The European Commission has enacted highly anticipated antitrust rules regulating online sales.

The rules clamp down on what the EC considers to be permissive distribution agreements that have arisen on occasion between goods manufacturers and resellers, and update regulations adopted prior to the massive growth in the last 10 years in commerce over the Internet.

The new rules are primarily aimed at facilitating online sales, which play a critical role in generating economic growth and integration across borders.  The rules allow manufacturers a relatively free hand in deciding their methods of selling goods in the European market as long as they have less than a 30 percent market share.  However, fixing resale prices remains restricted as harmful to competition. 

The revised rules are a result of several influences, according to press reports, that included heavy lobbying from luxury and online goods companies.

Luxury goods manufacturers in particular have been concerned with the cost of maintaining their brand image, and the EC took into account some of their arguments in fashioning the updated regulations.  For instance, some luxury goods manufacturers will be allowed to insist that their goods be sold online only by retailers that also have “bricks and mortar” stores.  Thus, purely online retailers such as Amazon and eBay would be unable to sell these goods directly.

Some industry observers have commented that this lobbying led to a more “watered down” version of the antitrust sales regulations that would have resulted otherwise.  Also, the new EU-wide rules will open up online sales by ensuring that manufacturers cannot discriminate against online shops when setting up their distribution networks.

Travel agents whose antitrust case against major airlines was grounded by a Court of Appeals’ application of the Supreme Court’s Twombly decision are hoping the Supreme Court will clear their complaint for takeoff.

On March 22, 2010, 49 travel agencies accusing several major airlines of conspiring to fix base commission rates petitioned the United States Supreme Court to reverse the Sixth Circuit’s decision affirming the Northern District of Ohio’s dismissal of their complaint, In re: Travel Agent Commission Antitrust Litigation, 583 F.3d 896 (6^th Cir. 2009). 

The complaint, filed in 2003, alleges that the defendant airlines conspired to reduce, cap and eventually eliminate the agents’ base commission rates in an attempt to drive the agents out of business.  The base commissions, paid until 2002, were a percentage of purchased ticket prices.  Plaintiffs assert that the conspiracy began in 1995, when several airlines contemporaneously announced that they were placing the same cap on the commissions.  Plaintiffs allege a pattern stretching over seven years in which one airline would announce a cap or a reduction in the commission and then other airlines would follow.  In 2002, Delta Airlines announced it would stop paying base commissions altogether, and other carriers quickly did the same. 

Plaintiffs allege that this game of “follow the leader” resulted not from airlines’ independent decisions but from an illegal agreement to eliminate the commissions.  Plaintiffs point to several industry-wide meetings at which the airlines had the opportunity to conspire, and to the testimony of a former airline executive that he had to match the commission cuts or else “undercut the movement.” 

The airlines respond that reducing commission rates advanced each airline’s independent self-interest by yielding net revenue greater than any potential loss from disgruntled agents redirecting their business.  The airlines also contend that new methods of purchasing tickets, including through the Internet, provide an economic incentive to cut commissions and then wait and see if competitors emulate.  click here for more »

Antitrust defendants got a reminder yesterday that while the United States Supreme Court may have stiffened pleading requirements in recent years, its Twombly decision is not always a silver bullet.

Applying Twombly (which often means the dismissal of an antitrust case), the Court of Appeals for the Second Circuit yesterday restored a complaint alleging price fixing of internet music by major record labels – including EMI, Sony BMG, Universal, Warner, and others – controlling over 80% of digital music in the U.S.

Judge Preska had dismissed the complaint under Twombly.  The appeals court reversed Judge Preska, holding that “[t]he present complaint succeeds where Twombly’s failed because the complaint alleges specific facts sufficient to plausibly suggest that the parallel conduct alleged was the result of an agreement among the defendants.” click here for more »

Italian consumer rights group Codacons has filed class action lawsuits against Italy’s two largest banks – Intesa Sanpaolo SpA (ISP.MI) and UniCredit SpA (UCG.MI) – for banking fees paid by more than 25 million customers.

The cases are the first to be brought under a new law permitting class action suits in Italian courts, and could force the two banks to pay up to 6.25 billion Euros (approximately nine billion dollars) to their customers.

In December 2009, an antitrust regulator ruled that the Italian banks charged higher fees on loans and credit lines to recover part of the overdraft fees canceled by the government in July.  In some cases the bank overdraft fees were 15 times higher than under the old system which was abolished with the aim of lowering charges.

The 25 million customers of Intesa and UniCredit who paid the banking fees can file a request for reimbursement of 250 Euros each, resulting in an overall total of 6.25 billion Euros.

The new law, effective as of January 1, 2010, allows collective lawsuits against any unfair commercial practice from August 16, 2009 onward.  However, unlike in the United States, the Italian law only allows for compensation to victims, not punitive damages against companies. click here for more »

If coffee executives can’t sleep at night, it isn’t the coffee, it’s the antitrust issues.

Coffee companies around the world are working through the holiday season, contending with merger issues in the U.S. and price fixing in Europe.

In the U.S., Green Mountain Coffee Roasters Inc. has voluntarily withdrawn its filing with the FTC regarding its purchase of Diedrich Coffee Inc. after consultation with the antitrust regulators.  Green Mountain has stated it withdrew the filing to give the FTC more time to review the merger, and will refile the report on or before Tuesday.

Green Mountain – the manufacturer of Keurig coffeemakers – announced earlier this month that it had beaten Peet’s Coffee & Tea Inc. in a bidding contest for the purchase of Diedrich, the maker of K-cups –single-serve containers used in the Keurig coffeemakers.

In dropping out of the bidding for Diedrich, Peet’s charged that there were significant antitrust issues with Green Mountain’s successful bid.

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