COMPETITIVE EDGE RETAIL & CONSUMER December 2015 RECENT COMPETITION LAW TRENDS ► Restrictions on online selling continue to be a focus for competition authorities, with the House of Lords launching an inquiry into online platform regulation which will contribute to the Digital Single Market Strategy and 25 authorities across Europe now monitoring the effect of Expedia and Booking.com's agreement to drop broad parity clauses from their contracts with hotels. These developments in the R&C sector form part of the wider scrutiny of digital markets, for example the FCA has recently launched a Call for Inputs on the use of Big Data in the retail general insurance sector. ► Online restrictions in the sports industry have also been in the spotlight – the European Commission ( Commission) has been asked to review geo-blocking techniques in relation to the screening of Rugby World Cup matches and there have been concerns about the possible impact of the Commission's review of pay TV on revenues of sports clubs. This week, the Commission has also presented its proposal on broadening access to online content. ► In addition, the Competition and Markets Authority (CMA) has launched investigations into possible anti-competitive arrangements in the sports equipment sector and online sales of licensed sport and entertainment merchandise (the latter in connection with an investigation by the US Department of Justice ( DoJ)). ► Elsewhere in Europe, the French competition authority has closed an investigation following Adidas' agreement to allow authorised retailers to sell on online marketplaces. This investigation was carried out in conjunction with the German competition authority, which reached a similar result earlier in the year. Interestingly, Asics was also the subject of a similar investigation in Germany and is understood to be taking action against the decision that its policy restricted online commerce. COMMERCIAL LEASE RESTRICTIONS ► The European Court of Justice (ECJ) has ruled that the mere existence of a restrictive covenant in a commercial lease between a Latvian supermarket chain and multiple shopping centres does not mean that the object of that agreement is to restrict competition.1 The judgment provides some guidance on the factors relevant to an effects-based analysis of these types of restriction and does not appear to require any changes to the way in which we currently analyse such restrictions. ► The court was analysing a series of commercial leases which gave the anchor tenant, Latvian supermarket chain Maxima Latvija, the "right to agree" to shopping centres letting further premises to rival retailers. The case was referred to the ECJ to ascertain whether such contracts were anticompetitive, with the Latvian Competition Council having previously decided that such leases were automatically anticompetitive. This has now been reversed. ► The ECJ held that such clauses require a thorough analysis of the economic and legal context, taking into account: ► All factors which determine access to the relevant market (availability and accessibility of commercial land and the existence of economic, administrative or regulatory barriers to entry i.e. whether there is a real possibility for a competitor to establish itself through alternative premises); ► The conditions under which competitive forces operate in the market (the number and size of competitors, the degree of concentration, customer fidelity and consumer habits); and ► Where access to the market is made difficult by the restriction and similar agreements, the extent to which they contribute to the closing-off of the market (based on each agreement's contribution, the position of the contracting parties in the market, and the duration of the agreement). ► The ECJ judgment is broadly consistent with the approach already taken in the UK (i.e. an effects based approach to restrictions), although the OFT land agreements guideline provides more detail on market definition and fascia counting thresholds (as does the Groceries Market Investigation (Controlled Land) Order 2010 in the context of grocery retail). This case is, nevertheless, a useful precedent for commercial retail leases, and provides broader signs of the effects-based treatment of such restrictive covenants in commercial contracts. 1 Case C-345/14, Maxima Latvija. MATTER UPDATE Price parity provisions – Online hotel booking probes across Europe Twenty five authorities across Europe have closed preliminary investigations into online accommodation booking, most recently including the CMA in the UK and the authorities in Poland, Switzerland, Ireland and Greece. As a result of a number of the investigations, Expedia and Booking.com voluntarily agreed to drop certain restrictive pricing clauses (broad parity clauses) from their contracts with hotels and online travel agencies. The authorities, together with the Commission, will now monitor the effect of these changes and will not start any new probes while the monitoring exercise continues, although the need to look at the sector again has not been ruled out. However, the discrepancies in the treatment of price parity clauses in this sector across the EU has resulted in a number of challenges. Booking.com has announced it is to challenge a draft German decision which preliminary ruled that "best price" clauses were anticompetitive. Online booking companies are also challenging a new French law which outlaws all forms of price parity and means hotels now have full control over pricing and can dictate the final price to online agencies. Italy is understood to be considering introducing similar legislation. Access to online content and modernisation of EU copyright rules The Commission has proposed a Regulation on the cross-border portability of online content services to allow Europeans to travel with their online content. At present, Europeans travelling within the EU may be cut off from online services providing films, sports broadcasts, music, e-books or games that they have paid for in their home country. The Commission has also outlined an action plan to modernise EU copyright rules. To read the press release click here. Geo-blocking in the audio-visual sector BEUC, the European Consumer Organisation, has asked the Commission to investigate the lack of cross-border access to audiovisual offers for the Rugby World Cup 2015 due to geo-blocking techniques applied to the online distribution of content. To read the press release click here. Pay-TV investigation could have effects in the sports sector In a SEC filing Manchester United has raised concerns that its broadcasting revenue could be affected by changes that may be introduced when the Commission concludes its investigation into various Hollywood studios and the sales model for TV rights. There are fears that any amendments to copyright rules which would enable wider access to online content across the EU would damage the copyright holders such as the Premier League who are currently able to derive large revenues from the exploitation of such rights within the EU. To read the SEC filing click here. Food packaging cartel In June the Commission fined eight manufacturers and two distributors of retail food packaging trays a total of €115,865,000 for having participated in at least one of five separate cartels. A number of appeals have now been brought against the Commission's decision by Consorzio Cooperative di Produzione e Lavoro SC, Italmobiliare, Huhtamaki and Coveris Rigid. The various grounds of challenge include that the Commission erred in its calculation of fines and attribution of joint and several parental liability, as well as that the Commission infringed the principles of ROUND UP OF RECENT DEVELOPMENTS MATTER UPDATE proportionality, equal treatment and its duty to give reasons. To read the case page click here. Restrictive clauses in commercial leases The ECJ has ruled that the mere existence of a restrictive covenant in a commercial lease between a Latvian supermarket chain and multiple shopping centres does not mean that the object of that agreement is to restrict competition. Whilst the judgment contains limited detail, it does provide some guidance on the factors relevant to an effects-based analysis of these types of restriction. To read the full judgment click here. Acquisition of Rexam by Ball The Commission is understood to have concerns that remaining competitors would not pose a sufficient competitive constraint on the merged entity, which would own approximately two thirds of the beverage can manufacturing plants in Europe. To remedy these concerns Ball has offered to sell 11 factories; equating to more than $1.58 billion worth of assets. Ball is understood to be seeking a single purchaser. The Commission is market testing the proposed divestments and has extended the deadline of the investigation to 22 January 2015. To read the latest press release click here. Anheuser-Busch InBev / SABMiller Anheuser-Busch InBev has agreed the terms of its £71bn takeover of rival SABMiller, in a deal that will combine the world's two largest beer makers. The newly-created firm will produce about 30% of the world's beer. AB InBev's brands include Stella Artois and Corona, while SABMiller produces Peroni and Grolsch. The two firms are predicting cost savings of at least $1.4bn a year. To clear the way for the takeover, SABMiller is to sell its 58% stake in its US joint venture MillerCoors to Molson Coors for $12bn (£7.9bn). AB InBev is also exploring the sale of a number of SABMiller’s European premium brands (Peroni and Grolsch) and related businesses. To read the latest press release click here. Online platform regulation Alex Chisholm, Chief Executive of the CMA, has stated that blanket solutions should be avoided in relation to online platform regulation; there is no "digital one size fits all". Instead, assessments should be made based on evidence of the potential adverse effects of specific industry features or practices before other tools are deployed. This should avoid disproportionate actions and side-effects. To read the full speech click here. In September the House of Lords EU Internal Market Sub-Committee launched an inquiry into the regulation of online platforms in the EU, which will contribute to the EU Digital Single Market Strategy. The inquiry will gather evidence on the benefits and problems that online platforms create for consumers and businesses. To date, the Committee has gathered evidence from a number of parties including Amazon, Etsy, Google and Airbnb. For the Committee's inquiry page click here. Online sales of licensed sport and entertainment merchandise The CMA has opened an investigation into online sales of licensed sport and entertainment merchandise, along with other consumer products, in the UK. The investigation concerns surround suspected anti-competitive arrangements / infringements of Chapter I CA98 and/or Art 101 TFEU. Searches have been conducted at the headquarters of Trod Limited, as well as the domestic premises of one of its officers, by the CMA and West Midlands Police on behalf of the US DoJ. The DoJ's searches are in connection with another investigation by their Antitrust Division, in MATTER UPDATE relation to the sale of Wall Décor, for price fixing by agreeing the pricing algorithms used in online sales. To read the press release click here. Sports equipment The CMA is investigating a suspected breach of competition law in the sports equipment sector, under Chapter I CA98 and/or Art 101 TFEU. At this stage the CMA has not reached a view as to whether there is sufficient evidence of an infringement, nor has it revealed the nature of the practices or any details in relation to the parties involved. It is estimated that a decision will be reached by April 2016. To read the press release click here. Uniform prices Following complaints, the CMA has written an open letter to schools, governing boards and suppliers of uniforms, advising them to review their arrangements for potential breaches of competition law. Exclusive arrangements between suppliers and schools may have prevented other suppliers from engaging with the market and some parents have been forced to pay up to £10 extra per item. The CMA has noted that this may not be offering parents value for money. This builds on the OFT's previous school uniform survey in 2012 and fact-finding review in 2006, which found similar issues. To read the press release click here. Heineken / Diageo Assets merger inquiry The CMA is investigating the partially completed acquisition by Heineken N.V. of some assets associated with Diageo plc's beer manufacturing business, including Red Stripe, Dragon Stout and D&G Malta in the UK. The CMA initially made an initial enforcement requiring Heineken to hold separate the Desnoes & Geddes business, however this has since been revoked. The invitation to comment closed on 2 December. To read the press release click here. Müller UK & Ireland Group LLP / Dairy Crest Group merger inquiry On 19 October 2015 the CMA accepted undertakings in lieu from Müller in relation to the anticipated acquisition of the dairy operations of Dairy Crest, following consultation and modification of the undertakings. The CMA has identified Medina Dairy Limited as the purchaser of the option to require Müller to process 100 million litres of milk each year for Dairy Crest to supply to national grocery retailers (for a period of at least 5 years). Due to its financial strength and experience, Medina Dairy is in a position to begin supplying large retailers and continue investing in this sector; addressing competition concerns. To read the press release click here. The Original Bowling Company Ltd / Bowlplex Ltd merger inquiry Last month the CMA announced it would consider an undertaking proposed by The Original Bowling Company (TOBC), rather than referring the inquiry to an in depth investigation. TOBC put forward plans to sell 6 bowling alleys to a suitable buyer to remedy the concerns highlighted by the CMA. Essenden Limited, owner of Tenpin Limited, has been cleared by the CMA as the agreed purchaser and will operate the 6 bowling centres in competition with TOBC's retained bowling centres. This has addressed market concerns and will not result in a phase II investigation. To read the press release click here. Reckitt Benckiser / K-Y brand merger inquiry On 4 November, the CMA announced its decision to accept the final undertakings from Reckitt Benckiser (RB) and Johnson & Johnson (J&J), in relation to RB's proposed acquisition of K-Y brand. RB and J&J supply personal lubricants to national pharmacy chains and retailers and the CMA found that the acquisition could result in higher MATTER UPDATE prices. To allay the CMA's concerns RB has agreed to license the K-Y brand in the UK to a third party on an exclusive basis for eight years. To read the press release click here. NBTY / Dr. Organic merger inquiry The CMA has cleared the anticipated acquisition by NBTY Limited of Dr. Organic Limited. Both brands manufacture health and beauty products. NBTY owns and manages a cluster of brands, offering a large range of private label products, including Holland & Barrett, whilst Dr. Organic specialises in skincare and natural remedies. To read the press release click here. Poundland / 99p Stores merger inquiry The CMA has cleared the merger of Poundland Group plc and 99p Stores Limited. Both retailers supply a range of general merchandise including groceries and homeware and are distinguished from other retailers due to selling nearly all their products at a single price point. Whilst the CMA found that Poundland and 99p Stores are each others closest competitors, the merged entity will continue to face competition from other value retailers and Poundland would not have an incentive to reduce the quality of its offering. To read the press release click here and the final report here. Booker Group / Musgrave Retail Partners merger inquiry The CMA has cleared the anticipated acquisition by Booker Group plc of Musgrave Retail Partners GB Limited. The parties overlap in the supply of symbol group services to convenience retailers throughout Great Britain through their Premier, Budgens and Londis brands. The CMA concluded that the parties were not particularly close competitors and will continue to face competitive pressure from remaining symbol group service providers and alternative wholesale channels. To read the full text decision click here. Digital audio-books in Germany The Bundeskartellamt is examining a long-term agreement on the purchase of audiobooks by Apple from Audible for sale in Apple's download shop iTunes Store. The proceedings were initiated following a complaint by the German Publishers and Booksellers Association, which objected to various practices used by Audible, including its exclusive supply of audio-books to Apple's iTunes Store. To read the press release click here. France closes Adidas probe The Autorité de la concurrence has closed an investigation against Adidas. Adidas distributes its products through a selective distribution network restricting the sale of its products to authorised retailers, chosen on the basis of specific criteria. Following the investigation, authorised retailers will no longer be prohibited from making Adidas products available on online marketplaces. To read the press release click here. CONTACT THE ADDLESHAW GODDARD COMPETITION TEAM Phil McDonnell 0161 934 6700 [email protected] Bruce Kilpatrick 0207 544 5214 [email protected] Rona Bar-Isaac 0207 160 3357 [email protected] Al Mangan 0207 544 5352 [email protected] To unsubscribe to this update please click here © 2015 Addleshaw Goddard LLP. All rights reserved. Extracts may be copied with prior permission and provided their source is acknowledged. This document is for general information only. It is not legal advice and should not be acted or relied on as being so, accordingly Addleshaw Goddard disclaims any responsibility. It does not create a solicitor-client relationship between Addleshaw Goddard and any other person. Legal advice should be taken before applying any information in this document to any facts and circumstances. 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