The Court of First Instance has ruled against the European Commission claiming that it illegally blocked the proposed takeover by French electric equipment company, Schneider Electric, of Legrand in 2001. Schneider filed suit against the EC seeking A$2.5 billion in damages for losses incurred caused by the prohibition of the merger. The CFI ruling will create a potent legal precedent that could significantly alter the operations of the EC’s future regulatory mechanisms. The EC will be required to pay a proportion of Schneider’s damages claim to be determined pending further hearing by the CFI.
European Union
Kroes announces A$241 million fine for Telefonica
The European Commission fined Spain’s largest telephone company, Telefonica, A$241 million for abuse of dominance in the broadband internet market for a period of more than five years. Telefonica was said to be charging wholesale rates too close to retail prices, creating a margin squeeze that prevented competing internet providers from making profits. EC Commissioner Neelie Kroes announced that the decision will send a strong message to others 'tempted to engage in similar practices' and that the EC will not permit dominant companies to use market power to 'close down markets that the European Union has opened'. Telefonica defended its position, citing the expansion of the Spanish broadband market as evidence of increased competition and indicated its intention to contest the fine.
China
Continuing problems in product safety
The Chinese quality regulator, the General Administration of Quality Supervision, Inspection and Quarantine, concluded that almost one-fifth of food and consumer products manufactured in China was found to be substandard, unsafe or tainted. This announcement came in the wake of continuing scandals related to Chinese-made goods, including toys, baby formula, a variety of foods, toothpaste and blood products, and in response to quality and safety concerns raised by United States and European regulators.
In addition, the Chinese product safety watchdog, the State Food and Drug Administration closed down three companies in advance of visits by European and US delegations arriving to investigate product safety issues in China. Two companies, Xuxhou Anying Biologic Technology Development Co and Binzhou Futian Biology Technology, had their licences revoked as products from both were responsible for numerous animal deaths in North America. The chemical plant Taixing Glycerin Factory was also closed after cough syrup it produced (containing antifreeze) resulted in 94 deaths in Panama.
The US Federal Trade Commission Spam Summit held in Washington in July concluded that, to combat spam, international enforcement agencies need to significantly increase their cooperation. The summit noted that developing countries with lower bandwidth and internet capability are frequently the worst affected by spam and online criminal activity. During its deliberations, the conference noted the success of Australia in combining industry regulation with an internet service provider industry code of conduct. Discussion included a recommendation that consumers become more proactive in the prevention of spam and that existing legislation such as the CAN-SPAM Act was hampered by limitations and the increasing severity and volume of spam.
Canada
Competition laws under scrutiny
Industry minister Maxime Bernier and finance minister Jim Flaherty announced the creation of an independent competition policy review panel designed to assess the effectiveness of competition and investment laws with a view to modernising Canada’s competition regime within the global economy. The five member panel will focus upon two key laws—the Competition Act and the Investment Canada Act—to finetune and modernise the legislation to stimulate increased competition. The panel will also observe the operations of state owned enterprises within the parameters of the law and consider the inclusion of a clause on national security. In relation to foreign trade and reciprocity, the panel will evaluate Canada’s sectoral restrictions on foreign direct investment, including comparisons with the competition and investment regimes of its trading partners. It is anticipated that the panel will report to the Canadian Government with non-binding recommendations for new legislation by 30 June 2008.
Japan
Pipe cartel scandal may damage industry structure
Following the Japan Fair Trade Commission’s investigation of nine companies (including Mitsubishi Plastics, Sekisui Chemical, Kubota and Aronkasei) for price fixing in the vinyl chloride pipe market, analysts have predicted a shake-up of the entire chemical industry. Chemical companies (particularly resin processors) are increasingly coming under regulatory scrutiny for price rises, despite raising their prices in line with rising crude oil costs. Industry experts are speculating that the JFTC investigation may spark an increase in mergers as firms seek to minimise lost profits.
