Articles

Competition Law Newsletter

Competition Law Newsletter

Competition Law Newsletter

01.08.2012 NL law

1.  Spanish raw tobacco cartel: principle of equal treatment leads ECJ to confirm that intermediate parent company is not liable 
 
On 19 July 2012, the European Court of Justice ("ECJ") dismissed the appeals (joined cases C-628/10  P and C-14/11 P) from Alliance One International Inc ("Alliance One"), Standard Commercial Tobacco Co, Inc ("Commercial Tobacco") and the European Commission (the "Commission") against a judgment of the General Court (Case T-24/05) relating to the Spanish raw tobacco cartel. In its decision of 2004, the Commission attributed liability to Alliance One, Commercial Tobacco as well as the intermediate parent company, Trans-Continental Leaf Tobacco Corp. Ltd ("Leaf Tobacco"), for the participation of World Wide Tobacco España, SA ("Tobacco España") in the Spanish raw tobacco cartel.

The ECJ agreed with the General Court's judgment which on the one hand confirmed the Commission's decision in relation to the liability of Alliance One and Commercial Tobacco and, on the other hand, annulled the Commission's cartel decision in so far as it related to the intermediate company Leaf Tobacco.

The main legal question in this case was whether the Commission had applied different standards in holding the parent companies of various participants liable in one and the same cartel, and if so whether it was lawful to do this.

The ECJ held that the General Court had been correct in finding that there had been a difference of treatment between Leaf Tobacco and the parent companies of other cartel participants with regard to the attribution of liability. This justified a partial annulment of the Commission's decision.

Where a parent company has a 100% shareholding in a subsidiary, that parent company is able to exercise decisive influence over the conduct of its subsidiary, and there is a rebuttable presumption that it does in fact exercise such influence. Nonetheless, there is nothing to prevent the Commission from establishing that a parent company did in fact exercise decisive influence over its subsidiary by other means, or in combination with the rebuttable presumption.

However, where the Commission adopts a particular method in order to determine whether liability should be attributed to parent companies whose subsidiaries have taken part in the same cartel, the principle of equal treatment requires the Commission to apply the same criteria for all those parent companies.

The General Court subsequently concluded that none of the evidence relied on by the Commission supported the presumption that Leaf Tobacco did in fact exercise decisive influence over Tobacco España. The lack of such evidence led the Commission to decide not to attribute liability to the parent companies of other cartel participants. Therefore, the Commission could not hold that Leaf Tobacco was jointly and severally liable for the fine on the sole basis of the parental liability presumption without discriminating against it vis-à-vis the parent companies of other participants in the cartel.

With regard to the appeal by Alliance One and Commercial Tobacco, the ECJ concluded that none of the claims raised by the appellants showed that the General Court had erred in its application of the law relating to the attribution of liability to parent companies or the principle of equal treatment. 
 
2.  Austrian data collection authority does not qualify as an undertaking 
 
On 12 July 2012, the European Court of Justice ("ECJ") handed down an interesting ruling (Case C-138/11) on the question of whether a State entity that registers certain information and makes this available to the public, qualifies as an undertaking within the meaning of competition law.

Austrian national law requires a company to publish certain information on its business activities in a register (the "Register"). The public has the right to access these data, in return for a fee payment. However, under Austrian law users who access information from the Register are prohibited from re-using this information.

Compass-Datenbank is a company that operates a database containing economic data for the purpose of providing information services. In order to perform such information services, Compass-Datenbank requires daily updates of the data recorded in the Register, which is then supplemented by its own research.

In national proceedings, the Austrian State sought an injunction against Compass-Datenbank to prohibit it from using the Register. Compass-Datenbank in turn argued that the Austrian State had abused its dominant position by prohibiting Compass-Datenbank from accessing the Register in return for payment.

The national proceedings eventually led the Austrian Supreme Court to question the ECJ as to whether article 102 of the TFEU must be interpreted as meaning that a public authority should indeed be presumed to act as an undertaking if it stores data reported by undertakings on the basis of statutory reporting obligations in a Register and then allows the inspection of and/or printouts of such information to be made in return for payment, but prohibits any more extensive use.

With reference to established case-law, the ECJ first of all reiterated that any activity consisting in offering goods and services on a given market is an economic activity. On the other hand, activities that fall within the exercise of public powers are not of an economic nature.

The ECJ subsequently considered that a data collection activity in relation to companies, on the basis of a statutory obligation on those companies to disclose the data and powers of enforcement related thereto, falls within the exercise of public powers. Equally, an activity consisting in the maintenance of and making available to the public of the data thus collected neither constitutes an economic activity. The reason for this is that the collection of the data "would be rendered largely useless in the absence of the maintenance of a database which stores the data for the purpose of consultation by the public".

The judgment is a reminder that for a State entity to qualify as an undertaking, it is not sufficient that it offers a service to the public in return for a fee payment. This is especially true if the service is closely related to an activity that falls within the exercise of public powers.  
 
3.  English Court awards damages for a breach of competition law for the first time 
 
On 5 July 2012, the UK Competition Appeal Tribunal ("CAT") published its judgment (Case Number: 1178/5/7/11) on the damage claim of 2 Travel Group PLC ("2 Travel") against Cardiff City Transport Services Ltd ("Cardiff Bus"). This claim was brought before the CAT in January 2011 by 2 Travel (at that time in liquidation) as a follow-on damages claim to the Office of Fair Trading ("OFT") decision that Cardiff Bus had abused its dominant position by engaging in predatory pricing. 2 Travel claimed that it had suffered losses as a result of the infringement and sought damages from Cardiff Bus. The damages claimed by 2 Travel totalled to an amount nearing £50 million.

In April 2004, 2 Travel, a small bus operator, launched commercial bus services on four routes in Cardiff. Cardiff Bus, an established local public transport company, responded by introducing competing services on the relevant routes with lower fares. The OFT determined that these fares were loss-making and amounted to predatory pricing. In February 2005, shortly after the withdrawal of 2 Travel from the market, Cardiff Bus discontinued its services on the relevant routes in Cardiff. Although the OFT decided that Cardiff Bus had abused its dominant position, it did not impose a fine.

In this judgment, the CAT awarded damages for the loss of profits (including interest) as well as exemplary damages. The CAT accepted 2 Travel's claim for the loss of profits, which were set at £33,818.79. Furthermore, the CAT awarded 2 Travel exemplary damages, as it found that Cardiff Bus' conduct had been "outrageous". The CAT reasoned that in the absence of the award of such exemplary damages, a compensatory award would be insufficient. By setting the exemplary damages amount to just £60,000 the CAT took into account the fact that Cardiff Bus is only a small company and owned by a public authority.

The judgment is noteworthy because it is the first final damages award made by the CAT and the first case in which an English Court also awarded exemplary damages. The CAT noted that the purpose of the exemplary damages is to punish and deter anti-competitive behaviour. The CAT acknowledged that this judgment is "likely to incentivise the bringing of claims for exemplary damages in competition cases" and noted that in other cases, in which the defendant is economically powerful, the exemplary damages must be set at a higher level. The amount should be sufficient to punish and deter the infringer. 

4.  Aegean Airlines/Olympic Air merger blocked: decision confirms the importance of credible market entry as a possible mitigating factor for high market shares 
 
On 3 July 2012 the European Commission (the "Commission") published the non-confidential version of its decision of 26 January 2012 prohibiting a proposed merger between Aegean Airlines and Olympic Air, which was notified to the Commission on 24 June 2010 (Case Comp/M.5830, the "Decision").

Cases in which the Commission prohibits a merger are rarely seen. This was only the second time since 2007 that parties even upon the submission of remedies did not succeed in obtaining clearance from the European Commission. Another well-published example of an outright prohibition concerns the Ryanair/Aer Lingus merger (Case Comp/M.4439), which was the first time the Commission prohibited a merger under the 2004 Merger Regulation (Regulation 139/2004). Furthermore, on 1 February 2012 the Commission announced that it had decided to block the proposed merger between Deutsche Börse and NYSE Euronext (see press release Case Comp/M.6166).

The Decision is especially relevant in that it underlines the importance of credible market entry which may be a possible mitigating factor for the parties' high market share.

As usual in airline mergers, the Commission assessed the relevant market on the basis of the "point of origin/point of destination" ("O&D") approach in which each O&D constitutes a separate market with its own characteristics in terms of passenger structure and product qualifications. From the market research, the Commission concluded that, except for in one route, ferry services and air services did not compete. Therefore, these services formed part of two separate markets. Furthermore, the Commission noted that Olympic Air and Aegean Airlines would obtain a market share of 90-100% of the passengers travelling on a number of Greek domestic routes. The transaction would therefore lead to the creation of a de facto monopoly and the elimination of competition between the parties, which in the absence of the transaction are close competitors.

As recently reported, on 7 June 2012, the acquisition of British Midlands Limited ("bmi") by the International Consolidated Airlines Group ("IAG") was conditionally approved by the Commission upon the release of fourteen daily slot pairs at London Heathrow in order to facilitate new entry (Case Comp/M.6447, see Stibbe's Competition Law Newsletter of July 2012). In the Aegean Airlines/Olympic Air merger, the parties also offered to release slots at various Greek airports. However, the Commission found that there were already sufficient slots available at most of the relevant airports. Moreover, the market test did not reveal any credible entry plans by any carriers. Consequently, the Commission found that the notified concentration would lead to a significant impediment to effective competition on nine domestic routes. The notified concentration was declared incompatible with the internal market and was therefore prohibited.

The parties have lodged an appeal against the Decision, the judgment is pending (Case T-202/11). 
 
5.  Court of Appeal Amsterdam rules that duty imposed on members of trade association to purchase software violates competition law 
 
The Court of Appeal Amsterdam handed down an interesting judgment (LJN: BX0460) in a civil case in which it ruled that an obligation imposed on the members of a trade association to exclusively purchase certain software violates article 6 of the Dutch Competition Act (the equivalent of article 101 of the TFEU).

The Dutch Association of Real Estate Brokers and Real Estate Experts (the "NVM") had developed an office software system called "Masterplan 2000". The NVM then obligated its members (i.e. 80% of all sworn estate agents in the Netherlands) to exclusively purchase the Masterplan 2000 system. Furthermore, the members were obligated to purchase at least one licence from another specified computer programme. The question which the Court was facing was whether the NVM's conduct violated the prohibition on anti-competitive agreements and/or rather the NVM abused its dominant position.

The Court considered first of all that the obligation imposed on the NVM members to exclusively purchase Masterplan 2000 did not have as its object the restriction of competition. The Court however ruled that the NVM's decision imposing this duty on its members did have the effect of restricting competition on the Dutch market for office software for estate agents. Furthermore, this restriction was considered to be appreciable. The Court rejected the NVM's claim that its decision was exempt pursuant to article 6 (3) of the Dutch Competition Act (the equivalent of article 101 (3) of the TFEU), as the NVM had not adequately substantiated that sufficient competition would remain.

In addition, HPC claimed that the NVM delayed the supply of certain specifications to ensure the interoperability between the software of HPC and the NVM's software. HPC argued that this conduct constituted an abuse of a dominant position. The Court however rejected this claim, because HPC had not sufficiently substantiated that the refusal to supply by the NVM did in fact amount to an abuse of a dominant position. The reason for this was that 20% of the estate agents in the Netherlands are not associated with the NVM. These estate agents are therefore not bound by the obligations imposed by the NVM. This led the Court to the conclusion that in any event there was no complete elimination of the competition on the relevant market.
 
6.  Court of Appeal Arnhem declares exclusive purchase clause with a duration of twenty years void 
 
This case (LJN: BX0258) dealt with an operating agreement, which stipulated that the operator of a petrol station was obliged to exclusively purchase fuels from BP during a twenty year period. A few years after the agreement had been concluded, the operator did not agree anymore with this exclusive purchase clause and the matter ended up at the Court of Appeal Arnhem.

The Court first of all considered that the Notice on agreements of minor importance (de minimis Notice of 22 December 2001, the "Notice") is not decisive when interpreting national competition law, as the legislator is not bound by the Notice. Next, the Court ruled that the exclusive purchase clause appreciably restricted the competition on the relevant market because of:

(i) the long duration of the exclusive purchase clause (i.e. 20 years);
(ii) the market share of BP on the relevant market (i.e.11-12%);
(iii) the fact that BP used the exclusive purchase clause in virtually all its contracts;
(iv) the fact that BP's competitors on the relevant market also regularly made use of similar exclusive purchase clauses (leading to so-called "network effects").

BP tried to counter this conclusion by referring to the unrelated Heineken case (case reference 2036), in which the Netherlands Competition Authority decided that operating agreements between Heineken and pub owners were reconcilable with competition law. However, in that case the pub owners were entitled to terminate the agreement by giving two months' notice. In the present case, the operating agreement with BP could not be terminated early, which led the Court to reject the comparison.

In sum, the Court declared the exclusive purchase clause void. BP was ordered to pay an advance for the damages of €0.02 per litre of fuel purchased by the operator since 1 January 2004. 
 
7.  Next steps in State aid reform: Commission issues questionnaires to consult on procedural aspects and on the de minimis Regulation 
 
As previously reported in Stibbe's Competition Law Newsletter of June 2012, the European Commission (the "Commission") launched a comprehensive reform of the State aid framework by adopting the Communication on "EU State aid modernisation (SAM)" on 8 May 2012. As part of the reform, the procedural framework on State aid is now subject to a revision that also extends to Council Regulation (EC) No 659/1999 of 22 March 1999 (the "Procedural Regulation"). Furthermore, the Commission will also review the Regulation 1998/2006 on the application of Articles 107 and 108 of the TFEU to de minimis aid.

The Procedural Regulation lays down detailed procedural rules on how to deal with State aid cases. One of the main purposes of the reform of the Procedural Regulation is to speed up the process of decision-making by the Commission. Next to this, the Commission's aim is to focus on cases with the highest impact at the EU level.

On 13 July 2012, the Commission started the consultation on the reform of the State aid procedural framework by issuing a questionnaire to collect the views of stakeholders on improving the handling of State aid complaints and information-gathering by the Commission when investigating cases of aid with a significant impact.

This consultation ends on 5 October 2012, after which the Commission will propose a revised regulation by December 2012. The revised regulation will then be submitted to the EU Parliament and the EU Council of Ministers.

As mentioned above, the de minimis Regulation is also under review. Pursuant to this Regulation, aid measures that do not exceed €200,000 are outside the scope of EU State aid control and are therefore not subject to the Commission's prior approval. The Commission will now assess whether the €200,000 threshold is still appropriate. This indicates that the Commission is considering increasing the threshold.

On 26 July 2012, the Commission issued a questionnaire to start the public consultation on the review process regarding the "de minimis" Regulation, which runs until 18 October 2012. The Commission will then prepare a revised draft regulation by the end of 2013.

Team

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