European Competition Law Newsletter – August 2015

August 12, 2015

Medical Professionals’ Trade Association Fined for Anti-Competitive Practices

Continuing an EU-wide trend, yet another trade association has been fined in the UK for cartel activities. This time it was a medical professionals’ association. The message is clear; trade associations of all types need to improve their compliance game, and members must ensure that they do this.

The fine was announced by the UK Competition and Markets Authority (CMA) on 14 July 2015, with the formal decision being published on 5 August 2015. A membership organisation of private consultant ophthalmologists − Consultant Eye Surgeons Partnership Limited (CESP) − has admitted breaching competition law and agreed to pay £382,500, reduced from £500,000 to take into account its co-operation with the CMA and its adoption of a comprehensive competition law compliance programme.

CESP represents 37 limited liability partnerships (LLPs) and their 200 consultant members based across the UK.

CESP Limited has accepted liability for a number of infringements during the period September 2008 to present, which include the following:

  • Recommending that its members refuse to accept lower fees offered by an insurer, and that they charge insured patients higher self-pay fees.
  • Circulating amongst its members detailed price lists for ophthalmic procedures, such as cataract surgery, to be used with insurers. These collectively set prices did not pass on lower local costs (such as cheaper hospital fees) and made it harder for insurers and patients to obtain lower prices.
  • Facilitating the sharing of consultants’ future pricing and business intentions, such as whether to sign up to a private hospital group’s package price, which enabled members to align their responses.

CESP Limited did not have a competition compliance programme and the CMA welcomed the adoption of one as a “positive step” which “[sets] a good example for other organisations in the medical professions”.

The CMA was also keen to warn other professionals:

This is the first time formal competition law enforcement action has been taken against medical professionals in the UK. This case demonstrates the CMA’s commitment to taking action in specialised and regulated sectors including the professions and makes it clear that membership organisations and their members are not outside the scope of competition law or its penalties … we hope that other professional membership organisations will take note of this case and take steps to ensure they operate in a way that does not infringe competition law.

EU’s Top Court Provides Guidance on Enforcement of SEPs

On 16 July 2015, in a major judgment, the EU’s top court, the European Court of Justice (ECJ), handed down a judgment on competition law issues arising out of the enforcement of standard essential patents (SEPs). This is the first ECJ ruling on the issue.

The European Commission (EC) has previously looked at the issue (in the Motorola and Samsung cases) and the ECJ effectively upheld the EC’s position. The ECJ was asked to rule on the following question: When is the seeking of an injunction by a company with a SEP that has agreed to license third parties on FRAND (fair, reasonable and non-discriminatory) terms, an abuse of dominance for the purposes of EU competition law?

The ECJ set out a five-step approach to determining this issue. However, in brief, the position is that the patent owner must, before it brings an action for an injunction prohibiting the infringement of its patent or for the recall of products for the manufacture of which that patent has been used, present to the alleged infringer a specific offer to conclude a licence.

The court is careful not otherwise to encroach on patent law, confirming that an alleged infringer is not restricted from challenging the validity of a patent and/or the essential nature of the patent to a standard and/or its actual use. Further, from the other side, a patent holder is not restricted from bringing an action for infringement with a view to obtaining the rendering of accounts in relation to past use or an award of damages in respect of those acts of use.

The case is of interest to any sector in which SEPs are used and, although setting out a very useful framework, will no doubt spawn much future litigation.

The Number Doesn’t Matter (When There is an Object Infringement)

On 16 July 2015, the ECJ confirmed that where a customer sharing arrangement is put in place, the number of customers affected is irrelevant. Such an arrangement will inevitably infringe EU competition law since it is a type of “object” (automatic) infringement.

This judgment provides a stark reminder that where a company engages in an “object” infringement (price fixing, market sharing, bid rigging and similar activities), it is at risk of infringing competition law even if there is no or minimal impact on the market. Fines can be imposed simply because the activity was attempted.

The case concerned private Romanian pension funds which had agreed to allocate between themselves customers which signed up to more than one fund (under Romanian law, each person can belong to only a single pension fund). This was done in order to avoid the random allocation to a fund which was required by law to take place whenever a person tried to join more than one fund.

The Romanian competition regulator imposed fines for this, treating it as customer sharing. There was an appeal and the Romanian court asked the EC for its view. The ECJ, inevitably, applied existing case law which has found that in analysing whether an agreement is restrictive by “object” it is simply necessary to examine the terms and the objective aims of the agreement, considered in the light of its economic and legal context. The number of customers shared out is not relevant.

Commission v. Hollywood; Country-by-Country Licensing in the EU Under Attack

The EC has sent a Statement of Objections (SO; provisional analysis of competition concerns) to six major film studios and Sky UK concerning contractual restrictions that prevent Sky from selling films cross-border in the EU. This is an extremely high-profile example of the EC pushing forward its single EU digital market agenda using competition law.

The EC will say that it is simply applying long-established principles on cross-border trade in the EU. The investigation hence focuses on contractual restrictions on “passive sales” (unsolicited sales) outside the licensed territory in agreements between studios and broadcasters.

U.S. film studios typically license audio-visual content, such as films, to a single pay-TV broadcaster in each member state (or combined for a few member states with a common language). The SO finds that clauses requiring “geo-blocking” (access from outside the licensed territory) restrict Sky UK’s ability to accept unsolicited requests for its pay-TV services from consumers located abroad (outside the UK and Ireland). Some agreements also contain clauses requiring studios to ensure that, in their licensing agreements with broadcasters other than Sky UK, these broadcasters are prevented from making their pay-TV services available in the UK and Ireland.

These clauses therefore grant “absolute territorial exclusivity” to Sky UK and/or other broadcasters, eliminate cross-border competition between pay-TV broadcasters, and partition the internal market along national borders.

The SO is seemingly based on the well-known Premier League case from 2011. The ECJ said there 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.

Competition law will not be the only battleground in this contentious case. There is also a clear potential conflict with copyright law which will need to be resolved. The EU Satellite and Cable Directive allows different copyright regimes in the various EU member states and broadcasters of course have to comply with copyright law. That issue was resolved in the Premier League case and the EC would presumably argue that the same principles can be applied.

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

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