CMA adopts changes to guidance on duty to refer mergers for in-depth investigation

 

CMA adopts changes to guidance on duty to refer mergers for in-depth investigation

 

The Competition and Markets Authority (CMA) has adopted revised guidance on the exceptions to the duty to refer mergers for in-depth Phase 2 investigations.

The revisions concern the exception for markets of insufficient importance (de minimis) to justify a reference.

The key changes are that:

1.        There is now a single, increased threshold for the application of the de minimis exception. The CMA will generally consider the market(s) concerned to be of sufficient importance to justify a reference (such that the exception will not be applied) where the aggregate annual value in the UK of the market(s) concerned is more than £30 million.

2.        The application of the de minimis exception is no longer contingent on there being no clear-cut undertakings in lieu of a reference available.

The new guidance is largely unchanged from the draft version on which the CMA consulted in November 2023.

The new guidance will apply to all new merger cases from 25 April 2024. This includes all cases where a Phase 1 investigation has not formally been launched on 25 April 2024.

https://assets.publishing.service.gov.uk/media/662a432d55e1582b6ca7e5e7/Exceptions_to_the_duty_to_refer_-_guidance.pdf

CMA@10

 

CMA@10

I was pleased to attend today’s 10-year anniversary event a decade on from the creation of the Competition and Markets Authority.

The event charted the contributions and challenges of the CMA over the last 10 years and as it continues to evolve. The CMA's stated mission is to make markets work well in the interests of consumers, businesses and the economy.  Its ambition is to be consistently one of the leading competition and consumer agencies in the world.

Kevin Hollinrake MP, the UK Minister for Enterprise, Markets and Small Business said that the Digital Markets, Competition and Consumers Bill will “radically change the balance of power” between big corporations and smaller businesses. He remarked that: “We’re now about to enter a pivotal moment. A seismic shift. A competition revolution.”  Sarah Cardell, Chief Executive of the CMA, described the current times as a “watershed moment” as far as digital issues are concerned.

So what lies ahead for the next ten years?  Cardell hoped that by then every business and consumer will be able to say that “the CMA has done something for me”.  It’s an interesting thought.  It resembles remarks from EU Commissioner Vestager that even though the years roll by and we may get a few grey hairs, some of the fundamental principles of competition law are enduring: “In antitrust, what is at stake is, in some ways, as old as Adam and Eve because it is about greed, to get more”. 

With the challenges of Big Tech, climate change, asymmetric economic shocks and the UK having some of the lowest investment levels in business across the G7, it is tempting to think that competition law can solve most things.  Of course it cannot do that and it cannot do it alone.  Competition law and competition authorities do need to stay relevant and responsive and keep the consumer interest in focus.  Not as an abstract economic concept but consumers as human beings, with real lives and bills to pay.

The Competition and Markets Authority’s CMA@10 event ended today.

CMA produces update to paper on foundational AI models

 

The Competition and Markets Authority (CMA) has updated its September 2023 report in its review of competition and consumer issues in relation to artificial intelligence (AI) foundation models.

In March 2023 the government asked regulators, including the CMA, to think about how innovation in and deployment of AI can be supported.

The CMA sets out its final principles for guiding the market to positive outcomes in terms of access, diversity, choice, fair dealing, transparency and accountability.

The CMA also identifies risks that firms that control critical inputs for developing foundation models may restrict access to them to shield themselves from competition.

The CMA is also intensifying its use of merger control to examine whether AI collaborative arrangements between major players fall within the current rules.  For example, speaking at the ABA Antitrust meeting in Washington the CMA has noted that Google, Apple, Microsoft, Meta, Amazon and Nvidia are involved in an “interconnected web” of over 90 AI partnerships and investments.  The CMA will also consider such arrangements under its new powers anticipated in the Digital Markets, Competition and Consumers Bill.

The CMA will provide a further update in autumn 2024.

 

https://www.gov.uk/government/news/cma-outlines-growing-concerns-in-markets-for-ai-foundation-models

CMA letter to nail technicians about compliance with competition law

 

The Competition and Markets Authority (CMA) has issued an open letter to nail technicians to remind them and their trade associations of their obligations under competition law.

 The CMA has unsurprisingly emphasised that businesses must set their prices independently of their competitors. The CMA has further underscored that businesses should not discuss or coordinate their actions on the timing and amount of future prices increases (whether directly or through a trade body).

The CMA’s guidance comes on the back of media reporting where the CMA notes that it understands that “a campaign has been launched encouraging nail technicians to raise their prices today. In that context, we want to remind all businesses in this sector of their obligations to comply with competition law.” 

The CMA’s guidance is part of its online collection of competition law guidance.  The initiative is a further reminder of the CMA’s education outreach on competition compliance directed at small businesses, many of whom are sole traders.

https://www.gov.uk/government/publications/open-letter-to-nail-technicians-about-compliance-with-competition-law

High Court calls time on refusal to supply claim against Swatch

 

The High Court has rejected an attempt by watch parts wholesaler Cousins to resurrect a claim against Swatch for abuse of dominance in a refusal to supply claim.  The Court ruled that the action would relitigate prior Swiss actions dismissing the claim.

Mr Justice Michael Green ruled that the Lugano Convention applied to the previous Swiss Court rulings.

The case dates back to supply chain events from 2015.  The Berne Commercial Court ruled in 2021 that Swatch’s refusal to supply was part of a rationalisation of its supply chain and was objectively justified and there was no need to consider the effect on UK competition.  The Federal Supreme Court subsequently upheld that decision in 2022.

The case involves consideration of application of the Lugano Convention.   The Convention still applies in this case because the action was commenced before the UK exited the Convention upon its withdrawal from the EU.  However a court can disapply the rules if a jurisdiction has manifestly different public policy objectives.   The Convention also prevents a UK court from re-examining the ruling of the court of another Convention jurisdiction on the merits.

It was argued on behalf of Cousins that the claimant was denied a right to be heard before the Swiss Courts which did not hear vast amounts of evidence relating to the UK.

Green J rejected the claims as “somewhat outlandish”.  He observed that Switzerland is a signatory of the European Convention on Human Rights and it is not obvious that the Swiss judgments are contrary to UK public policy.

The case is a sobre reminder of what Green J described as “a great risk of straying into the forbidden arena” of re-examining the merits of prior rulings and where the impugned judgments were found to reference evidence relating to the UK.

Cousins Material House v Swatch [2024] EWHC 710

Amendments to Digital Markets, Competition and Consumer Bill to prevent acquisitions by foreign powers

 

Amendments to Digital Markets, Competition and Consumer Bill to prevent acquisitions by foreign powers

 

Amendments to the Digital Markets, Competition and Consumer Bill have been tabled, to amend the Enterprise Act 2002 to introduce a new regime for mergers involving newspaper enterprises and foreign powers.

Under the amendments, the Secretary of State must give the Competition and Markets Authority (CMA) a “foreign state intervention notice” if the Secretary of State has reasonable grounds for suspecting that it is or may be the case that a "foreign state newspaper merger situation" has been or will be created.

A foreign state newspaper merger situation will arise where as a result of two or more enterprises ceasing to be distinct, a foreign power is able to control or influence the policy of the person carrying on the newspaper enterprise, or is able to control or influence that policy to a greater extent. The turnover test is reduced to £2 million for such mergers.

The CMA must then report on whether such a merger situation has been or will be created. If it reports that this is the case, then the Secretary of State must make an order containing such provision as the Secretary of State considers reasonable and practicable for the purposes of reversing or preventing the creation of the identified foreign state newspaper merger situation.

 

The DMCC Bill is due to have its third reading in the House of Lords on 26 March 2024.

https://bills.parliament.uk/publications/54855/documents/4610

CMA consults on market investigation into veterinary services for household pets

 

CMA consults on market investigation into veterinary services for household pets

The CMA is proposing to undertake a market investigation into the supply of veterinary services for household pets, including the supply of prescribed veterinary medicines.

This follows the CMA’s September 2023 consultation into the veterinary services market for household pets.  The consultation received an unprecedented level of responses tp its consultation.

The CMA found concerns that consumers may not be given enough information to enable them to choose the best veterinary practice or treatment.

The CMA has found that over 80% of veterinary practices have no pricing information on their websites, even for routine consultations or vaccines.

The CMA has found that while the Royal College of Veterinary Surgeons operates a voluntary standards scheme, around 30% of the market has not committed to this.

The CMA invites comments by 11 April 2024.

https://www.gov.uk/government/consultations/consultation-on-the-proposal-to-make-a-market-investigation-reference-into-veterinary-services-for-household-pets-in-the-uk

Ruling on permission to appeal approval of funding arrangements in collective proceedings against Mastercard and Visa

 

The Competition Appeal Tribunal (CAT) has granted an application by Mastercard and Visa for permission to appeal the CAT's judgment approving the funding arrangements for the applications for collective proceedings orders (CPOs) brought by Commercial and Interregional Card Claims I Limited (CICC I) and Commercial and Interregional Card Claims II Limited (CICC II), under section 47B of the Competition Act 1998.

The proposed class representatives (PCRs) have revised their CPO applications and funding arrangements in light of the Supreme Court's judgment in R (on the application of PACCAR Inc and others) v Competition Appeal Tribunal and others [2023] UKSC 28 (PACCAR).  Following PACCAR, the funding arrangements for large collective claims have been somewhat uncertain.

On 17 January 2024, the CAT rejected all of Mastercard and Visa’s arguments against the enforceability of the PCRs’ funding arrangements. The judgment emphasised a focus on the substance of funding arrangements as opposed to a blanket assertion of unenforceability regardless of funding arrangements or structure. This approach helps to reinforce the collective actions regime by allowing litigation funding – an essential component – to continue, without which, large claims against competition infringers would be impossible. The CAT accepted that the continuing uncertainty about these issues of funding enforceability arising in this and other cases before the CAT is unlikely to be resolved without determination of the issues by the Court of Appeal.

The CAT granted the applications for permission to appeal stating that it may be of assistance to the Court of Appeal to have a slightly different fact pattern to consider when resolving the points on appeal.

The ruling is timely following the panel discussion I participated in on 28 February 2024 at TL4’s Financial Services conference.

Commercial and Interregional Cards Claims I Limited v Mastercard Inc and others, Commercial and Interregional Cards Claims II Limited v Mastercard Inc and others, Commercial and Interregional Cards Claims I Limited v Visa Inc and Commercial and Interregional Cards Claims II Limited v Visa Inc [2024] CAT 16

Breach of Public Contracts Regulations not “sufficiently serious” to warrant damages under Francovich test

 

The Court of Appeal has held that a breach of the Public Contracts Regulations 2015 (SI 2015/102) that results in the wrong bidder being awarded a contract will not automatically constitute a "sufficiently serious" breach to warrant damages in accordance with Francovich v Italy (C-C/90) [1991] ECR 1-5357.

The claimant brought a claim against NHSE.  The High Court found that there was a manifest error by NHSE which, if it had not been made, would have resulted in the claimant winning the tender.  NHSE committed a single, inadvertent breach in an otherwise careful procurement exercise, which caused the wrong result.

In the absence of bad faith of the decision-maker, their "excusability" and state of mind were important factors in considering the "sufficiently serious" test.  The Court of Appeal ruled that a manifest error could be excusable, depending on the facts.

The judgment will be welcome to contracting authorities.  It settles and dismisses any assumption that a breach of procurement regulations resulting in an incorrect contract award will automatically be sufficiently serious to warrant an award of damages.  Aggrieved tenderers will find that the bar for raising a claim for damages is significantly raised.

This is the second case where a party has sought to argue that a particular type of breach or result automatically means that the "sufficiently serious" test is made out. The claimant and appellant attempted to do this (unsuccessfully) in Ocean Outdoor Ltd v Hammersmith and Fulham London Borough Council [2019] EWCA Civ 1642.

Braceurself Ltd v NHS England [2024] EWCA Civ 39

CMA market study into infant formula

 

The CMA has announced a market study into infant formula and follow-on formula in the UK.

The CMA intends to use the market study to consider how the supply of formula has, or may have, adverse effects on consumers, and how it might work better.

In the market study, infant formula comprises infant and follow-on formula as defined by Commission Regulation 2016/127, and formulas labelled as foods for special medical purposes that can be sold without prescription under Regulation 2016/128.

The market study follows work that the CMA has conducted on the rising costs of living where its November 2023 report found that consumers are not always well-equipped to make informed choices for infant formula.  Danon had a 71% share in the UK infant formula market in 2023 and the penetration of own-label alternatives was found to be weak..

The CMA also proposes to consider the market for growing up and toddler milks marketed for children over 1 year old.

The deadline for responses is 13 March 2024.

The CMA must announce within six months if it is intending to make a market investigation reference and must publish its final report on the market study within 12 months. The CMA has indicated it intends to publish its final report in September 2024.

 

https://www.gov.uk/government/news/cma-to-scrutinise-infant-formula-market-through-a-market-study

CAT rules on carriage dispute in collective proceedings against Amazon

 

CAT rules on carriage dispute in collective proceedings against Amazon

The Competition Appeal Tribunal (CAT) has determined the "carriage issue" in two applications to commence collective proceedings, under section 47B of the Competition Act 1998, against Amazon.

 The first application was brought by Ms Julie Hunter and the second by Mr Robert Hammond (each as the proposed class representatives).

The proposed proceedings would both combine standalone claims for damages caused by alleged breaches by Amazon of Article 102 of the TFEU (prior to 31 December 2020) and the Chapter II prohibition of the Competition Act 1998.

Each sets of proceedings allege abuse of a dominant position by Amazon in the market for intermediation services on online marketplaces through the operation of its "Fulfilled by Amazon" and "BuyBox" features.

The CAT ruled that it would not be able to certify both sets of proceedings due to the overlaps between them.  It decided which set of proceedings should be allowed to continue to a certification hearing as a separate provisional issue.

 The CAT concluded that Mr Hammond was most suitable to act as the proposed class representative. It considered that the methodology submitted by Mr Hammond's expert was preferable as it more closely aligned the counterfactual to the alleged abuse.

However, this may not be the final resolution of the matter.  The CAT decided that Ms Hunter's application should be stayed, rather than dismissed. It could still proceed to a certification hearing on the event that Mr Hammond's application for certification were to fail or, if granted, be revoked.  It may even be that the two class representatives might join forces in the future to allow claims to be brought by as wide a body of claimants as possible.

The CAT made no ruling on which class definition was more appropriate, finding that it is not an issue to be determined in a carriage dispute.

Julie Hunter v Amazon.com, Inc and others and Robert Hammond v Amazon.com, Inc and others [2024] CAT 8

Need a pay rise? CMA publishes report on market power in labour markets

 Need a pay rise? CMA publishes report on market power in labour markets

The Competition and Markets Authority (CMA) has published its first report prepared by its Microeconomics Unit, on competition and market power in UK labour markets.
The report examines employer market power and concentration in the labour market. It considers the ability of a firm to pay its workers less than the value of their contribution to the value of the firm’s output.

The CMA finds that market concentration in the labour market has remained roughly constant over the last 20 years. On average, wages are 10% lower in the most concentrated markets, compared to the least.
The report also examines the increase in hybrid and flexible working and the increasing importance of the gig economy.

The report raises a number of unanswered questions which will no doubt inform analysis by policy makers:

·        What lies behind the geographical differences in labour market concentration?
·        How do mergers and acquisitions affect labour market concentration and wages in the UK?
·        What would the impact of changing labour market policies (for example, on non-compete agreements, pay setting and the minimum wage) be for worker mobility and wages?

Competition and market power in UK labour markets - GOV.UK (www.gov.uk)

CMA investigation into fine fragrances cartel

 

CMA investigation into fine fragrances cartel

The CMA has issued an update in its investigation into suspected infringements of the Chapter I prohibition of the Competition Act 1998 involving suppliers of fragrances and fragrance ingredients.

The CMA launched its investigation in March 2023. The investigation was launched with a series of dawn raids alongside the European Commission, the Swiss Competition Commission and the US Department of Justice’s antitrust division. These led to four separate investigations by these antitrust agencies.

The firms under investigation are Firmenich International SA, Givaudan SA, International Flavours & Fragrances Inc and Symrise AG, and their group entities, including UK subsidiaries.

The CMA has extended the investigation to include suspected unlawful coordination between Firmenich International SA, Givaudan SA and International Flavours & Fragrances Inc involving arrangements relating to the hiring or recruitment of certain staff.

Reflecting similar concerns about ‘anti-poaching’ agreements in October, the CMA launched a separate probe into the BBC, ITV and several production companies over concerns about recruiting freelancers.

The CMA expects to publish its next update on the investigation in autumn 2024.

https://www.gov.uk/cma-cases/suspected-anti-competitive-conduct-in-relation-to-fragrances-and-fragrance-ingredients-51257

Challenges to European Commission’s gatekeeper designations

8 January saw the publication of appeals by Apple and Meta against the European Commission's September 2023 decisions designating them as ‘gatekeepers’ for the purposes of Regulation 2022/1925 on contestable and fair markets in the digital sector (Digital Markets Act (DMA)).

Apple’s designation is in relation to its operating system iOS and its online intermediation service App Store.  Apple claims the designation should be annulled insofar as it specified Apple’s operating system iOS as an important gateway for business users to reach end users, and insofar as it imposes on Apple an obligation to comply with the interoperability obligations of Article 6(7) of the DMA.  Apple alternatively asks the General Court to declare Article 6(7) inapplicable pursuant to Article 277 of the TFEU claiming that Article 6(7) is inconsistent with the requirements of the European Charter of Fundamental Rights and the principle of proportionality.  It further alleges that the Commission misinterpreted and misapplied the DMA and made material factual errors in reaching the conclusions that (1) App Store is single core platform service that constitutes an important gateway for business users to reach end users and (2) Apple iMessage is a number-independent interpersonal communications service.

In a separate appeal, Apple is challenging the Commission’s decision to launch a market investigation to determine whether its instant messaging service iMessage falls under the scope of the DMA.

Details have also been published of Meta’s arguments for challenging certain aspects of its designation.  It disputes the Commission’s conclusions that Facebook Messenger and Facebook Marketplace constitute core platform services pursuant to Article 3(9) of the DMA.

ByteDance (owner of Tik Tok) has challenged the platform’s gatekeeper designation outright.   It disputes findings that it has an “entrenched” position in the market.  It has also sought interim measures from the General Court to suspend its obligations under the DMA pending a challenge against its gatekeeper designation.

Microsoft, Google and Amazon have not brought appeals against their designations or the inclusion of their core platform services.

Case T-1080/23 – Apple v Commission (OJ C/2024/563)

Case T-1079/23 – Apple v Commission (OJ C/2024/562)

Case T-1078/23 – Meta v Commission (OJ C/2024/561)