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Competition Law Newsletter

Competition Law Newsletter

Competition Law Newsletter

01.11.2013

1.  The European Commission market tests commitments offered by Samsung regarding the enforcement of its UMTS standard essential patents 

The European Commission invites comments from interested parties on commitments offered by Samsung Electronics ("Samsung") in case COMP/C-3/39.939 in relation to the enforcement of the standard essential patents ("SEPs") it owns in the field of mobile communications. It is the first time the Commission addresses the obligations of owners of SEPs.

SEPs are patents that read on technologies that are technically essential to produce a product that complies with an industry standard. Since there are no alternative technologies available to a manufacturer wishing to produce a standard-compliant product, a SEP is considered to be a separate relevant market on which the owner has a monopoly position. To ensure that no manufacturers are unduly prevented from producing standard-compliant products, many standard-setting organizations ask SEP owners to commit to licensing their SEPs on fair, reasonable and non-discriminatory ("FRAND") terms. While it is generally accepted that non-compliance with FRAND terms can constitute an abuse of a dominant position, there is much debate about the exact scope of these terms.

Samsung owns several patents essential to the implementation of the 3G UMTS standard and had given FRAND terms to standard-setting organization ETSI. In 2011, Samsung started injunction proceedings against Apple, claiming Apple had infringed certain of these SEPs. After investigating the matter, the Commission took the preliminary view that Samsung's behaviour constituted an abuse of a dominant position. Particularly relevant in this regard is that Apple had declared itself willing to negotiate a license on FRAND terms.

Now it appears that the aforementioned proceedings against Samsung will in all likelihood end with a commitment rather than an infringement decision. The proposed commitments entail that Samsung shall not seek injunctions against "willing licensees" on the basis of its 3G UMTS SEPs, but also not on the basis of any SEPs it may have a reading on ETSI/3PP or Wifi standards. A potential licensee is considered to be willing if they agree to establish a FRAND royalty in conformity with the licensing framework set out in the commitment decision. This framework provides for a mandatory negotiation period of 6 to 12 months. If parties are not able to agree on licensing conditions within the prescribed time frame, FRAND terms are determined by either a court or an arbitral tribunal. This framework only applies to the licensing of SEPs required for the production of smartphones and tablets, but not for any type of desktop, notebook or laptop computers. Interested parties can submit their comments to the Commission until 18 November 2013.

Over the last couple of years, a trend of increased interest in the licensing practices of SEP owners has become apparent. Besides Samsung, Motorola is currently also facing antitrust scrutiny for the same kind of conduct. Furthermore, private parties increasingly rely on FRAND principles in litigation. In the context of a dispute between Huawei and ZTE, the Regional Court of Düsseldorf referred preliminary questions concerning the availability of remedies to owners of FRAND-committed SEPs in May of this year.
 
2.  The Dutch Supreme Court confirms exclusive purchase clauses in horizontal agreements can potentially restrict competition by object 
 
On 25 October 2013, the Supreme Court of the Netherlands ruled on whether an exclusive purchase clause infringes Article 6 of the Dutch Competitive Trading Act (which is the Dutch equivalent to Article 101 TFEU).

The exclusive purchase clause in this case was part of a transfer deed concerning plots of land on the Dutch island called "Texel". The clause stipulated that the buyer of the plots of land was only allowed to establish a petrol station on the condition it was supplied by a company affiliated to the claimant. The Supreme Court addressed two main issues in its decision.

The Supreme Court first addressed the question of whether the exclusive purchase clause can have the object to restrict competition and, as a result, infringes article 101(1) TFEU. The Court referred to case Allianz v. Gazdasagi (C-32/11), in which the European Court of Justice established that in order to answer this question, a concrete and individual examination of the wording and aim of the agreement, and the economic and legal context should be conducted. Claimant referred to, among others, case Pedro IV (C-260/07) in order to argue that exclusive purchase clauses cannot be considered to restrict competition by object. The Court dismissed this argument because this case law was only applicable to vertical agreements, while in this case claimant and defendant were also potential competitors as a result of their horizontal relationship on the retail market for petrol.

Secondly, claimant argued that the delineation of the relevant geographic market, which was restricted to the Texel Island, was not sufficiently substantiated. The Supreme Court found the delineation of the relevant geographic market was based on the consideration that motorists on the island would not be willing to incur the costs and efforts involved in getting to the mainland only in order to fill up their fuel tanks. According to the Court this finding sufficiently substantiated the conclusion, holding the relevant geographic market to be limited to the Texel Island.
  
3.  New Belgian Competition Act and Competition Authority operational    
 
On 6 September 2013, the new Belgian Competition Act entered into force. The material provisions of the act, prohibition on restrictive practices, prohibition on abuse of dominant position, merger control, remain largely unaltered. They follow principles similar to EU competition law.

However, the new act contains numerous important new features:

-   A new single integrated competition authority (abolishing the previous multilayer system)
-   Streamlined procedure in restrictive practice investigations with mandatory deadlines
-   Shorter deadlines for provisional measures
-   Introduction of a settlement procedures
-   Introduction of personal liability (up to EURO 10.000)
-   Introduction of a new price monitoring authority, called “Price Observatory”, with the possibility for the competition authority to impose interim measures in
    case problems regarding prices, margins, price evolutions or a structural market issues are detected by this monitoring authority.

The 20 members who, on a rotational basis, will judge individual cases have been nominated. The new authority has also launched a new website.

A series of implementing acts have now been published, which deal with, among others:

-   Procedural implementation rules
-   A new notification form for concentrations (mergers, acquisitions, full function joint ventures
-   Payment of fines
-   Payment of administrative fines and periodic penalty payments
-   Access to copies of the file.

The existing 2011 fining guidelines remain in force. First decisions regarding restrictive practices are expected beginning next year. The first merger decisions have been adopted, including an approval decision subject to undertakings in the media sector. 
 
4.  Belgian Competition Authority imposes exemplary fine on cement producers for anticompetitive behaviour in standardization process     
 
On 30 August 2013, the Belgian Competition Authority imposed a combined fine of EUR 14.7 million on three companies and two organizations active in the cement industry for committing an infringement as regards the prohibition of anti-competitive agreements and/or concerted practices within the meaning of Article 2, §1 of the Act on the protection of economic competition and Article 101, §1 TFEU. This case is interesting as it shows what kind of compliance issues could arise as a result of the use of standardization and certification processes by undertakings for purposes other than standardization and certification.

The undertakings involved concerted and exchanged information between May 2000 and October 2003 in order to protect their commercial interests. More specifically, they used the Belgian standardization and certification process to prevent or delay the use of ground granulated blast slag ("GGBS") in concrete in order to maintain their significant position on the grey cement market and delay the entrance of a competing product. This (indirectly) resulted in the maintenance of high prices for ready-mixed concrete. A complaining manufacturer of GGBS argued that his product was a partial cement substitute as ingredient for ready-mixed concrete and that the intervention of the addressees in the standardization and certification process was exclusively aimed at partitioning the Belgian grey cement market. The Competition Authority agreed and found that the conduct of the addressees went well beyond the standardization purpose and had to be considered as sheer protectionism, classifying it as a restriction of competition by object, having at least potential anticompetitive effects.

This case shows that undertakings involved in standardization and certification processes should keep in mind that their actions in this respect can have an effect on competition on the relevant market and thus draw the attention of competition authorities. In order to act in accordance with competition law, undertakings should make sure that these processes are used for standardization and certification purposes only.

Team

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