European Antitrust and
Trade Regulation Newsletter
April 8, 2009
Volume 1 – Issue 1
EU LAW DEVELOPMENTS
Authors:
Vanessa C. Edwards
vanessa.edwards@klgates.com
+44.(0)20.7360.8293
Neil A. Baylis
neil.baylis@klgates.com
+44.(0)20.7360.8140
In this Issue:
State Aid
Vanessa C. Edwards
The global financial crisis provides fertile ground for calls for government bailouts
and other assistance to beleaguered sectors and, in some cases, individual companies.
The EU State aid rules, however, start from the premise that such intervention
distorts competition and should not be tolerated. In recent months the European
Commission, charged with monitoring State aid by EU Member States, has issued a
series of guidance documents designed to clarify the application of the State aid rules
in the current economic climate:
•
three Communications (October and December 2008, February 2009) concern
application of the rules to financial institutions. The first lays down conditions to
ensure that measures are well targeted and proportionate to the objective of
stabilising financial markets and contain certain safeguards against unnecessary
negative effects on competition. The second lays down criteria for distinguishing
between banks that are fundamentally sound and receive temporary support and
distressed banks whose business model has brought about a risk of insolvency,
and the third provides guidance on the treatment of national measures dealing
with impaired assets (categories of assets on which banks are likely to incur
losses, such as US subprime mortgage-backed securities);
•
in December 2008 the Commission also adopted a temporary framework
providing Member States with additional possibilities to tackle the effects of the
credit squeeze on the real economy, in particular by ensuring sufficient bank
lending to companies, allowing companies with liquidity problems to benefit
from temporary relief and encouraging companies to continue investing into a
sustainable future, including through the development of green products.
Measures are limited until the end of 2010.
EU Law Developments
REACH
National Developments
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To date, the Commission has approved over 40 measures granting aid to the financial
sector in 18 Member State in accordance with the first two Communications and 24
schemes in 11 Member States under the temporary framework.
For further advice on this issue please contact vanessa.edwards@klgates.com
European Antitrust and Trade Regulation Newsletter
Public Procurement
Vanessa C. Edwards
Directive 2004/18/EC, laying down rules for the
award of public sector contracts, allows recourse to
an accelerated procedure for the so-called restricted
procedure where justified on the grounds of urgency.
This procedure significantly reduces the overall time
limit of the procedure from 87 days to 30 days. In
December 2008 the Commission issued a press
release recognising that the exceptional nature of the
current economic situation can justify the use of the
accelerated procedure. This presumption of urgency
is to apply throughout 2009 and 2010 for all major
public projects.
For further advice on this issue please contact
vanessa.edwards@klgates.com
REACH
Introduction
Vanessa C. Edwards
The initial pre-registration phase under the EU
Regulation on the Registration, Evaluation and
Authorisation of Chemicals (“REACH”) closed on 1
December 2008. Since that date it has been
unlawful to manufacture in, or import into, the
European Economic Area (i.e., the 27 Member
States of the EU plus Iceland, Liechtenstein and
Norway) chemical substances, whether on their own
or in preparations such as paints, cosmetics and
lubricants, which have not been either pre-registered
or registered. Registration involves the submission
and evaluation of a comprehensive dossier. REACH
is based on the premise that all
manufacturers/importers who pre-registered the
same substance will exchange data and submit a
joint registration dossier. To that end, registrants are
required to join the relevant Substance Information
Exchange Forum for a given substance. The
obligation to exchange data clearly raises
confidentiality issues where data are regarded as
sensitive. See here:
http://www.klgates.com/newsstand/Detail.aspx?publ
ication=5409
REACH also imposes obligations on
manufacturers/importers of articles containing
Substances of Very High Concern that have been
identified on the so-called Candidate List. The first
version of that list was published on 28 October
2008, triggering the application of Article 33.
Article 33(1) requires any supplier of an article
containing a substance on the Candidate List in a
concentration above 0.1% weight by weight to
provide the recipient with sufficient information,
available to the supplier, to allow safe use of the
article including, as a minimum, the name of the
substance, whereas Article 33(2) requires any
supplier of such an article, on request by a
consumer, to provide the consumer with the same
information, free of charge and within 45 days of
the request.
On 14 January 2009, the European Chemicals
Agency proposed to prioritise seven of the 15
SVHCs on the Candidate List for inclusion in the
forthcoming list of substances subject to
authorisation. Ultimately it will not be lawful to use
a substance on that list (other than for a specifically
exempted use) without authorisation. The Agency
has this month (April) closed a consultation on all
aspects of this proposal (namely whether all seven
prioritised substances should be included in the list,
which uses of included substances will be exempt,
and the date after which unauthorised use will be
lawful); the first list of priority substances
recommended for authorisation must be published
by 1 June 2009.
For further advice on this issue please contact
vanessa.edwards@klgates.com
Cartels
Neil A. Baylis
With the possible exception in recent weeks of State
aid policy, the most important area of competition
law enforcement for the European Commission
remains the identification and punishment of cartel
activity affecting EU markets. Price-fixing and
market-sharing activities between competitors are
regarded as being highly detrimental to consumers.
Accordingly, these activities tend to result in highprofile investigations and extremely high fines. The
current economic crisis may encourage increased
levels of collusion between firms as a means of
enhancing profits and reducing commercial risk.
Such collusion will be a high-risk strategy for the
companies involved.
April 8, 2009
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European Antitrust and Trade Regulation Newsletter
Developments so far in 2009 include:
•
an investigation launched into manufacturers of
refrigerator compressors;
•
a formal statement of objections issued to
manufacturers of pre-stressed steel;
•
an investigation launched into high-voltage
power cable manufacturers;
•
a €131 million fine levied on the marine hose
cartel participants; and
•
an investigation into the smart card chip sector.
The importance of cartels rests not only in the
potential for huge fines for the participants (the
highest ever fines were levied in November 2008:
€1.3bn for participants in a car glass market sharing
cartel), but also the possibility for affected
customers and suppliers to bring actions for damages
against the cartel members once the existence of the
cartel has been proved by the Commission's own
investigations. Such follow-on actions are becoming
increasingly common.
For further advice on this issue please contact
neil.baylis@klgates.com
Article 82 - Guidance from the Commission
Neil A. Baylis
Article 82 EC Treaty prohibits the abuse of a
dominant position. Notwithstanding its existence
since 1957, the European Commission has never
issued any formal guidance on the interpretation of
the Article (other than indirectly through its formal
decisions and press releases). On 3 December 2008,
the Commission issued guidance on exclusionary
abuses under Article 82. Such abuses aim to
exclude actual competitors from expanding or
would-be competitors from entering a market,
thereby potentially depriving customers of more
choice, more innovative goods or services and/or
lower prices. The guidance sets out the
Commission's determination to prioritise those cases
where the exclusionary conduct of a dominant
undertaking is liable to have harmful effects on
consumers.
The guidance stresses the need for a proper
economic analysis of any alleged abuse and that
conduct will be judged on the basis of its potential
effect on a market (and specifically consumers in
that market), rather than on a "per se approach"
whereby certain conduct is automatically assumed
to be unlawful. The guidance reflects the
Commission's recent decisions and is not intended
to bring about a fundamental shift in the way these
cases are approached. Further guidance on
exploitative abuses is expected later this year.
For further advice on this issue please contact
neil.baylis@klgates.com
NATIONAL DEVELOPMENTS
UK Merger Policy in the Downturn
Neil A. Baylis
The OFT has recently restated its approach to
assessing mergers where the target is claimed to be
a "failing firm"
(http://www.oft.gov.uk/news/press/2008/146-08). In
such cases, the failing firm argument is used by the
parties to a merger to argue a counterfactual - i.e.,
that in the absence of the merger, the target will
"fail" and will exit the market thereby reducing
capacity and resulting in a market structure less
competitive than if the target is "saved" through
being acquired by the purchaser.
The OFT has reiterated that notwithstanding the
current difficulties, it will still apply a high
evidential threshold to any mergers that are sought
to be justified on the basis of the failing firm
argument. In order for it to succeed, the purchaser
will need to demonstrate that:
•
the target will inevitably exit the market in the
absence of the merger; and
•
there is no realistic and substantially less anticompetitive alternative.
Accordingly, the mere assertion that a target is in
financial difficulty will not suffice, nor will the
failing firm argument succeed if there are a number
of other purchasers (with less competitive overlap
with the target than the actual purchaser) who would
be willing to acquire the target's business.
Nonetheless, the failing firm argument has been
applied by the OFT in recent cases and is likely to
prove increasingly relevant to mergers during the
current economic cycle.
April 8, 2009
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European Antitrust and Trade Regulation Newsletter
For further advice on this issue please contact
neil.baylis@klgates.com
German Merger Control to Apply
to Fewer Mergers
Neil A. Baylis
The law governing German merger control (the
Gesetz gegen Wettbewerbsbeschränkungen) has
been amended. Until recently, mergers were
required to be notified to the Bundeskartellamt
where the combined turnover of all the parties
concerned exceeded €500 million and at least one
party had turnover in Germany in excess of €25
million. Although there was also a requirement for a
merger to have an effect on German markets, this
was a low threshold such that even where one party
had no presence in Germany it was still possible for
mergers to be caught by German merger control
laws simply because the above thresholds were met.
Under the revised law, now in force, there will be an
additional requirement that a second party to the
merger must have turnover in Germany exceeding
€5 million. Accordingly, mergers will need to be
notified only where both parties to a merger made
sales in Germany (in excess of the prescribed
thresholds) in the financial year prior to the merger.
For further advice on this issue please contact
neil.baylis@klgates.com
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April 8, 2009
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