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Buyer Beware: UK Foreign Direct Investment Rules Now Much Tougher
The UK will see a dramatic strengthening of its protections against foreign direct investment under proposed rules announced by the government on 11 November 2020.
Once it passes through Parliament, the National Security and Investment Bill will introduce a mandatory notification requirement for corporate acquisitions and investments in particular sectors and a voluntary notification process (underpinned by a “call-in” power) for other corporate and asset transactions that may affect UK national security interests. The Bill includes no turnover or asset value jurisdictional thresholds, has extraterritorial effect, and contains retrospective provisions that mean it would apply to transactions closing on or after 12 November 2020 and before adoption.
Purchasers of entities or assets located in the UK or with a connection to the UK need to consider the potential impact of the changes now. Further details are in McGuireWoods’ 17 November 2020 alert.
Amazon Under Dual EU Investigations
An investigation opened in July 2019 by the European Commission into Amazon’s use of marketplace seller data by its ubiquitous e-commerce business has taken a decisive step forward with the issue of a statement of objections (SO), a preliminary statement of case. At the same time as issuing the SO, the Commission announced that it had opened a second antitrust investigation into Amazon's e-commerce business.
Both cases rely on potential abuse of a dominant position by Amazon, in breach of EU competition law. It was unclear in July 2019 whether the marketplace case would also rely on the rules which prohibit anti-competitive agreements between competitors, but the Commission has not gone down that route. This means the Commission believes it has a strong case showing Amazon is dominant in the market for the provision of marketplace services.
The case concerning seller data arises from Amazon’s dual role as a platform: (i) it provides a marketplace where independent sellers can sell products directly to consumers; and (ii) it sells products as a retailer on the same marketplace, in competition with those sellers. The Commission alleges that it is an abuse of Amazon’s dominant position for it to use nonpublic marketplace seller data in its own retail business. This allows Amazon to avoid the normal risks of retail competition and to leverage its dominance in the market for the provision of marketplace services in France and Germany (the biggest markets for Amazon in the EU).
This nonpublic business data of third-party sellers includes the number of ordered and shipped units of products, the sellers' revenues on the marketplace, the number of visits to sellers' offers, and data relating to shipping, to sellers' past performance and other consumer claims on products, including the activated guarantees. The Commission alleges that very large quantities of this data are available to employees of Amazon's retail business and flow directly into the automated systems of that business, which aggregate the data and use it to calibrate Amazon's retail offers and strategic business decisions to the detriment of the other marketplace sellers.
The new investigation announced at the same time, which will cover the entire EEA with the exception of Italy (where the Italian Competition Authority has its own investigation), concerns practices that might artificially favour Amazon’s own retail offers and offers of marketplace sellers that use Amazon's logistics and delivery services (“fulfilment by Amazon or FBA sellers”).
In particular, the Commission will investigate whether the criteria that Amazon sets to select the winner of the “Buy Box” and to enable sellers to offer products to Prime users, under Amazon's Prime loyalty programme, lead to preferential treatment of Amazon's retail business or of the sellers that use Amazon's logistics and delivery services.
The SO and the new investigation mark a significant escalation in the antitrust scrutiny of Amazon’s practices in the EEA. It is perhaps surprising that the marketplace case has reached this stage since Amazon previously denied that it uses data from its marketplace to gain an unfair advantage. Amazon UK and Ireland’s director for public policy has stated in evidence to a UK House of Lords Committee that “our retail business does not see any data relating to our Marketplace business. We do not have that visibility. Marketplace sellers can see how their things are selling, but our marketing people cannot see the sales figures or any of the data that relates to a Marketplace seller. That is just not available to them. They can see the same as anyone else.”
Price Comparison Website Fined in UK for Using MFN Clauses
On 19 November 2020, the UK Competition and Markets Authority (CMA) announced its first fine on a company for using most-favoured nation (MFN) clauses with its customers.
The CMA found that for two years the price comparison website ComparetheMarket breached EU and UK competition law by imposing wide MFN clauses on providers of home insurance selling through its platform. These clauses prohibited the home insurers from offering lower prices on other comparison websites.
According to the CMA, this protected ComparetheMarket — the largest price comparison site for home insurance in the UK — from being undercut elsewhere and made it harder for its rivals to expand and challenge the company’s already-strong market position. Rival comparison sites were restricted in gaining a price advantage over ComparetheMarket, for example, by lowering their commission fees to encourage those insurers to quote lower prices on their platforms. As a result, competition between price comparison websites, and between home insurers selling through these platforms, was restricted. The CMA found that this likely resulted in higher insurance premiums.
MFN clauses of this nature and similar provisions do not automatically infringe competition law. However, particularly where the company requiring them has market power, a careful analysis is needed to determine legality. A provision which is illegal is unenforceable, and companies subject to MFNs may be able to use this argument in negotiations.
UK Rolled Lead Suppliers Fined for Classic Cartel Activities
The UK CMA has imposed fines on two rolled lead suppliers for engaging in cartel activities for one-and-a-half years. A third company, which was provisionally found to have been involved, escaped a fine as the CMA determined there were no grounds for action in respect of it.
The behaviour by the two competing suppliers amounted to absolutely classic illegal cartel activity of the type any company should know is illegal and which should be caught by a competition law compliance programme. It is of the type very likely to give rise to fines and then follow-on damages claims from customers.
The activities included: colluding on prices; sharing the rolled lead market by arranging not to target certain customers; arranging not to supply a new business because it risked disrupting the firms’ existing customer relationships; and exchanging commercially sensitive information in relation to each of these arrangements.
There was no whistleblower in this case, but the cartelists were handed reduced fines since they settled and admitted their involvement in cartel activity. Parties under investigation may enter into a settlement if they admit they breached competition law and agree to a streamlined administrative procedure for the remainder of the investigation. In return, the CMA imposes a reduced fine on the business where settlement would achieve clear efficiencies, resulting in the earlier adoption of any infringement decision and resource savings.
Additional European competition law news coverage can be found in our news section.
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