EU/UK Competition Law Newsletter – September/October 2010

September 30, 2010

Landmark European Court of Justice Judgment on Legal Professional Privilege

On Sept. 14, 2010, the EU’s highest court (the European Court of Justice (ECJ)) confirmed in a case involving Akzo Nobel that, in the field of EU competition law investigations by the European Commission, internal company communications with in-house lawyers are not covered by legal professional privilege. This means that for the purposes of such investigations, these types of communications cannot automatically be withheld from the commission.

Several practical points to remember when considering this case:

  • The judgment does not change the law on this point, which had originally been established by the ECJ in 1982.
  • Advice from non-European Economic Area (EEA; which includes the EU) qualified external lawyers is also not privileged.
  • It remains the case that internal documents prepared by a company “for the exclusive purpose of seeking legal advice from [an external EEA-qualified] lawyer” are privileged.
  • Internal company documents reporting (without comment) an external EEA-qualified lawyer’s privileged advice are privileged.
  • The position in relation to investigations carried out by national competition authorities in the EU can be different.

European General Court Provides Confirmation of Abuse of Dominance Analysis

On Sept. 9, 2010, the European General Court (the EU’s first instance review court, from which final appeals are made to the ECJ) handed down a judgment concerning abuse of dominance by reverse vending machine manufacturer Tomra.

The court, upholding a decision of the European Commission, first confirmed that in order for there to be an abuse of dominance, it is enough that the practice in question tends to restrict competition or is capable of having that effect. It is not necessary for a practice to have an actual effect on competition. It then held that the exclusivity agreements, discount schemes, and retroactive rebates entered into by Tomra with various supermarket chain customers in the EU were abusive, and justified the EUR24 million fine imposed by the commission.

The case also emphasizes the importance of internal documents in EU competition investigations, the court stating that “. . . [Tomra’s] internal correspondence allowed the Commission to place [Tomra’s] practices in context and to substantiate its own assessment of those practices.”

Margin Squeeze Analysis in the EU

On Sept. 2, 2010, an Advocate General (AG) at the ECJ (advising the EJC as to its final judgment) gave his opinion in a margin squeeze case involving telecommunications company TeliaSonera.

Margin squeeze can arise where the price charged for an upstream input by a dominant company which is also active downstream using that input does not allow its downstream competitors sufficient scope to run a profitable business. In the AG’s view, this can only be abusive where the upstream dominant operator has a regulatory obligation to supply the input in question to downstream competitors. If not, the margin squeeze must be addressed as a type of refusal to deal. It remains to be seen whether the court will adopt this analysis and therefore confirm this as EU law, but the ECJ usually follows its AG’s opinions.

Joint UK OFT and CC Merger Guidelines

On Sept. 16, 2010, the Office of Fair Trading (OFT) and the Competition Commission (CC) published updated joint merger guidelines covering their analysis of mergers under UK merger control law. The guidelines set out the questions the CC and OFT will consider when reviewing mergers, how they define a “relevant merger situation,” what is meant by a “substantial lessening of competition” (SLC), and the criteria and methodology used when assessing mergers.

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