Table of Contents
- EU’s Highest Court Provides Guidance on Gun-Jumping and Pre-closing Covenants
- UK CMA Accepts Commitments From Amazon and Meta on Treatment of Marketplace Sellers
- UK CMA Approves Cooperation by Pharma Companies on Combination Therapies
- European Commission Fines Bank for Cartel Implemented Through Messages and Chats
On 9 November 2023, the EU’s highest court (Court of Justice or ECJ) handed down an important ruling in a case concerning gun-jumping issues in a merger.
The case concerned the acquisition of PT Portugal, a telecommunications and multimedia operator, by Altice Europe, a cable and telecommunications company. The European Commission approved the transaction under the EU merger control rules in April 2015. The Commission subsequently launched an investigation into Altice for implementing the transaction before its approval (gun-jumping) and imposed a fine in April 2018. The gun-jumping arose because clauses in the share purchase agreement (SPA) gave rights to Altice that allowed it to exercise control (decisive influence) over PT Portugal prior to closing. Those clauses had been implemented in some cases, and commercially sensitive information concerning PT Portugal had been provided to Altice as from signature of the SPA.
The pre-closing covenants gave Altice a right to veto the appointment of senior management of PT Portugal and its pricing policy and commercial terms agreed with clients, as well as a veto over it entering into, terminating or amending a wide range of contracts. Altice had used these rights prior to Commission approval (and closing) to, for example, give PT Portugal instructions on how to carry out an advertising campaign and provide advice on whether to include a TV channel on dogs in its product offering.
The Commission’s decision was appealed to the EU’s second-highest court (General Court), which upheld the gun-jumping aspects in September 2021. Altice further appealed to the ECJ.
The ECJ agreed with the General Court judgment on the gun-jumping aspects. From the date the SPA was signed, Altice had the possibility of exercising decisive influence over PT Portugal as a result of the covenants. These rights were not necessary to protect the value of PT Portugal and therefore not justifiable.
This case is a good reminder that provisions of an SPA should not grant inappropriate rights over decisions of the target following signature and prior to merger clearance and closing. There also should be suitable safeguards for information exchange, such as a clean team on the purchaser side, particularly where the parties are competitors.
UK CMA Accepts Commitments From Amazon and Meta on Treatment of Marketplace Sellers
The UK Competition and Markets Authority (CMA), in common with many other competition regulators around the world, is concerned about online platforms’ fair treatment of the companies that sell through these platforms. This is particularly the case where the platform competes for sales against those companies.
As a result of these concerns, the CMA launched separate abuse-of-dominance investigations under UK competition law into Meta in 2021 and into Amazon in 2022. Meta is, according to the CMA, “by far the largest supplier of digital display advertising in the UK.” Amazon is, according to the CMA, “the UK’s leading online retail platform.”
The Meta case concerned the company’s conduct in relation to the collection and/or use of data in the context of providing online advertising services and its single sign-on function and whether that results in a competitive advantage over downstream competitors. The Amazon case concerned the way nonpublic third-party seller data may be used within its retail business, how it sets criteria selecting which product offer is placed within the “Buy Box” and which sellers can list products under its “Prime label” on its Amazon Marketplace in the UK.
Both Meta and Amazon voluntarily offered commitments to the CMA to deal with these concerns, and the CMA accepted both offers on 3 November 2023. Commitments are designed to address the CMA’s competition concerns, and giving commitments does not imply a finding of competition law infringement.
Meta agreed to provide an option for Facebook Marketplace under which its advertising customers can opt out of their relevant ad data being used by the company to operate or improve the platform. This includes data that illustrates how users engage with their ads and can indicate to Meta which products or services interest a user. Beyond Facebook Marketplace, Meta will not use ad data derived from digital display advertising and business tool services, which identify advertisers, to develop products that compete with those advertisers.
Amazon agreed not to use rival sellers’ Marketplace data to gain an unfair advantage over them. It also agreed to guarantee all product offers are treated equally when Amazon decides which will be featured in the “Buy Box” on its platform, and to allow third-party businesses using Marketplace to negotiate their own rates directly with independent providers of Amazon Prime delivery services.
UK CMA Approves Cooperation by Pharma Companies on Combination Therapies
The UK CMA published a prioritisation statement setting out the circumstances under which it will not prioritise enforcement action under UK competition law against drug firms when they implement a specific negotiation framework to make more combination therapies available on the UK National Health Service (NHS). Its analysis is based on its new Prioritisation Principles for investigations.
A combination therapy is a treatment using two or more medicines in combination. The CMA explained in its statement that it had been told by the Association of the British Pharmaceutical Industry (ABPI) and a number of its member companies that medicines often generate better health outcomes when used in combination because they can target different pathways or levels of the disease. The CMA also was told that many combination therapies fail to get approval from the relevant UK healthcare technology assessment agencies and therefore are not available to NHS patients. This is because the price of the medicines, in combination, means the treatment cannot be deemed sufficiently cost-effective under the current UK access systems.
The ABPI believes it would be possible in a number of cases for the suppliers of the component medicines of a combination therapy to reach a commercial agreement that would allow the combination therapy to be supplied at such a price to the NHS. However, there are concerns that medicine manufacturers are reluctant to engage in the negotiations required to reach any such commercial agreement due to the perceived risk that doing so may be investigated by the CMA as potentially breaching UK competition law.
There are two particular competition law concerns where these activities involve actual or potential competitors. First, the discussions could give rise to the illegal exchange of competitively sensitive information. Secondly, to the extent that any commercial agreement involves coordination on the price of a component medicine, and in particular given the application of uniform pricing rules for supplies to the NHS, the agreement could amount to illegal price fixing.
In its statement, the CMA points out that it “is committed to taking action to ensure that innovating businesses can gain effective market access, particularly where this has a real impact on areas that are most important to people [and] making more combination therapies available to NHS patients — particularly given their increasing importance — will have a real, positive impact now and in the future, and will benefit patients, innovating businesses and the UK economy at large.”
Against this background, the ABPI proposed to the CMA a negotiation framework intended to permit companies to exchange information so as to reach a commercial agreement with a view to supplying combination therapies to the NHS at a cost-effective price. The framework was designed to minimise the risk of engagement between medicine suppliers and any potential resultant agreement raising competition law concerns.
The CMA confirmed in its statement that it will not prioritise the investigation of commercial negotiations and any subsequent agreements that are carried out according to the negotiation framework, where particular market features are present and provided certain conditions are met (which are specific to this market and are explained in the statement).
The prioritisation statement is a useful precedent for an approach that could be used in other business areas where there are seemingly insurmountable competition law concerns arising out of wide industry cooperation. If, on balance, envisaged conduct, taken as a whole, is not likely materially to harm competition and UK consumers (for example, through higher prices), does not raise particular strategic issues for the CMA and is likely to generate efficiencies, then the CMA may take a similar approach. In this context, it is notable that the CMA’s new Prioritisation Principles no longer refer to the consumer welfare standard (impact on consumers) for guiding the selection of cases. Instead, amongst other factors, the CMA will “focus particularly on ensuring that competition supports a resilient economy that can grow sustainably.”
European Commission Fines Bank for Cartel Implemented Through Messages and Chats
On 22 November 2023, the European Commission announced a €26.6 million fine on Rabobank for infringing EU competition law by participating in a cartel concerning the trading of certain Euro-denominated bonds, together with Deutsche Bank. Deutsche Bank was not fined as it revealed the cartel to the Commission under the leniency programme.
The Commission’s investigation found that, between 2006 and 2016, the two banks, through some of their traders, exchanged commercially sensitive information and coordinated their trading and pricing strategies. The traders operated at Deutsche Bank in Frankfurt and at Rabobank in London. They used Bloomberg emails, instant messages and online chatrooms to exchange information concerning: (i) prices, volumes as well as current and future trading strategies and positions; (ii) the counterparties’ identities; and (iii) their requirements for buying or selling bonds.
Traders adjusted their price levels and trading strategies based on these exchanges. This included inter alia coordination on prices to be offered and displayed on Bloomberg AllQ (all quotes for bonds) screens, which is a dealer-to-client electronic trading platform, and mutual warnings when the other bank’s indicative price on screen was considered too low or too high.
The case shows in particular that companies’ competition law compliance programmes and internal audits need to cover all methods of communication that employees may use. Any messaging platform, including private apps, used for work purposes can be identified and material from it used by competition regulators as evidence of a competition law infringement.
Additional EU and UK competition law news coverage can be found in McGuireWoods’ news section.