Antitrust and Procedural Law: What Q1 2023 Taught Us?

This article concludes the end of Q1 of 2023 and a quarter that gave us a lot of eventful happenings in antitrust like the birth of a new regulator in Vietnam and the CMA’s case against Apple getting thrown out due to procedural law. In general, the UK regulator has its hands full at the moment, with cases also probably being referred to it from other regulators in the future, due to the high profile and market position of companies that are to be investigated.

That being said, it’s not like the other competition watchdogs are sitting there with nothing to do, the German FCO are looking into payment service provider PayPal and are looking to getting a bite out of Apple, while the Colombian regulator raided the state-owned Oil company Ecopetrol over allegations regarding armoured vehicles and helicopters – yes, the Colombian regulator is not in international news every day, but when they do make headlines, they do so with style. What’s more, the raid may have been more politically motivated than the first impression suggests.?

Referral of Cloud Sector From Ofcom to CMA

The UK Competition watchdog has a lot on its hands at the moment, and it might become a whole lot more, depending on whether the communications regulator Ofcom refers the cloud sector or not.

The communications regulator has expressed specific concerns regarding the practices of Amazon and Microsoft, especially taking into account the market position of the two global players. Ofcom has identified behaviours by some providers that could potentially create obstacles to switching between providers and using multiple services, prompting significant concerns.?

Ofcom’s director stated that “We’ve done a deep dive into the digital backbone of our economy, and uncovered some concerning practices, including by some of the biggest tech firms in the world. High barriers to switching are already harming competition in what is a fast-growing market.”

The companies concerned have until May 17 to respond to Ofcom's consultation. The communications regulator will then make a final decision regarding the referral of the sector to the CMA by October 5.

Colombian Oil Company Raided by Regulator

Colombia's antitrust regulator raided the state-owned oil company Ecopetrol and its various subsidiaries to investigate allegations of dominance abuse and possible anticompetitive contracts related to armoured vehicles and helicopters.

The Superintendence of Industry and Commerce (SIC) raided the Bogotá offices of Ecopetrol and seized mobile phones, computers and conducted interviews with high level executives.

Following the raid, Ecopetrol CEO Felipe Bayón stated that the oil company cooperated with the SIC and fulfilled all their requests. In a shareholder meeting, Bayón communicated that “Ecopetrol has acted and will continue to act in the best interests of the country, with respect for regulations and laws."

The SIC stated in a press release that this initial phase aims to establish the grounds for a potential formal investigation into the possible violation of fair competition regulations.

A week before the raid, Felipe Bayón was interviewed by the Financial Times where he pledged for a gradual energy transition, commenting that “Ecopetrol needs to be protected from not being run as a technical exercise,” and that “It’s been politicised. Independence needs to be respected and Ecopetrol needs to be run like a business.” A comment that did not sit well with the leftist government that has raised taxes on oil and is driving a hard line in the transition into renewable energy.

German FCO Takes Closer Look at PayPal

The German Federal Cartel Office (FCO) initiated proceedings against the payment service provider PayPal. The accusation: PayPal's terms of use prevent merchants from making payment via other online payment methods more attractive for their customers than via PayPal.

First, the office criticises that PayPal merchants "may not charge surcharges or service fees, higher shipping costs compared to other payment methods, or other fees for the use of PayPal services." This clause effectively means that the merchant cannot pass through more favourable charges from other payment service providers to end customers through lower retail prices.

The specifications for PayPal's presentation require that merchants "treat PayPal on a par with other payment sources offered at their points of sale." For PayPal, this applies to, among other things, "treatment in terms of payment process, terms, conditions, limitations, and fees, in each case as compared to other brands and payment sources at your points of sale."

It’s possible that the FCO will find an abuse of market power by proving that certain companies are dependent on PayPal in such a way that there are no sufficient or reasonable possibilities for them to switch to competitors of PayPal.

Motorola Plans to Challenge CMA On Price Cap

Motorola Solutions has expressed its intention to contest what it considers to be an excessive overreach by the UK’s Competition and Markets Authority, which has imposed limitations on the fees the company can levy on emergency services for using its Airwave network.

The company stated that "Motorola Solutions strongly disagrees with the CMA's final decision and believes it cannot be justified on competitive, economic or legal grounds. We will appeal the decision.”

Back in 2016, the Home Office reached fixed price contracts with Airwave, which were submitted to the CMA during the approval process of Motorola Solutions' acquisition of the company. While the CMA acknowledged Airwave's service, the decision aims to enforce reductions in the agreed pricing for the future.?

Motorola Solutions stated their concern that this decision represents an “unprecedented overreach,” which could discourage long-term investment and contracting with the U.K. government.?

The Motorola spokesman also said that the company remains committed to protecting its contractual position in delivering the Airwave network, which plays a vital communication role for emergency services in the UK.?

European Commission to Investigate Orange/MasMovil Merger

A merger of the second and fourth largest operators at retail and wholesale level for fixed broadband and mobile services in Spain has caught the attention of the Commission, followed by the announcement of an in-depth investigation.?

In July 2022, Orange and MasMovil first announced the merger, which has an estimated value of €18.6 billion. The merger will take the shape of a 50-50 joint venture that is governed equally by both parties. As the main reason for the probe, the EC stated the expressed concern that the transaction could result in a decrease in competition for mobile and fixed broadband services in Spain's retail supply sector.

This is indicated by the close competition between Orange and MasMovil in the Spanish market for providing said retail mobile telecommunications services, as well as fixed broadband access services and bundles of multiple-play services. The direct detriment for consumers could lie in “higher prices and lower quality of telecom services for customers,” as stated by the EC.

Vietnam Creates New Competition Authority

Vietnam made headlines in February by putting in place their new competition authority. The journey there was not without obstacles. After a period of five years without enforcement, amendments to Vietnam's competition law have finally been put in place by the government. This has resulted in the?establishment of the Vietnam Competition Commission (VCC) as the sole antitrust authority.

Under the Ministry of Industry and Trade (MOIT), the Vietnam Competition Council and Vietnam Competition Authority have been combined to form the above mentioned VCC. The new regulator is primarily responsible for conducting competition proceedings, regulating economic concentration, granting exemptions from anti-competitive agreements, addressing appeals related to competition case settlements, advising and aiding the MOIT in managing competition, safeguarding consumer interests, and managing multi-level marketing activities.?

The formation with the VCC under MOIT may help circumvent challenges that new regulators tend to face, including limited resources, political pressure and jurisdictional issues when it comes to cases with cross-border implications.

Apple Blocks CMA Advances

Due to the UK Competition and Markets Authority's failure to meet its filing deadlines, the British Authority had to drop its investigation into Apple's involvement in the mobile browsing and cloud gaming markets.

Why was the U.K. watchdog gunning for Apple in the first place? This time it was because the tech giant obligated all browsers operating on Apple's iOS platform to use the company's WebKit rendering engine, which hinders substantial differentiation among browsers on iOS devices and confines web developers to the features Apple offers. Additionally, as we have also reported on before, Apple imposes constraints on cloud gaming services by directing payments through its own payment system, placing competitors at a disadvantage.

The British regulator investigated these policies stating that they harm UK consumer choice and may harm innovation.

Apple’s argumentation is based on the CMA having to propose an investigation notice within six months of a market study which the CMA published on June 15, 2021. The CMA gave notice on June 10, 2022, having dismissed the aforementioned market study as irrelevant from a procedural perspective, which it was not to the CAT.

"Given the importance of today’s judgment, we will be considering our options including seeking permission to appeal," the CMA's spokesperson said.

German Watchdog Wants a Bite Out of Apple?

Having won their battle against the CMA, Apple is now facing a stand-off with the German regulator, who has found that Apple has a “company with paramount significance for competition across markets.”?

While this (kind of) sounds like a compliment, it also means that Apple + subsidiaries are now subject to heightened scrutiny under Section 19a of the German Act against Restraints of Competition.

The paragraph in question describes a two-stage procedure for prohibiting practices that endanger competition from companies that have an overriding cross-market significance for competition. In the first stage, said "paramount cross-market importance" is established. However, with this determination in itself, the Federal Cartel Office does not make any statements about possible competition violations.

Apple has already communicated that they will appeal against these findings.

Outro

The first quarter has given us a strong reminder of the relevance of procedural law and deadlines in the antitrust framework. The exciting nature of competition law often entices us to draw our focus away from the procedural law that holds the framework together.?

And in all honesty, yes, deadlines are arguably not as desirable as, for example, looking for ways to make a competitive market more innovative by putting big players under pressure. However, that doesn’t mean that procedural law is not just as vital an instrument when you want to – depending on your position – secure a case, or completely disassemble it. A fact that Apple’s lawyers made use of in Q1 and the CMA – in this particular case – oversaw. Let’s see if Apple’s lawyers in Germany are just as quick-witted as their UK colleagues, they will need all their wits about them to fend off the heightened scrutiny that the German FCO wants to apply to the tech giant.?

With this in mind, I am looking forward to what the other three quarters have in store for us.?