Table of Contents
- UK FDI Regime Applied to Relationship Agreement Between Vodafone and Etisalat
- European Commission Accepts Renfe’s Commitments on Online Rail Ticketing
- UK Court Rules CMA May Demand Documents From Outside the Jurisdiction
- EU’s Highest Court Rules on Three Sport Cases
UK FDI Regime Applied to Relationship Agreement Between Vodafone and Etisalat
The part of the UK foreign direct investment (FDI) regime dealing with national security issues, contained in the UK National Security and Investment Act 2021 (NSI Act), is very wide in scope and must be taken into account in a range of transactions involving assets or businesses with a UK link. A recent decision by the UK government concerning a relationship agreement between UK-based mobile telecoms provider Vodafone and state-controlled Emirates Telecommunications Group Company PJSC (Etisalat) provides a good example of this.
Vodafone and Etisalat (majority owned by the UAE state) agreed in May 2023 on a strategic relationship. As part of this, the parties entered into a strategic relationship agreement (SRA) that established Etisalat as a “cornerstone shareholder” of Vodafone. Under the terms of the agreement, for as long as Etisalat maintained its then shareholding of 14.6%, the group CEO of Etisalat would join the Vodafone board as a non-executive director. Etisalat would also have the right to nominate a second non-executive director, independent of Etisalat, if its shareholding exceeded 20%. These appointments were subject to receipt of the “required regulatory approvals.”
On 25 January 2024, the UK government announced a decision on the case under the NSI Act. Given the limited shareholding, the arrangement did not fall subject to mandatory notification and approval prior to closing under the NSI Act and was therefore either voluntarily notified (perhaps in order to obtain the regulatory approval) or “called in” for review by the government.
The government found that it had jurisdiction under the NSI Act because the SRA, presumably also including the overall strategic relationship, gave Etisalat “material influence” over Vodafone. Due to Vodafone’s activities in the UK telecoms sector, its contribution toward ensuring UK cybersecurity and its position as a strategic supplier to the UK government, the UK government identified a national security risk from the SRA. Not mentioned, but presumably also relevant, is the state control of Etisalat.
Due to these concerns, the decision requires Vodafone and Etisalat to take various measures as a condition of approval of the arrangement. These measures are: (i) notification requirements in relation to any alteration to or termination of the terms of the SRA; (ii) requirements relating to Vodafone’s board composition, board committee membership and board committee functions; and (iii) establishment of a national security committee to oversee sensitive work that Vodafone and its group perform that has an impact on or is in respect of the national security of the UK.
The parties will no doubt be required to report on compliance with these measures. The third requirement, relating to the national security committee, in particular seems to impose a material compliance burden on Vodafone.
European Commission Accepts Renfe’s Commitments on Online Rail Ticketing
Under EU competition law, it is not always the case that a company can freely decide whether to allow access to its physical or intellectual property. Where a company is dominant in a particular market, that right has been limited or controlled. This issue can and does impact many types of markets.
Against this background, in April 2023, the European Commission opened a formal investigation over concerns that Renfe, the Spanish state-owned rail incumbent operator, may have abused its dominant position in the Spanish passenger rail transport market by refusing to providerival ticketing platforms with: (i) full content concerning its range of tickets, discounts and features; and (ii) real-time data (prejourney, on-journey or post-journey) related to its passenger rail transport services.
The Commission preliminarily found that Renfe’s refusal to provide its full content and real-time data may have prevented rival platforms from competing with Renfe’s own direct digital channels to the detriment of consumers, in breach of EU competition rules.
Following a consultation on an initial proposal to deal with those concerns, Renfe offered, and on 17 January 2024 the Commission accepted, commitments and closed its investigation. The commitments require Renfe to make availableto third-party ticketing platforms, irrespective of the channels they use to access Renfe content and real-time data, all the current and future content and real-time datadisplayed on any of its own online channels.
There are also various technical obligations relating to the provision of the data and a noncircumvention clause whereby Renfe commits not to use any unfair, unreasonable or discriminatory technical or commercial measures that would impede or hamper access to and distribution of Renfe’s content and real-time data.
This specific issue of foreclosing competing ticketing platforms also arises in other areas and the Commission investigation is another reminder of how it and national competition regulators in the EU and UK view the issue.
UK Court Rules CMA May Demand Documents From Outside the Jurisdiction
On 17 January 2024, the English Court of Appeal held that the UK Competition and Markets Authority (CMA) has the power to require overseas companies to produce documents and information when it is investigating suspected anti-competitive conduct under UK competition law.
The case arose out of a December 2022 decision under which the CMA imposed a fine on a non-UK company for failing to comply with an information request issued as part of a competition law investigation involving that company’s group. The company issued a legal challenge.
The CMA had requested the information because it believed important aspects of the suspected conduct were agreed outside the UK and implemented in the UK.
The UK Competition Appeal Tribunal found in favour of the firm. The CMA appealed this due to concerns that it needs the power to demand information from businesses based outside the UK in order properly to enforce UK competition law.
Agreeing with the CMA, the Court of Appeal stated that the CMA’s ability to conduct competition investigations would be compromised were it unable to obtain information from overseas. This would create “a perverse incentive for conspirators to move offshore to organise cartels directed at harming the United Kingdom market.”
This is an important procedural issue for companies and their advisers. In particular, companies based outside the UK that receive requests from the UK CMA should consider the position carefully before declining to respond on the basis that the CMA does not have jurisdiction.
EU’s Highest Court Rules on Three Sport Cases
On 21 December 2023, the EU’s highest court, the European Court of Justice (ECJ), handed down three judgments concerning the relationship between EU law and the administration and basis of professional sport competitions. Two of the cases related to football (or soccer) and the other to skating (figure and speed). The judgments likely will have a significant impact on the running of professional sport competitions in the EU.
The skating case considered the rules of the International Skating Union (ISU) on the prior authorisation of skating competitions, which empower it to subject international competitions to its approval and to impose penalties on athletes who take part in unauthorised competitions. The ECJ found that these rules are an infringement of the EU competition law ban on anti-competitive agreements — an “object” (i.e., automatic) breach of Article 101(1) of the Treaty on the Functioning of the European Union (TFEU) — because they are not subject to any guarantee ensuring that they are transparent, objective, nondiscriminatory and proportionate. They give the ISU a clear advantage over its competitors and have unfavourable effects for athletes as well as consumers and broadcast audiences. This upholds the European Commission’s original 2017 finding on the issue.
One of the football cases arose out of the proposed Super League. The ECJ considered the FIFA and UEFA rules that make any new interclub football project (such as the Super League) subject to their prior approval and control the participation of clubs and players in such a competition. It found that where there is no underlying framework for those powers setting out substantive criteria and detailed procedural rules for ensuring that they are transparent, objective, nondiscriminatory and proportionate (which there were not in this case), then there is both an abuse of a dominant position (infringing Article 102 TFEU) and an infringement of the ban on anti-competitive agreements (again, an “object” breach of Article 101(1) TFEU).
The same is true for rules that give FIFA and UEFA exclusive control over the commercial exploitation of the rights related to those competitions. Further, the system of prior authorisation for new football competitions could not be regarded as justified by the legitimate public interest objective of ensuring the open, meritocratic nature of the competitions concerned and ensuring a “solidarity redistribution” within football. However, in relation to these football rules, an exemption from the ban on anti-competitive agreements and a defence of objective justification under the ban on abuse of a dominant position may in principle be available.
The rules on interclub competitions (without an underlying framework of the same nature) also infringe EU law on the freedom to provide services in the EU. The consequences of these findings on competition and internal market law will be determined by the national court in Spain that requested the ECJ to rule on the points.
The other football case concerned the UEFA and Belgian football association rules on homegrown players, which was again a mixed competition and free movement case. The rules require football clubs that participate in their competitions to list a mandatory number of players trained by the club or in the national football association to which the club belongs. The ECJ held the normal competition law analysis applies so that there could in principle be an infringement of Article 101(1) and, if so, an exemption under Article 101(3) could be available. In relation to the free movement of workers (i.e., football players) rules, the ECJ held that there is an infringement unless it is established that they are suitable for ensuring, in a consistent and systematic manner, the attainment of the objective of encouraging, at local level, the recruitment and training of young professional football players, and that they do not go beyond what is necessary to achieve that objective. As with the Super League case, the referring national court will take its decision based on these principles.
The three judgments together are long and complex and raise numerous issues. The skating and Super League cases in effect subject organisations (such as the ISU, FIFA or UEFA) with regulatory or quasi-regulatory functions to particularly strict obligations. This could perhaps be extended to other organisations, such as some digital platforms.
These obligations include in particular a requirement to respect the principle of equality of opportunity and use rules that are transparent, objective, nondiscriminatory and proportionate. Importantly, however, ISU, FIFA and UEFA are not barred from protecting their competitions (against, for example, the Super League). Instead, the judgments set out the (procedural and substantive) conditions that must be employed in order to comply with EU competition and internal market law.
Additional EU and UK competition law news coverage can be found in McGuireWoods’ news section.
U.S. Antitrust
McGuireWoods publishes bulletins on U.S. antitrust developments, as well as regular publications on numerous other topics.