Subsidy Control Act 2022 receives Royal Assent

 

 

Subsidy Control Act 2022 receives Royal Assent

On 28 April 2022 the much awaited Subsidy Control Bill (the Bill) received Royal Assent and became the Subsidy Control Act 2022.   The new regime is expected to come into force in Autumn 2022.

The Bill was published on 30 June 2021 and is intended to create a legal framework for a UK subsidy control regime that meets the UK's international commitments.  These include the subsidies chapter of the UK-EU Trade and Co-operation Agreement (TCA).

Since 1 January 2021 public authorities have been subject to two parallel commitments in relation to subsidy control:

1)    The (limited) continued application of EU State aid rules under the Northern Ireland Protocol to the UK-EU Withdrawal Agreement: applies to aid measures which could affect trade in goods and electricity between NI and the EU

2)    The new TCA rules on subsidy control: have force of law within the UK by virtue of section 29 of the European Union (Future Relationship) Act 2020

The new regime under the Subsidy Control Act reflects the following elements:

1)    Public authorities will be responsible for self-assessing that subsidies they intend to grant comply with the statutory subsidy control principles and requirements

2)    Certain types of subsidy will be prohibited, or only permitted subject to specified conditions.

3)    A Subsidy Advice Unit (SAU) will be set up within the Competition and Markets Authority (CMA).  Its functions include monitoring and oversight, and providing pre-award and post-award advice.

4)    The Secretary of State will, in secondary legislation, designate some types of subsidy as "subsidies of interest" or "subsidies of particular interest". Public authorities can ask the SAU to provide advice on subsidies of interest (voluntary referral) and must ask the SAU to provide advice on subsidies of particular interest (mandatory referral).

5)    There are transparency requirements relating to the award of subsidies/ making a subsidy scheme.

6)    The Competition Appeal Tribunal will hear appeals by interested parties (or the Secretary of State) against subsidy decisions, using judicial review principles.

The government has announced that it will be publishing guidance to support public authorities in advance of the new rules coming in to force.

 

https://www.gov.uk/government/news/new-subsidy-control-system-will-support-uk-jobs-boost-the-economy-and-strengthen-the-union

CMA opens investigation into education software solutions

 

 

 

 

The Competition and Markets Authority has launched an investigation into suspected competition law breaches concerning the renewal of school management information systems contracts by Education Software Solutions Ltd Group (ESS).

School management information systems are required in UK state schools.  They administer student information including safeguarding and student attendance,

ESS requires customers to move from one year to three year contracts.  The CMA has questioned whether this allows customers to consider their options.  The long procurement process may also make it difficult for alternative providers to compete.

The CMA is also considering the pricing of ESS packages and its bundling practices.  The CMA also states that will consider interim measures while the investigation is ongoing,

The CMA’s initial investigation will take place between April and August 2022.

https://www.gov.uk/government/news/cma-to-investigate-ess-s-move-to-three-year-contracts-for-schools

Government publishes response to consultation on reform of competition and consumer policy

 

Government publishes response to consultation on reform of competition and consumer policy

 

The Department for Business, Energy and Industrial Strategy (BEIS) has published the government's response to the July 2021 consultation on reforming competition and consumer policy.

The government has decided to implement a number of reforms.  My ‘top 10’ are the following:

(1)   Requiring the Competition and Markets Authority (CMA) to produce regular reports on the state of competition.

(2)   Introducing a statutory duty of expedition for the CMA in relation to its competition and consumer law functions including in relation to the new digital markets regime.

(3)   Improving procedures for market inquiries including more opportunity for binding commitments to be accepted, greater flexibility to define the scope of market investigations, and removing the requirement to consult on a market investigation reference within the first six months of a market study.

(4)   More flexible and versatile remedies in market investigations.  The CMA will be able to require businesses to amend remedies in a 10-year period following its finding of an adverse effect of competition.

(5)   Reforms to the merger regime including:

a.     The turnover threshold for qualifying mergers will be increased to £100 million and there will be a safe harbour for mergers between small business (with UK turnover below £10 million).

b.     A new threshold to enable the CMA to investigate mergers where at least one party has a UK share of supply of 33% and has UK turnover of more than £350 million will also be introduced.

c.      Allowing commitments to be given earlier during Phase 2 and introducing an automatic fast-track referral procedure.

(6)   Competition Act investigations:  Reforms will include adjusting the territorial scope of the Chapter I prohibition, granting the CMA new evidence gathering powers, changing the standard of review for interim measures, introducing a new statutory framework for confidentiality rings and reducing the turnover threshold for immunity from financial penalties for breaches of the Chapter II prohibition.

(7)   Administrative penalties:  Tougher financial penalties for failure to comply with an investigation and new civil penalties for non-compliance with CMA orders, undertakings or commitments.

(8)   Stronger powers and tools for international co-operation will also be introduced.

(9)   Algorithms:  The CMA will have new powers to test and verify whether the use of algorithms by companies complies with competition law.

(10)                   Giving the Competition Appeal Tribunal (CAT) the ability to grant declaratory relief and returning to the courts and CAT the discretion to award exemplary damages for breaches of competition law.

The government has decided at this time not to amend the standard of review for competition appeals.

 

https://www.gov.uk/government/news/new-rules-to-protect-consumers-hard-earned-cash

Payment Systems Regulator finds anticompetitive conduct in pre-paid card market

 

Payment Systems Regulator finds anticompetitive conduct in pre-paid card market

 

The Payment Systems Regulator (PSR) published its decision finding that Mastercard, allpay, APS, PFS and Sulion breached the Chapter I prohibition of the Competition Act 1998 by engaging in anti-competitive market-sharing in the prepaid card services sector.

This is the first Competition Act infringement decision issued by the PSR since it obtained concurrent competition powers in April 2015.

The PSR found that the parties agreed not to target each other’s public sector clients during the currency of existing public sector clients until the contracts came up for tender and they exchanged customer information to facilitate this behaviour.

The conduct took place under the National Prepaid Cards Network (the Network), which was sponsored by Mastercard and organised by Sulion which acted as a facilitator.

The public interest focus of the decision is striking as the PSR found that the violations had as their object the restriction of competition in the supply of prepaid card services for welfare payments.

The PSR imposed fines amounting to about £33 million in total.

https://www.psr.org.uk/media/qk0a22tw/psr-final-infringement-decision-non-confidential-april-2022_.pdf

European Commission and Germany raid Gazprom

 

European Commission and Germany raid Gazprom

The European Commission and the German Federal Cartel office have confirmed that they have launched unannounced inspection visits on “several companies” operating in the energy sector, including Gazprom.

The antitrust probes relate to suspected abuse of dominance concerns. It is not unusual to see coordinated dawn raids across multiple EU sites in cartel cases but there is no reason why that modus operandi should not occur in an abuse case.

Media reports indicate that the Commission raided the German offices of Gazprom and its subsidiary Wingas founded on concerns around gas price increases and capacity withholding.

The Commission has rejected claims that the investigations are politically motivated.  However it is clear that European antitrust authorities have heightened their vigilance around the ramifications of the war in Ukraine for EU gas prices..

The Commission had an ongoing investigation into Gazprom even before the invasion of Ukraine citing unusual business behaviour.  Concerns have been raised which are reminiscent of the ‘strategic manipulation’ that was alleged in earlier Article 9 commitments cases in the energy sector.   The Commission has hinted at possible capacity withholding where Gazprom is alleged to fill only 16% of its storage facilities compared to 44% for other operators.

Meanwhile, last year Ukraine’s Naftogaz made a complaint to the Commission that Gazprom “sharply reduced” its gas deliveries to exert pressure on Russia’s neighbour.  In response, the Russian deputy prime minister Novak has laid the fault for the price increases at EU policies including Germany’s actions over the Nord Stream 2 gas pipeline.  He has also cautioned that sanctions could further put global energy markets in jeopardy.

Plainly today’s raids represent a ramping up of the Commission’s antitrust scrutiny of EU energy markets.  It would be naïve to suggest that the timing of this is unrelated to recent events in Ukraine and that Gazprom is only incidental to the intensification of regulatory focus. 

What is less clear is whether the actions of the antitrust authorities can make a real difference in geopolitical terms.  It is a familiar complaint that antitrust authorities act too late for their interventions to matter.  There can often be a double-bind problem: intervene too early and you may create economic shocks that make the problem worse; wait until you have more information to take a fully informed decision and it can be too late.  That dilemma becomes less of a quandary as events in Ukraine unfold.  

I would like to hope that the European regulators are able to act with agility when the time comes.  If supplies are in fact withheld, in significant amounts, it may be asked whether the time has come to introduce interim measures?  However, that still faces a practical question of how such measures would be enforced if an order came from the Kremlin to ignore them.  The test may well come down to the ‘realpolitik’ or, putting it differently, whether the EU as a destination for Russian gas is too valuable to lose.

General Court upholds re-adopted air cargo cartel decision but reduces fines

 

General Court upholds re-adopted air cargo cartel decision but reduces fines

The EU General Court has ruled in 13 appeals brought by air cargo carriers against the European Commission’s re-adopted March 2017 decision in the air freight cartel.

The General Court annulled the Commission's original 2010 cartel decision in December 2015.

In March 2017, the Commission re-adopted the cartel decision in largely identical terms to its original decision while addressing procedural defects found by the General Court.

The Court rejected appeals brought by Martinair, KLM, Cargolux, Air France-KLM, Air France, Lufthansa and Singapore Airlines and upheld the penalties that the Commission imposed on these carriers.

However, it annulled the Commission's decision in certain matters relating to the following where it reduced the fines:

• Air Canada and British Airways.  The Commission erred in finding that the airlines participated in the element of the infringement relating to the refusal to pay commission on surcharges.
• Cathay Pacific.  The Commission breached the statute of limitation.

·        Japanese Airlines. The Commission wrongly found Japan Airlines liable in respect of intra-EEA and EU-Switzerland routes.

• Latam Airlines and Lan Cargo. The Commission erred in finding that these carriers participated in the elements of the infringement relating to the security surcharge and the refusal to pay commission on surcharges, amongst other matters.

In relation to SAS Cargo Group the General Court found that the Commission erred in finding an infringement relating to the refusal to pay commission on surcharges and also in relation to routes from Thailand to the EU for part of the period of the infringement.  The court reduced the company’s fine by €4.5 million but then increased it by €4.4 million to take into account turnover on routes within Denmark, Sweden and Norway.

 

Martinair Holland v Commission (T-323/17), SAS Cargo Group and Others v Commission (T-324/17), Koninklijke Luchtvaart Maatschappij (KLM) v Commission (T-325/17), Air Canada v Commission (T-326/17), Cargolux Airlines v Commission (T-334/17), Air France-KLM v Commission (T-337/17), Air France v Commission (T-338/17), Japan Airlines v Commission (T-340/17), British Airways v Commission (T-341/17), Deutsche Lufthansa and Others v Commission (T-342/17), Cathay Pacific Airways v Commission (T-343/17), Latam Airlines Group and Lan Cargo v Commission (T-344/17) and Singapore Airlines and Singapore Airlines Cargo v Commission (T-350/17)

EU antitrust authorities ally to combat shocks arising from the war in Ukraine

 

Antitrust authorities in Europe are investigating increasing prices arising out of Russia’s invasion of Ukraine.  The European Competition Network (ECN) has pledged that it will not enforce the EU competition rules against collaboration between competitors which seeks to combat severe supply chain disruptions caused by the war.

On 21 March the European Commission and the antitrust authorities of the member states issued a joint memorandum condemning what was described as Russia’s “unprecedented military aggression”.  The statement recognised that companies may need to cooperate to ensure supply chain continuity or to mitigate the shocks of EU sanctions.

The authorities in Austria, Italy, Germany, Ireland and Albania are investigating or monitoring national fuel markets but said that they would not intervene in the face of temporary measures that were “strictly necessary” to address the severe perturbations in the supply chains.

The coordinated response of the authorities reflects a similar approach to the temporary relaxation of antitrust laws during the height of the coronavirus pandemic.  This is the third asymmetric shock that has been experienced in 15 years.  Its effects will be felt disproportionately and unequally across the bloc depending on the exposure of the various states to Russian supply chains and their economic health before the war broke out.

However, some authorities have expressed caution that the situation is not a free pass to breach competition law.  This again echoes the approach during the 2008 economic crisis that although it was not ‘business as usual’ from an antitrust perspective, this did not mean that distortions of competition would go unchecked.

Italy’s Competition Authority has sent requests for information to the main national oil companies following a few days of “extraordinary” prices increases in diesel and gasoline.

Ireland’s Competition and Consumer Protection Commission has sent a letter to an undisclosed trade association warning of potential antitrust violations that could arise from statements about future fuel price hikes.

Meanwhile the European Commission has an open antitrust investigation against Gazprom and is consulting on a new temporary crisis framework under the state aid regime.

https://www.bwb.gv.at/fileadmin/user_upload/PDFs/202203_joint-statement_ecn_ukraine-war.pdf