Recent competition law developments: EU and Latvia

Debora Pāvila

Jūlija JerņevaRiga, 5 March 2010

Contents

1. Overview of the year 2009: Latvia

2. Horizontal agreements

3. Vertical agreements

4. Abuse of dominant position

5. Mergers

6. Procedural issues: will the Intel case bring more clarity?

Overview of 2009 – Latvia

Types of cases 2009 2008 2007 2006

Abuse of dominant position

19 (3v) 18 (5v) 13 (2v) 11 (4v)

Prohibited agreements

9 (6v) 18 (7v) 12 (5v) 10 (5v)

Mergers 12 (1v) 57 (5v & 2p) 82 (3v & 1p) 28 (4v)

Horizontal agreements

• Akzo case• Hoechst case• KME Germany case• Latvian cases: overview

Akzo case: 100% share ownership• Case C-97/08: Choline chloride cartel

• “100% share ownership creates a presumption that the parent company controls the subsidiary and exercises decisive influence over its commercial policy and is therefore jointly and severally liable”

• “Where a parent company holds 100% of the capital of a subsidiary it is for the parent company to produce any evidence relating to the economic, legal and organisational links between the subsidiary and itself which in its view are such as to rebut the presumption that they do not constitute a single economic entity”

Hoechst case: liability of the seller of the shares

• Case T-161/05: Monochloroacetic Acid cartel

• Hoechst sold business to Clariant which then made a leniency application and was granted immunity

• Hoechst argued that due to transfer of business either:– Clariant was liable for fine; or– Hoechst should also benefit from immunity

T-Mobile Netherlands case

• Case C-8/08 (preliminary ruling)• Single meeting between competitors (to discuss the reduction of a

standard dealer remuneration)• “It is not necessary for there to be actual prevention, restriction or

distortion of competition or a direct link between the concerted practice and consumer prices. An exchange of information between competitors is tainted with an anti‑competitive object if the exchange is capable of removing uncertainties concerning the intended conduct of the participating undertakings.”

• “The national court is required, subject to proof to the contrary, which it is for the undertakings concerned to adduce, to apply the presumption of a causal connection, according to which, where they remain active on that market, such undertakings are presumed to take account of the information exchanged with their competitors. That presumption forms an integral part of applicable Community law”

Latvian cases: overview

• Aizputes Ceļinieks & Ceļu, tiltu būvnieks (road construction)– Decision dated: 14.05.2009– Type of case: price fixing

• Public procurement: two agreements with SIA „Komunālā pārvalde”; Vecliepāja & Jaunliepāja agreements (with identical price adjustment clauses)

• Exchange of information on planned increase of prices after the conclusion of the agreements

• Fine: LVL 69’733 ca EUR 99’222

Latvian cases: overview

• Tyre mounting and repair case– Decision dated: 27.06.2009– Fine: LVL 8’360 ca EUR 11’734– Type of case: price fixing

• No direct fixing of prices, but sufficient exchange of information

• Creation of artificial transparency on the market

Latvian cases: overview

• Balticovo et al. (eggs’ cartel case II)– Decision dated 11.12.2009– Fine: LVL 109’162 ca EUR 153’231– Exchange of information about:

• output • costs• sales volume• prices (including export prices)• debtors, clients• insurance (prices and conditions)• sales of real estate

Latvian cases: overview

• Plus Punkts, Narvesen Baltija and Preses Apvienība– Decision dated 16.12.2009– Fine: LVL 103’100 ca EUR 144’722– Agreements with Tele2 provided for:

• Maximum retail price of pre-paid mobile telephony cards• Precluded the retailers from charging the consumers a

“service fee”

– The retailers:• Almost simultaneously asked to remove these clauses• Started applying the same “service fee”

Vertical agreements• Introduction• Draft Commission

Regulation and Draft Guidelines on Vertical Restraints

• Latvian cases: Samsung

Introduction

• Vertical agreements = supply and distribution agreements

• Anti-competitive effects depend on the degree of market power of the parties, extent of competition faced

• Art 101(1) [ex 81(1)] and Art 101(3) [ex 81(3)]• Block exemptions as safe harbours ONLY

Draft Regulation and Guidelines on Vertical Restraints I• Regulation 2790/1999 (the VRBE) expires on 31 May

2010• Draft Regulation available at:

http://ec.europa.eu/competition/consultations/2009_vertical_agreements/draft_regulation_en.pdf

• Draft Guidelines available at: http://ec.europa.eu/competition/consultations/2009_vertical_agreements/draft_notice_en.pdf

Draft Regulation and Guidelines on Vertical Restraints II• Major changes:

– Supplier + buyer market share test (up to 30% for each) INSTEAD of the supplier market share test alone

– More attention to on-line sales restrictions• Other points of interest

– Agreements between retail chains and suppliers– Definition of ‘agreement’– RPM

Draft Regulation and Guidelines on Vertical Restraints III• Cumulative market share test

– Narrowing of the scope of application of the BE

– Questionable relevance of the buyer’s market power in the downstream market• Single branding and exclusive distribution

agreements• Input procurement

– Impractical self-assessment for suppliers

Draft Regulation and Guidelines on Vertical Restraints IV• Online sales

– Inherent problem of online sales for exclusive distribution systems

– Still generally regarded as ‘passive’ sales, i.e., restrictions thereof fall outside the BE

– Unclear meaning of “specifically targeted online advertisement”

– Allowed restrictions (‘brick and mortar shop’, quality standards for Internet site) are very limited

– Is the distinction between ‘active’ and ‘passive’ sales appropriate for online sales at all?

Draft Regulation and Guidelines on Vertical Restraints V• Specific agreements between retail chains and

suppliers:– Upfront access payments = fees charged for access

to retailer’s distribution network– Category management = supplier entrusted with

marketing of a category of products

• Exempted below the market share thresholds BUT what happens above the thresholds?

Draft Regulation and Guidelines on Vertical Restraints VI• Notion of ‘agreement’

– Unilateral action vs. tacit acquiescence– Bayer (T-41/96; C-2/01P & C-3/01P)

Draft Regulation and Guidelines on Vertical Restraints VII• RPM (retail price maintenance):

– Still a “hardcore restriction”– More detailed analyses of the competitive

effects– Is this good enough?– The Latvian case: Hanzas Maiznīcas

Latvian cases: Samsung

• Samsung Electronics Baltics– Decision dated 30.10.2009– Fine: LVL 4’099’943 ca EUR 5’833’693 (total: LVL

6’080’715 ca EUR 8’652’078)– Geographic market: Latvia, Lithuania, Estonia– Agreements:

• Price fixing• Market sharing

Abuse of dominant position

• Microsoft: PC operating systems case

• RWE Group: German gas supply case

• Rambus: ambush patent case

• Intel: rebates case• Latvian cases: overview

Microsoft: PC operating systems case

• Case COMP/39.530 

• Automatic tying of 'Internet Explorer' web browser to the 'Windows' computer operating system– deprives consumers of choice– results in fewer innovative products on the market

• January 2009: the Commission’s preliminary view that the company abused its dominant position in the market for client PC operating systems through the tying of Internet Explorer to Windows

Microsoft: PC operating systems case

• As of March 2010: browser “Choice screen”– "Choice Screen" enables users (from EEA) of Windows

XP, Windows Vista and Windows 7 to choose in an informed and unbiased manner which web browser(s) they want to install in addition to, or instead of, Microsoft's web browser

– Same applies to users, who receive an automatic update– Available for 5 years

• 16 December 2009: Commission’s commitment decision

Microsoft: PC operating systems case

• Mr. Nitot, president of Mozilla Europe (27.10.2009): “In 17 countries of Europe, Firefox is now the dominant browser, and the browser is particularly popular in Eastern Europe”

• Firefox was launched in 2004, i.e. when Microsoft was allegedly foreclosing the market

RWE Group: German gas supply case• Case COMP/39.402 

• RWE may have abused the dominant position on its gas transmission network to restrict its competitors' access to the network

• Types of abuses:– Capacity management: systematically keeping the transport capacity on

its gas network for itself– Margin squeeze: setting transmission tariffs at an artificially high level

with the effect of preventing even a competitor as efficient as RWE from competing effectively on the downstream gas supply markets or limiting competitors' or potential entrants' ability to remain in or enter the market

Margin squeeze: no discrimination

B C

Purchase price (PP) 40 40

Minimum manufacturing costs (MinC) 40 40

Maximum competitive retail price (MaxC) 100 100

Profit (P = MaxC – PP – MinC) 20 20

Sparkling wine manufacturer: B(group company with A) Sparkling wine manufacturer: C

Wine material manufacturer: A

Margin squeeze: no discrimination

B C

Purchase price (PP) 60 60

Minimum manufacturing costs (MinC) 40 40

Maximum competitive retail price (MaxC) 100 100

Profit (P = MaxC – PP – MinC) 0 0

Sparkling wine manufacturer: B(group company with A) Sparkling wine manufacturer: C

Wine material manufacturer: A

RWE: commitments

• RWE committed to divest its entire Western German high-pressure gas transmission network, including the necessary personnel and ancillary assets and services

• Competition Commissioner Neelie Kroes commented: "This very substantial set of remedies will fundamentally change the landscape of German gas markets…RWE will no longer be able to use the control of its network to favour its own gas supply affiliate over its competitors."

Rambus: patent ambush

• Case COMP/38.636 • Type of abuse:

– allegedly intentional deceptive conduct, resulting in – potentially abusive royalties for the use of certain

patents as

• US courts dismissed the claim: FTC had not proven that absent the incriminated conduct Rambus’ technology would not have been standardised

• Patent ambush and royalties: to be or not to be?

Intel: rebates case

• Case COMP/37.990 • Financial consequences:

– Fine: € 1.06 billion (largest fine on single firm, but only(?) 4.15% of the turnover)

– Settlement with AMD: $ 1.25 billion to be paid

• Facts:– Dominant position by Intel between October 2002-

December 2007– Relevant market: x86 Central Processing Units

(CPU) worldwide market (at least 70% market share)

Intel: types of abuses

1. Wholly or partially hidden rebates to computer manufacturers on condition that they bought all, or almost all, their x86 CPUs from Intel

2. Direct payments to Europe’s largest PC retailer (MSH) on condition that it stocked only computers with x86 CPUs

3. Direct payments to computer manufacturers to stop or delay the launch of specific products containing a competitor’s x86 CPUs and to limit the sales channels available to these products

Latvian cases: overview

• Riga Free Port case – Decision dated 20.03.2009– Fine LVL 45’000 ca EUR 63’166

• VIASAT and TV3 case– Decision dated: 18.06.2009– Fine LVL 87’000 ca EUR 122’122

• Alpha Express case – Decision dated 22.10.2009– Fine LVL 8’679 ca EUR 12’182

Latvian cases: overview

• 2009 commitments cases:

– Forum Cinemas case (18.06.2009)

– Preses Serviss case (04.02.2009)

– Latvenergo case (20.11.2009)

– Nasdaq OMX Riga case (18.12.2009)

Mergers

• Electrabel: de facto control• Qualcomm: third party

appeal of clearance• Schneider: action for

damages against the Commission

• Latvian cases: Ostas flote

Electrabel: de facto control

• Case No. COMP/M.4994• Transaction cleared in April 2008• EUR 20 million fine for acquisition of de facto

control already in December 2003• Appeal lodged before the CFI

Qualcomm: third party appeal of clearance

• Case T-48/04• Third party appeal of clearance of acquisition

by DaimlerChrysler Services and Deutsche Telekom of joint control over Toll Collect

• Appeal dismissed

Schneider: action for damages against the Commission• Case C-440/07P• Schneider ordered by Commission to divest of

Legrand; Commission decision was thereafter annulled

• Schneider claimed EUR 1’700 million in damages

• CFI awarded EUR 420k• ECJ set aside the CFI judgment

Latvian cases: Ostas flote

• Decision dated: 14.01.2010• Fine: LVL 27’250 ca EUR 38’773• Failure to notify acquisition of 50% (joint

control)

Procedural issues: will the Intel case bring more clarity?

• Intel: the power of context?

• Standard of proof

• Right of defence

• Some case-law

Intel: the power of context?

• Intel’s chief executive wrote in e-mail message to a colleague that Dell was “the best friend money can buy”– "Yeah, I said some of those things, but they are taken

broadly out of context. When the full nature of the emails is exposed, [it will be clear that] there is another way to interpret them.“

• Massive amount of information– 141 companies questioned– 21 dawn raids– Several hundred thousand pages (500 million pages?)

Standard of proof

• Confirmation bias: a search for evidence that confirms rather than challenges one’s beliefs

• European and national procedural rules: applying mutatis mutandis, ignoring or taking into the account?

Right of defence

• Extensive evidence gathering powers– On-site inspections– Requests for information– Power to take statements and to interview

• Judicial review possibilities• Control over the file (confidential information, (not)

including the gathered evidence to the file, redacted files)

• Reliance on complainants• “Blind” search and interviews... No sufficient

information before the “statement of objections”?

Some case-law

• Joined cases T-68/89, T-77/89 and T-78/89, Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v Commission

• Type of case: cartel

• Issues: – Deleting words – Excluding certain evidence

Some case-law

• Case T-342/99, Airtours plc v Commission

• Type of case: merger

• Issues: – Inconsistency with previous opinions– Misreading of evidence

Some case-law

• Case T-5/02, Tetra Laval BV v Commission

• Type of case: merger

• Issues: – Accuracy of economic evidence – “Convincing” evidence

Thank you!

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Debora Pavila Julija Jerneva

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