CMA opens in-depth investigation into Amazon Deliveroo tie-up

The Competition and Markets Authority (CMA) has referred the anticipated acquisition by Amazon of a minority (16%) shareholding and certain rights in Deliveroo for an in-depth merger investigation.

The CMA raised competition concerns in early December finding the UK online restaurant delivery market to be “highly concentrated”, with only three large players in the UK: Deliveroo, Just Eat and UberEats.

The CMA said the deal could mean that customers, restaurants and grocers face higher prices and lower-quality service

The parties were unable to offer remedies that would address the CMA’s concerns, which prompted the opening of a Phase II probe.  The CMA has prohibited only one minority investment since 2004 when it blocked Ryanair’s attempt to buy a stake in the competitor Irish airline Aer Lingus.

The German Federal Cartel Office cleared Amazon’s investment deal unconditionally in July after a Phase I review.  Deliveroo had practically no activities in Germany and has since committed to exit the German market.



https://www.gov.uk/cma-cases/amazon-deliveroo-merger-inquiry

CMA interim report finds that Google and Facebook have marker power in their markets

CMA interim report finds that Google and Facebook have marker power in their markets

The Competition and Markets Authority (CMA) has issued its interim market study report on online platforms and digital advertising.

The CMA finds that both Google and Facebook have market power in their respective markets.  It also notes features of those markets, including economies of scale and a lack of transparency can lead to a strong entrenching effect.

The CMA found that profitability was well above any reasonable estimate of what it may expect in a competitive market.  On this basis and other findings in the report the CMA thinks there are reasonable suspicions that competition is not working as well as it should.  It believes that these findings support the development of a dedicated regulatory regime to regulate the activities of online platforms fuelled digital advertising.

Any remedy would be UK-only.  However, the CMA has echoed concerns of other regulators including the Australian Competition and Consumer Commission’s recommendations to address a lack of “significant reflection” on the effects of digital platforms.

The CMA deadline for responses to the interim findings is 12 February 2020. The deadline for the final report is 2 July 2020.

Court rewinds CMA director disqualification order

Court rewinds CMA director disqualification order

The High Court has allowed two individuals to continue to act as company directors after the Competition and Markets Authority (CMA) secured disqualification orders against them.

The CMA fined five refurbishment companies in a settlement where they admitted to rigging bids on tenders from a college and law firms. Stamatis and Davis were directors at the implicated Forefront Group which includes 360 Workplace, Area Sq., Sketch Studios and Cube Interior Solutions and they received disqualification orders for two years and nine months and 18 months respectively.

The Court found that the public protection in upholding the orders must be balanced against the needs of the companies concerned. It found that the disqualifications could lead to further redundancies and that Stamatis was essential to the organisations’ culture.  Overturning the bans, the Court was satisfied that the conduct was not likely to be repeated.

Stamatis and Davis v CMA [2019] EWHC 3318 (Ch)

Review of EU Notice on Market Definition

Review of EU Notice on Market Definition

EU Commissioner Vestager has announced that the Commission will review and revise its 1997 market definition notice to take account of market developments and the globalisation of competition.

The definition of the relevant market, while intuitively simple and anchored in economic theory and legal precedents, can present particular issues in relation to the newer markets that have emerged in recent years.

Digitisation has changed how consumers interact with social media including in ways other than payment of money, such as exchange of personal data. 

The application of the so-called “Hypothetical monopolist test”, conveniently labelled as the “SSNIP” test (Small, Significant Non-Transitory Increase in Price) can present challenges when applied to newer markets.  This test seeks to assess the reactions of consumers in response to a company increasing its prices by, say, 5 – 10% over a period of time of about a year.  In Google Android the Commission had to address the fact that the Android operating system is available for free so instead of a SSNIP test the Commission asked what would happen if Google reduced the quality of Android software.

The Commission will also look at the potential lock-in effect of digital ecosystems where companies provide a full range of services making it hard for consumers to switch.

European Commission opens new competition probes into Google and Facebook

European Commission opens new competition probes into Google and Facebook

The European Commission has launched separate antitrust investigations into Google and Facebook’s data practices.  The preliminary probes concern the way that data is collated, used and commercialised by the companies, including for advertising.

This latest investigation adds to the scrutiny that both companies are facing from national antitrust authorities and the Commission.

To date the Commission has issued three separate infringement decisions against Google under EU competition law (Google Shopping, Google Android and Google Adsense). The General Court will hear Google’s appeal in the Shopping case in February.

The Commission is also investigating the governance and membership structure of Facebook’s cryptocurrency, Libra.

Meanwhile, New York’s attorney general and other state attorneys general in the USA are investigating Facebook’s data collection practices and others have ongoing investigations into Google’s online search practices.  Google has publicly confirmed that it is the subject of an investigation by the US Department of Justice.

Conservative party plans to move to a WTO-inspired regime for controlling state subsidies

Conservative party plans to move to a WTO-inspired regime for controlling state subsidies

The Conservative party has released its proposals to replace the EU state aid regime with one based on World Trade Organisation (WTO) rules on the restriction of harmful state subsidies.

The plans released on 29 November appear to represent a major shift from the previous UK policy.  Under that policy, the UK framework would replicate the existing EU state aid rules, with only technical modifications to correct deficiencies with the transposed EU law to ensure the regime operates effectively in a domestic context after exit.   This raises a question as to how different a WTO-inspired approach would be in practice? 

There are some differences between the formal scope of WTO rules on subsidies and EU state aid rules, but they do cover similar concepts.   Over the years, a large body of case law has developed on the state aid regime, with comparatively less on WTO rules.  While state aid rules effectively apply an ex ante approach to legality - in that state aid generally needs to be notified to and approved by the Commission before it can be put into effect - the general starting point under WTO rules is that a subsidy is permitted unless challenged.

The only clear point of distinction is that WTO rules apply only to goods, whereas the state aid regime also applies to services.   It is not clear that the plans would necessarily exempt services.

The proposals are not clear on how Northern Ireland would be treated.  Presumably it would have to follow EU state aid rules if a hard border on the island of Ireland is to be avoided.

It seems that the thrust of the proposals is to allow for quick implementation of short-term measures to rescue a failing company before restructuring.  If that is indeed the driver, then it would be possible within the existing EU state aid regime.  This begs the question as to how far a UK government would depart from that regime, at least in the immediate stages post-withdrawal.

Saudi Arabia clears Uber-Careem deal with conditions

Saudi Arabia clears Uber-Careem deal with conditions

The Saudi General Authority for Competition has cleared Uber’s USD3.1 billion acquisition of Careem, a Middle eastern ride-hailing business, subject to commitments.

Careem will become a wholly owned subsidiary of Uber but will be maintained as a brand.

The commitments require Uber to commit to a maximum rate for taxi rides which the Authority will monitor.  It must also maintain quality of service and work on innovation and improvement.  Uber must allow drivers to work for competitors, which will allow rivals to access Careem’s mapping data so that passengers may view their own data on the application. Prices must be applied to all customers without discrimination.

The transaction was subject to merger review in a number of Middle East countries, yet with differing results.  It was blocked by the Qatar Competition Protection and Anti-monopoly Committee but approved unconditionally in the UAE and Jordan.

Competition authorities in Pakistan and Egypt have raised antitrust concerns about the local impacts of the deal.

Secretary of State consults on undertakings in Advent International/Cobham merger

Secretary of State consults on undertakings in Advent International/Cobham merger

The Business Secretary has published undertakings to address national security concerns raised by the proposed acquisition of UK defence company Cobham plc by funds managed by Advent International Corporation (Advent) and the Blackstone Group.

With the acquisition of control by Advent and the Blackstone Group being effected via a single agreement and being inter-conditional, the CMA considered the two transactions as forming part of one single relevant merger situation

The Secretary of State identified national security concerns relating to the risks affecting security of information and security of supply.

The Secretary of State considers that she has the power to refer the transaction for a Phase 2 review by the CMA but is minded to accept undertakings. These include continuation and strengthening of existing security arrangements; requiring Cobham's new owners to honour the terms of existing contracts, notify the Ministry of Defence in advance if there is a material change to Cobham's ability to supply key services, and refrain from withdrawing from any specified service for a set period; and also requiring the new owners to give the Ministry of Defence prior notice of plans to sell the whole, or elements of, Cobham’s business.

Comments on the undertakings are invited by 17 December 2019.

Royal Mail fails in appeal against Ofcom’s abuse of dominance decision

The Competition Appeal Tribunal (CAT) has upheld Ofcom's 2018 decision fining Royal Mail GBP 50 million for abuse of dominance through discrimination against postal operators that competed with Royal Mail in bulk delivery.

The CAT rejected Royal Mail’s arguments that the case raised novel issues for the application of Article 102(c) TFEU in relation to prices that were not paid or charged.

The CAT further rejected submissions from Royal Mail that Ofcom erred in law in concluding that transactions entered into by Royal Mail and its customers were equivalent in material respects and that the price differential could not be objectively justified.

Royal Mail also failed in its argument that the conduct was objectively justified by reference to the need to preserve the viability of the universal service under economically acceptable conditions.

The decision of the CAT was unanimous and illustrates the hurdles that need to be overcome in successfully appealing a decision of a specialist economic regulator.

The Royal Mail plc v Office of Communications [2019] CAT 27

European Commission opens investigation into alleged collusion among supermarkets

European Commission opens investigation into alleged collusion among supermarkets

The European Commission has launched an investigation into whether French grocery chains Casino Guichard-Perrachon (Casino) and Les Mousquetaires (Intermarche) have colluded in breach of Article 101 TFEU.

The investigation follows dawn raids of the companies by the Commission in 2017 and 2019. 

Casino and Intermarche are two of the largest chains of grocery retailers in France.  For the past five years they operated a joint venture alliance for the procurement of their branded products.

The Commission’s investigation was prompted by concerns that the parties went beyond the purpose of the joint venture and strayed into coordination of their pricing policies and distribution networks.

Joint procurement alliances are increasingly common across the EU grocery sector. The case may well yield useful insights for the assessment of similar practices in other EU markets.

Privacy, misinformation and competition in the social media age

Privacy, misinformation and competition in the social media age





Professor Suzanne Rab was interviewed this morning on BBC Business Live as social media firms are to be placed under a new statutory duty of care in the UK, and risk prosecutions, fines or even bans from operating if they fail to protect their users from unacceptable content. 



The question of whether existing regulation is adequate to make social media companies take more responsibility has been raised in a number of areas prompting concerns over privacy, misinformation and competition.

In the wake of Facebook's latest results announcement it is clear that negative publicity and regulatory attention has not affected its growth, whether in terms of subscriber numbers, revenues or profits. 

The truth is that even though comparisons have been made with monopolies of the past, the world has not yet seen anything quite like the social media phenomenon where Facebook alone interacts with one in three people across the globe.  This has prompted calls for tougher regulation and even break-up.  However, passing laws to make social media companies police the internet brings with it other concerns.  Let's not be deluded that any law that orders a company to remove unacceptable content will face objections from proponents of free speech. Where the court making the judgment is from a country where the rule of law is cherished, we might not object.   But that cannot be said of all regimes globally who want to take proactive steps to counter what they perceive is objectionable content.



Please find below links to reporting on the interview.





https://www.linkedin.com/posts/serle-court_suzanne-rab-bbc-interview-social-media-activity-6595607396167499777--ADP

https://twitter.com/Serle_Court/status/1189842170406154240?s=20
http://www.serlecourt.co.uk/news/article/suzanne-rab-bbc-interview-social-media-firms-to-be-placed-under-a-new-statutory-duty-of-care-in-the-uk

CMA imposes £36 million fines on concrete products suppliers

CMA imposes £36 million fines on concrete products suppliers

The Competition and Markets Authority has fined FP McCann Ltd, Stanton Bonna Concrete Ltd and CPM Group Ltd a total of £36 million for infringing the Chapter I prohibition of the Competition Act 1998 and Article 101 TFEU.

The CMA finds that the companies were involved in a price fixing and market sharing cartel in relation to the supply of pre-cast concrete draining products to the construction industry. The CMA notes that these supplies are important for a number of sectors in the UK including the utilities and house building sectors.  It is likely that private and public sector purchasers suffered harm as a result.

The CMA found that the arrangements involved exchanged of competitively sensitive market information over the period 2006 – 2013 and involved senior executives at the companies.

The investigation started in 2013 with the launch by the Office of Fair Trading of a criminal case leading to a cartel offence guilty plea.  The CMA opened a civil investigation in 2017, although no further criminal charges have been sought to date.  This dual-track enforcement – both criminal and civil – illustrates the range of tools that the CMA has at its disposal to deal with cartel activity.

No jurisdiction to hear patent licensing competition claim against Philips

No jurisdiction to hear patent licensing competition claim against Philips

 

The High Court has upheld applications by the defendants in a claim alleging abuse of dominance in breach of Article 102 TFEU and the Chapter II prohibition concerning licensing of standard essential patents.

The claimants (Vestel UK) alleged that Advance Limited (Advance), and Koninklijke Philips NV (Philips), infringed competition law by offering licences for patents, essential in the manufacture of televisions, on terms that were not fair, reasonable and non-discriminatory.

The High Court concluded that it did not have jurisdiction in relation to Vestel's claim against Philips under Article 7(2) of the Recast Brussels Regulation.  It had not been established that Vestel has suffered or will suffer damage as a result of the pleaded abuse.

As to Advance, the High Court concluded that the claimants had not shown that any of the jurisdictional gateways in CPR Practice Direction 6B had been satisfied. It had not been established that any damage would be sustained in England.

Vestel Elektronik Sanayi VE Ticaret AS and Vestel UK Limited v HEVC Advance LLC and Koninklijke Philips NV [2019] EWHC 2766 (Ch)

National competition authorities seek stronger powers to impose remedies in digital markets

National competition authorities seek stronger powers to impose remedies in digital markets




National competition authorities in Belgium, Luxembourg and the Netherlands have called for the European Commission to allow remedies to be imposed on companies operating in the digital sector without a finding of a breach of competition law.

A joint memorandum made public by the Benelux authorities states that the enforcers seek to further the debate on competition in digital markets and urge the Commission to introduce ex ante regulation and revise merger control rules.

The memo highlights that a challenge with the current EU antitrust system is that the rules apply ex post once there has been a finding of infringement.  They argue that intervention may come too late in digital markets once the market has tipped in favour of a dominant technology. They call for tougher ex ante powers to take action to pre-empt an adverse market outcome.

The authorities have also asked the Commission to conduct an economic study on merger control in digital markets to examine whether the current rules should be revised. They offer potential changes to EU merger control including a reversal of the burden of proof in digital mergers. This would require the acquirer to show that the merger is pro-competitive as the price for clearance. Currently, the Commission must show that the merger gives rise to a serious impediment to effective competition in order to prohibit it. 

The joint memorandum can be found here:

https://www.abc-bma.be/sites/default/files/content/download/files/bma_acm_cdlcl.joint_memorandum_191002.pdf

CMA sends statement of objections to Fender alleging online resale price maintenance

CMA sends statement of objections to Fender alleging online resale price maintenance



The Competition and Markets Authority (CMA) has issued a statement of objections alleging that Fender Musical Instruments Europe Limited operated a policy between 2013 and 2018 which required its guitars to be sold at or above a minimum price.

The CMA alleges that this practice, known as resale price maintenance or “RPM”, restricted competitive online pricing by independent retailers.

At this stage, the CMA’s findings are provisional and the CMA is considering representations from Fender before it reaches a final decision on whether there has been a breach of the Chapter I prohibition/Article 101 TFEU.

In the past three years the CMA has sanctioned a number of other companies for online RPM in diverse sectors including digital piano and keyboards, light fittings, bathroom fittings and commercial refrigeration.

CMA requires divestment in Ecolab/Holchem merger

CMA requires divestment in Ecolab/Holchem merger

The Competition and Markets Authority (CMA) has published its final report on its merger investigation of the completed acquisition by Ecolab Inc. of The Holchem Group Limited.

Ecolab and Holchem are among the largest suppliers of formulated cleaning chemicals to the food and beverage sector in the UK.

The CMA finds that the merger may be expected to result in a substantial lessening of competition in the market for the supply of formulated cleaning chemicals to UK food and beverage customers.

The CMA identified competition concerns due to an expected increase in prices, a reduction in quality or customer services and a reduction in innovation and the range of services offered.

The CMA has required Ecolab to divest Holchem Laboratories Limited to address the “very serious” adverse effects of the merger it has identified.

Source:  https://www.gov.uk/government/news/cleaning-chemicals-firm-must-sell-acquired-business

European Commission probes Thomas Cook’s subsidiary rescue under State aid rules

European Commission probes Thomas Cook’s subsidiary rescue under State aid rules



Germany has announced that it is in “constructive talks” with the European Commission over whether an anticipated loan of EUR380 million to Condor Airlines amounts to State aid.

Condor’s parent company Thomas Cook went under compulsory liquidation last week after lenders refused to fund a rescue by its largest shareholder, Fosun.

The German federal and state governments agreed to grant a temporary loan to support the German subsidiary subject to advance State aid clearance.

Germany reports that it expects the loan to be approved under the State aid rules citing an earlier rescue package of EUR170 million granted to Air Berlin in 2017. 

It has been asked why a similar option was not open to the UK to bailout the parent company.  In short, the scale of the parent company’s financial difficulties meant that the prospects of returning it to long-term financial health were remote.  State aid of this nature can only usually be granted as a rescue measure once all market options have been exhausted, on a temporary basis and in combination with a repayment schedule.

General Court annuls HSBC Euribor cartel fine

General Court annuls HSBC Euribor cartel fine

The General Court has annulled the European Commission’s fine of EUR33.6 million imposed on HSBC for its participation in the euro interest rate derivatives cartel.

Although the Court has largely upheld the Commission’s substantive finding that HSBC participated in a single and continuous infringement in breach of Article 101(1) TFEU, it found that the Commission had not properly established that two discussions between the bank’s traders and their counterparts restricted competition by object.

The General Court further found that the Commission had given inadequate reasons for its approach to determining the value of sales for the purposes of calculating the fine.

It is quite unusual for the Court to annul a cartel fine in its entirety and even more interesting in a case where the findings on liability were largely upheld.  This emphasises the importance of the Commission substantiating and providing adequate reasons for its approach to calculation of the fine.

JP Morgan has a pending appeal against the same Euribor decision.

Case T‑105/17, HSBC Holdings plc, HSBC Bank plc and HSBC France v European Commission, ECLI:EU:T:2019:675

Ofcom settles parcel delivery case

Ofcom settles parcel delivery case

Ofcom has announced that Royal Mail and a reseller of its parcel delivery services have admitted their participation in an unlawful customer allocation agreement.

In September 2018 Ofcom issued a statement of objections alleging that Royal Mail and SalesGroup (trading as Desptach Bay) a reseller of its business parcel delivery services have breached the chapter I prohibition and Article 101 TFEU.

In May 2018 Royal Mail reported the arrangement to the Competition and Markets Authority who transferred the case to Ofcom as concurrent competition regulator for the postal sector. 

Ofcom states that the arrangements concerned at least 90 customers between 2013 and 2018 where the companies monitored and operated a customer sharing arrangement affecting both indirect and direct customers. Ofcom found that there was regular email correspondence between the parties which typically led to one of them withdrawing a lower price that they had offered to a customer.

The SaleGroup also shared its customer list with Royal Mail’s ParcelForce.

Royal Mail received immunity from fines under the CMA’s leniency policy.  SalesGroup was fined £40,000 which Ofcom regards as significant in view of the company’s small size.

Government closes enforcement gap in pre-Brexit merger and antitrust cases

Government closes enforcement gap in pre-Brexit merger and antitrust cases





On 10 September the government published the Competition (Amendment etc.) (EU Exit) (No 2) Regulations 2019 (SI 2019/1245), together with an explanatory memorandum.



The Regulations address a no-deal scenario and UK-related commitments made to the European Commission under EU merger control and antitrust. The Regulations ensure commitments made prior to exit day relating to the supply or acquisition of goods or services in the UK are preserved as retained EU law.  The Regulations grant UK competition authorities the power to monitor and enforce the commitments made under these decisions. 



The Regulations specify commitments made under 31 merger clearances and 12 EU antitrust cases going back to 2012.  These include historic multi-jurisdictional transactions such as Universal Music Group/EMI Music, Glencore/Xstrata, Takeda/Shire, and Microsoft/LinkedIn.  It was “previously thought” the European Commission would continue to monitor and enforce UK-related merger and antitrust commitments that were given pre-Brexit.



The Regulations are part of approximately 540 statutory instruments made in anticipation of Brexit since July 2018.

Vestager re-appointed as EU Competition Commissioner

Vestager re-appointed as EU Competition Commissioner

In an unprecedented move, Margrethe Vestager has been appointed as both EU Commissioner for Competition and Executive Vice-President responsible for co-ordinating the Commission's agenda on a Europe fit for the digital age.

The new College, announced on 10 September, will have eight Vice-Presidents, three of whom will have a double role, like Margrethe Vestager.

Vestager’s re-appointment to the role of Commissioner for Competition is an exceptional vote of confidence in her abilities and has been welcomed by the competition bars in Europe and the UK.

In her first term of office, she can be credited for promoting greater awareness of competition issues, many making headline news including in high profile cases such as Google Shopping and Google Android and in state aid cases involving individual tax arrangements.

In my view the dual appointment does not present a conflict. It may also contribute to policy cohesion provided that there is a clearly defined policy mandate for the two roles.

The change of Competition Commissioner does not usually signal a dramatic shift in focus for DG Competition.  If anything, Vestager’s re-appointment to the role means that those operating in the digital sector can expect continued scrutiny.

The new European Commission takes office on 1 November 2019, subject to the approval of the European Parliament.

European Commission and Facebook’s Libra

The European Commission is understood to be conducting a preliminary competition investigation of Facebook’s Libra, according to a report by Bloomberg.

The Libra Association is a group of 28 independent companies including Mastercard, PayPal and eBay, who oversee the cryptocurrency.

It appears that the Commission’s concerns relate to how the Libra Association will collect and share customer data, integration within Face book applications such as WhatsApp and Messenger, and whether Facebook could use Libra to foreclose rivals from fintech and related markets.

Facebook is expected to launch Libra and subsidiary, Calibra, to create an application that will allow Libra users to make payments, next year.

The European Commission is not the only regulator to have expressed concerns about Libra. The UK Information Commission and the US Federal Trade Commission have expressed concerns about the privacy risks presented by Libra’s digital currency and platform.

The European Commission also fined Facebook €110 million in 2017 for providing misleading information during the antitrust review of the Facebook/WhatsApp merger.

The European Commission has not commented on the case which is at an early stage at most.  It is likely that should the Commission’s inquiry deepen, the parties will be given an opportunity to amend their governance rules.

Government brings into force EU Withdrawal Act provisions to repeal European Communities Act 1972 on Brexit day

Government brings into force EU Withdrawal Act provisions to repeal European Communities Act 1972 on Brexit day

On 16 August 2019 the government made the European Union (Withdrawal) Act 2018 (Commencement No. 4) Regulations 2019 (SI 2019/1198) (regulations) which brought into force section 1 of the European Union (Withdrawal) Act 2018 (EUWA).

Unlike other significant provisions of the EUWA which came into force when it received Royal Assent, section 1 required the government to make regulations in order to bring it into force.

Section 1 of the EUWA will repeal the European Communities Act 1972 (ECA 1972) on exit day, which is defined in the EUWA as 11.00 pm on 31 October 2019.

The definition of exit day can be amended by the government by secondary legislation (EUWA, section 20(4)).  The making of the regulations does not affect the ability of the government to do this, at least until 31 October 2019, should the date of the UK's withdrawal from the EU change.

The definition of exit day has already been amended twice following successive agreements between the UK and the EU.

CMA consults on Aspen pay for delay settlement

CMA consults on Aspen pay for delay settlement

The Competition and Markets Authority (CMA) is consulting on proposed commitments from Aspen relating to supply of fludrocortisone acetate tablets in the UK.  Aspen has offered to pay the NHS £8m, as part of a wider package of commitments addressed at competition concerns.

The investigation arises from Aspen’s acquisition in 2016 of additional marketing authorisation for the drug in circumstances where it already held the only other authorisation for competing drugs. The CMA maintains that the acquisition strengthened Aspen’s dominant position.

According to the CMA, in 2015 Tiofarma became a competitor to Aspen.  As part of Aspen’s acquisition from Tiofarma of the worldwide and UK rights over the drug, Tiofarma entered a non-compete as well as a supply agreement under which it agreed to supply ambient storage fludrocortisone to Aspen and Aspen agreed to purchase all its requirements of ambient storage fludrocortisone only from Tiofarma for a period of five years.

The CMA has concerns that the arrangements infringe Article 102 TFEU and the Chapter II prohibition.

Aspen has offered to divest its UK rights over ambient storage fludrocortisone to an independent third-party and re-introduce and commercialise its other fludrocortisone product in the UK.

The CMA invites comments by 2 September 2019.

UK food industry asks government to relax competition rules in no deal scenario

UK food industry asks government to relax competition rules in no deal scenario



The Food and Drink Federation has asked the government to permit companies to cooperate to address food shortages after the UK leaves the EU.

The Federation’s members include Bird’s Eye, Cadbury’s, Coca-Cola, Danone, Haribo, Kelloggs and Nestlé.

The Competition Act 1998 allows the secretary of state for “exceptional and compelling reasons of public policy” to issue an order not to comply with competition law.  If used, this would give a defence to companies engaging in forms of cooperation with competitors that would otherwise violate competition law.

The provision has been used three times in relation to the defence industry and for the supply of oil and petroleum in 2012 at a time of fuel crisis.

The Federation says the waiver should be in place now, subject to renewal on a three monthly basis until industry and government can be confident that supply chains are operating efficiently.

Although around 30% of UK food supplies come from the EU, the situation should not require a complete suspension of competition law for the relevant companies, it should be temporary and only in so far as necessary to allow for the cooperation that is needed to avoid any essential supply chain issues. Clear guidelines would be needed on its scope to avoid mixed messages about what businesses can and cannot do to plan for and deal with the aftermath of a no deal Brexit.

The CMA has said that “this is a matter for government”.  A blanket waiver across the entire industry would represent a significant departure from government policy to date.

Court of Justice rules that indirect purchaser can claim in trucks cartel damages action

Court of Justice rules that indirect purchaser can claim in trucks cartel damages action

The Court of Justice has ruled on a request for a preliminary ruling on the interpretation of Article 7(2) of Regulation 1215/2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (the Recast Brussels Regulation).

The case arises out of a claim in the Hungarian national court by Tibor-Trans Fuvarozó és Kereskedelmi Kft (Tibor-Trans) against DAF Trucks in relation to the European Commission’s 2016 trucks cartel decision.

Article 7(2) of Regulation 1215/2012 provides that a person domiciled in a member state may be sued in another member state, in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.

Tibor-Trans did not purchase trucks directly from the cartel participants.  The trucks at issue were bought by Hungarian dealers who were alleged to have passed on the increased costs to end purchasers, including Tibor-Trans.

The Court of Justice ruled that Article 7(2) of Regulation 1215/2012 must be interpreted as meaning that in respect of a claim for breach of Article 101 concerning collusive arrangements, "the place where the harmful event occurred" covers the place where the market which is affected by that infringement is located.  This is the place where the market is distorted and in respect of which the victim claims that it suffered loss, even if it did not purchase directly from the cartel participants who were the addressees of the Commission’s decision. 

It seems to follow that courts in member states where the damage was felt may hear an action even if this is different from the market where the unlawful conduct occurred.  Usually, these places will coincide but not always.

(Case C-451/18) Tibor-Trans Fuvarozó és Kereskedelmi Kft. v DAF TRUCKS N.V. ECLI:EU:C:2019:635

European Commission launches consultation on draft disclosure guidelines

European Commission launches consultation on draft disclosure guidelines



The European Commission has published draft guidelines on how national courts in the EU should disclose confidential information in private competition law damages claims.

The Commission intends that the communication will provide practical guidance to courts on the disclosure of commercial information and sets out ways to protect that information.

The guidelines would not be binding on the national courts and would not modify existing member state procedural rules.

The principles set out the guidelines should be familiar to competition lawyers practising in England and Wales. The attempt at pan-European harmonisation in this area may be regarded as a positive step.

The consultation closes on 19 October 2019.

http://ec.europa.eu/competition/consultations/2019_private_enforcement/en.pdf

CMA sends statement of objections to Advanz Pharma

CMA sends statement of objections to Advanz Pharma



The CMA has issued a statement of objections to AMCo (now Advanz Pharma Services (UK) Limited), Alliance Healthcare (Distribution) Limited, Morningside Healthcare Limited and Morningside Pharmaceuticals Limited.

The CMA suspects that the companies have infringed the Chapter I prohibition and Article 101 TFEU by entering into anti-competitive arrangements for the UK supply of nitrofurantoin capsules.

The CMA alleges that under these arrangements, Alliance Healthcare would purchase equal volumes of the drug from each of the two suppliers.

The CMA also alleges that AMCo exchanged commercially sensitive information to Morningside to reinforce exclusivity arrangements.

The investigation echoes ongoing and previous probes by the CMA into arrangements between pharma companies which it believes deny tax-payers the benefits of effective competition.

European Commission fines Qualcomm for predatory pricing

European Commission fines Qualcomm for predatory pricing

The European Commission has imposed a fine of EUR242,042,000 on Qualcomm for abuse of dominance through predatory pricing of its UMTS chipsets between 2009 and 2011.

The Commission found that Qualcomm sold three of its UMTS chipsets below costs to Huawei and ZTE, with the aim of eliminating Icera, its main competitor at the time in a segment of the market offering advanced performance.

The fine represents 1.2% of Qualcomm’s 2018 revenues.  The Commission also ordered Qualcomm not to engage in practices with a similar purpose or effect.

Predatory pricing occurs where a dominant company sells below cost in order to eliminate competitors or deter entry, enabling it to further increase its market power.

In AKZO the EU Court decided that:

•             where prices are below average variable cost, predatory behaviour is presumed;

•             where prices are above average variable cost but below average total costs, predation is established if there is evidence of an attempt to eliminate a competitor;

•             prices above average total cost will not generally be predatory.

Predatory pricing is a difficult area to prove, not least since the claimant will not have full visibility on the costs of the dominant company so may be forced to rely on its own costs as a proxy.  Such costs may not be comparable to those of the dominant company where the complainant is not vertically integrated.  Also, not every sale below cost will be predatory because there may be an objective justification.  Extensive cost data are required and there is generally a need to establish at least some degree of intent to exclude a competitor from the market or limit its growth. 

Under EU competition law, unlike in the United States, there is no legal requirement to show a serious probability of recoupment.

It appears that the Commission has concluded that Qualcomm priced below its average total costs but higher than its average variable costs.  The traditional EU approach to predatory pricing indicates that where that is the case, the Commission will rely on internal documents to substantiate its theory of harm.

The case suggests that traditional antitrust enforcement tools are still relevant even in dynamic and innovative markets.



Qualcomm (Predation) (Case AT/39711).

Commission press release IP/19/4350.

Commission opens formal antitrust investigation into Amazon

Commission opens formal antitrust investigation into Amazon

The European Commission has launched an in-depth investigation into Amazon’s use of retailer data who sell on the Amazon marketplace.

The Commission’s investigation covers possible breaches of Article 101/ 102 TFEU.

Amazon sells products on its website as a retailer, while also providing a platform where independent retailers can sell their products direct to customers.  The Commission has concerns that Amazon is using competitively sensitive independent retailer information to distort competition in the online marketplace.

The Commission will also investigate the agreements between Amazon and sellers which allow Amazon to access and analyse third party data.  It will also probe Amazon’s use of data in selection of winners of the “Buy Box” which allows customers to add items directly to their shopping cart.

Competition authorities in Germany and Italy have also examined whether Amazon is distorting competition in its capacity as a platform operator.  This has prompted Amazon to announce changes to the standard terms on which it deals with retailers.

Case Amazon Marketplace (AT.40462)

Commission press release IP/19/4291

CMA intends to refer Live Nation-MCD merger to Phase 2

CMA intends to refer Live Nation-MCD merger to Phase 2

The Competition and Markets Authority (CMA) has announced that it will refer the proposed acquisition by LN-Gaiety Holdings Limited (Live Nation) of MCD Productions Unlimited Company (MCD) for a Phase 2 investigation unless suitable undertakings are offered.

The two companies operate music events and festivals.  Live Nation manages artists, operates venues and provides ticketing services through its own company, Ticketmaster.  MCD is a promoter of live music events.

The CMA’s concerns are quite narrowly focused on the loss of competition in the music promotion sector in Northern Ireland, where few promoters rely mainly on Ticketmaster to sell tickets.  The CMA is concerned about the potential foreclosure of rival promoters if Live Nation were to acquire MCD.

The parties have five days from receipt of the CMA’s decision to offer up acceptable undertakings.  It may be that commitments by the merged entity to grant access to Ticketmaster’s platform on terms no less favourable that those offered to its own operations could be sufficient to allay the CMA’s concerns. However, competition authorities including the CMA are usually wary of accepting such behavioural commitments, at least on a first stage inquiry.

British Airways faces record GDPR fine

British Airways faces record GDPR fine



The Information Commissioner’s Office (ICO) has announced plans to impose a record £183 million fine on British Airways (BA) after a data breach last year that affected around 500,000 customers.

The ICO cited “poor security arrangements” that led to the breach of logins, credit card information and other personal data.

The fine would mark the largest that the ICO has issued, eclipsing the £500,000 fine against Facebook for the Cambridge Analytica incident that affected 87 million users.  The fine imposed on Facebook was the maximum permitted under the Data Protection 1998; the legislation in force at the time.  The General Data Protection Regulation (GDPR) came into force on 25 May 2018 and allows the regulator to fine a company up to 4 per cent of its worldwide turnover.  The fine in BA’s case represents close to 1.5 per cent of its 2017 revenues.  BA now has 28 days to object to the ruling before it is final.

The ICO lists the factors in Article 83 GDPR as the criteria she will consider when deciding whether and how to respond to breaches of information rights. The policy is at a relatively high level of generality.   The huge rise in data breaches, plus the vast number of notifications, and the huge rise in the public profile of the issue, has led the ICO to focus attention on the most important and sensitive cases.

CMA publishes Digital Markets Strategy

CMA publishes Digital Markets Strategy

The Competition and Markets Authority has published its Digital Markets Strategy which sets out how it aims to continue to protect consumers in rapidly developing digital markets, while fostering innovation. It also provides responses to some of the recommendations in the Digital Competition Expert Panel (the Furman Report).

The CMA has put forward five strategic aims: 1) using its existing tools effectively and efficiently; 2) building its knowledge and capability; 3) adapting tools to the digital economy; 4) considering the case and options for regulation; and 5) considering potential future remedies in digital markets.

The CMA has also set out seven priorities to guide its future workplan.  These include opening a market study into online platforms and digital advertising, and reviewing the CMA's mergers approach to digital markets. The CMA intends to increase cooperation with other international authorities when looking at digital competition issues.

https://www.gov.uk/government/news/cma-launches-digital-markets-strategy

Commission seeks interim measures in Broadcom antitrust probe

Commission seeks interim measures in Broadcom antitrust probe

The European Commission has opened an investigation into whether Broadcom is abusing its dominant position in the market for TV and modem chipsets by requiring its customers to enter into exclusive obligations.
This is the first time the Commission has announced its intention to impose interim measures on the opening of an investigation.
The case also marks the first seeking of interim measures for almost two decades.
The last case where the Commission imposed interim measures was back in 2001 when it required IMS Health to license its industry standard to competitors, but the order was withdrawn in the wake of three Court judgments. That experience seems to have blunted the Commission’s appetite to seek interim measures.  It is understandable that it would choose its candidate cases carefully given the strict legal requirement to show that the conduct will cause serious irreparable harm.
The action is consistent with the trend of regulators internationally to favour interim measures in fast-moving digital markets, taking account of the risks that their ability to secure effective remedies may be hampered unless early corrective action is taken.

European Commission published guidelines on how to estimate overcharge in passing on cases

European Commission published guidelines on how to estimate overcharge in passing on cases

The European Commission has published guidelines for the national courts on estimation of the share of overcharge as a result of a breach of EU competition law in passing on cases.  The Commission was obliged to publish such guidelines under Article 16 of Directive 2014/104 (the Damages Directive) and the final guidelines follow consultation on a draft last year.

The Damages Directive is based on the principle of full compensation for anyone harmed by a cartel, regardless of whether they are direct or indirect purchasers.

The guidelines set out practical guidance on estimation of the difference between the price actually paid and the price that would otherwise have prevailed in the absence of the infringement.

They also set out the economic principles underlying passing-on and different methodologies  for quantifying the effects (price and volume related) of passing-on.

http://ec.europa.eu/competition/antitrust/actionsdamages/passing_on_en.pdf

European Commission prohibits ThyssenKrupp and Tata Steel merger

European Commission prohibits ThyssenKrupp and Tata Steel merger

The European Commission has prohibited the proposed merger between ThyssenKrupp and Tata Steel, the second and third largest producers of flat carbon steel in the EEA.  This is the third merger prohibition decision taken by the Commission in 2019 and only the eleventh taken under the current Merger Regulation (Regulation 139/2004).

The Commission found serious competition concerns in metallic coated and laminated steel for packaging applications, where the proposed merger would have created a market leader, and galvanised flat carbon steel for the automotive industry.

The Commission found that the merger would have eliminated an important competitor and this would not have been offset by competition from imports.

The Commission concluded that various structural divestments offered by the parties would not be sufficient to fully address its concerns.

The case shows how consolidation in the EU steel sector continues to face antitrust hurdles, yet this may be needed if the sector is to revitalise itself against growing competitiveness at global level.

Tata Steel/ ThyssenKrupp (M.8713)

CAT refuses to adjourn collective proceedings order application

CAT refuses to adjourn collective proceedings order application

The Competition Appeal Tribunal (CAT) has published an order made on 4 June 2019 refusing the applications by London & South Eastern Railway and South Western Trains to adjourn applications to commence collective proceedings under section 47B of the Competition Act 1998 by Mr Justin Gutmann (the class representative).

The CAT’s order may be contrasted with its 17 May decision to adjourn CPO applications in two collective damages actions against truck manufacturers. The CAT found that there were manifestly strong reasons to adjourn the CPO applications due to the possibility of an appeal to the Supreme Court by Mastercard of the Court of Appeal's judgment in Merricks v MasterCard.  In that case the Court of Appeal reversed the CAT's decision to refuse a CPO.

The CAT states that the respondents in the Gutman case may renew their application following the decision of the Supreme Court on the application for permission to appeal in Merricks.

Ofgem has imposed fines totalling £870,000 on the three companies

Ofgem has imposed fines totalling £870,000 on the three companies

Ofgem has found that energy suppliers Economy Energy and E (Gas and Electricity) Limited (EGEL), and Dyball Associates, an energy software and consultancy firm, entered into market sharing agreements in breach of the Chapter I prohibition.

UK sector regulators including Ofgem have concurrent powers alongside the Competition and Markets Authority to apply competition law in their respective sectors.  This is the first time that Ofgem has issued an infringement decision in a cartel-type case.

The agreements concerned the supply of gas and electricity to domestic customers in Great Britain between January and September 2016.

Ofgem also found that Economy Energy, EGEL and Dyball Associates shared commercially sensitive information about customer meters.

EGEL was fined £650,000.  The fine imposed on Economy Energy of £200,000 reflects the fact that it is now in administration. Dyball Associates was fined £20,000 for acting as a facilitator showing that third parties can be liable for facilitating competition law infringements, here through the use of algorithms.

Ofgem press release, 30 May 2019

CMA accuses pharma companies of market sharing in anti-nausea treatments

CMA accuses pharma companies of market sharing in anti-nausea treatments

The Competition and Markets Authority (CMA) has issued a statement of objections to Focus Pharmaceuticals, Medreich, Alliance Pharmaceuticals and Lexon alleging that they have infringed Article 101 TFEU and the Chapter I prohibition in relation to the supply of Prochlorperazine 3mg buccal tablets in the UK.  The concerned products are used to treat nausea and dizziness.

The CMA has provisionally found that Lexon and Medreich were paid a share of the profits earned by Focus on the supply of the Alliance drug and agreed not to compete in the supply of Prochlorperazine in the UK.

The CMA maintains that prior to entering the non-competes, Lexon and Medreich had been preparing to market their jointly developed product. The CMA finds that during the operation of the arrangement between December 2013 and December 2017 the prices paid by the NHS for Prochlorperazine increased by around 700%.

This latest investigation represents the CMA’s fourth major antitrust probe into the pharmaceutical sector since 2016.

Hong Kong Competition Commission wins first two cartel trials

Hong Kong Competition Commission wins first two cartel trials

The Hong Kong Competition Commission has proven the existence of hardcore anticompetitive agreements “beyond reasonable doubt” in its first two cartel cases before the Competition Tribunal.

In what marks the first piece of substantial jurisprudence under the Competition Ordinance, an important question was the standard of proof in the absence of precedent.

The Competition Tribunal found against the Competition Commission in ruling that a criminal standard should apply but it found that the authority had proven its case to that standard.

The Commission demonstrated that BT Hong Kong, Nutanix Hong Kong and Tech-21 Systems and Innovix Distribution rigged bids for the installation of a server system.

The Tribunal also upheld the Commission’s charges against 10 SMEs that they had illegally agreed to allocate markets and fix prices for decorator services at a public housing estate in the north of Hong Kong.

These cases are understood to be the tip of the iceberg. They provide important guidance for future cases.  The IT and construction sectors are expected to remain active areas for regulatory scrutiny.

EUR1 billion fine on Banks for rigging Forex

EUR1 billion fine on Banks for rigging Forex

The European Commission has fined fined Barclays, RBS, Citigroup, JPMorgan and MUFG Bank  - previously Bank of Tokyo-Mitsubishi - EUR1.07 billion for their participation in two Forex cartels for 11 currencies between 2007 and 2013.

UBS received full immunity from fines under the Commission's leniency policy.

According to the Commission, traders in charge of Forex spot trading exchanged sensitive information and trading plans.  On some occasions they coordinated their trading through online chatrooms.

The first cartel (the "Forex - Three Way Banana Split” cartel) involved UBS, Barclays, RBS, Citigroup and JP Morgan.  The second cartel (the Forex- Essex Express cartel), involved UBS, Barclays, RBS and MUFG Bank.

All the banks accepted their involvement in the cartels. The decisions were concluded under the Commission’s settlement policy, which lead to a 10% reduction in the fines.  All the banks apart from MUFG received additional leniency discounts to reflect their cooperation with the Commission’s investigation.

These are the 30th and 31st settlements since the first settlement decision was taken by the Commission in May 2010.

RBS’s settlements reflect settlements with the UK and US authorities on similar issues in 2014 and 2015.

Case AT.40135. Commission press release IP/19/2568.

European Commission fines AB InBev for abuse of dominance

European Commission fines AB InBev for abuse of dominance

The European Commission has fined Anheuser-Busch InBev SA (AB InBev) EUR200 million for unlawfully restricting cheaper imports of its Jupiler beer into Belgium.

The Commission found that AB InBev pursued a strategy of restricting wholesalers and grocers from accessing cheaper products and that the objective of this strategy was to maintain higher prices in Belgium by limiting imports of cheaper products from the Netherlands.  This strategy was implemented by restricting access to discounts, changing product packaging and limiting volumes.

The penalty reflects a reduction of 15% due to AB InBev’s cooperation with the Commission’s investigation and admission of the violation.  AB InBev has also committed to ensure that its product packaging for products in Belgium, France and the Netherlands will include mandatory information in Dutch and French for the next five years to ensure cross-border supplies.

While it is legitimate, even for a dominant company, to label products for a specific country it appears that in this case the Commission found evidence that the strategy was designed to limit parallel imports.

EU Court denies non-appealing cartelist reimbursement of its fine

The General Court has ruled that a non-appealing addressee of an infringement decision that is subsequently partially annulled is not entitled to reimbursement of its fine.

In December 2014, the General Court confirmed that the Commission was entitled to take the contested decision (in 2009).  Feralpi Holding SpA, Ferriera Valsabbia SpA and Valsabbia Investimenti SpA, Alfa Acciai SpA, Ferriere Nord SpA and Riva Fire SpA (but not Lucchini) appealed to the Court of Justice.  The Court held that the General Court had erred in concluding that the Commission was not obliged to hold a new hearing following a previous finding of annulment.

Lucchini claimed that the Commission's refusals to reimburse the fine it paid and to invite it to participate in the subsequent proceedings that had been reopened in the meantime breached its rights of defence.

The General Court dismissed the appeal and held that as Lucchini did not lodge an appeal against the 2014 judgment the decision of 2009 became final with regard to Lucchini.

The case is a reminder that non-appealing parties may not be able to benefit from a judgment that is favourable to their competitors down the line.

Case T-185/18 – Lucchini SpA v European Commission, ECLI:EU:T:2019:298

Commission accepts Visa and Mastercard commitments

Commission accepts Visa and Mastercard commitments

The European Commission has accepted commitments from Visa and Mastercard relating to inter-regional interchange fees for debit and credit payment card transactions.

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

The Commission has taken previous decisions against Visa and Mastercard relating to multi-lateral interchange fees for cards issued in the EEA.

This was a complex case as the payments regulatory framework has developed since the investigation began.  Further, the Interchange Fee Regulation (Regulation 2015/751) does not apply to cards issued outside the EEA.

Visa and Mastercard have agreed to cap the level of inter-regional interchange fees at 0.2% of the transaction value for debit cards and 0.3% of the transaction value for credit cards for card payments carried out by the cardholder in a shop.  The caps are 1.15% and 1.5% respectively for online debit and credit card transactions.

The measures are expected to cut the inter-regional interchange fees by on average 40%.

Commission press release IP/19/2311

Cases AT 39398 (Visa MIF) and AT 40049 (Mastercard II)

CMA blocks Sainsbury’s/ Asda tie-up

CMA blocks Sainsbury’s/ Asda tie-up



The Competition and Markets Authority (CMA) has blocked the combination between Sainsbury’s and Asda, setting a low threshold for intervention.  This decision suggests that future mergers between the Big Four UK supermarkets chains will face significant competition hurdles at both local and national level.

The CMA’s final report largely confirmed its provisional findings, although the number of concerns in local markets was reduced.  Nevertheless, the CMA concluded on a balance on probabilities that the proposed merger between the UK’s second and third largest grocers would lead to a substantial lessening of competition on a local and national level.  The CMA concluded that the transaction would lead to increased prices, reductions  in the quality of products available and negative effects in online shopping where customers would likely face higher process and fewer delivery options.

In previous grocery retail mergers, the CMA has largely focused on the impact of competition in local markets.  Here the CMA has sustained a national theory of competitive harm which it found could not be remedied by divestiture of stores in those local markets where the parties overlap. 

Further, the CMA did not find that the promise of £1 billion price reductions was sufficient to offset the concerns it had identified and was too vague and difficult to verify. The efficiencies claimed needed to be much bigger and clearly substantiated to have changed the CMA’s conclusions.





https://www.gov.uk/government/news/cma-blocks-merger-between-sainsburys-and-asda

Court of Appeal allows appeal in MasterCard collective damages action

Court of Appeal allows appeal in MasterCard collective damages action

The Court of Appeal has allowed an appeal against a Competition Appeal Tribunal (CAT) ruling that refused an application for a collective proceedings order (CPO) to bring opt-out collective proceedings in a damages claim against MasterCard.  The CPO application was remitted to the CAT for re-hearing.

The CAT did not consider that that the claims were eligible for inclusion in collective proceedings as they did not raise common issues relating to the overcharge passed on to individual consumers.

The Court of Appeal ruled that there was no legal requirement to assess an aggregate award through a calculation of individual loss.  The Court stated that pass-on to consumers generally satisfies the test of commonality necessary for certification.

The Court considered that the CAT had imposed too strict a standard at the certification stage and that the proposed class representative should be required to do no more than demonstrate that he has a real prospect of success.

Further, the Court held that there is no requirement for total damages to be distributed according to the compensatory principle as the CAT had required.

Walter Hugh Merricks CBE v MasterCard Incorporated & Ors [2019] EWCA Civ 674