European Competition Law Newsletter – April 2015

April 1, 2015

EU’s Highest Court Rules on Information Exchange

On 19 March 2015, the European Court of Justice (ECJ) handed down a significant judgment on the application of EU competition law to information exchange between competitors. The case was an appeal from the European Commission’s 2008 decision to fine banana importers Dole, Weichert and Del Monte a total of €60.3 million for participating in a cartel (established as a result of information exchange) for bananas in northern Europe.

The ECJ agreed with the EC that the cartelists’ communications before setting the quotation prices for bananas reduced uncertainty for each of the participants as to the conduct of their competitors. This had the objective of creating competitive conditions that did not correspond to the normal conditions on the market without such collusive contacts, and therefore gave rise to a cartel on the basis of a “concerted practice” established between them.

The EC welcomed the judgment, which also confirmed that a concerted practice may be anti-competitive even though there is no direct connection between the practice and consumer prices.

The case is a reminder of the risks of engaging in private exchanges of commercially sensitive information, particularly if this is forward-looking. This type of activity is seen as a very serious infringement of competition law by the EC and national regulators, a position now fully supported by the EU’s highest court.

Yet Another Reminder of The Risks of Trade Association Membership

On 19 March 2015, the UK Competition and Markets Authority (CMA) announced that an association of estate and lettings agents, three of its members and a newspaper publisher had admitted breaching competition law and agreed to pay fines totalling over £775,000.

The parties admitted that at various times between July 2005 and January 2014:

  • three members of the trade association entered into an agreement which prevented members of the association (including themselves) from advertising their fees or discounts in the local newspaper;
  • two of these members extended the scope of this arrangement, with the co-operation of the publisher of the local newspaper, to prevent any agents (whether members or non-members of the association) from advertising their fees or discounts in this newspaper; and
  • the membership rules of the association prohibited the association’s members from advertising their fees or discounts in the newspaper.

This case is of interest for several reasons, including that it relates to a local market (the area in and around one town in the UK). In addition, it shows that, where infringements take place within the context of trade associations, both the members of the association and the association itself can be found to have breached the law. This can result in severe financial penalties for the members, even where the association itself has limited funds (the trade association in this case was fined only £90, reflecting its “very limited financial resources”).

Any company which is a member of a trade association anywhere in the EU needs to ensure that the association has a competition compliance programme in place and that the programme is actively enforced.

The Application of Competition Law to Lease Restrictions

There have been several recent cases in the EU concerning the application of competition law to retail lease restrictions, which are of interest to any landlord or tenant active in the sector in the EU. The most recent decision was announced by the German regulator (Bundeskartellamt) on 3 March 2015.

A factory outlet centre in Germany had been restricting its tenants from operating shops in another outlet centre (or individually) within a 150 km radius. The Bundeskartellamt required this restriction to be limited to five years and 50 km since the wider clause was considered to be anti-competitive. 150 km was seen as beyond the geographic market in which the outlet centre competes, since most of the customers who shop at the centre live within a 100 km radius of the center or use this shopping facility when passing through the area.

A particular issue had been that the operators of a fashion outlet center 147 km away from the centre had encountered considerable problems in acquiring tenants because of this clause. The Bundeskartellamt considered that the principal aim of the clause was to restrict competition between the centre and its current and potential competitors by curtailing the freedom of action of its tenants.

Further Developments on Tax Rulings in the EU

The EC is currently investigating under the State aid rules tax ruling practices in Ireland, Luxembourg, the Netherlands and Belgium. Broadly, the issue is selective advantageous treatment of particular companies or types of companies, which might be illegal under EU State aid law.

Separately, the EC proposed on 18 March 2015 a package of tax transparency measures designed to tackle “corporate tax avoidance and harmful tax competition in the EU”. The central component of the package is a legislative proposal to improve cooperation between EU member states in relation to their cross-border tax rulings.

Currently, member states share very little information with one another about their tax rulings since it is a matter for the discretion of the member state to decide whether a tax ruling might be relevant to another EU country. The EC considers that the lack of transparency on tax rulings is being exploited by certain companies in order to artificially reduce their tax contribution.

To redress this situation, the EC proposes that member states will be required to automatically exchange information on their tax rulings. The idea is that this will enable member states to detect certain abusive tax practices by companies and take the necessary action in response. It should also encourage healthier tax competition, as tax authorities will be less likely to offer selective tax treatment to companies once this is open to scrutiny by their peers.

The legislative proposals of this package will be submitted to the European Parliament for consultation and to the Council of the EU for adoption. The EC hopes that member states will agree on the tax rulings proposal by the end of 2015, so that it can enter into force on 1 January 2016.

Additional European competition law news coverage can be found in our news section.

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