The most significant rulings of the competition and market authorities (October-December)
Competition law are designed to ensure fair and equal conditions for businesses, while leaving space for innovation, unified standards, and the development of small businesses. Market authorities monitors and investigates anti-competition practices, mergers and state aid to ensure a level playing field for all businesses, while guaranteeing choice and fair pricing for consumers.
In view of the particular importance of competition law and its role, I prepared a summarised article for a period from October to December of a case-law in competition cases.
The summary includes the most significant rulings of the competition and market authorities, specifically addressing issues such as anti-competitive practices, including prohibited agreements and abuse of dominant position, liability for anti-competitive practices, merger control of market participants, procedure for examination of a case, determination of fines.
? China’s crackdown on big tech continues, this time the Chinese Antitrust regulator is targeting Meituan, a platform for food delivery.
? After having fined several software companies in the past months, the Chinese competition authority, the State Administration for Market Regulation (SAMR), imposed a fine of 3.4 billion yuan on the major food delivery company Meituan, the equivalent of around 456 million euros. The antitrust watchdog accuses the platform operator of exploiting its dominant position.
? Meituan had used exclusive agreements to prevent restaurants from offering deliveries via other portals, which also harms the consumer who is ultimately deprived of alternative options.
?⚖️ According to the SAMR, the fine corresponds to three percent of Meituan’s turnover in China last year. However, the inspectors also ordered Meituan to reimburse the more than 1.6 million restaurants and other merchants
for the deposits they had to pay as part of deals with the platform. Meituan had reserved the right to withhold the security deposit if a partner breached
the agreement.
The refunds are said to total 1.29 billion yuan (just under 173 million euros), which amounts to roughly another percent of the yearly turnover.
8️⃣ Meituan is the eighth largest Chinese group by market value with around 510 million users and has been expanding into areas such as travel and hotel bookings as well as bike sharing for several years.
〽️ While these areas are not directly affected by the decision, what will happen to the company in general, especially with it’s shares, remains to be seen.
?? The Portuguese Competition Authority (AdC) recently fined supermarket chains Auchan, Pingo Doce and Modelo Continente, as well as the company B
imbo Donuts, for a total of 24.6 million euros. According to the official statement of the AdC, these companies participated in a lengthy consumer sale scheme, stretching over eleven years – from 2005 to 2016.
? What happened here exactly? According to the regulator, the companies in question eliminated competition and deprived customers of better prices through a “hub-and-spoke” arrangement, which they used to align prices.
? Hub-and-spoke arrangements are horizontal restrictions on the supplier or retailer level (the “spokes”), which are implemented through vertically related players that serve as a common “hub” (e.g., a common manufacturer, retailer or service provider).
? In a hub-and-spoke constellation, the market players don’t necessarily have to communicate directly with each other, which was the case here. All of the companies mentioned had no direct contact with each other but aligned their prices accordingly to a “series of emails” with a common supplier.
? The decision is still subject to appeal, however there has been no communication from any of the companies of their motivation to contest the AdC.
? In cross-border situations, cartel victims can – under conditions defined by the ECJ – not only take action against the cartel members themselves, but also against their subsidiaries (ECJ, judgment of 06.10.2021, Case C-882/19 – Sumal, S.L./Mercedes Benz Trucks España, S.L.). This landmark decision significantly expands the previous case law in the area of “economic entity” liability.
? Case Facts: Spanish container manufacturer Sumal, S.L. (Sumal) sued Mercedes Benz Trucks España, S.L. (MBTE), a Spanish subsidiary of the German Daimler AG, for damages. Leaning on a €2.93 billion fine imposed by the European Commission on a truck cartel for price fixing in 2016 – Daimler being part of the cartel at that time. The case was dismissed as inadmissible by the court of first instance but was later referred to the ECJ by the court of appeal, asking for a preliminary ruling on the question as to whether subsidiaries are liable for the cartel law infringement of the parent company in so-called “follow-on actions.”
☑️ Main takeaways: If a cartel is formed in violation of Art. 101 TFEU, victims of cartels may not only direct their claims against the fined parent company, but also against a subsidiary, even if this subsidiary is not the addressee of said fine. It is sufficient that parent company and subsidiary form an economic unit – a uniform organisation of personal, tangible and intangible resources, which permanently pursues a specific purpose, as well as the existence of a concrete connection between the economic activity of the subsidiary and the object of the established infringement.
?? A lengthy criminal cartel case against ANZ – an international bank headquartered in Melbourne, Australia – has been laid to rest after the Federal Court described the matter as a “complete shemozzle.”
? Back in 2015, ANZ had decided to raise money from institutional investors, by ways of issuing $2.5 billion worth of new shares. Through their senior executives, ANZ and three further banks – Citibank, Deutsche Bank and JP Morgan – allegedly came to an understanding on what to do with any shares that were unable to be sold. In this case, the unsold shares were worth about $790 million.
So what exactly made the Australian Federal Court resort to vocabulary straight out of an Agatha Christie novel to describe how much the Commonwealth Director of Public Prosecutions (CDPP) messed up this case❓
? For one, the committal hearings – where a magistrate decides whether there is sufficient evidence to take the matter to trial – were “long, drawn out and fairly pointless”. Justice Michael Wigney also described the fact that the indictment had not been finalized – three years after the first charge and about six months before the trial was due to commence – as “entirely unsatisfactory.” All in all, the indictment as a whole was described as “deficient and defective.”
? Despite the blow that the CDPP had to suffer, they are still proceeding with the prosecution against Deutsche and Citibank, JP Morgan is out of the picture because they blew the whistle on the whole operation.
? Competition Authority investigators on Tuesday raided the offices of Shufersal and Strauss Group, Israel’s largest supermarket chain and second-largest food maker, on suspicions that the two had engaged in price-fixing.
? The investigation targeted and seized documents as well as computers from both companies, questioned senior executives, including Itzhak Aberkohen – Shufersal’s CEO – and Eyal Dror – CEO of Strauss.
? The last investigation into the food sector involving companies of this size took place in 2009. Shufersal was also an addressee back then and the case resulted in the convictions of Shufersal CEO Efi Rosenhaus and vice president of commerce Eli Gidor.
?? The fact that the last investigation took place so long ago can be interpreted in two different directions. On the one hand, it can be assumed that the Israeli competition authority’s decision of 2009 left an impact strong enough to deter the food sector from any anticompetitive conduct for more than a decade. Another possibility of course is that the regulator is not keeping a strict enough eye on the sector and only acts when there is obvious misconduct.
❌ In any case, the two involved companies are already feeling the repercussions in the form of stock trade, or rather lack thereof, since trading with the two companies’ shares on the Tel Aviv Stock Exchange has been suspended until further notice.
? The Korean Fair Trade Commission (KFTC) recently hit seven poultry processing companies with a fine of 25.1 billion won (€18.2 million), showing us that “Squid Game” is not the only competition in Korea involving a lot of money and high stakes.
? Unlike the malevolent collaborators in the popular Netflix series – which is currently enjoying well-deserved international recognition – the cartel that the KFTC has targeted is very real. As is the hefty fine they are now forced to pay.
?⚖️ The fined companies are Harim Co. and six other poultry companies that have been found guilty of price fixing between July 2011 and July 2017, according to a report in the Korea Herald.
? The companies colluded to fix prices and supplies of chickens that would be used for Samgyetang, better known as “Chicken Ginseng,” a traditional Korean soup. The companies increased prices during the summer when consumer demand was high and prevented prices from falling in response to market pressure when the demand decreased.
? Harim Co. will have to pay the lion share, having been slapped with the largest fine of around €5.7 million. Orpum Co. follows in second place with a €3.7 million fine. The regulator plans to file a complaint with the prosecution against the two firms and has already ordered that corrective measures be implemented to prevent this from happening in the future.
Merger and acquisition control
? The Italian merger between Nexi and Sia – which aims to create one of Europe’s largest digital payment groups – has moved one step further to conclusion and will, according to Nexi, be completed “as soon as possible.” Now that Italy’s antitrust authority (AGCM) has given it’s green light on the matter, the two digital payment companies are looking to close the deal this quarter.
✅ The watchdog’s green
light comes with a few concessions that will have to be taken into account.
? After opening investigations into the merger last month, the AGCM has asked Nexi to waive an exclusivity clause in contracts with a payments
processor (equensWorldline) for domestic processing and clearing services outside the single euro payments area (SEPA), and to sell non-SEPA clearing contracts it currently has with banks.
? The AGCM stated that these measures aim at avoiding discrimination and granting efficiency to any potentia
l new players in the sector.
? More skeptical voices, however, are saying that the remedies are not likely to change anything about the current status quo of the Italian market in the digital sector and are preserving much of the dominant positions that already exist.
? The Competition Commission of South Africa (CCSA) is celebrating a recent win in the form of the South African Constitutional Court’s judgment prohibiting a hospital merger.
? The merger between Mediclinic Southern Africa (“Mediclinic”) and Matlosana Medical Health Services (“MMHS”) would have led to Mediclinic SA owning and operating more than half of the multidisciplinary private hospitals in a certain area.
? The CCSA argumented strongly, bringing forward that such a merger would raise the tariffs of the target hospitals significantly, in respect of both insured and uninsured patients. Not only would tariffs be raised, but lower tariffs – provided to uninsured patients at the MMHS hospitals – would fall away. The proposed merger would significantly affect the uninsured patients by limiting their ability to negotiate and switch to cheaper hospitals in the form of the MMHS hospitals.
?⚖️ For the CCSA this is, firstly, a win against the Competition Appeal Court (CAC) who moved to approve the merger subject to certain conditions, and, secondly, also a win as far as affirmation from the Constitutional Court in regard to economic expertise goes.
? Spokesperson Siyabulela Makunga said: “[This judgment] will certainly pave the way for the Commission’s constitutional approach to other areas of competition law, including excessive pricing.”
?⚖️ Under the suspicion of illegal cartel activity, the European Commission (EC) conducted unannounced inspections this month (October 12) on the premises of EU Member State companies that are active in the wood pulp industry.Wood pulp is a by-product of wood. It is used to make paper as well as many other products and a wide variety of materials such as tissue, writing paper, paperboard, etc.
❗️The European watchdog carries out these unannounced inspections as a preliminary step when they investigate suspected anticompetitive practices.
✅ The purpose of these raids is to secure documents that might show companies have been working with rivals to fix prices or allocate sales.
? Dawn raids (or surprise raids) do not necessarily mean that the companies are guilty of anti-competitive behaviour, nor do they prejudge the outcome of the investigation itself. However, being subject to such scrutiny is never a good look. Stora Enso Oyj – one of the companies raided by the EC – saw its stock fall to a record low since January when the raid was announced. UPM-Kymmene Oyj – the second wood manufacturer – dropped 5.1% in Helsinki trading when they announced that they had been raided by the EC.
? The EC is also notorious for its high fines, ranking among the world’s highest with companies paying up to 10% of yearly revenue if they are found guilty of breaching antitrust rules
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? The alcohol sector in India is heavily regulated, with regulations varying from state to state. Companies are obliged to submit and get their prices approved by local authorities every year.
? In an investigation spanning over multiple cities, the CCI conducted search and seizure operations with a focus on the alleged price fixing of “country liquor”, low-priced locally manufactured alcohol. The companies in question are apparently violating national antitrust laws by colluding on prices while seeking necessary regulatory approvals from states.
? As is normally the case, shares of the companies under investigation dropped after news agencies reported on the surprise raids. Associated Alcohols saw a decline of 3% after Reuters reported on the surprise raids.
? The CCI is known for its rather reserved attitude when it comes to divulging information to the media regarding their investigations. As is the case here, with the antitrust watchdog not responding to news agency emails. What we can take away, however, is that the CCI is now driving a harder course against the alcohol sector. The raids on October 27 came just weeks after the CCI imposed huge penalties on United Breweries and Carlsberg India in a price collusion case which started in 2018.
? The European Commission (EC) recently started an investigation into Google’s alleged abuse of its dominant position in the online display advertising market, upon which Italy’s competition authority dropped the ball on their investigation regarding the same matter.
? The Italian antitrust authority announced that they will not be taking further action as – under EU laws – the case is now out of their responsibility.
? The EC commenced their investigation in June and are looking into whether Google is restricting third party access to user data for advertising purposes on websites and apps, while reserving such data for its own use. In other words: Google is allegedly favouring its own online ad services leaving rivals, advertisers and online publishers at a loss. The question is whether that is the case and the loss is so big that it distorts competition.
? This would not be the first time Google is forced to pay up on account of an EC investigation. Over the past decade, the Commission has fined Google more than 8 billion euros for blocking rivals in online shopping, Android smartphones and online advertising.
? Recently, the European Commission (EC) was able to celebrate a win against tech-giant Google, who failed to overturn the €2.42 billion Shopping antitrust decision. With the General Court of the European Union largely dismissing their challenges, Google (for now at least) finds itself on the losing side of the constant battle that is raging between the EC and big tech.
? Some key facts: In 2017 the EC found that Google had abused their dominance by providing their shopping service „Google Shopping“ with prominent placement while at the same time demoting other shopping services. Apart from the obvious detriment for other shopping platforms (less visibility and therefore less revenue), this also restricted consumers in their shopping options.
❗️ The General Court further noted on the alleged nature of Google Shopping, which depends on comparison shopping services changing their business model, thereby ceasing to be direct competitors and becoming clients of Google. Google had countered with the fact that other shopping services still retained far-reaching visibility.
? “Comparison shopping delivers an important service to consumers, at a time when ecommerce has become more and more important for retailers and consumers. As digital services have become omnipresent in our society nowadays, consumers should be able to rely on them in order to make informed and unbiased choices,” the Commission added in their formal statement.
? The EU Digital Markets Act (DMA) is a legislative body that aims to keep big tech in check. There has been a lot of commentary revolving around whether the enforcement of this act should fall on the Commission alone or be shared between the Commission and national antitrust authorities. Representatives of European Union countries have now agreed the EC would be the “sole authority empowered to enforce” the EU’s proposed Digital Markets Act.
? The DMA, a proposition called into life by EU antitrust chief Margrethe Vestager, aims to level the playing field on the EU’s digital market, specifically by curbing the powers of multinational tech giants Google, Facebook, Apple and Amazon with a list of dos and don’ts.
?Although the EC may be the sole enforcer of the DMA, the antitrust watchdogs will still be playing a part, albeit a minor one:
? “In order to support the Commission, Member States may empower the competent authorities responsible for enforcing competition rules to conduct investigative measures into possible breaches of supervisors’ obligations,” the EU Council working group paper regarding the matter said.
⚖️ At the end of the day, however, it will remain fully in the hands of the EC whether to open an investigation or not, much to the dismay of many national regulators.
In summary, this article provides a consistent and focused view of three months competition law cases in the world. Looking at the many decisions of competition and market authorities, we can see that the risks associated with being a party to an anti-competitive agreement or abusing a dominant position are serious. In addition to the consequences listed above, a further risk for businesses is the disruption and damage to a company’s reputation which arise from lengthy investigations or subsequent litigation from customers, competitors and consumers, and significant legal costs and management time. In view of the severe consequences of non-compliance, businesses should regularly review whether the company’s practices and agreements comply with competition law.
