Due to Covid-19 restrictions, the Netherlands Authority for Consumers and Markets Consumer and Market Authority (“ACM“) has not carried out unannounced inspections (also called ‘Dawn Raids’) for a while. Given that most restrictions have been phased out, the ACM has announced that it will start again to conduct Dawn Raids in the near future.

In the Netherlands both the ACM and the European Commission (“Commission“) are allowed to carry out Dawn Raids for alleged infringements of competition law. These authorities are competent to use this power when there is a concrete indication of anti-competitive agreements or behaviour. Such indications may arise from (anonymous) tips from competitors and (former) employees, and as a result of an official investigation or a market study (see for example our blog about the Commission’s market study into the Internet of Things).

If the ACM knocks on your company’s door in order to execute a Dawn Raid, the ACM’s inspection will proceed (roughly) along the following lines:

• Entry and opening interview
• Analogue research
• Digital research
• Interview and/or administrative interview

This blog discusses what can be expected and indicates the limits of the investigative powers of the ACM.

Entry and opening interview

During a Dawn Raid, pursuant to article 5:15 of the Dutch General Administrative Law Act (“Awb“) (in Dutch: Algemene Wet Bestuursrecht), officials of the ACM are authorized to enter business premises and open vehicles without prior announcement. They may also enter private homes under article 50 of the Dutch Competition Act (“Mw“) (in Dutch: Mededingingswet). Please note that in order to enter a private residence they need prior authorisation from the supervisory judge.

At the beginning of the Dawn Raid the ACM will ask for a specific person or a person with a specific job description. They will conduct an opening interview with this person. The ACM will usually also ask for an IT person to join the opening interview to map out the IT infrastructure.

During the opening interview the ACM will identify itself on the basis of article 5:12 of the Awb and hand over the search warrant which describes the purpose and object of the Dawn Raid. The ACM must point out to the company that it has a right to legal assistance and will often be willing to wait for a maximum of half an hour for their arrival.

The ACM will clearly state, at the start of a Dawn Raid, that employees must cooperate with the investigation on the basis of article 5:20 of the Awb and that they may not destroy evidence. The duty to cooperate means that employees must not obstruct the ACM and must provide access when so requested. A fine of EUR 900,000 (also for natural persons) or 1% of the group turnover may be imposed for non-cooperation pursuant to article 12m of the ACM’s Establishment Act. In the event of a difference of opinion about the scope of the duty to cooperate, it is advisable to cooperate under protest and to have a note made in the report. This avoids the risk of a fine but gives the company the opportunity for judicial review (e.g. interim injunction proceedings or an appeal against a sanction decision).

Relevance of search warrant

The search warrant determines the limits of the ACM’s investigative powers. Under article 5:17 of the Awb the ACM may request access to all files that fall within the scope of the warrant. The ACM is not allowed to view or copy any files that fall outside the scope of the search warrant. Such files may include e-mails and other correspondence, WhatsApp messages, agendas, memos, minutes of meetings, photographic material, expense claims, and travel tickets. Contact with lawyers – ‘privileged’ communication – is excluded and may not be viewed or copied.

The search warrant that the ACM is obliged to provide must state the purpose and object of the investigation at the time of the Dawn Raid. However, pursuant to the Nexans judgment of June 2014 of the Court of Justice of the European Union (“ECJ“), the statement of purpose and object does not have to contain, and certainly not in the initial phase, a precise definition of the market concerned or a precise legal qualification of the alleged illegal acts. A judgment of the district court of The Hague in preliminary relief proceedings of October 2018 also shows that the ACM has a certain amount of discretion for the formulation of its purpose. What is important is that the definition of the purpose allows the company to determine the scope of its duty to cooperate and its rights of defence.

The question whether something falls within or outside the scope of the investigation task often leads to considerable discussions between the (lawyers of the) company and the ACM, as was the case in a recent dispute at the District Court of The Hague of June 2021. A number of companies brought preliminary relief proceedings because the ACM had considerably expanded the scope of its investigation in response to information found during a Dawn Raid. Initially, the assignment focused on procurement. However, during the Dawn Raid officials also copied files relating to other departments. When the officials at the ACM’s offices took a quick look at these files they came to the conclusion that not only the purchasing department but also the sales department had probably violated competition law. The ACM extended its investigation on the basis of this information.

The central question was whether the ACM was allowed to use this information that it acquired during a Dawn Raid to expand the scope of its investigation. The District Court ruled that on the basis of the Deutsche Bahn judgment of the ECJ, competition authorities are allowed to briefly inspect information in order to verify whether it falls within the scope of the investigation. The competition authority does not have a duty to ignore information that it happened to become aware of during this brief inspection. Accordingly, the District Court of The Hague ruled that the ACM was allowed to use the information that it acquired during its Dawn Raid even though the information clearly fell outside of the scope of the search warrant.

Analogue research

Officials can and may request access to physical files located in locked rooms, cabinets or drawers. In principle, employees must grant access to physical files as long as the ACM acts within the limits of scope of the search warrant.

The limits of the power to conduct analogue investigations were discussed in the so-called wastebasket case. The case concerned officials of the Dutch Financial Markets Authority (“AFM“), who like the ACM are allowed to conduct Dawn Raids. During a Dawn Raid the AFM had independently and randomly taken files from cabinets, opened drawers and searched through wastebaskets and paper bins. According to the Trade and Industry Appeals Tribunal (“CBb“) these actions were unlawful.

The CBb considered the actions of the officials of the AFM unlawful because they qualified as “fishing”. Officials of the AFM and ACM are not allowed to do this; they may only “look around” and subsequently must request access to documents. If, after requesting access, a discussion arises about the relevance of certain files, the officials may only inspect them briefly for verification purposes. Ultimately the CBb’s ruling on the unlawfulness in the wastebasket case made very little difference in practice; the fine imposed on the AFM was upheld because sufficient lawful evidence had been found. In general the case law on this topic shows that claimants are seldom able to prove that officials are guilty of “searching”.

Digital research

In contemporary practice most of the investigation during a Dawn Raid will be focused on digital files. The ACM is authorised to copy digital files from mobile phones, laptops, PCs and other data carriers. In order to manage digital investigations the ACM has published a Digital Working Method in 2014. This describes how the ACM proceeds when collecting and processing digital data taken during a Dawn Raid. In its Working Method, the ACM deviates from the Commission’s practice.

Mobile phones

Pursuant to article 5:17 of the Awb the ACM is permitted to inspect mobile phones if it has sufficient indications that the mobile phone is used for business purposes. The inspection of mobile phones will often take place on site in the presence of the employee that owns or usually uses the phone. The ACM must be able to establish briefly whether, for example, WhatsApp messages are business-related. On the basis of the proportionality requirement, the ACM should stop inspection if the chat is (partly) private. Any disagreement will be referred to the ACM’s confidentiality officer. The limits of the ACM’s authority with respect to the safeguarding and investigation of mobile data regularly leads to legal disputes.

In an anonymised summary proceeding of November 2017, a company argued that the ACM was not allowed to inspect mobile data, because it also included private data of the employee. However, the District Court of The Hague found that the phone contained a lot of relevant data and the ACM could not separate business and private data on the spot. The ACM was therefore allowed to copy all data including any private data. The District Court more over ruled that the ACM had provided sufficient safeguards in order to prevent it from obtaining access to private data in its Digital Working Method.

Deleting data from mobile phones after the ACM has pointed out to the company its duty to cooperate can lead to substantial fines. Recently, the ACM imposed a fine of EUR 1.84 million for deleting WhatsApp chats during a Dawn Raid.

Other digital files

During a Dawn Raid the ACM may seize many digital files for further investigation. These are often millions of individual files such as e-mails, minutes and contracts which the ACM can take with it by making integral copies of (several) complete computers. The files taken by the ACM are referred to as the ‘Safeguarded Dataset’.

Subsequently, the ACM will use search terms to filter out irrelevant documents from the Safeguarded Dataset to arrive at an ‘Within the scope Dataset’. An anonymised judgment of March 2019 of the Court of Appeal of The Hague shows that the ACM has discretion when it comes to choosing the search terms it uses in order to filter its datasets. Pursuant to article 1 of the Digital Working Method files may be considered within the scope of an investigation if the nature or content of the data can reasonably be deemed to fall within the purpose and object of the investigation. The search questions must therefore be sufficiently specific to be able to state that the hits are reasonably within the purpose and object of the investigation.

Finally, a specially designated official will filter out of the ‘Within the Scope Dataset’ all privileged files and private communications to create the ‘Investigation Dataset’. The investigating officials of the ACM then use this dataset to build a file against the company in question. In a judgement of September 2020 the interim relief judge of the Rotterdam District Court ruled that a company is entitled to inspect the Investigation Dataset that the ACM has compiled.

Interrogation or administrative interview – right to remain silent

Pursuant to article 5:16 of the Awb, the ACM also has the power to obtain information from employees in the course of an investigation. The duty of cooperation requires employees to answer questions unless they themselves are personally suspected of violating competition law. Before an interrogation begins, the interviewing official must inform the employee of his or her right to remain silent. If the employee is a suspect he or she is no longer obliged to answer questions with which he or she could (possibly) incriminate him or herself or the company (pursuant to article 5:10 of the Awb).

Seal

Dawn Raids often last longer than one day. To prevent evidence from being tampered with during the night officials of the ACM will seal rooms or closets as they see fit. Sealing can also be a solution to a discussion about the relevance or privileged status of certain material. That way a discussion can be postponed to be conducted in the presence of a lawyer.

The ACM can impose a very high penalty if a seal is broken almost regardless of whether the company can do anything about it. Therefore the risk of a seal being broken rests almost entirely with the company in question. The exception that confirms the rule in this respect is the National Association of General Practitioners case. In this case, the National Association of General Practitioners (“LHV“) was fined €51,000 for breach of seal. LHV shared its office with several companies and had taken precautions in order to prevent a seal from being broken. Nonetheless a night time security guard broke the seal during his normal rounds. The CBb annulled the fine imposed on LHV because it had taken all necessary precautions and did not directly employ the guard who had broken the seal.

After the Dawn Raid

Towards the end of the dawn raid, the ACM and/or the Commission will draw up an inventory of all the (digital) documents they have taken or copied. Companies are advised to draw up an inventory themselves in which they can compare to the inventory of the investigators and on which they can record any particularities that occurred during the Dawn Raid.

Checklist in case of Dawn Raid

• Appoint a Dawn Raid specialist within your company, and make sure they have the contact details of a trusted competition lawyer in advance.
• Please also read our preparatory documents (in Dutch) for a Dawn Raid, including:
  • separate instructions for receptionist,
  • separate instructions for staff who accompany ACM personnel during Dawn Raids, and
  • a detailed legal framework for Dawn Raids of the ACM.
• Create a ‘legal privilege’ folder where all (e-mail) correspondence with lawyers is stored.
• In the event of a Dawn Raid, send the ACM to an empty conference room.
• Formally object to the Dawn Raid without breaching your duty to cooperate and ask for proof of your objection.
• Make copies of all documents copied by the ACM during the Dawn Raid.
• Always make a note of whether, when and who is considered personally suspect by the ACM. The ACM will not directly state that an employee is a suspect so this must be derived from the fact that an employee is informed of his or her right to remain silent.
• Take a picture of any seal and hire a security guard to protect the seal.
• When the ACM is leaving, ask for a copy of their inventory.

Is the ACM currently performing a Dawn Raid at your premises? Would you like more information about the do’s and don’ts during a Dawn Raid? Or are you interested in a compliance training course in which employees are prepared for a Dawn Raid? The Dawn Raid team at Bureau Brandeis has extensive experience with raids of the ACM. Please feel free to contact Bas Braeken, Jade Versteeg, Lara Elzas, Timo Hieselaar, Demi van den Berg and/or Berend Verweij.

On 7 October 2021 the Grand Chamber of the Court of Justice of the EU ( “ECJ”) handed down a landmark judgment for the victims of antitrust infringements in Case C-882/19 Sumal. In essence,  it held for the first time that victims of a cartel infringement may, under certain circumstances, bring an action for damages against the subsidiary of a parent company which was found guilty of that infringement. This ruling has numerous practical implications for antitrust victims, notably in terms of choosing the legal entities against which they may bring a private damages claim and the jurisdiction(s) before which they may bring their claims. In so doing, the ECJ also appears to nuance the well-established “economic unit” doctrine.

In this blog, we briefly (i) sum up the background to the dispute, (ii) recall the questions asked to the ECJ and the Opinion of its Advocate General Pitruzzella, (iii) examine and clarify the answer and the reasoning of the ECJ, (iii) and formulate some observations about the solutions adopted by the ECJ.

Background to the dispute

The case referred to the ECJ is one of the many referrals sent by the Courts to the ECJ in the aftermath of the 2016 decision of the European Commission imposing fines on the European truck manufacturers for their participation in a cartel (“cartel decision”).

In casu, the claimant, a Spanish company seated in Barcelona had acquired between 1997 and 1999 two Daimler trucks from a dealership in Spain under a leasing contract.

To obtain compensation for the trucks it had purchased at cartelised prices, it brought a damages action before the Barcelona Commercial Court against the Spanish subsidiary of Daimler AG. While Daimler AG is one of the addressees of the European Commission’s cartel decision, its Spanish subsidiary was not.

On 23 January 2019, the Barcelona Commercial Court dismissed the action brought against the Spanish subsidiary, reasoning that it could not be sued since the cartel decision was only addressed to its parent company.

The Claimant appealed this ruling before the Barcelona Court of Appeal, which asked the ECJ for a preliminary ruling.

The Question asked to the ECJ and the AG’s Opinion

In essence, the referring court asks the ECJ whether the victim of an anti-competitive practice by an undertaking may bring an action for damages, without distinction, either against a parent company which has been punished by the Commission for that practice in a decision or against a subsidiary of that company which is not referred to in that decision, where those companies together constitute a single economic unit (para. 31).  While the question whether a parent company may be held liable for the behaviour of its subsidiary (‘upward liability’) has been answered by the ECJ both in the public (Akzo) and private antitrust (Skanska) contexts, it is the first time that the ECJ addresses the question whether a subsidiary may be held liable for the behaviour of its parent company in the context of a damages action (‘downward liability’).

In its Opinion delivered on 15 April 2021 (Opinion)Advocate General (AG) Pitruzzella proposes to give a positive answer to the question asked to the ECJ.

After quoting the case law regarding the concepts of “undertaking” and “economic unity” which, according to the AG, allow a parent company to be held liable for the anti-competitive behaviour of its subsidiary when the parent company “exercises a decisive influence on the commercial policy of its subsidiary”, AG Pitruzzella considers that, for the subsidiary to be held liable for its parent’s behaviour, the subsidiary must have taken part in the economic activity of the parent company that has materially committed the infringement (para.56 and 57 Opinion).

This leads the AG to consider that the criteria to hold the parent company liable for its subsidiary’s anti-competitive behaviour are different from those required to hold the subsidiary liable for the parent’s anticompetitive behaviour (para. 59 Opinion).AG Pitruzzella concludes therefore that a subsidiary may be held liable for its parent’s behavior if two requirements are met:

(i) They formed an ‘economic unit’ as established by their economic, organizational and economic links;

(ii) The subsidiary has contributed substantially to the realization of the objective pursued by the parent company and in the materialization of the effects of the infringement (for example, because the subsidiary sells the goods that are the subject of the cartel) (para. 53 Opinion).

The ECJ’s ruling

In its ruling, the ECJ agrees with the AG’s Opinion that a subsidiary might be held liable for the damage resulting from anti-competitive conduct of its parent company under certain circumstances but adopts a different reasoning from the AG.

As a first step of its reasoning, the ECJ relies notably on Skanska to insist on the right of antitrust victims to obtain redress against the “undertakings” which participate in anti-competitive behaviours (paras. 31 to 36), as well as the fact that the concept of “undertaking” has a similar scope in the context of private and public competition enforcement (para. 37).

As a second step, the ECJ details the concept of “undertaking” as defined in its well settled case law and its consequences on liability, i.e., the possibility of holding the parent company liable for the anti-competitive behaviour of its subsidiary when they form an “economic unit”. As the ECJ notes it, pursuant to the well-known Akzo judgment, such an economic unit exists when the subsidiary does not determine independently its own conduct on the market, but essentially carries out the instructions given to it by the parent company, having regard especially to the economic, organisational and legal links between those two legal entities (paras. 38 to 43).

As a third step, the ECJ appears to apply a new and nuanced approach to the existing functional concept of “undertaking”. It first finds (in para. 45) that there are groups of companies of the “conglomerate” type which are active in several unrelated economic fields. As a consequence of this finding, it considers (in para. 46) that an action for damages cannot automatically be brought against any subsidiary of the parent company referred to in a Commission decision. According to the ECJ (still in para. 46), this is because “the concept of an ‘undertaking” used in Article 101 TFEU is a functional concept, in that the economic unit of which it is constituted must be identified having regard to the subject matter of the agreement at issue”. The ECJ then explains (in para. 47) that, if the “undertaking” was not identified having regard to the agreement at issue, a subsidiary within a group of companies of the conglomerate type “could be held liable for infringements committed in the context of economic activities entirely unconnected to its own activity and in which they were in no way involved, even indirectly”.

The ECJ finds, as a consequence, that establishing that a subsidiary and the parent company which participated in the anti-competitive behaviour constitute an “undertaking” requires to prove, on the one hand, “the economic, organizational and legal links” between them, and, on the other hand, the “existence of a specific link between the economic activity of that subsidiary and the subject matter of the infringement for which the parent company was held to be responsible” (para.51).

Applying this rule to the circumstances of the case, the ECJ rules (in para. 52) that the victim should in principle establish that the anticompetitive agreement concluded by the parent company, for which it has been punished, concerns the same products as those marketed by the subsidiary. In so doing, the victim shows that it is precisely the economic unit of which the subsidiary, together with its parent company, forms part that constitutes the undertaking which actually committed the infringement found earlier by the Commission pursuant to Article 101(1) TFEU, in accordance with the functional interpretation of the concept of ‘undertaking’ (para.52).

The ECJ goes on (in para. 53 et seq.) to address the rights of defence for a subsidiary which is faced with an action for damages. The ECJ distinguishes two situations. In cases where no prior Commission decision has been adopted against the parent company, the ECJ states (in para. 54) that the subsidiary is entitled to dispute both that it belongs to the same undertaking as its parent company and to rebut its liability for the alleged damage (para. 53 and 59). By contrast, in cases where the Commission adopted a prior decision against the parent company, this decision is also final vis-à-vis the subsidiary which may dispute before the national courts that it belongs to the same undertaking as the parent company, but which may not dispute the existence of an infringement if it is found to be part of the same “economic unit” (paras. 52 to 55). This is because the undertaking has had opportunity to challenge the finding of an infringement in the administrative procedure.

The ECJ observes (in paras. 62 and 63) that the Commission is free to impose a fine on any legal entity of an undertaking which has taken part in an infringement of Article 101 TFEU. The Commission’s choice of a parent company as an addressee of its decision, does not preclude the national courts from finding that any of its subsidiaries being part of the same undertaking are also liable for the same infringement.

Finally, the ECJ finds that in the case at hand, the claimant could have brought an action before the Spanish Courts against both the parent company and the subsidiary if the conditions the ECJ set out in its ruling were met. Relying on its Tibor Trans judgment, it rules that where the market affected by the anticompetitive conduct is in the Member State on whose territory the alleged damage is said to have occurred, it is to be held that that Member State must be regarded as the place where the damage occurred for the purposes of applying Article 7(2) of Regulation No 1215/2012.

In light of those considerations, the ECJ finds (in paras. 68 et seq.) that – to ensure the full effectiveness of European Union Law – Article 101 TFEU must be interpreted as precluding national legislation which provides for the possibility of imputing a liability for the conduct of one company to another only if that second company controls the first company.

Some observations

Firstly, the Sumal judgment sheds (long awaited) light on the matter of downward liability, and more generally, whether a broad interpretation of the concept of “undertaking” in private enforcement as formulated in the Skanska judgment, is justified. While some argued that Skanska should be interpreted restrictively as applying only to a situation of economic continuity, others argued that it referred to a complete concurrence between public and private enforcement. The Sumal ruling brings the desired clarification on this matter. In the Sumal ruling – which will constitute for sure an important precedent as it was adopted by the Grand Chamber – the ECJ makes explicit that the concept of “undertaking” is of paramount importance, also in the context of private actions for damages. Although with a small nuance in the form of the substantive requirement that the entities which constitute an economic unit are active on the same market, it is the concept of “undertaking” that determines which entities can be held liable for damages resulting from anti-competitive behaviour of that undertaking, irrespective of which exact entity was fined by the Commission.

The ECJ appears to apply a less strict test to establish downward liability than AG Pitruzzella suggested in his Opinion. Whereas the AG explicitly formulated additional requirements on top of the existence of an economic unit, the ECJ incorporates all relevant criteria for the determination of civil liability within the concept of “undertaking”.

The distinction between upward and downward liability which AG Pitruzzella had identified becomes therefore less clear. While in practice, it will likely be easier for a victim to prove the existence of an economic unit and involvement in the same market in the context of upward liability, the legal requirements are in principle similar for upward and downward liability.

Secondly, the Sumal judgment may also be a first insofar as the influence of damages proceedings will also be felt in administrative proceedings. In a brief paragraph (para. 47), the ECJ appears to narrow down the classical concept of an “economic entity” which has been developed over decades. For the first time, the ECJ considers that one parent undertaking can be part of several economic entities. According to the ECJ, this approach stems of the idea that it would be illogical for a subsidiary to be held liable for damages caused by activities that are completely unrelated to its own activities. While this solution seems fair and logic, the practical consequences of this revolutionary approach of the concept of economic entity, merit further exploration and research.

Moreover, since the ECJ reiterates in this ruling its position in its Skanska judgment that the concept of “undertaking” in the context of public and private competition enforcement cannot be different, it  may be interpreted as an indication that the ECJ is likely to also confirm the solution adopted by the General Court in Biogaran. In that case, the General Court considered that the Commission could impose fines on the subsidiary which could be held liable for the infringement of its parent company when it somehow took part in this infringement by, for instance, selling some of the products.

Thirdly, the main practical consequences of the Sumal judgment in relation to bringing an action against subsidiaries of the parent company to which the Commission decision is addressed may be viewed as two-fold. On the one hand, as far as claimants are concerned, it strengthens their access to justice. First, they can sue subsidiaries which are not addressees of the Commission decision under the aforementioned conditions. Second, as pointed out by the AG in his Opinion in particular, it allows claimants to bring actions before the courts in their home jurisdiction rather than before the courts in foreign jurisdictions (both inside or outside the EU) with which they may be less familiar. This prevents possible higher litigation costs, more complex service and enforcement, as well as risks of restructuring or transfers of assets. It also allows claimants to bring actions in more claimant friendly jurisdictions than their home jurisdiction. On the other hand, as far as competition law infringers are concerned, it clearly increases their risks of being sued by claimants which otherwise might not have brought an action against them.

Conclusion

In short, like all the recent rulings adopted by the ECJ over the past few years, the Sumal judgment will certainly be welcomed by the victims of antitrust infringements in so far as it contributes to increasing their access to justice. The question remains, however, to what extent this approach will also be applied to sister companies. In our view it is likely and consistent with the new approach of the concept of an economic unity, as introduced by the ECJ in Sumal, that if a sister company is active on a market related to the one that is the object of a cartel decision and if it is part of the same economic unit as the addressee of the decision, this company could be sued for damages arising of the cartel prohibition as well.

Marc Barennes   Bas Braeken   Jade Versteeg

On 21 December 2020, the first part of the European Electronic Communications Code (“EECC”) was implemented in the Dutch Telecommunications Act. The EECC modernises the European regulatory framework for the telecommunications sector in light of the European Commission‘s (“Commission”) Digital Single Market strategy. In 2020, online communications services provided via the Internet (so-called ‘Over-The-Top’ (“OTT”) services) such as Skype, WhatsApp and Facebook Messenger also fall within the scope of the telecoms regime. The EECC establishes a set of updated rules for electronic communications networks and services to promote competition and increase connectivity for all citizens and businesses. This blog discusses (new) economic regulation and other competition law developments in the telecoms sector.

Access regulation to telecommunications networks

One of the most important changes brought about by the EECC is the broadening of the powers of national regulatory authorities (“NRAs”) to impose access obligations on network operators. Previously, the imposition of such obligations was subject to a market analysis procedure and the determination of (joint) significant market power (“SMP”). On 27 September 2018, the Netherlands Authority for Consumers and Markets (“ACM”) adopted the decision Wholesale Fixed Access (“WFA”) and found that without regulation, KPN and VodafoneZiggo have joint SMP in the fixed networks market. Because of this duopoly they had to grant alternative providers without an own network access to their networks. On 17 March 2020, the Trade and Industry Appeals Tribunal (“CBb”) however ruled that the ACM had failed to sufficiently substantiate the existence of joint SMP and annulled the decision. The ACM announced that VodafoneZiggo withdrew its access offer after the ruling. KPN has continued to offer access to its network, but has adjusted various access conditions.

New powers of ACM

The EECC continues and specifies the existing powers, but also creates additional powers. Firstly, the amended Telecommunications Act allows the ACM to impose ex officio obligations regarding the access conditions and prices applied by the network providers, for example regarding transparency and non-discrimination.

In addition, the ACM may, upon reasonable request, impose obligations on network providers to provide access to their networks. Article 6.3 of the Telecommunications Act provides that access can be inflicted to cables or associated facilities within buildings, or, if the point of convergence closest to the network connection point is outside the building, the cables or associated facilities to that point. Access should allow efficient operators to provide their services in an economically viable manner. If such passive access proves insufficient to ensure the interests of end-users, active or virtual access may also be imposed. The concept of access is therefore interpreted broadly and can for example include the provision of space to install equipment, the supply of power for and cooling of the equipment, but also the resale of certain services such as the use of unencrypted channels or a TV platform.

Regulation in case of replication barriers: old wine in new bottles

Upon the implementation of the ECC, the Dutch legislator considered that a request must be necessary in order to qualify as reasonable. The network elements must be actually necessary in order for alternative providers to be able to offer the services themselves. Article 6.1 of the Telecommunications Act also contains an obligation for providers to try to reach a negotiated solution without government intervention. The ACM will therefore also have to take into account the existence of voluntarily offered access and the conditions attached to it.

In addition, the new Article 6.3 of the Telecommunications Act requires that the construction of a new network alongside the existing network (replication) would be economically inefficient or physically impracticable. The EECC designates NRAs and the Body of European Regulators for Electronic Communications (“BEREC”) to give further effect to this criterion. In its guidelines, BEREC considers replication barriers to be obstacles which create a level of risk that deters efficient network operators from replicating (part of) a network, and which are unlikely to disappear or significantly diminish in the short term. In particular, such obstacles may include:

• significant (possibly sunk) costs associated with the construction of civil infrastructure works, accompanied by a low prospect of eventual cost recovery;
• technical, legal or administrative requirements and restrictions; and
• the impossibility to gain physical access to buildings or soil.

As KPN and VodafoneZiggo are the only two operators of fixed networks with national coverage, it is conceivable that replication barriers may be significant. The construction of a local loop is very costly and replication may therefore be difficult and economically inefficient. Possible regulation of providers such as KPN and VodafoneZiggo through these new possibilities is therefore certainly conceivable.

Ongoing ACM investigation

A request for access seems to have been made by T-Mobile earlier this year. The ACM subsequently re-investigated the price-quality ratios for internet, television, fixed telephony and data connections. On the basis of these investigations the ACM acknowledged that the access conditions of KPN constitute a competitive risk for its competitors. Therefore, the ACM has announced that it will prepare a new market analysis decision in order to assess whether the fixed networks need to be regulated and if so, in which way. The publication of the draft decision is scheduled for autumn 2021, after which telecom providers can submit their views. ACM invites (telecom) companies with similar wishes to come forward.

The ACM also aims to enable new and/or small providers such as Fiber, Tele2 and XS4all to compete by stimulating the roll-out of new fibre networks. In its market study of May 2021, the ACM emphasised the importance of open access to newly deployed fibre optic networks. It indicates that it will continue to monitor the market for the roll-out of fibre and to intervene in the event of anti-competitive behaviour.

Lowering switching barriers for bundles

The EECC also aims to promote competition between providers by lowering switching barriers. More and more often, consumers purchase a bundle of internet, telephony and television (all-in-one package). This increases the barriers to switch to another provider, as it is often not possible to switch for a single service. Article 106 of the EECC requires NRAs to ensure the efficiency and simplicity of the switching process for internet services for the end user. To that extent, Article 7.2c of the Telecommunications Act requires the transferring and receiving providers to jointly ensure the continuity of the internet service, for example by offering the consumer to terminate the contract with the old provider. These rules should make it relatively easier for small and/or new providers to compete with the fixed/mobile bundles of KPN and VodafoneZiggo.

Terminal equipment; more freedom of choice

The ACM also aims to lower the switching barriers for consumers by providing freedom of choice in terminal equipment. The EECC briefly mentions the bundling of services and terminal equipment. Rules on terminal equipment such as telephones, satellites and modems have been further described in Directive 2008/63/EC and implemented in Dutch legislation since 2016. The purpose of this framework is to promote competition in the markets for terminal equipment. In that context, the ACM published the Policy Rule regarding Enforcement of the Decision on Terminal Equipment on 27 July 2021, in which it provides clarity on which part of the network is owned by the telecom provider and which part is the consumer’s free choice. In practice, it means that consumers and companies will be able to choose their own modem and/or router. By offering a free choice of modem, the ACM expects to stimulate competition between providers and manufacturers of terminal equipment. In its policy rule, it has followed the opinion of the Disputes Committee for Telecommunications Services, which previously determined that customers must be able to use their own modem or router. VodafoneZiggo has opposed this opinion of the Disputes Committee and has brought the case before the court.

Net neutrality; a nuance of the permissibility of zero-rating

Another hot topic surrounding telecom regulation is net neutrality. Since 2016, the European Net Neutrality Regulation is in force. The regulation ensures that internet providers offer free and open access to the internet. For example, internet providers may not discriminate in internet traffic and may not block or unnecessarily restrict access to internet services. Following a public consultation, BEREC published its new guidelines for the application of the Net Neutrality Regulation last year. It pays a lot of attention to the application of so-called zero rates for certain services (‘zero-rating’), which may be in breach of the prohibition of discrimination laid down in the Regulation. In that context, the Rotterdam District Court ruled in 2019 that T-Mobile’s Data free Music service, which excluded certain music streaming services from data usage, did not violate the European net neutrality rules.

In recent judgments, the European Court of Justice seems to think differently about this. In September 2020, the Court issued an interesting judgment on net neutrality and zero-rating. When offering data bundle packages, Hungarian provider Telenor applied a zero rate for the use of Facebook, Facebook Messenger, WhatsApp, Instagram, Viber and Twitter, so that customers could continue to use these services unrestrictedly after consuming the data volume. Other applications and services were blocked or slowed down after the full data consumption. The Court ruled that such data bundle packages with a selective zero rate could infringe the net neutrality rules if they are based on commercial considerations.

On 2 September 2021, the Court seemed to go a step further. In three similar rulings, the Court determined that zero-rating options for certain partner services, such as those of ‘Vodafone Pass’ and Deutsche Telekom’s ‘Stream On’ service, are in fact based on commercial considerations. As the data traffic to applications of certain partner companies is not charged at the basic rate, the Court found that the two providers infringe the principle of non-discrimination laid down in Article 3 of the regulation. The selective offering of free internet services is therefore certainly not always compatible with the Net Neutrality Regulation.

Fixed and mobile telephony; 5G, roaming and tariff regulation

The past year, the ACM and the Commission have also been active as regards the quality and (tariff) regulation of mobile networks.

• Earlier this year, the ACM decided that telecom providers are allowed to cooperate for the rapid roll-out of mobile networks. In order to increase the capacity, quality and coverage of mobile networks and to accelerate the roll-out of 5G, telecom providers are allowed to cooperate by sharing their infrastructure. In its Guideline on Mobile Network Sharing, the ACM stipulates that telecom providers may use the network of another provider via (national) roaming. With a maximum of 40% of frequencies that one operator can use, the ACM believes that competition between operators will not be endangered.
•  In February 2021, the Commission proposed a new Roaming Regulation. The current Roaming Regulation, which expires in 2022, has abolished roaming charges within the EU. In that context, the Court of Justice ruled last year that all roaming providers must automatically apply the regulated roaming tariff from the moment the regulation entered into force, also in relation to customers who had previously chosen a different roaming tariff. The new proposal aims to increase the quality and speed of mobile networks by enhancing the ‘roam like at home’ For example, consumers will be better informed about possible additional costs of calling numbers that allow access to services. It also lowers wholesale price caps to allow operators to break even.
•  On 1 July 2021, the Delegated European Regulation on fixed and mobile voice termination entered into force. In this regulation, the Commission sets a single maximum rate that operators can charge each other to establish a connection. The new regulation sets a maximum rate of 0.2 euro cents per minute for mobile calls and 0.07 euro cents per minute for fixed calls across the Union. The regulation provides for an initial period to allow for gradual alignment. For fixed operators, the maximum charge of 0.07 euro cents per minute will apply from 2022 on.

Conclusion

The end of (ex ante) regulation in the telecom sector has been discussed for at least more than a decade. The selection of recent developments discussed above nevertheless makes it clear that the telecoms sector remains one of the most regulated sectors to this day. Yet, a shift is clearly visible. In addition to an increasing role for competition law in the roll-out of fibre optic and 5G networks, rules to protect consumers (roaming, net neutrality) are increasingly gaining the upper hand. The access provisions of the EECC are a notable and important exception to this. The possibility of gaining access to a network via a dispute resolution procedure (and therefore not on the basis of a market analysis decision) will bring many telecom lawyers back to the many dozens of interconnection disputes that were settled at the time. It will nonetheless not happen overnight, if only because the market has consolidated considerably in the past twenty years.

Internet of Things: risks to fair competition lurk

Internet or Things (hereinafter ‘IoT‘ or ‘smart devices‘) is revolutionising in many sectors worldwide. IoT devices are characterised by the fact that they are connected to a network and can be controlled remotely, for example via voice assistance and/or mobile devices, and can exchange data. The examples of smart devices are almost endless: self-driving cars; a smartwatch that provides insight into your athletic performance and offers tips to improve it; a patient who can leave the hospital sooner because he is monitored from a distance and can communicate directly with the hospital; the smart meter for electricity, water and gas; autonomous agricultural machines that work the land and inform the farmer about the harvest. It is clear that it is almost impossible to imagine our daily lives without IoT.

As IoT becomes part of our daily lives more and more, the topic has also been put high on the agenda of the European Commission (“Commission“). One of the Commission’s focus points in the field of IoT is the creation of a single market  for IoT. To achieve this, in 2020 the Commission launched a sector inquiry on competition in the consumer IoT sector.

On 9 June, the Commission published a preliminary report (“the report“). The report discusses the preliminary findings on the competition parameters, the main developments and the identified competition risks in the IoT sector. The findings of the Commission are relevant for smaller market players that (want to) offer IoT products and will be discussed in this blog.

Reason for starting a sector inquiry and its scope

Global consumer IoT revenue is expected to grow from EUR 107 billion in 2019 to around EUR 408 billion in 2030. The market is still developing, yet there are already indications of barriers to entry and some companies may be limiting competition. The sector inquiry identifies these problems. In addition, the choice of the sector inquiry fits well within the Commission’s 2019-2024 strategy entitled ‘A Europe Fit for the Digital Age‘.

The preliminary findings of the sector inquiry are based on the information provided by more than 200 different stakeholders from Europe, China and the United States who are active in the IoT consumer sector, including smart device manufacturers, providers of voice assistants and consumer IoT services and industry associations. Furthermore, these companies have shared more than 1,000 agreements with the Commission.

IoT for industrial products and connected cars are outside the scope of the market investigation. One of the specificities of consumer IoT is that the data collected by the smart devices usually includes personal data.

Entry barriers

According to the respondents, the main barriers to entry in the market are:

• Investment in technology. According to the respondents, the cost of investing in technology is high, especially in the market for voice assistants.
• Current competition situation. With regard to the competitive situation, the respondents note that it is difficult to compete with vertically integrated companies that have built their own ecosystems inside and outside the consumer IoT sector (e.g. Google, Amazon or Apple). It is also considered unlikely that new entrants will emerge in the field of voice assistants in the short term, as the costs of developing voice assistants are high.
• Interoperability. The various IoT devices are often only useful if the data collected can be combined with other data. This requires data interoperability. The main providers of voice assistants and mobile devices are usually also the parties with their own technology that enables interoperability between the various IoT products. Providers of IoT products are therefore often dependent on these parties for interoperability. Respondents indicate that the different integration requirements of technology platforms lead to additional complexity for IoT providers when integrating their products.
• Access to data. Providers of IoT products and services collect a lot of data. For example, a smartwatch collects information about the health, location and movement patterns of consumers. With the data collected, providers of IoT devices can respond to the needs of their consumers and further develop the product. Respondents note that they encounter obstacles in accessing data. This is caused, among other things, by differences in the formats in which data is collected and by limitations in data portability.

It is also notable that the price of the products was identified as a less important competition parameter, although it is still considered relevant.

Identified competition risks

Remote control is essential for smart devices. To achieve remote control, manufacturers of smart devices often use voice assistance and/or a mobile device. The main voice assistants in the EU are Amazon’s Alexa, Google Assistant and Apple‘s Siri. For mobile devices, Google’s Android and Apple’s iOS are the leading operating systems. The sector inquiry has shown that IoT providers are generally dependent on providers of voice assistants and (the operating systems) of mobile devices and that supply is limited. This leads to the following competition risks:

• Exclusivity and tying in voice assistants. The sector inquiry shows that the main providers of voice assistants are attempting to achieve exclusivity of voice assistants on certain IoT devices. Practices that limit the possibility of using different voice assistants on the same smart device are also reported. Smart device manufacturers are also concerned that voice assistant providers are bundling different types of software and technology, including voice assistants.
• Pre-installation, defaults and prominence. Respondents indicate that the leading providers of voice assistants and/or mobile devices pre-install, set as default or otherwise give prominence to their own services or the services of major international players on the smart device. This can create a competitive advantage for the provider of a service that is preinstalled to the detriment of often smaller and/or local players.
• Data. Voice assistants are at the centre of data collection in the IoT consumer sector. This enables the leading voice assistant providers to collect large amounts of data, allowing them to not only manage data flows and user relationships, but also to leverage on adjacent markets. With access to large amounts of data, voice assistant vendors can improve their technology through algorithmic training and machine learning. This leads to improvements in the quality of voice assistance. Not having this large-scale access to data can create barriers for new entrants to the voice assistant market.
• Standardisation and interoperability. The major providers of voice assistants and mobile devices have the technology that enables interoperability. These providers can unilaterally control the interoperability and integration processes. They are thus able to limit the functionalities of IoT devices and services to the advantage of their own services.

What can we expect from the Commission in the field of IoT?

The results of sector inquiries of the Commission often lead to formal investigation into individual companies. For example, the E-commerce sector enquiry resulted in many formal investigations and substantive fines for companies such as Asus, Philips, Pioneer, Guess, Sanrio, Nike, NBC Universal Studio and several video game publishers . Similarly, the sector inquiry into the pharmaceutical industry resulted in significant fines at the European level for, among others, Lundbeck, Jansen-Cilag and Servier and at the national level in fines for, among others, GlaxoSmithKline and Pfizer/Flynn (UK), Aspen (Italy) and CDPharma (Denmark).

It is to be expected that the Commission will initiate formal investigations as a result of its findings in the IoT sector. In describing the competition risks identified in the report, the Commission does not appointed not explicitly the parties that may restrict competition. The Commission mentions, among others, ‘leading players in the field of voice assistants and/or mobile devices’ and ‘IoT technology platforms’. However, it is not hard to understand that the Commission is referring to major players such as Google, Amazon and Apple since they are by far the largest parties offering the services and the Commission also refers to these parties more often in the report. The most obvious course of action is for the Commission to open a formal investigation into abuse of a dominant position against one or more of these parties on the grounds of, for example, exclusivity, tying and/or self-preference.

It is also quite conceivable that the final report of the sector inquiry – which is expected in the first half of 2022 – will influence the ongoing debate on the Digital Markets Act (“DMA“) proposal and ex ante regulation. The proposed obligations in the DMA largely address the identified competition risks in the IoT sector. Should Google, Amazon and Apple be designated as gatekeepers under the DMA, the obligations imposed in the DMA such as prohibition of bundling, access to non-public data and self-preferencing could partially eliminate the identified competition risks. For a discussion on ex-post enforcement and ex ante regulation in the proposed Digital Markets Act, see our blog of 24 June “The Digital Markets Act (DMA): an effective means of regulating Big Tech? ”

Although IoT for industrial products and connected cars fall outside the scope of the sector inquiry, it cannot be ruled out that in these sectors similar competition problems arise as in consumer IoT. Technology, data access and interoperability also play an important role in these sectors. The existence of dominant players should be assessed on a market-by-market basis. With regard to connected cars, there are indications that Nokia, among others, is a leading player. Since 2018, five formal complaints for abuse of a dominant position have already been submitted to the Commission by various parties against Nokia, but no formal investigation has been launched to date. For example, car manufacturer Daimler, among others, turned to the Commission complaining that Nokia is abusing its dominant position due to the licensing of patents essential for technology standards for connected cars. Daimler also initiated civil proceedings in Germany and the German court referred questions to the Court of Justice for a preliminary ruling. The preliminary question was eventually withdrawn because the parties settled the case in June.

We advise smaller market parties that (want to) offer IoT products to be alert to the competition risks described in the report. Market parties can comment on the report until until 1 September 2021. If market participants encounter competition problems in the IoT consumer sector or beyond, they can also file a complaint with the Commission or a national competition authority. It is also advisable to seek legal advice from a competition lawyer.

If you have any question please do not hesitate to contact Bas Braeken or Lara Elzas

In May, the Board of Appeal of the EUIPO decided that the portrait photographs of two Dutch models, Yasmin Wijnaldum and Rozanne Verduin, can be registered as an EU trademark for services of (photo)models and mannequins. In the Netherlands, a portrait may be protected based on portrait rights (which are regulated in the Dutch Copyright Act). In recent years, the protection of portraits through trademark registration has not been subject to much debate (anymore), simply because not everyone sees the added value of portrait marks. Will the judgments of the Board of Appeal change this?

Distinctive character

The decisions of the Board of Appeal concerning both models (Wijnaldum decision & Verduin decision) came after the EUIPO had previously decided that the portraits could not be registered as trademarks.

It concerned these portraits:

The reason for the refusal by the EUIPO was that, according to the EUIPO, the trademarks, which the models applied for, lacked distinctive character. This is a core requirement for obtaining a valid trademark, which stems from its primary function: a trademark must indicate the origin of a product or service. If a mark, in this case the portrait, is not distinctive, it cannot fulfil that function. Whereas the EUIPO called the portrait photos merely a ‘face in the crowd‘, the Board of Appeal decided that the portrait photos do have a distinctive character. As a result, (the portrait photos of) Yasmin Wijnaldum and Rozanne Verduin have now been registered as EU trademarks.

Portrait trademarks are not uncommon

Wijnaldum and Verduin are not the only ones with a portrait mark: fellow model Maartje Verhoef also managed to have her portrait registered as an EU trademark and, moreover, for many different types of goods and services, including nautical instruments and veterinary services:

By the way, the similarity between the portraits of Rozanne Verduin and Maartje Verhoef is quite striking. An interesting exam question: could Maartje Verhoef, relying on her portrait mark, have prevented the registration of the portrait of Rozanne Verduin in opposition, because of the similarity of both portraits, the similarity of the services offered, and the possible likelihood of confusion? And would a cancellation action on the same ground have a chance of success?

Also, the portraits of, for example, Formula 1 driver Max Verstappen and his father Jos are registered (Benelux) trademarks:

And one of the most famous portrait brands is perhaps the portrait of Colonel Sanders:

Even singer Liam Gallagher once had an EU portrait mark, but it has expired years ago:

Is a portrait mark useful?

Not everyone sees the added value of a portrait trademark. In all honesty, there are indeed some objections. For instance, isn’t a portrait mark sometimes descriptive (depending on the goods and services for which it is applied)? And isn’t a portrait, in some cases, a characteristic that gives substantial value to goods? And what about the fact that a person’s face changes (considerably) as the years go by? This does not only have consequences for possible revocation due to non-use, but also for answering the question whether there is a similarity between the registered trademark and the (allegedly infringing) portrait of someone used by a third party, years later.

Portrait rights

Moreover, there is, at least in the Netherlands, another way to protect a portrait: through portrait rights. Based on article 21 of the Dutch Copyright Act, every person can oppose the unauthorised use of his or her portrait, if he or she has a reasonable interest in doing so. Everyone can invoke his or her portrait right, without having to register it. This portrait right is included in the Copyright Act, because it can be seen as an exception to copyright, but in fact it mainly concerns a privacy interest.

A long time ago, in the judgment ‘t Schaep met de Vijf Pooten, the Dutch Supreme Court ruled that the commercial interest of famous persons to earn money by exploiting their portrait must also be considered a reasonable interest in the sense of article 21 of the Dutch Copyright Act. In such cases, an important factor in considering whether the portrait may be used by third parties is whether a reasonable payment was offered to the person portrayed. What constitutes a reasonable payment depends on the circumstances of the case. This is also referred to as ‘cashable popularity’. However, this right is reserved for celebrities and famous people only and, moreover, can only be invoked by themselves, as portrait rights are not transferable.

Commercial exploitation

This is one of the reasons why a portrait mark can be interesting. For a portrait mark to be valid, there does not have to be any ‘cashable popularity’. It is not required that the person portrayed is famous, as long as the portrait is distinctive. And once the portrait is registered as a trademark, an injunction and compensation of damages can be claimed for infringing use. Additionally, the portrait mark can also be commercially exploited by someone other than the person portrayed, because a portrait mark is transferable, unlike portrait rights, which can only be invoked by the person portrayed.

Thanks to Eva Smit

Want to know more? Please contact Syb Terpstra.

David Guetta is the latest addition to a growing number of artists that sell their music rights. The French superstar allegedly earned around $100 million from the sale to Warner Music.

Why have many artists been selling their rights for such great sums of money recently? And what exactly are they selling?

Who sells, who buys?

Bob Dylan ($300 – 400 million), Neil Young ($ unknown), Stevie Nicks ($100 million), Paul Simon ($250 million), Imagine Dragons (>$100 million), Shakira ($ unknown), Lindsey Buckingham ($ unknown), Calvin Harris ($100 million), Red Hot Chili Peppers ($140 million), and the list goes on. And more deals are to be expected; Noel Gallagher may very well be the next to sell his rights.

In recent years, many famous artists have sold (part of) their rights. Some sold their rights to existing publishers (e.g. Bob Dylan and Paul Simon), while others sold them to investment funds such as Vine Alternative Investments (e.g. Calvin Harris) and Hipgnosis (e.g. RHCP).

Especially the last fund (Hipgnosis) frequently appears in the limelight. If not because of yet another purchase of a rights catalogue of some international music legend, then because of the announcement of new capital injections to be able to acquire even more rights. Since its establishment in 2018, Hipgnosis has spent more than $2 billion on rights catalogues. Allegedly, the fund is already worth more than $2,21 billion.

The market for music rights is also of interest to private equity investors. Earlier this year, one of the largest private equity funds in the world, KKR, announced a collaboration with BMG to make its debut in the world of music rights investments. Both KKR and BMG immediately reserved an investment budget of at least $1 billion.

The trend of music investment funds has also blown over to the Netherlands, where Pythagoras Music Fund (founded by famous composer John Ewbank and others) has been active since the beginning of this year.

What exactly do the artists sell?

The burning question is: what exactly are all these artists selling for these large amounts of money? The media often report that artists have sold their ‘music rights’ or their ‘music catalogue’. Sounds nice, but what does that entail? In practice, that seems to differ from artist to artist to quite some extent.

It seems that, so far, most cases concern the sale of copyright (or at least, the entitlement to profits resulting from the exploitation thereof). In other words: the rights of composers regarding the music composed by them and the right of songwriters concerning lyrics written by them. This, for example, seems to be the case for Bob Dylan, Paul Simon and Shakira.

In other cases, artists are only selling a certain part of their music rights, namely the publishing rights. This means that they remain owner of a part of the copyright, namely their so called writer’s share.

In yet other instances, it’s not about copyright, but about the sale of neighbouring rights, or related rights. These are the rights to a certain performance of the musical work (for performing artists) and the rights to the recording of the musical work (for music producers or record labels). The last rights mentioned are also referred to as the master rights. It seems to be the case that David Guetta has sold his neighbouring rights to Warner Music.

Well-known record producer Jimmy Iovine (producer and engineer of records of artists such as Bruce Springsteen, Tom Petty and U2, plus co-founder of Beats by Dre) sold his rights as record producer (most likely the neighbouring rights that were attributed to him).

Moreover, some artists are not only selling the rights to already existing music, but also the obligation to attribute the rights of future music to the buyer (Lindsey Buckingham will attribute 50% of future copyrights to Hipgnosis and David Guetta and Warner Music have also agreed to certain arrangements for future recordings). Often additional agreements are entered into as well, such as the agreement between Stevie Nicks and Primary Wave on the basis of which they entered into a joint venture to sign new song writing talent. Imagine Dragons sold their writer’s share in their copyrights, but also a part of their publishing rights, while the other part of their publishing rights remains in the possession of Universal Music Publishing.

What often happens, is that the artists do not sell all rights they own. Some artists only sell a part of their catalogue, while other artists only sell a certain percentage of their rights. Neil Young for example only sold 50% of his rights and kept 50% to himself. Stevie Nicks sold 80% and kept 20%.

How is the purchase price established?

The sums some investors are willing to pay for the rights catalogues are enormous. The purchase price is often calculated by using a so called multiple, or in other words: X times the (average) yearly income that the exploitation of the relevant rights generates. Regarding Bob Dylan, Neil Young, Stevie Nicks and RHCP, the multiple is allegedly 25 to 28 times the yearly income. In case of Paul Simon the multiple is even said to be 30. Presumably, the multiples are calculated over the average income of several years (probably the last few years); in the end the validation is based on a combination of results from the past and expected success in the future. Before the purchase price is established, artists will therefore have to give insight into their administration and profits over the last few years. The buyer will have to conduct a due diligence investigation in order to be able to establish how much income certain songs have generated in the past.

Why are all these artists suddenly selling their rights?

The sale of rights catalogues has become booming business over the last few years. This has several reasons, of which I will name a few:

1. Instant income: the first reason is the most obvious. The sale of (a part of) your rights, means instant cash in the bank for the artist. This means you do not have to await fluctuating profits year after year. You receive one large lump sum payment, which provides you with certainty in the short term. You will never know beforehand if you would have received the same amount of money when keeping ownership of the rights (the market might crash, your music could become less popular, etc.). The downside to this is of course that, after the sale, you are not able to profit from any potential rise in popularity or income. That is, if you have not kept a share of the rights to yourself, of course. An artist might now gain millions of dollars in one instance, while it remains unsure for him/her if he/she might achieve the same over a longer period of time. Besides, age might be a factor for some artists; perhaps you would rather gain a quick $100 million while you are eighty years old than wait for a large portion of the profit to arrive while you are already dead.
2. Prevent battles over legacy: a second reason is that artists want to prevent that their heirs will argue over the exploitation of the rights. By selling their catalogue before their death, the potential conflict is limited to the distribution of money. That may be easier to resolve in a will, than an abundance of rights scattered all over the place. Besides, the artist is then able to decide for itself what exactly happens to his/her rights. For example, Noel Gallagher has jokingly said the following about the negotiations with Hipgnosis about selling his rights: “My fear is leaving it to my kids and they’ll swap it for a choc ice or Playstation.”
3. Profits from the exploitation of music rights are rising: a third reason is that profits from music rights have increased rapidly over the last few years, especially since the introduction of streaming. After the revolution in (illegal) downloading and the slow death of CDs, a part of the music industry was declared dead. However, the revival has been so strong, that the profits from recorded music are now higher than ever. The Covid-19 pandemic has contributed to this, as has been demonstrated by the most recent substantive rise in streaming (and vinyl sales) in the US. Higher profits mean more interest from investors, who see music rights as a relatively safe long-term investment.
4. Tax benefits: a fourth – and not unimportant – reason seems to be that the sale of music rights (at least in the US) could amount to tax benefits. Apparently, the sale of rights is considered to be a source of long-term financial profit in the US, which is taxed significantly lower than profit generated by royalties, which are considered to be ‘regular’ profit. Also, Joe Biden has proposed changes to the tax legislation, which could lead to higher taxes for artists. By selling their music catalogue now, artists can prevent that their incomes become subject to these higher tax rates.
5. Money issues: a fifth reason is related to the first: it could be that some artists are experiencing trouble with their cash flow, possibly related to the Covid-19 pandemic and/or spending habits, etc. After all, the profit generated by live performances has seized to exist almost completely and for many artists, that was precisely the biggest source of income. In such circumstances, an artist might be compelled to sell his/her rights at once to establish financial security.

Many artists will follow

For now, no end to these developments is in sight. Presumably, even more artists will sell (a part of) their rights to investors in the coming years. I also expect the first public announcement of the sale of a rights catalogue in the Netherlands any time soon.

Noel Gallagher already knows what to do with the profit of a potential sale, when it does happen:

“What do you do? Leave it to your kids? They don’t value music. Or do you take the £200million and buy the superyacht and the Learjet and go, ‘F***ing have it, come on! I think the latter. I’m getting a superyacht, I’m gonna call it ‘Mega Mega White Thing’. I’m gonna spend a year at sea. People can come and visit. I’ll be flying out my hairdresser, Neil, and paying £40,000 for a haircut. I’ll have a chef.”

Want to know more? Contact Syb Terpstra, senior associate IP & Entertainment at bureau Brandeis, Amsterdam.

This is the first Competition Flashback by bureau Brandeis, featuring a selection of some of the key competition law developments of the past quarter (see the original version here).

If you would like to receive the next Competition Flashback by e-mail you can subscribe to our mailing list here.

Overview Q2 2021

• Notarial deed paper cartel; fine reduced from €2 million to €10,000
• CJEU Recyclex: antitrust immunity only in the case of an extended infringement
• Fine of €40 million for Dutch railway company NS struck down by Court
• Private equity firm can recover cartel fine for incorrect information during due diligence
• State Aid to KLM and Condor called into question as a result of inadequate reasoning
• New ACM merger decision Sanoma/Iddink on the way after appeal by Noordhoff
• Preliminary findings in the truck cartel damages case: claimants may go ahead
• European Commission takes on Apple after Spotify complaint

ACM publishes notarial deed paper cartel four years later; fine reduced from €2 million to €10,000

ACM, press release of 1 July 2021 | Rotterdam District Court, judgment of 11 May 2021

Almost four years after the first fine decision, a long-running cartel case has been made public with the publication of a news release and a number of decisions by the Dutch Competition Authority (“ACM”). At the same time, the Rotterdam District Court also published two judgments in this cartel case (Rotterdam District Court judgments of 6 December 2018 and 11 May 2021, as published on 30 June and 1 July 2021).

At the centre of this case were (alleged) price and market sharing agreements on the market for notarial deed paper. This case revolved around agreements between one producer (of which the subsidiary that implemented the cartel agreements was separated from the parent company during the infringement period) and two distributors. All three parties supplied notary’s offices with notarial deed paper.

For the agreements concerning these sales the ACM imposed a fine of almost €2.8 million on the producer in a decision dated 17 February 2017 (whereby the parent company was held jointly and severally liable for the entire sum and the subsidiary for €2.06 million). One natural person, the de facto manager of the producer, was (initially) fined €200,000 (reduced to €80,000 after an objection). One distributor was fined €3,000 and the third distributor received full immunity from fines under the 2006 Notice on immunity from fines and reduction of fines in cartel cases (“Leniency Notice“).

Initially, the interim relief judge of the Rotterdam District Court suspended the decision of the ACM to publish the fine decision (judgment not yet published). The interim relief judge considered that the contentious agreements were vertical in nature and not horizontal. The Rotterdam District Court saw this differently and ruled that Article 2 (4) (a) of the Block Exemption for Vertical Agreements is not applicable. Based on this provision, agreements between competing companies (i.e. agreements of a horizontal nature) can also fall under the Block Exemption if there is a “non-reciprocal vertical agreement”, whereby the supplier is both a manufacturer and a distributor and the buyer is only a distributor. According to the Court, however, the agreements are (purely) horizontal in nature.

The Court also considered that in the case of object restrictions, no analysis of the counterfactual is required. The counterfactual refers to the market situation as it would have been without the alleged agreements. The producer had argued that without the distribution agreements it had entered into there would have been no competition at all. Indeed, until recently, the market for notarial deed paper was strictly regulated on the basis of rules of the Royal Dutch Association of Civil-law Notaries.

The District Court did not follow this line of reasoning. The Court, however, did rule that the ACM had set the gravity factor too high and lowered it from 2.75 to 1, and set the fine for the producer at €1 million and for the de facto manager at €60,000. A previously published judgment by the Trade and Industry Appeals Tribunal (“CBb“) shows that the producer’s fine was eventually reduced to €10,000. The difficult financial situation in which the company found itself as a result of the Covid 19 crisis was partly the basis for this reduction.

CJEU Recyclex: (partial) immunity from cartel infringement only if the scope of the infringement is extended

Court of Justice, judgment of 3 June 2021

On 3 June 2021, the Court of Justice (“CJEU”) delivered a judgment on the interpretation and application of the conditions set out in the third paragraph of point 26 of the Leniency Notice.

Recyclex had relied on the third paragraph of point 26 of the Leniency Notice when it provided the European Commission (“Commission“) with information about a particular meeting within the Car battery recycling cartel in which it participated. Recyclex submits that the Commission would have been unable to provide sufficient evidence of this particular meeting and therefore claims to be entitled to partial immunity. In this respect, according to Recyclex, it is irrelevant that the Commission was already aware of the fact that the meeting had taken place.

The CJEU does not share this view and holds that undertakings concerned can claim partial immunity only if they provide the Commission with evidence which “complement or supplement those of which the Commission is already aware and which alter the material or temporal scope of the infringement, as found by the Commission.”

Therefore, in order to successfully claim (partial) immunity on the basis of the third paragraph of point 26 of the Leniency Notice a cartel participant must provide the Commission with information on new facts which alter the original scope of the infringement.

Fine for Dutch railway company NS struck down by Court because dominance was not proven

CBb, judgment of 1 June 2021

In its judgment of 1 June, the CBb struck down a fine of more than €40 million that the ACM had imposed on Dutch railway company NS. The ACM had adopted this fine in a decision of 22 May 2017 alleging that NS had abused its dominant economic position.

According to the ACM, NS used its economic dominance on the main rail network (“HRN“) of the Netherlands to hinder its competitors Arriva and Veolia in the province Limburg. Specifically, in 2016 NS had submitted what the ACM considered to be a loss-making bid in the tender for a 15-year public transport concession in Limburg.

The Rotterdam District Court ruled in its judgment of 27 June 2019 that the ACM had not convincingly proven that NS actually had a dominant economic position. In addition, according to the District Court, the link between NS’ position on the HRN and the concession in Limburg was uncertain after 2024 (the concession for the HRN expires in 2024).

The CBb largely confirmed the ruling of the Rotterdam District Court. The ACM did not prove that NS has a position of economic dominance. According to the CBb, there is (potential) competition as the barriers for entering the HRN market is not too high. The fine of more than €40 million that the ACM had imposed on NS has therefore been permanently struck down.

Private equity can recover cartel fine in case of incorrect information during due diligence

Rotterdam District Court, judgment of 26 May 2021

Between November 2004 and July 2011 private equity firm Bencis held 92% of the shares in flour producer Meneba (now acquired by Dossche Mills). During this period Meneba was fined by the ACM for its participation in the flour cartel. This decision was confirmed by the ACM after administrative objection, by the Rotterdam District Court on appeal and by the CBb on further appeal.

Almost four years after the first decision and under the influence of European developments, the ACM (also) imposed a cartel fine of over €1,2 million on Bencis because of Meneba’s participation in the flour cartel. The basis of Bencis’ liability was that it had decisive influence on Meneba due to their close economic, organisational and legal ties. Therefore, according to the ACM, the infringement could also be attributed to Bencis.

Bencis is later seeking to recover this fine from Meneba in a case heard by the Rotterdam District Court. To this end, Bencis primarily argued that only Meneba factually participated in the cartel agreements. In its judgement of 26 may the Rotterdam District Court did not uphold Bencis’ claim. It considered that there is no room for recourse on the basis of a joint obligation (Article 6:10 Dutch Civil Code (“BW”)) since Bencis and Meneba were not fined jointly and severally. It also considered that there is no room for a claim based on tort (Article 6:162 BW). The tort claim failed on the basis of the relativity requirement, since the right to compensation for cartel violations does not extend to the protection of other cartel participants (see Courage/Crehan).

However, the judgement of the Rotterdam District Court is unlikely to be the end of this matter. At the hearing, Bencis argued that Meneba, within the context of a due diligence investigation prior to the acquisition of the shares by Bencis, had allegedly stated that no infringements, including infringements of competition law, had taken place. If Bencis succeeds in proving this with documents, this could, according to the Court, constitute an unlawful act by Meneba towards Bencis.

State aid to KLM and Condor called into question as a result of inadequate reasoning

General Court, judgments of 19 May 2021 and 9 June 2021

On 19 May 2021, the General Court in Luxembourg held that the Commission wrongly approved the €3.4 billion state aid granted to KLM on the basis of Article 107(3)(b) TFEU. This article provides for the possibility to grant aid to remedy a serious disturbance in the economy of a Member State, such as caused by the COVID-19 crisis. In its decision, the Commission did not provide sufficient reasoning by failing to adequately take into account the fact that KLM and Air France, both part of the same group, have been the recipient of two aid measures.

In its decision the Commission states that the Dutch authorities ‘confirmed’ that the financing granted to KLM would not be used by Air France. However, in the General Court’s view, the Commission failed to provide sufficient reasons as to how this would be guaranteed. In that regard, the relationship between KLM and Air France within the group – and the aid granted to them – was not sufficiently taken into account. Although the decision has been annulled, the aid granted does not have to be recovered immediately. KLM may keep the aid at least until the Commission has adopted a new decision.

The decision in which the Commission approved the German aid to airline Condor was also annulled by the General Court on the ground that it contained insufficient reasoning. The aid, based on Article 107(2)(b) TFEU, was intended to compensate Condor for the damage caused directly by the COVID-19 pandemic.

However, the German authorities included approx. €17 million in additional costs in the aid for Condor, because the latter was under an insolvency procedure following the liquidation of its parent company (Thomas Cook). This procedure started well before the outbreak of the COVID-19 pandemic, though. The Commission did not explain how (the costs surrounding) the failed sale of Condor in the insolvency procedure were related to the COVID-19 pandemic.

In this case, too, the aid granted will not be recovered immediately. In order to avoid direct damage to the German economy, Condor is allowed to keep the amount until the Commission has taken a new decision.

New ACM merger decision in Sanoma/Iddink coming after successful appeal by Noordhoff

ACM, announcement of 17 May 2021

On 28 August 2019, the ACM decided that Sanoma Learning (publisher of Malmberg schoolbooks) may acquire Iddink Group, distributor of educational material, conditional upon commitments. Iddink Group owns Magister, an electronic learning management system that many secondary schools in the Netherlands use. The commitments ensure that competitors have equal access to Magister and data from Magister after the merger. In addition, the merging parties must guarantee that no commercially sensitive information from competing publishers will be shared with Malmberg via Iddink.

Noordhoff, a competitor of Malmberg, did not agree with the ACM and appealed the decision. In its ruling of 4 March 2021, the Rotterdam District Court annulled the ACM’s decision.

According to the Court, the ACM had not sufficiently substantiated that post-merger Sanoma/Iddink has no possibility to foreclose competitors by means of bundling and that therefore no conglomerate effects existed. The ACM has announced that it will take a new decision and has also appealed against the District Court’s ruling.

Interim position truck cartel damages case: green light for the time being

Amsterdam District Court, judgment of 12 May 2021

On 12 May 2021, the Amsterdam District Court rendered an interlocutory judgment in the damages claim proceedings instituted by, among others, CDC against participants in the Truck Cartel. This judgment is limited to (i) an assessment of the scope of the Commission’s penalty decision, and (ii) the truck manufacturers’ defence that the exchange of information did not have a price-increasing effect and that the infringement therefore did not result in any damage.

With regard to the first point, the Court finds that it is bound by (the operative part of) the Commission’s decision regarding (the temporal and geographical scope of) the infringing behaviour as well as the persons liable for it. However, this does not exclude plaintiffs from providing further factual interpretation of the infringing behaviour.

With regard to the second point, the Court considered that the truck manufacturers must demonstrate that it is generally impossible that the infringement could have resulted in damage. Based on the expert reports, the Court finds that this has not been established. It is therefore up to the plaintiffs – for the remainder of the proceedings – to make it plausible that they have possibly suffered damage as a result of the unlawful actions of the truck manufacturers. This is needed to meet the threshold for referral to the damages assessment procedure.

Commission takes on Apple after Spotify complaint – national authorities follow

European Commission, press release of 30 April 2021

In March 2019 Spotify lodged a complaint with the Commission accusing Apple of distorting competition on the market for music streaming services offered through the App Store. Spotify claims that Apple is abusing its full control over the iOS mobile operating system and the App Store to impose unfair terms on competitors, such as Spotify, and to favour its own music streaming service Apple Music.

On 16 June 2020, the Commission launched an investigation into Apple’s policies on the App Store. In its press release of 30 April 2021, the Commission stated that in the Statement of Objections it had reached the preliminary view that Apple was abusing its dominant position. The Commission accuses Apple of forcing competing music streaming services to use the App Store’s ‘in-app’ purchase mechanism and charging a 30% commission in return.

In addition, the Commission’s objections relate to so-called ‘anti-steering provisions’ that restrict app developers in their ability to inform customers of alternative purchasing options. National authorities such as the ACM and the British CMA have also started investigations into these practices by Apple.

For all your questions regarding (EU) competition law, bureau Brandeis would be happy to assist you. You can reach us via the links below.

Bas Braeken, Jade Versteeg, Lara Elzas, Timo Hieselaar en Berend Verweij

The rise of Tech Giants such as Google, Amazon, Facebook, Apple and Microsoft (“Big Tech”) and their integration into people’s lives has been interesting on many levels. Particularly in the context of fair and contestable digital markets, it raises many questions. The most pressing of these is whether ex-post enforcement of EU competition law is effective enough to keep up with rapidly evolving (digital) markets and Big Tech companies.

To expand its enforcement toolkit, the European Commission (“Commission”) published a proposal for a Digital Markets Act (“DMA”) in December 2020. Its overall objective is to complement antitrust intervention in digital markets with ex-ante regulation in the form of a set of obligations that platforms identified as “gatekeepers” should abide by.

This blog covers recent developments in the fight against Big Tech, followed by a more detailed analysis of the DMA and its implications for gatekeepers.

Ex-post enforcement of Big Tech companies

The fight against anti-competitive behaviour by Big Tech companies has kept both the Commission and national competition authorities (“NCAs”) quite busy over the last years.

Although the Commission was initially relatively passive towards Big Tech, its Google Android decision from 2018 seems to have been an important starting point for (EU) competition law enforcement towards Big Tech. In this case, the Commission concluded that Google had abused its dominant position by tying the Google Search app to the Android appstore. Not only did the Commission impose a massive fine on Google of €4.3 billion (the highest fine ever imposed), it also established guidelines for assessing dominance in the mobile ecosystem.

Margrethe Verstager, European Commissioner for Competition, indicated that it became her mission to counter the rise of increasingly powerful digital platforms. Subsequently, it did not take long for the Commission to launch two formal investigations into Amazon.

The first investigation concerned Amazon’s use of marketplace seller data. In the Commission’s assessment, by using such non-public data, Amazon is able to avoid the normal risks of retail competition and to leverage its dominance on the market. The second antitrust probe assesses Amazon’s practices regarding its “Buy Box” and “Prime” label, which enables it to favour its own retail offers and offers of marketplace sellers that use Amazon’s logistics and delivery services over the ones of third-party sellers. When digital platform providers play a dual role – in which they act both as platform provider for business users and as retailer in competition with business users – they are incentivised to engage in self-preferencing.

In June 2020, after Spotify filed a complaint, the Commission launched a formal antitrust investigation into Apple’s rules for app developers on the distribution of apps via the App Store. On 30 April 2021, the Commission published its preliminary finding that Apple was indeed abusing its dominant position by requiring app developers to use Apple’s own in-app purchase system.

The Commission also launched a parallel investigation into Apple Pay, Apple’s mobile payment app. The Commission has expressed concerns that Apple’s terms related to the integration of Apple Pay for purchases of goods and services may distort competition and reduce choice and innovation, because no other payment solution than Apple Pay can access the payment chip technology embedded on iOS mobile devices for payments.

Lastly, Epic Games, the creator of the global hit game Fortnite, has officially filed a complaint with the Commission earlier this year. Epic Games accuses Apple of foreclosing the market for app distribution as well as the market for iOS in-app payment processing, allowing Apple to charge a higher commission. Previously, Epic Games has initiated proceedings against Apple in the US, Australia and the UK.

Also on the national level digital platforms have been subject to numerous competition law investigations. The Bundeskartellamt (“BKartA”) has been very active in this regard. In 2015, for instance, the BKartA issued a decision in which it prohibited Booking.com from continuing to apply its ‘best price’ clauses (for further information on APPAs and MFNs and the BKartA’s decision see our previous blog “On APPAs, MFNs and a tenacious German competition authority”).

Another significant case brought forward by the BKartA, regarding Facebook, dates back to 2019. In this decision, the German competition authority concluded that Facebook abused its dominant position in the social networking market by excessively collecting and combining user data without the consent of its users.

In April 2021, the BKartA has received an antitrust complaint about Apple from nine associations representing German media, Internet and advertising industries. They claim that the iPhone maker is abusing its dominant position with its recently introduced App Tracking Transparency program. This feature on iOS requires apps to ask users for permission to collect their data. However, the complainants submit that Apple itself can still collect significant amounts of user data.

In addition, the Netherlands Authority for Consumers & Markets (“ACM”) has conducted an in-depth market study into the mobile app store market and its implications for competition. This study shows that the lack of realistic alternatives to Apple’s App Store and Google’s Play Store puts them in a position – at least in theory – to set unfair conditions. The ACM is now investigating specifically whether Apple is abusing its dominant position through its App Store by imposing certain conditions on app providers that do not compete with Apple’s apps.

Need for ex-ante intervention?

Competition authorities in the EU thus appear to be willing to act against distortions of competition caused by Big Tech. However, given the (legal and factual) complexity and length of investigations, it often takes a long time before a sanction can be imposed. By then, the (perceived) damage has often already been done. The question therefore arises whether these measures can restore competition in a timely and effective manner. In light of ‘prevention is better than curing’, the DMA was proposed in December 2020. With this Act, the Commission aims to prevent the manifestation of anti-competitive effects in the digital market.

Definition of “Gatekeepers”

The DMA is focused at gatekeeper platforms. A gatekeeper is a provider of a core platform service with a significant impact on the internal market, including, among others, online intermediation services (e.g. app stores, Amazon), online search services (e.g. Google), online social networking services (e.g. Facebook), video-sharing platform services (e.g. TikTok), number-independent interpersonal communication services (e.g. WhatsApp), operating systems (iOS, Android, Microsoft).

The DMA only applies to gatekeepers that meet the following thresholds:

• An annual EEA turnover equal or above €6.5 billion in the last three financial years or an average market capitalisation that amounted to at least €65 billion in the last financial year.
• To serve as an important gateway for business users to reach their respective end users the core platform service must have more than 45 million monthly active end users in the EU and more than 10 000 yearly active business users in the EU over the course of the last financial year.

A platform has to notify the Commission if it meets these thresholds and therefore potentially constitutes a gatekeeper (duty to notify). The Commission reserves the right to proactively designate a core platform provider as a gatekeeper when they meet the thresholds, even – or especially – in cases where it did not receive a formal notification.

Obligations for gatekeepers

Once a core platform provider qualifies as a gatekeeper (whether or not designated as such by the Commission), it has to comply with certain obligations as set out in Articles 5 and 6 of the DMA. Some of these obligations relate to (similar) conduct that has given rise to many Big Tech competition cases in recent years. The DMA also includes a provision that creates the power for the Commission to update the list of obligations as a result of market investigations (Article 10 DMA). This makes the DMA flexible in its application and suitable to account for the highly dynamic and innovation driven markets.

Some of the proposed obligations concern:

• Third-party personal data: Gatekeepers must refrain from combining personal data sourced from their own services with personal data from other services offered by the gatekeeper or third-party services without the consent of the user pursuant to the GDPR (Art. 5(a) DMA). The Bundeskartellamt reached the same conclusion in 2019 in its case against Facebook.
• MFN/parity clauses: Gatekeepers must allow business users to offer the same products or services to end users through third-party online platforms under different terms and conditions than those of the gatekeeper’s platform (Section 5(b) DMA). The cases of Amazon e-books and Booking.com involved this type of conduct.
• Anti-steering prohibition: Gatekeepers must allow business users to promote their products in apps purchased through the platform’s core service, such as Apple’s App Store (Article 5(c) DMA). Business users will thus be able to conclude contracts with their end-users outside the core platform. This will, for example, allow Epic Games to offer and sell their in-app products through their own channel, rather than exclusively through Apple’s in-app purchase system.
• Opening of the operating systems to third-parties: Gatekeepers must allow third-party apps and app stores within the operating system of the device (i.e. iOS and Android). Such practices also lie at the heart of the Commission’s Apple App Store case. This obligation will have far-reaching implication for Apple’s App Store and Google’s Play Store. At the same time, the DMA acknowledges that the gatekeepers can take proportionate measures to ensure that third-party software applications do not endanger the integrity of the operating system provided by the gatekeeper.
• Bundling prohibition: Gatekeepers are no longer allowed to bundle several of their core platform services, such as Google did with the pre-installation of Google Chrome on Android devices (Art. 5(f) DMA).
• Non-public data: Gatekeepers have to refrain from using, in competition with business users, any data not publicly available, which is generated through activities by those business users (Art. 6(a) DMA). Such practices are currently under investigation with regard to the Amazon Marketplace.
• Self-preferencing: Gatekeepers will have to refrain from treating their own services or products more favourably than those of third parties (Art. 6(d) DMA). The ongoing investigation of Amazon’s “’Buy Box” option is an example of this.

If gatekeepers fail to comply with these obligations, the Commission may impose fines of up to 10% of the gatekeeper’s worldwide annual turnover. It may also impose periodic penalty payments of 5% of the gatekeeper’s average daily turnover. Finally, the Commission has the power to take structural and behavioural measures when, following a market investigation, it finds that a gatekeeper is systematically violating its obligations under the DMA. An example of a structural remedy is the mandatory divestiture of (part of) a business.

Powers for national competition authorities

In principle, the enforcement of the DMA will lie with the Commission. However, the presidents of the NCAs in the EU have stated in their view that they should be given a complementary enforcement role under the DMA. They argue that their knowledge and expertise will make the DMA’s enforcement more effective and faster. Whether the NCAs will eventually be assigned a role in the enforcement of the DMA is unclear at this time.

Conclusion

Once in place, the DMA will embody the shift from ex-post enforcement to an ex-ante regulatory approach. In doing so, the Commission aims to improve competition in the Big Tech landscape. This could have a significant impact on the operations of gatekeepers within the EU.

However, the DMA is currently only a legislative proposal. Given the scope and expected impact of the DMA, it will be subject to much debate. Thus, it is still uncertain what the DMA will ultimately look like upon its enactment.

For further questions, you may contact Bas Braeken, Jade Versteeg, or Timo Hieselaar.

Directors need to act now to integrate sustainability into the company’s strategy, decisions and oversight. In the current climate, there is a growing demand from investors and other stakeholders on companies to take into account the impact of their business operations on the environment, society, human aspects and the economy. They want the board to actively engage in integrating sustainability into its long-term strategy.

Promoting sustainability is also a high priority of the EU. To this end, the EU is currently preparing a proposal for a European Directive on Sustainable Corporate Governance. This initiative aims to introduce new rules on incorporating sustainability in long-term business strategies. It should steer companies towards more long-term visions that incorporate sustainability, which includes their environmental, human and social rights impact.

The initiative is complementary to the proposal for a Corporate Sustainability Reporting Directive, which amends the existing reporting requirements on sustainability matters.

The initiative on Sustainable Corporate Governance seeks to push companies to focus more on long-term sustainable value creation instead of short-term value creation and better manage sustainability-related matters. We expect the proposal for a European Directive on Sustainable Corporate Governance to be published later this year. As the proposal may lead to far-reaching legal reforms for all companies doing business within the EU, this article will take a look at some of the new expected rules.

Directors’ duty of care and liability

The European Commission is exploring the possibility of clarifying and expanding the directors’ duties of care. The scope of the duty of care is not always clearly defined in all Member States. According to the European Commission, this lack of clarity leads to a short-term focus on financial interests of shareholders. This would form a key obstacle to achieving Sustainable Corporate Governance.

The European Commission may introduce a duty of care that require directors to consider the environmental, human rights and social impacts of their activities. Directors may also need to integrate sustainability risks, impacts and opportunities into their company’s strategy and decision-making. Adequate procedures and measurable targets may become mandatory to ensure stakeholder risk and impact are identified, prevented and addressed. For example companies may be required to limit their own environmental footprint, or to actively trace the conditions under which production processes further up the supply chain take place.

These procedures and targets could force directors to take a broader group of stakeholder interests such as environmental issues into account. These interests may even prevail in case of conflicts with a company’s commercial interests. The primarily focus of the director on the interests and wellbeing of the company itself might be forced to shift towards other interests. The European Commission is looking at a broad range of stakeholders such as employees, environmental organizations, or any individuals or groups impacted by operations of the company or its supply chain.

Directors may face new, significant liability risks if their duty of care is extended in favour of this broader group of stakeholders. The European Commission is examining whether it needs to strengthen enforcement mechanisms outside of internal board structures and general meetings of shareholders. This might include an enforcement role for stakeholder groups, such as those representing environmental concerns.

In anticipation of the proposal, companies and its directors should check their internal procedures and targets. They should also check whether they already include all stakeholders in their corporate strategy and decision-making.

Due diligence duty – human rights and the environment

The European Parliament supports the European Commissions’ Sustainable Corporate Governance initiative. The European Parliament adopted a legislative initiative report, including a draft directive, setting out recommendations to the European Commission. The report introduces a new mandatory corporate due diligence duty.

The European Commission is now exploring this corporate due diligence duty requiring companies to establish and implement adequate processes for preventing, mitigating, and accounting for human rights, health, and environmental impacts in companies’ operations and supply chains.

The European Commission is also considering if a mandatory corporate due diligence duty should be accompanied by an enforcement mechanism.

Companies should check whether they already have policies in place and processes to take into account human rights and environmental due diligence in its business and supply chains.

Changes to directors’ remuneration

The European Commission may also introduce appropriate enforcement measures accompanying the (extended) duty of directors. Different approaches are for instance being considered to ensure directors’ remunerations are aligned with longer-term perspectives, such as non-financial performance.

The European Commission is investigating the integration of sustainability risks and opportunities in business strategies, as well as the establishment of sustainability-related metrics. These metrics may be linked to the company’s sustainability targets or performance. Other potential measures include variable remuneration policies and targets for bonuses which include non-financial targets, such as sustainability factors.

Sustainability expertise on boards of directors

Furthermore, the European Commission is considering what actions boards of directors will need to take to enhance their sustainability expertise. Examples of such actions include regularly assessing their expertise level on environmental, social and/or human rights matters and taking appropriate follow-up.

Another possibility being considered is a requirement on a number or percentage of directors to have environmental, social or human rights expertise.

Contact

For questions, please contact Michelle Krekels.

Directors need to act now to integrate sustainability into the company’s strategy, decisions and oversight. In the current climate, there is a growing demand from investors and other stakeholders on companies to take into account the impact of their business operations on the environment, society, human aspects and the economy. They want the board to actively engage in integrating sustainability into its long-term strategy.

Promoting sustainability is also a high priority of the EU. To this end, the EU is currently preparing a proposal for a European Directive on Sustainable Corporate Governance. This initiative aims to introduce new rules on incorporating sustainability in long-term business strategies. It should steer companies towards more long-term visions that incorporate sustainability, which includes their environmental, human and social rights impact.

The initiative is complementary to the proposal for a Corporate Sustainability Reporting Directive, which amends the existing reporting requirements on sustainability matters.

The initiative on Sustainable Corporate Governance seeks to push companies to focus more on long-term sustainable value creation instead of short-term value creation and better manage sustainability-related matters. We expect the proposal for a European Directive on Sustainable Corporate Governance to be published later this year. As the proposal may lead to far-reaching legal reforms for all companies doing business within the EU, this article will take a look at some of the new expected rules.

Directors’ duty of care and liability

The European Commission is exploring the possibility of clarifying and expanding the directors’ duties of care. The scope of the duty of care is not always clearly defined in all Member States. According to the European Commission, this lack of clarity leads to a short-term focus on financial interests of shareholders. This would form a key obstacle to achieving Sustainable Corporate Governance.

The European Commission may introduce a duty of care that require directors to consider the environmental, human rights and social impacts of their activities. Directors may also need to integrate sustainability risks, impacts and opportunities into their company’s strategy and decision-making. Adequate procedures and measurable targets may become mandatory to ensure stakeholder risk and impact are identified, prevented and addressed. For example companies may be required to limit their own environmental footprint, or to actively trace the conditions under which production processes further up the supply chain take place.

These procedures and targets could force directors to take a broader group of stakeholder interests such as environmental issues into account. These interests may even prevail in case of conflicts with a company’s commercial interests. The primarily focus of the director on the interests and wellbeing of the company itself might be forced to shift towards other interests. The European Commission is looking at a broad range of stakeholders such as employees, environmental organizations, or any individuals or groups impacted by operations of the company or its supply chain.

Directors may face new, significant liability risks if their duty of care is extended in favour of this broader group of stakeholders. The European Commission is examining whether it needs to strengthen enforcement mechanisms outside of internal board structures and general meetings of shareholders. This might include an enforcement role for stakeholder groups, such as those representing environmental concerns.

In anticipation of the proposal, companies and its directors should check their internal procedures and targets. They should also check whether they already include all stakeholders in their corporate strategy and decision-making.

Due diligence duty – human rights and the environment

The European Parliament supports the European Commissions’ Sustainable Corporate Governance initiative. The European Parliament adopted a legislative initiative report, including a draft directive, setting out recommendations to the European Commission. The report introduces a new mandatory corporate due diligence duty.

The European Commission is now exploring this corporate due diligence duty requiring companies to establish and implement adequate processes for preventing, mitigating, and accounting for human rights, health, and environmental impacts in companies’ operations and supply chains.

The European Commission is also considering if a mandatory corporate due diligence duty should be accompanied by an enforcement mechanism.

Companies should check whether they already have policies in place and processes to take into account human rights and environmental due diligence in its business and supply chains.

Changes to directors’ remuneration

The European Commission may also introduce appropriate enforcement measures accompanying the (extended) duty of directors. Different approaches are for instance being considered to ensure directors’ remunerations are aligned with longer-term perspectives, such as non-financial performance.

The European Commission is investigating the integration of sustainability risks and opportunities in business strategies, as well as the establishment of sustainability-related metrics. These metrics may be linked to the company’s sustainability targets or performance. Other potential measures include variable remuneration policies and targets for bonuses which include non-financial targets, such as sustainability factors.

Sustainability expertise on boards of directors

Furthermore, the European Commission is considering what actions boards of directors will need to take to enhance their sustainability expertise. Examples of such actions include regularly assessing their expertise level on environmental, social and/or human rights matters and taking appropriate follow-up.

Another possibility being considered is a requirement on a number or percentage of directors to have environmental, social or human rights expertise.

Contact

For questions, please contact Michelle Krekels.

Manufacturing and distributing products in the life sciences sector is complex and challenging. Life sciences companies frequently engage in cross-border partnerships and collaborations. Under these circumstances, international disputes often arise. Supply chain interruptions, differences in expectations, changes in direction and environment, can affect long-term collaboration. However, there are various options for resolving disputes.

Renegotiation and Settlement

If there is a long-term collaboration between parties, it might be preferred to reach an amicable settlement. Most companies in the life sciences industry include some form of negotiation in their contracts as a first dispute resolution step. Parties can try to find an amicable solution for the remainder of the term of the contract, before escalating the dispute to ligation or arbitration.

Also the need to keep disputes confidential (if inventions, know-how and reputation reasons are involved) can be an incentive to renegotiate the contract and reach a settlement. If a settlement is found, this can preserve the business relationship and provide a sustainable solution for the future.

Mediation

Mediation is a useful tool when the dispute involves some kind of long-term business relationship. Parties may be close competitors, partners in a long-term project or parties to a long-term contract. An increasing number of life sciences companies provide for mediation in their contracts as a dispute resolution step. Mediation is private and confidential, which is often the reason why parties choose for mediation.

Mediation is a similar process to negotiating a settlement. The key difference between negotiation and mediation is that the latter is conducted with the assistance of a neutral third party (the mediator). The mediator assists the parties in reaching a voluntary settlement.

Arbitration

For disputes in the life sciences industry, the most common form of dispute resolution is arbitration. One of the advantages of choosing arbitration for the resolution of disputes is that the parties to the dispute can provide that the procedure and result of the proceedings remain confidential. This is critical for life sciences disputes that often involve commercially sensitive information. Arbitration also tends to be quicker than court proceedings.

Furthermore, arbitration is useful when the dispute is technically complex and has to be decided by an expert. Business relationships in the life sciences industry often involve complex scientific, technological, or regulatory issues. Effective dispute resolution therefore requires special expertise. This is particularly true for contracts relating to the production and marketing of products, and licensing. In such case, arbitration provides a solution as an arbitrator generally has a professional background in the same field as the dispute.

Another advantage that arbitration may present for the resolution of disputes in the life sciences sector is that multinational litigation can be prevented. Life sciences contracts often involve parties from different countries, which increases the risk of multinational litigation. Companies may need to seek the enforcement of decisions in several foreign countries. This is not necessary if the parties involved choose to solve their dispute through arbitration. The dispute can then be settled by one arbitration instead of several proceedings spread over several countries.

Litigation

Litigation is more familiar to many companies than arbitration and has several advantages for the resolution of life sciences disputes. Litigation is preferable if a party wants to establish a legal precedent or obtain a public decision for future disputes. In the Netherlands, litigation is also a good choice for disputes, as courts generally have procedures in place to deal with disputes quickly and effectively.

Contact

For questions, please contact Michelle Krekels.

Cartel damages litigation is an increasingly hot topic in Europe. For those who are not familiar with this topic a short explanation. Under normal market conditions, enterprises set their own market prices for their products. Under cartelized conditions, however there is some form of concerted practice (either explicit or tacit) which could lead to an agreement on prices for instance. If competitors agree on a price, this will normally lead to higher prices than under normal circumstances. Competition law prevents competitors this kind of behavior, setting high penalties (potentially in the billions of Euros for world-wide players) when trespassers on the EU competition laws are caught. However, these penalties, severe as they might appear, nevertheless pale into insignificance compared to civil damages claims. The gap between the normal market price and the artificial cartelized price is the so-called cartel damage. In addition, to give you an idea of the enormity of these kind of damages we give as an example the trucks case. Six truck companies were caught red handed by the European Commission in a cartel that lasted (at least) from 1997 to 2011. They were fined 3.8 billion euros. However, estimates are that the total of cartel damages amount to a staggering figure of 200 billion euros. These stakes are high enough to ensure massive court battles. The defendants have no other option than to put forward any possible or impossible argument to prevent the court from a decision that might cause their bankruptcy. For the claimants on the other side it is inevitable to go to court, since their losses have been so high.

Therefore, when stakes are as high as they are, there is no other option than to be very thorough in all the arguments and defenses that are brought to the court. Let alone to be meticulous in the first place as where to litigate.

Several legal topics have drawn special attention over the last few years. In this series of articles, we will shed light on the most hotly debated. Today we discuss the passing on defense. We made a comparative analysis between the Netherlands, France and the United Kingdom. The Netherlands and England (along with Germany) are considered mature jurisdictions in cartel damages litigation, while France (along Spain and Portugal for instance) are on the move to join this lawyer’s paradise.

Passing-on

“Passing-on” in competition cases is where overcharges caused by a cartel, which affect the customers of the cartelists (direct purchasers), are passed-on by these purchasers to buyers further down the supply chain (indirect purchasers). The pass-on argument as a defense may be invoked by a cartel member as a (partial) shield against a claim for damages and by an indirect purchaser as a sword to support the argument that it has suffered damages and/or to evidence cartel collusion.

Legal background

The passing on defence is valid under both EU and national laws.

The Damages Directive[1] (and implementation laws in the Member States) has set two important presumptions reversing the burden of proof:

– as far as direct purchasers are concerned, it is presumed that they have not passed the overcharge on to their own customers. Thus, it is up to the defendant in the antitrust action for damages to prove that the overcharge has indeed been passed on and that its direct purchasers have not suffered any (or less) damage (Article 13 Damages Directive);

– concerning the indirect purchasers, it is presumed that their supplier has passed on the overcharge. Therefore, the burden of proof is here again placed on the defendant in the action for antitrust damages (Article 14 Damages Directive).

Those in itself contradictory presumptions could potentially apply to all claims. The presumptions in itself apparently are designed to help the (potential) claimants in a case.  Everyone familiar with civil litigation knows that a sentiment of wrongdoing is not the same as proving you were wronged. Therefore, it is extremely important to have the burden of proof shifted to the wrongdoers.  In that regard, national courts have established a common understanding for the enforcement of the passing on defence it is for the defendants to prove passing on and the extent thereof as well as the absence of volume effects.  This outcome is consistent with the acquis communautaire on the burden of proving pass-on (i.e. in line with the EU principle of effectiveness) that has been codified in Article 13 Damages Directive. So how do courts apply these presumptions in practice in their case law? We believe that this would lead to the conclusion that the odds should favour the claimants. However, do courts indeed apply this presumption? We compared the United Kingdom, the Netherlands andFrance.

United Kingdom approach

In two recent landmark cases the UK Supreme Court (SC) and the UK High court rendered decisions on the UK evidential standard in connection to the passing on defense. The Courts emphasized that claimants should be neither undercompensated nor overcompensated and therefore the evidential burden in relation to mitigation of loss on defendants / cartel members should not be ‘unreasonably high’. This is an approach in which no apparent choice seems to be made in favor of the claimants or the defendants.

In June 2020, the SC overturned a decision of the Court of Appeal in which it had decided that it required defendants (cartel members) to prove the (virtually) exact amount of loss mitigated in order to reduce claimed damages.[2] The SC decided that the law does not require such high evidential standard and that the Court of Appeal had erred insofar that it required ‘unreasonable precision’ from the defendants in the proof of the amount of loss that the claimants had passed on to end customers. This decision was rendered in the context of a damages lawsuit brought by several supermarkets against Mastercard, Visa and several other large banks for the use of certain payment card schemes, in particular the multilateral interchange fees (MIFs)[3] applicable in the EEA, which the European Commission found to be anti-competitive in 2007.

Key considerations of the SC regarding the evidential burden of defendants:

• Claimants should not be under-compensated but neither overcompensated when suffering harm from a competition law breach.
• In the UK, pass-on is an element in the quantification of damages that is required by the compensatory principle and required to prevent double recovery through claims in respect of the same overcharge by a direct purchaser and by subsequent purchasers in a chain. Against this background, the SC considered that “justice is not achieved if a claimants receives less or more than its actual loss”. (217)
• A balance is required between the compensatory principle and the principle that disputes should be dealt with ‘at a proportionate cost’. In that light “the court and the parties may have to forego precision, even where it is possible, if the cost of achieving that precision is disproportionate, and rely on estimates”. (217).
• The SC considered that it sees no reason why in assessing compensatory damages there should be a requirement of greater precision in the quantification of the amount of an overcharge which has been passed on to end consumers because there is a legal burden on defendants in relation to mitigation of loss. (219).

The preceding approach does not offend the principle of effectiveness of EU Law, according to the SC:

“As we have said, the relevant requirement of EU law is the principle of effectiveness. The assessment of damages based on the compensatory principle does not offend the principle of effectiveness provided that the court does not require unreasonable precision from the claimant. On the contrary, the Damages Directive is based on the compensatory principle.” (220)

“ As the regime is based in the compensatory principle and envisages claims by direct and indirect purchasers in a chain of supply it is logical that the power to estimate the effects of passing-on applies equally when pass-on is used as a sword by a claimant or as a shield by a defendant.” (224)

On 25 February 2021, the UK High Court rendered a decision in which it validated the approach to pass-on of the SC decision of June 2020.[4] The UK High court referred to several key considerations of the SC in its decision, among which the compensatory principle and the fact that claimants should not be overcompensated for their damages as much as they should not be undercompensated. In addition, the decision implies that the pass-on approach can / should also be applied in complex and a-typical cases of passing on of overcharges, as the underlying case, which would pose a difficult and costly evidential burden on both parties.

This case stems from the foreign exchange cartel and a damages lawsuit filed by Allianz Global Investors and other claimants against several banking groups for their participation in the aforementioned cartel. The case involves investment funds who seek to generate a return for their investors and in so doing make use of the foreign exchange services provided by banks. Pass-on in this case is said to occur when an investor redeems or withdraws his investment from the fund. The High Court made clear that even though this is not a typical pass-on case involving the sale and purchase of goods in a supply chain, the compensatory principle equally applies. Defendants should not be subject to double recovery (12).

Claimants argued that the defendants’ pass-on defense should be stricken out because there was no real prospect of success, mainly because investors would have no cause of action against the banks. They also argued that it would have great impact on the future scope of claims, in terms of disclosure of documents and provision of evidence. The UK High Court did not agree that there would be no real prospect of success. The UK High Court said that the defense was appropriate and therefore it considered it necessary to “investigate precisely how the alleged wrongdoing of the Defendants impacted upon the investment fund (…) and how that affected the sum payable to the investor”, by disclosure and by factual and perhaps expert evidence. The pass-on defense could therefore be advanced to trial.

Our preliminary conclusion is that the UK courts do not favor one party over the other. It seems as if the courts feel that over-compensation is just as bad as under-compensation. In addition, in this argument there seems to be a deviation from the choice for the principle of effectiveness. So how do the Dutch approach this?

The Dutch approach

In Dutch case law the threshold for an effective passing-on defense has been set relatively high, contrary to the standard that has been set in the UK. The principle of effectiveness and the scope of the Cartel Damages Directive have served as normative and guiding principles for Dutch courts in this regard. The landmark judgements stem from a follow-on damages case between electricity transmission operator TenneT and electricity equipment corporation ABB.

On 8 July 2016, the Supreme Court ruled in the cartel damages case between ABB and TenneT that ABB was liable for the damage suffered by TenneT through the cartel on the market of gas-insulated switchgear.[5]

Amongst others, the Dutch Supreme Court considered in this case that even without retroactive effect for material law, the Damages Directive nevertheless has to be taken into account in order to sure the European l’effet utile and the principle of equality (4.3.1 and 4.3.4). In other words, it was clear that the Damages Directive was not applicable in this case but the Supreme Court did consider it. With reference to article 12 (3) of the Damages Directive, the Supreme Court decided that the evidential burden in connection to passing on is in principle on the cartel member. Furthermore, the Supreme Court confirmed that the court is authorized to estimate damages if it is not possible to determine the amount of damages precisely. So with reference to the not applicable Damages Directive the Supreme Court clearly decided in favor of the claimant.

The District Court of Gelderland delivered judgment on 29 March 2017 and ABB was ordered to pay € 23 million in compensation for the damage caused by the cartel.[6] ABB argued against the extent of the damage by invoking the passing-on defense. The District Court did not agree with this and found that the question whether this defence is reasonable, the principle of equality, the principle of effectiveness and the scope of the Damages Directive serve as normative and guiding principles (4.17). The court considered that “the object of the Damages Directive is not that the infringer should be given a hook to get out his liability of damages. The intention is that the compensation to be paid by the infringer should accrue to the direct and indirect customers in the chain to whom the additional costs were charged” (4.18). The court also ruled that the chance of end consumers bringing their own damages actions (and thus the risk of double compensation) was negligible. Once again and even clearer than the Supreme Court the court here argued in favor of the claimant, especially because they took into account the possibility of actual passing on, but that it was unlikely that further down the line any consumer would collect these scattered damages.

The so-called efficiency defense has been paid particular attention to in this context. Nowadays, almost every claimant advances this defence. Parties claim the harm suffered and alternatively claim compensation by invoking the efficiency defence. Briefly stated, the efficiency defence results in the court nevertheless awarding compensation to the claimant even if strictly speaking, the claimant is unable to prove the harm. This is of course a slippery slope from the point of view of legal certainty. However, it does seem to follow the European starting position, which is that the process should not be made too difficult for claimants and which forms the basis for the Damages Directive.It is a means of ensuring that private litigation is not made impossible from the very start.

The French approach

In France, in cases in which Pre-Damages Directive rules apply, the question of the burden of proof regarding the passing on defense is not entirely settled yet.

According to the Circular of 23 March 2017, the new Article L481-4 of the French Commercial Code (including burden of proving passing on) does not apply to damages claims resulting from an infringement, which took place before its entry into force, that is on 11 March 2017.

Prior to the adoption on 9 March 2017 of the rules implementing the Damages Directive in France, there was no specific legal provision on the issue of pass-on of overcharge in cartel damages cases. The general civil law provisions, namely Art, governed the issue. 1315 of Old French Civil Code (Art. 1353 of the New French Civil Code with the exact same wording).

In accordance with  a ruling of the Cour de cassation[7], several French civil and commercial courts of first instance have handed down judgments putting the burden on the claimant to prove the absence of passing on.^[8] While in two cases the Paris Court of Appeal considered that it was for the defendant to prove the passing on after the plaintiff had brought some indicia showing that there was no passing-on^[9], it recently quashed a ruling of the first instance court where it found that the plaintiff which had been granted damages had not provided any evidence that there had not been any passing on.[10] Most recently however, the Paris Administrative Court of Appeal^[11] and the French Court of Cassation^[12] held that, in accordance with EU law and principles, the burden of proof regarding the passing on of the illegal overcharge lies with the defendant. Besides the economic aspects (additional damages in form of loss of profit and the difficult proof of causality), there are therefore strong legal arguments to counter any potential passing-on defence. As the case law stands, it therefore seems highly recommendable to the plaintiffs that they bring as much evidence as possible about the absence of passing-on, allowing then the French Courts to shift the burden of proof on the defendant to establish passing-on.

Therefore, overall it appears that the French courts are slowly marching away from Albion to get closer to the Dutch approach regarding cases in which Pre-Damages Directive rules apply.

On the other hand, with regards to cases where post-Damages Directive rules apply, there is no doubt that the plaintiffs will fully benefit from the presumptions set by the Damages Directive.

Next time we discuss the bundling of claims!

bureau Brandeis, 4 June 2021

Marc Barennes, Tessel Bossen, Hans Bousie & Sarah Subremon

[1] Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union Text with EEA relevance (OJ L 349, 5.12.2014, p. 1–19)

[2] UK Supreme Court 17 June 2020, case references UKSC 2018/0156 Sainsbury’s Supermarkets Ltd and others (Respondents) v MasterCard Incorporated and others (Appellants); UKSC 2018/015 Sainsbury’s Supermarkets Ltd (Respondent) v Visa Europe Services LLC and others (Appellants).

[3] MIFs are charged by a cardholder’s bank (issuer) to a merchant’s bank (the acquirer) for each transaction made to the merchant with a payment card. In practice, the acquiring banks passed these fees on to merchants by charging a merchant services charge (MSC), for which they were seeking damages. The banks however argued that the supermarkets had passed-on the overcharges by the MIFs/MSCs to their end consumers by raising retail prices.

[4] UK High Court 25 February 2021, Case no CL-2018000840.

[5] Supreme Court 8 July 2016, ECLI:NL:HR:2016:1483.

[6] District court of Gelderland 29 March 2017, ECLI:NL:RBGEL:2017:1724.

[7] Cour de cassation, 15 May 2012, Le Gouessant.

[8] Paris Commercial Court, 26 March 2018, Provera; Paris Commercial Court, 20 February 2020, Cora; Rennes High First Instance Court, 7 October 2019, FRSEA.

[9] Paris Court of Appeal, 20 September 2017, JCB; Paris Court of Appeal, 6 February 2019, Doux.

[10] Paris Court of Appeal, 14 April 2021, Johnson & Johnson.

[11] Paris Administrative Court of Appeal, 13 June 2019, SNCF Mobilités.

[12] French Court of Cassation, 12 February 2020, Collectes valorisation énergie déchets. This case does not relate to antitrust damages and may only be referred to by analogy.

The (European) supervision of concentrations is in full development. Most notably, the European Commission (“Commission”) has been cracking down on violations of the Merger Regulation in recent years.

If concentrations meet certain turnover thresholds, the companies involved have a notification obligation (Article 4 Merger Regulation). The companies involved may then not implement the concentration until the competent authority has approved the concentration. This is the standstill obligation (Article 7 Merger Regulation).

There is strict enforcement of violations of the notification and standstill obligation – so-called ‘gun-jumping’. It is therefore important to know what is and what is not permitted under competition law in the case of (the preparation of) a concentration. This blog provides an overview of recent legal developments and clarifies what merging parties can do prior to the approval of a transaction to avoid gun-jumping.

Unexpected decisive control?

If a company intends to acquire decisive control of another company, the acquiring party must notify this, provided that the turnover thresholds are met. However, it is not always clear when decisive control exists. For example, in 2012, Norwegian fish farmer Marine Harvest (now Mowi) acquired 48.5% of the shares in its competitor Morpol. This was notified to the Commission with a notice that the voting rights would not be exercised by Marine Harvest until approval was granted by the Commission. Prior to the notification, Marine Harvest made a public offer for the remaining shares in Morpol. This transaction was notified to the Commission, which subsequently found that the notification and standstill obligations had been violated because Marine Harvest had already acquired de facto decisive control in the acquisition of 48.5% of the shares in Morpol. The Commission reached this conclusion by checking the usual attendance of shareholders at previous shareholder meetings. On that basis, the Commission found that Marine Harvest, with 48.5%, constituted a majority among shareholders and could therefore exercise decisive control.

Marine Harvest was subsequently fined €10 million for violating the notification obligation and another €10 million for violating the standstill obligation. Although these appear to be two sides of the same coin, they are two distinguishable obligations for which the Commission can impose separate fines. Thus, there is no violation of the ne bis in idem principle. The Court of Justice of the European Union (“CJEU”) upheld the fines, ruling that in this case it did not matter that Marine Harvest had not exercised the voting rights because de facto sole decisive control had already been acquired prior to the public offer.

Decisive control or customary protection rights?

In February 2015, the telecom company Altice notified a proposed acquisition of PT Portugal, which received conditional approval from the Commission in April 2015. However, it later turned out that Altice could already exercise decisive influence before the acquisition was approved. In fact, the acquisition agreement already gave the telecom company veto rights over the appointment of senior management, pricing policy and several important contracts.

While the acquiring company may protect the value of the (shares in the) target company, it may not exercise decisive control beyond the ordinary course of business before the concentration approval is granted. Factors that are relevant in assessing whether there is a normal course of business are (i) the degree of involvement of the acquiring party in the day-to-day operation of the business, (ii) the nature of the measures in the agreement in favour of the acquiring company, and (iii) the monetary thresholds for exercising a veto with respect to the value of the target or purchase price. When these thresholds are very low, the exercise of decisive control is more likely to occur.

In this case, Altice already exercised decisive control prior to the notification through its involvement in PT Portugal’s negotiation strategy and choice of suppliers and certain TV channels. On that basis, in April 2018 the Commission imposed a fine of €124.5 million on Altice for gun-jumping, whereof €62.25 million for violating the notification obligation of Article 4 Merger Regulation and €62.25 million for violating the standstill obligation of Article 7 Merger Regulation.

On 8 November 2016, Altice was again fined €80 million for gun-jumping, this time by the French competition authority. In 2014, Altice notified the proposed acquisition of two telecom companies, SFR and OTL, by its subsidiary Numericable. The French competition authority had launched an investigation into gun-jumping, which revealed that Altice already had access to strategic information from and could exercise decisive influence over both companies before the concentration was approved. Altice had thus already acquired decisive control prior to any approval of the concentration, thereby engaging in gun-jumping.

Inseparable step for transaction does not necessarily lead to decisive control

An example of a situation where no decisive control was acquired by the purchasing company concerned the proposed concentration of KPMG Denmark and EY. The consultancy firms entered into a merger agreement on 18 November 2013. Since the Danish branch of KMPG still had a cooperation agreement with the KPMG group, this agreement was terminated on the very same day. The Danish competition authority approved the concentration at the end of May 2014, but stated (in December 2014) that unconditionally and irrevocably terminating the cooperation agreement with the KPMG Group before the concentration was approved could be regarded as an act in breach of the standstill obligation. The CJEU disagreed, concluding that the termination of the cooperation agreement does not lead to a change in decisive control of KPMG Denmark, even if this termination is inextricably linked to the concentration and may constitute a preparatory or side transaction of this concentration. According to the CJEU, transactions that do not lead to a change in decisive control do not fall within Article 7 Merger Regulation.

Transactions consisting of multiple steps

The Commission decision on Canon‘s acquisition of Toshiba Medical Systems Corporation (“TMSC”) shows that the notification and standstill obligation also applies to so-called ‘special purpose vehicles’. Canon intended to acquire TMSC by means of a ‘warehouse construction’. A special purpose vehicle was established which acquired 95% of the shares in TMSC for €800. Canon then acquired 5% of the shares for €5.28 billion and obtained a stock option on the remaining shares. The proposed acquisition was then notified to the Commission on 12 August 2016. After the Commission’s approval, the remaining 95% of the shares were acquired. The Commission launched an investigation into this construction in July 2017. It concluded that a transaction in which an interim buyer – the special purpose vehicle – acquires decisive control until the company will be sold to the ultimate seller, can be seen as the first step of the (final) transaction. After all, the preparatory step as such contributed to Canon’s acquisition of decisive control over TMSC, so that prior to this first step, notification was already required. As this was not done, the Commission imposed a fine of €28 million on Canon.

Another type of two-stage rocket was used by the French company Veolia. Veolia, active in the water, waste treatment and energy sectors, wanted to acquire decisive control of Suez through two steps. First, it obtained 29.9% of the shares in Suez from energy company ENGIE on 6 October 2020. The second step involved making a public offer for the remaining shares in Suez. Suez believed that these two steps should be considered as one transaction and that therefore Veolia should have notified the transaction before acquiring the shares. The Commission agreed that this was one transaction and that the two steps were interdependent; the public offer would never have happened without the previous acquisition of ENGIE shares. However, the Commission argued that both steps fell within the exception Article 7(2) Merger Regulation.

Article 7(2) Merger Regulation provides an exception to this standstill obligation for two types of transactions: a public bid and a series of share transactions where decisive control is acquired from multiple selling parties. However, the concentration must then be notified directly to the Commission and the acquirer may not exercise the voting rights. The Commission considered that the exception of Article 7(2) Merger Regulation regarding the public bid was also applicable to the first step of the concentration – the acquisition of 29.9% of the shares in Suez.

The Commission’s decision is in line with the General Court’s judgment in Marine Harvest. Indeed, the General Court concluded that it is possible for the acquisition of a minority stake, not yet acquiring decisive control of the target company, followed by a public takeover bid, to form part of one concentration falling within the scope of Article 7(2) Merger Regulation.

The difference between Marine Harvest and Veolia/Suez is that in the first situation, de facto decisive control was already obtained at the first step, namely through the acquisition of 48.5% of the shares in Morpol. This was not the case with Veolia with a 29.9% stake. Therefore, the standstill obligation is only violated if the first step already leads to an acquisition of decisive control. Although Suez has filed an appeal against the Commission’s decision, it does not appear to be going forward now that Veolia and Suez have reached a merger agreement on 12 April.

Lessons for the future

The aforementioned case law shows that the following points are important in the preparation of mergers:

• De facto acquisition of decisive control also triggers a notification and standstill obligation.
• This also applies to special purpose vehicles that acquire (temporary) decisive control.
• Always notify preparatory steps to a concentration if they as such contribute to the change of decisive control.
• Do not exercise decisive control prior to the approval of a concentration, insofar it is not necessary to protect the value of the target company.
• Decisive control may not relate to the day-to-day operations.
• In the case of a pre-closing veto right, the monetary threshold for exercising it must not be too low with respect to the transaction values.

Clean Teams

In addition to the notification and standstill obligation for concentrations, the cartel prohibition also still applies in full. In particular, the exchange of competitively sensitive information plays a role in the preparation of mergers. In that context, it is advisable under certain circumstances to set up Clean Teams in order to limit the risk of violating the cartel prohibition. Clean Teams are particularly advisable in transactions between two competitors.

• The exchange of information should not lead to the situation where the commercial market behaviour of parties could be influenced.
• Assemble the Clean Team, if possible, from a closed group of individuals who are not (as of that moment) involved (anymore) in the day-to-day operations of the parties.
  • For example, independent consultants or specially appointed employees.
• Treat information within the Clean Team as strictly confidential.
  • Establish (internal) protocols regarding what information is accessible and to whom.
• Seek legal advice when in doubt.
• Have individuals on the Clean Team sign a confidentiality agreement and monitor its compliance.

Finally, it is worth noting that the Commission has introduced a new policy expanding its supervisory role with respect to concentrations. In this regard, please read our blog on Article 22 Merger Regulation.

For all your questions regarding merger control, bureau Brandeis is happy to help. You can reach us through the links below.

Bas Braeken, Jade Versteeg and Timo Hieselaar

What to do when a dominant competitor takes over a promising start-up

Until recently, competitors and customers were left empty-handed in the case of a so-called ‘killer acquisition’. These are takeovers where a large, established company takes over a smaller, innovative and start-up competitor with the aim or effect of stifling innovation and/or eliminating potential competition. The reason for this was that many of these acquisitions do not have to be notified to a competition authority because the turnover thresholds are not met. Killer acquisitions could therefore not be assessed by the national competition authority or the European Commission. This has now changed.

On 26 March 2021, the Commission published new guidance on the application of the referral mechanism of Article 22 of the European Merger Regulation (“EU Regulation”). In addition to concentrations which are subject to notification to the national authorities, Article 22 of the EU Regulation also allows concentrations which are not subject to notification to be referred to the Commission for assessment.

The Commission is particularly interested in referrals of concentrations where the turnover of the parties does not accurately reflect their current or future potential. In practice, this will especially concern mergers involving new competitors and innovative companies. This will occur, inter alia, in digital, pharmaceutical, biotechnology and certain industrial sectors. The new policy is expected to have less impact on acquisitions in more traditional markets.

Background

On 26 March 2021, the Commission announced a major reform of the EU regulation. One of these major changes is a new policy on the application of Article 22 of the EU Regulation.

Old and new policy Article 22 EU Regulation

Article 22 of the EU Regulation allows one or more national competition authorities to refer a concentration to the Commission for examination when it may significantly affect competition in the internal market. The article dates back to 1989 when many Member States did not yet have a national merger control regime and therefore still had the possibility to have potentially anti-competitive concentrations examined by the Commission. Article 22 is also called the ‘Dutch clause‘ because it was introduced at the request of the Netherlands, which did not have merger control at that time. The article explicitly refers to concentrations that do not require notification. However, after almost all Member States had introduced a merger control regime, the importance of Article 22 significantly declined. It was even the Commission’s policy to discourage referrals of non-notifiable concentrations on the grounds that the concentrations would generally not significantly affect competition in the internal market.

The Commission’s new policy constitutes a major shift in the application of Article 22 of the EU regulation. The Commission now encourages Member States to refer certain concentrations to the Commission, even in cases where the referring Member State does not have jurisdiction to assess the concentration under the turnover thresholds. The Commission is free to decide whether to accept a referral request.

The new policy did not just come out of thin air. There had been a desire for some time by competition authorities to be able to assess killer acquisitions. The discussion was sparked in 2014 by Facebook’s acquisition of Whatsapp. The acquisition was not subject to notification in many member states because of Whatsapp’s low turnover. However, the acquisition was ultimately assessed by the European Commission because the acquisition was notifiable in three member states and was therefore qualified for a referral under Article 4(5) of the EU Regulation. The Commission approved the merger. This case was one of the reasons for Germany and Austria to adopt new laws introducing an additional notification threshold based on the value of the transaction. The Dutch Consumer and Market Authority (“ACM”), the Luxembourg Conseil de la Conucurrence and the Belgian Competition Authority (“BMA”) wrote a Benelux memorandum on the supervision of competition in the digital sector. This memorandum argued for a change in the notification thresholds, for example by introducing an additional threshold based on market power and/or the value of the transaction.

Test case: Illumina-Grail

Shortly after the Commission’s communication on the reforms of the EU merger control regime, it became known that the acquisition of Grail by Illumina was a test case for the application of the Commission’s new policy. For the first time since 1999, an Article 22 request was made without any of the expanding Member States having jurisdiction to assess the merger.

Illumina is one of the largest players in the world in the field of gene sequencing. Grail is a young company developing a blood test to detect about 50 types of cancer at an early stage by DNA sequencing. The company has no turnover in the EU, which means that, in principle, the concentration does not need to be notified to the Commission or the national authorities of the EU Member States. However, the acquisition had to be notified to the US Federal Trade Commission and is under attack there.

In February, the Commission expressed concerns about the potentially anti-competitive effects of the proposed merger in the field of cancer tests and encouraged national competition authorities to file a referral request in line with the new policy. The French Autorité de la concurrence has responded to the call and the ACM, BMA, and Greece Competition Commission supported the request. The acquisition was not subject to notification in any of those Member States. The Commission has accepted the request and will assess the proposed acquisition.

The referral request has caused quite a stir. Illumina brought lawsuits against the request in the Netherlands and France, but lost both cases. The case will undoubtedly be contested before the Court of Justice of the European Union. The new policy leads to much legal uncertainty in mergers and acquisitions in which a dominant competitor takes over a promising start-up. It is therefore important to take this into account during the (contract)negotiations of the acquisition. For example, when drafting the suspensive conditions in the contract, one should take into account the possibility of a referral to the Commission, even if the competition authorities in the Member States concerned do not have the power to assess the concentration themselves. On the other hand, the new policy also provides more opportunities for third-party stakeholders, such as competitors and purchasers, to complain.

What to do in case of a killer acquisition

Is a dominant competitor or supplier of yours taking over a promising start-up? Then take the following actions.

1. Consider whether the turnover of the start-up gives an accurate view of its current or future potential. It may be that a start-up has little or no turnover yet, but is of great importance to the competition in the market or will become so in the near future. This can, among others, occur in the following situations:
   • the target is an important innovator or conducts potentially important research
   • the target is an important (potential) competitor
   • the target has access to important assets (such as raw materials, infrastructure, data or intellectual property rights)

2. Contact as soon as possible the ACM and/or other Member States where the dominant competitor is active. The competition authority has a period of 15 working days to refer a concentration to the European Commission after the transaction has been ‘made known to the Member State concerned’. The period only begins to run when sufficient information is provided tot he Member State to make a preliminary assessment as to whether the criteria of Article 22 of the EU Regulation are met. Member States seem to have a fairly wide discretion in determining when the deadline starts running.

3. Explain why the concentration affects trade between Member States. This is, for instance, the case if the dominant competitor is active in several Member States and/or (potential) customers are located in different Member States.

4. Explain also why there is a real risk that the concentration will significantly impede competition within the territory of the Member State(s) concerned. A real risk exists where, as a result of the acquisition:
   • an important (potential) competitor is eliminated;
   • there is a merger between two important innovative companies;
   • competitors have fewer incentives or opportunities to compete because, among other things, market entry or expansion becomes difficult or even impossible;
   • there is an incentive or possibility for a strong market position in one market to be leveraged into another market through tying, bundling or other exclusionary practices.

5. Contact the Commission. The Commission may encourage Member States to refer the acquisition.

Bas Braeken, Lara Elzas and Jade Versteeg

Last weekend, two of the last Fieldlab events of the first phase took place in Biddinghuizen. After a business conference, a theatre performance, two football matches, a concert and a dance event indoors, it was now time for a dance event and a pop festival outdoors. The images of dancing visitors without face masks and without keeping a distance of 1.5 metres were somewhat alienating but mainly reassuring.

 What is Fieldlab?

Fieldlab is a research programme in which the government, the business community and the scientific community work together to gather knowledge about the coronavirus, the epidemic and the fight against it by means of practical tests, so that measures to fight the epidemic can be improved. Last December, bureau Brandeis was approached by the Fieldlab Events coalition, an informal collaboration established by the trade organisations Alliantie van Evenementenbouwers and EventPlatform, and the Ministries of Health, Welfare and Sport, Justice and Security, Education, Culture and Science, and Economic Affairs and Climate Change, to look into and advise on privacy law aspects of a series of field tests.

What do the Fieldlabs entail?

For the scientific research into the possibilities of admitting more visitors at events, but also in theatres, cinemas and other venues, Fieldlab prepared and carried out eight practical tests. The researchers created different situations to see how the visitors reacted, for example how people met, how long the meetings lasted and how people reacted to different preventive measures. To ensure safety, participation took place under strict conditions, such as the requirement to show a negative PCR test result. The Breda University of Applied Sciences, Radboudumc, Delft University of Technology, Eindhoven University of Technology, Twente University of Technology and TNO were involved in the research. The expectation is that the research results will also provide points of departure for opening up other parts of society safely. The research can also provide valuable data for possible future epidemics.

Privacy-by-design

The privacy team of bureau Brandeis has advised Fieldlab about the complex division of roles between the various parties involved in the research and how the concept of ‘privacy-by-design’ can be put into practice.

Dimitri Bonthuis, responsible for the Fieldlab Events pilots: “bureau Brandeis helped us to get started with the Fieldlab. They showed us the way along the privacy pitfalls in this complex process. Complex, because there was a modified law, involved several research institutes and various research questions. Moreover, it is a process that is under a magnifying glass, not only in the Netherlands, but worldwide, so everything had to be right straight away. We couldn’t have wished for a better partner.”

Christiaan Alberdingk Thijm and Marieke Berghuis explain: “We felt it was important for the success of these studies that the privacy law aspects were well thought out beforehand, that the GDPR would actually be one of the starting points in the design of the practical tests rather than a stumbling block along the way. Of course, we all hope for good research data so that we can go to a concert or festival again as soon as possible!”

bureau Brandeis carried out the work for Fieldlab partly pro bono, as part of the firm’s social practice and mission to use expertise to improve society.

Since our previous blog the Gaming Authority (Kansspelautoriteit; “Ksa”) published the (preliminary) final version of the Policy rules licensing remote gambling (Beleidsregels vergunningverlening kansspelen op afstand).

Most important points:

• The Policy rules Koa confirm the new timelines, start application process by 1 April 2021 and the extension of the cooling off to 2 years and 9 months.
• The requirements for the outsourcing of activities have been simplified: applicants must provide an overview of the work that will be contracted out and to whom, including an overview of the agreements concluded for this purpose. However, the agreements no longer have to be submitted directly with the application. The Ksa can, however, request these later.
• Player funds can now also be secured by the use of a third party bank account.
• The 3 forms to be submitted in connection with the audit of the gaming system have been included. The Ksa also published an updated version of the inspection calendar.
• A new Article 19 on the use of existing personal data, which incorporates the ban on the use of existing customer data acquired by unregulated operators before obtaining a license. This clause prohibits the use of an existing customer database for (b) marketing and advertising plus for (c) the registration of players. These restrictions will also be included in the license terms as was illustrated by the draft license as published.

The Ksa also published a new version of the Policy Rules on Responsible Playing (Beleidsregels verantwoord spelen).

Compared to the version of 19 October 2021, it includes:

• A more general elaboration of what players qualify as vulnerable groups.
• A further specification of the risk analysis of the gaming offer and the reporting thereof to the Ksa.
• A further elaboration of the scope of the investigation of possible problematic gaming behavior.

The Ksa also published a new version of the Guidelines for the Prevention of Money Laundering and Terrorist Financing Act (Leidraad Wet ter voorkoming van witwassen en financieren van terrorisme). Most important change is the fact that matchfixing is now integrated as an AML risk.

Should you have any questions on the above, please contact Machteld Robichon or Fransje Brouwer 

Goldman Sachs has to pay 37,3 million Euro because it invested in a later to appear cartelist (Prysmian). The EU’s top court upheld last week an earlier European Commission decision (2014) and the consecutive EU lower-tier court decision in 2018.

What is remarkable in this decision is not that Prysmian was found to be guilty of forming a decade long lasting cartel together with other producers of high-voltage cables. It is neither remarkable that Goldman Sachs was fined for the period of 2005 till 2007 since Goldman Sachs held 100% of the voting rights in this period. Under EU law a parent company that owns 100% of a subsidiary can be presumed liable for its conduct. So nothing new there either.

What was remarkable in the EC decision of 2014 was that Goldman Sachs was also held accountable for the consecutive period of two years, from 2007-2009, although it only held a mere 32% of the shares of Prysmian in this period. The commission argued that despite holding the minority of shares, Goldman Sachs still had a decisive influence over the Prysmian board.

Those who follow this case were interested to hear what the EU court would decide on exactly this issue, where Goldman Sachs argued before the court that it held only three directors in the 10-strong board of Prysmian that were employees of a Goldman Sachs related company.

The court would not have it. It held: “The relevance of personal links lie in the fact that they may suggest that a person, although active of a given company, actually pursues, in view of his or her links, with another company, the interests of the latter…That may also be the case where a person who sits on a board of directors of a company is connected to another company by means of “previous advisory services” or “consultancy agreements”.

Although we do not exactly know what happened here, since the circumstances were deemed confidential we do conclude that investors should be very careful in their decisions to control a board. If you do have control, albeit indirectly, you better be aware of this possible liability and have an antitrust compliance program in place or refrain from decisive control at all.

Hans Bousie

In almost every supply chain, agreements are concluded between suppliers and buyers to make the cooperation more efficient. Although vertical agreements are in many cases exempted by the Vertical Block Exemption Regulation (“VBER”) from the cartel prohibition under Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) and Article 6 of the Dutch Competition Act (“Mw”), not every restriction is permitted. After all, the VBER does not apply to a number of hardcore restrictions of competition, or where market shares exceed 30%. The distinction between permitted and prohibited restrictions is not always clear to companies. This is evident, for example, from a survey conducted by the Benelux Secretariat in which at least 89% of the companies questioned indicated that they had been confronted with prohibited territorial restrictions. This blog provides an overview of enforcement and case law from 2019 and 2020, and discusses the most recent developments.

Enforcement by ACM

In September 2020, the Authority for Consumers and Markets (“ACM”) announced that it had completed its investigation into drug manufacturer AbbVie. From the end of 2018, AbbVie offered significant discounts to hospitals for the rheumatology drug Humira. The patent on the active substance in Humira expired in October 2018, allowing other manufacturers to market a generic product. To prevent its market position from declining as a result thereof, Abbvie gave discounts to hospitals if they purchased Humira for all their patients. ACM considered that AbbVie thereby factually imposed an exclusive purchasing obligation on hospitals which limited competition for new products. AbbVie agreed not to include exclusive purchasing clauses in its agreements with hospitals anymore.

Case law on vertical agreements

In March 2019, the Court of Appeal of Arnhem-Leeuwarden ruled on the legality of an exit scheme of Avebe. The articles of association of Avebe, a cooperative of farmers, stipulated that if members wished to transfer the shares to Avebe upon termination of their membership, they had to pay an amount of €681 per share to the cooperative. Six arable farmers did not agree with this withdrawal arrangement. The Court of Appeal agreed with the lower court and ruled that although the exit scheme was a restriction of competition, the scheme did not divide the market or impose price restrictions or other hardcore restrictions and was therefore allowed.

At the end of 2019, the Amsterdam Court of Appeal ruled in an (as yet unpublished) interlocutory judgment in the case between Prijsvrij and Corendon that the termination of an agreement can be an instrument to achieve resale price maintenance. Customers could book trips of Corendon through Prijsvrij, which used discounts on its website on trips of Corendon. The tour operator did not want Prijsvrij to apply such discounts and eventually terminated the agency agreement. Prijsvrij held that this termination should be regarded as a form of prohibited resale price maintenance. The Court of Appeal agreed and considered it proven (for the moment) that the termination of the agreement with Prijsvrij was particularly caused by the discounts offered by Prijsvrij to consumers.*

On 12 June 2020, Advocate General Drijber concluded – with reference to the appeal in cassation against a judgment of the Court of Appeal of The Hague – that a settlement agreement regarding a patent did not violate competition law. Jet Set and Brielle Industrie Services (“BIS“) in this case, both active in the field of cleaning techniques for oil tanks, had reached a settlement which, according to BIS, included a non-compete and non-challenge clause. BIS considered this to be a licence agreement with hardcore restrictions within the meaning of the Technology Transfer Block Exemption Regulation (“TTBER“). However, Advocate General Drijber concluded that it was neither a licence agreement nor a non-compete clause. A prohibition to use Jet Set’s technology follows directly from the patent on that technology. There was therefore no need to review the TTBER or Article 6(3) Mw. Although a non-challenge clause does not generally fall under the TTBER, there was no such clause in this case either. BIS had in fact (successfully) contested the patent. The Supreme Court did not reach a substantive judgment.

A case that did involve vertical licensing agreements concerned a dispute between Dromenjager, the company behind the well-known Woezel & Pip children’s figures, and toy manufacturer International Bon Ton Toys (“IBTT“). IBTT produces and sells toys for which it is allowed to use the Woezel & Pip (figurative) trademark. The licence agreement included a provision requiring approval from Dromenjager for sales by the licensees to a certain number of retailers, including Kruidvat. IBTT wanted to sell its remaining stock of Woezel & Pip products to Kruidvat and complained that the required approval was contrary to competition law. The President of the court reached the provisional conclusion that the approval provision in the licence agreement is a hardcore restriction of competition law. The judgment in summary proceedings has been appealed.**

Vertical agreements also often play an important role in the pharmaceutical market. In its judgment of 8 June 2020, the district court of Midden-Nederland ruled that health insurer Zilveren Kruis was allowed to use a ‘discount policy’ to encourage hospitals to purchase medicines from a manufacturer that was cheaper for Zilveren Kruis. Together with other health insurers, Zilveren Kruis entered into an agreement with Janssen-Cilag, the producer of a medicine for leukaemia (named Imbruvica). On the basis of this agreement, Janssen-Cilag supplied Imbruvica to the hospitals, after which the health insurers received discounts (based on subsequent calculation). Zilveren Kruis applied a mark-up of 49% if hospitals purchased Imbruvica from suppliers other than Janssen-Cilag. Eureco-Pharma, a competitor of Janssen-Cilag, argued that Zilveren Kruis was channelling the Imbruvica offer to Janssen-Cilag through its discount policy. The judge, however, concluded that Zilveren Kruis’ policy is aimed at always paying the lowest price. A competitive company is able to pursue this aim. Moreover, Eureco-Pharma was able to conclude a similar agreement with Zilveren Kruis. Therefore, there was no prohibited vertical restraint.

Finally, at the end of 2020, the Amsterdam District Court ruled that Trek Benelux – supplier of fast, lightweight bicycles – had to continue an agreement with its distributor. Trek Benelux terminated the agreement when the distributor applied a discount on top of the recommended retail price. According to Trek Benelux, such discounts harmed its brand image. The agreement also included an obligation to deliver assembled bicycles to customers. The distributor argued that the recommended retail price is in fact a minimum price and that the obligation to deliver assembled bicycles limits its passive (online) sales. The judge in preliminary relief proceedings ruled in line with the VBER that forcing distributors to adhere to the recommended retail price constitutes a hardcore restriction of competition law. Moreover, no justification had been put forward by Trek Benelux. Therefore, the agreement had to be continued. Trek Benelux was, however, able to demonstrate that the obligation to deliver assembled bicycles was necessary to protect the quality of the bicycles, which requires accurate assembly and adjustment. This provision was not contrary to competition law.

Evaluation of the VBER

The current Regulation, which has been in force since 2010, expires on 31 May 2022. The European Commission (“Commission“) intends to amend the Regulation. In this context, the Commission conducted a review, the findings of which were published on 8 September 2020.

The review shows that the VBER, albeit still relevant, is no longer adequate for application to online sales. After all, the retail sector has changed tremendously in recent years, particularly as a result of digitalisation and the subsequent increase in e-commerce (e-tailing). Entirely new types of restrictions on online sales have been imposed on buyers the past few years, such as a ban on the use of Google AdWords by Guess or the (re)sale of products on online marketplaces by Coty. The Commission has also imposed fines on, amongst others, Asus, Philips and Pioneer for imposing resale price maintenance on their online retailers. The interpretation of the rules on online sales restrictions varies widely in Europe. The new VBER will have to provide clarification. According to the Commission, there is still too much uncertainty about the use and lawfulness of ‘across-platforms parity agreements‘ (APPAs) as well. For the background and recent developments regarding APPAs, please read our earlier blog.

In addition, the collection and use of data has become crucial to the business operations of (online) companies in recent years. In this context, the Commission has also launched an investigation into Amazon. The American company is said to use data of sellers on Amazon – which it obtained in its capacity as a platform – to benefit its sales channel on the same platform. For this ‘self-preferencing’, the Commission previously imposed a fine of more than €2.4 billion on Google, which put its own services above those of competitors in Google’s search results.

Conclusion

Vertical agreements can often benefit from the exemption from the cartel prohibition, but not every restriction can be imposed. Dutch and European case law over the past two years confirms this. It is therefore essential to know what may and may not be included in a vertical relationship. It is, in this regard, of great importance what the new VBER will entail, especially with regard to online sales. However, the clarifications that the Commission seems to have in mind will only apply after May 2022. In any case, both civil and administrative enforcement of competition law in respect of vertical relationships has increased dramatically in recent years. It is likely that this trend will continue in the coming years.

* Bas Braeken and Jade Versteeg assist Prijsvrij in these proceedings.

** Bas Braeken and Timo Hieselaar have (first) become involved on appeal as Dromenjager’s lawyers.

The Netherlands leads the way in Europe with the possibilities of instituting class actions. In this manner, large-scale infringements of people’s and companies’ rights can be efficiently exposed.

This will now become possible in all European countries, at least for consumers. For a consumer alone, it is often too expensive or impractical to recover damages from a company, especially if that company is located abroad. It is much more efficient to join forces. There are various interest groups, such as the Consumers’ Association (‘de Consumentenbond’), the Dutch Home Owners’ Association (‘Vereniging Eigen Huis’) and the Automobile Association (‘ANWB’), which work to achieve this on a structural basis. If a mass damage case occurs, there are also ad hoc entities that achieves this. The ad hoc entities, which are constituted for the purpose of a specific action, are usually financed by a litigation financier.

The European Parliament gave its consent on 24 November 2020 to the ‘Directive on representative actions for the protection of the collective interests of consumers’. The Directive is part of the New Consumer Deal to strengthen European consumer rights and their enforcement. This includes rights that result from European regulations and directives in areas such as unfair commercial practices, tourism, product safety, energy, financial services, telecommunications, product liability and data protection.

From 24 December 2020, Member States have two years to adapt their legislation if they do not yet comply with the Directive. The new national provisions must then be applied from six months after that.

The Netherlands already has a developed, and recently with the introduction of the WAMCA, extensive legal system in this area and drastic changes do not seem necessary. What is new is that the Directive leaves almost no room for newcomers to this practice, the so-called ad hoc entities for cross-border claims. The Directive works with a list system for interest representatives who want to operate across borders and bring consumer claims. Member States have to draw up a publicly accessible list of representative organisations (‘qualified entities’) for cross-border claims. Member states would have to submit the list of qualified entities for cross-border claims to the European Commission. The competent authorities should meet the criteria laid down in the Directive. One of these criteria is that, in principle, the qualified entities for cross-border claims must prove that they have been publicly active in the area of protection of consumer interests for 12 months (Article 4(3)(a) of the Directive).

Regarding domestic claims, Member States are allowed to designate ad hoc representative entities for the pursuit of domestic claims (recital 28). These entities should be listed in national electronic databases which are publicly accessible through websites providing information about the designated competent entities (recital 63). The requirements for the appointment of representatives to pursue domestic claims are left to the discretion of Member States in accordance with national law. However, these requirements should be in line with the objectives of the Directive. Member States may choose to apply the requirements applicable to representatives in respect of cross-border claims also to representatives pursuing domestic claims.

Although the WAMCA now also sets stricter requirements for claim foundations, the prior designation of claim foundations as competent bodies and the inclusion of the claim foundations in a public database or a list system has not been a hard requirement to date.

Collective actions occur in almost all areas of law. The collective action team of bureau Brandeis has specialists in collective actions and settlements of mass damage cases. Examples are the diesel fraud cases and the case against Oracle and Salesforce for violation of privacy rules. bureau Brandeis often works together with leading interest groups and litigation financiers. The team also acts in mass damage cases that are primarily conducted in the United States, but which have offshoots in the Netherlands.

For questions or comments, please contact Frank Peters, Michelle Krekels and Louis Berger.

In the past two years ACM as well as the European Commission, significantly stepped up their consumer protection enforcement efforts despite the COVID-19 crisis. A striking feature is the focus on digital products and services.

For instance ACM called on merchants and online platforms – such as bol.com, Marktplaats and Amazon – to tackle misuse of the COVID-19 crisis by sellers. In addition, the Dutch regulator published various guidelines and tools to guarantee the interests of consumers.

This blog grants an overview of the major enforcement practices and case law with regard to consumer protection law in the Netherlands in 2019 and 2020.

 Consumer protection law policy of ACM

In recent years ACM formulated various guidelines with a view to better consumer protection. In September, ACM published its consultation Sustainability Claims Guideline. This guide contains rules of thumb to assist companies in making claims about the sustainability of their products. It is especially important that the claims are clear and factually correct so that no misleading information about the sustainability of a product is spread about.

ACM also took steps in the area of digitalisation. ACM researched whether (online) sellers inform their consumers sufficiently when they buy ‘smart devices’. These are devices that use software and the Internet to provide certain functions, for instance a digital assistant such as Google’s Alexa or Apple’s Siri, or a smart thermostat. ACM has addressed and urged various sellers to inform consumers better about the characteristics and risks of smart devices. Larger retail chains such as bol.com, Coolblue and Mediamarkt have now adjusted this.

In addition, ACM provided clarity about misleading online in its Guidelines on the protection of the online consumer. Prior to the sale of a product companies must inform consumers in a complete, accurate and understandable way. Moreover, sellers are not allowed to capitalise on the vulnerability of certain groups in the online world, such as the elderly and children. As a supplement to this guideline ACM also published certain Rules of Thumb for online platforms with regard to information and transparency obligations as well as organisational and control obligations for online platforms.

 The European Commission is also active in the area of consumer protection. With its Consumer Agenda the European Commission sets five objectives on which it will focus in the coming years, namely a (i) digital and (ii) sustainable transition, (iii) more flexible international cooperation, (iv) stronger enforcement and (v) better protection of vulnerable groups.

ACM’s decision-making practise

 ACM uses the guidelines and researches referred to above to develop its enforcement policy. In the past two years ACM took action on various occasions against violations of consumer protection law. Partly because the online sale of products increased sharply due to COVID-19, ACM started to take tougher enforcement action against online shops. For instance, the regulator took action against Stay Healthy Products. This online provider of nutritional supplements and care products profiled itself with products that were supposed to be free. However, these products were only free if they were returned within a certain period at the consumer’s own expense. ACM reprimanded this company for this misleading practice. Now consumers don’t have to return the product or pay for it. In addition, many consumers complained to ACM about We Love Musthaves. The company did not deliver or delivered late and did not refund its consumers, contrary to the statutory cooling-off period. In addition, the web shop was difficult to contact for questions and complaints. ACM imposed an order on the company subject to a penalty. The web shop had to adjust the website and refund customers. The owner of the websites Goedkoper.nl and Euroknaller.nl has also been forced by ACM to make adjustments after the regulator received complaints with regard to non-delivery, late delivery and refunds to customers. Consumers that did not receive their order have in the meantime been refunded their purchase price. Consumers who make use of their cooling-off period will now receive the purchase amount refunded within the legal period of 14 days.

Moreover, at the end of 2019 ACM imposed a fine on four telecom providers for representing inaccurate and incomplete information about the telephone subscriptions they provided. Many consumers complained on ConsuWijzer about unexpected costs and high bills for their subscriptions from KPN, Tele2, T-Mobile or Vodafone. ACM had already formulated several starting points and discussed them with the telecom providers. However, several months later it appeared that the companies still gave ambiguous and inaccurate information on their websites. It was ambiguously stated on the websites that a one-off fee was payable when a subscription was taken out. It was also wrongly stated that the data, call and SMS bundles were unlimited, while this was not the case. Vodafone did not mention on the subscription price shown that it only applied to consumers who were already a customer of Ziggo. The fines for this violation ranged from EUR 2,715,000 to EUR 3,907,000.

ACM also enforced consumer protection law with regard to platforms. For example, bol.com was addressed to inform consumers (more) clearly who the actual seller is on the platform. It must be clear to consumers who they are dealing with and who they can contact with any complaints. Knaek, the company behind the Knaek-app with which students in the Netherlands and Flanders can obtain a discount from various companies and supermarkets has been reprimanded by ACM that it should include more clearly in its terms and conditions that the subscription can be terminated every month after the initial fixed subscription period has ended. The company has now adjusted this. Moreover, from this year onwards ACM will also tackle fake likes and fake reviews.

ACM established that Dutch companies provide such fake reviews whether or not for payment on platforms such as Facebook, Instagram, YouTube and Google in order thereby to improve the image of the company.

The regulator is going to find the providers of these services and instruct them to stop these practices, in connection with which customer bases could be demanded. If the companies refuse to cooperate a fine may be imposed on them.

Case law

The tougher enforcement policy of ACM with regard to consumer protection law often resulted in warnings and several orders subject to incremental penalties. Several court cases arose as a result from this. This overview discusses the major administrative court cases in the Netherlands with regard to consumer protection in 2019 and 2020.

This year ACM imposed on Netflix an order to terminate the violation within three months on pain of a penalty of EUR 15,000 per day, because in contravention of Section 3:15d BW Netflix did not provide any electronic mailing address for consumers on its website. Netflix only had a LiveChat on its website. The streaming platform stated that this LiveChat complied with the obligation to provide information under Section 3:15d of the Dutch Civil Code. The District Court of Rotterdam emphasises that pursuant to Section 3:15d of the Dutch Civil Code only the contact details, including the electronic mailing address of the service provider, must be easily, directly and permanently accessible. In the court’s opinion, LiveChat on the Netflix website constitutes a fast and effective form of communication, which is also available 22 hours a day in Dutch and 24 hours a day in English. The LiveChat therefore complies with the obligation to provide information of Section 3:15d of the Dutch Civil Code.

Inadequate information provision

In September 2020, ACM imposed an administrative fine of EUR 1,250,000 on an energy supplier for not mentioning reasonable termination fees in the agreements. The energy supplier – on the basis of ACM guidelines – used a different amount for consumers and small business users, but insufficiently assessed the capacity in which a customer concluded the agreement. In addition, the company included in the agreements both the termination rates for consumers and those for small business users, including the capacity in which the customer purchased the contract. The judge for interim relief held in its judgment that merely referring in contracts to standard conditions for different groups of consumers cannot be considered as stating reasonable termination rates. The judge for interim relief also ruled that the supplier has a duty to ascertain in order to adequately check the capacity of the customer.

ACM also imposed a fine on Vodafone for misleading consumers with regard to a subscription fee. It was stated in small print that the monthly fee shown only applied if the consumer was already a customer of Ziggo. ACM was of the opinion that this constituted a misleading omission. In its decision of 24 December 2019 the judge for interim relief took as a starting point what the average consumer experiences or can experience as clear. It held that it concerned information on the basis of which the consumer takes a decision with regard to an agreement which would otherwise not have been taken. It was not immediately clear to the average consumer that the price stated on the home page only applied to Ziggo subscribers. The practice therefore amounted to misleading information.

Equality principle and enforcement

The District Court of Rotterdam ruled on 23 May 2019 that ACM rightly imposed a fine on Seats and Sofas amounting to EUR 350,000. The furniture seller advertised so-called “was” prices, which gave the consumer the impression that a product has been more expensive before but has now been discounted. However, the furniture seller never actually applied the higher prices so that this commercial practice was qualified as misleading. In addition, the furniture was not provided with price tags: the price was only announced when the consumer asked for it. This is in violation of the Dutch Prices Act (Prijzenwet) because consumers must be able to determine the price of products independently. Seats and Sofas thought that ACM violated the equality principle by imposing the fine solely on Seats and Sofas. According to furniture seller there were other undertakings that were also guilty of such commercial practices but were not fined. The Trade and Industry Appeals Tribunal held in appeal that the equality principle does not reach so far that a fine has been imposed wrongfully purely because a possible (other) offender had not been fined. That would only be different if there was unequal treatment of similar cases. However, ACM had provided sufficient insight that Seats and Sofas distinguished itself from other sellers by its misleading advertisements and by being the subject of a large number of complaints on ConsuWijzer. Therefore the equality principle had not been violated.

ACM did not violate the equality principle either when on 7 June 2019 it imposed a penalty on Duinzigt Wonen B.V., which demanded a commission fee for its activities as a mediator from both the consumer-tenant as well as the landlord. This is in contravention of the prohibition of double commission in Section 7:417, subsection four, of the Dutch Civil Code. Duinzigt Wonen B.V. alleged that ACM acted in contravention of the prohibition of acting arbitrarily and the equality principle by imposing only on it a fine or order subject to a penalty, while other alleged offenders went unpunished. The District Court of Rotterdam held that the regulator must make choices in view of its enforcement capacity. It is not for the court to determine the way in which ACM must deploy its limited enforcement capacity. Therefore, the imposition of the fine on Duinzigt Wonen B.V. did not constitute a violation of the equality principle.

Unfair refund policy

 The Trade and Industry Appeals Tribunal adjusted and reduced in its decision of 5 February 2019 a fine of EUR 500,000 imposed by ACM on TOM B.V. – for which its two directors were jointly and severally liable up to the amount of EUR 125,000. TOM B.V. sold bicycles, sportswear and accessories to consumers through multiple web shops. The web shops structurally violated consumer protection law in connection with cancelling and returning orders by applying a “Squeaky Wheel System”. Customers were only reimbursed after repeated insistence, and in addition they first received a voucher instead of the purchase amount. The Trade and Industry Appeals Tribunal confirmed that ACM correctly established that this is an unfair commercial practice. However, the Trade and Industry Appeals Tribunal did not endorse the liability of the directors. According to the Tribunal this construction does not fit into the system of the General Administrative Law Act.

On 27 January 2019 the District Court of Rotterdam slightly mitigated a fine of EUR 375.000 by ACM on the debt collection agency Credit Invest. The debt collection agency collected on the basis of invalid agreements. Consumers who asked for clarification were often ignored. In addition, the debt collection agency conducted a policy of putting consumers under pressure, for instance by threatening them with expensive legal actions. Although ACM had established the duration of the violations partly incorrectly, the fine had been imposed rightfully according to the Trade and Industry Appeals Tribunal.

Conclusion

Consumer protection law has been a hot topic the past year. In the coming year, ACM will undoubtedly take even more and stricter action against violations of consumer protection law. The emphasis appears to be particularly on informing the consumer better and more honestly. This obligation to inform ranges from information with regard to the characteristics of the products to the underlying sellers. This will most likely also increase case law with regard to consumer protection law. Not only does ACM (and the European Commission) want to protect consumers’ justified confidence in producers and their products, it also represents a major step in the envisaged sustainable and digital transition. Consumer protection law is therefore adapting quickly to the current zeitgeist.

Bas Braeken, Jade Versteeg and Timo Hieselaar

The European Commission (EC) has proposed new legislation on crypto assets. This is laid down in the draft Markets in Crypto-Assets (MiCA) Regulation and seeks to highly impact the crypto-asset industry. For every business involved in crypto-assets preparation is key.

Just the other day, Ursela von der Leyen, the EC’s President, stressed the importance of a ‘common approach with Member States on cryptocurrencies to ensure we understand how to make the most of the opportunities they create and address the new risks they may pose’. In line with this statement, the draft MiCA of 24 September 2020 sets out an ambitious EU-wide framework that regulates currently unregulated crypto-assets, including stablecoins, which are used as a means of exchange as they maintain a steady value.

The draft MiCA is seen as welcome regulation to the crypto market, which is often troubled by a reputation of being notoriously unregulated, legally opaque and is opposed to frequent encounters of Initial Coin Offering (ICO) scams. This proposal aims to counter many of those negative aspects surrounding crypto-assets, while also providing a more investor friendly framework. To anyone actively providing crypto-asset related services it is of great importance to prepare their businesses for the upcoming regulation.

Why is MiCA introduced?

The draft MiCA is part of the EC’s Digital Finance Package. This package carries a number of legislative proposals to shape the digital transformation of the EU financial sector. It aims to ensure that the EU financial services regulatory framework is suitable for innovating FinTech solutions and applications. One of the main examples is the Distributed Ledger Technology (DLT), a digital system that is shared, replicated and synchronized among the members of a decentralized network and records transactions such as the exchange of assets.

This proposal aspires to fulfill four objectives: (i) to ensure legal certainty by providing a sound legal framework for all crypto-assets, (ii) to support innovation and fair competition in the EU, (iii) to instil levels of consumer and investor protection and market integrity, and (iv) specifically addresses the so-called stablescoins, which might pose a threat to financial stability due to more potential global adoption.

Furthermore, this proposal is expected to provide a fully harmonised regime and are aligned with existing financial services regulatory framework. For instance, crypto-assets service providers will need to prepare to be authorized, comply with market abuse rules and provide a whitepaper similar to a prospectus.

To whom does MiCA apply?

This legislative proposal contains a definition of ‘Crypto-Asset Service Provider’ (CASP), which is derived from the definition of ‘Virtual Asset Service Providers’ of the Financial Actions Task Force’s (FATF), the global money laundering and terrorist financing watchdog. A CASP is any person whose occupation or business is to provide crypto-asset services to third parties on a professional basis. These crypto-asset services include, for example, providing advice on crypto-assets, custody and administration of crypto-assets on behalf of third parties, crypto-fiat exchanges, execution of orders for crypto-assets for third parties. Needless to say, the number of actors on the crypto market that will fall under the MiCA-regulation will be significant.

Additionally, the draft MiCA provides a framework for specific classes of crypto-assets that are currently unregulated. Moreover, this legislative proposal does not apply to crypto-assets that are already regulated as they qualify as, for instance, a financial instrument, e-money, deposits, structured deposits or securitisations.

The draft MiCA regulates three new categories of tokens and contains a catch-all definition:

Electronic money token, or ‘e-money token’, of which the main purpose is to be used as a means of exchange and that purports to maintain a stable value by referring to the value of fiat currency that is legal tender’. This type of crypto-asset is specifically aimed to regulate stablecoins backed by one fiat currency, such as USD Tether, USD Coin and (possibly) Facebook’s Libra.

Asset-referenced token, which is also a type of stablecoin, ‘purports to maintain a stable value by referring to the value of several fiat currencies that are legal tender, one or several commodities or one or several crypto-assets, or a combination of such assets’. In contrary to the e-money token, this type of crypto-asset could be backed by several underlying assets (other than one fiat currency), while still maintaining a stable value. Examples include DAI (Ether-backed) and Money on Chain (Bitcoin-backed).

Utility token, is a token that ‘is intended to provide digital access to a good or service, available on DLT, and is only accepted by the issuer of that token’. Utility tokens are often issued through an ICO to be used to access a good or service provided by the issuer. Popular examples of utility tokens are Golem (marketplace for computing power) and Basic Attention Token (advertising platform).

The catch-all-definition of ‘Crypto-asset’ is formulated as ‘a digital representation of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology’. This definition is broader than the FATF definition of virtual asset as it leaves out the specific functions of a crypto-asset. As a result, any other –perhaps future- crypto-asset is expected to fall under the MiCA regime.

What are the obligations under MiCA?

Similar to the existing prospectus obligations when issuing securities, crypto-assets must be issued to the public (i.a. investors, customers) together with a whitepaper that meets several requirements (e.g. description of the project and token). In the case of asset-referenced tokens and electronic money tokens, the whitepaper needs to be approved by a local regulatory body of the EU Member State. It is not yet certain which Dutch local regulatory body will be assigned these tasks.

The issuance of electronic money tokens are only allowed if the issuer is a recognised credit institution or electronic money institution under the Capital Requirements Directive or the Electronic Money Directive.

CASPs are only allowed to perform crypto-asset services if they are authorised by the relevant national competent authority after filing an application to that end. Consequently, if authorised, it will benefit from the EU Passport regime and will not need physical presence in another EU Member State when providing cross-border services.

Additionally, all crypto-assets that are admitted for trade on exchange platforms are subject to regulation to counter market abuse. These measures include the obligation to disclose insider information as soon as possible and the prohibition of market manipulation. This should safeguard the market integrity and therefore result in a higher level of confidence of investors.

When to be ready?

The aim is to have the entire Digital Finance Package, with MiCA included, into full effect by 2024, though it still needs approval of the European Council and the European Parliament.

As with any FinTech solution and the rise of new applications such as Decentralized Finance (DeFi), an experimental form of peer-to-peer finance, regulation will always be a few steps behind the actual state of play.

However, should your business be involved in crypto-assets, MiCA will definitely have impact. MiCA brings various compliance obligations and infringements of MiCA could mean significant fines.

Therefore, it may be useful to start preparations for the upcoming legislation. This could mean assessing whether your business will qualify as a CASP under MiCA and needs authorisation. Also, when your business is planning to issue asset-referenced tokens, the drafting of a whitepaper could come in handy.

In case you need any advice in doing so, or should you have any other questions concerning the draft MiCA, do not hesitate to contact us; bureau Brandeis – Financial Services Litigation.

The rise and rise of online (booking and other) platforms in digital markets has been a headache for competition authorities for some time now, ever since (in 2015) they first came across a new type of agreement known as ‘across platform parity agreements’ (APPAs). Essentially, APPAs are Most Favoured Nation clauses (MFNs) but then applied to and in an online setting. These agreements, which are initiated by online platforms, ban suppliers from selling their products or services at a price below the price on the online platform. APPAs became an especially familiar (or more accurately: infamous) sight when Booking.com started imposing them on hotels. Although most European competition authorities (including the Italian, French and Swedish ones) accepted the promises made by Booking.com in this regard, the German Federal Cartel Authority (the Bka) is still involved in an intense legal battle as it tries to get such agreements banned in their entirety. The Bka has carried out a study into the effect that APPAs have on the online booking market, publishing its findings recently in a report. This blog looks at the consequences of using APPAs, the findings from the Bka report and the legal options that suppliers have for taking the offensive against APPAs or MFNs.

Types of APPAs

APPAs can be subdivided into two types. Narrow APPAs require suppliers to refrain from offering their products cheaper on their own website than they do on the online platform that initiated the APPA. This is a vertical relationship, where a ban is imposed by the ‘retailer’ – in this case the online platform – on the supplier. In some cases, however, the application of APPAs is extended into the horizontal relationship. This is the case with so-called wide APPAs, under which suppliers are not only not permitted to supply their products cheaper on their own website but are also prohibited from doing so on other online platforms. A real-life example of this is Booking.com, which made an APPA part of its own general terms and conditions. Its APPA barred hotels from offering their rooms more cheaply, not only on the hotel’s own website (‘narrow APPA’) but also on other online booking platforms (‘wide APPAs’) such as Trivago, Expedia and Airbnb. However, these agreements are applied in more than just the online booking market, as they may be seen in any online marketplace. In the Netherlands, online food order and delivery service Thuisbezorgd.nl has agreed narrow APPAs with restaurants that affiliate with its platform. According to the ACM (the Netherlands Authority for Consumers and Markets), these clauses do not give rise to any issues under competition law at the present time. However, in 2017 the European Commission rapped Amazon’s knuckles for imposing (online) MFNs on publishers of e-books. APPAs are proving problematical in the United States too, with the American Supreme Court ruling in 2016 that Apple’s MFNs for e-books in its App Store were illegal. Apple ultimately paid a compensation settlement of $400 million to the publishers in question.

The negative and positive impact on competition

So, what is the competition law-related problem with APPAs? Putting it simply: wide APPAs can lead to price uniformity across the entire platform market, since suppliers have to adjust their price for all online platforms if they change their price. As a result, a platform can then increase the commission that it requires its suppliers to pay. This also leads to the price increase that usually results from commission increases, which is then being applied on other platforms as well. This in turn means that if it is no longer possible to compete on price, platforms make all their investments in advertisements and in the quality of the platform. As a result, the barriers to entering the online platform market will be raised significantly.

However, the negative impact that APPAs can have must also be set against its positive effects. For example, the possibility of free-riding is prevented. Since prices are the same everywhere, customers have no incentive to search for and select a product on one platform before actually buying it more cheaply somewhere else. This reduces the risk that other parties will benefit from the investments that you have made. What’s more, APPAs offer a solution to the hold-up problem, as the certainty offered by an APPA means that there is now no barrier to investing in relationship-specific contracts.

The German competition authority takes it one step further

The above makes it clear that wide APPAs in particular give rise to competition issues. This is also why almost all national competition authorities have told Booking.com that it must stop using wide APPAs (see for example the ruling by the Italian competition authority in 2014 and the rulings by the French and Swedish authorities in 2015). However, for the German competition authority Bka, these rulings did not go far enough.

The Bka is of the opinion that narrow APPAs have to be prohibited too. This decision by the Bka in 2015 was first successfully contested by Booking.com and quashed by Düsseldorf’s OLG (Higher Regional Court) in 2019. The Bka then submitted an appeal against this OLG ruling to the BGH (the Bundesgerichtshof/Federal Supreme Court), Germany’s highest private-law court. This case is still ongoing. The Bka has carried out a related study, whose findings were published recently. This study relates to the period from 2015 to the summer of 2018, during which time the narrow APPAs were removed from the marketplace.

The Bka cites several findings from its report that in its opinion demonstrate that narrow APPAs are definitely anticompetitive. In other words, according to the German competition authority, a ban on all types of APPAs should be implemented.

First of all, the Bka is of the opinion that the ban on APPAs has not been detrimental to Booking.com’s business. The Bka’s study reveals that this online platform has not lost any market share in the sector of supplying accommodation to consumers in Germany. On the contrary, the Bka has found that Booking.com has even become market leader despite the absence of APPAs.

Secondly, the removal of APPAs from the platform market has led to increased competition (or at least to increased options to compete) on the part of hotels. Without APPAs, hotels are free to decide on their own pricing strategy and in this way to compete with other hotels. What’s more, this new freedom reduces the dominant position of platforms. This is because when APPAs are used, hotels are to a greater extent bound by the ranking assigned to them by the online platform (often against payment).

Finally, the Bka finds that there is almost no risk of free-riding. This finding is at odds with the idea that APPAs are actually intended to prevent free-riding. The Bka’s study reveals that two-thirds of users do not consult any other platform before booking a hotel. In almost all these cases, Booking.com is used as the first and only platform to book the accommodation. In other words, according to the Bka, there is almost no likelihood of free-riding, which eliminates the (supposed) need for APPAs.

The Bka also appears to be arguing that Booking.com has grown significantly even without APPAs. From the standpoint of Article 102 TFEU (the Treaty on the Functioning of the European Union), you can also argue that – in the case of Booking.com – APPAs make almost no difference to this platform’s opportunities for growth. Booking.com is such a major presence in the online booking market that such agreements may no longer be necessary to limit losses and to stimulate growth. However, this does not mean that the same is true for the smaller platforms, as (narrow) APPAs would actually make it possible for them to run fewer risks and to secure growth. Banning APPAs purely on the basis of this information may however give an incomplete picture of the options offered by these agreements in practice.

Conclusion

To sum up, then: APPAs can have a far-reaching impact on competition. According to the Bka, even narrow APPAs can cause problems, with its findings appearing to show that narrow APPAs do actually restrict competition. The Bka’s decision could provide a way for suppliers to get out of such agreements, which in many cases are still deemed to be reasonable. If the arguments that the Bka has submitted to the BGH ultimately prevail then suppliers in all kinds of markets could contest the APPAs and MFNs they are bound by. For example, the ‘best price’ guarantee currently offered by Thuisbezorgd.nl could come under fire. This would in turn mean that suppliers would once again be free to decide the pricing strategy on their own website themselves and to do so independently of the strategy they employ for an online platform such as Deliveroo or Uber Eats. These developments could also have a major impact for suppliers to online markets and price-comparison websites such as Bol.com, Amazon.nl and Beslist.nl. Prohibiting APPAs creates more room to compete, with the power and dominant position of the (major) platforms being reduced as well.

This is the first bureau Brandeis quarterly report of 2020 on the developments in the area of cartel damage litigation. You may download our quarterly report here.

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After many years of waiting, the market for online gambling in The Netherlands will finally open. As things currently stand, it will be possible for providers to request a license as of 1 January 2021.

The principle underlying the regulation of online gambling is to guarantee a safe environment for players to participate in online gambling, where gambling addiction and (gambling-related) crime is prevented. In this respect, the Dutch government has a ‘channeling’ objective of 80%, meaning that it aims for 80% of the people that participate in online gambling to do so with a legal and therefore reliable provider. By opening the market, the government expects that it will become easier to supervise the online gambling market. This supervision will be carried out by the Dutch regulator in the field of (online) gambling, the Dutch Gaming Authority (Kansspelautoriteit; “DGA”).

Applications for licenses will have to be submitted to the DGA for an amount of € 45.000 and will only be granted when the applicant meets a set of strict legal requirements set forth in the Remote Gambling Act (Wet kansspelen op afstand; “RGA”), the Decree Remote Gambling (Besluit kansspelen op afstand; “DRG”) and the Ministerial Decree Remote Gambling (Ministeriële regeling kansspelen op afstand; “MDRG”). Main features of these requirements are the reliability of the applicant, responsible play and crime prevention.

Reliability of the applicant

The reliability of the applicant, including its directors, policy makers and shareholders, must be beyond any doubt. In this respect, the applicant must provide information regarding (among others) criminal incidents, financing and an overview of affiliated companies.

The reliability of applicants that already have been active in the market, will be assessed by the DGA on the basis of the compliance with the so called ‘cooling off-criteria’ for a period of currently 2 years prior to the date on which the application is filed.

The cooling-off criteria are:

• no use of a .nl-extension;
• no use of the Dutch language;
• no advertising on television, radio or printed media, targeting the Dutch market;
• no use of domain names containing typical wordings referring to The Netherlands in combination with gambling references;
• no references from which a focus on The Netherlands can be derived, i.e. via wordings, symbols or images;
• no use of payment methods that are used exclusively or mostly by Dutch people, such as iDEAL;
• not allowing minors (< 18) to participate in online gambling.

Also, the applicant is required to have a policy in place to guarantee the continuity of the reliability.

Responsible play

The applicant must also have policies and measures in place that guarantee that minors and other vulnerable groups are protected against the risks of online gambling.

As for minors (< 18), this means that they have to be excluded from participation in online gambling in any case. As for youngsters (18 – 24), this means that they cannot be a target of marketing- and advertising activities. In line with this, it is also prohibited to use the services of individual professional sportsmen. Advertising that is permitted must be in accordance with the risk analysis that the license holder is required to make of its offer.

As for adults, there is (among others) a Central Register Exclusion Games of Chance (Centraal Register Uitsluiting Kansspelen; “CRUKS”). As the name suggests,  this register contains the names of persons that are (temporarily) excluded from online gambling, for instance due to excessive participation. Such registration can be both voluntary and involuntary. The tender for CRUKS was published last week. The DGA developed and tested the application in-house. The tender relates to the hosting, functional and technical application management and further future development of the application.

Furthermore, in order to prevent online gambling from even becoming excessive and eventually turn into gambling addiction, the license holder must provide for adequate trainings for its personnel.

Crime prevention

In order to provide for a crime free-environment for online gambling, applicants must demonstrate compliance with the provisions of the Prevention of Money Laundering and Terrorism Finance Act (Wet ter voorkoming van witwassen en financieren van terrorisme) and the Sanctions Act (Sanctiewet). The first act contains provisions on risk management, client investigation, reporting of unusual transactions, retention of supporting documents and training. In view of compliance with the latter, relevant are whether international measures were issued in response to a violation or threat to international peace and security.

Supervision by the DGA

When applicants are granted a license, they have to report frequently to the DGA in order for the DGA to exercise its supervisory powers. In this respect, license holders are also required to have a Control database (Controledatabank; “CDB”) in place that is accessible by the DGA. Via the Control database, the DGA can view digital data from license holders and verify whether they comply with certain license conditions.

Gambling tax is due on prizes that exceed the (gross) amount of €449 and must be paid by the license holder. The tax rate is 29%.

What’s next?

At this moment, the responses to the lower regulation that was published for consultation are being processed and details in the legal framework are specified. For instance, the amended Decree is expected this week. The technical requirements regarding CRUKS and the CDB are expected before the start of summer. When these (draft) requirements are published, a response hereto can be submitted via a consultation application form. However, with the information currently available it is well possible to already start preparing for submitting an application. As the saying goes, well begun is half done.

For questions, more information or assistance with (the preparation for) an application for online gambling in the Netherlands, please contact Machteld Robichon or Fransje Brouwer.

In our latest Financial Services Litigation Update we discuss recent judgments regarding the contracting obligation for banks when there is a risk of money laundering, the use of enforcement requests against foreign competitors and the impact of foreign regulatory enforcement measures on a fit and proper test for financial sector directors.

If you would like to discuss these or other financial law related topics, please feel free to contact us: bureau Brandeis – Financial Services Litigation.

Special duty of care of financial services providers and the risk of money laundering

Banks struggle with controlling the risk of money laundering. In this case, the court emphasizes that it is in itself perfectly justified that a bank imposes strict requirements on new clients within the framework of (the integrity requirements of) the Financial Supervision Act (Wft).

Nevertheless, the court finds that in this case the fight against money laundering should not preclude a special purpose entity that will be involved in (the legal production of) cannabis to apply for a bank account.

Although the bank claims that it has freedom of contract, the court considers that for commercial banks this does not exist to its fullest extent. After all, having a bank account is necessary to be able to participate in social and economic life.

According to the court, when it comes to being able to participate in payment transactions one should not make a distinction between private individuals and business customers. Both are in principle entitled to a bank account and, as a result, banks in principle have an obligation to contract all.

In addition, this special duty of care that banks have from their social function applies both to existing clients and to third parties, whereby the scope of the duty of care depends on the circumstances of the case.

The special feature of this case is that the claimant is a special purpose entity that is preparing to be admitted as a grower in the context of the “Experiment of the closed cannabis chain” on which a legislative proposal is pending.

Now that the aim of this project is precisely to reduce the illegal trade in cannabis by legally producing this substance and thus (indirectly) to prevent illegal activities and the risk of money laundering, the court allows the claim. The bank may, however, impose conditions on the use of the business account.

Court of Amsterdam 04-11-2019

ECLI:NL:RBAMS:2019:8144

Prosecuting director as fellow perpetrator or as de facto manager of alleged violation?

 The Netherlands Authority for the Financial Markets (AFM) has imposed an order subject to a penalty to a director of a group of entities that was offering securities for participation in its bond funds. The director allegedly acted as fellow perpetrator of alleged unfair commercial practices.

On the basis of the investment brochure, which is in the possession of the AFM, it is believed that essential information to make an informed decision about the investment is withheld from potential investors.

The AFM’s claim that the director acted as a fellow perpetrator is based on the fact that, among other things, the director set up and arranged the entities of the group, initiated the issue of the securities and is (indirectly) the director under the articles of association and sole depositary receipt holder /shareholder and thus cooperates closely and consciously with the group.

It is argued however that the director cannot be regarded as a fellow perpetrator of the alleged violation. The judge in preliminary relief proceedings agrees with this.

According to the preliminary relief judge, the AFM wrongly classified the director as fellow perpetrator of the alleged violation. On this ground, it is not allowed to impose an order subject to a penalty on him and to publish that penalty.

It follows from settled case law that it must be demonstrated beyond reasonable doubt that the cooperation between (legal) persons who cannot be equated has been so conscious and close, that they may be considered as fellow perpetrators.

In this case however, the behavior occurs within the framework of the normal business conduct of the entities and can be attributed to those entities. The AFM wrongfully equates the entities and the director. The court considers that the director may have had actual control of the alleged violation but cannot be referred to as a fellow perpetrator.

Now that the number of cases in which financial regulators are holding individual officers accountable for company violations, it is essential to always carefully examine the precise relationships and their qualifications, as this case shows.

Court of Rotterdam 12-07-2019

ECLI:NL:RBROT:2019:8214

Integrity screening of policymakers includes measures imposed by foreign regulatory authorities

 This case concerns a rejection of an application for a license to manage an investment institution, because the license requirements are not met. According to AFM, among other things, the integrity of the proposed policymakers is not beyond doubt.

The integrity of a policymaker is determined by the AFM on the basis of the policymaker’s intentions, actions and antecedents. The AFM will at any rate take into account supervisory antecedents and other facts and circumstances that indicate involvement in conduct in respect of which rules have been laid down in Dutch or foreign financial supervision legislation, if such  conduct may be relevant for the integrity screening.

A number of measures were imposed on the intended policymakers by the Luxembourg financial regulator in their capacity as policymakers of a Luxembourg investment manager. The measures were imposed because of the late submission of annual reports of this Luxembourg manager, belonging to the group and supervised there, and of funds managed by it. In addition, a measure was imposed on the manager for launching a new sub-fund without depositing its assets and not informing the Luxembourg regulator.

According to the Trade and Industry Appeals Tribunal (the “CBb”), the AFM correctly classified these measures as supervisory antecedents, because they were imposed for non-compliance with financial legislation similar to that in the Netherlands. The CBb ignores the argument that considering the Luxembourg measures as antecedents would unreasonably stretch the envisaged effects of the Luxembourg measures.

The CBb is particularly concerned about the fact that the intended policymakers did not report the antecedents. The Luxembourg measures were not reported on the relevant part of the integrity screening form, nor as ‘other relevant circumstances’. Also after questions from the AFM, the Luxembourg measures  were not reported as antecedents. The failure to report was in itself also rightly classified as a supervisory antecedent, according to the CBb.

This case demonstrates the importance of conduct prior to the fit and proper test as well as the transparency that targeted policymakers exercise during the review process. The financial regulator is allowed to consider both aspects in its assessment.

Trade and Industry Appeals Tribunal 15-10-2019

ECLI:NL:CBB:2019:498

Can a market party request regulatory enforcement against a competitor?

An Irish investment firm asked the AFM to take enforcement action against a Dutch investment firm for alleged violation of the statutory bonus cap rules.

The AFM did not respond to the enforcement request. According to the regulator, the investment firm has insufficiently demonstrated the impact on its competitive position and therefore there is an insufficient interest in a decision on its enforcement request.

In line with established case law, the Rotterdam Court considers that the Irish investment firm can only be considered as an interested party in the enforcement request, if enforcement action against the other investment firm can actually have an impact on its competitive position.

Both investment firms operate within the same market segment and coverage area. They trade for their own account, and are both market makers in largely the same exchange traded funds (ETFs) on the same stock markets and can therefore in principle be regarded as competitors.

Unlike the AFM, the court finds that it has become sufficiently plausible that if the AFM does not enforcement action, the Dutch investment firm will be in a more competitive position.

This is because in terms of remuneration policy the Dutch firm can be considered more attractive for (current and future) staff and it can also manage its costs more flexible through more variable remuneration. In addition, the Irish investment firm states that there are only minimal differences between its bid and offer prices and those of the Dutch investment firm, resulting in the deal going to the Dutch firm with the Irish investment firm having the second best price – but not getting the deal. The AFM has not rebutted this claim.

According to the court, the AFM cannot require the Irish investment firm to submit extensive economic analyses of the impact of regulatory  enforcement on its turnover in relation to that of the other investment firm. The AFM wrongly rejected the Irish investment firm’s request and is ordered by the court to decide on the firm’s objection to rejection of the request for enforcement.

This case shows that, with the correct justification, parties in a cross-border market can submit enforcement requests in other countries.

Court of Rotterdam 19-09-2019

ECLI:NL:RBROT:2019:7821

 In Europe cartel damages litigation is picking up speed. In contrast to the US where this kind of litigation has been practiced for decades, in Europe it all started only 16 years ago with the introduction of Regulation 1/2003[1] by the European Commission followed by the so-called Manfredi judgment[2] three years later.

The Regulation was introduced to increase the effectiveness of public enforcement by national and European competition authorities. And that desire for effectiveness has proven to be a fierce weapon for plaintiff counsel.

In Manfredi, the Court of Justice of the European Union (CJEU) summarized its preceding case law and held that once an infringement of Article 81 EC[3] has been committed, any individual should be able to rely on the invalidity of an agreement or practice prohibited under that article before a national court. In the Manfredi case, Vincenzo Manfredi, an Italian national, started national private damages litigation against a number of insurers who had agreed to a concerted practice of raising their premiums, which was held to be an infringement of national competition law. The Manfredi case has since proven to be a cornerstone for the theory and practice of private damages litigation, by introducing the so-called principle of effectiveness (effet utile) into cartel damages litigation. The direct effect principle ensures the application and effectiveness of European law in EU countries.[4]

How have courts applied this principle in cartel damages cases since Manfredi? First, it is important to note the introduction of the so-called Private Damages Directive[5]. With this directive, the European Commission introduced a tool kit for plaintiffs to seek damages, including the presumption of harm once a cartel has been discovered. A decision of the European Commission has to be respected by the national courts and cannot be rebutted by parties.

The Netherlands

The Dutch Supreme Court first held in TenneT[6],  that according to EU law, anyone must be able to claim compensation for the damage caused to them by an agreement or conduct which is capable of restricting or distorting competition, and that would not preclude national courts from ensuring that the protection of rights guaranteed by the EU legal order does not result in the unjustified enrichment of the beneficiaries (referring to the so-called Courage and Crehan case)[7]. In the absence of EU law, the estimation of damages by the Dutch Supreme Court takes place in accordance with Dutch law, with due regard for the principle of equivalence and the principle of full effectiveness. The Supreme Court subsequently considered whether the Private Damages Directive was applicable in this case, which clearly it was not, since the infringement referred to the Supreme Court took place long before the transposition of the directive, and the preamble of the directive even explicitly states that the directive has no retroactive effect. Nevertheless, the Supreme Court (quite remarkably) held that, despite the non-applicability of the directive, Dutch law has to be interpreted in such a way that the outcome of a case should not be contrary to the directive.

Germany

In 2018, the German Supreme Court followed suit by giving leeway to plaintiffs with regard to limitation periods. It considered that cartel damage claims are not only based on norms, but also on the effectiveness of the sanctions on cartel damages.[8]

CJEU

More recently, the CJEU held in the so-called Skanska case[9] that companies, interpreted as an economic unit, are liable for the damage caused by the cartel. This is also the case when it  changes its identity through restructurings, sales or other legal or organizational changes.  The CJEU ruled:

“As stated in paragraph 25 of this judgment, the right to claim compensation for damage caused by an agreement or conduct prohibited by Article 101 TFEU ensures the full effectiveness of that article and, in particular, the effectiveness of the prohibition laid down in paragraph 1 thereof.”[10]

“Therefore, if the undertakings responsible for damage caused by an infringement of the EU competition rules could escape penalties by simply changing their identity through restructurings, sales or other legal or organisational changes, the objective of suppressing conduct that infringes the competition rules and preventing its reoccurrence by means of deterrent penalties would be jeopardised”[11]

Inspired by the Skanska case, the Barcelona Provincial Court just recently in October 2019 referred a preliminary question to the CJEU:

“In previous ECJ rulings the parent company was held liable for the damages on behalf of the subsidiaries since they are party of one single economic unit (Skanska-case). But the question now is if that also counts the other way around and that subsidiaries can be held liable for the damages of the parent company?”

I conclude with the so-called Cogeco case[12], in which the CJEU held that the principle of effectiveness can set aside national limitation periods. The court ruled:

“Accordingly, the rules applicable to actions for safeguarding rights which individuals derive from the direct effect of EU law must not be less favourable than those governing similar domestic actions (principle of equivalence) and must not make it in practice impossible or excessively difficult to exercise rights conferred by EU law (principle of effectiveness).”[13]

I come to my conclusion. The principle of effectiveness can pierce the corporate veil (Skanska), can set aside limitation periods (Cogeco) and even European Regulations (Tennet). The defense counsel thus has more to deal with than just the plaintiff’s counsel.

[1]  Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition          laid down in Articles 81 and 82 of the Treaty.

[2] CJEU 13 July 2006, (C—295/04), ECLI:EU:C:2006:461 (Vincenzo Manfredi/Lloyd Adriatico Assicurazioni   SpA).

[3] Now article 101 TFEU.

[4] The direct effect of European law has been enshrined by the CJEU in the judgement of Van Gend en Loos of 5 February 1963. In this judgement, the Court held that European law not only engenders obligations for EU countries, but also rights for individuals. Individuals may therefore take advantage of these rights and directly invoke European acts before national and European courts.

[5] Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union Text with EEA relevance.

[6] The Dutch Supreme Court 8 July 2016, ECLI:NL:HR:2016:1483, para. 4.3.1 (TenneT/ABB).

[7] CJEU 20 September 2001, C-453/99, ECLI:EU:C:2001:465, para. 26 and 30 (Courage and Crehan

[8] Grauzementkartel II http://juris.bundesgerichtshof.de/cgi- bin/rechtsprechung/document.py?Gericht=bgh&Art=en&sid=2f03a61be819187fd0d90d7cdcf7e808&nr=84748     &pos=0&anz=1 para. 32 (p. 12).

[9] CJEU14 March 2019, C-724/17, ECLI:EU:C:2019:204.

[10] CJEU 14 March 2019, C-724/17, ECLI:EU:C:2019:204, para. 43

[11] See, by analogy, CJEU 11 December 2007, C‑280/06, EU:C:2007:775, para. 41 (ETI and Others) and the case-law cited there.

[12] CJEU 28 March 2019, C-637/17, ECLI:EU:C:2019:263 (Cogeco).

[13] CJEU 28 March 2019, C-637/17, ECLI:EU:C:2019:263, para. 43 (Cogeco). Cf. CJEU 5 June 2014, C‑557/12, EU:C:2014:1317, para. 25 (Kone and Others).