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Competition Law Newsletter April 2015
Contents
1.   European Commission announced launch of e-commerce sector inquiry (and may conduct inspections)
2.   Court of Justice clarified rules on recidivism and liability for cartel violations of subsidiaries
3.   Court of Justice confirmed that almost any discussion with competitors on market circumstances can be considered a cartel
4.   Oberlandesgericht Düsseldorf confirmed that claim vehicle business model was contrary to public morals
 
5.   Limburg District Court accepted jurisdiction in damages claim against immunity applicants
6.   Amsterdam District Court ruled that EU Commission is best placed to decide on disclosure of its cartel decisions
1. European Commission announced launch of e-commerce sector inquiry (and may conduct inspections)

On 26 March 2015, the Commission announced that it is seeking to launch an industry-wide review of business practices in e-commerce, known as a "sector inquiry".

What is this about?

Sector inquiries are investigations that the Commission carries out into sectors of the economy when it believes that a market is not working as well as it should and it suspects that breaches of the competition rules might be a contributory factor. If it finds grounds on the basis of the information obtained during the inquiry, the Commission may decide to open specific investigations into possible breaches of the competition rules. This is what the Commission did on the basis of the results of sector inquiries into the energy, financial and pharmaceutical sectors.

Why is this relevant?

In the context of previous sector inquiries, the Commission has conducted unannounced inspections at the premises of companies. Note that these inspections are not necessarily focused on companies for which the Commission already has positive indications of wrong-doing. Instead, inspections have been used more broadly to ensure immediate access to relevant information. In this context, companies active in industries where e-commerce is important (see below) should ensure that they are optimally prepared for possible inspections. Checking-up on dawn-raid manuals and compliance efforts can be part of that exercise. Also, the Commission is likely to send out questionnaires to industry participants. A sector inquiry can reveal evidence of infringing conduct which can lead to severe fines.

For whom is this relevant?

Sector inquiries, including the one announced, are characterized by their wide scope. The rise of e-commerce is of course affecting many industries including FMCG, electronics and leisure. Industries and companies that are particularly experiencing increasing pressure on existing business models as a result of online trade, may be involved in the sort of behaviour that can be problematic under the competition rules (see below).

What types of behaviour is the Commission looking for?

The Commission as well as national competition authorities have been expressing concerns for a while about efforts of suppliers to restrict the freedom of online distributors to freely use the internet to reach customers. The Commission has indicated that there are signs that “some companies may be taking measures to restrict cross-border e-commerce”. Furthermore, the sector inquiry "will focus on private – and in particular contractual – barriers to cross-border e-commerce in digital content and goods". This suggests that any direct or indirect efforts by suppliers that hamper online distributors from freely supplying customers throughout the EU will receive particular attention. However, any other e-commerce-related behaviour violating the competition rules discovered in the context of a sector inquiry can lead to fines. This includes agreements that a distributor shall limit its proportion of overall sales made over the internet and agreements that the distributor shall pay a higher price for products intended to be resold by the distributor online than for products intended to be resold offline.

What should I do?

If you operate a distribution network which includes online distributors, the upcoming sector inquiry can be a good reason to re-assess your contracts and business practices from a competition law compliance-perspective. At the same time and as noted above, it may be prudent to assess your dawn-raid readiness.
The sector inquiry is expected to commence in the next few months.
 
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2. Court of Justice clarified rules on recidivism and liability for cartel violations of subsidiaries

On 5 March 2015, the Court of Justice dismissed all appeal grounds in two cases regarding the Chloroprene Rubber ("Rubber") cartel (Joined cases Commission v Versalis SpA and Eni SpA C-93/13 P and Versalis SpA and Eni SpA v Commission C-123/13 P). The judgment provides clarification on the application of the concepts of economic succession and recidivism, at the core of which is the concept of "economic unit" or "undertaking".

Economic Succession

Through economic succession, the authorities are empowered to hold an entity liable for a competition law infringement if it has acquired the business related to the infringement from another entity. In their appeal, Eni and Versalis claimed that the concept of economic succession can only be applied in exceptional cases "where the infringing entity has ceased to exist, either in law or economically". In the present case, EniChem transferred its Rubber business to Versalis, both companies belonging to the same Eni Group. Given that EniChem still exists, the parties claimed an error on the application of economic succession. 

The Court of Justice dismissed these arguments and ruled that the Commission is not precluded from imposing penalties on the acquiring entity, even if the transferring entity still exists, when both entities constitute one economic entity. The Court further elaborated that in particular, this application of economic succession is permissible where both entities have been subject to control by the same person and have carried out the same commercial instructions, given their close economic and organizational links.

Recidivism

On appeal, the Commission claimed that the GC erred in law by ruling that, in order to take into account a previous infringement for which a legal entity from the Eni group was penalized and apply an increase in the fine on account of recidivism, the parent company, Eni, should have been an addressee of the statement of objections and the decision of the previous infringement.

The Court of Justice sided with the Commission and ruled that in order to establish a repeated infringement on the part of a parent company, it is "not necessary for that company to have been subject to previous legal proceedings" that gave rise to a statement of objections or the decision, or to have been able to dispute at that time, that it formed a single economic unit with other entities against which proceedings were brought. The Court of Justice emphasized that what matters is that the parent company is able to defend itself "at the time when the repeated infringement is alleged against it". At that moment, the Commission should issue a statement of objections that contains information demonstrating that the conditions for a finding of repeated infringement are satisfied. In particular, this information should show that the legal person formed, at the time of the first infringement, a single undertaking with the company found to have committed the first infringement. The Court of Justice concluded that that was not the case here as the decision at issue neither contained sufficient reasoning enabling Eni to defend itself nor the EU judicature to carry out its review. It thus ultimately dismissed the Commission's appeal.

From this judgment it follows that undertakings should be aware of the potential repercussions that can arise, at any point in time, due to previous infringements of their subsidiaries or the businesses that they acquire. This is particularly worrisome if one considers that the Court confirmed that the time elapsed between infringements is irrelevant and would only be taken into account when assessing the undertakings' disposition to infringe competition rules and the possible difficulties to exercise their rights of defense.  
       
   
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3. Court of Justice confirmed that almost any discussion with competitors on market circumstances can be considered a cartel

On 19 March 2015, the Court of Justice handed down its judgment in Dole v Commission (Case C-286/13 P
). The Court of Justice dismissed entirely Dole's appeal against a finding of participation in a concerted practice to exchange information in the market for bananas.

The General Court ("GC") had upheld the Commission's finding of infringement by object given that in the context of the market for bananas the information exchanged decreased uncertainty [See our April 2013 newsletter article]. The information exchanged related to, among others, competitors' own quotation prices, price trends and views on weather conditions. The pre-pricing information was found to reduce uncertainty because market trends, indications of developments and in some transactions actual prices could be inferred.

On appeal, Dole submitted that because the nature of the information and how removed it was from the setting of the actual prices, the exchange of information "cannot be regarded as capable of removing uncertainty".

In its judgment, the Court of Justice first recalled established case law on object restrictions. It is established in the jurisprudence that certain practices are so likely to have negative effects that, having regard to the objectives and the economic context, neither the effects on the market nor their direct connection to consumer the prices would have to be proven. The Court of Justice also recalled the rebuttable presumption that undertakings which remain active in the market are presumed to have taken account of the information exchanged (CB v Commission C-67/13 P; T-Mobile Netherlands v Commission C-8/08).

Having regard to the established case law and facts, the Court of Justice found that the GC did not err in law and was "entitled to take the view" that these pre-pricing communications constituted a restriction by object because they "made it possible to reduce uncertainty for each of the participants as to the foreseeable conduct of competitors". 

This judgment serves as a stark reminder that, given the economic context, certain pre-pricing information that may make it possible to reduce uncertainty, can be regarded by the authorities as an object restriction.  
       
   
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4. Oberlandesgericht Düsseldorf confirmed that claim vehicle business model was contrary to public morals

On 18 February 2015, the German Court of Appeal (Oberlandesgericht Düsseldorf; "OLG Düsseldorf") confirmed that the assignments of claims to claim vehicle ("CDC") in a follow-on action for damages in the cement cartel are void under German law. It held that the assignments violated German public morals (gute Sitten) as it was foreseeable at the time of the assignments that CDC would not be able to meet a possible future litigation cost order. The financial risks involved in litigation were thus unjustifiably shifted to the defendants [See our March 2015 newsletter article]. The OLG Düsseldorf thereby upheld the judgment
 of the Landsgericht Düsseldorf of 17 December 2013 [See our January 2014 newsletter article]. The OLG Düsseldorf recently published its judgment in full.

The OLG Düsseldorf held that it is up to the claimant to show that it has sufficient financial means at its disposal at the time of the assignments (sekundären Darlegungslast). In this case, CDC failed to do so. The OLG Düsseldorf rejected CDC's argument that the value of the assigned claims themselves would suffice to cover a possible future litigation cost order. The OLG Düsseldorf confirmed that the relevant moment to assess whether a legal act violates public morals, is the moment the act is performed. Therefore, CDC's statements with regard to its financial position after the assignments took place, were held irrelevant.

Furthermore, the OLG Düsseldorf held that it is not necessary to establish that the parties to the assignments intended to violate public morals. It suffices that they knew of the facts constituting the violation, or that they chose to ignore such facts. In this case, the OLG Düsseldorf held that the shift of the risk involved in litigation was an important purpose of the assignments. It also held that the parties to the assignments knew or should have known and accepted the risk that CDC might have insufficient funding to meet a possible future litigation cost order.

CDC decided not to appeal this judgment by the OLG Düsseldorf, rendering it a final judgment.

The question of the validity of assignments to claim vehicles is at issue in several follow-on proceedings before national courts within the EU. One of them is the paraffin-wax case in the Netherlands. In that case, on 17 December 2014, the District Court of The Hague found that the assignments of damage claims to a different CDC entity were valid under German law. The District Court held that CDC had sufficient funds to meet a possible future litigation cost order at the time of the assignments [See our January 2015 newsletter article].
       
   
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5. Limburg District Court accepted jurisdiction in damages claim against immunity applicants

On 25 February 2015, the District Court of Limburg ("District Court") rendered a judgment on various preliminary issues in an antitrust damage case between Deutsche Bahn and a number of producers of prestressing steel. The judgment confirms that, in general, Dutch courts consider themselves competent to rule on damages claims against all alleged cartel participants, even when they are foreign immunity applicants, if a Dutch "anchor" is amongst the defendants.

In the main proceedings, Deutsche Bahn claimed the defendants, including German immunity applicants DWK and Saarstahl, are liable for any damage they may have caused due to their Article 101 infringement (See Commission Decision COMP/38.344). The defendants filed various preliminary motions, including a motion to declare lack of jurisdiction and a request for disclosure.

The District Court dismissed DWK's and Saarstahl's motion to declare lack of jurisdiction because it found a sufficiently close connection between Deutsche Bahn's claims against Netherlands-based anchor defendants Nedri Spanstaal and Hit Groep on the one hand, and the claims against DWK and Saarstahl on the other. In establishing this close connection, the Court took into consideration that, according to the Commission decision, all defendants  took part in a "single and continuous infringement" of competition law and that they "had a common goal" in carrying out their arrangements.

Furthermore, DWK and Saarstahl argued that under the recently adopted, but not yet implemented, Actions for Damages Directive, immunity applicants such as themselves cannot be held jointly and severally liable for all damage caused by the cartel, but only for damage incurred by their own customers. The District Court rejected this argument, considering that even if it were to accept that the immunity applicants are only liable for damage caused to their own customers, the case against the immunity applicants still had a sufficiently close connection with the claims against the other defendants. 

The District Court furthermore dismissed the defendants' request for disclosure of invoice data and assignment deeds of the claims. The District Court ruled that the defendants did not yet have a legitimate interest in disclosure of these documents. Such disclosure would be “premature” as the relevance of these documents in assessing the defendants’ liability will depend on the substantiation of the parties in the main proceedings. 
       
   
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6. Amsterdam District Court ruled that EU Commission is best placed to decide on disclosure of its cartel decisions

In a 
judgment of 27 March 2015, the District Court of Amsterdam ("District Court") dismissed claims from claim vehicle Equilib that certain addressees of the European Commission air cargo decision should disclose a confidential version of this decision and documents from files of various non-European competition authorities. The District Court furthermore ruled that claims from the airlines that would require Equilib to hand over a large amount of documents in relation to its claims were "premature".

Equilib had argued it needed the unredacted Commission decision and the other documents to substantiate further its damage claims. Equilib suggested to ring-fence the confidential version around itself and its advisors, after a redaction of references to leniency corporate statements. The airlines stated that all the necessary information could be found in the publicly available summary of the decision.

The District Court decided that Equilib had not sufficiently substantiated why it needed the information in the confidential decision and the other documents, taking into account the information already available in the summary. Furthermore, the District Court considered that on the basis of EU law, the rights of addressees as well as non-addressees of the decision should be safeguarded, which would make the redaction process of a 300 page decision an extensive, time-consuming and burdensome task. The European Commission is better equipped for this task, and its publication process has reached an advanced stage.

The District Court also rejected claims from the airlines that Equilib should hand over, among others, a large amount of transport documents or "airway bills". The District Court considered that at this stage of the proceedings it is up to Equilib to substantiate further its claims, especially with regard to the alleged damage and causal link. Equilib should detail the specific routes, flights and actions for which it seeks damages. By this substantiation of Equilib the airlines may receive the information they are looking for, which would make their claim unnecessary.

In another damage claim against the airlines, instituted by claim vehicle SCC, the District Court reached a similar conclusion with regard to the airway bills sought. The District Court furthermore
decided that the appropriate time to rule on the request from the airlines to stay the proceedings, awaiting the outcome of the European proceedings against the air cargo decision, would be after the airlines submit their statement of defence.
 
 
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Team
Christof Swaak
Partner Amsterdam
 
Hendrik Viaene
Partner Brussels
 
Rein Wesseling
Partner Amsterdam
Peter Wytinck
Partner Brussels
 
Michelle Argueta
Associate Amsterdam
 
Laurence Temmerman
Junior Associate Brussels
Floris ten Have
Senior Associate Amsterdam
 
Delphine Gillet
Associate Brussels
 
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