The "European Antitrust Bimonthly Bulletin" (EABB) breaks down the major antitrust developments in Europe in the past two months into concise and actionable takeaways.
Sustainability Initiatives Get a Green Light in European Commission’s Revision of Rules on Collaboration Among Competitors
On June 1, 2023, the European Commission (EC) adopted revised rules and guidelines governing cooperation among competitors. The revised guidelines signal the EC’s newly accommodating stance for joint sustainability initiatives and clarify the ones that are unlikely to raise competition concerns, e.g., because their exclusive aim is to comply with “sufficiently precise” international treaty requirements. In addition, the EC creates a “soft” safe harbor for certain standard-setting sustainability agreements, provided that cumulative conditions are met (e.g., possibility for participants to adopt higher standards). Under the revised guidelines, sustainability agreements that negatively impact competition can benefit from an exemption if, inter alia, they generate broadly defined efficiencies that outweigh the harm to consumers. To help address any uncertainty that firms may have about planned sustainability initiatives, the EC has committed to issue guidance letters.
Clients considering entering into sustainability collaborations should engage with counsel at an early stage to manage antitrust risk across all affected markets. While more ambitious collaborations are now conceivable in Europe, there has been no such shift in the U.S. For further information, please see our detailed client alert on the topic.
European Commission Conditionally Approves Microsoft/Activision Blizzard Merger
On May 15, 2023, the EC approved Microsoft’s $68.7 billion purchase of Activision Blizzard, subject to licensing commitments requiring Microsoft to make Activision’s game catalog available to certain rival cloud gaming platforms at no extra cost for 10 years. The UK Competition and Markets Authority (CMA) rejected a similar remedy when blocking the deal in April, claiming it would replace market forces “in a growing and dynamic market” with sector regulation enforced by the CMA (see our client alert). Microsoft has appealed, with trial set for the end of July. The U.S. Federal Trade Commission suit against the deal will also be heard this summer. The next high-profile front for divergence among the key global agencies is Broadcom/VMware. Broadcom offered a behavioral remedy to assuage EC concerns over its buyout of virtualization software specialist VMware in the EU. While the UK CMA’s review is at an earlier stage, the case has all the hallmarks of a textbook CMA block. However, it remains to be seen whether any CMA decision will be tempered by the current political winds. The CMA is an independent regulator but has faced strong political backlash and calls for oversight, given a perception created by its Microsoft/Activision Blizzard merger block that the UK is now "closed for business."
Clients should consider factoring in these current enforcement dynamics in the EU and the UK into any initial M&A discussions. There is increasing divergence between the UK and both EU and global authorities, resulting in a much slower and more costly regulatory process. Vertical or conglomerate deals will not escape scrutiny and clients should develop a comprehensive plan to address potentially divergent regulatory concerns across the globe, including through the early consideration of appropriate remedy packages.
EU General Court Backs the European Commission’s Broad Approach on Information Requests
Requests for information (RFIs) are one of EC’s main investigative tools and can lead to high fines for the provision of incorrect, incomplete, or misleading information or the failure to reply within a set deadline. In a bid to limit the scope of an RFI it received from the EC as part of the EC’s investigation into its data use, Meta challenged an EC RFI before the EU General Court (GC) as being disproportionate and for impacting its employees’ privacy rights due to the sheer volume of data covered and insufficient safeguards. The GC sided with the EC and confirmed that requested information is deemed necessary where it “may help to determine” whether competition rules were infringed. It also backed the EC’s use of a virtual data room with restricted access for documents that may contain personal information, to ensure privacy rights are respected.
The increasingly large amounts of data requested by the EC through RFIs requires companies to have a clearly structured review and production framework. When faced with an RFI from the EC, clients should consider engaging with counsel as early as possible to maximize chances of narrowing its scope through EC engagement and ensuring appropriate protections for personal information.
European Court of Justice Softens Its Stance on Resale Price Maintenance
In a recent judgment, the European Court of Justice (ECJ) ruled that the practice of restricting a reseller’s ability to sell below a certain price, i.e., Resale Price Maintenance (RPM), does not always amount to a by object restriction of competition, departing from its previously categorical stance on this issue. Under its new approach, courts and agencies must consider the procompetitive effects generated by an agreement containing RPM when determining whether its harm to competition is so clear that it can be presumed (by object restriction) or whether its anticompetitive effects must be proven while also considering whether the agreement generates efficiencies that may outweigh its harm (effects restriction). This may result in a slight softening of approach towards RPM by certain European competition agencies. For companies, it opens the door to careful consideration as to whether, in limited contexts, the procompetitive effects of their agreements with resellers may justify the use of RPM.
Clients with European operations should engage with counsel when considering the use of clauses that affect their European reseller’s pricing or discounting autonomy. No longer automatically banned, any RPM clauses used should be carefully considered in the context of the whole agreement to mitigate risk.
European Commission and National Competition Authorities Conduct More Ex-Officio Investigations and Dawn Raids
Since the start of the year, the EC and National Competition Authorities (NCAs) have been increasingly active in cartel enforcement, with the EC leading the way with a rise in dawn raids. To date in 2023, it has carried out four unannounced inspections across several EU Member States covering a wide range of industries (e.g., fragrances, synthetic turf). This already equals the total number of raids carried out in 2022. Speaking at a conference, the EC’s Director for Cartels recently highlighted that the EC intends to “intensify” its own-initiative (ex-officio) efforts, rather than solely relying on leniency applications or complaints. In parallel, the EC increased its coordination with the U.S. Department of Justice, including by cooperating on specific investigations (e.g., in the fragrance industry) and sharing information on investigative methods and policies. While correlation does not always imply causation, the number of leniency applications to the EC has been increasing, with 12 applications in 2022 (three times as many as in 2020), showing a new leniency race to the EC.
At Member State level, many NCAs are also making increasing use of their inspection powers, including as part of ex-officio investigations (e.g., Greece). In addition, the European Court of Human Rights recently ruled that national competition authorities are entitled to use information collected from wiretaps in separate criminal proceedings by other national regulators, to advance their cartel investigations.
Our European team has strong experience in advising on cartel enforcement and a unique insight into the EC’s enforcement practice. We can help clients anticipate and mitigate risks related to ex-officio investigations, including inspections in domestic premises.
France Orders Meta to Give Access to Ad Performance Data Pending Full Antitrust Probe
Following a complaint by online advertising company Adloox, the French Competition Authority (FCA) is investigating whether Meta abuses its dominant position in the ad verification market. On May 4, 2023, the FCA imposed interim measures forcing Meta to redefine and make public on its website new “objective, transparent, non-discriminatory and proportionate” criteria to ensure companies have access to data on viewability and brand safety partnerships. The FCA also claimed that Meta’s conduct takes place while the independent ad verification market is opening up to competition as a result of the EU’s Digital Markets Act (see our previous alerts here and here), which will require large advertising platforms to provide free access to all the data necessary for the independent verification of their ad inventories. The FCA’s use of interim measures in an abuse of dominance probe is likely to be followed by similar actions at the EU level—speaking at a conference, the EC’s Director General for Competition recently noted that the EU enforcer should use the tool more often to take “speedy action” and that the requirements for doing so, which may be too burdensome, should be addressed as part of a sweeping review of the EU’s competition rules.
Clients should consider whether they are facing any access barriers because of conduct by dominant or incumbent firms in Europe for which recent decisions concerning the ad tech stack could provide a remedy/leverage in negotiations. We can assist in identifying possible opportunities and formulating the appropriate strategy for obtaining relief. Equally, we can assist with defending against access claims.
European Commission Publishes Draft Template for Digital Markets Act Compliance Report
On June 6, 2023, the EC launched a public consultation on the draft template compliance report that designated gatekeepers will have to submit annually under the Digital Markets Act (DMA) as of March 2024. Gatekeepers will have to describe in a detailed and transparent manner the measures that they have implemented to ensure DMA compliance. A nonconfidential summary of the report will be made publicly available, giving third parties the opportunity to raise compliance concerns with the EC. Failure to provide “true, correct or complete information may influence the Commission’s prioritization in opening proceedings with a view to the possible adoption of a non-compliance decision.” The public consultation is open until July 5, 2023. The first gatekeeper designation decisions will be adopted in September 2023 with obligations applicable in March 2024, at the time of the submission of the first compliance reports.
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.
