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Competition & Antitrust
The European Commission's report 'Competition policy for the digital era' is its most substantial step yet towards crystallising the dialogue on the question of how competition law could or should adapt to the rapidly changing technological landscape and the growing role of the digital economy. However, while the report touches on a wide range of ideas and proposals, it openly notes that not all of these are developed in detail or go beyond "very preliminary" conclusions.
Calls to end geo-blocking have grown more audible since the start of the European Commission mandate in 2014 and its digital single market strategy. But does the reality live up to the rhetoric? The commission's new Geo-blocking Regulation sets out certain situations where treating consumers differently is unjustifiable (eg, online and offline sales of goods and services) and applies only to transactions that have a cross-border element.
The European Commission recently imposed a record fine of €4.34 billion on Google. The commission identified a number of abuses and concluded that Google is dominant in the markets for general internet search services, licensable smart mobile operating systems and app stores for the Android mobile operating system. In such an innovative and competitive industry, a decision and fine on this scale arguably sends the wrong message.
Discriminatory pricing as an abuse is a little-deployed area of EU antitrust law and there has been no recent enforcement at the European Commission level. The few existing cases concern extreme facts, involving natural or statutory monopolies such as airports or copyright collecting societies. A recent European Court of Justice judgment offers welcome clarification of the case law. It starts with the premise that not all price differences are illegal.
The General Court has confirmed that suppliers may restrict aftermarket access to authorised repairers for their spare parts. Suppliers can refuse unauthorised repairers access, even if they are considered to have a dominant market position over those parts. The case clarifies that even if suppliers are considered to be a monopoly supplier of spare parts or consumables for their installed base of customers, they are still entitled to control how their parts or consumables are distributed.
The European Court of Justice recently dismissed an appeal against a General Court judgment which largely upheld the European Commission's prohibition decision taken against Telefónica and Portugal Telecom for a non-compete covenant in a share purchase agreement. The non-compete agreement purported to restrain the parties from competing in Portugal and Spain "to the extent permitted by law".
The European Commission's decisions in the abuse of dominance cases against Samsung and Motorola in 2014 and the European Court of Justice judgment in Huawei v ZTE in 2015 clarified the limits of standard-essential patent (SEP) holders' rights to seek injunctions against implementers under EU competition law. However, these cases left a number of important issues unresolved. As such, the European Commission recently presented its guidance on SEP licensing.
Under certain strict conditions, agricultural producers can coordinate their pricing and quantities without falling foul of the EU competition rules. However, the European Court of Justice recently confirmed that not all practices by agricultural producer organisations and their associations are automatically excluded from the application of those rules. This judgment is a timely reminder that the EU competition rules apply broadly to the agricultural sector and that any exclusions will be interpreted restrictively.
The European Court of Justice recently clarified a number of thorny issues regarding excessive pricing, which had been otherwise unaddressed by previous case law. The ECJ offered answers to the questions of how many countries must be surveyed when seeking to demonstrate excess through cross-border comparisons, how relative purchasing power should be taken into account and whether a defendant can claim that average prices are fair even if specific customer rates are not.
In its recent ruling on the European Commission's 500-page Intel decision, the European Court of Justice revisited 40 years of jurisprudence as to when a dominant company's rebate scheme may be abusive. Though not a final decision, the case marks a potentially major departure from the arguably form-based approach to rebates advocated by the European Union's lower court.
Although enshrined in the EU treaties since inception, 'unfair pricing' as an abuse of market power was a little-used tool in enforcers' armoury. The few cases that were brought tended to be based on exceptional circumstances, and many failed on the facts. A May 2017 EU probe has brought the abuse back to the enforcement agenda. However, this is unlikely to denote a new trend; it is too early to say that this is the new normal.
The European Commission continues to expand the concept of selectivity – the key feature of any state aid measure – to outlaw member states' measures as state aid. It has done so in its high-profile tax rulings cases, and the European Court of Justice refused to curtail this expansive approach in its judgment in the Spanish goodwill cases.
A recent European Court of Justice decision confirms that businesses can be liable for cartelising products that they do not even have in their portfolio and in jurisdictions in which they are not active, provided that there is an anti-competitive agreement with an overall plan covering multiple products and geographies and that the undertaking participated directly in the execution of some parts of the agreement and was aware of the other parts of the agreement.
A recent General Court judgment illustrates that an appeal to the courts on fine calculation methodology can be successful, notwithstanding the admissions of liability made during the settlement process. The judgment follows a European Commission decision against a number of parties for coordinating sales prices, allocating customers and exchanging competitively sensitive information in relation to stock and catalogue envelopes and special printed envelopes of all shapes, colours and sizes.
Third parties often complain that commitment decisions – where antitrust defendants offer binding remedies to end an EU investigation without penalties – fail to resolve antitrust issues or have a damaging effect on third parties. A recent judgment confirms how difficult it is to successfully appeal a commitment decision.
The European Commission is consulting on procedural and jurisdictional changes to EU merger control. One big proposed change is set to introduce a value-of-transaction threshold as a trigger for notification, which could potentially bring into the commission's net all deals where the global value of the transaction meets the commission's test. As notification is burdensome and can involve substantial delays to a deal, many companies may object that this is extra-territorial overreach.
In contrast to the position taken in Post Danmark II, in Intel Advocate General Wahl called for a common-sense approach to Article 102 of the Treaty on the Functioning of the European Union and its recentring within mainstream economic thought. Wahl's opinion offers a welcome reappraisal of the spirit and intent of Article 102's analysis of rebate schemes. However, it remains to be seen whether the European Court of Justice will accept this recommendation to revise and revisit old case law.
The EU General Court recently opined for the first time on the legality of reverse payment settlement agreements. However, those waiting for practical guidance and clear guidelines delineating lawful from unlawful settlements will be disappointed. The judgment is a muddle of conflicting ideas about patents and competition law from which no coherent counselling standard emerges. It is hoped that the inevitable appeals will produce a clearer standard by which to judge settlements.
Is collective bargaining exempt from European Economic Area competition law and free movement principles? While early case law from the European Court of Justice indicates that collective bargaining falls outside Article 101 of the Treaty on the Functioning of the European Union, a recent European Free Trade Association Court judgment serves as a timely reminder that the exception from antitrust scrutiny is limited.
A recently published decision of the European Commission has potentially far-reaching implications for how transactions involving state-owned enterprises (SOEs) should be assessed for the purposes of European (and potentially third-country) merger control review. The decision does not create a binding precedent, but suggests how the commission will treat transactions involving SOEs.
In its recent decision in VM Remonts the European Court of Justice ruled for the first time on whether a company can be liable for competition law infringements that result from the actions of a third-party service provider if the service provider is not an agent of the company and takes initiatives that clearly exceed the tasks assigned to it.
Since the EU competition commissioner said that information was the new currency of the Internet, antitrust commentators began to spill ink on the topic of Big Data. An executive order followed, asking for steps to be taken to address competition concerns. It is too early for companies to be scared into taking action, but it might be prudent to be aware of the antitrust issues that could be thrown up as the range of Internet of Things devices is developed.
The European Court of Justice has handed down judgments that clarify the limits on information requests issued by the European Commission in antitrust investigations – as regards the statement of reasons that is to be provided. These cases provide a reminder to companies and their legal advisers to review carefully any information request received to ensure that the document meets the required standard.
A European Commission report threatens the continued existence of the Insurance Block Exemption Regulation. The regulation report is regrettable – it challenges legitimate practices based on flawed reasoning and partial data. Rather than asking whether the application of the regulation has harmed competition, the presumption is that any sector-specific block exemption should be removed. However, there is no suggestion that markets are uncompetitive due to the regulation.
The European Commission recently published an initial issues paper on geo-blocking in the European Union. The paper is part of the commission's ongoing e-commerce sector inquiry examining whether suppliers impose illegal territorial restrictions on retailers' online activities. The paper concludes that geo-blocking is relatively widespread in the European Union, but offers little fresh analysis for companies. Fuller guidance is due for publication in mid-2016.
Can a company be held liable for the actions of a third-party contractor when the third party is not an agent of the company and has infringed competition rules by taking initiatives that exceeded the tasks assigned to it by the company? The advocate general to the European Court of Justice has recently issued a bold opinion on this new issue. It is a rebuttable presumption that a company is liable for competition law infringements committed by subcontractors.
A recent European Court of Justice decision confirms that automated messages can implicate the recipients in price fixing. The decision concerned an alleged cartel between travel agencies. The case arose when a web developer which ran an e-commerce platform for 30 travel agencies in Lithuania sent an administrator message to each member, stating that the e-commerce functionality allowing each travel agency to grant discounts would be capped at 3%.
Standard-essential patents (SEPs) and antitrust are a high-risk poker game. For licensors, injunctive relief is essential to IP protection. Without recourse to injunctive relief for licensors, infringers can act with impunity and fight any damages claim, or its quantum, through the courts at their leisure. As an SEP holder will be dominant, infringers can claim that it is abusing its dominant position by seeking injunctive relief.
The European Court of Justice has ruled that a clause in a property lease between a mall owner and a supermarket anchor tenant, which gave the tenant the right to approve the granting of leases to competing stores, was not anti-competitive by object. Investigating authorities must assess the likely effect of that type of clause in actual market conditions before ruling on its legality under EU competition law.
The European Court of Justice recently confirmed the European Commission's wide discretion in working out the value of sales on which a fine for cartel activity is to be calculated. The commission controversially took into account not just sales of the cartelised product, but also the company's inter-divisional sales. The case has significantly raised the stakes for vertically integrated companies.
In 2012 the first Post Danmark case resulted in a modest antitrust revolution against Article 102 of the Treaty on the Functioning of the European Union. Commentators expecting the same much-needed revamp to Article 102 rebates case law from the Post Danmark II case will be disappointed.
Inspectors on a dawn raid investigating one matter can also seize evidence on an unrelated matter if they happen to come across it. To critics which say that this enables the European Commission to fish for violations, the European Court of Justice judgment in Deutsche Bahn AG v Commission gives some respite. It does not fully curtail the commission's fishing power, but it does constrain its most blatant abuses.
In a recent opinion the advocate general concluded that collusion can arise among competitors in the e-commerce sector simply by one party failing to respond to an electronic notification. The case concerned whether a measure implemented by the administrator of a computer reservation system (which was integrated into the websites of multiple travel agencies) could trigger a concerted practice among those agencies by imposing a maximum discount level.
Advocate General Kokott's opinion in Post Danmark offers an old-school analysis of Post Danmark's rebates. Although the advocate general said that an efficient competitor (AEC) cost-based test was not necessary to analyse the schemes, an AEC would have immediately revealed a problem. The advocate general declined the opportunity to steer rebates case law towards a price-cost test.
In its recent banana judgment the European Court of Justice (ECJ) confirmed that sharing some types of business information with competitors will be treated as a serious cartel-type violation. The ECJ's message was clear – employees beware. There is zero tolerance for sharing future pricing-related information with rivals.
The European Commission's digital single market agenda was recently launched. It combines a wide-ranging antitrust inquiry with a series of legislative initiatives designed to shake up online businesses across Europe and globally. The inquiry is expected to inform the commission's agenda of further antitrust prosecutions in the sector, building on ongoing electronic products, pay television and video games investigations.
EU Competition Commissioner Margrethe Vestager recently announced that she will propose an inquiry into the e-commerce sector, focusing on contractual restrictions and geo-blocking in the online sale of goods and digital content. The European Union is likely to send detailed requests for information across the supply chain to suppliers, e-tailers and price comparison or marketplace platforms.
The General Court recently confirmed the European Commission's rejection of a complaint over airport charges. The court held that a second complaint lodged with a different national authority can be rejected as long as the first national authority has formally reviewed it. The case assists defendants in seeking to persuade authorities that serial complainers must not be addressed on the substance. Complainants are advised to choose the forum carefully.
Over the course of 2014 the European Commission issued a total of €1.7 billion in fines for cartel activities, due largely to the penalties imposed in the automotive bearings cartel (approximately €950 million) – the fourth-highest cartel fine ever imposed at EU level. The trend to settle decisions prevailed and the commission continues to target facilitators of cartel behaviour.
The European Commission is consulting on the future of the EU Insurance Block Exemption Regulation. The regulation allows insurers and reinsurers to benefit from an exemption to the prohibition of anti-competitive agreements under the Treaty on the Functioning of the European Union.
The European Commission recently adopted a revised de minimis notice. It provides clarity to companies on agreements of minor importance and when they can benefit from a safe harbour. Agreements containing 'by object' restrictions are now systematically excluded from the safe harbour and always constitute an appreciable restriction of competition.
The General Court has upheld the record €1.06 billion fine on Intel for entering into illegal rebate schemes with major customers. The court refused to analyse the commission's application of an efficient competitor cost-based test and remained adamant that cost-based tests alone offer no legal assurance. Exclusivity-linked schemes will be near per se illegal.
Since the first EU cartel settlement cases in 2010, 13 settlements have been concluded. Recent settlements in relation to a wire harnesses cartel and an interest rate derivatives cartel indicate novel approaches by the European Commission in calculating fines according to the circumstances of the case. They also provide an insight into how the commission conducts the settlement process and how this has evolved over the years.
The European Commission's new Technology Transfer Block Exemption Regulation and Guidelines update the EU antitrust rules applicable to agreements which license intellectual property for the production of goods and services. It is important that companies take into account the new rules and check existing agreements for compliance, particularly where formerly common practice wordings will potentially become unlawful.
The European Commission recently adopted a new filing regime under its Merger Control Simplification Package. An increasing number of merging parties can hope to have a less burdensome review process than under the existing procedure. However, while some changes will bring benefits, the improvements are accompanied by other changes that are unlikely to streamline information-gathering requirements.
During 2014 decisions are expected in a number of major cartel and abuse of dominance cases and new rules on patent and know-how licences are set to enter into force. Recent procedural changes to the EU merger control regime have entered into effect and aim to reduce the burden on parties to corporate transactions.
The EU General Court has dismissed an appeal against the European Commission's Phase I clearance of Microsoft's acquisition of Skype in 2011. In rejecting the appeal, the court made a number of remarks that will resonate with high-tech companies contemplating M&A activity. The judgment is likely to be contentious and it remains to be seen whether there will be further appeals.
The European Commission recently adopted a package with new rules on payment services. The package includes a proposal for a new Payment Services Directive and a regulation on interchange fees for card-based payment transactions. Despite various competition proceedings, the European payment card sector remains fragmented and interchange fees vary widely between member states.
The European Commission recently announced a public consultation on proposals to reform the EU merger control regime, including streamlining the process by which cases are referred between the commission and member states. The proposed measures are likely to place a significant burden on companies, as well as increasing the workload of the commission and national authorities.
The European Commission recently published a draft directive and a recommendation which seek to facilitate damages claims before national courts by alleged victims of antitrust violations. The commission has come up with a firm recommendation that collective actions involving a violation of EU rights should be introduced in all member states. The proposals are intended to complement existing national collective action mechanisms.
Dawn raids are a key investigative tool for the European Commission and officials have powers to inspect premises, seize documents and interview employees. The commission is increasingly tough on failures to play by the rules and serious fines have been imposed in recent years. During a raid companies are advised to remain calm, cooperate with inspectors and ensure that no documents are destroyed until further notice.
The European Commission imposed fines of €146 million on Lundbeck and a number of generic companies for entering into alleged pay-for-delay patent settlement agreements. Pay-for-delay deals are now classified as severe competition law infringements. The non-confidential version of the final decision is not yet publicly available; only once it is will the commission's theory of harm be fully understood.
A recent European Court of Justice judgment showcases the uncertainties and exposure faced by both the buyer and seller of a business, should competition law violations subsequently come to light. The case provides a timely warning to buyers and sellers to consider conducting a thorough audit before a business is sold and to ensure that competition law risks are covered by adequate warranties and indemnities.
The European Union recently issued a green paper aimed at tackling unfair business-to-business practices. It suggests that minimum notice periods should be mandated - something previously alien to common law jurisdictions. If mandatory notice periods operate as substantial exit penalties, a supplier may think twice before entering new markets. The paper also states that unfairly restrictive territorial restraints should be examined.
The European Commission recently published a long-awaited report on co(re)insurance pools and ad hoc co(re)insurance agreements on the subscription market. The report contains some helpful conclusions on the commission's purported concerns over ad hoc agreements and hints at a perceived failure by the industry to comply adequately with the Insurance Block Exemption Regulation.
The European Commission has recently published proposals to overhaul the Technology Transfer Block Exemption Regulation, which provides a competition law safe harbour for agreements which license patents and know-how to licensees for the production of goods and services. While no fundamental changes are being proposed, the commission has proposed tightening the rules in several ways.
'Crisis cartels' – schemes designed to downsize a sector in an orderly fashion – are not tolerated by the European competition authorities. In enforcement terms, there has been no retreat on this principle and the authorities are being particularly vigilant to the rise of cartels in a recession. But do Europe's competition laws offer any respite to industries feeling the effects of the economic crisis?
EU Competition Commissioner Joaquin Almunia has shown himself willing to tackle some difficult and sometimes highly political issues. In 2013 the commission is poised to take a stand on a number of key issues, including patent settlement agreements, cartels and controversial mergers. While the commission is committed to efficient enforcement, it has equally shown that it is prepared to tackle tough cases.
The European Competition Network has revised its model leniency programme. Its objective is to guarantee that leniency remains an attractive option for undertakings facing multiple filings with several competition authorities. The revisions include the possibility to submit summary applications to all categories of leniency. The changes must be incorporated into each competition authority's leniency programme or applied in practice.