Competition Flashback Q3 2022
This is the Competition Flashback Q3 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).
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Overview Q3 2022
- Illumina/GRAIL: European Commission may investigate non-notifiable concentration according to EU court and bans controversial transaction
- Highest administrative court overrules Rotterdam Court and upholds ACM’s approval decision Sanoma/Iddink
Cartels and vertical restraints
- Insurance Ireland commits to providing non-members with access to its database
- ACM allows sustainability agreements between soft-drink suppliers
- Cartel fine for H&S Coldstores upheld after referral back from the highest administrative court
- ACM receives extension of decision-making period and may supplement investigation report in complex cartel investigation
- Court permits one-year post-contractual non-compete clause in franchise agreement in case of protectable know-how
Abuse of a dominant position
- General Court largely upholds multi-billion euro fine Google in Android case, yet uncovers some procedural errors
- Refusal of DPG to continue to supply newspaper content to digital kiosk Blendle does not constitute an abuse of dominance
Follow-on competition damages claims
- Advocate General Drijber and District Court of Rotterdam confirm ‘broad’ jurisdiction of Dutch courts based on the existence of an anchor defendant
- Clarification of possibility for claim vehicles to choose Dutch applicable law and validity of assignments
- Obstruction of ACM investigation leads to significant fine for online shop owner
- Clothing companies offer commitments to ACM regarding sustainability claims
Illumina/GRAIL: European Commission allowed by EU Court to investigate non-notifiable concentration and bans controversial transaction
General Court, judgment of 13 July 2022; European Commission, decision of 6 September 2022 and press release of 19 July 2022
There have been a number of noteworthy developments surrounding Illumina’s high-profile acquisition of GRAIL. On 13 July 2022, the General Court of the European Union (“General Court”) ruled for the first time on the competence of the European Commission (“Commission”) to investigate a concentration following receipt of referral requests from national competition authorities under Article 22 of the Merger Regulation. The procedure for such a referral was explained in more detail by the Commission in its Article 22 Guidelines last year (see our previous blog). Although this provision functioned primarily as a safety net for Member States without a merger control regime, the General Court concludes that Article 22 has a broader scope and contributes to the purpose of the Merger Regulation. According to the Court, this interpretation does not undermine the principle of legal certainty. In that regard, it does emphasise that the Commission must observe a reasonable time limit. A period of 47 days between the moment that the Commission first learns about the acquisition (through a complaint) and that it sends an invitation to the Member States to submit a referral request, is considered unreasonably long. However, as this did not harm Illumina’s defence, it could not lead to the annulment of the decision. The General Court’s judgment thus appears to leave a fairly large degree of discretion to the Commission.
Hence, the Commission was allowed to launch an investigation into the Illumina/Grail-transaction and, after an in-depth investigation, banned the acquisition on 6 September 2022. GRAIL is an undertaking that develops blood tests for the early detection of cancer. Illumina is the only credible provider of so-called NGS-systems, which form a necessary input for the production of these blood tests. The Commission found that, post-transaction, Illumina would have the ability and incentive to exclude GRAIL’s competitors from the market, thereby significantly hampering innovation. As Illumina had already implemented the acquisition in August 2021, the Commission is currently considering measures to undo the concentration.
In parallel, the Commission launched an investigation into a possible breach by Illumina of the standstill obligation. On 29 October 2021, the Commission imposed interim measures on Illumina to restore/maintain competitive conditions on the market despite the implementation of its acquisition of Grail. On 19 July 2022, the Commission sent Illumina its Statement of Objections. An infringement could result in a significant fine (up to 10% of its annual turnover).
Illumina/GRAIL constitutes a special test case of Article 22 of the Merger Regulation where all kinds of novelties around merger control arise. Not only regarding the application of the referral regime itself, but also on the assessment of a possible breach of the standstill obligation (in the absence of a notification obligation) and the reversal of an already implemented transaction.
Highest administrative court overrules Rotterdam court and upholds ACM’s approval decision Sanoma/Iddink
Trade and Industry Appeals Tribunal, judgment of 12 July 2022
The judicial review of the Dutch Authority for Consumers and Markets’ (“ACM”) second-phase decision on the acquisition of Iddink – provider of the electronic learning environment (“ELO”) Magister – by schoolbook publisher Malmberg (Sanoma) recently took a new turn. While the District Court of Rotterdam annulled the decision following an appeal by rival textbook publisher Noordhoff, the Trade and Industry Appeals Tribunal (College van Beroep voor het bedrijfsleven, “CBb”) reversed that judgment and ruled that the decision is not unlawful.
Initially, the District Court of Rotterdam ruled that the ACM had not sufficiently examined whether the merging parties could deprive competing publishers (such as Noordhoff) of access to schools by bundling ELO services and educational programmes. According to the court, the ACM’s decision on this point was not adequately reasoned, as the ACM should not have concluded simply on the basis of a survey among schools that there was no need for bundling.
The CBb agreed with the Rotterdam District Court in that the ACM had not carefully presented the research results among schools, but ruled that this did not constitute a breach of the duty to state reasons which could lead to annulment. The demand of schools is only one of the factors the ACM took into account in its assessment of Iddink and Sanoma’s bundling strategy. As regards other aspects of the merger decision and the remedy proposal, the CBb found no shortcomings. For instance, the ACM has sufficiently substantiated its choice for behavioural remedies instead of structural remedies. Moreover, the CBb considers that the commitments are appropriately designed, despite their reactive nature, and the control mechanisms (external auditor, fast-track arbitration and audit options) are sufficiently effective and enforceable.
Hence, the ACM’s initial merger decision will revive and the amended decision following the court’s first ruling (see our Competition Flashback Q3 2021) is revoked.
Insurance Ireland commits to providing non-members with access to its database
European Commission, decision of 30 June 2022
On 30 June 2022, the Commission accepted commitments offered by Insurance Ireland, a trade association for the insurance sector in Ireland. The procedure revolved around the access provided by Insurance Ireland to its Insurance Link information exchange system, a database which facilitates the detection of fraud.
In 2019, the Commission launched a formal investigation into the conditions for insurance service providers to gain access to Insurance Link, as designed and imposed by Insurance Ireland. In its Statement of Objections, the Commission considered that Insurance Ireland unfairly made access to the database dependent upon membership of the trade association. It also found that the conditions for being admitted to Insurance Ireland were not sufficiently clear, transparent and objective, and were discriminatory. Moreover, the membership application process was not handled in an adequate manner. The Commission concluded that Insurance Ireland arbitrarily delayed or de facto denied access to Insurance Link to companies that had a legitimate interest in being admitted to it, which put them at a competitive disadvantage.
To address the Commission’s concerns, Insurance Ireland has committed to separate access to Insurance Link from the association’s membership, to revise the access criteria, and to improve the application procedure. In addition, for applicants that have been refused access, it will be possible to appeal to an independent appeal body. Finally, Insurance Ireland will not use Insurance Link’s fee structure to hinder access to the database. The Commission will monitor the implementation of and compliance with these commitments for a duration of ten years.
ACM allows sustainability agreements between soft-drink suppliers
ACM, press release of 26 July 2022
Using its draft Guidelines on Sustainability Agreements, the ACM announced that it will allow a joint agreement between soft-drink suppliers to abolish the plastic handle on multipacks of soft drinks. This is the fourth time the ACM has openly welcomed a sustainability initiative and reviewed it in light of its draft Guidelines (see two previous initiatives in the energy sector and the cooperation between Shell and TotalEnergies).
The ACM welcomes the initiative by Coca-Cola, Vrumona, Albert Heijn and Jumbo. It believes that the agreement will not negatively affect competition or come to the detriment of consumers, for example through an increase in price or a decrease in quality. The ACM also endorses the suppliers’ view that the handle does not play a role in the competitive process. Instead, the initiative makes a positive (non-mandatory) contribution to a sustainability objective and/or entails an improvement in product quality. The ACM does nevertheless emphasise, with reference to its Guidelines on sustainability claims, that suppliers may only use clear, correct and relevant sustainability claims if they wish to include this initiative in their advertisements.
Lower court upholds cartel fine for H&S Coldstores after referral back from the CBb
District Court of Rotterdam, ruling of 7 July 2022
After a quashing and referral back from the CBb, the Rotterdam District Court ruled again on the case concerning H&S Coldstores. In 2015, the ACM imposed a fine for the exchange of commercially sensitive information about fish storage in cold stores, in violation of the cartel prohibition. In first instance, the Rotterdam District Court annulled the fining decision as, in its view, there was insufficient evidence showing that the contacts were part of an overall plan and therefore amounted to a single and continuous infringement. On appeal, however, the CBb ruled that these contacts did in fact amount to a common overall plan and endorsed the existence of a single and continuous infringement. The CBb referred the case back to the court of first instance to examine the remaining grounds of appeal.
In this (second) judgment, the court addressed, amongst other things, the legality of the dawn raids performed in the preliminary investigation. The court ruled that by using the words “the operation of cold-storage warehouses” in conjunction with the underlying documents, the ACM had sufficiently clearly defined its investigation purpose. The ACM had also correctly determined the amount of the fine, as the parties frequently coordinated their offers, which effectively eliminated price competition. The appeal was completely dismissed, resulting in the revival of the fine of €694,000.
ACM receives extension of decision-making period and may supplement investigation report in complex cartel investigation
District Court of Rotterdam, judgments of 25 August 2022
In three (nearly identical) judgments, the Rotterdam District Court elaborated on the ACM’s decision-making period for (cartel) fining decisions and the possibility of supplementing its investigation report. Fifteen parties lodged an appeal against the ACM for the failure to adopt a timely decision after delivering a report in which it established a violation of the cartel prohibition. Under the General Administrative Law Act, the ACM must decide whether to impose an administrative fine within thirteen weeks after the delivery of the investigation report. Since the ACM has offered a data room procedure, several parties have initiated civil (interim relief) proceedings (and subsequent expedited appeals), and the parties have submitted further opinions, the ACM is of the opinion that an additional report is necessary before it can decide whether to impose a fine or not.
The court notes that the statutory decision period of thirteen weeks is (merely) an indicative period and that exceeding it does not deprive the ACM of its power to impose a fine. Given the complexity and size of the case, the court sees reason to honour the ACM’s defence and grants it until 31 December 2022 to hand down its decision. The court explicitly emphasises that this does not (yet) answer the question whether the ACM is actually authorised to issue a supplementary report and/or whether there is a violation of the principle of legal certainty. This might come up in subsequent proceedings, according to the court, in case a fine will be imposed.
Court permits one-year post-contractual non-compete clause in franchise agreement in case of protectable know-how
District Court of Amsterdam, judgment of 27 July 2022
In a judgment of 27 July 2022, the District Court of Amsterdam ruled that a non-compete clause agreed between Multicopy and one of its franchisees did not infringe the competition rules. The non-compete clause prohibited the franchisee from operating a shop competing with Multicopy at the same location within one year after termination of the agreement.
The dispute mainly concerned the question whether Multicopy had provided relevant and protectable know-how to a franchisee justifying a post-contractual non-compete clause (Pronuptia judgment). According to the court, to answer this question a link should be made with the Dutch Franchise Act, which came into force on 1 January 2021. That Act defines protectable know-how as “the whole of […] practical information […] which is confidential, substantial and identified”. The court found that the documents and training provided by Multicopy were, although general in scope, when taken together, sufficiently specific to graphic service businesses that they constitute know-how that warrants protection. The fact that an independent operator in the sector can obtain the information by other means does not affect the confidential nature of the information provided by Multicopy.
The court concludes that the non-compete clause, taking into account both its limited duration and geographical scope, does not infringe competition law and is not unreasonably onerous.
General Court largely upholds multi-billion-euro fine Google in Android case, yet uncovers some procedural errors
General Court of the European Union, judgment of 14 September 2022
On 14 September, the General Court delivered its judgment in the Google Android case. In 2018, the Commission imposed on Google its highest fine ever (over €4.3 billion) for maintaining multiple contractual restrictions on original equipment manufacturers (“OEMs”) and mobile network operators. OEMs had to pre-install Google Search and Google Chrome apps in order to obtain a licence for the Google Play Store, and were not allowed to sell devices with Android versions that were not approved by Google if they wanted to pre-install Google apps on any of their devices. Google also offered OEMs and operators a financial incentive to only pre-install Google Search (exclusivity payments). According to the Commission, these restrictions involved one overall strategy to cement Google’s dominant position on the market for general search services during the rise of mobile internet.
The General Court largely upheld the Commission’s decision. It confirms the Commission’s finding that Google enjoys a dominant position in the markets for (i) general search services (Google Search), (ii) Android app stores (Play Store) and (iii) licensable operating systems (Android). The General Court rejects Google’s repeated argument that it is subjected to competitive pressure from Apple. However, the Court does conclude that there is insufficient evidence that the exclusivity payments in themselves constituted an abuse. The Commission did not sufficiently demonstrate that the payments covered a significant part of the market for general search services, and that a hypothetically equally efficient competitor of Google would not be able to offset these payments. Given the shortcomings in the ‘as efficient competitor test’, and the fact that the Commission rejected Google’s request to have an additional hearing after receiving the additional letter of facts on this matter, the General Court reduced the fine to €4.125 billion.
Refusal of DPG to continue to supply newspaper content to digital kiosk Blendle does not constitute an abuse of dominance
Amsterdam Court of Appeal, judgment of 2 August 2022
On 2 August 2022, the Amsterdam Court of Appeal delivered its judgment in the case of Blendle v DPG Media.* In these expedited appeal proceedings, Blendle argued that DPG abused its dominant position by refusing to continue to supply newspaper articles (from e.g. AD, Trouw, de Volkskrant and het Parool) to Blendle’s digital kiosk. Since DPG’s newspapers constitute an essential input to market the Blendle platform, this leads to an abusive refusal to supply, according to Blendle. Blendle further argued that DPG was engaged in a strategy of self-preferencing as the refusal aimed to squeeze Blendle out the digital kiosk market in favour of DPG’s own initiatives, including Topics and tijdschrift.nl.
In first instance, the preliminary relief judge rejected Blendle’s request, mainly because it found insufficient evidence of a separate relevant market for digital kiosks. The Court of Appeal took a different approach and considered that it could not be established that DPG was actually developing its Topics platform into a digital news kiosk. In any event, this requires a more extensive factual investigation which cannot be conducted in the underlying interim relief proceedings. As regards the refusal to supply, the Court of Appeal underlined that DPG is in itself willing to make its newspapers available, but only on the basis of a micropayment model (on a pay-per-article basis). Thus, even if it were to be assumed that Blendle is an innovative service for which there is consumer demand, and that access to DPG’s content is indispensable for the realisation thereof, there is an objective justification and no absolute refusal, according to the court.
As it did not establish an abuse, the Court of Appeal did not need to elaborate on the existence of a dominant position and the definition of the relevant market. Hence, the court did not need to address Blendle’s argument that DPG holds a market share of 63% on the Dutch daily newspaper market and enjoys a dominant position. The Court of Appeal thus upheld the judgment of the Amsterdam District Court.
*Bas Braeken and Demi van den Berg have assisted Blendle in these proceedings
Advocate General Drijber and District Court of Rotterdam confirm ‘broad’ jurisdiction of Dutch courts based on the existence of an anchor defendant
Advocate General to the Dutch Supreme Court, opinion of 7 August 2022; District Court of Rotterdam, judgment of 17 August 2022
In his opinion of 7 August 2022, Advocate-General (“AG”) Drijber confirmed the judgment of the Amsterdam Court of Appeal in the case MTB/Heineken and AB. The case concerns a Greek brewery, Macedonian Thrace Brewery (“MTB”), which claimed damages from its competitor Athenian Brewery (“AB”), as well as AB’s Dutch parent company Heineken, for the abuse of dominance by AB in the Greek beer market. A central question in this case was whether the Dutch court has jurisdiction to hear the claims against the Greece-based AB due to the existence of a close link between the claims against AB and against the anchor defendant, Heineken. The court answered this question in the affirmative.
AG Drijber reaches the same conclusion: the Dutch court has jurisdiction to hear the claims against AB because the claims brought against AB and Heineken are closely linked. According to AG Drijber, it is important in this respect that, one way or the other, the Dutch court has to rule on the merits regarding AB’s actions, because Heineken – as a parent company – may be held liable for the alleged damage only if it is established that AB is liable. AG Drijber further concludes that a claimant only abuses procedural law where it creates jurisdiction artificially, for instance by bringing a claim that has no merit but solely aims to keep a defendant away from its own court.
In a damages claim relating to the bitumen cartel, the District Court of Rotterdam applied the same reasoning. The Dutch State claimed to have suffered damages as a result of the bitumen cartel and therefore sued Shell, Kuwait Petroleum and Total. These cartelists subsequently summoned, among others, the German oil and gas company Wintershall in indemnity. The District Court of Rotterdam confirmed the judgment of the Amsterdam Court of Appeal in MTB/Heineken and AB and ruled that there can only be grounds for refusing jurisdiction if it becomes sufficiently plausible that the claims were only brought to deprive the defendant of the jurisdiction of its national court, which was not the case here.
Clarification of possibility for claim vehicles to choose Dutch applicable law and validity of assignments
District Court of Amsterdam, ruling of 27 July 2022
On 27 July 2022, the District Court of Amsterdam ruled on the applicable law in cases where claims have been bundled into a claim vehicle, such as a foundation, as well as on the possibility of transferring victims’ claims to a claim vehicle by assignment. The case concerned the admissibility of claim vehicles claiming damages resulting from the truck cartel.
In assessing the question of which law applies to the claims (on the basis of conflict of laws), the court held that the bundling of claims would result in the applicability of a multitude of legal systems. This would render the goal of the rules on conflict of laws futile. Moreover, the Dutch Conflict of Laws Act (Wet conflictenrecht onrechtmatige daad) does not provide a uniform solution for a situation where a competition infringement affects several Member States.
Therefore, in line with the judgment of the Court of Appeal of Amsterdam in the Aircargo case, the District Court of Amsterdam ruled that, taking into account the principle of effectiveness, the applicable law to the bundled claims should be determined in a manner corresponding to the choice of law (lex fori) provided for in the Rome II Regulation. Pursuant to that regulation, claimants can make a choice of law. In this case, Dutch law was chosen to be applicable. The applicability of Dutch law was also foreseeable for the truck manufacturers since the Dutch market was also affected by the truck cartel. In light of the principle of effectiveness, the court held that Dutch law applied to all bundled claims.
In addition, the court held that the assignments of the claims to the claim vehicles were valid. The claimants’ burden of proof as to the validity of the assignments entails that the defendants, in this case the truck manufacturers, must be able to establish that the assignor and assignee actually assigned their claim(s) on the basis of the documentation submitted. This burden of proof is satisfied when the assignment agreement and the deed of assignment are provided for each individual underlying party, from which it is clear that they were signed/issued by the (representative) assignor. Defendants can rebut this with specific evidence which demonstrates that there was no legally valid assignment.
Obstruction of ACM investigation leads to significant fine for online shop owner
ACM, decision of 4 July 2022
On 4 July 2022, the ACM imposed a fine for obstructing the ACM’s investigation on the owner of an online store that sells accessories for mobile phones. During its investigation into a possible violation of Dutch consumer protection law, it asked the owner for information on multiple occasions.
Undertakings and individuals are generally obliged to cooperate with an ACM investigation. Although the ACM often merely threatens with a sanction for non-cooperation, it rarely actually imposes a fine. The owner in question did, however, not respond to any of the requests for information. As such, the ACM was unable to determine whether its suspicions were correct. According to the ACM, this seriously hindered the supervision of compliance with consumer protection rules and undermined its authority as a regulator. The ACM therefore decided to impose a fine of €10,000.
Clothing companies offer commitments to ACM regarding sustainability claims
ACM, decisions of 19 August 2022 and 29 August 2022
In spring 2021, the ACM launched a large number of investigations into potentially misleading sustainability claims, including in the clothing sector. It assessed the claims of ten major companies and, on the basis of those findings, launched a follow-up investigation into six of those. The investigation carried out by the ACM revealed that Decathlon and H&M offered their products using general terms such as ‘Ecodesign’ and ‘Conscious’ without immediately specifying clearly the sustainability benefits in the claim.
Although the ACM did not establish an infringement, Decathlon and H&M have committed to adjust or no longer use the sustainability claims on their clothes and/or websites, as well as to inform consumers more clearly in order to minimise the risk of misleading practices. Furthermore, the two companies will donate €400,000 and €500,000, respectively, to sustainable causes to compensate for their use of unclear and insufficiently substantiated claims.
The commitment decisions regarding Decathlon and H&M are the first in which the ACM explicitly assesses sustainability claims on the basis of the Guidelines on sustainability claims, which contain rules of thumb and practical examples that can help businesses when phrasing sustainability claims. The ACM is currently also investigating the use of sustainability claims in other sectors. In January, for instance, the ACM launched a follow-up investigation into misleading sustainability claims made by two energy suppliers.
Read more about recent developments in consumer law (and sustainability) in our recent blog.
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