Competitive edge - retail and consumer - September 2015

COMPETITIVE EDGE RETAIL & CONSUMER September 2015 RECENT COMPETITION LAW TRENDS Online markets continue to be a key area of focus for competition authorities, with restrictions on retail pricing, price parity and restrictions on cross-border trade all being scrutinised: ► The European Commission (Commission)'s latest questionnaires in its e-commerce investigation appear to be exploring pricing and contract terms for online marketplaces such as Amazon and eBay. Retailers have also been asked about limitations on their ability to sell a range of products cross-border and online, including through online marketplaces and price-comparison websites. ► The High Level Group on Retail Competitiveness made a number of recommendations to assist the Commission in improving the long-term competitiveness of the EU retail sector, such as addressing legal fragmentation through including digital activities within the scope of relevant legislation and initiatives to strengthen confidence in e-commerce. ► Competition authorities across the EU have continued to scrutinise online hotel booking platforms and price parity clauses, with commitments from Expedia and Booking.com being accepted or positively received by various authorities. However, a new French law banning all forms of price parity clauses in online hotel booking agreements suggests that an EU-wide consensus is some way off. MERGER REMEDIES & DIVESTMENTS Interesting remedies and divestments are on offer (or may be on offer shortly) in the retail and consumer sector, in order to solve competition authorities' concerns about a number of mergers, with both straightforward and more innovative approaches being taken to the design of proposed remedies: ► In the UK, the Competition and Markets Authority (CMA) is considering undertakings in lieu of a Phase 2 reference offered by Müller UK & Ireland Group LLP, which would require Müller to sell to another dairy processor an option to require Müller to process a certain volume of fresh milk each year for supply to national grocery retailers. ► The CMA recently concluded its Phase 2 investigation into Reckitt Benckiser's acquisition of the K-Y brand from Johnson & Johnson. The CMA required Reckitt Benkiser to license the K-Y brand in the UK to a competitor for 8 years, allowing time for it to develop a new brand to rival the Durex range. ► The CMA is also considering whether proposed undertakings will be sufficient to remedy its concerns about competition for ten pin bowling in certain local areas and therefore avoid the need for an in-depth Phase 2 investigation. The Original Bowling Company Ltd has offered to sell a ten-pin bowling centre (belonging to either itself or Bowlplex Ltd) in each of Bristol, Bracknell, Cardiff, Dudley, Leeds/Castleford and Glasgow. ► In the EU, the Commission has extended its in-depth investigation into Ball Corporation's acquisition of Rexam, a rival can maker. The merger would combine the first and second largest manufacturers of beverage cans in the EEA, making divestments of manufacturing plants in Europe a possibility. ► Merger control approval is also likely to be needed for Coty's acquisition of 43 brands from Procter & Gamble, with divestments reportedly being seen as a possibility. The transaction includes P&G’s global salon professional hair care and color, retail hair color, cosmetics and fine fragrance businesses, along with select hair styling brands. MATTER UPDATE European Commission sector review of e-commerce The Commission has continued its investigation into the e-commerce sector, with two further questionnaires being sent to interested parties. The first questionnaire has been sent to retailers, wholesalers and manufacturers and concerns a range of product groups including clothing, software, cosmetics and healthcare. The Commission appears to be exploring the limitations faced by retailers when trying to sell such products online, including any evidence of contracts and threats that may hinder the sale of products through online platforms/price comparison websites and across EU member states. There are also questions relating to the distribution models adopted, restrictions on selling prices, geoblocking, and price differences in different countries. In the second questionnaire the Commission has requested information on pricing and contract terms for websites that act as online marketplaces, such as Amazon.com and eBay. The questionnaire requests information on the amount of freedom sellers have and how agreements operate between them and the platforms. The Commission has asked for information on contract terms with sellers (including forms of exclusivity), pricing practices and commission, and the handling of users' data. European Commission statement of objections on cross-border provision of pay TV services As part of its ongoing investigation into whether certain provisions in licensing agreements between several major US film studios and the largest European pay TV broadcasters may breach Article 101 TFEU, the Commission has sent a statement of objections to Sky UK and Disney, NBCUniversal, Paramount Pictures, Sony, Twentieth Century Fox and Warner Bros. The Commission provisionally concluded that certain geo-blocking clauses in licensing agreements, that restrict cross-border provision of pay TV services, grant absolute territorial exclusivity to Sky UK and/or other broadcasters and eliminate cross-border competition between pay TV broadcasters. To read the press release click here. Price parity provisions – online hotel booking antitrust probes across Europe Earlier this year Expedia and Booking.com offered commitments to competition authorities in France, Italy and Spain to resolve concerns and allow those authorities to bring a close to their investigations. Expedia and Booking.com agreed to change the terms of hotel contracts to remove "broad" parity clauses (meaning that they can no longer require hotels to give them the same or better room rates, conditions and availability as other sales channels). These commitments have prompted statements from Denmark's Competition and Consumer Authority (which intends to close its investigation), the Austrian competition authority (where the proposed changes were well received) and the Swiss competition authority (which plans to conclude its investigation by the end of the year). However, an EU-wide agreement on this issue has yet to be reached, with different countries adopting inconsistent approaches and the Commission declining to open its own investigation. The Turkish competition authority opened an investigation into Booking.com in July and France has since introduced new national legislation banning all forms of price parity in online hotel booking agreements, overriding the commitments offered by Booking.com and Expedia. The German competition authority has also previously threatened to prohibit the use of "best price clauses". Commission opens Phase II investigation into acquisition of The Commission has opened an in-depth investigation into the merger of beverage can manufacturers Ball and Rexam. The Commission stressed that the two can ROUND UP OF RECENT DEVELOPMENTS MATTER UPDATE Rexam by Ball manufactures are the worldwide market leaders and own the most extensive network of plants in the EU. The merger would combine the first and second largest manufacturers of beverage cans in the EEA. The Commission does not believe that other existing suppliers pose a sufficient competitive constraint and has found that there are high barriers to entry and expansion. To read the press release click here. Commission opens Phase II investigation into acquisition of TNT Express by FedEx The Commission has initiated a Phase II investigation into the proposed acquisition of TNT Express by FedEx. FedEx provides services including small package delivery, freight forwarding and cargo transportation services through an integrated global network. TNT Express, based in the Netherlands, is active in the global logistics sector providing services including small package delivery, air and ground freight and freight forwarding. The Commission is concerned that the acquisition would result in insufficient competitive constraints from the only two remaining "integrator" players (UPS and DHL). This could lead to higher prices for business customers and consumers. To read the press release click here. Commission opens Phase II investigation into acquisition of parts of Walki's industrial packaging division by Mondi The Commission has opened an in-depth investigation into Mondi's proposed acquisition of industrial packaging plants currently owned by Walki. Mondi is a packaging and paper manufacturer and also operates a number of plants across Europe that manufacture extrusion coating products (used for food wrapping, insulation material or envelopes). Mondi and Walki are the two leading suppliers in the EEA of several products derived from extrusion coating. The Commission has concerns that the removal of a key competitor may lead to less choice and ultimately higher prices for customers of wrapping materials which also serve as moisture barriers (used in the paper industry or in boxes for fresh food products). To read the press release click here. Acquisition by Coty of 43 brands from Procter & Gamble Coty's plan to buy 43 brands from Proctor & Gamble will apparently need approval from the Commission. Coty has agreed to purchase a range of hair care and colour, retail hair colour, cosmetics and fine fragrance businesses, along with select hair styling brands. Clearance from the Commission reportedly may require divestment of certain assets. Commission approves acquisition of World Duty Free by Dufry The Commission has approved the acquisition of World Duty Free of Italy by Dufry of Switzerland. Both companies are global travel retail companies, operating predominantly at airports in Europe, North America and Asia. The Commission found that the merged entity would have moderate market positions in the relevant markets and strong competitors would remain. To read the press release click here. Commission approves acquisition of joint control of Elivia by Terrena and Dawn Meats The Commission has approved the acquisition of joint control of Elivia of France by QDB Holdings/Dawn Meats of Ireland and Terrena of France. Elivia is active throughout the beef value chain predominantly in France. Dawn Meats mainly operates in the beef and lamb sectors, in the slaughtering of live animals. Terrena is active in the production and distribution of various agricultural products. The Commission found no competition concerns would arise as a result of the transaction as the companies' combined market share would remain modest. To read the press release click here. MATTER UPDATE Commission approves acquisition of Thorntons by Ferrero The Commission has approved the acquisition of Thorntons of the UK by Ferrero of Luxembourg. The companies' activities overlap in the manufacturing and supply of chocolate confectionery and other sweet products in the UK and Ireland. The Commission decided that no competition concerns would arise from the proposed acquisition, due to the companies' moderate combined market position and the presence of a number of strong competitors providing similar goods in the relevant countries. To read the press release click here. High Level Group on Retail Competitiveness makes recommendations to Commission The High Level Group on Retail Competitiveness has presented a report to the Commission. The report covers various themes essential to improving competitiveness in the retail sector, including the removal of barriers to retail services, the development of e-commerce and supporting the growth of SMEs. It highlights the need to remove regulatory and organisational barriers to cross-border trade and the importance of simplifying cross-border e-commerce in the EU. The group also suggested that regulatory action does not hinder innovation and the ability to fairly compete at EU and a global level. To read the report click here. CMA consultation on review of monopoly remedies The CMA is consulting on whether to review a range of monopoly remedies that were put in place before 2005 and which have not been reviewed recently. These include undertakings relating to carbonated drinks, the supply of films to cinemas, foreign package holidays, and impulse ice cream. Any review would determine whether there has been a change in circumstances meaning that the remedies may be no longer appropriate and need to be varied, superseded or removed. The CMA will decide whether to proceed with these reviews in autumn 2015. To read the press release click here. Conduct in the modeling sector The CMA has opened an investigation into suspected anti-competitive arrangements in the UK modelling sector which may infringe Chapter I of the Competition Act 1998 and/or Article 101 of the TFEU. The CMA is in the process of conducting initial investigations and has indicated that it will be in a position to decide whether or not to proceed with the investigation by October 2015. To read the press release click here. CMA response to groceries pricing super-complaint The CMA has published its response to a super-complaint from Which? that made allegations of confusing and misleading prices in the groceries sector. Whilst examples of pricing and promotional practices were found that had the potential to confuse consumers, the CMA did not find that such practices were wide-spread and concluded that generally retailers are taking compliance seriously to avoid such problems occurring. The CMA intends to follow-up with those retailers identified as having specific practices that could breach consumer law. To read the press release click here. Original Bowling Company Ltd / Bowlplex Ltd merger inquiry The Original Bowling Company has offered to sell six bowling alleys to address competition concerns triggered by its purchase of Bowlplex. Last month the CMA concluded that the Original Bowling Company's proposed acquisition of Bowlplex would be referred for an in-depth investigation unless acceptable undertakings were offered. The CMA's concerns focus on ten-pin bowling facilities in six local areas (Bristol, Bracknell, Cardiff, Dudley, Leeds/Castlefield and Glasgow) where the two companies compete closely and there may be insufficient competition from alternative bowling MATTER UPDATE providers. To read the press release click here. Reckitt Benckiser / K-Y brand merger inquiry The CMA has concluded that Reckitt Benckiser's (RB) anticipated acquisition of the KY brand could lead to higher prices for personal lubricants. Both companies supply personal lubricants to a number of national pharmacy chains and grocery retailers, and hold almost three quarters of the market share in supermarkets and national pharmacies. The CMA found little evidence that other outlets could act as a brake on any price rises. To remedy the CMA's concerns, RB will have to license the K-Y brand in the UK to a competitor for 8 years, allowing time for it to develop a new brand to rival the Durex range that could gain access to supermarkets and national pharmacy chains. To read the press release click here. Poundland / 99p Stores merger inquiry The CMA has provisionally cleared the anticipated acquisition of 99p Stores Limited (99p) by Poundland Group plc (Poundland) that would create a combined network of around 800 UK stores. 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. The CMA has provisionally concluded that although the parties, along with Poundworld, are each other's closest competitors, the merger may not be expected to result in a substantial lessening of competition and so customers would not face a reduction in choice, value or lower-quality services. To read the press release click here. Richemont / Yoox / Net-A-Porter merger inquiry The CMA has cleared the anticipated acquisition relating to Compagnie Financière Richemont S.A., Yoox S.p.A and The Net-A-Porter Group Limited. To read the press release click 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. To read the press release click here. Netto / Co-operative Group merger inquiry The acquisition by Netto Limited of three grocery stores from Co-operative Group Limited has been cleared by the CMA. The CMA found that the merger will not result in a lessening of competition in the retail supply of groceries on either a national or local basis and there will remain sufficient competition. The parties overlap in the retail supply of groceries in New Edlington, Hedon and Roundhay. To read the full decision click here. Bako North Western / Bako Northern and Scotland merger inquiry The CMA has published the full text of its decision on the anticipated acquisition by Bako North Western (Group) Limited of Bako Northern (Holdings) Limited, Bako Scotland Limited and Bakers (Area 1) Limited. The CMA did not believe the merger would result in a substantial lessening of competition in the market for wholesale delivered supply of a full range of bakery products and ingredients to the bakery sector either nationally or regionally. The parties are not close competitors and there will remain sufficient competitive constraint from alternative suppliers. To read the full decision click here. Groceries Code Adjudicator Annual Report highlights main The Groceries Code Adjudicator published its Annual Report and Accounts for 2014/2015 in July 2015. The report sets out the key actions taken by the GCA in the last year, setting MATTER UPDATE issues on Code compliance out a list of issues relating to compliance with the Groceries Supply Code of Practice. The GCA has focused on five key issues relating to: forecasting/service levels, requests for lump sum payments, packaging and design charges, consumer complaints, and delays in payment. To read the report 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. Addleshaw Goddard is an international legal practice carried on by Addleshaw Goddard LLP (a limited liability partnership registered in England & Wales and authorised and regulated by the Solicitors Regulation Authority) and its affiliated undertakings. Addleshaw Goddard operates in the Dubai International Financial Centre through Addleshaw Goddard (Middle East) LLP (registered with and regulated by the DFSA), in the Qatar Financial Centre through Addleshaw Goddard (GCC) LLP (licensed by the QFCA), in Oman through Addleshaw Goddard (Middle East) LLP in association with Nasser Al Habsi & Saif Al Mamari Law Firm (licensed by the Oman Ministry of Justice) and in Hong Kong through Addleshaw Goddard (Hong Kong) LLP (a limited liability partnership registered in England & Wales and registered and regulated as a foreign law firm by the Law Society of Hong Kong) in association with Francis & Co. In Tokyo, legal services are offered through Addleshaw Goddard's formal alliance with Hashidate Law Office. A list of members/principals for each firm will be provided upon request. The term partner refers to any individual who is a member of any Addleshaw Goddard entity or association or an employee or consultant with equivalent standing and qualifications. For further information please consult our website www.addleshawgoddard.com or www.aglaw.com.