Client Case Study: A ‘Total’ Success in France

Orrick’s European competition team assisted and represented Total (Totalgaz and its parent company Total Raffinage Marketing) in a major, multi-year case in France that wrapped up on December 20, 2010, and that involved the five main players in the liquefied petroleum gas (LPG) market. Total’s competitor Shell had lodged price cartel accusations as part of its application for price leniencies submitted to the French Competition Authority (FCA), France’s national competition regulator. Shell had alleged that two cartels existed in the LPG market: one involving collusion on prices and one involving collusion to raise entry barriers for mass distributors who planned to enter the market.

The FCA investigated the allegations for more than five years and, at the end of the probe, accused the five companies involved of perpetrating a price cartel. The FCA also accused the parents of four of the companies, following the Akzo precedent (see Orrick’s summary of that ruling here). The FCA also determined that alleged barriers raised to hinder mass distributors’ entry represented an abuse of a collective dominant position, but not a cartel.

However, Shell’s leniency application, which had prompted the FCA investigation, was primarily based on e-mails and an affidavit from a former employee. The Orrick team discovered and proved that the e-mails were not genuine. No other party, nor the FCA itself, had raised this issue. Once Orrick’s team filed its findings, the FCA immediately appointed an expert who fully confirmed Orrick’s analysis. The FCA subsequently withdrew all of its accusations, dismissing the case without finding that any company had participated in a cartel.

Further, the FCA invited in the public decision its General Rapporteur (the head of investigations at the FCA) to initiate proceedings against Shell for misleading the FCA, which could net a fine up to one percent of Shell’s worldwide turnover. It also invited the chairman of the FCA to initiate criminal proceedings.

This case required complicated legal and economic analyses. One of the questions raised was whether the Airtours standard applied not only to ex-ante cases (merger control) but also to ex-post cases (antitrust) and whether it was the only standard to apply. The FCA decided to apply the Airtours test only and concluded, as argued by Total, that there was no collective dominant position in the LPG bottled gas market in France. This decision is very important for major companies because it applied the mergers and behavioral practices standard to antitrust cases and also gave useful guidance for how to analyze concentrated markets requiring high and long-term investments. Orrick’s team included associates Lise Damelet Grilli, Guénolé Le Ber and Philippe Zeller, and was led by Partner Philippe Rincazaux, all of the Paris office.

Regional Developments: United States

Federal Trade Commission Issues New IP/Antitrust Report and Addresses Standard Setting. On May 13, the FTC issued a new report regarding the intersection of antitrust and intellectual property law. The report, “The Evolving IP Marketplace: Aligning Patent Notice and Remedies With Competition,” continues the FTC’s engagement on intellectual property rights and competition concerns addressed in its 2003 report, “To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy.”

The new report focuses on enhancing competition through (1) improvements in providing notice to the public regarding patents and (2) recommendations to the courts with respect to improving patent law remedies to promote innovation and competition.

On June 21, the FTC hosted a one-day public workshop on standard setting to examine the legal and policy issues surrounding the competition problem of “hold-up” when patented technologies are included in collaborative standards. The panelists discussed mechanisms for standard-setting organizations to prevent patent hold-up, including (1) adopting clear patent disclosure rules, (2) requiring commitments to license on reasonable and nondiscriminatory (RAND) terms and (3) requiring the disclosure of licensing terms before a standard is adopted. The FTC is accepting public comments until August 5, 2011, which can be submitted by clicking here.

DOJ and FTC Issue New Regulations for Premerger Notifications. The DOJ and FTC have issued new regulations that refine the type of information and documentation companies must submit in connection with premerger notification filings under the Hart-Scott-Rodino Antitrust Improvements Act. While the form eliminates some information, the expanded definitions of (1) what constitutes a “4c” document, (2) what revenues must be reported and (3) what constitutes an “associated entity” will likely increase the burden and cost for both parties to the transaction. A summary of the changes follow:

  • Acquiring companies now are required to submit information about “associated entities.” Associated entities are those that are “commonly managed” by the same business as the purchaser. In the past, information about these entities have been excluded because they are not considered “controlled” by the ultimate parent entity of the acquirer under HSR regulations. The impact of this change is likely to be most significant on private equity and/or hedge funds.
  • The new rules also require that “pitch books,” confidential information memos and other materials created by third parties that are not specifically related to the transaction also be provided. This could include materials that officers and directors receive from third parties like investment bankers and consultants, even if the documents are not directly related to the transaction.
  • In the past, companies could report revenues from products manufactured abroad as imports, in much the same manner as they do for U.S. Census filings. Under the new regulations, companies will be asked to provide detailed product codes for foreign-manufactured goods just as they would for domestic products.

On the positive side, the revised rules eliminate the need to provide copies of filings with the U.S. Securities Exchange Commission, economic “base year” data, and detailed listings of all the voting securities acquired in a transaction. The new regulations will go into effect on August 7, 2011. A copy of the FTC notice may be found here, the new form can be found here and the text of the notice in the Federal Register can be found here.

Regional Developments: Europe

European Commission Unveils New Standardization Strategy. On June 1, 2011, the European Commission published a communication setting out its new policy on standardization. The aim of the reforms is to streamline existing rules on standardization, promote interoperability and innovation in standards and ensure user choice.

One of the Commission’s new initiatives is the creation of an annual Work Programme to identify priorities for European standardization. In addition, the Commission acknowledged in its new policy the role of specialized global fora and consortia in the development of standards. Such bodies play an increasingly important part in standard-setting, but this role has not previously been reflected in Commission policy.

At the same time, the Commission published proposals for a new regulation on standardization, which will also cover standards for services. The regulation will allow for public procurement documents, such as invitations to tender by public bodies, to reference selected standards for information and communication technology, provided that these standards comply with certain quality criteria.

European Court of Justice Gives Preliminary Ruling in TeliaSonera Case. On February 17, 2011, the European Court of Justice (ECJ) issued its judgment in the TeliaSonera case. TeliaSonera Sverige AB is the incumbent operator in the Swedish market for fixed-line telephony. The Swedish courts referred the case to the ECJ for guidance on the circumstances in which a margin squeeze may amount to abuse of a dominant position.

TeliaSonera argued that a dominant undertaking should be free to fix its terms of trade, unless its conduct meets the test established in the case of Bronner. Under Bronner, the terms of trade must be so disadvantageous to those trading with the dominant undertaking that they entail a refusal to supply.

The ECJ rejected TeliaSonera’s argument. It held that selling goods on conditions which are disadvantageous may in itself be a form of abuse distinct from refusal to supply, and in such case the Bronner criteria do not need to be satisfied. The ECJ justified its position on grounds of policy, arguing that to apply Bronner in the manner advocated by TeliaSonera would unduly reduce the effectiveness of Article 102 TFEU (EU law governing abuse of dominant position).

The Court also acknowledged in its judgment the concept of super-dominance. It noted, however, that the existence of a position of super-dominance is irrelevant to establishing the infringement, since a dominant position alone is sufficient for that purpose. The degree of dominance held by the undertaking, and therefore whether it is super-dominant, may be relevant when assessing the effects of the undertaking’s conduct.

Regional Developments: Asia

Supreme People’s Court of China Issues Draft Private Litigation Guidance in Antitrust Lawsuits. On April 25, 2011, the Supreme People’s Court of China issued a judicial interpretation (a form of draft regulation) entitled “Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in Hearing Monopoly Civil Cases.”

The draft declares that natural persons (including consumers) as well as organizations can be plaintiffs in stand-alone private antitrust suits even if an antimonopoly agency does not establish an infringement. It also clarifies procedural issues specific to civil proceedings instituted under the Antimonopoly Law of the PRC (the AML), including the burden and standard of proof, matters of territorial jurisdiction, multi-claimant litigation and case consolidation, the statute of limitations and the relationship between administrative and judicial enforcement processes.

Google Faces Antitrust Complaints over Mobile Internet Search Services in South Korea. Two South Korean search portals (NHN Corp./Naver and Daum Communications Corp.) filed complaints against Google in April 2011 with South Korea’s Fair Trade Commission (KFTC), alleging that Google is abusing the dominance of its Android smartphone platform to stifle and restrict competition in the mobile search market. The complainants allege that Google is restricting local mobile service providers and Android smartphone manufacturers from preloading smartphones with rival mobile search applications. The companies have asked the KFTC to determine whether such a restriction constitutes an unfair business practice.

China State Administration for Industry and Commerce Issues Three Antimonopoly Law Rules. Since February 2011, the State Administration for Industry and Commerce (SAIC) of China has implemented three new rules, the Provisions on Prohibiting Monopoly Agreements, the Provisions on Prohibiting Abuse of Dominant Market Position and the Provisions on Prohibiting Abusing Administrative Powers to Exclude or Restrict Competition, which will act as rules supporting the Antimonopoly Law of the PRC.

The new rules provide more detailed guidance on violations of the AML, abuse of dominant market position and abuse of administrative power to eliminate and restrain competition; improve antimonopoly enforcement by administrative agencies for industry and commerce; and further perfect the basis of AML enforcement.

The rules provide specific penalties for suspected monopoly activities. Monopoly agreements already entered into will be subject to confiscation of illegal gains and a one percent to 10 percent fine of the violator’s latest annual revenues. Monopoly agreements not yet entered into at the time of the new rules will be subject to confiscation of gains and a fine up to 500,000 Yuan. Abusers of a market dominant position will be subject to confiscation of illegal gains and a one percent to 10 percent fine of the abuser’s latest annual revenues.

Malaysia Establishes Competition Commission. The new Malaysian Competition Commission (MyCC), established in April of this year, will have powers to probe and enforce the 2010 Competition Act. The MyCC will have nine commissioners and a chairman who will hold office for three years (though their terms can be extended). The commissioners will be appointed by the prime minister on the recommendations of the Minister of Domestic Trade, Co-operatives and Consumerism. The MyCC, apart from advising the government, will function like a court in dealing with cases involving alleged anti-competitive practices. Persons or companies that run afoul of the provisions of the 2010 Act face strict penalties, including imprisonment. The Act applies to all commercial activities undertaken within and outside Malaysia that affect fair competition in the Malaysian market.

Events, Articles and Honors

Recent Events

Practical Lessons and Experience under the New Merger Guidelines
Silicon Valley – July 20, 2011
Orrick partners Ted Henneberry, Garret Rasmussen and Richard Vernon Smith will chair a panel discussion focusing on key lessons for mergers and acquisitions planning in light of new antitrust merger guidelines. The featured speaker will be former Deputy Assistant Attorney General for Antitrust in the U.S. Department of Justice, Daniel L. Rubinfeld.

Global Investigations
Tokyo – July 26, 2011
Orrick partners Lisa Tenorio-Kutzkey and Andrew Dale >will lead a discussion in the firm’s “Orrick Library” seminar series on the topic of global investigations.

Recent Articles

David Goldstein, Richard Goldstein, <a href="http://www.orrick.com/lawyers/Bio.asp?ID=243090″>Robert Reznick and Howard Ullman authored FTC Advisory Letters Clarify Obligation Report Drug Patent Agreements, >a Life Sciences and Antitrust Alert. It also appeared in Competition Law360 >on June 7, 2011.

Douglas Lahnborg, Veronica Lockyer and Elizabeth Turner contributed the UK chapter to the recently published PLC Competition Handbook 2011, Volume 2: Leniency – Country Q&A.

Douglas Lahnborg and Margarita Ivanova contributed an article on “Private Damages Actions in the EU” in the recently published Euromoney Competition & Antitrust Review 2011.

Recent Honors

BTI Consulting Group, a research firm devoted to general counsel issues, listed Orrick partner Bob Rosenfeld as one of 15 U.S. lawyers identified in a recent survey of corporate counsel for providing exceptional client service in antitrust matters.

Chambers has recognized several Orrick antitrust partners in its 2011 rankings. Milan-based Orrick partner Alessandro De Nicola is listed in Chambers Europe; San Francisco-based partners Bob Rosenfeld and Stephen Bomse and senior counsel Laurence Popofsky are listed in Chambers California; and Washington, D.C.-based partner Robert Reznick is listed in Chambers D.C.

The Legal 500 also released its rankings for 2011, recommending Orrick’s Antitrust and Competition Group as a whole and individually recommending partners Bob Rosenfeld, David Goldstein, David Smutny, Lisa Tenorio-Kutzkey, Robert Reznick and Ted Henneberry. Rosenfeld was called “a great counsel and courtroom lawyer;” Reznick was characterized as “a superior antitrust lawyer in every way;” Goldstein was quoted as being “very smart, very practical and extremely responsive;” and Smutny’s dedication to clients was called “unrelenting.”

The Legal 500 UK‘s latest rankings recommended Orrick’s London practice, which earned “top marks across the board,” and characterized partner Douglas Lahnborg as an “excellent practitioner” who “conveys clear messages” and is “very responsive.” This edition also recommended partner Ted Henneberry, who splits his time between Washington, D.C. and London, as possessing “deep experience” and “excellent judgment.”

Get to Know: Robert Rosenfeld

Robert “Bob” Rosenfeld is the Antitrust and Competition Group’s Practice Group Leader. His practice focuses on antitrust, complex commercial litigation and financial institutions. For more than 10 years, he has represented Microsoft Corporation in numerous antitrust proceedings in California and elsewhere in the United States and abroad. Bob is currently working on patent misuse matters on behalf of Microsoft before the International Trade Commission and in federal court.
He is also involved in antitrust litigation in the health care realm, including matters involving third-party payor and provider groups. He frequently advises clients about the antitrust implications of the new health care legislation and regulations. Bob also represents three major potato growers, in litigation in Idaho federal court, alleging that an unlawful cartel is limiting the potato supply for the purpose of raising prices.

Bob’s practice also includes complex business litigation, principally on behalf of major financial institutions. He has represented and counseled special litigation committees on the conduct of internal investigations and the prosecution and defense of derivative litigation.

This year, Bob was identified by the BTI Consulting Group in a recent survey of corporate counsel as one of 15 U.S. lawyers who provide exceptional client service in antitrust matters. He has also been named one of The Best Lawyers in America, for Antitrust Law, Bet-the-Company Litigation and Commercial Litigation, 2006-2010. In addition, Bob has been named as one of America’s Leading Lawyers: Antitrust, by Chambers from 2003 through 2011. He was recognized for his work this year by PLC Which Lawyer? and the Legal 500, which called him “a great counsel and courtroom lawyer.”

Bob is on the board of directors/executive committees of Sutter West Bay Hospitals, Sutter Pacific Medical Foundation and the Consensus Building Institute.