1. The CE imposes million-euro sanctions on several companies for cross-border and online trade restrictions
On 13 May, the EU Commission (EC) sanctioned beer-maker Anheuser-Busch InBev (AB InBev) with a fine of over EUR 200 million for restricting cross-border sales between Belgium and the Netherlands.
The EC has also published the Nike infringement decision of 25 March. Via this infringement decision, the EC fined Nike and several of its European subsidiaries with approximately EUR 12.5 million for restricting cross-border and online sales of merchandising products (of the French National Football Association and the F.C. Barcelona, Internazionale di Milano, Manchester United, A.S. Roma and Juventus teams).
The following is a brief summary of the behaviour that has been sanctioned in each case so that companies that operate in the consumer products sector within the EU can be aware of the risks that can arise when entering into and implementing licensing, merchandising and distribution agreements.
The EC has certified that from 2009 to 2016, AB InBev (the largest beer producer in the world):
- Changed the packaging of its Jupiler-brand products that were commercialised in the Netherlands at lower prices than in Belgium to make these products harder to sell in that country: they removed mandatory information in French and changed the size and design of beer cans;
- Limited the volumes of Jupiler products sold to a Dutch wholesaler to restrict the chances of that wholesaler importing those products into Belgium;
- Refused to supply certain products considered to be “essential” in the Belgian market to a Belgian retailer if it did not agree to limit or cease importing less expensive Jupiler beer from the Netherlands; and
- Conditioned a retailer’s product promotions to the retailer’s refusal to offer those promotions to their Belgian clients.
Although the sanctioned practices could have been considered as an infringement of Article 101 of the Treaty on the Functioning of the EU or TFEU (vertical restraints), the EC sanctioned the infringement under the scope of Article 102 TFEU (abuse of a dominant position).
In Nike’s case, the EC has proven that, from 2004 to 2017, Nike:
- Prohibited and prevented active and passive out-of-territory sales of Nike branded products. Nike employees at times brought the matter to licensees’ attention when they found licensed merchandise products outside the licensee’s domestic territory and asked them to cease trading outside “their domestic territory”;
- Restricted the sale of merchandising products in websites that made the sale of these products accessible to purchasers located outside of the territories assigned to each licensee and forced the licensees to submit all sales and delivery requests that came from outside the licensee’s territory for their evaluation by Nike;
- Punished the licensees that did not comply with the foregoing obligations; and
- Introduced claw back and double royalty clauses for cases where a licensee sold outside “its domestic territory”.
The EC has declared that Nike’s practices constitute a single and continuous infringement of Article 101 TFEU and that their objective was to control where their licensees and sublicensees could sell.
In both cases, the amount of the fines has been reduced (by 40% and 15%, respectively) since the companies have reached a settlement with the EC. Including both these cases, the EC has now reached settlements in eight non-cartel cases (after the ARA Foreclosure, Asus, Denon & Marantz, Philips, Pioneer and Guess precedents). The settlement procedure allows companies to reduce the total amount of the fine in return for the companies’ recognition of guilt and for collaborating with the EC during the investigation, thus, reducing the EC resources invested into the investigation as well as its duration.
➡ Recommendation: It is advisable to carefully revise distribution and licensing agreement clauses including online and cross-border sales provisions. It is also important that companies bear in mind that merchandising contracts are just another type of a distribution agreement.
2. Restrictive practices
2.1. Ongoing investigations
20/05/2019. The EC has carried-out inspections in the premises of two companies that operate in the grocery retail sector in France. Although the EC’s press release does not identify the companies, Groupe Casino and Intermarché have been identified by the media as inspected companies.
According to the media, the EC is investigating a possible infringement of Article 101 TFEU regarding the INCAA purchasing alliance, created by these two companies in 2014 and dissolved in 2018.
It is relevant that in July 2018, the French Autorité de la Concurrence opened investigations against the purchasing alliances established by, on the one hand, Auchan/Casino/Metro/Shiever, and Carrefour/Système U, on the other. The Autorité de la Concurrence is still investigating this possible collusion and no updates pursuant to the investigation are, so far, available [see our Consumer Products Alert | June - August 2018].
If the object of the EC’s investigation is confirmed, it would be the first time the EC investigates a purchasing alliance. This investigation, along with the previously mentioned Autorité de la Concurrence’s proceedings and the Belgian Competition Authority’s investigation (see below), prove the keen interest that competition authorities have for these types of alliances undertaken by retail companies in this sector.
Nustay alleges that both OTAs systematically restrict competition by penalising hotels that allow OTAs that compete with Booking.com or Expedia (such as Nustay) to offer rooms at a lower price than these platforms, by reducing their visibility and harming their rankings.
Furthermore, according to Nustay, the OTAs imposed “most favoured nation” clauses (MFN) that had restrictive effects on the market by forcing hotels to offer their rooms under the same conditions in all third-party reservation channels (via OTAs) as well as in their own channels (hotel websites), both online and offline.
20/05/2019. The Belgian Competition Authority has carried-out inspections in the premises of several companies that operate in the grocery retail sector in Belgium. According to the media, Carrefour and Provera Benelux (the entity that centrally manages the Delhaize Group supermarkets’ purchases) have been subject to the inspections. The Belgian Competition Authority is investigating certain purchasing alliances between the supermarkets that may have facilitated anticompetitive agreements.
This is not the first time that the grocery retail sector is investigated by the Belgian Competition Authority. In 2015, the authority settled with 18 companies, producers and retailers of drug, perfume and cosmetics products (inter alia Henkel, L’Oréal, Procter and Gamble, Unilever, Carrefour, Intermarché and Makro) and sanctioned them with fines amounting to EUR 174 million for several hub and spoke cartels between 2002 and 2007.
18/06/2019. The Polish Competition Authority has opened five infringement proceedings against five companies active in the wholesale bicycle and bicycle accessory market for possible restrictions of online trade and retail price maintenance practices.
AMP Polska, a bicycle accessory distributor, is being investigated for selling its products to retailers that operate online at higher prices than to those operating in traditional brick-and-mortar stores and for prohibiting them to sell their goods in online auctions.
Merida Polska, exclusive distributor in Poland of bicycle manufacturer Merida, is being investigated for refusing to deal with retailers that sold their bicycles at a lower price than its recommended prices for online sales.
The other investigations (against Trek Bicycle Corporation, Cossak and Aspire Sports) have as their object to analyse whether these companies have restricted competition both in online and brick-and-mortar sales.
08/05/2019. The Italian Competition Authority has opened a new investigation against Google for abuse of a dominant position.
Google operates an IT system, Android Auto, that integrates Android electronic devices (usually mobile telephones) with the interface of a vehicle to make them compatible with driving apps (music, GPS, etc). The authority is investigating Google for, allegedly, excluding the Enel X Recharge app (an app that allows users to locate electric vehicle charging stations) from Android Auto. The goal of said practice would be to favour Google’s own app, Google Maps, that also allows users to locate charging stations.
01/05/2019. The CMA has opened a new investigation into the musical instrument market in the UK regarding anticompetitive restrictive agreements. However, no indication whatsoever is given on the nature of these possible restrictive practices. The investigation shows the interest the authority has in this sector, as in April 2018 it opened another five investigations on vertical restraints.
In the investigation on guitar producer Fender Europe, a sanction reaching GBP 25,000 has been imposed to this company for refusing to consent to a CMA inspection. In another investigation against Casio, the CMA issued a statement of objections for possible retail price maintenance in the electronic piano market. The CMA has announced that it will issue a statement of objections this very summer regarding the third investigation. The final two investigations are still under seal.
29/05/2019. The Director of the Irish Competition Authority, Isolde Goggin, has stated that the authority has received several complaints pursuant to several alleged infringements of Competition Law in the beef-processing sector and regarding the beef producer-distributor alliance, Twenty20 Beef Club. However, the Irish Competition Authority does not, so far, have enough evidence so as to open an investigation or to request judicial authorisation to undertake inspections.
2.2. Infringement decisions
30/05/2019. The Spanish Competition Authority (CNMC) has sanctioned 34 school text-book publishers and the National Association of Teaching Books and Materials Publishers (ANELE) with fines reaching a total of EUR 33.8 million for (i) an infringement regarding the implementation and application of a Code of Conduct for the publishing sector and (ii) another infringement regarding the “E-textbook”.
- According to the CNMC, through the implementation and application of the Code of Conduct, the 34 sanctioned publishers and ANELE had adopted a strategy aimed at restricting competition when schools prescribed the textbooks on their students.
- The CNMC has accredited price-fixing and the imposition of commercial conditions regarding e-textbooks from 2014 to 2017.
3. Courts United Kingdom
02/05/2019. Media Saturn sued the British subsidiaries of Toshiba and Panasonic claiming damages from the TV and computer monitor tubes cartel. The British subsidiaries against which Media Saturn submitted its claim were not mentioned in the EC decision (although their respective parent companies were). Hence, the defendants consider that, as they had not been mentioned in the EC decision, there was no standing for claims to be brought against them.
However, the British judge has considered that, although the EC’s decision did not sanction these companies, nothing impedes a claimant from filing a suit notwithstanding the absence of a decision (i.e., submitting a “stand-alone” action). Furthermore, the judge has held that, although the British subsidiaries had not been sanctioned by the EC, they did indeed participate in the manufacturing of the products that were cartelised by their parent companies. According to the judge, “The fact that neither entity is an addressee of a Commission decision […], is, if not immaterial, then of marginal relevance”.
31/05/2019. The Vienna Cartel Court has refused to sanction Agrana Zucker and Südzucker AG (both sugar producers) for certain alleged anticompetitive horizontal agreements. At the date of this publication, the basis of this ruling is unknown.
In Austria, sanctions for Competition Law infringements are set by jurisdictional bodies at the request of the Austrian Competition Authority.
Germany and Sweden
Düsseldorf and Stockholm Courts allow Booking.com to apply "narrow" MFN clauses
“Wide” MFN clauses do not allow hotels to offer rooms (in any channel) at lower prices than those agreed with the OTA, so that the OTA is guaranteed to be able to offer the cheapest hotel room prices.
“Narrow” MFN clauses merely impede hotels from offering cheaper hotel room prices in the channels controlled by the hotel (e.g. its own website).
The Regional High Court of Düsseldorf has held that these clauses allow OTAs to avoid “free riding” problems, i.e. impeding that customers discover the hotel through Booking’s website and then make the reservation through the hotel’s own website. In the same vein, the Stockholm Court of Appeal has dismissed a claim filed by Visita (the Swedish hotel industry’s sector association) against narrow MFN clauses in agreements between Booking.com and hotel companies that are members of Visita.
However, this is a controversial issue that has not been treated in the same way in the jurisdictions where it has been analysed. The EC will specifically deal with this issue in the amendment of Regulation 330/2010 on Vertical Agreements (see infra).
19/06/2019. The Supreme Court of Romania has confirmed the Lei 269,852 fine (approximately EUR 61,000) that the Romanian Competition Authority imposed on the subsidiary of the Lactalis Group, Parmalat, in 2015 for having been a member of a hub and spoke cartel.
The Supreme Court has confirmed that, between 2005 to 2009, four retailers (Metro, Real, Selgros and Mega Image) and 21 producers (among them, Parmalat) took part in several hub and spoke cartels where, by contacting the producer and through their collaboration, grocery retailers set the same retail prices for their products, thus reducing intra-brand competition.
06/06/2019. Google intends to acquire Looker, a Santa Cruz (California) based company whose activity is the supply of information services to companies. It provides information through innovative data-exploration mechanisms of its website interface.
Google intends, via this acquisition, to integrate several of its products and services, particularly its Google Cloud sales team with the services provided for by Looker.
The parties are expecting to notify this concentration before several national competition authorities.
09/05/2019. The CNMC has authorised the transaction whereby the US investment fund, Platinum Equity Group will acquire exclusive control of Grupo Ibérica de Congelados, a Galician-based Spanish company that has emerged in the last years as one of the major fishing companies in Europe.
11/06/2019. The CNMC has authorised the acquisition of sole control of Grupo Palacios, a Spanish food-sector company, by the Spanish investment fund MCH (previously part of the Carlyle Group).
Grupo Palacios operates in the sectors of meat processing and preservation, ice-cream production, bread and fresh baked goods production and ready-to-eat meal production.
The decision has not yet been published in the CNMC’s website.
09/05/2019. The German Competition Authority, the Bundeskartellamt, has authorised the merger between the bookshops Thalia and Mayersche.
The Bundeskartellamt has stated that, although both companies represent a significant joint market share in several regional markets, the merged entity does not pose any risk for effective competition. Specifically, the authority has considered the foreseeable competitive restraints that the rise of online book commerce will exert.
20/05/2019. The Autorité de la Concurrence has authorised the acquisition of sole control of the Kooples Group (a family-owned Belgian clothing and shoe retailer of the Kooples brand), by the Swiss family group Maus Frères, which is a retailer of clothing and shoes of the Lacoste, Aigle and Gant brands.
23/05/2019. The Autorité de la Concurrence has authorised the acquisition of two abattoirs owned by Sofral, a subsidiary of Les Volailles Rémi Ramon by the LDC Group.
LDC Group is the largest poultry company in France. It sells its products under several brands, such as Maître Coq, Le Gaulois and Fermiers de Loué.
29/05/2019. The Czech Competition Authority has authorised the acquisition of UB Holding and its subsidiary United Bakeries by Agrofert, a corporate group of producers and retailers of agriculture, food and chemical goods.
The merger affects the wholesale markets of fresh bread, baked goods and toasted bread. In order to obtain authorisation, Agrofert was required to divest several production plants owned by the acquired entities.
E-commerce and vertical restraints
26/06/2019. Andrea Amelio (Policy Officer in the Competition Directorate-General of the EC) stated in a Brussels conference that the rise of e-commerce has shown the need to adapt the rules on vertical agreements to this new digital age.
Specifically, the “complexity and lack of predictability” of these rules as well as their permissiveness on selective distribution mechanisms, are two of the axes around which the amendment of these rules shall focus. The reforms will end with the replacement of Regulation 330/2010 on the application of Article 101(3) TFEU to categories of vertical agreements and concerted practices (Block Exemption Regulation), and the Guidelines on its application.
The Block Exemption Regulation is set to expire in 2022 and the public consultation period on its amendment has recently ended. The main issue on which the amendment process is focusing on is whether these rules are adequate for the digital age. In this regard, the EC is concentrating on MFN clauses (to harmonise the current regulatory divergence -see the article ut supra-), retail price maintenance and selective distribution (specifically the “hardcore” nature of these practices).
03/06/2019. EU Competition Commissioner, Margrethe Vestager, has analysed in the OECD’s Competition and the Digital Economy Conference in Paris the main problems that the new digital age poses regarding Competition Law.
The high level of connections that digital platforms offer (not only person-to-person, but also between machines) can incentivise the concentration of excessive market power in the hands of (few) platforms.
In order to promote competition in the digital market, competition authorities must generate opportunities so that small operators may be able to compete on equal footing with these platforms. Thus, according to the Commissioner, the EC will investigate MFN clauses to impede these platforms forcing their users to offer goods and services at higher prices in their competitor’s websites. Furthermore, the EC will have to stop digital platforms hindering their user’s ability to operate in platforms that provide similar services.
Finally, the Competition Commissioner focused on the “dual role” that several digital platforms have, both offering the platform services and acting as service providers that compete with their own clients in their own platforms (something similar to being both a “player and referee” in the same contest; see our Consumer Products Alert | November 2018 - January 2019). The Commissioner considers that this double role increases the risk of potential conflicts of interest that may incentivise the platform to modify the terms and conditions and the services it provides to favour itself against its customer-competitors.
Protected Designation of Origin
02/05/2019. The Court of Justice of the EU (CJEU) has issued a preliminary ruling posed by the Supreme Court of Spain pursuant to the protection of the Protected Designation of Origin (PDO) “Queso Manchego”.
The Fundación Consejo Regulador de la Denominación de Origen Protegida Queso Manchego (Foundation responsible for managing the PDO Queso Manchego) (the Foundation) filed a claim against Industrial Quesera Cuquerella (IQC) for applying signs and distinctive brands of the Castilla la Mancha region on its cheeses, which are not protected under the PDO. These signs consist in naming their cheeses as “Adarga de Oro” (small golden shield, similar to the one Don Quixote uses in the novel), “Super Rocinante” (Rocinante is Don Quixote’s steed), and the use of images that evoke characters and scenes from the Don Quixote novel (Don Quixote himself, Sancho Panza, Rocinante and windmills) in the packaging of the IQC cheeses (cheeses that although they do not meet the PDO standards, are indeed produced in the Autonomous Community of Castilla la Mancha).
In this regard, by upholding the interests of the Foundation, the CJEU has found that the evocation of a registered designation of origin, as well as the geographic area to which it is linked, can be carried-out using figurative signs. This applies even in cases where such figurative signs are used by a producer that is located in that same region but whose products, which are similar or comparable to those protected by the designation of origin, are not protected by it.
07/06/2019. The Dutch Competition Authority has published a study on the advertising agreements between hotel chains and booking websites.
According to the study, many hotel chains make agreements with booking websites not to advertise on search results for their brand names.
If a consumer enters the name of a hotel in a search engine, an automated instant auction will be held behind the scenes about what search result should be presented at the top of the list. Since a hotel has made arrangements with a booking website that the latter does not place any bids in the auction if the consumer enters the brand name of the hotel, the consumer will only be presented with an ad of the hotel and with the unpaid search results. According to the Dutch Competition Authority, the material consequence of this restriction is that consumers end up paying a higher price for the hotel room because when the reservation is made, the consumer does not immediately get to see a booking website, which means that the hotel faces less competition from other hotels on the booking website.
One potential benefit of these arrangements advertising expenditures could go down, the hotel chains passing such savings to consumers. However, the study shows that this has not been the case and that, in fact, prices have risen.