The European Commission has published legislative proposals that would make EU anti-dumping and anti-subsidy instruments more efficient and better adapted to shield EU producers from unfair practices. Specifically, the changes would also protect producers from any risk of retaliation by exporters or exporting countries.
To read the full article, click here.
Over 250 of the product requests submitted for tariff suspensions in January 2014 are still being examined by the EU Economic Tariff Question Group. The list of the products for which duty suspensions have been requested is now available on the website of the European Commission’s Taxation and Customs Union Directorate-General.
Businesses can submit their objections to any of the new requests, via the national administrations, by the deadline of 13 June 2013.
Aiste Slezeviciute, a trainee solicitor in McDermott's Brussels office, also contributed to this article.
by Wilko van Weert, Philipp Werner and David Henry
The patent wars between large technology companies continue unabated. The Court of Justice of the European Union (CJEU) is set to provide guidance on the antitrust rules when holders of standard essential patents seek injunctive relief.
To read the full article, click here.
by Martina Maier and Robert Bäuerle
The European Commission opened the first in-depth investigation into alleged State aid for professional football clubs. This comes after the Commission launched investigations into the financing of arenas. It is likely that other professional football clubs in the European Union, and other professional sports clubs and their related infrastructure, will be investigated by the Commission.
To read the full article, click here.
by Martina Maier, Andrea L. Hamilton, Mai Muto and David Henry
In an era when the vast majority of written communications are made by electronic means, a company’s obligations to cooperate with European Commission officials in an “antitrust dawn raid” extend to the granting of access to all electronically stored data. This is emphasised in the Commission’s revised guidelines on conduct of “dawn raids,” published on 18 March 2013.
To read the full article, click here.
by Wilko van Weert and David Henry
On 5 March 2013, the Brussels Court of Appeal delivered a judgment finding that, under Belgian law, in-house counsel are covered by legal professional privilege (LPP). In relation to antitrust investigations, the ruling highlights that LPP in the European Union depends on, not just local rules, but also whether or not the European Commission is involved in the investigation.
To read the full article, click here.
by Philip Bentley, QC, Veronica Pinotti, Wilko van Weert and Philipp Werner
On 29 January 2013, the UK Government’s Department for Business, Innovation & Skills announced new proposals designed to improve the ability for consumers and businesses to bring collective damages claims against competition law infringers.
The new proposals contain novelties that should make it easier for consumers and businesses to claim damages for loss arising out of competition infringements. While this may increase the financial exposure of the infringers, it could also introduce a greater degree of clarity as to the procedural rights of both sides, and provide infringers with the possibility to settle matters quickly and with limited publicity.
by Wilko van Weert and Philipp Werner
On 20 February 2013, the European Commission launched a public consultation in relation to a draft proposal for a revised block exemption for technology transfer agreements (the proposal). The Commission seeks to improve and update the current legal regime on technology licensing, with a view to encouraging competition, strengthening incentives for research and development activities and facilitating the diffusion of intellectual property.
To read the full article, click here.
by David Henry and Wilko van Weert
In a recent judgment, a District Court in the Netherlands (the DCA) handed down a judgment in what is the first substantive damages judgment in the Netherlands for a breach of competition law. In issuing the declaration of liability, the DCA held that ABB must pay damages to the Dutch grid operator TenneT for the overcharge that arose as a result of the gas insulated switchgear cartel, putting aside arguments by ABB that any damages should take into account the fact that the overcharge had been passed on to customers of TenneT. The court considered that in this case the indirect purchasers were likely to benefit from compensation to the direct customer.
To read the full article, click here.
by Philip Bentley, Wilko van Weert and Philipp Werner
Up until September 18, 2006, maritime transport services were exempt from the EU competition rules in respect of liner conferences. In addition, cabotage and international tramp vessel services were exempt from the enforcement powers in competition matters. These exemptions were abolished on September 18, 2006, subject to a two year transitional period. Maritime transport services then became subject to sector-specific guidelines that are applicable until September 26, 2013, when they will be superseded by the general, non-sector-specific guidelines.
To read the full article, click here.
by Philip Bentley and Philipp Werner
A judgment of the EU General Court in March 2011, upheld on appeal by the Court of Justice of the European Union (CJEU) on January 22, 2013, is potentially good news for parent companies. Where both a parent company and its subsidiary bring separate court challenges against a cartel fine for which they were held jointly and severally liable, the parent company should benefit from any reduction in fine that the court grants to the subsidiary, provided that the challenges brought by the two companies have the “same object”.
In light of these judgments, it would appear that a parent company’s argument should be similar to that adopted by its subsidiary when challenging a fine imposed jointly and severally on both of them. At the same time, the parent company may wish to contest the fact that it was held jointly and severally liable for the subsidiary’s infringement. This would require the parent to demonstrate that it did not exercise a “decisive influence” over the subsidiary’s commercial policy. Reconciling this latter argument with a challenge to the subsidiary’s fine is, however, likely to require skilful drafting of the parent company’s pleadings.
To read the full article, click here.
by Philip Bentley, QC and Philipp Werner
Joaquín Almunia, the European Union’s Commissioner for Competition, has announced that the European Commission hopes to settle around half of its outstanding cartel cases in 2013. It’s time to review the European Union’s settlement procedure.
To read the full article, click here.
by Martina Maier, Andrea Hamilton, David Heny and Philipp Werner
Tomra judgment: EU’s top court rules that actual effects do not need to be examined in exclusionary practice cases involving dominant firms.
To read the full article, click here.
by Philip Bentley and Philipp Werner
On 29 November 2012, the EU General Court (GC) issued a provisional order suspending the European Commission’s decision to communicate to the High Court of England and Wales a copy of Alstom’s reply to the statement of objections in the gas insulated switchgear cartel. The statement of objections, which contained confidential business secrets, had been requested by the High Court in the context of a follow-on damages claim brought by National Grid, one of Alstom’s former customers.
For defendants, it will be reassuring to know that the GC will not allow the Commission to disclose contentious documents until the matter has been debated fully in court. Plaintiffs will be relieved that they are not completely shut out of court on the issue of access to Commission documents that might support their claim for damages. The matter does have to be debated at length, however, and the result is likely to be a set of nuanced and finely balanced rules that turn on the circumstances of each individual case.
This order is, therefore, another piece in the increasingly complex puzzle of procedures on access to documents in the European Union for the purposes of follow-on damages actions. There are also wider issues surrounding document protection that must be considered carefully.
To read the full White Paper, click here.
by Philipp Werner and Wilko van Weert
On 13 December 2012, the Court of Justice of the European Union (CJEU) held that national competition authorities (NCAs) can apply European competition rules, and fine companies for an infringement of EU rules, even in cases where the European Commission considers that Article 101(1) Treaty on the functioning of the European Union (TFEU) is not applicable.
To read the full article, click here.
by Veronica Pinotti, Philipp Werner, Robert Bäuerle and Lionel Lesur
The network of European antitrust regulators, the European Competition Network, has revised its model leniency programme for cartels. Major changes include a broader scope for summary applications when applying for leniency in more than three EU Member States, the application of leniency programmes to cartels with vertical elements, clarifications on the non-disclosure obligation, and unification of the level of protection for oral and written statements by leniency applicants. The changes will take effect once the individual competition authorities have implemented them in their individual leniency programmes.
To read the full article, click here.
by Philip Bentley, QC and Philipp Werner
On 14 November, the EU General Court ruled in related cases T-135/09 and T-140/09 that the European Commission had been too broad when setting out its mandate for the carrying out of dawn raids at the offices of companies in France and Italy. The Court viewed that the Commission was illegally “fishing” for evidence of possible further anti-competitive activity. In essence, this means that the Commission must confine itself to a specific, targeted sub category when authorising dawn raids.
To read the full article, click here.
by Louise Aberg, Lionel Lesur and Philipp Werner
On November 6, 2012, the Court of Justice of the European Union (CJEU) ruled that the European Commission was entitled to represent the European Union in an action for damages before national courts. The CJEU ruled that the Charter of Fundamental Rights of the European Union did not prevent the Commission from taking an action for damages against the cartel participants for harm suffered by the European Union as a result of anti-competitive behavior that the Commission had already sanctioned by rendering an infringement decision. Companies should therefore bear in mind that the Commission is no longer just the investigator, prosecutor and judge of a cartel, but also a potential damages claimant.
To read the full article, click here.
by Philip Bentley, Andrea Hamilton and David Henry
UK antitrust regulator issues revised antitrust guidance. The OFT introduces increased transparency, more active participation and greater checks and balances into antitrust proceedings.
To read the full article, click here.
by Martina Maier, Philipp Werner and Robert Bäuerle
The European Commission eyes sector inquiries as a new tool in European State aid law. In European antitrust law sector inquiries are already successfully employed to detect cartelist activities. This could allow the European Commission to proactively investigate whole sectors for illegal subsidies and to subsequently open new cases.
To read the full article, click here.
by Henry L.T. Chen, David Henry, Frank Schoneveld and Philipp Werner
On September 20 , 2012, European Commission officials concluded a Memorandum of Understanding (MoU) with Chinese officials in respect of antitrust law. Signed by the Directorate General for Competition and two of China’s antitrust law enforcement authorities, the National Development and Reform Commission (NDRC) and the State Administration of Industry and Commerce (SAIC), the MoU strengthens the relationship between the two jurisdictions’ respective antitrust authorities.
To read the full article, click here.
by William Diaz, Alexander Harguth, David Henry, Stefan M. Meisner, Hiroshi Sheraton, Wilko van Weert and Philipp Werner
There has been a spate of antitrust complaints to the European Commission and other antitrust authorities of late, regarding the licensing of "essential patents". In the first months of 2012 alone, the European Commission received at least five new antitrust complaints over the potentially abusive use of technology patents. These complaints are being used increasingly by alleged patent infringers as another line of defense against actions brought by patent holders in the United States and in Europe. The use of complaints in this way has vital, strategic implications for the owners of technology patent portfolios and it is a tactic that should be taken into account by plaintiffs and defendants in the on-going “patent wars”.
To read the full article, click here.
by Philip Bentley, Andrea L. Hamilton and David Henry
UK Antitrust Regulator Revises Fines Guidance: Penalties to be More Appropriate and Compliance Efforts to be Rewarded.
To read the full article, click here.
by Joseph F. Winterscheid and Andrea L. Hamilton
Recent developments in the global legal landscape point to the inevitable conclusion that having an effective antitrust compliance program in place is now more important than ever.
To read the full article, click here.
by Philipp Werner and David Henry
There is a general presumption that the grant of public access to documents relating to merger control proceedings would undermine the purpose of those proceedings. The Commission does not therefore have to carry out an individual examination of each document before deciding to refuse access under EU transparency legislation.
To read the full article, click here.
by Lionel Lesur
The EU Commission was notified of the Seagate/Samsung transaction and the Western Digital/Hitachi transactions – both mergers involving hard drive disk businesses – within days of each other. In its decision on the Seagate/Samsung transaction (published on May 10, 2012), the EU Commission explains its different treatment of the two mergers.
The EU Commission explains that the 'priority principle' requires them to review a deal's impact on competition according to the date the deal was notified. Therefore, because Seagate/Samsung was notified first, the EU Commission examined the deal based upon the competitive conditions existing at the time of notification and without considering the potential impact of a second deal which was notified only one day later.
Reminder of the facts
Seagate Technology had prenotification contacts with the Commission March 14, 2011 and publicly announced and notified its acquisition of Samsung’s hard disk drive business on April 19, 2011. After a Phase II investigation, the EU Commission unconditionally cleared the transaction on October 19, 2011, concluding that it would not significantly impede effective competition in the hard disk drive market because four competitors would remain.
Western Digital proposed to acquire Hitachi’s hard drive business and notified this transaction on April 20, 2011, after Seagate/Samung. Western Digital and Hitachi publicly announced the deal on March 7, 2011 and had prenotification contacts with the Commission on March 10, 2011 – both dates earlier than the same events for Seagate and Samsung. The Western Digital/Hitachi transaction was also cleared by the EU Commission after a Phase II investigation on November 23, 2011, but was subject to several significant remedies (and application of the ”up-front buyer" system) unlike Seagate/Samsung because the EU Commission carried out its competitive analysis on the basis that only three hard disk drive competitors would remain.
Explanation of the 'priority principle' applied by the EU Commission
In its decision concerning the Seagate/Samsung transaction, the EU Commission recognizes having assessed the transaction according to a “priority principle” ("first come, first served" approach), based on the date of notification. The EU Commission defended the application of this “priority principle” and noted that it had already been applied in several previous cases (most recently in TomTom/Tele Atlas, Commission Decision of May 14, 2008) but the EU Commission had not expressly explained its approach as they have in the present case.
According to the EU Commission, the relevant framework to evaluate the effects of a transaction is the competitive conditions existing at the time of notification ("It is neither necessary nor appropriate to take into account future changes to the market conditions resulting from subsequently notified transactions that require approval from the Commission."). The EU Commission states that the date of notification is a clear and objective criterion for applying the priority principle. It "takes the view that the priority principle, based on the date of notification, is the only one that ensures sufficient legal certainty, transparency and objectivity and respect the other provisions and aims of the Merger Regulation."
The EU Commission explains that the fact that the Western Digital/Hitachi transaction was notified only one day after the Seagate/Samsung transaction is irrelevant ("The principle of legal certainty requires that the same priority rule is applied irrespective of the various time-periods that may lie between the notifications of transactions affecting the same market.").
Criticism of the application of the 'priority principle' by the EU Commission and lessons to be learned
This 'priority principle' should be taken into account when working on a transaction that has to be notified to the EU Commission in a heavily concentrated economic sector if there are rumors of other possible transactions between or involving competitors, or even more so in case public announcements of other transactions have been made. In such a specific context, companies and their counsel should consider notifying the transaction to the EU Commission as soon as possible and reduce the duration of, or even remove, the pre-notification time period.
It remains to be seen what the EU Commission’s position would be if, during the course of two concurring transactions within a highly concentrated sector, one transaction is notified before the other, but the notification file for the second transaction is completed before the one for the first transaction (i.e., will the EU Commission give the priority to the first notified transaction or to the second one?). However, in light of the abovementioned cases, particular efforts should be made to file a complete notification file immediately in order to circumvent any risk deriving from this uncertainty.
Western Digital has challenged both (i) the EU Commission's decision to apply the “priority principle” when deciding to open a Phase II (Case T-452/11), and (ii) the Commission's final conditional clearance decision of the Western Digital/Hitachi transaction (Case T-60/12). For the time being, only limited information is available on these appeals, but we believe that the first appeal should be rejected/declared inadmissible because the EU Commission's application of the “priority principle” when deciding to open a Phase II can be challenged under EU law.
by Andrea Hamilton, David Henry and Philipp Werner
EU Court rules that European Commission must undertake an individual and specific review of requested cartel documents before it can deny a damages claimant access thereto.
To read the full article, click here.
by Philipp Werner, David Henry and Andrea Hamilton
On April 24, 2012, the UK government took a significant step towards private antitrust actions by publishing a consultation document on how best to encourage private sector challenges to anticompetitive behavior. This consultation must be seen in the broader context of efforts to develop private antitrust enforcement in the European Union. The UK has already established itself as a premier venue for private antitrust actions, and the case law on jurisdiction, privilege and access to leniency documents in follow-on actions is rapidly evolving.
The UK government envisages that new, more effective, measures are to be introduced as a complement to public antitrust enforcement by the UK Office of Fair Trading and the European Commission. In particular, the UK Government is consulting on a host of measures the most salient of which are the following:
The consultation runs until July 24, 2012. A copy of the consultation is available here.
If companies are fined for antitrust infringements, the question arises whether the fines are tax-deductible. Given the high amounts of fines imposed by the European Commission and the competition authorities of European Union (EU) Member States, the importance of the question is obvious.
In several EU Member States such as the Netherlands, France or the United Kingdom, the authorities have already made it clear that antitrust fines are not tax-deductible. This is also the view of the European Commission. However, the question has not yet been settled by the European Court of Justice and has now come up again in Belgium in a recent case.
In 2011 Tessenderlo S.A., a Belgian chemical company, was fined € 83.7 million by the European Commission for breach of EU antitrust rules in an animal feed phosphate cartel case. It now seeks to deduct the amount of the fine from its tax liabilities in Belgium, arguing that the fine amounts to business costs (frais professionnels). This was refused by the Belgian tax administration and Tessenderlo brought the matter to the Brussels first instance court (Tribunal de première instance de Bruxelles), which decided to refer the matter to the Constitutional Court.
The Brussels first instance court seeks to know whether the currently argued interpretation of Belgian tax law is compatible with the Belgian constitutional principle of equality. According to that interpretation, administrative fines such as antitrust fines are included in the list of tax-deductible business costs – as opposed to criminal fines. An official from the European Commission has announced that the Commission will file an amicus curiae brief before the Belgian Constitutional Court, arguing that the deduction of antitrust fines would undermine their deterrent effect.
by Martina Maier and Philipp Werner
Under German law, companies may escape cartel fines by undertaking an internal restructuring. The German competition authority has indicated a willingness to reallocate such cases to the European Commission, which can impose a fine on the corporate group regardless of any internal restructuring. Commission officials speaking at a conference have suggested recently that the Commission would be willing to take over cartel cases from EU Member States, even at a late stage in the proceedings, in order to fine undertakings for their anti-competitive behaviour.
To read the full article, click here.
by Martina Maier and Philipp Werner
Under German law, companies may escape cartel fines by undertaking an internal restructuring. The German competition authority has indicated a willingness to reallocate such cases to the European Commission, which can impose a fine on the corporate group regardless of any internal restructuring. Commission officials speaking at a conference have suggested recently that the Commission would be willing to take over cartel cases from EU Member States, even at a late stage in the proceedings, in order to fine undertakings for their anti-competitive behaviour.
To read the full article, click here.
by Henry L.T. Chen, Frank Schoneveld and James Jiang
Recently China’s Ministry of Commerce (MOFCOM) approved Western Digital’s proposed acquisition of Hitachi’s hard disk drive business on a conditional basis. Containing the most comprehensive clearance conditions ever imposed by MOFCOM, this decision mirrors previous guidance issued by the European Commission and illustrates that at least two authorities in two of the world’s major economies are working toward imposing similar clearance conditions in their respective jurisdictions.
by David Henry and Philipp Werner
On February 7, the European Commission (EC) and the European Free Trade Association (EFTA) Surveillance Authority conducted unannounced inspections in the energy exchange market. Representatives of Nord Pool Spot (Lysaker, Norway) and EPEX Spot (Paris, France and Leipzig, Germany) announced that the companies were subject to inspections. It is not known whether other companies were also raided. The inspections show that the EC’s enforcement policy extends beyond the retail level of the energy sector.
To read the full article, click here.
The European Commission has launched a Green Paper consultation on credit card, internet, and mobile payments with regard to card-fees and related matters of concern to the competition authorities.
Interested stakeholders have until 11 April 2012 in which to submit their views.
To read the full article, click here.
by Martina Maier and Philipp Werner
On December 20, 2011, the European Commission adopted a new legislative package on the application of State aid rules on services to public services - known as Services of General Economic Interest (SGEI). EU Member States spend billions of euros each year on SGEI, so any rules concerning the assessment of these compensations under EU State aid rules have a huge political and economic impact in Europe.
Background
The principle of EU State aid law is that it prohibits the granting of State aid by EU member states to specific companies or industry sectors. This concerns direct grants as well as other economic advantages such as state guarantees, favorable interest rates or tax breaks. State aid may under certain circumstances be approved by the European Commission after notification of the aid measure by the member state.
The new package replaces the 2005 package and sends mixed signals. On one hand, it exempts any compensation for certain social services, regardless of the amount of compensation. It also provides for a simplified treatment of a wider range of SGEI including, for example, health care services, and de minimis regulation for SGEI, expected to be adopted early next year, may further ease the burden for member states and service providers. On the other hand, it lowers the compensation threshold for a more in-depth analysis of compensations for such services under EU State aid rules.
The new SGEI package contains rules for aid granted by member states to companies that provide certain social or other services in the public interest. If these services are (also) provided on the market, they are referred to as SGEI. As a general rule, compensation for SGEI may be granted if the company has been entrusted with the provision of such services, if the compensation is calculated on the basis of objective and transparent parameters, and if the compensation does not exceed the costs related to the provision of the service.
The New SGEI Package
The new package is comprised of four instruments: a communication explaining the basic concepts of State aid that are of relevance for SGEI, a decision that exempts compensation for certain SGEI from the notification requirement and summarily approves the compensation under EU State aid rules (such as the Block Exemption Regulations in the field of EU competition law), and a framework for the analysis of SGEI compensation that is not exempted under the decision. It also contains a proposal for a de minimis regulation. The latter could not be finalised in time due to substantial criticism from the member states and is expected to come into force next year.
The decision sets out the conditions under which State aid in the form of public service compensation granted to companies entrusted with SGEI is exempt from the notification requirement. This exemption has been extended from hospitals and social housing to a broader spectrum of social services. It now covers activities such as health and long term care, childcare, access to and reintegration into the labor market, care and social inclusion of vulnerable groups, and less-frequented air or maritime transport links to islands.
Although the range of exempted services has extended, the threshold for exemption has lowered from €30 million to €15 million of compensation per year. This means that compensation for SGEI will be exempted if it is under €15 million but will have to be analysed in detail under EU State aid rules if it exceeds this threshold. This is bad news for many member states and SGEI because many measures that had been exempted will now have to be notified to the European Commission.
According to the latest proposal, under the new SGEI de minimis regulation, which is expected to be adopted in early 2012, the threshold for compensation that will be exempt from State aid rules will be set at €500,000 over three years
The new framework specifies the conditions under which SGEI compensation that is not exempt under the decision can still be compatible with EU State aid rules. The new rules aim at a more detailed and more economic-based analysis of these measures, in particular concerning distortions of competition. It also provides for additional requirements, including the possibility of commitments from member states.
The new SGEI package overhauls the rules for compensation for services of general economic interests. It extends the simplified procedure of automatic exemption to a larger number of services but at the same time introduces a lower threshold. The impact of the new package is likely to differ from one member state to another. It is important for member states and public and private undertakings active in these sectors to know the rules because this will allow them to take advantage of the available exemptions and to ensure that they can keep the compensation they receive from member states.
by Philip Bentley QC, Philipp Werner and Christoph Voelk
In response to a request from the English High Court, which is currently reviewing a cartel damage claim, the European Commission has submitted an amicus curiae brief on the disclosure of leniency documents. The Commission’s opinion is that national courts should not order the disclosure of leniency documents prepared specifically for the purpose of an application under the EU leniency programme. In contrast, the applicant’s reply to the statement of objections and the replies to requests for information could be ordered to be disclosed, insofar as they do not concern leniency material.
To read the full article, click here.
The European Commission has invited comments as it reviews the current regime for Technology Transfer Agreements. All stakeholders that have worked with the current set of rules will have a real interest in its improvement and should find it worthwhile to take part in the consultation process. In order to be involved in the shaping of these proposals and not just in the polishing of them, it is important to submit comments ahead of the 3 February 2012 deadline.
To read the full article, click here.
The General Court rejects intervention of damages claimants in appeal before the European courts by taking a narrow and rather formalistic view of legal interest in the appeals. While it is true that damages actions are legally possible as stand-alone actions, the reality in Europe is that third parties’ damages actions stand and fall with the decision that finds an infringement.
To read the full article, click here.
by Philipp Werner and Martina Maier
On November 23, 2011, the European Commission published a new brochure, “Compliance Matters – What Companies Can Do Better to Respect EU Competition Rules.” Its stated purpose is to help companies that do business in the European Union "stay out of trouble" and to ensure their compliance with EU competition rules. However, it does not cover the various practical and legal problems that companies face when developing and implementing compliance programs.
The first part the brochure focuses on the general obligation to comply, as well as the benefits of compliance, such as the enhancement of a company’s reputation and attractiveness for promotional and recruitment purposes. The second part describes the costs of non-compliance: fines for companies, sanctions on individuals, nullity of illegal agreements and the possibility for damage claims before national courts, and bad press and collateral consequences. The third part gives an overview on the applicability of EU competition rules. The fourth part sets out the strategy that companies should follow to ensure compliance, including the basic steps for identifying the overall risk and individual exposure, as well as steps for implementing the compliance strategy, staff-training, keeping the compliance program current, and monitoring and auditing.
The European Commission makes clear that "although all compliance efforts are welcomed, the mere existence of a compliance programme is not enough to counter the finding of an infringement of competition rules." With respect to setting the level of fines, the Commission reinforces its position that while a company’s specific situation is taken into account "the mere existence of a compliance programme will not be considered as an attenuating circumstance,” nor will it be a valid argument to justify a reduction of the fine. Thus, the position of the European Commission stands in contrast with recent statements by the UK Office of Fair Trading (OFT) and France's Autorité de la Concurrence, both of which stated their intention to take the existence of a compliance program into account when setting the amount of fines.
Public Consultation on Settlement and Compliance Programs Launched by the French Competition Authority
by Louise-Astrid Aberg and Lionel Lesur
On October 14, the French Competition Authority (FCA) launched a two-month public consultation for guidelines on settlement and compliance programs. Both these guidelines have been highly anticipated since they were first announced last May.
The draft settlement guidelines contain details on the FCA's approach and decisional practices which were developed under the control of the French courts. Among the guidelines, the FCA determined that settlement is possible in all cases where infringement on competition law has taken place, including cartels, vertical restraints and single firm conduct. In the event of infringement, settlement becomes an option only after the parties have been formally charged. Once parties fully acknowledge their participation in anticompetitive conduct, the casehandler in charge of the matter would decide whether to respond positively to their request for a settlement. Parties retain the same procedural rights that they would in an ordinary procedure; in particular, they would be granted access to file. The FCA would reward parties who wish to settle with a fine reduction of 10 percent. In contrast to the settlement procedure of the European Commission (EC), it would not be possible to cumulate both a settlement reduction and a leniency reduction. However, parties settling with the FCA may decide to adopt behavioral or structural remedies which would enable them to benefit from an additional reduction of 5-15 percent. With regard to cartels, parties would benefit from a reduction up to 10 percent if they commit to changing their behavior in the future, in particular, by implementing a compliance program.
The draft guidelines elaborate further on the benefits of implementing a compliance program. The FCA clarifies several instances in which a compliance program would enable a party to benefit from a reduction of its fine. In the course of ordinary proceedings resulting in the imposition of a fine, the existence of a compliance program or the lack of it would not act as an attenuating or an aggravating circumstance. However, in the case of a settlement procedure, the commitment to implement a compliance program would be considered a commitment by the company to change its behavior in the future and would, thus, enable the party to benefit from a reduction of its fine. In this sense, the FCA and the EC agree that implementing compliance program would not have a significant effect on a fine that is set outside of a settlement procedure. The FCA only differs with respect to the specific context of a settlement procedure.
A fine reduction of up to 10 percent may not be easy to obtain. A compliance program would only be considered by the FCA if it includes the following characteristics: (i) the company's top executives are strongly committed to the program, (ii) the company has designated persons to oversee the program and take charge of its implementation, (iii) the company has taken effective measures to implement information, training and awareness programs, (iv) the company employs effective control, audit and alert mechanisms and (v) the company has an effective monitoring mechanism. These requirements are prerequisites without which parties would not be able to claim a reduction of their fine on the basis of their foreseen compliance program. Please note, however, that satisfying these prerequisites is not necessarily enough to obtain a reduction of their fine.
Some may argue that a 10 percent reduction would not be enough to encourage companies to spend time and resources implementing compliance programs. However, the FCA's vision is that such programs would enable companies to detect cartels more easily in the future and, thus, be the first in line to apply for leniency.
It remains to be seen whether these two sets of guidelines will be adopted at the end of the public consultation. If adopted, they could become useful tools for French competition lawyers and provide incentives for companies to implement compliance programs..
To read the full press release, click here
Italy's Prime Minister Announces New Cabinet
by Veronica Pinotti and Martino Sforza
Italy’s new Prime Minister, Mario Monti, has named the members of his new cabinet, which will start to work on economic reforms next week, once the Italian Parliament has passed its final vote of confidence on Monti.
All the new cabinet members are high profile individuals from academia, industry and the public sector, none are politicians or affiliated with any political party.
Antonio Catricalà, current Chairman of the Italian Competition Authority, was named under-secretary to the Prime Minister's office and Secretary of the Council of Ministers. There are a number of potential candidates to take Catricalà’s role at the Italian Competition Authority, including Lorenzo Bini Smaghi (former member of the ECB’s Executive Board) Luigi Fiorentino (current Secretary General of the Italian Competition Authority) and Pasquale de Lise (current President of the Council of State, the higher court for administrative cases in Italy).
In addition to Catricalà, with whom McDermott Italian lawyers have worked on many antitrust cases before the Italian Competition Authority, we have also crossed paths with other members of Monti's new cabinet including Corrado Passera, the current CEO of Intesa-San Paolo, who has been appointed as head of the newly-formed Ministry of Economic Development, Infrastructure and Transport; Elsa Fornero, also a board member of Intesa-San Paolo, who has been named head of the Ministry of Welfare and Francesco Profumo, the current President of the Politecnico University in Turin, who has been named head of the Ministry of Education.
by Veronica Pinotti and Martino Sforza
On Sunday November 13, 2011, Mario Monti, a former member of the European Commission, conditionally accepted a mandate to form a new Government. The main task of the new Italian Government will be to adopt a package of economic reforms considered necessary by the European Union to cut Italy’s massive debt and restore the market's confidence. Italy must repay or refinance around €200 billion (approximately US$276 billion), worth of maturing bonds by April 2012. If Italy is forced to continue to pay high rates for borrowings, it will have difficulty in handling its debt load, which is among the highest in Europe.
Monti is expected to present his cabinet and program for reform to the Italian Parliament in a few days. In order to be able to push through the urgent economic measures, he will ultimately need the support of a broad parliamentary coalition, which (considering Italy’s current political environment) might put the durability of the new Government at risk.
Mario Monti is one of the most prominent economists in Europe and former President of Milan Bocconi University. Between 1995 and 2004, he served as European Commissioner responsible for the Internal Market and Competition, where he won cornerstone antitrust cases such as those against Microsoft and General Electric. He also adopted important legislative changes, showing great sensibility for antitrust related matters.
Many McDermott lawyers have had the chance to work with and know Monti personally from his time at the European Commission. He has the necessary gravitas and rigour to lead the country for a transitional term, which may last a few months. His future administration is likely to reflect his long-run priorities, such as the adoption of liberalisation measures and the gradual reduction in state ownership of local services, as well as a higher level of antitrust scrutiny to increase market competition. These policy objectives are expected to be coupled with the adoption of the austerity measures needed to reform the Italian economy. Such measures may consist of a raise in the standard retirement age, or a pledge to raise funds from public real estate sales.
by Martina Maier and Philipp Werner
The European Union’s (EU) national competition authorities (NCA) and the European Commission have agreed upon best practices on cooperation in cross-border mergers. The best practices’ stated aim is to enhance cooperation in merger cases where the European Commission Merger Regulation does not apply and the merger needs to be notified in more than one EU Member State.The best practices follow a public consultation on draft best practices started earlier this year.
The best practices do not make cooperation between NCAs compulsory. The merging parties will not be able to insist that NCAs should cooperate in a multi-jurisdictional filing. Rather, NCAs will apply them in cases where they think cooperation could be beneficial for the NCAs, the merging parties and third parties, in particular where the merger raises similar comparable jurisdictional or substantive questions and concerns similar or the same product markets.
The best practices discuss a number of areas and instruments for facilitating a multi-jurisdictional merger review process, such as:
Merging parties are encouraged to contact each NCA where the merger will be filed and provide them with basic information, such as the jurisdiction where the merger will be filed, the date of the proposed filing and the sectors involved, to facilitate cooperation among the agencies. Also, the best practices support joint pre-notification contacts where useful. The best practices further highlight, that it will be for the merging parties to coordinate the timing and also the substance of possible remedies, e.g. where a remedy accepted in one Member State has an impact on the effectiveness of the remedy in another Member State.
Most important, the best practices clearly point out that it is fully within the merging parties’ respectively third parties’ discretion to provide waivers to the NCAs to exchange confidential information, that such information will be protected under national law in all Member States and that it will not be used for any purpose other than the review of the relevant merger. To this end a model waiver form can be found in the annex to the best practises. However, it should be noted that the best practice paper states that once a waiver has been provided, the parties will not be informed about the actual scope and timing of the exchange of the confidential information.
The best practices and its annex can be accessed here.
by Martina Maier and Philipp Werner
In Elf Aquitaine SA v Commission, the European Court of Justice ruled on 29 September 2011 that Elf Aquitaine was not jointly and severally liable as a parent company for the involvement of its wholly owned subsidiary in the cartel for monochloroaecetic acid. Taken with a number of recent judgments, this suggests that European courts are getting tougher with the Commission on parental liability.
To read the full article, click here.
by Martina Maier, Philipp Werner and Lionel Lesur
The European Commission’s new guidelines for best practices during antitrust procedures introduce some new elements that could be beneficial for companies under investigation, complainants and interested third parties if handled in the right way.
To read the full article, click here.
by Martina Maier, Christoph Voelk and Philipp Werner
On 9 September 2011, the European General Court in Deltafina ruled that the European Commission is entitled to withdraw the immunity of a leniency applicant in a cartel investigation if the leniency applicant discloses the fact that it had submitted a leniency application to the Commission and the disclosure does not correspond with the "real spirit of cooperation" (in particular, was not agreed with the Commission). The leniency applicant cannot rely on the protection of legitimate expectations in such a case. The General Court stated:
It should be also noted that the assessment of the facts, whether such a company behaved in manner that expressed the spirit of genuine cooperation in compliance with the requirements (…), can be done only with regard to the circumstances existing at the time when this conduct was performed. With regard to the “permanent” character of the required cooperation, which has to be continuously maintained throughout the whole procedure, any conduct contrary to the spirit of genuine cooperation in itself is sufficient to establish the breach of the duty of genuine cooperation. Therefore, any circumstance that occurred after the conduct in question cannot justify this breach (Judgment not yet available in English – convenience translation).
This judgment confirms that a company that wants to apply for leniency must know that it has to cooperate with the European Commission and that the cooperation obligation can be very far-reaching. Failure to cooperate will lead to a withdrawal of leniency. The company has to take this into account when making its decision, a decision that is increasingly complex and must balance many different, often conflicting, interests and obligations.
by Martina Maier and Philipp Werner
The European Commission (EC) imposed a EUR 8 million fine on Suez Environnement for the breach of a seal affixed during an antitrust inspection. This is the second case of such a fine on an EU level after the EC imposed a fine of EUR 38 million on E.ON in 2008. The fine was imposed even though Suez Environnement was able to prove that the breach of the seal was caused by negligence. The decision shows how serious the EC is about interference with antitrust inspections.
Therefore, in cases of ‘room-sealing’ during an EC investigation, it is crucial for companies to take all steps to ensure that the seal will not be broken, as even proof of negligence will not protect the company against a high fine. It may even be worth using security to protect seals against “accidents” involving cleaning or other personnel.
The decision concerns an incident that occurred in April 2010 when EU officials inspected Lyonnaise des Eaux (LDE), a subsidiary of Suez Environnement, due to suspicions of anticompetitive conduct. Before leaving the premises at the end of the first day of the inspection, the EC placed a seal on an office door. The next morning, that seal was broken. In this case, evidence suggested that the seal was broken by accident. However, neither the recordings of the surveillance-camera nor the testimonies of witnesses or the perpetrator himself helped the company to avoid a fine.
In the E.ON case, the company denied breaking the seal and maintained that the seal breach resulted from the ‘reduced adhesiveness of aging seals.’ However, despite this assertion, the fine was upheld by the EU General Court in December 2010. The Court clarified that the EC was right to assume at the very least a negligent breach of the seal in the present case, and that it is not necessary for the EC to prove how the seal was actually broken or that evidence had actually been manipulated after the breach of the seal to impose a fine (Case T-141/08).
It should be noted that fines can also be imposed for the breach of a seal affixed in the context of antitrust inspections by a national competition authority.
by Martina Maier, Philipp Werner, Andrea Hamilton and David Henry
A recent decision by the Court of Justice of the European Union may make it easier for prospective claimants to obtain at least those leniency statements and related materials that are submitted to the national competition authorities of the EU Member States. Companies doing business in the European Union are urged strongly to follow developments in this area and factor the risk of disclosure into the decision of whether or not to apply for leniency.
To read the full article, click here.
by Veronica Pinotti and Martino Sforza
Some recent developments in the European antitrust legal arena demonstrate that the enforcement of antitrust rules in the distribution sector is clearly one of the main priorities on the agenda of the European antitrust authorities. As such, compliance with antitrust legislation is also a priority for alcohol beverage companies reliant on distribution systems.
To read the full article, click here.
by Philip Bentley QC, Philipp Werner and Christoph Voelk
Under EU antitrust law, parent companies are presumed liable for antitrust infringement of their wholly owned subsidiaries. While this presumption is rebuttable, it is unclear what a company must do to rebut it successfully. The recent Air Liquide judgment of the General Court of the European Union marks the first time that a company escaped the presumption of liability, if only for procedural reasons. The judgment also sheds some light on the arguments that may work for a parent company.
To read the full article, click here.
by Veronica Pinotti, Riccardo Franceschi and Martino Sforza
Compliance with EU and national antitrust merger control rules can significantly impact the feasibility, timing and costs of M&A transactions. Parties to a proposed transaction in the EU should assess the merger control issues early in the process and evaluate and comply with any procedural antitrust requirements to avoid unnecessary delay, or even civil or criminal penalties, in any EU transactions.
To read the full article, click here.
by Veronica Pinotti and Martino Sforza
In Europe, the interplay between antitrust and criminal law at the national level may vary significantly by jurisdiction. Some European Union member states, such as the United Kingdom, Ireland, and Romania, have criminalized competition law. Other jurisdictions, such as Germany and Italy, do not envisage criminal penalties for anticompetitive practices; however, such conduct may sometimes qualify as a separate criminal offense. The following cases, across Europe, show that there appears to be a general trend towards more effective enforcement against serious antitrust violations – including by means of criminal penalties against individuals – and not only in the countries with criminal competition laws.
To read the full article, please visit: http://mwe.com/info/pubs/pinotti0611.pdf
by Martina Maier, Philipp Werner and David Henry
The European Court of Justice (ECJ) ruling of 14 June 2011 followed a case that originated in Germany. Pfleiderer, a firm in the wood industry, was considering a damages claim against members of a paper cartel. It sought access to the cartel files held by the German Competition Authority (FCO) in order to substantiate its claim. A dispute followed over whether disclosing the documents of companies who had cooperated with the FCO would undermine the national leniency programme since potential leniency applicants would fear eventual disclosure.
A German court asked the ECJ for a preliminary ruling whether or not the provisions of EU competition law are to be interpreted as meaning that cartel victims can be granted access to leniency applications received by an EU Member State competition authority.
The ECJ has held that it was for the courts and tribunals of each EU Member State on the basis of their own national law to determine the conditions under which such access must be permitted or refused by weighing the interests protected by EU law. The upshot of this ruling is therefore that each judge in each Member State has a discretion as to what type of leniency document can be disclosed to a cartel victim. The ECJ has therefore distanced itself from recommendations made by the Advocate General who suggested that documents which existed before the cartel was uncovered could be disclosed but said that submissions drafted for the purpose of revealing the infringement should be protected.
For leniency applicants, weighing the decision whether to apply for leniency has now become even more complex. On the one hand, a potential leniency applicant stands to benefit from immunity, or a reduction, from fines. On the other hand, it will now have to take into consideration not only the remaining risk of a fine and criminal sanctions but also the the fact that private damages claimant might get easier access to incriminating evidence. Such complexity is all the more greater given that the ECJ's ruling may lead to different results in different European countries.
by Martina Maier and Philipp Werner
The majority of merger control regimes around the world impose standstill or waiting period requirements for notifiable transactions, e.g. the US, the EU and most EU Member States. If a transaction meets the filing thresholds, it must be notified to the competent antitrust regulator and must not be closed without prior approval by the antitrust regulator or the expiration of the applicable waiting period.
Under German merger control rules, a notifiable merger must not be implemented without prior clearance decision. An infringement of the standstill obligation can (theoretically) lead to fines of up to 10 percent of the group's worldwide turnover. In addition, the infringement of the standstill obligation renders the contracts ineffective under German merger control rules.
The German Federal Cartel Office (FCO) has recently taken a stricter approach to the enforcement of the merger standstill obligation. In the past, the risk of fines was minor if the merger did not lead to any serious competition concerns, if it was the group's first infringement of the standstill obligation and if the company itself notified the FCO ex post of the implemented merger.
We see now a growing number of decisions imposing fines for the infringement of the standstill obligation (sometimes referred to as "gun jumping" in the United States). In May 2011, in the latest of a string of such decisions, the FCO imposed a substantial fine for infringement of the standstill obligation although the merger did not lead to any serious competition concerns and although the company had itself notified the implemented merger. These facts were only taken into account as mitigating factors for the calculation of the fine.
The European Commission has also recently imposed fines for the infringement of the standstill obligation.
In this changing environment, the filing requirement and the standstill obligation cannot be seen as a pure formality. It is therefore essential to always verify whether and in which jurisdictions a transaction is notifiable - and not to close the deal before the relevant competition authorities have cleared the deal.
by Martina Maier and Philipp Werner
In January 2011, the European Commission decided that the proposed merger between Aegean Airlines and Olympic Air should be prohibited because it would have resulted in a quasi-monopoly on the domestic Greek air transport market. This decision shows that traditional airline merger remedies, such as slot releases, are sometimes insufficient to allay concerns of monopolization. It also illustrates that the Commission will take a tough stance on competition policy, even when facing strong political pressure to clear the merger for the sake of the economy.
To read the full article here, click here.
by Philipp Werner and Christoph Voelk
The European Commission started a public consultation on a draft document which seeks to establish best practices on cooperation between national competition authorities (NCAs) in the EU when reviewing mergers. Although cooperation between NCAs exists already, especially through the European Competition Network (ECN), the best practices seek to formalize the cooperation between NCAs and thus providing more security and predictability for the parties and their legal advisers.
The best practices should enhance cooperation between NCAs in cases where the same merger is assessed by several NCAs because it does not meet the thresholds for review under the EU Merger Regulation. The Commission considers cooperation between NCAs as beneficial not only for the authorities but also for the merging parties: it will speed up the investigation process, reduce burdens on the merging parties and may help NCAs in designing remedies. Particularly in cases where serious concerns about the post merger situation exist, close cooperation between competition authorities will secure a non-conflicting and coherent outcome.
The object of the Commission's draft is twofold:
First, NCAs should keep each other informed of important developments related to their investigation into the merger. Also, NCAs should liaise in cases where closer cooperation is necessary and keep each other informed about their progress. Most importantly, the Commission proposes that NCAs should in future discuss market definition, theories of harm, empirical evidence and the possible impact of a proposed merger.
Second, the draft also assigns a role to the merging parties. Merging parties should, as far as possible, provide NCAs with information as to where the merger will be filed, the dates of the proposed filing, geographic areas, sectors involved etc. Also, merging parties should assist in ensuring that remedies do not lead to inconsistencies and that such remedies are effective. Of importance is further the proposal that the merging parties, but also third parties, shall - as far as possible - grant waivers of confidentiality so that NCAs actually are permitted to discuss particular issues of a proposed transaction.
Comments on the Commission's draft can be submitted until 27 May 2011 to comp-a2-mergers@ec.europa.eu.
The consultation page can be accessed via http://ec.europa.eu/competition/consultations/2011_merger_best_practices/index_en.html
by Andrea L. Hamilton and Wilko van Weert
A recent Decision of the European Court of Justice shows once more that it is still next to impossible for a parent company to rebut the presumption of liability for its subsidiary’s conduct. Nevertheless, companies with subsidiaries operating in the EU would be well-served to consider reinforcing their compliance programmes throughout their groups. Reinforcing compliance is more likely to reduce competition law risks for parent companies than, for example, a strategy of distancing itself from its subsidiaries.
To read the full article, please visit: http://www.mwe.com/info/news/bb0211l.htmhttp://www.mwe.com/info/news/bb0211l.htm
by Martina Maier, Clive Stanbrook, Frank Schoneveld, Wilko van Weert and Philipp Werner
On 14 December 2010, the European Commission published its New Horizontal Guidelines, which provide more detailed information on the assessment of cooperation agreements between actual and potential competitors, in particular concerning information exchange and standardisation, as well as new Block Exemption Regulations on R&D and specialization agreements.
To read the full article, please visit: http://www.mwe.com/info/news/ots1210k.htm.
McDermott Will & Emery's International News, Issue 2, 2010, covers a range of legal developments of interest to those operating internationally. This issue focuses on Antitrust and Competition.
In this issue...
The full issue can be found at: http://www.mwe.com/info/news/int0210.htm.
by Philip Bentley QC and Veronica Pinotti
The European Commission was expected to unveil its plans for a proposed directive on “class actions in antitrust affairs” on 7 October 2009, but at the last minute this was delayed, no doubt due to the far-reaching consequences of the proposal and staunch political and industry opposition in some quarters.
If adopted into European Union legislation, such a directive would oblige the 27 EU Member States to adopt legislation providing for class actions in antitrust matters. This would impinge on private law and court procedure in the Member States, thus going well beyond the mere administrative enforcement of Articles 81 and 82 of the European Community Treaty. For this reason, it is possible that such an innovation can only be adopted as a joint legislative measure of both the EU Council and the European Parliament, and not just as a measure of the EU Council adopted after “consulting” the Parliament. The possibility of an increased role of the Parliament has no doubt encouraged the proposal’s opponents.
Judging by the Commission’s White Paper published in April 2008, it seems that the idea was to create “opt-in” collective actions, in which individuals, including indirect purchasers, could decide to combine their claims into one single action and representative actions on behalf of “identified victims” brought by “qualified entities” (e.g., consumer associations or similar organizations) which would be either officially designated in advance or certified for a particular antitrust infringement by a Member State on an ad hoc basis.
While the Commission pauses to consider its next step, some Member States are proceeding with class action legislation on their own initiative, including, most recently, Belgium and Italy.
Belgium
A controversial pre-draft bill that would introduce class actions into the Belgian legal system was recently made public. This proposal does not focus on antitrust, in particular, but would of course be useable in such cases.
Recent “monster” trials, which proved to be almost unmanageable for the Belgian courts, and political pressure from consumer organisations have spurred the Ministries of Justice and of Consumer Affairs to this pre-draft bill. As with the European Commission’s initiative, the business community has spoken out against the pre-draft bill on business, political, legal and technical grounds.
The proposed procedure would be divided into two phases: an admissibility phase and a phase in which the Court of Appeals would decide on the merits of the claim. An action could be started unilaterally by writ or by “litigation” agreement among the claimants and the defendants, but in both cases the claimants would be required to nominate a sole legal representative for the conduct of the court proceedings.
In the admissibility phase, the court would determine whether the case in actuality concerned “mass-damage” and would define the class, in the case of an action brought by writ, or give or withhold approbation in the case of an action brought by litigation agreement. The Belgian approach favours an “opt-out” system unless the court or the litigation agreement provides for an “opt-in” system. The court or the litigation agreement would also stipulate how the action would be made public to the possible “class” of claimants (in addition to the fact that the action would be filed in a special public register).
If the court held the claim to be founded on the merits, it would also decide on the amount of damages to be awarded. The measures of damages would be limited to compensation for loss caused; exemplary or punitive damages would not be awarded. Damages could be awarded specifically to individual members of the class, or to the class as a whole, or to a combination of both. The sole representative of the class would normally be charged with sharing out any funds awarded to the class as a whole.
The main criticisms of the procedure as outlined in the pre-draft bill include the following:
The formal Parliamentary bill and explanatory notes are still awaited.
Italy
In Italy, a law has been passed which will introduce a form of class action with effect from 1 January 2010. Contrary to the Belgian approach, the Italian law is modelled on an “opt-in” system whereby individual consumers must opt-in expressly if they want to join the class. The final judgment will be binding only on those consumers who have opted-in.
As proposed for Belgium, the Italian courts will first carry out an admissibility test to determine whether to allow the case to proceed as a “class action”. Such evaluation requires consideration of potential conflicts of interest, the identity of the rights to be vindicated and the capacity of the claimant to represent the class. If the case is admitted as a class action, the court will then establish terms and procedures to make the case public and allow individuals of the same class to opt-in.
During the first hearing, the court may decide to defer the decision on the admissibility of the class action if there is an investigation pending before an independent authority (e.g., the Italian Competition Authority) or an administrative court.
The order of admissibility can be challenged before the Court of Appeal, although appeal against the grant of admissibility does not suspend proceedings on the substantive claim.
The new law provides that the final ruling, if favourable to the claimants, must determine the full amount of damages due to the members of the class, the measure of damages being compensatory, not exemplary. This ruling can also be further challenged before the Court of Appeal and the latter’s judgment can be appealed on points of law before the Italian Supreme Court (“cassation”).
The two recent examples provided by Italy and Belgium, as well as the European Commission’s initiative—albeit suspended for a while—show that the legal landscape is changing in Europe in matters of class actions, and so must be kept under review by consumers and producers alike. The creation of the ability to bring a class action will facilitate the bringing of claims by claimant groups or consumer organisations on behalf of their members, and so will tend to increase the amount of litigation in this area, as the US experience has shown. This, in turn, will create an added incentive for companies to prioritise compliance with antitrust rules.
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