Competition: Court of Justice of the European Union dismisses appeal lodged by Telefónica and Telefónica de Espaħa concerning abuse of a dominant position on the Spanish broadband market

On 10 July 2014, the Court of Justice of the European Union (“CJEU”) handed down its judgment on an appeal lodged by Telefónica S.A. and Telefónica de Espaħa S:A:U: (“Telefónica”) against the General Court’s (“GC”) judgment concerning the abuse of a dominant position by Telefónica on the Spanish broadband market. The GC’s judgment upheld the Commission’s decision of July 2007 imposing a fine of EUR 151.9 million on Telefónica for having abused its dominant position in violation of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”) by imposing an unlawful margin squeeze between the prices for retail broadband access on the Spanish ‘mass market’ and the prices on the regional and national wholesale broadband access markets. The infringement took place throughout the period from September 2001 to December 2006. In its judgment, the CJEU dismissed Telefónica’s appeal in its entirety and upheld the fine imposed by the Commission and upheld by the GC. Firstly, the CJEU concluded that the GC carried out an in-depth review of the Commission’s decision in light of the pleas in law put forward by Telefónica, which satisfied the requirements of a review exercising its powers of unlimited jurisdiction. The CJEU also pointed out that, according to the findings of the GC, the Commission correctly demonstrated the existence of a margin squeeze with potential anticompetitive effects which is sufficient to establish that the practice of squeezing margins was abusive. As for Telefónica’s argument that the Commission’s interpretation of the conditions for the application of EU law to the practice of squeezing margins was not foreseeable, the CJEU noted that interpretation was reasonably foreseeable at the time of the infringement was committed and rejected Telefónica’s argument also in this regard. Furthermore, according to the CJEU, the GC did not err in law in finding that the restriction of the relevant geographic market to Spain does not mean that the infringement cannot be classified as ‘very serious’ but the classification of an infringement as ‘serious’ or ‘very serious’ does not depend only on the size of the relevant geographic market but also on other criteria characterizing the infringement. Finally, the CJEU concluded that the Commission gave adequate reasons for its decision, that there was no breach of the principle of equal treatment and that Telefónica had failed to show in what way the starting amount of EUR 90 million imposed by the Commission in its decision was  excessive to the point of being disproportionate. Source: Court of Justice of European Union Press Release 10/07/2014

Competition: Commission fines Servier and five generic companies for curbing entry of cheaper versions of cardiovascular medicine

On 9 July 2014, the Commission imposed fines totaling EUR 427.7 million on the French pharmaceutical company Servier and five producers of generic medicines, namely Niche/Unichem, Matrix (now part of Mylan), Teva, Krka and Lupin, for concluding a series of deals all aimed at protecting Servier’s blockbuster blood pressure control medicine, perindopril, from price competition by generics in the EU. The Commission found that Servier had implemented a strategy to exclude competitors and delay the entry of cheaper generic medicines through a technology acquisition and patent settlements with generic rivals in breach of EU competition rules. Perindopril used to be Servier’s best-selling product and Servier held significant market power in the market for the perindopril molecule. Servier's patent for the perindopril molecule expired, for the most part, in 2003 and producers of generic versions of perindopril were intensively preparing their market entry. The Commission found that Servier acquired the most advanced competing technology, forcing a number of generic projects to stop and therefore delaying their entry. With this way to the market cut off, generic producers decided to challenge Servier's patents before courts. However, each time Servier and the company in question settled the challenge and the generic companies agreed to abstain from competing in exchange for a share of Servier's rent. This happened at least five times between 2005 and 2007 and cash payments from Servier to the generic producers amounted to several tens of millions of euros in total. Servier thus gained certainty that the generic producers would stay out of the national markets and refrain from legal challenges for the duration of the agreements. According to the Commission, it is legitimate and desirable to apply for patents, including so-called process patents, to enforce them, to transfer technologies and to settle litigation. However, the Commission found that Servier had misused such legitimate tools and violated EU competition rules by shutting out a competing technology and buying out a number of competitors that had developed cheaper medicines, to avoid competing on their own merits. Source: Commission Press Release 09/07/2014

Competition: Commission calls for strengthening position of national competition authorities to ensure effective enforcement of competition rules throughout the EU

The Commission has adopted a Communication identifying areas for action to enhance the enforcement of EU competition rules by national competition authorities (“NCAs”). The entry into force of Regulation 1/2003 in 2004 transformed the competition enforcement landscape, giving NCAs and national courts a key role in applying the EU rules on restrictive business practices and abuses of dominant market positions, namely Articles 101 and 102 of the Treaty on the Functioning of the European Union (“TFEU”). Based on ten years of experience, the Commission aims to further strengthen the position and tools of the NCAs. The Communication sets out priority areas where further progress is necessary and the Commission will then assess which policy initiatives should be taken to best achieve these goals. Source: Commission Press Release 09/07/2014

Competition: Commission adopts Staff Working Document on “by object” restrictions of competition

On 25 June 2014, the Commission issued revised rules for assessing when minor agreements between companies are not caught by the general prohibition of anticompetitive practices under EU competition law ("De Minimis Notice"). The De Minimis Notice provides a safe harbor for agreements between undertakings which the Commission considers to have non-appreciable effects on competition provided that the market shares of the undertakings concluding those agreements do not exceed the market share thresholds set out in the De Minimis Notice and that the agreements do not have as their object the restriction of competition. To assist companies in their assessment of whether agreements can benefit from the safe harbour, the De Minimis Notice is accompanied by a regularly updated Staff Working Document (“Staff Working Document”) setting out restrictions of competition that have been considered restrictions by object and providing guidance relating to the situations in which restrictions may benefit from the De Minimis Notice. The Staff Working Document does not contain any new law or requirements but has its basis on the restrictions of competition that are described as “by object” or “hardcore” in the various Commission regulations, guidelines and notices. Further, the Staff Working Document provides examples on the case law of the Court of Justice of the European Union (“CJEU”) and the Commission’s decisional practice. According to the Staff Working Document, restrictions of competition by object are those that by their very nature have the potential to restrict competition and which, in the light of the objectives pursued by the EU competition rules, have such a high potential for negative effects on competition that it is unnecessary for the purposes of applying Article 101(1) of the of the Treaty of the Functioning of the European Union (“TFEU“) to demonstrate any actual or likely anti-competitive effects on the markets. The Staff Working Document notes that the types of restrictions that are considered to constitute restrictions by object differ depending on whether the agreements are entered into between actual or potential competitors or between non-competitors. As for restrictions by object in agreements between competitors, the Staff Working Document mentions three classical types of restrictions, namely price fixing, output limitation and market sharing and discusses also bid rigging, collective boycott agreements, information sharing as well as restrictions on carrying out R&D or using own technology. As regards restrictions by object in agreements between non-competitors, the Staff Working Document discusses in particular sales restrictions on buyers, licensees and suppliers and resale price maintenance. The Staff Working Document is without prejudice to developments in the case law and in the Commission's decisional practice and does not prevent the Commission from finding restrictions of competition by object that are not identified in said document. The Commission's competition service will regularly update the examples listed in the Staff Working Document in the light of such further developments that may expand or limit the list of restrictions by object. Source: Commission Press Release 25/6/2014, Commission MEMO/14/440 25/6/2014 and Commission Staff Working Document Guidance on restrictions of competition “by object” for the purpose of defining which agreements may benefit from the De Minimis Notice

Competition (Finland): Market Court fines Valio EUR 70 million for abuse of dominant position

On 26 June 2014, the Finnish Market Court handed down its ruling dismissing an appeal brought by Valio Oy (“Valio”) against the Finnish Competition and Consumer Authority’s (“FCCA”) decision of December 2012 and imposed a EUR 70 million fine on Valio for having abused its dominant position by engaging in predatory pricing in the market for production and wholesale of fresh milk. In its decision of December 2012, the FCCA found that Valio had reduced its wholesale price of fresh milk below average variable production costs as of March 2010. The below cost pricing still continued when the FCCA handed down its decision in December 2012. The FCCA also found that Valio’s below cost pricing aimed to foreclose its competitors from the Finnish fresh milk market. Therefore, the FCCA found Valio’s conduct to amount to predatory pricing and ordered Valio to cease the abusive conduct and proposed that the Market Court should impose a fine of EUR 70 million on Valio. In its ruling, the Market Court upheld the FCCA’s finding that Valio’s fresh milk prices were below Valio’s average variable production costs for the entire period investigated by the FCCA. Further, the Market Court held that Valio’s price reductions were part of a detailed plan which aimed to force Arla out of the market by the end of 2011 or to significantly weaken Arla’s position in the market. Valio also aimed to increase its market share in the Finnish fresh milk market to 80 %. The Market Court also held that Valio’s plan was to raise prices back to their previous level once it had reach its goals. According to the Market Court, Valio’s behavior constituted a serious breach of the Finnish Competition Act and, therefore, the Market Court imposed the EUR 70 million fine on Valio proposed by the FCCA. This is the highest fine for an individual company in the Finnish competition law history. Valio has publicly announced that it will appeal the Market Court decision to the Supreme Administrative Court, which is the final appellate instance. Source: Market Court Press Release 26/6/2014

Merger control: Commission fines Marine Harvest EUR 20 million for taking control of Morpol without prior EU merger clearance

The Commission imposed a fine of EUR 20 million on a salmon farmer Marine Harvest ASA (“Marine Harvest”) for acquiring a 48.5 % stake in Morpol ASA (“Morpol”), both of Norway, without having received prior authorization under the EU Merger Regulation. The acquisition would have combined two of the largest farmers and primary processors of Scottish salmon and the Commission eventually approved the transaction subject to conditions. Under the EU Merger Regulation, mergers and acquisitions with an EU dimension must be notified to and authorized by the Commission before they are implemented. This so-called “standstill obligation” allows the Commission to identify whether the concentration raises competition concerns and, if the companies do not submit commitments that address them, to prohibit the transaction and prevent it from taking place. In the case at hand, the Commission concluded that Marine Harvest had committed a serious infringement of the EU merger control rules as it had acquired de facto sole control over Morpol eight months before the formal notification and over nine months before the Commission authorized the transaction although Marine Harvest should have been aware of its obligations under the EU Merger Regulation. Therefore, the failure of Marine Harvest to comply with these obligations amounted to negligent conduct. According to the Commission, the infringement was  also particularly serious and could have given rise to competition concerns because the transaction, as originally notified, raised serious doubts as to its compatibility with the internal market and it was approved only after the submission of significant remedies. The Commission’s decision only relates to the breach of the standstill obligation and has no impact on the Commission’s authorization of the transaction. Source: Commission Press Release 23/07/2014

Merger control: Commission conditionally approves acquisition of Rautaruukki by rival SSAB 

The Commission approved the proposed acquisition of Rautaruukki Oyj (“Ruukki”), of Finland, by its rival SSAB AB (“SSAB”), of Sweden. Both companies are active in the production and distribution of carbon steel and steel construction products. According to the Commission, the proposed acquisition, as originally notified, would have significantly reduced competition on the markets for certain carbon steel products in the Nordic countries, as well as for stainless steel and profiled steel construction sheets in Finland allowing the combined entity to raise prices in the Nordic countries. Furthermore, the Commission’s investigation revealed that continental European steel producers, in spite of large overcapacity, have limited market presence in the Nordic countries for the supply of hot-rolled, cold-rolled and organic-coated carbon steel flat products, and face barriers to expansion in particular in terms of routes to market, access to efficient local supply chains and transport costs. Moreover, SSAB and Ruukki have strong, vertically integrated businesses that are today in close competition. The Commission also found that SSAB and Ruukki are currently the clear market leaders in their respective home countries for the distribution of flat carbon steel products, and directly or indirectly control a large majority of the distribution in Norway. In addition, for the distribution of stainless steel in Finland, the combined entity would become more than three times larger than its only sizable remaining competitor BE Group. To address the Commission’s concerns, SSAB committed to divest five businesses in Finland, Sweden and Norway. Therefore, the Commission concluded that the proposed transaction would not significantly impede effective competition in the EEA or in any substantial part thereof. Source: Commission Press Release 15/07/2014

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 Dalkia’s operations in France by EDF
  • Commission approves merger between Carphone and Dixons
  • Commission approves acquisition of Motorola Mobility by Lenovo
  • Commission approves acquisition of joint control over Het Gastenhuis by Amvest and NPM
  • Commission approves acquisition of E-Plus by Telefónica Deutschland, subject to conditions
  • Commission approves acquisition of ONO by Vodafone
  • Commission approves acquisition of Independent Clinical Services Group by TowerBrook Investors
  • Commission approves acquisition of RWE Dea by LetterOne
  • Commission approves joint venture between SITA and Remondis in Dutch plastic waste sorting sector
  • Commission approves joint venture between Faurecia and Magneti Marelli in automotive supply sector
  • Commission approves joint venture between Sonangol and DTS in the LNG trading sector
  • Commission approves acquisition of Segezha Pulp and Paper Mill by Sistema
  • Commission approves acquisition of joint control over Labeyrie Fine Foods by PAI Partners and Lur Berri
  • Commission approves acquisition of Euro Media Group by PAI Partners
  • Commission approves acquisition of Mauser by CD&R Fund IX in packaging sector
  • Commission approves acquisition of joint control over Nets Holding by Advent International and Bain Capital
  • Commission approves acquisition of joint control over Visma by HgCapital, KKR and Cinven
  • Commission approves acquisition of joint control over Haier Biomedical and Laboratory Product by Carlyle and the Haier Group
  • Commission approves acquisition of controlling stake in wind farm operator Skogberget Vind by the Gothaer insurance group
  • Commission approves acquisition of Sinarmas Cepsa Pte by Cepsa and Golden Agri-Resources
  • Commission approves acquisition of sole control over Argos Group Holding by Reggeborgh
  • Commission approves acquisition of Deoleo by CVC
  • Commission approves joint venture between Cargill and Copersucar in the trading of sugar
  • Commission approves acquisition of Endemol by Apollo Management
  • Commission approves joint venture between Russian Machines and Fritzmeier for cab design and production
  • Commission approves acquisition of Bank Gospodarki Żywnościowej by BNP Paribas Fortis
  • Commission approves creation of a joint venture by Bekaert and Maccaferri
  • Commission approves acquisition of Groupe Steria by Sopra Group
  • Commission approves acquisition of Flint Group by Goldman Sachs and Koch Industries
  • Commission approves acquisition of Kion Group by Weichai Power
  • Commission approves acquisition of Foster Wheeler by rival AMEC
  • Commission approves joint venture between Allergopharma, Stallergenes and LETI
  • Commission approves acquisition of MZLZ Retail by Aéroports de Paris and Aelia
  • Commission approves acquisition of Teeuwissen and Jagero II by Saria
  • Commission approves joint venture between Lagardère Services and SNCF participations
  •  Commission approves acquisition of US headphone maker and music streaming business Beats by Apple
  • Commission approves acquisition of Vencorex by PTT Public Company Limited
  • Commission approves acquisition of Ipreo by Goldman Sachs and Blackstone
  • Commission approves acquisition of Pirelli's steel tyre cord business by Bekaert
  • Commission approves acquisition of Uniqa Life by Uniqa Insurance Group
  • Commission approves acquisition of GEA's heat exchanger business by private equity company Triton
  • Commission approves acquisition of Doeflex by INEOS in plastic compounding sector
  • Commission approves acquisition of Bull by Atos
  • Commission approves acquisition of Clece by ACS
  • Commission approves acquisition of sole control over Visteon Interiors by Cerberus Group
  • Commission approves acquisition of Delek Europe by TDR
  • Commission approves acquisition of EdRCP by Bridgepoint
  • Commission approves acquisition of parts of Rolls-Royce by Siemens
  • Commission approves joint venture between D'Ieteren and Continental in car sharing services
  • Commission approves acquisition of joint control over Northwind by Parkwind, Aspiravi and Summit
  • Commission approves acquisition of Vedici Groupe by CVC Capital