European Commission investigation into airline ticket distribution

European Commission investigation into airline ticket distribution

The European Commission is investigating whether agreements between booking systems Amadeus and Sabre, and airlines and travel agents, may be in breach of EU competition law.

The Commission is investigating whether provisions in the providers’ agreements with airlines and agents may limit the latter’s ability to use rival suppliers of ticket distribution.  This may make it more difficult for new distribution suppliers to enter the market and may increase costs for airlines which are passed on to consumers.

It will be recalled that as early as 2002 the Commission investigated the creation of the online travel agency, Opodo.  This was a joint venture by nine of Europe’s largest travel agents offering internet sales, hotel bookings, car hire and insurance.  The European Commission took into account a package of commitments offered by the parties and issued a ‘negative clearance’ type of comfort letter.   In order to allay concerns that the airlines might use the joint venture as a vehicle for collusion the parties put in place undertakings that the shareholders would not get access to commercially sensitive information about each other. In order to address the concern that the airlines would favour their own operations to the detriment of other travel agents, each undertook not to discriminate without objective justification between other travel agents.

Commission press release IP/18/6538

New head for India’s Competition Commission

New head for India’s Competition Commission

Ashok Kumar Gupta has been appointed as the new chairman of the Competition Commission of India, replacing Devender Kumar Sikri.

His appointment follows review by a selection committee consisting of the minister for corporate affairs, minister of law and justice and experts drawn from law and economics.  In common with other heads of India’s competition authority, Gupta does not have an antitrust enforcement background.  Gupta has been a civil servant for 36 years, starting out in Tamil Nadu’s state government. Recently he was head of the Department of Defence Production, part of the Ministry of Defence.

Gupta is expected to contribute deep sector expertise, particularly in the defence, healthcare and shipping sectors.

European Commission closes infringement case against Cyprus Bar Association over restrictive fee arrangements

The European Commission has ended its competition investigation against Cyprus over a minimum fee arrangement for out of court legal services including drafting contracts, drawing up wills, estates administration and company registration.

The Commission raised concerns in April 2018 that Cyprus legislation, by encouraging the Bar Association to adopt the minimum fee arrangements, could encourage conduct that might prevent, restrict or distort competition in the internal market.  As such, the Commission raised concerns that Cyprus could be in breach of Article 106 TFEU whereby member states must refrain from encouraging undertakings or associations of undertakings to favour or encourage anti-competitive behaviour that would breach Article 101 of the TFEU.

Cyprus amended its legislation in response to the Commission’s investigation.  The Commission also closed a parallel investigation into the minimum fee scale arrangements of the Cyprus Bar.

http://europa.eu/rapid/press-release_MEMO-18-6247_en.htm

CMA sends objections to ComparetheMarket about Most Favoured Nation clauses in contracts with home insurance providers

The Competition and Markets Authority has issued a statement of objections to BGL (Holdings) Limited, BGL Group Limited, BISL Limited (BISL), and Compare The Market Limited (together ComparetheMarket) alleging breach of the Chapter I prohibition and Article 101 TFEU.

ComparetheMarket operates a price comparison website.  The CMA is concerned about the use by ComparetheMarket of most favoured nation (MFN) clauses in agreements with home insurance providers.  The CMA has also conducted a market study into digital comparison tools.  It now alleges that the use of MFNs by ComparetheMarket is preventing home insurers from quoting lower prices on competing websites.

ComparetheMarket now has an opportunity to respond to the CMA’s objections.  Third parties may submit written representations on the objections if they can materially assist the CMA’s investigation and may request a non-confidential version of the statement of objections by 16 November 2018.

FCA issues paper on fair pricing in financial products

The Financial Conduct Authority has issued a discussion paper on fair pricing in financial services (DP18/9).  The paper addresses loyalty and inertia pricing, setting out the FCA’s framework for assessing fairness and harm caused by discriminatory pricing.  The paper also considers potential remedies.

The FCA intends that the paper will prompt a public debate on the issues. These issues are relevant particularly to the FCA’s general insurance market study.

The FCA is seeking views, particularly, on two practices.  First, firms charging different prices to different consumers based solely on differences in consumers’ price sensitivity (also known as ‘price discrimination’). Second, firms charging existing customers higher prices than new customers (sometimes referred to as ‘loyalty pricing’ or ‘inertia pricing’).

The FCA seeks comments on the discussion paper by 31 January 2019.

https://www.fca.org.uk/publications/discussion-papers/dp18-9-fair-pricing-financial-services

General Court dismisses application for injunction to block publication of Euribor decision

The EU’s General Court has rejected an application by Crédit Agricole for an interim injunction in an appeal against a European Commission decision to publish the Commission’s decision in the Euro Interest Rate Derivatives cartel.

The proceedings arise out of the Commission’s 2016 decision (the 2016 Decision) fining JPMorgan Chase, Crédit Agricole and HSBC EUR485 million for their participation in the Euribor cartel.  Crédit Agricole argued that the entirety of the decision should remain unpublished until the conclusion of its appeal against the 2016 Decision.  It argued that publishing the decision before the appeal was concluded would violate the presumption of innocence.

The General Court found that the applicants had failed to show that an interim order was justified in fact and law.  The ruling confirms that the bar for obtaining interim measures is high.

In principle, the publication of the 2016 Decision before conclusion of the appeals can be expected to fuel private follow-on damages actions.  However, in practice domestic courts may stay their actions if there is a realistic prospect that the decision will be overruled in appeal proceedings before the EU Courts.

Case T-419/18 R - Crédit Agricole and Crédit Agricole Corporate and Investment Bank v Commission (ECLI:EU:T:2018:726)

Six to become Five – SSE and N-Power approved

Six to become Five – SSE and N-Power approved

The Competition and Markets Authority has approved the merger between SSE Retail and N-Power without conditions and after a detailed investigation.

The combination will merge SSE Retail and Npower’s supply operations but other SSE activities such as generation and distribution remain separate.  British Gas (owned by Centrica), Scottish Power (owned by Iberdrola), E.On and EDF will remain independent among the larger energy companies.

The CMA launched a second phase probe amid concerns about the potential impact of the merger on customers on standard variable tariffs (SVTs), recalling concerns in its 2014-2016 broader market investigation that households on those tariffs do not tend to shop around.

In its in-depth merger review, however, the CMA found that switching levels between energy providers were at the highest they have been in a decade.  The CMA found that the main constraint on SVT pricing was that any increase would result in customers being engaged and then switching either to the supplier’s own internal lower tariffs or to a competitor.  This increase in switching was also fuelled by the number of internal and external prompts that the customer receives on better offers that may be available.  Of those customers who did switch, the CMA found that they tended not to move between the merging parties.

The clearance also anticipates the introduction of new energy price caps as proposed by Ofgem which will limit the prices that energy companies can charge for typical annual usage to £1,136.  The Money Advice Service has said that deals are available up to £300 cheaper than the cap.

This is the fifth transaction that the CMA has approved unconditionally in the 2017-2018 financial year.  This trend is probably reflective of the relatively low threshold to launch an in-depth review, relative to the strict standard for prohibition.

The extent of change in the energy market, highlighted by the CMA’s merger investigation, is relevant.  However, even with 70 or so energy companies the CMA continues to believe that the market is not working as well as it might for some customers who do not switch.  That is why it looked at SVTs closely, as customers on those tariffs were historically ‘sticky’.  Nevertheless, the clearance is a significant example of the CMA examining a complex transaction in light of the evolving market and regulatory developments.