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DMA-obligations come into force; a bird’s-eye view of the (technical) changes by the designated gatekeepers

Compliance Day; as of today, all gatekeepers designated by the European Commission (“Commission”) must comply with the provisions of the Digital Markets Act (“DMA”). In the run-up to this deadline, gatekeepers have been aligning their core platform services (“CPS”) with the provisions of the DMA. At the time of drafting, Apple and Meta have published their compliance reports. It is expected that more will follow in the course of today.

In addition to the adjustments required to comply with the DMA, there have been other interesting developments. In our previous blog, we already touched upon the appeals brought by Apple, Meta, and ByteDance against the designation of one or more of their services as CPS. Meanwhile, the Commission has alsop decided not to designate certain CPS, and new gatekeepers have reported themselves to the Commission.

This blog provides an overview of the recent developments and the adjustments that gatekeepers will introduce or have already introduced to comply with the obligations under the DMA.

Overview of general substantive obligations for gatekeepers
Alphabet
Amazon
Apple
ByteDance
Meta
Microsoft
Possible new gatekeepers and CPS: Booking.com, X and ByteDance

Overview of general substantive obligations for gatekeepers

On 6 September 2023, the Commission designated the following gatekeepers and CPS:

source: https://ec.europa.eu/commission/presscorner/detail/nl/qanda_20_2349

Some obligations stemming from the DMA are only relevant to a particular CPS. For example, the interoperability of number-independent interpersonal communication services is relevant to WhatsApp and Facebook Messenger, but not to Chrome or iOS. However, a number of obligations from the DMA apply to, and are relevant to, any kind of CPS and/or concern the interrelationship between (the use of) different CPS. The following provisions are particularly noteworthy in that context.

Article 5(2) DMA generally prohibits gatekeepers from combining personal data obtained from various (core platform) services without the end-user’s consent. Gatekeepers must thus obtain prior consent to combine and use personal data from different services in order to personalise ads and content. On the basis of Article 15 DMA, gatekeepers should furthermore provide a yearly audited description of any techniques for profiling of consumers that they apply (see for example Meta’s first report here).
Pursuant to Article 5(4) DMA, gatekeepers are required to allow business users to make offers (free of charge) to end-users acquired through the CPS or through other channels, and to conclude contracts with those end-users. Put differently, a gatekeeper may no longer prohibit business users from contracting or making offers for their services to end-users outside of the CPS. Also, the gatekeeper must – in accordance with Article 5(5) DMA – allow end-users to access and use certain services, content, subscriptions, features or other items through its CPS, even though the enduser acquired such access from the relevant business user directly (outside the CPS).
Article 5(8) DMA provides that gatekeepers may not require users to subscribe to or register with other CPSs as a condition for using or accessing a CPS of that gatekeeper (such as tying and/or bundling practices).
For consumers (end-users), Article 6(9) DMA is particularly relevant. Under this article, gatekeepers must allow end-users (upon request) to transfer the data they have provided or generated, and end-users must be given continuous real-time access to that data (data portability). The equivalent of this data portability obligation towards business users is contained in Article 6(10) DMA.
Finally, in general, under Article 6(6) DMA, gatekeepers may not impose technical or other restrictions on end-users switching to other software applications and services accessed through the gatekeeper’s CPSs. In the same light, under Article 6(13) DMA, gatekeepers may not impose disproportionate general conditions for terminating the provision of a CPS. Moreover, these termination conditions must be exercisable without undue difficulty.

As these obligations apply in any case, they are not in principle elaborated in the overview below. However, the relevant provisions of the DMA are discussed when the gatekeeper has explicitly proposed adjustments to meet these obligations.

Alphabet

Alphabet is the gatekeeper with the most CPS. As a result, there are many changes that need to be implemented to comply with the DMA.

To comply with Article 5(2) DMA, Alphabet will now let end-users decide whether to keep all CPS linked. If the CPS are linked, end-user personal data can be exchanged. In addition, a “consent or pay” option – where consumers consent to the use and combining of their personal data or pay a (monthly) fee to use the CPS – is still under discussion with the Commission.

In light of Article 6(9) DMA, regarding data portability, Alphabet has already been using Google Takeout for a while now. This tool allows users to download or transfer their data to another platform free of charge. To bring this process in line with the provisions of the DMA, Alphabet will soon test a new API (‘Application Programming Interface’) to facilitate the download and transfer of data. Alphabet has also announced to launch a data portability software in Europe this week, making it easier for developers to move user data to a third-party app or service.

Another significant change for Alphabet is the effect of Article 6(5) DMA, which in short prohibits self-promotion in rankings and requires the gatekeeper to use transparent, fair and non-discriminatory terms for those rankings. For Alphabet, this particularly affects the CPS Google Search, Google Maps, Google Shopping, and Youtube. For Google Shopping, Google Maps, and Youtube, Alphabet has announced that these services will henceforth no longer be linked to Google Search’s search results page by default. However, end-users can choose to link (one of) these services to (the search results of) Google Search by default.

As for Google Search itself, Alphabet says it is adding a tab to the search screen. This will not only allow users to filter by things like videos and images, but also by comparison services. In addition, Alphabet will remove its own specialised results window for flight searches (see below).

Instead, a carousel is displayed showing links to various comparison websites. Alphabet has shared the following possible examples.

For categories like hotels, Alphabet is starting to test a dedicated space for comparison sites as well as direct suppliers to display more detailed results, including images and reviews.

With regard to Alphabet’s advertising service, the tech giant’s most lucrative (core platform) service, Alphabet is required under Articles 5(9), 5(10) and 6(8) DMA to provide certain data to advertisers when they request it. The announced compliance plans for this are still being coordinated with the Commission.

For Google Android and Google Chrome end-users should be allowed to change their default settings pursuant to Article 6(3). End-users should also be allowed to switch browsers under Article 5(7) DMA. Alphabet has indicated that it will add a choice screen for the default search engine and browser during the initial setup of a device using Alphabet’s CPS, as illustrated below.

Finally, Alphabet must now also allow end-users to use other app stores under Article 6(4) DMA. As regards its Play Store, Alphabet has announced that app developers will be able to use alternative payment methods.

Amazon

Like Alphabet, Amazon also has a lucrative advertising service. Thus, Amazon too has to provide certain data to advertisers upon request under Articles 5(9), 5(10), and 6(8) DMA. Amazon has indicated that from 7 March 2024, it will provide comprehensive reports detailing ad costs paid by advertisers and received by publishers, displayed on third-party websites and applications. According to Amazon, these reports provide insight into the financial transactions between advertisers and publishers. The reports can be accessed by advertisers through the ‘Amazon Ads dashboard’, and by publishers through the ‘Amazon Publisher Services portal’. In doing so, advertisers and publishers can choose whether to disclose their cost data, or whether the data will be included in standard aggregated metrics. This flexibility allows users to adjust the level of transparency based on their preferences and business needs, Amazon said.

Amazon’s main obligation with regard to its best-know service, Amazon Marketplace, can be found in Article 6(2) DMA. This article prohibits the gatekeeper from using non-public data generated by competing business users for its own CPS. Article 6(5) DMA furthermore contains a prohibition on self-preferencing relating to the ranking of competing products and services on the gatekeeper’s platform. These provisions reflect the Commission’s 2022 investigation into Amazon’s Buy Box and Prime Programme. The investigation was eventually concluded through commitments.

Apple

Apple appealed its gatekeeper designation, as well as the App Store’s qualification as a CPS, on 16 November 2023. Nonetheless, Apple must comply with its obligations under the DMA as of today. It has therefore announced the following changes for its CPS. These will be briefly discussed below. In addition, Apple has published its first compliance report on 7 March. In this document, it sets out the specific obligations and (proposed) changes in more detail.

The App Store brings consumers and app developers together. For developers, the following will change. They will have options to use (other) payment services to finalise in-app purchases. Until now, Apple only enabled app developers to use its own payment system. In 2021, the ACM already imposed an order subject to a penalty payment on Apple for the mandatory use of its own in-app payment system for dating app providers. Apple eventually incurred the maximum amount of € 50 million in penalty payments. In accordance with Article 5(7) DMA, there will also be new options for processing payments via referrals: end-users can then complete a transaction for digital goods or services on the developer’s external website. There is still an ongoing discussion on the (other) conditions Apple imposes for the use of the App Store. For example, Apple envisages to maintain the ‘Core Technology Fee’ it charges to app developers in order to make use of the App Store.

These features are accompanied by a number of other changes. For example, Apple is introducing labels on the App Store product page that inform users when an app uses an alternative payment processing method (compared to Apple’s). There will also be so-called in-app ‘disclosure sheets’, which alert users when they are no longer making transactions through Apple, but using an alternative payment service. In addition, Apple is coming up with new processes to check whether developers accurately communicate information to end-users about transactions using alternative payment services. These changes are being introduced to protect consumers, Apple said.

Regarding the iOS operating system, Apple has indicated that new options are coming for distributing iOS apps through alternative app marketplaces. It will also become possible, using a new framework and new APIs, to develop alternative app stores and/or browser engines for iOS. Previously, only WebKit, the browser engine behind Apple’s Safari, could be used.

As for Safari itself, Apple is introducing a new selection screen that appears when users first open Safari in iOS 17.4 or later. On that screen, EU users are asked to choose a default browser from a list of options. It allows end-users to change their default settings and switch browsers (Articles 5(7) and 6(3) DMA).

All these CPS will also come with the ability to transfer/retrieve data, in line with Article 6(9) DMA. For instance, end-users will be able to retrieve and export new data on their use of the App Store to an authorised third party on Apple’s Data & Privacy site. App developers can use a form to submit requests for interoperability with iPhone and iOS hardware and software features.

Finally, Apple has indicated that it is introducing a number of adjustments in relation to iMessage, even though Apple’s service has not been designated as a CPS following a Commission investigation. Apple has pledged to improve iMessage’s interoperability with other communication services by implementing an RCS (‘rich communication services’) system. RCS includes features such as read receipts and type indication, which are already used with, for instance, WhatsApp. Green messages (messages between Apple and Android, for example) will also get these functionalities. Blue messages are those between devices of iOS users.

ByteDance

ByteDance, the company behind social network TikTok, unsuccessfully sought an interim injunction to suspend its designation as gatekeeper. In short, the President of the European General Court ruled in his order that ByteDance had not claimed, let alone demonstrated, that the alleged financial damage was serious and irreparable. This lacks the urgency required for an injunctive relief.

Thus, ByteDance too has to comply with the DMA’s obligations from today onwards. On 4 March, ByteDance published several changes on its website relating to the DMA. With TikTok’s ‘Download Your Data’ tool, end-users can request a copy of their TikTok data for access and portability purposes. TikTok has also launched a new ‘Data Portability API’, which allows registered developers to request end-users permission to transfer a copy of their TikTok data. End-users can allow for either a one-time or recurring transfer, and will be able to select specific categories of data or their full archive. TikTok also offers certain in-app and web analytics allowing business accounts to measure their performance. This includes an ‘Accounts API’ where businesses can access data related to their TikTok accounts.

Microsoft

Microsoft has displayed and explained all its planned changes for Windows on its website and in a separate blog post.

Microsoft is prohibited by Article 5(2) DMA from combining personal data from different (core platform) services. This applies to both Windows and LinkedIn. Microsoft now asks users if they want to synchronise their Microsoft account with Windows so that their data is available on other Windows devices and in Microsoft products where users log in (see also the image below). The information stored in the Microsoft account of an end-user who also uses other Microsoft products is then also available in Windows. This makes it possible for an end-user to restore settings, apps and passwords from another device, as well as synchronise set preferences between devices.

With regard to Windows, Articles 6(3) and 6(4) DMA additionally require that end-users be given the option to change their default settings. Microsoft indicates that end-users will be enabled to remove the Microsoft Edge browser. It also adds new ‘integration points’ for applications in Windows, allowing end-users, for example, to add a search application to the search bar on the Windows taskbar. In this way, end-users can switch from the Bing search engine to another search engine of their choice.

Microsoft will also stop giving recommendations to set Edge as the default browser, including during the configuration process when users first set up or update Windows.

Finally, all (default) apps in Windows can be uninstalled, such as the camera and photo app, Cortana (virtual assistant), Bing’s web search, and Microsoft Edge.

Possible new gatekeepers and CPS: Booking.com, X and ByteDance

Just before Compliance Day, Booking.com and X (formerly Twitter) notified the Commission that they meet the quantitative criteria to be designated as gatekeepers. ByteDance, already designated as a gatekeeper with TikTok as CPS, notified its advertising services, TikTok Ads, to the Commission.

Online intermediation service Booking.com said it expects to meet the DMA’s turnover thresholds from the end of 2023 and thus qualify as a gatekeeper. The reason that Booking did previously not meet the quantitative thresholds is probably mostly due to the (aftermath of the) COVID-19 pandemic, which put a heavy strain on the travel and hotel industry. Of particular relevance to Booking.com would be Article 5(3) DMA, which prohibits it from imposing (narrow or broad) parity clauses on corporate users. This use has already been investigated and fined at national level in recent years, and is now before the CJEU following a preliminary reference from the Amsterdam District Court (see our earlier blog for a further explanation of parity clauses). Regarding X, the most relevant obligation can be found in Article 6(12) DMA pursuant to which it has to apply FRAND criteria for access to its social network.

The Commission now has 45 working days to designate the companies as gatekeepers. If the Commission designates them as gatekeepers, the brand-new gatekeepers will have six months to comply with the obligations under the DMA.

Conclusion

With the substantive obligations for the first six gatekeepers coming into force, the Commission will be primarily occupied with their proposed and/or implemented amendments in the coming months. Especially the adjustments of Meta and Apple have received strong criticism so far. The coming period will show to what extent there is still room for a regulatory dialogue, or if the Commission has shut the door and will initiate enforcement. In addition, the new rules also enable third parties to initiate (private) enforcement against any of the Gatekeepers on the basis of (alleged) infringements of the DMA.

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The game is on: increased competition law scrutiny and enforcement in gaming industry

The past years have seen video games surge in popularity. Although the growing popularity of video games may have partly arisen from the lockdowns during the COVID-19 pandemic, the growing popularity of video games is set to continue in the near future as over half of the world’s population is expected to be gaming in 2024. The increasing popularity of video games is reflected by increasing valuations of the gaming industry. Whereas the gaming industry was already valued at approximately € 160 billion in 2021, its value is expected to grow to almost € 300 billion by 2027. A significant part of this growth is propelled by the growing popularity of mobile games, as almost everyone now has access to video games through their smartphone.

The rapid growth of the market for video games has not only yielded new technological developments and a wider range of video games but also brought along increased public and private enforcement of competition law. This blog provides an overview of the relevant players on the gaming market as well as the most significant developments of competition law enforcement in the industry.

Players on the market

The gaming industry can be subdivided into (i) PC games, (ii) console games, and (iii) mobile games. Within these markets, different market players contribute to bringing a game to the player.

A game is developed by a developer who is responsible for all the aspects integral to game development, such as the software and overall design. Once completed, a game is published by publisher. These publishers typically finances the development process and invests in the marketing of the game. It is, however, also possible for developers to market their games independently. Supergiant Games, for example, is responsible for both the development and the publishing of their video games.

The European Commission considers the market for developing and publishing PC and console games to be distinct from developing and publishing mobile games. The European Commission has left open whether or not this should be further segmented, for instance by distinguishing separate consoles (such as the PlayStation (Sony), the Xbox (Microsoft), and the Switch (Nintendo)) because of potential single-homing thereof, meaning that a user only uses a single console.

Users ultimately access a game through the game distributor. This can be a physical shop but is increasingly a digital platform. Well-known examples are – depending on the device of choice of the user (PC, console, and/or mobile phone) – Steam, Microsoft Store, Epic Games Store or the Apple App Store. Through these platforms, a game can be bought and/or downloaded. The market for game distribution can also be distinguished between (i) PC and console games and (ii) mobile games. The (adjacent) market for operating systems is often also relevant. In that regard, markets for operating systems of PCs (e.g. Windows, servers (e.g. Linux), and mobile devices (e.g. Android) can be distinguished.

Some large gaming companies are vertically integrated: they operate at multiple levels of the distribution chain – from developing and publishing to distributing games. For example, Microsoft operates as a developer (e.g. through subsidiary Obsidian Entertainment), a publisher (through Xbox Game Studios) and a distributor (through Microsoft Store) and has its own PC operating system (Windows). In addition, Microsoft also has its own console, the Xbox. Another example of a vertically integrated company is Sony, which is the producer of the PlayStation and owns multiple game developers (such as Insomniac Games), and also publishes its games through Sony Interactive Entertainment.

Monitoring acquisitions in the gaming world

This vertical integration of companies like Microsoft and Sony is partly due to major acquisitions, such as Microsoft’s takeover of Activision Blizzard (known for Call of Duty), Take-Two Interactive’s acquisition of Zynga (known for FarmVille) and Sony’s takeover of Bungie (known for Hal0).

This has, consequently, led to a significant increase in the number of merger control notifications to the European Commission. Since 2010, the number of merger notifications filed before the European Commission regarding the gaming industry has tripled. The competitive landscape in the gaming industry has also changed over the years. Until recently, acquisitions in the gaming industry were typically not considered to lead to anti-competitive effects. This was mainly due to the large number of game developers and distributors active in the market as well as the wide variety of games on offer, which makes the gaming market diverse and dynamic.

For instance, the European Commission approved Activision Blizzard’s acquisition of King in 2016 on the grounds that there were enough sufficient competitors in the video game market to ensure competition. Activision Blizzard itself was already the result of an acquisition by which the Vivendi Group, the parent company of Blizzard, acquired Activision. The European Commission approved this acquisition unconditionally.

Competition authorities have become increasingly critical of acquisitions in the gaming industry in recent years. This is due to the increased degree of concentration in various markets and the (further) vertical integration of gaming companies, which generally increases the risks of anti-competitive effects. For example, in 2021, the European Commission approved Microsoft’s acquisition of game developer and publisher Zenimax only after a second-phase investigation. The investigation was deemed necessary to determine with certainty that the parties involved could not adopt exclusionary strategies.

The most high-profile acquisition in recent years is undoubtedly the one of Activision Blizzard by Microsoft. Activision Blizzard is the developer and publisher of popular games such as ‘Call of Duty’, ‘Guitar Hero’, and ‘World of Warcraft’. The European Commission also launched a second-phase investigation into this acquisition. Only after this in-depth investigation, the merger was approved conditionally.

The European Commission’s concerns with this acquisition also related to ‘cloud gaming’, a recent development in the gaming industry. In cloud gaming, games are streamed from a server (‘cloud’) which can then be played on any kind of device, from mobile devices to PCs and consoles. Although cloud gaming currently only accounts for 1% of the global video game sales, it is considered the future of gaming. Microsoft already operates a cloud gaming service through its ‘Xbox Cloud’ but it is certainly not the only one: US-Based Nvidia developed Geforce Now, Amazon offers its cloud gaming service ‘Luna’, and Sony recently launched its own cloud gaming service through PlayStation Plus.

The barriers to entry for cloud gaming services are, however, rather high. Sony’s CEO, Kenichiro Yoshida, stresses: “I think cloud itself is an amazing business model, but when it comes to games, the technical difficulties are high”. Not every attempt to enter the market is therefore equally successful, as evidenced by Google’s discontinuation of its own cloud gaming service ‘Stadia’ as of January 2023.

The European Commission feared that after the acquisition, Microsoft would make Activision Blizzard’s games exclusively available on Xbox Cloud, thereby putting rival cloud gaming services at a significant disadvantage to Microsoft already at an early stage. To remedy these concerns, Microsoft pledged to (i) grant users a licence to access Microsoft’s Activision Blizzard games on any cloud gaming service – not just Microsoft’s – for the next 10 years, and to (ii) for the same period, grant a corresponding licence to all cloud gaming service providers so that they can make these games available to users. By doing so, Microsoft commits to not make Activision Blizzard’s games exclusively available on its own Xbox Cloud gaming service, thus allaying the European Commission’s concerns.

Remarkably, the UK’s competition authority, the Competition & Markets Authority (“CMA”), deemed these commitments insufficient and prohibited the acquisition in April 2023. Like the European Commission, the CMA also foresaw a “substantial lessening of competition” in the cloud gaming services market as a result of the acquisition, despite Microsoft proposing the same behavioural remedies as it did to the European Commission. However, the CMA considered these remedies to be insufficient, partly because they would be difficult to monitor and because they would still allow for games to be played only via the Microsoft Windows operating system.

In August 2023, to alleviate the CMA’s concerns, Microsoft decided to sell the streaming rights for Activision Blizzard’s current and future games (for the next 15 years) to Ubisoft. This makes Activision Blizzard’s games streamable on Ubisoft’s services and further leaves it up to Ubisoft to whom it further licenses these streaming rights anywhere outside the EU. Microsoft then filed a new notification of the acquisition to the CMA. After this commitment, the CMA finally approved Microsoft’s acquisition of Activision Blizzard.

In the United States, Microsoft has also been allowed to proceed with its acquisition of Activision Blizzard, despite the US Federal Trade Commission’s (“FTC”) initial prohibition to implement the acquisition of December 2022. The FTC ’s refusal was subsequently overruled by a US court, which held that Microsoft was allowed to “close” the deal, after which the FTC cut its losses. With the acquisition of Activision Blizzard being fully completed in the US, the EU, and the UK, Microsoft now is the third-largest gaming company in the world, behind only Tencent and Sony.

Behavioural oversight by authorities as well as competitors and users

Besides (ex ante) merger and acquisition supervision, the European Commission has also not been idle in terms of (ex post) enforcement of competition law in the gaming industry. For instance, Valve – the company that operates the video game platform Steam – and five game developers (Bandai Namco, Capcom, Focus Home, Koch Media, and Zeniax) were fined a total of almost € 8 million for engaging in geo-blocking in 2021. Valve granted activation keys to these game developers that allowed games not bought through Steam to still be played on Steam. At the request of the developers, these activation keys contained a geographical location restriction, which meant that the key could only be used in the Member State where the game was purchased. This way, Valve and the developers sought to prevent users from purchasing games at a lower price in one Member State and then playing them in another (i.e., their own) Member State where the same game(s) are sold at a higher price. Valve argued in its appeal against the fine that this was intended to protect developers’ copyrights and that it also has positive effects on competition. However, this appeal was declared unfounded by the General Court in September 2023.

Private enforcement in the gaming industry is also on the rise. For instance, Epic Games Store – known for Fortnite – started proceedings in the US against Apple over the 30% commission Apple charges for in-app purchases and the obligation to use Apple’s payment system. Epic has recently initiated a similar claim against Google with regard to the Google Play Store.

A similar case is also being pursued in the Netherlands, where three foundations filed class action suits against Apple. The foundations accuse Apple of violating Articles 101 and 102 TFEU because of the high commission rates for paid apps and in-app purchases in the Apple App Store and the fact that these payments could only be made through Apple’s payment system. In this context, the foundations partly base their claim on a recent decision by the Authority Consumer & Market (“ACM”). The Dutch regulator deemed it unfair that dating app customers could only make in-app purchases through the payment method imposed by Apple. The ACM forced Apple to amend its unfair terms, which the tech giant eventually did after forfeiting €50 million in penalties. Although this decision by the ACM does not directly affect the gaming industry, it does seem to have prompted the filing of class actions by these foundations.

These cases illustrate that private enforcement of competition law in the gaming market is also on the rise. Given the many developments and increased degree of supervision on this market, it is only a matter of time until more such (follow-on) cases begin to emerge.

Conclusion

Developments in the gaming world are increasing at a rapid pace and the growing popularity of video games does not seem to slow down. These developments are not going unnoticed by regulators either. The increase in the number of acquisitions as well as their value – and the impact this has on the competitive playing field – have already caused tighter merger supervision in recent years. Additionally, public and private enforcement of Articles 101 and 102 TFEU is increasing. All in all, the gaming market will continue to develop, and with it the enforcement of competition law on it.

Timo Hieselaar, Bas Braeken and Jade Versteeg

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Advertising online gambling update

Since the opening of the online gambling market in the Netherlands, a lot of developments have taken place. A ban on the use of role models in advertisements was introduced and the announced ban on untargeted advertising is expected to take effect by 1 July 2023. In addition, a tightening of the rules on the duty of care, in particular playing limits, is on its way.

In this blog, we update you on the recent and expected developments on the Dutch online gambling market.

Ban on untargeted advertising

In summer 2022, the Minister for Legal Protection (Minister voor Rechtsbescherming) published a draft Decree to amend the Decree on Recruitment, Advertising and the Prevention of Addiction to Gambling (Besluit werving, reclame en verslavingspreventie kansspelen; “Marketing Decree”) (“draft Decree”).

The draft Decree introduces a ban on untargeted advertising for online games of chance, as a result of which:

License holders for online games of chance will no longer be allowed to advertise via TV, radio and in public indoor and outdoor areas;
Advertisements via the internet and direct mailing will still be possible, but the rules will be tightened further in order to prevent vulnerable groups from being confronted with the advertisements; and
The use of sponsorship by providers of online games of chance will be prohibited in phases, so that the sports sector can find alternative sponsors:
- Program and event sponsoring will no longer be allowed a year after the ban has entered into force;
- Two years after the entry into force, sports sponsorship and shirt sponsorship will be prohibited.

Advice Council of State

On 2 January 2023, the Advisory Division of the Council of State (Afdeling advisering van de Raad van State; “Advisory Division”) published its advice regarding the ban. In short, the Advisory Division made several comments:

The Advisory Division recommends explaining in the explanatory memorandum why a ban on untargeted advertising is necessary at this time – before the 2024 evaluation and numeric insight – and how the draft Decree relates to advertising policy for other potentially addictive activities, such as smoking and alcohol;
Several parts of the draft Decree are not yet sufficiently developed, such as:
- what is meant by the ‘demonstrable measures’ to prevent internet advertising from coming to the attention of vulnerable groups;
- who are subject to the ban;
- the remaining scope for untargeted advertising for land-based providers; and
- to the extent that the government is pushing for the use of algorithms, it does not explain how this relates to the General Data Protection Regulation (Algemene verordening gegevensbescherming).

The Advisory Division thus expressed several concerns which the Minister should reconsider.

Expected publication of the ban

While the ban was meant to enter into force on 1 January 2023, the decree to amend the Marketing Decree has not been published yet. On 22 March 2023, the Minister gave an update on the expected entry into force of the ban on untargeted advertising: the ban will enter into force no later than 1 July 2023. The reason for the delay is the implementation of the advice of the Advisory Division, specifically the feedback regarding the proportionality and the enforceability. The Decree is expected to be published soon.

Belgium

In Belgium a similar ban has recently been adopted. The ban will enter into force on 1 July 2023, as a result of which:

General advertising will be prohibited from 1 July 2023, such as advertising on TV, radio, cinema’s, on websites and platforms;
- There is a transitional period for existing contracts that meet the requirements until 1 October 2023.
Advertising around sports (in stadium’s) will be prohibited from 1 January 2025;
(Shirt) sponsoring of professional clubs will be prohibited from 1 January 2028, strict rules apply from 1 January 2025 – 31 December 2027; and
(Shirt) sponsorship for non-professional sports clubs will still be allowed, but under strict rules (50cm² per advertisement).

Professional sports clubs have announced in the press that they will start litigation against the ban in Belgium.

Cap for playing limits being drafted

The Minister is currently working out a framework for a cap for playing limits. In the first quarter of 2023, the Minister consulted with various parties, such as addiction experts, the Ksa and banks to see how tightening the playing limits can be more protective, which will be worked out in regulations. The Minister aims to have a draft ready in the first half of 2023. Parliament will be informed this spring on its contours. In addition, the Minister will start a pilot in cooperation with operators and scientists to arrive at behavioural interventions that will make players set lower limits.

Extension Advertising Code Online Gambling until 1 June 2023

The board of the Advertising Code Foundation (Stichting Reclame Code) has extended the validity of the Advertising Code Online Games of Chance (Reclamecode Online Kansspelen; “ROK”) until 1 June 2023. The reason for the extension is the pending comprehensive evaluation of the ROK and the expected government measures against untargeted advertising for online games of chance.

Initially, the ROK was valid until 1 March 2023.

The government publishes interim report on Key Figures Addiction Care 2016-2021

On 16 March 2023, the government published the interim report on Key figures Addiction Care 2016-2021 (Tussenrapportage Kerncijfers Verslavingszorg 2016-2021; “report”). The report shows that there is a slight decrease in number and proportion of persons seeking help for gambling problems from 2016-2021. This decrease is also visible for 2022 from a survey of addiction institutions.

If you require any assistance in this regard or have any questions regarding the above, please do not hesitate to reach out to Machteld Robichon or Lisa Uppelschoten.

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Dutch court rules: Facebook unlawfully processed personal data

On 15 March 2023 the District Court of Amsterdam ruled that for a period of almost 10 years Facebook Ireland unlawfully processed the personal data from its Dutch users. The data that was unlawfully processed was not only used by Facebook for the functioning of the social network, but the court emphasizes that it was also used for advertising purposes.

The case was brought before the court by the foundation, Data Privacy Stichting, in collaboration with the Dutch consumer association, the Consumentenbond. The foundation claimed that Facebook Netherlands B.V., Facebook Inc.[1] and Facebook Ireland Ltd.[2] violated the General Data Protection Regulation and its predecessor, the Personal Data Protection Act.[3]

The foundation brought the case under the old collective action system, which only allows a representative organization to ask for a declaratory judgement regarding the unlawful acts, as opposed to the WAMCA which also allows representative organizations to claim damages on behalf of a group of victims.

The court ruled that Facebook Ireland, as the entity responsible for processing Facebook users’ data, unlawfully processed the data belonging to Dutch Facebook users that it was processing from 1 April 2010 until 1 January 2020.

Highlights of the decision

The court considered a number of issues that are relevant to collective actions regarding privacy violations in general. The field of collective actions on this topic is developing incredibly quickly, and there are many unanswered questions since both the WAMCA and the GDPR are fairly new. As such the considerations in this judgement – and in the potential judgement on appeal – could help determine the outcome of future cases.

Sufficient interest

Firstly, the court decides that the foundation had sufficient interest in its declaratory claims, because there is a plausible possibility of damage. The court considered that, in determining whether there is sufficient interest a certain level of abstraction from individual circumstances is appropriate. The possibility of damage could not be excluded in advance and in a general sense. One can conceive of circumstances in which the privacy violations (may) have resulted in material and/or immaterial damage. As such the possibility exists that damage was suffered. This possibility is sufficient as the foundation is asking for a declaratory judgement. According to the court, the question of whether damage was actually suffered does not need to be answered.

Statute of limitations

Secondly, the court rejects Facebook’s defense that the limitation period for the foundation to bring the claims has lapsed.[4] Under Dutch law, the applicable five-year limitation period begins to run on the day following the day on which the injured party became aware of both the damage and the person liable for it (actual awareness). The court considers that it is difficult to answer the question of whether the claims have (partially) lapsed. In collective actions, a defense based on the limitation period can only be successful if an individual approach is not necessary, as individual circumstances must be abstracted from. Facebook’s defense that the limitation period has lapsed, could only succeed if it could otherwise be determined that all members of the represented group became aware of both the damage and the person liable for it (actual awareness) before 30 December 2014. This is five years before the foundation brought the claim. The court goes on to state that in this case Facebook’s unlawful handling of data was not generally known before 30 December 2014. This meant that the limitation period for the collective claims has not elapsed, but the court explicitly states that it could not rule on the question whether in an individual case the limitation period might have been lapsed.

Data controller

Thirdly, in discussing the different Facebook entities as defendants, the court explains when an entity can be considered a data controller in terms of the GDPR/PDPA. According to the court, Facebook Ireland is the only Facebook entity responsible for processing the users’ data during the relevant period.

Burden of proof

Fourthly, the court sets out the application of the burden of proof in cases regarding violations of the GDPR and the PDPA. Under Dutch law, the general rule is that a party that invokes the legal consequences of a certain fact carries the burden of proof for that fact, unless any special rule or the requirements of reasonableness and fairness dictate a different allocation of the burden of proof. According to the court, both the GDPR and the PDPA contain an alternative division of the burden of proof. This means that it is up to the data controller, Facebook Ireland, to prove that the data processing is in accordance with the law and that it complied with the information obligations.

Similarity requirement and declaratory decision

Fifthly, Facebook argued that the declaratory decision could not be granted since not every Facebook user was a victim of the privacy violations. In an interim decision, the court already ruled that the similarity requirement of Article 3:305a of the Dutch Civil Code (old) had been met. In these collective proceedings, it is not yet necessary to be able to determine which individual may have been affected. It is sufficient that an individual can determine whether he has been affected by a possible privacy violation. In the court’s opinion, the circumstance that not every Facebook user belongs to the represented group does not stand in the way of granting the declaratory judgment. There is no further need to differentiate. What exactly is the size of the represented group does not need to be established in these proceedings. That can be addressed in any follow-up proceedings.

Unfair commercial practices

Sixthly, the court motivated why Facebook’s unlawful data processing also constitutes an unfair commercial practice. According to the court, both the GDPR/Data Protection Directive and the Unfair commercial practices directive can apply to the same situation simultaneously. This means that Facebook argued incorrectly that the claims based on data protection do not leave room for claims based on the Unfair commercial practice with regard to the necessary provision of information to users.

Unjust enrichment

Lastly, the court reviewed the foundation’s unjust enrichment claim. Damages resulting from privacy violations are difficult to assign a monetary value to and unjust enrichment is a frequently suggested method of approaching this issue. The court recognized that the personal data of the Facebook users were very valuable for Facebook. However, the court decides that the foundation did not sufficiently show that the Facebook user actually experienced a decrease in the value of his assets or increase in his liabilities (the impoverishment of the Facebook user).

Ongoing controversy regarding Facebook’s privacy practices

Facebook has announced its plans to appeal the ruling. Meanwhile, the foundation and the Consumentenbond have announced that they are starting a second case against Facebook, because Facebook continues to send personal data of its European users to the United States.

Expertise

bureau Brandeis has a great deal of experience representing claimants in collective actions regarding privacy violations. Our collective action team has previously instituted legal proceedings against large tech companies such as TikTok and Oracle and Salesforce. For more information please contact Michelle Krekels.

[1] Now called Meta Platforms Inc.

[2] Now called Meta Platforms Ireland Ltd.

[3] Prior to the GDPR the Data Protection Directive applied in the European Union. This directive was codified in the Netherlands in the PDPA.

[4] Facebook argued that the statute of limitation of the claims of the foundation, insofar as they relate to events before 30 December 2014, has lapsed under Section 3:310 of the Dutch Civil Code.

Vision

The interpretation of commercial contracts in arbitration

Many arbitration procedures involve the interpreting of the provisions of a contract. In such cases the arbitrator needs to determine the meaning of a certain phrase in a specific contract. One can however reach significantly different conclusions when faced with the same provision. Different countries also apply different rules to the interpretation of contracts; even within the European Union each member state has its own way of interpreting a contract.

The challenge that participants in arbitration face is predicting how the tribunal will approach the issue of interpretation within the legal framework chosen in the arbitration. It is thus important to ensure that the arbitrator is familiar with the right way of interpreting a contract under the applicable law.

Practical tips on how to ensure the right interpretation of a contract

Selecting the arbitrator

The parties generally choose the arbitrators themselves. The first practical tip is to make sure to select at least one arbitrator with extensive experience in the relevant contract law. An arbitrators can serve as sole arbitrator or as one of multiple arbitrators on a panel. Extensive experience in a comparable legal system of contract law could also be an advantage. When an arbitrator has a background in a legal system opposite to that of the applicable contract law, it can be challenging for the arbitrator to correctly understand and apply the relevant contract law. After all, the various approaches to contract interpretations can differ strongly.

The assistance of experts

An additional concern lies in the attitude of certain international arbitrators. According to research, there seems to be a widespread inclination amongst international arbitrators to interpret contracts according to their commercially reasonable meaning. In doing so the interpretative rules that are provided in the governing law are sometimes (unconsciously or consciously) ignored. To prevent this from happening, one should offer the arbitrator information regarding the correct interpretation according to the applicable contract law.

One of the opportunities arbitration provides is the possibility of submitting testimonies from experts. This means that a legal expert with an understanding of the relevant contract law and principles is allowed to offer assistance to the arbitral tribunal. Especially when the arbitrators are not familiar with the applicable law, an expert can explain and clarify the relevant foreign law principles to the arbitrators.

Questioning a legal expert can also aid an arbitrator in understanding the relevant contract law. The legal expert would preferably have specific contract law knowledge, strong communication skills, familiarity with the formal rules of the arbitration process as well as prior experience as an expert witness. Merely being an expert on the topic is not enough, given that the ability to communicate such expertise to the arbitrator(s) in a clear and concise manner is crucial.

Expertise

bureau Brandeis’ arbitrage team has many specialists in (international) arbitration. For more information, please contact our specialists.

Vision

Competition Flashback Q4 2022 – EU and Dutch competition law developments

This is the Competition Flashback Q4 2022 by bureau Brandeis, featuring a selection of the key EU and Dutch competition law developments of the past quarter (see the original version here).

Would you like to receive Competition Flashback by e-mail in the future? You can subscribe to our mailing list here.

Overview Q4 2022

Merger control

Long-awaited EU Foreign Subsidies Regulation adopted
Overview highlights merger cases European Commission

Cartels and vertical restraints

Vertical price fixing fine Samsung upheld by ACM
Styrene cartel member seeks to recover fine after takeover and guarantee from leniency applicant
Italian steel companies fined more than 30 years after cartel infringement

Digital platforms

Commission accepts commitments Amazon on use of non-public data and access to Buy Box and Prime
Civil court refers preliminary questions about legality of Booking’s parity clauses

Follow-on competition damages claims

CJEU holds that disclosure of evidence in cartel damages claims is not limited to pre-existing evidence
Director must contribute € 13 million for active, personal role in Dutch shrimp cartel
Court of Appeal confirms applicability of Dutch law and validity of assignments in Aircargo cartel damages case

Telecommunications

ACM advises on a maximum of three national radiofrequencies per media company

Consumer protection law

ACM may not require an undertaking to point consumers to existence of infringement
Energy companies offer commitments to ACM to adjust sustainability claims

Public Enterprises (Market Activities) Act

Court endorses two-step test for distinction between exercise of public powers and an economic activity

Long-awaited EU Foreign Subsidies Regulation adopted

Council of the European Union, press release of 28 November 2022

On 28 November 2022, the EU Foreign Subsidies Regulation (“FSR”) was adopted. The FSR introduces powers to the European Commission (“Commission”) to act against non-European subsidies that (may) distort competition within the EU internal market. To date, only subsidies provided by European Member States are subject to state aid rules and there is no control of subsidies originating from third countries. This new regulation will close the current enforcement gap.

Financial contributions provided directly or indirectly by a non-European government in the context of a merger or public procurement (exceeding certain FSR notification thresholds) must be reported to the Commission. The term financial contribution is defined broadly and includes, inter alia, capital injections, subsidies, tax exemptions or the granting of exclusive rights without adequate remuneration. The Commission can also initiate an ex officio investigation of a subsidy provided by a foreign government. In its investigation, the Commission will assess whether the subsidy may distort the internal market, examining, among other things, whether the foreign subsidy may strengthen the competitive position of the undertaking concerned. In doing so, the Commission will analyse the negative and positive effects of the subsidy on the development of the relevant economic activity to which the subsidy relates. If the Commission concludes that the subsidy distorts competition in the internal market, it may decide to impose structural or behavioural remedies.

The FSR will be officially published in January 2023 and will enter into force six months later. From 1 October 2023 onwards, companies contemplating mergers and acquisitions must thus not only take into account a potential notification requirement under the merger control regime, but also the new FSR regime, as well as the Act on security screening of investments, mergers and acquisitions (in Dutch: Wet Veiligheidstoets Investeringen, Fusies en Overnames, “Vifo Act”) that will enter into force the first quarter of 2023 (see our blog on the Vifo Act here).

Overview highlights merger cases European Commission

Booking.com/Etraveli

The Commission is currently conducting a phase II-investigation into the acquisition by Booking.com of Etraveli. Both companies are active on the market for online travel agencies (“OTAs”). Booking.com is a platform for accommodation rental and also owns metasearch platform KAYAK, a price comparison platform for airline tickets and OTAs. Etraveli is a flight OTA that sells airline tickets for various airlines. In its preliminary investigation, the Commission considers a potential dominant position of Booking.com on the OTA market. The Commission is concerned that the acquisition of Etraveli will increase the barriers to enter the OTA market. In addition, the Commission will investigate whether Booking.com could have the ability and incentive to exclude competing flight OTAs from its platform KAYAK as a result of the acquisition of Etraveli.

Microsoft/Activision

In September 2022, Microsoft notified its acquisition of Activision Blizzard (“Activision”) to the Commission. Activision is a developer and publisher of games for PCs, consoles, and mobile devices, as well as a distributor of PC games. As the Commission identified some preliminary concerns in its phase I-investigation, it will now further investigate how the acquisition may affect competition in the markets for (i) PC video games, (ii) video games on consoles, and (iii) PC operating systems (Windows). The Commission foresees the risk that Microsoft could exclude competing distributors from Activision’s PC and console games. Consequently, the Commission foresees the possibility that PC operating system providers will no longer be able to compete with Microsoft Windows post-transaction. The integration of Windows and Activision could potentially also deter users from purchasing PC’s that do not run on the Windows-system, according to the Commission.

Lagardère/Vivendi

Lagardère and Vivendi are both French multimedia groups active as, inter alia, book and magazine publishers. After the acquisition of Lagardère by Vivendi, the merged entity would become the largest player on the French book market. The Commission decided to conduct an in-depth investigation into the effects of the acquisition on several markets, namely (i) the market for the purchasing of author’s rights for French-language books, (ii) the market for the distribution and marketing of French-language books, and (iii) the market for the sale of French-language books to retailers. Since both companies also publish magazines, the Commission will also examine how the prices, diversity and quality of French magazines may be affected by the transaction.

Cochlear/Oticon

At the request of several national competition authorities, including the Dutch Authority for Consumers and Markets (in Dutch: Autoriteit Consument en Markt, “ACM”), the Commission will investigate Cochlear’s acquisition of Oticon. Oticon and Cochlear both produce specialised hearing aids that can be inserted as implants. As the transaction does not meet the EU merger thresholds, the companies are not formally subject to a notification obligation under the EU Merger Regulation. Several national competition authorities have nevertheless filed a request for referral with the Commission under Article 22 of the Merger Control Regulation. They are concerned that the acquisition will restrict future development and innovation and, this way, limit future competition.

Broadcom/VMware

The acquisition by Broadcom of VMware concerns the markets for software and hardware. Broadcom is primarily a manufacturer of hardware, such as Network Interface Cards and storage adapters. With the proposed acquisition of software provider VMware, Broadcom will be further expanding its business into the software market. In a second phase investigation, the Commission will assess whether and, if so, how the acquisition could harm the interoperability between VMware’s software and hardware providers competing with Broadcom. The Commission will, furthermore, investigate whether Broadcom could exclude competing hardware providers from VMware’s software.

Vertical price fixing fine Samsung upheld by ACM

ACM, decision of 21 November 2022

In September 2021, the ACM imposed a fine on Samsung of € 40 million for coordinating selling prices of televisions with different retailers. Samsung objected to this decision, yet without success.

The ACM does not follow Samsung in that illegal vertical price fixing can only occur if the price influencing, as identified by the ACM, is accompanied by coercive measures. The ACM is of the opinion that, by sharing competitors’ prices and frequently contacting retailers about price changes, Samsung provided a significant incentive for these retailers to follow Samsung’s price requests. According to the ACM, Samsung, along with its customers accepting interference in their pricing policies, had the overarching goal of maintaining higher margins. This affirms the existence of an overall, anti-competitive objective and a single and continuous infringement, according to the ACM.

The procedural objections brought forward by Samsung were also dismissed. According to the ACM, the fact that the Legal Department put a different emphasis on the evidence presented by the Competition Department does not mean that the fining decision exceeds the scope of the investigative report. Furthermore, the ACM disagrees with Samsung in that the failure to involve the retailers in the infringement has breached Samsung’s rights of defence. In fact, retailers were extensively questioned about their pricing during the investigation.

Finally, the ACM dismisses Samsung’s arguments as regards the amount of the fine. In its decision on objection, the ACM underlines that the fine cannot be considered disproportionate, as it has already applied a low seriousness factor and it has also taken into account the mitigating circumstance that this is the first time the ACM imposes a fine for vertical price alignment (eventually leading to a reduction of 20%).

Styrene cartel member wishes to recover fine after takeover and guarantee from leniency applicant

European Commission, decision of 29 November 2022

In November 2022, the Commission imposed a number of cartel fines adding up to € 157 million on various buyers of styrene. Styrene is a raw material that can be processed into a number of plastics, including rubber and latex. The Commission fined the styrene customers for exchanging commercially sensitive information and coordinating negotiation strategies with the aim of reaching a lower reference price.

The Commission launched an investigation into the styrene sector following a leniency application by cartel member Ineos. As Ineos was the first to present itself to the Commission and provide information about the anti-competitive behaviour, it escaped a fine for participation in the cartel. Four of the other five cartel members received a reduction of the fine as a result of their cooperation with the Commission’s investigation.

Particularly interesting about this case is that cartel participant Synthos has announced that it will initiate civil proceedings to recover its fine (€ 32.5 million) from Ineos. In 2016, Synthos acquired part of Ineos’ styrene division, with a guarantee of Ineos that the division was operating in compliance with European competition rules. A year after the acquisition, Ineos reported the cartel to the Commission. Synthos puts forward that it had no knowledge of the illegal behaviour within the styrene division and points to the guarantee provided by Ineos.

Italian steel companies fined more than 30 years after cartel infringement

General Court of the European Union, judgment of 9 November 2022

A number of Italian steel companies, including Alfa Acciai Spa and Ferriera Valsabbia Spa, have been fined for a cartel that took place between 1989 and 2000 in the field of rebar.

The Commission had already imposed fines for the same conduct in 2002 and 2009, but these fines were annulled due to procedural errors (see here and here). The Commission nevertheless imposed another fine in 2019, albeit mitigated due to the length of the investigation.

The judgment of the General Court of the European Union (“General Court”) of 9 November concerned the legality of the latter fine. The General Court found that the Commission had not committed any procedural errors in relation to the fine this time and that the duration of the proceedings was not unreasonable given the complexities of the case. The General Court also held that the ne bis in idem principle had not been violated as the Commission’s previous decisions had been annulled. The Court further considered that a reduction of the fine was appropriate, also considering the reduced deterrent effect due to the long period between the end of the infringement and the adoption of the contested decision.

Commission accepts commitments Amazon on use of non-public data and access to Buy Box and Prime

European Commission, decisions of 20 December 2022

On 20 December 2022, the Commission accepted the commitments offered by Amazon, addressing the Commission’s initial competition concerns. In July 2019, the Commission opened an investigation into Amazon’s use of non-public marketplace seller data for the benefit of its own sales services. In doing so, Amazon allegedly abused its dominant position. To address these concerns, Amazon has now committed to stop using non-public data from independent sellers on its online marketplace to improve its own retail business.

The Commission opened a second investigation into Amazon on 10 November 2020 regarding the possible bias by Amazon in granting sellers access to Amazon’s Buy Box and the Amazon Prime programme. The Commission preliminarily found that Amazon used preferential treatment in its selection of products for the Buy Box; a kind of ‘buy-now’ product catalogue at the top of the web page. Amazon primarily featured itself or third-party sellers using Amazon’s delivery services in the Buy Box. Similar preferential treatment was thought to be used in Amazon’s selection of suitable sellers for Amazon Prime.

Amazon commits to treat all sellers equally when ranking the offers for the Buy Box and to display a second competitive offer in the Buy Box. As regards Prime, Amazon promises to use non-discriminatory terms for the selection of sellers. Amazon further pledges not to use information it obtains from other carriers through Prime.

The commitments cover all of Amazon’s current and future marketplaces in the EEA, with the exception of Italy in so far it concerns the Buy Box and Prime, as the Italian competition authority had previously issued its own decision on these matters. The commitments regarding Prime and the presentation of a second offer in the Buy Box remain in force for seven years; the other commitments will apply for five years. For more information on platform and data regulation, see our recent blog on the role of data in competition law.

Civil court refers preliminary questions about legality of Booking’s parity clauses

Amsterdam District Court, judgment of 26 October 2022

In civil proceedings between Booking.com and a group of German hoteliers, the question has arisen whether Booking acted unlawfully by using ‘broad’ parity clauses in its general terms and conditions until 1 July 2015 and ‘narrow’ parity clauses from 1 July 2015 to 1 February 2016. Parity clauses prohibit hoteliers from offering better terms and conditions outside Booking’s platform; not on their own hotel websites (narrow), nor on other booking platforms (broad).

In this judgment, the District Court of Amsterdam first addressed the question of whether hoteliers are bound by the parity clauses. According to the District Court, the mere presence of the hotels on Booking’s platform is insufficient to speak of (tacit) acceptance of the parity clauses in Booking’s regularly amended general terms and conditions. The question whether these clauses apply to a specific hotel must thus be assessed on a case-by-case basis. Another question concerned the probative value of previous decisions by the German competition authority and German courts finding the illegality of the broad parity clauses. The court ruled that, under Article 9(2) of the Cartel Damages Directive, decisions of foreign competition authorities have free probative value.

In its substantive competition assessment, the court notes that broad and narrow parity clauses do, in any event, not qualify as a hardcore restriction within the meaning of Article 4 of the Vertical Block Exemption Regulation (“VBER”). Article 5(1)(d) of the VBER does however establish that broad parity clauses constitute an excluded restriction (see our blog on the new VBER here). This means that, for broad parity clauses, an individual analysis is necessary. In this context, the question arises whether parity clauses can qualify as an ancillary restriction. The court noted that, in order to answer that question, the relevant market on which the OTAs operate must first be defined. As there has been some discussion on defining the relevant market, the court decided to refer preliminary questions to the Court of Justice of the European Union (“CJEU”) regarding both the application of the ancillary restraints doctrine to parity clauses as the relevant market definition for OTAs.

CJEU holds that disclosure of evidence in cartel damages claims is not limited to pre-existing evidence

Court of Justice of the European Union, judgment of 10 November 2022

In its judgment in Paccar, the CJEU ruled that requests for the disclosure of evidence do not solely have to relate to pre-existing evidence, but can also include documents that have to be prepared ex novo. In doing so, the CJEU clarifies what is to be understood by ‘evidence’ within the meaning of Article 5(1) of the Cartel Damages Directive and further emphasises the importance of effective private enforcement.

The case concerns a preliminary referral from a Spanish court regarding a follow-on cartel damages claim arising from the trucks cartel. In 2016 and 2017, the Commission imposed multiple fines totalling nearly € 4 billion on, among others, Paccar, Scania and DAF. As a result of that cartel, purchasers of these trucks filed claims for damages with the Barcelona court. In these domestic proceedings, disclosure of certain evidence was sought in order to compare the recommended prices charged before, during and after the cartel period. The Spanish court asked the CJEU whether Article 5(1) of the Damages Directive also covers documents that did not exist before the investigation and had yet to be compiled or prepared by the cartelists.

The CJEU answers this question in the affirmative. It stresses that private enforcement is necessary to ensure full compliance with European competition law, particularly because private enforcement can also be used to recover indirect damages to the structure and functioning of the market as a whole. Against that background, the CJEU finds that, although the wording of Article 5(1) of the Damage Directive appears to refer merely to pre-existing evidence, the context as well as the purpose of that provision should be taken into account. Article 5(1) of the Damages Directive must be applied effectively in order to compensate for the information asymmetry between the parties and must not lead to the creation of obstacles that render the private law enforcement of EU competition rules more difficult.

The CJEU concludes that ‘evidence’ within the meaning of Article 5(1) Damages Directive thus also includes evidence that has yet to be created. However, this right of access to such ex novo evidence is not unlimited: it is up to the national court to examine thoroughly whether a request for evidence would be disproportionately burdensome for the defendants.

For a detailed analysis of this judgment, please see our blog.

Director must contribute €13 million for active, personal role in Dutch shrimp cartel

Court of Appeal of Arnhem-Leeuwarden, judgment of 6 December 2022

The Court of Appeal of Arnhem-Leeuwarden recently upheld the district court’s ruling that the director of the Heiploeg-group can be held personally liable due to his (factual) contribution to the shrimp cartel. The director is required to pay € 13 million in damages.

In 2013, the Commission imposed fines totalling over € 27 million on several companies within the Heiploeg-group for a violation of the cartel prohibition. Between 2000 and 2009, Heiploeg and its main competitor frequently contacted one another and agreed on, among other things, sales prices, purchase prices and market sharing. One of the directors within the Heiploeg group, the appellant in this case, was very closely involved until at least his resignation as a director in 2004. After the shrimp company was put into liquidation, the liquidators filed proceedings to hold the director liable for damages on behalf of the company. They argue the director can be held personally liable for a serious reproach as he was not only aware of the cartel arrangements, but was in fact the driving force behind them. As Article 101 TFEU – unlike Dutch law – does not allow for personal fines but only fines to be imposed on the undertaking, the director believes that his liability would undermine the purpose and effectiveness of Article 101 TFEU.

The court concludes that the present claim based on the Dutch Civil Code (2:9 BW) and in connection with the liquidation, is separate from the liability for the cartel fine in itself. Moreover, due to his intensive (factual) involvement in the cartel (literally referred to as the “godfather’” of the shrimp business), the director can indeed be held personally liable. The fact that the group had several directors cannot exempt the director from his own liability, the court rules.

As regards the extent of the damage, the director further argued that it should be reduced to the extent that the company has profited from the cartel during the cartel period. The court rejects this argument and holds that a cartel is not necessarily advantageous for the participating undertakings and that no concrete evidence was provided to support this. The argument that the company would not have suffered any damages since the cartel fine had not (yet) been paid is also dismissed. The Court of Appeal also rejected the director’s other defences relating to the forfeiture of rights, the extension of the limitation period, a reduction of the damages payable, the unlawfulness of the previous prejudgment attachment and the ‘unwillingness’ of the liquidators to reach an amicable settlement.

However, the court does rule that the director cannot be held liable for the continuation of the cartel after he resigned as a director (2005-2009), as this is the own responsibility of the succeeding directors. On balance, the court upheld the claim of over € 13 million.

**Court of Appeal confirms applicability of Dutch law and validity of assignments in Aircargo cartel damages case**

Amsterdam Court of Appeal, judgment of 22 November 2022

After the Amsterdam Court of Appeal issued an interlocutory judgement on 6 July 2021 regarding the applicability of Dutch law to SCC and Equilib’s damages claims against airlines that participated in the Aircargo cartel (see Competition Flashback Q3 2022), the court is now ruling on the validity of the assignments to the claim vehicles.

Before answering this question, the court addresses some separate issues related to some changed circumstances since the last interlocutory judgment. For example, the court confirmed that SCC correctly argued that the airlines violated the duty to tell the truth under Section 21 of the Dutch Code of Civil Procedure by denying that the cartel had a global dimension, whereas this appeared evident from the subsequently published non-confidential version of the Commission’s infringement decision. However, since the Commission’s press release already mentioned the existence of a worldwide cartel, the assertions of the airlines did not lead the court astray and no consequences need to be drawn from them, according to the court.

Furthermore, the court briefly discusses the earlier judgment of the CJEU in this case in response to preliminary questions referred. From that judgment it follows that the Dutch court is allowed to adjudicate claims for damages that relate to certain flights between a Member State and third countries (such as Switzerland) and flights that were not included in the Commission’s fining decision due to a temporal lack of jurisdiction. Although this substantive issue lies before the court of first instance, the court of appeal does emphasise that its conclusion on the applicability of Dutch law also applies to these (stand-alone) claims, as well as to the lingering effects of the follow-on claims. Finally, the court concludes that the assignments are valid under Dutch law.

ACM advises on a maximum of three national radiofrequencies per media company

ACM, opinion of 14 November 2022; Trade & Industry Appeals Tribunal, judgment of 20 December 2022

In the context of the upcoming auction of radiofrequencies for national radio stations, the ACM issued an opinion in November on the sustainability of current licensing conditions and the level playing field in the radio market(s).

The nine available national FM-frequency lots are currently in the hands of nine commercial stations, namely Sky Radio, Radio 538, Radio Veronica and Radio 10 (all belonging to Talpa), SLAM! and 100%NL as part of RadioCorp, QMusic, BNR Nieuwsradio and Sublime. In 2021, the Minister of Economic Affairs and Climate Policy decided to renew these licenses. Following an appeal by Kink FM against this renewal decision, the Trade and Industry Appeals Tribunal ruled that the Minister must put the radiofrequencies up for auction as of 1 September 2023.

Five of the nine stations are currently subjected to certain restrictions. Radio Veronica, SLAM!, 100%NL, BNR Nieuwsradio and Sublime have to take into account certain requirements regarding the content of their broadcasts (for example: mainly news/classical music). Moreover, based on current conditions, a commercial license holder may not hold more than four national FM-frequencies (the so-called usage restriction).

Partly based on previous investigations, the ACM foresees competition risks due to the maximum of four frequencies per entity. With a market share of 35,2%, Talpa Radio enjoys a strong position on the radio listening market (including both FM and DAB+), according to the ACM. Moreover, the ACM notes that Talpa Radio currently operates three of the four unrestricted radio stations, which are generally more profitable than restricted radio stations. As it is relatively easy for consumers to switch to another radio station, this high level of concentration is particularly problematic for advertisers, according to the ACM. In its view, this is especially so considering that Talpa Radio, RadioCorp and Sublime jointly sell their advertising space through media company One Media Sales (“OMS”). Earlier, the ACM already investigated a potential abuse of dominance by OMS in the radio advertising market. This was eventually settled with a commitment decision.

According to the ACM, marketing only two restricted and seven unrestricted frequency lots will offer providers more opportunities to acquire listeners (and subsequently: attract advertisers). The ACM also urges the Ministry to tighten the usage restriction from four to a maximum of only three frequency lots owned by one entity. In its view, this will prevent the restriction of effective competition in the radio listening and advertising market.

ACM may not require an undertaking to point consumers to existence of infringement

Rotterdam District Court, judgment of 4 October 2022

The Rotterdam District Court recently underlined that an undertaking on which a fine is imposed due to an infringement of consumer protection law does not have to actively inform its customers that it has committed an infringement. This summer, the ACM imposed an order subject to a penalty on an auction website for the imposition of unfair trading terms and maintaining an aggressive commercial practice. Subscribers to the auction website could not cancel their subscription online and the membership was tacitly renewed for another year after it expired, automatically locking consumers in for another year. To prevent so-called ‘invalid’ cancellations, the auction provider also sent letters to these subscribers, threatening with a fine of € 495. The Rotterdam District Court endorsed the ACM’s view that such practices were unreasonable and led consumers to take a decision they would otherwise not have taken.

The court did determine that the (information) requirements imposed by the ACM were too far-reaching. According to the court, it would be disproportionate to force the undertaking to explicitly inform its customers that it had committed an infringement. According to the court, sending customers the new general terms and conditions is sufficient.

Energy companies offer commitments to ACM to adjust sustainability claims

ACM, decisions of 20 September 2022 (date of publication: 10 October 2022)

In the spring of 2021, the ACM launched several investigations into potentially misleading sustainability claims, including in the energy sector. The ACM took a closer look at the sustainability claims of ten energy suppliers with the largest share in the small-business market. The investigation revealed that Vattenfall and Greenchoice presented themselves as sustainable by using certain comparisons without specifying what they were comparing themselves to. They also used different terms such as ‘green gas’ that did not correspond to the product offered. As a result of the investigation, both energy suppliers undertake to adjust the sustainability claims or to stop using them. The ACM has now declared these commitments binding.

These are the third and fourth commitment decisions in which the ACM explicitly analyses a sustainability claim based on its Guidelines on Sustainability Claims (read about the earlier commitments of H&M and Decathlon in our Competition Flashback Q3 2022 or our recent blog on developments in consumer protection law).

Court endorses two-step test for distinction between exercise of public powers and an economic activity

Rotterdam District Court, judgment of 10 November 2022

In its ruling of 10 November 2022, the Rotterdam District Court confirmed that the Dutch Land Registry Office is not required to offer its updated Klic-viewer software against payment. The Klic-viewer is a digital information system that allows parties wishing to perform excavation work to view the location of cables and pipes in order to prevent any excavation damage. Based on the Dutch Public Enterprises (Market Activities) Act (in Dutch: Wet Markt & Overheid,“Wet M&O”), an administrative body must charge at least the integral costs of the service when performing an economic activity. In contrast, when the governing body exercises its public powers, this does not constitute an economic activity.

Although it is no longer disputed that offering an information system is part of the performance of the Land Registry’s statutory duties, parties competing with the Klic-Viewer argue that its further development should be regarded as an economic activity. After all, commercial market parties have been offering software with improved functionalities, such as a mobile app and GPS function, against payment for a long time. By now offering similar software for free, the Land Registry squeezes these competitors out of the market, according to the competing providers.

The court follows the ACM’s decision on objection that the operation of the Klic-viewer is directly related to the exercise of public powers legally imposed on the Land Registry. For example, the updated Klic-viewer promotes the accessibility and exchangeability of information as included as an objective in the Land Registry Act. Hence, it does not constitute an economic activity and the Land Registry is subsequently not required to charge the integral costs for this service. Unlike the competing parties argue, and in line with the TenderNed judgment, the ACM therefore rightly did not get to the question of whether the operation of the software can be separated from the public powers. Only when certain activities of a public entity do not, as such, form part of the exercise of public powers, it must be assessed whether the activity can be separated from activities that are related to the exercise of those powers. Such was not the case here. Read our previous blog on the Wet M&O here.

For all your questions regarding (EU) competition law, bureau Brandeis would be happy to assist.

You can reach us via the links below.

Bas Braeken – Jade Versteeg – Lara Elzas – Timo Hieselaar – Demi van den Berg

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Big data, the Digital Markets Act and the Data Act: the growing importance of data in competition law

The increasing importance of (big) data for today’s economy is more and more reflected in (the enforcement of) competition law. In today’s digital (platform) economy, a company’s ability to collect data and subsequently strategically use it, has become one of the most important competitive parameters. As data becomes of growing importance and is increasingly seen as a means of payment (‘data as a currency’), the European Commission (“Commission”) and national competition authorities are intervening more frequently in transactions and anti-competitive behaviour that involve the use of data. Various enforcement tools are deployed in order to safeguard the role of data in the competitive process as much as possible. Although at first this mainly concerned remedies in the context of merger control, recently there has also been an increasing number of cases on the basis of Articles 101 and 102 of the Treaty on the Functioning of the European Union (“TFEU”) that involve data. In the near future, data-related competition issues will be regulated by specific legislation, such as the ‘Digital Markets Regulation’ (aka: Digital Markets Act, “DMA”) and the European Data Act. This blog aims to provide an overview of developments to date and look ahead to upcoming data legislation.

A reluctant start

In 2016, the Commission had to deal with several transactions where the merging parties’ datasets would be combined. Despite that the Commission examined the merging of datasets as a theory of harm in, among others, the Microsoft/LinkedIn, Verizon/Yahoo! and Apple/Shazam cases, yet none of the cases resulted in data-related remedies. In these three cases, the Commission considered that post-transaction aggregation of datasets might raise market entry barriers, but it concluded that this does not confer a competitive advantage on the merging parties. Specifically, the Commission found that the datasets are not unique (Verizon/Yahoo) or that access to the target’s database is not essential to compete in the market (Microsoft/LinkedIn). Moreover, the Commission noted – inter alia, in Verizon/Yahoo – that the merging parties could not significantly restrict competition through the use of data in itself, as they are bound by national legislation and the General Data Protection Regulation (“GDPR”).

Interestingly, in the same period, the Commission already recognised privacy as an important factor for consumers when choosing a service or platform. In the Facebook/WhatsApp case in 2014, the Commission considered that the parties’ privacy policies can be taken into account when assessing the extent to which the merging parties compete (directly) with each other.

In Microsoft/LinkedIn, the Commission took the view that privacy-related concerns, by themselves, do not fall within the scope of competition law, but that data protection can be an important parameter of competition in social media markets. In that particular case, the acquisition of LinkedIn could risk driving social media with better privacy conditions out of the market.

Dataremedies in merger cases

From 2019 onwards, a change of direction seems to be taking place where transactions in which data play an important role will now only receive (conditional) approval after data-related remedies have been offered. Generally, these remedies entail keeping the data of the merging parties separate and/or allowing or keeping third parties access to the platforms/APIs of (one of the) merging parties. For instance, in the case of the acquisition of Iddink (provider of electronic learning environment Magister) by Sanoma Learning (publisher Malmberg), the Authority Consumer and Market (in Dutch: Autoriteit Consument en Markt, “ACM”) stated that the transaction would give Sanoma an advantage over other learning resource publishers. For this reason, the ACM attached conditions to the approval of the merger. Iddink is obliged to continue to give competing learning resource publishers access to the Magister API, and the competing publishers are entitled to the same information provision as Malmberg. In addition, the commercial departments and IT systems of Sanoma Learning and Iddink are to remain separated via so-called internal Chinese walls. This should prevent competition-sensitive information of competing publishers from reaching Malmberg via Iddink. After the Rotterdam District Court annulled the ACM merger decision, this conditional approval was found to be lawful by the Trade and Industry Appeals Tribunal. See our Competition Flashback Q3 2022 for more details.

Vertical effects also occurred in the somewhat similar European merger case Google/Fitbit. After an in-depth investigation, the Commission concluded that Google would gain a competitive advantage by accessing Fitbit’s data that would allow it post-transaction to exclude rival health app providers from the market via Android. To address these concerns, Google has offered to use so-called data silos to keep Google and Fitbit’s data separated (so that Fitbit’s health data cannot be used for Google Ads, for example). In addition, Google has agreed to continue giving Fitbit’s competitors access to Android.

A slightly different case concerned the data joint venture between NS, GVB, HTM and RET, which aimed to create a platform for mobility services (often referred to as “mobility-as-a-service”, or “MaaS” platform). The ACM decision set out remedies to prevent (competition-sensitive) data flows from becoming accessible to the platform operators. The platform is prohibited from sharing competition-sensitive data from mobility services and other MaaS providers. Shareholders of the joint venture will also not be given access to this information.

Competition concerns in cartel and abuse cases

In addition to data-related merger control cases, data-related commitments have also been made in several recent investigations into infringements of Articles 101 and 102 TFEU. The Commission’s much-discussed investigation into Amazon concerned Amazon’s dual role as, on the one hand, the provider of the sales platform and, on the other hand, retailer on the platform, in competition with buyers of its platform service. As platform provider, Amazon has access to the sales data of the independent retailers that are active on the platform, such as sales numbers and number of page visits. The Commission concluded in 2020 that Amazon systematically used these data for the benefit of selling Amazon products on the platform, creating an advantage over other retailers. The Commission also concluded that Amazon favoured its own products and those of retailers using Amazon’s logistics services (Amazon Prime) in the so-called ‘Buy Box’.

As a result of the investigation, Amazon has agreed, among other things, to stop using non-public data on the activities of independent sellers for its own products competing with those of third parties on its marketplace. This applies both to Amazon’s automated use of data and to Amazon employees who may use the data for strategic decisions. Amazon will also apply fair terms for access to the Buy Box and Prime programme, and allow Prime sellers to freely choose another logistics provider. On 20 December 2022, the Commission published the final commitment decision, officially closing both investigations.

In the Insurance Ireland case, the Commission accepted commitments relating to Insurance Ireland‘s database. This database contains data relevant to insurance providers. The Commission objected to the fact that only members of the trade association had access to this data pool, and that access for other insurance companies was not offered on transparent and non-discriminatory terms. The commitments consist of Insurance Ireland decoupling membership from access to the database and applying fair and objective entry requirements for membership.

Of a slightly different order are cases where the possession or use of data has been considered by (national) competition authorities as a form of (abuse of) economic dominance. A high-profile example concerns the German Facebook case where the Bundeskartellamt (“Bka”) found in 2019 that Facebook abused its dominant position by collecting and processing users’ data without complying with legal requirements (based on the GDPR). In his recent opinion, Advocate General Rantos concluded that a breach of the GDPR can be an indication of a breach of competition rules, and that national competition authorities may take this breach into consideration when establishing an abuse of a dominant position. A similar investigation into Facebook has been ongoing in the UK since June 2021. Moreover, the Bka is currently investigating Google’s data processing conditions.

In December 2022, the Commission issued new objections to Meta. According to the Commission, Meta may be abusing its dominant position by linking the Facebook Marketplace to its social network Facebook, and applying unreasonable conditions towards ad providers using this ad service. The Commission also found that Facebook potentially uses data from ad providers for the benefit of its own platform.

Abuse (by legal monopolists) by siphoning off customer data

In the context of data and abuse it is interesting to look at two national cases in which a legal monopolist was fined. In the ENEL case in 2018, the Italian competition authority fined energy provider ENEL for using the customer database it had built during its time as a legal monopolist. After market liberalisation, ENEL used the database to contact customers and make them commercial offers, aiming to get them to switch as customers to ENEL’s subsidiary EE, which is active on the liberalised market. In this preliminary ruling procedure, the Court of Justice of the EU (“CJEU“) ruled that ENEL, as a former legal monopolist, was not allowed to use the data pool (or other resources and sources) that it had gathered during its legal monopoly after market liberalisation. .

The French EDF case also involved a former legal monopolist that continued to use its database after the energy market was opened up. The French competition authority fined EDF for using non-reproducible customer data during the period between 2004 and 2021 in order to maintain market share in the liberalised market. Moreover, the French competition authority concluded that the data EDF did share with other suppliers was incomplete.

Data legislation: DMA curbs data use by gatekeepers

The increasing occurrence of data-related problems for competition have triggered specific legislation. First and foremost, this involves legislation providing rules to curb the (inappropriate) use of data by gatekeepers and/or Big Tech (via the DMA).

The DMA contains a number of obligations for so-called data gatekeepers. These are, in short, digital platforms that are an important gateway to end-users for business users. For instance, Article 5 DMA states that gatekeepers are not allowed to combine personal data from their platforms with other services offered by the gatekeeper. A company like Meta, which owns Facebook and Instagram, may only combine data from these platforms when it has the explicit consent of the end user. This article seems inspired by Facebook’s previously fine for linking WhatsApp phone numbers to Facebook accounts.

In addition, Article 6 DMA prohibits gatekeepers from using non-public information of business users (or their end users) for the benefit of their own services. This Article shows a clear link to the Amazon case.

To enforce these rules, Article 19 DMA grants the Commission the – fairly far-reaching – possibility to request access to companies’ databases and algorithms. This competence not only includes access to databases and algorithms of gatekeepers, but also of other companies.

The DMA has been in force since 1 November 2022 and currently provides an interim period for gatekeepers to conform to the obligations of the DMA. In the meantime, the Commission has opened a consultation for the first draft of the Implementing Regulation for the DMA.

Data regulation in the making

Secondly, legislation that intends to promote data sharing, and this way also the data economy, is currently being worked on. Besides the DMA – which creates obligations only for gatekeepers – a European proposal for a more general Data Act is pending.

This act aims to give users access to their data (generated through the use of a particular product or service), and allows them to share this data with third parties. The Data Act requires producers to develop products in such a way that users can easily access their data. In addition, data must be made available to users free of charge. This way, the Data Regulation aims to shift control of data to the user. This shift, however, is not uncontested: by giving users control over the data they generate, the Data Act also gives them the responsibility to make data sufficiently available to companies for the benefit of an active data economy.

Moreover, at the end of 2023, the Data Governance Act will come into force, which aims to encourage and regulate the provision and sharing of data by companies and government agencies.

In the Netherlands, the ACM is currently developing the ‘Guideline for Promoting a transparent and fair online platform economy for businesses’. This guideline aims to give businesses a better understanding of how online platforms operate. The final version of the guide is likely to be published in early 2023.

Conclusion

It is clear that in recent years the Commission has made considerable efforts to get a grip on the anti-competitive effects of data. Strict enforcement action is now being taken against large companies that misuse their data or the data of others. To some extent, this trend can also be seen at the national level in Europe.

The introduction of the DMA – and in time, the Data Act – still involves some uncertainties. With regard to the DMA, it will soon (autumn 2023) become clear which companies will be designated as gatekeepers by the European Commission, and how they will incorporate the obligations from the DMA in their operations. Based on the Data Act, non-gatekeepers will also face data-related legislation. In this way, the Commission is sending a clear signal to companies that benefit from Big Data: they too can expect stricter enforcement in the future.

Bas Braeken – Jade Versteeg – Demi van den Berg

Vision

Recent developments of the Dutch Act on Government and Free Markets in a nutshell – part 2

Recent developments of the Dutch Act on Government and Free Markets in a nutshell – part 2

In this second of two blogs on recent developments of the Dutch Act on Government and Free Markets (“M&O Act“) (in Dutch: Wet Markt & Overheid), we discuss the most recent developments in the M&O Act over the past year. We conclude with a number of practical tips for entrepreneurs who are faced with (unfair) competition from state-owned companies.

In the first of two blogs on recent developments of the M&O Act, we discuss the intended legislative amendment and case law concerning so-called “general interest decisions”.

Other recent developments

In addition to the case law on the reasoning of public interest decisions (discussed in part 1 of this blog series), other important issues in the context of the M&O Act have been decided by the Dutch courts and the Authority for Consumers & Markets (“ACM”) in the past year.

ACM decision on objection DVI: Ministry’s roadshows provides benefit

On 21 December 2021, ACM confirmed in a decision on objection that the Ministry of Economic Affairs and Climate Policy (“EZK”) gave preferential treatment to its public company Dutch Venture Initiative (“DVI”) over other investment funds. DVI invests in funds that in turn invest in innovative, fast-growing SMEs. The case was prompted by a signal from the private investment fund, MKB Multifunds, which ACM received. According to MKB Multifunds, DVI and Oost NL have benefited in several ways. In its decision of 23 februari 2021, ACM found that there was no violation.

In its decision on the objection, ACM revised the primary decision on one point and came to the conclusion that there was, after all, preferential treatment within the meaning of Section 25j(1) of the Competition Act (‘Mw‘) (in Dutch: Mededingingswet). According to ACM, EZK had tried to interest investors in the DVI by organising ‘road shows’ and this constituted an infringement of the prohibition against preferential treatment within the meaning of Section 25j(1) Mw. ACM considered that the prohibition against preferential treatment, in the same way as the prohibition on State aid laid down in article 107 of the TFEU, aims to prevent the public authorities from conferring competitive advantages on an undertaking for the performance of economic activities. Therefore, ACM assesses whether the interest of an investor in DVI-funds fulfils the cumulative State aid elements of Article 107 TFEU.

The three cumulative elements of the State aid prohibition are: a) the direct or indirect granting of State resources; b) the advantage provided is not in conformity with the market; and c) there is selectivity. According to ACM, all three elements have been met and the Ministry of Economic Affairs is violating the M&A Act with this conduct. Non-financial support can therefore also qualify as ‘preverential treatment within the meaning of the M&A Act.

ACM decision on objection Land Registry: Klickviewer is governmental task

In its decision on objection, ACM focuses on the question of when a public service task can be exercised. The decision on objection is based on ACM’s earlier rejection of a complaint by BlindGuide, Geodirect, GOconnectIT, MijnKlic, Prosilic, Syntax Inframediairs, GO WIBON and Spatial Eye (the “Service Providers”). In the complaint, the Service Providers claimed that the Land Registry and Mapping Agency (the “Land Registry”) acted contrary to the M&O Act by not including the integral costs. The further developed KLIC-viewer is in fact offered free of charge. According to the Service Providers, the Land Registry should have offered the KLIC-viewer at least at cost price. The KLIC-viewer enables excavation contractors to see exactly where cables and pipelines are located at the location where they intend to carry out excavation work. The purpose of this is to prevent excavation damage. The Service Providers offer (paid) applications that provide insight into this data (among other things).

The central question is whether the provision of the further developed KLIC-viewer should be regarded as an economic activity or falls within the public task of the Land Registry. In its analysis, ACM explicitly refers to the Tendernet case of the Court of Justice of 7 November 2019 and Compass Datenbank case of the Court of Justice of 12 July 2012. On the basis of this European case law, ACM finds that when assessing activities carried out by public authorities it is sufficient to assess whether there is a close connection (connection criterion) between the activity concerned and the exercise of powers of the public authority. In that case there is no economic activity. Only if there is no such close connection and the activity qualifies as an economic activity, it should be assessed whether the activity can be separated from the public task (separation criterion).

According to the ACM, the provision of the KLIC-Viewer was closely linked to the Kadaster’s public service task as laid down in the Information Exchange of Above-ground and Underground Networks Act (‘WIBON‘) (in Dutch: Wet informatie-uitwisseling bovengrondse en ondergrondse netten en netwerken) and the Kadaster Act. ACM rejects the Service Providers’ argument that it should have applied the separation criterion even though there was a close link between the public service task and the activities of the Land Registry. According to ACM, the separation criterion only plays a role if there is no close link with the exercise of a public authority.

ACM decision parking garages municipality of Hilversum: unfair competition

In its decision of 26 januari 2021, the ACM ruled that the municipality of Hilversum had violated the M&O Act. ACM established that the municipality of Hilversum did not pass on all costs for the three municipal parking garages. As a result, it was competing unfairly with two commercial parking garages and a Q-Park parking garage.

The ACM has repeatedly rapped the knuckles of municipalities because the charges for municipal car parks and parking areas did not cover the cost price. This was the case in the municipalities of s’-Herthogenbosch, Hengelo, Emmen and Veenendaal. In the latter case, the municipality of Veenendaal took the position that barrier parking, like street parking, falls within the exercise of public authority and should therefore not be regarded as an economic activity, or at least that barrier parking and street parking are related in such a way that they cannot be seen separately, so that barrier parking should not be regarded as an economic activity either.

The CBb rejects this reasoning in ruling of 8 december 2020, in which it established that, unlike parking behind a barrier ‘barrier parking’, parking at the street parking ‘street parking’ is exclusively governed by public law. After all, the powers to regulate street parking are exercised exclusively by public authorities. The CBb ruled that barrier parking is an economic activity. The CBb must then answer the question whether the provision of ‘barrier parking’, in view of its nature, its purpose and the rules applicable to it, cannot be regarded as separate from the regulation of street parking, either because the regulation of street parking without the provision of barrier parking would be largely pointless, or because these activities are closely connected (seperation cirterion). The Court answered this question – not entirely surprisingly – in the negative. According to the CBb, ACM was right to make a distinction between the character of the activity of ‘barrier parking’ on the one hand, and that of street parking on the other hand.

ACM decision on objection camper municipality Stadskanaal: after increase of rates no more preferential treatment

In decision on objection dated 7 January 2021, the ACM rejected an objection from a commercial campsite, Camping Musselkanaal, about camper pitches from the municipality of Stadskanaal. Initially, the ACM could not act because the municipality of Stadskanaal had made a general interest decision. After the Court of Rotterdam annulled this decision, the ACM ruled in its decision that the municipality of Stadskanaal did not pass on all of its integral costs for the operation of the Spoordok camper pitches between 1 July 2014 and 1 June 2018. With regard to the period from 1 June 2018 to 31 December 2018, the ACM ruled that the municipality did cover the integral costs with a rate increase. Camping Musselkanaal objected to the decision but its objection was declared unfounded. In the end, the municipality was no longer able to circumvent the M&O Act by the annulled general interest decision and ultimately complied with the M&O Act after all.

Court decision on Heumen sports complex: rent unjustly too low

On 5 January 2021, the Court of Rotterdam ruled in the appeal cases brought by the municipality of Heumen and the lessor of sports facilities against the decision on objection of ACM. In that decision, the ACM confirmed its earlier opinion that the municipality of Heumen had leased a sports complex to a private company, Laco, in 2018 and 2019 without passing on all of the integral costs. Among other things, the municipality paid an operating fee to the private landlord. The competitive position of a competitor of the lessor, Lierdal Sportcentre, was thus affected. According to ACM, the municipality acted contrary to the M&O Act in doing so. The court upheld ACM’s decision but did not get around to a substantive assessment of its opinion. The two appeals were declared inadmissible by the court on formal grounds.

Suffering from an overly entrepreneurial government? Five tips for duped companies

Based on the developments discussed, we distil the following practical tips for companies dealing with a (potentially) competitive government:

Be alert to possible “general interest decisions” of municipalities and provinces and object to them in time. This can prevent the public interest decision from overriding the M&A Act.
Check whether there is an economic activity. This may be the case if a government offers products or services that other entrepreneurs also (can) offer. An overview of examples of economic activities can be found here.
Take a critical look at the service or products offered by the authority and at what remuneration. If the fee charged by the authority is not in line with the market, the integral costs may not be passed on properly. It may also be the case that the government is favouring its own company by granting subsidies or in some other way.
A company that suspects that a government body is competing unfairly can file a complaint with ACM.
A company that is faced with an unfairly competitive authority can claim compensation for the period during which the authority competed unfairly with the company.

Bas Braeken and Lara Elzas

Vision

Recent developments of the Dutch Act on Government and Free Markets in a nutshell – part 1

In this first of two blogs on recent developments of the Dutch Act on Government and Free Markets (“M&O Act“) (in Dutch: Wet Markt en Overheid), we discuss in a nutshell the legislative proposal to amend the M&O Act (the “Legislative Proposal”). The Legislative Proposal was submitted to the House of Representatives on December 7, 2021 and was debated in the House of Representatives on 14 January 2022. The main amendment of the Act concerns the justification of the so-called “public interest decision”. The submission of the Legislative Proposal did not happen overnight; the proposal was submitted four years after the consultation of the Legislative Proposal Legislative Proposal. In the meantime, the Dutch Trade and Industry Appeals Tribunal (“CBb“) (in Dutch: College van Beroep voor het bedrijfsleven) has clarified the legal framework clarifying the adoption of a public interest decision. This legal framework largely corresponds to the new obligations in the Legislative Proposal. In this blog we discuss the intended legislative amendment and the current assessment framework.

Market and Governance Act and the Legislative Proposal

The M&O Act which is incorporated into the Dutch Competition Act (“Mw”) (in Dutch: Mededingingswet) contains rules of conduct for administrative bodies that perform “economic activities” and compete with companies in that capacity. Autoriteit Consument en Markt (“ACM“) supervises the Act. The M&O Act applies only to activities that are not considered public service. The purpose of the M&O Act is described in the explanatory memorandum of the Legislative Proposal as creating a level playing field between administrative bodies and entrepreneurs in situation where administrative bodies perform economic activities. In order to realize this goal, four rules of conduct have been established that administrative bodies must adhere to when performing economic activities, namely:

Integral cost calculation. Administrative bodies must pass on the integral costs of these activities to customers when performing economic activities (Article 25i Mw).
Prohibition of favouritism. Administrative bodies may not favour their public undertaking over undertakings with which that undertaking competes and may not grant their public undertaking advantages going beyond normal commercial practice (Section 25j of the Act).
Making data available. Administrative bodies may only use data obtained in the performance of public tasks for economic activities if the data can also be made available to third parties (Section 25k Competition Act).
Prohibition on mixing functions. If administrative bodies carry out economic activities and also exercise a power under public law with respect to these economic activities, the same persons may not be involved in both activities (Section 25l of the Competition Act).

In practice, the first and second rules of conduct are the most relevant and are most frequently invoked by third parties.

A frequently heard criticism of the current law is that administrative bodies easily circumvent the M&O Act by making a public interest decision. This is because the M&O Act does not apply to economic activities carried out in the public interest on the basis of Article 25h paragraphs 5 and 6 of the Mw. Over 90 percent of the municipalities have frequently taken public interest decisions recently for this reason. In recent years, for example, public interest decisions have been taken for economic activities such as the lease of municipal real estate, the operation of parking garages, the operation of sports facilities, the collection of industrial waste and the operation of camper sites or berths in marinas. Often the reasons for the public interest decisions are limited. The Legislative Proposal should change this.

Legislative amendment – stricter justification of public interest decision

The Legislative Proposal clarifies and tightens the requirements for justification and the process of decision-making for a public interest decision. Administrative bodies that take a public interest decision must from now on:

describe the activity for which the public interest exception is invoked;
describe the public interest served by the decision;
explain the need to invoke the public interest exception;
describe the impact of the use of the public interest exception on entrepreneurs;
weighing the need to deviate from the rules of conduct under the public interest exception against the impact on entrepreneurs.

These requirements should ensure that public interest decisions are better substantiated and thus raise the bar for making a public interest decision.

Furthermore, the new law obliges administrative bodies to consult entrepreneurs if they wish to take a public interest decision. This will ensure that the interests of entrepreneurs are better weighed and it will become clear at an early stage whether a certain interest can also be realized by a company.

The change in the law obliges administrative bodies to evaluate decisions of public interest every five years, whereby entrepreneurs must also be consulted during the evaluation. In this way administrative bodies are forced to take changing market conditions into account. This also means that the public interest decisions taken by various municipalities in recent years must be re-examined.

The Bill is therefore good news for entrepreneurs. Tightening the law will reduce the risk of unfair competition between administrative bodies and entrepreneurs.

Other legal changes

Another change in the Legislative Proposal is that the release of the source code of open source software will be exempt from the rule of conduct for integral costing. The purpose of this exemption is to make it easier for administrative bodies to publish the source code of open software, thereby stimulating innovation, among other things. In addition, the “sunset clause” of the M&O Act will be scrapped, which will remove the temporary nature of the law.

Entering into force

It is not yet known when the new law will enter into force. A logical moment for this would be 1 July 1 2023 because the M&O Act expires on this date due to the sunset clause. Until more is known about the planning and final content of the legislative amendment, it is wise to use the assessment framework from case law as a guideline.

Assessment framework jurisprudence public interest decisions

Although the Legislative Proposal has not been given priority by the legislature for a long time, the CBb has not been idle and, on December 18, 2018, in the cases parking garage municipality of Hengelo and Marina municipality Zeewolde, provided more clarity on the legal framework applicable to public interest decisions. In both cases the question was whether the public interest decisions on the basis of which the municipality offered its services below the integral cost price had been established with sufficient care.

The CBb elaborates on the framework for substantiating public interest decisions. In summary, the assessment framework implies that administrative bodies:

has gathered the necessary knowledge of the relevant facts and the interests to be weighed prior to making the public interest decision;
must demonstrate that there is a public interest decision that is served by the economic activity in question. In any case, this public interest does not exist if the offering of the economic activity below cost price is not necessary to serve the public interest pursued; and
in view of the interests involved, could reasonably decide to make use of its authority to take a decision as referred to in Article 25h(6) of the Competition Act in the manner in which it did. In this respect it is of importance, among other things, whether the administrative body has included in the decision a price-setting mechanism which, on the one hand, actually achieves the intended effect and, on the other hand, the disadvantage for the undertaking(s) concerned as much as possible, on the other hand, whether it has attached a deadline to the decision and whether it has offered compensation for the disadvantage that should not reasonably be borne by the undertaking(s) concerned.

The review framework creates a barrier for administrative bodies to easily sideline the M&O Act by taking a public interest decision. It obliges administrative bodies to actually investigate the consequences of the decision for all parties and to make a proper balancing of interests. If they fail to do so, the decision can be annulled. This happened, for example, recently in the decision of CBb of 6 April 2021 in the case of parking garages ‘s-Hertogenbosch. The CBb ruled that the municipality had insufficiently examined why it was necessary to operate below integral cost price and wrongly failed to take into account the interests of the commercial provider. In the decision of the Rotterdam District Court of 14 October 2021 in the ‘s-Hertogenbosch case and the decision of the Rotterdam District Court of 2 February 2021, the District Court concluded that the reports showing the necessity of not passing on the costs in full were too general and, moreover, did not sufficiently weigh up the interests (for the latter point, see also the decision of the Rotterdam District Court of 28 June 2018 in the Hilversum case of parking garages). Thus, it is not unusual for public interest decisions to be annulled due to inadequate reasoning by municipalities. The case law is in line with the planned legislative amendment and therefore remains relevant for entrepreneurs who want to challenge a public interest decision.

In the second part of recent developments of the Dutch Act on Government and Free Markets bird’s eye view, we discuss the most relevant developments of the M&O Act over the past year.

Bas Braeken en Lara Elzas

Vision

Litigation boutique bureau Brandeis opens Paris office with focus on antitrust litigation.

Today, bureau Brandeis launched its Paris office. Throughout the EU, collective actions are on the rise in many areas, in particular antitrust damages cases. bureau Brandeis has been active in this and other high stake areas of litigation for many years , with a clear preference for the challenger. It now joined forces with seasoned French antitrust litigators Marc Barennes, Sarah Subrémon, David Reingewirtz and Philippe Zeller to increase its access to the French market and expand its network of first-class economists, data collectors and litigation funders. The office of bureau Brandeis Paris is located in 4 rue de Penthièvre, 75008 Paris, in the heart of the Paris business arrondissement.

bureau Brandeis Paris is the first European plaintiff litigation boutique in France dedicated primarily to assisting companies, public entities and groups of individuals harmed by competition law infringements. Other fields of high stake litigation will be added in due course.

bureau Brandeis Paris founding members declared: “We are thrilled to set up this office together and work with our Amsterdam colleagues in getting justice and compensation for large groups of antitrust victims.”

Hans Bousie, partner of bureau Brandeis Amsterdam about this new venture: “Clients want these cases brought where is best for them, whether that is in Amsterdam or elsewhere. With the opening of bureau Brandeis Paris, we take a major step in developing our EU presence, with unique access to claims funding. We are thrilled that Marc, Sarah, David and Philippe open a bureau Brandeis office in Paris. We share the same values and work from the belief that litigation is a tool to obtain justice. Apart from that, they are the nicest French (wo)men you can imagine. We are looking forward to working with them in antitrust cases and in other areas of litigation in the future”.

bureau Brandeis was established in Amsterdam in 2014, as a boutique law firm, specialized in litigation, and has a preference for the challenger. bureau Brandeis is a law firm with an emphasis on litigation and in (international) arbitration. We act, often together with other law firms at home or abroad, for national and international companies and other organizations, with a preference for the challenger. We participate in the social debate.

Marc Barennes was a référendaire with the General Court of the European Union and an officer with the European Commission (DG Competition) for 15 years, after starting his antitrust career with a US law firm in Brussels and Paris. He also gained significant experience in private damages actions as a senior executive of an antitrust claims aggregator in the past two years.

Sarah Subrémon is a former Deputy Rapporteur General of the French Competition Authority and a former official with the European Commission (DG Competition) and the English Competition and Markets Authority, where she worked for more than 15 years. She started her career as an antitrust lawyer in Paris. She joins bureau Brandeis Paris from an antitrust claims aggregator where she was also a senior executive.

David Reingewirtz is an antitrust and commercial litigator. After practicing antitrust law in various well-known UK and US law firms in Paris, Brussels and Washington for 8 years, David was appointed Secrétaire de la Conférence du stage in 2008, a prestigious position for French litigators. He then co-joined an independent litigation boutique, specializing in antitrust, commercial and criminal disputes.

Philippe Zeller is an antitrust, regulatory and public litigator. After earning his Ph.D. in public law and lecturing in this field in various law schools, Philippe joined prestigious US and French law firms in Paris where he held Counsel and Partner positions. He specializes in litigating cases before the French independent administrative agencies and Courts.

Vision

Cartel Damages Litigation – Quarterly Report I of 2019

This is the first bureau Brandeis quarterly report of 2019 on the developments in the area of cartel damage litigation. You may download our quarterly report here.

Would you like to receive the next edition of our quarterly report by email? Please subscribe to our mailinglist by filling in this form or sending us an email through this link.

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bureau Brandeis expands with new partner Bas Braeken

On 16 July Bas Braeken will be joining bureau Brandeis in Amsterdam as a partner. Bas is a recognised specialist in the field of (European) competition law and economic regulation in a variety of sectors, such as telecoms, media and fintech.
He is joining bureau Brandeis from Maverick, a company he helped found six years ago. Before that he was a long-time employee of Allen & Overy.
“Bas’s appointment fits in perfectly with our strategy of continuing to build on a broad litigation firm with a focus on complex cases,” says Louis Berger, one of the founders of bureau Brandeis. “Bas is an important piece of the puzzle that will give our ambition further shape. He enjoys an outstanding reputation in the field of European competition law, but also has specific sector knowledge of markets such as telecoms, media, mail & parcels, mobility and fintech. In Bas we see an ambitious partner who has the same entrepreneurial drive, level and values as the other partners of bureau Brandeis, which will provide a huge amount of synergy.”
In the last few years Bas Braeken has achieved major successes for T-Mobile, Canal+, Prijsvrij and others. He also regularly conducts legal proceedings before the European judicial authorities in Luxembourg.
Partner Machteld Robichon: “Bas’s outstanding knowledge and experience are a perfect fit with the regulated market practice of Simone Peek (financial law and life sciences) and mine (practices of change, media and telecoms) and with the cartel damage practice of Hans Bousie and Louis Berger. His focus on telecoms and media is also in keeping with the focus of Christiaan Alberdingk Thijm’s practice.”
Bas Braeken: “I am very impressed by the level of the lawyers at bureau Brandeis, the professionalism of the organisation and the single-minded desire to deliver the best service day after day. The existing practice at Brandeis is a seamless fit with my own practice, which very largely consists of proceedings, compliance and investigations, in addition to providing guidance to clients in complex merger control processes. I see a great deal of synergy and look forward to working with my new partners.”
About bureau Brandeis
bureau Brandeis is a boutique law firm that specialises in conducting complex proceedings for the corporate sector. It has experience in all the relevant fields of law, with a preference for the challenger: corporate litigation, commercial litigation, privacy, competition law, financial law, administrative law, intellectual property, media law, telecommunications law, class actions, international arbitration and cassation. With the arrival of Bas Braeken the firm will have 31 lawyers, seven of them partners.

Vision

Is copyright the devil? Or should we store Icebergs in the Sahara?

speech at Eurosonic Noorderslag 2011

If I would only find myself on Twitter and not in real life I would almost believe that copyright is just a burden, just so much dead weight. And today I have the honour to exchange ideas with you about whether this is in fact true. Is copyright the devil?

Before answering this question, I should first explain, of course, who I am, because when you hear a message, it is always a good idea to realise who the messenger is. I am a lawyer specialised in copyright and active in the creative industries. In other words, I earn my money with copyright. I breathe copyright. I work for large organizations in the field of music, books and films that earn their money by exploiting copyright. So I am a lawyer working for the majors and I fully understand the side of the big earners in the world of copyright. So tell me, do you expect me to give you an objective answer to the question whether copyright is the devil, what do you think? Am I objective or not?

Let’s take it one step further. As a lawyer I also represent artists and those who challenge claims to another’s copyright. I summon collecting society´s, or bring proceedings against them before Competition Authorities. I advise people how to escape the clutches of BREIN (that our Dutch copyright police). In recent years, I have provided legal support for many initiatives launched by people who are trying to create an alternative, such as Sellaband. As a result, I see the other side of copyright exploitation in the music industry every day; this other side often results in initiatives dying an early death. So let me ask the question again. Do you expect me to tell an objective story, yes or no?

Let me first make this speech absolutely boring. What in fact is copyright? Copyright is the author’s exclusive right to exploit a work. Nobody else has that right. And rights exploited in the music industry are our subject today. Today we are talking only about the music industry, because in this industry, copyright functions or hinders creativity totally differently from the way it works in other sectors. For instance in the book business, contracts are much more balanced than in the music business, and so there are fewer conflicts. Another example, developments in the fashion industry are so fast that copying does not make sense: by definition, those who copy lay behind in this business. So let’s get back to our beloved music industry.

And what’s the excuse from those in the music industry that invoke copyright? That they are on the side of the creative, because it is the interests of the poor musician that is promoted by all collecting societies, music watchdogs such as BREIN, publishers and record companies. That sounds good, in fact it sounds almost holy, but it is bullshit. All these organizations are acting primarily in their own interests. In itself, there is nothing wrong with that. As you might gather, I also act in my own best interests, as everybody in this room does. But it is important to get the facts clear here today. These representatives act in their own interests, not in the best interests of the composer or artist or the consumer for that matter. So copyright is not about protecting creativity but about collecting money. That´s why they are called collecting societies.

In practice, composers assign their copyrights to collecting societies and publishers and grant licences to record companies for the purpose of making recordings. And so, when the dust has settled, the composers’ and artists’ place is taken over by the middlemen who represent their interests. By collecting societies, by BREIN, by Warner Music, by Sony ATV et cetera. Their priority is not protecting the author’s creation but making money off the author’s work. Copyright is not the right to copy, but the right to a creative income.

And how is this right exercised nowadays? Lets talk about the business of digital downloads. As early as 2002 there were entrepreneurs that understood that digital downloading was the new model and that the industry really had to get started with making the most of that. To sell digital downloads, parties had and have to get in touch with all cbo´s in Europe to be granted a licence for each territory. And some societies grant licences more easily than others, for which reason Spotify is available in the Netherlands but not in Germany.

After getting a deal with them parties must get an agreement with all record companies to exploit the relevant recording and performance rights. Do you know how many record companies and publishers there are in the world? Experience shows that it takes a long time to even make an appointment with anyone in the music industry in the first place, let alone reach an agreement. And then the business faces prohibitive financial requirements.

Let me illustrate this with an example. It’s a bit of a complicated one since it contains figures and maths. So I try keep it simple. We all know that thanks to iTunes, the selling price of a download is 1 euro or a dollar worldwide. In other words, you cannot ask more than 1 euro for a download, because otherwise you do not sell anything. That includes VAT; in other words, your net selling price is 83 cents. Make a mental note of this figure, your maximum net selling price is 83 cents.

Now let’s do some figuring. Collecting societies demand 10% of your selling price, with a minimum of 10 cents per track (be it somewhat lowered these days in some countries), the record companies demand at least 70% of your selling price with a minimum of 70 cents per track. We then arrive at 80 cents and then only the music industry is paid. Remember your maximum selling price of 83 cents? So you bought something for 80 cts and you can not sell it for more than 83 cts. You now have 3 cts per track to work with. You have to pay the operating costs of the entire organization. The software, the office organization, the web application, maintenance, distribution (bandwidth costs) and then you have to make a profit, too. In this example, you are absolutely certain to suffer a loss on each and every track you sell. And that is even before you have paid your staff and yourself. This is exactly why even iTunes is not profitable.

And if all these parties have granted permission, which will be even more time-consuming than your whole business plan, you are often supposed to pay in advance, too, so you will be bankrupt even before you have properly started. It used to work like this. Anyone at the gate of the music industry had to pay advances, so having a deal with the majors would mean to pay 200.000 euro up front. These advances were not returnable and only recoupable within the first year. So if you would not sell enough tracks, your money would be gone. Don’t think I’m only talking about the majors here. Some Indies behaved even worse. They would charge you a fixed fee up front for any right to a download whether sold or not.

For anyone familiar with normal figures in the music industry, these figures are ridiculous. A normal album that would cost 18 euro in the store is sold to retailers for about 10 Euros. So retail has a healthy margin to work with. And amongst themselves the prices are even lower. If a record company wants to clear the right of a track for a compilation album it would be charged 5 cents per track, for a number one hit, max 15 cents. So one record company charging another one for max 15 cents per track. Remember the figures. If a retailer wants to sell a physical compilation cd, he would have to pay 10 Euros and with a normal price of 18 Euros would have enough margins to work with, to even lower the net selling price. If however a retailer in the example above would want to sell a digital download, he would be charged 80 cts at least with a maximum selling price of 83 cents. And that is, I repeat, why even iTunes isn’t a viable business model in itself.

So what happened here? By invoking copyright, these parties have succeeded in obstructing developments in digital music exploitation in this way for years now. For this reason, music consumption has gone its own way. People thought: if we cannot do it legal, let’s do it illegal. And this is how Napster, Kazaa, Mininova, and Piratebay were created and apparently, this exploitation satisfied a need that the music industry failed to respond to. And as a result, the big wigs in the record industry and the societies of this world sit with their fat asses on a big pile of content while this content is creeping outward under their own weight, becomes fluid and is dispersed all over the place beneath them. But it is to no avail to the industry itself.

Imagine all the music in the world as one large iceberg. This iceberg is guarded by the music industry. If you want a chunk out of it, you must buy it. But they made a big mistake; they are desperately trying to store this iceberg in the Sahara and refuse to tow it to a safer place. They might even think that it’s too expensive to tow the iceberg all the way up to the poles. The tragedy is that the industry is not even aware that the iceberg melts, so what they are trying to sell is slipping away and is freely admissible as plain and simple water. So on the Internet music is available like water, entirely free, but, unfortunately, illegal.

And here the execution of copyright kicks in. Has copyright been an exclusive property right until now? I propose that we replace it with the right to a creative income. The creative who communicates his work to the public or reproduces it must be paid for it, but there will be a different point of departure. Let’s not longer require from all parties to ask for prior permission, but make it possible to just exploit music and pay a fee for that afterwards.

What should we agree about?

From now on, we will prohibit the industry from charging minimum fees.
Copyrights will only be paid as long as revenues allow it and always afterwards.
Allow new initiatives a starting-up period.
Use a royalty or a subscription model.
Award initiatives like Spotify the Nobel Prize.

If we reach agreement on this, we will be able to enjoy music legally at last.

Let’s wrap it up. The current copyright system is ok in most cases, but the underlying idea does not work for digital music. Remember that copyright is not there to protect the creative but to earn a creative income. It turns out that a copyright system based on exclusive rights and prior permission is not effective at all on the Internet.

Let me finish.. Let us make sure that in the future music copyright will no longer be a right to intellectual property but a right to creative income. You always have permission, provided that you pay a reasonable fee afterwards. What we need is play now and pay later.And please industry, remove this iceberg from the Sahara.
Eurosonic Noorderslag 2011