The "European Antitrust Bimonthly Bulletin" breaks down the major antitrust developments in Europe during the past two months into concise and actionable takeaways.
Illumina/Grail: EU Court Ruling Reverses European Commission (EC) Below-Threshold Review Policy
On September 3, 2024, the EU's highest court, the European Court of Justice (ECJ), ruled that the European Commission (EC) had no jurisdiction to review Illumina's acquisition of Grail, overturning the EU's revised policy on Article 22 of the EU Merger Regulation (EUMR) of accepting referral requests from national competition authorities who themselves lack jurisdiction over a merger case. The ECJ found that the revised policy could not be used as a "corrective mechanism" to address potential gaps in EU merger control. Following this judgment, the EC decided to withdraw several of its previous decisions, including i) the prohibition decision, ii) two decisions concerning interim measures, iii) a decision concerning restorative measures, and iv) the decision fining both Illumina and Grail for implementing their merger before approval by the EC.
Companies contemplating M&A impacting the EU and United Kingdom (UK) should consider front-loading substantive assessments in any filing analysis and factor in the impact of EU and UK reviews on deal terms, timetables, and risk allocation—even if they generate little or no revenue in Europe—given the increasing risk of being "called in" for review. Although the EC's revised Article 22 policy has now been struck down, many jurisdictions are implementing below threshold merger review powers.
For more details on the ECJ judgment and the case generally, see our Wilson Sonsini Alert.
Advocate General Largely Backs Air Cargo Cartel Fines
On September 5, 2024, Advocate General Rantos delivered his opinion to the ECJ on the appeals of airlines against the EC's decision in the air cargo cartel case. In 2010, the EC fined a group of airlines a combined €776 million (approx. US$860 million) for allegedly fixing air-freight prices between 1999 and 2006. After this decision was set aside in 2015 by the EU's court of first instance, the General Court (GC), the EC materially readopted its decision in 2017 with few changes. In a 2022 challenge to the re-adopted EC decision, the GC reduced the fines of six airlines and maintained the fines of four other airlines.
In his opinion, Advocate General Rantos suggested to the ECJ that all appeals of the airlines against the GC's judgment should be rejected save for one which should be referred back to the GC for reconsideration of a claim of unequal treatment in the calculation of the fine. The Advocate General's opinion is not binding upon the ECJ, which will deliver its judgment at a later date.
Companies should carefully compare their treatment before the EU institutions with that of other companies in the same circumstances.
UK Appeals Court Reinstates Hydrocortisone Tablet Cartel Fine
On September 6, 2024, the UK Court of Appeal partially overturned a judgment of the Competition Appeal Tribunal (CAT) and reinstated a decision of the Competition and Markets Authority (CMA) fining a group of pharmaceutical companies a combined £260 million (approx. $360 million) for agreeing to delay entry to the market of generic versions of a tablet containing 10 milligrams of hydrocortisone. In a challenge against one set of fines the CAT had first upheld the CMA's finding that the agreements were anticompetitive, but then held that the infringement findings could not stand as the CMA had committed due process violations in questioning a witness. The Court of Appeal held that the CMA had not committed any errors in questioning the witness and was not required to prove dishonest intent, setting aside the CAT judgment.
Companies should know that the CMA is not obliged to prove dishonest intent in competition cases.
ECJ: Booking's Price Parity Clauses Are Not an "Ancillary Restraint"
On September 19, 2024, the ECJ responded to a request for a preliminary ruling from the Dutch court Rechtbank Amsterdam (District Court Amsterdam) regarding Booking's price parity clauses in contracts with hotels. The request for a preliminary ruling arose in the context of a suit for declaratory judgment by online hotel reservation platform Booking against several hotels, who then countersued Booking for damages due to infringing Article 101 of the Treaty on the Functioning of Europe (TFEU).
The ECJ held that price parity clauses by an online hotel reservation platform like Booking could only qualify as "ancillary restraints" and therefore be exempt from competition law if they were "indispensable," "proportionate," and "necessary." Such clauses could not be argued to be necessary solely because otherwise "negative consequences for the profitability of the services offered by that platform" might result. According to the ECJ, both wide (applicable to conditions offered to other platforms) and narrow (applicable to conditions offered by the hotels) parity clauses do not qualify as "ancillary restraints" and are not exempt from Article 101(1) TFEU. The District Court Amsterdam will now base its ruling on the ECJ's decision.
Companies should carefully consider parity clauses in their contracts with entities in the EU. We can assist with framing EU law compliant clauses or advise on challenging clauses of concern.
Advocate General Opinion on Protection of Leniency Application Documents from Prosecutors
On October 24, 2024, Advocate General Maciej Szpunar advised the ECJ that criminal enforcers may access leniency application documents emanating from antitrust proceedings as long as they are protected from disclosure to other litigants. This guidance came in response to questions referred from the Vienna Higher Regional Court as part of a dispute between construction business Strabag and Austria's public prosecutor. The Austrian court sought clarification from the ECJ on how EU law protects cartel leniency documents in criminal proceedings. The Advocate General’s opinion is not binding upon the ECJ, which will deliver its decision at a later date.
Companies should know that while leniency application documents are protected under EU law from disclosure to private parties, these documents are not necessarily protected from the grasp of prosecutors.
Advocate General Opinion on Google Android Auto Referral Case
On September 5, 2024, Advocate General Medina delivered her opinion to the ECJ in a case involving Google's alleged refusal to add Italian company Enel X's "JuicePass" app to its Android Auto app. The Italian Competition Authority AGCM held the refusal to be an abuse of a dominant position and fined Google. Google appealed this decision before the Italian Council of State, which referred the issue to the ECJ.
Advocate General Medina advised the ECJ that this case does not fall under the traditional case law applicable to refusals to grant access by a dominant undertaking, because the platform was not developed for the exclusive use of Google but instead was intended to be populated by third-party apps. According to the Advocate General, a refusal by a dominant undertaking to provide a third-party operator with access to a platform such as this one may be objectively justified where the access requested is technically impossible or where it could affect, from a technical perspective, the performance of the platform or run counter to its economic model or purpose. The mere need of having to develop a software template in order to grant access to a platform does not justify refusing access, provided that appropriate time is given, and that the third-party operator pays appropriate compensation.
The Advocate General's opinion is not binding upon the ECJ, which will deliver its decision at a later date. The Italian Council of State will then rely on the ECJ's decision for its judgment.
Companies should be aware that conduct by a dominant firm involving a refusal of access to an input (good, platform, or service), or access on discriminatory terms, is generally subject to a lower standard in the EU and thus involves greater antitrust risk.
EU Court Upholds EC's Google Shopping Fine
On September 10, 2024, the ECJ upheld an EC decision fining Google €2.42 billion (approx. US$2.62 billion). In 2017, the EC found that Google had preferenced its own comparison-shopping services over competing comparison-shopping services on its general search results pages by placing its results in the primary position in a box with attractive pictures and text, while relegating competing results to simple text links. The EC decided that Google had abused its dominant position on the markets for online general searches and for specialized product searches. The GC upheld the fine, but annulled the EC's decision insofar it held that Google's practice had had any—even potential—anticompetitive effects on the market for general search services.
The ECJ dismissed Google's challenge to the GC's decision. The ECJ held that there is no general rule that states that a dominant undertaking departs from competition on the merits irrespective of the circumstances of the case when it treats its own products or services more favorably than it treats those of its competitors. However, the ECJ found that the GC had correctly established that Google's conduct was discriminatory and did not fall within the scope of competition on the merits.
Companies should know that while all companies—including companies dominant on a specific market—may self-preference, they may not discriminate and depart from competition on the merits.
EU Court Annuls EC's Google AdSense Decision
On September 18, 2024, the GC annulled the EC's Google AdSense decision, which had imposed a fine of €1.49 billion (approx. US$1.61 billion) on Google. The EC's 2019 decision had found that using three types of exclusivity clauses in its agreements, Google had restricted websites which displayed ads in the context of internal searches using Google's services from displaying ads from services that competed with Google. According to the EC, the exclusivity clauses were abusive and amounted to three separate infringements which together constituted a single and continuous infringement running from January 2006 to September 2016.
The GC upheld most of the EC's findings but concluded that the EC failed to properly consider the duration of the exclusivity clauses when assessing their potential to deter publishers from sourcing from intermediaries competing with Google or preventing competitors from accessing a significant part of the market for online search advertising intermediation in the European Economic Area. Therefore, the GC found that the EC had not demonstrated that the clauses had deterred innovation, helped Google to maintain and strengthen its dominant position, and harmed consumers and thus annulled the EC's decision in its entirety.
Companies should be aware that exclusivity clauses in contracts with dominant firms may be problematic in certain circumstances. We can advise on their appropriate formulation or use as well as any challenges thereto.
EU Court Largely Upholds EC's Qualcomm Predatory Pricing Fine
On September 18, 2024, the GC largely upheld a 2019 EC decision fining chip designer Qualcomm €242 million (approx. US$262 million) for abusing its dominance in the market for slim and integrated baseband chipsets compliant with the Universal Mobile Telecommunications System (UMTS) standard between 2009 and 2011. The EC found that Qualcomm had abused its dominance during that period by supplying chips to two customers at below cost prices with the intention of eliminating its chip competitor Icera.
Qualcomm appealed the EC decision to the GC based upon multiple procedural arguments such as the length of the investigation, overly brief notes taken during interviews, and insufficient motivation of the decision, as well as attacking the amount of the fine itself. The GC rejected all arguments with the exception of those regarding the fine, holding that the EC departed from its Fining Guidelines without justification. Therefore, the GC reduced Qualcomm's fine to €238.7 million (approx. US$258 million).
Companies should be aware of the potential antitrust risks involved in dominant firms selling their products or services below their cost.
Germany Closes Investigation into Meta's Data-Gathering Practices
On October 10, 2024, Germany's competition authority, the Federal Cartel Office (FCO), announced that it had closed its investigation into the data-gathering practices of Meta. In 2019, the FCO had prohibited Meta from combining personal user data from different sources without user consent. Meta had appealed this prohibition in the German court system, with both the German Supreme Court and the ECJ weighing in and confirming the FCO's position in principle. Meta implemented several changes and agreed to implement several more regarding how it gathers and combines user data both from its services (including social media sites Facebook and Instagram) and from third-party websites, which allowed the FCO to now close its investigation.
Companies should know that European competition authorities are highly interested in how companies gather and combine data. They have gained new competencies under digital regulations such as the Digital Markets Act (DMA) and are increasingly cooperating with data protection authorities. Our European team has extensive experience in advising companies on the intersection of competition law and data protection.
EU Court Confirms Annulment of EC's Intel Fine
On October 24, 2024, the ECJ dismissed an appeal by the EC against a judgment of the GC, which in 2022 had partially annulled an EC decision regarding the loyalty rebate practices of chipmaker Intel and quashed entirely the resulting €1.06 billion (approx. US$1.15 billion) fine. The ECJ affirmed the GC's reasoning in its judgment, holding that the EC failed to properly consider Intel's evidence challenging the EC's economic analysis of anticompetitive effects.
Companies should be aware that while loyalty rebates used by dominant firms raise potential antitrust risk in the EU, the authorities must establish their anticompetitive effects and properly consider all arguments challenging their assessment.
EC Fines Teva for Alleged Misuse of Patent System and Competitor Disparagement
On October 31, 2024, the EC announced that it had fined pharmaceutical company Teva €462.6 million (approx. US$500.2 million) for allegedly abusing its dominant position to delay competition to its multiple sclerosis medicine Copaxone containing the active pharmaceutical ingredient glatiramer acetate, for which Teva held a patent until 2015. Teva's conduct allegedly occurred in seven Member States and during different time periods between February 2015 and February 2024.
Teva allegedly misused the patent system by filing so-called divisional patents in a staggered manner and strategically withdrawing them when rivals seemed likely to succeed with a challenge, artificially prolonging legal uncertainty about the validity of the divisional patents. Additionally, Teva allegedly implemented a disparagement campaign against a competing glatiramer acetate medicine, targeting doctors and national decision makers for pricing and reimbursement of medicines with misleading information about its safety, efficacy, and therapeutic equivalence with Copaxone.
Companies should know 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 patent filing strategies and disparagement of rivals.
EC Starts Two Specification Proceedings Addressing Apple Interoperability Issues
On September 19, 2024, the EC announced that it had initiated two proceedings to specify Apple's interoperability obligations under the DMA. Under the DMA, Apple is obligated to create free and effective interoperability between its DMA-designated operating systems iOS and iPadOS and third-party developers and businesses on its own, while the EC may act to further specify certain related obligations and standards.
The first proceeding concerns iOS connectivity features and functionalities that are most relevant for connected devices, including smartwatches, headphones, and virtual reality headsets. As a result of this proceeding, the EC will specify to Apple how to ensure effective interoperability regarding functionalities such as notifications, device pairing, and connectivity. The second proceeding concerns the process that Apple uses to address interoperability requests from third-party developers for iOS and iPadOS.
The EC is expected to conclude these proceedings within six months from their opening. The proceedings do not limit the EC from adopting a decision that Apple is noncompliant with the DMA, including the possibility of fines or periodic penalty payments.
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.
EC Declines to Designate X as a Gatekeeper
On October 16, 2024, the EC announced that the online social networking service of X should not be designated as a core platform service under the DMA. After X notified the EC that it met the quantitative thresholds to be designated under the DMA, the EC launched a market investigation. The EC concluded that while X did meet the quantitative thresholds it did not qualify as a gatekeeper in relation to its online social networking service, as the investigation showed that X was not an important gateway for business users to reach end users.
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 September 4, 2024, the UK's CMA announced that it had cleared Microsoft's hiring of former employees and related arrangements with Inflection AI, as it did not substantially reduce competition. The CMA had qualified this as a merger and initiated its Phase I review in July 2024. On September 27, 2024, the CMA announced that it had decided that Amazon's partnership with Anthropic did not qualify for a merger investigation since it did not amount to a merger. On October 24, 2024, the CMA announced an investigation into Google's partnership with Anthropic. The CMA has until December 19, 2024, to decide whether to refer this deal for an in-depth Phase II review.
On September 18, 2024, the EC took note of seven Member States withdrawing their referral requests to the EC under Article 22 EUMR to review Microsoft's acquisition of certain assets of Inflection AI, after the ECJ overturned the EC's revised Article 22 policy in the Illumina/Grail case. On September 19, 2024, Martijn Snoep, chairman of the Dutch competition authority ACM, acknowledged withdrawing the Dutch referral request to the EC to investigate the Microsoft/Inflection AI deal, stating that he was in favor of introducing a "call-in power" for the ACM, enabling it to review below-threshold mergers. According to public reporting on September 27, 2024, the FCO is evaluating whether the Microsoft/Inflection AI deal should have been notified as a merger in Germany.
On September 19, 2024, the EC published a policy brief on competition in generative AI and virtual worlds following two calls for contributions from January 2024. The policy brief highlighted the EC's concerns about competitive challenges from the vertical integration of Big Tech companies in the generative AI space but admitted that their partnerships with smaller developers of AI models could have procompetitive effects, too.
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 and the FCO able to take jurisdiction over minority equity stakes in certain circumstances.
EC Publishes Antitrust Evaluation Report, Hinting at Procedural Changes
On September 5, 2024, the EC published a staff working document containing an evaluation of the two EU Regulations which lay out the procedures for the application of EU competition rules. The evaluation highlighted the value of having national competition authorities enforce EU competition rules in parallel with the EC. On the other hand, it recognized a need to speed up investigations and issues stemming from increasing digitalization, such as accessing digital evidence during inspections or granting access to file. The EC will consider the evaluation results and consider a revision of the Regulations.
Companies should know that the EC is considering changes which may impact the procedure of EU competition investigations and cause repercussions for procedural rights.
Teresa Ribeira Designated to Become European Commissioner for Competition
On September 17, 2024, Ursula von der Leyen, President of the EC, announced the incoming members of the new College of Commissioners. She designated Teresa Ribera as Executive Vice-President for a Clean, Just, and Competitive Transition, which includes responsibility for the competition portfolio. President von der Leyen's mission letter tasks Ribera with vigorously enforcing existing rulebooks such as the DMA and the Foreign Subsidies regulation (FSR), addressing risks from killer acquisitions of smaller, innovative companies, and conducting a review of the existing Horizontal Merger Control Guidelines.
Ribera will face questioning by lawmakers in the European Parliament on November 12, 2024, with a positive evaluation expected. The College of Commissioners as a whole will face a vote of consent in the European Parliament and will then be appointed by the Council. Depending on the need to replace Commissioners-designate after the hearings, the new EC will be installed either in December 2024 or January 2025.
Companies should know that despite the change in the Commission, the EC is expected to continue vigorous enforcement of the competition rulebook. It remains to be seen what changes, if any, will result from the review of Horizontal Merger Control Guidelines.
EC Conditionally Approves the Acquisition of Parts of PPF Telecom—First In-Depth FSR Probe Ends
On September 24, 2024, the EC announced that it had conditionally approved the takeover of parts of PPF Telecom Group (PPF), excluding its Czech business. This was the first in-depth, merger-related FSR investigation closed by the EC.
The EC's investigation found that the buyer benefits from foreign subsidies. The EC accepted commitments to close the investigation, including i) removing an unlimited state guarantee for the buyer and ii) prohibiting the buyer's financing of PPF's EU activities.
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.
Germany Designates Microsoft for Extended Abuse Control Under German Competition Law
On September 30, 2024, the German FCO announced that it had designated Microsoft as an "undertaking of paramount significance across markets." Following this designation, Microsoft is subject to an extended abuse control pursuant to Section 19a of the German Competition Act. The FCO stated that it had not decided to investigate any specific behaviors yet, but that under its Section 19a designation it could target any Microsoft activities not covered by a designation under the EU's DMA. The FCO has previously designated several Big Tech companies under the same regime and initiated multiple investigations.
Companies should know that national competition authorities have gained additional tools to investigate alleged abuses of dominance and are increasingly willing to use these. We can assist in identifying possible opportunities and formulating the appropriate strategy for obtaining relief. Equally, we can assist with defending against such claims.
