State aid investigation into Poland’s tax on the retail sector
The European Commission has opened an in-depth investigation into a Polish tax on the retail sector. The European Commission has concerns that the progressive rates based on turnover give companies with a low turnover a selective advantage over their competitors in breach of EU State aid rules.
Under the tax, companies in the retail sector must pay a monthly tax based on their turnover from retail sales. The tax features a progressive rate structure with three different brackets and rates:
- a tax rate of 0% applies to the part of the company’s monthly turnover below approximately €3.92 million
- a tax rate of 0.8% is levied on the part of the company’s monthly turnover between approximately €3.92 million and approximately €39.2 million
- a tax rate of 1.4% is levied on the part of the company’s monthly turnover above approximately €39.2 million.
The Commission considers that the tax system should not unduly favour a particular type of company, for example companies with lower turnover.
Pharmaceutical pay-for-delay case
The General Court has recently upheld the European Commission’s Lundbeck decision and has ruled for the first time that pharmaceutical pay-for-delay agreements breach EU anti-trust rules. In such agreements an original pharmaceutical manufacturer pays generics producers to stay out of the market. The European Commission had established that the agreements eliminated the competitive pressure from the generic companies and were ‘a restriction of competition by object’.
The European Commission’s decision found that the Danish pharmaceutical company Lundbeck and four generics competitors had concluded agreements which allowed Lundbeck to keep the price of its blockbuster drug citalopram artificially high. The decision imposed a fine of €93.8 million on Lundbeck and fines totalling €52.2 million on the four generics competitors.
The European Commission has decided that Ireland has granted undue tax benefits of up to €13 billion to Apple. For further information, please see the news bulletin on our website dated 9 September 2016.
EU policies and guidance
Preliminary report on e-commerce sector inquiry
The European Commission‘s preliminary report on its e-commerce sector inquiry identifies business practices that might restrict competition. The European Commission may open case specific investigations to ensure compliance with EU rules on restrictive business practices and abuse of dominant positions.
The following product categories were covered: clothing, shoes and accessories; consumer electronics; electrical household appliances; computer games and software; toys and childcare articles; books; CDs, DVDs and Blu-ray discs; cosmetic and healthcare products; sports and outdoor equipment; and house and garden.
The preliminary report found that:
- over 40% of retailers face some form of price recommendation or price restriction from manufacturers
- almost 20% of retailers are contractually restricted from selling on online marketplaces
- almost 10% of retailers are contractually restricted from submitting offers to price comparison websites
- over 10% of retailers report that their suppliers impose contractual restrictions on cross-border sales.
Almost 33% of respondent retailers confirmed that they normally comply with the price indications given by the manufacturers, while slightly more than 25% said that they never comply.
50% of the retailers that replied to the sector inquiry reported that they are affected by at least one contractual sales restriction.
The preliminary report is now open to public consultation for a period of two months. The European Commission expects to publish its final report in the first quarter of 2017.
CCPC motor insurance investigation closed
In 2013, the Competition and Consumer Protection Commission (the “CCPC”) opened an investigation into potential anti-competitive information sharing between private motor insurers via a software product provided by an intermediary software services provider, Relay Software Limited (“Relay”). Insurance companies participating in the system provided their future pricing information to Relay for inclusion on Relay’s software platform. Insurance brokers subscribing to Relay’s software product could access their competitors’ future pricing information.
Relay confirmed that mechanisms had been put in place to ensure that each insurance company using the Relay product had access only to its own pricing information. Relay, Allianz plc, Axa Insurance Limited, Zurich Insurance plc, RSA Insurance Ireland Limited and Sertus Underwriting have each entered into Agreements and Undertakings with the CCPC. The Agreements and Undertakings addressed the CCPC’s competition concerns and the investigation was closed in August 2016.
CCPC opens new investigation in motor insurance sector
The CCPC is investigating breaches of competition law in the motor insurance sector regarding industry participants signalling future increases in motor insurance premiums. For further information, please see the news bulletin on our website dated 15 September 2016.
Any exchange of commercially sensitive information between competitors is likely to interfere with the normal conditions of competition in a particular market. In order to determine whether an information exchange has the potential effect of restricting competition, it is necessary to take into account all of the circumstances in which it takes place, including the type of information that is exchanged, the method by which it is shared and the characteristics of the relevant market more generally. The CCPC considers that the following types of information are commercially sensitive and in most cases must not be shared between competitors (however this list is not exhaustive):
- Current and future pricing information (for example, actual prices, discounts and rebates).
- Current and future output and sales information (for example, volumes, turnovers and market shares).
- Current and future commercial plans (including, product development, marketing and promotional plans).
- Information about costs.
- Customer lists.
This case involved the Blackstone Group L.P. (“Blackstone”) acquiring sole control of the Blanchardstown Shopping Centre, and adjacent retail and office property (the “Target Assets”).
There was a horizontal overlap between the business activities of Blackstone and the Target Assets in relation to the supply of rentable office property in Co. Dublin. The CCPC did not need to come to a definitive view on the precise relevant product market in this instance since its conclusion on the competitive impact of the proposed transaction would be unaffected whether the precise relevant product market was narrowly defined (eg the supply of rentable office property) or more broadly to encompass the supply of all types of rentable property (ie commercial and residential property).
Horizontal overlap was assessed by reference to square footage of rentable office property currently available in Co. Dublin. Blackstone would own between 0% and 5% of all rentable office property in Co. Dublin following the proposed transaction.
The CCPC noted that there were a number of large international property investors (Kennedy Wilson, Pimco, Lone Star and Hibernia Reit) currently active in the provision of rentable office property in Co. Dublin, as well as a number of local competitors, such as IPUT and Irish Life. These competitors will continue to act as a competitive constraint on Blackstone following the proposed transaction.
Similarly, it was not necessary for the CCPC to define precise relevant geographic markets in this instance. The CCPC examined the competitive impact of the proposed transaction by reference to the narrowest possible relevant geographic market, namely Co. Dublin.
In light of the above, the CCPC considered that the proposed transaction would not substantially lessen competition in any market for goods or services in the State.