January 2012

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This newsletter is intended to provide general information and may not be reproduced or transmitted in any form or by any means without the prior written approval of Drew & Napier LLC. It is not intended to be a comprehensive study of the subjects covered, nor is it intended to provide legal advice. Specific advice should be sought about your specific circumstances. Drew & Napier has made all reasonable efforts to ensure the information is accurate as of 31 December 2011.

SINGAPORE COMPETITION LAW WATCH

CCS FINES TEN MODELLING

AGENCIES FOR PRICE FIXING On 23 November 2011, the Competition Commission of Singapore (“CCS”) released an infringement decision against 11 modelling agencies in Singapore for breaching Section 34 of the Competition Act (Cap. 50B) (“Act ”). Section 34 of the Act prohibits, amongst other things, price fixing activities. The 11 agencies were:

(1) Ave Management Pte Ltd.

(2) Bees Work Casting Pte Ltd.

(3) Catworkz International Pte Ltd.

(4) Diva Models (S) Pte Ltd.

(5) Electra Management

(6) Impact Models Studio

(7) Linsan Models

(8) Looque Models Singapore Pte Ltd.

(9) Mannequin Studio Pte Ltd.

(10) Phantom Management Pte Ltd.

(11) Quest Model Management

The agencies were members of the Association of Modelling Industry Professionals (“AMIP”), which

Status Score Board

Number

Concluded Pending

Notified Agreements or Conduct

7 6 1

Notified Mergers or Anticipated

Mergers

29 28 1

Infringement Decisions 6 6 0

Appeals 4 3 1

In this issue

Singapore Competition Law Watch ..................................................1 Regulatory Updates .……….………….2 Industry News …….…….….…………..6 – Anti-Competitive Agreements …….6

– Abuse of Dominance ……………..12

– Merger Regulations ………………17

– Procedural Matters …………….....23

Feature Article ....……………..……….24 New Year Reminder: Compliance, Compliance, Compliance! Do you know? ………………..………..26

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was the subject of a complaint received by CCS in 2009 for fixing fees for modelling services. Out of the 11 agencies, ten were fined a total of SGD 361,596. Individual fines ranged from SGD 3,000 to SGD 132,315. One agency, Mannequin Studio Pte Ltd., qualified for immunity from financial penalty under the Competition (Transitional Provisions for Section 34 Prohibition) Regulations as it terminated its conduct within 6 months after the Act came into force by leaving AMIP. AMIP was established in 2005, and CCS’s investigations showed that AMIP and its members were engaged in a single overall agreement to fix prices for modelling services from 2005 to 2009. The price fixing activities extended to a wide variety of modelling services, for editorials, advertorials, fashion shows, print advertisements and television commercials. The anti-competitive activity affected customers such as publishers, photographers, fashion show choreographers, and fashion labels. The price fixing only stopped in July 2009, when CCS conducted inspections on several of the modelling agencies’ premises. The release of the infringement decision and fines follows the Proposed Infringement Decision (“PID”), a non-public version of the infringement decision, which CCS issued to the agencies on 18 May 2011. The agencies were given the opportunity to make written and oral representations to CCS based on the PID. Please click here to access further information on CCS’s investigation and the basis of calculation of the financial penalties. ALLIANCE BETWEEN SINGAPORE

AIRLINES AND VIRGIN AUSTRALIA

APPROVED BY CCS On 19 October 2011, CCS gave its approval of a proposed strategic alliance agreement (“alliance ”) between Singapore Airlines Limited (“SIA”) and Virgin Australia Pty Ltd (“Virgin Australia ”). CCS’s approval came just a few days after its Australia counterpart, the Australian Competition and Consumer Commission (“ACCC”), gave in-principle approval of the deal. ACCC has since

given its authorisation to the alliance on 1 December 2011. SIA currently operates flights to more than 100 destinations in 40 countries, including five destinations in Australia – Adelaide, Brisbane, Melbourne, Perth and Sydney. Virgin Australia flies to 32 Australian and 16 international destinations including the USA, UAE, New Zealand, Indonesia, Thailand, Papua New Guinea, Fiji, Samoa, Tonga, Vanuatu and the Cook Islands. However, Virgin Australia does not operate flights to Singapore. The alliance, which was announced in June 2011, includes, inter alia, a code sharing arrangement in which the airlines will sell each other’s seats on both international and domestic flights; offer reciprocal frequent-flyer programme benefits and lounge access; co-ordinate schedules between the airlines for routes between Singapore and Australia; and undertake joint sales, marketing and distribution activities. While CCS has not released details of its decision, the alliance is expected to result in increased competition for air passenger services between Singapore and various Australian, Pacific and trans-Tasman destinations. It is envisaged that the alliance would lead to a number of consumer benefits such as greater convenience through seamless connecting flights and more destination choices. Consumers can also expect more competitive fares, an expansion of services and products available to them and more opportunities to earn and use frequent-flyer points. Drew & Napier represented the airlines in the notification to CCS.

REGULATORY UPDATES IRELAND BOLSTERS COMPETITION

LAWS On 29 September 2011, Ireland announced a number of proposed changes to its competition laws, which would enhance enforcement powers for the Irish Competition Authority.

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The key proposals in the Competition (Amendment) Bill 2011 included the following notable changes:

� Increasing the maximum prison sentence for conviction of an offence relating to anti-competitive agreements, decisions and concerted practices from five to ten years.

� Increasing the maximum level of fines, for criminal convictions of hard-core offences (offences involving cartels, concerted practices, price-fixing, amongst others), from EUR 4m (approximately SGD 7.01m) to EUR 5m (approximately SGD 8.76m). For summary convictions, fines would increase from EUR 3,000 (approximately SGD 5,300) to EUR 5,000 (approximately SGD 8,800).

� Requiring a company convicted of anti-competitive behaviour to pay the costs of investigation and court proceedings.

� Empowering the courts to issue, either on their own prerogative or upon application, director disqualifications as an additional penalty for infringement of non-hard-core, competition offences (hard-core offences already result in automatic disqualification).

� Lowering the burden of proof for private actions for cases where an undertaking has been successfully convicted for anti-competitive practices by public enforcement proceedings.

Criminal penalties for competition law infringements in Ireland were introduced in 1996. Under the Irish Competition Act, the Irish Competition Authority may bring summary prosecutions before the courts, while prosecutions on indictment (e.g. hard-core offences) are brought before a jury in the Central Criminal Court, a division of the High Court. NEW ZEALAND PROPOSES CRIMINAL

SANCTIONS FOR CARTELS In October 2011, the New Zealand Minister of Commerce presented before Parliament the Commerce (Cartels and Other Matters) Bill (“Bill ”) that set out significant new changes to existing competition legislation. The changes seek to align sanctions for anti-competitive behaviour in New

Zealand with that of key trading partners such as Australia, the US and the UK. Key features of the Bill include:

� Clarification of the types of activities that will be considered hard-core cartels by prescribing a list, comprising price-fixing, output restrictions, market allocation and bid-rigging. Previously, cartels were only prohibited if it could be shown that they resulted in negative price effects.

� The introduction of criminal sanctions of up to seven years for individuals and companies found guilty of hard-core restrictions. In order to warrant criminal sanctions, the Bill establishes that it will be necessary to prove that the defendant has the “intention” to enter into a cartel.

� The introduction of an exemption for “collaborative activities”, such as joint ventures and enterprises that are not for the main purpose of lessening competition, as well as for vertical supply agreements. This safeguard provision would ensure that activities that appear anti-competitive at first instance will avoid liability if they are carried out for a legitimate purpose and are reasonably necessary.

� The introduction of a clearance regime to allow businesses to obtain certainty from the New Zealand Commerce Commission (“NZCC”) as to whether their collaborative activity would contravene competition law.

The Bill provides for a grace period of two years before the criminal regime takes effect. The Bill is expected to be passed into law with minor changes in 2012. In Singapore: Singapore currently does not have criminal sanctions for breach of competition provisions, nor has there been any indication that it is likely to introduce such penalties in the near future. However, a failure to comply with a requirement imposed by CCS under its formal powers (such as a refusal to provide information), or the provision of false information (among other offences) will result in imprisonment for

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a term not exceeding 12 months and/or a fine not exceeding SGD 10,000. BANGLADESH TO ENACT

COMPETITION LAW FOR THE FIRST

TIME Bangladesh is in the final stages of enacting a set of competition laws to combat anti-competitive practices in the country. The draft Competition Act 2010 (“Act ”) would bring Bangladesh in line with its neighbours, India and Pakistan, which have also introduced new competition laws in the last few years. The draft Act is intended to allow the government to stabilise prices of essential commodities such as rice, sugar, and edible oil, amidst widespread allegations that inflation in such commodities had been fuelled by the profiteering activities of cartels and syndicates. The Act will also set up a competition commission, which will comprise not more than five commissioners. In terms of sanctions, the commission will have the power to fine a company up to 10% of its average annual turnover for the last three preceding financial years. The Act does not provide for criminal sanctions against anti-competitive activities. The proposed Act will include provisions to prohibit anti-competitive agreements, abuse of dominance and market combinations (i.e. mergers) that result in a significant adverse effect on competition in the market. At this point in time, the government does not intend to commit to a market share threshold beyond which companies will be considered accountable for abuse of dominance practices. The draft Act was approved by the Cabinet in October 2011, and will be reviewed by the Law Ministry before it is tabled at Parliament for enactment. In Singapore: In its Guidelines on the Section 47 Prohibition, CCS has provided an indicative market share threshold of 60%, beyond which an undertaking will be likely to be considered as dominant. CCS will consider other factors such as entry barriers, degree of innovation, existing competition and

buyer power in reaching a conclusion as to whether an undertaking is actually dominant. OFT REVIEWS ITS FINANCIAL

PENALTIES AND LENIENCY GUIDANCE On 26 October 2011, the United Kingdom’s (“UK”) Office of Fair Trading (“OFT”) issued draft proposals to amend two of its guidelines, on financial penalties and awarding leniency in competition cases. The current guidelines on financial penalties, published in 2004, set out a five-step procedure used by OFT in its consideration of the appropriate amount of penalty. The proposed amendments are fairly comprehensive, in that they involve both substantive changes to certain steps, as well as a re-ordering of the sequence in which OFT will conduct its assessment of financial penalties. The most noteworthy of the proposed amendments, put forth by OFT for the financial penalties guidelines, is the proposal to increase the maximum starting point for penalty calculations from 10% to 30% of relevant turnover. The rationale for this is to give OFT access to a greater range of fines to better reflect the seriousness of an infringement and to deter anti-competitive activities. This would also bring UK in line with the approach taken by the European Commission (“EC”) and other jurisdictions. The proposal also includes a proviso to allow OFT to consider whether a penalty is fair and proportionate overall, to ensure that, on the whole, the level of fines set are not disproportionate or excessive in relation to the infringement. OFT acknowledges in its proposal that “in certain exceptional circumstances it may be appropriate to use a measure other than the turnover in published accounts for the purposes of the starting point”. Accordingly, OFT has proposed to revise the guidelines to reflect this view. OFT is also proposing to make explicit that it will henceforth use the turnover for the year before the infringement ended as the starting point for calculating financial penalties. This is a departure from OFT’s current practice of using turnover figures from the year before OFT's infringement decision.

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Other salient changes include clarifications on the circumstances in which a party's competition law compliance activities may be treated as a mitigating factor. OFT’s starting position with regard to competition law compliance activities will be neutral. However, evidence of adequate steps having been taken to achieving a clear and unambiguous commitment to competition law throughout the organisation may be regarded as a mitigating factor. The changes to the leniency guidelines are, in comparison, more piecemeal and are mainly designed to give greater clarity and transparency to OFT’s existing policies and practices on leniency. For example, in relation to legal professional privilege, OFT has clarified that it will not request waivers of privilege in civil cases, but cannot exclude the possibility that it may do so in criminal ones. The consultation period is set to end on 26 January 2012. In Singapore: In its Guidelines on the Appropriate Amount of Penalty, CCS sets out its approach to the calculation of financial penalties, which takes reference from OFT’s current approach. Features of CCS’s approach include:

� A maximum starting point for penalty calculations, comprising 10% of relevant turnover;

� A five-step approach to determining the amount of financial penalty for an infringing party;

� A consideration of the turnover from the last business year before the date of CCS’s infringement decision; and

� The consideration of aggravating or mitigating factors, which includes a discretionary percentage reduction where an undertaking has appropriate compliance policies and procedures in place.

Additionally, CCS sets out its specific considerations when calculating financial penalties in the context of each infringement decision, all of which are made public on CCS’s website.

DEVELOPMENTS IN COMPETITION

LAW IN MALAYSIA The Malaysian Competition Act (“Act ”) came into force on 1 January 2012. With this, Malaysia became the fifth country in ASEAN to have a national competition law (after Indonesia, Thailand, Vietnam, and Singapore). The Act prohibits anti-competitive agreements or arrangements, such as price-fixing and market-sharing, and abuses of a dominant position. Malaysia’s competition legislation is broadly consistent with international antitrust laws, except that it does not provide for a merger control regime. The Act was passed in May 2010, but businesses operating in Malaysia were given some 18 months to make the necessary preparations to ensure compliance with the new competition laws when they came into force on 1 January 2012, this year. For details of the Malaysian competition law regime, please click here for Drew & Napier LLC’s Guide to Malaysian Competition Law. Already the Malaysian Competition Commission (“MyCC”) has commenced a preliminary investigation into the share swap deal between airlines AirAsia Bhd and Malaysia Airlines. MyCC's investigation arose as a result of consumer complaints that the share swap deal and collaboration between the airlines could lead to higher airfares for consumers. MyCC's commencement of investigation sends a clear signal to businesses in Malaysia that it intends to actively enforce Malaysia's new competition laws. To provide businesses with a better understanding of how it intends to implement and enforce competition law in Malaysia, MyCC commenced consultation on a set of three guidelines in November 2011, namely the:

(1) Guidelines on Chapter 1 (Anti-competitive Agreements);

(2) Guidelines on Market Definition; and

(3) Guidelines on Complaints Procedures. Please click here for Drew and Napier LLC’s Legal Update dated 16 December 2011 for more details on the content of MyCC’s draft guidelines. The

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consultation on the guidelines closed on 30 December 2011.

INDUSTRY NEWS

ANTI-COMPETITIVE AGREEMENTS

Europe investigates patent settlement arrangements again

In October 2011, the EC announced that it has initiated a formal investigation into allegedly anti-competitive patent settlement arrangements between Johnson & Johnson (“J&J ”) and Swiss-based firm Novartis. The investigation will focus on whether arrangements were made between the two drug companies that hindered the entry of a generic version of the painkiller Fentanyl into the Dutch market. The arrangements could be a potential breach of Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) that prohibits, among other things, agreements that have as their object or effect the prevention or restriction of competition in the European Union (“EU” ). The pharmaceutical industry has already been the subject of scrutiny by the EC in recent years. In 2008-2009, the EC embarked on an inquiry into whether practices in the sector had the effect of delaying entry of generic potential drugs, resulting in significant consumer harm. One example of such practice would be patent infringement proceedings being settled between patent-holding and generic drug firms, in which the entry of the non-branded version of a drug is delayed, in return for a payment by the patent-holder. This has the adverse effect of depriving consumers and governments of cheaper medicines. The EC has taken a hard line in enforcing competition laws in the pharmaceutical sector due to the importance of keeping drug prices low to end-users. The EC took the position that “[p]harmaceutical companies are already rewarded for their innovation efforts by the patents they are granted. Paying a competitor to stay out of the market is a restriction of competition that the Commission will not tolerate”.

In the United States (“US”), agreements between patent holders and generic entrants to delay entry of cheaper generic drugs, referred to as “pay-for-delay” settlements, have also been the subject of aggressive enforcement action in recent years. In Singapore: A “pay-for-delay” settlement agreement may be considered to “limit or control production, markets, technical development or investment” and therefore, run foul of the Section 34 prohibition, unless it gives rise to net economic benefit.

GlaxoSmithKline fined by Korean Fair Trade Commission for anti-competitive conduct The Korean Fair Trade Commission (“KFTC”), which regulates competition in South Korea, has fined GlaxoSmithKline (“GSK”) KRW 3.04 bn (approximately SGD 3.44 million) and Seoul-based Dong-A Pharmaceutical (“Dong-A ”) KRW 2.12 bn (approximately SGD 2.40 million) for collusion. KFTC found that the companies had colluded to prevent a cheaper generic version of GSK’s Zofran, from being sold in the Korean market. Zofran is an anti-nausea drug developed by GSK, widely used for the suppression of nausea after chemotherapy treatment. According to news reports, GSK and Dong-A came to a settlement agreement (“contract ”) following GSK’s lawsuit against Dong-A for patent infringement of the drug in 1999. The contract reportedly gave Dong-A the exclusive rights to sell Zofran and the anti-viral drug Valtrex. Under the contract, Dong-A would receive 25% of Zofran sales for two years and 7% of sales from the third year, even if Dong only reached 80% of its sales target; and KRW 100 m (approximately SGD 113,200) a year for five years for selling Valtrex, regardless of the sales volume. In return, Dong-A withdrew Ondaron, the generic version of Zofran, from the market. GSK’s patent rights expired in 2005, yet according to KFTC, the contract was renewed regularly, even after GSK’s rights had expired. This amounted to “an unfair action to block development and sale of generics for which the original drug maker does not own the patent rights.”

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KFTC stated that the anti-competitive conduct prevented cheaper medicine from becoming available on the market, resulting in high prices for patients and adversely impacting on the Korean government’s health insurance budget. GSK is likely to appeal the decision, arguing that it was exercising its legitimate patent rights. In Singapore: An agreement between competitors or potential competitors to restrict the production or supply of goods will likely infringe Section 34 of the Competition Act (which prohibits anti-competitive agreements or arrangements). According to CCS’s Guidelines, such an agreement will, by its very nature, be regarded as restricting competition appreciably.

South Korea punishes LCD cartelists

As part of the crackdown on an international liquid crystal display (“LCD”) cartel, KFTC fined ten of the world’s leading flat panel makers from South Korea, Japan and Taiwan a total of KRW 194 bn (approximately SGD 215 million) for price-fixing. According to KFTC, firms including Samsung Electronics and LG Display from South Korea and AU Optronics and Chimei Innolux from Taiwan colluded from 2001 to 2006 to control prices and reduce output of LCD flat screens and to exchange sensitive commercial information, including price quotations, shipments for each customer, yield rates and operating ratios. The LCD companies agreed on, amongst other things, minimum selling prices of large-sized LCD panels, price increases/decreases, the timing of price hikes, and whether rebates should be offered. When there was a glut of LCD panels on the market, the companies conspired to cut supplies. The companies also colluded to use the media to artificially boost prices of LCD panels by supplying false information on the supply and demand of the LCD panels. The companies monitored each other’s compliance with the cartel agreement and applied sanctions on companies which deviated from the same. Staff from the companies took deliberate steps to conceal the conspiracy by keeping their bilateral and multilateral meetings, which took place in countries including Korea and Taiwan at least once a month, secret.

The fines are the latest in a string of penalties against LCD companies around the world. Just late last year, the EC also fined six LCD companies a total of EUR 649 million (approximately SGD 1 bn) for operating a cartel. Samsung Electronics received full immunity from fines under the EC’s leniency programme, as it was the first to provide information about the cartel.

Recently, KFTC has stepped up enforcement against international cartels, investigating most of the international cartels that are also being investigated by other major competition authorities. In Singapore: The Section 34 Prohibition of the Competition Act prohibits cartel activities which have an adverse impact on competition within any market in Singapore. Cartel activities which take place outside of Singapore may similarly be caught if they have an adverse impact on competition in Singapore. As such, it is immaterial whether cartel meetings are held locally or overseas; if the cartel affects any market in Singapore, the parties to the cartel will similarly be in breach of the Competition Act.

Australian construction companies fined for bid-rigging Three Queensland construction companies, JM Kelly, TF Woollam & Son, and Carmichael Builders were fined a total of more than AUD 1.1 m (approximately SGD 1.4 m) by the Federal Court in Brisbane for colluding on tender prices submitted. The Federal Court also handed down penalties on individuals involved in the bid-rigging. According to the Australian Competition and Consumer Commission, the three companies were involved in cover-pricing in relation to tenders for government construction projects. Cover pricing is a form of bid rigging, where potential suppliers in a tender process collude to discuss the prices of their bids prior to the actual bidding process to ensure a winner. Cover pricing is prevalent in the construction industry. It is typically used in situations where a construction company may not have the time, resources or inclination to prepare an accurate tender but still wants to be seen as tendering for

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the project. The presiding judge condemned such behaviour as it sends false signals about prices for the required week and creates an illusion as to the range of prices and the existence of a particular level of competition. In Singapore: Bid-rigging is prohibited under Section 34 of the Competition Act. CCS, in its first infringement decision, fined six pest control companies for similar “cover pricing” conduct whereby these companies colluded to submit tenders/quotations for termite treatment projects.

OFT issues statement of objections to British Airways and Virgin Atlantic In November 2011, OFT issued a statement of objections to British Airways (“BA”) and Virgin Atlantic, as part of its civil law investigation into the airlines’ alleged fixing of fuel surcharges for long-haul passenger flights to and from the UK between August 2004 and January 2006. The investigation started in 2006 but was suspended in 2009 when OFT decided to take criminal action against specific BA executives. As the “whistle-blower”, Virgin Atlantic was granted conditional immunity under OFT’s leniency policy. The airline’s immunity was reviewed following OFT's decision in May 2010 to discontinue criminal proceedings against four current and former BA executives for the cartel offence under the UK Enterprise Act 2002. According to OFT’s press release on the matter, OFT’s further investigations found that Virgin Atlantic’s conduct “did not amount to non co-operation such as to warrant the revocation of its immunity”. In 2007, before the civil law investigation was suspended, BA had admitted collusion over prices of fuel surcharges and agreed to pay a penalty of GBP 121.5 m (approximately SGD 245 m) as settlement upon the receipt of OFT’s final decision. BA had also accepted OFT's finding that on at least six occasions the two companies discussed and/or informed each other about proposed changes to the level of the surcharges, rather than set levels independently.

It remains to be seen whether BA will challenge the quantum of financial penalty in light of the discontinuance of the criminal trial in 2010. In Singapore: CCS has stressed that any agreement involving price-fixing will always have an appreciable adverse effect on competition. The Act provides that CCS may impose a financial penalty on any infringing party provided that the infringement has been intentionally or negligently committed. The maximum amount of penalty is 10% of the turnover of the business of the undertaking in Singapore for each year of infringement, up to a maximum of three years. The Competition Act does not provide for criminal action against any anti-competitive activities.

EC raids automobile parts makers On 8 November 2011, the EC confirmed that it conducted raids on the offices of car part makers in several EU member states. This is the second raid conducted by the EC on automobile parts makers in six months. Earlier, in June 2011, the EC carried out unannounced inspections at the premises of companies that supply car seatbelts, airbags and steering wheels for suspected violations of Article 101 of the TFEU, which prohibits cartels and restrictive business practices. The latest raids were carried out on makers of bearings for automotive and industrial use. The current investigations were conducted amid concerns over whether producers of automotive and industrial bearings have violated Article 101 of the TFEU as well. Although the EC did not reveal the names of the companies investigated, according to news reports, ball-bearing producers SKF, Schaeffler Group, Jtekt and Nachi-Fujikoshi have confirmed that commission officials conducted unannounced inspections at their offices. The United States Department of Justice (“DoJ ”) and the Japan Fair Trade Commission (“JFTC”) have opened similar investigations into other automobile part makers in the previous six months. Investigations in one jurisdiction can

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indicate that the companies involved may be infringing competition laws in other jurisdictions and many competition authorities have in place co-operation agreements under which they will notify each other of potential violations of competition laws and, in some cases, conduct parallel dawn raids. In Singapore: CCS has wide investigative powers and can carry out dawn raids on companies which are suspected to have infringed competition laws in Singapore. CCS has the power to enter into any premises to carry out inspections, either with or without a warrant. Where no warrant is held, CCS officers are not empowered to force entry. Additionally, without a warrant, although CCS may require the production of specified documents, it does not have the power to search rooms, cabinets, desks or computer systems. Where CCS has obtained a warrant, it may use reasonable force to enter and search any premises stated in the warrant.

German court publishes passing-on defence judgment On 28 June 2011, the German Federal Court of Justice, Der Bundesgerichtshof (“BGH”), confirmed that indirect purchasers could sue a cartel for damages in follow-on actions. Additionally, it also held that a “passing-on defence” was available to cartel members in civil claims following an infringement of Germany’s competition laws. In 2001, ten carbonless paper manufacturers were fined EUR 313 m (approximately SGD 518 m) by the EC for taking part in price-fixing and market-sharing agreements. Kreissparkasse Steinfurt (“Kreissparkasse ”), a savings bank, claimed against Papierfabrik August Koehler AG (“Papierfabrik ”), one of the printing firms which had been fined by the EC, for damages arising from inflated prices of paper as a result of Paperfabrik’s participation in the cartel. Kreissparkasse had gained control of an insolvent printing firm which had purchased carbonless paper from a full subsidiary of Papierfabrik, and pursued its claim under assignment. In its judgment, BGH held that:

(a) indirect purchasers, who purchase products at an inflated price from a company which has itself been the victim of a price-fixing cartel, are entitled to bring damages claims against members of the cartel; and

(b) cartel members may invoke the "passing- on defence” to oppose actions for damages, if they can demonstrate that a claimant purchaser customer has not suffered damage because it was able to pass on the price increase to its own customers. Based on the judgment, indirect customers that suffer damages when inflated prices are passed on to them by the direct customers now have the right to be compensated by the members of the cartel. Although BGH confirmed the availability of the “passing-on defence”, it also set a high bar for its successful application, with a significant burden of proof placed on parties who wish to use it. To prove that “passing-on” occurred, the cartelist must show that direct customers passed on the higher price to indirect customers, using conditions in the secondary market, including price elasticity and pricing trends as evidence. The cartelist must also prove that the higher prices were not triggered by other factors such as lower demand. In addition, the cartelist must show how mark-ups that the direct purchaser added to the product affected the pricing. In Singapore: This issue has not been tested as yet, although persons who have suffered indirect loss arising from the anti-competitive conduct of a company would likely be excluded from claiming damages under the Singapore Competition Act by way of private action.

E-book pricing arrangements under investigation On 6 December 2011, the EC commenced formal antitrust proceedings against five international publishers: Hachette Livre, Harper Collins, Simon & Schuster, Penguin and Verlagsgruppe Georg von Holzbrinck, in an alleged case of illegal restriction of

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competition in the sale of e-books in the European Economic Area, in conjunction with technology giant, Apple.

The EC is examining the publishers’ agency agreements under which publishers decide the prices at which retailers sell their e-books. In 2010, Apple announced that it would adopt an ‘agency model’ for pricing e-books sold through its iBookstore. This was a departure from the traditional ‘wholesale model’ where publishers sell books to retailers at a real retail price (“RRP”) less a discount, and the retailer determines the final selling price to the consumer. Under the agency model, it is the publishers, rather than the retailers, who set the prices at which the books (or e-books) are sold to the consumer. Under Apple’s agency model, publishers keep 70% of the sale price, while Apple keeps the remaining 30%. In response to Apple’s adoption of the ‘agency model’, plaintiffs in the US had commenced a class action against Apple and the five publishers, alleging that they had conspired to illegally fix the prices of e-books. In February 2011, OFT had made investigations in relation to several publishers’ arrangements with retailers of e-books. OFT has since closed its investigations. In March 2011, the EC raided the offices of some e-book publishers including French publishers Hachette Livre, Gallimard, Flammarion and La Martinière. The day following the EC’s announcement of its commencement of proceedings against the five publishers, the DoJ confirmed it was conducting a similar investigation into the e-book industry. The Netherlands' Competition Authority is also looking into the pricing of e-books, though it has recently accepted commitments from publishers to leave e-book retailers free to compete on the prices they offer consumers. In Singapore: Collective agreements between competitors in relation to price are prohibited under Section 34 of the Competition Act. Agreements which are entered into outside of Singapore can also fall foul of the Act if they have an anti-competitive effect on a Singapore market for goods and services.

KFTC fines manufacturers of cathode ray tube glass KFTC has fined four manufacturers of cathode ray tube glass for their participation in an international cartel to fix prices and control output.

Cathode ray tube glass is a component of cathode ray tubes used in television sets and computer screens. The cartel involved South Korean manufacturers Samsung Corning Precision Materials Co. and Hankuk Electric Glass Co., Japanese manufacturer Nippon Electric Glass Co., and its Malaysian subsidiary Nippon Electric Glass (Malaysia) Sdn. Bhd. According to KFTC, the manufacturers met at least 35 times from March 1999 to January 2007 to (i) agree on price cuts and increases; (ii) allocate major customers; (iii) limit production; and (iv) exchange confidential business information, such as information on sales production and market shares, to fulfil and monitor the implementation of the cartel. These meetings were surreptitiously conducted in various countries including South Korea, Japan and Singapore. KFTC imposed on the four manufacturers a total fine of KRW 54.5bn (approximately SGD 61.2 m). Samsung Corning received the highest fine of KRW 32.5 bn (approximately SGD 36.5 million). Fines for the other companies were as follows:

� Hankuk Electric Glass - KRW 18.3 bn (approximately SGD 20.5 m);

� Nippon Electric Glass - KRW 3.7 bn (approximately SGD 4.2 m); and

� Nippon Electric Glass (Malaysia) -KRW 37 m (approximately SGD 41,532).

In calculating the quantum of the fines, KFTC took into account the affected sales of the companies involved, the nature of the infringement, and the current status of the industry. This case was triggered by a leniency application, and KFTC embarked on a joint investigation in March 2009 with other competition authorities around the world, including the EC.

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In Singapore: When assessing the appropriate quantum of financial penalty to be imposed, CCS will consider the following factors: the seriousness of the infringement; the turnover of the cartel participant’s business in Singapore for the relevant product and geographic markets affected; the duration of the infringement; other relevant factors such as deterrence; and any further aggravating or mitigating factors based on the conduct of the cartel participant.

Germany fines Reckitt Benckiser

On 24 November 2011, Germany’s Federal Cartel Office (“FCO”) fined consumer goods producer Reckitt Benckiser Deutschland GmbH (“RB”) and its employees a total of EUR 24 m (approximately SGD 39.7 m) in two proceedings. In the first proceeding, FCO found that RB and its German competitor Henkel Wasch- und Reinigungsmittel GmbH (“Henkel ”) had agreed on and co-ordinated price increases for dishwasher detergents and other products. FCO also considered that the agreement between RB and Henkel to decrease packaging sizes of products without changing their prices constituted agreements for indirect price increases. RB had its fine reduced because of its co-operation with the authorities. Henkel, which brought the cartel to the attention of FCO, escaped a fine under Germany’s leniency policy. In the second proceeding, RB, with other manufacturers of drugstore products, was found to have illegally exchanged information about upcoming price increases, new demand for rebates and the negotiations with retailers. This proceeding was triggered in 2006 by Colgate Palmolive GmbH’s leniency application. The information was exchanged at meetings of one of the trademark association’s working groups, and a proceeding has been initiated against the trademark association for supporting the information exchange. RB’s fines were reduced because it co-operated with FCO in the investigation.

In 2010, RB was fined EUR 1.1 m (approximately SGD 1.82 m) by the Czech Office for the Protection of Competition for cartel activity and price-fixing with competitors Henkel and Procter & Gamble. In the same year, OFT fined RB GBP10.2 m for abusing its dominance in relation to its products, Gaviscon Original Liquid and Gaviscon Advance Liquid. In 2005, RB withdrew the original Gaviscon from UK’s National Health Service and patients were transferred to Gaviscon Advance Liquid. This happened after Gaviscon's patent had expired, but before it had been assigned a generic name. Prescriptions were therefore issued for Gaviscon Advance, rather than pharmacists being able to choose a cheaper generic alternative. The fine was the largest that OFT had imposed under its Chapter II prohibition at the time. Following the decision, UK’s National Health Service has also commenced legal action against RB.

Germany fines hydrant companies for price-fixing FCO had fined six manufacturers and distributors of hydrants and other water pipe fittings, as well as four of their employees, for participating in a cartel to fix prices. Together, the companies have a combined market share of 70% in the German hydrants industry. FCO embarked on its investigation after it obtained a lead following a separate investigation of a pipe manufacturing cartel. Hydrants are fittings for drawing water from a water pipeline system, a key element in fire-fighting sprinkler systems. The companies operated by distributing their products in the retail sector through civil engineering retailers, and selling directly to end consumers such as waterworks, water boards, private water suppliers and water system engineers. According to FCO, the employees of the hydrant companies met regularly to exchange sensitive commercial information and collaboratively agreed on (i) list price increases; (ii) general discounts; (iii) individual maximum discounts; and (iv) conditions for specific customers. Directors and sales managers met regularly to exchange competition-relevant information.

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A total fine approximating EUR 15.5 m (approximately SGD 26.3 m) was imposed on all the parties involved. FCO calculated the quantum based on the turnover achieved from the price agreement, the severity and duration of the offence, and the economic viability of each individual company. Several parties had their fines reduced through the leniency programme.

In Singapore: CCS has the power to grant total immunity to a participant in a cartel if it is the first to come forward before an investigation has commenced, provided that CCS did not already have sufficient information to establish the existence of the alleged cartel activity. Even after investigations have commenced, a cartel participant may still be granted a reduction of up to 100% of the financial penalties if it is the first to come forward with evidence of the cartel activity to assist CCS’s investigations. Subsequent companies who co-operate may be granted a reduction of up to 50% of the fine. In determining the reduction in financial penalties, CCS will consider (i) the stage at which the company comes forward; (ii) the evidence already in CCS’s possession; and (iii) the quality of information provided by the company. In order to qualify for leniency, the company must not have initiated the cartel or coerced other companies to participate, and must render full co-operation to CCS.

ABUSE OF DOMINANCE

Microsoft sued by MiniFrame for abuse of dominance MiniFrame Ltd (“MiniFrame ”), a small Israeli technology company, filed a lawsuit on 19 October 2011 in a New York Federal court against software giant Microsoft Corp (“Microsoft ”) for alleged abuses of dominance. SoftXpand, designed by MiniFrame, is a software which allows multiple users from various locations access to the same personal computer operating system. SoftXpand circumvents the use of a server to host a multi-user system like Microsoft’s Windows

Client Operating System and avoids the need to purchase a more costly server operating system such as the one Microsoft offers. MiniFrame alleged that Microsoft has abused its dominant market position by unfairly changing its licensing agreements to include restrictions that prevent multiple users from sharing a single operating system, and that Microsoft changed the design of its software to prevent users from installing SoftXpand. MiniFrame also claimed that Microsoft used its monopoly in the client operating-system market to dissuade potential customers such as Hewlett-Packard and JP Morgan Chase & Co. from accepting MiniFrame’s bids for contracts, costing MiniFrame millions of dollars loss in sales. In essence, MiniFrame argued that through these anti-competitive strategies, Microsoft is abusing its dominance over the multi-user market to force software like SoftXpand out. Microsoft’s actions are also preventing the cheaper software from being available to consumers, thus forcing them to purchase Microsoft’s more expensive server operating system. In Singapore: In assessing cases of alleged abuse of dominance, CCS will consider if the dominant undertaking is able to objectively justify its conduct. The dominant undertaking will have to show that it has behaved in a proportionate manner in defending its legitimate commercial interest (e.g. the restriction on installation of third party software is to protect the integrity of its own product), and that it did not take more restrictive measures than are necessary to do so.

South African media company charged over predatory pricing Media 24, South Africa’s leading publishing agency, has been charged with predatory pricing by adopting below-cost pricing in order to drive a competitor out of the market. During the period from January 2004 until February 2009, Media 24 operated two community newspapers, Vista and Goudveld Forum in the Goldfields area.

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According to the South African Competition Commission (“Commission ”), Media 24 engaged in exclusionary pricing conduct by pricing Goudveld Forum’s advertising rates below cost to “exclude competitors and to bolster Media 24’s reputation as an aggressive competitor in order to reduce the likelihood of future entry into the community newspaper market”. The Commission further concluded that Goudveld Forum was used as a “fighting brand to prevent competition with Media 24’s larger and more lucrative title, Vista”. The investigation into Media 24’s alleged abuse of its dominance followed complaints from competitor Berkina Twinting (Pty) Ltd, a newspaper publisher in South Africa’s Free State region operating as Gold-Net News. The Commission’s investigations found that Goudveld Forum budgeted for and operated at a loss over the period of the alleged abuse and was closed down in January 2010 after Gold-Net News had been driven out of the market. In Singapore: Dominant firms are prohibited by the Singapore Competition Act from leveraging on their dominance to engage in abusive/predatory practices such as deliberately pricing products or services below cost to drive out smaller players from the market. In addition, CCS has indicated that the feasibility of recouping losses by the dominant firm may be considered in determining predation, rather than regarded as a condition to satisfy before predation could be found.

Indian real estate developer DLF appeals against abuse of dominance finding Indian real estate developer DLF Ltd (“DLF”) has appealed against a finding by India’s Competition Commission (“CCI”) that DLF abused its dominant market position. DLF was fined INR 6.3 bn (approximately SGD 158 m), the largest fine imposed by CCI, which amounts to 7% of DLF’s three years’ average annual turnover. In view of the appeal by DLF, India’s Competition Appellate Tribunal (“Compat ”) has stayed the fine on condition that if DLF is unsuccessful in its

appeal, DLF will have to pay the full fine along with interest at the rate of 9% per annum. The case stems from complaints by the Belaire Owner’s Association (“Belaire Association ”), the association formed by the apartment allottees of the housing complex developed by DLF, the Belaire. The Belaire Association had alleged that DLF abused its dominant market position in four ways: (a) by not obtaining consent from the allottees when DLF decided to raise the number of floors from 19 to 29; (b) by not informing the allottees of the date of delivery following the delay of the project; (c) by unilaterally charging allottees for the modifications in apartment size, and (d) by changing the apartment without the consent of the allottees. CCI was of the view that DLF had “imposed highly arbitrary, unfair and unreasonable conditions” on the allottees, a vulnerable section of consumers who have little ability to act or organise against such abuse. Additionally, recognising this abuse of dominance involved the basic necessity of housing, CCI adopted a deterrent approach in imposing the record fine. On 9 November 2011, Compat heard a petition by DLF and granted a stay on the fine imposed. The appeal is scheduled for hearing in the second week of February 2012. For further information on CCI’s decision in this case, please click here to refer to Drew & Napier’s previous Competition Law Quarterly Update.

China investigates state-owned landline operators China’s two biggest landline operators, China Telecom and China Unicom, are under antitrust investigation by the country’s National Development and Reform Commission (“NDRC”) for alleged monopolistic practices in the broadband internet market. This latest probe is significant as it is the first public antitrust investigation into the activities of a state-owned enterprise in China and serves as a clear indication that these state-owned enterprises will not be exempted from enforcement by the Chinese authorities should they engage in anti-competitive practices.

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According to reports, both China Telecom and China Unicom, which are, amongst other things, internet service providers (“ISPs”), together occupy more than two-thirds of the internet access market share. China Telecom and China Unicom also control key local loop infrastructure, which other ISPs must connect to in order to provide internet access. With this stranglehold over its ISP competitors, the two telecoms giants allegedly charged some ISPs higher local loop infrastructure On 2 December 2011, China Telecom and China Unicom each issued announcements to the Hong Kong Stock Exchange stating that they had applied to NDRC for the suspension of the antitrust investigation into their internet access pricing practices. According to the China Telecom announcement, it has proposed remedies to address NDRC’s concerns, by, amongst other things, enhancing the quality of interconnection and standardising the tariff management of internet-dedicated leased line access with respect to the local loop infrastructure. According to Article 45 of the Chinese Anti-Monopoly Law (“AML”), in the process of investigating monopolistic conduct, the anti-monopoly enforcement authority “may suspend the investigation if the subject undertakings promise to eliminate the effects of the conduct through the use of concrete measures within the period prescribed by the anti-monopoly enforcement authority”. The authority will supervise the implementation of the commitments and upon their fulfilment, the authority may make a decision to terminate the investigation. Where, however, (a) the undertakings fail to implement the commitments; (b) the facts on which the decision to suspend investigations were based have undergone significant changes; or (c) the information provided by the undertakings on which the suspension decision was premised were incomplete or inaccurate, the authority will resume its investigations into the matter. If monopolistic conduct is established, China Telecom and China Unicom could be fined up to a maximum of 10% of the companies’ business turnover of the preceding year in accordance with the AML. Economics 101: A “margin squeeze” is an exclusionary abuse where a dominant vertically-integrated company may

charge inflated prices for inputs sold to a downstream rival such that an equally efficient rival cannot survive or effectively compete in that downstream market. Margin-squeezing by a dominant undertaking is prohibited under Section 47 of the Singapore Competition Act. In assessing whether a dominant vertically-integrated undertaking has engaged in a margin squeeze, CCS will generally determine whether an efficient downstream competitor would earn (at least) a normal profit when paying the input prices set by the vertically-integrated undertaking. The test here is whether the integrated undertaking’s downstream business would make (at least) a normal profit if it paid the same input price that it charged its competitors, given its revenues at the time of the alleged margin squeeze.

China pricing authority issues large antitrust fines on two pharmaceutical Companies Two Chinese pharmaceutical companies, Weifang Shuntong Pharmaceuticals and Weifang Huaxin Pharmaceuticals, were fined a total of RMB 7 m (approximately SGD 1.4 m) by NDRC in November 2011 for abusing their dominant position in the pharmaceutical industry, particularly in the market for blood pressure drugs. According to a press release issued by NDRC, the companies had engaged in "monopoly pricing" (i.e. excessive pricing) for the popular blood pressure drug, Reserpine, by raising prices of the drug by almost 700%. It was reported that the companies had earlier secured a collective dominant position in the market for the supply of Reserpine after they had entered into exclusive agreements with manufacturers of raw material pro-methazine hydrochloride used to manufacture Reserpine. According to reports, these are the first significant fines issued by NDRC under the AML which came into force on 1 August 2008. In May 2011, NDRC fined Unilever RMB 2 m (approximately SGD 400,000) for making advanced announcements on intended price increases in breach of the AML. For more information on the Unilever case, please click here to access our previous update.

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In Singapore: Exploitative practices such as excessive pricing are not statutorily provided as illustrative examples of an abuse of a dominant position. Further to this, exploitative conduct is not referred to in the Section 47 Guidelines issued by CCS, which set out various forms of conduct that might potentially be considered to be abusive. That said, it remains untested whether CCS will investigate and penalise undertakings which have been found to have abused their dominant position by engaging in exploitative practices.

Swedish telecoms giant fined for abusing dominance On 9 December 2011, the Stockholm City Court fined Swedish telecoms company TeliaSonera SEK 144 m (approximately SGD 27 m) for abusing its dominance. The finding centred on an allegation of “margin squeezing”, whereby TeliaSonera charged its competitors more than it charged its own private customers for access to its telecoms infrastructure. In determining the fine, it was found that the margin squeeze conduct had had significant foreclosure effects on competitors in the broadband access market. The case had its origin in 2004, when the Swedish Competition Authority filed a lawsuit against TeliaSonera alleging that it had charged unfairly high prices for wholesale access to its network, which was squeezing the profit margins of its broadband access competitors. The case then found its way to the European Court of Justice, and back to the Swedish City Court, ultimately culminating in the imposition of the financial penalty. Debate on the case is likely to continue, with Tele 2 (TeliaSonera’s competitor) also suing TeliaSonera, seeking SEK 873 m (approximately SGD 163 m) in damages. In Singapore: Competition law issues in the telecommunications industry in Singapore are handled by the Infocomm Development Authority of Singapore (“IDA”), in accordance with the Telecom

Competition Code. In this regard, the sector is carved out from the general authority of CCS.

The Telecom Competition Code contains a provision (clause 8.2.1.2) which prohibits a dominant company from engaging in price squeezes.

Thompson Reuters commits to change its conduct in Europe Thomson Reuters has proposed commitments to the EC to address concerns that its licensing practices may be in breach of EU antitrust rules. On 30 October 2009, the EC initiated investigations against Thomson Reuters over a possible abuse of its dominant position in the market for consolidated real-time datafeeds. The company had prohibited customers from using its Reuters Instrument Codes (“RICs”) to retrieve and compare data from rival data suppliers, creating substantial barriers for customers wishing to switch to alternative data providers. RICs are codes that identify securities and their trading locations. They are used to retrieve information from Thomson Reuters’ datafeeds for up-to-date information on stock prices. Customers who use RICs widely in their internal applications would have to remove the existing RICs and replace them with alternative codes. This is technically challenging and costly, preventing customers from switching to Thomson Reuters’ competitors. On 14 December 2011, Thomson Reuters offered to extend the usage rights of its RICs, providing customers with information to cross-reference RICs with the codes of other providers as well as licensing its RICs for the purpose of switching. Licences would be available to interested customers for a period of five years, with a monthly fee based on the number of RICs to be used. The EC has sought public comments from third parties on the commitments. In Singapore: CCS has so far only issued one infringement decision relating to an abuse of dominance. The decision relates to ticketing agent SISTIC’s exclusive agreements. It is noted that the Competition Act does not provide for CCS to

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accept commitments in lieu of investigation for potential Section 34 or Section 47 infringements. It remains to be seen whether CCS would do so as a part of its investigation process.

Postal company fined for abuse of dominance In December 2011, Italy’s Antitrust Authority (“Authority ”) had fined postal company, Poste Italiane (“Poste ”), for abusing its dominant position

Poste was fined EUR 39.4 m (approximately SGD 65.2 m) for taking advantage of its control over the country’s postal delivery network to exclude rivals and diminish their ability to compete in the market for guaranteed deliveries and value-added services. Following investigations, the Authority found that Poste had adopted predatory pricing strategies and offered special service discounts, which put their postal services below cost to poach its competitors’ customers. In 2008, the company had offered such anti-competitive pricing policies to win tenders from the Municipality of Milan and from Equitalia, a financial services company. This case was triggered by a complaint made by Poste’s competitor TNT, which claimed that Poste had applied predatory prices to exclude them from the market. Further, the Authority found that Poste would return any mail handled by TNT in their network back to the sender, who would be asked to pay full price postage to get hold of the original mail, or risk having it destroyed after a 10-day period. The Authority ordered an immediate halt to Poste’s conduct and gave the company three months to submit a report on the measures it would take to remedy its effects. In Singapore: Section 47 of the Competition Act prohibits companies from abusing its dominant position by employing predatory behaviour towards its competitors. Such predatory behaviour includes pricing below average variable cost, or marginal cost, in order to foreclose competition from rivals.

Proceedings against car-refrigerant manufacturers

The EC has initiated antitrust proceedings against US chemical company DuPont and conglomerate Honeywell over their agreements for the development of a new refrigerant for air-conditioning systems in cars. An investigation was launched against DuPont and Honeywell to determine if the joint development, licensing and production arrangements between the two companies are anti-competitive. In addition, the EC is also investigating if Honeywell has abused its dominant position in the new car refrigerants market. Honeywell is alleged to have engaged in deceptive conduct in the evaluation of the new refrigerant by failing to disclose its patents and patent applications, and then failing to grant licences on fair and reasonable terms. The investigation was prompted by a complaint filed by French chemical company Arkema in April 2011. The EC’s primary concern appears to be that patent regulations are being used as a tool for anti-competitively foreclosing competition within a market. In Singapore: CCS takes a three-step approach to determine if licensing agreements entered into have an anti-competitive effect. First, CCS will distinguish if the agreement is made between competing or non-competing undertakings, as the latter has significantly smaller risks to competition. Second, CCS will consider (1) if the agreement restricts actual or potential competition that would have existed in its absence; and (2) the impact on inter-technology and intra-technology competition. Third, CCS will ascertain whether an agreement that is deemed anti-competitive would have a net economic benefit. If so, the agreement will be excluded from the Competition Act and no prior decision by CCS to its anti-competitive effect will be required.

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MERGER REGULATIONS OFT approves Amazon acquisition of The Book Depository OFT cleared the proposed acquisition by Amazon.com, Inc. (“Amazon ”), the UK’s largest online book retailer, of The Book Depository International Limited (“The Book Depository ”). Amazon’s current market share is believed to be around 70% after its acquisition of aebooks.com, another book site in 2008. The Book Depository is another online book retailer with sales in the UK and in a number of international markets. The Book Depository sells books through its own website and through the Amazon Marketplace. Amidst calls to reconsider its decision, OFT maintained that the small increment to Amazon’s market position through its acquisition does not raise significant competition issues, with The Book Depository only accounting for between 2% to 4% of the online market for physical books, and that The Book Depository’s growth has been mainly in overseas rather than local (UK) markets. OFT also believed that the UK book market would still have a significant number of booksellers both online and offline post-acquisition, and that existing levels of competition would still be present even after the merger. As such, OFT decided not to refer the case to the Competition Commission for further investigation. In Singapore: In assessing whether a merger substantially lessens competition, CCS will compare the effect the merger will have on the market (the “factual ”) and the competitive situation in the market without the merger; or, in the case of a merger which has already taken place, what the competitive situation would have been without the merger (the “counterfactual ”). CCS will take into consideration the imminent exit of a “failing firm” in the counterfactual, if the firm is in such dire situation that the firm and its assets will exit the market in the near future without the merger.

Liberty Global offers commitments in three-to-two merger FCO has given conditional clearance to the proposed acquisition by cable company, Liberty Global (“Liberty ”), of German cable company Kabel Baden-Wurttemberg (“Kabel ”) from Swedish private equity fund EQT. Liberty operates in Germany through its subsidiary Unitymedia. FCO was concerned that the proposed acquisition could increase Liberty’s market share in the nationwide licensing market, further strengthening its market dominance. Television channels in Germany depend on three companies, Kabel, Unitymedia, and Kabel Deutschland GmbH (“KDG”), to deliver their signal strength over their cable networks to housing blocks with a large number of apartments, primarily owned by housing associations. As a consequence of the planned merger, the oligopoly would narrow from three to two cable companies and FCO expressed its concerns that it is highly unlikely that the remaining companies would compete against each other, post-merger. Further, the existence of long-term contracts with terms of 10 or 15 years between the cable companies and the housing owners, as well as building exclusivity and legal uncertainty about network ownership after expiry of the contract, would pose considerable barriers to market entry for other competitors such as small cable network operators or telecommunications providers. In a bid to quell competition concerns, Liberty had put forward several rounds of commitments to FCO. Unitymedia would distribute signals for German free-to-air channels unencrypted so as to allow smaller cable TV companies and telecom providers access to these signals. The company has also agreed to forgo certain exclusivity clauses and ownership claims or rights to dismantle household cable connections. Housing associations in the network areas of Unitymedia and Kabel will be granted special contract termination rights. This will allow the households an earlier opportunity to look for a less expensive network operator for their housing units. The special termination right applies to contracts for retail TV services with more than 800 housing units and remaining contract terms of more than three years, thus covering a large amount of the particularly attractive retail TV service contracts. According to FCO, the merger could only be cleared with far-reaching commitments by the companies

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involved, such that the negative effects of the merger are compensated. In Singapore: Where competition concerns arise, merger parties may offer commitments to CCS at any stage of the merger review to alleviate CCS’s concerns. CCS has stated in its merger guidelines that it will consider both behavioural and structural remedies, but will only accept commitments that are sufficient to address clearly the identified adverse effects to competition and are proportionate to them.

EMI to be split and sold

It was announced in November 2011 that British music company EMI is to be split and sold in an acquisition that would shake the music recording industry down from four to three major players. The deal, worth GBP 2.5 bn (approximately SGD 5 bn), will involve EMI’s recorded music division being sold to Universal Music Group (“Universal Music ”), whilst EMI’s music publishing division would be sold to a group of investors led by Sony Music Entertainment (“Sony”). If approved by the relevant competition authorities, the sale would increase Universal Music’s presence in recorded music, raising its market share from an estimate 30% to 39%. Similarly, Sony would become the largest player in the publishing segment. Concerns were raised as to whether the transactions would give Universal Music and Sony undue negotiation power over artistes and distributors of music. However, a number of commentators have speculated that the rise of online distributors such as Amazon and iTunes could counter their market power and allay any competition concerns that might have otherwise arisen through the deal. The transactions are expected to be reviewed by competition authorities in Europe, the US, Japan and Australia. In Singapore: The EMI deal may be subject to the jurisdiction of CCS if there would likely be a competitive effect on a Singapore market as a result of the deal. The

significance of any such effect would likely influence whether the deal is notified to CCS for its consideration under the merger notification regime, albeit such notification in Singapore is not mandatory.

China approves GE/Shenhua joint venture with conditions

On 10 November 2011, the Chinese Ministry of Commerce (“MOFCOM”) granted conditional clearance to the General Electric (“GE”)/Shenhua joint venture under Chinese merger control rules, confirming that joint ventures can be subject to the Chinese merger control framework. The joint venture, which was announced by GE in a press release on 18 January 2011, “would sell industrial coal gasification technology licenses, … advocate for and develop integrated gasification combined cycle (“IGCC”) facilities and conduct research and development to improve cost and performance of commercial scale gasification and IGCC solutions. This includes industrial coal gasification applications in China as well as [the pursuit of] the deployment of commercial scale IGCC plants.” According to MOFCOM’s press release on its decision, after a preliminary investigation of the notified joint venture, MOFCOM found that further examination of the joint venture was necessary and extended the review period. Under Article 25 of the AML, MOFCOM will conduct a preliminary investigation of a filed concentration to make a decision whether to implement further examination of the joint venture within 30 days of receiving the documents required. Pursuant to Article 26 of the AML, where MOFCOM decides that a further examination of the concentration is necessary, MOFCOM will decide to approve or prohibit the concentration within 90 working days from the date of its decision for implementing further examination. In the GE/Shenhua joint venture review, MOFCOM found that market concentration for the licensing of coal gasification technology is high with high entry barriers; and that with respect to coal-water slurry gasification technology, GE has the largest market share and the Shenhua group is the largest supplier of raw materials.

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To ameliorate potential competition concerns, MOFCOM cleared the joint venture on the condition that the GE/Shenhua joint venture cannot compel customers to use its gasification technology or increase the cost of using competing technologies by, amongst other means, limiting supplies of raw coal; or conditioning the supply of raw coal on customers obtaining licences for the joint venture’s technology. In Singapore: Joint ventures may be considered under Section 34 of the Competition Act (on anti-competitive agreements) or Section 54 of the Competition Act (on anti-competitive mergers), depending on the nature of the joint venture. A “full-function” joint venture, which performs on a lasting basis, all the functions of an autonomous economic entity, will be reviewed under Section 54 of the Competition Act.

Still hope for Deutsche Börse and New York Stock Exchange merger? In an attempt to gain EC approval to merge, Deutsche Börse and the New York Stock Exchange had in November 2011 offered to divest businesses where they overlap, and had offered behavioural undertakings including unprecedented third-party access to clearing services in Europe. The EC’s investigations had thrown up concerns with the deal in respect of trading and clearing markets in Europe, and particularly that the deal would remove an important competitor for derivatives trading in Europe. Offers to sell assets or divisions (structural undertakings), and offers to commit to act in a certain way (behavioural undertakings) are commonly considered by parties in the context of merger reviews when the mergers give rise to significant competition law concerns. If such undertakings genuinely address the competition law concerns at hand, and they do not impose any onerous monitoring requirements on the competition authority, they are often viewed with favourably. Indeed, competition authorities generally prefer to clear mergers subject to satisfactory conditions, rather than block them altogether. Whether the undertakings offered in

this case are sufficient to address the concerns of the EC remains to be seen. The EC has extended the deadline for its decision on the matter to 23 January 2012 in order to consider the offers. In Singapore: In the context of a merger review in Singapore, CCS has the ability to consider structural or behavioural undertakings (“commitments ”) by the parties in question. Furthermore, CCS also has the ability to grant clearance to a merger subject to compliance with directions as it might think fit to impose in the individual case. In its Decision CCS 400/004/10, involving Samworth Corporation Pte Ltd and Highway International Pte Ltd, CCS considered that a proposed commitment by the parties was ultimately not necessary. Furthermore, on two occasions, CCS has also cleared mergers on the basis of commitments made by the parties in overseas jurisdictions that would have worldwide effect and would sufficiently address its concerns.

DoJ clears Google’s purchase of Admeld

On 2 December 2011, the DoJ approved Google Inc.’s (“Google ”) USD 400 m (approximately SGD 515 m) acquisition of New York City-based AdMeld Inc. (“AdMeld ”). Google operates the largest search engine in the world and one of the world’s largest display advertising platforms, with majority of its revenue coming from advertising. AdMeld operates a major supply-side platform (“SSP”) that connects potential advertisers with web publishers looking to display advertisements on their web pages. The DoJ’s investigation focused on the potential effect of the acquisition on the display advertising industry. One “significant consideration” was that web publishers often use multiple display advertising platforms, a practice known as “multi-homing”. The DoJ considered that “multi-homing” means that web publishers are able to move business among different platforms. The DoJ stated that this “lessens the risk that the market will tip to a single dominant platform”, and also highlighted that “there have been

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recent SSP and advertising exchange entrants in the display advertising industry”. The department concluded that the acquisition was “not likely to substantially lessen competition”. The DoJ also noted Google’s significant presence in search, and considered whether the acquisition would enable Google to extend its market power in the Internet search industry to online display advertising through anti-competitive means. The DoJ found that “this particular transaction was unlikely to cause consumer harm”. In Singapore: In considering whether a merger may be expected to “significantly lessen competition in the relevant market”, CCS, like the DoJ, will take into account whether consumers can easily switch to alternative suppliers. In considering the effect of new entries, CCS will only consider actual or threatened entry into the relevant market to be a sufficient competitive constraint when three conditions are satisfied:

(a) new entry should likely occur in the event that the merger parties seek to exercise market power;

(b) any new entry should be of sufficient scope to constrain any attempt to exploit increased post-merger market power; and

(c) any such prospective new entry would have to be sufficiently timely and sustainable to provide lasting and effective post-merger competition.

China approves Nestlé’s bid for domestic sweet-maker

On 6 December 2011, MOFCOM approved Swiss food company Nestlé’s SGD 2.1 bn bid for a 60% stake in Chinese sweet and snack-maker Hsu Fu Chi International Limited. (“Hsu Fu Chi ”), which is listed on the Singapore Stock Exchange (“SGX”). Hsu Fu Chi is one of China’s largest confectionery companies, boasting a strong distribution network in first-tier cities and rural areas with four plants and 16,000 employees across the country. The deal is Nestlé’s second takeover of a Chinese company in the same year, having previously

acquired a 60 per cent share in Yinlu Foods Group in April 2011. Nestlé had also acquired four other domestic companies in China between 1998 and 2010. Article 27 of the AML provides that when examining a merger and acquisition (“M&A”) transaction leading to a concentration of entities, the relevant elements to be considered include the market shares of the business operators involved in the relevant market and the controlling power over that market, the degree of market concentration, the influence of the concentration on market access and technological progress, the influence of the concentration on the consumers and other business operators and on national economic development, and other elements that may have an effect on competition. Whilst MOFCOM had previously blocked the acquisition of local juice company Huiyuan Juice in 2009 by Coca-Cola, the approval of Nestlé’s bid may give foreign companies some cause for optimism when considering local targets for acquisition.

In Singapore: Mergers that substantially lessen competition in a Singapore market for goods and services are prohibited under Section 54 of the Singapore Competition Act. In making a determination on the effect of a proposed merger, CCS will primarily have regard to the strength of existing competition within a market, the barriers to entry and constraint imposed by potential competition, and any countervailing power in the hands of large buyers. Please see Drew & Napier’s Guide to Merger Control in Singapore for more details. Google’s acquisition of Motorola On 15 August 2011, Google announced its USD 12.5 bn (approximately SGD 16.1 bn) acquisition of Motorola Mobility Holdings, Inc. (“Motorola ”), which manufactures smart phone handsets and tablets. Under the deal, Motorola handsets will continue to run Google’s free and open-source Android mobile operating system (“Android ”). As part of the proposed merger, Google also reportedly stands to take over close to 25,000 patents from Motorola.

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Both the DoJ and the EC are reviewing the acquisition for any potential anti-competitive effects. In September, the DoJ sent a second request for more information to both Google and Motorola as part of their anti-trust investigations and in December the EC suspended its review of the merger while requesting further information from Google. The preliminary phase of the EC review was originally scheduled to end by 10 January 2012. The EC has reportedly asked high-tech trade associations and other market players whether Google would likely use its newly-acquired Motorola patents to boost the popularity of its own revenue-generating mobile applications by requiring other smart phone makers to pre-install Google mobile applications such as Google Maps and Google Earth, before allowing them access to Motorola’s patents. Another reported concern is that Google might charge other smart phone makers who do not use Android, higher royalties for access to Motorola patents than they would have paid directly to Motorola otherwise. Google states on its official blog that the acquisition “will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.” Google executives have also made assurances that the Android platform would continue to be available as a free and open mobile operating system to other handset manufacturers, and that Google will run Motorola as a separate business. A Google spokesperson stated that Google is “confident that the commission will conclude that this acquisition is good for competition”. Other device makers that run Android, including Motorola’s rival HTC, have backed the deal as a way to gain patent protection for the operating system. In Singapore: According to CCS’s guidelines, while the ownership of an Intellectual Property Right (“IPR”) does not normally impose an obligation on the IP owner to license the use of that IPR to others, a dominant undertaking’s refusal to license an IPR that relates to an essential facility may, however, constitute an infringement under the Section 47 prohibition.

Hard disk drives market experiences parallel global mergers The proposed acquisition by Seagate Technology PLC (“Seagate ”) of the hard disk drives business of Samsung Electronics Co., Ltd (“Samsung ”), and the proposed acquisition by Western Digital Corporation (“Western Digital ”) of the hard disk drives and solid state drives businesses of Hitachi Global Storage Technologies (“Hitachi ”) were notified in various competition law jurisdictions across the globe, including Europe, China, and Singapore. Europe On 19 October 2011, the EC cleared the proposed acquisition by Seagate of the hard disk drives business of Samsung. The clearance by the EC followed extensive investigations by the EC, which went into a second and more detailed investigative phase (ie “a Phase 2 assessment”). According to the EC, the main impact of the proposed transaction would be on the markets for 3.5-inch desktop hard disk drives and 2.5-inch mobile hard disk drives, in which Samsung was not a particularly strong competitor.

In approving the Seagate/Samsung deal, the EC noted that with at least three suppliers of hard disk drives remaining in the market post-merger, customers “will retain sufficient possibilities to switch suppliers”. With respect to suppliers to the merged entity, the EC found that the proposed transaction “would not jeopardise the business of Japan's TDK, an independent supplier of heads (ie essential component parts) for hard disk drives, as the merged entity will continue to buy a sufficient volume of components from TDK post-merger”. The EC also found that the removal of Samsung is not likely to lead to a risk of coordination among the remaining hard disk drives suppliers. Finally, the EC found that “there would be no effect on the market for external hard disk drives in the [European Economic Area] as non-integrated suppliers of external hard disk drives would retain sufficient alternative sources for hard disk drives.” The Seagate/Samsung deal was assessed independently of Western Digital's proposed acquisition of the hard disk drives and solid state drives businesses of Hitachi, which was notified to the EC one day later.

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As Seagate and Samsung were “first through the door”, the EC examined the proposed Seagate/Samsung merger on the basis that there would be three remaining competitors in the market for the supply of 3.5-inch desktop hard disk drives – the merged entity, Western Digital and Hitachi. The Western Digital/Hitachi merger was assessed on the basis that there would only be two remaining players in the market for the supply of 3.5-inch desktop hard disk drives; ie the Seagate/Samsung merged entity and the Western Digital/Hitachi merged entity. The Western Digital/Hitachi merger was given conditional clearance by the EC on 23 November 2011. The EC’s approval was conditional upon the divestment of essential production assets for 3.5-inch hard disk drives by the Western Digital/Hitachi merged entity, including a production plant, and accompanying measures, such as a further condition that Western Digital could not complete the acquisition until it found a suitable purchaser approved by the EC. China In China, MOFCOM gave its conditional approval to the Seagate/Samsung deal on 12 December 2011. To date, China is the only jurisdiction in which conditions were imposed on Seagate for clearance of the deal. According to MOFCOM press release, clearance was given by MOFCOM on condition that Seagate must keep the Samsung brand as an independent competitor for at least one year and continue to expand production capacity under the Samsung brand within six months of MOFCOM’s decision. Additionally, Seagate cannot compel customers to purchase their hard disk drives and is prohibited from compelling its supplier, TDK China Co., Ltd. to exclusively supply recording heads for hard drives to Seagate and its affiliated companies, or limiting its supplies to other hard disk drives manufacturers. The Western Digital/Hitachi deal was also notified to MOFCOM for approval. At the date of this article, no decision has been issued by MOFCOM on the Western Digital/Hitachi deal as yet. News reports have indicated, however, that MOFCOM has expressed the view that Western Digital’s acquisition will hurt competition in the market for computer hard disk drives “to a certain extent” and

that the ministry will seek “appropriate solutions” from Western Digital to address its concerns. Singapore In Singapore, following an in-depth Phase 2 assessment of the Seagate/Samsung deal, CCS cleared the proposed transaction on 29 November 2011 on the grounds that “the transaction, if carried into effect, would not infringe Section 54 of the [Competition] Act”. Section 54 is the provision prohibiting mergers which lead to a substantial lessening of competition in any market in investigations into the matter. From CCS’s investigations into the Seagate/Samsung deal, CCS found that the countervailing bargaining power of customers in Singapore would not change significantly as a result of the merger, if carried into effect. Additionally, given that other hard disk drives suppliers have spare capacity which would allow them to expand their supply of hard disk drives to customers in the event that the merged entity reduced output or increased prices, the transaction would not raise any competition concerns as a result of non-coordinated horizontal effects. Finally, CCS agreed with Seagate and Samsung’s arguments that the proposed acquisition would not raise concerns in terms of coordinated effects on competition despite the reduction in the number of market participants in the relevant market for the following reasons: (a) the hard disk drives market is of a highly

innovative nature, the time between innovation cycles are short and there are great benefits of being “first to market”. As such, any attempts by market players to coordinate market behaviour would be undermined;

(b) the asymmetry of market shares removes the incentive for the smallest player to participate in any coordination;

(c) there is significant countervailing buyer power which could disrupt any attempt at coordination; and

(d) given the differences in margins between the various hard disk types, ease of supply-side switching and ability to add capacity rapidly, any attempt at coordination between market players would require granular communication and, thus, would not be feasible.

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Drew & Napier acted for Seagate/Samsung in the Singapore notification of CCS. Western Digital/Hitachi did not notify their merger in Singapore. Learning Points: The EC’s approach in the Seagate/Samsung deal, which accorded Seagate and Samsung “first-mover advantage”, has wide repercussions with respect to parallel mergers in concentrated markets. As Seagate and Samsung were “first through the door”, the EC examined the merger on the basis that there would be three remaining competitors in the market. The Western Digital/Hitachi merger, which was formally notified to the EC only a day later, was assessed, however, on the basis that there would only be two remaining players in the market (ie on the basis that Seagate and Samsung have merged and constitute one player, instead of two players). The Western Digital/Hitachi deal was not notified in Singapore, and, as such, it remains to be tested how CCS will deal with parallel mergers and whether similar “first mover advantage” will be granted to applicants who are first to put in their merger notifications in Singapore. As a matter of prudence, in future cases of parallel mergers, there is value for merger parties to consider filing their merger notifications as early as practicable. For more practical tips on merger notification in Singapore, please click here to refer to our feature article in our previous Quarterly Update, titled

“Demystifying Merger Notifications – Procedures

and Practical Tips”.

PROCEDURAL MATTERS BETTER COORDINATION FOR CROSS-ATLANTIC MERGER REVIEWS The US and EU competition authorities have recently published an updated set of best practices for coordinating merger reviews across the Atlantic. The guidelines set out how the EU’s Directorate General

for Competition, the US Federal Trade Commission and the DoJ antitrust division will cooperate when they review the same merger. The best practice guidelines come on the 20th anniversary of the US-EU bilateral antitrust agreement signed back in September 1991. The 1991 accord was intended to provide a broad framework for inter-agency cooperation on competition matters, including mergers and acquisitions. The revised set of practices aims to provide further guidance to ensure the authorities continue with coordinated merger reviews in an “effective and efficient” manner. Also, the best practices ensure international convergence so that, where possible, the authorities can avoid coming to contradictory decisions when investigating the same merger. The most notable example of this was the General Electric and Honeywell transaction which was cleared by the US authorities with commitments but was blocked by the European authorities. The revised guidelines place more emphasis on informal and on-going cooperation between the agencies during a merger review. For example, the revised guidelines detail specific junctures at which it may be appropriate for the agencies to touch base, and recommend specific office holders from each agency with whom to make contact, amongst other things. Notably, the revised guidelines also provide details on the role of the merger parties in facilitating cooperation between the agencies. Parties are encouraged to consider early consultations with the agencies on matters such as the appropriate times to file, and suggested timeframes for the submission of documents, so as to allow for cooperation even before formal notification begins. Waivers of confidentiality, including from third parties (eg the merging parties’ competitors and customers) are also encouraged, in order for the agencies to share information. Learning points: The US-EU best practice guidelines serve as a useful guide for merging parties when considering when to notify a multi-jurisdiction transaction, including for areas outside the US and EU. In certain merger contexts, CCS has been known to request for confidentiality waivers from merging

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parties in order to share information with authorities overseas in relation to a multi-jurisdiction merger.

FEATURE ARTICLE

NEW YEAR REMINDER: COMPLIANCE, COMPLIANCE, COMPLIANCE! In recent months, the topic of business compliance has occupied current discourse in competition circles. This has been prompted, in no small part, by the notable number of competition authorities in Europe which have recently published guidance in relation to business compliance. In June 2011, OFT published updated guidance for businesses on competition law compliance, accompanied by a slew of user-friendly materials such as a short film which includes acted out footage of a dawn raid. Subsequently, OFT commenced a consultation on proposed revisions to its Competition Act 1998 penalties guidance, which saliently included clarifications on how OFT would regard an undertaking’s competition law compliance activities for the purpose of calculation of penalties (See related article on “OFT reviews its penalties and leniency guidance” for details in this update). In October 2011, the French Competition Authority (“FCA”) became the first European agency to offer a guaranteed 10% reduction in fines for companies that implement a “robust and effective” compliance programme. This was followed, in November 2011, by the compliance guidelines for companies published by the EC. The guidelines represent the first time the EC has taken a comprehensive position on compliance, and they provide an accessible summary of its competition rules and practical steps, in order to help companies stay out of trouble. With such a surfeit of materials on business compliance, businesses now have ample

resources, and correspondingly less excuses for non-compliance going forward. Why comply?

Sanctions Breaches of competition law can have serious financial consequences. In most jurisdictions, the maximum fine on a company for breaches of competition law is typically set at 10% of the company’s annual worldwide turnover. OFT, in its currently on-going consultation on proposed revisions to its penalties guidance, is proposing to increase the maximum starting point for penalty calculations from 10% to 30% of relevant turnover. In Singapore, the statutory maximum fine is up to 10% of the turnover in Singapore for each year of infringement, up to a maximum of three years. These percentages translate into absolute amounts that are by no means small. To date, the maximum fine imposed on an individual company in Singapore is SGD 989,000, against SISTIC.com for abuse of its dominant position1. In the EU, the highest fine to date was issued against Intel in 2009, to the tune of EUR 1.06 bn (approximately

SGD 1.65 bn) for abusing its dominance in the computer chip market, while the average fine imposed for cartel cases between 2007 and 2011 was EUR 52 m (approximately SGD 86 m). In addition to financial penalties, companies are likely to be directed to change their behaviour, amend contractual terms, or divest assets, depending on the nature of the breach. In countries such as the UK, company directors can also be disqualified from managing a company for up to 15 years. In the worst case scenario, criminal sanctions may also be imposed on individuals who dishonestly engage in cartel activity. In the UK, the maximum period of imprisonment is five years. In Singapore, criminal sanctions only apply where an individual or company fails to co-operate with CCS during investigations (eg refusing to provide information, destroying or falsifying documents, providing false or misleading information). Such offences will be

1 The case is currently under appeal before the Competition Appeal Board, and one of the matters is in relation to a reduction of the financial penalty.

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prosecuted in court and are subject to fines (not exceeding SGD 10,000) and/or to imprisonment (not exceeding 12 months) or both. Finally, and perhaps with far more damning long term consequences, the reputational damage from being exposed as a company that engaged in wrongdoing to get ahead, to the detriment of competitors, customers or suppliers, may be the hardest to shake off. OFT’s research paper on the deterrent effect of the UK Competition Regime released in December 2011 (“Research Paper ”) found that businesses in the UK viewed reputational damage and criminal sanctions as the most important drivers of compliance, followed closely by the associated financial penalties. New Incentives? Despite the hefty sanctions, the EC’s new guidelines have been criticised by industry practitioners for not providing enough incentive for firms to implement compliance programmes. Unlike in the UK and France, it has categorically stated that the implementation of a compliance programme does not give a company the right to a fine reduction if the company breaches competition rules. According to the EC guidelines: “If a company which has put a compliance programme in place is nevertheless found to have committed an infringement of EU competition rules, the question of whether there is any positive impact on the level of fines frequently arises. The answer is: No.” On the other hand, FCA has made the bold move of guaranteeing a 10% reduction in fines for companies whose compliance programme meet the stipulated criteria set out in its guidelines (See below for the criteria). Straddling the middle ground is OFT, which has stated that its starting position with regard to the impact of competition law compliance activities on the calculation of fines will be neutral. However, OFT may provide a case-by-case percentage reduction when calculating financial penalties for companies which can demonstrate that they have taken adequate steps to achieve a clear and unambiguous commitment to competition law throughout the organisation. Singapore’s approach to the consideration of compliance programmes appears to be similar to

that taken in the UK, namely that the existence of an effective compliance programme may factor into its consideration of mitigating factors and the corresponding application of a discretionary reduction when calculating financial penalties2. The provision of such incentives sends a strong signal from the authorities, and are intended to encourage greater commitment by companies towards compliance efforts. How to comply?

A Culture of Compliance The EC urges companies to move beyond an adherence to a form-based application of “Do’s and Don’ts” to demarcate the boundaries of competitive activity, and to instead adopt a more holistic approach that centers on consistent monitoring and the dissemination of adequate knowledge to employees at all levels of the company to ensure a good understanding of the areas in which the company is likely to run the most risk, and how to minimise those risks. OFT advocates a similar approach, referring to “a competition law compliance culture” in its guidelines. OFT also noted that management’s buy-in to compliance was one of the key reasons for companies staying within the law. More prescriptive guidance on what constitutes an effective compliance programme The EC guidelines set out that compliance should be a “strategy”, starting with a comprehensive audit of risk, proper internal reporting mechanisms and monitoring, and should include “visible and lasting commitment…by senior management”. FCA’s guidelines, which are under consultation until February 2012, state that companies are required to fulfill the following five steps in their corporate compliance programme in order to qualify for the reduction in financial penalties:

� a firm, clear and public commitment by the entire board and management to comply

2 See CCS’s Guidelines on the Appropriate Amount of Penalty, paragraph 2.12.

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with competition law and to support the company's compliance programme;

� designating a person within the organisation, and empowering him with the necessary autonomy and resources to implement and oversee all aspects of the compliance programme;

� developing an effective information, training and awareness toolkit to spread and maintain a competition culture at all levels of the company;

� setting up effective control, audit and warning mechanisms, including conducting regular assessments of various aspects of the compliance program and audits of the business; and

� implementing follow-up measures, including procedures for handling follow-up, and sanctions for breach of the company's compliance programme.

Conclusion It is clear that merely paying lip-service to a compliance programme subjects a company to the false illusion that it is in compliance with competition law, and cuts no ice with competition authorities. As the European Competition guidelines state, “…what matters ultimately is that the rules are actually complied with… a company should devote sufficient resources – appropriate to its size and the risks it faces – to ensure it has a credible programme.” It is indeed a timely New Year message for companies to relook the compliance programme they have implemented over the years and to ensure that these programmes do achieve their purpose.

DO YOU KNOW? THE ASSOCIATION OF SOUTHEAST

ASIAN NATIONS (“ASEAN”) COMPETITION CONFERENCE The ASEAN Competition Conference was held on 15 -16 November 2011 in Bali, Indonesia. The Conference was co-organised by the ASEAN

Secretariat, the ASEAN Experts Group on Competition (“AEGC”) and the Commission for the Supervision of Business Competition of Indonesia (“KPPU”), and jointly supported by Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (“GIZ”), the ASEAN-Australia-New Zealand Free Trade Area Economic Cooperation Work Program, and the Japan International Cooperation Agency. The Conference was host to about 200 participants. Among the attendees were government officials, Members of Parliament, business persons, politicians, academics and the media. Lim Chong Kin, co-head of Drew & Napier’s Competition Law Practice Group, was among the speakers invited to make presentations and exchange views with the participants. Chong Kin’s presentation on “Comparisons of Competition Regimes in ASEAN ”, compared the differences in how various ASEAN countries have approached competition law, from their institutional set-up to key substantive legislation. Chong Kin also spoke about the challenges faced by foreign investors at both a country level and a regional level. In particular, he highlighted that disparate competition regimes within ASEAN may raise compliance costs and deter businesses from expanding their operations across the region. He suggested some short-term and mid-term goals which ASEAN could work towards to achieve greater harmonisation for businesses in the region.

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The Drew & Napier Competition Law Team

For more information on the Competition Law Practice Group, please click here .

Cavinder Bull, SC •••• Director (Disputes)

Cavinder handles complex litigation spanning a wide area of corporate and commercial matters. One of his areas of particular focus is competition law where he has represented various clients in investigations by competition law regulators both in Singapore and overseas. Cavinder has successfully defended companies being investigated for abusing a dominant position in Singapore, and filed the first appeal to the Competition Appeal Board in respect of a CCS infringement decision.

Cavinder previously practiced antitrust law in New York, working on cases like the Microsoft antitrust litigation and obtaining US Department of Justice’s approval for the merger between Grand Metropolitan and Guinness, one of the world’s largest mergers then. Cavinder graduated from Oxford University with First Class Honours in Law. He clerked for the Chief Justice of Singapore as a Justices’ Law Clerk. Cavinder also has a Masters in Law from Harvard Law School which he attended on a Lee Kuan Yew Scholarship. Cavinder is consistently recognised as one of the leading litigators in Singapore. He was recently awarded the title of "Lawyer of the Year" for 2011 in Antitrust Law by Best Lawyers. For the 4th consecutive year, he was endorsed in The Practical Law Company Which Lawyer? Cross Border Handbook 2011/2012. The Guide to the World’s Leading Competition & Antitrust Lawyers/Economists 2010 nominated him as a Leading Antitrust Lawyer in Singapore. Chambers Asia 2009 states that Cavinder is a “rising star, going from strength to strength”, while Asia Pacific Legal 500 2008/2009 recognises Cavinder as a “first-rate lawyer”.

Tel: +65 6531 2416 •••• Fax: +65 6533 3591 •••• Email: cavinder.bull@drewnapier.com

Lim Chong Kin •••• Director (Corporate Transaction & Advisory)

Chong Kin practices corporate law with a strong emphasis in the specialist area of competition law. Chong Kin also played a key role in the development of sectoral competition regulation in the telecommunications, media and postal industries in Singapore. He regularly advises large international clients on competition law, and was instrumental in the first merger notification filing to CCS in 2007. Chong Kin was cited in Who’s Who Legal – Singapore 2008 as a leading competition and regulatory communications lawyer. The International Who’s Who of Competition Lawyers 2008 – 2012, the International Who’s Who of Business Lawyers 2010, 2011 & 2012 and Regulatory Communications Lawyers 2008 all recognise Chong Kin for his strength in regulatory and competition advisory work. Practical Law Company’s Which Lawyer Survey 2011/2012 describes Chong Kin as a highly recommended lawyer in Competition/Antitrust. The Guide to the World’s Leading Competition & Antitrust Lawyers/Economists 2010 (9th Edition) and 2012 (10th Edition) nominates Lim Chong Kin as a leading antitrust lawyer in Singapore. Asia Pacific Legal 500: 2008 recognises him as a competition and regulatory expert. AsiaLaw Leading Lawyers 2008 and 2009 name Chong Kin as a leading Competition/Antitrust lawyer. The Asian-counsel Representing Corporate Asia 2009 Survey has ranked Drew as Antitrust/Competition Firm of the Year for the third consecutive year.

Tel: +65 6531 4110 •••• Fax: +65 6535 4864 •••• Email: chongkin.lim@drewnapier.com

Ng Ee-Kia, Joy, Head (Competition & Regulatory Econom ics)

Ee-Kia was previously the Director of Economics in the Policy and Economic Analysis Division in CCS. She was responsible for developing policy frameworks and guidelines in relation to the Competition Act as well as conducting economic analysis in competition cases. Ee-Kia had worked on a wide range of regulatory and competition issues in the telecommunications industry while she was with the telecommunications regulators in Singapore and Hong Kong. In addition to her economics training, Ee-Kia has a Postgraduate College Diploma in EC Competition Law & Economics for competition law respectively as well as a Master of Laws. Ee-Kia has been recognised as one of the leading competition economists in Singapore by The International Who’s Who of Competition Lawyers & Economists 2010, 2011 & 2012 and the Guide to the World’s Leading Competition & Antitrust Lawyers/Economists 2010 (9th Edition) and 2012 (10th Edition).

Tel: +65 6531 2274 •••• Fax: +65 6535 4864 •••• Email: eekia.ng@drewnapier.com

Copyright in this publication is owned by Drew & Napier LLC. This publication may not be reproduced or transmitted in any form or by any means, in whole or in part, without prior written approval. Drew & Napier LLC accepts no liability for, and does not guarantee the accuracy of information or opinion contained in this publication. This publication covers a wide range of topics and is not intended to be a comprehensive study of the subjects covered nor is it intended to provide legal advice. It should not be treated as a substitute for specific advice on specific situations.