Competition Currents | September 2021 | The Netherlands | United Kingdom | Poland Italy | European Union
A. Dutch National Competition Authority (ACM) Decisions
1. For the time being, no ACM inspection on ‘hidden subsidies’ via municipalities.
For the time being, the Dutch National Competition Authority (ACM) is allowing commercial operators of, e.g., sports halls or swimming pools to receive a helping hand via operating contributions from municipalities. These contributions by themselves are not prohibited, for instance when a municipality wants to promote school swimming in a commercial swimming pool. But if applied incorrectly, these contributions can become a so-called “hidden subsidy,” putting competition at a disadvantage. The ACM first wants more clarity from the Trade and Industry Appeals Tribunal (CBb) on the role operating fees play within the Public Enterprises (Market Activities) Act (Wet Market en Overheid). This Act protects the business community against unfair competition by government parties. The ACM further emphasizes that it will continue to enforce this Act in all other areas.
2. N.V. Nederlandse Gasunie, Energiebeheer Nederland B.V. and the Port of Rotterdam Authority N.V. are allowed to establish a company.
On July 29, 2021, the ACM stated (link in Dutch) that N.V. Nederlandse Gasunie, Energiebeheer Nederland B.V., and the Port of Rotterdam Authority N.V are allowed to set up a joint venture. The companies are engaged in the provision of regulated gas transport services, the implementation of government policy with regard to the Mining Act (Mijnbouwwet) and the operation, development, and management of industrial areas. The ACM has examined this proposed concentration and decided that a license is not required, as there is no reason to believe that the proposed concentration will significantly affect competition in the Dutch market or a part thereof.
3. Royal Flora Holland is allowed to acquire three transporters of flowers and plants.
On Aug. 25, 2021, the ACM allowed Royal Flora Holland (RFH) to acquire three transporters of flowers and plants. After extensive research, which included market research among transporters, growers, and buyers of floriculture products, the ACM concluded that there is sufficient competition in the transport of flowers and plants by road. RFH will bring together the transport companies De Winter, Van Marrewijk (Wematrans), and Van Zaal in a new company: Floriway. RFH is a cooperative of growers of flowers and plants (ornamental plant products). RFH operates the world’s largest auction and trading platform for trading flowers and plants.
The investigation showed that there are enough other carriers that can compete with Floriway. Growers and buyers also see few obstacles if they want to switch to another carrier. Although RFH is the largest auction and trading platform in the world, research shows that this acquisition will not have a major impact on competition. It is unlikely that RFH can restrict competition by, for example, bundling its own auction activities with transportation by Floriway. This is due to a combination of factors, e.g., growers and buyers can and do trade outside RFH. Moreover, there is countervailing power through RFH’s cooperative structure and also from critical growers and buyers vis-à-vis RFH.
B. Consumers and businesses may choose their own modem.
Consumers and companies are allowed to connect their own modems and routers to the network of their telecom provider, as set forth in European rules. As a national supervisor of these rules, the ACM provided clarity on the interpretation thereof with the policy rule titled “Enforcement of the End User Equipment Decision.” The policy rule was published July 27, 2021, and will take effect six months after publication. This gives the internet providers the opportunity to set up the necessary processes and information provision so that end users can ultimately choose and connect their own modems and routers.
Freedom of choice for users ensures that competition and innovation exist in the market for these devices. Free choice of modems and routers contributes to lower switching barriers for consumers, as it allows them to take their own modem to a new telecom provider in many cases.
C. Dutch Courts
1. Interlocutory ruling in telecom case on retroactive rate increase after annulment of rate caps.
The Trade and Industry Appeals Tribunal (CBb) rendered an interlocutory decision in the so-called ND-5 case. This long-running case mainly concerns a dispute about tariff ceilings set by the ACM from 2009-2011. KPN, a Dutch landline and telecommunications company, had increased the tariffs for Main Distribution Frame (MDF) access with retroactive effect after the CBb had annulled the tariff ceilings set by the ACM. The ACM found that the increase resulted in a margin squeeze, meaning that KPN’s competitors could not buy access to MDF at the increased price and still profitably sell services to consumers. This margin squeeze is prohibited by what is known as the ND-5 obligation. The CBb ruled that KPN must comply with the ND-5 obligation when recalculating the MDF tariffs.
2. Court ruling on prioritization of Competition Act enforcement request.
On July 30, 2021, the Court of preliminary relief upheld (link in Dutch) the ACM’s decision not to further investigate Coca-Cola European Partners Nederland B.V. (CCEP-NL). Riedel B.V. requested that the ACM take enforcement action against CCEP-NL, alleging that CCEP-NL is guilty of violating Article 24 of the Dutch Competition Act (Mededingingswet). After an exploratory investigation, the ACM decided on the basis of its prioritization policy not to investigate the case further. Then, the Court in preliminary relief proceedings deemed the investigation conducted by ACM and its reasons for refraining from further investigation sufficient.
1. Competition and Markets Authority (CMA) phase 2 decisions -- background.
Divestment has featured in recent CMA phase 2 merger cases. The competition regulator is considering divestment remedies in one platform case and has accepted final divestment undertakings in another. It is also reviewing divestment undertakings provided by the parties to a hospitals merger in order to avoid a phase 2 investigation, with a view to determining whether there has been a change in circumstances, e.g., relating to COVID-19, which would mean the undertakings are no longer appropriate, or should be varied or superseded.
2. CMA initial enforcement undertakings.
Where a merger has been completed before being investigated under the UK merger rules, the CMA will generally impose hold-separate orders on the parties, to ensure that the target businesses are operated independently pending the outcome of the investigation. The CMA has started to enforce these orders more rigorously and, on Aug. 17, 2021, it published a decision imposing a penalty of £325,000 on ION Investment Group for breach of a hold-separate order in relation to its acquisition of Broadway Technology Holdings. The breach consisted of a joint approach by ION and Broadway to a consultant representing a prospective customer and failure to disclose this approach to the CMA under the reporting requirements contained in the order.
B. Antitrust Enforcement
1. PCR tests – pricing and reliability.
On Aug. 6, 2021, the UK secretary of state for health and social care wrote to the chief executive of the CMA, with a request that the CMA conduct a rapid review of the conduct of firms offering COVID-19 PCR tests to international travelers. The letter expressed concerns about excessive pricing and exploitative practices. The CMA is examining these concerns, in particular whether individual firms are in breach of consumer laws and should be the subject of enforcement action; whether there are structural problems in the market for PCR tests that affect the tests’ price and reliability; and whether there are any actions the government could take immediately, while the CMA gathers the data it requires.
2. Pricing of phenytoin sodium capsules.
In the latest step in the CMA’s long-running investigation into the pricing of anti-epilepsy phenytoin sodium capsules, on Aug. 5, 2021, the CMA issued a statement of objections against two pharmaceutical companies for overcharging for the drugs. The investigation began in 2013, proceeded to a statement of objections in 2015, and concluded with a CMA decision in December 2016 imposing penalties on the parties for abusing a market dominant position by charging excessive prices for the capsules. Appeals to the Competition Appeal Tribunal and then the Court of Appeal resulted in the parties’ allegations that the CMA had incorrectly applied the legal test for determining whether prices are unfair/excessive being upheld, and the case was remitted to the CMA in March 2020. The CMA began its remittal investigation in June 2020, and the most recent statement of objections provisionally finds that the prices for the capsules were unfairly high. The statement of objections is not a public document, so it remains to be seen how the CMA will apply the legal test this time round.
3. Football broadcast rights—exclusion order.
On Aug. 3, 2021, the UK Department of Digital, Culture, Media and Sport (DCMS) announced its decision to bring forward secondary legislation that will enable the UK Premier League to renew its existing agreements with national and international broadcasters for a further three years starting in 2022 on essentially the same terms, without putting the agreements out to tender, as required by competition law. The exclusion was requested by the Premier League in light of the economic crisis faced by English football as a result of the COVID-19 pandemic and the need for certainty regarding the level of revenues received by the Premier League, which provides funding to all levels of football, from grassroots and community to elite. The exclusion is subject to a number of conditions that protect this funding.
C. Policy Developments
1. Settlement of antitrust investigations.
A firm under investigation for breach of UK antitrust rules can settle the investigation by agreeing to admit to the infringement under investigation and accept a discounted penalty, both of which will be set out in a published CMA decision. The CMA is currently proposing to make it a condition of settlement that the settling firm must also agree not to appeal against the finding of infringement or the penalty imposed in the decision. The consultation on this proposal ends Sept. 28, 2021.
2. Reform of UK competition policy.
Oct. 1 is the deadline for comments on the proposed reforms to the UK’s competition policy and also for comments on the proposed new UK competition regime for digital markets.
A. Entrepreneurs may be encumbered with new obligations – Poland works on a bill aimed at increasing consumer protection.
In July, a draft bill (Draft) implementing EU directive no. 2019/2161 (the so-called “Omnibus Directive”) was published. The Omnibus Directive aims to enhance enforcement and modernize the consumer protection framework. The Draft, among other things, introduces new rules on setting discounted prices as well as other provisions aimed at protecting consumer rights. This may result in new obligations for retailers.
1. New requirements relating to reporting discounted prices.
With respect to setting discounted prices of goods or services, the Draft provides that:
ever the price of a given product (or service) is reduced, the reduced price must be indicated (in the place of sale, including on websites) along with the lowest price in effect during the 30 days prior to the reduction;when
if a given product has been for sale for less than 30 days, the trader will be obliged to present the lowest price in effect starting from when the product was first offered for sale;
if a given product is perishable or has a short shelf life, the trader will not be obliged to present the lowest price for the last 30 days prior to the reduction. Instead, the Draft requires that the trader present the reduced price along with the price before the discounted was first applied.
The above rules will apply to advertisements if they include information on discounted prices.
The Draft envisages fines of up to PLN 20,000 (approx. EUR 4,400/USD 5,100) for breaching the new rules, or—if the trader fails to comply with the new obligations at least three times within 12 months—up to PLN 40,000 (approx. EUR 8,800/USD 10,200).
The president of the Polish Competition Authority (UOKiK) may impose a fine of up to 10% of the given entrepreneur’s turnover in the preceding year for violation of the new discounted-price reporting requirements. In such case, UOKiK may also impose a fine of up to PLN 2 million on the company’s managers who intentionally allowed the infringement.
2. Other proposed consumer protections.
In addition, the Draft introduces several changes to the provisions regulating agreements with consumers. Pursuant to the Draft, in particular:
obligations related to agreements with consumers such as the provision of relevant information or the right of withdrawal will apply not only to agreements where the product or service is provided in exchange for remuneration but also, as a rule, to agreements where the trader supplies digital content/digital services to the consumer free-of-charge but in exchange for the consumer’s personal data;
information obligations are extended to also include online trading platforms;
rules on informing consumers about individual adjustments to the price based on automated decision-making will be introduced.
The Omnibus Directive requires member states to implement it by Nov. 28, 2021, and to apply the regulations from May 28, 2022. Public consultations have recently ended. Once approved by the government, the Draft will be submitted to the parliament for further legislative work. The Draft is planned to enter into force in the fourth quarter of 2021.
B. UOKiK raises objections to a transaction in the medical services sector.
On Aug. 13, UOKiK issued objections to a planned concentration consisting in major medical services provider Lux Med acquiring Lecznice Citomed, a local medical services provider. UOKiK claims that the parties to the concentration are close competitors and that the proposed concentration may lead to strengthening Lux Med’s position in local markets for private medical services. UOKiK noted that in each of the local markets in question, Lux Med’s second largest competitors would have much lower shares than the merged entity. According to UOKiK, such a strong position could lead to the elimination of competitors from the market.
It is not clear from the announcement whether the merged entity would achieve a dominant position or whether it is instead a so-called gap case, i.e., a merger in oligopolistic markets where competition would be affected even if the creation or strengthening of dominance may not be established. The proceedings are still pending. This case shows, however, that major players looking to consolidate may face competition challenges on certain local markets, especially given that in terms of the geographic dimension, markets are defined rather narrowly (e.g., territory of a given city and its surroundings).
A. Italian Competition Authority (ICA) returns to monitor and sanction practices implying abuses of economic dependence, penalizes Poste Italiane for abusive practices in mail operations in Naples
The ICA has relaunched investigations into practices that may constitute an abuse of economic dependence pursuant to article 9, Law n. 192/1998. This approach shows ICA’s revived interest in cases concerning this kind of competition-distortive conduct.
On Aug. 6, 2021, the ICA announced that it has imposed a fine amounting to more than €11 million on Poste Italiane S.p.A. for abusive practices towards Soluzioni S.r.l., an Italian company that has carried out mail distribution and collection for Poste Italiane in the city of Naples. According to ICA, Poste Italiane imposed unjustifiably onerous clauses in the contracts signed in 2012 and 2013 (effective until 2017) with Soluzioni S.r.l. Specifically, Soluzioni S.r.l. was forced, inter alia, to endure the prohibition of joint transport and delivery of Poste Italiane’s products and those of third parties, to perform additional unpaid services not provided for in the contracts as well as to allow Poste Italiane to arbitrarily reduce the minimum quantities and to change the type of its products.
In ICA’s view, Poste Italiane hindered the development of market competition by excluding an operator that could have both provided its services to alternative postal operators and become a potential competitive player at a local level.
B. ICA opens an investigation into the large retail supermarket-chain sector.
On Aug. 16, 2021, ICA announced it had opened an investigation into a possible breach of Italian competition law by the supermarket chain Fratelli Arena S.r.l. (Arena), related to the merger control proceeding concerning its acquisition of 33 business concerns of SMA S.p.A.; 8 business concerns of Distribuzione Cambria S.r.l. (DC); and 11 business concerns of Roberto Abate S.p.A. in liquidazione (Abate) services.
The concentration was filed in July 2019 and was cleared in phase II in December of the same year. ICA accepted several commitments from Arena, including the divestment of several supermarkets in three geographical areas. Subsequently, the time period to complete the divestment was further extended over 2020 and 2021. Finally, in May 2021, Arena communicated that the competitive conditions in the geographical areas where the supermarkets were located had substantially changed due to new openings by competitors.
ICA now will have to assess whether to revoke or modify the measures imposed on Arena with the adoption of the clearance decision, as well as whether there has been a breach of the commitments undertaken during the merger control proceeding, pursuant to Article 19 of the Italian competition law (l. 289/90).
C. ICA clears the acquisition by the Italian Ministry of Economy of SACE.
On Aug. 3, 2021, ICA allowed the acquisition by the Italian Ministry of Economy (MEF) of SACE S.p.A to move forward. The target is the Italian Export Credit Agency, which provides guarantees and insurance coverage in relation to political, catastrophic, economic, commercial, and exchange-rate issues to which national operators are exposed in their foreign activities. SACE is also authorized to issue guarantees and insurance coverage for operations of strategic importance for the Italian economy. SACE is currently solely controlled by Cassa Depositi e Prestiti S.p.A. (CDP), which itself is controlled by the MEF.
The concentration has been cleared in phase I, as it does not give rise to competition concerns due to the absence of MEF from the markets involved in the proposed transaction. SACE is substantially the only operator in the market that can offer such products and services benefiting from the state guarantee. Such products and services have characteristics that make them non-substitutable with other products and services offered by third-party operators.
Since EU thresholds for merger control were not met, ICA was the competent antitrust authority to review the proposed transaction. The case seems to represent an application by ICA of the so-called “silo doctrine.” Notwithstanding that SACE is already indirectly owned by the MEF through CDP, the proposed transaction has been treated as a concentration between independent undertakings, possibly due to the fact that SACE has to be seen as an autonomous operator on the market.
A. European Commission
1. The European Commission approves a Danish aid measure to support coronavirus-related research and new vaccine development.
In an Aug. 23, 2021 decision, the European Commission authorized aid granted by Denmark in favor of Bavarian Nordic, a company active in vaccine development and manufacturing, in the form of a repayable advance amounting to EUR 108 million. The aid was notified by Denmark and subsequently approved under the State aid Temporary Framework, a regime adopted March 19, 2020, to enable Member States to use the flexibility under State aid rules in the context of the coronavirus outbreak. The above-mentioned framework, in place until the end of December 2021, allows Member States to grant different types of aid, including the support for coronavirus related research and development (“Coronavirus R&D”).
The purpose of the Danish aid measure is to support Coronavirus R&D and to strengthen the development of a novel coronavirus vaccine, currently undergoing phase II of the clinical trial. The aid will serve as funding for phase III of vaccine development, consisting in confirming its safety and demonstrating its efficacy, carrying out experimental operations, and working within the regulatory framework.
The Commission found the measure necessary, appropriate, and proportionate to fight the health crisis pursuant to article 107(3)(c) TFEU. Also, the Commission considered the aid in line with the requirements provided for in the Temporary Framework because: (i) the aid will cover less than 80% of the relevant research and experimental development costs and be fully recovered in case of regulatory authorization; moreover, (ii) any results of the research activities would be made available to third parties in the EEA, at non-discriminatory market conditions through non-exclusive licenses.
2. The Commission opens an investigation into health technology company Illumina for possible breach of the “stand still” obligation.
On Aug. 20, 2021, the Commission opened an investigation to assess whether Illumina’s decision to complete its acquisition of GRAIL—while the Commission’s in-depth investigation into the proposed transaction was still pending—constitutes a breach of the “standstill obligation” under Article 7 of the Merger Regulation (EUMR). Pursuant to this provision, to prevent negative impact on competition, a proposed transaction may not, in principle, be completed before the end of the assessment carried out by the Commission.
Illumina supplies next-generation sequencing (NGS) systems for genetic and genomic analysis, while GRAIL is a customer of Illumina developing cancer detection tests relying on NGS systems. The Commission is reviewing the transaction following the referral submitted by Belgium, France, Greece, Iceland, the Netherlands, and Norway under EUMR Article 22. The transaction did not meet the EUMR’s turnover thresholds and was not notified in any Member State. However, according to the Commission, the transaction met the criteria for referral under article 22 EUMR due to its impact on trade and competition in the single market. In particular, the Commission considers that GRAIL’s competitive significance is not reflected in its turnover.
On Aug. 18, Illumina pointed out, among other things, that in its view the Commission did not have jurisdiction to review the merger, and the General Court of the European Union will hear Illumina’s jurisdictional challenge later this year. Moreover, Illumina explained that the decision of the Commission was expected to be issued after the expiration of the deal. The company also highlighted that, pending the competition and regulatory assessment of the transaction, GRAIL will remain a separate and independent unit.
B. Antitrust questions on Adidas sale published by CJEU.
Following a referral from a French court, the EU’s top court published a series of questions relating to the sale of Adidas in the early 1990s. The French commercial court said Crédit Lyonnais failed to notify its control of Adidas to EU merger regulators and asked the EU court what effects that has. The French court also wants to know whether an arrangement between Crédit Lyonnais and other banks amounted to illegal collusion and, given that Crédit Lyonnais was state-owned, the French court enquired about the application of state aid laws.
Co-authored by Edoardo Gambaro, Pamela J. Marple, Yuji Ogiwara, Stephen M. Pepper, Gillian Sproul, Hans Urlus , Dawn (Dan) Zhang, Mari Arakawa, Filip Drgas , Marta Kownacka, Pietro Missanelli, Massimiliano Pizzonia, Anna Rajchert, Jose Abel Rivera-Pedroza, Ippei Suzuki, Rebecca Tracy Rotem, Chazz Sutherland, John Gao.