European Competition Law Newsletter – December 2016

December 1, 2016

Table of Contents

  • Large Fine for Gun Jumping
  • Alleged Abuse of Dominance Through Predatory Pricing
  • Warning About Online Price-Fixing
  • Alleged Abuse of Dominance Through Discrimination

Large Fine for Gun Jumping

On 8 November 2016, the “Autorité de la concurrence” (French competition authority) provided a stark warning about the dangers of early implementation of a transaction prior to merger control clearance. This is one type of “gun jumping,” the other being anti-competitive coordination between competitors prior to closing (which applies whether or not the transaction is subject to merger control clearance).

In this case, the Autorité jointly fined Altice and SFR EUR80 million for having prematurely completed two mergers, notified for merger control clearance in France in 2014, in the electronic communications sector (see here).

In relation to the acquisition by Altice of SFR, the Autorité found that Altice had intervened in the operational management of SFR on several occasions by validating a number of strategic decisions. Further, during the period before clearance was obtained, Altice and SFR implemented an “advance coordinated strategy for the two groups,” including going so far as to negotiate and operationally prepare the launch of a new range of very high-speed broadband Internet access offers under the SFR brand. Further, before the merger was cleared, Altice and SFR exchanged large quantities of strategic information in readiness for the integration of the two groups.

In relation to the acquisition by Altice of OTL, before the merger was cleared, Altice made a number of strategic decisions on behalf of OTL, which concerned, in particular, agreements to host OTL’s mobile customers with network operators. Altice also set up a weekly information reporting mechanism allowing it to keep close track of OTL’s economic performance. This monitoring, which was considered “comparable to that exercised by a controlling shareholder,” provided Altice with access to commercially sensitive information concerning OTL. Finally, OTL’s managing director began to carry out his duties within the purchasing group before the merger had been cleared and, in particular, was involved in its new commercial projects and received commercially sensitive information.

Competition law advice on the steps which may be taken prior to completion of a transaction should be standard, regardless of the jurisdiction. It is clear that the Autorité took the view that the steps identified above fell well on the wrong side of the line.

Alleged Abuse of Dominance Through Predatory Pricing

The European Commission (EC) has brought an unusual case concerning alleged abuse of dominance as a result of selling below cost. This is of interest to any company which may be dominant in the EU or which purchases from or competes with such a company.

The allegations, set out in a statement of objections (preliminary statement of case), were sent to the Czech railway incumbent České dráhy, a.s. (ČD), on 10 November 2016 and concern a train route in the Czech Republic (see here).

ČD is the main railway operator in the Czech Republic and, until 2011, it was the only rail company active on the Prague – Ostrava route. After the market entries of competing rail passenger companies RegioJet in 2011 and LEO Express in 2012 on the route, ČD significantly decreased the prices it charged to passengers on the route. The EC has concerns that ČD may have charged prices that are so low that it could not cover the costs of the service (predatory pricing).

The investigation results from a complaint, following which the EC carried out a dawn raid at the premises of ČD in April 2016.

Warning About Online Price-Fixing

On 7 November 2016, the UK Competition and Markets Authority (CMA) launched a campaign to ensure online sellers know how to avoid breaking UK competition law (see here).

This follows the CMA’s recent decision, in one particular case following an eight-month investigation, which imposed a fine of over £160,000 on an online seller of posters and frames, Trod Ltd, for agreeing with a competitor, GB eye Ltd (trading as ‘GB Posters’), not to undercut each other’s prices when selling on Amazon’s UK website. GB eye escaped a fine by reporting the cartel under the CMA’s leniency programme.

The CMA has also produced information that includes an at-a-glance summary for online sellers that explains what constitutes “price-fixing” and what they can do to avoid it. There is also a case study that provides more detail on how the two sellers in the CMA’s recent investigation ended up breaking competition law.

In the Trod/GB eye case, both companies used automated repricing software to implement their agreement not to undercut each other’s prices. The campaign’s key warnings are that online sellers of any size should not:  

  • agree with their competitors on what prices they will charge, or that they won’t undercut each other on price; or 
  • discuss their pricing intentions or strategies with competitors.

The CMA also provided a warning about facilitation. It said to software providers that they, too, risk falling afoul of competition law if they help their clients use software to facilitate illegal price-fixing agreements. Facilitation of competition law infringements by third parties is an area of increasing focus by regulators.

Alleged Abuse of Dominance Through Discrimination

The UK energy regulator (Ofgem) has settled an unusual case concerning alleged abuse of dominance through discrimination (see here). This is of interest to any company which may be dominant in the EU or which purchases from or competes with such a company.

The settlement, announced on 7 November 2016, followed an investigation under the UK Competition Act 1998 into whether the behaviour of SSE, a UK energy supplier, could have impeded competition for connecting new developments to its electricity distribution network in the South of England. Independent companies compete against regional distribution network operators, such as SSE, to connect new customers to these networks.

Ofgem’s investigation identified competition concerns regarding SSE’s behaviour in providing services needed for competitors to connect new developments to its network. These included inconsistencies in providing essential services needed to allow competitors to compete effectively, including inconsistency in quotes.

SSE has committed to put in place new processes and procedures to make sure it provides these essential services to all parties on a consistent basis. These steps include splitting operations within SSE’s connections business to separate the team that provides essential services to the connections market from the team that competes in the connections market and mandatory and regular competition law compliance training. It has also agreed to frequent, independent, third-party auditing of and reporting on SSE’s compliance with the commitments.

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

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