Greenberg Traurig February 2022 Competition Currents: the UK and the EU
A. Merger Control—Interim Enforcement Orders
A key feature of the UK merger regime that distinguishes it from most other merger regimes is that a transaction that qualifies for investigation under the regime does not need to be cleared by, or even notified to, the UK merger regulator, the UK Competition and Markets Authority (CMA) before closing. However, this so-called “voluntary” aspect of the regime is misleading. The CMA on its own initiative may still investigate qualifying mergers that have not been notified, and this can occur any time within four months after completion of the transaction or public announcement of the transaction, whichever is later. This timeline often means that an acquirer has integrated, or at least started to integrate, the target into its organisation. The CMA will often impose an initial enforcement order (IEO), ordering the acquirer to keep the operations of the target separate from its own and to suspend further integration, and even to unwind integration, pending the outcome of the CMA’s investigation.
B. Merger Control—Cartels
The CMA continues to focus on competitor collusion to increase the prices of pharmaceuticals supplied to the UK National Health Service (NHS). On Feb. 3, 2022, it imposed fines totaling £35 million on four pharmaceutical firms and their parent companies, which include private equity firms. According to the CMA, the firms had operated an anti-competitive arrangement between 2013 and 2018 that resulted in increases of around 700% in the prices paid by the NHS during that period for prochlorperazine, which is used to treat nausea, dizziness, and migraines. Under the arrangement, two firms, Lexon and Medreich, agreed to abandon their joint development of a version of prochlorperazine in exchange for a share of the profits generated from sales of the competing version, manufactured by Alliance and distributed by Focus. The CMA previously fined some of the firms and their parent companies for similar breaches in relation to other pharmaceuticals.
A. European Commission
1. General Court partially annuls European Commission decision to fine microprocessor manufacturer Intel for abuse of dominance.
In May 2019 the European Commission fined Intel EUR 1.06 billion for alleged abuse of dominance in the worldwide market for computer processor x86. According to the Commission, Intel engaged in two types of abusive conducts vis-a-vis its trading partners, specifically naked restrictions and conditional rebates. Intel moved for the annulment of such decision, criticizing the Commission for failure to examine the controversial rebates in light of all relevant circumstances and, in particular, for failure to conduct the “as efficient competitor test” to determine whether the rebates could foreclose a competitor as efficient as Intel. On Sept. 6, 2017, the European Court of Justice set aside the appealed judgment and referred the case back to the General Court for it to examine, given Intel’s arguments, the capability of the rebates at issue to restrict competition.
In its Jan. 22, 2022 decision, the General Court annulled in part the contested decision in so far as it considered the rebates at issue abusive within the meaning of Article 102 TFEU and fined Intel for all of its actions characterized as abusive. The General Court found the Commission failed to analyze the anticompetitive effects of these rebates. Finally, the General Court annulled in its entirety the section of the contested decision that fined Intel EUR 1.06 billion for infringement.
2. Commission prohibits Korean shipbuilding deal.
On Jan. 13, 2022, the Commission blocked Hyundai Heavy Industries’ $2 billion acquisition of Daewoo Shipbuilding & Marine Engineering after an in-depth (i.e., Phase II) review. The Commission held that the merger would have created a dominant position for the merged entity and reduced competition in the global market for the construction of large liquefied natural gas (LNG) carriers. The companies have a combined market share in the large LNG carrier sector of over 60%, with only one other competitor. However, according to the Commission, that rival cannot exert sufficient competitive restraint on the merged business to offset competition concerns. Also, there are high barriers to entry. The merger was previously cleared unconditionally in China and Singapore.
B. EU Courts
1. European Commission commits serious breach by withholding default interest from Deutsche Telekom.
On Jan. 19, 2022, the EU General Court ordered the European Commission to pay Deutsche Telekom (DT) EUR 1.75 million in compensation, as—according to the General Court—the Commission had no discretion to refuse the default interest for an overpaid fine. The Commission had refused to pay DT default interest after the General Court reduced the Commission’s margin squeeze fine imposed on DT from EUR 31 million to EUR 19 million in December 2018.
C. European policy developments
1. European Commission publishes final report on sector inquiry into IoT.
On Jan. 20, 2022, the European Commission published its final report in relation to its sector inquiry into the internet of things (IoT). The Commission noted respondents emphasized the need for both competition enforcement and regulation to address potentially harmful practices. The IoT sector has high barriers to entry.
Additionally, the final report indicates the cost of technology investment and development and the vertical integration of smart device operations system providers and voice assistants are particularly important barriers to entry and expansion in the voice-assistant market. According to the final report, some voice-assistant providers license their voice assistants only together with other types of software or applications. The European Commission stated that it may open case-specific follow-up investigations where the concerns identified appear to result from potentially anticompetitive conduct.
2. European Parliament states need for earlier review of foreign subsidies’ legislation.
On Jan. 25, 2022, the European Parliament’s Committee on the Internal Market and Consumer Protection (IMCO) indicated the European Commission needs to assess within three years its own enforcement of its proposed rules to tackle distortive foreign subsidies. In its proposal, the Commission suggested it would present a review report within five years of the proposed rules entering into force. The IMCO’s opinion notes that this timeline should be shortened because there is not yet enough data on the impact of third-party subsidies in Europe. Also, IMCO’s draft opinion proposes cooperation with national public procurement authorities.
3. European Parliament approves Digital Services Act proposal.
On Jan. 20, 2022, the European Parliament voted in favor of the Digital Services Act (DSA), which aims to provide transparency and security in digital markets to better protect consumers and includes new rules and obligations for companies offering online services in the EU. The European Parliament and the Council still need to agree on the DSA’s final text. It is expected the DSA will take effect in 2022 or early 2023.