European Competition Law Newsletter – October 2016

October 3, 2016

Table of Contents

  • Stand-Alone Refusal to Supply Claim Launched in UK Court
  • Is Your Tax Treatment in the EU Too Good to Be True?
  • Waste Collection Infrastructure Operated by Nonprofit Found to Be Essential Facility
  • Warning to Companies to Review EU Distribution Agreements

Stand-Alone Refusal to Supply Claim Launched in UK Court

Competition law litigation continues to develop rapidly in the UK. Companies should be aware that this can be a useful commercial weapon against competitors and others. A previous finding by a regulator of an infringement of competition law is not necessary.

One of the most recent cases, concerning an alleged abuse of a dominant position, is an example of a so-called “stand-alone” case, where there has not been a previous finding of an infringement. On 20 September 2016, the UK Competition Appeal Tribunal (CAT) published a notice describing the claim.

The claimant distributes equipment and consumables used to perform tests on samples from the human body to detect and diagnose medical conditions and monitor their treatment. The claimant alleges that the defendant holds a dominant position in the markets for the supply of (a) tissue-based cancer diagnostics solutions (including the equipment and consumables) destined for use in Belarus and (b) consumables that work in conjunction these products. The claimant further alleges that the defendant wrongfully and unlawfully terminated all supplies to the claimant, other than the supply of certain consumables in respect of orders relating to tenders won in Belarus prior to 31 December 2015.

The claim, therefore, is for alleged wrongful termination of supplies constituting an abuse of a dominant position. The facts are clearly very specific and indeed unusual, but one can imagine the case will put commercial pressure on the defendant to settle and resume supplies. Indeed, it is quite likely that this is the claimant’s underlying rationale.

Is Your Tax Treatment in the EU Too Good to Be True?

The European Commission (EC) is not backing down from its investigation under EU State aid law of tax arrangements granted by EU Member States. The latest decision concerns Apple, which on 30 August 2016 was found to have received undue tax benefits from Ireland of up to EUR13 billion. Ireland is now obliged to recover the money from the company.

The decision is specific to the facts, but the key message is that the EC saw Ireland’s treatment of Apple (in issuing two tax rulings to the company) as selectively giving the company a significant financial advantage over other businesses subject to Irish tax. According to the EC, the rulings had allowed Apple to allocate profits within its group in a way that did not reflect economic reality (specifically, attributing profits to a “head office” function that only existed on paper).

Under significant criticism (not least from Ireland and Apple), the EC has robustly defended itself. It said that it simply applied long-established EU State aid law that provides that a government cannot give special tax treatment to certain companies that is not available to others.

The EC has also sounded a warning to all companies that they cannot rely on EU tax authorities to get it right. EU Competition Commissioner Margrethe Vestager said in a speech that, while the primary responsibility for complying with EU State aid law rests with Member States themselves, “this does not absolve companies from themselves double-checking any special tax treatment.” Further, she said that, “if the actual amount of tax paid looks too good to be true, then it may well be problematic under State aid rules,” and the company would therefore be at risk of having to pay the benefit back, with interest.

Waste Collection Infrastructure Operated by Nonprofit Found to Be Essential Facility

A recent EC decision shows that the essential facilities doctrine is alive and well in the EU and can be employed to obtain commercial benefits in perhaps unexpected industries. Under this doctrine, an owner of an essential facility has a duty to deal with competitors.

The decision, taken on 20 September 2016, found that Altstoff Recycling Austria (ARA), a nonprofit organisation, had blocked competitors from entering the Austrian market for management of household packaging waste from 2008 to 2012. In Austria, producers of goods are obliged to take back packaging waste that results from the use of their products. This may be done by a third party, and ARA had been the dominant provider of these services in Austria since at least 2008.

The EC found that the nationwide collection infrastructure, partly controlled and partly owned by ARA, could not be duplicated. Hence, competitors who wanted to enter or expand in the market were dependent on receiving access to this existing infrastructure. Between March 2008 and April 2012, ARA refused to give access, so competitors were excluded from the market and competition eliminated.

This refusal was an infringement of EU competition law for which the EC imposed a fine and required ARA to divest the part of the household collection infrastructure that it owns. The requirement for a divestment is unusual and, along with its focus on a nonprofit and the use of essential facilities theory, is another notable feature of the case.

Warning to Companies to Review EU Distribution Agreements

On 15 September 2016, the EC published the initial findings of its e-commerce sector inquiry. The report identifies various business practices that may limit online competition in the EU. Commenting on this, Commissioner Vestager said that the report “should be a trigger for companies to review their current distribution contracts and to bring them in line with EU competition rules if they are not.”

The report considered both the online sale of consumer goods and the distribution of digital content. In relation to the former, particular practices that should be carefully considered include selective distribution arrangements that restrict online sales, cross-border sales restrictions within the EU, absolute bans on using online marketplaces, the use of recommended resale prices and absolute bans on using price comparison websites.

Commissioner Vestager’s comments are a clear warning that the EC is on the look-out for cases against individual companies. Any company selling online in the EU, including any company only distributing digital content, should consider whether its business practices comply with EU competition law.

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

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