European Competition Law Newsletter – April 2014

April 1, 2014

New EU Competition Regime for Technology Licensing Agreements

On 21 March 2014, the European Commission (EC) adopted new rules for the assessment of technology transfer agreements under the EU antitrust rules. The purpose of such agreements is to enable companies to license the use of patents, know-how or software held by another company for the production of goods and services. Although, as compared with the previous regime, the changes are not dramatic, these rules are important for any company active in this area in the EU and they should review them carefully.

The new regime consists of two instruments. The first is the Technology Transfer Block Exemption Regulation (TTBER), which creates a safe harbour for licensing agreements concluded between companies that have limited market power and that respect certain conditions set out in the TTBER. Such agreements are deemed to have no anticompetitive effect or, if they do, the positive effects outweigh the negative ones. The second instrument is the Technology Transfer Guidelines, which provide guidance on the application of the TTBER as well as on the application of EU competition law to technology transfer agreements that fall outside the safe harbour of the TTBER.

The new rules take effect in May 2014.

UK Office of Fair Trading Investigates Abuse of Dominant Position Via Contract Terms

The UK Office of Fair Trading (OFT) is currently consulting on proposals to settle two cases which consider abuse of a dominant position via the imposition of contract terms. The first consultation, announced on 10 March 2014 and concerning epyx Limited (Epyx), concerns the market for the supply of service, maintenance and repair platforms to businesses with vehicle fleets. The second consultation, announced on 18 March 2014 and concerning Certas Energy, concerns the market for the supply of petrol and diesel to filling stations in the Western Isles of Scotland (UK).

The OFT started its Epyx investigation following a complaint. The OFT is concerned that certain provisions in Epyx's contracts with its customers that lead to exclusivity and restrict or prevent the evaluation, development and marketing of alternative systems, may amount to an abuse of market power.

In relation to Certas, the OFT is concerned about Certas’s contracts with filling stations which require them to purchase road fuels exclusively from Certas for five years.

Both cases are interesting because they show that complaints to competition regulators in the EU can produce commercial benefits for the complainant (Epyx case) and also because they show again that contractual terms imposed by a dominant company can amount to an abuse of a dominant position in the EU (although in both cases the OFT has not formally found an infringement of competition law).

You Need to Answer and You Need to Answer Accurately

Two recent cases confirm that questions from the EC and data submissions to it cannot be taken lightly. Businesses need to allocate suitable resources to ensure that all communications with the EC are dealt with properly. There are significant potential penalties for getting this wrong.

On 25 February 2014, the EC sent a Statement of Objections (preliminary statement of its case) to Ahlstrom Corporation, Munksjö Oyj and Munksjö AB concerning allegations that, in a merger notification, they had provided misleading information with regard to the market for abrasive paper backings. Such behaviour, if established, would be in breach of the companies' obligation to include their true best estimates of the markets in question in the merger notification and could result in a fine of up to 1 per cent of turnover.

In the second case, on 14 March 2014, the EU General Court (GC; the EU’s second-highest court) upheld a 2011 EC decision requiring certain cement producers to provide information to it in a cartel investigation. Some of the producers had resisted on the basis that the information was not needed by the EC, was excessive and created a disproportionate burden on the companies. A formal decision to request information obliges a company to reply in a correct and complete manner and within the specified time limit. If it does not do so, the EC can again impose a fine of up to 1 per cent of the company's total turnover.

While these cases concern dealings with the EC, the same general principles apply in relation to other national regulators in the EU, such as the UK OFT or the German Federal Cartel Office.

Developments in Private Competition Litigation in the EU

The EU competition litigation landscape continues to evolve and there have been two significant recent developments. First, new legislation aimed at assisting private damages claimants in the EU has nearly been finalised. An agreement in principle between the various institutions was reached (and endorsed by EU Member State representatives on 26 March 2014) and this now only needs to be formally approved by the European Parliament and the Council of the EU. The text as agreed includes specific provisions ensuring discovery/disclosure can take place, protecting whistleblower evidence from discovery (but not pre-existing documents), providing for the joint liability of defendants, ensuring full compensation for harm (with the possibility of a pass-on defence) and providing for a minimum limitation period. The overall effect should be further to increase the amount of private competition litigation in EU Member State courts.

The second development was a 27 February 2014 judgment of the EU’s highest court (the Court of Justice; ECJ), which overturned the finding of the junior EU General Court in a case concerning third-party access to cartel documents under the EU’s public transparency regulation (Regulation).

The Regulation provides for a general right of access to EC documents, subject to specific restrictions. So as to assist it in bringing a private damages claim, EnBW (a German energy company) had used the Regulation to request all documents held by the EC in relation to its investigation into a gas insulated switchgear cartel.

The ECJ ruled that the EC may adopt a “general presumption” against disclosure under the Regulation in cartel cases, without carrying out a specific, individual assessment of each document. This presumption may be rebutted by showing that specific documents are either not covered by the presumption, or that there is an overriding public interest in disclosure, but the fact that EnBW’s request was made to assist it in bringing a private damages action was not considered an overriding public interest. In order to rebut the general presumption, potential private damages claimants must establish that access to a particular document is “necessary”.

Additional European competition law news coverage can be found in our news section.

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