Competition law update - Q1 2022

Welcome to the Q1 2022 edition of our Competition Law Newsletter. A quarterly update covering key developments in UK and EU competition law.

UK Competition Law Developments

Motorola fails to overturn CMA market investigation decision

On 1 February 2022, the UK Competition Appeals Tribunal ("CAT") rejected a challenge brought by Motorola Solutions Inc. ("Motorola"), (i) to the Competition and Markets Authority's ("CMA") decision to make a market investigation reference into Motorola's Airwave network, the mobile radio network used by all emergency services in Great Britain ("Decision"), and (ii) the administrative timetable set for conducting the investigation.

By way of background, following a consultation opened in July 2021, the CMA decided on 25 October 2021 to launch a market investigation into the Airwave network, the current mobile radio network used by all British police, fire and ambulance services. The CMA was concerned that the market might not be working well based on Motorola's dual role as the company providing Airwave and as a supplier in the roll-out of the new Emergency Services Network "ESN"), indicating that it could result in a more expensive service for customers and the taxpayer.

The CMA determined that the final report should be published in June 2022, eight months after the investigation had been opened (and around ten months before the statutory deadline of 23 April 2023). Motorola had suggested a longer timetable, with the final report due in December 2022. The Home Office (being the Government department principally interested in the Airwave network) had suggested an even shorter timeframe than that eventually determined by the CMA.

In its appeal to the CAT the first ever application for judicial review of a decision to make a market investigation reference - Motorola contended that the CMA's Decision was flawed and should be quashed. This was on the basis that the CMA:

(1) proceeded on the basis of a mistake of fact that played a material part in its Decision;

(2) had regard to an irrelevant consideration and/or failed to have regard to a relevant consideration;

(3) failed to conduct the assessments necessary in order to produce a defensible decision; and

(4) acted irrationally and/or unreasonably. Motorola claimed that the CMA had made numerous errors, including in assuming that the Home Office and Motorola had to negotiate an extension to their contract from 2018 onwards to maintain the current network. Instead, the parties had agreed in 2016 to extend their contract until 2026, at a time when the Home Office had significant bargaining power (given its ability to prevent Motorola's anticipated acquisition of Airwave). Motorola's counsel submitted that this represented a failure by the CMA to consider highly material facts and matters which ought to have been considered.

However, the CAT disagreed, stressing that its role was not to second-guess the potential findings of the market investigation reference (which it would be doing, were it to resolve the above grounds of review). Rather, it was concerned with establishing whether the CMA had "reasonable grounds for

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suspecting that any feature, or combination of features of a market ...prevents, restricts or distorts competition" in connection with the supply of goods or services in the United Kingdom.1 The correct approach, in this case, was therefore to ask standing back and viewing the Decision as a whole whether the decision to refer (given that the touchstone is "reasonable suspicion") is itself unreasonable, i.e. if it is so unreasonable that no reasonable decision maker, taking into account all (relevant) considerations, would have taken it. The CAT concluded that it was not, rejecting Motorola's application.

Motorola was similarly unsuccessful in persuading the CAT that the CMA's administrative timetable was unfair and its decision in setting it unreasoned. The CAT did not consider that there was any substantive unfairness, given the CMA's procedural discretion in setting the timetable, the limited number of parties, and the ability of the CMA to extend the timetable if necessary. Further, that the CMA engaged in appropriate consultation with the parties on the timetable, and the CMA's notification regarding the administrative timetable did not need to contain express reasons. Motorola's challenge was therefore rejected.

The CMA's market investigation is proceeding, with the administrative timetable indicating that the deadline for parties' responses/submissions required before the Provisional Decision report (in April) will be this month. It remains to be seen whether the CMA will be able to complete its investigation within the eight-month period originally set, or whether the deadline of June 2022 will need to be extended after all.

group over 35 million for an illegal arrangement in the supply of important NHS prescription anti-nausea tablets.

The CMA launched its investigation on 10 October 2017 into the allegation that Focus, Medreich, Alliance (now owned by Advanz, and previously owned by the private equity firm Cinven) and Lexon had breached Chapter 1 of the Competition Act 1998 by entering into anti-competitive agreements in relation to the supply of prescription-only Prochlorperazine 3mg dissolvable or "buccal" tablets ("Prochlorperazine") to the NHS.3

On 23 May 2019, the CMA issued a statement of objections alleging that, between June 2013 and July 2018, Alliance, Focus, Lexon and Medreich agreed not to compete for the UK supply of Prochlorperazine to the NHS.

The CMA paused its investigation during the COVID19 pandemic and on 22 January 2021 it announced it was closing its investigation in respect of certain separate agreements made between: (1) Alliance and Focus, and (2) Focus, Lexon and Medreich, and that it would instead focus on an overarching arrangement between Alliance, Focus, Lexon and Medreich between June 2013 and July 2018 in relation to the supply of Prochlorperazine to the NHS (the "Arrangement").

CMA fines pharma companies for restricting drug supplies

Excessive pricing abuses by pharmaceutical firms has increasingly become the target of anticompetitive investigations, as reported previously in this newsletter, in respect of the supply of liothyronine tablets, Phenytoin sodium capsules, hydrocortisone tablets, and the antidepressant nortriptyline.2 This trend has certainly continued as, on 3 February 2022, the CMA fined four pharmaceutical companies and a private equity

Before entering into the Arrangement, Lexon and Medreich had been preparing to launch their jointlydeveloped version of Prochlorperazine. Under the

1 Under Section 131 of the Enterprise Act 2002 2 Competition law update - Q2 2021 (shlegal.com) and Competition law update Q3 2021 (shlegal.com) 3 The investigation related to the following entities: (i) Alliance Pharmaceuticals Limited and Alliance Pharma plc; (ii) Focus Pharmaceuticals Limited, Focus Pharma Holdings Limited, Mercury Pharma Group Limited, Concordia Investment Holdings (UK) Limited, Concordia Investments (Jersey) Limited and Advanz

Pharma Corp. Limited; (iii) Cinven Capital Management (V) General Partner Limited, Cinven (Luxco 1) S..r.l and Cinven Partners LLP; (iv) Lexon (UK) Limited and Lexon UK Holdings Limited; (v) Medreich plc, Medreich Ltd, Meiji Seika Pharma Co. Ltd and Meiji Holdings Co. Ltd.

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Arrangement, Alliance appointed Focus as its distributor, and Lexon and Medreich were paid a share of the profits that Focus earned by selling Alliance's product. In return, Lexon and Medreich agreed not to compete in the supply of these prochlorperazine tablets in the UK by agreeing not to launch their jointly-developed product.

Between December 2013 and December 2017, the prices paid by the NHS for Prochlorperazine rose by 700%, from 6.49 to 51.68 per pack of 50 tablets. Consequently, between 2014 and 2018, the annual costs incurred by the NHS for Prochlorperazine increased from around 2.7 million to around 7.5 million, even though the number of packs dispensed fell.4

On 3 February 2022, the CMA issued an infringement decision pursuant to Chapter 1 of the Competition Act 1998 in respect of the Arrangement ("Chapter I Prohibition").

Resulting from the Chapter 1 Prohibition, the CMA issued fines as follows:

(i) a 7.9m fine for Alliance;

(ii) a 7.3m fine for Lexon;

(iii) a 4.6m fine for Medreich;5 and

(iv) a 15.5m fine for Focus, which was apportioned between Advanz and Cinven.6

The Chief Executive of the CMA stated that, "the size of the fines reflects the seriousness of this breach. These firms conspired to stifle competition in the supply of this important medication, so that the NHS the main buyer of the drugs lost the opportunity for increased choice and lower prices."7

Both Advanz and Cinven have until 25 April 2022 to challenge the Chapter 1 Prohibition by way of appeal, following an order to extend the deadline granted by the Competition Appeal Tribunal on 18

February 2022. The additional time is granted so that Advanz and Cinven have sufficient time to prepare its appeals in relation to the hydrocortisone and liothyronine decisions concurrently.8

Simultaneous dawn raids signal the nature and extent of post Brexit cooperation

On 15 March 2022, the UK's CMA and the European Commission ("Commission") made separate announcements noting that each authority had conducted dawn raids into companies and associations active in the market for end-of-life automotive vehicles ("ELVs") in their respective jurisdictions.9 Although neither authority is capable of conducting investigations or taking enforcement action in the other's jurisdiction following the end of the Brexit transition period,10 it is striking that both the CMA and the Commission noted in their respective press releases that their dawn raids had been coordinated. As such, it is one of the most concrete examples of cooperation between the two antitrust authorities since the UK's departure from the EU.

An ELV is essentially any vehicle which, either as a result of an accident or the effects of age, is no longer safe or licensed to be driven and is subsequently classified as waste. ELVs are therefore sent for scrap and processed by shredding companies and others who specialise in ELV recycling services. However, this process of ELV recycling is subject to strict laws and regulations owing chiefly to the potentially hazardous environmental impact that can result from processing ELVs. The original EU directive on ELVs11 (the implementing legislation for which has been retained on the UK's statute books)12 outlines the main principles that automotive companies and recycling firms must adhere to in this area and the Commission published a decision in 2005 outlining specific recycling targets under the aforementioned directive.13 These ELV laws apply

4 CMA fines firms over 35m for illegal arrangement for NHS drug GOV.UK (www.gov.uk) 5 Medreich's fine would have been higher but it was reduced by 40% as a result of Medreich being granted leniency in return for admitting its involvement in the infringement and cooperating with the CMA's investigation. 6 Advanz, Cinven, and Lexon have all previously been issued fines in previous CMA pharmaceutical investigations and, in the case of Advanz and Cinven, this is the first time that a company has been fined by the CMA in three separate investigations. 7 CMA fines firms over 35m for illegal arrangement for NHS drug GOV.UK (www.gov.uk) 8 For further details in respect of these appeals, see our Competition Law Newsletter Q3 2021: stephenson-harwood-llp---competitiongroup-newsletter---q3-2021.pdf (shlegal.com) 9 The CMA's press release is available at: https://www.gov.uk/government/news/cma-launches-investigationinto-recycling-of-cars-and-vans The Commission's press release is available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1765

10 The exemption to this is investigations or cases that were commenced before the end of the Brexit transition period and are still ongoing. 11 European Commission. Directive 2000/53/EC of the European Parliament and of the Council of 18 September 2000 on end-of-life vehicles. 18 September 2000. Available at: https://eurlex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:02000L005320200306&from=EN 12 The End-of-Life Vehicles Regulations 2003 SI No. 2635. Available at: https://www.legislation.gov.uk/uksi/2003/2635/pdfs/uksi_20032635_e n.pdf See also The End-of-Life Vehicles (Producer Responsibility) Regulations 2005 SI No. 263. Available at: https://www.legislation.gov.uk/uksi/2003/2635/pdfs/uksi_20032635_e n.pdf 13 Commission Decision of 1 April 2005 laying down detailed rules on the monitoring of the reuse/recovery and reuse/recycling targets set out in Directive 2000/53/EC of the European Parliament and of the Council on end-of-life vehicles. C(2004) 2849. Available at: https://eur-

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across the entire automotive industry, from original vehicle manufacturing companies vis--vis the types and quantities of particular metals or materials that cars can be constructed with, for instance to bespoke ELV recycling firms who must ensure that ELVs are disposed of in a sustainable way.

Typically, regulators often launch dawn raids as a result of receiving an immunity application from a whistle-blower company which alerts the former that certain anti-competitive conduct may have taken place. It has been reported that, in this case, Mercedes Benz made an application for immunity and that the two regulators conducted dawn raids at the premises of a host of other car manufacturers. Additionally, sources have suggested that certain companies may have also received requests for information ("RFIs") from these authorities, to which they are in the process of responding. Other car manufacturers alleged to be involved include Opel, BMW, Renault, Toyota and Ford.

The news of the coordinated dawn raids from the CMA and the Commission casts a very interesting light on the nature of the two regulators' cooperation post-Brexit. It suggests that, although the two authorities will inevitably work less closely than when the UK remained part of the EU single market (where UK-based companies were consequently subject to the Commission's jurisdiction and enforcement powers),14 the two will nonetheless continue to collaborate constructively and share information that will allow for investigations (albeit separate ones) to be conducted in areas of mutual interest and relevance.

In addition to this clear indication of post Brexit cooperation with the Commission, an announcement from the CMA on 17 February 2022 has signalled the extent to which it also plans to work constructively with other global competition regulators in future. Specifically, the CMA has confirmed its intention to work alongside the national competition authorities15 of the constituent members of the so-called 'Five Eyes Alliance', the collaboration between the governments of the UK, the U.S., Canada, Australia and New Zealand.16 The driving factor behind this announcement has been the rising inflationary pressures these countries are experiencing as a result of global supply chain disruption, which are perceived to be linked (at least partly) to anti-

competitive activities as opposed to solely legitimate factors like the COVID-19 pandemic. It seems evident that, in addition to (or perhaps in order to realise) its desire to have a seat at the top table of international regulators following the end of the Brexit transition period, the CMA is keen to utilise a broad network of cooperation with other global competition regulators.

Facebook faces further fine following second IEO breach In our Competition Law Newsletter from Q4 of 2021,17 we reported that the CMA had, in November 2021, ordered Facebook Inc (now and hereafter referred to as "Meta") to divest the entirety of Giphy Inc ("Giphy") after its attempted and ultimately unsuccessful acquisition of the latter. In addition, we also discussed the CMA's decision one month prior to fine Meta 50.5 million for repeated failures to comply with the terms of an initial enforcement order ("IEO") imposed on its business during the regulator's review of the acquisition.

Less than four months later, on 4 February 2022, the CMA announced it had again fined Meta for breaches of the same IEO, although this time the sum was somewhat smaller at 1.5 million. The reasoning for this second penalty was Meta's failure to inform the CMA of any 'material changes' to its business. This included an obligation both to notify the CMA of the resignation and departure of certain key staff, and to seek the CMA's written consent prior to such

lex.europa.eu/legalcontent/EN/TXT/PDF/?uri=CELEX:32005D0293&from=EN 14 It should be noted that UK companies will still be subject to the Commission's jurisdiction vis--vis any and all operations they have that affect, or take place within, the EU's Single Market. 15 The national competition authorities with whom the CMA will collaborate are: (i) the United States' Department of Justice ("DoJ");

(ii) the Canadian Competition Bureau; (iii) the Australian Competition and Consumer Commission; and (iv) the New Zealand Commerce Commission. 16 See the CMA's press release at: https://www.gov.uk/government/news/international-agencies-putsupply-chains-on-notice-against-collusion 17 See Competition Law Newsletter Q4 2021

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departures and any subsequent rehires or redistribution of responsibilities. Meta failed to do either following the resignation of three 'key employees' and subsequent re-allocation of their roles. As a result, the CMA stated, it was unaware of "important developments at a business under investigation', a fact which 'created the risk of prejudicing [its] ability to carry out important statutory functions under the UK merger regime."18

In its defence Meta cited the difficulties created by US employment laws applicable to the three employees in question, which prohibit an employer from preventing a US employee's departure. The company subsequently informed the CMA of the employees' departures and role reallocation several days later, with unintended human error blamed for the delay. Being the second instance that Meta had failed to notify the CMA of a 'key employee's' change of status19, the CMA found that Meta's explanations did 'not amount to a reasonable excuse'.20 After all, Meta's repeated IEO breaches occurred after the CMA had conceded to its request that the scope of its order be limited a fact which further convinced the CMA of Meta's 'failures to put in place sufficiently robust compliance processes' and justified in its own mind the decision to impose a further penalty.21

Despite its disagreement with the decision to impose a fine, Meta has suggested it will pay the penalty. This case serves to highlight just how severe the penalties for IEO non-compliance can be. Companies subject to investigation must therefore remain fully aware of their obligations and diligent in carrying them out to ensure the CMA does not turn its gaze their way.

More Misery for JD Sports, Footasylum as footwear chains face hefty fine for IEO breach

In our Competition Law Newsletter from Q4 of 2021,22 we reported that the CMA had blocked the attempted 90 million merger between JD Sports Fashion Plc ("JD Sports") and Footasylum Plc ("Footasylum") on the grounds it would result in a substantial lessening of competition in the UK sportswear retail market. In reaching this verdict, the CMA had, on 19 May 2021, issued an IEO to prevent the two companies from integrating further

and to ensure they continued to compete with each other in the market. However, fast forward to 14 February 2022 almost three years after it first 'completed' the acquisition of Footasylum and only three months after the deal was blocked JD Sports has been dealt a further blow after receiving a 4.3 million fine for breaches of the IEO. Footasylum has likewise been fined 400,000 for its part in the breaches. The fines stemmed from three separate but connected breaches of the IEO relating to the reporting and prevention of disclosures of 'commercially sensitive information' ("CSI").

Specifically, the CMA found that both JD Sports and Footasylum had breached paragraph 6(1) of the IEO, which required both parties to take active steps and implement purpose-driven policies to prevent the disclosure of CSI an offence which yielded a 2.5 million and 200,000 fine for JD Sports and Footasylum respectively. In addition, the parties were held to have both shared CSI on 'at least two occasions' (Breach 2) and failed to notify the CMA after each instance that such CSI had been exchanged (Breach 3). These breaches attracted a further 1.8 million in fines for JD Sports and 180,000 in penalties for Footasylum, with all fine amounts deemed "appropriate... proportionate... and not anomalous" by the CMA, taking into account the parties' respective global turnover and their net assets.23 Both parties were also fined an additional 20,000 in relation to their failure to comply with an information notice at a meeting held on 2 December

18 See the CMA's Summary of its decision here. 19 500,000 of the CMA's previous 50.5 million fine on 20 October 2021 related to Meta's changing of its chief compliance officer on two occasions without first seeking agency approval. 20 See the CMA's Summary of its decision here. 21 Between August 2020 and May 2021, both the Competition Appeal Tribunal and Court of Appeal upheld the scope of the CMA's original IEO after Meta had alleged it was excessively broad. In June 2021, the CMA nonetheless granted Meta's request that the

IEO only cover material changes affecting Meta's GIF-related activities, rather than within all business units; see the CMA's Summary of its decision here. 22 See Competition Law Newsletter Q4 2021 23 Ibid; under the merger control rules, the CMA is entitled to fine parties up to 5% of their global turnover for breaches of the kind committed by JD Sports and Footasylum. The fines levied in this case amounted to 0.063% of JD Sports' global turnover and 0.15% of Footasylum's.

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2020 requiring any documents exchanged or tabled at such a meeting to be provided to the CMA.

In response to the fines, JD Sports maintained it had "always acted honestly and in good faith" to comply with the IEO and that there was neither a prohibition on the meetings that took place, nor a legal requirement to notify the CMA of their occurrence. It also asserted that the CMA's conclusions were either "incorrect... or presented in a misleading manner through the use of inflammatory language".

By contrast, commenting on the CMA's ruling, Kip Meek, chair of the inquiry group investigating the merger, asserted that the fine should 'act as a warning' to other businesses. He explained that there was a 'black hole' regarding the meetings held between Footasylum and JD Sports one of which was reportedly filmed in secret by a competitor and later published by The Sunday Times and suggested that, had 'proper safeguards' been in place, the CMA "would have been alerted to these breaches in good time and would have had the necessary information to tackle them head on".24 Meek's words serve to reiterate the purpose of IEOs in preserving the integrity of CMA investigations by preventing such 'pre-emptive action' that could otherwise undermine the regulator's position. Likewise, the hefty fines imposed on JD Sports and Footasylum further evidence the CMA's increased willingness to flex its muscles when enforcing the UK's merger control rules in post-Brexit Britain.

Another UK class action is launched this time against Meta

Meta's litany of legal challenges was further increased on 14 February 2022 when a new collective proceedings order ("CPO") was lodged against it at the CAT by Dr Liza Lovdahl Gormsen, a prominent competition law academic.25 The CPO seeks 2.3 billion in damages from Meta on behalf of an estimated 45 million class members.

Dr Gormsen alleges that, between 11 February 2016 and 31 December 2019 ("Claim Period"), Meta used its (previously eponymous) social media platform

Facebook to unfairly collect swathes of its users' sensitive personal data26 without providing proper recompense. The CPO alleges based on the (as yet unsubstantiated) assertion that Facebook held a dominant position in the Personal Social Network Market27 and/or the Social Media Market28 in the UK that such conduct constituted an abuse of dominance contrary to Article 102 of the Treaty on the Functioning of the European Union ("TFEU") and the prohibition under Section 18 of the Competition Act 1998 ("Chapter II prohibition").

The CPO application submits that Meta's alleged abuse of dominance manifested itself in two key ways:

i. In signing up to and using Facebook, users were forced29 to accept unfair terms and conditions ("T&Cs")30 relating to the provision of personal data that went beyond what was reasonably proportionate or necessary for the objective of providing a social media networking site ("Unfair Data Requirement").

ii. Meta demanded an unfairly high 'price' or payment in kind, more accurately from its users in return for the social networking services Facebook provided ("Unfair Price"). Indeed, users received no monetary value in exchange for their personal data and the CPO alleges that the social media networking services that users did receive were insufficient recompense. This allegation is buoyed by the inversely high profits that Facebook were able to generate from the use of this data in advertising revenue.

According to Dr Gormsen, the Unfair Data Requirement and the Unfair Price constituted unfair and anti-competitive trading conditions on the basis that: (i) users wishing to use Facebook's platform were unable to avoid signing up to the T&Cs; (ii) the T&Cs were excessively long and/or complex; and (iii) Facebook failed to explain (adequately or at all) the nature, extent and/or scope of the personal data it collected and/or the way it utilised the personal data.31

24 See Sports retailers fined almost 5m for breaching CMA order GOV.UK (www.gov.uk) 25 See the CAT's summary of the claim at: https://www.catribunal.org.uk/sites/default/files/202203/20220308_1433_Gormsen_v_Meta_Summary.pdf 26 The sensitive personal data Meta collected from its users included: (i) personal data provided by users explicitly (such as their name and contact details); (ii) personal data provided implicitly (such as contacts, browsing history, private messages, behavioural patterns etc.); (iii) personal data obtained by or via third party websites (such as browsing history, internet usage, census data, health data); and (iv) other sensitive data (e.g. individuals' racial or ethnic origin, political opinions, religious beliefs, sex life and health).

27 The CPO defines the Personal Social Network Market as the market for "the supply of an integrated range of functions that were used by people to maintain personal relationships and share personal experiences in a shared social space with a focus on friends, family and other social connections". 28 The CPO provisionally defines the Social Media Market as the market for the provision of social media services which facilitate "interaction between their users, allowing them to communicate with each other, and share and discover engaging content". 29 Users were effectively forced to accept the T&Cs 30 The T&Cs on Facebook encompassed its Data Policy and Cookie Policy. 31 See https://www.catribunal.org.uk/sites/default/files/202203/20220308_1433_Gormsen_v_Meta_Summary.pdf

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Suitability of the CPO to be determined

The CPO against Meta has been brought on an optout basis, meaning that the constituent class members are automatically included in any ultimate award of damages unless they specifically elect not to take part in the claim. In order to be heard at trial, the CPO must first be certified by the CAT as meeting the requisite criteria under the CAT Rules 2015, where the CAT must be satisfied that:

1) a suitable individual can be authorised to act as the class representative ("Authorisation Test"); and

2) the underlying claim is eligible to be heard as a CPO ("Eligibility Test") whereby the action must:

a) be brought on behalf of an identifiable class of persons;

b) raise common issues; and c) be suitable32 for collective proceedings,

particularly for an aggregate damages award.33

Dr Gormsen has submitted her initial arguments as to why the criteria are met in this case. It will be interesting to see whether the CAT ultimately agrees and subsequently certifies the CPO to proceed to trial.

such claim to be certified to proceed to a full trial by the CAT. This was due to the restrictive approach to certification taken by the CAT that persisted until a landmark ruling given by the Supreme Court in December 2020 clarified issues relating to the proper interpretation of criteria under the Eligibility Test.

In fact, since August 2021 a total of seven CPOs have now been certified by the CAT to proceed to trial and numerous other CPO applications have been lodged by prospective claimants. Although a full trial in any of these claims remains a long way off (much less a decision), it is nonetheless significant that so many purported victims of anti-competitive conduct (alleged or otherwise) are increasingly pursuing redress through CPOs.

Achilles' heel Network Rail ordered to pay 3.8 million in damages over anticompetitive quality assurance scheme

On 11 February 2022, the CAT delivered its final judgment in a long-running dispute between Achilles Information Limited ("Achilles") and Network Rail Infrastructure Limited ("Network Rail") over the latter's mandated supplier assurance scheme.34 Having initially determined that Network Rail had committed a breach of both the prohibition under Chapter I and Chapter II of the Competition Act 1998 following an expedited trial of this preliminary issue in July 2019, the CAT has now ordered Network Rail to pay out 3.8 million in damages to Achilles. This sum reflects the level of Achilles' lost profits in the years it was effectively excluded from the UK rail market.

CPOs on the rise

CPOs have been gaining in traction in recent months, though they have faced a slow start on the whole. Indeed, it took almost six years since CPOs were first introduced through reforms to the Competition Act 1998 by the Consumer Rights Act 2015 for the first

Background the parties and supplier assurance

Achilles is a company which provides supplier assurance services. Supplier assurance refers to the process whereby a particular supplier (whether an individual or company) which is relied upon by another entity to perform a particular service is confirmed to be suitably competent and resourced to execute such service to the required standard. In the context of the UK rail industry, supplier assurance covers everything from background checks on individual contractors to ensuring that corporate entities have sufficient health and safety systems in place to safely operate on-track machinery and carry out construction works.

32 Rule 79(a)-(f) of the CAT Rules list a number of non-exhaustive factors that can be used to assess a CPO's suitability. 33 Rule 79(1) of the CAT Rules. Available at: https://www.legislation.gov.uk/uksi/2015/1648/pdfs/uksi_201516 48_en.pdf

34 The Competition Appeal Tribunal. Achilles Information Limited v Network Rail Infrastructure Limited [2022] CAT 9. 11 February 2022. Case No: 1298/5/7/18. Available at: 1298/5/7/18 Achilles Information Limited v Network Rail Infrastructure Limited - Judgment (Damages) | 11 Feb 2022 (catribunal.org.uk)

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Network Rail is a public sector company which oversees the majority of the rail infrastructure network in the UK. As part of its duty to maintain and develop this infrastructure, Network Rail relies on contractors to carry out regular works and requires that these contractors are pre-vetted by the supplier assurance scheme run by the Rail Safety and Standards Boards ("RSSB") known as the Railway Industry Supplier Qualification Scheme ("RISQS"). Achilles had been the supplier assurance company relied upon by the RSSB to operate RISQS between 2014 and 2018. However, Achilles subsequently lost out in a tendering process to continue operating the IT and audit arms of RISQS. As a result, the RSSB awarded the contracts for these two halves of RISQS to alternative companies to take over from Achilles on 1 May 2018.

The issues exclusivity of RISQS The problematic element in this case was a requirement Network Rail imposed whereby any contractor who gained access to its rail infrastructure must be vetted by the supplier assurance scheme under RISQS. Saliently, this did not just cover contractors with whom Network Rail engaged directly. (Achilles itself acknowledged at trial that Network Rail should be free to choose its provider of supplier assurance for the purpose of vetting those entities with whom it is contracting directly as buyer). Rather, this requirement extended to any sub-contracts awarded to additional suppliers and any contractors who were not even in the supply chain with Network Rail at all, such as those engaged by train operating companies ("TOCs"). As such, if contractors were not pre-vetted under RISQS they could not carry out any works on the rail infrastructure controlled by Network Rail. This

requirement for exclusive authorisation through RISQS was referred to as the "RISQS-only rule".

After Achilles lost the IT and audit contracts under RISQS, it submitted that it was effectively shut out of the market to provide supplier assurance in the UK rail sector. If no contractor could access the rail infrastructure without approval under RISQS and if, in turn, Achilles was effectively excluded from operating any part of the RISQS supplier assurance platform then (according to Achilles) this was the only viable conclusion to make.

Achilles thus argued that the RISQS-only rule was anti-competitive on two counts:

1) Network Rail, as a gatekeeper to the rail infrastructure market in the UK, was engaging in anti-competitive arrangements with those entities who were able to operate RISQS. Network Rail Achilles argued should have recognised other supplier assurance companies if the standard of the pre-vetting services they offered were commensurate with the stipulations and standards under RISQS. This being the case, the RISQS-only rule could not be defended as a proportionate or legitimate requirement in order to uphold any overriding standard or quality of service.

2) As Network Rail was accepted by both the parties and the CAT to hold a dominant position in the market for the operation and provision of access to national rail infrastructure in the UK, Achilles further submitted that the RISQS-only rule also constituted an abuse of dominance.

As noted, the CAT found in favour of Achilles in July 2019 that the RISQS-only rule was anti-competitive on both counts. Following this, Network rail was required by the CAT to amend this exclusivity system in an order made in September 2019 (the "Order"). The question that remained thereafter was the extent to which Achilles was entitled to damages as a result.

Making up for lost profits

Pursuant to the Order, Network Rail abandoned the RISQS-only rule and introduced a new system for supplier assurance which came into effect on 5 September 2020.35 The NR 302 Standard now allows supplier assurance to be provided by any entity which meets the requisite standards. This allowed Achilles to re-enter the rail market in April 2021.

35 This new system of supplier assurance is known as NR/L2/SCO/302 (the "NR 302 Standard").

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Achilles submitted that, if Network Rail had had an equivalent to the NR 302 Standard in place from the start, it would not have been excluded from the UK rail market for the near three-year period between May 2018 and April 2021. Quantifying the profits it believed it would have made but for this anticompetitive conduct, Achilles claimed for 12,061,968 in damages. This sum also reflected future lost profits Achilles submitted it would have made in 2022 and 2023 but for its enforced absence from the UK rail market in the preceding years from 2018 onwards (which it argued had left it in a weaker position to compete).

Despite its initial submission that Achilles had not suffered any recoverable losses at all, Network Rail conceded that (by its own calculations) Achilles was entitled to damages between 581,081 and 1.8 million.

The CAT agreed with the premise of many of Achilles' assumptions underpinning its quantification of losses such as the anticipated retention of buyers for its supplier assurance services but for the RISQS-only rule and the increased expenses it incurred as a result of the same but it did not agree with the level of damages Achilles claimed for. Ultimately, after identifying (inter alia) the actual percentage of customers Achilles would have retained but for the RISQS-only rule, the CAT ordered Network Rail to pay Achilles 3.8 million in damages.

In the course of its investigation which was launched in October 2017 the PSR uncovered the existence of two separate cartels. The first cartel involved agreements between all five parties not to solicit or poach each other's public sector customers in the context of the National Prepaid Cards Network ("NCPN") and initially also to divide new business between them, between 2012 and 2018. The second cartel involved PFS and APS whereby the two companies agreed not to target the other's public sector customers during any contract renewal periods (including through public tender) between 2014 and 2016. The PSR determined that these activities amounted to unlawful market sharing and customer allocation.

UK sectoral regulator levies over 33 million in fines in first ever cartel decision

In a move that appears to signal that the UK's sectoral competition regulators will be prepared to take as hard a line as the CMA when it comes to cartel infringements, on 18 January 2022 the Payment Systems Regulator ("PSR") concluded its investigation into the conduct of five different prepaid card providers,36 determining that they had breached the Chapter 1 prohibition of the Competition Act 1998 and imposing total fines on them of 33,261,352. The individual fines were as follows: (i) Mastercard 31,560,062; (ii) PFS 916,746; (iii) APS 755,419; (iv) allpay 28,553; and (v) Sulion 572. The fines comprised leniency reductions (PFS), reductions under the settlement procedure (all parties) and a reduction to ensure that the fine did not exceed 10% of turnover (Sulion).

Both cartels concerned the supply of prepaid cards to public sector entities via the NPCN, a platform that was established and wholly funded by Mastercard. Prepaid cards differ from debit and credit cards in that they are not linked to any checking or banking account or external supply of credit. Rather, prepaid cards operate by having a sum of money 'stored' on the physical card itself so that the money available from the card is limited to the sum originally uploaded to it. There are no overdraft or credit facilities and the prepaid card can only be used until the pre-uploaded amount on it is exhausted (in which case, it will then need to be topped up by the user). In this way, prepaid cards operate much like physical cash withdrawn from an ATM except that the funds are stored digitally on the card. Public bodies and local authorities rely on prepaid cards to distribute welfare payments to vulnerable members

36 The five prepaid card providers were: (i) Mastercard UK Management Services Limited, Mastercard Europe SA, Mastercard Europe Services Limited and Mastercard Incorporated (together, "Mastercard"); (ii)

allpay Limited ("allpay"); (iii) Advanced Payment Solutions Limited ("AFS"); (iv) Prepaid Financial Services Limited ("PFS"); and (v) Sulion Limited ("Sulion").

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of society (such as the homeless, victims of domestic abuse and asylum seekers).37

Mastercard sponsored and funded the NPCN during the relevant period,38 with allpay, APS and PFS being programme managers who provided the prepaid card services to the public sector entities who were members of the NPCN. Sulion, meanwhile, provided ancillary services to Mastercard in relation to the NPCN (including promoting the use of prepaid cards in the public sector), for which it was remunerated directly by Mastercard.

All parties involved in either or both of the cartels ultimately admitted wrongdoing to the PSR and accordingly benefitted from reductions in the fines they received under the settlement procedure. In particular, PFS, allpay and Mastercard received discounts of 20% for agreeing to settle prior to the PSR issuing its Statement of Objections ("SO"). APS and Sulion each received discounts of 10% for agreeing to settle after the SO had been issued. PFS had also approached the PSR for leniency in February 2018 under the terms of the CMA's leniency notice, and received a reduction for its cooperation.

The PSR's conclusion was that the two cartels had the effect of restricting competition in the prepaid cards market, with the result that public bodies and local authorities reliant on the pre-paid cards were unable to source them from alternative suppliers. This meant that these public sector entities missed out on possibly cheaper (or otherwise more favourable) deals that may have been available had there been increased price and quality competitiveness in this market.

Sectoral regulators are increasingly willing to take action

Although the CMA oversees competition law policy and regulation in the UK as a whole, there are a number of sectors in the UK which are overseen by regulatory bodies with concurrent competition law powers to the CMA.39 These concurrent powers allow these sectoral regulators to: (i) investigate any potentially anti-competitive conduct within their industry and ultimately sanction the entities involved;40 and (ii) commission market studies or

market investigations to ensure they are functioning properly.

To date, direct actions or investigations from some sectoral regulators have been relatively rare. However, in recent years many have shown themselves increasingly willing to investigate anticompetitive behaviour and take formal action against infringing entities where necessary. For instance, the UK's Financial Conduct Authority ("FCA") issued its first formal decision using its competition enforcement powers in February 2019 and imposed fines on three asset managers who were found to have colluded by illegally exchanging strategic information.

This latest move from the PSR underlines the fact that sectoral regulators are willing to take direct action against those entities which engage in anticompetitive conduct. Once again, it highlights the importance of competition law compliance and the fact that no industry is shielded from the application of the UK's competition laws.

UK finance regulator to investigate competition concerns in wholesale data markets

The FCA announced on 11 January 2022 that it would launch two market studies and gather further information to investigate access to wholesale trading data, in response to concerns raised in response to a Call for Input ("CFI") published in March 2020, looking at the use and value of data and advanced analytics in wholesale financial markets.

The original deadline for responses to the CFI was extended from May 2020 to January 2021 (due to the pandemic) and although overall views were mixed, respondents identified several areas in which competition in the trading data market may not be working as well as it could. Views diverged depending on whether data vendors were well established or start-ups, with the latter identifying various barriers to entry and bundling concerns.

The first market study will begin this summer, to enable the FCA to understand how competition is working between benchmarks. This will include investigating concerns that 'complex contracts' for benchmarks and indices prevent switching, as well as how benchmarks are priced and contractual

37 See https://www.psr.org.uk/news-updates/latest-news/news/thepsr-fines-five-companies-more-than-33-million-for-cartel-behaviour-inthe-prepaid-cards-market/ 38 Other than during a short period in 2016. 39 In addition to the PSR, other sectoral regulators are: (i) Civil Aviation Authority; (ii) Financial Conduct Authority ("FCA"); (iii) Gas and Electricity Markets Authority ("Ofgem"); (iv) Northern Ireland Authority

for Utility Regulation; (v) Office of Communications ("Ofcom"); (vi) Office of Rail and Road ("ORR"); and (vii) Water Services Regulation Authority ("Ofwat"). 40 Importantly, however, note that sectoral regulators cannot pursue criminal sanctions against individuals. These powers can only be exercised by the CMA under the Enterprise Act 2002.

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terms. The second market study (which should be launched before the end of the year) will look at competition in the sale of credit rating data, including in terms of contractual relationships, the scope for and level of innovation, and whether high charges for access to such data is adding costs to investors and limiting new market entrants.

The FCA has concurrent competition law powers with the CMA and uses market studies as a principal investigation tool to determine how well markets are working for consumers. At the end of the market study, if the FCA has reasonable grounds to suspect that any feature, or combination of features, of a market (for the supply or acquisition of financial services) prevents, restricts or distorts competition, it can refer the market to the CMA for an in-depth investigation (or accept an appropriate undertaking in lieu of a reference, although the FCA does not consider that these will be common). Alternatively, the FCA may itself intervene to impose market wide remedies, such as changing existing rules or publishing general guidance, or firm specific remedies (including taking action against infringements of the competition rules identified in the market study).

Finally, the FCA will begin gathering further information on competition in the market for wholesale trading data, such as the number of financial instruments traded (and at what price), and the prices at which trades are executed, in view of concerns that limited competition could increase costs and impact the types of assets traded. Depending on the evidence, the FCA could consider whether further guidance is needed to address the concerns identified, if other policy options would be more appropriate, or indeed, that no further action is needed. The FCA will publish its findings later this year, and its conclusions on next steps will be eagerly awaited.

microelectronic devices on the condition that it only sold computers containing Intel's CPUs, amounted to an abuse of its dominant position. The Commission noted that Intel structured its pricing policy to ensure that a manufacturer which opted to buy CPUs from Intel's rival (AMD) would lose the rebate, and therefore be obliged to pay a higher price for the Intel units. Further, in order to compete with Intel's rebates (for that part of the supplies open to competition), a competitor as efficient as Intel would have had to offer CPUs at prices below the cost of production, even if its average prices were in fact lower. These strategies ensured the loyalty of the four OEMs and the retailer, diminishing the ability of competitors to compete and ultimately reducing consumer choice and incentives to innovate.

The GC rejected Intel's appeal in 2014, holding that such rebates could be characterised as abusive without the Commission being required to undertake an effects-based analysis. However, the European Court of Justice ("ECJ") set aside this ruling in 2017 on the basis that the GC had failed to examine the 'as efficient competitor' ("AEC") test undertaken by the Commission (or take into account Intel's submissions relating thereto), referring the case back to the GC.

EU Competition Law Developments

Intel wins EU appeal against EUR 1.06 billion fine

On 26 January 2022, the EU General Court ("GC") partially annulled the decision of the Commission finding that Intel abused its dominant position in the worldwide market for x86 processors, and set aside the entirety of the associated EUR 1.06 billion fine.

The Commission's decision of 13 May 2009 found (inter alia) that rebates granted by Intel to four strategic original equipment manufacturers ("OEMs") on the condition that they purchased almost all of their x86 central processing units ("CPUs") from Intel, and payments to a retailer of

An effects-based analysis

The GC followed the framework of the ECJ's ruling, setting out 'three instructive inferences':

1. Although the Commission may assume that such a system of rebates is anti-competitive, this is simply a presumption which is not capable of relieving the Commission of the obligation to conduct an analysis of the anti-competitive effects.

2. Where the dominant undertaking presents evidence to support its assertion that its conduct was not capable of producing the identified foreclosure effects, the Commission must

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analyse the foreclosure capability of the scheme by reference to:

the extent of the dominant position on the relevant market;

the share of the market covered by the practices;

the conditions and arrangements for granting the rebates in question;

their duration and their amount; and

the possible existence of a strategy aiming to exclude competitors that are at least as efficient as the dominant undertaking from the market.

3. Although the Commission is not required to carry out an AEC test, where it does so, that test is one of the factors which must be taken into account by the Commission in assessing whether the rebate scheme is capable of restricting competition.

In applying these principles, the GC found that the Commission made an error of law in concluding that the rebates were by their very nature abusive, without having to consider their capability to restrict competition.

The GC noted that the Commission had failed to take account of all of the above factors to conduct an effects-based analysis, so that it did not determine the share of the market covered by the conduct, or consider the impact of the duration of the rebates. Moreover, the GC concluded that the Commission made a number of errors in its economic analysis, including in its calculation of the 'contestable share' (i.e. that proportion of the customer's demands that it would be willing to switch) and its assessment of the rebates' values.

The burden and standard of proof

The judgment also clarifies the burden and standard of proof in abuse of dominance cases, with the starting point being the principle of the presumption of innocence:

Where the Commission maintains that the established facts can be explained only by anticompetitive behaviour and the undertakings put forward an alternative plausible explanation, the infringement will not have been sufficiently demonstrated.

Where the Commission relies on evidence which is in principle capable of demonstrating the existence of an infringement, it is for the undertakings concerned to demonstrate that the probative value of that evidence is insufficient

Comment

The judgment represents a significant victory for Intel and confirms the necessity of a thorough economic effects-based analysis. In doing so, it places an additional burden on the Commission in assessing rebates granted by dominant undertakings (and abuse of dominance investigations more broadly), both in carrying out the analysis, and in assessing and taking into account all evidence put forward by the dominant undertaking.

It will also be relevant to the two pending appeals in the Qualcomm and Google Android cases that also concern rebates and exclusivity payments, and it will be interesting to see what impact this judgment has on those cases.

EU Parliament suggests reduced period for review of new foreign subsidies legislation

The Commission first published its proposal ("Proposal") for a new EU foreign subsidies regulation on 5 May 2021 ("Draft Regulation"),41 following which, it has been considered and discussed by the EU Parliament in the context of the ordinary legislative approval procedure. On 25 January 2022, the Internal Market and Consumer Protection ("IMCO") within the European Parliament published an opinion recommending a reduction in the five-year review period proposed by the Commission to evaluate the Draft Regulation's application - together with any legislative proposals to three years. The IMCO also suggested that the review should consider whether the Draft Regulation's thresholds were appropriate. When the Draft Regulation is enshrined into law, its impact will doubtless be significant, not least since it will establish another ex ante approval process for certain M&A transactions that will be entirely separate from the existing merger control rules.

What is the new EU foreign subsidies regime?

In essence, the Draft Regulation seeks to address what EU policymakers regard as the potentially distortive effects on the bloc's internal market linked to entities operating within it which are (or have been) buoyed in some way by subsidies given to

41 European Commission. Proposal for a Regulation of the European Parliament and of the Council on foreign subsidies distorting the internal market. 5 May 2021. Available at:

https://ec.europa.eu/competition/international/overview/proposal_for_r egulation.pdf

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them by foreign (i.e. non-EU) countries or governments.42 The Draft Regulation therefore attempts to close a perceived regulatory gap left by the existing State aid rules under Article 107 of the TFEU, which only cover subsidies granted by Member States and do not apply extra-territorially. The lack of a comparable regime to monitor foreign subsidies granted by non-EU countries therefore risked fostering unfair competition and an unlevel playing field in the EU.43

Saliently, it should be noted that the Draft Regulation is to be distinguished from any foreign direct investment ("FDI") review process. FDI laws focus on potential threats to national security arising from foreign investors, whereas the Draft Regulation is concerned with any potential anti-competitive effects on the EU's internal market arising from activity which may have been bolstered by the provision of foreign subsidies. With this context in mind, the Draft Regulation will equip the Commission with three new tools to address the potentially distortive effects of foreign subsidies:

1) A new mandatory and suspensory M&A approval process In a move that will add further complications to M&A transactions taking place in the EU, the Draft Regulation will require deals to be notified for prior approval before completion in instances where:

a) the target (or, in instances of 'pure' mergers, at least one of the merging parties) operates in the EU and generates an aggregate turnover in the EU of at least 500 million; and

b) the parties involved in the transaction have received foreign subsidies equivalent to more than 50 million over the preceding three-year period prior to the acquisition taking place.

Interestingly, though the Draft Regulation states that foreign subsidies which facilitate the acquisition of a target entity operating in the EU will be considered more likely than not to be distortive, there does not actually need to be any direct connection between the foreign subsidies and the acquisition in other words, the one does not need to facilitate the other for the transaction to be reviewable under this tool.

As this new approval process will be entirely separate from any applicable merger control and FDI clearance that might be necessary, this limb of the Draft Regulation will create new due diligence requirements for deal parties by effectively requiring them to conduct a tripartite assessment of all future contemplated acquisitions to ensure that all mandatory or otherwise necessary approvals are obtained prior to completion.

2) Ex ante approval of foreign subsidies enabling public procurement

The Commission has concerns that public procurement could be undermined in instances where entities bidding for contracts have been bolstered by the provision of foreign subsidies. To this end, the Draft Regulation stipulates that bidders in an EU public procurement process must disclose to the relevant public body any foreign subsidies it has received within the preceding three-year period in instances where the public procurement in question is valued at 250 million or more. In these instances, the public body will refer the matter to the Commission to investigate and the affected bidder cannot be awarded any contract until

42 Please note that, under the Proposal, "foreign subsidy" is defined as a "financial contribution" from a third country (i.e. non-EU country) which "confers a benefit to an undertaking engaging in an economic activity in the internal market and which is limited, in law or in fact, to an individual undertaking or industry or to several undertakings or industries". See Article 2(1) of the Proposal. Note, too, that "financial contribution" is defined very broadly and can include: (i) the transfer of funds or liabilities, such as capital injections, grants, loans, loan guarantees, fiscal incentives, setting off of operating losses, compensation for financial burdens imposed by public

authorities, debt forgiveness, debt to equity swaps or rescheduling; (ii) the foregoing of revenue that is otherwise due; and/or (iii) the provision of goods or services or the purchase of goods and services. See Article 2(2)(a) of the Proposal. 43 In the Commission's view, foreign subsidies will be potentially problematic in instances where they have (e.g.) facilitated the acquisition of EU undertakings, influenced investment decisions, distorted trade in services or otherwise influenced the behaviour of their beneficiaries in the EU market to the detriment of fair competition. See page 2 and Article 4 of the Proposal.

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such time as the Commission is satisfied that any foreign subsidies that may have been received will not distort the public procurement process in question.

3) An ex officio tool allowing the Commission to conduct investigations

Finally, the Draft Regulation will give the Commission a broad power to investigate potentially distortive foreign subsidies. Pursuant to this provision, the Commission will be able to launch bespoke investigations on its own volition where it suspects that foreign subsidies may have distortive effects on competition in the internal market (in a particular sector or industry). As such, this is very much a catch-all power enabling the Commission to conduct investigations outside the mandatory notification processes prescribed by the Draft Regulation. With reviews able to be initiated on the basis of any source of information of which the Commission is made aware, it is likely that Member States and competitors will have an active role in bringing specific cases to the Commission's attention.

The Commission's powers of investigation under the new regime will include the ability to require companies to submit responses to RFIs and to conduct dawn raids. Where the Commission concludes that foreign subsidies have been granted and have distortive effects, it will also have recourse to a wide variety of redressive measures including decisions to prohibit a contemplated transaction or public procurement bid, and the ability to accept commitments to remove the distortion on the market.

What amendments to the Draft Regulation have been recently proposed and debated?

As the Draft Regulation continues to be scrutinised by the European Parliament and representatives from Member States' national governments in the EU Council a process that could potentially last for another 6 months or longer certain amendments have been proposed to address issues regarding the Draft Regulation's scope and likely impact on investments affecting the EU bloc.

One of the more important debates revolves around the thresholds triggering mandatory notifications for

certain M&A activity and public procurement bids. Policymakers and stakeholders have so far been divided on the issue as to whether the current thresholds are fit for purpose, with some arguing that they risk capturing a disproportionate amount of investment activity within the bloc and others submitting the opposite or else that the thresholds should be expanded to include more areas where foreign subsidies are having allegedly distortive effects.

To address this divergence of opinion, the IMCO proposed on 25 January 2022 that the Commission should analyse the effects of the Proposal three years after it enters into force, as opposed to five years (under the Commission's current proposal). It is hoped that this amendment will be sufficient to identify and address any issues with the thresholds in a timely fashion, should they indeed prove to be in need of amendment.

Additionally and in continued reflection of the wide spectrum of views on the Draft Regulation there have been calls from some quarters for even tighter controls to be imposed in some circumstances (for instance, in relation to state owned enterprises), and for additional carveouts or exemptions from others. In relation to the latter, on 15 February 2022 a number of organisations including entities from the American Chamber of Commerce to the European Union and the European Australian Business Council submitted an open letter calling for a number of revisions to the scope of the Proposal.44 Separately, too, EU lawmakers have raised the possibility of carveouts for investors in receipt of foreign subsidies from national governments in jurisdictions with comparable measures on subsidy control.

It remains to be seen just how much the Draft Regulation will be amended and altered before it enters into force.

EU lawmakers express concerns over buying alliances in the agricultural and food supply chains

On 15 March 2022, the European Parliament's ("EP") Committee on Economic and Monetary Affairs ("ECON") adopted a series of amendments to an EP resolution on the Commission's draft 2021 Competition Policy Report ("Report").45 ECON had first proposed these amendments on 27 January 202246 in response to a preliminary version of the

44 See a copy of this letter at: https://www.amchameu.eu/system/files/position_papers/foreign_subsid ies_regulation_views_from_key_eu_trade_and_investment_partners.pd f 45 See ECON's press release at: https://www.europarl.europa.eu/news/en/press-

room/20220309IPR25161/meps-outline-needed-reforms-forcompetition-policy 46 European Parliament Committee on Economic and Monetary Affairs. Amendments 1 274 on the Draft Report on the Competition Policy Annual Report 2021. 2021/2185(INI). 27 January 2022. Available at:

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EP's resolution published on 3 December 2021.47 The amendments voted on by ECON also reflected points made in an opinion published by IMCO on the draft resolution on 1 March 2022.48 The Commission publishes an annual report which outlines a summary of the main activities it has undertaken in the area of competition law during the preceding year as well as its main considerations for competition policy and enforcement going forwards. The EP receives a draft version of this annual report from the Commission before it is published, which allows EU lawmakers to table suggested additions or amendments to the report for the Commission's consideration. A chief benefit of this exercise is to allow the EP to recommend specific areas of competition law that it believes the Commission should prioritise and address in future. It is noteworthy that, among the numerous amendments adopted on 15 March 2022, ECON noted that it was still 'deeply concerned' about the perceived adverse effects of buying alliances49 in the European agricultural and food supply chain.50

Buying alliances have existed in one form or another since the 1930s51 and comprise of horizontal alliances between retail companies active in the same (or similar) markets whereby their respective bargaining and purchasing powers are pooled collectively in order to source their supplies more cost effectively. Buying alliances are very common in the food supply chain whereby grocery retailers

are able to source products from their suppliers more advantageously using economies of scale (often involving higher volumes with lower purchasing costs). From a competition law standpoint, buying alliances often walk a very fine line. It is widely accepted that buying alliances can result in procompetitive effects if the entities entering into them pass on the benefits of these agreements to their customers and consumers in the form of say lower prices and a greater quality and/or range of products. Conversely, buying alliances may bring about distortive effects on competition if they result in a sharp fall in innovation, less available choice and inefficient supply chains. Saliently, too, buying alliances might be used by participating retailers as a front for anti-competitive activities, such as the exchange of competitively sensitive information to facilitate price fixing or market sharing arrangements.

Both the Commission and National Competition Authorities ("NCAs") have taken steps in recent years to investigate different buying alliances operating in the EU's agricultural and food supply chain that were suspected (or are currently suspected) to be anti-competitive. For instance, the Commission has been investigating Casino GuichardPerrachon ("Casino") and Les Mousquetaires SAS (which trades as "Intermarch") since November 2019 for suspected cartel activity resulting from their joint purchasing arrangements.52 Moreover, the French NCA, Autorit de la concurrence, accepted binding commitments from four food retailers53 in October 2020 to address its concerns over the effects of these retailers' buying alliance.54 Augmenting this already keen interest at both the EU and national level have been two in-depth studies published by the Commission which have examined the effects of buying alliance in the EU's food supply

https://www.europarl.europa.eu/doceo/document/ECON-AM704711_EN.pdf 47 European Parliament Committee on Economic and Monetary Affairs. Draft Report on the Competition Policy Annual Report 2021. 2021/2185(INI). 3 December 2021. Available at: https://www.europarl.europa.eu/doceo/document/ECON-AM704711_EN.pdf 48 European Parliament Committee on the Internal Market and Consumer Protection. Opinion of the Committee on the Internal Market and Consumer Protection for the Committee on Economic and Monetary Affairs on the Draft Report on the Competition Policy Annual Report 2021. 1 March 2022. Available at: https://www.europarl.europa.eu/doceo/document/IMCO-AD700476_EN.pdf 49 Also known as retail alliances or joint purchasing agreements.

50 See: https://www.europarl.europa.eu/news/en/pressroom/20220309IPR25161/meps-outline-needed-reforms-forcompetition-policy 51 European Commission. The economic impact of modern retail on food chgoice and innovation in the EU food sector (Final report). September 2014. Available at: https://ec.europa.eu/competition/publications/KD0214955ENN.pdf 52 See the Commission's press release at: https://ec.europa.eu/commission/presscorner/detail/en/ip_19_6216 53 The four retailers were: (i) Casino; (ii) Groupe Auchan SA ("Auchan"); (iii) Metro AG ("Metro"); and (iv) Schiever Distribution SA ("Schiever"). 54 The decision is available at: https://www.autoritedelaconcurrence.fr/sites/default/files/integral_texts /2020-10/20d13.pdf

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chains more generally, the first of which was published in 201455 and the most recent in 2020.56

It is therefore illuminating that, despite the regulatory scrutiny that has already been brought to bear on these particular forms of buying alliances, ECON felt compelled to ensure that an amendment entreating the Commission to take further steps to monitor and investigate them was included in the EP's resolution. Despite the efforts of the Commission and NCAs to date, it seems that EU lawmakers feel there are still relevant anticompetitive concerns to be addressed in this area.

EU considers behavioural remedies in Illumina/Grail deal

As reported in previous editions of the Competition Law Newsletter (Q2 and Q3 2021),57 the US pharmaceutical giant Illumina proceeded with its US$8 billion acquisition of the US start-up Grail on 18 August 2021 (the "Acquisition"), despite a standstill obligation that required the suspension of the Acquisition pending the Commission's approval. On 20 September 2021, the Commission announced that it had sent a Statement of Objections to Illumina and Grail concluding that the completion of the Acquisition constituted a breach of the standstill obligation and that interim measures were necessary in order to restore and maintain effective competition.

On 11 January 2022, Grail followed suit by filing an appeal at the General Court on similar grounds, which are as follows:

1. the Commission did not have the authority to impose the interim measures in this case due to the alleged illegality of the Commission's decision to accept the referral of the transaction (made by each of France, Belgium, Greece, Iceland, the Netherlands and Norway) in April 2021 under Article 22 of the EU Merger Regulation; and

2. the Commission made various errors in adopting the interim measures decision. In particular, Grail claims that the Commission failed to take account of hold-separate commitments given by Illumina, failed to show how the Acquisition reduced effective competition, and failed to identify any urgency that would justify the interim measures. Grail also claims that the decision was vitiated by error of law and that it was not necessary or proportionate.58

Subsequently, the Commission adopted interim measures, that were binding upon Illumina and Grail, whilst it considered whether or not to impose a fine for illegal gun-jumping. In summary, the interim measures had the effect of keeping Illumina and Grail's businesses separate, by prohibiting the sharing of competitively sensitive information, requiring Illumina and Grail to deal with each other strictly at arm's length, and requiring Illumina to provide Grail with sufficient funds to allow it to continue operating and developing separately.

Ongoing appeals

Illumina lodged an appeal contesting the imposition of the interim measures with the General Court on 3 December 2021. The appeal was heard on 15 December 2021 and the judgment is still pending.

On 14 January 2022, Illumina received a 100 page 'letter of facts' from the Commission as part of its review of the Acquisition, its purpose being to support and bolster the Commission's known objections to the Acquisition. The 100 page 'letter of facts' was nearly as long as the formal Statement of Objections itself. Illumina and Grail were given until 21 January 2022 to respond to the 'letter of facts', and Illumina has since sent a nearly 200 page response to the Commission.

55 European Commission. The economic impact of modern retail on food choice and innovation in the EU food sector (Final report). September 2014. Available at: https://ec.europa.eu/competition/publications/KD0214955ENN.pdf 56 European Commission. JRC Science for Policy Report Retail alliances in the agricultural and food supply chain. November 2020. Available at: https://publications.jrc.ec.europa.eu/repository/handle/JRC120271

57 stephenson-harwood-llp---competition-group-newsletter-q2-2021.pdf (shlegal.com) and stephenson-harwood-llp---competition-groupnewsletter---q3-2021.pdf (shlegal.com) and stephenson-harwood-llp--competition-group-newsletter---q4-2021.pdf (shlegal.com) 58 Case T-23/22: Action brought on 11 January 2022 -- Grail v Commission (europa.eu)

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Illumina's package of behavioural commitments

On 27 January 2022 Illumina offered a package of behavioural commitments to the Commission (the "Commitments Package") in an attempt to secure approval of the Acquisition. Details of the Commitments Package are not publicly available and the Commission has not commented on this proposal. Although the Commitments Package triggered a further extension to the Commission's Phase II decision deadline until 25 March 2022, it is understood that the case timeline has been stopped as a result of the parties' failure to provide certain information to a Commission request for information, such that this deadline of 25 March no longer holds.

EU and UK launch twin Meta and Google probes

In their latest effort to tackle the market power of the world's biggest technology companies, on 11 March 2022, the CMA and the Commission launched twin investigations in relation to a suspected anticompetitive agreement entered into between Facebook (now under the parent company name Meta) and Google in 2018 in relation to Meta's use of Google's header bidding product (the "Agreement").59 The CMA is also investigating Google's conduct more widely in relation to header bidding services to determine whether the firm abused its dominant position and gained an unfair advantage over its competitors. This arrangement is referred to in Google's internal documents as "Jedi Blue".

The CMA's investigation is under both Chapter 1 and Chapter II of the Competition Act 1998 and the Commission's investigation is under both Articles 101 and 102 of the TFEU. The CMA and the Commission have stated that they intend to cooperate closely on this investigation.

By way of background, header bidding is a service which allows sellers to offer their online advertising space to multiple buyers at the same time, rather than receiving offers one by one. As a result, buyers (or advertisers) compete against each other for advertising space and publishers can compare bids from multiple buyers simultaneously. Google provides its own header bidding service, which is called the Open Bidding programme.

The Agreement purportedly guaranteed Facebook: (i) 90% of auctions, regardless of the number of

bids, (ii) 300 milliseconds to bid compared to the standard 160 milliseconds, and (iii) allowed Facebook to view the identity of a large proportion of web users, on Google's Open Bidding programme. In return, Facebook allegedly agreed not to enter the market for header bidding at a time that posed a threat to the dominance of Google's Open Bidding programme.

The CMA and the European Commission seek to determine whether the Agreement had the effect of excluding advertising tech services from competing with Google's Open Bidding programme, which would ultimately have the effect of restricting competition in markets for online display advertising.

The Commission stated that it is concerned that the Agreement took the form of a "sweetheart" deal so that Facebook would continue to use Google's Open Bidding programme instead of switching to another header bidding product.

The CMA's chief executive, Andrea Coscelli, said it is concerned that Google may have 'teamed up' with Facebook 'to put obstacles in the way' to rivals providing important online display advertising services to publishers.

The Agreement is also subject to great scrutiny in the US. The US litigation is led by a coalition of US states led by Texas attorney general Ken Paxton. In the US litigation, states have alleged that Google came up with its Open Bidding programme as a direct attempt to thwart header bidding, and it later enticed Facebook into the Agreement to avoid the firm being a threat in the advertising market.

59 See: Antitrust: Commission opens investigation into (europa.eu) and CMA investigates Google and Meta over ad tech concerns GOV.UK (www.gov.uk)

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As this is only the start of the investigation, neither the CMA nor the Commission have reached a view as to whether there is sufficient evidence of an infringement or infringements of competition law for it to issue a statement of objections to either Google or Facebook.

EU conditionally clears Facebook / Kustomer

The Commission has conditionally approved the proposed acquisition of the customer service platform Kustomer by Meta (formerly Facebook). The clearance is subject to full compliance with the behavioural commitments offered by Meta.60

Background

As part of its plan to profit from private chats, the deal had been announced in November 2020, but was under the scrutiny of regulatory authorities.

Kustomer is an omnichannel customer relationship management ("CRM") platform that enables businesses to track all their interactions with a participant customer in a single-screen view. The newest Meta acquisition is considered by the Commission as an "innovative and fast-growing player".

The Commission's review

The review by the Commission was triggered by a referral request61 in May 2021 from the Austrian Federal Competition Authority as the proposed transaction met national notification thresholds. It was joined by the Belgium, Bulgarian, Dutch, French, Icelandic, Italian, Irish, Portuguese, and Romanian competition enforcers.62

The Commission's decision follows an in-depth investigation of the deal. The investigation revealed that the transaction, as initially notified, would have harmed competition in the market for the supply of customer service and support CRM software. European customers faced the risk of not having effective access to new suppliers of CRM software due to significant existing barriers to entry. Indeed, Meta would have had the ability and the economic incentive, to engage in foreclosure strategies. Regarding the market for the supply of online display

advertising services, where concerns had been preliminary raised by the Commission, the agency ultimately stated that the "merger was not likely to lead to a significant impediment of effective competition".63

Commitments

Meta has offered comprehensive access commitments with a ten-year duration. Firstly, Meta commits to guarantee non-discriminatory access, without charge to its publicly available application programming interfaces for its messaging channels to Kustomer's rivals and new entrants. Secondly, to the extent that any features or functionalities of Messenger, Instagram messaging or WhatsApp are used by Kustomer's customers today may be improved or updated, Meta commits to also make available equivalent improvements to Kustomer's rivals and new entrants.

The implementation of these commitments is to be monitored by an appointed trustee. The trustee will have "far-reaching" power, including access to Meta's records, personnel and facilities. In addition, if Meta is in breach of these commitments, third parties may invoke a fast track and binding dispute resolution.

Approvals from other competition authorities

Across the ocean, Meta received a green light in the UK64 and in Australia.65 On 11 February 2022, Germany's Federal Cartel Office unconditionally cleared Facebook's acquisition of Kustomer.66

Interestingly, by contrast, on 29 March 2022 Cargotec and Konecranes called off their US$5 billion merger after the UK and US competition authorities rejected a package of remedies, which had already been approved by various antitrust agencies, including the Commission. This is the first time that the CMA has blocked a merger that the Commission has cleared demonstrating that it is quite content to take an entirely different position to other regulators. The CMA indicated that the merger of the two world's leading providers of cargo handling equipment would harm competition in the supply of a wide range of container handling equipment

60 See the Commission press release about the conditional clearance of the Meta/Kustomer merger 61 Article 22 of the Merger Regulation allows for one or more Member States to request the Commission to examine, for those Member States, any concentration that does not have an EU dimension but affects trade between Member States and threatens to significantly affect competition within the territory of the Member State or States making the request. 62 See the Commission press release of the opening of its in-depth investigation into proposed acquisition of Kustomer by Facebook

63 See the Commission press release about the conditional clearance of the Meta/Kustomer merger 64 See the CMA press release about the Facebook/Kustomer merger 65 See the ACCC press release about the Facebook/Kustomer merger : 66 See the Federal Cartel Office press release about the Facebook/Kustomer merger

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products resulting in higher prices and lower quality products and services for customers as well as leave customers with limited choice of other alternative suppliers. Over the last few months, it has become clearer that there are signs of divergence between the UK and EU on merger control matters. It awaits to be seen what position the CMA will take on its indepth review of waste management heavyweights Veolia and Suez which the Commission conditionally approved in Phase I.

EU committed "serious breach" by withholding default interest General Court rules

On 19 January 2022, Deutsche Telekom ("DT") was awarded EUR 1.75 million in compensation by the Commission after the Commission refused to pay the company default interest when DT's margin squeeze fine was reduced by EUR 12 million.67

Background

On 15 October 2014, the Commission found that DT and its subsidiary, Slovak Telekom ("ST"), had abused their dominant positions on the Slovak market for broadband internet services, by limiting the access of alternative operators to its local loop between 2005 and 2010. Consequently, the Commission imposed a fine of EUR 39 million on both telco companies. An additional fine of EUR 31 million was imposed on DT - first, for its status as a repeat infringer as the company was involved in illegal margin squeeze practices in German broadband markets in 2003 and, secondly, due to the size of its turnover warranting a more severe penalty.

On 13 December 2018, the General Court upheld the Commission's conclusion that DT and ST had abused their dominant position, but partially annulled the Commission's decision reducing the amount of the fine imposed on DT by EUR 12 million. The appeals lodged by the companies against the decision of the General Court were subsequently dismissed by the Court of Justice in March 2021.

The Commission repaid the amount of EUR 12 million to DT in 2019 but did not pay the corresponding default interest. The Commission claimed that EU law did not oblige it to make such a payment when reimbursing a fine. Further, that the fine did not accrue any interest while in the authority's possession as the investment of the fine resulted in a native return. Consequently, DT brought an action before the General Court. DT first sought the

annulment of the decision and claimed compensation for the loss of profit due to the deprivation of its enjoyment, during the period in question, of the part of the fine unduly paid. In the alternative, DT claimed for compensation for the loss suffered following the Commission's refusal to pay default interest.

General Court's ruling

The General Court dismissed all DT's claim but upheld its claim for compensation for the damage resulting from the Commission's refusal to pay default interest. The General Court held that the refusal to pay default interest by the Commission constitutes a 'breach' of Article 266, TFEU which requires the EU institutions "to take all necessary measures to comply" with the judgements of the European courts.

The General Court held that "even if the amount of the fine paid by the applicant did not yield interest while it was in the Commission's possession, the Commission was required" to repay DT "the portion of the fine held to have been unduly paid, together with default interest". The General Court added that the Commission had 'no discretion' to refuse to pay DT default interest for an overpaid fine and that the Commission was not entitled to determine the conditions under which it would pay interest.

The General Court also clarified that companies are entitled to claim for restitution when they have provisionally paid a fine that is later cancelled and reduced, pursuant to applicable EU legislation. As such, the Commission is obliged to pay default interest on the portion of the fine reduced by the courts for the entire period in question (namely, at the European Central Bank ("ECB") refinancing rate plus 3.5% from the date of the provisional payment of the fine until its reimbursement). Interestingly, it appears that if DT had opted for the putting in place of a bank guarantee by way of payment of the fine during the appeal process, then it would not have been entitled to the reimbursement of the default interest.

EU blocks Korean shipbuilding deal

On 13 January 2022, the Commission prohibited The Hyundai Heavy Industries Holdings' ("HHIH") proposed US$2 billion acquisition of Daewoo Shipbuilding & Marine Engineering ("DSME"), after the South Korean shipbuilding companies failed to offer formal remedies to address the Commission's concerns bringing an end to the Commission's

67 See Case T-610/19

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Phase II investigation. This is the tenth merger that the Commission has blocked in the last ten years. Competition Commissioner Margrethe Vestager described the South Korean companies as "very strong players" in the market for the construction of large liquefied natural gas ("LNG") carriers ("LLNGCs"). The agency revealed that the merged entity resulting from HHIH and DSME merger would have created a dominant position and reduced competition in the worldwide market for the construction of LLNGC. Indeed, the number of players in such market would have been reduced from three to two. Vestager also, admitted that, "given that no remedies were submitted, the merger would have led to fewer suppliers and higher prices for large vessels transporting LNG".68

By way of background, the Commission was notified of the transaction on 12 November 2019. The preliminary concerns of the Commission consisted in the removal of an important competitive force in: (i) large containerships, (ii) oil tankers, (iii) LNG and (iv) liquefied petroleum gas ("LPG") carriers' markets. The Commission had also identified high barriers to entry in these markets. Consequently, the proposed transaction would have resulted in the significant reduction of competition in the market for cargo shipbuilding, leading to higher prices, less choice and reduced incentives to innovate.69 Accordingly, the Commission decided to open an indepth investigation on 17 December 2019 which

ended in a decision prohibiting the proposed acquisition of DSME by HHIH on 13 January 2022.70

The decision focused on the market for LLNGC where the Commission found that the transaction, as notified and with no remedies offered, would have resulted in: (i) the creation of a dominant position by the merged company in the market for the construction of large LNG carriers, (ii) a reduced choice in suppliers, and (iii) higher prices for EU customers and ultimately for energy consumers.

The decision of the Commission is based on several considerations. First, the parties enjoy very large and increasing market shares, and the market shares of the merged entity would be of at least 60%. Then, both South Korean shipbuilding companies only faced one other large competitor in the market, which would not have been able to constrain price increases. Additionally, the Commission sustained that entering and successfully operating in the market for LLNGC was very difficult as LLNGC were extremely complex to build. Moreover, the choice of shipbuilders as possible suppliers was very limited for customers who typically make small orders. In 2020, the Chinese71 and Singaporean72 competition authorities cleared the proposed merger with no remedies. HHI decided to withdraw its merger filing from the South Korean antitrust regulator after the Commission blocked its bid to purchase DSME.73 Japan's Fair Trade Commission is still reviewing the process.

Competition Commissioner Vestager explained that the merger "would have led to fewer suppliers and higher prices for large vessels transporting large liquefied gas." Thus, this wise and cautious decision of the Commission is a blessing for the maritime container logistics supply chain given the fact that European businesses continue to experience rising container shipping costs.74

68 Mergers: Commission prohibits proposed acquisition (europa.eu)

69 Mergers: Commission opens in-depth investigation into propos

(europa.eu) 70 Mergers: Commission prohibits proposed acquisition (europa.eu)

71 Antitrust in China and across the region: Quarterly Update April

to June 2021 (cliffordchance.com) 72 CCCS Clears Proposed Merger of Korean Shipbuilders | CCCS 73 Hyundai Heavy withdraws filing for Daewoo Shipbuilding deal

from KFTC after EU's merger block | MLex Market Insight 74 Mergers: Commission prohibits proposed acquisition (europa.eu)

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