EU Year in Review: What Happens to
Antitrust Enforcement When Economies
Falter?
Gavin Bushell – Partner, Baker & McKenzie, Brussels
20 September 2012
Autumn 2008 – A Pivotal Moment
– Over one weekend in Brussels in October 2008, EU
Member States argued for a suspension of the competition
rules for the financial sector.
– Competition Commissioner Neelie Kroes saved the day at
the EU level – DG COMP was clearing bank rescue
packages under the State aid rules in as little as 24 hours
and adopting merger clearance decisions in record time.
– National carve-outs from normal merger rules were
hurriedly adopted in France, Ireland and the UK but have
been used sparingly if at all.
– But what has happened since then?
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The “Goldilocks” Approach*
– In Europe, the mantra is that the proper application of
competition law can lift an economy out of a downturn
much faster than a relaxation of the rules.
– The authorities talk “robust” but know when to give a
little… (not too hard, not too soft… just right).
– What does this mean in practice?
* phrase coined by John Fingleton, CEO of OFT
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Merger Control
Cartels
Other Trends
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1. Mergers: more lenient scrutiny?
– No resurgence in the “failing firm” defence (the theory that no
competitive harm should be attributed to a merger if the target was
destined to exit anyway and there is no realistic less anti-competitive
outcome). No real development in consideration of efficiencies.
– Trends in filings:
– Total numbers are down from 402 notifications in 2007, with 259 in
2009, 309 in 2011, and 193 notifications through to August 2012.
– 8 cases went into phase II in 2011, up from 4 in 2010, 8 already in
2012.
– 4 Phase II cases in 2011 were cleared without commitments.
– allowing time for more complex economic analysis can pay dividends
– Potentially increased numbers of derogations?
– Caterpillar/MWM triggered a dawn raid to simultaneously pick-up
bidding data for the merger analysis as well as evidence of suspected
collusion!
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1. Mergers: more lenient scrutiny?
– Number of complex Phase II investigations in 2012:
– Ryanair/ Aer Lingus III
– Long running saga - closest competitors on a large number of European routes,
mainly out of Ireland.
– Universal Group/EMI Music
– The merged entity would have significant market shares and would enjoy
increased market power in relation its direct customers (advanced remedies
discussions; decision expected imminently).
– Outokumpu/ Inoxum
– The parties have significant combined shares of the EEA markets for the sale of
slabs, hot rolled and cold rolled stainless steel products (oral hearing took place
on 30 August 2012).
– Hutchison 3G Austria/ Orange Austria
– May give rise to serious competition problems by removing Orange as a
competitor in the retail market for end consumers and on the wholesale market
for network access and call origination. The merger will reduce the number of
network operators from four to three in Austria (remedies submitted in August,
SO expected this week).
– UPS/TNT
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– Four-to-three concentration in the market for express parcel services.
2. Cartels: more tolerance of crisis cartels?
“It has to be made clear that, in attempting to cope with difficult market
conditions or falls in demand, undertakings must use only means that
are consistent with the competition rules. Price-fixing and market-sharing
are certainly not legitimate means of combating difficult market
conditions. Nor are undertakings entitled to flout Community competition
rules because of alleged overcapacity.”
Graphite Electrodes,
Commission Decision of 18 July 2001, para. 197
– European law is much stricter on information exchanges
than many other agencies (Commission Guidelines on
Horizontal Agreements, paragraphs 55-110).
– State involvement in managing, orchestrating or
encouraging “crisis cartels” is no defense absent State
compulsion (and even this is contentious ground).
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Zero tolerance on substantive infringements
but more flexibility on fines
– Ostensibly, the European Commission has taken its foot off the pedal (30
cartel cases decided in 2000-2004; 33 in 2005-2009; 15 in 2010-2012) but the
statistics are deceptive.
– We are seeing numerous examples of strict enforcement despite genuinely
difficult economic circumstances.
– Window Mountings (EU cartel case of March 2010 in which fines were
reduced for the “mono product” nature of the companies and inability to
pay).
– Packaged Flour Cartel (October 2011 the German Federal Cartel Office
fined mills company VK Mühlen AG in the amount of € 23.8 million for price
fixing and customer and market allocation but reduced the fine and allowed
the company to pay in 5 installments due to concerns over its “economic
viability”.
– French Endives (€ 3.6m French fine for price-fixing and output restraints –
low fine due to bargaining power of the grocery retail sector and growers’
limited funds).
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Zero tolerance on substantive infringements
but more flexibility on fines
– Uptake in the adoption of personal sanctions against
individuals at national level.
– 1,488 cases investigated by national competition
authorities under Article 101 and 102 TFEU since May.
2004 with most activity in France, Italy, Germany, Spain,
Netherlands and Denmark in that order.
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Fines Levied on Cartels by the European
Commission (2007- June 2012)
€3,500
€3,000
€2,887
€2,500
€2,869
Fines Levied
(in millions)
€2,259
€2,000
€1,541
€1,500
€1,000
€614
€400
€500
€0
2007
2008
2009
2010
2011
2012
Calendar Year
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Average Fines Levied on Cartels by the
European Commission (1990-2011)
€350
€316.61
Fines Levied
(in millions)
€300
€270.44
€250
€200
€150
€105.24
€100
€31.30
€50
€4.52
€1.86
€43.75
€27.10
€41.96
€20.11
€0
1990-1994
1995-1999
2000-2004
2005-2009
2010-2011
Calendar Year
Average fine levied per undertaking
Average fine levied per case
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Cartel Enforcement Developments
– At EU level, the European Commission has developed a
methodology for reducing fines due to a company’s
“inability to pay” - designed to ensure firms don’t go to the
wall just because of a cartel fine.
– Settlement procedures are another quiet way of being less
tough in framing an offense in the guise of procedural
efficiency.
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Recent Fines for Procedural Breaches
– Obstructing an inspection
– € 2.5m fine in March 2012 on Energetický a průmyslový (failure to
block an email account, refusing to open encrypted emails,
diverting incoming emails during inspection).
– Polish authority fined Polkomtel € 33m in March 2011 (refusing to
hand over a hard drive, delaying the entry of investigators in certain
premises, and giving incomplete documentation to inspectors).
– Spanish authority: € 3.8m fines for obstruction in Sept 2010 on ferry
operator (start of raid was unduly delayed), and in March 2011 on
one office supplies maker € 161.000 (documents disappeared
during the raid).
– Breach of seals
– Suez fined € 8m in May 2011. The Commission took into account
the “immediate and constructive cooperation” of Suez which
provided “more information than was its obligation”.
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Private Actions
– Access to leniency documents: Pfleiderer (Case C-360/09, 14 June
2011)
– EU law does not prohibit disclosure.
– It is for national courts on a case-by-case basis to weigh the
integrity of the leniency system against the need to provide
effective compensation for damages caused by anti-competitive
conduct.
– Pfleiderer working its way through national courts
– German Court rules against disclosing documents (30 Jan 2012).
– UK High Court orders disclosure of limited parts of non-confidential
Commission cartel decision to claimants in follow-on actions (5 Apr
2012).
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Private Actions
– A Resolution of the Meetings of Heads of European
Competition Authorities adopted on 23 May 2012 on the
protection of leniency material in the context of civil
damages actions:
“... leniency materials should be protected against
disclosure to the extent necessary to ensure the
effectiveness of leniency programmes”.
– EU legislative proposals expected soon (?) on disclosure
as well as private damages actions/collective redress
disclosure.
– In the meantime, litigation continues apace especially in
Germany, Netherlands and the UK.
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3. Other Enforcement Trends
– The economic crisis has engendered a trade-off between
doing work that addresses real harm (“washing the dirty
laundry”) and addressing issues that raise public concerns
but where there isn’t a significant competition problem
(“washing clean laundry that looks dirty”).
– That phenomenon has manifested itself in a burgeoning of
agency monitoring/market investigations/sector inquiries.
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Recent Market Monitoring / Sector Inquiries
– Electricity wholesale markets and gas concession contracts (Germany).
– Patent settlement agreements between pharmaceutical originators and
generics (EU).
– The cost of car maintenance (sector inquiries in France, Romania).
– The price of petrol at the pumps (Germany, Poland).
– The price of food and beverages at large retailers (Germany, UK, Turkey).
– The price of French fries at Belgian “fritkot”!
– Dentistry services (UK).
– Online commerce (France sector inquiry report delivered on Tuesday).
– European Competition Network Report on Activities in the food sector between
2004-11 (published 24 May 2012), details 180 investigations, 1,300 merger
control proceedings and 100 market monitoring initiatives.
– EU Retail Action Plan in the making.
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What can we expect on the policy front?
Vice-President Almunia is keen to tap the potential of competition policy
as a driver of innovation and growth:
1. Financial Services:
– Ultimate goal of giving Europe a leaner and healthier banking system
centered on the financing of the real economy through State aid policy
linking bank rescue aid to strict restructuring programmes.
2. Network Industries:
– Energy – using competition enforcement to support a Single European
Energy Market planned for 2014.
– Telecoms – closely following standard-setting and joint ventures to offer
new mobile-supported services such as payments or advertising.
3. State Aid Modernization:
– Major overhaul underway and expected to continue in 2013 including
increased scrutiny of large aid grants, sector inquiries across the EU,
more ex officio investigations, fast procedures targeting network
industries, incumbents in liberalized markets (transport, postal services,
etc.) and selective tax advantages.
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Questions?
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