February 19, 2013 2:55 pm
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• No softening of antitrust enforcement expected
• EC looks to wrap up Google and ’patent war’ cases, probes into banks
• ‘Business-friendly’ merger control mulled by EC, national regulators consolidate
A crunch year for private enforcement
The record cartel fine handed down by the European Commission (EC) in late 2012 – a whopping EUR 1.47bn against seven cathode ray tube manufacturers – may well have set an appropriate tone for what to expect in 2013.
As the European Commissioner for Competition Joaquin Almunia approaches the second half of his time in office, in spite of the continuing economic crisis, practitioners expect no softening for antitrust enforcement at the European Union (EU) level.
The Spanish commissioner, who has hit the headlines by blocking NYSE Euronext’s takeover of Deutsche Boerse and by publicly sparring with Google, is into the last couple of years of his mandate. Next year, EU member states will start looking for a replacement.
And as Almunia enters the last years of his tenure, the commissioner’s legacy is starting to take shape, said Nicholas Levy, an antitrust partner in the Brussels and London offices of Cleary Gottlieb Steen & Hamilton.
“A general priority for 2013 is to preserve healthy competitive conditions in the single market against the growing temptation to respond to weak economic conditions with laxer competition rules and softer implementation,” Alexander Italianer, director general of the EC’s Directorate General for Competition (DG Comp), told PaRR.
The long-awaited initiative on damages actions, designed to stimulate the European culture of antitrust litigation, is also forthcoming. Although the first discussions on this initiative began in 2005, Almunia admitted to PaRR in September that the draft legislation would likely slip into 2013.
The proposal has been held back by the EC’s efforts to devise a pan-European collective redress scheme. Concerns over damages claimants’ access to confidential leniency documents on the EC’s case files also contributed to the delay.
A “legislative proposal is planned in the coming months to give more legal certainty on a number of issues at the interface between the public and private enforcement of EU competition law, in particular access to the evidence related to leniency requests,” said Italianer. “As to the issue of collective redress, the European Parliament stressed the need for a broad European initiative,” he added.
“The EC leniency programme has been one of the most significant developments in antitrust enforcement in the last 20 years,” said Nicholas Levy. He expected the EC to prioritise “providing guidance to national courts to avoid discoverability of leniency documents in follow-on damages actions”.
The EU courts are also expected to further clarify the limits of thirdparty access to leniency documents when ruling on several pending cases, including appeals of the EC decisions in the Heat Stabilisers, Air cargo and Carglass cartel cases as well as the EC’s appeal in the EnBW Energie Baden-Württemberg case before the EU’s highest court.
Although the European legislative landscape for antitrust follow-on claims remains ill-defined, cases are nonetheless being brought in courts across member states in increasing numbers.
In grouped claims, following on from the EC’s air cargo cartel decision, filed in the UK and the Netherlands, the plaintiffs are seeking compensation in excess of the EUR 799m fine already paid out by the airlines, as reported by PaRR in November.
Nor have member states been passive in anticipation of the EC’s overdue private enforcement initiative.
The French government has tabled reforms that would introduce a form of class actions into the country’s legal system. The reform will focus primarily on facilitating damages claims from groups of individual consumers, and possibly SMEs, giving a central role to consumer associations.
However, this reform should not lead to as extensive class actions litigation as in the US, noted Laurent Godfroid, partner at competition practice of Gide Loyrette Nouel. The exact scope of the reform will be clearer in March 2013 when the draft law is presented, he added.
The president of France’s Competition Authority, Bruno Lasserre, said recently that he expected companies to bring claims in Paris courts rather than in London or Amsterdam. The claimants have a vested interest in litigating under the rules, which they could contribute to, the president noted.
Meanwhile, the consultation on reforming the follow-on actions system in the UK is seen by lawyers as an attempt to consolidate London’s leading position as a forum for such claims, as reported by PaRR in July.
EC and member states eye tech and healthcare
Several major cases remain on Almunia’s wishlist. “The commissioner will be keen to close those cases he has taken a personal interest in” before his mandate is over, predicted Levy.
The EC’s probe into Google online search services is finally nearing its end, several years after the first complaints were lodged, and the EC is also looking into allegations against Samsung.
Commissioner Almunia has taken a personal interest in the so-called “patent wars”, as his speeches have frequently addressed suspected abuses by standard-essential patent holders seeking injunctions against potential licensors.
The EC sent a statement of objections to Samsung before Christmas. Meanwhile, as reported by PaRR in October, the regulator is coordinating internally to ensure that a coherent policy on excessive pricing conduct is applied both in standard essential patent cases and in the investigation against Gazprom.
Practitioners are also waiting with baited breath to see the outcome of investigations into alleged anticompetitive practices related to credit default swaps (CDS) and the setting of benchmarks for interbank lending rates (Libor and Euribor). Indeed, Almunia has said, with some irony, that the potential fines imposed on banks found to have breached competition rules “will not be EUR 1”.
“Balancing competition and regulatory requirements in a way that does not discourage necessary investment in the energy and telecoms sectors will also be important this year,” David Broomhall, managing partner at Freshfields in Brussels, expected. A similar prediction was made by an EC official last November, as PaRR reported.
Energy companies will likely face antitrust scrutiny for information exchange about so-called “network codes”, as well as tougher enforcement by national competition authorities and more state aid investigations, the EC official said. He singled out the energy sector in Eastern Europe as likely to attract particular regulator attention.
“The commissioner is also keen to catch up after a year with virtually no cases settled,” said Broomhall. “We are likely to see more settlements of cartel cases this year,” he predicted.
At the national level, several sectors are expected to be on regulators’ radar.
France’s competition watchdog announced on 15 January that it would launch a sector inquiry into the country’s pharmaceuticals industry. This comes on top of at least three antitrust probes concerning generic drug makers’ access to the market.
The French regulator is also expected to keep a close eye on the “net giants” to ensure that consumers are not locked into new monopolies, noted Godfroid.
Healthcare and telecoms will be closely watched by the Dutch regulator, Chris Fonteijn, the chairman of the Netherlands Competition Authority, said in a recent interview.
In Germany, Carsten Grave, a partner at Linklaters’ Dusseldorf office, predicted the competition authority would focus on the food retail, energy and healthcare sectors. The Bundeskartellamt is also conducting inquiries or investigations into postal services and banking as well as cable networks markets.
Andreas Mundt, the president of the German Bundeskartellamt, told PaRR that the Bundeskartellamt will “look more thoroughly into the subject of vertical restraints” in light of “numerous complaints in various sectors, often in relation to e-commerce”. The authority will, for example, assess the new distribution rules of Asics and Adidas,” Mundt added.
“The EC is increasingly focusing on state aid and merger control, where if they do not act no one will, as well as EU-wide cartels and high-profile dominance cases,” observed Levy. “That leaves quite a significant part of competition policy that is largely being enforced at the national level, including joint ventures that do not meet the EU merger control criteria and vertical restraints.”
Streamlining procedures and authorities
Commissioner Almunia is keen to see several legislative and procedural changes implemented under his watch. “To encourage growth in Europe we have decided to make our merger procedures more business-friendly,” Italianer told PaRR. “The streamlined system will allow the commission to focus on the cases that have a real impact on competition and require complex analyses.”
Almunia previously described streamlining the merger review process as a priority for 2013 in comments reported by PaRR in December. This reform is expected to increase the number of deals reviewed under the so-called “simplified procedure” by 10%.
The business and legal communities will welcome any easing of the burden on notifying companies, said Levy. These measures may help expedite approvals and reduce costs for notifying companies, and could well be taken up by other jurisdictions that have systems based closely on EU merger control, he added.
Italianer confirmed that the EC was planning a consultation on the streamlining of merger control. There will also be a consultation on the EC’s controversial plan to extend its EC merger control to transfers of non-controlling minority stakes.
Several member states with established antitrust enforcement traditions will be reforming their institutions and rules over the coming year.
The UK will merge its Office of Fair Trading (OFT) with its Competition Commission, while Spain and the Netherlands plan to concentrate various competition, sector and consumer authorities into overarching national super-regulators.
“We expect the top priority for Lord Currie, the designate chairman of the UK Competition and Markets Authority and his newly appointed CEO, Alex Chisholm, will be to ensure a smooth transition to the combined authority, in particular trying to avoid any drop-off in case output,” said Alastair Mordaunt, a partner at Clifford Chance’s competition practice in London.
“We could see the OFT wrapping up on some pending cases this year, as it carries out some ‘spring cleaning’ to ensure that it hands over a decent portfolio of cases to the new authority,” Mordaunt added.
A forthcoming regulatory merger is understood to have given rise to concerns within Spain’s Comisión Nacional de la Competencia (CNC). After a bumper year of activity and plentiful fines, the effects of the merger on the authority’s work are hard to predict, a source at the CNC told PaRR. The authority might extend the time limits applicable in antitrust investigations to smooth the transition, the source said.
Changes are also under way in Germany, where amendments to competition law have been meandering through the country’s legislative process. The changes will align German competition rules with EU law, introduce a “significant impediment on competition” (SIEC) test into national merger control rules, and will seal a legal gap over successor liability for cartels.
The draft law, originally scheduled to come into force on 1 January, is back with the German federal parliament, having been blocked by the country’s regional states. The opponents were particularly vocal against subjecting state-owned healthcare providers to competition scrutiny, as reported by PaRR.
The competition law reform “is stalling and might be postponed until elections are over in September”, predicted Grave.
Mundt did not expect the delay to cause significant problems. “On a case by case basis this could create some degree of uncertainty for companies,” he recognised. “It could make a difference whether a merger is assessed under the old rules or under the SIEC test, which will hopefully apply soon,” Mundt added.
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