News

Ireland: New regime for vertical agreements

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The new category certificate and category licence are to be welcomed. They recognise the positive contribution which vertical agreements normally make to economic life. While the use of market share thresholds introduces a degree of uncertainty in relation to the application of the documents (particularly for companies with market shares which may be close to the thresholds), this seems a small price to pay for a more realistic recognition of the effect on competition of such agreements. In practice, this approach will eliminate the need to consider the possible application of the Competition Act to the vast majority of vertical agreements. Of course, where such agreements may affect trade between EU Member States, the European Commission’s existing block exemption regulations will remain relevant until they too are replaced by a more flexible regime. It is to be hoped that any divergences which may arise between the new Irish regime and the Commission’s new block exemption regulation will not cause too much difficulty for businesses marketing their goods and services in Ireland.

Belgium: Draft bill on electricity market opening

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Because of delays in the passage of the Bill caused by the introduction of amendments, the law is not expected to be adopted before mid- April 1999 at the earliest. However, the level of market opening that will be reached in Belgium is already substantial and is higher than the 26.48 per cent minimum set by the Commission.

Volvo/ Ford

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Ford Motor Company is set to become the world’s second largest car manufacturer if its planned £4 billion acquisition of AB Volvo of Sweden goes through.

Intel/ Intergraph

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Intel Corporation has settled with the FTC on the eve of its landmark antitrust case.

USA: Enforcers need to take account of high-tech realities

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Chairman Pitofsky’s remarks about the application of the antitrust laws to high-tech industries come at a time when US antitrust regulators have been particularly visible in monitoring and challenging the practices of some high-tech businesses. It will be particularly interesting to se whether, if the Justice Department is successful in its current monopolisation suit against Microsoft, the remedy that is mandated will take account of Pitofsky’s call for caution and restraint.

France: Canal+ fined for abuse of dominant position

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Canal+, pointing out its support of French film production (on which it spent 9 per cent of its turnover, ie FFr800 million, in 1998), appealed against this decision, which could have drastic consequences for the film industry. Film producers and industrialists also condemned the decision, believing it could result in Canal+ reducing or even scrapping altogether its financial backing for film production, a loss which would not be made good by TPS (which only spent FFr58 million in 1998 to support film production). The Conseil’s decision, which was confirmed by the Paris Court of Appeal on February 18, could constitute a turning point in the relationship between the French pay-TV market and the film industry. The decision by the Conseil to fine Canal+ and force it to surrender its exclusive right to pre-purchase French film broadcasting is likely to change significantly the current structure of financial support to the French film industry.

Franchising: EU proposals to modify vertical restraint rules harmful to franchising

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The Commission is proposing to use a market share approach for the exemption of some vertical restraints. However, there is little guidance or precedent in the EU on the way in which markets should be defined in the context of distribution arrangements in general, and franchising arrangements in particular. In the US, the courts and antitrust enforcement agencies have rejected the notion that any presumption of market power flows from a franchisor’s trademark or unique name. Therefore, the markets in which franchisors operate are generally identified as the upstream market for the sale of business opportunities or a broad downstream market for products sold by both franchised and nonfranchise businesses.

Switzerland: Concept of collective dominance established

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In a decision based on a rigorous economic analysis, the Swiss Competition Commission has introduced the concept of collective dominance into Swiss antitrust law. Drawing in its analysis on the EU Commission’s decisions and the checklist of the German Bundeskartellamt, the Commission ordered the merging companies to divest two affiliated companies. The decision centred on the duopoly which would have been created by the merger and the fact that both companies were vertically integrated.

Thomas Cook/ Carlson

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UK Travel group Thomas Cook is to merge its worldwide leisure travel and financial services business with the US travel company Carlson Group. Simultaneously, Preussag AG, owner of Hapag-Lloyd, the largest German integrated leisure travel operator, has invested in the merged entity with rights to take a majority share of the equity. The joint venture will create one of the UK’s largest vertically integrated travel groups, operating under the name of Thomas Cook.

Spain: Telecommunications giant fined

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The imposition of a record fine by the TDC demonstrates the increasing commitment of the Spanish competition authorities to the enforcement of competition law, particularly in those sectors being progressively liberalised by the government such as electricity and telecommunications. The competition authorities are clearly not prepared to allow large firms which previously held monopolies in sectors of the Spanish economy to undermine the government’s push towards liberalisation.