2018 was a busy year for competition enforcement in the UK and EU as the authorities sought to keep pace with a fast-moving economy amid rapid technological change. In this briefing, we consider what to expect in relation to competition law enforcement in 2019.

E-commerce restrictions: algorithms and advertising

In July 2018, the European Commission (EC) imposed fines on Philips, Asus, Pioneer and Denon & Marantz totalling more than €111 million for restricting online retailers' freedom to set retail prices. The EC highlighted the use of automated pricing algorithms to monitor, and adapt to, competitors' prices. In December, the EC handed down its first infringement decision involving restrictions on online advertising, with Guess fined almost €40 million for restricting retailers from bidding on its trade marks in search engine advertising. We expect the EC to continue its focus on these types of cases, with several cases ongoing in relation to geo-blocking practices (limiting access to content depending on the user's location) concerning video games, three investigations into barriers to online and offline cross-border trade and an investigation into airline ticket distribution services. The UK Competition and Markets Authority (CMA) is also likely to focus on this area in 2019, having indicated that it is "actively considering" a market study into digital advertising.

Pricing algorithms have caught the eye of national competition authorities across Europe, amid concerns that they could facilitate anti-competitive behaviour, both horizontally (e.g. collusion) and vertically (e.g. resale price maintenance). In June 2018, the French and German competition authorities launched a joint project on algorithms and competition, whilst the CMA published its research paper on pricing algorithms in October 2018. In 2019, we can expect to see competition authorities closely monitor how businesses use algorithms and how this may affect competition.

Data probes into online platforms

Competition authorities can be expected to continue their close scrutiny of how large online platforms use data. In September 2018, the EC initiated a probe into Amazon's use of data collected from the businesses it hosts. This concerns Amazon's dual role as a seller and as a host for other sellers. Similar investigations are also being carried out by national competition authorities, including those in Germany, Austria and France.

Increased scrutiny in tech and digital sectors

Transactions in the tech and digital sectors are likely to continue to attract increased scrutiny from the authorities, both with respect to merger control thresholds and in their substantive assessment.

Competition authorities are reconsidering merger control thresholds to ensure they have jurisdiction to review these types of deals, which often involve targets with low revenue but with a much more significant market value (which arguably better reflects their competitive significance). Some EU member states, such as Austria and Germany, have already amended their merger regimes to include market value thresholds to deal with these types of situations. Other proposals for change can be expected in 2019: the EC is currently conducting a review of its competition rules, and in December 2018 the UK, Spanish and Austrian competition authorities recommended that the EC consider revising its merger thresholds to keep up with the digital economy.

Competition authorities are also likely to scrutinise the competitive effects of transactions in the tech and digital sectors more closely. In December, the CMA referred Paypal's US$2.2 billion acquisition of iZettle for a Phase 2 investigation, while the EC approved Apple's acquisition of Shazam in September 2018, but only after a Phase 2 review. More generally, the CMA has expressed concerns that tech-related mergers may have been under-enforced in the past, and that it will continue to scrutinise such mergers to develop its understanding of the issues they present.

The rise of the European champion?

Prominent EU politicians, including Chancellor Merkel and President Macron, have called for ''European champions'' to compete globally with their Chinese and American rivals. The EC is set to rule on the sizeable combination of the rail operations of Siemens and Alstom by 18 February, which, if approved, will create a company three times the size of its largest competitor in some markets. While there is intense political pressure on the EC to clear the deal, a lengthy statement of objections was issued to the parties at the end of October, after which they offered remedies. Several national competition authorities (including the CMA, the Spanish, Belgian and Dutch authorities) wrote publicly to the EC criticising the transaction. It therefore remains to be seen whether 2019 will mark the rise of the European champion.

Foreign investment: increased screening powers

Economic populism can be expected to continue to spill over into competition enforcement, as governments increasingly look to restrict foreign ownership of certain types of businesses. The UK government intends to introduce a broader foreign investment regime, which will significantly increase the UK's screening powers. This proposal follows the amendments introduced in the UK in June 2018 allowing the government to review foreign investment in the military/dual-use, computer hardware and quantum technology sectors. The government anticipates 200 transactions will ultimately be caught by the new regime each year, with around 50 likely to be subjected to conditions or an outright prohibition.

This is against the backdrop of the EC's proposed Regulation for an EU-wide foreign investment screening framework, expected in early 2019. The Regulation provides a cooperation mechanism between member states and the EC, requiring the EC to be notified of foreign investment under review at a national level. It also allows the EC to screen foreign investment which may affect projects of "Union interest".

Where next for cartel damages claims?

2018 was a relatively quiet year for follow-on damages claims. One notable exception was the BritNed v. ABB judgment handed down in October 2018, which ruled that the presumption that a cartel has caused loss or damage did not apply, as the conduct in question took place before March 2017 (before the UK's implementation of the EU Damages Directive, which mandates such a presumption). Deciding factors in the court's assessment included that the key individuals responsible for bidding and negotiating ABB's deal with BritNed had no knowledge of the cartel and that the conduct concerned one single transaction, rather than many sales over a long period, as is usually the case with a follow-on cartel claim. Whether these cases will have a wider impact remains to be seen, especially in light of the implementation of the Damages Directive, which may affect the outcome of such claims.

Increasing reliance by competition authorities on contemporaneous internal documents

Large scale document requests are likely to become increasingly common in complex merger reviews. The EC has recently had recourse to such requests in a number of cases, with some amounting to several hundred thousand documents and even reaching several million in certain instances. In complex merger cases, the amount of information sought from the parties may be very onerous, as it could potentially require both the drafting of a Form CO and substantial production of documents.

Equally, the CMA has started the new year by confirming this week (in new guidance on the use of internal documents in merger reviews) that it intends to continue to seek and rely on internal documents when conducting merger investigations.

The perils of procedural violations

The EC and the CMA continue to demonstrate their willingness vigorously to pursue procedural infringements and non-compliance with merger rules.

In April 2018, the EC imposed a fine of €124.5 million on Altice, a Dutch telecoms company, for gun-jumping. This follows the EC's decision to fine Facebook €110 million in 2017 for providing incorrect or misleading information. Additionally, the EC is currently pursuing three separate investigations regarding gun-jumping and the provision of incorrect or misleading information.

Similarly, in June 2018, the CMA imposed its first fine for the breach of an interim enforcement order, amounting to £100,000, followed by a further fine in January 2019 of £300,000. This follows the CMA's decision in late November 2017 to impose a penalty on Hungryhouse for failing to disclose documents during a merger inquiry and reflects the CMA's tougher approach with respect to procedural violations.

A brave new world for the CMA?

We expect the CMA to take a proactive approach to cross-jurisdictional matters that have implications for the UK, rather than waiting for the EC to initiate action. For example, the CMA launched a probe into the Atlantic Joint Business Agreement between American Airlines, British Airways, Iberia and Finnair, two years earlier than the EC's scheduled review of the agreement, a matter that would previously have been dealt with exclusively by the EC.

... and finally: Brexit

There is, of course, the thematic elephant in the room: Brexit. There is still much uncertainty as to what the substance of any Brexit deal might be, and indeed whether the UK will exit from the EU without any deal.

Brexit may well affect the UK competition law regime in 2019, but, even so, we do not expect it significantly to alter the trends and themes we have identified above. Look out for a briefing from us as soon as the position becomes clearer.

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