EU & Competition Law Update – June 2017

by Bryan Cave
Contact

Hope for a Cleaner Brexit After ECJ Ruling

Selective Distribution Still (Sometimes) Alive and Well in France

Federal Public Procurement Tribunal Rejects AGES

The Italian Competition Authority Suspects an Agreement Between the Italian Banking Association and Italian Banks

The Competition and Markets Authority Bids Against Auction House Services Provider


Hope for a Cleaner Brexit After ECJ Ruling

In a ruling which is likely to have positive implications for a possible Brexit deal, the European Court of Justice (ECJ) on 16 May 2017 opened up the ability of the EU institutions to negotiate free trade agreements without the approval of individual Member State legislatures.

The case, which involved a Singapore-EU trade deal agreed some years ago but not yet ratified, is being seen as a blueprint for a way to get a future Brexit deal through the EU without the threat of a rogue national Parliament blocking the deal.

The ECJ ruling involved a power struggle between the EU Institutions of the EU Commission and EU Parliament on the one hand and the Member States (as represented in the Council of the European Union) on the other. The Council was arguing that the EU could not conclude the Singapore agreement without reference to the Member States because certain parts of the agreement fall within a competence shared between the EU and the Member States or within the exclusive competence of the Member States.

On 16 May 2017 the ECJ ruled that the trade agreement would need the support of both the individual Member States and the EU itself because it contained provisions relating to areas where competence was shared with Member States, those areas being non-direct foreign investment and the regime governing dispute settlement between investors and Member States.

The above ruling sets out a demarcation of the rights and competences of the EU and those of the Member States. As a corollary therefore, the ruling is seen as a precedent which would allow the EU alone to negotiate and approve a foreign trade deals as long as it does not include Member State competencies.

The whole Brexit process is haunted by the way an aggrieved national Parliament could hold the trading block and the UK to ransom over a future trade deal. This happened recently with the EU's agreement with Canada when a Belgium regional Parliament did precisely that. Therefore, this development is being seized upon as a possible way to get a more limited Brexit agreement through the EU, avoiding such a situation.

As well as trade/tariff issues, the other areas of EU-only competence mentioned by the ECJ included substantial areas such as provisions concerning IP, provisions targeting anti-competitive activity and access to the EU market for goods and services.

However, others argue that a Brexit agreement done in stages (to stop it being held hostage by aggrieved national parliaments) is not likely to find favour. An agreement to address the issues thrown up by many decades of integration will probably require a wide-ranging agreement which will inevitably involve the support and votes of the Member States.

Robert Bell, Head of EU & Competition Law at international law firm Bryan Cave, commented: "depending upon how the Brexit agreement is eventually structured, this Court ruling could have a beneficial effect on the approval of a future trade deal between the UK and the EU".

Nevertheless, a note of caution serves to dampen down such optimism: given that the UK has been a member of the Community for nearly 45 years the issues which need to be addressed in any future UK/EU deal place it in a league of their own.

The ECJ press release can be found here.

Selective Distribution Still (Sometimes) Alive and Well in France

On March 14, 2017, the Paris Court of Appeals heavily sanctioned internet marketplace Brandalley for having sold on its website perfumes whose brands belong to French cosmetics leader L'Oréal, despite Brandalley not being an authorized distributor.

This decision may come as a surprise as the same Court had just last year ruled in favor of internet marketplaces, including Brandalley, in cases where cosmetics owners Coty and Caudalie were found to have been unable to demonstrate the legality of their selective distribution networks (see our previous May and September 2016 Bulletins: "Internet marketplaces trump selective distribution contracts" and "Paris Court of Appeals pokes another hole in luxury selective distribution network").

However, the Paris Court of Appeals in L'Oréal used the same reasoning as before, but this time the selective distribution network was found to have met all the requirements to be considered lawful under EU Regulation 330/2010 on vertical agreements. According to well-established case law, it is for the supplier of the selective distribution network to prove its lawfulness. In this case, L'Oréal adduced all its French selective distribution contracts in evidence and was found to have proved that:

  1. Its perfume market share was less than 30%, based on studies carried out by NPD, an institute which the Court characterized as an authority recognized in the past by the French Competition Authority and the European Commission.
  2. The disputed provisions contained in its selective distribution agreements did not constitute "hard-core" restrictions on competition.

The Court found that the clauses which prevented the authorized distributors from selling the products to a distributor, intermediary, wholesaler or retailer within the EEA and EFTA which did not belong to the selective distribution network were valid as they constitute the very essence of a selective distribution network.

Brandalley also disputed a provision that prevented authorized distributors from actively marketing new products which had not yet been launched in France for the year following their launch in another Member State. According to the Court, this did not constitute a prohibited restriction either as it was justified expressly in the agreements by the necessity not to jeopardize the launch of a product in the event of staggered launches, the purpose of which was to test the product for a limited period of time in a particular area.

  1. Brandalley's allegations that L'Oréal’s selective network was not "water-tight", based on the facts that L’Oréal did not produce its distribution contracts with parties in other EU Member States and did not explain how it policed unsold stock remaining in the hands of former distributors, did not convince the Court that such network was not “water-tight”.

Thus, as Brandalley did not demonstrate that the L'Oréal products it proposed for sale on its website were obtained through the L'Oréal selective distribution network, Brandalley was found to have violated Article L. 442-6 of the French Commercial Code which, inter alia, holds liable a party who participates in the breach of the prohibition for distributors bound by a selective distribution agreement to sell outside the network.

Furthermore, Brandalley was found to have

  1. committed free-riding;
  2. harmed the brand image of the products;
  3. misled consumers by advertising price reductions whereas L'Oréal did not recommend retail prices to its distributors;
  4. committed acts of unfair competition.

The Paris Court of Appeals therefore ordered Brandalley to pay L'Oréal €500,000 in damages.

Decision: CA Paris 14 March 2017 no. 15/23991

Federal Public Procurement Tribunal Rejects AGES

The German Federal Public Procurement Tribunal recently rejected AGES Road Charging Services GmbH & Co. KG's (AGES) application for review of a decision, rendered by the Federal Ministry of Transport and Digital Infrastructure, denying its participation in the bidding procedure for Toll Collect GmbH, an operator of the German toll system for heavy goods.

Until now, shares of Toll Collect GmbH have been held by a consortium consisting of several European groups. However, the Transport Ministry intends to exercise a call-option to acquire shares held by the consortium by 1 September 2018, where shares will be awarded to the winner of the on-going invitation to tender.

AGES was not admitted to subsequent negotiations because it submitted a less than adequate reference, in comparison to other candidates, to the Transport Ministry. This reference required documentation that the candidates themselves or a third company nominated by the candidate already had experience with the productive operation of a toll system. AGES objected to the assessment conducted by the Transport Ministry and brought it before the Federal Public Procurement Tribunal at the German Federal Cartel Office (Bundeskartellamt — FCO). The FCO found no errors of law in the Transport Ministry's assessment and rejected the application for review.

According to the FCO, the fact that the contract with the current operator of the German toll system for heavy goods vehicles will expire in 2018 justified the Transport Ministry decision to make experience with the productive operation of toll systems a condition for possible candidates in order to be considered. On the basis of the criteria established by the Transport Ministry it was allowed to exclude AGES from participating in the next stage of the bidding competition. Furthermore, the FCO found no infringement on the Federation's part with respect to the award procedure and the exclusion of AGES itself.

In 2016, collected tolls for heavy goods vehicles on German highways amounted up to EUR 4.6 bn and are expected to rise, as the toll-free use of national roads will end on 30 June 2018. Analysts are of the opinion that this will further increase the already attractive revenues that operators are able to generate in the field of toll collecting. Thus, it will be interesting to see how AGES chooses to respond. AGES does reserve the right to file an immediate appeal against the decision at the Düsseldorf Higher Regional Court, if the appeal is made within two weeks.

The Italian Competition Authority Suspects an Agreement Between the Italian Banking Association and Italian Banks

On 28 April 2017 the Italian Competition Authority (the "ICA") concluded an investigation into the Italian Banking Association ("ABI") and certain other banks, including main market operators, and ascertained the execution of a confidential agreement aimed at establishing commercial strategies in relation to the new remuneration model of the "SEDA service".

This Agreement replaced the previous direct charge system of bills, named "RID". The system allows businesses and consumers to pay periodic charges (i.e. utility bills) directly through withdrawal from bank accounts. At present, the system includes a real payment method (called "SEDA DD") and an informative service addressed to and paid by billers (called "SEDA").

The ICA ascertained that, during the transition from the former RID system towards the new one, the agreement executed by ABI and the Accused Companies was an anti-competitive agreement, in contravention of Article 101 of the Treaty on the Functioning of the European Union.

However, with reference to the specific circumstances of this case, the ICA did not apply any fine on ABI and the accused companies, considering it a minor violation — also in light of the legal and economic context in which the conduct took place — and because during the investigation, the parties proposed an amendment to the system that halved the "SEDA service" total fees, providing businesses and consumers with a reduction in costs.

This decision is significant as it shows the importance the ICA places on the conduct of the parties during the investigation and its practical effect in the relevant market.

The Competition and Markets Authority Bids Against Auction House Services Provider

On 30 May 2017, the Competition and Markets Authority announced that it was consulting on proposals from an online bidding platform to change its practices, following its concerns that the platform was engaged in anti-competitive practices.

The CMA had accused ATG Media, the largest provider of live online bidding platforms in the UK, of carrying out practices which harmed its rivals in the online bidding platform market. These platforms are used by auction houses to allow people to bid online, whilst an auction is on-going.

The CMA's investigation is under both Chapters I&II of the Competition Act 1998, meaning it is scrutinizing the company both for anti-competitive agreements but also a possible abuse of dominance.

The CMA's specific concerns were that ATG Media were requiring exclusivity from its customers and was therefore preventing rivals from entering the market or competing effectively if already on it. Once an auction house was signed up, it also had a provision which stopped the auction houses' customers using a rival at lower cost, a so called most favoured nation or price parity clause. Lastly, it prevented the auction houses from advertising or promoting rival services to ATG Media.

However, rather than continue its investigation and possibly issue a fine, the CMA is consulting proposed commitments from ATG Media to address the concerns.

The last day when interested parties can comment on the proposals is 19 June 2017. A final decision from the CMA to close the investigation, re-negotiate or continue the investigation will be reached after that.

This development in the auction services market follows long-running investigations into similar price parity clauses in the hotel booking sector and the online car insurance comparison markets. The central themes in each case would be a platform in a dominant or powerful position on a market, insisting on price parity fees that were likely to raise prices for consumers. More industries and platforms will likely be investigated in the near future.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bryan Cave | Attorney Advertising

Written by:

Bryan Cave
Contact
more
less

Bryan Cave on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.