As the Global Competition Review ($) reports, China has adopted a new competition law. The law will be effective in a year (August 1, 2008).

“It definitely has a full complement of antitrust bells and whistles,” says Abbott B “Tad” Lipsky of Latham & Watkins LLP. “As far as its substantive standards are concerned, it’s well within hailing distance of international standards and, beside a couple of wrinkles, would be more or less recognisable to a US or EU competition lawyer.”

The WSJ has background, and raises some questions about the new law:

Some see it as a tool that can aid domestic and government-owned companies and protect them from inroads by foreign multinationals. Accelerating inflation this year has also led to renewed official interest in controlling price increases by manufacturers.

Yet other local proponents see the antitrust code as a way to bring more competition and openness to the Chinese economy, many parts of which are still dominated by the state.  . . .

Whether the law lives up to that promise depends less on the language that is finally approved by legislators and more on the priorities of future Chinese administrations. And in the last couple years, foreign investment in China has come under increasing political scrutiny, as leaders worry less about attracting money from abroad and more about supporting emerging local companies.

The always interesting Sports Law Blog wonders if Michael Vick will also be banned from the Canadian Football League as well as the NFL. 

Since the NFL announced its suspension of Michael Vick, many of my esteemed colleagues have presumed that Vick will also get banned from the Canadian Football League (”CFL”) based on the “Ricky Williams Rule,” which prevents any player suspended by the NFL from entering the CFL.

But is there an antitrust problem?

Isn’t it true that an agreement amongst all of the teams in a pro sports league to boycott a class of players would indicate a prima facie case of an antitrust violation? Isn’t it also the case that the CFL has market power in the labor market for players banned by the NFL (presuming that issue is even relevant) because NFL teams are not part of the viable market for such players’ services?

… under antitrust law, there are less restrictive alternatives for the CFL to prevent the entry of troublesome players, such as for the CFL to review the candidacy of each prospective player on a case-by-case basis. A case-by-case review of players banned by the NFL would make more sense given that the CFL has already “grandfathered” players that are currently playing in the CFL but previously banned from the NFL. In a statement that may prove especially damning to the CFL, the CFL in November of 2006 stated that “one of the reasons for the ban is to maintain a good relationship with the NFL.”

Indeed, the biggest challenge to bringing a suit against the CFL may involve proving U.S.-based anti-competitive effects given that much of this allegedly anti-competitive conduct occurred outside of the United States.  However, given that most of the football players that would be banned from the CFL under this rule live in the United States, as well as that some of the CFL fans reside in the United States, and that CFL games are broadcast into the American market through Dish Network, DirecTV and America One, these concerns should not prevent a bona fide antitrust challenge against the Ricky Williams Rule in United States federal courts.

Of course, the question is a slightly premature as Vick will have to serve twelve to eighteen (at least) first.

Nicolas Sarkozy won the French presidential election yesterday.  American presidents, and Presidential candidates rarely mention antitrust (or competition) law, but the same is not true in France.  The Antitrust Hotch Potch notes that although antitrust/competition law was not mentioned during the televised debate between Sarkozy and Ségolène Royal, but they did express their views in a Revue Concurrence questionnaire.

On Wednesday, the Department of Justice announced that it had arrested eight executives and charged them “for their role in a conspiracy to rig bids, fix prices, and allocate markets for United States sales of marine hose used to transport oil.” The press release also states that:

A criminal complaint was unsealed today in U.S. District Court in Miami, against four executives: Peter Whittle, owner of the U.K.-based consulting firm PW Consulting (Oil & Marine) Ltd.; Bryan Allison, managing director, and David Brammar, sales and marketing director, both of the U.K. company Dunlop Oil & Marine Ltd.; and Jacques Cognard, the oil and marine manager of Trelleborg Industrie S.A. in France. A separate criminal complaint was filed late last night in U.S. District Court in Ft. Lauderdale, Fla. against four executives: Christian Caleca, the president of the Industrial Hose Business Unit of Trelleborg Industrie S.A. in France; Vanni Scodeggio, a business unit manager at Parker ITR slr in Italy; Francesco Scaglia, a product manager at Manuli Rubber Industries SpA in Italy; and Misao Hioki, an executive involved in the sale of marine hose for Bridgestone Corporation in Japan. According to the criminal complaints, the charged executives participated in the conspiracy at various times during the period from at least 1999 to the present. … Marine hose is a flexible rubber hose used to transport oil between tankers and storage facilities and buoys. Marine hose is purchased by companies such as Shell, Exxon, and Chevron that are involved in the off-shore extraction and transportation of petroleum products. It is also purchased and used by the Department of Defense. Court papers allege that during the conspiracy the conspirators sold hundreds of millions of dollars worth of marine hose and related products. According to the affidavit filed in support of the criminal complaint charging Whittle, Allison, Brammar and Cognard, the conspirators met in locations such as Key Largo, Fla., Bangkok, and London. At these meetings, the conspirators discussed and agreed to the rules for implementing their bid-rigging, price-fixing and allocation scheme. They also allegedly kept agendas and detailed “minutes” of cartel meetings.

Technorati Tags: antitrust, price fixing, marine hose, more exciting than the cement industry price fixing cases DOJ has recently been bringing

Yesterday, the House held a hearing on House Bill 1902 which would “prohibit brand name drug companies from compensating generic drug companies to delay the entry of a generic drug into the market ….”  The House Committee on Energy and Commerce heard from FTC Commissioner Leibowitz, Mike Wroblewski of Consumers Union, Professor Scott Hemphill (Columbia Law), Phillip Proger of Jones Day, Ted Whitehouse of Willkie Farr, and Bernard Sherman, CEO of Apotex.  The AP (via Forbes.com) has a short article about the hearing.

In other Congressional antitrust news, last week the Senate Judiciary Committee passed Senate Bill 879 which would “amend the Sherman Act to make oil-producing and exporting cartels illegal.”  As Trade Regulation Talk explains, the bill

would allow the federal government to take legal action against foreign states, including members of OPEC, for price fixing and artificially limiting the amount of available oil. … The bill, which would amend the Sherman Act, would clear the way for the federal courts to hear antitrust suits against OPEC, according to Senator Herb Kohl, the bill’s sponsor and chairman of the Judiciary Committee’s Antitrust, Competition Policy and Consumer Rights Subcommittee.

A new paper analyzes US and and EU merger enforcement. Of particular note is that two of the co-authors are Malcolm Coate and Shawn Ulrick of the Federal Trade Commission. According to the abstract:

Merger regulation affects large transactions in the market for corporate control in both the European Union (EU) and the United States (US). This paper compares the merger enforcement policies of the two regions using descriptions of the merger investigations prepared by the staff of the EU and the Federal Trade Commission. The policies are found to share a common foundation with substantial weight being placed on both the market structure characteristics and the likelihood of effective entry. US enforcement was broader-based in that it scrutinized markets that might be characterized as raising oligopoly, unilateral, and dominant firm concerns, while the EU policy focused largely on market dominance. Neither regime is found to be stricter in all circumstances, since the market and firm characteristics impact the enforcement decisions differently. However, we find that the US regime is more predictable (given our measures of the explanatory variables), tougher on strong dominance cases and oligopoly cases, but more permissive on weak dominance cases.

Download it while it is hot.

Here is a guest post by Pascal Berghe on current developments in Europe.

Consultations on merger remedies

The EU Commission released a draft notice to replace the current Merger Remedies Notice dating of 2001. The draft notice takes into account the conclusions of the Commission’s 2005 study on the implementation and effectiveness of merger remedies and recent case-law. It also realises the necessary adaptation to bring the notice in line with the new regulation EC Merger Regulation adopted in 2004 (Regulation 139/2004). The implementing regulation (Reg. 802/2004) is slightly amended as well, with the creation of a “Form RM” to describe the commitments proposed by the parties. Upon a first quick glance, the 35-page draft notice discusses in much more detail what type of remedies may be suitable (divestiture of a viable and competitive business, divestiture of crown jewels, and other remedies such as access remedies and change in long-term exclusive contracts). It also recommends the inclusion of a review clause in the proposed commitments. With regard to procedure, it addresses separately the necessary requirements that commitments must meet when submitted during Phase I or Phase II. Lastly, it provides guidance on the different phases of the implementation process (including the role of the trustee and post-implementation monitoring). Clearly, the document is worth a closer analysis. If reading the document inspires any comments, they may be submitted to the Commission until June 3, 2007.

Consultation on state aid reform

If you are not interested in mergers, the Commission launched a second consultation on the same day on simplified rules for block exemptions in state aid. State aid reform has been one of the Commission’s priorities. The new draft Block Exemption Regulation (BER) consolidates the five existing BERs and creates new eligible categories of aids (environmental aid, risk capital aid and extension of R&D aid to large undertakings). In implementing its 2005 State Aid Action Plan, the Commission’s general motto is to promote “less and better targeted aid” that achieves horizontal (ie non sector specific) objectives. The deadline for comments is also June 3, 2007.

Technorati Tags: antitrust, competition law

After Russia, Indonesia has now declared that it is not interested in forming an OPEC-like liquefied natural gas (LNG) cartel. Iran has called for a global cartel, but Indonesia, having been burned in the past by OPEC, doesn’t seem interested.

Russian President Vladimir Putin rejected the creation of a cartel that would influence prices, but said the idea of cooperating to help secure supplies to customers was interesting. The globalisation of the natural gas market thanks to the growth of LNG and greater connectivity between gas grids make a cartel increasingly possible, although analysts say the dominant use of long-term contracts priced against oil weigh against it. Indonesia would be a key player in any gas group, as it has been for years the biggest shipper of LNG, accounting for about 17 per cent of all supplies of the super-cooled natural gas in 2005, while neither Russia nor Iran currently produces LNG.

(That last bit puzzles us: We thought Russia was the largest exporter—via pipeline—of LNG. Update: As a helpful comment points out, “Russia exports natural gas, not liquefied natural gas. Same but different. A difference without enormous distinction, globally.” Thanks!)

Here is some background on the Gas not-cartel from Slate.

The notion that Vladimir Putin, Mahmoud Ahmadinejad, and Muyammar Qaddafi would reliably stick to the terms of a cartel pact is laughable. What’s more, the natural-gas cartel would find its power limited by large producers who wouldn’t join. In 2004, the United States, Canada, the Netherlands, Norway, and the United Kingdom—democratic, liberal, Western countries all—collectively accounted for 35 percent of total global production.

There already exists the Gas Exporting Country Forum, which accounts for 40% output and 70% reserves, but it apparently does not fix prices. LNG is different from oil, of course, in that most of it is delivered by pipelines and not shipped. Reuters also reported earlier tensions:

“If I imagine that there is some agreement on limiting production or price, there is inevitably (an effect) on consumers,” EU Energy Commissioner Andris Piebalgs said at the time. In a further sign of tensions between European consumers and gas suppliers, Spain’s government this week proposed laws barring large producers like Russia and Algeria from selling directly to Spanish businesses.

The Antitrust Review deprecates cartels, especially beer cartels, and welcomes the news that there will not be another OPEC.

Dan Sokol has a new paper out, Technical Assistance for Law & Economics: An Empirical Analysis in Antitrust/Competition Policy, co-authored by Michael Nicholson, Daniel Sokol, and Kyle Stiegert. Here is a taste from the abstract:

Many nations have augmented their development of competition agencies with technical assistance (TA) support. Determining how best to design TA programs to interact with nascent and financially constrained competition agencies is a difficult and complex matter. The objective of this study is to assess the impacts of the TA-agency partnership. This paper focuses specifically on factors that lead to improved effectiveness of TA as it pertains to improved agency effectiveness. In a field that has been lacking for empirical evaluation, we use a unique dataset of responses from 38 competition agencies that have received technical assistance from the period 1996-2003. Our empirical analysis demonstrates that issues of timing and absorptive capacity of particular forms of technical assistance within a larger political economy consideration maximize the impact and effectiveness of technical assistance provided to competition agencies.

Keith Sharfman reports on Truth on the Market that:

Israeli newspapers have an interesting story about a multibillion dollar antitrust suit that an Israeli manufacturing firm has brought against Israel’s three major banks. The complaint alleges that the banks price colluded on rates, charging identically in five distinct rate categories: a uniform prime rate always 1.5% above the central bank’s; a uniform risk premium of 3%; a uniform 3.5% extension premium; a uniform credit allocation fee of 1.5% per quarter; and uniform quarterly management fees of NIS 150.

Keith is skeptical about the merits of the case, because

It is not surprising that banks who pay the same price for capital would charge the same fee for it, just as it is not surprising for adjacent gas stations to charge the same price per gallon.

While there are good arguments for interest rate uniformity being driven by the market, I am not so sure about risk premiums, extension premiums, credit allocation fees, and — in particular — management fees. Why would we expect uniformity with respect to elements of price that are not directly related to common costs of capital? There were a number of serious cartel prosecutions in Europe on charges that don’t seem to be all that different. I am thinking of the “Lombard Club” in Austria, Germany, Italy, and the Netherlands.

Technorati Tags: antitrust, israel, banks, interest rates

The St. Petersburg Times reports that the three largest mobile phone companies in Russia are being investigated for tariff setting:

Russian antitrust authorities began a case against the country’s top three mobile-phone companies including Mobile TeleSystems, for setting tariffs between themselves at a lower rate than for other competitors.

The Federal Anti-Monopoly Service has started the case after Mobile Telesystems, VimpelCom and MegaFon, the country’s three largest operators, set the tariff to terminate a call between them at 0.95 ruble ($0.04) and at 1.1 rubles for other operators, the service said in a statement posted on its web site Thursday. The watchdog will hear the case on Sept. 28.

Apart from the great names, like MegaFon, what caught my eye was this:

The “Big Three” companies together operate 86 percent of cellular phones in Russia, a country of 143 million people, where mobile-phone penetration reached 98.5 percent last month.

We’ve previously blogged about the debate in the European Union about mobile phone roaming charges.