For the second time in as many years, antitrust enforcers have blocked a proposed deal between mining companies BHP Billiton Ltd. and Rio Tinto Ltd. to create the world’s largest iron-ore exporter.

The companies have announced that they will not proceed with a $10 billion joint venture of their ire ore operations in western Australia, due to objections from antitrust agencies in Australia, Germany, Japan, and Korea.  BHP Billiton and Rio Tinto are two of the world’s three largest producers of iron ore.  The joint venture would have combined mining and transportation assets in the Pilbara region of Australia.

Germany and Japan led the charge against the joint venture.  Both Japan and Germany, announced on Oct. 14, 2010, that they would prohibit the joint venture.  Further, the European Union was planning to begin its own investigation of the joint venture. 

In 2008, BHP sought to acquire Rio Tinto for $66 billion, but the EU blocked that deal as well.

A worldwide antitrust crackdown on scrap metal cartels has landed in Korea with the Korean Fair Trade Commission’s recent imposition of a $1.45 million fine against 25 scrap metal processors for price fixing.

Scrap metal processors purchase the scraps that are produced by the steel production process.  The processors in turn sort and clean the scrap metal and sell the final product to end users, frequently other steel mills.  Because of its enforcement action, the Korean Commission expects prices paid by end users to fall in the near future.

The scrap metal industry has also been the focus of antitrust claims in the United States. For example, the Court of Appeals for the Sixth Circuit upheld a $23 million jury award against three scrap metal processors in 2008.  Plaintiffs in that case, In re Scrap Metal Antitrust Litigation, accused the defendants of bid rigging and market allocation, among other charges.  The U.S. Department of Justice also brought criminal charges against two scrap metal dealers for price fixing, but the companies were acquitted in 2009.

Korea and the United States are not alone in closely scrutinizing the scrap metal industry.  Earlier this year, South Africa’s Competition Commission announced it was referring an investigation into 13 scrap metal processors to its Competition Tribunal.  The decision concerns various charges, including price fixing, market allocation, and bid rigging.  The referral followed a four-year investigation into the South African scrap metal industry.

The United Kingdom’s two antitrust agencies will be merged if a proposed consolidation that seeks to streamline the British regulatory process passes its own merger review by the government.

Currently, the U.K. employs two regulatory bodies to scrutinize competition activity, the Office of Fair Trading (“OFT”) and the Competition Commission.  The two bodies have slightly different roles, but work together in the clearance of mergers and in investigating allegedly anticompetitive conduct.

The U.K. government is considering merging the two bodies in the interest of enhancing efficiency and accountability in the scrutiny of merger deals, which can take longer to clear in the U.K. than in other jurisdictions.

The OFT has the authority to investigate cartels, while the Competition Commission leads investigations in alleged market dominance.  Typically, the OFT will conduct initial investigations in the scrutiny of merger deals in the U.K., and it will pass the investigation onto the Competition Commission if it has any concerns with the deal.

Unlike in the United States, where the antitrust regulators (the Federal Trade Commission and the Department of Justice) have to convince courts of the merits of blocking a merger, the U.K. grants its regulatory agencies the final word on merger clearance.

The U.K. has stated it will make a final decision on the proposed plan in 2011 after seeking public comments.

The idea of merging the agencies has drawn mixed reactions.  Some applaud the increased efficiency of having one agency conducting the merger process and competition oversight, while others fear that such an agency merger may undermine the quality of the oversight process. 

Alec Burnside, a competition partner at Linklaters LLP, cautioned that “[t]he challenge will be to make sure there is somehow still a ‘fresh pair of eyes.’”  He noted the possible danger of having one agency with all the antitrust power in that it might be “judge, jury, and executioner.”  However, he added that “the argument for a merger is compelling in its own way, and there may be other ways of ensuring the right checks and balances.”  Other competition lawyers in the U.K. have expressed the view that from cutting down the number of regulators will promote efficiency. 

The U.K. business community appears to favor the idea.  The Confederation of British Industry believes it would expedite the merger review and investigation processes, thus “reducing the time firms are left in limbo.”

Although the American version of class actions may still be viewed as an unwelcome immigrant by businesses in Europe, the European Commission appears to be reviving efforts to fashion its own kinder, gentler, European version of class actions for antitrust violations.

Recent reports indicate that the European Commission has gone back to work on an initiative to allow collective actions for damages by parties injured by violations of EU antitrust law – just a year after killing a previous proposal for such actions.

The EU College of Commissioners reportedly met on October 12, 2010, to discuss the issue of antitrust damages actions. Three Commissioners – Competition Commissioner Joaquín Almunia, Consumer Policy Commissioner John Dalli and Commissioner for Justice Viviane Reding – prepared a briefing paper for their colleagues on the topic.

The European Commission’s previous efforts to allow collective antitrust actions for damages collapsed in dramatic fashion last year.

Under the helm of then Competition Commissioner Neelie Kroes, the Commission had been crafting a Directive which was to include provisions to that effect. But in October 2009, just days before a meeting of the College of Commissioners at which it was to be discussed, the Directive was shelved sine die.

Commission President José Manuel Barroso made the decision to kill the initiative under pressure from the European Parliament. Members of the Parliament complained that the Commission had failed to involve them in the process of drawing up the Directive, and claimed that the Commission’s proposed measures would expose businesses to abusive litigation.

The European Commission has been studying the possibility of collective redress for antitrust violations for a number of years. In December 2005, the Commission issued its Green Paper on Damages Actions for Breach of the EC Antitrust Rules, in which it noted that it was impractical, if not impossible, for individual purchasers with small claims to bring damages actions. Consideration should therefore be given to collective actions as a means to better protect consumer interests, and achieve time and cost efficient redress by consolidating small claims into a single action. click here for more »

Australian mining giant BHP Biliton Ltd. Has won its first regulatory approval – from U.S. antitrust authorities – in its $39 billion dollar hostile bid to take over Canada’s Potash Corp., the world’s largest producer of potash, a key crop nutrient used in fertilizer.   

BHP has announced that the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice have terminated the HSR mandatory waiting period early, permitting BHP to proceed with its bid.  BHP still requires antitrust clearance from other regulatory authorities, including Canada’s Competition Bureau, which has sought further information regarding the proposal, and the Investment Canada review, for which BHP must prove its offer is of “net benefit to Canada.”  

Despite these remaining regulatory hurdles, BHP has stated that it “remains confident” that it will secure the remaining antitrust approvals necessary to complete its takeover.

In its bid, BHP seeks to acquire all of the issued and outstanding common shares of Potash along with any associated rights under Potash’s Shareholder Rights Plan.  BHP offered Potash shareholders $130 per-share, a 20 percent premium over the NYSE August 11 closing price.  Potash rejected BHP’s offer as too low, commenting that BHP’s bid was “grossly inadequate” and “highly opportunistic.”  Potash’s board of directors has publicly encouraged its shareholders to reject the bid.  

To further block BHP from acquiring Potash, Potash set up a “poison pill” policy on its shares to block any bidder from completing a hostile takeover.  The “poison pill” is triggered by an unasked-for purchase of over 20 per cent of its shares.  In that instance, Potash would automatically flood the market with cut-price shares that would be offered to every shareholder other than the unsolicited bidder.  This has the effect of diluting the value of the unsolicited bidder’s stake. 

Potash has also filed a complaint in federal court alleging that BHP has engaged in various federal securities violations.  Specifically, Potash alleges that BHP has made false and misleading statements to manipulate stock prices and mislead stockholders.  Potash claims that BHP attempted to erode the stock prices by disseminating phony plans to enter the potash industry, which, if true, would flood the market with potash and devalue Potash’s stock.  

BHP responded to the allegations by saying that “this lawsuit is entirely without merit and we will contest it vigorously.”  BHP further stated that Potash seeks to “deprive its shareholders of a fully financed all-cash offer” and that the lawsuit will not “interfere with or delay our offer.”  

BHP’s offer has been extended to November 18, 2010 to allow completion of the regulatory review in Canada.