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Sugar-coated antitrust scrutiny (Overview of competition events for February 2024)

Sugar-coated antitrust scrutiny (Overview of competition events for February 2024)

We bring you the forty-fifth instalment of our regular newsletter on events in the world of competition law. In this edition we cover the month of February 2024. Again, this is a purely subjective selection of events that we found interesting.

As we are both sports fans, in February we were interested in a certain departure from the current approach of the competition authorities to the granting of broadcasting rights for football events. Nonetheless, below you can also read about other activities of the competition authorities in the sugar, waste management, postal services, electricity, coal and ammunition sectors.

Sugar price increases in the light of competition rules

You may recall that a year ago, the  Minister of Agriculture complained in the media about high sugar prices and asked the Czech Competition Authority to take action against rising prices.

Then, in February this year, the Czech Competition Authority published the results of its sector inquiry into the production and sale of sugar. According to the Czech Competition Authority, there were objective reasons for the increase in the production prices of sugar beet and sugar itself. However, with regard to the retail sale of sugar, the Czech Competition Authority found that the margins of retail chains had exceptionally increased by approx. CZK 5. The authority is therefore now investigating the causes of this increase and whether there was any anti-competitive behaviour.

At the same time, the Czech Competition Authority has announced the areas in which it intends to conduct sector inquiries in 2024: food production and waste management. We therefore recommend that those operating in these sectors prepare for these investigations, including preparing for onsite inspections. The Czech Competition Authority can and will not hesitate to carry out onsite inspections in the context of sector inquiries: this is what happened in the sugar inquiry.

Cartel by error?

The legal error that an agreement (does not) constitute a cartel is not often recognised by the competition authorities. One example is the Austrian elevator manufacturer Schindler, which followed the advice of its lawyers, who told it that its behaviour was in line with competition law. According to the Court of Justice, Schindler was nevertheless fully liable for its conduct. Now, however, the Danish companies LKF Vejmarkering and Eurostar Danmark have succeeded with this defence, having entered into an alleged bid-rigging cartel between themselves. This consisted of submitting a joint bid (!) for a tender for road markings. The joint bid was more advantageous to the contracting authority. The Danish High Court confirmed in February that the conduct of LKF Vejmarkering and Eurostar Danmark constituted the most serious anti-competitive agreement bid-rigging, but that the companies were justified in believing that submitting a joint bid was in line with competition law. Moreover, even the court of second instance itself did not consider the submission of a joint bid in this case to be a cartel. Therefore, according to the High Court, it was an excusable error and no sanction should have been imposed on the companies concerned.

Football broadcasting

Football fans know that for many seasons the competition authorities have enforced the so-called "no single-buyer rule" for the sale of broadcasting rights to football events (matches of a given league can be watched on different channels).

However, in its recent assessment of the Bundesliga's marketing model for the 2025/26 to 2028/29 seasons, the German competition authority (temporarily) waived the application of this rule. This is because the broadcasting rights for the different football competitions (Champions League, Premier League, Europa League, etc.) are currently shared between several broadcasters. Moreover, there is competition between broadcasters, not only in terms of the football leagues they broadcast, but also in terms of innovation (they all operate OTT, among other things). If there is no similar distribution of leagues for the next cycle, the competition authority would reinstate the application of the no single-buyer rule.

The Dutch competition authority also dealt with football broadcasting rights. Several potential bidders complained that the Dutch football association Eredivisie CV had sold the broadcasting rights to the Dutch top flight for 2025-2030 to the current broadcaster ESPN (part of the Disney group) without a transparent, public and non-discriminatory tender. However, the Dutch competition authority closed the case, stating that at this stage it saw no reason to consider the agreement between Eredivisie and ESPN to be anti-competitive.

We would like to remind you here that in the Czech Republic, the Czech Competition Authority also recently dealt with the conditions for the sale of broadcasting and betting rights to the top football and ice-hockey competitions and actively influenced these conditions with its comments.

Abuse of dominant position in network industries

Network industries are very diverse, but they have one thing in common: a natural tendency to monopolise certain markets. For this reason, competition authorities regularly investigate possible abuses of dominance in these markets.

The European Commission (EC) has accused Public Power Corporation (PPC), Greece's largest electricity supplier, of selling electricity generated by thermal power plants on the wholesale market at prices below its variable costs. This behaviour, which may constitute an abuse of a dominant position in the form of predatory pricing, was likely to drive its competitors out of the market. In addition, PPC's behaviour discouraged investment in alternative green electricity sources.

The Austrian competition authority then accused Österreichische Post (ÖP) of discriminatory pricing in the market for the delivery of addressed direct mail. The discriminatory behaviour allegedly consisted of ÖP granting lower annual rebates and discounts to mail consolidators than to direct customers. This restricted price competition between consolidators and ÖP.

What to avoid when filing a merger

When filing a merger notification and further communications with the competition authority, it is important to ensure that all the information requested is provided to the authority and is truthful and complete.

After approving the acquisition of munitions manufacturer Expal Systems, the Spanish competition authority found that the acquirer, Rheinmetall, had failed to disclose in the notification all the markets affected by the merger. It also provided some misleading information. Rheinmetall now faces a fine of up to 5% of the annual turnover of the entire group.

If a merger is cleared with commitments, the commitments must be fulfilled within the deadline – even in the event of a completely unforeseeable and exceptional situation that fundamentally affects the business of the merged entity.

In April 2023, the Czech Competition Authority imposed a fine of CZK 20 million on XLCEE-Holding (XXXLutz) for failing to sell one of Kika's stores within the deadline, as it had undertaken to do in the clearance procedure for the acquisition of Kika Nábytek. The Chairman of the Czech Competition Authority recognised that the COVID-19 pandemic was an exceptional situation which, although it could not lead to an exemption from liability, at least constituted an attenuating circumstance. He therefore reduced the fine by more than 96% to CZK 324,000.

Premature implementation of a merger (gun jumping) should also be avoided. However, in certain circumstances, competition authorities are prepared to grant an exemption and allow the merger to proceed prior to clearance (we wrote about this last time here).

In February, the Slovak Competition Authority granted such an exemption to petrol station operator OMV Slovakia in the context of the procedure to approve the acquisition of Benzinol petrol stations. OMV applied for permission to carry out certain urgent measures. The competition authority granted the exemption also because the measures did not concern any of the petrol stations for which the possible negative effects of the acquisition on competition were still being examined.

Resale prices back on the agenda

Finally, it should be noted that competition authorities continue to consider resale price maintenance (RPM) to be anticompetitive and some have even made the fight against these practices a priority.

The Polish competition authority imposed a fine of PLN 2.5 million (approx. CZK 14.7 million) on Atex, an importer and seller of coal for setting resale prices to authorised dealers. Atex entered into an agreement with its business partners which was described as a commercial agency. Apparently, it did so in the knowledge that genuine commercial agency agreements are not covered by competition law. However, the competition authority found that the agreements in this case did not meet the requirements for commercial agency. Therefore, resale price maintenance in such a contractual relationship was subject to the legal prohibition.

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