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Competition Law Newsletter June 2014

Competition Law Newsletter June 2014

Competition Law Newsletter June 2014

02.06.2014

1. Commission adopts new general block exemption regulation for state aid and new guidelines for state aid in the area of environmental protection and energy

In 2012, the Commission decided to reform and modernize its legislation in the area of state aid. Since then, the Commission has reformed its procedural regulation and adopted a number of new guidelines for various sectors.

New Environmental and Energy Guidelines

On 9 April 2014, the Commission adopted in principle new guidelines on aid to projects in the field of environmental protection and energy ("the Guidelines"). Formal adoption will follow. The Guidelines will support Member States in reaching the climate targets contained in the Europe 2020 strategy which focusses on creating the condition for smart, sustainable and inclusive growth in the internal market.

To that end, the Guidelines identify a number of environmental and energy measures for which aid under certain conditions may be compatible. These measures concern aid for, inter alia, environmental protection beyond EU standards, investment and operating aid for energy from renewable sources, environmental studies, resource efficiency and waste management, remediation of contaminated sites, and energy infrastructure.

The Guidelines set out the criteria that the Commission will use in its compatibility assessment. The Commission will consider a state aid measure compatible only if it satisfies each of the following criteria: (a) well-defined objective of common interest, (b) need for State intervention, (c) appropriateness, (d) incentive to behave differently, (e) proportionality, (f) avoidance of major negative effects and (g) transparency.

The Guidelines indicate how these criteria are to be interpreted for environmental and energy measures generally, before applying the criteria to several specific categories of environmental and energy aid.
Last, for several categories of aid, the Guidelines determine thresholds under which the proposed measure does not need to be notified.

New GBER

Last week, the Commission reached another milestone by adopting a revised General Block Exemption Regulation (GBER). The GBER allows Member States to implement certain state aid measures without having to notify these to the Commission for prior approval. Measures that fall outside of the scope of the GBER are not necessarily incompatible, but will have to be notified following to the normal procedures of the procedural regulation.
The Commission intends to reduce the administrative burden for the Member States and itself while at the same time increasing legal certainty for state aid beneficiaries, by considerably extending the "safe haven". The main new elements are:

  • Increased thresholds: the thresholds for many measures that were already covered by the GBER have been raised;
  • Additional categories of aid: the new GBER allows exemptions for aid measures in more sectors, such as aid for local, broadband, research and energy infrastructures, innovation clusters, regional urban development funds, social aid for transport for residents of remote regions, culture and heritage conservation, audio-visual works, sports and recreational infrastructures and aid to make good damage caused by certain natural disasters;
  • Simplification: the conditions that aid measures should meet to benefit from the exemption have been significantly clarified and simplified.

The significant increase in exempted aid measures is balanced by several safeguards, such as improved transparency requirements (national public registers of individual aid awards), increased monitoring and continuous evaluation.

2. Draft ACM fining policy rules and draft leniency policy rules published

The Ministry of Economic Affairs published draft policy rules regarding the imposition of fines by the Authority for Consumers & Markets ("ACM"). Additionally, it published draft policy rules regarding leniency for cartel infringements. The policy rules are published for the purpose of consultation.

Whereas these rules were formerly laid down in the Minister of Economic Affairs' policy rules on the imposition of administrative fines by the ACM, the imposition of fines and leniency are now regulated by separate policy rules.

The draft ACM Fining Policy Rules 2014 have been introduced to simplify the existing rules and to harmonise these rules with related legislation. The draft policy rules do not contain any substantive changes to the previous policy rules. A relevant change from a competition law perspective is the calculation of the base fine. Under the previous fining policy rules the base fine (basisboete) amounted to 10% of the relevant turnover. Subsequently, an aggravating factor between 0 and 5 was applied to the base amount. Under the ACM Fining Policy Rules 2014 the base fine ranges from 0 to 50% of the relevant turnover. An aggravating factor is no longer applied.

The draft Policy Rules on Leniency for Cartel Infringements ("Leniency Policy Rules") are based on the revised Model Leniency Programme of the European Competition Network. The Leniency Policy Rules include two important changes to the former leniency rules. The first change relates to fine reduction for the first leniency applicant. Under the former rules first applicants were granted a benefit starting at 60% fine reduction up to full immunity. According to the draft policy rules, first applicants are now granted full immunity from fines.

The second important change concerns fine reduction for leniency applicants that are not eligible for immunity. The Leniency Policy Rules introduce three reduction categories: 30-50%, 20-30% and ≤ 20%. The categories respectively apply to the second, third and subsequent applicants.
It should be noted that the legislative proposal relating the increase of fines for cartel infringements have not been taken into account in the ACM Fining Policy Rules 2014. If the said legislative proposal is to be passed, an amendment of the ACM Fining Policy Rules 2014 will be required.

The consultation phases end on 13 June 2014.

3. Minister of Economic Affairs adopts new policy rule on the assessment of agreements in the interest of sustainability

On 6 May 2014, the Dutch Minister of Economic Affairs ("Minister") adopted a new policy rule on the assessment of agreements in the interest of sustainability. The policy rule lays down a number of aspects that the Authority for Consumers & Markets ("ACM") needs to take into consideration when assessing whether such agreements fall under the exception of Article 6(3) of the Dutch Competition Act ("DCA").

The new policy rule is aimed at agreements meant to advance sustainability. Although the policy rule does not provide an exact definition of sustainability, it does indicate that that concept encompasses at least the following interests: the environment, ecology, public health, animal welfare and fair trade. Undertakings that enter into agreements to develop production methods that contribute to the protection of such interests, can rely on the policy rule to qualify for the exception laid down in Article 6(3) DCA. That provision exempts agreements from the cartel prohibition of Article 6(1) DCA.

To invoke Article 6(3) DCA four conditions must be met: (i) the agreement creates benefits; (ii) a fair share of these benefits goes to consumers; (iii) the restrictions must be indispensable; and (iv) no possibility of eliminating competition in a substantial part of the market. The new policy rule provides a specific framework for the ACM to assess agreements in the interest of sustainability in relation to these conditions. For example, when assessing the first and second condition, the ACM will from now on also weigh the long term benefits of agreements, such as reduced carbon dioxide emissions. In addition, the policy rule recognizes the limits of the third and fourth condition when dealing with agreements advancing sustainability. The accompanying explanatory statement also provides various practical examples as to how specific agreements should be assessed under the policy rule.

Overall, the new policy rule gives undertakings interested in promoting sustainability more clarity as to how the ACM will assess their agreements. This in turn should give them more possibilities to rely on the exemption of Article 6(3) DCA when entering into such agreements. It is nevertheless important to point out that these agreements should still be assessed on a case-by-case basis, since the policy rule does not automatically exempt them from the cartel prohibition.

4. General Court reduces Donau Chemie fine due to incorrect application of the Leniency Notice

On 14 May 2014, the General Court ("GC") handed down its judgment (T-406/09) on the appeal by Donau Chemie AG ("Donau Chemie") against the European Commission's decision on the calcium and magnesium reagents cartel (Case COMP.39.396). The GC partially upheld Donau Chemie's appeal, finding that the Commission erred in applying the Leniency Notice by granting an insufficient reduction of the fine in view of the evidence provided by Donau Chemie.

The Commission held Donau Chemie liable for breaching Article 101 TFEU by participating in a price-fixing and market-sharing cartel for calcium carbide powder, calcium carbide granulates and magnesium granulates. In accordance with the Leniency Notice 2002 (2002/C 45/03), Donau Chemie qualified for a reduction of the fine within the band of 30% to 50%. In determining the percentage, the Commission noted that Donau Chemie's reduction would affect the fine that was imposed for the infringements on the calcium carbide granulates market and the calcium carbide powder market, while the evidence provided only added significant value for proving the infringement with respect to the former. On this basis, the Commission concluded that Donau Chemie was entitled to a 35% reduction of the fine that would otherwise have been imposed.

Donau Chemie argued that a reduction closer to 50% was more appropriate on the basis of the value of its cooperation. The GC agreed and considered it appropriate to increase the reduction to 43.5%. Two factors were of particular relevance for this finding. First, the GC noted that it would have been contrary to the Leniency Notice to grant a reduction of the fine concerning only that element of the fine relating to the part of the infringement for which Donau Chemie provided evidence of significant added value. Secondly, the GC took into account that Donau Chemie provided evidence necessary to prove an element of the infringement representing between 30% and 35% of total turnover affected by that infringement. On this basis the GC considered it appropriate to increase the reduction granted in the basic amount of the fine from 35% to 43.5%. This resulted in a reduction of the fine to be imposed on Donau Chemie from EUR 5 million to EUR 4.35 million.

5. The Court of Justice rules that re-adoption of decision does not breach Bolloré's rights of defense

On 8 May 2014, the Court of Justice upheld the General Court ("GC") judgment dismissing Bolloré's appeal against the Commission's re-adoption of its decision in the carbonless paper cartel. In 2009, the Court of Justice held that the GC had breached Bolloré's right of defense by confirming the Commission’s decision, imposing a fine on Bolloré for its direct participation in the carbonless paper cartel although the statement of objections made no mention of Bolloré’s direct involvement. Following this judgment, the Commission re-adopted its decision referring to the direct involvement of Bolloré in the cartel as well as to its subsidiary’s involvement based on Bolloré’s parental liability. This re-adopted decision was confirmed by the General Court.

With regard to parental liability, the Court rejects Bolloré's claim that it was not in a position to defend itself. The Court upholds the GC's conclusions that Bolloré should not only have defended itself with regard to the issue of control over the subsidiary but also its illegal actions. In addition, the Court confirms that Bolloré, being an addressee of the first Commission’s decision, knew that the objections were also addressed to it. Therefore, the GC did not err in law by stating that the claim of direct involvement in the second statement of objections was not a new claim. Consequently, the time elapsed between the first and the second statement of objections does not constitute a violation of Bolloré's right of defense.

Moreover, the Court concluded that Bolloré cannot reopen the question of the validity or amount of a fine, on the sole ground that there was a failure to adjudicate within a reasonable time, where all of its pleas directed against the findings made by the GC concerning the amount of that fine and the conduct that it penalizes have been rejected. Bolloré should launch a separate action for damages before the GC, but not request a reduction of the fine.

 

Team

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