Court of Justice FIFA and UEFA Rulings: Super League ban and ‘home grown’ rules

 

 

Court of Justice FIFA and UEFA Rulings: Super League ban and ‘home grown’ rules  

The European Court of Justice has delivered a series of much awaited rulings on the compatibility with EU competition law of rules imposed by football associations FIFA and UFEA.

The Court issued a preliminary ruling stating that rules imposed by FIFA and UEFA forcing any new interclub football project to seek their approval lacked a framework to ensure they are transparent, objective, non-discriminatory and proportionate.  The Court therefore held that the associations were abusing their dominant position when they arbitrarily banned clubs from forming a European Super League.  The associations' rules on approval, control and sanctions also constitute "by object" infringements of Article 101(1) of the TFEU, as well as unjustified restrictions on the freedom to provide services.

In a separate ruling on UEFA rules, the Court found that a rule requiring football teams to include a least eight locally-trained or “home-grown” players could restrict competition. However, it will be for the national court to determine whether those rules restrict competition as a result of their very object or because of their actual or potential effects.  The Court also considered that the rules in question may give rise to indirect discrimination, based on nationality, against players coming from other member states.  In both scenarios, it remains possible for UEFA and the URBSFA to demonstrate that those rules nevertheless encourage recruitment and training, and that they are proportionate to that objective.

European Superleague Company SL v Unión de Federaciones Europeas de Fútbol (UEFA) and Fédération internationale de football association (FIFA) (Case C-333/21) ECLI:EU:C:2023:101

UL, SA Royal Antwerp Football Club v Union royale belge des sociétés de football association (URBSFA) ASBL (C-680/21) ECLI:EU:C:2023:1010

CMA invites comments on Microsoft AI partnership

 

The Competition and Markets Authority (CMA) has published an invitation to comment on a partnership arrangement between Microsoft Corporation (Microsoft) and OpenAI, Inc (OpenAI).

Microsoft has a long-term, multi-billion partnership with OpenAI.  As part of the arrangement Microsoft and OpenAI can independently commercialise resulting AI technologies and Microsoft is the exclusive provider of cloud services to OpenAI.

In the wake of a chaotic week for OpenAI between Sam Altman’s firing and re-hiring as CEO, the CMA notes that there have recently been developments in the governance of OpenAI, some of which involved Microsoft.

It is, therefore, considering whether it is or may be the case that the Microsoft/OpenAI partnership, or any changes to that partnership, have resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002.

If the CMA finds that as relevant merger situation exists, it will examine whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the UK for goods or services.

The CMA invites comments by 3 January 2024, in advance of launching a potential formal Phase 1 merger investigation.

M&A involving generative AI could lead competition authorities to investigate these transactions. In a dynamic market, markets may be more difficult to define and effects more challenging to anticipate.

The development is timely following my appearance yesterday at a ThoughtLeaders4 Disputes | TL4D webinar on the intersection of generative AI, law, and education! OpenAI's ChatGPT is stirring discussions among legal professionals.

https://www.gov.uk/government/news/cma-seeks-views-on-microsofts-partnership-with-openai

CAT rules in CMA warrant application

 

The Competition Appeal Tribunal has granted the Competition and Markets Authority a warrant to enter and search business premises for the purposes of an investigation under section 25 of the Competition Act 1998.  The CAT refused to grant the warrant in relation to domestic premises.

This was the first time that the CMA made an ex parte and without notice for a UK-wide warrant.  The CAT also refused an application by the CMA that the judgment should not be published.

The CAT was satisfied that the CMA had reasonable grounds to suspect an infringement, for the purposes of section 25 of the Competition Act.

The CAT was further satisfied that there were reasonable grounds for suspecting that there were on the premises identified by the CMA documents falling within the CMA’s powers under section 26 of the Competition Act.

In relation to the business premises, the CAT was satisfied that that there was a risk that the documents would not be produced but would be concealed, removed, tampered with or destroyed, such that the requirements of section 28 of the Competition Act were met. However, in relation to the domestic premises of an individual, the CAT concluded that this was not the case. 

Cases: 1611/13/12/2023 (W), 1612/13/12/2023 (W), 1613/13/12/2023 (W) and 1614/13/12/2023 (W).

Competition and Markets Authority v Another (Judgment (Application for Warrants) [2023] CAT 62

Court of Appeal reinstates CMA’s market investigation into Google and Apple’s mobile ecosystems

 

Court of Appeal reinstates CMA’s market investigation into Google and Apple’s mobile ecosystems

The Court of Appeal has upheld an appeal by the Competition and Markets Authority against a Competition Appeal Tribunal (CAT) ruling which quashed the decision of the CMA to make a market investigation reference into the supply of mobile browsers and the distribution of cloud gaming services in the UK.

The case has its origins in the CMA’s final report on a market study in June 2022, where the CMA consulted on making the market investigation reference. The market investigation reference was made on 22 November 2022.

The Court of Appeal held that the CAT had erred in its interpretation of the Enterprise Act in quashing the decision to make a market reference. The section 131B time limits apply to the consultation process within a market study and do not limit the CMA's standalone power to make a market investigation reference under section 131 of the Enterprise Act.

The Court of Appeal rejected the CAT’s interpretation of the CMA’s jurisdiction to make a reference, stating that this could have “serious consequences”, entailing that the CMA does not have jurisdiction to investigate Apple or Google for similar conduct in later years following a market study. The Court of Appeal said that there is “no overarching principle that an undertaking is entitled to be investigated once, and once only”.

Competition and Markets Authority v Apple Inc and others [2023] EWCA Civ 144

CMA announces reform plans for merger review process

 

The Competition and Markets Authority is consulting on changes to its mergers jurisdictional and procedural guidance (CMA2).

The main changes include:

·        Opportunities for merger parties to engage directly with the CMA early in the process.

·        An "interim report" will be published earlier in the process, replacing the provisional findings report and setting out the CMA's provisional assessment of the impact of the merger on competition.

·        Earlier without prejudice remedy discussions between the CMA and merger parties.

The issues statement will be abandoned and, instead, the CMA will invite submissions on the Phase 1 decision. greater opportunities for economic experts to engage with the CMA's experts.

There are other changes to the revised guidance to reflect developments in the CMA's practice and in case law. These mainly relate to confidentiality and disclosure.

While the reforms reflect some important streamlining of the CMA’s merger review process, the CMA has declined calls to grant merger parties full access to evidence provided by third parties.

The CMA has also published for consultation a draft of the proposed new Phase 2 Remedies Form and a revised draft Template Waiver.

A revised draft Merger Notice is also available for comment.

Interested parties should provide responses to the consultation by 8 January 2024.

https://assets.publishing.service.gov.uk/media/655788a4046ed400148b9b2f/Consultation_document_Nov23.pdf

National Security and Investment Act – Call for Evidence

 

 

On 13 November the Cabinet Office issued a call for evidence in relation to the National Security and Investment Act 2021 (NSIA) to collect views on how the national security and investment regime can be more business friendly.  It also sought views on how the provisions could be refined while protecting national security.

Specifically, the call for evidence is designed to identify views on:1) the impact of the NSI regime on businesses and investors, 2) whether the scope and requirements of the NSI regime are proportionate and effective, and 3) how stakeholders understand the NSI regime.

The NSIA replaced the Enterprise Act in January 2022.  It allows the government to scrutinise and intervene in acquisitions in 17 sensitive industries that could harm the UK’s national security.  The government has cleared around 93% of transactions it has reviewed within 30 working days, while it has remedied or prohibited 17 deals.

There are concerns that the NSI regime may be cast too widely; not least since the rules can even require companies with no UK operations to notify investments.

The call for evidence may be regarded as a natural evolution of a maturing regime. The rules require a review within three years of implementation so the timing of the  consultation is not surprising.

Responses to the call for evidence should be submitted by 15 January 2024.

 

https://www.gov.uk/government/calls-for-evidence/call-for-evidence-national-security-and-investment-act

CAT ruling in collective proceedings against Apple in battery throttling case

The Competition Appeal Tribunal has granted, subject to funding matters, a collective proceedings order (CPO) brought by Mr Justin Gutmann to start collective proceedings under section 47B of the Competition Act 1998 against Apple Inc., Apple Distribution International Limited, and Apple Retail UK Limited (together, Apple).

The application relates to alleged breaches by Apple of Article 102 TFEU prior to 31 December 2020.  The application claims that the abuse derives from Apple's lack of transparency in failing to inform consumers of issues surrounding battery health of their iPhones and the resultant impact on the performance of their iPhone, such that Apple would have been required to compensate them.

The CAT first rejected Apple's strike-out application, which submitted that Mr Gutmann had not established any abuse on the facts.

However, the CAT found that there was a reasonable prospect of Mr Gutmann showing at trial that the negative impact on the performance of affected iPhones was sufficiently material.

The CAT also found that the methodology being advanced by Mr Gutmann offered a realistic prospect of establishing loss on a class wide basis if he established relevant facts at trial. In addition, it was just and reasonable that Mr Gutmann act as the class representative in these proceedings.

However the claimants have informed the CAT they may need to alter their funding arrangements following the Supreme Court’s recent ruling in PACCAR in July, 2023.

The claimants have also stated that Apply has settled a similar class action in the US in August 2023 for approximately USD500 million.

Mr Justin Gutmann v Apple Inc and others, judgment [2023] CAT 67

Collective Competition Actions: Challenges for Case and Costs Management

It is timely to reflect on the mounting scale, complexity and scope of collective actions in competition cases. I have just had an article published in Issue 10 of TL4’s Disputes Magazine where I discuss how the ongoing Interchange Fees and Trucks Litigation cases and others will continue to pose challenges for case management in the Competition Appeal Tribunal. I also note that some funding agreements will need to be revised to reflect the Supreme Court’s recent ruling R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28. Navigating the future landscape will require a delicate balancing exercise between proportionality, fairness and reasonable cost.

This article was first published with ThoughtLeaders4 Disputes Magazine.

Collective Competition Actions

CMA gives green light to reworked Microsoft-Activision Blizzard merger

 

The Competition and Markets Authority (CMA) has approved Microsoft Corporation’s acquisition of the major part of Activision Blizzard, Inc (Activision), excluding Activision’s cloud streaming rights outside of the EEA.

In April 2023, the CMA prohibited Microsoft’s proposed acquisition of the entirety of Activision. The CMA opened a new Phase 1 investigation in August 2023.

The reworked transaction involves Activision's global cloud streaming rights (outside the EEA) for all current and future Activision PC and console games released during the next 15 years (the Activision Streaming Rights), being divested to Ubisoft Entertainment SA, pursuant to a divestment agreement between Activision and Ubisoft, immediately before Microsoft acquires Activision.

The CMA is satisfied that the new deal will stop Microsoft from “locking up competition in cloud gaming as this market takes off, preserving competitive prices and services for UK cloud gaming customers.”   

This has been a high-profile transaction, attracting the criticism of commentators who challenged whether the UK’s merger control regime was suited to handle large tech mergers in a dynamic environment.  It was then subject to a stayed appeal before the UK’s Competition Appeal Tribunal and where Microsoft has made the case for the CMA to depart from its original order. The case culminated in a new Phase I probe to assess Microsoft’s restructured proposal.

Whether we will see a similar saga play out in the future remains to be seen. It may be conjectured whether the restructured deal proposal might have been offered earlier to avert the costs, delay and uncertainty that has prevailed in the interim.

But it is not all over (yet).  The transaction has yet to be approved by the Australian Competition and Consumer Commission.

https://www.gov.uk/government/news/microsoft-concession-a-gamechanger-that-will-promote-competition

 

 

CMA investigation into freelance and employed labour in the production of TV content

 

The Competition and Markets Authority (CMA) is investigating suspected violations of competition law in relation to the purchase of services from freelance providers, and the employment of staff, who support the production, creation and/or broadcasting of television content in the UK. The probe, announced on 12 October, excludes sport content.

The CMA has announced that it suspects infringements of the Chapter I prohibition of the Competition Act 1998 by a number of organisations.  These include at least, the British Broadcasting Corporation, Hartswood Films Limited, Hat Trick Productions Limited, ITV PLC, Red Planet Pictures Limited, Sister Pictures Limited and Tiger Aspect Productions Limited.

The investigation is at a preliminary stage and the CMA  expects to complete its information gathering by March 2024. 

The CMA is separately investigating suspected breaches of the Chapter I prohibition in relation to the purchase of freelance services and the employment of staff supporting the production and broadcasting of sports content in the UK. This other investigation was opened in July 2022.

The CMA has not set out its exact theory of harm.  However, last year The Financial Times and Daily Telegraph reported that the sports content investigation is examining whether broadcasters colluded over how much they paid freelance sports production staff.

https://www.gov.uk/cma-cases/suspected-anti-competitive-behaviour-relating-to-freelance-and-employed-labour-in-the-production-creation-and-slash-or-broadcasting-of-television-content-excluding-sport

Competition and Markets Authority investigation into cloud services

 Competition and Markets Authority investigation into cloud services

This morning I was interviewed on BBC’s World Business Report about Ofcom’s probe into practices and features that could limit competition in cloud infrastructure services. The regulator was expected to refer the market to the Competition and Markets Authority to examine the strength of competition and any features that could limit innovation and growth. Shortly after the broadcast was aired, the CMA launched its investigation as expected.

The referral comes on the back of a market study where Ofcom found that there are two leading providers of cloud infrastructure services in the UK: Amazon Web Services (AWS) and Microsoft who have a combined share of 60-70% and where Google is their closest competitor with a share of 5-10%.

Further details can be found on the CMA's case page here: https://www.gov.uk/government/news/cma-launches-market-investigation-into-cloud-services

CMA clears £1.2bn deal between healthcare tech providers

 

 

The Competition and Markets Authority has approved the acquisition of EMIS Group Plc by UnitedHealth Group Incorporated (UH).

EMIS supplies data management systems to the NHS, including the electronic patient record system used by the majority of NHS GPs. Optum, part of UH, currently supplies software used by GPs when prescribing medicines

The CMA found during its Phase 1 investigation that there was a realistic prospect of a substantial lessening of competition (SLC) as a result of partial foreclosure in the supply of medicines optimisation (MO) software and population health management (PHM) services in the UK.

In its Phase 2 investigation the CMA found that although EMIS holds a strong market position in the supply of electronic patient record systems the merger may not be expected to result in a SLC.

The CMA did not consider that the merged entity would have the incentive to engage in partial foreclosure in the supply of MO software by restricting access to EMIS's electronic patient record system..

The merged entity would not have the ability to partially foreclose Optum's PHM services rivals by restricting access to the primary care data held by EMIS.

 

https://www.gov.uk/government/news/cma-clears-nhs-healthcare-tech-deal

European Commission launches online database on content moderation decisions

 

 

The European Commission has launched its Digital Services Act (DSA) Transparency Database.

 

Article 17 of the DSA requires hosting services providers to provide a service recipient a "statement of reasons" explaining their decision to remove or disable access to specific items of information provided by the recipient.  The statement of reasons must be clear and easily comprehensible and as precise and specific as reasonably possible, so as to reasonably allow the service recipient to effectively exercise their redress options.

 

Article 24(5) of the DSA obliges the European Commission to establish a publicly accessible and searchable database, which will store providers' statements of reasons for the removal of information and other content moderation decisions. Providers must submit their decision and statement of reasons to the Commission's database in a standard format, without undue delay after taking a decision.

 

Only Very Large Online Platforms, as designated under the DSA, are required to submit data to the database. Other providers of online platforms, with the exception of micro and small enterprises, will have to submit data on their content moderation decisions from 17 February 2024.

The aim of the database is to achieve real-time updates. The Commission launched a consultation on the format of the database in June 2023.

https://digital-strategy.ec.europa.eu/en/news/digital-services-act-commission-launches-transparency-database

Department for Business and Trade statement on PACCAR

 

Department for Business and Trade statement on PACCAR

The Department for Business and Trade issued statement in response to the Supreme Court's decision in R (on the application of PACCAR Inc) v Competition Appeal Tribunal [2023] UKSC 28.

By a 4 to 1 majority, the Supreme Court held that litigation funding agreements (LFAs), where the funder plays no part in the conduct of the litigation but their remuneration is based on a percentage of any damages recovered, are damages-based agreements (DBAs).  As such they will be unenforceable unless they comply with the relevant regulatory regime for DBAs.

This situation has led many observers to speculate whether legislative change may be forthcoming as only this would seem to reverse the position.

The Department of Business and Trade has stated briefly that it "is aware of the Supreme Court decision in Paccar and is looking at all available options to bring clarity to all interested parties".  The statement is striking in its brevity.

2022/23 has been important for the development of collective private enforcement actions for breach of competition law.  Some funding agreements will need to be revised to reflect the Supreme Court’s recent ruling.  Navigating the future landscape will require a delicate balancing exercise between proportionality, fairness and reasonable cost.

 

https://www.gov.uk/government/news/department-for-business-and-trade-statement-on-recent-supreme-court-decision-on-litigation-funding

CMA makes final prohibition in order in Microsoft-Activision merger and opens a Phase 1 investigation into restructured deal

The CMA has made a final order prohibiting the anticipated acquisition by Microsoft Corporation of Activision Blizzard, Inc.

In April 2023 the CMA concluded on its final report that the acquisition may be expected to result in a substantial lessening of competition in the market for the supply of cloud gaming services in the UK.

The CMA has not been satisfied that any change in circumstances warrants a different conclusion to that reached in its final report.  Accordingly, its 22 August 2023 Order prohibits, except with the prior written consent of the CMA, Microsoft from acquiring an interest (as a means of conferring control) in Activision or any entity holding an interest in Activision for 10 years.  Activision is subject to the same prohibition in relation to Microsoft.

Meanwhile Microsoft and Activision have entered into a new, restructured transaction, under which Microsoft will not acquire cloud streaming rights for existing Activision PC and console games, or for new games released by Activision during the next 15 years (this excludes the EEA.  Instead, the rights will be divested to Ubisoft Entertainment SA (Ubisoft) prior to Microsoft's acquisition of Activision

The CMA has said that the restructured transaction is “substantially different from what was put on the table previously”.

The CMA has opened a new Phase 1 investigation to examine the new deal. The CMA invites comments by 1 September 2023.

The unfolding saga of events in this case is not what many observers expected.  It seems that the revised deal is more of a ‘fix-it-first’ remedy with a prior divestment to a named third party than a revised transaction structure as such.  What matters is whether this will be sufficient to address the concerns raised by the CMA in the final report, principally around vertical foreclosure in cloud streaming services.

 

https://www.gov.uk/government/news/microsoft-submits-new-deal-for-review-after-cma-confirms-original-deal-is-blocked

CMA gives unconditional clearance to Broadcom’s acquisition of VMware

 

The Competition and Markets Authority (CMA) has cleared Broadcom’s acquisition of VMware without remedies.

Broadcom is a US technology company that designs, manufactures and supplies a broad range of hardware and infrastructure software solutions.

VMware supplies virtualisation software that is mainly used either in data centres or in private clouds.

In its in-depth investigation the CMA examined whether the merged entity would be able to harm competing manufacturers of storage adapters and fibre channel switches by reducing interoperability between VMware's virtualisation software and competitors' hardware and switches.

The CMA confirmed its provisional findings that any potential financial gain to Broadcom and VMware of reducing interoperability of rival products would not outweigh the potential financial cost in terms of lost sales.

The European Commission conditionally cleared the transaction in July after Broadcom agreed to commitments allowing competitors access to VMware’s cloud computing software. The transaction has been cleared in Australia, Brazil, Canada, Israel, South Africa and Taiwan.  The US Federal Trade Commission has yet to conclude its own in-depth investigation.

The CMA’s decision may be viewed as a welcome antidote to concerns that its merger review procedure, in the wake of its prohibition decision in Microsoft/Activision, is insufficiently flexible to deal with tech mergers.

https://www.gov.uk/cma-cases/broadcom-slash-vmware-merger-inquiry

No equitable jurisdiction to award compound interest in all fraud cases

 

No equitable jurisdiction to award compound interest in all fraud cases

The Court of Appeal has dismissed an appeal against the strike out of part of a "follow-on" damages claim concerning an infringement of EU competition law in the market for LCD panels. The Court ruled that there is no basis to invoke the equitable jurisdiction to award compound interest.  The ruling is a set-back for LCD cartel claimants – here all in liquidation.

The equitable jurisdiction to award compound interest is not available in every case of fraud. The Court ruled that such jurisdiction is available only where the defendant has retained the claimant's funds and used them for their own benefit.

Moreover, the Court found that even if there was such jurisdiction to expand the scope of damages, it would not be appropriate in this case.  The claimants could recover compound interest at common law post-insolvency, if they could plead and prove loss.  In this case the claimants accepted that they had not suffered such losses, other than being kept out of the damages suffered pre-insolvency.

A five-week trial is scheduled for October 2023.

Granville Technology Group Ltd (in liquidation) and others v LG Display Company Ltd and another [2023] EWCA Civ 980

Competition Appeal Tribunal upholds CMA’s pharmaceuticals excess pricing decision

 

 

Competition Appeal Tribunal upholds CMA’s pharmaceuticals excess pricing decision

The Competition Appeal Tribunal (CAT) has ruled that the CMA was correct in its July 2021 decision finding infringements of the Chapter II prohibition of the Competition Act 1998 by Advance Pharma and its parent companies in relation to the supply of a thyroid drug, liothyronine.

The CMA had that Advanz had abused its dominant position by charging excessive prices for supplying 20mcg liothyronine tablets, between 2009 and 2017. The CMA found that the prices for the packs increased by 1,110% from £20 in 2009 to £248 in 2017.  The CMA imposed total fines of over £100 million, of which Advanz Pharma was liable for over £40 million.

The CAT upheld the CMA’s findings on infringement.  It dismissed all the appellants’ arguments that that the CMA had erred in its assessment using a costs-plus methodology and that the CMA should have used alternative comparators in determining that the prices charged were unfair.

The CAT also concluded that there was no error in the CMA’s assessment that there was no objective justification for the price increases and that the purpose of the pricing was to exploit the lack of regulatory and competitive constraints, resulting in a significant and adverse impact on pricing to the NHS.  The CAT reject the appellants’ submissions that there had been acquiescence by the NHS in the price increases.

The CAT rejected most of the challenges to the CMA’s calculation of penalties but concluded that in this case there was no basis to impose an uplift for deterrence.  It therefore reduced the fine imposed on Hg Capital to £6.2 million and on Cinven to £37.1 million.   Advanz Pharma received no further reduction as its fine was already reduced by the statutory cap.

The judgment is likely to clear the ground for the NHS to seek damages.

Hg Capital LLP, Cinven Capital Management (V) General Management Limited and others and Mercury Pharmaceuticals Limited and others v Competition and Markets Authority [2023] CAT 52

Supreme Court rules that litigation funding agreements are ‘damages based agreements

 

Supreme Court rules that litigation funding agreements are ‘damages based agreements’

By a 4 to 1 majority, the Supreme Court has upheld an appeal by truck manufacturer DAF challenging the litigation funding agreements (LFAs) in two separate follow-on collective claims against members of the EU trucks cartel.  The judgment renders those arrangements unenforceable until certain conditions are met.

At the heart of this case is the definition of a damages-based agreement (DBA), derived from one legislative context  - the Compensation Act 2006 (the CA 2006) - and its use in a different legislative context (section 58AA of the Courts and Legal Services Act 1990 (CLSA 1990)).

Section 58AA(1) and (2) CLSA 1990 provide that a DBA will be unenforceable unless certain conditions are satisfied. Shortly after the insertion of section 58AA, the Damages Based Regulations 2013 (the "DBA Regulations 2013") came into force. These set out further requirements which must be satisfied if a DBA is to be enforceable. It is accepted that the LFAs in this appeal would not satisfy these conditions.

The relevant part of the definition of DBA in this appeal, pursuant to section 58AA(3), is whether the LFAs involve the provision of “claims management services".

The Court held that claims management services are capable of covering LFAs when “read according to their natural meaning”.

As a result, the claimants’ funding arrangements fall under the scope of the DBA Regulations 2013 since damages-based funders provide “client management services” and would be paid based on how much the tribunal awarded as damages.

The judgment has been seen as a setback to the burgeoning litigation funding industry.  Existing and future collective competition claims within the scope of the judgment will need to structure their funding arrangements to be compliant.

It may be questioned whether LFAs where the funder’s return is not linked to the damages awarded will be immune from the same strictures.  However the court noted that the 2013 Regulations defined “claims management services” as providing advice “or other services in relation to the making of a claim” and gave this a wide construction.                              

Early reactions to the judgment suggest, however, that the judgment – though unwelcome – will not sound a death knell to the growing body of funded collective competition law claims.  Funding agreements will need to be revised to reflect the ruling but certain of the more prominent funders in the industry have reacted to say the judgment will not stem their appetite to fund a claim with merit. 

While the highest court in the land has ruled on the issue, this may not be the end of the matter. But reversing this position would require legislative change.

R (on the application of PACCAR Inc and others) (Appellants) v Competition Appeal Tribunal and others (Respondents) [2023] UKSC 28

Microsoft to face new European Commission investigation in to bundling of Teams

 

Microsoft to face new European Commission investigation in to bundling of Teams

As the European Commission and other competition and regulatory bodies intensify their interest in the technology sector, Microsoft is facing a new antitrust probe into bundling of its Office products with its Teams services.

Media reports, including in the Financial Times, have suggested that a formal probe could be launched as early as the coming week, if suitable remedies cannot be found.

The Commission’s antitrust concerns follow a complaint first made by Slack in 2020, now part of Salesforce.  German supplier Alfaview has raised similar concerns. The complaints allege that Microsoft has abused its dominant position by bundling of the two services – Office and Microsoft Teams – such that rival suppliers of video conferencing services cannot compete on the merits where users have the bundle of services automatically installed on their devices.

This is not the first time that Microsoft has faced antitrust scrutiny over bundling practices. 

The General Court’s 2007 decision upheld the Commission’s 2004 decision that Microsoft had unlawfully tied its Media Player (“WMP”) with the Windows Operating System (WOS) thereby foreclosing innovation and limiting consumer choice. The case involved technical tying through the technical integration of one product (WMP) into another (WOS).  Four years after the Commission’s 2004 decision, it fined Microsoft EUR899 million for failure to comply with the part of the decision that required Microsoft to licence its interoperability information for a reasonable fee.

A second major competition law probe in relation to Microsoft concerned an allegation of foreclosure contrary to Article 102 on the basis that Microsoft was tying its browser (Internet Explorer) to the WOS. Rather than the case being resolved with an infringement decision under Article 7 of Regulation 1/2003, Microsoft offered commitments under Article 9.  These involved commitments to (1) make available a mechanism in its Windows 7 (and subsequent) operating systems within the EEA enabling Internet Explorer to be turned off and on; and (2) to distribute a software update to EEA users of WindowsXP, Windows Vista and Windows 7 to introduce a Choice Screen to give consumers a choice of competing web browsers.  No fine was imposed to resolve the Commission’s investigation but in 2013 Microsoft was fined EUR561 for violating its commitments.

Microsoft is understood to be in discussions with the Commission to seek to resolve the pending investigation.

Case COMP/C-3/37.792 Microsoft, decision of 24 March 2004

Case T-201/04 Microsoft Corporation v Commission [2007] ECR II-3601

Case COMP/39.530 — Microsoft (Tying), decision of 16 December 2009

US Court allows Microsoft/Activision transaction to proceed while UK appeal is on hold

 

US Court allows Microsoft/Activision transaction to proceed while UK appeal is on hold

A US Court has refused a request by the Federal Trade Commission (FTC) to temporarily restrain Microsoft’s acquisition of Activision.

Meanwhile, the merging parties are understood to be renewing discussions with the UK Competition and Markets Authority (CMA) regarding a possible solution.

The US District Court for the Northern District of California rejected the FTC’s claim that the acquisition by Microsoft of Activision would provide it with the incentive to denigrate the quality of games such as Call of Duty.  In refusing to grant the preliminary injunction, the judge concluded that there would be “no foreclosure of Call of Duty” if the deal is not immediately blocked. The judge found “the merger will enhance, not lessen, competition in the cloud-streaming market.”

The judge has made some modifications to the temporary restraining order to expire on 14 July unless the FTC obtains a stay pending an appeal to the US Court of Appeals for the Ninth Circuit. The deadline to close the transaction is currently 18 July. 

In April 2023 the CMA had prohibited the transaction outright finding that no remedies could be found to avert the substantial lessening of competition that it found.  The UK’s Competition Appeal Tribunal was due to start hearing an appeal against that decision on 28 July.  In a turn of events following the US Court judgment, the CMA has agreed to a stay of the appeal of its prohibition decision. This is intended to allow for discussions to be renewed regarding possible structural fixes.

Case No. 23-cv-02880-JSC:  https://storage.courtlistener.com/recap/gov.uscourts.cand.413969/gov.uscourts.cand.413969.305.0_4.pdf

Seven potential gatekeepers submit notifications under EU Digital Markets Act

 

Seven potential gatekeepers submit notifications under EU Digital Markets Act

The European Commission has received notifications from seven companies who consider that they qualify as "gatekeepers" under Article 3 of Regulation 2022/1925 on contestable and fair markets in the digital sector (Digital Markets Act (DMA)).  

The Commission received notifications from Alphabet, Amazon, Apple, ByteDance, Meta, Microsoft and Samsung.  More notifications are likely to follow.  The Commission could also fine companies up to 1% of their global revenues for not complying with the notification obligation or for providing incorrect or misleading evidence in the designation process. The  Commission can also designate companies that do not meet the quantitative criteria as gatekeepers following a market study.

The DMA became fully applicable on 2 May 2023.  It sets out rules that designated gatekeepers need to comply with, including prohibiting gatekeepers from engaging in certain practices.

Potential gatekeepers that meet the thresholds established in the DMA had until 3 July 2023 to notify their core platform services to the Commission.   

The Commission has 45 working days (until 6 September 2023) to make an assessment as to whether these undertakings meet the thresholds and to designate them as gatekeepers.

Following their designation, gatekeepers will have six months to comply with the requirements in the DMA, at the latest by 6 March 2024.

https://digital-markets-act.ec.europa.eu/potential-gatekeepers-notified-commission-and-provided-relevant-information-2023-07-04_en

CAT rejects CMA’s request to adjourn hearing of Microsoft's appeal against decision to prohibit Microsoft/ Activision Blizzard merger

 

CAT rejects CMA’s request to adjourn hearing of Microsoft's appeal against decision to prohibit Microsoft/ Activision Blizzard merger

The Competition Appeal Tribunal has dismissed a request by the Competition and Markets Authority for the adjournment of the substantive hearing of the application brought by Microsoft Corporation, for review of the CMA's final report on the anticipated merger between Microsoft and Activision Blizzard Inc.

Following a phase 2 investigation the CMA concluded  that only the prohibition of the merger would be an effective and proportionate remedy to address the competition concerns identified.

The CAT listed the substantive hearing to begin on 28 July 2023. The CAT considered that a delay to October 2023, as requested by the CMA, would not appropriately reflect the need for and public interest in the swift resolution of Microsoft's application.  The CAT did not accept that the CMA's legal team would not be able to prepare itself in time.

 

Case No. 1590/4/12/23 Microsoft Corporation v Competition and Markets Authority: Ruling on application for adjournment [2023] CAT 43

 

https://www.catribunal.org.uk/sites/cat/files/2023-06/2023.06.29_1590_Microsoft_Ruling_Adjournment_Final.pdf

Mobile Merger: Is Three Enough?

 

Mobile Merger: Is Three Enough?

 

A merger has been announced between Vodafone and the owner of Three UK.

 

The firms plan to merge their UK-based operations.  The transaction would if completed give them around 27 million customers making it the biggest mobile network in the UK behind Virgin Media O2.

 

The transaction has yet to be approved by regulators, and it can be expected that the Competition and Markets Authority will scrutinise it closely.

 

The merger revisits the question of how many mobile operators are needed to maintain competitive markets.  The UK has a history of aggressive mobile competition prompting commentators to speculate that if a four-to-three merger cannot be approved here, then the hopes for similar consolidation in the mobile sector may now be more limited.  There are however already precedents for allowing consolidation from four to three players in other countries, for example the merger between KPN and Telfort in the Netherlands. 

 

The CMA is likely to look at the impact on consumer choice and prices, as well as the implications for development of future infrastructure, including 5G. A further area concerns the impact on mobile virtual network operators, or “MVNOs” to the extent that the transaction would reduce the number of operators effectively willing to host MVNOs on their networks.

 

It’s been argued that the merger would in fact be efficiency-enhancing leading to much needed investment in 5G in the sector.  In the current economic climate, it is perhaps understandable that merging parties would lay claim to such efficiencies to support a more moderated view of a merger between the larger players.  It is also understandable that regulatory authorities will continue to want to be assured that such efficiencies are clearly substantiated by robust economic evidence and argument.

CMA increases the value of informant rewards

 

CMA increases the value of informant rewards

The Competition and Markets Authority (CMA) has increased the maximum value of financial rewards that it will pay to informants who provide the CMA with information about a cartel from £100,000 to £250,000.

In 2008 the Office of Fair Trading introduced a policy of paying financial incentives of up to £100,000 to people who provide information about illegal cartels.  The CMA continued this policy.

The grant of an award and its amount is at the discretion of the CMA. The CMA has stated that it will pay a reward if the information concerned is significant in nature and leads to enforcement action by the CMA against those involved in the cartel. 

When considering the amount of the reward the CMA will have regard to factors such as the value of the information, the amount of harm that the information has helped to stop, and the effort and risk taken by the informant in providing the information.

Under the CMA’s leniency policy a company or individual which confesses its involvement in a cartel can gain complete civil and criminal immunity from sanctions provided certain conditions are met.  The CMA does not consider that an individual in such circumstances should ordinarily also gain a financial reward.

 

https://www.gov.uk/government/news/blowing-the-whistle-on-cartels

European Commission conditionally approves Microsoft’s acquisition of Blizzard

 

European Commission conditionally approves Microsoft’s acquisition of Blizzard

The European Commission has approved the acquisition of Activision Blizzard by Microsoft, subject to conditions.

The companies develop and publish games for PCs, consoles, and mobile devices and distribute games for PCs. Microsoft distributes games for consoles and offers the Xbox console.

Following its Phase II investigation, the Commission found that Microsoft would not be able to harm rival consoles and rival multi-game subscription services.

The Commission did, however, conclude that post-merger, there was a risk of foreclosure if Microsoft made Activision's games exclusive to its own cloud game streaming service and withheld them from rival cloud game streaming providers.  This presented a further risk that Microsoft could also strengthen the position of Windows in the market for PC operating systems.

The Commission's decision was perhaps predictable when viewed against a more finely tuned appraisal of cloud gaming streaming ecosystem competition, and what it describes as “comprehensive licensing” commitments.

It is not an unconditional clearance.  The Commission has accepted 10-year licensing commitments to address the competition concerns identified in the market for the distribution of PC and console games via cloud game streaming services.

Microsoft has agreed to grant a free license to consumers in the EEA that would allow them to stream, via any cloud game streaming services of their choice, all current and future Activision Blizzard PC and console games for which they have a license. A corresponding free license will be granted to cloud game streaming service providers to allow EEA-based gamers to stream any Activision Blizzard's PC and console games.

The clearance under the EU merger regulation is in stark contrast to the CMA’s outright prohibition of the merger in April.  Meanwhile the FTC has a pending challenge to the merger in the USA.

While the CMA and the European Commission apply very similar analytical frameworks, their views on the impacts on their own markets are coloured by the results of the market test and impacts on competition they consider to be important.  The Commission found that even without this transaction, Activision would not have made its games available for multi-game subscription services.

The Commission’s decision is unlikely to stop the CMA’s current hawkish enforcement stance in merger control which shows it is prepared to tread its own path.

Whether the UK decision will scupper the whole deal remains to be seen as an appeal is understood to be underway. However, the parties and their advisers will no doubt be taking a long hard look at the global implications of different approaches of the merger authorities to a deal with global and complex impacts.

https://ec.europa.eu/commission/presscorner/detail/en/ip_23_2705

Competition and Markets Authority review of AI foundation models

 

Competition and Markets Authority review of AI foundation models

The CMA has launched a review of Artificial Intelligence foundation models to better understand the competition and consumer protection implications.

Over the past two decades, the field of artificial intelligence or “AI” has been reshaping virtually every industry founded on the idea that machines could be used to simulate human intelligence through so-called “machine learning” or “ML”.  This evolution brings with it a number of benefits, including improvements in economic outcomes, enhanced human decision-making, increased levels of productivity and potential solutions for complex and pressing economic and social problems.  At the same time, AI and ML present a number of potential challenges that will need to be confronted if the full benefits are to be realised.  Not least, there is a challenge in ensuring that policy, laws and regulations governing systems enabled by AI are relevant, adequate and proportionate.

The CMA observes that AI foundation models have the potential to transform much of what individuals and businesses do.

In its March 2023 White Paper on AI regulation, the government asked regulators, including the CMA to consider how to support the innovative development of AI.

The CMA's initial review will examine how the competitive markets for foundation models and their use could evolve.

It will also examine the opportunities and risks for competition and consumer protection, including the impact on competition in other markets.

The CMA invites comments by 2 June 2023.

The CMA expects publish a short report setting out its findings in early September 2023.

https://www.gov.uk/government/news/cma-launches-initial-review-of-artificial-intelligence-models

CMA blocks Microsoft’s acquisition of Activision – a tale of the unexpected

 

CMA blocks Microsoft’s acquisition of Activision – a tale of the unexpected

The UK’s Competition and Markets Authority (CMA) has prohibited Microsoft’s $68.7 billion purchase of Activision Blizzard.

The CMA has found that the transaction may not be expected to result in competition concerns in console gaming services in the UK, but that it may be expected to result in a substantial lessening of competition in cloud gaming services in the UK.

The CMA has decided to block the deal instead of accepting Microsoft’s proposed remedies, stating “significant shortcomings”. According to the CMA, the rejected remedies would be tantamount to requiring the agency to regulate what is the “growing and fast-moving” worldwide cloud gaming sector. Microsoft had proposed to license a set of Activision games to competitors for use in cloud gaming services, but the CMA rejected the proposal. This was mainly because it did not cover different cloud gaming business models and was not fully open to rivals who might want to offer different versions of games other than on the Windows operating system.

This is the second ever CMA prohibition of an acquisition by a major tech giant, following the order to Meta to unwind its acquisition of Giphy.

In the course of the second stage review, the CMA retreated from its initial view that only a divestiture could allay its concerns and focused increasingly on the cloud gaming sector. However the remedy proposals did not go far enough, and the CMA has opposed replacing the pre-merger competitive situation with what it views as ineffective regulation in a dynamic market.

The ban comes about a month before the European Commission is to issue its own findings in its second phase probe. The Commission is currently market testing proposed commitments which also involve licensing. However, other global antitrust authorities, including in South Africa, Brazil, Chile, China and Japan have already cleared the deal, mainly based on licensing commitments.

But this not may be the end of the transaction. Late revisions to the CMA’s provisional findings could form the basis for an appeal.

https://www.gov.uk/government/news/microsoft-activision-deal-prevented-to-protect-innovation-and-choice-in-cloud-gaming

 

Competition Appeal Tribunal will jointly case manage collective actions in maritime carriers cartel action

 

Competition Appeal Tribunal will jointly case manage collective actions in maritime carriers cartel action

 

In a novel judgment on case management, the Competition Appeal Tribunal has published an order in the Mark McLaren Class Representative Limited v MOL (Europe Africa) Ltd and others collective damages action. The CAT has ruled that the McLaren proceedings will be jointly managed as one case together with Volkswagen’s standalone damages action.

The defendants in the claim were addressees of the European Commission's February 2018 decision, under the settlement procedure, establishing a cartel between maritime car carriers.

At this stage the CAT has not yet ruled that the cases raise ubiquitous matters relating to overcharge and pass-on – the overlapping elements of the claims. The CAT noted there was a real likelihood that an Umbrella Proceedings Order would be needed. Smith J said that the respective claimants “inevitably have to advance different and almost certainly inconsistent cases” as to who paid the unlawful overcharge.

The order sets out a timetable for McLaren class representatives and Volkswagen claimants to file and serve relevant documents, witness statements, expert reports and evidence to parties to both proceedings.

The order lists the main trial in the McLaren proceedings for 2025, with a provisional time estimate of 10 weeks, and main trial in the Volkswagen proceedings for 2026.

The ruling shows that the CAT is trying to use its case management powers to avoid inconsistent decisions in cases involving overlapping issues.

https://www.catribunal.org.uk/sites/cat/files/2023-04/2023.04.06_1339_1528%28T%29_Order%20of%20the%20Tribunal%20%28Directions%20to%20trial%29.pdf

European Commission Call for Evidence on revised abuse of dominance guidance

 

European Commission Call for Evidence on revised abuse of dominance guidance

The European Commission is proposing to issue new guidance on the application of Article 102 TFEU to exclusionary abuses of dominance.  The Commission has issued a call for evidence to assist in its work and amended its 2008 guidance on enforcement priorities concerning exclusionary abuses (“2008 guidance”).

The Commission intends that the new guidance will increase legal certainty and bring the guidance in line with recent practice and decisions of the EU Courts.

The Commission seeks evidence by 24 April 2023 with a view to adopting new guidance in 2025.

Prior to finalisation of the new guidance, the amendments to the 2008 guidance clarify that in markets characterised by in particular network effects the Commission may investigate practices by a dominant company which are capable of foreclosing competitors that are not (yet) as efficient as the dominant company.

Furthermore the Commission may investigate cases where a dominant firm imposes unfair access conditions to a particular input even if there is no evidence that such input is indispensable to compete in a relevant market.

The Commission also clarifies that margin squeeze is a separate form of abuse from refusal to supply.

The Commission has also published a DG Competition Policy Brief titled “A dynamic and workable effects-based approach to Article 102 TFEU”.

The amendments are the first major policy statement change in the area of abuse of dominance since the Commission’s 2008 guidance. However, that document was always an unusual statement leading to some ambivalence as to the legal position.  The Commission set out an avowedly economics-based test for its enforcement priorities without this actually being part of the law. It is hoped that the revised guidance as the Commission intends will lead to a less dogmatic and strict application of the tests on anticompetitive foreclosure and as efficient competitor.

https://ec.europa.eu/commission/presscorner/detail/en/ip_23_1911