Posted by Chantal Lavoie on 1 September 2018
In case you missed it…you’ll find below a summary of key EU competition law developments from this summer (end June to end August 2018).
On the EU antitrust front (Articles 101+102 TFEU), the Commission’s enforcement efforts focused this summer on the energy, tech and online retail markets. The key development was the adoption of the Google Android decision with the imposition of a record breaking fine of EUR 4.34 billion. Decisions adopted and new investigations opened this summer also show a continued interest in vertical arrangements and in particular that the European Commission – and not only the EU’s national competition authorities – will step in to crack down on RPM practices.
On the merger control front, the Commission’s key decision was the clearance with conditions of the Praxair/Linde merger. The Commission also adopted a number of decisions with commitments (almost all structural remedies), in particular in Phase 1. This autumn will also offer a pipeline of much awaited decisions, following (i) the opening of a Phase 2 investigation in Siemens/Alstom and (ii) the opening of two Phase 2 investigations in the copper sector with proposed acquisitions by each of KME and Wieland. A common theme arising from a number of the merger decisions adopted and in-depth investigations opened this summer is the concern over essential inputs and ensuring that access to these inputs is preserved for competitors.
ANTITRUST (Articles 101/102 TFEU)
21 June 2018 Qatar Petroleum’s supply agreements – new investigation
The Commission opened an investigation on 21 June 2018 to review supply agreements entered into by Qatar Petroleum with European importers of liquefied natural gas. It has been ‘tagged’ as a priority investigation, thus indicating that a ‘fast-track’ outcome could be expected. The investigation will focus on whether the agreements contain direct or indirect territorial restrictions, particularly in the light of the destination of imports and alleged contractual constraints imposed on EEA importers regarding resale or diversion of cargoes. The case is being investigated under both Articles 101 and 102 TFEU.
This case falls clearly within the Commission’s priority of creating (and removing obstacles to the creation of) an integrated European energy market. It also follows closely on recent cases resolved by DGComp this year in this area, namely the commitments obtained from Gazprom relating to the CEE gas markets, the commitments obtained from Greece to ensure fair access to lignite-fired electricity generation for competitors of the incumbent electricity operator; commitments proposed by the German grid operator (and currently under market review) to address cross-border capacity restrictions which allegedly prevented Danish producers from selling electricity in Germany.
Note that DGComp is currently looking into (i) alleged gas export restrictions by Romania’s Transgaz in an investigation opened in June 2017 as a result of inspections carried out in 2016; and (ii) the possible foreclosure of gas markets in Bulgaria in an investigation opened in July 2013.
18 July 2018 Google Android decision – fine of EUR 4.34 billion
The Commission adopted its most-awaited decision in Google Android on 18 July 2018. The decision was adopted a little over two years after the opening of proceedings. The investigation focused on Google’s alleged restrictions imposed on Android device manufacturers and network operators to channel traffic to Google’s search engine. Three practices were found to be anti-competitive.
The Commission concluded that:
- Google is dominant in the markets for general internet search services, licensable smart mobile operating systems and Android app stores; and
- Google abused its dominant position by engaging in:
- illegal tying of Google apps to its app store
- illegal conditional payments based on exclusive pre-installation of Google Search
- illegal obstruction of competing Android operating systems through the way Google manages Android’s open source code and information (in particular Android forks)
The fine imposed on Google (EUR 4.34 billion) is the largest ever adopted by the Commission. As per the Google Search decision, Google is required to put an end to these illegal practices within 90 days of the decision. This means at least putting an end to the three practices mentioned above “in an effective manner”. However the Commission is not imposing any specific remedy but rather leaving it to Google to remove current illegal practices and ensure any new practices comply with the Commission’s decision.
Google confirmed that it will appeal this decision to the Court of Justice. Whilst a public version of the decision is not yet available, market definition could form a key ground for judicial review. Indeed, the Commission’s case on market definition relies on a narrow market definition, in particular to the exclusion of specialised search services as regards the internet search market and competitors such as Apple as regards the mobile operating systems market and the app stores market. Interestingly, as we can make out from the press release, the Commission did assess whether Apple constrained Google’s market power upstream for the licensing of Android to device manufacturers and for app stores but ultimately concluded it did not. The public version of the decision is not expected before the end of the year. The decision should shed further light on its application of the concepts of tying and conditional rebates to this case, in particular in the light of the most recent case law, including in Microsoft and in Intel.
19 July 2018 Qualcomm predatory pricing case – supplementary SO
On 19 July 2018, the Commission issued a supplementary statement of objections in the Qualcomm predatory pricing investigation. The Commission’s statement is reported to focus on certain aspects of the price-cost test used to assess if Qualcomm has been selling chipsets at below cost.
24 July 2018 Commission decision fining consumer electronics manufacturers for online resale price setting
On 24 July 2018, the Commission imposed a fine of EUR 111 million on Asus, Denon & Marantz, Philips and Pioneer in four separate decisions. The decisions are not yet available. These cases were opened during the e-commerce sector inquiry which had identified online resale-related price restrictions as a key concern. The Commission had not adopted a decision on RPM since 2003, although the EU’s national competition authorities have been active in this area. These decisions bring back to the forefront RPM as a hardcore restriction under article 101 TFEU and the risks of adopting recommended prices in distribution agreements.
Significant reductions ranging between 40% and 50% were imposed on the parties for their cooperation in the investigations. By doing so, the Commission confirms its willingness to reduce fines for cooperation beyond cartel cases to all antitrust cases. The decision was adopted only a year and a half after the opening of proceedings.
The companies were found to have fixed or imposed minimum resale price maintenance on online retailers and to have resorted to threats or sanctions for non-compliance. Once available, the decision should shed further light on the Commission’s assessment of the effect of pricing algorithms on the pricing restrictions. The Commission states in its press release that the pricing restrictions had a “broader impact on overall online prices” as a result of the use of pricing algorithms by many online retailers. The use of online monitoring tools were also singled out as allowing the manufacturers to enforce compliance by its online retailers. The Commission does not appear to object to the existence of such price monitoring tools but rather to its use as a tracking mechanism to ensure the efficiency of price setting practices.
In a similar vein in the e-commerce sector, the Commission is also continuing to investigate (i) Nike, Sanrio and Universal Studios in three separate investigations in relation to their licensing and distribution policies for the sale of licensed merchandise cross-border and online and (ii) Guess’ distribution practices. These cases stem from the e-commerce inquiry which had outlined concerns regarding the possible barriers resulting from online licensing and distribution practices.
27 June 2018 Rhone-Zodiac/Fluidra pool equipment JV cleared with conditions
This case is one of a handful of cases cleared this year with conditions in Phase 1. The parties offered to divest most of Fluidra’s robotic pool cleaner business to address concerns in this market where only a few competing suppliers would have remained. The need for R&D investment and the IP rights protection afforded to features of the robotic pool cleaners were relevant factors in assessing the (low) potential for market entry and therefore the market power of the merging parties.
4 July 2018 Tronox/Cristal acquisition cleared with conditions
Cleared in Phase 2, the parties offered an upfront buyer remedy to address concerns in the market for chloride-based titanium dioxide pigment for use in paper laminate. In this four-to-three merger, the Commission was concerned that too few suppliers would remain in the market, thereby leading to reduction in choice and possibly price increase. The purchaser of the divested assets – Venator Materials - has since been approved by the Commission on 17 August 2018 as a suitable purchaser of Tronox’s 8120 product laminate product grade which it had agreed to divest. US FTA clearance is still pending.
6 July 2018 ACS/Hochtief/Atlantia/Abertis Infraestructuras cleared
The joint acquisition of Abertis (and its subsidiary Hochtief) by ACS and Atlantia was cleared without conditions following an analysis of the impact of the transaction on the market for toll motorway concessions in particular in Italy and Spain. Relevant factors leading to clearance are the fact that ACS, Abertis and Atlantia were not each other’s closest competitors in this market and due to the presence of other important competitors. The Commission also considered the effect of the transaction on other ancillary markets where the parties’ activities overlap.
9 July 2018 T-Mobile Austria/UPC Austria cleared
This is a mostly complementary merger of UPC’s fixed telecoms business in Austria with T-Mobile Austria’s mobile telecoms business. In the limited markets where the parties overlap, such as the provision of internet access services for residential customers, the Commission considered the competition impact to be limited due to the difference in product and technology and the presence of strong competition such as the incumbent A1 Telekom Austria and Hutchison Drei Austria. Vertical and conglomerate effects were also assessed, in particular whether the parties could resort to bundled fixed and mobile services such as multiple play services but competition concerns were discarded.
The case was cleared in Phase 1 without conditions. Interestingly the parties appear to have offered commitments in Phase 1 thereby triggering a deadline extension but no reference to commitments is made in the press release. The decision is not yet available but presumably the commitments were not needed.
12 July 2018 Ryanair/LaudaMotion cleared
Ryanair’s acquisition of LaudaMotion, a leisure air carrier, was cleared without conditions. The Commission reviewed the effect of the deal on a number of overlapping routes from German, Swiss and Austrian airports to the Mediterranean and Canary islands. Also, the portfolio of airport slots to be acquired by Ryanair was not found to raise competition concerns, particularly in terms of creating barriers to entry for competing airlines.
The acquisition was notified in June 2018. However, note that the Commission reports that it granted Ryanair two derogations in March and May 2018 under Article 7(3) EUMR from the suspension obligation to allow it to implement the deal prior to notification. Such derogation decisions are highly exceptional, even more so when they arise, as in this case, not only prior to clearance but also prior to notification. The Commission states in its press release that this allowed Ryanair to sell seats on LaudaMotion flights whilst the merger review was ongoing.
30 July 2018 Total Produce joint acquisition of Dole cleared with conditions
This is another case cleared this summer in Phase 1 with conditions. The notification consisted in the acquisition of joint control of Dole by Total Produce and Dole’s prior owner Mr David H. Murdock. The competition concern focused on the market for the supply of bagged salads in Sweden - where only one significant competitor would have remained - and resulted in commitments being offered to divest Dole’s bagged salad business in Sweden.
20 August 2018 Praxair/Linde cleared with conditions
This is the key merger case cleared this summer. Notified at the beginning of this year, deadline for clearance was extended and suspended on several occasions during the merger review following the submission of commitments in Phase 2 and Commission requests for information.
This four-to-three merger would have created the largest player in the European gas industry, with only three other major competitors left as suitable alternative suppliers. This gave rise to competition concerns in the markets for industrial gases, medical gases, specialty gases and helium where these gases are key inputs for a wide range of products. Commitments consisted in an extensive set of divestments: (i) an upfront buyer remedy whereby Praxair’s entire gas business in the EEA will be sold to a suitable buyer, including helium contracts to satisfy demand in the EEA. Taiyo Nippon Sanso is reported to be in the running to acquire this business. This would ensure the continued presence of four competitors in the European gas market; (ii) a fix-it first remedy whereby Praxair sells its stake in SIAD (an Italian JV active in CEE and Italy) to Flow Fin, its joint venture partner (iii) an upfront buyer remedy whereby the divestment of additional helium sourcing contracts will be sold to suitable buyers to address further concerns regarding access to sources of helium.
The merger has not yet been cleared by the US FTC and discussions remain ongoing in the US regarding further divestitures which may be required.
31 August 2018 Hutchison/Wind Tre cleared with conditions
In another case cleared in Phase 1 with conditions, Hutchison’s sole acquisition of Wind Tre from VimpelCom required structural remedies to address competition concerns in the Italian retail mobile market. Notwithstanding the entry of Iliad in this market in 2016 (as a condition to clearance of the Wind Tre JV created in 2016 by Hutchison and VimpelCom), the Commission concluded in this 2018 review that market circumstances have not changed significantly since 2016 and therefore that the same concerns would arise if the 2016 commitments - which are still being implemented - would cease to be implemented. In a uniquely-tailored solution approved by the Commission, Hutchison offered to assume responsibility for complying with the 2016 commitments, thereby releasing VimpelCom from its obligations as parent of Wind Tre.
26 June 2018 Opening of Phase 2 for BASF’s acquisition of Solvay’s nylon business
This is a horizontal merger between manufacturers of nylon compounds and nylon fibres. The merged entity would be the most fully integrated player across all levels of the production chain. The Commission’s concerns focus on the impact of the merger on the supply to other manufacturers of essential inputs needed to produce nylon compounds and nylon fibres. A decision is expected by 31 October 2018.
13 July 2018 Opening of Phase 2 for Siemens’ acquisition of Alstom
As expected, the Commission has opened a phase 2 investigation in relation to the proposal to create a European champion in the market for the supply of trains and signalling systems. The merger is reported to create the first global player for rail signalling systems and the second global player for the supply of trains. The Commission has already expressed having significant preliminary concerns with such a two-to-one merger where the merger entity is unlikely to be constrained by other competitors in the EEA.
Siemens’ proposed acquisition of Alstom may be DGComp’s most challenging case for clearance this autumn and is likely to become increasingly political as the Commission’s merger decision deadline approaches. DGComp will be placed under enormous pressure to approve this merger which France and Germany argue is necessary for the future of Europe’s rail industry, in particular to compete on a global scale with China’s CRRC. Earlier this year, Chancellor Merkel stated: “We need global champions in various industries and our competition rules do not help us to build these champions”. This case will no doubt be a test of the Commission’s merger enforcement powers. DGComp indicated in its press release that it views the entry of Chinese suppliers in particular as unlikely “in the foreseeable future” and it is concerned that the merger could lead to “higher prices, less choice and less innovation”, to the detriment ultimately of European passengers.
A decision is expected by 21 November 2018, with commitments having already been offered in Phase 1.
23 July 2018 Opening of Phase 2 for KME’s acquisition of MKM
KME’s proposed acquisition of MKM has moved to Phase 2, following the Commission’s rejection of commitments offered by the parties in Phase 1. The Commission’s concerns focus on (i) the supply of rolled copper products where the parties’ business overlap and pre-rolled strips which are used as an input for manufacturing rolled copper products and where MKM is active (ii) sanitary copper tubes where KME is the EU market leader and MKM is a strong competitor.
Another in depth investigation was also opened this summer in the copper sector in Wieland/Aurubis Rolled Products and Schwermetall (see below). However, the KME/MKM notification should benefit from the ‘priority’ rule based on the date of notification according to which the Commission’s review would focus on the market at the time of notification and therefore without regard to Wieland’s proposed acquisition as it was subsequently notified. A decision is expected by 29 November 2018.
23 July 2018 Opening of Phase 2 for Thales' acquisition of Gemalto
The Commission has opened a Phase 2 investigation amid concerns that the acquisition would ‘risk creating a dominant player at the European and global level’ in the market for hardware security modules. Part of the in-depth review will consider whether software-based security solutions compete with hardware security modules. A decision is expected by 29 November 2018.
1 August 2018 Opening of Phase 2 for Wieland’s acquisition of Aurubis Rolled Products and Schwermetall
Wieland proposes to acquire Aurubis’ rolled products business and Schwermetall, a JV between Wieland and Aurubis. Interestingly, this is the second case the Commission is currently reviewing in the same sector, after opening a Phase 2 investigation on 23 July 2018 in the proposed KME/MKM acquisition. As per the KME/MKM notification, the parties submitted commitments in Phase 1 which were ultimately rejected by the Commission as insufficient.
Combined with the KME/MKM review, this case is particularly interesting in that (i) the Commission has identified preliminary concerns in relation to billets which are used as input in the manufacturing of copper tubes; (ii) the parties to this acquisition are considered the top two suppliers of rolled copper products in a market further concentrated as a result of KME’s proposed acquisition of MKM which was notified prior to this case; (iii) access to pre-rolled strip is a common concern both in this case and in KME/MKM where Schwermetall and MKM are suppliers.
As this case was notified after KME/MKM, the Commission is expected to follow its ‘priority rule’ in which case Wieland may be disadvantaged since the Commission’s assessment would take into account the effect of the merger on the markets at the date of this notification which should therefore include the previously notified KME/MKM deal. This should be the case regardless in which order the Commission finalises its in-depth review of both deals. This situation is reminiscent of the Western Digital/Hitachi deal which was notified in 2011 a day after Seagate/Samsung. A decision is expected by 10 December 2018.