EU Antitrust Damages Directive Nearly There
New legislation aimed at assisting private claimants seeking damages for competition law infringements in the EU has nearly been finalised. On 17 April 2014, the European Parliament approved the text of a new directive and it now only needs to be formally approved by the Council of the EU. EU Member States will then have a maximum of two years to bring the rules into force in their national law.
The text as agreed includes specific provisions ensuring discovery/disclosure can take place, protecting whistleblower evidence from discovery (but not pre-existing documents), providing for the joint liability of defendants, ensuring full compensation for harm (with the possibility of a pass-on defence) and providing for a minimum limitation period.
The overall effect should be further to increase the amount of private competition litigation in EU Member State courts. However, at least in the UK, the law has already largely developed beyond the standards set out in the directive, and it seems likely that the UK, along with Germany and the NL, will continue to be the jurisdictions of choice for pan-EU claims. Further, from a plaintiff’s point of view, private litigation in the U.S. (particularly for those seeking damages from cartelists) will continue to be much more attractive than in the EU.
Resale Price Maintenance and Online Sales
On 27 March 2014, the UK Office of Fair Trading (OFT) announced a decision finding that Pride Mobility Products Limited, a manufacturer of mobility scooters, and some of its UK-wide online retailers, have infringed competition law. The OFT found that the parties entered into arrangements that prevented the retailers in question from advertising online prices below Pride’s Recommended Retail Price (RRP) for certain models of mobility scooter. This therefore appears to be a straightforward resale price maintenance (RPM) situation; RRPs are generally permitted under UK (and EU) competition law but they cannot be turned into fixed or minimum prices. If they are, that is RPM.
The OFT said: “ Today’s decision sends a clear message to businesses in this and other sectors that, where credible evidence is found or provided, enforcement action will be taken against arrangements that restrict the freedom of retailers to advertise their actual selling prices online.” It’s therefore clear that, even though no fine was imposed in this case (the parties all falling below certain “small business” thresholds which exempted them), the OFT wanted to send a message with this decision and larger companies would have been fined.
This decision is also interesting because it follows a study into the mobility aids sector carried out by the OFT in 2011 and another OFT competition law infringement decision in 2013 in the sector. That decision also concerned online sales restrictions. This shows that market studies at national or EU level should be followed carefully since they can lead to material consequences for businesses affected (including but not limited to enforcement actions such as these).
Private Equity Owners Can be Fined for Activities of Their Investees
It has long been clear that parent companies can be (and regularly are) fined for the anti-competitive activities of their subsidiaries in the EU, particularly in relation to participation in cartels. On 2 April 2014, the European Commission used this principle to fine Goldman Sachs (GS) as the “parent” of an investee company, Prysmian, which participated in a high voltage power cable cartel.
GS was only the manager of a fund (GS Capital Partners) which invested in Prysmian. Nevertheless, since it had been involved in the management decisions of Prysmian through exercising voting rights and through the right to appoint board members, it was seen as akin to a parent. This is of course the standard situation for many private equity and similar investments. Commenting on the position of GS, the EC said “[GS’s] influence was to all intents like that of traditional industrial owners, which are regularly held liable in cartel cases.”
Also of interest is that GS Capital Partners had exited its investment in Prysmian before the cartel finished. This did not allow GS to escape liability; a former owner can be held liable for the actions of its subsidiary during the period of ownership.
The clear message from this case is that financial investors need to monitor carefully the compliance activities of their investees, just like a normal trade investor. The EC also commented on this issue, saying that investment companies “should take a careful look at the compliance cultures of companies they invest in”.
Remember to Check Whether Merger Control Applies
A current “gun-jumping” case being investigated by the EC provides a reminder that companies need carefully to check the merger control implications of acquisitions, including of minority stakes, as well as of joint ventures.
On 31 March 2014, the EC said that it is investigating salmon farmer and processor Marine Harvest for taking a 48.5% stake in its competitor Morpol without filing the acquisition with the EC and obtaining clearance in advance. If this is confirmed, the EC can impose a fine of up to 10% of Marine Harvest’s annual worldwide turnover.
Morpol was listed in Norway but Marine Harvest acquired the stake in one transaction, pursuant to an SPA, from a single vendor. It then made a mandatory public offer for the remaining 51.5% shares in Morpol pursuant to the Norwegian Securities Trading Act.
EU merger control law contains an exemption allowing for the acquisition of shares on a stock exchange prior to obtaining clearance, provided that the voting rights are not exercised. However, this only applies where there is a public bid or a series of stock exchange transactions, not in the case of a single acquisition from one seller. Merger control law is not always straightforward and it is easy to be caught out.
Additional European competition law news coverage can be found in our news section.