Competition Law

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  • New OFT penalty guidanceIntroduced following strident criticism in the CAT in the context of the construction cartel appealsProportionality in the context of the undertaking’s size and financial position, the nature of the infringement, the role of the company in the infringement and the impact of the infringement on competition – the proportionality cross check comes immediately following the point where the OFT is required to see whether any adjustment is required to the fine (having taken into account duration and any aggravating and mitigating factors) for the purposes of specific deterrence – ie the need to deter the companies the subject of the decision from engaging in future anti-competitive activity as distinct from general deterrence which is the need to deter companies generally from engaging in anti-competitive activity and which is most effectively dealt with at Step 1 where the type of activity / seriousness of the infringement is the driving force. An example of where an increase for specific deterrence may be appropriate would include a situation where the gains made by the company concerned from the anti-competitive activity are estimated to have exceeded the proposed penalty.New OFT investigation proceduresStill to be published but consultation complete and announced that decision making will now be made by Committee which will not involve the Senior Responsible Officer (who makes all the significant decisions during the course of the investigation) – in other words there will be separation of the investigation team and the decision makers.Also flagged as a likely introduction is the proposed sharing of key elements of the penalty calculations so that representations in relation to those calculations can be made and taken into account in the setting of the penalty. Anticipated that this will assist in reducing the number of appeals made to the CAT purely in relation to the amount of the penalty.
  • Questioning powers (para 31 draft Bill)CMA will be able to issue notice to an individual (copy to the connected undertaking) requiring him to answer questionsCould be there and then or at a time and place specifiedNotice must indicate subject matter and purpose of investigationResponses will not generally be able to be used against the individualResponses will not generally be able to be used against the individual’s current or former employer in the context of prosecution for a criminal offence but will be able to be used in the context of civil proceedingsFine of up to £30,000 and daily fines of up to £15,000 for failure to comply with requirementRemoval of dishonesty requirement (para 39 draft Bill)“Prior publication” defenceRequires prior publication of names of companies, details of products or services, and description of nature of arrangements (and why they might be considered as cartel arrangements)Follows technical debate as to whether dishonesty requirement impeded prosecutionsPart of drive to ensure greater accountability for competition law compliance placed on individuals (cf revised guidance on director disqualification published June 2011)
  • Competition Law

    1. 1. Competition lawSomething to move up the Boardroomagenda? Kate Newman, Principal Associate 4 October 2012
    2. 2. Outline• a reflection on recent policy and case law trends in the sector• what is the ECN and how is the work of its members relevant?• what are the implications for food and drink companies?• UK competition law developments in train
    3. 3. Recent policy initiatives (1)• European Commission antitrust “task force” for food sector – two year “mission” from January 2012 – established as a result of continued calls for scrutiny of retail markets – complements rather than replaces national competition authority investigations
    4. 4. Recent policy initiatives (2) • food and retail sector as a specific focus for the ECN – ECN stands for European Competition Network – nature of food markets tends to be local/national rather than Europe wide – so enforcement activity predominantly national rather than at pan European level – special food sub-group
    5. 5. Report of the ECN food sub-group (1)• published May 2012 in response to: – European Parliament calls for explanations of action taken to address volatility of commodity markets – concerns about rising food prices – perceptions of a malfunctioning food supply chain
    6. 6. Report of the ECN food sub-group (2)• statistics from 2004 to 2011: – 180 antitrust investigations; 1300 mergers; 100 sector enquiries (“robust” enforcement)• anti competitive activity across the supply chain: – price fixing; market sharing; unlawful information exchange; resale price maintenance; exclusionary conduct
    7. 7. National food-retail – a matter ofperennial interest? (1)• power struggle between large retail and food suppliers a recurring political issue• repeated calls from European Parliament for inquiry into the retail sector• 2008 resolution requiring DG Comp to investigate the impact of the supermarkets• 2010 saw establishment of the High Level Forum for a Better Functioning Food Supply Chain
    8. 8. National food-retail – a matter ofperennial interest? (2)• recent (2010/2011) national investigations in: – Germany – Finland – Spain – Hungary – Belgium – Italy – Bulgaria – Latvia – Czech Republic – Portugal – Denmark – Iceland – Croatia• exercise of market power -v- “unfair trading practices” stemming from unequal bargaining power
    9. 9. Cartel investigations 2012 (1)• fruit and vegetables (Hungary)• bread (Spain)• cotton (Spain)• beer (Austria) €1.1 million• flour (France) €242.4 million• milk (Cyprus)• bell peppers/shallots (Netherlands) €23 million
    10. 10. Cartel investigations 2012 (2)• beer (Spain)• CO2 for soft drinks (Spain)• purchase of raw milk (Spain)• confectionery (discounts/rebates to retailers) (Germany) €2.4 million• poultry (Greece)• watermelon* (Hungary)* also involves investigation of territorial sales restrictions
    11. 11. Resale price maintenance 2012• meat processors (Poland)• food retail (Austria)• beer (Germany)• pet food* (France) €35.3 million• vegetable oil (Bulgaria)• dairy products (Portugal) €341,100• bakery/pastry products (Romania)* also involved territorial sales restrictions
    12. 12. Market investigations/sector inquiries 2012• food retail (Paris)• milk (Germany)• food retail (Germany)• primary food production (Finland)
    13. 13. Abuse of dominance investigations 2012• Tasty Foods (Pepsico) (Greek salted snacks market)• Coca-Cola Hellenic Bottling (Greece)
    14. 14. Implications (1)• the more competition authorities look, the more they find …• … so they will keep on looking• communication across the ECN has the potential to trigger a domino effect across Europe
    15. 15. Implications (2)• companies could be sitting on time bombs …• … which could explode in the event of investigation• how confident are companies that their own businesses are competition law compliant?• how confident are directors that they don’t face the risk of disqualification?• new OFT guidance on penalties – a timely reminder of the OFT’s deterrence objective
    16. 16. Implications (3)• consolidation opportunities continue to arise in the current economic climate• in an M&A context need to be alive to successor liability principle – buy the shares – buy the liability• extra care needed in terms of due diligence and contractual protection• immediate compliance review required post completion
    17. 17. UK competition law developments in train (1)• new OFT Guidance on penalties – maximum starting point for fines increased to 30% of relevant turnover – up to 100% uplift for each bout of recidivism – inclusion of a specific proportionality check – relevant for cases where SO still to be issued• OFT investigation procedures in competition cases – move to collective decision making – ability to make representations on key elements of draft penalty calculations
    18. 18. UK competition law developments in train (2)• Enterprise and Regulatory Reform Bill highlights: – formation of the Competition and Markets Authority (a merged OFT and Competition Commission) – CMA to have enhanced powers to require individuals to answer questions as part of an antitrust investigation – dishonesty requirement under criminal cartel offence to be removed
    19. 19. Conclusions• the food sector has been a fertile source of competition law infringements• there are pressure points up and down the supply chain which may tempt companies to collude• the authorities show no signs of turning out the spotlight• competition law still seen as a priority for ensuring better functioning of the economy and driving performance• a good time for companies to take stock, re-assess their risks and ensure their compliance measures are robust
    20. 20. Any Questions?

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