Competition Currents UK & Netherlands | March 2021
A. Regulatory matters in the telecom industry.
Under the Netherlands Authority for Consumers and Markets’ (ACM) guidelines, Telecom operators are allowed to collaborate, under certain conditions, in order to invest in the capacity, quality, and coverage of mobile networks. ACM had previously submitted guidelines for consultation to market participants in the telecom industry. Their responses have been incorporated into the final version, published Feb. 2, 2021. Below is a summary of those guidelines.
1. ACM: telecom operators are allowed to work together for a fast roll-out of mobile networks.
Well-functioning mobile services are crucial for the Netherlands. Mobile-data consumption has been increasing for years, and, in 2020, consumption was more than 10 times higher than five years ago. This growth is expected to continue over the next few years. ACM finds it important that telecom operators invest efficiently to expand the capacity, quality, and coverage of mobile networks.
2. ACM finds that acquiring locations for telecom towers does not impair competition.
Given much-needed growth in the number of mobile antennas and decreasing availability of locations, it is becoming increasingly difficult for telecom operators to find tower locations. To resolve this, operators hope to be able to coordinate their search. ACM does not expect that, within the boundaries set out in the guidelines, competition between operators of mobile services will be jeopardized if they work together to find tower locations.
3. Spectrum leasing
The new Dutch Telecommunications Act will allow operators to lease spectrum (frequencies for mobile-data traffic). Leasing frequencies to, for example, an operator of local business networks could lead to new services and increased competition. Since the spectrum-auction of mid-2020, the maximum number of frequencies that a single operator can use has been capped at 40%. ACM’s guidelines state that this cap will ensure that, in general, competition will not be jeopardized.
4. Roaming using 2G or 3G networks.
Over the next few years, Dutch telecom operators will switch off their 2G or 3G networks. This could impact the so-called machine-to-machine services (M2M services) that rely on these networks, such as smart-energy meters or automatic emergency contact systems in cars. In 2020, more than 7.5 million M2M devices were operational. If an operator shuts down a 2G or 3G network, the M2M services are able to use, through roaming, the network of another operator that still offers 2G or 3G, allowing more time to migrate these devices to 4G or 5G. Therefore, ACM is generally in favor of such national roaming agreements, provided that the agreements are compliant with competition rules.
1. Interim injunction granted to block terminated retailer’s contract with bicycle manufacturer for retailer selling unassembled bikes below required price.
On Jan. 22, 2021, an Amsterdam District Court found (link in Dutch) that a system of selective distribution (i.e., sales to end-users only) that allowed for the distribution of a range of uniformly branded race, mountain, and city bikes likely violated antitrust laws. The bicycle manufacturer in the case included strict terms within its contracts that required retailers to sell bicycles only to end-users, required that all bikes be preassembled before sale, and set a minimum price for all sales. After the retailer breached this contract by selling boxed bicycles online and below the minimum price set, the manufacturer terminated its contract. Despite acknowledging the above contract breaches, the retailer sued, claiming that the selective distribution provisions violated vertical antitrust laws.
It is unclear whether the EU’s Vertical Agreements Block Exemption Regulation (VBER) allows selective distribution agreements for any product. This will have to be clarified in the recast VBER.
2. Administrative court rules that online gambling ban is lawful.
The Highest Dutch Administrative Court ruled (link in Dutch) on Feb. 17, 2021, that the current absolute Dutch ban on online gambling is not in breach of the right of freedoms for services as per article 56 Treaty of the Functioning of the European Union (TFEU). This overruled a lower court ruling, which found that the absolute ban, when tested for proportionality under the test required by article 56, was disproportional, given that licenses under a new set of laws would be available after mid-2021. The Administrative law division of the State Council, however, found that a total ban was an adequate manner to achieve the current objectives of the current Gambling Act. The upcoming new laws will allow licensed online gambling in the future and do not violate the complete ban.
A. UK Competition Law Post-Brexit—Policy/Legislation
1. CMA announces review of retained Vertical Block Exemption Regulation.
Although the UK has left the EU, many important elements of EU competition legislation have been retained in UK law. One such example is the EU’s Vertical Block Exemption Regulation (VBER), which provides for an important “safe harbor” from EU competition law enforcement for vertical agreements (for example, distribution and franchising arrangements) meeting certain criteria. During the UK’s membership in the EU, the VBER had a direct effect in the UK and did not require implementation in UK law. Following the Brexit transition period, an “onshored copy” of the VBER exists in UK law.
The current VBER dates from 2010 and expires May 31, 2022. The European Commission (the “Commission”) is currently undergoing an extensive process of review and revision with the aim of implementing an updated version of the VBER and associated guidance when the current regulation expires. While the EU is expected to retain the broad framework and key elements of the current VBER, important updates are expected to take account of market and technological developments since 2010, particularly as they relate to the digital economy.
The new EU regulation will not form part of UK law; any updating will need to be effected by the UK. In this context, the UK Competition and Markets Authority (“CMA”) announced on Feb. 10, 2021, that it is conducting its own review of the retained VBER currently in force in the UK. CMA is required to provide the Secretary of State with a recommendation as to whether to renew the retained VBER and on whether any amendments would be appropriate. CMA is planning to go out to public consultation on the content of this recommendation later this year. While the CMA has stated that it currently considers that retained VBER is largely fit for purpose, it will carry out an in-depth review to ensure that it serves the interests of UK businesses and consumers.
The parallel reviews by the Commission and the CMA of essentially identical current legislation and guidance provide an early opportunity to see whether, and if so how far, the EU and UK competition regimes will diverge in the post-Brexit world.
2. UK government consults on new subsidy control regime.
Following its withdrawal from the EU, the UK is no longer subject to the long-established EU state aid regime, which regulates subsidies within the EU to avoid distortions of competition within the EU’s internal market. On Feb. 3, 2021, the UK’s Department for Business, Energy and Industrial Strategy (BEIS) launched a consultation on the proposals of the UK government for a new subsidy control regime for the UK.
The government’s stated intention is to create a framework capable of “providing more flexible and tailored financial support to businesses”; representing a “clear departure from [the] inflexible and bureaucratic EU state aid regime[;] and tailored to better support start-ups, small businesses and new industries” while avoiding “a return to the 1970s approach of government trying to run the economy or bailing out unsustainable companies.” In addition, the new regime will also need to ensure that the UK complies with its international commitments under World Trade Organization rules, the UK-EU Trade and Co-operation Agreement (UK-EU TCA) and other trade agreements.
The regime proposed by the government would:
Require all UK public authorities to comply with seven key principles when awarding subsidies. The majority of these mirror the principles set out in the UK-EU TCA, but the UK government is proposing an additional principle requiring public authorities to minimize any harmful or distortive effects on competition within the UK internal market.
In line with obligations under the UK-EU TCA, prohibit certain types of subsidies perceived to be particularly harmful (such as export and local content subsidies) and subject others to conditions.
Include exemptions for certain categories of subsidy, including subsidies of low value, those relating to emergencies, and public services.
Not contain a requirement for ex ante notification to, and approval of subsidies by, an independent regulator. The government is consulting on the extent to which the as-yet-to-be-determined regulator should have post-award enforcement powers.
The consultation ends March 31, 2021. The government will publish its response to the consultation summarizing the responses received and setting out the actions it will take in developing its final proposals.
B. UK Competition Law Post-Brexit—Digital markets strategy
On Feb. 9, 2021, the CMA announced a refreshed digital markets strategy, with a revised set of priorities. The refresh reflects several significant developments in the international and national political and regulatory environment since the CMA originally announced its strategy in 2019 – including the Digital Markets Act proposals published by the European Commission in December 2020; regulatory developments in the United States, Germany, Australia, and Japan; and increased antitrust enforcement activity in digital markets.
A key next step for the CMA is the establishment of the Digital Markets Unit (DMU) within the CMA by April 2021. The DMU will oversee and enforce a new UK “pro-competition” regime for digital businesses that have Strategic Market Status (SMS) and will monitor competition in digital markets more generally. In brief, the aim of the pro-competition regime is to enable the DMU to preempt harm occurring in digital markets as well as to act quickly when harm does occur.
The DMU’s powers have not yet been enshrined in legislation which, the CMA has indicated, the UK government will introduce as soon as parliamentary time allows. In the meantime, the CMA’s intention is to focus on using its existing competition and consumer tools to maximum effect. Cooperation with other UK regulators, especially Ofcom and the Information Commissioner’s Office, and international cooperation through the Organisation for Economic Co-operation and Development, the International Competition Network, and the International Consumer Protection and Enforcement Network, will form part of this process.
C. UK Competition Law Post-Brexit—Antitrust
1. Infringement decision on wide MFN clauses in contracts with home insurers.
On Feb. 9, 2021, the CMA published its decision finding that a number of companies within the corporate group trading as ComparetheMarket had infringed the Chapter I prohibition of the Competition Act 1998 (and Article 101 TFEU) by imposing wide “most favored nation” (MFN) clauses on providers of home insurance selling via the group’s price-comparison website. The CMA found that ComparetheMarket was party to agreements with 32 home insurers that contained wide MFN clauses which restricted the prices that the home insurers were allowed to offer on other price comparison websites. The CMA found that the MFNs prevented insurers from offering lower prices on rival price comparison websites and had an appreciable effect of preventing, restricting, or distorting competition.
The CMA imposed a fine of £17.9 million on ComparetheMarket. The decision is under appeal at the Competition Appeal Tribunal.
2. CMA warning and advisory letters.
The CMA does not have the resources to enforce UK competition law against all infringing firms. Where it receives evidence indicating infringement and decides not to proceed with a formal investigation, it may send the firms concerned a warning or advisory letter, which is then published in a CMA register. The CMA issued a statement on Feb. 18, 2021, announcing a record number of these letters in 2020 – 14 advisory letters and 97 warning letters, as opposed to two advisory letters and 25 warning letters in 2019. It attributes this significant increase to evidence received rather than a change in approach.
D. UK Competition Law Post-Brexit—Mergers
1. CMA issues final report on StubHub’s acquisition of viagogo.
On Feb. 2, 2021, the CMA issued its final report into the completed acquisition of viagogo of the StubHub business of eBay Inc. According to the report, the parties are the two main providers of secondary ticketing platforms in the UK (with a combined market share in excess of 90%). The CMA found that the transaction may cause a substantial lessening of competition and that the merged entity would be able to increase fees or reduce service quality. To address its concerns, the CMA is requiring viagogo to sell StubHub’s business outside of North America to an independent third party, subject to prior approval by the CMA.
2. CMA announces in-depth review of Advenita’s acquisition of eBay Classifieds Group.
On Feb. 16, 2021, the CMA announced that it would refer the anticipated acquisition by Adevinta ASA of eBay Classifieds Group (eCG) from eBay Inc., and eBay Inc.’s acquisition of a minority stake in Adevinta to an in-depth phase 2 review, unless the parties offer acceptable undertakings to address the CMA’s concerns. Adevinta and ECG both operate online classified advertising platforms in the UK. Adevinta’s Shpock and eCG’s Gumtree allow people to buy and sell a broad range of used or new goods.
Edoardo Gambaro, Pamela J. Marple, Yuji Ogiwara, Stephen M. Pepper, Gillian Sproul, Hans Urlus, Dawn (Dan) Zhang, Mari Arakawa, Filip Drgas, Simon Harms, Marta Kownacka, Pietro Missanelli, Massimiliano Pizzonia, Anna Celejewska-Rajchert, Jose Abel Rivera-Pedroza, Ippei Suzuki, Rebecca Tracy Rotem and Alan W. Hersh contributed to this article.