I NATIONAL HIGHLITHS

Portuguese Competition Authority

Fine for implementation of a concentration prior the notification

In a press release of 9 January 2013, the PCA announced that, on 28 December 2012, it had levied fines to three companies that had implemented a concentration without the previous decision from the regulator.

This decision concerns the acquisition, in June 2008, by Farminveste – Gestão de Participações, SGPS, Lda. (“Farminveste”) of the sole control of Glintt – Global Intelligent Technologies, SGPS, S.A.. The concentration was notified to the PCA only in November 2009, following an ex officio proceedings instructed by the PCA against Farminveste for failure to comply with the obligation of notification, under the terms of article 56 of Law Nr 19/2012, of 8 May (“Competition Act”). The PCA issued its non opposition decision in May 2010, given the lack of competition impact of the concentration.

Following its investigation started in January 2012, the PCA applied fined in a total amount of €149,278.79 to ANF and to Farminveste – Investimentos, Participações e Gestão, S.A.. The Farminveste did not receive a fine as it had not generated turnover, in the reference year of the calculation of the fine. The fines correspond to 0.05% of the turnover of ANF and of 0.05% of the turnover of Farminveste, S.A.. In determining the fines to apply, the PCA had in consideration, namely, the fact that the concentration was subject to a non opposition decision.

This is the first time the PCA applies a fine for non notification of a concentration.

In fact, the concentrations that fulfill the notification thresholds (set out in Article 37 of the Competition Act) must be notified previously to the PCA. In accordance with the Competition Act of 2012, the PCA can request the companies involved in concentrations in the last five years, that did not comply with the obligation of previous notification, to notify such concentrations. The notification a posteriori does not prevent the companies to receive a fine. This is what happened in the present case.

Portuguese Competition Authority

Publication of new documents

The PCA published another two documents following the public consultations it held during the summer of 2012 as it was set out in several dispositions of the Competition Act.

On 14 February 2013, the new Notification Forms for Concentrations between Undertakings were published in the Official Gazette (please see our Legal Flash of 15 February 2013 here).

On the 1st February 2013, the PCA published its Guidelines on the priorities in the exercise of its sanctioning powers and on the investigation of restrictive practices, under the terms of article 7 (1) and (2) of the Competition Act. The new competition regime sets the new Framework for the sanctioning powers of the PCA. The PCA must now analyze objectively the opportunity of exercising the sanctioning powers considering the public interest of the promotion and defense of competition, and define the priority degrees that can be attributed to the several questions submitted to the PCA. With these Guidelines, the PCA intended to express its understanding on the Framework, thus explaining the procedures that will be applied in the new cases that will be submitted to the PCA.

II EUROPEAN HIGHLIGHTS

Court of Justice of the European Union

Judgment of the European Union Court of Justice of 19 March 2013 (Cases C-399/10P and C-401/10P)

State Aid to France Telecom

The European Union Court of Justice (“EUCJ”) has issued its judgment on the Processes C-399/10P and C-401/10P. The main issue discussed in these processes was the qualification of a certain State behavior as State aid.

The cases referred to statements of the French Government given in 2002 regarding the financial situation of France Telecom, of which the French State was a shareholder. The French government publicly stated that it would contribute to the strengthen France Telecom’s capital base.

After the relevant procedure, the Commission declared the aid incompatible with the internal market. This decision was annulled by the General Court (“GC”) grounded on the fact that according to this Court the declarations of the French Government did not determine the transfer of State resources.

The EUCJ annulled the GC’s judgment stating that it is not necessary to establish that there has been a transfer of State resources for the advantage to be regarded as State aid. For this purpose it is sufficient to show a sufficiently concrete economic risk of burdens on the State budget (in fact, the opposite would leave outside the scope of State aid advantages given in the form of State guarantee).

For these reasons, this judgment, despite revisiting an old issue – the notion of State aid – has great importance in current practice.

Court of Justice of the European Union

Judgment of the European Union Court of Justice of 7 February 2013 (Case C-117/12)

Scope of post-term non-compete obligation in franchise agreement

On 7 February 2013, the EUCJ ruled that a non-compete obligation in a franchise agreement valid after the termination of the agreement could only benefit from a block exemption (Regulation Nr 2790/1999, “old VBER") if its geographic scope is restricted to the physical space from which the contract goods or services were sold.

The case concerned franchise agreement with a duration of five years, which contained a non-compete obligation valid for the duration of the agreement and one year after the termination of the agreement The non-compete obligation covered the entire territory assigned to the franchisee under the agreement.

Under Article 5 of the old VBER, non-compete obligations valid after the termination of the agreement benefit from the exemption (i.e., are not considered to be anti competitive) if certain conditions were met. Subject to debate in the present case was the condition that the non-compete obligation was limited to "the premises and land from which the buyer has operated during the contract period" (Article 5(b)), as it was necessary to ascertain whether the non -compete clause was exempted under the old VBER. The Court of Appeal of Burgos, called to decide a conflict opposing the franchisor and the franchisee, considered unclear whether "premises and land" only referred to the place or physical space from which the franchisee operated or whether they could be interpreted as to include the entire territory assigned to the franchisee under the franchise agreement and referred the question to the EUCJ.

In its ruling, the EUCJ conclude that Article 5(b) of the old VBER could not be interpreted as referring to the entire territory assigned to the franchisee based on the literal meaning of the words "premises and land" and the objective of the old VBER.

Therefore, a non-compete obligation valid after the termination of the agreement that prohibits the franchisee to sell goods or provide services outside the physical point of sale from which it operated under the franchise agreement does not benefits from the exemption under the old VBER.

This judgment is very important as it clarified one clause that is very common in commercial relationships. Even though it regards the old Vertical Block Exemption Regulation, this judgment is still relevant since the current Vertical Block Exemption Regulation (Regulation Nr 330/2010) contains a similar provision and identical wording as the one that is subject of the EUCJ's clarifications.

European Commission

Microsoft fined for non-compliance with browser choice commitments

On 6 March 2013, the European Commission (“Commission”) fined Microsoft in €561 million for failure to comply with its commitments imposed in the investigation into a suspected abuse of dominant position by Microsoft due to the tying of its web browser, Internet Explorer, to its dominant client PC operating system Windows.

In 2009, the Commission closed its investigation on the US software company by making the commitments offered by the latter legally binding until 2014. Microsoft committed to offer users of the Windows operating system a browser choice screen enabling them to choose in an informed and unbiased manner, which web browser(s) they wanted to install in addition to, or instead of, Microsoft's web browser. The “choice screen" would be available for five years. The choice screen was provided as of March 2010 to European Windows users with Internet Explorer set as their default web browser.

However, from May 2011 until July 2012, Microsoft failed to display the choice screen with its Windows 7 Service Pack 1. After acknowledging the infringement, the Commission opened a new proceeding, and decided to apply another fine to Microsoft.

This is the first time the Commission fined a company for non-compliance with a commitments decision and reflects the strict monitoring of commitments by the Commission.