Not Guilty Verdict in UK Criminal Trial, But Still a Compliance Warning
On 24 June 2015, the UK Competition and Markets Authority (CMA) was defeated in its first attempt at convincing a jury to convict individuals for the UK
criminal “cartel offence”. The jury was not persuaded that the two defendants (Clive Dean and Nicholas Stringer) acted “dishonestly” and therefore returned
a unanimous not guilty verdict after only around 2.5 hours of deliberation.
This is a bad loss for the CMA but it is putting a brave face on it, pointing out that the case was brought under the law as it applied to conduct before
April 2014. Under that law the cartel offence was only committed where the individuals concerned were dishonest. Following a change in the law, for conduct
after 1 April 2014, it is no longer necessary for the CMA to prove individuals acted dishonestly to commit the cartel offence and therefore potentially
face a fine and/or jail time.
The CMA was also careful to state that “we remain committed to investigating and prosecuting individuals who take part in cartels”. It wants to prosecute
and is always on the lookout for a good case. Competition compliance efforts in the UK remain essential for all businesses, whether large or small and
whatever the size of the market.
European Commission Goes After Rare Purchasing Cartel
Most cartels restrict competition between competitors as to their sales, whether in relation to price or customers or any other matter. However, cartels
can also arise in relation to purchasing and the European Commission (EC) recently announced that it is investigating such a case.
On 24 June 2015, the EC informed five lead recycling companies that it suspects them of having participated in a cartel for scrap lead-acid batteries,
which was aimed at lowering purchase prices. The alleged intent was to maintain higher profit margins for the recycling companies. The behaviour would likely reduce the value of used batteries sold for
scrap, to the detriment of the sellers.
The EC takes the view that, if ultimately proven, this activity amounts to the same thing as a standard price-fixing cartel: it disrupted the normal
functioning of the market and prevented competition on price.
It has always been clear that cartels on the purchasing side are in competition law terms just as bad as standard selling cartels. However, this case
provides a good reminder and a useful example for compliance training programmes.
E-books and MFN Clauses Part II
On 11 June 2015, the EC announced a formal antitrust investigation into price and non-price most-favoured-nation (“MFN”) provisions in Amazon’s contracts
with publishers concerning the distribution of e-books. This is the latest in a stream of high-profile MFN and similar cases in the EU involving online
sales and distribution.
The various parties to the Apple e-books case, which partly concerned MFN provisions, settled it with the EC in 2012 and 2013. Amazon has previously been
investigated in the UK and Germany for a similar price parity provision in its Marketplace arrangements and there are also various hotel booking website
MFN cases currently active in the EU.
These cases all have different fact patterns but all concern Internet distribution. In addition to these specific cases, on 6 May 2015 the EC launched a
general antitrust inquiry into the e-commerce sector in the EU. This is focusing particularly on potential barriers erected by companies to cross-border
online trade in goods and services where e-commerce is most widespread such as electronics, clothing and shoes, as well as digital content. Knowledge
gained through the sector inquiry will contribute to better enforcement of competition law in the e-commerce sector, such as the Amazon, Apple and hotel
It is clear that the EC, along with national competition law regulators in the EU, has and will continue to have a strong focus on Internet distribution
and any company whose business model may be affected should be aware of developments.
European Commission Further Ramps Up State Aid Investigations Into Tax Rulings
Since June 2013, the EC has been investigating the corporate tax ruling practices of a number of EU Member States under EU State aid law. These rulings are
comfort letters issued to a company on a specific tax matter.
The concern is that some of these rulings provide a selective advantage to a company or group of companies that competitors do not have. In this situation,
the ruling would give rise to illegal State aid, which might therefore have to be repaid with interest. The issue is therefore of relevance not just to
companies which have or might benefit, but to competing enterprises as well.
In the most recent development in the investigation, on 8 June 2015, the EC ordered Estonia and Poland to deliver general information on their tax rulings
and requested individual company tax ruling information from a further 15 Member States. This means only five of the EU Member States are not currently
being investigated in one way or another.
This further development shows that the EC continues to expand its tax State aid investigations. This issue will run and run, and any company active in the
EU would be well-advised to consider the potential impact. Separately, the European Parliament has established a “special committee” to conduct a general
probe into tax evasion and fraud in the EU and the EC is working on various measures aimed at ensuring greater transparency on tax rulings.
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