Antitrust Bites - Newsletter

Lazio Regional Administrative Court again annuls ICA decision because proceedings started late

Just a few months after issuing its preliminary referral order on August 2, 2023, No 13016 (as discussed in the last newsletter), the Lazio Regional Administrative Court (TAR Lazio) has reaffirmed the principle that a delayed investigation by the ICA renders the sanctioning measure illegitimate.

With a decision dated October 9, 2023, the TAR Lazio annulled the sanctioning measure issued by the ICA at the conclusion of procedure I845. This decision was based on the delay in starting the proceedings, which began over two years after the ICA had received the report of the infringement.

The TAR Lazio recognized the delay in starting the proceedings, disregarding the “strict application” of the 90-day time limit as per Article 14 of Law No 689/1981 and instead applying general principles such as good functioning and efficiency of administrative action.

According to the TAR Lazio, in this specific case, the ICA could have gathered all the necessary information to “outline the basic elements of the offense” and decide whether to initiate the investigation in a significantly shorter time than what had actually elapsed. The general principles of national law of legality, good functioning and efficiency of administrative action, as well as supranational principles set forth by Article 6 ECHR and Article 41 of the Fundamental Charter of EU Rights imply that investigations should be initiated within a reasonable period of time (from the full knowledge of the unlawful conduct).

The interpretative judgment of the EU Court of Justice regarding the applicability of the statutory time limit as per Article 14 of Law No 689/1981 to the initiation of ICA proceedings will surely be significant. But this decision clarifies the administrative judge’s intention to consider, in all cases, subject to annulment – and regardless of the “strict” application of Art. 14 – the measures adopted by the ICA following proceedings not initiated within reasonable timeframes genuinely calibrated to the complexity of the case.

 

Classification of exchange of information as a restriction of competition by object: AG Rantos’ opinion

On 5 October, 2023, Advocate General (AG) Rantos delivered his opinion in Case C-298/22. The case concerned a reference for a preliminary ruling made by the Portuguese Competition Court on the interpretation of Article 101(1) TFEU, with regard to the conditions under which an exchange of information between undertakings may be classified as a restriction of competition by object.

The main proceedings concern a decision from the Portuguese Competition Authority. The decision established the existence of an (alleged) exchange of information relating to spreads and production volumes between several banking institutions. The Authority considered the conduct to be a cartel restrictive of competition by object. This was disputed by the banking institutions, which argued that the exchange of information in question could not be considered sufficiently harmful to be declared contrary to Article 101 TFEU, regardless of the analysis of the effects. They also stated that the Authority should have considered the efficiencies brought about by the conduct.

The national court referred two questions to the court for a preliminary ruling, asking:

• whether Article 101 TFEU may preclude the classification as a restriction of competition by the object of an exchange of information on commercial conditions and production results;
• if the answer to the first question is yes, whether Article 101 TFEU permits the classification where no efficiencies or procompetitive effects resulting from the exchange have been established or identified.

AG Rantos, as a preliminary point stated that, according to the settled case law of the Court of Justice, it’s possible to classify a practice as a restriction of competition by object when, from the analysis of its content, its objectives and the legal and economic context in which it takes place, the conduct presents a sufficient degree of harm to competition to consider that its effects need not be identified. AG further clarified that the existence of a reliable and robust experience – intended as the existence of a precedent decision that has ruled on similar conduct – is not a prerequisite for a given practice to be considered a restriction by object. That being so, as pointed out by the AG, the notion of restriction by object must be interpreted restrictively so that, while it is true that some practices for which there is no precedent may be considered restrictive by object, such classification should be limited only to cases where the anticompetitive nature of a practice is manifest or where the practices in question have no credible explanation other than the restriction of competition on the market.

The AG then came to the declination of these principles to the case of the exchange of commercially sensitive information. The AG noted that the qualification of restrictive agreement by object can only be adopted for exchanges of information for which it clearly and unequivocally appears, in the light of their characteristics, that they are capable of reducing or eliminating uncertainty as to the strategic market behavior of a competitor. So it will directly influence the commercial strategy of competitors by enabling them to adapt their own market behavior. This is the case where the information exchange relates to crucial competitive elements such as future capacities and prices.

The AG examined the information exchanges individually. He concluded that the exchange concerning spreads, insofar as it concerned a component of the price that would be adopted, could be considered capable of revealing strategic intentions concerning future pricing behavior. So it could be restrictive by object. The AG then pointed out that, given the particularly sensitive nature of the information exchanged, even assuming that the exchange in question could generate efficiencies to the benefit of consumers, this would not exclude the anticompetitive nature of the conduct.

As to the exchange relating to production volumes, the AG noted that it concerned not prospective but historical data, since the data referred to the previous month. So he considered that the Portuguese Authority’s decision did not contain any elements enabling it to clearly establish that this exchange was of a particularly detrimental nature to competition and that it would (in itself) have made it possible to reduce strategic uncertainty as to the future behavior of competitors.

The Portuguese Authority did not consider that each of the exchanges was in itself restrictive by object, but considered that they were part of a “single exchange” classified as a restriction of competition by object. So, in the AG’s opinion, the Authority should have identified a sufficiently clear link between the two exchanges and demonstrated why the exchanges of information, considered together, were part of a manifestly anticompetitive “plan”.

AG Rantos suggested that the court interpret Article 101(1) TFEU as meaning that:

• it does not preclude the classification as a restriction of competition by object of an exchange, between competitors, of information on commercial conditions and production results, if that practice increased transparency and reduced uncertainty as to the operation of the market; and
• it does not preclude such classification where no efficiencies, ambivalent or procompetitive effects resulting from that exchange of information have been established or sought to be identified.

 

General Court of the European Union rules on relationship between antitrust law and copyright in geo-blocking case

The General Court of the European Union has dismissed the action against the decision in which, in January 2021, the Commission sanctioned an online gaming platform and five other video game publishers for violating Articles 101 TFEU and 53 of the Economic European Area Agreement and for implementing geo-blocking practices.

With the contested decision, the Commission had sanctioned the online gaming platform and the five video game publishers for participating in a group of bilateral agreements and/or anti-competitive concerted practices. These practices were intended to restrict cross-border sales of certain video games by preventing unsolicited requests to purchase (known as “passive sales”) from users located outside certain European Economic Area (EEA) countries. These restrictions were allegedly implemented by geo-blocking keys enabling activation and use of the video games on the gaming platform. This prevented users outside certain countries from using the video games on the platform if they had purchased them from a country other than the one in which they were established.

In dismissing the action, the General Court held that the Commission established to the requisite legal standard the existence of an agreement or concerted practice between the gaming platform and each of the five publishers. The General Court found that the practice aimed at restricting cross-border sales of video games by means of geo-blocking practices that were intended to prevent users from being able to buy them in a country where they were sold at a lower price than in the country where the purchaser was established. The General Court found that the geo-blocking did not pursue the objective of protecting the copyright of the publishers of the video games, but was used to prevent parallel imports from those countries where video games were sold at lower prices to countries where they were sold at higher prices.

The General Court – referring to a precedent of the Court of Justice – observed that copyright is intended only to ensure protection of the right to exploit commercially the marketing or the making available of the protected subject matter, by the grant of licenses in return for payment. Copyright does not guarantee the right holder the opportunity to demand the highest possible remuneration for making the protected product available or to engage in conduct such as to lead to price differences between the national markets.

 

Expiry of CBER Regulation: European Commission decides not to extend validity of block exemption for liner shipping consortia

With a communication dated October 10, 2023, the European Commission has decided not to extend Regulation (EC) No 906/2009 of September 28, 2009. The Regulation concerns a block exemption for liner shipping consortia (CBER Regulation), which is set to expire on April 25, 2024.

Liner shipping involves the regular and scheduled provision of sea freight transportation services by carriers operating vessels on one or more specific routes between different ports. To rationalize their operations, carriers often cooperate through consortium agreements, which consist of one or a set of separate but interrelated agreements between liner shipping companies under which the parties operate the joint service.

To make it easier to create and operate consortia between small and medium-sized carriers in 2009 the Commission found it necessary to adopt the CBER Regulation with a five-year validity. The consortia were deemed capable of generating positive effects in terms of efficiency and consumer benefits and of preventing the creation of oligopolistic market structures. The Regulation sets the specific conditions for exempting consortium agreements among carriers from the application of Article 101(1) TFEU. The validity of the CBER Regulation has been extended twice during the years – in 2014 and in 2020. This extension was based on assessments conducted by the Commission near its expiry, consistently demonstrating that, despite market developments, the CBER Regulation remained suitable for its purpose and capable of achieving its objectives, resulting in increased efficiency for carriers and consumers.

But it appears that the conditions for maintaining this Regulation in force are no longer being met. The findings of the Commission’s evaluation demonstrate that the CBER Regulation no longer meets the criteria of effectiveness, efficiency and added value. According to the working document published by the Commission summarizing the evaluation results, it is evident that in recent years the Regulation has provided limited cost savings for carriers in terms of compliance and can no longer pursue the objective of promoting competition by allowing smaller carriers to cooperate and offer alternative services in competition with larger carriers. The Commission’s assessment also seems to show that carrier cooperation no longer contributes to improving the competitiveness of the EU liner shipping industry or to the development of EU trade. Instead, consortia seem to favor the consolidation of a market with prohibitive entry costs and where service differentiation is entirely absent.

As a result, the Commission has deemed a further extension of the CBER Regulation unjustified. Starting  from April 25, 2024, carriers operating to or from one or more ports within the EU that intend to cooperate can do so, but only following an assessment of compatibility between potential cooperation agreements and the antitrust provisions outlined in the Horizontal Block Exemption Regulation and Specialisation Block Exemption Regulation.

 

European Commission vetoes Booking’s acquisition of eTraveli

On September 25, 2023, the European Commission vetoed the acquisition of Flugo Group Holdings AB (eTraveli) by Booking Holdings (Booking). This marks the 11th veto – out of more than 3,500 scrutinized transactions – imposed by the Commission in the past decade.

The decision is based on several reasons. The Commission determined that Booking had established a dominant position in the market for services provided by online travel agencies (OTAs) for booking hotels and accommodation in the European Economic Area (EEA). This dominant position was deemed to exist due to a market share above 60%, in the absence of competitors capable of exerting effective competitive pressure, along with network effects stemming from the extensive range of hotels offered by Booking.

While eTraveli operates in a different market segment – namely, flight OTAs, where it’s the number two player in the EEA – the Commission expressed concerns that its acquisition by Booking could further strengthen Booking’s dominant position. Essentially, this was based on two key factors:

• The acquisition would have allowed Booking to harness a significant customer acquisition channel, given the substantial amount of traffic generated by specialized flight OTAs, and considering that booking a flight is typically the initial step in travel planning, often leading to subsequent bookings for accommodations and other services.
• Booking could have expanded its travel services ecosystem, centered around online hotel reservations, maximizing opportunities for cross-selling accommodation bookings, and leveraging eTraveli’s potential to become the primary flight OTA.

So, according to the Commission, the transaction would have simultaneously posed risks of:

• reducing competition by reinforcing network effects and increasing entry barriers, making it more challenging for other OTAs to compete effectively; and
• allowing Booking to enhance its bargaining power, leading to price increases (commissions) for hotels as well as, potentially, for consumers.

During the investigation, Booking presented its commitments, which essentially included that, during the flight purchase checkout process, users would have been given four options for bookable hotels, offered by different competing OTAs (including Booking itself). For each hotel, a dropdown menu would have allowed users to make reservations through various OTAs, with the lowest price listed first. This mechanism would have been implemented through the algorithm of the platform Kayak, a company specializing in price comparison services and owned by Booking.

The Commission deemed these commitments insufficient for these reasons:

• the lack of adequate assurances as regarding transparency and non-discrimination concerning the selection and ranking of OTAs and their offers, given that the mechanism’s implementation would have been under the purview of a Booking subsidiary;
• the commitments would have solely pertained to the flight checkout page, with no proposals addressing other potential cross-selling channels, like emails, notifications and other pages of the website.
• given the challenges in predicting the functionality of Kayak’s algorithm, the Commission believed that the effective monitoring of the proposed commitments would have been too complex.

We now await the outcome of the appeal – which Booking has already declared its intention to file – against the Commission’s decision.