The most significant rulings of the competition and market authorities (April - May)

Like any other legal or professional field, competition law must constantly develop to adequately reflect the current business – and under certain circumstances – the political environment. Processes that enable new developments are plentiful, most commonly taking place in the form of precedent cases, revisions, and/or petitions. 

Before this backdrop, keeping an eye on contemporary case law and decisions is highly relevant for legal workers and businesses alike. I have put together the most relevant cases of the past months while setting the focus on the international perspective and the possible impact of the cases on competition law.

AdSense Appeal to Take Place in the First Week of May

The first week of May will start with a heavyweight standoff as the EU Commission (EC) and Google go before the EU’s General Court regarding Google’s appeal to the EC’s €1.49 billion fine for including anti-competitive clauses in its AdSense contracts.

Quick refresher regarding the case facts:

In the first quarter of 2019, the EC fined Google for having abused its dominance relating to its AdSense platform. The specific conduct in question was the online giant’s prevention of direct competitors from placing their ads on so-called “third party publisher websites.” These are better known as “Pay-per-click” ads, which are placed left and right from the relevant content on websites the users visit.

By imposing these restrictions for the direct competition, Google was able to prevent companies like Yahoo and Microsoft from using AdSense for their benefit.

The Commission’s findings concluded that between 2006 and 2016 Google included restrictive clauses in its contracts with major sites that use its ad platform which could only be seen as intending to keep rivals out of the market.

Since the EC’s decision, said restrictions have been uplifted by Google and amendments made to their operational methods regarding Google Shopping and Android in Europe. If this change, of course, will prove helpful in the appeal, remains to be seen.

Meta Appeals CMA’s Merger Block

When Meta bought Giphy in May 2020 for $400 million, the main goal – as communicated by Meta – was to integrate the GIF (Graphic Interchange Format – pronounced [ɡ?f]) creation platform into Instagram.

About half a year later, the UK’s Competition and Markets Authority (CMA) reacted with a precedent case, blocking and reversing the tech tie-up, even though it had already gone through.

The CMA’s investigations, which were initiated before the deal was closed, concluded that Meta’s full ownership of Giphy would provide the social media giant with the option to simply block the competition’s access to Giphy’s services, thereby also restricting Giphy’s ambitions in regard to the expansion of their digital advertising campaigns. This in turn would lead to a loss of potential competition, according to the CMA.

Before this backdrop, the CMA has now demanded the unwinding of the deal, requiring Meta to sell Giphy, stating that this would be necessary for “promoting competition and innovation in digital advertising and ensuring that rival social media providers can get competitive access to Giphy’s services – for the benefit of UK consumers.”

Meta has now lodged an appeal, arguing with the insignificant market potential of Giphy’s ad platform and general lack of ad presence in the U.K.

General Court Denies UPS Compensation Claim

Back in 2013, the United Parcel Service (UPS) had its merger ambitions with TNT – a logistic service provider from the Netherlands – blocked by EU antitrust regulators. The € 5.2 billion deal was halted by the European Commission because the parties did not offer enough remedies to ensure that the tie-up would not become detrimental to consumers.

The decision was challenged victoriously in court by UPS, who then proceeded to sue the EU executive for compensation for the harm allegedly suffered as a result of the EU veto.

The General Court has now dismissed the compensation claim on the grounds that UPS “failed to establish that the infringements of its procedural rights in the procedure for the control of the concentration between itself and TNT constituted the determining cause of the types of damage alleged."

There have also been further claims from subsidiaries, such as ASL Aviation Holdings DA and ASL Airlines (Ireland) Ltd – subcontractors of UPS – that had commercial deals in place with TNT that were supposed to be performed after the approval of the said merger. These claims were also shot down by the GC.

An appeal to the European Court of Justice – only on points of law – is still a possibility for UPS. There is however no indication so far of what the logistic giant is planning.

Irish Regulator Aiming to Suspend Data Transfers from Meta

Facebook owner Meta Platforms is now facing a direct order to suspend data transfers to the United States by the Dublin-based Data Protection Agency (DPC) – an EU-Agency in charge of data protection.

The privacy case has Meta’s full attention, which has already threatened to pull its websites from Europe, should the decision go through. On an international level, the agreement of this decision by EU regulators could have sweeping effects, encompassing all companies that transfer data from the EU to the United States. A number that easily goes into the thousands in the EU.

DPC Commissioner Helen Dixon sought the suspension on February 21st, with the preliminary decision sent to the DPC’s European counterparts, who will make the final call.

A recent comment by Meta puts the future of this particular business area in focus: “A long-term solution on EU-US data transfers is needed to keep people, businesses and economies connected.”

How this long-term solution will look, however, remains unclear until now.

Mission Failed Successfully? French Autorité Applies Failing Firm Defence in Precedent Case

The French Autorité de la Concurrence (Autorité) has, for the first time, applied the failing firm defense to a merger review in the case of Mobilux (parent company of But) acquiring their rival Conforama.

A little bit of background info at this point:

According to the OECD, a failing firm is one “that has been consistently earning negative profits and losing market share to such an extent that it is likely to go out of business.

In the context of merger and acquisition proceedings, an acquiring company may therefore rely on the “failing firm defense,” arguing that the transaction in question will not substantially lessen competition, in light of the “failing” nature of the target entity and its lack of current and future competitive significance. In other words, as the alternative to the acquisition would be the liquidation of the target entity, the acquisition of the “failing firm” would not lessen any viable competition – in some cases the acquisition may even be preferable to the liquidation.

This is what happened in the Mobilux/Conforama merger. The former rivals in the area of furniture retail will now be able to merge even though the analysis of the Autorité concluded that three categories of risks would emerge, should the tie-up go through.

However, Conforama's financial difficulties and the absence of a less harmful alternative moved the Autorité to authorize the transaction. The French antitrust enforcer added: "The effects of the disappearance of Conforama would not be less harmful than the takeover by But, as this takeover would ensure that the diversity of the offer is maintained.”

Belgian Regulator Makes Big Tobacco Go Up in Smoke

What started as a formal inquiry by the Belgian Competition Authority (BCA) in May 2017 ended in a 36 million euro fine for Big Tobacco on April 13, 2022.

The BCA directed the fine at firms that act as subsidiaries of Philip Morris International, Imperial Brands, Japan Tobacco, and British American Tobacco. The firms in question would amount to about 90 % of tobacco consumption in Belgium.

The fines were split up as follows:

?          5.7 million euros on British American Tobacco Belgium NV

?          7 million euros on établissements L. Lacroix Fils NV

?          7.2 million euros on JT International Company Netherlands BV

?          16 million euros on Philip Morris Benelux BVBA

The Belgian watchdog stated that the companies had been “receiving confidential commercially sensitive information from their customers between 2011 and 2015 without objecting,” thereby being able to circumvent regular competition.

The decision is still subject to appeal, whereas no information thereto has been communicated yet by the fined companies.

Amazon and Flipkart Subject to Raid by Indian CCI

Over a course of two days, the Indian antitrust regulator raided the workplaces of top Amazon and Flipkart sellers, both being the top eCommerce platforms in India, while Flipkart belongs to Walmart. The documents and digital data were seized over suspicion of competition law violations.

The two sellers in the crosshairs of the antitrust watchdog are called Cloudtail and Appario, among others.

As is already publicly known, the Indian regulator is very discreet when it comes to divulging information about raids, as is also the case here. What is known about the background here is that the platforms were allegedly unfairly promoting the listings of the above-mentioned sellers.

The visibility of listings is vital for an eCommerce seller’s revenue. The higher the rank, the more people are likely to buy this product and also build up an emotional attachment to said seller or listing, leading them to return next time. Preferential treatment of already successful sellers puts other eCommerce merchants, whose livelihood depends on how well their listing ranks, at a considerable disadvantage.

Amazon and Flipkart have both denied any wrongdoing and stated that all their actions are in compliance with Indian law.

The Coexistence of the DMA and National Law

The European Digital Markets Act (DMA) is already causing a lot of commotion, even though the legislation that is designed to keep big tech in check will foreseeably come into force in a few years – 2024 at the earliest. A hot topic in this regard is the co-existence of the EU regulation with its national counterparts, considering that the DMA will rank higher and supersede national law.

Contemporarily, there are already a lot of national regulations that restrict the anti-competitive conduct of big tech firms. Germany’s Section 19a of the Act against Restraints of Competition (ARC) is a prominent example, often being called the “blueprint” of the DMA.

How will regulations like Section 19a ARC and the DMA find a suitable modus operandi? Naturally, one would think that national regulations – to complement the DMA – would adapt to the EU regulation, but that raises the question of whether it makes a lot of sense, taking into account that national competition regulations are tailored to the specific national business conduct and are therefore often more effective than a blanket regulation such as the DMA.

One should also take into account the relevant role that national regulations and their regulators play when it comes to cases with “low priority” cases and initial investigations. Especially in regard to the latter, the Commission is dependent on its national counterparts, since the European watchdog cannot have its eyes everywhere at once.

India Revises Confidentiality Regime

The Competition Commission of India (CCI) recently revamped the Indian confidentiality regime, thereby establishing a legal environment that enables faster access to relevant documents for parties involved in an antitrust investigation. At the same time, the new and improved confidentiality regime protects classified documents against unauthorized disclosure. The process has received a lot of positive feedback from the legal community and press alike.

What initiated this revision in the first place? In the past, matters in regard to the protection of confidential data and/or gaining access to said data of the other parties at the CCI led to interim adjudicatory processes in parallel. Naturally, this would prolong the actual case at hand, especially when these parallel processes were taken on by another court.

The CCI, therefore, recognized the necessity of a streamlined process that would allow them to protect the confidentiality of information, while at the same time respecting the rights of the affected party in need of discovery.

The adoption of the confidentiality ring (CR) was introduced on 8 April 2022.

Exclusion of Russian Regulator from ICN

On February 25th, Lithuania, Estonia, and Latvia called for an exclusion of the Federal Antimonopoly Service of the Russian Federation (FAS) from the International Competition Network (ICN), following Russia‘s open large-scale aggression against Ukraine.

The ICN comprises a total of 140 competition authorities from 130 jurisdictions. It was founded to facilitate cooperation and convergence between authorities worldwide. FAS Russia and the Antimonopoly Committee of Ukraine are both members of the ICN.

The Joint Statement, signed by ?arūnas Keserauskas (Chairman of the Lithuanian Competition Council), M?rt Ots (Director General of the Estonian Competition Authority), and Juris Gaikis (Chairman of the Latvian Competition Council), declares the events in Ukraine as an “unacceptable act of aggression and a blatant violation of international law.”

It further specifies that Russia‘s aggression violates fundamental values protected by the competition policy – the well-being of citizens, businesses, and society as a whole.

ICN Chair (Andreas Mundt) reviewed FAS Russia’s participation in the network and, after consultation with the members of the Steering Group, decided to suspend FAS Russia’s participation in ICN activities as of 2nd March. The ICN notes that the suspension can be reconsidered should the circumstances change.

The Joint Statement was shared and supported by individuals and states, the exclusion followed through on March 3rd.

It’s only natural that most events happening in the field of competition law tend to be of a legal nature, i.e. case developments, appeals, court decisions etc. However, it is especially the last two summarized events – namely the revision of the Indian Confidentiality Regime and the exclusion of the Russian Regulator from the ICN – that show prominently how the field of competition law is shaped by other factors, be they political or simply driven by the need to streamline relevant processes in order to protect the rights and save the time of parties to a lawsuit. 

From a commercial standpoint, we can also take away the following: The failing firm defense used to be an interesting topic we may remember from a paper we wrote during our second year in college. However, the fact that it was now applied by the French Autorité in a precedent case shows very clearly that the past few years of the pandemic have left their mark on European businesses.

At the end of the day, it is up to legal fields like competition law (and the innovation that this field propels) to support the revitalization of the economy and the businesses it encompasses, making the constant development of this field all the more important.