European Commission fines Guess for online sales and advertising restrictions

The European Commission has imposed a €39.8 million fine on the fashion company Guess for online sales and advertising restrictions, reduced by 50% as a result of the company’s admissions.

The Commission found that Guess limited its retail distributors from using its trademarks and brand names for online search advertising or online selling without its permission.  The arrangements also restricted retailers in selling outside their allocated territory, making cross-supplies to other authorised distributors and independently setting retail prices.

The Commission maintains that Guess divided markets in eastern and central Europe where retail prices for its products were, on average, 5-10% higher than in western Europe.

The Commission reduced the fine by 50% to take account of the fact that Guess drew the practices to its attention and provided significant information for the antitrust investigation.  Guess also admitted liability and its participation in the infringement. 

This case is among the first cases where Commission has used its new cooperation procedure in respect of non-cartel conduct and where an investigated party admits the facts and liability in return for a reduction in the fine.

The probe was launched on the back of the Commission’s e-commerce sector inquiry.

 

 

Construction firm suppliers settle cartel investigation by CMA

Construction firm suppliers settle cartel investigation by CMA

The Competition and Markets Authority has issued a statement of objections in its investigation into suspected cartel activity in the supply of precast concrete drainage products to the construction industry in violation of the Chapter I prohibition and Article 101 TFEU.

The CMA's statement of objections is addressed to: Stanton Bonna Concrete Limited and its parent companies Bonna Sabla SA, Consolis Finance SAS; Consolis SAS, and Consolis Group SAS; CPM Group Limited; and FP McCann Limited.

Stanton Bonna Concrete Limited and CPM Group Limited have admitted their participation in a seven year cartel which started in 2006 and have agreed to pay fines which will be determined at the end of the CMA’s investigation.  FP McCann Limited is still under investigation and has not made any admissions.

The CMA maintains that throughout the period of the alleged cartel activity the participants were leading players and from 2010 accounted for 90% of the market.

The CMA will consider representations on the statement of objections before March 2019.

European Commission consults on commitments offered in Mastercard and Visa inter-regional interchange fees case

 

 

The European Commission is market-testing separate commitments offered by Mastercard and Visa to address competition concerns under Article 101 TFEU relating to their inter-regional interchange fees for debit and credit card payments. 

Inter-regional interchange fees are charged on payments made with cards issued outside the EEA for purchases made in the EU.  These payments are typically made by tourists.

The Commission's earlier decisions on Mastercard’s and Visa’s interchange fees have concerned multi-lateral interchange fees for payment cards issued in the EEA.

The Interchange Fee Regulation (Regulation 2015/751) does not apply to cards issued outside the EEA.

Mastercard and Visa, in separate offers of commitments, have both agreed to a cap on the level of their interchange fees (for a period of five years and six months) at 0.2% of the value of the transaction for debit cards and 0.3% of the value of the transaction for credit cards for card payments carried out in a store, and 1.15% and 1.5% respectively for online debit and credit card transactions.

CMA consults on referring funeral services for in-depth market review

The Competition and Markets Authority has published its interim findings on its market study into the supply of funerals in the UK.  It is consulting on whether to make a market investigation into the supply of funeral director and crematoria services.

The CMA is concerned that various features of the market prevent, restrict or distort competition including customers' vulnerability and difficulty in engaging at the point of need and unresponsiveness to indicators of price and quality.

The possible reference comes at a time of increasing regulatory scrutiny of the funeral services sector.  In July the government issued a call for evidence in relation to the pre-paid funeral sector, including, potentially, the impact of additional regulation by the Financial Conduct Authority.

The CMA invites views on whether it should exercise its discretion to make a market investigation reference by 4 January 2019.

European Commission investigation into airline ticket distribution

European Commission investigation into airline ticket distribution

The European Commission is investigating whether agreements between booking systems Amadeus and Sabre, and airlines and travel agents, may be in breach of EU competition law.

The Commission is investigating whether provisions in the providers’ agreements with airlines and agents may limit the latter’s ability to use rival suppliers of ticket distribution.  This may make it more difficult for new distribution suppliers to enter the market and may increase costs for airlines which are passed on to consumers.

It will be recalled that as early as 2002 the Commission investigated the creation of the online travel agency, Opodo.  This was a joint venture by nine of Europe’s largest travel agents offering internet sales, hotel bookings, car hire and insurance.  The European Commission took into account a package of commitments offered by the parties and issued a ‘negative clearance’ type of comfort letter.   In order to allay concerns that the airlines might use the joint venture as a vehicle for collusion the parties put in place undertakings that the shareholders would not get access to commercially sensitive information about each other. In order to address the concern that the airlines would favour their own operations to the detriment of other travel agents, each undertook not to discriminate without objective justification between other travel agents.

Commission press release IP/18/6538

New head for India’s Competition Commission

New head for India’s Competition Commission

Ashok Kumar Gupta has been appointed as the new chairman of the Competition Commission of India, replacing Devender Kumar Sikri.

His appointment follows review by a selection committee consisting of the minister for corporate affairs, minister of law and justice and experts drawn from law and economics.  In common with other heads of India’s competition authority, Gupta does not have an antitrust enforcement background.  Gupta has been a civil servant for 36 years, starting out in Tamil Nadu’s state government. Recently he was head of the Department of Defence Production, part of the Ministry of Defence.

Gupta is expected to contribute deep sector expertise, particularly in the defence, healthcare and shipping sectors.

European Commission closes infringement case against Cyprus Bar Association over restrictive fee arrangements

The European Commission has ended its competition investigation against Cyprus over a minimum fee arrangement for out of court legal services including drafting contracts, drawing up wills, estates administration and company registration.

The Commission raised concerns in April 2018 that Cyprus legislation, by encouraging the Bar Association to adopt the minimum fee arrangements, could encourage conduct that might prevent, restrict or distort competition in the internal market.  As such, the Commission raised concerns that Cyprus could be in breach of Article 106 TFEU whereby member states must refrain from encouraging undertakings or associations of undertakings to favour or encourage anti-competitive behaviour that would breach Article 101 of the TFEU.

Cyprus amended its legislation in response to the Commission’s investigation.  The Commission also closed a parallel investigation into the minimum fee scale arrangements of the Cyprus Bar.

http://europa.eu/rapid/press-release_MEMO-18-6247_en.htm

CMA sends objections to ComparetheMarket about Most Favoured Nation clauses in contracts with home insurance providers

The Competition and Markets Authority has issued a statement of objections to BGL (Holdings) Limited, BGL Group Limited, BISL Limited (BISL), and Compare The Market Limited (together ComparetheMarket) alleging breach of the Chapter I prohibition and Article 101 TFEU.

ComparetheMarket operates a price comparison website.  The CMA is concerned about the use by ComparetheMarket of most favoured nation (MFN) clauses in agreements with home insurance providers.  The CMA has also conducted a market study into digital comparison tools.  It now alleges that the use of MFNs by ComparetheMarket is preventing home insurers from quoting lower prices on competing websites.

ComparetheMarket now has an opportunity to respond to the CMA’s objections.  Third parties may submit written representations on the objections if they can materially assist the CMA’s investigation and may request a non-confidential version of the statement of objections by 16 November 2018.

FCA issues paper on fair pricing in financial products

The Financial Conduct Authority has issued a discussion paper on fair pricing in financial services (DP18/9).  The paper addresses loyalty and inertia pricing, setting out the FCA’s framework for assessing fairness and harm caused by discriminatory pricing.  The paper also considers potential remedies.

The FCA intends that the paper will prompt a public debate on the issues. These issues are relevant particularly to the FCA’s general insurance market study.

The FCA is seeking views, particularly, on two practices.  First, firms charging different prices to different consumers based solely on differences in consumers’ price sensitivity (also known as ‘price discrimination’). Second, firms charging existing customers higher prices than new customers (sometimes referred to as ‘loyalty pricing’ or ‘inertia pricing’).

The FCA seeks comments on the discussion paper by 31 January 2019.

https://www.fca.org.uk/publications/discussion-papers/dp18-9-fair-pricing-financial-services

General Court dismisses application for injunction to block publication of Euribor decision

The EU’s General Court has rejected an application by Crédit Agricole for an interim injunction in an appeal against a European Commission decision to publish the Commission’s decision in the Euro Interest Rate Derivatives cartel.

The proceedings arise out of the Commission’s 2016 decision (the 2016 Decision) fining JPMorgan Chase, Crédit Agricole and HSBC EUR485 million for their participation in the Euribor cartel.  Crédit Agricole argued that the entirety of the decision should remain unpublished until the conclusion of its appeal against the 2016 Decision.  It argued that publishing the decision before the appeal was concluded would violate the presumption of innocence.

The General Court found that the applicants had failed to show that an interim order was justified in fact and law.  The ruling confirms that the bar for obtaining interim measures is high.

In principle, the publication of the 2016 Decision before conclusion of the appeals can be expected to fuel private follow-on damages actions.  However, in practice domestic courts may stay their actions if there is a realistic prospect that the decision will be overruled in appeal proceedings before the EU Courts.

Case T-419/18 R - Crédit Agricole and Crédit Agricole Corporate and Investment Bank v Commission (ECLI:EU:T:2018:726)

Six to become Five – SSE and N-Power approved

Six to become Five – SSE and N-Power approved

The Competition and Markets Authority has approved the merger between SSE Retail and N-Power without conditions and after a detailed investigation.

The combination will merge SSE Retail and Npower’s supply operations but other SSE activities such as generation and distribution remain separate.  British Gas (owned by Centrica), Scottish Power (owned by Iberdrola), E.On and EDF will remain independent among the larger energy companies.

The CMA launched a second phase probe amid concerns about the potential impact of the merger on customers on standard variable tariffs (SVTs), recalling concerns in its 2014-2016 broader market investigation that households on those tariffs do not tend to shop around.

In its in-depth merger review, however, the CMA found that switching levels between energy providers were at the highest they have been in a decade.  The CMA found that the main constraint on SVT pricing was that any increase would result in customers being engaged and then switching either to the supplier’s own internal lower tariffs or to a competitor.  This increase in switching was also fuelled by the number of internal and external prompts that the customer receives on better offers that may be available.  Of those customers who did switch, the CMA found that they tended not to move between the merging parties.

The clearance also anticipates the introduction of new energy price caps as proposed by Ofgem which will limit the prices that energy companies can charge for typical annual usage to £1,136.  The Money Advice Service has said that deals are available up to £300 cheaper than the cap.

This is the fifth transaction that the CMA has approved unconditionally in the 2017-2018 financial year.  This trend is probably reflective of the relatively low threshold to launch an in-depth review, relative to the strict standard for prohibition.

The extent of change in the energy market, highlighted by the CMA’s merger investigation, is relevant.  However, even with 70 or so energy companies the CMA continues to believe that the market is not working as well as it might for some customers who do not switch.  That is why it looked at SVTs closely, as customers on those tariffs were historically ‘sticky’.  Nevertheless, the clearance is a significant example of the CMA examining a complex transaction in light of the evolving market and regulatory developments.

High Court rules that ABB did not deliberately overcharge BritNed as a result of power cables cartel

The facts really do matter in competition follow-on damages actions, according to the High Court’s ruling in a claim brought by BritNed against ABB arising out of the power cables cartel.

ABB did not dispute its participation in a cartel which was the subject of a European Commission 2014 decision finding an infringement of Article 101 TFEU.  It did, however, deny that BritNed had suffered any loss as a result.

BritNed alleged that it was overcharged for the cable component of the Dutch-UK Interconnector.  The High Court did not accept that claim, finding that there was no deliberate overcharging and that the direct costs for ABB’s tender for the project were honestly and competently compiled.

The High Court did, however, find an overcharge on account of embedded inefficiencies where the cartel was found to have an insulating effect for ABB.  On this reasoning, but for the cartel, ABB would have had to cut costs for the tender.  The High Court also found an overcharge arising from a “cartel saving” where ABB’s common costs were reduced because the cartelists did not have to compete

The High Court rejected BritNed’s claims for loss of profits and compound interest and also ABB’s claims that any damages needed to be assessed by reference to the regulatory cap on BritNed’s earnings.

ABB was ordered to pay approximately €7.5 million for the inbuilt inefficiency and €5.5 million for the efficiency savings arising from participating in the cartel.

BritNed Development Limited v ABB AB and ABB Limited [2018] EWHC 2616 (Ch)

Indian Supreme Court overrules Competition Commission LPG cartel decision

Indian Supreme Court overrules Competition Commission LPG cartel decision

India’s Supreme Court has reversed a decision of the Competition Commission of India (CCI) finding that suppliers of liquid petroleum gas engaged in a bid-rigging cartel where they submitted identical bids on tenders put out by state-owned company, Indian Oil.

The Supreme Court overruled a finding by the former Competition Appellate Tribunal which upheld the CCI’s decision, albeit reducing the fines (amounting to about EUR 25 million at the time of the CCI’s 2012 decision).

The Supreme Court stated that price parallelism is not sufficient to prove concerted action.  It was critical of the quality of the evidence put forward by the CCI, in particular its reliance on a meeting that only 19 members attended and where non-participants in the meeting also submitted the same bids.

Interestingly, the Supreme recognised that buyers and suppliers can influence pricing in a concentrated market such that price parallelism of itself provides insufficient evidence of collusion.

The CCI will need to pay close attention to other plus or minus factors in cases where it relies purely on economic evidence to prove a cartel. 

Remedies in consumer markets

Remedies in consumer markets

The Competition and Markets Authority (CMA) and the Financial Conduct Authority (FCA) have published a joint paper on remedies in consumer markets.

The paper follows a work programme by the UK Competition Network (UKCN) and sets out how demand-side issues can produce poor consumer outcomes.  It examines the importance of testing remedies that are designed to address such problems.

The paper provides high-level principles on remedies development including understanding the nature of the problem, being bold, letting the consumer remain in control, leveraging from private sector experience and review of effectiveness. The paper also notes that good analysis is not enough to secure good consumer outcomes.  It recognises challenges and opportunities for the future posed by the digital economy.

Echoing similar themes, the FCA has published a speech by its Executive Director of Strategy and Competition, Chris Woolard setting out how the authority tests its market interventions.

CMA and FCA paper "Helping people get a better deal: Learning lessons about consumer facing remedies"

Speech by Christopher Woolard, Executive Director of Strategy and Competition at the UKCN conference, 1 October 2018.

ECJ rules on smart chips cartel appeals

The ECJ has ruled in appeals by Infineon and Philips against the General Court judgments that rejected their challenges to the European Commission's 2014 infringement decision on the smart card chips cartel.

The ECJ dismissed claims by both appellants that the General Court had erred in its application of Article 101(1) TFEU relating to its finding of a restriction of competition by object.

As to Infineon, the ECJ found that the limited review by the General Court of only five of the 11 contacts found by the Commission to be illegal was justified but it held that the extent of Infineon’s participation should have been taken into account when determining gravity and the resulting fine.

The ECJ set aside the judgment against Infineon and has referred it back to the General Court to assess the proportionality of the fine.  If necessary, the General Court must examine whether the Commission properly established the illegality of the six contacts which it had not examined.  The ECJ has in effect said that if factual findings are in issue the Court cannot properly make a determination as to the overall participation of the undertaking without examining that evidence.

The ECJ upheld the decision and fine against Philips in full.

 

 

Case C-99/17 - Infineon Technologies AG v Commission (ECLI:EU:C:2018:773)

Case C-98/17 - Koninklijke Philips NV and Philips France v Commission (ECLI:EU:C:2018:774)

Comcast on top after auction for control of Sky concludes with £30 billion offer

Comcast has outbid Fox in a rare sealed auction to set itself up to win full control of Sky. 

Comcast finally offered £17.28 per share, against Fox’s £15.67.  This is a dramatic milestone in what has become one of the most complex battles for corporate control in my two decades of practice as a corporate lawyer. 

The issue of who would take full control of Sky has been long-fought, contested and controversial.  It continues to be a conquest between media giants that has played out in the media, as well as before the regulators. 

Fox already has a 39% interest in Sky.  The Murdoch group has attempted to gain control of the remaining 61% on two memorable occasions. The first back in 2011 was jettisoned amid the phone hacking scandal.  UK regulators and Sky shareholders did not have an opportunity to decide definitely on the deal.  The most recent attempt began with Fox’s £10.75 per share offer in December 2016.  Although the transaction was cleared on antitrust grounds following a review by the European Commission, it met with UK public interest concerns that complete control by Fox would threaten media plurality.  The deal only received conditional approval in July this year, with Fox committing to Sky News’ editorial independence and maintain £100 million in investment over 15 years.

Meanwhile, Disney has agreed to acquire the Fox entertainment assets – which include Fox’s stake in Sky.  The transaction awaits full regulatory approvals but is expected to close next year.

These developments reached a high-water mark over the weekend in an unusual bidding procedure as neither Fox nor Comcast had put in what they declared to be a final offer.  The auction was overseen by the UK Takeover Panel and was structured around three rounds of sealed bidding before the winner emerged. Such procedures are not uncommon in private M&A.  They are unusual in the case of a UK public company and Sky is probably the most-high profile of the five targets to date.  Other examples have included Enodis, steel-maker Corus, Canary Wharf property group and online retailer, QXL.  They are eclipsed by the £30 billion bid for Sky.

It might be asked whether Comcast has bid too high, but Sky has been described as a “unique asset” and a “jewel in the crown”.  Critics might say that blind bidding and sudden death procedures fuel over-valuation. The point has been raised by Tata reflecting on its own experience on its acquisition of Corus where it paid £6.7 billion in an auction.

Undeniably, there is a substantial difference in the Comcast and Fox final bids but there are questions of strategy, Boardroom egos and financial headroom to consider.

For Comcast there is much to play for.  It has lost out to Disney over the Fox entertainment assets.  It is the biggest cable operator in the USA and includes NBC Universal in its corporate stable.  Yet Comcast faces declining North American subscriber shares and competitive threats from streaming services such as Netflix and Amazon.  Sky is not just a satellite TV service but has a diversified offering including the Now TV streaming service, broadband internet and mobile.  Sky presents clear complementarities and opportunities for vertical integration across the media value chain from content into distribution and cross-media.  Sky offers an opportunity for geographic reach and diversification, adding some 23 million customers in key European markets such as the UK, Ireland, Germany, Austria and Italy without having to grow these organically.  Then factor in Sky’s premium sports rights, and a brand, business model and product that has reportedly won the respect of Comcast senior management, it is not difficult to see why this deal matters to the US group. 

Disney has seen the value of its conditional interest in Sky increase dramatically as the corporate tussles have ensued.  The Disney-Fox side already has a 39% stake which gives a level of influence and ability, at least in principle, to hold the status quo.  That it is not to say that it does not want to own Sky outright, but other factors come into play.

In short, Comcast really had to come in with a knockout bid to give it the best prospects of emerging on top.  Deal insiders say that it had to raise its offer substantially above that of Disney-Fox to be sufficiently alluring to those shareholders who would be likely to go with the latter based on their existing interest.

This is not quite the end of the process.  Sky’s shareholders have until 11 October to decide which formal offer to accept. Comcast says that it expects to conclude by the end of October.  Since that bid has been recommended by the Sky Board, it seems on track to do so.  Disney will be considering its position on its interest in Sky.

What will this mean for Sky customers? They are probably unlikely to see any immediate change.  Only time will tell.  Comcast has had to dig deep to fund its offer.  It will understandably be looking at creating synergies and cutting costs  Where those savings will come from and the extent to which they will be passed on to customers is not entirely clear.  Whoever ultimately controls Sky will not want to kill off the golden goose by alienating its growing pool of customers through higher prices and less choice.  It will need to continue to invest in quality services and features, including premium sports content, which is arguably one of its most prized assets.

Commission investigates Amazon’s use of merchant data

Commission investigates Amazon’s use of merchant data

The European Commission has launched an antitrust investigation into Amazon’s use of the data it collects from retailers that sell through its platform.

The investigation is at a preliminary stage. The Commission does not rule out that the collection of data by Amazon might be legitimate such as when used to improve Amazon’s services to merchants. But it says that the practices could strengthen Amazon’s competitive position.

The challenge is that Amazon operates both as a distribution platform to give smaller retailers access to customers, while at the same time being a significant merchant in its own right.  It has grown beyond its 1995 origins as an online book retailer, expanding into other markets and launching virtual shopfronts which have allowed third parties to sell their goods.

The Commission has said that it is keen to get the full picture on how Amazon’s use of the data it collects through its platform may be a source of competitive advantage.  It should not lose sight of the fact that Amazon’s platform has provided a useful route to market for small and medium-sized businesses.

This is not the first time that the Amazon platform has been the subject of antitrust scrutiny in the EU. Member states such as Germany have warned against the antitrust risks of manufacturers limiting the ability of smaller retailers to sell through Amazon as this could lead to concentrated online environment dominated by the larger manufacturers and e-commerce platforms.

Commission opens proceedings against German automakers

Commission opens proceedings against German automakers

The European Commission has opened an investigation into BMW, Daimler and Volkswagen over their alleged collusion to restrict competition in the development and distribution of emission cleaning technology.  The investigation extends to VW brands Volkswagen, Audi and Porsche.

The Commission maintains that the so-called “circle of five” held meetings to discuss strategies for the development and distribution of technology to limit exhaust emissions for diesel and petrol passenger cars.

The Commission has already undertaken a series of competition investigations in the automotive and parts sector.  This includes cases involving suppliers of medium and heavy trucks, automotive bearings, wire harnesses in cars, flexible foam used in car seats, parking heaters in cars and trucks, alternators and starters, air conditioning and engine cooling systems, lighting systems, occupant safety systems, braking systems and spark plugs.

Commission press release IP/18/5822

No deal and competition law damages claims – a technical note

The UK government has published 25 notices setting out its preparations for the possibility of the UK leaving the EU without a deal being in place after 29 March 2019 (‘exit day’).

The notice on ‘merger review and anticompetitive activity’ says that after exit day claimants will no longer be able to rely on the binding effect of a European Commission infringement decision in follow-on damages actions.

Currently, in a follow-on claim claimants in the UK may rely on a decision of the Commission in order to establish liability for an infringement, although proving loss and causation remains an issue.  According to the notice, in a no deal scenario claimants in the UK will not be able to rely on the binding effects of Commission decisions.  Infringement decisions that are made by the Commission before exit day may still be relied on as proof of liability in the UK courts.

The possibility has been left open of enforcing Commission decisions in the UK courts through a claim founded on a foreign tort.

The notices state no more than what is the logical result of a no deal scenario.  Although the note maintains that such a result remains unlikely, it may be expected to have a dampening effect on the attractiveness of the UK as a venue for bringing private damages claims founded on Commission decisions, all things being equal.

Perhaps the bigger issue is the extent to which Commission decisions will be persuasive authority before the UK courts.  If the UK courts treat such decisions as highly compelling evidence the practical difference may be slight.

Source:  https://www.gov.uk/government/publications/merger-review-and-anti-competitive-activity-if-theres-no-brexit-deal/merger-review-and-anti-competitive-activity-if-theres-no-brexit-deal#more-information

CAT dismisses Ping internet sales ban

The Competition Appeal Tribunal (CAT) has rejected an appeal against a decision of the Competition and Markets Authority (CMA) fining Ping GBP 1.45 million for infringing Article 101 of the TFEU and the Chapter I prohibition of the Competition Act 1998.

The CMA found that Ping operated an online sales ban without objective justification. This prevented UK retailers selling Ping golf clubs online. The CMA found that Ping could have promoted its instore fitting through less restrictive means than an internet sales ban.

The CAT rejected Ping’s claims that the CMA’s decision violated its human rights and was disproportionate and that the CMA erred in finding that the restriction was not objectively justified and did not qualify for individual exemption.

The CAT did find that the CMA erred in law by not conducting a full proportionality test as part of its Article 101(1) assessment but did not consider that this made any difference to the CMA’s overall finding.  The CAT said that a proportionality test is part of the Article 101(3) assessment and is necessary only if it is established that the measure infringes Article 101(1) (whether being a restriction of competition by object or effect).

As to the penalty, the CAT found that the CMA made an error in treating director involvement as an aggravating factor. The CAT said that although director level staff were negligent, this did not constitute an aggravating factor.  The CAT therefore reduced the penalty by GBP 200,000 to GBP 1.25 million.

Ping Europe Limited v Competition and Markets Authority [2018] CAT 13

CMA gives provisional clearance to SSE-Npower merger

The Competition and Markets Authority has provisionally cleared the combination of SSE and Npower, unconditionally and following a Phase II review.

The merger combines the supply activities of SSE Retail and Npower but does not extend to other aspects such as energy and distribution.

The second stage probe was launched on the basis of concerns that the transaction would lead to price increases in standard variable tariffs.  However, the CMA does not consider that such concerns are substantiated as the parties are not closest competitors.  This finding is interesting in light of the CMA’s 2014-2016 energy market reference which found that customers on standard variable tariffs were less likely to switch.  During the merger review the CMA found that the proportion of customers on such tariffs has now decreased. Those that do switch were found not to switch between the merging parties.

In the 2017-2018 period the CMA has cleared five transactions at Phase II without remedies.  Two transactions have been cleared with structural commitments. 

Against this background, merging parties in high value more complex deals may well consider that it is in their interests to fast-track to Phase II where the issues can be looked at more closely.  They will have to weigh up the costs and the benefits of trying to secure faster clearance at Phase I potentially subject to remedies against taking their chances with Phase II, where they may come through without remedies.  The CMA is expected to issue its final report by 22 October 2018.

Ofcom fines Royal Mail £50 million for abuse of dominance

Ofcom fines Royal Mail £50 million for abuse of dominance

Ofcom has found that Royal Mail has breached the Chapter II prohibition of the Competition Act and Article 102 TFEU through unlawful discrimination against rival postal delivery operators.

Ofcom launched its investigation in 2014 after a complaint from Whistl, a provider of bulk mail services, concerning a proposed change in Royal Mail’s wholesale access prices.  Whistl was planning to build its own delivery network but relied on Royal Mail to deliver business letters that it collected and sorted.

The proposed pricing structure meant that if the firm wanted to begin bulk delivery itself in certain regions, it would have to pay Royal Mail 1.2 per cent more per letter than those firms who used Royal Mail to deliver mail across the UK.  Ofcom considered that Royal Mail had used its quasi-monopoly position as a provider of delivery services to sanction operators who entered into competition with it.

Royal Mail and Whistl had asked Ofcom to consider the case using Ofcom’s sector regulatory powers but Ofcom instead decided to use its competition powers.

The £50 million fine is the largest fine to be imposed by Ofcom.

Royal Mail has said that it will appeal against the decision.

Meanwhile, Royal Mail is embroiled in antitrust litigation itself through a follow-on action arising out of the European Commission’s July 2016 decision against the EEA trucks cartel.  It is seeking some £270 million in damages against DAF Trucks undertakings as a result of the overcharge it allegedly paid for trucks.

Ofcom press release, 14 August 2018

Public interest immunity material cannot be disclosed on an application to challenge a warrant

The Court of Appeal has allowed an appeal by the Competition and Markets Authority (CMA) against a High Court ruling that required the CMA to disclose evidence that was not protected by public interest immunity (PII) to a party seeking to vary a warrant granted to the CMA under section 28 of the Competition Act 1998.

The warrant in question relates to the CMA’s investigation of possible infringements of competition law by Concordia International RX.

The High Court had held that a judge on an application to challenge a warrant could not take into account material protected by PII even where the judge who issued the warrant had properly taken it into account.  The High Court ruled that PII issues should be addressed at the initial ex parte hearing and that a confidentiality ring could not be used to disclose PII material.

In light of the Supreme Court judgment in Haralambous in January 2018, Concordia accepted that the CMA can use PII material to support its case for a warrant. 

The Court of Appeal departed from the High Court and ruled that the appropriate time for the court to rule definitively on PII is when the application is made by the subject of the warrant for it to be set aside or varied.  The Court of Appeal confirmed that the use of a confidentiality ring in relation to the challenging of warrants in competition cases has no place in relation to PII material.

It is now for the CMA to make submissions to the High Court that the evidence it relied on to obtain the warrant qualifies for PII protection.  The High Court will decide whether the grant of the warrant was correct.  This will determine whether the CMA can continue to rely on the material in its ongoing investigation without disclosing it.

The Competition and Markets Authority v Concordia International RX (UK) [2018] EWCA Civ 1881

High Court refuses judicial review of Ofcom’s ‘fit and proper’ decision in Fox-Sky merger

 

The High Court has dismissed an application for judicial review of Ofcom’s decision that a proposed merger between Fox and Sky would result in Sky not being a fit and proper person to hold its broadcasting licences.

The transaction would result in Fox obtaining 100% of Sky and takes place against allegations of impropriety against Fox. Ofcom found that the conduct alleged of Fox represented a significant corporate failure but that there was insufficient evidence to conclude that, after the merger, Sky would be unfit to hold its broadcasting licences.

The High Court found no error of law in applying the fit and proper test, which was a matter for Ofcom’s judgment. Ofcom must be satisfied that its decision was necessary and proportionate to the interference with freedom of speech that would be a consequence of licence revocation. This is a high threshold and the High Court ruled that it was not irrational to adopt such a standard when deciding whether to revoke a licence of a broadcaster whose businesses depended on the statutory permission.

The High Court also found that it would not lightly interfere with Ofcom’s regulatory judgment. Sky and Fox had shown that they were fit and proper to hold broadcasting licences for several years and Ofcom was not satisfied that there was sufficient evidence to show that Sky would not comply with broadcasting regulation after the merger. The High Court rejected the claim that Ofcom did not give sufficient weight to Fox’s corporate failures as a predicator of future failings. It also dismissed the claim that Ofcom had taken insufficient account of findings while James Murdoch was chairman of Sky in 2012.

The decision is a reminder of the high threshold for judicial review and where significant latitude is afforded to the specialist regulator.

Avaaz Foundation, R (On the Application Of) v The Office of Communications (Ofcom) [2018] EWHC 1973 (Admin), 27 July 2018. (Supperstone J)

Data Privacy: An Indian and international perspective

Data privacy has risen up the Boardroom agenda for businesses internationally, with concerns such as cybercrime, data theft and scams to name but a few.  New legislation such as the General Data Protection Regulation in the EU has focused the minds of individuals on their rights to protection against unwarranted intrusions into their privacy.

But the issues go beyond Facebook.  Policy-makers, legislators and regulators are still grappling with how to address data privacy concerns where protection for fundamental rights faces different cultural norms and expectations. 

In India, the nuclear family and other cultural factors which have traditionally blunted calls for greater privacy protection have given way to urbanisation and changing expectations. The growth of the internet and digitisation have fuelled the demand for greater protection of personal space.  The Supreme Court has asserted that the right to privacy is a fundamental right.

Against this background, the Government of India has set up a Committee of Experts under the chairmanship of former Supreme Court judge Shri B N Srikrishna. The final draft of The Personal Data Protection Bill, 2018 alongside the Expert Committee report was submitted to the government on 27 July 2018.  This represents a significant milestone in India’s data privacy journey as it seeks to strike a balance between the challenges and opportunities of the digital era and the need for privacy protection. 

Join me in New Delhi on 24 August 2018 when I will be speaking about data privacy and related areas of compliance and risk management against the emerging contexts.

Home page:  https://sites.google.com/creactos.com/srab

Registration Page: https://sites.google.com/creactos.com/srab/register

Data Protection Framework for India

https://www.dsci.in/content/data-protection-framework-india

PSR Market Review: Card services

The Payment Systems Regulator (PSR) is proposing to conduct a market review into card acquiring services.  It seeks comments on its consultation on the draft terms of reference by 14 September.

The PSR finds that in the UK in 2017, 13.2 billion payments were made by debit card and 3.1 billion payments by credit card.

If merchants are to accept payments by card, they need to purchase card acquiring services and the costs they pay may be passed on to customers in the prices they charge.

The PSR wants to be satisfied that the market for card acquiring services is working well for merchants and ultimately benefits consumers.

Comments on the PSR’s consultation can be made here.

Reflections on Google after Android

Reflections on Google after Android

The European Commission has now issued its decision in the latest abuse of dominance investigation into Google’s business practices.  The Commission has imposed a record EUR 4.3 billion fine on Google attracting headlines worldwide.  Two days on from the decision, a few early themes are developing.

The theories of harm that the Commission has settled on are much closer to established case law.  The Commission finds that Google has acted abusively by unlawfully (1) tying its Search and Chrome browser applications by requiring smartphone manufacturers to pre-install these on Android devices if they also want to offer Google’s Play Store, (2) offering financial incentives to those manufacturers to exclusively pre-install Google Search, and (3) hindering the development of rival Android systems.

The fine represents a much higher percentage of worldwide turnover than in other cases and is larger than the EUR 2.4 billion penalty imposed just a year ago in the Commission’s Google Shopping investigation.  This is not surprising given the size of the relevant markets and the scope of the Commission’s findings in Android.

Google has understandably refuted the Commission’s case.  It says that the Commission failed to take sufficient account of competition from Apple’s iOS.  While there may be competition between Android and Apple at the retail level, this appears to miss the point.  The issue at stake in this case is whether Google had sufficient market power over smartphone manufacturers at the stage of pre-installation of apps and where important technology choices are set.  Apple does not license its iOS to manufacturers.

Questions remain as to the effectiveness of remedial measures and what form they will take.  To ask Google to stop the practices that the Commission has found to be infringing may not go far enough for some complainants.  It is not clear whether other apps might be in scope.

Although the Commission’s decision has settled the latest stage in this three-year long probe, there remain questions as to whether the outcome will deliver what rivals have been seeking in terms of levelling the competitive playing field.   The Commission launched its investigation in 2015, but significant complaints were made before then.  

The challenge for regulatory intervention in a technology environment is getting the right balance.  Consumers have grown accustomed to using Google services as default options.   The Commission faces no easy task in trying to overcome consumer acceptance of those products and services over the years.  Whether this is as a result of superior products and services - or as a result of the practices that the Commission has found to be problematic - depends on whether you are ‘pro-Google’ or not.  And views can be quite diametrically opposed.

https://www.bbc.co.uk/news/technology-44858238

https://www.linkedin.com/feed/update/urn:li:activity:6425637450982453248

Further Google apps abuse of dominance complaint

Mobile app store Aptoide has reportedly filed an abuse of dominance complaint against Google with the European Commission.  It claims that Google has blocked Aptoide’s own application from working on Android devices.

Aptoide offers an alternative to the Google Play Store and claims that Google has used antivirus software to prevent use of the competing application purchasing store.

Aptoide has said that it filed the complaint with the European Commission earlier this week and that this is not its first complaint against Google.  Aptoide was a vocal complainant in the EU abuse of dominance mobile operating and search services investigations.  The Commission’s decision in its investigation into Google’s allegedly restrictive licensing conditions imposed on mobile phone operators is expected imminently.

Meanwhile, Google faces litigation in the UK and Australia from Unlockd which claims that Google abused its dominant position by threatening to remove applications using its advertising system from the Google Play Store.

Court of Appeal rules that Visa and MasterCard interchange fees restricted competition

The Court of Appeal has ruled in appeals in three cases concerning claims for damages against Visa and MasterCard alleging that their multilateral interchange fees (MIFs) infringe Article 101 TFEU.

The first two cases concern High Court judgments that dismissed claims against, respectively, Visa and MasterCard. The third is an appeal by MasterCard against the Competition Appeal Tribunal’s 2016 judgment awarding damages to Sainsbury’s.

In a 99 page judgment the Court of Appeal followed the ruling of the European Court of Justice in 2014 finding that Mastercard’s MIFs restricted competition within Article 101(1) and overturned Phillips J's November 2017 ruling that Visa's UK MIFs did not restrict competition within Article 101(1).

The Court of Appeal referred the cases back to the CAT to reconsider issues relating to application of Article 101(3) and quantum.

The Court of Appeal found that it was not necessary for it to undertake a complete review of the evidence to conclude that the CAT lacked an evidentiary basis for its finding that significant MIFs would have been agreed on a bilateral basis in the absence of the MIF.

The CAT will not hear new evidence (save on certain elements of quantum).  However, in an attempt to avoid arbitrary results the parties will be able to rely on generic evidence in the other cases that are equally applicable to both schemes.

Sainsbury’s Supermarkets Ltd v MasterCard Incorporated and Others, Asda Stores Ltd and others v Mastercard Incorporated and others and Sainsbury's Supermarkets Limited v Visa Europe Services LLC, Visa Europe Limited and Visa UK Limited [2018] EWCA 1536 (Civ) (4 July 2018).

Application to bring collective proceedings against trucks manufacturers

The Competition Appeal Tribunal has published a notice of an application for collective proceedings in a competition damages action under section 47B of the Competition Act 1998 against Fiat Chrysler Automobiles N.V., CNH Industrial N.V., Iveco S.P.A., Iveco Magirus AG and Daimler AG.

The proposed action combines follow-on claims arising out of the European Commission’s decision - in Case AT.39824 – Trucks - announced on 19 July 2016 that it had imposed fines on four truck manufacturers (with a fifth receiving immunity) for their participation in a cartel for medium and heavy trucks in the EEA.

The applicant has applied for a collective proceedings order for it to act as the class representative in opt-out collective proceedings or, in the alternative, on an opt-in basis.

The proposed class comprises persons who, between 17 January 1997 and 18 January 2011, acquired one or more new medium or heavy trucks registered in the UK.

The commencement of collective proceedings under section 47B of the Competition Act, and the suitability of the proposed class representative, must be approved by the CAT.

The CAT will now consider whether to make a collective proceedings order.

The application follows the CAT’s 2017 rejection of an application by Walter Merricks as the putative class representative for a collective proceedings order in a £14 billion opt-out action against MasterCard.  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.

Case 1282/7/7/18 - UK Trucks Claim Limited v Fiat Chrysler Automobiles N.V. and Others

European Commission probes Qatari LNG supply agreements

The European Commission has opened an antitrust investigation into supply arrangements between Qatar Petroleum and EEA importers of liquefied natural gas (LNG).

The Commission is investigating whether Qatar Petroleum’s long-term supply agreements, for the supply of LNG in the EEA contain direct or indirect restrictions on the ability of the buyers to sell the LNG in the EEA. Some of these arrangements are of 20 or 25 years’ duration.

The Commission suspects that such practices, if proven, violate Article 101 and 102 of the TFEU.

The Commission has pointed to its previous decisional practice citing precedents such as its investigations into GDF/ENI and GDF/ENEL where territorial restrictions were treated as restrictions ‘by-object’.  Those cases were decided over 15 years ago and although the Commission has identified a potential theory of harm in the current investigation it is less clear whether it will focus on Article 101 or 102 in this case.  Qatar Petroleum is the largest gas exporter in the world and apparently accounts for close to 40% of the EU’s gas imports and more in some member states.

Case AT.40416 - Qatar Petroleum. Commission press release IP/18/4239

Have I got news for you? Media ownership regulation and the future of Sky News

As part of a series of lectures and launch of a Competition Law Summer School, on Wednesday 20 June 2018 Suzanne Rab will be presenting and leading a discussion on media ownership regulation. The session promises to be highly topical against the backdrop of rival bids for Sky News and the aftermath of an extensive public interest review by the Competition and Markets Authority. The talk begins in Chambers at 18:00 followed by drinks at 19:15. This invitation is open to professionals with an interest in this sector and we would be very pleased if you could join us. Please email rsvp@serlecourt.co.uk to confirm your place.

https://www.linkedin.com/feed/update/urn:li:activity:6413364054101880833