EU Competition Law Newsletter —
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May 2019 EU Competition Law Newsletter — Highlights — The Commission Fines Five Banks Over €1 Billion For Participating In Two Foreign Exchange Spot Trading Cartels — The Commission Fines AB InBev €200 Million For Abusing Its Dominance On The Belgian Beer Market By Restricting Cross-Border Sales The Commission Fines Five Banks Over €1 Billion For Participating In Two Foreign Exchange Spot Trading Cartels On May 16, 2019,1 the Commission announced The Commission’s Investigation that it had adopted two settlement decisions The Commission found that between 2007 and implicating a total of six banks and confirming 2013 certain forex traders,2 who were responsible their participation in two separate foreign exchange for aspects of spot trading at each of their spot trading cartels in breach of Article 101 TFEU. respective banks, used online chat rooms to The “Three Way Banana Split” cartel—named exchange sensitive information and trading plans after one of the two online chat rooms at the relating to the G11 currencies.3 The Commission center of the investigation—involved Barclays, found that the traders often knew each other RBS, Citigroup, JP Morgan, and UBS and led to personally and based on “closed circles of trust” total fines of €811 million. The “Essex Express” with the “Essex Express” chat room—so named cartel involved Barclays, RBS, Bank of Tokyo- because most of the traders shared the same train Mitsubishi (now MUFG Bank), and UBS, and total from Essex to London. fines of €258 million. The Commission started its investigation in September 2013 following an The Commission concluded that these exchanges immunity application from UBS which revealed enabled the traders “to make informed market the existence of both cartels and thus avoided total decisions” on whether and when to sell or buy fines of around €285 million. the currencies they had in their portfolios. On 1 Settlement Decisions “Forex – Three Way Banana Split” and “Forex – Essex Express.” See Commission Press Release IP/19/2568. 2 Foreign Exchange, or “Forex” refers to currency trading. When companies exchange large amounts of a certain currency, they do so through a human Forex trader or an algorithm. The main customers of Forex traders include asset managers, pension funds, hedge funds, major companies, and other banks. 3 The G11 currencies are the most traded currencies by volume, namely: the Euro; Pound Sterling; Japanese Yen; Swiss Franc; US, Canadian, New Zealand, and Australian Dollars; and Danish, Swedish, and Norwegian crowns. clearygottlieb.com EU COMPETITION: MONTHLY REPORT MAY 2019 occasion, the exchanges also allowed the traders addition, with the exception of MUFG, all of the to identify “opportunities for coordination.” For banks also applied successfully for leniency, and instance, traders agreed to a practice known as received fine reductions ranging from 100% “standing down,” where some traders may have to 10%. The Commission issued two separate temporarily refrained from trading currencies settlement decisions, which correspond to the to avoid interfering with a competing trader’s two sets of online chat rooms the traders used activities. to communicate with each other. Details of each bank’s involvement in the infringements, All of the banks agreed to settle with the including the duration of their participation and Commission and admit to their traders’ respective fines and reductions, are summarized wrongdoing, receiving a 10% fine reduction. In in the table below. Three Way Banana Split Infringement Company Start of End of Leniency Settlement Fine infringement infringement Reduction Reduction (€ M) UBS 10/10/2011 31/01/2013 100% 10% 0 Barclays 18/12/2007 01/08/2012 50% 10% 116 RBS 18/12/2007 19/04/2010 30% 10% 115 Citigroup 18/12/2007 31/01/2013 20% 10% 311 JP Morgan 26/07/2010 31/01/2013 10% 10% 229 Total Fine 811 Essex Express Infringement Company Start of End of Leniency Settlement Fine infringement infringement Reduction Reduction (€ M) UBS 14/12/2009 31/07/2012 100% 10% 0 Barclays 14/12/2009 31/07/2012 50% 10% 94 RBS 14/09/2010 08/11/2011 25% 10% 94 MUFG 08/09/2010 12/09/2011 0% 10% 70 Total Fine 258 Implications forex related infringements, the Commission is also investigating an alleged infringement The Commission noted that it “will continue concerning U.S. dollar supra-sovereign, sovereign pursuing other ongoing procedures concerning and agency bonds traded via online chat rooms past conduct in the Forex spot trading market.” between 2009 and 2015, as well as an alleged These investigations take place under an infringement resulting from the trading of “ordinary” non-settlement procedure, and involve eurozone sovereign bonds from 2007 to 2012. at least Credit Suisse’s participation in “an alleged infringement which may have taken place in Shortly after the Commission, the Swiss another chat room.”4 In addition to these other competition authority also issued its settlement 4 Statement from Commission spokesperson as reported by the Financial Times on May 16, 2019. See too Credit Suisse Securities (Europe) 2018 Annual Report, page 115. 2 EU COMPETITION: MONTHLY REPORT MAY 2019 decision fining Barclays, JPMorgan, Citi, and RBS a underscores the importance of maintaining robust total of €91 million for similar conduct. The foreign and comprehensive compliance programs. In exchange-related misconduct addressed in the the current case, a single JP Morgan employee’s Commission’s decisions have also been scrutinized conduct in the “Three Way Banana Split” by financial regulators in at least the U.S., U.K., and infringement led to a fine in excess of €200 million. Switzerland, where fines in excess of US$4 billion In addition, early detection systems and a pre- have been imposed on a number of banks.5 formulated leniency strategy can be crucial in damage mitigation efforts, as evidenced by UBS’ Compliance and leniency strategies matter. avoidance of a nearly €300 million fine through Taken as a whole, the Commission’s scrutiny of its successful immunity application. bankers’ conduct from an antitrust perspective The Commission Fines AB InBev €200 Million For Abusing Its Dominance On The Belgian Beer Market By Restricting Cross-Border Sales On May 13, 2019, the Commission fined AB InBev shares in excess of 50% and resulting ability to €200 million for abusing its dominant position lead pricing, as well as significant barriers to entry, on the Belgian beer market by restricting the “must-have” brands, and fragmented supermarket ability of Belgian customers to purchase cheaper purchasing behavior. products from the neighboring Netherlands Infringement. The Commission found that AB between February 9, 2009, and October 31, 2016.6 InBev abused its dominance by trying to prevent The Commission’s investigation commenced on Belgian supermarkets and wholesalers from June 30, 2016, just a month after it had concluded importing Jupiler beer from the Netherlands, an in-depth examination of several EU beer where it was cheaper than in Belgium. This type markets, including Belgium, in its merger review of cross-border restriction on sales by a dominant of AB InBev/SABMiller (“SABMiller Decision”).7 company is a well-recognized form of abuse.8 The The Commission’s Decision Commission’s press release describes four specific methods that AB InBev used to implement this Dominance. The Commission found that AB strategy: InBev is dominant on the Belgian beer market for four reasons: (i) its consistently high market First, AB InBev changed the packaging of its shares, (ii) its ability to price independently from Jupiler products in the Netherlands, which made competitors, (iii) high barriers to significant them harder to sell in Belgium. This included entry and expansion by competitors in Belgium; changing the labelling of its products to remove and (iv) the limited countervailing buyer power any French language content, which was of customers, in large part because several of necessary to sell the beer products in bilingual AB InBev’s brands are considered essential for Belgium. AB InBev also altered the size of its retailers to stock. The Commission’s findings products, and introduced design differences in this case are similar to those in its SABMiller to Dutch Jupiler beer cans to make them less Decision where the Commission similarly appealing to Belgian consumers, such as adding identified, for Belgium, AB InBev’s high market the language “Jup Holland Jup,” a variant of the 5 FCA Press Release, “FCA fines five banks £1.1 billion for FX failings and announces industry-wide remediation programme,” November 12, 2014; CFTC Press Release (7056-14), “CFTC Orders Five Banks to Pay over $1.4 Billion in Penalties for Attempted Manipulation of Foreign Exchange Benchmark Rates,” November 12, 2014; and, FINMA Press Release, “FINMA sanctions foreign exchange manipulation at UBS,” November 12, 2014. 6 Commission Press Release IP/19/2488, “Antitrust: Commission fines AB InBev €200 million for restricting cross-border sales of beer,” May 13, 2019. 7 AB InBev/SABMiller (Case COMP/M.7881), Commission decision of May 24, 2016. 8 Coöperatieve Vereniging “Suiker Unie” UA and others v. Commission (Joined cases 40 to 48, 50, 54 to 56, 111, 113, and 114-73), EU:C:1975:174. 3 EU COMPETITION: MONTHLY REPORT MAY 2019 popular “Hup Holland Hup” or “Go Holland Go” Interestingly, changes to a product’s labelling, size, football chant. and other packaging features are commercial and marketing decisions that companies routinely Second, AB InBev restricted sales of Jupiler make for perfectly legitimate reasons. The fact to a Dutch wholesaler that presumably made that the Commission placed so much importance significant onward sales to Belgian customers, on AB InBev’s behavior in this regard—both in the which the Commission found had resulted in length dedicated to the abuse in its press release restrictions of imports to Belgium.