EU Mergers

Phase I Mergers

  • M.8266 MCHC / UBE / MCIS-CN / AETZ-CN ASSETS (18 January 2017)
  • M.8087 SMITHS GROUP / MORPHO DETECTION (19 January 2017)

EU Competition 

Reference from Portuguese court to ECJ on application of Article 102 TFEU to discriminatory pricing practices. On 16 January 2017, details were published in the Official Journal of the European Union (OJEU) concerning a request by a Portuguese court for a preliminary ruling by the European Court of Justice (ECJ) on a number of questions relating to the application of Article 102 of the Treaty on the Functioning of the European Union (TFEU) to discriminatory pricing by a dominant undertaking. In particular, the ECJ is asked whether, in establishing that a dominant undertaking has engaged in abusive discriminatory pricing that places a retail undertaking at a competitive disadvantage (within the meaning of Article 102(c) of the TFEU), there must be an assessment of the gravity, relevance, or importance of those effects on the affected undertaking’s competitive position and/or ability to compete, in particular as regards its capacity to absorb the difference in the costs incurred in the context of the wholesale service. The ECJ is also asked whether there is an abuse of dominance where there is proof that the discriminatory prices charged by the dominant undertaking are of significantly reduced importance for the costs incurred, income obtained and profitability achieved by the affected retail undertaking. Alternatively, the ECJ is asked whether such factors are insufficient to preclude a breach of Article 102 and only relevant to determining the degree of liability of the infringing undertaking. The ECJ is also asked about the meaning of the term "at a competitive disadvantage" in Article 102(c).

Commission welcomes steps taken by Amazon/Audible and Apple to improve competition in audiobook distribution. On 19 January 2017, the Commission announced that it welcomed an agreement to end all exclusivity obligations concerning audiobook supply and distribution between Amazon's subsidiary Audible and Apple. The Commission had been reviewing the exclusivity arrangement between the companies since it received a complaint from the German Publishers and Booksellers Association (the Börsenverein des Deutschen Buchhandels), which objected to various practices used by Audible, including its exclusive supply of audiobooks to Apple's iTunes Store. A substantially similar complaint was submitted by the same association to the German Federal Cartel Office, which opened an investigation against Audible and Apple on 16 November 2015. The agreement between Amazon/Audible and Apple to remove these exclusivity obligations, following contacts with the Commission and the German Federal Cartel Office, means that Audible is able to supply its downloadable audiobooks to third party platforms, that Apple can source audiobooks from alternative suppliers, and that publishers and content aggregators will be able to enter into distribution agreements directly with Apple.According to the Commission, the agreement is likely to improve competition in downloadable audiobook distribution in Europe.

State Aid

Commission approves Italian guarantee (State aid) for Banca Popolare di Vicenza and Veneto Banca banks. On 19 January 2017, the Commission announced that it has decided to approve under EU State aid rules the Italian State guarantee for Banca Popolare di Vicenza and Veneto Banca banks. The State aid consists of the Italian State providing a guarantee for bonds that the two banks plan to issue, for which both banks will pay a fee. The Commission has assessed the measures and decided that the guarantee is targeted, proportionate, and limited in time and scope. The Commission has therefore concluded that this liquidity support is in line with EU State aid rules.

UK Competition 

CMA publishes full text of reference decision on acquisition by AMC of Odeon and UCI Cinemas. On 17 January 2017, the Competition and Markets Authority (CMA) published the full text of its decision to refer the anticipated acquisition by AMC (UK) Acquisition Limited (AMC) of Odeon and UCI Cinemas Holdings Limited unless satisfactory undertakings in lieu are offered.AMC is a wholly owned subsidiary of AMC Entertainment Holdings, Inc. which is itself, a wholly owned subsidiary of the Dalian Wanda Group Co. Ltd. The overall acquisition was notified to the Commission under the EU Merger Regulation and approved on 15 November 2016. However, at AMC’s request, the Commission referred the UK element of the merger to the CMA. Before the transaction, AMC operated only one cinema in the UK (being a large multiplex cinema in Manchester). As a result, the CMA examined only the impact of the proposed transaction on the supply of cinema exhibition services in Manchester. As part of its investigation, the CMA found that Odeon operated a number of cinemas in Manchester, including a large multiplex cinema in Manchester. THE CMA found that the two multiplex cinemas were close competitors and that there is a risk of the proposed transaction leading to higher ticket prices and/or reduced quality in cinema exhibition services in Manchester. On 22 December 2016, AMC offered a number of undertakings to the CMA. The CMA considers there are reasonable grounds for believing that the undertakings, or a modified version of the undertakings, might be acceptable to address the CMA’s competition concerns. The CMA has until 21 February 2017 (or until 20 April 2017 if the CMA decides to extend the timeframe) to decide whether to accept AMC’s undertakings.

CMA to look in detail at undertakings offered in MasterCard/VocaLink merger. On 18 January 2017, the CMA announced that it has decided to consider in detail whether to accept undertakings offered by the parties in lieu of referring to a Phase 2 investigation the anticipated acquisition by MasterCard UK Holdco Limited (MasterCard), an affiliate of MasterCard International Incorporated, of VocaLink Holdings Limited (VocaLink). In January 2017, the CMA announced that the transaction would face an in-depth investigation, unless the companies could address the CMA’s competition concerns over the deal. In particular, the CMA found that VocaLink and MasterCard are two of the three most credible providers of infrastructure services - which include software and hardware provision, as well as secure telecommunications networks - to the LINK ATM network. As such, the transaction would limit the ability of the LINK scheme to obtain good value when tendering for an infrastructure provider. MasterCard and VocaLink have proposed remedies to the CMA which could address its competition concerns by reducing the cost to LINK of switching from VocaLink to alternative suppliers of infrastructure services. The CMA has decided that there are reasonable grounds for believing that these proposals, or a modified version of them, might be acceptable to remedy the competition concerns it has identified. The CMA has until 15 March 2017 to consider whether to accept the undertakings, although the CMA may decide to extend this deadline to 15 May 2017 if it decides that there are special reasons for doing so. As part of its process, the CMA will undertake a public consultation. If the CMA does not accept the proposed undertakings, the merger will be referred for an in-depth investigation.

CMA announces settlement in the furniture industry products investigation. On 19 January 2017, the CMA announced it has agreed a settlement with Thomas Armstrong (Timber) Limited (Thomas Armstrong) and Hoffman Thornwood Limited (Hoffman) after the companies admitted market sharing, co-ordinating prices, bid-rigging, and exchanging commercially sensitive information. Both of the companies supply drawer parts to well-known furniture manufacturers, and have admitted they infringed competition law by agreeing not to compete on price and sharing out which customers they would supply. Thomas Armstrong and its parent company have agreed to pay a fine of £1,509,000 in relation to the drawer wraps cartel, and £684,000 in relation to the drawer fronts cartel. Hoffman and its parent company, have agreed to pay a fine of £688,000 in relation to the drawer fronts cartel. These penalties include a 20% reduction for settlement, reflecting that the companies have admitted breaking competition law and have agreed to follow a streamlined procedure for the remainder of the case. The CMA noted that another manufacturer, BHK (UK) Limited, also confessed its involvement shortly after the start of the investigation. The CMA announced that BHK (UK) Limited would not be fined, provided it continues to co-operate with the CMA and complies with the other conditions of the CMA’s leniency policy. The fines will not become payable until after the CMA has issued a formal infringement decision imposing the fines and setting out the CMA’s findings in full, together with the basis for the calculation of the fines. The next procedural step is the issue of a formal statement of objections, which is expected by the end of January 2017. The investigation began as a criminal investigation into suspected cartel offences under section 188 of the Enterprise Act 2002, after information was received on the CMA cartels hotline. However, in September 2015, the CMA decided not to instigate criminal proceedings.

CMA clears VTech/LeapFrog merger. On 12 January 2017, the CMA announced that it has formally cleared the merger of children’s toymakers, VTech, and LeapFrog. According to the CMA, an in-depth investigation by a group of independent CMA panel members has confirmed that the merger may not be expected to result in a substantial lessening of competition. The group found that while the companies are close competitors in the supply of learning toys for 0 to 5 year olds, there are numerous other credible suppliers in the sector, and VTech and LeapFrog were not each other’s closest competitor. The group also found that the market for child tablets and content is evolving rapidly, with new entrants and an increasing number of alternatives available for child-appropriate content on electronic devices.