Investigation

European Commission sends Statement of Objections to Brussels Airlines and TAP Portugal

The European Commission has informed Brussels Airlines and TAP Portugal of its preliminary view that their code-share cooperation on passenger services between Brussels and Lisbon restricted competition between the two airlines.

Under the code-share agreement in question, the two airlines granted each other the right to sell an unlimited number of seats of almost all categories on each other’s flights on the Brussels-Lisbon route. Prior to the agreement, the two airlines had operated competing services on the route and were in fact the only two airlines flying this route.

The European Commission has concerns that the two airlines pursued an anti-competitive strategy on the Brussels-Lisbon route by:

  • discussing a capacity reduction (number of seats) and an alignment of their pricing policy on the route;
  • granting each other unlimited rights to sell seats on each other’s flights on the route (where they had previously competed); and
  • implementing these arrangements by actually reducing capacity, completely aligning their fare structures as well their ticket prices on the route.

Decision

European Commission fines ARA €6 million

The European Commission has fined Altstoff Recycling Austria (“ARA”) €6 million for blocking competitors from entering the Austrian market for management of household packaging waste. The fine was reduced by 30% due to ARA’s cooperation with the European Commission.

In Austria, producers of goods are obliged to take back packaging waste that results from the use of their products. ARA has been the dominant provider of these services for household packaging waste in Austria since at least 2008.

The European Commission found that the nationwide collection infrastructure, partly controlled and partly owned by ARA, could not be duplicated. Competitors who wanted to enter or expand in the market were dependent on receiving access to this existing infrastructure. Between March 2008 and April 2012 ARA refused to give access to this infrastructure. Such behaviour is an abuse of a dominant market position.

The European Commission also imposed a structural remedy to address the issue of foreclosure. ARA offered to divest the part of the household collection infrastructure that it owns.

EU Policies and Guidance

Consultation on evaluation of procedural and jurisdictional aspects of EU merger control

The European Commission recently launched a public consultation on certain procedural and jurisdictional aspects of EU merger control. The focus of the consultation is on:

  • the functioning of the case referral system between Member States and the European Commission;
  • the effectiveness of the turnover-based jurisdictional thresholds for EU merger control. The public consultation refers specifically to the digital and pharmaceutical industries, where the acquired company, while having generated little turnover, may play a competitive role, hold commercially valuable data, or have a considerable market potential for other reasons; and
  • simplification for the treatment of certain categories of cases that do not generally raise competition concerns.

Interested parties have until 13 January 2017 to respond.

Practice note

Failure to notify the CCPC

Failure to notify a merger or acquisition which requires notification to the Competition and Consumer Protection Commission (the “CCPC”) under the Competition Acts 2002 to 2014 could result in the merger or acquisition being void.

Also, an undertaking or the “person in control of an undertaking” which fails to notify the CCPC of a mandatory notification will be guilty of an offence and will be liable:

  • on summary conviction, to a fine not exceeding €4,000; or
  • on conviction on indictment, to a fine not exceeding €250,000.

If the offence continues after the date of its first occurrence, the undertaking or the “person in control of the undertaking” will be guilty of a separate offence of up to €25,000 for each day that the offence continues.

A “person in control of an undertaking” is defined as:

  • in the case of a body corporate, any officer of the body corporate who knowingly and wilfully authorises or permits the offence;
  • in the case of a partnership, each partner who knowingly and wilfully authorises or permits the contravention; and
  • in the case of any other form of undertaking, any individual in control of that undertaking who knowingly and wilfully authorises or permits the offence.

Merger Determination

Petrogas Group Limited (Applegreen plc) / Certain assets of M.K.M.H. Limited

This transaction involved Applegreen plc (“Applegreen”) acquiring sole control over a retail fuel service station and associated convenience store (located in Naas) from M.K.M.H. Limited.

There were two horizontal overlaps in the activities of the parties in the State:

  • the retail sale of motor fuel and automotive lubricants; and
  • the operation of forecourt convenience stores.

For the purpose of its competitive analysis, the CCPC considered the narrowest possible relevant product markets, i.e., the retail sale of motor fuels and automotive lubricants, with associated forecourt convenience stores.

In order to determine whether the proposed transaction would result in a substantial lessening of competition, the CCPC analysed its impact by reference to the narrowest possible geographic market, i.e., the local area in which the motor fuel service station is located.

In relation to forecourt convenience stores, both parties are involved in retail sales through convenience stores which, while forming part of their motor fuel retail service stations, are not considered to be part of the same product market.

There is a large and varied (in size) number of competitors in the retail sector whose presence will constrain the activities of the merged entity.

In relation to the retail sale of motor fuels and automotive lubricants, the Competition Authority has previously found that there is a localised motor fuel retail market, delineated by isochrones for local markets which differentiate between urban and rural settings (i.e., 2 miles / 3.2 km radius in an urban setting and 5 miles / 8 km in a rural setting). The Competition Authority in subsequent decisions focused on a radius of 5 miles / 8 km from any target retail fuel forecourt.

The Competition Authority previously commented that given that the retail distribution of both motor fuels and automotive lubricants occur through retail service stations, it would be reasonable to suggest that competition in the retail distribution of automotive lubricants is local in nature.

Within a 5 mile / 8 km radius of the target assets, there were at least 5 competing facias.

Post-transaction, Applegreen will have an estimated market share for the retail sale of motor fuels and automotive lubricants within a 5 mile / 8 km radius of the target assets of approximately 11-15% by volume. There is also a large and varied (in size) number of competitors in Naas and the surrounding areas whose presence will constrain the activities of Applegreen in the retail sale of motor fuels and automotive lubricants post-transaction.

In light of the above, the CCPC considered that the proposed transaction will not substantially lessen competition in any market for goods or services in the State.

Brexit

Brexit challenges dismissed by Northern Ireland High Court

The Belfast High Court has dismissed two judicial review applications that challenged the outcome of the Brexit referendum. For further information, please see the update on our website dated 28 October 2016.

UK government suffers Brexit setback

The UK High Court ruled that the British Prime Minister does not have the power to use the royal prerogative to serve an Article 50 notice triggering the UK’s exit from the EU. For further information, please see the update on our website dated 3 November 2016.