On Nov. 12, 2014, the Court of Justice of the European Union (CJEU) issued its judgment in Guardian v. European Commission. Guardian, fined €148 million (US$184 million) by the Commission in 2007 for its participation in the “Flat glass” cartel, asked the CJEU to set aside the General Court’s judgment dismissing the company’s original appeal to have its fine reduced. Upholding Guardian’s arguments that the Commission had infringed the principle of equal treatment, the CJEU reduced the fine imposed on Guardian by 30 percent to €103.6 million (US$128.8 million). The CJEU clarified that, for the purpose of fine calculation, the proportion of the overall turnover derived from the sale of products in respect of which the infringement was committed best reflects the economic importance of the infringement. Thus, when determining value of sales, the Commission must not draw a distinction between internal sales and sales to independent third parties. The exclusion of internal sales had, in the present case, led to the relative weight of one vertically integrated company (Saint Gobain) being reduced and that of Guardian being increased commensurately. READ MORE
UK Competition Appeal Tribunal Extends Scope of BSkyB’s Wholesale Must-Offer Obligation in the Pay TV Sector
On Nov. 5, 2014, the Competition Appeal Tribunal (CAT), the UK’s specialist competition judicial body, varied the scope of an interim relief order to include an additional platform to which BSkyB (Sky)―the holder of exclusive broadcasting rights to several premier sporting events in the UK―must offer to wholesale its core premium sports channels (CPSCs). The interim relief order stems from a 2010 decision of Ofcom, the UK’s communications regulator, which amongst other things regulates the pay TV sector. In its 2010 “Pay TV Statement,” Ofcom concluded that Sky had market power in the supply of CPSCs and was restricting supply to other pay TV providers in a manner that was prejudicial to fair and effective competition. To remedy the competition concerns, Ofcom decided to impose a term in the broadcasting licences of Sky such that it must offer to wholesale its CPSCs to retailers at a fixed price set by Ofcom. On the basis that Sky would appeal, the interim relief order was made, in 2010, to limit Sky’s wholesale must-offer obligation to only certain specified platform operators. READ MORE
General Court Confirms EC Decisions Ordering Inspections at Premises of Orange
In its judgment of Nov. 25, 2014, the General Court of the European Union rejected arguments put forward by Orange disputing the proportionality and necessity of decisions by the European Commission requiring Orange to undergo inspections. Orange, the subject of a Commission inspection in July 2013, had argued that the Commission did not have the right to order the inspection since the French Competition Authority had already investigated identical allegations and found Orange’s conduct to be in compliance with EU competition rules. The Court pointed out that the Commission is not bound by decisions taken by a national court or national authority pursuant to Articles 101 and 102 TFEU. The Commission may at any time make decisions relating to competition, even where such decisions conflict with national decisions. The Court also noted that Member State national authorities are not empowered to take negative decisions declaring that violations of the EU competition rules have not occurred. Moreover, it cannot be concluded from an absence of intervention that the Commission has accepted the validity of a decision by a national authority (national competition authorities are obliged to inform the Commission no later than 30 days before adopting certain types of decisions). READ MORE
China and EU Reach Amicable Settlement on Trade Defense Investigation Into Chinese Telecoms
On Oct. 18 2014, at the 28th session of the China-EU Trade and Economic Joint Committee, intensive discussions led by Chinese Minister of Commerce Gao Hucheng and EU Trade Commissioner Karel De Gucht were concluded with an amicable settlement of the Commission’s trade defence investigation into Chinese telecoms. The Commission’s investigation threatened to impose significant EU anti-subsidy countervailing duties on Chinese exporters of mobile telecommunications networks equipment. The value of Chinese exports of the equipment to the EU is over €1 billion (US$1.2 billion) per year. The main points of the settlement include tasking an independent body with the monitoring of the Chinese and EU telecoms networks markets; guaranteeing access to the relevant Chinese standard-setting body for European companies without discrimination; and equal treatment of companies bidding for publically funded research and development projects. READ MORE
EC Imposes Fines of €138 Million on Smart Card Chips Cartel
On Sept. 3, 2014, the European Commission (Commission) announced fines totaling €138 (US$ 174 million) on Infineon, Samsung, Renesas and Philips for breaching Article 101 of the Treaty on the Functioning of the European Union (TFEU) by coordinating their market behavior in the smart card chips sector. The Commission found that, between September 2003 and September 2005, the cartel had exchanged commercially sensitive information on pricing, customers, contract negotiations, production capacity and future market conduct. The cartel was found to have operated across the European Economic Area (EEA).
The Commission had previously entered into settlement negotiations with the cartel participants pursuant to the Commission’s 2008 Settlement Notice. However, this process was discontinued in 2012 following a lack of progress in settlement discussions.
As “whistleblower,” Renesas received full immunity under the Commission’s 2006 Leniency Notice, having notified the Commission of the cartel. Samsung’s fine was reduced by 30 percent for cooperating with the investigation. Since the infringement, Philips has divested its smart card chips business but remains liable for its conduct during the period of the infringement.
The Commission’s press release announcing the fine is available here.
Zipper Maker YKK Wins Fine Reduction at EU’s Highest Court
On Sept. 4, 2014, the Court of Justice of the European Union (CJEU) rejected an appeal by the YKK Group (YKK) against the judgment of the General Court that the European Commission (Commission) had been correct in its decision relating to the fasteners cartel, in which YKK was found to have participated. In September 2007, the Commission announced fines totaling €329 million (US$412 million) on the members of the cartel, which was found to have committed serious breaches of EU competition law, including fixing prices, coordinating price increases, sharing markets, allocating customers, and exchanging commercially sensitive market information in the zipper and other fasteners markets.
YKK appealed on four grounds: 1) that the Commission and General Court had incorrectly applied the 1996 Leniency Notice rather than the 2002 Leniency Notice; 2) that the General Court had given inadequate reasons for supporting the Commission’s decision to set the starting amount of the fine at €50 million (US$62 million); 3) that the Commission and General Court had imposed fines that exceeded the upper limit of 10 percent of worldwide group turnover; and 4) that the Commission and the General Court had incorrectly applied a deterrence multiplier to the size of the fine in recognition of YKK’s economic power. READ MORE
CJEU Affirms Commission’s Decision Against MasterCard Interchange Fees
On Sept. 11, 2014, the Court of Justice of the European Union (CJEU) rejected MasterCard’s appeal against the General Court’s 2012 judgment that the European Commission (Commission) had been correct in its assessment that MasterCard’s multilateral interchange fees (MIFs) breached Article 101(1) of the Treaty on the Functioning of the European Union (TFEU). CJEU also simultaneously dismissed cross-appeals from Royal Bank of Scotland and Lloyds Banking Group.
In December 2007, the Commission found that the decisions of the MasterCard payment organization in setting MIFs constituted decisions by an “association of undertakings” falling within the scope of Article 101(1) TFEU, and that the MIFs had appreciable restrictive effects on competition, which affected trade between EU Member States. The Commission concluded that the MIFs were not objectively necessary for MasterCard’s system to operate and to compete. MasterCard appealed to the General Court in the first instance and its appeal was dismissed. READ MORE
CJEU Narrows Scope of “By Object” Antitrust Infringements
On Sept. 11, 2014, the Court of Justice of the European Union (CJEU) upheld an appeal by Groupement des Carte Bancaires (GCB) against a General Court judgment that had concluded that fees charged by GCB on the issuing of cards were anticompetitive and a breach of Article 101(1) of the Treaty on the Functioning of the European Union (TFEU). The fees were higher for banks that were not sufficiently active in installing ATMs or making contracts with acquiring merchants. In practice, such banks were new members of GCB, and included online banks and the banking arms of major retailers.
The CJEU held that the General Court had erred in law with regard to the criteria that it used to determine that the fee agreement constituted a “by object” restriction of competition. The General Court held that by object restrictions must not be interpreted restrictively, and that the wording of the fee agreement made it clear that it was restrictive of competition by object. In contrast, the CJEU stated that only certain types of coordination, where the undertaking clearly reveals such a degree of harm to competition that there is no need to examine their effects, can be found to be restrictions by object. READ MORE
Vestager Appointed as EU Competition Commissioner
On Sept. 10, 2014, the European Commission (Commission) President-elect Jean-Claude Juncker nominated Margrethe Vestager, former deputy prime minister of Denmark, for the position of new EU Competition Commissioner. Subject to approval of the European Parliament, she will succeed Joaquín Almunia when his term ends on Oct. 31. On Oct. 2, Vestager faced a confirmation hearing in the European Parliament and answered questions on the ongoing Google investigation, the impact of competition fines on small and medium-sized enterprises and how competition policy can keep up with technological developments. The European Parliament will vote on the suitability of all appointees for the new Commission on Oct. 22. If, as is expected, all appointees are confirmed, Vestager will take office in November.
Vestager, 46, served as Denmark’s deputy prime minister as well as minister for Economics and Interior Affairs between October 2011 and August 2014, when she was appointed as the Danish candidate for the new Commission. Vestager represents the Danish Social Liberal Party (DSLP, also known as Radikale Venstre, or Radical Left), which she has led since 2011. Vestager was elected to the Danish Parliament in 2001. Between 2001 and 2011 she was chairwoman of the DSLP’s parliamentary group, and under former Prime Minister Poul N. Rasmussen, she served as minister of Education and Ecclesiastical Affairs from 1998 until 2001. READ MORE
European Court Rejects Appeal Challenging the Commission’s Dawn Raid Powers
On June 25, 2014, the Court of Justice of the European Union (CJEU) dismissed a challenge brought against the European Commission (Commission) by the French cable manufacturer Nexans SA in which it sought to challenge the Commission’s powers to seize documents in dawn raids.
In January 2009, the Commission launched dawn raids at the premises of Nexans France in relation to its potential participation in a suspected cartel in the market for high-voltage cables. The documents inspected during the Commission’s raid included business records that concerned projects outside EU markets.
Nexans challenged the inspection decision, and its appeal was partially upheld by the General Court in 2012. The General Court found that the Commission did not have reasonable grounds to seize documents in relation to products other than high-voltage underwater and underground electric cables and associated materials. However, the Commission decision with regard to the geographical scope of its powers was upheld by the General Court. READ MORE
European Court Upholds Fine Against Electrabel for ‘Gun-Jumping’
On July 3, 2014, the Court of Justice of the European Union (CJEU) upheld the decision of the European Commission (Commission) to impose a €20 million fine (about U.S.$27 million) on Electrabel SA for implementing its acquisition of Compagnie Nationale du Rhone (CNR) without prior approval.
Electrabel acquired 17.68 percent of the shares and 16.88 percent of the voting rights in CNR in June 2003 and increased its shareholding to 49.95 percent of shares and 47.92 percent of the voting rights on Dec. 23, 2003. In August 2007, Electrabel commenced discussions with the Commission as to whether it had acquired control of CNR, and formally notified the Commission of its acquisition of CNR from Electricité de France (EDF) on March 26, 2008. READ MORE
European Commission Sets Out Proposals for Changes to Merger Rules
On July 9, 2014, the European Commission (Commission) launched a public consultation on proposals contained in its White Paper, “Towards More Effective EU Merger Control.” The proposals aim to introduce a tailor-made review system targeting non-controlling minority shareholdings that may affect competition and to simplify existing referral procedures.
The proposals surrounding minority shareholdings aim to address the current “enforcement gap” that has emerged due to the Commission’s current lack of power to address competition concerns arising from acquisitions of minority shareholdings. The Commission proposes to introduce a light review system requiring parties to submit an information notice containing basic information about a proposed acquisition to allow the Commission to determine which cases could potentially be problematic and therefore suitable for full review. The proposals would bring the Commission’s powers in line with those held by regulators in some EU Member States (regulators in the UK, Austria and Germany are currently competent to assess the national effects on competition of acquisitions of minority shareholdings) and would allow such acquisitions to be reviewed where they have European Economic Area (EEA)-wide effects. READ MORE
Commission Adopts Revised Rules for Agreements of Minor Importance (De Minimis)
On June 25, 2014 the European Commission (Commission) issued a revised Notice on agreements of minor importance (De Minimis Notice), which are not subject to the prohibition of Article 101(1) of the Treaty of the Functioning of the European Union (TFEU). The revised Notice is accompanied by a separate guidance paper that contains a checklist of “by object” restrictions that do not benefit from the protection granted in the De Minimis Notice.
The Court of Justice of the European Union (CJEU) has consistently held that the prohibition in Article 101(1) is not applicable where the impact of the agreement on competition is not appreciable. The objective of the De Minimis Notice is to provide guidance on whether the impact of an agreement is “appreciable” and whether it therefore may be caught by Article 101(1). The original 2001 notice established that restrictive agreements entered into between undertakings whose combined market share is below certain thresholds are not capable of producing “appreciable” effects. The thresholds were fixed at 10 percent for agreements between competitors and at 15 percent for agreements between non-competitors, except were the relevant market was characterized by networks of parallel agreements, in which case the threshold was 5 percent. The thresholds remain unchanged in the revised notice. READ MORE
French Supreme Court (Cour de Cassation) Strengthens the Right of Lawyer’s Presence During Dawn Raids
On June 26, 2014, the criminal chamber of the French Supreme Court (Cour de Cassation) held that during antitrust procedures, the defendants’ rights of defense must be respected during the entire procedure, including during the preliminary inquiry and especially dawn raids. Cour de Cassation, 26 June 2014, n° 25.06.2014.
In this case, the date of the investigation is of crucial importance. The challenged dawn raid was held on March 18, 2008. At that time, the attendance of external lawyers during dawn raids was not provided for by French law, and their presence was thus not a right. In the interim, article L. 450-4 of the French code of commerce (which provides for the French dawn raid proceedings) was modified by an order on Nov. 13, 2008. The new rules provide that parties may be assisted by the counsel of their choice during antitrust investigations. READ MORE
Opt-Out Antitrust Class Actions—A U.S. Perspective on the Consumer Rights Bill Pending in UK’s Parliament
Note: This article was adapted from a speech given by Mr. Popofsky at the Oxford Centre for Competition Law & Policy in the UK on May 2, 2014.
Will opt-out class actions proposed by the UK Parliament’s Consumer Rights Bill bring the dreaded U.S.-style litigation culture to the United Kingdom? My personal assessment—that of a seasoned American antitrust practitioner—is that it’s doubtful.
But first, some background. Opt-out class actions are a form of what are known as collective actions or collective proceedings. Such actions are currently permitted in UK and European courts only on an opt-in basis—essentially a form of voluntary joinder—but then only in private claims for redress in the high court that follow on a prior public agency decision of wrongdoing under the competition laws of the UK or EU. Private antitrust actions in the UK are quite rare; only 27 such cases resulted in judgment in the 2005-2008 period. Only one collective action for damages has been brought on behalf of consumers. READ MORE
European Commission Issues Statement of Objections Against Marine Harvest for “Gun Jumping”
The European Commission has issued a Statement of Objections against Marine Harvest ASA for the early implementation of its acquisition of Morpol ASA. Marine Harvest is a Norwegian seafood company and Morpol is the largest salmon processor in the European Economic Area.
In December 2012, Marine Harvest acquired a 48.5 percent stake in Morpol from Friendmall Ltd. and Bazmonta Holding Ltd., and subsequently submitted a mandatory public offer for the remaining 51.5 percent of shares in January 2013. Following the settlement and completion of the mandatory offer on March 12, 2013, Marine Harvest acquired 87.1 percent of the shares in Morpol. On August 9, 2013, Marine Harvest notified the Commission of its acquisition of Morpol, and the transaction was conditionally approved on Sept. 30, 2013. Marine Harvest completed its acquisition of the remainder of Morpol’s shares in November 2013. READ MORE
General Court Orders the Commission to Pay All Costs Following Delay in Responding to Request for Access to Documents
On May 6, 2014, the European Union’s General Court dismissed an appeal filed by Unión de Almacenistas de Hierros de España (UAHE)—a Spanish association of iron warehouses—against a decision of the European Commission to refuse access to documents exchanged with the Spanish competition authority, the Comisión Nacional de la Competencia (CNC), during an investigation, but required the Commission to pay all costs in the appeal because of the length of time the Commission took to issue its refusal.
The CNC fined UAHE in May 2010, alleging that it implemented a system of concerted billing and surcharging practices by sending recommendations to its members on how to charge its services to customers. During the course of its investigation, the CNC sent documents and other information to the Commission pursuant to the framework of cooperation set out in Article 11(4) of Regulation 1/2003. UAHE was fined again by the CNC in a separate but related investigation in 2012. In February 2013, UAHE made a request to the Commission to hand over the documents and correspondence exchanged with the CNC during its 2010 investigation. Following various exchanges and requests for extension, the Commission responded to UAHE’s request in June 2013 stating that it could not provide a response, extending indefinitely the period for its responding to the requests. UAHE subsequently filed an appeal before the General Court alleging that the Commission denied access to the documents by failing to provide an answer within the timescale prescribed by EU transparency rules, and requested that the Court annul the Commission’s decision to extend and require the Commission to disclose the documents. READ MORE
First Person Extradited From Europe to the United States for Criminal Antitrust Charges
In June 2013, Romano Pisciotti, an Italian national, was arrested at Frankfurt Airport in Germany while in transit from Nigeria to Italy. His arrest was executed upon request of the U.S. Department of Justice’s Antitrust Division (DOJ) for price-fixing charges, pursuant to a bilateral extradition treaty between Germany and the United States. On April 3, 2014, Pisciotti was extradited to the United States to appear before a U.S. District Court in Florida. Two weeks later, he pleaded guilty and was sentenced to serve 24 months in prison and to pay a $50,000 fine, but was credited the nine-month period already served in Germany pending the extradition. He also must cooperate with the DOJ in its ongoing probe of the marine hose industry.
For more than 20 years, until he left the company in 2006, Pisciotti was a manager at Parker ITR. In 2007, it was uncovered that Parker ITR had participated in a worldwide cartel with respect to marine hoses. The cartel agreed to allocate shares of the marine hose market, to use a price list for marine hose, and not to compete for customers with other sellers either by not submitting prices or bids or by submitting intentionally high prices or bids. Pisciotti and his co-conspirators would also provide information gleaned from customers about upcoming marine hose jobs to another conspirator, who would serve as a coordinator. The coordinator would act as a clearinghouse for bidding information, and was paid by the manufacturers for coordinating the conspiracy. READ MORE
French Competition Authority Launches Market Test on Nespresso-Compatible Single-Serve Coffee Capsules
Following complaints by two single-serve coffee capsule makers, the French Competition Authority (FCA) recently launched a market test relating to undertakings proposed by Nespresso with respect to single-serve coffee capsules. As a market leader for both coffee machines (73 percent market share) and for Nespresso-compatible coffee capsules (85 percent market share), the FCA was concerned at the risk of foreclosure of Nespresso’s competitors. First, Nespresso could have rendered its competitors’ capsules incompatible by not publishing details of technical updates of its machines. Second, Nespresso could abuse its dominant position by pushing consumers to use only Nespresso-branded capsules through various means, including the media, its “Nespresso Club,” labeling/branding on its machines or in Nespresso’s guarantee terms and user guides.
In response to the FCA’s concerns, on April 17, 2014, Nespresso offered commitments, to be enforced for seven years, as part of which the company will communicate technical updates to any third-party capsule maker that requests them, three months before implementation. Nespresso also will refrain from dissuading customers from using competing capsules in the press or through “Club Nespresso,” and will amend its guarantee terms.
The market test ended on May 19, and the FCA’s conclusions are expected soon.
EC Adopts Revised Regime for Technology Transfer Agreements
On March 21, 2014, the European Commission adopted a new package of rules for the assessment of technology transfer agreements (TTAs) under EU competition law. The package consists of: (1) an updated Block Exemption Regulation for TTAs (TTBER) substituting the previous TTBER adopted in 2004; and (2) new guidelines to reflect the changes in the TTBER, the most recent case law and developments on the assessment of TTAs that fall outside the TTBER. The main changes focus on the scope of the TTBER, patent pools, termination clauses, exclusive grant-back obligations and settlements.
TTAs are licensing agreements where the licensor authorizes one or more licensee(s) to exploit its patents, know-how, utility models, design rights and software copyrights for the production of goods and services. READ MORE