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Leniency isn’T for free (Overview of competition events for April to June 2024)

Leniency isn’T for free (Overview of competition events for April to June 2024)

We are pleased to present the forty-seventh instalment of our newsletter, which brings you interesting facts from the world of competition law for the period from April to June 2024. Regular readers will know that this is a purely subjective selection of events that we found interesting this time around.

Lounging on the beach, relaxing between bike rides or enjoying a glass of chilled rosé in the evening calls for interesting reading, and that's what we hope to provide you, competition law fans. This time we focus on anti-competitive agreements, both horizontal and vertical. You will learn about new trends in antitrust (employees and sports), the old favourite resale price maintenance and particularities (such as monitoring competitors’ prices or restricting cross-border trade).

When a successful leniency applicant challenges a decision

If the company was a successful leniency applicant, it may not be appropriate to bring an action against the relevant decision of the competition authority. This was the case for CERP, a Belgian pharmaceutical distributor, which appealed against a decision to fine it EUR 0.8 million for a cartel agreement on margins. The original fine of EUR 1.6 million was reduced by 50% under a leniency programme. The Belgian Competition Authority responded to CERP's action by asking the court to annul the reduction of the fine if the action was unsuccessful. This made it too risky for CERP to continue the proceedings and it withdrew the case instead. In this way, the competition authority protects the functionality of its leniency programme.

Forthcoming amendment to the Czech Competition Act

The Czech Competition Authority is also seeking to ensure the effectiveness of its leniency programme. Our regular readers will have noticed that it is also doing this through the forthcoming amendment to the Competition Protection Act (which we have written about in more detail here). In the meantime, the Czech Competition Authority has submitted a text of the amendment act which is reflects the outline we presented to you. A comment procedure took place in June. There were a number of comments and suggestions, so we are curious to see if the draft will be amended.

Robert discussed the need for the amendment and its risks with the Chairman of the Czech Competition Authority in the radio programme “Pro a proti” (Pro and Con) on ČRo Plus.

Employee-related agreements

As you will have noticed from our previous posts, the investigation of anti-competitive agreements involving employees is becoming a trend and a permanent feature of the antitrust authorities’ activities. This spring was no different.

First, it should be noted that in addition to the Czech Competition Authority, the Slovak Competition Authority has also started to focus on employee agreements. In May, it initiated administrative proceedings against a Slovak business association for adopting a code of ethics that included provisions restricting the hiring of employees. We are of course monitoring the case.

Then, in April and May, the Portuguese competition authority continued to pursue an agreement by large technology consultancies not to hire employees and not to make unsolicited offers to employees of competing companies. In the past it has already fined two companies EUR 1.3 million and EUR 2.5 million respectively for this behaviour, and in April it fined another company EUR 278,000. The Portuguese Competition Authority reduced the fines of all these companies in a settlement procedure. The last two cartel members (belonging to the same group) that refused to settle are still under investigation. A Statement of Objections was sent to them in May. A fine, which is likely to be significantly higher, can be expected by the end of the year.

In April, the Lithuanian Regional Administrative Court upheld a EUR 969,060 fine imposed on the Lithuanian Association of Real Estate Agents and its 39 members. The association’s code of ethics contained provisions that prevented estate agents from taking over each other’s brokers.

What else can be a cartel?

Price monitoring between retail chains can also be considered anti-competitive behaviour. In 2020, the Norwegian Competition Authority announced its intention to impose a record fine of NOK 21 billion (approx. CZK 46 billion) on three retail chains (Norgesgruppen, Coop and Rema 1000). The alleged conduct consisted of using so-called "price hunters" to scout competitors' stores and granting the price hunters access to their own stores. The price hunters collected information on shelf prices in individual stores for a significant number of products. According to the Competition Authority, this was a deliberate infringement of competition law (the chains should have used the information to coordinate prices). The Authority has now reviewed its conclusion. It still considers the use of price hunters to be anti-competitive (it may have led to price increases), but no longer considers the infringement to be intentional. As a result, it has reduced the impending total fine to "only" NOK 4.9 billion (approx. CZK 10.7 billion).

Information exchange in the context of dual distribution, where (at least) one of the parties is both a supplier and a competitor of the other party (the buyer), may also be considered a prohibited cartel agreement. In such cases, competition law allows the exchange of certain information between competitors if it is in the interest of the efficient functioning of the supply chain. But there are limits. In May, the Danish Maritime and Commercial Court upheld the findings of the Danish Competition Authority that Hugo Boss and its two retailers, Kaufmann and Ginsborg, had entered into an anti-competitive agreement between competitors when they exchanged information on sales prices by e-mail. Kaufmann then pleaded guilty to the anti-competitive conduct in June and paid a reduced fine of DKK 6 million (approx. CZK 20 million). Two of its executives involved in the conduct paid a fine of DKK 120,000 (approx. CZK 405,000) each.

Antitrust in sport

This spring has not only provided sports fans with entertainment in the arena, but also in the field of competition law.

In his opinion for the Court, Advocate General Szpunar addressed FIFA’s rule that a player who terminates his association with his original club in breach of his contract is jointly and severally liable with his new club for a contractual penalty. According to the Advocate General, this rule restricts the ability of clubs to acquire players (the risk for the new club to pay a contractual penalty even if it was not involved in the player's departure from the original club) and distorts competition in the transfer market.

There have also been further developments with the Super League and the FIFA/UEFA rules, which have prevented the emergence of competing ventures to the Champions League and its ilk (we last wrote about this here). In line with the Court's previous ruling, the Commercial Court of Madrid has confirmed that the FIFA/UEFA rules, which require clubs participating in the Super League to be excluded from these associations, are anti-competitive and constitute an abuse of a dominant position.

By contrast, the German Competition Authority has confirmed that the German Football League (DFL) can continue to apply the so-called 50+1 rule. Under this 25-year-old rule, if the professional football division of a non-profit parent club was transferred to a joint-stock company, the non-profit parent club had to retain a majority of the voting rights in that company. The DFL Executive Committee could then grant a "benefactor exception" to this rule if the investor had significantly supported the football activities of the parent club for more than 20 years without interruption. As a result of the antitrust investigation, however, the DFL had to withdraw this exemption in order to create a level playing field for all clubs.

Finally, we would like to draw your attention to the new information sheet of the Czech Competition Authority “Competition and Sport”. In it, the Competition Authority deals with the application of competition law in sport, both in general and in relation to certain specific areas such as the sale of broadcasting rights, association rules, football agents, ticketing and merchandising products, etc.

Competition authorities’ evergreen: resale price maintenance

The Czech Competition Authority continues to pursue resale pricing in the household appliances and pet food sectors. In the first case, it imposed a fine of CZK 72.3 million for setting minimum resale prices, compliance with which was monitored by the supplier, inter alia through Heureka. Non-compliance was subsequently sanctioned. In the second case, the Czech Competition Authority imposed a fine of CZK 8 million for a similar infringement. (The difference in the fines is due to the difference in the turnover of the two companies). The Greek Competition Authority also fined a white goods manufacturer in June: the fine was reduced to EUR 46,160 as part of a settlement procedure.

However, other foreign competition authorities have shown that resale price maintenance can also be successfully dealt with in the context of competition advocacy, e.g. through so-called warning letters (see Dutch or UK competition authorities).

Restrictions on cross-border sales

Although resale price maintenance is the most commonly prosecuted anti-competitive vertical agreement, it is by no means the only one. In May, the European Commission (EC) confirmed this when it fined Mondelēz International EUR 337.5 million for a total of 22 agreements restricting cross-border sales. Specifically, Mondelēz entered into agreements with wholesalers that limited the territories into which they could sell. One agreement required the application of higher prices for goods destined for export than for goods destined for the domestic market. Other agreements prohibited exclusive distributors from responding to requests for supplies from customers outside their allocated territories. According to the EC, Mondelēz also abused its dominant position in the chocolate bar market by refusing to supply wholesalers in Germany and the Netherlands because they resold chocolate bars to Member States where prices were higher.

The following day, the EC also confirmed that it would carry out an inquiry into restrictions on cross-border sales and price differences between Member States. This followed an initiative by eight Member States (including the Czech Republic) in early May.

The Trouble with BigTech

In June, the EC dropped an abuse of dominance case against Apple over its rules requiring the use of its own in-app purchase (IAP) system and restricting the ability of app developers to inform iPhone and iPad users of alternative, cheaper purchase options outside the AppStore. The case was dismissed on the grounds that the EC had designated the AppStore as a gatekeeper under the Digital Markets Act (DMA) and that Apple could therefore be prosecuted under the DMA. However, the DMA can have more than positive effects: the application of strict rules can deprive users of access to newer technologies. For example, Apple has just announced that it will delay the launch of some Apple Intelligence features in the EU as a result of prosecution under the DMA.

The AppStore is not the only element that the EC is targeting as a potential abuse of dominance. Other cases relate to Apple Wallet and the use of NFC technology (where the EC may close the case with commitments in the near future), e-books/audiobooks and music streaming services.

In June, Microsoft received a Statement of Objections from the EC alleging that it illegally bundled the sale of Teams with its productivity apps, which are part of the Office365 and Microsoft365 enterprise suites. This was intended to reduce competition in the market for communication and collaboration apps and, through the bundled sales model, to strengthen Microsoft's position in the productivity apps market against competing standalone app vendors.

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