1. Dutch Court rules on cartel damage claims in Gas Insulated Switchgear case
On 16 January 2013, the District Court for the Eastern Netherlands handed down a landmark judgment concerning a claim for cartel damages. The judgment concerns a follow-on claim for damages by the Dutch electricity company, TenneT, against three entities of the ABB-group ("ABB"). The case is one of the first in the Netherlands to address substantive issues of civil liability for a cartel infringement.
Firstly, the District Court ruled that both ABB Ltd. and its main Dutch subsidiary, ABB B.V., are liable. ABB Ltd. - a parent company within the ABB group - was found liable by the European Commission of participation in the Gas Insulated Switchgear infringement. From the text of the Commission's decision, it appears that ABB Ltd. was held liable for its own participation (not merely on the basis of its control over participating subsidiaries). According to the Arnhem Court, it was therefore bound to find ABB Ltd. liable for civil damages. However, TenneT had purchased the product which was subject to the cartel, namely a gas-insulated switchgear station, based on an offer of tender from ABB B.V., a subsidiary within the ABB Group. ABB B.V., which was not amongst the addressees of the Commission's decision, argued that the mere fact that its indirect parent company, ABB Ltd., had been found liable of cartel conduct did not imply that ABB B.V. should also be held liable for cartel damages. The Court agreed in principle that an entity within a group of companies is liable for cartel damages only if that entity itself was liable of wrongdoing. However, the Court further held that such wrongdoing exists if the subsidiary was aware of the infringement and was therefore aware, or should have been aware, that it was being used as an instrument for the implementation of a cartel agreement. Based on the specific facts of the case and the defendants' procedural posture during the Court hearing, the Court found that ABB B.V. did in fact have knowledge of the infringement and was therefore liable vis-à-vis TenneT.
Secondly, the Court ruled that TenneT's claim was brought within the prescribed time limits. Under Dutch law, a claim for damages becomes time-barred five years after the claimant has sufficient knowledge of the facts to be able to file a claim. On 13 May 2004, the European Commission issued a press release announcing that it had launched an investigation into the conduct of, inter alia, ABB. On the same day, ABB issued its own press release indicating that an internal audit had revealed evidence of anti-competitive conduct by ABB employees in the relevant market. By the time TenneT filed its claim in 2010, more than five years had passed since those initial press releases. Therefore, ABB argued that TenneT's claim was now time-barred. However, the Court rejected this line of argument. In the Court's view, even if it were assumed that TenneT was aware in 2004 that the European Commission had launched an investigation, it does not follow that TenneT had sufficient knowledge to be able to file a claim for damages.
Thirdly, the Court rejected ABB's "passing-on"-defence. According to the Court, TenneT suffered a loss as soon as it overpaid for the cartelized product. If TenneT managed to recover some or all of the alleged overcharge from its own customers, the damages may be reduced on the basis of "compensation for advantage" ("voordeelsverrekening"), a Dutch doctrine that allows a defendant to offset a benefit that was conferred onto the claimant through his wrongdoing against the damages owed for that same wrongdoing. While the Court and the parties will revisit the potential application of that doctrine later in the proceedings, in its interim decision the Court openly doubts whether ABB can successfully rely on "voordeelsverrekening". According to the Court, allowing set-off may not be reasonable in this case. In this context, the Court appears to assume that an award of damages will ultimately be passed on by TenneT to its own customers through a reduction in electricity prices.
2. Alleged illegal operations no justification for a boycott by competitors
On 7 February 2013, the European Court of Justice ("ECJ") ruled on a reference from the Slovakian Supreme Court in a case concerning three major Slovakian banks (Case C-68/12). The ECJ ruled that the fact that a party, in this case: Akcenta, carried out illegal operations was no justification for such party to be boycotted by its competitors.
The three banks had terminated in a coordinated manner all contracts relating to Akcenta. The Slovakian competition authority had subsequently fined them for this behaviour. One of the banks, Slovenská spritel'ňa, disputed that the alleged boycott infringed competition law, as Akcenta was operating on the market illegally, i.e. without the required licence from the Slovak National Bank.
The ECJ considered that the agreement entered into by the banks had as its object to restrict competition. In addition, none of the banks had challenged the legality of Akcenta's business prior to being investigated. The alleged illegality of the operations of the undertaking affected is irrelevant for the assessment of an infringement, as there is no need to consider the concrete effects of an agreement once it becomes evident that its object is to restrict competition.
The ECJ further considers that the restriction was not justified either. The agreement to boycott Akcenta was not indispensable, as required pursuant to Article 101(3) TFEU. The ECJ stated that if it was indeed the aim of the banks to impel Akcenta into complying with the statutory requirements, then they should have filed a complaint with the competent authorities as opposed to organizing a boycott.
3. European Court of Justice clarifies scope of post-term non-compete obligation in franchise agreement
In its judgment of 7 February 2013, the European Court of Justice ("ECJ") ruled (Case C-117/12) that a post-term non-compete obligation in a franchise agreement could only benefit from the old vertical block exemption regulation (old "VBER") if its geographic scope is restricted to the physical space from which the contract goods or services were sold. The old VBER does therefore not extend to non-compete clauses covering the entire territory that is assigned to the franchisee. The case is relevant since the current vertical block exemption regulation contains a similar provision and identical wording as the one that is subject of the ECJ's clarifications.
On 11 November 2004, La Retoucherie de Manuela, S.L. ("franchisor") and La Retoucherie de Burgos, S.C. ("franchisee") entered into a five-year franchise agreement concerning the provision of clothing repairs and other related services. The agreement contained a non-compete obligation that was valid for the duration of the agreement and extended to one year after the termination of it. The non-compete clause covered the entire territory assigned to the franchisee under the agreement.
After the unilateral termination of the agreement by the franchisee, the franchisor initiated proceedings in which he claimed compensation for the early termination of the contract and breach of the non-compete clause. One of the questions that the courts had to decide on was whether the non-compete clause was exempted under the old VBER.
Article 5 of the old VBER exempts a post-term non-compete obligation provided that certain conditions were met. These included the requirement that was subject to debate in the present case that the non-compete obligation should be limited to "the premises and land from which the buyer has operated during the contract period".
The Court of Appeal of Burgos considered that it was unclear whether the words "premises and land" only referred to the place or physical space from which the franchisee operated or whether they could be interpreted as to include the entire territory assigned under the franchise agreement.
In its ruling, the ECJ considered the literal meaning of the words "premises and land" and the objective of the old VBER, to conclude that Article 5(b) of the old VBER could not be interpreted as referring to an entire territory. The Court therefore rejected an extensive interpretation of those words and explained that a restrictive interpretation is appropriate when applying an exception to the general rule as the one provided in Article 5(b) and in particular when doing so within the context of a block exemption regulation.
The ECJ therefore answered that a post-term non-compete clause that prohibits the franchisee to sell goods or provide services outside the physical point of sale from which it operated under the franchise agreement is not exempted under the old VBER.
4. Paris Court of Appeal confirms: Pierre Fabre breached competition law by banning internet sales within its selective distribution network
In 2006, the French Competition Authority (the Conseil) started to investigate whether a number of manufacturers of cosmetics and personal care products had violated competition law by preventing internet sales of their products. Of the eleven companies concerned, ten agreed to amend their distribution agreements. Pierre Fabre, the sole undertaking refusing to amend its policy, was imposed a fine of € 17,000.
After Pierre Fabre lodged an appeal against the decision of the Conseil, the Paris Court of Appeal made a preliminary reference to the ECJ (Case C-439/09). The Court of Justice provided the following guidance:
- A contractual clause requiring sales of cosmetics and personal care products to be made in a physical space in the presence of a qualified pharmacist, resulting in a ban on internet sales, amounts to a restriction by object in the meaning of Article 101(1) TFEU where, having regard to the properties of the products at issue, such clause is not objectively justified.
- A clause prohibiting de facto internet sales cannot benefit from the Vertical Block Exemption Regulation. It can nonetheless benefit from an individual exemption insofar as the four cumulative conditions of Article 101(3) TFEU are met.
In its judgment of 31 January 2013, the Paris Court of Appeal essentially applies the two cited principles to the selective distribution network of Pierre Fabre.
As to the existence of an ‘objective justification’, the arguments of Pierre Fabre are rebutted one by one. Thus, the arguments related to the protection of consumer harm are deemed unconvincing. Similarly, the need to offer personalized advice to the customer does not constitute a valid justification, since such advice can also be provided on a webpage – as the practice of Pierre Fabre’s competitors illustrates. The Court concludes that the clauses qualify as ‘restrictions by object’.
The Court next denies that the clauses meet the cumulative requirements of Article 101(3) TFEU. In particular, it dismisses the three efficiency gains invoked by Pierre Fabre, i.e. the guaranteeing of personalized advice, the prevention of imitation products and the prevention of parasitism. As to the first and third elements, the Court finds that an absolute ban on internet sales is not indispensable to meet these objectives. As for the second one, it holds that there is no causal link between the permitting of internet sales and the trade in imitation products.
The decision of the Conseil is accordingly upheld.
5. Bpost fined for abuse of its dominant position in the Belgian postal sector
As from 2005, the Belgian Competition Council received a number of complaints against Bpost for abuse of its dominant position in the Belgian postal sector. On 10 December 2012, the Competition Council condemned Bpost for having applied between January 2010 and July 2011 an abusive rebate system called “model per sender”. Through that system, Bpost awarded rebates to its largest clients (i.e., direct clients and intermediaries) based on the volume of the mail or on the degree to which the mail was prepared for further treatment by Bpost. However, that system did not apply in the same way to direct clients and intermediaries (i.e., companies working between Bpost and the senders, offering themselves a wide variety of services, such as the preparation, collecting, sorting, transporting and distribution of the mail). Indeed, the intermediaries were not allowed to consolidate the mail they treated for their clients, unless they passed on to Bpost their clients’ identity. When they did so, they received the same rebates as Bpost’s direct clients, but retroactively. This led several intermediaries to lodge complaints with the Competition Council.
One of the particularities of this case is that the intermediaries are not only customers but also competitors of Bpost. Another particularity is that on 20 July 2011, the Belgian postal and telecom regulator(“IBPT”) considered that rebate system incompatible with postal regulations and imposed a fine of EUR 2,300,000 on Bpost. Consequently, one of the arguments invoked by Bpost before the Competition Council was the lack of competence of the Council to apply postal regulations, which fall within the exclusive competence of the IBPT. The Council rejected that claim, considering that competition law fully applies within the postal sector as in any other sector.
The Council found that Bpost had a very high market share on the market for national industrial mail and concluded that Bpost was dominant on this market. It then went on to analyse the alleged abuse. In this context the Council observed that Bpost’s direct clients and intermediaries are both Bpost’s commercial partners and that the services provided to them by Bpost are mainly identical. Then, the Council indicated that within the framework of the contested system, the conditions awarded to the direct clients were more advantageous than those applicable to the intermediaries. Accordingly, the Council identified the existence of a different treatment between Bpost’s direct clients and the intermediaries. In view of the fact that the intermediaries are also Bpost’s competitors, the Council considered that the different treatment identified was not only discriminatory, but also that it had exclusionary effects towards Bpost’s competitors or potential competitors.
Accordingly, the Council considered that the “model per sender” system disadvantaged the intermediaries which were not able to offer the large senders the same conditions as Bpost. It therefore concluded that Bpost abused its dominant position. In view thereof, the Council imposed a fine of EUR 37,399,786 on Bpost. It is noteworthy that the Council reduced the fine in view of the fact that the French competition authority validated a quite similar rebates system applicable in France. The Council also deduced the amount of the fine already imposed by the IBPT since it related to the same rebates system (even though the IBPT’s decision was based on postal regulations and not on competition law).
6. Brussels Court of Appeal annuls infringement decision in VEBIC-case on procedural grounds
By judgment of 13 February 2013 the Brussels’ Court of Appeal ("CoA") annulled the decision of the Competition Council (Raad voor de Mededinging, "CC") of 25 January 2008. The judgment of the CoA has not yet been published.
The CC ruled in this decision that VEBIC, i.e. the association of Flemish Bakeries, infringed Article 2 APEC (Belgian counterpart of Article 101 TFEU) by publishing and disseminating amongst its members a bread price index and cost calculation scheme, after the bread price was liberalized. According to the CC, the index and calculation scheme were decisions of an association of undertakings with the purpose to influence and harmonize the price policy of bakeries with the ultimate goal to raise prices. These decisions are anti-competitive and violate Article 2 APEC.
The CoA annulled this decision on purely procedural grounds and did thus not pronounce itself on the substance of the case.
The CoA ruled that it could not verify whether the chamber of the CC which decided on the matter was composed in accordance with Article 19 APEC. That article provides that the General Assembly of the Council shall determine on an annual basis the composition of the chambers and choose the presidents from among their members. This provision serves to protect the impartial allocation of cases. Because the decisions of the General Assembly are not published, and the decision of the CC itself does not explain how the chamber was composed, the CoA held that it could not verify if the decision was taken by a chamber composed according to Article 19 APEC. Therefore the decision was annulled.
After annulling the decision, the CoA, making use of its full jurisdictional power, substituted the CC’s decision by its own judgment. The CoA examined whether the decision to start an investigation into the practices of VEBIC, was lawful. The investigation started after the Minister of Economic Affairs addressed a letter to the President of the CC requesting that an investigation concerning the bread price should be conducted. This letter, together with some other documents (two complaints from private persons concerning alleged price agreements between bakeries, and possibly a written finding of a policeman), was later sent to the competition prosecutor. Article 23 APEC 1999 (the law applicable at the time), provides that an investigation can be started after a request of the Minister or the CC if there are serious indications of an infringement. The CoA concluded that the unmotivated request of the Minister and the few additional documents cannot constitute a serious indication of an infringement. Therefore, the CoA ruled that the decision to start the investigation was unlawful. As a consequence, the investigation and the motivated report of the Competition Prosecutor which is based on that investigation are also unlawful. Consequently, there are no more grounds to condemn VEBIC for violation of Article 2 APEC.
7. European Commission publishes draft Technology Transfer Regime
The Commission has taken a new step in revising the Technology Transfer Block Exemption Regulation (the "TTBER") and its accompanying guidelines (the "TT-Guidelines"). On 20 February 2013, it published a proposal for a revised Technology Transfer regime in which it invites stakeholders to comment thereon. The deadline for the submission of responses is 17 May 2013. The full text of the draft regulation and guidelines as well as further information on the consultation can be found here.
The TTBER creates a safe harbour for technology transfer agreements, while the TT-Guidelines provide guidance on the application of EU competition law to technology transfer agreements. Both the TTBER and the TT-Guidelines are due to expire on 30 April 2014. In its proposal, the Commission introduced only minor changes to the current regime. These changes primarily relate to the scope of the safe harbour provided by the TTBER. If the current proposal would be adopted, passive sales restrictions between licensees; exclusive grant-backs; and termination clauses will no longer be eligible for safe harbour protection.
It is furthermore interesting to note that the Commission has not embarked upon any big changes in its framework of assessment relating to patent pools and other multi-party licensing agreements. A 2011 study on the interface between competition law and patent law, which the Commission commissioned as part of the revision process, especially focused on patent pools. Moreover, in its previous consultation on the existing TT regime, the Commission welcomed in particular any comments on the application of the TT-Guidelines to patent pools. Nevertheless, these preparatory steps have not yet led to major changes in the draft for a new regulatory framework relating to patent pools.