EU & Competition Law Update – December 2017

  • European Court of Justice questions validity of commitments procedure under EU competition law
  • Ticket websites to change policies after CMA investigation
  • No dough for pizza franchisor
  • Price freeze by vending sector condemned by Italian Courts
  • German Federal Cartel Office zeroes-in on price comparison websites

European Court of Justice questions validity of commitments procedure under EU competition law

On 23 November 2017, the Court of Justice of the European Union (CJEU) surprised many competition law commentators, when it appeared to challenge the validity of the ‘commitments procedure’ under Article 9 of Council Regulation 1/2003.

The commitments procedure is a mechanism whereby the European Commission may reach a settlement with companies to take or refrain from a particular action, in exchange for an end to any investigation.

The case concerned a referral from the Spanish Supreme Court regarding a question of law, that being whether national courts are barred from declaring an agreement to be an infringement of competition law when the Commission has accepted commitments regarding the agreement in question.

The CJEU considered the question and held that a commitments decision by the Commission does not preclude or bar a national competition authority or court from applying Articles 101 and 102 TFEU and considering any agreement anti-competitive. The CJEU considered the nature of a commitments decision and held it does not consider whether an infringement in law has occurred, and therefore national courts and authorities are free to declare it so. Commitments are given without prejudice to the rights of the parties and therefore do not admit that a competition law infringement has taken place.

The CJEU went further, and held that the commitments decision itself is an indication of the anti-competitive conduct or agreement in question. The CJEU observed “the commitment decision cannot ‘legalise’ the market behaviour of the undertaking concerned, and certainly not retroactively”. Additionally, in words that may hold much importance in future litigation proceedings (and possibly contradict the earlier assertion that a commitments decision was not an infringement of law), the CJEU then went to state that a commitments decision could be regarded “as an indication, if not primae facie evidence, of the anticompetitive nature of the agreement at issue”.

It remains to be seen if this finding will undermine future commitments decisions. The CJEU’s logical, if unhelpful finding to the integrity of commitments certainly leaves a door open for a company to sue another which has reached commitments with the Commission, and to press for damages. Such a case would blur the line between a stand-alone action where someone sues but must establish the anti-competitive nature of the conduct, and a follow-on action following a finding of infringement. In a follow-on action, the illicit conduct is already proved by the regulator’s decision and rather it is for the claimant to merely prove their harm and exposure to the action in question.

The full judgment can be found here.

Ticket websites to change policies after CMA investigation

On 28 November 2017, the Competition and Markets Authority (‘CMA’) announced that it would take enforcement action against secondary ticketing websites after an investigation revealed possible breaches of consumer protection law. The laws in question include the Consumer Rights Act 2015 and the Consumer Protection from Unfair Trading Regulations 2008.

The unnamed companies in question would be asked to change their behaviour and policies, and if not, would face court action by the CMA under Part 8 of the Enterprise Act 2002.

The CMA has concerns regarding the following behaviour:

  • pressure selling – whether claims made about the availability and popularity of tickets create a misleading impression or rush customers into making a buying decision;
  • difficulties for customers in getting their money back under a website’s guarantee;
  • speculative selling – where businesses advertise tickets for sale that they do not yet own and therefore may not be able to supply; and
  • concerns about whether the organisers of some sporting events have sold tickets as a primary seller directly through a secondary ticket website, without making this clear to consumers.

To combat the possible infringements of consumer law mentioned above, the CMA is in turn looking for the accused companies to implement the following changes:

  • it must be clear if there are restrictions on using a resold ticket that could result in buyers being denied access to an event;
  • people should know whom they are buying from – for example if the seller is a business and/or an event organiser – and can benefit from their legal rights; and
  • customers need to be told where exactly in a venue they will be seated.

In an interesting tactic, the CMA also revealed that it would be contacting event organisers to help them avoid being challenged for using terms to restrict the resale of their tickets, indicating that they may have been under pressure from ticketing websites who rely on their ability to resell legally.

Please follow this link for further information.

No dough for pizza franchisor

[co-author: Emmanuelle Mercier]

On 25 October 2017, the Paris Court of Appeal confirmed the 7 July 2014 decision of the Paris Commercial Court which had dismissed – for lack of proof of causation – Speed Rabbit Pizza’s claims that its competitor Domino’s Pizza had engaged in aggressive and anti-competitive practices to its detriment. In the first instance, the Commercial Court also ordered Speed Rabbit to pay Domino’s attorneys’ fees of EUR 487,852, as well as EUR 2,300,000 of damages on account of Speed Rabbit’s denigration of the latter (EUR 1,000,000) and abuse of procedure and disorganization of Domino’s Pizza’s network (EUR 1,300,000).

On appeal, the Court reduced the sums owed by Speed Rabbit Pizza to only those amounts found sufficiently proven, i.e. EUR 500,000 in respect of denigration, in addition to EUR 487,852 plus EUR 50,000 in respect of attorneys’ fees.

The Background

This case arose from Speed Rabbit’s allegation that from 2003 to 2013, it lost 26 franchisees (out of a total of 98 remaining points of sale in 2013) and corresponding turnover due to aggressive business practices by its competitor, Domino’s Pizza, which operated a network of 227 franchisees in 2013.

Speed Rabbit Pizza alleged that Domino’s Pizza abused its dominant position, erected barriers to entry to the market by potential competitors, and granted its own franchisees abnormally long payment deadlines, unjustified forgiveness of debt and loans in violation of the banking monopoly. Speed Rabbit claimed this compelled its franchisees to abandon their activity and thus had an adverse effect on Speed Rabbit’s turnover, derived from royalties. Speed Rabbit sought damages in excess of EUR 75 million.

On its side, Domino’s sought dismissal of Speed Rabbit’s claims and counterclaimed that Speed Rabbit had engaged in multiple procedures and complaints and a targeted campaign of denigration against it at trade fairs and on the internet. On appeal, Domino’s sought confirmation of the amounts awarded by the Commercial Court plus an additional EUR 350,000 of damages for Speed Rabbit’s continued public denigration and an additional EUR 150,000 of attorneys’ fees.

Decision of the Paris Court of Appeals

In line with the Paris Commercial Court, the Appeals Court ruled that no causal link was demonstrated between the alleged aggressive business practices of Domino’s Pizza and the damage allegedly suffered by Speed Rabbit. The Paris Court of Appeals added that the fact that there may have existed a “consecutiveness” between the alleged unfair competition and the alleged damages, Speed Rabbit did not demonstrate a causal link between the two.

As regards the alleged anti-competitive practices and abuse of a dominant position, the Court of Appeals found that Speed Rabbit did not prove that Domino’s occupied a dominant position in the relevant market or that Domino’s and its franchisees accounted for a market share greater than the 30% “black clause” threshold.

As regards the abuse of procedure complained of by Domino’s, the Paris Court of Appeals noted that the right to sue is fundamental and may be considered as being misused for exceptional reasons only, and thus overturned the award of EUR 1,300,000 the Paris Commercial Court had granted.

Finally, regarding Domino’s claim for denigration by Speed Rabbit, the Court reduced the damages to EUR 500,000 in the absence of a more precise economic impact study produced by Domino’s.

Price freeze by vending sector condemned by Italian Courts

The Italian Administrative Court of the Region Lazio (the “Court”) confirmed the decision of the Italian Competition Authority (“ICA”) that found the existence of an anticompetitive agreement (“Agreement”) among many companies, operating in the vending and distribution machines sector, and the relevant trade association Confida.

In particular, the ICA decision ascertained and condemned the anti-competitive behaviour of the companies and Confida, in violation of Article 101 of the Treaty on the Functioning of the European Union. Such conduct was aimed at restricting competition by “freezing” prices in the vending and distribution machines sector, with the purpose of keeping price levels under control, in order to attract a bigger part of the market and clients and to affect competition with other competitors.

The Companies and Confida challenged the ICA decision arguing that the grounds of the judgement were uncertain and vague.

However, the Court rejected the Companies’ objections, stating that the ICA clearly defined the subject matter of the anti-competitive behaviour in such a way to prove the existence of a violation of competition by the Companies and Confida.

Therefore, a specific qualification of each anti-competitive conduct was not necessary.

This decision shows the importance of the ICA’s and Italian Courts’ commitment in discovering and punishing anti-competitive behaviours and in protecting the Italian economic and trade system.

German Federal Cartel Office zeroes-in on price comparison websites

On 24 October 2017, the Bundeskartellamt (German Federal Cartel Office – FCO) announced that it had launched a sector inquiry into online price comparison websites focused on travel, insurance, financial services, telecommunications and energy.

The FCO will survey selected website operators by the end of this year on questions concerning rankings, financing, corporate links, reviews, and availability or relevant market coverage.

The sector inquiry is intended to identify possible deficiencies in the private and public enforcement of consumer rights in this business sector. The resulting report may help indicate how the FCO can enforce fair trading rules to protect German consumers.

According to the FCO, information provided by trade and consumer associations has shown that problems with comparison websites should be dealt with in a more fundamental way than by individual court proceedings. Since bookings involving substantial amounts and extensive contract agreements are influenced by the information published on price comparison websites, the FCO aims to ensure consumers will be able to count on the reliability, objectivity and transparency of these websites.

After the promulgation of the 9th Amendment to the German Competition Act (GWB) on 8 June 2017, the FCO is allowed to launch a sector inquiry if there is reasonable suspicion that significant, permanent or repeated infringements have occurred that affect a large number of consumers. As with a sector inquiry for the protection of competition, a sector inquiry in the area of consumer rights under Section 32e(5) of the GWB is not targeted against individual companies, but is meant to examine the conditions of a specific market or economic sector.

The results of the inquiry will be used to evaluate how the FCO could support efforts to eliminate unfair trade practices and thereby protect a large number of consumers in the German market. In order to pursue the objective of consumer protection, the FCO has furthermore announced that it is considering whether to launch another sector inquiry in the area of consumer problems in everyday digital life by the end of the year.

[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.

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