1. Investigation in Portugal into a hub and spoke cartel between supermarkets and drinks suppliers 2. Restrictive practices 3. Courts 4. Mergers 5. Others
1. Investigation in Portugal into a hub and spoke cartel between supermarkets and drinks suppliers
22/03/2019. Portugal’s competition authority has sent statements of objections as part of three investigations into several supermarket chains, as well as Super Bock, Central de Cervezas (owned by the Heineken Group) and alcoholic beverage firm PrimeDrinks for allegedly forming a hub and spoke cartel to fix prices between the supermarkets for the sale to the public of the drinks makers' products (including beer, flavoured water and carbonated soft drinks) since 2003. Specifically, the three investigations are made up of the following companies:
- Modelo Continente, Pingo Doce, Auchan, Intermarché and Super Bock;
- Modelo Continente, Pingo Doce, Auchan, Intermarché, Super Bock and Central de Cervezas; and
- Modelo Continente, Pingo Doce, Auchan, Intermarché, Lidl, E.Leclerc and PrimeDrinks.
In addition, the authority's statements of objections have also been issued to a plethora of Modelo Continente, Central de Cervezas and Super Bock directors and executives accused of being actively involved in the alleged unlawful practice.
Hub and spoke cartels entail the use of a third party (common distributor, supplier or consultancy firm) as a means of exchanging information on prices and other trade-related conditions between competitors in order to coordinate their practice in the market and reduce competition.
In this case, the supermarket chains, without directly contacting each other, resorted to bilateral contacts with the two brewers and PrimeDrinks to exchange confidential information and align the retail prices for the drinks makers' portfolio of products, therefore reducing intra-brand competition (between products of the same brand).
What's more, according to the Portuguese competition authority's press release, the three investigations are the country's first into hub and spoke cartels.
In Spain, one of the rare cases which could be likened to a hub and spoke cartel is that of motorcycle manufacturer Montesa Honda (case S/0154/09, MONTESA HONDA). The company was fined by the former competition authority (CNC) in 2011 together with some of its Madrid, Toledo and Guadalajara-based dealerships for operating a cartel to set the final sale price of Honda motorcycles. Specifically, Montesa Honda sent lists including minimum prices and oversaw that they were being observed, as well as punishing those who strayed from the agreement, therefore creating a cartel between dealerships.
The Spanish competition authority concluded that Montesa Honda's vertical agreement with its dealerships to set resale prices overlapped with the horizontal agreement between such dealerships in order to set minimum resale prices for the motorcycles and restrict competition between them. However, the horizontal agreement did include direct contacts between dealerships (in addition to indirect communications through Montesa Honda).
Hub and spoke cartels have also been subject to punishment in other EU Member States. For example, in June 2015, the Belgian competition authority reached a settlement with 18 companies, producers and manufacturers of perfumes and cosmetics (including Henkel, L’Oréal, Procter & Gamble, Unilever, Carrefour, Intermarché and Makro), fining them with a combined 174 million euros fine for operating numerous hub and spoke cartels between 2002 and 2007. The distributors, through their common supplier and without contacting each other directly, agreed the retail prices to be applied to each brand. Although each producer was involved in the cartel with reference to their own products, the setup was the same across the board, leading to all of the cases being punished as part of one investigation.
In 2015, the Polish competition authority imposed fines of up to 2 million zloty on five companies in the Watches case, namely Swatch Group Polska (exclusive distributor in Poland of Omega, Tissot, Certina, Longines and Swatch timepieces) and four downstream wholesalers of Swatch Group Polska watches. Since 2005, these companies made use of Swatch Group Polska as a middle man to agree the prices of watch sales to the public both online and in-store.
➡ Recommendation: What is clear in these cases is that manufacturers must exercise particular caution not to share their clients/distributors' confidential information (on prices – including recommended retail prices –, costs, commercial practices, etc.) with others, nor should they act (not even inadvertently) as a middle man between such clients, opening up to the possibility of being viewed as operating a cartel at distribution level.
2. Restrictive practices
2.1. Ongoing investigations
European Union
19/02/2019. The European Commission ("EC") has raided several salmon farmers over alleged infringements of Article 101 of the Treaty on the Functioning of the European Union ("TFEU"). Mowi (formerly known as Marine Harvest) and Grieg Seafood have confirmed that dawn raids were carried out at offices in Scotland and the Netherlands.
Incidentally, Marine Harvest was already fined in 2014 by the EC with a 20 million-euro fine for acquiring competitor Morpol without prior authorisation from the authority (a so-called "gun-jumping" infringement).
Austria
Probe into Amazon over favourable treatment of its own retailers
14/02/2019. Austria’s competition authority has begun a formal investigation into whether Amazon is exploiting its market dominance in the country.
Specifically, the authority is looking into the company's dual role as an online retailer and marketplace. The investigation stems from a complaint filed by the Austrian trade association and includes the following elements:
- The abrupt termination of seller accounts;
- Obligations to disclose purchase prices;
- The addition of incorrect delivery details to the sellers' accounts;
- The unjustified loss of some sellers' product rankings. In essence, the authority is looking into whether Amazon discriminates against other retailers in a bid to favour the sale of its own products; and
- Jurisdiction clauses that complicate taking legal action against the company.
The investigation represents a further blow to Amazon on the back of other investigations opened by the EC and Germany's Bundeskartellamt (click here for more information).
France
Raids on wine and spirit makers
10/04/2019. The Autorité de la Concurrence has raided several wine and spirit makers aimed at investigating unspecified anti-competitive practices.
At the time of publication of this Alert, drinks maker Marie Brizard has identified itself as one of the companies under scrutiny.
Italy
Amazon under investigation over logistics services
16/04/2019. Italy's competition authority has opened an investigation into Amazon for possible abuse of its dominant position in the provision of logistics services. Specifically, the authority will examine the terms and conditions of the "Amazon Logistics" service. The company is alleged to have granted third-party vendors that participated in its own logistics service an advantage over other sellers not involved in the service.
The probe is the fourth into Amazon in less than a year (following those launched by the EC, the Bundeskartellamt and the Austrian competition authority).
The Netherlands
11/04/2019. The Dutch competition authority has launched an investigation into Apple on the back of a market study into app stores. The company has allegedly been favouring its own apps over third-party creations on its App Store.
The probe falls in line with an EC inquiry into a complaint by Spotify that Apple abuses its position in relation to online music streaming services.
UK
Resale price maintenance of electronic keyboards
11/04/2019. The Competition and Markets Authority (CMA) has issued a statement of objections to Casio for the resale price maintenance of electronic keyboards.
According to the CMA, between 2013 and 2018, Casio allegedly restricted online retailers' freedom to set their own prices for selling its keyboards to the public. Essentially, Casio enforced a minimum price which retailers were forbidden from dropping below.
This latest case of resale price maintenance is yet another example of the re-emergence of vertical restraints on the competition authorities' radar.
2.2. Infringement decisions
European Union
Google faces further fine for abusing its market dominance
20/03/2019. The EC has fined Google 1.49 billion euros for abusing its market dominance in the brokering of online search adverts between advertisers and the owners of websites with embedded search functions.
This latest fine adds to the 2.424 billion-euro penalty imposed by the EC in June 2017 and the 4.380 billion-euro fine it was hit with in July 2018 (see here).
As stated in the EC's decision, between 2006 and 2009 Google included abusive exclusivity clauses in its contracts which meant that website owners were prohibited from placing any search adverts from competitors (mainly Microsoft and Yahoo). As of March 2009, Google gradually began replacing the exclusivity clauses with so-called “premium placement” clauses requiring the reservation of the most profitable space on their pages for Google's adverts.
Million Euro fine on Nike for vertical restraints
25/03/2019. The EC has fined Nike with 12.5 million euros for restricting cross-border sales of merchandising products for which it held the licence.
As part of the investigation launched in 2017, the EC concluded that Nike's non-exclusive licensing and distribution agreements for the merchandising products of football clubs and national federations restricted sales outside of the licensees' territory. Nike imposed a number of direct measures restricting cross-border sales of these products by licensees, threatening them with terminating their agreements or refusing to supply if it feared that sales could be going towards other territories, in turn forcing licensees (as well as sub-licensees) to stay within their territories, etc.
Since Nike cooperated with the EC by providing information that allowed it to extend the scope of the case, the fine was reduced by 40%.
Spain
Fines imposed on tobacco companies
12/04/2019. The Spanish Competition Authority (CNMC) has fined tobacco companies Philip Morris Spain, Altadis and JT International Iberia and distributor Logista with combined 57.71 million euros fines for exchanging commercially sensitive information.
As stated in the CNMC's decision, from 2008 to 2017, Spain's almost-monopolist tobacco distributor Logista (with a 99% market share) created a system through which tobacco companies received free daily sales data broken down by brand, outlet and city (not just for their own brand, but their competitors' data as well). The system would have served to reduce the producers' market instability and enabled them to maintain their respective market shares. In addition, this practice stabilised and guaranteed Logista's share.
British American Tobacco has escaped punishment by the CNMC given that since 2012 it "distanced itself from the information exchange" and its infringement outlasted the statute of limitations.
Denmark
Icon Hairspa fined over vertical restraints
15/02/2019. A Danish court has fined beauty and hair product distributor Icon Hairspa for resale price maintenance. While the company has been ordered to pay 1 million Danish krone (134,000 euros), one of its executives has also been hit with a 100,000-krone penalty (13,400 euros).
During 2016, Icon Hairspa demanded that the company’s distributors followed the recommended retail prices as minimum prices when selling its products. The investigation was launched on the back of a complaint from a distributor.
3. Courts Spain
Waste paper and cardboard collection cartel fines annulled
18/02/2019. Spain's Supreme Court has upheld the appeals lodged by the companies fined by the CNMC in the Paper Collection case S/0415/12.
The case was opened on the back of indications of a potential infringement in the market for waste paper and cardboard collection brought to light during an inspection relating to a breach in the medical waste management market (case S/0415/12, ABH-ISMA). The purpose of the warrant authorising the investigation was triggered by a possible violation in the market for the "collection and treatment of medical and other types of waste".
In its judgment, the Supreme Court annulled the CNMC resolution in the belief that the wording of the warrant referring to other types of waste was extremely vague and lacked sufficient credibility to enable the collection of the evidence used to open fresh infringement proceedings relating to the paper and cardboard collection sector.
Germany
12/04/2019. Germany's leading price comparison website Idealo is suing Google for damages based on Google's abuse of its dominant market position for which it was fined in 2017 by the EC for favouring its own price comparison service over those of its competitors.
The German company is seeking damages of 500 million euros before the courts (damages which it claims it will continue to suffer despite the fine imposed on Google) on the back of the tech giant's practice.
UK
DS Smith vs. Truck cartel
28/03/2019. British packaging company DS Smith is suing Daimler, DAF, MAN and a further 12 companies before the UK Supreme Court for the damages suffered alongside five other companies belonging to the group due to the truck cartel fined by the EC in 2016.
Damages claims on the back of the cartel have been filed by several parties in Spain, Germany, Ireland and the UK.
France
Avi-Charente vs. Lactalis & Lactalis Nestlé
13/03/2019. The Paris Court of Appeal has thrown out the appeal lodged by Avi-Charente (formerly known as Senoble Desserts Premium) against the judgment delivered by the Commercial Court of Rennes dismissing a claim for damages against Lactalis Nestlé Ultra-Frais and its parent company Groupe Lactalis for an alleged abuse of a dominant position.
By rejecting the appeal, the Court of Appeal upheld the lack of evidence of predatory or denigratory practice by Lactalis Nestlé Ultra-Frais in line with the decision issued by the Directorate General of the French Competition Authority, which shelved the claim filed by Avi-Charente over several events.
4. Mergers
Spain
Alantra / Frías de Ponferrada / Frías
14/02/2019. The CNMC has authorised in first phase the merger through which Frías de Ponferrada would go from being fully controlled by Frías Nutrición to jointly controlled by Frías Nutrición and Alantra Capital. The affected sector includes the following markets: (i) soups, purées and stocks, (ii) dairy products and (iii) vegetable-based products.
Denmark
27/02/2019. The Danish competition authority has given green light to the acquisition of Bev.Con (owner of RTD (Ready-to-Drink), cider and energy drink firm CULT) by brewer Royal Unibrew (beer, malted beverages, soft drinks, energy drinks, RTDs and cider).
Despite the horizontal overlap in the production and sale of ciders, RTDs and energy drinks (both in the Horeca and retail distribution channels), the Danish authority has approved the deal after concluding that the markets in question are very dynamic and that consumers exhibit limited brand loyalty.
UK
25/04/2019. The CMA has blocked the merger between supermarket chains Sainsbury's and Asda. Following an analysis of the deal in second phase, and despite the commitments offered by both parties, the CMA believes that the merger would lead to increased prices in stores and reductions in the quality and range of products available.
According to the CMA, it is highly unlikely that the divestment of a series of assets would be sufficient remedy for the competition issues uncovered, not to mention the fact that the commitments are viewed as impractical given the large number of supermarkets, online stores and petrol stations involved and the complexity of the companies’ operations.
Sweden
Arla Foods / Norrmejerier / Folköping / Svensk Mjölk
30/04/2019. The Swedish competition authority has blocked the deal through which Arla Foods, Norrmejerier and Folköping sought to acquire joint control of cheese and dairy producer Svensk Mjölk.
Had the merger gone ahead, the production of Priest, Herrgard and Grevé cheeses would have fallen exclusively into the hands of the three acquiring parties. According to the authority, this would have led to a reduction in competition and damage to consumers.
5. Others
Denmark
Competition among hotel-booking platforms improving but users must be better informed
01/02/2019. A report released by the Danish competition authority has warned that while competition among hotel-booking platforms is improving, the sector continues to pose "certain challenges for the regulators".
The Danish government has asked the competition and consumer authorities to implement a series of initiatives aimed at educating hotels and consumers on the terms and conditions of platforms such as Booking.com and Expedia.
What's more, the government has urged the competition authority to oversee two separate measures: (i) to assist hotels in understanding changes to the terms and conditions of booking platforms, and (ii) information aimed at young adults who may feel "more pressured by the platforms' sales techniques", for example when a website claims that only a few rooms remain.
In addition, the Danish government will work with the EU to ensure that these platforms are forced to show consumers which hotels have paid to appear higher up in the search results.
Germany
Facebook ordered to change the way it gathers data
07/02/2019. The Bundeskartellamt has ordered Facebook to change the way it processes user data in Germany. Until now, users were only able to use Facebook's services (as well as the other social networks belonging to its group: WhatsApp and Instagram) if they allowed Facebook to collect their browsing data from such networks and third-party sites to subsequently assign the data to the user's Facebook account. This combination of data sources in a single account – which users were mainly unaware of – enabled Facebook to build a more accurate and specific view of the data obtained from each individual and use it for marketing purposes.
The Bundeskartellamt told Facebook that (i) the data gathered from social networks aside from Facebook but which belong to the Facebook Group (WhatsApp and Instagram) can only be assigned to a Facebook account if the user provides their consent to such practice, and (ii) the data gathered from third-party sites (those using Facebook Analytics, i.e. with "like" and "share" buttons) can only be assigned to a Facebook account if the user provides their consent to such practice. If users refuse to consent to their data being processed as described above, Facebook may no longer assign the data as it previously was doing.
Facebook has the highest market share out of any social network in Germany. The Bundeskartellamt estimates its share of the daily users market – those who connect at least once a day – at 95%, not to mention its 80% share of the monthly users market. Against this backdrop, the authority believes that a simple click on a consent request for the large amount of data on offer is insufficient, and that this practice represents an abusive exploitation of users and the network's competitors.
The decision grants Facebook four months to submit a proposal as to how it will cease the practice and 12 months to fully discontinue the abusive conduct. However, Facebook has declared its intention to appeal the decision.
France
Simplification of the merger control procedure
25/04/2019. The Autorité de la Concurrence has simplified its merger control procedure:
- The number of hard copies of the notification has been reduced from four to one;
- Upon analysing the vertical effects of the proposed merger, the market share threshold has increased from 25% to 30%;
- The table summarising the merging companies' financial data has reduced from 93 fields to 13;
- An online notification platform is undergoing testing.
The above changes are aimed at modernising the procedure and adapting it to new technologies.
