Competition Law Bulletin Issue 15 - January 2009

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Competition news in brief from around Europe   This issue of the Competition Law Bulletin contains a comprehensive summary of the important antitrust and competition law developments at EC level and national level in each of our jurisdictions, since September 2008.  These include the European Commission's guidance on Article 82 EC, issued at the beginning of December 2008, ground-breaking divestment requirement imposed by the Commission on E.ON in the German electricity sector and European Court rulings regarding dominance of music collecting societies in relation to royalties and on parallel trade on referrals from the Swedish and Greek courts respectively.  At a national level there have been further developments in the telecoms sector, particularly in France where an exclusivity agreement between Apple and Orange has been suspended, and France Telecom has given commitments regarding access to its network and improved services to competitors.  In The Netherlands conditional approval has been given to a planned joint venture between the Dutch Telecom provider, KPN and the optical fibre company, ReggeFiber.  National competition authorities have been imposing fines for anti-competitive behaviour in diverse sectors including facilities (Italy) and a care homes cartel (in The Netherlands).   In France, Pierre Fabre has been required to end a ban on internet sales in its vertical agreements for cosmetic sales.  The banking crisis has led to unprecedented steps by the UK  Government to facilitate the acquisition of HBOS by Lloyds TSB without reference to the Competition Authorities.  The UK Competition Appeal Tribunal has also adopted an important judgment on excessive pricing (in the long-running Dŵr Cymru litigation). In this issue     EC Competition Law   News by country   France   Germany   Italy   The Netherlands   Sweden   UK    Bird & Bird is the appointed contributor to the PLC Global Counsel Multi-jurisdictional Competition Law e-mail service for France, Germany, Italy, The Netherlands, Sweden and the UK. The articles in this Competition Law Bulletin on national level competition law developments are based on articles originally written by Bird & Bird which have been published in PLC Global Counsel Multi-jurisdictional Competition Law.   If you have any queries or wish to speak to someone at Bird & Bird about the Bulletin, please do not hesitate to contact Richard Eccles on +44 (0)20 7415 6000 or email BBCLB@twobirds.com. EC Competition Law Commission publishes guidance paper on applying Article 82 EC to abusive exclusionary conduct by dominant undertakings Richard Eccles and Mary Smillie, London On 3 December 2008, the European Commission published guidance on enforcement priorities in applying Article 82 to abusive exclusionary conduct by dominant undertakings.  This guidance contributes to the process of a more economics based approach in the enforcement of EC competition law.  The finalised Guidance paper is, however, considerably streamlined and shortened as compared with the original discussion paper issued by the Commission in December 2005.  The Guidance sets out the Commission's intended enforcement principles in relation to identifying market power, anti-competitive foreclosure and price-based exclusionary conduct, before analysing specific forms of abuse, namely exclusive dealing, tying and bundling, predation and refusal to supply (including margin squeeze).  This article summarises the main principles set out in the Guidance in these areas.   European Court ruling on copyright royalties Richard Eccles, London The European Court of Justice ("ECJ") has issued an important judgment in December 2008 on excessive and discriminatory pricing issues in respect of copyright royalties charged by a copyright collection society STIM, on a reference from the Swedish courts under Article 234 EC on a claim by the commercial broadcasters Kanal 5 Limited and TV4 AB.  The ECJ held that the remuneration model was not excessive for purposes of the EC rules on abuse of dominance, on the basis that the royalties were assessed by reference to the revenue of the relevant TV channels and proportionately by reference to the quantity of copyright-protected musical works actually broadcasted.     Refusal to supply exporter wholesalers as abuse of dominant position Richard Eccles, London The European Court of Justice ("ECJ") has given judgment in relation to the long running disputes involving Greek wholesalers and GSK concerning the supply of GSK products for export.  Article 82 EC issues were referred by the Greek Court of Appeal to the ECJ.  The ECJ has concluded that under Article 82 EC, a dominant undertaking on a relevant market for pharmaceutical products will abuse a dominant position where it refuses to meet ordinary orders from wholesalers in order to put a stop to parallel exports to other Member States carried out by such wholesalers.    Commission opens the German energy sector up to competition Richard Eccles and Mary Smillie, London On 26 November 2008, the European Commission adopted a decision making divestment commitments offered by E.ON legally binding.  The commitments were to divest about 20% of generation capacity and its transmission systems business, run by E.ON Netz comprising an Extra-High-Voltage line network and system operations.  This is the first time in European antitrust history that a company is divesting very significant assets to address competition concerns.  The power generation divestment will reduce E.ON's ability to withdraw capacity and hence raise prices, and also opens up the market to competition.  The divestment of the network will remove any incentive for the operator of the network to favour a particular supplier.  Top National Competition Law   France France Telecom undertakes not to favour its own subsidiary on the telephone fitting engineering market  Romain Ferla, Paris France Telecom has offered further commitments following the Competition Council's earlier order granting Solutel interim measures to prevent France Telecom restricting competition in the telephone fitting engineering market.  The Competition Council approved these commitments, on October 7, 2008, as credible, verifiable and solving all the competition issues.    The Competition Council requires Pierre Fabre to allow internet sales  Romain Ferla, Paris On 29 October 2008, the Competition Council condemned Pierre Fabre Dermo - Cosmétique ("Pierre Fabre") for anti-competitive behaviour. The Council found that Pierre Fabre had prevented its authorised distributors from selling its products on the Internet.  The Council required Pierre Fabre to stop the prohibition on online sales in its distribution contracts for cosmetic and personal hygiene products. In addition, Pierre Fabre was fined €17,000.   The French Competition Council orders interim measures against Orange and Apple  Romain Ferla, Paris On 17 December 2008, following a complaint from Bouygues Telecom in September 2008, the Competition Council, ordered Orange and Apple to suspend the five-year exclusivity agreement which allowed the mobile operator Orange to control the sales of iPhones in France. The Competition Council considered that the exclusivity granted by Apple to Orange would reduce competition (regarding prices and quality of networks) and ordered interim measures aimed at allowing other mobile phone operators to begin distributing iPhones. Top Germany Federal Supreme Court blocks further shareholding in regional suppliers by market-dominant energy producers Dr Jörg Witting and Fabian von Busse, Düsseldorf The Federal Supreme Court has confirmed the decisions of the Düsseldorf Higher Regional Court and of the Federal Cartel Office which prohibited the acquisition of a 33.3% share in municipal supplier Stadtwerke Eschwege by German energy producer E-ON. Top   Italy  The Antitrust Authority imposes fine of €1.67 million on Aeroporti di Roma for abusing its dominant position Claudia Crupi, Rome On 23 October 2008, the Antitrust Authority decided that Aeroporti di Roma (AdR) had abused its dominant position by levying excessive charges for refuelling and sub-letting office facilities to freight operators.  AdR also found that the system of charges for access to Rome Fiumicino's Cargo City hindered free competition and damaged other handlers.     Top The Netherlands NMa fines two cartels in Dutch home care industry Natascha Linssen, The Hague The Netherlands Competition Authority (NMa) has imposed fines, varying between €611,000 and €4 million, on five home care providers in the Dutch regions of Kennemerland and 't Gooi for involvement in cartel activities. These cartels deprived clients of their freedom to choose their own care.   NMa fines ProRail for violating Dutch Railway Act Natascha Linssen, The Hague The Netherlands Competition Authority (NMa) has imposed fines on Dutch railway infrastructure manager ProRail for two violations of the Dutch Railway Act.  First, ProRail was fined €776,000 for the way it treated Dutch railway company Connexxion during the capacity allocation process for rail companies. During that process, ProRail did not abide by the rules laid down in the Railway Act, which are there to safeguard the distribution of capacity in a non-discriminatory manner.  Second, the NMa fined ProRail €100,000 for taking longer than the time limit to perform a capacity analysis.    NMa conditionally approves joint venture of KPN and Reggefiber Cezanne Philips-Santman, The Hague The Netherlands Competition Authority (NMa) has conditionally approved a proposal from Dutch telecom provider KPN and optical-fibre company Reggefiber in which fair access to the planned optical-fibre networks of their intended joint venture is guaranteed. KPN and Reggefiber plan jointly to construct optical-fibre networks in the Netherlands over the next few years. These networks will enable them to offer broadband services that are impossible to offer with existing copper lines.   Top Sweden Swedish Competition Authority publishes proposals to promote competition in Sweden Henrik Nilsson, Stockholm The Swedish Competition Authority ("KKV") published a report on 17 November 2008 on how to promote competition in Sweden. The KKV has consulted over 600 stakeholders and consulted several independent experts. The Competition Authority will deliver its final report by 31 March 2009.   Top UK Competition Appeal Tribunal judgment in respect of BSkyB's acquisition of shares in ITV Plc Richard Eccles, London The Competition Appeal Tribunal (CAT) has dismissed British Sky Broadcasting's (BSkyB) appeal against the Competition Commission's report and Secretary of State's decision regarding the acquisition and the divestment remedy (British Broadcasting Group plc v Competition Commission and Secretary of State) but has upheld Virgin's appeal against the Competition Commission's media plurality findings (Virgin Media v Competition Commission and Secretary of State) in its judgment of 29 September 2008.  BSkyB and Virgin Media were both refused permission to appeal against these judgments by the CAT on 5 December 2008.   Court of Appeal confirms that claimants seeking damages for losses suffered as a result of a breach of competition law are only entitled to compensatory damages under English law Louise Banér, London The Court of Appeal has upheld the High Court's judgment on an award for damages against manufacturers of vitamins who were found by the European Commission to have breached Article 81 of the EC Treaty by entering into a cartel (Devenish Nutrition Ltd v Sanofi-Aventis SA (France) and others [2008] EWCA Civ 1086). The High Court had concluded that on the facts of the case, compensatory damages were the appropriate remedy and that restitutionary damages would not normally be available under English law in relation to cartel damages.    The Lloyds TSB and HBOS merger found to be in the public interest Jeremy Robinson, London The Secretary of State has given competition clearance of the Lloyds TSB/HBOS merger after concluding that the merger was in the public interest, despite the OFT's report to the Secretary of State for Business, Enterprise and Regulatory Reform a report on the proposed Lloyds TSB/HBOS merger, finding that there was a realistic prospect that the anticipated merger will result in a substantial lessening of competition.  The Secretary of State intervened on national interest grounds under the Enterprise Act 2002.  An appeal to the Competition Appeal Tribunal against the Secretary of State's decision brought by a specially formed grouping "The Merger Action Group" was rejected in a judgment given on 10 December 2008.     Albion Water v Water Services Regulation Authority (Dŵr Cymru Intervening) Richard Eccles, London On 7 November 2008, in Albion Water Ltd, Albion Water Group Limited v Water Services Regulatory Authority and Dŵr Cymru Cyfyngedig, United Utilities Water PLC intervening Case Number 1046/2/4/04 [2008] CAT 31, the Competition Appeal Tribunal (CAT) ruled that the incumbent water supplier Dŵr Cymru had abused its dominant position in setting an excessive common carriage or network access price, upholding an appeal made by Albion Water Limited against the decision of the water regulator, now OFWAT.  In finding that the access prices were excessive the CAT applied primarily an Average Accounting Costs plus approach, and in finding that the prices were also unfair and therefore abusive, the "economic value" was considered in relation to the price, which showed margins of 46.8% for users generally and 68.1% for the specific system used.   Top This update gives general information only as at the date of first publication and is not intended to give a comprehensive analysis. It should not be used as a substitute for legal or other professional advice, which should be obtained in specific circumstances.