Table of Contents
Consultation on Changes to Rules on Vertical Agreements
EU Vertical Block Exemption Regulation (VBER) is probably, in practice, the most important of the range of block
exemptions which form part of EU competition law. Block exemptions provide
for an automatic exemption from the law’s ban on anti-competitive
arrangements, as long as the particular conditions of the individual block
exemption are satisfied.
The VBER, adopted by the European Commission in 2010, applies to commonly
used vertical agreements, such as distribution, franchising and supply
agreements. Any agreement involving a buy/sell arrangement between
non-competitors (and competitors in some cases) may be covered. The
Commission has also produced a
notice providing guidance on the interpretation of the VBER and on the EU
competition law rules as they apply to vertical agreements which do not
fall within the VBER (including “true” agency agreements).
The period of validity of the VBER finishes on 31 May 2022 and the
Commission has launched a
public consultation on the functioning of the VBER and the related guidance. It is considering
whether to let the VBER lapse, prolong its duration or revise it, together
with the guidance.
The consultation is open until 27 May 2019. The Commission has requested
comments from all interested stakeholders. The consultation will no doubt
elicit strong views from many quarters, not least manufacturers that wish
to control distribution of their products online. Any company which uses a
vertical agreement in the EU/EEA should give consideration to making a
reasoned response to the consultation, since the conclusion of the
consultation will shape EU competition law in this crucial area for many
Dangers of Pure Information Exchange
Three recent cases have shown once again the dangers which can arise when
competitors exchange competitively sensitive information. This is
irrespective of whether any coordinated behavior results; just the exchange
itself (“pure” information exchange) may be illegal and give rise to
competition law liability in the EU.
On 21 February 2019, the UK Financial Conduct Authority (FCA) announced the
decision under its competition enforcement powers. It found that three asset
management firms had breached EU and UK competition law by sharing
strategic information on a bilateral basis. Two of the firms were fined,
while the third escaped a fine since it was the whistleblower in the case.
The exchange arose during one initial public offering and one placing,
shortly before the share prices were set. The firms disclosed and/or
accepted otherwise confidential bidding intentions, in the form of the
price they were willing to pay and sometimes the volume they wished to
acquire. This allowed one firm to know another's plans during the IPO or
placing process when they should have been competing for shares.
Also in the financial services sector, on 31 January 2019, the European
announced that it had sent a Statement of Objections (preliminary statement of case)
to eight unnamed banks. The Commission alleges that the banks breached EU
competition law by colluding to distort competition when acquiring and
trading European government bonds. This distortion allegedly arose through
the exchange of commercially sensitive information (as well as coordination
on trading strategies) “mainly — but not exclusively — through online
Finally, on 15 February 2019, the English Court of Appeal (CA)
upheld a December 2016
fine imposed by the UK Competition and Markets Authority (CMA) for exchange of
competitively sensitive information between competitors at a single
At the meeting in question, steel water tank supplier Balmoral was invited
to join a long-running cartel to allocate customers and fix prices.
Balmoral refused to take part in the customer allocation and price-fixing
cartel, but exchanged competitively sensitive information with its
competitors. The CMA secretly recorded that meeting.
The CMA finding against Balmoral was originally
upheld in October 2017 by the Competition Appeal Tribunal (which the CMA
welcomed) and now further upheld by the CA.
The CMA also
welcomed the CA’s judgment and commented as follows:
“This important judgment from the Court of Appeal sends a clear and
unequivocal message, not just in this sector but to all businesses
across the UK. If companies exchange competitively-sensitive,
confidential information — even at just one meeting — that is itself a
breach of [EU and UK] competition law.”
The risks arising from information exchange at a single meeting are not
new, but it’s unusual for such a case to reach the level of the CA.
“Tip of the Iceberg” for Digital Companies: Facebook Abused Its
Dominance by Infringing EU Data Protection Law
On 7 February 2019, the German competition authority, Bundeskartellamt
announced that it had found Facebook dominant in the market for social networks in
Germany and that the company had abused that dominant position. The abuse
came about since, according to the BKA, Facebook violated EU data
protection rules through its terms of service and the manner and extent to
which it collects and uses data.
Welcoming the finding, the European Data Protection Regulator (EDPR)
“This case is the tip of the iceberg — all companies in the digital
information ecosystem that rely on tracking, profiling and targeting
should be on notice.”
The data collection at issue did not relate to data arising from use of
Facebook’s own service, but the collection of user data from third-party
sources, including Facebook-owned services such as Instagram or WhatsApp
and third-party websites which include interfaces such as the Facebook
“like” or “share” buttons.
Where such visible interfaces are embedded in websites and apps, the data
flow to Facebook starts when these are called up or installed. It is not
even necessary, the BKA found, to scroll over or click on a “like” button.
Calling up a website with an embedded “like” button will start the data
flow. The BKA also found that, even if no Facebook symbol is visible to
users of a website, user data will flow from many websites to Facebook.
This happens, for example, if the website operator uses the Facebook
analytics service in the background to carry out user analyses.
Facebook’s violation of the EU data protection rules through its collection
of data on this scale without effective justification or informed voluntary
consent (which violation was established by the BKA following discussions
with “leading” EU data protection authorities) gave rise to an exploitative
abuse of Facebook’s dominant position. This was to the detriment of both
the consumers who use Facebook and its competitors (which are not able to
amass such a “treasure trove” of data).
Facebook was not fined but has agreed to change its practices so far as
concerns private users in Germany. Facebook-owned services like WhatsApp
and Instagram can continue to collect data. However, assigning the data to
Facebook user accounts will only be possible subject to the users’
voluntary consent. Collecting data from third-party websites and assigning
them to a Facebook user account will likewise be possible only if users
give their voluntary consent.
Beyond the digital companies themselves, the case is of interest to their
actual and potential competitors, since it shows these companies another
route to challenge a dominant provider’s business practices. The EDPR
recognised this issue, also commenting,
“Fundamental rights are at particular risk where companies become so
powerful that they can determine their own means and purposes of data
processing with little or no regard to ... alternative approaches from
European Commission Blocks Two Mergers in One Day, Creates Political
On 6 February 2019, the European Commission blocked two mergers, only the
eighth and ninth such cases out of the more than 3,000 transactions reviewed
during the last 10 years under the EU Merger Regulation. One transaction
went largely unnoticed by politicians, but the other produced a political
storm and subsequent proposals from the French and German governments to
reform some aspects of EU competition law, in particular, merger control.
Companies doing cross-border transactions, particularly but certainly not
only in sensitive sectors, should be aware of these political trends.
Similar issues arise around the world and many countries have or are
introducing or expanding legislation relating to the control of foreign
direct investment (FDI) or the public interest aspect of transactions.
The two transactions were, respectively,
Wieland’s takeover of Aurubis’ rolled copper products business and
Siemens’ (Germany) takeover of Alstom’s (France) rail transport
business. In both cases, the companies offered remedies to try to obtain approval,
but the Commission judged neither offer sufficient to allay its competition
concerns and therefore to allow approval on the basis of the remedy.
The proposed rail transport transaction produced significant supportive
comment from politicians during the process. This was largely along the
lines that large EU-based companies must be allowed to consolidate (and
produce “European Champions”) so as to compete against others on the world
stage, not least since other countries do not “play fair.”
Competition Commissioner Margrethe Vestager, in announcing the block of the
took on these points. She pointed out that, due to the size of the EU Single
Market, companies can grow very large (even in world terms) just within the
confines of the EU. Further, policymakers are not standing still in
striving to support EU industry with various industrial policies. Examples
include Horizon Europe (the EU research and innovation funding programme)
and efforts to complete the Digital Single Market.
Commissioner Vestager also referred to various EU efforts to ensure a level
playing field for EU business, including seeking to strengthen the World
Trade Organization rules on subsidies, the new EU FDI screening framework
and the European Commission’s proposal to ensure equal access and
reciprocity in public procurement.
None of this was enough for the French and German governments, which days
later published a
“Manifesto for a European industrial policy for the 21st Century.” This includes various proposed changes to the EU merger control rules,
including allowing politicians in the Council of the European Union to
override the fact- and evidence-based Commission merger control decisions
in certain cases. It will be some time before these proposals come to pass
(if they ever do) but the sentiments, and political intervention of this
nature, are not uncommon around the world. The possibility of
non-competition and political factors becoming relevant needs to form part
of deal planning and analysis alongside standard fact- and evidence-
(competition-) based factors.
Additional European competition law news coverage can be found in our news section.
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