Tag: European Commission

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

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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.

Response to the additional Public Consultation on Proposed Guidance relating to Information Exchange in the context of Dual Distribution

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As part of the ongoing review of the Vertical Block Exemption Regulation and Guidelines, on 4 February 2022, DG COMP launched a two-week consultation regarding proposed guidance on information exchanges in dual distribution.  The proposed new section provides much needed clarity and valuable additional guidance on the circumstances in which information exchange in a dual distribution context will not raise concerns.  The Commission also appears to have dropped the proposed 10% market share threshold, which is very welcome as this will materially reduce complexity and uncertainty.   

Euclid Law’s response is available here. 

Intel Wins Historic Court Fight Over EU Antitrust Fine

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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.

European Commission Evaluation of the Vertical Agreements Block Exemption Regulation (VBER)

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Response to the Public Consultation on the draft revised Regulation and Guidelines

Euclid Law Ltd.

1. Euclid Law Ltd. (Euclid Law) is a boutique competition law firm, with offices in London and

Brussels. We advise on all aspects of EU and UK competition law. Euclid Law is also a

founding coalition member of eControl GlobalTM, through which we work closely with US law

firm Vorys, Sater, Seymour and Pease. Our European eControl practice has a particular focus

on advising brands on the roll-out of selective distribution systems.

2. Our lawyers advise on the compatibility of distribution agreements with EU competition law

on a daily basis. We also have experience of representing clients in investigations of their

distribution arrangements by the European Commission (Commission) and National

Competition Authorities (NCAs). As well as advising a wide range of brands, from globally

established companies to start-ups, we have advised online retailers, marketplace operators,

brick and mortar retailers, software companies, sporting rights companies, financial services

companies, insurance companies, gaming companies and pharmaceutical companies on their

distribution arrangements.

3. We are submitting this paper from the position of practitioners who see merit in having a

rational, predictable and up to date competition law regime for vertical agreements. The views

stated are our own and do not necessarily represent the views of any client of our firm.

Download and read the full memo here.

Revised EU rules for vertical agreements unveiled

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by Becket McGrath & Loukia Kopitsa

On 9 July 2021, the European Commission (the ‘Commission’) published its draft texts for the new Vertical Agreements Block Exemption Regulation (‘VBER’) and Guidelines on Vertical Restraints (‘Guidelines’) for public consultation.  These are the result of an evaluation process, which started in 2018, of the current competition law rules for vertical agreements.  Those rules entered into force in January 2010 and are due to expire at the end of May 2022.

One area that has not changed is the attitude taken to price restrictions.  Despite intense lobbying, the new VBER retains the current approach in classifying resale price maintenance (‘RPM’)as a hardcore restriction of competition that is presumptively unlawful and can be justified only in exceptional circumstances.

The single key theme that emerges most strongly from the new texts is that the Commission agrees with those who have argued that the 2010 regime was unduly favourable to online retailers and marketplaces (principally Amazon).  While the 2010 changes were motivated by a desire to encourage online retail, as a means of developing the single market and improving consumer access to products on a cross-border basis, brands objected that the regime made it too difficult for brands to control online retail.  Should they be retained in the final texts, the proposed changes will make life harder and less certain for online retailers (especially those, such as Amazon, that operate third party marketplaces in parallel) and those doing business with them.  While some of the changes will be welcomed by brands, others introduce additional complexity and uncertainty that are likely to make it harder to apply the VBER in practice.  As a result, it cannot be said that, taken in the round, the new texts mark a distinct improvement on the 2010 regime.

Background

The VBER creates a safe harbour, known as a ‘block exemption’, which protects common forms of distribution agreements from legal challenge under Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’), which prohibits anticompetitive agreements, and national equivalent rules.  In principle, any agreement between parties operating at different levels of the supply chain (for example, a brand and a distributor) can benefit from the block exemption, provided that the parties’ market shares do not exceed 30% of the relevant markets and the agreement does not contain any ‘hardcore’ restrictions of competition. 

Hardcore restrictions (e.g., RPM, absolute territorial protection, customer allocation), which are set out in Article 4 of the VBER, are presumed to be so harmful to competition that they render an entire agreement ineligible for protection and presumptively unlawful.  If an agreement contains a less serious ‘excluded restriction’, the specific restriction will be unenforceable, but the rest of the agreement will be protected.  

The Guidelines set out extensive guidance concerning application of the VBER and for assessing the legality of agreements outside of its protective scope.  Taken together, the VBER and Guidelines effectively create a code for the application of EU competition law (and, by extension, national competition laws) to vertical agreements.

Click here to download the full briefing and dive into the main changes of the revised Regulation.

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

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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.

Signs of Commission’s Verticals Focus Emerge in VBER Evaluation Document

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by Becket McGrath, Sarah Long and Aakash Kumbhat

On 8 September 2020, the European Commission (‘the Commission’) published the results of its evaluation of the Vertical Block Exemption Regulation (‘VBER’) and associated guidelines in the form of a Staff Working Document. 

The 232 page document summarises evidence received by the Commission from businesses, their advisers, consumer bodies and national competition authorities (‘NCAs’) in response to its consultation on the operation of the current vertical agreements regime.  It also takes account of the findings of the Commission’s E-commerce sector inquiry, which ran from 2015 to 2017, and a detailed ‘evaluation support study’ that was conducted by external consultants.  Although the document is primarily concerned with pulling together the wide-ranging views received through this process, which has been running since 2018, it does contain some broad conclusions and an indication of its priorities for updating the verticals regime.

To read the full note, click here.

European Commission Consultation on New Competition Tool

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Justification for a New Competition Tool

Based on our experience of the operation of the UK market investigations regime, we agree that a new tool that goes beyond the options currently available to the Commission under Articles 101 and 102 TFEU, and that enables the Commission to identify and tackle structural market issues, is likely to be a useful addition to the EU competition regime. As far as jurisdictional scope is concerned, however, while digital markets may be particularly prone to structural issues, and the need for rapid action may be greater, there is nothing inherently novel or ‘digital’ in the desirability of a ‘backstop’ regime that empowers an authority to take specific action if harms arise for which traditional antitrust tools are insufficient.

UK experience has demonstrated that, as well as being helpful for tackling issues in potentially oligopolistic markets (such as groceries or audit), such a tool can be valuable where markets are not functioning well due to wider factors, including the interplay with regulatory regimes (for example, rolling stock leasing, energy or private health care) or past government decisions (for example, airports). Each case will turn on its facts, however, justifying the need to individual assessments, within a clearly defined legal framework.

Our response to the European Commission Consultation

As lawyers qualified in the UK and Member States with significant expertise in advising clients on EU and UK competition law, our views also draw on personal experience of enforcing the UK competition regime gained by members of the firm while working for the UK Competition and Markets Authority and its predecessor, the Office of Fair Trading. Our hope is that this experience can provide useful pointers that may assist the Commission in the design of a new competition tool. To read our full response, click here.

So… this is Brexit

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UK competition law beyond the withdrawal – Part I & II

by Becket McGrath

Since the moment that the result of the UK’s referendum on EU membership in June 2016 was announced, there has been significant uncertainty over when the UK would leave the EU, whether the terms for departure could be agreed in time to avoid a “no deal” exit and even whether Brexit would happen at all. The first part focused on the competition law provisions in the Withdrawal Agreement. These provisions confirm the continued application of EU competition law in the UK during the Brexit transition period, which is currently due to end on 31 December 2020 These uncertainties were ultimately resolved sufficiently to enable Brexit to take place on 31 January 2020.

The second part goes beyond the Withdrawal Agreement which also provides for the continued jurisdiction in the UK of the European Commission and Court of Justice of the EU (CJEU) after the end of the transition period for certain matters, including competition investigations that are ongoing at that point and related appeals. Finally, the Northern Ireland Protocol to the Agreement provides for indefinite Commission jurisdiction to supervise UK state aid measures with a potential to affect trade between Northern Ireland and the EU. Assuming that the UK abides by its international law obligations under the Withdrawal Agreement, these aspects of the relationship are now fixed. As a result, the only major area of uncertainty regarding the transition period is whether it will be extended.

To read the rest of this article which was published in Competition Law Insight, click for Part I and Part II.

Becket McGrath quoted in GCR article: “CMA proposes regulatory reform to combat big tech”

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The UK’s Competition and Markets Authority has called for a new regime to regulate the online economy, after its digital advertising study found the market power of Google and Facebook is causing substantial harm to “society as a whole”.

The enforcer today asked the UK government to create a digital markets unit and empower it to break up big tech companies and enforce a code of conduct among online platforms to resolve competition concerns in that sector. It did not specify if the new unit should function within an existing body or be created as a new standalone regulator.

The EU enforcer launched a public consultation on its proposed market investigations tool in May. EU competition commissioner Margrethe Vestager has cited the CMA’s similar power as an efficient way of tackling competition concerns in fast-moving markets.

Euclid Law partner Becket McGrath, who advised a publisher during the UK enforcer’s market study, said it is understandable why the CMA asked the government to introduce a new regulatory regime. Conduct that is not good for competition does not necessarily infringe antitrust law, but it could be addressed through careful, targeted regulation, he said.

Combating concerns related to the market power of big tech requires difficult public policy trade-offs that extend well beyond competition law, McGrath added. 

“With all these moving pieces, there has to come a point when the CMA, as an independent and unelected agency, hands over to the government,” he said.

McGrath also questioned if the UK could effectively implement some of the CMA’s proposals without aligning with reforms emerging elsewhere, particularly in the EU. “Solutions need to be closely coordinated – it’s not good for businesses if there is too much divergence,” he warned.

To read the full article on GCR website, click here.