April 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 March 2012.

SINGAPORE COMPETITION LAW WATCH

CCS CLEARS PROPOSED ACQUISITION OF SYNTHES BY J&J On 5 January 2012, the proposed acquisition of Synthes, Inc. (“Synthes ”) by medical devices and diagnostics giant, Johnson and Johnson (“J&J ”), was cleared by the Competition Commission of Singapore ("CCS") in a Phase 1 review. The parties submitted a notification of their proposed transaction to CCS on 11 November 2011, detailing the acquisition by J&J of all the voting securities in Synthes. J&J and Synthes are both key players in the business of manufacturing and supplying orthopaedic medical devices and orthopaedic biomaterials. Section 54 of the Competition Act prohibits mergers that have resulted or may be expected to result in a substantial lessening of competition. In assessing whether the proposed merger between J&J and Synthes would infringe section 54, CCS had to establish whether or not the merger would indeed substantially lessen competition through an assessment of the impact of the merger on the structure and competitive dynamics of the market, among other factors. The proposed acquisition would place the merged entity’s market share at approximately 40-50 percent of the market for the supply of spine devices; approximately 80-90 percent of the market for the supply of trauma devices; and

Status Score Board

Number

Concluded Pending

Notified Agreements or Conduct

7 6 1

Notified Mergers or Anticipated

Mergers

29 29 0

Infringement Decisions 6 6 0

Appeals 6 3 3

In this issue

Singapore Competition Law Watch ..................................................1 Regulatory Updates .……….………….4 Industry News …….…….….…………..9 – Anti-Competitive Agreements …….9

– Abuse of Dominance ……………..17

– Merger Regulations ………………19

– Procedural Matters …………….....24

Feature Article ....……………..……….25 Global Patent Wars

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approximately 15-25 percent of the market for supply of bone graft substitutes. Private and restructured hospitals, as well as surgeons in private practice primarily form the market for orthopaedic medical devices and orthopaedic biomaterials in Singapore (specifically, in relation to spine and trauma devices and bone graft substitutes). CCS found these customers to have significant buyer power as they have the ability to switch between competing suppliers of orthopaedic medical devices and orthopaedic biomaterial products. Further, CCS established that there were only moderate barriers to entry in the market, as existing global manufacturers which did not presently have a presence in Singapore were not constrained from entering the Singapore market to supply orthopaedic medical devices and orthopaedic biomaterial products (subject to the necessary regulatory approvals from the Health Sciences Authority). In this regard, CCS sought the views of four competitors and four suppliers in the market for supply of spine devices, trauma devices and bone graft substitutes. CCS also noted that the regulatory requirements were not prohibitive, nor were the costs of entry prohibitively high. CCS considered that these global manufacturers, should they enter the Singapore market, could act as a competitive constraint on any attempt by the merged entity to exploit any reduction in rivalry flowing from the acquisition. CCS dismissed concerns that the proposed acquisition may bring about coordinated effects which may substantially lessen competition in the market. This was because the product markets are already sufficiently differentiated and the relevant product markets being marked by intense competition between the suppliers due to the structure of supply where suppliers enter into fixed contracts for a minimum of two years and the method of procurement via competitive tenders. CCS further noted that in the relevant product markets, competition was not usually based on price but on other factors such as customer service and the clinical track record of the products. Accordingly, given the intense nature of competition in this market, strong countervailing buyer power of the customers, moderate barriers to entry as well as other competitive characteristics of in the relevant market, CCS

found that the proposed acquisition by J&J would not result in a substantial lessening of competition or infringe section 54 of the Competition Act. The proposed acquisition was cleared by the European Commission on 18 April 2012, but is still pending regulatory approval by the US Federal Trade Commission and other national competition authorities.

CCS CLEARS PROPOSED NIPPON/SUMITOMO MERGER On 10 February 2012, CCS cleared the proposed merger between Japan’s two largest steelmakers Nippon Steel Corporation (“Nippon ”) and Sumitomo Metal Industries, Ltd (“Sumitomo ”) in a Phase 1 review. CCS was notified of the proposed transaction on 21 December 2011. The proposed transaction involves a worldwide acquisition of Sumitomo’s entire business by Nippon, with Sumitomo ceasing to exist as a legal entity after the transaction takes effect. The parties have also filed notifications of the proposed transaction to competition authorities in ten other jurisdictions. CCS’s review of the proposed merger involved an examination of regional (Asian) markets for the supply of (i) seamless steel pipes; (ii) seamed steel pipes; (iii) H-beams; (iv) plates; (v) hot-rolled steel sheets; (vi) cold-rolled steel sheets; (vii) galvanised steel sheets; and (viii) retaining structures. This approach was taken as almost all of Nippon and Sumitomo’s customers procured steel products in each of the relevant product markets on a regional or global basis. CCS also noted that other large global players in the finished steel product markets would act as competitive constraints on the merged entity. Within Singapore, while the parties estimated that the market share of the merged entity would be increased marginally (between 0-10 percent) in each of the eight product markets, CCS considered that this was not a significant increase, and did not give rise to a presumption that the proposed transaction would substantially lessen competition. As part of its review, CCS also contacted the Building and Construction Authority to discuss the regulatory regime in Singapore with regards the import of steel products in the construction industry. While CCS considered that there were no

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regulatory barriers for new market entrants, it nonetheless took the view that the high capital investment costs suggested that competitive constraint from new entrants or existing steel manufacturers switching production facilities may be relatively low in the short term. Notwithstanding this, CCS observed that owing to a general trend of overcapacity of finished steel products globally, the merged entity would be unlikely to exercise any market power in these market conditions. Based on feedback from customers in the industry, CCS found that these customers (which included trading companies and downstream manufacturers) hold some degree of countervailing buyer power as they have the ability to switch among third-party suppliers. Further, CCS observed that post-merger coordination would be unlikely, given that Nippon and Sumitomo’s total combined output of finished steel products in 2010 contributed to less than 10 percent to the top 20 steel manufacturers globally. In addition, customers’ procurement decisions were not based only on pricing, but on other factors such as long-term business relationships, quality and delivery time. In considering these factors, CCS found that the proposed transaction would be unlikely to increase the potential for coordinated effects. The parties expect to effect the merger on 1 October 2012, pending clearance from the competition authorities in China.

CCS ISSUES PROPOSED INFRINGEMENT DECISION AGAINST

FERRY OPERATORS On 9 March 2012, CCS issued a Proposed Infringement Decision (“PID”) against two ferry operators, Batam Fast Ferry Pte Ltd and Penguin Ferry Services Pte Ltd, for alleged concerted practices which had as their object, the prevention, restriction or distortion of competition, in contravention of section 34 of the Competition Act. As the PID has not been made publicly available, details of the precise nature of the parties’ conduct in question are still unknown to the public. However, CCS has indicated that instead of determining their ferry ticket pricing independently, the parties exchanged sensitive and confidential price information in respect of the routes operated

by them between Harbourfront and Sekupang, Batam, and Harbourfront and Batam Centre. Before CCS finalises its decision on whether there has been an infringement, the ferry operators were given an opportunity to submit their arguments, as well as any other information by 23 April 2012. Should CCS proceed to issue a final infringement decision, the parties may lodge a Notice of Appeal to the Competition Appeal Board within eight weeks of CCS’s decision. The merits of any possible appeal remain to be seen, and whilst section 34 cases are largely factual in nature, some parties have had success in reducing the financial penalties imposed by CCS in such cases.

PROPOSED REVISIONS TO THE SINGAPORE MERGER CONTROL PROCEDURES CCS conducted a month-long public consultation between 20 February 2012 and 20 March 2012 on its proposed changes to CCS’s Guidelines on Merger Procedures (“Proposed Amended Guidelines ”). The Proposed Amended Guidelines seek to increase transparency of CCS’s merger review procedures, streamline the process of merger notification in order to minimise the burdens on businesses as well as to encourage merger parties to file problematic mergers despite Singapore’s voluntary merger notification system. Notwithstanding that merger notifications are voluntary in Singapore, CCS does engage in active market surveillance on mergers and may take enforcement measures in cases where a merger which has not been notified may nonetheless infringe section 54 of the Competition Act relating to mergers that result in a substantial lessening of competition (“Section 54 Prohibition ”). The key proposed amendments include: (a) self-assessments on whether notification

is necessary – for example, mergers involving two small companies with relatively low turnover in Singapore are unlikely to raise competition concerns (ie turnover of each of the parties in the financial year preceding the transaction is below SGD 5 m for Singapore, and the worldwide turnover is below SGD 10 m);

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(b) a new process whereby merger parties can obtain a confidential opinion from CCS on whether a merger is likely to raise concerns, with the qualification that such advice is provided without having taken into account third party views. This new process is a welcome change, especially for confidential mergers involving listed companies;

(c) clarification on the treatment of

confidential information. CCS cautions that where it considers that the confidentiality claims made in respect of the notification or any other submission are excessive or unreasonable, it may “stop the clock” on the assessment process until such time as the applicants file a non-confidential version that meets CCS’s requirements;

(d) streamlining information requirements to

reduce information requests to the parties, and help reduce the likelihood of delays in the assessment process;

(e) emphasising the benefits of pre-

notification discussions – in particular, the Proposed Amended Guidelines make clear that where the merger parties consider that some of the requested information contained in the form which is used for the Phase 1 review (i.e. Form M1) is not relevant to the assessment of their merger, they can discuss this with CCS in pre-notification discussions;

(f) a process whereby CCS and the merger

parties can resolve competition concerns in Phase 1 by way of commitments; and

(g) clarifying the role of third parties and

complainants. The existing Guidelines on Merger Procedures were issued by CCS to afford greater clarity to the industry on the Section 54 Prohibition. The Section 54 Prohibition came into force on 1 July 2007. For more details, please refer to our legal update here .

REGULATORY UPDATES CHANGES AHEAD FOR UK COMPETITION REGIME Changes are ahead for the UK competition regime, with proposals now being considered that could be implemented as early as April 2014. The most noteworthy change is the merger between the Office of Fair Trading ("OFT") and the UK Competition Commission ("CC") to create the “Competition and Markets Authority” ("CMA"). This move is expected to pool expertise and other synergies across the entities which currently have different sets of competition functions, while remaining voluntary, merger review will be undertaken solely by CMA instead of the current phase approach between OFT and CC. A statutory time limit of 40 working days for a Phase 1 review and 24 working days for a Phase 2 review will be introduced. The separate sector regulators will retain the competition powers but it is expected that they will work more closely with CMA. Another significant change that is proposed is in respect to how the UK authority makes a finding of criminal liability for participation in cartel activity. At present, it is necessary for a company or director to be found or to have acted “dishonestly” in order for criminal liability to attach. In a move that will likely further disincentivise participation in cartels, the new threshold will focus on the “mental elements" of intention to enter into a collusive agreement. This change has been prompted by the difficulties faced by OFT in the use of the criminal sanctions to date. Other proposed changes include increased filing fees for merger reviews (albeit that the notifications will remain voluntary), and the ability for CMA to impose stricter penalties with regard to non-compliance with requests for information and documents during the investigative process.

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AUSTRALIA: NEW LAW TARGETING

PRICE SIGNALLING IN BANKING INDUSTRY On 24 November 2011, the Australian Government passed the Competition and Consumer Amendment Act (No. 1) 2011 (“Act ”) to prohibit certain forms of anti-competitive price signalling and information disclosures. The Act is not intended to be broadly applicable across all sectors, and will only apply to specific classes of goods or services as prescribed by regulation. This new law will come into force on 6 June 2012 and specifically prohibits: (a) private disclosure of price-related

information to a competitor, regardless of the purpose of the disclosure or its effect on competition; and

(b) public or private disclosure of any

material aspect of a corporation’s commercial strategy, if the objective is to substantially limit competition in the market.

The prohibitions also encompass various anti-avoidance provisions, which provide that the Act will apply notwithstanding the fact that the disclosure was also made to non-competitors alongside competitors, or that the information disclosed is otherwise available in the market, among other conditions. In conjunction with the passing of the Act, the draft Competition and Consumer Act Amendment Regulations (2012) (“Draft Regulations ”) was also released on 22 December 2011 for consultation. Key features of the Draft Regulations include: (a) the Act will initially apply to the banking

sector, in response to concerns brought forth by the Australian antitrust regulator, the Australian Competition and Consumer Commission (“ACCC”), that banks were signalling one another of their pricing intentions in relation to interest rates;

(b) a process that must be followed before the

Act can be extended to other classes of goods and services (beyond the banking

industry). Among other things, the Minister must be satisfied that a consultation is appropriate and reasonably practicable before a class of goods or services is subjected to the Act; and

(c) a process for companies to apply for

immunity for proposed disclosures that would otherwise contravene the Act. A party may be able to apply to ACCC to seek immunity from the price signalling prohibitions if it provides a net public benefit.

In Singapore: Singapore’s Competition Act does not contain prohibitions that explicitly cover price signaling, although price signaling may be considered to be a form of anti-competitive information sharing. After a few years of taking the position that observation of parallel price movements in the retail petrol market did not provide sufficient evidence of anti-competitive behaviour publicly, CCS embarked on a detailed market inquiry to satisfy itself as to whether there is any evidence of collusion in the market. In the first half of 2011, CCS published a staff report summarising its findings, with the conclusion that the current facts and data do not present any evidence that the petrol companies are engaging in collusive behaviour. However, CCS indicated that it will continue to monitor developments in the sector.

KOREA REFINES MERGER CONTROL GUIDELINES The Korea Fair Trade Commission (“KFTC”) adopted a range of amendments to its merger control rules in December 2011. Collectively, the changes are intended to refine merger control review criteria in Korea—on one hand tightening scrutiny over certain mergers, while allowing more non-problematic mergers to qualify for expedited review. Under one set of amendments, which came into force on 1 January 2012, large companies (ie those with a consolidated global annual turnover of at least KRW 2 tn (approximately SGD 2.2 bn)) will now be required to submit a pre-closing business combination report prior to acquiring a stake of more than 20 percent in another company

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(or a stake of more than 15 percent in a Korean stock market listed company), and adhere to a 30-day standstill period. The standstill period may be waived in limited situations, or may be extended for up to an additional 120 days. Previously, such transactions only required a post-transaction report within 30 days of the acquisition. Post transaction reporting continues to apply for all other share acquisitions. The amendment to the pre-closing criteria means that KFTC will be able to scrutinise a wider range of transactions, including those involving the acquisition of newly issued shares by large businesses, even for businesses where they pre-own shares. Amendments have also been made to KFTC’s merger control guidelines. The amendments became operative on 28 December 2011 and are intended to simplify the review procedure for mergers between firms with non-complementary or non-overlapping business activities, as well as improve the assessment criteria for mergers which could potentially harm consumers. The first set of amendments to the guidelines extend the simplified 14-day review process to mergers involving firms that do not produce complementary or substitute products, as KFTC deems that such mergers are unlikely to result in restrictions on competition. Therefore mergers involving companies with no horizontal (between competitors) or vertical (between companies at different levels of production and distribution chain) overlap will now be eligible for the simplified review process. The simplified review process had previously been offered only to a limited range of cases, while all other mergers were subject to the standard review track, which had a 30 to 120-day review and standstill period. The second set of amendments to the guidelines involve a slew of refinements to the assessment criteria for mergers which do not qualify for the simplified review. The amendments provide for: (a) the requirement that mergers where a

party obtains the right to veto the appointment of executives and major decisions, etc are to be notified to KFTC. Previously, a review was triggered only where one party acquired more than a 50

percent stake, or acquired a stake that put it in a position of sole dominance;

(b) an expanded criteria for assessment of

coordinated effects, and to take into account the possibility of tacit collusion as well;

(c) new provisions relating to anti-

competitive effects arising from the acquisition of small equity stakes; and

(d) more detailed criteria setting out the

possibility of anti-competitive effects arising from increased buyer power.

In addition, various mitigating factors that previously applied to horizontal mergers have also been extended to vertical and conglomerate mergers. These factors have been set out in a separate chapter of the guidelines, and include consideration of potential new entries and the presence of powerful buyers, amongst other things. In Singapore: CCS has recently closed its public consultation on proposed amendments to its merger procedure guidelines. While the proposed amendments do not put forward fundamental changes to the current voluntary filing regime, the proposed changes emphasise that CCS may commence its own investigations into non-notified mergers. Parties are also provided with more recourse to engage CCS at an early stage of a confidential merger transaction to obtain greater certainty about the need to file their transaction in Singapore. Mergers that are not notified may, amongst other things, risk being unwound. Businesses who intentionally or negligently by-pass filing in Singapore, may attract financial penalties of up to 10 percent of the company’s turnover, for up to 3 years.

CHINA INTRODUCES RULES ON TARGETING FAILURE TO NOTIFY A

CONCENTRATION On 30 December 2011, China’s Ministry of Commerce ("MOFCOM") issued the Interim

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Measures on Investigation and Punishment of Failure to Duly Notify Concentrations of Undertakings ("Interim Measures "), which came into effect on 1 February 2012. The Interim Measures set out the procedure for MOFCOM to investigate and penalise companies which fail to notify a notifiable transaction in violation of the Anti-Monopoly Law ("AML "). Presently, the 2008 State Council Order provides that a transaction must be notified where it meets the notification thresholds as follows: (a) the combined global annual turnover of

all undertakings concerned exceeds RMB 10 bn (approximately SGD 2 bn), and the annual turnover in China of at least two of the undertakings concerned each exceeds RMB 400 m (approximately SGD 79.4 m); or

(b) the combined annual turnover in China of

all undertakings concerned exceeds RMB 2 billion (approximately SGD 397 m), and the annual turnover in China of at least two of the undertakings concerned each exceeds RMB 400 m (approximately SGD 79.4 m).

Investigation procedures The new Interim Measures provide that MOFCOM shall initiate an investigation where it has prima facie evidence of a suspected case of failure to notify. Any person may raise a complaint to MOFCOM of a case of suspected failure to notify and such complaints are kept confidential by MOFCOM. The merger parties shall, within 30 days from the date they are notified of a proposed investigation by MOFCOM, provide to MOFCOM the documents pertaining to whether the transaction is a ‘concentration’ and whether the notification thresholds have been met. Within 60 days of receipt of these documents, MOFCOM shall determine whether to commence an in-depth investigation or to close the case. Where MOFCOM decides to proceed with an in-depth investigation, the parties have 30 days to submit all such documents to MOFCOM as they would have been required to submit if they were to file a notification of a concentration to MOFCOM.

The Interim Measures further provides that parties must cease implementation of the concentration or merger when MOFCOM commences its in-depth investigation against the parties. MOFCOM shall conclude its in-depth investigation within 180 days from the date it receives all the information from the parties. Penalties Under the Interim Measures, companies that fail to notify a transaction can receive fines of up to RMB 500,000 (approximately SGD 100,000). MOFCOM may also impose remedies as it considers necessary to restore the market situation that existed prior to the transaction, including ordering parties to cease implementation of the transaction, to dispose shares or assets, or to transfer the business. In Singapore: CCS may conduct an investigation if there are reasonable grounds for suspecting that a merger has infringed, or that an anticipated merger if carried into effect will infringe, section 54 of the Competition Act. Any person may submit a complaint to CCS using CCS mergers complaint form. CCS’s powers of investigation include the power to require the production of specified documents or information, enter premises without a warrant, and enter and search premises with a warrant. CCS is further empowered under the Competition Act to issue directions imposing interim measures when it has yet to conclude its investigations. Similar to MOFCOM, CCS may, upon finding that a merger has infringed the section 54 prohibition, give such directions as it considers appropriate to remedy, mitigate or prevent the adverse effects to competition caused by the merger situation.

INDIA SIMPLIFIES MERGER CONTROL

RULES On 23 February 2012, the Competition Commission of India (“CCI”) issued the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Amendment Regulations, 2012 (No. 1 of 2012).

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The amendments streamline the existing merger review application process and the key highlights include: (i) the introduction of three types of merger review applications, namely, Form I, Form II and Form III applications; (ii) changes in filing fees; (iii) increase in shareholding limit for exempt acquisitions; (iv) exemption of certain intra-group mergers; and (v) clarification on the calculation of the thresholds for a merger review application. The following is a summary of the key amendments. Forms for filing merger review applications A Form I application is the standard form, intended for use in less complex transactions. A Form II application should be used: (a) in the case of a horizontal combination

where the combined market share of the parties is more than 15 percent in the relevant market; or

(b) in the case of a vertical combination where

the combined market share of the parties exceeds 25 percent in the relevant market.

A Form III application is mandatory to be used in respect of any combinations by public financial institutions and foreign institutional investors, banks or venture capital funds which are made pursuant to any covenant of a loan or investment agreement. Change in filing fees For a Form I application, the filing fee has been increased to INR 1 m (approximately SGD 23,600) rupees for each application, a twenty-fold increase from the previous filing fee of INR 50,000 (SGD 1,180). For a Form II application, the filing fee has been raised to INR 4 m (SGD 94,500), a four-fold increase from the previous filing fee of INR 1 m (SGD 23,600). Form III applications do not attract any filing fees.

Increase in shareholding limit for exempt acquisitions Under the revised regulations, acquisitions which do not entitle the acquirer to hold 25 percent or more of the total shares or voting rights of the target company in the ordinary course of business or as an investment are regarded as being not likely to have an appreciable adverse effect on competition in India, and are thereby exempted. Previously, the shareholding limit was 15 percent. Exemption of certain intra-group mergers The amendments exempt only certain types of intra-group mergers, that is, mergers or amalgamations between a parent company and a subsidiary belonging to the same group, or between subsidiaries that are wholly owned by companies belonging to the same group. Calculation of the thresholds For the purpose of assessing whether the transaction falls within the definition of a “combination” (as defined in section 5 of the Competition Act 2002), which is required to be notified using Forms I, II or III, the amendments clarify that the assets and turnover of the selling (transferor) company is relevant, and shall be attributed to the value of assets and turnover of the enterprise to which the assets are being transferred. For more information on the merger control framework in India, please refer to our Q3/2011 quarterly update article. In Singapore: Merger filings in Singapore are not mandatory, unlike in India, and entities seeking to notify a merger may do so using either (i) Form M1 (for a shorter, Phase 1 review) or (ii) Form M1 and Form M2 (for more complex cases, where CCS’s review is likely to proceed to a Phase 2 review). Merger parties are not required to "stay" the implementation of their merger, although they risk CCS requiring modifications or even unraveling the merger if it reaches a negative decision.

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PHILIPPINES COMPETITION LAW IN

THE PIPELINE The Philippines has moved closer to becoming the sixth ASEAN (Association of Southeast Asian Nations) country to introduce general competition law, with its senate granting provisional approval for the Competition Policy Act of 2011 in February 2012. The move comes off the back of the approval from the Philippines House of Representatives to introduce a comprehensive competition law regime in August 2011. The Office of Competition within the Department of Justice was also created last year. Whilst certain sectors in the Philippines are subject to some quasi competition law, through various pieces of legislation, the Philippines lacks a centralised and comprehensive general competition law. The introduction of a general competition law seems to have now attained the critical and high level political support needed to drive it through the country’s legislative mechanics. It appears that the key universal prohibitions against anti-competitive agreements, abuse of dominance, and mergers that substantially lessen competition, as well as a notification mechanism, are set to form part of the law. It is unclear when precisely competition law will be introduced or take effect, but it seems to have now become a top legislative priority for the Philippines. Regional watch The introduction of competition law in the Philippines will be a milestone not only for the Philippines, but for the ASEAN region itself as it moves towards achieving the targets set out in its economic blueprint in 2015. Successful implementation of competition law in the Philippines would leave only four ASEAN countries (Brunei, Cambodia, Lao PDR and Myanmar) without general competition law in place.

INDUSTRY NEWS ANTI-COMPETITIVE AGREEMENTS Airlines first to be scrutinised in Malaysia

A share swap between AirAsia and Malaysia Airlines, resulting in AirAsia’s major shareholder taking a 20.5 percent share in Malaysia Airlines, and Malaysia Airlines' major shareholder taking 10 percent of AirAsia, continues to be scrutinised by the Malaysian Competition Commission (“MyCC”), in one of its first ever investigations since competition law took effect in Malaysia on 1 January 2012. The airlines have also agreed to cooperate in the provision of many services, including ground-handling and engineering. It was understood that Malaysia Airlines would reduce investment in its budget airline which competes head-on with AirAsia. The Federation of Malaysian Consumers Association has leaned on the issue by suggesting that the deal may have led to higher fares for consumers, and is urging MyCC to take action. From a competition perspective, the concern is that the share swap would soften competition between the parties, which might in-turn have an effect on fare or service competition between them. MyCC has announced that the investigation remains on-going, and that it would not be appropriate to comment on it at this juncture. In Singapore: Share swap may either be analysed as mergers or as agreements depending on the nature of the arrangement and the extent to which control may be passed/created. Whether any particular share swap would give rise to competition law concerns would depend on a full analysis of all the facts, and the impact on the market.

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LPG in the spotlight in India

Forty-eight makers of liquid petroleum gas (“LPG”) have been fined by CCI for engaging in bid-rigging activities. The collective fines imposed totaled INR 1.65 bn (approximately SGD 40 m). The bids at issue were those in relation to tenders floated by Indian Oil in respect of LPG canisters, which it fills at its own facility for retail. Indian Oil became suspicious after receiving identical bids, and elevated its complaint to CCI. Complaints from recipients of rigged bids are a frequent way in which competition authorities find and crack bid-rigging cartels. CCS’s first infringement decision in 2007 was a bid-rigging case in the pest busting industry, which came to CCS’s attention in a similar way. In Singapore: Bid-rigging is prohibited under section 34 of the Singapore Competition Act, and CCS has stated that it is an offence that will always be considered to have an appreciable effect on competition. This means that CCS will not examine the actual effect on competition before taking enforcement action against the conduct. To date, two of CCS’s five infringement decisions under the section 34 prohibition have involved bid-rigging.

ATM fees in Pakistan under the microscope

The Pakistan Competition Commission (“CCP”), has raided the offices of the Pakistan Bank Association, on suspicion that it has been the forum for collusion between banks in respect of charges levied on customers for ATM withdrawals. It was reported that 26 Pakistan banks charged a standard fee of 15 rupees (approximately SGD 0.20) for ATM withdrawals. The uniformity of this charge, across a large number of banks, raised the suspicion of CCP, particularly given that there is a range in the services provided by the various banks, which might be expected to give rise to a range in the charges levied. CCP has previously raided the offices of one of the largest ATM networks in Pakistan: 1-Link. The raid on 1-Link provided CCP with information

suggesting that the Pakistan Bank Association may be involved, thus leading to the recent raid. Competition authorities generally use their powers to raid premises where there is a suspicion of conduct that is contrary to competition law, and where there is reason to believe that information or documents might be destroyed or tampered with if requested by other means. It is not uncommon for competition authorities to hold some form of dawn raid investigation powers, and they are frequently used in investigations relating to collusive or cartel activity. The investigation remains ongoing, and it remains to be seen whether CCP will proceed to make an infringement finding on the matter. In Singapore: CCS has the ability to raid premises, where it has a warrant to do so, under section 65 of the Singapore Competition Act. In such circumstances, CCS has the ability to search offices, seize original copies of documents and equipment, and to ask a limited range of questions. CCS also has the power to enter a premise and request documents and information where it does not hold a warrant, although it does not have the ability to search the premises in such circumstances. CCS’s powers can extend to searching people and vehicles on the premises, and to residential premises in certain circumstances.

KFTC penalises electronic giants for price fixing

Two Korean electronics companies, Samsung Group and LG Corporation, were fined a total of approximately KRW 45 bn (approximately SGD 49.5 m) in January 2012 by KFTC for colluding to fix the prices of washing machines, flat screen televisions and laptop computers. According to KFTC, representatives from both companies held secret meetings between 2008 and 2009 to keep prices of those items at agreed levels. The investigation reportedly commenced based on a leniency application from LG. According to news reports, LG qualified for full exemption from its

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KRW 18.8 bn (approximately SGD 20.7 m) fine, while Samsung qualified for a 50 percent reduction of its KRW 25.8 bn fine (approximately SGD 28.4 m) as a second informant under the leniency programme. Under KFTC’s leniency programme, the first “whistle-blower” may qualify for an automatic exemption from a fine if it reports such activities prior to any investigation. A second informant may also be eligible to receive a 50 percent reduction in fines. Samsung and LG have been the subject of previous antitrust enforcement by KFTC. Most recently, in October 2011, both companies were among ten liquid crystal display ("LCD") flat screen makers to be fined a total of KRW 194 m (approximately SGD 213,000) by KFTC for price fixing in the computer monitor and television markets between 2001 and 2006. Alongside the imposition of a fine on the two companies, KFTC has also made the unprecedented move of offering to subsidise online and newspaper advertisements inviting customers harmed by the two companies to join a class action suit to claim for follow-on damages. KFTC has offered at least KRW 100 m (approximately SGD 110,000) for private enforcement in this instance, a move justified by KFTC as part of a “wider policy” of deterrence, and assisting consumers to fulfill their basic rights. In Singapore: Under CCS’s leniency programme, a person or organisation that provides CCS with evidence of cartel activity prior to the commencement of an investigation will obtain full immunity from financial penalties. Subsequent leniency applicants may also be granted a reduction of up to 50 percent of the financial penalty if they come forward before CCS issues a notice of its proposed infringement decision under section 68(1) of the Act.

Auto light investigation gathers steam

The US Department of Justice’s (“DoJ ”) investigation into the auto light aftermarket continues to gather steam, as it has announced a further guilty plea by an executive of Depo Auto Parts Ltd, in relation to

involvement in cartel activities between 2000 and 2008, to exchange information and fix, and adhere to prices for the lights. The latest development comes on the back of the US DoJ securing previous guilty pleas from executives of other companies involved in the cartel activities, and in the context of the European Commission and the Japan Fair Trading Commission also investigating the industry, as outlined in Drew & Napier’s previous quarterly updates in October 2011 and January 2012 . The similarity between the timing of the investigations worldwide could indicate coordination between the authorities, which do have powers to share information in certain circumstances. Whilst various companies are under the spotlight and are looking at significant penalties, the case is a reminder that executives cannot hide behind the corporate veil in order to escape personal scrutiny. Indeed, the US DoJ has targeted and secured guilty pleas from five executives from the various companies, relating to their involvement in the cartel activity – a charge which can result in a prison term of up to ten years, and a USD 1 m (approximately SGD 1.25 m) fine. In addition to guilty plea of the executive of Depo, various executives from Maxone, Sabry Lee, Eagle Eyes Traffic Industrial and Yazaki Corporation have been charged. Two executives have already been slapped with a USD 25,000 fine (approximately SGD 31,000) and a 180 day prison term, and a USD 200,000 (approximately SGD 250,000) fine respectively. Under United States law, such private criminal actions (and plea bargains) can be entered into before an investigation has been completed by the US DoJ. To date, the US DoJ has secured more than USD 800 m (approximately SGD 1 bn) in criminal fines from all of the companies that have pleaded guilty, making it one of the largest antitrust investigations in US history. In Singapore: Participation in cartel activity in Singapore does not give rise to personal criminal liability. However, the criminal liability does arise in respect of certain conduct such as refusing to provide information to

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CCS, obstructing a CCS officer, destroying or falsifying information etc. The maximum penalty for such conduct is a 12 month prison sentence, a SGD 10,000 fine or both. To date, CCS has not publicly announced any instance of anyone being charged for such an offence since the introduction of competition law in 2006.

Ferry operators face enforcement proceedings in Spain

Five ferry operators in Spain, operating services between the mainland and the Spanish islands, have received stiff penalties for engaging in price fixing and market sharing activities between 2001 and 2010. The companies (Trasmediterránea, Baleria, Islena Marítima de Contenedores, Sercomisa and Mediterránea Pitiusa) were each handed fines equaling 10 percent of their annual turnover, the maximum possible fine under Spanish competition law. Price fixing and market sharing are usually viewed as particularly serious competition law infringements, and often attract penalties that are at the higher end of the spectrum. In this case, the length of the infringement was an aggravating factor in the calculation of the penalties. CCS had recently, on 9 March 2012, issued a proposed infringement decision against 2 ferry operators (Batam Fast Ferry Pte Ltd and Penguin Ferry Services Pte Ltd) servicing routes between Harbourfront and Batam. Whilst a proposed infringement decision does not represent a final enforcement decision, it is an indication that CCS will likely take enforcement action against the parties, subject to receiving representations from the parties involved. In the present case, representations are due to the Commission by 23 April 2012. In Singapore: The maximum penalty for competition law violations in Singapore is 10 percent of a companies annual turnover in Singapore, up to a maximum of three years. At present, CCS’s practice is not to make public the percentages it applies on particular parties in relation to its infringement decisions.

Detroit nurses claim against Michigan hospitals for alleged fixing of wages

In a drawn-out case, a group of registered nurses in Michigan, US, filed a class-action claim in a US District Court in 2006 against eight hospitals in Michigan for allegedly colluding to depress wages paid to nurses by, amongst other things, exchanging information on nurses’ wages (including salary ranges, retention and sign-on bonuses, planned raises and the timing of annual increases) in working group meetings attended by the chief executive officers of the defendant hospitals and by way of commissioned wage surveys from 2004 through 2006. According to an Opinion and Order regarding the Defendants’ Motions for Summary Judgment (“Order ”) on 22 March 2012, three of the original defendants, St. John Health, Oakwood Healthcare Inc and Bon Secours Cottage Health Services agreed to settle the claims against them in 2010. With respect to the case against the remaining five defendants, the District Court found that the evidence presented by the plaintiffs was insufficient to succeed in a per se claim against the defendants under section 1 of the Sherman Act, which imposes stringent standards of proof, and awarded the defendants summary judgment in that respect. However, the Court allowed the nurses’ action to proceed on a rule-of-reason basis in which the standard with respect to proving a detrimental impact on the wages paid is more “relaxed”. In Singapore: The fixing of employee wages and compensation between competitors can similarly constitute “purchase” price-fixing and run afoul of Singapore’s Competition Act.

EU imposes fines on freight forwarders case

The European Commission (“EC”) has imposed a fine of EUR 169 m (approximately SGD 277 m) on 14 freight forwarders for fixing the level of surcharges levied on forwarded freight shipments between 2002 and 2007.

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The EC determined that the forwarders had conspired to set four separate surcharges on the forwarding of freight, namely the “New Export System” (“NES”) surcharge, the “Advanced Manifest System” (“AMS”) surcharge, the “Currency Adjustment Factor” (“CAF”) surcharge, and the “Peak Season” (“PSS”) surcharge. The NES surcharge applies to shipments from the United Kingdom, which are required to go through the electronic declaration system introduced in 2003. Similarly, the AMS surcharge relates to new requirements for shipments entering the United States, which were introduced in the wake of the terrorist attacks in 2001. The PSS is a charge that relates to shipments exiting Hong Kong during the Chinese new year period, and the CAF was a surcharge introduced to deal with the one-time currency de-pegging of the Chinese Renminbi from the United States dollar in 2005. The fixing of surcharges can be viewed as price-fixing even if the base prices are not affected. CCS has similarly adopted the position that the fixing of a surcharge can amount to a price fixing agreement, in its infringement finding relating to the provision of express bus services (decision CCS/500/003/08). EC’s findings followed those made by the US DoJ, which has also recently investigated the matter and handed down fines totalling nearly USD 100 m (approximately SGD 125 m), with many of the fines being agreed to through plea agreements. New Zealand and Switzerland have also investigated the industry and reached settlement with many of the parties involved, though Canada and Australia both dropped their investigations. Many of the freight forwarders have announced that they are considering appealing the decision. In Singapore: Agreements and cartel activity entered into or carried out overseas is potentially subject to Singapore competition law if it has an impact on a Singapore market for goods and services. Given that freight forwarding necessarily involves an international dimension, it is possible that an investigation might be made by CCS into the same activity.

Update on Libor cartel investigations

The London Interbank Offered Rate ("Libor ") investigations concern a multi-jurisdictional probe into many major international banks, which are alleged to have been involved in fixing the Libor interbank rates between 2006 and 2008. In particular, the probe involves inquiries into whether the banks may have understated their borrowing costs (thereby resulting in mispricing of derivatives contracts) or communicated with each other and through brokers to manipulate the Libor. The Libor interbank rank, which is calculated by the British Bankers’ Association on a daily basis, is the reference borrowing rate applied by banks in London when lending among themselves. The Libor, alongside other benchmark interbank interest rates such as the Tokyo Interbank Offered Rate (Tibor) and the Euro Interbank Offered Rate (Euribor), are used for the trade of derivatives and other financial products worth approximately SGD 440 tn worldwide. UK FSA joins in worldwide Libor cartel probe On 21 February 2012, UK’s Financial Services Authority (“FSA”) revealed that its own investigations into an alleged global cartel among banks setting the Libor were already underway. The UK FSA is currently coordinating its investigation efforts alongside the US DoJ’s antitrust division and the US Securities and Exchange Commission (the authorities which first commenced the inquiry into the interbank rate-fixing allegations), as well as other national authorities which subsequently joined in the probe, such as the EC, the Canadian Competition Bureau, Japan’s Financial Services Agency and Switzerland’s Competition Commission. UBS has obtained leniency and conditional immunity in various jurisdictions In a few jurisdictions (at least in UK, US, Switzerland and Canada), UBS has sought to gain immunity by being the whistleblower. In these jurisdictions, UBS has agreed to cooperate with the relevant authorities in their investigations, and to disclose the involvement of its employees in collusions to rig the Libor. In exchange, UBS has obtained conditional leniency or conditional

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immunity in the US and in Switzerland. In the UK, it potentially faces a reduced fine for its alleged manipulation of the Libor interbank rate. It is unclear at this stage whether the EC has granted immunity to UBS, or any other of the parties involved in the investigations. RBS challenges Canadian Competition Bureau’s request for information In Canada, the Royal Bank of Scotland ("RBS") has challenged the Canadian Competition Bureau’s information request to the bank for its alleged role in the alleged Libor interbank rate manipulation. The information request contained requests for RBS to produce documents held by its UK-based parent company. While RBS had managed to secure a temporary stay against the Bureau’s request for documents in November 2011, the bank subsequently sought to obtain a permanent stay in relation to the Bureau’s information request. US investors commence private antitrust actions Separately, in the US, investors have commenced private actions in relation to the alleged manipulations of the Libor which are in violation of US antitrust laws. In Singapore: CCS grants total immunity from financial penalties for the first party to come forward before an investigation has commenced, subject to the satisfaction of several conditions where CCS has commenced investigations on its own accord, the "whistle-blower" may nonetheless be granted reductions in the financial penalty they face, of up to 100 percent. To date, CCS has received several leniency applications. In the Electrical and Building works bid-rigging case, the "whistle-blower" received full immunity from financial penalty.

Employees claim against Silicon Valley Companies for Non-Poaching Agreements

Six Silicon Valley companies are facing a US antitrust class action suit for practising anti-competitive employment practices.

In 2010, the US DoJ investigated the “non-poaching” agreements between Adobe Systems Inc., Apple Inc., Google Inc., Intel Corporation, Intuit Inc. and Pixar, which restrained competition between them for highly-skilled employees. In the high-technology sector, employees are typically recruited via “cold calling” and directly solicited from other companies. According to the US DoJ, the companies involved in the “non-poaching” pact had mutually agreed not to “cold call” each other’s employees, and in the absence of any legitimate protection of commercial interests ancillary to any legitimate collaboration between companies, this distorted competition for high-technology employees and deprived the employees of competitive information. Although there was no admission of any wrongdoing, the six companies eventually entered into a settlement with the US DoJ to end their “non-poaching” practice. They undertook to refrain from participating in any agreement that prevented the solicitation, recruitment or competition for employees. It should be noted that the settlement makes clear that the companies are not prohibited from attempting to enter into, entering into, maintaining or enforcing a no direct solicitation provision, provided the no direct solicitation provision is: (a) contained within existing and future

employment or severance agreements with the companies’ employees;

(b) reasonably necessary for mergers or

acquisitions, consummated or unconsummated, investments, or divestitures, including due diligence related thereto;

(c) reasonably necessary for contracts with

consultants or recipients of consulting services, auditors, outsourcing vendors, recruiting agencies or providers of temporary employees or contract workers;

(d) reasonably necessary for the settlement

or compromise of legal disputes; or (e) reasonably necessary for (i) contracts

with resellers or Original Equipment

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Manufacturers (“OEMs”); (ii) contracts with providers or recipients of services; or (iii) the function of a legitimate collaboration agreement, such as joint development, technology integration, joint ventures, joint projects (including teaming agreements), and the shared use of facilities.

The current class action suit is prompted by the US DoJ’s investigation. Former employees of the companies claim that these “non-poaching” agreements restricted competition for existing employees and harmed potential employees in the high-technology labour market as employers not having to compete for skilled employees would result in employees being compensated for less than what would have prevailed in a competitive labour market. At present, the class action suit is proceeding forward, with the plaintiffs being granted permission to search for more evidence of the anti-competitive agreements between the defendants. The jury trial date has been set for 10 June 2013. In Singapore: While the Competition Act and related Guidelines do not explicitly refer to such “non-poaching” agreements, section 34 of the Competition Act prohibits agreements which have an appreciable, preventive, restrictive or distortive effect on the Singapore market. Where companies collude to influence employment practices affecting the hire, retention or compensation of employees, this may constitute a buyers’ cartel and be considered an anti-competitive agreement.

Oil companies settle South Africa bitumen cartel case In March 2010, the South Africa Competition Commission ("SACC") referred its findings of price fixing in the bitumen market, against the Southern African Bitumen Association ("SABITA ") and seven major oil companies, to the South African Competition Tribunal ("Tribunal ") for adjudication. Bitumen and modified bitumen products are used in road construction, and is derived from the refining of crude oil.

The companies and SABITA were found by SACC to have fixed the price of bitumen, by collectively determining and agreeing on pricing principles, including a starting reference price and month price adjustment mechanism between 2000 and at least 2009. Two of the seven companies, Sasol Limited and its subsidiary, Tosas (Proprietary) Limited, were granted immunity from fines as their application for leniency had resulted in SACC's investigation into the alleged collusive agreements. SACC entered into settlement agreements with oil company Masana Petroleum Solution (Proprietary) Limited and SABITA and most recently in February 2012, announced that it had extended similar agreements with Engen Petroleum Limited and Shell South Africa Marketing (Proprietary) Limited. Total SA (Proprietary) Limited and Chevron SA (Proprietary) Limited are the remaining companies which have not reached an agreement with SACC. SACC is now awaiting confirmation of the settlements from the Tribunal. In Singapore: CCS has the power to grant total immunity to "whistle-blowers" that had not initiated the cartel or coerced other companies to participate, provided that they render their full cooperation to CCS and CCS did not already have sufficient information to establish the existence of the alleged cartel activity. The degree of leniency is determined by the stage in which the application was made: (a) Stage 1 – Total immunity for the first to

come forward before investigation commenced.

(b) Stage 2 – Reduction of up to 100 percent

in the level of financial penalties where the undertaking is the first to come forward but which does so only after an investigation has commenced.

(c) Stage 3 – Reduction of up to 50 percent

in the level of financial penalties to subsequent leniency applicants before CCS issues its intention to make a decision.

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(d) Leniency Plus – Additional reduction to financial penalties, if the applicant provides evidence of cartel activity in a separate market.

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.

German FCO raises objection against "most favoured treatment" clauses

Germany’s Federal Cartel Office (“FCO”) has issued a statement of objections against Hotel Reservations Service Robert Ragge GmbH ("HRS"), the largest online reservation portal in Germany, for taking advantage of its market power to force hotels to sign "most favoured treatment" clauses. FCO considered the clauses to be in violation of sections 1 and 20 of the German Act against Restraints of Competition. Most favoured nation clauses are not always considered to be anti-competitive and need to be assessed on the facts of the individual case. In some instances, they can give rise to consumer benefits. However, if they are engaged by entities with significant market power, their effect might be to foreclose the market from effective competition. HRS operates an electronic hotel reservation portal offering online bookings of hotel rooms from an international database of hotels. It is alleged that the "most favoured treatment" clause would disincentivise hotels from lowering its rates for HRS’s competitors (as in doing so it would need to also extend the same rate to HRS). This was seen to detrimentally affect competition by making it more difficult for smaller competitors to compete with HRS. FCO also alleged in its press release that HRS had, in the past, repeatedly blocked hotels that had not adhered to the "most favored treatment" clause, from its online booking services. HRS has the opportunity to comment on the allegations as the statement of objections does not constitute a final decision. In responding to the announcement, HRS claimed that the clauses will result in lower prices, higher availability and more favourable conditions for consumers.

In Singapore: To date, CCS has not made any enforcement decision involving most favoured nation clauses and their Guidelines on the section 34 Prohibition are silent as to how they may be approached in Singapore. Ultimately, CCS would likely assess the actual effects of any such clauses on competition, considering both the pro-competitive and anti-competitive effects, before forming a view on their legitimacy. Companies holding a significant degree of market power ought to be particularly careful when considering utilising such clauses.

European Commission investigates transatlantic joint venture between SkyTeam members

In January 2012, EC opened an investigation into a transatlantic joint venture between three SkyTeam members, Air France-KLM, Alitalia and Delta, to determine if the joint venture may harm passengers on certain EU-US routes by reducing competition on those routes. SkyTeam is one of three international airline alliances. Its members enter into various cooperation agreements with one another, which can vary in terms of scope, intensity and effect on competition. In 2009 and 2010, Air France-KLM, Alitalia and Delta entered into various agreements, under which they fully coordinate their operations on transatlantic routes with respect to capacity, schedules, pricing and revenue management. The airlines also share profits and losses on transatlantic routes. According to EC, this joint venture “represents the deepest form of cooperation within SkyTeam” and “aims at the alignment of the parties’ commercial incentives”. This latest investigation by EC comes hot on the heels of its 2010 investigation of a joint venture between members of Oneworld and an on-going investigation of another agreement between members of Star Alliance. In Singapore: Cooperation agreements and other agreements establishing joint ventures between competitors may potentially infringe Section 34 of the

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Competition Act which prohibits anti-competitive agreements between undertakings. Since 2006, CCS has cleared a number of cooperation and joint venture agreements in the airline industry. Most recently, Drew & Napier successfully assisted Singapore Airlines and Virgin Australia Airlines to obtain a clearance decision from CCS in respect of their proposed alliance.

ABUSE OF DOMINANCE Greece punishes Pepsi subsidiary The Competition Commission of Greece ("HCC") has issued a decision finding The Tasty Foods, a subsidiary of PepsiCo that competes in the savoury snacks market (under the Lay’s brand), has abused its dominance. The decision relates to conduct taking place of a period of eight years (2000 to 2008) and was built on dawn raids conducted in 2008, and HCC’s statement of objections in 2010. In issuing its decision, HCC fined The Tasty Foods EUR 16.2 m (approximately SGD 27.1 m), being the largest fine that HCC has issued in 2 years, and emphasising HCC's tough stance against anti-competitive practices. According to HCC's press release, The Tasty Foods was alleged to have engaged in a "… single, consistent and targeted policy in the market for salty snacks that sought to exclude its competitors from smaller retail outlets has adopted and (notably kiosks, grocery stores and traditional food stores & mini-markets)...". Specifically, The Tasty Foods was alleged to have used the following practices to exclude competition: (a) exclusivity agreements at wholesale level; (b) agreements for the provision of cabinets

on the basis of exclusivity, aimed at capturing the available space at smaller retail shops (e.g. kiosks) and raising entry/expansion barriers, to the exclusion of competitors;

(c) rebates conditional upon the commitment

of all, or the most substantial part of, available shelf/store space for its products;

(d) target rebates at both wholesale and retail level; and

(e) coordinated and targeted acts aimed at

replacing and removing, by unorthodox means, the products and cabinets/ of competitors from those outlets.

Ultimately, the concern of HCC is one relating to the foreclosure of competitors, through the implementation of the above practices. Such actions are seen to limit the growth possibilities of smaller competitors, and exploit consumers by preventing rivals from selling their products. The Tasty Foods have said that it is considering appealing against the decision. In Singapore: All of the listed practices could raise abuse of dominance concerns under Singapore competition law, where the indicative threshold for market dominance is considered to be a 60 percent market share. CCS’s first and only abuse of dominance decision in Singapore involved exclusive arrangements, albeit that the decision is currently being appealed.

Europe: Telecoms Companies in the Spotlight for Margin Squeezing On 6 January 2012, the Comisión Nacional de la Competencia ("CNC") commenced formal investigations against the country’s three leading mobile phone operators, Telefónica Móviles de España (“Telefónica ”), Vodafone España (“Vodafone ”), and France Telecom España (“Orange ”) for allegedly abusing their dominant position in the telecommunications market. The three companies own the necessary network infrastructure to provide both consumer and wholesale telecommunication services, and either selling these services to consumers directly at retail prices or charge mobile virtual network operators wholesale prices for hosting their services. CNC embarked on its investigation after receiving complaints from British Telecommunications PLC and BT España de Servicios Globales de Telecomunicaciones that the three companies abused their dominant position by consistently

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narrowing the price disparity between their retail and wholesale services, squeezing the profit margins of the mobile virtual network operators and thus restricting them from the market. CNC has reportedly found preliminary evidence of such margin squeezing as the wholesale prices imposed on the mobile virtual network operators appear excessive compared to the retail prices paid by consumers. The investigation is anticipated to be concluded within 18 months. Separately, on 10 February 2012, CNC fined Abertis Telecom (“Abertis ”) EUR 13.8 m (approximately SGD 23.04 m) for abusing its dominant position in the market for digital terrestrial television programmes. Abertis, which manages the country’s only national digital terrestrial television network, is obligated by law to grant its competitors access to the infrastructure at wholesale prices. However, CNC found that Abertis had abused its dominant position from April 2009 till end 2011 by offering its customers very low retail prices compared to the wholesale prices charged to its competitors. Such tactics reduced the profit margins of Abertis’ competitors, restricting them from the market even if they were as efficient as Abertis. Abertis has stated that they would appeal against CNC’s decision. Interestingly, these two cases involved wholesale prices that were either fixed, approved or heavily regulated by the Spanish telecommunications regulator, Telecoms Market Commission (“CMT”). It is worth noting that in two earlier cases, Telefónica and Deutsche Telkom were fined by the European Commission for engaging in similar margin squeezes. In both cases, the General Court upheld the European Commission’s fines of EUR 151 m (approximately SGD 248 m) and EUR 12.6 m (approximately SGD 20.7 m) on Telefónica and Deutsche Telecom respectively on appeal, confirming that companies cannot "ride behind" administratively-approved wholesale prices if the retail prices offered for the same services would make it unprofitable for the wholesale purchasers. In Singapore: There is no jurisdictional overlap between CCS and Singapore’s telecommunications regulator, the Info-Communications Development Authority of Singapore (“IDA”), since IDA has sole jurisdiction over competition matters involving telecommunication licensees in Singapore.

However, where feasible and appropriate, IDA will consult with other regulatory authorities, such as CCS, to facilitate the development of a fair and effective competition policy. Under the Telecom Competition Code 2012, IDA may direct telecommunication licensees to share the use of any infrastructure it controls with its competitors or offer a service on a wholesale basis where the infrastructure constitutes critical support infrastructure or where it is in the interest of the public. A telecommunications licensee with significant market power is also prohibited from engaging in anti-competitive pricing like price squeezing. IDA will find that price squeezing exists if the licensee’s downstream business or affiliate would fail to make a normal profit if it was required to pay the same input price as an efficient downstream competitor.

Italy fines Pfizer over generics The Italian Antitrust Authority ("Authority ") has fined pharmaceutical giant Pfizer for abusing its dominant position in the market for glaucoma treatment in Italy. The investigation was sparked off after the Authority received separate complaints from Ratiopharm Italia, a producer of generic drugs, and the European Generic Medicines Association that Pfizer was abusing its dominant position and preventing competitors from entering the market. This case is notable as it is the first time the Authority expounded on the issue of patent protection management strategies as a possible anti-competitive practice. According to the Authority, Pfizer, which has a 60 percent market share, artificially extended its patent protection on its drug, Xalatan, to prevent manufacturers from producing generic versions of the drug from entering the market. Beyond its original patent, Pfizer had applied for a divisional patent, followed by a supplementary protection certificate to extend the drug’s patent protection till 2011. Pfizer also threatened to sue these manufacturers if they attempted to commercialise their products before the expiration of the extended patent protection period. This resulted in a delay of seven months before Xalatan-equivalent generic drugs entered the market, and allowed Pfizer to reap EUR 17 m (approximately

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SGD 28.9 m) in additional profits, while the Italian healthcare system lost EUR 14 m (approximately SGD 23 m) in savings. The Authority imposed a fine of EUR 10.6 m (approximately SGD 17.9 m) on Pfizer and ordered the company to cease its anti-competitive practices. Pfizer denies any wrongdoing and intends to appeal against the Authority’s decision. The company claims that it applied for an extension of its patent protection to align the expiry date in Italy with other European countries. In Singapore: CCS recognises that intellectual property rights can be exploited to achieve anti-competitive effects. In determining whether a company is exploiting its intellectual property rights to abuse its dominant position and foreclose the market to competitors, CCS will consider, amongst others, whether (i) there is a refusal to supply a licence for use of the intellectual property in essential facilities; (ii) it would impact the technology and innovation markets; (iii) competition in another market would be harmed; and (iv) the acquisition of exclusive rights to a competing technology would harm competition.

MERGER REGULATIONS Postal Services Merger On The Cards Postal and logistics giants United Parcel Service (“UPS”) looks set to acquire its rival TNT, in a deal worth EUR 5.2 bn (approximately SGD 8.54 bn). However, there is wide speculation that the deal will be closely analysed by the European Commission and other competition authorities, as it will involve the consolidation of two significant players in the postal and logistics market. With the merger, it is understood that UPS will have the largest market share in both express and ground B2B parcels in both Europe and United States, or be in a strong position in other parts of the world. The other major players in this market are DHL and FedEx. In the usual course, the competitive assessment of a merger involves a study of potential “coordinated

effects” and “non-coordinated” effects. Coordinated effects are those which might indicate that the likelihood of collusion or coordinated behaviour amongst competitors is increased by the merger. Non-coordinated effects are those whereby the merged entity and the remaining competitors will be placed in a position to raise prices or lower quality after the merger. The deal is expected to close by September 2012 (subject to approval of the relevant authorities). In Singapore: In a case where two smaller competitors merge to become a more effective competitor in the market (eg lower costs arising from economies of scale or more comprehensive services due to a wider distribution network), this may be pro-competitive (albeit with a larger market share post merger), and not infringe the Competition Act.

UK Competition Commission approves in-flight catering joint venture

The UK CC has unconditionally cleared the in-flight catering joint venture between Alpha Flight Group Limited (“Alpha ”) and LSG Lufthansa Service Holding AG (“LSG”) despite initial concerns that the joint venture would lead to a duopoly situation for in-flight catering services at several airports in the UK. On 14 March 2012, the CC published its final report, in which it stated that the joint venture is unlikely to result in higher prices or lower quality for airline customers. Both Alpha and LSG are major suppliers of in-flight catering services within the UK. In addition to supplying both traditional hot meals and light snacks for service on aircraft, the companies also offer catering management and logistics services (eg trucking of food and loading on aircraft, dish washing services, and sourcing of buy-on-board goods such as tobacco and alcohol). Under the transaction, Alpha and LSG will combine their UK in-flight catering operations into a 50:50 joint venture. The businesses which contributed to the joint venture would cease to be distinct. In referring the case to the CC, OFT had initially been concerned that the joint venture would result

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in high combined market shares at ten UK airports (including London Heathrow) and lead to a reduction in the number of major national UK suppliers from three to two. However, the CC’s inquiry identified the presence of additional market players and ultimately found that the joint venture was unlikely to lead to a substantial lessening of competition in the relevant market for the supply of in-flight catering services in the UK. The CC was satisfied that the supply of services would remain sufficiently competitive in each of the relevant market segments (ie Heathrow versus other UK airports and short-haul versus long-haul catering. The CC considered that larger airlines would still be able to enjoy a degree of buyer power post-merger. Additionally, the CC found that in the short-haul segment (for both Heathrow and other UK airports), barriers to entry were not significant. The greatest competition concerns arose in relation to the market segment for long-haul flights out of Heathrow. Nevertheless, in reaching a favourable decision, the CC was satisfied that recent entrant DHL could act as a credible supplier to assuage concerns relating to a substantial lessening of competition in that segment.

In Singapore: In assessing whether a merger transaction will substantially lessen competition in the relevant market, while the level of market concentration is a factor of consideration, CCS will similarly consider other factors such as the extent to which new entry can take place to constrain the merged entity, the ability of customers to exert countervailing buyer power and the ability of existing rivals to compete with the merged entity.

Mining companies Glencore and Xstrata set to merge On 8 February 2012, commodities trading giant and mining investment company Glencore announced its intention to buy mining company Xstrata in a deal worth USD 39 bn (approximately SGD 48.2 bn) involving the mining, agriculture and commodities trading industries. The deal has drawn attention for its potential to change the mining landscape globally. Glencore is

one of the world’s largest commodities traders, while Xstrata owns coal, copper and nickel mines across Africa, South America and Central Asia. The companies’ activities overlap primarily with regard to copper, zinc and coal. The merger is expected to create the world’s biggest exporter of coal for power plants and the largest producer of zinc. The parties were initially expecting that the merger might not require a notification to EC. Glencore already owns a 34 percent stake in Xstrata, and as Glencore and Xstrata may already be regarded as a single entity, the deal may not constitute a merger under competition law. EC has also concluded in the context of previous mergers in 2006 and 2007, that Glencore has control (or ”decisive influence”) of Xstrata. However, EC concluded that due to material changes arising from the level of control Glencore has over Xstrata, the proposed deal warranted further review and ordered the parties to file a notification. It is noted that EC decides each case based on its specific facts, and that there is no precise shareholding or test for decisive influence under the European Competition rules. The parties announced at the end of February 2012 that the merger will be notified to EC. The deal is likely to come under the scrutiny of competition authorities in the US, Australia, China and South Africa as well. In Singapore: Control over an undertaking is defined in section 54(3) of the Competition Act as the ability to exercise decisive influence over the activities of that undertaking by reason of any rights, contracts or other means. CCS considers that decisive influence is generally deemed to exist if an acquirer gains ownership of more than 50 percent of the voting rights of another undertaking. However, CCS also notes that besides the legal acquisition of property rights, an acquirer may also obtain “de facto” control of an undertaking. CCS does not provide any precise thresholds for when it considers acquirer to have gained “de facto” control. In determining whether decisive influence exists, CCS will consider all the relevant circumstances on a case-by-case basis, and not only the legal effect of any instrument, deed, transfer, assignment or other act.

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EC scrutinises proposed takeover of EMI Music In November 2011, Universal Music Holdings Limited (“Universal ”) and Sony/ATV (a joint venture of Sony Corp. and Michael Jackson Estate) (“Sony ”) reached in-principle agreements with EMI Group (“EMI”) to buy EMI’s music business for a combined USD 4.1 bn (approximately SGD 5.2 bn). Under the proposed deal, Universal will acquire EMI Music for USD 1.9 bn (approximately SGD 2.4 bn), whereas a Sony-led consortium will acquire EMI Music Publishing for USD 2.2 bn (approximately SGD 2.8 bn). The proposed acquisitions are subject to approval by EC and national competition regulators elsewhere, including the US. Proposed Universal/EMI Music deal enters Phase II review in EU Universal is presently the world’s largest recording music company, with an estimated 27 percent market share in the recorded music industry worldwide. The acquisition of EMI’s recorded music business will see Universal’s market share in the global recorded music market increased to approximately 40 percent. Within the European Economic Area ("EEA"), the new merged entity could be almost twice the size of the next largest player in the relevant market, and in some countries such as France, may account for 50 percent or more of the market share in the recorded music market. After finding that the proposed Universal/EMI Music merger raised preliminary competition concerns in the wholesale of physical and digital recorded music in numerous European Union (“EU”) member states as well as in EEA as a whole, owing to the merged entity's high market share and increased market power vis-à-vis its direct customers, EC announced in March 2012 that the merger was going into a Phase II review. Under EC’s Phase II review, the regulatory authority has 90 days to determine whether to approve the proposed merger, or to seek additional remedies or divestments from Universal. EC is expected to issue its decision on the proposed merger on 8 August 2012.

Proposed Sony/EMI Music Publishing deal cleared by EC Sony presently engages in recorded music, music publishing and other activities including electronic products, entertainment services and online retail and music video services. The proposed Sony/EMI Music Publishing merger, if approved, will see Sony holding an approximate 30 percent market share in the music publishing market worldwide, ahead of Universal’s market share which is estimated at 22 percent. On 19 April 2012, EC cleared the proposed acquisition of EMI Publishing by Sony, conditional upon the divestiture of the worldwide publishing rights to works included in four catalogues (Virgin UK, Virgin Europe, Virgin US and Famous Music UK) and the musical works of 12 contemporary Anglo-American authors (some of whom have future delivery obligations towards Sony and EMI Publishing). In light of these commitments, EC concluded that the transaction would not significantly impede effective competition in the European Economic Area or any substantial part of it. In Singapore: A Phase II review by CCS typically takes 120 working days, and is undertaken where CCS is unable to conclude, within the Phase I review whether the proposed merger situation raises any competition concerns. Prior to CCS completing its assessment of a notified proposed merger situation, merger parties may offer commitments that remedy, mitigate or prevent the substantial lessening of competition arising from the merger. CCS will generally consult with persons it considers appropriate before accepting the commitments. Where CCS accepts a commitment, it will make a favourable decision.

China clears Western Digital/Viviti merger with conditions In March 2012, just over three months after obtaining conditional merger clearance from EU, Western Digital’s proposed acquisition of Viviti, Hitachi’s hard disk drive (“HDD”) business, was given the green light by China’s MOFCOM with substantial remedies imposed.

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The transaction, which was scheduled for completion in the same month, followed closely on the heels of the Seagate/Samsung HDD merger, which was completed in December 2011. The two mergers saw the number of market players in the worldwide HDD business shrink from five to three. Like the Seagate/Samsung merger, the Western Digital/Hitachi merger was notified across many jurisdictions around the world. Whilst China was the only competition/antitrust law jurisdiction to impose conditions on the clearance of the Seagate/Samsung merger, conditions were imposed for the clearance of the Western Digital/Hitachi merger in, amongst others, EU, US, and China. For more information on the Seagate/Samsung merger notifications in EU, China and Singapore, please see our previous quarterly update here . The remedies imposed by MOFCOM on the Western Digital/Hitachi merger included both structural and behavioural remedies. As with EU and US decisions, the merged Western Digital/Hitachi entity was required by MOFCOM to divest essential production assets for its 3.5-inch HDDs. The divested assets were sold to competitor Toshiba. Other behavioural conditions imposed by MOFCOM on the Western Digital/Hitachi merger included: (a) A requirement to maintain Viviti in its pre-

transaction state (ie as a separate competing entity and brand) for at least two years in respect of investment/spending in research and development (“R&D”), production, procurement, marketing, after-sales services, etc.

(b) A requirement that prior approval from

MOFCOM must be sought for any R&D co-operation between the parties. MOFCOM made clear that whilst Western Digital and Viviti could cooperate to increase productivity and innovation, such cooperation cannot lead to any reduction in competition between, or a loss of independence of, the parties.

(c) A requirement for “chinawalls” to be established between the Western Digital and Viviti to prevent the sharing and exchange of commercially-sensitive information between them.

(d) The appointment of an independent

supervision trustee to oversee the carrying out of, and adherence to, the remedies imposed by MOFCOM. The parties are required to report to the supervision trustee on matters pertaining to the business operations and independence of the businesses on a monthly basis.

In Singapore: CCS, like MOFCOM, has the power to impose both structural and behavioural conditions on a merger. CCS has, however, indicated that it considers that structural remedies are preferable to behavioural ones, as they tend to address the competition concerns created by the merger more directly and also require less monitoring (ie less administrative resources on the part of CCS).

Namibia clears Wal-mart/ Massmart merger with conditions Following the Namibian Competition Commission’s successful appeal in the Supreme Court of Namibia against a High Court order to set aside conditions imposed for the clearance of a merger between Wal-mart and Massmart, the Nambian Competition Commission imposed fresh conditions for the clearance of the proposed deal. The conditions previously imposed on the deal, which Wal-mart appealed against, included, inter alia: (a) the allowance for local participation in

order to promote a greater spread of ownership, in particular to increase the ownership stakes (in the merged entity) of historically-disadvantaged people;

(b) a requirement that there should be no

employment loss as a result of the merger; and

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(c) the merger should not create harmful effects on competition that may give rise to the risk of the market becoming foreclosed to competitors, especially small and medium enterprises.

The revised conditions imposed by the Namibian Competition Commission following the Supreme Court decision reportedly include commitments by the supermarkets to preserve employment (ie not to retrench workers and to continue to work with representative trade unions) for two years and to consult with the Minister of Trade and Industry to establish a programme to develop domestic supplies. From news reports, it appears that the Namibian Competition Commission has omitted the original condition imposing local ownership in the merged entity from the revised conditions. Commentary: Commitments or conditions imposed on mergers by competition authorities may not necessarily only include conditions to ameliorate competition concerns. The conditions imposed may reflect the particular jurisdiction’s prevailing policy objectives and wider economic concerns direction. When notifying of a merger or a transaction, it is helpful to obtain local counsel’s advice or, indeed, informal preliminary advice from the relevant authority on prevailing thinking so that where necessary, representations which may alleviate any policy concerns may be made at an early stage.

UK Competition Commission's Provisional Decision questions construction joint venture The UK CC has issued a provisional decision regarding the proposed Joint Venture between international construction companies Tarmac Limited ("Tarmac ") (a subsidiary of Anglo American PLC) and Lafarge S.A. ("Lafarge "). The Commission was of the view that that the proposed joint venture could harm competition in certain markets for construction materials. OFT, which had originally referred the GBP 1.8 bn (approximately SGD 3.57 bn) proposed joint venture to the Commission in September 2011, had identified four major areas of concern:

(a) overlaps in the supply of aggregates, asphalt and ready-mixed concrete in a large number of local areas;

(b) an overlap in the supply of bulk grey

cement at a regional and/or national level;

(c) an increased prospect of coordination in

the supply of bulk grey cement; and (d) a concern that the joint venture could

foreclose independently ready-mix concrete ("RMX") suppliers by making it substantially more difficult for them to source bulk grey cement at competitive prices.

Cement and aggregates are the key ingredients of RMX and aggregates can be used in the production of asphalt and in specialist applications like rail ballast and high purity limestone. The Commission echoed OFT's concerns and provisionally found that the proposed joint venture could lead to substantial lessening of competition in the markets for the supply of bulk cement, rail ballast, high purity limestone, aggregates, asphalt and RMX. The Commission is now consulting on various methods to address its concerns, including prohibiting the inclusion of the parties' cement and ready-mixed concrete businesses in the joint venture, requiring the parties to divest some of these operations and looking at areas where the companies’ local businesses overlap to address concerns in specific places. Economics 101: The manufacture of cement requires significant sunk investments and large economies of scale. Markets with such characteristics tend to be concentrated with few players. As such markets are usually oligopolistic, they are often the subject of competition law scrutiny, be it in the form of market investigations on the competition authorities' own accord, investigations into complaints alleging collusion or merger assessment.

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South Africa blocks copper market merger In February 2012, the South Africa Competition Commission ("Commission ") announced that it had prohibited the acquisition of Jobling Investments (Proprietary) Limited ("Jobling ") and its subsidiary Maksal Tubes (Proprietary) Limited ("Maksal ") by Sunset Bay Trading 368 (Proprietary) Limited ("Sunset Bay "). This is the fifth merger blocked by the Commission in recent months. Maksal manufactures and supplies solid copper extrusions and extruded copper busbars ("copper products ") to OEMs as well as to the acquirer in this transaction - Sunset Bay and its subsidiary, Copalcor (Proprietary) Limited ("Copalcor "). As Sunset Bay and Copalcor, in turn, also supply to OEMs, the Commission considered the parties to be at the very least potential competitors in the market for the distribution of copper products. The Commission's decision, published in the Government Gazette on 23 March 2012, highlighted that the proposed merged entity would have a very strong market position in the down-stream distribution market. The merger would raise the already high entry barriers higher and make it difficult for both existing competitors or potential entrants to compete. The customers of the merged entity would have very limited countervailing power. The merged entity would likely be able to unilaterally increase prices, reduce output or the quality of copper products and would have the ability and incentive to foreclose current and potential competitors. The Commission was also of the view that despite the merged parties' submission that efficiencies in production would arise, and that the merger would create jobs in South Africa (which the Commission stated was an important consideration), the Commission ultimately determined that the merger had no credible efficiencies and did not produce sufficient benefit to be justified. Economics 101: Vertical mergers can be defined as mergers between two undertakings which operate on different levels of production or supply chain of an industry. Horizontal mergers are those that take place between entities operating in the same

economic market. Vertical mergers are often pro-competitive and are generally considered less likely to raise concerns compared to horizontal mergers. However, vertical mergers may be anti-competitive if market power is present in at least one level in the production or supply chain, or if the market is already characterised by significant vertical integration.

PROCEDURAL MATTERS UK COMPETITION APPEAL TRIBUNAL LIMITS ACCESS TO

DOCUMENTS In an important decision with regard to the boundaries of litigation privilege in the context of competition law proceedings, the Competition Appeal Tribunal (“CAT”) has denied a request by OFT to access certain documents of supermarket group Tesco. Tesco is in the process of appealing a decision by OFT to CAT, and had disclosed documents prepared after its own internal investigations (conducted in conjunction with external counsel), in order to build its case. The issue at hand was that Tesco had only disclosed those documents favourable to its own case, and not all of the documents. Ultimately, CAT determined that the documents would be covered by litigation privilege, and that OFT did not have a right to obtain all of the documents. The decision is significant for a number of reasons. First, should CAT have ruled in OFT’s favour, this may well have impacted how companies go about conducting internal investigations and how evidence is collected and presented in the context of appeals. Secondly, the decision appears to support the principle that the disclosure of some privileged documents does not waive privilege in respect of all documents. In Singapore: In the context of an investigation and an appeal, parties have the ability to resist disclosure of a document on the basis that it is legally privileged.

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According CCS’s own guidelines, this privilege can attach to documents prepared by external counsel, in-house counsel, and foreign counsel. The question of whether the disclosure of some privileged documents waives privilege in respect of all documents is yet to be considered in a competition law context in Singapore.

LENIENCY APPLICATIONS AND PAPERS GUARANTEED

CONFIDENTIALITY IN GERMANY In what is likely to be an influential and much discussed decision, the district court in Bonn has ruled that papers filed in a leniency application, including the application itself, should not be disclosed to a third party seeking access to the documents to strengthen its private damages claim against parties that were subject to the cartel in question. Pfleiderer, a customer of a decorating-paper cartel in Germany, was seeking access to leniency documents held by the German competition authority, FCO. FCO rejected the request on the basis that it would damage the effectiveness of the leniency programme and would likely lead to a chilling effect on the likelihood of parties coming forward to seek leniency. Leniency programmes are generally designed to incentivise parties to come forward and provide information to competition authorities regarding cartel activities. In the usual course, a party can stand to benefit from full immunity from prosecution or up to a 100 percent reduction in the amount of financial penalties levied, depending on the point at which the application is made, and subject to the fulfillment of certain conditions. Leniency programmes are now prevalent in a large number of competition regimes, and are generally acknowledged to be an important tool in identifying and cracking cartels. The Bonn district court was referred the matter from the European Court of Justice (“ECJ”), which heard the appeal in respect of FCO’s decision. Whilst ECJ appeared to give Pfleiderer a glimmer of hope in stating that EU laws could allow the disclosure of documents, it referred the decision to the Bonn district court to make the final ruling.

Ultimately, the Bonn district court’s ruling was premised on the desire to not undermine the effectiveness of the leniency programme in place. In doing so, leniency applicants in Germany now seem to be assured that the documents that they provide during the leniency process will not be used against them in private damages claims by third parties. In Singapore: Singapore has operated a leniency programme since the introduction of the Competition Act in 2006. It has been utilised on numerous occasions and affords the first applicant to meet CCS’s criteria full immunity from prosecution (or up to a 100 percent reduction in the financial penalty imposed). Private actions for damages are also allowed in Singapore, under section 86 of the Competition Act, following an infringement decision being issued by CCS. It is, as yet, untested whether any such litigant may seek third party discovery of documents submitted to the authorities in the context of a leniency application.

FEATURE ARTICLE GLOBAL PATENT WARS We provide a brief summary of recent developments and discuss some of the implications under competition law for businesses Microsoft, Apple, Motorola, Google, Samsung – these companies have revolutionised the way we work and communicate. However, in the last year or so, the competition between these high-tech bigwigs and household names has burgeoned into a series of bitter and complex patent litigation battles across multiple jurisdictions. At the heart of the battles is the licensing of standard-essential patents – patents that are vital for industry players to achieve adherence to a technology standard. In order to ensure continued access to standard-essential patents, patent holders of such patents

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are typically required by standard-setting organisations to comply with a set of licensing obligations known as FRAND (ie fair, reasonable and non-discriminatory) terms, and to refrain from imposing discriminatory licensing costs or terms that could harm competition. Recent Developments In the last three months alone, EC commenced three investigations to look into the alleged failure of patent holders to honour their commitments to the European Telecommunications Standards Institute (“ETSI”), a key industry standard setting body in Europe. In 1998, ETSI imposed a set of conditions on holders of patents that were necessary for the implementation of 3G mobile and wireless telecommunications system standards in Europe. Samsung Electronics (“Samsung ”) and Motorola Mobility Inc. (“Motorola ”) are currently the subject of separate investigations by EC, in relation to whether their patent licensing practices breach their commitments to ESTI. EC’s investigation into Samsung’s patent licensing practices comes on the back of a high profile and much-reported multi-jurisdictional patent war between Samsung and Apple, in relation to the technology for tablets and mobile handsets produced by the companies. The disputes between the two technology giants reportedly began in April 2011 when Apple filed a lawsuit against Samsung Electronics in the US, alleging patent infringements. Samsung retaliated by taking out injunctions against competing mobile device makers, among them Apple, for alleged infringements of some of Samsung’s patent rights. EC is currently investigating whether Samsung’s injunctions violate its commitments to ETSI and distort competition in the market for mobile devices in Europe. Similarly, Motorola, a supplier of mobile devices, TV set-top boxes, end-to-end video solutions and cable broadband access solutions, had sought injunctive relief in Germany against Apple and Microsoft’s key products, such as the iPhone, iPad, Windows and Xbox. Apple’s first offer for licensing rights of Motorola’s patents was rejected by Motorola as it was deemed too low, a view affirmed by the lower court when it granted the initial injunction. In late February 2012, a higher

court in Germany cancelled the injunction against Apple on the back of a second offer by Apple. In response to complaints by Apple and Microsoft, EC is investigating whether Motorola’s actions amount to a breach of its patent licensing commitments made under FRAND terms and whether such behaviour results in a contravention of European competition rules. EC is also assessing whether Motorola’s licensing conditions for its essential patents were “unfair”. Immediately prior to this, Motorola was in the spotlight for its merger with Google, in a vertical deal worth USD 12.5 bn (approximately SGD 15.6 bn) that had been under antitrust review since it was announced last August. Google’s purchase of Motorola provided it with the capability to manufacture its own mobile handsets, as well as an accompanying portfolio of approximately 17,000 patents and 6,800 patent applications, including many standards-essential mobile patents. The merger received unconditional antitrust clearance most notably from the US, European and Korean antitrust authorities. The merger had raised antitrust concerns on two fronts. Firstly, whether Google would restrict its Android operating system to Motorola handsets only and secondly, whether Google would restrict competition in the mobile operating systems market through an abuse of Motorola’s standard-essential patents (eg requiring preferential treatment for its Android operating system or other core products, or by slowing competitors’ access to the patents, delaying innovation and the entry of new products into the market). The merger was eventually cleared on the basis that the first concern would be unlikely to result in restrictions to competition as Google’s core business model is to push its online mobile services and software to the widest possible audience. Therefore, the authorities concluded that Google would not have the incentive to limit access to its Android operating system—estimated to constitute half of the global market for smartphone operating systems—to Motorola handsets only, given Motorola’s small market share. In relation to the second concern, the authorities deemed the risk of patent abuses to have existed

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even before the merger, and hence the concerns in that regard were not merger-specific. Google apparently pledged to standard-setting organisations around the world that it would cap its licensing fees at a maximum rate of 2.25 percent of the net selling price for each phone, among other promises on the conditions under which it would license the patents. However, the authorities indicated that they will keep close watch for possible abuses in Google’s use of the standard-essential patents. While Israel and Taiwan have also cleared the deal, to date, antitrust regulators in China have yet to rule on the merger. The Chinese authorities indicated that they were looking at a possible decision in June this year. In February this year, Cisco Systems (“Cisco ”), which manufactures high-end video conferencing equipment, appealed against EC’s decision to clear the merger between Microsoft and Skype on the last day available for an appeal. The USD 8.5 bn dollar (approximately SGD 10.6 bn) deal was unconditionally cleared by EC in October 2011, and Cisco’s views had been sought as part of EC review. While Cisco claims that it does not oppose the deal, it has cited concerns that the merged entity will dominate video communications, and is appealing for the imposition of stricter conditions on Microsoft, including the guarantee of inter-operability between Skype and other voice over Internet protocol (“VoIP”) software. Cisco launched its appeal in EU General Court together with Messagenet SpA, an Italian fixed-line and VoIP telephone services provider, and a Skype rival. Interface between intellectual property and competition laws It is not unusual to ask whether there is an inherent conflict between the objectives of intellectual property (“IP”) and competition laws. IP law confers exclusive rights; competition law strives to keep markets accessible to all. However, the ultimate goal of both laws is the same – to promote innovation and competition. In the last decade, there has been increasing recognition of the alignment between intellectual property and competition law, as well as the need to clarify the interface between the two. The US antitrust agencies, the US Federal Trade

Commission and the Department of Justice first published their Guidelines for Licensing Intellectual Property in 1995, and updated this with their 2007 Report on Intellectual Property Rights. The debate on the interface between intellectual property and competition law also started to pick up speed in Europe after 20001. The European Court of Justice, in particular, has made it clear that the mere ownership of patents cannot form the basis for an abuse of dominance. Instead, it is the improper use of such patents that may give rise to concerns. In the US, the Supreme Court has also ruled that the ownership of patents do not necessarily create market power. In Singapore, CCS has espoused similar principles. CCS Guidelines on the treatment of Intellectual Property Rights set out the factors and circumstances that CCS may consider when assessing agreements and conduct which concern IP rights. While CCS considers that in general, any company – even a dominant firm – may choose with whom to deal, in limited circumstances, a dominant undertaking’s refusal to supply a licence may constitute an abuse of dominance. Another important point to note is that agreements which have as their primary objective the assignment or the licensing of IP rights do not benefit from the exclusion for vertical agreements applied to section 34 of the Competition Act. To date, CCS has not publicly investigated any party for a competition violation in relation to IP-related issues. However, the existence of sophisticated rivals with the resources and wherewithal to make a credible case before competition regulators may well be effective at increasing the likelihood of regulatory intervention. Businesses that deal with IP may wish to review their practices to ensure their licensing practices are compliant with competition law, to reduce the ability of rivals to use complaints as a tactic to divert their resources and attention.

1 See the EC's Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements.

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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 (9th Edition) and 2012 (10th Edition) 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 and the International Who’s Who of Regulatory Communications Lawyers 2008 - 2011 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. Most recently, Chong Kin was listed in Best Lawyers for Antitrust Law in Singapore.

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.