1. Dia / Eroski Agreement 2. Mergers 3. Restrictive practices 4. Courts 5. Others
1. Dia / Eroski Agreement
The purchasing alliance agreed between Dia and Eroski more than a year ago continues to be the sector's main talking point. Although the Food Indus-try Information and Control Agency (AICA) has an-nounced the opening of infringement proceedings against the two groups due to indications of a breach of the Act for the improvement of the func-tioning of the food supply chain (LCA), the National Markets and Competition Commission (CNMC) has concluded that the alliance does not restrict compe-tition, therefore dismissing the complaint filed by the Spanish Food and Drink Industry Federation (FIAB).
CNMC dismissal (S/DC/0570/15)
The CNMC has recently published its resolution dated 29 September 2016 (see here), in which it concludes that the joint purchasing agreement between Dia and Eroski does not restrict competition in breach of article 1 of the Spanish Competition Act (LDC).
According to the CNMC, the decision to dismiss the complaint is based on the fact that the market power achieved by the two brands in both the supply and downstream distribution markets is not high enough to pose a threat to competition.
With regard to the supply market, the CNMC states that the 15% threshold would only be exceeded in one segment of the procurement market, distinguishing the market by product category*. Thus, the CNMC believes that the suppliers' negotiating power remains sufficient to counteract the strengthening of Dia and Eroski's purchasing power (in fact, the resolution outlines that the agreement only applies to 20 of the initially anticipated 40 suppliers).
With regard to the downstream distribution market, a financial report provided by the parties in question states that their combined share only exceeds 15% in [40-50%] of the regions in which their retail distribution of everyday consumer goods overlaps, with the share surpassing 30% in [0-10%] of such regions.
Moreover, the CNMC supports its decision on the fact that there is no current awareness of similar agreements to the one entered into by Dia and Eroski which may entail the strengthening of purchasing power, as opposed to events in other jurisdictions such as France (see here).
The CNMC also rejects the possibility of an infringement of article 2 of the LDC (prohibition of abuse of a dominant position) or article 3 of the same (prohibition of unfair conduct). Having analysed the market shares of the entities involved, the CNMC believes that Dia and Eroski do not hold a dominant position, nor is competition affected under the terms of article 3 of the LDC.
Lastly, the CNMC does not appear to have carried out a thorough review of the other aspects of these types of agreements which, in our opinion, may pose risks from a competition law perspective. Said risks are: (i) exchanges of information, and (ii) the incentive for manufacturers to increase their sale prices as a result of the type of most favoured nation clause contained in the agreement. As we explained here, said clause provides for requesting suppliers to pay a financial contribution corresponding to the difference resulting from a comparison of the purchase conditions (reference-by-reference) between the two companies. Under these circumstances, in view of the rational fear that in years to come Dia and Eroski may again request contributions as a result of the comparison between the prices agreed with each brand, the suppliers may try to avoid such price differences occurring in the future, which could unravel in the form of an alignment - most likely upwards - of the suppliers' transfer prices.
The resolution makes a brief reference to both aspects -although maintains the confidentiality of the majority of the agreement's terms- to conclude that with regards to exchanges of information, the safekeeping measures set forth in the agreement would ensure that strategic information is not leaked. With regard to incentives, the CNMC confines itself to stating that the preferred client clauses would only pose issues if undertaken in a highly concentrated market, which is not the case here.
In any event, the CNMC's decision not to open infringement proceedings and close the case (despite the fact that the decision may be appealed under judicial review) highlights a recognition for the distribution sector as regards the CNMC's stance in favour of joint purchasing agreements. We shall have to wait and see whether the domino effect occurs, i.e. an increase in similar actions between other operators as we have seen in countries such as France.
*Upon acting in such manner, the CNMC would have reviewed its stance at the time of defining the supply market by analysing the parties' purchasing power in view of product category and not, as previously done, by taking into account a single supply market across the entire national territory. Nevertheless, the CNMC would not have divided such market into geographical areas.
Opening of infringement proceedings by the AICA (Press release)
According to reports in the media (nothing has been published as of yet), the AICA has decided to open infringement proceedings against Dia and Eroski for 88 and 90 breaches of the LCA, respectively.
In particular, the AICA believes that there are reasonable indications to suggest that both Dia and Eroski have committed minor infringements of the terms of sections e), f) and g), article 23.1, of the LCA, i.e. (i) amending contractual conditions not expressly agreed between the parties; (ii) requesting further payments in addition to the agreed price; and (iii) requesting or disclosing commercially sensitive information.
As prescribed by article 24 of the LCA, the AICA may punish such minor infringements with fines of up to EUR 3,000. Nevertheless, the fines may by increased up to EUR 100,000 or even EUR 1m in certain cases of repeated offence. It remains to be seen whether the AICA considers Dia's 88 and Eroski's 90 infringements as repeat offences under the terms of article 24 or not. As opposed to the terms of the LDC, the LCA does not enable the AICA to declare the agreement invalid.
In any event, and although we shall have to await the final outcome of the investigation, the mere initiation of the proceedings may be regarded as a statement of intent from the infant AICA to rigorously apply the terms of the LCA.
ABP Group / Fane Valley / Slaney (Press release)
07/10/2016. The European Commission has cleared unconditionally the proposed acquisition of joint control of the Irish entities Slaney Foods JV and Slaney Proteins by meat processor ABP Group and farmer-owned agri-food company Fane Valley.
All of the companies involved are active in the purchase and slaughter of live cattle, as well as the de-boning and processing of meat. Their activities also cover the trading of fresh meat to meat retailers (including supermarkets) and industrial meat processors. Despite overlapping in the markets, the European Commission concluded that the transaction would not raise any competition issues since alternative competitors with sufficient influence to prevent the resulting entity from being able to increase prices would still remain.
Danone /White Wave Foods (M.8150)
26/10/2016. On 26 October 2016, Danone notified the European Commission of the acquisition of the plant-based foods producer White Wave Foods. According to the available information, on 25 November Danone offered a series of commitments which are yet to prompt the European Commission to authorise the transaction. The European Commission's deadline to resolve the case has been postponed until 16 December.
The Coca-Cola Company / Coca-Cola HBC / Neptuno Vandenys (Press release)
The Coca-Cola Company has notified its acquisition from Coca-Cola HBC of a 50% interest in Neptuno Vandenys, a Lithuanian company that bottles and sells mineral and flavoured water. Following the transaction, Neptuno Vandenys will be jointly controlled by The Coca-Cola Company and Coca-Cola HBC.
Frescos Delisano / Cárnicas Medina / Incarlopsa / Martínez Loriente (C/0795/16)
29/09/2016. The CNMC has authorised in the first phase the acquisition by Incarlopsa and Frescos Delisano of Martínez Loriente, an exclusive supplier of meat products to Mercadona. The CNMC's authorisation validates the transfer of the activities comprising the trimming and packaging of pork and lamb, slaughtering and the stripping of beef to the aforementioned companies.
Palacios / Fuentetaja (C-0789/16)
31/11/2016. The CNMC has published its resolution authorising the acquisition of the ready meals producer Fuentetaja by Grupo Palacios Alimentación, a producer of cured meats and prepared food. The markets affected by the transaction fall within the prepared food sector, in particular chilled salads, chilled pizzas, and chilled and frozen omelettes in their varying distribution channels.
Nevertheless, chilled omelettes is the only market in which the companies' combined share exceeds 30%. In said market, Palacios and Fuentetaja are the leading producers with their own brand (with a share of over 50% for 2015 in the retail market).
In its resolution, the CNMC does not believe that the transaction poses a threat to the maintenance of effective competition by taking into consideration the following factors: the distributor’s own brand products were clearly at the forefront of the chilled omelette sector, customer loyalty is still particularly low, there are no significant barriers to entry and numerous alternatives are available to consumers.
Eurocash / Polska Dystrybucja Alkoholi (Press release)
18/10/2016. The Polish competition authority has issued its concern over the transaction comprising the acquisition by consumer products distributor Eurocash from the alcoholic beverages wholesaler Polska Dystrybucja Alkoholi (PDA). According to the authority, the entity resulting from the transaction would hold a dominant position in the market for the sale of alcohol to specialised outlets, where there are no comparable competitors.
Rewe / Coop (Press release)
28/10/2016. The Bundeskartellamt has authorised the acquisition by Rewe of the northern German food distributor Coop, subject to conditions. According to the German authority, the transaction would restrict competition in eight regional markets. Thus, during the merger control proceedings the parties sold 11 outlets falling within these markets to Bartles Langness.
In addition, the authority concluded that the transaction did not raise any issues in the procurement markets since Coop's own procurement volume amounts to less than 0.5% of the total procurement volume of the German food retail sector. Prior to the merger, both Coop and Rewe were already part of the same joint purchasing agreement, hence each operator did not represent a genuine alternative for suppliers in the market.
Galeries Lafayette / Bazarchic (Press release) 2/11/2016. On 27 September, the Galeries Lafayette group notified the Autorité de la Concurrence of a merger entailing the acquisition of exclusive control of Bazarchic. Both operators are active in the sale of discontinued products and travel services. Nevertheless, their limited presence in both markets has led to the French competition authority authorising the transaction in the first phase and without conditions.
Fromageries Bel / Mont Blanc Materne (Press release)
28/11/2016. Fromageries Bel, a specialist firm in the cheese industry (and, in particular, the portioned cheese market), has notified the French competition authority of the acquisition of Mont Blanc Materne, a producer and marketer of compotes, jams, custard, cereal-based desserts and concentrated milk for cooking.
AB InBev / Bosteels (Nota de prensa)
25/11/216. The Belgian competition authority has rejected the application for interim measures filed by Heineken subsidiary Alken Maes in relation to the merger in which AB InBev acquires the Bosteels brewery.
In the application, Alken-Maes argued that although the transaction was not subject to mandatory notification to the Belgian competition authority, the acquisition entailed an abuse of a dominant position by AB InBev. In particular, it was argued that the acquisition of the Karmeliet brand would significantly strengthen AB InBev's dominant position.
Nevertheless, the Belgian authority ruled that there are no indications to suggest that the merger places restrictions on competition which may be distinguished from the mere effect of the concentration and which may, prima facie, be classified as an abuse of a dominant position. The authority declared that if AB Inbev excludes from the market other competing beers at the establishments in which its brands are sold following the merger with the Karmeliet brand, such conduct may be investigated as a breach of competition law.
3. Restrictive practices
Metro Cash and Carry / Fantastico (Press release)
17/10/2016. The Bulgarian competition authority has carried out surprise inspections at the offices of the Sofia-based subsidiary of the German wholesaler Metro Cash & Carry, as well as those belonging to the Bulgarian supermarket chain Fantastico, in order to investigate possible competition restricting agreements and practices.
Sok (Press release)
11/10/2016. The Finnish authority has closed its investigation into the customer loyalty scheme launched by food distributor Sok.
Sok holds a share of over 30% in the Finnish food distribution market, which in said country represents a dominant position. Nevertheless, the discount and bonus scheme offered to customers does not raise any competition issues since the loyalty generated does not lead to the exclusion of competitors in the market.
Sausages (Press release)
19/10/2016. An internal restructuring of the Sur Mühlen Group has enabled two of its companies to avoid a EUR 128m fine imposed by the Bundeskartellamt in 2014 for their participation in a sausage manufacturing cartel. Having appealed the fines, the two companies' key assets were transferred to other entities within the group and subsequently dissolved. The companies took advantage of a loophole in the German legislation to avoid the fine.
02/11/2016. The High Court has upheld the resolution issued by Spanish competition authority declaring that the National Association of Seafood Canning Manufacturers (ANFACO) infringed article 1 of the LDC. The infringement would have consisted in adopting decisions among competitors aimed at temporarily suspending the purchase of Galician mussels and to force producers into reaching an agreement on purchasing conditions.
The Court affirms that a boycott agreement, implying collective coercion and an attack on corporate liberty, represents unjustified collusion. Not even in the hypothetical case of intending to neutralise another form of anti-competitive conduct, as occurred in this case, would this be accepted. In particular, the ANFACO's decisions were made under conflict with the Galician mussel producers and as a response to practices declared anti-competitive by the CNC in its resolution dated 26 April 2011 following a complaint filed by the Association itself.
Nevertheless, the High Court partially upholds the ANFACO's appeal with regard to the EUR 2.11m fine imposed in the CNC resolution since it was determined in accordance with the CNC notification on the calculation of sanctions, declared unlawful by the Supreme Court.
Detergent (Press release)
26/10/2016. The French wholesale chain Casino Guichard-Perrachon has reached an agreement with Unilever, Procter & Gamble and Henkel on the damages claims filed before the courts of the United Kingdom in view of the detergents cartel uncovered by the European Commission in 2011.
Pursuant to the Commission's decision, the cartel held an agreement for the fixing of detergent prices which affected eight member States over a period of more than three years between January 2002 and March 2005.
08/11/2016. The Supreme Court of France has upheld the majority of a decision issued by the French competition authority in March 2012 declaring the existence of two cartels in the packaged flour sector; one in the domestic French market and the other affecting France and Germany.
15/11/2016. A French court has dismissed a lawsuit filed by Paris-based luxury watch outlet Elysees Shopping against Rolex France in which Rolex was alleged to have infringed competition law by rejecting the outlet's application to join its selective distribution network.
The court believed that Elysees was unable to prove that the Rolex's selection criteria was inaccurate or discriminatory, nor that the latter held a dominant position in the domestic luxury watches market.
Hygiene products (Press release)
28/10/2016. The Paris Court of Appeal has upheld the infringement declared by the French competition authority in 2014 leading to the imposition of a EUR 951m fine on eight hygiene product manufacturers for their participation in two cartels. Nevertheless, the Court has reduced the total amount of the fine by EUR 2.2m.
08/11/2016. A court in Mannheim has agreed to process the damages claims of six companies (four non-alcoholic beverage producers, an animal feed producer and a chocolate manufacturer) against Suedzucker, Nordzucker and Pfeifer & Langen for their participation in a cartel within the sugar sector as declared by the Bundeskartellamt in 2014. One of the defendants, Suedzucker, is headquartered in Mannheim.
The claims are joined with those already filed by other operators affected by the cartel and admitted by the same court (among others, Lindt, Bauer, Vivil, Lambertz, Nestle and Goebber) (see here).
Edeka /Tengelmann (Press release)
24/11/2016. According to the media in Germany, the German wholesale chains Rewe, Markant and Norma have withdrawn their respective appeals against the decision to authorise the acquisition of Tengelmann by Edeka, thus avoiding the loss of 18,000 jobs.
Rewe / Coop (Press release)
16/11/2016. According to the German press, Edeka has appealed the decision with conditions adopted by the Bundeskartellamt in relation to the acquisition by Rewe of Coop's outlets (see related story in this edition).
Carrefour (Press release)
10/11/2016. The French Economy Minister has filed a lawsuit against Carrefour before the mercantile courts for abusive commercial practice. The lawsuit has been filed following an investigation carried out by the Ministry's Competition department. In particular, Carrefour is believed to have demanded significant additional discount from suppliers without offering anything in return.
Loi Sapin II (Press release)
15/11/2016. The draft bill of the act on transparency, the fight against corruption and modernisation of the economy, expected to be passed in the coming weeks, amends the rules applying to commercial relationships between professionals with regard to payment deadlines and commercial negotiation.
With regard to commercial negotiation, the bill introduces the possibility of single master agreements being multiannual, in which case any corresponding prices would be subject to review. Moreover, two new restrictive practices which may be sought in accordance with the strict current sanctioning regime are established: the imposition of sanctions for a failure to deliver on time in cases of force majeure, and the imposition of a price review or renegotiation clause in line with one or several public indices which are not directly related to the contracted products or services.
With regard to payment deadlines, the Sapin II Act repeals the 60-day period and introduces a 45-day period from the issuing of the invoice, although there are some exceptions. In addition, the bill increases the fines prescribed for breaches of the rules on payment deadlines, with the maximum rising from EUR 375,000 to EUR 2m for natural persons.