Antitrust Bites - Newsletter

Analyzing concentrations outside the scope of merger control law under Article 102 TFEU: Guidance from the Court of Justice

On 16 March 2023, the EU Court of Justice (ECJ) issued a judgment in the preliminary ruling case C-449/21. The ECJ held that failing to meet the prior notification thresholds set by Regulation No. 139/2004 and by the laws of the individual Member States does not affect national competition authorities’ power to assess ex post the compatibility with Article 102 TFEU of concentration operations that fall below the thresholds.

The decision comes from the preliminary question raised by the Cour d’appel de Paris in an appeal brought by Towercast against a decision of the Autorité de la concurrence. The French Competition Authority had rejected Towercast’s claim that Telédiffusion de France (TDF), a former monopolist in the now liberalized terrestrial television broadcasting market in France, had abused its dominant position by acquiring exclusive control of its competitor Itas.

The Authority did not act on Towercast’s complaints. It stated it could not assess TDF’s acquisition of Itas under Article 102 TFEU because it fell below the thresholds for prior notification established by Regulation No. 139/2004 and French law. As stated in the judgment, the Autoritè claimed that the establishment of a prior concentration control mechanism (first with Reg. 4064/89, then replaced by the current Reg. 139/2004) excludes a concentration operation being subsequently subject to the ex post scrutiny applicable to anti-competitive practices.

The appeal court referred a question to the ECJ for a preliminary ruling on the interpretation of Article 21(1) of Regulation 139/2004, according to which the latter is “the only regulation applicable” to concentration operations referred to in Article 3, to which Regulation 1/2003 (on the application of Articles 101 and 102 TFEU) does not apply.

The ECJ observed that Reg. No. 139/2004 – far from depriving national competition authorities of the power to apply the competition provisions of the TFEU to transactions pursuant to Art. 3 – is part of a “legislative whole intended to implement Articles 101 and 102 TFEU and to establish a system of control ensuring that competition is not distorted in the internal market of the European Union”.

As the Court pointed out, Regulation No. 139/2004 only applies to concentrations with a Community dimension, so it is possible that certain concentrations may not be caught by prior control and be subject to ex post control. According to the Court, this is confirmed by Recital no. 9 of the Regulation and Article 1, limiting the scope of the Regulation to concentrations reaching the turnover thresholds, and by Recital no. 7, which expressly recognizes that certain concentrations liable to distort competition may escape the review provided for in Articles 101 and 102 TFEU.

The ECJ argues that the inapplicability of Regulation No. 1/2003 to the concentrations covered by Regulation No. 139/2004 – and Article 5, concerning the powers of the national competition authorities to apply Articles 101 and 102 TFEU – cannot result in the national competition authorities being prohibited from subjecting certain concentrations to control under Article 102 TFEU.

The ECJ concluded that Regulation No. 139/2004 does not preclude the competition authorities of a Member State from considering as constituting an abuse of a dominant position a concentration that is below the relevant thresholds for notification to the European Commission and to the national competition authorities and has not been referred to the Commission pursuant to Article 22 Reg. No 139/2004.

ICA imposes first fines for failing to respond to requests for information under the new powers granted by the annual law on the market and competition

With two decisions (cases C12476B and C12476C) published in Bulletin no. 7/2023 of 13 February 2023, the ICA imposed fines for failing to respond to requests for information related to concentrations between undertakings, applying Article 16 bis of Law No. 287/1990 for the first time since its introduction.

Article 16 bis of Law No. 287/1990, gives the ICA the power to ask undertakings for information and useful documents at any time. If they don’t respond, undertakings can face fines of up to 1% of the total global turnover.

The ICA fined (of around 0.01% of the undertakings’ turnover) two companies that had received requests for information. The requests aimed to verify whether there were grounds for an investigation related to an acquisition (C12476) between companies active in the telecommunications and ICT services sectors.

In both cases, the requests for information were sent on 20 September. The ICA set 3 October 2022, as the deadline for responses to be received. This was later extended to 8 October, after the companies failed to respond and the ICA sent reminders to the companies.

The Authority received responses from the companies on 16 November 2022, and 1 December 2022, that is to say, after the initiation of proceedings C12476 which was notified on 8 November 2022, and, in the second case, after the decision not to initiate the investigation adopted on 22 November 2022.

The Authority did not think the justifications put forward by the undertakings for their failure to comply with the deadlines for the response to the requests for information were adequate. One of the companies blamed the delay on the need to instruct the response at the relevant corporate functions and urgent activities that were happening at the same time, while the other company affirmed to have viewed the request for information late because of problems in the management of one of the two corporate certified electronic email inboxes.

In both cases, the ICA concluded that the failure to provide information depended on the companies’ fault.

The Authority considered other elements in its evaluation. First was the failure of the companies to challenge the adequacy of the deadline given to them to respond to the requests for information. Second was the substantial uselessness of the answers provided by them. The responses were received at a later stage than the collection and evaluation of the information useful for the purposes of the evaluation of the transaction.

ICA’s public consultation on “settlement procedures” implementing Article 14-quater of Law 287/90

On 22 February 2023, the ICA opened a public consultation regarding the Notice on the application of Article 14-quarter of Law No. 287/1990. The Notice sets out the procedural rules for submitting and evaluating settlement proposals and the amount of the reduction of the fine to be applied if the procedures provided for in Article 14-quarter are completed successfully.

Article 14-quater of Law No. 287/1990 was introduced by the Annual Market and Competition Law No. 118/2022. It provides that, during the proceedings opened pursuant to Article 14, paragraph 1, the Authority can set a time limit for companies to express in writing their intention to participate in discussions with a view to submitting settlement proposals. If the outcome of the discussions is positive, the Authority can set a deadline for the undertakings to follow the settlement procedure by submitting settlement proposals reflecting the results of the discussions and in which they acknowledge their participation in an infringement under Articles 101 or 102 TFEU and/or 2 or 3 of Law No. 287/1990.

The Notice subject to public consultation provides that the analysis concerning the interest of the parties in a possible settlement, which must be started after three months from the notification of the opening of an investigation, is the sole responsibility of the Authority. The Authority will assess the likelihood of quickly reaching a settlement of the proceedings through a settlement procedure between the parties.

The Notice provides that, if the parties express interest in reaching a settlement, the Authority can (but is not obliged to) initiate bilateral discussions to settle with each of the parties. The Notice states that where the ICA deems it possible to reach a solution, it will give the undertakings a deadline of no less than 15 days for them to submit a settlement proposal. The proposal should contain an acknowledgement “in clear and unequivocal terms” of the parties’ liability for the infringement and an indication of the maximum amount of the fine they think the Authority may apply and which they would accept.

Following the proposal, the Notice establishes that the Authority may proceed with adopting the final decision, reserving the right to adopt a final decision that deviates from the parties' settlement proposals, as expressed in the communication of the investigative findings.

The public consultation on the text of the Notice closed on 24 March. The final version of the Notice is now expected to be published.

ICA’s new online platform for whistleblowing

In its press release of 27 February, the ICA announced the creation of a new platform on its website, through which it is possible to send reports on anticompetitive conduct and on the subjects involved, while maintaining anonymity.

The establishment of this mechanism is in line with the best practices of the European Commission and other national competition authorities. It will allow those who have confidential information on competition infringements to cooperate with the investigation offices without having to reveal their identity.

Whistleblowers can use the appropriate form published on the ICA website to submit their messages. Their messages will then be received in encrypted form by an intermediary company, which in turn will send an “alert” to the competent office of the Authority.

It is also possible to establish two-way communication with the Authority. In this case the whistleblower will have access to the intermediary company’s system to view the reply or the requests for information transmitted by the competent ICA office. This will help them establish a dialogue, anonymously, making the report much more useful and increasing the chance of starting an investigation.

The latest interventions of the European Commission concerning state aid

On 9 March 2022, The European Commission intervened on state aid rules by adopting a new Temporary Crisis and Transition Framework (C(2023) 1711) and amending the General Block Exemption Regulation (No. 994/98) to promote and simplify support for the EU's green and digital transitions.

The “Temporary Crisis and Transition Framework for State Aid measures to support the economy following the aggression against Ukraine by Russia” amends and prolongs the temporary framework adopted on 23 March 2022. It includes provisions to support the economy in the context of the war in Ukraine.

The aim of the new framework is to promote the transition towards a net-zero economy, by speeding-up investments and financing for clean tech production in the EU, according to the “Green Deal Industrial Plan”. The latter is a plan presented by the Commission on 1 February 2022, aimed to strengthen the competitiveness of the EU’s net zero industry and promote the transition to climate neutrality. It introduces four pillars: a predictable and simplified regulatory environment, speeding up access to finance, enhancing skills, and open trade for resilient supply chains.

The main measures set forth by the new framework, following a specific consultation addressed by the Commission to the Member States, are to:

• prolong, until 31 December 2025, the aid regimes that EU Member States can establish to accelerate the rollout of renewable energy and energy storage, and schemes for the decarbonization of industrial production processes;
• provide amendments aimed at facilitating and making more effective the state aid measures mentioned in the point above. There are simplified conditions to grant aid to small projects and less mature technologies, such as renewable hydrogen, by lifting the need for a competitive bidding process, subject to certain safeguards;
• provide new measures, applicable until 25 December 2025, to promote investments in strategic sectors for the transition towards a net-zero economy.

For what concerns the amendments to the General Block Exemption Regulation – which, as known, declares specific categories of State aid compatible with EU legislation and exempts the categories from the obligation of pre-notification if they fulfil specific conditions – the new rules:

• provide for measures to increase and streamline state aid in the environmental protection and energy sector. They also provide for an exemption for the state aid measures that regulate prices for energy. Moreover, the notification thresholds for environmental aid and for Research, Development and Innovation aid have been significantly increased;
• aim to facilitate the implementation of projects involving beneficiaries in several Member States, such as Important Projects of Common European Interest (IPCEI), in research and development;
• clarify and streamline the possibilities for risk finance aid, for small and medium-sized enterprises (SMEs) and startups, and for financial products supported by the InvestEU Fund (the fund created in the context of the homonymous project approved by European Parliament to support investments in the EU);
• increase the thresholds provided for in the Regulation and prolong their validity until the end of 2026.