1. Geo-blocking and e-commerce regulations

The Council of the European Union and the European Parliament have approved a new Regulation to prevent the restriction of e-commerce through so-called geo-blocking.

Geo-blocking is a technique used by companies to block their online services and product offers based on customers' place of residence, nationality or place of establishment.

A typical example of this is the case when a Spanish citizen, who, attracted by a product's price and quality, tries to acquire a computer from a German website. However, when checking out, he is told that the purchase is not possible, or is redirected to a Spanish version of the same website with a different price. According to the European Union, 57% of European citizens made a purchase online in 2017. However, only 15% acquired products from online shops located in a different country in the EU. Therefore, the growth of e-commere is not having the expected impact on the number of online transactions from one member state to another.

This is owed, among other factors, to companies creating artificial barrier that prevent online customers from accessing products and services and acquiring them from a website located in another member state. The reasons for this market segmentation by businesses differ from one case to another. In the case of large companies, with affiliates in the majority of member states and websites in each one of them, online market fragmentation prevents a consumer from acquiring a product for a lower price based on the location from which the website is accessed. In the case of small and medium-sized companies, the legal uncertainty that business with third countries implies -such as tax or environmental questions-, the costs for delivery of language requirements discourage companies from accepting online transactions from other member states.

Regardless of the matter in which geo-blocking is employed, for the European institutions, it is a discriminatory practise. They see it as discriminating against a user's residence or nationality. This is not so desirable, keeping in mind that the European Union should operate as a single market in which services and goods circulate freely, even in the digital sphere. At least this is the aim of the European Commission, which in 2015 launched its strategy to achieve a so-called Digital Single Market. According to the commission, the Digital Single Market could add 515 billion euros a year to the European economy.

The new regulation, which will enter into force in December this year and which modifies Regulations 2006/2004 and 2017/2394 on cooperation on consumer protection and Directive 2009/22 on injunctions for the protection of consumers' interests, aims to correct online market segmentation as much as possible.

To that end, the regulation foresees the following lines of action:

(a) No discrimination in regards to general conditions and price. Accordingly, companies are prohibited from discriminating against clients based on their residence or nationality provided that the company:

  • sells goods that are delivered in a member state in which the company offers delivery services or picks them up in a place agreed to with the customer;
  • offers electronic services, such as cloud services, data warehousing, website hosting and firewall services; or
  • offers services that the customer receives in the country where the company operates, such as hotel booking services, sport events, car hire or tickets for music festivals or amusement parks.

It must be stressed that what is prohibited is the discrimination of prices. That is to say, the website cannot change prices based on an online user's nationality or place of residence. That does not mean, however, that the prices on the website cannot vary from one member state to another, in the same way that prices at physical markets vary between states. Furthermore, companies will not be obliged to deliver goods to customers in a member state where delivery services are not offered.

(b) No discrimination regarding payment method. Companies cannot apply different payment conditions to online customers based on nationality, place of residence or place of establishment. This does not mean that companies can reject certain types of payment cards -for example, debit cards- or cards issued by a certain bank. However, when the rules for payment method are established, the company cannot reject the payment based on an online user's nationality, place of residence or place of establishment.

(c) No discrimination on access to electronic commerce websites. Companies will not be able to block or limit customers' access to online interfaces due to nationality or place of residence, provided said block is not a result of compliance with a legal obligation. Websites that block or limit customers' access to an interface or redirect them to a different version of the interface must justify the redirection based on a legal provision -for example, regulation that prevents certain content to be viewed from another member state-.

(d) Prevalence of the Regulation on exemptions foreseen in article 101.1 (3) of the Treaty on the Functioning of the European Union (TFEU) with regard to passive sales. Competition law makes a distinction between passive sales - sales made in response to spontaneous requests- and active sales -sales made proactively by companies when they actively capture clients-. While restrictions on active sales are a common practice which arises from commercial freedom of a distribution contract, restrictions to passive sales are prohibited by competition law. In fact, a classic example of passive sales is those sales made as a result of a search on a network by a user.

However, if a certain restriction on passive sales in a particular contract were shown to have a positive effect on the market, an exception could be made to the restrictions imposed by competition rules based on article 101.1 (3) of the TFEU. So, by virtue of this new Regulation, it must be understood that the new Regulation prohibiting these sales prevails over any exemption that attempts to legalise -via article 101.1 (3) of the TFEU- a restriction on passive sales. Any clause to that effect would be invalid.

(e) Exceptions to the Regulation: services linked to content protected by audio-visual rights, copyright, music streaming services and e-books are outside the scope of the Regulation. However, the Regulation foresees a review clause of the Regulation by virtue of which the Commission will evaluate the potential inclusion of said products in the future.

As can be seen, the scope of the new Regulation is ambitious, even leaving outside of its scope of application -for now- very important products for the European consumer. Its application will have to be analysed from the moment it enters into force in December this year.

2. Restrictive practices

INVESTIGATIONS

Belgium and France

Cosmetics (Press article)

01/03/2018. The French and Belgian competition authorities have performed inspections of various companies dedicated to distributing beauty products.

Possible anti-competitive practises against article 101 TFEU are being investigated.

The names of the research companies have not emerged. Both authorities confirm that the inspection does not in any way prejudge the result of the investigation or the final decision.

France

Leclerc (Press article)

28/02/2018. The Competition, Consumer Affairs and Fraud Prevention Directorate General has made inspections at the headquarters of the supermarket group Leclerc.

According to a press release from the company, the investigation deals with its annual price negotiations with its providers.

The inspections attempted to verify Leclerc's compliance with the regulations on minimum prices and limitations on rebates to farmers.

As shown in previous Alerts (August-September, October-November), worries from European competition authorities surrounding the position of these actors in the food supply chain are constant -see, for example, the public consultation from the European Commission or investigations by the Polish authority.

SANCTIONS

European Union

Electronic products (Press release)

21/02/2018. The European Commission has fined eight producers of capacitors €254 million. Capacitors are a component used in electronic products such as mobile phones and batteries.

The eight companies, with addresses registered in Japan, have been fined for exchanging commercially sensitive information -mainly on price policies- between 1998 and 2012.

The meetings and contacts with the cartels took place in Japan. However, inasmuch as the restrictive agreements have had a negative impact on the European Economic Area (EEA), the European commission has been considered competent to pursue this behaviour.

The company Sanyo Electric and its parent company Panasonic Corporation have avoided the fine by entering into a leniency programme.

3. Courts Germany

Rossmann (Press release)

01/03/2018.The Düsseldorf Higher Regional Court has raised a fine imposed in 2015 by the Bundeskartellamt on consumer retailer Dirk Rossmann from 5.25 to 30 million euros.

The company was fined for having participated in price-fixing agreements for the resale of roasted coffee products between the cafe producer Melitta and its distributors.

Rossmann was the only company that decided not to take part in the settlement agreements which were reached between Bundeskartellamt, Melitta and its distributors, rejecting a deal with the authority and appealing the fine to the courts.

Now, the court does not only agree with the resolution passed by the German competition authority in 2015, but it has increased the fine when learning that the vertical price-fixing agreement caused a strong homogenisation of prices between distributors in a widely consumed product, which is coffee.

Rossman has already announced that it will appeal the sentence to the German Federal Court of Justice.

Asics (Press release)

25/01/2018. The German Federal Court of Justice ruled against ASICS, which will not be able to forbid its distributors from using price comparison engines.

The court, after stressing the importance of these comparison engines for consumers, affirms that the total ban on sales through such pages constitutes a restriction -an especially harmful restriction for the competition- and therefore, it is not necessary to analyse the effects.

The German High Court refers to the Coty issue, in which the CJEU declared in favour of selective distribution systems by virtue of which the distribution of luxury cosmetics is prevented through online platforms -like Amazon- in order to protect the product's image.

However, it argued that ASICS clothing and sports shoes must not be considered luxury products, in contract to the cosmetics in the Coty case, and ruled in favour of the distributor.

4. Mergers

European Union

Essilor / Luxottica (Press release)

01/03/2018. After an in-depth analysis, the European Commission has approved the merger of Essilor and Luxottica, both leaders in the eyewear industry.

French company Essilor's main focus is the production of ophthalmic lenses, while the Italian group Luxottica is mostly focused on the design and distribution of glasses frames. Ray-Ban and Oakley are some of the stand-out brands in its portfolio.

Essentially, the Commission feared that, as a result of the merger, the new company would be able to exploit the power of Luxottica's brands to force optical companies to buy lenses made exclusively by Essilor, effectively ousting the competition.

However, the Commission’s fears were quelled after performing a market test with more than 4,000 opticians. According to the results of this test, the majority of opticians that operate in the EU do not sell the most important brands of sunglasses and glasses frames for Luxottica. Furthermore, the company resulting from the merger will not be able to exploit its power in the sunglasses market to close off access to other lens manufacturers because this product is generally sold without a prescription. In addition, no incentives were found to engage in practices such as bundling and tying because of the risk of the resulting company losing customers. The merger will not cause any of Luxottica's competitors to shut down given that the resulting company will not have enough market power.

Bayer / Monsanto (Press release)

21/03/2018. The European Commission has approved Bayer's acquisition of Monsanto, subject to conditions.

The operation mainly affects the pesticide sector and has caused concerns among competition authorities, given that it implies the merger of two leading competitors in an already concentrated market -particularly in light of recent mergers between Dow / Dupont and Syngenta / ChemChina–.

The commitments offered by Bayer and accepted in principal by the Commission imply: (i) the divestment of Bayer's assets in the seed and pesticide market to chemical company BASF; (ii) maintaining research activities carried out by Bayer to develop a product that competes with the gylophosphate herbicide from Monsanto; and (iii) the awarding of licences by Bayer for all its products relating to digital agriculture in order to ensure competition in this emerging market.

The Commission will permanently authorise the merger once the viability of the divestments and the aptitude of the companies that acquire the divested assets are confirmed.

Spain

Welbit / Crem (File)

23/03/2018. The multinational maker of food-handling equipment Welbit has notified the National Markets and Competition Commission of the acquisition of the coffe machine manufacturer Crem Internacional, thereby entering the hot-drink market.

Rana / Nestlé (File)

27/02/2018. Leader in fresh pasta Pastificio Rana has notified the National Markets and Competition Commission of its intention to acquire Nestle Italiana's fresh pasta and sauce factory in Moretta, Italy.

A notification has been issued due to the transaction reaching the market share threshold of 30%.

France

Apax Partners / Compagnie Marco Polo / Bompard (Press release)

15/02/2018. The French Competition Authority has approved the acquisition of Bombard -a company specialising in cashmere products- by the investment fund managed by Apax and Marco Polo.

The Bombard group is primarily focused on retail distribution of cashmere clothing and accessories through physical shops and its remote sales service.

Although some companies of the Marco Polo group are also focused on clothing sales, the competition authority believes that the operation will not have a negative impact on the sector.

Netherlands

Dossche Mills / Meneba (Press release)

14/02/2018. Dutch authorities have authorised the merger between flour producers Dossche and Meneba.

Meneba is the largest producer of flour in the Netherlands. Dossche Mills is a Belgian producer operating in the country both from its Belgian headquarters as well as from its Dutch subsidiary.

Due to the distinctive features of this sector in the Netherlands, the Dutch authority gave the operation an in-depth analysis. In this regard, the type of special flour needed by Dutch bakers, who make a type of light bread characteristic of the area, was taken into account. The importance of distance and cost of the product was also taken into account.

As a matter of fact, owing to the favourable conditions for wheat planting and its transport in the area, the authority believes that Dossche will continue to see strong competitive pressure, especially from German companies, which is on the rise and who supply Dutch bakers.

Portugal

Valsabor / Euroeste (File)

08/02/2018. The Portuguese authority has authorised the first phase of a joint acquisition of Euroeste, which is active in the pork sector, by Valsabor and Mr Pedro García Matos.

The acquirer's activity is also related to pork, cattle and agriculture.

Despite the overlap and the vertical effects that the operation presents, the Portuguese authority understands that its execution will not have a negative impact in the affected markets.

Violas / Viacer (File)

07/02/2018. The Portuguese authority has received notification of a merger through which Violas is attempting to acquire Viacer.

The acquirer leads a group of companies active in the industrial sector -manufacturing of products for industrial storage- and in providing services -hotels, education and real estate industry-.

The acquired company -through its ownership of 56% of the Super Bock group- is active in the drinks sector, particularly beer, water, soft drinks, wine and coffee.

5. Miscellaneous

Toys

Toys 'R' Us (Press release)

26/03/2018. The chain of toys Toys 'R' Us has announced the winding down of all its locations in the United States and the United Kingdom and plans to close a large part of its business in Europe.

The decision has been presented to the United States court, which is in charge of the liquidation proceedings of the company. Its creditors are in favour of the measure.

In the case of the United States and Puerto Rico, the closure will affect 735 locations. In the United Kingdom, 75 stores will remain open until all inventories are sold at a discount. The 25 remaining stores will shut immediately. In Europe, the German, Austrian and Swiss businesses will undergo a "reorganisation and sale" process. The viability of the locations in Spain, Portugal, France and Poland is being considered.

Analysts note that the competition from the internet and changes in consumer habits are behind the crisis of the toy store chain.

Safe toys (Press release)

28/02/2018. Polish authorities have carried out inspections on 1.5 million toys originating from outside the EU.

The Office of Consumer protection, the Trade Inspection Authority and Polish customs have focused their investigation on searching for hazardous chemicals -mainly phthalates used as plastic softeners.

The entry of 700,000 toys in the country was denied, due to many of them lacking necessary documentation. Additionally, the authorities destroyed 30,000 toys upon learning that they contained an excessive level of hazardous chemicals. The EU's RAPEX system has been informed about the most dangerous products in order to alert the other member states.

Designations of origin

Manchego cheeses (Press article)

19/03/2018. The CJEU must make a decision on allusions to "El Quijote" and Castilla-La Mancha in the labelling of Manchego cheeses.

The Supreme Court has issued a preliminary ruling to the CJEU so that it rules on the litigation the Regulatory Board faces on the Manchego cheese Designation of Origin from the company Industrial Quesera Cuquerella S.L., whose label and packaging allude to images of "El Quijote" and Castilla-La Mancha.

As in the case analysed in the December-January alert, the CJEU must give its verdict on the subject of designations of origin, particularly on Manchego cheese. For a Manchego cheese to receive a designation of origin, the product must only be produced with Manchego sheep's milk. The problem resides in the fact that some cheeses produced by Industrial Quesera Cuquerella are made with a combination of goat, cow and sheep's milk. However, on the product's label, the company aludes to Castilla-La Mancha and the carachters from "El Quijote" such as Don Quixote himself and his horse, Rocinante.

For the Regulatory Board, this is a case of deceptive advertising because it attempts to attract the consumer by using a name protected by a designation of origin, in the view of Article 13(1).b of Regulation 1151/2012 on quality schemes of agricultural and food products.

For now, both at first instance as well as appeal, the judgements have been in favour of the company. Among other arguments, the courts have shown "the use of symbols such as the name 'Rocinante' or the image of Don Quixote evokes an image of La Mancha but does not evoke an image of the cheese protected by the designation of origin 'Manchego cheese'".

Now it is the CJEU's turn to give its opinion on the matter.

Internet advertising

Re-sale of tickets (Press release)

07/03/2018. The British Advertising Standards Authority (ASA) has taken measures against four ticket resale websites for misleading advertising.

The websites are StubHub UK, Viagogo, Seatwave and GET ME IN, which have been prohibited from not including the reservation fee (VAT included), not reflecting delivery costs, and not making clear the total price of the ticket when the customer begins to search.

Furthermore, particular measures were taken against Viagogo, which may not make the claim "official website", given it confused customers by making them believe that it was an official first-hand sales website and not a place to re-sell tickets. It is also prohibited from using the expression "100% Guarantee", as there is actually a high risk that the customer is not allowed access to an event with tickets acquired through re-sale.

Holiday booking (Press release)

09/02/2018. The Irish Competition and Consumer Protection Commission has published recommendations for booking holidays.

In regard to online competitors, the authority highlights that booking through these pages can often mean accommodation is booked directly with a hotel and not with the booking website. Thus it is important to look at hotel reviews before booking as any legal issues that occur will need to be resolved with the hotel- for example, the hotel does not permit cancellations-.

The Irish authority also warns on online scams, which are normally made by scammers placing a fake listing on a genuine holiday website. Often, these scammers require that the total price of the rental be paid -or at least a large part of it- when making the reservation.

Online shopping risks (Press release)

06/02/2018. The Netherlands Authority for Consumers and Markets has warned of risks associated with e-commerce and the difficulty of acting against websites that employ these abusive sales practises.

The growing popularity of online shopping and social networks, as well as the difficult of locating and taking action against online operators -the majority of which are foreign- has resulted in an increase in unfair practises against Dutch consumers. Among said practises, of note are subscription services that have not been requested or sending products that the consumer knows he or she has not purchased. All this is linked to aggressive billing practises.

The authority has launched a campaign entitled "Don't just order something on social media. Find out first who they really are".

Autocontrol: digital advertising (Press release)

15/03/2018. Autocontrol, the independent self-regulation body of the advertising industry in Spain, has published the 2017 Balance of Activity data, highlighting that one of every three requests for review of a campaign refers to digital advertising.

According to the report by the institution, "of the 31,568 advertisements reviewed before publication, more than 11,800 were digital campaigns, up 44% from 2016.”

Furthermore, the Advertising Board resolved 217 cases of 1,785 claims presented in 2017. Among them, "112 refer to digital advertising and 96 to television advertising".

Whistleblowing

Austria and the UK (Press release)

In February 2017, the anonymous information system came into effect through which any individual may confidentially report anti-competitive acts to the Austrian competition authority.

In Spain, there is a similar procedure which allows the reporting person's identity not to be registered, encouraging citizens and companies to report to the CNMC without the need to present a formal complaint.

The British Competition and Markets Authority has launched a campaign to encourage whistleblowing with the slogan "Be safe not sorry" after last year's successful "discovering cartels", which saw a 30% increase in the number of anonymous tips on anti-competitive practises.

The British authority is trying to attract possible whistle-blowers whose identity needs to be kept secret. There are rewards of up to 100,000 pounds for anyone with information on anti-competitive practises. The campaign is also directed to reformed cartels alluding to reduced penalties for sharing information on anti-competitive practises.