EU Mergers

Phase I Mergers

  • M.8175 EXERTIS / HAMMER (19 December 2016)
  • M.8180 VERIZON / YAHOO (21 December 2016)
  • M.8233 ROCKAWAY E-COMMERCE / EC INVESTMENTS / BONAK / SULLY SYSTEMS (21 December 2016)
  • M.8234 ENEL / CDP EQUITY / CASSA DEPOSITI E PRESTITI / ENEL OPEN FIBER / METROWEB ITALIA (15 December 2016)
  • M.8240 DANA / BREVINI FLUID POWER AND BREVINI POWER TRANSMISSION  (16 December 2016)
  • M.8243 ALLIANZ / NN GROUP / THE FIZZ STUDENT HOUSING (15 December 2016)
  • M.8244 THE COCA-COLA COMPANY / COCA-COLA HBC / NEPTŪNO VANDENYS (21 December 2016)
  • M.8267 EVERIS INITIATIVES / BANKIA / NETTIT COLABORATIVE PAYMENT (20 December 2016)
  • M.8274 CINVEN / PERMIRA / ALLEGRO / CENEO  (21 December 2016)
  • M.8280 DEUTSCHE POST DHL / UK MAIL (15 December 2016)
  • M.8291 PSA / ARAMIS (20 December 2016)

State Aid 

Commission orders Ireland to recover illegal State aid awarded to Apple. On 19 December 2016, the European Commission (Commission) published the non-confidential State aid Decision in which it ordered Ireland to recover €13 billion (plus interest) that it had unlawfully provided to Apple in the form of selective tax treatment. CompetitionCommissioner, Margrethe Vestager, said: "Member States cannot give tax benefits to selected companies – this is illegal under EU State aid rules. The Commission's investigation concluded that Ireland granted illegal tax benefits to Apple, which enabled it to pay substantially less tax than other businesses over many years. In fact, this selective treatment allowed Apple to pay an effective corporate tax rate of 1 per cent on its European profits in 2003 down to 0.005 per cent in 2014." The Decision found that Apple benefited from Ireland’s “inconsistent” application of its tax rules and the lack of “objective criteria” led the Commission to conclude that the Irish authority used its “discretion” in the tax rules. As such, the Decision concluded that two tax rulings issued by Ireland to Apple have “substantially and artificially lowered the tax paid by Apple in Ireland since 1991" and allowed the taxable profits for two Irish incorporated companies of the Apple group (Apple Sales International and Apple Operations Europe) to be established in a way which, according to the Commission, did not correspond to economic reality. Almost all sales profits recorded by the Apple subsidiaries were internally attributed to Apple’s head offices and not to their respective Irish branches and, therefore, were not subject to tax in any country under specific provisions of Irish tax law, which are no longer in force. The Irish government has since lodged an appeal with the General Court to annual the Commission’s Decision and denied that it gave favourable tax treatment to Apple, firmly stating that “Ireland does not do deals with taxpayers.” The Irish government has also published a summary of its grounds of appeal, in which it explains the Commission has misapplied State aid law by finding that the Apple subsidiaries were granted a selective advantage. It argues that the Commission has erroneously tried to re-write the Irish corporation tax rule, contrary to Member State sovereignty in relation to direct taxation. Further, the Irish government claims that the Commission misapplied the "arms-length" principle, failed to follow required procedures, wrongly invoked novel rules, gave insufficient reasons for its decision, and exceeded its powers and interfered with national tax sovereignty.

ECJ rules Spanish tax breaks for foreign shareholders are illegal State aid. On 21 December 2016, the European Court of Justice (ECJ) handed down its judgment which set aside the General Court’s ruling that had annulled the Commission’s decisions on a Spanish tax scheme relating to acquisition of foreign companies. The ECJ concluded that the General Court had erred in law when applying the condition relating to selectivity, by concluding that the measure was not selective on the ground that the Commission had not identified a particular category of undertakings exclusively favoured by the tax measure concerned. The ECJ ruled that instead, the General Court should have determined whether the Commission had established that the measure at issue was discriminatory, when applying the condition relating to selectivity. The ECJ agreed with the Commission finding the measures selective, as the tax breaks derogate from the general Spanish corporation tax system and discriminate between undertakings that are in a comparable situation. The ECJ noted companies that are resident in Spain that acquire a 5% shareholding in another company also resident in Spain cannot receive the tax advantage conferred by the measure at issue, however, in contrast, the measure benefits undertakings that make acquisitions of at least 5% shareholdings in a foreign company. As a result of the judgment, the Commission’s decisions are reinstated, including Spain's obligation to recover the State aid granted under the measure.

Commission clears Italian funding to support move of freight transport from road. On 19 December 2016, the Commission announced its approval of Italy’s Marebonus scheme, which encourages freight transport by sea rather than road. The Commission notes Marebonus is in line with the Commission's State Aid Maritime Guidelines, as it should also lead to less traffic on the roads and so reduce pollution and ease transport congestion. State aid will be granted to shippers for starting new maritime services or upgrading existing sea routes. With a budget of €138 million, this ruling comes in addition to the Commission’s previous approval of Italian State aid for Italy’s road to rail scheme, Ferrobonus. On 24 November 2016, the Commission found that the €255 million Ferrobonus scheme operates in line with the Commission’s Guidelines on State aid for railway undertakings, and aims to shift freight traffic, which predominately uses road transportation, to use rail transport links instead. The Commission’s assessment found both Marebonus and Ferrobonus would be beneficial for the environment as the schemes are “supporting a mode of transport that is less polluting than road”. The level of State aid Italy is to deliver to each of these schemes is based on reduction in external costs that the sea or rail transport allows in comparison to road. The Commission also found the two schemes would not “distort the level playing field by unduly impacting on maritime transport or inland navigation”, noting that both schemes were open to all operators.

Commission approves UK State aid to covert unit of Drax power plant from coal to biomass. On 19 December 2016, the Commission concluded that UK State aid provided for the conversion of one unit of the Drax coal-fired power plant to biomass was lawful. The Drax power plant is one of eight projects selected under the Final Investment Decision Enabling for Renewables, a UK State aid measure for renewable energy projects. The Commission has already approved UK State aid for a number of projects under this measure. The UK government intends to support the conversion with a premium paid on top of the market price of the electricity generated (a so-called "Contract for Difference"). The scheme will receive State aid from the UK government until 2027. In giving this approval, the Commission confirmation it is satisfied that the State aid “would not lead to overcompensation and undue distortions of competition in the biomass market”. As part of their investigation, a detailed analysis of the project business case was carried out, taking into account the comments received from interested third parties, as well as further information submitted by the UK.

ECJ orders Ryanair and Aer Lingus to repay illegal Irish State aid. On 21 December 2016, the ECJ upheld the Commission’s appeal against the General Court’s judgment to overturn a Commission recovery order on unlawful air travel tax State aid. The ECJ also dismissed cross appeals brought by airlines Aer Lingus and Ryanair, finding that the General Court and Commission had not erred by requiring Ireland to recover the difference between the higher and lower rates of the tax for every ticket issued. The ECJ rejected the airlines' arguments in relation to errors in fixing the reference rate, and held whether a tax measure may be contrary to other provisions of EU law is not, in isolation, relevant for State aid purposes. The ECJ ruled the two-tier tax used by airlines Ryanair and Aer Lingus was unlawful, as it gave the two airlines an unfair advantage over competitors. The ECJ ruled that the airlines which benefited from the reduced rate “enjoyed a competition advantage” of €8 per passenger, compared with airlines that paid the standard rate. Ireland has been ordered to recover the sum of €8 per passenger (plus interest) for each of the flights concerned.

Commission approves tenth prolongation of Irish credit union resolution scheme. On 19 December 2016, the Commission cleared plans by Ireland to extend a resolution scheme for the orderly winding-up of credit unions. These measures safeguard financial stability and help to transfer assets and liabilities of a failing credit union to an acquirer and are in line with the 2013 Banking Communication. The Commission noted the competitive process of the transfer will “help to achieve the maximum value for the assets and liabilities, ensuring that the aid is limited to the minimum necessary for an orderly winding-up and that no buyer gains an undue economic advantage through the acquisition of under-priced assets and liabilities”. The scheme was initially approved in December 2011, and has been prolonged on nine further occasions, in successive periods of six months. The latest extension will allow the scheme to be valid until 30 June 2017.

Commission approves extension of bank guarantee schemes. On 19 December 2016, the Commission approved the prolongation of a Greek guarantee scheme and a Polish bank guarantee scheme, each for credit institutions within their respective regions. Both schemes have been approved for an extra six months, and will now expire on 30 June 2017. The Greek guarantee scheme was initially approved in November 2008, and the Polish guarantee scheme was approved initially in September 2009. Each scheme has been prolonged several times in successive periods of six months. The Commission does this in order to “be able to monitor developments and adjust conditions accordingly”. The Commission noted that both schemes are in line with the rules on state aid to banks during the crisis, in particular because each measure “is targeted, proportionate and limited in time and scope”.

Commission approves prolongation of Polish export contracts scheme. On 19 December 2016, the Commission authorised an extension of a State guarantee scheme to cover certain risks of default on export contracts of companies established in Poland, which can be issued at the request of Polish exporters for the direct benefit of foreign customers. The Commission approved the initial scheme in July 2007 and have authorised prolongations of the scheme in six month successive periods since. In approving the latest prolongation, the Commission noted that the extension of this scheme requires no further State aid as it is financed through market-based premiums paid by exporters, in line with the Commission’s Notice on Guarantees. The premiums cover the normal risks associated with granting the guarantees, the administrative costs of the scheme and the yearly remuneration of sufficient capital.

Commission approves Polish small commercial and cooperative bank resolution scheme. On 20 December 2016, the Commission announced its approval of a Polish scheme which allows prompt resolution for small commercial and cooperative banks with total assets of below €3 billion, should they be found to be in difficulty. The scheme facilitate the work of the Polish resolution authorities should a concrete case and need arise. In approving this scheme, the Commission noted this type of scheme allows the prior authorisation of aid when qualifying banks are in distress, enabling the national authorities to carry out an orderly resolution of that bank. The Commission concluded this was compatible with the 2013 Banking Communication and EU banking rules. The authorisation of aid under the scheme is granted for six months from today (until 30 June 2017) and can be prolonged following a report by the Member State and an assessment by the Commission.

Commission approves German support for electricity supply measures. On 20 December 2016, the Commission approvedGerman plans to put in place a reserve for four years to ensure sufficient electricity capacity in Southern Germany (the Network Reserve). German transmission operators will pay operators of power plants that have notified their intention to close down but that are relevant to keep the electricity system in balance, for remaining available to the network. The scheme will also be open to power plants located outside Germany, i.e. Italy and Austria, who can be contracted to increase or decrease production to keep the grid in balance if so instructed by the transmission system operator. The Commission also separately approved amendments to the German renewable energy scheme; as of 2017 support will mainly be granted through auctions. Margrethe Vestager, the Commissioner in charge of competition, said: "Competitive bidding processes support the deployment of renewable energy whilst keeping electricity costs at bay for consumers. The amendments to the German EEG law we approved today make sure that one of the largest renewable support schemes in the EU will be based on auctions. The decision allows Germany to organise separate auctions for different renewable energy technologies to keep its electricity grid stable, and commits Germany to test alternative auction designs for the future through pilot projects."

Trade

ECJ rules EU-Morocco trade deal is valid. On 21 December 2016, the ECJ handed down its judgment that the 2012 EU-Morocco trade agreement providing for reciprocal liberalisation measures on agricultural products, processed agricultural products and fish and fishery products (Liberalisation Agreement) is legal, and reversed the previous judgment that annulled the Liberalisation Agreement. The Western Sahara region’s controlling Front Polisario had argued for specific safeguards to be entered into the Liberalisation Agreement and wished to annul the Liberalisation Agreement if it involved the Western Sahara region without these safeguards. Front Polisario questioned the ECJ whether the contested region was covered by the agreement. The ECJ held that there was no need to debate the region’s distinct status, as international law has already acknowledged it; therefore the Liberalisation Agreement is not applicable to Western Sahara.

UK Competition

Liberty Media gains CMA approval to acquire Formula One. On 16 December 2016, the Competition and Markets Authority (CMA) cleared the acquisition by Liberty Media of the Formula One Group, a car racing franchise. The CMA had been considering since 7 November 2016 whether the transaction would result in, or be expected to result “in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services”. The CMA’s approval is the final clearance Liberty Media required from competition regulators in Europe. The deal has already been cleared by the competition authorities in each of Austria, Spain, and Portugal. 

CMA approves acquisition by Severn Trent Plc of Dee Valley Group Plc. On 16 December 2016, the CMA cleared the acquisition of Dee Valley Group Plc by Severn Trent Plc. The decision of the CMA not to refer the merger for a Phase II investigation arrives after an investigation on whether the merger of the two water enterprises would be “likely to prejudice Ofwat’s [the UK regulator of water and sewage providers] ability, in carrying out its functions, to make comparisons between water enterprises”. The full text of the decision is yet to be published on the CMA’s website.

Dover Corporation / Wayne Fueling System deal wins approval. On 19 December 2016, the CMA announced its acceptance of undertakings by Dover Corporation in its acquisition of Wayne Fueling System. The CMA’s investigation into the potential merger of these two fuel pump suppliers raised concerns about the lack of choice for petrol and diesel retailers in the UK. The CMA was concerned that a lack of choice would lead to the “cost of purchasing and maintaining fuel pumps at petrol stations in the UK to increase, or service quality to fall” which in turn would result in higher road fuel costs for UK motorists. In order to ease the CMA’s concerns, and in lieu of receiving a referral to a Phase II investigation under the Enterprise Act 2002, Dover Corporation has agreed to sell the UK distribution business of Wayne Fueling System to competitor Petrotec S.G.P.S. S.A.

CMA fines modelling agencies £1.5 million for price collusion. On 16 December 2016, the CMA announced it has imposed fines on model agencies FM Models, Models 1, Premier, Storm and Viva, as well as their trade association, the Association of Model Agents (AMA) for “colluding instead of competing on prices for modelling services”. As a result of the CMA’s investigation, Storm Model Management was awarded the largest fine at £491,000; FM Models was fined £251,000; Models One was fined £394,000; Premier Model Management was fined £150,000; Viva Model Management was fined £245,000; and the Association of Model Agents Limited was fined the lowest amount, £2,500. The antitrust breach was found to have taken place from at least April 2013 until March 2015 and directly involved the modelling agencies “regularly and systematically” exchanging confidential and sensitive information and discussing prices with each other in the context of negotiations with particular customers. The CMA’s investigation also found cases where the agencies agreed to fix minimum prices or agreed a common approach to pricing. Moreover, the AMA and the agencies sought to influence other AMA members by regularly issuing email circulars, known as “AMA Alerts”, in which AMA members were urged to resist the prices offered by customers on the grounds they were too low.The CMA’s investigation concerned a wide range of modelling assignments and affected a range of customers; from high street stores to online brands. John Wotton, Chair of the Case Decision Group responsible for making the decision, said: “Strong competition benefits consumers, the economy and society. When businesses collude rather than compete the ultimate losers are customers.” The CMA also added that “top models” were not involved in the price-fixing, which the CMA defines as “those individuals whose fame plays a part in the customer’s decision to contract for their services and who, as a consequence of this, usually pay significantly lower commission to the model agency and earn higher fees than other models”.The CMA’s decision follows French and Italian decisions made in the law few weeks, in which the French competition authority fined almost all the modelling agencies in France for anti-competitive behaviour and the Italian competition authority recently imposed fines of €4.5m on eight major modelling agencies for similar behaviour.

CMA fines suppliers of galvanised steel tanks over £2.7 million. On 19 December 2016, the CMA issued two decisions imposing fines on suppliers of galvanised steel tanks for their involvement in a cartel, following a settlement announced in March 2016 and a formal statement of objections in May 2016. Galvanised steel tanks are used for water storage in larger buildings, such as schools, hospitals and other commercial and public buildings, and supply the water used in fire sprinkler systems. The CMA found that four suppliers participated in an illegal cartel in the galvanised steel tank market by which they colluded to share the market between them, fix prices and rig bids between 2005 and 2012. Franklin Hodge Industries Ltd and its parent company Carter Thermal Industries Ltd was fined £2,015,135; Galglass Ltd, and its parent companies Irish Industrial Tanks Ltd and Kernoff Ltd was fined £587,926; and KW Supplies Ltd (as economic successor to Kondea Water Supplies Ltd) was fined £22,248. The fourth supplier CST Industries (UK) Ltd and its parent company CST Industries Inc. received immunity from fines under the CMA's leniency policy, “having brought the arrangements to the authorities’ attention and co-operated with the investigation”. The CMA’s investigation found the cartel aimed to improve their profit margins by “avoiding customers being able to negotiate the best deal through ‘playing’ the competitors off against each other.” In a separate infringement decision, the CMA has also found that three of the suppliers that participated in the main cartel (Franklin Hodge Industries Ltd., Galglass Ltd. and KW Supplies Ltd.) and one other supplier (Balmoral Tanks Ltd. - who was not part of the cartel) exchanged information about current and future pricing intentions at a single meeting in July 2012. During this meeting, which was secretly recorded by the CMA, Balmoral Tanks Ltd. refused an invitation from the other suppliers to join the cartel. The three cartel participants have not received a further fine for this separate infringement, however, the Balmoral Tanks Ltd. has been fined £130,000 for exchanging commercially sensitive information with its competitors.

East Midlands airport admits to car-parking price fixing in CAA’s first competition investigation. On 20 December 2016, the Civil Aviation Authority (CAA) issued its first competition infringement decision using its concurrent competition powers. The CAA concluded that East Midlands International Airport Limited (Airport) and Prestige Parking Limited (Prestige) breached competition law by agreeing to fix prices of car parking services at the Airport. The CAA’s investigation found that the parties agreed a minimum price for parking services which matched the Airport’s own price. This was imposed by the Airport as a condition of the lease which granted Prestige to access facilities at the airport between (at the latest) October 2007 and September 2012. The access was essential for Prestige to provide car parking services to its customers on the Airport’s site. The CAA’s investigation also found that the Airport “actively monitored” the car parking prices set by Prestige, and exchanged information about their prices. The CAA concluded that “both parties independently identified that their agreement might harm competition but failed to act on it.” As the Airport, Manchester Airports Group Plc (the Airport’s parent company) and Prestige “proactively disclosed details of the agreement” under the CMA’s leniency programme before the CAA investigation began, the Airport was able to avoid a fine of almost £12.5 million, and was instead awarded full leniency. Prestige also avoided a fine as it had ceased trading in 2012, therefore the CAA faced a statutory cap of 10% of Prestige’s turnover (of which it had none). Following the investigation, Manchester Airports Group Plc has agreed to set up a programme to ensure ongoing compliance with competition law within its business and among staff, and has also agreed to review existing concession contracts that the Airport has entered into, to ensure that they do not break the law on anti-competitive agreements.In addition to this investigation, the CAA is also conducting a wider sector review of potential antitrust breaches for road-based access to large UK airports - including car parking services.