Competitive Edge: Competition & EU law news - March 2020
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Keeping you up to date on Competition & EU Law developments in Europe and beyond
Double Caution: Gun Jumping Risks in M&A transactions
On 4 March 2020, the European Court of Justice dismissed the appeal against the EU Commission’s EUR 20 million fine imposed on Marine Harvest ASA (now: Mowi ASA). In the Mowi-judgement, the ECJ confirms the strict approach taken to gun-jumping in merger cases by the Commission. The ECJ confirms that both the failure to notify a concentration and the implementation of a concentration without prior regulatory clearance constitute gun-jumping and should be regarded as separate violations of the EU merger control rules. This is the second judgement by the ECJ relating to gun-jumping since the preliminary ruling in the Danish Ernst & Young/KPMG DK case (2018). And more are expected to follow as two more cases are currently pending in appeal before the General Court.
In this article, we explain the current debate on gun-jumping in the EU, discuss the recent developments in the cases decided by the ECJ and the EU Commission and indicate how a better balance may be struck between legitimate business interests and merger regulation enforcement
State aid & the COVID-19 pandemic – obtaining State aid for mitigating the financial impact of the pandemic
The COVID-19 pandemic has been declared an exceptional occurrence, paving the way for more and faster approval of national State aid initiatives in the EU. To stem the worst effects of the financial impact, the European Commission has in record time set up a new framework that will allow EU Member States to mitigate the financial impact through grants of State aid.
The State aid rules are complex and navigating these remains a challenge. For more information and contacts of our Bird & Bird State aid experts, who are standing by to help, read more.
Coronavirus (COVID-19) In Focus Page
Bird & Bird has created a dedicated Covid-19 page, which includes global guidance as well as regional advice, jurisdiction-specific FAQs and regular updates, to help companies protect their employees and their business and navigate this period of uncertainty.
Please note that whilst our competition teams across our different offices are now often working remotely, we remain available as usual and ready to assist our clients online and over the phone.
Worth mentioning in these times of economic crises is that we have many team members with in-depth specialist knowledge of the EU state aid rules. Likewise, the COVID-19 crisis has impacted the staffing of competition authorities all over the world and may impact on timing of ongoing or envisaged merger control proceedings.
We are available to advise on such scenarios, so please do not hesitate to contact us if you have any questions.
Bird & Bird news
- The ECN+ Directive: Practical implications for NCAs and Businesses - recorded webinar
- Upcoming speaking engagements at Competition & EU law conferences
Updates from our network:
EU
Hotels should not discriminate customers based on residence
Australia
ACCC decides not to appeal Federal Court's decision to allow Vodafone/TPG merger
Belgium
Behavioural measures do have an expiry date
Czech Republic
Green light for Heimstaden to take over the Residomo Group
Denmark
Court finds medicine distributor guilty of abuse of dominance after price increase by 2,000 percent
Finland
A merger was blocked for the first time in Finland
France
New paper on competition issues raised by the digital economy
Hungary
“Green bio”, “bio” and “power of nature” are misleading health claims for solariums
Italy
Big data Survey: focus on competition issue of a joint final report
Singapore
Ongoing Review of Proposed Merger of Korean Shipbuilders
Spain
The CNMC opens formal proceedings against 7 firms to investigate the use of algorithms in the real estate intermediation market
The Netherlands
CBb confirms that even if no cartel fine is imposed a company may still have interest to appeal cartel decision
UK
Pharma companies fined over £3 million for fixing price of nortriptyline
EU
Hotels should not discriminate customers based on residence
The hotel group Meliá received a fine of EUR 6.7 million from the European Commission (the “Commission”) for clauses it included in agreements with tour operators which discriminated among customers based on their place of residence in 2014 and 2015. At the same time, the Commission closed probes into four tour operators (Kuoni, REWE, Thomas Cook and Tui) which began in 2017.
The Commission's investigation found that Meliá's standard terms and conditions for contracts with tour operators contained a clause whereby such contracts were only valid when a customer making a reservation was resident in specified countries. These clauses restricted on the one hand active sales, because they prevented tour operators from selling hotel accommodation freely in all EEA countries and passive sales for hotel accommodation, and on the other hand passive sales, because they prohibited responding to direct requests from customers resident outside the countries specified in the contracts. Consequently, in effect, the terms in question created a situation where the market could be partitioned. In effect, this has left end customers unable to see the full hotel availability or to benefit from better prices offered by tour operators in other Member States.
This decision highlights that whilst the EU supports "innovative pricing mechanisms" to help hotels maximize room usage, the Commission will not permit hotels and tour operators to discriminate between customers on the basis of their location. Such clauses could prevent consumers from benefiting from better conditions available in other EU countries. Furthermore, this decision fits in the recent list of decisions targeting restrictive clauses in agreements related to consumer goods.
The Commission's press release is available here.
Australia
ACCC decides not to appeal Federal Court's decision to allow Vodafone/TPG merger
The ACCC has decided not to appeal the Federal Court of Australia's highly anticipated judgment in the TPG/Vodafone merger in which it declared that the proposed merger between the two parties would not have the effect, or likely effect, of substantially lessening competition in the supply of retail mobile services in Australia. According to its public announcement, the ACCC was unable to find an error of law in the Federal Court's decision required to establish a ground of appeal.
The successful legal challenge by TPG and Vodafone followed the ACCC's decision to oppose the proposed merger in May 2019 on the basis that a merger between TPG and Vodafone would reduce competition and contestability in the telecommunications sector and prevent the emergence of a new mobile network operator to challenge the three incumbent operators, Telstra, Vodafone and Optus. The ACCC had argued that a merger between the two parties would effectively prevent TPG from reviving its plan to roll out Australia's fourth mobile network and become a competitive constraint on the other three existing telecommunications providers in Australia.
Belgium
Behavioural measures do have an expiry date
On 11 February 2020, the Belgian Competition Authority (BCA) approved a request from the Kinepolis group, a major cinema complex operator, to lift one of the merger commitments which had been imposed on the group in the 90s.
Since the creation of the Kinepolis group in 1997 following the merger of the Bert and Claeys groups, the company was prevented from creating new theatre complexes in Belgium without the prior authorisation of the BCA. Following a judgement of the Brussels Markets Court of 23 October 2019, the BCA decided to lift the behavioural remedy. The authority considers that behavioural remedies constitute a "far-reaching restriction" on market freedom and should therefore be restricted in time. The restriction on "organic growth" (i.e. growth as a result of own investments as opposed to acquisition) will be lifted after a transition period which ends on 11 August 2021. Certain commitments, such as the obligation for Kinepolis to notify any acquisition of a cinema complex to the BCA (also if the transaction does not reach the merger notification thresholds laid down in the law) remains in force.
Czech Republic
Green light for Heimstaden to take over the Residomo Group
In a simplified procedure, the Office for the Protection of Competition authorised the merger of Heimstaden Bostad AB with RESIDOMO, s.r.o., RESIDOMO Services, s.r.o. and DomTherm, s.r.o. The Swedish group thus gains the opportunity to control the aforementioned companies exclusively. The decision has already become final.
The acquired companies operate mainly in the area of residential property rentals and commercial rentals in the Czech Republic. Since the group Heimstaden does not have a presence on the Czech market yet, the merger is considered as a conglomerate merger that does not have any impact on the current competition on the relevant market.
The British investment group Round Hill Capital sells its residential portfolio to the Swedish investment group, whose main focus is on the residential property rentals and is one of the largest in Europe with its presence on five, now six European markets. According to the press release of the company, it will become the biggest provider in the area of residential property rentals in the Czech Republic. Heimstaden Bostad AB will acquire residential portfolio consisting of 4,515 assets with 42,584 residential units and 1,675 commercials, through the acquisition. The agreed purchase price on asset level amount to approx. EUR 1,3 billion, which is one of the largest real estate transaction in the Czech Republic.
Since the contemplated transaction will not have an adverse effect on the competition on the relevant market, the merger was authorised. Please find the relevant press release here (in Czech only).
Denmark
Danish merger control deadlines suspended
In an unprecedented move, the Danish merger control deadlines have been suspended from the 18 March due to the COVID-19 situation until 10 May for now.
When undertakings wish to implement a larger merger, the Competition and Consumer Authority (“DCA”) must ensure that the merger will not significantly impede competition to the detriment of competitors and consumers. The DCA has a statutory period to approve or prohibit the merger, but as a result of the measures taken to prevent and curb the spread of COVID-19, the deadlines have been suspended several times. At expiry of the recent suspension period, the DCA reviewed whether to extend the suspension and ultimately decided to extend it further – until at least 10 May for now.
As a consequence of the current situation, the DCA encourages companies wishing to merge to contact the agency well in advance.
For more information, please refer to the press release available here (only available in Danish).
Finland
FCCA requires ex ante approval to notify transactions due to COVID-19
Due to the novel coronavirus the Finnish Competition & Consumer Authority ("FCCA") has published a statement requiring companies to contact the FCCA before filing a new merger control notification and specifically agreeing with the FCCA that a notification may be filed. This requirement is not based on any legal provision but in all likelihood will be applied by the FCCA by continuing to adopt a very strict approach to declaring notifications incomplete if they have not been approved by the FCCA in the pre-notification phase. If possible, the FCCA also recommends postponing merger notifications.
Please find the press release of the FCCA in Finnish here.
France
Apple hit with record €1.1 billion fine for antitrust practices
On 16 March 2020, the French Competition Authority (FCA) imposed a €1.1 billion fine on Apple, the highest fine ever handed out to a company. The FCA considered that Apple had engaged in three anticompetitive practices with its distributors in the retail market for Apple products (excluding iPhones):
- Illegal sharing of products and customers between Apple’s wholesalers: the FCA found that Apple entered into anticompetitive agreements with its two Tech Data and Ingram Micro - to control the exact quantities of products to be delivered to each Apple premium reseller (APR). Following this, APRs became totally dependent on the stock decided by Apple, which led to an elimination of competition on the wholesale market. Tech Data and Ingram Micro were respectively fined €76.1 million and €62.9 million for this anticompetitive agreement.
- Resale price maintenance on APRs: Apple compelled APRs to charge the same prices as those charged in Apple Stores, in particular by (i) supervising the conditions under which APRs could organise promotions and (ii) setting up a price monitoring system with reprisals. This led to an alignment of selling prices to consumers and allowed Apple to limit competition between APRs as well as between APRs and Apple distribution channels.
- Abuse of APRs’ situation of economic dependence: such situation arose from the APRs’ contracts prohibiting them to sell Apple competitors’ products and the lack of an alternative to the distribution of Apple products. The FCA found that Apple abused this situation through discriminatory treatments of APRs, supply delays and uncertainty about Apple's commercial terms.
Apple already announced its intention to appeal the decision. However, as the appeal lacks suspensory effect, the fine is immediately due.
The full text of the FCA’s decision is not yet available on its website and will be published at a later stage. For more information, the FCA’s press release is available here (in English).
Hungary
“Green bio”, “bio” and “power of nature” are misleading health claims for solariums
The Hungarian Competition Office (“GVH”) found that Fox Consulting Kft.’s (“Fox Consulting”) practice of using “green bio”, “bio” and “power of nature” in advertising solariums mislead Hungarian consumers and imposed a fine of HUF 7 million (approx. EUR 20,830).
Fox Consulting is the franchisor company of solarium services named “KiwiSun”, with as many as 57 franchise partners in Hungary. The terms “green bio” and “bio” are part of the trademarks owned by Fox Consulting in connection with the KiwiSun franchise, referring to the green coloured solarium UV tubes and the green design of the KiwiSun premises. Furthermore, health claims such as “increases the production of endorphins”, “helps the absorption of calcium”, “helps joints to move better” and “strengthens the immune system” were also frequently used.
In its decision dated 21 February 2020, the GVH found that Fox Consulting did not explain what was meant by the “green bio”, “bio” and “power of nature” claims, and so these claims were considered unjustified health claims even on their own, but especially together with the other health claims used in the communications in question (i.e., “increases the production of endorphins”, “helps the absorption of calcium”, “helps joints to move better” and “strengthens the immune system”), and thus violated the Hungarian Unfair Commercial Practices Act (implementing the EU’s Unfair Commercial Practices Directive). The GVH also established that unjustifiably presenting a service as healthy, which is in fact harmful for the human body according to the current state of science, is unlawful.
Please find the GVH’s decision here (Vj/4/2019) in Hungarian and the related press release here in English and here in Hungarian.
Italy
Big data Survey: focus on competition issue of a joint final report
On 10 February 2020, the Italian Competition Authority (“ICA”) published the final report of the Big Data joint fact-finding survey, launched in collaboration with the Italian Communications Regulatory Authority ("AgCom") and the Data Protection Authority on 30 May 2017. As part of the initiatives adopted following the joint inquiry, the Authorities also identified policy guidelines and recommendations addressed to the legislator.
From the perspective of antitrust enforcement, the ICA focused its investigation on the implications of Big Data in terms of both the protection of competition and consumer interests. Its analysis firstly concerned consumers’ propensity to allow the use of their data in exchange for use of online services; then, it addressed several "hot" competitions topics such as: i) the analysis of market power and the effects of concentrations; ii) the qualitative dimension of competition in markets where services are offered for free; iii) the role of portability in reducing switching costs and ensuring market contendibility.
According to the indications provided in the final report, the ICA aims to: a) extend - in the definition of the relevant market - the antitrust analysis beyond the traditional parameters related to prices and quantities, by including quality, innovation and fairness objectives; b) change the Italian merger control regime by introducing an evaluation standard grounded on the SIEC criteria (“Substantial impediment to effective competition”), and review the merger notification thresholds in order to be able to prevent so-called “killer acquisitions” by large players in the digital sector; c) promote the competition for data access and consumer protection by providing additional portability and mobility data obligations; d) reinforce the investigative powers of the ICA and the AgCom outside proceedings and increase the penalties for the violation of consumer protection law.
The proposed measures are not entirely new in their application of antitrust law at both a national and European level. Therefore, it will important mainly to monitor the concrete application of traditional antitrust rules and principles in the near future.
For more information, please find the ICA press release here.
Singapore
Ongoing Review of Proposed Merger of Korean Shipbuilders
The estimated US$2 billion (S$2.7 billion) transaction raised concerns that the removal of competition would be detrimental to customers in Singapore.
Following an application for decision on 12 September 2019, The Competition and Consumer Commission of Singapore (the ''CCCS'') concluded the Phase 1 review of a proposed merger between Korea Shipbuilding & Offshore Engineering Co., Ltd. and Daewoo Shipbuilding & Marine Engineering Co., Ltd. ("Proposed Transaction"), and noted there were competition concerns including:
- That the Proposed Transaction will remove competition between two main suppliers of commercial vessels, to the detriment of customers in Singapore;
- Whether alternative suppliers will be sufficiently strong competitors to the merged entity; and
- That the barriers to entry and expansion, particularly in relation to more sophisticated vessels such as LNG carriers, may be high.
As there were remaining competition concerns that could not be dismissed, CCCS proceeded on to Phase 2 of the review including a second public consultation that was concluded on 19 February 2020.
The targeted completion for a Phase 2 review is 120 business days but is subject to change due to complexities of the transaction, or additional time required to obtain further information.
The merger parties can, at any time, offer commitments to address the competition concerns for CCCS' consideration.
The current review by CCCS is one of a number of ongoing regulatory reviews of the Proposed Transaction including those by authorities in China, Japan and the European Union. The Kazakh competition authority has reportedly approved the merger.
Mergers and tie-ups between other shipbuilders have also been announced or are reportedly being explored. Notably, China announced the merger of two of its shipbuilders in November 2019 and similar mergers between domestic shipbuilders are being reportedly explored in Japan and Singapore.
Spain
The CNMC opens formal proceedings against 7 firms to investigate the use of algorithms in the real estate intermediation market
On 19 February 2020, the Spanish competition authority (the "CNMC") formally opened proceedings against a major Spanish company, Idealista and other 6 firms for alleged anticompetitive agreements for coordination of prices and other commercial conditions in the real estate intermediation market.
The CNMC considers that coordination would have been implemented through the use of software and digital platforms, causing an increase in the housing prices. In fact, the CNMC affirms that this conduct would have been facilitated by firms specialized in IT solutions through the design of a real estate management software and embedded algorithms.
Idealista has denied its participation in the practices under investigation and has declared that it has never altered the prices of the properties advertised on its platform. The company has also clarified that it is the advertising clients who decide the conditions of their properties offered without any algorithm modifying the price.
In case that the CNMC's concerns are confirmed at the end of the investigation, this case would support the view that the increasing use of algorithms may affect competition in digital markets. There are no doubts that algorithms are playing an increasingly important role in emerging digital markets, by forecasting or even making business decisions. However, despite their advantages, such as cost reduction or ease of use, they can facilitate agreements between competitors on automated pricing.
In Spain this represents a new issue, since this is the first time that the CNMC initiates an antitrust investigation for a potential anticompetitive use of algorithms. By contrast, in other countries, including the UK or the USA, sanctions have already been imposed for the use of algorithms as a tool of repricing the products sold and distributed via online platforms.
On the basis of the above, similar cases will foreseeably be under review by the competition authorities in the near future, which will oblige them to reinforce their specialization in the technological field to determine liability of both the suppliers of the software and the companies using them for the coordination and alteration of prices.
For more information, please find the CNMC's official press release here.
The Netherlands
CBb confirms that even if no cartel fine is imposed a company may still have interest to appeal cartel decision
On 18 February 2020 the Dutch Trade and Industry Appeals Tribunal (“CBb”) ruled that a company may still have an interest in bringing proceedings against a cartel infringement decision even if no fine is imposed on it and even if it is not the direct addressee of the infringement decision. In the judgment at hand the interest to appeal was established on the basis that the company was held jointly and severally liable for a cartel fine imposed on its wholly-owned subsidiary. This judgment confirms earlier caselaw by the CBb of July 2019 according to which a party may still have an interest to appeal an infringement decision of the competition authority even if no fine was imposed on it.
In 2017, the Dutch competition authority (“ACM”) fined three companies and two natural persons for a price fixing agreement. One of these companies was the wholly-owned subsidiary of the appellant in the judgment at hand. The appellant was as parent company held jointly and severally liable for the total amount of the fine, but it was not the direct addressee of the infringement decision. Subsequently, ACM decided after the objection proceedings not to impose a fine on the parent company due to its inability to pay the fine. This decision was appealed at the Rotterdam District Court (“District Court”), which ruled that this decision had no negative legal effects for the applicant (parent company) for which reason it had no cause of legal action due to a lack of interest.
UK
Pharma companies fined over £3 million for fixing price of nortriptyline
The Competition and Markets Authority ("CMA") announced that it has issued two infringement decisions in relation to the supply of 10mg and 25mg tablets of the anti-depressant nortriptyline.
In its first decision, the CMA found that King and Auden Mckenzie shared out between them the supply of nortriptyline tablets to a large pharmaceutical wholesaler. From September 2014 to May 2015, the two companies agreed that King would supply only 25mg and Auden Mckenzie only 10mg tablets. The two firms also colluded to fix quantities and prices. After the infringement, Accord-UK took control of Auden Mckenzie’s nortriptyline business, and it has been held liable for the infringement, along with King.
The CMA has fined King £75,573 and Accord-UK, £1,882,238, with both companies handed reduced fines for admitting the infringement. Accord-UK and Auden Mckenzie also agreed to make a £1 million payment to the NHS in connection with the case. This payment does not stop the NHS from seeking further damages from the businesses involved in the infringement, but it would be offset against any further damages awarded.
In its second decision, the CMA found that between 2015 and 2017, King, Lexon (UK) ("Lexon") and Alissa Healthcare Research ("Alissa") exchanged commercially sensitive information about prices for nortriptyline, the volumes they were supplying and Alissa's plans to enter the market. In September 2019, King and Alissa both admitted to breaching Competition law, and they have been fined £75,573 and £174,912 respectively. Lexon did not admit to breaking the law and is now being fined a total of £1,220,383.
The CMA, in December 2019 has also secured the disqualification of Dr Philip Hallwood, a director of King Pharmaceuticals, banning him from the management of any UK company for 7 years. The CMA says it is also considering the possible disqualification of other directors. The CMA's decision is a stark reminder of the punitive consequences of companies fixing prices and attempting to ignore Competition law rules.
For further information, please find the CMA press release here and the CMA case page here.
Watch webinar on the ECN+ Directive:Practical Implications for NCAs and Businesses
On 4 December 2019, our Competition partner José Rivas presented on the practical implications of the ECN+ for NCAs and Businesses in a webinar hosted by the Academy of European Law (ERA).
Receive a 25% discount on the registration fee by taking the following steps:
1. Click on this link and click “Register for the webinar”
2. When redirected to the webinar page, create a My ERA account (at the bottom of the page).
3. Write an email to Avgustina Dorich ([email protected]) indicating that you are a contact of Bird&Bird and provide the password ‘ERA_ECN’. She will make sure you receive the 25% discount.
Upcoming speaking engagements at Competition & EU law conferences
- Partner José Rivas will speak about Aftermarket restraints in aviation: can data justify a novel approach? at the InformaConnect conference on Competition Law Challenges in Transportation on Wednesday 23 September in Brussels.
