1. Defence rights during dawn raids: the General Court attempts to put principles into practice
Competition authorities have broad powers of investigation during unannounced inspections of companies’ premises ("dawn raids"). In its judgment in Deutsche Bahn, the General Court ("GC") elaborated on what the practical limits are to the Commission’s right of inspections. The GC fully reviewed the Commission inspection decisions and the way these decisions were implemented in practice.
The GC ruled that there is no per se obligation for authorities to have prior authorization from a court before being allowed to inspect business premises, provided that adequate safeguards are in place. The following safeguards should protect companies against discriminatory and disproportionate inspections:
- The dawn raid decision: should state (i) the subject and purpose of the inspection; (ii) the starting date of the inspection; (iii) the risk of sanctions in case of non-cooperation; (iv) the possibilities of appeal against the dawn raid decision; (v) the hypotheses and suspicions underlying the inspection that the Commission intends to verify; and (vi) characteristics of the suspected infringement, including the relevant market, the nature of the suspected infringement, business segments that would be involved, how the company would be involved and elements targeted by the inspection.
- The limits on the Commission during an inspection: (i) non-business and legally privileged documents should be excluded from the investigation domain of the Commission; (ii) the company has the right to be assisted by an attorney; and (iii) the undertaking has the right to remain silent with regard to statements in which it would have to admit its guilt.
- The assistance of national authorities: when an undertaking objects to an investigation, national authorities can assist by checking whether the measures taken by the Commission are not arbitrary or disproportional considering the subject of the inspection.
- Ex post assessment by the EU court: in which a full assessment has to take place of all the factual and legal aspects. If the court would conclude that a dawn raid decision has to be annulled, the Commission will not be able to use the gathered evidence.
Regarding the specific inspections at the Deutsche Bahn’s offices, the GC found that all the safeguards were in place. The GC ruled that the dawn raid decision contained all the information required and there was no evidence of a targeted search by the Commission outside the scope of the dawn raid decision. An important aspect in the GC's assessment was that Deutsche Bahn did not formally object against the actions of the Commission officials during the dawn raid and did not request the Commission to note its objections in its official report. Furthermore, the allegations in the appeal were not supported by the reports from attorneys present during the dawn raid and there was no other evidence of a targeted search outside the scope of the dawn raid decision.
The judgment confirms that the GC will review Commission inspection measures fully and in detail. If a company has objections it is therefore crucial to document these objections and to request the Commission to make note of these objections.
2. Most Favoured Nation provisions increasingly investigated by European Competition Authorities
Most Favoured Nation ("MFN") provisions have come under increased scrutiny of European competition authorities. MFN provisions, also referred to as "price parity clauses", are clauses in which a party extends to its counterparty the most favourable contractual terms it grants to any third party.
MFN clauses are most likely to produce anticompetitive effects where at least one contracting party possesses market power. Furthermore, anticompetitive effects are more likely to be expected in transparent markets with relatively homogeneous products.
In September 2010, the UK Office of Fair Trading ("OFT") opened an investigation into allegedly anticompetitive agreements between hotels and online travel agents. In July 2012, the OFT issued a statement of objections alleging that both Expedia and Booking.com had concluded agreements with InterContinental Hotel Group ("IHG") that contained MFN clauses which prevented the travel agents from offering hotel rooms at a lower rate than the rate determined by IHG.
The OFT alleged that these agreements were anticompetitive by nature as they could hamper price competition between online travel agents and the hotel's own online platforms and bar new agents from either entering the market or expanding their market share by providing discounted accommodation. The three companies have now made a joint proposition with legally binding commitments to address the concerns of the OFT. On the basis of these commitments online travel agents would inter alia be free to offer rooms at discounted rates. The OFT has issued a notice with intention to accept the commitments. The OFT's final decision is expected in December 2013.
In February 2013, the Bundeskartellamt ("BKA") conducted an investigation into online retailer Amazon. On its Marketplace platform, Amazon enforced an MFN policy prohibiting retailers from offering products through any other online sales channel cheaper than they sell on Amazon Marketplace. The BKA had concerns that Amazon's policy limited retailers too much in determining their price and hampered competition between online marketplaces. Retailers pay online marketplace operators a percentage of the price of their product. The MFN clause would limit retailers in translating an operator's better terms into a better price for the consumer. This would make it more difficult for operators to attract new retailers.
On 27 August 2013, Amazon announced that it will abolish its MFN policy. The German Competition Authority will now assess whether Amazon's policy change is sufficient to terminate proceedings against Amazon. The UK OFT, which had also started an investigation into Amazon, has welcomed Amazon's policy change.
In December 2011, the European Commission launched proceedings against publishers of e-books Simon & Schuster, HarperCollins, Hachette, Holtzbrinck/Macmillan, Penguin and Apple. The reason was the joint switch from wholesale to agency contracts with retailers, which contained the same key terms including a MFN clause. The Commission suspected a common strategy aimed at increasing, or preventing the decrease of, e-book prices on a global scale. In December 2012, the European Commission accepted binding commitments from four publishers and Apple and in July 2013 also from Penguin. In one of the commitments, the undertakings pledge to refrain from including MFN clauses in agreements with retailers.
The US Department of Justice also conducted an investigation into agreements between Apple and these publishers, ending on a trial which found that Apple conspired with the publishers to raise e-book prices, inter alia by using MFN clauses.
3. Serious and irreparable harm must be proven even in interim measures aimed at protecting fundamental rights
On 10 September 2013, the Vice-President of the Court of Justice published an order in Commission v Pilkington, upholding the interim measures granted by the President of the General Court ("GC") but amending the reasoning behind the assessment (C-278/13 P(R)).
On 11 March 2013, the GC President had granted an application for interim measures to protect Pilkington's confidential information pending its appeal against the Hearing Officer's decision, which rejected the application for confidential treatment of the Commission decision in the car glass cartel (Case COMP/39.125). The GC President had found that because Pilkington's rights to professional secrecy and effective judicial remedy were in jeopardy, as fundamental rights, they concerned per se serious and irreparable harm.
In the present order, the Vice-President upheld the GC assessment that fundamental rights were at issue, given that the disclosure of the contested information could irreversibly undermine the commercial interest of Pilkington. Nevertheless, the Vice-President went further and conducted the assessment of whether serious and irreparable harm could occur. The Vice-President held that an application for interim relief measures must include proof that the potential harm is both serious and irreparable, irrespective of whether the case concerns a potential restriction or an outright deprivation of fundamental rights.
It is also noteworthy that the Vice-President confirmed that the age of the contested information is not per se dispositive of a claim for confidentiality. The assessment for an application of interim measures must look at whether there is a prima facie case for harm, urgency and whether there is a countervailing public interest, notwithstanding the age of the document.
4. General Court confirms rebuttable presumption that access to the Commission's file may be refused under the Transparency Regulation
In its judgment of 13 September 2013 (Case T-380/08), the General Court upheld a Commission decision denying the Kingdom of the Netherlands ("the Netherlands") access to the full confidential version of the Commission's Bitumen Decision. The Netherlands applied for access under Regulation 1049/2001 regarding public access (the "Transparency Regulation"), claiming that inspection of the confidential version of the Bitumen decision would aid it in instigating damages claims against the alleged infringers.
The main argument of the Netherlands was that the Commission could not base its refusal to grant access on the grounds that publication of the confidential information in the Bitumen Decision might undermine the commercial interests of the alleged infringers as well as the purpose of the Commission's investigations. The GC rejected this argument. It confirmed that there exists a general presumption, which may be rebutted, that the confidential version of a Commission decision establishing an infringement of Article 101 TFEU falls within the scope of the Transparency Regulation's provisions exempting the disclosure of information. According to the GC, this presumption exists irrespective of whether the decision has already become final or appeals are still pending. The GC furthermore held that the Commission may rely on this presumption when refusing access to documents in its file.
Also noteworthy is the GC's finding that there did not exist an overriding public interest warranting publication of the confidential version of the Bitumen Decision. The Netherlands asserted that an overriding public interest was present and consisted of competition law compliance and the fact that any overcharges were paid with tax-payer money by the government of a Member State. However, the Court found neither of these arguments particularly convincing and thus rejected them. Moreover, the Court observed obiter that it is upon the competent national judge to evaluate whether access to the confidential decision or parts thereof is necessary to rule on a follow-on damages claim. In doing so, the GC could be suggesting that the preferred method of obtaining access to the Commission's file is for a national judge to ask the Commission to transmit the relevant information to them rather for plaintiffs to submit an application for access under the Transparency Regulation.
5. General Court reduced fines but confirmed Commission's finding of a single, continuous and complex infringement in the bathroom fittings cartel
On 16 September 2013, the General Court ("GC") ruled on the appeals against the Commission's decision of 23 June 2010 on the bathroom fixtures and fittings cartel. In its decision, the Commission imposed fines totaling over €622 million on 17 bathroom equipment manufacturers for their participation in a single and continuous infringement. The infringement consisted of a coordination on the sales price for bathroom fixtures and fittings in Germany, Austria, Italy, Belgium, France and The Netherlands. The majority of the appeals by various companies were dismissed by the GC. However, the GC reduced the fines imposed on Wabco, the Sanitec/Keramag group and the Roca group. The main legal issues the GC addressed in the various judgments are discussed below.
Commission needs to establish the nature of the infringement
In Villeroy & Boch and Others v Commission (Case T‑373/10, T-374/10, T-382/10, T-402/10), the GC considered the concept of a single continuous infringement to be an objective concept. This means, according to the GC in Masco and Others v Commission (Case T‑378/10), that the Commission has no particular margin of discretion when determining whether or not unlawful practices form part of a single infringement. In the same line of reasoning, the GC found in Villeroy & Boch and Others v Commission, that if the Commission had objective reasons for finding the existence of a single infringement, it was bound to make such a finding. Moreover, the GC should in that situation carry out a comprehensive review of the facts on the basis of which the Commission adopted or rejected the classification of that infringement (see Masco and Others v Commission).
Information exchange between non-competitors
In Wabco Europe and Others v Commission (Case T‑380/10) and Keramag Keramische Werke AG and Others v Commission; Sanitec Europe Oy v Commission (joined Cases T‑379/10 and T‑381/10), the GC held that it cannot be presumed that where non-competing undertakings exchange commercially sensitive information this has an anti-competitive object or restrictive effect on competition. On the contrary, such information exchange is not capable, in principle, of having an impact on competition on the market the exchanged information relates to.
Reduction in fine of the subsidiary is extended to the parent company
As a final issue, the GC extended a fine reduction to a parent company that requested to benefit from any reductions awarded to its subsidiaries, given that it was not materially involved in the infringement. Based on earlier case law, these claims should be granted when the parent company and its subsidiaries raise similar pleas in law in their respective actions (Commission v Tomkins, C-286/11). However, in Roca Sanitario (Case T‑408/10), the parent company explicitly asked the GC to extend to it the benefit of any reduction of the fine which may be granted to its subsidiaries. The GC accepted this claim on the observation the parent's liability was purely derivative, secondary and dependent on its subsidiary.
6. The General Court upholds finding that the French government grant for very high-speed broadband network did not constitute State Aid
On 16 September 2013, the General Court rejected three applications for annulment and upheld the Commission's decision that the French government grant of €59 million to Sequalum did not constitute state aid (T-79/10 Colt Télécommunications France v. Commission, T‑258/10 Orange v. Commission and T-325/10 Iliad, Free infrastructure and Free v. Commission).
On 30 September 2009, the Commission adopted a decision declaring that the compensation for public service charges of €59 million, granted by the French government to Sequalum SAS (a subsidiary of the Numericable group), for the establishment and operation of a very high-speed broadband electronic communications network in the French Hauts-de-Seine department does not constitute State aid. Three actions for annulment were introduced before the General Court against that decision by electronic communications operators active in the Hauts-de-Seine department.
The applicants first claimed that the Commission infringed their procedural rights, by not having initiated the formal investigation procedure provided for in Article 108(2) TFEU, despite the fact that it experienced serious difficulties in assessing whether the measure at stake was compatible with the common market. The applicants argued, inter alia, that the 15 month-long preliminary examination of the notified measure by the Commission constituted an indicator of the serious difficulties encountered. The GC rejected that argument, recalling that the duration of the preliminary examination must be calculated as from the date of receipt by the Commission of the complete notification. According to the Court, a notification can only be regarded as complete after the last transmission, by the notifying Member State, of information requested by the Commission. From that moment, the Commission has a maximum period of two months to adopt a decision. In the present case, the GC considered that the last additional information was sent on 10 August 2009 by the French government, and that the Commission’s decision, which was adopted on 30 September 2009, occurred within the two-month time limit.
The applicants also claimed that the Commission committed an error of law in applying the four Altmark criteria. Particularly, they argued that the contested measure does not respond to a market failure. The General Court confirmed that market failure is a necessary condition for the general economic interest criteria but concluded that the Commission did not err in law in finding that there was a market failure. This conclusion is in stark contrast to applicants' contention that several electronic communications operators, including Orange, were already present in the department at the time of the adoption of the contested decision or had announced their intention to deploy very high speed broadband networks. Notwithstanding these claims, the GC considered that there was a market deficiency justifying the public compensation. Accordingly, the GC confirmed the Commission’s decision and dismissed the three applications for annulment.
7. The Court of Justice confirms the possibility to attribute liability to the parent companies of a full-function joint venture
On 26 September 2013, the European Court of Justice ("Court of Justice") dismissed the appeals by EI du Pont de Nemours and Company ("EI DuPont") and The Dow Chemical Company ("Dow") against the judgments of the General Court ("GC") and confirmed their liability in the chloroprene rubber cartel.
Both appeals focus on the attribution of joint and several liability to EI DuPont and Dow as the parent companies of the full function joint venture DDE, which was found to have participated in the infringement.
The Court of Justice held that the General Court had not erred in law in upholding that the liability for the unlawful conduct of an equally owned joint venture can be imputed to its parent companies where the Commission has demonstrated that the parent companies have exercised decisive influence over the joint venture on the basis of factual evidence and having regard to all the economic, organisational and legal links between them.
The fact that a joint venture is autonomous within the meaning of the EC Merger Regulation does not mean that it enjoys autonomy in relation to adopting strategic decision and that it is therefore not under the decisive influence of its parent companies for the purposes of Article 101 TFEU.
Further, the Court of Justice ruled that the GC had not misconstrued the concept of 'single undertaking'. It held that where two parent companies hold 50% each of a joint venture that has infringed competition law, "it is only for the purposes of establishing liability for participation in the infringement of that law and only in so far as the Commission has demonstrated that both parent companies exercise decisive influence over the joint venture, that those three entities can be considered to form a single economic unit and therefore a single undertaking for the purposes" of Article 101 TFEU.
8. ACM publishes fining decisions in a cartel between real estate traders
On 12 September 2013, the Authority for Consumers and Markets ("ACM") published non-confidential versions of its decisions by which it fined 79 real estate traders for participating in a cartel on the market for the sale of houses under execution.
The ACM started its investigation in October 2009 after it had received information from the Dutch tax authority which, after a fiscal investigation, suspected that real estate traders active on the market for the sale of houses under execution were acting in violation of Dutch competition law. An earlier investigation into the sector in 2006 by the ACM did not lead to any fines as the ACM had not found any proof of anticompetitive conduct. The ACM now has established that between June 2000 and December 2009, a total of 83 real estate traders participated in a single, complex and continuous infringement by aligning their bidding behaviour on numerous sales of houses under execution with the objective to keep the auction price for houses as low as possible in violation of Article 6(1) of the Dutch Competition Act. After a house was purchased at a low price by one of the real estate traders at the official auction, the real estate traders organized a secret auction amongst themselves at which the house was sold at a higher price. The winner of the secret auction would then compensate the other participants.
Because of the large number of participants in the cartel, the ACM divided them into three groups, based on their participation in the number of "affected" transactions. The first group was fined for its participation on 13 December 2011, while the second and third group were fined on 7 January 2013.
One of the real estate traders that was fined by the ACM had requested the interim relief judge of the District Court of Rotterdam to prohibit the ACM from publishing a non-confidential version of the decision that contained his name while the decision had not yet become final. The interim relief judge held that the real estate trader could be disproportionately harmed by publication of his name if the fining decision would subsequently be annulled. In order to establish whether this risk could manifest itself, the interim relief judge preliminary assessed the lawfulness of the fining decisions. The interim relief judge did not find any grounds for doubting the lawfulness of the fining decisions and therefore rejected the real estate trader's request for a preliminary injunction on 1 August 2013. Various real estate traders that were fined in the first group have appealed the ACM's decisions before the District Court of Rotterdam, while the real estate traders from the second and third group still await the outcome of their administrative appeal before the ACM.
9. Dutch Competition Authority concludes that elements in the Dutch “Energy Agreement” violate competition rules
On 6 September 2013, Dutch private and (semi-) public organizations entered into the "Energy Agreement for promotion of sustainable growth". Within this context, four energy companies agreed to close down five coal-fired power stations in the Netherlands before the end of their economic life cycle. This arrangement was submitted to the Dutch Competition Authority ("ACM") with the request to provide its view on its compatibility with the competition rules.
On 26 September 2013, the ACM announced its provisional view that the agreement to close down the five power stations is not compatible with the cartel prohibition. Moreover, the ACM suggested there may be room for a similar arrangement if it is less harmful to effective competition while benefiting environmental policy.
This case provides a rare, if not unique, example of the application of the "exemption provision" for cartel agreements (i.e. Article 101(3) in the TFEU) in which the ACM quantifies in its assessment the environmental benefits and balances them against the quantified negative effects on competition and price.
The ACM first established that the agreement will lead to a reduction of production capacity in the Netherlands of approximately 10%. The ACM restricted its analysis to the Dutch market because it considers that the relevant markets are not yet broader. It concluded that the significant production reduction will result in upward pricing pressure for electricity sold on the Dutch market.
The ACM then examined whether the negative effects on competition are sufficiently counterbalanced by the environmental benefits. The closure of the power stations will result in reduced emissions of carbon dioxide (CO2), sulphur dioxide (SO2), nitrogen dioxide (NOx) and particulates (PM). The ACM concludes that the improvement of the air quality as a consequence of reduced emissions qualifies as benefits which can play a role in the assessment. However, the reduced emission of CO2 did not qualify as a benefit because it leads only to reduced need for CO2 emission rights which can then be traded with and used by third parties.
The ACM concluded that the environmental benefits do not outweigh the negative effects on competition. The ACM did not elaborate on the consequences of its preliminary view. It is up to the parties to determine whether the agreement is critical to the arrangements or whether it could be severed.