Telecoms giant hit with injunction in successful use of new powers
On 20 July 2015, it was reported in the High Court how Telefonica, the owner of O2 and the UK telecoms giant, had been hit by an interim injunction by a small business (Packet Media Limited) which believed that Telefonica were abusing their position of dominance in the wholesale provision of access to call and SMS text origination. The case is important in showing the growth of competition litigation in the UK, and the protection it affords small businesses who feel threatened by the anti-competitive behaviour of much larger companies.
The case concerned O2 withdrawing support which was essential to Packet Media's business. Packet Media relied on O2 providing and supporting their SIM cards which they in turn provided to customers to allow them a low cost GSM gateway for calls and text messages. In response to this threatened suspension, Packet Media sought an interim injunction against the suspension at the High Court and was successfully granted one on the basis that Telefonica had a case to answer for a possible abuse of dominance, in breach of Article II of the Competition Act 1998.
What makes the case more notable is the fact that it constitutes what is known as a 'stand-alone' case, as Telefonica have not been found guilty in any case before the EU or UK regulators, Packet Media must prove fault if they are to succeed in obtaining a permanent injunction against any withdrawal of service. The case was made easier for Packet Media as a result of the reforms in the Enterprise and Regulatory Reform Act 2013 which aimed to make competition law access easier for smaller UK businesses. In this particular case, it lowered the standard of proof necessary for the granting of an interim injunction from "significant damage" in section 35 of the Competition Act 1998 to "serious, irreparable harm".
Retail distribution sector: Increased structural injunction powers granted to the FCA to police retail sector
On 10 July 2015, the bill for economic growth and activity - often dubbed the "Macron Law" after its chief architect, French Economy Minister Emmanuel Macron - was adopted by the French Parliament. The Macron Law aims to liberalize the French economy and simplify regulations in certain areas such as environmental and labour law. The Macron Law is the government's flagship and wide-ranging attempt to shake up the French economy through pro-business reform and increased competition.
The Macron Law includes changes regarding French competition law and specifically with respect to French Competition Authority ("FCA") powers. Indeed the new law grants the FCA the right to issue a "structural injunction" outside of merger control procedures and without having to prove the existence of an abuse of a dominant position. This power can only be used for the retail distribution sector.
In the event of a dominant position (a market share above 50 per cent held by a retailer, or a group of retailers), the FCA will be enabled to issue a reasoned opinion to the retailer if it finds (i) that the concentration distorts competition in the area and; (ii) higher prices or margins compared to usual practices.
The targeted retailer may offer commitments to the FCA in order to remedy the situation. Should they be considered unsatisfactory, the FCA may issue a reasoned decision to force the retailer to amend or terminate the agreements or acts which result in the economic dominance, or even to sell assets if necessary.
This very mechanism was created in 2012 by the "Lurel Law" but was limited to the French overseas departments and territories. The Macron Law has extended it to the rest of the French territory.
The Italian Competition Authority opens investigation into the co-ordination of prices for the long-term hiring of motor vehicles
On 10 August 2015, the Italian Competition Authority (the "ICA") opened an in-depth investigation into eight leading Italian companies operating in the long-term hiring of motor vehicles sector (the "Accused Companies") along with their representative association called "Aniasa" (the "Association") for an alleged infringement of Article 101 TFUE; the prohibition of anti-competitive agreements and/or concerted practices.
The investigation stemmed from an anonymous complaint, which alleged an anti-competitive agreement or concerted practice among the Accused Companies based on the alleged alignment of their offers in terms of fees and ancillary services.
The ICA found that the complaint was grounded as the Accused Companies would de facto avoid competing with each other. This strategy would be implemented by the Accused Companies by sharing detailed commercial information during the meetings held in the Association's premises.
In particular, the ICA argued that thanks to the information sharing, the Accused Companies would coordinate their commercial decisions and align their fees and services to offer to the general public and other undertakings, causing a significant increase in price.
Therefore, the ICA found that the conduct raises serious issues regarding its compatibility with Article 101 TFEU. In fact, any agreement not to compete with competitors would fall within such provision which forbids commercial coordination among competitors.
The ICA has increased its focus on sensitive information sharing and investigations of such a kind are becoming numerous. Indeed, if wrongdoing is found, the ICA investigation and subsequent enforcement action could be considered a high profile deterrent against commercial coordination among undertakings. However, the alleged wrongdoing is not proven at this stage and the investigation continues.
German FCO urges efforts against bid-rigging agreements
Having experienced in the past how difficult bid-rigging agreements are to identify, the German Federal Cartel Office ("Bundeskartellamt" – FCO) strives to raise the awareness of the problem.
Pointing out the importance of leads provided by contracting entities for the successful prosecution of such agreements between companies, on 19 August 2015 the FCO published an informative note, stating several indicators which are supposed to help contracting entities to detect bid-rigging agreements at an early stage of the tender process.
Based on the structure of previous cases of bid-rigging agreements, the FCO names several criteria, which can point to illegal collusion by the bidding companies. These criteria include the similarity of the respective bids in their design, indices that the bidders have knowledge of the bids submitted by the other bidders or the repeated occurrence of certain bidding patterns.
However, the FCO is not the only German state authority interested in combatting bid-rigging. Due to Art 298 of the German Penal Code, respective agreements are not only subject to prohibitions under the German Act against Restraints on Competition (Gesetz gegen Wettbewerbsbeschränkungen, GWB), punishable by severe fines being imposed by the FCO against the companies involved; it is also a criminal offense, which can be punished with imprisonment for up to five years or a fine, being imposed on the individuals responsible. Therefore, the prosecution department is playing a major role in uncovering inadmissible bid-rigging agreements.
Having already cooperated with each other in the past, the two authorities intend to further utilize synergy effects in the course of the prosecution, enabling a more effective law enforcement against bid-rigging agreements and a further increase of the quota of uncovered violations.
What a waste!: Italian Competition Authority imposes fines for collusive public tendering
As previously mentioned in our articles, on 17 September 2014 the Italian Competition Authority (the "ICA") opened an in-depth investigation into four Italian companies (the "Accused Companies") providing services in the waste recycle sector for the alleged infringement of Article 2 of Law No. 287/1990 (the "Italian Competition Law"); the prohibition of anti-competitive agreements or concerted practices.
On 17 August 2015, at the end of the investigation, the ICA imposed on the Accused Companies a significant fine totalling Euro 542,267.87, rejecting all their defensive statements.
In particular, the ICA held that although the case involved a small part of the Italian Market, the conduct of the Accused Companies had to be deemed a hard core restriction, having anti-competitive effects per se.
The case stemmed from an anonymous complaint, which alleged anti-competitive conduct during tenders made for providing organics waste disposal services within the territory of the province of Rovigo; a small part of the Italian region Veneto.
Tender procedures were based on a lowest bid mechanism so that the invitation containing the lowest discount to a set price won the tender.
The ICA found that only the Accused Companies possessed all the requirements to make such invitations for four tenders but they did not compete among them. Indeed, each Accused Company made one invitations for each of the four tenders without ever overlapping. Therefore, each Accused Company won a tender without real competition.
Therefore, the ICA held that the Accused Companies tried to avoid competing with each other for the tenders as they had the requirements to participate to all the tenders and there was no objective reason for the decision not to participate.
In such respect, the ICA argued that this behaviour could not be the result of true competition and held that the Accused Companies had decided to illegally allocate markets by deciding the winner of the relevant tender before making invitations.
According to the ICA, through this strategy, the Accused Companies sustained far lower costs which they would have borne by competing.
Therefore, the ICA found the conduct incompatible with Article 2 of the Italian Competition Law. In fact, any agreement not to compete with competitors would fall within such provision which forbids bid rigging and market allocation.
The ICA has increased its focus on the waste recycle sector as cases of such a kind are becoming numerous. However, the fine imposed can be considered a high profile deterrent against bid rigging and allocating markets.
Germany takes firm line on internet sales and pricing
On 27 August 2015, the German Federal Cartel Office (FCO) concluded its competition investigation into the online distribution system of Asics Deutschland, one of Germany's leading athletics brands.
Under German and European competition law, manufacturers of branded products have a right to safeguard quality standards in the distribution of their products and impose requirements to this effect on their authorised dealers. However, these measures may not be allowed to excessively restrict small and medium-sized dealers in their ability to sell the products over the internet.
Such sales restrictions are likely to prevent consumers from enjoying the benefits of the availability of both offline and online sales. The FCO stated that a selective distribution system may not be used to eliminate a broad range of online offer and price reductions. In the present case, the FCO found the effect of Asics restrictions was excessive and anti-competitive in nature. Specifically; Asics prohibited its authorised online distributors from using the Asics brand name in their advertising, from participating in price comparison engines and tools, and from using prominent internet marketplaces and sports discount shops.
The repercussions of such strict limitations on online distribution can be highly detrimental to both distributors and consumers. Decreasing the sales opportunities of online distributors, for example by barring them from the use of major sales channels, jeopardises their very existence. This, in turn, reduces the consumer's options of where they can shop and, in many cases, means that prices remain unchallenged. The FCO has been very clear that such market manipulation, aimed at leading consumers to buy directly from the manufacturer, will not be permitted.
Both the FCO and Asics Deutschland have since confirmed that Asics' distribution policy has been amended and is now compliant with national and EU Competition laws. The EU Commission has also launched an inquiry into e-commerce and will be looking at various internet selling practices as well as the restrictions imposed by suppliers on their authorised distributors to prevent their use of on-line market places. The lead taken by the German authorities will no doubt be the subject of debate in the Commission’s investigation.