Competition Flashback Q2 2021
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.
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.
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