EU & Competition

Latest Developments in EU Competition Law

EU Competition law has seen a year with landmark developments on the legislative and judicial level, which will lead the way for competition law enforcements in the years to come. The developments span from a new directive on damages, a new facet in the debate on abusive rebates, a proposal to broaden the scope for merger control and, lastly, a new Competition Commissioner.

Proposal for a directive to facilitate private antitrust damages actions

On 17 April 2014, the Euro­pean Par­lia­ment passed the long-await­ed direc­tive on pri­vate antitrust dam­ages actions (the Direc­tive). The Direc­tive will har­monise nation­al rules with a view to facil­i­tate recov­ery of dam­ages for vic­tims of com­pe­ti­tion law infringe­ments, includ­ing car­tels and abus­es of dom­i­nant mar­ket posi­tions. It will remove a num­ber of prac­ti­cal dif­fi­cul­ties which EU cit­i­zens and busi­ness­es face today when try­ing to recoup com­pen­sa­tion for harm suf­fered. Vic­tims will obtain eas­i­er access to evi­dence to prove the dam­age and more time to make their claims. Once offi­cial­ly adopt­ed, EU mem­ber states will have two years to trans­pose the pro­vi­sions of the Direc­tive into their legal sys­tem. The Direc­tive will increase the lev­el of car­tel dam­ages recov­ery that is being seen across Europe today.

Landmark judgment on abusive rebates

The Gen­er­al Court (EU) opened a new chap­ter in the debate on how to prop­er­ly assess rebates by a dom­i­nant com­pa­ny. It is no over­state­ment to say that two ide­o­log­i­cal views, from the Euro­pean Com­mis­sion (EC) and from the court, clashed. The dis­cus­sion came about fol­low­ing Intel’s appeal against the deci­sion of the EC to impose fines on it of more than EUR 1 bil­lion for abu­sive rebates. While the court’s judg­ment comes as a vic­to­ry for the EC (it upheld the fine), it is from a pol­i­cy per­spec­tive a hefty defeat for the EC’s con­cept of an effects-based test.

The EC’s think­ing on rebates has sig­nif­i­cant­ly evolved over the last decade. The so-called more eco­nom­ic approach (which focus­es on the actu­al effects of behav­iour and less on for­mal cri­te­ria) led the EC to rethink its prac­tice on rebates and con­sid­er them as a legit­i­mate way for dom­i­nant firms to com­pete, unless com­pet­ing under­tak­ings would not able to match a rebate, lead­ing to a neg­a­tive effect on com­pe­ti­tion. This cumu­lat­ed in a pri­or­i­ty paper, which iden­ti­fies those rebates which the EC will pri­ori­tise to go after. The court did not leave doubts as to its think­ing on the EC’s the­o­ries and restat­ed a for­mal­is­tic approach. Exclu­sion­ary rebates are per se ille­gal irre­spec­tive of whether they exert actu­al neg­a­tive effects on com­pe­ti­tion. As a mat­ter of pol­i­cy, exclu­sion­ary rebates are deemed to be such a severe restric­tion that no effects analy­sis is need­ed.

The com­pe­ti­tion world after the Intel judg­ment is one of uncer­tain­ty, leav­ing com­pa­nies in lim­bo which test to apply – the EC’s test is per­ceived to be the “appro­pri­ate” test to iden­ti­fy anti­com­pet­i­tive behav­iour, while the court judg­ment man­i­fests the actu­al legal stan­dard. This uncer­tain­ty will remain for a while. Intel appealed against the deci­sion of the court to the Euro­pean Court of Jus­tice. Anoth­er round of debate is ensured.

Review of acquisitions of non-controlling minority shareholdings

On 9 July 2014, the EC pub­lished pro­pos­als (the White Paper) to reform the Euro­pean Merg­er Reg­u­la­tion (Merg­er Reg­u­la­tion). The White Paper spins for­ward the pub­lic con­sul­ta­tion which the EC kicked off based on a Staff Work­ing Doc­u­ment in sum­mer 2013 (see relat­ed arti­cle in the Schoen­herr Roadmap 2014).

At present the EC has lim­it­ed pow­ers to cap­ture and review non-con­trol­ling minor­i­ty share­hold­ings. The White Paper now intro­duces the con­cept of a “tar­get­ed trans­paren­cy sys­tem”. It sug­gests that minor­i­ty share­hold­ing in a com­peti­tor or direct­ly ver­ti­cal­ly relat­ed com­pa­ny would trig­ger the EC’s juris­dic­tion if the acquired share­hold­ing is (i) above 20% or (ii) between 5% and 20%, but com­bined with “addi­tion­al fac­tors” (ie, rights that give the acquir­er a de-fac­to block­ing minor­i­ty, a seat on the board of direc­tors or access to com­mer­cial­ly sen­si­tive infor­ma­tion of the tar­get).

The EC of the White Paper was sent to pub­lic con­sul­ta­tion. It is uncer­tain whether the new Com­mis­sion­er (see below) will endorse the leg­isla­tive ini­tia­tive launched by her pre­de­ces­sor. If so, the tar­get­ed trans­paren­cy sys­tem of the White Paper is like­ly to be the mech­a­nism we will see intro­duced into the Merg­er Reg­u­la­tion. Once adopt­ed the impact is antic­i­pat­ed to go beyond the EU merg­er con­trol regime. We expect that nation­al leg­is­la­tors in and out­side the EU will review their respec­tive merg­er regimes with a view to cap­ture non-con­trol­ling minor­i­ty share­hold­ings.

New EU Competition Commissioner

Mar­grethe Vestager, for­mer Deputy Prime Min­is­ter of Den­mark, was nom­i­nat­ed by the Juncker’s team to become the new EU Com­pe­ti­tion Com­mis­sion­er for an term of five years, begin­ning 1 Novem­ber 2014. Her appoint­ment was con­firmed by the Euro­pean Par­lia­ment (EP) in Octo­ber 2014. Dur­ing the hear­ing before the EP, Ms. Vestager addressed a num­ber of issues that she would like to focus on dur­ing her five-year term in office. She con­firmed the impor­tance of com­pe­ti­tion pol­i­cy to Europe and declared to resist polit­i­cal pres­sure from the mem­ber states, notably when it comes to pres­sure for pro­tec­tion­ism. The enforce­ment against car­tels is said to be a top pri­or­i­ty dur­ing her term. More­over, the Com­pe­ti­tion Com­mis­sion­er des­ig­nate wel­comed ini­tia­tives that encour­age pri­vate dam­ages actions.

This is in line with the mis­sion let­ter of Junck­er in which he asked Vestager to focus on mobil­is­ing com­pe­ti­tion pol­i­cy tools and mar­ket exper­tise so that they con­tribute to the EC’s jobs and growth agen­da, includ­ing in areas such as the dig­i­tal sin­gle mar­ket, ener­gy pol­i­cy, finan­cial ser­vices, indus­tri­al pol­i­cy and the fight against tax eva­sion.

Lit­tle is known about Mar­grethe Vestager. The Com­pe­ti­tion com­mu­ni­ty looks for­wards to see­ing how she shapes com­pe­ti­tion pol­i­cy in the EC’s next term.

The competition world after the Intel judgment is one of uncertainty, leaving companies in limbo as to which test to apply.