Portugal Asks European Court to Determine the Criteria Required for Discriminatory Pricing to Be an Abuse Under Article 102 of the Treaty on the Functioning of the European Union
BMW Reverses Its Policy on Internet Selling Restrictions for Dealers Following CMA Action
Combative French Plaintiff Obtains Extended Jurisdiction Over Cross-border Online Marketplace Sales
New Rules on Competition Stand-alone and Follow-on Legal Actions Before Italian Courts
Portugal Asks European Court to Determine the Criteria Required for Discriminatory Pricing to Be an Abuse Under Article 102 of the Treaty on the Functioning of the European Union
Portuguese Court has asked the European Court of Justice (ECJ) to provide guidance on when " discriminatory pricing applied to equivalent transactions " amounts to an abuse of a dominant positon under Article 102 (c) of the TFEU.
Is it enough that discriminatory pricing is proved on the facts? Or does the Court need to consider whether the effects of the discriminatory behaviour in question places the aggrieved party at a competitive disadvantage to make out the offence? The court also asked that, if this is correct, what the minimum level of disadvantage that needs to be suffered for an abuse to be committed is.
On 16 January 2017, the Official Journal published details of a request from a Portuguese Court for a preliminary ruling by the ECJ concerning the application of Article 102 of the TFUE on discriminatory pricing practices by a dominant company. (Case C-525/16 Meo – Serviços de Comunicações e Multimédia, Official Journal C 14/20, 16 January 2017).
Article 102 states that “any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States.
Such abuse may, in particular, consist in:
(c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage;"
The first question asked by the Portuguese Court was, what kind of "disadvantage" in terms of the gravity, relevance or importance of the discriminatory practice must exist upon the aggrieved undertaking’s competitive position and/or its ability to compete for it to result in an abuse of a dominant position? In particular, did the Court need to consider whether the aggrieved party was capable of absorbing the cost differences incurred at a wholesale level without significantly blunting its ability to compete downstream?
The ECJ was also asked to answer whether an abuse of dominance should be found where the discriminatory prices charged by a dominant company had limited effect on the costs, income obtained and profitability achieved by aggrieved company (e.g. the increased costs may have been passed on to the ultimate consumer or may be cushioned in some way). Alternatively if those factors were sufficient to conclude that there was a breach of Article 102, were they only relevant to determine the extent of the damages to be awarded or the level of the fine to be imposed to punish the infringement?
Finally, the Portuguese Court seeks the ECJ's guidance on how to assess whether a competitor of the allegedly dominant company has been placed in a competitive disadvantage. To that end, the Portuguese Court specifically asks the ECJ to opine on the meaning of the term "at a competitive disadvantage" in Article 102 (c) and whether there was a minimum disadvantage that has to be suffered by the aggrieved company for an abuse to occur.
BMW Reverses Its Policy on Internet Selling Restrictions for Dealers Following CMA Action
In 2016, Carwow, a new car portal, which introduces customers to dealers for the purchase of cars, complained to the Competition and Markets Authority (the "CMA") that BMW UK was prohibiting its dealers from listing their new BMW and MINI cars on the portal. It asked the CMA to launch an investigation into whether this restriction was anti-competitive and breached EU or UK competition law.
Online comparison tools can help promote competition in many markets and assist consumers to make informed choices. An increasing number of customers are looking to use online channels to make purchases. Internet commerce is therefore an increasingly important route to market.
The CMA policy, as shown in previous cases, is to attack restrictions imposed upon internet commerce as being in breach of the competition rules under both EU and UK competition law. Placing barriers on dealers to limit their use of internet platforms or online market places is regarded as a ban on passive sales. These are restrictions by object within the meaning of Article 101(1) of the Treaty on the Functioning of the European Union and Chapter I of the Competition Act 1998. This means that they are viewed as serious infringements of the competition rules without needing to demonstrate that the conduct in question has anti-competitive effects.
The CMA carried out a preliminary assessment of the complaint and met with both Carwow and BMW UK. However, following this initial investigation, BMW UK offered commitments to the CMA to change its policy to enable its UK retailers to work with Carwow and similar internet-based new car platforms. The CMA welcomed BMW UK’s change of policy.
These commitments were made without any admission by BMW UK that its actions breached competition law. In addition, although the CMA decided not to initiate any formal investigation into BMW UK, it reserved its position to review its decision should facts change.
Combative French Plaintiff Obtains Extended Jurisdiction Over Cross-border Online Marketplace Sales
On 21 December 2016, the European Court of Justice (ECJ) handed down an interesting interpretation of jurisdictional issues in cross-border competition law and online sales. The ECJ ruled that courts of a Member State have jurisdiction to hear an action to establish liability for infringement of a prohibition on sales via marketplace websites based outside such State where such sales are alleged to have harmed the party in the first Member State.
On 16 March 2012, “Concurrence”, a French retailer of consumer electronics products based in Paris, well-known for its litigiousness, entered into a selective distribution agreement with Samsung regarding high-end Samsung products called “Elite products”. This agreement, entitled “Specialist Elite Retailer”, stipulated a prohibition on online sales. However, despite the prohibition, Concurrence made sales not only through its Paris store but also via its website.
Predictably, a dispute arose between the parties, and Samsung terminated the agreement alleging that Concurrence breached the contract by selling the products on its own website. For its defence, Concurrence claimed that under EU competition law, bans on online sales are prohibited as hardcore restrictions. Additionally, Concurrence argued that Samsung was not applying its prohibition uniformly due to the fact that these same products were sold on several other websites outside France including well known on line market platforms without any reaction from Samsung.
In this context, Concurrence brought summary proceedings against Samsung and one of those on line market platforms before the Paris Commercial Court seeking a ruling that the prohibition of online sales was unenforceable, and also seeking an injunction for the withdrawal of the products from that on line market platform in several Member States on the ground that Concurrence was suffering harm as a result of that platform’s breach of the online prohibition. After having been dismissed by the commercial and appeals courts, the proceedings came before the French Supreme Court which referred to the ECJ the question as to the French courts’ jurisdiction to hear matters involving alleged harm suffered in France due to internet sales irregularly operated outside of France.
Concurrence argued (i) that the on line market platform’s sites were accessible in France and equipped to deliver products to France, even though they were not specifically targeted to the French consumer and (ii) in any event, the alleged harm was suffered in France.
The ECJ ruled that the Member State where the plaintiff suffered a loss as a result of a reduction in its sales, albeit caused by actions outside such State, must, under Article 5(3) of Council Regulation (EC) N° 44/2001, be regarded as the place of jurisdiction. Thus, the European Court did not consider it necessary to determine whether the online platforms on which the products were offered for sale were specifically targeted to consumers in the plaintiff’s territorial market (so-called “active sites”) or whether such platforms were merely accessible to such market (so-called “passive sites”) in order to confer jurisdiction.
The aftermath of this ruling for the proceedings brought by Concurrence is that the French courts should now be considered to have jurisdiction to assess whether Concurrence suffered harm as a result of sales made by sites of the on line market platform based outside France.
While the availability of the cross-border injunctive relief sought by Concurrence remains somewhat unclear, the ruling of the ECJ effectively renders unnecessary the application of the active vs. passive website theory of jurisdiction.
In parallel with the court proceedings it initiated, Concurrence has also initiated a still ongoing investigation as to whether or not Samsung was entitled to restrict online sales before the French Competition Authority.
New Provisions on German Antitrust Law Under Debate in German Parliament As Follows
On 1 July 2016, the German Ministry for Economic Affairs published a draft bill for the 9th amendment of the German Act against Restraints of Competition (Gesetz gegen Wettbewerbsbeschränkungen - GWB). The draft bill addresses numerous topics which have been subject to intensive discussions in German competition policy and will bring material changes to German antitrust law. Under current German antitrust laws, companies may be able to avoid liability for fines by restructuring operations and corporate groups.
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Expanded system of sanctions and fines
One of the main pillars of the 9th amendment of the GWB is the introduction of more comprehensive provisions than the present system on sanctions and penalties for antitrust violations to plug a number of legal loopholes exposed by recent cases.
To prevent this happening again, the proposed new provisions empower the FCO to impose fines on companies’ legal successors, limiting the possibilities for corporate restructuring to try and limit liability.
Furthermore, under the new provisions, the FCO will be entitled to impose fines on a parent company, in situations where its subsidiary has been a member of a cartel, and the parent company and subsidiary form one economic entity. Not only will the parent company be subject to additional fines but, under the proposed measures, the fines will be calculated according to the revenue of the overall group. This in turn will mean significantly higher fines for antitrust violations.
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Expanded merger control thresholds targeting digital market players
Another central issue of the 9th amendment of the GWB is to adapt German competition law to the latest developments in the area of digital economics. The new provisions aim to significantly widen the scope of merger control by implementing an additional merger control threshold, stating that a merger is also subject to notification when the consideration exceeds EUR 350m.
Under the current antitrust-rules, takeovers of small, but innovative and highly promising companies have not been subject to notification, when the smaller company did not reach the relevant turnover threshold of EUR 5m in turnover.
A famous example in this context is the takeover of WhatsApp by Facebook in 2014, when Facebook was willing to pay EUR 14bn for WhatsApp (which at that time did meet the turnover threshold of German merger control law). In the future, the new consideration-based threshold will empower the FCO to capture similar cases for merger control review.
This provision is accompanied by the new Sec. 18 (3a) GWB, which clarifies that a relevant market is also formed, even if the specific service (such as a smartphone app) is performed free of charge. Due to the diverging position of the FCO and the Higher Regional Court of Düsseldorf, there was legal uncertainty on this point to date.
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Implementation of Directive 2014/104/EU on Actions for Damages
The third substantial part of the 9th amendment of the GWB is implements the provisions of Directive 2014/104/EU on Actions for Damages into German law. Of particular note are the provisions which deal with the applicability and scope of the passing-on-defence, the limitation of civil liability of ‘crown witnesses’ and furthermore raises the limitation period dependent upon knowledge from currently 3 years to 5 years (maximum limitation period: now 30 years).
Of crucial importance for future antitrust trials is the introduction of a mandatory legal presumption of damage in cartels. Based on the new provisions, the occurrence of damage as well as the causal link between the respective cartel and the damage itself are now rebuttable presumptions. This measure is specifically designed to encourage more competition litigation.
Forecast
Although the draft bill is only at the beginning of its legislative passage, there is a high likelihood that its provisions will reach the statute book relatively unchanged. As a consequence, the 9th amendment of the GWB is likely to have a deep impact on German competition law practice in the years ahead.
New Rules on Competition Stand-alone and Follow-on Legal Actions Before Italian Courts
The Italian Legislative Decree No. 3 of 19 January 2017 (the "Decree"), effective as of 3 February 2017, provides for specific procedural and substantial rules about private legal actions for violations of European and Italian competition rules.
The Decree applies the Directive 2014/104/EU and governs either stand-alone or follow-up actions to be brought before specialised Courts (located in Milan, Rome and Naples).
The legal actions may be started in any alleged breach of competition rules, without regard to whether the Italian Competition Authority (the “ICA”) has previously decided the relevant case.
Indeed, in stand-alone cases, the Decree strengthens the powers of the specialised Courts to request any third party to disclose documents, deemed necessary to make the plaintiff prove the alleged violation of competition rules and the consequent damages suffered.
This provision may be considered as one of the most important points of the legislative reform as information asymmetry (between the accused and accuser) has always been the main ground for the lack of effectiveness of the private enforcement of competition rules over the European Union. Effectively, companies have struggled to bring competition claims due to a lack of available evidence.
In follow-up cases, the Decree makes the decisions issued by the ICA which have not been appealed or the relevant appeal has been rejected binding on the specialised Courts.
Finally, the Decree provides that a plaintiff can sue for all the damages from any undertakings involved in the alleged anti-competitive conduct, regardless of the importance of their role in the alleged infringement.
The effect of the Decree is likely to increase the number of private legal actions for competition rules violations and consequently, it is advisable that undertakings pay particular attention on obtaining specialist competition law advice in relation to their operations to minimise the possibility of being the subject of such a court action.
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