China’s Supreme Court Upholds High Court’s AML Ruling in Tencent Case

On Oct. 8, 2014, China’s Supreme Court made the final decision upholding the first instance ruling by Guangdong High People’s Court dismissing allegations by Qihoo against Tencent for allegedly abusing market dominance.

In November 2011, Beijing Qihoo Technology Ltd. (Qihoo) sued Tencent Technology (Shenzhen) Co., Ltd. and Shenzhen Tencent Computer Systems Company Limited (collectively Tencent) before the Guangdong High People’s Court, alleging Tencent abused its dominant market position in the relevant market of instant message (IM) software and service.

The first instance decision was made in March 2013, dismissing Qihoo’s allegations. Although the Supreme Court upheld the lower court’s ruling, it corrected some analyses made in the first instance decision. In particular, the final decision concluded the following: 1) The relevant market shall be defined as the Mainland China IM service market (rather than the global market as defined by the first instance court), including not only personal computer terminal IM service but also mobile terminal IM service, and including not only comprehensive IM services but also non-comprehensive IM services like text, audio or visual, etc.; 2) The evidence presented was not sufficient to establish that Tencent holds a dominant market position―market share-related evidence alone was not enough given that the IM field is rapidly developing and features a great number of players (e.g., Alitalk, Fetion, MSN, Renren, Skype and many others) Furthermore, Tencent’s ability to control the commodity price, quality, quantity or other trading conditions is weak; factors like network effects do not significantly increase the users’ dependence on the IM service provided by Tencent; entering the IM market is relatively easy; 3) Tencent’s alleged conduct did not constitute abuse of market dominance. The company’s issues with incompatible products did not result in excluding or limiting competition despite their inconvenience to users, the Supreme Court found, nor did Tencent’s product tie-ins.

The Supreme Court’s decision is available here.

SAIC Fines Tobacco Wholesaler 1.7 Million RMB for Differential Treatment Under China’s Anti-Monopoly Law

On Sept. 29, 2014, under the authorization of the China State Administration of Industry and Commerce (SAIC), the Jiangsu Administration of Industry and Commerce imposed fines of 1.7 million RMB (US$276,000) on the Pizhou Branch of Xuzhou Tobacco Company (Pizhou Branch) for differential treatment under the Anti-Monopoly Law (AML).

The investigation, triggered by a complaint from Pizhou city local tobacco retailers, was initiated in August 2013. In accordance with China’s Tobacco Monopoly Law, the State exercises administration over the production, sale, import and export of tobacco commodities, and implements a tobacco monopoly license system. Pizhou Branch was the sole company with the “license for tobacco monopoly wholesale enterprise” in Pizhou. Thus, all tobacco retailers in Pizhou could purchase tobacco products only from Pizhou Branch, as under the Regulations for the Implementation of the Tobacco Monopoly Law, a retailer with the “license for tobacco monopoly retail trade” shall lay in new stocks of tobacco products at the local tobacco monopoly wholesale enterprise. SAIC therefore found that Pizhou Branch holds a dominant position of the cigarette wholesale market in Pizhou. Read More

Shaanxi High Court Upholds Intermediate Court Decision Dismissing Market Dominance Claims Against Xianyang Taxi Service Under China’s Anti-Monopoly Law

On Sept. 10, 2014, Shaanxi High People’s Court made a final decision upholding the first instance ruling by Xi’an Intermediate People’s Court dismissing claims by Xianyang Huaqin Taxi Service Co., Ltd. (Huaqin) against Xianyang Qindu Taxi Transport Service Branch (Qindu), Xianyang Weicheng Taxi Transport Service Branch (Weicheng), Xianyang Huaguang Taxi Transport Service Branch (Huaguang), Xianyang Public Transport Group Company (Public Transport) and Xianyang City Transport Management Department (Management Department) for abuse of market dominance. Similar first and second instance decisions were made in a similar case that was separately filed by Xianyang United Transport Service Co., Ltd. (United) against the same defendants.

The so-called Three Branches (Huaqin, Qindu, and Weicheng) were collectively owned enterprises originally set up by Management Department in 1995 and were transferred to Public Transport in 2011. Management Department is an administrative agency responsible for taxi transport management and issuing transport operation licenses. The plaintiffs alleged that the Three Branches had contracted with 950 (out of the total 1,153) individual taxi drivers in Xianyang urban area for a long period of time; thus individual taxi drivers were deprived of the rights to choose service companies, and the plaintiffs were excluded from the competition with the Three Branches for providing services to the individual taxi drivers. Read More

SAIC Fines Four Chongqing Quarry Operators for Market Division Under China’s Anti-Monopoly Law

On Oct. 31, 2014, China’s State Administration of Industry and Commerce (SAIC) published an August 2014 decision by the Chongqing Administration of Industry and Commerce regarding fines against four Chongqing quarry operators. The investigation began in December 2012 against the four respondents, Xiaobo Zhang, Aiyuan Wen, Xianxue Wen and Gongzheng Wu, who controlled all seven quarries in Shanghuangpian area of Wuxi County, Chongqing.

The Fengxi Expressway project, launched in 2008, was in great need of gravel, and specifically the expressway sections E4 to E10, close to the Shanghuangpian area, relied on gravel purchased from the quarries in this area. Before June 2011, there was intense competition among the quarries in selling gravel to the section E4 to E10 project departments. In May 2011, operators of the quarries started to meet to discuss dividing the market. Agreements were reached on which quarry would sell to which project department, and the four respondents followed the agreement until July 2011. The project departments were forced to accept the four respondents’ agreement, given the special nature of the gravel commodity as well as cost concerns.

The four respondents were fined, respectively, 40,000 RMB (US$6,500), 70,000 RMB (US$11,400), 200,000 RMB (US$32,500) and 90,000 RMB (US$14,600). The SAIC Decision is available here.

EU Council Adopts Directive on Antitrust Damages Actions

On Nov. 10, 2014, the Council of the European Union formally adopted a Directive on antitrust damages actions. The Directive, proposed by the European Commission, sets out rules designed to ensure that citizens and businesses, in the EU, who have suffered harm caused by an infringement of Article 101 or 102 TFEU, or equivalent provisions of national competition law, can effectively claim damages against the infringing party. The Directive, which was formally signed on Nov. 26, 2014, will enter into force late December 2014. Member States will then have two years to implement it at national level. For further reporting on the Directive, see here and here.

Court of Justice Emphasizes in Guardian Case That There Must Be No Discrimination When Fines Are Calculated

On Nov. 12, 2014, the Court of Justice of the European Union (CJEU) issued its judgment in Guardian v. European Commission. Guardian, fined €148 million (US$184 million) by the Commission in 2007 for its participation in the “Flat glass” cartel, asked the CJEU to set aside the General Court’s judgment dismissing the company’s original appeal to have its fine reduced. Upholding Guardian’s arguments that the Commission had infringed the principle of equal treatment, the CJEU reduced the fine imposed on Guardian by 30 percent to €103.6 million (US$128.8 million). The CJEU clarified that, for the purpose of fine calculation, the proportion of the overall turnover derived from the sale of products in respect of which the infringement was committed best reflects the economic importance of the infringement. Thus, when determining value of sales, the Commission must not draw a distinction between internal sales and sales to independent third parties. The exclusion of internal sales had, in the present case, led to the relative weight of one vertically integrated company (Saint Gobain) being reduced and that of Guardian being increased commensurately. Read More

UK Competition Appeal Tribunal Extends Scope of BSkyB’s Wholesale Must-Offer Obligation in the Pay TV Sector

On Nov. 5, 2014, the Competition Appeal Tribunal (CAT), the UK’s specialist competition judicial body, varied the scope of an interim relief order to include an additional platform to which BSkyB (Sky)―the holder of exclusive broadcasting rights to several premier sporting events in the UK―must offer to wholesale its core premium sports channels (CPSCs). The interim relief order stems from a 2010 decision of Ofcom, the UK’s communications regulator, which amongst other things regulates the pay TV sector. In its 2010 “Pay TV Statement,” Ofcom concluded that Sky had market power in the supply of CPSCs and was restricting supply to other pay TV providers in a manner that was prejudicial to fair and effective competition. To remedy the competition concerns, Ofcom decided to impose a term in the broadcasting licences of Sky such that it must offer to wholesale its CPSCs to retailers at a fixed price set by Ofcom. On the basis that Sky would appeal, the interim relief order was made, in 2010, to limit Sky’s wholesale must-offer obligation to only certain specified platform operators. Read More

General Court Confirms EC Decisions Ordering Inspections at Premises of Orange

In its judgment of Nov. 25, 2014, the General Court of the European Union rejected arguments put forward by Orange disputing the proportionality and necessity of decisions by the European Commission requiring Orange to undergo inspections. Orange, the subject of a Commission inspection in July 2013, had argued that the Commission did not have the right to order the inspection since the French Competition Authority had already investigated identical allegations and found Orange’s conduct to be in compliance with EU competition rules. The Court pointed out that the Commission is not bound by decisions taken by a national court or national authority pursuant to Articles 101 and 102 TFEU. The Commission may at any time make decisions relating to competition, even where such decisions conflict with national decisions. The Court also noted that Member State national authorities are not empowered to take negative decisions declaring that violations of the EU competition rules have not occurred. Moreover, it cannot be concluded from an absence of intervention that the Commission has accepted the validity of a decision by a national authority (national competition authorities are obliged to inform the Commission no later than 30 days before adopting certain types of decisions). Read More

China and EU Reach Amicable Settlement on Trade Defense Investigation Into Chinese Telecoms

On Oct. 18 2014, at the 28th session of the China-EU Trade and Economic Joint Committee, intensive discussions led by Chinese Minister of Commerce Gao Hucheng and EU Trade Commissioner Karel De Gucht were concluded with an amicable settlement of the Commission’s trade defence investigation into Chinese telecoms. The Commission’s investigation threatened to impose significant EU anti-subsidy countervailing duties on Chinese exporters of mobile telecommunications networks equipment. The value of Chinese exports of the equipment to the EU is over €1 billion (US$1.2 billion) per year. The main points of the settlement include tasking an independent body with the monitoring of the Chinese and EU telecoms networks markets; guaranteeing access to the relevant Chinese standard-setting body for European companies without discrimination; and equal treatment of companies bidding for publically funded research and development projects. Read More

FTC Settles Its First Action Against a Patent Assertion Entity

On Nov. 6, 2014, the U.S. Federal Trade Commission settled its first action against a patent assertion entity. The FTC alleged that MPHJ Technology Investments LLC and its law firm had sent more than 16,000 letters to small businesses throughout the United States asserting that they were infringing its patents for scanning documents to email and that MPHJ would institute litigation unless the letter recipients agreed to pay MPHJ a royalty. The FTC alleged that the mass letters were misleading and therefore actionable under Section 5 of the FTC Act, because, among other things, MPHJ did not have an intention of actually filing patent infringement suits. MPHJ maintains that it always intended to bring suits, but only decided not to after the validity of its patents was challenged in America Invents Act proceedings. Under the settlement, MPHJ agreed to refrain from making certain deceptive representations when asserting its patent rights. A copy of the agreement containing consent order is available here.

FTC Reaches Consent Agreements with Blue Rhino and AmeriGas to Settle Charges of Restraining Competition

The two leading suppliers of pre-filled propane exchange tanks, commonly used in barbecue grills and outdoor heaters, have reached an agreement with the U.S. Federal Trade Commission to settle charges that the companies illegally agreed not to deviate from their plan to reduce the volume of propane sold to Walmart and other key customers. The companies had previously settled private multi-district litigation based on the same conduct.

The administrative complaint, issued on March 27, 2014, alleged that Blue Rhino and AmeriGas—which together account for around 80 percent of the market—each decided in 2008 to reduce the fill of their propane tanks from 17 to 15 pounds without a corresponding price decrease, effectively increasing by 13 percent the per-unit price of the propane. This initial reduction was not alleged to be an unlawful agreement. However, in the face of resistance from Walmart, Blue Rhino and AmeriGas allegedly agreed that each company would stand firm in its reduction and not give in to Walmart’s pressure. Among the evidence supporting these allegations were telephone and email conversations in which the companies’ executives discussed the reduction and urged each other to “hang in there” when insisting on the 15-pound tank. The complaint alleged that the conduct was a per se unlawful price-fixing agreement. Read More

Price-Fixing MDL Against Online Travel Booking Companies Dismissed With Prejudice

On Oct. 27, 2014, the U.S. District Court for the Northern District of Texas dismissed with prejudice a complaint accusing a group of online travel booking companies of colluding to set hotel room rates. The putative customer class had alleged that the online travel companies, including Orbitz, Expedia, Travelocity and Priceline, colluded with hotels like Marriott and Hilton to fix room prices, thereby engaging in a resale price maintenance conspiracy. The complaint alleged that the companies struck agreements with hotels that ensured that online retailers didn’t discount room reservation rates. The hotels allegedly refused to let competing online retailers sell room reservations if they wouldn’t fix and maintain prices.

In dismissing the complaint with prejudice, the court noted that plaintiffs described the alleged conspiracy in vague terms and used a vague and contradictory timeline of events, leaving open the possibility that the companies’ actions were legitimate and could be explained by common economic experience. The court had previously dismissed a prior complaint on similar grounds. Though plaintiffs’ amended complaint provided new allegations and dropped a group of hotel chains from the suit, the court ultimately found the changes insufficient to suggest a conspiracy had actually formed.

Court Approves Settlement of Narrowed Class Following Supreme Court’s Denial of Class Certification in Comcast v. Behrend

On Dec. 12, 2014, a District Court judge granted preliminary approval of the settlement submitted by the plaintiff class in Glaberson. v. Comcast Corp., No. 2:03-cv-06604 (E.D. Pa.). Judge John R. Padova issued the order in the case, a decade-old class action in which the U.S. Supreme Court had reversed a 3rd U.S. Circuit Court of Appeals order affirming class certification in the closely followed case captioned Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). The proposed settlement fund is $50 million, consisting of $16.7 million in cash and services valued at $33.3 million. For background on the case and the Supreme Court’s decision, click here.

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NDRC Fines Zhejiang Insurance Association and 22 Insurance Companies for Price Fixing Under China’s Anti-Monopoly Law

On Sept. 2, 2014, China’s National Development and Reform Commission (NDRC) published 23 administrative penalty decisions made at the end of 2013 against the Insurance Association of Zhejiang Province (Association) and 22 insurance companies doing business in the same province, for a total of more than 110 million RMB (US$18 million).

The NDRC’s investigation revealed that since 2009, the Association had arranged for 23 property insurance companies within Zhejiang province to reach and implement agreements on fixing commercial auto insurance rates and fixing and altering commercial auto insurance agency commissions, both of which violated the Anti-Monopoly Law (AML). The following arguments by the Association were not accepted by the NDRC: 1) the agreements on fixing insurance rates had not been implemented since 2011; and 2) the original intention of agreements on fixing the insurance agency commissions was to protect small and medium-sized insurance companies and increase their competitive capabilities, and at the same time, such agreements would not harm consumers’ interests. The 23 insurance companies that had participated in making and implementing the agreements were also found to have violated the AML. Read More

NDRC Fines Three Jilin Cement Companies 114 Million RMB for Price Fixing Under China’s Anti-Monopoly Law

On Sept. 9, 2014, China’s National Development and Reform Commission (NDRC) announced that it had instructed the Jilin Province Price Bureau to impose fines totaling 114 million RMB (US$19 million) on three cement companies for unlawful price fixing under the Anti-Monopoly Law (AML): Jilin Yatai Group Cement Sales Co., Ltd (Yatai), North Cement Co., Ltd. (North) and Jidong Cement Jilin LLC (Jidong).

The NDRC found that in April 2011, the three companies met and agreed to coordinate pricing on cement products in areas of Northeast China. The investigation also found that in May 2011, North and Yatai struck price agreements on cement products in areas within Jilin province.

The three companies’ conduct was found to have violated the AML, because it restricted market competition and harmed the interests of downstream industries and customers. However, there was overcapacity in the cement sector around the time the agreements were struck, so the three companies’ pricing agreements did not last long and the anticompetitive effect only applied to limited areas. With this in mind, the NDRC fined Yatai and Jidong, which failed to actively cooperate in the investigation, 2 percent of their sales revenue in 2012. This amounted to approximately 60 million RMB (US$10 million) for Yatai and 13 million RMB (US$2 million) for Jidong. The NDRC fined North, which cooperated and actively took corrective measures, 1 percent of its 2012 sales revenue, or approximately 41 million RMB (US$7 million).

The Jilin Province Price Bureau’s decisions are not currently available, but the official news is available here or here.

Hubei Price Bureau Fines FAW-Volkswagen and Audi Dealers for Price Fixing Under China’s Anti-Monopoly Law

On Sept. 11, 2014, Hubei Price Bureau announced that it recently imposed a fine of 249 million RMB (US$40 million) on FAW-Volkswagen Sales Company Ltd. (FAW-Volkswagen) and a fine of 30 million RMB (US$5 million) on eight Hubei Audi dealers for unlawful price fixing under the Anti-Monopoly Law (AML).

The investigation was initiated in March 2014 by the Hubei Price Bureau under the guidance of China’s National Development and Reform Commission (NDRC). It revealed that since 2012, FAW-Volkswagen had repeatedly arranged for 10 Audi dealers in Hubei to reach and implement monopolistic agreements on prices of whole vehicle sales, service and maintenance. The investigation also found FAW-Volkswagen had issued administrative documents and formed a work group to urge the dealers to follow its price-management measures. Read More

EC Imposes Fines of €138 Million on Smart Card Chips Cartel

On Sept. 3, 2014, the European Commission (Commission) announced fines totaling €138 (US$ 174 million) on Infineon, Samsung, Renesas and Philips for breaching Article 101 of the Treaty on the Functioning of the European Union (TFEU) by coordinating their market behavior in the smart card chips sector. The Commission found that, between September 2003 and September 2005, the cartel had exchanged commercially sensitive information on pricing, customers, contract negotiations, production capacity and future market conduct. The cartel was found to have operated across the European Economic Area (EEA).

The Commission had previously entered into settlement negotiations with the cartel participants pursuant to the Commission’s 2008 Settlement Notice. However, this process was discontinued in 2012 following a lack of progress in settlement discussions.

As “whistleblower,” Renesas received full immunity under the Commission’s 2006 Leniency Notice, having notified the Commission of the cartel. Samsung’s fine was reduced by 30 percent for cooperating with the investigation. Since the infringement, Philips has divested its smart card chips business but remains liable for its conduct during the period of the infringement.

The Commission’s press release announcing the fine is available here.

Zipper Maker YKK Wins Fine Reduction at EU’s Highest Court

On Sept. 4, 2014, the Court of Justice of the European Union (CJEU) rejected an appeal by the YKK Group (YKK) against the judgment of the General Court that the European Commission (Commission) had been correct in its decision relating to the fasteners cartel, in which YKK was found to have participated. In September 2007, the Commission announced fines totaling €329 million (US$412 million) on the members of the cartel, which was found to have committed serious breaches of EU competition law, including fixing prices, coordinating price increases, sharing markets, allocating customers, and exchanging commercially sensitive market information in the zipper and other fasteners markets.

YKK appealed on four grounds: 1) that the Commission and General Court had incorrectly applied the 1996 Leniency Notice rather than the 2002 Leniency Notice; 2) that the General Court had given inadequate reasons for supporting the Commission’s decision to set the starting amount of the fine at €50 million (US$62 million); 3) that the Commission and General Court had imposed fines that exceeded the upper limit of 10 percent of worldwide group turnover; and 4) that the Commission and the General Court had incorrectly applied a deterrence multiplier to the size of the fine in recognition of YKK’s economic power. Read More

CJEU Affirms Commission’s Decision Against MasterCard Interchange Fees

On Sept. 11, 2014, the Court of Justice of the European Union (CJEU) rejected MasterCard’s appeal against the General Court’s 2012 judgment that the European Commission (Commission) had been correct in its assessment that MasterCard’s multilateral interchange fees (MIFs) breached Article 101(1) of the Treaty on the Functioning of the European Union (TFEU). CJEU also simultaneously dismissed cross-appeals from Royal Bank of Scotland and Lloyds Banking Group.

In December 2007, the Commission found that the decisions of the MasterCard payment organization in setting MIFs constituted decisions by an “association of undertakings” falling within the scope of Article 101(1) TFEU, and that the MIFs had appreciable restrictive effects on competition, which affected trade between EU Member States. The Commission concluded that the MIFs were not objectively necessary for MasterCard’s system to operate and to compete. MasterCard appealed to the General Court in the first instance and its appeal was dismissed. Read More

CJEU Narrows Scope of “By Object” Antitrust Infringements

On Sept. 11, 2014, the Court of Justice of the European Union (CJEU) upheld an appeal by Groupement des Carte Bancaires (GCB) against a General Court judgment that had concluded that fees charged by GCB on the issuing of cards were anticompetitive and a breach of Article 101(1) of the Treaty on the Functioning of the European Union (TFEU). The fees were higher for banks that were not sufficiently active in installing ATMs or making contracts with acquiring merchants. In practice, such banks were new members of GCB, and included online banks and the banking arms of major retailers.

The CJEU held that the General Court had erred in law with regard to the criteria that it used to determine that the fee agreement constituted a “by object” restriction of competition. The General Court held that by object restrictions must not be interpreted restrictively, and that the wording of the fee agreement made it clear that it was restrictive of competition by object. In contrast, the CJEU stated that only certain types of coordination, where the undertaking clearly reveals such a degree of harm to competition that there is no need to examine their effects, can be found to be restrictions by object. Read More