New Draft Directive on actions for antitrust damages is set for formal approval
- Commission adopts new block exemption regulation and guidelines on technology transfer agreements
- The General Court confirmed the Commission's powers of investigation in the cement cartel decisions to request information
- General Court ruled that the Commission should allow partial access to documents on inability to pay
- General Court dismisses Faci's appeal in heat stabilizers cartel
- Credit card companies under scrutiny from competition authorities
- District Court of Rotterdam dismissed appeal against prohibition decision on rusk and gingerbread merger
- District Court allows the ACM to take into account EU-wide turnover in determining a cartel fine
1. New Draft Directive on actions for antitrust damages is set for formal approval
On 26 March 2014, the Committee of Permanent Representatives endorsed an agreement between the Presidency of the Competitiveness Council and European Parliament representatives on the proposed directive on actions for damages for competition law infringementste ("New Draft Directive"). The analysis below highlights important provisions and compares them to the previous draft published on 11 June 2013 ("Commission draft"). (See Stibbe's article.)
Discovery: Both leniency statements and settlement submissions remain undiscoverable in the New Draft Directive ("black list"). However, the possibility is still left open to contest whether a document or part thereof is in the black list. The information that is found by the competent national court to fall outside the black list may be disclosed subject to an assessment. Disclosure will hinge on an analysis of the document's relevance, proportionality, and the valid interest of the undertakings, with the party against discovery having a right to be heard. Noteworthy is that the New Draft Directive adds that an interest in avoiding action for damages is not an interest that warrants protection.
As with the Commission draft, the New Draft Directive contains provisions for the disclosure of certain kinds of evidence after the competition authority has closed its proceedings ("grey list"), including documentation prepared in the context of the proceedings. Unlike the Commission draft, however, the New Draft Directive has a somewhat reduced protection by allowing "withdrawn" settlement submissions to be discoverable, the repercussions of which are yet unknown. The New Draft Directive could mean that communications exchanged in the context of settlement discussions that do not lead to an actual settlement, could become discoverable. If so, it might undermine the parties' willingness to engage in settlement discussions.
Joint and several liability: Under the New Draft Directive, infringers can be held jointly and severally liable for the harm the claimant has suffered. In addition, the New Draft Directives provides for national law to decide how that liability is divided amongst cartelists, who are entitled to file cross claims for contribution against each other.
The New Draft Directive also allows for an affirmative defense for small and medium enterprises against joint and several liability. That is, cartelists who have less than 5% of the relevant market at any time during the infringement and who would risk economic viability, may only be liable to their direct and indirect purchasers. This defense would be unavailable if the undertaking led the infringement or coerced others to participate, or has been previously found to have infringed competition law. This provision may result in claimants having to cast a wide net in order to get relief.
Immunity recipients remain in the New Draft Directive immune for joint and several liability, unless they are the debtor of last resort.
Passing-on: Whether direct or indirect purchasers, the New Draft Directive allows for a right to full compensation. The burden to prove passing-on of overcharge rests with the indirect-purchaser who raises the claim. The Commission will issue guidelines in that regard.
Probative value of national decisions: Instead of giving full effect to the decision of a national competition authority as envisioned in the Commission draft, the New Draft Directive provides for national infringement decisions to be taken as prima facie evidence that will be examined according to the laws of the competent jurisdiction.
Time limit: Under the New Draft Directive, national legislations should provide claimants with a period of at least five years to bring their claims. The limitation period will not begin to run before the infringement has ceased and the claimant knows or can reasonably be expected to know: the behaviour and that it constitutes an infringement, that it caused harm to him and the identity of the infringer. The Commission draft's provision of suspension of limitation periods during consensual dispute resolution remains in the New Draft Directive.
Quantification of harm: The New Draft Directive empowers national competition authorities to assist in estimating the harm suffered. The New Draft Directive retains the rebuttable presumption that harm was caused by the infringer's actions but it does not establish double presumption. That is, each individual claimant still has to show that the harm was caused to him.
The European Parliament and the Council have yet to formalize the agreement. Member States will have two years to transpose the New Draft Directive after it enters into force.
2. Commission adopts new block exemption regulation and guidelines on technology transfer agreements
On 21 March 2014, the Commission adopted a new technology transfer block exemption regulation ("TTBER") and accompanying guidelines ("TT Guidelines"). These instruments provide the framework of analysis for "technology transfer agreements": license agreements allowing the licensee to produce products incorporating "technology rights" (know-how and various intellectual property rights, such as patents, utility models and plant breeders' rights). The new framework will apply from 1 May 2014 until 30 April 2026. There is also a transitional period of one year within which technology transfer agreements block exempted under the previous framework will have to be brought in line with the new TTBER.
First, it is clear now that the TTBER only applies to licensing agreements that fall within the scope of the block exemption regulations on R&D and specialization agreements. Further, the scope of application has been extended to cover provisions concerning the purchase of products or the licensing/assignment of other IPRSs such as trademarks to the extent that those provisions are directly related to the production or sale of the products produced with the licensed technology.
In addition, the new TTBER maintains the market share thresholds under which a safe harbour is provided to bilateral agreements when certain conditions are met (i.e. 20% for agreements between competitors and 30% for agreements between non-competitors). However, certain provisions frequently used in license agreement would no longer benefit from the safe harbour protection. In particular, termination clauses in non-exclusive license agreements, all exclusive grantback clauses, and passive sales restrictions in agreements between non-competitors, will now fall outside the TTBER and therefore require an individual assessment of their likely effects.
Moreover, the Commission has shortened the TTBER's hardcore list for competitors but this may or may not mean that there have been material changes. This does not become apparent when reading the hardcore list itself, for example, it seems to follow from the wording of Article 4(1)(c)(i) TTBER that field of use restrictions should henceforth be regarded as hardcore restrictions. However, the Commission has indicated in a press release it only intended to propose textual changes. That the amended hardcore list has no changes in regards to substance also seems to follow from the TT Guidelines.
Finally, the TT Guidelines also include new sections on licensing in the context of settlement agreements and technology pools. A noteworthy innovation is that the new the TT Guidelines create a "soft law safe-harbour" for the creation and operation (including the licensing) of technology pools, regardless of the market position of the parties but subject to certain cumulative conditions (see section 261 of the TT Guidelines).
3. The General Court confirmed the Commission's powers of investigation in the cement cartel decisions to request information
On 14 March 2014, the General Court ("GC") handed down several appeal judgments on the Commission decisions to request information in the cement cartel. Several companies appealed to the GC to suspend the Commission decisions. The GC accepted one ground of appeal in the case Schwenk Zement v Commission (T-306/11) but dismissed the other cases entirely. [Namely, Cemex and Others v Commission (T-292/11); Buzzi Unicem v Commission (T-297/11); Cementos Portland Valderrivas, SA v Commission (T-296/11); Holcim (Deutschland) and Holcim v Commission (T-293/11); HeidelbergCement v Commission (T-302/11); Italmobiliare v Commission (T-305/11)].
Highlights of these cases are discussed below.
The GC accepted Schwenk's submission that the Commission infringed the principle of proportionality because a period of two weeks to answer a specific set of questions was insufficient. In assessing proportionality, the GC took into account the risk of imposition of a fine if the undertaking provided incomplete, false or misleading information. The GC found that the two week response period amounted to a disproportionate burden for Schwenk and annulled the Commission decision in that respect.
Other arguments as to proportionality made by the other appellants failed. In each case, the GC held that though there was a heavy burden imposed, it was proportionate to the investigatory needs of the Commission.
Regarding Buzzi Unicem's claims that the Commission had violated its rights against self-incrimination, the GC held that only those questions that could not be qualified as "purely factual" would be open for assessment to ascertain whether the Commission was actually compelling Buzzi Unicem to incriminate itself. From the examples discussed in the judgment, it appears that questions on actual market behaviour previously conducted by the undertaking would be consider purely factual, whereas questions concerning how an undertaking would act in a hypothetical situation may not be considered purely factual.
In addition, the arguments raised by Cemex, Holcim, HeidelbergCement, Italmobiliare and Buzzi Unicem as to the Commission's breach of the duty to state reasons by not providing adequate information on the subject and purpose of the investigation, were also unsuccessful. The GC reiterated that at the investigation stage, the Commission need not provide all the elements that may establish the infringement and though it agreed that the decision to request information was very general, the Commission had fulfilled the minimum requirements under Article18(3). However, in Cementos Portland, the GC went further and on request, it examined the indicia upon which the Commission based its decision. According to the GC, the standard that the Commission must fulfill before issuing a decision to request information is "reasonable suspicion" that there has been an infringement. After examining the Commission's summary of the case and excerpts of the information available to it at the time that it issued the information request, the GC concluded that they were sufficient and thus also dismissed Cementos Portland's appeal.
4. General Court ruled that the Commission should allow partial access to documents on inability to pay
On 20 March 2013 the General Court ("GC") handed down its judgment in Case T-181/10 Reagens v Commission. Reagens appealed the Commission's decision to refuse access to documents on inability to pay concerning two other addressees of the cartel decision. The GC partially agreed with Reagens and held that the Commission had unlawfully refused to disclose the inability to pay requests and the Commission's first questionnaire.
Reagens and two other companies had requested that their inability to pay be taken into account in setting the fine. Reagens' request was rejected, while it was clear that one of the other companies had received a reduction. In November 2009, Reagens requested access to documents on the basis of the Transparency Regulation concerning the inability to pay, which the GC divided into five categories: (i) the requests from the other two undertakings, (ii) the Commission's first questionnaire, (iii) the undertakings' reply to the first questionnaire, (iv) the Commission's second questionnaire, and (v) the undertakings' reply to the second questionnaire.
The Commission rejected Reagens' request on the basis that all the documents fell under an exception of Article 4(2) of Regulation 1049/2001, namely the protection of the commercial interests. The Commission furthermore held that its questionnaires also fell under the exception relating to the protection of the purpose of investigations.
The GC allowed Reagens' appeal regarding documents (i) and (ii). As regards category (i), the requests for inability to pay, the GC dismissed the Commission's argument that disclosure of these requests could lead the undertakings' creditors to withdraw, since that risk existed as soon as the creditors became aware of the investigations. Moreover, the Commission could redact these requests. In addition, given that the undertakings at the time were unaware of the exact amount of the fine, the requests were necessarily abstract and any sensitive information could be redacted. The GC furthermore observed that the two first questionnaires were identical, relatively abstract and generic. As such, the Commission erred by refusing access to the non-confidential versions of the undertaking's requests and to the Commission's first questionnaire.
The GC was furthermore unconvinced that the disclosure of the documents in category (ii), the first questionnaires, would affect ongoing or future similar investigations, in view of the "standard" content of those questionnaires. In addition, the GC held that ongoing or future investigations would not be affected by the disclosure of the second questionnaires, as these were specific to each undertakingThus, the Commission had also erred in relying on the protection of the purpose of the investigation as a reason for non-disclosure.
The GC dismissed Reagens' appeal regarding document in categories (iii)-(v), stating that these documents contained specific information about the financial situation of the undertakings' concerned. As regards the undertakings' replies to the questionnaires, and the Commission's second questionnaire, the GC furthermore noted that the purpose of better preparing an action against a decision does not, as such, constitute an overriding public interest in disclosure prevailing over the protection of confidentiality.
This judgment provides further guidance on what specific documents are covered by the exceptions of the Transparency Regulation. The GC in particular demonstrates the importance of the level of detail of the documents in determining whether the exceptions of Article (4)2 apply. In view the annulment of several GC judgments concerning the access to documents under the Transparency Regulation, it should be noted that this judgment can still be appealed before the European Court of Justice.
5. General Court dismisses Faci's appeal in heat stabilizers cartel
On 20 March 2013, the General Court ("GC") handed down its judgment in Case T-46/10 Faci v Commission concerning an appeal in the heat stabilizers cartel. This judgment comes a little over one month after the three judgments that were handed down by the GC on 6 February 2014, relating to the same cartel. In its judgment, the GC dismissed Faci's appeal in its entirety.
In its decision the Commission stated that Faci was liable for an infringement that consisted of the exchange of commercially sensitive information and the fixing of prices and allocation of markets and customers. Contrary to the applicants in the previous three judgments, Faci admitted that it had participated in a cartel from 6 November 1996 until 26 September 2000. However, in its appeal Faci argued, among other things, that it only exchanged commercially sensitive information.
The GC dismissed Faci's arguments by ruling that the Commission had provided sufficient evidence that the cartel, during the period of Faci's involvement, not only exchanged information but also fixed prices and allocated customers and markets.
In line with established case law, the GC noted that the Commission did not need to provide evidence for each specific meeting. It continued by stating that even if the Commission did not adduce specific evidence for meetings that were attended by Faci, the Commission could still infer the anticompetitive nature of the meetings on the basis of previous anticompetitive meetings.
The GC furthermore emphasized the importance of distancing from the cartel. Without distancing itself the undertaking will in principle retain full responsibility for its participation in the cartel. Mitigating circumstances such as the non-implementation of a cartel will only be taken into account if the undertaking concerned is able to show that it clearly and substantially opposed the implementation of the cartel. The GC held that Faci neither distanced itself from the cartel nor had provided the Court with the necessary evidence.
6. Credit card companies under scrutiny from competition authorities
On 26 February 2014, the European Commission rendered the commitments offered by Visa Europe legally binding. These commitments involve significantly cutting its multilateral interchange fees ("MIFs") for consumer credit card transactions. Two days earlier, on 24 February 2014, due to the commitments offered by MasterCard, the Netherlands Authority for Consumers & Markets ("ACM") decided not to start an investigation into the MIF practice of MasterCard.
An interchange fee (also known as an inter-bank fee) is charged by the cardholder's bank (issuing bank) to a merchant's bank (the acquiring bank) for each sale transaction. The multilateral aspect comes into play when the interchange fees are agreed upon by a number of issuing/acquiring banks.
The Commission observed substantial differences in the level of multilateral interchange fees across Member States and was concerned that the practice of setting multilateral interchange fees by credit card companies may harm competition within the EU (see also MasterCard and Others v. Commission (T-111/08); MasterCard and Others v. Commission (C-382/12 P)). National competition authorities are investigating MIFs in several Member States. In France, Poland and Hungary MIFs of both Visa and MasterCard have already been capped.
In the 26 February 2014 Commission commitment decision, the credit card MIFs of Visa Europe are capped at a weighted average of 0.3% per transaction. This cap relates to all consumer credit card transactions in the EEA where Visa Europe sets the MIF-rate. Moreover, from 1 January 2015 this cap of 0.3% per credit card transaction and the cap of 0.2% per debit card transaction which was made legally binding by commitments in 2010, will also apply to transactions with issuing banks outside the EEA (cross-border inter-bank fees).
The commitments offered by MasterCard are different from those of Visa Europe. MasterCard commits to cap the MIFs for consumer credit card transactions within the Netherlands according to a phased reduction scheme. Three months after the adoption of the commitments, MasterCard commits to cap the MIFs for consumer credit card transactions within the Netherlands at a weighted average of 0.7% per transaction. From 2015 on these MIFs will be capped at 0.5% per transaction and in 2016 the MIFs cap will be further lowered to a weighted average of 0.3% per transaction.
The commitments of Visa Europe and MasterCard differ with respect to their duration. Despite the fact that both commitments have a set duration of four years, the commitments offered by MasterCard will be terminated with the entry into force of the proposed Regulation on interchange fees for card-based payment transactions (COM(2013)550 final, 24-7-2013), while the commitments made binding on Visa Europe by the Commission will not automatically terminate with the entry into force of this Regulation.
7. District Court of Rotterdam dismissed appeal against prohibition decision on rusk and gingerbread merger
On 27 February 2014, the District Court of Rotterdam dismissed the appeal brought by two Dutch rusk and gingerbread producers against the ACM's decision to prohibit the intended acquisition of A.A. ter Beek by Continental Bakeries ("the Parties"). The Parties had notified the ACM of the intended transaction on 13 December 2011. The ACM feared that the transaction would lead the Parties to have a 70-80% market share on the Dutch market for the production of rusk. The ACM feared that this would result in decreased competition and a risk of higher prices for consumers. After a Phase II procedure, the ACM prohibited the transaction on 14 December 2012, rejecting the undertakings' proposed remedies of offering a production line to a competitor.
The Parties appealed against the ACM's decision before the District Court of Rotterdam. First, the Parties contended that the ACM erred in its definition of the relevant market by concluding that both the upstream (sales to retailers) and downstream (sales to consumers) level of trade are relevant, while the Parties are only active on the upstream level. Furthermore, contrary to the ACM's findings, the Parties contended that separate markets exist for branded rusk and private label rusk. Second, the Parties claimed that their market shares were incorrectly determined and therefore gave an inflated image of the Parties' market power. Third, the Parties contended that the ACM failed to take their customers significant countervailing buyer power into account. Finally, the Parties claimed that the ACM's rejection of their proposed remedies was economically incorrect and that the ACM incorrectly refrained from conducting a market test in order to appraise its proposed remedies.
The District Court dismissed all grounds of appeal. Most interesting is the fact that the District Court upheld the ACM's rejection of the remedy proposed by the Parties. The Parties had proposed to divest a product line for the production of rusk. They had proposed two potential buyers for the product line. The buyer could purchase the product line for EUR 1. The buyer would need to invest an undisclosed amount in order to get the production line operational and would be able to recoup that investment within one year. Because the costs of exiting the market were insignificant, the ACM feared that the potential buyer would not remain a lasting presence on the rusk market and therefore would not exert competitive pressure on the combined entity. Interestingly enough, the ACM earlier found that entry onto the market of new competitors would be unlikely due to the high costs of investment involved. However, the District Court agreed with the ACM that the remedy offered by the Parties did not sufficiently ensure that the buyer of the production line would become a lasting presence on the Dutch rusk market. The District Court dismissed the Parties' appeal, because the offered remedy could not ensure that the significant impediment of effective competition would not materialise.
8. District Court allows the ACM to take into account EU-wide turnover in determining a cartel fine
On 20 March 2014 the District Court of Rotterdam handed down its judgment on five appeals from the onion cartel. The District Court ruled that the Netherlands Authority for Consumers & Markets ("ACM") is allowed to take into account turnover generated outside of the Netherlands in determining the amount of the fine.
The District Court confirmed the ACM decision in which several undertakings involved in the cultivation, processing and sale of onions were found guilty of one single continuous infringement consisting of illegal agreements on market quotas, joint purchasing of operating assets from competitors and the exchange of market information between competitors.
Noteworthy is the method for calculating the fine. In its decision, the ACM took into account the EU-wide turnover instead of only the national turnover of the undertakings as the base when setting the fine. The ACM based its approach on the fact that pursuant to Article 5 of Regulation 1/2003, national competition authorities obtained the jurisdiction to apply the European competition law provisions of Article 101 and 102 TFEU in individual cases. This sole consideration was also sufficient for the District Court to rule that the ACM was authorized to take into account the EU-wide turnover of the undertakings from the date of adoption of Regulation 1/2003 on May 1st 2003.
Appellants argued that there was no reason for the ACM to deviate from the method for calculating the fine that was applied by the ACM in the shrimp cartel case (Case 2269/shrimps), in which only the national turnover was taken into account as fine base. The District Court found, however, that the decisions in the shrimp case were taken against a fundamentally different historical context in which the Dutch Competition Authority was not yet experienced with the cooperation and allocation of cases between authorities within the European Competition Network. Although the District Court did not explicitly mention that the ACM initially imposed fines in the shrimp cartel case before Regulation 1/2003 was adopted, this fact seems to play a crucial role in the reasoning of the District Court.
This judgment seems to be in line with the proposal by the Dutch minister to enable the ACM to impose higher fines with respect to cartel infringements (see: "Dutch government seeks higher fines for cartel infringements").