Bosley Inc., the nation’s largest surgical hair restoration company, has agreed to a consent order settling a Federal Trade Commission (“FTC”) complaint alleging that the company exchanged competitively sensitive information with Hair Club Inc. before the two companies merged.

Bosley, a subsidiary of Aderans Co Ltd., performs hair loss treatments at 22 offices across the United States.  According to the FTC complaint, Bosley’s CEO discussed price floors and discounts, business expansions and operations, and future products with executives at Hair Club Inc. and other competitors for four years.

While the FTC did not find evidence of an explicit agreement between Bosley and Hair Club, Section 5 of the Federal Trade Commission Act authorizes the FTC to bring a complaint if it finds evidence of unfair and anticompetitive acts that could harm consumers.

“The information could facilitate coordination or endanger competition by reducing uncertainty about a rival’s product offerings, prices, and strategic plans.  For example, the information exchanges could lead a competitor to determine not to open facilities or market services in a particular location,” the FTC’s complaint analysis states.

Aderans, a Japanese company, purchased Hair Club Inc. for $163.5 million in July 2012.  The FTC found the anticompetitive communications while conducting investigations to determine whether or not to approve the acquisition.

As part of the agreement, Bosley and Aderans must immediately stop any communications of sensitive, nonpublic information with competitors.  The companies must also implement antitrust compliance programs requiring all employees to participate, including the highest level executives.  Bosley and Aderans will also submit compliance reports to the FTC when they make any corporate changes affecting competition.

The FTC will accept public comment on the consent agreement until May 8, 2013.  Members of the public can submit comments online or they can mail comments to Federal Trade Commission, Office of the Secretary, Room H-113, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

The United Kingdom is considering moving closer to the American class action system and several other reforms that would strengthen antitrust enforcement.

Under a plan announced by the U.K.’s Department for Business Innovation and Skills (the “BIS”), the U.K. would adopt an opt-out collective action system – similar to the American class action system – in an effort to make it easier for consumers and small businesses to obtain damages in price-fixing cases.

The BIS announcement stated that the government has decided to: (1) establish the Competition Appeal Tribunal (CAT) as the major venue for competition actions in the U.K.; (2) introduce a limited opt-out collective actions regime, with safeguards, for competition law; and (3) promote alternative dispute resolution as an alternative to court action.  Much of the proposal would require new legislation.

The British Courts would face significant changes under the plan.  Currently, private cases are heard by an inundated High Court making private litigation lengthy and expensive.  Between 2005 and 2008 judgment was reached in only 41 competition cases.

Under the proposed new system, the CAT would hear all private disputes.  The CAT would also continue to hear appeals of public investigations decided by the Office of Fair Trade.

“Since its creation, the CAT has built up its expertise in competition cases and has become familiar with competition litigation.  There is now a substantial body of CAT case law on many aspects of substance and procedure in this field.  The concept of a specialist competition tribunal or court is recognized internationally as a key strength of the UK regime,” the BIS stated.

Such use of the CAT would also enable a fast-track process to be created to encourage small and medium sized companies to bring cases.

The BIS recommended instating “opt-out” collective action in order to ensure that businesses or consumers affected by an anticompetitive action would receive redress unless they specifically opted out of such relief.

Pro-business interest groups have criticized the plan.  “The Government has let the litigation genie out of the bottle by adopting US-style collective actions.  By grouping potential claimants together indiscriminately these ‘opt-out’ actions fail the growth test and will fuel a litigation culture in the UK,” said Katja Hall, Chief Policy Director for the Confederation of British Industry.

Despite signifying a major change from current U.K. policy on class actions, the new system would maintain significant differences from the American system.  For example, the new British system would not adopt jury trials, treble damages, or contingency fees.  Collective action cases would only be permitted in competition litigation.

European Union competition regulators have formally blocked a proposed merger between United Parcel Service Inc. (UPS) and its Dutch competitor TNT Express NV based on potential adverse effects on competition in 15 EU countries.

The express delivery companies had already announced they were abandoning the 5.2 billion euro ($6.99 billion) deal after being informed by the European Commission that it was working on a decision to block the merger.

The Commission found that only four companies in Europe have the required international air and ground transport network necessary to provide reliable overnight and express delivery service: UPS, FedEx, DHL and TNT Express. According to the Commission’s findings on the original merger offer, shipping costs would have increased for consumers in 29 European countries.

The Commission gave UPS time to correct the anticompetitive effects of the merger by finding a buyer to purchase and maintain TNT’s operations in 17 countries where the acquisition would have most severely restricted competition.

As part of a proposed solution, UPS would have provided a potential buyer with air support declaring in a press release, “customers and consumers will benefit from a broader portfolio of services and better global access, along with lower supply-chain costs overall.”  

After on-going negotiations failed, however, Commissioner Joaquin Almunia announced that UPS’s proposed corrections did not go far enough.  “We still had serious doubts on whether the buyer that UPS was working with – the French group La Poste/DPD – would have the ability and incentive to become a strong player in express deliveries,” Almunia said.

“In the absence of suitable remedies to the competition concerns we identified, I had no other choice but to propose to the college of commissioners to issue a negative decision,” Almunia said.

This is only the third merger out of nearly 800 reviewed since Almunia began his term in 2010 that have been prohibited.

One year ago, believing it would have deterred investment at an already rocky time, Almunia blocked a merger between the New York Stock Exchange and Germany’s stock market Deutsche Boerse.  Prior to that, the Commission blocked the merger of two Greek airlines based on the effects on local competition.

The European Court of Justice is being urged to get stricter with parents of misbehaving subsidiaries in an appeal that highlights the controversial issue of to what extent parent companies should be held liable for illegal cartel activities committed by their wholly-owned subsidiaries.

Juliane Kokott, the German Advocate General at the Court of Justice of the European Union, has submitted a brief to the European Court of Justice siding with the European Commission’s appeal of the judgment of the European General Court in European Commission v. Stichting Administratiekantoor Portielje and Gosselin Group NV.  Kokott submitted the brief under the Court of Justice’s practice of accepting analysis from one of eight impartial advocate generals appointed by EU member states for precedent setting cases.

The Commission is appealing the General Court’s ruling that Stichting Administratiekantoor Portielje  (“Portielje”) could not be held liable for the cartel activities of its subsidiary Gosselin Group NV (“Gosselin”) because the parent company neither participated in the economic activity at issue nor was involved in the management of the subsidiary.

The Commission had previously found that from 1984 to 2003 Gosselin and nine other Belgian companies had illegally utilized a cartel to fix prices and share the market for international moving services.  After the Commission held that Portielje, as the parent company of Gosselin, was liable for the illegal cartel activities of its subsidiary, Portielje successfully appealed that ruling to the General Court.

The Commission is now appealing the General Court’s annulment of the Commission’s decision holding Portielje liable for the illegal cartel activities of its subsidiary.  The Commission is arguing that responsibility under antitrust law depends entirely on whether the parent company and the subsidiary together form an undertaking within the meaning of European competition law and on whether that economic unit can be accused of participating in the cartel.

In siding with the Commission’s appeal, Kokott argues that the General Court misapplied the rebuttable presumption that a parent that owns virtually all the shares of a subsidiary exercises control of that subsidiary.  “Since the parent company’s 100% (or almost 100%) shareholding in its subsidiary prima facie allows the conclusion that decisive influence is actually being exercised, it is for the parent company to rebut precisely that conclusion, adducing cogent evidence to the contrary,” Kokott stated.

Despite formal autonomy, Portielje owns 99 percent of Gosselin shares, and three members of Portielje’s board of directors also serve in the same capacity for Gosselin.

Kokott criticized the General Court for relying too heavily on Gosselin’s “company law,” under which Gosselin makes business decisions independently of its parent company, Portielje.

“It would, however, have been of decisive importance, leaving aside all the formal deliberations on company law, to examine the actual effects of the personal links between Portielje and Gosselin on everyday business,” Kokott wrote.

Kokott’s brief claims that the General Court also misinterpreted what constitutes an “entity” under competition law.  Kokott argues that although Portielje did not participate in commercial activity, the company had a stake in the cartel’s economic goals.

 “All such parent companies have an eminently economic interest in the specific activities of their respective subsidiaries on the market.  To make a distinction between them in terms of responsibility under antitrust law would be contrary to the principle of equal treatment,” Kokott concluded.

The Advocate General recommends using internal memos and witness statements rather than the reliance on company law to help determine responsibility for antitrust violations in the future.

The European General Court has ruled that the European Commission overstepped its authority by conducting a broad reaching competition investigation in electric cable markets that amounted to a “fishing expedition.”

The General Court annulled much of a European Commission decision that ordered an inspection of Nexans SA and its wholly-owned subsidiary Nexans France SAS – two French companies active in the electric cable sector.

According to the Judgment of the General Court, the Commission began collecting evidence in January 2009 to determine whether or not Paris-based Nexans SA and its subsidiary acted in concert with other companies to control what the Commission broadly defined as “the supply of electric cables and material associated with such supply.”

However, the Nexans companies argued that the Commission did not have enough evidence to cast such a wide net because first the investigators asked only to speak with employees working on high voltage underwater cables.

Moreover, a February 2009 press release  also announced that the Commission was investigating companies making “high voltage undersea cables” rather than companies making electric cables in general terms. 

The Court’s opinion noted that before beginning the Nexans investigation, the Commission had previously concluded low, medium, and high voltage cables warranted separate product markets.

“A distinction between low and medium voltage on the one hand and the higher voltage ranges high and extra-high voltage on the other hand is required due to the different competitive conditions governing the supply and demand of these products,” the Commission stated in a July 2000 merger decision.

Finding the scope of the investigation far broader than the grounds justifying the investigation, the Court overturned any part of the Nexans investigation that did not specifically pertain to high voltage underwater and underground electric cables.

Despite keeping a significant part of the investigation intact, the Court’s opinion warns the Commission to be more careful to respect individual rights in future investigations.

“Although the Commission is not required to communicate to the recipient of an inspection decision all the information at its disposal concerning the presumed infringements, or to make a precise legal analysis of those infringements, it must none the less clearly indicate the presumed facts which it intends to investigate,” the Judgment stated.