Competitive Edge: Competition & EU law news - April 2020

Tightening the enforcement belt – the Special Advisors, Self-preferencing, Google Shopping & the General Court

The European Commission is reflecting on the report of the special advisors and examining the fitness of the competition regime. The experts have put forward proposals to toughen enforcement and promote competition on the platforms by limiting self-preferencing and in particular to shift the burden of proof on the digital platforms. We briefly assess the merits of this approach by reference to Google Shopping which is currently on appeal and await the General Court's judgement which will inform the debate.

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Increased leeway for cooperation between Pharma and Medical Equipment companies during the COVID-19 crisis

The EU as well as the network of European competition authorities are now explicitly acknowledging that extraordinary times may require the types of cooperation normally caught and sanctioned by the competition rules.This article provides an overview of the relevant competition rules, tips and practical guidance on how companies in the Pharma and Medial Equipment sector can proceed in times of Covid-19.

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Coronavirus (COVID-19) In Focus Page

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.

Over the past month, our team has prepared numerous briefings to guide relevant actors in different sectors during the COVID-19 crisis, including the following topics: 

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Bird & Bird news

• Our Dawn Raid App in French - now live!

• Key drivers for compliance in aviation and commercial aerospace - Bird & Bird recorded webinar

• Webinar exploring data protection requirements in anti-trust leniency applications -  register to upcoming webinar

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Updates from our network:

EU
Third time’s the charm: Italy penalised for failing to recover unlawful state aid

Australia
ACCC launches Ad Tech Inquiry

Belgium
The BCA publishes 2020 priority policy

Czech Republic
Czech Office for the Protection of Competition at the time of COVID-19

Denmark
Danish merger control deadlines suspended

Finland
FCCA requires ex ante approval to notify transactions due to COVID-19

France
Apple hit with record €1.1 billion fine for antitrust practices

Germany
German Federal Minister of Economic Affairs is considering relaxation of cartel rules at the time of COVID-19

FCO approves DFL marketing model for the Bundesliga 1 and 2

Hungary
The GVH updated its collection of important decisions

Italy
ICA fines Telecom Italia for abuse of dominant position in the broadband market 

Poland
Poland fining the price-fixing conduct in the online sales of printers

Spain
The CNMC enables a special mailbox during the health crisis

The Netherlands
CBb confirms that even if no cartel fine is imposed a company may still have interest to appeal cartel decision

UK
The CMA fines Fender Europe £4.5m for engaging in resale price maintenance

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EU

Third time’s the charm: Italy penalised for failing to recover unlawful state aid

In 2008, the European Commission decided that Italy had granted unlawful State aid in favour of the hotel industry in Sardinia. Consequently, Italy was required to recover that unlawful aid, totalling at about EUR 13.7 million.

On 29 March 2012, the Court of justice upheld the arguments of the Commission in its action for failure to fulfil obligation, agreeing that Italy had not taken the measures necessary in order to recover the unlawful aid. In 2018, the European Commission brought a second action, this time for not complying with the 2012 Court judgment.

On 12 March 2020, the Court decided that Italy failed to fulfil its obligation to implement the 2012 judgment by not recovering the aid in full.

While the Court took into account the efforts made to recover the amounts, it dismissed Italy's argument that it was impossible to recover the totality of the aid. Thus, it deemed necessary to impose pecuniary penalties for not complying with its earlier judgement. Italy will therefore have to pay to the budget of the EU a lump sum of EUR 7.5 million as well as, as from today, a periodic penalty payment of EUR 80,000 for each day of delay.

This judgment is the third pecuniary penalty condemnation of Italy for failing to recover illegal State aid. Last time, the lump sum was of EUR 30 million. Along with Spain and Greece, Italy is one of the countries most condemned to penalty payments for failing to recover State aids.

The full judgment can be found here.

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Australia

ACCC launches Ad Tech Inquiry

The ACCC has now commenced an inquiry into the digital advertising technology supply chain and advertising agency services in Australia, releasing an issues paper encouraging interested stakeholders (including advertisers and ad hosts) to provide their feedback on key issues affecting the competitiveness, efficiency, transparency and effectiveness of the markets for the supply of ad tech services and digital agency services markets (the "AdTech Inquiry").

The commencement of the AdTech Inquiry comes off the back of the ACCC's Digital Platform Inquiry Final Report and, in particular, its recommendation to the Australian Government that an inquiry into the ad tech supply chain be conducted in order to address the varied concerns that had been raised during the Digital Platforms Inquiry regarding the complexity and opacity shrouding ad tech services and the supply of online advertising services.

The ACCC's issues paper indicates that the key areas of focus for the Inquiry will be broader than those anticipated by the Digital Platforms Inquiry and include:

• Whether market participants have enough information (including about pricing, rebates and revenue flows) to make informed choices about the use of ad agency and ad tech services;
• Competition throughout the ad tech supply chain and in the supply of ad agency services;
• The role and use of data in supplying these services; and
• Whether competition and efficiency are being affected by supplier behaviour, including vertically integrated suppliers preferencing their own services, or by ad tech services businesses or ad agencies not acting in the best interests of their clients.

It is likely that the ACCC will leverage off the similar work being done by its counterpart overseas regulators in conducting this inquiry, including, in particular, the UK's Competition and Market Authority which is in the process of conducting a market study into online platforms and digital advertising.

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Belgium

The BCA publishes 2020 priority policy

On 26 March 2020, the Belgian Competition Authority (“BCA”) published its annual enforcement priorities, which are largely similar to those of 2019:

• Telecommunications - the BCA notes that the increased reliance on bundled offers in the telecom retail markets has the effect of increasing consumer loyalty. The BCA indicates that it will safeguard market entry. The inclusion of telecommunications in the BCA's list does not come as a surprise. It reflects the ongoing debate in Belgium regarding the creation of a fourth telecoms operator, to remedy the perceived lack of competition in the market and the difficulties regarding the allocation of 5G spectrum.
• Pharmaceutical sector - the BCA indicates that it will pay attention to all levels of the distribution chain. The focus on pharmaceuticals is not unexpected, given that the BCA has been extremely active with regards to the pharmaceutical market in the past year. Many of these investigations still continue.
• Public procurement - public tenders are of great importance to the Belgian economy, representing approximately 10-15% of the GDP. It comes as no surprise that the BCA continues to focus on this regulatory area.
• Distribution and relations with suppliers - distribution agreements have been a recent focus point of the European Commission. The BCA is expected to follow this guidance of the Commission concerning behaviour in the Belgian market. It will explicitly focus on territorial restrictions, as uncovered in the recent AB InBev case.
• Digital Economy - this is the only new priority of the BCA compared to 2019. This fits within the focus of the European Commission and National Competition Authorities on competition in digital markets. The BCA also published a joint memorandum on the topic together with the Dutch and Luxembourgish competition authorities.

The other priority sectors are the services sector and logistics. The BCA indicates that it will try to seek a balance between the enforcement against evident infringements and more complex and innovative cases.

Full text is available in Dutch here and in French here.

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Czech Republic

Czech Office for the Protection of Competition at the time of COVID-19

Like many other public authorities, the Czech Office for the Protection of Competition (the Office) has adopted several measures related to the social and economic consequences caused by COVID-19.

In order to minimize personal contact, the Office has limited public access to the Office's premises and communication takes place electronically only. The Office also enabled inspecting the administrative files electronically by delivery to the data box or on a flash drive. In both cases, the prior express written consent of the applicant is required and the extent disclosed is the same as if accessing the file at the Office.

The Office also published on its website a translation into Czech of the Joint statement by the European Competition Network (ECN) on the application of competition law during the Corona crisis (available in English here) and appealed for undertakings to continue operating in accordance with the competition law. The Office reminded that it continues to closely monitor the markets and compliance with competition rules and is ready to intervene. The Office will focus in particular on cartels and prohibited exclusionary practices of dominant competitors related to emergency goods and services such as food, energy, medicines, etc.

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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).

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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.

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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).

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Germany

German Federal Minister of Economic Affairs is considering relaxation of cartel rules at the time of COVID-19

The German Federal Minister of Economic Affairs, in order to effectively prevent supply difficulties that could potentially arise from the Corona crisis, intends to consider easing cartel rules in relation to potential co-operations between food industry and retailers. To this end, the president of the German Federal Cartel Office (“FCO”), Andreas Mundt, while underlining that the German competition law already allows for far-reaching co-operation between the food industry and retailers in special situations such as the COVID-19 pandemic, signalled his willingness to discuss these issues further with companies, associations and policymakers.

FCO approves DFL marketing model for the Bundesliga 1 and 2

The Federal Cartel Office has approved the German Football League´s (“DFL”) marketing model for the transmission rights of the Bundesliga and Bundesliga 2 matches from the 2021/22 season onwards. DLF´s marketing model is based on the joint sale of media rights of individual football matches. Such joint sale, principally, constitutes an anti-competitive agreement. However, it is recognized, in Germany as well internationally, that the joint selling of media rights by a central association provides many advantages for consumers such as the simplified organisation of the league matches, the timely coverage of highlights and the provision of high quality league-related products, e.g. the “conference” coverage of Saturday matches played at the same time.

The approval of DLF´s marketing model is, however, conditioned upon various self-commitments that the DFL has offered and which the FCO has declared legally binding. These self-commitments were undertaken by the DFL in order to assuage the FCO´s competition law concerns regarding the DFL marketing model. Chief among the self-commitments is a so-called 'no single buyer' rule, already applied in the last media rights award round, which is intended to avoid the monopolization of transmission rights.

The broadcasting rights this time will be sold via an auction for live games in four packages (Saturday afternoon, Saturday evening, Friday/Sunday and Saturday conference) covering all transmission channels (satellite, cable, internet). To enable competition between TV and streaming providers the no single buyer rule will apply once again, in particular, preventing a single bidder from acquiring all of the four packages exclusively.

For further information on the decision please click here (in German and English).

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Hungary

The GVH updated its collection of important decisions

The Hungarian Competition Authority (“GVH”) has published updates to the collection of its important decisions relating to the Competition Act (the “Competition Act Collection”) and to the Consumer Protection Act (the “Consumer Protection Collection”), respectively, covering cases closed by the GVH in 2019.

In the Competition Act Collection several interesting decisions from 2019 may be found regarding the imposition of fines by the GVH:

• The development of existing compliance programs (Husquarna, vertical restraint, VJ/103/2014) and the compliance program put in place before the closing of an investigation, with specific regards to the ongoing investigation (Healthcare cartel, VJ/19/2016, see our earlier report here) may both be considered as extenuating factors when imposing a fine;

• Joint and several liability of group companies may be established irrespective of whether the relevant group company has a formal competence to influence the decisions of the infringing undertaking, and the statutory maximum for fines (i.e., 10% of the net turnover in the last audited financial year) does not apply to companies jointly and severally held liable for the fine of the infringing undertaking (Till machine cartel, VJ/110/2015);
• If an undertaking was found to have infringed the Competition Act on several occasions, a fine must be imposed even if there are a complex commitments to lessen the fine (Magyar Telekom, consumer protection, VJ/24/2018).

Below are highlights from the newly added 2019 cases in the Consumer Protection Collection:

• When a user consents to the use of his or her personal data by a service provider, this has such a significant market value, such that the service cannot be viewed and advertised as free of charge (Facebook, misleading customers, VJ/85/2016, see our earlier report here);

• It is self-evident that a significant market player will choose a slogan that can influence consumers and therefore the defense that such a slogan is not targeted but merely promotes the image of the undertaking cannot be accepted (Vodafone, misleading advertising, VJ/76/2016);

• Having to change the default options requires effort and a deeper understanding from the consumer that he or she should have implement when confronted with possibly disturbing circumstances, and therefore the default option cannot be worse from the consumer’s perspective than the option he or she would otherwise choose (HelloPay, aggressive advertising, VJ/64/2017).

The collection on decisions relating to the Competition Act is available here and that relating to the Consumer Protection Act here (both in Hungarian only).

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Italy

ICA fines Telecom Italia for abuse of dominant position in the broadband market

The Italian Antitrust Authority ("ICA") launched in June 2017 a proceeding for alleged violations of Article 102 TFEU committed by Telecom Italia ("TI") - through a complex abusive strategy aimed at a double purpose: in the retail market, to make its customer base less contestable by other competitors; in the wholesale market, to discourage investments in new networks and make them less profitable.

In particular, TI allegedly sought to slow down the tenders announced by Infratel Italia S.p.A. - company entrusted with the task of implementing in Italy the measures defined in the National Strategy for Ultrabroadband - intended to build ultra-broadband infrastructure in areas of market failure in Italy. As for the commercial offer of ultra-broadband telecommunication services, the Authority assessed whether the technical and economic conditions they contained were such as to lock in the customer to TI for a long period and with prices unable to be replicated by alternative operators. Furthermore, during the investigation, the ICA found further anti-competitive behaviour, which led to extending the subject matter of the proceedings to the economic conditions applied by TI in the provision of wholesale broadband and ultra-broadband access services and TI’s misuse of inside information available thanks to its dominant position in network management activities.

On 6 March 2020, confirming most of the charges, the ICA sanctioned TI for having undertaken a complex abusive strategy aimed to hinder the entry of the new infrastructure competitors in the broadband communication services sector. However, by imposing a fine of EUR 116 million, ICA recognised certain mitigating circumstances in favour of the company, including the suitability of the measures undertaken to mitigate the consequences of the abusive strategy in the retail market. In addition, the ICA found no evidence of the instrumental use of inside information concerning the clients of alternative operators in the retail market and therefore dropped the preliminary allegation made in the objective extension decision.

For more information, please find the official press release here.

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Poland

Poland fining the price-fixing conduct in the online sales of printers

In February 2020, the Polish Competition Authority (“UOKiK”) announced that in December 2019 it imposed a PLN 1.4 million fine on Brother Central & Eastern Europe (“Brother”), a manufacturer of office equipment, which set minimum online sale prices for printers.

Between 2010 and 2017, Brother restricted resellers’ ability to set their own sale prices of printers. The company required resellers not to lower their prices below the suggested retail prices (“SRPs”). Brother monitored sales prices and intervened if a reseller offered printers below the level it had specified. Resellers were then requested to increase prices at least to SRP, and threatened with sanctions in the form of – limited supplies or worse terms of sales support measures offered by Brother.

Monitoring was also carried out by the resellers themselves who monitored each other's prices and informed Brother if any of them did not comply with the SRPs.

Such conduct benefitted Brother as it allowed online resellers to achieve higher margins and incentivized them to offer more Brother printers. Conversely, such conduct could have deprived consumers of the benefits of effective price competition.

The PLN 1.4 million fine was about 40% lower than originally foreseen because Brother voluntarily submitted to the penalty and took advantage of the leniency program, which can also be applied to vertical restraints on competition in Poland.

Although Brother was the initiator of the conduct and could not be granted immunity from the fine, it received a 30% leniency fine reduction because it provided UOKiK with evidence that allowed UOKiK to better understand the conduct, to specify the group of resellers participating in the conduct, and to establish the exact start and end day of the anti-competitive practice.

Brother also received an additional 10% fine reduction because it voluntarily submitted to the penalty. Such a possibility has been provided by Polish competition law for several years and was used for the first time in this type of case.

The decision is available in Polish at the UOKiK website.

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Spain

The CNMC enables a special mailbox during the health crisis

The Spanish Competition authority (the "CNMC") has made available a special mailbox for complaints and queries related to the application of competition rules in the context of the health crisis created by COVID-19.

During these exceptional circumstances, this mailbox is intended to resolve current doubts and uncertainties raised about potential cooperation agreements between competing companies known as "crisis cartels".

The CNMC has announced that this kind of agreements might be allowed as long as they consist of temporary collaboration with the only aim of supplying essential goods or services and for the benefit of consumers. However, the CNMC has stressed the extreme importance of vigilance to prevent potential abuses or restrictive practices that could hinder the supply or raise the prices of those products especially needed, such as groceries or health care equipment.

In addition, ongoing proceedings have been temporarily suspended until further notice, except for those where suspension could seriously jeopardize the rights and legitimate interests of the parties concerned. 

The CNMC will maintain its on-site registry closed, but the e-services portal remains fully operational for all communications.  

For more information, please find the official press release here (in Spanish).
 

The Netherlands

CBb reverses ACM’s fixed access telecoms regulation

On 17 March 2020, the Dutch Trade and Industry Appeals Tribunal (“CBb”) reversed the 2018 decision of the Authority for Consumers and Markets (“ACM”) requiring telecom providers KPN and VodafoneZiggo to open up their fixed networks in the Netherlands to other providers. 

In September 2018, the ACM argued in its market analysis decision on Wholesale Fixed Access (“WFA decision”) that KPN and VodafoneZiggo hold a position of collective dominance on the market which would enable KPN and VodafoneZiggo in the absence of regulatory obligations to tacitly coordinate their behaviour on the relevant market. Resulting in delayed investments and higher prices on the market.

The CBb referred in its judgment to the Airtours criteria in European Union law for establishing a market position of collective dominance and considered that the ACM had not demonstrated that these criteria were met. Furthermore, the CBb analysed ACM’s economic theories of harm (based on game theory and a market analysis of the counterfactual in the absence of access regulations) and concluded that these theories were not sufficient to establish that KPN and VodafoneZiggo would tacitly coordinate their behaviour in the absence of the WFA decision.

Consequently, the CBb ruled -as highest national administrative court in this case- that the WFA decision lost its foundation and the obligations imposed on KPN and VodafoneZiggo to provide access to their fixed networks in the Netherlands no longer hold. The CBb considered it is up to ACM to decide to do a new investigation into the relevant market definition. If ACM concludes on this basis that one or more parties do hold a dominant market position, new regulatory requirements could be imposed.       

The decision is available in Dutch here.

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UK

The CMA fines Fender Europe £4.5m for engaging in resale price maintenance

After conducting a full investigation in April 2018, the CMA on 22 January 2020, fined Fender Musical Instruments Europe Limited (Fender Europe), an international seller of guitar instruments, £4,521,185 (the largest fine imposed in the UK for resale price maintenance) for its infringement of the Chapter I prohibition of the Competition Act 1998 (Chapter I prohibition) by using anti-competitive agreements and/or concerted practices for its network of guitar resellers and mass merchants designed to restrict competitive online pricing.

The CMA conducted a without notice inspection of Fender Europe's property between 17 and 19 April 2018, which included first-account interviews with three Fender Europe employees.

The CMA discovered from its investigations that Fender Europe's resellers entered an Authorised Dealer Agreement (ADA) under which a dealer must fulfil a variety of level requirements to stock the products contained at that level. Under the ADA, Fender Europe operated a pricing policy to prevent resellers from advertising or selling the relevant products online below a certain minimum price specified.

The CMA found this policy was driven by complaints by resellers who wanted to improve their margins and increase the attractiveness of the Fender brand. The pricing policy extended to all online sales of Fender Europe's UK resellers, was based on a formula from which resellers could calculate the minimum price, prohibited online discount codes and was verbally communicated to resellers, was updated through Fender Europe circulating price lists and through follow up calls to resellers. The CMA noted that although there was no written agreement, in the absence of an agreement, tacit acquiescence is sufficient to give rise to an agreement for the purposes of Competition law. Absent the agreement, the CMA considered that resellers would have been able to determine their own prices, and, therefore, the policy restricted reseller's ability to compete and potentially resulted in higher prices for consumers.

The CMA concluded that between 2013 and 2018, Fender Europe operated a policy designed to restrict competitive online pricing, requiring its guitars to be sold at or above a minimum price and therefore infringed the Chapter I prohibition and Article 101(1) of the TFEU.

The decision CMA decision is available here.

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Our Dawn Raid App in French now live

Our Dawn Raid app is a free compliance tool designed to guide you through the essential information you and your colleagues would need in the event of a dawn raid by antitrust authorities.

Use it to find out exactly what to do, what rights you have and what powers the inspecting authorities have in the event of an unexpected investigation.

The app includes a checklist of information for before, during and after a dawn raid and the subsequent investigation, to ensure that your business cooperates fully, whilst minimising disruption and protecting your company's legal position. It also features a list of frequently asked questions and gives you a quick access to emergency Bird & Bird contacts.

Download our app in French from the Apple App Store or Google Play. Our English version is, of course, still available on the Apple App Store or Google Play. 

You can also test your knowledge of what to do in the event of a dawn raid with our interactive Dawn Raid Game (available in English, French and Japanese), which can be customised upon request.

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Compliance in Aviation & Commercial Aerospace

In this webinar, our Bird & Bird experts, including Pauline Kuipers, Partner and Co-head of our Competition & EU Group, present the essential key drivers for compliance in the aviation and commercial aerospace sector.

• Click here to download the recording from the session.
  
  
• Click here to download the slides provided during the session. 

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Exploring data protection requirements in anti-trust leniency applications 

Join OneTrust DataGuidance and Bird & Bird for a webinar exploring data protection requirements in connection with antitrust leniency applications.

Competition partner Anne Federle and Data Protection & IP/IT Partner Benoit Van Asbroeck will provide practical guidance on how to reconcile the competing needs of an antitrust investigation and data protection law, and how to limit the resulting risks for companies.

When? Wed, Apr 22, 5:00 PM - 6:00 PM CEST

Register for the webinar (free of cost) here.