34
FOCUS
Competition law
Levelling the playing field? ACQ investigates whether the tougher enforcement of competition law will help regulate the free market.
Dr. Michael Paroussis
Tatiana Ignatovskaya
DETAILS
Dr. Helen Papaconstantinou, John Filias & Associates 2 Coumbari str., 106 74 Athens GREECE T: +30 210 3626624 F: +30 210 3626742 E: mail@hplaw.biz W: www.hplaw.biz
16 Kuibysheva Street, 4th Floor, 220029 Minsk Belarus T: +375-17 209-4483 F: +375-17 204-8672 E: t.ignatovskaya@spplaw.by W: spplaw.by/en/ignatovskaya_ bio_en.html
ACQ February 2011
Competition law or ‘antitrust’ regulates the use of market power by corporations, governments and other economic groups. The law is at the forefront of European business consciousness at the moment as many EU member states try to catch up with the US by introducing it into their own national legislation. During the recent economic downturn many regulators and governments struggled to prevent the collapse of large companies, bailing out failing banks. However competition law still remains at the heart of free market economies. Michael Paroussis, counsel at Dr H Papaconstantinou, J. Filias and Associates, told ACQ how competition law affects the economy in Greece. What is the difference between EU competition law and US ‘antitrust’? Traditionally the main difference between US antitrust and EU competition law is considered to be structured by the fact that the antitrust law in the United States is primarily judge-made, rather than defined by statute, as it is the case in the EU. The principal U.S. federal antitrust laws are generally worded, and they give the federal courts and antitrust enforcement agencies wide freedom to develop a federal “common law” on antitrust regulation. A serious development in direction of a convergence between the two systems is marked by the entering into force at the beginning of 2011 of the “EU Guidelines on the Applicability of Art 101 of TFEU to horizontal cooperation agreements”, which pay tribute to a profound economic analysis as regulative ideal. Should the law be enforced more robustly? Competition law should keep a reasonable level of intervention permitting the fulfilment of its goals, namely the protection of individuals exposed to unilateral decisions of suppliers of goods and services, and the maintenance of a structured order in the market. The success of the market regulation as undertaken by governmental policies and actions of independent agencies or decisions of competent courts depends purely on the sensitive application of a right measure, which should never go beyond the accessory character of the normative framework in order to achieve the value of economic freedom. A tougher enforcement would turn the economy from a free market to a highly paternalistic regulation regime. How does competition law help supervise M&A? Greek economy is by its nature an oligopolistic economy, since the consumers’ mass does not support quite
extended market competition. There are usually three to five main players in every economy sector. A typical example is the existence of just two airlines, which intended to merge this year, a merger finally prohibited by the EU Commission. From this point of view CL plays a major role in the right functioning of the market.
ACQ spoke to Tatiana Ignatovskaya, a partner at Stepanovski, Papakul & Partners LLC and a founder and Board member of the non-profit partnership “CIS Competition Support Association in Belarus. What is competition law like in Belarus? The Belarusian competition law was developed in the early 90s, and it has not been considerably amended by now. The deficiencies of the antitrust legislation are related primarily to the underdevelopment of domestic market. In comparison with US antitrust law Belarusian competition law is also based commonly on the principle of single-firm and multi-firm unlawful conduct division. Belarusian Law “On Countermeasures against Monopolistic Activities and Development of Competition” (hereinafter – the Law) contains some general norms in respect of price fixing, bid rigging, unfair competition, merger control. However, almost all cases concerning antitrust violations are handled in accordance with common civil legislation, but not in accordance with the antitrust law. This situation is caused by the imperfection of antitrust proceedings. What does competition law mean for M&A? The Law provides the necessity of control over the mergers and acquisitions, if they may lead to gaining or maintaining a dominant position in the market. The Law obliges the merger’s participants to obtain a preliminary permission from the local antitrust authority to conclude a corporate deal. This permission is to some extend a guarantee validity and legality of the M&A deal. The absence of this permission may lead to recognition of the deal as null and void upon the antitrust authorities claim. Under the norms, concerning prevention of domination, the local antitrust authority controls legal entities, who dominate in the market, applying special price regulation and special requirements for these entities’ M&A deals. According to the Law, the antitrust authority is empowered to conclude antitrust agreements with the legal entities, achieving dominance in the market, thus preventing the latter from monopolizing. Such agreements also determine price range.
FOCUS
35
Competition law
What is your experience of competition law? Our lawyers have significant experience of dealing with the Russian antitrust authorities (Federal Antimonopoly Service of the Russian Federation) and the national regulatory authorities (Ministry of Economy of the Republic of Belarus). We regularly deal with these authorities in merger notifications, dominating companies issues and a variety of counseling matters, including a wide range of antitrust issues involving different industries, including telecommunication and media, hardware manufacturing, pharmaceuticals, consumer products, etc.
ACQ spoke to Alexis Apostolidis, Head of the Competition Law Group at Adams & Adams about competition law in South Africa. Is competition law in South Africa different? Although South African competition law borrows certain concepts from US Antitrust law, the focus of South African competition law is tailored for the South African economy and aside from the usual concerns of competition law it places an emphasis on promoting a greater spread of ownership, in particular to increase the ownership stakes of historically disadvantaged persons and to ensure that small to medium sized enterprises have an equitable opportunity to participate in the economy. What are the drawbacks/benefits of tougher enforcement within South Africa? The drawbacks of a tougher enforcement system would seem to be that sometimes smaller and more delicate sectors with struggling participants may suffer and the consumer may not be better off while a benefit is that in the larger sectors tougher enforcement of competition law will hopefully lead to better competition within the sector and an improvement in consumer welfare. Tougher enforcement will mean that participants in the market will be more aware of and concerned with competition law. Whether or not this will ultimately benefit the end consumer is difficult to tell. What practices will competition help eradicate? Predatory pricing and refusal to deal are expressly dealt with under the abuse of dominance provisions in the Competition Act and if a party is found guilty of such conduct said party may be exposed to an administrative penalty of up to 10% of the party’s preceding annual turnover in the Republic of South Africa (including exports from South Africa) in the first
instance. Absent dominance, such conduct may be dealt with under the horizontal or vertical restrictions of the Competition Act and may be analysed on the basis of whether there is a substantial lessening or prevention of competition in the relevant market.
ACQ spoke to Jorge Sanchez DeVanny, a senior partner at Sanchez-DeVanny Eseverri SC, about Mexican Antitrust law. How is Mexican antitrust law different? Mexican Anti-trust law compared to the US and EU Competition law is not as advanced and sophisticated. Although the Mexican Competition Commission (the “Commission�) does actively pursue unfair market advantages and investigates monopolies etc. the monetary size of the unfair practices pursued, represent a fraction of the values in unfair practices in the EU or USA. This is due to the size of the economies involved in the USA and EU and because the Commission in Mexico does not have the political strength to pursue the large monopolies or concentrations. How does this law affect M&A in Mexico? If a merger reaches the thresholds then a notice has to be filed at, and approved by, the Commission, before consummation of the merger takes place in Mexico. The Law and Regulations establish the mechanism to determine that a company has substantial power in a specific market segment, also taking into account the problems customers will encounter when substituting another similar or comparable product for the product involved in the transaction. Therefore, if a small merger occurs, in which the thresholds are not met but the affect of the merger is in fact the creation of a monopoly, the analysis of market power, barriers for substitution come in to play. What is the importance of competition law within free market economies? Although the Law and its Regulations do regulate practices such as price fixing amongst competitors, the Commission, does not have the political strength to fight the large monopolies or commercial companies which, although carrying out unfair practices, are creating jobs and developing the Mexican economy. Mexico may be able to move on to accept fair practices and competition control, when the government allows competition in sectors that traditionally have been held by the government, for example, energy and telecommunications sector.
Alexis Apostolidis
Yevgeny A. Voevodin
DETAILS
Adams & Adams Alexis Apostolidis T: +27 12 432 6202 E: alexis-a@adamsadams.co.za W: www.adamsadams.com
T: +7 (495) 970-10-90 E: yvoevodin@cls.ru W: www.cls.ru
ACQ February 2011