B&M muscles in on Interbrew competition ruling

Baker & McKenzie and Simmons & Simmons scored a victory at the end of last week acting for Interbrew in a Competition Commission challenge in the High Court.`But despite any input it may have had, Baker & McKenzie is not the solicitor listed on the record in the matter. It is understood that the firm invited itself on board after acting for Interbrew abroad.`Baker & McKenzie’s dispute resolution partner David Fraser added this win to his record of winning judicial reviews following his involvement in last year’s review into the lottery franchise on behalf of Camelot.`After a Competition Commission inquiry, Secretary of State for Trade and Industry Stephen Byers ordered Interbrew to divest Bass Brewers, a £2.3bn acquisition. The company also owns Whitbread and as a result controlled almost 30 per cent of the industry. This was found to be an excessive monopoly by the commission. However, Bass is three times the size of Whitbread, which the company bought several years ago.`Simmons & Simmons head of litigation Philip Vaughan said that the order to sell Bass was “simply odd”. He went on: “We expected to be told to sell the smaller chunk or some intermediate section. Somewhere the process had gone wrong.”`The odds were stacked against a victory – 12 previous cases have been brought against regulatory issues and failed.`The point that Interbrew won on was that the commission’s procedures were held to be unfair in a material fashion. Its decision was reached on the basis of the company’s licensing arrangements. Faced with the decision to request the divestment of Whitbread or Bass, the commission considered the fact that Interbrew licenses Whitbread to brew Stella Artois. This gives Interbrew dual capacity as a licenser of Stella Artois and owner of Bass. If Whitbread was spun off into the market, a link would necessarily remain between the parties. This led the commission to conclude that Bass, the larger and therefore more profitable acquisition, must be sold.`Interbrew was able to overturn the ruling because this reasoning was never made clear. The commission has since declared that it is to review all of its procedures.`However, the finding that Interbrew has an unacceptable share of the market was not overturned by Mr Justice Moses.`This lack of clarity is something the Department of Trade and Industry (DTI) is grappling with. In the UK, the Competition Commission hears all relevant points together. As a result, lawyers do not know for certain what they are addressing and are therefore trying to argue alternatives simultaneously.`Vaughan said: “On a European level, investigative bodies have two stages. Primarily they ask if any adverse competition consequences arise from a proposed merger. If they do, the second stage considers what remedies are appropriate.”`The European system is often considered to be more fair because a merger taskforce gives its objections to the company and invites it to submit suggestions for undertakings.`However, it is not certain whether the DTI will adopt this two-step process or find another way to clarify procedures. Nicholas Green QC, instructed by Vaughan, does not believe that is the only way forward. He said: “Greater transparencies in remedies is necessary, but there are a number of different ways this could be done.”`Judge Moses agreed with Green, saying in his summing-up that the two-step system is only one way to make the procedures fairer.`Vaughan said: “It’s always difficult to satisfy a court that a regulation has gone wrong, but we did feel that a mistake had been made and the result the commission came to was not proportionate or fair.”`Interbrew will still need to reduce its market hold but will have more of a say in how that happens. Interbrew is likely to suggest a new licensing contract making the divestment of Whitbread, rather than Bass, a realistic option.