European Commission secures binding commitments from Gazprom

European Commission secures binding commitments from Gazprom

The European Commission has accepted binding commitments from Gazprom to address concerns that Gazprom has abused its dominant position in markets for the wholesale supply of gas in Central and Eastern Europe (CEE).

The Gazprom case reflects a particular theme in the last few years where the Commission’s attention has been on abuse of dominance investigations in the energy sector in the CEE.  It has undertaken high profile investigations against European energy incumbents in Bulgaria, the Czech Republic and Romania, as well as against Russia’s Gazprom.   

Gazprom was among the companies that were subject to a dawn raid in 2011.  The inspections concerned its German (Gazprom Germania) and Czech (Vemex) offices.

On 4 September 2012 the Commission announced that it had opened formal proceedings to investigate whether Gazprom may be abusing a dominant position contrary to Article 102 TFEU. 

An indication of the complex interplay between EU law and political relations with Russia was the presidential decree signed in September 2013 which banned ‘strategic companies’ – mostly state-owned companies such as Gazprom – from disclosing information to foreign countries, companies or regulators without the prior approval of an authorised Russian federal body.  This was widely seen as an attempt to obstruct the Commission’s competition investigation into Gazprom.

The commitments require Gazprom to remove any restrictions placed on customers to re-sell gas across EU borders. Gazprom must enable gas flows to and from parts of the CEE that are isolated from other member states.

Gazprom must put in place a process to ensure competitive gas prices.  It cannot act on any advantages relating to gas infrastructure, which it may have obtained from customers as a result of its position in gas supply.

The commitments must remain in place for eight years.  If Gazprom fails to comply, the Commission can impose a fine up to 10% of its worldwide turnover without having to prove an infringement of EU competition law.

http://europa.eu/rapid/press-release_IP-18-3921_en.htm

Final settlement: Supreme Court allows appeal by CMA in tobacco retail pricing case

The Supreme Court has allowed the CMA’s appeal against a judgment of the Court of Appeal finding that the OFT was wrong to fail to extend to Gallaher and Somerfield the benefit of appeals in favour of other parties arising out of its 2010 tobacco retail pricing investigation.

The OFT repaid the fine imposed on TM Retail on the basis of assurances given in the course of early resolution that it would not be prejudiced by the outcome of appeals brought by other parties.  No such assurances were given to Gallaher and Somerfield who, in common with TM Retail, had also entered into early resolution agreements but who had not appealed against the OFT’s infringement decision in time.

The Court of Appeal had found that the OFT’s failure to repay the fines paid by Gallaher and Somerfield was a breach of the principle of equal treatment and was unfair.

The Supreme Court found that even if the OFT had acted contrary to a legitimate expectation, the differential treatment was objectively justified and not irrational.  It did not provide a basis for reversing the fines that had been paid by Gallaher and Somerfield.

The Supreme Court found that the parties who entered into early resolution knew that there was a possibility that other parties might appeal successfully.  Gallaher and Somerfield took that risk without obtaining any assurances from the OFT as to how they might be affected by any successful appeal.

The problem for Gallaher and Somerfield was that they did not obtain explicit assurances from the OFT or appeal the original infringement decision in time. 

The OFT accepted that it made a mistake in offering the assurances to TM Retail that it did, so the fact pattern in this case is unlikely to be repeated.  Despite its more historical significance, the Supreme Court’s decision underscores the principle of finality of settlement.  It will be a rare case where settling parties can reopen a settlement that they have entered into voluntarily in return for an abbreviated procedure and settlement discount.

Source:  R (on the application of Gallaher Group Ltd and others) (Respondents) v The Competition and Markets Authority [2018] UKSC 25

High Court grants interim injunction against Google

The High Court has granted a software application developer, Unlockd Ltd (Unlockd), an interim injunction to prevent Google from withdrawing or suspending ‘Admob’ services used for the delivery of advertisements on mobile phones.

The High Court considered that if the services were to be withdrawn there was an appreciable risk of harm to existing commercial relationships and that damages would be inadequate.

Unlockd alleges that the decision by Google to withdraw the Admob services constitutes an abuse of Google’s dominant position and the High Court considers that there is a serious issue to be tried.

Unlockd asked for an expedited trial to start in July but due to the unavailability of a suitable competition judge the earliest trial date that could be found is at the end of September.  The trial is expected to last for five to seven days, starting on 24 September.

Unlockd Ltd and Unlockd Media Technology Ltd v Google Ireland Ltd, Google Commerce Ltd and Google LLC (unreported)

India’s Competition Commission grants first immunity from cartel fines

Some nine years after obtaining competition law enforcement powers against cartels, the Competition Commission of India (CCI) has granted total immunity from penalties for the first time.

The CCI found that battery-makers Eveready, Nippo and Panasonic Energy India engaged in an eight-year cartel which resulted in a 60% increase in the price of dry-cell batteries since 2010.

Panasonic, the whistle-blower, was granted 100% immunity from penalties.  The CCI also reduced Eveready’s fine by 30% to 1.71 billion rupees (EUR21 million), and Nippo’s fine by 20% to 423 million rupees (EUR5.2 million).

The case is also reported to be the first in which the CCI has formally used its dawn raid powers.

The Competition Act 2002 provides the CCI with the power to impose lesser penalties. If the CCI is satisfied that any member of a cartel has contravened the provisions of the Competition Act, but has made full and true disclosures in respect of the alleged contraventions and such disclosures are ‘vital’, the CCI may impose a lesser penalty than that prescribed under the Competition Act.

The case is a welcome development in competition law enforcement in India and shows that the CCI is prepared to offer leniency in appropriate cases.  However, its infrequent deployment is in sharp contrast to the reliance on the policy in some other jurisdictions.  In contrast, in the EU leniency is probably the single most powerful tool that the European Commission uses to detect and enforce against cartels. 

Leniency will only be attractive if the net benefit to the company of applying for leniency exceeds the real and likely penalty. Yet there is no detailed guidance in India on the likely level of penalty or the potential size of the reduction for leniency, other than the practice that can be discerned in case law.

Competition and Markets Authority probes anticompetitive agreements in musical instruments sector

The CMA has announced that it is investigating anti-competitive agreements in the musical instruments and equipment sector under the Chapter I prohibition and Article 101 TFEU.

The CMA’s website contains details of its launch of five investigations (case references 50565-2 to 6) into alleged anti-competitive agreements and/or concerted practices in relation to musical instruments and equipment.

Minimal details of the probes are available at present.  The CMA states that it will carry out an initial investigation through to autumn 2018

CMA press release, 17 April 2018:  https://www.gov.uk/cma-cases/musical-instruments-and-equipment-suspected-anti-competitive-agreements-50565-6

CMA publishes guidance on competition law and joint ventures

The Competition and Markets Authority has published a short guide for businesses on competition law compliance in relation to joint ventures.

The guidance follows a decision of the CMA in December 2017 where it imposed a fine of £1.7 million on two suppliers of laundry services for a market sharing agreement that it found to be in breach of the Chapter I prohibition of the Competition Act 1998.  The CMA’s case was that the violation occurred under the cover of a joint venture.

The guidance comprises ‘dos and don’ts’ for businesses who are considering entering into or who are already involved in joint ventures, alliances or similar forms of cooperation with competitors.  The CMA has stated that it will be communicating with over 1000 law firms across the UK asking them to draw this guidance to the attention of their clients.

The substantive content of the guidance is nothing new. It recognises that agreements may be a response to increasing competitive pressures driven by globalisation, the speed of technological progress and the generally more dynamic nature of markets.  Cooperation can also be a means to share risk and pool know-how to get innovative products and services to market faster.

Where the economic and consumer benefits outweigh the negative effects on competition, such agreements will usually be lawful.  However, the guidance is a timely reminder that many cooperative business arrangements or routine agreements may fall foul of competition law and need to be scrutinised to ensure that any restrictions imposed are the minimum necessary to deliver their claimed benefits.

Source: CMA press release of 12 April 2018:  https://www.gov.uk/government/publications/joint-ventures-and-competition-law-dos-and-donts

Competition and Markets Authority to be given State aid powers post-Brexit

The UK government has said that the Competition and Markets Authority will be given State aid powers following the UK’s withdrawal from the European Union.

The minister for small businesses, consumers and corporate responsibility stated in a letter of 28 March 2018 to Lord Whitty, the Chair of the, EU Internal Market Sub-Committee that the Government’s view is that the UK should be prepared to establish a “full, UK-wide subsidy control framework, with a single UK body for enforcement and supervision”.  Further, the Government has concluded that at the point an independent UK State aid authority is required, the CMA would be “best placed” to take on the role of State aid regulator.

The European Commission has stated that state aid provisions would be a condition of any trade deal between the EU and the UK.

At first sight, it is understandable that the CMA might seem well-positioned to take on this role in view of its experience of markets. But it would need to have the resources to take on this expanded mandate.  While the CMA is independent from government, the EU would need to be convinced that it was genuinely free from political capture to take on this role.  State aid differs from mainstream competition law.  The application of State aid law is a politically sensitive issue.  This is a clear area of controversy. 

There are some examples of member state authorities taking on a similar role in pre-accession situations, but obviously Brexit is the converse situation and without precedent.

Source: http://data.parliament.uk/DepositedPapers/Files/DEP2018-0337/280318_-_Letter_Andrew_Griffiths_to_Rt_Hon_Lord_Whitty.pdf