European Union: Competition Newsletter January 2018

Last Updated: 25 January 2018
Article by Emmanuelle van den Broucke and Alexia Delaunay

The Court of Justice of the European Union confirms the sanction imposed on Telefónica and Portugal Telecom for a market-sharing clause as part of a concentration operation

By a ruling dated 13 December 2017, the Court of Justice of the European Union rejected the appeal made by Telefónica and confirmed the decision of the European Commission sanctioning Telefónica and Portugal Telecom for having concluded an anti-competitive agreement as part of the acquisition project of the Brazilian mobile operator Vivo notified to Brazilian authorities. The Spanish and Portuguese operators were sanctioned by the European Commission for €67 million and €13 million respectively for having included in their operation a non-compete obligation involving the two parties and covering the totality of the Iberian Peninsula. This non-compete clause was detected by the Spanish Competition Authority following declarations by Telefónica in a press article. The Spanish Authority then referred the issue to the Portuguese Competition Authority and the European Commission.

First, the Court recalls that, according to well-established case law, market-sharing arrangements constitute particularly serious violations of competition. As the Commission revealed in 2013, a non-compete clause involving both the seller as well as the buyer and concerning a geographical market that is completely separate from that of the operation can in no way be considered as being directly linked or necessary to the implementation of said operation. Furthermore, concerning the stipulation at the beginning of the non-compete clause, "to the extent permitted by law," the Court underlines that Telefónica could not demonstrate how this clause did not constitute a restrictive clause by object while the inclusion of this mention turns the clause into an auto-assessment clause of the legality of the non-compete commitment. However, the fact that the clause was terminated in advance by the parties a couple of months before it became applicable constitutes a mitigating factor, in the same way as the non-secret nature of the violation does, enabling the parties to benefit from a 20 percent reduction on the base amount of the fine.

This decision reminds companies that a merger does not legitimize the introduction of any clause restricting competition for which the necessity and proportionality with regard to the proposed operation must be assessed on a case by case basis.

The Competition Authority issued a €30 million exemplary sanction against Brenntag for obstructing investigation

In its decision dated 21 December 2017, the Competition Authority blamed Brenntag and its parent company for having obstructed the investigation in their answers to requests for information raised by the Authority as part of an investigation of abuse of dominant position on the French market of chemical product distribution. More specifically, Brenntag transferred, with major delays, information that was incomplete and imprecise in response to the questions of the Authority and even refused to answer certain questions. The Authority imposed on Brenntag a very high penalty, indicating that it is essential to ensure the deterrent effect of the sanction to this type of practice to prevent companies from guarding themselves in this way against any sanction for their anti-competitive practices.

This decision falls within a special procedure as it follows a rejection decision of the Competition Authority that was reversed on appeal and referred for investigation. These requests, which pertain to simple investigation, were not subject to any warning or injunction and a fine before the sanction decision. Companies are however warned now : Whether as part of merger control procedures or an investigation in anti-competitive practices, not providing complete and accurate information can be very costly.

The Competition Authority sanctions the laboratory Janssen-Cilag and its parent company Johnson & Johnson for having delayed the development of the generic medication of Durogesic

In this matter for which the decision has not yet been published, the laboratory was criticized for two successive anti-generic behaviors following a complaint from Ratiopharm which became Teva Santé and led to a €25 million penalty.

The Competition Authority first reproached the laboratory of having intervened on several occasions with the French Health Products Safety Agency (AFSSAPS) to try to convince it to not grant the generic status in France to medicinal products competing with Durogesic, while the European Commission had granted a marketing authorization to these medicinal products. By putting in question the bioequivalence that was already recognized by the Commission and by pointing out public health risks that the substitution could cause, the laboratory managed to delay by one year the granting of the generic status of competing medicinal products, when it should have intervened sooner after the Commission's decision.

The Authority also reproached the Janssen-Cilag laboratory, following the marketing authorization of Durogesic's generic medicines, of having mass-distributed to doctors and pharmacists a speech denigrating Durogesic's competing medicinal products by insisting notably on the differences regarding the quantities of the active principle and by diverting AFSSAPS' warning message by insisting on the substitution risks of the originator product by the generic medicine—when the warning was intended for all cases of substitution equally—and by not specifying the categories of people at risk and the fact that a medical surveillance would avert these risks, the laboratory sparked serious alarm among health professionals who renounced the substitution of Durogesic with generic products.

The Authority found that the practices of the Janssen-Cilag laboratory delayed the arrival of generic products on the market by several months and manifestly prevented their development given the scale of the smear campaign. The laboratory was thus able to take advantage of its monopoly on the markets concerned for longer.

This sanction decision for anti-generic practices is in addition to the Sanofi-Aventis and Schering-Plough decisions of 2013 which also sanctioned the smear campaigns of these laboratories addressed to doctors and pharmacists against generic medicines put on the market by competitors.

OVS: An email between in-house lawyers revealing the contents of an outside lawyer's letter and referring to the strategy proposed by the latter is covered by legal professional privilege

On the basis of elements gathered during a first series of visit and seizure operations carried out in October 2013 in the premises of various manufacturers and a distributor of "white" and "brown" goods, the agents of the Competition Authority carried out a second series of investigations in May 2014 on the premises of other companies active in the same sector and notably, on the premises of Whirlpool. During this second series of operations, several documents were seized including internal emails amongst in-house lawyers discussing the defense strategy advised by the Whirlpool outside lawyer who was consulted following the October 2013 operations. Additionally, these emails contained the in-house lawyers' comments on the recommended strategy.

As part of the Whirlpool appeal against the May 2014 operations, the President of the Paris Court of Appeal had to reach a decision on whether or not the documents seized from the company premises were confidential. By an order dated 8 November 2017, the latter welcomed the claimant's argument according to which the correspondence between a company's employees is covered by legal professional privilege as soon as it contains the outside lawyer's advice as an attachment or includes the content, word for word or in the form of a summary, including if the correspondence also contains comments from these employees as a direct follow-up of the outside lawyer's advice. This shows that the definition of confidential correspondence has been softened. However, the fact that existing case law regarding the sanction of the seizure of confidential documents is limited to cancelling the seizure of the concerned documents remains disappointing as the investigators were able to consult their contents for several years and direct the subsequent investigatory measures.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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