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From the Czech woods and fields... (Overview of competition events for May 2023)

From the Czech woods and fields... (Overview of competition events for May 2023)

We present to you the thirty-ninth instalment of the information service regarding events that occurred in the world of competition law in April 2023. Regular readers know that this is necessarily a purely subjective selection, and one simply cannot expect complete objectivity from it.

The Czech competition authority was extremely active in May, which is why the May blog post is mainly devoted to competition events from the Czech woods and fields. However, in the regular procedural corner, we also focus on various competition procedural aspects of the business of one of the BigTech companies.

Cartels and other prohibited agreements

In our April article, we already dealt with the Czech competition authority's campaign against anti-competitive decisions of associations of undertakings. In May, the Czech competition authority continued its campaign.

First, it fined the association of wholesale distributors of medicines, AVEL, for conduct in connection with payments for recalls of medicines. Such recalls may occur, for example, because of adverse drug effects or because of the imminent expiry or the termination of sales in the Czech Republic. Such cases are called mandated (or actual) recalls. In addition, mock recalls also occur. Until the fateful AVEL member’s meeting, the recalls were paid for by the wholesale distributors. At that time, however, EU legislation was adopted introducing a safeguard to prevent counterfeiting of medicines (the so-called unique identifier). According to the Czech competition authority, distributors feared that this would increase the error rate and lead to more frequent recalls. It was decided at the association’s meeting that distributors would charge manufacturers/importers a flat fee for mock recalls and, in the case of mandated recalls, an amount based on one pack of the medicine. The Czech competition authority considered this to be an anti-competitive decision by an association of undertakings. Since there was no increase in the number of recalls and the decision was therefore not put into practice, the Czech competition authority assessed the conduct as a one-off of one day's duration. Moreover, AVEL settled with the Czech competition authority and adopted an effective competition compliance programme. The resulting fine was therefore only CZK 696,000.

Another conduct of an association of undertakings under scrutiny concerned the price declarations of the Czech-Moravian Association of Microbreweries. This case – as well as the case of the beekeepers – was resolved within the framework of competition advocacy. It was essentially the same situation, where the representatives of the association informed through the media about the rising costs of production and, as a consequence, about the planned increase in beer prices (e.g. here). The Czech competition authority, as part of the competition advocacy, instructed the representatives of the association about the competition risks, and also drew attention to potentially risky provisions in the code of conduct and communication of the association in this sense. The wording of the association's code has been amended and the association has taken further corrective measures in the area of communication. Thus, the Czech competition authority saw no need to initiate formal administrative proceedings and closed the investigation.

In May, however, the Czech competition authority dealt not only with prohibited agreements in the form of association decisions, but also with the anticompetitive agreements of employers - in particular, so-called no-poaching agreements and wage-fixing agreements (we have already written about them here). These are anticompetitive agreements that are (so far) not often prosecuted on the European continent, but which are gradually coming to the attention of competition authorities (we have written about it e.g. here or here). It is not clear whether the Czech competition authority is currently dealing with any such agreements. However, it has already issued an information bulletin on these agreements and indicated that it intends to focus on them as a priority. It has also recommended that the prevention of such agreements should become part of compliance programmes. The European Commission (EC) is reportedly conducting an investigation into no-poaching agreements in the area of radio frequency front end products.

May was interesting not only because of the activities of the Czech competition authority, but also because of the decisions of other European authorities protecting effective competition. The following cases reminded us of the different ways in which anticompetitive agreements can be concluded.

In the first case, a Düsseldorf court upheld a fine of EUR 50 million imposed by the German competition authority on the brewery Carlsberg for a price agreement. Although Carlsberg had not formally concluded any price agreement, the former CEO of Carlsberg decided to adapt the brewery’s market behaviour after meeting representatives of other breweries. According to the German competition authority, sensitive commercial information was shared at this meeting. This was enough to prove an anticompetitive agreement.

A further lesson is drawn from a Danish court decision which confirmed that Clear Channel Denmark and AFA JCDecaux had entered into an anticompetitive agreement on discounts for customers (first in the form of a written agreement in the narrow sense and subsequently in the form of a concerted practice). The competitors first concluded a written agreement on joint discount rates for the sale of outdoor advertising space. This was effective from 5 September 2008 until 31 December 2010. The agreement was not renewed thereafter, but the competitors continued to apply the agreed discount rates until April 2015. Thus, although the form of the conduct had changed completely, the court held that it was still an anticompetitive price agreement.

A final lesson – on how (not) to communicate via WhatsApp – comes from the Dutch competition authority's decision on price agreements between three companies buying eggs from farmers. The fact that you negotiate a price agreement via an encrypted communication app does not prevent the competition authority from reading the conversation on your mobile device during an onsite inspection. The communication secured in this way is like a textbook on competition law: Company A: " n this market, the status quo with customers and farmers is the best option. In that way, we will not be played off against each other, and we will finally be able to make some money." Company B: " Totally agree! I’ll drink to that."

On other Czech competition authority’s activities

In May, the Czech competition authority again fined a vertical agreement on resale price maintenance. This time, it imposed a fine of €30 million. CZK to FAST ČR, a wholesale and retail seller of various goods, including electronics, watches and garden equipment. As a wholesaler, FAST determined the minimum prices at which retailers should sell. FAST monitored compliance with these prices and, in the event of non-compliance, invited sellers by e-mail to increase their prices to the set level. The fine was reduced thanks to FAST's voluntary submission of additional evidence (an informal precursor to the leniency programme for vertical agreements to be introduced by the amendment to the Competition Act). Furthermore, FAST ČR entered into a settlement agreement with the competition authority and significantly strengthened its – already established – competition compliance programme.

The Czech competition authority also imposed a fine of CZK 20 million on XLCEE-Holding, which operates the furniture chains XXXLutz and Möbelix, for failing to meet its obligations related to the acquisition of another furniture chain (Kika). In the course of approving this transaction, the Czech competition authority identified a potential competition risk in the Pilsen Region. In order to eliminate this risk, XLCEE-Holding committed to divest one retail outlet in this territory. However, XLCEE-Holding did not fulfil this commitment. The Czech competition authority then concluded that it had not been sufficiently active in its search for a buyer. In setting the amount of the fine, the authority took into account that the search for a potential buyer may have been hampered by the Covid-19 pandemic.

Also in May, the Czech competition authority brought to a conclusion its fast-track sector inquiry into five staple foods (cow's milk, butter, chicken meat, chicken eggs and wheat flour) initiated by political commission in February this year. The report of this inquiry is over 100 pages long, but – as the Czech competition authority acknowledges – the inquiry did not show any distortion of competition in this area. It found no evidence of a cartel or the presence of a dominant undertaking. Furthermore, it found that margins at retail level are constant and that all links in the supply-customer chain are able to pass on increased costs to end consumers. It concludes that it does not recommend the introduction of price regulation (e.g. price caps) in this area.

The procedural corner

In the competition blogpost for March we informed you about the controversial draft amendment to the Competition Protection Act introducing, among other things, the possibility for the Czech competition authority to use telecommunications traffic records, data on telecommunication traffic (traffic and location data) and records obtained during surveillance of persons and things (audio records (e.g. spatial audio surveillance, placement of microphones and recording devices in residences/business premises), visual records, records of the content of documents, etc.) obtained by criminal law enforcement authorities.

In May, this amendment was adopted by the Chamber of Deputies of the Czech Republic, in June it was approved by the Senate of the Czech Republic and, in July, signed by the President. It is therefore only a matter of weeks before the provision in question, and with it other provisions of the amendment, come into force. The amendment provides for a very short (15-day) vacation legis period. We will gradually introduce you to the individual novelties on this blog.

At the same time, it should be acknowledged that the use of data obtained in the context of lawful wiretapping by law enforcement authorities was upheld by the European Court of Human Rights (ECtHR) in May in the case of Janssen de Jong Groep against the Dutch Competition Authority. According to the ECtHR, there was no violation of the right to respect for private and family life, home and correspondence – even if the transfer was made without the prior knowledge of the competitor concerned. Indeed, the transfer was foreseeable to the undertaking in the light of the relevant legislation and its history and the case-law of the Dutch Supreme Court. The ECtHR further found that the interference with the right to privacy had a legitimate aim: the protection of the economic well-being of the country. The ECtHR then examined the existence of adequate measures protecting from the abuse of the competition authority’s power. In this context, it found that Dutch law sets limits and conditions for the use of this power (inter alia, a balancing of interests test and a proportionality test must first be carried out). In addition, the undertakings concerned have the possibility to challenge the transfer of data in court (which was not exercised by the undertakings in the present case).

The amendment passed by the Czech legislator, however, does not contain any such protection measures. We therefore believe that it would not stand up to a test before the ECtHR. Moreover, in the Czech case, not only is there no need to inform the parties in advance of the transfer, but the party will not have access to the transferred data until the statement of objections is issued. It is therefore not only a violation of the right to privacy, but also a violation of the right of defence.

However, May was not only the month of the Czech competition authority, but also the month of Meta, and showed that interim measures can also be successfully used in relation to BigTech companies, although this is being questioned at EU level in the context of the adoption of the DMA Regulation.

In our previous post we informed you about the interim measures issued by the Italian competition authority in relation to the unjustified termination of negotiations between Meta and the Italian collective rights administrator SIAE. Among other things, Meta has removed music content managed by SIAE from its Facebook and Instagram platforms. The Italian competition authority has ordered Meta, by way of interim measure, to return to the negotiating table and restore the availability of SIAE-managed music content on Meta's platforms. SIAE reported in May that it had managed to conclude an interim agreement with Meta and return music content to Facebook and Instagram.

The French competition authority has also successfully applied a similar interim measure against Meta. The latter is investigating Meta's conduct in the context of ad verification, following a complaint from Adloox. Ad verification consists in particular of verifying the visibility of the ad (the user has actually seen the ad), detecting fraud (including detecting invalid machine access) and protecting the trademark (checking that the ad is not displayed in an inappropriate environment). This service is offered by the platforms providing advertising space themselves (such as Meta) or by independent companies (such as Adloox) that need the platform to give them access to its ecosystem. However, according to Adloox, Meta has set unreasonable conditions for access since 1 January 2023, and has only granted it partial access. The French competition authority has initiated proceedings against Meta. At the same time, it adopted an interim measure ordering Meta to suspend the application of the conditions of 1 January 2023, to adopt the new conditions within two months and to allow Adloox access to its ecosystem on fair terms. In view of the fact that Meta did not appeal against the interim measure, it is expected to enter into a settlement agreement with the French competition authority.

Moreover, in May, Meta lost a case before the General Court regarding requests for information and documents sent to it by the EC in connection with an investigation into its (and Google's) user data collection practices. These requests were quite extensive and concerned tens of thousands of documents: the EC demanded the handing over of documents found on the basis of certain search terms. According to Meta, these search terms were generic and allowed the seizure of a significant number of documents unrelated to the investigation. In 2020, in an interim measure, the General Court concluded that they were likely to cause serious and irreparable harm to Meta's employees. In doing so, it ordered the EC to set up a virtual data room to dispose of documents containing personal data. As regards the remaining documents, the General Court found in May that Meta had failed to show that the search terms used (albeit rather vague in some cases) were contrary to the principle of necessity. According to the General Court, the requirement of correlation between the search term used and the conduct under investigation is satisfied if the EC could reasonably have expected at the time that the information obtained would help it in determining whether or not the anti-competitive conduct under investigation had occurred. The General Court then held that (in view of the principle of the presumption of legality of decisions of the EU institutions) it examined only those search terms which Meta had specifically mentioned in its application, not all of them. It is therefore not possible to say whether all the search terms actually complied with that principle.

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