Welcome to the Competition Stories – a bimonthly exploration of recent courts and competition law agencies’ decisions. Authored by Makis Komninos, a renowned expert in the field, this new column aims to go through the latest and most important developments in competition law of the last two months. We call them “stories” because Makis has promised to include some anecdotes from time to time, and not just stay at the black letter. Enjoy!
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May and June were two rather uneventful months from the point of view of final decisions or court judgments at EU level. We had two important Opinions, one by Advocate General Bobek in Stichting Cartel Compensation and another by Advocate General Pitruzzella in the optical disk drive cartel case. The former is of greater importance than the latter. And there were a few developments at the Commission front.
However, national developments were more numerous and important. Among those, I would mention the Google Adtech settlement decision in France, whereby Google agreed to pay a EUR 220m fine and offered commitments which were accepted by the French Competition Authority. According to the Autorité’s press release, Google did not dispute the facts and settled the case (while accepting no guilt – this is possible under the French “transaction” procedure); Google’s commitments “will change the way its advertising service DFP and its sales platform AdX function”. Meanwhile, the Bundeskartellamt has now opened proceedings based on the new Section 19a of the German Competition Act against all four major digital players: Facebook (already since January), Amazon, Google and Apple. All this shows that the application of competition law to the digital sector is becoming more and more a national matter. Is this a good or a bad thing? That’s a long discussion. One thing is clear: all this national activity weakens the rationale behind the Commission’s proposal for a Digital Markets Act, which is based precisely on safeguarding the functioning of the internal market and avoiding fragmentation.
But let’s see what’s new at the EU.
I. Court of Justice
- AG Bobek’s Opinion in Stichting Cartel Compensation
This is an Opinion dealing with foundational questions of Article 101 TFEU and the relationship between public and private enforcement. The fact that the Opinion lies in the area of “legal archaeology”, since it is about the pre-modernisation times, should not decrease its importance.
In short, the facts are as follows: In 2010 the Commission had adopted an infringement decision against a number of air cargo carriers for operating a price-fixing cartel. The Commission’s original decision was annulled by the General Court on procedural grounds (in a series of judgments, see e.g. here) and in 2017 the Commission re-adopted the infringement decision. Although the Commission found evidence of continuous price coordination practices from 1999 to 2006, due to the system of secondary legislation put in place by the Council under Article 103 TFEU, it limited its infringement findings as follows:
- For intra-EU routes, the Commission was competent to find an infringement and impose fines for conduct concerning air transport between EU airports before 1 May 2004, when Regulation 1/2003 started to apply. That is because, before 1 May 2004, Regulation 3975/1987 granted the Commission implementing powers to apply Article 101 TFEU in respect of air transport between EU airports only.
- For EU – third country routes, the Commission’s competence was limited to conduct occurring after 1 May 2004, because these routes were excluded from the scope of Regulation 3975/1987.
- For intra-EEA routes, the Commission was competent to find an infringement and impose fines for the whole period from 1999 (when the conduct allegedly started) to 2006 (when it allegedly ended).
- For non-EU/EEA – third country routes, Decision 130/2004 and Decision 40/2005 entered into force on 19 May 2005. From that date onwards, Regulation 411/2004 and Regulation 1/2003 became applicable in the framework of the EEA Agreement. Therefore, the Commission did not find an infringement or impose fines for conduct concerning routes between EEA countries that were not EU Member States and third countries before 19 May 2005.
This new decision has been challenged before the General Court.
In the meantime, there were damages actions filed in the Netherlands. The plaintiffs, in particular, seek damages for the periods (i) prior to 1 May 2004 (for EU – third country routes), (ii) prior to 19 May 2005 (for non-EU/EEA – third country routes); and (iii) prior to 1 June 2002 for EU – Swiss routes. In other words, the plaintiffs rely on Article 101 TFEU even for the period prior to the dates that the Commission acquired competence to enforce that provision.
The important legal question is whether the plaintiffs can rely on the direct effect of Article 101 TFEU to establish competence for the national court, irrespective of the public enforcement (Commission’s) decision and notwithstanding the so-called “transitional regime”, during which Articles 104 and 105 TFEU applied. And, does the direct effect of Article 101 TFEU trump the “transitional regime” established by the above Council regulations? The Dutch referring court seems to believe so, but the UK courts (pre-Brexit) thought otherwise (see here and here). This is the foundational question. And, to put it simply, can a regulation restrict the direct effect of a Treaty provision?
As I expected, and contrary to what the Commission advised the Court to decide here, the Advocate General concludes that the direct effect of Article 101 TFEU and the competence of national courts based on that direct effect cannot be affected by secondary legislation. I have long argued this in my monograph on private enforcement.
The Advocate General starts from the premise that Articles 104 and 105 TFEU only apply to the administrative enforcement of Article 101 TFEU and do not affect the “judicial application” of that provision. Then, Article 101 TFEU clearly had direct effect prior to the Council adopting regulations on the administrative enforcement of that provision pursuant to Article 103 TFEU. The Advocate General refers, in particular, to cases where a cartel is illegal under Article 101(1) TFEU and the issue of exemption (under 101(3)) does not even arise.
On that point, I would have gone even further and I would have said that also Article 101(3) TFEU is capable of direct effect – indeed, the Commission itself had recognised that national courts could apply it even positively. For my monograph on private enforcement, I had engaged in some “legal archaeology” and I had discovered that the Commission recognised in its observations in the context of the old de Norre case that national courts could apply Article 101(3) TFEU and that a national judgment upholding the validity of an agreement did not amount to the granting of an exemption in the sense of Article 101(3) TFEU (in the pre-modernisation times), since the judgment would not have erga omnes effects and would not be constitutive in nature, like the old Commission exemption decisions were.
A tricky point for the Advocate General was how to reconcile his preferred solution with the old judgments in the air transport sector (Asjes and Ahmed Saeed) where the Court of Justice had established that the national courts were denied competence to apply Article 101 TFEU during the “transitional regime”. Actually, in Asjes the Commission had argued that national courts retained competence but the Court held otherwise! Interestingly (but again that was to be expected), the Advocate General brushes aside the importance of these judgments, which he considers to be “partially obsolete” and “trapped in the logic of their time” (paras 97, 65).
In the end, the Advocate General does not miss the foundational nature of the preliminary questions at stake. He stresses that in the final section of his Opinion, under the title “The bigger picture: the public and the private enforcement of competition rules”.
I will risk the prediction that the Court of Justice will follow his Advocate General in this case, notwithstanding the urging of the Commission. I think this approach, which in effect reverses some of the findings in Asjes and Ahmed Saeed, is better suited to the current state of affairs of decentralised application of EU competition law and to the full direct effect of Articles 101 and 102 TFEU. We must not forget that some authors that had argued against the compatibility of Regulation 1/2003 and of the “legal exception system” with the Treaty relied precisely on these two judgments. If the Court were not to follow the Advocate General, an old can of worms could be re-opened…
- AG Pitruzzella’s Opinion in Sony and Others
Advocate General Pitruzzella continued his spree of competition opinions with an interesting take on the concept of “single and continuous infringement”. I will only stay on this part of the Opinion, since the other parts are relatively unimportant. The Advocate General proposes that the General Court’s rulings that dismissed the appeals against the Commission’s decision (see e.g. here) should effectively stand, but considers that the General Court made some legal errors in supporting the wording used by the Commission in its decision.
In particular, the Commission had said that the “single and continuous infringement” consisted of “several separate infringements”. The addressees of the decision had challenged this finding but the General Court held that the Commission did not infringe their rights of defence by referring to the “several separate infringements” point for the first time in the decision, as opposed to the Statement of Objections.
The Advocate General started by reminding the existing case law: “[A]n infringement of Article 101(1) TFEU can result not only from an isolated act, but also from a series of acts or from continuous conduct, even if one or more aspects of that series of acts or continuous conduct could also, in themselves and taken in isolation, constitute an infringement of that provision. Accordingly, if the different actions form part of an ‘overall plan’ because their identical object distorts competition within the common market, the Commission is entitled to impute responsibility for those actions on the basis of participation in the infringement considered as a whole” (para. 57 – emphasis in the original).
He then stressed that a “single and continuous infringement” is continuous conduct consisting of “a series of actions or forms of conduct”, though not necessarily “the sum of multiple instances of unlawful conduct”, which are unlawful in themselves (para. 62). Instead, the actions or forms of conduct that are part of a “single and continuous infringement” “might not in themselves be unlawful under competition rules, or their material or legal substance might not be fully established during the administrative procedure” (para. 63).
The rationale behind the concept of “single and continuous infringement” is that it makes the enforcer’s life simpler by making sure that there is no need to prove that every single fact amounts to illegal behaviour, when there is an “overall plan”.
While the Commission may opt for a “dual characterisation” and consider that a serious of actions amounts both to a “single and continuous infringement” and to individual infringements, the burden of proof it must satisfy is different. The Commission cannot use the concept of “single and continuous infringement” to “cover” all individual incidents and consider them automatically as individual infringements (para. 79). To use the Advocate General’s words, “[t]he Commission may be allowed to resort to the dual characterisation, but for this to be legitimate, it must make this explicit in the statement of objections to the parties and discharge the associated burden of proof and duty to give proper reasoning” (para. 83).
The fact that the parties were fully aware of the instances of individual conduct at issue and defended themselves in that respect was immaterial, because there is a clear difference between the simple existence of an event or contact between the parties, and the fact that it is listed and presented to the parties, “with its legal characterisation” (para. 94). This is the point where the General Court erred, “misled by the Commission’s arguments” (para. 95). Consequently, the Advocate General believes that the Court of Justice should set aside that part of the General Court’s ruling and that the Commission’s decision should be partially annulled. However, the lawyers may be happy but the parties would remain unhappy: the General Court’s “error of law has not affected the overall scheme of the judgment under appeal; nor has it affected that of the decision at issue. If the wording of the ‘dual characterisation’ is removed from the operative part, the single and continuous infringement remains fully established” (para. 117). In other words, the operation has succeeded, although the patient died…
II. Commission
In the area of cartel enforcement, the Commission imposed fines totalling € 371 million on a number of investment banks for allegedly participating in a cartel in the primary and secondary market for European Government Bonds. Interestingly, the fines were imposed only on Nomura, UBS and UniCredit. NatWest was not fined being the immunity recipient, while Bank of America’s and Natixis’s infringement fell outside the limitation period. Portigon, the legal and economic successor of WestLB, received a zero fine as it did not generate any net turnover in the last business year which served as a cap to the fine.
The Commission also re-adopted its decision (annulled by the General Court in 2017 – annulment confirmed on appeal in 2019) to fine ICAP for facilitating cartels in the Yen Interest Rate Derivatives trading market.
On the policy front, the Commission published a report setting out the results of a study that it commissioned to support its ongoing evaluation of the 1997 Market Definition Notice, two expert reports (see here and here) to support its review of the vertical agreements Block Exemption Regulation and the accompanying Guidelines, and a Preliminary Report setting out the initial findings of its sector inquiry into the consumer Internet of Things (IoT). The timing of that sector inquiry is critical. Apart from possibly leading to the future opening of competition investigations of individual companies, it may also inform the ongoing legislative debate on the Digital Markets Act and thus influence ex ante regulation. See further here.
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Finally, a pre-taste of what will come in September: The General Court has planned a five day hearing for the Google Android appeal on September 27. In the autumn, my expectation (and hope) is also that we will be reading the Court’s rulings in Intel (bis) and Google Shopping. Let’s see whether the Court will oblige!
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Citation: Makis Komninos, Competition Stories: May & June 2021, CONCURRENTIALISTE (July 19, 2021)
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