On 4 October 2022, the European Council adopted the final version of the Digital Services Act (“DSA”).Together with the so-called Digital Markets Act (“DMA“, see here), the DSA forms the basis of new European legislation for the digital economy.

The DSA contains EU-wide rules for online intermediaries, including online platforms and search engines. The DSA intends to update the more than 20-year-old E-Commerce Directive. Indeed, since 2000, digital technologies, business models and services have changed significantly.

The DSA contains important new rules for virtually all online services. However, some platforms and search engines operators are regulated more heavily. The aim of the DSA is, among others, to ensure that illegal online content is addressed quickly and that the fundamental rights of internet users are protected. The DSA aims to combat current digital challenges, such as illegal products, hate speech, disinformation and fake news.

For that purpose, the DSA contains rules, inter alia, on:

• The liability of intermediary services;
• Notice and action mechanisms;
• Content moderation practices;
• Online advertising, profiling and targeting;
• The use of algorithms and recommender systems;
• The traceability of traders; and
• Systemic risks of very large online platforms and very large online search engines.

The DSA also introduces a new oversight mechanism.

Enough reason, therefore, to take a closer look at this important new regulation, which comprises over 300 pages. What will change with the DSA – and what won’t? What obligations apply to which services? A Q&A on the DSA.

 1)            What services are covered by the DSA?

The DSA contains new rules on the responsibilities and liability of “intermediary services“, or internet intermediaries. The DSA distinguishes between the following four different types of services:

• Intermediary services, which can either be (i) mere conduit (transmission) services, (ii) caching (temporary storage) services or (iii) hosting services. According to the recitals of the DSA, these services may, inter alia, include online search engines, local wireless networks, DNS services, domain name registers, virtual private networks, cloud services, proxies and webhosting services;
• Hosting services: services that consist of the storage of information provided by end users;
• Online platforms: hosting services that, at the request of the user, not only store, but also disseminate information to the public. The latter means that the information, at the request of the user, is made available to a potentially unlimited number of third parties. Online platforms include, inter alia, online market places, social media services, and app stores.
• Very large online platforms and search engines: online platforms and search engines with more than 45 million monthly active users in the EU. In other words: the Facebooks and Googles of this world.

The obligations with which these services must comply increase gradually. The very large online platforms are therefore subject to the heaviest due diligence obligations.

 2)           What happens to the liability safeguards contained in the E-Commerce Directive?

The liability framework in the E-Commerce Directive remain largely intact. This framework stipulates when an intermediary service cannot be held liable in relation to illegal content provided by the recipients of the service.

The existing liability exemptions for “mere conduit”, “caching” and “hosting” services are incorporated in full in articles 4-6 of the DSA. The prohibition on general monitoring (article 8) also remains in place.

This also means that the existing case law of the Court of Justice of the European Union (“CJEU”) concerning the liability exemptions and the measures that can be imposed on intermediaries, remains guiding. The cases L’Oréal/eBay, Scarlet/SABAM, UPC/Telekabel, McFadden, Eva Glawischnig and YouTube & Cyando thus remain relevant in practice.

At the same time, the DSA clarifies certain elements of the existing framework. One of these clarifications is the introduction of a so-called “Good Samaritan” clause. The fact that a service carries out voluntary own-initiative investigations or takes others measures to combat illegal content, does not lead to that service being ineligible for the exemptions from liability (article 7).

The DSA also makes it explicit that providers of intermediary services must comply with orders issued by judicial or administrative authorities to act against one or more specific items of illegal content (article 9) and to provide information about one or more specific individual recipients of the service (article 10). The service provider must inform the authority issuing the order of the effect given thereto, after which the authority shall transmit the order to the Digital Services Coordinator (see Question 8) from the Member State of the issuing authority. The order will then be shared with all other Digital Services Coordinators.

It is not entirely clear from the DSA whether these orders– stemming from inter alia law enforcement authorities (recital 32)– differ from the orders that can be issued to terminate or prevent an infringement pursuant to the relevant liability clauses, although it looks like they do. Indeed, the DSA stipulates that these orders “shall be without prejudice to national civil and criminal procedural law”.

 3)           What obligations will apply to all intermediary services?

The DSA contains a number of “due diligence” obligations that digital services must comply with. These requirements are proportionate to the size and risks of the service: the greater the service, the greater the responsibilities.

The DSA contains a number of obligations that all intermediary services must comply with, including the obligation to:

• designate points of contact, both for supervisors and end users (article 11-12). Services established outside the EU must appoint legal representatives (article 13);
• include information on content moderation, algorithmic decision-making and complaint handling systems in their terms and conditions (article 14);
• publish public transparency reports with information on content moderation measures taken and the number of orders received from authorities (article 15). Additional reporting obligations apply to hosting providers and (very large) online platforms.

4)           What is “Notice and Action”? And how does it differ from Notice and Takedown?

The E-Commerce Directive dictates that hosting providers must have a so-called Notice and Takedown (NTD) system in place: upon receipt of a notice, there are obligated to remove (takedown) illegal information.

The DSA prescribes “notice and action mechanisms”, meaning that hosting providers should “act” when the receive a notice. Other than under the E-Commerce Directive, the DSA spells out what information a notice must contain. This includes a sufficiently substantiated explanation of reasons, the exact electronic location of the illegal information, and a statement confirming that the notice is made in good faith (Article 16). This system very much resembles the current DMCA-system in the U.S.

From article 17 of the DSA, it can inferred what the required “action” may entail, namely:

• a restriction on the visibility of specific information, including the removal, disabling access or demotion of content;
• a suspension, termination or restriction of payments;
• a suspension or termination of the service; or
• a suspension or termination of the account of the (alleged) infringer.

The hosting provider is obliged to notify both the user requesting the measures and the affected users of the decision it takes and the reasons therefore (article 17).

What is noteworthy is that the DSA does not contain a specific staydown obligation. In other words, it does not specifically require a hosting provider to prevent the same illegal content from reappearing again, although this may be inferred from the case law of the CJEU.

On the whole, Notice and Action resembles Notice and Takedown, be it that the procedure is made much more administrative under the DSA.

5)           What additional obligations apply to online platforms?

In addition to Notice and Action mechanisms, online platforms must:

• have in place an effective internal complaint-handling system through which users can lodge complaints following a decision taken with regard to illegal content (article 20);
• give priority to notices submitted by so-called “trusted flaggers” (article 22): entities with particular expertise and competence for the purposes of detecting, identifying and notifying illegal content. The status of trusted flaggers can be awarded by the Digital Services Coordinator (see Question 8);
• take measures against repeat infringers (article 23), meaning users that frequently provide manifestly illegal content or frequently submit notices that are manifestly unfounded;
• refrain from using so-called “dark patterns”: user interfaces that have been crafted to (subtly) trick or manipulate users into doing certain things (article 25);
• provide transparency regarding online advertising (article 26, also see Question 6 below);
• ensure that recipients of their service are informed about how recommender systems impact the way information is displayed, and how users can influence how information is presented to them. Platforms should clearly present the parameters used for such recommender systems, including the most important criteria in determining the information suggested to the recipient of the service and the reasons for their respective importance, including where information is prioritised based on profiling and users’ online behaviour (article 27). Very large platforms must offer an option for recommendations that is not based on profiling (article 38);
• Vet the credentials of business users (article 29), in case the platform allows consumers to conclude distance contracts with traders (KYBC – “know your business customer”). Online platforms must further organize their online interfaces in a way that allows traders to comply with their information obligations towards consumers.

 6)           How does the DSA regulate online advertising?

Online advertising plays an important role in the online environment. The provision of online services is often wholly or in part remunerated though advertising revenues. Indeed, ads are Meta’s and Google’s main source of income.

Online advertising also poses significant risks, ranging from ads that are themselves illegal to the discriminatory presentation of ads with an impact on society (recital 68). For that reason, the DSA contains very important new provisions relating to online advertising, aiming to give online users more control and understanding over the ads they see online. For this purpose the DSA stipulates that:

• Commercial communication must be clearly identifiable as such (though clear markers) and users will have to be clearly informed, for each specific ad, on whose behalf the advertisement is presented and who paid for the ad (article 26). Moreover, providers of online platforms that present advertisements must also provide “meaningful information” about the main parameters used to determine the recipient(s) to whom the ad is shown and. This includes information on the logic used and information about profiling techniques. This means that services should elaborate on the nature of their advertising activities: is it contextual, what profiling criteria are used? Services should also inform their users about any means available for them to change such criteria.
• Targeted advertising based on profiling using special categories of personal data, such as sexual orientation or religious or political beliefs, is prohibited (article 26 paragraph 3). This provision thus significant limits services in using targeting techniques to optimize ads to match a user’s interests and potentially appeal to their vulnerabilities.
• Providers of online platforms should not present advertisements based on profiling using personal data of the recipient of the service when they are aware with reasonable certainty that the recipient of the service is a minor (article 28).

For very large online platforms, the DSA prescribes additional measures to mitigate risks and enable oversight. These services will have to maintain and provide access to ad repositories, allowing researchers, civilians and authorities to inspect how ads were displayed and how they were targeted. Very large online platforms and search engines also need to assess whether and how their advertising systems are manipulated or otherwise contribute to societal risks, and take measures to mitigate these risks (see Question 7).

 7)           Which obligations apply to very large online platforms- and search engines?

Due to the particular risks tech giants such as Facebook, TikTok and Google pose in the dissemination of illegal content and societal harms, these parties are subject to the most stringent due diligence obligations.

• They must conduct risk assessments to identify systemic risks stemming from the design and use of their services (article 34). Systemic risks include issues such as disinformation, illegal content, election manipulation, manipulation during pandemics and harms to vulnerable groups. In conducting the risk assessment, account must be had to all aspects of the service, including content moderation, advertisement and algorithmic systems.
• They must prevent abuse of their systems by taking risk-based action, including oversight through independent audits (article 35, 37). These measures must be carefully balanced against restrictions of freedom of expression;
• They must comply with a new crisis response mechanism, forcing them to act upon instruction of the Commission in cases of serious threat for public health and security crises, such as a pandemic or a war (article 36);
• When Big Tech platforms recommend content, users must be able to modify the criteria used and be given the option to choose not to receive personalized recommendations (article 38).
• They must comply with additional online advertising transparency obligations (see Question 6 above), including by offering a publicly available and searchable online register (article 39). This register must in any case include the following information per advertisement: (i) the content of the advertisement, (ii) the advertiser on whose behalf the ad was presented, (iii) the (legal) person who paid for the ad, (iv) the period during which the ad was presented, (v) whether the ad was specifically intended for a particular group of recipients and, if so, the parameters used to define that group and (vi) the number of recipients of the advertisements, broken down by Member State.

 8)           How will the DSA be supervised and enforced?

The DSA foresees in a unique oversight structure. Each Member State will need to appoint a Digital Services Coordinator, an independent authority which will be responsible for supervising the intermediary services established in their territory.

The European Commission will be the primary regulator for very large online platforms and search engines. In the most serious cases, it can impose fines of up to 6% of the global turnover of a service provider.

An EU-wide cooperation mechanism will be established between national regulators and the Commission.

The Digital Services Coordinators will cooperate within an independent advisory group, called the European Board for Digital Services, which shall provide advise to the Digital Services Coordinators and the Commission on matters covered by the Regulation.

 9)           When does the DSA apply?

All online intermediaries offering their services in the EU must comply with the new rules. This is regardless of whether they are established in the EU or not. A provider offers services in the EU if a “substantial connection” to the Union exists. This is the case when a service provider has an establishment in the Union or, in the absence thereof, when the number of recipients of the service in one or more Member States is significant in relation to the population thereof. A substantial connection can also exist on the basis of the targeting of activities towards one or more Member States. This may be derived, for example, from the availability of an application in the national application store, from the provision of local advertising or advertising in a language used in that Member State, or from providing customer service in a language generally used in that Member State.

The mere fact that a website is accessible from the EU, on the other hand, cannot in itself be considered as establishing a substantial connection to the Union.

 10)         When will the DSA enter into force?

Today, the Council formally adopted the DSA, which will now be published in the Official Journal of the EU. The DSA will be directly applicable across the EU after entry into force.

Very large online platforms and search engines will have to comply with the new rules within four months after their designated as such by the Commission.

All the other digital services will be obliged to comply with the DSA by 1 January 2024, or fifteen months and 20 days after the date on which the DSA is published in the Official Journal of the EU, whichever is later.

For the first time in a while, the financial supervision chamber of the Rotterdam District Court has dealt with a market abuse case. The Authority for the Financial Markets (AFM) had imposed an administrative fine of EUR 2 million on SBM Offshore N.V. (SBM) for failing to timely disclose inside information. SBM appealed the fining decision and has now partly been proven right.

On appeal the court found that with respect to two of the four alleged violations the financial regulator applied an incorrect legal criterion in assessing whether the listed company had price sensitive information. The court has settled the matter itself by reducing the fine to EUR 1 million.

The matter dates back to SBM’s internal investigation into allegations of bribery and unlawful payments to international trade agents in 2012, in which context the company i.a. consented to an out-of-court settlement of USD 240 million with the Public Prosecutor’s Office.

Criteria for assessing if information is concrete are not to be mixed

Similar to previous market abuse matters (for example, in relation to Royal Imtech N.V.), the main question before the Rotterdam court was whether the information regarding possible unlawful trade practices in Brazil that SBM had on March 27, 2012 and May 27, 2014 was so “concrete” that it fell within the definition of inside information.

Pursuant to market abuse laws and regulations, issuers of financial instruments like SBM are to disclose inside information as soon as possible, insofar as it relates directly to the issuer concerned.

With reference to the Geltl/Daimler case of the European Court of Justice and CESR guidance on the Market Abuse Directive, the Rotterdam court distinguishes two criteria. To determine whether there is concrete information one can either depart from an existing situation that has occurred or from a future situation that may reasonably be expected to come into existence.

In assessing whether there is concrete information within the meaning of inside information, the AFM chose not to base its assessment on an existing situation or a situation that has taken place (for which, according to the guidance, there must be sufficient “hard” and objective evidence of that situation), but on a future situation or an event that may reasonably be assumed to occur.

The AFM takes the position that on March 27, 2012, and again on May 27, 2014, SBM had a reasonable expectation that bribery in Brazil would be identified in the future. In order to (have to) have that expectation, evidence is not required; a significant probability that this situation will occur is sufficient according to the AFM.

Evidence for the event to which the information relates is required

The Rotterdam court agrees with SBM and finds that the AFM used an incorrect legal criterion. In the opinion of the District Court, the facts and circumstances which the AFM used as a basis for two of the four alleged violations relate to an existing situation, namely the information known to SBM on March 27, 2012 and May 27, 2014 about possible bribery in Brazil.

According to the court, the AFM should have therefore proceeded on the basis of the existing situation – requiring firm and objective evidence – and not on the basis of a future situation in the form of the possibility that bribery (from the past) would be established in the future. In other words, if one criterion is used, the test of that criterion is to be used and vice versa. The two criteria and relevant tests are thus not be mixed, which also from a logical point of view seems to make sense.

The court repeals the AFM decision relating to the alleged violations on disclosure of unlawful trade pactices in Brazil and considers a total fine of EUR 1 million for the two remaining violations with regard to disclosure of SBM’s exclusion from a Petrobras tender appropriate and necessary.

Interestingly enough, the AFM could have imposed a fine of EUR 2 million on SBM for each violation separately. As it did not do so in this case but imposed one overall fine in the amount of the basic amount of EUR 2 million for four violations, this argument does not lead to a different conclusion on the adjustment of the fine, says the court.

District Court of Rotterdam, 21 June 2022, ECLI:NL:RBROT:2022:4948

This is the Competition Flashback Q1 2022 by bureau Brandeis, featuring a selection of the key competition law developments of the past quarter.

Would you like to receive the Competition Flashback news letter of bureau Brandeis by email in the future? That is possible! You will find the registration form here.

Overview Q1 2022

• Enforcement of consumer rights by ACM: principle of legal certainty as a safety net
• Court of Appeal nullifies non-compete clause in cooperation agreement between radiologists due to breach of cartel prohibition
• ACM’s focus areas: digital economy, energy transition & sustainability, housing market
• Further investigation into merger RTL/Talpa by ACM
• The Data Act: European legislative proposal for far-reaching data sharing
• EU General Court annuls billion euro fine for Intel for alleged abuse of dominance
• Court of Justice clarifies the application of ne bis in idem principle in competition law
• Roadshows by the Ministry of Economic Affairs for public company DVI violate the Dutch Act on Government and Free Markets
• Acquisition of Kustomer by Meta approved by European Commission and Bka
• Supermarket chains Coop and Plus may merge under condition of selling several supermarkets
• No compensation for UPS after the European Commission wrongly vetoed the UPS/TNT merger
• European Commission must also pay default interest after (partial) nullity of a fine

Enforcement of consumer rights by ACM: the principle of legal certainty as a safety net

Rotterdam District Court, judgment of 20 January 2022 | ACM, press release of 20 January 2022

Consumer rights in the energy sector have been on the radar of the Authority for Consumers and Markets (“ACM”) for some time now. An interesting development in this context is the judgment of the District Court of Rotterdam of 20 January 2022, concerning a fine imposed by the ACM for the application of unreasonably high cancellation fees to freelancers. According to the ACM, this group should have been regarded as consumers and not as (small) business customers. The court ruled, with due observance of the lex certa principle, that the legislation offers no starting points for the distinction made by the ACM in its guidelines between consumers and (small) business customers. The fine of EUR 1,25 million imposed by the ACM was therefore annulled. The ACM has announced that it will appeal the ruling.

This judgment provides insight into the relationship between policy rules of the ACM and higher legislation. Although the ACM frequently uses guidelines, directives and other soft law in its supervision, the principle of foreseeability requires that ACM’s policy must always be regarded in the light of the intention of the legislator, according to the court.

In this context, reference can also be made to the in-depth investigation into misleading sustainability claims made by two energy suppliers, as published by the ACM on 25 January 2022. Following the publication of the Guidelines on Sustainability Claims, the ACM started a broad investigation in the energy sector in May 2021. The investigation showed that energy suppliers do not sufficiently explain what is the basis of their claims about green energy and sustainability, and fail, for instance, to indicate what percentage of the gas actually consists of green gas or whether it is CO2-compensated gas. The (increasing) supervision of the ACM in the energy sector is thus (again) based on its own policy rules. In the event of judicial review, it might be relevant to assess whether and to what extent the ACM’s guidelines are in accordance with the law.

Court of Appeal nullifies non-compete clause in cooperation agreement between radiologists due to breach of cartel prohibition

Court of Appeal ‘s-Hertogenbosch, judgment of 8 February 2022

On 8 February 2022, the Court of Appeal of ‘s-Hertogenbosch (the “CoA”) handed down a judgment annulling a non-compete clause on the basis of Article 6 of the Dutch Competition Act (“DCA”). The appellant before the CoA is a radiologist working at a hospital operated by Zuyderland. Since 1 January 2015, the appellant transferred his radiology practice to MSB: a cooperation of medical specialists affiliated to Zuyderland. MSB concluded a members’ agreement (the “Agreement”) with the professional company of the appellant, which contains a non-compete clause prohibiting the appellant to perform work (in)directly for healthcare providers competing with MSB without MSB’s permission. In addition, the non-compete clause was to apply for another two years after expiry of the agreement, within a radius of 30 kilometres.

The judgment shows that the radiologist had repeatedly breached the non-compete clause during the term of the agreement. MSB therefore decided to terminate the agreement on 11 April 2018. On appeal, the radiologist argued that the non-compete clause in the agreement was null and void pursuant to Article 6 DCA. Therefore, it could not serve as a ground for termination.

The CoA ruled, first of all, that the non-compete clause is a restriction by object within the meaning of Article 6 DCA. The CoA added that, even if the non-compete clause does not qualify as a restriction by object, it is still a prohibited restriction. It referred to case law of the Court of Justice of the European Union (“CJEU”), from which it follows that a non-compete clause for members of a cooperation is generally subject to the cartel prohibition. According to this case law, a non-compete clause may not go beyond what is necessary to ensure the proper functioning of the cooperation. The CoA considered that the non-compete clause at issue did not meet this criterion of necessity, as the proper working of MSB can also be achieved by means of a less far-reaching exclusivity obligation. The CoA therefore upheld the appeal and ruled that the non-compete clause is null and void on the basis of Article 6 DCA. As the other grounds for termination did not justify immediate termination either, the CoA held that MSB did not have a (legitimate) ground for termination.

ACM’s focus areas: digital economy, energy transition & sustainability, housing market

ACM, focus areas 2022-2023, publication of 24 January 2022

The ACM has put three ACM-wide topics on the agenda for the next two years:

• Digital economy: this subject was already on the 2020-2021 agenda and remains topical according to the ACM. The ACM announces, inter alia, that it will take action against online service providers for the use of unfair terms and conditions, decide on access to fixed networks for telecom providers without their own network, and publish guidelines on competition rules for IT-providers in the healthcare sector.
• Energy transition and sustainability: the topic of energy transition was also on the 2020-2021 agenda, but has been expanded to include sustainability. The ACM has announced that it will for example continue to enforce misleading sustainability claims in the energy sector.
• Housing market: The housing market is a new topic on the ACM’s agenda. The ACM will intensify the supervision on rental agencies and realtors and conduct a market study into market power on the municipal-land market.

The coming years, these three topics will receive extra attention from the ACM. This means that we can expect more investigations regarding these topics, and that the ACM will assess tips and complaints in these fields with particular interest.

Further investigation into merger RTL/Talpa by ACM

ACM, decision of 28 January 2022

On 28 January, the ACM decided that a licence is required for the acquisition of Talpa Network by RTL Group. In its Phase I-decision, the ACM specifically foresees the possible creation or strengthening of a dominant position on the markets for (i) the sale of television advertising space, (ii) the production and procurement of audio-visual content, and (iii) the wholesale supply of television channels to distributors such as KPN and VodafoneZiggo.

Due to their strong positions on the market for the provision of television advertising space, RTL and Talpa might increase their prices for advertisers. The ACM even mentions the possibility to leverage their positions on the television advertising market to the radio advertising market (on which Talpa is active with its radio station Q-Music). With regard to the market for wholesale supply of television channels, the ACM also expects that the parties (with a combined market share of 70-80%) could raise prices for distributors and worsen the conditions of, for instance, on-demand services (such as recording television programmes/interactive television). Moreover, the bundling of the parties’ TV activities could place external content producers in a worse bargaining position, and have the result that RTL and Talpa will no longer, or under worse conditions, externally supply the programmes they produce themselves to other broadcasters. According to the ACM, this may come at the expense of the diversity of the television offer. The extensive investigation in the licensing phase will therefore focus on these three – according to the ACM, strongly interrelated – markets.

At first sight, the ACM does not foresee any competition issues in the markets for the procurement of journalistic services, the procurement of facility services and for the provision of retail television services. The ACM for example considers an increase of video on demand services such as Netflix and Disney+, which (may) exert competitive pressure on the retail television services of the parties (RTL XL, Videoland and Kijk), and potentially even on linear television services (live television).

The Data Act: European legislative proposal for far-reaching data sharing

European Commission, legislative proposal of 23 February 2022

On 23 February 2022, the European Commission (“Commission”) presented a new legislative proposal that aims to create a harmonised framework for data sharing by public authorities and companies (such as providers of data-generating products including connected devices and data-sharing services such as cloud/edge computing). The aim of the regulation is to create a level playing field between data holders and re-users of data, and to enable data portability in the event that a user switches to another provider. This way, the Commission seeks to promote data-driven innovation, in line with the Commission’s data strategy to form a single market for data.

The Data Act is a so-called ‘horizontal’ regulation which outlines a general EU-wide framework. The Commission is also considering to adopt more detailed (vertical) regulation in certain specific sectors, such as healthcare and transport.

The legislative proposal was publicly consulted last year and will be discussed by the European legislative bodies in the coming period. Given its far-reaching consequences, the Data Act is expected to lead to much political discussion. Criticism has already been voiced by, for example, Big Tech companies that also qualify as gatekeepers under the Digital Markets Act. Under the current proposal, gatekeepers are excluded from receiving data when a customer switches to one of their products.

EU General Court annuls billion euro fine for Intel for alleged abuse of dominance

General Court of the EU, judgment of 26 January 2022

On 26 January 2022, the General Court of the European Union (the “General Court”) partially annulled the Commission’s decision in which it held that chip manufacturer Intel had abused its dominant position. As a consequence, the fine of EUR 1,06 billion imposed on Intel was also annulled. The judgment marks a departure from the per se approach whereby certain conduct is considered inherently anti-competitive. If a dominant company provides (economic) evidence in the administrative procedure that its conduct is not capable of restricting competition, the Commission has to investigate the anti-competitive effects of the conduct.

Background

In 2009, the European Commission fined Intel for abusing its dominant position in the microprocessor market from 2002 to 2007. The Commission found that Intel holds a dominant position in the x86 processor market, with a market share of around 70%. Intel abused this position by (i) offering rebates to four computer manufacturers (Dell, HP, Lenovo and NEC) on the condition that they purchase all or almost all x86 CPUs from Intel, and (ii) making payments to manufacturers that would delay, cancel or restrict the launch or commercialisation of laptops with CPUs of Intel’s rival AMD.

According to the Commission, these so-called loyalty rebates restrict competition by their very nature, so that it is not necessary to analyse the anti-competitive effects. In other words, loyalty rebates are thus considered prohibited per se. The Commission still applied the ‘as-efficient competitor‘ test (“AEC test”) to show that the loyalty rebates made it impossible for equally efficient competitors to compete profitably. Intel appealed against this decision in 2014. Following a rejection of the appeal by the General Court, Intel appealed to the CJEU in 2017. The CJEU subsequently set aside the General Court’s judgment, as the General Court had not examined the Commission’s analysis of the AEC test and Intel’s arguments in relation to that test. The case was referred back to the General Court.

The judgment of the General Court

In the recent judgment, the General Court found that the Commission’s economic analysis was flawed and did not sufficiently demonstrate that Intel’s conduct was capable of producing actual and/or potential anti-competitive effects. Loyalty rebates may be presumed, by their very nature, to potentially have restrictive effects on competition, yet the General Court underlines that this is a rebuttable presumption. According to the General Court, loyalty rebates are therefore not per se illegal. Since Intel brought forward supporting evidence showing that its conduct was not capable of restricting competition and producing foreclosure effects, the Commission should have examined the specific effects of the loyalty rebates. The General Court found that the Commission did not sufficiently demonstrate that the loyalty rebates were capable of having foreclosure effects throughout the relevant period.

As a result, the Commission must repay the fine of EUR 1,06 billion plus an interest of 3,5% (see below). The Commission has announced that it will appeal this judgment.

Court of Justice clarifies the application of ne bis in idem principle in competition law

Court of Justice of the EU, judgments of 22 March 2022 (Nordzucker and Others v. bpost)

On 22 March 2022, the CJEU delivered two interesting judgments concerning the application of the ne bis in idem principle in competition law. In Nordzucker and Others, the CJEU clarified the applicability of the principle where multiple national competition authorities (“NCAs”) investigate a cross-border cartel infringement. After the German Bundeskartellamt (“Bka”) issued cartel fines to German sugar producers for market sharing with effects in both Germany and Austria (partly on the basis of Article 101 TFEU), the Austrian court rejected a subsequent request from the Austrian competition authority to establish a cartel infringement regarding the same undertakings and on the basis of the same facts.

The CJEU ruled that the national court must examine whether the previous decision of the NCA had the purpose of establishing a cartel on the basis of effects on both the German and the Austrian market. If such is the case, the duplication of proceedings cannot be justified under Article 52(1) of the EU Charter of Fundamental Rights. In order to justify duplication, the subsequent decision must in fact pursue a complementary objective relating to different aspects of the same unlawful conduct. As both the German and the Austrian authorities could (and should) apply Article 101 TFEU, they both pursue the same objective of general interest. The fact that one of the cartel members in the German proceedings participated in a leniency programme does not, according to the CJEU, affect the applicability of the principle.

In case of duplication of infringement decisions based on different types of legislation, pursuing legitimate and distinct objectives, a breach of the ne bis in idem principle could potentially be justified. In bpost, the CJEU ruled that a previous fining decision by the Belgian postal regulator for maintaining a discriminatory tariff system did not, in principle, preclude a subsequent infringement decision by the Belgian Competition Authority (“BMa”) on the basis of Article 102 TFEU, despite the fact that it concerned the same conduct. The CJEU considered that the postal sectoral rules are intended to ensure the liberalisation of the postal sector, whilst the proceedings conducted by the BMa are intended to ensure free competition in the internal market. If there are clear, precise and foreseeable rules, the two procedures have been conducted in a sufficiently coordinated manner are and closely linked in time, and if the overall penalties imposed correspond to the seriousness of the offences committed, a duplication of proceedings would be justified.

Roadshows by the Ministry of Economic Affairs for public company DVI violate the Dutch Act on Government and Free Markets

ACM, decision on objection of 21 December 2021; press release of 24 January 2022

In its decision on objection of 21 December 2021, the ACM found that the Ministry of Economic Affairs and Climate Policy (“EZK”) violated the Dutch Act on Government and Free Markets (Wet Markt & Overheid, “M&O Act”) by favouring public company Dutch Venture Initiative (“DVI”) with regard to other investment funds. DVI invests in funds that, in turn, invest in innovative, fast-growing SMEs.

The Ministry of EZK tried to interest investors in the DVI by organising road shows, which, according to the ACM, constitutes an infringement of the prohibition on favouring companies within the meaning of Section 25j(1) DCA. The ACM holds that this prohibition is intended to prevent the government from providing competitive advantages to a company for the performance of economic activities in the same way as the prohibition on state aid in Article 107 of the TFEU. For this reason, the ACM assessed whether the attraction of investors to the DVI funds meet the cumulative state aid criteria of Article 107 TFEU, and eventually concludes that it does. Non-financial support can thus also qualify as preferential treatment within the meaning of the M&O Act.

Acquisition of Kustomer by Meta approved by European Commission and Bka

European Commission, press release of 27 January 2022 | Bundeskartellamt, press release of 11 February 2022

On 27 January 2022, the Commission conditionally approved the acquisition of Kustomer by Meta (formerly Facebook). In its in-depth investigation, the Commission envisaged that the acquisition of Kustomer, an innovative player in the market for customer service software applications, could potentially restrict competition in the market for customer service software and customerrelationshipmanagement (“CRM”) support software. Meta’s Whatsapp, Instagram and Messenger are popular messaging channels through which businesses interact with their customers, and therefore constitute important inputs for suppliers of customer service and CRM software. According to the Commission, Meta would, following the acquisition, potentially have the ability as well as the economic incentive to deny or degrade access to the Application Programming Interfaces (“APIs”) for Meta’s messaging channels to software providers competing with Kustomer.

To address these concerns, Meta has offered commitments with a 10-year duration. Meta undertakes to guarantee non-discriminatory access, without charge to its publicly available APIs for its messaging channels to competing customer service (CRM) software providers and new entrants. In addition, Meta offered to make available equivalent improvements and updates of the features or functionalities of its messaging channels to such providers.

The concentration was referred to the Commission under Article 22 of the Merger Regulation (“MR”) by Austria and supported by eight other Member States, including the Netherlands (find our blog on Article 22 MR here). The German Bka decided not to join the referral request and conducted a parallel review of the effects of the concentration. The parties also received approval from the Bka on 11 February 2022.

Supermarket chains Coop and Plus may merge under condition of selling several supermarkets

ACM, decision of 21 December 2021; press release of 6 January 2022

On 21 December 2021, the ACM decided that supermarket chains Plus and Coop may merge under the condition that they divest twelve supermarkets. The ACM has investigated whether the merger will result in higher prices or a less attractive supermarket offer for consumers. According to the ACM, this is not the case on a national level, due to the presence of strong competitors such as Albert Heijn, Jumbo and Lidl.

The ACM also investigated whether consumers have sufficient local supermarkets to choose from. It determined the definition of the local markets on the basis of customers’ willingness to travel to the supermarket by car within 10 minutes. In twelve areas, the ACM foresees that there may be no or limited choice for consumers, with a risk that prices will increase or the range of products and/or quality of service will deteriorate. To address the concerns of the ACM, Coop and Plus will sell their supermarkets in these twelve areas to a competitor.

No compensation for UPS after the European Commission wrongly vetoed the UPS/TNT merger

General Court of the EU, judgment of 23 February 2022 (UPS)

The world’s largest courier company, UPS, will not receive compensation from the Commission for the alleged damage resulting from the failed concentration of the Dutch parcel company TNT, the General Court ruled on 23 February 2022. The Commission decided in 2013 to prohibit the intended concentration between UPS and TNT. Subsequently, UPS decided not to go ahead with the concentration. However, in its decision, the Commission used an econometric model different from the one on which the Commission and UPS had exchanged views during the administrative procedure, without notifying UPS. The ECJ ruled in 2017 that this violated UPS’ rights and subsequently annulled the decision. The ECJ upheld the General Court’s judgment in 2019.

However, TNT had meanwhile been acquired by rival FedEx. This concentration was approved by the Commission on 8 January 2016. UPS therefore claimed damages of over EUR 1,7 billion from the Commission, consisting of inter alia a payment of EUR 200 million to TNT for terminating the proposed concentration, the costs incurred by UPS for being involved in the investigation of FedEx’s takeover of TNT, and the lost profits by not being able to complete the concentration.

According to the General Court, the failure to timely send the definitive version of the econometric model used during the administrative procedure constitutes a sufficiently serious breach of UPS’ rights of defence within the meaning of Article 266 TFEU. However, the General Court holds that there is no direct causal link between that infringement and the alleged damage. The damages stemming from the costs of being involved in the FedEx/TNT merger investigation and the termination clause are not the result of the Commission’s errors, but rather the result from UPS’ free choice to intervene in those proceedings and from a voluntarily agreed upon contractual obligation between UPS and TNT. Finally, there is also no direct causal link between the failure to send the adjusted econometric model and the alleged loss of profit. It cannot be assumed that the concentration would have been approved if the other econometric model had been used. Moreover, UPS itself decided to abandon the concentration after the Commission vetoed it and decided not to make a new offer for TNT to compete with FedEx.

UPS will therefore not be compensated for any of its losses. Although the judgment is understandable from the perspective of the regulators, it creates a high threshold for private parties by expecting them to still actively try to pursue a concentration after it has already been vetoed by the Commission. With this judgment, the General Court introduces a strict standard for successfully claiming damages for an unjustified veto of an intended merger.

European Commission must also pay default interest after (partial) nullity of a fine

General Court of the EU, judgment of 19 February 2022 (Deutsche Telekom)

The General Court ruled on 19 January 2022 that the Commission must repay more than EUR 1,7 million to Deutsche Telekom AG for refusing to pay default interest to the German telecom company. On 15 October 2014, the Commission fined Deutsche Telekom for abusing its dominant position in the Slovak market for broadband internet services. The Commission imposed a fine of approximately EUR 31 million on Deutsche Telekom. By judgment of 13 December 2018, the General Court reduced this fine by more than EUR 12 million. The Commission repaid this amount to Deutsche Telekom on 19 February 2019. Deutsche Telekom also claimed over EUR 1,7 million in default interest from the Commission for the period when it did not have that money at its disposal (i.e. 2014-2019). When the Commission refused to pay the interest, Deutsche Telekom claimed damages before the General Court.

By judgment of 19 January 2022, the General Court upheld that claim. First of all, the General Court concludes that there is indeed a sufficiently serious breach of Article 266 TFEU. The General Court confirmed the CJEU’s ruling in Printeos that Article 266 TFEU imposes an absolute and unconditional obligation to repay, with interest, payments collected in violation of European Union law. Second, the General Court holds that there is a causal link between the damage and the refusal to repay default interest. It points out that an undertaking may expect the Commission to reimburse it for the amount unduly paid, together with default interest, should the fine be annulled or reduced at a later stage.