Development in National Competition Laws
Herausgeber:Bernhard Heitzer ´ Lioba Jüttner-Kramny ´ Karl M. MeessenLars-Hendrik Röller ´ Dirk SchroederEhrenmitglied: Alfred-Carl Gaedertz
Developments in National Competition Laws(January 1 ± March 31, 2009)
This is the sixtieth quarterly report on developments in national competition laws publis-hed by Wirtschaft und Wettbewerb-WuW. This report summarizes principal developmentsin the competition laws of Australia, Austria, Belgium, the Czech Republic, France, Germa-ny, Hungary, Italy, the Netherlands, Poland, Portugal, the Slovak Republic, Spain, Sweden,Switzerland, the United Kingdom and the United States of America during the period fromJanuary 1 until March 31, 20091).
I. AustraliaCourt rejects legal privilege for ACCC summaries of statements by immunity applicantsThe Federal Court of Australia dismissed applications by Emirates and Singapore Airlineschallenging the validity of several notices issued by the Australian Competition and Consu-mer Commission (¹ACCCª) seeking compulsory disclosure of information and documents bythe airlines in relation to their involvement in the international air cargo cartel. The airlineshad argued that the sought information and documents were in relation to matters that wereoutside the jurisdiction of Australia's competition law. The Court took a broad view of theextra-territorial powers of the ACCC, rejecting the airlines' arguments and upholding the va-lidity of the notices. The Full Court of the Federal Court held that so-called witness proofs,prepared by the ACCC summarizing statements made to the ACCC by employees of Amcor,the immunity applicant in the cardboard box cartel with Visy, are not subject to legal profes-sional privileged and must be provided to Cadbury Schweppes, the plaintiff in a private da-mages action against Amcor. The Court found that the witness statements were not protectedby legal professional privilege because they were created by the ACCC to be served, and actu-ally were served, on Visy in the price fixing litigation. Due to the disclosure of the relevantdocuments, an essential element of the litigation privilege was not present, namely confiden-tiality in the form of non-disclosure to one's opponent in litigation.
II. AustriaSupreme Court remands dismissal of margin squeeze claim against Telekom AustriaIn the RAG merger case, concerning indirect acquisitions of shares and the special definiti-on of a concentration contained in the Austrian Cartel Act, the Austrian Supreme Cartel
1) General information on the legislative and institutional framework of the countries covered by this report is
included in the following previous reports: For Belgium, Denmark, France, Germany, Italy, the Netherlands,Spain, and the United Kingdom, see the first report published in WuW 1996, pp. 489 to 493; for Switzerland,see the fourth report published in WuW 1997, pp. 227 to 231; for Sweden, see the fifth report published inWuW 1997, p. 515; for Poland, see the sixth report published in WuW 1997, p. 712; for the United States ofAmerica, see the eight report published in WuW 1998, pp. 250 to 258; for Austria and Hungary, see the ninthreport published in WuW 1998, pp. 577 to 584; for Finland, see the tenth report published in WuW 1998,pp. 851 to 857; for the Slovak Republic, see the fourteenth report published in WuW 1999, pp. 865 to 872;for the Czech Republic, see the twenty-sixth report published in WuW 2002, pp. 1189to 1196; and for Portu-gal, see the thirty-second report published in WuW 2004, pp. 615 to 621. More detailed information on eachof the developments referred to in the reports is available from WuW; responsible for this Section: ChristianZschocke and Jürgen Beninca, Frankfurt.
Court (¹Supreme Cartel Courtª) confirmed the functional definition of an ¹undertakingª inAustrian Competition law. Regardless of the type of legal entity (shareholders of corporati-ons or other persons involved), the decisive factor for an undertaking is the power to takeessential economic decisions concerning the position on the market, thus exercising econo-mic control. In the case of an indirect shareholding, a concentration under the AustrianCartel Act only exists if the subsidiary actually exceeding the relevant threshold of either25% or 50% is controlled by the acquirer. Before this decision, it had been controversialwhether exceeding the thresholds by way of multiplying shareholdings down the chainwould suffice.
The Supreme Cartel Court annulled a decision by the Austrian Cartel Court (¹Cartel Courtª)in a ¹margin squeezeª case in the telecommunications industry, dismissing applications forinjunctions and remanding the case to the Cartel Court. Several alternative telecom opera-tors had claimed that the incumbent network operator Telekom Austria was dominant onthe upstream markets for broadband internet access solutions and connection services aswell as on the market for unbundling and had abused said dominant position by charginghigh prices to the applicants upstream while offering supra-competitively low prices toend-customers on the retail market. The Supreme Cartel Court held that ± even if the alle-ged infringement itself were terminated ± the long-term contracts between Telekom Austriaand its customers which were concluded under the impression of the abusive pricing couldproduce ongoing anti-competitive effects.
III. BelgiumInterim measures against JC Decaux for abuse of a dominant position deniedThe College of Prosecutors denied requests from Belgian Posters and Clear Channel for in-terim measures to prevent the Brussels region from granting a public tender contract for bi-cycle services to JC Decaux. The companies claimed that JC Decaux had a dominant positi-on in the market for the provision of so-called ¹urban advertisement furnitureª (such as pu-blic transport shelters, signposts and billboards) which it abused in order to win a tendercontract from the regional authorities, thereby obtaining a dominant position in the marketfor bicycles for public use. Furthermore, it was claimed that JC Decaux had abused its posi-tion by tying these markets and using profits from its urban advertising activities to financeits public bicycle activities. The prosecutor concluded that the decision by the regional go-vernment to link the markets did not at first sight fall within the scope of the national equi-valent of Article 81 EC, nor was there evidence of any other prima facie infringement.
IV. Czech RepublicOffice finds anticompetitive distribution practices with respect to the Czech version of Harry
PotterThe Czech Anti-Monopoly Office (¹Officeª) approved Metrostav's acquistion of Pragis inthe construction sector. Metrostav is one of the major construction companies apart from
Skanska, Strabag and Ohl while Pragis was one of its small competitors.
The Office continues to use the ¹procedureª of competition advocacy. It found that Alba-tros, a traditional Czech publisher of children's books, used prohibited vertical arrange-ments in relation to the publishing of the Czech version of ¹Harry Potter and the Deathly
Hallowsª. Albatros, as the exclusive holder of the rights for the Czech Republic, bound itsdistributors not to sell the book to supermarkets in order to prevent discount prices of thebook. The Office prohibited these agreements and continued a deeper investigation intothe contracts of Albatros detecting some further anticompetitive agreements in regard toprices and distribution channels. Albatros cooperated fully, recognized the practices andchanged the agreements.
V. FranceReform Of French Competition Authorities enters into forceAmendments for a modernization of competition and commercial law in France went intoeffect introducing a new Competition Authority which will hold the investigative powersand resources shared formerly between the Competition Council and the Ministry of Eco-nomy. The Ministry of Economy will focus purely on concentrations ¹of less significance.ªThe new law, inter alia, also modifies certain thresholds and time-periods applicable tomerger control, specifically expressing time periods in business days, rather than calendardays, allowing for the suspension of time periods at a party's request ¹on an ad hoc basis tofinalize commitmentsª and applying specific turnover thresholds (E75 and E15 million re-spectively) for parties active in retail or overseas territories.
The Paris Court of Appeal confirmed the interim measures granted by the French Competi-tion Council (¹FCCª), suspending the exclusivity clause contained in the agreements bet-ween Apple and Orange for the distribution of iPhones in Franc, pursuant to which Orangewas to act as the exclusive network operator and wholesaler of iPhones in France for fiveyears. The Paris Court of Appeal approved the FCC's analysis, holding that the exclusiveagreements could not benefit from the Block Exemption Regulation on Vertical Restraintsbecause they contained hard-core restrictions on cross-supplies between distributors wit-hin a selective distribution system, and on sales to end users by members of a selective dis-tribution system. The length of the exclusivity term, in conjunction with the reputationaladvantage of Apple's position in the market for digital music players, was deemed to haveprovided Orange with a major competitive advantage. Following a complaint by three on-line travel agencies, the FCC imposed a fine on the French incumbent rail operator, SNCF,and the world's biggest online travel agency, Expedia, of E5 million and E500,000 respecti-vely, for engaging in anti competitive practices. The FCC found that the parties had enteredinto an anticompetitive agreement in the market for travel agency services and that SNCFhad abused its dominant position in the market for train tickets. SNCF proposed extensivecommitments in exchange for a reduction in its fine. The FCC fined Adecco, VediorBis andManpower a total of E94.4 million for colluding in the French market for temporary em-
ployment services. The complaint was brought before the European Commission by a for-mer manager of the Luxembourg subsidiary of VediorBis, before being referred back to theFrench competition authorities.
Antoine Winckler, François Brunet, Paris
VI. GermanyNew German turnover threshold of E5 million introducedA second domestic turnover threshold of E5 million became effective, to be met by one of theparties to a transaction in addition to the existing E25 million turnover threshold, to be met byone other party. By introducing this second domestic turnover threshold, the need for pre-closing approval for deals with minimal nexus to Germany was eliminated. The GermanFederal Cartel Office (¹FCOª) started to publish case summaries of selected matters conclu-ded without a formal decision (available on its website in German as well as in English).
The FCO imposed another substantial fine of E4.15 million (following the E4.5 million fineon Mars in December 2008, see WuW 2009p. 284) on Druck- und Verlagshaus Frankfurtam Main for having put a concentration into effect before obtaining clearance. This occur-red in the context of its acquisition of the publishing company Frankfurter StadtanzeigerGmbH, affecting the Frankfurt advertising market. The FCO cleared several mergers in thenewspaper sector, including the acquisition of Neusser Pressehaus by Rheinisch-BergischeVerlagsgesellschaft, Düsseldorf; the acquisition of Berliner Verlag (Berliner Zeitung, Berli-ner Kurier, Tip Berlin, various free sheets and advertising newspapers) and MorgenpostVerlag, Hamburg, (Hamburger Morgenpost) by the publishing company M. DuMont Schau-berg and the acquisitions of various publishing houses of regional subscription newspapers(Abo-Tageszeitungen) by Axel Springer, Berlin, affecting the respective regional newspapers
and advertising markets. The acquisition of Danish Sugar, Copenhagen, by Nordzucker wascleared although the FCO concluded that there is an oligopoly in the German market of su-
gar for the food industry. To address this, the FCO imposed the condition that the DanishSugar production plant in Anklam, Germany, is sold to a third party. Three transactions inthe retail and corporate banking sector were cleared by the FCO: Deutsche Bank's controlover Deutsche Postbank, Commerzbank's acquisition of Dresdner Bank, and the merger bymeans of acquisition between Deutsche Zentral-Genossenschaftsbank and WestdeutscheGenossenschafts-Zentralbank. The FCO imposed additional conditions on Werhahngroup's acquisition of Norddeutsche Mischwerke (belonging to DEUTAG) and Preusse Bau-holding, which had been cleared subject to conditions in 2005 (see WuW 2005, 1252), sub-ject to an appeal pending before the Higher Regional Court (¹OLGª) Duesseldorf. The newlyimposed conditions concern five regional markets for melted asphalt which the FCO hadnot reviewed in 2005 based upon their determination as de minimis markets. Meanwhile,following a decision by the Federal Court of Justice (¹BGHª), the aggregation of sales achie-ved in ¹neighboringª markets had been introduced, leading to the applicability of the mer-ger control rules to the asphalt markets concerned.
The BGH confirmed the ruling of the OLG that Lufthansa may not deny permission to cre-dit card companies to disclose the VAT on Lufthansa's flight services on their invoices forlodge cards with input tax deduction (Reisestellenkarten mit Vorsteuerabzugsmöglichkeit).
The BGH held that by allowing the VAT disclosure only to its own subsidiary AirPlus, Luft-hansa secures AirPlus a monopoly position on the market for lodge cards with input tax de-
duction and thereby abuses its dominant position on the market for the approval of VAT di-
sclosure on lodge cards. The BGH referred the case back to the OLG for further clarificationof whether Lufthansa may ask for a fee in exchange for its permission.
Triggered by the review of the Nordzucker merger, the FCO searched three companies andeconomic interest groups in the sugar sector, including Südzucker and the WirtschaftlicheVereinigung Zucker, on the suspicion of forbidden price fixing, quota arrangements andmarket divisions. Following the FCO's prohibition proceedings, the major lens manufactu-rers Essilor, Rupp und Hubrach, Rodenstock, Zeiss and Hoya gave up their recommended
retail prices for lenses. According to the FCO, this practice had the effect of actual minimumor fixed prices and therefore limited comptetition among opticians on a national level. TheFCO imposed fines in the amount of E188 million against nine companies of the clay roof ti-
le sector and twelve individuals for anticompetitive agreements such as energy surchargeand price fixing.
The FCO closed its proceedings against Gasversorgungsbetriebe Cottbus, declaring the re-gional gas supplier's assurances binding and accepting the offer of a considerable price cutin April 2009. The BGH confirmed the FCO's decision against E.ON Ruhrgas (see WuW2008 p. 279; 2006 p. 620), finding that it may not oblige the mostly regional distributors tosign long-term natural gas supply contracts and that such existing contracts have to be ter-minated. Moreover, the BGH ruled that contracts may not be combined systematically, the-reby prohibiting E.ON Ruhrgas to achieve market foreclosure of the relevant markets of re-
Christian Zschocke, Eva Rayle, Frankfurt am Main
VII. HungaryStrabag's acquisition of Cemex Austria cleared subject to conditionsThe Hungarian Competition Authority (¹GVHª) closed its sector inquiry on customer mobi-lity in retail banking, establishing that switching barriers such as long term contractual re-lationships might seriously limit consumers' choice. The GVH considered that effectivecompetition requires a new, stricter regulation of unilateral modification of contracts, a cei-ling for early repayment fees, comparable price information and portability of state sub-sidies.
The GVH authorized Strabag's acquisition of control over Cemex Austria subject to the con-dition that the acquirer guarantees that the ready-mix concrete manufacturing site of CemexHungµria at Salgótarjµn will be sold to an independent undertaking. The parties had re-quested the transaction to be examined in its entirety by the competent authorities of Aus-tria and Hungary and the European Commission approved the referral of the case.
The GVH imposed a fine of approx. E10 million on three road-constructing undertakingsfor colluding during two public procurement procedures for the award of public works con-
tracts. A fourth undertaking, received full immunity from fines within the framework ofthe leniency policy.
VIII. ItalyAuthority Conditionally Clears the Acquisition of CartaSi by Istituto Centrale delle Banche
Popolari ItalianeThe Italian Competition Authority (¹Authorityª) conditionally cleared the proposed acqui-sition of Italy's leading main credit card issuer and acquirer, the CartaSi group, by the IstitutoCentrale delle Banche Popolari Italiane which owns Key Client Cards & Solutions, a compe-ting credit card issuer and acquirer. The Authority held that the proposed transaction wouldresult in the creation of a dominant position in the market for card issuing and merchant
acquisitions, but cleared the transaction, because the post-merger entity inter alia committedto: (i) Ensuring that all services are offered separately under transparent and non-discrimi-natory conditions; (ii) Making a transparent and non-discriminatory selection of its proces-sing provider, should it decide to outsource the management of IT platforms and applicationsservices to a third party and (iii) Undertaking that all members of the post-merger entity'sboard of directors will not sit on the board of any competing Italian credit card company.
The Authority fined the most important producers of dry pasta in Italy, as well as their tra-de association, for having agreed on price increases for dry pasta productsy between Octo-ber 2006 and March 2008. Aggregate fines amounted to approx. E12.5 million. The investi-gation was prompted by a complaint lodged by a consumer association.
Mario Siragusa, Giuseppe Scassellati-Sforzolini, Rome
IX. The NetherlandsNMa publishes new merger procedure guidelinesThe Competition Authority of the Netherlands (¹NMaª) published a revised version of itsMerger Procedure Guidelines replacing guidelines published in 2004. The changes werenecessary in the light of recent amendments to the Dutch Competition Act and the new ru-les on when a concentration may be cleared without a fully reasoned decision.
Following a Phase II investigation, the NMa approved the merging of Walcheren and Oos-terschelde hospitals, even though it found that the merger would result in a monopoly in
clinical and non-clinical hospital care in Middle-Zeeland. The NMa accepted the parties' ef-ficiency defence, but attached strict conditions.
Maurits Dolmans, Robbert Snelders, Brussels
X. PolandNew Polish leniency and fining guidelines issuedThe Polish Office of Competition and Consumer Protection (¹OCCPª) issued proceduralguidelines for leniency applications. Undertakings may now submit initial ¹markerª appli-cations, whereby only a limited scope of information must be provided upfront to theOCCP. Valid submission of a marker application will ensure that the undertaking receivesthe required priority, provided that the missing information is submitted to the OCCP indue course. If the collusion affects the territories of at least three Member States, it is nowpossible to submit a summary application in Poland, in order to safeguard ¹the place in thequeueª. The requirements of summary applications are similar to those introduced for mar-ker applications but the applicant should also mention the Member States where cartel evi-dence can be found and inform in which other Member States leniency applications aresubmitted. Also, the OCCP launched its first guidelines on fining policies applicable topractices violating the collective consumer interests. The prohibited practices include theapplication of illegal contractual clauses (registered in the abusive clauses register), themisinformation of consumers and unfair business practices or acts of unfair competition.
Under the Polish Antimonopoly Law, the President of the OCCP has the power to issue ad-ministrative decisions in favour of harmed consumer groups and impose fines on violatorsof up to 10% of the annual turnover.
XI. PortugalInvestigation of fuel sector continuesThe Portuguese Competition Authority (¹PCAª) continued its in-depth investigation regar-ding the existence of a cartel in the fuel sector in Portugal. An interim report regarding li-quid fuel was issued stating that there is no real evidence of a cartel.
Joo Caiado Guerreiro, Andreia Bento Simðes, Lisbon
XII. Slovak RepublicOffice imposes fine for ¹gun-jumpingªThe Division of Concentrations of the Antimonopoly Office of the Slovak Republic (¹Of-ficeª) imposed a fine on the Czech undertaking eD system, for violation of the prohibitionto put into effect a concentration when eD system acquired direct control over EURO ME-DIA. In October 2007, the Office had received the notification and had cleared the mergerin May 2008. During a subsequent investigation, the Office found that the undertaking eDsystem exercised rights and obligations resulting from this concentration before the decisi-on on the concentration became legally valid.
XIII. SpainCNC publishes fining guidelinesThe Spanish competition authority (¹CNCª) for the first time published fining guidelines toimprove the transparency and objectiveness of its fining policy. The region of Cataloniahas modified the functioning of its competition authority, established in 2002, by creatinga single and unified competition authority, mirroring the CNC's model.
The CNC started cartel investigations in the markets for recycling tyres and high-voltage elect-
rical cables, carrying out dawn raids in both sectors. The Supreme Court confirmed the de-cision of the former Spanish competition authority (¹TDCª) to fine Altadis, the former statemonopoly in the tobacco market, E3 million for refusing to supply products of its own brandsto Conway, a new wholesaler who sought entry into the liberalised distribution market.
The Spanish telecommunications regulator (¹CMTª) adopted the final regulation for the who-
lesale broadband market. While abandoning its original plan to segment the wholesale broad-band market geographically, after the European Commission had questioned its previous pro-posal, the CMT eventually limited its wholesale bitstream access obligations to fibre-opticnetworks up to speeds of 30 Mbps. Above this, Telefónica's competitors only have accessto its ducts (physical infrastructure), obliging them to lay their own new generation networks.
The CNC conditionally approved the proposed merger between Spanish utilities Gas Naturaland Unión Fenosa. After an in-depth investigation, the CNC cleared the concentration obli-ging Gas Natural to ensure the operational autonomy of Unión Fenosa as a gas supplier inSpain, to sell certain gas distribution networks and 2,000 MW CCGT power plants, and toreduce its portfolio of small gas clients, among other commitments. The CNC fined Gas Na-tural Distribución E 492,000 for abusing its dominant position by refusing to grant access to its
natural gas network to Gas Alicante, a subsidiary of electricity utility Endesa.
XIV. SwedenAuthority issues decision on SAS bonus schemeThe Swedish Competition Authority (¹Authorityª) held that the injunction issued by theSwedish Market Court concerning SAS's EuroBonus scheme on domestic air routes couldno longer be used to impose conditional fines. The Swedish Market Court had ruled in
2001 that SAS' application of its EuroBonus scheme constituted an abuse of a dominant po-sition and the airline was ordered not to use the scheme on domestic routes where it opera-ted in competition with others. SAS had observed the ruling until the Authority resolvedthat the court ruling from 2001 would not be applicable to a potential reintroduction of theEuroBonus scheme on domestic routes exposed to competition.
The District Court of Stockholm decided to stay proceedings against TeliaSonera (the lead-ing Nordic telecommunication company) brought by the Authority and seeking a fineamounting to SEK 144 million for having abused its dominant position in certain broad-
band services. The District Court referred the case to the European Court of Justice (¹ECJª)to clarify whether margin squeeze may constitute an abuse in a situation where there is noregulatory obligation to supply and the supplies would be addressed to new customers.
XV. SwitzerlandReport on functioning of the Swiss Cartel Act issuedThe Swiss Federal Government was presented with a Synthesis Report evaluating the on-going effects and functioning of the Swiss Cartel Act (¹Actª). The Task Force stated that theAct together with the legal instruments that were introduced upon its last revision in 2003have demonstrated their ability to serve their purposes. However, further modifications arenecessary to improve the efficiency of the Federal Cartel Competition Commission (¹FCCª)and its Secretariat, international cooperation, and enhanced control of mergers and verticalrestraints. The Federal Department of Economic Affairs was instructed to submit proposalsby spring 2010 with a view to adjusting the Act. These proposals shall include measures tostrengthen the FCC as an independent authority, adapt the control of mergers, introduce adifferential treatment of vertical agreements and expedite the proceedings.
The Secretariat of the FCC issued a decision proposal to charge the manufacturers and dis-
tributors of male impotence drugs with price fixing. Following an investigation opened in2006 into prices charged for erectile dysfunction medication (which includes Viagra, Cialisand Levitra), the Secretariat came to the conclusion that Bayer (Schweiz) AG, Eli Lilly(Suisse) SA and Pfizer AG made unlawful vertical competition agreements that maintaineda recommended public selling price.
XVI. The United KingdomHigh Court approves OFT's closing of the investigation triggered by CityhookThe Competition Commission (¹CCª) published its final report on the BAA airports marketinvestigation. The report found that several features prevent, restrict or distort competition,and imposed various remedies, including the divestitures of Gatwick, Stansted, and eitherEdinburgh or Glasgow airport. The Competition Appeals Tribunal (¹CATª) allowed Tesco'sappeal against the CC's April 2008 report concerning the supply of groceries in the UK. Oneof the CC's recommendations was the introduction of a competition test by reference towhich planning permission would be refused to large grocery stores in areas where therewas already a high concentration in a market in which the applicant retailer was a substan-tial participant. Applying the same principles as would govern an application for judicialreview, the CAT agreed with Tesco that the CC had failed to properly analyze the adverseeffects of this test and referred the matter back to the CC, which undertook to reach a newdecision within 6 months.
The CC announced its rejection of the proposed joint venture for video on demand (¹VODª)between BBC Worldwide (the commercial arm of the BBC), Channel Four Television, andITV. The CC found that the joint venture was likely to result in a substantial reduction ofcompetition in both the wholesale and retail supply of UK television VOD content.
The High Court found that the Office of Fair Trading (¹OFTª) had acted reasonably in clo-sing its investigation into allegations by Cityhook, a company marketing technology for the
installation of submarine telecommunication cabling that their technology had been boycot-
ted collectively by the United Kingdom Cable Protection Committee whose members inclu-ded BT, Alcatel, Cable & Wireless, and NTL. The Court of Appeal handed down itsjudgment in Ofcom v Floe Telecom Limited finding that the Office of Communications (¹Of-comª) should be allowed to appeal against elements of a CAT decision predominantly in itsfavor because the CAT's judgment on the construction of a standard license was a matter ofpublic interest that affected Ofcom's performance of its regulatory function. As to the con-struction of the Vodafone license at issue, the Court of Appeal found that the CAT had beenwrong to apply the Marleasing principle (¹because the license is neither domestic law made
to implement the EC directive, nor is it any other kind of ¹lawªª) and that the ordinary andnatural meaning of the license should have been applied instead.
XVII. The United States of AmericaSupreme Court rules on price-squeezesPresident Obama selected the new leaders of the U.S. federal antitrust enforcement agen-cies, nominating Christine Varney to head the Antitrust Division of the Department of Justi-ce (¹DOJª) and designating Jonathan Leibowitz as Chairman of the Federal Trade Commis-sion (¹FTCª). Legislation was introduced in both the House of Representatives and the Se-nate to ban so-called ¹reverse paymentª settlements. These settlements, which occur al-most exclusively in the pharmaceutical industry, involve payments by a patent holder toan alleged infringer to settle patent litigation. The FTC has challenged several such sett-lements in court, arguing that reverse payment patent settlements should be per se illegalunder the U.S. antitrust laws. The FTC's position, however, has not been adopted by themajority of courts that have considered the issue. Three federal Courts of Appeal have heldthat reverse payment settlements must be evaluated under the Rule of Reason and thatsuch settlements are legal so long as they are within the scope of the patent rights at issue.
The Supreme Court of the United States significantly reduced the relevance of ¹price-squeezesª as an independent theory of antitrust liability. In Pacific Bell Telephone Co. v. lin-
kLine Communications, Inc., the Supreme Court held that ¹price-squeezesª only violate theU.S. antitrust laws where (1) the defendant has an ¹antitrust duty to dealª at the wholesalelevel and (2) charges prices ¹below an appropriate measure of costª at the retail level. Eitherof those requirements would be sufficient to establish an independent antitrust violation;and both are exceedingly difficult to establish under existing U.S. precedent.
John Clayton Everett Jr., Aaron Hewitt, Washington, D.C.
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