1. Intel case: Loyalty rebates applied by dominant undertakings
On 8 September 2017, the Court of Justice of the European Union (CJEU) delivered its ruling on the Intel v Commission (C-413/14) issue. In its judgment, the CJEU annulled the previous ruling of the General Court (T-286/09) confirming the €1.06 billion fine imposed by the European Commission on Intel for abusing its dominant position, urging the court of first instance to re-asses the case.
In 2009, the European Commission imposed the highest sanction to date on Intel as a result of the company´s rebate policy. This policy had been developed in relation to the sale of processors to four well-known computer manufacturers. The Commission understood that these rebates, granted in exchange for de facto exclusivity, were mainly aimed at excluding Intel´s only competitor in the market, i.e. Advanced Micro Devices, Inc. (AMD). For the Commission, those rebates constituted a per se anticompetitive practice. However, the Commission also applied the “As Efficient Competitor” (“AEC”) test in order to conclude that the rebate scheme was able to exclude its largest competitor in the processor market.
In 2014, the General Court upheld the decision of the European Commission. Nevertheless, the Court did not undertake an assessment of Intel´s claims with regard to the absence of exclusionary effects of its rebate policies when applying the efficient competitor test. The General Court understood that loyalty rebates are, by their very nature, able to restrict competition, in so far as they constitute exclusivity rebates.
Loyalty rebates are understood as rebates subject to the condition that the customer is supplied –entirely or in a substantial part of its needs– exclusively by the undertaking which grants those rebates. This policy, which is quite common in the consumer products sector, raises competition concerns if established by undertakings in a dominant position, in so far as it may foreclose the market vis-à-vis the dominant company´s competitors. These competitors are not able to access the buyers loyal to the dominant undertaking, thanks to its rebate practices and not for its savoir-faire.
In the past, loyalty discounts granted by companies in a dominant position have been considered per se restrictive practices. In the consumer products sector, several issues concerning the establishment of this sort of policy by dominant undertakings have been investigated by the competition authorities, and, when appropriate, the companies responsible for these rebates have been sanctioned. In this sense, for instance, the beer brewer Interbrew and the soft drinks manufacturer Coca Cola committed to withdraw such rebates from their commercial policies when the European Commission opened investigations on those companies for alleged anticompetitive practices in 2004 and 2005.
The judgment analysed in this document modifies the previous case law in order to “rationalise” the assessment of this type of business practice. In line with the opinion of Advocate General Wahl (see here), the Court of Justice criticises the ruling delivered at first instance, and clarifies that when examining whether a loyalty rebate scheme articulated by a dominant undertaking is able to restrict competition, the Commission has to take into account the following elements: (i) the extension of the dominant position; (ii) the market share covered by the rebates; (iii) the conditions, duration and quantity of the rebates; and (iv) the existence of a strategy aimed at excluding equally efficient market operators.
In this sense, the Court of Justice states that protecting less efficient market operators than the dominant undertaking is not the aim of prohibiting the abuse of a dominant position. Moreover, the Court sustains that in abuse of dominant position cases, the efficiencies which result from the policies developed by the dominant operators can also be taken into consideration.
In any case, the General Tribunal will now have to assess the economic arguments submitted by Intel on the basis of the efficient competitor test, determining thereby whether the rebates in question were able to restrict competition.
Lastly, leaving aside the relevant substantial content of the ruling, it is worth making reference to the procedural argument through which the Court of Justice confirms that the European Commission is entitled to prosecute anticompetitive practices which have been committed outside EU territory. In particular, by invoking the “qualified effects” criterium, the CJEU claims that EU Competition Law can be applied to practices that are committed outside this territory provided that those practices have an immediate and substantial effect on the European Union. In order to determine whether this effect takes place, the joint conduct of the undertaking has to be taken into account, and not only the conclusion of a given contract.
2. Restrictive practices
26/09/2017. The Competitive Authority of Cyprus has launched a formal investigation into Henkel and its subsidiary GPM Henkel Ltd concerning an eventual abuse of dominant position.
The preliminary investigation is a result of a complaint lodged by K.A.C Constantinides Trading Ltd.
Prima facie, the abuse of a dominant position would have taken place in the wholesale distribution of heavy duty laundry detergents market, in which Henkel would be applying exclusionary and/or obstructive practices to parallel importers in the market and/or exclusive supply practices of Dixan products.
As the Cypriot authority has pointed out, both practices would limit the distribution of products in the market, therefore distorting effective competition to the detriment of consumers.
29/09/2017. The Turkish Competition Authority has opened proceedings to examine whether Sony´s Turkish subsidiary has engaged in restrictive agreements by means of establishing the resale prices of the products sold by its dealers.
The investigation is the result of a complaint filed with the competition authority against the Japanese multinational corporation’s subsidiary.
30/08/2017. The Danish Competition Authority (Konkurrence- og Forbrugerstyrelsen) has found that a horizontal cooperation agreement between two media agencies –aimed at jointly purchasing and reselling unaddressed advertising material– breached competition law, as it included customer allocation.
The Danish authority has ordered the parties to abstain from entering into similar anti-competitive arrangements in the future.
The authority has also decided to submit the case to the Danish State Prosecutor in case criminal proceedings were to be brought against the companies.
11/09/2017. Google has decided to challenge the historic EUR 2.4 billion fine imposed by the European Commission as a result of the company´s alleged abuse of dominant position through its internet search engine. The Court of Justice of the European Union will review the fine imposed by the European Commission. However, it is expected to take several years before a decision is made at first instance.
Schweppes Spain (Opinion of Advocate General)
12/09/2017. The EU Advocate General Paolo Mengozzi has delivered his opinion within the framework of the preliminary ruling requested by the Commercial Court No 8 of Barcelona in May 2017 regarding the Schweppes Group. In particular, the legal dispute concerns the Spanish subsidiary of the Schweppes Group, Schweppes Spain, and the Coca Cola Group in the United Kingdom.
As we explained in previous editions (see here), the Schweppes trade mark has different proprietors depending on the country in question: while the proprietor of the trade mark in Spain is Schweppes España, in the United Kingdom it is the Coca Cola Group which holds the property rights of the brand. Thus, the issue under discussion is whether Schweppes España is entitled to impede the commercialisation on Spanish soil of Schweppes tonic beverages produced by the Coca Cola Group in the United Kingdom.
In his opinion, the Advocate General confirms the EU case law by virtue of which the exhaustion of the rights conferred to the trade mark –in the case of identical parallel marks– can operate when these marks are “under unitary control”. That said, the AG considers that the concept of unitary control applies only when the proprietors of parallel trademarks agree on their joint exploitation, adopting a commercial strategy aimed at preserving and maintaining the image of the unitary mark in their own signs –which only occurs provided that certain requirements are met.
In any case, it is the national judge´s task to examine the evidence and the factual circumstances in order to determine the fulfilment of the requirements which undermine the application of the exhaustion doctrine in these cases, characterised by a fragmentation of exclusive rights with the same origin.
August 2017. The Tribunal Supremo has confirmed the legality of the decision delivered by the Spanish Competition Authority on the existence of agreements aimed at sharing the mussel market in Galicia and at fixing the commercial terms and prices among associations and majority organisations between 1997 and 2008 (case file S/0107/08, Plataforma del mejillón).
In its judgment, the Tribunal Supremo rejects one by one the allegations made by the appellant (OPMEGA association). Among other reasons, the Spanish Court has rejected that the agreements in which the associations participated met the requirements to benefit from the exemption foreseen for those arrangements that are not prohibited as they generate sufficient economic efficiencies; that the necessary elements to recognise continuous infringement were not present; and that the role played by the Administration in the case justified the invoking of the principle of legitimate expectations.
24/08/2017. The Düsseldorf Higher Regional Court confirms the decision of the German Competition Authority (Bundeskartellamt) on the prohibition of the merger between the supermarket chains EDEKA and Kaiser´s Tengelmann. The Court has upheld the thesis of the Bundeskartellamt, which sustained that the merger would have negative effects on the retail food market.
Initially, the German Economics Ministry had considered the possibility of authorising the merger on the grounds of public interest. The commitments required by the Bundeskartellamt were rejected by the parties and the issue ended up in court.
Monsanto / Bayer (Press release)
22/08/2017. The European Commission has announced the opening of an in-depth investigation into the proposed acquisition of German entity Bayer by the American multinational corporation Monsanto. The acquisition was notified on 30 June.
The operation, which was promoted by the agrochemical giant, would predominantly target the Bayer Crop Science division, which mainly covers agricultural treatment products (products used for the protection of seeds and traits and environmental science in general).
If completed, the transaction would create the world's largest integrated pesticides and seeds company; implying the merging of two of the strongest competitors in the field of non-selective herbicides, the treatment of seeds and traits and the development of the so-called digital agriculture; and, it would also result in the reduction of competitors in an already concentrated market, especially taking into account the recent mergers of Dow / Dupont and Syngenta / ChemChina.
Selecta / Pelican Rouge (Press release) 25/08/2017. The European Commission has conditionally authorised the acquisition of the Dutch vending services provider and machine installer Pelican Rouge by its Swiss competitor Selecta.
After having analysed the effects of the transaction in the EEA countries where the activities of both companies overlap, the Commission has concluded that the transaction does not pose anticompetitive risks in any of those countries, with the exception of Finland, where a significant concentration in the market for full vending services –including the segment for hot beverages– would take place.
Consequently, authorisation has been conditioned to Selecta divesting all its vending services in Finland.
03/08/2017. The European Commission has authorised the acquisition of the Danish Company Faerch Plast by the American Advent International Corporation.
Faerch Plast manufactures plastic trays for food packaging. Advent, in turn, is a private equity investment firm.
01/09/5017. The European Commission has approved the acquisition of the German manufacturer of dairy products Omira by the French dairy group Lactalis.
Despite both companies´ activity overlapping in the raw milk supply market and in the long-life dairy products market in Italy and Slovenia, the Commission has concluded that the transaction does not raise competition issues.
The presence of credible competitors in the market and the limited increase in the market share that would result from the transaction explain the Commission´s decision.
Nestlé / Beverage Partners World (Notification request)
11/09/2017. Nestlé has notified the European Commission of its intention to acquire exclusive control of the NESTEA branded RTD tea business, currently operated by Beverage Partners Worldwide, a joint venture created between Nestlé and The Coca Cola Company.
The transaction will affect the NESTEA branded RTD tea business in all European countries except for the Iberian Peninsula.
21/09/2017. The Catalonian group Europastry, Spanish leader in the deep-frozen bread market, has notified the CNMC of the acquisition of control over the Galician company Ingapan, specialising in the manufacture of bakery and farinaceous products.
Europastry will acquire 60% of Ingapan´s shareholding. Europastry has been regularly supplying Ingapan and both companies had associated in the past to set up production centres in Begonte (Lugo) and Tenerife.
18/09/2017. Douglas España, subsidiary of the German group Douglas GmbH, has notified the CNMC of the acquisition of the perfumery and cosmetics marketer Dapargel, which belongs to the Eroski group.
The transaction implies an acquisition of sole control. The affected markets are the wholesale trade of perfumery and cosmetics and the retail business of cosmetic and care products in specialised dealers.
Sligro / Heineken (Press release)
12/09/2017. The Dutch Competition Authority (Autoriteit Consument & Markt) has accepted the acquisition of part of Heineken’s wholesale activities by Sligro.
Through this transaction, Sligro, a wholesale supplier of food, acquires certain segments of Heineken’s wholesale business, including customer relations, supply and logistics contracts, as well as certain assets with regard to food products and non-food products related thereto, such as napkins and disposable cutlery for the hospitality industry.
Sligro does not acquire the wholesale activities related to beer and cider, which will continue to be operated by Heineken, although it will provide logistics services for Heineken in this respect.
The Dutch authority has authorized the transaction having assessed that there are sufficient competitors in the market segments in which Sligro will operate (such as Lekkerland, Hanos, Bidfood and Makro), and that the market increasingly experiences competitive pressure from direct deliveries by producers, and from buying from supermarkets
Fnac / Darty (Press release)
11/09/2017. The Autorité de la concurrence has opened an investigation to examine the conditions under which Fnac is carrying out the divestment required to conclude the acquisition of Darty.
In July last year, the French Competition Authority approved the acquisition of the household appliances and electronic devices marketer Darty by the Fnac group. The transaction, however, was authorized subject to the condition that Fnac would get rid of six physical stores in the city and region of Paris.
The deadline for meeting the commitments required by the Autorité de la concurrence expired on 31 July 2017. To date, however, the Fnac group has only divested four of the six stores required by the commitments. Consequently, the Autorité has decided to open a proceeding to investigate the extent to which the Fnac group is working to fulfil the commitments.
15/08/2017. The British supermarket chain Sainsbury´s has put the takeover of wholesaler Nisa on hold.
Doubts over the viability of the transaction under British Competition Law would explain the suspension of the negotiations.
According to the publicly available information, Sainsbury’s is awaiting the decision of the Competition and Markets Authority on a similar transaction between the supermarket chain Tesco and the food wholesaler Booker (see here).
The CNMC appeals the Decrees regulating tourist apartments and holiday homes in Gelicia and Castilla y León (Press release)
06/09/2017. The CNMC has appealed the decrees issued by the regional governments of Galicia and Castilla León which regulate tourist apartments and holiday homes. The competition authority sustains that the legislation passed by both autonomous communities breaches competition law and is contrary to the principle of efficient economic regulation.
Among the controversial articles, the CNMC particularly opposed the following: the establishment of catalogues, guides, directives and IT systems containing indicative prices for the apartments; the excessive technical requisites and minimum services required; the prohibition of per room rent modalities, etc.
The CNMC has appealed similar decrees in the Autonomous Community of Madrid and the Canary Islands. Both the High Court of Madrid and the High Court of Canarias have ruled in favour of the competition authority, thus annulling the competition-restrictive articles.
Common Agricultural Policy and agrifood chain (Press release)
16/08/2017. The European Commission has launched a public consultation in the EU on how to achieve a fairer agrifood chain in the European Union.
Farmers, citizens and all interested parties are invited to share their opinion on the functioning of the agrifood chain in the EU. The online public consultation will remain open until 17 November. You can access the consultation using this link.
Butter price (Press release)
27/09/2017. The Latvian Competition Authority (Konkurences padome) has published a report on the factors explaining the increase of butter prices in Latvia and in the European Union. The exponential rise of butter prices over the last year –a 94% increase in the EU– has raised concerns in the dairy industry as well as among consumers.
In its report, the Latvian authority points towards the global dynamics in the dairy market, particularly the poor climate conditions and the decreasingly interventional role of the EU vis-à-vis the Common Agricultural Policy. According to the authority, these dynamics result in a reduction in the production of dairy products in general and, consequently, in the rise of prices as the supply decreases.
Moreover, according to the Latvian authority, the demand of butter has increased in so far as, over the last few years, consumers seem to be reticent to acquire vegetable oil and, especially, palm oil. The substitution of vegetable oils for the consumption of butter implies an increase of the demand of the latter, and a subsequent rise in prices.
The Latvian authority also observes that the percentage of fat content in milk has considerably diminished in the last few years. Thus, more milk is required in order to produce a significantly fatty product such as butter. This increases production costs and the final price.
Lastly, the authority points at the retail businesses. In Latvia, their profit margin for selling butter reaches 70%. This pricing policy is further fuelled by the atmosphere of growing demand and falling supply.
16/08/2017. The German Bundeskartellamt reminds those harmed by restrictive practices that they can claim damages against the companies involved in the illegal arrangement. In a report on the decision of sanctioning the clothing manufacturer Wellensteyn and the retail supplier P&C Düsseldorf –see last edition–, the competition authority stresses the possibility of claiming damages.
The competition does not only remind those harmed by the vertical arrangement that they can trigger action in court to claim damages, but also adds that the courts are bound by the decision made by the competition authority, as long as the decision is final.