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Annual European Competition Review 2019

McDermott’s Annual European Competition Review summarizes key developments in European competition rules. During the previous year, several new regulations, notices and guidelines were issued by the European Commission. There were also many interesting cases decided by the General Court and the Court of Justice of the European Union. All these new rules and judicial decisions may be relevant for your company and your day-to-day practice.

In our super-connected age, we can be inundated by information from numerous sources and it is difficult to select what is really relevant to one’s business. The purpose of this review is to help general counsel and their teams to be aware of the essential updates.

This review was prepared by the Firm’s European Competition Team in Brussels and Paris. Throughout 2019 they have monitored legal developments and drafted the summary reports.

Access the full report.




Beware of “Gun Jumping”: EU Court Upholds EUR 20 Million Fine Imposed On Norwegian Seafood Company

Between 2012 and 2013, Marine Harvest ASA (“Marine Harvest”), a Norwegian seafood company, acquired Morpol ASA (“Morpol”), a Norwegian producer and processor of salmon. Marine Harvest notified the transaction to the European Commission under the European Union’s Merger Regulation (“EUMR”), but implemented it prior to the European Commission having granted clearance. In 2014, the European Commission imposed a EUR 20 million fine on Marine Harvest for “jumping the gun”. On 26 October 2017, the General Court of the European Union (“General Court”) confirmed the European Commission’s decision (“Decision”).

WHAT HAPPENED:

On 14 December 2012, Marine Harvest entered into a share and purchase agreement (“SPA”) with companies owned by Jerzy Malek, the founder and former CEO of Morpol. Under the SPA, Marine Harvest acquired 48.5% of the shares in Morpol (“Initial Transaction”). The Initial Transaction was closed on 18 December 2012. On 15 January 2013, Marine Harvest submitted a mandatory public offer for the remaining 51.5% of the shares in Morpol (“Public Offer”). Following settlement and completion of the Public Offer in March 2013, Marine Harvest owned a total of 87.1% of the shares in Morpol (together, the “Transaction”).

Marine Harvest established first contact with the European Commission on 21 December 2012 by submitting a “Case Team Allocation Request”, which initiates the pre-notification process under the EUMR. After submitting various drafts and answers to requests for information, Marine Harvest formally notified the Transaction on 9 August 2013. On 30 September 2013, the European Commission cleared the Transaction subject to some conditions.

On 31 March 2014, the European Commission formally launched a separate investigation into alleged “gun jumping” by Marine Harvest, and in the decision of 23 July 2014, the European Commission imposed a fine of EUR 20 million on Marine Harvest (“Fining Decision”). The European Commission held that Marine Harvest, by implementing the Initial Transaction, had acquired de facto control over Morpol. By acquiring de facto control, Marine Harvest had infringed Art. 7(1) EUMR (“Standstill Obligation”). Under the Standstill Obligation, transactions requiring notification to, and clearance by, the European Commission may not be implemented prior to clearance.

The European Commission rejected Marine Harvest’s argument that the implementation of the Initial Transaction was covered by an exemption provided for in Art. 7(2) EUMR (“Public Bid Exemption”). Under the Public Bid Exemption, the acquisition of control from various sellers through a public bid, or a series of transactions in securities, can be implemented prior to clearance. However, this applies only if the transaction is notified without delay to the European Commission, and if the acquirer does not exercise the respective voting rights. According to the European Commission, the Public Bid Exemption is not intended to cover situations involving the acquisition, from a single seller, of a “significant block of shares” which in itself confers de facto control.

Marine Harvest appealed against the Fining Decision to the General Court. However, with the Decision, the General Court confirmed the European Commission findings, both on substance on with respect to the level of the fine.

WHAT [...]

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Finally Implemented! The Italian Council of Ministers Approves a Legislative Decree Implementing the EU Antitrust Damages Directive

On 14 January 2017, the Italian Council of Ministers approved the Legislative Decree implementing Directive 2014/104/EU on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union (the “Directive”). The final version of the Legislative Decree has not been published yet on the Official Journal. However, the key points emerging from it include:

  1. A strengthened mechanism of evidence disclosure in actions for damages related to alleged infringements of competition rules. In fact, the judge will have the power to request the defendant or a third party, including the Italian Competition Authority (the “Authority”), to disclose relevant evidence which lies in their control.
  2. The extent to which Italian courts will be able to rely on decisions of the Italian Competition Authority or other national competition authorities. For instance, an infringement of competition law ascertained by a decision of the Italian Competition Authority (or appeal judgment), which is not subject to further means of appeal, will be deemed to be indisputably established for the purposes of an action for damages brought before the national courts under Article 101 or 102 TFEU or under national competition law.
  3. The rules applicable to limitation periods for bringing actions for damages, as well as how Italian courts shall assess the joint and several liabilities of companies which are found to have infringed competition rules, and how they shall quantify the harm suffered as a consequence of the alleged infringements.
  4. The business sections of the courts of Milan, Rome and Naples, identified as the only competent courts for such actions for damages, including class actions.

According to the established Italian case-law, in case of actions for damages regarding alleged violations of competition rules, the judge shall use all available investigation means in order to address the obstacles faced by the claimant to access the relevant evidence in antitrust cases, and therefore apply broadly the rules on the disclosure of evidence and information requests (Corte Suprema di Cassazione, judgment no. 11564 of 4 June 2015).

On 26 November 2014, the European Parliament and the Council of the European Union adopted the Directive, which entered into force 26 December 2014, setting 27 December 2016, as the deadline for its transposition at national level. On 27 October 2016, the Italian Council of Ministers approved an initial proposal for a Legislative Decree implementing the Directive and sent it to the relevant commissions of the Italian Parliament for their mandatory (non-binding) opinions. The Legislative Decree was therefore finally approved in the Council of Ministers’ meeting of 14 January 2017. Although it is difficult to predict the likely impact of the Legislative Decree, it will definitely provide a more certain legislative framework for companies and consumers interested in claiming damages on the basis of alleged antitrust infringements.

Gabriele Giunta contributed to this post. 




E-Commerce: The European Commission Completes Its Preliminary Report on the E-Commerce Sector Inquiry

In May 2015, the European Commission (the Commission) launched a sector inquiry in the field of e-commerce in the context of its Digital Single Market strategy. Its aim was to obtain an overview of prevailing market trends, gather evidence on potential barriers to competition linked to the growth of e-commerce and understand the prevalence of certain, potentially restrictive, business practices and the underlying rationale for their use.

In the course of this inquiry, the Commission gathered evidence from nearly 1,800 companies active in the e-commerce of consumer goods and digital content and analyzed around 8,000 distribution contracts. On 18 March 2016, the Commission published its initial findings showing that geo-blocking is widespread in the European Union due to unilateral decisions by companies not to sell abroad as well as contractual barriers set up by companies preventing consumers from shopping online across EU borders.

On 15 September 2016, the Commission completed its preliminary report (the Preliminary Report), which confirms the fast growth of e-commerce in the European Union and identified business practices that might restrict competition and limit consumer choice. (more…)




The Concept of Full-Function Joint Venture in the EU

In the European Union (EU), at the inception of a joint venture (JV), parent companies must determine whether the newly created structure presents a full-functionality nature, which depends on its degree of autonomy. The answer to this question will determine the legal framework applicable to it.

On the one hand, if the JV is full-function it will fall within the scope of the EU Merger Regulation (Council Regulation (EC) No 139/2004 of 20 January 2004), assuming that the turnover thresholds set out in the Regulation are met. Under these circumstances, the European Commission (EC) will assess the impact of the JV on competition on an ex ante basis.

On the other hand, if the JV is not full-function and takes the form of a partnership formalized by a legal structure to a large extent dependent on its parent companies, the creation of a JV will not have to be notified but the EC may operate a control ex post, in the light of Article 101(1) of the Treaty on the Functioning of the EU which prohibits anticompetitive agreements between undertakings. In such a context, it is up to the parent companies creating a JV to determine whether their JV is compatible with competition law rules.

The ex post control has the advantage of avoiding the notification process that delays the implementation of the JV. However, within that framework, companies may not obtain a clearance decision and the fate of their JV is subject to legal uncertainty. It is thus generally preferable for companies to make sure that their JV will fall within the scope of the Merger Regulation because a clearance decision is irrevocable and unlimited.

Read the full article to learn more.




McDermott’s Antitrust M&A Snapshot Published on July 17, 2016

McDermott’s Antitrust M&A Snapshot is a resource for in-house counsel and others who deal with antitrust M&A issues but are not faced with these issues on a daily basis. In each quarterly issue, we will provide concise summaries of Federal Trade Commission (FTC), Department of Justice (DOJ) and European Commission (EC) news and events related to M&A, including significant ongoing investigations, trials and consent orders, as well as analysis on the trends we see developing in the antitrust review process.

United States: January – June Update

The Federal Trade Commission (FTC) and US Department of Justice (DOJ) have been actively challenging mergers and acquisitions in the first half of 2016. In some instances, the parties abandoned their deal once the FTC or DOJ issued a complaint, in others, the parties entered into consent agreements with the agencies. In matters where a divestiture is an acceptable remedy, the FTC and DOJ have required robust divestitures with financially and competitively viable buyers. There is increasing pressure for broad divestitures and for upfront buyers in industries where the agencies do not have ample experience and where there may not be multiple competitive buyers willing to acquire the assets.

In merger challenges, the agencies have been successful in obtaining preliminary injunctions in Washington, DC, but have been less successful outside of their home court. The agencies have successfully argued price discrimination markets, where sales of products to a narrow group of customers were the market, and courts are accepting the agencies’ narrow market definition. We also see a trend in challenges due to innovation, where the merging parties are the market leaders in new developments and research and development in particular areas. Investigations continue to take many months, with many approaching or exceeding a year.

EU: January – June Update

In the EU, there has been a noticeable increase in the number of notified transactions to the European Commission (from 277 notifications in 2013 to 337 in 2015). Most of these transactions have been cleared by the EU regulator in Phase I without any commitments. However, there have still been a number of antitrust interventions requiring the merging parties to offer, often far-reaching, remedies. One industry has recently seen a particularly high ratio of antitrust intervention is the telecoms sector. For example, in the merger between the mobile operators Telenor and TeliaSonera, the parties abandoned the transaction due to European Commission opposition to the transaction. The European Commission publicly announced that the transaction would not have been cleared, and that the remedies offered by the companies were not convincing. A prohibition decision was also issued, despite the offered remedies, in the failed combination of Telefónica UK’s “O2” and Hutchison 3G UK’s “Three”. This transaction involved the longest merger control review by the European Commission to end up in a prohibition decision (243 calendar days, compared to the average of 157 calendar days to block a deal).

With regard to current trends in merger control remedies at the level of the European Commission, there continues to be [...]

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Significant Number of Dawn Raids Shows Increased Antitrust and Criminal Law Enforcement in Italian Pharmaceutical Sector

On 27 November, the Italian Competition Authority dawn raided a major South African company for alleged excessive pricing of its oncology products in Italy. According to a complaint by one of the most active consumer associations in Italy, the group would have required the Italian Medicines Agency (AIFA) to align the price of its products, which are covered by the National Health Service (NHS), with the higher prices applied in other European countries, threatening the withdrawal of the products from the Italian market.

This new investigation is just the latest of many dawn raids that have taken place in Italy throughout 2014 relating to alleged bid rigging and other antitrust and criminal law infringements by pharmaceutical companies, including their participation in public tenders for the supply of products to the NHS. The significant number of dawn raids this year shows increased antitrust and criminal law enforcement in Italy in the pharmaceutical sector.

Two good examples of this trend are the €182.5 million in fines imposed in February 2014 on two major international groups for alleged collusive conduct concerning the sale of drugs for treating eye illnesses, and the investigation started by the Authority in January 2014 into alleged infringements in the sale of octreotide acetate in Italy. In the first case, the NHS would have suffered an overall cost increase of over €45 million in 2012 and likely damages of approximately €540 million in 2013 and €615 million in 2014. The second case relates, as do many of the investigations started this year, to alleged collusive conduct in public tenders for the supply of products to the NHS.

As soon as a proceeding is started in one Member State, international groups should brace themselves for potential complaints and investigations in all other countries where they have a presence or do business. As a recent example, the February 2014 fines were followed in April 2014 by unannounced inspections by the French Competition Authority at the premises of the same two pharmaceutical groups. In May 2014, former EU Competition Commissioner Joaquín Almunia reportedly indicated that the European Commission was gathering more information on the conduct of the two companies and was in contact with the national competition authorities of several EU Member States to assess whether or not further action would be needed. On 25 November 2014, a Belgian consumer association filed a complaint before the Belgian Competition Authority against the two pharmaceutical companies concerning the same alleged conduct.

Closer Cooperation Between the Commission and National Competition Authorities

Since the entry into force of Regulation No 1/2003 and the European Commission Notice on Cooperation within the Network of Competition Authorities of 27 April 2004, the Commission and the national competition authorities within the European Economic Area can cooperate more easily and more closely. They can now

  • Inform each other about pending cases, even during informal proceedings
  • Exchange and use information, including documents, statements and digital information, collected by other national competition authorities
  • At the latest, 30 days before the adoption of [...]

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New EU Consumer Contracts Legislation Comes Into Force on 13 June 2014: E-Commerce Businesses Should Review Terms and Conditions of Sale Now

by Rohan Massey, Lionel Lesur, Veronica Pinotti, Vincent Schröder

All e-commerce businesses active in the European Economic Area (EEA) should review their current processes, policies, terms and documentation and implement any changes before 13 June 2014 to ensure they are compliant with the new national laws of the EU Member States implementing EU Directive No 2011/83/EU on consumer rights. In those Member States that fail to implement the Directive into their national laws, the provisions of the Directive will directly apply.

Please click here  to read the full article.




State Aid Procedural Regulation Grants More Powers to the European Commission

by Martina Maier and Robert Bäuerlewith contribution from Katharina Dietz, a paralegal at McDermott Will & Emery’s Brussels office

New rules of procedure in EU State aid investigations will enter into force very soon.  The European Commission will, for the first time, have the opportunity to request information from entities other than the EU Member State concerned, such as public and private companies that are not subject of a State aid investigation themselves.  Companies will be obliged to respond to the information request and fines might be imposed for failing to respond on time or providing incorrect, misleading or incomplete information.  Other major changes include a more restrictive approach in dealing with complaints and the European Commission now being able to conduct inquiries across various EU Member States into a particular sector.

To read the full article, click here.




Merger Control Notifications in Several EU Member States – Best Practices on Cooperation Between Competition Authorities

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:

  • Exchange of certain basic non-confidential information
  • Aligning timelines in the review process and with regard to remedies
  • Regular contacts and updates between NCAs with regard to timing and with regard to decisions to open in-depth investigations
  • Dicussions of substantive analysis such as market definitions or possible anti-competitive effects of the merger

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.




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