EU/UK Competition Law Newsletter – March 2013

March 1, 2013

European Commission Consults on New Rules for Licensing of Patents and Know-how

On 20 February 2013, the European Commission (EC) published for comments a proposal for new EU competition rules concerning “technology transfer agreements” (TTAs). TTA is the EC’s term for patent, know-how and software copyright licensing agreements, as well as similar agreements.

The current regime consists of a “block exemption regulation”, which creates a safe harbor under EU competition law for certain TTAs, plus guidelines on the application of the block exemption and on the assessment under EU competition law of agreements that fall outside the block exemption. These rules, which came into force in 2004, expire in May 2014, and the EC’s proposal would replace them.

This consultation is important for any business that is or might be a licensor or licensee under a TTA in the EU, because the results of the consultation will set in place the EC’s competition law enforcement policy in this area for several years to come.

UK Cartel Fines; Small Companies Are Not Immune

On 21 February 2013, the UK Office of Fair Trading (OFT) announced that Mercedes-Benz and three of its independent commercial vehicle dealers in the UK had admitted infringing competition law and agreed to pay fines totalling GBP2.6 million. The dealers involved are mainly active in areas within the North of England and parts of Wales and Scotland. The nature of the infringements varies but all contain at least some element of market sharing, price coordination or exchange of commercially sensitive information.

The OFT is using this case to send a signal that small companies active in local markets are not immune from competition law enforcement in the UK, stating that “the OFT will take firm action against companies that collude to deny customers the benefit of fair competition regardless of the size of the firms involved or geographic scope of the investigation.” The case also serves as a reminder that under UK (and EU) competition law the mere exchange of commercially sensitive information can be seen and fined as a cartel.

Be Careful When Cooperating With a Competitor

The EC recently provided a reminder that cooperation arrangements between competitors must be very carefully handled. The case concerned the maritime industry, but has general application.

Two maritime cooperatives had been established which were aimed at coordinating certain activities of the owners of minibulk and container feeder vessels, mainly in Northern Europe, for example in the joint purchasing of inputs such as fuel. The EC investigated and the cooperatives have had to abandon two aspects of their cooperation due to competition law concerns.

The first problematic aspect was a compensation system set up for owners laying up their vessels (i.e. keeping them idle). The EC considered that this would give the owners an incentive to withdraw capacity from the market, resulting in charter rate increases. The second problematic aspect was an information exchange scheme which would have provided charter rate recommendations to vessel owners on the basis of information collected from them about their own charter rates. This could, the EC considered, have enabled the coordination of rates between competitors that would have likely resulted in charter rate increases.

European Commission Investigates Payments to Delay Market Entry

On 31 January 2013, the EC announced that it is investigating a so-called “co-promotion agreement” entered into by two generic pharmaceutical competitors in the EU.

Janssen-Cilag, a Johnson & Johnson subsidiary supplying a painkiller called fentanyl in the Netherlands, concluded the agreement with its close generic competitor Sandoz, a Novartis subsidiary, in July 2005. At the time there were no regulatory barriers to developing and marketing generic versions of fentanyl and therefore for Sandoz to enter the Dutch market. The agreement provided for monthly payments from Janssen-Cilag to Sandoz for as long as no generic product was launched by Sandoz in the Dutch market. The EC considers that, as a result, Sandoz refrained from entering the market for the duration of the agreement, which may in turn have kept prices for fentanyl in the Netherlands artificially high.

Although the case is still being investigated, it provides a reminder that competitors should not agree to keep out of each other’s market, and that the name of an arrangement which has this object or effect is not relevant to the analysis.

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

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