EU/UK Competition Law Newsletter - January 2011

January 3, 2011

New rules on horizontal cooperation agreements in the EU

On Dec. 14, 2010, the European Commission (EC) published revised rules for the assessment of cooperation agreements between competitors. The texts include two “block exemptions” (safe harbor rules) covering certain specialization agreements, and research and development (R&D) agreements, as well as very important general guidelines. The latter provide a framework for the EU competition law analysis of the most common forms of horizontal cooperation agreements, including those concerning R&D, production, purchasing, commercialization, standardization, standard terms and information exchange.

The R&D block exemption has been, in the words of the EC, “considerably extended” so as “to [facilitate] innovation in Europe.” The two most noteworthy changes in the guidelines are a new chapter on the difficult issue of information exchange, and substantial changes to the chapter on standardization agreements. This set of rules is important to any company which has or proposes to enter into a cooperation agreement with a competitor, if that agreement may have an impact in the EU.

UK Companies Cannot Recover Competition Law Fines from Their Directors or Employees

On Dec. 21, 2010, the English Court of Appeal found that corporate competition law fines imposed under the UK Competition Act 1998 are “personal” to the fined entity. Accordingly, it cannot seek recovery of the fines or related costs from the directors or employees who engaged in the conduct which brought about the fine. The case arose out of Safeway’s (a British supermarket chain) settlement with the UK Office of Fair Trading (OFT) in December 2007, under which it agreed to pay a fine of GBP11 million for alleged price fixing concerning dairy products.

It subsequently brought an action in the UK for damages against certain former employees (including directors), which has now been stopped by this judgment. The judgment removes one area of potential competition law-related liability for UK directors/employees, although it remains the case that the OFT is increasingly seeking to ensure that UK directors focus on competition law compliance.

Do Not Obstruct the EC During a Raid

Several recent cases demonstrate an increased EC appetite to tackle procedural violations arising out of dawn raids. In the most recent development, on Dec. 20, 2010, the EC issued a formal statement of its case (statement of objections) against Czech companies Energetický a průmyslový holding and J&T Investment Advisors. The allegation is that during a dawn raid at the companies’ premises, they obstructed the EC through “the failure to block [access to] an e-mail account, the failure to open encrypted e-mails [so as to allow review by the EC] and the diversion of incoming e-mails.”

This very closely followed a Dec. 15, 2010, judgment of the European General Court which upheld a EUR38 million fine imposed by the EC on German energy conglomerate E.ON. The fine was for obstructing a raid by breaking a seal which had been affixed to an office door overnight so as to preserve documents identified by the EC as relevant to its investigation.

Dominance Investigations in EU; Now It’s Google’s Turn

On Nov. 30, 2010, the EC announced an investigation into allegations that Google has abused a dominant position in online search in the EU. The opening of the case follows complaints by search service providers about unfavourable treatment of their services in Google's unpaid and sponsored search results, coupled with an alleged preferential placement of Google's own services. Subsequently, the French competition authority announced on Dec. 14, 2010, that it had concluded that Google holds a dominant position in France on the advertising market linked to search engines (although it did not find any abuses).

These cases follow the EC’s opening in July 2010 of two investigations of IBM for suspected abuses of a dominant position (concerning tying and access to spare parts), and a 2009 settlement with Microsoft (which included a commitment regarding disclosure of interoperability information). It is clear that the EC and national competition authorities in the EU remain willing and able to investigate technology companies (wherever they are based), including in difficult areas such as access to intellectual property and interface information.

Additional EU/UK competition law news coverage can be found in our news section.

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