Ofcom recommends part separation of Openreach and BT

Ofcom has issued a progress report recommending a partial separation of BT Group from its internet infrastructure business, Openreach.  But this measure is short of the full unbundling that BT’s competitors have been pushing for.

Ofcom began its review of digital connection capacity in March last year.  Early in 2016 it said that Openreach should be more independent from BT so as to deliver necessary investment in high-speed broadband infrastructure over the next decade.

Ofcom is seeking to open up Openreach’s ducts and poles to allow competitors to connect their own systems.

Current regulations require Openreach to allow access to all customers on non-discriminatory terms.  Ofcom believes that BT still has the ability and incentive to make investment decisions that favour its own retail operations, rather than the network as a whole.

Under the proposal Openreach would be a separate company with its own board but the size of its budget would ultimately be controlled by BT.

This semi-separation might be seen as a cautious move by Ofcom.  A full divestment would take time and create potential for market disruption.  But the proposed approach will leave many disappointed by leaving investment decisions in the hands of BT, albeit, such decisions would need to be made in the interests of all Openreach customers.  If Ofcom is not satisfied that it can hold BT accountable under the new model or roll-out, speeds and service fall short of expectations, a full separation might need to be considered.

Ofcom press release and progress update: supporting investment in ultrafast broadband networks, 26 July 2016

Google faces new and renewed EU antitrust objections

The European Commission has sent two further Statements of Objections to Google. In a supplementary Statement of Objections, the Commission has supported its preliminary conclusion that Google has abused its dominant position by systematically favouring its comparison shopping service in its search result pages.

In a separate set of objections, the Commission has set out its preliminary view that Google has abused its dominant position by artificially restricting the possibility of third party websites to display search advertisements from Google's competitors.

EU Commissioner Vestager has stated that Google has developed “incredible and innovative products” but that this does not give it the right to deny others the opportunity to innovate and compete. 

In the shopping comparison search case the Commission has rejected Google’s argument that websites such as Amazon and eBay compete with Google’s shopping service and it views these players more as customers than competitors.  Commissioner Vestager maintains that even if the Commission accepted Google’s market definition, its practices would still have restricted competition.

In the new advertising objections the Commission claims that Google has an 80 per cent share of the EEA search advertising market through its AdSense platform.  The Commission is concerned that Google has restricted how third parties obtain and use advertising from its competitors through a range of practices: requiring third parties not to source search ads from Google's competitors; requiring third parties to take a minimum number of search ads from Google and reserve the most prominent space on their search results pages to Google search ads; and requiring third parties to obtain Google's approval before making any change to the display of competing search ads.

The Commission has not provided a timeline for conclusion of these cases.

Scene set for UK’s largest opt-out collective action

MasterCard faces a £19 billion action for damages on behalf of consumers who were overcharged as a result of its interchange fees on payment transactions.  Press reports suggest that a claim is about to be brought by Quinn Emanuel in the Competition Appeal Tribunal which would be the second opt-out collective action to be brought under the UK’s new competition law damages regime introduced with effect from 1 October 2015.

The proceedings have a long administrative history dating back at least to the December 2007 European Commission infringement decision against MasterCard in relation to its cross-border multilateral interchange fees (MIF).  The Commission found that MasterCard had infringed Article 101 TFEU in that the MIF arrangements restricted competition between acquiring banks and increased the costs of accepting cards without leading to efficiencies within the meaning of Article 101(3) TFEU.  On 11 September 2014, the Court of Justice dismissed the appeal and cross-appeals challenging a General Court judgment that upheld the Commission’s original decision.

Assuming that the CAT grants a collective proceedings order, the case would test the boundaries of the new regime. The affected class is potentially extensive comprising all consumers and, conceivably, not only MasterCard holders who paid increased prices for their goods and services as a result of the practices.  This is also an indirect purchaser action for a huge sum of money. 

On paper, it appears to be just the type of case that the new regime was expected to encourage.  However, it can be expected that the case will be fiercely contested as the administrative proceedings have been.  While the trial is not expected to begin until 2018, potential claimants and class representatives in other cases will be watching developments closely.

First collective action launched in the CAT

The Competition Appeal Tribunal has published a notice of application to commence collective proceedings under the amended section 47B of the Competition Act 1998.  If the CAT decides to make a collective proceedings order (CPO) the case will be the first opt-out class action following the Consumer Rights Act reforms.  The proposed action combines follow-on damages actions relating to the 2014 mobility scooters decision of the Office of Fair Trading. 

The application is brought by the proposed class representative (Ms Dorothy Gibson), the General Secretary of the National Pensioners Convention that represents around 1000 UK pensioners’ organisations.  The relief sought is damages to be assessed on an aggregate basis.  The application states that the action should proceed on an opt-out basis as it would be highly impractical for it to proceed on an opt-in basis in view of the vulnerability of the members and the sums at stake.

The CAT may only make a CPO if it considers that the person who bought the proceedings is a person who the CAT could authorise to act as the representative and if the CAT considers that the claims raise the same, similar or related issues of fact or law and are suitable to be brought in collective proceedings.

The procedural rules governing collective proceedings are set out in Rules 73-98 of the CAT Rules, with guidance in Section 6 of the 2015 Guide to Proceedings.

Case 1257/7/7/16 - Dorothy Gibson v Pride Mobility Products Limited

Microsoft and LinkedIn – A Complementary Combination?

Microsoft plans to acquire the largest professional networking business LinkedIn for US$26.2 billion representing the largest acquisition in its history.

Merger clearance is being sought in the USA, Canada and EU and a few other antitrust regimes, which has prompted commentators to speculate on the prospects for clearance.

There do not seem to be any significant horizontal overlaps.  Microsoft is not a major social media player and LinkedIn is not a provider of operating systems or business software.  Nor do there seem to be any obvious vertical issues.  You don’t need Windows to create an online social network and LinkedIn’s network is not a critical input for competitors to Microsoft’s software business.

The transaction has been hailed as a merger of complements.  LinkedIn gives Microsoft access to data in relation to a readymade network of users for Microsoft’s cloud-interoperable programs.  You can see how the deal would make Microsoft’s products more useful to the LinkedIn community because they would be able to share them with their connections.  It could serve as a counterbalance to cloud-based programs such as Google Docs that can benefit from an established network of users.

So, is there an antitrust problem if Microsoft acquires LinkedIn information on who you are connected with?  An obvious point is that merely having access to personal data - even vast amounts of it - is not to be equated with economic market power.   However, this has not stopped regulators on both sides of the Atlantic venturing theories on the competition law implications of ‘Big data’ and whether existing legal tools including merger control are adequate to address new situations.  The Microsoft-LinkedIn tie-up is of relatively limited interest when approached through the traditional antitrust toolkit.  It is hoped that the merger control authorities keep those principles firmly in sight when looking at the data aspects.

European Commission probes Romanian natural gas sector

The European Commission confirmed on 7 June that it has carried out dawn raids at the premises of Romanian natural gas companies on suspicion that they have engaged in anticompetitive practices that hinder natural gas exports to other member states and/or that they abused their dominant market position.

Few details are available of the scope of the investigation at this stage, although the Romanian state-owned company Transgaz has confirmed that was raided.  Natural gas producer OMV Petrom has also stated that it was subject to an inspection.

The raids are not the only ongoing investigation by the European Commission into natural gas exports.  In April last year the Commission issued a statement of objections to Gazprom alleging that it had hindered cross-border trade with eight other member states. The Commission maintains that Gazprom charged unfair prices and restricted its customers from selling gas outside their territory, as well as demanded concessions that did not properly relate to Gazprom’s transport infrastructure.  In September, Gazprom’s deputy chief executive reported that the company had submitted a proposed settlement to the Commission but the investigation has not reached a conclusion.

The latest raids in Romania show that Commission’s competition law interest in the energy sector has not waned but appears to have shifted eastwards as illustrated in cases involving Gazprom, CEZ, Bulgarian Energy and OPCOM.  In many respects the lines of inquiry pursued in these cases resemble those in other post-sector inquiry probes.  However, one particular line of inquiry that is unprecedented in the Gazprom case is the allegation that it is abusive for a dominant company to insist on prices that are indexed to oil prices.  It is not clear whether that allegation is being pursued in the Romanian case.  Since the majority of these energy sector competition cases have been resolved using commitments, their precedent value is likely to be more limited.  Until they are challenged successfully before the EU Courts, the case law experience is likely to give further impetus to investigations at EU and national level as well as private law challenges on the back of similar theories of alleged harm.  

#VOOM 2016 - The Professionals

#VOOM 2016 – Suzanne Rab selected as one of the Professionals

Suzanne Rab, Competition Law barrister at Serle Court Chambers has been selected to help Sir Richard Branson’s #VOOM 2016 team find the cream of entrepreneurs from across the UK and Ireland.

Out of a pool of 15,000 applicants Suzanne will be one of 12 experts selected from a range of disciplines including law, marketing, accountancy, mentoring and entrepreneurship to be #VOOM 2016 professionals.  As a member of this team, she will play an integral part in every stage of the selection process.  At the 29 hour Pitchathon on 1 and 2 June the judges will whittle 160 shortlisted entrants down to 40 semi-finalists.  These businesses all have their sights on the Live Finale on 28 June, where six finalists will pitch to Sir Richard Branson and win a share of £1 million in prizes.

Further details can be found at:

https://www.vmbvoom.com/professionals