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Competition Law Newsletter

Competition Law Newsletter

Competition Law Newsletter


1.  European Court of Justice simplifies classic case law and rules that all object infringements that have an effect on interstate trade violate Article 101 TFEU 
On 13 December 2012, the European Court of Justice ("ECJ") ruled on a reference from the French Supreme Court in the Expedia case (Case C-226/11). The Court held that the national competition authority is not required to take into account the thresholds established in the de minimis notice in order to determine whether or not a restriction of competition is appreciable. The judgment is noteworthy, in that the Court held that an agreement that has an effect on the interstate trade and an anti-competitive object constitutes an appreciable restriction on competition per se.

The French State railway company SNCF wished to expand the sale of train tickets and travel over the internet and decided to cooperate with the internet travel company Expedia. To that end, the parties established a joint subsidiary, Agence ("Agence VCS"). However, the French competition authority held that the agreement establishing Agence VSC breached Article 101 TFEU and fined both companies.

Expedia appealed against the decision and claimed that the agreement fell within the Commission's de minimis notice. On further appeal, the French Cour de Cassation referred a question to the ECJ asking whether it is possible for the national competition authority to bring proceedings against undertakings whose market share is below the thresholds in the Commission's de minimis notice.

First of all, the ECJ referred to the Pfleiderer case (Case C-36/09) and held that a Commission notice, such as the de minimis notice, is not binding in relation to the Member States but is intended to give guidance. Furthermore, the ECJ held that the thresholds established in the de minimis notice are no more than factors among others that may be taken into account by a national competition authority to determine whether or not a restriction is appreciable by reference to the actual circumstances of the agreement.

Furthermore, the Cour de Cassation had concluded that the agreement between Expedia and SNCF had an anti-competitive object. Advocate General Kokott considered in her opinion that the requirements concerning proof that a restriction of competition "by object" is appreciable should under no circumstances be more stringent than the requirements concerning proof of an appreciable effect between Member States as established in Article 101 TFEU. This means that when an agreement between undertakings with an anti-competitive object is capable of appreciably affecting trade between Member States, it is given that this agreement is also capable of appreciably restricting, distorting or even preventing competition within the internal market.

The Court followed the Advocate General's approach and held that an agreement that may affect trade between Member States and which has an anti-competitive object constitutes, by its nature and independently of any concrete effect that it may have, an appreciable restriction on competition.

According to the previous case law (Völck/Vervaeke (Case C-5/69)) an agreement, whether it restricts competition by object or by effect, falls outside the cartel prohibition when it "has only an insignificant effect on the markets, taking into account the weak position which the persons concerned have on the market of the product in question." The Court has now simplified the case law by ruling that agreements with the object to restrict competition that have an effect on trade between Member States will always constitute a violation of Article 101 TFEU. 
2.  European Court of Justice gives guidance on the room for partial annulments in the context of so-called "single, complex and continuous infringements" in Coppens 
It is established EU case law that a set of agreements and/or concerted practices may together constitute one single continuous infringement. In a recent case, the European Court of Justice ("ECJ") clarified what consequences should be attached to a finding that a company participated in some - but not all - of the practices constituting the single continuous infringement of the EU cartel prohibition (Case C-441/11).

In the present case, the Commission had fined Coppens for its participation in the Belgian international removal services cartel. According to the Commission, the participants in this cartel had concluded two sets of agreements, a bid rigging agreement ("cover quote agreement") and an agreement to financially compensate competitors that did not win a tender ("commissions agreement"). According to the Commission, together these agreements constituted one single and continuous infringement of Article 101 TFEU. However, Coppens had only participated in the cover quote agreement, not in the commissions agreement. On appeal the General Court found that Coppens could not be held accountable for participation in the single continuous infringement established by the Commission as this single infringement covered both agreements and Coppens could not be held liable for the whole. The General Court annulled the Commission decision vis-à-vis Coppens in its entirety.

The Commission appealed and argued that the General Court should have partially annulled its decision. It argued that Coppens should not escape liability for its participation in the cover quote agreement. In its recent judgment, the ECJ confirmed the Commission's approach and held that partial annulment of Commission cartel decisions is justified when (i) the remaining decision does not change the essential substance of the original decision and (ii) the company's rights of defence are protected in the process, i.e. it must have been able to foresee that it was held liable for the more limited cartel infringement and it must have had the opportunity to defend itself effectively against the allegation thus constructed. The ECJ ruled that these conditions were fulfilled in Coppens.

After overturning the General Court's verdict, the ECJ also ruled on the appropriate fine. It reduced Coppens' fine from €104,000 to €35,000. Interestingly, it came to this amount by applying the Commission's Fining Guidelines. While the ECJ is not bound by the Commission Guidelines, it nevertheless was of the opinion that it would discriminate between cartel participants if it used a different method. As such the Commission Fining Guidelines effectively determine the outcome of the European Courts exercising their full jurisdiction in the area of fines.  
3.  Misuse of regulatory proceedings: European Court confirms special responsibility for dominant companies 
On 6 December 2012, the European Court of Justice ("ECJ") dismissed the appeal by AstraZeneca against the General Court judgment that essentially upheld the European Commission's decision in which AstraZeneca was fined for the misuse of its patent rights with respect to Losec, a drug used for gastrointestinal conditions (Case C-457/10).

In June 2005, the Commission decided that AstraZeneca had abused its dominant position by attempting to block or delay market access for generic versions of Losec and preventing parallel imports of Losec. According to the Commission, AstraZeneca had first of all submitted misleading information to the patent offices in Germany, Belgium, Denmark, Norway, the Netherlands, the UK, and before the national courts of Germany and Norway. As such, AstraZeneca attempted to obtain additional protection for Losec which went beyond the original patent protection. Secondly, the Commission found that AstraZeneca had requested a withdrawal from the marketing authorisations for Losec capsules in Denmark and Norway. The intent of the withdrawal was to prevent the entry of generic products and parallel trading. The Commission imposed a total fine of €60 million on AstraZeneca.

The ECJ confirmed that AstraZeneca had abused its dominant position by providing misleading information to the patent offices. The General Court was therefore correct in holding that AstraZeneca's conduct, aimed at maintaining its dominant position, did not qualify as competition on the merits. Further, the ECJ consented with the General Court that AstraZeneca had abused its dominant position by using regulatory procedures so as to prevent or make the entry of competitors on the market more cumbersome. This would only be different if AstraZeneca could have relied on an objective justification for its behaviour. The mere fact that the regulatory framework allowed AstraZeneca to withdraw the marketing authorisations did not qualify as an objective justification.

The ECJ also rejected a cross-appeal by the Commission. The ECJ agreed with the General Court that the Commission had failed to prove that the deregistration of the marketing authorisations in Denmark and Norway restricted parallel imports.

The judgment of the ECJ resembles to some extent the ECJ judgment in the Deutsche Telekom case (Case C-280/08). In that case, Deutsche Telekom was found to have abused its dominant position by engaging in a margin squeeze. Deutsche Telekom argued that its behaviour was fully compliant with ex ante sector-specific regulation. This, however, did not dismiss Deutsche Telekom from ensuring its behaviour was also in line with competition law. It should be noted though that Deutsche Telekom was not found to be misusing regulatory proceedings. Nevertheless the judgments in both AstraZeneca and Deutsche Telekom confirm that dominant companies cannot infer from the fact that their behaviour is compliant with sector-specific regulation that their behaviour is also compliant with generic competition law. 
4.  General Court upholds € 20 million fine on Electrabel for acquiring control of a local electricity provider without prior notification 
On 12 December 2012, the General Court upheld the Commission’s € 20 million euro fine on Electrabel for implementing a concentration without notifying it (Case T-332/09).

In June 2003, Electrabel, a Belgian company active on the market for electricity and natural gas, acquired 16.88% of the voting rights, in Compagnie Nationale de Rhône (“CNR”). On 23 December 2003, Electrabel increased its participation to 47.92% of the voting rights.

On 9 August 2007, Electrabel contacted the Commission seeking its opinion on whether Electrabel had acquired sole control of CNR. Eventually it notified the concentration indicating it had acquired sole control of CNR in the course of 2007. The Commission declared the concentration compatible with the common market but left open the exact date on which Electrabel had acquired sole control. On 10 December 2009, the Commission issued its decision because the implementation of a concentration between 23 December 2003 and 9 August 2007 had breached Article 7(1) of Regulation No 4064/89.

In its judgment the Court concluded that a minority shareholder can hold de facto sole control of an undertaking, for example by obtaining a majority in the shareholders’ meeting where other shareholders are dispersed without having the majority of voting rights. According to the Court, the Commission put forward sufficient evidence that Electrabel held an absolute majority on the Board of directors as from December 2003 and had the prospect of maintaining that position. Moreover, French legislation might prevent Electrabel from acquiring de jure control of CNR because it was not a public undertaking, this however did not preclude the possibility to acquire de facto sole control.

The General Court confirmed that putting into effect a concentration contrary to EU law is not merely a formal or procedural infringement. Indeed, it can bring about significant changes in the competitive situation on the market. Hence, the five year limitation period of Article 1(1)(b) of Regulation 2988/74 and not the three year limitation period argued by Electrabel, applies.

The Court found no reason to annul or reduce the fine. The Commission rightfully considered the infringement as serious, even though it was committed out of negligence and the concentration was compatible with the common market. The unintentional character of the infringement is not necessarily an attenuating circumstance. The case confirms the need to actively assess the status of minority participants in entities with dispersed shareholder relations. 
5.  President of the General Court suspends yet another Commission decision to disclose confidential information 
On 3 December 2012, an Order of the President of the General Court was published in interim proceedings initiated by the French energy company Alstom (Case T-164/12). In this Order, the President suspended a decision by the Commission to transmit documents to the High Court of England and Wales submitted by Alstom in the gas insulated switchgear cartel case. This Order follows similar decisions to suspend the Commission's decisions relating to the disclosure of confidential information (see the Orders in Akzo Nobel and Degussa, reported in the previous issue of Stibbe's Competition Law Newsletter).

Following the Commission decision in the gas insulated switchgear cartel, National Grid Electricity Transmission plc brought a claim for damages against Alstom before the High Court of England and Wales. In this procedure, the High Court granted an application from National Grid for disclosure of the replies of Alstom to the statement of objections. Before the High Court requested the Commission to transmit the documents, it established a confidentiality ring. The aim of the confidentiality ring was to protect the confidential information contained in the documents provided to the parties to the High Court proceedings. After the Commission decided to accede to the High Court's request, Alstom took the matter to court and submitted interim relief proceedings seeking suspension of the Commission decision.

In assessing whether the condition of urgency was satisfied, the President considered that it was likely that the High Court would issue a judgment on the damages case sooner than the General Court would rule on the decision to transmit documents to the High Court. This meant that there was a serious and far from hypothetical risk that the High Court would reach a decision taking into account the information transmitted, before the General Court would have had the opportunity to rule on the lawfulness of that transmission. The President held that Alstom's right to effective judicial protection would be rendered meaningless if the application were to be refused and the documents were transmitted to the High Court. This led the President to conclude that the condition of urgency was met.

Subsequently, the President concluded that there was a prima facie case. First of all, the President found that the Commission had failed to assess the actual effects of the protection provided by the confidentiality ring. The President pointed out that "the composition of the confidentiality ring clearly presented difficulties for the applicant since it objected to the disclosure within that circle of the confidential versions of the documents requested." Given this circumstance the President held that the Commission had failed to take precautions other than those provided for in its decision.

Furthermore, the President found that the confidentiality ring consisted of a large number of people (92) in various positions, some of them not being lawyers. The President held that the Commission failed to examine in detail the specific consequences of the confidentiality ring for the protection of professional secrecy. The President concluded that the Commission could not simply maintain that the purpose of the confidentiality ring was to enable the parties' lawyers to inspect the documents disclosed, when in fact the composition of that ring was neither immutable nor restricted to lawyers.

The President even took it a step further in finding that this was an exceptional case in which it might not be possible to fully ensure the protection of third parties, despite taking all the necessary precautions. In that case, the Commission may refuse to disclose documents to national judicial authorities. The President held that it was conceivable that the Court when ruling on the main application must determine whether the Commission found itself in that situation. 
6.  Former employees can invoke the undertaking’s right to remain silent under Dutch competition law 

On 21 December 2012, the Dutch Trade and Industry Appeals Tribunal ("College van Beroep voor het bedrijfsleven, CBb") rendered two judgments (LJN: BY7031, LJN: BY7026) on appeal in cases concerning the right against self-incrimination (the “right to remain silent”) enjoyed by undertakings in the context of investigations conducted by the Dutch Competition Authority ("NMa"). Contrary to the NMa’s position, the CBb ruled that former employees may also invoke this right, that is to the extent that the inquiries made by the NMa concerned a period in which the individual was still employed by the undertaking under investigation.

In 2009, the NMa had fined two former employees for failing to cooperate, i.e. answer questions, during its investigation into the historical behaviour of their former employer. The employees had refrained from answering these questions and referred to the right to remain silent enjoyed by undertakings by virtue of Article 53 of the Dutch Competition Act (and ultimately also by the European Convention on Human Rights). The NMa claimed that such right could not be invoked by former employees as they would not be part of the undertaking any more. As a consequence it imposed fines on the former employees.

The NMa’s reasoning has now been wholly rejected (no further appeal is possible) as the CBb considered that it would be an unwarranted restriction of the right against self-incrimination if it could not be invoked by former employees when they are questioned on the behaviour of their former employer taking place at the time of their employment relationship. In reaching this conclusion the CBb referred to the very broad scope of the duty to cooperate under Dutch law and it held that, in this light, the right to remain silent should not be restricted. The CBb referred to the European Union system in which the obligation to cooperate with investigations is limited to undertakings. There is no obligation for individuals to cooperate with EU Commission investigations.

This judgment will be relevant in cases in which a former employee is interrogated (which happens frequently) without this individual being suspected of “de facto directorship” (feitelijk leidinggeven). In the latter scenario, the individual would enjoy a right to remain silent by virtue of that suspicion itself.  
7.  Belgian Constitutional Court rules against deductibility of cartel fines from tax income 
In a judgment of 20 December 2012, the Belgian Constitutional Court held that the Belgian tax legislation had to be interpreted in accordance with EU law, which implied that fines imposed by the Commission for infringements of article 101 TFEU were not deductible costs.

Tessenderlo Chemie was the subject matter of a cartel investigation in 2004 and 2006. It made provisions in its accounts for a possible fine. Following a new circular of the Belgian tax authorities, these authorities considered that they could impose taxes on such provisions. Tessenderlo contested this point of view before the court of first instance in Brussels which referred a preliminary reference to the Constitutional Court. The court of first instance wished to know whether there would be a violation of the principle of non-discrimination in the Belgian Constitution when criminal pecuniary sanctions could not be deducted from professional income whereas administrative sanctions, such as fines from EU competition law infringements could. The court also whised to know whether there would be such violation if both pecuniary sanctions were not deductible even though they were of a different nature.

It is interesting that the Commission intervened in the national procedure. Referring to the judgment of the European Court of justice of 11 June 2009 (Case C-429/07, Inspecteur van de Belastingdienst/ X), the Constitutional Court held that the interpretation of the deductibility or not of the Commission’s fine touched upon the effectiveness of EU competition law. On that basis, the Constitutional Court held that the Commission had locus standi to intervene.

The Constitutional Court continued that on the basis of the same judgment, as well as on the basis of the duty of loyal cooperation between the EU and the Member States (as enshrined in Article 4(3) TFEU), it could only conclude that the national tax provision at stake had to be interpreted as meaning that the fines imposed by the Commission for infringements of competition law, were not deductible from professional income. This situation, according to the Constitutional Court, did not lead to a discrimination that would follow from the same treatment of two different categories: criminal sanctions versus administrative sanctions. It was precisely the need for an effective competition policy and the ensuing prohibition to deduct cartel fines, that offered a reasonable explanation of such similar treatment. 

8.  Belgian competition council: Happy Time offer Belgacom does not involve margin squeeze even when taking into account costs of "reasonably efficient operator" 
On 29 November 2012, the Belgian competition council ("BCC") decided that the Happy Time offer of Belgacom, the incumbent Belgian telecom operator, did not amount to an abuse of a dominant position.

Tele2 (now known as KPN) filed a complaint with the BCC against Belgacom alleging that Belgacom abused its dominant position by performing a margin squeeze through its Happy Time offer for fixed telephony. It claimed that due to the prices it had to pay to Belgacom for the wholesale terminating and collecting services, it was unable to match the Happy Time offer.

The BCC held that Belgacom was dominant on both relevant wholesale markets (i.e. the wholesale markets for collecting and terminating services). The BCC confirmed that margin squeeze is a specific form of abuse of dominance which does not require that the wholesale or retail prices are as such abusive (respectively excessive or predatory prices). Instead, margin squeeze occurs when a vertically integrated undertaking with a dominant position in the market of an essential upstream input, places its prices on the wholesale and retail markets in such a way that the difference between the prices for the end users of that undertaking and the prices charged for the intermediary product to its competitors is negative or insufficient to cover the costs on the downstream market (see TeliaSonera (Case C-52/09) and Deutsche Telekom (Case C-280/08)).

The BCC clarified that two methodological questions should be answered to determine the applicable test to determine the existence of a margin squeeze.

First, the BCC confirmed that in principle the costs of the dominant undertaking (the “equally efficient operator” (EEO) test) should be used, and not the costs of the competitors (the “reasonable efficient operator” (REO) test). In 2005, however, CPS-operators (like Tele2) had to bear unavoidable additional upstream costs compared to the dominant undertaking (i.e. the fixed interconnection costs) in order to enter the market. Therefore, the BCC considered that in casu a REO test should be applied. This approach differs from the approach the European Court of Justice ("ECJ") applied in TeliaSonera and Deutsche Telekom. In those judgments, the ECJ considered that a margin squeeze test should be conducted on the basis of the EEO-test.

Second, the BCC confirmed that in principle one should analyse the margin squeeze in relation with all the products offered by the dominant undertaking on the relevant downstream market. However, in specific circumstances (i.e. when the newly launched offer due to its high popularity could lead to a total negative margin in the future) margin squeeze should be determined on a product level, thus in relation with a specific offer (i.e. the Happy Time offer). As the Happy Time offer became rapidly popular, the Competition Council decided to apply both tests.

Based on the answers on the methodological questions, the BCC performed four different margin squeeze tests and concluded that Belgacom did not perform any margin squeeze. 

9.  Dutch competition authority clears proposed concentration between Fox and Eredivisie 

On 7 December 2012, the Dutch competition authority ("NMa") published its decision in which it cleared the proposed concentration between the US media company Fox International Channels ("Fox"), Eredivisie Beheer B.V. ("EBV") and Eredivisie Media & Marketing C.V. ("EMM"). On the same day, the NMa also published its "informal memorandum" in which it assessed the competition law implications of the cooperation of the parties in exploiting the broadcasting rights of the football clubs in the Dutch highest league ("Eredivisie").

EMM exploits the broadcasting rights of the football clubs in the Eredivisie. The broadcasting rights for live football coverage are currently being exploited via EMM's own paid television channel "Eredivisie Live". Furthermore, EMM has granted a licence to the public television channel NOS to be the first to broadcast the highlights of the Eredivisie until 1 July 2014. After the expiry of this licence EMM is considering whether to exploit the broadcasting rights for the highlights itself via a new television channel called "Fox NL".

In its decision the NMa concluded that the parties only have a small combined market share on the investigated markets, i.e. the markets for broadcasting rights for audio-visual content, for the transmission of television signals at wholesale level and for television advertising. According to the NMa, it was unlikely that the proposed concentration would significantly impede competition on any of the said markets.

In its informal memorandum the NMa concluded that there is a possibility that the Fox NL channel will be offered on discriminatory conditions to the so called "distribution platforms", i.e. companies which offer television through their own infrastructure, such as cable. EBV, EMM and Fox put forward that the Fox NL channel will be offered to all the distribution platforms, however the parties reserved the right to develop commercial propositions which combine the Fox NL channel and other content from Fox. The NMa held that this conduct might violate competition law in as far as it significantly impedes competition. Unless new evidence emerges or in case of a complaint the NMa considered it, however, unlikely that it will start an investigation on its own initiative.

10.  State aid reform - European Commission proposes new draft Procedural Regulation and Enabling Regulation 
As part of its broader State Aid Modernisation initiative (previously reported in Stibbe's Competition Law Newsletter of June 2012), the Commission on 5 December 2012 adopted proposals to amend two (somewhat dated) Council Regulations governing EU state aid control, notably the ‘Procedural Regulation’ of 1999 and the ‘Enabling Regulation’. The two proposals will now be discussed in the Council and in the European Parliament.

The proposal for a new ‘Procedural Regulation’ primarily aims at increasing the efficiency and transparency of the state aid procedure. It inter alia formalises the right of national courts to obtain information, or ask opinions, from the Commission on state aid issues. The proposal also introduces the right for the Commission to make amicus curiae submissions before national courts. It moreover clarifies the requirements to submit a state aid complaint. Complainants are required to submit a certain amount of compulsory information. Second, complainants must demonstrate that they are interested parties within the meaning of Article 108(2) TFEU and Article 1(h) of the Procedural Regulation. This should result in a reduction of the workload of the Commission (which would only be obliged to investigate well-founded complaints).

The proposal contains other interesting features. For instance, as is already the case in antitrust and merger investigations, it would equip the Commission with effective ‘market information tools’. Thus, instead of having to rely on the voluntary cooperation of third parties, the Commission would be capable of ordering the communication of certain information within a specified deadline, subject to penalties. The proposal also envisages the possibility for the Council to conduct sector inquiries.

The proposal for a new ‘Enabling Regulation’ aims at expanding the categories of aid that may, subject to predetermined compatibility requirements, be excluded from the obligation of notifying the Commission. It would extend the scope of the Regulation inter alia to aid in favour of: culture and heritage conservation; forestry and the promotion of certain food product; conservation of marine biological resources; innovation; amateur sports; or certain broadband infrastructure.

The goal of the Commission is to have the Council amend the Enabling Regulation in the course of 2013. The Commission would then be able to implement its newly granted competence by amending the Global Block Exemption Regulation or by adopting additional Block Exemption Regulations. 
11.  Proposed merger between Dutch regulators into Authority for Consumers and Markets postponed 
On 1 January 2013, the Dutch Authority for Consumers and Markets ("ACM") was expected to come into force. However, the proposed merger between the three Dutch authorities for competition, telecoms and consumers has now been postponed as a result of the Dutch Senate who raised numerous concerns on the legislative proposal which will establish the ACM ("Instellingswet ACM").

One main concern of the Dutch Senate was that the Instellingswet ACM was closely related to another legislative proposal, which streamlines the competences and procedures of the merging authorities ("Stroomlijningswet ACM"). This legislative proposal was, however, only recently sent to the Council of State, who is not expected to issue an opinion on the legislative proposal until early 2013. The Dutch Senate suggested postponing the Instellingswet ACM until the Stroomlijningswet ACM was sent to the House of Representatives of the Netherlands.

However, the Minister of Economic Affairs argued that it was not only possible but also advisable to continue dealing with the Instellingswet ACM. To this end the Minister put forward, among others, that the Stroomlijningswet ACM is not an indispensable piece of legislation for the actual merger of the regulators. According to the Minister, the Stroomlijningswet ACM streamlines competences that already exist and does not create new competences. In other words, the Minister holds the view that the ACM can play its role independently of the Stroomlijningswet ACM.

It appears that the Dutch Senate has accordingly considered the arguments of the Minister and has since decided to hold a discussion on the Instellingswet ACM on 5 February 2013.


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