Author Archives: DevelopingWorldAntitrust

3 June 2016
2 Comments
Africa

Antitrust, Cheaper Beer, and the First Global Brewery (the South African Chapter)

By Francisco Beneke*

The price of beer is currently one of the hottest antitrust topics at the global stage. The largest merger the beer market has ever seen has been met with various attitudes from competition authorities around the world depending on, partly, the relative positions of the firms in each national or regional market. Today I focus on South Africa’s recent developments.

The Global Context

The USD$107 billion purchase of SABMiller by AB InBev is the third largest transaction in history. It will create what the media has dubbed the first truly global brewery and will account for half of the industry’s profits around the world. It already received antitrust clearance subject to (very tough) conditions in the EU, and it is still under review in other big markets such as the US and China. In the former, the Justice Department is believed to be close to a decision that involves SABMiller’s divestiture of its joint venture with Molson Coors. An almost identical divestiture has also taken place in China ahead of the MOFCOM’s decision in order to set the ground for the approval.

According to the media, the merger’s main focus is not the largest markets where the two brewers have substantial overlaps but the smaller Latin American, Asian, and African countries where either of the companies enjoy close-to-monopoly positions. This view is consistent with the approach of the merging parties of quickly proposing important asset divestitures in the US and China.

The merger has different implications in every market in which it is or has been subject to antitrust review. However, there are some particularities in the South African chapter, home country of one of the merging parties, that we are not going to see in many places around the world.

A Quick Dive into South African Merger Law

The Competition Commission of South Africa issued last Tuesday a press release in which it gives a detail of the several conditions under which it has recommended to the Competition Tribunal the approval of the merger. Before we get into the details, a quick primer on South Africa merger law is in order.

South Africa has an institutional design in which the prosecuting and adjudicative entities are separated. The prosecuting entity is the Competition Commission, who in the case of large mergers only has the power to recommend to the Competition Tribunal whether to approve or block a transaction. The merger can be enjoined if it will substantially lessen competition or if it cannot be justified on public interest concerns (article 12a, (2) and (3) of the Competition Act). In the case of the second category of considerations, the Minister of Economic Development can intervene in the proceedings before the Tribunal (article 18 of the Competition Act). In the present case, the Commission recommended that the merger go forward but, as mentioned above, under certain conditions.

Public Interest Considerations in the South African Beer Market

What makes the analysis of the deal so particular in the case of South Africa is the role public interest considerations play. People that are not familiar with South African merger law could have a hard time getting their heads around a condition that obliges the merged entity to present plans for the advancement of black people within the company or the establishment of a USD$63.6 million fund to promote local agriculture of hops, barley, and corn. One of the most striking conditions is that the merged entity has committed itself in perpetuity not to lay off any employee as a result of the merger.

The conditions regarding the agricultural promotion fund and not laying off employees in duplicate positions were the result of a previous agreement with the Minister of Economic Development. Some critics of the South African merger regime argue that the involvement of this government official brings uncertainty to potential merging parties. In the case in point, even if one disagrees with the uncertainty argument, it is undeniable that the Minister’s intervention was substantial.

One of the most important issues regarding the justifiability of the public interest clause is whether the remedies imposed are effective. In the present case, the no lay-offs condition lies on weak grounds and the fund is at least debatable.

Market regulation always has a way around. In this case, the resulting entity’s drive to lower costs can lead it to get creative in ways to lay off workers without it looking as if it was with the mere purpose of cutting costs. The supervision of this condition will inevitably turn the South African competition authorities in labor law judges because they will have to rule whether there were grounds to fire an employee. That is, the Competition Tribunal will have to determine whether the grounds of the lay-off are valid or if they are only an excuse. This is just one way to get around the condition and it reveals how costly it can be for the Commission to monitor its compliance.

The compliance with the fund may not be an issue because at a first glance it looks pretty straightforward. The effectiveness can still be compromised if the money is not spent well. The debate around development aid is applicable here. Many critics, such as William Easterly of NYU, have charged against aid programs that pour money into a problem with no tangible benefits.[1] Others, such as Jeffrey Sachs of Columbia University, are strong advocates of aid as a tool to avoid a poverty trap.[2]

There is not enough information so far on the specificities of the agricultural fund to make a prediction on how effective it will be for the development of local farmers. One component it should have is the gathering of information and the design of a study to measure its impact, independently from who bears the cost of such an assessment. This will be key in ensuring that the condition will not only impose the burden to burn money on a program with no real benefits to the South African society.

Competition Concerns

There is not much information on the significance of AB InBev’s position in the South African market, only that it does have a presence through a contract with a local distributor. Some of the conditions recommended by the Commission do involve horizontal and vertical conduct remedies. I will not go into detail in the analysis because Amine will fill you in the details next week with a post that complements what we have talked about here and with more information on the Minister of Economic Development’s intervention in the proceedings.

The Road Ahead

The proceedings before the Competition Tribunal have started and we will have to wait on the final word on the matter. Some argue that the Tribunal usually takes the Commission’s recommendations on merger control, but, as our colleagues from African Antitrust point out, there are some proposed remedies to which AB InBev and SABMiller have not agreed, and we could therefore see some litigation instead.

*Co-editor, Developing World Antitrust

@Paco_Beneke

[1] William Easterly, Why Aid Doesn’t Work. http://www.cato-unbound.org/2006/04/02/william-easterly/why-doesnt-aid-work

[2] Jeffrey Sachs, The End of Poverty: Economic Possibilities for Our Time. Penguin Books; Reprint edition (February 28, 2006).

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25 May 2016
1 Comment
Asia

Price Fixing in Pakistan’s Poultry Market: Is There a Case of False Positive?

By Owais Hassan Shaikh*

Introduction

The Competition Commission of Pakistan (CCP) is the national competition authority in the country. It was created in 2007 as a successor to the Monopoly Control Authority and operates under the Competition Act, 2010 (Act). To date the CCP has issued around 100 orders in various cases. In February 2016, the CCP issued an Order against the Pakistan Poultry Association (PPA), finding that the PPA violated section 4 of the Act, which relates to prohibited agreements.

Facts

The PPA advertised prices of broiler chicken (live and meat) and chicken eggs in various Pakistani newspapers between 6 and 9 October 2015. The CCP issued a show cause notice to the PPA as it considered the advertisements to be ‘decisions’ under section 4 to fix prices in the broiler chicken and egg markets having the object or effect of restricting competition in those markets. The PPA responded arguing that the local governments fix the prices of the poultry products and that PPA members face arbitrary price fixation by many city administrations. In this regard it also provided an official assurance that the prices are set by the government and not by the PPA.

Analyzing the PPA arguments, the CCP came to the conclusion that by advertising these prices, the PPA violated section 4(1) of the Competition Act. In coming to this conclusion the CCP held that the PPA’s defense that the poultry product prices are not determined by it, and therefore that it has no liability, is not tenable as the ‘discussion, approval or advertising of prices’ falls within the ambit of anti-competitive behavior; and even if the defense is accepted, advertising prices under its own name signals to the market that the PPA approves the prices, that they are an optimum rate to be followed and that the alleged advertisements could influence the overall market prices. It stressed that the PPA’s ‘standing as an association ensures a certain authority which has the implicit effect of manipulating the behaviour of players in the relevant markets’. According to the CCP, the advertisements also constituted ‘the exchange of data which encourages more uniform prices than might otherwise exist.’ The CCP fined the PPA Rs. 50 million (approx. $ 0.48 million) for the broiler chicken and the egg markets each and ordered it to immediately suspend such advertisements. In imposing the high fines, the CCP observed that the PPA had already been cautioned in a previous Order to ‘desist from taking any decision, even if merely suggestive in nature, regarding pricing, production and sale of poultry products.’

Analysis

The main issue in the Order was whether the advertisement by the PPA of broiler chicken and egg prices could be considered a ‘decision’ under section 4 of the Act. Paragraph 1 of Section 4 prohibits an association of undertakings from taking a decision that may have the object or effect of restricting competition with certain exceptions.

The CCP defined ‘decision’ of an association of undertakings in its earliest Order pertaining Section 4.[1] It held that ‘a decision of an association of undertakings reflects an understanding between its members’. ‘Agreement’ includes ‘understanding’ as defined in Section 2 of the Act, therefore, a decision by an association of undertakings is an agreement between its member. It is generally held that the concept of agreement or understanding requires a concurrence of wills or meeting of the minds.[2]

However, the problem in this Order is that the CCP did not provide any evidence showing a concurrence of wills or meeting of the minds with regard to fixing prices in the two markets by the PPA or its members. It does not even provide any evidence to rebut the PPA’s assertion and assurance that it does not fix the prices, but that it is forced to take them as they are from the local governments. Unlike the CCP’s Order in 2010 against the PPA, which relied extensively on the documents recovered from the PPA offices to prove cartelization, the current Order is uncharacteristically short (only 8 pages as compared to 36 pages in 2010) and does not provide any evidence of the alleged conduct. Instead, it implies that advertising the prices by the PPA itself is tantamount to a decision as it has the ‘object’ of preventing or restricting competition in the relevant markets. However, as analyzed above, in the absence of a ‘decision’ in the meaning of section 4, there is no basis of claiming that the advertisement per se had the object of restricting competition in the market.

According to the CCP, advertising prices by an association of undertakings falls within the ambit of anti-competitive behaviour. Therefore, the publication of prices in these advertisements under the PPA’s name may reflect to the different market players, including the consumers, that these prices have the approval of the PPA and are the optimum rates to be followed. In general, advertisements are pro-competitive tools in that they provide consumers information about the various characteristics of a product. They reduce consumers’ information and search costs. According to the CCP, the said advertisements carried the daily prices for the products in the broiler chicken and egg markets. The Order does not mention whether the government also provided the information about prices to the consumers. If this was not the case, the PPA advertisements did disseminate useful information to the consumers.

Without convincing evidence of independent meeting of the minds regarding price fixing by the PPA or its members, especially where the association provides additionally an assurance with regard to its stance, the imposition of a fine to the tune of Rs. 100 million appears to be unjustified. Though there is merit in the CCP’s argument that without an appropriate disclaimer that these prices are fixed by the government and the advertisements are not endorsements of these prices by the PPA, they may be seen as such by the market players, including the consumers, the CCP could direct the PPA to include the same, or a variation thereof, so that no one would be misled with regard to the PPA’s role in fixing poultry prices.

Moreover, by fining the PPA, the CCP fails to remedy the actual anti-competitive conduct in the market i.e., price fixing by the local governments. To solve this, the CCP should have focused on the concurrence of wills between the local governments and the PPA or its member undertakings. This could be done, for example, by investigating whether there was any coordination, communication or understanding between the PPA and the local governments prior to fixing prices on a daily basis.[3] Penalizing the PPA would definitely not discourage the local governments from fixing the prices, but it will deprive consumers from acquiring the most relevant information regarding broiler chicken and chicken eggs i.e., their prices.

* Visiting Lecturer, EU Business School, Munich; PhD, Ludwig Maximilians University, Munich; LL.M, University of Augsburg, Augsburg; MBA, Institute of Business Administration, Karachi.

[1] In the matter of Show Cause Notice dated 24 December 2007 for Violation of Section 4 of the Ordinance ¶ 46 available at http://cc.gov.pk/images/Downloads/Order_of_Banks.pdf.

[2] Bayer v Commission, Case T-41/96, [2000] E.C.R. II-03383 ¶ 69

[3] This was the actual line of inquiry in the Dole food case that the CCP cited in the Order where supplier of bananas coordinated wholesale prices which was then signaled to the market, though, the final market price would be negotiated with ALDI, as the biggest buyer. See Dole Food and Dole Fresh Fruit Europe v Commission, C-286/13 P, [2015] E.C.R. II ___ (delivered 19 March 2015). The CCP, however, did not adopt this line of inquiry in its own investigation in the current Order.

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20 May 2016
4 Comments
Development and Antitrust Law

How Can Competition Law Enforcement in the Digital Economy Help in the Fight Against Poverty?

By Amine Mansour*

When talking about competition law and poverty alleviation, we may intuitively think about markets involving essential needs. The rise of new sectors may however prompt competition authorities to turn their attention away from these markets. One of those emerging sectors is the digital economy sector. This triggers the question of whether the latter should be a top priority in competition authorities’ agenda. The answer remains unclear and depends mainly on the potential value added to consumers in general and the poor in particular[1].

Should competition authorities in developing countries focus on digital markets?

Obviously, access to computer and technology is not a source of poverty stricto sensu. In the absence of basic needs, strategies focusing on digital sectors may prove meaningless. In practice, the last thing people living in extreme poverty will think about is gaining digital skills. Their immediate needs are embodied in markets offering goods and services which are basic necessities. The approach put forward by several Competition authorities in developing countries corroborates this view. For instance, in South Africa, digital markets are not seen as a top priority. Instead, the South African competition authority focuses on food and agro-processing, infrastructure and construction, banking and intermediate industrial products.

There are however compelling arguments to be made against such position. Most importantly, although access to technology and computers is not a source of poverty, such an access can be a solution to the poverty problem. In fact, closing the digital gap by providing digital skills and making access to technology and Internet easier can help the low income population when acting either as entrepreneurs or consumers. In both cases competition law can play a decisive role.

The low income population acting as consumers

First, when acting as consumers, people with low income can enjoy the benefits of new technology-based entrant. Thanks to lower costs of operation, lower barriers to entry and (almost) infinite buyers, these new operators have changed the competitive landscape by aggressively competing against traditional companies. These features have helped them not only extending existing products and services to low-income consumers but also making new ones available for them. Better yet, in some cases increased competition coming from technology-based companies motivates traditional business forms to adapt their offer to low-income consumers so as to face this new competition and remedy shrinking revenues. Perhaps, the most noteworthy aspect of all these evolutions, is that these new entrants have, in some instances, been able to challenge incumbents’ position by driving prices downward to levels unattainable by traditional companies without scarifying their profitability.

A shining example of all this dynamic is the possibility for low-income consumers to engage, thanks to some mobile companies, in financial transaction without the need to pass through the traditional stationary banking infrastructure. For instance, in Kenya, M-PESA a mobile money transfer service that has over 22 million subscribers[2] and around 40,000 agents (around 2600 Commercial bank branches)[3] changed the life of million of citizens. The service enables clients to deposit cash into their M-PESA accounts, send or transfer money to any other mobile phone user, withdraw cash and complete other financial transactions. A farmer in a remote area in Kenya can send or receive money by simply using his mobile phone. In this way, M-PESA can act as a substitute to personal bank accounts. This experience shows how the digital economy helps overcoming the prohibitive costs of reaching low-income customers and thus raising living standards.

On that basis, we can easily imagine the counter-argument incumbent companies might put forward. In this regard, unfair competition and the need for regulation to preserve policy objectives are often in the forefront. However, there is a great risk that these arguments are simply used to restrict market entry and impede competition from those new players.

In fact, this kind of arguments do not always reflect market reality. For example, in some remote geographic areas, traditional companies and the new ones based on the digital/internet space do not even compete directly against each other. Accordingly, regulation intended to protect policy goals has no role to play given that the affected consumers are out of the reach of the traditional business. In the M-PESA example, it may be possible to argue that any operator engaging in financial transactions should observe the regulatory restrictions that apply to the banking sector in order to ensure that policy objectives such as the stability of the banking system or the protection of consumer savings are preserved. However, applying such a reasoning will leave a large part of consumers with no alternative given the absence of a banking infrastructure in remote areas. The unfair competition and regulation arguments may only hold in cases where consumers are offered alternatives capable of providing an equivalent service.

This shows the need to proceed cautiously by favoring an evidence-based approach to the ex-post use of the regulation argument by incumbent operators. This is however only one of different facets of the interaction between the competitive impact of companies based on the internet-space, the regulatory framework and the repercussions for people with low income[4].

The low income population acting as entrepreneurs

Second, the focus on digital markets as way to alleviate poverty is further justified when low-income people act as entrepreneurs. In fact, digital markets are distinguished from basic good markets in that they may act as an empowering instrument that encourages entrepreneurship.

More precisely, the digitalization of the economy results in an improved access to market information which in turn may benefit entrepreneurs especially the poor whether they intervene in the same market or in a different one. Practice is replete with cases where, for instance, a downstream firm heavily relies for its production/operation on services or products offered by an upstream company operating in a digital market. Similarly, in a traditional and somewhat caricatural way, a small-scale farmer may use VOIP calls to obtain market information or directly contact buyers suppressing the need for a middleman.

However, we can well imagine the disastrous consequences for these small-scale farmers or the downstream firm if mobile operators decide to block access to internet telephony services such as Skype or WhatsApp based on cheap phone calls using VOIP (this is what actually happened in Morocco). In such a case, the digitalization of the economy has clearly contributed to greatly lowering the costs of communication and distribution. However, low income entrepreneurs are prevented from benefiting of these low costs, which are a key input to be able to compete in the market.

The major difficulty here lies in the fact that, when low income people act as entrepreneurs, it is likely that they organize their activities in small structures. This result in relationships and structures favorable to the emergence of exploitative abuses. Keeping digital markets clear from obstructing anticompetitive practices is thus indispensable to ensure that small existing or potential competitors are not prevented from competing. This might not be easily achieved given that competition authorities’ focus is sometimes more on high profile cases.

*Co-editor, Developing World Antitrust

[1] Intervention may also be justified by the institutional significance argument. This significance lies in the fact that those markets are growing ones and challenging the common ways of both doing business and applying competition rules which in turn make it crucial for authorities to intervene by drawing the lines that ensure the right conditions for those market to grow and develop.

[2] http://www.safaricom.co.ke/about-us/about-safaricom

[3] http://www.safaricom.co.ke/personal/m-pesa/get-started-with-m-pesa/m-pesa-agents

[4] For instance, it possible to think of the same problem from an ex-ante point of view highlighting incumbent firms’ efforts to block any re-examination of the regulatory standards that apply to the concerned sector (no relaxation of the quantitative and qualitative restrictions). This aspect has more to do with the advocacy function of competition authorities.

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13 May 2016
1 Comment
Intellectual Property and Antitrust Law

The Relationship between Intellectual Property and Innovation: Do Patent Rights Always Spur the Creation of New Products and Technologies?

By Monika Hasbún*

It is generally acknowledged that patent rights, in an economic sense, work as an incentive to promote innovation. Nevertheless, it must also be acknowledged that this incentive can also generate inefficiencies. For this reason it is necessary to question and evaluate the scenarios in which patent rights do not necessarily promote innovation but can actually be detrimental to it.

The World Intellectual Property Organization defines a patent as “…an exclusive right granted for an invention, which is a product or a process that provides, in general, a new way of doing something, or offers a new technical solution to a problem”. The protection is granted for a limited period, generally 20 years from the filing date of the application. Any product or procedure that receives this protection, cannot be commercially made, used, distributed, imported or sold by others without the patent owner’s consent.

The main argument to justify patents is the necessity to stimulate invention. Innovation is based on the idea of producing knowledge. Knowledge, considered as a public asset, has two attributes: First, the amount of available knowledge does not diminish when others use it (“non-rivalrous good”). Besides, once it has been produced, others can benefit from it (“non-excludable good”). These aspects produce a market failure so that not sufficient incentives are available that encourage economic agents to innovate.

To solve this dilemma, the patent system establishes two mechanisms that permit inventors to maximize their externalities: (i) The granting of a temporary monopoly on the invention, which works as a protecting mechanism that allows the right owner to obtain a retribution because of his dominant position, for a determined period of time and geographic area; and, (ii) The requirement to publish the invention. The right owner has to disclose and publish the details of its innovation. This way a patent right offers, in principle, an incentive for the study of new technologies by allowing the right owner to exclude competitors from the market and requiring the publication of the innovation details. Nevertheless, there are some cases in which patent rights do not necessarily act as an incentive to innovation.

The first aspect to be addressed is the quality of the patent right that is granted. The basic idea is the following: If everything is patentable, there is no innovation. If products or services that are not novel or innovative are patentable, those that truly are, might not obtain the required protection. This strategic use of the patent system of doubtful quality impedes third parties to innovate and compete in the creation of products that are truly innovative. For example, regarding pharmaceutical products it is extensively discussed whether simple chemical or formula changes should be considered as an authentic innovation. In this case, patent applications should be thoughtfully and carefully analyzed, so as to guarantee that the proposed innovative product presented in the patent application deserves to be recognized with a monopoly right.

It should also be considered, that depending on the sector where innovation needs to be promoted, patent rights may result unnecessary. For example, according to conducted research, patents do not seem to be essential to promote innovation in the service sector. In Japan, for example, the percentages of firms holding patents are 39.2% for manufacturing firms and 9.8% for service firms, a large and statistically significant difference.[1] This suggests that appropriation mechanisms other than patent filing, such as secrecy and lead-time, play an important role in this matter. The benefits provided by the advantages of arriving first to the market, complementary assets and network externalities result, at times, sufficient so that inventors in service companies recover their research and development investment costs and decide to innovate. It is even acknowledged that a patent right may result unnecessary as long as an invention can be maintained in secret without further ado.

In a similar manner, innovation in SMEs is commonly conducted by more “informal” means. This sector usually deals with incremental improvements or minor modifications to existing products which respond to concrete demands of the market. For small enterprises it is difficult to destine resources to obtain a patent right, since doing this would imply that less resources are destined to their innovation activities per se. For this reason they prefer to use alternative strategies of protection, such as the launching time in the market, investing in complementary assets, among others.

Finally, a country’s development level is also a key factor when analyzing the efficiency of patent systems. The existing asymmetry in the innovation capacities among developed and developing countries has an impact in the way agents in these countries respond to the patent protection system. In the case of developing countries, different from developed countries, companies demand and consume more technology than that which is internally produced, so that they become “technology importers”. Their investment in research and development is extremely limited, so that the granting of patent rights is practically non-existing. Companies in such countries tend to limit to the imitation and adaptation of technologies, so that patent rights result unnecessary and can even act as a barrier to the import of different technologies. Besides, developing countries do not generally have patent protection systems that are sufficiently mature so as to act as an actual incentive to innovation.

Patent rights and competition are closely connected. On the one hand, patent legislation seeks to promote innovation by awarding an exclusive right that prevents the patented invention from being commercially exploited by third parties. On the other side, competition legislation seeks to impede the abuse that such right owners could perform.

Considering that patent rights could act as a legal instrument that obstructs competition, it should be evaluated, according to the previously exposed ideas, that its justification is not always legitimate. It is not always the case that patent rights promote innovation. In determined cases patent rights may result unnecessary and even harmful to attain it. For this reason, so as to achieve an adequate patent system and the rewards it offers, without excessively restricting competition, the context in which the patent right is being granted should be carefully evaluated so as to determine its efficiency.

*The author is a lawyer and notary public in El Salvador, holds a bachelor of laws degree from the Universidad Dr. José Matías Delgado and has postgraduate degrees in public policy management and in law, economics, and business. She is currently a senior legal counsel in the Salvadoran competition authority.

[1] Morikawa, Masuyaki. (2014) “Protection of intellectual property to foster innovation in the service sector”. Available at: http://voxeu.org/article/intellectual-property-and-service-sector-innovation

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6 May 2016
1 Comment
Latin America

Ten Years of the Competition Superintendence – Past, Present, and Future

By Marlene Tobar*

Competition law enforcement in El Salvador started ten years ago, an ideal moment to assess the work of the Competition Superintendence, the authority in charge of its implementation since January 2006.

In these first years, the institution has carried out a healthy oversight of markets promoting undistorted competition, strictly following the legal framework and proving its independence from political forces[1]. In addition, the authority has taken a leading position in the region. It has been awarded twice at the World Bank’s Competition Advocacy Contest, it is the only authority in Central America that has enjoined a merger (the acquisition of Digicel by Claro in the telecommunications market), and it has given a strong push to the design of a regional competition law through its work in the RECAC[2] (the Central American network of competition authorities).

In the law enforcement area, it conducted investigations in markets that have spillover effects in the economy such as the energy industry, the wheat flour market (carrying out dawn-raids), the distribution of sugar (imposing a fine on Dizucar, the dominant wholesale distributor that is owned by the local sugar mills), and the telecommunications industry, among others.

The institution acknowledged the role that public sector intervention plays and allocated substantial resources to identify restrictions to competition arising from regulations. For that purpose, the authority pointed toward the need of improving regulations to promote more openness to trade regarding products of social importance such as rice and sugar. The Competition Superintendence has also pushed for reforms to the law that creates a legal cartel in the production of sugar. Another important policy change promoted has been the amendment of the system under which radio-electric spectrum concessions are granted in the telecommunications industry. The recommendations are aimed at promoting competition in the allocation of this input (competition for the market) in a context of upcoming expiration dates to current grants in the broadcasting market and the still uncertain process of digital technology adoption in the country.[3] Recently, the authority issued a statement regarding a decision by the Supreme Court’s Constitutional Bench[4] on the alleged unconstitutionality of certain provisions of the Telecommunications Law. The Court stated that the national congress should not close the door on any advisory intervention of the Competition Superintendence during the hearings on the issue.[5]

The Competition Superintendence has decided a total of 14 cases of anticompetitive behavior, analyzed 16 merger transactions, carried out 23 market studies, issued 128 opinions, signed 36 MoU’s, and implemented a wide-ranging program of diffusion and promotion of the country’s competition law. The authority has imposed $15.1 million USD in fines (93% of which correspond to anticompetitive behavior decisions). In other words, it is quantitatively and qualitatively clear that the authority has sought to cover all sources of restrictions to competition.

Nonetheless, the main topic to reflect upon is the ability of having a real impact on efficiency and consumer welfare (objectives that the authority has to pursue by law), which are to be understood as indirect means to achieve higher living standards for society.

At the moment, such ability is hindered by the lack of support from the legislative, executive, and judiciary branches evidenced by (at least) two facts: first, the Supreme Court’s Administrative Bench’s judicial backlog regarding the review of the Competition Superintendence’s decisions on anticompetitive behavior. From the total of fines imposed by the authority ($15.1 million USD), more than 90% have been challenged by the punished firms, with 27 ongoing proceedings before the Administrative Court and 1 before the Constitutional Court. Currently, there are $9.1 million USD of overdue payments in fines. On its part, the Administrative Court has temporarily enjoined some of the payments and other precautionary measures, a part of which have been certified to the National Prosecutor[6].

Second, the authority has found scant support from other government institutions in the implementation of policy recommendations and inter-institutional dialogues have been rare at best (or non-existent in many cases). The first element hinders the ability to correct the punished anticompetitive behavior and hampers the deterrent effect of the fines; and the lack of support from other government entities reduces the likelihood that competition policy can spur economic and social growth.

All that said, it is important to look at the future and set the direction of competition policy in El Salvador. In his speech in the event commemorating the tenth year anniversary of the institution, the superintendent stated that he would seek for the institution to have a greater impact in key variables of the economy (development, poverty, and inequality) with the purpose of contributing to its “democratization”.

In order to do that, in addition to tackling the problems mentioned above, the authority will have to aim its competition enforcement activities toward solving the real problems faced by the country. As a consequence, there are more than a few considerations to be made. Some of the main issues to be analyzed are if the current legal framework is adjusted to the nation’s objectives; if the use of neoclassic economic theory is an adequate basis for the analysis of competitive restrictions (as the international community advises as best practices); determining the objectives that competition policy has to pursue in order to effectively contribute to the country’s development; to define the term of economic efficiency that will be pursued, among others. This analysis will have to be made taking into consideration El Salvador’s particular traits and variables that determine the dynamics of competition in its national markets.[7]

*The author is the head of the department in El Salvador’s competition authority that is in charge of the merger review proceedings, market studies, and opinions regarding law proposals and rules of tendering in public procurement.

[1] The law entered into force under a right-wing government. Under the current left-wing government the authority imposed a fine in the amount of $759,924 USD to Alba Petróleos for failing to report mergers. This firm is partly owned by ENEPASA, an association of municipalities governed by majors from the political party that controls the executive branch. Even so, the president re-elected the superintendent, Francisco Díaz, for a second term, setting a precedent in the region.

[2] Composed of the competition authorities from Costa Rica, El Salvador, Honduras, Nicaragua, Panama, and the Dominican Republic. Representatives of the Guatemalan government attend the meetings in an observer capacity since Guatemala has no competition law to this date.

[3] Currently, the Congress is evaluating the best way to implement the amendments ordered by the Constitutional Court regarding the design of an alternate mechanism for the auctions of radio-electric spectrum.

[4] Decision of the Constitutional Court on the accumulated unconstitutionality proceedings with references 65-2012 and 36-2014. In El Salvador, the Supreme Court of Justice is divided into separate sub-courts according to a subject-matter criterion.

[5] Clarification issued by the Constitutional Court on December 16, 2015, regarding its decision on the accumulated unconstitutionality proceedings with references 65-2012 and 36-2014.

[6] One such example is the order enjoining the anticompetitive behavior for which DIZUCAR (the wholesale distributor owned by El Salvador’s sugar mills) was punished.

[7] Gal, M., et al. (ed.) (2015). The Economic Characteristics of Developing Jurisdictions, Their Implications for Competition Law”. Edward Elgar, Northampton, United States.

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15 April 2016
3 Comments
Development and Antitrust Law

The Fear of Market Concentration, the Legacy of the Chicago School of Antitrust, and Political Influence of Firms – Lessons for Developing Countries

By Francisco Beneke*

The Fall of the Structure-Conduct-Paradigm and the Rise of the Chicago School of Antitrust

In its first decades, the courts and enforcers in the US were skeptical of market concentration and took a wide view of which conducts from dominant firms could be considered unlawful under the antitrust laws. This was in part due to the influence of the structure-conduct-performance paradigm that was widely supported by industrial organization economists of the time.

That changed with the rise of the Chicago School of Antitrust. Some of their main ideas were that market concentration was not always a sign of diminished competition and that the unilateral exercise of market power is almost always self-correcting and does not warrant the costs of antitrust intervention. This thinking took a strong foothold in academia and the courts in the late 1970’s and during the first Reagan Administration. During this time, many key positions in the DOJ, FTC, and the federal bench were filled with Chicago School supporters. The result was a clear break with prevailing rules regarding merger control and unilateral conduct such as predatory pricing.

Since then, some of the considerations that courts made in the past when blocking mergers and punishing dominant firms are now dismissed as making no economic sense. In this post, I analyze one such specific consideration that relates to the desire of a decentralized market structure because of the danger market concentration poses to democracy.

Does Favoring an Economy of Many Producers instead of a few big Efficient Corporations Make No Economic Sense?

In the 1960’s, starting with Brown Shoe Co., the US Supreme Court issued a series of merger decisions blocking transactions that in their most part concerned companies with low market shares. One of the main arguments of the Court was that the intent of Congress in enacting certain amendments to the Clayton Act was to stop the worrisome rising tide of concentration in the American economy. In the words of the Supreme Court: “we cannot fail to recognize Congress’s desire to promote competition through the protection of viable, small, locally owned businesses”. Higher prices could result from curtailing consolidation but the Court interpreted that Congress had stroke a balance in favor of decentralization. Similar arguments were used in 1945 in the Alcoa decision by judge Learned Hand in interpreting section 2 of the Sherman Act.

The decisions mentioned that Congress was worried not only with the economic power of firms controlling large parts of commerce but also with the threat that such control could have on other values of their democratic society. Individuals could find themselves helpless before big corporations. These considerations are now largely dismissed as not grounded on sound economic analysis. Weren’t they though? Under the light of political economy theories it is a valid question to ask.

Some economists argue that market concentration is a predictor of the formation of interest groups, and that dominant firms are more likely to exert political influence independently from their industry peers. That is, a firm with monopoly power is more likely to lobby for its own interests rather than those of the market as a whole. In addition, there is literature that supports an association between campaign donations and policy outcomes favorable to the donating firms. In other words, interest groups are effective in shaping public policy. In an earlier post in this blog, Amine already analyzed how influential firms could shape the adoption and enforcement of antitrust laws.

These theories and empirical studies can provide a framework and foundation on which to analyze a worrisome trend toward concentration of firms in the economy and still fit the analysis under the consumer welfare paradigm. For example, a merger that will lead to a stronger oligopoly can make firms in the industry lobby more effectively in order to entrench their position, especially in regulated markets. The likely result could be lower consumer welfare even in the face of efficiencies associated with the transaction.

These political economy theories are old. Dismissing the concern of the courts in the past regarding concentrated markets and the threat to democracy as based on unsound economic analysis was more a product of not looking outside the boundaries of microeconomics rather than the considerations lacking any economic sense.

Should Developing Countries be Concerned about a Worrisome Trend toward (or a Reality of) Concentrated Markets?

Professor Eleanor Fox advocates for a different focus for competition policies in developing countries. Rather than pursuing consumer welfare, Professor Fox advocates for competition policy as a tool of empowering medium and small enterprises by protecting them from abuses of dominant firms. The theories that link concentrated markets with the formation of interest groups and sub-optimal policies can be another argument in favor of Professor Fox’s approach.

The possibility of entrenching a monopoly or oligopoly position with the help of government policy can also have a long lasting impact in the overall development of the country. Firms that have already made investments in a given technology can oppose the introduction of new ones until they recoup their investment. That in turn would slow the pace with which countries adopt the latest methods of production, affecting productivity and, therefore, the income of workers.

If there is a link between concentrated markets and all of these harms that are usually not considered in antitrust analysis, then developing countries should be concerned with a rising tide or a current predicament of concentrated markets.

Another issue would be to analyze whether competition policy could be an effective tool to achieve this end. Given the already extensive length of this post, that can remain as a topic for future discussion.

*Co-editor, Developing World Antitrust

@Paco_Beneke

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1 March 2016
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Between an UBER Rock and an UBER NOT TOO Hard Place.

In this post from LaLibreCompetencia, Carlos Esguerra Cifuentes makes a compelling case on why Uber’s decision to not treat its drivers as employees does not make it vulnerable to price-fixing liability. We recommend this reading of an issue that is likely to appear in many jurisdictions in which the company operates.

Carlos Esguerra Cifuentes's avatarDerecho y Políticas de Libre Competencia en América Latina

I was invited to write in this blog by Mr. Juan David Gutierrez, whom I would like to thank the opportunity and the space to express my ideas.

As a regular reader of Mr. Gutierrez blog, I came across with a very interesting post titled “Between an UBER Rock and an UBER Hard Place” written by Professor Julian Nowag. In said post, Professor Nowag argued that it could be of the best interest of Uber to be seen as the employer of the Uber drivers (the “Drivers”) in order to reduce the risk of being held responsible for price fixing in the market of taxi services.

The core of his argument is that the Uber’s price definition model could be challenged as a “hub and spoke” cartel that coordinates the prices that Drivers charge to consumers, as already happened in Canada. Therefore, Professor Nowag argues that “it…

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10 February 2016
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Latin America

Telecommunications Industry, Market Failures, and Government Intervention in El Salvador

By Carmen Ortiz*

In October of 2015, an incumbent in the Salvadoran telecommunications industry, Telefonica, affirmed that the country is the most underdeveloped in terms of telecommunications in Latin America[i]. The government responded with an effusive denial[ii]. It supports the current framework of allocation of Radio Electric Spectrum (RES) by auctions that reward the highest price. The controversy brings up considerations from a public law and competition policy perspectives regarding the impact that the sector regulation, Ley de Telecomunicaciones (LT), has on the conditions of competition in the market for broadband services.

The regulation’s objectives are the promotion of access to telecommunications for all sectors of the population, the protection of the rights of the users, operators, and service providers, the development of a competitive telecommunications market and the rational and efficient use of RES. RES[iii] is a scarce public resource fundamental for essential sectors such as telecommunications and for services such as mobile and wireless broadband. The reason for the regulation of RES is its scarcity and the fact that competing uses of the same frequencies result in chaos[iv]. Barriers to entry through the hoarding of RES are a type of business strategy[v].

The controversy points out market failures in terms of missing markets for the provision of full national coverage of broadband services. Three operators, Telefonica, Claro, and Tigo, offer 3G and/or 4G only in restricted areas close to the main cities. Digicel does not offer 3G, nevertheless, is the only one with national coverage for 4G services. The fact that the frequencies assigned for mobile telecommunications have all been licensed to incumbents[vi] and that no entry has occurred in the last 10 years indicate that the lack of RES is a barrier to entry.

SIGET, the regulator responsible for the management of RES, orders public auctions upon requests of licenses for its use. Licenses have a 20-year term and are adjudicated to the highest bidder. From a public policy and competition policy point of view, the legal framework is fundamentally flawed: it bans an evaluation for the appropriateness of issuing licenses of RES according to its rational and efficient use.

“Effective policy must recognize competition issues in the downstream market for wireless services”[vii]. Superintendencia de Competencia, the national competition authority, performed a substantial analysis on the topic and issued recommendations to SIGET on how to promote and protect competition through the management of RES[viii], for example, by performing auctions exclusively for entrants. Unfortunately, its recommendations are not binding for the regulator.

An analysis from a public law perspective can identify if the regulation favors certain players at the detriment of others and if competition and consumer welfare are neglected. The question to be answered is how the LT protects or neglects the interests of the players involved.

Starting with incumbents, who in majority have colluded in the past[ix], they would prefer to maintain the status quo and close the market than to confront pressures of an entrant. The price for closing the market can be paid through an auction, even if overbidding is necessary. The LT permits this strategy and facilitates foreclosure. On the contrary, potential entrants are negatively affected. They might not posses at once the economic resources necessary to win an auction against motivated incumbents and to invest on sunk costs to enter the market. Being implicitly excluded from a positive outcome in the auction and from the downstream market means they are losers. Moreover, the LT gives them incentives to abstain from participating in auctions.

The SC is obstructed from protecting and promoting competition to achieve economic efficiency and consumer welfare because its opinions and recommendations on the efficient management of RES are not binding for SIGET. SC could even be demotivated to continue spending resources in performing analysis and recommendations on a topic that has a dead end with the regulator. The SIGET is unable to achieve its own objectives because the LT inhibits it from evaluating the efficiency and rationality in allocating RES. New market failures cannot be prevented or corrected. The central government, receiving millions of dollars to be paid in the auctions, supports emphatically the higher bidder-winner design and fails to acknowledge the new market failures faced in the industry. Favored with additional income, it has no intentions to reform the legal framework. Finally, consumers, the most important of all, are deprived from wider choices and from the benefits of vigorous competition, innovation, lower prices, and ample access to broadband benefits in wider geographical areas. Hence, consumers are losers.

From a competition law and public law perspective, an efficient management of RES and a national broadband planning for the long term should be a priority in developing countries. The state is responsible for these and its responsibility cannot be circumvented by the economic gains resulting from a higher bidder-winner auction design. Auctions for licenses of RES are a way of efficient allocation and encouragement of investment. For this, the regulator should make efforts to remove the legal obstacles that obstruct its responsibilities. Then, evaluate the existence of market failures, the conditions of competition in the market (with the support of the competition authority), the legitimate needs of RES of the incumbents and the asymmetries between incumbents and entrants. The ideal outcome of an auction and its design should be based on a case-specific analysis. The design of auctions of RES must have as objectives attracting entrants, preventing collusion and promoting competition both in the auctions and in the downstream markets[x]. Regulations that inflexibly favor the higher bidder-winner may hinder competition, obstruct economic efficiency, economic growth and neglect consumer welfare. Such design does not guarantee that the winner could give the most efficient use of RES. Aiming for the highest price does not imply success in public policy nor economic efficiency in benefit of consumer’s welfare.

*LLM in International Competition Law and Policy, University of Glasgow, School of Law, Scotland, United Kingdom. Candidate for the LLM in Law and Economics, University of Utrecht, Netherlands. Head of the Mergers Control Unit in Superintendencia de Competencia, El Salvador, from January 2012 to August 2015.

References

[i] See recent declarations on local newspapers, available at: http://www.laprensagrafica.com/2015/10/15/el-salvador-el-pais-mas-atrasado-en-telecomunicaciones-de-latinoamerica

[ii] See, Government of El Salvador’s official webpage, available at:

http://www.presidencia.gob.sv/el-salvador-en-primeros-lugares-de-latinoamerica-en-crecimiento-de-acceso-a-telefonia-roberto-lorenzana/

[iii] Radio waves or hertzian waves: Electromagnetic waves of frequencies arbitrarily lower than 3 000 GHz, propagated in space without artificial guide. See the Radio Regulations Articles, International Telecommunication Union (ITU) Library & Archives, Edition of 2012, pg. 7, available at: http://www.itu.int/dms_pub/itu-s/oth/02/02/S02020000244501PDFE.PDF

[iv] Ozanich G.W., Hsu, C., Park, (2004). H. 3-G wireless auctions as an economic barrier to entry: the western European Experience, Telematics and Informatics 21, pg. 227. Available at: https://www.researchgate.net/profile/Han_Park/publication/223696166_3-G_wireless_auctions_as_an_economic_barrier_to_entry_the_western_european_experience/links/00463536b910a89e98000000.pdf

[v] Porter, M., (1984). Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press, NY., pg. 13-14.

[vi] According to the Cuadro Nacional de Atribucion de Frequencias (Table of national assignation of frequencies), see at: http://www.siget.gob.sv/attachments/2213_CNAF%202004%20y%20modificaciones%20al%202014.pdf

[vii] See, Cramton, P., Kwerel, E., Rosston, G., Skrzypacz, A. (2011). “Using Spectrum Auctions to Enhance Competition in Wireless Services”, The Journal of Law and Economics, Vol. 54, pg. 168, available at: https://web.stanford.edu/~skrz/spectrum-auctions-and-competition.pdf

[viii] See the opinion issued by the Competition Authority of El Salvador, 11/10, 2013, pg. 11, available at: http://www.sc.gob.sv/uploads/SC-043-S-LP-R-2013_111013_1340.pdf and the decisions SC-016-S/C/R/2011 and SC-013-S/C/R-2012

[ix] See Superintendencia de Competencia decision on collusion: SC-017-O/PS/R-2010/RES:19-12-2011

[x] Klemperer, P. (2001).”How (Not) to Run Auctions: the European 3G Telecom Auctions”, November 2001, available at: http://dx.doi.org/10.2139/ssrn.297907, pg. 3

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18 January 2016
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Latin America

The Chain Reaction of the Poultry Cartel in Chile

By Benjamin Gomez*

On the last decade, Chile has witnessed an explosion in its cartel history. Strangely enough, while the latest Antitrust reforms have aimed to higher sanctions and invasive investigation methods, and the public scrutiny has increased as more information becomes available, the major corporations seem to have assumed the risk of taking a go at it anyway. This sense of invincibility and recklessness has given way to some of the most outrageous cartels, involving public health (raising the prices of medicine in the “Pharmacy Cartel” [1]) and even daily life hygiene (see the recent “Toilet Paper Cartel” [2]).

But there is another recent case which has been considered as Chile’s biggest cartel in terms of economic impact and duration, affecting the most basic of commodities. The latest episode of this story was released to the media when on January the 6th, 2016, the National Antitrust Prosecutor of Chile (Fiscalia Nacional Economica – FNE) filed a claim against the three major supermarket companies of the country, Walmart, Cencosud, and SMU, for coordinating a cartel in the market of fresh poultry sale to end consumers, where they reach a combined market share of over 90%.

However, this is nothing but a shrapnel deriving from a previous cartel case, commonly known in Chile as the “Poultry Cartel”, articulated by the three major poultry producers of the country, Agrosuper, Ariztia, and Don Pollo, who combined have an 80% of the total national market share, with poultry being the highest consumed meat per-capita. In its investigation, the FNE determined that the cartel rested on the permanent exchange of sensitive and strategic information which was very detailed in regards to the operations of the three companies involved. All of this under the wing of APA, the trade association which was in charge of monitoring the agreement. [3]

The evidence of the second cartel planned by the supermarket companies came during the investigation of the main Poultry Cartel formed by the producers. It was a flawless strategy for the FNE to actually wait for the first case to be discussed and resolved by the Antitrust Tribunal (Tribunal de Defensa de la Libre Competencia – TDLC), and later upheld by the Supreme Court of Chile, and only then file its second claim on the secondary colluded market. Indeed, on October 30th, 2015, the Supreme Court found that “a cartel existed among the defendants, it was coordinated by APA, and affected one element of competition since it allocated market quotas among its members and limited the production of meat destined to local consumption” and therefore imposed maximum legal fines as provided by law for cartel conduct to Agrosuper and Ariztia (US$23.3 million each approximately); and of US$9.3 million to Don Pollo. [4] This historic ruling also confirmed the TDLC’s initial decision ordering the dissolution of the APA, turning the spotlight on trade associations and guilds in all markets.

It is truly a vertical chain reaction, where one cartel in a specific relevant market gives way to another cartel in a different industry. Yet, the accused supermarket companies could not prevent this storm coming their way, as their files and computers had already been seized for the initial Poultry Cartel investigation; their fate was already written. With the existence and illegality of the first cartel already established by the country’s highest court, we can already guess what future awaits for the supermarkets.

The new accusation is a serious one: instead of calling it out, the supermarkets took advantage of the existing price fixing agreements from the main Poultry Cartel, and coordinated with those producers to monitor the agreed prices in the three main supermarket chains – and in other smaller competitors as well – in order to set a minimum sale price for fresh poultry products to final consumers. It is an interesting case of two cartels operating and cooperating simultaneously, something completely new and outrageous in the local Antitrust scene, or what we could call a “same-product / multi-market cartel”.

But the chain reaction does not end with this new prosecution by the FNE. This aggressive revelation of Chilean cartels to the public is raising again the question among the media and politicians of what actions can possibly be taken to prevent the most serious Antitrust conduct to keep taking place. The conversation is heading towards reinstating imprisonment as a sanction. Until 2003, Chilean Antitrust legislation contemplated up to 5 years of prison for these anticompetitive conducts (although no one was ever sentenced). Michelle Bachelet’s government has taken action in the middle of the storm, and passed a bill on October of 2015 – to be approved by Congress – not only to reinstate prison time for cartels, but increasing its duration to twice as high, going to up to 10 years for the most serious cases.

The government’s proposal also makes other amendments to Decree Law 211 – the Antitrust statute in Chile – by giving more incentives to use the current leniency program, increasing economic sanctions, and incorporating the prohibition to hold a position in public office for the term of 5 years as a new punishment. This is a clear sign that in almost a decade since its creation, the statute has failed to be dissuasive enough, having to be amended each time a high-impact cartel is revealed. This already happened with the Pharmacies Cartel – which generated the first major amendments back in 2008, which raised fines and created the current leniency program – and now another case is raising the punishment bar once again.

I have pondered in the past on the evolving nature of Antitrust as the only legal field governed by common law in a strongly civil law-based system as Chile [5], but it is still interesting to raise the question: Is this flexibility of the statute a positive aspect, allowing the law to keep adapting to the times and to new anticompetitive conducts? Or is it instead a sign of weakness, proving it is more a reactive statute than a dissuasive one? Whatever the conclusions may be, the legal changes are already on their way as the aforementioned bill has already been unanimously approved in its first discussion stage at Congress last November – something quite rare for the divided Chilean legislature – and is expected to be passed definitely in the terms proposed by the government early this year.

* Attorney at Law, Pontificia Universidad Católica de Chile
LL.M., University of California, Berkeley, School of Law

[1] http://www.concurrences.com/Bulletin/News-Issues/September-2012/The-Supreme-Court-of-Chile-upholds?ordre_suivant=date_redac&onglet=1&lang=fr

[2] http://www.economist.com/news/americas/21679517-new-breed-competition-regulator-takes-cartels-toilet-paper-tangle

[3] http://www.fne.gob.cl/english/2015/10/29/chilean-supreme-court-upholds-fines-for-collusion-against-agrosuper-ariztia-and-don-pollo-and-hardens-sanction-against-the-trade-association/

[4] Idem.

[5] http://www.concurrences.com/Bulletin/News-Issues/September-2012/The-Supreme-Court-of-Chile-upholds?ordre_suivant=date_redac&onglet=1&lang=fr

5 January 2016
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Shipping News – China Imposed a Fine on Seven Shipping Companies For Price Collusion

By Maria Koliasta*

China’s National Development and Reform Commission (NDRC) announced its decision on the 28th of December imposing a fine of 407 million yuan ($63 million) on seven shipping lines. The NDRC reached that conclusion after finding the aforementioned companies responsible for price fixing in the transportation of vehicles and heavy equipment. According to NDRC such a price collusion ‘had hurt the interests of China’s importers and exporters, and violated the country’s 2008 anti-monopoly law[1]’.

The companies accused of wrongdoing were Korea’s Eukor Car Carriers Inc., Japan’s Nippon Yusen KK, Kawasaki Kisen Kaisha and Eastern Car Liner Ltd., Mitsui OSK lines, Norway’s Wallenius Wilhelmsen Logistics AS, Chile’s Cia Sud Americana de Vapores SA and its shipping line[2]. The companies acknowledged their responsibility.

The NDRC noted that the eight shipping companies, previously mentioned, were involved in price fixing and sales planning, which involved an exchange of sensitive information. Frequent bilateral or multilateral communications on prices took place, in particular whether one of the companies had the intention of increasing its price and to what extent. In addition, investigators noticed that shippers improperly coordinated bids and routes to maintain prices high. In the light of the foregoing, the NDRC imposed a fine on seven companies. Japan’s Nippon Yusen cooperated with the investigators and was granted full immunity from fines.

In calculating the fine for each of the seven companies, the NDRC took into account the firm’s international shipping sales to and from China. The fine imposed corresponded to 4 – 9% of those sales. The highest fine of approximately $44 million was imposed on Eukor.

The breakdown of the fines imposed to each company for their participation in the cartel is as follows:

Company’s name Fine imposed (Chinese Yuan)
Japan’s Nippon Yusen KK 0 (benefited from immunity)
Mitsui OSK lines 38 million
Kawasaki Kisen Kaisha 23,98 million
Eastern Car Liner Ltd 11.27 million
Norway’s Wallenius Wilhelmsen Logistics AS 45 million
Chile’s Cia. Sud Americana de Vapores SA (CSAV) 3.07 million
CSAV’s roll-on, roll-off shipping unit 1.19 million
Korea’s Eukor Car Carriers Inc 284 million

According to the Bloomberg, Eukor will not dispute the NDRC decision and will pay the fine of 284 million yuan. The company has also carried out a comprehensive competition compliance program[3]. Eastern Car Liner ‘will execute what was directed immediately, said Yoshihisa Inmasu, the general manager of its general affairs department’[4]. The firm will initiate more rigorous and detailed legal compliance measures. Kawasaki Kisen ‘is restructuring to carry out compliance, said spokesman Masaya Futakuchi’[5].

Lastly, it must be borne in mind that the probe comes behind similar investigations initiated by the European Commission in 2013 and Japan’s Fair Trade Commission. In particular, the European Commission targeted shipping lines (AP Moeller-Maersk A/S, CMA CGM SA and MSC Mediterranean Shipping Co.) in a 2013 probe over hints that a disclosure of their general rate increases allowed companies to coordinate prices. Additionally, Japanese regulators conducted dawn-raids in the offices of five shipping lines in 2013 over suspicions that they discussed increasing the rates together for transporting cars, and fined Nippon Yusen and Kawasaki Kisen in January 2014.

*Stagiare Attorney at WilmerHale (Brussels)
LLM, University of California, Berkeley, School of Law

Disclaimer: the post reflects the author’s own views and by no means those of Wilmer Cutler Pickering Hale and Dorr LLP.

[1] http://www.ibtimes.com/china-fines-7-foreign-shipping-companies-63m-price-fixing-2240695.

[2] NDRC Statement of the 28th of December 2015.

[3] https://gcaptain.com/china-fines-shipping-firms-63-million-for-price-fixing-scheme/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Gcaptain+%28gCaptain.com%29#.VoJ-wvkwjIU

[4] Ibid.

[5] Ibid

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