McDermott has published an EU Competition Annual Review for 2015. This 87 page booklet will help General Counsel and their teams focus on the most essential EU competition updates for 2015. Beyond being used to understand recent developments, this booklet is a great reference when dealing with complex issues of EU competition law.
Read the full Annual Review here.
On 1 October 2015 the UK Consumer Rights Act 2015 (CRA 2015) entered into force, bringing with it a raft of changes pertaining to consumer protection law and competition law litigation. These changes were discussed in an article featured in our most recent issue of our flagship publication, International News: Focus on Tax (Issue 3 2015).
The CRA 2015 sets the scene for the future proliferation of competition damages actions in the United Kingdom and consolidates the country’s reputation as one of the most advanced competition regimes in Europe.
The new rules introduce a series of significant changes to facilitate claims, including the establishment of a fast-track procedure for simple claims, the introduction of a collective settlement regime, and an extension of the limitation period for actions before the Competition Appeal Tribunal (CAT), the United Kingdom’s specialist competition law tribunal.
Arguably the most controversial and high-profile measure is the introduction of collective proceedings before the CAT which, subject to the CAT’s discretion, can be brought on an opt-in or opt-out basis for both follow-on and stand-alone claims.
The CAT will certify claims that are eligible for inclusion in collective proceedings. In this regard the following three conditions must be met. There must be an identifiable class; the claim must raise common issues; and it must be suitable for collective proceedings, taking into account, inter alia, whether or not collective proceedings are an appropriate means for the fair and efficient resolution of the common issues, the costs and benefits of the collective proceedings, and the size and nature of the class.
If the CAT decides that collective proceedings are appropriate, it then determines whether the proceedings should be “opt-in” or “opt-out”. The CAT will take into account all the circumstances, including the estimated amount of damages that individual class members may recover, the strength of the claims, and whether it is practical for the proceedings to be brought on an opt-in or opt-out basis.
If appropriate, the CAT will also authorise an applicant to act as class representative. The representative must not have, in relation to the common issues for the class members, a material interest that is in conflict with the interests of the class members, and must be someone who would act fairly and adequately in the interests of all class members.
In order to prevent the rise of a “litigation culture”, certain safeguards are included. For instance, the CAT may not award exemplary damages in collective actions, and contingency fees, i.e., damages-based agreements whereby the lawyers are paid a proportion of the damages obtained, are not permitted in opt-out collective actions.
There will no doubt be considerable up-front litigation surrounding the issue of class certification before the first cases get off the ground. It is likely, however, that the mere threat of class actions before the CAT will represent a powerful weapon in the hands of the claimant when negotiating a settlement.
The long-awaited ruling on the seeking of injunctions in the context of standard-essential patents encumbered by fair, reasonable, and non-discriminatory (FRAND) terms has been delivered by the Court of Justice of the European Union, in Huawei v. ZTE C 170/130. Although the judgment lays down the legal test applicable to injunctions involving standard-essential patents, and significantly clarifies the landscape that had previously been shaped by the European Commission, a number of issues remain unresolved.
Huawei Technologies entered into negotiations with ZTE Corporation over the possibility of concluding a licence agreement in relation to Huawei’s patent that is essential to the long-term evolution (commonly known as 4G) standard, on FRAND terms. Given that negotiations between the companies were unsuccessful, and because Huawei contends that ZTE continued using the standard-essential patent (SEP) without paying royalties, Huawei brought an infringement action against ZTE, seeking an injunction to stop the sale of certain ZTE products.
In adjudicating the matter, the Regional Court of Düsseldorf considered that the outcome of the litigation largely depended on whether or not the action brought by Huawei constituted an abuse of dominance. Given this consideration, and the uncertainty surrounding the topic of SEP injunctions, the Court made a reference for a preliminary ruling to the CJEU. The Court asked in what circumstances a dominant SEP holder, who has committed to grant licences to third parties on FRAND terms, can seek an injunction to stop an infringement of that SEP, or to recall products manufactured using the SEP, is to be regarded as committing an abuse contrary to Article 102 of the Treaty on the Functioning of the European Union (TFEU).
The Test for SEP Injunctions
The CJEU decided that the following conditions must be satisfied before a dominant SEP licensor can validly bring an injunction against a party infringing an SEP, without acting contrary to Article 102 TFEU.
Notification From The SEP Holder
Prior to taking any action, a SEP holder that has given an irrevocable undertaking to a standardisation body to grant a licence to third parties on FRAND terms, must alert the alleged infringer to the infringement complained about. This prior notice must designate the SEP in question, and specify the way in which it has been infringed.
“Willingness” of The Alleged Infringer
After the alleged infringer has been informed about the infringement, it must (somehow) express its willingness to conclude a licensing agreement on FRAND terms. Presumably, this willingness refers to the alleged infringer agreeing to receive a FRAND offer from the SEP holder. It would seem, therefore, that an alleged infringer who is not prepared to enter into any sort of bona fide negotiations would be presumed to be unwilling.
Unfortunately, although the CJEU refers to the concept of “willingness”, it does not address the criteria for determining the alleged infringer’s willingness. The ruling therefore does not make it entirely clear what the potential licensee should do in order to be treated as willing.
FRAND Offer
The SEP holder must present to the alleged infringer [...]
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On 9 July 2015, the Court of Justice of the European Union (CJEU) issued its judgment in InnoLux Corp. v Commission C-231/14P, confirming the existence of a new concept in cartel fining: “direct European Economic Area [EEA] sales through transformed products”. This new concept can be used by the European Commission to calculate fines of an amount higher than a restrictive reading of its Fining Guidelines might suggest.
Background
The judgment arose out of the liquid crystal display (LCD) cartel case, which involved several LCD producers in Asia. The European Commission determined that the cartel participants had three channels of sale into the EEA:
Direct EEA sales, i.e., LCD panels for IT or television applications directly sold to another undertaking in the EEA.
Direct EEA sales through transformed products, i.e., LCD panels incorporated intra-group into a final IT or television product and subsequently sold to another undertaking in the EEA.
Indirect Sales, i.e., LCD panels sold by one of the cartel participants to another undertaking outside the EEA, which would then incorporate the panels into final IT or television products and sell them in the EEA.
The Commission took the view that inclusion of the third channel was not necessary for the purposes of imposing a fine to achieve a sufficient level of deterrence, but did take account of the first two channels. InnoLux challenged the inclusion of the second channel, and the General Court of the European Union rejected the challenge.
The CJEU’s Judgment
The CJEU upheld the decisions of the EU General Court and the Commission, notwithstanding the opinion of the Advocate-General to the contrary.
The CJEU referred first to the established case law, according to which the amount of the fine imposed on an undertaking must reflect “the economic significance of the infringement and the relative size of the undertakings’ contribution to it”.
Next, the CJEU observed that, applying this principle, the existing case law (Guardian Industries C-580/12P 12 November 2014) concludes that sales of the product concerned to a related party in the EEA should be taken into account in the same way as sales direct to unrelated parties.
The CJEU then took an innovative step. It extended the approach in Guardian Industries as follows. When sales of a cartelised product are made to a related party outside the EEA, and the product is incorporated into a downstream product that is sold to independent third parties inside the EEA, the sales of the downstream product into the EEA can be taken into account in determining the amount of the fine. The value to be taken into account is not the full value of the downstream product, but the proportion of that value that corresponds to the value of the cartelised product that was incorporated into the downstream product.
The CJEU emphasised that this case was not about whether or not the Commission had jurisdiction. The Commission’s jurisdiction was not in dispute because the cartel participants, including Innolux, made some sales of LCDs direct to independent [...]
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Margrethe Vestager, former Deputy Prime Minister of Denmark, is designated to become the next European Union Competition Commissioner in November 2014. In a three hour hearing before the European Parliament (EP) last night (2 October), Ms Vestager answered the EP’s questions and revealed a number of issues that she would like to focus on during her five year term of office. These priorities include vigorous cartel enforcement and—at least initially—assessment of whether or not certain tax arrangements in a small number of EU Member States infringe State aid rules.
by Andrea Hamilton, David Henry, Aiste Slezeviciute
The Enterprise and Regulatory Reform Act 2013 took effect on 1 April 2014. Increased efficiencies and deterrence are the main drivers of this reform.
As of 1 April 2014, the Enterprise and Regulatory Reform Act 2013 (ERRA) brings about significant substantive and structural change to the United Kingdom’s competition regime. As part of a more general overhaul of this regime, the recently created Competition and Markets Authority (CMA) becomes fully operational, a revised criminal cartel offence enters into force, and the merger control regime becomes more robust. These changes bring in their wake a swathe of new investigatory and enforcement powers and penalties for failure to comply. Businesses are therefore urged to take note of these new changes and to be alert to compliance risk. This On the Subject summarizes some of the key aspects of the reforms.
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by Philipp Werner and Robert Bäuerle
On 8 October 2013, the European Commission issued updated guidance for companies making oral statements in leniency applications. The Commission requests that the oral statement is clear, factual and to the point and is only accepted during working hours.
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