Dr. Till Steinvorth

Partner

Düsseldorf


Read full biography at www.orrick.com

Finding a niche to combine his passion for international law and competition law, Till Steinvorth is a partner in Orrick’s Antitrust & Competition practice group in Düsseldorf. He has practiced in several other major European centers, including Berlin, London and Brussels, and he received his PhD in Italy. It was there when his interest in European law was piqued and that brought him to the area of competition law.

He practices in all aspects of competition, including mergers, compliance, cartels, litigation, abuse of dominance, among others – but his interest in antitrust damages claims have become a highlight of his practice.  For example, he recently brought an action for damages against the members of the German "sugar cartel" on behalf of a manufacturer of sweets and confectionary. This was one of the very first damages actions in Germany where the members of a cartel were sued to disclose information for calculating the quantum of damages. Cartel investigations are also a centerpiece of his practice, including representing a Japanese electronics company in a global cartel investigation. 

Till also pursues international trade and compliance matters, including matters involving foreign investment filings in Germany. He teaches competition law at the FOM Hochschule für Oekonomie und Management in Essen.

Posts by: Till Steinvorth

EU: Parent Companies Are Liable for Cartel Damages Caused By Their Liquidated Subsidiaries

In a landmark judgment (Case C‑724/17, Vantaa vs. Skanska Industrial Solutions and others), the European Court of Justice (ECJ) decided on March 14, 2019 that companies cannot use corporate restructuring to escape their liability for cartel damages.

Background

The Skanska case concerned a cartel in the asphalt market in Finland. Seven companies were ultimately fined for their participation in the cartel. After the cartel became public, the municipality of Vantaa, which had bought asphalt during the cartel period, requested compensation from the cartelists. However, several companies had already been dissolved in “voluntary liquidation procedures.” Their sole shareholders (among them Skanska) had then acquired the dissolved companies’ assets and continued their economic activity.

The liquidation of the companies involved in the cartel did not prevent the Finnish authorities from imposing fines on their parent companies. They applied the “principle of economic continuity,” which is well established in the law on fines for EU competition law infringements. However, Skanska disputed that this principle should also apply in civil damages matters. It argued that it could not be held liable because it was not personally involved in the cartel.

The Decision of the European Court of Justice

The ECJ did not follow the arguments of Skanska and the other defendants and found that the defendants could be held liable for the harm caused by their former subsidiaries.

According to the ECJ, the EU prohibition of cartels will be effective, punitive and deterrent only if the associated right to seek private damages is also effective. The identification of the liable entity for a damage claim is governed by EU law and must be based on the same interpretation of the “concept of undertaking” as for the imposition of fines. This means, in particular, that companies cannot circumvent the right of victims to claim damages by dissolving the legal entity which participated in the cartel.

Practical Implications

The Skanska judgment is the latest of a series of judgments in the EU that have strengthened the rights of claimants in antitrust damages actions. It has closed the door for defendants to use corporate restructurings to escape their responsibilities. While Skanska concerns a very specific situation of legal succession, the ECJ’s reasoning implies that the entire case law on the “concept of undertaking” may be applied in private damages cases. As a consequence, corporate parents may be held liable for infringements of group companies to a far greater extent than previously thought.

The Skanska judgment will also have implications for M&A transactions. Since the “concept of undertaking” attaches liability to assets rather than to a particular legal entity, the buyer of a business in an asset deal needs to consider the possibility of being held financially accountable for antitrust infringements of the seller. This aspect should be part of any due diligence.

New EU Rules on Foreign Investments: All You Need to Know About the New Screening Mechanism

The Council of the European Union (EU) has adopted a new regulation “establishing a framework for the screening of foreign direct investments into the Union” (the Regulation). This is the first time the EU is equipping itself with a comprehensive framework to monitor investments into EU businesses by investors from outside the EU.

The new rules create a cooperation mechanism where EU member states and the European Commission are able to exchange information and raise concerns. The Commission will have the possibility to issue opinions in cases concerning several member states, or where an investment could affect a project or program of interest to the whole EU. However, EU member states remain in charge of reviewing, and potentially blocking, foreign investments on grounds of security or public order. The decision to set up and maintain national screening mechanisms also continues to be in the hands of individual member states.

In the following, we give an overview of the main features of the Regulation.

The New Regulation

Until recently, there were no measures at the level of the EU on the review and control of foreign direct investments. At the national level, such measures have existed in several member states – and amid growing concerns about the impact that certain foreign investments may have on national interests, some member states have made their review procedures significantly more stringent in recent years. However, the decentralized and fragmented nature of the national review procedures raised questions about their effectiveness in addressing adequately the potential (cross-border) impact of foreign investments in sensitive sectors.

To respond to such concerns, the European Commission proposed the Regulation in 2017.

The objective of the Regulation is not to harmonize the formal foreign investment mechanisms used in EU member states, or to replace them with a single EU mechanism. Rather, it provides a mechanism for EU-wide cooperation and information sharing to allow member states to make informed decisions taking into account all relevant risks and protect pan-European interests. The decision on whether to set up a review mechanism or to review a particular foreign investment remains the sole responsibility of the member states.

The EU Council adopted the Commission’s proposal on March 5, 2019. The Regulation will enter into effect after a transitional period of 18 months following its publication in the Official Journal, expected to take place on March 21, 2019.

Under the Regulation, the competent authorities of the EU member states remain in charge of screening foreign direct investments under the applicable national laws. The role of the European Commission is to facilitate coordination and to advise member states where it considers that an investment would likely affect security or public order in one or more member states.

Transactions Subject to Review

The Regulation does not put in place a review requirement for foreign investments; rather, it sets up a procedural framework for screening mechanisms created by the EU member states. The rules of the Regulation apply to any national “procedure allowing to assess, investigate, authorize, condition, prohibit or unwind foreign direct investments.”

The definition of “foreign direct investments” is broad and does not require an investment above a defined threshold of shareholder rights or the acquisition of control in the target company. Any investment “aiming to establish or to maintain lasting and direct links” with a business in “in order to carry on an economic activity” in an EU member state is sufficient. The investment must be made by a “foreign investor,” defined as “a natural person of a third country or an undertaking of a third country.” Third countries are countries outside the EU. Therefore, the Regulation does not apply to the screening of cross-border investments inside the EU.

 

Procedure

The aim of the Regulation is to enhance cooperation and increase transparency between EU member states and the European Commission. To this end, it creates a “cooperation mechanism” that requires member states to inform each other and the Commission of incoming foreign direct investments affecting security and public order (→ EU Cooperation Mechanism for the Screening of Foreign Direct Investments):

  • Where a member state screens a foreign direct investment, it is obliged to notify the other member states and the Commission by providing, “as soon as possible,” certain information on the investment (→ Information Requirements). The other member states can then comment and the Commission can issue a (nonbinding) opinion within certain time limits, normally within 35 calendar days following the notification (this period is extended if other member states or the Commission request additional information).
  • Where a foreign direct investment in a member state is not undergoing screening and other member states or the Commission considers that the investment is likely to affect security or public order, the latter may request from the former certain information on the investment (→ Information Requirements). The other member states and the Commission may then provide comments or a (nonbinding) opinion, respectively, to the member state receiving the foreign direct investment. The time limit for comments and opinions is 35 calendar days following the receipt of information on the investment, although extensions are possible.

Although the final screening decision is the sole responsibility of the member state receiving the foreign investment, it is required to give “due consideration” to the comments of the other member states and the opinion of the Commission. Moreover, in cases where the Commission believes that the foreign direct investment may affect projects or programs of “Union interest,” the member state receiving the investment is required to take “utmost account” of the Commission’s opinion and provide an explanation if the opinion is not followed. Project and programs of “Union interest” are defined in the Annex of the Regulation. They currently include:

  • European GNSS programs (Galileo & EGNOS);
  • Copernicus;
  • Horizon 2020;
  • Trans-European Networks for Transport (TEN-T);
  • Trans-European Networks for Energy (TEN-E);
  • Trans-European Networks for Telecommunications;
  • European Defence Industrial Development Programme; and
  • Permanent structured cooperation (PESCO).

In addition to creating the cooperation mechanism, the Regulation also imposes certain minimum standards for the national screening mechanisms of EU member states. These include:

  • National rules and procedures must be transparent and not discriminate between third countries.
  • Member states must set out the circumstances triggering a screening, the grounds for screening and the applicable detailed procedural rules.
  • Member States must apply timeframes that allow them to take into account the comments of other member states and the opinions of the Commission under the coordination mechanism.
  • Confidential information must be protected.
  • Foreign investors and the undertakings concerned must have the possibility to seek recourse against screening decisions of the national authorities.
  • National screening mechanism must include measures necessary to identify and prevent circumvention.

Substantive Assessment

The Regulation does not attempt to harmonize national rules on foreign investments in the EU member states. However, it does provide a list of factors that the member states and the European Commission may take into consideration when conducting their assessment. This includes potential effects on the following:

  • critical infrastructure (incl. energy, transport, water, health, communications, media, data processing, finance);
  • critical technologies and dual use items (incl. artificial intelligence, robotics, semiconductors, cybersecurity, aerospace, defense, energy storage, quantum, nuclear, nano- or biotechnologies);
  • supply of critical inputs (incl. energy, raw materials, food);
  • access to sensitive information (incl. personal data); or
  • freedom and pluralism of the media.

 

German Competition Authority Investigates Amazon

The German Federal Cartel Office (FCO) has opened abuse proceedings against Amazon for practices related to the German marketplace amazon.de. This move comes not long after the European Commission initiated a preliminary investigation into Amazon’s use of transaction data.

In both the German and the EU case, the competition concerns appear to be linked to Amazon being not only the largest online retailer but also the largest online marketplace for competing retailers. There are, however, important differences between the two investigations: While the Commission is looking at “exclusionary abuse,” i.e. conduct hindering the competitive opportunities of its rivals, the FCO investigates potential “exploitative abuse,” i.e. imposing conditions that are significantly more onerous for retailers using the marketplace than they would be in a competitive environment (see the FCO’s press release).

The approach of the FCO is based on special features of German competition law, which facilitate proceedings against abuses of market power:

First, regarding the issue of market power, the German prohibition on abusive market conduct applies not only to companies with a dominant market position (as under EU law) but also to companies with “relative market power,” which is a less demanding standard. A company has relative market power if small or medium-sized customers or suppliers are dependent on it and cannot reasonably switch to other companies for the supply or the sale of a particular type of goods or services. The FCO believes that Amazon may be dominant or may have relative market power because it functions as a “gatekeeper.” In fact, Amazon has become so powerful in Germany that many retailers and manufacturers depend on the reach of its marketplace for their online sales.

Second, regarding the existence of abuse, the FCO suspects that Amazon is abusing its market position to the detriment of sellers active on its marketplace by imposing unfair terms and conditions. Here, the FCO relies on the case law of the German Supreme Court, which has decided that the use of unfair terms and conditions by a dominant firm can constitute an abuse – provided it is because of its dominance or relative market power that the firm is able to impose such terms and conditions. In other words: there must be a causal link between the firm’s market power or dominance and the unfair terms and conditions. It is not yet clear how the FCO will establish such a link.

Regarding the terms and practices that will be scrutinized, the FCO has listed the following provisions as being potentially illegal:

  • liability provisions
  • choice of law and jurisdiction clauses
  • rules on product reviews
  • the non-transparent termination and blocking of sellers’ accounts
  • withholding or delaying payment
  • clauses assigning rights to use the information material that a seller has to provide with regard to the products offered
  • terms of business on pan-European dispatch

The FCO’s Amazon investigation shows some similarities to its ongoing proceedings against Facebook (see our previous Blog post). Both cases are focused on the use of unfair terms and conditions. The FCO has said that it will issue its Facebook decision in early 2019. We expect that decision to set the direction for the Amazon investigation.

 

Platform Bans: German Competition Authority Critical Despite Coty Judgment

Since last year’s “Coty” judgment of the European Court of Justice (ECJ), it may have seemed settled that authorized dealers in a selective distribution network can be prohibited from selling products via third-party marketplaces, i.e. online platforms operated by third parties such as Amazon.[1] However, in a recent position paper, the German Federal Cartel Office (FCO) has expressed a much more nuanced view.[2]

According to the Coty judgment, EU competition law generally allows the banning of online third-party platforms in selective distribution systems, especially for luxury goods. First, where such a ban is applied without discrimination and in a proportionate manner to the distribution of luxury goods and with the objective of preserving the luxury image of such goods, the ban is not considered a restriction of competition. Second, in all other cases – for example where the goods in question are not “luxury goods” – the ban may be justified by the Vertical Block Exemption Regulation (VBER), provided the market shares of the parties are below 30 percent.[3]

The FCO, however, makes it clear that there are several issues that remain unsolved, even after the Coty ruling.

First, the FCO points out that the Coty judgment deals with “luxury goods” and that it cannot simply be applied one-to-one to other types of products, including high-quality products. Thus platform bans for non-luxury goods may, in fact, infringe competition law, even within selective distribution systems. In the absence of a clear definition separating “luxury goods” from other (high-quality) branded products, accepting outright bans of online platforms will, therefore, be anything but automatic.

Second, the FCO explains the policy that it proposes to apply outside the (limited) scope of the Coty ruling, i.e. to non-luxury goods, including high-quality branded products: it considers that a general prohibition on using third-party online platforms is likely excessive and that less restrictive measures, such as specific quality requirements, will normally suffice to protect a brand image. For example, the FCO explains that dealers could be required to have their own online shop on the marketplace rather than share a product page with other dealers.

Third, the FCO also puts a question mark over the application of the VBER to third-party platform bans. The ECJ decided in its “Pierre Fabre” judgment that manufacturers generally cannot prevent their distributors from using the internet as a sales channel.[4] An outright ban on internet sales is normally an infringement of EU competition law. However, in “Coty,” the ECJ added that a mere ban of third-party platforms does not amount to a prohibition on using the internet – provided distributors are able to run their own online shops and are unrestricted in using the internet for advertising and marketing purposes so that customers can find their online offers via online search engines. The FCO now points out that consumer preferences and the relative importance of different sales channels may vary between EU member states. According to the FCO, marketplaces and price comparison sites are much more significant in Germany than in other EU member states. In Germany, banning the use of marketplaces could reduce a distributor’s visibility to such an extent that the ban becomes equivalent to a complete ban of online sales and, thus, unlawful.

In a nutshell, the FCO is not prepared to generally accept the legality of third-party platform bans and it can be expected that it will continue to challenge such prohibitions if they have restrictive effects on competition.

However, the FCO also recognizes that Amazon Marketplace has become increasingly important for manufacturers and that many manufacturers can no longer afford to exclude this particular sales channel from their distribution system. The rising market power of Amazon Marketplace is of particular concern for the authority because of Amazon’s dual business model. Amazon is a “hybrid platform” that acts both as an intermediary for online dealers and as an authorized dealer for the same products. The FCO highlights the risks that follow from this setup: in particular, independent dealers could be disadvantaged or squeezed out of the market. The FCO is very clear about its intention to keep online markets open and that it will closely monitor Amazon’s growing market power with this in mind.

_________________________ 

[1] EU Court of Justice judgment of December 6, 2017, Coty Germany GmbH vs. Parfümerie Akzente GmbH, C-230/16, EU:C:2017:941.

[2] “Competition and Consumer Protection in the Digital Economy: Competition restraints in online sales after Coty and Asics – what’s next?” published on the FCO website (link).

[3] Commission Regulation (EU) No 330/2010 of April 20, 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices.

[4] EU Court of Justice judgment of October 13, 2011, Pierre Fabre Dermo-Cosmétique SAS vs. Président de l’Autorité de la concurrence a.o., C-439/09, [2011] ECR I-9447.

First Person Extradited From Europe to the United States for Criminal Antitrust Charges—Continued

Can Germany extradite an EU national to the United States for criminal prosecution when Germany’s own nationals are protected from extradition? This question has been put to the European Court of Justice, and the court’s advisor, Advocate General Yves Bot, has said “yes”. READ MORE

Gun-Jumping Continues To Be Serious Infringement in EU

Like many other merger control regimes, the EU merger control regulation (Regulation No. 139/2004, hereinafter “EUMR”) imposes certain obligations on parties to mergers and acquisitions that come under the jurisdiction of the European Commission. In particular, a transaction must be notified to the Commission prior to its implementation, and the parties must not implement the transaction until it has been cleared by the Commission. Failure to comply with the notification or the “standstill” obligations may result in a fine of up to 10% of the worldwide group turnover for each party. READ MORE

Big Data: German Antitrust Decision Regarding Facebook Expected in 2017

As more internet users entrust their personal data to operators of websites, operators’ use of this “Big Data” has become a growing concern. As a result, government agencies around the world are grappling with whether and how to regulate “Big Data” in the context of social networking websites.  This includes some competition authorities that are trying to expand their purview by using competition laws to regulate “Big Data” in the context of social media.  The possibility that competition authorities around the world may try to become super regulators of “Big Data” should be of concern to all operators of social networking websites.

A case in point is the German competition authority (FCO), which in March 2016 initiated proceedings against one of the most popular social networking sites – Facebook – purportedly based on a concern that it may have infringed data protection rules. Since the case is the first of its kind in Europe, the outcome – which is expected before the end of the year – is awaited with great interest.

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German Competition Authority Still One of the Most Active Regulators in Europe

Bundeskartellamt Haus German Competition Authority Still One of the Most Active Regulators in Europe

Germany’s Federal Cartel Office (FCO) has published two documents summarizing its activities for the public: a more detailed “Activities Report” for the years 2015 and 2016 and the high-level “Annual Report 2016.” These documents confirm that the FCO continues to be a highly active operator in the area of competition law enforcement in Europe.

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New Merger Filing Thresholds In Germany and Austria

Merger Acquisition Antitrust

Merger notification obligations are changing in Germany and Austria, as new alternative jurisdictional thresholds based on the “transaction value” are being introduced into the respective national regimes, previously solely based on turnover thresholds.

Germany

In Germany, the introduction of a new set of alternative thresholds was approved by both chambers of Parliament and will enter into force upon the (imminent) signature by the Federal President.

Even though the new thresholds are being introduced with a view to better control acquisitions of Internet startups, they apply regardless of the economic sector to any high-valued acquisition of undertakings that have a “significant” presence in Germany. READ MORE

General Court Annuls 2013 EU Veto on the TNT Acquisition by UPS

Logistics and transportation circular illustration - vector colorful logistic sign General Court Annuls 2013 EU Veto on the TNT Acquisition by UPS

For the first time in over a decade, the General Court of the European Union has annulled a European Commission (EC or Commission) decision to block a deal. This is a rare setback for the EC’s merger control program.

The ruling overturns a January 2013 move by the EC to stop global package delivery company, United Parcel Service (UPS), from acquiring a rival, TNT Holdings. The EC’s decision turned on its finding that the transaction would have restricted competition in 15 Member States regarding express delivery of small packages to other European countries. The Commission argued that the transaction would remove one of the four top players in Europe, leaving DHL as the only remaining significant competitor and FedEx as a distant third, with a European network lacking the density and scale to exert a meaningful competitive constraint on a combined UPS/TNT.

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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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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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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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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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Higher Regional Court of Schleswig, Germany, Rules That Ban on Sales Via Online Marketplaces Infringes Competition Law

Many manufacturers of branded goods, who have expressed concerns about the image of their products and worry that these are sold on the cheap, have sought to restrict the use of the Internet by their distributors. In particular, distribution agreements oftentimes include provisions that ban sales via online marketplaces such as eBay and Amazon Marketplace. The legality of such sales bans has repeatedly been questioned by the German competition authority (Bundeskartellamt) and before the German courts. The manufacturer adidas AG, for instance, recently changed its distribution agreements following pressure from the German competition authority to allow the members of its distribution system the sale of adidas sports gear via online platforms. READ MORE