Proposal for a directive to facilitate private antitrust damages actions
On 17 April 2014, the European Parliament passed the long-awaited directive on private antitrust damages actions (the Directive). The Directive will harmonise national rules with a view to facilitate recovery of damages for victims of competition law infringements, including cartels and abuses of dominant market positions. It will remove a number of practical difficulties which EU citizens and businesses face today when trying to recoup compensation for harm suffered. Victims will obtain easier access to evidence to prove the damage and more time to make their claims. Once officially adopted, EU member states will have two years to transpose the provisions of the Directive into their legal system. The Directive will increase the level of cartel damages recovery that is being seen across Europe today.
Landmark judgment on abusive rebates
The General Court (EU) opened a new chapter in the debate on how to properly assess rebates by a dominant company. It is no overstatement to say that two ideological views, from the European Commission (EC) and from the court, clashed. The discussion came about following Intel’s appeal against the decision of the EC to impose fines on it of more than EUR 1 billion for abusive rebates. While the court’s judgment comes as a victory for the EC (it upheld the fine), it is from a policy perspective a hefty defeat for the EC’s concept of an effects-based test.
The EC’s thinking on rebates has significantly evolved over the last decade. The so-called more economic approach (which focuses on the actual effects of behaviour and less on formal criteria) led the EC to rethink its practice on rebates and consider them as a legitimate way for dominant firms to compete, unless competing undertakings would not able to match a rebate, leading to a negative effect on competition. This cumulated in a priority paper, which identifies those rebates which the EC will prioritise to go after. The court did not leave doubts as to its thinking on the EC’s theories and restated a formalistic approach. Exclusionary rebates are per se illegal irrespective of whether they exert actual negative effects on competition. As a matter of policy, exclusionary rebates are deemed to be such a severe restriction that no effects analysis is needed.
The competition world after the Intel judgment is one of uncertainty, leaving companies in limbo which test to apply – the EC’s test is perceived to be the “appropriate” test to identify anticompetitive behaviour, while the court judgment manifests the actual legal standard. This uncertainty will remain for a while. Intel appealed against the decision of the court to the European Court of Justice. Another round of debate is ensured.
Review of acquisitions of non-controlling minority shareholdings
On 9 July 2014, the EC published proposals (the White Paper) to reform the European Merger Regulation (Merger Regulation). The White Paper spins forward the public consultation which the EC kicked off based on a Staff Working Document in summer 2013 (see related article in the Schoenherr Roadmap 2014).
At present the EC has limited powers to capture and review non-controlling minority shareholdings. The White Paper now introduces the concept of a “targeted transparency system”. It suggests that minority shareholding in a competitor or directly vertically related company would trigger the EC’s jurisdiction if the acquired shareholding is (i) above 20% or (ii) between 5% and 20%, but combined with “additional factors” (ie, rights that give the acquirer a de-facto blocking minority, a seat on the board of directors or access to commercially sensitive information of the target).
The EC of the White Paper was sent to public consultation. It is uncertain whether the new Commissioner (see below) will endorse the legislative initiative launched by her predecessor. If so, the targeted transparency system of the White Paper is likely to be the mechanism we will see introduced into the Merger Regulation. Once adopted the impact is anticipated to go beyond the EU merger control regime. We expect that national legislators in and outside the EU will review their respective merger regimes with a view to capture non-controlling minority shareholdings.
New EU Competition Commissioner
Margrethe Vestager, former Deputy Prime Minister of Denmark, was nominated by the Juncker’s team to become the new EU Competition Commissioner for an term of five years, beginning 1 November 2014. Her appointment was confirmed by the European Parliament (EP) in October 2014. During the hearing before the EP, Ms. Vestager addressed a number of issues that she would like to focus on during her five-year term in office. She confirmed the importance of competition policy to Europe and declared to resist political pressure from the member states, notably when it comes to pressure for protectionism. The enforcement against cartels is said to be a top priority during her term. Moreover, the Competition Commissioner designate welcomed initiatives that encourage private damages actions.
This is in line with the mission letter of Juncker in which he asked Vestager to focus on mobilising competition policy tools and market expertise so that they contribute to the EC’s jobs and growth agenda, including in areas such as the digital single market, energy policy, financial services, industrial policy and the fight against tax evasion.
Little is known about Margrethe Vestager. The Competition community looks forwards to seeing how she shapes competition policy in the EC’s next term.
The competition world after the Intel judgment is one of uncertainty, leaving companies in limbo as to which test to apply.