Regional Developments R-9
Regional Developments
Cyprus
LEGALITY OF THE
COMPOSITION OF
THE CYPRUS
COMMISSION FOR
THE PROTECTION
COMPETITION DUE
TO THE
APPOINTMENT AND
PARTICIPATION OF
A MEMBER WHO
ALSO IS A MEMBER
OF THE COMMITTEE
OF A POLITICAL
PARTY
On 3 March 2017, the Plenary Supreme Court of the Republic of Cyprus in
its second instance jurisdiction convened to hear two appeals, nos 2/2016
and 7/2016 against the decision of the Administrative Court in case
5651/2013, which related to the Commission for the Protection of
Competition’s (CPC) Decision number 38/2013 dated 13 June 2013 regarding
the imposition of provisional measures against the Cyprus
Telecommunications Authority (CyTA). The Supreme Court upheld the
decision of the CPC and also decided on the issue of legality of the
composition of the Cyprus CPC.
The CPC decision related to Primetel PLC’s application for interim
measures against CyTA in the context of a complaint submitted for alleged
infringements of s.6(1)(a) and 6(1)(c) for
“direct or indirect fixing of unfair purchase or selling prices or any other
unfair, under the circumstances, trading conditions; and applying
dissimilar conditions to equivalent transactions, thereby placing certain
undertakings at a competitive disadvantage”.
Primetel’s complaint concerned a number of agreements between Primetel
and CyTA in relation to the rights to use the capacity of a submarine cable
system. It centred on CyTA’s refusal to negotiate the repayment, operation
Abuse of dominant position; and maintenance charges, the unilateral interruption of capacity which had
Administrative decision-making; been assigned to Primetel and the threat of termination of the agreements
Cyprus; Impartiality; National
and repossession of the assigned capacity. The CPC, taking into account
competition authorities; Political the possible distortion to competition in the telecommunications sector,
parties; Price fixing; Ultra vires ordered CYTA not to terminate its agreement with Primetel, and to reinstate
acts; Unfair commercial
Primetel’s usage rights, subject to conditions it simultaneously imposed on
practices
Primetel.
In addition, the Supreme Court decided on the legality of the composition
of the CPC, and overturned the Administrative Court’s ruling of 29 January
2016, which had held that the CPC was illegally constituted since it included
an individual who at the time was a member of the executive committee of
a political party. In its decision, the Supreme Court provided a definition of
the terms “political office” and the “member’s political party capacity or Officer
of a political party” and decided that this is not linked to a political position
which primarily entails the exercise of government function. Moreover, the
Supreme Court clarified the issue of illegal composition within the meaning
of infringement of the principle of impartiality, deciding that this concerns
the function of the organ in every case and that it is within this framework
and specific way that the principle of impartiality of an administrative act is
examined.
[2017] G.C.L.R., Issue 2 © 2017 Thomson Reuters (Professional) UK Limited and Contributors
R-10
Global Competition Litigation Review
Commentary
In conclusion, in view of the above, we anticipate that the member of the
Cyprus CPC whose position had been challenged, will return to his post so
as to continue in his capacity as a member of the Cyprus CPC.
Ramona Livera
Evyenia Epaminondou
Finland
On 29 December 2016, the Finnish Supreme Administrative Court (SAC)
upheld the Finnish Market Court’s judgment imposing a €70 million fine on
Valio Oy, the dominant dairy operator in Finland. The SAC held that Valio
had abused its dominant position by engaging in predatory pricing in the
market for production and wholesale of fresh milk in Finland. The SAC’s
judgment fully confirms the Finnish Competition and Consumer Authority’s
(FCCA) decision of 2012 and the Market Court’s judgment of 2014.
Both the FCCA and the Market Court had found that a significant price
reduction implemented by Valio on 1 March 2010 caused Valio’s wholesale
prices of fresh milk to drop below its average variable production costs.
Valio’s fresh milk prices remained below average variable costs at least until
late December 2012, when the FCCA handed down its decision ordering
Abuse of dominant position; Valio to cease the abusive conduct and proposing to the Market Court the
Finland; Milk; Milk products;
imposition of a €70 million fine on Valio. The Market Court upheld the FCCA’s
Predatory pricing
decision and imposed the €70 million fine.
In its appeal to the SAC, Valio argued that its fresh milk pricing could not
be assessed based on the cost criteria applied in the case law of the Court
of Justice of the European Union (CJEU). Valio argued that instead of
average variable costs, the relevant cost level to be applied in assessing
whether its pricing was predatory was the opportunity cost of alternative use
of raw milk. In the alternative, Valio argued that in case the SAC would apply
the average variable cost threshold set in the CJEU’s case law, Valio’s
profitability should be assessed on the basis of a bundle including fresh
milks and certain highly profitable fat based products which can be made
with the leftover fat of fresh milk production. In addition, Valio presented
several claims concerning the way in which its average variable costs of
fresh milk production should be calculated.
The SAC rejected Valio’s arguments in their entirety. The SAC held that
the CJEU’s case law did not support the assessment of predatory pricing
on the basis of opportunity costs. Further, the opportunity costs presented
by Valio were considerably lower than Valio’s average variable costs. Thus,
the SAC also noted that if predation was assessed on the basis of the
opportunity costs presented by Valio, it would not be possible to identify
predation in such circumstances that are considered as predation based on
the CJEU’s case law.
In respect of Valio’s bundle argument, the SAC held that since the FCCA’s
decision did not concern predatory pricing of such bundle, but only predatory
pricing of fresh milks, the predation assessment must concern only Valio’s
prices and costs of fresh milk. Therefore, it was not relevant to assess
whether Valio was able to cover the losses made with fresh milk pricing with
profits from other products or whether the pricing of fresh milk’s below
average variable costs was the most appropriate alternative from the
perspective of Valio’s total product portfolio.
SUPREME
ADMINISTRATIVE
COURT UPHOLDS
€70 MILLION FINE
FOR PREDATORY
PRICING IN THE
FINNISH FRESH
MILK MARKET
[2017] G.C.L.R., Issue 2 © 2017 Thomson Reuters (Professional) UK Limited and Contributors