ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
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Labor Markets in the Focus of European Competition Law

by and | Jul 25, 2024 | , , ,

In May 2024, the European Commission published a Competition Policy Brief classifying certain agreements related to labor markets as serious antitrust infringements. According to the Commission, so-called wage-fixing and no-poach agreements can only be justified in exceptional cases. The Brief follows the first unannounced inspections by the Commission concerning labor market agreements in Germany and Spain in the online meal ordering and delivery industry. It is vital that companies operating in Europe focus on educating their recruiting and human resources departments on antitrust rules to avoid severe fines.

LABOR MARKETS ON THE AGENDA

The Commission’s Competition Policy Brief could be interpreted as a warning for companies exposed to tight labor markets: Restrictive labor market agreements between competitors will be taken as seriously as price-related cartels. Companies must also bear in mind that competitors for labor are not limited to those companies with which they compete to sell products or services. It is sufficient that they compete for the same employees.

Given that restrictions on competition in labor markets mainly affect national markets, the main investigators will be (and already are) national competition authorities.

WHAT AGREEMENTS ARE CAUGHT

The following types of labor market agreements are considered potentially problematic:

  • No-poach agreements: In some cases, employers (in writing or orally) agree not to steal employees from each other. Such agreements can take different forms: In the case of nonsolicitation or no-cold-calling agreements, companies agree not to actively approach the other companies’ employees with a job opportunity. More far-reaching are no-hire agreements, i.e., companies agree not to hire (actively or passively) employees of other parties to the agreement. As a matter of principle, all forms of no-poach agreements in the Commission’s view constitute market sharing (supply-source sharing) within the meaning of Article 101(1)(c) of the Treaty on the Functioning of the European Union (TFEU) and therefore form a competition risk to be sanctioned.
  • Wage-fixing agreements: Sometimes, employers agree to fix wages or other types of compensation or benefits for their respective employees. The Commission considers these agreements akin to price fixing within the meaning of Article 101(1)(a) of the TFEU.

The Commission does acknowledge that no-poach agreements may pursue a legitimate objective by incentivizing companies to invest in training their own employees without fearing that they would be later lured away by competitors, and by preventing employees from taking non-patent intellectual property rights (such as trade secrets) to competitors. However, both types of agreements “reveal a sufficient degree of harm to competition” such that the Commission does not see a need to examine their effects. Due to their alleged negative impact on employees’ wages, firm productivity and innovation, they are regarded “by their very nature” as harmful.

The above does not apply, however, to collective bargaining agreements between organizations representing employers and employees, which are explicitly outside the scope of the Commission’s Competition Policy Brief. The Court of Justice of the European Union (CJEU) recognized that certain restrictions of competition are inherent in collective agreements, which [...]

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Annual European Competition Review 2019

by | Feb 3, 2020 | , , , , , , , , , ,

McDermott’s Annual European Competition Review summarizes key developments in European competition rules. During the previous year, several new regulations, notices and guidelines were issued by the European Commission. There were also many interesting cases decided by the General Court and the Court of Justice of the European Union. All these new rules and judicial decisions may be relevant for your company and your day-to-day practice.

In our super-connected age, we can be inundated by information from numerous sources and it is difficult to select what is really relevant to one’s business. The purpose of this review is to help general counsel and their teams to be aware of the essential updates.

This review was prepared by the Firm’s European Competition Team in Brussels and Paris. Throughout 2019 they have monitored legal developments and drafted the summary reports.

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Advocate General Wahl Delivers Opinion on Legality of Bans on Online Sales via Third-Party Platforms in Selective Distribution Systems

by | Aug 23, 2017 | ,

According to Advocate General Nils Wahl’s opinion, delivered on July 26, in the Court of Justice of the European Union’s (CJEU) case Coty Germany GmbH v Parfümerie Akzente GmbH (case C-230/16), suppliers of luxury goods may prohibit their authorized retailers from selling their goods via third-party internet platforms. Such bans do not necessarily infringe Article 101(1) of the Treaty of Functioning of the European Union (TFEU) (which prohibits anticompetitive agreements).

Background of the Case

On July 16, 2016, the Higher Regional Court of Frankfurt lodged a request for a preliminary ruling with the CJEU asking whether selective distribution systems that serve to ensure a “luxury image” for the goods constitute an aspect of competition that is compatible with Article 101(1) TFEU and, whether bans on sales via third-party internet platforms constitute a restriction “by object” and should be viewed as “hardcore restrictions” under the Commission’s Vertical Agreements Block Exemption Regulation (VBER).

The initial dispute arose when Coty, a supplier of luxury cosmetics in Germany, brought an action against one of its authorized retailers, Parfümerie Akzente, for having infringed a provision in Coty’s selective distribution agreement that prohibited the retailers from distributing the luxury products via third-party platforms, such as Amazon, in order to preserve the brand image. The agreement provided that the authorized retailers could only sell the products online through an “electronic store window,” provided that the luxury character of the products was preserved. (more…)



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General Court of the EU Confirms Fines Imposed on Lundbeck and Generic Drug Manufacturers for Entering into Patent Settlements

by | Sep 22, 2016 | , ,

On 8 September 2016, the General Court of the EU (GCEU) handed down five judgments upholding a decision by the Commission of 19 June 2013 imposing fines on Lundbeck, an originator company, and Merck (the parent company of Generics), Arrow, Alpharma and Ranbaxy, four generic companies. The Commission found that the companies had entered into anticompetitive “pay-for-delay” settlement agreements whereby Lundbeck paid a lump sum to the generic companies in exchange for their agreement to delay their entry on the market for Citalopram, an anti-depressant drug.

This ruling is notable in that it is the first time that the GCEU has been asked to rule on patent settlements between originators and generic companies. The GCEU upheld the Commission’s reasoning, noting that the Commission’s reasoning in this case reflects the provisions of its Guidelines on the application of Article 101 of the Treaty on the Functioning of the EU (TFEU) to technology transfer agreements.

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EU Court Rules That Royalties for Unpatented Technology Are Not Necessarily Anticompetitive

by | Jul 11, 2016 | ,

On 7 July 2016, the Court of Justice of the European Union (CJEU) handed down a judgment on whether Article 101 of the Treaty on the Functioning of the European Union (TFEU) must be interpreted as precluding effect being given to a licence agreement requiring the licensee to pay royalties for the use of a patent which has been revoked (Sanofi-Aventis v. Genentech, Case C-567/14).

Background

In 1992, Hoechst granted a licence to Genentech for a human cytomegalovirus enhancer. The licensed technology was subject to one European patent and two patents issued in the United States. In 1999, the European Patent Office revoked the European patent.

Under the licence agreement with Hoechst, Genentech was obliged to pay a one-off fee, a fixed annual research fee and a running royalty based on sales of finished products. Genentech never paid the running royalty, however, and in 2008 it notified Hoechst and Sanofi-Aventis (Hoechst’s parent company) that it was terminating the licence. Hoechst and Sanofi-Aventis believed that Genentech had used the enhancer to manufacture its blockbuster drug Rituxan and was therefore liable to pay the running royalty on its sales of that drug.

Sanofi-Aventis initiated two separate actions. In the United States, it brought an action alleging that Genentech infringed the two US patents. The US courts ultimately decided that there was no infringement of the patents in question. Sanofi-Aventis also submitted an application for arbitration against Genentech before the International Court of Arbitration to recover the royalties.

In the arbitral award, the sole arbitrator held that Genentech had manufactured Rituxan using the enhancer and that the company was therefore required under the licence to pay Sanofi-Aventis the running royalties. According to the arbitrator, the commercial purpose of the licence was to avert all litigation on validity. Thus, payments already made under the licence could not be reclaimed, and payments due had to be made regardless of whether the patent had been revoked or was not infringed.

Genentech brought an action before the Paris Court of Appeal seeking annulment of the arbitral award. The company relied on public policy arguments, claiming that a requirement to pay for the use of technology that Genentech’s competitors could use without charge put Genentech at a competitive disadvantage and contravened Article 101 TFEU. The Paris Court of Appeal stayed the proceedings and made a preliminary reference to the CJEU.

CJEU Judgment

The CJEU explained that royalties reflect the parties’ assessment of the value that is attributable to the possibility of exploiting licensed technology, and that this assessment may still apply after expiry of the period of validity of the patent. The court referred to established case law (Case 320/87 Ottung) and held that, where the licensee is free to terminate the licence agreement by giving reasonable notice, an obligation to pay a royalty throughout the validity of the agreement (i.e., not the validity of the IP rights) does not fall within the purview of the Article 101(1) TFEU prohibition.

The CJEU argued that Article 101(1) TFEU does [...]

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EU Court Maintains Tough Stance Against Business Practices by Firms With Strong Market Power

by | Jun 16, 2014 |

The European Union’s court of first instance, the General Court, has confirmed the Commission’s decision in Intel and upheld a record fine of €1.06 billion. In so doing, it condemned a number of Intel’s business practices, including loyalty rebates. The General Court’s approach suggests that it views exclusionary business practices by a company in a position of dominance as anti-competitive by their very nature. On this basis, it is likely that the courts will continue to assess allegations of antitrust infringements by dominant companies without taking into account their effects on the market, and might condemn conduct that may not, in fact, be harmful.

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European Commission Uses EU State Aid Rules Against Aggressive Tax Planning by Multinational Companies

by | Jun 11, 2014 |

by Martina Maier and Philipp Werner (with contribution from Katharina Dietz)

The European Commission (Commission) took the first concrete action towards using EU State aid rules against aggressive tax planning by multinational companies by opening formal investigations against Ireland (Apple), Luxembourg (Fiat Finance and Trade) and the Netherlands (Starbucks). The Commission has concerns that these companies may have benefited from a selective advantage in the form of tax rulings by tax authorities that confer on them a preferential calculation of the taxable basis. The Commission has already announced that it investigates further cases of alleged State aid in the form of tax rulings in at least six EU Member States (including France and the UK) in the upcoming months.

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Revised GBER Reduces Need For Commission Prior Approval of State Aid But Some Conditions Stricter Than Before

by | May 22, 2014 |

The European Commission (Commission) has adopted new rules that exempt public support given to companies by EU Member States, including regional and local authorities, from the requirement of prior notification to, and approval by, the Commission. These new rules, which revise the General Block Exemption Regulation (GBER) significantly extend the scope of support that can be granted by Member States without the Commission’s involvement. Some substantive conditions for exemption will, however, be stricter than before. Public authorities and aid beneficiaries are well advised to take the new opportunities and challenges introduced by the revised GBER into account when designing their aid measures.

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The Case of Ophthalmic Drugs in Italy and France: A Lesson to Learn – Parallel Antitrust Investigations and Cooperation Between National Competition Authorities

by and | May 7, 2014 | , ,

The recent investigations into two pharmaceutical companies active in the ophthalmic drugs market in Italy and France serve as a reminder of the cooperation that takes place between national competition authorities. International groups should therefore take into account all the jurisdictions where they have a presence or do business when developing their antitrust audit and compliance programmes.

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