European Antitrust and
Trade Regulation Newsletter
April 2010
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 includes lawyers practicing out
of 36 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.
In this Issue:
•
All Change at the Commission
•
Proposed New Vertical Agreements Block Exemption
•
Proposed New Motor Vehicle Block Exemption
•
New Insurance Block Exemption
•
New Guidance from the European Commission Relevant to Antitrust
Proceedings
All Change at the Commission
On 9 February 2010 the new European Commission was approved by the European
Parliament. The new Commission will remain in place October 2014, after the
next election in June 2014.
Mr. Joaquin Almunia has been elected as the new Commissioner for Competition,
replacing Neelie Kroes whose robust approach saw many high profile cases in the
period from 2005 to 2009.
On 15 February, Mr Almunia, a Spaniard with a background in law and economics,
set out his intended approach for the EU competition directorate. He made it clear
that the Commission intends to maintain its vigorous enforcement of EU
competition law in pursuing cartels, abuses of dominance and merger control.
Given the financial crisis facing Europe, the Commission intends to be "fair but
firm" in assessing the fines to be imposed on firms that have infringed the rules.
The Commission will also continue its review of possible legislation to facilitate
private actions for damages for breach of competition laws. While such actions are
permitted under EU national laws, the consensus is that EU legislation is required
to increase the availability of civil litigation as a remedy for those affected by anticompetitive behaviour.
The other key appointment is that of Alexander Italianer, a Dutchman, who is the
new Director General of the Competition Directorate. Details of the current staff
within DG Competition are available on the Commission's website at
http://ec.europa.eu/dgs/competition/index_en.htm.
Proposed New Vertical Agreements Block Exemption
Vertical agreements, e.g. distribution and supply agreements for goods or services,
currently benefit from an exemption from the prohibition on anti-competitive
agreements in Article 101 of the Treaty on the Functioning of the European Union
("TFEU"). The exemption is set out in Block Exemption Regulation N° 2790/1999
which expires at the end of May 2010. The Regulation specifies a framework
whereby agreements involving a supplier with less than 30% of the relevant
market, which do not contain certain prohibited terms such as price fixing or
absolute export bans, will benefit from an exemption from Article 101.
European Antitrust and Trade Regulation Newsletter
The Commission has spent the last two years
assessing the relevance and application of the
Regulation, based on experience and feedback
from companies, advisers and other affected
parties and has found that the current rules have
worked well in practice.
well as the supply of spare parts and information.
The Commission's general strategy is to seek to
remove sector specific block exemptions as
markets become more competitive. This is
reflected in the proposed new Motor Vehicle
Block Exemption.
At the time of its adoption in 1999, the
Regulation aimed at considerably reducing the
regulatory burden on companies, in particular for
companies with no market power which, as noted
above, was deemed for the purposes of the
Regulation to be a market share of less than
30%.
Under the draft revised Motor Vehicle Block
Exemption, the Commission proposes to prolong
the application of the existing Block Exemption
until 31 May 2013 to contracts for the purchase,
sale or resale of new motor vehicles. From 1
June 2013, the new Vertical Agreements Block
Exemption will apply to those agreements.
Two major developments have marked the tenyear period following the entry into force of the
Regulation: a further increase in large
distributors' market power and sales on the
Internet.
Vertical agreements relating to the purchase, sale
or resale of spare parts for motor vehicles or
repair and maintenance services for motor
vehicles (the aftermarket) will be subject
immediately to the new Vertical Agreements
Block Exemption (including its list of hardcore
restrictions). In order to benefit from an
exemption, such agreements must also not
contain any of the hardcore clauses listed in the
draft revised Motor Vehicles Block Exemption.
To take account of these developments, the
Commission proposes that for a vertical
agreement to benefit from the Block Exemption,
not only the supplier's market share (as is
currently the case) but also the buyer's market
share should not exceed 30%. This will be likely
to take a number of agreements outside the Block
Exemption and will require those agreement to be
carefully assessed for compliance with Article
101.
The new Block Exemption will also clarify that
every distributor must be free to use the Internet
to advertise or to sell products. A restriction on
the use of the Internet will only be compatible
with the Block Exemption to the extent that
promotion on the Internet or sales over the
Internet would lead to active selling into other
distributors' exclusive territories or customer
groups. In general, however, the use of the
Internet is not considered to be a form of active
selling into such territories or customer groups. If
a customer outside the allotted territory visits the
web site of a distributor and contacts the
distributor and if such contact leads to a sale,
including delivery, then that is considered passive
selling.
Proposed New Motor Vehicle Block
Exemption
At the same time as reviewing the Vertical
Agreements Block Exemption, the Commission
is also consulting on a new Motor Vehicle Block
Exemption which deals specifically with the
purchase, sale or resale of new motor vehicles as
These are:
•
a restriction on the sale of spare parts for
motor vehicles by members of a selective
distribution system to independent repairers
which use these parts for the repair and
maintenance of a motor vehicle;
•
a restriction, agreed between a supplier of
spare parts, repair tools or diagnostic or
other equipment and a manufacturer of
motor vehicles, of the supplier's ability to
sell these goods or services to authorised or
independent distributors or to authorised or
independent repairers or end users;
•
a restriction, agreed between a manufacturer
of motor vehicles which uses components
for the initial assembly of motor vehicles
and the supplier of such components, of the
latter's ability to place its trade mark or logo
effectively and in an easily visible manner
on the components supplied or on spare
parts.
The Commission will monitor the operation of
the new regulation, drawing up a report on its
operation by 31 May 2018. The new Motor
Vehicle Block Exemption will expire on 31 May
2020.
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European Antitrust and Trade Regulation Newsletter
New Insurance Block Exemption
On 1 April 2010 the new EU Block Exemption
for the insurance sector comes into force. As part
of the general trend away from widely drafted
exemptions for particular sectors, the new Block
Exemption is now limited to exempting the
following arrangements from the prohibition in
Article 101 TFEU:
•
the joint compilation and distribution of
information necessary for the:
o
calculation of the average cost of
covering a specified risk in the past;
o
construction of mortality, illness,
accident and invalidity tables.
The exemption is subject to a number of provisos
including that the tables or studies do not identify
specific insurance companies or the level of any
premiums.
•
the setting up and operation of pools of
insurance or re-insurance for the common
coverage of a specific category or risks in the
form of co-insurance or co-reinsurance.
Such pools are only exempted:
o
where the pool is to last for three years
or less;
o
where the market share of the
participants is less than 20% of the
relevant market for co-insurance pools
and 25% for co reinsurance pools;
o
where the agreement does not limit
output or sales, allocate markets or
customers or allow for premiums to be
agreed.
The new Block Exemption will expire on 31
March 2017.
New Guidance from the European
Commission Relevant to Antitrust
Proceedings
The European Commission’s Directorate-General
for Competition had a busy time in the last few
weeks of former Commissioner Neelie Kroes’s
tenure. Among other things, DG Comp
published an external Study on the quantification
of harm suffered by victims of competition law
infringement together with three explanatory
documents concerning how EU antitrust
procedures work in practice.
The Study on the quantification of harm is the
result of a study commissioned from a group of
economic consultants and lawyers as part of DG
Comp’s recent initiatives on damages actions for
breach of EU antitrust rules, which have
included a 2008 White Paper and the ill-fated
draft Directive which was withdrawn in October
2009 [link to previous edition of newsletter]. It
now seems from a recent speech by John Dalli,
the new EU consumer commissioner, that the
Commission plans to carry out a fresh
consultation on the proposals later this year, so
legislation is unlikely to be adopted for some
time to come.
The Study notes that one of the widely
recognised obstacles to such damages actions is
the quantification of damages and seeks to assist
the Commission in developing non-binding
guidance for the benefit of national courts and
for the parties. The study considers the
conceptual framework for damages estimation
(determining the counterfactual scenario for
hardcore cartel agreements and exclusionary
conduct and moving from the counterfactual
stage to a final damages value), methods and
models for quantifying damages (comparator
based approaches, financial-analysis-based
approaches, market-structure-based approaches)
and further insights from economics and finance
into the existence and possible magnitude of
cartel overcharges and pass-on of overcharges.
The conclusion, “Arriving at a final damages
value”, notes that a range of methods and models
can in principle be used for estimating the
various types of damage that might result from
antitrust infringements, with the choice of
approach (or approaches) depending on the
details of each case. The primary focus in any
given case would normally be on whether
specific methods or models have been applied
reasonably and robustly to the case at hand, so
that the court can identify a preferred model or
“pool” a selection of model results to arrive at a
final damages value.
The Study was finalised in December 2009 and
followed in January 2010 by a workshop of
external economic experts to discuss a range of
issues concerning the quantification of harm in
damages actions for antitrust infringements, also
organised by DG Comp. (See also the first
article of this newsletter).
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European Antitrust and Trade Regulation Newsletter
On 6 January 2010 the European Commission
published three documents entitled Best Practices
on the conduct of proceedings concerning
Articles 101 and 102 TFEU [formerly Articles 81
and 82 of the EC Treaty],
Best Practices for the submission of economic
evidence and data collection in cases concerning
the application of Articles 101 and 102 TFEU
and in merger cases and Guidance on procedures
of the Hearing Officers in proceedings relating to
Articles 101 and 102 TFEU. The documents are
intended to make it easier for companies under
investigation to understand how the investigation
will proceed, what they can expect from the
Commission and what the Commission will
expect from them. The documents may be
amended in the light of comments received from
stakeholders, but will apply in their published
form to procedures ongoing at the time of
publication.
Best Practices on the conduct of antitrust
proceedings
This paper covers the procedure followed during
the investigative phase, whether it leads to a
prohibition decision, a commitment decision or a
rejection of complaint; the main procedural steps
and rights of defence in the context of procedures
leading to prohibition decisions; the specificities
of the commitment procedure; rejection of
complaints; the limits to use of information; and
the adoption, notification and publication of
decisions.
The aim of the document is to further improve
procedures by enhancing transparency while at
the same time ensuring the efficiency of the
Commission's investigations. Important areas
where the Commission will be amending its
procedures include:
•
earlier opening of formal proceedings, as
soon as the initial assessment phase has been
concluded; offering state of play meetings to
the parties at key points of the proceedings;
•
disclosing key submissions, including giving
early access to the complaint, so that parties
can express their views in the investigative
phase;
•
publicly announcing the opening and closure
of procedures, as well as when Statement
Objections have been sent;
•
providing guidance on how the new
instrument of commitment procedures is used
in practice.
The Best Practices do not apply to the settlement
and leniency procedures which may be used in
cartel cases, and certain provisions in the Best
Practices guidance (such as that concerning the
state of play meetings) do not generally apply to
cartel investigations.
Best Practices on submission of economic
evidence in antitrust cases
This document formulates best practices
concerning the generation and presentation of
relevant economic and empirical evidence that
may be taken into account in the assessment of a
competition case. It also explains the practice of
the competition department's case teams and the
Chief Economist when interacting with parties
which submit economic evidence.
The paper is in two main sections.
The first section provides recommendations
regarding the content and presentation of
economic or econometric analysis in order to
facilitate its assessment and the replication of
any empirical results by DG Comp and/or the
other parties. It covers formulating the relevant
question; data relevance and reliability; choice of
empirical methodology; reporting and
interpreting the results; and robustness.
The second section provides guidance to respond
to Commission requests for quantitative data to
ensure that timely and relevant input for the
investigation can be provided. It covers general
motivation for, and common elements of, data
requests and the main criteria to consider when
responding to a data request.
The paper concludes with a helpful Annex
showing the structure and basic elements of a
sound empirical submission.
Guidance on procedures of the Hearing
Officers in antitrust proceedings
The Commission created the post of Hearing
Officer in 1982 to ensure that the effective
exercise of the right to be heard is respected in
competition proceedings before the
Commission. Hearing Officers, of whom there
are currently two, are independent of DG Comp
(although they are attached to the Competition
Commissioner for administrative convenience
and may be Commission officials). The aim of
the Guidance is to make their role more
transparent.
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European Antitrust and Trade Regulation Newsletter
The Paper sets out the various tasks of the
Hearing Officers as established in their mandates
and outlines how these tasks are usually carried
out in the different phases of an antitrust case,
including the investigative phase; access to the
file; disclosure of confidential information;
deadlines to reply to the Statement of Objections;
admission of third parties to the procedure; the
oral hearing; rejection of complaint; and
commitment decisions. The Paper thus provides
companies subject to investigations,
complainants and other third parties with a
manual of when they can turn to the Hearing
Officers to ensure due process is ensured.
Finally, the Paper explains the reporting
obligations and the advisory role of Hearing
Officers towards the Competition Commissioner,
the College of Commissioners and the
addressees of Commission decisions.
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April 2010
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