EU Mergers

Phase I Mergers

  • M.8486 3M COMPANY / SCOTT SAFETY (2 October 2017)
  • M.8585 AXIS / NOVAE (6 October 2017)
  • M.8604 XELLA INTERNATIONAL / URSA (5 October 2017)
  • M.8613 KONICA MINOLTA / INNOVATION NETWORK CORPORATION OF JAPAN / AMBRY GENETICS (6 October 2017)
  • M.8620 KKR / WBA / PHARMERICA (5 October 2017) M.8630 BLACKSTONE / MASSMUTUAL / CAMBOURNE LIFE INVESTMENT / ROTHESAY (3 October 2017)
  • M.8631 IFM / PSA / MERSIN (2 October 2017)

EU Competition

Commission fines Lithuanian Railways €28 million for abuse of dominance. On 2 October 2017, the European Commission (Commission) imposed a fine on Lithuanian railway operator AB Lietuvos geležinkeliai (Lithuanian Railways) for infringing Article 102 of the Treaty of the Functioning of the European Union (TFEU). The company was inspected in March 2011 following complaints by AB Orlen Lietuva (Orlen), a Polish oil company’s Lithuanian subsidiary, over the dismantling of 19km of track connecting Lithuania with Latvia, nearby Orlen’s factory. This resulted in Orlen needing to use a longer route to reach Latvia and prevention from using alternative services. It has now been concluded that the action hindered competition in the rail freight market. The Commission imposed a €28 million fine and is requiring Lithuanian Railways to rectify the infringement by rebuilding the track or though offering customers broader improved access conditions.

Commission publishes public summary of vehicle-lights cartel decision. On 5 October 2017, the Commission published a summary of its decision in the vehicle-lights cartel case in the Official Journal. The Advisory Committee’s Opinion and the Hearing Officer’s Final Report have also been published. According to the Commission, the cartel had three members (namely Hella, Automotive Lighting, and Valeo) and lasted from July 2004 until October 2007. It consisted of anti-competitive contacts relating to pricing and certain other trading conditions. In June 2017, the Commission concluded that the behaviour constituted a single and continuous infringement of Article 101 of the TFEU and fined two of the participants a total of €27 million, the third (Valeo) having secured full immunity.

EU Mergers

Commission publishes decision conditionally approving HeidelbergCement’s acquisition of Italcementi. On 3 October 2017, the Commission published its May 2016 decision conditionally approving HeidelbergCement’s acquisition of Italcementi (M.7744). The parties are both active in cement and aggregate markets, especially in the Benelux region where the parties had a combined market share of 50%. To secure the Commission’s approval, HeidelbergCement agreed to divest Italcementi's Belgian businesses.

Commission clears MassMutal and Cambourne acquisition of joint control over Rothesay. On 3 October 2017, the Commission approved Massachusetts Mutual Life Insurance Company and Cambourne Life Investment Pte. Ltd.’s acquisition of joint control over Rothesay HodCo UK Ltd (M.8630). Together, they will exercise control with the Blackstone Group LP, which is already a controlling shareholder. Although the transaction creates limited horizontal and vertical relationships between the parties, the Commission concluded that the proposed acquisition would raise no competition concerns due to low market shares in overlapping areas.

State Aid

Ireland referred to ECJ over illegal Apple tax benefits. On 4 October 2017, the Commission announced that it is referring Ireland to the European Court of Justice (ECJ) for its failure to recover illegal tax benefits from Apple worth up to €13 billion. The referral stems from the Commission’s 30 August 2016 decision that Apple’s tax treatment in Ireland constituted illegal state aid. Ireland’s failure to comply by recovering the tax means that the competitive distortion created by the aid has not been removed. The deadline for Ireland to implement the decision was 3 January 2017, the standard four months from the official notification. The Commission is now referring the matter to the ECJ and hopes to conclude its work by March 2018. In the meantime, Ireland and Apple have brought actions to annul the Commission’s decision before the General Court.

Amazon faces Commission decision on Luxembourg tax treatment. On 4 October 2017, the Commission announced that Amazon has been granted state aid worth approximately €250 million from Luxembourg in the form of selective tax treatment. The Commission’s investigation concluded that a tax ruling issued by Luxembourg’s tax authorities to Amazon in 2003 and extended in 2011 constituted illegal state aid by endorsing payments between group companies which had no economic basis and resulted in Amazon paying lower taxes than other companies. As a result, Amazon gained a significant economic advantage in the EU by avoiding taxation on just under three quarters of its European profits. The Commission has calculated the value of Amazon’s competitive advantage to be approximately €250 million, plus interest, which Luxembourg’s tax authorities must now verify and recover. 

UK Mergers

CMA publishes interviews in Tesco / Booker merger inquiry. On 5 October 2017, the Competition and Markets Authority (CMA) published summaries of interviews with third party wholesalers and third party suppliers as part of its ongoing Phase 2 investigation into the anticipated acquisition by Tesco plc of Booker Group plc. On 12 July 2017, the CMA announced that it was referring the merger to a Phase 2 investigation using the fast track procedure on the basis that there are more than 350 local areas where there is an overlap between “symbol” stores of both parties. This has created concerns that shoppers could face worse terms when buying groceries in these localities. The statutory deadline for the CMA’s investigation is 26 December 2017.

CMA publishes decision on Isle of Wight Festival’s acquisition by Live Nation. On 3 October 2017, the CMA published the full text of its approval of the acquisition by LN-Gaiety Holdings Ltd. (Live Nation) of Isle of Wight Festival Ltd. The decision not to proceed to a Phase 2 investigation was announced on 14 September 2017. Although the parties overlap in the supply of music festivals and their shares of supply exceed 25% in a number of bases, the CMA considered that the merger would not substantially reduce competition in the UK because music festivals are highly differentiated and switching would continue to occur.

UK Competition

High Court hands down judgment on right to bring damages action under Article 101 against BA. On 4 October 2017, the High Court handed down a judgment in which it ruled on a preliminary point in relation to the temporal right to bring an action for damages under Article 101 of the TFEU against British Airways (BA). The action was brought by air freight shippers who assert that they were overcharged for freight services by BA and other airlines who, the claimants allege, were part of a cartel which coordinated air freight surcharges. BA argued that the claim was founded on a retrospective change to substantive law. Specifically, before 1 May 2004 when Regulation 1/2003 implemented EU competition rules, competition rules could only be applied to air transport between the EU and third countries through transitional provisions in the TFEU (namely Articles 104 and 105). As such, the only bodies with the jurisdiction over such agreements were the Commission and national authorities, meaning that the High Court was not intended to be a designated authority for such decisions. Additionally, BA argued that ECJ case law has established in a broad sense that the prohibition of anti-competitive agreements did not have direct effect before 1 May 2004. The High Court agreed with BA, ruling that the claimants had no reasonable grounds for bringing a claim and that they had no real prospect of success.

CAT blocks direct right of appeal against judgment on competition issues transferred from the High Court. On 5 October 2017, the Competition Appeals Tribunal (CAT) handed down a ruling on an application to appeal against its July 2017 judgment in proceedings brought by Agents’ Mutual Ltd. (Agents’ Mutual) against Gascoigne Halman Ltd. (Gascoigne). The case itself concerns the breach of a contract between Gascoigne and Agents’ Mutual, both estate agents, and was brought in the High Court. Part of Gascoigne’s defence is its assertion that certain provisions governing its participation in an online property portal established by Agents’ Mutual breached the Chapter I prohibition of the Competition Act 1998 and are therefore void. This part of the claim was transferred to the CAT and, in July 2017, the CAT found that none of the provisions constituted a breach of competition law. In its 5 October ruling, the CAT determined that there is no statutory right of appeal from the CAT. An order giving effect to this will be made by the Chairman in his capacity as a High Court judge and Gascoigne’s application will be treated as an application to the High Court for permission to appeal against the subsequent order of the High Court giving effect to the CAT’s determination.

CAT dismisses Balmoral Tanks’ appeal. On 6 October 2017, the CAT handed down its judgment in Balmoral Tanks Limited’s (Balmoral) appeal against the CMA’s £130,000 fine for engaging in exchanges of pricing information in breach of Article 101 of the TFEU and Chapter I of the Competition Act. The CAT agreed with the CMA that even a one-off discussion could infringe competition rules and therefore upheld the CMA’s fine calculation.

Speeches & Publications

Director-General of Competition highlights the importance of finding a balance when enforcing competition rules.

On 20 September 2017, Director-General of Competition Johannes Laitenberger delivered a speech in Tallinn entitled “Striking the right balance in the enforcement of competition rules”. Mr. Laitenberger discussed enforcement challenges for competition authorities resulting from technology, noting the need to balance incentivising innovators and preventing disruptive businesses from becoming dominant.