This newsletter gives an overview of highlights in the field of competition law from the first half of 2023, both in Norway and at the European level.
2023 has been an exciting year so far for the development of Norwegian competition law practice. With a record of two new Supreme court decisions, Wiersholm is pleased to have successfully represented our clients in both. In February the Supreme Court annulled the Norwegian Competition Authority ("NCA") and the Competition Appeal Tribunal's ("CAT") decision to block Schibsted's acquisition of Nettbil and in June the Supreme Court declared third party-financed class actions under the Dispute Act inadmissible. Noteworthy also is Oslo District Court's decision in one of the few follow-on actions for breach of EU/EEA competition law in Norway, where several international truck companies were acquitted from Posten Norge's 900 MNOK claim for compensation for alleged illegal price collusion. The decision is currently under appeal.
The first half of 2023 has otherwise been characterized by legislative work, with several proposals all of which widely expand the NCA's enforcement powers. The proposals equip the NCA with (i) a market investigation tool with extensive sanction options, both behavioral and structural, without establishing an infringement of competition law, (ii) the right to sanction individuals with civil administrative fines up to 43 MNOK for violations of the Norwegian Competition Act and to impose management quarantines and (iii) the right to appeal decisions from the CAT and bring legal actions before the Norwegians courts (which entered into force on 1 July 2023).
Legislative work has also been on the EU agenda. The Foreign Subsidies Regulation ("FSR") entered into force in January and is set to impact the landscape for M&A transactions by imposing a regulatory filing regime for certain transactions involving foreign subsidies from non-EU states, in which financial contributions from the EFTA countries are considered relevant for the calculation of financial contribution set out in the filing thresholds.
At the EU Commission level, a consultation on the adoption of new Guidelines on exclusionary abuses of dominance has been launched and revised guidance has been published providing clarification on enforcement priorities regarding Article 102 TFEU. Included below are also highlights of the Commission's adopted revised Horizontal Block Exemption Regulations and revised Horizontal Guidelines on the applicability of Article 101 TFEU. A welcome endorsement of the revised Horizontal Guidelines was announced by the NCA on 6 July. The NCA simultaneously issued their updated guidance on bidding consortia, seemingly in line with the Commission's revised Horizontal Guidelines.
In the Court of Justice's (the "Court") decision in Towercast, it was confirmed that a concentration without a community dimension may be subject to an ex-post control by national competition authorities and by national courts, due to the direct effect of the Article 102 TFEU prohibition of abuse of dominant position. In Super Bock Bebidas, the Court clarified circumstances under which a vertical agreement fixing minimum resale prices may constitute a restriction of competition by object under Article 101 TFEU, including guidance on the concept of an agreement under Article 101. In the much anticipated CK Telecoms decision, the Court of Justice has announced that the General Court erred in law and must rule once again on the lawfulness of the Commission's prohibition of the acquisition of Telefónica Europe (O2) by Hutchison 3G UK (CK Telecoms). Finally, the Commission has for the first time fined the target company (Grail) for gun-jumping in its decision against Illumina and Grail, while imposing the full 10 % of Illumina's turnover as a fine due to the knowingly and intentionally breach of the standstill obligation.
Noteworthy is also the announcement of EFTA Surveillance Authority's ("ESA") initiated investigation of Elkjøp for potential violations of Articles 53 and 54 of the EEA Agreement, and the Commission's Statement of Objections ("SO") to Google over alleged abusive practices in online advertising technology, where the Commission suggests that only divestment would sufficiently address its competition concerns.
Please find some selected highlights below.
COMPETITION LAW IN NORWAY
Norwegian laws and regulation
The Norwegian Competition Authority may now appeal decisions (excluding merger decisions) from the National Competition Appeals Tribunal ("CAT") and bring actions before the Norwegian courts
In March, a proposal to provide the NCA with formal rights of action against decisions from the CAT (excluding decisions to prohibit mergers) was issued. Decisions from the CAT have previously only been brought before national courts by the private undertaking concerned.
The proposal has now been adopted. As of 1 July 2023, the NCA may themselves bring actions concerning the enforcement of the Norwegian Competition Act Section 10, 11 and 12 third and fifth paragraph, regulations issued pursuant to Section 14 and Article 53 and 54 of the EEA Agreement in before national courts according to Section 39 of the Norwegian Competition Act.
The Norwegian Ministry of Trade, Industry and Fisheries launched a public consultation for a market investigation tool and an independent inquiry for individual civil sanctions for infringements of competition law
On 31 March, the Norwegian Ministry of Trade, Industry and Fisheries (the "Ministry") launched a public consultation for a new market investigation tool that allows the NCA to initiate investigations and impose behavioral and/or structural remedies on market participants without requiring the NCA to provide evidence of an infringement in the market. The new proposed tool will provide the NCA with wide discretionary powers to investigate markets as long as there are circumstances implying that competition in the relevant market is or may be in danger of being restricted.
If the NCA proves that there are issues present in the market that significantly restrict or are capable of significantly restricting competition in the market, the NCA may impose remedies and/or temporary measures on the market players. Such remedies or measures will likely most often materialize in the form of behavioral measures, e.g., access to important input, services etc. Where behavioral measures are not considered sufficient, the NCA will have the competence to impose structural remedies on the undertakings active in the relevant market.
Companies who are unwilling to accept and incorporate the remedial measures imposed on them by the NCA will risk sanctions, including administrative fines of up to 10 % of the company group's turnover.
The Ministry has in its consultation asked for feedback on whether it is considered necessary to limit the appeal bodies competence to review appeals of decisions adopted under the market investigation tool regime. Noteworthy, although unsurprisingly, the NCA has (in its consultation response published on 29 June) indicated that the review by the appeal body should be limited to a legality test rather than a full review.
Along with the proposal for a new market investigation tool, the Ministry published an expert report inquiring whether the NCA should have powers to sanction individuals with fines for infringements of competition law and other measures including quarantine periods for company management. In the expert report, it is recommended that the current authority to impose criminal fines and prison sentences on individuals is replaced with the authority to impose individual civil sanctions for infringements of Section 10 in the Norwegian Competition Law, including administrative fines and management quarantine.
The report proposes to cap the civil administrative fines for infringement of Section 10 at 43 MNOK, and other infringements at 9 MNOK. It is also proposed to enable the NCA to impose management quarantine of up to five years in certain cases. The proposal will cover both intentional and negligent infringements and will be applicable in general for all employees, not limited to people holding management positions.
In its reply to the public consultation published on 29 June, the NCA proposed that it should also be granted powers to impose administrative fines and enabled to sanction conduct in violation of Section 11 concerning the abuse of a dominant position, Section 16 and 16a regarding decisions about concentrations and minority acquisitions and regulations adopted in accordance with Section 14 of the Norwegian Competition Act.
The NCA also expressed skepticism concerning the wide scope of application envisaged for management quarantine e.g. for the duty to provide correct information, and proposed that the authority impose a management quarantine limited to violation of Section 10 and 11 in the Norwegian Competition Act.
More detailed information about the proposals and implications for market players can be found in our April newsletter here. The public consultation can be found on the government's website here and the NCA's reply here.
The Norwegian Competition Authority published updated guidance on bidding consortia
On 6 July 2023, the NCA publicly announced that they are endorsing the EU Commission's Revised Horizontal Guidelines (see below). The NCA has also updated their guidance on bidding consortia, seemingly in line with the Commissions' Revised Horizontal Guidelines.
According to the NCA, actual or potential competitors cannot, as a main rule, submit a joint bid. Undertakings are considered actual or potential competitors if they could each participate individually in the tender procedure. This starting point and main rule is somewhat nuanced in the NCA's updated guidance on what constitutes a bidding consortia. The NCA explains that if the collaboration's centre of gravity is not submitting a joint bid in a tender process, but for example joint Research and Development (R&D) or joint production, the EU Commission's Horizontal Guidelines has separate chapters on these topics.
Moreover, the NCA also refers to its statement related to the consultation on qualitative criteria and support scheme for Utsira Nord, where they in section 2.5 state that for other forms of cooperation than commercialization, for example joint R&D or joint production, a further assessment as to whether the cooperation has anti-competitive effects contrary to section 10(1) of the Norwegian Competition Act, should be carried out.
To summarize, the NCA will follow a strict approach where the centre of gravity is joint sales. The NCA should, however, have been clearer and provided more guidance on the distinction between what constitutes joint sales and joint production in a bidding context.
Norwegian case law
The Supreme Court declared third party-financed class action under the Dispute Act Section 35-7 inadmissible
Following the NCA's decision to fine two companies active within alarm services for infringing Section 10 of the Norwegian Competition Act by way of market sharing, a class action was filed in respect of the two companies in 2021. The class action was filed by "Alarmkundeforeningen", an association representing Norwegian alarm customers in the period 2011-2017, and was organized as an "opt-out" class action under the Section 35-7 of the Dispute Act, which entails that the relevant customers automatically become members of the class action without prior registration.
In order to finance the class action, Alarmkundeforeningen entered into an agreement with Therium Litigation Finance AFP – a global litigation funding firm whereby if the class action succeeded, Therium would receive a "succession fee" of 3x the invested amount, covered through a reduction in the total amount of compensation awarded to the group members. Alarmkundeforeningen wanted the courts to approve this agreement structure and set such approval as a condition of being appointed as group representative.
While Oslo District Court dismissed the class action on the grounds that Therium did not have the required authorisations to perform litigation funding, the Borgarting Court of Appeal found that Norwegian procedural law did not allow for holding group members responsible for funding costs in class actions made under the opt-out alternative in Section 35-7 of the Dispute Act Section.
In its decision on 5 June 2023, The Supreme Court upheld the Borgarting Court of Appeal's decision. The Supreme Court confirmed that Norwegian procedural law did not allow for holding group members responsible for external funding costs in a class action such as the one at issue. That the group members were not held directly liable for these costs, but indirectly through a reduction in the total amount of compensation awarded to the group members, made no difference in this respect, according to the Supreme Court. Neither the principle of effectiveness under EEA law nor ECHR Article 6 altered the Supreme Court's conclusion. Having established that, the Supreme Court concluded that Alarmkundeforeningen could not be regarded as "willing" to be appointed group representative, which is an absolute condition for filing a class action under Section 35-9 of the Dispute Act Section. Thus, Borgarting Court of Appeal's decision was considered correct and Alarmkundeforeningen's appeal was rejected.
The decision can be found here.
The Norwegian Supreme Court annulled both the NCA and Competition Appeal Tribunal's decision to block Schibsted's acquisition of Nettbil
Schibsted acquired Nettbil AS in 2019. Nettbil operates a website offering a digital marketplace for cars, where they sell cars for consumers to car dealers through a web-based auction. Schibsted, on the other hand, controls Finn, which offers online classified ads.
The NCA prohibited the transaction in 2020. In short, the NCA held that the Finn and Nettbil were in the same product market and that the transaction would impede effective competition in the market for "online intermediation of cars".
Schibsted appealed the decision to the CAT, which upheld the decision. Following this decision, Schibsted appealed to the Court of Appeal, which annulled the competition authorities' decisions. The NCA appealed the Court of Appeals' judgment to the Supreme Court, which heard the case in January 2023.
The Supreme Court held that Finn offers an online classified ad, whereas Nettbil's product is significantly more complex (i.e., taking over the whole sales process for the consumer). The court noted that the competition authorities had failed to consider the major qualitative differences between the merging parties and disregarded the price differences. These differences lead the Supreme court to the conclusion that Finn and Nettbil were not in the same product market, and that the transaction would not lead to restrictive effects on competition.
The Supreme Court's judgment includes important guidelines on how the product market shall de defined, the courts' standard of review in competition cases and how the NCA shall evaluate evidence (especially internal documents). Besides the Court underlined that SIEC is a high threshold and something more than a de minimis standard as argued by the NCA.
The decision can be found here.
The Oslo District Court has in its judgement concluded that MAN, Volvo, Renault, Daimler and DAF are acquitted of Posten Norge's claim for compensation for alleged illegal price collusion
Following the EU Commission's settlement decision in the so-called Trucks case, Posten Norge AS and its subsidiaries filed a private action for damages against international truck companies MAN, DAF, Volvo/Renault, Daimler and Iveco before the Norwegian courts. The case is one of few follow-on actions for breach of the EU/EEA competition law in Norway.
The case, before the Oslo District Court, concerned whether Posten was entitled to compensation because they had purchased trucks at higher prices than they would otherwise have in the period 1997-2011.
On 28 February 2023 the Oslo District Court ruled in favour of the truck manufacturers and dismissed Posten's entire claim of approx. 900 MNOK including loss of interest. Posten has appealed the decision to Bogarting Court of Appeal.
Recent practice from the Norwegian Competition Authority
The NCA closed its investigation of Axess Logistics AS's acquisition of the bankruptcy estate of Auto Transport Service AS, in the market of "Finished Vehicle Logistics"
In January, the NCA decided to close the investigation into the merger between Axess Logistics AS ("Axess") and the bankruptcy estate of Auto Transport Service AS ("ATS") after first imposing an obligation to notify and thereafter initiating a phase II investigation. Axess is active in the market for "Finished Vehicle Logistics" ("FVL"), which comprises services within preparation and transport of vehicles from the production premises to the dealer or end customer. Before filing for bankruptcy, ATS also provided services within FVL.
In the Statement of Objections, the NCA found grounds to believe that the merger would lead to non-coordinated effects in the market for FVL services, and thus significantly impede effective competition. The NCA emphasised the fact that the market for FVL services was highly concentrated and that Axess had a strong market position. However, after a more thorough assessment, the NCA concluded that there was insufficient evidence to establish a causal link between the acquisition and a potential weakening of competition. The assessment showed that uncertainty remains regarding whether the acquisition of assets and other resources from the bankruptcy estate by one or more players would be sufficient to restore or contribute to improved competition. At the same time, recent market developments indicate that there are opportunities for other players to enter the market for FVL services. Thus, the merger between Axess and the bankruptcy estate of ATS could proceed.
The decision can be found here.
The NCA closed its investigation of the merger between two players active in the market of water treatment of swimming facilities
In April, the NCA closed the investigation of the merger between SKion Water International GmbH ("SKion") and Enwa AS ("Enwa"), two players active in the market of water treatment. This case was originally initiated by the NCA imposing an obligation to notify and thereafter opening a phase II investigation before reaching the clearance decision.
The merger concerned SKion's acquisition of 100 % of the shares in Enwa. Initially, the NCA found grounds to believe that the merger would significantly impede effective competition. The NCA's concern was related to non-coordinated effects in a national market for equipment and services related to water treatment of swimming facilities.
In its preliminary assessment, the Authority considered the market highly concentrated, and the merging parties to be close competitors. However, after a closer assessment, the NCA decided that there were lower barriers to entry than initially assumed. Furthermore, the NCA emphasised that customers have a significant ability to structure their procurements as competitive tenders. Against this background, the NCA concluded that there was insufficient evidence to demonstrate that the merger would significantly impede effective competition.
The decision can be found here.
The NCA prohibited ØB Group's acquisition of Betongvarer
On 10 May 2023, the NCA prohibited ØB Group's acquisition of Betongvarer, after indicating in the Statement of Objections in March that the merger may impede effective competition in the local market for ready-mixed concrete. The concrete market is on the NCA's watch list, including ØB Group's parent company the Nordic Concrete Group AS which is subject to an information requirement to the NCA relating to mergers and acquisitions (even if they fall below the notification thresholds).
The ØB Group is part of the Nordic Concrete Group AS, which has ownership interests in several concrete plants producing ready-mix concrete in Norway. ØB Group operates concrete plants in Odda, Ølensvåg and Stord, among other locations. Betongvarer is a small local market player which sells and produces ready-mixed concrete. Betongvarer has one concrete plant located in Dimmelsvik, Kvinnherad.
The NCA expressed concerns that customers of ready-mixed concrete at Folgefonnhalvøya would have limited alternative suppliers to choose from after the acquisition, given that ØB Group and Betongvarer are the two largest and closest competitors in the relevant market. The NCA's concern was related to the high transportation costs for ready-mixed concrete and the fact that the other market players have a significant disadvantage in this local market, either due to the longer transportation distances or the need to rely on ferries to transport the ready-mixed concrete.
The NCA therefore concluded that the acquisition would lead to restricted local competition and consequently result in higher prices for ready-mixed concrete at Folgefonnhalvøya. The case demonstrates that the NCA still pays close attention to competition in smaller local markets.
The parties appear to have decided not to appeal the decision to the Norwegian Competition Appeals Board (Konkurranseklagenemnda).
The decision can be found here.
COMPETITION LAW IN EUROPE
EU laws, regulations and guidelines
The EU Foreign Subsidies Regulation has entered into force
On the 20 January this year, the new Foreign Subsidies Regulation ("FSR") entered into force. The new legislation is expected to change the landscape for M&A transactions as it imposes a regulatory filing regime for certain transactions involving foreign subsidies from non-EU states. The FSR aims to address distortions in the internal market caused by foreign subsidies that are not subject to the EU Commission's control. With the FSR in place, the EU Commission will have three different tools to investigate and assess the foreign subsidies compatibility with the internal market:
- Filing requirement for mergers and acquisitions exceeding certain thresholds (based on both turnover and size of financial contributions from third countries)
- Filing requirements for high-value public procurement procedures involving undertakings who have received financial contributions
- Ex- officio investigations of foreign subsidies
Transactions that are notifiable under the FSR will be subject to a standstill obligation until approval from the EU Commission. The EU Commission will also have the authority to block the transaction and in certain cases require the parties to reverse transitions that are not notifiable. Breach of the filing obligation or the standstill obligation may trigger fines of up to 10% of the aggregate turnover of the company group.
All transactions that are not closed before 12 October 2023 will be subject to a notification requirement if:
- At least one of the merging entities, acquired companies or joint venture established in the EU generates turnover exceeding 500M EUR; and
- The entities involved have been granted a combined financial contribution of more than 50M EUR from third countries in the past three years.
The concept of financial contribution in the FSR is wide-reaching and encompasses all forms of direct and indirect financial contributions from non-EU countries such as grants, loans, tax exemptions and the provision of goods and services. It was initially unclear whether the concept of a "third country" encompassed financial contributions from the EFTA states, as any subsidies from EFTA-states governments already are subject to state aid control under the EEA Agreement. The Commission has clarified that it considers financial contributions from the EFTA countries as relevant for the calculation of financial contribution set out in the filing thresholds, but does not consider them as relevant foreign subsidies necessary to list in the formal notification. The entire Q&A session from the EU Commission can be found here.
In addition to the FSR, the public consultation for the draft Implementing Regulation was closed on 6 March . The draft sets out the form, content and procedures for the filing process to the EU Commission. Overall, the Implementing Regulation received a negative response due to its extensive and detailed information requirements concerning foreign subsidies required for the formal notification.
More about the information requirements, understanding of the notification thresholds and the implications for future M&A transaction can be found in our newsletter from this spring here.
The EU Commission published its revised Guidance on enforcement priorities regarding Article 102 TFEU (abuse of dominance) and launched a consultation on the adoption of new Guidelines on exclusionary abuses of dominance
On 27 March 2023, the EU Commission published amendments to its 2008 Guidance on enforcement priorities concerning exclusionary abuses of dominance as well as a call for evidence seeking feedback on the adoption of new guidelines on exclusionary abuses. The update reflects significant developments in the case law of the EU courts on Article 102 TFEU and the Commission's enforcement practice, while also taking into account market developments.
Key clarifications from the Amendments to the Guidance on the Commission's enforcement priorities include:
- A clarification that the concept of "anti-competitive foreclosure" does not only refer to cases where the dominant undertaking's conduct can lead to the full exclusion or marginalization of competition, but also to cases where it is capable of resulting in the weakening of competition. It is further clarified that profitability of the dominant undertaking's conduct is not a requirement for the Commission's enforcement priorities.
- As regards price-based exclusionary conduct of a dominant undertaking, the Commission specify that the Commission will generally intervene against conduct that has already been or is capable of hampering competition from as-efficient competitors, while also recognizing that in certain circumstances a less efficient competitor may also exert constraints which should be taken into account when considering whether particular price-based conducts leads to anti-competitive foreclosure.
- The price-cost "as-efficient competitor test" is only one of a number of methods for assessing whether a conduct is capable of producing exclusionary effects. A generalized use of such a test to determine which cases of price-based exclusionary conduct to prioritize is not warranted, and should in any event be assessed together with all other relevant circumstances, including other relevant quantitative and/or qualitative evidence.
- The Commission may further investigate cases where a dominant undertaking imposes unfair access conditions to a particular input ("constructive refusal to supply), even if there is no evidence that such input is indispensable.
- Margin squeeze constitute an independent form of abuse distinct from refusal to supply.
With its initiative for new Guidelines on the application of Article 102 TFEU, the EU Commission aims to increase the legal certainty regarding the assessment of when certain conduct may constitute abuse of dominance. The consultation was closed on the 24 April. In its press release, the EU Commission states that it plans to publish draft guidelines for public consultation by mid-2024 and adopt them in Q4 of 2025, and at the same time withdraw the amended 2008 Guidance on enforcement priorities.
The press release can be found here.
The EU Commission has adopted revised Horizontal Block Exemption Regulations and revised Horizontal Guidelines on the applicability of Article 101 TFEU
On 1 June 2023, the EU Commission adopted the revised Horizontal Block Exemption Regulations on Research and Development (R&D) and Specialisation agreements and the accompanying revised Horizontal Guidelines on the applicability of Article 101 TFEU. The Horizontal Block Exemption Regulations ("HBER") entered into force on 1 July 2023 and will remain valid for 12 years. The Guidelines will enter into force as soon as they are published in the "Official Journal of the EU" (in July).
In general, the revised rules provide clearer guidance on how to assess horizontal cooperation agreements, reflect newer case law and seek to support the green and digital transition by making it easier for businesses to cooperate in economically desirable ways. They bring about several changes, an overview of which is set out below.
- The Specialisation Block Exemption Regulation's scope has been expanded to cover production agreements concluded by more than two parties. For the R&D Block Exemption Regulation, more prominence is given to the protection of innovation competition. It is now stated that where the parties to an R&D agreement are not competitors in the existing product or technology markets, they may nonetheless be considered competitors in innovation.
- There are also changes that apply to both Block Exemption Regulations. A more flexible approach to calculating market shares has been introduced, i.e. where sales data for the preceding calendar year is not representative of the parties' market position, sales data for the three preceding calendar years should instead be used. In addition, the grace period is simplified, meaning that the period during which the agreement continues to benefit from the block exemption after the market share threshold is exceeded and is now two calendar years in all cases.
- As regards the Guidelines, the first main change is that there is now further guidance on when joint purchasing activities may infringe competition law, including a clearer distinction between joint purchasing and buyer cartels.
- Second, the chapter on information exchange has been revised to reflect case law and enforcement developments. Among other changes, the chapter provides guidance on the exchange of digital content and data, and indirect information exchange via an online platform or facilitated by algorithms. Unlike several other chapters, the chapter on information exchange does not contain a safe harbour as information exchange between competitors is seen to potentially have a significant effect on competition irrespective of the parties' market shares.
- Third, a chapter on sustainability agreements has been newly incorporated. This provides guidance over when sustainability agreements are unlikely to raise competition concerns, such as agreements relating to internal corporate conduct. It also provides further guidance on how to assess relevant consumer benefits and collective benefits produced by sustainability agreements. Moreover, certain sustainability agreements may benefit from a "soft safe harbour" as long as six cumulative conditions are met.
- Fourth, the chapter on Commercialisation Agreements now includes a specific section on bidding consortia which provides further guidance on differentiating bid rigging from legitimate bidding practices. A joint bidding consortium agreement is generally permitted if it enables the parties to participate in projects that they would not otherwise have able to undertake individually (e.g., because of contract size or complexity). Since the parties are not potential competitors for the project's implementation, there is no restriction of competition. The updated Guidelines clarify however that a mere theoretical possibility of submitting separate bids is not sufficient to consider the parties as competitors. A genuine assessment of whether the parties would in fact carry out the project/bid alone is necessary. If there are more parties to a consortium agreement than necessary, the joint bid may, in the presence of certain factors, restrict competition. Whereas if the parties are able to bid alone an evaluation of the agreement's centre of gravity is required, i.e. whether there is a sufficient degree of integration of resources and activities for a joint price to be considered ancillary. This could for instance be the case if the collaborations centre of gravity is joint production. In any event, the parties can still potentially benefit from the exception under Article 101 (3) TFEU.
- Finally, other important changes include the introduction of a new section on Mobile Telecommunications Infrastructure Sharing Agreements, and a greater flexibility in the effects analysis by allowing a more limited participation in the standard-setting process in standardisation agreements.
EU General Court and Court of Justice – notable decisions
C-449/21 – Towercast - The Court of Justice has confirmed that a concentration without a community dimension may be subject to an ex-post control by national competition authorities and by national courts (under national procedural rules), due to the direct effect of the Article 102 TFEU prohibition on abuse of a dominant position
The judgment addressed the question whether Article 21(1) of the EU Merger Regulation ("EUMR"), which grants the Commission exclusive competence to examine concentrations with an EU dimension, has the effect that such concentrations are only subject to review under merger control rules – thus excluding a parallel or subsequent application of Article 102 TFEU.
The case concerned a French broadcasting company, TDF Infrastructure Holding, which acquired control over one of two remaining market players, Itas. TDF had previously held a statutory monopoly on the market for terrestrial television broadcasting prior to liberalisation. For an in-depth presentation of the facts and legal implications of the decision please refer to our briefing note from March 2023 available here. In a nutshell, the merger did not meet the requisite turnover thresholds under either EU merger control or French national rules and was not caught by the Article 22 EUMR referral procedure either.
Towercast, the third player in the market, argued that the acquisition was an abuse of a dominant position due to a strengthening of TDF's (already dominant) position on the upstream and downstream wholesale markets for digital broadcasting. The complaint was rejected by the French autorité de la concurrence who concluded that merger control applies exclusively to concentrations (as defined in Article 3 of the EUMR) and Article 102 no longer applies where no anticompetitive conduct exists besides the concentration itself. On appeal, the Cour d'appel in Paris referred the following question to the Court: can a competition authority subject a concentration (where one party has a dominant position) to an ex-post investigation for abuse of dominance where national and EU merger thresholds are not met, and consequently no prior assessment had been made?
Following the Court of Justice hearing, Advocate General Kokott's opinion came first in October 2022 and concluded that although the assessment of potential anti-competitive effects of a concentration is primarily the task of merger control rules, an ex-post control of the conduct of a dominant undertaking in connection with such a concentration is not excluded. The final judgment of the Court followed Kokott's opinion and confirmed that a concentration without a community dimension may be subject to an ex-post control by national competition authorities and by national courts (under national procedural rules), due to the direct effect of the Article 102 TFEU prohibition on abuse of a dominant position.
The Court confirmed that Article 21(1) of the EUMR must be interpreted as not to prevent the competition authority of a Member State from regarding a concentration with (i) no Community dimension, which is (ii) below the thresholds for mandatory ex ante control laid down in national law, and (iii) has not been referred to the European Commission under Article 22 EUMR, as constituting an abuse of a dominant position, in light of the structure of competition on a market which is national in scope.
The potential for applying an abuse of dominance standard to non-notifiable concentrations post-closing has in theory far reaching implications for the remit of competition rules in the future. In practice however the effects may be more limited since the legal tests appear to offer a relatively narrow route. The acquirer must be dominant in the same market or a related market to the target and the transaction itself, namely the act of two entities merging, must be harmful to competition by strengthening that position. This would potentially require high levels of concentration and sizeable entry barriers to be established, and according to the judgment, that the level of dominance reached is sufficient to impede competition.
For early-stage targets for example this may not be the case as it is not possible to predict the transactions effect on competition at that early stage. Crucially, as noted by Kokott in her opinion, the general reliance on behavioural remedies in Article 102 infringement cases also rather limits the potential effectiveness in solving the competitive concerns (typically addressed by structural remedies) in merger cases.
Finally, since the Norwegian Competition Authority can already require transactions falling below the thresholds to be notified, the implications for transactions involving Norway-specific markets are likely to be more limited.
The judgement is available here.
C-211/22 - Super Bock Bebidas - The Court of Justice clarified, among others, several circumstances under which a vertical agreement fixing minimum resale prices may constitute a restriction of competition by object under Article 101 TFEU
The Court of Justice's judgment in Super Bock Bebidas concerns a preliminary reference from the Lisbon Court of Appeal seeking clarification on the interpretation of Article 101(1) TFEU, in the context of exclusive vertical distribution agreements, the purpose of which was to fix the minimum prices of resale.
The case concerned Super Bock, a company established in Portugal which manufactures and markets beers, bottled waters, soft drinks, iced teas, wines, sangrias and ciders. When distributing beverages in Portugal, Super Bock entered into exclusive distribution agreements with independent distributors in the "HoReCa" sector (hotels, restaurants and cafes) in almost the entirety of the Portuguese territory.
The Competition Authority considered this to constitute an infringement of national and EU Competition rules and imposed fines on Super Bock, "AN" (a member of Super Bock's board of directors), and "BQ" (head of Super Bock's commercial department with responsibility for sales in the 'HoReCa' sector). The Tribunal da Concorrência, Regulação e Supervisão (Competition, Regulation and Supervision Court, Portugal) confirmed the decision of the Competition Authority.
Super Bock, AN and BQ brought an appeal before the Tribunal da Relação de Lisboa (Court of Appeal, Lisbon, Portugal), the referring court in this case. According to the facts of the referring court Super Bock regularly fixed and imposed the terms of business on all distributors when reselling products, in particular the minimum resale prices.
The referring court considered it necessary to seek the below clarifications from the Court of Justice as to the interpretation of Article 101 TFEU.
- First whether the concept of 'restriction of competition by object' is capable of covering – and, if so, under what conditions – a vertical agreement fixing minimum resale prices.
- Secondly, it had questions concerning the concept of 'agreement' where minimum resale prices are imposed by the supplier on its distributors.
- Thirdly, whether the concept of 'effect on trade between Member States' may include the consequences of a distribution agreement which affects, solely, almost the entirety of the territory of one Member State.
The Court found that Article 101(1) TFEU in this context should be interpreted as follows:
- The finding that a vertical agreement fixing minimum resale prices entails a 'restriction of competition by object' may only be made after having determined that the agreement presents a sufficient degree of harm to competition, taking into account the nature of its terms, the objectives that it seeks to attain and all of the factors that characterise the economic and legal context of which it forms part.
- There is an 'agreement', within the meaning of that article, where a supplier imposes on its distributor's minimum resale prices of the products that it markets, if the imposition of those prices by the supplier and compliance with them by the distributors reflects the expression of the concurrence of wills of those parties.
- A concurrence of wills may be shown from the terms of the distribution contract at issue where it contains an express invitation to comply with minimum resale prices or authorises the supplier to impose those prices. In addition, it can be shown from the conduct of the parties, in particular, from any explicit or tacit acquiescence on the part of the distributors to an invitation to comply with minimum resale prices.
- Further, (when read together with the principle of effectiveness), the existence of an 'agreement', between a supplier and its distributors, may be established not only by means of direct evidence, but also on the basis of objective and consistent indicia from which the existence of such an agreement may be inferred.
- The fact that a vertical agreement fixing minimum resale prices covers almost the entirety, but not all, of the territory of a Member State does not prevent that agreement from being capable of affecting trade between Member States.
Case C-376/20 P | Commission v CK Telecoms UK Investments – The General Court must rule once again on the lawfulness of the Commission's prohibition of the acquisition of Telefónica Europe ('O2') by Hutchison 3G UK ('Three')
Back in May 2016 the Commission blocked the proposed acquisition of Telefónica Europe ('O2') by Hutchison 3G UK Investments (now CK Telecoms UK Investments Ltd 3 ('CK Telecoms'). Following an action brought by CK Telecoms, the General Court set aside the Commission's decision (in May 2020) however the Commission subsequently challenged this before the Court of Justice.
On 13 July 2023, the Court of Justice annulled the General Court's judgment, citing the nature and scope of errors made. It referred the case back to the General Court (to rule once again), in light of the clarifications provided. The judgment notes that the General Court:
- Erred in law by holding that the Commission must demonstrate with a 'strong probability the existence of significant impediments' to effective competition, since this standard of proof does not follow from the Merger Regulation (as interpreted by the Court of Justice). The Court of Justice's reasoning is that the prospective nature of the economic analysis the Commission must carry out under the Merger Regulation precludes a requirement for it to meet a particularly high standard of proof to demonstrate whether a concentration would significantly impede effective competition
- Erred in law by interpreting the Merger Regulation to mean that in the absence of the creation or strengthening of a dominant position following a concentration on an oligopolistic market, a significant impediment to effective competition can be established only if the Commission demonstrates that two (cumulative) conditions are satisfied. First, the elimination of important competitive constraints the merging parties had exerted upon each other and, second, the reduction of competitive pressure on the remaining competitors. This interpretation was too restrictive to be compatible with the overall objective of the regulation.
- Distorted the decision by finding that it was apparent that the Commission was of the view that the elimination of an 'important competitive force' or the closeness of competition between Three and O2 would be sufficient, in themselves, to prove a significant impediment to effective competition.
- Distorted the Commission's written pleadings at first instance as regards the exact value of the price increase to which the proposed concentration could give rise (in its quantitative analysis of effects of the proposed concentration on prices).
- Erred in law by finding that the Commission ought to have included the 'standard' efficiencies in its quantitative analysis. Such efficiencies (according to the General Court), accompany all concentrations. The Court of Justice commented that while certain concentrations may give rise to efficiencies which are specific to them, that in no way implies that all concentrations give rise to such efficiencies. In any event, it is for the notifying parties to demonstrate those efficiencies so that the Commission can take them into account in its review.
- Erred in law by failing to carry out an overall assessment of the relevant factors and findings (especially in light of factors contested by CK Telecoms) in order to ascertain whether the Commission had demonstrated the existence of a significant impediment to effective competition.
- Distorted the decision by observing (incorrectly) that the Commission had not made an assessment of the possible degradation of the quality of the network of the entity (resulting from the proposed concentration), when the Court of Justice considers it did.
The judgment is available here.
The European Commission sent a Statement of Objections to Google over abusive practices in online advertising technology – suggesting only divestment would sufficiently address its competition concerns
On 14 June 2023, the Commission informed Google after two years of investigation of its preliminary view that the company breached TFEU Article 101 by distorting competition in the advertising technology industry ('adtech'). Noteworthy is the Commission's preliminary view that only divestment would sufficiently address its competition concerns, indicating the illegality of certain self-preferencing behaviour.
The Commission has preliminary found that Google is dominant in the EEA-wide markets for (i) publishers ad servers with its service "DFP" (the sell-side), and (ii) for programmatic ad buying tools for the open web with its services "Google Ads" and "DV360" (the buyer-side). Google also has a strong market position within ad exchanges, where publishers and advertisers meet in real time, typically via auctions to buy and sell display adds.
The investigation has shown that Google appears to have abused its dominant positions by favouring its own ad exchange "AdX":
- In the ad selection auction run by its dominant publisher ad server DFP, e.g. by informing AdX in advance of the value of the best bid from competitors which it had to beat to win the auction
- In the way in which its ad buying tools Google Ads and DV360 place bids on ad exchanges, e.g. by Google Ads avoiding competing ad exchanges and mainly placing bids on AdX, thus making it the most attractive ad exchange.
The Commission is concerned that Google's conduct may have been aimed at giving AdX a competitive advantage and foreclosing rival ad exchanges. This would again have reinforced Google's AdX role in the adtech supply chain and Google's ability to charge a high fee for its service.
The Commission has preliminary found that behavioural remedies are unlikely to effectively prevent the risk that Google continues its self-preferencing conduct since Google is active and allegedly dominant on both the buy and sell sides of the market, in addition to operating the largest ad exchange. This gives rise to an inherent conflict of interest for Google. Only mandatory divestment by Google or part of its services would therefore address the Commission's preliminary competition concerns.
The Commission's press release is available here.
EFTA Surveillance Authority
ESA initiated an investigation into possible anticompetitive conduct by Elkjøp in electronic goods
On 24 May the EFTA Surveillance Authority (ESA) formally opened an investigation into whether Dixon Stores Group Retail Norway AS, Elkjøp Nordic AS and Elkjøp Norge AS (jointly referred to as "Elkjøp") have infringed Articles 53 and 54 of the EEA Agreement by entering into arrangements that secure Elkjøp exclusive access to certain electronic goods. The investigation will also consider where specific competitors may have been denied access to certain electronic goods.
Elkjøp is a leading retail of electronic goods in the Nordic countries. The decision to initiate an investigation into possible anticompetitive conduct follows an unannounced inspection carried out by ESA at Elkjøp's premises in June 2021, after which ESA has reviewed the electronic data collected.
The EEA agreement Articles 53 and 54 corresponds to the TFEU Articles 101 and 102 which respectively prohibit cartels and other restrictive practices that may distort competition and abuse of dominance. The case is the first (publicly known) investigation of potential breaches of competition law launched by ESA since 2016.
The press release can be found here.
EU case law – notable decisions by the EU Commission and Court of Justice
Case M.11111 – UBS / CREDIT SUISSE – derogation from the standstill obligation granted under Article 7(3) of the EU Merger Regulation
On 25 May the European Commission approved the merger between Credit Suisse and UBS unconditionally.
The Commission concluded that the transaction between the two investment banks would not raise competition concerns in the European Economic Area ('EEA'). Although both are active in wealth and asset management and investment banking, the Commission considered the newly merged entity would still be subject to competition from a large number of competitors, including other global banks, specialist providers and local financial institutions in these abovementioned markets where the parties have overlapping activities.
The transaction was notified to the Commission on 26 April 2023. Pending the Commission's review, due to the financial difficulties experienced by Credit Suisse and the consequent risk of financial instability, the parties requested a derogation from the standstill obligation, which requires merging companies not to implement a merger until it has been cleared. This derogation was requested in order to allow for UBS to implement specific measures, including among others, closing the transaction.
The Commission's decision on 4 April 2023, granted the parties the derogation on the basis of Article 7(3) of the EU Merger Regulation, subject to conditions. In deciding on a request under Article 7(3), the Commission takes into account, inter alia, the effects of the suspension on the undertakings concerned by the concentration or on a third party and the threat to competition posed by the concentration. In practice, the Commission grants such derogations only in exceptional circumstances.
The Commission found that in this specific case all conditions for granting a derogation were met and that the risk of systemic harm to third parties and to the banking sector outweighed any potential threat to competition resulting from an early closing.
The text of the decision is not yet published but the press release is available here.
The European Commission has fined Illumina and Grail for implementing their proposed merger prior to Commission approval
On 12 July 2023 the Commission imposed fines of approximately 432 MEUR and 1,000 EUR respectively on Illumina (a U.S. company developing cancer screening tests) and Grail (a U.S. biotech company), for intentional breach of the "standstill obligation" which requires that merging companies do not implement mergers until approved by the Commission – i.e., before structural changes modify the competitive landscape.
Previously, on 13 July 2022 the General Court upheld the Commission's jurisdiction to review the acquisition of Grail by Illumina, (See our previous Competition law highlights H2 2022 for a summary of this case). However, in August 2021, while the Commission's review was still ongoing, Illumina publicly announced it had completed its acquisition of Grail. The parties executed all documents required and merged with two wholly owned subsidiaries of Illumina, including payments to shareholders for sale of shares.
After review the Commission blocked this merger in September 2022 and has confirmed its findings that Illumina and Grail knowingly and intentionally breached the standstill obligation. By closing the transaction Illumina was able to exercise a decisive influence over Grail and did so. The Commission noted that Illumina strategically weighed up the risk of a gun-jumping fine against the risk of having to pay a high break-up fee if it failed to takeover. It also considered the potential profits it could obtain by jumping the gun, even if it were ultimately forced to divest before intentionally decided to proceed and to close the deal while the Commission was still investigating the transaction.
The Commission is subject to a statutory limit of 10% of Illumina's turnover, i.e., approximately 432 MEUR, and ultimately imposed this amount as a fine on Illumina. With regards to Grail, the Commission noted that Grail was aware (and played an active role in the infringement) however decided only to impose a symbolic fine of €1,000 since this is the first time it imposes a fine for gun-jumping on a target company.
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