EU Competition

Paramount’s commitments accepted by the Commission. On 26 July 2016, the European Commission (Commission) announced that it had accepted undertakings provided by Paramount Pictures International Limited (Paramount) in respect of cross-border pay-TV services. The commitments address the Commission’s concerns in respect of clauses in film licensing contracts entered into between Paramount and Sky UK (Sky) which have the effect of (a) preventing EU consumers outside of the UK and Ireland from accessing films via satellite or online from Sky; and (b) ensuring that only Sky is permitted to make their pay-TV services available in the UK and Ireland. The Commission concluded that “such clauses restrict the ability of broadcasters to accept unsolicited requests (so-called "passive sales") for their pay-TV services from consumers located outside their licensed territory” and, as a result, might negatively impact cross-border competition among pay-TV broadcasters. Paramount has committed to not act upon or enforce these clauses in existing contracts with EEA broadcasters, nor reintroduce any similar clauses in future licensing agreements with EEA-based broadcasters.

E.ON released from commitments ahead of schedule. On 26 July 2016, the Commission announced that it had released E.ON from commitments it provided in order to reduce long-term bookings on the German gas grid, which had the effect of preventing new entrants to the market. Specifically, new entrants were unable to gain sufficient access to the gas pipelines as E.ON was booking on a long-term basis the significant majority of the available transport capacity at entry points into its own gas transmission networks. E.ON provided commitments in May 2010 (which were due to last until April 2021) to address the Commission’s concerns. At E.ON’s request, the Commission re-assessed the market position and found that due to the successful implementation of the commitments, competition has significantly increased following a number of new competitors entering the German gas market.

AG hands down opinion in respect of animal feed phosphates cartel appeal. On 28 July 2016, the Advocate General handed down his opinion in respect of Timab Industries’ (Timab) appeal against the General Court’s decision to uphold the decision of the Commission in respect of Timab’s participation in the animal feed phosphates cartel and the fine imposed on it by the Commission. Whilst Timab took part initially in the Commission’s settlement procedure, Timab later decided to withdraw from settlement when it found out the range of fines the Commission intended to apply for the alleged conduct. In its appeal to the General Court, Timab claimed it was penalised in the fine that was later imposed by the Commission because of Timab’s decision to withdraw from the settlement procedure. The General Court rejected Timab’s arguments, and Timab appealed the General Court’s judgment to the European Court of Justice (ECJ). In his opinion, however, the Advocate General found that the General Court correctly considered the fine imposed on Timab including any reductions that could be applied to fines imposed on companies inside or outside of the settlement procedure. On this basis, the Advocate General did not find that the amount of the fine imposed on Timab was excessive.

EU Mergers

Phase I Mergers

  • M.7927 EPH / ENEL / SE (25 July 2016)
  • M.8032 RAM / TERMICA MILAZZO (26 July 2016)
  • M.8116 MACQUARIE / SLFL GIO II / SGI ITALIA (26 July 2016)

State Aid

ECJ dismisses Pollmeier Massivholz appeal against German State aid decision. The ECJ has published its order of 14 July 2016 dismissing  in its entirety Pollmeier Massivholz GmbH & Co. KG’s (PM) appeal against a General Court judgment that had only partially upheld PM’s challenge of a Commission’s decision to reject PM’s complaint regarding two German state aid measures provided to PM’s competitor, Abalon DE (Abalon). In its order, the ECJ rejected the majority of PM’s pleas as inadmissible, finding that PM’s arguments challenged the assessment of the evidence made by the General Court without alleging any distortion of that evidence. According to the ECJ, PM’s remaining arguments were unfounded or irrelevant.

General Court rejects application to suspend repayment of illegal Belgian State aid.The General Court has published its order of 19 July 2016 rejecting an application made by Belgium for interim measures to suspend the recovery of tax reliefs granted to companies under Belgium’s excess profit tax scheme following a Commission decision finding that such scheme constituted illegal State aid. In March 2016, Belgium brought an action before the General Court for the annulment of the Commission’s decision, and in April 2016 Belgium brought an action for interim measures in order to suspend the relevant payments pending the General Court’s judgment in its appeal of the Commission’s decision. In rejecting Belgium’s application for interim measures, the General Court noted it is only in exceptional circumstances that interim measures suspending the operation of a decision can be granted. The General Court also noted that Article 156(3) of the General Court’s Rules of Procedure requires sufficient urgency for interim measures to be applied, and requires serious and irreparable harm to the applicant’s interests being caused during the period before the appeal decision is reached. In rejecting Belgium’s appeal, the General Court found that Belgium had been unable to establish that it would suffer the requisite harm.

Spain ordered to recover illegal State aid provided to ADIF. On 25 July 2016, the Commission announced that it has ordered the recovery of illegal State aid granted by Spain to railway operator, ADIF, for the construction of a high-speed train test centre in Andalusia. During its investigation, the Commission found that Spain had already paid a substantial sum to ADIF, prior to the Commission approving its State aid plans, in violation of EU rules. The Commission also found that the project was not in line with EU State aid rules as (a) it did not meet a genuine objective of common interest, given that there was no market for high-speed services meaning the project was not commercially viable; (b) the private sector showed no interest in investing in the project, leading to the project generating losses during its period of operation; and (c) overall, the project did not contribute to the objective of promoting a sustainable development of the Andalusia region. The Commission, therefore, found that “the public funding would thus create a distortion of competition by subsidising a new entrant in the market”.

Advocate General hands down opinion on Spanish State aid for acquisitions of foreign companies. On 28 July 2016, the Advocate general handed down his opinion on the Commission’s appeals against two General Court rulings annulling a decision of the Commission which found that a Spanish tax scheme that allowed deductions of shareholdings in foreign companies breached State aid rules. In particular, the Commission found that the scheme provided a selective advantage to Spanish companies acquiring foreign EU companies over Spanish companies acquiring national companies. The General Court, however, said it could not establish any selectivity as the tax scheme was, in principle, available to any Spanish company. The Advocate General, upheld both of the Commission’s appeals, finding that, “tax measures which favour undertakings that export capital from a Member State to the detriment of others which, in a comparable situation, invest in the national territory are selective within the meaning of Article 107(1) TFEU”.

UK Competition

High Court orders documents relating to smart card chips cartel to be handed to Vodafone pursuant to its damages claim. On 25 July 2016, the High Court ordered Infineon Technologies, Renesas Electronics, and certain other companies who were found by the Commission to have participated in a smart card chips cartel, to hand over certain documents to Vodafone to pursue its damages claims against the parties. The documents in question were already in existence prior to the EU investigation, and were provided to the Commission together with certain information in response to a request for information from the Commission. As the Commission has yet to publish the public version of its decision, Vodafone requested the documents in order to enable it to pursue its damages claim against the cartel. The documents are now required to be provided, subject to redactions, pursuant to the High Court’s order.

Court of Appeal rejects challenge brought by FIPO against CMA’s findings in private healthcare investigation. On 25 July 2016, the Court of Appeal (CoA) rejected a challenge brought by the Federation of Independent Practitioner Organisations (FIPO), against the Competition and Markets Authority’s (CMA) finding in its private healthcare market investigation that private insurers had not distorted competition between physicians. FIPO argued that the purchasing power of AXA and other private healthcare insurers, prevented physicians from charging fees either above or below the standard fees set by the insurers. The CMA, however, found that although the standard fees set by insurers acted as a constraint on physicians’ fees, there was no evidence to suggest that this had resulted in a reduction in consumer choice or generally harmed competition.

CMA publishes final report following Phase II investigation into Ladbrokes / Coral merger. On 26 July 2016, the CMA published its final report as part of its Phase II investigation into the merger of Ladbrokes plc (Ladbrokes) and certain businesses of Gala Coral Group Limited (Gala), both of which are active in the betting and gaming sector. The CMA has identified a number of local areas where the parties overlap and as a result of the merger, a substantial loss of competition might be expected to occur at a regional and national level. As a result, the CMA has accepted Ladbrokes’ commitments to make certain divestitures in the affected areas to address their concerns, but notes that this is conditional on whether suitably qualified up-front purchasers of the divested betting shops can be found. The CMA also set out its review of whether 1999 undertakings, provided in connection with a previous acquisition by Ladbrokes of a Coral betting business, are no longer appropriate in light of subsequent changes in the market and should, therefore, be superseded by new undertakings in order to permit the new divestiture remedy.

CMA accepts Breedon Aggregates / Hope Construction undertakings. On 27 July 2016, the CMA announced that it had accepted undertakings from Breedon Aggregates Limited (Breedon) in respect of its acquisition of Hope Construction Materials Limited (Hope) in lieu of referring the matter to a Phase II investigation. Breedon and Hope both produce and supply aggregates and ready mix concrete. Following its Phase I investigation, the CMA found that, post-merger, there would only be two competing suppliers of ready mixed concrete operating within the vicinity of Boston, Lincolnshire. The CMA has therefore, accepted Breedon’s offer to divest of 14 aggregates and ready mix concrete plants to Tarmac and the Concrete Company, which the CMA has approved as purchasers.

CAT hands down judgment on application of FLPA to CAT proceedings. On 27 July 2016, the Competition Appeal Tribunal (CAT) handed down its judgment on whether competition damages proceedings in the CAT relating to a substantive claim which is governed by foreign law are subject to the limitation periods set out in the Competition Act 1998 (CA) and CAT procedural rules, or the Foreign Limitation Periods Act 1984 (FLPA). In particular, while it is well established that claims brought after 1 October 2015, and to which section 47E CA applies, will be subject to FLPA, the cases of Deutsche Bahn v MasterCard and Peugeot v Pilkington (the matters under consideration by the court) were brought prior to this date. Both defendants argued that the claims were time-barred under the applicable foreign law. The CAT concluded that there were no overriding policy reasons which indicated that the limitation rules under the CA should be given such extraterritorial effect and displace the limitation rules of the foreign law which would otherwise govern. On this basis, the CAT held that that the foreign rules on limitation will apply to foreign law governed proceedings brought pursuant to section 47A CA.

Court of Appeal hands down judgment in contribution for damages claim made against Delta following settlement in competition damages proceedings. On 27 July 2016, the CoA handed down its judgment dismissing an appeal brought by Delta Limited and Delta Engineering Holdings Limited (together, Delta) in respect of a High Court matter in which Delta was being pursued by W.H. Newson Holding Limited’s (WHNH) for a contribution to damages paid by WHNH to settle a follow-on competition damages action. On appeal to the CoA, Delta argued that WHNH had settled the follow-on claim even though WHNH had a defence to the action because the claim had been brought out of time. In applying section 1(4) of the Civil Liability (Contribution) Act 1978, the CoA found that where contribution is sought towards a bona fide settlement, all that needs to be shown is that the factual basis of the claim disclosed a reasonable cause of action in law so as to make the defendant liable for the damages suffered by the claimant, not whether the defendant was actually liable.

CMA reviewing undertakings provided in respect of Acadia/Priory merger. On 28 July 2016, the CMA announced that it would be considering whether to accept undertakings offered by Acadia Healthcare Company, Inc. (Acadia) in respect of its acquisition of Priory Group No. 1 Ltd (Priory), in lieu of referring the matter to a Phase II investigation. Following the CMA’s Phase I investigation, Acadia and Priory were found to overlap in 20 local areas for the supply of acute services, children’s and adolescent mental health services, psychiatric intensive care units, rehabilitation services, and secure mental health services. The CMA now has until 23 September 2016 to decide whether to accept Acadia’s proposed undertakings.

CMA to proceed with investigation into the supply of products to the furniture sector.On 28 July 2016, the CMA announced that it has taken the decision to continue its investigation into suspected anti-competitive arrangements in the supply of products to the furniture industry in breach of Chapter I of the CA and/or Article 101 TFEU. The CMA has not yet confirmed the case timetable for the remainder of the investigation.

CMA issues Statement of Objections following Trod online price-fixing cartel settlement. On 28 July 2016, the CMA announced that it had sent its Statement of Objections to Trod Limited (Trod), setting out its case for Trod’s agreement with GB Eye Limited (GB), its competitor in the licensed sport and entertainment merchandise market, not to undercut each other’s prices for posters and frames sold on Amazon’s UK website. The Statement of Objections follows Trod reaching a £163,371 settlement with the CMA.