Summary of Key Developments — January/February 2024
The “European Antitrust Bimonthly Bulletin” breaks down the major antitrust developments in Europe during the past two months into concise and actionable takeaways. For any questions or suggestions please contact Jindrich Kloub, Deirdre Carroll, or any other attorney in the European Antitrust Team listed at the end of the Bulletin.
Amazon/iRobot Deal Abandoned
On January 29, 2024, Amazon and iRobot, a maker of robot vacuum cleaners (RVC), announced that they were abandoning their proposed transaction due to regulator opposition. The European Commission (EC) had issued a charge sheet (Statement of Objections) on November 27, 2023, and signaled in mid-January that it intended to block the deal. The EC expressed concerns that Amazon could be incentivized to foreclose rival RVC manufacturers from Amazon’s online marketplace after the transaction. The parties chose to terminate the deal rather than offer commitments to the EC. In contrast, the United Kingdom’s (UK) Competition and Markets Authority (CMA) cleared the transaction unconditionally on June 16, 2023. The failed acquisition is the latest in a string of tech deals to fall foul of increased agency scrutiny, with Booking/eTraveli blocked by the EC (despite CMA clearance) and Adobe/Figma abandoned after EC and CMA concerns.
Companies contemplating M&A impacting the EU and UK should consider front-loading substantive assessments in any filing analysis and factor in the impact of EU and UK reviews on deal terms, timetables, and risk allocation. Companies should anticipate and prepare for non-horizontal (and non-traditional) theories of harm, including through the early involvement of economists and the early consideration of appropriate remedy packages.
Airline Consolidation in the Spotlight
On February 13, 2024, the EC announced its conditional approval of Korean Air’s acquisition of Asiana Airlines. Extensive commitments obligate the parties to i) divest Asiana Airlines’s global cargo freighter business including aircraft, slots, employees, and customer contracts and ii) make available to competing airline T’Way all assets necessary to start flight operations on four overlapping passenger routes between South Korea and Europe, including slots and traffic rights as well as access to the required aircraft. The transaction cannot close until T’Way has commenced operating all routes.
Two other airline deals are currently progressing through in-depth reviews before the EC: the proposed acquisition of joint control of ITA Airways (ITA) by Lufthansa and the Italian Ministry of Economy and Finance (MEF) and the proposed acquisition of Air Europa by IAG (Phase II opened on January 23 and 24, 2024, respectively).
The EC’s preliminary concerns in both cases include the effect of the proposed mergers on both long-haul and short-haul flights as well as potential dominance at the Madrid-Barajas hub for IAG/Air Europa and Milan-Linate in the case of ITA. The EC additionally wants to assess whether ITA, Lufthansa, and their joint venture partners United Airlines and Air Canada should be treated as a single entity regarding long-haul routes between Italy and North America. Lufthansa offered commitments during Phase I, which the EC regarded as insufficient and refused to market-test with competitors. IAG announced it would offer commitments only during the Phase II investigation, giving the EC sufficient opportunity to assess.
Companies contemplating M&A in the aviation industry should know that the EU is increasingly skeptical of airline consolidation and may demand far-reaching commitments that go beyond the airport slot divestitures previously accepted by regulators.
EU Court Upholds Truck Cartel Fine Against Scania
On February 1, 2024, the EU’s highest court, the European Court of Justice (ECJ), rejected an appeal by truck maker Scania against a €880.5 million (approx. US$948 million) cartel fine. In 2016, truck makers Daimler, DAF, Iveco, MAN, and Volvo/Renault agreed to settle EC allegations that they had colluded on pricing and when to introduce emissions-reducing technology. They accepted a joint fine of €2.93 billion (approx. U.S. $3.24 billion), with MAN escaping any fine for revealing the cartel to the authorities. However, Scania chose not to participate in the settlement and was separately fined by the EC in 2017.
In its appeal, Scania argued that the EC’s investigation had not been impartial, because the EC prejudged Scania after settling with the other truck manufacturers, and that the decision was time barred, as Scania management stopped participating in cartel discussions in 2004. The ECJ rejected the first argument as Scania had not produced any evidence in support, holding that the same case team could negotiate a settlement with one party and impose a cartel fine on another party in the same matter without becoming biased. In rejecting the other argument, the ECJ held that Scania participated in meetings until 2011, in which the participants discussed information that Scania could have taken into consideration for its commercial decisions. The judgment is final.
Companies, especially those in the automotive sector, should review their compliance policies to ensure they are up to date and effective and appropriately focus on risks arising out of improper information sharing.
French Competition Authority Fines Canning Cartel
On January 11, 2024, the French Competition Authority (FCA) announced that it had fined a number of companies active in the food canning sector €19.5 million (approx. US$21 million) for allegedly participating in a cartel. A French law banned the chemical Bisphenol A (BPA) as harmful to human health from food cans starting from January 1, 2015, but a transitional period allowed the sale of products already on the market to use up existing stocks. The relevant companies allegedly agreed not to compete on the presence or absence of BPA in their cans, with the conduct occurring during the period of October 6, 2010, to July 21, 2015. The FCA’s decision targeted three professional canning associations and a trade union of can manufacturers, as well as 11 individual companies as members of these associations due to attendance at meetings where anticompetitive conduct took place.
Companies and trade associations should review their compliance policies to ensure they are up to date and effective and appropriately focus on risks arising out of improper information sharing.
EC Accuses Norwegian Salmon Farmers of Antitrust Violations
On January 25, 2024, the EC sent Statements of Objection to six Norwegian producers of farmed Atlantic salmon. The EC alleged that between 2011 and 2019 salmon producers Bremnes, Cermaq, Grieg Seafood, Lerøy, Mowi, and SalMar exchanged commercially sensitive information relating to sales prices, sales volumes, and production capacities, as well as other price-relevant factors. The alleged conduct only impacted spot sales into the EU, and not long-term contracts. The EC opened the investigation ex officio, without relying on a leniency application. In 2019, the EC conducted unannounced inspections of the premises of several salmon producers. Several of the alleged participants of the anticompetitive conduct rejected the EC’s allegations according to public reporting.
Companies should be aware that exchanging competitively sensitive information poses a risk under EU competition law. Companies should review their compliance policies to ensure they are up to date and effective and appropriately focus on risks arising out of improper information sharing.
EC Raids Tire Makers Across Europe
On January 30, 2024, the EC conducted unannounced inspections at the premises of several tire producers. The EC stated that it believed the companies may have coordinated prices for new replacement tires for cars, vans, trucks, and buses sold in the European Economic Area (EEA), including via public announcements. Several tiremakers, including Bridgestone, Continental, Goodyear, Michelin, Nokian, and Pirelli confirmed they were targeted by the dawn raids.
Companies should review their compliance policies to ensure they are up to date and effective and appropriately focus on risks arising out of improper information sharing. This investigation underlines the strong EC interest in the automotive industry in the past years, with the EC investigating alleged cartels involving automotive bearings, car seats, braking systems, emissions controls, and, most recently, starter batteries.
UK Court Allows CMA to Require Overseas Document Production
On January 17, 2024, the UK Court of Appeal (CoA) ruled that the CMA can request information from foreign-based companies with subsidiaries in the UK. The appeal stemmed from information requests sent to the UK subsidiaries and the German-based parent companies of BMW and Volkswagen (VW) as part of an investigation into suspected anti-competitive agreements by vehicle manufacturers and trade associations. The CMA imposed a penalty on BMW which challenged it in the Competition Appeal Tribunal (CAT), while VW sought judicial review of its request in the High Court, with both arguing that the CMA did not have the power to require the German-based parent companies to respond. In February 2023, in a single judgment for both proceedings, the CAT and the High Court together found in favor of BMW and VW, noting the CMA was “aggressively extraterritorial.”
On appeal, the CoA found that Parliament intended s.26 of the Competition Act 1998, which gives the CMA these powers, to have extraterritorial effect, and that not being able to exercise s.26 extraterritorially would “create a perverse incentive” for conspirators to organize cartels offshore, which would be “easy to achieve” in the digital era.
VW has asked for permission to appeal the ruling to the Supreme Court, and it is open to BMW to follow suit.
Companies should be aware that the CMA may attempt to use its powers to request information and documents from parties to antitrust cases and merger control proceedings, including those in the possession of overseas parent companies.
EC Accuses Greek Utility of Abusing Its Dominance and Potentially Impacting Availability of Clean Energy
On February 7, 2024, the EC sent a Statement of Objections to the Greek electricity utility company PPC, formally accusing it of having abused its dominance in the Greek wholesale electricity market between 2013 and 2019 by selling electricity below cost. During this period, PPC controlled all lignite and hydro power capacity in the interconnected Greek market, as well as some of the natural gas and renewable power generation plants. PPC also supplied electricity to businesses and households.
The EC alleges that during this period, PPC sold the power from its thermal power generation plants (i.e., lignite and natural gas) at prices below their variable generation cost. This may have deterred independent power producers from investing in new, cleaner electricity generation capacity after the Greek electricity market was liberalized in 2013. As a result, Greek consumers may have experienced less retail competition and higher prices as well as higher local emission levels.
Companies should consider whether they are facing any barriers because of conduct by dominant or incumbent firms in the EU. We can assist in identifying possible opportunities and formulating the appropriate strategy for obtaining relief. Equally, we can assist with defending against such claims.
EC Declines to Designate Additional Apple, Microsoft Services Under Digital Markets Act
On February 12, 2024, the EC closed four market investigations under the Digital Markets Act (DMA). Apple’s messaging service iMessage and Microsoft’s online search engine Bing, web browser Edge, and online advertising service Microsoft Advertising all escaped designation and will not be subject to the DMA’s strict conduct rules. In July 2023, Apple and Microsoft notified the EC that these core platform services (CPS) met the quantitative thresholds under the DMA, but also submitted arguments attempting to rebut the consequent presumption that they were gatekeepers with respect to those CPSs. The EC accepted the rebuttal arguments following a market investigation, including engagement with stakeholders. The EC noted that it will continue to monitor these CPSs and can revisit the designation if market circumstances change.
With one market investigation still running (into Apple’s iPadOS), other designation decisions being challenged in court, pushes for artificial intelligence (AI) to be included in the scope of the DMA, and substantive obligations for designated gatekeepers coming into force on March 6, 2024, the DMA continues to be the EC’s enforcement priority.
Our European team has extensive experience with the DMA and a unique insight into the EC’s enforcement practice and can assist with DMA compliance or assessing third-party intervention opportunities.
EC, French Competition Authority Consult on AI and Virtual Reality
On January 9, 2024, the EC published two calls for contribution, focused on competition in virtual worlds and in generative AI. In addition, the EC stated that it will look at the agreements between “large digital market players” and “generative AI developers and providers.” Interested parties can submit contributions until March 11, 2024.
On February 8, 2024, the French Competition Authority (FCA) announced that it had also launched an inquiry into the competitive functioning of the AI sector. Like the EC, the FCA is interested in the investments of large digital players into AI companies, as well as the importance of cloud computing infrastructure, data, and skilled workforces. Interested parties can provide input until March 22, 2024.
Both the EC and the UK’s CMA are assessing whether Microsoft’s investment in OpenAI is reviewable under their rules, and the German agency noted that while it does not have jurisdiction currently, it would “keep a very close eye” on developments in Microsoft’s influence. The CMA also contacted Amazon over its investment in Anthropic, but it did not initiate a formal review. After Microsoft announced a partnership with French AI company Mistral on February 26, 2024, the EC confirmed it would scrutinize this deal as part of its consultation on competition and generative AI.
Companies in the AI sector should consider whether they wish to proactively engage with competition authorities at this stage when the authorities are forming their understanding of the sector. We can assist in identifying possible opportunities and formulating the appropriate strategy for engagement. Companies should also be aware that minority stakes may be reviewable in certain jurisdictions and any commercial partnerships need to be carefully structured to ensure merger control rules are not triggered where possible.
EC Creates New Department to Enforce Foreign Subsidies Regulation
On February 22, 2024, the EC published a policy brief reviewing the first 100 days of the Foreign Subsidies Regulation (FSR) becoming applicable to mergers. The report confirmed prior news that effective March 1, 2024, the EC will create a new directorate within its antitrust enforcement agency, tasked with implementing the FSR. According to a news report, Karl Soukup, the experienced chief of the state subsidies directorate, will lead the new FSR directorate.
The EC report shows that the FSR is causing more work for the EC than it expected: Although the FSR only began to apply in July 2023, the EC has already received over 50 pre-notifications of mergers instead of the only 30 it expected to receive annually. And just in the first 100 days of application, the EC received more than 100 public procurement notifications, compared with the up to 36 expected annually. On February 16, 2024, the EC announced that it had opened its first in-depth investigation under the FSR, targeting a tender by the Chinese train manufacturer CRRC Qingdao Sifang Locomotive, a subsidiary of state-owned CRRC Corporation, to supply electric trains to Bulgaria.
The FSR gives the EC new powers to police subsidies from non-EU countries, complementing the EC’s powers to control state aid from EU member states. This includes i) M&A transactions involving companies active in the EU that meet certain turnover and foreign financial contribution (FFC) thresholds; and ii) bids for large tenders in the EU by companies that have received FFC above a specified threshold.
Clients should be aware that the FSR adds yet another potential regulatory filing to the approval checklist for M&A transactions, alongside regimes such as antitrust and foreign investment. It also creates a new regulatory hurdle for companies bidding for large public contracts in the EU.
For more information about the FSR, see the Wilson Sonsini Fact Sheet, EU Foreign Subsidies Regulation.
EC Publishes New Market Definition Notice
On February 8, 2024, the EC published its revised Market Definition Notice (Notice). The Notice sets out how the EC will define product markets and geographic markets for the purposes of merger control, cartel, and abuse of dominance cases. The new Notice has a stronger focus on non-price parameters for product market definition, such as quality, innovation, reliability of supply, and sustainability. It specifically authorizes forward-looking assessments, such as when markets are in a transition due to innovation or regulation. The Notice contains guidance on market definition for specific market circumstances such as multi-sided platforms or digital ecosystems. Notably, a geographic market may be defined as global while still excluding specific areas due to high entry barriers, recognizing the limits of globalization in the current age.
