EU/UK Competition Law Newsletter – April 2013

April 1, 2013

Yes, They Can Take That; European Commission Updates Its Dawn Raid Guidance

On 18 March 2013, the European Commission (EC) published updated guidance on how it goes about conducting dawn raids at business premises in the EU. The focus of the update is on the contentious area of searching IT systems. Companies need to be aware of this document, as the penalties for obstructing dawn raids can be very high indeed.

The guidance makes the point that the EC’s staff can search the IT system and all storage media of the company (laptops, desktops, tablets, mobile phones, CD-ROM, DVD, USB-key, etc.) and the company may be required to assist with this. This assistance includes not only providing an explanation of the system but also helping with specific tasks such as the temporary blocking of individual email accounts, temporarily disconnecting computers from the network, removing hard drives from computers and providing “administrator access rights” support. The EC also confirms that it can take a copy of electronic data which it did not have the time to review during the raid and take this back to Brussels for further review.

A Government Statement Results In Illegal Aid

In a ruling welcomed by the EC, the EU’s highest court (the Court of Justice (ECJ)) held on 19 March 2013 that a public declaration of support for state-owned France Télécom by the French Minister for economic affairs and the subsequent offer of a shareholder loan by the French State was illegal state aid.

France Télécom had been in financial difficulties and in July 2002 the minister stated that “… the State [will] take whatever decisions [are] necessary to overcome” any financing problems. Ratings agencies quoted this statement and it was decisive in their decision to maintain an investment rating for the company. The price for France Télécom shares soared and in December that year the French authorities announced their intention to grant a shareholder loan of €9 billion in favour of the company. That proposal was neither accepted nor acted on by France Télécom, but the ECJ agreed with the EC’s view that, nevertheless, when seen against the background of the July 2002 statement, it conferred an illegal advantage on the company.

The case demonstrates that illegal state support can take many forms. If your competitor is being funded or supported by the state, even indirectly, it may be possible to take action to stop this.

Dismantling Track May Be Abusive

On 6 March 2013, the EC announced that it is investigating Lithuanian railway incumbent AB Lietuvos geležinkeliai (LG) to investigate whether it limited competition on the rail markets in Lithuania and Latvia by removing a railway track.

In September 2008, LG suspended traffic on a railway track running between Lithuania and Latvia. One month later LG dismantled the track and has not rebuilt it. The EC’s initial view is that since this limits the number of rail connections between Lithuania and Latvia for international freight traffic, it could limit competition on the rail markets in Lithuania and in Latvia, in particular by preventing customers from redirecting their railway freight to Latvia using the services of other rail operators. The EC considers that this could amount to the illegal abuse of a dominant position by LG.

This case shows once again that the scope of illegal abuses of a dominant position can be very wide. Companies which are struggling against the actions of a dominant or potentially dominant competitor, supplier or customer should take notice.

Additional EU/UK competition law news coverage can be found in our news section.

U.S. Antitrust

We publish a newsletter and bulletins on U.S. antitrust developments, as well as regular publications on numerous other topics.