Commission following conclusion of the agreement or announcement of the public bid, for example. Notification can also be made where the undertakings concerned show to the Commission a good faith intention to conclude an agreement or, in the case of a public bid, where they have publicly announced an intention to make such a bid.
Formal/informal guidance
Informal guidance before notification consists of pre-notification contact (see Question 4).
Responsibility for notification
A merger must be notified jointly by the parties to the merger.
In all other cases, the notification must be effected by the undertaking acquiring control of the other undertaking(s). However, as a practical matter, given the large amount of detailed information required to complete a notification, the buyer and target co-operate to a large extent. Notifications of hostile bids may therefore be much more difficult to complete.
Relevant authority
Notifications are made to the Commission.
The first step, before any (pre-)notification, is to request the allocation of a case team. This is done through a dedicated form, sent to a dedicated e-mail address (COMP-MERGER-REGISTRY@ec.europa.eu), indicating the appropriate NACE (economic sector) code.
Certain transactions notified to the Commission may, under certain conditions, be referred (in part or in whole) to the national competition authority of a member state, and vice versa.
Form of notification
Notifications are made by completing a notification form, known as the Form CO.
Filing fee
There is no filing fee.
Obligation to suspend
There is a standstill obligation (see above, Timing).
As an exception, the parties can request a derogation from the Commission so that they can implement the transaction before obtaining clearance from the Commission. A derogation can be applied for and granted at any time, before notification or after the transaction. In reviewing such a request, the Commission takes into account several factors, including the effects of the suspension and the threat to competition posed by the concentration. A derogation can be made subject to conditions and obligations designed to ensure effective competition, for example the insurance that voting rights acquired prior to clearance are exercised by an independent trustee (see for example Schneider/Legrand (Case COMP/M.2283) 2002). Other cases where the Commission granted a derogation include the following:
- Mobile/JV Dissolution (Case IV/M.1822) 2000, where the transaction clearly did not raise any competitive concerns.
- Orica/Dyno (Case COMP/M.4151) 2006, where the derogation was deemed appropriate to permit to the parties to implement a transaction in other parts of the world.
India
Law stated as at 01-Dec-2011
Mandatory or voluntary
Notification of a combination is mandatory.
Timing
Notification must take place within 30 days of either:
- The board of directors of the relevant enterprises approving the merger or amalgamation referred to in section 5(c) of the Competition Act.
- The execution of any agreement or other document for an acquisition referred to in section 5(a) or 5(b) of the Competition Act (see Question 2). "Other document" means any binding document, which conveys an agreement/decision to acquire control, shares, voting rights or assets (Combination Regulations). The Combination Regulations further clarify that:
- in the event of a hostile acquisition, "other document" is any document executed by the acquirer, which conveys a decision to acquire;
- where a document has not been executed but the intention to acquire is communicated to the central government, state government or a statutory Authority, the date of this communication is deemed to be the date of execution of the other document for acquisition.
Where an acquisition, share subscription or financing facility is carried out by any of the following under a covenant in a loan agreement or an investment agreement, a notification must be made within seven days of the acquisition in the prescribed form:
- A public financial institution.
- A foreign institutional investor.
- A bank.
- A venture capital fund (as defined under the Competition Act).
Formal/informal guidance
There is no provision for formal or informal guidance under the Competition Act or the Combination Regulations. However, the Commission states on its website that it offers informal, verbal, non-binding pre-notification consultation as an additional assistance facility. Consultation only applies to procedural issues with filing and not in relation to substantive interpretive issues.
Responsibility for notification
In an acquisition, the acquirer must notify the Commission and in a merger/amalgamation, the parties must jointly notify the Commission (Combination Regulations).
Relevant authority
The notification must be made to the Commission.
Form of notification
The Competition Act does not specify a form of notification. However, the Combination Regulations prescribe three forms for filing a merger notification:
- Form I (short form). This is the most common form. The Combination Regulations set out certain transactions that can ordinarily be filed in Form I and the parts that must be completed.
- Form II (long form). This form is used when the Commission requires more information. The parties can also opt to use this.
- Form III. This is a post-completion notification form and must be filed within seven days of an acquisition, share subscription or financing facility, entered into:
- by a public financial institution, registered foreign institutional investor, bank or registered venture capital fund;
- under a covenant in a loan agreement or an investment agreement.
Filing fee
The fees vary depending on the form that is filed (Combination Regulations):
- Form I: INR50,000.
- Form II: INR1,000,000.
- Form III: no fee payable.
All fees are payable by the person filing the notification.
Obligation to suspend
A combination notified to the Commission must be suspended for 210 days from the date of the notification or until an order clearing the transaction is passed by the Commission, whichever is earlier (section 31(11), Competition Act).
UK (England and Wales)
Mandatory or voluntary
Notification is voluntary. However, if a transaction meets the jurisdictional thresholds and the parties do not notify, the OFT can start an investigation on its own initiative and can, at any time in the four months following the completion or public announcement of the merger (whichever is later), make a reference to the CC (see Question 4).
Notification is therefore advisable if a merger raises substantive competition issues, to avoid an investigation after completion that may lead to the transaction's prohibition or the imposition of conditions. In that case, the acquirer would have to sell all or part of the business. A compulsory sale is more likely to be on unfavourable terms.
Timing
There is no deadline to make a filing, but the date of notification has timing implications for the transaction. OFT deadlines to decide whether to refer the merger to the CC depend on the form of notification used (see Question 4).
Formal/informal guidance
The OFT gives informal advice on competition issues (and/or jurisdictional issues where relevant) arising out of potential merger situations if the OFT is satisfied that both:
- A confidential transaction exists, that is, the transaction is not hypothetical or in the public domain. There must be a good faith intention to proceed with the transaction, based on adequate financing and evidence of board-level consideration by the acquirer, or (for agreed transactions) heads of agreement or similar documentation.
- There is a genuine issue (that is, that it may be referred to the CC).
Parties seeking the OFT's informal guidance must submit a short (no more than five pages) application to the OFT that sets out:
- Why the transaction is suitable to receive informal advice (with reference to the principles above).
- The theory of harm underlying the transaction that would lead the OFT to consider that referral to the CC is a genuine issue.
- Any key substantive and/or jurisdictional issues on which the parties seek guidance.
Any informal advice provided by the OFT is not binding. The parties receiving informal advice are required to keep confidential both the content of the informal advice and the fact that informal advice has been sought.
The OFT generally aims to indicate whether it will accept or reject an application within five working days of receiving the application, but tries to handle urgent cases more swiftly.
Responsibility for notification
One or both parties may notify. In practice, the buyer is usually responsible. However, given the large amount of detailed information required to complete a notification, the buyer and target must co-operate to a large extent. Notifications of hostile bids may therefore be much more difficult to complete.
Relevant authority
Notification is made to the OFT (Mergers Group).
Form of notification
Notifications are made either by completing a pro-forma Merger Notice or by informal written submission. An informal written submission allows the parties greater flexibility to make their case but is not subject to a strict timetable (seeQuestion 4).
Filing fee
The fee, depending on the size of the target's UK turnover, is:
- GB£30,000 where turnover is below GB£20 million.
- GB£60,000 where turnover is between GB£20 million and GB£70 million.
- GB£90,000 where turnover exceeds GB£70 million.
There are a few exemptions from the filing fee, notably for small and medium-sized enterprises. The fees are payable when the decision is given, unless the Merger Notice is used (see above, Form of notification), in which case, the fee is payable on submission of the Merger Notice.
Obligation to suspend
There is no obligation to suspend the transaction. However:
- The OFT can seek undertakings or make hold-separate orders preventing parties to a completed transaction from integrating their businesses, to the extent that integration would make a prohibition or conditional clearance decision impossible to implement.
- Once a merger is referred to the CC, the buyer must not acquire any more shares in the target without the CC's consent (section 78, Enterprise Act). When a completed merger is referred to the CC, the merged entity must obtain its consent before further integrating the businesses (section 77, Enterprise Act). In addition, the CC can seek undertakings or make hold-separate orders (sections 80 and 81, Enterprise Act).
- For mergers subject to the City Code on Takeovers and Mergers (that applies primarily to companies with listed securities), a reference to the CC automatically causes the offer to lapse.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Mandatory or voluntary
HSR notification is mandatory if the transaction meets the thresholds and is not exempt (see Question 2, Thresholds andExemptions).
Timing
A transaction can be notified at any time after the parties reach a letter of intent or binding agreement or the acquiring firm publicly announces a tender offer. While there is no filing deadline, the statutory waiting period does not begin to run until the parties have correctly notified the DOJ and FTC.
Formal/informal guidance
Parties can seek informal guidance (on an anonymous basis) from the FTC's Premerger Notification Office (PNO) on pre-merger notification and filing requirements.
Responsibility for notification
Both parties to a transaction, which meets the thresholds, must make an individual filing. However, for tender offers and formations of joint ventures only the acquiring party or parties must file.
Relevant authority
Filings must be made with both the DOJ and FTC.
Form of notification
Filings must be submitted using the HSR Notification and Report Form (Form), which requires information on the:
- Parties':
- corporate structure;
- nature of business; and
- revenues.
- Structure of the transaction.
The filing must also include (HSR Rules):
- Any relevant agreements.
- Various regularly prepared financials.
- Materials, prepared by or for officers or directors, regarding the competitive aspects of the transaction (Item 4(c) documents).
- Confidential Information Memoranda, materials prepared by third party advisors for officers or directors relating to competitive aspects of the sale of the acquired entity(s) or assets, and documents analysing the synergies and/or efficiencies of the transaction prepared by or for any officers or directors of the acquiring entity (Item 4(d) documents). This requirement is new as of August 2011 (see below).
The Form and HSR rules were revised in August 2011. The updated Form and instructions for notification are available from the PNO and at www.ftc.gov/bc/hsr/hsrform.shtm.
Filing fee
The acquiring party must pay a filing fee, determined by the transaction's size, which ranges from US$45,000 to US$280,000.
Obligation to suspend
Procedure and timetable
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Pre-notification discussions
Notifying parties are expected to initiate informal and confidential contacts with the Commission at least two weeks before the date of notification. During pre-notification discussions, notifying parties and the Commission can raise issues such as jurisdictional questions as well as potential competitive concerns. Discussions are also intended to determine the scope of information to be submitted to ensure that the notification form is complete. For more information, see the Commission's Best Practices on the conduct of EC merger control proceedings, available athttp://ec.europa.eu/competition/mergers/legislation/proceedings.pdf.
Phase 1
The Commission carries out a substantive examination of the proposed transaction, taking into account:
- Information provided by the parties (the Commission may request parties to provide it with necessary information).
- Publicly available material.
- Third-party views (for example views of customers or competitors of the merging undertakings) (see Question 6).
Once the Commission is notified, it has 25 working days to carry out its examination and decide whether to open a Phase 2 investigation. This is extendable by up to ten working days where the Commission receives a request for referral from a member state or where the undertakings concerned offer commitments to obtain clearance.
The Commission adopts one of the following decisions at the end of Phase 1:
- Unconditional clearance.
- Clearance subject to commitments (see Question 8).
- Open a Phase 2 investigation.
The Commission must start a Phase 2 investigation if it considers that the transaction raises serious doubts about its compatibility with the common market.
If the Commission has not taken a decision before the end of Phase 1, the concentration is deemed to have been cleared.
Phase 2
The Commission has a statutory period of 90 working days to conduct its Phase 2 investigation and adopt its decision. This period can be extended by up to 15 working days where the undertakings concerned offer commitments to obtain clearance, or if the notifying parties request this. Similarly, at any time following initiation of proceedings, the periods for review can be extended by the Commission with the agreement of the notifying parties. The total duration of any extension or extensions during the investigation cannot exceed 20 working days.
The investigation includes:
- A statement of objections from the Commission.
- Written submissions (from the parties to the transaction and interested third parties).
- An oral hearing (with the parties to the transaction and interested third parties).
The Commission must make one of the following decisions at the end of Phase 2:
- Unconditional clearance.
- Conditional clearance subject to commitments (proposed by the merging parties and negotiated with the Commission) (see Question 8).
- Prohibition of the transaction.
If the Commission has not taken a decision before the end of Phase 2, the concentration is deemed to have been cleared.
For an overview of the notification process, see flowchart, EU: merger notifications.
India
Law stated as at 01-Dec-2011
Although not specifically referred to as such in the Competition Act or the Combination Regulations, the merger control process has two phases:
- Phase I. The Commission must form a prima facie opinion on whether a combination is likely to cause an appreciable adverse effect on competition within the relevant market in India within 30 calendar days of the notification by the parties. The Commission can either decide to clear a transaction within this period or subject it to further investigation. This period is extended to 45 calendar days if modifications are proposed by the parties (Regulation 19, Combination Regulations).
- Phase II. If the Commission forms a prima facie opinion that a combination is likely to cause an appreciable adverse effect on competition, it launches a detailed investigation. This phase can last up to an additional 180 calendar days. The standstill obligation continues until the Commission reaches a final decision or 210 days lapse from the date of filing the notification (see below, Outcome: Approve the combination and Question 3, Obligation to suspend).
Procedure
In forming its prima facie opinion, the Commission can (Regulation 19(2), Combination Regulations):
- Ask parties to the combination to file additional information.
- Accept modifications proposed by the parties.
- Ask for information from any other enterprise in relation to a proposed combination.
If the Commission is of the prima facie opinion that a combination is likely to cause an appreciable adverse effect on competition, it will issue a show-cause notice to the parties to the combination. The parties must respond within 30 days of receiving the notice giving reasons as to why a detailed investigation should not proceed (section 29(1), Competition Act).
After receiving the parties' responses, the Commission can call for a report from the DG (Regulation 20, Combination Regulations). Within seven working days of the receipt of the parties' response or receipt of the DG's report (whichever is later), the Commission will direct the parties to publish details of the combination to the public within a further ten working days (see Question 5, Publicity).
The Commission can invite affected parties or members of the public to file written objections to the combination within 15 working days of the date of publication of details of the combination (section 29(3), Competition Act) (see Questions 5 and 6).
The Commission can call for additional information from the parties to the combination, if necessary, within 15 working days from the expiry of the time for filing objections. The parties must file the additional documents within a further 15 days (sections 29(4) and (5), Competition Act).
The Commission must deal with the case within 45 working days of the receipt of all of the information (section 29(6), Competition Act).
Outcome
Depending on the Commission's opinion of the combination at the end of the investigation, it can do one of the following:
- Approve the combination. The Commission can approve the combination unconditionally by written order if it is not likely to cause an appreciable adverse effect on competition in the relevant market(s). If no order is passed within 210 days from the date of a valid notification to the Commission, the approval is deemed to have been granted (section 31(1) and 31(11), Competition Act).
- Prohibit the combination. If the Commission finds an appreciable adverse effect on competition, it will direct that the combination will not take effect (section 31(2), Competition Act).
- Propose a modification to the combination (remedies or commitments). If the adverse effect can be eliminated by suitable modifications to the combination:
- the Commission will propose modifications to the parties (section 31(3), Competition Act);
- if the Commission's proposed modifications are acceptable to the parties, they are to be carried out within a specified period (section 31(4), Competition Act);
- if however, the parties do not accept the Commission's original proposed modification, they can submit amendments within 30 working days of the Commission's proposal (section 31(6), Competition Act);
- if the Commission finds the parties' proposed amendments acceptable, it will approve the combination (section 31(7), Competition Act);
- if however, the Commission rejects the parties' proposed amendments, the parties are allowed a further 30 working days to accept the Commission's original proposed modification (section 31(8), Competition Act).
- The combination is deemed to have an appreciable adverse effect on competition and cannot take effect if either of the following applies:
- having accepted the Commission's modifications, the parties do not carry them out within the specified period (section 31(5), Competition Act);
- the parties do not agree to the modifications suggested by the Commission within the time periods specified above (section 31(9), Competition Act).
If either of the parties or the Commission accepts the modifications under this procedure, the Commission will, by order, approve the proposed combination (Regulation 25(3), Combination Regulations).
To date, only 16 combinations have been cleared by the Commission (without any modifications or conditions) within the 30-day prima facie review period.
For an overview of the notification process, see flowchart, India: merger notifications.
UK (England and Wales)
Phase 1 - initial examination by the OFT
The OFT carries out a substantive examination of the proposed transaction, taking into account:
- Information provided by the parties (the OFT can request parties to provide it with necessary information).
- Publicly available material.
- Third-party views (for example, of customers or competitors of the merging undertakings) (see Question 6).
The OFT can investigate a transaction on its own initiative and refer it to the CC at any time in the four months following completion or public announcement (whichever is later). The OFT must bring the investigation to the attention of the merging parties and consult any relevant person (see Question 6). It must reach a decision as soon as reasonably practicable.
If the OFT is notified by Merger Notice, it has 20 working days (four weeks, plus public holidays) to carry out its examination and decide whether to refer the merger. This is extendable by up to ten working days (two weeks plus public holidays).
There is no maximum deadline for notifications made by informal written submission, but the OFT generally aims to reach a decision within 40 working days (eight weeks plus public holidays).
The OFT can stop the clock on these timetables if the parties fail to comply with its information requests.
The OFT makes one of the following decisions at the end of Phase 1:
- Unconditional clearance.
- Clearance subject to legally binding undertakings (see Question 8).
- Reference to the CC for a Phase 2 investigation.
The OFT must refer a transaction if it considers that it may result in a substantial lessening of competition on the market(s) concerned. The Court of Appeal has stated that a merger must be referred if the OFT has a positive and reasonable belief, objectively justified by relevant facts, that there is a realistic prospect that the merger will substantially lessen competition (Office of Fair Trading v IBA Health Limited [2004] EWCA Civ 142). The OFT must refer the transaction if there is a more than 50% chance of the merger substantially lessening competition and the OFT has wide discretion to refer it if the chance is less than 50% but more than "fanciful".
However, the OFT has discretion not to refer a merger if either of the following applies:
- The market(s) concerned is of insufficient importance to merit a CC investigation. This will be considered to apply where either:
- the affected markets are worth less than GB£3 million; or
- the affected markets are worth less than GB£10 million (but more than GB£3 million) and the expected customer harm resulting from the merger is not materially greater than the average public cost of a CC reference (currently around GB£400,000) having regard to the:
- size of the market concerned;
- likelihood of a substantial lessening of competition;
- magnitude of any competition that would be lost; and
- duration of any substantial lessening of competition.
- There are clear and quantifiable customer benefits arising from the merger that outweigh the substantial lessening of competition.
In addition, the OFT has the discretion not to make a reference in certain other circumstances, such as when it is considering whether to accept undertakings in lieu of making a reference.
In December 2010, the OFT published guidance on the exceptions to the duty to refer and undertakings in lieu of reference.
Phase 2 - full investigation by the CC
The CC has a statutory period of 24 weeks to conduct its investigation and publish a report. This period can be extended by up to eight weeks at the CC's discretion. The investigation includes written submissions (from the parties to the transaction and interested third parties) and oral hearings (with the parties to the transaction and very significant third parties).
The CC must decide whether there is a relevant merger situation (see Question 2) and, if so, whether it may lead to a substantial lessening of competition. The CC must make one of the following decisions at the end of Phase 2:
- Unconditional clearance.
- Conditional clearance, subject to legally binding undertakings (proposed by the merging parties and negotiated with the CC) (see Question 8).
- Prohibition.
For an overview of the notification process, see flowchart, UK (England and Wales): merger notifications.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Initial waiting period
Parties must wait 30 calendar days after filing (15 calendar days for cash tender offers and certain bankruptcy proceedings) before they can complete their transaction (HSR Act). The DOJ and FTC can grant early termination of the waiting period if the parties request this and the agencies choose not to investigate (see below).
Both the DOJ and FTC conduct a preliminary review of notified transactions. If both agencies choose to investigate further, they will decide through a clearance process which regulator will conduct the investigation. The decision is usually based on industry expertise.
During the initial waiting period, the reviewing agency can:
- Request voluntary submissions of information, such as customer lists and marketing plans.
- Interview executives of the notifying parties.
- Contact relevant third parties, such as competitors, customers and suppliers.
The notifying parties can request meetings with the reviewing agency and submit position papers addressing the reasons for the transaction and its likely competitive effects.
If early termination is not granted, the reviewing agency can allow the waiting period to expire or issue a request for additional information and documents (second request).
Second request and extended waiting period
A second request seeks further information, including data and documents. Requests can be substantial and the notifying parties can negotiate with the reviewing agency to narrow the scope, such as limiting the issues to be addressed or number of executives required to produce documents.
The reviewing agency has the right to:
- Interview party executives and relevant third parties informally or under oath.
- Issue voluntary request letters to third parties for information and documents.
- Issue a compulsory process which requires the submission of documents by third parties.
Once the parties have substantially complied with the second request, the reviewing agency has a 30-day review period (ten days for cash tender offers and certain bankruptcy proceedings), to determine whether to:
- Allow the parties to complete the transaction.
- Enter into a consent order requiring the parties to take certain actions to alleviate anti-competitive concerns (seeQuestion 8).
- Seek a preliminary (DOJ and FTC) or permanent (DOJ only) injunction in federal court to block the transaction.
- Initiate an administrative proceeding before an administrative law judge (ALJ) (FTC only).
The review period is often extended by the parties' consent.
In the absence of a preliminary injunction, the parties can close the transaction while a decision is pending in an administrative or judicial proceeding.
Failure to issue a second request or challenge the transaction does not prevent the DOJ or FTC from challenging a completed transaction. Additionally, state AGs and private parties can challenge completed transactions.
For an overview of the notification process, see flowchart, United States: merger notifications.
Publicity and confidentiality
5. How much information is made publicly available concerning merger inquiries? Is any information made automatically confidential and is confidentiality available on request?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Publicity
The Commission publishes the following two main announcements during Phase 1:
- The fact of the notification, indicating the names of the undertakings concerned, their country of origin, the nature of the concentration and the economic sectors involved.
- The end of its examination, announcing clearance or opening of Phase 2, which is followed by the publication of a non-confidential version of its decision.
Once a Phase 2 investigation has been initiated, the Commission will generally make no further announcement until it reaches its final decision. It will issue a press release announcing its decision and will ultimately publish a non-confidential version of its decision.
Procedural stage
Information is published by the Commission at the start, during and at the end of Phases 1 and 2 (see above, Publicity).
Automatic confidentiality
Commission officials (as well as National Competition Authority (NCA) officials) have a duty of professional secrecy, that is, not to disclose information acquired or exchanged between them. In addition, information that they obtain during an investigation can only be used for the purpose for which it was acquired.
Confidentiality on request
A party can specify that certain information provided to the Commission constitutes either business secrets or other confidential information, which should not be divulged to any third party.
So far as disclosure of information about an undertaking's business activity could result in serious harm to the same undertaking, the information constitutes business secrets. Examples of business secrets are:
- Methods of assessing costs.
- Production secrets and processes.
- Supply sources.
- Quantities produced and sold.
- Market shares.
Information other than business secrets which may be considered as confidential, insofar as its disclosure would significantly harm a person or undertaking, is classified as other confidential information. Examples of other confidential information include certain letters received from customers which, if disclosed, may lead to retaliatory measures.
India
Law stated as at 01-Dec-2011
Publicity
There is no obligation on the parties or the Commission to make details of the combination public at the time of notification. The Commission will direct the parties to publish the details of the combination after it is of the prima facieopinion that a combination has, or is likely to have, an appreciable adverse effect on competition within the relevant market(s) in India, at the end of Phase I (section 29(2), Competition Act) (see Question 4).
Procedural stage
After the end of Phase I (see Question 4), the Commission must issue a direction for the publication of the details of the combination. This must be done within ten working days of the Commission's prima facie direction (see Question 4). Parties must publish, using Form IV, in all-India editions of four leading daily newspapers, including at least two business newspapers and on the parties' websites (Regulation 22, Combination Regulations).
Automatic confidentiality
Generally, information relating to any enterprise obtained by the Commission or the Competition Appellate Tribunal (CompAT) (see box, The regulatory authorities and Question 10) cannot be disclosed without the enterprise's prior written approval (section 57, Competition Act). This provision does not apply if the disclosure is made to comply with the Competition Act or any other existing law.
The Competition Act provides for a process by which parties to proceedings before the Commission can inspect documents on file (Regulation 37, General Regulations (see Question 6)). If a party to proceedings requires the information it has provided to be kept confidential, it must specifically claim confidentiality in accordance with the procedure set out in Regulation 35 of the Competition Commission of India (General) Regulations 2009 (No. 2 of 2009), as amended (General Regulations).
Confidentiality on request
The Commission must generally maintain confidentiality of the information that the parties request to be kept confidential (section 57, Competition Act and Regulation 35, General Regulations) (see Question 21).
If any confidential or commercially sensitive information is submitted, a party can file a request to the Commission to treat the information as confidential. The request must be accompanied with all of the following:
- Reasons/justifications for confidential treatment.
- Duration of time for which confidential treatment is claimed.
- Details of the implications for the parties if the information is not treated as confidential.
The request for confidential treatment must be accompanied by confidential and non-confidential versions of the documents submitted, in the form prescribed by Regulation 35 of the General Regulations.
UK (England and Wales)
Publicity
The OFT publishes the following two main announcements (on its website and through the electronic Regulatory News Service) during Phase 1:
- The start of its examination.
- The end of its examination, announcing its reasoned decision as to whether to refer the merger.
If a merger is referred, the CC publishes a detailed report of its findings at the end of its investigation:
- On its website.
- In printed form.
The CC also publishes various interim reports and documents during the investigation, available on its website.
Procedural stage
Information is published by the OFT and the CC at the start, during and at the end of Phases 1 and 2 (see above,Publicity).
Automatic confidentiality
Generally, all information relating to a business or an individual that the OFT or CC obtains in connection with their investigations remains confidential. However, they can disclose information in any of the following circumstances:
- If they obtain consent from the party to whom the information relates (or the disclosing party).
- To comply with EU law.
- In connection with the investigation of a criminal offence (provided the disclosure is proportionate).
- If necessary to facilitate their statutory functions.
Confidentiality on request
A party can specify that information is confidential. The authorities can not disclose this information if its disclosure either:
- Would be contrary to the public interest.
- May significantly harm an undertaking's legitimate business interests or an individual's interest.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Publicity
HSR notifications (and subsequent information submitted) must remain confidential under the HSR Act unless the parties request and are granted early termination. Early termination notices are published with the parties' names in the Federal Registrar and online at www.ftc.gov/bc/earlyterm/index.html. However, the existence of an investigation into a transaction can become clear to third parties interviewed by the reviewing agency (see Question 4).
Procedural stage
All information provided by the parties pursuant to the HSR Act is confidential (see above, Publicity). Additionally, parties can take steps to avoid disclosure of confidential information during litigation (see below, Confidentiality on request).
Automatic confidentiality
All information provided by the parties pursuant to the HSR Act is automatically kept confidential (see above, Publicity). Information obtained through compulsory process must also be kept confidential.
Confidentiality on request
The parties can seek a protective order to prevent disclosure of confidential information during litigation and, after the investigation is closed, can request the return or destruction of materials provided to the agencies.
Rights of third parties
6. What rights (if any) do third parties have to make representations, access documents or be heard during the course of an investigation?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Representations
Just after notification, the Commission publishes a notice on the Directorate General for Competition (DG Comp) website (see box, The regulatory authority) and in the Official Journal, allowing ten days for comments. In addition, the Commission generally invites certain classes of third parties (that is, customers, competitors and suppliers) to answer a questionnaire, in order to be able to assess all aspects of the transaction.
Document access
If the Commission decides to launch a Phase 2 investigation, it will issue a statement of objections to the parties involved. The parties have access to the Commission's file for the purpose of preparing their comments.
In the interests of the investigation, the Commission may also, when appropriate, provide third parties that have shown a sufficient interest in the procedure with a summary of the statement of objections, to allow them to make their views known on the Commission's preliminary assessment.
Be heard
The Commission can allow third parties to participate in the oral hearing (see Question 4, Phase 2). It can also invite third parties to bilateral meetings or triangular meetings with the notifying parties, if it believes this is necessary for the purposes of the investigation.
India
Law stated as at 01-Dec-2011
Representations
There are no provisions for third parties to make any representations to the Commission in respect of a proposed combination before it forms its prima facie opinion in Phase I. At the commencement of a Phase II investigation, the Commission requires the parties to publish details of the combination and invites written objections from any person or member of the public who has been affected, or who is likely to be affected, by a combination. Objections must be made within 15 working days from the date on which the details of the combination are published (section 29(3), Competition Act).
Document access
Generally, only parties to a proceeding before the Commission can apply to inspect and obtain copies of the documents or records submitted during proceedings. Access will be granted on payment of specified fees and subject to confidentiality (Regulation 37, General Regulations).
However, the Commission can allow third parties, on written application, to present their opinion and take part in the proceedings if both of the following are satisfied (Regulation 25(1), General Regulations):
- The third party has substantial interest in the outcome of proceedings.
- It is in the public interest to do so.
It is currently unclear if third parties, who make successful applications to the Commission, would be considered to be party to the proceedings and therefore be allowed to access the documents.
To date, the Commission's practice has been not to grant access to the file during the Phase I review period.
Be heard
While the Commission retains the discretion to provide an opportunity to be heard to the parties to the combination, no equivalent right or discretion exists for third parties, in respect of a combination (Regulation 24, Combination Regulations). Third parties can apply to the Commission to present their opinion and take part in proceedings (see above, Document access).
UK (England and Wales)
Representations
The OFT routinely consults third parties during its investigation through a published invitation to comment. If a merger raises substantive competition issues, the OFT usually contacts those businesses that the merging parties identified in the notification as their main competitors, customers or suppliers. In own-initiative investigations, the OFT must consult any person on whom the decision is likely to have a substantial impact.
If appropriate, the OFT also consults other regulators and relevant government departments.
During a CC investigation, third parties can make written submissions on the substance and on key interim documents.
Document access
Third parties do not have access to the OFT's files or to submissions and data submitted by the merging parties. However, the OFT can decide to make non-confidential data available for comments.
During a CC investigation, the CC will typically publish on its website key documents including the parties' submissions, on which third parties may then comment, subject to excluding from disclosure certain confidential information where publication would (in broad terms) prejudice the interests of a business or an individual or the public interest.
Be heard
The OFT is not specifically required to hear third-party oral representations and will seldom do so (only where this would be necessitated by the general public law duty to give affected parties a fair hearing).
During a CC investigation, third parties may be invited to attend oral hearings if their views are particularly important to the merger concerned.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Representations
Although there is no formal procedure for third parties to participate in merger investigations, the DOJ and FTC routinely contact third parties to conduct voluntary interviews and obtain information about the market and potential competitive effects of the transaction. The agencies can also use compulsory process to obtain oral testimony, documents and other information from third parties.
Third parties can request a meeting with the DOJ or FTC to express concerns and submit information to illustrate potential anti-competitive effects. In addition, third parties can comment on consent orders during the public comment period.
Document access
The DOJ and FTC usually cannot share information or documents related to an investigation with third parties.
Be heard
Third parties have no right to be heard during the course of a government investigation but can independently challenge a transaction in court if they will suffer anti-competitive harm from the transaction.
Substantive test
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
The substantive test both for opening a Phase 2 investigation and for the Commission's decision is whether a concentration would significantly impede effective competition in the common market or in a substantial part of it, in particular as a result of the creation or strengthening of a dominant position.
This may be found in particular where the transaction creates or strengthens either:
- Single-firm dominance/market power.
- An oligopolistic situation (that is, co-ordinated or unilateral effects arising through a small number of competitors being reduced still further).
India
Law stated as at 01-Dec-2011
The substantive test for the assessment of combinations is whether they cause, or are likely to cause, an appreciable adverse effect on competition within the relevant market in India.
The Competition Act provides a list of factors for consideration by the Commission in determining whether a combination causes, or is likely to cause, appreciable adverse effects within the relevant markets, namely the (section 20(4), Competition Act):
- Actual and potential level of competition from imports in the market.
- Extent of barriers to market entry.
- Level of combination in the market.
- Degree of countervailing power in the market.
- Likelihood that the combination will result in a significant or sustained increase in prices or profit margins for the parties.
- Extent of effective competition likely in the market.
- Extent to which substitutes are, or are likely to be, available.
- Market share in the relevant market of the persons or enterprises in a combination, individually or as a combination.
- Likelihood that the combination will result in the removal of a vigorous and effective competitor.
- Nature and extent of vertical integration in the relevant market.
- Possibility of the business failing.
- Nature and extent of innovation.
- Contribution to economic development.
- Whether any benefits outweigh the adverse impact of the combination.
UK (England and Wales)
The substantive test both for making a reference to the CC and for the CC's decision is whether a merger is likely to lead to a substantial lessening of competition in the relevant market(s).
This can be found where the transaction creates or strengthens either:
- Single-firm dominance/market power.
- An oligopolistic situation (that is, co-ordinated or unilateral effects arising through a small number of competitors being reduced still further).
A merger gives rise to a substantial lessening of competition when it has a significant effect on rivalry over time and, therefore, on the competitive pressure on firms to improve their offer to customers or become more efficient or innovative (OFT and CC joint merger assessment guidelines, published September 2010).
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
A transaction is unlawful if it may result in a substantial lessening of competition or tend to create a monopoly (section 7, Clayton Act).
The DOJ and FTC have jointly issued Horizontal Merger Guidelines (Guidelines), available atwww.ftc.gov/os/2010/08/100819hmg.pdf, which outline the framework and analytical techniques the agencies use in reviewing proposed transactions. The Guidelines are designed to detect mergers that may create or enhance the merged entity's market power to (§ 1, Guidelines ):
- Increase prices.
- Reduce output.
- Diminish innovation.
- Engage in exclusionary conduct toward competitors.
Market definition and market concentration
The agencies typically define the relevant anti-trust market(s) to determine the area(s) in which anti-competitive harm can occur and to calculate market shares and market concentration levels in those areas. The agencies can rely on evidence of anti-competitive effects to define the market(s) (§ 4, Guidelines).
Market definition is based on the customers' willingness and ability to substitute other products for either of the merging entities' product(s). The relevant market includes the:
- Relevant product market. This includes a product of one merging firm that competes with a product of the other merging firm and the substitutes for that product.
- Relevant geographic market. This is, generally, the geographic area where suppliers make sales, including all competing suppliers with facilities in that region, regardless of their customers' location. However, when suppliers can price discriminate based on their customers' location, such as when suppliers deliver the products to customers, the geographic market will be where customers are located.
Adverse competitive effects
Generally, the reviewing agency will assess whether anti-competitive effects are likely to result in the relevant market(s) from (§ 2, Guidelines):
- Unilateral effects. This is the merged firm's ability to unilaterally engage in anti-competitive conduct as a result of the transaction, including increasing prices, reducing output, or diminishing innovation (§ 6, Guidelines).
- Co-ordinated effects. This is the increased likelihood of co-ordination among remaining competitors to engage in anti-competitive conduct, such as explicit or implicit agreements to increase prices (§ 7, Guidelines).
To determine the likelihood of these anti-competitive effects, the agencies consider:
- Actual effects of a completed merger.
- Relevant events in the industry, such as other mergers.
- The extent to which the merging firms are competitors.
- Whether the merger removes a maverick firm (one that plays a disruptive role in the market) from the market.
- The existence of powerful buyers that can constrain otherwise potential anti-competitive effects.
Entry analysis
The enforcement agencies will consider whether new entry into the relevant market or expansion by existing competitors is timely, likely and sufficient to deter or counteract the likely anti-competitive effects from the merger. Entry analysis includes the history of actual entry into (or exit from) the relevant market and the effort and expense required to enter the market (§ 9, Guidelines).
Efficiencies
The enforcement agencies will consider potential merger-specific efficiencies that will benefit customers and are unlikely to be obtained without the merger, such as reduced costs and the introduction of new products. However, efficiencies must be substantiated by the merging firms and verifiable by reasonable means (§ 10, Guidelines). An efficiencies defence alone will almost never justify an otherwise anti-competitive transaction.
Failing firm defence
The agencies will also consider whether the acquired entity is otherwise likely to fail, and its assets likely to exit the market, making the merger no more anti-competitive than if the acquired firm had been permitted to fail (§ 11, Guidelines). However, the failing firm defence very rarely succeeds.
Remedies, penalties and appeal
8. What remedies can be imposed as conditions of clearance to address competition concerns? At what stage of the procedure can they be offered and accepted?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
The Commission can accept commitments at the Phase 1 stage instead of opening a Phase 2 investigation (see Question 4).
At Phase 2, the Commission can accept commitments as a condition of clearing a transaction. These are only negotiated and implemented once the Commission finds that the concentration raises serious doubts about its compatibility with the common market.
Undertakings are either:
- Structural (for example, divesting part of the business where overlaps cause competition concerns).
- Behavioural (that is, formal commitments in relation to future conduct). These are less common.
India
Law stated as at 01-Dec-2011
The Commission and/or the parties can propose modifications to the combination that eliminate the appreciable adverse effect on competition, during both Phase I and Phase II of the combination review process (section 31, Competition Actand Regulation 19, Combination Regulations).
There is no precedent or guidance regarding the Commission's preference for structural or behavioural remedies. The parties to the combination must carry out the modification in the time specified by the Commission and file a compliance report within seven days of completion (Regulation 26, Combination Regulations).
In addition, if the Commission is of the opinion that a modification requires supervision, it can appoint independent agencies (such as accounting firms, management consultancies, law firms, reputed independent practitioners, and so on) to oversee the modification on the terms and conditions specified by the Commission (Regulation 27, Combination Regulations).
UK (England and Wales)
The OFT can accept undertakings instead of making a reference at the Phase 1 stage (undertakings instead of reference) (see Question 4). At Phase 2, the CC can accept undertakings as a condition of clearing a transaction. These are negotiated and implemented only when the CC has reached an adverse finding that the merger results, or may be expected to result, in a substantial lessening of competition.
Undertakings can be:
- Structural (for example, divesting the part of the business where overlaps cause competition concerns).
- Behavioural (that is, formal commitments in relation to future conduct). These are less common.
The OFT and third parties that have suffered damage as a result of a breach can enforce undertakings. The CC can also make an enforcement order where it considers that an undertaking it accepted has not been, is not being, or will not be, fulfilled.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
The parties can negotiate a consent order with the reviewing agency to resolve anti-competitive concerns at any time during the investigation, including after the regulator has initiated litigation to block the transaction. Consent orders are subject to a public comment period and either judicial scrutiny (DOJ) or internal agency review (FTC).
Remedies which can be imposed as conditions of clearance include:
- Structural. The most common structural remedy is the divestiture of assets of one of the overlapping businesses to create a viable new competitor in the relevant market. Divestitures can be coupled with behavioural remedies to further minimise harm to competition, including:
- providing assistance to the purchaser of divested assets;
- licensing assets;
- entering or amending certain business agreements; and
- implementing firewalls to prevent sharing of sensitive information between the merging parties.
- Behavioural. In some cases, particularly vertical transactions, behavioural remedies alone can suffice, but the agencies are less confident in the ability of behavioural remedies to maintain competition in the market.
Alternatively, the parties can propose and implement a structural remedy which, if the reviewing agency accepts it, allows the transaction to proceed without a formal consent order. However, this "fix-it-first" remedy is not favoured by the agencies and is rarely used.
In June 2011, the DOJ issued revisions to the Antitrust Division Policy Guide to Merger Remedies, available atwww.justice.gov/atr/public/guidelines/272350.pdf. The revisions do not alter the key principles or types of remedies applied by DOJ staff but are meant to reflect the DOJ's more recent approach to merger remedies, including greater use of conduct remedies to address anti-competitive concerns.
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Failure to notify correctly
When parties intentionally or negligently fail to notify a transaction, the Commission can:
- Impose fines of up to 10% of the combined worldwide turnover of the concerned undertakings.
- Take interim measures to restore or maintain effective competition.
Where a notifying party intentionally or negligently provides incorrect or misleading information to the Commission, the Commission can impose fines of up to 1% of the undertaking's worldwide turnover. For example:
- The Commission fined Deutsche BP EUR35,000 for failure to include information in the appropriate form concerning its position on certain vertically affected markets, and for providing misleading information on those markets (BP/Erdölchemie, Case COMP/M.2624 2002).
- In the Tetra Laval/Sidel case, the Commission fined Tetra Laval EUR45,000 for supplying incorrect and misleading information (Tetra Laval/Sidel, Case COMP/M.3255, 2004).
Implementation before approval or after prohibition
A transaction cannot be completed before clearance has been obtained (unless authorised by the Commission). If it is implemented before clearance, the Commission can impose sanctions (see above, Failure to notify correctly).
On breach of a prohibition decision, the Commission can:
- Impose fines of up to 10% of the combined worldwide turnover of the undertakings concerned.
- Take interim measures to restore or maintain effective competition.
- Order the undertakings concerned to dissolve the concentration.
Any third party that has suffered loss as a result of implementation can bring an action for damages.
Failure to observe
If a party fails to observe conditions and obligations attached to a clearance decision, the Commission can:
- Impose fines of up to 10% of the worldwide turnover of the undertaking.
- Order the undertakings concerned to dissolve the concentration.
India
Law stated as at 01-Dec-2011
Failure to notify correctly
Failure to notify a combination is punishable by a penalty of up to 1% of the total turnover or assets of the combination (whichever is higher) (section 43A, Competition Act). The Commission can also initiate separate proceedings under section 43A of the Competition Act, where parties notify a combination after the passage of the statutory 30-day trigger period (see Question 3). In addition, the Commission can investigate an un-notified combination on its own initiative or on information received by it, up to one year from the completion date of the combination (proviso to section 20(1), Competition Act).
A penalty of between INR5 million and INR10 million can be levied for making a false statement or omitting material information in the notification (section 44, Competition Act).
Implementation before approval or after prohibition
The Competition Act does not provide any specific penalty for implementation of the combination before approval, but it provides that the combination does not take effect until the expiry of 210 days from the date of the notice or the Commission issues an order, whichever is earlier (section 6 (2A), Competition Act) (see Question 6, Outcome). While this has not happened in practice, implementation before approval could adversely affect the outcome of the Commission's assessment. In addition, if the combination is later found to cause or be likely to cause an appreciable adverse effect on competition in India, it will be void. As a result, all acts in furtherance of the void combination will also be void.
For implementation after prohibition, see below, Failure to observe.
Failure to observe
Civil penalties. A penalty of INR100,000 per day can be levied, up to a maximum of INR100 million, for contravention of Commission orders (section 42(2), Competition Act).
Criminal penalties. Contravention of Commission orders can also lead to imprisonment for a term of up to three years, or with a fine of up to INR250 million, or both, as the Chief Metropolitan Magistrate of Delhi deems fit (section 42(3), Competition Act).
Personal liability. Persons in charge of, or responsible for, a company's business at the time of the breach can also be liable, unless they can demonstrate that either the breach was committed without their knowledge or they had exercised all due diligence to prevent the breach.
In addition, if it is proved that the breach was committed with the consent or involvement (or is attributable to neglect on the part) of any director, manager, secretary or other officer of the company, they will also be liable (see Question 24).
UK (England and Wales)
Failure to notify correctly
Notification is voluntary so there are no penalties.
Implementation before approval or after prohibition
A transaction can be completed before clearance has been obtained unless it has been referred to the CC. The OFT and the CC can start civil proceedings to obtain appropriate remedies (particularly injunctions) on a breach of:
- A hold-separate order.
- Sections 77 or 78 of the Enterprise Act (see Question 3).
The CC can also start civil proceedings on a breach of a prohibition decision.
Any third party that has suffered loss as a result of implementation can bring an action for damages.
Failure to observe
The following penalties apply:
- Failure to observe undertakings made to, or orders given by, the OFT and the CC. Either body can start civil proceedings for appropriate remedies (such as injunctions).
- Failure to comply with information requests. This causes the timetable to pause until the required information is produced.
- Providing false or misleading information to the OFT or the CC. This is an offence, punishable by either or both:
- a fine of up to the statutory maximum;
- up to two years' imprisonment.
Where the offence of providing false or misleading information is proved to have been committed by a company with the consent, or attributable to the negligence of a director, manager or company secretary (or of an individual who purports to act in that capacity), that individual and the company are both liable (section 125, Enterprise Act).
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Failure to notify correctly
Failure to correctly notify the anti-trust authorities prevents the statutory waiting period from beginning to run.
Implementation before approval or after prohibition
Violations under the HSR Act can result in a civil fine of up to US$16,000 for each day of the violation, which can be imposed on reporting entities and individual officers and directors. In addition, if a completed transaction violates the HSR Act, the agencies can require a divestiture of voting securities or assets by the merged firm or rescission of the transaction. The federal government may enforce these penalties in a civil action.
Failure to observe
10. Is there a right of appeal against any decision? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties or only the parties to the decision?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Rights of appeal and procedure
The parties involved and interested third parties can appeal a Commission decision to:
- Open or not open a Phase 2 investigation.
- Clear or block a concentration.
Appeals are made to the General Court within two months (plus ten calendar days to take account of distance) of the date on which the decision was notified to the applicant or published, whichever is earlier.
The General Court's judgment can be appealed (on points of law only) to the EU Court of Justice.
Third party rights of appeal
The third party appeal procedure follows the same procedure applicable to merging parties (see above, Rights of appeal and procedure).
To be granted standing to appeal, interested third parties (including competitors) must show that the transaction is likely to bring about an immediate change in their situation in the market or markets concerned (Schlüsselverlag JS Moser GmbH and others v Commission (Case T-170/02) para 27). In most cases, competitors who actively took part in the notification process are granted standing before the EU courts.
Under certain conditions, the EU courts can grant standing to potential competitors, employees and customers.
Interested third parties can also intervene during a procedure initiated by notifying parties or the Commission itself.
India
Law stated as at 01-Dec-2011
Rights of appeal and procedure
In Competition Commission of India v Steel Authority of India Limited (Civil Appeal No. 7779 of 2010), the Supreme Court of India (Supreme Court) decided that both:
- An appeal lies to the CompAT only against Commission directions, decisions or orders which have been specifically stated under section 53A(1)(a) of the Competition Act.
- Any other orders not mentioned in section 53A(1)(a) of the Competition Act cannot be treated as being appealable by implication.
Any order of the Commission passed under section 31 of the Competition Act, in respect of a combination, can be appealed before the CompAT within 60 days by any of the following (section 53A(1)(a) and Section 53B(1), Competition Act):
- The government (both central and state-level).
- A local authority.
- An enterprise or person aggrieved by the Commission's order.
Further, any person aggrieved by a decision of the CompAT can file an appeal to the Supreme Court of India within 60 days of the date of communication of the decision (section 53T, Competition Act).
An appeal from any Commission decision, order or direction must be filed within 60 days of receipt of the decision, order or direction. The CompAT can allow delays in filing the appeal where justified.
Third party rights of appeal
Prima facie, any aggrieved person can file an appeal against any Commission direction, decision or order before the CompAT (section 53B, Competition Act). This includes a third party who is not a party to the combination.
However, under the Combination Regulations, the right of appeal has been restricted to an aggrieved party to the proceedings on matters relating to the combination. (Regulation 29, Combination Regulations). Therefore, while there is no Commission clarification on this point, it seems that third parties who are not a party to the proceedings have no right of appeal. It is anticipated that this provision will be challenged in the future.
UK (England and Wales)
Rights of appeal and procedure
The merging parties and interested third parties can appeal against:
- The OFT's decision about whether to refer.
- The CC's decision to clear or block a transaction.
Appeals are made to the CAT (Competition Appeal Tribunal) within four weeks of the date on which the reasoned decision was notified to the applicant or published, whichever is the earlier. In determining an appeal of a merger decision by the OFT or CC, the CAT must apply the same principles a court would apply to an application for judicial review.
The CAT's decision can be appealed (on points of law only) to the Court of Appeal.
Third party rights of appeal
Third parties who are aggrieved by the relevant decision of the OFT or CC have rights of appeal as described above (see above, Rights of appeal and procedure). Aggrieved parties are likely to include:
- Complainants in the OFT or CC process.
- Direct competitors of the merging parties.
- Representative groups of either producers or consumers in the industry.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Rights of appeal and procedure
The FTC, DOJ and state AGs must initiate litigation in court to prevent a proposed transaction from closing until after a final determination on the merits. The merging parties can appeal these federal district court decisions to the federal court of appeals. The FTC can also bring administrative proceedings before an ALJ, which can be appealed to the FTC's full Commission and then to the US Court of Appeals.
Third party rights of appeal
Third parties cannot appeal a decision in an action brought by an enforcement authority but can bring a private action to challenge the transaction (see Question 6).
Automatic clearance of restrictive provisions
11. If a merger is cleared, are any restrictive provisions in the agreements automatically cleared? If they are not automatically cleared, how are they regulated?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Notified concentrations are excluded from the prohibition on anti-competitive agreements (see Question 13).
Ancillary restrictions also benefit from this exclusion. They are provisions that are subordinate to the merger's main purpose but are directly related and necessary to the implementation of the concentration. An example is restrictive covenants by the seller not to compete with the business transferred within a certain duration and geographical limits. They are assessed as part of the merger review.
The Notice on restrictions directly related and necessary to concentrations (OJ 2005 C56/24) applies. It is available athttp://ec.europa.eu/competition/mergers/legislation/notices_on_substance.html#restraints.
India
Law stated as at 01-Dec-2011
Neither the Competition Act nor the Combination Regulations specifically provide that any restrictions in the agreements relating to the combination will be automatically cleared on approval of a combination by the Commission. However, it is likely that the Commission will consider the restrictive provisions during their substantive assessments of the combination.
In general, any ancillary restraint or non-compete agreement for engaging in any business during the continuation of the contract are usually valid under Indian law. Therefore, it is expected that the Commission will take a similar view in this regard.
Any other restrictive provisions may be assessed separately under sections 3 and 4 of the Competition Act (see Questions 13 and 27).
UK (England and Wales)
Mergers are excluded from the prohibition on anti-competitive agreements (see Question 13). However, the OFT may withdraw this exclusion in certain limited circumstances, such as where a transaction is a relevant merger situation but has not resulted in acquiring a controlling interest (see Question 2, Triggering events).
Ancillary restrictions also benefit from this exclusion. They are provisions that are subordinate to the merger's main purpose but are directly related and necessary for its implementation (for example, restrictive covenants by the seller not to compete with the business transferred within certain duration and geographical limits). Usually, they are assessed as part of the investigation. If they are unacceptable, they may have to be dropped or amended as a condition of clearance.
Any restrictions that go beyond what is ancillary may be regulated as restrictive agreements.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
The anti-trust laws authorise the relevant authorities to investigate and challenge potentially unlawful transactions. However, the agencies' failure to challenge a transaction or restrictive covenant in the merger agreement does not make such conduct lawful under the anti-trust laws. In addition, failure to object to a restrictive covenant does not prevent the DOJ, FTC, state AGs, or private parties from later challenging the provision in court.
Regulation of specific industries
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
For credit institutions and other financial institutions, as well as for insurance companies, in place of the above turnover figures (see Question 2), other elements are taken into account to determine if the concentration has a Community dimension (a list of the relevant income items are listed in Article 5(3) of the Merger Regulation).
Further, in relation to certain industries, member states can take appropriate measures to protect legitimate interests, such as public security, plurality of the media and prudential rules. Any such public interest must be communicated to the Commission by the member state concerned and will be assessed by the Commission.
India
Law stated as at 01-Dec-2011
No industry is specifically regulated either by, or outside of, the merger control regime under the Competition Act. However, there is currently a bill before parliament, in which the Reserve Bank of India (the banking sector regulator) has sought specific exemption for bank mergers from the merger control regime.
In addition, the Indian Planning Commission recently suggested that all combinations in the pharmaceutical industry should be subject to review by the Commission, irrespective of whether they meet the financial thresholds (see Question 2, Thresholds), in order to prevent all of the following:
- The creation of monopolies.
- The shift of Indian pharmaceutical companies' core business away from the needs of the Indian citizens.
- Rising drug prices. (Although this would be in the public interest, the government has not yet implemented this suggestion, which is likely to require an amendment to the existing law.)
UK (England and Wales)
Mergers between water companies in England and Wales are automatically referred to the CC unless they fall below certain de minimis turnover thresholds. The CC assesses water mergers under a special test, weighing the loss of comparative competition against the transaction's possible benefits.
Merger situations that raise public interest issues in media ownership, newspaper ownership or national security can be assessed on those public interest issues. They can also be assessed on competition issues if the Secretary of State for Business, Innovation and Skills intervenes (see box, The regulatory authorities).
A further, more restricted, category of mergers is special public interest cases (applicable in newspaper and broadcasting sectors, to mergers raising issues of national security, and to the maintenance of the stability of the UK financial system).
In these cases, the Secretary of State can order an investigation even if the normal merger jurisdictional thresholds are not met. Special public interest cases are assessed on public interest grounds only.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Certain industries are regulated by federal and state agencies that share enforcement powers with the DOJ and FTC, including:
- Railroads.
- Energy and electricity providers.
- Telecommunications companies.
- Banks and other financial institutions.
- Insurance companies.
- National security.
These regulators can impose additional requirements on merging entities, including prior approvals and notifications.
Restrictive agreements and practices
Scope of rules
13. Are restrictive agreements and practices regulated? If so, what are the substantive provisions and regulatory authority?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Restrictive agreements and practices
Restrictive agreements and practices are regulated by Article 101 of the Treaty on the Functioning of the European Union (TFEU) (Article 101).
Article 101 prohibits agreements, concerted practices and decisions of an association of undertakings that restrict competition, with the requirement that the agreement has the potential to affect trade between EU member states.
The prohibition applies both to:
- Horizontal agreements (agreements between competitors).
- Vertical agreements (agreements between non-competitors such as a supplier-distributor relationship).
Potentially illegal horizontal agreements include, for example, agreements that:
- Fix prices.
- Allocate geographic markets or customers.
- Unfairly discriminate.
- Provide for competitors to exchange commercially sensitive information.
- Involve exclusivity.
- Distort the competitive process in tenders.
Potentially illegal vertical agreements include, for example, agreements that:
- Restrict the buyer's ability to determine its sale prices (resale price maintenance or RPM).
- Restrict the territory into which, or the customers to whom, the buyer can sell, subject to certain exceptions (in particular, a restriction on active sales to certain territories or customers is permitted, whereas restrictions on passive sales are generally not permitted).
- Impose a direct or indirect obligation on the buyer to buy the large majority (more than 80%) of its requirements from the supplier, when it exceeds five years.
The Commission is primarily responsible for enforcing Article 101. NCAs and national courts also have the duty to apply Article 101.
The Commission is particularly well placed if agreements or practices have effects on competition in more than three member states. Similarly, when a case raises a new competition issue, the Commission is likely to investigate the case to implement its competition policy effectively. The Commission may refuse to investigate a case because it is already investigated by an NCA. On the other hand, when the Commission starts an investigation, it relieves the NCAs of their power to act.
The Commission and NCAs can co-operate to exchange information and evidence when needed.
The Commission has published Best Practices in proceedings concerning Articles 101 and 102 TFEU (OJ 2011 C308/8), which sets out how it conducts investigations into potential breaches of competition law (available athttp://ec.europa.eu/competition/antitrust/legislation/legislation.html).
For information on sector inquiries, see Question 27.
India
Law stated as at 01-Dec-2011
The provisions of the Competition Act relating to restrictive agreements came into force on 20 May 2009.
Regulation of restrictive agreements
An agreement entered into by an enterprise or person is void if both of the following apply (sections 3(1) and 3(2), Competition Act):
- It is in respect of the production, supply, distribution, storage, acquisition or control of goods, or the provision of services.
- It causes, or is likely to cause, an appreciable adverse effect on competition in India.
Presumption for horizontal agreements
Agreements between enterprises or persons engaged in an identical or similar trade in goods or provision of services, including cartels and decisions of associations of enterprises or persons, are presumed to have an appreciable adverse effect on competition when they (section 3(3), Competition Act):
- Determine purchase or sale prices.
- Limit or control production, supply, markets, technical development, investment or provision of services.
- Share the market, source of production or provision of services, by allocating geographical market areas, types of goods or services, customers, or any similar arrangement.
- Result in bid-rigging or collusive bidding.
However, if a horizontal agreement relating to the above behaviour is entered into by way of an efficiency enhancing joint venture, the presumption of appreciable adverse effect on competition does not apply and a rule of reason approach is applicable (see Question 37).
Vertical agreements
Vertical agreements (for example, tie-in arrangements, exclusive supply agreements, exclusive distribution agreements, agreements involving refusals to deal and resale price maintenance agreements) are prohibited only if they are found to cause, or be likely to cause, an appreciable adverse effect on competition in India (section 3(4), Competition Act).
Regulatory authority
If the Commission is of the prima facie view that an agreement or practice causes an appreciable adverse effect on competition, it can direct the DG to conduct an investigation either on its own initiative or on receiving a:
- Complaint from any person, consumer or consumer association or trade association.
- Reference from the central or state government.
- Reference from a statutory authority.
The DG must submit a report on its findings to the Commission within the time specified by the Commission. The Commission proceeds with its inquiry on the basis of those findings (see Question 18).
UK (England and Wales)
Restrictive agreements and practices are regulated by the Chapter I prohibition in the Competition Act 1998 (Chapter I), the UK version of Article 101 of the Treaty on the Functioning of the European Union (TFEU) (without the requirement that the agreement may affect trade between EU member states).
Chapter I prohibits agreements, concerted practices and trade association decisions that restrict competition in UK markets. This includes agreements that:
- Fix prices.
- Allocate markets or customers.
- Unfairly discriminate.
- Provide for competitors to exchange commercial information.
- Involve exclusivity.
The OFT is responsible for enforcing Chapter I, in addition to Article 101, although the UK's sectoral regulators (for example, in rail, water, energy and electronic communications) have concurrent powers to investigate alleged breaches in their sector.
The OFT (or sectoral regulator) investigates alleged infringements on its own initiative or at the request of a third-party complainant. In March 2011 the OFT published guidance on its procedures in investigations. In addition, private litigants can go to court seeking damages and/or injunctive relief for breaches of Chapter I and Article 101.
It is a criminal offence, known as the cartel offence, for individuals to engage dishonestly in hard-core cartel activity, such as (Enterprise Act):
- Price-fixing.
- Market sharing.
- Bid-rigging.
- Quota sharing.
The OFT (together with the Serious Fraud Office) is responsible for criminal prosecutions of the cartel offence (seeQuestion 24).
Companies involved in cartel activity have also been investigated by the Serious Fraud Office for breach of the English common law criminal offence of conspiracy to defraud. However, following the decision of the House of Lords in Norris (Norris v Government of the United States of America and others [2008] UKHL 16, [2008] 2 WLR 673 and R v GG plc and others [2008] UKHL 17), a prosecution under common law is only now possible if a secret cartel has aggravating features (such as deception) that elevate the cartel into an unlawful conspiracy to defraud.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Unreasonable restraints of trade are prohibited (section 1, Sherman Act, 15 USC § 1). This can be enforced under civil or criminal law by the DOJ and under civil law by state AGs. However, criminal penalties are generally reserved for clearly unlawful conduct. In addition, restrictive practices are subject to civil investigation by the FTC under section 5 of the FTC Act (15 USC § 45) and civil or criminal investigation by state AGs under state anti-trust laws. In addition, private parties who suffer direct anti-competitive harm from violations under section 1 of the Sherman Act can bring private actions for triple the amount of actual damages (treble damages) or injunctive relief (section 4B, Clayton Act).
Unlawful restraints of trade generally raise prices, diminish the amount or quality of output or affect market power. To determine whether conduct unreasonably restrains trade, one of two standards is applied:
- Per se rule. Certain categories of naked restraints among horizontal competitors are deemed per se illegal because their effects almost always harm competition. These include horizontal price-fixing, bid-rigging and market allocation.
- Rule of reason. The parties' conduct is analysed for its actual competitive effects and will be found unreasonable if its anti-competitive effects outweigh the pro-competitive benefits. This approach considers the relevant market conditions and the restraint's history, nature, and effect in a relevant market.
14. Do the regulations only apply to formal agreements or can they apply to informal practices? Are there broad categories of agreements that might violate the law?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Article 101 applies equally to formal and informal agreements, whether legally binding or not, and whether written, oral or tacit.
India
Law stated as at 01-Dec-2011
The prohibition applies to both formal and informal agreements. The term "agreement" is defined widely to include any arrangement, understanding or action in concert, regardless of whether it is formal or in writing, or is intended to be enforceable by legal proceedings (section 2(b), Competition Act).
UK (England and Wales)
Chapter I, like Article 101, applies equally to formal and informal agreements, whether legally binding or not, and whether written, oral or tacit.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Violations under section 1 of the Sherman Act occur only where the restrictive practice results from an agreement between two or more entities. The agreement can be:
- Formal or informal, including tacit agreements between parties.
- Proven by direct or circumstantial evidence that tends to exclude the possibility that the entities acted independently.
Mere parallel conduct by multiple firms, even conscious parallelism after competing firms recognise it is in their best interests to avoid price competition, is not an agreement punishable under section 1 of the Sherman Act.
Agreements to engage in per se illegal restraints of trade will violate section 1 of the Sherman Act (see Question 13).
Exemptions and exclusions
15. Are there any exemptions? If so, what are the criteria for individual exemption and any applicable block exemptions?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
An agreement that is not excluded (see Question 16) can benefit from an exemption if either:
- It meets the terms of an EU block exemption, for example:
- Regulation (EU) 330/2010 on the application of Article 101(3) of the TFEU to categories of vertical agreements and concerted practices (Vertical Restraints Block Exemption). See also the Commission's Guidelines on Vertical Restraints (available at: http://ec.europa.eu/competition/antitrust/legislation/vertical.html);
- Regulation (EC) 772/2004 on the application of Article 101(3) of the TFEU (formerly Article 81(3) of the EC Treaty) to categories of technology transfer agreements (Technology Transfer Block Exemption Regulation);
- Regulation (EU) 1217/2010 on the application of Article 101(3) of the TFEU to certain categories of research and development agreements (Research and Development Block Exemption); and
- Regulation (EU) 1218/2010 on the application of Article 101(3) TFEU to certain categories of specialisation agreements.
- It meets the conditions of Article 101(3), which are the following:
- it contributes to technical or economic progress, or improves production or distribution;
- consumers enjoy a fair share of the resulting benefit;
- the restrictive elements are indispensable to the aim pursued; and
- it does not give the parties the opportunity to substantially eliminate competition.
India
Law stated as at 01-Dec-2011
The central government can exempt from the application of the Competition Act (section 54, Competition Act), in certain limited circumstances:
- Any class of enterprise, if it is in the public interest or in the interest of the security of India.
- Any practice or agreement arising out of, and in accordance with, any obligation assumed under a treaty, agreement or convention with other countries.
- Any enterprise that performs a sovereign function on behalf of the state or central government. In this case, the exemption is only in respect of activity relatable to the sovereign functions.
There are no block exemptions under the Competition Act.
UK (England and Wales)
An agreement that is not excluded (see Question 16) can benefit from an exemption if either:
- It meets the terms of an EU or a UK block exemption (for example, the EU block exemptions for vertical agreements or for technology transfer agreements or the UK block exemption for public transport ticketing arrangements).
- The OFT or a court has declared it exempt under Chapter I (or the European Commission, the OFT or a court has declared it exempt under Article 101(3)), which will occur only if all of the following criteria are met:
- it contributes to technical or economic progress, or improves production or distribution;
- consumers enjoy a fair share of the resulting benefit;
- the restrictive elements are indispensable to the aim pursued; and
- it does not give the parties the opportunity to substantially eliminate competition.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
There are express statutory exemptions for certain industries and activities, including:
- Insurance companies (where regulated by state laws).
- Organised labour activities.
- Agricultural co-operatives.
- Export trade companies.
- Professional sports leagues.
- Air carriers.
Judicial exemptions from enforcement of the anti-trust laws include:
- State action doctrine. This exempts action taken by state and local governments or private parties in accordance with state policy and subject to active state supervision.
- Noerr-Pennington doctrine. This affords anti-trust immunity to efforts to influence government action, including agreements to seek legislation or file a lawsuit.
In addition, courts have provided implied immunity to certain activities where enforcement of the anti-trust laws would be incompatible with an existing federal regulatory scheme, such as regulation by the Securities Exchange Commission (see Credit Suisse v Billing, 551 US 264 (2004)).
16. Are there any exclusions? Are there statutes of limitation associated with restrictive agreements and practices?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Exclusions
Certain agreements are automatically excluded from Article 101, including agreements that result in a concentration (seeQuestion 11). Agreements which are considered de minimis (that is, agreements which are deemed not to have an appreciable effect on competition) are not subject to Article 101. Generally, that is the case for:
- Horizontal agreements: when the parties combined market share does not exceed 10%.
- Vertical agreements: when each of the parties does not have a market share exceeding 15%.
However, if the agreement contains one of the hardcore restrictions listed at paragraph 11 of the Notice on agreements of minor importance (OJ 2001 C368/13), the de minimis exclusion does not apply.
Statutes of limitation
Infringements of Article 101 and Article 102 of the TFEU (Article 102) are subject to a five year limitation period. Time begins to run on the day on which the infringement ceases.
Any investigative action taken by the Commission or a NCA (for example, a request for information, an unannounced inspection of premises (dawn raid) or a statement of objections) interrupts the limitation period, which means that time starts running afresh.
The limitation period expires at the end of a period equal to twice the limitation period, that is, ten years from when the infringement ceases.
India
Law stated as at 01-Dec-2011
Exclusions
The Competition Act provides the following exclusions from the regulation of restrictive practices (see Question 13):
- The right of any person to prevent any infringement of, or to impose reasonable conditions necessary for the protection of, any of his intellectual property rights under the following Indian statutes:
- Copyright Act 1957;
- Patents Act 1970;
- Trade and Merchandise Marks Act 1958 or the Trade Marks Act 1999;
- Geographical Indications of Goods (Registration and Protection) Act 1999;
- Designs Act 2000; or
- Semi-conductor Integrated Circuits Layout-Design Act 2000.
- The export of goods from India to the extent to which the restrictive agreement relates exclusively to the production, supply, distribution or control of goods or provision of services for export.
Statutes of limitation
There are no specific periods given under the Competition Act and the Limitation Act 1963 applies. The limitation period provided for civil disputes is three years. (However, there has been no judicial determination on this in relation to the Competition Act.)
UK (England and Wales)
Exclusions
Certain agreements are automatically excluded from Chapter I, including agreements that either:
- Result in a merger.
- Are subject to competition scrutiny under the:
- Financial Services and Markets Act 2000;
- Broadcasting Act 1990; or
- Communications Act 2003.
Although previously excluded under the Competition Act 1998, since 6 April 2011 land agreements (that is, contracts and other commercial arrangements in the property sector) are now subject to scrutiny under Chapter I, regardless of whether the land agreements were entered into before or after that date.
Agreements with de minimis (that is, non-appreciable) effects are not subject to Chapter I. There is no legislative definition of this but the OFT takes into account the European Commission practice under Article 101.
Separately, agreements between undertakings with a combined turnover from their ordinary activities of below GB£20 million are not fined. The undertakings may still face an OFT investigation or a civil action by third parties. This exclusion does not apply to price-fixing agreements.
Statutes of limitation
By contrast with the five-year limitation period for European Commission Article 101 and 102 decisions, there is formally no limitation period for OFT action under the Competition Act. However, some English lawyers consider that the general statutory limitation periods (in the Limitation Act 1980) also apply to Competition Act actions by the OFT, although this proposition has not to date been tested.
There are, however, two different limitation periods for third parties bringing follow-on damages claims, depending on whether the action is brought in the High Court or before the CAT. Proceedings in the High Court are subject to the general rule on limitation that applies to tort claims, which requires that a claim is brought within six years from the date on which the cause of action accrued. For claims in the CAT, the period is two years from the later of:
- Issuance of the infringement decision.
- Expiry of the parties' right to bring an appeal.
- Final judgment in such appeal.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Exclusions
There are no exclusions for de minimis restrictive agreements. However, enforcement authorities and courts can choose not to investigate or punish restrictive conduct unlikely to have a substantial effect on commerce or competition, such as where the agreeing parties have an insignificant share of market power.
Statutes of limitation
A general five-year statute of limitations applies to criminal violations of the Sherman Act (15 USC § 3282(a)). The time period does not begin to run until the purpose(s) of the conspiracy have been achieved or abandoned.
Civil actions challenging restrictive practices, brought under the Clayton Act, are subject to a four-year statute of limitations (section 4B, Clayton Act). This time period begins to run when the cause of action accrues, generally when the claimant(s) suffers an anti-trust injury from the alleged violation. However, the time period may be suspended when:
- Certain government anti-trust proceedings are pending (section 5(i), Clayton Act).
- The defendant(s) has fraudulently concealed its violation.
Notification
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Notification
There is no mechanism for notification of potentially restrictive agreements/practices (Regulation (EC) 1/2003 on the implementation of the rules on competition laid down in Articles 101 and 102 of the TFEU (formerly Articles 81 and 82 of the EC Treaty) (Modernisation Regulation)). Undertakings must self-assess whether their agreements are subject to Article 101 and, if so, whether they qualify for an exemption or exclusion (see Questions 15 and 16).
Informal guidance/opinion
Undertakings must self-assess whether their agreement complies with Article 101 (see above, Notification). However, where cases give rise to genuine uncertainty because they present novel or unresolved questions, individual undertakings can seek informal guidance from the Commission (Recital 38, Modernisation Regulation).
The Notice on informal guidance relating to novel questions concerning Articles 101 and 102 of the TFEU (OJ 2004 C101/78) applies. It is available at: http://ec.europa.eu/competition/antitrust/legislation/guidance.html.
Responsibility for notification
Not applicable (see above, Notification).
Relevant authority
Not applicable (see above, Notification).
Form of notification
Not applicable (see above, Notification).
Filing fee
Not applicable (see above, Notification).
India
Law stated as at 01-Dec-2011
Notification
No notification of restrictive agreements is required or permissible under the Competition Act.
Informal guidance/opinion
There is no specific provision for informal guidance under the Competition Act.
UK (England and Wales)
Notification
There is no mechanism for notification. Undertakings must self-assess whether their agreements are subject to Chapter I or Article 101 and, if so, whether they qualify for an exemption or exclusion (see Questions 15 and 16).
Informal guidance/opinion
The OFT can, on an ad hoc basis, offer confidential, non-binding advice on the compatibility of an agreement with Chapter I or Article 101. In cases that raise new or unresolved questions requiring clarification in the interests of a wider audience, the OFT may also publish an opinion.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Notification
There is no notification requirement for restrictive agreements or practices, and a party cannot obtain clearance from the government that proposed conduct is lawful. However, parties can limit their exposure to enforcement and damages (being potentially liable only for actual, not treble, damages) by voluntarily notifying the agencies of:
- Joint ventures for research and development.
- Standards development organisations engaged in standards development activity.
Informal guidance/opinion
Under the DOJ's business review process and FTC's advisory opinion practice, parties can obtain a non-binding statement of the agency's enforcement intentions regarding proposed business conduct.
Responsibility for notification
Not applicable.
Relevant authority
The DOJ and FTC are the relevant authorities.
Form of notification
There is no official form for voluntary notification or informal guidance.
Filing fee
Not applicable.
Investigations
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Regulators
The Commission can investigate, on its own initiative, alleged infringements of Articles 101 and 102. NCAs and national courts may also apply Article 101 and 102 (see Question 13).
Third parties
Third parties (such as customers, competitors or suppliers) can prompt an investigation by lodging a formal or informal complaint with the Commission (they can also start civil proceedings in the courts).
India
Law stated as at 01-Dec-2011
Regulators
The Commission can start investigations on its own initiative (section 19(1), Competition Act).
Third parties
Any person, consumer, consumer association or trade association can make a complaint to the Commission. These third parties can initiate an investigation by both:
- Making a complaint to the Commission under the Competition Act.
- Paying the requisite fee of (General Regulations and Competition Commission of India (General) Amendment Regulations, 2009 (No. 5 of 2009)):
- INR5,000 for individuals, Hindu undivided families, non-governmental organisations, consumer associations, co-operative societies and trusts;
- INR20,000 in case of a firm or company having a turnover in the preceding year up to INR10 million; or
- INR50,000 in all other cases.
Governmental authorities
In addition, the central or state government or any statutory authority can make a reference to the Commission.
UK (England and Wales)
Regulators
The OFT (or sectoral regulator) can investigate, on its own initiative, alleged infringements of both the EU's Articles 101 and 102 and the UK's Chapter I and Chapter II.
Third parties
Third parties (such as customers or competitors) can prompt an investigation by:
- Lodging a complaint with the OFT or the relevant sectoral regulator.
- Starting civil proceedings in the courts.
In March 2011, the OFT announced that, where it receives a "well structured written complaint supported by evidence", it will inform the complainant concerned whether it will open a formal investigation within four months of receiving the complaint.
Since 2008, the OFT has been operating a policy (initially envisaged as temporary) of offering financial incentives of up to GB£100,000 in return for information to help it to identify and take action against illegal cartels.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Regulators
The DOJ, FTC and state AGs can start investigations on their own initiative.
Third parties
Third parties can challenge restrictive agreements by lodging a complaint with the enforcement agencies or filing a private action in court.
19. What rights (if any) does a complainant or other third party have to make representations, access documents or be heard during the course of an investigation?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Representations
Informal complainant. Any complainant or third party can lodge an informal complaint with the Commission. Correspondence to the Commission that does not comply with the requirements of a formal complaint (see below, Formal complainants) is considered by the Commission as general information that, where it is useful, may lead to an own-initiative investigation by the Commission.
This information can be provided on an anonymous basis (the Commission must respect an informant's request for anonymity). This special arrangement enables undertakings or citizens to provide market information to the Commission informally and to prompt the Commission to take action.
Formal complainants. A complainant who submits a written, reasoned formal complaint against an agreement (or a concerted practice) to the Commission must establish a legitimate interest, and use a dedicated complaint form (Form C).
The rejection of complaints can be based on:
- Insufficient grounds for acting (also known as lack of EU interest).
- Lack of competence.
- Lack of evidence to establish the existence of an infringement.
If the Commission, after careful examination of the case, comes to the preliminary conclusion that it should not pursue the complaint for any of these reasons, it will inform the complainant in a meeting or by telephone that it has come to the preliminary view that the complaint will be rejected.
Once informed, the complainant can withdraw the complaint. Otherwise, the Commission will inform the complainant by formal letter, giving the complainant an opportunity to comment in writing. The complainant can request access to the documents on which the Commission based its provisional assessment (however, the complainant cannot access business secrets and other confidential information belonging to other parties involved in the proceedings).
If these comments do not lead to a different assessment of the complaint, the Commission rejects the complaint by decision (this decision can be appealed to the EU courts).
If the Commission decides to pursue the complaint, it will conduct its investigation in accordance with the normal procedure (see Question 20).
Document access
If the Commission comes to the preliminary conclusion that it should not pursue the case, a formal complainant can request access to the documents on which the Commission based its conclusion.
If the Commission issues a statement of objections, the formal complainant is usually provided with a non-confidential version of the statement of objections (see above, Representations: Formal complainants).
Be heard
The Commission can, where appropriate, give formal complainants the opportunity to express their views at the oral hearing of the parties to which a statement of objections has been issued (see above, Representations: Formal complainants).
India
Law stated as at 01-Dec-2011
Representations
Complainant. The complainant who initiates a case has various rights to make representations, and can make oral submissions or file written arguments during the course of an inquiry within the time specified by the Commission (Regulation 29(1), General Regulations).
The Commission can also invite the complainant to participate in the preliminary conference called to decide whether aprima facie case exists for further investigation (Regulation 17(2), General Regulations). However, the Supreme Court held in Competition Commission of India v Steel Authority of India Limited that:
- The Commission does not have a statutory duty to issue a direction to the DG to start an investigation.
- No party can, as a matter of right, claim that they should be heard at the preliminary conference.
The Commission has discretion to direct the concerned party or parties to provide assistance or produce information.
The complainant can be invited to present its objections or suggestions to the Commission where the DG's report finds no contravention of the Competition Act (Regulation 21(2), General Regulations).
Third parties. The Commission can add third parties as parties to the proceedings on written application by any party to the proceedings if (Regulation 24(1), General Regulations):
- The third party has either:
- any alleged right to relief in respect of, or arising out of, the same act or transaction, or series of acts or transactions;
- an interest in common with the complainant.
- The third party's participation is necessary for the determination of issues.
The Commission can permit a third party to take part in further proceedings and present its opinion on a particular matter if (Regulation 25(1), General Regulations):
- It has a substantial interest in the outcome of the proceedings.
- It is in the public interest to allow it to present its opinion on that matter.
Document access
Complainant. The complainant can inspect or obtain copies of documents or records submitted during the proceedings on written application to the Secretary of the Commission and payment of a fee of INR1,000 per day per case. The charge for copying is fixed at INR20 per page (Regulations 37(1) and 50, General Regulations).
Third parties. Third parties who are added as parties to the proceedings can access documents previously filed in the matter by other parties, by making a written application to the Commission (Regulations 24(3) and 25(3), General Regulations) and paying a fee and charges (see above, Complainant).
Third parties who are not parties to the proceedings can inspect the documents or records of the proceedings if the party both (Regulations 37(2) and 50, General Regulations):
- Demonstrates sufficient cause before the Commission through a written application.
- Pays the required fees (see above, Complaint).
Be heard
See above, Representations.
UK (England and Wales)
Representations
Informal complainants. Any complainant or third party can lodge an informal complaint with the OFT. The OFT acknowledges receipt and, if it decides to close the file, will inform all complainants.
Formal complainants. A complainant who submits a written, reasoned complaint to the OFT and is (or is likely to be) materially affected by the agreement or practice concerned, is granted (on its request) formal complainant status. The main advantage of acquiring this status is that the formal complainant has the opportunity to become involved at key stages of the OFT investigation.
Document access
Third parties (including formal complainants) are not generally given access to documents or information, other than the statement of objections (if requested).
Be heard
If the OFT does not issue a statement of objections setting out a provisional finding of infringement (see Question 20), the formal complainant only can comment on the OFT's provisional findings before a definitive decision is made to close the file.
If the OFT issues a statement of objections, the formal complainant is consulted and given an opportunity to comment either in writing or at an oral hearing.
Third parties (including formal complainants) are not invited to attend the parties' oral hearings, except in exceptional cases where the OFT considers additional disclosure and/or attendance necessary.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Representations
Third parties can make complaints to the government and are often permitted (or required) to provide information and documents to the reviewing agency. Third parties can also comment on proposed consent agreements before they are implemented (see Question 23).
Document access
Third parties have no right to access confidential documents obtained during the course of an investigation.
Be heard
Third parties have no right to be heard during the course of an investigation but may independently challenge restrictive agreements in court if they will suffer anti-competitive harm from that conduct.
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
There is no set timetable for conducting an investigation.
An investigation may result from a (formal or informal) complaint or on the Commission's own initiative.
Generally, the Commission seeks information from the parties to the investigation and/or other interested parties (for example, customers, competitors and suppliers) and/or carries out dawn raids. If, after considering the evidence obtained using its powers of investigation (see Question 22), the Commission makes a provisional finding that there has been an infringement, it must issue a statement of objections to the parties. This sets out the basis of its provisional findings and the evidence relied on.
The parties are entitled to the following before the Commission proceeds further (for example, to a supplementary statement of objections, a letter of facts or a final decision):
- Access to the Commission's file (except for business secrets and other confidential information, and internal documents of the Commission/NCAs).
- An opportunity to respond, both in writing and during an oral hearing.
If, after considering the evidence, the Commission does not consider that there has been an infringement, it generally publishes a brief case closure statement.
India
Law stated as at 01-Dec-2011
The investigation has the following stages:
- Formation of prima facie opinion. Following receipt of a complaint, a reference from another governmental body or information that it has obtained itself, the Commission must consider the information or reference to form a prima facie opinion as to whether there is a case of a breach of the Competition Act. The information or reference is received by the Secretary to the Commission, who places it before the Commission (Regulation 16(1), General Regulations). The Commission must consider the matter, to form a prima facie opinion, at an ordinary meeting held within 15 days of the date of the Secretary placing the matter before the Commission (Regulation 16(3), General Regulations). In cases of anti-competitive agreements or abuse of dominance, the Commission must form its opinion on the existence of a prima facie case of a breach of the Competition Act within 60 days from the time that the Secretary places the matter before the Commission (Regulation 16(2), General Regulations).The Supreme Court has held that the Commission is expected to hold its meetings and record its opinion on the existence of a prima facie case within a period shorter than the stated period of 60 days. The court also held that the Commission must record reasons for its prima facie opinion, expressing clearly that it is convinced that a prima faciecase exists (Competition Commission of India v Steel Authority of India Limited).
- Investigation by the DG. Where a prima facie case exists, the Commission directs the DG to conduct an investigation (section 26(1), Competition Act and Regulation 18(1), General Regulations).The DG must submit a report on his findings within the period specified by the Commission (section 26(3), Competition Act). Under the Supreme Court's directions, the DG's report must be submitted within the time set by the Commission. In all cases they must be submitted no later than 45 days from the date of the directions passed under section 26(1) of the Competition Act until the Commission passes suitable regulations in relation to this (Competition Commission of India v Steel Authority of India Limited). The Commission has amended the General Regulations to allow for an initial period of 60 days, after which the DG applies to the Commission for an extension on the provision of sufficient reasons (Regulations 20(2) and 20(3), General Regulations). If, on consideration of the DG's report, the Commission is of the opinion that further investigation is required, it can order the DG to (Regulation 20(6), General Regulations):
- conduct further investigation on specific issues; and
- submit its supplementary report within 45 days.
The Commission can forward a copy of the DG's report(s) to the parties concerned and/or to the central or state government, or to the statutory authority that made the reference (section 26(4), Competition Act and Regulation 21(1), General Regulations). - Outcome of the DG's report. If the DG decides that the allegations regarding the breach of the Competition Act are not substantiated, the parties concerned, or the referring authority, are given an opportunity to respond (section 26(5), Competition Act). After this response, the Commission can, on consideration of any suggestions or objections to the DG's report, either (section 26, Competition Act and Regulation 21, General Regulations):
- close the case and communicate its orders to the central or the relevant state government, statutory authority or the parties concerned, as the case may be; or
- direct the DG to continue the inquiry (or continue the inquiry itself).
If the DG finds that the allegations regarding the breach of the Competition Act have been substantiated, the Commission must invite objections and suggestions from the central or state government, statutory authority or the parties concerned, as applicable. If the Commission considers that further investigation is necessary, it directs the DG to continue the inquiry and submit supplementary reports on specific issues within a specified reasonable period (Regulations 21(7) and 21(8), General Regulations). - Final order. The Commission must pass its orders or decision, as far as practicable, within 21 days of the date of conclusion of final arguments (Regulation 32(2), General Regulations). The Competition Act does not prescribe a maximum time limit for an investigation initiated in respect of an anti-competitive agreement or an abuse of dominance. However, where the Commission has granted interim relief, the Supreme Court has ordered that a final order should be passed within 60 days of the interim order (Competition Commission of India v Steel Authority of India Limited). The Commission amended the General Regulations to provide that where an interim order under Section 33 has been passed, a final order must, as far as possible, be passed by the Commission within 90 days of the date of the interim order (Regulation 31(3), General Regulations).
UK (England and Wales)
There is no set timetable for conducting an investigation. Guidance on the OFT's investigation procedures was published by the OFT in March 2011.
If the OFT considers the evidence obtained using the powers of investigation (see Question 22) and makes a provisional finding that there has been an infringement, it must issue a statement of objections to the parties. This sets out the basis of its provisional findings and the evidence relied on. The parties have the opportunity to respond before the OFT issues a final decision.
If the OFT considers the evidence and does not find an infringement, it generally publishes a brief case closure statement. The OFT usually issues a formal non-infringement decision only where the investigation started from a complaint.
Since March 2011, there is a Procedural Adjudicator (that is an OFT staff member independent of the investigatory team) who is responsible for resolving disputes on procedural issues in the investigation. The OFT is considering strengthening the Procedural Adjudicator's role.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
There is no set procedure for investigating restrictive conduct and the duration of an investigation depends on the type of conduct at issue and whether the investigation is civil or criminal. At any time during the investigation, the parties can attempt to negotiate and enter a consent agreement with the reviewing agency to avoid litigation (see Question 23).
Pre-investigation
Once an enforcement authority elects to investigate restrictive conduct and clears the investigation with the other agency, the regulator can conduct a preliminary investigation, including requests for voluntary submissions from and interviews with the target firms and relevant third parties.
Formal investigation
If the agency believes an anti-trust violation may have been committed, it can proceed to a formal investigation using a compulsory process to obtain documents, testimony, and answers to interrogatories.
Post-investigation
Following a completed investigation, the reviewing agency can bring a civil action for injunctive relief in court or before an ALJ (FTC only). The full litigation and appeal process can take years.
Criminal prosecution
If the DOJ decides that criminal prosecution is appropriate, the agency can open a grand jury investigation and obtain discovery through grand jury subpoenas and other discovery tools. The DOJ may then seek an indictment from the grand jury, enter a plea agreement, or terminate the investigation.
21. How much information is made publicly available concerning investigations into potentially restrictive agreements or practices? Is any information made automatically confidential and is confidentiality available on request?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Publicity
When applicable, the Commission generally publishes:
- A press release about the fact that dawn raids have been conducted at the premises of undertakings.
- A press release when opening an investigation and on the issue of a statement of objections in certain high-profile cases.
- A press release on the adoption of a decision (which may impose fines and/or periodic penalty payments).
- A brief case closure statement when it decides not to proceed to a decision.
- A non-confidential version of the final decision (although this may be some time later).
Automatic confidentiality
Commission officials (as well as NCA officials) have a duty of professional secrecy, that is, not to disclose information acquired or exchanged between them (for a definition of protected information, see Question 5). In addition, information that they obtain during an investigation can only be used for the purpose for which it was acquired. However, the Commission can disclose and use information necessary to prove an infringement.
Confidentiality on request
Any party making a submission to the Commission should clearly identify any material which it considers to be a business secret or other confidential information (see Question 5), giving reasons, and provide a separate non-confidential version. The Commission has a basic duty to keep this information confidential. If undertakings or associations of undertakings fail to comply with these requirements, the Commission can assume that the documents or statements concerned do not contain confidential information.
India
Law stated as at 01-Dec-2011
Publicity
There is no provision under the Competition Act for making the details of potentially restrictive agreements or practices that are under investigation public. The proceedings before the Commission are not public unless the Commission decides otherwise, keeping in mind considerations such as (Regulation 47, General Regulations):
- Harm caused by disclosure to the public.
- Efficient and proper conduct of proceedings.
- Resources of the Commission.
The Commission can publish a brief summary or full text of its orders or decisions if it considers that it is in the public interest (Regulation 53, General Regulations). However, in practice, complainants often inform the press of pending investigations without effective redress under the Competition Act, as the Competition Act's provisions only bind the Commission and the CompAT, but not the parties.
Automatic confidentiality
As a matter of general principle, the Commission cannot disclose any information relating to an enterprise, obtained by or on its behalf for the purposes of the Competition Act, without the prior written permission of the enterprise involved, except to comply with the provisions of the Competition Act or any other law (section 57, Competition Act).
However, the Competition Act specifically provides for a process by which parties to proceedings before the Commission can inspect documents on file, subject to confidentiality (Regulation 37, General Regulations).
Confidentiality on request
If a party to proceedings requires the Commission to keep information provided by it during the proceedings confidential, it must specifically claim confidentiality over this information. A party must submit a written request to the Commission or the DG to treat information as confidential for a specified time period, if making the information public would either (Regulation 35, General Regulations):
- Disclose trade secrets or destroy or appreciably diminish the commercial value of any information.
- Cause serious injury.
If a party has its request rejected by the DG, it can approach the Commission for a decision regarding confidential treatment.
Where confidential information is included in the party's written submissions, the party must file the complete version of the submissions with the words:
- "Restriction of publication claimed" on the top of the first page.
- "Confidential" near the top on each page in red ink.
The party must also file a public version of the submissions with the confidential information clearly redacted (Regulation 35(5), General Regulations).
In addition, the Commission must maintain as confidential the identity of an informant (a complainant or whistleblower, as applicable) if requested to do so in writing (Regulation 35(1), General Regulations).
UK (England and Wales)
Publicity
The OFT rarely announces details of an ongoing investigation, although it can respond to press speculation. It can announce that it has issued a statement of objections in certain high-profile cases.
Automatic confidentiality
The OFT has a basic duty to keep information relating to any business or individual confidential, subject to exceptions.
Exceptions. The OFT can disclose confidential information provided during an investigation under Chapter I or Article 101 with the consent of the party that supplied it. It is advisable when making submissions to identify any material that is confidential.
The OFT can also disclose confidential information to facilitate its statutory duties as a further exception to the basic duty of confidentiality.
However, if the OFT is proposing disclosure, it must both:
- Inform the person supplying the information of its proposed action.
- Give that person a reasonable opportunity to make representations that the information should not be disclosed.
Before disclosing, the OFT must consider:
- The extent to which disclosure is necessary.
- Whether disclosure would be contrary to the public interest.
- The need to exclude from disclosure:
- commercial information that may significantly harm the legitimate business interests of an undertaking; and
- information relating to the private affairs of an individual that may significantly harm the individual's interests.
Confidentiality on request
It is open to a party to request that certain information be kept confidential. In dealing with this request, the OFT applies the same rules as are described above (see above, Automatic confidentiality).
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Publicity
The enforcement agencies or the parties can disclose the existence of an anti-trust investigation. However, investigations generally remain private and confidential until the reviewing agency terminates the investigation, files a complaint, or the parties release a public statement regarding the investigation.
Automatic confidentiality
Information submitted to the enforcement authorities is protected from public disclosure by statute. However, information or documents can be disclosed in connection with litigation or an administrative proceeding. In a criminal investigation by the DOJ, Rule 6(e) of the Federal Rules of Criminal Procedure requires that grand jury proceedings and information disclosed in these proceedings be kept confidential. However, the rule does not prevent witnesses from disclosing information.
Confidentiality on request
To prevent disclosure of voluntarily submitted information without prior notice by the government, the parties can:
- Request written assurance from the DOJ that the information will be kept confidential.
- Mark information as confidential to the DOJ and FTC.
During litigation, the parties may seek a protective order to prevent disclosure of commercially sensitive information, however, courts generally favour more liberal disclosure.
22. What are the powers (if any) that the relevant regulator has to investigate potentially restrictive agreements or practices?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
The Commission has extensive powers to investigate suspected infringements of Article 101, including to:
- Require information to be provided, through a:
- request for information (to which there is no duty to respond, however fines can be imposed for supplying incorrect or misleading information); or
- Commission decision (which can result in a fine if incorrect, incomplete or misleading information is supplied, as well as if the information is not supplied within the required time limit).
- Conduct dawn raids where officials can, for example, examine documents, take copies of documents and seal premises, which includes private homes.
- Interview members of staff to obtain explanations of relevant facts or documents (during a dawn raid or at another time during the investigation).
- Exchange information with the competition authorities of member states (and other competition authorities around the world, in particular the US anti-trust authorities).
India
Law stated as at 01-Dec-2011
The DG can investigate only if the Commission directs it to do so (sections 26(1) and 41(1), Competition Act) (see Question 20).
The DG and the Commission's powers include:
- Summoning and enforcing the attendance of any person for examination on oath.
- Requiring the discovery and production of documents or material objects.
- Receiving affidavit evidence.
- Issuing commissions for the examination of witnesses or documents.
- Requisitioning any public record or document, or copy of a public record or document, from any office (subject to sections 123 and 124 of the Indian Evidence Act 1872, dealing with issues of privilege).
The Commission's additional powers include:
- Calling on experts from the fields of economics, commerce, accountancy, international trade or other discipline as they deem necessary.
- Dismissing an application in default or deciding it without the party being present.
- Issuing interim orders, without giving notice to the party, to restrain any act in contravention of the Competition Act until the inquiry's conclusion or further orders (section 33, Competition Act).
- Joining or substituting parties in proceedings (Regulation 24, General Regulations).
- Permitting a person or enterprise to take part in proceedings (Regulation 25, General Regulations).
- Consolidation of two or more similar information requests, references or applications (Regulation 27, General Regulations).
The DG's additional powers include:
- Requiring any person to furnish any information, books or papers necessary for an investigation.
- Calling for personal appearance and examination on oath of any officer, employee or agent of a company or any other person.
- Power of search and seizure of documents relating to the company or employees and officers, including dawn raids on their official and residential premises (with the permission of the Chief Metropolitan Magistrate of Delhi).
UK (England and Wales)
The OFT has extensive powers to investigate suspected cartels under Chapter I, including powers to:
- Require information to be provided.
- Make unannounced inspections of premises (dawn raids), where officials can examine and take copies of documents and require members of staff to provide explanations of relevant facts or documents.
- Use surveillance powers (watching a person's home or office).
For the cartel offence (see Question 13), the OFT's dawn raid powers extend to removing originals of documents. Its surveillance powers are also more extensive, including the right to plant bugging devices in residential premises or vehicles and to use informants.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Civil investigations
In addition to requests for voluntary submissions of documents and informal interviews, the enforcement agencies can issue subpoenas or civil investigative demands requiring the production of documents, responses to interrogatories and oral testimony from target entities and third parties. If an enforcement authority commences litigation, it can then use the broad discovery allowed under the Federal Rules of Civil Procedure and corresponding state rules.
Criminal investigations
The DOJ and state AGs can also obtain information through:
- Grand jury subpoenas.
- Search warrants.
- Wiretaps.
- Electronic surveillance.
23. Can the regulator reach settlements with the parties without reaching an infringement decision? If so, what are the circumstances in which settlements can be reached and the applicable procedure?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
There are two ways in which a competition investigation can be settled with the Commission without a formal infringement decision being reached:
- Informal settlement. Cases can be settled informally because the Commission has accepted informal assurances, given by the investigated parties, that address the Commission's concerns.
- Binding commitments. If the Commission intends to adopt a decision requiring an infringement to be ended, and the undertakings concerned offer commitments to meet the concerns expressed to them by the Commission in its preliminary assessment, the Commission can by decision make those commitments binding on the undertakings. Such a decision can be adopted for a specified period, and will conclude that there are no longer grounds for action by the Commission (Article 9, Modernisation Regulation (Article 9)). A decision under Article 9 does not imply any admission of liability from the parties that were being investigated.A party can (but is not required to) offer binding commitments at any time during the Commission's investigation, until a decision is made. However, from a practical point of view, the closer the Commission is to reaching a decision, the less likely it is to accept commitments.In practice, the Commission does not accept commitments in cases involving hard-core infringement, such as price-fixing, bid-rigging or market-sharing cartels.Where the Commission intends to adopt a decision under Article 9, it publishes a concise summary of the case and the main content of the commitments, to allow interested third parties to submit their observations.The Commission and the parties can negotiate to finalise the binding commitments. If a binding commitment is accepted, the Commission publishes its decision.
Formal settlement. A competition investigation under Article 101 can also be settled with a formal infringement decision being reached. A settlement can be reached with some of the addressees of a statement of objections. In return for an admission of liability, the Commission imposes lower fines than those which would otherwise have been imposed.
The Commission retains a broad discretion whether to engage in settlement discussions and whether to settle. However, the Commission's choice of the settlement procedure cannot be imposed on the parties.
If the Commission decides to reward a party for settlement, it can reduce the fine by 10%.
The Commission has issued a Notice on the conduct of settlement procedures (OJ 2008 C167/2.7) (Settlement Notice), available at: http://ec.europa.eu/competition/cartels/legislation/settlements.html.
Early resolution agreements have so far been reached with some of the addressees of a statement of objections in five Commission cartel investigations:
- DRAMs (Case COMP/38.511).
- Animal feed phosphates (Case COMP/38.866).
- Consumer detergent products (Case COMP/39.579).
- Manufacture of glass and glass products (Case COMP/39.605).
- Refrigeration compressors (Case COMP/39.600).
This reduction of fines can be combined with a reduction of fines due to a leniency application, provided that the conditions for both regimes are met (see Question 24, Immunity/leniency).
India
Law stated as at 01-Dec-2011
There is no specific provision under the Competition Act allowing the Commission to reach settlements or accept binding or informal commitments from the parties without reaching an infringement decision. The Competition Act also does not allow parties to withdraw from proceedings.
UK (England and Wales)
There are three ways in which a competition investigation can be settled before a formal infringement decision has been reached:
- Informal settlement. Cases may be settled informally because either the:
- company concerned persuades the OFT that there has been no infringement; or
- OFT has accepted informal assurances that addressed its concerns.
- Formal settlement. A formal settlement may be reached with some of the addressees of a statement of objections by early resolution agreements. In return for an admission of liability and an agreement to co-operate fully with the OFT's investigation the OFT imposes substantially lower fines than those which would otherwise have been imposed. Early resolution agreements were reached with some of the addressees of the statement of objections in the OFT's investigations into alleged price-fixing of:
- dairy products (February 2008);
- tobacco products (July 2008).
- Binding commitments. The OFT can accept binding commitments offered to it by an individual or an undertaking to address potential infringements of the EU and UK competition rules and is likely to do this where the:
- competition concerns are readily identifiable;
- commitment offered would be effective in meeting the competition concerns; and
- proposed commitments are capable of being implemented effectively and, if necessary, within a short period of time.
Only in exceptional circumstances will the OFT accept commitments in cases involving price-fixing, bid-rigging or market-sharing cartels. In determining the appropriate commitments, the OFT assesses the seriousness of the effects on competition.
A party can (but is not required to) offer binding commitments at any time during the OFT's investigation until a decision is made. However, the closer the OFT is to reaching a decision, the less likely it is to consider it appropriate to accept commitments.
If the OFT intends to accept a commitment, it notifies affected parties, who have an opportunity to provide representations within a specified period set by the OFT (not less than 11 working days from the date of notice). The OFT and the parties can negotiate to finalise the binding commitments. If a binding commitment is accepted, the OFT publishes it. The OFT makes no statement as to the legality of agreements before commitments are accepted.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLP
Law stated as at 01-Dec-2011
Civil investigations
The reviewing agency can enter into a consent order requiring the parties to discontinue the restrictive practice at any time. Consent order agreements proposed by the FTC are subject to a 30-day public comment period before the Commission's vote to issue the order. Consent decrees proposed by the DOJ must be approved by the Assistant Attorney General (AAG), accompanied by a competitive impact statement, and filed in federal district court. Consent decrees are then published in the Federal Registrar and subject to a 60-day public comment period. Following the public comment period, the court must find the settlement to be in the public's best interest before entering the decree. In both cases, parties to consent agreements do not admit liability.
Criminal investigations
The DOJ often enters into plea bargaining discussions. A plea agreement must be approved by the AAG and accepted by a federal district court to become effective.
Many state AGs have similar procedures for settling anti-trust investigations.
Penalties and enforcement
24. What are the regulator's enforcement powers in relation to a prohibited restrictive agreement or practice?
EU
Vincent Brophy and Scott McInnes, Jones Day
Law stated as at 01-Dec-2011
Orders
The Commission can:
- Order modification or termination of the infringing agreement or practice.
- Order interim measures, in urgent cases due to the risk of serious and irreparable damage to competition, based on a prima facie finding of infringement. Such a decision applies for a specified period of time, and can be renewed if necessary and appropriate (Article 8, Modernisation Regulation).
Fines
If the Commission concludes that an agreement breaches Article 101(1) and is not exempted under Article 101(3), or is a breach of Article 102, it can impose a fine of up to 10% of the annual worldwide turnover of the offending undertaking's corporate group.
Personal liability
The Commission is not empowered to impose any measures against individual employees or directors of an infringing company. However, the competition laws of some member states provide for such personal liability.
Immunity/leniency
Parties to a restrictive agreement can benefit from a reduction of fines, or even escape up to 100% of fines, by blowing the whistle on unlawful cartel arrangements.
To obtain a reduction of fines (up to 50%), the whistleblower must do all of the following:
- Have ended its involvement in the alleged cartel immediately following its application.
- Not have destroyed, falsified or concealed evidence of the alleged cartel.
- Co-operate genuinely, fully, and on a continuous basis and expeditiously with the Commission.
To benefit from immunity of fines (100% reduction), the whistleblower must also both:
- Be the first to submit information and evidence which, in the Commission's view, will enable it to carry out a targeted inspection in connection with the alleged cartel, or find an infringement of Article 101 in connection with the alleged cartel.
- Not have taken steps to coerce other undertakings to join the cartel or to remain in it.
The Commission Notice on immunity from fines and reduction of fines in cartel cases (OJ 2006 C298/17) (2006 Leniency Notice) applies. It is available at: http://ec.europa.eu/competition/cartels/legislation/leniency_legislation.html.
A reduction of fines based on a leniency application can be combined with a reduction of fines due to a formal settlement process, provided that the co-operation offered by an undertaking qualifies under both the 2006 Leniency Notice and the Settlement Notice (see Question 23).
Impact on agreements
Offending provisions of an agreement are void and unenforceable. If, under the relevant national contract law, they are not severable from the agreement, the whole agreement is void. The Commission can also order modification or termination of an infringing agreement (see above, Orders).
India
Law stated as at 01-Dec-2011
Orders
The Commission can:
- Order the parties involved to discontinue or not to re-enter into the agreement.
- Direct that the agreement be modified to the extent and in the manner it specifies.
- Impose a penalty (see below, Fines).
The Commission can also pass any order that it deems fit, such as ordering the parties concerned to abide by any other orders it passes and comply with any directions (section 27, Competition Act).
Fines
The Commission can impose a penalty of up to 10% of the average turnover for the previous three financial years on each party to the agreement or abuse.
If the agreement has been entered into by a cartel, the Commission imposes on each producer, seller, distributor, trader or service provider in the cartel, a penalty equivalent to the higher of either:
- Three times its profits for each year of the duration of the agreement.
- 10% of its turnover for each year of the duration of the agreement.
Additional fines of up to INR100,000 can be imposed for each day of non-payment, subject to a cap of INR100 million (section 42(2), Competition Act). Non-payment of these fines is a criminal offence punishable by imprisonment for a maximum term of three years or maximum fine of INR250 million, or both (section 42(2), Competition Act).
Only two fines have been imposed for violation of section 3 of the Competition Act so far. In both cases, the Commission imposed fines of INR100,000 on each of the alleged participants in the cartel because the cartel only lasted for a short period.
Personal liability
If a breach has been committed by a company, every person who, at the time the breach was committed, was in charge of and responsible for conducting the business of the company, is deemed guilty of the breach. These persons are liable unless they can prove that the breach was committed without their knowledge or that they exercised due diligence to prevent the breach.
If it is proved that the breach has taken place with the assistance or consent of, or is attributable to any neglect on the part of any director, manager, secretary or other officer of the company, that person is also liable for the breach (section 48, Competition Act).
There are no specific penalties prescribed in the Competition Act in relation to breaches by individual managers or directors. Nor is there any precedent or specific guidance in this area. However, the Competition Act provides for a penalty of imprisonment for a term up to three years, a fine of up to INR250 million or both if any orders of the Commission are contravened. These penalties are imposed on persons in their individual capacities. Similarly, if a person makes false statements or omits to furnish material information, the Commission can impose a penalty between INR5 million and INR10 million on that person.
Immunity/leniency
The Commission can impose a lesser penalty on a producer, seller, distributor, trader or service provider included in a cartel, who makes a full, true and vital disclosure in relation to the alleged cartel agreement or practice. However, the Commission cannot do so if the DG's investigation report has been received before the disclosure (section 46, Competition Act).
The Commission can revoke a lesser penalty and re-impose the original penalty if it is satisfied that any of the following apply:
- The person concerned had not complied with the conditions attached to the lesser penalty.
- The person concerned had given false evidence.
- The disclosure made is not vital.
- The person concerned stops co-operating with the Commission before the proceedings are complete.
The Commission can grant a reduction in fines of up to (Regulation 4, Competition Commission of India (Lesser Penalty) Regulations 2009 (Lesser Penalty Regulations)):
- 100% to the first applicant.
- 50% to the second applicant.
- 30% to the third applicant.
The Commission will only grant leniency to the second and subsequent applicants both:
- After evaluation of the evidence provided by the first applicant.
- If it is of the opinion that each applicant can provide evidence that significantly adds value to the evidence that the Commission has in its possession.
Impact on agreements
If the restrictive provisions in an anti-competitive agreement are severable, then the Commission can order modification of the agreement. If the restrictive provisions are not severable, the entire agreement is void. The Commission has adopted this approach in some cases, asking the parties to sever or modify the offending clauses of a restrictive agreement (Vijay Gupta v. Paper Merchants Association, Delhi − Case No. 7/2010).
UK (England and Wales)
Orders
The OFT can:
- Order modification or termination of the infringing agreement or practice.
- In urgent cases, where it has a reasonable suspicion of infringement, adopt interim measures to order an agreement to be suspended, pending the outcome of the investigation.
Fines
If the OFT finds that an agreement breaches Chapter I and is not exempt, it can impose a fine of up to 10% of the annual worldwide turnover of the offending undertaking's corporate group. If the fine is not paid the OFT can recover the amount as a civil debt.
Personal liability
Disqualification of directors. Directors of infringing companies can face disqualification from UK directorships, for up to 15 years.
The OFT can apply to the High Court for a Competition Disqualification Order (CDO) against a director. Alternatively, the OFT may accept undertakings from a director, instead of continuing with an application for a CDO. The provision of undertakings is also likely to lead to a shorter period of disqualification than the OFT would seek in applying for a CDO.
The Court can make a CDO against a director, not only where it is proven that the director concerned was involved in the infringement, but also if either the:
- Director's conduct did not contribute to the breach but the director had reasonable grounds to suspect that the undertaking's conduct constituted a breach and took no steps to prevent it.
- Director did not know but ought to have known that the undertaking's conduct constituted a breach.
In June 2010, the OFT published revised guidance setting out its approach to seeking CDOs against directors in competition law cases. A year later, in June 2011, the OFT published a general guidance document for directors (Company directors and competition law), which gave more details on its approach to CDOs, including about non-executive directors. The OFT is yet to exercise its power to make a stand-alone CDO application, but CDOs were ordered by the Crown Court in the context of the cartel offence prosecutions in the marine hose cartel. This resulted in the disqualification in June 2008 of three directors for periods of between five and seven years (see R v Whittle, Allison & Brammar [2008] EWCA Crim 2560 for the defendants' appeal against their sentences). Despite not having made CDO applications, the OFT has stated that it often considers doing so in cartel investigations and the revision of its guidance indicates a stepping up in its approach to seeking CDOs.
Cartel offence. Individuals convicted of the cartel offence (see Question 13) are liable to either or both:
- Up to five years' imprisonment.
- An unlimited fine.
To date there have been only two prosecutions of the cartel offence. First, following the US Department of Justice investigation into the marine hose cartel in the US, three UK businessmen involved in the cartel agreed to plead guilty to the cartel offence in order to return to the UK. They were subsequently sentenced to imprisonment for between two and a half and three years each for committing the cartel offence (on appeal, the sentences were reduced by about one-third). All three defendants were also disqualified from acting as company directors for periods of between five and seven years.
Second, in August 2008, the OFT announced criminal charges against four former executives of British Airways for alleged participation in a long-haul passenger fuel surcharge cartel with Virgin Atlantic. The trial began in April 2010 but collapsed a month later when a significant volume of additional evidence was introduced by Virgin Atlantic during the trial, which neither the OFT nor the defendants' legal teams had an opportunity to review. The OFT decided that it would be potentially unfair to continue with the trial.
There have been a number of other criminal investigations by the OFT but to date no charges have been brought in those.
Immunity/leniency
Parties to a restrictive agreement can escape up to 100% of fines, and individuals who have committed the cartel offence can escape imprisonment, by blowing the whistle on unlawful arrangements. To obtain full immunity, the whistleblower must do all of the following:
- Stop all further participation in the cartel activity.
- Be the first cartel participant to inform the authorities of the arrangement.
- Not have bee
- the ringleader or instigator of the cartel, nor have encouraged any of its members to engage in unlawful activities.
- Co-operate continuously and fully with the authorities throughout the investigation, providing all relevant information and evidence.
Smaller reductions in fines (of up to 50%) may be available if some but not all of these criteria are met.Small agreements (that is, agreements that do not fix prices between undertakings with a combined annual turnover that does not exceed GB£20 million) that infringe Chapter I are exempt from fines.The OFT has published a guidance note on the handling of leniency applications (December 2008).Impact on agreements
Offending provisions of an agreement are void and unenforceable. If, under contract law, they are not severable from the agreement, the whole agreement is void. The OFT can also order modification or termination of an infringing agreement (see above, Orders).United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011Orders
If an ALJ decides that section 5 of the FTC Act has been violated, the FTC can issue a cease and desist order requiring termination of the restrictive conduct. The FTC can, but rarely does, seek disgorgement or restitution in court. The DOJ and state AGs cannot issue orders, but can seek civil remedies or criminal sanctions by initiating litigation in court. In addition, all enforcement authorities can enter into consent agreements with the target parties.Fines
The following fines can be imposed on the participating companies:- A civil penalty of up to US$16,000 can be imposed for each violation, or each day of a continuing violation, of an FTC cease and desist order by initiating litigation.
- Criminal penalties of up to US$100 million for corporations and US$1 million for individuals can be imposed for violations under section 1 of the Sherman Act prosecuted in court by the DOJ.
Under federal law, the statutory maximum fine can be exceeded and a fine of up to twice the amount of financial gain to parties to the agreement or harm suffered by victims can be imposed.Personal liability
Individuals can be subject to:- Criminal fines of up to US$1 million and a prison sentence of up to ten years for violation of section 1 of the Sherman Act.
- Civil liability exists for violations of an FTC cease and desist order in which the individual was personally named. However, individuals are not often the target of civil investigations.
Immunity/leniency
In the case of criminal anti-trust enforcement, the DOJ offers leniency to corporations and individuals if certain requirements are met. This includes:- Corporate leniency. The DOJ grants leniency to a corporation (and its current directors, officers and employees) that:
- reports illegal anti-trust activity before an investigation is initiated or information is received from another source, if the corporation promptly terminated its part in the illegal activity;
- provides continuing and complete co-operation throughout the investigation; and
- was not the sole ringleader in performance of the illegal activity.
Leniency can be available after an investigation has begun if the corporation is the first party to come forward and the DOJ does not yet have incriminating evidence against the corporation. - Individual leniency. Individuals who approach the DOJ on their own behalf will be awarded leniency if:
- the DOJ has not yet received the information from another source;
- the individual provides continuing and complete co-operation through the investigation; and
- the individual was not the sole ringleader in carrying out the illegal activity.
Persons who qualify for leniency can also be entitled to limited exposure to civil damages of only actual damages rather than treble damages.
Impact on agreements
Where an agreement contains a provision that violates the anti-trust laws, the entire agreement can be enjoined in court or terminated by a cease and desist order.Third party damages claims and appeals
25. Can third parties claim damages for losses suffered as a result of a prohibited restrictive agreement or practice? If so, what special procedures or rules (if any) apply? Are class actions possible?EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011Third party damages
A third party that can show that it has, or is likely to, suffer loss as a result of a prohibited restrictive agreement or practice, can bring a civil action for damages and other civil remedies before the national courts (for example, injunctions). The action can be subsequent to, or independent of, any Commission or NCA investigation.Special procedures/rules
There are specific mechanisms in some of the member states to facilitate such actions for damages.Class actions
A harmonised class action procedure does not yet exist under EU law, but the Commission is contemplating its introduction. The Commission published a white paper on the subject in 2008, available at:http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0165:FIN:EN:PDF.India
Law stated as at 01-Dec-2011Third party damages
Any person can apply to the CompAT for compensation for loss or damage suffered as a result of a breach of the Competition Act. The pre-condition for making the application is a finding by the Commission (or the CompAT in an appeal) of a contravention of the Competition Act.The CompAT makes an inquiry into the allegations and where it is satisfied that the applicant has suffered loss or damage, it makes an order directing the infringing enterprise to make the payment to the applicant (section 53N, Competition Act).Special procedures/rules
The CompAT has the power to regulate its own procedure and is not bound by the Code of Civil Procedure 1908. It is, however, bound by the principles of natural justice in all of its activities.Class actions
Where loss or damage is caused to many persons with the same interest, one or more persons can obtain permission from the CompAT to make an application for the benefit of all persons (section 53N(4), Competition Act).UK (England and Wales)
Third party damages
A third party that can show that it has, or is likely to, suffer loss as a result of a prohibited restrictive agreement or practice can bring a civil action for damages and other civil remedies (for example, injunctions). The action can be subsequent to or independent of any OFT investigation.If the OFT or the European Commission makes a decision that Chapter I or Article 101 has been infringed and this decision is no longer subject to appeal (see Question 26), third parties can also bring a follow-on action for damages before the CAT or the High Court without further need to prove an infringement.Special procedures/rules
The procedure for a follow-on action for damages before the CAT is subject to separate procedural rules from those that normally apply to civil litigation, as set out in the CAT Rules 2003. Of particular note is that there is a two-year limitation period for bringing such actions (see Question 16).Class actions
Class actions, in the US sense of the term, (that is, a large group of people bringing an action collectively), are not permitted under English litigation procedural rules. English courts have resisted attempts to establish US-style claims where a group of claimants purports to bring an action on behalf of a larger group. The leading case in this area isEmerald Supplies v. British Airways [2009] EWHC 741 (Ch) and [2010] EWCA Civ 1284.However, there are three procedures under English law that provide scope for a claim to be brought on behalf of multiple parties:- First, section 47B of the Competition Act provides that a specified consumer body can bring an action before the CAT on behalf of two or more consumers. The CAT's rules regulate these actions. To date only one claim has been brought, that is, the Consumers' Association claim for damages against JJB Sports on behalf of consumers who had been over-charged as a result of price fixing in the supply of replica football shirts. The action attracted only about 130 claimants.
- Second, Part 19 of the Civil Procedure Rules (CPR) makes certain provisions for the bringing, or joint management, of representative actions, which might be considered a form of class action. However, the attempt to establish a representative claim in the air cargo litigation in Emerald Supplies failed.
- Third, Part 19 of the CPR also provides the court with the power to make a group litigation order, which allows for the collective management by the court of a number of separate cases that give rise to common or related issues of fact or law.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011Third party damages
Third parties who have suffered an anti-trust injury can bring a private action for treble damages or injunctive relief, as well as costs and legal fees (section 4B, Clayton Act).Special procedures/rules
Excluding provisions for treble damages, private anti-trust actions are subject to the same procedural rules applied in other civil litigations.Class actions
Class actions are permissible if the criteria for class certification are satisfied.26. Is there a right of appeal against any decision of the regulator? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties, or only to the parties to the agreement or practice?EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011Rights of appeal and procedure
Parties to a Commission decision can seek annulment of the Commission decision before the General Court, within two months (plus an approximate ten day extension on account of distance) of the date on which the appellant is notified of the decision. Such an action can be on points of law or fact.An application for annulment does not suspend the decision (nor the obligation to pay fines, however the Commission generally accepts a bank guarantee instead of paying the fines). The parties can seek a separate order suspending the decision (including payment of the fines) pending proceedings on the merits of the case. However, such orders are rarely granted in practice.The General Court's powers include:- Confirming or setting aside the decision (partly or in whole).
- Confirming or amending the level of fines imposed.
A General Court judgment can be appealed, on points of law only, to the EU Court of Justice.Third party rights of appeal
A third party with sufficient interest in the proceedings can also seek annulment before the General Court (see above,Rights of appeal and procedure).India
Law stated as at 01-Dec-2011The right and process of appeal against any Commission decision, order or direction made under the sections noted in section 53A of the Competition Act, is the same as for combinations (see Question 10).UK (England and Wales)
Rights of appeal and procedure
Parties to the agreement can appeal to the CAT against OFT and sectoral regulators' decisions, within two months of the date on which the appellant was notified of the disputed decision. An appeal can be on points of law or fact.Making an appeal automatically suspends the obligation to pay fines but not the decision itself. However, the CAT can order suspension of a decision, pending the hearing.The CAT's powers include:- Confirming or setting aside the decision.
- Sending the case back to the regulator for further investigation.
- Confirming or amending the level of financial penalties imposed.
- Adopting interim measures.
A CAT decision can be appealed, on points of law only, to the Court of Appeal.Third party rights of appeal
A third party with sufficient interest in the proceedings has the same rights of appeal to the CAT as a party (see above,Rights of appeal and procedure).United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011Rights of appeal and procedure
The DOJ and state AGs must initiate litigation to obtain civil relief or impose criminal sanctions for anti-trust violations. Court orders can be challenged on appeal to the appropriate appellate court. ALJ decisions in actions brought by the FTC can be appealed to the Commission. The Commission's final decisions can be appealed to the US Court of Appeals and, ultimately, to the US Supreme Court.Third party rights of appeal
Third parties cannot appeal a decision in an action brought by an enforcement authority but can bring a private action to challenge the restrictive conduct (see Question 18).Monopolies and abuses of market power
Scope of rules
27. Are monopolies and abuses of market power regulated under civil and/or criminal law? If so, what are the substantive provisions and regulatory authority?EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011Abuses of a dominant position
Article 102 prohibits:- Unilateral conduct which is an abuse by an undertaking with a dominant market position in the internal market or in a substantial part of it.
- The abuse by more than one undertaking of a jointly dominant position, although there is a high threshold to establish this.
Sector inquiries
The Commission can make a sector inquiry where there are reasonable grounds to suspect that any feature or features of the market have the effect of preventing, restricting or distorting competition in the EU.In a sector inquiry, the Commission has the same powers as in an Article 101 or 102 investigation (see Question 22).Sector inquiries do not result in a prohibition decision and there are no fines (except in relation to information requests), but they can lead to investigations under Articles 101 and/or 102. The Commission generally publishes a report on the results of its sector inquiry and invites comments from interested parties.For example, the Commission has pursued sector inquiries into the following sectors:- Roaming.
- Energy.
- Financial services (retail banking and business insurance).
- Pharmaceuticals.
For further information on these sector inquiries, see http://ec.europa.eu/competition/antitrust/sector_inquiries.html.India
Law stated as at 01-Dec-2011Abuse of dominance is regulated under the civil jurisdiction of the Competition Act, which came into force on 20 May 2009. The Competition Act prohibits an abuse of a dominant position (section 4, Competition Act).The Commission can investigate an alleged abuse of a dominant position on:- Its own initiative.
- Receiving a complaint from any person, consumer, consumer association or trade association.
- Receiving a reference from the central or state government.
- Receiving a reference from a statutory authority.
On determining that there has been a breach of section 4 of the Competition Act, the Commission can issue various orders, including cease and desist orders, division of a dominant enterprise, compensation and penalties (see Questions33 and 34).UK (England and Wales)
Chapter II prohibition
Monopolies and abuses of market power are only regulated under civil law. The Chapter II prohibition in the Competition Act (Chapter II) mirrors Article 102 of the TFEU (without the requirement that the conduct may affect trade between EU member states).It prohibits:- Unilateral conduct which is an abuse by an undertaking having a dominant market position within the UK (or any part of the UK).
- The abuse by more than one undertaking of a jointly dominant position, although there is a high threshold to establish this.
Market investigations
The OFT, the sectoral regulators or (in certain circumstances) the Secretary of State can make market investigation references to the CC where there are reasonable grounds to suspect that any of the market's features have the effect of preventing, restricting or distorting competition in the UK.Before making a market investigation reference, the OFT or sectoral regulator can conduct an initial market study or market review to see whether there is sufficient concern to merit a reference. Voluntary action addressing the concern can be accepted instead of a reference to the CC. A market study can lead to other outcomes, including investigations under Chapters I or II.Market investigations do not involve a prohibition and there are no penalties, but the CC has wide powers to remedy any anti-competitive market features identified by its investigation, by imposing behavioural or structural undertakings on industry participants.United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011Unlawful monopolisation is subject to civil and criminal investigation and prosecution by the DOJ under section 2 of the Sherman and by state AGs under state anti-trust laws. However, criminal investigations under section 2 of the Sherman Act are rare. Monopoly-related conduct is also subject to civil investigation by the FTC under section 5 of the FTC Act. In addition, third parties directly harmed by anti-competitive conduct can bring private actions for civil remedies (section 4B, Clayton Act).The following are prohibited (section 2, Sherman Act):- Monopolisation. A violation exists if the defendant:
- possesses monopoly power in the relevant market; and
- has engaged in exclusionary conduct to obtain or preserve monopoly power.
- Attempted monopolisation. A violation exists if the defendant has engaged in exclusionary conduct with the specific intent of obtaining a monopoly resulting in a dangerous probability of obtaining monopoly power.
- Conspiracy to monopolise. A violation exists if:
- two or more entities enter a combination or conspiracy;
- there is specific intent to monopolise; and
- an overt act is taken in furtherance of this conspiracy.
Only monopoly power obtained or preserved through anti-competitive conduct, with no legitimate business justification, violates the anti-trust laws. Not all monopolies are unlawful, such as those obtained through:- Superior business acumen.
- A superior product.
- A historical accident.
EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011A dominant position arises if a company has a position of economic strength which enables it to prevent effective competition being maintained on the relevant market, by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately its consumers (United Brands v Commission Case C-27/76, [1978] ECR 207, paragraph 65).Dominance is assessed by various factors, including:- Market shares of the alleged dominant company (a market share of over 50% is presumed dominant, but a share of under 40% is unlikely to be dominant) and of other market players, both at a given time and considering market share trends.
- Market structure/number of competitors in the market.
- Barriers to entry/barriers to expansion.
- The degree of countervailing buyer power.
India
Law stated as at 01-Dec-2011The test for dominance is whether an enterprise, in the relevant market in India, is able to operate independently of competitive forces prevailing in the relevant market, or affect its competitors or consumers in its favour (section 4, Competition Act).The Commission examines the following factors in determining whether an enterprise enjoys a dominant position (section 19(4), Competition Act):- Market share of the enterprise.
- Size and resources of the enterprise.
- Size and importance of the competitors.
- Economic power of the enterprise.
- Vertical integration of the enterprises or sale or service network of the enterprises.
- Dependence of consumers on the enterprise.
- Whether the dominant position was acquired as a result of any statute or by virtue of being a government company or a public sector undertaking or otherwise.
- Entry barriers.
- Countervailing buying power.
- Market structure and size of market.
- Social obligations and social costs.
- Relative advantage, in relation to its contribution to economic development.
UK (England and Wales)
The test for dominance is the same as that under EU law. A dominant position arises if a company has a position of economic strength that enables it to prevent effective competition by affording it the power to behave, to an appreciable extent, independently of its competitors, customers, and ultimately of its consumers (United Brands v Commission (Case C-27/76) [1978] ECR 207).Dominance is assessed by various factors, including:- Market share (a market share of over 50% is presumed dominant, but a share of under 40% is unlikely to be dominant).
- Market structure.
- Barriers to entry.
- The degree of countervailing buyer power.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011Courts define monopoly power as the ability to maintain prices above a competitive level or exclude competitors from the relevant market. Monopoly power can be proven by:- Direct evidence of control over prices.
- Direct evidence of exclusion of competitors.
- Indirect evidence such as market share, high barriers to entry and specific market characteristics.
Courts have generally found that a defendant having a market share in excess of 70% is prima facie evidence of monopoly power in the relevant market, especially where there are high barriers to entry or increased competitor output. Where a defendant has a market share of 50% or less, courts rarely find that monopoly power exists. In attempted monopoly cases, courts:- Generally find a dangerous probability of monopoly power where the defendant possesses a market share of 50% or more.
- Are unlikely to find a violation where the defendant's market share is between 30% and 50%.
- Almost never find a violation where the defendant's market share is less than 30%.
EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011Abuses are unilateral commercial acts which either:- Exploit the dominant position by imposing harsh trading terms on customers or suppliers (exploitative abuse), for example:
- excessive pricing;
- imposing unfair trading terms and conditions.
- Seek to exclude competition (exclusionary abuse), for example:
- selling below costs (predatory pricing);
- rebating policies designed to remove competitors;
- price/margin squeeze;
- imposing exclusivity obligations;
- refusing to supply customers who are downstream competitors (in certain circumstances);
- bundling/tying.
India
Law stated as at 01-Dec-2011An abuse of dominance is where a dominant enterprise, directly or indirectly (section 4(2), Competition Act):- Imposes discriminatory or unfair conditions on purchases, sales of goods or provision of services.
- Imposes discriminatory or unfair prices on purchases or sales of goods or provision of services, including predatory pricing.
- Limits or restricts the provision of goods or services (or technical or scientific developments relating to goods or services) to the prejudice of consumers.
- Indulges in practices which prevent market access.
- Makes the conclusion of contracts subject to acceptance by other parties of supplementary obligations that have no connection with the subject matter of the contract.
- Uses its dominant position in one market to enter into, or protect, other relevant markets.
UK (England and Wales)
Abuses are unilateral commercial acts that either:- Exploit the dominant position by imposing harsh trading terms on customers or suppliers, for example:
- excessive pricing;
- imposing unfair trading terms and conditions.
- Seek to exclude competition, for example:
- predatory pricing;
- rebating policies designed to remove competitors;
- imposing exclusivity obligations;
- refusing to supply customers who are downstream competitors (in certain circumstances);
- bundling/tying.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011The following types of abusive conduct have been found to violate section 2 of the Sherman Act:- Refusal to deal. The refusal to do business with certain suppliers or customers. However, in Verizon Communications Inc v Law Offices of Cutis V Trinko, LLP, 540 US 398 (2004)), the Supreme Court concluded that suppliers have no general duty to deal with competitors and, therefore, refusals to deal violate section 2 of the Sherman Act only in limited circumstances, such as where a firm terminates an existing voluntary, and presumably profitable, business agreement without a valid business justification.
- Exclusive dealing. Agreements requiring a buyer to purchase all or almost all of its supplies from one supplier, where that supplier possesses a significant share of the relevant market.
- Tying arrangements. Tying the purchase of one product to the purchase of another.
- Predatory pricing. Pricing below an appropriate measure of cost where the party has a reasonable prospect of recovering its losses by subsequently driving out competition and raising prices.
- Misuse of government processes. This may include influence over a standard-setting organisation or government standards, bringing sham litigation against a competitor to harm the competitor's ability to do business or fraudulently obtaining government protection from competition.
- Tortious conduct. Tortious or otherwise illegal conduct that disparages competitors and significantly impedes competition.
Exemptions and exclusions
EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011There are only very limited exclusions to Article 102, including:- Conduct by an undertaking operating services of general economic interest.
- Conduct that results in a merger.
There are no formal exemptions. However, certain conduct that would otherwise be an abuse may not be prohibited if the dominant undertaking can show that its conduct is justified. It can do so by showing either that:- Its conduct is objectively necessary.
- Its conduct produces substantial efficiencies which outweigh any anti-competitive effects on consumers.
In this context, the Commission assesses whether the conduct is indispensable and proportionate to the goal allegedly pursued by the dominant undertaking (for example, if a price discrimination policy expands output, or if a rebating policy improves efficiency).India
Law stated as at 01-Dec-2011The Competition Act does not provide for any exclusions or exemptions in the case of abuse of dominance.UK (England and Wales)
There are only very limited exclusions to Chapter II, including:- Conduct by an undertaking operating services of a general economic interest.
- Conduct that results in a merger.
There are no formal exemptions. However, certain conduct that would otherwise be an abuse may not be prohibited if there is a proportionate objective justification (for example, if a price discrimination policy expands output or if a rebating policy improves efficiency).Conduct of minor significance (that is, if the undertaking's annual turnover does not exceed GB£50 million) is exempt from fines. However, this does not protect the undertaking from damages actions brought by third parties (see Question 35).United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011There are various statutory exemptions available for various industries and activities (see Question 15).Notification
31. Is it necessary (or, if not necessary, possible/advisable) to notify the conduct to obtain clearance or (formal or informal) guidance from the regulator? If so, what is the applicable procedure?EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011There is no formal notification and clearance process. However, there is a possibility to seek informal guidance from the Commission in relation to novel questions (see Question 17).India
Law stated as at 01-Dec-2011There is no provision under the Competition Act for the notification of practices constituting abuse of dominance or for obtaining approval or guidance from the Commission.UK (England and Wales)
There is no formal notification and clearance process. However, the OFT offers ad hoc informal guidance on the application and interpretation of Chapter II and Article 102 (see Question 17).United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011Parties cannot obtain clearance from the regulators through notification. Parties may obtain informal guidance from the DOJ or FTC, however, such requests are uncommon (see Question 17).Investigations
32. What (if any) procedural differences are there between investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices?EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011The procedure is the same as for restrictive agreements (see Questions 18 to 21 and 23), except that there are no leniency/immunity or formal settlement procedures with the attached reductions of fines.India
Law stated as at 01-Dec-2011This is the same as for restrictive agreements and practices (see Question 18 to 21 and 23).UK (England and Wales)
The procedure is the same as for restrictive agreements (see Questions 18 to 21 and 23). For market investigations, seeQuestion 27.United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011The regulator's powers are the same as for restrictive agreements and practices (see Question 22).India
Law stated as at 01-Dec-2011See Question 22.UK (England and Wales)
The regulator's powers are the same as for restrictive agreements and practices (see Question 22).United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011The regulators' powers are the same as for restrictive agreements and practices (see Question 22).Penalties and enforcement
EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011Penalties and orders are the same as for restrictive agreements (see Question 24), except that there are no leniency/immunity or settlement procedures with the attached reductions of fines. To the extent that an agreement infringes Article 102, it is unenforceable in the courts.India
Law stated as at 01-Dec-2011The Commission can issue orders including:- Cease and desist orders against the abuse of dominant position.
- Penalties (see Question 24).
- Recommending the division of an enterprise (see below).
The penalties for abuse of a dominant position are the same as those for engaging in restrictive practices (see Question 24). The Commission can also order a dominant enterprise to be divided into two or more entities, to ensure that it does not abuse its dominant position (section 28, Competition Act).In abuse of dominance cases decided by the Commission so far, the following fines have been imposed:- INR6.3 billion (equivalent to 7% of the average turnover of the past three years): imposed on DLF Limited (in Belaire Owner's Association v DLF Limited and HUDA).
- INR555 million (equivalent to 5% of the average turnover of the past three years): imposed on National Stock Exchange of India Limited (in MCX Stock Exchange Ltd & Ors. v National Stock Exchange of India Ltd & Ors).
UK (England and Wales)
The penalties are the same as for restrictive agreements (see Question 24). To the extent that an agreement infringes Chapter II, it is unenforceable in the courts.United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011The available penalties and orders are the same as for restrictive agreements and practices (see Question 24).Third party damages claims
35. Can third parties claim damages for losses suffered as a result of abuse of market power? If so, what special procedures or rules (if any) apply? Are class actions possible?EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011The same rules apply as for restrictive agreements (see Question 25).India
Law stated as at 01-Dec-2011This is the same as for restrictive agreements and practices (see Question 25).UK (England and Wales)
The same rules apply as for restrictive agreements (see Question 25).United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011Third parties' rights are the same as for restrictive agreements and practices (see Question 25).EU law
36. Are there any differences between the powers of the national regulatory authority(ies) and courts in relation to cases dealt with under Article 101 and/or Article 102 of the TFEU, and those dealt with only under national law?EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011Not applicable.India
Law stated as at 01-Dec-2011Not applicable.UK (England and Wales)
There are no significant differences as Chapter I mirrors Article 101 and Chapter II mirrors Article 102.United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011Not applicable.Joint ventures
EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011There is no legal definition of joint venture under the EU merger regime. Joint ventures are dealt with under the merger control rules (see Questions 1 to 12) or under Article 101 (see Questions 13 to 26) depending on the extent to which the joint venture is or is not a full function joint venture.India
Law stated as at 01-Dec-2011The Competition Act does not specifically deal with joint ventures, except in relation to horizontal agreements falling under section 3(3) that both:- Are entered into by way of joint ventures.
- Increase efficiencies in production, supply, distribution, storage, acquisition or control of goods or provision of services.
These horizontal joint ventures are not subject to the presumption of appreciable adverse effect on competition (seeQuestion 13) under section 3(3) of the Competition Act. Therefore, once it is proven that these horizontal agreements are joint ventures that increase efficiencies, they are subject to a rule of reason assessment of their overall anti-competitive effect (applying the factors in section 19(3) of the Competition Act). All other horizontal joint ventures which do not fall within section 3(3) are assessed by the Commission for their overall anti-competitive effect using a rule of reason test (sections 3(1) and 19(3), Competition Act).The Competition Act does not specifically provide for the treatment of vertical joint ventures. However, it is believed that they will be treated by the Commission in the same manner as other vertical agreements and assessed for their overall anti-competitive effect under sections 3(1), 3(4) and 19(3) of the Competition Act.The Competition Act does not state whether joint ventures that meet the relevant thresholds for merger control will be treated as combinations subject to mandatory pre-notification (see Question 2). However, the incorporation of Greenfield joint ventures is likely to be exempt from merger control. This is due to the de minimis target exemption introduced by the Notifications for target enterprises where either the Indian assets are less than INR2.5 billion or the Indian turnover is less than INR7.5 billion (see Question 2).UK (England and Wales)
Joint ventures (JVs), where they are not notifiable under the EU Merger Regulation (Regulation (EC) 139/2004 on the control of concentrations between undertakings), are dealt with either under the merger control rules (see Questions 1 to 12) or under Chapter I/Article 101 (see Questions 13 to 26):- If the JV involves both of the following, it is subject to UK merger control rules:
- one (or more) parents acquiring at least material influence (see Question 2) over an existing enterprise (or several existing enterprises), which means that some continuing business or goodwill are injected into the JV; and
- the turnover or 25% share of supply test being satisfied.
In theory it could also be assessed under Article 101 but not under Chapter I. (Calculation of the turnover test depends on the JV structure. If only part of the parents' businesses are input into the JV, the relevant turnover is the total of all the businesses that will be controlled by the JV. If the parents pool the entirety of their businesses into the JV, the relevant turnover is the totality of all the businesses minus the turnover of the largest business.) - If the JV does not involve one or more parents acquiring at least material influence over an existing enterprise, it will be assessed under Chapter I/Article 101.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011There is no formal legal definition of a joint venture, however, the FTC and DOJ's Antitrust Guidelines for Collaborations Among Competitors defines a competitor collaboration as "a set of one or more agreements, other than merger agreements, between or among competitors to engage in economic activity, and the economic activity resulting therefrom". These guidelines are available at www.ftc.gov/os/2000/04/ftcdojguidelines.pdf.Formations of joint ventures are analysed under the Guidelines to determine whether they may substantially lessen competition, or tend to create a monopoly in violation of section 7 of the Clayton Act (see Question 7).Joint venture agreements are also subject to review under section 1 of the Sherman Act prohibiting unreasonable restraints of trade. However, agreements between participants of an efficiency-enhancing joint venture are analysed under the rule of reason, and not deemed per se illegal, if they are reasonably related and necessary to achieve the pro-competitive benefits of the enterprise (see Question 13). Therefore, in Texaco Inc v Dagher, 547 US 1 (2006), the Supreme Court held that the internal pricing decisions of a pro-competitive and legitimate joint venture cannot be deemed per seunlawful price-fixing.A joint venture is also subject to enforcement under section 2 of the Sherman Act if it unilaterally engages in exclusionary conduct to obtain or maintain monopoly power. However, in American Needle, Inc v Nat'l Football League, 130 S Ct 2201 (2010), the Supreme Court held that because the 32 football teams comprising the NFL are independently managed and in competition with each other for business, they are separate economic entities and agreements between them are subject to review under section 1 of the Sherman Act rather than section 2.Inter-agency co-operation
38. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to infringements of competition law? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information)?EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011In some circumstances, the exchange of information between the Commission and authorities in different jurisdictions is permitted, both within and outside the European Competition Network (ECN) (which consists of the Commission and the NCAs from the various EU member states).Within the ECN
For the purpose of applying Articles 101 and 102, NCAs and the Commission can exchange and use information including, in some circumstances, confidential information (Article 12, Modernisation Regulation). This is subject to a number of restrictions, including that:- The information can only be used to apply Articles 101 and 102 in relation to the subject matter for which it was originally collected.
- The information cannot be used to impose custodial sanctions on individuals.
- Exchange is subject to the rules of professional secrecy.
Outside the ECN
Effective enforcement of the EU competition rules in a global environment requires co-operation with competition authorities outside the EU, both in relation to concentrations and behavioural (in particular, cartel) activity. The Commission has co-operated with competition authorities in countries outside the EU for many years, both on policy and enforcement issues of mutual interest. The main objective is to promote convergence of competition policy and practices across jurisdictions, and to facilitate co-operation in enforcement. This takes place at both:- Bilateral level: based on bilateral agreements or memoranda of understanding, for example with the US authorities. The nature of co-operation varies between countries (for example, co-ordination of enforcement action, sharing information on cases of mutual interest and dialogue on competition policy issues).
- Multilateral level: the Commission participates in a number of organisations such as the International Competition Network (ICN), the Organisation for Economic Cooperation and Development (OECD) and the World Trade Organisation (WTO).
India
Law stated as at 01-Dec-2011The Commission began its operations in May 2009 (see Question 39). It has already established contact and interaction with the various regulators, including the US Federal Trade Commission, US Department of Justice (Antitrust Division) and the European Commission (DG Competition), to establish co-operation protocols. The Secretary to the Commission is responsible for entering into formal relationships, including the signing of any memorandum or arrangement, with the foreign competition authorities and any other foreign agencies with the prior approval of the Commission and the central government (section 18, Competition Act and Regulation 14 (3), General Regulations). In the context of merger control, the Commission can seek the opinion of other agencies in relation to a particular combination (Regulation 34, Combination Regulations). In addition, the Commission is an active member of the International Competition Network.UK (England and Wales)
Generally, disclosure of information is restricted (see Question 5). However, in some circumstances, exchange of information between authorities in different jurisdictions is permitted:- Disclosure of information under UK rules. The OFT or other public authority, when exercising its powers under the Enterprise Act and other specified competition legislation (including the Competition Act), can disclose information to an overseas authority to facilitate:
- the carrying out of investigations for the enforcement of competition law;
- bringing civil or criminal proceedings in relation to an infringement of competition law; and
- deciding whether to start or end investigations or proceedings.
In deciding whether to disclose, the OFT must consider whether:- the matter in relation to which the disclosure is sought is sufficiently serious to justify making the disclosure;
- there are arrangements in place for the provision of mutual assistance between the UK and the other jurisdiction in relation to disclosure;
- the law of that jurisdiction provides appropriate protection in relation to disclosure.
However, information gathered by the OFT during a merger or market investigation cannot be disclosed. In addition, the Secretary of State can prohibit disclosure if he considers that the overseas authority is exercising an inappropriate jurisdiction.
- Disclosure of information under EU rules. For the purpose of applying Articles 101 and 102, national competition authorities and the European Commission can exchange and use in evidence any matter of fact or law, including, in some circumstances, confidential information (Regulation (EC) 1/2003 on the implementation of the rules on competition laid down in Articles 101 and 102 of the TFEU (formerly Articles 81 and 82 of the EC Treaty) (Modernisation Regulation)). This is subject to a number of restrictions, including that:
- the information can only be used to apply Articles 101 and 102 in relation to the subject matter for which it was originally collected;
- the information cannot be used to impose custodial sanctions on individuals; and
- exchange is subject to the rules of professional secrecy.
Disclosure is made through the European Competition Network (ECN), which consists of the European Commission and the national regulators from each EU member state. The OFT has regard to considerations in the Enterprise Act when deciding whether to disclose information under the Modernisation Regulation.
United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011The US has formal bilateral anti-trust co-operation agreements and informal understandings with foreign countries to obtain co-operation in anti-trust enforcement matters. However, information obtained by enforcement agencies under the HSR Act or through compulsory process remains protected from disclosure and cannot be shared with foreign enforcement agencies without the information provider's waiver.The US has also entered into bilateral mutual legal assistance treaties with foreign countries for co-operation in criminal anti-trust law enforcement. The US agencies also participate in the Competition Committee of the Organisation for Economic Co-operation and Development (OECD) and the International Competition Network.Proposals for reform
EU
Vincent Brophy and Scott McInnes, Jones DayLaw stated as at 01-Dec-2011On 17 October 2011, the Commission released a:- Notice on best practices for the conduct of proceedings concerning Articles 101 and 102 TFEU.
- Decision on the function and terms of reference of the hearing officer in certain competition proceedings.
The adoption of this Notice was undoubtedly a response by the Commission to the pressure it has faced to provide more transparency and due process in its competition investigations. The changes essentially concern:- Earlier opening of proceedings.
- Earlier access to key documents.
- State of play meetings.
- Triangular meetings.
- Including fines parameters in the statement of objections.
- Publication of the rejection of complaints.
Regrettably, despite what Commissioner Joaquín Almunia had previously announced, no changes were announced to the way oral hearings take place.In relation to the powers of the hearing officer, the changes concern his earlier involvement in the proceedings, some powers in relation to legal privilege, and powers in relation to enquiries about the procedural status of a case.Only time will tell whether the announced measures will have a practical effect on the protection of investigated parties' rights of defence and due process (some of the changes may be helpful, but some of them may not have any significance in practice).In 2011, the Commission held a public consultation on the quantification of harm and, more generally, on actions for damages. Official results of this have not yet been made public by the Commission. In September 2011, Commissioner Joaquín Almunia mentioned in a speech that the Commission would soon publish a communication on the general principles of collective redress. More developments are therefore to be expected in this field.India
Law stated as at 01-Dec-2011A committee headed by Dhanendra Kumar (formerly Chairman of the Commission) has been set up to frame a national competition policy for effectively ensuring fair competition laws and policies across India (NCP Committee). To implement the new national competition policy, it is proposed that both:- All government ministries, authorities and agencies will be encouraged to have an in-house cell to undertake competition impact assessments of new laws and policies.
- A new body, the National Competition Policy Council, will be set up, among other things, to assist the government in the competition impact assessments and the mobilisation of awareness of the competition policy principles across India, including through the consumer movement.
The NCP Committee has proposed amendments to the Competition Act (including collective dominance and a control-based merger control test). If accepted by parliament, these are expected to be incorporated into the law in the next few years.UK (England and Wales)
The UK government is proposing a range of fundamental reforms of UK competition law institutions and procedures, which were the subject of a consultation in the first half of 2011. Reforms under consideration include:- Amalgamating the OFT and the CC into a single Competition and Markets Authority (this is thought highly likely).
- Possibly making UK merger notification mandatory.
- Changing the process for UK investigations under Chapter I and Chapter II (and Articles 101 and 102), such that the final decision is taken by a body separate from the original investigating body (whether a separate panel within the competition authority, or by the competition authority bringing the case before the CAT).
- Possibly widening the criteria for applying the cartel offence.
- Changing the sectoral regulators' role in competition law enforcement.
The government's announcement on how it proposes to take forward these possible reforms was expected in early 2012.United States
Aimee Goldstein and Andrea Levine, Simpson Thacher & Bartlett LLPLaw stated as at 01-Dec-2011During the past two years, US anti-trust laws and policy have seen meaningful changes including:- The revised Horizontal Merger Guidelines issued in August 2010.
- The revised Antitrust Division Policy Guide to Merger Remedies issued in June 2011.
- Changes to the HSR Form and HSR regulations announced in July 2011.
In addition, in October 2011, the DOJ and FTC issued a joint Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program. This statement addressed the agencies' policy on accountable care organisations (ACOs) (organisations of healthcare providers), including application of rule of reason analysis to an ACO's joint contracting activities and expedited voluntary anti-trust review of newly formed ACOs.There are currently no new proposals to further reform US anti-trust laws in the immediate future
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