Competition Flashback Q1 2023 – EU and Dutch competition law developments
This is the Competition Flashback Q1 2023 by bureau Brandeis, featuring a selection of the key EU and Dutch competition law developments of the past quarter (see the original version here).
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Overview Q1 2023
- ACM blocks acquisition of Talpa Network by RTL Group
- Court overturns ACM veto of Mediq/Eurocept due to insufficient investigation and reasoning
- Overview highlights merger cases European Commission
Cartels and vertical restraints
- CJEU declares Commission dawn raids in French supermarket sector unlawful due to insufficient evidence
- CJEU calls General Court to order, but considers hybrid cartel decision (Euribor) lawful
Abuse of a dominant position
- Non-notifiable mergers may constitute abuse of dominance
- Partial removal of railway by Lithuanian rail operator constitutes abuse of dominant position
- CJEU clarifies burden of proof of anti-competitive effects of exclusivity clauses and liability of conduct of distributors in Unilever
- Commission revises guidelines on Article 102 TFEU and abandons ‘more economic approach’
Follow-on competition damages claims
- Judgment in Regiojet provides wide access to evidence in cartel damages proceedings, also pending (suspended) investigation
- Estimation of damages in follow-on cartel damages cases impossible after ‘inaction’ claimant
- Discounts on airport fees for Wizz Air may constitute state aid
- Commission adopts new Temporary Crisis and Transition Framework and amends General Block Exemption Regulation to speed up green transition
Public Enterprises (Market Activities) Act
ACM blocks acquisition of Talpa Network by RTL Group
ACM, decision of 3 March 2023
The Dutch Authority for Consumers and Markets (in Dutch: Autoriteit Consument en Markt, “ACM”) decided on 3 March 2023 to definitively block the acquisition of media company Talpa Network (“Talpa”) by rival company RTL Group (“RTL”). According to the ACM, the concentration would render RTL/Talpa the largest provider of television channels, thereby gaining too much market power in both the television advertising market and the market for the distribution of television channels to parties such as KPN and VodafoneZiggo. Previously, the ACM decided on similar grounds that the concentration required a merger licence (see also CF Q1 2022). In the prohibition decision, the ACM confirms the concerns earlier identified.
In addition, the ACM examined whether the merging parties could leverage their market power in the television advertising market to the online advertising market (conglomerate effects). In the end, no such risks were identified. Finally, the ACM investigated the market for the purchase of TV-content, as RTL/Talpa could potentially gain an important buying position in some segments. Ultimately, the ACM left open whether this would be the case, as the acquisition was already blocked due to competition risks in the aforementioned markets.
RTL and Talpa tried to convince the ACM with various remedy proposals, yet without success. For instance, they offered to fully and exclusively transfer the sale of advertising space on Talpa channels to Mediahuis for a period of ten years. However, based on the market test, the ACM concluded that the proposed remedy would not allow Mediahuis to compete autonomously and independently from RTL/Talpa. In addition, the parties offered to separately and independently negotiate with TV-distributors on (the fees of) their channel packages for five years. According to the ACM, this behavioural remedy would also not eliminate the problems identified, as the proposed duration is insufficient and RTL and Talpa could still align their negotiations.
Court overturns ACM veto of Mediq/Eurocept due to insufficient investigation and reasoning
Rotterdam District Court, judgment of 24 March 2023
On 24 March 2023, the Rotterdam District Court overturned the ACM’s decision to block the merger of Mediq and Eurocept. The ACM decided to refuse the merger licence because the merging parties would obtain a very strong market position on the market for the provision of ambulatory infusion pumps for domestic use. Mediq’s appeal mainly focused on this very specific market definition.
Besides ambulatory infusion pumps, the product group includes elastomeric pumps and stationary infusion pumps. Following its market investigation, the ACM concluded that elastomeric pumps and stationary infusion pumps are not interchangeable with ambulatory infusion pumps. The court ruled that the ACM had not sufficiently investigated the variety of medication that can be administered by the ambulatory infusions pumps and the elastomeric pumps. Therefore, it could not be concluded that these products are not interchangeable. In addition, the court did not follow the ACM’s statement that stationary infusion pumps are only rarely used in domestic situations, as other market players had stated that stationary infusion pumps are, in fact, suitable for domestic use.
Since the ACM has not made it sufficiently plausible that ambulatory infusion pumps are not interchangeable with elastomeric pumps or stationary infusion pumps, the court rejects the market definition maintained by the ACM decision, and hence, the basis for refusing the merger licence. The ACM will have to conduct further investigation into the relevant product market.
Overview highlights merger cases European Commission
The European Commission (“Commission”) is currently investigating Adobe‘s acquisition of Figma. Adobe is a software company offering, among other things, product design programme Adobe XD. Figma provides product design programme Figma Design and online whiteboard programme Figjam. As the acquisition does not exceed European merger thresholds, the parties were not subjected to a obligation to notify the transaction to the Commission. However, several national competition authorities submitted a request to the Commission under Article 22 of the Merger Regulation to investigate the acquisition. The ACM has also joined this request. The competition authorities concerned foresee a risk that the acquisition will restrict competition in the market for interactive design and whiteboard programmes.
In January 2023, Viasat notified the acquisition of Inmarsat to the Commission. Both companies are providers of in-flight connectivity (“IFC”)-services to commercial airlines. In its phase I-investigation, the Commission found, inter alia, that Viasat and Inmarsat are close competitors and that few other providers are active on the market. Viasat’s acquisition of Inmarsat could therefore reduce competition between providers of IFC-services. The Commission will therefore conduct an in-depth investigation into the impact of the acquisition on the market for IFC-services in the commercial aviation sector.
On 12 December 2022, Swiss construction chemicals producer Sika notified the Commission of its intention to acquire its German rival MBCC. The Commission’s preliminary investigation found that the transaction would significantly reduce competition on the European markets for chemical and concrete admixtures, leading to higher prices and a decrease in innovation. In particular, the Commission concluded that the merged parties would acquire high market shares in the relevant markets, which are already characterised by a relatively weak level of competition and high barriers to entry. To address the Commission‘s concerns, Sika offered to divest MBCC‘s chemical admixtures business in the EEA, Australia, Canada, New Zealand, Switzerland, the UK and the US, including all global research and development facilities. British chemical giant INEOS will transform the divested business into an independently competing company. Under these conditions, the Commission approved the acquisition.
Deutsche Telekom, Orange SA, Telefónica, Vodafone
Following its phase II-investigation, the Commission has approved the creation of a joint venture by telecom companies Deutsche Telekom, Orange SA, Telefónica and Vodafone. The companies will use the joint venture to create a platform for digital marketing and advertising activities that generates and links a unique digital code to users, allowing them to better adapt their content to specific users. The Commission’s investigation found that there are sufficient alternatives for digital recognition of users and that there is no risk that the four providers will coordinate their behaviour outside the joint venture.
The Commission has launched an in-depth investigation into Korean Air’s proposed acquisition of Asiana. Asiana and Korean Air are the two largest airlines in South Korea. The Commission’s preliminary investigation found that the two airlines are close competitors. In the second phase, the Commission will examine to what extent the acquisition may affect competition in the market for both passenger and cargo air travel between the EEA and South Korea.
Belgian telecom company Orange has received clearance from the Commission to acquire VOO and Brutélé, two retail providers of fixed and mobile telecommunications services. The acquisition is subject to conditions, as the Commission’s in-depth investigation found that the acquisition would restrict competition in the retail market. In several market segments, the number of telecoms providers would fall from two to three. The acquisition would also increase the likelihood of coordination between other operators. To address these concerns, Orange has committed to giving telecom company Telenet, one of Orange’s competitors, access to its fibre-optic network and to the network infrastructures of VOO and Brutélé for a period of ten years.
CJEU declares Commission dawn raids in French supermarket sector unlawful due to insufficient evidence
Court of Justice of the European Union, judgment of 9 March 2023
The Court of Justice of the European Union (“CJEU”) has recently overturned a number of Commission decisions ordering dawn raids in the supermarket sector. In February 2017, the Commission carried out dawn raids at French supermarket Intermarché, distributor Casino and their joint purchasing group, based on suspicions that the undertakings exchanged anti-competitive information, for example relating to their commercial strategies.
The Commission based its suspicions on conversations with several suppliers of Intermarché and Casino. The Commission only recorded these conversations in internal minutes. The CJEU ruled that this is not in line with the Commission’s duty to register, which requires it to record statements and provide a copy of the statement to the interviewee. The fact that the interviews with the suppliers served only as an indication for the opening of the investigation and were not held in the context of the gathering of evidence during the investigation, does not relieve the Commission from its duty to register the interviews. Any interview held to gather information for the investigation is covered by the duty to register, according to the CJEU. However, the Commission is free to decide how it registers the interviews, for example through a voice recording or in writing.
Because the unrecorded interviews were disregarded as evidence in the assessment of the legality of the dawn raids, the CJEU finds that the Commission did not have sufficiently serious evidence to justify these visits.
CJEU calls General Court to order, but considers hybrid cartel decision (Euribor) lawful
Court of Justice of the European Union, judgment of 12 January 2023
Following the full rejection of its appeal by the General Court of the European Union (“General Court”), HSBC appealed at the CJEU against the fine imposed by the Commission for participating in the Euribor cartel.
The Euribor cartel is characterised by a hybrid procedure, in which four of the banks under investigation settled with the Commission (settlement decisions of 4 December 2013) and three banks followed the ordinary procedure. In the ordinary procedure, the Commission issued its statement of objections on 19 March 2014 and adopted decisions on 7 December 2016. The CJEU recently ruled on the appeal of one of the banks that did not settle, HSBC.
In its judgment of 12 January 2023, the CJEU ruled that the General Court had not properly assessed HSBC’s arguments relating to the presumption of innocence and the impartiality requirement. According to the CJEU, the General Court should have examined the decision in its entirety in order to establish that the Commission did not reach a premature conclusion regarding HSBC’s participation in the cartel. The CJEU, giving final judgment itself, concluded that the Commission chose its words in the settlement decision with sufficient caution. By expressly including reservations to prevent that banks that had not settled were being held liable in any way, and by referring to those banks only to the extent strictly necessary for a proper understanding of the facts, the settlement decision does not infringe the presumption of innocence.
Regarding the impartiality requirement, the CJEU noted that the Commissioner for Competition at that time had indeed made inattentive statements at the end of the settlement procedure and the statement of objections in the normal proceedings in 2014 (Almunia had stated that the case was not the most difficult and that there was a lot of evidence). However, as this was a preliminary finding and no information was disclosed that was not already revealed in the decision, the CJEU concluded that it could not be regarded as the expression of any bias.
Finally, the CJEU held that the General Court had also applied the wrong test when considering the pro-competitive effects of the conduct at issue, as argued by HSBC. The CJEU stressed that pro-competitive effects must be taken into account when assessing – under the first paragraph of Article 101 TFEU – the context in which a restraint of competition takes place, and not only in the context of ‘ancillary restraints’ or the third paragraph of Article 101 TFEU, as the General Court had held. However, the CJEU ruled that the pro-competitive effects brought forward by HSBC did not alter the characterisation of the Euribor cartel as a restriction by object. The decision thus remains fully intact.
Non-notifiable mergers may constitute abuse of dominance
Court of Justice of the European Union, judgment of 16 March 2023
In the landmark judgment in Towercast, the CJEU ruled that Article 102 TFEU can apply to concentrations that do not meet national and/or European notification thresholds and have not been referred to the Commission under Article 22 of the Merger Regulation.
The judgment followed a complaint by Towercast to the French competition authority. Towercast claimed that Télédiffusion de France (“TDF”) abused its dominant position by acquiring competitor Itas in October 2016. The acquisition was not notifiable because neither the French nor the European merger notification thresholds were exceeded. According to Towercast, the CJEU’s 1973 ruling in Continental Can established that an acquisition could constitute an abuse of a dominant position if the acquirer enjoys a dominant position and the acquisition strengthens this dominant position, thereby restricting competition. The French competition authority rejected the complaint on the grounds that, with the entry into force of the Merger Regulation in 1989, a clear dividing line was drawn between (ex ante) merger control and (ex post) control of anti-competitive behaviour (Articles 101 TFEU and 102 TFEU), rendering Article 102 TFEU inapplicable when it comes to concentrations.
Towercast appealed the rejection of the complaint to the French court. The French court subsequently referred to the CJEU the preliminary question of whether a national competition authority could declare the acquisition to constitute an abuse of a dominant position in circumstances where that acquisition fell below the national and EU merger thresholds and had not been referred to the Commission under Article 22 of the Merger Regulation. The CJEU ruled that this was indeed possible, considering the wording, context, objectives and origin of the EU Merger Regulation.
As a result of this judgment, competitors have (even) more opportunities to arm themselves against so-called ‘killer acquisitions’. In our earlier blog, we discuss the Commission’s new policy on the application of Article 22 of the Merger Regulation and the opportunities for competition authorities to assess killer acquisitions.
Partial removal of railway by Lithuanian rail operator constitutes abuse of dominant position
Court of Justice of the European Union, judgment of 12 January 2023
In 2008, Lithuanian national railway operator and carrier Lietuvos geležinkeliai AB (“LG”) dismantled nearly twenty kilometres of its railway track. The reason for this was that Polish oil refiner PKN Orlen wanted to engage with a competitor of LG to transport crude oil to and from its refineries. The Commission found that LG abused its legally obtained dominant position by dismantling the track, and fined the company over € 27 million. Upon appeal, the General Court upheld the decision, but reduced the fine to € 20 million.
Before the CJEU, LG argued that the General Court was wrong not to apply the essential facilities doctrine. This doctrine entails that an undertaking must provide access to certain infrastructure under certain conditions if such access is ‘indispensable’. The CJEU rejected this argument. Firstly, the case does not concern the refusal of access but the entire removal of the railway. This prevented not only LG’s competitor from running its services for PKN Orlen, but also LG itself. This constitutes a separate category of abuse distinct from refusal of access. Secondly, the railway track was an infrastructure funded by the Lithuanian state and not financed by the undertaking itself, as required under the essential facilities doctrine. Finally, the CJEU concluded that LG, as national railway operator, had a legal duty to provide access to the railway line. By removing it instead, LG thus abused its dominant position. The judgment of the General Court was upheld.
CJEU clarifies burden of proof of anti-competitive effects of exclusivity clauses and liability of conduct of distributors in Unilever
Court of Justice of the European Union, judgment of 19 January 2023
In a preliminary reference regarding Unilever‘s abuse of its dominant position, the CJEU ruled that the Italian competition authority (“AGCM”) must prove that the exclusivity clauses used by Unilever actually had the ability to exclude competitors. In 2017, the AGCM imposed a € 60 million fine on Unilever for the use of exclusivity clauses (through its distributors) for the purchase of pre-packaged ice creams towards sales outlets such as cafes, sports clubs and swimming pools. While Unilever provided economic evidence to substantiate that there could be no exclusionary effect, the AGCM ruled that this evidence was ‘totally irrelevant’ given the harmful nature of exclusivity clauses as previously established in the court’s case law.
In line with the recent judgment in Qualcomm, the CJEU stresses that, although a competition authority does not have to prove that the conduct had an actual anti-competitive effect (i.e. the abuse does not have to have been ‘successful’), the authority does have to examine whether the conduct could have had such an effect in the underlying market. The specific evidence submitted by Unilever in that context must therefore be taken into account by the AGCM, according to the CJEU.
The CJEU did endorse the AGCM’s decision to fine only Unilever and not the distributors. It considered that the distributors merely act as instruments for the implementation of Unilever’s commercial policy, and hence, that Unilever should be considered the only responsible party, also considering its special responsibility under Article 102 TFEU. This does not require that the distributors concerned were part of the same undertaking or in a hierarchical relationship with Unilever. The fact that the conduct was not carried out independently by the distributors, but was part of a policy unilaterally adopted by Unilever and implemented only through the distributors, is sufficient to only impose a fining decision towards Unilever, the CJEU rules.
Commission revises guidelines on Article 102 TFEU and abandons ‘more economic approach’
European Commission, communication of 27 March 2023
On 27 March 2023, the Commission amended its 2008 guidelines on enforcement priorities when applying the prohibition on the abuse of a dominant position. In the original guidelines, the Commission applied a ‘more economic approach’ to abuse cases. This approach was largely followed by the CJEU. For example, in the Intel judgment (which focused on the use of the as-efficient competitor test (“AEC-test”) in the context of fidelity rebates), the CJEU confirmed the crucial role of sound economic analysis in abuse cases. The amended guidelines show that the Commission wants to return to a less economic approach.
The three main changes to the guidelines are as follows:
- As to the concept of anti-competitive foreclosure, the original guidelines referred only to the dominant undertaking’s ability to profitably increase prices as a result of its abusive conduct. In the amended guidelines, the Commission clarifies that it is not appropriate to look at the ability to profitably raise prices. The concept of anti-competitive foreclosure is described as a situation where the dominant undertaking’s conduct has a negative impact on the effective competitive structure.
- In the original guidelines, the Commission seemed to suggest that, in the case of an exclusionary pricing abuse (such as loyalty discounts, predatory pricing and margin squeeze), it always applies the AEC-test. Using the AEC-test, the Commission analyses whether an equally efficient competitor can match the price charged by the dominant firm without loss. In the amended guidelines, the Commission clarifies that the use of the AEC-test is optional and not necessary to prove abuse. The Commission also clarifies that in some cases the competition of less efficient competitors can also be taken into account to determine whether price-based exclusionary behaviour by a dominant firm leads to foreclosure.
- In the original guidelines, refusals to supply, margin squeeze and other ‘constructive refusals to supply’ were assessed using the same criteria. The Commission clarifies that these are independent forms of abuse with their own assessment criteria.
Judgment in Regiojet provides wide access to evidence in cartel damages proceedings, also pending (suspended) investigation
Court of Justice of the European Union, judgment of 12 January 2023
Following the recent judgment in Paccar, the CJEU held that a national civil court can order access to relevant evidence even pending a Commission investigation. The fact that the investigation previously opened by the national competition authority, as well as the national civil action for damages have been suspended pending the Commission’s investigation, does not alter this conclusion.
In the context of an investigation by the Czech Competition Authority (“UOHS”) into an alleged abuse of dominance by the local national railway company, RegioJet brought an action for damages before the national civil court in 2015. After the Commission launched an investigation into the same behaviour in 2016, the UOHS suspended its investigation that same year. RegioJet then requested the civil court to order the national railway company to provide access to several types of evidence, including some documents that were specifically prepared for the UOHS in the context of the (as yet) suspended investigation. The national court decided to largely grant this request and suspended the proceedings on the merits regarding the damages claim pending the Commission’s investigation. Both parties appealed against the court’s decision to disclose (part of the) evidence, and a preliminary reference followed.
The CJEU clarifies that, as an (ongoing) investigation by a national competition authority and/or the Commission does not preclude parallel national damages proceedings, this does not automatically prevent a national court from granting access to evidence. National courts should assess on a case-by-case basis whether disclosure of evidence may impede the investigation at this stage. In any event, the court must limit access to what is strictly relevant, proportionate and necessary. The CJEU emphasises that this cannot include documents that were specifically prepared in the context of a (national) investigation procedure or provided to the undertaking by the authority. Such grey-listed documents under Article 6 of the Cartel Damages Directive can only be provided after the official conclusion of an investigation. The CJEU finds that the suspension by UOHS of the national investigation pending before the Commission does not conclude the investigation in that sense.
To limit the information asymmetry between the alleged infringer and the claimant, this grey list should nevertheless be interpreted restrictively. Documents that have been provided to the authority in the context of the proceedings, but that also exist and need to be produced independently of these proceedings, do not fall under this exception and may therefore be eligible for access already pending the investigation. To assess whether a document is grey listed, the court may order that evidence to be placed under sequestration and review it, the CJEU ruled.
Estimation of damages in follow-on cartel damages cases impossible after ‘inaction’ claimant
Court of Justice of the European Union, judgment of 16 February 2023
Article 17(2) of the Cartel Damages Directive allows a national court to estimate the damages resulting from a cartel when it is practically impossible or excessively difficult to accurately determine the damages suffered based on the available evidence. In a recent answer to preliminary questions from the Spanish court – in a case concerning an application for damages as a result of the truck cartel – the CJEU ruled that a national court may not carry out such an abstract estimation of damages where the impossibility of concretely determining the amount of damages is the result of inaction on the part of the claimant.
While the CJEU recognises that uncertainties about the scope of damages are inherent in follow-on cartel damages cases, the mere existence of such uncertainty is insufficient to estimate damages in abstracto. The CJEU clarifies that the information asymmetry between the cartelist and the claimant does not play a role here. In that regard, the Cartel Damages Directive already provides for specific instruments aiming to eliminate this asymmetry, including in particular the possibility of requesting access to evidence under Article 5 of the Cartel Damages Directive. Before proceeding to an abstract assessment of damages, it is up to the national court to consider whether the requesting party has made sufficient use of this key provision.
Discounts on airport fees for Wizz Air may constitute state aid
General Court of the European Union, judgment of 8 February 2023
In September 2010, Romanian regional airline Carpatair filed a complaint with the Commission regarding alleged state aid granted to Hungarian Wizz Air by AITTV, the operator of Timișoara International Airport. 80% of AITTV is owned by the Romanian state. In particular, the complaint concerned certain discounts on airport fees granted by AITTV, for which only Wizz Air was eligible. After a lengthy investigation, the Commission subsequently decided on 24 February 2020 that it did not constitute state aid. The discounts were not selective as any undertaking could receive them as long as certain conditions were met. In addition, the agreement with Wizz Air on airport charges was very lucrative for AITTV: a private party would also have entered into this agreement, according to the Commission.
The appeal by Carpatair was upheld by the General Court. With regard to the discounts, the General Court held that the Commission could not conclude that they were not selective simply because all airlines could qualify. The General Court confirmed that Wizz Air was the only company that was actually eligible. The Commission should thus have assessed whether there was de facto selectivity by examining the effects of the discount system.
The General Court further concluded that it is the responsibility of the Member State, or in this case AITTV, to provide – prior to entering into the agreement with Wizz Air – an economic justification of its profitability, similar as a private company would do. Although such a justification had been carried out in advance, it was not submitted during the Commission’s investigation and therefore was not used by the Commission in its decision-making. The General Court therefore annuls the Commission’s decision.
Commission adopts new Temporary Crisis and Transition Framework and amends General Block Exemption Regulation to speed up green transition
European Commission press releases, 1 February and 9 March 2023
On 1 February 2023, the Commission presented the Green Deal Industrial Plan, which follows the European Green Deal published at the end of 2019. The aim of this plan is to accelerate the transition to a climate-neutral industry. The Green Deal Industrial Plan should provide a simplified regulatory framework and facilitate quick access to funding for green initiatives. Earlier this year, the Commission had already requested comments from market players on its draft guidelines for sustainability in the agricultural sector.
The need for the Green Deal Industrial Plan is largely due to the high energy prices caused by the Russian war in Ukraine. In line with this, the Commission adopted a new Temporary Crisis and Transition Framework after consulting the Member States. At the same time, the Commission amended its General Block Exemption Regulation. Both initiatives aim to encourage and facilitate investments for a faster development of renewable energy and to support the ‘decarbonisation’ of the industry. Member States can now more easily support greener initiatives. This way, the Commission hopes to further accelerate the green transition in the EU. The rules in the Temporary Framework Guidance related to the green transition are valid until 31 December 2025. The rules related to the immediate crisis situation surrounding the Russian war in Ukraine apply until 31 December 2023.
Free provision of source code by municipality not in violation of Dutch Act on Government and Free Markets
ACM, decision of 21 November 2022 (publication date 3 January 2023)
On 21 November 2022, the ACM issued a decision on objection following its earlier rejection of a complaint by Bloqzone. In the complaint, Bloqzone alleged that the municipalities of Nijmegen, Arnhem and the Drechtsteden violated the Dutch Act on Government and Free Markets (in Dutch: Wet Markt & Overheid, “Wet M&O”) by offering an open source code of their software. This means that a source code is made available online for free and can be viewed and used by anyone. Bloqzone develops a competitive software.
In its decision on objection, the ACM decided not to give priority to Bloqzone’s complaint. According to the ACM, open-source sharing of codes generally has many public benefits, such as increasing innovation power and promoting code quality. Enforcement would thus not be in the public interest. Also, according to the ACM, enforcement would not be opportune due to a currently pending legislative proposal that will exempt the provision of open-source code from the Wet M&O. Finally, the ACM sees no evidence of harmful effects on consumer welfare.
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Bas Braeken – Jade Versteeg – Lara Elzas – Timo Hieselaar – Demi van den Berg