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)

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