CARTEL INTEL: UPDATES FROM OUR EMEA NETWORK - In this issue - Herbert Smith Freehills
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CARTEL INTEL: UPDATES FROM OUR EMEA NETWORK In this issue 01 Welcome 02 Brussels 05 France 08 Germany 10 Italy 12 Russia 13 South Africa 15 Spain 17 United Kingdom JANUARY 2021
01 KEY CONTACTS
Key Contacts
Daniel Vowden
Welcome
Partner, Brussels
T +32 2 518 1851
daniel.vowden@hsf.com
Adrian Brown
Counsel, Brussels Welcome to our first bulletin of 2021, addressing key cartel
T +32 2 518 1822
enforcement developments across the EMEA region in the
adrian.brown@hsf.com
preceding three months.
Marie Louvet This period has seen significant activity across a range of legal areas, as well as
Counsel, France important policy initiatives and procedural reforms. These are described in expert
T +33 1 53 57 70 75 summaries contributed by our network of offices, intended to assist clients to
marie.louvet@hsf.com keep pace with current legal thinking and practice.
Sergio Sorinas A few examples illustrate the far-reaching nature of some recent developments. In
Partner, Paris France, the adoption of the ECN+ Directive has resulted in the simplification of the
T +33 1 53 57 76 77 national leniency procedure and a significant strengthening of the powers
sergio.sorinas@hsf.com available to investigate cartels. As reported by our Brussels office, the European
Court of Justice has reaffirmed prevailing principles concerning the liability of
parent companies for infringements committed by subsidiaries and, in a separate
Florian Huerkamp
judgment, provided important guidance concerning the duration of bid-rigging
Counsel, Germany
cartels. In Italy, we report on substantial cartel fine reductions granted having
T +49 211 975 59063
regard to the economic impact of COVID-19. In Russia, the national competition
florian.huerkamp@hsf.com
authority is increasingly looking to take a leading role on the international stage
and has recently advocated the development of common leniency rules across
Marcel Nuys BRICS states (comprising Brazil, Russia, India, China and South Africa). As ever,
Partner, Dusseldorf we will monitor this initiative and provide timely updates.
T +49 211 975 59065
marcel.nuys@hsf.com The relationship between leniency applications and follow-on damages claims has
also been in the spotlight. In December 2020, the European Commission issued a
Francesca Morra report1 on the implementation across EU Member States of the Damages
Partner, Milan Directive2. The report confirms a significant growth in damages actions before
+39 02 3602 1412 national courts in relation to infringements of EU antitrust rules (from
francesca.morra@hsf.com approximately 50 cases at the beginning of 2014 to 239 cases in 2019). As
explained below, the recent landmark judgment in the United Kingdom by the
Evgeny Yuriev Supreme Court in the Merricks case may further encourage collective damages
Partner, Moscow actions. In this regard, we also report on significant concerns expressed in
+7 495 78 36698 Germany over a sharp reduction in leniency applications, potentially as a result of
evgeny.yuriev@hsf.com the growth of follow-on damages cases. In this context the Federal Cartel Office
has discussed new cartel detection techniques and enforcement strategies.
Jean Meijer
Partner, Johannesburg It is impossible to conclude this bulletin without at least a brief reference to Brexit.
+27 10 500 2642 Following the withdrawal of the United Kingdom from the EU we face the prospect
jean.meijer@hsf.com of parallel investigations by the UK Competition and Markets Authority and the
European Commission in relation to the same anti-competitive conduct. The
Nick Altini implications of Brexit for cartel enforcement and a spectrum of other activities is
Partner, Johannesburg considered in detail in our “Beyond Brexit” publications, available here (https://
+27 10 500 2679 hsfnotes.com/brexit/), and will no doubt be a matter we report on in future bulletins.
nick.altini@hsf.com
Daniel Vowden, Partner, Brussels
Adrian Brown, Counsel, Brussels
Henar Gonzalez
Partner, Madrid
T +34 91 423 4016
henar.gonzalez@hsf.com
Stephen Wisking
Partner, London 1. Commission Staff Working Paper on the implementation of Directive 2014/104/EU (14
T +44 20 7466 2825 December 2020).
stephen.wisking@hsf.com
2. Directive 2014/104/EU of the European Parliament and of the Council of 26 November
2014 on certain rules governing actions for damages under national law for
infringements of the competition law provisions of the Member States and of the
European Union.
HERBERT SMITH FREEHILLS BRUSSELS 02
Brussels
CJEU confirms Pirelli’s parental According to the Commission, between First, the Court agreed with the GC that the
liability in power cables cartel 1999 and 2005, Pirelli was the parent arguments raised by Pirelli were clearly
company of Pirelli Cavi e Sistemi SpA insufficient to call into question the
Parent's liability for cartel conduct (PirelliCS) and later Pirelli Cavi e Sistemi presumption of decisive influence. The
of its subsidiary remains hard to Energia SpA (PirelliCSE); two companies three rejected arguments were that:
disprove active in the submarine and underground (i) PirelliCS had a corporate structure that
The Court of Justice of the European Union electrical cable sector. In 2005, Pirelli sold enabled it to operate autonomously;
(CJEU) has dismissed an appeal by Pirelli & PirelliCSE to a wholly-owned subsidiary of (ii) Pirelli acted exclusively as a financial
C. SpA (Pirelli) against a General Court Prysmian SA ("Prysmian"), which in turn holding company, controlling over 100
(GC) ruling which had confirmed Pirelli’s was indirectly owned by Goldman Sachs. different companies in different sectors,
joint and several liability in the 2014 power with limited managerial activities; and
cables cartel.3 The Commission concluded that since (iii) Pirelli was not aware of the activities of
Pirelli owned almost 100% of the shares in its subsidiaries because the monthly reports
The CJEU confirmed that the European PirelliCS and PirelliCSE, it was presumed it received were of a purely informative and
Commission was entitled to rely on the to exercise decisive influence over its administrative nature.
presumption of decisive influence as subsidiaries. Similarly, Goldman Sachs
between a parent company and its was held liable because one of its funds Second, Pirelli claimed that the GC
subsidiaries when attributing liability to had a majority shareholding in Prysmian at breached its fundamental rights by wrongly
Pirelli for the conduct of two of its the time of the infringement (ie from 2005 rejecting its complaints alleging
subsidiaries that participated in the power to 2009). infringements of the principles of legality
cables cartel. and personal responsibility, the
On this basis, the Commission imposed presumption of innocence and the principle
The CJEU confirmed that when parties look fines of €104.6 million on Prysmian, of of proportionality. The CJEU rejected these
to challenge the Commission’s findings and which Pirelli was held jointly and severally arguments and recalled well-established
rebut the presumption of decisive influence liable for €67.3 million and Goldman Sachs case law according to which a parent
it is necessary in its decision for the for €37.3 million. company can be held liable for breaching
Commission only to show that the elements EU competition rules if its subsidiaries do
put forward by the relevant undertakings The GC’s ruling of 12 July 20185 not autonomously determine their
are insufficient. The Commission is not Further to an appeal by Pirelli, the GC held behaviour on the market but instead follow
required to discuss each of the elements that the Commission was right to presume instructions from the parent. According to
put forward, especially where these are that Pirelli exercised decisive influence over the CJEU, these instructions can be inferred
manifestly irrelevant, meaningless or its subsidiaries PirelliCS and PirelliCSE from economic, organisational and legal ties
clearly of secondary importance. because it held close to 100% of the share between the subsidiaries and the parent
capital of each company. Pirelli appealed company because, in essence, they are part
This case is a reminder that the bar to rebut against the GC’s ruling to the CJEU, as of the same undertaking.
the presumption that parent companies described below.
exercise decisive influence over their The CJEU also confirmed that the GC was
subsidiaries is high. There are only a handful Like Pirelli, Goldman Sachs also appealed right to rely on the presumption of decisive
of cases in which such arguments have unsuccessfully to the GC against fines influence because, at the time, Pirelli owned
prevailed; the large majority of cases have imposed by the Commission and made a nearly 100% of the shares in its subsidiaries
been dismissed. further appeal to the CJEU against the GC involved in the cartel and had not provided
ruling. At the time of writing the CJEU's sufficient evidence to rebut the
Background to the case ruling is pending. presumption.
The Commission Decision of April 2014 Third, the CJEU rejected Pirelli’s arguments
CJEU confirms Pirelli’s parental liability
In April 2014, the Commission imposed that the GC breached the principles of joint
fines totalling €302 million on 11 producers Pirelli put forward a number of arguments and several liability, proportionality and
of underground and submarine high voltage against the GC’s ruling, which had confirmed equal treatment in holding Pirelli jointly and
power cables (Power Cables Decision)4. the Power Cables Decision finding that Pirelli severally liable for the purpose of paying the
The Commission found that these companies exercised decisive influence over PirelliCS fine. According to the Court, Pirelli’s joint
shared markets and allocated customers and PirelliCSE. All of these arguments were and several liability stems simply from the
between themselves from 1999 to 2009. rejected by the CJEU. fact that both Pirelli and its subsidiaries
3. C-611/18 P, Pirelli & C. SpA v European Commission, 28 October 2020 (only in French and Italian)
4. Case AT.39610, Power cables.
5. T-455/14, Pirelli & C. SpA v European Commission, 12 July 2018 (Only in French and Italian)
03 BRUSSELS HERBERT SMITH FREEHILLS
In this case the CJEU considered a situation
where the winning bidder to a public
procurement exercise had colluded with
competitors when submitting its successful
tender. The winning bidder had then
proceeded to provide contract services and
receive payment on a staggered basis over
the contract term. Considering these facts,
the CJEU ruled that the period of
infringement ended for limitation purposes
on the date of signature of the contract
concluded between the winning bidder and
the public authority. The infringement period
was not deemed to continue for the period
over which contractual services were
provided or payment received for those
services.
Background
In April 2007 Fingrid Oyj (Fingrid), the
operator of the electricity transmission
network in Finland, launched a tender to
procure construction services. Eltel
submitted the winning bid and signed a
contract with Fingrid in June 2007. The
works were completed in November 2009,
and Eltel received final payment under the
contract in January 2010.
The Finnish Competition and Consumer
Authority (KKV) found that Eltel colluded
with Empower before submitting its 2007
offer. The KKV claimed that these contacts
started in October 2004 and lasted until at
least March 2011. In October 2014, the KKV
asked Finland’s Market Court to confirm its
findings and impose a €35m cartel fine on
Eltel.
The Market Court dismissed this request,
finding that the KKV had only proven that
the cartel was active until 2007. According
to the Market Court, the alleged cartel
were part of the same economic entity that either of these entities. In any event, joint related to design work for a transmission
infringed EU competition law, which is and several liability does not preclude the line and not to the subsequent construction
sufficient to attribute liability. parent company from asking its subsidiary of that transmission line. Relevant design
to reimburse the fine in total or in part. work was completed in 2007. On the basis
Finally, the CJEU dismissed Pirelli’s that the cartel infringement ended in 2007,
arguments that imposing a fine on it – When does a bid-rigging the Market Court concluded that the KKV’s
jointly and severally for the behaviour of its infringement end? October 2014 cartel decision was
subsidiaries, instead of imposing the fines time-barred as a result of the five-year
on the subsidiaries alone – weakens the CJEU adopts a narrow view
limitation period applicable in Finland.
deterrent effect of the fines. According to on duration
the CJEU, such an argument is based on the On 14 January 2021 the CJEU issued a Appeal to Supreme Administrative Court
incorrect premise that sanctions should preliminary ruling addressing the principles The KKV filed an appeal before the
focus on the subsidiary instead of the parent to determine the duration of an Supreme Administrative Court of Finland,
company. The CJEU held that it is clear from infringement of Article 101 TFEU in claiming that Market Court had incorrectly
the case law that there is no priority bid-rigging cases.6 assessed the duration the cartel
regarding the imposition of the fine on infringement. The KKV maintained that the
6. C-450/19 Kilpailu- ja kuluttajavirasto before the European Court of Justice, 14 January 2021
HERBERT SMITH FREEHILLS BRUSSELS 04
infringement continued until the last The CJEU ruled that an infringement of Finally, the CJEU added that it is now for the
payment made to Eltel in January 2010, or Article 101 TFEU lasts for so long as the referring court in Finland to ascertain the
at least until the completion of the restriction of competition resulting from it date on which the essential characteristics
construction works in November 2009. The remains. In bid-rigging cases relating to a of the relevant contract, and in particular
KKV claimed that in this case, involving the public tender, the restrictive competitive the total price payable, were definitively
procurement of construction services, the effects caused by the cartel cease, in determined.
infringing conduct have concrete and principle, at the moment in which the
long-lasting effects because consideration essential characteristics of the procurement Implications
for the contract services was paid in are determined, usually with the signature
The CJEU ruling provides welcome legal
periodic instalments. of a contract between the winning entity
certainty regarding the date on which a
and the contracting authority.
bid-rigging infringement ends. The CJEU
In June 2019, the Finnish Supreme
has made clear that this occurs when the
Administrative Court made a request for The CJEU added that the signature of the
winning bidder signs the final contract that
preliminary ruling on this issue to the CJEU. contract is the last moment in which the
results from the collusive tendering process,
contracting authority was deprived of the
and not at some later date, such as when
CJEU ruling possibility of obtaining goods or services
the performance of that contract (or the
under normal market conditions.
The CJEU observed that, as a general payments under it) come to an end.
principle, the period over which collusive
Additionally, the CJEU pointed out that it is
prices are in force is relevant to the The date on which an infringement ends is
important to differentiate between the
determination of the duration of an important because, as in this case, it
restrictive effects of the cartel, which
infringement, even when the related cartel determines the date from which any
excluded other competitors from the tender
agreement has formally ceased.7 limitation period runs. At EU-level, for
or artificially restricted the choice of the
example, Regulation 1/2003 lays down a
contracting authority, and the wider adverse
In this case, however, the CJEU considered five-year limitation period within which the
economic effects on other market players
that the submission of coordinated bids for Commission may start proceedings in
which may form the basis of damages
the public tender constituted the last respect of substantive competition
claims before a national court.
relevant part of Eltel’s behaviour in the infringements and this period runs from the
infringement. date on which the infringement ceases.
Consequently, the CJEU concluded that,
when a company has participated in
Contrary to arguments submitted by the The date on which the infringement ends is
bid-rigging agreement, and this firm has
Governments of Finland, Germany and also relevant for the calculation of fines, as
been awarded the contract stipulating a
Latvia, the CJEU found that Eltel’s the duration of the infringement is an
price, the infringement period ends with the
participation in the cartel could not be important factor in the methodology for
signature of the contract between the
extended beyond the date in which the determining the amount of any fine.
company and the contracting authority.
essential characteristics of the tender were
determined, in particular the total price for
the works.
7. C‑70/12 P, Quinn Barlo Ltd and Others v European Commission, 30 May 2013
05 FRANCE HERBERT SMITH FREEHILLS
France
Bid coordination by members of Article L.420-1 of the French Commercial In light of relevant CJEU case-law, the FCA
a single economic unit Code (“Article L420-1”). assessed the degree of influence exercised
by Ovimpex over the three entities and
French Competition Authority The French settlement procedure considered that Dhumeaux, Mondial Viande
(FCA) amends its decisional Service and Vianov were almost entirely
In line with its decisional practice on bid
practice on bid rigging between owned by Ovimpex. Therefore, the four
rigging, the FCA sent a statement of
subsidiaries of the same group and companies constituted one single economic
objections to each of the three companies
aligns with the CJEU position unit within the meaning of EU competition
and their parent company, based on
Background concerted practices falling within the scope law. Moreover, even if the three subsidiaries
of Article 101 TFEU and Article L.420-1. submitted distinct offers to France AgriMer,
Facts and previous FCA decisional practice there was no evidence that each subsidiary
Every year, an agency of the French Ministry The companies requested to settle the case was autonomous, which could result in the
of Agriculture, France AgriMer, organises through the French settlement procedure application of both Article 101 TFEU and
tenders to provide food products to (III of article L. 464-2 of the French Article L.420-1.
charities. Commercial Code). This procedure allows
companies which do not challenge the facts Hence, neither Article 101 TFEU nor
Between 2013 and 2016, Dhumeaux, Mondial of which they are accused to obtain a Article L.420-1 was applicable to the
Viande Service and Vianov appeared to reduced financial penalty. agreement concluded between these
submit separate offers in response to the companies to take part in the tendering
public procurements organised by France FCA’s decision No. 20-D-19 process organised by France AgriMer.
AgriMer. In reality, these offers were agreed
on beforehand by all three companies. During CJEU preliminary ruling The FCA used this case law to develop its
this period, all three companies were part of In its Specializuotas transportas case8, the decisional practice regarding the application
the Ovimpex group. CJEU ruled for the first time that, even if of the prohibition on cartels to concerted
several companies belonging to the same bids by subsidiaries of the same group. Since
Dhumeaux was in charge of drafting the group submit separate bids in a tendering the four companies all belonged to the same
offers for each of the three companies, procedure, they still constitute one single undertaking, the infringement could not be
which then submitted their offers economic unit within the meaning of EU established, the relevant provisions did not
individually. Dhumeaux’s role in this process competition law. Hence, Article 101 TFEU, apply and the settlement procedure had no
was kept confidential. Dhumeaux also which prohibits anticompetitive agreements basis. Consequently, no fine could be
managed all the lots awarded to the different between competitors, does not apply in imposed, despite the settlement reached
companies and the delivery logistics. such a case, even though those between the parties and the Chief
undertakings coordinated their participation Case Handler.
According to the previous decisional in a tendering procedure.
practice of the FCA, undertakings belonging In its press release and decision, the FCA
to the same group but enjoying commercial The CJEU added that national courts have recalled, in line with CJEU case law, that
autonomy may submit separate offers in jurisdiction to carry out the necessary these practices could still be caught by EU
tendering procedures, provided they do not verifications and assessments to ascertain and national public procurement law, since
coordinate beforehand. Alternatively, these whether the companies do constitute a they are likely to mislead the public
companies may renounce their respective single economic unit in light of the decisive purchaser and distort the results of the
commercial autonomy and decide to submit influence exercised by the parent company. procurement process.
one offer for the group.
Conclusions
Thus, the mere submission of two At first, due to the national dimension of the
competing offers by entities belonging to markets at stake and the position of the
the same group deemed them competitors companies on the relevant product markets,
in the eyes of the FCA, regardless of their the FCA had concluded that the practices
structural and organisational links. Hence, were likely to affect trade between Member
for the FCA, concerted practices by States. Therefore, the conduct had to be
companies belonging to the same group in assessed in light of both Article 101 TFEU
the context of a tendering procedure could and Article L.420-1.
fall within the scope of Article 101 TFEU and
8. CJEU, 17 May 2018, case C-531/16, Specializuotas transportas
HERBERT SMITH FREEHILLS FRANCE 06
France implements the ECN+ Such measures, although legitimately As part of the DDADUE law, the fine cap has
Directive aiming at simplifying and rationalising the been raised to 10% of the consolidated
applicable procedure, are questionable from worldwide group turnover, so as to enable a
Implementation strengthens the the raided undertakings’ point of view. broader use of the simplified procedure. In
FCA’s powers and simplifies its Being located in a different jurisdiction, the return, the simplified procedure now offers
procedures. judge’s ability to respond efficiently to any improved guarantees for the protection of
French lawmakers have voted to implement report from police officers of potential the parties’ rights. Amongst these
a package of EU laws, including the ECN+ incidents during the dawn raids will guarantees, the case handler will be required
Directive.9 The so-called ‘DDADUE’ law necessarily be more limited. As regards the to inform the parties, prior to issuance of the
came into force on 5th December 2020, limited number of police officers, it remains statement of objections, of its decision to
providing that the implementation of the to be seen in future dawn raids whether the use the simplified procedure, in which case
ECN+ Directive will be further defined FCA’s investigation services will in practice he/she will set out the determinants of the
through government orders enacted within enable efficient control by the police officer. proposed fine in the statement of objections.
6 months of publication of the law10. Below The parties will also have the right to obtain
we identify selected key reforms. Broader use of the simplified procedure in an extension of the time-limit for responding
the adversarial phase of the investigation to the statement of objections from two to
New measures that came into force with If, at the end of the investigation, the FCA's four months.
the DDADUE law on 5th December 2020 Chief Case Handler considers there to be
sufficient evidence of anti-competitive Simplification of the leniency procedure
Simplification of the dawn raid procedure
practices, the case handler in charge of Until now, once a company had applied for
Under French law, dawn raids are subject to the case will prepare a statement of leniency and provided information in this
prior authorisation from a judge. The judge objections which is then notified to all regard, the College of the FCA had to issue a
is also responsible for supervising the dawn parties concerned by the alleged leniency notice which would state whether
raid and appoints police officers to attend infringement. Those parties are then the company was entitled to an exemption
and keep the judge informed of the conduct granted access to the supporting file or a reduction in the amount of the fine, and
of the dawn raid. prepared by the case handler. the conditions to which the proposed
exemption/reduction was subject
Previously the request for authorisation In the standard procedure, the parties have (cooperation conditions).
had to be sent to the judge with territorial two months to submit their comments in
jurisdiction over the targeted response to the statement of objections. However this procedure proved
undertaking’s premises. When several Following this a second adversarial phase burdensome, requiring the College to assess
undertakings located in different places commences: the case handler issues a report, the extent of the company’s cooperation and
were targeted by the dawn raid, the judge responding to the parties’ arguments, and the added value and usefulness of the
sent letters to the competent judges in specifying all elements necessary for the information communicated prior to any
others jurisdictions so that they would College (ie the decision-making body) of the other investigation.
also authorise the dawn raids. FCA to determine the amount of the financial
penalty to be imposed on each party. The In order to speed up the investigation, the
The new legislation simplifies this parties are given another two months new legislation provides that the Chief
mechanism. It enables one single judge to to respond. Case Handler (not the College) is now in
have national jurisdiction and authorise charge of informing the applicant in
dawn raids taking place simultaneously at Under the previous legislation, the Chief writing of its eligibility for a total or partial
several locations across France. Case Handler could opt for a simplified exemption from financial penalties, and of
procedure and skip the second adversarial any cooperation conditions attaching to
In addition, the new legislation now provides phase only in limited situations. However, the exemption.
that only one police officer will be appointed when the simplified procedure was applied,
to attend each undertaking’s premises. The the amount of the fine was capped at
previous legislation did not provide for any €750,000, and such procedure was thus
specific number of police officers, but the hardly ever used.
FCA’s practice over the past few years has
been to have two police officers at the
premises of each undertaking.
9. Directive (EU) 2019/1 of the European Parliament and of the Council of 11 December 2018 to empower the competition authorities of the Member
States to be more effective enforcers and to ensure the proper functioning of the internal market.
10. Loi n° 2020-1508 du 3 décembre 2020 portant diverses dispositions d'adaptation au droit de l'Union Européenne en matière économique et financière
(DDADUE).
07 FRANCE HERBERT SMITH FREEHILLS
Additional measures implementing
ECN+ Directive will be enacted by
government orders
Enhanced prioritisation powers
The new legislation will enable the FCA to
prioritise investigations in order to make
effective use of its resources.
To this end, the FCA will now be entitled to
reject complaints on the grounds that they are
not a priority, whereas it previously had to
investigate any complaints filed. This new
power is without prejudice to its existing power
to reject complaints on other grounds, such as
lack of competence, or to decide that there are
no grounds for action. In case of formally filed
complaints, complainants will be able to
challenge any refusal to investigate before the
Paris Court of Appeal.
Power to impose interim measures on the
FCA’s own initiative
The new legislation will enable the FCA to
impose interim measures on its own initiative,
absent any request from a complainant, to
ensure that, while being investigated, the
suspected infringement does not seriously and
irreparably harm competition.
Harmonisation of maximum fine amounts
France was the only EU Member State to
provide for a lower maximum fine for
infringing entities which were not companies
(eg business associations, trade unions,
professional orders, etc.). For these
organisations, the fine was capped at
€3 million. This exception will be removed
and the general cap of 10% of the
consolidated worldwide turnover will now be
applicable to such entities. This
harmonisation is aimed at reinforcing the
dissuasive nature of the financial penalty
whatever the legal status of the
infringing entities.
HERBERT SMITH FREEHILLS 08
Germany
Sharp reduction in leniency revealed at the FCO’s traditional year-end less active in terms of cartel prosecution.
applications blamed on review in December – only 13 applications On the contrary, President Mundt
follow-on litigation for leniency were received. described alternative instruments which
the FCO has developed to discover
FCO president considers sharp Mundt considers the main reason for this anti-competitive behaviour.
decline in leniency applications and development to be “many follow-on claims
new cartel detection techniques •Whistle-blower system: The FCO
in Europe, especially in Germany”. Indeed,
encourages people who have insider
Although cartel investigations by antitrust Germany has seen a rise of follow-on
knowledge or specific information about a
authorities and follow-on damage claims damages claims in its courts. Recent
cartel to use its anonymous tip-off tool,
essentially pursue similar objectives – both examples are litigation surrounding the
which guarantees full anonymity to the
are instruments to deter undertakings from truck cartel decision by the EC in 201611 and
whistle-blower. While tip-offs can also be
engaging in anti-competitive behaviour – it the sugar cartel decision by the FCO in
submitted by post or phone, the FCO has
has become increasingly apparent that 201412. In both cases the cartel participants
introduced a digital version of its
there can be an inherent conflict between face claims for damages that far exceed the
whistle-blower system which can be
the two. amount of the cartel fines. The same is true
reached through the FCO’s website.
for follow-on damages claims pursuant to
In a recent discussion with his Polish the FCO’s railway cartel decision of 201313. •Market screening: The FCO also
counterpart, the President of the German encourages suppliers and customers to
Federal Cartel Office (FCO), Andreas Given that leniency or immunity does not come forward and report strange or
Mundt, shed some interesting light on this extend to follow-on damages claims, it is suspicious behaviour. The agency then
conflict from the German perspective. obvious that the rise of follow-on damages screens the behaviour to check for
has massively changed the incentives for potential violations.
Leniency versus follow-on claims – a undertakings considering whether to apply
conflict in the making for leniency and facilitate the discovery of a President Mundt highlighted that roughly
The conflict is rooted in the importance that cartel. Moreover, this is not expected to 300 people per year use the digital
leniency applications have for cartel change in the near future. On the contrary, whistle-blower tool. According to Mundt,
investigations. Mundt highlighted that half recent changes to the German Act against tip-offs have led to the discovery of
of antitrust investigations in Germany are Restraints on Competition have introduced infringements of considerable size,
triggered by leniency applications. They are additional claimant-friendly provisions including a case which ended in the
therefore an essential tool for the FCO. which will likely lead to a further increase in adoption of a decision imposing a fine of
However, as Mundt pointed out, the FCO follow-on claims. EUR 90 million.
has seen a drastic decline in leniency
applications over the past five years: the Alternative tools for detecting With regard to the FCO’s market screening
FCO received 76 leniency applications in anti-competitive behaviour efforts, Mundt pointed out that this cannot
29 cases in 2015, but only 16 applications in The decline in leniency applications must be considered as an “easy exercise”. In
14 cases in 2019. In 2020 – as Mundt not be misinterpreted as the FCO being particular, market screening is dependent
11. AT.39824
12. Bundeskartellamt (Bonn), Pfeifer & Langen Cologne, Südzucker Mannheim and Nordzucker Braunschweig, 18 February 2014 (only in German)
13. Bundeskartellamt (Bonn), Moravia Steel, 11 July 2013
09 SECTION TITLE HERBERT SMITH FREEHILLS
on large quantities of data to lead to raid of the other participants, including the comparable behaviour in previous cases. It
meaningful results. Nonetheless, as claimant who applied for leniency seems fair to state that the conduct of the
President Mundt reported, the FCO has immediately after the dawn raid. This case handler was not beyond reproach, as
executed at least one search warrant based leniency application did not lead to full illustrated by the fact that the FCO has
on such market screening. immunity but only to a partial reduction of initiated an internal investigation into the
the fine, since the claimant was not the first case handler’s behaviour.
If the FCO rings twice – unsolicited undertaking applying for leniency.
“help” from Bonn It is likely that the claimant will appeal the
The Court’s reasoning decision. Should the Appellate Court and
Alleged mishandling of leniency
The Regional Court of Bonn denied that the ultimately the Supreme Court confirm that
procedure sees FCO sued for
case handler’s conduct in this investigation the FCO’s conduct was within the law, it
damages
violated principles of law and consequently remains to be seen whether the FCO will use
The leniency program also featured rejected the claim for damages. a comparable tactic more often. The stark
prominently in a court decision in decline in leniency applications (see
November 2020, which dealt with a novel •According to the court, the FCO enjoys previous article) might cause the agency to
and peculiar challenge under German cartel substantial discretion regarding the use unorthodox tactics to turn a rather
law: a cartel participant sued the FCO in a specific conduct of its investigation; and unspecific anonymous tip-off into a leniency
civil court for damages covering the fine it informing an alleged participant of an application that justifies a dawn raid.
had to pay under the FCO’s infringement anonymous hint may be a permissible
decision – instead of challenging the investigation method under German law.
decision itself. In the eyes of the court, the FCO’s
approach was still legitimate as it was the
Facts of the case only step likely to reveal a potential cartel.
The anonymous tip-off was too unspecific
The case relates to a cartel between seven
to justify a dawn raid.
wholesalers of plant protection products
whose employees agreed on price lists, •The court considers that calling three of
discounts and some individual sales prices the participants (but not the claimant)
to retailers and end customers in Germany. was not arbitrary. The anonymous tip-off
The FCO found that the companies agreed hinted at the claimant being one of the
on price lists for plant protection products main drivers of the cartel. Hence, it was
in the spring and autumn of each year justifiable that the case handler chose to
between 1998 and the dawn raid in call participants who appeared to play a
March 2015. All seven wholesalers applied less active role in the anticompetitive
for leniency, cooperated with the FCO conduct, in the hope that they might be
during the proceedings and ultimately more willing to cooperate. Calling all of
entered into a settlement. the participants would not have been a
viable option, according to the court,
After adoption of the settlement decision, since this could have led the undertakings
one of those wholesalers, BayWa AG to coordinate among themselves and
(“BayWa”), brought a civil claim seeking to jointly decide not to apply for leniency.
establish the FCO’s state liability for
•The court found that the FCO did not
breaching its official duties. BayWa was of
violate the principle of equal treatment,
the view that the FCO had violated the
since BayWa and the companies which
principle of equal treatment by contacting
the FCO called were not sufficiently
two further participants of the cartel in the
comparable. The main differentiating
run-up to the dawn raid. The company
factor was that, at least based on the
claimed damages from the FCO to cover the
information available to the FCO at the
amount of the cartel fine that it had to pay
time, BayWa’s had a prominent role as
and its defence costs.
the main driver of the violation.
The Regional Court of Bonn, which •Ultimately, the FCO did not violate the
ultimately rejected the claim, found that the requirements laid down in its own
proceedings had started with an leniency guidance. The court takes the
anonymous tip-off, which indicated that the position that the guidance does explicitly
claimant had entered into anti-competitive rule out the possibility that an applicant
agreements with its competitors. On the has obtained information from the FCO
basis of this tip-off, the case handler called prior to the application.
three of the companies involved (but not
the claimant), informing them about the A new precedent for unorthodox
anonymous complaint and mentioning the investigations?
possibility of a leniency application. The Regional Court in Bonn explicitly
Subsequently, two of these companies highlights that the facts of this case were
applied for leniency which led to a dawn unique and that the FCO has not engaged inHERBERT SMITH FREEHILLS ITALY 10 Italy Impact of COVID-19 leads to cartel fine reduction The ICA fines four taxi firms in Naples for foreclosure of open platforms, but greatly reduces the fine amounts to reflect COVID-19 difficulties The Italian Competition Authority (“ICA” or “Authority”) has imposed fines totalling just over Euro 17,000 on four providers of taxi services in Naples for having breached Article 101 TFEU by entering into a horizontal agreement which foreclosed the entry of app-based taxi providers into the local market. The amount of the fines would have been much higher but was reduced by 80%, to reflect the negative impact of the COVID-19 pandemic on the taxi sector. This is the first time that the Authority has recognised the pandemic as a major mitigating factor in the calculation of its fines. Background In November 2018, four undertakings active in traditional taxi services14 in Naples (the "Taxi Companies") entered into an agreement (the “Agreement”) by which they mutually committed to prohibit taxi drivers from using any app other than those approved and used by the Taxi Companies. The Agreement was aimed at prohibiting the use of “open” platforms: ie those platforms which allow members to participate on a non-exclusive basis, such as Mytaxi and DigiTaxi. The Agreement prevented de facto such platforms from entering the market. After entering into the Agreement, the Taxi Companies instructed the taxi drivers that they were not allowed to join “open” platforms, forcing them to make a choice and threatening to immediately terminate their contracts if they offered non-approved app-based services. In February 2019, following a complaint by Mytaxi and DigiTaxi, the ICA launched an investigation into a possible violation of Article 101 TFEU due to the execution of a cooperation agreement which potentially had restrictive effects on competition. Following commencement of the ICA proceedings, the Agreement was terminated in March 2019. As noted below, the ICA had previously found that taxi companies in Milan and Rome had committed similar infringements. 14. Referred to as "radio taxis" in the ICA proceedings, because customers call an operator who communicates with the taxi drivers via radio.
11 ITALY HERBERT SMITH FREEHILLS
The parties' defences providers such as Mytaxi and DigiTaxi. Regional Administrative Court
The Taxi Companies argued that the annuls Euro 678 million of fines
Agreement was not restrictive of competition, In determining the fine amounts, the ICA imposed on the captive banks of
since it was only aimed at: (i) controlling concluded that the collusive conduct car manufacturers
possible migrations of the taxi drivers to other constituted a very serious infringement of
conventional taxi companies; (ii) monitoring competition law and that a symbolic fine, as ICA decision overturned due to delay
compliance with shift regulations, in order not requested by the Taxi Companies, would not and inconsistent reasoning
to incur disciplinary measures which could be appropriate. However, after calculating the
reduce the fleet and jeopardise services; and theoretical fines (which would have totalled The TAR of Lazio has annulled very high fines
(iii) ensuring ongoing awareness of the latest around Euro 86,000), the Authority then imposed by the ICA on the “captive banks” of
availability of the fleet, thereby avoiding reduced the amounts by 80%, in recognition nine automotive groups17 and two trade
inefficiencies. of the negative impact of the COVID-19 associations18 for violation of Article 101 TFEU.
pandemic on the taxi sector.
Moreover, in the Taxi Companies’ view, the Background
services provided by conventional taxis and Comments By decision No. 27497 of 20 December 2018
those provided by online platforms are not part It is interesting that the ICA was willing to (as amended by decision No. 27498 of 16
of a single relevant market and, as a reduce the fines by such a substantial amount January 2019), the ICA imposed fines totalling
consequence, there could be no foreclosure of in light of the negative effects of the COVID-19 around Euro 678 million upon the captive
the market. pandemic. Operators in other sectors of the banks and two trade associations for having
economy which have been hit badly by the entered into an anticompetitive agreement in
The ICA’s decision pandemic may hope for similarly lenient breach of Article 101 TFEU. The agreement
By decision No. 28353/2020 of 15 September treatment. was aimed at distorting, through financing, the
2020, the ICA rejected the Taxi Companies' competitive dynamics of the automotive
arguments and fined them for an overall It is also worth mentioning that this decision is market. In particular, according to the ICA, the
amount of Euro 17,257. the latest episode of a gripping saga in Italy, agreement concerned the exchange of
involving the ICA, conventional taxi firms and commercially sensitive information relating to
According to the Authority, the Agreement app-based taxi providers, which has led to current and estimated sale volumes and
represented horizontal collusion among contrasting rulings by the Regional prices.
competitors, aimed at defining a coordinated Administrative Courts (“TAR”) and the
strategy in order to impede market entry by Administrative Supreme Court. By decisions The TAR decisions
new players, in breach of Article 101 TFEU. In No. 27244 and 27245 of 27 June 2018, the Through 15 decisions published on
the Authority’s view, the Agreement expressly ICA found violations of Article 101 TFEU 24 November 2020, the TAR upheld the
disclosed its anticompetitive purpose of committed by three taxi firms active in Milan appeals lodged by the captive banks and the
maintaining the market position held by each and Rome. According to the ICA, these taxi trade associations for annulment of the ICA’s
Taxi Company in the city of Naples and firms foreclosed the market to “open” decision. The TAR ruled that the ICA’s decision
preventing the entry of “open” platforms. platforms, by including a number of was unlawful on both procedural and
non-compete clauses in their contracts. On substantive grounds.
The ICA rejected the defences raised by the appeal, the TAR annulled the ICA’s decision for
Taxi Companies, finding that: insufficient inquiries and an inadequate In terms of procedure, the delay in starting the
statement of reasons15. The Supreme proceedings (which occurred about three
•the Agreement was aimed at curtailing the Administrative Court then annulled the TAR years after the submission of the relevant
use of “open” platforms rather than decision last summer, confirming the violation leniency application) was ruled non-compliant
migrations to other conventional taxi firms, of Article 101 TFEU16. with the general principles of efficiency and
•only the Municipality is entitled to monitor sound administration.
compliance with shift regulations, not the The ICA treated the Naples case as a cartel
Taxi Companies, and infringement, but the arrangements in the In addition, on substance, the ICA’s decision
Milan and Rome cases were considered to was held to be illogical due to the
•both conventional taxi firms and “open involve vertical agreements. In yet another inconsistency between the investigation scope
platform" operators are unable to provide case, the ICA found that a taxi firm in Turin had – focusing on the automotive financing sector
precise information on the availability of the committed an abuse of dominant position. It is – and the final decision – where the reasoning
fleet in real time, so the Agreement could therefore evident that the ICA has adapted its is transposed to the sales of automobiles
not serve that purpose. legal approach towards these taxi-related through financing. Moreover, the TAR
arrangements, depending on the precise facts considered that the information exchanged
In addition, the Authority confirmed the of each case. was not relevant to competition in the market
market definition, holding that conventional
and, as such, was not capable of distorting
taxi companies compete with, and provide a
competition.
service which is substitutable for, app
15. Decisions No. 5358/2019, 5359/2019, 5417/2019, 5418/2019 and 5419/2019.
16. Decisions No. 3501, 3502 and 3503 of 4 June 2020, No. 7991 of 14 December 2020 and No. 8061 of 15 December 2020.
17. A captive bank is a wholly owned subsidiary of a multinational group of companies whose purpose is to provide banking services to the group and those
with whom the group deals. In this specific case, we refer to Banca PSA Italia S.p.A., BMW Bank GmbH, FCA Bank S.p.A., FCE Bank Plc., General Motors
Financial Italia S.p.A., Mercedes Benz Financial Services Italia S.p.A., RCI Banque SA, Toyota Financial Services Plc. and Volkswagen Bank GmbH
(jointly, the "Captive Banks")
18. Namely, Assilea -Associazione Italiana Leasing e Assofin – Associazione Italiana del Credito al Consumo e Immobiliare.HERBERT SMITH FREEHILLS RUSSIA 12
Russia
Round-up of recent developments BRICS (comprising Brazil, Russia, India, over the matter before the courts, all the
in Russian cartel enforcement China and South Africa) held in November way up to the Supreme Court23.
2020. Amongst other issues discussed, the
Emphasis on technology and Russian regulator advocated the Impact of COVID-19 on cartel
COVID-19 development of common leniency rules by enforcement in Russia
the antitrust regulators of BRICS member
According to the Russian Federal According to FAS, COVID-19 has not, in
states. Such a focus on developing the
Antimonopoly Service ("FAS"), cartels itself, led to a growth of detected collusive
international legal framework may be
result in a loss for the economy of around practices in Russia.
reflective of a more active stance by FAS in
2% of the GDP. Yet, cartels are generally
the detection and investigation of
difficult to detect and prosecute. This At the same time, FAS has actively
cross-border cartels.
explains the particular attention paid by prosecuted cartels in markets which have
FAS to this type of infringement. Recent been an easy prey of cartelists: medicine,
Technology as a cartel facilitator
trends in Russian cartel law and personal protective equipment,
enforcement have been driven by factors FAS has emphasized recently that disinfectants and vital grocery. Given that
which are generally common for many technology may often be used for facilitating cartels in these kinds of markets are
other jurisdictions: globalisation, anticompetitive practices, including cartels. severely harmful to consumers, FAS tended
digitalisation and, recently, COVID-19. One of the common violations of this type is to react as fast as possible and used
collusion between competitors through the preventive measures more often than usual
FAS participation in international events use of pricing tools and auction robots. For (issuing warnings, holding meetings with
instance, in one recent case in Russia,19 market participants to explain prohibitions
The last quarter of 2020 was marked by
bidders for medical equipment used robots relevant to their activity. etc.).
active participation of FAS in
to simultaneously decrease the bidding
international events related to fighting
price. This enabled them to have the same A good example to illustrate this point is an
cross-border cartels. In particular, FAS
price offers and allowed one of them to win alleged cartel between two leading grocery
was involved in the discussion of this
the bid, which was deemed a cartel. chains which resulted in a significant
topic at the 8th UN Conference on
increase of prices for buckwheat. FAS
Competition and Consumer Protection
When alleged violations have technology launched a cartel investigation against the
(UNCTAD) in October. Adoption of the
dimensions, FAS has typically used a wide grocery chains and the retailers dropped the
Guiding Policies and Procedures was a
range of digital evidence to support its prices almost immediately. FAS has also
remarkable result of the Conference. This
position. For instance, in the held meetings with retailers’ management
document set out a toolkit for
above-mentioned e-auction case, FAS to discuss their pricing policies and has
cooperation in competition cases,
evaluated the hash-sum of the files initiated audits in 56 regions.
including the mechanism for conducting
submitted by the bidders20. In another case,
initial contacts, timing alignment and
FAS was able to show that competing The described trend may further intensify
exchange of confidential information.
suppliers of equipment used common IP over time and may even be a precursor of
Although adherence to the Guiding
addresses to make bids, which was new legislative developments. Recently, the
Policies and Procedures by each member
considered as an indication of collusion Head of the FAS Cartel Unit has advocated
state is voluntary, its adoption is likely to
among the bidders. 21 broadening the application of preventive
facilitate the detection and investigation
measures and making the enforcement
of cross-border anticompetitive conduct
In another recent case, FAS proved a process faster and more efficient.
including cartels. In addition, at the
cartel between oil traders at the St.
initiative of FAS, the combat of The pandemic has also brought the topic
Petersburg International Commodity and
cross-border cartels was added to the list of purchase alliances back onto the agenda.
Raw Materials Exchange. 22 In arguing its
of UNCTAD’s priorities for the next five The main idea underlying such alliances is
position, FAS claimed that certain traders
years and a dedicated UNCTAD working to allow SMEs to cooperate in order to
used common MAC-addresses when
group was created. effectively compete with major
making their bids. This case is also
remarkable as it was the first cartel market players.
Cross-border cartels was also one of the
detected by FAS at an exchange and FAS
topical issues discussed at the meeting of
had to continuously defend its jurisdiction
the Committee for Antimonopoly Policy of
19. The decision of FAS Perm department in case No. 059/01/11-1050/2019 dated 22 January 2020
20. Based on the analysis of hash-sum and metadata of the e-documents filed by the bidders at the auction FAS came to the conclusion that some of the
bidders submitted the very same file
21. The decision of FAS Stavropol department in case No. 026/01/11-1579/2020 dated 28 December 2020.
22. FAS decision in case No -11-13/00-22-19 dated 20 August 2020.
23. High Court decision No. 305-ЭС20-13656 dated 26 October 202013 SOUTH AFRICA HERBERT SMITH FREEHILLS
South Africa
Raising the bar for successful furthermore, that an agreement was
cartel prosecutions actually reached between the relevant firms
or that these firms had the intention to act
Clarification provided by
in a concerted manner.
Competition Appeal Court and
Competition Tribunal The I&J decision is also the first complaint
The Competition Appeal Court and referral dismissed by the Tribunal based on
Competition Tribunal, respectively, have the characterisation principle since the
affirmed the principle of “characterisation” decisions of both the Tribunal and the
(defined below) as a valid argument in Competition Appeal Court (CAC) in the SAB
cartel cases.In addition, the Competition matter.24 In that earlier case, the Tribunal
Tribunal has reminded the Competition and CAC were called upon to consider
Commission that more is required for whether the dual distribution arrangement
successful prosecution than the mere between South African Breweries (SAB) and
possibility of an unlawful agreement. various appointed distributors of its beer
products, which had been allocated
Introduction exclusive distribution territories, fell within
During September 2020, the Competition the market division prohibition.
Tribunal of South Africa (Tribunal)
dismissed the Competition Commission’s The I&J decision comes off the back of the
(Commission) complaint referral against CAC’s judgment in Competition Commission
Irvin & Johnson Limited (I&J) in which the v NPC-Cimpor Proprietary Limited & Others,
Commission alleged that I&J and Karan handed down in August 2019, where the
Beef Proprietary Limited had concluded a CAC sounded a reminder to the
market division agreement in contravention Commission of the standard of evidence
of the Competition Act 1998. required to prove the commission of a
cartel infringement.25 The CAC stressed
In dismissing the complaint, the Tribunal that this standard, and indeed the rule of
reaffirmed that the principle of law, cannot be ignored.
characterisation is now a tenet of South
African antitrust jurisprudence. Background
The characterisation approach was first
This principle requires the Commission, or adopted in South Africa by the Supreme
any other party seeking to prosecute an Court of Appeal (SCA) in American Soda
alleged cartel, to first consider and present Ash Corporation & Another v Competition
evidence of surrounding circumstances, in Commission & Others.26 The SCA recognised
addition to the terms of the allegedly unlawful that there may be many instances where
agreement, in order to establish whether the competitors conclude bona fide commercial
agreement is of the nature or character that is agreements, which have as an incidental
sought to be proscribed by the anti-cartel feature some form of ostensibly
provisions of the Competition Act. unlawful coordination.
In other words, evidence will need to be As such, the SCA formulated a test
produced which shows that the agreement whereby one would first have to determine
between competitors has as its object or whether the character of the impugned
purpose the division of markets or conduct coincides with the character of the
customers or the fixing of prices and, cartel conduct that is sought to be
24. Competition Commission v South African Breweries Limited and Others 2015 (3) SA 329 (CAC).
25. CAC Case No: 178/CAC/Dec19 para 79.
26. 2005 (6) SA 158 (SCA).HERBERT SMITH FREEHILLS SOUTH AFRICA 14
prohibited by the cartel prohibitions in the Warplas Share Trust (Warplas) in respect antitrust judicial hierarchy, right up to the
Competition Act. This would require an of their shareholding in Sangio Pipes was a Constitutional Court. It is now clear that all
examination of evidence in respect of the market division agreement in breach of the of the judicial bodies accept that conduct
circumstances of the conclusion, operation cartel provisions.27 The non-compete clause which may appear, on the face of it, to
and effect of the agreement. prohibited Dawn and its subsidiaries from constitute cartel conduct will require a more
manufacturing HDPE piping (a certain type detailed assessment into the intention and
This characterisation principle was of plastic piping) in South Africa for as long object of the arrangements between the
subsequently applied by both the Tribunal as it held shares in Sangio Pipes. competitors in order to determine whether
and the CAC in SAB, both of which or not the conduct warrants censure.
determined, despite the Commission’s The CAC observed that “[a] restraint which is
arguments to the contrary, that the dual commercially reasonable in the context of the The I&J and NPC-Cimcor judgments may
distribution model adopted by SAB in the transaction is not characterised as violating s motivate the Commission to undertake
distribution of its beer products could not be 4(1)(b)(ii)” and ultimately held, overturning more thorough upfront assessments of the
characterised as having market division as its the Tribunal’s ruling in the same matter, that circumstances surrounding the conclusion
object and character. The CAC found that, the non-compete clause in the shareholders of any agreement, as well as its outcomes,
even though SAB and its appointed agreement was justified having regard to than it may have previously undertaken,
distributors could be regarded as potentially the circumstances of the agreement and before concluding on whether the
competing firms, as SAB also distributed beer transaction between Dawn and Warplas. agreement constitutes an infringement by
in its own right, the agreements properly The Commission subsequently sought leave object. These upfront assessments may
characterised were vertical in nature. to appeal the CAC’s judgment to the lead to a reduction in the number of cartel
Constitutional Court, which dismissed the infringement complaint referrals,
The CAC subsequently confirmed its own Commission’s application. particularly in circumstances where the
approach to characterisation in Dawn Commission may lack clear evidence
Consolidated Holdings (Pty) Ltd and Others v Consequences for cartel prosecutions supporting an intentional coordination
Competition Commission where it had to These cases are indicative of an alignment between respondent firms and where the
consider whether a non-compete clause in of approach in respect of the assessment of coordination may be underpinned by a
a shareholders agreement between Dawn cartel infringement allegations across the substantiated commercial rationale.
Consolidated Holdings (Dawn) and
27. (155/CACOct2017) [2018] ZACAC 2 (4 May 2018).You can also read
