The "European Antitrust Bimonthly Bulletin” breaks down the major antitrust developments in Europe during the past two months into concise and actionable takeaways.

Mixed Signals on Airline Consolidation
On July 3, 2024, the European Commission (EC) announced its conditional approval of the proposed acquisition of joint control over ITA Airways (ITA) by Lufthansa and the Italian Ministry of Economy and Finance (MEF). Under the conditions, Lufthansa and MEF will make available to one or two rival airlines the assets necessary for them to start non-stop flights between Rome or Milan and certain airports in Central Europe, enter into agreements with rivals to improve their competitiveness on certain long-haul transatlantic routes of concern, for instance through interlining agreements or slot swaps, and transfer takeoff and landing slots at the Milan-Linate airport to the remedy takers for the short-haul routes. Lufthansa and MEF may only implement the transaction once the EC has approved suitable remedy-takers for all three remedy types offered.

On August 2, 2024, the EC took note of IAG's decision to call off its proposed acquisition of Air Europa. The EC had opened an in-depth investigation into this transaction on January 24, 2024, and sent a Statement of Objections to the merging parties on April 26, 2024.

Companies contemplating M&A in the aviation industry should know that the EU is increasingly skeptical of airline consolidation and may demand far-reaching commitments that go beyond airport slot divestitures previously generally accepted by regulators.

EC Opens Formal Investigation into Alleged Anticompetitive Agreements Between Glovo and Delivery Hero
On July 23, 2024, the EC announced that it had initiated a formal investigation into alleged anticompetitive agreements between online food delivery services Glovo and Delivery Hero. Delivery Hero held a minority share in Glovo starting from July 2018, and acquired sole control over Glovo in July 2022. The EC is investigating whether Glovo and Delivery Hero may have allocated geographic markets and shared commercially sensitive information (for instance, commercial strategies, prices, capacity, costs, or product characteristics). The EC is additionally investigating whether the companies may have agreed not to poach each other's employees. According to the EC, these practices may have been facilitated by Delivery Hero's minority share in Glovo.

Companies should be aware that exchanging competitively sensitive information poses a risk under EU competition law and that antitrust regulators in Europe are increasingly targeting employee no-poach agreements. Companies should review their compliance policies to ensure they are up to date and effective and appropriately focus on risks arising out of improper information sharing, including among HR professionals.

EU Court Holds That Information Exchanges by Banks Can Be Restrictive by Object
On July 29, 2024, the EU's highest court, the European Court of Justice (ECJ), held in a preliminary ruling that an exchange of information over a period of more than 10 years between banks in Portugal could constitute a restriction of competition by object. The Portuguese Competition Authority had fined 14 banks a total of €225 million (approx. US$244 million) for exchanging commercially sensitive information on credit rates in Portugal between 2002 and 2013. Most of the banks challenged the fine before the Portuguese competition court, which asked the ECJ for a preliminary ruling.

The ECJ, in line with previous case law, held that operators in a normally functioning market must independently determine their policy and remain uncertain as to the future conduct of other participants on that market. An exchange of information that removes this uncertainty constitutes a restriction of competition by object. The Portuguese competition court will reflect the ECJ's preliminary ruling in its decision.

Companies should be aware that sharing of competitively sensitive information carries high risk in the EU and may be pursued as a type of cartel conduct leading to high fines.

EC Accepts Apple's Commitments to Open Up Mobile Payments Technology on iPhone
On July 11, 2024, the EC announced that it had accepted commitments from Apple and closed an investigation into mobile payments technology on the iPhone. The EC had sent Apple a Statement of Objections in May 2022, challenging Apple's practice of restricting third-party mobile wallets from accessing the necessary Near-Field Communication (NFC) technology on iPhones. The EC market-tested Apple's proposed commitments in January and February 2024 and secured additional commitments and clarifications.

Apple's numerous commitments include allowing third-party mobile wallet providers to access the iPhone's NFC technology free of charge without licensing Apple Pay or Apple Wallet, instead using Host Card Emulation (HCE) to safely store payments information. Developers will not be restricted from combining the HCE function with other use cases and will not need a license as a Payments Services Provider. Users will be able to set up payment default choices within a few clicks and use identification mechanisms such as Face ID and Touch ID. The commitments will remain in force for 10 years and be monitored by a trustee.

Companies should consider whether they may benefit from Apple's commitments or may have been affected by its conduct. We can assist in ensuring that affected clients fully benefit from Apple's change of policy.

EC Accepts Vifor's Commitments in Drug Disparagement Case
On July 22, 2024, the EC announced that it had accepted commitments made by pharma company Vifor and closed the investigation into Vifor's alleged disparagement of Pharmacosmos' iron medicine Monofer, the closest competitor to Vifor's intravenous iron medicine Ferinject. In a Preliminary Assessment adopted on April 8, 2024, the EC preliminarily found Vifor to be dominant in several national markets for the provision of intravenous iron medicine and to have abused its dominance by disparaging Monofer. On April 19, 2024, Vifor offered conduct commitments in a bid to end the EC's investigation into its suspected abuse of dominance.

To settle the investigation, Vifor committed to publish factual clarifications to healthcare professionals in the national markets impacted by its alleged conduct, including in medical journals and on its website, to allow Monofer's supplier Pharmacosmos to use these materials when contacting healthcare professionals, and to limit its communications about Monofer's safety. Vifor will implement safeguards to ensure compliance, including reviews of all external promotional and medical communications, as well as annual internal training of staff and a system of certification of compliance. Companies should be aware that the EC is actively focusing on competition in the healthcare sector and is open to investigating based on innovative theories of harm, such as the disparagement alleged in this case.

Companies should consider whether they are facing any barriers because of conduct by dominant or incumbent firms in Europe. We can assist in identifying possible opportunities and formulating the appropriate strategy for obtaining relief. Equally, we can assist with defending against such claims.

Spain Initiates Formal Investigation into Apple for Imposing Unfair Conditions on App Developers
On July 24, 2024, Spain's competition authority CNMC announced that it had opened an investigation against Apple for possibly engaging in anticompetitive practices by imposing unfair commercial terms on third-party developers who use the Apple App Store to distribute applications to users of Apple products. The CNMC must take a decision within 24 months of initiating a case.

Companies should consider whether they may have been affected by Apple's conduct. We can assist in ensuring their rights and interests are adequately pursued. We can assist in identifying possible opportunities and formulating the appropriate strategy for obtaining relief.

Spain Fines Booking €413 Million
On July 30, 2024, Spain's competition authority CNMC announced that it had fined online travel agency (OTA) Booking €413.24 million (approx. US$447.7 million) for two alleged abuses of dominance. First, Booking allegedly exploited its dominance over hotels in Spain by i) preventing them from offering their rooms on their own sites below the price offered on Booking, ii) stating that only the English version of Booking's general terms is legally binding with Dutch law governing the general terms, and iii) providing insufficient information on the price and cost-effectiveness of programs allowing participating hotels to improve their ranking in Booking's ranking of results in exchange for higher commissions or discounts for Booking.

Second, Booking allegedly abused its dominance by excluding rival OTAs from the Spanish market. Booking used the total number of bookings of a hotel through Booking.com as a criterion in Booking's default ranking results, encouraging hotels to concentrate their online bookings at Booking. Additionally, Booking used a performance requirement based primarily on each hotel's profitability for Booking as a criterion for special benefits programs, encouraging hotels to consolidate their sales on the platform.

Companies should consider whether they are facing any barriers because of conduct by dominant or incumbent firms in Europe. We can assist in identifying possible opportunities and formulating the appropriate strategy for obtaining relief. Equally, we can assist with defending against such claims.

UK's Competition and Markets Authority (CMA) Closes Apple, Google App Store Investigations, Awaits Roll Out of New Digital Markets Competition Regime
On August 21, 2024, the CMA announced that it had closed its investigations under the Competition Act into Apple's App Store and Google's Play Store. The CMA explained that if Apple and/or Google were designated as having ‘strategic market status' in connection with any digital activities in the mobile sector, then the CMA would be able to use its new powers to consider the issues raised in these cases more holistically than it otherwise could. In May 2024, the UK passed into law the Digital Markets, Competition and Consumers Act (DMCC), which created a new competition regime for digital markets, and made significant changes to the UK's existing mergers, antitrust investigations, and consumer law regimes.

In digital markets, the CMA will be able to designate an undertaking as having "Strategic Market Status." The undertaking must have both "substantial and entrenched market power" and "a position of strategic significance," and either annual turnover of more than £25 billion (approx. US$31.8 billion) worldwide or more than £1 billion (approx. US$1.3 billion) in the UK. Once designated, the CMA may impose tailored conduct requirements on and make "pro-competitive interventions" in relation to an undertaking, failure to comply with which may ultimately result in financial penalties of up to 10 percent of global turnover and up to five percent of daily turnover.

Companies should know that being designated as having Strategic Market Status under the DMCC will lead to the imposition of tailored rules. We have unique insights and can assist with DMCC compliance or assessing third-party intervention opportunities.

Greece Sends Statement of Objections to Novartis over Eye Medicines
On August 29, 2024, Greece's Hellenic Competition Commission (HCC) announced that it had sent a statement of objections to pharmaceutical company Novartis AG and its Greek subsidiary Novartis Hellas SA. The HCC alleged that from 2009 to 2017, Novartis held a dominant position in the relevant market for the treatment of macular diseases in Greece. During that period, Novartis allegedly implemented a strategy of excluding competing medicines through direct or indirect payments and providing various benefits to doctors and clinics, as well as through disparaging competing medicines.

The HCC expects to issue a final decision during December 2024.

Companies should know that European competition agencies are actively focusing on competition in the healthcare sector and are open to investigating based on innovative theories of harm, such as the disparagement alleged in this case. Companies should consider whether they are facing any barriers because of conduct by dominant or incumbent firms in Europe. We can assist in identifying possible opportunities and formulating the appropriate strategy for obtaining relief. Equally, we can assist with defending against such claims.

EC Preliminarily Finds That Meta's "Pay or Consent" Model Infringes Against the DMA
On July 1, 2024, the EC announced that it had preliminarily found that Meta's "pay or consent" advertising model infringes the DMA. Under the DMA, gatekeepers must seek users' consent for combining their personal data between designated core platform services and other services, and if a user refuses such consent, they should have access to a less personalized but equivalent alternative. The EC considers that Meta's model does not allow users to opt for a service that uses less of their personal data but is otherwise equivalent to the "personalized ads" based service and does not allow users to exercise their right to freely consent to the combination of their personal data.

The EC should conclude its investigation within 12 months from the opening of proceedings on March 25, 2024. If it establishes that Meta failed to comply with the DMA, the EC may impose fines of up to 10 percent of its total worldwide turnover. For repeated infringements the fines may be increased up to 20 percent of the gatekeeper's total worldwide turnover. In cases of systematic infringement, the EC may impose additional remedies, including the break-up of the gatekeeper.

On July 22, 2024, the Consumer Protection Cooperation Network (CPC) sent a letter to Meta identifying several practices in the context of Meta's roll-out of its "pay or consent" advertising model that could potentially be considered unfair and contrary to the Unfair Commercial Practices Directive and the Unfair Contract Terms Directive. The CPC includes the consumer protection authorities of the Member States. Meta has until September 1, 2024, to reply to the letter and propose solutions.

Our European team has extensive experience with the DMA and a unique insight into the EC's enforcement practice. We can assist with DMA compliance or assessing third-party intervention opportunities.

EU Court Affirms Designation of ByteDance As a Gatekeeper Under the DMA
On July 17, 2024, the EU's court of first instance, the General Court (GC), affirmed the EC's decision designating ByteDance as a Gatekeeper for its social networking platform TikTok. The GC rejected ByteDance's arguments that it was not an important gateway allowing business users to reach their end users and held that Bytedance enjoyed an entrenched and durable position.

The GC was not swayed by the argument that ByteDance was not an important gateway because its market value hinged on large turnovers in China compared to low EU turnovers. Second, the GC relied on TikTok's rapid user growth to hold that it was an important gateway to reach end users, rejecting ByteDance's argument that it did not have an ecosystem and did not benefit from network or lock-in effects. Finally, the GC rejected ByteDance's argument that it was a challenger to more established companies, stating that ByteDance had consolidated its position on the market despite competitors launching new services. The GC's decision may still be appealed to the ECJ.

Our European team has extensive experience with the DMA and a unique insight into the EC's enforcement practice. We can assist with DMA compliance or assessing third-party intervention opportunities.

Treatment of AI Partnerships in Europe
On July 16, 2024, the UK's CMA announced a Phase I merger investigation into Microsoft's hiring of former employees and related arrangements with Inflection AI. The CMA has until September 11, 2024, to decide whether to refer this deal for an in-depth Phase II review. On July 30, 2024, the CMA launched an additional merger investigation, this time into Alphabet's partnership with Anthropic, and asked any interested party to provide comments on the deal by August 13, 2024. On August 8, 2024, the CMA announced a Phase I merger investigation into Amazon's partnership with Anthropic. The CMA has until October 4, 2024, to decide whether to refer this deal for an in-depth Phase II review.

On July 17, 2024, it was publicly reported that the EC asked Generative AI industry participants for input on the agreement of Google and Samsung to pre-install Google's Gemini Nano Generative AI chatbot on the Samsung Galaxy S24 Series of high-end smartphones. The EC is assessing whether this default inclusion may restrict competition with other chatbots for Samsung smartphones.

Companies in the AI sector should consider whether they wish to proactively engage with competition authorities at this stage when the authorities are forming their understanding of the sector. We can assist in identifying possible opportunities and formulating the appropriate strategy for engagement. Companies should also be aware that minority stakes may be reviewable in certain jurisdictions and any commercial partnerships need to be carefully structured to ensure merger control rules are not triggered where possible.

Joint Statement by U.S., UK, and EC Antitrust Authorities on Competition in Generative AI Foundation Models and AI Products
On July 23, 2024, the U.S. Department of Justice as well as the Federal Trade Commission, the EC, and the CMA released a joint statement highlighting competition risks in Generative AI and other markets. They identified three competition risks for AI: the concentrated control of key inputs, the entrenching or extension of existing market power, and arrangements involving key players that could coopt competitive threats. The statement also notes that there are other competitive and consumer risks involving AI, including algorithms that enable competitors to fix prices or engage in unfair price discrimination and the risk that firms will "unfairly use consumer data to train their models."

To combat the aforementioned competition risks, the competition authorities set forth several common principles to enable competition: fair dealing, interoperability, and choice. For fair dealing, the statement warns that firms with market power who engage in exclusionary tactics can discourage investment and innovation by other parties. Under interoperability, the competition authorities state that competition in AI is likely to increase if AI products, services, and inputs are interoperable. Finally, concerning choice, the statement notes that scrutinizing how companies use lock-in mechanics as well as investments and partnerships between incumbents and newcomers can foster a competitive process that provides choices among business models and products.

For more information, see Wilson Sonsini's Client Alert.

Companies should know that competition authorities are extremely interested in investments in and partnerships with companies developing AI models. Companies should carefully consider how they communicate about partnerships and closely scrutinize statements (if any) relating to AI partnerships' impacts on competition. From a merger control perspective, European and UK agencies will carefully assess whether there is a change of control or material influence at play, with the CMA able to take jurisdiction over minority equity stakes in certain circumstances.

Von Der Leyen Confirmed As EC President: Her Recent Antitrust and AI Implications Statements
On July 18, 2024, the European Parliament elected Ursula von der Leyen to a second five-year term as President of the EC. In her Political Guidelines for her second term, she promised "a new approach to competition policy, better geared to our common goals and more supportive of companies scaling up in global markets—while always ensuring a level playing field. This should be reflected in the way we assess mergers so that innovation and resilience are fully taken into account."

President von der Leyen additionally promised to ramp up enforcement of the DMA and to make Europe a global leader in AI innovation. She proposed to provide supercomputing capacity to AI start-ups and industry. Finally, President von der Leyen previewed the development of an "Apply AI Strategy to boost new industrial uses of AI and to improve the delivery of a variety of public services, such as healthcare."

Companies should know that President von der Leyen did not clearly commit to either stricter or more lenient competition enforcement. More clarity is expected to arise following the appointment of the next Commissioner for Competition, who will have significant influence on enforcement priorities.

EC Provides Guidance on Key Concepts of Foreign Subsidy Regulation (FSR)
On July 26, 2024, the EC published a staff working document providing insight in how it interprets key concepts of the FSR. The FSR gives the EC new powers to police subsidies from non-EU countries, complementing the EC's powers to control state aid from EU member states. This includes i) M&A transactions involving companies active in the EU that meet certain turnover and foreign financial contribution (FFC) thresholds; and ii) bids for large tenders in the EU by companies that have received FFC above a specified threshold.

For instance, the staff working document clarifies that the notion of a "distortion in the internal market" under the FSR and the notion of "significant impediment to effective competition" as applied in the assessment of concentrations under the EU Merger Regulation are different. The staff working document lists several ways in which foreign subsidies may distort the internal market in the context of a merger, including giving a direct grant, an unlimited state guarantee, or a loan on below market terms to the acquirer. In addition, subsidies granted to the target or even to the seller, may also be relevant.

Clients should be aware that the FSR adds yet another potential regulatory filing to the approval checklist for M&A transactions and creates a new regulatory hurdle for companies bidding for large public contracts in the EU. For the moment, investigations have focused on cases involving Chinese entities.

For more information about the FSR, see the Wilson Sonsini Fact Sheet, EU Foreign Subsidies Regulation.

EC Consults on Draft Guidelines on Exclusionary Abuses
On August 1, 2024, the EC published draft Guidelines on Exclusionary Abuses (the draft Guidelines) for public consultation. The draft Guidelines set the EC's understanding of Article 102 TFEU as it relates to exclusionary abuses, its interpretation of the decisions of EU courts, and give a hint of the EC's enforcement priorities in this area. This development follows the EC updating its 2008 Guidance on Enforcement Priorities for Exclusionary Abuses in 2023, as well as publishing a staff policy paper and announcing it would draft the new guidelines which are currently being consulted on.

The most significant changes in the draft Guidelines concern what must be proven to show that a behavior is capable of producing exclusionary effects. The EC sets a generally low bar, having to show more than just hypothetical effects, but not appreciable effects or even actual exclusion. The EC defines a special category of conduct, which if proven can be presumed capable of producing exclusionary effects. The dominant company can then submit evidence to rebut the presumption and the EC is required to engage with such evidence. This category includes exclusive dealing, exclusivity rebates, predatory pricing, margin squeezes, and certain forms of tying.

Interested parties may submit comments on the draft Guidelines until October 31, 2024. The EC intends to finalize the draft Guidelines in the course of 2025 and then withdraw its 2008 Guidance on Enforcement Priorities for Exclusionary Abuses as amended.

Companies should know that the EC is tightening its approach to practices it views as exclusionary abuses of dominance. We have deep experience engaging with the EC in abuse investigations and can assist clients in identifying both risks and opportunities under the EC's new approach.