About the Bimonthly Bulletin

The "European Antitrust Bimonthly Bulletin" breaks down the major antitrust developments in Europe during the past two months into concise and actionable takeaways. For any questions or suggestions, please contact Jindrich Kloub, Deirdre Carroll, or any other attorney in the European Antitrust team listed at the end of the Bulletin.

European Commission (EC) Sends Statement of Objections over Alleged Pharma Cartel
On June 13, 2024, the EC sent a Statement of Objections to Alchem International Pvt. Ltd. and its subsidiary, Alchem International (H.K.) Limited (Alchem). The EC alleges that Alchem may have participated in a cartel involving the setting of minimum prices to customers (distributors and generics manufacturers) and allocation of quotas for the substance N-Butylbromide Scopolamine/Hyoscine (SNBB), along with the exchange of commercially sensitive information. SNBB is used in the production of abdominal antispasmodic drug Buscopan and its generic versions.

On October 19, 2023, the EC had fined five pharmaceutical companies for participating in the same alleged cartel. In a hybrid settlement, the EC imposed fines totaling €13.4 million (US$14.3 million) on Alkaloids of Australia, Alkaloids Corporation, Boehringer Ingelheim, Linnea, and Transo-Pharm. The companies received a 10 percent reduction in fines for settling. C2 PHARMA received no fine because it had revealed the cartel to the EC under the EC's leniency program. Alchem chose not to participate in the settlement. The overall cartel lasted from November 2005 to September 2019, while some companies took part for shorter periods. The EC cooperated with the Australian and Swiss authorities in this investigation. The Swiss authority confirmed that it has an ongoing investigation involving the same companies.

Companies, in particular those in the pharma sector, are advised to review their compliance policies to ensure they are up to date and effective. The EC highlighted the pharma sector's importance, and it is not uncommon that a first investigation in a sector leads to others in the same sector. Companies should also consider whether they may have been affected by the cartel sanctioned by the EC and may be able to claim damages.

EC Conducts Dawn Raid on Consultancy over Tire Cartel
On June 18, 2024, the EC announced that it had conducted further unannounced inspections in its ongoing investigation in the replacement tire sector, this time at the premises of a consultancy. The EC suspects that the consultancy, which worked for a trade association of the tire manufacturing industry, may have contributed to an alleged cartel between tire manufacturers by facilitating or instigating the suspected price coordination among the manufacturers, which allegedly also used public communications channels to collude.

The first inspections in this investigation took place on January 30, 2024, with the EC carrying out unannounced inspections at the premises of several companies supplying new replacement tires for passenger cars, vans, trucks, and buses in the European Economic Area (EEA). Several tiremakers, including Bridgestone, Continental, Goodyear, Michelin, Nokian, and Pirelli, confirmed they were targeted by the dawn raids. On April 8, 2024, Michelin filed a lawsuit at the General Court of the EU challenging the dawn raid on it.

Companies should know that information sharing and participation in industry associations are a focus of EC enforcement.

EC Fines Company for Deleting Messages During Inspection
On June 24, 2024, the EC announced that it had fined International Flavors & Fragrances Inc. and International Flavors & Fragrances IFF France SAS (together, IFF) €15.9 million (approx. US$17.2 million) for obstructing an EC inspection in 2023. The EC found that during the inspection on March 7, 2023, a senior employee of IFF intentionally deleted WhatsApp messages exchanged with a competitor containing business-related information, after he had been informed about the inspection. The EC detected the deletions using forensic software and restored the messages.

EU law provides that companies that intentionally or negligently produce incomplete business records during an inspection may be fined up to 1 percent of their total turnover in the preceding business year. IFF immediately admitted the facts, helped restore the messages, and engaged in a cooperation procedure with the EC, gaining a 50 percent reduction of the fine.

Companies should ensure that they have appropriate guidance/training for employees on how to conduct themselves in the case of an inspection by a competition authority.

Poland Investigates Digital Distribution of Video Games
On May 13, 2024, the Polish Competition Agency (UOKiK) announced that it had initiated a preliminary investigation into possible anticompetitive practices in the digital distribution of video games. UOKiK conducted unannounced inspections at a Sony group company, as well as at the offices of two Polish video game developers and publishers.

UOKiK is investigating whether providers of digital distribution platforms for video games could have engaged in prohibited agreements or in an abuse of a dominant position. Such conduct could consist of applying restrictions on the sale of games and ancillary content on competing platforms or online stores, interfering with the pricing and discount policies of game developers and publishers, or restricting market access to competing platforms and other digital service providers.

Companies, in particular those in the video game distribution sector, are advised to review their compliance policies to ensure they are up to date and effective. This investigation is at a preliminary stage and parallels a number of investigations being conducted into distribution practices both on the EU and Member State level.

EC Fines Mondelēz for Cross-Border Trade Restrictions, Will Launch "Fact-Finding Mission" on Territorial Supply Constraints
On May 23, 2024, the EC fined snack and confectionery company Mondelēz €337.5 million (approx. US$365 million) for restricting cross-border trade of various chocolate, biscuit, and coffee products, and for abusing its dominant position in certain national markets for the sale of chocolate tablets.

The EC alleged that between 2012 and 2019, Mondelēz struck agreements with wholesalers limiting where they could resell Mondelēz products, and from 2006 to 2020 prevented exclusive distributors from replying to sales requests from outside their sales territories without the prior permission of Mondelēz. The EC also alleged that between 2015 and 2019, Mondelēz abused its dominance regarding certain chocolate products by refusing to supply them to low-price territories where they were liable to be re-exported to high-price territories. Mondelēz cooperated with the EC's investigation and admitted its guilt, gaining a 15 percent reduction in its fine.

Companies should review their distribution policies, especially if they involve elements of exclusivity, to ensure they are up to date and effective. The EC has renewed its focus on distribution agreements that may prevent cross-border trade within the EU.

EC Issues Statement of Objections to Microsoft over Teams Tying Allegations
On June 25, 2024, the EC announced that it had issued a Statement of Objections to Microsoft as part of its investigation into Teams. The EC preliminarily found that Microsoft is dominant worldwide in the market for software as a service (SaaS) productivity applications for professional use. The EC believes that since April 2019, Microsoft has been tying Teams with its core SaaS productivity applications (Office 365/Microsoft 365), and thereby potentially restricting competition in the market for communication and collaboration products.

The EC is also concerned that Microsoft may have granted Teams an unfair advantage by not letting customers choose whether they wanted to access Teams when licensing Microsoft's core SaaS productivity applications. In addition, Microsoft may have limited interoperability between its services and the services of competitors to Teams. While Microsoft changed how it distributed Teams after the EC opened its investigation in July 2023, the EC found these changes insufficient to address concerns that Microsoft may be abusing its dominance. Microsoft may now defend itself against the allegations. There is no legal deadline for the EC to complete its investigation and issue a final decision.

Companies should consider whether they are facing any barriers because of conduct by dominant or incumbent firms in the EU. 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 Designates Booking as a Gatekeeper, Accepts Rebuttals for X Ads and TikTok Ads, and Launches Market Investigation into X
On May 13, 2024, the EC announced that it had designated Booking as a gatekeeper in relation to its online intermediation service, Booking.com. Booking is the first European company designated as a gatekeeper and has six months to comply with the relevant DMA obligations and to submit a compliance report to the EC. The EC decided not to designate X Ads and TikTok Ads, noting that while both met the quantitative thresholds, neither qualified as an important gateway for business users to reach end users. Both X and ByteDance had submitted rebuttal requests along with their respective notifications. The EC opened a market investigation to further assess X's rebuttal request with respect to its online social networking service, X, on May 13, 2024. This investigation should be completed within five months (approximately October 2024).

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

EC Sends Apple Preliminary Objection Against Steering Rules in App Store, Opens Additional Non-Compliance Investigation into App Developer Rules
On June 24, 2024, the EC informed Apple of its preliminary view that the steering rules in the App Store do not comply with the DMA. The EC identified three sets of rules that may infringe the DMA: i) a prohibition against developers providing pricing information within the app or communicating in any other way to promote offers available on alternative distribution channels; ii) restrictions on implementing links to webpages in apps that prevent app developers from communicating, promoting offers, and concluding contracts through their preferred distribution channel; and iii) unjustifiable fee structures for purchases concluded via a link to the webpage of the developer. Apple may now defend itself against these allegations. The EC may then adopt a non-compliance decision within 12 months of the opening of the investigation on March 25, 2024.

On June 24, 2024, the EC opened an additional investigation into Apple's new contractual terms for developers that are necessary to access additional features mandated by the DMA. The EC intends to investigate whether the following Apple practices comply with the DMA: i) Apple's "Core Technology Fee" rule, according to which developers and app stores will have to pay €0.50 (approx. US$0.54) for each installed app; ii) rules that may make it unduly difficult to download alternative apps or app stores; and iii) the eligibility criteria for developers who wish to offer alternative app stores or allow the downloading of apps directly from a webpage. The EC may adopt a non-compliance decision within 12 months.

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

UK's Competition and Markets Authority (CMA) Ends Review of Microsoft/Mistral Partnership
On May 21, 2024, the CMA published its decision on the partnership between Microsoft and French Foundation Model (FM) developer Mistral AI. The partnership involved compute and distribution agreements regarding Mistral's use of the Microsoft Azure platform, an investment in convertible bonds issued by Mistral of €15 million (approx. US$16 million) from Microsoft, and the possibility of future collaboration between both parties on R&D. The decision highlighted that Microsoft's investment was less than 1 percent; that after conversion of the bonds, it would still be a minority investor, unable to block special resolutions; that it had not been given any particular rights that would enable it to "exercise substantially greater influence" such as veto rights over relevant policy or strategic matters; and that it did not receive board representation.

However, the CMA emphasized that a compute agreement or a distribution agreement with an FM developer can result in material influence where they create a dependency on the supplier of compute. Factors such as exclusivity and restrictions on the developer's decisions on how it commercializes its IP are relevant considerations. Nevertheless, the CMA considered that in this case, the compute commitment was a modest proportion of Mistral's contracted compute. In addition, the agreements were neither exclusive nor gave Microsoft an ability to materially influence Mistral's commercial policy, e.g., by requiring Microsoft's consent for certain actions. The CMA also considered that the collaboration opportunities as set out were not likely to enable Microsoft to materially influence Mistral's commercial policy. Consequently, the CMA did not believe that they had "ceased to be distinct," and announced that the partnership did not qualify for investigation.

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 their 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.

EC High-Level Group Issues Statement on AI and the DMA
On May 22, 2024, the EC High-Level Group for the Digital Markets Act issued a statement on AI and the DMA. It acknowledged the issues of access to cloud infrastructure and services, access to data (including training and testing and validation data), standardization, and interoperability, as well as the influence that incumbent undertakings may exert on innovative start-ups through cooperative agreements. The High-Level Group agreed to exchange enforcement experience and regulatory expertise as relevant to the implementation and enforcement of the DMA, as well as with regard to AI. The High-Level Group seeks to develop means to ensure effective cooperation, leading to a consistent regulatory approach across the DMA and other legal instruments.

The High-Level Group is composed of the Body of the European Regulators for Electronic Communications (BEREC), the European Data Protection Supervisor (EDPS) and European Data Protection Board, the European Competition Network (ECN), the Consumer Protection Cooperation Network (CPC Network), and the European Regulatory Group of Audiovisual Media Regulators (ERGA).

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 their 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.

French Authority Publishes Report on Generative AI and Competition
On June 28, 2024, the French Competition Authority (FCA) published a report on Generative AI and competition. The FCA reiterated its view that there are high barriers to entry, including a shortage of specialized AI chips, the necessity of cloud computing services to train Generative AI models and serve them to users, the need for large, high-quality datasets to train new models, talented developers, and significant funding needs. The FCA identified numerous risks related to potentially anticompetitive conduct of chip providers, cloud service providers, and vertically integrated players. The FCA noted that investments and partnerships of large tech companies with start-ups could have both procompetitive and anticompetitive effects.

Companies should know that the FCA is closely watching developments in the Generative AI space. We have experience interacting with the FCA and can assist with identifying opportunities for obtaining relief, as well as protecting against third-party claims.

EC Publishes Policy Brief on Antitrust and Labor Markets
On May 3, 2024, the EC published a policy brief on antitrust and labor markets. In the policy brief, the EC identifies and analyzes no-poach agreements and wage-fixing agreements as the most concerning examples of anticompetitive conduct in labor markets that it will prioritize for enforcement. The EC considers these restrictions to be anticompetitive "by object," closing off most avenues to justify them on the grounds of efficiency.

In recent years, the competition authorities in Hungary, Lithuania, and especially Portugal have conducted investigations and fined companies for anticompetitive conduct in labor markets. On November 21, 2023, the EC announced that it had conducted unannounced inspections in the online food delivery sector. This investigation was earlier limited to alleged market allocations, but was then extended to cover additional conduct in the form of alleged no-poach agreements and exchanges of commercially sensitive information.

Companies should be aware that antitrust regulators in Europe are increasingly targeting employee no-poach agreements and ensure that their compliance policies and training appropriately focus on HR professionals.

Foreign Subsidies Regulation: Romanian PV Plant Tender, NucTech Challenges EU Dawn Raids
The EC continued in-depth investigations under the Foreign Subsidies Regulation (FSR). On May 13, 2024, the EC took note of the decision of two consortia to drop out of a tender to design, construct, and operate a photovoltaic park in Romania. On April 3, 2024, the EC had announced in-depth investigations into the separate bids from two consortia, including the European subsidiaries of Chinese companies Longi and the Shanghai Electric Group.

On May 31, 2024, it was reported that the Chinese manufacturer of security scanner Nuctech filed an appeal before the General Court of the EU against the unannounced inspection performed by the EC under the FSR. On April 23, 2024, using these powers for the first time, the EC had conducted unannounced inspections of Nuctech's offices over alleged distortive foreign subsidies granted to Nuctech.

On June 10, 2024, the EC announced that it had opened its first in-depth assessment of a proposed merger under the FSR. The EC is investigating whether distortive foreign subsidies were granted to a party seeking to acquire sole control of PPF Telecom Group B.V. (PPF), excluding its Czech business.

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.

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 on EU Foreign Subsidies Regulation.

Sustainability Cooperation Agreements: French Authority Publishes Guidance Notice, Portuguese Authority Opens Consultation on Best Practices Guide
On May 27, 2024, the FCA adopted an "open door" policy, inviting companies to apply to the FCA for guidance on sustainability cooperation agreements. The FCA stated it would issue such informal guidance letters within four months of determining that providing guidance is appropriate. Any guidance given is supposed to be published on the FCA's website. Separately, on May 29, 2024, the Portuguese regulator opened a public consultation on its draft Best Practices Guide on Sustainability Agreements.

Companies should know that both the EC and national competition authorities are willing to discuss and provide clarity on proposed sustainability agreements. We can help by assessing proposed sustainability cooperation agreements and reaching out to competition authorities.

UK Competition Appeal Tribunal (CAT) Overturns Nausea Drug "Pay for Delay" Fines
On May 23, 2024, the CAT overturned a 2022 decision from the UK's CMA, fining pharma companies Alliance Pharma, Focus, Medreich, and Lexon a combined £35 million (approx. US$44.5 million) over alleged anticompetitive behavior in the supply of nausea drug prochlorperazine. The CAT also overturned the decision to disqualify directors over the same alleged conduct.

The CMA had alleged that between June 2013 and July 2018 the drugmakers had agreed not to compete over supplying prochlorperazine 3mg dissolvable tablets to the UK's state-funded health service (the NHS) and to allocate the market. The CMA had further claimed that Focus was the exclusive distributor for Alliance's product, and that Focus paid off Medreich and Lexon so that they would abstain from providing prochlorperazine in bulk to the UK market. The CAT held that the CMA made material errors in assessing the factual evidence of the anticompetitive agreements.

Companies should review their distribution policies, especially if they involve elements of exclusivity, to ensure they are up to date and effective.

UK Passes New Digital Markets, Competition, and Consumers Act (DMCC)
In May 2024, the DMCC was enacted. It is the first major UK law to make substantive updates to the UK's antitrust regime in over a decade. It creates a new competition regime for digital markets, and makes significant changes to the UK's existing merger, antitrust investigation, and consumer law regimes. The CMA published draft guidance to the DMCC on May 24, 2024, and is consulting on it until July 12, 2024. The law itself is planned to come into force in October 2024.

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 may ultimately result in financial penalties of up to 10 percent of global turnover and up to 5 percent of daily turnover.

In mergers, transactions will fall within CMA jurisdiction if the target has UK turnover of £100 million (approx. US$127.2 million). Mergers where neither party has UK turnover exceeding £10 million (approx. US$12.7 million) will not. A transaction can now also fall within CMA jurisdiction if the target has an existing share of supply of goods or services in the UK of 33 percent, a UK turnover of at least £350 million (approx. US$445.2 million), and a UK nexus (by having been incorporated, having activities, or having customers in the UK).

In antitrust investigations, the prohibition of anti-competitive agreements will apply to agreements implemented outside the UK if they are likely to have an "immediate, substantial, and foreseeable effect on trade within the UK." There is now also a duty on a person who knows that a CMA investigation is being carried out to preserve documents that they know or suspect are likely to be relevant, and the CMA can issue requests for the production of documents or specified information in its investigations to persons overseas whose activities are being investigated.

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.

CMA Publishes Update on Cloud Services Market Investigation
On June 6, 2024, the CMA published an updated issues statement in its market investigation into public cloud infrastructure services. The statement shows that the CMA views cloud services as including both infrastructure as a service (IaaS) and platform as a service (PaaS) markets. It emphasized that both markets are concentrated, estimating AWS's and Microsoft's collective market shares as 70-80 percent and 50-60 percent in each. The statement also focuses on the impact of AI on cloud services. The CMA highlighted that partnerships between the large cloud providers and FM developers are extensive and likely to grow. It also noted the related competition between providers to secure accelerator chips. While the CMA has not yet reached any provisional conclusions, it reiterated its four theories of harm under consideration. These focus on the barriers to switching providers, the reduction of the ability and incentive of rival suppliers to compete for each other's customers caused by committed spend discounts/agreements, and software licensing practices that restrict customer choice.

In a separate working paper also released on June 6, 2024, the CMA outlined a package of potential remedies in the event that it finds harm to competition in the sector. Structural remedies could include divestitures of certain cloud providers' operations. Alternatively, operational separation of certain business units is considered. The behavioral remedies considered include technical measures such as increasing standardization and interoperability of cloud services; restricting the level of egress fees and increasing their visibility and clarity; setting restrictions on the use of commitments discounts and agreements; and introducing non-discriminatory pricing for software and increasing price transparency for software products.

The statutory deadline for the investigation is April 4, 2025. Further updates in this space will give insights into the CMA's approach in this increasingly important sector.

Companies should know that European regulators are scrutinizing the market for cloud computing. While the CMA is closely examining the market for cloud services and may choose to impose new rules, there are persistent calls within the EU to bring cloud computing into the scope of the DMA.

EU Member States Investigate Exchange of Information in the Context of Dual Distribution Violations
On June 12, 2024, the Danish Competition and Consumer Authority announced that Danish clothing retailer Axel Kaufmann ApS had admitted to having illegally exchanged information with tailor Hugo Boss about prices, discounts, and/or quantities in future sales. The information exchanges occurred between January 2014 and November 2017. Hugo Boss is a supplier to the clothing retailer, but sells directly to consumers, too. Axel Kaufmann ApS agreed to pay a fine of DKK 600,000 (approx. €80,500/US$86,200), with two senior employees each paying a fine of DKK 120,000 (approx. €16,100/US$17,200) for having contributed to the violations. An investigation continues regarding other participants in the alleged conduct.

On June 14, 2024, the Romanian Competition Council (RCC) announced that it had conducted unannounced inspections at the premises of 14 companies that are active in the Romanian information and communication technology (IT&C) equipment market. The RCC is investigating allegations that public tenders for providing equipment produced by Cisco were possibly shared among bidders with the support of the supplier, either directly or through authorized distributors, to favor certain firms. The RCC believes that the potentially anticompetitive conduct began as early as 2019.

Companies should review their distribution policies, especially if they involve dual distribution systems, to ensure they are compliant with the EU's recently revised guidance on dual distribution, and effective.

German Antitrust Authority Presents Annual Report
On June 26, 2024, the Federal Cartel Office (FCO), Germany's antitrust authority, presented its annual report for the year 2023/2024. The report highlighted the FCO's emphasis on the digital sector. To date, the FCO has designated several large tech companies as "undertakings of paramount significance for competition across markets" using its new enforcement tool and has conducted multiple abuse proceedings against tech companies that ended with prohibition decisions or settlements in which the tech companies agreed to alter their conduct. FCO President Andreas Mundt focused on the impacts of AI on competition, identifying the "risk that digital markets will become even more concentrated and that power will increase at different stages of the value chain, from chips to front end."

Companies should know that the FCO is highly concerned about competition in the digital sector and the impacts of AI. We have experience interacting with the FCO and can assist with identifying opportunities to obtain relief, as well as protecting against third-party claims.