We present you the forty-sixth instalment of our newsletter, which brings you interesting news from the world of competition law for the month of March 2024. Regular readers will know that this is a purely subjective selection of events that we found interesting this time.
In selecting March's highlights, we obviously had to include one of the highest fines for anti-competitive behaviour, abuse of a dominant position. However, there were more cases of abuse of a dominant position in March. We would also like to remind you that resale price maintenance does not have to end with a "mere" fine.
Big Tech and unfair trading conditions
In March, the European Commission (EC) imposed another record fine for abuse of dominance, this time amounting to €1.8 billion. Unsurprisingly, it was one of the tech giants: after Microsoft, Google, Intel and Qualcomm, it was Apple that had to bite, as we Czechs say, the sour apple. According to the EC, it had applied unfair trading conditions. For almost 10 years, it had prohibited music streaming app developers from informing users about alternative and cheaper subscription services available outside the app. As a result, consumers paid higher subscription fees for streaming services than they would have paid in an undistorted market, and missed out on a potentially better user experience, the EC said. What's interesting about the whole case is that, under the rules for calculating fines, Apple should only have been fined EUR 40 million. But the EC said that would have been about as noticeable as a parking ticket (quote!), hence it added a lump sum of EUR 1.8 billion... So the fine was increased 45-fold to at least 0.5% of Apple's total annual turnover.
Another tech giant penalised for unfair terms in March was Google. It was fined EUR 250 million by the French competition authority for failing to comply with commitments made in an earlier case, which concerned Google's negotiations with publishers over remuneration for the use of their content in search results. The non-compliance relates to the AI service Bard, which was launched in July 2023. Google used content from news agencies and publishers to train its AI model, without informing them. Bard then continued to display this content without giving publishers the opportunity to object to the use of their content or to negotiate remuneration for such use.
What else can be considered an abuse of a dominant position?
In March, the Portuguese Competition Authority fined one of Europe's leading payment processors, SIBS Group, EUR 13.8 for tying (making the sale of one product conditional on the purchase of another). SIBS Group has a 90% share of the Portuguese payment processing market. It required card issuers and acquirers interested in accessing SIBS Group's payment schemes to also sign contracts with it for its processing services. According to the Competition Authority, this harmed not only competing processing service providers, but also merchants and consumers, who could not benefit from differentiated services.
In March, the EC opened a formal investigation into the animal health company Zoetis for blocking the development of a "competing" drug. Zoetis produces the only monoclonal antibody (mAb) approved in Europe for the treatment of chronic pain associated with osteoarthritis in dogs (the drug Librela). In 2017, Zoetis acquired its competitor Nexvet Biopharma, which was also developing an mAb for the same purpose (ranevetmab). At the time, Zoetis was already the global leader in the treatment of chronic pain in companion animals, and ranevetmab posed a threat to its market position. In 2019, Zoetis halted development of ranevetmab and only completed development of its own drug. It later refused to transfer the development of ranevetmab to Virbac, with whom Nexvet had previously signed a general collaboration agreement and a distribution agreement for ranevetmab. The EC sees this behaviour as a possible abuse of a dominant position.
Beware of resale price maintenance
The fact that resale price maintenance carries a high risk of fines perhaps needs hardly be mentioned in this forum. Most recently, in March, the German competition authority fined protective clothing manufacturer Pfanner Schutzbekleidung EUR 783,000 for prohibiting its retailers from offering discounts in promotions. Instead, retailers were only allowed to offer buyers cheaper gifts in kind (e.g. T-shirts or goggles).
We know from experience that a much more serious consequence of anticompetitive behaviour than a fine from a competition authority can be damages claimed by injured competitors or customers. Most of the damages claimed in this way relate to cartels and abuses of dominant positions. However, the sword of Damocles also hangs over resale price maintenance agreements. The sword recently fell on Dutch company LG Electronics, which was fined EUR 8 million by the Dutch Competition Authority in 2023 and now faces a representative action by consumers who bought LG-branded TVs between 2015 and 2018. We note that there are not many such cases yet, but that they may increase as representative actions develop.
Show the right mobile phone during the dawn raid
There is no harm in recalling the extent of the obligations imposed on the investigated competitor and its employees during the local investigation carried out by the competition authority again. Indeed, competitors continue to violate these rules. In March, the Polish competition authority fined Abexil Bąbała PLN 150,000 (approx. CZK 873,000) and its shareholder Rafał Bąbała PLN 100,000 (approx. CZK 582,000). In response to a request for a work mobile phone, the latter provided the officials with a phone with no contacts, containing only a few messages and calls from the day of the dawn raid. The actual work phone was not made available to the officers until the following day, following an additional request.
Even under Czech law, substantial fines can be imposed on competitors and their employees(!). Competitors can be fined up to 1% of their total annual turnover, employees up to CZK 300,000.
Dutch clause back on the scene
The saga of the prohibited Illumina/GRAIL merger, which was originally not subject to merger control at all, only to have its notification enforced and ultimately prohibited, has filled the pages of our blog for several years (most recently here). In this case, the EC used the so-called Dutch clause in the Merger Regulation, which was designed to allow Member States without a merger control regime (e.g. the Netherlands at the time) to ask the EC to review a merger if it had a European dimension. In March, Advocate General Emiliou issued an opinion recommending that the Court of Justice annul the EC decision. This is because extending the application of the Dutch clause to cases that do not meet the notification criteria, as the EC did in the Illumina/GRAIL case, would give the EC the power to review almost any merger anywhere in the world, regardless of the turnover and presence of the undertakings in the EU and the value of the transaction, at any time, even after the merger has taken place. This was not the original intention of the provision.
In the meantime, however, the Dutch clause still serves its original purpose. In March, the EC accepted a request from the Luxembourg competition authority to review the Brasserie Nationale/Boissons Heintz merger. Luxembourg does not yet have its own merger control regime.
And what else to watch out for in mergers?
It's actually a bit of a repeat of the last episode. Make sure that the planned acquisition is not actually subject to merger control. Otherwise, there is a fine for prematurely implementing the merger: The Czech competition authority fined AUTO UH CZK 1.84 million for this "inadvertence".
Provide only true and accurate information in your notification to the competition authority: Kingspan faces a fine from the EC for providing incorrect, incomplete and misleading information on basic facts about its internal organisation.
If the merger is cleared with commitments, ensure that they are fulfilled in time: The Spanish competition authority has cleared Naviera Armas' acquisition of the competing Canary Islands ferry operator Transmediterranea on condition that it allows a competitor to enter the market. The conditions included the conclusion of berth rental agreements, changes to ticket sales, etc. However, Naviera Armas did not comply with some of the commitments. The Spanish competition authority considered this to be a very serious infringement, but thanks to the admission of guilt, it reduced the fine for Naviera Armas to EUR 450,000.
