European Antitrust and
Trade Regulation Newsletter
November 2009
Authors:
Vanessa Edwards
vanessa.edwards@klgates.com
+44.(0)20.7360.8293
Neil Baylis
neil.baylis@klgates.com
+44.(0)20.7360.8140
K&L Gates is a global law firm with
lawyers in 33 offices located in North
America, Europe, Asia and the Middle
East, and represents numerous
GLOBAL 500, FORTUNE 100, and
FTSE 100 corporations, in addition to
growth and middle market companies,
entrepreneurs, capital market
participants and public sector entities.
For more information, visit
www.klgates.com.
Stop Press – Lisbon Treaty to Enter into
Force on 1 December 2009
The Lisbon Treaty, nine years in the making, received its last ratification on
Tuesday 3 November 2009 with the signature of the Czech President. It will come
into force on 1 December 2009. See: New Treaty Makes it Easier to Challenge EU Law.
UK Developments
More directors to be disqualified?
The UK's competition authority, the Office of Fair Trading ("OFT"), has proposed
changing its approach so as to make it more likely that it will issue Directors
Disqualification Orders ("DDOs") in relation to future breaches of UK competition
law. Under the Enterprise Act 2002, the OFT can seek an order preventing a person
from acting as a director for up to 15 years. The OFT's current guidance states that
where a company has infringed UK or EC competition law, all appeals have been
exhausted, and fines have been imposed on the company concerned, then it is likely
to apply for a DDO if the director was directly involved in the infringement, and is
quite likely to do so if the director knew or had reasonable grounds to suspect an
infringement was taking place.
The OFT is now proposing a more flexible approach, whereby it will analyse in
each case whether the director is fit for the role, and whether or not his conduct
directly contributed to the infringement. The new approach is deliberately intended
to act as a stronger deterrent to competition law infringements.
Along with the threat of imprisonment for any individual knowingly involved in a
cartel, DDOs are aimed at encouraging directors to take active steps to ensure that
both they and the companies they work for take all measures to avoid competition
law infringements. This latest guidance is a further step towards a stronger
enforcement regime in the UK.
Damages claim against cartel participants
In October 2008, the European Commission fined wax producers €676 million for
a price-fixing and market-sharing cartel. A number of European candle
manufacturers have recently brought proceedings for damages in the UK against
two of the cartel members (Shell and Exxon-Mobile). The applicants claim that the
two companies are jointly and severally liable for the actions of all cartel members
for losses suffered as a result of the price-fixing agreements. This is a good
example of a cartel damages claim instituted while proceedings are continuing (an
appeal to the Court of First Instance is pending) to ensure that the claim is not
time-barred.
EC Developments
New Maritime Block Exemption
The European Commission has issued a new Regulation (906/2009) on the
application of Article 81(3) of the EC Treaty to certain categories of agreements,
decisions and concerted practices between liner shipping companies (consortia).
European Antitrust and Trade Regulation Newsletter
The new Regulation replaces Regulation
823/2000 and applies to international liner
shipping services for the carriage of cargo. This
includes services to and from a port in the EU,
but excludes services within the same member
state (maritime cabotage).
The block exemption only applies to agreements
concluded between members of a consortium. It
does not cover restrictive agreements concluded
between consortia (or one of its members) and
other shipping companies, or between different
consortia or their members.
Under the Regulation, the exempted activities
are:
•
the joint operation of liner shipping transport
services;
•
capacity adjustments in response to
fluctuations in supply and demand;
•
the joint operation or use of port terminals
and related services; and
•
any other ancillary activity which is
necessary for the implementation of the other
permitted activities.
Regulation 906/2009 will not apply to:
•
the fixing of prices when selling liner
services to third parties;
•
the limitation of capacity or sales except for
the permitted capacity adjustments; or
•
the allocation of markets or customers.
Regulation 906/2009 will only apply where the
market share of the consortia is less than 30%.
The Regulation will have a duration of five years
and will come into force on 26 April 2010
(immediately on the expiry of Regulation
823/2000).
Sector enquiry and continued investigations
of the Pharmaceutical Sector
On 8 July 2009 the European Commission
published a Report following its inquiry into the
pharmaceutical sector. The Commission sought
to examine in particular the reasons for the
observed delays in the entry of generics to the
market and the apparent decline in innovation.
The Report notes the importance of innovation
and intellectual property rights for the promotion
of innovation in the pharmaceutical sector while
stressing that competition by generics
manufacturers is essential to keep public costs
down and to increase access to medicines for the
benefit of consumers. In particular, generics need
to be able to reach the market without
unnecessary or unjustified delay.
The Report identifies a number of practices
which companies may use to block or delay
generic competition and/or the development of
competing originator products. These include:
“patent clusters” and “patent thickets”
(numerous patent applications filed for the same
medicine)
•
defensive litigation: the vast majority is
instigated by originators while the majority
is won by generics; the average duration is
2.8 years
•
“reverse payment settlements” of litigation:
the total value of direct payments from
originators to generics manufacturers in
return for a restriction of the generics
company’s ability to market its medicine
exceeding €200 million; such settlements
are currently under anti-trust scrutiny in the
US and other jurisdictions
•
intervention by originators in procedures by
generics manufacturers seeking marketing
authorisations; only 2% of such
interventions were upheld, but they delayed
the authorisation by an average of 4 months
The overall conclusion was that “Competition
does not work as well as it should”. On average
generic medicines entered the market more than
seven months after the originator drug’s loss of
exclusivity. Across the EU from 2000-7,
immediate entry would have saved €3 billion.
On 6 October 2009, the European Commission
announced that along with relevant national
competition authorities, it had been conducting
unannounced inspections ("dawn raids") at the
premises of pharmaceutical sector companies.
The Commission is investigating suspicions that
the companies concerned may have engaged in
illegal restrictive practices in breach of Article
81 of the EC Treaty and/or abused a dominant
market position in breach of Article 82 of the EC
Treaty. These inspections are a preliminary stage
in the Commission's investigation into the
possible infringements. Depending on the
complexity of the case and the co-operation of
the companies involved, the investigation could
take a number of years to complete.
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European Antitrust and Trade Regulation Newsletter
The Commission last conducted dawn raids on
certain pharmaceutical companies in November
2008 and as a result of those inspections, the
Commission initiated a formal investigation into
suspected breaches of Article 81 and Article 82
of the EC Treaty by Les Laboratoires Servier and
a number of generic pharmaceutical companies.
EU private competition damages directive?
Earlier this year it was reported that the European
Commission had prepared a draft directive on
private actions for damages for infringements of
EU competition law. More recently there were
indications that the draft directive, which has
never been published although some of its
provisions were leaked, would be presented to the
College of Commissioners for approval (as a
proposal) on 7 October. The draft would have
permitted bodies such as trade and consumer
associations to bring class actions for damages
before national courts on behalf of consumers
and companies who had suffered loss as a result
of, for example, a cartel. Class members would
have had the right to “opt out” of the action,
failing which they would be included in it. In
early October it was reported that, following
intervention by Commission President Jose
Manuel Barroso, the draft directive had been
withdrawn just days before its proposed
presentation to the full Commission. It is thought
that there were concerns that the proposal had
insufficient support both at Member State level –
many Member States are reluctant to cede
competence over national procedural issues – and
in the European Parliament. It is not known
whether it will be re-presented.
Commission fines consultant company for
cartel involvement
The European Commission has imposed a total of
€173 864 000 in fines on 24 companies for two
separate price fixing and market sharing cartels
involving different products in the plastic
additives sector. Of particular interest is the fine
of €174 000 imposed on the Swiss consultancy
firm Treuhand AG on the basis that it provided
premises and services for the meetings at which
the principal decisions for both cartels were
taken. Neelie Kroes, the Competition
Commissioner, reportedly said that Treuhand’s
Swiss premises were chosen for the secret
meetings as they were outside the EU and hence
beyond the Commission’s jurisdiction, which
made seizure of documents more difficult.
Treuhand has indicated that it will appeal,
although its appeal against an earlier decision
imposing a symbolic fine of €1000 on similar
grounds in the organic peroxide cartel case (T99/04) was dismissed by the Court of First
Instance last year.
Judgments of the Court of First
Instance (“CFI”) and European
Court of Justice (“ECJ”)
Case C-8/08 T-Mobile Netherlands
(judgment of 4 June 2009)
In December 2002, the Netherlands Competition
Authority imposed fines on five mobile
telephone network operators in the Netherlands
for allegedly concluding an agreement or
entering into a concerted practice at a meeting in
June 2001. That decision was challenged and the
ECJ was asked to clarify the concept of
concerted practice.
The ECJ made the following points in its ruling.
First, a concerted practice pursues an
anti-competitive object for the purpose of Article
81(1) EC where, according to its content and
objectives and having regard to its legal and
economic context, it is capable in an individual
case of resulting in the prevention, restriction or
distortion of competition within the common
market. It is not necessary for there to be actual
prevention, restriction or distortion of
competition or a direct link between the
concerted practice and consumer prices. An
exchange of information between competitors is
tainted with an anti-competitive object if the
exchange is capable of removing uncertainties
concerning the intended conduct of the
participating undertakings. Second, in examining
whether there is a causal connection between the
concerted practice and the market conduct of the
undertakings participating in the practice – a
connection which must exist if there is a
concerted practice within the meaning of Article
81(1) EC – the national court is required, subject
to proof to the contrary, to apply the presumption
of a causal connection established in the ECJ’s
case-law, according to which, where they remain
active on that market, such undertakings are
presumed to take account of the information
exchanged with their competitors. Third, in so
far as the undertaking participating in the
concerted action remains active on the market in
question, there is a presumption of a causal
connection between the concerted practice and
the conduct of the undertaking on that market,
even if the concerted action is the result of a
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European Antitrust and Trade Regulation Newsletter
meeting held by the participating undertakings on
a single occasion.
The importance of this case lies in the ECJ’s
acceptance of the possibility that a single
meeting may suffice to establish a concerted
practice within the meaning of Article 81 EC.
Case C-511/06P Archer Daniels Midland
(judgment of 9 July 2009)
In 2002 the Commission fined five producers of
citric acid for participation in an alleged cartel.
The statement of objections (“SO”) listed five
principal items of documentary evidence on
which the Commission based its factual findings.
Those items were appended to the SO with six
other documents, including a report of statements
made by a former ADM representative to DOJ
and FBI agents and statements made by two
cartel participants to the Commission. ADM was
fined €40 million which included a 35% increase
on account of the “aggravating factor” that it was
an instigator and leader. In support of that
finding, the Commission referred to certain facts
from the FBI report and from the statement of
another participant. There was no mention in the
SO of those facts. The ECJ held that the failure to
refer to the facts in the SO meant that ADM’s
rights of defence had been infringed. The
Commission had therefore been wrong to classify
ADM as the leader and was consequently not
entitled to increase the basic amount of the fine
by 35%. The ECJ accordingly reduced the fine to
€30 million.
This judgment is significant as it underlines the
need for the Commission to refer explicitly in
the SO to any fact on which it bases a finding in
the subsequent decision.
Case C-440/07P Commission v Schneider
Electric (judgment 16 July 2009)
Under the previous merger regulation, certain
mergers were to be notified to the Commission
and could not be put into effect until they had
been declared compatible with the common
market, but the Commission could derogate in the
case of a bid for a public company. In February
2001 Schneider Electric (“SE”) notified the
Commission of its proposal to acquire control of
Legrand (“L”) by a public offer and the
Commission launched an investigation. The final
outcome of the offer meant that in August 2001
SE had acquired 98.7% of L’s shares. In October
2001 the Commission issued a decision declaring
the merger incompatible with the common
market. In December 2001 SE appealed against
that decision. In January 2002 the Commission
ordered SE to divest by November 2002,
subsequently extended to February 2003. In
March 2002 SE appealed against that decision.
In preparation for possible dismissal of its
actions, SE entered into a contract in July 2002
to sell L by 10 December 2002 at a price which
was less than market value to reflect deferred
implementation. In October 2002 the CFI upheld
SE’s appeal and annulled the prohibition
decision and the divestiture order because of a
breach of SE’s rights of defence. In November
2002 the Commission reopened its investigation.
In December 2002 it became apparent that the
parties were unable to agree on acceptable
corrective measures and SE decided to sell L
under the contract. In October 2003 SE sued the
Community for €1.7 million damages. The CFI
awarded damages for expenses attributable to
SE’s participation in the reinvestigation and for
2/3 of the price reduction which SE had had to
accept on the sale, on the basis that the breach of
the rights of defence in the decision was directly
linked to the deferral to December 2002 of
completion of the sale and hence to damage from
the price reduction. On appeal, the ECJ upheld
the CFI’s finding that the breach caused the costs
of reinvestigation but held that there was no
direct causal link to the price reduction – the
direct cause of that was SE’s decision to defer
the sale until December 2002. The ECJ
accordingly set aside the judgment of the CFI in
so far as it awarded damages reflecting 2/3 of the
loss allegedly resulting from the reduced transfer
price but confirmed the award of damages for
SE’s costs on participating in the reinvestigation.
This judgment is likely to have only limited
impact in practice because (i) it is unusual to
acquire a target before clearance and (ii)
prohibition decisions are very rare.
Case C-385/07P Der Grüne Punkt
(16 July 2009)
In April 2001 the Commission issued a decision
finding an abuse of dominant position in the
packaging waste collection and recovery sector
in Germany. A challenge to the decision was
lodged before the CFI on 5 July 2001. The final
written pleadings were lodged on 27 May 2002.
In June 2006 the CFI opened the oral procedure;
the hearing was in July 2006. By judgment of 24
May 2007 the CFI dismissed the action. The
applicant appealed to the ECJ which upheld its
argument that the CFI had committed a
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European Antitrust and Trade Regulation Newsletter
procedural irregularity and adversely affected the
applicant’s interests by failing to have regard to
its fundamental right to have the case dealt with
within a reasonable time as recognised by Article
6 of the European Convention on Human Rights.
The ECJ held that the length of the proceedings
could not be justified by any of the particular
circumstances of the case. The CFI judgment was
not in fact annulled since the ECJ ruled that the
length of the proceedings had not affected the
outcome; in principle, however, the applicant has
a possible remedy in damages against the
Community.
This judgment confirms that unduly protracted
proceedings before the CFI may justify
annulment of its judgment or give rise to a
claim for damages.
Joined Cases C-322/07P, C-327/07P and
C-338/07P Papierfabrik, Bolloré and
Distribuidora Vizcaína de Papeles v
Commission (judgement of 3
September 2009)
In 2001 the Commission imposed fines on 10
undertakings for their involvement in a pricefixing and market-sharing cartel in the carbonless
paper sector. In April 2007 the CFI ruled that the
Commission had been wrong to hold Bolloré
(“B”) liable for the infringement on the ground of
its personal and direct involvement in the cartel
whilst in the SO the infringement had been
attributed to B solely in its capacity as the parent
company of its wholly-owned subsidiary.
However, the CFI did not annul the decision,
ruling that the Commission could, on the basis of
other factors in the decision on which B had had
the opportunity to comment, establish B’s
liability for the infringement of its subsidiary,
irrespective of B’s direct involvement. On appeal,
the ECJ ruled that the fact that in the decision B
was held liable on the ground that it had been
involved in its capacity as C’s parent company,
as well as on the ground of its personal
involvement, did not preclude the possibility that
the decision had been based on conduct in respect
of which B had not been able to defend itself.
The ECJ stressed that the SO must specify
unequivocally the legal person on whom fines
may be imposed, be addressed to that person and
indicate in which capacity an undertaking is
called upon to answer the allegations. The ECJ
accordingly set aside the judgment of the CFI and
annulled the decision in so far as it concerned B.
This judgment underlines the importance of
correctly identifying in the SO the addressees of
the subsequent decision and the capacity in
which they are alleged to have infringed the
competition rules.
Cases T-161/05 Hoechst v Commission
(judgment of 30 September 2009)
In 2005 the Commission imposed fines totalling
€217 million on Hoechst and a number of other
companies for their participation in a cartel on
the monochloroacetic acid market.
On Hoechst’s challenge to that decision, the CFI,
noting that under the Leniency Notice the fine
for a cartel may be reduced where an
undertaking informs the Commission that it does
not substantially contest the facts on which the
allegations are based, reduced Hoechst’s fine by
10% on the basis that it had expressly stated to
the Commission that it was not contesting the
facts. Even though Hoechst’s statement did not
provide the Commission with any new evidence,
the CFI considered that it must have facilitated
the Commission’s task.
T-174/05 Akzo v Commission and T-175/05
Elf Aquitaine v Commission (judgments of
30 September 2009)
The above-mentioned decision had also imposed
fines on companies in the Azko Nobel and the
Elf Aquitaine group, in each case attributing
joint and several liability on parent companies
for infringements committed by their 100%
subsidiaries. On separate challenges by those
companies, the CFI confirmed that, in the case of
a parent company holding 100% of the capital of
a subsidiary which has committed an
infringement, there is a rebuttable presumption
that the parent company exercises decisive
influence over the conduct of its subsidiary and
that they therefore constitute a single
undertaking within the meaning of Article 81. It
is thus for a parent company which disputes
before the Community judicature a Commission
decision fining it for the conduct of its subsidiary
to rebut that presumption by adducing evidence
to establish that its subsidiary decides
independently upon its own conduct in the
market. If the presumption is not rebutted, the
Commission will be able to hold the parent
company jointly and severally liable for payment
of the fine imposed on the subsidiary. Since the
Akzo and Elf parent companies had not adduced
sufficient evidence to rebut that presumption,
their claim that the decision erroneously
November 2009
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European Antitrust and Trade Regulation Newsletter
attributed joint and several liability to them for
the infringements committed by their subsidiaries
was dismissed.
This judgment confirms that the Commission is
entitled to presume that a company will be liable
for the anti-competitive conduct of its 100%
subsidiary in the absence of evidence that that
subsidiary acts independently of its parent
company.
Footnote: Ruiz Jarabo Colomer, Spanish
Advocate General at the European Court of
Justice in Luxembourg, died suddenly on 11
November. AG Ruiz Jarabo’s written Opinions to
the Court were renowned not only for their legal
learning but also for their arcane literary
allusions. By way of a small tribute there follows
a brief selection of some of his more colourful
contributions in competition and telecommunications cases. All footnotes within the
quotation marks are from the original (although
the less interesting ones have been omitted, as
have paragraph numbers).
“If anyone had ever suggested to me that Samuel
Beckett might have found inspiration for his
famous play Waiting for Godot in proceedings
for the recovery of State aid, I probably would
not have believed it. However, as I conclude this
Opinion, the tenacious patience of the
Commission as it awaits the repayment of the aid
reminds me of that great work of the theatre of
the absurd. … First, attention must be drawn to
the ambiguous position of Member States which
grant State aid without reservations, probably
with laudable reasons but in contravention of
Community law. When those States are
subsequently asked to provide the necessary
cooperation to recover illegally granted aid, the
most extraordinary arguments are put forward as
a defence in the proceedings for failure to fulfil
obligations which the Commission is required to
bring because other action has repeatedly failed
to yield satisfactory results. That is, of course, in
the event that the Commission receives a reply at
all and is not, as in the present case, faced with a
situation similar to that of the colonel to whom
no one wrote.1” (Case C-232/05 Commission v
France)
“The economic value of the delivery service
provided by the various postal administrations,
their cost structures and the charges invoiced to
customers were subject to considerable
variation.2” (Case C-449/98 P International
Express Carriers Conferences (IECC) v
Commission of the European Communities and
C-450/98 P International Express Carriers
Conference (IECC) v Commission of the
European Communities)
“It may seem paradoxical but, even though the
patent for the telephone was granted to
Alexander Graham Bell in 1876 following a
lengthy legal dispute, the United States
Congress recently reinstated the memory and the
achievements of the Italian Antonio Meucci,
acknowledging that before that date, in 1860, he
publicly demonstrated the operation of the
invention in New York. Therefore, with the
passage of time each individual has been placed
in his rightful position.3” (Joined Cases
C-152/07, C-153/07 and C-154/07 Arcor AG &
Co. KG, Communication Services TELE2 GmbH,
and Firma 01051 Telekom GmbH v
Bundesrepublik Deutschland)
1
In his novella No One Writes to the Colonel, translated by J.S. Bernstein, Penguin, London, 1974, Gabriel García Márquez
tells the tale of another absurd, tragic wait, namely that of a colonel who, for many years, has gone down to the river each
week to meet the boat which brings the mail and, perhaps, the longed-for letter from the capital confirming that he has been
granted a pension for his participation in one of the revolutions which shook the country where the action is set. Since he
does not hold any office or carry on any trade and is relying on the pension to enable him to live more comfortably, the
colonel falls deeper and deeper into poverty. At the end, when his wife puts stones in the food she cooks so that the
neighbours do not think they have not got enough to eat, the letter bearing the good news has still not arrived.
2
Of interest are the tariffs referred to by Alejo Carpentier in El Siglo de la Luces, a magnificent tale of the French Revolution
in the Antilles, where he writes that 'Those fields of destruction were assailed by a predatory flock of vile colonial
functionaries ... who, in exchange for the despatch of a letter ... took a wedding ring, a locket, a family medallion - some
th
treasured possession intended to be kept safe to the last as a reason for living‘ (published by Seix Barral, 4 Ed., Barcelona
1990, p. 234).
3
After hearing the replies of the prophesying ape, Don Quixote, addressing Sancho, predicts: ‘Events will show … for time,
which reveals all things, leaves nothing that it does not drag into the light of day, even things hidden in the bosom of the
earth.’ Cervantes Saavedra, M. de, Don Quixote, translated by J.M. Cohen, Penguin Books, Harmondsworth, 1986, Part II,
Chapter XXV, p. 637
November 2009
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November 2009
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