The U.K.’s Competition Commission is proposing regulations designed to promote competition among auditors of major companies and to ensure that auditors are satisfying the demands of shareholders.

The Competition Commission’s provisional decision seeks to remedy the lack of competition among auditors that serve large British companies.  This problem would be addressed by a requirement that companies open up their audit contracts every five years to new bidders.  Companies, however, would not be required to switch auditors.  These “major” companies would include the 350 largest companies listed on the London Stock Exchange.

 The Competition Commission views audits as a crucial part of reassuring shareholders of the accuracy and dependability of corporate reports. 

In February, the Competition Commission published provisional findings that concluded that competition was restricted in the audit market due to factors that inhibit companies from switching auditors and by the incentives that auditors have to focus on satisfying management instead of shareholders.  Four companies have dominated the auditing sector for years due to companies being hindered from switching auditors.

The remedies being proposed by the Competition Commission include measures to “improve the bargaining position of companies and encourage rivalry among audit firms; measures to enhance the influence of the AC in a company’s relationship with its external auditors; and measures to promote shareholder engagement in the audit process.”  The requirement that companies open their audit contracts to bidders every five years is designed to force auditors to demonstrate that they are doing a good job.  The requirement would also allow other auditors to compete for business on a regular basis.

Another proposed change would be to give shareholders a vote on whether or not the audit reports in the company’s annual reports have enough information in them.  The goal of this proposal would be to ensure that auditors are meeting shareholders’ needs, and not just making management happy.

According to the Competition Commission, “an increase in competition and a refocusing of competition towards shareholder demand should increase audit quality and have important beneficial effects on shareholder value.”

The Competition Commission is seeking comments on the provisional remedies until August 13, 2013.

The U.S. Court of Appeals for the Eleventh Circuit has affirmed dismissal of monopolization claims against steel producer Nucor Corp., finding that the cross-elasticity of supply for various steel products defeated the limited product market alleged by the plaintiff.

The appellate court affirmed the district court’s grant of summary judgment in favor of Nucor in Gulf States Reorganization Group Inc. v. Nucor Corp.  Gulf States Reorganization Group (GSRG) sued Nucor for allegedly attempting to monopolize the market for black hot rolled coil steel, a popular type of steel which is rolled into a coil for ease of storage, handling and transportation.

Nucor is a leading manufacturer of black hot rolled coil steel.  In 1999, Gulf States Steel, one of Nucor’s main competitors, filed for bankruptcy.  After GSRG bought the bankrupt company’s non-steel-producing assets, it contracted with the bankruptcy trustee in 2002 to purchase the steel-producing assets for $5 million unless another party bid higher, which would cause a public auction.  Nucor entered into a confidential agreement with Casey Equipment Co., which buys steel-related equipment, to create a limited liability company to bid on Gulf States’ steel-producing assets.  The limited liability company bid $5.25 million for the assets, which triggered a public auction.  In the public auction, Nucor’s limited liability company bid $6.3 million.  Although GSRG bid $7 million, its bid was denied due to its failure to meet auction rules.  As a result, Nucor’s limited liability company purchased the steel-producing assets of Gulf States.

GSRG sued Nucor, alleging that it was attempting to obtain a monopoly in the black hot rolled coil steel market in the Southeast United States, in violation of § 2 of the Sherman Act.

The Court of Appeals affirmed the district court’s holding that GSRG’s proposed relevant product market—black hot rolled coil steel—was too limited because it failed to “account for the fact that manufacturers of pickled and oiled steel could, without much difficulty or cost, switch their production to that of black hot rolled coil steel.”  Pickled and oiled steel is simply black hot rolled coil steel that has been bathed in acid and coated with oil.

The Eleventh Circuit noted that one way to determine if manufacturers can take business away from a potential monopolist is to apply the concept of cross-elasticity of supply, which analyzes competition from the viewpoint of the producers of products, instead of consumers.  The court concluded that black hot rolled coil steel has a high cross-elasticity of supply because producers of pickled and oiled steel could easily and cheaply switch their production to black hot rolled coil steel.

Several car dealerships have filed an antitrust class action against four Japanese automobile parts suppliers for allegedly rigging bids for lighting equipment sold to major car companies.

Mitsuba Corp., Koito Manufacturing Co. Ltd., Ichikoh Industries Ltd. and Stanley Electric Co. are being sued in the putative class action of Martens Cars of Washington Inc. et al. v. Koito Manufacturing Co. Ltd. et al., which the plaintiff car dealers filed in the U.S. District Court for the Eastern District of Michigan.

The plaintiffs allege that the defendants violated federal and state antitrust laws by conspiring to increase the price of automotive lamps – including headlights and taillights – by “preordaining winners and losers” in the bidding process.

The auto parts industry has recently been the focus of several investigations by antitrust enforcers on three continents.

Two of the companies, Koito and Ichikoh, were fined less than four months ago for this same type of alleged behavior by the Japanese Federal Trade Commission, Japan’s antitrust regulator.  Koito was fined $36 million, and Ichikoh was fined $13.1 million.

An investigation into the auto parts industry by the U.S. Department of Justice has resulted in more than $800 million in fines and guilty pleas by several companies.

The European Commission, which is conducting a corresponding investigation, has announced that it has imposed fines of more than €141.7 million ($182 million) against companies that were found participating in cartels regarding automotive products.

The Office of Fair Trading (“OFT”) in the United Kingdom has released updated guidelines for leniency in cartel cases that will eliminate demands for waivers of the attorney-client privilege as a condition of leniency.

The leniency guidelines will fine-tune the UK’s framework for leniency applications, which the OFT views as essential to the UK’s enforcement efforts against cartels.  Under the leniency program, businesses that come forward and report their involvement in cartel activity may avoid a financial penalty or have the penalty reduced substantially. Similarly, individuals involved in cartel activity may be granted immunity from criminal prosecution.

Previously, the guidelines provided that attorneys could be asked to waive legal professional privileges when representing leniency clients in criminal cases but not civil ones.  The new guidelines eliminate this possibility.

Jack Holland, the OFT official who oversaw the revision of the guidelines, explained why leniency programs are especially important in antitrust enforcement, stating that “[t]he secret nature of cartels and their damaging effects justifies a policy which rewards businesses or individuals who come forward to tell us about cartel activity that would otherwise have remained hidden.”  He further noted that leniency “also helps us bring successful enforcement action against the other cartel members or individuals involved to bring the harmful activity to an end, as well as deterring businesses and individuals more widely from engaging in cartel activity in the future.”

A Colorado federal judge has dismissed class action antitrust claims brought against the United States Postal Service for allegedly forcing post offices to buy mailing labels from a designated vendor.

Judge John L. Kane of the U.S. District Court for the District of Colorado ruled in TOG Inc. et al. v. United States Postal Service et al. that the claims were barred by the federal statutory immunity that permits antitrust claims against the Postal Service only when the claims involve products that are not reserved to the Postal Service as part of its monopoly for the carriage of stamped mail.

The claims against the Postal Service were made by two private companies that operate as Contract Postal Units (“CPUs”), which enter into contracts with the Postal Service to provide postal services to the public.  Plaintiffs TOG Inc. and Wild Harvest LLC assert that the Postal Service violated antitrust laws by forcing them to purchase mailing labels from a specific vendor.

The Postal Service provides metering devices to the CPUs for the production of labels and stamps that are used to mail packages and letters.  The Postal Service requires CPUs to purchase blank labels for the metering devices from approved sources.  The plaintiffs allege that they were forced to buy labels at exorbitant prices from Innovation Group Inc., which was the only approved source.

The court dismissed the antitrust claims, finding that under the Postal Service Act, the metering devices and labels should not be considered “products” that are not reserved to the Postal Service for its stamped mail monopoly.  The court reasoned that because the Postal Service contracts with the CPUs to help fulfill its universal service mandate, the functions that the CPUs perform fall under the mail monopoly as functions that facilitate the carriage of mail.