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).

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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

The rise of Tech Giants such as Google, Amazon, Facebook, Apple and Microsoft (“Big Tech”) and their integration into people’s lives has been interesting on many levels. Particularly in the context of fair and contestable digital markets, it raises many questions. The most pressing of these is whether ex-post enforcement of EU competition law is effective enough to keep up with rapidly evolving (digital) markets and Big Tech companies.

To expand its enforcement toolkit, the European Commission (“Commission”) published a proposal for a Digital Markets Act (“DMA”) in December 2020. Its overall objective is to complement antitrust intervention in digital markets with ex-ante regulation in the form of a set of obligations that platforms identified as “gatekeepers” should abide by.

This blog covers recent developments in the fight against Big Tech, followed by a more detailed analysis of the DMA and its implications for gatekeepers.

Ex-post enforcement of Big Tech companies

The fight against anti-competitive behaviour by Big Tech companies has kept both the Commission and national competition authorities (“NCAs”) quite busy over the last years.

Although the Commission was initially relatively passive towards Big Tech, its Google Android decision from 2018 seems to have been an important starting point for (EU) competition law enforcement towards Big Tech. In this case, the Commission concluded that Google had abused its dominant position by tying the Google Search app to the Android appstore. Not only did the Commission impose a massive fine on Google of €4.3 billion (the highest fine ever imposed), it also established guidelines for assessing dominance in the mobile ecosystem.

Margrethe Verstager, European Commissioner for Competition, indicated that it became her mission to counter the rise of increasingly powerful digital platforms. Subsequently, it did not take long for the Commission to launch two formal investigations into Amazon.

The first investigation concerned Amazon’s use of marketplace seller data. In the Commission’s assessment, by using such non-public data, Amazon is able to avoid the normal risks of retail competition and to leverage its dominance on the market. The second antitrust probe assesses Amazon’s practices regarding its “Buy Box” and “Prime” label, which enables it to favour its own retail offers and offers of marketplace sellers that use Amazon’s logistics and delivery services over the ones of third-party sellers. When digital platform providers play a dual role – in which they act both as platform provider for business users and as retailer in competition with business users – they are incentivised to engage in self-preferencing.

In June 2020, after Spotify filed a complaint, the Commission launched a formal antitrust investigation into Apple’s rules for app developers on the distribution of apps via the App Store. On 30 April 2021, the Commission published its preliminary finding that Apple was indeed abusing its dominant position by requiring app developers to use Apple’s own in-app purchase system.

The Commission also launched a parallel investigation into Apple Pay, Apple’s mobile payment app. The Commission has expressed concerns that Apple’s terms related to the integration of Apple Pay for purchases of goods and services may distort competition and reduce choice and innovation, because no other payment solution than Apple Pay can access the payment chip technology embedded on iOS mobile devices for payments.

Lastly, Epic Games, the creator of the global hit game Fortnite, has officially filed a complaint with the Commission earlier this year. Epic Games accuses Apple of foreclosing the market for app distribution as well as the market for iOS in-app payment processing, allowing Apple to charge a higher commission. Previously, Epic Games has initiated proceedings against Apple in the US, Australia and the UK.

Also on the national level digital platforms have been subject to numerous competition law investigations. The Bundeskartellamt (“BKartA”) has been very active in this regard. In 2015, for instance, the BKartA issued a decision in which it prohibited Booking.com from continuing to apply its ‘best price’ clauses (for further information on APPAs and MFNs and the BKartA’s decision see our previous blog “On APPAs, MFNs and a tenacious German competition authority”).

Another significant case brought forward by the BKartA, regarding Facebook, dates back to 2019. In this decision, the German competition authority concluded that Facebook abused its dominant position in the social networking market by excessively collecting and combining user data without the consent of its users.

In April 2021, the BKartA has received an antitrust complaint about Apple from nine associations representing German media, Internet and advertising industries. They claim that the iPhone maker is abusing its dominant position with its recently introduced App Tracking Transparency program. This feature on iOS requires apps to ask users for permission to collect their data. However, the complainants submit that Apple itself can still collect significant amounts of user data.

In addition, the Netherlands Authority for Consumers & Markets (“ACM”) has conducted an in-depth market study into the mobile app store market and its implications for competition. This study shows that the lack of realistic alternatives to Apple’s App Store and Google’s Play Store puts them in a position – at least in theory – to set unfair conditions. The ACM is now investigating specifically whether Apple is abusing its dominant position through its App Store by imposing certain conditions on app providers that do not compete with Apple’s apps.

Need for ex-ante intervention?

Competition authorities in the EU thus appear to be willing to act against distortions of competition caused by Big Tech. However, given the (legal and factual) complexity and length of investigations, it often takes a long time before a sanction can be imposed. By then, the (perceived) damage has often already been done. The question therefore arises whether these measures can restore competition in a timely and effective manner. In light of ‘prevention is better than curing’, the DMA was proposed in December 2020. With this Act, the Commission aims to prevent the manifestation of anti-competitive effects in the digital market.

Definition of “Gatekeepers”

The DMA is focused at gatekeeper platforms. A gatekeeper is a provider of a core platform service with a significant impact on the internal market, including, among others, online intermediation services (e.g. app stores, Amazon), online search services (e.g. Google), online social networking services (e.g. Facebook), video-sharing platform services (e.g. TikTok), number-independent interpersonal communication services (e.g. WhatsApp), operating systems (iOS, Android, Microsoft).

The DMA only applies to gatekeepers that meet the following thresholds:

• An annual EEA turnover equal or above €6.5 billion in the last three financial years or an average market capitalisation that amounted to at least €65 billion in the last financial year.
• To serve as an important gateway for business users to reach their respective end users the core platform service must have more than 45 million monthly active end users in the EU and more than 10 000 yearly active business users in the EU over the course of the last financial year.

A platform has to notify the Commission if it meets these thresholds and therefore potentially constitutes a gatekeeper (duty to notify). The Commission reserves the right to proactively designate a core platform provider as a gatekeeper when they meet the thresholds, even – or especially – in cases where it did not receive a formal notification.

Obligations for gatekeepers

Once a core platform provider qualifies as a gatekeeper (whether or not designated as such by the Commission), it has to comply with certain obligations as set out in Articles 5 and 6 of the DMA. Some of these obligations relate to (similar) conduct that has given rise to many Big Tech competition cases in recent years. The DMA also includes a provision that creates the power for the Commission to update the list of obligations as a result of market investigations (Article 10 DMA). This makes the DMA flexible in its application and suitable to account for the highly dynamic and innovation driven markets.

Some of the proposed obligations concern:

• Third-party personal data: Gatekeepers must refrain from combining personal data sourced from their own services with personal data from other services offered by the gatekeeper or third-party services without the consent of the user pursuant to the GDPR (Art. 5(a) DMA). The Bundeskartellamt reached the same conclusion in 2019 in its case against Facebook.
• MFN/parity clauses: Gatekeepers must allow business users to offer the same products or services to end users through third-party online platforms under different terms and conditions than those of the gatekeeper’s platform (Section 5(b) DMA). The cases of Amazon e-books and Booking.com involved this type of conduct.
• Anti-steering prohibition: Gatekeepers must allow business users to promote their products in apps purchased through the platform’s core service, such as Apple’s App Store (Article 5(c) DMA). Business users will thus be able to conclude contracts with their end-users outside the core platform. This will, for example, allow Epic Games to offer and sell their in-app products through their own channel, rather than exclusively through Apple’s in-app purchase system.
• Opening of the operating systems to third-parties: Gatekeepers must allow third-party apps and app stores within the operating system of the device (i.e. iOS and Android). Such practices also lie at the heart of the Commission’s Apple App Store case. This obligation will have far-reaching implication for Apple’s App Store and Google’s Play Store. At the same time, the DMA acknowledges that the gatekeepers can take proportionate measures to ensure that third-party software applications do not endanger the integrity of the operating system provided by the gatekeeper.
• Bundling prohibition: Gatekeepers are no longer allowed to bundle several of their core platform services, such as Google did with the pre-installation of Google Chrome on Android devices (Art. 5(f) DMA).
• Non-public data: Gatekeepers have to refrain from using, in competition with business users, any data not publicly available, which is generated through activities by those business users (Art. 6(a) DMA). Such practices are currently under investigation with regard to the Amazon Marketplace.
• Self-preferencing: Gatekeepers will have to refrain from treating their own services or products more favourably than those of third parties (Art. 6(d) DMA). The ongoing investigation of Amazon’s “’Buy Box” option is an example of this.

If gatekeepers fail to comply with these obligations, the Commission may impose fines of up to 10% of the gatekeeper’s worldwide annual turnover. It may also impose periodic penalty payments of 5% of the gatekeeper’s average daily turnover. Finally, the Commission has the power to take structural and behavioural measures when, following a market investigation, it finds that a gatekeeper is systematically violating its obligations under the DMA. An example of a structural remedy is the mandatory divestiture of (part of) a business.

Powers for national competition authorities

In principle, the enforcement of the DMA will lie with the Commission. However, the presidents of the NCAs in the EU have stated in their view that they should be given a complementary enforcement role under the DMA. They argue that their knowledge and expertise will make the DMA’s enforcement more effective and faster. Whether the NCAs will eventually be assigned a role in the enforcement of the DMA is unclear at this time.

Conclusion

Once in place, the DMA will embody the shift from ex-post enforcement to an ex-ante regulatory approach. In doing so, the Commission aims to improve competition in the Big Tech landscape. This could have a significant impact on the operations of gatekeepers within the EU.

However, the DMA is currently only a legislative proposal. Given the scope and expected impact of the DMA, it will be subject to much debate. Thus, it is still uncertain what the DMA will ultimately look like upon its enactment.

For further questions, you may contact Bas Braeken, Jade Versteeg, or Timo Hieselaar.