CMA reports interim concerns and potential solutions in infant formula market study

 

The Competition and Markets Authority (CMA) has published its provisional report on its market study into infant formula and follow-on formula in the UK. The CMA invites comments on its interim report by 29 November 2024.

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

The CMA found that the market has a highly concentrated structure.  It identified  concerns relating to the unintended consequences of regulations designed to support public health goals, a lack of timely, clear and impartial information for parents about formula, and companies' responses to regulations around marketing.

The CMA raised concerns about how this impacts pricing, and limited competition on formula prices at the retail level.

The CMA has explored potential solutions. Recommendations cover the provision of clear, accurate and impartial information, including on the nutritional sufficiency of infant formula products, in both healthcare and retail contexts.

The CMA recommends strengthening labelling and advertising rules to moderate the role of brand awareness in decision-making in the market.

The CMA’s provisional findings echo concerns raised by customers.  The provisional findings bring together multiple tools from competition law oriented remedies to consumer protection measures around promotions at the retail level.

The deadline for the CMA to publish its final report is 19 February 2025.

https://www.gov.uk/government/news/infant-formula-cma-sets-out-concerns-and-potential-solutions

CAT rules in favour of self-represented claimant in RPM case

 

The Competition Appeal Tribunal (CAT) has ruled in a claim by Up & Running (UK) Limited against Deckers UK Ltd (Deckers), a retailer of specialist running shoes. The case appears to be the first time a self-represented claimant has been successful in the CAT.  It is only one of few claims that have undergone the fast-track procedure.

The CAT found that the Deckers selective distribution system did not meet the criteria for establishing that a selective distribution agreement has a legitimate goal and falls outside Article 101(1) of the TFEU (being relevant at the time the relevant practices occurred).  The CAT found that the system lacked transparency, it employed some quantitative criteria and was applied in a discriminatory manner.

The CAT held that a supply agreement that allowed Deckers to prevent Up and Running from creating a secondary website to sell shoes at a discount, was a ‘by object’ infringement of UK/EU competition rules because it pursued “no plausible material objective” other than to restrict competition.

The CAT found that the agreement contained hardcore restrictions so that the EU Vertical Block Exemption did not apply.

The CAT concluded that Up & Running has suffered loss as a result of the infringements of the Chapter I prohibition (the amount of which will be determined separately).

However, the CAT declined to make an injunction requiring Deckers to supply the relevant product to Up & Running.

The ruling can be understood in light of its very specific facts.  Nevertheless, it is likely to cause a number of retailers and their lawyers to pause for thought on whether their distribution systems and supply practices are compatible with competition law.

Up & Running (UK) Limited v Deckers UK Limited [2024] CAT 61

Court of Justice dismisses European Commission’s appeal against General Court’s judgment in Intel abuse of dominance decision

 

Court of Justice dismisses European Commission’s appeal against General Court’s judgment in Intel abuse of dominance decision

The Court of Justice of the EU has dismissed an appeal by the European Commission against the General Court’s judgment finding errors in the Commission’s 2009 decision that Intel had infringed Article 102 TFEU by imposing exclusivity rebates and other restrictions.

The judgment brings to an end a long and tortuous history of procedural challenges.  The General Court upheld the Commission’s findings in its first judgment on the case in 2014.  However, the Court of Justice annulled that finding in 2017 and sent the matter back to the General Court to examine all of Intel’s arguments about the application of the ‘as efficient competitor’ (AEC) test.

The General Court then annulled the Commission's decision in so far as it found that Intel's rebates infringed Article 102, as well as the fine of EUR1.06 billion imposed on Intel.  This was due to the errors that it found in the Commission’s approach to the AEC test.

The Court of Justice found that the General Court had not erred in its assessment of the ability of the rebates to foreclose competition or in the application of the standard of proof applied in assessing the AEC test.  The Court of Justice held that it was not for the General Court to ascertain whether the operative part of the Commission's decision could be justified on the basis of reasoning that did not contain the errors found, where that reasoning is not set out coherently in that decision.

The decision brings to an end another high-profile defeat for the Commission in relation to the appeal of an exclusionary abuse of dominance case. The General Court has also annulled a EUR997 million abuse of dominance penalty against Qualcomm and quashed an EUR1.49 billion fine against Google. A key enforcement challenge for the Commission will be managing such complex and evidence-based abuse cases within a reasonable timeframe according to the correct test and standard of proof.

Case C‑240/22 P, European Commission v Intel Corporation Inc., ECLI:EU:C:2024:915

CMA decides that Amazon/ Anthropic does not qualify for investigation

 

The Competition and Markets Authority (CMA) has published its decision that the partnership between Amazon.com, Inc and Anthropic does not qualify for investigation under the merger provisions of the Enterprise Act 2002.

 The partnership involves a US$4 billion investment by Amazon in Anthropic, which is convertible into non-voting equity in certain circumstances. The tie-up also involves a long-term non-exclusive licensing of Anthropic's Foundation Models (FM) to Amazon for use in Amazon services.

Amazon argued that it has not acquired material influence over Anthropic as a result of the partnership.

The CMA noted that agreements to provide infrastructure to an FM developer as well as distribution agreements between an FM developer and a cloud service provider may result in an acquisition of material influence.  This may arise where conditions are such that the agreement creates a relationship of dependency such that it enables the partner to influence materially the commercial policy of the FM developer.

The CMA also considered that the other categories of agreements and rights set out in the description of the Amazon/Anthropic partnership, including consultation and advice rights in relation to significant Anthropic business issues, are, in principle, capable of contributing to a finding of material influence.

However, the CMA did not need to reach a conclusion on material influence as Anthropic's UK turnover does not exceed £70 million in the UK, nor do the parties together account for a 25% or more share of supply of any description of goods or services in the UK.

https://assets.publishing.service.gov.uk/media/6710ba44e84ae1fd8592f52c/Full_text_decision.pdf

CMA accepts undertakings Barratt/ Redrow merger

 

CMA accepts undertakings Barratt/ Redrow merger

The Competition and Markets Authority (CMA) has accepted undertakings in lieu of referring the completed acquisition by Barratt Developments plc of Redrow plc for a Phase 2 merger investigation.

In its Phase 1 investigation, the CMA found that the merger gives rise to a realistic prospect of a substantial lessening of competition as a result of horizontal unilateral effects in the supply of new-build private residential housing. The effects were confined to one local area centred around the Barratt development at Tilstock Road, Whitchurch.

The CMA consulted on commitments relating to Redrow's entire overlapping area in the Kingsbourne, Nantwich site that has planning consent for the development of 324 houses.

Under the final undertakings, the parties have appointed an independent third-party agent, Savills, to manage the sale of the remaining unsold houses and houses where the sale has not been legally completed.

The undertakings require a monitoring trustee and an independent professional quantity surveyor (approved by the CMA) will be appointed.

https://assets.publishing.service.gov.uk/media/66ffc0a130536cb927482c3b/Full_text_decision__undertakings_accepted_.pdf

General Court annuls Google AdSense abuse decision

 

The General Court has ruled in an appeal by Google and its parent company Alphabet against the European Commission's decision to fine Google EUR1.49 billion for abusing its market dominance in the online search advertising intermediation market.

In 2019 the Commission found that Google had infringed Article 102 TFEU by imposing restrictive clauses in contracts with third-party websites that prevented Google's competitors from placing their search adverts (ads) on these websites.

The General Court found that the Commission had not established that the clauses could have produced a foreclosure effect in 2016, in the absence of data about their market coverage in that year.

The General Court also found that the Commission had erred in its assessment of the duration of the clauses, in particular by failing to take into consideration all the relevant circumstances of the publishers subject to the clauses.

The General Cout found that these errors undermined all the Commission's findings in relation to the foreclosure effect of the clauses and its conclusion that they constitute a single and continuous infringement of Article 102. As a result the Commission's decision must be annulled in its entirety.

The General Court’s judgment is in marked contrast to the Commission’s victory before the Court of Justice this month which upheld its Google Shopping decision.  However, the latter case can be considered to be somewhat more significant for the Commission than AdSense  in upholding the legal basis for self-preferencing as an abuse of dominance independently of the essential facilities line of case law. 

The practical significance of the AdSense decision may be more diminished as it is understood that Google has not used the relevant clauses since 2016.  However, today’s judgment may not be the end of the Commission’s interest in contractual clauses which may have foreclosure effects in online advertising markets.  In particular, the Commission now has the Digital Markets Act at its disposal to tackle potentially foreclosing practices on the part of digital gatekeepers and without the need to prove effects.

Case T‑334/19, Google LLC and Alphabet Inc v European Commission ECLI:EU:T:2024:634

Qualcomm fails to overturn predatory pricing abuse of dominance decision

 

 

 

The General Court has dismissed an appeal against the European Commission's decision to impose a fine of EUR 242,042,000 on Qualcomm for infringing Article 102 of the TFEU by engaging in predatory pricing.

In July 2019 the Commission found that Qualcomm abused a dominant position in the global market for UMTS baseband chipsets by supplying UMTS chipsets to Huawei and ZTE, at below cost prices, with the intention of eliminating Icera, who was then its main competitor.

Qualcomm alleged that the Commission erred in defining the relevant market, applied the incorrect legal standard, and that its theory of predation was illogical.

Qualcomm also raised various procedural irregularities and errors in the Commission’s reasoning.

The General Court rejected Qualcomm's arguments in their entirety.

However the General Court accepted Qualcomm’s plea concerning the calculation of the amount of the fine.  The Court found that the Commission departed, without justification, from the methodology laid down in its 2006 Fining Guidelines.  The General Court found that the Commission erred in calculating the basic amount of the fine by adding together the value of sales made by Qualcomm during the second half of 2009, in 2010, and in the first half of 2011, instead of by multiplying the value of sales made during the last calendar year by the number of years of participation in the infringement

The General Court recalculated the fine to be imposed on Qualcomm, setting it at EUR238,732,659.33 representing a reduction in the fine of approximately EUR 3.3 million.

The judgment is a victory for the Commission’s substantive analysis. The reduction in the fine indicates that there can be monetary benefits in contesting the level of the fine However, in this case, a question may be asked as to whether the reduction in the penalty was outweighed by the legal costs and involvement in a lengthy appeal, notwithstanding the points of legal principle at stake.  It remains to be seen whether Qualcomm will fight on to the Court of Justice.

Case T-671/19, Qualcomm v Commission EU:T:2024:626