Antitrust bites - Newsletter

AG Rantos clarifies notion of “single economic unit” and standard of proof for abuse of dominant position through imposing exclusivity obligations

On 14 July 2022, Advocate General (AG) Rantos delivered his opinion in case C-680/20, concerning a request for a preliminary ruling referred by the Italian Council of State.

The opinion clarified the notion of “single economic unit”, for undertakings that are not linked by shareholding relationships but only by contractual relationships. It also explained the necessity to prove the exclusionary capability of conduct under investigation compared to an “as-efficient competitor”, especially in cases of abuse of dominant position through the imposition of exclusivity obligations.

Regarding the first question, to ascertain a “single economic unit” between undertakings bound only by contractual obligations, in particular distribution agreements, in the AG’s opinion, the approach should be mutatis mutandis the one applied to ascertain a “single economic unit” in the case of undertakings bound by shareholding relationships that are not total or quasi-total.

In the AG’s opinion, it shouldn’t be necessary to find the existence of a hierarchical connection, according to which the distributor is subject to “multiple, constant and systematic acts of direction”. Conversely, regardless of these acts of direction, it should be sufficient to ascertain a set of concordant indexes resulting in the effective exercise of a decisive influence on distributors. These indexes should be assessed in the light of economic, organizational and legal links between the parties which induce the distributor to replicate the conducts conceived by the producer without the possibility to act independently on the market. Should the distributor act independently, the efficacy of the conducts conceived by the producer would be reduced, and there would also be the fear of economic negative repercussions. This occurs, in principle, when the distributor doesn’t bear the financial risks linked to the product sale and acts exclusively for the producer.

Regarding the second question, according to the AG, to find an abuse of dominant position, the prosecuting authority must always prove – including in the case of exclusivity obligations – that the conduct of the dominant undertaking restricts competition and excludes “as-efficient” competitors. The principles expressed by the EU Courts on the necessity to prove the effective exclusionary capability of the conduct under investigations should have a general application, irrespective of the nature of restrictions, when the alleged effective exclusionary capability has been challenged by the dominant undertaking.

This assessment has to take into account elements – especially those of an economic nature – brought by the dominant undertaking to challenge the alleged exclusionary capability of its own conduct. This entails a duty of motivation on the part of the authority, when it retains that the evidence is not suitable to affect the demonstration of the exclusion from the market of the as-efficient competitors (e.g., without being able to deny relevance ex ante to economic studies submitted by the dominant undertaking).

Hindering the right to data portability: Italian competition authority launches an investigation for alleged abuse of dominant position

With decision no. 30215 of July 5, 2022, the Italian competition authority (ICA) launched an investigation against Google LLC., Alphabet Inc., Google Ireland Limited and Google Italy S.r.l. (together “Google”) for an alleged abuse of dominant position in violation of Article 102 TFEU. The alleged abuse involved obstructing interoperability while sharing users’ data with other platforms.

The investigation originates from a complaint from an operator active in Italy that developed an “investment database” managed through an application called Weople, with the purpose of increasing the value of users’ data. The database collects – with users’ consent – data available on the main internet platforms. All subscribers can earn money every time third companies ask for their data (in static, aggregated or anonymous form), for targeting activities or other goals.

In May 2019, the complainant supposedly contacted Google to identify data portability mechanisms necessary to transfer users’ data to the related Weople account (exercising users’ right to data portability under Article 20 para. 2, Regulation (EU) 2016/679 – GDPR).

Google allegedly answered the request, pointing out that it was in the process of elaborating a common framework for interoperability in data portability. However, at the moment of the request, interoperability in data portability could only have been allowed through “Google Takeout”, exclusively available directly and individually to users, subject to authentication. According to the complainant, this proceeding would have discouraged the data portability requests from Weople users.

The ICA assumed that these conducts could constitute an infringement of Article 102 TFEU in multiple relevant markets in which Google would hold a dominant position (as already found in past proceedings before the European Commission). In these markets, thanks to the services provided, Google would collect massive amounts of users’ data and, because of the alleged abusive conduct, preserve its own economic advantage in the commercial exploitation of data.

The alleged obstacles in identifying interoperability mechanisms able to make data available to alternative platforms could constitute an undue exploitation of users as the benefit they could have from the potential exploitation of their data is limited. This conduct would also restrict competition as it would hamper the development of new innovative methods for the exploitation and valorization (also economic) of data by other competitors.

European Commission opens public consultation on framework for application of EU antitrust rules

On 30 June 2022, the European Commission opened a public consultation concerning the Antitrust Procedural Regulations (Regulation 1/2003 on the implementation of Articles 101 and 102 TFEU and the related Regulation 773/2004), which constitute the relevant framework for the application of EU antitrust rules.

The public consultation is part of a review process initiated by the Commission in the past few years (among the most recent initiatives, for example, the review of the Vertical Block Exemption Regulation and related Guidelines), with the aim of adapting EU legislation to the new economic reality and, in particular, to the changes determined by digitization.

The public consultation comprises two questionnaires: the former addressed to the general public, the latter, of a more technical nature, addressed to those with specific knowledge as regards the application of the Regulations.

The Commission’s objective is to have a solid basis made of the contributions gathered from the respondents to the consultation, to evaluate whether the procedural antitrust EU framework currently in force will be kept or amended.

The consultation will end on 6 October 2022.

State Aid: European Commission amends Temporary Crisis Framework

On 20 July 2022, the European Commission has published the first amendment of the Temporary Crisis Framework, adopted on 23 March 2022, to enable EU Member States to benefit from the flexibility provided for by state aid rules to remedy the liquidity shortage faced by those undertakings affected by the war in Ukraine.

The amendment follows the consultation announced by the Commission informed through a press release of 11 July 2022, concerning a project of proposal to amend the Temporary Crisis Framework which was submitted to the EU Member States.

The amendments to the Temporary Framework provide for state aid measures which the EU Member State will be able to grant, in the form of direct grants, repayable advances, loans, guarantees or tax advantages, to accelerate the diffusion of renewable energies and to facilitate the reduction of the use of fossil fuels (decarbonization) by industries.

In particular, a new section (No. 2.5) has been included in the Temporary Framework concerning state aid measures for “accelerating the rollout of renewable energy, storage, and renewable heat.” To summarize, under specific circumstances, EU Member States will be able to grant state aid measures to promote the following activities: (i)photovoltaic or other solar electricity or wind power electricity generation; (ii)geothermal energy generation; (iii)electricity or thermal energy storage; (iv)production of renewable heat or hydrogen; (v)production of biogas and biomethane from waste and residues.

Recently introduced section 2.6 concerns certain state aid measures which, under specific circumstances, can be granted by EU Member States to facilitate investments aimed at the decarbonization of industrial activities “through electrification and technologies using renewable and electricity-based hydrogen”.

This type of state aid is provided for investments that result in a substantial reduction of greenhouse gas emissions from industrial activities currently relying on fossil fuels as energy source or feedstock, as well as for investments resulting in a substantial reduction of energy consumption in industrial activities and processes.

The intervention complements the initiative of the European Commission, as described in a press release concerning measures aimed at reducing gas demand in order to reduce its consumption in Europe by 31 March 2023.

The two new state aid measures can be granted until 30 June 2023.

Network sharing agreements in Czech Republic: European Commission closes proceedings initiated under Article 101 TFEU with acceptance of commitments

On 11 July 2022, the European Commission announced that it had closed – with acceptance of commitments – proceedings initiated in October 2016 against the main mobile operators active in the Czech Republic. The proceedings related to whether the network sharing agreements the mobile operators had entered into could constitute anticompetitive agreements violating Article 101 TFEU (case AT40305).

The agreements under investigation provided that each operator would operate the network in a specific geographical area of the country and provide others with network services in its area of competence. The network sharing cooperation, which started in 2011, gradually increased to cover all mobile technologies (2G, 3G, 4G) and the entire Czech territory – with the only exceptions being Prague and Brno – affecting the 85% of the population.

After the parties’ proposal for commitments, the Commission adopted a preliminary assessment in which it highlighted several concerns. One concern was that the different infrastructure conditions in the different regions could have generated discriminations to the detriment of consumers as regards network speed. The Commission also highlighted the risk that certain conditions provided for in the agreements could have discouraged operators from investing in the area of the country that did not fall under their own direct management. In addition, the Commission pointed out that the exchange of information that occurred between the parties in the context of the network sharing would go beyond what was strictly necessary.

In the light of that, and following the market test that had been conducted, the parties modified the commitments proposal, by providing for the modernization of the mobile network equipment, the modification of the conditions provided in the unilateral investments in network development, in order to remove disincentives to the unilateral development, the amendment of the contractual provisions in order to limit information exchange to what is strictly necessary for network operation and to not further extend the geographic coverage of the shared network.

The Commission found that the proposed commitments were suitable to remove the competitive concerns and therefore accepted them and made them binding, thus closing the proceedings without ascertaining the infringement.