Euclid Law continues to strengthen its practice with hire of Partner Andrea Zulli to head the Brussels office

Andrea joins from US law firm Covington. He was previously a Partner at Norton Rose Fulbright in Milan.

Being qualified in the UK, Belgium and Italy, Andrea advises clients on all aspects of EU and UK competition law, with a strong focus on merger control, behavioural antitrust, compliance, and foreign direct investment. Andrea’s experience and innovative thinking covers a variety of sectors, including private equity, financial services, basic industries, consumer & luxury goods, technology and life science. He is also instructed by Italian law firms on Brussels matters.

Oliver Bretz, Founding Partner of Euclid Law, commented: “I have known Andrea for over 20 years – in addition to being an outstanding lawyer, his reputation in Brussels, London and Italy and his broad and profound experience across all areas of competition law will be of great value to the firm and to our clients.  I look forward to working with Andrea to expand our Brussels footprint.”

Andrea Zulli commented: “I am delighted to be joining Euclid Law, a truly innovative and diverse boutique firm entirely focused on providing expert competition law and FDI advice to the highest possible standard, both in Brussels and London.  I am looking forward to being able to provide a unique offering and insight to clients both here and in Italy.”

Andrea holds an LL.M. in EU and Competition Law from the University of Stockholm and a J.D. from L.U.I.S.S. University in Rome. He is an Italian avvocato, admitted to the Rome Bar, a Solicitor of the Senior Courts of England and Wales, and registered in the A-list at the Balie Brussel.

European Commission confirms final texts for new EU rules for vertical agreements

On 10 May, the European Commission (the ‘Commission’) published final texts of the new Vertical Agreements Block Exemption Regulation (‘VBER’) and the accompanying Guidelines on Vertical Restraints (‘Guidelines’).  These two documents set out the full legal framework for the assessment of vertical agreements under EU competition law that will apply from 1 June. 

Although the process leading up to this moment started back in 2018, this means that businesses and their advisers have been given only three weeks to digest the final texts before they come into force.  While the main changes that will come into force on 1 June are largely as previewed in the draft texts that were published for consultation back in July last year, there are some surprises.

To discover and be surprised, download a copy of our briefing.

Intel Wins Historic Court Fight Over EU Antitrust Fine

by Stephanie Bodoni (26 January 2022)

  • Court topples $1.2 billion penalty levied by EU in 2009
  • Critics of EU procedures question time taken for ruling

Oliver Bretz quoted in Bloomberg and the Luxembourg Times on the Competition law aspect of the Intel case.

Intel Corp. won a historic victory in its court fight over a record 1.06 billion-euro ($1.2 billion) competition fine, in a landmark ruling that upends one of the European Union’s most important antitrust cases.

The EU General Court ruled on Wednesday that regulators made key errors in a landmark 2009 decision over allegedly illegal rebates that the U.S. chip giant gave to PC makers to squeeze out rival Advanced Micro Devices Inc.

While the surprise ruling can be appealed one more time, it’s a stinging defeat for the European Commission, which hasn’t lost a big antitrust case in court for more than 20 years. 

The Luxembourg-based EU court said the commission provided an “incomplete” analysis when it fined Intel, criticizing it for failing to provide sufficient evidence to back up its findings of anti-competitive risks. 

Margrethe Vestager, the EU’s antitrust commissioner, said her team would “study in detail what it can learn” from the judgment on the case, which was pushed through by her predecessor Joaquin Almunia.

Intel “always believed that our actions regarding rebates were lawful and did not harm competition,” it said in an email. “The semiconductor industry has never been more competitive than it is today and we look forward to continuing to invest and grow in Europe.” 

The judgment follows a 2017 ruling from the bloc’s top court, which criticized the General Court — the EU’s second-highest tribunal — for not properly checking all factual and economic evidence when it previously weighed Intel’s appeal. 

The EU commission in 2009 hit Intel with what was then the bloc’s biggest antitrust fine. It represented about 4% of Intel’s $37.6 billion in sales in 2008. Since then, Santa Clara, California-based Intel has been locked in a non-stop legal dispute with the EU’s antitrust arm. 

Wednesday’s victory may now offer encouragement for other companies to go to court. Many companies under investigation for monopoly abuse have opted not to fight hard since the chances of overturning the EU at court were viewed as low.

But European consumer group BEUC said the duration of the court fight reveals a major flaw in the EU justice system.

Twenty Years

“The ruling is disappointing, as we believe Intel engaged in anti-competitive behaviour which limited consumer choice,” said Agustin Reyna, BEUC’s director for legal and economic affairs.

“But it is even more striking that it has taken over twenty years for a decision on this antitrust case,” Reyna said. “What we need is an urgent, speeding up of antitrust procedures. It cannot take so long for the conclusion of a case in which there are such serious competition concerns raised.”

Following its investigation, the commission said it found evidence that Intel hindered competition by giving rebates to computer makers from 2002 until 2005 — if they bought at least 95% of PC chips from Intel. It said Intel imposed “restrictive conditions” for the remaining 5%, supplied by AMD, which struggled to overcome Intel’s hold on the market for processors that run the devices.

The court on Wednesday said the commission had failed to show “to the requisite legal standard” that the contested rebates posed an anti-competitive risk. 

“There is finally a degree of common sense creeping in,” said Oliver Bretz, a lawyer at Euclid Law in London. In the Intel case that means “to require that rebates have to be capable or likely to have anti-competitive effects, based on the evidence.”

The case is: T-286/09 RENV – Intel Corporation v. Commission.

The articles were posted in Bloomberg and in the Luxembourg Times.

Taking Security and Options Seriously: the UK and German Investment Screening Regimes

Arrangements involving current and potential future events, such as taking security and agreeing options, require careful scrutiny under investment screening regimes. It is not safe to assume that a trigger will operate in the same way as under another more developed regulatory regime, such as merger control. Moreover, taking a security or agreeing an option needs to be considered upfront and not just when the security is about to be enforced or the option exercised.

In this piece we consider the position under the UK’s forthcoming National Security & Investment Act (NSI Act) regime and briefly compare this to the position under the recently reformed German regime. We assume that the other requirements for triggering are satisfied and focus on whether a security or an option could in itself take the transaction over the jurisdictional threshold.

Taking security

When a security is actually enforced, then this may well trigger an investment screening regime, as enforcement will typically involve the lender gaining control over the relevant target or its assets which are the subject of the security. The more difficult question, which will likely arise many years earlier at the initial transaction stage, is whether merely taking the security is sufficient.

To download and read the full paper, click here.

UK consumer watchdog frustrated at lack of bite

CMA left reliant on courts to fulfil role despite government promises to give it more powers two years ago

“The CMA’s main gripe is that it has never had the fining powers and the ability to run a [consumer protection] case through to a final decision with penalties,” said Becket McGrath, competition partner at Euclid Law. “The CMA wants to have the equivalent set of [consumer] powers as its competition powers that it can use to effectively take enforcement action against consumer law practices which evolve at a [fast] rate.”

Follow the link to read the full Financial Times article.

Countdown running for entry into force of new UK national security investment screening regime

The UK’s new national security investment screening regime will enter fully into force on 4 January 2022.  From that date, the National Security and Investment Act 2021 (the ‘NSI Act’) will give the Government the power to review a wide range of investments in businesses that are active in the UK or acquisitions of related assets.  While the new regime has the ultimate objective of preventing transactions that could harm the UK’s national security, it will impact a much wider range of deals. 

Under the new regime, investments in entities that are active in the UK in 17 specific sectors will have to be notified to the Government and cleared before completion.  The notification obligation applies regardless of whether the investor is foreign or UK-based and severe civil and criminal penalties will apply if notifiable transactions are not notified.  The underlying transaction will also be void as a matter of English law. 

Although 4 January may feel like a long way off, it is now less than three months away.  The new NSI regime will have a potentially significant impact on timetables and deal certainty for transactions where closing is due to take place after that date.  As a result, it may well be relevant to transactions that are currently being negotiated.  It is also notable that, once the regime is in force, the Government will have the power retrospectively to review and call in any transaction that completed on or after 12 November 2020 (the date on which the bill was originally introduced to Parliament).

Filings will be mandatory where the target is active in any of the following sensitive sectors:

Advanced materialsCritical suppliers to governmentMilitary and dual-use
Advanced roboticsCritical suppliers to the emergency servicesQuantum technologies
Artificial intelligenceCryptographic authenticationSatellite and space technologies
Civil nuclearData infrastructureSynthetic biology
CommunicationsDefenceTransport
Computing hardwareEnergy 

The assessment of whether a qualifying entity is involved in a specified sector will involve careful analysis of the target’s business alongside the relevant statutory definitions. These are extremely detailed and prescriptive, with some running to several pages. 

To download and read the full paper, click here.

Reforming Competition and Consumer Policy

Response to the Public Consultation by the Department for Business, Energy and Industrial Strategy

Proposals on Markets and Merger Control Jurisdiction

Euclid Law Ltd

We are submitting this paper from the position of practitioners who strongly believe that consumers, businesses and practitioners benefit from rational, predictable and up to date competition and consumer law regimes. The views stated are our own and do not necessarily represent the views of any client of our firm.

While the Government’s reform proposals are extremely wide-ranging, we have focused this response on the two areas where the proposed changes cause us most concern, namely the markets and merger control regimes.

[…] The Government’s consultation looks at strengthening the somewhat unique feature of market investigations. This allows the CMA to impose remedies in markets where there is no evidence of wrongdoing. It is essentially the exercise of a Ministerial power delegated to the CMA, enabling the CMA to regulate parts of the economy without any Ministerial or Parliamentary involvement. Few other competition authorities enjoy such wide-ranging powers. The flipside of that coin is that the process involves a lengthy and rigorous review by independent Panel Members, only at the end of which remedies can be imposed – so-called “Market Investigation References”. The Panel Members are part-time and are independent of the CMA and its Board. It is that independence that is seen as an integral part of the system.

While the CMA has the ability to conduct Market Studies without a full market investigation (and thus without the involvement of independent Panel Members), it lacks the power to impose a binding remedy in such cases. If the CMA wishes to impose remedies, the only option is for the Board of the CMA to refer the matter to an independent Panel for a market investigation. Of course, the CMA already has other options available to it short of imposing remedies, such as seeking voluntary undertakings from market participants in lieu of a reference or making recommendations for others to take action (including other regulatory bodies or Government).

Download and read the full response here.

UK Competition and Markets Authority Confirms Direction of Travel for Post-Brexit Approach to Vertical Agreements

by Becket McGrath

On 17 June, the UK Competition and Markets Authority (‘CMA’) published a keenly awaited consultation document setting out its proposed recommendations to Government for the UK’s new competition law regime for vertical agreements.  Essentially, the CMA is proposing to adopt an approach that remains closely aligned with the EU verticals regime, which is itself about to undergo a refresh to take account of market and legal developments since its last update in 2010.  This is a welcome development, as it should reduce the potential for material divergence between the two regimes, which would reduce legal certainty and increase costs for businesses trading in both the EU and UK.

Background

The need for this consultation has arisen now, as the post-Brexit transitional arrangements for vertical agreements (such as selective and exclusive distribution agreements) are about to expire.  To summarise the legal position, while the UK was an EU Member State the analysis of vertical agreements in UK competition law was largely determined by the EU Vertical Agreements Block Exemption Regulation (‘VBER’).  This sets out the circumstances in which a vertical agreement is protected from challenge under Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’).  Importantly, the VBER also defines certain ‘hardcore’ restrictions that render an agreement presumptively unlawful.   Together with the accompanying European Commission Guidelines, the VBER effectively serves as a complete code for the treatment of vertical agreements in EU competition law.

[…]

Since the direct application of EU competition law in the UK ceased at the end of the Brexit transition period on 31 December 2020, new arrangements were needed urgently to determine the status of vertical agreements in UK competition law from that point.  The immediate solution adopted by the UK Government was essentially to continue the pre-Brexit approach, by incorporating the current EU VBER in UK domestic law, as a ‘retained block exemption’, at least until the VBER’s expiry on 31 May 2022.  Since that date is now approaching, the Government needs to decide what to do.  At the same time, the Commission is part way through its own review of the VBER and Guidelines, as it needs to decide the extent to which the EU regime should be updated after 1 June 2022.

While it may be tempting to continue with the UK’s current approach of aligning completely with EU law in this area (which broadly works), unlike the last time the VBER was reviewed in 2010 UK Government and CMA officials no longer have any input on the text of the EU VBER and Guidelines.  As a result, a decision simply to follow the (revised) EU regime from June 2022, whatever its form, would hardly be a ringing endorsement of the UK’s new found freedom to diverge from EU rules.  On the other hand, the Government and the CMA need to bear in mind that diverging from EU law in this area for its own sake would introduce complexity for the large number of businesses that trade in the UK and EU.  To introduce further complexity, many of the core principles of EU law competition law as applied to vertical agreements rest on EU-specific policy priorities arising from the need to create a single European market.  It was unclear how far these priorities should continue to determine the shape of UK competition law, post-Brexit, especially since the UK is no longer part of the Single Market.  Given this uncertainty, the UK CMA consultation document is an important step forward.

To read about key recommendations and next steps, download the full briefing here.

Free enterprise – The Law Gazette

By Marialuisa Taddia

Debates concerning the role and procedures of the Competition Appeal Tribunal mirror the UK’s dilemma post-Brexit

So how do practitioners rate the tribunal? ‘In my view, the CAT is one of the real success stories of the “new” UK competition regime that was put in place by the Competition Act 1998,’ says Becket McGrath, a partner at Euclid Law. ‘It has proved to be an effective and independent tribunal that is prepared to overturn decisions that are insufficiently well reasoned and to pick up material procedural defects, while showing sufficient deference to authorities’ discretion.’

[…]

There are also plenty of examples where CAT has upheld the regulator’s decisions, […] dismissed all of the applicant’s arguments and upheld the CMA merger decision in full’, McGrath notes.  

McGrath says the Penrose report contains ‘a mix of good and bad ideas but the details were largely brushed aside’. […]

To read the full article, click here.

EC Evaluation of the VBER – Euclid Law’s response to the Public Consultation

As part of its ongoing assessment of the Vertical Block Exemption Regulation (VBER), the European Commission launched a public consultation questionnaire, which closed on 26 March 2021, to obtain specific feedback on various policy options. 

Euclid Law responded to the consultation, agreeing with the Commission’s overall evaluation that the VBER and Guidelines remain useful and relevant, but also agreeing that they need to be updated to take account of market and case law developments since 2010. 

To support the questionnaire response, Euclid Law prepared a separate paper focused on some of the specific points addressed by the Commission, which you can find here.