Compliance Warning; Your Company Will Be Fined if You Obstruct a Dawn Raid
On 26 November 2014, the EU General Court (GC) (the EU’s second-highest
court) upheld a EUR2.5 million fine imposed by the European Commission (EC) for
obstructing an EC dawn raid. The case shows the crucial importance of properly
training staff, including IT staff, in advance so they know what to do if a dawn
The case concerned Czech companies Energetický a průmyslový holding (EPH) and
its subsidiary EP Investment Advisors (EPIA), which had been fined in 2012 for
failing to block an email account and diverting incoming emails during a dawn
raid in 2009. The GC confirmed that the EC was right to consider both of these
incidents serious breaches of EPH and EPIA’s obligation to cooperate with the EC
during the raid. In line with previous case law, the GC held that the incidents
constituted an obstruction in themselves; the EC did not need to show that any
document was actually removed or manipulated.
The judgment sends a clear message to companies that any steps that undermine
the integrity and effectiveness of EC dawn raids, including tampering with data
stored electronically, are illegal and will be sanctioned. The position is
similar in the case of raids by EU Member State competition authorities, and
companies of all sizes with EU operations should take note.
This is not the first time the EC has fined a company for obstructing a dawn
raid. In 2008, the EC fined German energy company E.ON EUR38 million for the
breach of a seal during an inspection. The EC’s decision was confirmed by the GC
in 2010 and subsequently by the EU Court of Justice (ECJ) in 2012.
European Commission Publishes Latest Pharma Patent Settlement Survey, but
Legal Position Still Unclear
The EC’s latest report on pharmaceutical patent settlement agreements in the
EEA (the EU plus three other countries), covering 2013, was published on 5
December 2014. The EC started these reports after its 2009 competition inquiry
into the pharmaceutical sector, which identified settlements that limit generic
entry and provide at the same time for a value transfer from the originator to
the generic company as potentially raising competition concerns.
The headline finding in the report is that, as with previous years, the vast
majority of pharmaceutical settlement agreements (some 92 percent) are prima
facie unproblematic in competition law terms. The EC says this shows the
industry’s increased awareness of potentially problematic practices. This may or
may not be the case, but in any event this area of law remains unclear despite
these reports and two recent EC decisions concerning this issue.
In its June 2013 Lundbeck decision, the EC imposed a fine of EUR93.8 million
on Danish pharmaceutical company Lundbeck and fines totalling EUR52.2 million on
several producers of generic medicines for agreeing to delay the market entry of
cheaper generic versions of citalopram, a blockbuster antidepressant. In July
2014 the EC imposed fines totalling EUR427.7 million on Servier and five
producers of generic medicines for concluding a series of deals all aimed at
protecting Servier’s perindopril product from price competition by generics in
the EU. This followed the expiry of Servier’s principal patent for the
perindopril molecule in 2003. Certain secondary patents had remained in force.
Both of those cases have been appealed to the GC, and the correct legal
position will not be known until the court opines. Meanwhile, legal uncertainty
limits the appetite of originators and generics to negotiate patent settlement
agreements and indeed probably reduces the likelihood that generic suppliers
will challenge patents in the first place (which could in turn skew the findings
of the EC’s monitoring reports going forward).
Although these cases and studies come from the pharmaceutical sector, similar
issues would apply in any other sector. Companies are of course able to apply
for patents, to enforce them, to transfer technologies and to settle litigation.
However, competition law concerns may arise where such tools are misused. The EC
stated in relation to the Servier case that “engaging in an exclusionary
strategy to foreclose important competing technologies and buying [a] close
competitor … is blatantly abusive.”
Lessons From the Latest European Commission Cartel Case
The latest EC cartel fining decision, handed down on 11 December 2014 and
relating to envelope producers, contains several lessons for companies active in
the EU. Not the least of these is that, as promised, under new Competition
Commissioner Vestager, the EC’s competition directorate will continue to
prioritise its fight against cartels in the EU.
An interesting particular point from the case is that there was no
whistleblower. Instead, the EC started on its own initiative the investigation
that led to the fines. The EC is keen to undertake such investigations to
demonstrate to cartelists that there are a number of ways in which cartels can
be identified and to destabilize them further.
Further, the case shows that in an acquisition a company takes on any cartel
liability of the target. One of the cartelists had gone into liquidation after
the cartel had ended and some of its entities/assets were purchased by a
competitor. That competitor, also a cartelist in its own right, thereby gained
liability for the activities of the liquidated business, and its total fine was
increased as a result.
The risk of cartel fines remains very high in the EU, both at the EC and
national levels. Companies should make sure that suitable compliance programmes
are in place, that training is carried out and, ideally, that internal audits
The Risks of Trade Association Membership
Trade associations continue to be a good source of cases for competition
regulators in the EU. It is essential that companies which are members
understand how competition law applies to trade associations and to their
participation in them. Where a trade association is involved, depending on
exactly how any anti-competitive arrangements were organized, fines can be
imposed on the association, its members or both.
A recent case from the UK provides a good example of the risks. On 10
December 2014, the UK Competition and Markets Authority (CMA) issued a statement
of objections (preliminary statement of case) to an association of estate and
lettings agents, some of its members and a newspaper publisher. The statement of
objections alleges that these entities breached competition law by agreeing to
prevent estate and lettings agents from advertising their fees or discounts in
the local property newspaper. As part of this, it is alleged that the membership
rules of the association themselves breached competition law.
The CMA may ultimately find no competition law infringement in that case, but
it shows the risks of involvement. It is also notable that back in 2008 the
predecessor to the CMA had sent a warning letter to the trade association in
question to alert it that its rules of membership might infringe competition
law. The current investigation was then started in 2013 following a complaint by
a third party. Although no allegations have yet been proven, it appears that the
trade association and its members may not have properly taken heed of this
Another Consequence of Infringing Competition Law; Exclusion From Public
Many companies rely wholly or partly on revenue from public bodies. A recent
case emphasises that participation in public tenders can be put at risk by a
competition law infringement. This is the case even where the EU public
procurement directives do not apply.
This was the finding of the ECJ on 18 December 2014 in a case concerning
whether a tenderer could be validly excluded from a public tender process in
Hungary on the basis that it had breached national competition law. The breach,
concerning vertical restrictions, had been identified by the Hungarian
competition authority and upheld by a Hungarian court.
The ECJ took the view that it is permissible for national legislation to
exclude the participation in a tendering procedure of an entity in this
scenario, even where the general EU public procurement rules do not apply. This
is fully in line with general EU law principles.
Additional European competition law news coverage can be found in our news section.
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