In 2011, Samsung pursued injunctions against competitors in the manufacture of mobile devices for infringement of its patents. This was despite Samsung having given a commitment to the European Telecommunications Standards Institute (ETSI) in 1998 to license standard essential patents relating to European mobile telephone standards to its competitors on fair, reasonable and non-discriminatory terms.  According to the EC, Samsung’s pursuit of an injunction may be an abuse of its dominant market position under Article 102 of the Treaty on the Functioning of the European Union. European standards are agreed specifications imposed by the EC in order to ensure interoperability of products, and standard patents should be licensed on fair, reasonable and non-discriminatory terms.

The EC has said that Samsung was obliged to license the use of 3G mobile and wireless technology patents to its competitors on fair, reasonable and non-discriminatory terms but that, in trying to enforce its rights over those patents against its competitors in court, it may have breached those obligations.

In Apple’s business model, it calls itself an agent and gets a commission on the sale price. In genuine agency situations, the supplier is free to tell the agent what price to sell at. However, if it is not a genuine agency situation, this is forbidden. The EU rules as to what amounts to a genuine agency are complex. They include looking at who bears the financial risk or commercial risk in the sale of the books.

The Commission will now investigate. If found guilty, the parties to anti-competitive arrangements can be fined up to 10% of their turnover, the agreements are unenforceable and third parties can sue for damages.

The relationship broke down in 2008 and was terminated in December 2009 by R and Stoneygate. P issued proceedings for breach of contract, suing Stoneygate for arrears of commission due under the agreement, both before and after termination. R argued that post-termination commission was not payable, and that the agreement was not enforceable in any case as it was an unreasonable restraint of trade.

The High Court ruled in favour of R, ruling that the agreement was invalid and unenforceable – it was a restraint of trade on the grounds that it imposed substantial restraints on R over a significant period of time, on terms that were uncommon in the industry, and had been agreed by inequitable negotiation between P and R when R was 17 and had not received legal advice. The High Court also ruled that, even if the agreement was enforceable, post-termination commission was not payable under the terms of the agreement. P appealed to the Court of Appeal on a number of points.

The Court of Appeal ruled that:

1. on construction of the agreement, post-termination commission was payable in relation to arrangements procured by P and for which Stoneygate received payment after completion; and
2. the agreement was a restraint of trade, despite the fact that R’s primary occupation was as a footballer and his primary earning potential was not through the image rights that were the subject of the agreement – the exploitation of image rights was almost always going to be ancillary to another occupation, and was just as capable of protection under the restraint of trade doctrine as any other occupation.

Due to the fact that the agreement was a restraint of trade, P could not recover accrued entitlements as the agreement was unenforceable in the first place.

Simon Weinberg, a solicitor in the Commercial/IP/IT team at Matthew Arnold & Baldwin LLP and assistant editor of Upload-IT, commented, “In this case, it was extremely difficult for the courts to see past the fact that, when the agreement was negotiated and entered into, one of the parties was a 17-year-old without legal representation; the bargaining powers of the parties were unequal from the start, undermining the basis for the agreement. The fact that its terms restricted Rooney’s own exploitation of his image rights until he was 25 was always likely to lead to arguments of restraint of trade once he did receive appropriate legal advice. This case serves as a useful reminder that, when negotiating a contract, it is important to ensure that the other party has legal representation; if they do not have that legal representation and the agreement seems to be one-sided, there is a risk that the foundations of that agreement will be challenged in future. If you convince the other side to sign without legal advice, and the terms of the agreement seem too good to be true, they probably are.”

The European Court of Justice has backed up the French Competition Board’s decision. The ECJ looked specifically at the question of selective distribution networks. It said that establishing those networks are not prohibited by Article 101 if resellers are chosen based on objective criteria, where those criteria are applied uniformly and non-discriminately, where the characteristics of the products need to preserve the quality and ensure proper use, and the criteria only go as far as is necessary. However, provisions within those networks may still end up offending against competition law. The ECJ has not accepted arguments relating to the need to provide individual advice to customers and to ensure their protection against incorrect use of products in the context of non-prescription based products to justify an Internet sales ban. Contract provisions that effectively prohibited Internet sales meant that the benefit of the block exemption did not apply. That said, it would still be for the national court to ascertain whether the contract had an individual exemption, as the failure of an agreement to fall within block exemption parameters does not automatically mean that it will not be found to be individually exempt on other criteria.

The ECJ has ruled that:

-       national legislation that restricts the sale or use of foreign decoder cards is in breach of Article 56 of the Treaty on the Functioning of the European Union (“Treaty”) and it infringes the freedom to provide services; and

-       exclusive licence agreements that restrict the supply of decoder cards to TV viewers who want to watch those broadcasts outside of the Member State for which the licence is granted are in breach of Article 101 of the Treaty, which prohibits agreements that have as their object or effect the distortion of trade between Member States.

The ECJ ruled that a breach of Article 56 cannot be justified either by the intention to protect the intellectual property rights in the broadcasts or in an attempt to encourage more people to actually attend the football matches being broadcast.

The ECH also considered Article 3(1) of the Copyright Directive, which allows copyright owners to restrict any “communication to the public” of their works. The ECJ ruled that the transmission in a pub of broadcasts containing copyright protected works – in this case the opening video sequence of Premier League matches that contains the Premier League anthem – is a “communication to the public” under the Copyright Directive, and the consent of the copyright owner is required for such a communication.

The ECJ’s ruling is largely in line with the opinion of Juliane Kokott, one of the eight Advocates General to the ECJ whose opinions, whilst not binding, are usually followed in the ECJ’s ruling. It remains to be seen how the High Court applies the ECJ’s ruling to the facts of the case of Karen Murphy and other similar cases before it. It would seem that pubs cannot be prevented from obtaining foreign decoders to show Premier League matches shown by foreign broadcasters.

However, the part of the ruling relating to the Premier League’s anthem and opening video sequence may take the edge off the ruling for rights holders. It would seem that, if the Premier League can continue to include certain copyrighted content in the broadcasts, such as its anthem and opening sequence, commercial institutions such as pubs will not be able to show broadcasts from foreign broadcasters without the consent of the Premier League. However, this seems unlikely to impact on an individual’s rights under the ruling, who may be able to show such copyrighted material in their own homes as it would not then be a “communication to the public”.

Others have argued that the Premier League will find it hard to protect this copyright and enforce its rights against commercial venues if the High court agrees with this interpretation. Still, we may yet see increased amounts of copyrighted content in each Premier League broadcast which would further prevent commercial venues showing the broadcasts, and attempts by commercial venues to split the copyrighted content from the match itself, which the ECJ confirmed is not the copyright of the Premier League as it cannot be considered the Premier League’s own “intellectual creation”.

The ECJ’s ruling seems to have implications on how the Premier League, and possibly other rights holders in relation to films and music, sell their rights within the European Union. The ruling may result in a single EU-wide market for rights as the Premier League tries to mitigate the effect of the ruling; this would avoid the domestic price being undercut from overseas. This may impact on domestic broadcasters, such as Sky, who would then need to buy the rights on an EU-wide basis rather than domestically. But at least it would protect the value of their investment.

Now, the OFT has published a report evaluating the impact of its 2001 decision. It has concluded that, as a result of its intervention, the prices in the hospital sector have risen so that other people can compete, Napp’s market share has dropped significantly, and prices in the community sector have come down (and by far more than the OFT had required in its decision). This has therefore been a significant success for boosting fair competition.

SGC owns two other UK-based gaming and amusement machine operators – The Global Draw and Games Media. Global Draw is estimated to have a 43% share of the gaming and amusement machine market.

The High Court said that Guna was in breach of the agreement and should have transferred the registrations. It struck out Guna’s competition law defence. For that defence to work, it should have produced detailed evidence. Instead, the evidence was only general and sketchy. These were complex issues and the arguments needed to be fully made out and argued with good supporting evidence. It may have been that Nelsons’ market share was very high and that its actions were not permitted in the circumstances, but this was not clear from the evidence presented. As the defence was uncertain, what was left was that Guna was in breach of contract.

The UK currently has the events on a ‘protected list’ under the Broadcasting Act 1996, an enactment of a European Union (EU) Directive, which allows EU Member States to designate certain cultural and sporting event for free-to-air television as being in the national interest. FIFA and UEFA have argued that, as a result, they cannot sell their respective events fairly, that it distorts competition and infringes their intellectual property rights. In February, the European General Court rejected the football governing bodies’ challenge, but they have now decided to take their challenge to the ECJ in a final attempt to get their way, although the appeal may take more than a year to even be heard by the ECJ. A similar appeal has been launched by FIFA against Belgium showing the World Cup on free-to-air television.

Whatever the outcome of the appeal, matches at the events involving England, Scotland, Wales or Northern Ireland (the ‘Home Nations’) will remain free-to-air. The appeal relates to matches shown in the UK not involving the Home Nations. UEFA and FIFA argue that these matches should not be shown on free-to-air television, but in their appeal they can only make arguments on points of law – for example, an argument that the European General Court breached procedure or law in their initial ruling, or that the European General Court lacked sufficient competence in making their initial ruling.

The rights for the European Championships in 2012 and World Cup in 2014 have already been sold. However, the rights for the European Championships in 2016 and World Cup 2018 will be sold by UEFA after the Football Association (FA), the governing body for English Football, agreed to let UEFA sell the rights collectively for both events, and the outcome of the appeal will directly affect UEFA’s intentions.

You get the impression that they are not just playing for pride, but this particular fixture will have big financial ramifications in an industry where money has become ever more important.

The investigation began three years ago after the Commission was tipped off by Henkel, a German company. The investigation related to alleged price fixing in eight European Union countries.

The companies had the fines discounted by 10% after they had admitted being part of a cartel. Unilever was fined €104 million and Proctor & Gamble €211 million. Henkel, due to its role in tipping off the EC, avoided a fine.

A dirty cartel with its dirty laundry being aired in public – the jokes on this story are endless, but we’ll spare you. At least the jokes are clean, though, if nothing else.

Microsoft released details of the complaint in a blog on its website. It alleges five ways in which Google has attempted to control the search market:

• preventing the Microsoft search engine ‘Bing’ from indexing content on YouTube, which is owned by Google;
• preventing Microsoft smartphones from operating properly with YouTube;
• controlling access to the ‘Google Books’ project such that only a Google search would show results from the project (the Google Books project was in the news recently after its progress was dealt a blow in the New York courts);
• unfairly controlling the promotion and demotion of adverts in search results, and preventing people placing those adverts from recovering information from Google about them; and
• obliging websites to use only Google search boxes on their sites.

Microsoft’s actions are latest in a line of disputes with Google – earlier this year it was Google accusing Microsoft of copying Google search results in its ‘Bing’ search engine.

Google is already being investigated by the European Commission for alleged anti-competitive practices. Microsoft’s complaint may well be considered part of this ongoing investigation into Google’s alleged anti-competitive behaviour if it is accepted by the European Commission. To be accepted, Microsoft must prove that Google both had a dominant market position and that Google had abused it.

If the case against Google is upheld, Google could be subject to a fine of up to 10% of its worldwide earnings.

Simon Weinberg, a solicitor at Matthew Arnold & Baldwin, comments: “As Google gets bigger and more successful, to some extent it is becoming a victim of its own success. The past few months have seen complaints and criticisms of Google from many quarters, and it seems like it is open season to attack Google – whether in relation to anti-competitive behaviour or privacy issues. The main thing for Google, for now at least, seems to be that consumers aren’t abandoning it based on allegations – the Google bandwagon is strong enough to withstand criticism provided it has as many users as it does. If the European Commission imposes a large fine and other sanctions, Google may be restricted in its ability to serve those users as they have become used to – in that situation, users may begin to look elsewhere for its services, and the landscape may change drastically for Google.”

A European Union (EU) Directive allows each EU Member State to designate certain sporting and cultural events for free-to-air broadcast on television for the purposes of national interest. In the UK, this Directive was enacted by the Broadcasting Act 1996.

FIFA and UEFA challenged that law on the basis that it restricted their ability to sell rights to show the tournaments at the most favourable prices, and that it was an infringement of their intellectual property rights and a distortion of competition in the sports broadcast market. They accepted that, in the UK, the matches involving England, Scotland, Wales and Northern Ireland, along with the finals and semi-finals, should continue to be shown on free-to-air television, but they argued that they should have the ability to sell the rights to show other matches to subscription-only television.

The EGC rejected the challenge, and ruled that all of the matches that take place at such tournaments are ‘events of national importance’, making the free-to-air nature of the entire tournament compatible with EU law.

The EGC is the European court where first instance rulings are made, and appeals are made to the European Court of Justice. FIFA and UEFA have two months to appeal.

A ruling in favour of FIFA and UEFA could also affect the broadcast of events such as the Olympic Games and Wimbledon on free-to-air television.

The case on which she was commenting is currently before the ECJ, and concerns a pub landlady in England who used a decoder card from Greece to show the matches live. The decoder card is much cheaper than paying the commercial fees charged by domestic broadcasters to show the matches live.

Kokott opined that to prevent such use of decoder cards would partition the EU market into several distinct internal markets, impairing freedom to provide services. The agreements under which licensors prohibited licensees in other countries from enabling the games to be watched from the UK were anti-competitive contrary to Article 101 of the Treaty on the Functioning of the European Union. There was also no copyright infringement. Whilst the decoder cards may offer a cheaper way of showing the football, they were still legitimate as the relevant licence fee charges to use the television rights had been paid, albeit in a roundabout way.

Whilst the Advocates General offer only non-binding advice to the ECJ, this advice is followed in many cases. If the ECJ does rule in accordance with Kokott’s advice, it would be a watershed moment for Sky and other similar broadcasters. This ruling could even apply beyond just the Premier League matches they show, and may also include film and television rights. Subscribers would look elsewhere for a cheaper provision of the services that are provided by those broadcasters. This may lead to rights owners licensing the whole EU market in one go rather than by country, or refusing to supply certain territories unless they pay a different price.

It is possible that there may be less money offered for the rights to show the Premier League due to the lack of domestic exclusivity available, with drops in payment filtering through to the football clubs. If there is less money swirling around the Premier League, will some of the rich foreign owners of Premier League clubs be quite as interested? What would happen to the value of the clubs and their ability to meet their huge debts? We have recently seen Premier League clubs flex their financial muscle in purchasing players in the January transfer window. If the Advocate General’s advice is put into practice by the ECJ, extravagant spending by football clubs may become a thing of the past and their very survival may be called into question.

The EC’s decision shows that there were serious competition concerns in relation to the merger, in particular with regards to the potential bundling of CPUs from Intel with the security products produced by McAfee, if such bundling did not allow for interoperability of the McAfee security products with the CPUs manufactured by Intel’s competitors and vice versa.

As a result, the EC gave its conditional approval to the acquisition under the EC Merger Regulation, the conditions being that such interoperability be possible and all necessary information for interoperability be made available to Intel’s, and McAfee’s, competitors.

It remains to be seen whether the Supreme Court accepts Safeway’s application, although if it takes into account the unanimous decision of the Court of Appeal, it is unlikely to do so. If the Supreme Court does choose to review the case, directors and employees of an organisation will again be at risk of being ruled to be liable for breaches of competition law by that organisation.

The Office of Fair Trading (OFT) launched an investigation in January 2005 into allegations of collusion between producers of dairy products and supermarkets in relation to retail pricing. In September 2007 the OFT informed a number of businesses, including Tesco, Sainsbury, Asda, Morrisons and Safeway (which was bought by Morrisons in 2004), that the OFT had found evidence of their involvement in collusion that infringed Chapter I of the Competition Act 1998. Chapter I of the Competition Act 1998 prohibits an agreement, decision or concerted practice between undertakings which may affect trade in the UK (or part of the UK) and has as its object or effect the restriction, prevention or distortion of competition within the UK.

The OFT reached early resolution agreements with many of those accused, under which those businesses admitted that they had been involved in collusion, accepted liability and any fine imposed by the OFT, and agreed to assist the OFT in the continued investigation. Under the early resolution agreement, Safeway agreed to pay a fine of more than £10 million, which had been reduced from £16 million under the terms of the agreement.

A number of companies within the Safeway ‘group’ filed proceedings in order to recover damages from former directors and other former employees, and hoped to obtain an indemnity against the costs of the OFT investigation and fine. Safeway argued that those former employees had breached their contracts of employment, had breached fiduciary duties they owed to Safeway, and had been negligent.

The defendants applied to the court for a summary judgment or to have the claim struck out on the grounds that, firstly, the claim went against the principle of ‘ex turpi causa – that a claimant cannot pursue an action if it arises in connection with the claimant’s own wrongdoing, and a court will not assist a claimant seeking to recover a benefit from that wrongdoing – and, secondly, that the claim went against the Competition Act 1998 and accompanying competition regime.

The High Court ruled that the case should proceed to trial on the grounds that Safeway had a real prospect of defeating any defence brought by the defendants based on the ‘ex turpi causa’ principle as Safeway’s liability was arguably not personal, primary or direct, and it was possible that the defendants had been the ‘directing mind and will’ of Safeway at the time of the breach. The High Court also ruled that moving the fine from Safeway to the former employees at fault was consistent with the competition law regime under the Competition Act 1998. The High Court therefore ruled that the case should proceed to trial for a more thorough consideration of the facts. The defendants appealed the ruling.

The Court of Appeal ruled in December 2010 that the appeal should be allowed, and that the defendants were entitled to summary judgment such that Safeway’s claims were struck out. In a unanimous verdict, the Court of Appeal ruled that the ‘ex turpi causa’ principle did apply, such that Safeway could not recover the amount of the fine due to the OFT from its former employees alleged to be at fault for the breach of competition law. The Court of Appeal ruled that Safeway’s liability was personal and could not be passed to its employees, and that the aim of the Competition Act 1998 is to protect consumers, and the general public, from distorting trade practices, which would be undermined if a company could then pass on any liability to individual employees.

The High Court had arguably put directors at risk of huge financial liabilities if their companies infringed competition law. However, the ruling of the Court of Appeal ensured that directors are no longer at personal risk under competition law, and clearly states that the competition law regime imposed by the Competition Act 1998 places liability on companies themselves, and that such liability must remain personal to those companies and not passed on to employees past or present, even if those employees were at fault for the infringement.

The full text of the ruling can be found here.

Google is being investigated by the European Commission over allegations that it abused its dominant position in the search engine market, contrary to European Union competition law. The fact that there is an investigation does not mean that Google has done anything wrong, but the Commission will now look into things more closely. The complaints came from rival search engines Foundem and ejustice.fr as well as price comparison site Ciao. They allege that the search engine giant lowered the ranking of competing sites in Google’s unpaid and paid for search results, as well as artificially boosting Google’s own position in its results. There are further allegations that Google unfairly requires exclusively obligations and prevents them from placing certain types of competing ads on their websites.

For the full text of Ofcom’s decision see http://stakeholders.ofcom.org.uk/binaries/enforcement/competition-bulletins/closed-cases/all-closed-cases/cw_613/decision.pdf

The first is aimed specifically at SMEs (small and medium sized enterprises) setting out step-by-step guides to stay in line with competition law. The second is aimed at directors of all companies, outlining the level of knowledge and understanding directors need to have of competition law.

With businesses liable to be fined up to 10% of their turnover and with directors at risk of disqualification should their companies breach competition law, the guidance is likely to be welcomed.

A link to the two sets of guidance can be found here:  http://www.oft.gov.uk/OFTwork/consultations/current/achieving-compliance/  and   http://www.oft.gov.uk/OFTwork/consultations/current/company-directors/.

At present, the two bodies assess whether companies merging would breach competition laws, in addition to investigating anti-competitive agreements. The Office of Fair Trading is responsible for initial enquiries and investigations into suspected infringements. The Competition Commission takes on the most serious cases for in-depth investigation and final decisions. Some enforcement decisions may be filtered down to local branches of trading standards offices, although this is yet to be confirmed.

Amid mixed feelings within industry, the move begs the question – will anyone be calling for an investigation of this merger…?

The decision contemplates other measures to improve competition, such as ensuring that PPI cannot be paid for in a single premium, ensuring that marketing information is easier for the customer to understand, and increased information availability throughout the life of a PPI policy allowing the customer to review the insurance that covers them. More PPI information will also be available for pricing comparison tables produced by such bodies as the FSA.

It is expected that the new regulations will come into force in April 2012.

The first investigation had related to a country of purchase rule which had made it hard for customers to have their iPhones repaired in a different country from which it was purchased. The Commission had been concerned that Apple’s agreements amounted to carving up the single European market and adversely affecting trade between Member States, contrary to Article 101 of the Treaty on the Functioning of the European Union. However, Apple has agreed no longer to enforce the country of purchase rule.

The second investigation had concerned licence agreement restrictions with independent developers of applications for the iPhone operating system whereby those restrictions could have hindered competition from devices operating on other platforms. In response to the Commission’s investigation, Apple has agreed to relax those restrictions too.

The Independent Commission on Banking will consider the structure of the UK banking sector, and look at structural and non-structural measures to reform the banking system and promote competition.

It will formulate policy recommendations with a view to:

• Reducing systemic risk in the banking sector, exploring the risk posed by banks of different size, scale and function;
• Mitigating moral hazard in the banking system;
• Reducing both the likelihood and impact of firm failure; and
• Promoting competition in both retail and investment banking with a view to ensuring that the needs of banks’ customers and clients are efficiently served, and in particular considering the extent to which large banks gain competitive advantage from being perceived as too big to fail.

It aims to produce a final report by the end of September.

M-Tech’s objection here was that Oracle had conducted its business in a way in which it was not possible for traders to ascertain whether the goods had originated inside the EEA or outside. In particular, it had deliberately chosen not to make publicly available its database of product serial numbers – and those could have identified where the goods had been first marketed.

The High Court had awarded Oracle summary judgment but on appeal the Court of Appeal agreed that M-Tech had an arguable case. It thought that it was possible that Oracle’s actions amounted to an artificial partitioning of the European market, contrary to the Treaty on the Functioning of the European Union (previously the EC Treaty), with the aim of maintaining price differences in each country rather than any legitimate wish to protect its brand. The Court of Appeal did not award victory to one party or the other, but said that M-Tech’s arguments warranted a full trial and the case should probably end up being referred to the European Court of Justice to make a ruling.

The action comes following the European Commission’s other high-profile competition law battles with major IT and Internet players such as Microsoft, Google, Intel and DRAM chip suppliers.

R tendered alone for a possible contract, and C clubbed together with another supplier. C went into liquidation and its rights were taken by J. R won the tender. J claimed that R had breached the prohibitions in its agreement with C and that if it had been unable to do what it did, then it would have had to bid with C (now J) and they could have won the bid together. R claimed that the prohibition was an unenforceable restraint of trade and breached Article 101 of the Treaty on the Functioning of the European Union (formerly Article 81 of the EC Treaty).

The High Court ruled that the restriction was unenforceable under EU competition law and granted R summary judgment on the issue. The wide scope of the restrictions and the people affected as well as what was covered by C’s ‘confidential information’ meant that if R had information relating to C or its business practices, finances, dealings and clients received from C, it would breach the contract if any group company made contact with C’s existing or prospective clients. It was very wide in time and unlimited in geography. It went further than could reasonably be required to protect C’s confidential information. This breached Article 101, as it amounted to an agreement that had the object or effect of distorting competition and which could affect trade between Member States of the EU. Since the parties were not operating at a different level of supply – as C was not purchasing or supplying to R but merely assisting clients with obtaining supplies – a possible block exemption for vertical agreements under Article 101(3) did not apply to exempt the arrangement.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘This case should act as a warning to commercial entities that want to agree non-compete provisions. If they are too wide in scope, they could infringe EU competition law. That in turn could entail large fines, unenforceable agreements and third parties suing for damages.’

The High Court sided with P. The level of know-how and assistance provided by P to its franchisees totally justified the restrictive covenants. The restrictive covenants were no more than necessary to protect P’s business. Those provisions were therefore not void at common law or contrary to competition law as they were essential to maintain P’s goodwill. The injunction was justified and the other side’s claim for damages was dismissed.

Asda has been able to legitimately buy goods from the EU for sale elsewhere in the EU, but as Tesco found out when it lost its battle to stock Levi jeans in 2002 it is an unlawful use of trade marks to buy goods from outside the EU for sale in the EU unless the brand owner has agreed to this.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘Umbro could be in trouble if they are found to be abusing a dominant position in the market by refusing to supply customers and this keeps the price artificially high for consumers. However, it may be that Asda has sold the shirts at low or negative profit in order to prove a point and make a case, and that Umbro is merely making a reasonable level of profit.’

This latest criminal trial against the four individuals has collapsed after the discovery of a lot of emails. The OFT, which brought the prosecution, has so far not explained why it dropped the case. However, the defence team claims that the emails showed that the executives had not colluded with Virgin and made the case untenable.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘We await details of the reasons for the collapse of the case. In the lead up to the trial, the executives have suffered unexpected turbulence to their careers and they will now hope to draw a line under the episode. The OFT is keen to make examples of people who engage in anti-competitive practices. They did not succeed this time, but businesspeople should be careful not to do anything that could put themselves in the firing line. Entering into discussions with any competitors or acting in a co-ordinated way with competitors is a dangerous game and could have serious unwanted effects for the future of the business and individuals concerned.’

• Agreement as to the actual or minimum resale price.
• Restrictions on the territories or customers to whom the buyer may sell, subject to certain exemptions such as an exclusive territory reserved to the supplier or another distributor.
• Restrictions on members of a selective distribution system from selling to end users.
• An prohibition on the buyer not to supply competing goods if that prohibition is indefinite or more than five years.

The Commission’s Guidelines, which need to be read alongside the new Regulation, contain particular points around use of the Internet. Receiving orders on a web site is generally considered to be passive selling, and passive selling cannot be restricted. This is also the case where a customer opts in to be automatically informed about developments and this leads to a sale. It is unacceptable to have a provision that prohibits a distributor from preventing customers in another territory from viewing its web site or automatically re-routing those customers to another distributor. However, a web site can have a link to another distributor’s site. Likewise, you cannot terminate a customer’s Internet transaction once it is clear from credit card data which shows an address not within the distributor’s own territory.

A further web development is that a distributor cannot be required to have a limit on the amount of Internet sales as a proportion of its overall sales. However, one new development which appeals to operators of selective distribution networks is that the supplier can require the buyer to sell a certain absolute amount (in value or volume) off-line in a bricks and mortar shop. The supplier can also require the buyer’s web site to be consistent with the supplier’s overall brand.

The Guidelines also consider the extent to which Internet advertising would be active or passive selling. Banner advertising or advertising on third party web sites addressed to certain customers is active selling, as is paying search engine service providers or other online ads where (in each case) the advertising is directed to users in a particular territory.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘It’s good news in terms of certainty that the previous rules have been largely replicated. One interesting change of emphasis is on Internet selling. The European Commission is keen to promote and enhance trade between Member States and the latest rules try to prohibit restrictions on distributors from using the Internet to obtain what are seen as ‘passive sales’ from customers in other countries.

It is important for businesses to conform with competition law, because I have often had to advise clients against use of terms that they do not realise infringe competition law. Failure to comply with the law in this area could have serious implications: fines of up to 10% of global turnover, an unenforceable agreement, and the right for third parties to sue for damages.’

Virgin’s is having the tables turned on it. In 2006, the OFT started action against Virgin and British Airways over co-ordination in price changes involving fuel surcharges. In that case, BA was fined £120m by OFT and £200m by the US Department of Justice but Virgin received total immunity from fines for having been the whistleblower then. Meanwhile, a trial of four BA executives for alleged cartel activity relating to that case has recently started at Southwark Crown Court.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of Upload-IT, comments: ‘People generally know that agreements between competitors may be anti-competitive. What they don’t realise is that if they agree certain things with different levels of the supply chain then that can also be unlawful. Specifically, setting agreed or minimum resale prices with a customer is absolutely prohibited. I have had to warn many clients of the dangers of those sorts of provisions in supply contracts, as they could be fined big amounts, sued by third parties and find that their contracts are unenforceable for having a provision that is considered to be anti-competitive. It’s not always popular advice, but someone has to say it as it is!’

The High Court did not accept IDL’s arguments. Even though it could be an abuse of a dominant position by refusing to supply, that was not the case here. Pfizer was not seeking a competitive advantage by its refusal to supply, nor was it favouring any particular customer over that customer’s competitors. The application of its policy was universal and was not anti-competitive.