Antitrust Bites Newsletter30 December 2022
The Court of Justice’s ruling on disclosing evidence in actions for damages for infringements of competition law
With the recent judgement of November 10 2022 on case C‑163/21, the Court of Justice of the European Union ruled on the scope of Article 5 of Directive 2014/104/EU. The directive provides for rules applicable in civil proceedings for damages caused by breaches of competition law. The provision regulates the regime of disclosure of evidence by making it possible for national courts to order the defendant or a third party to disclose relevant evidence that are under their control, following a reasoned request from the claimant in actions for damages for infringements of competition law. The provision is transposed into Italian law by Article 3 of Legislative Decree of 19 January 2017, No. 3.
The judgement stems from a question referred for a preliminary ruling by which the court was asked whether Art. 5 of the Directive should be interpreted as meaning that “the disclosure of relevant evidence refers exclusively to existing documents in the control of the defendant or a third party” or whether the provision also includes the possibility of ordering the disclosure of documents that the person to whom the order is addressed must create “ex novo (…) by complying or classifying information, knowledge or data held by it.”
The court resolved the question for a preliminary ruling by stating that the order for disclosure of relevant evidence in the control of the defendant, or a third party, also covers evidence that the party to whom the request to disclose evidence is addressed must create ex novo, by complying or classifying information, knowledge or data in its possession. National courts, when asked to decide on the request of disclosing evidence, are required to restrict the disclosure of evidence to that which is relevant, proportionate and necessary.
The court’s decision is essentially based on the following considerations:
- The fact that the claimant, petitioner of the order to disclose, is only provided with “unprocessed, pre-existing (…) documents” would correspond only imperfectly with its request, whereas it is necessary that the provision at hand (Article 5, para 1, of Directive) is “applied effectively so as to provide injured parties with tools that are capable of compensating for the information asymmetry between the parties to a dispute.”
- To exclude at the outset the possibility of requesting disclosure of documents or other evidence that the party to whom the request is addressed would have to create ex novo could represent an obstacle to the applicability of antitrust law in the framework of civil actions for the assessment of competition law infringements and compensation for consequential damage (so-called private enforcement), whereas the facilitation of private enforcement represents the primary objective of the Directive.
- The Directive also provides that national courts must carry out a rigorous examination of the claimant’s request of disclosure “as regards the relevance of the evidence requested, the link between that evidence and the claim for damages submitted, the sufficiency of the degree of precision of that evidence and the proportionality of that evidence. ”National courts are called on to assess whether the request for disclosure of evidence created ex novo from pre-existing evidence in the control of the defendant or a third party is likely “to impose a disproportionate burden on the defendant or the third party concerned, whether as a result of the cost or workload that that request would entail.”
Legal privilege: towards an extension?
In ruling in case C-694/20 of December 8, the Court of Justice affirmed some general principles regarding the confidentiality of communications between lawyers and clients which seem to broaden the scope of legal privilege previously beyond the boarders previously marked by EU case law.
The judgment stems from a question referred for a preliminary ruling referred by a Belgian Court regarding the validity of certain provisions of the Flemish regulation on administrative cooperation in the field of taxation. The provisions impose an obligation on a lawyer acting as an intermediary to inform other persons of the impossibility to fulfil the reporting obligations on taxpayers in relation to whom such lawyer is bound to professional secrecy by reason of the legal assistance provided.
The Court underlined that Article 7 of the Charter of Fundamental Rights of the European Union and Article 8 of ECHR grant enhanced protection to communications between lawyers and their clients. This protection covers not only the activity of defense but also legal advice both with regard to its content and to its existence.
These reflections, even if stated incidenter tantum by the court, show a more extensive interpretative approach to legal professional privilege apparently broader than the one followed by the court’s previous case law on antitrust proceedings.
In its precedents on the subject (see in particular, the Akzo case) the Court of Justice set two conditions for the enforceability against antitrust authorities of the legal privilege in relation to communications with lawyers: (i) the existence of a connection between the communication from the lawyer and the exercise of the client’s right of defense; and (ii) the emanation of the communication from an independent lawyer. The first condition has led to some uncertainties, in particular for communications for which the connection with the defense activity is not immediately evident.
The principles recently confirmed by the Court of Justice seem to overcome the first of the two conditions acknowledging the applicability of the legal professional privilege to all communications from independent lawyers, and clarifying that the legal privileged covers non only the content of the communication, but also its existence.
AG Rantos’ opinion on European Super League case: FIFA and UEFA statutes comply with European competition law.
On December 15, 2022, Advocate General (AG) Rantos delivered his opinion in case C-333/21, which concerned a reference for a preliminary ruling from the Juzgado de lo Mercantil de Madrid, brought by the European Super League Company (ESLC).
The main dispute arises from the joint statements issued by the FIFA (Fédération Internationale de Football Association) - football’s world governing body - and UEFA (Union of European Football Associations) – football’s governing body at European level. The statements set out their disagreement with the initiative promoted by ELSC, a company whose shareholders are prestigious European football clubs, to organize the European Super League (ESL), annual European football competition. According to ESLC, the competition would be independent from UEFA, but participating clubs would still take part in football competitions promoted by FIFA and UEFA, as well as national football federations. FIFA and UEFA have expressed their refusal to recognize the ESL and warned that any player or club participating in the new competition would be expelled from competitions organized by FIFA and its confederations.
The central issue of the question addressed to the Court of Justice is whether the provisions of the statutes of FIFA and UEFA which require prior authorization for any new competition, provide for fines for the event of infringement and give FIFA and UEFA the exclusive marketing of all sports rights relating to competitions under their jurisdiction are compatible with EU competition law.
In its conclusions, AG Rantos took as his starting point the “European sport model,” outlined by Article 165 TFEU, aimed at promoting competitions that are open and accessible to all, within a transparent system based on sporting merit.
According to the AG, the art. 165 TFEU represents a special rule with respect to the general provisions of articles 101 and 102 TFEU, which can be used as a standard for the interpretation and application of the provisions of competition law in the sports sector.
On this basis, the AG concludes that measures pursuing the objectives set out in Art. 165 TFEU can be excluded from the scope of application of art. 101 TFEU, provided that such measures are necessary to achieve those legitimate objectives and proportionate.
In its conclusions, the AG deemed the statutory provisions under analysis as inherent the pursuit of legitimate objectives relating to the specific nature of sport, as they are aimed inter alia at maintaining the principles of participation based on merit, equal opportunities and solidarity on which the structure of European football is based, and proportionate to the achievement of those objectives; the sanctions involving exclusion targeted at players who have no involvement in the project in question are instead according to the AG disproportionate, in particular as regards their exclusion from national teams.
In the light of the above, the AG concludes that the statutory provisions relating to the authorization, sanctioning and marketing regime of sports competition rights, are not contrary to EU competition law, with the sole exception of the sanctions against individual football players to the extent above.
Italian Antitrust Authority imposes EUR5 million fines in the energy sector for unfair commercial practices
With a decision of November 2, 2022, the Italian Antitrust Authority (AGCM) imposed several administrative sanctions, of around EUR5 million, on a group of companies operating in the energy sector for violating regulations on unfair commercial practices.
The proceedings originate from complaints of consumers and trade associations about the dissemination by agencies partner of the operators involved in the proceedings of a pre-recorded message, from an answering machine of the sanctioned energy operator and call centers, containing misleading information concerning:
- (i) the alleged date of termination, indicated by the operators as “imminent,” of the protected market in the energy sector, and instead currently scheduled for January 10, 2024, at times projecting as “mandatory” the transition to the free market;
- (ii) the need to enter into a contract on the free market with the same sanctioned operator;
- (iii) the substantial continuity of gas and electricity services offered on the free market regime with the protected market regime.
The AGCM also found elements of aggressiveness in the persistent and repeated phone calls to consumers (even several times a day), some of whom had not given their explicit consent to be contacted for marketing purposes. A further critical issue was identified for some of the partner agencies, which consciously carried out their sales activities by making use of sub-agencies and individual agents, who were not authorized by the energy operator, and who unduly had lists of customers belonging to the protected market. In light of the above, the AGCM found a breach of Articles 20, 21, 24 and 25 of the Consumer Code.
The Authority considered that the conduct constituted an unfair commercial practice, because it was likely to distort, to an appreciable extent, the consumer's economic behavior in relation to a service of primary interest, such as the supply of energy services.
The Authority ascertained the operators acted without the necessary professional diligence, having failed in implementing an effective control system on how partner agencies, sub-agencies and agents contacted customers and acquired new contracts on the free energy market. The Authority considered not sufficient to exclude operator responsibility the adoption of a “check and quality call” post-sale control mechanism, consisting in calls aimed at verifying the receipt of contractual proposal and verifying consumers’ willingness to proceed with the conclusion of the contract, and the adoption of a procedure according to which agencies would have to clear the lists initially acquired on the market of the names acquired without consent or deleting duplicates (“deduplication”), since this procedure was exempt from further subsequent control by the operator and did not prevent sub-agencies and individual agents from contacting and contracting names not included in the lists previously checked and included in lists unduly hold.
ICA adopted the Communication on concentrations below the merger control thresholds
In Bulletin no. 46/2022 of 27 December 2022, the ICA published the Communication “on the application of Article 16, paragraph 1-bis, of Law No. 287 of October 10, 1990, adopted following a public consultation ended on 26 November 2022. With the Communication ICA intends defining, in conformity with EU law, the procedural rules for the application of new Article 16, paragraph 1, of Law no. 287/1990 governing the control of certain concentration operations that do not meet the cumulative turnover thresholds set forth in art. 16, first paragraph, of law 287/1990 (so-called "below-threshold" concentration), and clarifying the scope of application of the new regulation.
As known, Law no. 118 of August 5, 2022, introduced paragraph 1-bis of Article 16 of Law No. 287/1990, which now provides that the ICA may require the parties concerned to notify a below-thresholds concentration where the following conditions are simultaneously fulfilled:
- (i) at least one of the two thresholds provided by Article 16, paragraph 1 is met, or the combined worldwide turnover of the parties exceeds EUR5 billion;
- (ii) there are substantial risks for the competition in the national market or in a relevant part thereof exist, also taking into account the detrimental effects on the development of small businesses characterized by innovative strategies;
- (iii) no more than six months have passed since the “completion of the transaction,” i.e., from the moment when, as specified in the Notice, “the effect of the acquisition of control is produced.” In case of complex operations, that moment may coincide with the closing of the transaction or with the transfer of control.
If the Authority becomes aware of a concentration that prima facie fulfils the above conditions, it may require each of the undertakings concerned to file the transaction within 30 days. The notification must be made within 30 days from the request (unless extensions). If the Authority deems the concentration likely to be prohibited pursuant to Article 6 of Law 287/90 it starts the investigation within 30 days from receiving the complete notification of the transaction.
In the Communication ICA indicates the criteria that will be applied to assess the likeliness of substantial anticompetitive risks.
In general, the Authority will verify this aspect by taking into account all relevant characteristics of the undertakings concerned and the markets in which they operate and, in particular, market shares and the degree of concentration.
Other circumstances may be relevant, such as the particular competitive strength of an undertaking or its access to goods that are relevant under a competitive point of view, such as raw materials, infrastructure, data or intellectual property rights.
Even where none of the undertakings involved generates turnover in Italy, the Authority may investigate how likely the transaction is to affect competition in the national market or a relevant part of it, in the light of the specific characteristics of the transactions and of the undertakings involved.
In any case, the undertakings involved may voluntarily file the transaction where they believe it falls within the scope of Article 16, paragraph 1-bis of Law No. 287/1990. The Authority, following the evaluation of the information provided, will communicate to the undertakings whether a filing of the concentration pursuant to Article 16, para. 1-bis is required, within 60 days from the receipt of the voluntary communication.