Court Confirms Both Parents Liable for Cartel Activity of a Joint Venture
On Feb. 2, 2012, the EU’s General Court confirmed that two parent companies in a 50/50 joint venture (JV) can be held liable and therefore fined for cartel activity carried out by the JV in the EU. The judgment relies on the long-established principle under EU competition law that when a parent holds “decisive influence” over a subsidiary, then the parent and the subsidiary are considered to be one entity. The court made its finding despite the fact that the JV was “full-function” for the purposes of merger control (so treated as an autonomous economic entity for that purpose) and that control by the parents was only negative. The judgment serves as a reminder that in assessing competition law risk in the EU, companies cannot ignore their partly owned subsidiaries. At the same time, there may be greater scope for cooperation with such subsidiaries, since competition law does not in general apply to agreements or practices between separate companies if they are part of a group.
Leniency Documents Continue to be Protected Against Private Plaintiffs in the EU; Legislation Forthcoming
There have been two recent developments in the ongoing battle over protection of statements submitted to a regulator in the EU in order to obtain immunity from fines or a fine reduction. First, the European Commission (EC) has made available to the public an opinion from November 2011, which it submitted to a UK court in the context of a private damages claim arising out of the EC’s “gas insulated switchgear” cartel decision. The EC makes it clear in its opinion that it continues to hold the view that the “special characteristics” of corporate leniency statements (admissions that are especially prepared for the purposes of an immunity or leniency application) mean that they must be protected from plaintiffs seeking damages for a cartel. Secondly, on Jan. 30, 2012, a German court, applying the seminal 2011 Pfleiderer judgment of the European Court of Justice (ECJ), and following this approach of the EC, concluded that leniency documents submitted to the German regulator ought to be protected from disclosure to potential damages claimants. The position remains uncertain, however, and the EC recognizes that only legislation will cement the position. It therefore intends to introduce during 2012 legislation that will clarify the issue of protection of leniency statements, as well as the operation of private competition law damages actions in the EU generally.
EC Takes Aim at Patent Enforcement
Enforcement of patents is at the very top of the EC’s agenda at the moment. On Jan. 31, 2012, it opened a formal investigation against Samsung to determine whether it illegally took infringement action to protect patents incorporated in mobile telephone standards. This could be an abuse of a dominant position, contrary to EU competition law, since it would normally be required to license such patents on fair, reasonable and non-discriminatory terms. Then, when clearing Google’s acquisition of Motorola Mobility on Feb. 13, 2012, the EC specifically pointed out that it “will continue to keep a close eye on the behaviour of all market players in the [technology] sector, particularly the increasingly strategic use of patents.” It didn’t take long for the significance of this to become clear, as within a week it became known that both Apple and Microsoft had filed complaints with the EC against Motorola Mobility and/or Google concerning enforcement of standards-essential patents. Companies active in sectors in which patents are important would be well advised to keep an eye on these cases.
UK Court Strikes Out Bans on Parallel Trade in Premier League Case
On Feb. 3, 2012, a UK court applied a 2011 judgment of the ECJ concerning restrictions on cross-border sales in the EU. The ECJ had said that, although exclusive country-by-country satellite broadcast licenses for the English Premier League football competition are in principle permitted, an obligation requiring the broadcasters to prevent their satellite decoder cards from being used outside the licensed territory infringes EU competition law since it eliminates all competition between broadcasters in relation to the broadcasting of the matches. The UK court applying this judgment duly declared that such an obligation was therefore void and unenforceable. The judgments are limited to the facts of this case, but are nevertheless consistent with the position applying in other situations under EU competition law. Thus, bans on cross-border sales in distribution agreements, for example, are not permitted, although so-called “active” sales restrictions are allowed in some cases.
Additional EU/UK competition law news coverage can be found in our news section.