The French Supreme Court confirms the French Competition Authority’s approach on the squeeze-out strategies shared between a supplier and its distributor
In this case, Reckitt Benckiser (Reckitt), holder of rights on the original medicine Subutex, had entrusted its marketing in France to Schering Plough. In 2006, Arrow started marketing a Subutex generic.
On December 18, 2013, the French Competition Authority (ADLC) sanctioned Schering Plough and Reckitt for their participation in an anticompetitive unlawful agreement intended to impede the entry on the market of this generic medicine. The ADLC found that Reckitt and Schering Plough had agreed together on Schering Plough’s commercial communication plan to provide financial incentive to pharmacists so that they order significant stocks of Subutex to inundate their shelves and offer them payment facilities (longer payment terms, discounts) for this purpose.
After an unsuccessful appeal before the Paris Court of Appeal, Reckitt contested its sanction before the French Supreme Court. By a decision dated January 17, 2017, the Court found that the emails and documents exchanged between Schering Plough and Reckitt show that, as early as October 2005, these companies agreed to establish a strategy intended to impede the entry of Subutex generics and that they had agreed on actions implementing this strategy. Neither the fact that the license agreement entered into between the supplier Reckitt and its exclusive distributor Schering Plough (which provided that they meet once a year to agree on sales strategies, was valid) nor the fact that the behaviors, subject-matter of the agreement, were implemented unilaterally by Schering Plough, had any impact on the characterization of this anticompetitive agreement. The Court added that the non-dominant position on the market of one of the companies party to the unlawful agreement (i.e. Reckitt) was irrelevant with respect to the characterization of this unlawful agreement.
The Court also stated that, contrary to what Reckitt argued, this case was not about sanctioning quantity rebates but rather about the fact of having developed a plan to delay the entry of generics through disparagement and loyalty rebates. Thus, although sharing a commercial strategy between a supplier and its distributor is not prohibited per se, it is important to be very vigilant with regard to the content of this strategy when it is turned against competitors to avoid any squeeze-out effect.
Administrative courts have the power to order the measures of inquiry necessary to prove the prejudice suffered by a competitor as a result of an illegal State aid
On January 13, 2017, the French Administrative Supreme Court (FASC) repealed a decision of the Paris Administrative Court of Appeal refusing to grant the request from Société Internationale de Diffusion et d’Edition (SIDE) to obtain communication of accounting records from its competitor, a third party to the proceedings, which had benefited from an illegal State aid.
In this case, CELF (Coopérative d’Exportation du Livre Français) had benefited from a State aid for the export of small orders of books which had then been declared illegal by the European Commission in 2010, for lack of notification and incompatibility with the internal market.
Its only competitor on the export market of French-language books, SIDE, then brought proceedings before French courts to receive compensation for the prejudice suffered as a result of the grant of an illegal State aid to CELF. The administrative court and the Paris Administrative Court of Appeal both rejected these claims on the grounds that SIDE had not established any causal link between the grant of the State aid to CELF and the alleged losses of its own clients. Indeed, establishing this causal link was very difficult without access to CELF’s accounts whose communication the trial judges had refused to order on the grounds that they were in the hands of CELF’s liquidator, a third party to the proceedings.
The FASC repealed the Administrative Court of Appeal’s judgment reminding the trial judges that they have the power, when exercising their general managerial capacity on the procedure, to order any measure of inquiry necessary to resolve the disputes and in particular require from the parties and, as the case may be, from third parties, communication of documents enabling them to verify the parties’ allegations. This reminder is welcome to facilitate proof of claims for damages by competitors of companies having benefitted from illegal State aids.
Football-related collectables: the General Court of the EU ruled on the grant of exclusive licenses in respect of intellectual property rights
Topps Europe, a company that sells collectable objects throughout Europe, had lodged a complaint before the European Commission for anticompetitive practices against Panini and several federations, including the Fédération Internationale de Football Association (FIFA), the Union of European Football Associations (UEFA) and the Fédération Française de Football (FFF).
The applicant notably alleged that the parties had infringed Article 101 of the TFEU which prohibits anticompetitive agreements by (i) entering into long-term exclusive agreements with Panini resulting in the total foreclosure of the market for collectibles relating to the World Cup and the Euro tournaments, (ii) bundling licenses to cover stickers and collectible trading cards and (iii) failing to organize an open, transparent, fair and non-discriminatory tender processes for the granting of licenses.
The Commission rejected this complaint for lack of interest in conducting the investigation on the grounds that there was a limited likelihood of establishing the existence of an anticompetitive practice.
In a decision rendered on January 11, 2017, the General Court of the European Union confirmed the Commission’s decision. It considered that the 4-year term had little relevance with regard to an agreement relating to short-term events which only take place every four years. Furthermore, the General Court noted the presence of numerous competitors of Panini and the applicant on the relevant market which is not limited solely to Word Cup and Euro collectibles (and which may be substituted for other collectibles about football or any other theme). It also found that the competitors of Panini, including the applicant, had been invited to participate in tenders organized by the federations for intellectual property rights (IPR) on the World Cup and Euro tournaments, and that on this occasion, the applicant had acquired IPR related to the World Cup and Euro tournaments from other federations. Recalling that a license agreement is not in itself forbidden, the Court found that in this case, the relevant market was not foreclosed and that it was functioning in a competitive manner. Therefore, there was no general exclusive purchasing obligation imposed by Panini downstream on its distributors and retailers, and Panini’s competitors were consequently not excluded from this downstream market.
The capacity for a parent company to exercise decisive influence on a joint subsidiary makes it liable for the latter’s actions
By a judgment rendered on January 18, 2017, the Court of Justice of the European Union (CJEU) confirmed the fine of more than €82 million imposed jointly on Toshiba and Panasonic for the conduct of their joint subsidiary for concerted practices in the field of cathode ray tubes for television sets.
It considered that, due to the decisive influence of parent companies on the conduct of their joint subsidiary on the market, these companies were liable for the joint venture’s participation in the concerted practice, even if this joint venture was a full function joint venture with a separate legal personality.
To confirm the judgment of the General Court of the European Union, the Court ruled that Toshiba’s mere capacity to exercise decisive influence on the joint venture was sufficient to incur its liability, even if the veto rights it holds were not implemented in practice, and even if Toshiba did not influence the joint venture’s operational management.
The Court then confirmed that the facts found by the General Court were sufficient evidence to conclude that decisive influence had been exercised and that Toshiba therefore had a veto right over the company’s business plan. Additionally, Toshiba had a veto right not only on the material investments of the joint venture but also on the acquisition of another company or business or on the granting of loans to subsidiaries, beyond a relatively modest limit. The fact that the joint venture was the parent companies’ preferred supplier for the production of television sets was further indication of the decisive influence of the parent companies on the subsidiary and the existence of close and lasting economic ties between these companies.