Competition Law Update | November 2017


Written on 29 November 2017

The beginning of November brought with it confirmation that the date for the Coty ruling is set: on 6 December 2017, the Court of Justice of the European Union will give its ruling on whether it is permissible, in certain circumstances, to prohibit sales via third-party platforms, such as Amazon or eBay, as part of a selective distribution network. This is a key decision for brand owners, platforms and retailers alike.

Such is the importance of this topic that the Amsterdam District Court saw no need to wait until December to rule that Nike’s European selective distribution system, which excludes Amazon from its network, is compatible with EU competition law. Relying on Advocate General Wahl’s opinion that a prohibition on third party platforms can be legitimate, the court found that Nike as a luxury brand was justified in excluding Amazon from its selective distribution network.

Support for selective distribution as a tool to protect luxury brands has also come from the European Union.  In October, the General Court upheld a refusal by Swiss watch manufacturers to provide spare parts to “unauthorised” independent watch repairers. However, the judgment did serve as a reminder that any selective system must adhere to strict criteria, a point which the Coty judgement is likely to explore further.

With selective distribution continuing to provoke discussion across Europe, so too does the role of compliance programmes in fining decisions. Last month we noted that there were signs that the German courts may begin to take an approach more consistent with other member states, including France, by taking compliance systems into account when setting fines. However, in the latest in a series of cartel enforcement decisions, the French Competition Authority moved towards a less lenient approach, ruling that the creation or enhancement of a compliance policy can no longer be used to reduce the level of an anti-trust fine.

In Spain, it is the Competition Authority itself that is under examination.  A line of decisions by the authority that have been overruled by the Spanish Courts has served to challenge the authority of the “super-regulator”, with a break-up into separate regulators looking imminent.

The UK merger control regime is also facing scrutiny, with the UK Department for Business, Energy and Industrial Strategy concluding that that the current regime is not sufficient to protect national security.  BEIS’s proposals include a radical reduction of the merger control thresholds in relation to the defence and advanced technology sectors and consideration of a foreign investment control regime.

Following our report in July that the Competition Appeal Tribunal refused to certify a “collective action” claim by Walter Merricks against Mastercard on behalf of 46 million UK consumers, Mr Merricks’ application for permission to appeal against that decision has now also been rejected by the CAT.  This is not necessarily the end of the road for Mr Merricks (who has re-appealed) or collective claims, though: the CAT has set out how such claims should be argued.

Finally, the European Commission has, after months of negotiation, confirmed that an agreement has been reached to end certain types of geo-blocking; sellers of physical goods, electronically supplied services and services provided in a specific physical location will no longer be able to discriminate unfairly against customers from different EU member states.  While copyright is, for the moment, outside the scope of the Regulation, other retail websites will need to ensure they comply in 2018. 

Netherlands | Court of first instance deems A-G Wahl’s considerations on selective distribution convincing

The Amsterdam District Court has ruled that Nike’s selective distribution system, which excludes Amazon from its network, is compatible with Article 101(1) of the TFEU; relying on the opinion of Advocate General Wahl in his opinion on the Coty case. The court notably did not see any cause to stay the proceedings until after the CJEU has provided its ruling on Coty. Importantly, and in contrast to Coty, Nike does allow a number of other platforms to be part of its selective distribution system, and therefore distributors do have a choice of platforms for making web sales.

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EU General Court says that restriction to supply watches spare parts is valid if within the limits of a lawful selective repair network 

On 23 October 2017, the General Court of the European Union ruled that Swiss watch manufacturers’ refusal to supply unauthorised independent watch repairers with spare parts did not infringe Articles 101 or 102 of the TFEU. The judgement serving as a reminder that where selective criteria are applied properly, even dominant companies may be able to justify a refusal to supply. 

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EU General Court says that restriction to supply watches spare parts is valid if within the limits of a lawful selective repair network 

On 23 October 2017, the General Court of the European Union ruled that Swiss watch manufacturers’ refusal to supply unauthorised independent watch repairers with spare parts did not infringe Articles 101 or 102 of the TFEU. The judgement serving as a reminder that where selective criteria are applied properly, even dominant companies may be able to justify a refusal to supply. 

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France | French Competition Authority fines floor coverings cartel €302 million and changes its competition compliance policy

In the latest in a series of cartel enforcement decisions in France, leading PVC and linoleum floor covering manufacturers and their trade association have been sanctioned for anti-competitive practices. The FCA also took the opportunity to make changes to its competition compliance policy in relation to fine mitigation, incorporating the reasoning it gave in this decision. In contrast to other EU jurisdictions such as Italy, this means that compliance programs can no longer be used to reduce an antitrust fine in France. 

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Spain | A national competition authority in crisis

Following a line of CNMC cases which have been overruled by Spanish Courts, the future of the super-regulator is in doubt, with its separation potentially imminent. Our experts in Spain take a look at the roots of the CNMC’s current difficulties, and what the future holds in store for the beleaguered regulator.

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UK | M&A into the UK: tight controls expected soon on deals across tech and defence sectors, new regime may follow across wider sectors

On 17 October 2017, the UK Department for Business, Energy, and Industrial Strategy announced its long-anticipated proposals on increased scrutiny of inwards investment into the UK.  Finding that the current regime is not sufficient to protect national security, its proposals include a radical reduction of the merger control thresholds in relation to the defence and advanced tech sectors. It is also seeking views on whether a standalone foreign investment control regime ought to be introduced. 

Read part one here, part two here and part three here.

UK | Competition Appeal Tribunal refuses permission to appeal on certification in the collective action against Mastercard

Following the CAT’s refusal to certifya “collective action” claim by Walter Merricks against Mastercard on behalf of 46 million UK consumers, Mr Merricks’ application for permission to appeal against that decision has now also been rejected, although Mr Merricks has recently announced that he will appeal again – this time to the High Court.  Despite rejecting the appeal, the CAT appears keen to emphasise that it is not averse to large collective claims, provided they are coherently formulated and genuinely face common issues.  The rejection of the appeal therefore does not alter our experts’ view that properly defined classes and well-prepared applications should be able to secure certification. 

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Copyright escapes Geo-Blocking Regulation but other retail websites will need to comply in 2018

On 20 November 2017, the European Parliament, the Council and the Commission reached a political agreement to end certain types of unjustified geo-blocking: by the end of 2018, sellers of physical goods, electronically supplied services, and services provided in a specific physical location will no longer be able to discriminate unfairly against customers from different EU member states. While the agreement makes strides towards achieving a “digital single market” the notable exclusion of copyrighted materials from the ban on geo-blocking is a significant retreat for the Commission from its initial vision of the “end” of geo-blocking in the European online market. 

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*This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.