COMPETITION LAW NEWSLETTER
I NATIONAL HIGHLITHS
Portuguese Competition Court grants largest fine reduction ever to Galp Energia in the bottled gas market
On February 3, 2015, the Portuguese Competition Authority (“PCA”) imposed a fine of EUR 9.29 million on Petróleos de Portugal - Petrogal, Galp Açores and Galp Madeira (“Galp Energia”), as it concluded that the subsidiaries of Galp Energia had prevented its distributors from selling bottled liquefied petroleum gas outside the allocated territories and banned passive sales in mainland Portugal and the Autonomous Regi ons of the Azores and Madeira.
Galp Energia appealed the decision to the Portuguese Competition , Regulation and Supervision Court (“Competition Court”), which, on January 4, 2016, reduced the fine levied by the PCA in more than EUR 5 million.
The Court of Competition ruled that Galp Energia’s subsidiaries acted negligently but did not have a deliberate intention to commit an infringement. It also resulted proved in Court that, as in seven out of the nine Azores islands and in one island of Madeira there was only one distributor, no restriction of competition could have taken place in those islands. The Court also considered that there was no evidence of an infringement to article 101 of the Treaty on the Functioning of the European Union (“TFEU”) .
This reduction of the fine to EUR 4.1 million (representing 55% of the originally imposed fine) is the largest reduction ever granted by the Competition Court.
Rulings from the Competition Court can be appealed to the Lisbon Court of Appeal.
The Portuguese Competition Authority fines the National Association of Pharmacies for abuse of dominant position
In a press release dated December 31, 2015, the PCA announced it has imposed a fine of EUR 10.3 million on the National Pharmacies Association (Associação Nacional das Farmácias, “ANF”) and on three companies of the ANF Group (Farminveste – S.G.P.S., S.A., Farminveste – Investimentos, Participações e Gestão, S.A., and HMR – Health Market Research, Lda.) for abuse of dominant position in the form of margin squee ze in the Portuguese pharmacies’ commercial data market and in the markets of pharma market studies based on these data.
ANF Group is active both on the pharmacies’ commercial data sales market, through Farminveste – Investimentos, Participações e Gestão S.A., and on the market of pharma market studies based on these data, since 2009 with the creation of HMR – Health Market Research.
According to the investigation of the PCA, between January 2010 and the end of 2013, the prices charged by the ANF Group for the pharmacies' commercial data (upstream market) and those charged by the ANF Group for pharma market studies based on those data (downstream markets) did not provide an equally efficient competitor, active in the downstream market, with a sufficient margin to cover the remaining production costs.
The PCA concluded that the behaviour of the ANF Group constitutes a serious infringement of article 11 of the Portuguese Competition Act as well as of article 102 of the TFEU.
This is the largest fine imposed in the pharmaceutical sector by the PCA.
DIA Portugal offers commitments regarding the relation with its franchisees
On April of 2014, the PCA initiated proceedings against DIA Portugal Supermercados, Sociedade Unipessoal, Lda (“DIA Portugal”) due to suspicion of non-compliance with the national competition rules, namely the rules concerning the relation between the Franchiser (DIA Portugal) and its Franchisees.
Its investigation included the analysis of all the Franchise agreements, a questionnaire to all the Franchisees and inquiries and inspections. The PCA has some concerns regarding the definition of the resale prices in the context of the Franchise agreement.
In accordance, the PCA concluded that DIA Portugal would need to clarify if the prices established were fixed resale prices – which is not allowed - or if they were only recommended and maximum prices aiming at the prevention of price increases.
On March 15, 2016, DIA Portugal submitted commitments to PCA in relation to the expressed concerns. These commitments comprehended a Circular Letter to the Franchise Network stating that DIA Portugal merely recommends resale prices or establishes maximum resale prices and that, therefore, the Franchisees may opt for lower prices. In addition, DIA Portugal has committed to not include, in the Franchise agreements, any clause limiting the Franchisee’s freedom to set the resale prices.
PCA will have to assess if these commitments are sufficient to avoid any restrictive effect on the market. In that case, PCA will admit the commitments and DIA Portugal will have to comply with them. The commitments were submitted to a public consultation during 20 working days.
Intervention of the Portuguese Competition Authority led to positive changes in the motor vehicles warranties
The beginning of 2016 was marked by the conclusion of several infringement procedures initiated by PCA in relation to the motor vehicles warranties of different car manufacturers. In all of the procedures, the PCA concluded that the competitive concerns
had been eliminated in relation to the limitations of the automobile warranty extension contract.
According to the press release of February 23, 2016, the PCA rendered legally binding the commitments presented by SIVA – Sociedade de Importação de Veículos Automóveis,
S.A. (“SIVA”), in relation to the brands Audi, VW e Skoda.
In addition, on February 9, 2016, the commitments submitted by FCA Portugal, S.A. (“Fiat”) were also rendered legally binding by PCA, and the PCA closed both the procedures.
The procedures concerned the existence of contractual clauses – in the SIVA and Fiat warranty extension contracts – that prevented the consumers of carrying out maintenance or repair at independent repairers, if not to lose the right to the manufacturer’s warranty.
In order to eliminate the competitive concerns raised by the limitations in the use of the automobile warranty, SIVA and Fiat have submitted commitments – subject to public consultation – in light of the modification of all the contracts and relevant documents that might contain any restriction in relation to the respective legal warranty.
At the start of the year (Press Release of January 26 of 2016), PCA has also filed the infringement procedure against SEAT Portugal, Unipessoal, Lda. (“SEAT”) as the company has modified its warranty extension contracts by clarifying that the benefits resulting from the legal warranty were not conditioned to the execution of the maintenance or any repair in the official repair networks of SEAT. SEAT has communicated the referred contractual modification to its official dealers, repair networks as well as its clients.
PCA has considered that the submitted commitments were able to eliminate the poten tial harmful effects on competition and consumer’s interests.
II EUROPEAN HIGHLIGH TS
E-commerce sector inquiry finds geo-blocking is widespread throughout EU
On 18 March of 2016, the European Commission (“Commission”) has published its conclusions on the prevalence of geo-blocking in the European Union (“EU”), in the context of its sectorial inquiry about the competition on the e-commerce sector, launched in May 2015.
The replies - from more than 1400 retailers and digital content providers from all 28 EU Member States – have shown that geo-blocking is common in the EU for both consumer goods and digital content. Through this practice of geo-blocking, retailers and digital content providers prevent consumers online to buy consumer goods or to have access to digital content services, due to their location or country of residence (for instance refuse to delivery abroad or refuse to accept foreign payment methods ).
The use of geo-blocking does not constitute, necessarily, an infringement of competition rules. The cases where geo-blocking results from agreements between suppliers and distributors may be considered to breach competition rules. On the other hand, if geo- blocking is based on a unilateral business decision by a company, of not to sell abroad, such behavior is not considered to be in breach of competition rules as long as the company does not hold a dominant position.
In mid-2016, the Commission will launch a public consultation on the conclusions of the sectorial inquiry on the e-commerce. The final report is scheduled for the first quarter of 2017.
The aim of the competition inquiry is to identify the cross -barriers to e-commerce still exist within the EU, in order to contribute to the objective of achieving a Digital Single Market.
Court of Justice of the European Union
Judgment of the Court of Justice, of 20 January 2016 (C -373/14P)
Toshiba Corporation v. European Commission
Restriction by object
On 20 January 2016, the Court of Justice of the European Union (“CJEU”) rejected the appeal of power transformer producer Toshiba against the 2014 judgment of the General Court of the European Union (“General Court”), thus upholding in its entirety the Commission’s decision in the power transformers cartel case for the participation in a market-sharing agreement. This judgment clarifies the concept of restriction by object within the meaning of article 101 of the TFEU.
In 2009, the Commission fined Toshiba and six other Japanese and European power transformer producers for their participation in a gentlemen's agreement in which the Japanese producers agreed not to sell power transformers in Europe, and the European producers not to sell such products in Japan. In the Commission’s decision, as well as in the judgment of the General Court, the "gentlemen's agreement" was deemed to constitute a restriction of competition by object. As the General Court rejected the appeal against the Commission’s decision (Case T-519/09 - Toshiba v European Commission), the power transformer producer Toshiba appealed to the CJEU.
For the Japanese producer, both the Commission and the General Court had erred in law in characterizing the gentlemen’s agreement as a restriction by object. Toshiba claimed, among other reasons, that the General Court could not have established the existence of a restriction of competition by object, since the parties to the cartel were not potential competitors, as there were insurmountable barriers to entry preventing producers from entering into each other’s regions.
According to the CJEU, the General Court properly assessed that there was potential competition between the Japanese and European producers, as it demonstrated, in particular, the barriers to enter the European market were not insurmountable. The oral agreement between the Japanese and European producers itself was considered, by the CJEU, as another (strong) indication that the parties were potential competitors.
The CJEU then concluded that when it is obvious that an agreement (such as a market - sharing agreement in this case) constitutes restriction by object, “ the analysis of the economic and legal context of which the practice forms part may thus be limited to what is strictly necessary in order to establish the existence of a restriction of competition by object”.