Today, the European Commission conditionally cleared a $1.76 billion (1.2 billion euro) acquisition by Unilever, an Anglo-Dutch company, of the Sara Lee Corporation household and body care division.  The clearance required a divestiture of Sara Lee’s Sanex brand and other related business in Europe due to a concern about anticompetitiveness in certain deodorant markets. 

“We had to ensure that the transaction would not lead to increased prices for consumers,” said Joaquín Almunia, the EC Vice President of Competition Policy.  “As Unilever offered a strong and clear-cut remedy to address the competition concerns in a number of deodorant markets, the Commission was able to clear the merger.” 

The investigation into the potential merger lasted five months, and the EC noted that Unilever had a “particularly strong” position in the European deodorant market due to its Axe, Dove, and Rexona brands.  The EC was particularly concerned about the merger’s possible effects on deodorant markets in Belgium, the Netherlands, Denmark, Ireland, Spain, Portugal and the United Kingdom. 

The EC noted that the merger could “remove an important competitive force and would likely have led to price increases.”  Thus, the Commission concluded that the divestiture of the Sara Lee Sanex brand and related business in Europe “offers a clear and workable remedy, sufficient to restore competition in all markets where the Commission had concerns.”   Unilever employs 163,000 people worldwide and sells a range of products that includes cosmetics, food, tea, and other goods.  Sara Lee employs 33,000 people worldwide and sells products that include, among other things, packaged food products, shoe polish, deodorant, and other products.

The parties notified the Commission of the proposed merger on April 21, 2010, and the Commission opened an investigation into it on May 31, 2010.

In addition to antitrust, Constantine Cannon has an environmental and sustainability practice and represents green technology companies profiting from wise resource use.  These different disciplines that we work in are reflected in a recent filing we noticed in the federal district court for Connecticut, Environmental Products Corp. (“Envipco”). v. Tomra of North America, Inc. (D. Conn. filed Nov. 4, 2010).

In Envipco, both plaintiffs and defendants are in the business of manufacturing and operating Reverse Vending Machines (RVMs), which collect deposit bottles and cans and refund the deposit.  The RVM company must then sort the containers of each manufacturer and return each one’s bottles and cans to it.  The suit alleges that a good pick-up service for the cans to return them to their manufacturers requires that each firm have a concentrated customer base and collection route, requiring a contract with at least one major supermarket chain in which the RVM company operates.  Envipco says that Tomra has entered into exclusive RVM contracts with 12 of 20 major supermarket chains that account for the majority of RVM use, foreclosing Evipco from a substantial portion of business in the bottle bill states that constitute the relevant market or markets.  Moreover, Tomra is alleged to have entered into equity-based partnerships with beverage manufacturers, precluding Envipco from a substantial portion of the can and bottle pickup business, forcing Envipco to turn to Tomra for that function in those places, and causing Envipco to lose underlying RVM business.  Envipco also alleges that Tomra engaged in deceptive billing practices to lure in customers and forged joint ventures with key players in the market, “denying competitors the ability to compete on a level playing field.”

The complaint also claims that Tomra is negotiating to buy another reverse vending company, Can & Bottle Systems Inc., that has monopoly power in Oregon.  Tomra and Envipco are alleged to be the only significant competitors in the U.S. in this particular market, with Tomra enjoying a 70 percent market share — or 77 percent, if the company is successful in its plans to acquire Can & Bottle.

Asserting claims under the Clayton Act and the Sherman Act, the complaint, citing to Tomra’s alleged monopoly power and market manipulation, seeks compensatory, punitive and treble damages and an order blocking Tomra from entering into long-term exclusive contracts with customers.

Businesses such as these that promote the effective use of bottle bills that recycle cans and bottles are a positive in the environmental marketplace.  The suit raises important antitrust concerns and we will monitor its progress.

The potential acquisition of telecommunication company Qwest by Internet provider CenturyLink has cleared another hurdle.  Integra, a competitive local exchange carrier that both uses and resells Qwest network services, had fought the proposed deal because of the potential effects on its existing connectivity agreements with Qwest.  However, with a settlement agreement in place that ensures its rights under those prior contracts, Integra dropped its opposition to the deal.

The merger deal, valued at more than $22 billion, would create one of the largest telecommunications companies in the United States, with an extensive broadband network as well as landline telephone and wireless networks.  Because the combined company would present a formidable competitive force, many competitors still oppose the deal, such as the wireless carrier Sprint and other local exchange carriers. 

Whether the Integra settlement agreement will act as template for future agreements remains to be seen.  The settlement agreement contains a number of concessions to Integra, including a guarantee that the combined company will not pass on merger expenses to Integra, a guarantee that Integra can prevent Qwest from making certain types of changes to its network, and the right for Integra to inquire into any deteriorations in Qwest network services. 

The merger must also be approved by both the Federal Communications Commission and several state regulators.  The Department of Justice and the Federal Trade Commission do not oppose the merger.

Last week, Italy’s competition enforcement agency, the Antitrust Authority, levied penalties against MasterCard and several Italian banks totaling more than $8.4 million for artificially raising interchange fees and passing those increases onto merchants and customers.  Interchange fees are fees paid by merchants to the banks that issue the debit or credit card to their customers (the “issuing” banks). 

After a 15-month investigation, the Antitrust Authority accused MasterCard and several issuing banks of using licensing agreements to raise and keep interchange fees high.  In addition, the merchant banks entered into agreements that prevented them from comparing MasterCard’s fees to those of other credit cards.  During this time, Visa’s interchange fee was 30% below MasterCard’s fee.

In addition to fines, MasterCard’s issuing banks will now have to provide a financial justification for their interchange fees, and the issuing banks might have to renegotiate their merchant contracts.

While the three most important things about real estate may be location, location and location, Canadian antitrust enforcers are telling real estate brokers that competition is also important.

The Competition Bureau of Canada has entered into a consent agreement with the Canadian Real Estate Association (CREA) settling the Bureau’s claims that the rules imposed by the CREA limited consumer choice and prevented innovation in the market for residential real estate services.

CREA is a trade association whose membership includes more than 100 Canadian real estate boards and approximately 90% of licensed real estate brokers in Canada.

In February 2010, the Canadian Commissioner of Competition made an application to the Competition Tribunal alleging that CREA had “substantial and complete control over the supply of residential real estate brokerage services throughout Canada” through the Multiple Listing Service (MLS).  The application sought to enjoin “exclusionary restrictions” by CREA that were affecting real estate brokers and agents who sought to provide less than a full package of brokerage services.

According to the Commissioner, MLS was the “only comprehensive listing of homes for sale in Canada,” with no adequate substitutes.  CREA imposed restrictions on the use of the MLS and required that its members periodically certify compliance with CREA’s rules and regulations.

Some of the alleged exclusionary restrictions required listing realtors to always act as agents for property sellers, disallowed agents from merely posting property information on the MLS system without using MLS’ other services, and provided that only the listing realtor’s name and contact information appear in publicly accessible websites.  The Commissioner determined that these rules restricted the ability of consumers to choose real estate services, while forcing them to pay for services they did not need.  The rules also allegedly prevented real estate agents from offering more innovative service and pricing options to consumers.