Competition Newsletter No. 7/2010

Policy

Court of Justice – Legal professional privilege
On 14 September 2010, the Court of Justice of the EU issued a judgement clarifying the extent of the legal professional privilege in the field of competition investigations. The Court upheld its previous case-law, confirming that internal company communications with in-house lawyers are not covered by legal professional privilege in European Commission competition law investigations. The origins of the case go back to the European Commission’s decision of 10 February 2003, ordering Akzo Nobel Chemicals and its subsidiary Akcros Chemicals to submit to an investigation aimed at seeking evidence of possible anti-competitive practices. During the examination of the documents seized a dispute arose in relation, in particular, to copies of two e-mails exchanged between the managing director and Akzo Nobel’s coordinator for competition law, a lawyer of the Netherlands Bar and a member of Akzo Nobel’s legal department employed by that company. After analysing those documents, the Commission took the view that they were not covered by legal professional privilege. The decision of the European Commission was subsequently upheld by the Court of First Instance (the General Court after the entry into force of the TFEU). Companies have subsequently appealed against that judgment to the Court of Justice. By the decision issued on 14 September, the Court reiterated the ruling on the extent of legal professional privilege in AM & S Europe v Commission, holding that it is subject to two cumulative conditions. First, the exchange with the lawyer must be connected to “the client’s rights of defence” and, second, that the exchange must emanate from ”independent lawyers”, who are not bound to the client by an employment relationship. Independence of external lawyers refers to independence from their clients as to the content of advice which is presumably reflecting the law as opposed to the commercial interests of the client. The requirement of independence means the absence of any employment relationship between the lawyer and his client, so that legal professional privilege does not cover exchanges within a company or group with in-house lawyers. The Court considered that the current legal situation in the Member States does not justify a change in the case law towards granting in-house lawyers the benefit of legal professional privilege.Moreover, the Court considered that this interpretation does not violate either the principle of equal treatment or the principle of legal certainty in so far as the in-house lawyer is in a fundamentally different position from external lawyers. The full text of the judgement is available at: http://curia.europa.eu/jurisp/cgi-bin/form.pl?lang=EN&Submit=rechercher&numaff=C-550/07

Agreements

Competition Council – Fine – Private pensions funds
The Romanian Competition Council has applied a RON 5.2 million fine (approximately EUR 1.22 million) to 14 undertakings considered as having taken part to an anti-competitive agreement on the market of privately managed pensions funds (second pillar) in Romania. Within the ex officio investigation initiated in December 2007, regarding the conduct of the undertakings active in the field of privately managed pensions funds, the competition authority concluded with respect to the existence of an agreement having as object the sharing of “doubles” between 14 out of the 18 undertakings which have entered on the market newly established in 2007. The “doubles” represented participants simultaneously registered with two funds during the initial accession period.
The allegations concerning a possible concerted practice performed by the mother companies of the private pension funds managers regarding the level of the management fees are subject to further analysis by the competition authority. The competition authority has doubts regarding an alleged exchange of sensitive information having lead to the implementation by market players of the maximum level of the management fee allowed by law.
The Competition Council’s decision is available at: http://www.consiliulconcurentei.ro/documente/Decizia%20nr%2039%20site_18748ro.pdf
European Commission – Dawn raids – Paper envelope industry
On 14 September 2010, Commission officials carried out unannounced inspections at the premises of several European manufacturers of paper envelopes in France, Denmark, Spain and Sweden. The Commission believes that the manufacturers concerned may have, amongst others, coordinated price increases and allocated customers on several European markets.
European Commission – Preliminary investigations into Apple's business practices relating to the iPhone
In Spring 2010, the Commission launched two parallel preliminary investigations into Apple's business practices relating to the iPhone. One focused on the country of purchase rule, whereby repairs service is only available in the country where the iPhone was bought, which made the exercise of warranty rights difficult for consumers who had purchased an iPhone in another EU/EEA country than their home country. The other investigation concerned Apple's decision of April 2010 to restrict the terms and conditions of its license agreement with independent developers of applications or “apps“ for its iPhone operating system. Following a recent announcement, Apple is no longer enforcing the country of purchase rule within the EU/EEA and has appointed independent Authorised Service Providers to offer cross-border iPhone warranty services in those Member States where Apple does not directly take charge of repairs. Apple also announced having removed restrictions previously introduced on the development tools used to create iPhone apps.

Abuse of dominance

European Commission – Natural gas market – Commitments
In March 2009, the Commission notified ENI (the Italian multinational oil and gas company) in a formal Statement of Objections of its preliminary view that it may be abusing its dominant position on the gas transport markets by refusing to grant competitors access to capacity available on the network; by granting access in an impractical manner and; by strategically limiting investment in ENI's international transmission pipeline system. Also, ENI may have had the incentive to engage in a strategy of foreclosing rivals to protect its margins in the downstream gas supply markets. The practices were potentially harmful for competitors, weakened competition on the downstream gas markets and ultimately harmful for gas customers in Italy. ENI committed to divest its shares in three international transport pipelines to Italy: the TAG, the TENP and the Transitgas pipeline, in order to ensure that third-party requests to access the gas pipelines will be dealt with by an entity independent of ENI, the main supplier of gas in Italy. The commitments offered by ENI and tested on the markets are expected to increase the opportunity for other companies to transport gas into Italy and to compete on the Italian market to the benefit of gas consumers.

Merger Control

Competition Council – Unconditional approvals
Dairy products market
The Competition Council cleared the economic concentration performed by way of acquisition of joint control by Bongrain Europe SAS, Mr. Gheorghe-Tudor Comaniciu, Mr. Dragos Comaniciu, Mr. Adrian-Victor Vartolomei and Mr. Romulus Dumitru over Delaco Distribution SA. Bongrain Europe SAS is a company registered in France, member of the group Soparind Bongrain, performing activity in the field of the manufacturing of cheese and other dairy products. Delaco Distribution SA is active on the markets of manufacturing and trading of mozzarella, semi-hard cheese, process cheese in Romania, as well as on the distribution markets of cheese and other dairy products.
European Commission – Unconditional approvals
Leisure travel sector
The European Commission has approved the proposed acquisition of German tour operator Öger Tours GmbH by Thomas Cook Group plc of the UK. The Commission's analysis found that the combined market shares of the parties will be moderate, even when looking on the narrowest possible market definitions and parties will continue to experience strong competition.
Pharmaceutical market
The European Commission has approved the proposed acquisition by Deutsche Bank of control over the Icelandic generic pharmaceutical company Actavis (an international company headquartered in Iceland which is active in the development, production and marketing of generic pharmaceutical products). The Commission found that competition concerns could be excluded due to an absence of overlaps between the activities of the two companies.
Consumer goods market
The European Commission has accepted the request by six EU Member States to assess under the EU Merger Regulation the proposed acquisition of Sara Lee household insecticide business by SC Johnson (SCJ). Spain and subsequently Belgium, Greece, France, Czech Republic and Italy submitted the referral request pursuant to the EU Merger Regulation, which allows Member States to request the Commission to examine a concentration that does not have a Community dimension but affects trade within the EU's internal market and threatens to significantly affect competition within the territory of the Member States making the request.
Online TV and advertising markets – Referral to national competition authorities
The European Commission has referred the assessment of the joint venture between the German private broadcasters ProSiebenSat.1 and RTL to the competition authorities of Austria and Germany, at their request. The purpose of the joint venture is to create an internet platform on which consumers can watch repetitions of television content during seven days after the programme has been broadcast on free-to-air TV. After a preliminary investigation, the Commission found that the proposed transaction would affect competition in national online TV and advertising markets in Austria and Germany.

State Aid

European Commission – Closing investigation into Temporary Framework state guarantee for Romanian chemical producer Oltchim
The European Commission opened an in-depth State aid investigation, in November 2009, over concerns that the planned guarantee of a bank loan to Oltchim, one of Romania's largest chemical companies, did not meet the conditions set in the Temporary Framework on state aid to assist companies' access to finance during the financial crisis. The investigation was triggered after a complaint that the State had granted the guarantee to cover 80% of a EUR 62 million bank loan to Oltchim for it to acquire Arpechim, a troubled supplier. The Romanian authorities having, in the meantime, informed that the guarantee had not been granted, the Commission decided to close the investigation.
European Commission – Investigations into state aid schemes in Spain
The European Commission has opened in-depth investigations to examine whether two schemes to finance the digitization and extension of the terrestrial television network in Spain are in line with EU state aid rules. One investigation concerns the Spanish plan to finance the transition to digital terrestrial television (DTT). The Commission has concerns that the measure favors certain technologies to the detriment of others, in breach of the principle of technological neutrality. The second case concerns the implementation of the transition plan in the region of Castilla - La Mancha, where, in addition to a possible technological discrimination, there are allegations of a discrimination against regional and local terrestrial platform operators.
European Commission – Regional aid – Production of electricity – Negative decision
The European Commission has concluded that a EUR 19.5 million regional investment aid that Italy intended to grant towards the takeover and conversion, by Fri-el Acerra S.r.l, of a closed thermoelectric power plant into a power plant fuelled by bioliquids is not compatible with EU state aid rules. This is because the project in Acerra, in the Italian southern region of Campania, was launched well before the aid was granted, showing that the financial incentive was not necessary to attract the investment. The size of the regional aid itself did not appear commensurate with the benefits for the region. As the aid has not yet been paid out, this decision does not give rise to recovery.
European Commission – Spain – Failure to recover illegal aid
The European Commission referred Spain to the Court of Justice for failure to implement a previous Court ruling, confirming a Commission decision ordering the recovery of an illegal state aid. The original Commission decision had found that loan guarantees, loans at non-market conditions, non-refundable subsidies and interest subsidies granted to Migasa, Gursa, Cunosa and Indosa, all subsidiaries of Spanish household appliances group Magefesa, were in breach of EU state aid rules and required Spain to recover the illegal aid. The Court confirmed the decision of the European Commission in 2002. Having failed to respect the Court ruling, the Commission has decided to ask the Court to impose a daily penalty payment of EUR 131,136 for each day after the second Court ruling until the infringement ends and a lump sum based on EUR 14,343 per day elapsed since the 2002 Court judgement until the second Court ruling.

European Commission – Authorization decisions

Bank wind-up scheme
The European Commission has authorised a resolution scheme for the handing of distressed banks in Denmark. The Commission found the scheme to be compatible with EU rules that allow aid to remedy a serious disturbance in the economy of a Member State. In particular, the measure is limited in time and scope, ensures adequate burden-sharing and contains safeguards to avoid undue distortions of competition. The authorisation is granted until 31 December 2010.
Restructuring aid
- The European Commission has approved a thorough restructuring of Parex that before the crisis was Latvia's second biggest bank. The bank benefitted from State guarantees, recapitalisation and liquidity support for a total of around EUR 1.6 billion. The Commission assessed the restructuring package against its Communications on restructuring aid to banks and on impaired assets treatment and concluded that the plan was capable of securing the bank's long-term viability and to adequately address competition distortions.
- The European Commission has temporarily authorised a transfer of approximately EUR 200 billion of toxic and non-strategic assets into a winding-up institution, and additional State guarantees of up to EUR 40 billion for the German bank Hypo Real Estate (HRE), for reasons of financial stability.
Recapitalisation schemes:
- EUR 650 million recapitalisation provided by Germany in the context of the restructuring of Sparkasse KölnBonn. According to the restructuring plan the bank will concentrate on providing traditional retail banking services to retail customers and small and medium-sized firms, withdraw from other activities and divest non-core subsidiaries;
- scheme for the recapitalisation of credit institutions in Greece by the Hellenic Financial Stability Fund (FSF). The objective of the Fund is to safeguard the stability of the Greek banking system when capital is not available through normal, generally private, solutions.
Regional investment aid
The European Commission has authorized EUR 97.5 million in regional investment aid that the German authorities intend to grant to Wacker Chemie AG. The project involves investments of EUR 800 million for the construction of a new plant. The Commission found the measure to be compatible with the requirements of the Regional Aid Guidelines 2007-2013 and in particular with its rules on large investment projects.
Source: European Commission & Romanian Competition Council