Commission proposes new Regulation on the control of foreign subsidies in the single market
On May 5, the European Commission presented a proposal for Regulation on foreign subsidies distorting the single market aimed at addressing potential distortive effects caused in the single market by subsidies granted by non-EU governments which, unlike subsidies granted by Member States, are not subject to any scrutiny.
The proposal for a Regulation provides for the introduction of three instruments aimed at controlling foreign subsidies:
- An obligation to notify the Commission of concentrations in
- the acquired undertaking or at least one of the merging undertakings is established in the Union and generates an aggregate turnover in the Union of at least EUR500 million; and
- the undertakings concerned received from third countries an aggregate financial contribution in the three years before notification of more than EUR50 million.
- An obligation to notify bids in public procurement by undertakings that have received a financial contribution from a government of a non-EU country in the three years before notification, where the value of the procurement exceeds EUR250 million.
- An ex officio power of the Commission to examine other market situations, such as investments in new sectors or below-threshold mergers and procurements, where subsidies from non-EU countries are suspected.
The Commission, both in exercising its ex officio power and in reviewing notifications, will have to assess whether subsidies from non-EU countries distort the single market on the basis of specific indicators, such as the amount, nature and rationale of the subsidy and the economic situation of the undertaking and markets concerned. Furthermore, the Commission, in assessing the impact of subsidies from non-EU countries, will have to balance the negative effects of a foreign subsidy in terms of distortion on the internal market with positive effects on the development of the relevant economic activity. Only if the negative effects outweigh the positive ones will the Commission have the power to impose redressive measures or accept commitments from the undertakings concerned that remedy the distortion.
Finally, the proposal for a Regulation also grants remedial powers to the Commission, including imposing fines of up to 10% of the total turnover of the undertakings involved in a concentration or in a public contract, if subsidies from non-EU countries have not been notified. The Commission will also have the power to prohibit the subsidised acquisition or the award of the public contract to the bidder benefiting from subsidies.
The European Parliament and the Member States will now discuss the Commission's proposal in the context of the ordinary legislative procedure with a view to adopting the final text of the Regulation.
A subsidiary company can be ordered to pay compensation for damages caused by the anticompetitive behavior of the parent company: Opinion of the AG Pitruzzella in case C-882/19
On April 15, the Opinion of Advocate General Pitruzzella in case C-882/19 was presented. The case concerns a request for a preliminary ruling raised in the context of a follow-on action for damages, whereby the Court of Justice is asked to clarify whether a subsidiary company may be held liable for an infringement of EU antitrust provisions committed by its parent company.
To fine the parent company for the anticompetitive conduct of its subsidiaries, the case law of the EU courts refers to the theory of economic unity, by means of a kind of "ascending process" (from the subsidiary to the parent company).
The Advocate General (AG) considers that the basis of the liability of the parent company for the anticompetitive conduct of the subsidiary is to be found in the unity of the economic action of those entities or in the existence of a single economic unit, ie in the general relationship existing between the parent company and the subsidiary as legal entities constituting a unitary undertaking under competition law.
In the context of this model of economic unity, there are no logical reasons – in the opinion of the AG – to exclude that the allocation of liability may operate not only in an "ascending" sense (from the subsidiary to the parent company), but also in a "descending" sense (from the parent company to the subsidiary).
As the AG points out, to ascribe the anticompetitive conduct of the parent company to the subsidiary, it is necessary not only to prove the parent company had a decisive influence on the commercial policy of the subsidiary, but also that the subsidiary took part in the economic activity of the undertaking managed by the parent company committed the infringement so its activity was necessary for the implementation of the anti-competitive conduct.
If the subsidiary carries out an activity that is extraneous to the economic sphere in which the parent company has adopted the anti-competitive conduct, there cannot be joint responsibility of the former for the anti-competitive conduct of the latter.
Finally, the AG points out that the scope of the notion of economic unit, as outlined in the Opinion, should apply to both public and private enforcement of antitrust law.
European Commission publishes a Staff Working Document on the evaluation of the Horizontal Block Exemption Regulations
On March 6, 2021, the European Commission published a Staff Working Document summarizing the evidence gathered in relation to the functioning of the two horizontal block exemption regulations on Research and Development (Reg. 2010/1218/EU, R&D BER) and specialization agreements (Reg. 2010/1217/EU, Specialization BER), which will be in force until December 22, 2022, as well as the Guidelines on the applicability of Article 101 TFEU to horizontal co-operation agreements (Horizontal Guidelines), in order to decide whether it should prolong their duration, revise them or let them lapse.
The evidence gathered by the Commission shows that both the Regulations and the Guidelines are still relevant; however, they need to be revised to fix the most critical issues by filling potential normative gaps and aligning with the most recent market developments.
As underlined by the respondents, the key issues with the Regulations and the Guidelines include:
- the lack of clarity and the excessive strictness of certain provisions, with specific regard to the provisions of the Specialization BER and the Horizontal Guidelines concerning information exchange, research and development, production, commercialization and standardization agreements;
- the complexity and onerousness of the definition of the relevant markets and calculation of market shares, due to the difficulty in obtaining the information necessary to carry out such assessments;
- the excessive lowness of the market share thresholds in so far as they do not exempt all agreements that comply with Article 101 TFEU;
- the excessive narrowness of the scope of the Specialization BER that should be extended to include additional types of horizontal cooperation agreements;
- the excessive wideness of the scope of the R&D BER, since it includes "paid for R&D" which should not be exempted;
- the lack of indications in the Horizontal Guidelines on agreements pursuing sustainability goals; and
- the lack of provisions related to the new cooperation models which are recently increasing as a consequence of digitization, such as information exchange and network sharing agreements, that often involve significant investments.
In the coming weeks, the Commission will launch an impact assessment to analyze the most critical issues already identified in the working document with a view to revising the current rules by December 31, 2022. In view of this goal, the stakeholders will have the opportunity to submit their comments on the inception impact assessment and to provide their views in the context of a public consultation which will be held in the coming months.
ICA fines Google for abuse of dominant position
With a decision published on May 13, ICA closed the A529 proceeding by imposing a fine of EUR102 million jointly on Google LLC, Google Italy S.r.l. and Alphabet Inc. for abuse of dominant position in the market for licensing operating systems for smart mobile devices and in the market for application sales portals (app stores) for Android.
In the ICA's view, since September 2018 Google has allegedly hindered the availability on its Android Auto platform (a platform that allows apps to be used while the user is driving) of Enel X Italy's JuicePass app, which offers various functionalities pertaining to electric vehicle charging, such as searching, booking and paying for charging stations, for the sole purpose of favoring its Google Maps app, which offers functional services for electric vehicle charging currently limited to searching for charging stations and navigation.
Google's conduct, as stated in the ICA's decision, is alleged to have caused detrimental effects in terms of reduction of supply and therefore restriction of users' choice. Moreover, in the ICA's view, the exclusion of Enel X Italia's app from the Android Auto platform not only may potentially alter the structure of the market, with regard to services connected to electric recharging offered through apps, with consequent dispersion of technology investments made by Enel X Italy and loss of an alternative business model to that of Google Maps, but it may also influence the development of electric mobility, with specific concern for the development of a network of infrastructure for charging electric vehicles that is adequate to the needs of the demand for such service.
In addition to the fine, the ICA has ordered Google to provide Enel X Italia, as well as other app developers, with the final version of the template for the development of electric charging apps which are interoperable with Android Auto and to complete the template with the functions considered essential by Enel X Italia, namely the booking and the start of the charging session.
The ICA will also monitor the effective and correct implementation of the obligations through an independent expert with whom Google will have to cooperate and to whom it will have to grant access to the necessary information and resources.
The issue relating to the nullity of guarantees drawn up according to the ABI model should be referred to the Joint Sections
With an order of April 30, 2021, the First Section of the Supreme Court has referred the case to the First President, for the possible assignment of the case to the Joint Sections of the Supreme Court on the question concerning the applicability of the principles set out in relation to the nullity of contracts concluded on the basis of anticompetitive agreements to guarantees drawn up according to the so-called ABI model and containing clauses that the ICA, in 2005, ascertained to be the result of an anticompetitive agreement.
In particular, the order asks to establish:
- whether the total or partial coincidence of the guarantee with the conditions defined by the anticompetitive agreement gives rise to the declaration of nullity of the clauses accepted by the guarantor or only allows the consumer to exercise the action for damages;
- in the first case, what is the regime applicable to the nullity action, from the point of view of the type of defect and the legitimacy to enforce it;
- whether a declaration of partial nullity of the guarantee is admissible; and
- whether the investigation required for this purpose should also cover the potential willingness of the guarantor to consent to the issuance of the guarantee, or the exclusion of a change in the structure of interests resulting from the contract.
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