Competition: European Parliament publishes study on the legal perspective of the regulatory framework and challenges for franchising in the EU

On 3 October 2016, the European Parliament published a study on the legal perspective of the regulatory framework and challenges for franchising in the EU ("Study"). The Study considers how the EU regulatory environment affects franchising. It suggests that the failure of franchising to fulfil its full potential in the EU is due, at least in part, to dysfunction in the EU regulatory environment. It concludes that for franchising to achieve its full potential, a franchise-focused European Legal Act is necessary.

The Study states that EU competition law places franchise chains at a disadvantage compared to corporate chains, thus preventing franchisors and franchisees, which are mostly Small and medium-sized enterprises ("SMEs") and individuals, from effectively competing with big business. The Study also concludes that price (and non-price) vertical restraints are unlikely to be anti-competitive or reduce economic efficiency when the franchise system faces substantial upstream and downstream competition. The Study suggests that the OECD’s suggestion of a ‘simple rule’ should be adopted that allows franchisors to use retail price maintenance in certain circumstances.

Further, the Study notes that multi-channel sales strategies, particularly online sales and other commercial use of the internet, are an important part of franchise chains, and this needs to be reflected in EU competition law. According to the Commission, franchisors should be given greater flexibility and control over their internet strategy so that they can add greater value to both the franchisee's business and their own by proactively increasing operational efficiencies and communication. Source: European Parliament Press Release 30/9/2016 and European Parliament Study on the Legal Perspective of the Regulatory Framework and Challenges for Franchising in the EU, September 2016

Competition: General Court dismisses appeal against Commission's rejection of a complaint alleging abuse of dominance by Split Port Authority 

On 30 September 2016, the General Court ("GC") found that the Commission was right to reject an abuse of dominance complaint brought against the Port Authority of Split ("Split Port Authority") by the operator of a passenger terminal.

In 2013, Trajektna Iuka Split d.d. ("Trajektna"), the private operator of the passenger terminal at the Port of Split in Croatia, complained to the Commission that the Split Port Authority had abused its dominant position by fixing port-services fees at "prohibitively low maximum" levels. Thus the Split Port Authority allegedly prevented Trajektna from managing its business profitably. In 2014, the Commission rejected the complaint on three grounds: first, the likelihood of finding an infringement by the port was limited; second, the national competition authority ("NCA") was the best body to deal with the issue; and third, the impact on the functioning of the internal market appeared to be limited.

In 2015, Trajektna appealed to the GC. Trajektna argued that the Commission had committed a manifest error of assessment when it refused to carry out a full investigation. The company also argued that the Commission had relied too extensively on a previous decision by the NCA.

In its judgement, the GC found that the Commission did not merely refer to the wording of the contested decision but did indeed analyze the situation before concluding there were insufficient grounds to warrant a full investigation. The court also found that the Commission was right to believe that the national authority's legal position provided a good indication that finding an infringement under EU law was unlikely. The court noted that the provisions of Croatian national law on which Trajektna based its complaint are the national equivalent of EU abuse-of-dominance law. Therefore, the Commission was justified in adopting the legal argument followed by the NCA without itself conducting a similar analysis. Source: Case T‑70/15 Trajektna Iuka Split d.d. v. Commission, judgment of 30 September 2016

Merger Control: Commission conditionally approves acquisition of Faiveley by Wabtec 

On 4 October 2016, the Commission announced that it has conditionally approved the acquisition of French railway equipment manufacturer Faiveley Transport ("Faiveley") by US competitor Westinghouse Air Brake Technologies Corporation ("Wabtec"). The approval is conditional on the parties selling Faiveley’s friction materials business, Faiveley Transport Gennevilliers.

The proposed transaction would bring together Faiveley and Wabtec, two of the world's largest companies manufacturing and supplying various railway and train equipment, such as complete brake systems and their subsystems and pantographs. The Commission had concerns that the proposed transaction, by eliminating one of only three strong suppliers of sintered friction materials for train brakes, could have led to reduced competition and price increases for these products. The Commission initially had additional concerns relating to a number of other types of train equipment, including friction brake systems and pantographs. However, following its in-depth investigation, the Commission concluded that those concerns were not substantiated.

To address the Commission's competition concerns, the parties offered to sell Faiveley Transport Gennevilliers. This company specializes in the development and production of sintered friction materials for various purposes, including train brakes. The Commission concluded that the divestment will remove all overlap between Faiveley and Wabtec in sintered train friction brake materials. Accordingly, the Commission approved the transaction, as modified by the commitments.
Source: Commission Press Release 4/10/2016

Merger control: Commission opens in-depth investigation into proposed merger between Deutsche Börse AG and London Stock Exchange Group

On 28 September 2016, the Commission announced that it has opened an in-depth investigation to assess whether the proposed merger between Deutsche Börse AG ("DB") and London Stock Exchange Group ("LSE") would reduce competition in several financial market infrastructure areas. DB is a diversified financial market infrastructure organization. It is best known for operating the Frankfurt Stock Exchange, a regulated marketplace for trading stocks, bonds and various other financial instruments. LSE is one of Europe's pre-eminent financial infrastructure companies and best known for operating the London Stock Exchange. It also owns Borsa Italiana, the Italian stock exchange, and operates a number of other platforms for trading of stocks and other equity-like exchange traded products, bonds and derivatives. The proposed transaction would combine the activities of DB and LSE. By combining the exchanges of Germany, the United Kingdom and Italy, as well as several of the largest European clearing houses, it would create by far the largest European exchange operator. The Commission was notified of the transaction on 24 August 2016.

The Commission's initial market investigation identified preliminary competition concerns in several markets, including the clearing market, derivatives market, repurchasing market, German stocks market and exchange traded products market. In its investigation the Commission will also further analyze the transaction's impact on competition in other markets, such as international listing of non-EEA companies; index licensing, where the parties combine the largest European index families; and trading and clearing of freight derivatives. The Commission now has 90 working days, until 13 February 2017, to decide. The opening of an in-depth investigation does not prejudge the final result of the investigation. Source: Commission Press Release 28/9/2016

Merger control (Finland): Finnish Competition and Consumer Authority abolishes commitments concerning Tuko Logistics Cooperative in merger between Ruokakesko Oy and Lähikauppa Oy

On 5 October 2016, the Finnish Competition and Consumer Authority ("FCCA") announced that it has decided to abolish the commitments relating to Tuko Logistics Cooperative ("Tuko Logistics"), which were part of the conditional approval decision of the merger between Ruokakesko ("Ruokakesko") Oy and Suomen Lähikauppa Oy ("Suomen Lähikauppa").

On 11 April 2016, the FCCA conditionally approved Ruokakesko's acquisition of Suomen Lähikauppa. During its investigation, the FCCA identified competition concerns in the Finnish daily consumer goods retail market. In order to address the FCCA's competition concerns, Ruokakesko offered a commitment package, including both structural and behavioral commitments. Firstly, Ruokakesko committed to divest a Suomen Lähikauppa store in each of the 60 problematical markets to existing or potential competitors. Secondly, Ruokakesko committed to continue purchasing from Tuko Logistics for a fixed period of 18 months. Further, Suomen Lähikauppa committed to complete its Tuko Logistics membership during the transitional period. In addition, the FCCA restricted the possibilities of Suomen Lähikauppa and Ruokakesko to participate in decision making in Tuko Logistics.

The FCCA has now concluded that Tuko Logistics and Ruokakesko have agreed on delivery and supply relations between Suomen Lähikauppa and Tuko Logistics. According to the FCCA, the commitments relating to Tuko Logistics have therefore become unnecessary. Consequently, the FCCA has on application of Ruokakesko decided to abolish the commitments. The FCCA's decision does not affect Ruokakesko's commitment to divest a Suomen Lähikauppa store in each of the 60 problematical markets. Source: Finnish Competition and Consumer Authority Press Release 5/10/2016 (in Finnish)

State aid: Commission publishes policy brief on state aid transparency

On 29 September 2019, the Commission published a policy brief on state aid transparency ("policy brief"). The policy brief explains that, under EU state aid rules, aid granted to companies must be transparent, which means that aid must be easily detected and subject to public scrutiny. In practice this means that authorities that grant aid amounts of more than EUR 500,000 must give market participants relevant information about those public interventions that may potentially distort competition and intra-EU trade. As of July 2016 and starting from the date of the grant, the authorities have six months, or one year in case of tax advantages, to provide this information.

The Commission notes that transparency is important because it promotes accountability and more effective policies. Competitors of aid recipients and other interested parties will be able to see which companies have received state aid, how much they receive and for what purpose. This enables market monitoring and contributes to a level playing field between companies and Member States.
The information submitted by the authorities to fulfil the transparency obligations in state aid is available on the consolidated Public Search Website. At the moment, the database is only searchable by country, but the Commission will provide a fully functional EU-wide search function before January 2017. Source: Commission Competition Policy Brief and Commission Public Search Website