Antitrust in focus - March 2022
25 March 2022
This newsletter is a summary of the antitrust developments we think are most interesting to your business. Louise Tolley, PSL Counsel based in London, is our editor this month (learn more about Louise in our Q&A feature at the end of the newsletter). She has selected:
- Our merger control report finds antitrust authorities continue to take a tough approach
- Our analysis shows a rise in 2021 antitrust fines and predicts an era of heightened enforcement may lie ahead
- EU antitrust authorities will not prevent cooperation measures necessary to address disruptions caused by Russia’s invasion of Ukraine
- Increased focus on green initiatives: draft EU guidelines, planned UK market study and Dutch guidance on specific projects
- U.S. DOJ warns criminal charges are possible for monopolisation
- U.S. authorities take “whole-of-government” approach to antitrust enforcement
- Belgian merger control notifications now subject to filing fees
- Big step for EU Digital Markets Act as political agreement reached
- Turkish merger control amendments target tech companies
- Japan’s Fair Trade Commission accepts commitments in parity clauses case
Our latest Global trends in merger control enforcement report is now out. We analyse data on merger control activity in 2021 from 26 jurisdictions, focussing on the EU, UK, U.S. and China.
As M&A volumes reached record levels last year, we discuss how antitrust intervention in deals remained high. The report highlights seven key findings:
- Antitrust authorities continued to frustrate M&A, including vertical deals
- Bolstered rules, new policies and greater international coordination signal tougher enforcement
- Antitrust intervention targeted life sciences, energy and transport sectors but not (yet) tech
- Procedural enforcement surged, with China leading the charge
- Authorities coordinated on remedies as use of behavioural conditions declined
- Green deals and merger control: sustainability considerations may have a role
- Tougher foreign direct investment regimes complicated deal making
Our analysis shows a rise in 2021 antitrust fines and predicts an era of heightened enforcement may lie ahead
Fines for antitrust infringements increased significantly in 2021 – by over 125% from USD5 billion to USD11.4bn in the jurisdictions surveyed. In our Global antitrust enforcement report we discuss the reasons behind this increase. We also look at what to expect in the coming year as wide-reaching reforms are progressed and new political agendas are implemented.
The report highlights the following key trends:
- Heightened enforcement activity in the digital space
- Sustainability initiatives are welcomed but no excuse for antitrust breaches
- Healthcare sector can expect increasing scrutiny
- U.S. and EU highlight labour markets as an area of interest
- Novel forms of collusion, novel forms of enforcement: authorities adapt their toolboxes
- Two European Court judgments widen the scope of corporate group liability
- The role of leniency applications as a tool to boost cartel detection: regulators debate options/revise rules
- Global authorities undertake to increase international coordination
EU antitrust authorities will not prevent cooperation measures necessary to address disruptions caused by Russia’s invasion of Ukraine
The European Commission (EC) and antitrust authorities of the EU Member States have published, through the European Competition Network (ECN), a joint statement on the application of EU antitrust rules in the context of the war in Ukraine.
The statement relates to cooperation between companies that is designed to address severe disruptions caused by the impact of the war and/or of sanctions. These could include initiatives to:
- ensure the purchase, supply and fair distribution of scarce products and inputs
- mitigate severe economic consequences, such as those arising from compliance with sanctions imposed by the EU
The authorities note that such cooperation measures are either unlikely to amount to a restriction of competition under EU antitrust rules, or could generate efficiencies to outweigh any restriction. Importantly, they say that they will not “actively intervene” against specifically targeted, strictly necessary and temporary measures.
Companies that are uncertain as to whether their planned initiatives are compatible with antitrust rules are invited to approach the EC or national authorities for informal guidance.
The statement is similar to the ECN’s announcement in relation to the Covid-19 pandemic. In particular, it contains the same warning to businesses: “the ECN will not hesitate to take action against companies taking advantage of the current situation by entering into cartels or abusing their dominant position”.
The statement comes as antitrust authorities across the EU have started to look closely at fuel prices. In Austria, the BWB has launched a market inquiry into the Austrian fuel market in response to significant price rises at petrol stations. The Italian antitrust authority has also been monitoring the price rises and has sent information requests to major oil companies.
In addition to the statement, other significant antitrust developments in connection with Russia’s invasion of Ukraine include:
- The Antimonopoly Committee of Ukraine suspending consideration of all active merger control and behavioural antitrust cases. However, we understand that this has not had an impact on the obligation to make a merger control filing where the relevant thresholds are met.
- The EC adopting a State aid Temporary Crisis Framework to enable Member States to support companies and sectors severely impacted by Russia’s invasion of Ukraine. Member States will be able to grant limited amounts of aid in any form to businesses affected by the crisis. The framework also provides for liquidity support in the form of guarantees/subsidised loans and aid to compensate for high energy prices.
- The International Competition Network (ICN) suspending the Russian antitrust authority’s participation in ICN activities.
Increased focus on green initiatives: draft EU guidelines, planned UK market study and Dutch guidance on specific projects
Antitrust authorities continue to debate how sustainability issues and green initiatives should be considered under antitrust rules. Each of our global merger control and antitrust reports, mentioned above, discusses this hot topic.
In Europe this month, there have been several developments.
The European Commission’s position takes shape
In early March, the European Commission (EC) published for consultation its draft revised Guidelines on Horizontal Cooperation Agreements and draft revised Horizontal Block Exemption Regulations on research and development and specialisation agreements. These are designed to help companies self-assess when cooperation with rivals may restrict competition under EU antitrust rules, and in which cases such cooperation may benefit from an exemption.
Interested parties can submit their comments until 26 April 2022. The new rules will come into force on 1 January 2023.
The long-awaited drafts contain a number of amendments and clarifications which aim to adjust the current ten-year-old rules to take into account recent societal and economic developments such as digitalisation and the green transition.
The drafts include new rules on the assessment of, in particular, agreements pursuing sustainability objectives, joint purchasing agreements, mobile network sharing agreements, bidding consortia and data sharing.
Our alert summarises and comments on the proposed changes with a particular focus on sustainability agreements, data sharing and use of algorithms. On sustainability agreements, we discuss the following headline points from the draft guidelines:
- Sustainability cooperation will only raise competition law concerns when it affects competition parameters such as price, quantity, quality, choice or innovation.
- Sustainability standardisation agreements may benefit from a so-called “soft safe harbour” and fall outside the EU antitrust rules, as long as certain conditions are met.
- More generally, sustainability agreements may benefit from an individual exemption if they meet four cumulative criteria. The draft gives extensive guidance on one criterion in particular – consumers getting their fair share of benefits – and highlights the need for clear evidence that any benefits arising from the agreement are passed on to consumers.
It is also worth mentioning that, separately, the EC has launched a consultation concerning special rules on sustainability agreements in agriculture.
UK authority sets out plans for market study and further guidance
The UK Competition and Markets Authority (CMA) has published advice to the government on how competition and consumer laws can help meet the UK’s environmental goals.
Of most immediate interest to businesses is the CMA’s commitment to launch at least one new market study in a net zero-related market in the next year, although it doesn’t give any more details as to which sector(s) it plans to target.
The CMA advises the government that the current antitrust rules are sufficiently flexible and should not be an obstacle to sustainability initiatives. But it acknowledges that there is a need for more clarity and intends to issue guidance.
In advance of any guidelines, the CMA gives an indication of the position it may take. In its view, a sustainability agreement that restricts competition may benefit from an exemption where it leads to environmental benefits to a broad group of consumers, provided that the consumers harmed by the agreement are also part of that broad group. This is in line with the EC’s position.
Finally, the CMA plans to launch a sustainability taskforce to act as a focal point within the authority for sustainability policy issues.
Energy sustainability agreements receive favourable guidance in the Netherlands
The Dutch Authority for Consumers and Markets (ACM) recently announced it was in favour of two sustainability agreements in the energy sector.
One concerned an arrangement between system operators to use a fixed purchase price per tonne for CO2. The second was submitted by the Energy, Environment and Water Association (VEMW). Members of VEMW wanted to collectively enter into a long-term contract to purchase energy from an offshore wind farm.
In both cases, the ACM concluded that the agreements were in line with sustainability guidelines published in July 2020 and updated in January 2021 and did not breach antitrust rules.
Commenting on the initiatives, ACM head Martijn Snoep said that the authority is happy to help businesses that have questions about sustainability collaborations. We expect to see more of this type of guidance on individual projects – by the ACM as well as other antitrust authorities – in the coming months.
In early March, the Department of Justice (DOJ) Antitrust Division Deputy Assistant Attorney General Richard Powers floated what would be a momentous shift in federal enforcement of the antitrust laws.
While speaking on a panel, Powers noted that the DOJ may abandon the federal government’s long-standing civil enforcement policy for monopolisation claims, warning that criminal enforcement may now be on the table for both individuals and companies for Section 2 Sherman Act violations.
Historically, the DOJ reserved criminal charges for price fixing, bid rigging and similar cartel agreements. That policy reflected the clear judicial view that the anti-competitive nature of a cartel – eg a naked agreement between competitors to fix their prices – is clearer to demonstrate than unilateral conduct and its effects are much less ambiguous and without any legal justification. As the Supreme Court once put it, collusion is “the supreme evil of antitrust”.
By contrast, the courts and government enforcers have long recognised the difficulty in defining what is unlawful monopolisation. There is often a very thin line between permissible and anti-competitive conduct, and the analysis to separate the two requires courts to second guess firms’ intentions and weigh the anti-competitive effects of the conduct against its pro-competitive benefits and efficiencies. Criminal enforcement has, therefore, not been viewed as a real threat for cases involving purely unilateral conduct.
A new DOJ position that threatens criminal enforcement would be at odds with the DOJ’s decades-old policy view of Section 2 enforcement, which cautioned that “[t]he Supreme Court has consistently emphasized the potential dangers of overdeterrence”. The long-held position of the DOJ recognised the Supreme Court’s concern that mistakes in such enforcement would cause companies “to forgo legitimate and competitively useful conduct rather than risk treble damages and perhaps even criminal penalties.” As the DOJ explained, “it often can be difficult to determine whether the conduct of a firm with monopoly power is anticompetitive.”
One extreme example of this is the 1975 Section 2 case against IBM, which was voluntarily dismissed by the DOJ following a trial with testimony from over 950 witnesses and 300,000 pages of documents. Until Powers’ statement, the DOJ had recognised an exception allowing for criminal enforcement of Section 2 only when violence or threats were used, such as in cases involving organised crime.
The implications of the proposed policy shift are far-reaching. The DOJ does not seek fines or monetary penalties for civil violations as a general matter. With criminal enforcement now a possibility, the DOJ could threaten to bring substantial fines as the Sherman Act authorises fines of up to USD100 million per violation.
The DOJ could also seek fines under the Alternative Fines Act (AFA), which permits fines on the basis of double the gain or double the loss attributed to the violation. Enabled by the AFA, the DOJ has sought and obtained hundreds of millions of dollars in fines in many of the agency’s criminal price-fixing cases.
Additionally, a shift to criminal enforcement brings added risk to individual executives. Powers’ announcement specifically warned that the agency will be evaluating criminal charges against individuals for monopolisation violations.
Companies should monitor a potentially evolving DOJ position on criminal penalties for non-cartel antitrust violations. As appropriate, they should consider re-assessing their compliance programmes with a greater focus on monopolistic conduct and take prompt action if they are aware of any potential allegations of a Section 2 violation.
Last month we reported on the growing number of international cooperation initiatives between antitrust authorities. We focussed in particular on a new working group to develop and share intelligence in order to detect and investigate suspected anti-competitive behaviour in global supply chains. The group is made up of antitrust authorities from the U.S., UK, Australia, New Zealand and Canada.
Our alert on U.S. criminal antitrust enforcement priorities takes a closer look at U.S. inter-agency and global coordination. It examines the U.S. authorities’ “whole-of-government” approach to antitrust enforcement. In particular, the alert provides an update on the work of the Procurement Collusion Strike Force as well as U.S. scrutiny of potentially collusive conduct arising from Covid-19-related supply chain disruptions.
Elsewhere, we have seen other instances of cross-border cooperation between antitrust authorities. We understand, for example, that the Arab Competition Network recently held its first meeting. The aim of the network is to facilitate communication among members on competition policy as well to share information on antitrust and merger control cases. Also see our article below on intelligence sharing within the EU and our two annual reports, featured above.
Belgium has introduced filing fees for standard and simplified merger control notifications of, respectively, EUR52,350 and EUR17,450.
The new measure will give a much-needed boost to the finances of the Belgian competition authority. In time this may lead to more robust and timely merger control enforcement and even an uptick in antitrust enforcement. Our alert on the development provides more details.
Hot off the press as we publish this month’s edition of Antitrust in focus is the news that the European Parliament and EU Member States have reached political agreement on the Digital Markets Act (DMA).
The DMA will apply to large online platforms designated as “gatekeepers”, which will be subject to a defined set of obligations and prohibitions. It will be enforced by the European Commission.
The new regime is not applicable yet: it must now be formally approved, and then must be implemented within six months after its entry into force.
We are preparing a more detailed alert on this development – watch out for it in the coming days.
Significant amendments to the Turkish merger control regime will enter into force in early May 2022. Notably, lower turnover-based thresholds will apply to tackle so-called “killer acquisitions” in the tech sector.
The special thresholds will apply to certain mergers involving “technology undertakings”. These are defined as undertakings and assets operating in digital platforms, software and gaming software, fin-tech, bio-tech, pharmacology, agrochemicals and healthcare technologies. Importantly, an acquisition of a technology undertaking operating in Turkey may require notification even though the target does not generate turnover in Turkey.
An alert on the development from our associated law firm Gedik & Eraksoy provides more detail on the new jurisdictional threshold for tech companies. The alert also sets out the long-overdue substantial increase in the general merger control thresholds, as well as key changes to the template notification form.
Japan’s Fair Trade Commission (JFTC) has for the first time resolved an antitrust probe into a foreign company, Booking.com, with commitments.
For a number of years the JFTC has been investigating Booking.com’s “wide” parity clauses with accommodation providers in Japan. Under these clauses, which are also called most-favoured-nation clauses, the accommodation providers were required to ensure that room rates and room availability listed on Booking.com’s website were equivalent to or more favourable than those offered through all other sales channels.
Under the commitments, Booking.com has agreed to discontinue the use of these wide parity clauses. In addition, Booking.com has committed to implementing ranking algorithms and other systems to determine the order of accommodation on its website for the next three years. The company’s board of directors will be obliged to cease the conduct at issue for the same time period. Booking.com must notify accommodation providers and its employees of all the relevant measures, as well as take specified compliance steps.
With its commitments, Booking.com has avoided an infringement decision and fines. However, the commitments do not cover “narrow” parity clauses. These clauses force providers to offer the same or more favourable room rates and other terms on Booking.com as they do on their own sales channels. The JFTC notes that, at present, accommodation operators do not necessarily abide by these clauses. But the authority will pay close attention to any effect on competition among online travel agencies caused by the future management of narrow parity clauses for room rates by Booking.com and will “respond strictly” to any antitrust issues that arise.
A number of antitrust authorities across the globe have now prohibited wide parity clauses. However, we are starting to see some differences in exactly how they approach these provisions.
The European Commission (EC), for example, plans to carve wide retail price parity clauses imposed by online intermediaries out of its revised Vertical Block Exemption Regulation, which means that the clauses would be subject to an individual assessment. In the UK, the government proposes to treat wide retail price parity obligations (regardless of whether they are online or offline) as “hardcore restrictions”, requiring an individual assessment of the entire agreement. We discuss the impending differences in the approach of the EC and the UK to vertical agreements in our Global antitrust enforcement report.
The Spanish antitrust authority (CNMC) has fined steel companies ArcelorMittal, Balboa and Sidenor a total of EUR24m for exchanging information in relation to the purchase of scrap iron.
What stands out in this case is that the CNMC sanctioned the sharing of data on the technical shutdowns of the companies’ steel mills. According to the authority, this enabled them to anticipate reductions in the level of future demand for scrap. That knowledge could have strengthened their negotiating position with respect to scrap iron suppliers.
The other alleged exchanges of commercially sensitive information are of a nature more frequently found to infringe antitrust laws. The companies disclosed information on the future purchase prices they intended to offer to their iron scrap suppliers. They also exchanged information on third-party competitors’ prices, obtained from their suppliers, that were not yet publicly available.
Another point of interest is that the CNMC’s probe was triggered by an anonymous complaint to the European Commission. Antitrust authorities worldwide have sought to increase the attractiveness of their whistleblower policies and tools in part to compensate for a tailing off in leniency applications.
The case is also a reminder that antitrust authorities share intelligence to assist in the detection and enforcement of possible infringements. This will particularly be the case across the EU’s European Competition Network.
Read our Global antitrust enforcement report for more on trends in leniency applications and international cooperation.
U.S. challenge to health insurance deal shows appetite for scrutinising data/technology acquisitions
Deals in the life sciences/healthcare sector have been a focus for the U.S. antitrust agencies in recent years. The Department of Justice (DOJ)’s latest move in this area is the lawsuit to block UnitedHealth Group’s acquisition of Change Healthcare. Attorneys General in Minnesota and New York have joined the challenge.
United is a vertically integrated healthcare firm that owns the largest U.S. health insurer, a significant provider network, a large pharmacy benefit manager business and an advanced healthcare technology business. Change is an independent healthcare technology firm that provides software and services to health insurers and other healthcare industry participants.
The DOJ is concerned that the deal would enable United to have access to, and potentially use, the competitively sensitive information of its health insurance rivals for its own business purposes. This is particularly in the wake of internal United documents referencing Change’s data rights as the “primary question” and “foundation” for the acquisition’s business case.
The agency also claims that United would be able to control its competitors’ access to innovations in vital healthcare technology. It alleges that the deal would eliminate United’s only major rival for first-pass claims editing solutions, an important technology which facilitates the efficient processing of health insurance claims. Currently, Change markets itself as a partner to health insurers, providing “collaborative benefits” and a “consistent track record of innovation”, which the DOJ alleges would be disrupted post-transaction. And, as Change’s claims editing product is customised with insurers’ proprietary plan and payment rules, the DOJ is concerned that United would be able to reverse-engineer this competitively sensitive information for its own profit.
The suit shows the willingness of the DOJ to look closely at whether acquiring access to data can diminish competition, as well as the impact of a transaction on innovation. It is also another example of a challenge involving vertical concerns. Commenting on the case, Attorney General Merrick Garland stated that the DOJ is “committed to challenging anticompetitive mergers, particularly those at the intersection of health care and data”.
Meanwhile, United has responded to the DOJ’s challenge, saying that the combination of Change’s assets with its own will enable the development of a “frictionless platform” that will reduce administrative waste and inefficiency and will benefit providers, insurers and patients. The company has reported that it intends to divest Change’s claims editing product, ClaimsXten, to address the DOJ’s horizontal concerns. While it claims the agency’s vertical concerns are based on “vague and speculative theories”, it has offered behavioural commitments, including putting in place firewalls to the Change business to protect sensitive customer data.
Whether the DOJ will be satisfied by these remedies, however, remains to be seen, particularly following Assistant Attorney General Jonathan Kanter’s January speech which set out his preference for blocking deals rather than entering settlements. The trial is set to start in August.
About your editor
Louise is a Professional Support Lawyer Counsel based in London. She is responsible for managing the know-how resources for the global antitrust practice. Louise keeps the global antitrust team and its clients on top of legal developments, in particular by producing current awareness briefings and thought leadership pieces. These include our annual Global trends in merger control enforcement report and this monthly newsletter.
Louise regularly delivers training and workshops both internally and to clients on a wide range of topics. She has particular expertise in antitrust compliance and dawn raids, including running mock dawn raids and helping businesses to develop their inspection protocols.
Advising on the impact of developments in antitrust policy and regulation is a key part of Louise’s role. She also advises clients on complex behavioural antitrust issues such as distribution arrangements and cooperation agreements between competitors.
Louise is closely involved in the group’s business development initiatives and has co-developed a number of products and tools to assist clients with their antitrust compliance activities. She was co-editor of the Butterworths Competition Law Handbook for ten years and is a consultant editor of the LexisPSL Competition online tool.
Spotlight on Louise
A typical working day in London… catching up on overnight legal developments with a large cup of tea, working out which colleagues/clients need to know about them and trying to spot patterns and trends in enforcement activity. Then speaking to members of the team from around the world to give advice and support on their cases. At the end of the day, (always) leaving the office ten minutes too late and having to sprint to pick up my kids!
If I hadn’t become an antitrust lawyer, I would…. be a teacher. Or a zookeeper.
The best career advice I’ve been given is…. keep learning – try to learn one at least one new thing every day. Oh, and be organised – lists are the key to success!
The most interesting matter I’ve worked on is…. I enjoy spotting and writing about global trends, so working on our annual merger control report is really interesting (check out this year’s edition from the link above if you haven’t already).
For me, being a good lawyer/advisor means…. listening, and trying to deliver what clients or colleagues need before they know they need it.
Something I’d like to do but haven’t yet done is…. write a novel (I always fancied writing a children’s story about wizards and witches, but it seems that idea has been taken…).
My ideal weekend in a sentence…. a chilled out weekend with the family where my boys play beautifully together, someone else cooks dinner and the sun is shining.
My typical weekend in a sentence…. a weekend with the family where my boys spend most of the time wrestling each other, I cook dinner, and it rains (although I’m originally from the north of England so I’m used to the latter!)
Something that might surprise you about me is…. I learnt dressmaking at the London College of Fashion.
My top tip for visitors to London (now that travel possibilities are opening up) is…. go for a long walk on Hampstead Heath, checking out the views from Parliament Hill. Head into the city centre for afternoon tea. And if you come with kids, visit the Science Museum – their hands-on exhibition is amazing.