European Antitrust and
Trade Regulation Newsletter
July 2009
Authors:
Volume 1 – Issue 2
Vanessa Edwards
EU Law Developments
vanessa.edwards@klgates.com
+44.(0)20.7360.8293
Neil Baylis
neil.baylis@klgates.com
+44.(0)20.7360.8140
Mathias Schulze Steinen
mathias.schulze-steinen@klgates.com
+49.(0)69.945.196.2960
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.
Report on EU Competition Law
The entry into force on 1 May 2004 of Regulation 1/2003 radically changed the
landscape of anti-trust regulation in the European Union. It abolished the
requirement for business to notify agreements to the European Commission for
advance approval, empowered national courts and competition authorities to apply
EU antitrust rules and strengthened the Commission’s enforcement arsenal. At the
end of April 2009 the Commission, as required by the Regulation and after
consultation with many sectors, published a Report on the functioning of
Regulation 1/2003.
The Report concludes that the Regulation has significantly improved the
Commission’s enforcement of Articles 81 and 82 EC. In particular, resources have
been freed by the abolition of the notification procedure, enabling the Commission
to focus on areas where it can make a significant contribution to enforcement. The
Commission has launched large scale inquiries in key sectors of the EU economy
which directly impact consumers and the number of enforcement decisions has
risen in comparison with earlier periods. It has also made use of its increased
powers in investigations: for example the power to seal business premises, books
and records has been regularly employed, and the new sanction for breach of a seal
was invoked for the first time in 2008 when the Commission fined E.ON €38
million.
The Report highlights a number of areas where further improvements may be
envisaged. Of particular interest is the discussion of the disclosure of information
from the Commission file in the context of private litigation in non-EU countries,
in particular the US , and with regard to the exchange of information with third
country public authorities. The Report notes that disclosure of such information
may seriously undermine the effectiveness of public antitrust enforcement in the
EU and concludes that the legal framework could be clarified and reinforced to
improve protection against disclosure.
For further information contact Vanessa C. Edwards
State Aid – Improved Procedures
The European Commission has adopted a Simplification Package for State aid.
The Package comprises two Notices which seek to improve the procedure for
approving State aid.
The Notice on a simplified procedure for treatment of certain types of State aid
aims to improve the Commission’s treatment of straightforward cases. The
intention is that aid which is clearly compatible under existing guidelines, but
which none the less requires notification, will be approved within one month where
Member States (which channel requests to clear State aid) provide a
complete notification.
European Antitrust and Trade Regulation Newsletter
The simplified procedure will apply to certain aid
for small and medium-sized enterprises,
environmental aid, innovation aid and rescue and
restructuring aid. It will not however apply to aid
measures notified by Member States in the
context of the current economic crisis, for which
the Commission operates in accordance with
specific ad hoc internal measures designed to
enable it to treat such measures with
extreme urgency.
The simplified procedure also provides for
greater transparency: a summary of notified
measures will be published on the Commission’s
website before the final decision is adopted to
allow interested parties to submit comments.
For cases not subject to the simplified procedure,
the Best Practices Code on the conduct of State
aid control proceedings details how State aid
procedures should be carried out in practice. The
focus is on an enhanced pre-notification phase
facilitating increased dialogue between the
Commission and the Member State concerned. It
is envisaged that pre-notification contacts should
not normally last longer than two months and that
the Commission will normally provide an
informal, non-binding preliminary assessment at
the end of the pre-notification phase. In cases
which are particularly novel, technically complex
or otherwise sensitive, or extremely urgent, the
Commission will offer Mutually Agreed Planning
to the notifying Member State .This is a form of
structured cooperation intended to cover
agreement on priority treatment if appropriate,
the information to be provided by the Member
State and/or the potential beneficiary of the aid,
and the likely time frame from notification to
decision.
The Best Practices Code also includes provisions
intended to streamline the conduct of formal
investigations after notification, such as a time
frame for publication of the Commission’s
decision to open the procedure (two months from
adoption), and proposals to improve the efficient
and transparent handling of complaints, including
a commitment by the Commission to use its best
endeavours to investigate a complaint within an
indicative time frame of 12 months from receipt.
For more information contact Vanessa C.
Edwards
Cartels – Liability of Parent Company for
Conduct of Subsidiary
In 2004 the Commission found that four
wholly-owned subsidiaries of Akzo Nobel NV
had infringed Article 81(1) EC by participating
in a cartel in the choline chloride industry.
Although the parent company, Akzo Nobel NV
(“Akzo”), had not itself participated in the cartel,
it was fined together with its subsidiaries. The
Commission decision was upheld by the Court of
First Instance (“CFI”). Akzo appealed to the
European Court of Justice (“ECJ”). In most
cases before the ECJ, an Advocate General
delivers a written Opinion to the judges before
they start their deliberation. AG Kokott
delivered her Opinion in Case C-97/08P Akzo
Nobel v Commission Akzo on 23 April 2009.
The ECJ's judgment is expected some time
towards the end of the year. The ECJ usually,
but not always, follows the Opinion of the
Advocate General.
The first issue before the ECJ was whether the
CFI erred in law in presuming exertion of
decisive influence over a subsidiary where a
parent company owns 100% of the shares. AG
Kokott considers that, on the basis of the caselaw of the ECJ, there is a rebuttable presumption
that a parent company exerts decisive influence
over a 100% subsidiary.
AG Kokott rejects Akzo’s argument in the
alternative that the ECJ should refine its case-law
and raise the standard of proof so as to require, in
addition to a 100% holding, evidence that the
subsidiary was actually influenced by its parent
company. She states that the effective
enforcement of competition law requires clear
rules. A presumption that a parent company is
responsible for the cartel offences of its wholly
owned subsidiaries creates legal certainty and is
straightforward to implement. It does not lead to
a reversal of the burden of proof that would be
incompatible with the presumption of innocence,
since only the standard of proof is being laid
down. The interests of the parent company are
not impaired since it may rebut the presumption.
The second issue arose out of the CFI’s
statement that it is for the parent to adduce “any
evidence relating to the economic and legal
organisational links between its subsidiary and
July 2009
2
European Antitrust and Trade Regulation Newsletter
itself which in its view are apt to demonstrate that
they do not constitute a single economic entity”.
Akzo argued that the only relevant criterion is the
exertion of influence on commercial policy in the
narrower sense, that is, on the determination of
the subsidiary’s market conduct. AG Kokott
rejects this argument also, stating that in general
terms, attribution of conduct as between parent
and subsidiary is always possible where both
form one economic entity, that is, where they are
to be regarded as a single undertaking.
Ultimately the decisive factor is whether the
parent company, by reason of the intensity of its
influence, can direct the conduct of its subsidiary
to such an extent that the two must be regarded as
one economic unit. Since what matters, therefore,
is the general relationship of parent and
subsidiary, the CFI rightly emphasised the
importance of the ‘economic and legal
organisational links’ between them rather than
confining itself solely to commercial policy in the
narrower sense.
For more information contact Vanessa C.
Edwards
Abuse of Dominance - Record Fine for Intel
After an investigation lasting nearly nine years,
the European Commission has imposed its
highest ever fine for an infringement of Article
82 of the EC Treaty. On May 13, Intel was fined
€1.06 billion (c. $1.45 billion), a sum far
exceeding the previous highest fine of €456
which had been imposed on Microsoft in 2004.
Article 82 prohibits the abuse of a dominant
position where such abuse may affect trade
between Member States. Its US equivalent is
found in section 2 of the Sherman Act.
The Commission found three principal means by
which Intel had abused its dominance:
•
the provision of "wholly or partially
hidden" rebates on condition that Intel's
customers bought all or almost all their
Central Processing Units ("CPUs") from
Intel;
•
making payments to a large retailer on
condition that it self exclusively Intelpowered personal computers;
•
making payments to computer
manufacturers in return for them
delaying or cancelling products
incorporating competitors' CPUs.
The original complaint was brought by Intel's
competitor, AMD, who argued that they had
been foreclosed entry to the market by Intel's
actions. Intel meanwhile, argues that its actions
had no detrimental effect on consumers.
Intel has already faced enforcement actions in
Korea and Japan and litigation and agency
investigations continue in the US.
The Commission's Decision was based in part on
evidence gathered from two dawn raids including emails, responses to its requests for
information and statements made by other
companies. Although the abuse rested in part on
the allegations of exclusive dealing
arrangements, Intel denied that it ever entered
into exclusive supply arrangement or refused to
deal with customers who purchased CPUs from
AMD. Nonetheless, the Commission found
sufficient evidence to support its finding of
exclusionary practices.
The Decision, which will be appealed by Intel,
marks a notably robust stance taken by the
Commission in relation to Article 82 cases,
which was strengthened by the European Court's
recent upholding of the infringement decision
against Microsoft referred to above. Companies
enjoying a dominant position in the EU need to
exercise considerable caution in relation to any
behaviour that might be found to exclude smaller
rivals from gaining access to the market.
For more information contact Neil A Baylis
UK News
OFT Guidance on Mergers and Market
Investigations
The Office of Fair Trading ("OFT") is the UK's
first instance competition authority. It
investigates mergers qualifying for investigation
and where there are prima facie concerns as to a
substantial lessening of competition, it refers the
matter to the Competition Commission ("CC")
for a full "second phase" inquiry.
In order to aid business and transparency the
OFT and CC have now issued joint merger
guidelines which set out how they will assess
mergers qualifying for investigation in the UK.
July 2009
3
European Antitrust and Trade Regulation Newsletter
Currently separate guidelines exist from the OFT
and the CC which while similar, are not
always consistent. The new guidelines feature
sections on the operation of the UK merger
regime, the questions the OFT and CC must
consider when assessing merger, how they define
a "relevant merger situation", the criteria and
methodology used by the authorities when
assessing mergers, guidance on public interest
cases and information on related matters such as
interim measures and remedies. The draft
guidelines have been developed in consultation
with Government, the European Commission and
other relevant external parties.
The OFT has also issued draft guidance on how it
conducts market studies. Market studies are
conducted under the Enterprise Act into markets
which may not be working well for consumers.
They consider if there are problems that are
causing detriment to consumers and if there are,
how those problems might be addressed.
The existing (2004) guidelines are being updated
with sections on:
•
how the OFT decides which cases to
investigate - the prioritisation principle;
•
how the OFT seeks transparency in its
dealings with those affected by market
studies
•
how the OFT evaluates market studies.
Recent OFT market studies have looked at
homebuilding, airports, payment protection
insurance, sales and rentback, and personal
current accounts.
The consultation period on both the above
guidelines runs to early August, following which
the guidelines will be published in
their final form.
For more information contact Neil A. Baylis
German News
Restrictions on Foreign Investments - The
New Foreign Trade Act
On 24 April 2009, much-anticipated restrictions
on foreign investments in German enterprises,
introduced by the thirteenth amendment to the
Foreign Trade Act (Außenwirtschaftsgesetz)
("FTA"), came into effect.
The amendments to the FTA effectively enable
the Federal Ministry of Economics and
Technology (the "Ministry") to review certain
direct or indirect investments in businesses based
in Germany within a three months period from
the signing date and to impose restrictions or
even prohibit such investments if they threaten
the public order or security. An investment is
subject to such review if
•
the investor is from outside the EU or the
European Free Trade Association ("EFTA")
or 25 % or more of the voting rights in the
investor are owned by a shareholder from
outside the EU or EFTA; and
•
following the transaction, the investor
directly or indirectly holds 25% or more of a
German company's voting rights.
The legislation is not limited to specific sectors
or enterprises of a certain size.
Should the Ministry prohibit or restrict a
transaction, the underlying sale and purchase
agreement will be deemed to be invalid under
German civil law. Any decision of the Ministry
to restrict or prohibit a transaction may be
challenged before German courts.
Due to restrictive precedents of the European
Court of Justice on restrictions of the free
movement of capital within the EU, a restriction
or prohibition by the Ministry will only be
possible in rare and exceptional cases, i.e. where
critical and unique infrastructure assets are to be
sold to an investor in a country outside the
EU or EFTA.
Although the implications of the amendments for
potential investors are supposed to be rather
limited, they will have an effect on the
structuring of acquisitions in Germany.
For more information contact Mathias Schulze
Steinen. Frankfurt associate, Daniela Bohn,
contributed to this article.
German Stimulus Package II
Following the Financial Market Stabilisation Act
(Finanzmarktstabilisierungsgesetz), enacted in
October 2008, the German Parliament adopted
the "Pact for employment and stability in
Germany" (Gesetz zur Sicherung der
Beschäftigung und Stabilität in Deutschland) on
2 March 2009.
This second stimulus program has been designed
to stabilise the German economy and targets five
core areas: the easing of the credit market, public
July 2009
4
European Antitrust and Trade Regulation Newsletter
investment, employment and skills, tax reduction
and sustainable fiscal policy.
The main objective of the new program is the
extension of the credit and guarantee program
offered by German KfW bank by guaranteeing up
to 80% of the loan value to businesses which find
it difficult to obtain bridging loans from private
banks. A total of EUR 100 billion has
been earmarked for such guarantees. So far, large
companies have applied for guarantees in the
amount of 6 bio. EUR plus requests of smaller
companies. Just recently, KfW approved a credit
of 300 mio. EUR and a guarantee of 500 mio.
EUR to German Heidelberger Druckmaschinen
(manufacturer of printing presses), whereas,
requests from Aksys GmbH (automotive
supplier), Arcandor AG (holding of Thomas
Cook, Primondo and Karstadt) and Porsche AG
have been declined.
The new program also extends conditions for
participation in the "KfW Special Program 2009"
to large companies. The program was introduced
with the first stimulus package already last year
to assist small- and medium-sized companies
with the financing of both innovation projects as
well as machines and equipment.
Another approach of the program is a
simplification of the public procurement process
for building work and services planned for a
limited period of time in connection with further
monies granted for public investments.
Rehabilition of public schools and other projects
with a contract volume of less than EUR
1,000,000 shall have priority in order to support
national and regional building companies. The
program also specifically targets investments in
the expansion of broadband communications
networks.
To safeguard jobs and avoid discharge of
workforce, the new program facilitates the
possibility of so-called „short-time“ work
(Kurzarbeit). The German Government has just
recently prolonged the short-time compensation
for such work to a period of up to 24 months.
Other measures in the new program focus on
encouraging car sales, providing relief to private
households and increasing consumer demand
intending to boost the German economy.
For more information contact Mathias Schulze
Steinen. Frankfurt associate, Daniela Bohn,
contributed to this article.
Anchorage Austin Beijing Berlin Boston Charlotte Chicago Dallas Dubai Fort Worth Frankfurt Harrisburg Hong Kong London
Los Angeles Miami Newark New York Orange County Palo Alto Paris Pittsburgh Portland Raleigh Research Triangle Park
San Diego San Francisco Seattle Shanghai Singapore Spokane/Coeur d’Alene Taipei Washington, D.C.
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.
K&L Gates comprises multiple affiliated partnerships: a limited liability partnership with the full name K&L Gates LLP qualified in Delaware and
maintaining offices throughout the U.S., in Berlin and Frankfurt, Germany, in Beijing (K&L Gates LLP Beijing Representative Office), in Dubai,
U.A.E., in Shanghai (K&L Gates LLP Shanghai Representative Office), and in Singapore (K&L Gates LLP Singapore Representative Office); a
limited liability partnership (also named K&L Gates LLP) incorporated in England and maintaining offices in London and Paris; a Taiwan
general partnership (K&L Gates) maintaining an office in Taipei; and a Hong Kong general partnership (K&L Gates, Solicitors) maintaining an
office in Hong Kong. K&L Gates maintains appropriate registrations in the jurisdictions in which its offices are located. A list of the partners in
each entity is available for inspection at any K&L Gates office.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied
upon in regard to any particular facts or circumstances without first consulting a lawyer.
©2009 K&L Gates LLP. All Rights Reserved.
July 2009
5