Current issues

Lawfulness of restricting resellers from selling luxury and technical products on online market places

The long awaited Coty decision was handed down on 6 December 2017. The decision confirmed that restricting sales on third-party marketplaces such as Amazon and eBay, where the supplier itself does not sell on these platforms, can be permissible, although an absolute prohibition on online sales remains unjustifiable. In 2018, attention will turn to the way in which this decision is interpreted by the competition authorities. With the German Competition Authority already indicating that it interprets the decision as being limited to luxury brands, the position that the Competition and Markets Authority (CMA) takes will be one to watch.

Greater scope for dominant companies to offer rebates

In the years following the imposition of the €1.06bn fine on Intel in 2009, the journey of the subsequent appeals through the court system has put to the test the extent to which dominant companies can lawfully offer rebates to their customers. The CJEU’s ruling on Intel’s appeal (September 2017) is to be welcomed by companies with strong market positions. Moving away from a line of cases where certain rebates were deemed automatically unlawful (an easy win and a worrying enforcement risk profile for companies with strong market positions), the CJEU held that regulators must consider whether these rebates actually have harmful effects on competition – placing a higher evidential burden on regulators and reducing the enforcement risk for businesses.

Implications of Brexit for competition law compliance

Businesses involved in mergers, acquisition, joint ventures and other changes of control are likely to face increased merger control scrutiny, in some cases being required to seek clearance from the CMA in addition to the European Commission. Brexit will undoubtedly have profound implications for the application of State aid rules, which govern the extent to which the UK government can subsidise industries, support UK businesses and challenge support provided by other governments. Whilst anti-protectionist rules will be required if the UK is to enter into trade deals (with the EU or any other country or trading bloc), the form of, and body selected to regulate, those rules remains a live and contentious issue.

Crackdown on “geoblocking” of digital content and the sale of goods online

By the end of next year, new legislation will be introduced prohibiting the blocking of access to websites, online content and the rerouting of customers to national websites. Charging additional fees to customers from different member states will also be prohibited. The new law will affect online retailers of physical goods as well as suppliers of online digital content and services. As things stand, copyright is excluded from the scope of the legislation, meaning that IP protection could lend itself as an effective tool for some businesses, for whom geo-blocking forms a central part of their distribution model.

Excessive pricing cases in the pharma industry

A clutch of recent cases demonstrate an intense interest on the part of competition regulators into the high price of pharmaceutical products. Businesses with strong market positions in other (particularly consumer-facing) sectors should also take stock and consider the extent to which their pricing might be challenged for being “excessive”. To illustrate, less than a year after fining Pfizer and Flynn Pharma a total of c.£90 million for excessive pricing of anti-epilepsy drugs, the UK regulator issued a statement of objections to Actavis for excessive pricing for hydrocortisone and announced a similar investigation into the pricing of Liothyronine tablets by Cincordia. The UK regulator is not alone; the European Commission is currently investigating the pricing practices of Aspen Pharma, which also faced an investigation by the Italian Competition Authority’s last year.

CMA’s report on the digital comparison tool (DCT) market study

DCTs and businesses whose products or services feature on DCTs’ platforms ought to be conscious of the findings of a report, published by the CMA in September 2017, setting out it findings (and recommendations) from its market study into the supply of DCTs in the UK. The market study was triggered by concerns in relation to consumer trust in, and the transparency of information provided by, DCTs. While the report generally takes a positive view of DCTs, regarding them as facilitative of competition, it does express concerns about a number of practices commonly employed by DCTs, including: wide price parity clauses, non-brand bidding, negative matching and non-resolicitation agreements.

Dates for the diary

January 2018 CMA due to make provisional findings in the on-going Phase 2 investigation into the anticipated 21st Century Fox/ Sky merger, with the final report due be given to the Secretary of State by 6 March 2018. The CMA is investigating the proposed acquisition on the grounds of media plurality and a genuine commitment to broadcasting standards.
May 2018 Competition Appeals Tribunal to hear the appeal by Ping Europe against the company’s £1.45 million fine imposed for its operation of an online sales band, with a judgment potentially to follow by the end of 2018.
July 2018 CMA aims to publish its provisional decision in its investigation into the supply and acquisition of investment consultancy and financial services to and by institutional investors and employers in the UK.
December 2018 Anti-geoblocking legislation is expected to come into force that will limit the extent to which:
  • retailers can restrict cross-border sales over the internet (e.g. through redirecting customers to national websites, or limiting the geographic regions in which delivery is offered); and
  • digital content and providers can technically block access to that content across borders (e.g. by blocking access to downloads when the consumer travels to another EU country).