CCI chairman stresses on advocacy

The chairman of the Competition Commission of India Mr.Dhanendra Kumar in a recent interview spoke about the need to generate awareness on competition issues and the benefits of voluntary compliance with the recently notified Competition Act. He referred to the mandate of advocacy given by the act. He also said that tackling cartels would be a primary priority for the Commission. The chairman has said in the interview that provisions relating to combinations are likely to be made effective shortly and on enforcement he said that the Commission has sufficient powers of investigation and that the certainty of being caught and punished if one violates the law would assist in ensuring compliance. For the full text of the interview, see: India Law Journal

Power transformer producers fined for market sharing cartel

Seven companies- ABB, AREVA T&D SA, Siemens, Toshiba, Hitachi, Fuji electrics and ALSTOM SA, have been fined 67.6 Million Euros (around 460 Crores in INR) for operating a market sharing cartel selling transformers in the European Economic Area and Japan. The cartel was in operation from around June, 1999 to May, 2003. The companies involved met once or twice in a year in either Asia or Europe, used code names and went to great lengths to hide their illegal actions.
Siemens was granted immunity from the fine under the leniency programme, which was introduced since it was very difficult to gather evidence on cartels without insider support. Under a similar provision on the Competition Act in India, any participant in a cartel who comes forth before investigations are complete and offers full and unconditional cooperation can be exempted from fines.
The cartel is reminiscent of the Lysine cartel which was exposed by the FBI and subsequently had to pay a huge fine apart from federal prison terms for top officials of Archer Daniels Midland. The company also had to settle a class action lawsuit later. The transformers cartel may also face lawsuits from victims of the cartel in national courts and the EC's fine is not inclusive of potential fines that former members of the cartel might incur or payments they might have to make in these lawsuits. For more information see: EC Press Release

EU focus on antitrust class action lawsuits

European Union antitrust regulators shall be promoting private damages actions in competition cases so that victims can be compensated and companies can be deterred from breaching the EU’s strict rules. Class actions are rare in Europe and much more common in the United States, where individuals group claims into one lawsuit. This gives consumers the incentive to pursue compensation — often for small sums — when it would be costly or time-consuming to take action individually.
In an attempt to avoid any abuse of class actions, the draft directive underlines that only state bodies or non profit-making organisations appointed by national governments in the EU can bring class action lawsuits in national courts. A so-called “opt-out” clause means victims would automatically be included in the class action lawsuit unless they had been notified by the appointed body and choose to be excluded from the litigation. The draft directive would allow victims at least two years to take legal action after a final court ruling on a company’s infringement. Claims can be made for actual losses and loss of profit.

CCI to automatically approve 'Large M&As'

India’s anti-trust body, the Competition Commission of India (CCI), is planning to come out with regulations for automatic approval to large mergers and acquisitions (M&As) if these are not harming the interest of the consumers. As per the regulations which are being finalised by the CCI, its permission is required for any acquisition where the combined turnover of the two parties (acquirer and the enterprise being acquired) exceeds Rs 3,000 crore or the combined value of their assets is more than Rs 1,000 crore. If it is an overseas transaction, the threshold limit is $500 million worth of assets or turnover in excess of $ 1.5 billion. Sections 5 and 6 of the Competition Act, 2002 which deal with mergers and acquisitions is yet to be notified. Till these sections are not notified, the CCI cannot deal with cases under these two sections. Under the current competition framework, the CCI can take up to 210 days to clear a transaction.

Is the Jet-Kingfisher code sharing deal anti-competitive?

The proposed code-sharing agreement between India’s two biggest private operators in the airline industry, Jet Airways and Kingfisher Airlines has come under the scrutiny of the Competition Commission of India (CCI) as a complaint has been filed with the competition watchdog saying the pact could lead to the formation of a cartel. The scope of the strategic alliance between Jet and Kingfisher, announced in October 2008, includes code-sharing on both domestic and international flights and joint fuel management in order to reduce expenses. Aviation analysts feel that costs for the airlines are at a peak, which has led to a serious dip in demand. This, coupled with the global financial crisis has also made the raising of capital almost impossible.

When two principal competitors come as collaborators, this can only be as a means to survive. If the situation was normal, this alliance could be called anti-competition, more so as both together have a market share of around 60%. But in the given circumstances this alliance is a need of the hour, a rescue plan to bring stability in the industry. However, experts at India’s regulatory body for competition law, the Competition Commission of India while airline alliances can shed costs, these can adversely impact competition in the markets. They reduce choice for the travelling public and increase tariffs. For this reason, airline alliances and mergers have been the subject of investigations by competition authorities.
For more on the same, please see: Business Standard article

'Oneworld' airline alliance facing rough winds?

The European Commission has raised objections against the 'oneworld' airline alliance (consisting of British Airways, American Airlines and Iberia) proposed cooperation on passenger air transport services on transatlantic routes. The Commission sent a statement of objections which is a formal step in antitrust investigations in which the Commission informs the parties concerned in writing of the objections raised against them.

Rival airlines have complained that the proposal would curb competition in several important routes, with Virgin Atlantic, owned by Richard Branson, terming the proposal as something that would create a 'monster monopoly' with power to collude on prices. The proposal would have resulted in the parties jointly managing schedules, capacity and pricing, as well as sharing revenues on transatlantic routes between North America and Europe.

The Commission is currently investigating similar agreements between Star Alliance (Lufthansa, Continental Airlines, United Airlines and Air Canada among others) and Skyteam (Air France-KLM, Delta Airlines etc.), alliances which have been granted immunity by authorities in the United States on the other side of the Atlantic, but that immunity is unlikely to have any impact on any decision the European Commission might take.
Also read:New York Times Report and European Commission Press Release