EnforcementComplaints procedure for private parties
Is there a procedure whereby private parties can complain to the authority responsible for antitrust enforcement about alleged unlawful vertical restraints?
Yes. Private parties showing a legitimate interest (those actually or potentially suffering damage as a result of the conduct in question) can file a complaint with the Commission either formally on the Commission’s form C or informally (including orally or anonymously). The submission of a formal complaint ties the Commission to responding within a given time, which, in principle, is four months. However, the CJEU and the EU General Court have long held that the Commission has a wide discretion in choosing which complaints to pursue.Regulatory enforcement
How frequently is antitrust law applied to vertical restraints by the authority responsible for antitrust enforcement? What are the main enforcement priorities regarding vertical restraints?
In the 18 years from 1 January 2001 to 1 January 2019, the Commission took around 22 vertical restraints infringement decisions under article 101. This includes only cases in which the Commission:
- focused its enforcement on article 101, as opposed to article 102;
- focused its enforcement on the vertical aspects of practices, rather than any horizontal aspects; and
- either took a formal infringement decision or identified infringements but reached formal settlement agreements with the parties involved.
Since 2013, the Commission has opened (and not yet closed) formal investigations into cross-border aspects of pay-TV, holiday pricing, licensed merchandise, video games and airline booking system providers, all of which appeared to relate, in part, to vertical restraints. In January 2017 the Commission opened a consultation on commitments proposed by Amazon in respect of the investigation into the sale of e-books, which the Commission formally accepted in May 2017. In relation to the investigation of major US film studios and the largest European pay-TV companies, consultations were also opened in November and December 2018. Provided the Commission considers that they address its concerns, the commitments may be expected to be formally accepted early in 2019.
Broadly speaking, the Commission’s enforcement has focused on territorial and resale price restrictions.
What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?
Under article 101(2), restrictions of competition infringing article 101(1) and not qualifying for exemption under article 101(3) are rendered null and void. The exact consequences of a finding of voidness will depend on the text of the agreement itself and on the provisions of the applicable national law of contract regarding severability. There are two main alternative consequences - either the entire agreement is void and unenforceable or the prohibited restriction can be severed from the rest of the agreement and the prohibited restriction alone is void and unenforceable.
May the authority responsible for antitrust enforcement directly impose penalties or must it petition another entity? What sanctions and remedies can the authorities impose? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?
Under Regulation No. 1/2003, the Commission itself has the ability to impose fines of up to 10 per cent of the worldwide group revenues of the infringing party (or parties) without needing to have recourse to any court or government agency. Such a decision can be appealed to EU courts.
In the 18 years from 1 January 2001 to 1 January 2019, the Commission imposed the following fines on the following companies in cases relating to vertical restraints (some of which were reduced or overturned on appeal): Nintendo - €149 million; DaimlerChrysler - €71.8 million; Asus - €63.5 million; Peugeot - €49.5 million; Guess - €39.8 million; Volkswagen - €30.96 million; Yamaha - €2.56 million; and Topps - €1.59 million. In a number of cases, the Commission did not impose fines, but instead required the companies to introduce behavioural or structural remedies, or both, for example:
- in April 2006, the Commission required Repsol to open up certain long-term exclusive supply contracts with Spanish service stations;
- in May 2004, the Commission reached a settlement with Porsche to end the tying of after-sales service provision to the sale of new cars; and
- in April 2003, the Commission approved supply agreements between Interbrew and pubs, restaurants and hotels located in Belgium, on the condition that Interbrew amended the agreements to offer its brewer competitors access to the outlets in question.
While the Commission still actively enforces its rules on vertical restraints, especially in the motor vehicle sector, it is fair to suggest that market liberalisation, the reduction of anticompetitive state aid and the fight against cartels have been higher enforcement priorities in recent years. Since suppliers often organise distribution at a national level within individual member states, there has been more frequent enforcement of national and EU antitrust rules on distribution by member state-level competition authorities than by the Commission. However, in some individual cases the Commission may consider that it is better placed to enforce the EU rules on vertical restraints than individual, member state-level competition authorities.Investigative powers of the authority
What investigative powers does the authority responsible for antitrust enforcement have when enforcing the prohibition of vertical restraints?
Under Regulation No. 1/2003, the main investigative powers of the Commission are to request (and ultimately require) the production of documents and to conduct announced or unannounced inspections (ie, dawn raids) of business premises and employees’ homes and cars. In carrying out such inspections, the Commission is often assisted by the national competition authorities of the member states in which the inspections take place. The Commission may also request national competition authorities to undertake, in their territory, the inspections that the Commission considers to be necessary.
In addition, the Commission can and does request information from parties domiciled outside the EU (it has done so in cartel investigations). It can also require that EU-domiciled subsidiaries produce information even where their parent companies are located outside the EU, provided the information is accessible from the premises of the EU-domiciled subsidiary.
In March 2017, the Commission submitted a proposal to the European Parliament and to the Council of the European Union to harmonise and, in certain respects, to expand the powers of the competition authorities of the EU member states to enforce articles 101 and 102 TFEU, as well as the national competition law provisions that are applied in parallel. Following inter-institutional negotiations opened in February 2018, the Directive was signed in December 2018.Private enforcement
To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?
Although the EU adopted a directive on antitrust damages actions in November 2014, with the express intention of making it easier to bring antitrust damages actions in the EU, private enforcement of antitrust breaches is still in its infancy. Private damages actions cannot be brought before the Commission or before the EU courts and must instead be brought in the relevant courts of the member states having jurisdiction to hear the case in question. National rules on jurisdiction, recovery of legal costs, remedies and who can bring a claim vary widely across the EU, with certain jurisdictions, such as the United Kingdom, being more claimant-friendly than others. The EU Damages Directive, which EU member states were required to transpose into national law by 27 December 2016, goes some way towards harmonising rules on limitation periods, disclosure, and the ‘passing on’ defence, although there is no EU-wide scheme for collective actions.
The Commission is required under the EU Damages Directive to publish guidelines for national courts on passing-on of overcharges to indirect purchasers, although at the date for transposition such guidelines has not been published. The Commission is also reassessing its 2013 recommendation on introducing collective redress mechanisms in the EU member states. Although the Commission indicated that it might propose further measures by July 2017, it has not yet done so.
The key case before the EU courts on private damages actions is Courage v Crehan, a case referred from the UK courts, in which the CJEU states that private parties must be able to claim damages in relation to infringements of article 101. The CJEU also clarified that parties to infringing agreements are themselves able to claim damages if, as a result of their weak bargaining positions, they cannot be said to be wholly responsible for the infringement. Cases concerning vertical restraints, in particular, have accompanied the growth in e-commerce, such as Concurrences v Samsung, in which the CJEU, in December 2016, considered the rules governing jurisdiction in actions brought in respect of resale restrictions in selective distribution systems. (For more detail on private enforcement more generally, see Getting the Deal Through - Private Antitrust Litigation.)