Hans-Jörg Niemeyer is a partner at Hengeler Mueller specialising in competition law. Recent highlights include representing the Japanese company Nippon Chemi-Con in General Court proceedings against a European Commission capacitors decision.
Anna Lyle-Smythe is a partner in Slaughter and May’s Brussels office. She has a broad competition practice, including advising on mergers, cartels, state aid and market investigations. Her highlights include advising DuPont on the EU investigation of the chloroprene rubber cartel, and in the subsequent appeals to the EU General Court, and European Court of Justice.
Bart de Rijke is a partner at De Brauw Blackstone Westbroek who specialises in competition law with a special interest in technology-driven industries. He has significant experience in acting as coordinating counsel in multi-jurisdictional merger filings, has successfully litigated in abuse of dominance cases and regularly advises clients on related topics. His work includes advising and defending clients in cartel investigations by European and national regulators.
1 What kinds of infringement has the antitrust authority been focusing on recently? Have any industry sectors been under particular scrutiny?
Anna Lyle-Smythe: As regards cartel decisions, the Commission has more or less maintained its level of activity and decided four cases against 20 undertakings in 2018. The total amount of cartel fines imposed in 2018 amounted to €800 million, which is considerably less than the €3.7 billion record high in 2016. The largest individual fine imposed in 2018 was €207 million against Wallenius Wilhelmsen Logistics-EUKOR Carrier, in the Maritime Car Carriers decision. In terms of type of infringement, in addition to the inevitable attention on ‘classical’ cartel scenarios involving agreements on sales prices and market sharing, there has been growing focus on cases where the infringement involves competitors exchanging competitively sensitive information with one another and on cartels between buyers fixing purchase prices.
Bart de Rijke: And in addition, the Commission focused more on cases that affected online consumers in the EU. In the aftermath of the Commission’s e-commerce sector inquiry, the Commission opened proceedings against suspected online retail price maintenance and geo-blocking. In 2018, the Commission fined producers of electronic consumer goods for retail price maintenance. Furthermore, the Commission fined Guess for several online sales restrictions imposed on its retailers and illegal territorial sales restrictions. The Commission has been particularly keen on addressing territorial restrictions, also more broadly. For instance, the Geo-Blocking Regulation came into force in late 2018 and prohibits unilateral geo-blocking and geo-discrimination.
Hans-Jörg Niemeyer: The Commission’s practice has maintained its focus on two key industries previously in its attention – the automotive sector and the banking sector.
The Commission continued its series of investigations into the automotive sector in 2019 by fining a car safety equipment suppliers cartel. This is the second time that the Commission has sanctioned car safety equipment suppliers for participating in a cartel. Also in early 2019, the Commission addressed a Statement of Objections to BMW, Daimler and VW for restricting competition on emission-cleaning technology. In 2018, the Commission fined maritime car carriers and car parts suppliers for their involvement in cartels concerning spark plugs and braking systems. Overall, so far from 2013 until April 2019, the Commission has fined car parts cartels over €2 billion.
The Commission also continues its investigations into the banking sector – in 2019 it has sent a Statement of Objections to several banks allegedly involved in a cartel for acquiring and trading European government bonds. In 2018, the Commission issued a Statement of Objections to a cartel involving USD supra-sovereign, sovereign and agency bond trading. As a side note, in April 2019, the Commission also published its final study in the field of syndicated loans. The study recommended several important safeguards in the industry in order to limit competition risks in practice.
2 What do recent investigations in your jurisdiction teach us?
ALS: Most investigations are still triggered by leniency applications, suggesting that the Commission’s leniency programme remains a valuable tool for the enforcement of European competition law, even if data suggests that the rate of applications has declined. There are various reasons why a company may choose to apply for leniency. Very often, investigations in the same sector may prompt companies to conduct internal investigations and, as a consequence of information unearthed during that investigation, consider applying for leniency. Companies may, for example, learn that a competition authority has conducted an inspection (or dawn raid) at the business premises of a competitor or an undertaking active in a neighbouring market. These investigations are then often reported through press statements by the companies involved. In many cases, the Commission will then confirm the inspection, recent examples being in the kraft paper or the ethylene purchasing sectors. Once it becomes apparent that a particular industry is under scrutiny or that investigations have already started, there is always the risk of spillover to other companies or to neighbouring markets. As a result, companies active in those markets have an incentive to determine whether they are also at risk of investigation.
3 How is the leniency system developing, and which factors should clients consider before applying for leniency?
HJN: We have witnessed a decrease in leniency applications before the Commission over the past years. This trend goes hand in hand with the fact that, since 2017, the Commission has issued fewer decisions (four in 2018, one in 2019, as opposed to seven in 2017), and has imposed lower amounts of fines. The constant decrease of leniency applications signals not only the (apparent) reduction of cases handled by the Commission, but also the necessity for further incentives for companies to come forward with information and cooperate with the authority. We have followed with interest Eric van Ginderachter’s statements from October 2018. He expressed the Commission’s fear that the recent proliferation of different leniency regimes worldwide had resulted in uncertainty for companies that would once have been probed in a more limited number of jurisdictions. He also identified as a cause for the decrease in leniency applications the threat of civil litigation following cartel decisions, which means that EU authorities need to reconsider private damages in Europe.
BdR: The decline in leniency applications coincides with the increase of follow-on damage claims. The use of a Commission decision as evidence in those follow-on cases probably makes it less attractive to apply for leniency compared to the period when follow-on damage claims were infrequent. Also, the possible disclosure of internal documents relating to a leniency application in follow-on procedures makes it less attractive to apply.
ALS: Next to those internal documents, the employees involved in the cartel are usually the most important source for providing valuable information for a leniency application. If a company applies for leniency, all available information on the cartel must be disclosed to the Commission, including the information obtained from the company’s employees. There are no penalties imposed on individuals under EU law. However, the gathering of information from a company’s employees is a very delicate process. Companies and legal counsel need to observe many requirements, for example, data protection or labour law, which may differ from country to country.
4 What means exist in your jurisdiction to speed up or streamline the authority’s decision-making, and what are your experiences in this regard?
ALS: In 2008, the Commission introduced the possibility of a settlement procedure. The aim was to simplify and speed up administrative proceedings and reduce protracted appeals before the EU courts while ensuring effective competition enforcement. The Commission does not enter into plea bargaining or similar agreements. In its settlement procedures, the Commission neither argues nor bargains the use of evidence or the appropriate sanction. Instead, the companies must admit their liability for the cartel infringement and reach a common understanding with the Commission as regards the nature and scope of the illegal activity. To this end the companies agreeing to a settlement procedure are informed of the Commission’s anticipated objections and the evidence these objections are based on. The companies can then give their views regarding these preliminary findings. The Commission will also give the companies an indication of the potential fine they can expect.
BdR: In 2018, we have seen the development of a settlement procedure outside the field of purely horizontal cartels between competitors. The Commission applied this new settlement procedure in its case against the producers of electronic consumer goods; all four of them individually reached a settlement with the Commission. Later in 2018, Guess settled with the Commission in a verticals case and Nike settled in early 2019.
HJN: As recently as March 2019, the Commission launched its new eLeniency online tool, designed to facilitate for companies and their legal representatives the submission of statements and documents as part of leniency and settlement proceedings, among others. The novelty of eLeniency is that statements and submissions that were, until now, provided to the Commission in writing can be filed online. The platform itself offers the possibility of either (i) typing in directly in a specially designated field that is available for 24 hours; or (ii) uploading already existing documents from one’s computer desktop. Any document, for example, historical or contemporaneous evidence, that is uploaded (and therefore not typed) into the platform will be considered as a written statement. Any statement typed directly into the platform would be considered as an oral statement. This lightens the logistical burden of the companies and their representatives in terms of not having to submit the statements in person at the Commission’s premises. In the case of cartel settlement procedures, eLeniency can be used for submitting documents, providing comments or making formal settlement submissions to the Commission. In terms of confidentiality and legal protection of the oral statements, it is still unclear whether the new system provides the same guarantees as the ‘traditional procedure’.
5 Tell us about the authority’s most important decisions over the year. What made them so significant?
ALS: In 2018, the Commission continued its major investigation into cartels in the automotive parts sector. On 21 February, the Commission announced three separate decisions, fining four maritime car carriers €395 million, two suppliers of spark plugs €76 million and two suppliers of braking systems €75 million. The Maritime Car Carriers decision was the largest fine in 2018 and the Commission found that the carriers fined were responsible for the transportation of almost half of the motor vehicles imported to and exported from the EU.
BdR: Furthermore, over the past year, the first fines were imposed in the cases that resulted from the Commission’s e-commerce sector inquiry, which was finalised in 2017. It concerned the producers of electronic consumer goods which settled with the Commission with regard to online retail price maintenance. In early 2019, Nike settled with the Commission for restricting cross-border online sales of shirts of some football clubs and national teams through licensing agreements. Similar agreements by Sanrio, and Universal Studio’s with their respective wholesalers and retailers of Hello Kitty and Despicable Me merchandise, are still under the Commission’s scrutiny. Also, other cases that the Commission had opened as a result of the e-commerce sector inquiry are still ongoing. In early 2019, the Commission sent a statement of objections to video game producers and video game platforms that are accused of geo-blocking by making it impossible for gamers to purchase video games in other member states than where they reside.
HJN: From the Commission’s latest 2019 practice, the investigation concerning emissions technology – an investigation that broadly continues the series of previous EU antitrust investigations into the automotive sector.
6 What is the level of judicial review in your jurisdiction? Were there any notable challenges to the authority’s decisions in the courts over the past year?
HJN: One of the developments we have noticed is that the General Court seems to scrutinise Commission cartel decisions more thoroughly. The main reason in practice is the increasing number of settlement cases, which means that less decisions are appealed. Consequently, the General Court has more time at its disposal to look for reasoning errors and to test the Commission’s evidence on the margins, for instance challenging the entire duration, product or geographic scope of the infringement. Concerning the duration of proceedings, we noticed that 2017 has been an exceptional year since the average duration of a case was approximately 26.4 months. It appears from the 2018 figures that the duration of the cases is becoming more extensive without reaching the high levels of 2014–2015. The same evolution is evident in the number of completed competition law cases.
In terms of judicial review, one of the more prominent cases was the Keramag judgment of 3 July 2018, whereby the General Court had to reassess its own infringement of the obligation to state reasons and the rules applicable to the taking and appraisal of evidence by failing, for instance, to undertake a complete examination of the Commission’s decision and of the evidence, to examine the probative value of certain evidence mentioned in the Commission’s decision and to ascertain whether the evidence, viewed as a whole, could be mutually supporting. Following its analysis, the General Court concluded that the entirety of the body of evidence submitted for its assessment indicated that the companies that had been fined did in fact participate in the cartel and subsequently upheld the fine.
Another notable judgment was the 12 July 2018 Goldman Sachs case, where the Court stated that the Commission was not required to show that each of the projects to be implemented outside the EEA had a sufficient impact in the EU to justify the application of EU antitrust law, since the question of whether legal provisions apply must be assessed in the light of the effects of the allegedly collusive behaviour.
Last but not least, the General Court again focused on the definition of the restriction of competition by object in its Servier judgment of 12 December 2018. More precisely, the Court confirmed that certain patent settlement agreements may restrict competition by object. The Court’s assessment again puts into perspective the co-existence of antitrust and intellectual property law.
BdR: The Perindopril case against Servier and five generic drug producers also demonstrates that whether there is an anticompetitive pay-for-delay agreement is not a straightforward assessment. With regard to the agreements reached by Servier with one of the generics, the Court ruled that the Commission had erroneously qualified IP agreements as an illegal pay-for-delay-agreement. A side-deal may be an indication for the existence of an illegal pay-for-delay agreement, but entering into a licence agreement concerning the patent in dispute in addition to a settlement agreement is not considered an illegal side-deal. On the contrary, the Court considered that to be an appropriate deal to resolve the dispute.
ALS: We have also seen a notable ruling from the General Court, which issued a judgment on 3 July 2018 upholding the original €57 million fine imposed on Sanitec Europe and its subsidiaries for participating in a cartel in the bathroom fixtures and fittings market. The Commission’s initial 2010 decision imposed fines exceeding €622 million on 17 bathroom manufacturers for participating in a cartel between 1992 and 2004 that spanned six member states. On appeal in 2013, the General Court annulled the fines imposed on two of Sanitec’s subsidiaries and reduced the group’s total fine to €50 million. In 2017, however, the European Court of Justice set aside the General Court’s ruling, finding that the latter had not properly considered the evidence or verified whether the pieces of evidence, viewed as a whole, could be mutually supportive, and referred the case back to the General Court. In the 2018 judgment, the General Court viewed the evidence as a whole, concluding that even if there is no single compelling piece of evidence, several pieces of evidence taken together may be sufficient to prove an infringement.
7 How is private cartel enforcement developing in your jurisdiction?
ALS: There is no EU-level private cartel enforcement, and follow-on claims concerning Commission decisions must be brought before the national courts. We continue to see a lot of activity in those member states in which private actions for cartel damages are already well established (notably the UK, Germany, the Netherlands and Finland). However, following the implementation of the EU Damages Directive we have started to see an increase in private damages cases across the EU.
BdR: The further growth of follow-on litigation cases in the EU also leads to an increase in the number of cases in which the differences between legal concepts in competition law and national private laws are questioned. The question is whether differences can co-exist or whether they have to converge. Important questions are, for example, whether the Woodpulp I-doctrine also influences questions in private international law about which judge is competent and which domestic civil law is applicable, and whether there can be parental liability in follow-on damages cases.
HJN: We followed with interest the latest developments from the EU’s top court in the case Skanska Industrial Solutions and others. At the heart of the case lies the question of whether the principle that the liability for antitrust fines rests on the concept of economic entity (which means that the parent company can be held responsible for the actions of its subsidiaries) would also apply to liability in a civil lawsuit. The court was called to decide whether the EU member states are the ones to determine their own rules for civil liability, while advocate general Nils Wahl argued that since liability is attached to assets (rather than a particular legal personality), the same undertaking that committed the infringement will be held liable for both public sanctions and private law damages. The Court agreed with the advocate general that actions for damages for infringement of EU competition rules are an integral part of the system for enforcement of those rules, which are intended to punish anticompetitive behaviour on the part of undertakings and to deter them from engaging in such conduct. Consequently, if undertakings responsible for damages caused by an infringement of the EU competition rules could avoid penalties by restructurings, sales or other legal or organisational changes, the objective of suppressing conduct that infringes the EU competition rules and preventing its reoccurrence by means of imposing penalties would be compromised. The Court therefore concluded that article 101 TFEU must be read as meaning that, in cases where all the shares in the companies having allegedly participated in a cartel prohibited by that article were acquired by other companies that have dissolved the former companies and continued their commercial activities, the acquiring companies may be held liable for the damage caused by the cartel in question.
8 What developments do you see in antitrust compliance?
HJN: We consider that even if there has been a decline in the number of Commission decisions and overall amount of imposed fines, antitrust compliance has to remain at the forefront of the companies’ activity. Regular antitrust compliance trainings, together with specialised outside counsel, ensure that employees are up to date with the latest developments in antitrust practice. We particularly value the interactive side of the antitrust compliance trainings, where employees can put forward the issues they are faced with in their daily activity. We also encourage attendees to trainings to work closely and proactively with their legal department to implement antitrust compliance.
ALS: In our experience, few companies rely solely on IT-based modules. They prefer to add other modules, for example, face-to-face training by external counsel or the firm’s legal department. These sorts of training sessions allow a company to reinforce its messaging on the importance of competition law compliance. Also, participants can interact with legal advisers in an informal setting, which helps to raise awareness and encourage open dialogue between commercial and legal teams. Some companies conduct periodic audits in which key documents are screened for antitrust compliance and interviews are conducted with key staff interviews. Other companies set up internal whistle-blower hotlines and offer rewards for whistle-blowing. Overall, the aim of every successful compliance programme should be to provide guidance and foster a culture of compliance. Everybody should be put in a position to conduct their business successfully and without the risk of a competition infringement.
BdR: This is similar to our experience. We also see that companies sometimes prefer a thematic approach to these compliance training sessions. Such training sessions can, for instance, focus on the latest developments in the area of competition law or specific issues that arise in the digital economy.
9 What changes do you anticipate to cartel enforcement policy or antitrust rules in the coming year? What effect will this have on clients?
HJN: Going back to the Commission’s latest investigation into the automotive sector – the Statement of Objections sent to BMW, Audi and VW for restricting competition on emission-cleaning technology; in commissioner Vestaeger’s own words, it is an innovative case when compared to the Commission’s 60 years of cartel investigations as the Commission is stating that a cartel that holds back innovation could be as harmful as one that fixes prices.
ALS: It is not really a change so much as an increase in emphasis on the role of technology-assisted review and other tools for streamlining document disclosure. These have been in use in the US for some time, so it’s great to see the EC starting to use them but there is scope for clarifying and improving the use of these procedures.
BdR: The current debate is about all aspects of competition law in the digital economy. With regard to cartels, the question is, for example, how to deal with tacit collusion resulting from the use of algorithms by competing undertakings and liability for algorithms more broadly. An extensive report on competition law in the digital era has been produced by experts commissioned by the Commission. This report may further stimulate the public debate on antitrust rules in the digital economy. Where the focus and changes will be exactly also depends on the new European Commission that will be appointed later this year.
The Inside Track
What was the most interesting case you worked on recently?
ALS: So much of the work we do on cartels we can’t talk about publicly – at least for many years – but we are waiting for the Court hearing on the Air Cargo case. It will be interesting to see how the Court reacts to the novel approach the Commission took to readoption.
BdR: I cannot mention names, but I worked on a case that raises novel legal questions specific to online markets and potential disruptors that is particularly interesting.
If you could change one thing about the area of cartel enforcement in your jurisdiction, what would it be?
HJN: We still consider that cartel cases are prone to have implications for more than one member state, and it is neither time efficient nor resource efficient for companies to submit pro forma markers or apply for leniency in several EU member states. We continue to support the idea of a one-stop-shop system, similar to the one we have for mergers and that would provide considerable efficiencies for companies applying for leniency.
ALS: I agree! As we have already discussed, the settlement procedure has proved very successful. However – and particularly given the increasing role of private damages actions – I wonder whether it is already time for a revamp. Some specific ideas include increasing the scope for bilaterally negotiated settlements, and reducing yet further the level of public disclosure of the terms of settlement. These would bring the EU practices closer in line with the US and would, in my view, reinforce the leniency programme as there would be even clearer benefits to cooperation with the authorities.
BdR: The biggest challenge in the area of cartel enforcement today is how to give companies sufficient incentives to come forward and apply for leniency again, in view of the significant increase in follow-on damages claims that currently create a clear disincentive to apply for leniency.
Hans-Jörg Niemeyer email@example.com
Hengeler Mueller - Brussels www.hengeler.com
Anna Lyle-Smythe firstname.lastname@example.org
Slaughter and May - Brussels www.slaughterandmay.com
Bart de Rijke email@example.com
De Brauw Blackstone Westbroek - Brussels www.debrauw.com