Europe

Fine in Phosphates Cartel Case Confirms Need to Carefully Evaluate European Commission Settlement Proposals

Businessman's hands exchanging euro on blue background, closeup shot Fine in Phosphates Cartel Case Confirms Need to Carefully Evaluate European Commission Settlement Proposals

On January 12, 2017, the Court of Justice of the European Union (“CJEU”) dismissed Roullier group’s appeal and thereby confirmed a fine of €59,850,000 imposed by the European Commission (“EC”) in the phosphates cartel case.[1] This blog post summarizes the decision and discusses the CJEU’s reasoning, which provides valuable guidance to a firm in a cartel investigation that is evaluating a settlement proposal from the EC. In particular, the firm must weigh the fact that, pursuant to the CJEU’s decision, the EC may ultimately impose fines greater than those it proposed in a rejected settlement offer, even if it determines that the firm’s cartel participation was significantly less than it thought at the time of settlement discussions.

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DOJ and FTC Stand Their Ground on Comity Policy Despite Second Circuit’s Decision in Vitamin C Case

International Flags on poles DOJ and FTC Stand Their Ground on Comity Policy Despite 2d Circuit’s Decision in Vitamin C Case

Last September, we discussed the U.S. Court of Appeals for the Second Circuit’s opinion in In re Vitamin C Antitrust Litigation vacating a $147 million judgment against Chinese vitamin C manufacturers based on the doctrine of international comity.  That case stemmed from allegations that the defendants illegally fixed the price and output levels of vitamin C that they exported to the United States.  In reversing the district court’s decision to deny the defendants’ motion to dismiss, the Second Circuit held that the district court should have deferred to the Chinese government’s explanation that Chinese law compelled the defendants to coordinate the price and output of vitamin C.

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EU Held Liable To Pay Damages As a Result of the “Excessive” Length of Judicial Proceedings for an Appeal Against a Cartel Decision

The possibility for a claim to be brought against the European Union (the “EU”) as a result of “damage” caused by its institutions is enshrined in Article 340 of the Treaty on the Functioning of the European Union (“TFEU”).  In a General Court judgment of 10 January 2017, Case T-577/14 Gascogne Sack Deutschland and Gascogne v European Union (EU:T:2017:1), the appellants successfully brought a claim for material and non-material harm suffered as a result of the “excessive” length of the judicial proceedings in the context of an appeal against a European Commission (“Commission”) decision of 30 November 2005.

The timing of the process was as follows. On 23 February 2006, two entities from the Gascogne group filed appeals before the General Court against the Commission decision of 30 November 2005 finding the existence of a cartel in the plastic industrial bags sector in a number of Member States. The written procedure of the General Court proceedings in each of these cases ended in February 2007 and the oral procedure began in December 2010. The appeal was not dismissed by the General Court until 16 November 2011.  READ MORE

CMA Launches Consultation on Proposed Changes to De Minimis Exception in UK Merger Control Regime

On 23 January 2017, the UK Competition and Markets Authority launched a public consultation on possible changes to the de minimis exception. The proposed changes would increase the upper threshold for markets considered to be sufficiently important to justify a merger reference from £10 million to £15 million, and would raise the lower threshold for markets not considered to be sufficiently important from below £3 million to below £5 million. Handshake of businessmen - greeting, dealing, mergers and acquisition concept

The UK Competition and Markets Authority (“CMA”) has a duty to refer a transaction for an “in depth” phase 2 investigation in instances where it believes that there is a realistic prospect of a transaction resulting in a “substantial lessening of competition”, subject to certain exceptions. This includes a de minimis exception in markets of “insufficient importance”, where the costs involved in investigating the transaction would be disproportionate to the size of the market concerned.

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Parties Challenge the European Commission’s Decision to Open a Phase II Investigation

European Commission Considers Introduction of New European Union Merger Control Thresholds European flags in front of the Berlaymont building, headquarters of the European commission in Brussels

In an unprecedented move, the parties to a planned merger transaction have brought an action for annulment against the European Commission’s decision to initiate proceedings even before the proceedings are closed.

Under the EU Merger Regulation (“EUMR”), the Commission’s review procedure is divided into two phases: “Phase I”, which is normally limited to 25 working days, serves to separate unproblematic cases from cases that require a deeper analysis. At the end of phase I, the Commission must either clear a transaction (if it does not find significant competition concerns or if it concludes that it has no jurisdiction) or it must initiate “phase II” (if it has serious doubts as to the transaction’s compatibility with the EU law). While a decision to open phase II does not prejudice the final outcome – the Commission may still clear the transaction – it significantly increases the burden in terms of cost and inconvenience for the merging parties. The opening of phase II normally entails a significant delay of several months, and during that time and until the Commission issues a clearance decision, the parties may not close the transaction.

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U.S. DOJ and FTC Issue Updated Antitrust/IP Guidelines and International Enforcement and Cooperation Guidelines

On January 13, 2017, the U.S. Department of Justice and the Federal Trade Commission issued their updated Antitrust Guidelines for the Licensing of Intellectual Property, first issued in 1995, which explains how the two agencies evaluate licensing and related activities involving patents, copyrights, trade secrets and know-how. Although the agencies have issued a variety of reports since 1995 regarding antitrust and IP issues, this is the first comprehensive update of the Guidelines.  The final updated Guidelines do not differ significantly from the proposed Guidelines released in August 2016, which we analyzed in this blog post.

Also on January 13, 2017, the DOJ and FTC issued their revised Antitrust Guidelines for International Enforcement and Cooperation, first issued in 1995 as the Antitrust Enforcement Guidelines for International Operations. These Guidelines explain the agencies’ current approaches to international enforcement policy and their related investigative tools and cooperation with foreign enforcement agencies.  The revised Guidelines differ from the 1995 Guidelines by adding a chapter on international cooperation, updating the discussion of the application of U.S. antitrust law to conduct involving foreign commerce (e.g., the Foreign Trade Antitrust Improvement Act, foreign sovereign immunity, foreign sovereign compulsion, etc.), and providing examples of issues that commonly arise.

Phone Roaming Charges for Periodic Travel in the European Union To End

The European Union commitments contained in the Telecoms Single Market Regulation of 2015 to end roaming charges for periodic travel in the EU requires the EC to adopt rules by December 15, 2016. Image of a man in the park checking roaming status on the smartphone screen.

The development of a digital single market is a key objective for the European Union. As Jean-Claude Juncker, President of the European Commission (“EC”) said in September, “We need to be connected. Our economy needs it.[1] Although this economic policy objective was initiated when the EC published its communication on the Digital Single Market Strategy[2] for Europe in 2015, the various proposals it contains need to be formally adopted and implemented in the EU. This process is now underway.

The EU’s commitments contained in the Telecoms Single Market Regulation[3] of 2015 to end roaming charges for periodic travel in the EU required the EC to adopt rules by 15 December 2016.  A transition period—starting from 30 April 2016 to 15 June 2017—has been established to make the abolition of roaming charges sustainable throughout the EU without an increase in domestic prices.  On December 8, the EC sent an implementing draft on the end of the roaming charges to the representatives of Member States (via the Communications Committee (“COCOM”)). They voted on the text on December 12, and the EC will adopt these new rules regarding the retail market[4] in the coming days. READ MORE

CMA Obtains Director Disqualification for Breach of Competition Law

The Competition and Markets Authority (“CMA”) has today announced that it has secured the first disqualification of a director of a company which has infringed competition law. Under the Company Directors Disqualification Act 1986 (as amended by the Enterprise Act 2002), the CMA can apply to the court for a disqualification order to be made against a director in cases where a company has breached competition law and the director’s conduct makes him or her “unfit to be concerned in the management of a company[1]. This is the first time that the CMA has utilised this power.

In this case, poster supplier Trod breached competition law by agreeing with a competitor that they would not undercut each other’s prices for posters and frames sold online, with the agreement between the competitors being implemented using automated re-pricing software. The company received a fine of £163,371 for this behaviour.

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Record-Breaking Fine for Gun-Jumping Imposed by the French Competition Authority

On 8 November 2016 the French Competition Authority (“FCA”) imposed the highest “gun-jumping” national and worldwide fine ever, €80 million, on Altice-Numericable, a major French telecommunications operator, in relation to its 2014 acquisitions of SFR (“Société Française du Radiotéléphone”) and OTL (“Omer Telecom Limited”). Image of French flag overshadowing Western Europe.

On November 8, 2016, the French Competition Authority (“FCA”) imposed the highest “gun-jumping” national and worldwide fine ever, €80 million, on Altice-Numericable, a major French telecommunications operator, in relation to its 2014 acquisitions of SFR (“Société Française du Radiotéléphone”) and OTL (“Omer Telecom Limited”).

This is a world first decision when considering the amount of the sanction and the seriousness of the circumstances,” commented Isabelle de Silva, the President of the FCA since last October.

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European Commission Considers Introduction of New Merger Control Thresholds

European Commission Considers Introduction of New European Union Merger Control Thresholds European flags in front of the Berlaymont building, headquarters of the European commission in Brussels

The European Commission has launched a public consultation to evaluate several aspects of EU merger control for possible revision. Stakeholders are invited to provide feedback until 13 January 2017. A link to the questionnaire can be found here.

The current consultation partly builds on previous efforts to improve and simplify the EU merger control regime, including the so-called “Simplification Package”, which has been in force since January 2014.

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E-Commerce: The EU Commission Releases Its Preliminary Report in the E-Commerce Sector Inquiry

After gathering information from nearly 1800 stakeholders from all 28 EU Member States and collecting around 8000 distribution agreements, the EU Commission published on 15 September a preliminary report on the findings of its ongoing competition sector inquiry into e-commerce.[1]

The inquiry was launched by the Commission in May 2015, after finding that despite the growing significance for e-commerce across EU countries over the last years (approximately 50% of the population of the Union shopped online in 2014), cross-border online trade remained limited.

While such limitations may have been attributable to language barriers, consumer preferences or differences in legal frameworks between Member States, the Commission sought to investigate the sector based on indications that companies active on the e-commerce market may be engaged in anticompetitive agreements.

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Germany Plans to Introduce New Merger Notification Test

Merger Acquisition Antitrust

The German government has recently published a bill that would significantly amend the criteria for determining whether an M&A transaction is subject to German merger control.

Currently, the applicability of the German merger control rules depends primarily on the revenues of the firms participating in a transaction. A concentration needs to be notified to the German competition authority – the Bundeskartellamt – where all the following three turnover thresholds are met: (i) EUR 500 million worldwide, (ii) EUR 25 million in Germany, and (iii) EUR 5 million in Germany. The 500 million threshold (i) refers to the sales achieved by all of the parties combined in their last completed financial year. The other two thresholds (ii) and (iii) refer to the individual sales of two parties to the transaction (e.g., the acquirer, on the one hand, and the business being acquired, on the other). Where the notification thresholds are met, the parties are subject to a standstill obligation. They must not consummate the transaction until it has been cleared (or is deemed to have been cleared) by the Bundeskartellamt.

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English High Court Allows LCD Damages Action to Proceed

On 29 July 2016, the High Court of England and Wales delivered its judgment dismissing the applications of two defendants to strike out a follow-on damages case in which the claimant, iiyama, asserts that it suffered losses as a result of the defendants’ alleged participation in the LCD cartel. Iiyama v Samsung [2016] EWHC 1980 (Ch).

The claim follows on from the European Commission’s decision of 8 December 2010, which found that six LCD panel producers had entered into a world-wide price fixing cartel and had implemented that cartel within the EU.  The Commission had been satisfied that the agreement related to direct and indirect sales of LCD panels to companies in the EU.  It also found that the participants in the cartel had sought to implement the cartel within the EU, even if price negotiations took place outside the EU.

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Fnac-Darty: A Landmark Merger Decision in France

On 18 July 2016, the French Competition Authority (“FCA”) broke new ground in France by holding that retail distribution of electronic products through both physical stores and online channels is a single relevant market.

The background and the FCA’s Decision

The FCA’s decision concerns Fnac’s acquisition of Darty. The proposed transaction drew a great deal of public attention because it involves France’s two largest click and mortar retailers. It drew even more attention in March 2016, when the FCA announced a phase II examination of the potentially negative effects of the merger. However, in its 18 July 2016 decision, the FCA reversed course and granted conditional approval for the transaction after determining the relevant market includes both online and physical distribution channels.

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Price Signalling Can Put Companies in Hot Water in the EU

The long list of practices violating EU competition law just got longer: in Container Shipping, the European Commission confirmed that the unilateral publishing of pricing information, in public media, can violate Article 101 TFEU.[1]

In this case, the Commission expressed concern that the practice of fourteen container liner shipping companies (“Carriers”) to publish intentions to increase prices may harm competition. The Carriers regularly announced intended increases of freight prices on their websites, via the press, or in other ways. The announcements were made several times a year and included the level of increase and the date of implementation. The Carriers were not bound by the announced increases and some of them postponed or modified the price increases after announcement.

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European Commission Puts the Boot into Spanish Football Clubs

On 4 July 2016, just as European football takes centre stage at the final stages of the UEFA European Championships in France, the European Commission (“Commission”) issued a decision ordering Spain to recoup tens of millions of euros of unlawful State aid granted to seven Spanish football clubs, including two of the best-known clubs in the world, Real Madrid and FC Barcelona.

The Commission’s probe was launched in December 2013, with three parallel investigations into certain public support measures granted to Real Madrid, FC Barcelona, Athletic Club Bilbao, Club Atlético Osasuna, and three Valencian football clubs, Valencia CF, Elche CF and Hercules CF.

“Protect the level playing field”

In announcing the rulings, Margrethe Vestager, Competition Commissioner, stated: “Using tax payers’ money to finance professional football clubs can create unfair competition. Professional football is a commercial activity with significant money involved and public money must comply with fair competition rules. The subsidies we investigated in these cases did not.” The Commission’s press release cites its application of State aid rules in these investigations as “protect[ing] the level playing field” for competing professional football clubs against State measures that could “prevent rivals from growing and being competitive.

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Health Check for Hospitals in Germany

Are patients receiving the best care in hospitals? The German competition authority – Bundeskartellamt – has now decided to apply a health check to the German hospitals market.

On May 31, 2016, the German competition authority announced that it was launching a so-called “sector inquiry” into the hospital services market to examine the degree of competition in that sector of the economy.

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The European Commission’s Priorities in Pursuing Enforcement Actions

Businesses often wonder how competition authorities pick and choose the cases they decide to bring.  Companies with operations in Europe now have some guidance as a result of a recent speech by European Competition Commissioner Margrethe Vestager, in which she outlined how the Commission prioritizes its enforcement efforts.

Commissioner Vestager explained that the Commission uses three main criteria in prioritizing which cases to pursue.  Not every case needs to satisfy all three criteria, but the Commission tries to keep these three objectives in mind in determining whether to pursue an enforcement action.

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Observations on “Brexit” and the EU/UK Competition Law Regime

Rightly considered to be a “once in a generation decision,” the UK electorate will on 23 June 2016 have a chance to vote on whether the UK should remain a member of the European Union (“EU”).

This upcoming referendum has resulted in emotional rhetoric and heated discussions in the media (and no doubt around dining tables throughout the UK and elsewhere) on which way to vote, and why. However, what is striking to us is the relative lack of focus on the legal implications of so-called “Brexit,” including on EU and UK competition law.

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Now in force: Major amendments to the antitrust damages regime in the UK

The Consumer Rights Act 2015 (“CRA”) comes into force today, 1 October 2015.1 It introduces major reforms to the antitrust damages actions regime in the UK.2 In particular, the CRA broadens the type of cases that can be heard by the UK’s specialist antitrust court, the Competition Appeal Tribunal (the “CAT”), to include opt-out class actions, and makes other procedural amendments aimed at facilitating and streamlining private damages actions in the UK.

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