We present you the fifty-first instalment of the information service bringing interesting facts from the world of competition law. This time we share with you a selection of events for November 2024 that caught our attention.
This year under the antitrust Christmas tree you will find prohibited arrangements in distribution agreements that are not resale price maintenance, we will look at tips on how to (not) abuse a dominant position and we will remind ourselves of the limits of lawful cooperation between competitors.
Cooperation between competitors is always suspect
Adam Smith said something to that effect. More importantly for us, such cooperation does not necessarily violate competition law. There are a number of exceptions where competition law allows competitors to cooperate under certain conditions - e.g. joint purchasing, joint selling, setting standard terms for the sector within an association, etc.
The German Competition Authority investigated the cooperation between Heinrich Bauer Verlag (Bauer) and RTL Deutschland (RTL) in offering advertising space in magazines through AdAlliance. Both Bauer and RTL have popular food and drink, household and women’s magazines in their portfolio. By working together, they will gain significant market share, which may weaken the bargaining position of some advertisers. On the other hand, the individual Bauer and RTL magazines are not close competitors and there is another major player, Burda, on the market. The Competition Authority therefore decided to tolerate the cooperation. However, it required significant amendments to the cooperation agreement, in particular regarding the possibility of independently setting prices for advertising space or limiting the exchange of information.
On the other hand, the European Commission (EC) has imposed a fine of EUR 5.7 million for the settings of a cooperation between Pierre Cardin and menswear manufacturer Ahlers. Pierre Cardin grants licences for the manufacture and sale of the brand’s clothing. Ahlers is the largest licence holder in the EEA. The parties have jointly agreed that Pierre Cardin will prohibit other licensees and customers from selling Pierre Cardin branded clothing outside their allocated territory, both offline and online. At the same time, Pierre Cardin was to prohibit them from supplying the garments to retailers who sell them to consumers at low prices, in particular discounters. The aim was to give Ahlers absolute territorial protection in the countries for which it had obtained a licence from Pierre Cardin, while ensuring that Pierre Cardin's luxury clothing was not sold at low prices. According to the EC, such restrictions on cross-border trade allow manufacturers and suppliers to maintain artificially high prices in national markets.
The various associations and chambers represent, in principle, a permissible and to some extent necessary cooperation between competitors. However, they are subject to competition law and the threat of fines for anticompetitive agreements - usually in the form of decisions by the association bodies.
In November, the Lithuanian Supreme Court upheld the decision of the local competition authority to fine the Chamber of Notaries (EUR 88,400) and eight members of its board (EUR 100-20,800 depending on their income) for setting the amount of fees for notarial acts and the calculation formula. The Portuguese Competition Authority then issued a statement of objections against an association of consultancy service providers for architectural and engineering projects. This association allegedly adopted and published price lists containing minimum prices for the services of its members, which served as reference prices for the entire Portuguese market. These price lists had been in use on the market since 1994.
Problematic cooperation in distribution
As our regular readers know, European competition authorities issue decisions on resale price maintenance almost every month. However, in November they also issued other interesting decisions on distribution agreements, which we have given priority to this time. This is because they concern very important aspects of product distribution.
The first case we would like to mention concerns the selective distribution system. If it is properly set up, it does not pose a competition law problem. However, setting it up correctly usually requires the assistance of competition lawyers. Otherwise, the manufacturer/distributor risks a heavy fine or a claim for damages.
Footwear distributor Deckers stopped supplying HOKA brand running shoes to retailer Up & Running because the retailer was selling them at a discount on its unauthorised website. Deckers argued that the website did not meet the criteria of its selective distribution system. However, Up & Running brought an action for damages before the UK Competition Appeal Tribunal. The Tribunal found in favour of Up & Running, finding that Deckers’ selective distribution system infringed competition law because the selection criteria were not sufficiently transparent and were applied in a discriminatory manner. At the same time, the Tribunal found that the sole purpose of the selective distribution system was to restrict price competition and not to promote the HOKA brand. If you are considering introducing a selective distribution system, we would be happy to assist you.
The Slovak Competition Authority dealt with the issue of exclusivity clauses in contracts between the parcel delivery service provider Packeta Slovakia and parcel pick-up points. The arrangement was that the pick-up points (mostly smaller shops/outlets) were not allowed to be pick-up points for competing delivery services – otherwise they were threatened with a contractual fine. This made it more difficult for competitors to gain access to the few available pick-up points, thereby restricting competition in the market for delivery services. However, instead of imposing a fine, the Competition Authority accepted commitments in which Packeta promised to abolish the arrangement in question and allow competitors access to the pick-up points. A similar case was dealt with by the Czech Competition Authority earlier this year.
How (not) to abuse a dominant position – continued
Following on from the October instalment of our competition blog, we present further examples of how dominance can be abused (and what competitors in a dominant position should avoid doing).
The EC fined Meta EUR 797.72 million (still relatively low compared to other BigTech companies) for abuse of dominance in the markets for personal social networks and online display advertising on social media. According to the EC, Meta tied access to its advertising service Marketplace to its Facebook social networking service: All Facebook users have automatic access to Marketplace and are regularly exposed to it, whether they want to or not. This gives Meta a significant advantage over other social media advertising providers, which could be foreclosed from the market. In addition, Meta has unilaterally imposed unfair trading conditions on competing advertising providers that use Meta’s platforms (Facebook, Instagram). This allowed Meta to use competitors' advertising data for its marketplace service.
Another case concerning access to data was dealt with by the Romanian Competition Authority. It carried out an onsite inspection at the premises of the National Institute of Hydrology and Water Management. According to the Competition Authority, this institution has a dominant position on the market for the provision of hydrological data. It is the only body that can provide the data needed for ecological studies of water flows. It also carries out these studies itself. According to the Competition Authority, the Institute allegedly restricted competitors’ access to its hydrological database, thereby eliminating competition in the market for water flow studies.
If the suspicion is confirmed, this would be a typical example of restricting access to an essential facility. But the essential facility will not be the physical infrastructure, as we are used to, but data. However, this is not an entirely new case. For example, the Czech Competition Authority has previously fined CHAPS for denying access to updated timetable data.
Overly high prices are not often prosecuted by competition authorities. Excessive prices usually come to their attention when their unfairness is blatant and affects vulnerable customers. In other words, it is usually the pharmaceutical markets where patients and public health insurance systems are the victims of excessive prices.
In November, the UK Competition Appeal Tribunal found that Pfizer and Flynn had abused their dominant position in the market for epilepsy medicines (phenytoin sodium capsules). According to the UK Competition and Markets Authority, whose decision was reviewed by the Tribunal, prices for this drug had risen by 780-1,200 % over four years. The Tribunal found that Pfizer and Flynn had behaved in an unjustifiable or opportunistic – in a word, unfair – manner. They were fined a total of GBP 69 million.
As far as abuse of dominance by associations is concerned, the vast majority of the cases we deal with in this forum concern sports associations (we have already written about ISU, FIFA, UEFA, etc.). However, the rules of associations that restrict competition/exclude competing associations are not only the domain of sport.
The Polish Competition Authority is currently dealing with such a case. It is investigating the Polish Kennel Club for possible abuse of a dominant position. The Polish Kennel Club is the oldest and one of the largest Polish cynological associations in Poland and the only Polish member of the Fédération Cynologique Internationale (FCI). It is alleged to have committed the abuse by preventing its members from joining other cynological organisations with which the Polish Kennel Club or the FCI do not cooperate. Similarly, members were prevented from breeding with other associations and participating in events (including shows, competitions and training) organised by these organisations. According to the Competition Authority, these rules could prevent members of other organisations from purchasing purebred dogs for breeding purposes and reduce the income of these organisations.
