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Textbook Long-Term Cartel Fined in the EU
On 27 September 2019, the European Commission announced it had fined two canned vegetable suppliers for participating in a cartel that ran for more than 13 years. Another supplier was not fined since it blew the whistle on the arrangements.
The arrangement was of very wide scope, covering all of the European Economic Area (EEA), and included many of the textbook illegal activities that can give rise to a cartel: price fixing, agreements on market shares and volume quotas, allocation of customers and markets, coordination on replies to tenders (bid rigging) and the exchange of commercially sensitive information.
Unhelpfully for the parties, and even though this was a settlement case in which the parties admitted their involvement, the Commission specifically described the precise coverage of the cartel. This will without doubt result in follow-on civil claims for damages throughout the EEA.
The Commission identified the following affected products and customers:
- Private-label sales of canned vegetables, including green beans (and other products), to retailers EEA-wide
- Own-brand and private-label sales of canned vegetables to retailers and the food service industry in France
It’s not known how the whistleblower identified the infringement, but it avoided a fine of around €250 million. Some of this “savings” will no doubt be wiped out by the costs of defending the follow-on claims, and potentially settling or being required to pay damages as a result, but it clearly took the view that its best course was to blow the whistle before one of the other cartelists potentially did so.
Careful — He Might Be Wired! UK Fine for Cartel Coordinated by Senior Executives at Recorded Meetings
On 23 October 2019, the UK Competition and Market Authority (CMA) announced it had fined three suppliers of concrete drainage products for participating in a cartel that ran for nearly seven years.
The arrangements covered all of Great Britain and involved price fixing, customer allocation and the exchange of competitively sensitive information. Remarkably, the cartel was partly organised at meetings attended by senior executives from each of the companies. Unfortunately for the parties and these individuals, the CMA recorded a number of these meetings and used these recordings as evidence.
Companies involved in cartel activity in the UK should be worried, since the CMA has taken an increasingly proactive approach to cartel detection. Almost half of UK cartel investigations do not originate with a leniency (whistleblower) application, and this is the second recently publicised example of the CMA using its investigatory powers to bug meetings at which businesses took part in illegal cartel activity. In addition, calls to the CMA’s cartels hotline have ultimately resulted in several recent fining decisions.
This means real, living competition law compliance programmes, not just manuals that sit on the shelf, are more important than ever for companies trading in the UK (and indeed, the EU as a whole).
UK Regulator Again Investigates Restrictions on Online Pricing
Online resale price maintenance (RPM) is usually an automatic infringement of competition law, and in recent years, numerous companies in the UK and the rest of the EU have been fined for this.
The European Commission fined four companies for RPM in July 2018: Philips, Pioneer, Asus and Denon. The CMA has so far fined companies for online RPM in four cases: one in August 2019 in the digital pianos and digital keyboards sector, one in August 2016 in the light fittings sector, and two in May 2016, in the bathroom fittings sector and the commercial refrigeration sector.
Nevertheless, the practice continues, as shown by the latest case in the UK, in which the CMA accused guitar manufacturer Fender of engaging in the practice.
The CMA provisionally decided that, between 2013 and 2018, Fender Europe operated a policy designed to restrict competitive online pricing, requiring guitars to be sold at or above a minimum figure (i.e., RPM). The CMA considers this particularly problematic, given that online sales of musical instruments have grown to around 40 percent of the total market in the UK.
The CMA commented: “We take allegations of RPM very seriously because it removes one of the benefits of the internet of making it easier to quickly find a better price by shopping around. It stops online retailers from selling at the prices they want to, and this then leads to higher prices for customers.”
Merger Control Has Very Wide Scope: Make Sure Transactions Are Properly Analysed
Three recent judgments from the Cartel Court of Austria show the wide scope of merger control law and the risks of misapplying the rules. Numerous regimes around the world take a similar approach to that in Austria. It’s therefore essential to properly analyse the application of merger control law worldwide to all M&A and joint venture transactions — plus asset acquisitions — even where only a minority stake is acquired.
The first case reflects that a minority acquisition of more than 25 percent falls subject to merger control law in Austria. The court imposed a fine of €60,000 on KTM AG and Kiska GmbH after KTM acquired a 1.1 percent stake in Kiska, thus taking its total holding to 26 percent. The jurisdictional thresholds were met, and therefore the move to 26 percent should have been notified for pre-merger approval to the Federal Competition Authority (FCA) under the Austrian merger control rules.
In the second Cartel Court case, the court fined Eurazeo SE €30,000 for indirectly acquiring a 58.8 percent stake in 2R Holding SAS without notifying the transaction to the FCA for approval. A stake above 50 percent will usually be treated as a merger and therefore fall subject to the merger control rules in most jurisdictions if the jurisdictional thresholds are met. The case also shows that consideration needs to be given to all companies and assets within the target business.
Completing this group of cases, the court fined an investment vehicle of Bestseller United A/S (part of private holding company Heartland A/S) €75,000 for the late notification of its acquisition of more than 25 percent of Asos plc. The acquisition was carried out in 2012 but only notified in 2018, presumably following an internal review, which had identified the original failure to notify.
Additional European competition law news coverage can be found in our news section.
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