How Political Landscape Shapes the Antitrust Environment in Europe

The past year has seen a lot of politically driven antitrust decisions, specifically in Europe. While competition law is traditionally guided by legal and economic principles, political factors cannot be ignored and can shape the way competition law is formulated and implemented. In recent years we have seen more and more how the political landscape has shaped the antitrust environment. Europe is currently seeing this mainly because of soaring gas prices and states trying to support their economy by creating aid schemes for small businesses and SMUs.

Moreover, we have many national regulators displaying strength, be it either with the help of the legislative or the government. Korea’s top court, as an example, upheld a hefty fine which the watchdog slapped on Qualcomm, or in Germany, where the government is backing the FCO for more rights. On the other hand, we also have regulators that are taking a step back due to work overload, as is the case in Indonesia.

As always I invite you to read, comment and join the discussion below.

Dutch small to medium sized enterprises are going to be able to benefit from a Dutch state aid scheme which has found approval by the European Commission.

This approval is not the first and will most likely not be the last that the EC handles under the Temporary Crisis and Transition Framework, which amends and prolongs in part the Temporary Crisis Framework, adopted on 23 March 2022 to enable Member States to support the economy in the context of Russia’s war against Ukraine. State aid is especially necessary when it comes to energy-intensive companies that are feeling the full blow in regard to repercussions of the war.

Let’s take a look at the specifics: The European Commission has approved the €1.4 billion scheme to support small and medium-sized enterprises (SMEs) in the Netherlands facing increased energy costs due to Russia’s war against Ukraine. The aid will take the form of direct grants, covering part of the increased costs of natural gas and electricity for SMEs whose purchases of natural gas and electricity amount to at least 7% of their annual turnover for the year 2022. The aid amount will cover 50% of the eligible costs, up to a maximum of €160,000 for each potential beneficiary. The Commission found that the Dutch scheme is in line with the conditions set out in the Temporary Crisis and Transition Framework and is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Crisis and Transition Framework.

The EU Commission has given Austrian furniture giant XXXLutz the green light to take over Berlin-based online furniture retailer Home24. According to the European watchdog, the planned merger does not pose a threat to competition in the furniture market. To solidify their argument, the EC stated that the gain in market share as a result of the merger would be small. In addition, there are also sufficient competitors in the furniture market.

The takeover is now to be completed within the next few days, as the XXXLutz Group announced. Afterwards, the furniture giant intends to delist the Home24 share from the stock exchange.

XXXLutz is looking forward to seizing new growth opportunities with Home24 and giving the company stability and clout as a strong partner, it said. Like many other online retailers, Home24 suffered from falling sales last year as consumers held onto their money in the face of the Ukraine war and inflation. Home24 itself had completed its acquisition of the Butlers housewares chain just a year ago.

The Austrian furniture giant had already secured more than 92 percent of Home24 shares at the turn of the year with its takeover bid announced in October. Home24’s top management supported the takeover bid from the outset.

Local cement companies in Saudi Arabia have been fined a total of $37.3 million by the General Authority for Competition (GAC) for manipulating prices, with each of the 14 companies paying $2.7 million.

This violation of Article 4 of the Kingdom’s Competition Law involves practices that increase or decrease the prices of goods and services intended for sale, which harms the market. The reformed version of the law, which came into effect on September 23, 2019, prohibits such agreements or contracts among competing firms.

According to media reports, the 14 manufacturers, who dominate the Saudi cement market, were accused of forming an illegal agreement to raise cement prices and divide the local market among themselves.

While some parts of Southeast Asia are currently furthering an expansion of competition law (Vietnam with the creation of their own antitrust regulator, for example), other regulators are forced to take a step back due to work overload.

The Indonesian Competition Commission (KPPU) has introduced a significant reform of its merger control system by implementing a simplified regulation that reduces the number of mergers, consolidations, and acquisitions that require notification, particularly foreign-to-foreign transactions. The new regulation also establishes new guidelines for the notification process and shortens the review period.

Additionally, the Indonesian government has introduced a rule that imposes a notification fee on mergers subject to KPPU notification. The new merger control regulation maintains the same asset/sales thresholds as the previous 2019 regulation it replaces.

However, the calculation of the asset and sales value is now based only on assets and sales in Indonesia, as was the case before 2019, resulting in a significant decrease in the number of transactions that require notification to KPPU, particularly foreign-to-foreign transactions.

Qualcomm, the U.S. chip maker which is famous for having acquired 39 firms (5 of them in the last 5 years), has been fined approximately $779 million by the South Korean antitrust regulator for engaging in unfair business practices.

The country’s Supreme Court has rejected the appeal made by three Qualcomm affiliates against a 2019 lower court ruling, which had upheld the decision made by the Korea Fair Trade Commission (KFTC). This brings an end to the prolonged legal case that began in 2016 when the KFTC imposed a record fine of 1.030 trillion won, – equivalent to $778.5 million – on Qualcomm for violating antitrust laws. The antitrust watchdog built and won the case on the grounds of Qualcomm  misusing its dominant market position to force rivals and handset manufacturers to accept unfavourable business conditions.

The company had limited access to its patents by competing chip makers and forced mobile-phone manufacturers into unfair licence agreements. This fine is the largest ever imposed on a single company in South Korea.

The European megadeal that everyone has its eye on is facing strict scrutiny from the Commission, which deemed that it “could restrict competition.”

The Commission expressed concerns about potential limitations to competition in the market for certain hardware components resulting from U.S. chipmaker Broadcom’s proposed $61 billion acquisition of cloud computing company VMware.

Where is the specific issue that the European watchdog sees in the deal? According to the Commission, it has notified Broadcom of its objection that the proposed acquisition could impede competition in the worldwide markets for the supply of fibre channel host bus adapters (FC HBAs) and storage adapters by constraining competitors’ access to VMware’s software.

Despite this assessment that the EC came to as a result of the investigation that started last December, Broadcom expressed confidence that regulators will ultimately come to the conclusion that their tie-up does not pose any competition concerns and stated that it anticipates closing the transaction “in fiscal year 2023.”

One of Italy’s largest energy companies was raided on April 14 by the Italian watchdog regarding the company’s alleged abuse of their dominant position for electric vehicle charging stations.

Apart from Enel’s main offices in Italy, the raid also targeted further subsidiaries, including Enel X Way, Enel X Way Italia and Ewiva.

In a press statement, Enel argued that its units had always acted according to the rules and they were “confident they will be able to demonstrate the full legality and correctness of their actions” to the antitrust authority.

In all fairness, the raid didn’t seem to have the deterrent effect that is normally accompanied by such an action. Quite the contrary actually: The Enel spokesman also stated that the company is planning to add more than 10,000 electric-vehicle chargers in the U.S. and over 2 million in total across North America by 2030.

The German FCO is facing quite a bit of backlash regarding their new reform proposals, which have been described as “egregious and overreaching.”

In view of the experience gained in the energy crisis, the cabinet has launched a reform of competition law. This is intended to strengthen the powers of the Federal Cartel Office. The plans go too far for the business community. The German Cabinet has approved a reform of competition law. The bill provides for an expansion of the powers of the Federal Cartel Office. The Ministry of Economics said the aim was to put an end to disruptions to competition so that consumers could benefit from lower prices. This is particularly important in markets with only a few suppliers and conspicuous price developments.

The German Economics Minister argued that in light of current crises, “it is imperative to consistently use the strengths of competition,” which he believes is the most effective means of safeguarding consumers from unwarranted price hikes.

However, the proposed reform faced opposition from the business community which argued that this would be a shift toward state intervention in the market as a last resort. It was further challenged in a sense that the proposed reform – as a national legislative solo act – would weaken Germany’s position in the global market, at a time when the country is already struggling to compete in various sectors.

Much like Enel after the Italian watchdog raided them, international antitrust is moving ahead with a “business as usual” mentality. In a nutshell: the principles of competition law are being effectively upheld on an international scale, and businesses are being held accountable for any attempts to overstep the boundaries. The European Commission’s response to state aid schemes has been adequate, and the Indonesian regulator has wisely taken a step back to avoid work overload.

While companies constantly attempt to test the limits of competition law, they are often made very aware of the potential consequences, as was shown this month by Korea’s supreme court which upheld the national regulator’s fine directed at chipmaker Qualcomm.

While fortifying competition law and its regulators to maintain a level playing field for businesses and consumers is a main pillar, it’s also important to question and challenge too intrusive monitoring that may restrict economical advance where it is necessary. The discussion in Germany about how much more regulatory strength the German watchdog should receive is a prime example of why a healthy equilibrium should be the first and foremost objective international antitrust aims for.