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Competition Law Newsletter

Competition Law Newsletter

Competition Law Newsletter

01.05.2013 NL law

1.  General Court partially annuls the Commission decision finding anti-competitive conduct on the part of copyright collecting societies    
 
On 12 April 2013, the General Court partially affirmed and partially annulled the Commission's decision finding that the International Confederation of Societies of Authors and Composers (“CISAC”) infringed Article 101 TFEU.

The CISAC and several collecting societies had been investigated for mutual concertation in relation to the conditions of management and copyright licensing of public musical performances via the internet, satellite, and cable transmission.

On 16 July 2008, the Commission had found that there was an infringement of Article 101 TFEU because: (i) membership clauses in these agreements restricted the authors' ability to affiliate freely; (ii) the exclusivity clauses gave collecting societies absolute territorial protection against other societies; (iii) there was a concerted practice to limit a society's right to grant repertoire licenses in the territory of another society.

In the present judgment, the General Court first affirmed the Commission’s conclusions in respect to the illegality of the membership and exclusivity clauses because there was neither an objective necessity nor a justification for such restrictions on competition.

However, the General Court partially annulled the finding of a concerted practice. In reaching its decision, the General Court reconfirmed two basic tests. (i) If the Commission’s proof of a concerted practice between undertakings is not based on a mere finding of parallel market conduct but on evidence of concertation, then the burden is on the undertakings not merely to submit another explanation for the facts but to challenge the existence of those facts; (ii) If the Commission’s reasoning is based on the assumption that the behaviour established in its decision cannot be explained other than by concertation between the undertakings, then it is sufficient for the undertakings to prove circumstances which cast the conduct established by the Commission in a different light and thus allow an alternative explanation.

In the present case, the Court held that the Commission had failed the first test. That is, it had not demonstrated that the collecting societies acted in concert in that respect. In respect of the second test, the Court held that the Commission did not provide evidence rendering implausible the applicants’ explanation that the parallel conduct of the collecting societies at issue was not the result of concertation, but rather of the need to fight effectively against the unauthorized use of musical works. Consequently, the limitation on a society's right to grant repertoire licenses in the territory of another collecting society was found not to contravene EU competition law.

2.  ECJ sets aside General Court's decision concerning right to appeal for lack of adequate reasoning 
 
On 13 April 2013 the European Court of Justice ("ECJ") held that the General Court's decision to reject Mindo's initial appeal lacked adequate reasoning. Mindo had lodged an appeal at the General Court, claiming an interest in the outcome of the proceeding against itself and Alliance One, its former parent. This interest stemmed from the possibility of Alliance One having a cross-claim over Mindo for the payment of the fine for which they were jointly and severally liable.

In its decision of 2005 concerning the Italian raw tobacco cartel, the European Commission had fined the legal predecessors of both Mindo and Alliance One a total of EUR 10 million. Of this total, Alliance One was held liable for the whole fine and Mindo only jointly and severally liable for EUR 3.99 million. On February 2006 Alliance One paid the total amount of the fine and in September of that same year Mindo entered into liquidation.

The General Court held that Mindo had not established to the requisite legal standard that it had an interest in seeking the partial annulment of the Commission's decision and/or reduction of the imposed fine. In that regard, the General Court found that Mindo did not adduce sufficient evidence to demonstrate that Alliance One still had a claim over it and still intended recovering that claim.

The ECJ sets aside the General Court's judgment because several findings were vitiated by insufficient reasoning. In its appeal before the General Court, Mindo stated that under Italian law, by paying the total amount of the fine, Alliance One had obtained the right to claim contribution from Mindo. Although this was not disputed between the parties, the General Court found that Alliance's payment was not sufficient to give rise to such claim, merely stating that five years had passed without any request from Alliance One for a contribution. According to the General Court there was no evidence to rule out that Alliance had waived its right to claim a contribution from Mindo.

The ECJ stated that this finding was inadequately reasoned, especially as Mindo had argued in a sufficiently precise and clear manner that under Italian law on liquidation and creditor arrangements, Alliance One's claim would only be time-barred in 2016.

Regarding the General Court's finding that Mindo should prove the intention of Alliance One to recover the claim, the ECJ held that the General Court erred in law. The General Court placed an impossible burden of proof on Mindo by requiring it to prove a third party's intention.

This judgment shows that the General Court must provide sufficient and adequate reasoning when finding that an applicant, who is an addressee and has been fined by a Commission decision, has no vested interest in an appeal. Moreover, there should be a substantial basis, beyond mere assumptions, to find this lack of vested interest. 

3.  EU Commission Proposal to Simplify EUMR Notification Procedure 
 
From 27 March until 19 June 2013, the EU Commission is conducting a public consultation on its proposed changes to the EU Merger Regulation ("EUMR") notification procedure. The purpose of this proposal is to simplify the procedure and make it more business-friendly. This initiative is a "technical reform within the existing framework of EU merger control", meaning that it does not entail an amendment of the EUMR.

The EU Commission envisions expanding the thresholds for undertakings eligible to file a notification through the simplified procedure. Currently, the EU Commission clears mergers through a simplified procedure if they are unlikely to raise competition concerns because their combined market share is below a certain threshold. The proposal would raise the market share threshold from 15% to 20% for horizontal mergers. However, for those mergers that exceed the 20% threshold, the simplified notification procedure would still be available if the resulting increase in market share is small. For vertical mergers, those between two merging companies who are active in upstream and downstream markets, the threshold would be raised from 25% to 30%.

In addition, when two or more undertakings merge or acquire sole or joint control over a third, the simplified notification procedure would be available if the combined market share of the undertakings is less than 50% and the increment of the Herfindahl-Hirschman Index (“HHI”) resulting from the concentration is below 150.

The EU Commission's proposal seeks to establish a more tailored and targeted approach to different categories of cases. For instance, if there are no reportable markets, the merging undertakings would only explain the transaction, turnover, and business. In addition, those with a joint venture outside of the EEA, would only explain the Joint Venture's business and the reasons it will have no effect in the EEA. Moreover, for those mergers that do not fall within the thresholds of the simplified procedure, the merging firms would have to submit a thorough investigation regarding only those markets that exceed the threshold.

The proposed changes are expected to increase by 10% the number of applications that are processed through the simplified notification procedure. That would bring the total percentage of cases handled through simplified notification to 70%.

The next steps after this consultation will be to analyse the feedback and adopt the final proposals. Stakeholders and interested parties have until 19 June 2013 to visit the website and submit their response. 

4.  European commission adopts modified explanatory note on the authorisation to conduct an inspection 
 
On 18 March 2013, the European Commission adopted a new version of its explanatory note to the authorisation to conduct inspections following a Commission decision under Article 20 (4) of Council Regulation No 1/2003.The main changes in the revised explanatory note relate in practice to IT-searches.

The Commission clarifies the scope of an IT-search, which can deal with the IT-environment and storage media of the undertaking, including: laptops, desktops, tablets, mobile phones, CD-ROM, DVD and USB-keys. It also sets out the tools that can be used in such a search, that are not limited to built-in keyword search tools, but also dedicated software and/or hardware of the Commission.

In addition, the Commission for the first time clarifies that the undertaking has the obligation to cooperate fully and actively with the IT-search. In the Commission’s view this does not only mean that the undertaking has to provide explanations on the IT-environment, but also assist the Commission in specific tasks, such as temporarily blocking individual email accounts, disconnecting running computers, and providing “administrator access rights”. In the execution of such tasks, the Commission may decline to use the hardware provided by the undertaking. The Commission has recently followed this approach in a decision imposing a fine of Euro 2.5 million on EPH for unblocking an email account and diverting emails of several key individuals to a separate computer server. EPH has brought an action against the Commission Decision.  

The Commission also reaffirms its authority to make a full copy of the data contained on the storage media for continued inspection outside the premises of the undertaking. To preserve the chain of custody, the copy is placed in a sealed envelope. The undertaking is invited to attend the opening of the sealed envelope in the Commission's premises and to continue to assist the inspection. The Commission seems to have interpreted the General Court judgments in the recent Nexans and Prysmian cases as a confirmation of this practice. In those cases, the General Court dismissed the actions brought against the Commission's use of the sealed enveloped procedure because it was not considered separable from the inspection decisions and therefore not capable of being challenged on their own. Nexans' further appeal before the ECJ of Nexans against the General Court judgment does not seem to cover this aspect of the judgment although the parties could also address the matter in an appeal against an eventual Commission Decision in the underlying cartel.

5.  ACM highlights its 2013 key priorities   
 
The new Authority for Consumers and Markets ("ACM") highlighted the key priorities it will pursue during the rest of the year. It will seek to address problems in the markets for housing, medical supplies, telecommunications, and energy. The ACM also emphasized its goal to safeguard and nurture the values of fair competition, investment and innovation, and consumer welfare.

Specific markets highlighted – housing, medical supplies, telecommunications, and energy

In relation to the housing market, the ACM seeks to improve competition and transparency in the market chain. Expected challenges include the reduction in competition of the mortgage market, developments in the rental market, as well as innovation and entry barriers in the estate agent business.

In the market for medical supplies, the ACM prioritized addressing the problem of high purchasing costs for drugs and medical equipment. Particularly, the ACM will target specific pricing and marketing strategies used by suppliers.

Focusing on telecommunications, the ACM expects to pursue this year an examination of market developments to assess whether they have led to increased competition and consumer benefits.

The ACM will help the integration of the European energy market by drafting new regulation and ensuring that the existing national regulations encourage network operators to meet the needs of producers. In addition, the ACM will finalize this year the draft method decision for the regulatory period 2014-2016, which seeks to bring stability to the market and give investors certainty.

Specific values highlighted – transparency, fair competition, investment and innovation, and consumer welfare

To promote transparency, the ACM will publish an online knowledge bank that will help businesses understand the application of competition law to sustainability initiatives. In addition, the ACM will focus on raising tariff transparency in the telecommunications and energy sectors, as well as in the travel industry and for online games.

In terms of fair competition, the ACM will focus on competition between private companies and government supported economic activities. The ACM will increase awareness and conduct audits under the 2012 Dutch Act on Government and Free Markets.

Seeking to nurture investment and innovation, the ACM will focus on broadband internet. This year it will draft the first market analysis decision, following the objectives set out in the European Digital Agenda.

The ACM will continue to further the ultimate goal of safeguarding consumer protection by addressing aggressive sellers and their strategies of intimidation, deception, and unsolicited approaches. The ACM will also continue to provide information to help consumers via ConsuWijzer.

The ACM plans to continue highlighting its key priorities every two years. In the fall of 2013, the ACM will publish a draft version for the 2014-2015 agenda for public consultation.

6.  Under a pre-Expedia instruction of the Dutch Supreme Court, the Arnhem Appeals Court applies the appreciability test to an object infringement  
 
On 26 March 2013, the Arnhem Appeals Court rendered its judgment in the Batavus case (LJN: BZ5188) , following remand instructions from the Dutch Supreme Court.

Previously, the Leeuwarden Appeals Court held that Batavus had violated Article 6 of the Dutch Competition Act (Mededingingswet, "CA", the equivalent of Article 101 TFEU) and committed an infringement by object. Batavus was found to have coordinated with other distributors to end an agreement with its distributor Vriend because it sold its bicycles online for overly discounted prices.

The Dutch Supreme Court partially affirmed the judgment of the Leeuwarden Appeals Court but annulled its decision that an infringement by object was always appreciable. The Supreme Court remanded the case to the Arnhem Court of Appeals with instructions to assess appreciability.

The present ruling from the Arnhem Appeals Court first recalled the recent European Court of Justice ("ECJ") ruling on the Expedia Case, which was adjudicated after the Dutch Supreme Court remanded the case. In Expedia, the ECJ affirmed that infringements by object that affect interstate trade are by nature and without any regard to the effects, appreciable. The Arnhem Appeals Court pointed to the possibility that the Dutch Supreme Court's judgment in Batavus may be at odds with the recent Expedia case. Although Batavus deals with Dutch and not EU Competition law, legislative history dictates that Dutch competition law should be neither stricter nor more lenient than EU law. In addition Article 6 CA refers explicitly to provisions in Article 101 TFEU.

The Arnhem Appeals Court noted that it is questionable whether the Supreme Court's ruling that under Dutch competition law appreciability is a requirement for object infringements, is in line with the recent Expedia ECJ ruling. Without resolving this question, the Arnhem Appeals Court found that the restriction at issue was in any case appreciable and considered it therefore unnecessary to ask the ECJ preliminary questions on this issue.

The ECJ had ruled in Expedia with regard to EU competition law that infringements by object that may affect trade between Member States are always appreciable restrictions of competition. It remains to be seen whether this means that appreciability has lost its relevance in Dutch competition law for object infringements.

7.  PEMAA rule on separation of duties will be applicable to all economic activities from 1 July 2013 
 
The Public Enterprises Market Activities Act (Wet Markt en Overheid, "PEMAA") is in force from 1 July 2012. The purpose of this act is to counter unfair competition of governmental bodies and public enterprises that engage in economic activities, for example by providing advertisement or security services to private entities or by leasing publicly owned space. Public enterprises are undertakings controlled by the government or in which the government participates. While acting on the playing field of private undertakings, governmental bodies and public enterprises could have competitive advantages such as the possession of financial reserves and information that is not publicly available. Such competitive advantages could lead to unfair competition.

The PEMAA contains four rules of conduct that are applicable to all governmental bodies and public enterprises when engaging in economic activities:
(i) Full passing-on of costs: a governmental body or public enterprise that offers products or services, which could be offered by private undertakings, has to charge the full costs to the purchaser of these goods or services.
(ii) Prohibition of preferential treatment: governmental bodies are not allowed to discriminate public enterprises in favour of other undertakings.
(iii) Use of data: governmental bodies that have obtained information within a public context are not allowed to use this information while engaging in economic activities if this information cannot be provided to third parties as well.
(iv) Separation of duties: persons that exercise public functions are not allowed to be involved in economic activities, which relate in any way to this exercise.

From 1 July 2013 rule (iv) regarding the separation of duties is applicable to all economic activities. Rule (i) is applicable from 1 July 2012 if the relevant economic activity already took place before 1 July 2012. Otherwise, this rule will be applicable as of 1 July 2014. Rules (ii) and (iv) are applicable as of 1 July 2012 if the contract involved is concluded before 1 July 2012 and as of 1 July 2014 if the contract is concluded after 1 July 2012. The Authority for Consumers & Markets (Autoriteit Consument & Markt, "ACM") monitors compliance with the PEMAA. 
 
8.  Overview competition law developments 2012 (in Dutch)  
 
This article provides an overview of competition law developments in 2012. To read the article in full, please click on the title:

Kroniek van het mededingingsrecht
Rein Wesseling en Floris ten Have, Nederlands Juristenblad ,12-04-2013, afl. 15.

Team

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