The European Antitrust Agenda: Return of EC Cartel Fines; Defense Sector Raided; Veolia Proposes Suez Merger Concessions; Cargotec, Konecranes Get More Time for EC Remedies While Also Facing UK Concerns; Italy Halts Chinese Takeover; Facebook Offers Kustomer Undertakings

Published on Nov 29, 2021

Cartel fines. Companies in breach of EU cartel rules have racked up fines totalling almost 1.4 billion euros ($1.58 billion) so far in 2021, according to updated statistics released last week by the European Commission.

That compares to fines amounting to less than 300 million euros ($338 million) in 2020, signaling a bounce back to the almost 1.5 billion euros ($1.69 billion) collected in 2019, the last full year prior to Covid-19-related economic disruptions.

Travel and social-distancing restrictions put in place at the pandemic’s outset had forced European competition agencies to suspend planned inspections; but as restrictions eased, enforcers have conducted so-called “dawn raids” in the latter half of this year.

Earlier in the pandemic, authorities had also taken a more lenient view toward certain types of coordination between companies: As early as March 2020, the European Competition Network (ECN)—through which the EC and EU national watchdogs cooperate—issued a notice that said the “extraordinary situation [brought about by Covid-19] may trigger the need for companies to cooperate in order to ensure the supply and fair distribution of scarce products to all consumers.” The ECN said it would “not actively intervene against necessary and temporary measures put in place in order to avoid a shortage of supply.”

The return to normality has seen the EC this year hand out its seventh-biggest cartel fine, totaling 875 million euros ($987 million), against participants in a car emissions cartel. In July, the commission said Daimler, BMW and Volkswagen (VW) group had broken antitrust rules by colluding on technical development in the area of nitrogen oxide cleaning. Daimler escaped financial punishment as it blew the whistle on the existence of the cartel.

VW’s share of the fine was a little over 500 million euros ($564 million), the eighth-largest cartel fine issued against an individual company, commission statistics show.

The agency has adopted eight cartel decisions so far this year, compared with three last year and five in 2019. The manufacturing industry, excluding car parts, accounts for the biggest portion of those fines—38%—since 2010. The finance industry comes in at second place, with a near 20% share, and the Information and Communications Technology (ICT) industry rounds out the top three with 14%.

The EC is showing its reinvigorated cartel enforcement in other ways. The commission in June revealed it had conducted its first dawn raid, or unannounced inspection, since March 2020. That involved the authority visiting the German premises of a company in the clothing industry that it didn’t name.

Following the raid, the law firm Herbert Smith Freehills said in a legal briefing note that “companies should take note that a step-change in enforcement activity is very likely, with a wave of new cartel investigations set to take place across Europe in the months to come.”

The EC latest statistics appear to lend weight to that prediction.

Speaking in a personal capacity at Informa Connect’s Advanced EU Competition Law in Brussels last week, Annemarie Ter Heegde, a policy officer at the Directorate-General for Competition said that there were “definitely more [raids] to come” as part of the renewed enforcement effort.

EC defense raid. The commission last Tuesday carried out an unannounced inspection at the premises of a defense industry company. The EC said it’s worried the company, which it didn’t name, may have violated bloc antitrust rules that prohibit restrictive business practices. Commission officials were accompanied by their counterparts from the national competition authority in the unnamed country where the inspection took place.

Making green and competition policies compatible. Rival companies that join forces to come up with greener products and practices need assurances from EU cartel investigators that they would consider how these collaborations benefit society rather than their impact on the “immediate consumer,” said Dirk Middelschulte, Unilever’s global general counsel for competition.

Middelschulte told participants of the Informa’s Brussels conference last week that the EC should clarify this point in its ongoing revision of the EU’s guidelines on horizontal cooperation.

Since last year, the EC has been exploring how competition law and sustainability policies can complement each other. The enforcer plans to adopt by the end of 2022 a revised version of its Horizontal Block Exemption Regulations and related guidelines on the application of competition rules to types of “green” cooperation agreements, such as information exchange, research and development, joint production, and joint purchasing.

In a speech last month, EC competition chief Margrethe Vestager said that “cooperation can help industry to produce better, greener products,” acknowledging that companies need more clarity on how their agreements would be assessed.

Middelschulte said that the EC does accept that environmental benefits such as carbon emissions reductions come into play in the assessments.

But Middelschulte said that the EC hadn’t yet “fully committed to an answer” in relation to whether cartel investigators should “look at the environmental benefits that materialize vis-a-vis other people, citizens,” and not just “the immediate consumer of the product.”

To illustrate his point, he gave the example of airlines agreeing to introduce less-polluting fuels such as methanol, which could lead to significant price increases for business class passengers. Under current guidance, the fuel change would probably qualify as a restrictive practice of a cartel, he said.

Ultimately, an economic analysis might show that the emissions reductions benefits for plane passengers might not be significant enough and justify the cost increase, Middelschulte said.

“If you, however, take into account the emissions reductions that materialize across the planet for everybody else . . . then you would come to a different result: [it would mean] a billion people on the planet [are the] beneficiaries,” he said.

During the same conference, Olivier Guersent, who leads the EC’s Director-General for Competition, said that the EC considers “it could be useful to have an additional chapter in the revised horizontal guidelines setting out how the commission would analyze agreements that pursue sustainability objectives.”

He said the commission planned to publish a revised draft of the guidelines for public comment in the first few months of next year.

Veolia makes Suez concessions. As expected, Veolia last week submitted remedies to address commission misgivings about the company’s planned takeover of waste and water management rival Suez. The commission extended its phase I review deadline to December 14 as a result of the offer.

In addition to the pre-agreed sale of most of Suez’s French Water and Waste operations, Veolia’s remedy offer is said to include both mobile and industrial water assets, with the EC testing whether a non-industrial buyer would be a suitable buyer. Some of the assets—in particular for mobile water—are in the UK.

Cargotec, Konecranes get more time for EC remedy as CMA provisional findings published. The EC extended by 20 working days its in-depth probe of the planned merger between rival container and cargo handling equipment suppliers Cargotec and Konecranes, pushing the decision deadline to February 10 from January 13.

The move gives the companies more time to devise and offer remedies to the Brussels-based watchdog. Without the extension, the parties faced a midnight Tuesday deadline to offer concessions to the EC. The commission has sent the Finnish companies a Statement of Objections, strongly indicating they will have to cough up remedies to get a green light. A remedy offer would automatically extend the review by 15 working days.

But if Cargotec and Konecranes are to successfully complete the deal, they will have to overcome complications beyond Brussels. DOJ, the UK’s Competition and Markets Authority (CMA), Australia’s Competition and Consumer Commission (ACCC) and New Zealand’s Commerce Commission are all investigating the transaction.

Both Antipodean watchdogs have expressed formal concerns about the merger, with responses to the New Zealand authority’s Statement of Issues due by Thursday. Submissions relating to the ACCC’s Statement of Issues were due November 19.

In the UK, CMA has provisionally found that the transaction raises competition concerns in the supply of a range of container-handling equipment. The CMA’s inquiry group dismissed the companies’ argument that increased competition from China would discipline the merged entity. The CMA is seeking feedback on its provisional findings by December 17, as well as a range of remedy options by December 10. The agency’s options include prohibition, or acceptance of a partial divestiture—which could consist of Cargotec’s Kalmar division or Konecranes’ Port Solutions division—and a behavioral remedy, though the CMA notes the latter option “does not appear to be appropriate.”

On November 26 the CMA extended its investigation by eight weeks, giving a new April 1 review deadline.

Facebook makes Kustomer concessions. Facebook parent Meta Platforms has sought to address with remedies EC concerns that the company’s planned purchase of Kustomer, which specializes in customer relationship management software, is anticompetitive.

Meta made the offer on November 24 but hasn’t disclosed details of the concessions. The commission responded by extending its phase II decision deadline by 15 working days to January 28.

Merger deals inked by the GAFA (Google, Apple, Facebook and Amazon) have started drawing more regulatory scrutiny in Brussels. Apple’s purchase of music recognition service Shazam in 2018 drew a phase II review but was ultimately approved unconditionally. Likewise, Google’s takeover of advertising technology company DoubleClick in 2008 was cleared unconditionally by the EC following an in-depth examination.

But the EC appeared to change its views of such acquisitions late last year when Google only achieved approval for its purchase of Fitbit following an in-depth EC probe that resulted in the company making formal concessions, including keeping certain Fitbit data separate from other Google data that’s used for advertising.

Unlike Meta, Google managed to avoid a SO. With its remedy offer, Meta is aiming to avoid the ignominy of being the first of the GAFA to have a deal blocked in Brussels.

On the other side of the channel, CMA is preparing to rule on Meta’s completed acquisition of Giphy. Absent an extension, the decision will come this week since the CMA’s statutory deadline is Wednesday, December 1. The Financial Times today reported that the CMA will require Meta to unwind the transaction.

Technical foam merger to undergo in-depth review. Greiner’s unsolicited attempt to buy Recticel, a rival producer and supplier of technical foams, has drawn a phase II investigation from the EC. The probe, launched last Wednesday, will determine whether a deal would result in reduced choice and higher prices for technical foam rolls; noise-, vibration- and harshness-reducing foams; and filter foams in a number of European markets, the commission said.

Technical foams are used by producers of automotive parts, including car seats and engine compartment insulation. They’re also used in the construction, household and clothing industries.

The EC is concerned the merged entity would have high market shares in already concentrated markets, particularly in central European countries such as Austria, Germany, Poland and the Czech Republic.

Greiner had said on November 15 it expected the EC to start a phase II review as it shunned the opportunity to submit phase I remedies. The company said it didn’t think an “economically reasonable remedy package would achieve Phase I clearance.”

Competition concerns, though, are just part of the story. Recticel’s board is opposed to Greiner’s advances. Greiner announced its intention to make an unsolicited offer in May for 13.50 euros

($15.22) per share in cash. Last month, Recticel unveiled an agreement to sell its Engineered Foams business to Carpenter, leading Greiner to question the strategic rationale of the move.

With the initiation of a phase II merger probe, Greiner’s offer is set to lapse under Belgian stock exchange rules unless the company waives the phase I regulatory approval condition. Greiner on November 15 said it would “review its position regarding the conditions precedent at the latest by the publication of the results of the Initial Acceptance Period, which is expected to be 21 December.”

The EC’s phase II review deadline is April 8, 2022.

EC to decide on Sky, ViacomCBS JV. By Wednesday, the commission will conclude its phase I merger investigation into a joint venture plan between Comcast-owned Sky and ViacomCBS. Among the businesses operated by the JV is a subscription video on-demand streaming service in 22 European countries, including Bulgaria, Croatia, the Czech Republic, Denmark, Finland, Hungary, the Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden. The review is proceeding under the “normal” procedure, whereby the authority conducts a full and comprehensive market investigation.

IAG’s attempt to buy Air Europa gets more complex. CMA has launched a merger review of International Airlines Group’s (IAG) planned takeover of Air Europa, the authority announced last week. The belated UK probe is the latest hurdle in an already protracted deal process—IAG and Air Europa parent Globalia inked the transaction more than two years ago. CMA’s phase I deadline is January 19.

Responding to the commencement of the UK enforcer’s review, an IAG spokesperson said the company “will collaborate with the CMA,” adding that “the London-Madrid route is highly competitive and is already part of the European Commission process.”

The EC started its review of the deal in May, with the watchdog’s phase II investigation set to conclude by January 4. Realistically, the commission’s competition directorate will have to decide on the outcome this week or next because of the upcoming holiday and a number of administrative steps that still need to be completed. IAG on October 27 offered remedies to the commission.

Guidance from IAG and subsidiary Iberia has gotten more gloomy of late: Last week Iberia Chief Customer Officer Maria Jesus Lopez was reported to have said, “We are now more pessimistic than optimistic about the Air Europa merger.”

Google’s Privacy Sandbox. Google has agreed to a wider set of commitments that entail deeper oversight by the CMA of its proposed Privacy Sandbox, the authority said on Friday. The Sandbox project aims to remove third-party cookies and other functionalities from Google’s Chrome browser. The search giant has offered commitments in the areas of monitoring and reporting, testing and market consultation, and greater transparency on its use of data. The CMA said its initial view is that Google’s revised offer addresses its competition concerns. The enforcer will accept comments on the new commitments until December 17.

EC and CMA keep in contact post Brexit. A top EC official said that the commission is in regular contact with the CMA post Brexit to ensure consistent enforcement of antitrust rules. DG Comp’s Guersent told attendees of Informa’s Advanced EU Competition Law conference in Brussels last week that he had a monthly call scheduled that day with CMA chief Andrea Coscelli to discuss cases of interest to both parties. Guersent said the EC and the CMA have yet to sign a formal cooperation agreement, but in the meantime the dialogue continues informally to avoid unnecessarily burdening businesses.

“One of the big problems when authorities are not cooperating is that you may impose different remedies to the same problem and make it virtually impossible for the firms to complete the deal in mergers,” Guersent said. He added that the EC has “exactly the same” working relationship with its U.S. counterparts.

Vestager’s Weekly Calendar

Monday. Participates in the Future Tech Forum in London

Tuesday. Gives keynote speech at the Digital Tech Summit in Denmark

Tuesday. Virtual meeting with Move EU, which represents ride-sharing companies such as Uber

Wednesday. Gives keynote speech at the conference on “AI and the Future of Europe” in Brussels, organized by the European Parliament’s Renew Europe group

Thursday. Meets in Brussels with Estonian President Alar Karis

Thursday. Meets in Brussels with Claude Turmes, Luxembourg’s minister for energy and spatial planning

Thursday. Meets in Brussels with the members of the European Affairs committees of the French Assemblée Nationale and Sénat

The Week Ahead And Beyond

Monday, Tuesday. CMA co-hosts with the EU the Future Tech Forum with the heads of the G7 antitrust authorities—Canada, France, Germany, Italy, Japan, the UK and the U.S. Those gathered will discuss greater cooperation on questions related to competition in digital markets. The heads of the competition authorities in Australia, India, South Africa and South Korea will also participate. Topics will include app stores, online marketplaces, digital advertising, mobile ecosystems, cloud computing and algorithms. The G7 enforcers today plan jointly publish a document outlining their individual work in the sector.

Tuesday, 9:30 a.m. EST (3:30 p.m. CET). “AI and the Future of Europe, Brussels,” a conference sponsored by the European Parliament’s Renew Europe group. Speakers include EC competition chief Vestager.

Tuesday, Wednesday. Digital Tech Summit, Copenhagen. Speakers include Vestager.

December 7. Launch of EU-US Technology Competition Policy Dialogue between Vestager and FTC Chair Lina Khan and DOJ antitrust chief Jonathan Kanter. ” Other participants include DG Comp’s Guersent and Tim Wu, a senior White House adviser on technology and competition.

December 9-10. The Academy of European Law’s Annual Conference on EU Competition Law 2021, Trier, Germany, in-person and online. Speakers include Maria Jaspers, director of DG Comp’s cartels division; Martijn Snoep, chairman of the Dutch competition authority; and Natalie Harsdorf, deputy director general and managing director of Austria’s competition enforcer.

December 16. Charles River Associates Brussels, “Competition & Regulation in Disrupted Times” conference, in-person and online. Speakers include Vestager, the FTC’s Khan and other top global antitrust/competition officials.

Recent Developments

EU a step closer to issuing new restrictions on Big Tech. Apple, Google and other large online platforms should face new rules for a level playing field in the digital sector, EU governments said last week as they adopted a common position on the draft Digital Markets Act (DMA). Under the agreement, the EC will enforce obligations for “gatekeepers” between businesses and consumers, but EU states can empower their national competition authorities to start investigations into possible infringements and communicate their findings to the commission.

Before the agreement was reached, the European Parliament’s lead committee on the DMA, the Committee Internal Market and Consumer Protection approved last week an amended version of the bill ahead of a full plenary vote next month. The committee increased the thresholds governing whether an online platform will be covered by the rules, but it also raised the maximum fines for an infringement to up to 20% of a company’s annual global turnover.

Amazon, Apple fines. Italy’s antitrust enforcer fined Amazon and Apple over 200 million euros ($224 million) for alleged reseller collusion. The tech giants had put in place an agreement in 2018 that prohibited legitimate resellers “genuine” Apple and Beat products from using the marketplace, the Italian Competition Authority said in a statement on November 23. Amazon was fined 68.7 million euros, while Apple received a 134.5 million euros penalty.

Italy thwarts Chinese semiconductor industry deal. Italian Prime Minister Mario Draghi blocked Zhejiang Jingsheng Mechanical’s plan to set up a joint venture with U.S. semiconductor manufacturing equipment supplier Applied Materials, Reuters reported last week. The deal would have seen the Chinese company buy Applied Materials’ screen-printing equipment business in Italy. The prohibition is the third bid halted by Draghi since February, when the current Italian government took over.