Financial institutions
Energy
Infrastructure, mining and commodities
Transport
Technology and innovation
Life sciences and healthcare
Competition World
A global survey of recent competition and antitrust law developments with practical relevance
Quarter 2: 2015
In this issue:
Europe
European Union: European Commission unveils Digital Single Market Strategy
Ambitious proposals include wide-ranging legislative initiatives but also an e-commerce sector
inquiry
United Kingdom: FCA Concurrency – what it means and what to expect
The Financial Conduct Authority now has the remit to enforce competition law
United Kingdom: Which? super-complaint about grocery pricing
What it means for the UK groceries sector
United Kingdom: First GCA investigation may trigger shift in supermarkets’ dealings with
suppliers
Competitive marketplace
North America
Canada: Important changes to Investment Canada Act coming
Fewer transactions to be reviewed, but the information burden will increase for all filings
Canada: Supreme Court clarifies test for merger review
Lays waste to Commissioner’s case on efficiencies, but serves as reminder of hazards of internal
documents
United States: Trade associations remain under FTC lens
Federal Trade Commission remains vigilant about trade association activity restraining
competition
United States: Fifth Circuit reverses antitrust judgment against trade association
Court points out key factors that may protect associations from antitrust violations when setting
membership standards
Africa
South Africa: The impact of regulation on competition in telecommunications and piped gas
Recent experience highlights the exercise of jurisdiction by the competition authorities in regulated
sectors
Asia Pacific
Australia: Competition and Consumer Commission focuses on the pharmaceutical industry
The case ACCC v Pfizer provides insights for the pharmaceutical industry on generic defensive
strategies
Australia: Harper review concludes and makes numerous recommendations for reform
The recommendations if adopted could have significant implications for retailers
Competition World
From the editor
Welcome to the twelfth issue of Competition World, which
surveys key antitrust and competition law developments around
the world and is produced by the global legal practice Norton
Rose Fulbright.
Antitrust and competition authorities around the world continue
to be extremely active in a wide range of areas. In this issue,
we discuss 11 major developments in Europe, North America,
Africa and Australia, reflecting the global nature of our antitrust
and competition group.
In Europe, the EU Directorate-General for Competition has been
very active. In recent months, for example, the Commission
sent statements of objections to Amazon, Gazprom and Google.
Further, DG Competition opened another in-depth investigation
into the State aid implications of certain tax ruling practices,
which were discussed in the issue of Competition World
published in October 2014.
In addition to its individual cases, DG Competition has taken
actions in a number of policy areas linked to the Commission’s
broader policy goals. For example, DG Competition launched
its first sectoral inquiry in the State aid area, an investigation
into the use of energy capacity mechanisms in eleven Member
States. This inquiry follows on the Commission’s adoption of
new guidelines on State aid in the energy sector in 2014 and is
linked to the Commission’s European Energy Union initiative.
Similarly, DG Competition announced an inquiry into EU
antitrust issues in e-commerce, an initiative that is linked to the
Commission’s Digital Single Market initiative. The Commission’s
Digital Single Market initiative and the e-commerce sector
inquiry are discussed in this issue.
While a number of recent enforcement cases and indeed the
Digital Single Market initiative as a whole focus on the online
economy, there have also been important developments in
the traditional economy. In 2014, the EU’s new regulation
establishing a common organisation of the markets in
agricultural products, which includes derogations from the EU
competition rules for agricultural producers, entered into force,
and in 2015, the Commission consulted on draft guidelines on
the application of these derogations. The food and agricultural
sector also featured in two interesting UK developments that
illustrate the interplay between competition and other policy
goals in the agricultural sector. These developments are
discussed in three articles in this issue.
More than 50 locations, including Houston,
New York, London, Toronto, Hong Kong,
Singapore, Sydney, Johannesburg, Dubai.
Attorney advertising
02 Norton Rose Fulbright – Quarter 2 2015
The interplay between competition policy and sector-specific
policy aims is also key to the UK’s extension of the Financial
Conduct Authority’s jurisdiction over competition enforcement
in the financial services sector. The implications of this
development and the interaction between the FCA and the UK
Competition and Markets Authority are the topic of another
article in this issue.
In North America, we report on two significant developments in
Canada and two in the United States. In Canada, we discuss the
significant changes to the notification requirements under the
Investment Canada Act, as well as an important Supreme Court
case that discusses the role of efficiencies in merger analysis. In
the United States, we discuss two developments relating to trade
associations, which are a useful reminder that the activities of
trade associations can raise significant antitrust issues.
In Africa, as in the EU, the interplay between competition
law enforcement and regulation is topical. In this issue, we
discuss competition authorities’ exercise of jurisdiction in
telecommunications and piped gas.
Finally, in Australia, we discuss ACCC v Pfizer, a case addressing
antitrust limitations on generic defensive strategies, an issue
that also arose in a recent Italian case, which we discussed in
the July 2014 issue. We also discuss the recommendations of
the Harper review, which is a landmark review of Australia’s
competition policy that we have covered from the beginning in
issues of Competition World published in July 2014 and March
2015. If implemented, the Harper review will have significant
implications for Australian retailers, as discussed in the article
in this issue.
If you have any comments or questions about the articles in this
issue, please feel free to contact the authors. Similarly, if you
would like to discuss other antitrust and competition issues
relevant to your part of the world, please feel free to contact
me or any of the antitrust and competition partners across our
global network. Contact details are at the end of the issue.
For more frequent updates, you can also follow us on Twitter.
We are @NLegal_Global.
Jay Modrall
Editor, Partner
[email protected]
Competition World
European Commission
unveils Digital Single
Market Strategy
On May 6, 2015, the European
Commission (the Commission)
published a Communication on a
digital single market (DSM) strategy for
Europe. The DSM is a key priority for
the Commission, the European Council
and the European Parliament. The
Commission sees the strategy as a
means to close the gap between the EU
and the US in relation to productivity
due to information and communications
technology (ICT). The Commission
estimates that a fully functional DSM
could contribute €415 billion per year
to the EU economy and create hundreds
of thousands of new jobs.
The DSM focusses on three ‘pillars’:
• better access for consumers and
businesses to on-line goods and
services across Europe
• creating the right conditions for
digital networks and services to
flourish
• maximising the growth potential of
the European Digital Economy.
The Commission lays out 16 concrete
actions it plans to take under these
headings, some involving new
legislation and significant amendments
to existing legislation.
In a related development, also on
May 6, the Commission launched
a competition inquiry into the
e-commerce sector in the European
Union in the context of the DSM
strategy. The sector inquiry will focus
on those goods and services in which
e-commerce is most widespread, such
as electronics, clothing and shoes, as
well as digital content.
These developments are described in
more detail below.
Digital Single Market Strategy
Better access to digital goods and
services
The Commission argues that the DSM
will require breaking down barriers to
cross-border online activity, including
differences in contract and copyright
law between Member States, and
reducing VAT-related burdens. The
Commission also highlights the need
for affordable and high-quality crossborder parcel delivery services, an
appropriate e-commerce framework,
and mechanisms to prevent unfair
discrimination when consumers and
businesses access content or buy goods
and services online.
The Commission announced eight
concrete actions it proposes to take to
improve consumers’ access to digital
goods and services:
• Introduce measures to improve
price transparency and enhance
regulatory oversight of parcel
delivery in connection with on-line
purchases, following an industry
self-regulatory report to the
Commission in June 2015 (2016).
• Conduct a review to prepare
legislative proposals addressing
unjustified Geo-blocking, practices
used by online sellers that result
in the denial of access to websites
based in other Member States,
for example by revising the
e-Commerce Framework Directive
(Directive 2000/31) or Article 20
of the Services Directive (Directive
2006/123) (2015).
• Conduct a sector inquiry into
competition law aspects of
e-commerce (2015) (see below).
• Introduce legislative proposals to
reform EU copyright law, including
by providing incentives to create and
invest while allowing transmission
and consumption of content across
borders (2015).
• Introduce legislative proposals to
harmonise cross-border contract
rules (2015).
• Conduct a review of the Satellite
and Cable Directive (Directive
98/83) and consider amendments
to enlarge its scope to include online
transmissions (2015/2016).
• Review the Regulation on Consumer
Protection Cooperation and establish
an on-line dispute resolution
platform (2016).
• Introduce legislative proposals to
reduce the administrative burden
on businesses arising from different
VAT regimes (2016).
Norton Rose Fulbright – Quarter 2 2015 03 Competition World
Right conditions for digital
networks and services
The Commission notes that the DSM
requires reliable, trustworthy, highspeed, affordable networks and
services that safeguard consumers’
fundamental rights to privacy and
personal data protection, while
also encouraging innovation. This
requires a strong, competitive and
dynamic telecoms sector to carry
out the necessary investments,
exploit innovations such as cloud
computing, big data tools and the
Internet of things. The Commission
expressed concerns about the market
power of some online platforms,
whose importance for other market
participants is becoming increasingly
critical.
• Analyse the role of platforms and
online intermediaries to address
issues such as (i) transparency, e.g.
in search results (involving paid-for
links and/or advertisement), (ii)
platforms’ usage of the information
they collect, (iii) relations between
platforms and suppliers, (iv)
constraints on the ability of
individuals and businesses to move
from one platform to another and (v)
how best to tackle illegal content on
the Internet (2015).
• Review the e-Privacy Directive, with
a focus on ensuring a high level of
protection for data subjects and a
level playing field for all market
players, once the new EU rules on
data protection are adopted (2016).
The Commission has announced five
concrete actions it proposes to take
to improve the conditions for digital
networks and services:
• Establish a cybersecurity contractual
public-private partnership in the
area of technologies and solutions
for online network security (2016).
• Propose legislation to reform the
current telecoms rules, focusing
on (i) a consistent single market
approach to spectrum policy
and management, (ii) delivering
the conditions for a true single
market by tackling regulatory
fragmentation to allow economies
of scale for efficient network
operators and service providers
and effective protection of
consumers, (iii) ensuring a level
playing field for market players
and consistent application of the
rules, (iv) incentivising investment
in high-speed broadband networks
(including a review of the Universal
Service Directive) and (v) a more
effective regulatory institutional
framework (2016).
Maximising the growth potential
of the digital economy
• Review the Audiovisual Media
Services Directive, with a focus on its
scope and on the nature of the rules
applicable to market players, in
particular the promotion of European
works and rules on protection of
minors and advertising (2016).
04 Norton Rose Fulbright – Quarter 2 2015
Under this pillar, the Commission
notes that in the future, most economic
activity will depend on digital
ecosystems, including traditional
industries outside the ICT sector,
which account for 75 per cent of the
value added by the digital economy.
The Commission proposes to take a
range of measures to ensure European
industries are at the forefront of
developing and exploiting ICT,
automation, sustainable manufacturing
and processing technologies.
Specifically, the Commission plans to
take the following three actions:
• Taking initiatives in the areas
of data ownership, including a
European ‘free flow of data’ initiative
to address issues of ownership,
interoperability, usability and
access to data in situations such
as business-to-business, businessto-consumer, machine-generated
and machine-to-machine data,
as well as a ‘European Cloud’
initiative, including cloud services
certification, contracts, switching
of cloud services providers and
a research ‘open science’ cloud
(2016).
• Adoption of a priority ICT standards
plan to identify and define key
priorities for standardisation,
with a focus on the technologies
and domains that are critical
to the DSM, including sectoral
interoperability and standards in
health (telemedicine, m-health),
transport (travel planning, e-freight),
environment, and energy, as
well as extending the European
Interoperability Framework for
public services (2015).
• Introducing a new e-Government
Action Plan, including an initiative
on the ‘Once-Only’ principle and
an initiative on building up the
interconnection of business registers
(2016).
Next steps
The Commission calls on the European
Parliament and the Council to endorse
the policy initiatives laid out in the
Communication. The Commission
plans to engage with the European
Parliament and the Council, as well
as stakeholders, to ensure effective
implementation of the DSM strategy.
The Commission expects to rely on
dedicated advisory and support groups
and encourages the European Council
to provide the necessary impetus and
review progress regularly.
E-Commerce Sector Inquiry
As noted, simultaneously with the
announcement of the Commission’s
DSM strategy, the Commission
announced the initiation of a sector
inquiry to gather information on
barriers to trade across national
borders set up by companies supplying
goods and services online.
Competition World
Under EU antitrust rules, the
Commission can require companies
and trade associations to supply
information, documents or statements
as part of a sector inquiry. The
Commission often uses its findings
in such sector inquiries to launch
enforcement actions and to take other
initiatives to address perceived barriers
to competition.
The Commission noted that only 15 per
cent of the EU’s population shopped
online in another Member State. In
addition to the issues noted in the DSM
strategy document, the Commission is
concerned that there are indications
that undertakings active in e-commerce
may restrict cross-border online trade
within the EU by deliberately creating
private – and in particular contractual
– barriers.
The purpose of the e-commerce
sector inquiry is to gain more
market knowledge in order to better
understand the nature, prevalence and
effects of these and similar barriers
erected by companies that hinder crossborder e-commerce and to assess them
in the light of EU antitrust rules.
The Commission plans to send
requests for information to a range of
stakeholders throughout the EU. The
companies concerned may include,
for example, manufacturers and
wholesalers as well as e-commerce
retailers. The Commission expects
to publish a preliminary report for
consultation in mid-2016, with a final
report expected in the first quarter of
2017.
Conclusion
The DSM is a key priority for the
Juncker Commission. The Commission’s
proposals are ambitious, involving
important legislative changes in a wide
range of areas, including the regulation
of the telecommunications and media
sectors, intellectual property, contract
law, consumer protection and tax law,
as well as important non-legislative
initiatives, including notably DG
COMPETITION’s e-commerce sectoral
inquiry.
will be likely to enjoy broad support
from the European Parliament and
the European Council, at least on
general principles. As the Commission’s
proposals become more specific,
however, especially in new and
amended legislation, many points
will inevitably be hotly contested.
As always, the devil will be in the
details. We will continue to monitor the
Commission’s proposals closely and
report on the implementation of the
DSM strategy.
For more information contact:
Jay Modrall
Partner, Brussels
Norton Rose Fulbright LLP
[email protected]
The Commission can be expected
to devote substantial resources to
implementing its proposals, and it
Norton Rose Fulbright – Quarter 2 2015 05 Competition World
FCA Concurrency – what it
means and what to expect
Context
From 1 April 2015, the Financial
Conduct Authority (FCA) has
‘concurrent’ competition powers,
meaning that in the financial services
sector it will have the remit and the
tools to enforce competition law. The
FCA has had a primary competition
objective since its inception in 2013
which was designed to ensure that the
FCA used its regulatory powers having
regard to the impact on competition,
but concurrent powers allow the FCA to
take on a full competition enforcement
role. These powers are ‘concurrent’ in
that the FCA will become an additional
competition regulator, working
alongside the UK’s primary competition
regulator, the Competition and Markets
Authority (CMA). Specifically, the FCA
will be able to investigate breaches of
the Competition Act 1998 (CA98), as
well as breaches of Articles 101 and
102 of the Treaty on the Functioning of
the European Union.1 Further, the FCA
will be able to conduct market studies
under the Enterprise Act 2002 (EA02),
to consider if aspects of the supply of
financial services may prevent, restrict
or distort competition. Where the FCA
has reasonable grounds to suspect that
this is the case, it will now be able to
make a market investigation reference
to the CMA, prompting a more in-depth
‘phase 2’ market investigation.
These new powers bring the FCA into
line with other sectoral regulators with
concurrent powers (including Ofgem,
Ofcom, Ofwat and the Office of Rail
and Road). In some respects, given
the intense scrutiny of competition
issues in the financial sector in recent
years, it could be said that these
concurrent powers are overdue for the
FCA. However, the FCA is on a very
different footing from other sectoral
regulators. Concurrent regulators
have, in the main, been created to
ensure that competition law is applied
within the privatised industries (for
example, energy, telecoms, water and
rail) and to encourage the application
of competition law rather than overreliance on sector-specific regulation.
There has been a concern that these
competition powers may have been
under-used, and in practice function as
an ancillary tool to sector-specific rules
designed to deal with these markets. By
contrast, the FCA regulates over 70,000
businesses across the UK’s financial
services sector. The FCA has to been
able to conduct its own market studies
under the Financial Services and
Markets Act 2000 (FSMA), to consider
competition issues, and it already has
a range of tools to remedy problems
it uncovers. Indeed, the FCA intends
to continue to use ‘FSMA market
studies as one of [its] principal tools’ to
promote effective competition.2
2
1
The FCA will not have criminal competition enforcement
powers – the cartel offence will continue to be enforced
by the CMA.
06 Norton Rose Fulbright – Quarter 2 2015
CP15/1 infra, Market studies and market investigation
references: A guide to the FCA’s powers and procedures,
para 2.4. See also the recent FCA final findings on the
cash savings market, a market study carried out under
the FSMA regime.
Recognising this background, and
the dynamics of the financial services
sector, the FCA has sought to adopt the
competition law processes of the CMA,
but with certain modifications to reflect
its existing powers. In its January
2015 consultation paper,3 the FCA
proposes draft guidance for the use of
its CA98 and EA02 powers, and a draft
amendment to the FCA Handbook. The
more controversial components relate
to the ‘draft reporting requirement’, the
operation of settlement, and the use of
market studies. Below we consider how
these elements reflect a tension in the
concurrency framework, before offering
our view of how we expect the FCA to
use its concurrent powers in practice.
Tensions
Concurrency, with its system of
parallel competition jurisdictions,
makes the UK competition regime
unusual by international standards.
In most countries, sector regulators
do not have competition powers. One
reason why most other countries shy
away from concurrency is that there
may be a tension between whether a
regulator should deploy competition
powers or sector-specific rules to deal
with any given issue. As is evident
from the consultation paper, the
FCA is seeking to balance internal
consistency (coherency between its
new competition powers and its other
powers and processes), and external
3
FCA Competition Concurrency Guidance and Handbook
amendments CP15/1 (CP15/1). Our response to the FCA’s
consultation is available at the following link.
Competition World
consistency (coherency between the
FCA’s use of competition law and the
approach of the CMA and other sectoral
regulators).
This tension is perhaps most apparent
in the draft reporting obligation. The
draft amendment to the FCA Handbook
SUP 15 requires firms to report any
possible breaches of competition law
to the FCA. The FCA has explained that
the proposed amendment is simply
a clarification that competition law
breaches are matters of which the
FCA expects to be notified. Indeed,
there is, in financial services, a wellestablished general obligation to
report matters of which the FCA would
reasonably expect notice.4 However,
the more detailed draft requirement
risks cutting across the leniency regime
as it applies in all other arenas. The
general rule is that companies can
choose whether or not to selfreport
competition infringements, and in so
doing, earn immunity from penalties.
This is predicated on the basis that selfreporting is voluntary and rewarded. By
contrast, the draft reporting obligation
imposes an obligation on the financial
institution to report any suspected
breach of competition law, with no
materiality threshold.5
The tension is also evident in the
proposed guidance on settlement,
which is based on existing CMA
guidance but with some apparently
minor – but potentially highly
significant – adjustments. The guidance
as it stands would provide that the FCA
can settle CA98 investigations with
the parties it is investigating (as can
the CMA), but would allow the FCA
to require the parties to waive their
right of appeal. While this is common
practice in FSMA investigations, it is
not consistent with the approach of the
CMA, which allows those companies
that decide to settle an investigation
to later appeal, subject to the risk that
the appropriate level of penalty may be
reconsidered and increased. While it
may be unusual for a settling party to
appeal an infringement decision, it has
happened in the past.6 This provides
an important safeguard to settling
parties that if an ultimate infringement
decision is reached on a different basis
from the settlement agreement, the
party has the opportunity to challenge
that decision.7
Finally, there is also a tension in
relation to the FCA’s approach to
EA02 market studies. As its guidance
stands, the FCA would conduct these in
precisely the same manner as the CMA,
and so this appears to be externally
consistent. However, unlike the CMA,
the FCA can choose whether to use an
EA02 market study or a FSMA market
study to support its functions and in
pursuit of its competition objective.8
In practice, it is difficult to foresee an
occasion where the FCA would not have
the freedom to choose between the two
procedures, notwithstanding that there
are procedural advantages depending
on which approach is taken.9
The future
We will have a better understanding of
how these tensions are to be resolved
– or at least mitigated – when the FCA
publishes its final guidance in the light
of the responses to the consultation.
However, in terms of how the FCA and
CMA are likely to divide enforcement
responsibilities in the financial services
sector in the future, the following
points are worth noting:
The FCA is well-resourced and has a
clear mandate to enforce competition
6
4
5
FCA Principle 11. We note in our response to the FCA’s
consultation some further problems in the way the draft
obligation is structured. See in particular paragraphs 1.41.17.
Please see Section 1 of our consultation response for
further comments.
7
8
9
See the Tobacco litigation; Asda, a settling party,
successfully appealed the infringement decision by the
Office of Fair Trading, the predecessor of the CMA.
Please see Section 2 of our consultation response for
further comments.
Section 1B(2) FSMA.
Please see Section 3 of our consultation response for
further comments.
law. The FCA has been busy preparing
for its new powers: recruiting around
50 competition experts, including
many former CMA employees and
high profile practitioners. Compared
to other sectoral regulators, the FCA
has a relatively large budget.10 It has
already shown its intent, in launching
cash savings and credit card market
studies, and programming work in the
wholesale markets. This programme
of work perhaps reflects the recent
changes to the concurrency regime
which encourage regulators to use their
competition powers, or face losing
them.11
The CMA has faced criticism that it has
tended to defer to sector regulators.
Certainly, in the concurrency
arrangements, sectoral regulators with
industry expertise and knowledge of
the parties and issues are well placed
to take on cases12, and the CMA’s
current annual plan is explicit in
aiming to ‘encourage a higher level of
competition law enforcement activity’
by concurrent regulators.13
However, the same changes to
concurrency that encourage concurrent
regulators to use their powers also
confirm the CMA’s position at the top
of the competition hierarchy. While
in practice regulators are usually in
agreement about which of them should
take any given case, the CMA now
effectively has a veto right on those
discussions, and has the ability to take
over cases from concurrent regulators.14
Moreover, the CMA is still the body
responsible for market investigations
where a reference has been made and
still retains exclusive responsibility for
enforcing the cartel offence.
10 For example, in 2013-14 Ofgem’s budget was £83.14
million. In the same year, the FCA raised £435.4 million
in fees to form its budget for the year.
11 Enterprise and Regulatory Reform Act 2013, particularly
sections 51-53 and Schedule 14.
12 Paragraph 3.22 of CMA10 Regulated Industries: Guidance
on concurrent application of competition law to regulated
industries.
13 Paragraph 5.16 of the CMA Annual Plan 2015/16.
14 Regulations 5 and 8 of the Competition Act 1998
(Concurrency) Regulations 2014.
Norton Rose Fulbright – Quarter 2 2015 07 Competition World
Over the coming months we expect
to see a confident FCA with the
means and the motivation to actively
use its concurrent competition law
powers. However, recognising that
the competition powers are a new
weapon in what is already a formidable
armoury, it will be interesting to see
what enforcement option the FCA
choses to deploy in any given matter.
The range of options available to
the FCA from its regulatory toolkit
means that it is unlikely that the FCA
will often refer matters to the CMA
for further investigation and so lose
control of the eventual outcome.
Potentially the greatest risk from an
external consistency perspective is
that the financial services sector will
be, in effect, subject to a discrete and
potentially more onerous regulatory
regime than other sectors of the
economy. The extent to which this
materialises will be dependent in large
part on the oversight and monitoring
role of the CMA. The irony of the FCA
being the last sectoral regulator to gain
concurrent competition law powers is
08 Norton Rose Fulbright – Quarter 2 2015
that, while its long established fellowsectoral regulators have been criticised
for failing to use their competition
powers, the early signs suggest that the
greatest potential concern is overuse of
the FCA’s concurrent powers.
For more information contact:
Peter Scott
Partner, London
[email protected]
Caroline Thomas
Senior associate, London
[email protected]
Jamie Cooke
Associate, London
[email protected]
Katie Stephen
Partner, London
[email protected]
Competition World
Which? super-complaint
about grocery pricing –
what it means for the UK
groceries sector
The Competition and Markets Authority (CMA) is
considering a super-complaint published by consumer
body Which? on April 21, 2015 concerning UK grocery
pricing practices. As defined in the UK Enterprise
Act 2002, super-complaints may be brought by a
designated consumer body and concern any feature
or combination of features of a UK market that may be
harmful to the interests of consumers. In this article,
we examine the supercomplaint, the potential issues
the super-complaint raises for consumers and for
competition in the sector, and the steps the CMA can
take to respond to the super-complaint.
What is the super-complaint?
The Which? super-complaint alleges
that the following three grocery pricing
practices are harming consumers:
• Using confusing promotional offers
(including discounts, multi-buy and
value pack offers that offer no better
value than the previous prices or the
prices of non-value versions of the
products).
• Using inconsistent and confusing
comparable unit pricing
(comparable unit pricing is required
by EU Directive 98/6/EC).
• Maintaining prices where product
sizes decrease.
In addition, Which? has asked the CMA
to consider the effects of supermarket
price-matching schemes. Its concern
is that the wide range of products
on offer may make accurate price
matching impossible, which may result
in consumers mistakenly relying on
price-matching schemes rather than
shopping around for the best deal.
In its super-complaint, Which? has
asked the CMA to investigate the
practices outlined above, and to
identify the regulatory and practical
changes that are needed to enable
consumers to make informed choices
and obtain best value.
This is the first super-complaint the
CMA has received. In recent years, the
CMA’s predecessor regulatory body,
the Office of Fair Trading (OFT), has
handled super-complaints across a
number of industries, often concerning
the clarity of pricing. For example, in
relation to a complaint in the travel
money market, relating to charges for
purchasing foreign currency and using
credit and debit cards abroad, the OFT
agreed voluntary improvements to
industry practices including relating
to standardisation of key terms and
provision of clearer information on
charges to consumers in card and
current account monthly statements1.
The issues raised by Which? cover a
mixture of competition and consumer
issues. We outline both below.
Promotional and pricing
practices
Which? is concerned that the
cumulative effect of the practices it
has identified makes it difficult for
consumers to identify best value – for
example because unclear unit pricing
and/or changes in pack sizes make
it difficult for a consumer to evaluate
promotional offers.
Where a promotional offer is
misleading, this potentially raises
concerns over compliance with the
Consumer Protection from Unfair
Trading Practices Regulations (CPRs).
The CPRs prohibit traders from, among
other things, presenting a product in a
way that deceives or is likely to deceive
an average customer in relation to the
existence of a specific price advantage,
and cause the consumer to make a poor
1
OFT, Travel Money and Card Use Abroad: Response to the
Consumer Focus super-complaint, December 2011.
Norton Rose Fulbright – Quarter 2 2015 09 Competition World
transactional decision as a result. The
CPRs can be enforced by the CMA and
by local trading standards authorities.
OFT guidance2, adopted by the CMA,
suggests that confusing promotional
offers may breach the CPRs. Which?
agrees: the super-complaint states
that ‘some of the practices we have
uncovered are issues of lack of
compliance and effective enforcement.
Our research has repeatedly uncovered
practices that are, in our view, in
breach of the CPR’.
There may well be room for
improvement in the guidance as it
stands, particularly in clarifying some
aspects of the rules – for example, with
respect to unit pricing. However, where
there are practices that breach existing
laws such as the CPRs, it would seem
that the best response is to enforce
2
Principles on food pricing display and promotional
practices.
10 Norton Rose Fulbright – Quarter 2 2015
those laws, rather than considering
implementing new legislation or
extending existing legislation to deal
with the issue.
Price matching
Which? has also raised a concern that
the use of price-matching policies
by supermarkets could be reducing
consumer pressure on supermarket
prices by discouraging consumers from
shopping around, which would appear
to have a potentially dampening effect
on competition in the groceries market.
The suggestion that there may be
competition concerns is perhaps
surprising, given that the UK grocery
market is regularly cited as one of
the most competitive markets in
the UK. There are multiple credible
competitors, including disruptive
discounters. In its 2008 market
investigation in this sector, the
Competition Commission found
competition issues in the grocery
sector at a local level (where one
supermarket chain may have a degree
of local market power) but not at the
national level, where competition was
found to be ‘effective and delivers good
outcomes for consumers’.3
When competition concerns are
raised, it is often in relation to the
interactions between supermarkets and
their suppliers, where supermarkets
are considered to have significant
buyer power. For example, in the
CMA’s recently published provisional
findings in the pork pies merger
(which concerned Pork Farms Caspian
Limited’s acquisition of Kerry Foods’
chilled savoury pastry business), the
CMA gave ‘considerable weight to the
importance of countervailing market
3
CC Groceries Market Investigation, Final Report of April
30, 2008, paragraph 10.1.
Competition World
power’, both of the major supermarkets
and other grocery retailers.4 In general,
this buyer power helps to keep prices
low for consumers, as supermarkets are
able to obtain good deals on the goods
they sell.
However, in its 2000 and 2008 market
investigations, the Competition
Commission found that the exercise
of buyer power – particularly the
transfer of excessive risks and costs
to suppliers – was a feature of the
UK grocery market that prevented,
distorted or restricted competition. This
finding led to the creation and revision
of the Grocery Supply Code of Practice
(GSCOP), which obliges supermarkets
to deal fairly with their suppliers. The
Groceries Code Adjudicator, which
enforces the GSCOP, is currently
investigating Tesco for breaches of
the GSCOP, and the regulator has
recently been given the ability to fine
supermarkets for GSCOP breaches.
Price-matching policies would seem on
their face to be highly pro-competitive,
as they provide retailers with an
incentive to cut prices in order to meet
the price-matching commitment.
However, Which? is concerned that,
given the scope of the policies and
the extremely wide range of products
carried by supermarkets – 30,000 4
Completed acquisition by Pork Farms
Caspian Limited of the chilled savoury
pastry business of Kerry Foods Limited,
Provisional findings report, April 21,
2015 (paragraph 8.60-2). in a typical
store – consumers may mistakenly
rely on them in deciding not to shop
around, without realising that not all
products would be caught by the price
match guarantee. Which? identifies in
particular exclusions that consumers
may not be aware of for ownbrand
products and different pack sizes.
4
As a result, Which? believes that
these policies are not necessarily as
procompetitive in practice as they may
at first appear. The super-complaint
invites the CMA to consider their effects
in more detail, in combination with
the more specific concerns described
above.
What can the CMA do?
The CMA has 90 days from the
receipt of the super-complaint to
publish a reasoned decision setting
out its response. It then has a wide
range of possible actions open to
it: it could recommend the quality
and accessibility of information for
consumers is improved; encourage
businesses in the market to
selfregulate; make recommendations
for government to legislate on; it
could take competition or consumer
enforcement action; it could instigate a
market investigation or market study;
or it could give the market a clean bill
of health.
For more information contact:
Caroline Thomas
Senior associate, London
[email protected]
Jamie Cooke
Associate, London
[email protected]
While the UK groceries market is of
critical importance to consumers, it has
already been well-scrutinised by the
competition authorities in recent years.
Although the super-complaint raises a
mixture of consumer and competition
concerns, it remains to be seen
whether the CMA will regard these as
sufficient to justify a third major market
investigation in the groceries sector in
15 years.
Completed acquisition by Pork Farms Caspian Limited
of the chilled savoury pastry business of Kerry Foods
Limited, Provisional findings report, April 21, 2015
(paragraph 8.60-2).
Norton Rose Fulbright – Quarter 2 2015 11 Competition World
First GCA investigation may
trigger shift in supermarkets’
dealings with suppliers
On February 5, 2015 the Groceries Code Adjudicator
(GCA) announced plans to investigate Tesco plc over
concerns that it had breached the Groceries Code
through some of the practices associated with its profit
over-statement announced in September 2014. The
role of the GCA – conferred on it by the Groceries Code
Adjudicator Act 2013 – is to enforce the Groceries
Supply Code of Practice and to encourage and monitor
compliance with it. The code applies to Aldi Stores
Limited, Asda Stores Limited, Co-operative Group
Limited, Iceland Foods Limited, Lidl UK GmbH, Marks
& Spencer plc, Wm Morrison Supermarkets plc, J
Sainsbury plc, Tesco plc and Waitrose Limited.
Competitive marketplace
The GCA’s decision to investigate Tesco
over its dealings with suppliers could
signal a marked shift in suppliersupermarket relations. Only Tesco has
been identified by the GCA as having
potentially breached the Groceries
Supply Code of Practice; however, the
GCA has made clear that it will consider
whether it is appropriate to extend
the scope of its investigation to other
retailers if the practices appear more
widespread. In particular, the GCA’s
concerns relate to whether Tesco:
• deals fairly and lawfully with
suppliers
• pays suppliers within a reasonable
time
12 Norton Rose Fulbright – Quarter 2 2015
• does not charge for better
positioning of goods, unless in
relation to promotions.
While this sector is considered
highly competitive – with retailers
competing fiercely to offer low prices to
consumers – and notwithstanding the
consumer benefits of low retail prices,
retailers are increasingly scrutinised
in the media for the effect that this
is having on suppliers, which claim
that they are being squeezed to the
point of becoming unviable. Earlier
this year, the Environment, Food and
Rural Affairs (EFRA) Select Committee
publicly called into question retailers’
practices in the context of milk prices,
arguing that they have been using
their market power to squeeze retailers
unduly.
Application of competition
law
However, this issue is not easily
catered to by competition law. Seeking
to address this by treating it as an
abuse of dominance case – that is,
for the Competition and Markets
Authority to find Tesco dominant
and to characterise the practices as
an abuse of dominance driving down
prices to suppliers – would be difficult,
given the degree of competition which
Tesco faces from other large retailers.
Therefore, the launch of the GCA’s first
investigation, described as ‘a historic
day [showing that the GCA] has real
teeth’ by UK Business Secretary Vince
Cable, will allow the adjudicator to
consider issues that do not specifically
fall within the UK competition law
framework, but which should be
investigated to address any adverse
effects on the supply chain. Further, the
GCA’s ability to focus on fair treatment
of suppliers makes it potentially more
effective in securing the policy objective
of ensuring the long-term viability of
the supply chain.
Penalties
By way of penalties, the GCA can issue
legally binding recommendations on
Tesco’s processes and on how it should
behave in future, as well as ‘name
and shame’ the retailer by taking out
advertisements disclosing what it has
done. However, the GCA has not yet
been empowered to levy financial
Competition World
penalties. This is expected to change:
a final agreement in government
was recently reached to proceed
with legislation to enable the GCA
to impose hefty fines (up to one per
cent of turnover) on retailers that are
found guilty of mistreating suppliers.
Various parties urged for this to take
place before the general election in May
– including members of Parliament
following the EFRA Select Committee
report on dairy prices, which called
on the government to do so to enable
the GCA to enforce the code more
effectively and put it on an equal
footing with other regulators, as well
as to consider revisions to the code to
extend its protection to farmers.
Comment
For more information contact:
The launch of the GCA probe of Tesco
comes at a heated time for large
retailers in the grocery industry and
signals increasing scrutiny. The risk of
an adverse finding and accompanying
media attention – coupled with the
threat of the regulator exercising its
promised fining powers on Tesco – will
likely lead to changes in large retailers’
practices and begin to alter the nature
of supplier supermarket relations going
forward.
Peter Scott
Partner, London
[email protected]
Ian Giles
Partner, London
[email protected]
Shaha El-Sheemy
Associate, London
[email protected]
Norton Rose Fulbright – Quarter 2 2015 13 Competition World
Important changes to Investment
Canada Act coming: fewer transactions
to be reviewed, but information
burden will increase for all filings
On March 25, 2015, the Canadian government
published two long-awaited regulations amending the
Investment Canada Act. One is intended to reduce the
number of transactions that are subject to pre-closing
review and approval, but will increase the amount
of detailed information required in routine filings for
transactions that are not reviewable. The second will
lengthen the period for transactions undergoing a
national security review by providing the government
additional time to complete such reviews.
Thresholds for review
Under the Investment Canada
Act, the acquisition of control of a
Canadian business by a non-Canadian
is generally subject to pre-closing
review and approval by the Minister of
Industry where the book value of the
Canadian business’s assets exceeds
C$369 million. At the conclusion of the
review, the minister must be satisfied
that the proposed transaction is likely
to result in ‘net benefit’ to Canada.
Lower thresholds exist for the
acquisition of control of a business
related to Canada’s national identity or
cultural heritage,1 or where the buyer is
1
Cultural businesses include the publication, sale
or distribution of books, magazines, periodicals or
newspapers, and the production, distribution, sale or
exhibition of (i) film or video recordings or (ii) audio or
music video recordings.
not from a member of the World Trade
Organization. Transactions that are
not subject to pre-closing review are
subject to a notification requirement
that entails completing a relatively
straightforward two-page form within
30 days of the transaction’s closing. All
investments in a Canadian business
by a non-Canadian, regardless of
the interest obtained or value of the
interest, are also subject to review on
national security grounds.
Beginning April 24, 2015, the
threshold for the net benefit review will
generally be based on the enterprise
value of the Canadian business. The
threshold will be C$600 million for two
years, followed by two years at C$800
million, and then C$1 billion for a year,
after which it will be adjusted annually
for inflation.
How enterprise value is determined
will depend on the nature of the
transaction:
Publicly traded entity:
acquisition of shares
Market capitalisation plus total liabilities (excluding operating liabilities), minus
cash and cash equivalents
Not publicly traded entity:
acquisition of shares
Total acquisition value, plus total liabilities (excluding operating liabilities),
minus cash and cash equivalents
Acquisition of assets
Total acquisition value, plus assumed liabilities, minus cash and cash
equivalents transferred to buyer
14 Norton Rose Fulbright – Quarter 2 2015
Competition World
The enterprise value test will not apply
to all transactions. The government is
maintaining lower review thresholds
for cultural industries, investors from
non-WTO members, and state-owned
enterprises. These investments will
continue to be reviewable based on
a book value of assets test using the
current monetary thresholds.
There will also be no change in how
indirect acquisitions of control are
treated. When control of a Canadian
business is acquired due to the
acquisition of control of its foreign
parent company, and where the buyer
is from a WTO-member nation, the
transaction will not be subject to review
unless the acquired business carries on
a cultural business. In such a case, if
the threshold is exceeded, the review
could occur post-closing.
New information
requirements
Under the new regulations, the amount
of information that must be supplied
in both an application for review and
in a post-closing notification will
increase, and will doubtless require
additional time and resources to
compile. This will have a significant
impact on notifications, as they have
traditionally been straightforward to
complete and required little more than
basic information about the parties
and the transaction. Among the new
information that must be provided are:
• The legal names of the investor’s
directors as well as the investor’s five
highest-paid officers, together with
a business and personal mailing
address, telephone and fax number,
email address, and date of birth for
each person.
foreign state may have over the
business or the appointment of its
officers.
For more information contact:
• The sources of funding for the
investment
• Descriptions of the products of the
Canadian business, including the
associated NAICS codes.
Kevin Ackhurst
Partner, Toronto
[email protected]
Certain of these requirements are,
according to the government, designed
to provide it with the information
it considers necessary to properly
undertake a national security review.
Parties should ensure they provide
themselves additional time to
prepare notifications given these new
requirements.
John P Carleton
Senior partner, Calgary
[email protected]
Longer national security
reviews
The second regulation published
on March 25 relates to the national
security provisions of the Investment
Canada Act. Any transaction that
involves the acquisition of an interest
in a Canadian business by a nonCanadian can by reviewed and
actions taken where the government
believes the investment could be
injurious to Canada’s national security.
There is no monetary threshold. The
amendments to the regulation, which
took effect March 13, 2015, provide
the government with additional time
during certain phases of its national
security review. As such, in cases where
a review is commenced, the review can
be expected to take longer than under
the previous rules.
Thierry Dorval
Partner, Montréal
[email protected]
Richard A Wagner
Partner, Ottawa
[email protected]
• An indication of whether a foreign
state has a direct or indirect
ownership interest in the investor,
as well as information about any
special rights or influence the
Norton Rose Fulbright – Quarter 2 2015 15 Competition World
Supreme Court clarifies
test for merger review in
Canada
Lays waste to Commissioner’s case on efficiencies, but
serves as reminder of hazards of internal documents.
On January 23, 2015, the Supreme
Court of Canada (SCC) released its
much-anticipated decision in Tervita
Corp. v Canada (Commissioner
of Competition).1 In 2011, the
Commissioner of Competition
(Commissioner) challenged Tervita
Corp.’s merger with a potential
competitor, Complete Environmental
Inc., and in 2012 the Competition
Tribunal (Tribunal) ruled in favour of
the Commissioner and ordered Tervita
to divest itself of the assets it had
acquired. The Federal Court of Appeal
(FCA) upheld that decision. In its first
ruling on the Competition Act’s merger
review provisions in more than 20
years, the SCC allowed Tervita’s appeal
and overturned the earlier decisions.
The decision largely validated
the Commissioner’s analytical
approach, but raised fault with the
Commissioner’s failure to adduce
evidence of the identified anticompetitive effects. Section 96 of
the Competition Act provides that
no order can be made in respect of a
merger where the merger is likely to
result in gains in efficiency that will be
greater than, and will offset, the anticompetitive effects of the prevention
of competition that are likely to result
from the merger. Because of the
Commissioner’s failure to quantify the
1
Tervita Corp. v Canada (Commissioner of Competition),
2015 SCC 3 [Tervita].
16 Norton Rose Fulbright – Quarter 2 2015
anti-competitive effects, the fact Tervita
had demonstrated even ‘marginal’
efficiency gains was enough to succeed
with the section 96 defence.
There are several key lessons from the
case:
• the Commissioner will, in
appropriate cases, challenge mergers
or acquisitions he believes are likely
to prevent competition
• the analysis and evaluation of
potential efficiency gains will take
on a greater role in strategic mergers
where a lessening or prevention of
competition is possible
• small mergers that do not exceed the
pre-merger notification thresholds
are not immune from scrutiny
• a robust competition compliance
program that includes training on
how employees communicate can
help minimise competition lawrelated risks.
Background and analysis
For additional details on the
background of the transaction, the
decisions of the lower courts, and the
SCC’s analysis, please see our more
detailed update here.
SCC decision
The SCC’s decision focused on the
following two main issues:
What is the proper test to
determine when a merger results
in a substantial prevention of
competition?
The SCC upheld the Tribunal’s decision
that the merger would likely result in a
substantial prevention of competition.
The Tribunal correctly identified
Complete as the potential competitor.
As well, it properly used the forwardlooking ‘but for’ analysis to determine
that, absent the merger, Complete
would have entered the relevant market
in a manner sufficient to compete with
Tervita. As a result, the SCC held that
the merger was likely to substantially
prevent competition.
What is the proper approach to
the efficiency defence?
The SCC found that Tervita was able to
prove quantifiable ‘overhead’ efficiency
gains resulting from combining
administrative and operating functions
of the merging parties. Although these
efficiencies were ‘marginal,’ they
nonetheless met the ’greater than and
offset’ requirement under section 96
because there were no quantifiable
or qualitative anti-competitive effects
proven by the Commissioner. As a
result, the SCC held that the efficiency
defence applied and allowed Tervita’s
appeal, resulting in the divestiture
order being set aside and the
Commissioner’s application under
section 92 being dismissed.
Competition World
Implications
In a statement issued following the
decision, the Commissioner ‘welcomed’
the decision, ‘embraced the clarity’
it offered in respect of applying
the merger review provisions, and
was ‘pleased’ the SCC endorsed the
decisions of the Tribunal and FCA on
the question of whether the merger
substantially prevented competition.
One can expect the Bureau will
continue to apply its theory of
prevention of competition as warranted
in future cases. One can also expect the
Commissioner will ensure that where
the efficiencies defence is likely to be
invoked, he will present evidence of the
identified anti-competitive effects. As
such, it is likely that the Commissioner
will seek more detailed economic
data from merging parties through the
supplementary information request
process and that Bureau economists
will be busy crunching the numbers to
support the merger case teams.
The case also serves as a reminder
that the Bureau will not shy away from
reviewing mergers that are below the
pre-merger notification thresholds
in the Act. As stated by the former
Commissioner, Melanie Aitken,‘Volume
of commerce is not the only factor we
consider when reviewing mergers –
we are willing to take on cases where
competition is being denied, regardless
of size.’ Merging parties must be
cognizant of this fact and not stop their
competition analysis after reviewing
the notification thresholds.
The evidentiary record in this case
proved problematic to Tervita.
The Tribunal relied upon internal
documentation from Tervita and
Complete to conclude that Complete’s
bioremediation business would fail
and Complete’s eventual entrance
into the secure landfill market in
northeastern British Columbia would
cause financial hardship on Tervita and
result in a reduction in prices charged
to customers in this market.
Merging parties must be cognizant
that the Bureau will seek all relevant
internal documentation to bolster
its case. As such, this is a valuable
reminder that companies should have
in place a competition law compliance
program that includes training on the
scope of the Bureau’s investigative
powers and the importance of
exercising caution when drafting
reports about potential transactions.
For more information contact:
Kevin Ackhurst
Partner, Toronto
[email protected]
John P Carleton
Senior partner, Calgary
[email protected]
Richard A Wagner
Partner, Ottawa
[email protected]
Norton Rose Fulbright – Quarter 2 2015 17 Competition World
Trade associations
remain under FTC lens
In May 2014, the FTC issued a
statement highlighting its continued
focus on trade associations and their
compliance with antitrust laws.1 In that
statement, the FTC acknowledged the
importance of trade associations, but
warned that trade association conduct
or rules restricting competition would
continue to invite antitrust scrutiny,
citing two enforcement actions by the
FTC against two trade associations at
the close of 2013 as a reminder that
the Commission ‘remains vigilant
about trade association activity that
restrains competition.’ True to form,
the spotlight on trade associations
continues. Just last week, the FTC
announced new consent decrees
against two trade associations accused
of anticompetitive conduct. These two
enforcement actions follow consent
settlements previously announced
against trade associations in August
2014.2 The enforcement activity
against trade associations is trending
up, which should be incentive alone for
trade associations and their members
to assess their current and planned
activities to ensure that their conduct
does not invite antitrust scrutiny.
On December 23, 2014, Professional
Lighting and Sign Management
1 Geoffrey Green, Antitrust by association(s), Federal Trade
Commission, Bureau of Competition, May 1, 2014, 8:34
AM, http://www.ftc.gov/news-events/blogs/competitionmatters/2014/05/antitrust-associations.
2 To Settle FTC Charges, Professional Associations of
Property Managers and Vocal Arts Teachers Agree to
Eliminate Rules that Restrict Competition among Their
Members: Settlement Orders Designed to End Restraints
Contained in Codes of Ethics, Federal Trade Commission
Press Release, Aug. 22, 2014, http://www.ftc.gov/
news-events/press-releases/2014/08/settle-ftc-chargesprofessional-associations-property-managers.
18 Norton Rose Fulbright – Quarter 2 2015
Companies of America, Inc.
(PLASMA), a trade association of
licensed electricians, entered into
a proposed Consent Agreement3
for alleged violations of Section 5
of the Federal Trade Commission
Act, 15 U.S.C. § 45. PLASMA, the
FTC alleged, adopted and enforced
policies restricting members from
competing in the geographic territory
of another member and restricting
individuals who left the association
from soliciting clients of members.
PLASMA reportedly also maintained
a price schedule that applied when
a member performed commercial
lighting or sign services in the
designated territory of another member.
The FTC complaint alleged that
PLASMA had a policy of sanctioning
violations through a grievance
committee. The Commission alleged
that these restrictions unreasonably
restrained competition and injured
consumers by ‘discouraging and
restricting competition among
licensed electricians, and by depriving
consumers and others of the benefits
of free and open competition among
licensed electricians.’4 The consent
agreement orders PLASMA to abandon
these competitive restrictions and
practices, which were included in
bylaws, standard operating procedures,
3
4
Agreement Containing Consent Order, In the Matter of
Professional Lighting and Sign Management Companies
of America, Inc., Federal Trade Commission File No.
141-0088, http://www.ftc.gov/system/files/documents/
cases/141223prolightingorder.pdf.
In the Matter of Professional Lighting and Sign
Management Companies of America, Inc. a corporation,
http://www.ftc.gov/system/files/documents/
cases/141223prolightingcmpt.pdf.
and a price schedule for commercial
lighting or sign services.
Similarly, the Professional Skaters
Association, Inc. (PSA), a professional
association of ice-skating coaches,
reached a Consent Agreement5 which
the FTC announced on the same day.
PSA members teach, train, and coach
skaters from beginning skill levels to
elite levels of competition and with a
membership of approximately 6400
coaches worldwide. The FTC alleged
that a PSA Code of Ethics provision
restricting coaches from soliciting
students was anticompetitive. The
provision at issue barred member
coaches from recruiting skaters with a
pre-existing coach, providing expressly
that ‘[n]o member shall in any case
solicit pupils of another member,
directly or indirectly, or through
third parties.’6 The FTC complaint
alleged that the PSA Code of Ethics
broadly defined ‘solicitation,’ listing
the following examples of prohibited
solicitation under the Code of Ethics
provision:
• ‘Targeting a skater already
established with a coach and
suggesting they change to you is
SOLICITATION.’
5
6
Agreement Containing Consent Order, In the Matter of
Professional Skaters Association, Inc., Federal Trade
Commission File No. 131-0168, http://www.ftc.gov/
system/files/documents/cases/141223proskatersorder.
pdf.
In the Matter of Professional Skaters Association, a
corporation, http://www.ftc.gov/system/files/documents/
cases/141223proskaterscmpt.pdf.
Competition World
• ‘Telling a skater already involved
in a coaching relationship they
will have better results with you is
SOLICITATION.’
• ‘(Solicitation) A coach approaches
a skater (or skater’s parent) who is
already taking lessons and has a
primary coach.’
• ‘(Solicitation) A team travels to
an established training centre
for a seminar with a nationally/
internationally recognised coach.
After the seminar, the programme
director/coach/presenter suggests
they stay for a few days of training to
work with them or someone else.’
• ‘(Solicitation) Contacting, either
directly or through another means,
a skater or parent by sending
recruiting material (resume, etc.)
directly to a skater or parent is
‘targeting’ a skater.’
• ‘A coach or team manager should
not approach (target) a skater who is
a member of another team or taking
private lessons.’
• ‘Sending recruiting material directly
to a skater on another team is
‘targeting’ a skater.’
The FTC complaint also alleged that the
PSA released social media guidelines
stating: (1) ‘[s]ocial media solicitation
remains solicitation and is unethical;’
(2) ‘it is solicitous to recruit skaters
using any form of social media,’ and
(3) ‘[i]t is a violation of the PSA Code
of Ethics for any coach, US Figure
Skating official, or US Figure Skating
official who is also a coach, to use any
form of communication or engage in
any acts which reasonably could give
the appearance of the intent to solicit
a business or personal relationship
with any skater or a parent (or legal
guardian) of a skater, who is not
the current student of that coach or
with a skater who is competing in a
competition in which the US Figure
Skating official is officiating.’
The FTC complaint alleged that the
non-solicitation restrictions were
broadly disseminated among PSA
members, who were educated and
trained on the specific limitations
by the PSA’s Ethics Committee. The
complaint further alleged that the
PSA implemented and administered a
grievance and enforcement programme
to address violations of the nonsolicitation rule. Under the terms of
the consent order, the PSA will no
longer enforce the non-solicitation
restrictions. Both settlements impose
requirements on the PLASMA and PSA
to implement an antitrust compliance
programme.
The PSA and PLASMA consent orders
mirror consent decrees announced in
tandem by the FTC in August 2014
against the National Association of
Residential Property Managers, Inc.
(NARPM) and the National Association
of Teachers of Singing, Inc. (NATS).7
The FTC, through a consent order,
prohibited NARPM, an organisation of
4,000 real estate managers, brokers,
and agents, from restraining members
from soliciting property management
work, and required the organisation
to adopt and implement an antitrust
compliance programme. Likewise,
NATS, an organisation of 7,300
vocal arts teachers, was ordered to
stop constraining member teachers
from soliciting students from other
instructors. The provision at issue
stated ‘[m]embers will not, either
by inducements, innuendos, or
other acts, proselytise students of
other teachers.’ In addition, the FTC
required that NATS sever any chapters
that fail to certify that they are not
restricting solicitation, advertising,
or price-related competition among
members. The two consent orders
required that NARPM and NATS remove
the problematic language from their
governing documents, inform their
respective chapters and members of
the change, and refrain from adopting
7
To Settle FTC Charges, Professional Associations of
Property Managers and Vocal Arts Teachers Agree to
Eliminate Rules that Restrict Competition among Their
Members: Settlement Orders Designed to End Restraints
Contained in Codes of Ethics, Federal Trade Commission
Press Release, Aug. 22, 2014, http://www.ftc.gov/
news-events/press-releases/2014/08/settle-ftc-chargesprofessional-associations-property-managers.
Norton Rose Fulbright – Quarter 2 2015 19 Competition World
similar limitations and requirements
for the 20-year life of the orders. Both
PSA and PLASMA, like NARPM and
NATS, will be obligated to provide
the FTC with regular reports of their
compliance efforts. Like the NATS and
NARPM consent orders, the proposed
settlements with the PLASMA and
PSA continue the FTC narrative that
trade association activities limiting
competition remain an enforcement
priority for the FTC.
The increased FTC enforcement
activity targeting trade associations
should incentivise trade groups and
their members to assess their current
and planned activities to ensure that
their conduct does not invite antitrust
scrutiny. Proactive, ongoing compliance
is best practice. Among other areas of
inquiry, trade associations and their
members should query:
• Does the association have an
effective antitrust compliance
programme, and are members
attuned to antitrust concerns and
risks?
• Whether the association’s bylaws
and membership rules limit
competition in any way?
• Are association meetings and
discussions properly tailored to
avoid problematic discussions?
• Are association members
exchanging confidential or
commercially sensitive information,
and if so, have antitrust risks
presented by the information
exchange been assessed and
adequately mitigated?
• Does the association have antitrust
counsel engaged and advising on
antitrust compliance?
20 Norton Rose Fulbright – Quarter 2 2015
For more information contact:
Carlos R Rainer
Partner, Houston
[email protected]
Aubrey Joy Stock
Associate, Houston
[email protected]
Emery Gullickson Richards
Associate, Houston
emery.gullickson.richards
@nortonrosefulbright.com
Competition World
Fifth Circuit reverses
antitrust judgment
against trade association
On January 14, 2015, the Fifth Circuit
reversed a judgment against the
American Quarter Horse Association
(AQHA) and held that AQHA can ban
cloned horses from its elite breed
registry without violating the antitrust
laws.1 The court’s opinion contained
a lengthy discussion of American
Needle v National Football League,2
a landmark decision rejecting ‘single
entity’ protection for the NFL and
guiding scrutiny of joint venture
organisations accused of conspiracy
under the Sherman Act. The court’s
decision highlights several limitations
of American Needle by pointing out key
factors that may protect associations
like the AQHA from antitrust violations
when setting membership standards.
Background
AQHA is a worldwide non-profit
association organised ‘to collect and
register the pedigrees and protect the
breed of the American Quarter Horse.’3
AQHA membership and registration
guarantees participation in a variety of
lucrative activities including
international horse shows, breeding,
and races. Recent scientific
developments have allowed breeders to
clone quarter horses. The AQHA Board,
as recommended by its Stud Book and
Registration Committee (SBRC),
adopted and maintained a rule
1
2
3
Abraham & Veneklasen Joint Venture v American Quarter
Horse Ass’n, No.13-11043 2015 WL 178989 (5th Cir. Jan.
14, 2015).
560 US 183 (2010).
American Quarter Horse Ass’n, 2015 WL 178989, at *1.
prohibiting the registration of cloned
quarter horses. Breeders of the cloned
horses sued AQHA alleging that
members of the SBRC and AQHA
conspired to exclude cloned horses
from the registry to further their own
personal economic interests in breeding
and racing. AQHA moved for judgment
as a matter of law, which was denied.
The jury found AQHA liable, but
awarded no damages, and subsequently
the district court, to effectuate the
verdict, issued an injunction to the
AQHA to permit breed registration of
the cloned horses. AQHA appealed.
American Needle at the haystack
In addressing the conspiracy claims,
the court discussed American
Needle. There the Supreme Court
clarified that while Section 1 of the
Sherman Act generally does not
apply to single entities, courts must
engage in a functional analysis to
determine whether there is evidence
of joint action by separate economic
actors pursuing distinct economic
interests sufficient to trigger Section 1
liablity.4 The Supreme Court observed
the analysis under Section 1 does
not begin and end with whether a
defendant is or seems like a single
entity in some metaphysical sense,
but rather explained that courts
must look at the ‘competitive reality’
with Section 1 liability turning
on ‘whether there is a ‘contract,
combination …, or conspiracy’ amongst
‘separate economic actors pursuing
separate economic interests,’ such
4
Am. Needle, Inc. v Nat’l Football League, 560 US 183, 195
(2010).
that the agreement ‘deprives the
marketplace of independent centres
of decisionmaking,’ and therefore
of ‘diversity of entrepreneurial
interests.’’ If there is evidence of
such an agreement, the entities are
capable of conspiring under Section
1. The Supreme Court found that the
NFL’s joint venture to license and
market team logo apparel from 32
separate NFL teams was not engaged
in single firm conduct, but rather
functionally was a group of separate
decisionmakers, even competitors,
ultimately pursuing independent
economic interests and therefore
capable of conspiring under the
Sherman Act.
The Fifth Circuit applied American
Needle’s functional analysis to the
AQHA and its anti-cloning rule, but
found that the factual scenario was
a horse of a different color compared
to the alleged NFL conspiracy in
American Needle. The court made the
following distinctions:
• First, out of the quarter of a million
members in the AQHA, only a tiny
number (.5 per cent) of the economic
actors within the AQHA could pursue
separate economic interests relevant
to the elite quarter horse market
unlike all 32 members (100%) of the
NFL venture who stood to directly
profit from the licensing arrangement.
• Second, this is a case about animal
breeding, rather than selling
sports attire based on intellectual
Norton Rose Fulbright – Quarter 2 2015 21 Competition World
property owned by 32 separate
and competing entities. No other
cases involving an animal breed
registry organisation have held that
adopting and maintaining certain
qualifications for the breed itself
violates antitrust laws—these breed
standards are ‘essential to creating
the product.’5
• Third, unlike the economic interests
of the NFL member teams in
American Needle, AQHA’s interests
in maintaining specific breed rules
are not limited to profit, but to
‘preserve and enhance the breed’s
characteristics.’6
• Fourth, AQHA’s organisational
structure with 300 annually rotating
Board members, the SBRC’s inability
to unilaterally make decisions, and
the potential involvement of any
AQHA member in the rule-making
process make it highly unlikely
that the AQHA is even capable of
conspiring.
Given these important differences, the
court declined to extend American
Needle’s holding to the AQHA’s anticloning rule. The court reasoned further
that even if the AQHA was legally
capable of a conspiracy, the breeders’
circumstantial evidence concerning
a minority of SBRC members with
relevant financial interests and alleged
‘unfavourable statements’ or ‘secret
meetings’ to defeat the clones was
insufficient to prove a conspiracy.7
5
6
7
American Quarter Horse Ass’n, 2015 WL 178989, at *5.
Id.
The breeders submitted testimony about SBRC members
who had financial interests in the elite horse market that
resulted in notable influence over the SBRC and AQHA.
The court responded that the existence of a financial
interest did not establish a conspiracy and furthermore,
the few SBRC members who met this criterion were
outweighed by the majority of the committee not involved
in the elite horse market. The breeders also argued that
SBRC members, including the former AQHA president,
made ‘unfavourable statements’ about cloning and other
‘secret meetings’ were held to plot against the registration
of cloned horses. The court refuted the breeders’ evidence
by pointing out that the ‘unfavourable statements’
evidence was one-sided or taken out of context and
the alleged ‘secret meeting’ was announced by email
and thus, not so secret. The breeders also brought
monopolisation claims under the Sherman Act which the
court found were unsustainable as a matter of law.
22 Norton Rose Fulbright – Quarter 2 2015
Implications for associations
and other professional
organisations
The court’s decision and its analysis
of American Needle are important
for associations, professional
organisations, and standard setting
organisations to contemplate when
evaluating antitrust risks.
Trade association membership
agreements and association activities
generally may face antitrust scrutiny
under American Needle, if they
constitute joint decisions made by
separate economic actors pursuing
separate economic interests. But, the
Fifth Circuit’s reasoning in this case
demonstrates how an association may
set standards and not offend antitrust
laws, even when financial interests
may be at play. Based on the court’s
analysis, the following questions
should be considered when adopting
exclusionary membership rules:
Do members or individuals involved in
creating the standard hold a significant
financial interest in the association
and will it be affected by this particular
standard, e.g. .5 per cent of members
with a financial interest versus. 100
per cent of members with a financial
interest?
What is the objective of the standard
and its connection to the association’s
purpose? Is it essential for ‘creating
the product’ of the association, e.g.
maintaining a specific animal breed
or adopting a particular technology
standard?
Are there legitimate interests, besides
making a profit, to support the
association adopting the standard,
e.g. preserving and enhancing an
animal breed or promoting a universal
technology standard to increase its
availability to consumers?
What is the organisational structure
of the association in relation to the
adoption and retention of the potential
standard? Is the decision only in the
hands of the same power players
who will benefit financially from the
standard or is there an opportunity for
many members to contribute to the
process, e.g. rotating members of the
Board?
For more information contact:
Layne Kruse
Partner, Houston
[email protected]
Carlos R Rainer
Partner, Houston
[email protected]
Eliot Turner
Senior associate, Houston
[email protected]
Aubrey Joy Stock
Associate, Houston
[email protected]
Competition World
The impact of regulation
on competition in
telecommunications and
piped gas
This article was first published by the
AJIC Journal.
The South African experience over the
past 14 years since the Competition
Act1 came into force demonstrates the
difficulties inherent in sector regulators
exercising concurrent jurisdiction over
competition matters in key sectors of
the economy. Uncertainty about which
authority has jurisdiction has impacted
on the ability of both the competition
authorities and the sector regulators to
deal with anticompetitive pricing and
other forms of conduct in key sectors
of the South African economy such as
telecommunications and energy.
This paper examines the ‘ex post’
exercise of jurisdiction by the
competition authorities in the
telecommunications sector in the
Telkom case, as well as subsequent
attempts by the Legislature to clarify
matters following the decision of the
Supreme Court of Appeal in that case.
We also analyse the ‘ex ante’ powers
to regulate competition bestowed on
the Independent Communications
Authority of South Africa (ICASA)
and National Energy Regulator of
South Africa (NERSA) in terms of the
Electronic Communications Act2 (ECA)
and the Gas Act3 and their recent
exercise of these powers in the mobile
and piped gas industries.
We also analyse recent proposed
amendments to the ECA which will
impact on the exercise of these powers
by ICASA if they come into effect.
We conclude that significant legislative
amendments are required in order
to align the relevant legislation and
enhance competition in these regulated
sectors.
Exercise of jurisdiction by
the competition authorities
in regulated sectors – the
Telkom case
In South Africa, one of the first
cases to tackle the respective roles of
competition authorities and sector
regulators, and jurisdiction over
anticompetitive conduct in a regulated
sector, was the Telkom case4.
A complaint was made against the
incumbent fixed line operator, Telkom
by a number of parties which relied
on access to Telkom’s lines in order
to offer their services. In May 2002,
the South African VANS Association
(SAVA), the Internet Service Providers
Association (ISPA) and 18 Value-added
network services providers (VANS)
lodged a complaint in relation to
alleged anticompetitive conduct by
Telkom. In August that year, Omnilink
and Internet Solutions lodged a further
complaint, which the Commission
consolidated into a single investigation
with the SAVA complaint. In February
2004, the Commission referred various
aspects of these complaints to the
Competition Tribunal for adjudication.
In summary, the Commission’s referral
alleged that Telkom’s refusal to provide
telecommunications facilities to VANS,
to ‘peer’ with VANS and/or to lease
access facilities directly to VANS,
constituted an exclusionary act in
terms of section 8(c) of the Competition
Act, and/or a refusal to provide access
to an essential facility in terms of
section 8(b) of the Competition Act,
and/ or price discrimination in terms of
section 9 of the Competition Act.
Telkom applied to review and set aside
the Commission’s decision to refer
these complaints and the referral itself.
Telkom also sought an order declaring
that the Commission did not have the
power to refer the matters forming the
subject matter of the referral to the
Tribunal for adjudication, and that the
Tribunal similarly lacked any power in
law to adjudicate on this conduct.
The key issues raised by Telkom
related to the competition authority’s
jurisdiction to evaluate anti-competitive
conduct in the telecommunications
industry at all. To understand the basis
on which the Competition Commission
did make its referral, it is necessary
to consider the powers granted to the
competition authorities in terms of
the Competition Act. Although the
relevant provision had gone through
numerous iterations, at the time of the
determination of the Telkom case - as
it is now - the governing provision was
Section 3(1A) of the Competition Act.
This section reads:
‘(a) In so far as this Act applies to an
industry, or sector of an industry, that
is subject to the jurisdiction of another
regulatory authority, which authority
has jurisdiction in respect of conduct
Norton Rose Fulbright – Quarter 2 2015 23 Competition World
regulated in terms of Chapter 2 or 3 of
this Act, this Act must be construed as
establishing concurrent jurisdiction in
respect of that conduct.
(b)The manner in which the concurrent
jurisdiction is exercised in terms of this
Act and any other public regulation,
must be managed, to the extent
possible, in accordance with any
applicable agreement concluded in
terms of section 21(1)(h) and 82(1) and
(2).’5
The wording of this section provided
a gap for Telkom to contend that the
Commission had no jurisdiction at all
to refer this complaint for adjudication
by the Tribunal. Section 3(1A) only
established concurrent jurisdiction ‘in
so far as’ the Competition Act applies –
if it does not apply, then section 3(1A)
finds no purchase, and no concurrent
jurisdiction is established. Whether the
Competition Act applies is therefore
a question of law, which has to be
answered independently of section
3(1A).6
Telkom argued that the conduct which
formed the subject of the complaint
fell within the exclusive jurisdiction of
ICASA and outside of the jurisdiction
of the competition authorities, because
it was either authorised in terms of
the Telecommunications Act7, and/
or by the sectoral regulator in terms
of Telkom’s licences ; or related to
the scope of Telkom’s licences8 and
Telkom’s powers and obligations
to VANs providers in terms of the
Telecommunications Act. Since these
matters were by their nature disputes
between different kinds of licensees,
Telkom argued, they fell within the
exclusive purview of ICASA, the
sectoral regulator entrusted with the
task of determining such dispute and
interpreting the Telecommunications
Act. It argued that the legislature had
clearly created a regulatory regime
to deal with the dispute which was
the subject of the complaint referral,
24 Norton Rose Fulbright – Quarter 2 2015
and had appointed ICASA as the
regulatory body to resolve this dispute.9
Since the conduct complained of
is contemplated by the relevant
telecommunications legislation and/
or the licences, the legislature could
never have contemplated that the
competition authorities would have the
authority to condemn this conduct as
anticompetitive. Accordingly, Telkom
argued, the Competition Act did not
apply to this conduct at all.
Telkom also argued that the
referral was invalid on a number of
other grounds, including that the
Commission’s reliance on a report
supplied by an external service
provider had created a reasonable
apprehension of bias, and that even if
concurrent jurisdiction did exist, the
Commission had failed to adhere to
peremptory provisions prescribed by
the MOA between it and ICASA.
The Commission argued that the
alleged contraventions of the
Competition Act by Telkom were not
authorised by the Telecommunications
Act, ICASA or Telkom’s licences. It also
raised the point that, since the Tribunal
and the Commission are specialist
bodies, and these complaints raised
complex competition issues, the High
Court should not deprive the Tribunal
of the authority to determine whether
these complaints involved possible
contraventions of Chapter 2 of the
Competition Act.
The High Court’s decision was not
based on the issue of jurisdiction – it
ruled that the referral was invalid on
the basis that the Commission was
biased towards the complainants
as it had relied heavily on a report
by Link Centre, a research body
in the field of information and
communications, which had strong ties
to the complainants. The High Court
accordingly set aside the Commission’s
decision to refer the matter and ordered
the Commission to pay Telkom’s costs.
Both parties applied for, and were
granted, leave to appeal the High
Court’s decision.10
The SCA rejected Telkom’s argument
and confirmed that the Competition Act
applies to all economic activity within
the Republic, including Telkom’s
conduct. The SCA concluded that
the Commission had jurisdiction to
deal with the complaint and where
its jurisdiction overlapped with that
of ICASA’s, the Commission had
sufficiently co-operated with ICASA
in accordance with the Competition
Act. The SCA found that the
Telecommunications Act did not oust
the jurisdiction of the Commission to
investigate competition matters in the
telecommunications industry.
The SCA’s decision is an important
one, because it confirms that the
competition authorities can enter
into regulated sectors and exercise
their powers, and indeed, that the
‘competition authorities not only have
the required jurisdiction but are also
the appropriate authorities to deal with
the complaint referred.’11
However, it only deals with the exercise
of concurrent competition jurisdiction
by the Commission. This decision did
not clarify whether the jurisdiction
of the competition authorities can
potentially be entirely excluded by
sector specific legislation. For example,
in the gas industry, if Nersa is granted
the power to approve maximum
prices for piped gas, does this mean
that the competition authorities lack
jurisdiction to investigate and refer
complaints about excessive pricing?
Legislative amendments after
the Telkom case
The SCA’s judgment was based on the
law as it existed in February 2004,
when the Competition Commission
referred the complaint to the Tribunal.
Competition World
At that time, the Telecommunications
Act was the applicable law.
However, the ECA came into force
on 19 July 2006 and repealed the
Telecommunications Act.
The Convergence Bill (the Bill that
preceded the ECA) proposed to expand
the powers of ICASA in relation to
competition matters in the electronic
communications sector. In particular,
the Bill proposed that ICASA would
be empowered to direct a licensee
to refrain from engaging in acts
likely to substantially prevent or
lessen competition, and to prescribe
regulations defining relevant markets
and market segments, so that procompetitive conditions could be
imposed upon licensees having
‘significant market power’.
In their submissions on the Bill,
the Competition Tribunal and
the Commission argued that the
jurisdiction over competition matters
granted to ICASA in the Convergence
Bill should be removed. They argued
that the exercise of concurrent
jurisdiction over competition by the
Commission and the regulator ‘was
meant as a temporary measure and
[was] not ideal’.12 They pointed out
when the Telecommunications Act was
enacted, it was only necessary for the
regulator to have the power to tackle
anticompetitive behaviour because
the Competition Act had not yet been
enacted. Given that the Competition
Act had now come into force, they
argued, there was no longer a need for
ICASA to regulate competition at all.
Therefore they submitted that while
the Commission and sector regulators
should evaluate prohibited practices
issues together, the final decision
should be made by the Commission.13
Unfortunately, the approach advocated
by the competition authorities did
not prevail. When it came into effect
in July 2006, the ECA expanded
the powers of ICASA in relation to
competition matters in the electronic
communications sector. In particular,
section 67(1) and (2) allow ICASA
to direct a licensee to cease or
refrain from engaging in an act that
is likely to substantially prevent or
lessen competition by giving undue
preference to or causing undue
discrimination against any other
licensee or a person providing a service
pursuant to a licence exemption. ICASA
is required to prescribe regulations to
describe what would be considered
as giving undue preference or causing
undue discrimination in this case.
Regulations detailing procedures for
complaints and the monitoring and
investigation of such complaints, as
well as prescribing penalties for failure
to comply with written notice are also
to be promulgated by ICASA. These
provisions were retained despite the
competition authorities’ submission
that these are issues over which the
competition authorities should have
exclusive authority.14
Section 67(10) of the ECA recognises
that ‘the authority is, for the purposes
of the Competition Act, a regulatory
authority defined in section 1 of
that Act’, and subsections 10 and
11 provide that ICASA and the
Commission can ask for and receive
assistance or advice from each other in
relation to their proceedings. However,
section 67(9) went a step further
than simply endowing ICASA with
concurrent jurisdiction in relation to
competition in the sector. It provided
that:
‘subject to the provisions of this
Act, the Competition Act applies to
competition matters in the electronic
communications industry.’
In effect, this provision excludes
the application of the Competition
Act where conduct is specifically
authorised or addressed by the ECA.
Accordingly, if the SCA were to decide
the Telkom case today, in respect of
a referral that took place after July
2006, the outcome may well have been
different, despite the principled basis
of enabling a regulator with experience
in competition matters to exercise
jurisdiction over those matters.
Realising this, prior to the handing
down of the SCA decision, the
Legislature introduced proposed
amendments to the Competition Act,
which culminated in the passing of the
Competition Amendment Act in 2009.15
The Department of Trade and Industry
claimed that its primary motivation
in amending the Competition Act was
to elevate the status of competition
law principles by recognising their
importance for the South Africa’s
economic development and growth. To
this end a new object was to be inserted
into the Act which states ‘to provide
for consistent application of common
standards and policies affecting
competition within all markets and
sectors of the economy’. To achieve
this, an amendment to Section 3(1) of
the Competition Act seeks to ‘overrule’
any other legislation by providing that
‘despite anything to the contrary in
other legislation’ the Act will apply to
all economic activity in or having an
effect within the Republic. There are
however a couple of provisos to this
section, one of which relates to the
situation where the Competition Act
applies to any conduct arising within
an industry or sector of an industry
that is subject to the jurisdiction
of another regulatory authority in
terms of any other legislation. In this
situation, the regulator in question and
the competition authorities will have
concurrent jurisdiction.
Interestingly, however, the
amendments introduce the concept of
‘primary authority’ in circumstances
where there is concurrent jurisdiction.
In such cases, the sector regulator
is charged with primary authority
to ‘establish conditions within the
industry that it regulates as required to
Norton Rose Fulbright – Quarter 2 2015 25 Competition World
give effect to the relevant legislation in
terms of which that authority functions
as well as the policies and principles
of this Act’, while the Competition
Commission must exercise primary
authority to ‘detect and investigate
alleged prohibited practices within
any industry or sector and to review
mergers within any industry or sector’.
The Amendment Act also proposed
to effect an amendment to the ECA,
to remove the offending ‘subject to’
wording in section 67(9) and replace
it with a ‘despite’ thus leading it to
read: ‘despite the provisions of this
Act, the Competition Act applies to
competition matters in the electronic
communications industry.’
In essence, the Competition
Amendment Act aims to clarify
jurisdiction by distinguishing between
‘ex ante’ jurisdiction (i.e. – the power
to adopt ‘before the fact’ rules and
regulation which are aimed at creating
conditions in the sector that enable
it to facilitate competitive outcomes)
and ex post jurisdiction (the power to
evaluate (allegedly anticompetitive)
conduct ‘after the fact’) (except in so
far as competition authorities maintain
ex ante regulation in respect of merger
evaluation).16
And indeed, the structure of the ECA
allows for such division of labour. The
provisions of section 67 envisage ICASA
using ex ante power to set conditions
in the market to facilitate competition.
Section 67 requires ICASA to prescribe
regulations defining relevant markets
and market segments, so that procompetitive conditions may be imposed
upon licensees having ‘significant
market power’, in circumstances
where ICASA determines such markets
or market segments have ineffective
competition.17 Subsection 7 sets out
examples of such pro-competitive
terms and conditions.
26 Norton Rose Fulbright – Quarter 2 2015
However, it is unfortunate that the
ECA retains section 67(1) and (2)
which relate to ex post evaluation of
conduct engaged in by participants in
the industry.18 This creates problems
because, while ICASA’s primacy over
competition matters in the electronic
communications industry will end
when the Competition Amendment Act
comes into force, it is not clear when
that will happen. The Amendment Act
has not come into force since it was
signed into law in 2009, and now,
five years later, the prospect of the
Amendment Act ever coming into force
is uncertain (although one provision
thereof – the market inquiry provision,
was brought into force in March 2013
19
). Accordingly, if the competition
authorities wish to evaluate allegedly
anti-competitive conduct ex post in this
industry, there may still be challenges
to its jurisdiction, which raise the same
severe delays as experienced in the
Telkom case.
The exercise of competition
jurisdiction by regulators
While the Telkom case and the
intended amendments to the
Competition Act will go some way
to clarifying the extent to which the
competition authorities deal with
competition issues in competition
sectors, an equally pressing question
has arisen in recent years regarding
the manner in which sector regulators
should deal with competition issues in
regulated sectors.
As noted by the ICN,20 the justification
for the existence of sectoral regulations
designed to promote competition, when
there is already a general competition
law applicable to all sectors, is that, in
sectors which are just being exposed
to competition, competition cannot yet
work and there is a need to monitor the
gradual development of competitive
forces.
These concerns are addressed through
‘economic regulation’ by sector
regulators. Moodliyar & Weeks21
explain the distinction between the
terms ‘economic regulation’ and
‘competition policy’ and note that
the term ‘economic regulation’ has
been used to describe the regulatory
response to natural monopolies
and other phenomena which result
in outright market failure.22 Motta
explains that the term ‘competition
policy’ ‘applies to sectors where
structural conditions are compatible
with a normal functioning of
competition (whether the market
functions well in practice or not is
another matter).’23
Economic regulation is applied ex ante,
and requires long-run and continuous
involvement on the part of the regulator
for purposes of conducting monitoring
and ensuring compliance.24 On
the other hand, competition policy
interventions are meant to address anticompetitive conduct in markets that
would otherwise tend towards effective
competition and are applied ex post.25
In South Africa, certain sector
regulators are explicitly granted
the power to examine the state of
competition in markets within their
sector, and where they find that
competition is weak, to address this
through appropriate regulation. For
instance, NERSA is, in terms of the Gas
Act, required to regulate pricing in the
industry ‘where there is inadequate
competition’. Similarly, Chapter 10
of the ECA provides that ICASA ‘must
prescribe regulations defining the
relevant markets and market segments,
as applicable, that pro-competitive
conditions may be imposed upon
licensees having significant market
power where the Authority determines
such markets or market segments have
ineffective competition.’
These provisions raise a key issue
highlighted by Moodliyar & Weeks –
that ‘an important area of convergence
between economic regulation and
Competition World
competition policy is in the application
of competition analysis for purposes
of diagnosing the market power
problem and identifying appropriate
remedies’.26
In the section below, we examine the
ways in which ICASA and NERSA have
recently exercised these powers in the
mobile and piped gas industries.
ICASA – Section 67 of the
ECA
As explained above, a key aspect of
ICASA’s economic regulatory powers
was introduced by section 67(4)-67(8)
of the ECA. This brought the ECA in
line with developments in Europe
relating to guiding economic regulation
with competition analysis.27 Guidance
provided by the EU notes that the
framework for economic regulation
and competition law in electronic
communications is based on three
concepts:28
• That the degree and intensity of
regulatory intervention must be
proportional to the competition
problem at hand: where markets
are already, or are in the prospect of
becoming effectively competitive,
existing regulatory measures will be
withdrawn or made lighter.
• That markets need to be analysed
following competition analysis
principles, from the very definition
of the market, to the assessment of
market power, to the identification of
remedies to address the competition
problems observed.
• That there is a need to consider
products and markets on the basis
of economic value rather than on
their physical or technological or
regulatory characteristics.
The provisions of the ECA follow
this approach and incorporate some
of these principles. Section 67(4)
requires ICASA to apply competition
law principles to identify market power
problems and determine whether
there is ineffective competition, which
then justifies the imposition of procompetitive terms and conditions,
which are required to be proportional.
The structure of such assessment is as
follows: ICASA is first to determine the
relevant market. A determination of
the market definition (section 67(4)(a))
must include:
• a consideration of the non-transitory
(structural, legal or regulatory)
barriers to entry
• a consideration of the dynamic
character and functioning of the
market/s. (67(6)(a))
Then, ICASA must determine which
firms in that market have ‘significant
market power’ (SMP) (Section 67(4)
(d)). This should include:
• A consideration of who is dominant
in the defined market
• A consideration of who has control
of essential facilities in the defined
market
• A consideration of who has a
vertical relationship that may harm
competition in the defined market.
(Section 67(5))
There is also a requirement to
determine whether the defined
market/s have effective competition
or whether there are market failures
(Section 67(4)(c)). This assessment
includes:
• an assessment of relative market
share of the various licensees in the
defined market/s (Section 67(6)(b)(i)
• a forward looking assessment of the
market power of each of the market
participants over a reasonable
period in terms of at least (Section
67(6)(b)(ii))
• actual and potential existence of
competitors
• the level, trends of concentration,
and history of collusion, in the
market
• the overall size of each of the market
participants
• control of essential facilities
• technological advantages or
superiority of a given market
participant
• the degree of countervailing power
in the market
• easy or privileged access to capital
markets and financial resources
• the dynamic characteristics of
the market, including growth,
innovation, and products and
services diversification
• economies of scale and scope
• the nature and extent of vertical
integration
• the ease of entry into the market,
including market and regulatory
barriers to entry.
There is then a requirement to impose
pro-competitive measures that would
remedy those market failures (Section
67(4)(c)). There is no explicit indication
in the ECA of the considerations
that are relevant for determining the
pro-competitive conditions, except
what is contained in Section 67(4)(c)
– that such conditions must ‘remedy’
the market failures in the markets
found to have ineffective competition.
Section 67(7) sets out what such
pro-competitive terms and conditions
may consist in. They include, amongst
others:
Norton Rose Fulbright – Quarter 2 2015 27 Competition World
• a prohibition against discrimination
in relation to certain matters
(access, provisioning of services,
interconnection and facilities
leasing)
• an obligation requiring the licensee
to publish information for the
purpose of ensuring transparency
• an obligation to maintain a
separation for accounting purposes
• price controls, including
requirements relating to the
provision of wholesale and retail
prices.
Section 67(8) then provides for
a review of the pro-competitive
conditions. This requires:
• a review of the ‘market
determinations’ made on the basis of
earlier analysis (Section 67(8)(a)(i))
• a determination of whether, the
licensees to whom pro-competitive
conditions apply, still possess SMP
(Section 67(8)(b))
• a determination of whether there are
changes in the competitive nature
of the defined market/s that require
changes to the pro-competitive
conditions. This requires, according
to Section 67(8)(b):
—— an assessment of whether the
pro-competitive conditions
previously applied are
proportional, or whether they
need to be modified to ensure
proportionality.
Whether the remedies or conditions
are still proportionate to the identified
market failure is thus at the heart of the
review process.
28 Norton Rose Fulbright – Quarter 2 2015
Mobile interconnection rate
regulation by ICASA
ICASA promulgated call termination
regulations in 2010 and it then
conducted a review of the procompetitive conditions imposed
in terms of those regulations and
promulgated new call termination
regulations in 2014.
Under Chapter 7 of the ECA, ICASA has
the power to regulate interconnection
and it may regulate interconnection
rates in terms of Section 41 of that
Chapter. Interconnection is the physical
linking of networks to one another
so as to enable the transmission of
calls from one network to the other
network on which the called number
can be found. For example, an MTN
subscriber wishing to make a call
to a Cell C subscriber, is likely to be
unaware that the two networks are
‘interconnected’ because the call
transfers between the two in a seamless
manner. However, it is common
practice for the network that receives
(or ‘terminates’) the call to charge the
network that sends (or ‘originates’)
the call, a fee for termination. This
is referred to as an interconnection
rate or a ‘termination rate.’ In mobile
electronic communications, the rate is
referred to as the ‘mobile termination
rate’ or ‘MTR’ and in fixed electronic
communications the rate is referred to
as the ‘fixed termination rate’ or ‘FTR’.
Interconnection is a critical part
of the electronic communications
sector, without which operators
cannot enable their subscribers to call
other subscribers on other networks.
However, interconnection is often an
area in which market failure occurs,
because interconnection rates are
often used as a tool by incumbent
operators to exacerbate market failure,
particularly in concentrated markets.
It is recognised internationally
that one of the challenges faced by
new or late entrants into electronic
communications markets, and one
aspect of the market which enables
the entrenchment of existing market
power, is the charging by incumbents
of high interconnection rates to late
or new entrants. These rates form a
‘floor’ for the prices that are charged to
consumers. When an operator decides
what retail price to charge consumers
for calls which terminate on another
network (‘off-net calls’), it must start its
calculation from the interconnection
rate. For example, when the MTR
was R1,25, operators had to charge
consumers a retail price higher than
this in order to make any profit.
Scale is an important component of
the ability to compete in this industry.
In order to compete for customers,
new or late entrants must provide
national coverage, at a high quality,
at reasonable prices, together with
other value-added services. Given
these features of the market, a new or
late entrant’s total investments and
operator costs will be almost as high
as those of existing operators. Late
entrants obviously earn less revenue
and therefore have a smaller scale,
because their ability to attract and
retain new subscribers is limited by the
market power of the incumbents which
have easier access to capital markets,
large subscriber communities, on-going
subscriber contractual commitments,
and sunk costs advantages.
Maintaining high interconnection rates
is a strategy which can be employed by
the incumbent super-scale operators
to exacerbate this effect, and eliminate
the likelihood of a late entrant gaining
sufficient scale to compete effectively.
Without regulatory intervention, a
smaller operator cannot on its own
achieve reasonable scale in this
environment.
For these reasons, there are a number
of regulators internationally that have
decided to regulate interconnection
rates. In addition, numerous regulators
in other jurisdictions have recognised
Competition World
that there is frequently a positive
relationship between market share
differences and cost differences.
Symmetric rates imposed on operators
with low market shares may have
adverse effects on profitability.
Accordingly, asymmetric rates (that
enable smaller operators to charge
higher interconnection rates to
their larger competitors, than those
competitors are entitled to charge
them) may be justified, for example to
encourage the development of a new
entrant that suffers from a lack of scale
due to late market entry.
The historical position in South Africa
provides an illustration of the use of
interconnection rates to stymie the
ability of new entrants to compete in
the market. When Vodacom and MTN
entered the market in 1994 and 1995
respectively, they were given the benefit
of an asymmetrical interconnection
rate with the then dominant fixed
operator, Telkom. At that stage, Telkom,
Vodacom and MTN were the only
three communications operators in
the market. Vodacom and MTN could
charge R1.00 more than the fixed
termination rate vis-à-vis Telkom. This
enabled them to grow their businesses
and to obtain the necessary scale
benefits.
When Cell C launched in 2002, it
similarly benefited from asymmetry
with Telkom but ICASA did not at that
time regulate mobile termination rates.
Vodacom and MTN operated without
regulatory scrutiny in this area since
their launch until the 2010 Regulations
were promulgated - a period of 17 and
16 years respectively during which
MTRs were unregulated.
In anticipation of Cell C’s entry to the
market, Vodacom and MTN increased
interconnection rates between 1998
and 2001 by a staggering 515%.
In 1998, the interconnection rate
was R0.20. The agreement between
Vodacom and MTN to increase the
interconnection rate to R1.25 per
minute was taken a few weeks before
Cell C was set to open its doors.
This prevented the growth of Cell C
into an effective competitor as it was
restricted in its ability to compete
vigorously in the face of high MTRs.
This impacted directly on Cell C’s
ability to build significant market share
with proportionate value share. A
fourth mobile operator, Telkom Mobile,
entered the market in 2010. While it
benefitted from having interconnection
rates regulated at the time of its entry,
it has also struggled over the last four
years to gain the necessary scale to
compete effectively with Vodacom and
MTN, illustrating that the regulatory
intervention may not have been
aggressive enough.
This is an area well-suited to ex
ante economic regulation, and
ICASA accordingly has special
powers to regulate interconnection
under Chapters 7 and 10 of the
ECA. Unfortunately, ICASA had not
exercised this power at the time that
Cell C entered the market. By 2006/7,
ICASA began to appreciate that there
was significant market failure within
the industry and so it commenced
Norton Rose Fulbright – Quarter 2 2015 29 Competition World
the process, designed under section
67 of the ECA, of analysing the
market, identifying market failure,
and considering what remedies were
appropriate to correct that market
failure. This process included an
‘inquiry’ into call termination rates
under section 4D of the ICASA Act in
2006/7, resulting in the 2007 Findings
document;29 and draft regulations
on each of the components set out in
section 67(4) in 2008.30 Given the time
that had passed since its 2007 Findings
document, on 9 October 2009, ICASA
released a request for information
from all licensees to facilitate upto-date evidence-based evaluation
of the effectiveness of competition
in the call termination market in
South Africa.31 On 8 March 2010, it
released a ‘Guideline for Conducting
Market Reviews’ in order to provide
stakeholders and licensees with clarity
as to how market reviews in terms
of section 67 were to be conducted,
including the public consultation
process, the relevant powers of
information gathering and the types of
information which may be requested.
This process eventually culminated
in the Draft Call Termination
Regulations being published on 16
April 2010,32 and final Call Termination
Regulations being published in October
2010.33 Pro-competitive remedies
imposed by ICASA under the 2010
Regulations provided for a reduction in
interconnection rates and asymmetric
MTRs. Asymmetry enabled Cell C and
other licensees to charge higher MTRs
to Vodacom and MTN than MTN and
Vodacom could charge them.
ICASA explained that such remedies
were aimed at addressing failures
in the each of the mobile and fixed
markets. In section 2.4.5(6) of the
explanatory notes to the 2010
Regulations, ICASA stated that ‘the
application of asymmetric rates for
a transitory period will benefit total
social welfare by stimulating increased
competition in the respective markets,
30 Norton Rose Fulbright – Quarter 2 2015
thereby benefiting end users. However,
asymmetric (higher) termination rates
may only be justified on certain criteria
to ensure that only those licensees that
are dedicated to the goal of reducing
retail prices through competitive forces
qualify for such asymmetry.’
ICASA also indicated, at paragraph
3 of the explanatory notes to the
2010 Regulations that it expected the
imposition of these pro-competitive
terms and conditions on operators in
the relevant markets to achieve the
following:
• a more efficient and effective access
regime
• a more dynamic retail pricing
environment
• continued access and investment in
electronic communications networks
in SA.
In addition to the existence of section
67(4) of the ECA, the 2010 regulations
also provided for a ‘schedule of review’
of the regulations. ICASA began this
process in July 2013 when it launched
its ‘Cost to Communicate’ programme,
and noted in that notice that it
would review the call termination
regulations of October 2010 and ‘the
review will not consider revisions of
either the market definitions or SMP
determinations as these will not have
changed’.34
Such a review led to the release of
draft call termination regulations in
October 2013, and final regulations
on 4 February 2014. This review
concluded that the market definitions
had not changed, and that there was
still ineffective competition in these
markets and still a need to impose procompetitive remedies. Indeed, ICASA
concluded that far more extensive cuts
in call termination rates were called for,
and more expansive asymmetry. This
conclusion is supported by the fact that
none of the intended outcomes of the
2010 regulations had been achieved
yet and that market shares in the
downstream retail market (based on
revenue share) have remained largely
stagnant, reflecting that the smaller
operators, and late entrants have not
been given a sufficient leg-up to achieve
the scale necessary to compete with the
incumbents.
There have therefore been regulations
in place for three years, designed to
create the conditions for competition
to emerge. As explained in the
explanatory memoranda to both
the 2010 and the 2014 regulations,
these pro-competitive measures are
not intended to be in place forever.
Once the market can be controlled
by competitive forces, it should be
possible to reduce the degree and
intensity of regulatory intervention, as
proposed by the EU guidance.
However, it seems that in South Africa,
we are still far away from that, in
both the space of interconnection,
and in numerous other spheres in
telecommunications and broadcasting.
It is unfortunate that the only time
ICASA has exercised its section 67
powers is in relation to interconnection
rates, where such interventions are
required in other spheres.
It is, for example, a great pity
that there have not been such
investigations into markets in the
broadcasting sphere. ICASA has
published a Discussion Document on
Broadcasting Transmission Services.37
But there are no final regulations in
this regard, nor have there been any
active interventions in relation to
the dominance in the subscription
television market. Broadcasting
appears to be an area where ICASA has
been so late in the day in intervening
that the incumbent players have
benefitted for years from a lack of
thorough regulation that they can
easier entrench their dominance. For
instance, in the area of subscription
broadcasting services, Top TV, a
Competition World
subscription broadcaster, was licensed
in 2008 and launched service in
2010 but at the end of 2012 went into
business rescue. Although there are
doubtless also other reasons for this,
one of the contributing factors was
publicly acknowledged to have been
the challenge that Top TV faced in
competing for subscribers with DStv
and MNet (both owned by Multichoice),
who had been entrenched in the
market for 14 years and almost 23
years respectively.
ICASA’s lack of intervention in this area
can be compared against many years of
regulatory work by Ofcom in the UK in
addressing the market power of BSkyB
in the subscription television market.
There is now regulation in place which
provides that third parties can access
Sky’s set top box (i.e. broadcast their
own services via Sky’s infrastructure
so that customers need not install
separate satellites or set top boxes
to view the services of competing
broadcasters). Not only do third parties
have access to the Sky set top box, but
those third parties can also enforce
conditional access on end viewers
(e.g. BT Sports can ensure that only
Sky subscribers who pay a bit extra
are allowed to watch the BT Sports
channels, as delivered over the Sky
STB). Similar interventions in South
Africa would assist in encouraging
competing broadcasters to enter the
market and be sustainable in that
market.38
Amendments to the ECA
As we have illustrated above, there is
a precise step-by-step process set out
in section 67 of the ECA on how to
engage in a competition analysis for
the purposes of economic regulation.
Of course, assistance from the
competition authorities in engaging
in such evaluations, would provide
further assistance to the regulator to
successfully implement these steps. But
even in the absence of such support,
the legislation provides helpful
guidance to ICASA on conducting these
assessments.
There is therefore some concern that
proposed amendments to the ECA aim
to reduce the considerations that ICASA
should take into account in assessing
the effectiveness of competition in the
market.
In this regard, proposed amendments
to the ECA are introduced by
the Electronic Communications
Amendment Bill, B17B-2013. On the
one hand, they appear to respond to
criticism of ICASA’s holding of ex post
competition jurisdiction, but deleting
section 67(1)-(3) of the ECA. The
Amendments appear to propose the
removal of ICASA’s powers to evaluate
and remedy past anti-competitive
conduct engaged in by participants in
the electronic communications sector.
This appears to be a positive move,
since the Competition Commission
is better suited to exercise ex—post
competition jurisdiction.
Unfortunately however, some ex post
jurisdiction appears to be retained
through the addition to be Section
67(4)(f) of the amended act. The new
provision provides that ICASA must
‘prescribe regulations defining relevant
markets and market segments and
impose appropriate and sufficient
pro-competitive licence conditions on
licensees whether there is ineffective
competition, and if any licensee has
significant market power in such
markets or market segments. The
regulations must, amongst other things
…
(f) provide for monitoring and
investigation of anti-competitive
behaviour in the relevant market and
market segments.’
This addition seems to undermine
the goal of removing ICASA’s ex post
jurisdiction and indeed, appears
to complicate matters by placing
such powers within the scope of the
provisions that address its ex ante
economic regulatory role. Moreover,
there are no amendments proposed
to subsections 67(8)- (12), and
accordingly subsection (9) remains
and continues to read ‘Subject to the
provisions of this Act, the Competition
Act applies to competition matters
in the electronic communications
industry.’ It is concerning that the
addition of 67(4)(f) and the failure to
amend subsection (9) may retain space
for forum shopping and disputes over
jurisdiction.
Of further concern are the proposed
changes to section 67(4)-(6). The
amendments propose the addition
of Subsection 64(4A), providing for
the analysis of the effectiveness of
competition in the relevant markets.
This new section contains far fewer
factors to consider in evaluating
competition in the market. The
amendments propose the consideration
of (among other things not specifically
identified): barriers to entry and the
dynamic functioning of the markets
(including market share). Excluded are
the current 67(6)(b) considerations
such as: the existence of competitors;
the level and trends of concentration;
the degree of countervailing power in
the market; and economies of scale and
scope; and many others.
We are of the view that the
considerations in the current ECA assist
the Authority with the assessment
of the market by directing it to
consider issues normally considered
by competition authorities when
examining the adequacy of competition
in a market. These considerations can
help the Authority to reach the correct
conclusion in light of well-established
and relevant factors. The factors now
left in subsection (4A)(a) and (b) do not
seem like sufficient guidelines to direct
ICASA in making this assessment.
Norton Rose Fulbright – Quarter 2 2015 31 Competition World
A further notable amendment is the
proposed section 67(4)(d) which
provides that the Regulations must
‘impose appropriate pro-competitive
licence conditions on those licensees
having significant market power to
remedy the market failure’.
In some ways, this wording is
better and clearer than the current
provision. It introduces the concept of
appropriateness, proportionality and
the requirement to tailor the remedy
to the market failure. However, it
suggests the only pro-competitive
remedies that can be proposed must be
contained in licence conditions. This
seems unnecessary and cumbersome,
if licences will need to be amended to
accommodate new regulations.
It is hoped that the final version of
the Amended ECA will take into
account the success of ICASA in
promulgating the Call Termination
Regulations, and how the provisions
of section 67 provided the requisite
guidance which enabled it to engage in
economic regulation with reference to
competition analysis. The amendments
should not remove such guidance.
Maximum price regulation of
piped gas by Nersa
The regulatory framework for piped
gas is set by the Gas Act, 2001,
which established a National Gas
Regulator and provided for the
‘orderly development of the piped
gas industry’.39 The functions of the
Gas Regulator are set out in section
4 of the Gas Act and include the
power to ‘regulate prices40 in terms of
section 21(1)(p) in the prescribed41
manner’; and to ‘monitor and
approve, and if necessary regulate,
transmission and storage tariffs and
take appropriate action when necessary
to ensure that they are applied in
a non-discriminatory manner as
contemplated in section 22’.
32 Norton Rose Fulbright – Quarter 2 2015
Section 21(1) of the Gas Act deals
with conditions of licences, and
provides that the Gas Regulator may
impose licence conditions within a
stipulated framework of requirements
and limitations, including, in terms
of subsection ‘maximum prices
for distributors, reticulators and
all classes of consumers must be
approved by the Gas Regulator where
there is inadequate competition as
contemplated in Chapters 2 and 3 of
the Competition Act, 1998 (Act No. 89
of 1998)’.42
However, In terms of section 36 of the
Gas Act, its provisions were subject
to the provisions of the Mozambique
Gas Pipeline Agreement (MGPA)
between the Minister of Minerals and
Energy, the Minister of Trade and
Industry and Sasol Limited concerning
the introduction of natural gas by
pipeline from Mozambique into South
Africa. This agreement endured for a
period of 10 years after natural gas
was first received from Mozambique,
until 25 March 2014. Its purpose
was to compensate Sasol for the
investment it was required to make
in order to extract natural gas from
the gas field in Mozambique and to
construct a gas transmission pipeline
from Mozambique to South Africa. In
exchange for supplying 120 million
GJ pa of natural gas from Mozambique
to South Africa for 25 years after the
date upon which natural gas was first
sold and delivered on a commercial
and continuous basis to pipeline
customers in South Africa (clause 4),
Sasol was permitted to charge external
customers a price for the gas which
was determined43 in accordance with a
‘Market Value Pricing (MVP) formula.44
This effectively allowed Sasol to
charge monopoly, and in many cases
discriminatory prices for natural gas
and effectively shielded Sasol from
complaints in terms of the Competition
Act, for example, based on excessive
pricing in contravention of section 8(a).
In anticipation of the MPGA coming to
an end, NERSA released a consultation
document on 21 October 2010 dealing
with the ‘Methodology to approve
maximum prices for piped-gas’ in
terms of section 21(1)(p) of the Gas
Act. NERSA noted that its responsibility
to approve maximum prices required
there to be ‘inadequate competition’
as contemplated in Chapters 2 and
3 of the Competition Act45 and this
implied that ‘NERSA should encourage
competition and seek to replicate
competitive market outcomes in
approving maximum prices’.46 NERSA
explained further that the regulated
maximum price for the gas energy
component of the maximum price
should shadow the hypothetical price
that would occur if competition were
not limited. NERSA stated that ‘On this
basis, the maximum regulated price
for gas energy will fall somewhere in
the envelope bounded on the low end
by the cost of production of gas, and
on the high end by the opportunity
value for consumers (their cost of a
reasonable alternative fuel).’47 NERSA
observed that ‘This latter outcome
(which may result in Market Value
Pricing), is inefficient, and results in
a deadweight loss to the economy as
a whole.’48 NERSA concluded that:
‘The best regulatory option is to seek
to replicate market outcomes and set
the maximum price for gas energy as
closely as possible to the marginal
cost of supply.’49 NERSA went on to
state, however, that the marginal
cost approach may not encourage
competition because it may not leave
any surplus for a potential competitor
to enter the supply market. NERSA
also expressed the view that marginal
cost is also difficult to calculate.50
NERSA also dismissed international
benchmarking as an inappropriate
basis for piped-gas pricing in South
Africa on the grounds that the South
African gas market is unique.51 On this
basis, NERSA proposed that the price
of alternatives is ‘arguably the more
appropriate option’.52
Competition World
In June 2011, NERSA released a ‘Draft
Methodology to Approve Maximum
Prices of Piped-Gas in South Africa’.
NERSA stated in that document that ‘In
the absence of a transparent gas market
price in South Africa, the maximum
price for gas energy (at the point of
its first entry into the transmission/
distribution system) shall be
determined by reference to energy price
indicators.’53 NERSA recognised that, in
order for it to approve maximum prices
of piped gas, it had to be of the view
that there existed market conditions or
market features indicating inadequate
competition in line with the provisions
of chapters 2 and 3 of the Competition
Act. NERSA proceeded to set out an
assessment of the current piped gas
market conditions that indicated, in its
view, inadequate market competition,
and hence the need to approve
maximum piped gas price in the
prescribed manner.54
Those included:
• a monopolistic market structure
in terms of which Sasol (pursuant
to the MVP model) references the
price of natural gas to the costs
of an alternative energy source
available to an individual customer.
NERSA noted that ‘This is a perfect
price discrimination scenario by a
monopolist’
• gas prices that are higher than those
charged in perfect competition or in
a competitive market
• significant entry barriers, lack
of countervailing power, lack
of product differentiation,
discriminatory pricing and a high
degree of vertical integration of
Sasol in the gas market.55
In September 2011, NERSA produced
a discussion document relating to
the ‘Determination of the Inadequate
Competition in the Piped-Gas Industry
as Contemplated in Chapters 2 and 3
of the Competition Act, 1988’. In that
document, NERSA repeated the views it
had expressed in its Draft Methodology
on Maximum Pricing of Gas regarding
the inadequacy of competition in the
South African gas industry.56
NERSA also recognised that ‘given
the costs of fuel conversion, once the
decision to use gas has been made,
the customer is effectively captured by
the gas supplier, and in the absence
of multiple gas suppliers the customer
is no longer open to competitive
threat,’.57 NERSA noted in this regard
that ‘the adoption of energy price
indicators related to other fuels is a
pragmatic approach to determine what
a competitive energy price should be. It
is not evident that alternative fuel types
provide adequate competition for gas.
NERSA does not support the view that
the market is defined as a broad ‘energy
market’, but instead considers the
relevant market to one for piped-gas
including (mobile) storage.’58
In October 2011, NERSA released
the final ‘Methodology to Approve
Maximum Prices of Piped-Gas in South
Africa’ along materially the same lines
as the Draft Methodology, and that
was approved by NERSA on 28 October
2011. NERSA explained in its final
methodology that it would approve a
single maximum price per licensee,
based on which different customer
category maximum prices would
be approved, as per the customer
categories listed in Annexure A to the
Gas Regulations. A licensee would
therefore be required to apply for
maximum prices for each customer
class and each customer category’s
price would have to be below the
maximum price as approved by
NERSA for that licensee.59 NERSA
again recognised in its decision that
the requirement to approve maximum
prices and hence to implement this
methodology was contingent on NERSA
determining that there was inadequate
competition as contemplated in
Chapters 2 and 3 of the Competition
Act. It stated that this determination
formed part of a separate assessment
by NERSA that would be performed
from time to time.60
On 8 February 2012, NERSA approved
the determination of inadequate
competition in the piped gas market
as contemplated in Chapters 2 and
3 of the Competition Act, 1998, as
envisaged in section 21(1)(p) of the Gas
Act.
In early 2013, NERSA received two
applications from Sasol Gas Limited
(Sasol) requesting:
• approval of a maximum gas prices
for the period 26 March 2014 to 30
June 2017, and a trading margin
for the period 26 March 2014 to 30
June 2015 (the maximum gas price
application)
• approval of a transmission tariff
for the period 26 March 2014 to 30
June 2015 (the transmission tariff
application).
These applications were published on
NERSA’s website on 4 February 2013
for stakeholder comments and input.
In accordance with NERSA’s procedure
for the processing of maximum
prices and tariff applications, NERSA
reviewed and made a preliminary
assessment of the maximum prices
of gas to be applied by Sasol as well
as a preliminary assessment of the
proposed gas transmission tariffs on 6
February 2013, which were published
on NERSA’s website on 8 February
2013 for public comment and input.
Detailed written submissions to NERSA
were submitted in respect of Sasol’s
applications on behalf of several large
industrial users of gas, who argued that
both the methodology and the process
adopted by Nersa were flawed.
On 25 March 2013, the Piped-Gas
Sub-Committee of NERSA met and
recommended approval of Sasol’s
applications and on 26 March 2013,
Norton Rose Fulbright – Quarter 2 2015 33 Competition World
Sasol’s maximum gas price application
and transmission tariff application
were approved by the Board of
NERSA. Reasons for approving Sasol’s
maximum gas price application and
transmission tariff application were
issued by Nersa on 24 April 2013.
An application for the review of
Nersa’s decision in relation to these
pricing applications was filed by a
group of large industrial users of gas
in the North Gauteng High Court on
18 October 2013. The application
alleges that Nersa’s decision suffered
from serious procedural errors, and
that it utilised an approach to gas
pricing, in particular, using a pricing
methodology, that is fundamentally
inconsistent with the underlying
objective of the statutory powers
granted to Nersa in terms of the Gas
Act, which is to ensure that suppliers
charge prices that are reflective of those
they could charge in competitively
priced markets (as opposed to
uncompetitive or monopoly prices).
They argue that Nersa’s pricing
decision will have the perverse effect
of entrenching Sasol Gas’ monopoly
pricing structure, and allow it to
charge prices which are significantly
higher than the average prices it
currently charges customers of piped
gas (in market in which pricing was
and still is significantly warped by
the fundamentally anticompetitive
Mozambique agreement). At the time
that this paper was written, answering
papers had yet to be filed. It may be
some time before the Court rules on the
application.
There is also concern (although this
is not one of the grounds of review)
that NERSA appeared to choose to
regulate prices before conducting
the inadequate competition
assessment, since such an assessment
is a jurisdictional pre-requisite for
regulation. More importantly, the
inadequate competition assessment
itself did not contain a thorough
34 Norton Rose Fulbright – Quarter 2 2015
analysis of competition in the market,
and it appeared to display a lack of
understanding of key competition law
and economics principles.
For instance:
• NERSA seems to have included
products within the market
definition purely because of the
terms of the Gas Act, rather than the
question of substitutability. (See for
instance the fact that CNG is viewed
as part of the piped-gas market
because of the definition in the Gas
Act.
• Despite the manner in which NERSA
set the Methodology to approve
pricing (by including a basket of
alternative fuel sources’ pricing),
it did not consider that alternative
fuels are in the same market as
piped gas because of the high cost of
switching.
• NERSA makes its geographic market
definition conditional on:
—— suppliers being willing to build
the infrastructure;
—— a pipeline available to connect
the customer;
—— willingness of the customers
to pay a connection and
transportation costs; and
—— sufficient gas to supply the
customer.
It concludes that the relevant
geographic market is South Africa.
Although NERSA is correct in stating
that if these factors are present then
a customer can access gas anywhere
in the country, a comprehensive
market definition requires the
actual undertaking of an analysis of
whether these factors are present.
• NERSA concludes that the relevant
functional market is the market
for the supply of gas to the
wholesale and retail market which
includes distributors, traders, and
reticulators, without a undertaking
a functional market definition
exercise. NERSA seemingly reaches
this conclusion on the basis that
Sasol Gas is active on all levels of
the supply chain. But of course there
are functional distinctions between
these levels and parties that operate
on only one of those functional
levels.
• NERSA made no determination
of what the term ‘inadequate
competition’ means, and
unfortunately, this term is not
defined with reference to the
Competition Act. Using section 7,8,
9 and 12A(2) of the Competition
Act, NERSA was able to identify key
issues that impede more effective
and adequate competition, namely:
structure of the market, entry
barriers, exercise of market power,
anticompetitive conduct such as
price discrimination and high prices
and market allocation. However,
these considerations are all based
on Sasol’s position in the market as
well as Sasol’s conduct which was,
in any event, permissible in terms of
the MPGA.
• NERSA states that it has used
sections 7, 8 and 9 of the
Competition Act in its analysis.
However, while section 7 sets out
when a firm is considered to be
dominant, section 8 and 9 deal with
abuses of dominance. It is important
to note that the mere fact that a firm
is dominant and has market power
is not viewed as anti-competitive
by the Competition Act. It is only
the abuse of that dominance
in the ways set out in section 8
and 9 of the Competition that is
considered anti-competitive and is
therefore prohibited in terms of the
Competition World
Competition Act. A mere assertion
of dominance and market power
by NERSA is therefore insufficient
to show inadequate competition
in terms of chapters 2 and 3 of the
Competition Act.
Recommendations
Legislative amendments are
required
As the Telkom case demonstrates,
uncertainty about which authority
has ex post jurisdiction to deal with
complaints about anti-competitive
conduct has seriously hampered
enforcement by both the competition
authorities and the sector regulators.
In the telecommunications sector,
for example, the Telkom complaint
took some 11 years to reach finality,
during which time, complainants
were effectively deterred from
pursing complaints about anticompetitive conduct to either ICASA
or the Commission. Despite the
fact that the Commission identified
telecommunications as a priority sector
for investigation.
As the recent experience described
above indicates, ex ante regulation
by ICASA and Nersa has also proven
to be problematic in several respects.
For instance, in the case of the ECA,
legislative gaps have allowed for
forum shopping and make it unclear
which authority should exercise
primary jurisdiction over which area of
regulation.
In the case of the Gas Act, there are also
proposed amendments in the pipeline.
The Gas Amendment Bill proposes to
change section 21(1)(p) so that it will
provide: ‘maximum prices and tariffs
for distributors, reticulators, and all
classes of customers must be set in
the prescribed manner’. It therefore
contemplates a far more interventionist
regulation of pricing – to ‘set’ rather
than just ‘approve’ licensees’ maximum
prices. Most worryingly, however, the
pre-requisite to determine whether
there is inadequate competition in the
market before exercising its pricing
regulation power, has been removed in
the Bill.
Furthermore, there is an amendment
which provides that NERSA must
monitor the application of the prices
and tariffs and take appropriate action
where necessary to ensure nondiscrimination. This appears to be the
imposition of ex post regulatory power
on NERSA.
Legislative amendments are clearly
required to address these issues. It is of
concern that the proposed amendments
to the ECA seem to diminish the level
of guidance to ICASA, while in the
case of the present Gas Act, a lack of
particularity in the requirement that
there be ‘inadequate competition’ has
failed to provide the regulator with
sufficient guidance on how to conduct
economic regulation. The proposed
amendments to the Gas Act suggest
that there be no assessment of the
levels of competition before pricing
regulation is imposed. These concerns
should be addressed so that the final
version of the legislation provides
for thorough, ex ante economic
regulation through the application of a
competition analysis.
The sector specific legislation
should be clear and consistent
with the Competition Act
Nersa has no general powers in terms
of the Gas Act to monitor gas prices and
to initiate a process to regulate pricing.
It can only ‘approve’ a maximum
pricing application once it receives one.
There is also no provision for Nersa
to initiate a review of its decisions on
maximum pricing, in the event of a
material change in market dynamics,
and no means for buyers of gas to
trigger such a review.
Moreover section 21(1)(p) does not
provide adequate guidance to Nersa
on what process it should follow in
order to assess whether inadequate
competition exists (and therefore,
whether it should regulate prices,
and if so, how). Although the section
clearly implies that Nersa must assess
the nature and extent of inadequate
competition before regulating prices,61
the Gas Act does not set out a clear
series of steps to be followed to identify
the relevant market and then evaluate
the competitive conditions in that
market.
Nersa’s power to regulate prices is
triggered in terms of section 21(1)(p)
‘where there is inadequate competition
as contemplated in Chapters 2 and 3
of the Competition Act’. This general
reference is to the prohibited practices
sections of the Competition Act
(Chapter 2, dealing with price-fixing
and market allocation by competitors,
as well as restrictive agreements
between customers and suppliers and
abuses of dominance) and the merger
regulation provisions (Chapter 3).
There is no specific guidance, as set out
in section 67 of the ECA. It would be
far more helpful if the Gas Act would
set out, as section 67(4) of the ECA
does, that what Nersa must do is define
the relevant markets and set out a
methodology for determining whether
there is inadequate competition in
these relevant markets, which could
include, for example, the factors set out
in section 12A(2) of the Competition
Act which are commonly used in
traditional economic analysis to assess
the nature and level of competition
in a relevant market- such as the
actual and potential level of import
competition in the market; ease of
entry into the market, including tariff
and regulatory barriers; level and
trends of concentration, and history
of collusion, in the market; degree of
countervailing power in the market;
dynamic characteristics of the market
including growth, innovation and
Norton Rose Fulbright – Quarter 2 2015 35 Competition World
product differentiation; nature and
extent of vertical integration in the
market.
The legislation should make
provision for mandatory coordination and interaction
between the competition
authorities and sector regulators
Regulators are expected to apply
competition analysis to create
conditions that would foster
competition, without much experience
of competition law and competition
economics, or the techniques used by
competition authorities to regulate.
Accordingly, there needs to be cooperation between the competition
and sector regulators so that there is
appropriate knowledge sharing. This
can be done in the case of both ex post
or ex ante regulation, to the extent
that there is concurrent regulation.
Accordingly, sector specific legislation
should tie up with the provisions of the
Competition Act that provide for MoUs
to be entered into between the parties.
Such MoUs should set out practical
and particular steps on engagement
in each instance that there needs to be
the application of ex post regulation in
a regulated sector or the application of
competition analysis in relation to ex
ante regulation.
Adequate provision for appeals.
Neither the Gas Act, nor the ECA,
provide for any appeals in relation to
the exercise of competition regulation
by independent regulators. Parties
aggrieved by decisions by Nersa and
ICASA in the course of exercising their
powers have to bring an application
to the High Court to review these
decisions.
At the time that this paper is being
written, Vodacom and MTN have
launched applications to review
ICASA’s 2014 Call Termination
36 Norton Rose Fulbright – Quarter 2 2015
Regulations, and requested interim
relief from the High Court in the
form of an order suspending the
implementation of the Regulations
until the review is decided. The parties
are alleging numerous defects in
the regulations and ICASA’s process.
As explained above, similar review
is being pursued against NERSA
in relation to its maximum pricing
regulation.
While we present no views regarding
the validity of NERSA’s or ICASA’s
processes which led to these reviews
or indeed the substantive ‘correctness’
of the regulation which resulted from
these processes, we note that reviews
like these take many years to complete.
In the review of the call termination
regulations, if the regulations are
suspended pending the outcome of
the review process, the market will
suffer from a further period without
pro-active intervention of economic
regulation, thereby delaying the
prospect of creating the conditions
necessary for the market to function
without regulation.
This problem highlights the advantages
of the competition authorities’ process.
In this regard, if the Competition
Commission regulates, its decisions
primarily lead to referral to the
Competition Tribunal. There is thus
an investigation process during
which the Commission can take into
account stakeholders’ submissions.
However, the Commission’s decision
is then subject to further oversight
and decision by the Tribunal, and
the Tribunal process provides for the
exchange of pleadings of the relevant
parties and opportunities for testimony
and cross examination of both factual
and expert witnesses.
It is for this reason that the High
Court has found that a referral by
the Competition Commission does
not amount to administrative action,
because it does not have a direct,
external effect on the rights of the
affected parties.62 The decision of the
Tribunal will affect parties’ rights, and
this decision will only be taken after
a comprehensive fair hearing process.
Such Tribunal processes can be
completed in shorter periods than High
Court litigation.
It would accordingly be helpful if
the ECA and the Gas Act provided
for some internal review processes,
before resort to High Court review
is required. For instance, the
creation of an ‘economic regulation
tribunal’ may enable questions of
both legal procedural process and
substantive technical regulation to
be considered by an expert body that
can adjudicate complaints regarding
sector regulators’ regulation. A single
economic regulation body could
play this role (there needn’t be one
for telecommunications, one for gas,
one for airlines, one for broadcasting,
etc.), since the principles underlying
economic regulation, with the
application of competition analysis
should be consistent across industries.
Such a Tribunal’s decisions may or
may not in turn be subject to review
in the High Court, but its existence
should be designed to provide for more
efficient and speedy assessment of
reviews of economic regulation, and
can be staffed by persons familiar with
economic regulation and competition
regulation, so that account is taken
of the specific needs of economic
regulation, so that for instance, minor
gaps in process can be weighed against
the substantive outcomes of such
process. If the High Court does in turn
review this body’s decision, it should
provide for significant deference to
the body, in light of the expertise
thereof, as happens in relation to the
Competition Tribunal.
Competition World
Conclusion
Endnotes
The experience of regulation by
sector regulators and the competition
authorities over the past 10 years
demonstrates the challenges inherent
aligning competition law enforcement
and efficient regulation of the
telecommunication and gas sectors.
1
Act 89 of 1998.
2
Act 36 of 2005.
3
Act 48 of 2001.
4
Telkom SA Limited v Competition Commission of South
Africa and Another (11239/04) [2008] ZAGPHC 188
(June 20, 2008) (the High Court decision); Competition
Commission of South Africa v Telkom SA LTD and Others
(623/2009) [2009] ZASCA 155; [2010] 2 All SA 433 (SCA)
(November 27, 2009) (the SCA decision); and Competition
Commission and Telkom SA Ltd Case No 11/CR/Feb04
(003855) (the Tribunal decision).
5
The Competition Commission had entered into a
Memorandum of Agreement with ICASA, which came
into effect from September 16, 2002 (the MOA) (see GG
23857; GN 1747 of 2002. memorandum of agreement
entered into between the Competition Commission and
ICASA, available at www.icasa.org.za or www.compcom.
co.za). The MOA provided for co-operation between
the Competition Commission and ICASA in relation to
both merger reviews and complaint investigations and
dealt with aspects such as the exchange of confidential
information, the sharing of resources, the establishment of
a joint working committees, the manner of consultation,
as well as the participation by one regulator in the
proceedings of another. However, what the MOA did not
do (and indeed, it would not have had the power to do) is
to determine where the jurisdiction of one regulator ends,
and the other begins – this is something which must be
determined with reference to the legislation.
It is clear that legislative amendments
are required to define roles and
responsibilities more clearly and
enhance the ability of NERSA and
ICASA to work with the competition
authorities to achieve pro-competitive
outcomes which ultimately deliver
lower prices and improved products
and services to South African
consumers. Such legislation should
be consistent with the Competition
Act, and provide for the application of
competition analysis in relation to ex
ante regulation. There should also be
legislative and mandatory provision
for interaction between competition
authorities and sector regulators to
ensure knowledge transfer, as well as
effective regulation.
However, amendments of this
nature can only be successfully
effected if there is a clear consensus
in government about the role of
competition in the economy. It is not
merely about who should regulate
what, but also, whether competitive
markets can be trusted to deliver the
best results for consumers in the long
term.
6
This is in line with the interpretation of the repealed
section 3(1)(d) in the Nedcor/ Stanbic case (Standard
Bank Investment Corporation and The Competition
Commission 2000 2 SA 797 (SCA)), in which Schutz AJ
noted that concurrency only arises where another statute
regulated what he termed ‘monopolistic acts’.
7
Act 103 of 1996.
8
The distinction between conduct which is a party is
‘obliged’ to perform and that which is ‘authorised’ by
other legislation, is raised by the Commission in its Heads
of Argument filed in the Supreme Court of Appeal – it
acknowledges that the competition authorities have
no competence to condemn conduct which a party is
obliged to perform or refrain from performing (and that
an attempt by the competition authorities to exercise
such jurisdictional competence would be unlawful and
reviewable), but denies that the conduct which forms the
subject of the complaint falls within this class.
9
Telkom noted that the issues raised in the complaint
referral had been referred to ICASA on a number of
occasions.
10 The Commission appealed on the basis that the High
Court had erred in granting the review relief, whilst
Telkom cross-appealed on the basis that the High Court
ought to have granted not only the review relief, but
should have declared that the competition authorities had
no power to investigate (in the case of the Commission)
and adjudicate (in the case of the Tribunal) on the conduct
forming the subject matter of the complaint.
11 At para 35 of the SCA decision (footnote 4 above).
12 Competition Commission and Competition Tribunal
‘Submission of the Competition Commission and the
Competition Tribunal on the Convergence Bill (B9-2005)
for consideration by the Portfolio Commission on
Communications’ available at http://www.compcom.
co.za/policyresearch/Comments%20on%20the%20
Convergence%20Bill%20April%202005.doc
13 Submission on the Convergence Bill (footnote 13) at
paragraph 3.1.1.
14 Submission on the Convergence Bill (footnote 13) above
at paragraph 32.
15 Competition Amendment Act 1 of 2009.
16 See also Fungai Sibanda ‘Of concurrent and exclusive
jurisdiction in the ICT sector’ Mail and Guardian 21 July
2009, available at: http://www.mg.co.za/article/200907-21-of-concurrent-and-exclusive-jurisdiction-in-theict-sector.
17 It defines what ‘significant market power’ is, and
subsection 6 provides the methodology for determining
the effectiveness of competition in market segments.
18 The background to such ex post power is this: As noted
above, the ECA replaced the Telecommunications Act.
The Telecommunications Act set up a telecommunications
regulator, the South African Telecommunications
Regulatory Authority (SATRA). The Telecommunications
Act was amended in 2001, and, with the promulgation
of the ICASA Act, SATRA was replaced by ICASA. This
legislation established ICASA and gave it wide powers
to regulate broadcasting and telecommunications in
the public interest and in pursuance of the objects set
out in the Telecommunication Act, the Independent
Broadcasting Authority Act 4 of 1999 and the
Broadcasting Act 103 of 1996. At this point, both
technical and economic regulatory tasks (such as
licensing) were allocated to the sector regulator. In
particular, Section 36(1)(d) conferred on ICASA certain
powers in relation to competition in the sector. It provided
‘Where it appears to the Authority that Telkom, in the
provision of its telecommunications services, is taking or
proposing to take any step which confers or may confer
on it an undue advantage over any person who may in the
future be granted a licence in competition with Telkom,
the Authority may direct Telkom to cease or refrain from
taking such step, as the case may be.’
Section 53(1) provided: ‘If it appears to the Authority that
the holder of a telecommunications licence is taking or
intends taking any action which has or is likely to have
the effect of giving an undue preference to or causing
undue discrimination against any person or any category
of persons, the Authority may, after giving the licensee
concerned an opportunity to be heard, direct the licensee
by written notice to cease or refrain from taking such
action, as the case may be’. It is this latter provision
which was translated into section 67(1)–(3) of the ECA,
which confers on ICASA ex post jurisdiction to deal with
complaints of anti-competitive conduct in the sector.
19 Proclamation 5 of 2013, GG36221.
20 International Competition Network, Antitrust Enforcement
in Regulated Sectors Working Group Subgroup 2:
Enforcement experience in regulated sectors, Report to the
Third ICN Annual Conference, Seoul, April 2004
21 K Moodaliyar & K Weeks, ‘A framework for promoting
competition in electronic communications: clarifying the
role of the Competition Authority and the sector regulator’
available at:
http://www.compcom.co.za/presentations-third-annualcompetition-conference.
22 Moodliyar & Weeks, page 2 (footnote 21 above).
23 Moodliyar & Weeks, pages 2–3 (footnote 21 above).
24 Moodliyar & Weeks, page 3 (footnote 21 above.)
25 Moodliyar & Weeks, page 3 (footnote 21 above.)
26 Moodliyar & Weeks, page 4 (footnote 21 above.)
27 Moodliyar & Weeks note that bringing competition
law principles into economic regulation has been a
key objective of the European Union in its directive
on a common regulatory framework for electronic
communications networks and services (referred to as
the ‘Framework Directive’). They explain: ‘Prior to the
Framework Directive National Regulatory Authorities
(NRAs) in Europe applied ex-ante regulation on the basis
of a Significant Market Power (‘SMP’) designation applied
to firms with a market share of 25% or more. Although
NRAs also took into account factors such as turnover
relative to the size of the market and control of access
in deciding on remedies, no comprehensive analysis of
market power and competition was undertaken in order
to justify the need for interventions or determine their
proportionality given the nature of the market power
problem.
The Framework Directive however provides direction
to NRAs by indicating markets that are likely to be
susceptible to ex ante regulation. Such markets will
be characterised by high and non-transitory entry
barriers and will be unlikely to be subject to effective
competitive constraint due to the presence of bottleneck
facilities (or some other impediment). The NRAs are
then required to carry out market analyses (applying the
principles of competition analysis) to assess whether
or not competition is effective in the relevant markets
and designate providers with SMP to which specific
obligations may be applied.’(See Moodliyar & Weeks, page
4-5 (footnote 22 above.)
Norton Rose Fulbright – Quarter 2 2015 37 Competition World
28 International Competition Network, Antitrust
Enforcement in Regulated Sectors Working Group,
Subgroup2: Interrelations between Antitrust and
Regulatory Authorities, Report to the 4th ICN Conference,
Bonn. (Quoted in Moodliyar & Weeks, pages 5-6 (footnote
22 above).
29 Publication of the findings pursuant to section 4C of the
ICASA Act of an inquiry conducted in terms of section 4B
of the ICASA Act, GN 1627 of 2007, Government Gazette,
No.30449.
30 Intention to define relevant wholesale call termination
markets in terms of section 67(4), 29 January 2007, GG
29568; Draft Regulation pursuant to section 67(4)(a-e), 6
March 2008, GG 30850.
31 ICASA, 2009 ‘Submissions to questionnaire’, 9 October
2009, Government Gazette No. 32628.
32 Draft Call Termination Regulations, 16 April 2010,
Government Gazette No. 33121.
33 Call Termination Regulations, 29 October 2010,
Government Gazette No 33121.
34 ICASA General Notice of intention to implement a cost
to communicate programme, 4 June 2013, Government
Gazette No. 36532.
35 ICASA discussion document on regulatory framework
for broadcasting transmission services, 15 June 2011,
Government Gazette no. 34371.
36 The EU Communications Directives (2002) is the latest
set of EU-wide directives setting out the regulatory
requirements on electronic communications networks.
Among the five directives contained within this framework
(Framework, Access, Authorisation, Universal Service,
and Privacy), Access Directive deals with the obligations
on operators to provide access to other service providers.
Specifically within the Access Directive, Article 6
(along with the accompanying Annex 1) deals with the
accessibility of conditional access systems. The UK
Communications Act (2003) adheres to Article 6 and
Annex 1 Part 1 of the Access Directive by requiring the UK
regulator, Office of Communications (‘Ofcom’) to ensure
that all broadcasters have access to conditional access
systems as prescribed by the Access Directive. Oftel, ‘The
regulation of conditional access’, 24/07/2003.
http://www.ofcom.org.uk/static/archive/oftel/
publications/eu_directives/2003/condac0703.pdf sets
out the conditions of operation for Sky. Other technical
broadcasting services, such as access control services
(interactive functionality in digital television) and
electronic programme guide (EPG) listings, are also
regulated in the UK.
37 Section 2 of the Gas Act sets out a wide range of objectives
are to promote the efficient, effective, sustainable and
orderly development and operation of gas transmission,
storage, distribution, liquefaction and re-gasification
facilities and the provision of efficient, effective and
sustainable gas transmission, storage, distribution,
liquefaction, re-gasification and trading services; facilitate
investment in the gas industry; ensure the safe, efficient,
economic and environmentally responsible transmission,
distribution, storage, liquefaction and re-gasification
of gas; promote companies in the gas industry that
are owned or controlled by historically disadvantaged
South Africans by means of licence conditions so as to
enable them to become competitive; ensure that gas
transmission, storage, distribution, trading, liquefaction
and re-gasification services are provided on an equitable
basis and that the interests and needs of all parties
concerned are taken into consideration; promote
skills among employees in the gas industry; promote
employment equity in the gas industry; promote the
development of competitive markets for gas and gas
services; facilitate gas trade between the Republic
and other countries; and promote access to gas in an
affordable and safe manner.’
38 The term ‘price’ is defined in section 1 as ‘the charge for
gas to a distributor, reticulator or a final customer’.
39 The term ‘prescribed’ is defined in section 1 as ‘prescribed
by regulation or by rules’.
38 Norton Rose Fulbright – Quarter 2 2015
40 The provisions of section 21(1)(p) must be read together
with Regulation 4 of the Gas Regulations, which provide
as follows:
‘(3) The Gas Regulator must, when approving the
maximum prices in accordance with section 21(1)(p) of
the Act
a) be objective i.e. based on a systematic methodology
applicable on a consistent and comparable basis;
b) be fair;
c) be non-discriminatory;
d) be transparent
e) be predictable; and
f) include efficiency incentives.
(4) Maximum prices referred to in subregulation (3) must
enable the licensee to –
(a) recover all efficient and prudently incurred investment
and operational costs; and
(b) make a profit commensurate with risk.
(5) The Gas Regulator must approve maximum prices for
gas for each distribution area or group of distribution
areas as indicated in Annexure A for the following classes
of customers:
(a) residential; and
(b) commercial and industrial.’
For more information contact:
Heather Irvine
Director, Johannesburg
[email protected]
41 In terms of clause 8.4.
42 This referred to ‘determining the gas price by comparison
with:
(a) the cost of the alternative fuel delivered to the
customer’s premises or anticipated place of use (in the
case of Greenfields Customers); plus
(b) the difference between all the operating costs of the
customer’s use of the alternative fuel and the operating
costs of using natural gas; plus
(c) the difference between the Nett Present Value (NPV)
of the capital costs of the customer’s continued use of the
alternative fuel and the NPV of the capital costs involved
in switching to natural gas, as would be reflected in the
customer’s accounts.’
43 Page 7 of the Consultation Document.
44 Page 16 of the Consultation Document.
45 Pages 25-26 of the Consultation Document.
46 Page 26 of the Consultation Document.
47 Page 27 of the Consultation Document.
48 Page 30 of the Consultation Document.
49 Page 30 of the Consultation Document.
50 Page 30-31 of the Consultation Document. It stated in
this regard that:
The level of the alternative fuel cost can be managed by
using a basket of alternative fuels and:
recognizing that no single fuel is a perfect substitute for
gas; and
allowing regulated prices to be determined at a level
that reflects the balance between encouraging new entry
and sharing economic surplus between consumers and
producers.’ (p 29)(p 29)
51 Section 3.1 of the Draft Methodology.
52 Page 31 of the Draft Methodology.
53 Pages 32-33 of the Draft Methodology
54 Para 2.9, page 5 and Para 2.17, page 7 of the
Determination of Inadequate Competition.
55 Para 3.9, page 10 of the Determination of Inadequate
Competition.
56 Para 3.10, page 10 of the Determination of Inadequate
Competition.
57 Para 5, page 24 of the Final Methodology.
58 Para 14, page 4 and Para 42, page 11 of the Final
Methodology.
59 One of the grounds on which Nersa’s determination
of Sasol’s applications is being reviewed is that Nersa
determined its methodology before making its finding of
inadequate competition.
60 Telkom SA Limited v Competition Commission of South
Africa and Another (11239/04) [2008] ZAGPHC 188 (20
June 2008).
Lara Granville
Director, Johannesburg
[email protected]
Competition World
Competition and Consumer
Commission focuses on the
pharmaceutical industry
The case ACCC v Pfizer provides insights for the pharmaceutical
industry on generic defensive strategies
Introduction
This article provides insights and tips
for the pharmaceutical industry arising
from the case of Australian Competition
and Consumer Commission v Pfizer
Australia Pty Ltd.1 Until May 2012,
Pfizer held the patent for a cholesterol
drug known as atorvastatin. Pfizer
marketed atorvasatin under the brand
Lipitor. Lipitor was one of Pfizer’s most
profitable drugs.
In anticipation of the upcoming expiry
of its patent for atorvastatin, Pfizer
implemented a new distribution
model and sales platform. The
Australian Competition and Consumer
Commission (the ACCC) alleged that
in executing this new strategy, Pfizer
misused its market power and engaged
in exclusive dealing in contravention
of the Competition and Consumer Act
2010 (the Act).
Despite finding that Pfizer took
advantage of its market power, the
ACCC’s case did not succeed as the
Federal Court was not convinced
that Pfizer had the requisite anticompetitive purpose. Pfizer was able
to defend what it did to secure market
share for Lipitor and its own generic
product as an astute commercial
strategy, rather than one that had a
substantial anti-competitive purpose.
The ACCC has appealed the decision.
Nonetheless, the decision contains
valuable insights and cautionary
messages in relation to competitive
1
[2015] FCA 113. An appeal by the ACCC is pending.
conduct in the pharmaceutical
industry. While generic defence
strategies and aggressive commercial
tactics are permissible, they are risky.
This is especially the case where a
patent confers market power and/or
when strategic documentation contains
prejudicial language or strategy, from
which an anti-competitive purpose
might be inferred.
Contentions and findings
The expiry date for the patent
protecting Lipitor was mid-May 2012.
In anticipation of the expiry, Pfizer
implemented a new distribution and
sales model called ‘Project Leap’, which
aimed to retain its revenue in the face
of expected market entry by generic
products. This involved:
• in December 2010, a change to
Pfizer’s distribution arrangements
from supplying through
pharmaceutical distributors to
supplying direct to pharmacies
(Direct to Pharmacy Model);
• in January 2011, the establishment
of an ‘accrual funds scheme’ by
which an additional rebate was
withheld by Pfizer to be paid out to
pharmacies at a later (undisclosed)
date (Accrual Program); and
• in January 2012, an offer to all
pharmacies to supply both Lipitor
and Pfizer’s own generic atorvastatin
(Pfizer Generic), which tied the
rebates from the accrual fund to the
initial quantity of the Pfizer Generic
purchased by the pharmacy. No
rebate was to be paid if the quantity
acquired was less than 75% of
the six months’ total anticipated
generic atorvastatin required by that
pharmacy) (Bundling Offer).
In summary, the ACCC contended that:
• Pfizer held a substantial degree of
market power and, by implementing
Project Leap, took advantage of
that power for the purpose of
deterring or preventing a person
(i.e. other generic manufacturers
and suppliers) from engaging in
competitive conduct in breach of
section 46(1)(c) of the Act2; and
• the Bundling Offer constituted a
course of exclusive dealing under
subsections 47(2)(d) and (e)3 of
the Act and was engaged in for the
purpose of substantially lessening
competition.
Market definition: The Court agreed
with the ACCC that the market relevant
to the competition analysis was the
Australia-wide market for the supply
of atorvastatin to, and the acquisition
2
3
Section 46 prohibits a corporation with a substantial
degree of power in a market from taking advantage of
that power in that or any other market for the purpose of
eliminating or substantially damaging a competitor in
that or any other market, preventing the entry of a person
into that or any other market or deterring or preventing
a person from engaging in competitive conduct in that or
any other market.
Section 47(2), relevantly prohibits a corporation from
giving or offering a rebate, discount or credit on condition
that the acquirer will not (or will not except to a limited
extent) acquire or re-supply certain goods that have been
acquired from a competitor of the corporation.
Norton Rose Fulbright – Quarter 2 2015 39 Competition World
of atorvastatin by, community
pharmacies.
Presence of market power: The Court
found that up to December 2011 (six
months before the patent expiry)
Pfizer possessed substantial market
power as a result of owning the Lipitor
patent (Pfizer being the sole supplier of
atorvastatin). However, Pfizer’s market
power gradually decreased the closer
it came to the expiration of its patent
and from January 2012 its market
power could no longer be described
as ‘substantial’. The other generic
manufacturers had registered their own
atorvastatin products by mid-2011
and had started promoting and even
(informally) offering their generics
to pharmacies in anticipation of the
expiry of the Lipitor patent from late
2011. This significantly undermined
the market power held by Pfizer in the
atorvastatin market.
Taking advantage of market power:
The Court found that in implementing
Project Leap, Pfizer had taken
advantage of its market power. This
was because Pfizer procured terms that
it would not have been able to procure
from pharmacies were it not for its
market power. In particular:
• Pfizer was able to implement the
Direct to Pharmacy Model despite
the pharmacies not wishing
to change their current supply
arrangements. As the Court stated,
‘the pharmacies did not like the
Direct-to-Pharmacy Model – but they
could not obtain atorvastatin… from
any other source’; and
• Pfizer was able to establish the
Accrual Program even in the
absence of any certainty on the
part of the pharmacists when it was
implemented as to how or when
their rebates could be accessed; and
40 Norton Rose Fulbright – Quarter 2 2015
• the ability to access the rebates
that had accrued was linked to
the commitment to purchase
Pfizer’s generic atorvastatin, via
the Bundling Offer. This bundling
was something which no other
manufacturer could offer.
Purpose of deterring or preventing
competitive conduct: The Court found
that no prohibited purpose was
present.
• Pfizer did not have the purpose
of ‘preventing’ competitors from
entering the market or engaging in
competitive conduct, because it was
a known fact that those competitors
would do so. It would not be
possible to infer such ‘commercial
naivety’ on the part of Pfizer that
they could ‘prevent’ entry.
• Pfizer also did not have the purpose
of ‘deterring’ competitive conduct
because Pfizer pursued its conduct
for the substantial purposes of:
—— ensuring that it remained a
supplier of pharmaceutical
products, including both Lipitor
and its generic atorvastatin; and
—— ensuring that it remained
competitive in the atorvastatin
market.
• Even if Pfizer’s other purposes may
have been to gain a commercial
advantage or make it harder for a
generic competitor to succeed, they
were not a ‘substantial’ purpose.
Exclusive dealing: Only one aspect of
the Bundling Offer was found to fall
within the relevant section of the Act.
The aspect was a condition that linked
Lipitor discounts to ‘first line support
of [Pfizer Generic]’. However, the Court
also found that Pfizer did not engage
in this conduct for the purpose of
‘substantially lessening competition’
for reasons similar to those set out
above.
Practical insights
Unique patented molecule equals
market power
A market may be a market for the
supply or acquisition of a single
molecule or active ingredient,
where there are no close substitutes.
Determining whether or not there are
close substitutes will depend on a
number of factors including:
• clinical use and treatment profile;
• the mechanisms of action;
• the mode of administration and
design;
• regulatory and prescription regimes;
and
• the side effect profile.
It is highly likely that the owner of a
patent for a sufficiently unique active
ingredient will have a substantial
degree of market power in the market
for the supply of that product during
the term of the patent.
However, as the patent expiry date
approaches, the degree of market
power will lessen as the threat of
new entry increases. This will be
particularly so where the potential
revenues are large and the market is
characterised by highly sophisticated
originating and generic manufacturers
that pre-emptively develop and
promote generic versions.
Competition World
Defensive strategies OK but risky
with market power
Bundling, exclusivity and other dealing
restrictions are permissible under the
Act unless they have:
• an anti-competitive purpose (that
was a substantial purpose); or
• the effect of substantially lessening
competition.
The risks associated with bundling,
tying and other dealing restrictions are
heightened where there is substantial
market power but decreases as a patent
expiry date approaches (i.e. within six
months of patent expiry).
Taking advantage: If market power
exists, take care when bundling,
tying, requiring exclusivity, refusing
supply, offering loyalty rebates or
reducing pricing below cost, if those
arrangements could not plausibly have
been imposed, absent market power.
Aggressive competitive strategy
generally OK
Purpose: Nonetheless, it is possible
to pursue strategies which do take
advantage of market power if it can
be demonstrated that the intention
is not to foreclose or substantially
lessen competition. Decision-makers
should ask themselves whether the
conduct has, as a substantial (although
not necessarily sole) purpose, the
deterrence or injury of a competitor
or competition. Decision-making
documentation in borderline cases
should record the actual purposes.
Effect: The likelihood of a bundling
or exclusive arrangement having an
anti-competitive effect is heightened
with market power, as such conduct is
more likely to have an actual impact
on market dynamics. The conduct in
the Pfizer case was not alleged to have
had the likely effect of substantially
lessening competition. However,
this should also be checked before
embarking on any strategy.
Beware competitively charged
language like ‘blocking’ or
‘corner the market’
Many documents in the case produced
during the planning process for Project
Leap contained references to ‘blocking’
both generic competitors from entering
the market, and pharmacies from being
able to source generic atorvastatin from
such competitors.
The Court indicated that the ‘rhetoric
of competition’ should not be confused
with anti-competitive purpose.
Nonetheless, it was, in part, this
rhetoric that raised the ire of the
ACCC in the first place. The Court
also indicated that the documentary
evidence could, absent contradictory
evidence, permit the inference of a
prohibited purpose.
Ensure language used in planning
documentation, throughout the
company, presents an accurate picture
of the strategy and its purpose
Norton Rose Fulbright – Quarter 2 2015 41 Competition World
Pfizer staff were able to counter the
impression created by planning
documentation and explain to the
Court’s satisfaction that the purposes
of Project Leap were legitimate
(to mitigate anticipated loss of
market share, and to be competitive
after patent expiry). Clarity in
documentation on the purpose at the
outset would have assisted greatly.
Care must therefore be taken during
project planning processes to limit the
authorship and content of documents
relating to complex commercial
strategies, which may later be
misconstrued.
Whose purpose is relevant?
One issue in this case was the fact that
the documents in evidence had often
been prepared by various persons who
were not actually decision-makers
within the company. The Court found
that it was not the subjective purpose of
any individual author which mattered –
it was the purpose of those responsible
for making the ultimate decision that
mattered.
While this offers real comfort, mixed
motives expressed by more junior staff
in an organisation can still significantly
increase the risk of an anti-competitive
purpose being inferred.
42 Norton Rose Fulbright – Quarter 2 2015
Reminder – cartels
Remember – generic defence strategies
engaged in between actual or potential
competitors (i.e. other pharmaceutical
manufacturers or distributors) can,
especially if not properly managed,
present an even greater risk.
Arrangements between competitors
that may influence market entry or
competitive behaviour can constitute
cartel conduct in contravention of the
Act, irrespective of whether or not they
have any anti-competitive purpose or
effect.
Earlier the European Commission’s
decision was published confirming its
finding that Lundbeck and a collection
of generic manufacturers agreed that
the generic manufacturers would delay
entering the market in competition with
Lundbeck’s originator antidepressant
product. Together they were fined in
excess of EUR 140 million.
ACCC focus on pharmaceuticals
industry
The ACCC has variously indicated
the importance of its case against
Pfizer. With or without this outcome,
it is apparent that the ACCC’s gaze
has turned towards the health and
pharmaceuticals sectors. The ACCC’s
recently announced Enforcement
Priorities for 2015 spell this out.
For more information contact:
Nick McHugh
Partner, Sydney
[email protected]
Claire Forster
Senior associate, Sydney
[email protected]
Competition World
Harper heat map: Retail sector
The Harper Review concluded on March 31, 2015.
The panel reported comprehensively on the current
standing of competition law and policy in Australia,
and made 56 recommendations to the Federal
Government for reform.
Quick snapshot
Recomendation
Implications for retailers (if adopted)
Reforms to planning and zoning laws
• more competitive land use
In this update, we outline the potential
implications of the Harper Review
recommendations for the retail sector.
• fewer barriers to market entry
• local government discretion decreased
• potential for more larger format retailers
in areas where previously prohibited
Removal of retail trading hour restrictions
• impediments for bricks-and-mortar
retailers removed, particularly important
in the face of growing online retail
competition
‘Reframing’ of the misuse of market power
prohibition
• catches more conduct- ‘taking
advantage’ not required to be
demonstrated, move to an ‘effects test’
• may be a positive for smaller businesses,
but may also discourage legitimate
rivalry
Improved clarity in the competition law
and enhancements to exemption processes
• will make compliance easier, remove
uncertainty and facilitate engagement in
legitimate collaborations
• improved proportionality of legal regime
to conduct and easier to obtain comfort
from the ACCC for certain activities
Norton Rose Fulbright – Quarter 2 2015 43 Competition World
Igniting retail competition
Harper considered issues relating to
how competition is operating in grocery
and fuel retailing, and regulations on
planning, zoning and trading hours. It
also examined regulations specific to
some industries, such as those affecting
pharmacy and liquor retailing.
In good news for retailers, Harper
advocates for the removal of
regulations that limit where and when
retailing (and hence competition) can
occur. In particular:
• reforms to planning and zoning
laws (some of which are already
under way at state and territory
and local government levels) were
championed and encouraged as
important to promoting market
entry. It was recommended that
these reforms should take account of
the following principles:
—— Arrangements that explicitly
or implicitly favour particular
operators are anti competitive.
44 Norton Rose Fulbright – Quarter 2 2015
—— Competition between individual
businesses is not in itself a
relevant planning consideration.
—— Restrictions on the number of
a particular type of retail store
contained in any local area
are not a relevant planning
consideration.
—— The impact on the viability of
existing businesses is not a
relevant planning consideration.
• the removal of remaining restrictions
on retail trading hours (subject to
very limited exceptions) is strongly
recommended. The remaining
restrictions are seen as creating
a regulatory impediment to
competition by raising barriers to
expansion and distorting market
signals, and as putting’ bricks and
mortar’ retailers at a disadvantage
compared to internet retailers.
—— Development permit processes
should be simplified.
Slated as a positive for smaller
businesses complaining of being at the
mercy of larger players, is the proposed
‘reframing’ of the misuse of market
power prohibition. It is recommended
that the focus of the prohibition be
upon the anti-competitive effect of
unilateral conduct, not just its purpose.
Also, ‘taking advantage’ (which
requires there to be a connection
between market power and conduct)
would not need to be demonstrated.
—— Planning systems should be
consistent and transparent to
avoid creating incentives for the
gaming of appeals processes.
Couched in this way, the prohibition
would capture far more conduct than
at present. However, it is not clear
whether this is necessary given the
—— Proximity restrictions on
particular types of retail stores
are not a relevant planning
consideration.
—— Business zones should be as
broad as possible.
Competition World
breadth of other prohibitions, or
effective given its potential to manifest
a high degree of conservativism
in competitive behaviour. Also, an
effects test may weaken the practical
protections to very small business
that are inherent within the current
formulation.
Nonetheless if the reforms come off,
this will be good news overall for the
sector.
• Retailers can have more confidence
when collaborating with their
competitors and dealing with
upstream suppliers and customers,
provided that their conduct does not
have an anti-competitive purpose
or effect. However, any conduct
that may have an anti-competitive
purpose or effect is potentially in the
firing line - whether this is formal
collaboration, tacit coordination
or unilateral conduct with market
power.
• Where there is a risk that
conduct could fall foul of the law,
enhancements to ACCC exemption
processes and alternatives should
often permit retailers to more readily
obtain comfort.
Taking the temperature
of the Harper Review
recommendations
For more information contact:
See our attached graphic for an
overview of potential implications for
Australian competition following the
Harper Review recommendations.
We’re only getting warmed up
Nick McHugh
Partner, Sydney
[email protected]
Stay tuned for future in-depth
commentary on specific issues
or contact us if you would like to
understand any aspect of Harper in
more detail.
There is an opportunity to make
submissions to the Commonwealth
Treasury on the Harper report. This
may influence the Government’s
response to its recommendations.
Submissions close on 26 May 2015.
Dylan McKimmie
Partner, Perth
[email protected]
Andrew Riordan
Partner, Melbourne
[email protected]
Martyn Taylor
Partner, Sydney
[email protected]
Claire Forster
Senior associate, Sydney
[email protected]
Norton Rose Fulbright – Quarter 2 2015 45 Competition World
Contacts
If you would like further information please contact:
Europe
London
Martin Coleman
Tel +44 20 7444 3347
[email protected]
Peter Scott
Tel +44 20 7444 3834
[email protected]
Ian Giles
Tel +44 20 7444 3930
[email protected]
Mark Simpson
Tel +44 20 7444 5742
[email protected]
Paris
Mélanie Thill-Tayara
Tel +33 1 56 59 5343
[email protected]
Marta Giner Asins
Tel +33 1 56 59 52 72
[email protected]
Hamburg
Maxim Kleine
Tel +49 40 970799 180
[email protected]
Other offices in Europe
We also have competition specialists in
Moscow, Munich and Warsaw.
Africa
Johannesburg
Heather Irvine
Tel +27 11 685 8829
[email protected]
Marianne Wagener
Tel +27 11 685 8653
[email protected]
Rosalind Lake
Tel +27 11 685 8941
[email protected]
Lara Granville
Tel +27 11 685 8684
[email protected]
Mark Tricker
Tel +322 237 3861
[email protected]
Mark Griffiths
Tel +27 11 685 8864
[email protected]
Brussels
Asia
Jay Modrall
Tel +322 237 6147
[email protected]
Michael Jürgen Werner
Tel +322 237 6150
michaeljuergen.werner@
nortonrosefulbright.com
Christian Filippitsch
Tel +322 237 6154
[email protected]
46 Norton Rose Fulbright – Quarter 2 2015
Hong Kong
Marc Waha
Tel +852 3405 2300
[email protected]
Competition World
Australia
Canada
Sydney
Ottawa
Nick McHugh
Tel +61 2 9330 8028
[email protected]
Martyn Taylor
Tel +61 2 9330 8056
[email protected]
Melbourne
Richard Wagner
Tel +1 613 780 8632
[email protected]
Toronto
Kevin Ackhurst
Tel +1 416 216 3993
[email protected]
Tom Jarvis
Tel +61 3 8686 6966
[email protected]
United States
Andrew Riordan
Tel +61 3 8686 6680
[email protected]
Layne E. Kruse
Tel +1 713 651 5194
[email protected]
Dylan McKimmie
Tel +61 8 6212 3291
[email protected]
Houston
Darryl Wade Anderson
Tel +1 713 651 5562
[email protected]
Carlos Ray Rainer
Tel +1 713 651 3673
[email protected]
Washington DC
Daniel Wellington
Tel +1 202 662 4574
[email protected]
David Foster
Tel +1 202 662 4517
[email protected]
New York
Mark A. Robertson
Tel +1 212 318 3304
[email protected]
Latin America
Venezuela
Luis Ernesto Andueza
Tel +1 58 212 276 0007
[email protected]
Mariano T De Alba Uribe
Tel +1 58 212 276 0764
[email protected]
Anne M Rodgers
Tel +1 713 651 3797
[email protected]
Joseph M Graham, Jr.
Tel +1 713 651 8214
[email protected]
Norton Rose Fulbright – Quarter 2 2015 47 nortonrosefulbright.com
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