EU/UK Competition Law Newsletter – March

March 1, 2010

Changes at the European Commission

On Feb. 9, 2010, the new group of European Commissioners was approved by the European Parliament, and took office on Feb. 10. They will remain in office until Oct. 31, 2014.

The new European Commissioner for Competition (responsible for the Directorate General for Competition (DG COMP), the part of the Commission responsible for enforcing competition policy in the EU), is Joaquín Almunia from Spain. He will work with a new Director-General for Competition, or day-to-day functional head of DG COMP, Alexander Italianer from the Netherlands. In addition to these senior personnel changes, the groups of Commission officials dealing with state aid in the transport and energy sectors have been moved to DG COMP from, respectively, the Directorate-Generals for Transport and Energy.

Almunia has spoken about his policy direction during his term of office. He will “focus on fighting against cartels, preventing dominant companies from abusing their market power in any sector or any country in Europe, and maintaining a rigorous scrutiny of proposed mergers.” This has been very much the focus of recent Commissioners for Competition and reflects orthodox competition policy in most jurisdictions, as well as EU law. In particular, it is clear that fines for cartel infringements will remain high, despite the economic crisis, and that economic analysis will continue to underpin competition law decisions in the EU.

So far as concerns EU-specific issues, Almunia has indicated he will consider whether there should be EU legislation on rules governing damages actions for infringements of competition law in the EU. Proposed legislation on this issue has been held up pending the installation of the new Commissioner, and it will be interesting to see how Almunia takes it forward. However, in the absence of EU harmonization, competition litigation is developing in the EU anyway, with the UK in particular now a forum for numerous claims.

So far as concerns state aid, Almunia has indicated that the “most pressing issue is to manage the financial crisis and its impact.” Bailed-out banks will be required to restructure, and Almunia has indicated it is important to ensure a level playing field and avoid the “moral hazard” effect.

More generally, Almunia has indicated that companies must assume responsibility for their behavior and take the necessary measures to prevent unlawful conduct. This is yet another reminder that companies operating in the EU are expected to have competition law compliance programs in place.

Several New EU “Block Exemptions” to Appear in 2010

EU “block exemptions” automatically exempt certain types of agreements from the basic prohibition on anti-competitive agreements contained in Article 101 of the Treaty on the Functioning of the European Union (TFEU). There will be several developments in the area of block exemptions during 2010, that are important for day-to-day business operations in the EU.

The most high-profile change will be the introduction of the new Vertical Agreements Block Exemption (VABE), replacing the existing version that expires May 31, 2010. It is likely that the changes will be evolutionary rather than revolutionary, with the key change being the introduction of a buyer market share threshold. This would mean the VABE will only apply if the market shares of the buyer and seller on their respective markets are below 30%. Related guidelines will also be produced.

Two more block exemptions expire at the end of 2010 – those relating to R&D and specialization agreements. A review of these block exemptions and the Commission’s general guidelines relating to horizontal agreements has been undertaken. The result is expected soon, and the guidelines in particular, covering a range of horizontal cooperative arrangements, will be an important document. There are also two specialist block exemptions that must be renewed during the first half of 2010. These relate to vertical agreements in the motor vehicle sector and certain types of agreements in the insurance sector.

Another Successful Appeal against a Regulator’s Decision in the UK

On Feb. 11, 2010, the UK Competition Appeal Tribunal (CAT), by agreement with the UK Competition Commission (CC) and third-party appellant CTS Eventim, quashed the CC’s report into the Ticketmaster/Live Nation merger. This followed an appeal lodged by CTS Eventim on grounds of procedural fairness.

The CC cleared the merger in its report but CTS Eventim, which had, prior to the merger announcement, reached an agreement with Live Nation to provide ticketing services for the latter’s live music events and venues in the UK, brought an appeal to the CC on various grounds. One of the grounds was that it had been denied a fair hearing. The CC, having considered the grounds, took the view that the challenge based on lack of a fair hearing was arguable in the circumstances of the case, and that it would not be efficient to argue this issue before the CAT. It therefore asked the CAT to quash the report, so that the CC would immediately be able to reconsider the case and report again.

This CAT proceeding is just one of a number of recent appeals to the CAT against decisions of UK regulators in relation to mergers and market investigations. Another high-profile example concerned the CC’s report on the British Airports Authority (BAA) airports market investigation. The CAT upheld an appeal by BAA that the investigation was tainted by apparent bias on the part of one of the members of the investigating team, and partially quashed the report. The CC is seeking to appeal to the UK Court of Appeal.

In addition to victories in the CTS Eventim and BAA cases, third parties have had recent successes in several other cases on appeal. It is therefore clear that the authorities in the UK can successfully be challenged in relation to merger and market investigation (as well as general competition law) decisions and that possible grounds of appeal are wide. There is no doubt this will only encourage others to try their hand.

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