Competition Newsletter - May 2021

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This month we invite you to Russia, where the competition authority is announcing a new competition law compliance system that may result in less fines.

Recognition of antimonopoly compliance in Russian Federal Law

Early this year, the antimonopoly compliance system was for the first time recognized in the Russian antimonopoly legislation and regulated at the level of a federal law. The relevant amendments made to the Federal Law “On Protection of Competition” and the market practice that has already been formed by the time those amendments were adopted show that the businesses operating in the Russian market and the Russian Federal Antimonopoly Service (“FAS”) as the regulator perceive the antimonopoly compliance systems (the “System”) as an increasingly popular method of antimonopoly risks management.

Today the main incentive for undertakings to develop and implement the System is to lower the risk category assigned to their business as part of a risk-oriented approach during state oversight of antimonopoly compliance. For example, pursuant to Russian Federation Government Resolution No. 213 of March 1, 2018, one of the grounds for lowering the risk category from average and moderate to moderate and low, respectively, is that the undertaking has a functioning System for at least one year by the day of a decision to assign (or change) the risk category. In practical terms, this means a longer time between scheduled inspections of the undertaking by FAS, from three to five years (if the risk is lowered from average to moderate), or no scheduled inspections at all (if the risk goes down from moderate to low).

It is worth noting that Russian law does not currently consider an undertaking’s merely having a System to be a ground for exempting it from administrative liability or reducing an administrative fine for antimonopoly law violation. However, considering that the Russian legislation on administrative offenses contain an open list of mitigating circumstances, in administrative proceedings over an antimonopoly violation case FAS could consider the fact that a company has a favorably reviewed System to be a factor mitigating its administrative liability.

Pursuant to the amendments the undertakings are not obliged to develop or implement the System or to have it reviewed and approved by FAS. However, if an undertaking elects to file the documents underlying the System with FAS for its review and approval, it must ensure that those documents contain at least the following:

  • Requirements for how antimonopoly violation risks are assessed
  • Steps to reduce the undertaking’s risks of violating antimonopoly law
  • Steps to monitor the system’s functioning
  • How employees are acquainted with the documents underlying the System
  • Information about the officer responsible for the System’s functioning

The amendments do not offer further definition or clarification of any of the above requirements. This enables undertakings to implement them at their own discretion and using their chosen methodology in practice.

So far there has been only a few undertakings which have filed their Systems for FAS’ review and approval, but as the pandemic restrictions become less stringent a greater number of businesses is anticipated to seek FAS’ approval of their Systems in order to lower their antitrust risk.

The General Court of the European Union dismisses Ryanair’s appeals against aids granted to Scandinavian Airlines by Denmark and Sweden

The Kingdom of Denmark and Sweden had notified to the European Commission aid measures of up to SEK 1.5 billion (“aid measures”) in the form of guarantees on a revolving credit facility for the airline company Scandinavian Airlines (“SAS”). These aid measures were intended to compensate SAS partially for the damage resulting from the cancellation and rescheduling of its flights due to the travel restrictions resulting from to the COVID-19 pandemic. The Commission considered compatible with the internal market these aids intended to remedy the damage caused by an extraordinary occurrence.

Ryanair, who did not benefit from these measures brought an action for annulment of the Commission’s decisions. By two decisions dated April 14, 2021, the General Court of the European Union dismissed Ryanair’s appeal and confirmed the Commission’s decision, thus approving for the first time the compatibility of individual aid measures intended to compensate for the consequences of the COVID-19 pandemic.

The claimant first argued that the aids intended to remedy the damage caused by natural disasters or other extraordinary occurrences were not intended to benefit only one company but that, on the contrary, they were intended to compensate the damage suffered by all of the victims of these occurrences. The General Court noted however that there was no obligation for Member States to grant such aids. The General Court also noted that the Member States are not required to remedy all of the damage caused by an extraordinary event,grant aids to all of the victims of such damage and that they could limit them to companies with a license on their territory.

Contesting the proportionate nature of the measure and the calculation method used to assess the damage, Ryanair also criticized the Commission for authorizing a potential overcompensation of the damage suffered by SAS. The General Court dismissed this second argument, considering notably that the measure was only intended to compensate part of the damage suffered by the company. Even if the aid corresponded in fine to the maximum guaranteed (SEK1.5 billion), this amount remained less than the damage suffered by SAS. The General Court found moreover that the two Member States had undertaken to carry out an ex post assessment of the damage actually suffered by SAS and to request if necessary the reimbursement of the aid if it exceeds the damage suffered, in light of all of the aids likely to be granted to SAS as a result of the COVID-19 pandemic, including by other Member States.

The situation is therefore mixed for Ryanair, which had already lost its appeals against certain aid granted to Air France and Finnair, but has just won its case against other aid granted to Air France-KLM or TAP.

The French Competition Authority sanctions Fleury Michon for obstruction in the investigation of a case

For the record, in July 2021, the French Competition Authority fined the Fleury Michon group €14.7 million for participating to an anticompetitive agreement in the ham and cured meats sector.

The story could have ended there for Fleury Michon if an action for obstruction practice to the investigation conducted by the Authority had not been uncovered. Any company under investigation by the Authority’s services is bound by a duty of active and loyal cooperation, so that it makes available any information or supporting documentation requested. However, more than one month before the statement of objections was sent, the Fleury Michon group had finalized an internal-restructuring operation, resulting in the absorption of the entity that was involved in the illegal practices. The Group never informed the investigation services about this operation although it had expressly been ordered to inform these services of any internal restructuring.

In addition to this absence of information, the Fleury Michon group deliberately misled the Authority by sending written submissions under the name of Fleury Michon Charcuterie, a company that no longer existed.

Lastly, Fleury Michon tried to invoke its own breaches by stating that Fleury Michon S (the entity resulting from the restructuring operation) should be exonerated since the statement of objections had not been sent to it.

The Fleury Michon group has asked to benefit from the settlement procedure and accordingly has not contested these practices. The Authority has accepted its request and pronounced a fine of €100,000.

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.

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