France: Competition Newsletter April 2019

Last Updated: 16 May 2019
Article by Emmanuelle van den Broucke and Alexia Delaunay

Competition law news is marked by numerous investigations and sanctions against GAFA (Google, Amazon, Facebook, Apple) illustrating the European competition authorities’ increasing concern to monitor the behavior of these internet giants efficiently. The size and market power acquired by these companies has made it indispensable to analyze their practices, in particular under the lens of the prohibition of abuses of a dominant position.

This is the case, for example, of Google that was fined €1.49 billion last March for abuse of its dominant position on the online advertising market (AdSense) after imposing exclusivity clauses in the agreements entered into with third party web sites, preventing its competitors from placing their advertisements on these sites. This sanction is already the third imposed on this operator by the Commission after the fines relating to Google Shopping and Android, totaling to date more than €8 billion for the European Union alone. Moreover, Google is currently the subject of an action for damages brought by Idealo following the Google Shopping decision.

The European Commission also has Apple in its sights since Spotify filed a formal complaint last March regarding the rules of its application App store that allegedly favors its own applications compared to those of third parties. Apple is also being investigated in the Netherlands for the same reasons.

Facebook, for its part, has been the subject of injunctions handed down by the Bundeskartellamt relating to the combined use of its users’ data, practices contrary to the regulations on personal data that may constitute an abuse of dominance under German law. Commissioner Vestager recently declared that the search engines or social networks that do not respect personal data protection could be considered as breaching the European competition rules.

Finally, Amazon – until now relatively sheltered – has been the subject of several investigations by the European Commission and the Austrian and German authorities for having allegedly used the data collected on its marketplace in order to favor its products to the detriment of those of third party merchants.

In parallel to these decisions and investigations, the national competition authorities (in particular French and German) and the European Commission are multiplying ideas to adapt the reasoning previously used to the specificities of the digital markets.

A report entitled “Competition Policy for the digital area” was recently published by the Commission at the request of Commissioner Vestager. This report emphasizes that it is necessary to rethink the notions of evidence, market definition and market power and focuses particularly on the practices linked to the platforms and data. It suggests abandoning the theory of essential facilities (which was suited to the infrastructures such as ports) to the benefit of requirements of interoperability and portability to facilitate data flows between players. Regarding merger control, the report does not recommend modifying the European thresholds for the time being. It proposes revisiting the anticompetitive effect of certain operations to analyze the intentions of the acquirers of a start-up.

We should also remember the publication in 2016 of a common report of the French and German competition authorities on the analysis of the interactions between data, the companies’ market power and competition law. In June 2018, the two authorities launched a joint project on algorithms and their stakes for the enforcement of competition law.

Isabelle de Silva, president of the French Competition Authority, underlined the importance of the impact of personal data on competition. She then indicated wanting an extensive application of the prohibition of excessive prices to comprehend the platforms’ anticompetitive practices. Finally, she indicated that she was working on the issue of predatory acquisitions falling below the national notification thresholds.

The GAFA are warned: they must make sure not to use their very strong market power in their favor and to the detriment of their competitors and consumers.

The Court of Justice of the European Union rules that companies succeeding undertakings having participated in a cartel must compensate the victims 

On March 14, 2019, the Court of Justice of the European Union considered that companies succeeding entities sanctioned for participation in a cartel must be held liable and compensate the victims.

In 2009, the Finnish Supreme Court condemned seven undertakings for their participation in a cartel on the asphalt market between 1994 and 2002. Following this judgment, the City of Vantaa initiated a private action for damages against SIS, NCC and Asfaltmix, to obtain compensation for the harm caused by this cartel. These companies had not themselves participated therein.

However, during the cartel, they respectively acquired shares of Sata-Asfaltti, Interasfaltti and Asfalttineliö, three companies condemned for the offense, then took over their business activities and dissolved them in liquidation proceedings.

When determining the entities liable to compensate the harm suffered, the Finnish judges noted a contradiction between national law and Community law. Finnish civil liability law rules state that only the entity having caused the harm is liable. On the contrary, European Union law established a principle of economic continuity assigning liability of an anticompetitive practice to the successor of the liable entity, when this entity has ceased to exist legally or economically.

Consequently, the Finnish Supreme Court referred to the CJEU for a preliminary ruling to know whether, pursuant to the principle of economic continuity, the companies succeeding the undertakings that had committed the offense should be held liable for the harm caused by the cartel.

In its reply, the Court confirmed the application of the principle of economic continuity in private actions. The determination of the entity liable to pay damages must be governed by Union law and not by national law, which is to be set aside.

In the case at hand, the companies responsible for the cartel had ceased to exist as legal entities. Therefore, it is SIS, NCC and Asfaltmix that were to be held liable for the harm caused, given that they ensured the economic continuity of the companies that were sanctioned.

This decision is particularly important since it transposes the principle of economic continuity applicable in public actions to the sphere of private actions. This principle will therefore be applied by national courts, in favor of victims of anticompetitive practices. This risk must also be taken into account by acquirers, notably when negotiating the warranty of liabilities under the antitrust risk.

The Commission fines General Electric €52 million for providing incorrect information in LM Wind takeover

On January 11, 2017, General Electric (GE) notified to the Commission its proposed acquisition of LM Wind Power and provided, by negligence, incorrect information in the merger notification form.  GE stated that it did not have any higher power output wind turbine for offshore applications in development, beyond its existing 6-megawatt turbine. However, through information collected from a third party, the Commission found that GE was simultaneously offering a 12-megawatt offshore wind turbine to potential clients. As a result, GE withdrew its notification and re-notified the same transaction on February 13, 2017 with complete information. On March 20, 2017, the Commission approved the proposed acquisition.

According to the merger regulation, the Commission can impose fines of up to 1 percent of the aggregated turnover of companies which intentionally or negligently provide incorrect or misleading information to the Commission.

On July 6, 2017, the Commission addressed a Statement of Objections to GE alleging that it had committed a serious offense by negligently providing incorrect information. The Commission considers that GE should have been aware of the relevance of the information for the project’s assessment. Consequently, the Commission fined GE €52 million.

This is the second time the Commission imposes a fine on a company for the provision of incorrect or misleading information. In May 2017, the Commission fined Facebook €110 million for providing incorrect information as part of its acquisition of WhatsApp. These decisions send a strong signal to companies that must be extremely rigorous when preparing their notification files.

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