Insurance Companies Now More Like “Normal” Companies under EU Competition Law
On 24 March 2010, the European Commission adopted a new block exemption for the insurance sector that applies from 1 April 2010, until 31 March 2017. The block exemption narrows the cases in which the insurance sector benefits from special treatment under EU competition law, requiring insurers to self-assess more agreements under the normal principles of the law.
EU block exemptions automatically exempt certain types of agreement from the general ban on anti-competitive agreements in the EU contained in Article 101(1) of the Treaty on the Functioning of the European Union (TFEU). The new insurance block exemption covers – subject to certain conditions – only two of the four categories of agreements that were exempted under the previous block exemption:
- Agreements in relation to joint compilations, tables and studies (types of information exchange).
- Pools that cover “new” risks, or subject to the participants falling below certain market share thresholds, other risks that are not “new.”
Automatic exemptions for agreements between insurers on standard policy conditions or security devices, which were both included in the previous block exemption, are no longer considered justified.
Unless one of the general block exemptions applying industry-wide (such as relating to vertical agreements) can be relied upon, companies in the insurance sector have to self-assess all types of agreements not covered by the new block exemption for compliance with Article 101(1), and as necessary (where Article 101(1) is infringed), for the availability for a particular agreement of an individual exemption under Article 101(3) TFEU.
It is very difficult to be certain of the position under Article 101(3), and accordingly, the narrowing of the block exemption will in particular give rise to compliance difficulties for insurers wishing to continue using agreements on standard policy conditions and agreements on security devices (that will not come within a general block exemption). However, in this regard, the position is no different from the position the vast majority of businesses in other sectors face where a general block exemption does not apply.
Large UK Fine for Unilateral Information Provision
Following what appears to have been an “early resolution” (or agreed settlement) of the case, the UK Office of Fair Trading (OFT) announced on 30 March 2010, that The Royal Bank of Scotland (RBS), which is majority owned by the UK state following its 2008 bail out, has agreed to pay a fine of GBP28.59 million after admitting breaches of competition law during 2007 and 2008. The fine was reduced from GBP33.6 million to reflect RBS’s admission and agreement to cooperate. The case is yet another reminder of the ease with which provision of commercially sensitive material to a competitor can give rise to serious competition law breaches in the UK, as elsewhere.
Individuals in RBS’s Professional Practices Coverage Team had unilaterally disclosed generic as well as specific confidential future pricing information to their counterparts at Barclays Bank, and this information was taken into account by Barclays in determining its own pricing. The disclosures by RBS took place in the course of contacts on the fringes of social, client or industry events or through phone conversations. The information concerned the pricing of loan products to large professional services firms.
Barclays reported the infringements voluntarily before an investigation had been launched, thus obtained full immunity from a fine under the OFT’s leniency policy.
There have been a number of previous early resolution cases in the UK. The reduction in the present case, at 15% of what would otherwise apparently have been imposed (GBP33.6 million), is at the lower end of what has previously been obtained in the UK, but higher than the reduction available under a similar procedure available at EU level (10%).
The OFT has indicated that a formal infringement decision will be published in due course. Third parties will be able to base damages actions on that decision.
UK Regulator’s Involvement Does Not Provide Protection from Abuse Fine
On 23 February 2010, the English Court of Appeal (CA) gave judgment on an appeal by National Grid plc (NG) against a judgment of the UK Competition Appeal Tribunal (CAT). The CAT had upheld a ruling by the UK Gas and Electricity Markets Authority (GEMA) that NG had abused its dominant position by entering into long-term contracts for the provision of domestic gas meters.
The CA upheld the CAT’s judgment concerning abuse of dominance, but reduced the fine, principally to reflect the fact that regulator GEMA had worked closely with NG in relation to the establishment of the contracts (but also due to the novelty of the case). Nevertheless, NG will still have to pay a fine of GBP15 million. This demonstrates that regulatory involvement in the establishment of an agreement or course of conduct does not necessarily provide protection from competition law. Companies still independently need to consider the application of the law.
The case is also interesting because it considered how an abuse case should be analysed, in particular confirming that, even if a particular type of contract is normal in an industry sector, it does not automatically follow that its use by a dominant company is not abusive. Further, although a legitimate method of analysis, considering what would happen in the absence of a course of action (the counterfactual) to determine its effect or otherwise, is not obligatory and is a matter for the judgement of the decision maker.