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Antitrust in focus - July 2019

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Ninane Florence
Florence Ninane



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29 July 2019

This newsletter is our take on the antitrust developments we think are most interesting to your business. Florence Ninane, partner based in Paris, is our editor this month. She has selected:



Consumer & Retail


Transport & Infrastructure


Chinese SAMR makes use of controversial hold-separate merger remedy

The hold-separate remedy, which requires merging parties to remain independent of each other in relation to various parts of their businesses, even post-completion, is uniquely employed in China. Cargotec’s planned acquisition of certain businesses of TTS Group is the latest example of the hold-separate being used. The State Administration for Market Regulation (SAMR) found that the deal was likely to eliminate or restrict competition in the markets for various equipment for merchant ships. To remedy these concerns, SAMR has imposed various conditions on the parties, including that they keep their management, finance, personnel, pricing, R&D, design, production, sale and purchases separate. They must continue to compete in the markets where concerns were identified, and must put in place firewalls to ensure the independence of these functions. The conditions will remain in place for two years. In addition to the hold-separate remedy, the parties are also required to refrain from raising prices, in China, of the products in question, and must not refuse to supply them to Chinese customers. These conditions will apply for five years.

The inclusion of a two-year time limit after which the hold-separate will automatically expire is important. It follows the approach in the Advanced Semiconductor Engineering/Siliconware Precision Industries decision in 2017 (the last time the hold-separate remedy was used) and is a clear departure from previous cases where parties had to apply to the authority for removal of the conditions, with the approval sometimes not coming until years after the specified period. This is therefore a clear improvement. But it does not completely remove the controversial nature of the remedy: whilst many merger control regimes around the world require parties to refrain from integrating their businesses during the merger review process, this obligation generally falls away once merger approvals have been obtained and the deal has completed. The willingness of the Chinese authorities to impose hold-separate conditions in foreign-to-foreign deals (like Cargotec) only adds to this controversy. Merging parties will, however, gain comfort from the fact that since 2013, including the Cargotec case, the remedy has only been used four times – they will be hoping that this latest case does not signal SAMR’s intention to employ it more regularly in future decisions.

DOJ announces new approach for crediting corporate compliance programs

Antitrust authorities across the globe have taken differing approaches to the question of whether to give credit, when setting fines for antitrust infringements, to companies for having an antitrust compliance program. In the U.S., in a major speech the Assistant Attorney General for Antitrust has recognised that the Department of Justice’s Antitrust Division will credit robust compliance, solidifying its evolving position away from the ‘all-or-nothing’ philosophy adopted by the long-standing corporate leniency program. Historically the Antitrust Division has not credited corporations at the charging stage or at sentencing for compliance programs that did not detect criminal conduct (a policy which was captured by the U.S. Department of Justice Manual). Likewise, it has not generally credited corporations that seek to improve pre-existing compliance programs after the start of an antitrust investigation. That policy started to shift in September 2014, when Antitrust Division officials began to re-assess their approach. Officials announced that the Division was “actively considering ways in which we can credit companies that proactively adopt or strengthen compliance programs after coming under investigation”. As part of the policy assessment, the Antitrust Division preliminarily identified the elements of an effective compliance program: (i) direction from the top; (ii) training of senior management and executives with sales/pricing responsibilities and providing employees the opportunity to report anonymously and seek guidance about possible violations without fear of retaliation; (iii) monitoring and auditing of at risk activities; (iv) willingness to discipline employees who violate the compliance program; and (v) willingness to make changes to a compliance program that failed to prevent criminal conduct. Officials re-emphasised this in speeches in 2018 and 2019. 

The Assistant Attorney General for Antitrust’s speech completes the policy shift. He announced that “the time has now come to improve the Antitrust Division’s approach and recognize the efforts of companies that invest significantly in robust compliance programs”. Although the Antitrust Division reiterated its commitment to the leniency program, under the new framework it will: (i) change its approach to crediting compliance at the charging stage; (ii) clarify its approach to evaluating the effectiveness of compliance programs at the sentencing stage; and (iii) for the first time, make public a guidance document for the evaluation of compliance programs in criminal antitrust investigations. The Manual has been updated, and provide a that Antitrust Division prosecutors must now consider, among other things, “the adequacy and effectiveness of the corporation’s compliance program at the time of the offense, as well as at the time of a charging decision”. In addition, the Antitrust Division will allow prosecutors to proceed by way of a deferred prosecution agreement (DPA) when warranted (although notably, the Antitrust Division will “continue to disfavor non-prosecution agreements (NPAs) with companies that do not receive leniency because complete protection from prosecution for antitrust crimes is available only to the first company to self-report and meet the Corporate Leniency Policy’s requirements”). Separately, at the sentencing stage, the Division will recognise that a compliance program, if effective, may allow a corporate defendant to obtain a three-point reduction under the Sentencing Guidelines. A compliance program also may be relevant to determining the appropriate corporate fine within the Guidelines range and to the probation recommendation.

The Antitrust Division joins a number of other antitrust authorities in granting fine reductions or other benefits to companies which have in place a compliance program. In the UK, for example, penalty reductions of up to 10% can be (and have been) granted. Discounts may also be available in Australia, Brazil and Canada, plus other EU Member States including Hungary and Italy. This is in stark contrast to the approach of the European Commission, which is clear that it will offer no discounts for compliance programs – in its view the reward for having an effective program is that no infringement should occur in the first place. Turning back to the U.S., we expect the treatment of compliance programs in the context of antitrust investigations to continue to evolve. For more information on the speech and its implications, see our full summary.

European Commission issues passing-on guidelines to assist national courts in assessing antitrust damages

The European Commission is keen to encourage claimants to seek compensation for losses suffered as a result of cartel or other anti-competitive conduct. It falls within the remit of national Member States courts to hear these damages actions. In 2014 the Commission adopted the Damages Directive, setting out minimum standards for antitrust damages actions across Member States. Alongside the Directive, the Commission has published guidance (and a more detailed practical guide) to assist national courts when quantifying harm in antitrust damages actions. The Directive aims not only to facilitate claims by direct customers of companies found to have breached antitrust law, but also indirect customers and final consumers where the cartel related price increase has been passed on to them. At the same time, the Directive provides that claimants should not be overcompensated for the harm caused to them by the infringement. In this vein, the Commission has now issued guidelines for national courts on passing-on, to help them determine what level of compensation is available to indirect purchasers.

The passing-on guidelines set out the legal context as well as the economic theory underlying passing-on, plus various approaches and methods to quantifying passing-on effects. They are not binding on national courts, and should be read in conjunction with the other guidance mentioned above. While primarily aimed at national courts, the Commission notes that the guidelines may also be useful for infringers (who often argue passing-on as a defence to a claim by a direct purchaser) or for indirect purchasers seeking to make a claim. The complexity of assessing passing-on, combined with a proliferation of antitrust damages actions across Member States in recent years, means that the guidelines are likely to be welcomed by national courts and parties alike. For more information on the guidelines (and in particular their impact in Belgium), see our alert.

UK CMA steps up enforcement of procedural breaches of merger control rules with another interim measures fine

Globally, antitrust authorities are clamping down on procedural breaches of merger control rules -  enforcement fines exceeded EUR140m in 2018. The UK Competition and Markets Authority (CMA) is no exception. In particular, and fairly uniquely given the voluntary nature of the regime, the CMA has stepped up its policing of so-called ‘interim measures’, ie measures designed to prevent merging parties from integrating their businesses pending the outcome of the CMA’s merger review. Interim measures are used by the CMA routinely in completed mergers (and can also be imposed in anticipated deals, although this is rarer in practice).

Most recently, the CMA has fined Nicholls’ (Fuel Oils) for three separate interim measures breaches during the phase 1 review of its completed acquisition of an oil distribution business. According to the CMA, Nicholls’ relocated staff, used its assets to service the target business and failed to provide compliance statements on time. The fine totalled GBP146,000. It marks the fifth penalty imposed by the CMA for breaches of interim measures since summer 2018. The CMA has also used the experience gained in these cases to update its interim measures guidance, providing more information to merging parties on when and how such measures will be required. For more information on this trend of tougher UK enforcement, read our alert.

French antitrust authority fines cooperative for geographic market allocation

Antitrust enforcement in France this month serves as a reminder that organisations composed of independent companies can themselves fall foul of antitrust laws. After a four-year investigation the French competition authority has fined bakery supplier cooperative Back Europ EUR1.7m for organising a geographical market distribution between its members covering the whole of France.

Unusually, the illegal exclusivity provisions were explicitly set out in Back Europ’s articles of association and internal rules of procedure. Each of the 42 member wholesaler-distributors of bakery products and materials were provided with an exclusive geographical distribution area, drawn precisely on detailed maps that were dated and signed by the members. Bakers would be systematically rerouted to the member in charge of a zone if they contacted another member. The preference was to lose customers rather than allow members to operate in each other’s territories. Monitoring and retaliation measures were also specified – non-compliant members would be summoned and heard by Back Europ’s Board of Directors with exposure to a penalty that could result in exclusion. In terms of impact on competition, the authority notes that Back Europ is the leading network in the wholesale distribution of bakery supplies. And the pact operated for nearly 30 years, in place since Back Europ was established in 1989. Back Europ did not contest the facts and benefitted from the settlement procedure and reduced fines.

The decision sits alongside other enforcement action taken against cooperatives in July, including a caution issued by the Japan Fair Trade Commission to an agricultural cooperative for allegedly limiting production of its members as well as who they could sell to, and the opening of a probe by Brazil’s antitrust authority CADE into a cooperative of spine surgeons on suspicion of standardising fees and payment conditions.

Consumer & Retail

French antitrust authority again takes action against unjustified online sales ban

The European Court of Justice’s 2017 Coty judgment gave some guidance on when online sales restrictions in a selective distribution system, in particular preventing distributors selling through third-party platforms, may be permissible to preserve a luxury brand’s image. The French antitrust authority has subsequently developed its approach to online sales bans, most recently fining bicycle manufacturer Bikeurope EUR250,000 for inserting provisions in its general terms and conditions requiring store delivery of online sales and, later, explicitly prohibiting all online sales. Surveillance by Bikeurope meant non-compliant retailers faced warning letters and termination of supply. The authority considered that the prohibition went further than necessary to preserve consumer safety and ensure the proper use of the highly technical bicycles, finding that the firm illegally restricted competition and limited consumer choice.  

This is the second time in recent months that the French antitrust authority has considered online sales bans. In October last year it expressly noted that manufacturers of high-quality or high-technology products could legitimately use selective distribution and could potentially ban online sales on third-party platforms. It nevertheless fined chainsaw manufacturer Stihl EUR7m for effectively banning all online sales of outdoor power equipment, concluding that the nature of the products required neither direct contact between the distributor and the buyer nor a demonstration of use. Together the cases show that: (i) whilst the authority has not ruled out that online sales bans on third party platforms could be justified for highly technical as well as luxury/quality products, any such arguments will need to be compelling and well-evidenced; and (ii) that general online sales bans are likely to be specifically scrutinised.


Qualcomm fine marks first predatory pricing penalty imposed by European Commission in 16 years

Dominant companies risk antitrust enforcement action if they are suspected of engaging in ‘predatory pricing’ by selling below cost with the aim of forcing their rivals out of the market – as shown by the European Commission’s decision to fine chipmaker Qualcomm EUR242m. The Commission concluded that Qualcomm held a dominant position in the global market for UTMS baseband chipsets due to its market share (of around 60%, almost three times its biggest competitor) and high barriers to entry to the market. It found that Qualcomm abused this dominant position for a two-year period by selling certain amounts of these chipsets below cost to two key customers. Qualcomm’s intention, said the Commission, was to eliminate Icera, its main rival at the time, from a particular segment of the market. The Commission based its conclusion on a price-cost test (to assess whether Qualcomm sold the products at a loss) supported by other qualitative evidence, including Qualcomm’s internal documents, which the authority said demonstrated the company’s anti-competitive rationale. According to the Commission, there was no evidence that Qualcomm’s conduct created efficiencies that could justify its conduct.

The decision is interesting on several counts. First, predatory pricing cases are pretty rare. The last time the Commission imposed a fine for this conduct was in 2003 against Wanadoo. Competition Commissioner Vestager is clear to point out, though, that the Commission is committed to fighting predatory pricing “no matter how difficult and complex these cases are”. Second, this is not the first abuse of dominance fine imposed on Qualcomm by the Commission. In January 2018 the Commission found that Qualcomm made significant payments to Apple on condition that it would not buy from Qualcomm’s rivals, imposing a fine of EUR997m (Qualcomm has appealed the decision). Third, this was a long case – the original complaint by Icera was made in May 2010 and the Commission opened its formal investigation in July 2015. The proceedings saw a statement of objections, supplemental statement of objections, two oral hearings and extensive requests for information (one of which was appealed by Qualcomm to the General Court and is now before the European Court of Justice). Commissioner Vestager commented that these procedural steps are key to ensuring procedural fairness, but acknowledged that they “do take time”, with length of investigations remaining a challenge for the Commission in future cases. And this case is far from over. Qualcomm has announced that it plans to appeal, arguing that the decision is based on a “novel theory of alleged below-cost pricing” and lacks precedent. The full text of the Commission’s decision, when published, along with any EU court judgment, will no doubt provide further insight into how alleged predatory pricing conduct will be analysed in future.

UK CMA launches digital markets strategy and market study into online platforms and digital advertising

The debate about whether competition policy and rules should be amended to deal with digital markets continues to gain momentum. In the UK, following on from the Furman and Lear reports, and building on the more general proposals for reform it presented to the UK Government earlier in the year, the Competition and Markets Authority (CMA) has announced its digital markets strategy. At the core of the strategy is a market study into online platforms and digital advertising, which the CMA launched alongside the strategy itself. The study will consider: (i) the market power of digital platforms in consumer-facing markets; (ii) any lack of consumer control over data; and (iii) competition in the supply of digital advertising. If concerns are found and remedies are ultimately required, the CMA notes that these are likely to take the form of a regulatory regime, building on the Furman report’s recommendations for activities of online platforms to be regulated. The study must be concluded within 12 months, with provisional views expected in January 2020.

In addition to the market study, the strategy contains six other priority areas of focus. The CMA will, for example, use its existing powers of consumer and antitrust enforcement, as well as merger assessment tools, to the fullest extent possible. This includes investigating fake online reviews, celebrity endorsements, conduct of price comparison websites/online platforms and mergers in fast moving markets. Reviewing its approach to mergers in digital markets and following up on the proposals it made for reform of its enforcement tools are also on the CMA’s agenda. The CMA intends to continue the functions of its recently established Data, Technology and Analytics (DaTa) unit, which has been developing skills in data analysis, machine learning/AI techniques and algorithms, and is considering possible remedies in digital sectors. And it will carry out policy work to consider the proposal for a ‘digital markets unit’ made by the Furman report, which looks set to be taken forward by the Government. Finally, the CMA recognises that international cooperation is vital when considering the digital economy – it will increase efforts to collaborate with international counterparts.

The CMA’s priorities are largely consistent with the independent reports and previous CMA statements on digital markets seen during the first half of 2019. And the launch of the market study has answered numerous calls for the CMA to look more closely at digital advertising. For players in the digital sector, it gives a steer as to where the CMA is likely to focus its attention going forward, and signals that increased enforcement is on the cards. Firms with international operations will, however, keep a close eye on how the CMA’s strategy fits with that of other antitrust authorities and governments across the globe. While we have seen some collaboration between jurisdictions – the antitrust authorities of the G7, for example, have just announced a ‘common understanding’ on competition and the digital economy which broadly aligns with the CMA’s strategy – overall it remains to be seen how consistent their approaches will be. For more information on the CMA’s strategy and its priority areas of focus, read our full summary.

Transport & Infrastructure

Brazilian subway cartel decision adds to growing fines tally

Following a six year investigation, Brazil’s antitrust authority CADE has fined 11 companies and 42 individuals BRL535.1m (EUR126m) for rigging bids for the construction of subways and railways. The largest fines were imposed on CAF Brasil (nearly EUR40m) and Alstom (EUR30m). CADE found that Alstom was the leader of the cartel, and as a result has barred the company from participating in public tenders in the markets affected by the cartel for five years. The authority also recommended that Alstom, Bombardier and CAF (which it regarded as “hard core” members of the cartel) should not receive any government tax incentives or subsidies, again for a five-year period. Siemens, which blew the whistle on the cartel and entered a leniency agreement with CADE, escaped fines.

Fines imposed by CADE for cartel activity have steadily risen in recent years. In 2018, total fines were up 40% compared to the previous year (see our Global trends in cartel enforcement report for more details). In addition to the subway cartel, in 2019 so far fines have been imposed across a whole range of sectors, including auto parts, fuel retail, LCD and electrical components. The subway cartel decision in particular shows that bid-rigging remains high on the priority list for CADE, following a cooperation agreement entered into with the Federal Audit Court last year which aimed to increase efficiency in enforcement against this type of conduct. And more generally the case acts as a warning to firms with operations in Brazil that the consequences of antitrust breaches are serious – not only does CADE have the appetite to impose large fines, but parties found to have a key role in any cartel conduct may face additional sanctions which could affect their operations in Brazil going forward.

About your editor

Florence is a partner in our Paris office and heads our French antitrust practice. She has significant experience in all areas of French and European competition law (antitrust, mergers and State aid), with particular expertise in advising on distribution law issues. She regularly handles French, EU and multi-jurisdictional merger notifications and represents clients in competition law litigation before competition authorities and national courts (in cartel investigations, abuse of dominance, State aid and private enforcement matters). Her expertise spans many industry sectors, with a notable emphasis on finance, internet and consumer goods.

Florence has a postgraduate degree in business law and a DJCE degree (counsel in commercial law) from the University of Paris II, Panthéon Assas, and a postgraduate degree in comparative European law from the University of Nancy II. She is recognised by all the leading legal directories. Among recent commentary is that of Legal 500 EMEA 2018, which highlights her “deep understanding of French antitrust law and developed network in the field”.  Florence frequently publishes and speaks on antitrust issues and is regularly interviewed in the press.


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