Competition Authorities Clamp Down on Big Tech Acquisitions
Edgaras Margevicius
Founder & Managing partner @ Prevence | M&A, Venture Capital and Private Equity | Competition law | Corporate | Business & Startups advisor
The last month has once again given us a new list of cases and events that are representative of the dynamic antitrust environment on an international scale: the cases are multifaceted, one even precedential, stakeholder actions unpredictable and some fines deterringly high for those companies caught red-handed in anticompetitive conduct.
But there is also good news for some companies. In regard to high-profile cases, the CMA has (partially) cleared Broadcom/VMWare following a phase 2 inquiry, assessing that the tie-up will not significantly affect the UK’s server hardware supply negatively. As opposed to this, things are not looking so bright for Amazon in the US, as the Federal Trade Commission does not see things so favourably for the e-commerce platform, whom they have accused of tricking customers into subscribing to Amazon Prime with the use of “dark patterns” – a method which, in practice, is much less ominous than it sounds, yet still harming to the consumer. More on this below.
Moreover, this month we saw regulators from all over the world tighten their grip on companies displaying anti-competitive conduct: South Korea’s watchdog slapped a resounding fine on misconducting pharma companies and Kenya’s regulator imposed their highest fine so far on a nationwide steel cartel. Read about this and more in the article below. As always we welcome any comments and points of discussion from your side.?
International Landscape
CCC Prohibits First Mergers Since Becoming Operational
The COMESA Competition Commission (CCC) has rejected the acquisition of the decorative coatings business of Kansai Plascon Africa Ltd (Kansai) in Eswatini, Zambia, and Zimbabwe by Amsterdam-based AkzoNobel N.V. This decision marks the CCC's first blocking of a merger since being founded in 2013.
Some background on this: COMESA stands for the Common Market for Eastern and Southern Africa. It is a regional economic organization in Africa that promotes economic integration and cooperation among its member states with the primary goal of creating a common market, facilitating trade, and enhancing economic development in Eastern and Southern Africa.
The CCC conducted a review of the merger and identified overlaps in both industrial and decorative coatings markets. Concerning industrial coatings, the merger was approved without conditions as it wouldn't harm competition in the Common Market. However, for decorative coatings, the CCC had significant competition and public interest concerns.
Specifically, in the decorative paints market, the merger would combine two strong brands (Plascon and Dulux) without effective competition. This loss of competition would allow the merged entity to potentially exercise undue market power, leading to the CCC's decision to prohibit the merger despite multiple offerings of remedy commitments, mostly involving divestitures.
Australian Regulator Imposes Huge Fine on Bluescope Steel
BlueScope Steel, a multinational industry giant, has been hit with a fine of €34.2 million due to involvement in cartel activities aimed at manipulating steel product prices within Australia. The Federal Court verdict also led to the personal imposition of a fine of €341.000 on the company's former general manager, who played a key role in the scheme. The Australian Competition and Consumer Commission (ACCC) initiated legal action against BlueScope in 2019, with the final ruling being delivered in 2022.
BlueScope's attempt to collude with eight local steel distributors and an overseas manufacturer in order to artificially alter the price of flat steel was unveiled during the trial. This conduct could have significantly raised costs for flat steel products, which are extensively utilized in construction, manufacturing, automotive, and transportation sectors.
ACCC Commissioner emphasized the broader implications of this case, stating that it should serve as a stern warning for all individuals and businesses contemplating similar price-fixing endeavors. The repercussions are substantial, even if such attempts fail to result in concrete agreements. The court's decision also carried a notable directive aimed at deterring future misconduct. It ruled that Mr. Ellis would not be permitted to seek insurance coverage for his fine, as this could undermine the deterrent effect of the penalty.
Amazon Investigated by FTC for Duping Customers?
Known for their deep understanding of customer centricity, Amazon is now going to have a harder time promoting this image, seeing that the Federal Trade Commission (FTC) is currently accusing the eCommerce giant of unlawfully enrolling millions of consumers into its paid subscription service without consumers consent and making it unnecessarily difficult for them to cancel. The FTC filed a lawsuit against Amazon in federal court, alleging that the company knowingly deceived consumers into unknowingly signing up for Amazon Prime.
Amazon has rejected the FTC’s claims adamantly, claiming they are "false on the facts and the law." The FTC, however, contends that Amazon employed "dark patterns," manipulative and deceptive user-interface designs, to trick consumers into enrolling in automatically renewing Prime subscriptions. While Amazon is constantly in headlock with competition regulators internationally, it is uncommon for the company to so outspokenly reject the allegations made towards them.?
The lawsuit seeks civil penalties and a permanent injunction to prevent future violations by the company. It is part of a larger effort by President Joe Biden's administration to rein in the enormous market power wielded by Big Tech firms and promote increased competition to safeguard consumer interests. The FTC has been investigating Amazon's Prime program's sign-up and cancellation processes since March 2021.
The complexity faced by consumers attempting to cancel their Prime subscriptions, as outlined in the complaint, highlights the growing global efforts to curtail the immense influence of tech giants like Amazon, Apple, and Meta, especially by watchdogs like the FTC or the EU Commission. As the efforts to rein in their excess influence intensifies, this lawsuit is seen as emblematic of the broader regulatory challenges faced by competition regulators worldwide.
South Korean Regulator Slaps Hefty Fine on Pharmaceutical Companies
South Korea's Fair Trade Commission (SKFTC) is known for not holding back when it comes to high fines for anticompetitive businesses and they are currently living up to their name by having recently cracked down on Korea’s pharmaceutical industry for market collusion. The KFTC has issued a hefty $31.9 million fine to a network of 32 pharmaceutical firms allegedly involved in collusive practices in the production, distribution, and wholesale of vaccines for the national immunization program.
The investigation revealed that the companies engaged in unfair business practices during 170 vaccine procurement bids carried out by the Public Procurement Service between 2013 and 2019. These bids amounted to a staggering 700 billion won in total. The antitrust regulator's findings showed that the companies shared bid prices to pre-select a winner, thereby undermining the competitive nature of the bidding process.
The fines also extended to companies that had previously faced punitive measures back in 2011 but were found to be involved in collusion again. Notably, the investigation exposed extensive bid rigging across the local vaccine market, implicating vaccine manufacturers, distributors, and wholesalers alike.
Apart from punishing the companies involved, this crackdown communicates two messages: Firstly, South Korea is committed to enhancing competitiveness and accountability within the international market, secondly, that they are determined to keep a watchful eye on the pharmaceutical sector to ensure that anti-competitive behaviour is curtailed.
Kenyan Watchdog Slaps Record Fine on Steel Cartel
The Competition Authority of Kenya (CAK) has taken further steps to inhibit anti-competitive practices in Kenya’s steel manufacturing sector, imposing penalties of around $2 million on nine prominent steel companies. The move comes after an exhaustive investigation revealed that these companies engaged in cartel behavior, artificially inflating steel product prices and thereby raising construction costs for housing and infrastructure projects.
The penalized firms include Nail and Steel Products Limited, Brollo Kenya Limited, Blue Nile Wire Products Limited, Tononoka Rolling Mills Limited, Devki Steel Mills, Doshi & Hardware Limited, Corrugated Steel Limited, Jumbo Steel Mills, and Accurate Steel Mills Limited. They have been held accountable for orchestrating price-fixing arrangements, collectively setting prices and adjustments. Except for Accurate Steel Mills, these companies were also implicated in limiting imports of certain steel components, leading to an artificial shortage and price hike.
These practices stand in direct violation of the Kenyan Competition Act, which underscores the importance of competitive markets for consumer benefits such as reasonable prices, product variety, and improved quality. Such markets also foster innovation among industry players.
According to the press release, the primary goals of the penalties are to restore fair competition dynamics within the sector and to discourage companies from adopting anti-competitive strategies.
The CAK highlighted the seriousness of the situation, noting, "Cartels, as we've seen here, operate against consumer interests and result in economic harm. In this case, steel companies colluded to manipulate prices, margins, and output strategies, all of which directly contravene our competitive market principles."
European Landscape
British CMA Clears Broadcom/VMWare Merger
Global technology company Broadcom's acquisition of VMware, a provider of software products and services for efficient server operations, has been given the green light by the Competition and Markets Authority (CMA) following a Phase 2 inquiry. The CMA's independent panel conducted a thorough investigation, considering new evidence and stakeholder input. The primary concern was whether Broadcom's purchase of VMware would limit competition in server hardware components.
Despite initial worries about the deal's impact on competition and innovation, the panel concluded that the acquisition would not significantly diminish competition in the UK's server hardware component supply. Concerns included the potential for Broadcom to undermine rivals' products' compatibility with VMware's software. However, the panel determined that the financial benefits of such action would not outweigh the possible costs in terms of lost business.
Moreover, the panel evaluated whether Broadcom might gain sensitive information from VMware's competitors after the acquisition, which could stifle innovation. However, this concern was dismissed, as the sharing of sensitive information generally occurs at a stage where it wouldn't provide a competitive advantage.
The decision, reached after considering feedback during a consultation on provisional findings, affirms that the Broadcom-VMware deal poses no substantial reduction in competition and can proceed in the UK market without restrictions.
Icelandic Shipping Company Loaded With Hefty Fine
The Icelandic Competition Authority has fined Samskip, a multinational shipping company with a €30 million fine for collusion with their biggest competitor named Eimskip. Samskip strongly disputes the decision.
The decision was announced on a seven-year investigation, including raids at Samskip and Eimskip offices, revealing alleged extensive violations, including?
Samskip’s legal team clearly expressed dissatisfaction with the findings and the decision and have made it clear that the company will take the case to the Competition Appeals Committee, strongly believing that the fine and charges cannot withstand deeper scrutiny.
CMA Reviews Provisional Findings in Hitachi/Thales Mega Merger
The Competition and Markets Authority (CMA) has issued an updated evaluation concerning Hitachi's proposed €1.7bn acquisition of Thales' Ground Transportation (GTS) segment, involving rail signalling.?
In June, CMA flagged potential competition concerns related to digital rail signalling systems. After analyzing new evidence and prior data, the CMA's inquiry group now believes the merger won't significantly reduce competition for communications-based train control (CBTC) signalling systems in the UK. However, the CMA still maintains its concerns about reduced competition in the digital mainline signalling sector.?
The focus of evaluation was primarily on Bakerloo and Piccadilly lines' resignalling contracts for the London Underground, where initial indications showed Hitachi as a competitive bidder. Yet, post-consultation data suggests Hitachi might not meet the client’s project standards due to ongoing and less intricate CBTC initiatives.?
Consequently, the CMA revised its initial conclusions, indicating that Hitachi wouldn't strongly challenge Thales for future CBTC projects on the London Underground, ultimately not diminishing competition for CBTC signalling systems in the UK.?
The investigation is ongoing, with the final report expected by October 6th.
Final Thoughts
As every month, we review the cases and events that have occurred with the thought in mind: “What goals were pursued by these decisions and actions and were these goals achieved appropriately?”
Competition law exists to ensure that businesses compete fairly, consumers have choices, and markets remain open and competitive. It is highly motivating to see regulators that are not often on the international radar take a stand by issuing fines on companies that are suppressing aforementioned goals. The CCC and Kenya’s regulator is a fine example for this, although in the latter case the question of the deterrent effect has to be asked, as it is so often asked, especially when a fine of $2 million is divided among nine companies – in the steel industry nonetheless.
In terms of cooperation with regulators, Amazon has been very unaccommodating with the FTC in regard to the latters accusation of using dark patterns to trick people into subscribing and staying subscribed to Amazon Prime. As much as Amazon is used to getting accused and fined by regulators all over the world, the online giant is also known to be open for cooperation, which gives the slight impression that the FTC might have come to their conclusion too fast in accusing a big tech player – something that is also known to happen, especially with the current administration.
All in all, we can say that we are very happy to look back on an eventful month and also look forward to informing you about current events in four weeks.The last month has once again given us a new list of cases and events that are representative of the dynamic antitrust environment on an international scale: the cases are multifaceted, one even precedential, stakeholder actions unpredictable and some fines deterringly high for those companies caught red-handed in anticompetitive conduct.
But there is also good news for some companies. In regard to high-profile cases, the CMA has (partially) cleared Broadcom/VMWare following a phase 2 inquiry, assessing that the tie-up will not significantly affect the UK’s server hardware supply negatively. As opposed to this, things are not looking so bright for Amazon in the US, as the Federal Trade Commission does not see things so favourably for the e-commerce platform, whom they have accused of tricking customers into subscribing to Amazon Prime with the use of “dark patterns” – a method which, in practice, is much less ominous than it sounds, yet still harming to the consumer. More on this below.
Moreover, this month we saw regulators from all over the world tighten their grip on companies displaying anti-competitive conduct: South Korea’s watchdog slapped a resounding fine on misconducting pharma companies and Kenya’s regulator imposed their highest fine so far on a nationwide steel cartel. Read about this and more in the article below. As always we welcome any comments and points of discussion from your side.?
International Landscape
CCC Prohibits First Mergers Since Becoming Operational
The COMESA Competition Commission (CCC) has rejected the acquisition of the decorative coatings business of Kansai Plascon Africa Ltd (Kansai) in Eswatini, Zambia, and Zimbabwe by Amsterdam-based AkzoNobel N.V. This decision marks the CCC's first blocking of a merger since being founded in 2013.
Some background on this: COMESA stands for the Common Market for Eastern and Southern Africa. It is a regional economic organization in Africa that promotes economic integration and cooperation among its member states with the primary goal of creating a common market, facilitating trade, and enhancing economic development in Eastern and Southern Africa.
The CCC conducted a review of the merger and identified overlaps in both industrial and decorative coatings markets. Concerning industrial coatings, the merger was approved without conditions as it wouldn't harm competition in the Common Market. However, for decorative coatings, the CCC had significant competition and public interest concerns.
Specifically, in the decorative paints market, the merger would combine two strong brands (Plascon and Dulux) without effective competition. This loss of competition would allow the merged entity to potentially exercise undue market power, leading to the CCC's decision to prohibit the merger despite multiple offerings of remedy commitments, mostly involving divestitures.
Australian Regulator Imposes Huge Fine on Bluescope Steel
BlueScope Steel, a multinational industry giant, has been hit with a fine of €34.2 million due to involvement in cartel activities aimed at manipulating steel product prices within Australia. The Federal Court verdict also led to the personal imposition of a fine of €341.000 on the company's former general manager, who played a key role in the scheme. The Australian Competition and Consumer Commission (ACCC) initiated legal action against BlueScope in 2019, with the final ruling being delivered in 2022.
BlueScope's attempt to collude with eight local steel distributors and an overseas manufacturer in order to artificially alter the price of flat steel was unveiled during the trial. This conduct could have significantly raised costs for flat steel products, which are extensively utilized in construction, manufacturing, automotive, and transportation sectors.
ACCC Commissioner emphasized the broader implications of this case, stating that it should serve as a stern warning for all individuals and businesses contemplating similar price-fixing endeavors. The repercussions are substantial, even if such attempts fail to result in concrete agreements. The court's decision also carried a notable directive aimed at deterring future misconduct. It ruled that Mr. Ellis would not be permitted to seek insurance coverage for his fine, as this could undermine the deterrent effect of the penalty.
Amazon Investigated by FTC for Duping Customers?
Known for their deep understanding of customer centricity, Amazon is now going to have a harder time promoting this image, seeing that the Federal Trade Commission (FTC) is currently accusing the eCommerce giant of unlawfully enrolling millions of consumers into its paid subscription service without consumers consent and making it unnecessarily difficult for them to cancel. The FTC filed a lawsuit against Amazon in federal court, alleging that the company knowingly deceived consumers into unknowingly signing up for Amazon Prime.
Amazon has rejected the FTC’s claims adamantly, claiming they are "false on the facts and the law." The FTC, however, contends that Amazon employed "dark patterns," manipulative and deceptive user-interface designs, to trick consumers into enrolling in automatically renewing Prime subscriptions. While Amazon is constantly in headlock with competition regulators internationally, it is uncommon for the company to so outspokenly reject the allegations made towards them.?
The lawsuit seeks civil penalties and a permanent injunction to prevent future violations by the company. It is part of a larger effort by President Joe Biden's administration to rein in the enormous market power wielded by Big Tech firms and promote increased competition to safeguard consumer interests. The FTC has been investigating Amazon's Prime program's sign-up and cancellation processes since March 2021.
The complexity faced by consumers attempting to cancel their Prime subscriptions, as outlined in the complaint, highlights the growing global efforts to curtail the immense influence of tech giants like Amazon, Apple, and Meta, especially by watchdogs like the FTC or the EU Commission. As the efforts to rein in their excess influence intensifies, this lawsuit is seen as emblematic of the broader regulatory challenges faced by competition regulators worldwide.
South Korean Regulator Slaps Hefty Fine on Pharmaceutical Companies
South Korea's Fair Trade Commission (SKFTC) is known for not holding back when it comes to high fines for anticompetitive businesses and they are currently living up to their name by having recently cracked down on Korea’s pharmaceutical industry for market collusion. The KFTC has issued a hefty $31.9 million fine to a network of 32 pharmaceutical firms allegedly involved in collusive practices in the production, distribution, and wholesale of vaccines for the national immunization program.
The investigation revealed that the companies engaged in unfair business practices during 170 vaccine procurement bids carried out by the Public Procurement Service between 2013 and 2019. These bids amounted to a staggering 700 billion won in total. The antitrust regulator's findings showed that the companies shared bid prices to pre-select a winner, thereby undermining the competitive nature of the bidding process.
The fines also extended to companies that had previously faced punitive measures back in 2011 but were found to be involved in collusion again. Notably, the investigation exposed extensive bid rigging across the local vaccine market, implicating vaccine manufacturers, distributors, and wholesalers alike.
Apart from punishing the companies involved, this crackdown communicates two messages: Firstly, South Korea is committed to enhancing competitiveness and accountability within the international market, secondly, that they are determined to keep a watchful eye on the pharmaceutical sector to ensure that anti-competitive behaviour is curtailed.
Kenyan Watchdog Slaps Record Fine on Steel Cartel
The Competition Authority of Kenya (CAK) has taken further steps to inhibit anti-competitive practices in Kenya’s steel manufacturing sector, imposing penalties of around $2 million on nine prominent steel companies. The move comes after an exhaustive investigation revealed that these companies engaged in cartel behavior, artificially inflating steel product prices and thereby raising construction costs for housing and infrastructure projects.
The penalized firms include Nail and Steel Products Limited, Brollo Kenya Limited, Blue Nile Wire Products Limited, Tononoka Rolling Mills Limited, Devki Steel Mills, Doshi & Hardware Limited, Corrugated Steel Limited, Jumbo Steel Mills, and Accurate Steel Mills Limited. They have been held accountable for orchestrating price-fixing arrangements, collectively setting prices and adjustments. Except for Accurate Steel Mills, these companies were also implicated in limiting imports of certain steel components, leading to an artificial shortage and price hike.
These practices stand in direct violation of the Kenyan Competition Act, which underscores the importance of competitive markets for consumer benefits such as reasonable prices, product variety, and improved quality. Such markets also foster innovation among industry players.
According to the press release, the primary goals of the penalties are to restore fair competition dynamics within the sector and to discourage companies from adopting anti-competitive strategies.
The CAK highlighted the seriousness of the situation, noting, "Cartels, as we've seen here, operate against consumer interests and result in economic harm. In this case, steel companies colluded to manipulate prices, margins, and output strategies, all of which directly contravene our competitive market principles."
European Landscape
British CMA Clears Broadcom/VMWare Merger
Global technology company Broadcom's acquisition of VMware, a provider of software products and services for efficient server operations, has been given the green light by the Competition and Markets Authority (CMA) following a Phase 2 inquiry. The CMA's independent panel conducted a thorough investigation, considering new evidence and stakeholder input. The primary concern was whether Broadcom's purchase of VMware would limit competition in server hardware components.
Despite initial worries about the deal's impact on competition and innovation, the panel concluded that the acquisition would not significantly diminish competition in the UK's server hardware component supply. Concerns included the potential for Broadcom to undermine rivals' products' compatibility with VMware's software. However, the panel determined that the financial benefits of such action would not outweigh the possible costs in terms of lost business.
Moreover, the panel evaluated whether Broadcom might gain sensitive information from VMware's competitors after the acquisition, which could stifle innovation. However, this concern was dismissed, as the sharing of sensitive information generally occurs at a stage where it wouldn't provide a competitive advantage.
The decision, reached after considering feedback during a consultation on provisional findings, affirms that the Broadcom-VMware deal poses no substantial reduction in competition and can proceed in the UK market without restrictions.
Icelandic Shipping Company Loaded With Hefty Fine
The Icelandic Competition Authority has fined Samskip, a multinational shipping company with a €30 million fine for collusion with their biggest competitor named Eimskip. Samskip strongly disputes the decision.
The decision was announced on a seven-year investigation, including raids at Samskip and Eimskip offices, revealing alleged extensive violations, including?
Samskip’s legal team clearly expressed dissatisfaction with the findings and the decision and have made it clear that the company will take the case to the Competition Appeals Committee, strongly believing that the fine and charges cannot withstand deeper scrutiny.
CMA Reviews Provisional Findings in Hitachi/Thales Mega Merger
The Competition and Markets Authority (CMA) has issued an updated evaluation concerning Hitachi's proposed €1.7bn acquisition of Thales' Ground Transportation (GTS) segment, involving rail signalling.?
In June, CMA flagged potential competition concerns related to digital rail signalling systems. After analyzing new evidence and prior data, the CMA's inquiry group now believes the merger won't significantly reduce competition for communications-based train control (CBTC) signalling systems in the UK. However, the CMA still maintains its concerns about reduced competition in the digital mainline signalling sector.?
The focus of evaluation was primarily on Bakerloo and Piccadilly lines' resignalling contracts for the London Underground, where initial indications showed Hitachi as a competitive bidder. Yet, post-consultation data suggests Hitachi might not meet the client’s project standards due to ongoing and less intricate CBTC initiatives.?
Consequently, the CMA revised its initial conclusions, indicating that Hitachi wouldn't strongly challenge Thales for future CBTC projects on the London Underground, ultimately not diminishing competition for CBTC signalling systems in the UK.?
The investigation is ongoing, with the final report expected by October 6th.
Final Thoughts
As every month, we review the cases and events that have occurred with the thought in mind: “What goals were pursued by these decisions and actions and were these goals achieved appropriately?”
Competition law exists to ensure that businesses compete fairly, consumers have choices, and markets remain open and competitive. It is highly motivating to see regulators that are not often on the international radar take a stand by issuing fines on companies that are suppressing aforementioned goals. The CCC and Kenya’s regulator is a fine example for this, although in the latter case the question of the deterrent effect has to be asked, as it is so often asked, especially when a fine of $2 million is divided among nine companies – in the steel industry nonetheless.
In terms of cooperation with regulators, Amazon has been very unaccommodating with the FTC in regard to the latters accusation of using dark patterns to trick people into subscribing and staying subscribed to Amazon Prime. As much as Amazon is used to getting accused and fined by regulators all over the world, the online giant is also known to be open for cooperation, which gives the slight impression that the FTC might have come to their conclusion too fast in accusing a big tech player – something that is also known to happen, especially with the current administration.
All in all, we can say that we are very happy to look back on an eventful month and also look forward to informing you about current events in four weeks.