Welcome to the Competition Stories – a bimonthly exploration of recent courts and competition law agencies’ decisions. Authored by Makis Komninos, a renowned expert in the field, this new column aims to go through the latest and most important developments in competition law of the last two months. We call them “stories” because Makis has promised to include some anecdotes from time to time, and not just stay at the black letter. Enjoy!
With some delay, I am now presenting the relatively few developments in March-April 2022. Clearly the most important judgments were bpost and Nordzucker on the principle of non bis in idem. Particularly bpost is a major development and is highly relevant to the forthcoming Digital Markets Act (DMA) and its interaction with competition law enforcement. The Commission also published its draft Horizontal Block Exemption Regulations and Guidelines, which are intended to come in effect as of January 2023.
I. Court of Justice
The judgments were eagerly awaited because this is an area where the case law has been inconsistent and – prior to the two cases – the Court of Justice was taking a different approach in competition law than in other areas of EU law and was reading the non bis in idem principle more restrictively. Indeed, in other areas of EU law, the Court of Justice assesses “idem”, i.e. the identity of the offence, on the basis of only a two-fold criterion, identity of facts and offender. In competition cases, however, the Court of Justice used to employ an additional criterion, identity of the “legal interest” protected (Aalborg Portland, para. 338; Toshiba, para. 97). In September 2021, AG Bobek produced two Opinions (see my July-October 2021 stories) that suggested a more stream-lined approach, so the question was whether the Court would follow the Advocate General. In the end, the Grand Chamber of the Court of Justice opted for a stream-lined approach but this was not exactly the approach suggested by AG Bobek. The Court’s preferred methodology is a bit different.
Let us first start with the bpost judgment, which should be read before Nordzucker. I have already described the facts in my July-October 2021 stories. In bpost, the question was whether the principle of non bis in idem applies between competition law and sectoral regulation.
The first question that the Court addressed was how to assess “idem”. The Court agreed with its Advocate General that the approach should be the same in competition law matters, as in any other area of EU law. However, instead of accepting AG Bobek’s preferred approach, which was to extend the competition law solution to all other areas of EU law, by “making the examination of the protected legal interests, and thus of the objective pursued, part of the consideration of idem” (para. 132 of the bpost Opinion), the Court opted not to refer at all to “legal interest”. For the Court, “the relevant criterion for the purposes of assessing the existence of the same offence is identity of the material facts, understood as the existence of a set of concrete circumstances which are inextricably linked together and which have resulted in the final acquittal or conviction of the person concerned” (para. 33). In other words, facts and offender are the two criteria. And to be clear, the Court indicated that it is changing its cace law as to the additional criterion of “legal interest” in competition cases. It held that “the legal classification under national law of the facts and the legal interest protected are not relevant for the purposes of establishing the existence of the same offence” (para. 34, emphasis added). The same had to be true “of the application of the non bis in idem principle […] in the field of EU competition law, inasmuch as, as the Advocate General noted in points 95 and 122 of his Opinion, the scope of the protection conferred by that provision cannot, unless otherwise provided by EU law, vary from one field of EU law to another” (para. 35).
But the Court did not stop here. It relied on Article 52 of the Charter of Fundamental Rights and further observed that limitations may be imposed by law on the exercise of a fundamental right, such as non bis in idem, as long as the limitations respect the essence of the right, are necessary and genuinely meet objectives of general interest recognised by the European Union (para. 40 et seq.). It is in that assessment that the “objectives” of the legislation concerned must be taken into account. According to the Court, “duplication of proceedings and penalties respects the essence of Article 50 of the Charter, provided that the national legislation does not allow for proceedings and penalties in respect of the same facts on the basis of the same offence or in pursuit of the same objective, but provides only for the possibility of a duplication of proceedings and penalties under different legislation” (para. 43). In other words, through the recourse to Article 52 of the Charter, which provides for limitations on the exercise of rights and freedoms, the Court brings back “from the back door” the concept of “legal interest”, albeit without using that name. Instead, the Court refers to “legitimate objectives” pursued by the legislation at stake (para. 44). In the case at hand, the Court held that the two sets of legislation at issue pursue distinct legitimate objectives. The object of the sectoral rules at issue is the liberalisation of the internal market for postal services, while Article 102 TFEU pursues “the objective – which is indispensable for the functioning of the internal market – of ensuring that competition is not distorted in that market” (paras 44-46). But this assessment is not aimed at concluding whether non bis in idem applies at all (as was the case under the previous case law) but rather at checking whether the “duplication of proceedings and penalties under sectoral rules and competition law meets an objective of general interest” (para. 44). In the case at hand, it was in principle legitimate for a Member State to punish infringements, on the one hand, of sectoral rules concerning the liberalisation of the relevant market and, on the other hand, of the rules applicable to competition law (para. 47), as long as the principle of proportionality was paid due respect (para. 48). In that regard, the Court stresses:
“[P]ublic authorities can legitimately choose complementary legal responses to certain conduct that is harmful to society through different procedures forming a coherent whole so as to address different aspects of the social problem involved, provided that the accumulated legal responses do not represent an excessive burden for the individual concerned […]. Consequently, the fact that two sets of proceedings are pursuing distinct objectives of general interest which it is legitimate to protect cumulatively can be taken into account, in an analysis of the proportionality of the duplication of proceedings and penalties, as a factor that would justify that duplication, provided that those proceedings are complementary and that the additional burden which that duplication represents can accordingly be justified by the two objectives pursued.” (para. 49)
So is there a difference with the previous state of the law? Yes, there is. Whereas before, if the two regimes protected different legal interests, the principle of non bis in idem did not apply, under the new approach, non bis in idem applies, as long as the sectoral and the competition rules relate to the same facts. In that case, a duplication of proceedings would amount to a limitation of the fundamental right guaranteed in Article 50 of the Charter, i.e. the principle of non bis in idem, but such a limitation can be justified on the basis of Article 52(1) of the Charter. An ad hoc assessment is required, which we can call a “procedural rule of reason under the control of the law”. The conditions are: (i) the duplication of proceedings must be acknowledged as a possibility in the law itself; (ii) there are clear and precise rules making it possible to predict which acts or omissions are liable to be subject to a duplication of proceedings and penalties, and also to predict that there will be coordination between the two competent authorities; (iii) the two sets of proceedings have been conducted in a sufficiently coordinated manner within a proximate timeframe, and (iv) the overall penalties imposed correspond to the seriousness of the offences committed (paras 54-58).
Clearly a very important judgment, bearing in mind the risk of parallel or consecutive investigations and sanctions under the forthcoming DMA and the competition rules. At the outset, there may be some ground to argue that while post, telecoms, and energy regulations are about the liberalisation of public monopoly-dominated markets and are therefore different from competition law, the DMA is pretty much a competition law statute, so it’s unclear whether we really have “distinct objectives”. If that first hurdle is overcome, let’s check how the DMA fares vis-à-vis the above “procedural rule of reason”. It seems that condition (i) is fulfilled. Condition (ii) is tricky and some of the new amendments introduced by the Council and the EP may suffice to tick that box. Condition (iii) was probably not fulfilled in the initial DMA Proposal but the latest text of the DMA (of May 2022) now has a new Recital 86 that copy-pastes some of the bpost text:
“Compliance with the obligations imposed by this Regulation should be enforceable by means of fines and periodic penalty payments. To that end, appropriate levels of fines and periodic penalty payments should also be laid down for non-compliance with the obligations and breach of the procedural rules subject to appropriate limitation periods, in accordance with the principles of proportionality and ne bis in idem. The Commission and the relevant national authorities should coordinate their enforcement efforts in order to ensure that those principles are respected. In particular, the Commission should take into account any fines and penalties imposed on the same legal person for the same facts through a final decision in proceedings relating to an infringement of other Union or national rules, so as to ensure that the overall fines and penalties imposed correspond to the seriousness of the infringements committed.”
Finally, condition (iv) can only be assessed by the courts ad hoc.
In practice, we are talking here about the scenario in which the Commission brings a non-compliance proceeding under Article 29 DMA and say the Bundeskartellamt is bringing in parallel or consecutively a Section 19a non-compliance case. Obviously, the optimal scenario is that such duplication is avoided in the first place and a choice is made on which tool to use exclusively. But if it happens, then DMA-based proceedings would not be entirely immune from competition law proceedings and vice-versa. “Gatekeepers” could rely on the principle of non bis in idem, albeit with limitations.
Let’s now go to Nordzucker. Again, for the facts of the case and the specific questions that the Court of Justice was called upon to answer, see my July-October 2021 stories. For a number of questions, Nordzucker repeats bpost. Then, there are the questions that are specific to the Nordzucker facts and relate to the application of non bis in idem to a cartel fine imposed by the Austrian competition authority on an undertaking that had already been fined by the Federal Cartel Office in Germany exactly for the same facts (there is disagreement as to whether the German decision had taken into account or not the effects of the infringement in Austria). Here, the Court of Justice followed the approach proposed by AG Bobek.
According to the Court, the factual question that the national court had to clarify when deciding was whether the German decision really considered certain “Austrian” facts to be “one of the constituent elements” of the “German” infringement and whether it found an infringement that thus encompassed the territory of Austria (para. 44). If the referring court finds that the German decision did not find and penalise a cartel infringement on the basis of the cartel’s anticompetitive object or effect in Austrian territory, the Austrian proceedings before it do not relate to the same facts and, therefore, the principle of non bis in idem is not violated. In the converse scenario, we would be dealing with the same facts and this duplication of proceedings and penalties would amount to a limitation of the fundamental right guaranteed in Article 50 of the Charter (paras 47-48).
Then, the Court applies the same test as in bpost and checks first whether that limitation can be saved under Article 52 of the Charter, if it is necessary and genuinely meets objectives of general interest (para. 50). There is no doubt that Article 101 TFEU pursues such an objective (para. 51). According to the Court, “a duplication of criminal proceedings and penalties may be justified where those proceedings and penalties pursue, for the purpose of achieving such an objective, complementary aims relating, as the case may be, to different aspects of the same unlawful conduct at issue” (para. 52). Is this the case here, where we have two national competition authorities applying Article 101 TFEU and their equivalent national competition rules? This is where the Court’s response breaks new ground. Following AG Bobek’s Opinion, the Court resorts to an interesting reasoning based on Article 3 of Regulation 1/2003. Since under Article 3(2), first sentence, of Regulation 1/2003 national competition law cannot prohibit conduct that is allowed under Article 101 TFEU, the two regimes “pursue the same objective of general interest of ensuring that competition in the internal market is not distorted by agreements, decisions of associations of undertakings or anticompetitive concerted practices” (para. 56) and therefore “a duplication of proceedings and penalties, where those proceedings and penalties do not pursue complementary aims relating to different aspects of the same conduct […], cannot in all events be justified under Article 52(1) of the Charter” (para. 57). In other words, the old Walt Wilhelm case law is no longer good law on that point.
The question that immediately comes to mind here is: what about Article 102 TFEU and national competition rules on unilateral conduct? The Court says nothing about that but bearing in mind the reasoning based on Article 3(2) of Regulation 1/2003, I think this will be very much an ad hoc issue. Possibly, if the national rule is a copy-paste of Article 102 TFEU, then the principle of non bis in idem becomes an issue. But if it is quite different (think, for example, of Section 19a of the German Competition Act), then it may not be a problem.
- Paccar Opinion
One more Opinion on the Damages Directive – and again in a preliminary reference from Spain! This time, by AG Szpunar. The question at stake related to the interpretation of Article 5 of the Damages Directive, which includes rules on evidence. Does Article 5 go as far as ordering a defendant to disclose documents that it must create ad hoc for the first time, by compiling or classifying information, knowledge, or data? The case goes back to the 2016 Commission Decision in the tracks cartel case. The plaintiffs here asked the referring court to order the defendants to disclose documents to allow them to compare recommended prices for trucks before, during, and after the cartel period, to calculate production costs, and to distinguish between gross and net prices in order to prepare an expert report. The problem was that such documents had to be created ad hoc.
The Advocate General resorted to a textual, systematic, and teleological interpretation of the Damages Directive. Textual interpretation was of no help because of the existence of conflicting texts. Still, textual interpretation, according to the Opinion, did not preclude the Directive from being interpreted as meaning that it allows national courts to order the disclosure of documents that must be created ex novo (para. 79). The systematic interpretation of the Directive was more helpful. According to the Advocate General, Article 5(3)(b) supported the view that the EU legislator “has taken into account the fact that, in order to comply with an order to disclosure information, it may sometimes be necessary to perform tasks which go beyond the mere communication of objects containing information” (para. 83). Finally, the whole teleology of the Damages Directive was clearly supportive of the extension that the Advocate General favoured: “[A] teleological interpretation of Directive 2014/104, which takes into account its purpose, must lead to the conclusion that it is necessary to apply the competition rules effectively and, to that end, to provide injured parties with effective tools to balance the information asymmetry” (para. 85). And “the exclusion from the outset of the possibility of requesting the disclosure of documents that must be created ex novo by the party to whom the request for information is made would, in some cases, lead to the creation of insurmountable barriers to the private enforcement of EU competition rules. It is therefore more consistent with the spirit of the objective of Directive 2014/104, which is to remedy the information asymmetry, to recognise the possibility of requesting the disclosure of such documents and to circumscribe the way in which that possibility is applied in practice through the examination of requests for the disclosure of evidence, while according a central role to the national courts” (para. 90). Since the whole process is under the strict supervision of national courts, which are required to consider the relevance of the evidence requested and the necessity and proportionality of the measures relating to its disclosure, as well as the legitimate interests and fundamental rights of the various parties involved, the Advocate General saw no risk of abuse (para. 89). Consequently, Article 5(1) of the Damages Directive has to be interpreted as meaning that the disclosure of “relevant evidence” also covers documents which may have to be created ex novo by compiling or classifying information, knowledge or data held by it.
- DB Station Opinion
This is probably an Opinion that the specialist observers have missed. However, the question treated is an important one. The case relates to a private action in Germany brought against a subsidiary of Deutsche Bahn (DB), a railway infrastructure company that maintains 5,400 stations (traffic hubs), by a rail transport company that uses the defendant’s traffic hubs for passenger railway services. The civil action alleged that the charges levied for that purpose were excessive and thus constituted an abuse of a dominant position. The complication here was, however, that the sector is regulated by EU secondary law (Directive 2001/14/EC, later repealed by Directive 2012/34/EU), and the Federal Network Agency, acting as the competent regulatory body, declared the DB price system to be invalid, albeit with effect from a later date than their adoption. That decision is currently under appeal. The referring court entertained doubts as to whether national civil courts are entitled and obliged to review the charges levied based on Article 102 TFEU and national competition law, independently of the monitoring carried out by the regulatory authority. In other words, shouldn’t the Federal Network Agency take precedence?
The German court’s doubts were fuelled by a previous ruling of the Court of Justice, not related to competition law, which had imposed limitations on national courts. In CTL Logistics, the Court held that the German courts’ reliance on the German Civil Code (BGB) to perform a review of the equity of the charges levied by railway infrastructure undertakings was incompatible with the provisions of Directive 2001/14/EC. In essence, the Court thought that this constituted “excessive protection” incompatible with the requirements and objectives of EU sectoral legislation. CTL Logistics was confirmed in another – more recent – ruling, in Koleje Mazowieckie.
In other words, should the existence of EU secondary regulation impose a rule of precedence in favour of the sectoral regulator, thus resulting in limiting private enforcement of EU/national competition law?
AG Ćapeta, maybe unsurprisingly, proposes that the Court should not transpose its CTL Logistics and Koleje Mazowieckie case law to the facts of the case, which is about the application of primary law (Article 102 TFEU) by the national courts. However, instead of simply and only relying on the hierarchy of norms and the direct effect of Article 102 TFEU (which she does in paras 26-37 of her Opinion), the Advocate General goes even further and invites the Court to revisit its CTL Logistics and Koleje Mazowieckie case law altogether by clarifying that it does not mean that the sectoral regulator has an exclusive competence that precludes private actions. For her, EU law provides for safeguards to avoid conflicts of resolution and it should not be necessary to retain a radical rule of supremacy of public over private enforcement. Of course, according to the Advocate General, national courts should be free to suspend proceedings, while waiting for a decision by the sectoral regulator. However, this is a discretion they should have and not an obligation.
It will be interesting to see how the Court of Justice will decide this. I am not sure the Court will follow the Opinion in all respects. I think the Court is likely to stress the hierarchy of norms and the direct effect of Article 102 TFEU and thus distinguish this case from the CTL Logistics and Koleje Mazowieckie cases.
II. General Court
The only judgments worth mentioning are the thirteen rulings in the air cargo cartel appeals. The case has a very long history. The European Commission had adopted in 2010 a Decision imposing a fine of € 790 million against a number of airlines for operating a cartel in the airfreight market. The cartel related to the introduction of fuel and security surcharges, as well as the refusal to pay commission to freight forwarders on those surcharges. In 2015, the General Court annulled the Commission’s Decision because of internal contradictions that were likely to undermine the rights of defence of the companies concerned and prevent the Court from conducting its review. As it happens in such cases, the Commission adopted a fresh Decision in 2017, amending the defective reasoning. Again, as it happens in such cases (remember the private damages actions!), the carriers brought fresh actions before the General Court.
The short conclusion is that some carriers lost, while some other carriers saw a reduction of their fines. Martinair, KLM, Cargolux, Air France-KLM, Air France, Lufthansa, and Singapore Airlines lost. However, Japan Airlines, Air Canada, British Airways, Cathay Pacific, SAS Cargo, and Latam saw their overall fines reduced. For some carriers, the General Court found that they did not participate in a part of the infringement or that the limitation period for the specific conduct at issue had expired. For one carrier, the General Court increased part of the amount of the fines imposed, in order to ensure equal treatment.
III. Commission developments
On 1 March 2022, the Commission published for consultation its draft rules for horizontal agreements. The whole package includes draft Block Exemption Regulations (BERs) for R&D and specialisation agreements and draft Horizontal Guidelines. The new regime would apply as of 1 January 2023. The Commission’s ambition is to adapt the existing rules to account for economic and social developments, in particular the digital transition and the European Green Deal.
One of the most important novelties is the new chapter in the draft Horizontal Guidelines on so-called “sustainability agreements”. There have been long and somewhat heated discussions in Europe about this… In short, there have been two schools of thought: (i) the traditional one, represented by the Commission and authorities such as the Bundeskartellamt, which has been relatively reluctant to accept out-of-market efficiencies and exempt agreements that raise prices without compensating with concrete benefits those that stand to lose; and (ii) the more radical approach, mainly represented by the Dutch ACM (which is probably the agency with the most sustainability-related cases) and the Hellenic Competition Commission, which advocates a departure from the above approach and favours out-of-market efficiencies.
In the end, the draft Guidelines show a lot of openness, but the Commission holds its ground in some areas which amounts to the sancta sanctorum for it.
The draft Guidelines’ chapter on “sustainability agreements” relies on a broad scope of “sustainability”, i.e. it does not include only environmental aims, but is extended also to other social objectives, such as labour and human rights. According to the draft Guidelines, agreements can fall outside the scope of Article 101(1) TFEU, if they only concern internal corporate conduct, relate to the organisation of industry-wide awareness campaigns, or aim at creating a database containing suppliers’ sustainability credentials (provided this does not entail requirements to purchase from, or sell to, specific companies).
According to the draft Guidelines, “agreements that restrict competition cannot escape the prohibition of Article 101(1) for the sole reason that they are necessary for the pursuit of a sustainability objective” (para. 548). That being said, where “an agreement genuinely pursues a sustainability objective may be taken into account in determining whether the restriction in question is a restriction by object or a restriction by effect” (para. 559). Then, for “by effect” restrictions, the draft Guidelines introduce a “soft safe harbour” (para. 572), as long as certain conditions are met, in particular: (i) the procedure for developing the sustainability standard is transparent; (ii) the sustainability standard does not (directly or indirectly) impose any obligations to participate; (iii) the participating undertakings remain free to adopt higher sustainability standards; (iv) there is no exchange of competitively sensitive information; (v) there is effective and non-discriminatory access to the outcome of the standardisation; (vi) there is no significant increase in price or significant reduction in choice of products (that’s a tough one…); and (vii) there is an effective monitoring system in place.
If the sustainability agreement falls under Article 101(1) TFEU, then Article 101(3) TFEU can come to rescue. (We are now entering the tricky territory…) The draft Guidelines take a rather broad view on benefits that can be taken into account. These can be: (i) individual use value benefits (e.g. consuming vegetables grown with the help of organic fertilizers may have better taste and/or be healthier for consumers than vegetables produced with non-organic fertilizers) (para. 590 et seq.), (ii) individual non-use value benefits (e.g. consumers valuing the impact that their sustainable consumption will have on others) (para. 594 et seq.); and – interestingly – (iii) collective benefits (e.g. positive externalities that benefit society as a whole) (para. 601 et seq.). So some degree of out-of-market efficiencies can be accepted. However, the Commission insists on two important caveats: (i) a restriction of competition can only be justified if consumers in the relevant market receive a fair share of the benefits and in the words of the draft Guidelines, “the benefits deriving from the agreement [must] outweigh the harm caused by the same agreement, so that the overall effect on consumers in the relevant market is at least neutral” (para. 588); (ii) “where consumers in the relevant market substantially overlap with, or are part of the beneficiaries outside the relevant market, the collective benefits to the consumers in the relevant market occurring outside that market can be taken into account if they are significant enough to compensate consumers in the relevant market for the harm suffered” (para. 603). This seems like a wise choice to me. Of course, this does not go as far as the Dutch Draft Guidelines, which will now have to be adjusted to the new EU standard (indeed, the President of the ACM has confirmed this).
For the rest, the new rules are less revolutionary but still interesting.
Inter alia, on R&D agreements, there is generally a lot of new text dealing with what we could call “innovation theories of harm” and a new threshold has been added into the R&D BER that is satisfied if there are three competing and comparable R&D efforts that are not party to the agreement (Article 6(3) R&D BER). There are also rules on when undertakings are competing in innovation, when R&D efforts are competing, and when they are comparable. On joint purchasing, there is more guidance on distinguishing a (lawful) joint purchasing arrangement from an (unlawful) buyer cartel. On specialisation agreements, the draft Guidelines now consider horizontal subcontracting agreements generally and mobile infrastructure sharing agreements specifically. On commercialisation agreements, there is a new section on bidding consortia and additional guidance on the main risks of output limitation and on agricultural products. Finally, on information exchange, there is additional guidance on some concepts relevant to self-assessment (such as genuinely public information and data, aggregation of data, age of information, etc.), the examples on “by object” restrictions are expanded to current (instead of only future) prices and there is now guidance on the use of algorithms and data pools.
Citation: Makis Komninos, Competition Stories: March & April 2022, Network Law Review (May 31, 2022)
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