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Monopolization/Abuse of Dominance

FTC Commissioner Wright’s Policy Statement Proposes Section 5 Limitations

by Emily Townsend | Jun 20, 2013 | FTC Developments, Monopolization/Abuse of Dominance

On June 19, 2013, Commissioner Joshua Wright of the Federal Trade Commission (FTC) proposed a Policy Statement on the FTC’s enforcement authority under Section 5 of the FTC Act, which prohibits unfair methods of competition. According to Commissioner Wright, the intent of his proposed Policy Statement is to initiate a discussion on the appropriate parameters of the FTC’s authority under Section 5. Commissioner Wright expects that the proposed Policy Statement will end years of ambiguous Section 5 enforcement by articulating a clear standard of what types of conduct constitute an unfair method of competition. The Policy Statement defines an unfair method of competition as “an act or practice that (1) harms or is likely to harm competition significantly and that (2) lacks cognizable efficiencies.” Commissioner Wright explained that the definition as a whole allows the Commission to reach conduct not covered by the Sherman and Clayton Acts, is tied to modern jurisprudence on harm to competition as well as to the Horizontal Merger Guideline’s efficiencies standards, focuses on conduct that is most likely to harm consumers and reduces the risk of prosecuting pro-competitive behavior.

Commissioner Wright remarked that before the FTC will exercise its Section 5 authority, the conduct at issue must be outside the bounds of well-defined antitrust case law. He further stated that the FTC should exercise this authority in areas where the Commission finds business practices that harm consumers through activities not yet reviewed by the courts. Commissioner Wright foresees two broad areas of enforcement under Section 5: invitations to collude, and using unfair competition to acquire market power (where monopoly power might not exist). According to Wright, before the Commission brings a case, it should examine both the magnitude and the probability of harm to competition to determine whether the conduct constitutes an unfair method of competition. Even if the Commission concludes that conduct harms competition, the second prong of Wright’s proposed policy would restrict the Commission’s ability to prosecute if a cognizable efficiency exists.

For Commissioner Wright’s full discussion of the proposed Policy Statement, see: https://www.ftc.gov/speeches/wright/130619section5recast.pdf

Abuse of IP Rights Under China’s Antitrust Rules: Recent Cases Have a Potentially Serious Impact

by McDermott Will & Emery | Mar 22, 2013 | Chinese Developments, IP Antitrust, Monopolization/Abuse of Dominance

by Frank Schoneveld

Corporations doing business in China, based on their intellectual property (IP) rights, need to be aware of the potentially serious impact of China’s Anti-Monopoly Law and other antitrust rules. China’s Anti-Monopoly Law prohibits the holder of IP rights from abusing those rights when it has a dominant market position. Such dominance can be achieved under Chinese law with a market share as low as 10 percent. Two recent cases demonstrate the greater reliance of Chinese companies on the antitrust rules, particularly when bargaining for lower royalties and license fees.

Interdigital v. Huawei

The Shenzhen Intermediate Court recently decided that Interdigital abused its patent rights by requiring Huawei to pay “excessive” royalties for essential patents for mobile telephone technology. The license terms proposed by Interdigital to Huawei reportedly complied with the European Telecommunications Standards Institute’s policy as Fair, Reasonable and Non-Discriminatory (FRAND) terms. However, the court found that the terms of the proposed license were not a FRAND complaint, and even if the offered licenses were a FRAND compliant, the royalties to be paid by Huawei should not exceed 0.019 percent of the sale price of each Huawei product using the patents. This was significantly less than what Interdigital was prepared to accept (and reportedly less than that agreed upon in Europe for the same license). In effect, Interdigital must now give Huawei a compulsory license at the lower royalty rate as fixed by the Chinese Court. Interdigital has indicated it will appeal the decision.

While the judgment has not been published, it is reported that other findings of the Shenzhen Intermediate Court include that Interdigital had also abused its IP rights by:

Tying the licensing of essential patents to the licensing of non-essential patents
requiring that Huawei provide a grant-back of certain patent rights

Microsoft v. Guangzhou Kam Hing

Another recent IP abuse case involves Microsoft, who reported Guangzhou Kam Hing to the Chinese local authorities in 2010 for using pirated Microsoft software. This resulted in Guangzhou Kam Hing being fined by the Chinese authorities. Subsequently, Microsoft filed a complaint to a local (Nansha) court claiming damages of RMB 4.7 million and requiring that Guangzhou Kam Hing purchase a specified quantity of genuine Microsoft software at a certain price. Guangzhou Kam Hing has now brought proceedings in the Guangzhou Intermediate Court accusing Microsoft of abusing its IP rights by allegedly:

Applying quantity restrictions to reinforce its dominant position
Charging excessive prices thereby gaining “monopoly” profits

There was also a claim of discrimination in its pricing of software licenses based on differential pricing in Hong Kong and Mainland China for the same product. It is unclear whether the claim of discriminatory pricing is being pursued. The decision in this case is still pending.

U.S. Supreme Court Hears Oral Argument in Phoebe Putney Hospital Merger Challenge

by Emily Townsend | Nov 27, 2012 | FTC Developments, Healthcare Antitrust, Mergers & Acquisitions, Monopolization/Abuse of Dominance

by Jeffrey Brennan, Ashley Fischer, David Marx and Carrie Amezcua

In oral argument in FTC v. Phoebe Putney Health System, Supreme Court Justices focused on whether the state legislature clearly articulated a state policy to displace competition with regulation, in a case challenging the application of the state action doctrine to a hospital merger to monopoly.

To read the full article, click here.

Price-Fixing Cartels: China Crackdown Continues

by McDermott Will & Emery | Oct 31, 2012 | Cartel Enforcement, Chinese Developments, Monopolization/Abuse of Dominance

by Henry L.T. Chen, Frank Schoneveld, Jared Nelson and Sean Pan

Several major actions taken against price-fixing cartels by China’s enforcement authorities in the last year have sent a clear message that this is not a temporary campaign. It is a new reality.

To read the full article, click here.

When Is Resale Price Maintenance Legal in China?

by Emily Townsend | Jul 5, 2012 | Chinese Developments, Monopolization/Abuse of Dominance

by Henry L.T. Chen, Frank Schoneveld and Alex An

A Shanghai court recently decided the first case involving vertical monopoly agreements (i.e., between supplier and distributor) since China’s Anti-Monopoly Law (AML) came into effect in 2008. Of note, the court found that resale price maintenance by itself does not constitute a monopoly agreement. However, given that other courts and AML enforcement authorities can impose fines for illegal resale price maintenance, market players should not assume the practice is legal in China.

To read the full article, click here.

China’s Anti-Monopoly Law Makes it Easier to Sue in Cases of Anti-Competitive Conduct

by McDermott Will & Emery | May 9, 2012 | Chinese Developments, Monopolization/Abuse of Dominance, Private Litigation

by Henry L.T. Chen and Frank Schoneveld.

Recently, the Supreme People’s Court of China issued final rules to build a working framework for civil anti-monopoly cases brought under the country’s Anti-Monopoly Law. The rules will take effect on 1 June 2012.

To read the full article, please click here.

Private Actions in Competition Law: UK Government Consultation

by McDermott Will & Emery | Apr 25, 2012 | EC Developments, Monopolization/Abuse of Dominance

by Philipp Werner, David Henry and Andrea Hamilton

On April 24, 2012, the UK government took a significant step towards private antitrust actions by publishing a consultation document on how best to encourage private sector challenges to anticompetitive behavior. This consultation must be seen in the broader context of efforts to develop private antitrust enforcement in the European Union. The UK has already established itself as a premier venue for private antitrust actions, and the case law on jurisdiction, privilege and access to leniency documents in follow-on actions is rapidly evolving.

The UK government envisages that new, more effective, measures are to be introduced as a complement to public antitrust enforcement by the UK Office of Fair Trading and the European Commission. In particular, the UK Government is consulting on a host of measures the most salient of which are the following:

Establish the Competition Appeal Tribunal as the "go to" venue for antitrust actions in the UK;
Introduce an opt-out collective actions regime;
Promote Alternative Dispute Resolution;
Measures to ensure that private actions effectively complement public enforcement.

The consultation runs until July 24, 2012. A copy of the consultation is available here.

An RMB 150-Million Litigation in China for the Abuse of a Dominant Market Position

by Emily Townsend | Apr 24, 2012 | Chinese Developments, Monopolization/Abuse of Dominance

by Henry L.T. Chen and Frank Schoneveld

Recently, the High People’s Court of Guangdong held a public hearing for a high-profile lawsuit involving two software giants and alleged abuse of a dominant market position. This is the first anti-monopoly case accepted by the court, and the claimed amount is RMB 150 million (approximately US$23.8 million). With few judicial precedents in China, this case will be watched closely, and its outcome is expected to have far-reaching implications.

To read the full article, click here.

China Law Alert: Focus on Competition – March 2012

by McDermott Will & Emery | Mar 26, 2012 | Chinese Developments, Mergers & Acquisitions, Monopolization/Abuse of Dominance

by Henry L.T. Chen, Frank Schoneveld, Alex An, Brian Fu and Angel Wang

McDermott Will & Emery has released the latest China Law Alert: Focus on Competition, which provides insight on current issues surrounding cross-border antitrust and transactional issues.

China’s New Merger Control Regime Makes Major Progress in Its First Three Years

It is now just more than three years since China’s Anti-Monopoly Law (AML) was introduced. Compared with the well-established practices of US antitrust and EU competition authorities, AML enforcement is still in its infancy. However, China’s AML regulators, especially the authority in charge of merger control, the Ministry of Commerce (MOFCOM), has moved quickly to make its mark on international business. Now, most large, cross-border mergers, acquisitions and joint ventures must also successfully pass the rigors of review by MOFCOM as well as the European Commission and the US Department of Justice (DOJ) and/or Federal Trade Commission (FTC). Read the full article here.

NDRC and SAIC’s Actions in 2011 and Prospects in 2012

China’s National Development and Reform Commission (NDRC) and State Administration for Industry and Commerce (SAIC) are the two authorities in charge of investigation and supervision of “monopoly” agreements and abuses of dominant market position. NDRC focuses on price-related cases while SAIC takes care of non-price related violations of the law. Compared to MOFCOM, which is responsible for merger control, NDRC and SAIC have been relatively quite since China’s AML came into force on 1 August 2008. Read the full article here.

Civil Litigation under China’s Anti-Monopoly Law

Since the introduction of the China AML in August 2008, Chinese courts have experimented with various methods of civil dispute adjudication based on breach of the AML. In general, China’s courts have very limited judicial experience with such cases. A number of civil cases have been brought before the courts, but very few, if any, have resulted in a successful judgment for breach of the AML. Read the full article here.

Might the Ministry of Industry and Information Technology (MIIT) Become A New Enforcement Authority for China’s Competition Laws?

In addition to MOFCOM, SAIC and NDRC, the three major enforcement authorities for the anti-unfair competition and anti-monopoly laws, it seems the MIIT might also become a regulator of competition in the telecommunications sector. In addition to a Draft Regulation on Internet Information Services, published for consultation in January 2012, MIIT released an “Opinion on Regulating the Business Activities of Basic Telecommunications Carriers on Campuses” (the Opinion) on 30 June 2011. Read the full article here.

China Imposes Largest Fine So Far on a Cartel Ringleader

by McDermott Will & Emery | Feb 29, 2012 | Cartel Enforcement, Chinese Developments, Monopolization/Abuse of Dominance

by Henry L.T. Chen, Frank Schoneveld and Brian Fu

China’s National Development and Reform Committee recently imposed the largest fine ever on a sodium hydrosulphite manufacturer for price fixing and other anticompetitive activities.

To read the full article, click here.

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