On 6 September 2023, the European Commission (“Commission”) designated Alphabet, Amazon, Apple, Meta, Microsoft, and ByteDance (the parent company of TikTok) as gatekeepers under the Digital Markets Act (“DMA”). The DMA imposes additional obligations on online platforms that enjoy significant economic power and act as an important gateway for business users to reach end users (see also our earlier blog on the DMA). The substantive obligations of the DMA will enter into force in March 2024, subjecting the undertakings designated as ‘gatekeepers’ to a stricter regulatory regime.

In the meantime, Apple, Meta, and ByteDance have already appealed their designation decisions to the General Court of the European Union (“General Court”), and the Commission is conducting market investigations into possible additional designations. ByteDance has also filed an application for the suspension of its designation with the President of the General Court. In this blog, we discuss the scope and obligations of the DMA through seven questions and answers. We also cover recent developments regarding the designations, enforcement issues, and the role of third parties.

1. What is the DMA?
2. To whom does the DMA apply?
3. Which undertakings have been designated as gatekeepers so far?
4. What obligations does the DMA impose on gatekeepers?
5. When does the obligation to inform the Commission about concentrations apply?
6. How is the DMA enforced?
7. Does the DMA facilitate private damages claims?

1. What is the DMA?

The DMA is an EU regulation that seeks to safeguard competition on digital markets by ensuring that digital markets remain ‘fair’ and ‘contestable’. The previous years, several online platforms have become so sizeable and powerful that new entrants face significant challenges when competing with these incumbents. Moreover, large online platforms typically possess such a vast and all-encompassing ecosystem that provides them with a significant advantage in reaching end users and enables them to effectively exclude other market participants. Furthermore, the vast amounts of data the gatekeepers generate further reinforce the competitive advantage gatekeepers typically enjoy over their competitors. As a result of the foregoing, innovation and quality in digital markets are diminished as existing competitors are unable to keep up, and new entrants are discouraged from entering the market.

The use of Articles 101 and/or 102 TFEU has not always proven to be effective in tackling these structural issues. Although both the Commission and national competition authorities (“NCAs”) have pursued several investigations in digital markets in recent years (for the Commission, think about the Amazon Buy Box and three investigations into Google), these investigations are often complex and time-consuming. The Commission’s investigations into Apple Pay and Apple’s App Store (music services), launched in 2020, are for example still ongoing. Ex post enforcement action based on Articles 101 and/or 102 TFEU may thus – in the view of the European legislator – in some cases come too late to repair the harm to the competitive playfield. The DMA seeks to close this enforcement gap by providing an ex ante regulatory framework for large online platforms (see also our earlier blog on this subject).

2. To whom does the DMA apply?

The DMA applies to gatekeepers. A gatekeeper provides one or more so-called core platform services (“CPSs”) The DMA distinguishes the following CPSs:

A CPS provider qualifies as a gatekeeper if a number of qualitative requirements are met. A gatekeeper is not necessarily dominant within the meaning of EU competition law. Instead, an undertaking is qualified as a gatekeeper if it (i) has a significant impact on the internal market, (ii) it provides a CPS which is an important gateway for business users to reach end users, and (iii) has or is expected to have an entrenched and durable position. An undertaking is subsequently presumed to satisfy the abovementioned requirements if it meets the following quantitative criteria:

If an undertaking meets the quantitative criteria, it is obliged to notify the Commission within two months after those thresholds are met. Upon notification, undertakings that qualify as gatekeepers can try to rebut this presumption. So far, Alphabet, Microsoft, and Samsung have successfully argued that they should not be designated as gatekeepers as regards their Gmail, Outlook, and Samsung Internet Browser, despite meeting the DMA’s quantitative thresholds. The Commission conceded to the objections and refrained from designating Alphabet, Microsoft and Samsung as gatekeepers with respect to these services.

Where the arguments challenging a designation fall short of outright refuting the designation, but do cast sufficient doubt, the Commission may conduct a market investigation. The Commission is currently conducting investigations in order to establish whether Microsoft Bing, Microsoft Edge, Microsoft Advertising, and Apple’s iMessage ought to be designated under the DMA. In the reverse, the Commission can also designate an undertaking as a gatekeeper on the basis of a market investigation if the undertaking does not meet the DMA’s quantitative thresholds.

A designation by the Commission is not temporally limited. The Commission can, upon request or on its own initiative, reconsider, amend, or repeal a designation if there has been a substantial change in any of the facts underlying the designation, or where it is found that the designation was founded on incomplete, incorrect, or misleading information. The Commission may later also designate new gatekeepers. There is for example already some talk about the potential designation of Booking.com in the near future. So far, Booking eluded the DMA’s quantitative thresholds – in large part due to the COVID-19 pandemic – but is already considered to be a prime candidate for a gatekeeper designation in the media.

3. Which undertakings have been designated as gatekeepers so far?

On 6 September 2023, the Commission designated six undertakings as gatekeepers in respect of twenty-two CPSs. The image below provides an overview.

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

The Commission’s gatekeeper designations could be appealed until 16 November 2023. Microsoft, Amazon, and Alphabet (Google) expressed that they will not appeal their designations. Apple, ByteDance, and Meta did appeal their designation decisions. In its appeal, ByteDance essentially argues that TikTok does not enjoy an entrenched and durable position and that it does not meet both the DMA’s turnover and capitalisation thresholds (unlike all other gatekeepers so far designated). Meta specifically appealed the designation of ‘Facebook Marketplace’ and ‘Facebook Messenger’. Apple, in its turn, appealed all gatekeeper designations and also filed a complaint against the Commission’s decision to initiate a market investigation into whether Apple’s iMessage should be included in the designation decision. These appeals will probably be decided on next year.

Third parties may join the appeal proceedings before the General Court if they can establish an interest in the General Court’s decision. The ongoing proceedings will reveal whether competitors, customers or other third parties have a sufficient interest already in the stage of the gatekeeper’s designation, or whether this interest only arises in the event of a gatekeeper’s non-compliance with the DMA.

4. What obligations does the DMA impose on gatekeepers?

Articles 5, 6 and 7 of the DMA introduce a wide range of obligations for gatekeepers. Many of the obligations relate to the collection, processing, and combining of (personal) data. Without the express consent of the end user, a gatekeeper is for example prohibited to collect the personal data of end-users using services of third parties for advertising purposes. Additionally, a gatekeeper is prohibited from cross-using personal data generated by a CPS in other services provided separately by the gatekeeper and vice versa. The gatekeeper is furthermore precluded from (re)directing end-users that access a specific service of the gatekeeper into signing on to other services of the gatekeeper with the aim of combining the user’s personal data. Gatekeepers must furthermore provide end users with effective data portability.

The DMA also contains obligations to provide business users, advertisers and publishers insight into the data generated by and/or for them. The gatekeeper may not use the non-public data generated by business users in competition with these users, for example on a downstream market. With regard to advertisers and publishers, there is also an obligation to provide daily information on the ads placed upon their request, free of charge. For online search engines (i.e. for the time being only Google Search), there is an additional obligation to grant third-party search engines, upon their request, access to anonymised ranking, query, click and view data under fair, reasonable and non-discriminatory conditions (also: “FRAND”-conditions).

In addition to these rules on the processing and accessing of data, gatekeepers must abide by many different obligations that, at their core, concern the interaction between different services and the application of fair trading conditions. To this end, the DMA contains both certain do’s – for example, in the context of interoperability of certain hardware and communication services – and don’ts (think of the express prohibition of self-preferencing and the mandatory use of certain identification or (in-app) payment systems). Gatekeepers are also barred from engaging in tying and bundling practices, for example by making the use of one CPS contingent upon the registration or subscription to another. A gatekeeper should enable end users to easily install and uninstall software applications (including third-party app stores) and allow end-users to easily change the default settings. End users should not be (technically) prevented from switching to or additionally using other software applications or services, and should be able to terminate their service with the gatekeeper without undue difficulty.

Furthermore, the gatekeeper should not prevent business users from offering the same products or services to end users through their own direct sales channel and/or third-party services at prices or conditions that are different from those offered through the online intermediation services of the gatekeeper. More generally, the gatekeeper should not prevent business users and end users from going around the gatekeeper and contracting with other parties (e.g. also indirectly by denying access to certain content or features upon doing so). Specifically with regard to app stores, online search engines and online social networking services, the DMA includes the obligation to apply general FRAND access conditions for business users, which should also contain an alternative dispute settlement mechanism.

Finally, to encourage effective enforcement, the DMA explicitly prescribes that the gatekeeper may not restrict or prevent business users and end users from reporting breaches of the DMA or other EU law rules to a competent authority. A full overview of the obligations the DMA imposes can be found in Articles 5 – 7 of the DMA. The designated gatekeepers must bring their operations into compliance with the DMA by March 2024. Gatekeepers must also submit a compliance report to the Commission and establish an independent compliance function.

5. When does the obligation to inform the Commission about concentrations apply?

Another unique feature of the DMA that has so far received rather little attention is the obligation for gatekeepers to inform the Commission of any proposed concentration in the digital sector, regardless of whether the proposed concentration must be notified to the Commission under the EU Merger Regulation (“EUMR”) or to a national competition authority. This duty to inform reflects the increasing emphasis of the Commission on preventing so-called killer acquisitions. It complements the Commission’s use of Article 22 EUMR to examine mergers that do not meet EU and/or national merger thresholds (read more here), and the CJEU’s recent Towercast-judgment, where the CJEU ruled that certain non-notifiable mergers may qualify as an abuse of dominance under Article 102 TFEU.

As the DMA merely introduces a duty to inform the Commission, it does not provide the Commission with additional powers to investigate these concentrations, and hence, to potentially veto them. Upon ‘notification’, the gatekeeper is required to provide a description of the concentration and the activities of the undertakings involved, as well as the annual EU turnover, the value and rationale of the transaction, the number of annual active users and the number of monthly end users. This will allow the Commission to monitor whether new CPSs need to be designated. The DMA also explicitly states that this information could potentially be used for a subsequent Article 22-referral.

6. How is the DMA enforced?

The primary responsibility for enforcement of the DMA lies with the Commission. In addition to the market investigation mentioned above, the DMA provides the Commission with various investigative powers, such as the possibility to request information and conduct inspections (similar to those under Regulation 1/2003). In doing so, the Commission can also impose interim measures. In case of an infringement of the DMA, the Commission, after issuing its preliminary findings, can impose substantial fines and periodic penalty payments, as well as behavioural remedies. These fines can amount to 10% of an undertaking’s annual turnover and may be doubled to up to 20% for repeat offenders. In case of systemic non-compliance (more than three infringement decisions in eight years), the Commission may also impose structural measures (including, for example, a temporary ban on new acquisitions), following a market investigation.

NCAs only play a supporting role in the enforcement of the DMA by monitoring compliance. In the Netherlands, the Digital Markets Regulation Implementation Act (“Implementation Act”) designates the Dutch Competition Authority (Autoriteit Consument en Markt, “ACM”) as the competent national authority responsible for overseeing compliance with the DMA. The ACM possesses various supervisory powers and may initiate investigations into possible breaches of the DMA on its own initiative. Yet ultimately, the ACM reports back to the Commission, and only the Commission can initiate enforcement proceedings under the DMA.

The ACM’s supervisory powers end where the Commission’s investigation begins. It might nevertheless be difficult to establish clear boundaries as these supervisory and investigative powers could overlap. In its recent advice on the Implementation Act, the Dutch Council of State already indicated that the powers of the Commission, the ACM, and the Dutch Data Protection Authority’s (Autoriteit Persoonsgegevens, “AP”) potentially overlap with one another (for example regarding the enforcement of the Platform-to-Business Regulation and the Data Protection Regulation). Also, many obligations from the DMA bear close similarities to (or even: mirror) previous cases that were addressed under ‘regular’ competition law (think of the specific ban on self-preferencing in the DMA following the Google Shopping case). At the same time, the DMA prevents national authorities from taking decisions contrary to a decision adopted by the Commission on the basis of the DMA. In light of these ambiguities, the Dutch Council of State has advised the (Dutch) legislator to complement the explanatory memorandum of the Implementation Act on these points.

Public enforcement of the DMA may also be initiated on the basis of complaints and signals from third parties, including competitors, business users, and end users. Under Article 27 of the DMA, third parties may directly report possible breaches of the DMA to both the competent national authorities and the Commission. The DMA also encourages whistleblowers to report infringements by gatekeepers to the competent authorities. The Commission stresses that whistleblowers can play a crucial role in the enforcement of the DMA as they alert the competent authorities of potential infringements. To encourage employees to ‘blow the whistle’, the Commission has asserted that whistleblowers need to be protected from retaliation. Consequently, the EU Whistleblower Directive is also applicable to the DMA.

7. Does the DMA facilitate private damages claims?

As of now, still little is known about private enforcement of the DMA. On the basis of Article 288 TFEU, all EU Regulations, hence including the DMA, enjoy direct effect throughout the Member States. Individuals can invoke the rights enshrined in an regulation in civil proceedings where the rights granted to the individual are sufficiently clear, precise, and relevant to the individual’s situation. Given that most obligations in the DMA are formulated in a rather specific and precise fashion, it can be assumed that such is the case (also confirmed by the Commission), although Article 6 of the DMA contains obligations that may “be further specified”.

If a third party suffers damages as a result of a gatekeeper’s infringement of the DMA, it may initiate civil proceedings before a national court. Article 39 of the DMA provides for cooperation between the national competition authorities and the Commission in the national application of the DMA. A national court may request the Commission to provide information and issue guidance when applying the DMA in national proceedings. The Commission can also intervene on its own initiative if the coherent application of the DMA so requires. Additionally, Member States must forward to the Commission a copy of any written judgment of national courts deciding on the application of the DMA.

Throughout the legislative process, it has been stressed that the DMA is not a competition law instrument. Also considering the legal basis of the DMA, the procedural guarantees and (material) presumptions that Regulation 1/2003 and the Cartel Damages Directive provide, are inapplicable. The DMA therefore explicitly stipulates that national courts shall not give a decision which runs counter to a decision adopted by the Commission under the DMA. It can thus be inferred that the unlawful conduct (as one of the elements for establishing a tort action under the Dutch Civil Code) is irrefutably established before a national court after a DMA- infringement decision by the Commission (just as it is on the basis of Article 16 of Regulation 1/2003). This will facilitate a follow-on damages claim following a non-compliance decision based on the DMA.

Conclusion

After many years of negotiations, the practical entry into force of the DMA is nearly in sight. Six undertakings have so far been designated as gatekeepers and the first legal proceedings challenging these designations are already pending before the General Court. In the meantime, the Commission is conducting market investigations to determine whether other services provided by these gatekeepers should be designated under the DMA. Given the thin dividing line between the DMA on the one hand and European and national competition rules on the other, national authorities will need to consider how to most effectively shape cooperation among themselves and with the Commission. Third parties such as the gatekeepers’ competitors and customers may also want to prepare for the new rules that are set to apply to their competitors/business partners in March 2024. During the legislative process of the DMA, the legislator strengthened their role in the enforcement of the DMA by providing for an explicit complaint option as well as by implementing several additional rules on how the DMA is to be applied in national civil proceedings. Third parties are therefore expected to play a crucial role in overseeing the enforcement of the DMA.

More questions about the DMA? Please contact one of our competition law specialists.

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

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

Overview Q3 2021

• Altice’s appeal against gunjumping fine dismissed by General Court
• Commission launches two investigations into Google and Apple after preliminary report Internet of Things
• ACM makes (long-awaited) turn and fines vertical price fixing agreements
• Genuine or non-genuine agency? New interlocutory judgment in Prijsvrij/Corendon is not yet conclusive
• ACM gives second green light for merger of Sanoma and Iddink
• Prestressing steel cartel and elevators cartel: far-reaching duty to allege cartel damage and causality
• Truck cartel damages: broad interpretation jurisdiction of national courts based on Erfolgsort
• Automobile manufacturers fined € 975 million by European Commission for illegal technological discussions
• Aircargo damage: flexible approach to the question of applicable law
• Fine of € 19.5 million imposed on pharmaceutical company for charging excessive prices
• ACM allowed to extend scope of investigation with accidentally obtained evidence

Altice’s appeal against gunjumping fine dismissed by General Court

General Court, judgement of 22 September 2021

In 2018, French telecom company Altice was fined twice € 62.25 million (a total of € 124.5 million) by the European Commission for its premature acquisition of PT Portugal. According to the Commission, Altice already had – and actually exercised – decisive influence over the day-to-day operations of PT Portugal before it obtained the necessary approval from the Commission. For example, it had the power to influence the (structure of the) senior management as well as the pricing policy of PT Portugal. You can read more about the case and the Commission decision in our blog on gunjumping.

Altice appealed the fine decision to no avail. On 22 September 2021, the General Court ruled in favour of the Commission. It held that the Commission had sufficiently established that Altice had effective control over PT Portugal and, moreover, that it actually exercised its control. The fine for the breach of the notification requirement, however, was reduced by 10% by the General Court, because Altice had notified the concentration to the Commission.

Commission launches two investigations into Google and Apple after preliminary report Internet of Things

European Commission, press releases of 22 and 20 September 2021

The European Commission has already launched two investigations relating to the Internet of Things investigations since the publication of its preliminary sector-wide report on June 9, 2021. The investigations concern Google and Apple. You can read more about the preliminary inquiry sector-wide report of the Commission in our blog on the Internet of Things.

The investigation into Google relates to the use of Google Assistant, the tech giant’s voice assistant. Google allegedly (ab)uses its Android operating system to exclude competing voice assistants. The Commission suspects that manufacturers of smart TVs and cars, for example, are being forced to (pre-)install Google Assistant as a standard service. This will give Google easy access to the user data of consumers of those products, which it can then use for its other services. The Commission is furthermore curious to know whether Google requires manufacturers to exclusively use Google Assistant, whether multiple voice assistants from different providers can be used simultaneously, and whether manufacturers receive a portion of the advertising revenue generated on the device from Google.

With respect to Apple, the Commission’s investigation focuses on how Apple’s iPhones and iPads interact with wearable devices (“wearables”). These include smartwatches, fitness bands and wireless headphones. The Commission is concerned that there may have been technical and/or contractual restrictions placed by Apple regarding the interoperability of iPhones/iPads with such wearables. This would entail that it is more difficult for wearables of other manufacturers to compete with Apple’s wearables, such as Apple Watch or AirPods. The Commission has now asked manufacturers of wearables whether Apple raises obstacles with regard to accessing features on iPhones and iPads, such as reading and replying to messages via the wearable or location services thereof. Both investigations are still ongoing.

ACM makes (long-awaited) turn and fines vertical price fixing agreements

ACM, decision of 14 September 2021

On 14 September 2021, the Netherlands Authority for Consumers and Markets (“ACM“) imposed a fine of over € 39 million on Samsung for influencing the online selling prices of its television sets. In its decision, the ACM finds that Samsung infringed the cartel prohibition by exercising undue pressure on seven of its retailers in the period between 2013 and 2018.

Samsung monitored the online retail prices of its television sets through so-called spider software and analysed their price movements. If it was alerted (through complaints of competing retailers) on a retail price lower than its desired market price, it contacted the retailer and urged it to increase its prices. Although Samsung only maintains ‘price recommendations’ and the agreements between Samsung and retailers stipulate that they are free to determine their own retail prices, the ACM concluded that these ‘recommendations’ in practice lead to illegal price-fixing.

The ACM held that Samsung’s monitoring, internal coordination and external communication are aimed at controlling and minimising price deviations. By frequently and individually contacting retailers about retail prices and informing them of the price intentions of their competitors, the ACM speaks of a systematic practice of price coordination between Samsung and its retailers. As retailers are consequently discouraged from lowering their prices and consumers are confronted with a higher price, the ACM held that Samsung’s behaviour had the object of restricting competition.

It is the first time in twenty years that the ACM has showed interest in vertical price agreements. In doing so, it appears to abandon its effects-based approach to vertical restraints and to align with the strict approach of the European Commission and other national competition authorities. In 2018, the Commission imposed four fines of in total € 111 million on Asus, Denon & Marantz and Philips for monitoring and pushing retailers’ prices. German authorities also maintain a strict approach. The Bundeskartellamt has for example been very active in fining resale price maintenance practices in recent years, and in 2018 the German Bundesgerichtshof confirmed that Asics may not prohibit its retailers from participating in price comparison websites.

For more insights into competition law in vertical relationships read our blog.

Genuine or non-genuine agents agency? New interlocutory judgment in Prijsvrij/Corendon is not yet conclusive

Amsterdam Court of Appeal, (interlocutory) judgment of 31 August 2021

A long-running dispute is ongoing between Prijsvrij and Corendon regarding the termination of an agency agreement by Corendon. In a recently published interlocutory judgment (in Dutch) of 3 December 2019, the Amsterdam Court of Appeal formulated a number of evidentiary assignments. Subsequently, on 31 August 2021, the Court of Appeal issued a new interlocutory judgment (also in Dutch) in the context of those evidentiary assignments.

The case between Prijsvrij and Corendon is of essential importance for sectors where resellers are frequently used, such as the travel sector. The main question is under which circumstances these agents can be qualified as ‘genuine’ agents within the meaning of competition law. This requires that the agent bears no or minimal commercial risks, so that the principal and its agent form a single economic unit. Only in that case is the cartel prohibition, including the prohibition on resale price maintenance, not applicable. In the case of genuine agency the principal may compel its agents to apply certain prices.

In the past, Prijsvrij was active as a reseller of Corendon’s package holidays until Corendon terminated its agreement with Prijsvrij in 2013. The Court of Appeal considered it (provisionally) proven that the reason for the termination could be found in the discounts offered by Prijsvrij to consumers. Such termination can be an instrument to achieve resale price maintenance and is therefore prohibited, unless Prijsvrij was a genuine agent of Corendon. In the interlocutory judgment the Court of Appeal gave Corendon the evidentiary assignment to prove that Prijsvrij qualified as an genuine agent.

In the context of these principal points of contention, Prijsvrij and Corendon have submitted documentary evidence and Corendon has called a number of witnesses. In doing so, a discussion has arisen as to whether the Court may include all of this evidence in its assessment of the evidence.

In its recent interlocutory judgment of 31 August 2021, the Amsterdam Court of Appeal decided to include all evidence submitted earlier and to reopen the examination of witnesses. Thereafter, the Court of Appeal will rule and is expected to provide clarity on the application of the doctrine of genuine agency.

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

ACM gives second green light for merger of Sanoma and Iddink

ACM, decision of 26 August 2021

Sanoma may take over Iddink according to a recent second decision of the ACM on the matter. Sanoma is a publisher of both traditional and digital educational materials through its subsidiary Malmberg. Iddink is a distributer of educational materials and owns Magister – a student information system (“SIS”) and electronic learning environment (“ELO”).

The licence application for the concentration of Sanoma and Iddink was submitted to the ACM in January 2019. After the ACM had conditionally approved this merger mid-2019, rival publisher Noordhoff filed an appeal against this decision with the Rotterdam District Court. In its ruling (in Dutch) of 4 March 2021 the District Court annulled the contested decision of the ACM due to a failure to sufficiently state reasons. The Court held that the ACM should have conducted more research into the possible need of schools for ‘bundling’ the digital teaching materials and the electronic learning environment. If there were such a need, the concentration between Sanoma and Iddink could lead to market foreclosure.

In its recent decision, dated 26 August 2021, the ACM again approved the concentration under the same conditions as before. The ACM provided additional reasoning as to why it is not plausible that the concentration would lead to market foreclosure through anticompetitive bundling. The ACM argued that there are different procurement procedures for teaching materials and the ELO/SIS, with different timeframes.

Consequently, schools do not have the need to purchase teaching materials and an ELO/SIS at the same time. In addition, the ACM maintains that prices are of little importance for a school’s selection of educational materials. Schools are primarily focused on quality, which limits the possibility for Sanoma/Iddink to apply a bundling strategy. The ACM also considers it implausible that there is an incentive for Sanoma/Iddink to bundle products.

In a press release (in Dutch) of 27 August 2021, the ACM announced that it will appeal the ruling of the Rotterdam District Court since it believes that its original decision did not contain a lack of reasoning.

Prestressing steel cartel and elevators cartel: far-reaching duty to allege cartel damage and causality

‘s-Hertogenbosch Court of appeal, judgement of 27 July 2021 | Rotterdam District Court, judgement of 23 June 2021

Recently, two judgments were published that are relevant for the duty of an injured party (‘plaintiff’) to allege damages and causality in cartel damage cases. In cartel damages proceedings the plaintiff must allege and prove that his or her damages were caused by the cartel in order to be awarded compensation. An important aspect in that regard concerns the data that is necessary to further substantiate such claims.

On 27 July 2021, the Court of Appeal of ‘s-Hertogenbosch ruled (in Dutch) that Deutsche Bahn, who is the plaintiff in this case, must bring forward sufficient factual evidence to make it plausible that it suffered damage as a result of the prestressing steel cartel. Such factual evidence concerns information that specifies which cartel products were purchased, when, from whom and at what price. The submission of a few examples is considered insufficient by the Court of Appeal.

When providing concrete evidence a plaintiff must prove the identity of the cartel participants and provide insight into its transactions with them (on the basis of contracts, invoices, packing slips, administrative data, annual documents, etc.). Although the substantiation of a claim should normally take place in the early stages of proceedings, the Court of Appeal gave Deutsche Bahn the opportunity to provide the required evidence at a later stage.

In a judgment (in Dutch) of 23 June 2021 (published on 12 July 2021) the Rotterdam District Court provided other relevant guidance regarding the duty to furnish facts in relation to damages and causality. In the elevators cartel damage case, the District Court assessed whether Stichting De Glazen Lift (a claim foundation representing housing associations) had fulfilled its obligation in that regard.

The District Court ruled that in the event of concrete indications that an agreement was concluded between a housing association and one (or more) cartel participant(s) during the infringement period it is plausible that damages were suffered and caused by the cartel.

The District Court then examined for each housing association whether the foundation submitted sufficient documents to make the damage plausible. For each individual (underlying) claimant, it must be shown that the party claiming damages contracted with or paid a cartel participant during the infringement period.

Lastly, the District Court ruled that, in view of rental price regulation, it is unlikely that the housing associations could have passed on their damages to their tenants by raising rent. Therefore, it is plausible that the installation of a elevators and escalators is at the expense of the housing associations. The District Court concluded that all the housing associations sufficiently alleged damages and causality and referred the proceedings for the determination of damages.

Truck cartel damages: broad interpretation jurisdiction of national courts based on Erfolgsort

CJEU, judgment of 15 July 2021

On 15 July 2021, the Court of Justice of the European Union (“CJEU”) ruled in RH v Volvo on how national courts should interpret article 7(2) of the Brussels I-bis Regulation, after preliminary questions were asked by a Spanish national court. The CJEU ruled on an interpretation for jurisdiction based on the place where the damage occurs, also referred to as ‘Erfolgsort’. The CJEU held that article 7(2) does not only relate to international jurisdiction (which Member State has jurisdiction), but also to territorial jurisdiction (which court within a Member State has jurisdiction).

Firstly, the CJEU holds that, in the case of damage resulting from a cartel that concerned the whole of the European Economic Area (“EEA”), the place where the damage occurred is considered to be within that entire market. This includes Spain, so the Spanish national courts have international jurisdiction.

Subsequently, the CJEU addresses the question on territorial jurisdiction. It observes that it is clear from the wording of article 7(2) that this provision directly and immediately aims to regulate both international and territorial jurisdiction. Nevertheless, Member States are free to designate a specific court to deal with certain specific types of disputes. In the absence of such national centralisation of competence/jurisdiction, territorial jurisdiction must comply with the principles of proximity, foreseeability and the proper administration of justice.

According to the CJEU, the court of the place where the goods of the cartel participants were purchased – possibly indirectly – has primary territorial jurisdiction. If the plaintiff has purchased goods in several jurisdictions, the seat of the plaintiff should determine the territorial jurisdiction. This reasoning is in line with the aforementioned principles, inter alia because cartel participants are deemed to be aware of the fact that the customers are located in the (entire) market affected by the anti-competitive conduct.

Automobile manufacturers to be fined € 975 million by Commission for illegal technological discussions

European Commission, decision of 8 July 2021

In a recent decision the European Commission has determined that Daimler, BMW and the Volkswagen group (Volkswagen, Audi and Porsche) violated competition law by jointly agreeing on technological development in the field of emissions cleaning. Daimler avoided a fine of € 727 million because it reported the conduct to the Commission.

The infringement is notable because this is the first time that a cartel decision has targeted agreements and contacts that took place as part of technological discussions related to innovation, rather than classic price or customer allocation agreements. For this reason, the fines were reduced by 20%.

Although the investigation started as a full-fledged cartel investigation, it was concluded with a voluntary settlement procedure. In addition, Daimler applied for leniency. BMW submitted a comprehensive statement after which the Commission dropped some of its allegations against the German car manufacturer.

Air cargo damages: flexible approach to the question of applicable law

Amsterdam Court of Appeal, (interlocutory) judgement of 6 July 2021

In its judgment (in Dutch) of 6 July 2021, the Amsterdam Court of Appeal ruled on the question of applicable law in the Air cargo damages proceedings. Many plaintiffs suffered damages as a result of paying excessive fees for the shipments of air cargo. Their claims are bundled in foundations Equilib and SCC.

As a preliminary matter, the Court of Appeal rules that it can rely on the facts determined by the European Commission in the cartel decision, even though that decision is still under appeal before the European Courts.

The Court of Appeal then ruled on the question of whether article 4 of the Dutch Tort Conflict of Law Act (“WCOD”) offers the relevant legal framework to answer the question of applicable law. The Court of Appeal finds that, in principle, for each separate claim of each individual plaintiff the damage resulting from a specific flight, the applicable law is that of the State in which the airport of departure is located.

The Court of Appeal subsequently observed that this outcome leads to a strong fragmentation of applicable laws. Strict application of article 4 WCOD would lead to dozens of different applicable legal systems. To avoid this fragmentation, the Court of Appeal first rules that the separate claims of each plaintiff should be considered as one single claim, in analogy with the concept of a single continuous infringement as applied by the Commission in its cartel decisions. Second, the Court of Appeal considers that not only the airport of departure is relevant for determining the applicable law, but also the airport of arrival. Article 4 WCOD does not limit its scope to the place in which competition is directly affected by the anticompetitive behaviour, but also the place that is indirectly affected (e.g. in case of umbrella damages).

The international nature of airline services results in the distortion of competition in multiple places, as is also confirmed by the Commission in its decision. As a result, the Court of Appeal considers that the claim of a plaintiff is governed by several national jurisdictions. The WCOD does not provide for a solution in such instances, however. To fill this legislative gap, the Court of Appeal relies on broadly shared EU principles, such as legal certainty and effectiveness. It notes that the EU legislator has addressed this issue in article 6(3) sub b of Regulation (EC) No 864/2007 (‘Rome II’), in which claimants may choose the applicable law, albeit under strict conditions.

Given that Equilib and SCC requested that Dutch law is applicable, the Court of Appeal concludes that the follow-on damages claims of the foundations are governed by Dutch law. This applies to all claims relating to flights falling within the scope of the cartel decision (flights departing and/or arriving in the EEA and Switzerland).

Fine of € 19.5 million imposed on pharmaceutical company for charging excessive prices

ACM, decision of 1 July 2021

In a decision of 1 July 2021 the ACM imposed a fine of € 19.5 million on the Italian pharmaceutical company Leadiant, manufacturer of chenodeoxycholic acid (“CDCA”). The ACM ruled that Leadiant had abused its dominant position by charging an excessive price for the medicine. It is the first decision imposing a fine that concerns medicine prices after the ACM announced that it will conduct more investigations into medicines in 2018.

Leadiant acquired the right to produce CDCA from another pharmaceutical company and has been selling it on the Dutch market since 2008. In 2008, the price for a package of CDCA in the Netherlands was € 46. After that, Leadiant increased the price of CDCA, which it sold under changing brand names, several times until it finally reached a maximum of € 14,000 per package in June 2017.

The ACM ruled that Leadiant abused its dominance in the period from June 2017 to December 2019. According to the ACM Leadiant had a special responsibility in the context of its dominant position to abstain from charging excessive prices. The ACM accuses Leadiant of failing to fulfil its responsibilities in this respect and that the (excessively high) prices charged were out of proportion to its costs.

ACM allowed to extend scope of investigation with accidentally obtained evidence

District Court of The Hague, judgement of 3 June 2021 (published on 12 July 2021)

On 3 June 2021, the District Court of The Hague rendered an anonymised judgment in instituted by a number of undertakings whose premises had been raided by the ACM. The investigation of the ACM initially focused on possible prohibited purchasing price agreements. However, during the Dawn Raid the ACM also found indications of possible agreements on the selling price. Based on this information the ACM expanded the scope of its investigation. You can read more about Dawn Raids in this blog.

An important question was whether the ACM had not merely cursorily examined this information and whether the ACM was allowed to use the information for the purpose of extending the scope of its investigation. The Court ruled that the ACM, on the basis of the Deutsche Bahn judgment of the CJEU, is allowed to take a cursory look at evidence (in the present case: chat messages and e-mail conversations) in order to assess whether something falls within or outside the scope of the investigation. The ACM does not have to limit itself to viewing the most recent message while keeping the scope of the investigation in mind. In view of the interwovenness between the new evidence and the original scope of the investigation, the Court did not find it remarkable that the ACM stumbled upon the evidence by chance.

In addition, the Court was asked whether the ACM is allowed to select relevant chats by entering the names of persons in the chat program when inspecting mobile phones. The Court ruled that the search on names of persons is proportionate and thus permitted.

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

Bas Braeken, Jade Versteeg, Lara Elzas, Timo Hieselaar, Demi van den Berg and Berend Verweij

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

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

Overview Q2 2021

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

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

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

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

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

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

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

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

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

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

Court of Justice, judgment of 3 June 2021

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

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

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

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

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

CBb, judgment of 1 June 2021

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

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

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

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

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

Rotterdam District Court, judgment of 26 May 2021

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

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

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

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

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

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

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

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

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

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

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

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

ACM, announcement of 17 May 2021

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

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

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

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

Amsterdam District Court, judgment of 12 May 2021

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

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

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

Commission takes on Apple after Spotify complaint – national authorities follow

European Commission, press release of 30 April 2021

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

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

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

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

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