In industries governed by standards, it is not always easy to identify the goal of antitrust intervention. Neelie Kroes defined it as follows:

When a market develops in such a way that a particular proprietary technology becomes a de facto standard, then the owner of that technology may have such power over the market that it can lock-in its customers and exclude its competitors’. Where a technology owner exploits that power, then a competition authority or a regulator may need to intervene. In essence, the competition authority has to recreate the conditions of competition that would have emerged from a properly carried out standardisation process.

This definition makes a collaborative standard setting process the normative benchmark even for de facto standards that evolve as a result of the operation of the marketplace.

The EU Commission on Monday announced that it is investigating the French drug maker Sanofi-Aventis for obstruction of justice. As part of its crack-down on the pharmaceutical industry, the EU conducted a dawn raid at Sanofi-Aventis, but was refused access to documents without a French search warrant:

The commission’s allegation centers on Sanofi-Aventis’ refusal to let inspectors examine and copy relevant documents until the French authorities produced a national search warrant, the commission says. The European antitrust regulator was raiding the pharmaceutical company’s headquarters in France, as part of a wider inquiry into the sector. Under European antitrust laws, companies have an obligation to cooperate with the commission’s inspectors, including full access to important documents.

A press report is here.

The Financial Times Deutschland reports, according to Marketwatch, that

the European Union’s competition authority will take action later this year against Intel Corp. over the semiconductor giant’s sales and distribution practices.  The Financial Times Deutschland said the EU had acquired enough evidence to act to keep Intel from selling its microprocessors at a discount to PC companies.  The paper said the EU could fine Intel up to 10% of its annual sales, or $4.1 billion.

Thompson Financial (via Forbes.com) reports that:

The European Commission is planning to bar some of Intel Corp.’s sales practices to curb the company’s market power in Europe, Financial Times Deutschland reported, citing sources in Brussels.

Commissioner for competition Neelie Kroes has already made a ‘factual’ decision, the paper said, with the decision to be published in late summer.

According to the EU plans, Intel will have to stop marketing its processors at discount prices to PC-manufacturers.

In addition, the EU intends to ban Intel from paying marketing cost subsidies to retailers, if Intel demands exclusivity in return.

I would link to the FTD article but my German is poor.  Perhaps one of my fluent-in-German co-bloggers can link to and/or report on the original article.

The Commission published a White Paper on Private Damages Actions. While EU law clearly provides for the compensation of victims of antitrust violations, many member states have been slow in updating their rules of civil procedure to make the enforcement of such rights commercially viable. The white paper contains recommendations as to collective redress (class actions and representative actions), availability of the pass-on defense and, as a flip side, indirect purchaser actions, offensive collateral estoppel rules for final, non-appealable decisions by competition authorities, and somewhat more relaxed discovery rules. As to the latter, a key component (since US style discovery is neither possible nor desirable), in my view, is the ability of the courts to draw negative inferences from the non-production of materials.

In the aftermath of the international Graphite Electrodes cartel, the US sought the extradition of former Morgan Crucible Co. Chief Executive Officer Ian Norris from the UK on the theory that price fixing is a criminal conspiracy to defraud (which is punishable both in the US and in the UK). The House of Lords disagreed. According to Bloomberg, Norris

won a ruling from the U.K.’s highest court that hinders attempts to extradite him for a trial in Pennsylvania. … The House of Lords today ruled he couldn’t be extradited on the antitrust claims because price-fixing wasn’t a crime in the U.K. at the time of the alleged misconduct. “Mere price fixing was not at any time” a criminal offense in the U.K. when the cartel operated, the House of Lords said.

That said:

While Norris doesn’t have to face U.S. antitrust charges, the Lords said he may be extradited over the obstruction of justice claim and sent the issue to a lower court for review.

Stay tuned, we might be in for a revival of the Alcoa and Hartford Fire debates. (These things seem to coincide with the ABA Spring Meeting.)

Technorati Tags: antitrust, extradition

From the AP (via the Washington Post):

The European Union fined Microsoft Corp. a record $1.3 billion Wednesday for the amount it charges rivals for software information.

EU regulators said the company charged “unreasonable prices” until last October to software developers who wanted to make products compatible with the Windows desktop operating system.

The fine is the largest ever for a single company and brings to just under $2.5 billion the amount the EU has demanded Microsoft pay in a long-running antitrust dispute.

Microsoft immediately said the issues for which it was fined have been resolved and the company was making its products more open.

The fine comes less that a week after Microsoft said it would share more information about its products and technology in an effort to make it work better with rivals’ software and meet the demands of antitrust regulators in Europe.

…

Microsoft fought hard against a March 2004 decision that led to a 497 million euro ($613 million) fine and an order that the software maker share interoperability information with rivals within 120 days. The company lost its appeal in that case in September.

Microsoft was fined $357 million in July 2006 for failing to obey that order.

The EU alleged that Microsoft withheld crucial interoperability information for desktop PC software _ where it is the world’s leading supplier _ in an effort squeeze into a new market and damage rivals.

The company delayed compliance for three years, the EU said, only making changes in October to the patent licenses for companies that need data to create software that works with Microsoft.

Microsoft had initially set a royalty rate of 3.87 percent of a licensee’s product revenues for patents and demanded that companies looking for communication information _ which it said was highly secret _ pay 2.98 percent of their products’ revenues.

The EU complained last March that the rates were unfair. Under threat of fines, Microsoft two months later reduced the patent rate to 0.7 percent and the information license to 0.5 percent _ but only in Europe, leaving the worldwide rates unchanged.

The EU’s Court of First Instance ruling that upheld regulators’ views changed the company’s mind again in October when it offered a new license for interoperability information for a flat fee of 10,000 euros ($14,900) and an optional worldwide patent license for a reduced royalty of 0.4 percent.

Microsoft does not yet have a statement about this on its website, but one should appear here shortly.

Yesterday, EC competition authorities “raided” the European offices of Intel and several electronics retailers.  According to the Financial Times:

European Commission officials visited Intel’s Munich offices, as well as Europe’s biggest electronics chain, Media Markt, its second-biggest, DSG International, operator of the UK’s PC World, and French retailer PPR.

“The Commission has reason to believe that the companies concerned may have violated EC treaty rules on restrictive business practices and/or abuse of a dominant market position,” the regulator said.

It stressed that the raids did not prejudge the outcome of the investigation.

Intel, Media Markt, PPR and DSG confirmed the visits and said they were co-operating with the investigation.

The Commission’s move comes at an unusual stage in its long-running probe into Intel, which began nearly seven years ago after a complaint from the US company’s smaller rival, Advanced Micro Devices.

Having carried out raids in 2005, the Commission formally accused Intel six months ago of trying to do deals with computer makers to push AMD out of the central processing unit business.

The latest raids appear to be focused primarily on Intel’s relationships with retailers, rather than computer makers, suggesting that the Commission may be enlarging the scope of its inquiry.

I am sure that most of our readers regularly read Flight International magaine.  For the few that do not, it is reporting that the EC has issued statements of objection to at least 15 airlines.

The cargo price-fixing probe has entered a new phase with European regulators handing at least 15 airlines statements of objections. These and similar investigations by other governments could lead to hefty fines for several major carriers.

Two years after government agents raided airline offices around the world, the cargo probe that is causing genuine paranoia in airline cargo departments everywhere is moving from an investigation into actual charges.

The European Commission has entered this phase ahead of the US Justice Department and other agencies by issuing statements of objection to at least 15 airlines. The EC has not said which or how many airlines it has served but 15 carriers have acknowledged they have received such statements (see list above right).

Other government-owned or privately-held airlines that have no duty to disclose may also have been served, but have not told anyone. Some sources claim as many as 25 airlines have received the EC statements, but this number is unconfirmed.

This list of airlines is instructive. First, it includes the three airlines - British Airways, Korean Air and Qantas - that have already pled guilty and agreed to pay fines of nearly a $1 billion. Second, several airlines whose offices were raided or were otherwise investigated have not been named. These include American and United Airlines, as well as Taiwan’s China Airlines and EVA Air.

Both facts underscore a critical point. Even though this may be the world’s largest antitrust investigation, each jurisdiction decides independently how and against whom to proceed. None of the three airlines that settled did so with the EC. Hence, it and any other competition agency that did not settle with these airlines may go after them. And even though the EC apparently has not charged American, United, China Air, EVA or a number of other airlines, this does not mean they are off the hook in other countries. It is possible, for instance, that the EC elected not to charge these carriers, not because it thought they were innocent, but because they did not transport enough cargo to or from Europe to bother.

The article continues at some length.  Check it out.

According to the Wall Street Journal:

European Union investigators raided drug companies in several countries as the bloc’s antitrust watchdog launched a wide investigation of potentially anticompetitive practices in the industry.

Neelie Kroes, the EU antitrust chief, said the industry-wide inquiry would examine whether large companies are abusing their market power to prevent competitors from bringing new drugs to market, or whether companies were colluding to restrain competition.

AstraZeneca PLC, GlaxoSmithKline PLC, Sanofi-Aventis SA, and Pfizer Inc. said they were among the companies contacted, although the commission did not name the companies searched Tuesday and early Wednesday, nor where they were located.

The EU’s so-called sector inquiries are broad-brush examinations; they don’t necessarily lead regulators to bring antitrust cases, but can result in substantial fines. Recent sector inquiries have focused on energy markets and payment-card systems. Both eventually resulted in antitrust action — most recently in the EU’s declaring unlawful a type of interbank fee set by MasterCard.

…

The EU began the sector inquiry with unannounced inspections — triggering the first ones within hours of the commission’s decision Wednesday to authorize the inquiry. In earlier sector inquiries, EU officials had begun more politely, with requests for information.

Bloomberg also has a report.

The Commission’s press release is here; and the Commission’s FAQ on its antitrust sector inquiry into pharmaceuticals is here.

Apple and the EU have reached an agreement that will end the EU’s investigation of Apple. According to the AP:

The maker of the popular iPod media players had been under investigation since April by EU authorities after a British consumer group complained that Apple and major record companies were unfairly restricting the choice and ramping up the cost of downloads at the company’s European music stores.

…

EU regulators opened a probe into iTunes last year. They alleged distribution agreements Apple signed to sell music from its online stores in EU countries contained territorial restrictions which violated EU competition rules because consumers can only download music from the iTunes store in their country of residence.

Downloaders have to provide a credit card issued by a bank with an address in the country where they live.

Britain’s Consumers’ Association filed a complaint with EU regulators in 2004 complaining that British customers of iTunes downloads had to pay more than those in France or other iTunes stores in countries using the euro currency.

Apple said it would introduce a new pricing policy for British based iTunes consumers and will “soon pay the same for music downloads from iTunes as customers from the euro-zone countries,” the European Commission said.

It added that it has now closed the case against Apple’s iTunes operation.

The EU executive office added however that there is “no agreement” between Apple and major record companies on how iTunes stores are organized in Europe, notably on allowing consumers to download music from an iTunes store outside their country of residence.

AFP also has an article on the settlement.

Technorati Tags: Apple, iTunes, iPod, EU

The NYT has the story:

T-Mobile can sell Apple’s sought-after iPhone exclusively locked to its own service, a German court ruled Tuesday, reversing an injunction last month requiring the company to sell an unlocked version in Europe’s biggest economy. The Hamburg District Court said Tuesday that T-Mobile, part of Deutsche Telekom AG, could indeed sell the phone, coupled with a two-year contract, that could not be used on networks provided by rival wireless companies.

Technorati Tags: antitrust

Here is an interesting presentation by Nicolas Petit on the VirginMesa case. Virgin claimed that Apple was abusing a dominant position by refusing to license its FairPlay technology to Virgin. Apple is vertically integrated with the iTunes store upstream and the iPod downstream. The two are connected via FairPlay DRM. Virgin is present only at the upstream level and complains that without a FairPlay license its customers cannot play Virgin music files on their iPods. That claim, of course, is almost comical, and the French Competition Council rightly dismissed it. The reason that Virgin’s files don’t play on the iPod is that Virgin’s DRM is incompatible with the iPod, not that the iPod uses FairPlay to tether songs purchased from the iTunes music store to the iPod. The iTunes store-iPod integration is by no means airtight, if anything, it is “one way,” in the sense that (most) iTunes store files only play on iPods, not “two way,” in the sense that iPods only play iTunes music store files. And even the one-way integration is rather loose. Any iTunes file can (in descending order of legality and ascending order of convenience) be burnt to CD, audio ripped, or stripped of DRM entirely. No one keeps Virgin from selling music in mp3 format, which plays just fine on the iPod. And, hey, it’s good karma, too.

Technorati Tags: antitrust, IP, apple, virgin

According to the AP (via the Washington Post):

Microsoft Corp. dropped a nearly decade-long legal battle with European regulators Monday, agreeing to key parts of an antitrust ruling that has already led to hundreds of millions in fines.

The world’s largest software company will slash the royalty fees it charges rivals for critical interoperability information needed to make programs that work smoothly with Microsoft’s ubiquitous Windows. It will broaden access for open source developers that the EU said are now “virtually the only alternative for users.”

Microsoft said it would not appeal a EU Court of First Instance decision on Sept. 17 that turned down its challenge to a 2004 European Commission order three years ago that found it guilty of monopoly abuse.

…

The company will now charge a one-time fee of 10,000 euros ($14,310) to any developer _ including those working on open source systems such as Linux _ for “complete and accurate” technical information to help make software compatible with Microsoft’s Windows desktop operating system. It had previously demanded a percentage of future sales.

Developers _ such as IBM Corp. and Sun Microsystems Inc. _ which sell software based on Linux will pay a worldwide patent fee of 0.4 percent of revenues for Microsoft’s data. Microsoft’s original rate was 5.95 percent.

Microsoft will now charge for only 31 server protocols under patent instead of the 154 originally offered for licensing.

Earlier this week, the European Commission searched the offices of several freight forwarders and at least one US freight forwarder confirmed it the Department of Justice subpoenaed it.  As reported by the Wall Street Journal:

A slew of freight forwarders including Switzerland-based Kuehne & Nagel International AG and Panalpina Welttransport Holding AG have been searched as part of a U.S. and European probe into pricing practices.

The European Commission said Wednesday that it carried out unannounced inspections at the offices of several international freight-forwarding companies without naming them, saying it has “reason to believe that the companies concerned may have violated EC Treaty rules that outlaw restrictive business practices.” Freight forwarders make delivery arrangements for shipping companies.

The raids were sparked by information received from an unidentified person, who tipped EU, U.S. and Swiss authorities to alleged cartel behavior, said Patrik Ducrey, deputy director of Switzerland’s competition authority.

…

DHL, an international shipping unit of Deutsche Post AG, said European authorities had contacted the company, but it didn’t provide further detail. The investigation centers on whether the freight forwarders fixed prices for fuel and other surcharges, Kuehne & Nagel Chief Financial Officer Gerard van Kesteren said Wednesday.

…

In the U.S., international freight-forwarding and logistics company Expeditors International of Washington Inc. said Wednesday that it received a subpoena from the Justice Department ordering the company to produce information and records relating to an investigation of air-cargo freight forwarders. The company said it intends to work with the Justice Department.

A leading EC textbook on competition law offers the following startling insights regarding the Commission’s case against Microsoft:

Microsoft did not contest that it was dominant in the market for client PCs and the Commission found that it had abused that position by selling its PCs with a streaming media player already built in. (p.141) … Software is a network industry with an applications barrier to entry. Microsoft licenses some 93.8% of the operating systems for personal computers (PCs). Consequently, there is a big incentive for consumers to use Microsoft operating systems, so that they can communicate with more people. (p.175)

V. Korah, EC Competition Law and Practice (2004). No, I’m not making this up.

UPDATE (10/03/07): Cosmo Graham shared this comment with us: “In fairness, this is from an old edition. The most recent, the 9th (only published very recently), seems very different from a quick skim. In particular, it is made clear that it is operating systems, not PCs which are in issue. The applications barrier to entry seems to have been straightened out as well on p 123. The statement about the incentive to communicate does remain - on p 121 - in the context of a general statement about network effects which latter seems unexceptionable.”

Technorati Tags: antitrust, microsoft, textbooks to avoid