European Union: European Competition Law Newsletter – October 2014

New Chief EU Antitrust Enforcer Announced; Areas of Focus Revealed

On 10 September 2014, European Commission (EC) President-elect Jean-Claude Juncker unveiled his team of commissioners, who with him will run the EC for the next five years. The new commissioners must be approved by the European Parliament (EP). This approval is expected to be granted in time for the team to take office from the beginning of November.

Although Mr Juncker has introduced several changes to the structure of the EC, the operation of competition policy remains unchanged. DG Competition (DG COMP), which will be led by Margrethe Vestager of Denmark, remains solely in charge of this area. In setting the general approach of DG COMP, Ms Vestager will, however, be required to liaise with the Commissioner for Jobs, Growth, Investment and Competitiveness.

In his 10 September mission letter to Ms Vestager, Mr Juncker set out very clearly the areas of focus for competition policy over the next five years. These are the digital single market, energy policy, financial services, industrial policy and the fight against tax evasion. The latter is a particularly interesting area for companies active in the EU, given the very significant figures involved and public disquiet as to alleged practices of certain companies.

An interesting insight into Ms Vestager's likely approach will be gained when she appears before the EP in her confirmation hearing. EP members are expected to quiz her about areas including state aid to the banking industry and high profile current cases such as the investigations into Google and Gazprom.

UK Competition and Markets Authority Investigates Abuse of Dominant Position Via Contract Terms

The UK Competition and Markets Authority (CMA) has accepted commitments which settle a case concerning the abuse of a dominant position via the imposition of contract terms. The case, relating to the alleged activities of Epyx Limited, involves the market for the supply of service, maintenance and repair (SMR) platforms to businesses with vehicle fleets.

The CMA (at the time, the Office of Fair Trading) started its Epyx investigation following a complaint. The CMA was concerned that certain provisions in Epyx's contracts with its SMR platform customers that lead to exclusivity and restrict or prevent the evaluation, development and marketing of alternative systems, may amount to an abuse of market power. The commitments remove and, in some other respects, modify potentially restrictive terms in Epyx's contracts. The CMA considers that this offers clear opportunities for competitors to enter the market, in particular by making it easier for Epyx's current customers to switch to rivals if they choose.

The case is interesting because it shows that complaints to competition regulators in the EU can produce commercial benefits for the complainant and also because it shows again that contractual terms imposed by a dominant company can amount to an abuse of a dominant position in the EU (although formally the CMA has not found an infringement of competition law).

You Cannot Wave Goodbye Yet; Post-sale Liability for Competition Law Infringements

A recent EC cartel fining decision reinforces once again that a parent company can still be held responsible for the actions of a subsidiary after the sale of the subsidiary. This is one application of the EU rules on parental liability for competition law infringements.

The decision, announced on 3 September 2014, concerns a cartel in smart card chips. Several companies were found to have colluded through a network of bilateral contacts in order to determine their respective responses to customers' requests to lower prices. One of the companies was fined €20 million even though it had divested its smart card chips business after the period of the cartel infringement, the EC commenting that it "remains liable for what happened during the period of the infringement".

The law on parental liability is complex, but the bottom line is that a company should assume that it is and remains liable (on a joint and several basis) for the actions of a wholly-owned subsidiary, even after sale. In addition to these rules, it is notable that, although a parent does not itself gain liability for pre-acquisition infringements, an acquired subsidiary retains that liability and therefore susceptibility to fines.

Parental liability needs to be taken into account in EU competition compliance programmes and in the planning of disposals. A pre-disposal audit of a business may be appropriate in some cases, so as to try to identify any infringements carried out by the business. This is of particular importance if an infringement is suspected or is a possibility, since if the purchaser later discovers an infringement and makes a leniency (whistleblowing) application seeking protection from fines, the seller will not also be protected.

Additional European competition law news coverage can be found in our news section.

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