Competitive Edge: Competition & EU law news - September 2019
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Keeping you up to date on Competition & EU Law developments in Europe and beyond
When does speaking badly about your competitors become a Competition Law problem?
Over the past decade, a new form of abusive conduct, namely the practice of “denigration” has been identified and pursued by different competition authorities across Europe. The decisions mark a change of direction and a development of the scope of application of competition law and contain further interesting points with significant practical relevance. Read more >EU competition rules on horizontal agreements between companies – feedback period is open!
The EU Commission has started the evaluation process for the competition rules relating to cooperation agreements between competitors, so-called horizontal agreements. The current legal framework, the EU block exemption regulations for R&D Agreements resp. Specialisation Agreements and the accompanying Guidelines, was adopted in 2010 and will expire in 2022. In order to examine whether to let these regulations (and the guidelines) lapse, extend them or amend them, the Commission invites companies to give feedback on the working of the existing regime. In the evaluation, the Commission is assessing the relevance, effectiveness. efficiency and coherence of the two block exemption regulations for horizontal agreements. Companies are requested to share not only evidence on the functioning of the two Block Exemption Regulations but also their views on how market developments since 2010 should be taken into account.The feedback phase closes on 3 October 2019 and precedes a public consultation which is expected in Q4/2019. Feedback will be taken into account for further development and fine tuning of the initiative. Feedback will be published. If you want to provide feedback on a no-name basis, we may be able to assist you. Please do not hesitate to reach out to any of our Bird & Bird competition law experts if you would like to explore the options.
Competition & EU group news
Our Dawn Raid Game is now available in French!Bird & Bird German Competition team shortlisted for prestigious JUVE award
Upcoming speaking engagements at Competition & EU law conferences
Updates from our network
EU - Summary of contributions to the consultation on the Vertical Block Exemption Regulation published
Australia - Australia's competition regulator takes action against leading Australian steel producer for alleged cartel conduct
Denmark - Purchasing association accepts a fine of DKK 1.3 million for illegal price coordination and information exchange from Danish Competition Authority
Finland- Supreme Administrative Court of Finland rules on scope of legally privileged material
Germany - Court expresses serious doubts regarding German Federal Cartel Office's Facebook decision
Hungary - Current trend towards commitments in unfair trading practices procedures in Hungary
Poland - Landmark judgement by the Polish Supreme Court on delaying a dawn raid
Spain - The CNMC extends disciplinary proceedings against 11 consultancy companies for bid-rigging
The Netherlands - The Dutch Competition Authority advocates ex-ante enforcement tools to deal with competition issues in the digital economy
UK- UK Competition & Market Authority announces settlement with Aspen and consults on proposed commitments
EU
Summary of contributions to the consultation on the Vertical Block Exemption Regulation published
Between February and May 2019, the European Commission ("Commission") conducted a public consultation evaluating the Vertical Block Exemption Regulation ("VBER") and the accompanying Guidelines on Vertical Restraints ("VGL"). Stakeholders were invited to evaluate the effectiveness, efficiency, relevance, coherence and added value of the rules.
The Commission recently published a summary of the contributions it received. This summary does not entail an official position of the Commission on a potential revision of the Regulation, it merely summarises the positions taken by stakeholders. However, it does give an indication of the main issues arising in the implementation of the Regulation, which might merit amendments in the upcoming revision. The next steps in the evaluation process are an open public stakeholder workshop, discussions with the national competition authorities, and the publication of a staff working paper outlining the official EU position.
Of particular interest in the contributions by stakeholders are the following observations:
• The majority of respondents indicate that the VBER and VGL increased legal certainty in the Union. However, they did point out some difficulties in their application for certain sectors, for SMEs, in light of recent market developments and recent case law;
• Respondents point out inconsistencies in the application of the rules by national authorities due to the non-binding nature of the VGL, especially regarding online sales restrictions and retail price maintenance ("RPM");
• According to stakeholders, legal certainty can be improved in relation to RPM, territorial and customer restrictions, online sales restrictions, restrictions of active/passive sales in selective distribution, MFN and price parity clauses, online search advertising restrictions, dual pricing and manufacturers with a dual role as distributor and competing seller;
• A significant number of respondents argue that both agreements between companies with a 30-40% market share and RPM clauses that generate efficiencies should benefit from the VBER's exemption as well;
• A majority of respondents indicated that the VBER's safe harbour outweighs the costs generated by the assessment of its applicability, therefore a majority would like to see the safe harbour prolonged.
The overwhelming feedback supports the renewal of the VBER and VGL. However, respondents urge the Commission to consider a review in light of recent market trends. The main trends identified are the increasing importance of online sales, online platforms and online advertising, and the effect of the use of price monitoring software and pricing algorithms on RPM. It remains to be seen which positions the Commission will take on these issues in its evaluation of the VBER and VGL.
Please find the summary of the contributions by stakeholders (here).
Australia
Australia's competition regulator takes action against leading Australian steel producer for alleged cartel conduct
In August 2019, Australia's competition regulator, the Australian Competition and Consumer Commission ("ACCC") commenced proceedings in the Federal Court of Australia against BlueScope Steel Limited ("BlueScope") and its former General Manager of Sales and Marketing, Mr Jason Ellis, for alleged cartel conduct. The relevant conduct concerned attempts by BlueScope and Mr Ellis to induce a number of steel distributors operating in Australia, as well as overseas manufacturers, to enter into agreements which contained a price fixing clause between September 2013 to June 2014.
Under Australia's Competition and Consumer Act 2010 ("Cth"), it is an offence for competitors to make, or give effect to a contract, arrangement or understanding that contains a 'cartel provision'. A cartel provision is one with relates to, amongst other things, price fixing – i.e. the ' ‘fixing, controlling or maintaining’ of prices between competitors. Breach of the cartel conduct prohibitions in the CCA can give rise to prosecution for significant civil penalties, or even criminal prosecution against the individuals concerned.
The ACCC is seeking to obtain orders from the Federal Court to impose civil penalties against BlueScope and also to disqualify Mr Ellis from managing corporations. The ACCC has also referred the matter to the Commonwealth Director of Public Prosecutions, which will determine whether to bring criminal charges against Mr Ellis.
Please find the press release by the Australian competition regulator here.
Denmark
Purchasing association accepts a fine of DKK 1.3 million for illegal price coordination and information exchange from Danish Competition Authority
The Danish purchasing association for photo dealers, Team DS, has accepted a fine consisting of DKK 1.3 million for infringing the Danish Competition Act by coordinating prices and illegal information exchange. In addition to the imposition of a fine on the association itself, a fine of DKK 100.000 was also imposed on an executive employee at Team DS.
Team DS consists of 50 members that are all independent, competing photo dealers. According to the Danish Competition Authority, Team DS instructed their competing members from 2008 until 2013 on the applicable sales prices of cameras and thereto related equipment. Consequently, the Danish Competition Authority concluded that Team DS infringed the cartel prohibition ultimately resulting in consumers paying too much for their camera products.
On August 5th 2019, Team DS therefore received a fine notice, imposing a fine of DKK 1.3 million on it for having (i) illegally coordinated prices and (ii) illegally exchanged information on several competitive parameters. In determining the amount of the fine, special attention was paid to the association's ability to pay and its solidity.
For more information, please refer to the press release from the Danish Competition Authority available in Danish here.
Finland
Supreme Administrative Court of Finland rules on scope of legally privileged material
The Finnish Competition and Consumer Authority ("FCCA") had, during a dawn raid at a company's premises, seized a memorandum drafted by this company which, among other things, referred to the legal advice provided to the company by an external attorney. The FCCA argued that as the internal memorandum did not confine itself to reporting the text or the content of written communications between the lawyer and the client, as required for internal communications of companies to be regarded as legally privileged (Court of First Instance in the Hilti case (T-30/89)) it could not be regarded as legally privileged. The Market Court acting as the first judicial instance, agreed with the FCCA and considered that the memorandum was an interpretation of an external legal advice and was therefore not covered by legal professional privilege.
The Supreme Administrative Court took a different view and stated that the memorandum contained a clear reference to external legal advice in the subject matter under investigation. The Court stated that the internal statements and inferences based on external legal advice could not be distinguished from the advice itself and should therefore be covered by legal professional privilege . The Supreme Administrative Court also discussed whether legal privilege could not be invoked anymore due to the fact that the company had forwarded the memorandum to other members of the cartel and noted that there was no EU case law concerning internal documentation reporting external legal advice being passed on outside the company. The Court found that although the content of the legal advice had ceased to be internal to the company as the memorandum in question had been forwarded, it was nonetheless protected by legal professional privilege. According to the Supreme Administrative Court in such a situation open to interpretation, the rights of defense of the parties suspected of competition law infringements should be attributed a broad scope.
The press release (in Finnish) of the Supreme Administrative Court can be found here.
Germany
Court expresses serious doubts regarding German Federal Cartel Office's Facebook decision
On 26 August 2019, the Higher Regional Court of Düsseldorf (“Court”) suspended the effect of the Facebook decision of the German Federal Cartel Office (“FCO”) after a complaint by Facebook questioning in particular the FCO’s finding of an abuse of a dominant market position by Facebook.
Facebook had asked for interim relief against the FCO’s decision of 6 February 2019. The company’s complaint is directed against restrictions imposed by the FCO on the processing of user data by Facebook. In essence, the FCO stated in its decision that Facebook infringes the German competition law abuse prohibition by way of requiring the consent of its users to contractual conditions which are inappropriate with regard to data protection law under the General Data Protection Regulation (“GDPR”). For further details please find a summary of the decision of the FCO in English here as well as an article by Bird & Bird partner Jörg Witting here.
The Court criticized in its summary examination that the FCO did not sufficiently investigate which terms and conditions would have been established in case of effective competition. Furthermore, according to the Court, the users of Facebook are not exploited if they consent to the amalgamation of their data collected by other services (i.e. Whatsapp and Instagram) with data of the Facebook network. The Court stressed that the data can be duplicated and also be offered to competitors of Facebook on the market for social networks any number of times so that the user is not economically weakened. Besides, in contrast to the FCO the Court deemed it to be sufficient in order to control their data that users can decide freely whether they want to use Facebook or not.
Mainly, the Court argues that even if a market dominant company imposes unlawful or unreasonable conditions on its customers, i.e. even if the Facebook’s terms and conditions breached GDPR rules, this would not automatically strengthen its market position or weaken the competitive structure on the relevant markets. Dealing with the VBL-Gegenwert I and II decisions of the Federal Supreme Court, the Court holds that the behavior of a market dominant company can only be qualified as abusive if it causes anti-competitive effects. In the Court’s view the FCO failed to prove such anti-competitive effects in the Facebook case so far. The decision of the Court grants interim relief so that Facebook does not have to fulfil the FCO’s requirements until a decision in the main proceedings pending before the same court. The parties can contest the Court’s present decision before the Federal Supreme Court.
For more information please find the Court’s decision in German here.
Hungary
Current trend towards commitments in unfair trading practices procedures in Hungary
Two recent unfair trading practices procedures of the Hungarian Competition Authority ("GVH") ended with commitments involving the payment of compensation to customers.
In case Vj/68/2016 (31 July 2019), the GVH accepted the commitments of 4Life Direct Kft., Red Sands Life Assurance Company (Europe) Limited and Red Sands Insurance Company (Europe) Limited to pay approximately HUF 100 million (EUR 3 million) to beneficiaries of insurance products compensating for incomplete information provided to customers. In addition, the undertakings subject of the investigation also committed to implement a compliance program focusing on future commercial communications.
In case Vj/17/2017 (31 July 2019), WizzAir committed to compensate airline passengers in a total amount of around HUF 250 million (EUR 760,000) affected by the Wizz Flex service since 2010. The customers were unable to benefit from the free flight modification under the Wizz Flex service because the customers were inadequately informed of applicable restrictive conditions (e.g., flight tickets on the same booking could not be modified separately, no refund in case the re-routed flight was cheaper than the original). In addition to the compensation scheme, WizzAir also undertook to implement IT developments and amend its information practices in order to make the conditions of the Wizz Flex service more comprehensible.
The summary of the 4Life Direct case is available here and the full decision here (both in Hungarian only). The summary of the WizzAir case is available here (in English) and the full decision here (in Hungarian).
Spain
The CNMC extends disciplinary proceedings against 11 consultancy companies for bid-rigging
On 6 February 2019, the Spanish Competition Authority ("CNMC") opened formal proceedings against 25 consultancy companies — including, inter alia, Deloitte, PwC, and Indra — and eight individuals. This investigation was initiated in January 2017 by the Regional Competition Authority in the Basque Country that carried out dawn raids and later referred the case to the CNMC.
The CNMC carried out in October 2018 additional dawn raids and considered that a number of consultancy companies had reached market-sharing agreements of consultancy services for private and public tenders throughout the national territory. According to the CNMC, these companies would have submitted fake offers to participate in concerted tenders between 2009 and 2018.
In July 2019, the CNMC carried out a new round of dawn raids and decided, on 16 August 2019, to extend the proceedings against 11 other companies – including, inter alia, KPMG and Everis - and two additional individuals.
Interestingly, a company from the PwC Group subject to the CNMC dawn raids, appealed the Court order authorizing access to its premises on the grounds that it does not perform neither consultancy services nor participate in any public tender. However, the appeal Court has recently rejected these arguments by stating that those facts may not per se be sufficient to exclude its participation in the alleged anticompetitive conduct, given its close relationship with other companies of the Group under investigation.
For more information, please find the CNMC's official press release here (in Spanish).
Poland
Landmark judgement by the Polish Supreme Court on delaying a dawn raid
On 10 September 2019, the Polish Supreme Court issued a landmark judgement in which it clarified the applicable rules during a company inspection by the Polish Competition and Consumer Protection Office (UOKiK). As the UOKiK regularly conducts (unannounced) company inspections (or 'dawn raids'), this is a relevant judgement that should be taken into account by companies having premises located in Poland.
The judgement concerned a dawn raid conducted in December 2009 by the UOKiK at the premises of a telecommunications company. UOKiK inspectors arrived at 10:10 am at the reception, they had to wait for a company employee until 10:43 am, and further had to wait until being allowed access to the premises and to meet with a Management Board member. For delaying the beginning of the dawn raid, UOKiK imposed a fine amounting to the equivalent of EUR 30 million, stating that the delay may have resulted in evidence being concealed.
In its judgement of 10 September 2019, the Supreme Court confirmed that inspectors must present their authorisation at the start of a dawn raid to a person authorised by that company, or an employee who is actively on duty on the company premises whose purpose is to serve the general public (Article 97 of the Polish Civil Code). The Court further clarified that the formal start of a dawn raid is marked by the inspectors presenting an authorisation to a company employee instead of to an employee at the reception, because such person should not be interpreted as the one specified in Article 97 of the Polish Civil Code. The Court further confirmed the company’s liability for delaying the dawn raid albeit for a shorter period than argued by UOKiK. As a result, the fine was substantially reduced to the equivalent of EUR 300,000.
Companies with premises located in Poland should take this judgement into account when preparing their compliance policies in case of dawn raids.
Please note that the Supreme Court judgement of 10 September 2019 (I NSK 46/18) has not yet been published. A link to the UOKiK decision of 4 November 2010 (DOK-9/2010) can be found here (in Polish).
The Netherlands
The Dutch Competition Authority advocates ex-ante enforcement tools to deal with competition issues in the digital economy
In May 2019 the Dutch State Secretary of Economic Affairs & Climate ('Ministry') stated that she will plead in Europe for a new competence in European competition enforcement to keep digital markets accessible. One of her suggestions is to enable the competition authority to intervene in advance (ex ante) if a digital platform threatens to take restrictive measures or poses conditions that undertakings or consumers cannot disregard.
The Dutch Authority for Consumers & Markets ('ACM') and the Ministry have jointly published a discussion paper on 6 August 2019 ('paper'). In this paper, the idea of an extra ex ante enforcement tool to prevent competition problems in the digital economy is being advocated. They envisage a tool that allows competition authorities, including the European Commission, to impose proportionate remedies on (presumably) dominant companies aimed at preventing competition problems, rather than relying on the current after-the-fact enforcement. In this regard two comparisons are made in the paper:
1. the enforcement powers of the UK Competition and Markets Authority, that has the ability to impose remedies following market studies;
2. the power of national telecom authorities to impose remedies on undertakings with significant market power.
Furthermore, it is emphasized that the remedies should always be proportionate and tailored to specific situations. It should be kept in mind that strategies and economic dynamics that make it possible for undertakings to become dominant do not necessarily create competition problems. The ex ante tool should be there to prevent dominant undertakings protecting their market position by foreclosing actual and potential competitors, deliberately raising switching costs or locking in customers. And the tool should closely follow the interpretation of the current abuse of dominance article (Article 102 TFEU). The paper recognizes that market definition is rather complex in dynamic multi-sided markets. Therefore it suggests to update the guidelines in which the role of data, consumer behaviour and network effects is taken into account.
With this discussion paper the ACM and the Ministry also wish to contribute to the policy agenda of the new European Commission. For more information please find the discussion paper on the website of the ACM here (in Dutch only).
UK
UK Competition & Market Authority announces settlement with Aspen and consults on proposed commitments
On 14 August 2019 the Competition & Market Authority ("CMA") invited interested parties to comment on its intention to accept commitments from Aspen over an agreement that allegedly prevented the entry of a competing version of the drug fludrocortisone in the UK. The CMA suspected Aspen infringed Article 102 of the Treaty on the Functioning of the European Union ("TFEU") and its UK equivalent by acquiring in 2016, in addition of its marketing authorisation for cold storage fludrocortisone, a marketing authorisation to supply ambient storage fludrocortisone in the UK. The CMA is concerned that this preserved Aspen's position as sole supplier of fludrocortisone in the UK and enabled it to charge supra-competitive prices.
In order to address CMA's concerns and without prejudice to its position that it has not infringed the competition rules, Aspen offers to resolve this case by paying £ 8 million to the UK National Health Service ("NHS"). In addition, Aspen offers to divest specific UK rights to an independent third-party and reintroduce the commercialisation of a fludrocortisone drug in the UK market in order to ensure that there will be at least 2 future suppliers of fludrocortisone in the UK. As part of its settlement with the CMA, Aspen has also agreed to pay a maximum fine of approximately £ 2.1 million if the CMA would reach a formal decision that the agreement at issue breached competition law. Interested parties were invited by the CMA to comment on the proposed commitments until 2 September 2019. The CMA will now decide whether to accept these commitments.
This is the first time that a CMA investigation has led to the offer of a direct payment to the NHS. The CMA explicitly stated in its announcement that the proposed payment by Aspen to the NHS would not preclude the NHS from seeking further damages if it considers doing so appropriate.
A link to the CMA Notice of intention to accept Aspen's binding commitments is available here and more information on still running CMA investigations concerning 6 other pharmaceutical drugs is available here.
Êtes-vous prêt? Try our Dawn Raid Game in French!
Our quirky 'Dawn Raid' game, used by hundreds of clients in the past two years to test their team's preparedness for a Dawn Raid by Competition Authorities, is now available in French.
The interactive game takes 15-20 minutes, and positions the player as an in-house employee who is at work when a dawn raid occurs. It's designed as a fun way for wider business groups to prepare their employees for a dawn raid and test their existing knowledge of what to do in certain situations. The Game is customizable for clients upon request.
This initiative demonstrates Bird & Bird's commitment to innovative client-facing technology and is part of the firm's wider Compliance & Investigations offering, which includes a Dawn Raid app and eLearning courses on Competition Law topics.
Click here to play the game in French.
Click here to play the game in English.
German Competition team shortlisted for prestigious JUVE award
Our German competition team is one of five nominated teams in Germany for the 2019 JUVE Award in the category: Law Firm of the Year for Competition Law. The winner will be announced during a gala event on 24 October 2019 in Frankfurt. A big thank you to our clients and peers for this nomination!
Upcoming speaking engagements at Competition & EU law conferences
• Fourth Annual Conference of the Florence Competition Programme: Hipster Antitrust, the European Way - October 25th in Fiesole, (Florence)
Competition partner Hein Hobbelen will be a panelist on the topic How to tackle concentration in digital markets.
• Knect365 Competition Law & Regulation in the Telecoms & Communications sectors - November 5th in Brussels. Marjolein Geus, Chair of Bird & Bird’s Global Tech & Comms Group and Head of the international sector regulation and consulting practice of the firm, will be a panelist on the topic Working within New Regulatory Frameworks. Get a 20% discount using VIP code FKW82896EMSPK when registering.
• Knect365 Competition Law & Regulation in the Media, Broadcasting & Digital Sectors - November 6th - Brussels. Partner Roelien Van Neck will speak on the topic Geo-blocking Regulation in Practice. Get a 20% discount using VIP Code FKW82897EMSPK when registering.
• Knect365 Competition Law and Regulation in the Energy Sector Conference - Nov 19th in Brussels. Partner Peter Willis will be speaking on recent developments in REMIT. Click to receive a 20% discount when registering for the conference.
• Advanced EU Competition Law Conference - 25th - 27th November in Brussels.
Partner Hein Hobbelen will present on the topic The Demise of Leniency. Click to receive a 30% discount when registering for this conference.
