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Competitive Edge: Competition & EU law news - April 2019

Competitive Edge: Competition & EU law news - April 2019

Published

Apr 17 2019

Written By

Pauline Kuipers

Partner
Netherlands

Keeping you up to date on Competition & EU Law developments in Europe and beyond

Also available as a pdf >

The implications of Brexit on UK competition law

This article examines the impact of Brexit on competition law, one of the most visible areas of EU enforcement. We address in turn each of the main pillars of competition enforcement (1) antitrust (rules prohibiting anti-competitive agreements and abuses of dominance), (2) mergers and (3) State aid. It is inevitable that Brexit will result in the UK Competition and Markets Authority having a bigger workload than it currently does. The CMA expects to take on larger merger cases, a greater number of complex antitrust investigations (sometimes in parallel with the Commission) as well as the enforcement responsibility for State aid rules across the UK.

EU

European Commission launches new online "eLeniency" tool

On 19 March 2019, the European Commission (“EC”) announced the launch of "eLeniency", its new online tool for companies to submit statements and documents in leniency and settlement proceedings in cartel and in non-cartel proceedings under Articles 101 and 102 TFEU, where an undertaking cooperates with a view to acknowledging an infringement of competition rules (EC technical guidance can be found here).

While the eLeniency tool is voluntary (companies still have the option of using the traditional verbal procedure), it is intended to provide an alternative to attending the EC's premises to make verbal statements. Therefore, the goal of the eLeniency platform is to make the process of providing evidence to the EC more efficient and less burdensome for companies.

The EC stresses that the new system ensures that the confidentiality and legal protection safeguards granted under the verbal procedure are applicable to an equivalent extent under the eLeniency system. Corporate statements under the Leniency Notice made via eLeniency are protected against discovery in civil litigation, in the same way as verbal submissions.

In this regard, the EC emphasizes that it has set up systems to guarantee the secure nature of the eLeniency system:

It is not possible to print or copy information entered into the eLeniency system.
Parties must type their statements or submissions all in one go and cannot save them with a view to finalising at a later point in time. Once a user starts making a statement or submission, the session remains open for 24 hours. Longer statements may be submitted in fragments subject to proper referencing.
The EC cannot retrieve any statement or submission or any supporting documents, until they have been formally submitted.
Once a statement or submission has been uploaded to the eLeniency server, only the EC can access it and no trace of it remains on the user’s computer. The user shall receive a timestamp to confirm the recorded date and time of its submission to the EC.

Whilst the eLeniency platform is available 24 hours a day, 7 days a week, individuals must be registered to be able to make use of it by (i) first creating an EU Login account either for a law firm or individually and (ii) then asking to have the EU Login registered within the eLeniency system. This ensures only authorised users have access.

As the registration of user requests is only open between 9 am to 5 pm on weekdays, the EC advises companies and their lawyers to register in advance, before any need to use eLeniency arises.

Having been involved in the expert group for the eLeniency tool, Bird & Bird has a thorough understanding of how this new mechanism works in practice and can provide advice on any related queries.

Australia

ACCC publishes Consumer Data Right draft rules

On 29 March 2019, the Australian Competition and Consumer Commission (“ACCC”) published the draft Competition and Consumer (Consumer Data) Rules 2019 (the “Draft Rules”). The Draft Rules set out how the Consumer Data Right (the “CDR”) will be implemented, and how it will operate in practice. The CDR will be introduced in relation to the banking sector initially, and then be extended to other sectors, including the telecommunications and energy sectors.

The purpose of the CDR is to give consumers better control over their data and to enhance competition by providing consumers with a right to request that certain data be given to them, or to a business of the consumer's choosing in a specific electronic format. This will enable consumers to request and transfer data to suppliers who can then tailor products and services to meet their needs, and it will improve the efficiency and competitiveness of markets by introducing lower barriers to entry for new entrants in markets where incumbents hold vast amounts of data and by addressing information imbalances across those markets.

A key challenge that will need to be effectively addressed is the extent to which the CDR will interact with privacy legislation, and who will be considered to be a 'consumer' for the purposes of the CDR.

Interested parties are being invited to make submissions in relation to the Draft Rules by 10 May 2019.

Belgium

Expanded powers for the Belgian Competition Authority

On 21 March 2019, the Belgian Parliament adopted a proposal amending Belgian competition law to include the concept of abuse of economic dependence in the toolbox of the Belgian Competition Authority (“BCA”) following the example of a number of other EU Member States.

Under the new rules, it will be illegal to abuse a position of economic dependence of two or more undertakings where the Belgian market, or a substantial part of it, is affected. Economic dependence is defined as "a position of dependence of an undertaking on one or more other undertakings characterised by the absence of reasonable equivalent alternatives available within a reasonable time and under reasonable conditions and costs, that would enable those or each of those undertakings to impose performance or conditions which cannot be obtained under normal market conditions." In essence, the purpose of the rules is to prevent the abuse of relative dominance in relation to one specific counterparty (compared to the prevention of the abuse of absolute dominance in relation to all other market operators under Article 102 TFEU and the national equivalents).

The new provision, Article IV.2/1 of the Code of Economic Law, prohibits non-dominant undertakings from abusing a relation of economic dependence. The BCA will be able to impose fines of up to 2% of the annual Belgian turnover of the undertaking, if three cumulative conditions are fulfilled: (i) the existence of a relation of economic dependence between two or more undertakings; (ii) an abuse; and (iii) an effect on competition in the Belgian market or a substantial part of it.

The law also clarifies practices that could be caught by the new provision, strongly resembling those practices which fall under traditional abuse of dominance prohibitions, including: (i) the refusal of a sale, a purchase or of other transaction terms or conditions; (ii) directly or indirectly imposing unfair purchasing or sales prices or other unfair contractual terms or conditions; (iii) restricting production, sales or technical development to the detriment of consumers; (iv) applying dissimilar trading conditions to economic partners for equivalent services, which places them at a competitive disadvantage; (v) making the conclusion of agreements conditional on the acceptance of additional services which, by their nature or according to commercial usage, have no connection with the subject matter of these agreements.

The date on which these changes will enter into force is not yet known. It depends on the official publication of the Act.

The newly adopted rules are available in French and in Dutch here.

Czech Republic

Billa, Penny and REWE settled to pay CZK 164 million in fines for abuse of significant market power

The Czech Antimonopoly Office imposed a fine for abuse of significant market power in the aggregate amount of CZK 164,372,000 on the retail chains BILLA, spol. s.r.o., (“Billa”), Penny Market, s.r.o. (“Penny”) and their subsidiary, Rewe Buying Group s.r.o. (“RBG”). The decision was adopted within the settlement procedure; no appeal was filed and the decision has already become final.

On the basis of information from suppliers and the findings of preliminary investigation, the Office initiated an administrative proceeding focused on the manner in which the parties acted in cooperation with each other as a purchasing alliance, negotiated and obtained the RBG bonuses from their food suppliers. Following the amendment to the Act on Significant Market Power of 2016, which restricts payments without any consideration, the parties to the proceedings started to convert the RBG bonuses into quantity or price discount. However, in relation to particular suppliers the RBG bonus still remained in its original form.

In its decision, the Antimonopoly Office concluded that the RBG bonus in all above-mentioned forms is a fee without real consideration which has been requested without any legitimate reason and therefore is unlawful. At the same time, in some cases the RBG bonus was a condition for delivery of food to relevant retail chains. The Office has revealed a total of 23 administrative offences concerning 22 suppliers affected by this illegal payment.

The respective fines imposed amount to CZK 70,791,000 on Billa, CZK 93,377,000 on Penny and CZK 24,000 on RBG. The relevant press release can be found in Czech here.

Denmark

Personal and corporate fines levied for bid rigging

On 7 March 2019, a Danish plumbing company (Christoffersen & Knudsen A/S) was fined DKK 575,000 (€ 77,000) by the Danish State Prosecutor for Serious Economic and International Crime for entering into a cartel agreement with their competitor (Sanoterm Danmark A/S). In the same case complex, another plumbing company (Fredensborg VVS-Teknik A/S) accepted to pay a fine of DKK 1 million (€ 134,000) in August 2017.

In this case, the two companies were found to be part of bid coordination since late 2012 by exchanging information on prices and conditions, which is illegal according to the Danish State Prosecutor for Serious Economic and International Crime for infringing section 6 of the Danish Competition Act (corresponding to TFEU Article 101).

Remarkably for the two cases in a European perspective, three leading employees (one from each company) were also fined personally for their intentional or negligent behaviour. The employees were fined DKK 25,000 (€ 3,350) each. Criminal liability on a personal level is unique for Danish Competition Law compared to other EU member states. Section 23 (3) of the Danish Competition Act states: "The punishment for anyone who acts in breach of Section 6(1) of this Act or Article 101(1) TFEU, cf. Section 24(1), by entering into a cartel agreement, cf. second sentence, may increase to imprisonment for up to one year and six months if the breach is intentional and of a grave nature, especially due to the extent of the infringement or its potentially damaging effects."

The full decision with links to the specific fines is available here (only available in Danish) and an English language summary here.

Finland

Different approach of the FCCA and the EC to the same transaction?

The recent decision of the European Commission (“EC”) regarding Danish Agro's acquisition of Konekesko's agrimachinery businesses in Finland, Estonia, Latvia and Lithuania provides for an interesting opportunity to compare the approach of the Finnish Competition and Consumer Authority (“FCCA”) and the EC to the same transaction. While the EC did not identify any competition concerns on the Finnish market, the EC decision is nonetheless interesting from the Finnish perspective, as the transaction was first notified to the FCCA in August 2018. The FCCA identified the markets of self-propelled forage harvesters and combine harvesters as potentially problematic and initiated a phase II investigation. According to the FCCA, the combined market share of the parties in forage harvesters seemed to be as high as 80-90 % and 40-50 % in combine harvesters respectively.

Shortly after the initiation of the II phase investigation, the issue was raised that the transactions in Finland and the Baltic countries may be interrelated and thus belong to the exclusive jurisdiction of the EC. The FCCA suspended its investigation and on 1 February 2019, the EC communicated that the transactions notified to the respective national competition authorities constituted a single concentration and therefore gave the EC exclusive competence over the matter.

The EC, in its investigation, did not find the acquisition to raise concerns regarding the Finnish market. The EC press release states that the presence of a sufficient number of alternative suppliers in most of the markets, waived any concerns on the potential adverse effects of the proposed transaction. As the public version of the decision is not yet available it is too early to draw conclusions on eventual differences in the Finnish and EU appraisal practices, but we will keep you updated once the public version of the EC decision is available.

It has, however, become clear that the FCCA is quite prone to initiate phase II investigations (5 phase II investigations were initiated out of approximately 30 notifications in 2017 and 9 out of approximately 30 in 2018) compared to the EC initiating 7 phase II investigations out of 380 notifications in 2017 and 12 out of 414 in 2018. This is worth taking into account when envisaging transactions which need to be notified to the FCCA.

The information in this country update is based on publicly available information only.

You can find the EC's press release on the decision here; the FCCA's press release on the investigation being taken up by the EC here (in English); the FCCA's decision to initiate a phase II investigation here (in Finnish only); and the FCCA's related press release here (in English).

France

French Competition Authority vs French energy regulator: diverging views on the concept of “contestable price”

On March 25th 2019, the French Competition Authority (“FCA”) issued – on its own initiative - an opinion in which it advises against the 7.7 % increase in the tariffs of regulated retail electricity proposed by the French energy regulator (“CRE”) in a ruling adopted in February 2019.

The FCA raised several objections, the most interesting one being the improper application by the CRE of the concept of contestable price.

As the French incumbent energy operator, EDF has a dominant position on the French electricity market which means that its tariffs should be set at such a level that the market remains contestable for alternative suppliers.

In its ruling, the CRE considered that the regulated tariffs should be set at a level allowing all the alternative suppliers to cover their costs to ensure contestability.

The FCA strongly rejected this position and indicated that the market should be considered contestable as long as EDF covers its own costs - irrespective of the costs of the alternative suppliers - the logic behind it being that EDF should not undercut the price of “as-efficient” competitors. The FCA made a strong statement that the fact that less efficient competitors may be unable to contest the market (i.e. to match EDF’s tariffs) does not constitute a competition law issue.

The FCA pointed out that increasing the tariffs to the level of the costs of less efficient competitors would not make economic sense and would be to the detriment of 28 million customers on regulated tariff who would be deprived of the benefit of the competitiveness of existing nuclear power plants operated by EDF. It also noted that using the costs of alternative suppliers as a relevant benchmark would not be practicable in particular given that EDF competitors’ costs widely vary from one competitor to the other.

The FCA therefore recommended that the government reconsiders the evolution of the regulated retail electricity tariffs, suggesting that it may be more suitable to regulate the conditions at which alternative electricity suppliers can access electricity produced by nuclear plants on the upstream market. The FCA also recommended that the government undertakes a review of the legality and advisability of the proposed method, as well as asks for a new deliberation from the CRE.

For more information: please refer to the full FCA’s opinion (in French) here or the FCA’s press release (in English) available here. Please also refer to the CRE’s ruling (in French) here.

Germany

FCO investigations lead to loosening advertising restrictions imposed on German athletes

On 27 February 2019, the German Federal Cartel Office (“FCO”) issued a press release announcing that the German Olympic Sports Confederation (“DOSB”) and the International Olympic Committee (“IOC”) committed to enlarge the advertising opportunities for German athletes during the Olympic Games. This so-called commitment agreement is a common means to conclude administrative proceedings initiated by a competition authority and terminates a long-lasting investigation.

The FCO, in coordination with the European Commission, initiated proceedings against the DOSB and the IOC in 2017 for suspected abuse of a dominant position by way of restricting advertising opportunities for German athletes and their sponsors. According to its preliminary assessment the FCO finds the DOSB and IOC to be dominant on the market for organizing and marketing the Olympic Games.

Both organisations, in consequence, amended their advertising guidelines in December 2017 prior to the Olympic Games in Pyeongchang. The FCO preliminarily accepted these changes. However, following a market test (interviews with athletes, sponsors and associations), the FCO found that the original changes were in fact insufficient given that they still did not address sufficiently the competition law concerns associated with the so-called “frozen period”, i.e. the period during the games and several days before and after the games when no athlete participating in the Olympic Games may allow his person, name, picture or sports performances to be used for advertising purposes.

In its latest commitment the DOSB and IOC therefore agreed to enlarge the advertising opportunities for German athletes and their sponsors even further, including in particular also the right for athletes to use (i) terms like "medal, gold, silver, bronze, winter or summer games", (ii) photographs of athletes competing, (iii) social media during the Olympic Games and (iv) to bring advertising-related disputes before the regular (and not sports arbitration) courts. The DOSB will now issue a new guideline which defines the new conditions and the IOC accepted to give priority to those guidelines over the IOC rules as regards Germany.

For further information please refer to the FCO’s press release in English and German.

Italy

Sky – investigation into the acquisition of Mediaset Premium’s R2

On 7 March 2019, the Italian Competition Authority ("AGCM") opened an in-depth investigation (phase II) to assess the proposed acquisition of R2 S.r.l., the Operation Pay branch of Mediaset Premium, by Sky Italia S.r.l. and Sky Italian Holdings S.p.A.

The investigation is aimed at examining the competitive impact of the acquisition, considering that Sky, the acquirer company, is the dominant operator in the Italian pay-TV market and that R2, the acquired company, is Mediaset Premium’s terrestrial digital broadcasting technical platform, which so far has been the most effective competitor of Sky in the Italian pay-TV market.

In particular, the investigation focuses on whether this transaction might strengthen the dominant position of Sky in the pay-TV retail service market, as well as in the wholesale market of pay-TV terrestrial digital broadcasting platform access services, so to eliminate or substantially reduce competition in those markets and in related markets such as digital broadcasting, pay-TV contents and pay-TV channels.

For more information please see the press release and the Decisions of the AGCM in Italian here.

Spain

The Spanish Competition Authority applies for the first time the prohibition to enter into agreements with the Public Sector

On 14 March 2019, the Spanish Competition Authority ("CNMC") fined Siemens, Alstom and 13 other companies with a total of 118 million euros for colluding in public tenders convened by the Spanish Administrator of Railways of Infrastructures (“ADIF”).

The CNMC has identified three separate practices infringing Article 1 of the Spanish Competition Act ("LDC") and Article 101 TFEU, which constitute three different cartels:

• Cartel for the sharing of tenders for the manufacturing, supply, installation and maintenance of electrification systems of high-speed railway networks, from 2008 to 2016;

• Cartel for the tampering of tenders for the maintenance of electrification systems of conventional railway networks, from 2002 to 2016;

• Cartel for the sharing of tenders for the manufacturing, supply, installation and maintenance of electromechanical equipment of high-speed railway networks, from 2012 to 2015.

In addition, the CNMC has fined 14 individuals involved in the infringements with a total of 666,000 euros. In Spain, fines for individuals can go up to 60,000 euros and, in this case, sanctions range from 23,700 to 59,800 euros. These are the highest fines imposed to managers so far.

The most outstanding aspect of this decision is the first practical application of the ban from entering into contracts with the Spanish Public Administration. This prohibition was introduced in the Spanish legal system by the Public Sector Contract Law 9/2017, which came into force in March of last year implementing the provisions of Directives 2014/23/EU and 2014/24/EU, of 26 February 2014, on public procurement and the award of concession contracts.

The CNMC has clarified that all leniency applicants, without distinction between those opting for immunity or reduction of the fine, are exempted from the prohibition. Therefore, Siemens and Alstom, as leniency applicants, cannot be subject to the exclusion from public contracts. However, the CNMC has let other matters open, such as the duration and the scope of the prohibition, which should be determined by the competent Public Administration.

For more information, please find the CNMC's final decision here (in Spanish).

The Netherlands

ACM publishes its market study on mobile app stores and opens an investigation into abuse of dominance by Apple

On 11 April 2019 the Dutch competition authority ("ACM") published its findings on the ACM market study into mobile app stores ("Market Study").

ACM conducted the Market Study in order to gain more insight into how app providers are able to offer their apps in app stores and what influence app stores have on the selection of apps for users. Both Apple and Google have attained significant market positions with their operating systems iOS and Android respectively. ACM however considers that initially its further formal investigation will focus on Apple because, at the moment, the most detailed reports indicating conduct at odds with competition law were received about Apple's App Store.

According to ACM, its Market Study reveals that app providers depend on the app stores in order to reach users on their mobile phones. ACM concludes that for numerous apps, no realistic alternatives to Apple's App Store and Google's Play Store exist which would give Apple and Google the opportunity to set unfair conditions. On the one hand, ACM recognizes that Apple and Google have an interest in offering many different apps from app providers in their app stores. But at the same time Apple and Google are app providers in their own right, too. So their apps compete with those of other market participants. According to ACM, these competing interests may pose antitrust problems.

ACM concludes that three conducts by app stores identified in its Market Study might warrant further investigation:

1. Favouring own apps over apps from other providers;

2. Unequal treatment of apps in general (unequally restricting interoperability, access to data concerning payments via in-app purchases and the featuring of apps in the app stores);

3. Lack of transparency (on terms and conditions in general and the justification for removal of an app).

With respect to this third issue, ACM notes that app providers consider the upcoming EU Platform to Business regulation to be a step in the right direction, but as not going far enough. This is because this regulation only requires platforms, such as app stores, to be transparent but does actually not prohibit behaviour that might be deemed problematic.

Based on its findings in the Market Study, ACM simultaneously announced that it launches an investigation into potential abuse of dominance by Apple with its conduct relating the Apple App Store. ACM will investigate, among other aspects, whether Apple acted in violation of the prohibition of abuse of dominance, for example, by giving preferential treatment to its own apps. ACM indicates that it will initially focus its investigation on Dutch apps for news media that offer their apps in Apple's App Store in order to establish whether Apple committed an abuse of a dominant position. However, ACM is calling on app providers to come forward (publicly or on an anonymous basis) if they experience any problems with either Apple’s App Store or Google’s Play Store.

UK

UK CMA issues its first fine for concealing documents during a dawn raid

On 17 April 2018, the CMA carried out a dawn raid at the premises of Fender Musical Instruments Europe Limited ("Fender"), a guitar manufacturer based in England, launching an investigation under Chapter I of the Competition Act 1998 ("CA98") and Article 101 TFEU.

Section 27 of the CA98 gives the CMA the power to carry out dawn raids at business premises. Through Section 27, an officer can also require any person on the premises to produce any document relating to the investigation. At the outset of the dawn raid, the investigators served a Section 27 Notice on Fender specifying the documents required. This included staff notebooks, which Fender provided. However a senior member of staff, when asked if he had any earlier notebooks, told inspectors he had disposed of his historic notebooks.

Three weeks later, lawyers for Fender Europe notified the CMA that there were in fact ten further notebooks that had not been provided during the dawn raid. It emerged that the senior staff member had removed the historic notebooks during the inspection and told a junior employee to store them off-site. As soon as Fender became aware of this, it had immediately taken steps to seize the books. Four entries in the concealed notebooks were found to be relevant to the CMA's investigation.

Section 40A of the CA98 gives the CMA the power to impose a fine on companies who fail to comply with Section 27 described above. The penalty may be a fixed amount of up to £30,000, an amount calculated by a daily rate of £15,000 or a combination of both. The CMA had not used this power until this investigation. It imposed a £25,000 penalty on Fender for failing to comply with the requirement to produce documents. The CMA chose not to enforce the maximum £30,000 fine as Fender Europe had taken steps to remedy the breach and the delay of three weeks had had limited adverse effects on the investigation. (You can read the Penalty Notice in full here)

This case illustrates the importance of complying fully with legal obligations during dawn raids and throughout CMA investigations. It also shows the value of immediately taking steps to rectify any mistakes made during a raid. However it also highlights the relatively low levels of fines the CMA can impose in such circumstances when compared with the European Commission's ability to impose a fine of up to 1% of a company's group worldwide turnover if it intentionally or negligently produces incomplete books or records.

Upcoming events

On May 21st, partners Richard Eccles (UK) and Thomas Jones (Australia) will give a lecture at Pembroke College,Oxfordon the topic of Digital Platforms under Scrutiny: Recent competition and regulatory reviews in the UK and Australia. The event is organised by Oxford University's Centre for Competition Law and Policy. Read more>

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