Competition: Commission appeals General Court judgment on payment of interest on cartel fines

On 7 September 2015, the Official Journal published details of the Commission's appeal to the Court of Justice of the European Union against a General Court ("GC") judgment. The GC's judgment upheld appeals by Total SA ("Total") and Elf Aquitaine SA ("Elf Aquitaine") against the imposition of interest on the fines the two companies must pay for their involvement in the acrylic glass cartel. In May 2006, the Commission announced that it had fined Arkema France SA ("Arkema") and its wholly-owned subsidiaries Altuglas International SA and Altumax Europe SAS for the participation of these subsidiaries in an illegal cartel between 1997 and 2002 on the market for acrylic glass. The Commission also found that Total and Elf Aquitane, the parent companies of Arkema, were jointly and severally liable for the EUR 219 million fine imposed in that case.

In September 2006, Arkema paid the full amount of the fine. All the three companies brought actions before the GC, which in June 2011 dismissed the appeals by Total and Elf Aquitaine in their entirety but reduced the Arkema's fine to EUR 113 million. The Commission then sent two letters to Total and Elf Aquitaine demanding the payment of the remainder of the fine plus interest that had accrued since September 2006. Total and Elf Aquitaine paid the amount but brought further actions before the GC in September 2011 seeking a declaration of invalidity of the letters. In its judgment, the GC ruled that there had been no basis for imposing interest because all payment obligations had been met in good time. Therefore, the GC annulled the Commission's letters in so far as they required payment of interest.

To support its appeal, the Commission states that the GC judgment wrongly rejected the Commission's submission that the action is inadmissible and failed to respect the principles of lis pendens and res judicata. In the alternative, the Commission claims that the GC judgment was based on contradictory reasoning, which constitutes sufficient grounds for setting aside the judgment. Source: Case C-351/15 P – Commission v Total and Elf Aquitaine, Official Journal 2015 C 294/44, 7/9/2015

Competition: Advocate General Wahl and Advocate General Mengozzi deliver opinions on calcium and magnesium reagents cartel appeals

On 3 September 2015, Advocate General Wahl gave an opinion on an appeal by SKW Stahl-Metallurgie GmbH and SKW Stahl-Metallurgie Holding AG (jointly "SKW") against a General Court ("GC") judgment on the calcium and magnesium reagents cartel. On the same date, Advocate General Mengozzi gave an opinion on an appeal by Evonik Degussa GmbH and AlzChem AG (jointly "Evonik Degussa and AlzChem") against a GC judgment on the same cartel. In July 2009, the Commission imposed fines totaling EUR 61 million on nine companies for their participation in a price-fixing and market-sharing cartel for calcium carbide powder, calcium carbide granulates and magnesium granulates. All nine companies asked the GC to annul the Commission's decision. The GC dismissed the appeal by SKW in its entirety but amended the fines imposed on Evonik Degussa and AlzChe, finding that the Commission had erred in applying a multiplier for recidivism on AlzChem. The Commission had also erred in when it calculated the multiplier that was applied to the basic amount of the fine so that it would reflect the duration of the companies' participation in the infringement. Finally, the GC found that the Commission had erred in its application of the Leniency Notice to Degussa and AlzChem.

SKW, Evonik Degussa and AlzChem brought an action before the Court of Justice of the European Union ("CJEU"). SKW submitted several grounds for appeal and alleged that the GC failed to acknowledge that the Commission had breached its essential procedural rights by refusing to hold in camera hearing. Advocate General Wahl found that parties who receive a statement of objections must have the opportunity to develop their arguments at an oral hearing, if they so request in their written submissions. However, Regulation 773/2004 only provides that each person may be heard separately or in the presence of other persons invited to attend, having regard to the legitimate interest of the undertakings in the protection of their business secrets and other confidential information. In addition, Advocate General Wahl considered that the decision to grant an in camera hearing remains at the discretion of the Commission, although this discretion must be exercised lawfully. Thus, Advocate General Wahl concluded that the GC had not erred in its assessment of the Commission's procedure and that the appeal should be dismissed in its entirety.

Evonik Degussa and AlzChem also submitted several grounds for appeal, including that the GC erred in attributing the anti-competitive conduct of SKW to them. The allegation was based on the fact that SKW, against the express specific instructions of Evonik Degussa and AlzChem, had unilaterally participated in the cartel from April 2004 in a power vacuum before the sale of SKW to Gigaset AG in August 2004. However, Advocate General Mengozzi concluded that although it was an important fact that its parent company had specifically instructed SKW not to participate in the cartel, the GC had not erred in finding that the evidence was insufficient to rebut the presumption of decisive influence in this case. Thus,Advocate General Mengozzi considered that the appeal should be dismissed in its entirety.Source: Case C‑154/14 P - SKW Stahl-Metallurgie GmbH and SKW Stahl-Metallurgie Holding AG v Commission, Opinion of Advocate General Wahl, 3/9/2015 and Case C-155/14 P Evonik Degussa GmbH and others v Commission, Opinion of Advocate General Mengozzi, 3/9/2015 (in Finnish)

Competition (Sweden): Swedish Competition Authority presents report on commercial exploitation of sporting activities 

On 1 September 2015, the Swedish Competition Authority ("SCA") presented a report on commercial exploitation of sporting activities from a competition law perspective. The report examines whether the commercial exploitation models are compatible with competition law based conditions in Sweden.

According to the report, the compatibility of a particular exploitation model with competition law must be assessed on a case-by-case basis. However, the report contains twelve recommendations for sports market operators to consider when designing a model for the commercial exploitation of sports. Source:Swedish Competition Authority Press Release 01/09/2015 and Swedish Competition Authority Report 2015:5

Merger control: Commission approves GE's acquisition of Alstom's power generation and transmission assets, subject to conditions

On 8 September 2015, the Commission approved the acquisition of Alstom's energy business by General Electric ("GE"), subject to divestment of central parts of Alstom's heavy duty gas turbines business to Ansaldo. GE is a US multinational conglomerate that operates through several business departments. Alstom is a French multinational company active in the electricity generation and rail transport markets. Heavy duty gas turbines are mainly used in gas-fired power plants. They operate on either of two frequencies, 50 Hz and 60 Hz, and can be further differentiated according to power output–medium, large and very large. In the European Economic Area ("EEA"), all heavy duty gas turbines operate at the 50 Hz frequency.

The Commission's in-depth investigation focused on the markets for the sale and servicing of heavy duty gas turbines operating at 50 Hz, where Alstom competes directly with GE in the EEA. According to the Commission, the market for heavy duty gas turbines is concentrated, with only four globally active full technology competitors. This is due to the necessary large upfront investments in R&D, testing and manufacturing, which sets very high technological and financial barriers to market entry. The Commission had concerns that the transaction would have eliminated one of GE's main global competitors in the heavy duty gas turbines market, where GE is the world's largest and Alstom is the third largest manufacturer. This would have led to less innovation and higher prices in a market for a technology vital to meeting climate change goals.

To address the Commission's concerns, GE offered to divest central parts of Alstom's heavy duty gas turbines business to Ansaldo of Italy, which is an existing competitor in the heavy duty gas turbine market. According to the Commission, the commitments will allow Ansaldo to replicate Alstom's previous role in the market and thereby maintain effective competition. Further, the commitments guarantee the continuation of Alstom's distinctive dual combustion heavy duty gas turbine technology, which is particularly well suited for the needs of European customers and offers purchasers advanced R&D capabilities and incentives to continue driving innovation on this market.

Source: Commission Press Release 8/9/2015

Merger control: Commission opens in-depth investigation into acquisition of parts of Walki's industrial packaging division by Mondi

On 2 September 2015, the Commission opened an in-depth investigation (a so-called "Phase II") to assess whether the proposed acquisition by Mondi of two industrial packaging plants currently owned by Walki is in line with the EU Merger Regulation. Mondi is a vertically integrated packaging and paper manufacturer that operates a number of plants across Europe, manufacturing extrusion coating products. Walki is a producer of technical laminates and protective packaging materials. The transaction entails the sale of two of Walki's extrusion coating plants located in Pietarsaari (Finland) and Wroclaw (Poland), both of which produce wrapping materials for the paper industry, case lining and other applications. Extrusion coating is a process through which a molten resin is added on to a substrate material, for example paper. It is a coating technique that results in a strong and moisture resistant foil with a large number of uses, like paper packaging, envelopes, food wrapping and bags, timber wrapping, and insulation materials for construction.

The Commission's initial investigation showed that Mondi's acquisition of Walki's two plants would remove a major competitive constraint on Mondi. Mondi and Walki are the two leading suppliers in the European Economic Area ("EEA") of several applications for extrusion coating, in particular wrapping materials for the paper industry and case linings. The Commission therefore has concerns that remaining competitors would not be able to exert competitive constraint on the behavior of the merged entity because they have considerably lower production capacity, and they might not be able to match their product offering or proximity of key customers. This could lead to a reduction of choice for customers and, potentially, to price increases for the products concerned. The Commission now has 90 working days, until 18 January 2016 to investigate the effects of the transaction on competition and to determine whether its initial concerns are confirmed.

Source: Commission Press Release 2/9/2015 

State aid: Court of Justice of the European Union rules on calculation of interest when recovering unlawful state aid

On 3 September 2015, the Court of Justice of the European Union ("CJEU") handed down its preliminary ruling on a reference from the Italian Court of Cassation on the calculation of interest when recovering unlawful state aid. In June 2002, the Commission found that Italy had given aid to undertakings in the form of exemption from corporate tax and possibility to contract low-interest loans. According to the Commission, this was incompatible state aid under the EU state aid rules. The Commission thus ordered Italy to recover the aid. In 2006, the CJEU held that Italy had failed to recover the aid from the beneficiaries and thus had not fulfilled its obligations. Following the CJEU's judgment, Italy took the necessary measures to recover the aid with compound interest. In particular, Italy provided in its legislation that the amounts to recover would be subject to compound interest. This legislation was based on an EU Regulation 794/2004 which entered into force in 2004, i.e. after the Commission decision of 2002. Subsequently, the Italian authorities required the two companies, ASM Brescia and AEM, which in the meantime merged to create the company A2A, to repay EUR 170 million by way of the corporation tax which they had not paid because of the exemption granted by Italy. Further, the authorities required the companies to repay EUR 120 million by way of compound interest. A2A contested the basis of this interest calculation before the Italian courts.

The Italian Court of Cassation, the last instance to hear the case, asked the CJEU to rule whether the Italian legislation could provide for compound interest by reference to a regulation that was not yet applicable at the time recovery of the aid was ordered by the Commission. In its judgment, the CJEU concluded that EU law does not preclude the Italian legislation. The CJEU noted that EU law did not state whether interest should be calculated on a simple or compound basis at the time when the Commission ordered Italy to recover the aid. Therefore, the CJEU held that it was solely for Italian law to determine whether the interest rate should be calculated on a simple or on a compound basis. However, the CJEU also noted that where a national measure implements EU law, the Member State in question must respect the general principles of EU law, such as the principles of legal certainty and protection of legitimate expectations. Therefore, the CJEU concluded that the Italian legislation did not apply retroactively as it only applies new rules to the future effects of situations that arose under the earlier rules. Finally, the CJEU held that the application of compound interest is a particularly appropriate measure to neutralize the competitive advantage unlawfully granted to undertakings that benefited from the state aid in question. Source: Court of Justice of the European Union Press Release 3/9/2015 

Public Procurement (Sweden): Swedish National Agency for Public Procurement new authority for handling Public Procurement

As of 1 September 2015, a new authority, the Swedish National Agency for Public Procurement (Sw. Upphandlingsmyndigheten), takes over responsibility for the support and guidance function regarding public procurement. Therefore the Swedish Competition Authority ("SCA") no longer handles these functions. According to the SCA's press release, the purpose of the new authority is to gather the guidance and support function for municipalities, government agencies and suppliers in matters relating to public procurement. Source: Swedish Competition Authority Press Release 01/09/2015

In addition, kindly note the following merger control decisions by the Commission which are published on the website of the Commission’s Directorate-General for Competition:

  • Commission approves acquisition of AOR by ADM in seed oil sector
  • Commission approves acquisition of Deutsche Glasfaser by KKR and Reggeborgh
  • Commission approves acquisition of BG Group by Royal Dutch Shell