A recent flurry of competition law developments has hit the legal headlines involving big brands such as Gaviscon, Google, Persil and Amazon, but which case involved a £10.2m fine? Zoe Hare reports.
Topic: Competition
Who: Office of Fair Trading and European Commission
When: March/April 2011
Where: UK and EU
Law stated as at: 28 April 2011
What happened:
1. Microsoft complain to European Commission about Google
On 30 March 2011, Microsoft confirmed that it had lodged its first ever formal complaint with the Commission about a rival, in relation to the Commission's ongoing investigation into Google.
The Commission are currently investigating Google to see whether it has abused a dominant position, contrary to the competition rules. Microsoft alleges that Google has used a "pattern of actions … to entrench its dominance in the markets for online search and search advertising to the detriment of European consumers" and therefore impedes competition.
Brad Smith, Senior Vice President and General Counsel at Microsoft, confirms that Microsoft's complaint alleges that Google:
(a) "walled off" access to its YouTube website, leaving Microsoft's search engine Bing and its competitors unable to return accurate searches containing links to YouTube videos;
(b) refused to allow Microsoft's Windows mobile phone software to operate or link to YouTube videos;
(c) blocked access to content owned by book publishers;
(d) contractually blocked certain EU websites from using competing "search boxes" on their webpages; and
(e) charged discriminatory prices to its competitors for advertising online.
The Commission will now give Google a chance to respond to the complaint and consider its action as part of the ongoing investigation.
2. European Commission and OFT investigation into e-book publishing
In January 2011, OFT launched an investigation into e-book publishing, looking to see whether arrangements put in place by publishers with retailers for the sale of e-books breaches the competition rules.
Subsequently, on 2 March 2011, the European Commission confirmed that it had conducted unannounced dawn raids on 1 March at the offices of certain e-book publishers in various EU member states. The Commission's investigations were undertaken in connection with the national competition authorities of those member states. Indeed, the OFT has confirmed that it is fully aware of the Commission's investigation and is co-operating very closely to avoid any duplication between the investigations.
The investigations are currently at a very early stage. However, the Commission has confirmed that there is reason to suspect that the companies involve have acted contrary to the competition rules enshrined in Article 101 TFEU, which prohibits cartels and other restrictive business practices. The investigations are likely to take a few years to complete, before the Commission announces whether it will fine the companies involved for infringing the rules.
Both the OFT and the Commission have stated that the investigations are at a preliminary stage and that it should not be assumed that those companies involved have breached competition law.
3. Reckitt Benckiser fined £10.2 million by OFT for patent abuses
On 13 April 2011, the OFT confirmed that it has issued an infringement decision against Reckitt Benckiser for abusing its dominant position, imposing a £10.2 million fine.
Reckitt Benckiser was found to have withdrawn its Gaviscon Original Liquid medicine from the NHS prescription channel after the patent protection had expired but before a generic name had been allocated to the drug.
Where the patent of a branded medicine such as Gaviscon Original expires, a generic name is usually assigned to it. GPs, who then wish to prescribe the medicine, give patients an "open" prescription that refers to the generic name. Pharmacists then have the choice of whether to give the patient the branded or generic product. This method saves money for the NHS and increases competition between pharmaceutical manufacturers and suppliers.
However, in Reckitt Benckiser's case, pharmacists could not prescribe Gaviscon Original Liquid and producers and suppliers of generic medicines could not enter the market to compete with the product, as it was removed from the NHS list. As a result, more prescriptions would be made for Reckitt Benckiser's new alternative product, Gaviscon Advance Liquid, which was patent protected and did not face competition from generic medicines.
The infringement decision in April follows Reckitt Benckiser's admission to the infringement and agreement to pay a fine, on 15 October 2010. Reckitt Benckiser admitting infringing competition law by withdrawing and de-listing Gaviscon Original Liquid from the NHS prescription channel. As part of its settlement with the OFT, the company agreed to pay a £10.2 million fine. This figure had been reduced from £12 million to reflect the company's admission and co-operation with the OFT's investigation.
4. Unilever and Procter & Gamble fined for washing powder cartel
Following dawn raids at the offices of several consumer detergent companies back in 2008, on 13 April 2011 the European Commission confirmed that it had imposed fines totalling €315.2 million on Procter & Gamble and Unilever for participation in an anti-competitive cartel.
Together with a third company, Henkel, the two companies had coordinated and fixed the prices of powder detergents used in washing machines in 8 EU member states between 2002 and 2005, with the aim of stabilising their market positions.
In 2002 the companies implemented an initiative to improve the environmental performance of their products. However, unrelated to the environmental aims of the initiative, the companies engaged in anti-competitive cartel practices. The companies were seeking to ensure that none of them gained a competitive advantage by decreasing prices. They wished to ensure that their market positions remained the same.
Having blown the whistle on the cartel, Henkel was awarded full immunity from the investigation and fines by the Commission. However, Procter & Gamble and Unilever were not so lucky.
Both companies admitted infringing the competition rules and entered into settlements with the Commission. Procter & Gamble were fined €211.2 million, while Unilever were fined €104 million. Both received a reduction for cooperating with the Commission
Why this matters:
These recent cases demonstrate the serious impact of breaching competition rules. The enforcement action taken by the competition authorities, both at a national and EU level, is stronger than ever. The authorities are keen to identify anti-competitive practices and impose penalties on the infringers.
As the Microsoft/Google case shows, it's not just contact with competitors that can get you in trouble. While competitors in a cartel may blow the whistle before they get caught, rivals are often more than happy to assist the competition authorities in investigations about their competitors.
Given that the fines imposed can be up to 10% of a corporate group's worldwide turnover, it is imperative that companies have up to date and effective compliance regimes in place. Companies must be careful not to fall foul of the rules or else they may end up paying a hefty fine.
Zoë Hare
Solicitor
Osborne Clarke, London
zoe.hare@osborneclarke.com
