Disney-Fox and the future of Sky

Disney-Fox and the future of Sky

Walt Disney Company’s proposed purchase of 21st Century Fox has been viewed as a deal that will reshape the media landscape.  Yet despite potentially addressing the concerns that have been identified in the CMA’s public interest review of Fox’s bid to acquire the interests in Sky that it does not already own, this latest development may not make not much difference to the course of that review as matters presently stand.

Disney will acquire 21st Century Fox’s interests in Sky and Tata Sky, among other assets.  Fox has said that it expects to complete the acquisition of the Sky shares that it does not own by 30 June 2018.

Meanwhile, the CMA’s public interest review of the Fox-Sky transaction is due to report by the statutory deadline of 6 March 2018.  The CMA plans to issue its provisional findings in January.

As to plurality, the theories of harm identified by the CMA are a reduction in the range of viewpoints available to and consumed by the public; and an increase in the influence of the Murdoch Family Trust on public opinion and the political agenda.

In relation to broadcasting standards, the CMA has identified a theory of harm that there will not be a genuine commitment to broadcasting standards after the transaction.

The CMA’s review is far advanced.  It remains to be seen to what extent it will consider the Disney deal, which is itself subject to regulatory approval.  The CMA operates on the basis of what is known or reasonably likely and not on what may happen at some future date, even though this does not always match real-world realities.

That said, there do not seem to be insuperable regulatory hurdles for the Disney transaction and it should allay any residual public interest concerns with the Fox-Sky combination. 

Disclosure order in trucks cartel damages action

The High Court will order DAF to give the Royal Mail disclosure of information from the European Commission’s trucks cartel file.

Royal Mail is seeking £270 million in damages representing the overcharge it allegedly paid as a result of a cartel between major European truck manufacturers spanning 14 years.  The claim is one of many in progress and in the pipeline which have been filed in the UK and in other Member States.  The Settlement Decision (addressed to undertakings in the MAN, Volvo/Renault, Daimler, Iveco and DAF groups) and the Infringement Decision (addressed to the Scania undertaking) concern the same anti-competitive conduct – which consisted of:

a.       coordination amongst the participating undertakings in respect of the EEA gross list prices for medium trucks (weighing between 6 to 16 tonnes) and heavy trucks (weighting 16+ tonnes) (

b.       coordination amongst the participating undertakings in respect of the timing of introduction of new emissions standards on affected trucks and the extent to which the costs associated with the introduction of these standards would be passed on.

The Settlement Decision by its nature is relatively limited in terms of the detail of the infringements and operation of the cartel. 

Mrs Justice Rose has ordered DAF to disclose evidence in two stages.  The first is due by 28 February 2018 and consists only of evidence about DAF that is redacted for confidentiality and for privileged or leniency material.  The second, containing evidence about other participants in the cartel, is due by “the end of April”.  Other participants will be able to redact confidential, privileged or leniency material.

FCA issues first statement of objections to asset managers

 

FCA issues first statement of objections to asset managers

 

The Financial Conduct Authority (FCA) announced on 29 November that it has issued a statement of objections to four asset management firms alleging infringements of the Chapter I prohibition and/ or Article 101 TFEU.

This is the first time that the FCA has issued a statement of objections in relation to suspected competition law breaches since it obtained concurrent competition enforcement powers in April 2015.  The FCA stated in the annual concurrency report (published in April 2017) that it had opened one Competition Act investigation in March 2016 and another in March 2017

The FCA takes the provisional view that four firms - Artemis Investment Management LLP, Hargreave Hale Ltd., Newton Investment Management Limited/The Bank of New York Mellon Corporation and River and Mercantile Asset Management LLP/River and Mercantile Group PLC - exchanged sensitive information through disclosure of the price they intended to pay in relation to one or more Initial Public Offerings and one placing before the prices were set.  According to the FCA, these practices enabled firms to know each other’s strategies during the placing when they should have been acting in competition.

Any person who can materially assist the investigation may request a non-confidential version of the statement of objections by contacting the FCA no later than 12 January 2018, explaining how they can assist.

Court of Justice rules on application of Article 101 TFEU to setting minimum legal fees

The Court of Justice has ruled on two references from the Bulgarian court seeking a preliminary ruling on the application of Article 101 TFEU to the setting of a minimum level of legal fees by the Bulgarian Supreme Council of the legal Profession.

The court asked whether Article 101(1) TFEU precludes a national provision whereby a professional association has discretion to set down in advance minimum legal fees.

The Court found that Article 101 TFEU (when read with article 4(3) TEU) must be interpreted as meaning that national legislation which does not allow a lawyer and his client to agree fees in an amount less than the minimum amount laid down in regulation, without that lawyer being subject to a disciplinary procedure, and which does not authorise the courts to order reimbursement of fees in an amount below that minimum amount, is capable of restricting competition in the internal market within the meaning of Article 101(1) TFEU.

The Court said that it was for the national court to confirm whether the legislation actually met with legitimate objectives and whether the restrictions were limited to what was necessary to achieve those objectives.

The case illustrates the interaction between rules imposed under professional services regulation and competition law in what is becoming an interesting battle ground.  There are already indications of the readiness of the CAT to consider standalone competition claims and, in particular, in relation to the decisions of an approved regulator.  For example, the CAT has recently found that the requirement under the terms of the Conveyancing Quality Scheme that members of the scheme must obtain certain training courses exclusively from the Law Society breaches the Chapter I and Chapter II prohibition (Case 1249/5/7/16 Socrates Training Limited v The Law Society of England and Wales [2017] CAT 10).

Joined cases C‑427/16 and C‑428/16 - CHEZ Elektro Bulgaria v Yordan Kotsev and FrontEx International v Emil Yanakiev (not yet available in English)

The High Court has banned the Competition and Markets Authority from relying on undisclosed evidence in a challenge by Concordia against a CMA search warrant

High Court prevents CMA from using redacted evidence in Concordia’s challenge to search warrant

The search warrant was issued under section 28 of the Competition Act 1998 and related to documents concerning suspected anti-competitive conduct in the UK Carbimazole and Hydrocortizone markets.

The CMA launched its investigation into the Hydrocortizone market in April 2016.  In March 2017 it issued a statement of objections alleging that Concordia and Actavis UK had infringed EU and UK competition law by entering anti-competitive agreements between 2013 and 2016.

Concordia applied to have the section 28 warrant varied and challenged it on the basis that the additional material relied on by the CMA to justify the use of the warrant be disclosed.  The CMA sought to justify non-disclosure on the basis of the public interest.

The High Court observed that this was the first challenge to a section 28 warrant and it must be determined on a case-by-case basis whether or not information is protected from disclosure.  It ordered that the information be disclosed to the Court, subject to redactions on grounds of public interest and relevance.  The CMA was also required to set out the ‘gist’ of the redacted material in an affidavit.

The case is something of a test case and may make the CMA more cautious in relying on wide public interest claims to justify its warrant process in competition cases. 

The Competition and Markets Authority v Concordia International RX (UK) Limited [2017] EWHC 2911

General Court annuls fine on ICAP in Libor case

The General Court has given judgment in an appeal by ICAP in its challenge against the European Commission’s 2015 decision to fine ICAP EUR14.9 million for facilitating cartel activity in the market for interest rate derivatives denominated in yen.  The Commission had founded that ICAP facilitated six cartels that were the subject of a settlement involving UBS, RBS, Deutsche Bank, Citigroup and JPMorgan.  ICAP decided not to settle.

The General Court did not find any errors of law in the findings by the Commission that the infringements alleged against ICAP represented infringements “by object”, nor that ICAP had infringed Article 101(1) TFEU by facilitating four of the cartel infringements.

However, the General Court found that the Commission had not established to the required legal standard that ICAP was aware of RBS’s role in a bilateral cartel between RBS and UBS and the Commission had erred in the calculation of the duration of ICAP’s role in four of the cartels.  

The General Court also held that the Commission had violated ICAP’s rights of defence and the presumption of innocence and that it had not provided sufficient reasons for its methodology when setting fines.  The General Court therefore annulled the fines imposed by the Commission in the decision.

The judgment is a useful clarification of the application of the test for liability of intermediaries in the facilitation of cartels.  In particular, the Court found that the Commission did not follow the facilitation test set out by the European Court of Justice in AC-Treuhand and that ICAP had not made the collusion between banks possible but had only contributed to it. 

Case T-180/15, Icap plc, Icap Management Services Ltd and Icap New Zealand Ltd v European Commission, judgment of 10 November 2017 (ECLI:EU:T:2017:795)

EU proposal to regulate online platforms

DG Connect has launched a consultation on its proposal to regulate online platforms.

DG Connect has set out three options to regulate digital platforms.  The lightest touch approach would be EU ‘soft law’ designed to incentivise industry-led initiatives such as voluntary standards and monitoring of online activity.

More radical options could take the form of new legislation that might include prohibiting certain ‘problematic’ business-to-platform commercial practices or the creation of a new regulatory framework for online platforms that would apply in parallel to competition law.  The latter option could also include a dedicated EU-led regulator for digital platforms.

DG Connect is concerned that there is inequality of bargaining power weighted towards digital platforms where some smaller retailers are experiencing discrimination. It has cited examples such as Apple, Amazon and Google app stores.

There has been some speculation that the proposal represents a stand-off between DG Connect and DG-Competition, creating the potential for confusion between the roles of regulation and competition law in the digital world.  A closer reading, however, suggests that the Commission is concerned about the potential for inconsistency and fragmentation in the rules in the different member states and that it is seeking to promote a unified approach as part of its digital single market agenda.

The Commission is seeking comments by 22 November 2017

See, further:  https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-5222469_en

European Commission raids German car manufacturers

European Commission raids German car manufacturers

The European Commission has confirmed that on 23 October it has carried out further unannounced inspection visits at the premises of German car manufacturers.  Daimler and Volkswagen have confirmed that they have been raided.

The raids follow inspections in the German vehicle sector made last week and where BMW has confirmed that it has been the target of an inspection visit by the Commission.

The Commission has stated that it believes that the manufacturers may have breached Article 101 TFEU.

Reports in the German media in the summer have speculated that the manufacturers coordinated over the size and shape of car parts. There has also been speculation that Daimler and Volkswagen applied for leniency some time ago, although the recent raids suggest that the Commission has not rushed to investigate the conduct at issue.  This might be due, in part, to the type of conduct under investigation which may bear the hallmarks of legitimate cooperation over standardisation rather than hardcore cartelisation. 

Source: Commission STATEMENT/17/4103

CMA confirms more investigations in pharma

The Competition and Markets Authority has announced that it is conducting three further investigations into suspected anticompetitive arrangements in the pharmaceutical sector.  The statement confirms the CMA’s already extensive probes in the sector.
The three investigations will all examine possible collusion, while two will also investigate abuse of dominance.
Aspen Pharma has confirmed that a new CMA investigation will focus on the supply of steroids used primarily to treat Addison’s disease, and another product used to treat a range of inflammatory diseases including asthma, allergies, arthritis, blood disorders and kidney disease.
Concordia has confirmed that the CMA is investigating some products in its “international segment”.

The CMA has also extended a separate investigation into Concordia, launched on 25 October 2016, for alleged excessive pricing of drugs supplied to the NHS. 

European Commission raids banks and trade associations over access to account data

The European Commission carried out dawn raids on 3 October at the premises of companies and trade associations active in the banking sector “in a few” member states.  The Commission suspects that these parties may have restricted financial technology companies from gaining access to customer account data, despite the customers consenting to access.

The Commission has confirmed that it is investigating the matter under Articles 101 and 102 of the TFEU.

According to media reports, the Polish Banking Association and the Dutch Banking Association are part of the investigation.  The British Bankers Association and the Belgian Banking Association have confirmed that they are not currently part of the probe.

The investigation takes place against a changing regulatory framework where, under Payment Services Directive 2, to be implemented by January 2018, banks will be obliged to grant third parties access to certain account data where their customers have consented.  This should facilitate market entry and expansion by payment services providers into the payment services sector.

The practices under investigation do not seem to be confined to one member state.  It will be interesting to see how the investigation develops as the issues are not straightforward.

Owing to the nature of financial markets which are characterised by network effects and often large economies of scale, there is frequently a need to balance competition with cooperation and the benefits this can bring.  However, this investigation does not appear to involve a blatant horizontal boycott of third parties and there may be legitimate reasons for refusing access.  At the same time, the investigation raises a wider question of data portability and whether this might harm competition.

The Commission has not ruled out an abuse of – single or collective – dominance.  However, this raises a fundamental question of whether a unilateral refusal to supply even by a dominant company can be abusive in the absence of the requested access being an essential facility.

No direct right of appeal from competition issues transferred to the Competition Appeal Tribunal

The Competition Appeal Tribunal (CAT) has ruled that there is no statutory right of appeal from the CAT where competition issues are transferred to it

The case concerned proceedings brought by Agents' Mutual Limited against Gascoigne Halman Limited. The competition issues were transferred to the CAT by the High Court, under the Section 16 Enterprise Act 2002 Regulations 2015. The contractual issues remained with the High Court. 

The CAT found that the rules governing access to Agents' Mutual’s property portal did not breach the Chapter I prohibition.

Gascoigne Halman applied for permission to appeal against the CAT's judgment. The CAT ruled that the competition issues in this case were analogous to determination of a preliminary issue.  The CAT accepted that there could be a right of appeal from the CAT on determination of such issues, for example if they arose in proceedings for competition law damages under sections 47A and 49 of the Competition Act 1998.  However, the CAT did not consider that the wording of those sections was apt to cover the situation in this case where the competition issues were transferred to the CAT in the context of a breach of contract claim.

Therefore, the application had to be treated as an application to the High Court under CPR 52.3 for permission to appeal the order of the High Court giving effect to the CAT’s determination.

Case 1262/5/7/16 (T) - Agents' Mutual Ltd v Gascoigne Halman Ltd (t/a Gascoigne Halman), ruling (application permission to appeal) [2017] CAT 22

CAT refuses permission to appeal against rejection of MasterCard collective proceedings

The Competition Appeal Tribunal has dismissed an application for permission to appeal its rejection of an application for a collective proceedings order (CPO) for a £14 billion claim against MasterCard for damages arising out of the European Commission’s 2007 infringement decision on multilateral interchange fees.

On 21 July 2017 the CAT found that the case should not be certified.  It concluded that the class representative had not put forward a reasonable and practicable means for estimating the individual loss which could be used for distribution and that the claims were unsuitable for bringing as collective proceedings.

The CAT ruled that the Consumer Rights Act 2015 did not provide for appeals against decisions of the CAT to grant or reject CPOs and that the Court of Appeal would not have jurisdiction to hear the appeal.  The CAT also ruled that even if the Court of Appeal had jurisdiction, the appeal would not have a reasonable prospect of success.

The CAT considered that although there is a parallel jurisdiction in the ordinary courts for competition law damages claims, only the CAT can hear collective proceedings. The CAT reasoned that the legislature has sought to confine the right of appeal in collective proceedings to decisions on the substantive claims and preclude prolonged litigation in the course of approving the use of collective proceedings.

It will be interesting to see whether the class representative will seek leave directly from the Court of Appeal given the potential ramifications of this judgment.

Case 1266/7/7/16 Walter Hugh Merricks CBE v MasterCard Inc and Others, CAT ruling, 28 September 2017

European Commission fines Scania EUR 800 million

The European Commission has imposed a fine of EUR 800 million on Scania.  It has found that Scania infringed EU competition law by colluding for 14 years with five other truck manufacturers on truck pricing and on passing on the costs of technologies to implement new, more stringent emissions standards.

Scania has expressed its intention to appeal the decision.

The decision follows the Commission’s settlement decision on 19 July 2016.  The Commission found that MAN, Volvo/Renault, Daimler, Iveco and DAF infringed Article 101(1) TFEU by colluding for 14 years on the pricing of trucks and on passing on the costs of compliance with stricter emission rules.  The Commission imposed a record fine of EUR 2,926,499,000 being the highest aggregate fine imposed to date for breach of EU competition law.  The Commission stated in its 19 July 2016 press release that its investigation into Scania would continue under the standard (non-settlement) procedure. 

The onslaught of private actions has started.  Road Hauliers Association has announced that it intends to bring a collective action as a representative body (i.e., as an opt-out collective proceeding in the Competition Appeal Tribunal).  Lenaghan International Transport, an Irish freight forwarding company, commenced proceedings in September 2016 in the High Court in Ireland against DAF, Daimler, Fiat Chrysler Automobiles, MAN, Renault, Scania and Volvo.  Bundesverband Güterkraftverkehr Logistik und Entsorgung eV, a German transport and logistics industry association, has stated that it is seeking to bundle as many as 100,000 purchases and rentals in a competition damages action.  Claims brought by members of the UK Freight Transport Association are believed to be in the pipeline.

European Commission - Press release, Antitrust: Commission fines Scania €880 million for participating in trucks cartel, 27 September 2017

Tata Steel and ThyssenKrupp plan to combine European steel activities

Tata Steel and ThyssenKrupp propose to merge their European steel businesses in a deal that would create a number two player in the market, combining the world’s fourth and tenth largest players.

The companies have stated that they have signed a memorandum of understanding and expect to conclude a joint venture agreement in early 2018.  The transaction would be subject to regulatory approvals.  As presently understood, ThyssenKrupp and Tata would hold equal shares in a joint venture consisting of ThyssenKrupp’s European business and Tata’s European flat steel business.

Tata paid £6.7bn to buy Corus in 2007, against competition from CSN of Brazil.  Ten years on from that, how different the world looks?  It may be that the merger represents a concrete step to build a sustainable future for Tata’s European steel activities.  The proposed transaction is expected to deliver annual cost savings of up to 600m euros (£533m; $720m).

The transaction will almost certainly be reviewed by the European Commission and comes against an industry backdrop where the sector faces increasing consolidation, excess supply from Chinese steel-makers and minimal new entry.  The market analysis is likely to be painstaking, examining different product and geographic markets, especially the UK as Tata’s core EU presence.

Court of Justice rules on excessive pricing test

The Court of Justice has ruled on a reference from the Latvian Supreme Court concerning the application of Article 102 TFEU to excessive pricing by collecting societies. The Court ruled that comparing prices in different Member States can be an appropriate way of determining whether prices are excessive.

The case concerns the Latvian collecting society AKKA/LAA which was fined by the Latvian Competition Council for charging excessively high rates for authors’ remuneration.

The Court found that trade between Member States was capable of being affected by the rates set by a collecting society that holds monopoly rights and manages the rights of non-national copyright owners such that Article 101/102 may apply.

On the question of excessive/unfair pricing the Court said that it was appropriate to compare rates with those in neighbouring Member States, provided that these are selected in line with objective and verifiable criteria and comparisons are made consistently. 

There is no minimum threshold above which a rate might be deemed “appreciably higher” but this in an indication of abuse which the dominant company has the burden of justifying the differential.  The Court’s recognition that ability to pay is a relevant factor suggests that in some markets country comparisons might not be appropriate.

The judgment is in line with the United Brands test where the Court considered that charging a price that was excessive because it had no reasonable relationship to the economic value of the product supplied would be an abuse.  It follows the opinion of Advocate General Wahl, although it does not go as far as Wahl who said that the authorities must be “almost sure” that there can be no other rational economic explanation for higher prices before finding an abuse.

Case C-177/16 Biedrība ‘Autortiesību un komunicēšanās konsultāciju aģentūra – Latvijas Autoru apvienība’ v Konkurences padome, ECLI:EU:C:2017:286

CMA launches market investigation into investment consultants

CMA launches market investigation into investment consultants

The Competition and Markets Authority (CMA) has launched a market investigation into investment consultancy and fiduciary management services following a reference from the Financial Conduct Authority (FCA). 

The FCA’s reference follows its own market study into asset management.  The FCA concluded that it has reasonable grounds to suspect that there are features of the sector which prevent, restrict or distort competition.  The FCA found that buyers of investment consultancy may not be best placed to judge quality or value for money; that the largest firms hold a large share of the market; barriers to expansion for smaller firms; and potential conflicts of interest relating to cross-selling of other services.

The FCA has the power to investigate markets both under its competition powers (market studies under the Enterprise Act 2002) and also under its regulatory powers (under the Financial Services and Markets Act 2000). This gives the FCA flexibility and means that markets can be investigated outside the confines of the relatively tight competition regime (meaning the FCA has more flexibility and can investigate broader issues than the CMA).  However, only the CMA may conduct a full ‘second phase’ market investigation under the Enterprise Act.

The CMA issued requests for information today to the main market players.  An issues statement will be published shortly, where the CMA will invite submissions from interested parties.

The CMA is due to report on its investigation by March 2019, although the timetable may be extended by a further 6 months.

An enduring regulatory trend of the last twenty years or so has been the series of market investigations and similar probes into the financial services sector.  These have covered such areas as: SME banking, store cards and insurance, PPI, home credit, most recently, personal current accounts, audit services, pay day lending and retail banking.  The latest market investigation into the asset management sector where 12 of the largest consultants advise on around £1.6 trillion of assets echoes many familiar themes.

CMA press release, 14 September 2017.  Available at:  https://www.gov.uk/government/news/cma-launches-market-investigation-into-investment-consultants

Court of Justice sets aside General Court judgment in Intel loyalty rebates case

In a victory for Intel, the Court of Justice has set aside a General Court judgment dismissing its appeal against the European Commission’s 2009 decision fining Intel for breach of Article 102 TFEU.

The Court of Justice has referred the case back to the General Court to reconsider whether the Commission correctly applied the “as efficient competitor” (AEC) test to Intel’s loyalty rebates.  The AEC test played a significant role in the Commission’s assessment of the foreclosure effect of Intel’s rebate scheme on competitors.

The Court of Justice found that if, in a decision finding loyalty rebates to be abusive, the Commission concludes that the scheme restricts competition, the reviewing Court must examine all arguments that challenge the Commission’s findings on the potential for the rebates to give rise to foreclosure.  

The Court of Justice rejected Intel’s contention that the General Court misapplied the qualified effects doctrine to establish jurisdiction.  The qualified effects doctrine allows for the application of EU competition when it is foreseeable that the conduct in question will have an immediate and substantial effect in the EU.   The Court of Justice ruled that the General Court had correctly applied this test.

The Court of Justice upheld Intel’s argument that the Commission should have recorded a meeting with an executive of another company.  According to the Court, there was no valid distinction between “formal” interviews, covered by Article 19(1) of Regulation 1/2003 and Article 3 of Regulation 773/2004, and “informal" interviews”.   However, the Court did not consider that the failure to make a recording infringed Intel’s rights of defence such that it was capable of leading to annulment of the Commission’s decision.

The message from the Court of Justice is that the Commission cannot rely on a formalistic approach to the analysis of loyalty rebates under Article 102.  It provides some reassurance of the importance of an effects-based approach, backed up by robust economic evidence and analysis.

Case C-413/14 P - Intel Corporation Inc.v European Commission (ECLI:EU:C:2017:632)

Indian Competition Commission revises leniency regime

The Competition Commission of India (CCI) aims to boost applications for leniency by confirming that up to four applicants may benefit from reduced penalties. Individuals may also benefit from leniency.

The CCI’s original leniency policy which was implemented in 2009 only granted reductions to the first three applicants.

The CCI has now confirmed that companies who approach the agency after the first three and provide “significant” information may benefit from reductions in the penalty of up to 30%.

The CCI granted leniency for the first time in January 2017 when it granted leniency to three companies and an individual who were involved in the railway electrics cartel.

Under the previous regime, it was uncertain whether fourth and later applicants and individuals could benefit from leniency. While the CCI has confirmed that individuals may benefit from leniency, it is not clear whether this will be extended to individuals who were not mentioned in the company’s application for leniency.

Further amendments to the policy allow the CCI to disclose leniency information with the approval of the CCI’s decision-making arm.  There is some uncertainty as to how this policy will operate and how it will affect the incentives on applicants to come forward with information. A more measured approach would have been to require companies to provide confidential and non-confidential versions of their applicants which would allow the CCI to disclose certain of the underlying information to other defendants and in its published decision.

CMA fines Ping £1.45 million for banning online sales of golf clubs

The Competition and Markets Authority (CMA) has found that Ping European Limited (Ping) has violated competition law by banning two UK retailers from selling its golf clubs online.  Ping has been ordered to end the sales bans and not to impose the same or equivalent terms on other retailers.

The £1.45 million penalty imposed on Ping is intended to serve as a warning to other manufacturers.  The CMA was satisfied that Ping was pursuing a genuine commercial aim of promoting bricks and mortar sales from its stores but it considered that this could be achieved through less restrictive means.  The level of fine imposed on Ping reflected the CMA’s finding that the website sales ban was imposed in the context of this genuine aim.

Restrictions on online sales by distributors continue to attract competition law scrutiny.  The starting point is that, in principle, every distributor should be allowed to use the internet to sell its products.

One thorny issue relates to the differentiation between "luxury" and everyday goods and whether certain restrictions on online selling may be permissible in the case of the former.  While the EU vertical restraints block exemption exempts selective distribution "regardless of the nature of the product concerned", the accompanying vertical restraints Guidelines state that, where the characteristics of the product do not require selective distribution, or do not require the applied criteria, such as for instance the requirement for distributors to have one or more brick and mortar shops or to provide specific services, such a system does not generally bring about efficiency enhancing effects to offset what the Commission describes as "a significant reduction in intra-brand competition" (paragraph 176).

While certain luxury or branded products might be candidates for efficiency and other justifications for restrictions which would be hardcore in other contexts, the competition authorities are reluctant to allow such restrictions on the mere assertion of the need for a personalised sales service.  The coming years will test whether the strict stance seen in cases like this is sufficiently malleable to address the challenges of the online age.

See, further, CMA press release of 24 August 2017.

CMA closes Unilever abuse of dominance investigation

The Competition and Markets Authority has confirmed that it will not pursue an investigation into whether Unilever’s ice cream promotions breach competition law.

The CMA had launched an investigation into whether Unilever’s promotions offered to retailers between January 2013 and February 2017 excluded rivals.  Unilever offered impulse ice cream (i.e. ice cream products bought for immediate consumption rather than being eaten at home) for free or at a discount if the retailer bought a minimum number of single-wrapped products.

The CMA found no evidence that competitors were adversely affected or that the promotions affected how retail customers bought impulse ice cream.  Unilever’s offers were without distinction as to whether retailers bought more or less popular brands and were made in February and March of each year and not in the summer months where consumption was higher.  Retailers’ acceptance of the bulk discounting offers represented no more than 10% of Unilever’s 2016 sales.

The CMA found that the conduct met the threshold for opening an investigation but it closed the case upon finding that there were “no grounds for action”.

The CMA’s decision may prove to be helpful guidance for future cases and in determining when dominant companies are able to offer discounts on packaged bundles: clearly they can do so without infringing competition law but the boundaries between permissible and impermissible conduct are not always straightforward to draw.

European Commission issues further statement of objections to Visa

The European Commission has sent a supplementary statement of objections to Visa Inc and Visa International in relation to inter-regional interchange fees.

This new statement of objections follows one adopted against Visa in 2012.

The Commission maintains that inter-regional fees – i.e. those charged on payments made with cards issued outside the EEA for purchases made in the EEA – are an important part of the fees within the Visa scheme.

This supplementary Statement of Objections focuses on practices not already covered by the commitments offered by Visa Europe in 2014, namely the inter-regional fees applied on transactions with consumer debit cards. 

The Commission is further examining the implications of the fact that in June 2016, Visa Europe became a subsidiary of Visa Inc. and ceased to exist as a separate undertaking.  It can be expected that this corporate restructuring may make it simpler for the Commission to take enforcement action.

Commission news MEX-17-2341, 3 August 2017

Commission raids ethylene purchasers

The European Commission has confirmed that it has raided ethylene purchasers in a number of Member States on suspicion of infringing Article 101.

Ethylene is used to create plastic polyethylene.

The Commission has not identified the companies that it has raided but US company Celanese and Swiss company Clariant have confirmed that they are being investigated.

The investigation is a further example of the Commission’s focus on potential buy-side cartel activity as opposed to collusion between competing suppliers over prices, markets, terms and conditions of sale.

In a similar respect the Commission’s investigation into German car manufacturers confirmed this week appears to concern buy-side activity in the choice of suppliers and purchase terms.

Antitrust investigations on the purchasing side are relatively unusual but not without precedent. An example is the Commission’s decision of 7 February 2017 finding that between 2009 and 2012, four recycling companies took part in a cartel to fix the purchase prices of scrap lead-acid automotive batteries in Belgium, France, Germany, and the Netherlands.

European Commission press release: Antitrust: Commission confirms unannounced inspections in the ethylene purchasing sector, 26 July 2017

CAT dismisses opt-out collective proceedings against MasterCard

The Competition Appeal Tribunal has rejected an application by Walter Merricks as the putative class representative for a collective proceedings order in a £14 billion opt-out action against MasterCard under section 47B of the Competition Act 1998.  The proposed proceedings would have aggregated follow-on actions for damages arising from the European Commission’s finding that MasterCard's EEA multilateral interchange fees infringed Article 101 TFEU.

The CAT denied certification of the claim on behalf of a proposed class comprising some 46 million individuals who between May 1992 and December 2007 purchased goods or services from businesses selling in the UK that accepted MasterCard cards.

The CAT found that the claimants had not put forwarded a cogent methodology that could be applied to calculate an amount reflecting the consolidated individual claims and there was no plausible way of arriving at a sum that approached an approximation of the loss.

The CAT was critical of Merricks’ approach for calculation of the loss on the basis of a ‘top down’ method which gave a sum for the loss suffered by the class as a whole, rather than seeking to establish the losses suffered by the individual claimants.  The CAT was also sceptical of whether damages could be awarded to a class of potentially 46 million people according to the compensatory principle.

Merricks was not given the opportunity to serve an amended claim form as was allowed in the Gibson Scooter Mobility case. 

The CAT did confirm, however, that had it certified the class action it would have authorised Merricks to serve as the class representative.

The CAT's judgment is important in its assessment of the new provisions relating to funding of collective proceedings and costs under section 47C of the Competition Act.

The ruling indicates that the CAT will scrutinise applications for collective proceedings carefully.  It may mean that similar cases will tend to focus on less ambitious definitions of the class of claimant affected, at least until there has developed a sizeable body of case law establishing how the CAT will approach issues of certification.

Case 1266/7/7/16 Walter Hugh Merricks CBE v MasterCard Inc and Others, 21 July 2017

Commission launches infringement proceedings against seven Member States for failure to implement Damages Directive

The European Commission has sent reasoned opinions to Bulgaria, Cyprus, the Czech Republic, Greece, Latvia, Malta and Portugal asking them to take steps to implement Directive 2014/104 on private damages for infringements of competition law.

The Directive states that it is designed to ensure that “anyone who has suffered harm caused by an infringement of competition law…can effectively exercise the right to claim full compensation”.  The broad aim of the Directive is to address the impediments to the effective enforcement of competition law in the majority of Member States and to establish minimum standards and approaches in the procedural rules.

Member states were required to implement the Directive into their national law by 27 December 2016 but Bulgaria, Cyprus, the Czech Republic, Greece, Latvia, Malta and Portugal have failed to notify the Commission of their domestic transposition measures.

These seven member states now have two months to inform the Commission of measures taken to implement the Directive.  If not, the Commission may bring proceedings against them before the Court of Justice.

Private damages actions are already increasingly common in a number of Member States, for example the UK, Germany and the Netherlands have been the more attractive venues for bringing private claims.  Once implemented it is expected that the Directive will have a considerable impact on the laws in Member States where the system for private enforcement is less developed. 

Yet despite the framework for common EU-wide approaches, it is likely to remain the case for some years at least that certain jurisdictions will provide a more attractive venue for bringing a private damages claim than others. 

MEMO/17/1935, 13 July 2017

CAT dismisses claim that rules in online property portal are anti-competitive

The Competition Appeal Tribunal has given judgment on competition issues in a case brought by Agents' Mutual Limited (a mutual owned by its estate agent members) against Gascoigne Halman Limited (t/a Gascoigne Halman).

The competition issues concern the rules for participation in Agents’ Mutual’s online property portal “OntheMarket” and were transferred to the CAT by the High Court.

Gascoigne Halman alleged that certain of the rules infringed the Chapter I prohibition.  These included a rule by which an estate agent may list properties on no more than one other portal (one other portal rule); a rule restricting membership to office-based estate or letting agents (bricks and mortar rule); and a rule requiring members to promote only OntheMarket (exclusivity rule).

Gascoigne Halman also alleged that the arrangements were part of a collective boycott of Zoopla and/or Rightmove, again in breach of the Chapter I prohibition.

The CAT rejected all of Gascoigne Halman’s claims.  It found that the one other portal rule was objectively necessary to the rules which bind members of Agents’ Mutual.  It dismissed the claim that the bricks and mortar rule and the exclusivity rule were restrictive by object and Gascoigne Halman did not advance its case by arguing effects.  The CAT found no evidence that the rules were part of a collective boycott of Zoopla/ Rightmove.

Case 1262/5/7/16 (T) Agents' Mutual Ltd v Gascoigne Halman Ltd (t/a Gascoigne Halman) [2017] CAT 15

European Commission fines Google for abuse of search engine dominance

The European Commission has fined Google EUR 2.4 billion for abuse of dominance by promoting its own comparison shopping service ahead of those of its rivals.

The penalty is the largest that has been imposed on a single company for breach of EU competition law, doubling that handed down to Intel for abusive discounting practices in 2009.

The focus of the Commission’s antitrust concern is the prominent display, within Google's web search results, of links to Google's own specialised web search services (e.g. Google Shopping) relative to links to competing specialised web search services.

The theory of competitive harm is controversial.  First, it is clear that a dominant company may compete on the merits and is entitled to differentiate itself from its competitors provided that this is not based on “methods different from those which condition normal competition”.

 This implies that a dominant company may, in principle, compete on marketing elements such as displaying responsive search results and even those that favour its own services.  It can be asked why Google cannot show what it considers to be its own directly responsive results, since that is precisely what a search engine does and is a core value proposition. 

Second, any obligation on a dominant company to deal with its competitors has traditionally been confined to the situation where the firm controls essential facilities or access is otherwise indispensable to compete.  Moreover, even where access to an essential facility has been mandated in previous cases this indicates that such access need not be on identical terms to that granted to the dominant firm itself, provided that access allows for the provision of a commercially viable service.

The key issue for competition, then, is what Google should or should not be permitted to do in terms of differentiating itself.  Putting it another way: should third parties be entitled to an equal position in Google’s search results?  Even if that is accepted, how is that to be achieved in a way that allows consumers to make an informed choice and without destroying Google’s and other parties’ incentives to innovate?  These are the issues at the heart of the Google case.

The search engine case is not the only abuse of dominance investigation that the Commission is pursuing against Google.  The Commission is also investigating Google’s practices in relation to its Android operating system, alleging that it is limiting the development of alternatives by requiring smartphone and tablet manufacturers to pre-install its own applications.  Another case relates to the effect of exclusivity arrangements allegedly preventing advertisers from moving their online advertising campaigns to rivals.

The Commission’s focus on Google (and Microsoft before it) has prompted the often recurring question as to whether US companies are receiving rather more EU competition law scrutiny than their European rivals.  However, Vestager has made clear her views that Google is a ‘good company’ and that it makes no difference from the EU competition law perspective whether a company is American or European.

It is expected that Google will appeal the decision.

Commission fines car lighting system producers

The European Commission has fined Automotive Lighting and Hella EUR27 million for their participation in a cartel relating to car lighting systems. 

The decision was reached under the cartel settlement procedure, resulting in a reduction of 10% in fines.

Valeo received full immunity from fines under the 2016 Leniency Notice.  

The Commission found that for over three years the companies co-ordinated prices and other trading conditions for the supply of vehicle lighting systems.  They also coordinated price increase on spare parts and co-ordinated how long after mass production they would end contractual availability of the relevant spare parts.

The Commission has already found competition law infringements in several auto parts markets.  The latest decision is the first involving replacement parts for cars that are out of production.

European Commission investigates Nike, Universal Studios and Sanrio

 

European Commission investigates Nike, Universal Studios and Sanrio

The European Commission has opened separate antitrust investigations into the distribution and licensing arrangements of Nike, Universal Studios and Sanrio.

The Commission suspects that the companies’ practices may unlawfully restrict distributors from selling cross-border and over the internet within the EU single market.

The products under investigation include clothes, shoes, phones, bags and toys on which an image, logo or text is applied during the manufacturing process.  The manufacturers can only include an image or text if they have a licensing agreement with the owner of the underlying intellectual property rights.

Nike is the licensor of rights for Barcelona Football Club, Universal owns the rights for “Despicable Me” and “Minions” and Sanrio owns the rights for “Hello Kitty”.

A Commission spokesman has said that the investigation has not been prompted by complaints.

The practices of concern raise similar issues to those in the Commission’s e-commerce sector inquiry which highlighted the antitrust issues arising in selective distribution agreements.  However, it appears that the investigations are separate from the sector inquiry.

Last week the Commission opened a similar inquiry into the distribution agreements of Guess, the US clothing manufacturer.

The investigations show that the Commission has a continued appetite to open enforcement proceedings in cases involving vertical restraints. The latest investigations will revisit the interplay between restrictions on competition and limitations that are inherent in licensing agreements and show the Commission’s vigilance to tackle impediments to cross-border trade.

European Commission investigates Guess distribution agreements

The European Commission has launched an investigation into US clothing company Guess for restricting distributors from selling to consumers within the EU single market.

The Commission has stated that it believes that Guess may be banning cross-border sales within the EU.

The investigation follows the Commission’s e-commerce sector inquiry where its report published in May found evidence of restrictions that may limit competition in selective distribution systems.  The Commission considers that such agreements may hinder consumers from benefiting from lower prices and greater product choices. The Commission is already planning legislation designed to ensure that consumers seeking to acquire products or services on a cross-border basis are not discriminated against.

Source:  http://europa.eu/rapid/press-release_IP-17-1549_en.htm

Arkema seeks FRAND access in second antitrust complaint against Honeywell

Arkema has launched a complaint to the European Commission against Honeywell in an attempt to gain fair, reasonable and non-discriminatory terms of access to the latter’s patents.  The complaint is the latest development in a series of attempts by Arkema to challenge Honeywell’s allegedly anti-competitive practices in relation to the standardisation of patents for “1234f” an eco-friendly auto air conditioning refrigerant used in the car industry.

The Commission is already investigating Honeywell and Chemours on suspicion that their agreement to produce “1234f” may have limited supplies available to the market and impeded technical development contrary to Article 101 TFEU.

Arkema’s fresh complaint alleges that there are grounds for the Commission to pursue an abuse of dominance investigation.  It believes that the complaint is pressing and maintains that the car industry is moving to worldwide use of 1234f. Arkema says that it wants to participate in the 1234f market with its own production technology and is seeking access to Honeywell’s patents in order to contribute to a competitive market.

The Commission would not be in a position to pursue the abuse of dominance complaint without issuing a further statement of objections as its current one, issued in 2014, covers only the allegedly restrictive agreement.

Irish Supreme Court rules on litigation funding ban

The Supreme Court of Ireland has ruled that the doctrines of champerty and maintenance prevented third party litigation funders from financing litigation.

The ruling concerns a non-competition case where Persona Digital Telephony and Sigma Wireless Networks were suing the Business Minister after they lost a bid in a mobile telephone auction.

The Supreme Court upheld a ruling of the Irish High Court that the funding agreement with Harbour Capital was unlawful.  The Supreme Court president found that the fund had no connection with the claimants other than the funding arrangements.  As such, it was a “champertous agreement” which, in the absence of a statutory exception, was unlawful.

The judgment comes at a time when claimants are considering antitrust litigation in a number of jurisdictions.  It remains to be seen what effect the ruling will have on the attractiveness of Ireland as a venue for such actions. 

It might be said that the ruling does no more than confirm the existing position on funding based on a narrow construction of existing statutory provisions.  In this respect it is noteworthy that the president gave a nod to the need for legislation on the matter noting that such a complex and multi-faceted issue was “more suited to a legislative analysis”.

Persona Digital Telephony Limited & Sigma Wireless Networks Limited v The Minister for Public Enterprise, Ireland and the Attorney General [2017] IESC 27

Commission opens rare abuse of dominance case into excessive pricing by Aspen Pharma

Commission opens rare abuse of dominance case into excessive pricing by Aspen Pharma

The European Commission has opened an investigation into whether Aspen Pharma is charging excessive prices for certain cancer medicines in breach of Article 102 TFEU.

The Commission suspects that Aspen has imposed “very significant” and “unjustified” price increases of up to several hundred per cent for medicines that it acquired after the expiry of patent protection.

The Commission’s investigation will cover the whole of the EEA except Italy.  In 2016 the Italian competition regulator fined Aspen EUR 5.2 million for infringing Article 102 TFEU as a result of unfair pricing and found price increases of up to 1500 per cent for some cancer medicines.

This is the first competition investigation by the Commission into excess pricing in the pharmaceutical sector.  Excessive pricing cases are rare in EU law and the competition authorities cite the mantra that they do not want to act as price regulators.  It may be that by opening this case, the Commission is seeking to achieve a uniform approach at national and EU level to what can be a knotty legal and economic question: the circumstances in which prices may be deemed excessive.

Commission press release. IP/17/1323.

Mediating disputes in regulated sectors

http://kluwermediationblog.com/2017/05/08/from-regulation-to-resolution-mediating-disputes-in-regulated-sectors/

Court of Justice dismisses appeal in bananas cartel

The European Court of Justice has dismissed the appeal brought by banana importer Pacific Fruit group against a General Court judgment of 2015.

In October 2011 the European Commission imposed a fine of EUR 8,919,000 on Pacific Fruit for its participation with Chiquita in a price fixing cartel for bananas in Greece, Italy and Portugal.

As part of its investigation, the Commission received copy documents from the Italian finance police. The Court has confirmed that the documents could be used as evidence in proving the competition law infringement.  The Court ruled that documents transferred by the national authorities are admissible in competition law proceedings provided that their transfer has not been ruled unlawful under national law.  The Court concluded that the rules on cooperation between authorities in the European Competition Network do not prevent the Commission from using information transferred by the national authorities merely on account of the fact that the documents have been obtained for other purposes.

The Court upheld the General Court’s judgment in its entirety in finding that the infringement could be characterised as restrictive of competition by object without the need to prove effects and it found that the General Court had not erred in its review of the fine.

Case C-469/15 P - FSL Holdings and Others v European Commission, judgment of 27 April 2017. 

National security: Public interest intervention notice in digital radio merger

UK Business Secretary Greg Clark has issued a public interest intervention notice relating to China-headquartered Hytera’s proposed acquisition of digital radio manufacturer Sepura.  This is the first public interest intervention on national security grounds in over a decade and the sixth time the government has issued an intervention notice on national security grounds to the CMA or its predecessors.

Under section 58(1) of the Enterprise Act 2002, "the interests of national security" is a specified ground for the Secretary of State to intervene in a merger.  Once an intervention notice has been issued, the CMA must report to the Secretary of State. The CMA has 15 working days, until midnight on Thursday 4 May 2017, to complete and submit its report to the Secretary of State.  The CMA reports on the competition issues and whether, if it were not a public interest case, it would refer it to Phase 2 or accept undertakings in lieu of a reference. The CMA may also give its views and recommendations on the public interest consideration. 

The Secretary of State may make a reference for a Phase 2 investigation by the CMA if he believes that the merger may be expected to operate against the public interest as a result of either both the public interest consideration and a substantial lessening of competition, or solely on the basis of the public interest consideration.  In exercising his discretion as to whether to make a reference or not, the Secretary of State is required to accept the CMA’s findings on competition issues (section 46(2), Enterprise Act) but not on any views expressed about the public interest consideration.

In the past, defence mergers including General Dynamics/ Alvis, Finmeccanica/ AgustaWestland, Finmeccanica/ BAE Systems, Lockheed Martin/ Insys and General Electric/ Smiths Aerospace were the subject of interventions on national security grounds. Those transactions were ultimately cleared by the Office of Fair Trading after the parties offered remedies.

Proposed acquisition of Sepura plc by Hytera Communications Corporation Ltd: public interest intervention, BEIS intervention 10 April 2017

Deutsche Bahn faces limitation block in MasterCard Interchange litigation

The Court of Appeal has ruled that Deutsche Bahn cannot backdate a claim to benefit from an earlier limitation period when attaching a new claim to its ongoing damages action against MasterCard.

CPR Part 17.4(2) provides that, if a party applies to amend a statement of case and a period of limitation has expired, the court may allow an amendment whose effect will be to add or substitute a new claim, but only if the new claim arises out of the same facts or substantially the same facts as a claim in respect of which the party applying for permission has already claimed a remedy in the proceedings.

The original claim alleges that MasterCard’s EEA and domestic multilateral interchange fees infringe competition law, relying on the European Commission’s 2007 infringement decision against MasterCard.  The new claim maintains that MasterCard’s central acquiring rule itself infringes competition law.

The Court of Appeal concluded that the High Court was incorrect to find that the requirements of CPR Part 17.4(2) were satisfied.  The differences in the counterfactual to be applied indicated that the new claim did not arise out of the same facts or substantially the same facts as those in issue in the original claim.

These proceedings are separate from a damages action brought in December 2015 in the CAT by Deutsche Bahn and others against MasterCard. The CAT action has been stayed until 14 days after the final outcome of the preliminary issue hearing listed to be heard on 8 to 19 May 2017 in the High Court.

MasterCard Inc & Others v Deutsche Bahn AG & Others [2017] EWCA Civ 272

Advocate General: Unfair prices can only exist in regulated markets?

Unfair or excessive pricing is one of the most vexed questions under EU competition law.  Advocate General Wahl (the “AG”) of the European Court of Justice has suggested that excessive pricing should be considered unlawful only in regulated markets and only prices that are “persistently” and “significantly” supra-competitive should be caught by the prohibition of abuse of a dominant position.

The AG’s opinion was given in the context of a referral to the Court of Justice from the Supreme Court of Latvia which is ruling over an appeal by collecting society AKKA/LAA against a penalty imposed by the Latvian Competition Council in respect of their setting of allegedly abusive fees.  The fees charged were 50% to 100% higher than the EU average and the competition authority said that the society had failed to provide an objective justification.

The AG said that only “important deviations” should be considered abusive for the purposes of Article 102 TFEU.    He also pointed to a dearth of EU case law on the issue of unfair pricing and said that interventions by competition authorities against excessive prices should focus on cases where the actions by the sector regulators had failed to correct the abuses.

The call for caution in the AG’s opinion is in my view a sensible approach and regulators should be reluctant to rush to a conclusion that allegedly high prices are unlawful where this finding does not accord with recognised economic thinking, such as for example in industries that are characterised by economies of scale or which are capital-intensive.  In other cases, comparisons with other markets might be useful benchmarks but regulators should consider whether such comparisons are properly made.

Case C-177/16 - Biedrība ‘Autortiesību un komunicēšanās konsultāciju aģentūra – Latvijas Autoru apvienība’ v Konkurences padome, Advocate General's opinion of 6 April 2017