Margrethe Vestager retains EU competition role, to be combined with an additional digital brief
In an unprecedented move, European Commission President-elect Ursula von der Leyen earlier this month
reappointed Margrethe Vestager for a second term as Competition Commissioner. She also
charged her with coordinating the Commission’s digital agenda. It will be interesting to see how she balances these priorities, and particularly whether her industrial policy objectives lead to any potential conflict with her competition duties. Read our short
op-ed piece on this development as well as our
guide to all the new Commissioners-designate and their
dossiers. Confirmation hearings before Parliament are set to take place and it remains to be seen if the whole of the proposed new Commission will make it through to take up office on 1 November.
CEE antitrust enforcement continues with vigour, as authorities focus on bid-rigging and look to use new technology to aid detection
Our Global Cartel Enforcement Report summarised the enforcement activity of CEE antitrust authorities in 2018. In particular, we reported that bid-rigging was a key area of focus – it is clear as we reach Q4 of 2019 that this is a continuing trend. In the Czech Republic, for example, the chairman of the antitrust authority (UOHS) will continue to prioritise bid-rigging. The Polish authority (UOKiK) has several on-going bid-rigging cases, including in the road construction and waste management sectors, while the Slovak Antimonopoly Office recently opened an investigation into suspected tender coordination for the supply of agricultural machinery. Earlier this year in Hungary, the antitrust agency (GVH) imposed fines on several solar power firms for colluding on tenders in relation to a government programme and, only last week, EUR1.1m worth of fines were imposed in Romania against four road maintenance firms. More bid-rigging decisions are expected in the region going forward.
Abuse of dominance is also on the authorities’ radar. The Polish UOKiK has four on-going investigations into alleged abuses by waste management firms, and is keeping an eye out for more potential cases in that sector. And a couple of months ago in Slovakia, the Antimonopoly Office fined a rail freight transport company EUR2.99m for refusal to supply.
In Poland, we also expect to see UOKiK’s first decisions sanctioning individuals (board members and other decision-makers) for their involvement in antitrust infringements. Amendments to the Polish antitrust rules were introduced in 2016 and gave UOKiK new powers to impose administrative fines on individuals in such circumstances.
Finally, in terms of detecting potential antitrust infringements, dawn raids remain a key tool for CEE authorities. In the Czech Republic, UOHS carried out on-site inspections at the premises of 23 companies in 2018, with nearly ten so far in 2019, and more reportedly in the pipeline. The Polish UOKiK conducted nine dawn raids last year, with five in 2019 to date, involving 22 companies. These inspections serve as key sources of evidence of potential infringements. But, in common with many other regulators worldwide, the authorities are also looking to increase their use of technology to strengthen their enforcement toolkit. The Czech UOHS is reportedly working on software which would help it to detect bid-rigging. And in Poland, UOKiK is planning to launch a new IT whistleblowing system which would enable it to get in touch with informants (who would remain anonymous) to clarify the information submitted – currently, whistleblowers are able to submit information to UOKiK but the authority has no ability to respond or ask questions. So as the authorities reach the end of a number of key investigations in Q4 2019, it seems likely that their pipeline of cases will remain strong.
U.S. annual mergers report shows a fall in Second Requests, but an uptick in merger challenges and litigation
Each year the U.S. Federal Trade Commission and U.S. Department of Justice’s Antitrust Division issue an annual report giving statistics for U.S. merger control activity in the past fiscal year. The fiscal year 2018 report, published in late September, shows that while notified transactions were up by nearly 3% from the previous fiscal year, the proportion of those subject to a detailed Second Request remained small at 2.2% of cases. This is the lowest percentage in almost two decades. Significantly, however, fiscal year 2018 saw a greater proportion of Second Request cases resulting in a challenge (ie where the agency identifies antitrust concerns as a result of the deal). This was up 11% from fiscal year 2017. Similarly, there was an increase in merger litigation, with the agencies bringing actions in administrative or federal court in six cases, doubling the tally from the previous year. So far in fiscal year 2019 we have seen some fascinating cases, two of which we cover below (Novelis/Aleris and CVS/Aetna). Next year’s annual report looks set to be equally interesting. For more information on the report, please see our alert.
European Commission State aid decisions on tax rulings get careful scrutiny by General Court
Over the past five years the European Commission has been investigating a number of tax rulings granted by Member States. Its aim is to assess whether these rulings give a selective advantage to specific companies which could distort competition in the EU’s Single Market, in breach of EU State aid rules. Two of the first decisions were reached in October 2015 – the Commission found that Luxembourg and the Netherlands had granted illegal State aid to Fiat and Starbucks, respectively. According to the Commission, in each case the tax ruling issued to the companies by the national tax authority had artificially lowered the tax paid by the company. The Commission ordered the recovery of EUR20m to EUR30m in unpaid taxes from each company. The Commission’s decisions were appealed by the Member States and firms in question. Now, in judgments handed down this month, the General Court has confirmed that the Commission was entitled to review the tax rulings for compatibility with EU State aid rules. It also confirmed the Commission’s approach to assessing whether a measure is selective, and its use of the so-called “arm’s length principle” to assess whether transactions between intra-group companies give rise to an advantage under State aid rules. But while it upheld the Commission’s finding of illegal State aid in the Fiat case, it annulled the decision in Starbucks, concluding that the Commission was ultimately unable to show that the tax ruling resulted in an advantage in favour of the company.
Competition Commissioner Margrethe Vestager has welcomed the judgments as giving “important guidance on the application of EU State aid rules in the area of taxation”. So far, the Commission has concluded eight investigations concerning tax rulings, with appeals pending in a number of those cases. It also has several more on-going probes. Amongst these are the in-depth investigations to assess tax rulings granted by Belgium to 39 multinational companies, announced earlier this month following a February General Court ruling which annulled the Commission’s original decision on the basis that the Commission had failed to establish that the rulings formed part of an overall Belgian aid scheme. We can therefore expect more to come in terms of both decisions and court judgments. Indeed, Vestager notes that the “Commission will continue to look at aggressive tax planning measures under EU State aid rules to assess if they result in illegal State aid”, which will take place in parallel with “efforts to make legislative changes and change corporate philosophies”.
ACCC steps in to oppose unnotified chilled ready meals transaction
TEarlier this month the Australian Competition & Consumer Commission (ACCC) decided to oppose B&J City Kitchen’s acquisition of Jewel Fine Foods. The parties are the two largest manufacturers of chilled ready meals in Australia and the ACCC found that rival manufacturers have not supplied similar volumes. It concluded that the merger would therefore concentrate most of the manufacturing capacity of chilled ready meals in one business.
As B&J City Kitchen had not initially sought ACCC clearance for the transaction, the case serves as a reminder of the dangers of not notifying potentially problematic deals in jurisdictions where filing is voluntary. In announcing its findings, ACCC Chair Rod Sims warned company executives that not seeking clearance from the ACCC for deals between competitors “risks court action from the ACCC seeking injunctions to prevent completion of the transaction, as well as divestment and penalties”. In this case the target is in voluntary administration for insolvency and Mr Sims noted that administrators also have a responsibility to ensure that potential buyers notify the ACCC at the earliest opportunity where relevant. Antitrust authorities in most mature voluntary merger control regimes have teams tracking merger activity for potential review. In Australia, while statistics are not published, there are many reviews every year initiated by the ACCC and at least two notable prior examples of interventions after the event. Looking beyond Australia, in the UK the Competition and Markets Authority (CMA)’s mergers intelligence function reviewed over 600 transactions during its 2018/19 financial year. The CMA then launched 14 phase 1 investigations, finding antitrust concerns in three cases. Only last month, for example, following an in-depth probe, the CMA required Tobii to divest the whole of a business it had acquired in October 2018, but had not notified. And the Canadian Competition Bureau has recently expanded the role of an internal unit to include a broader focus on active intelligence gathering on non-notifiable merger transactions that may raise antitrust concerns.