EU/Competition – Legal Update
Status as of: 1 August 2022
► Merger Control: EGC grants competition authorities extended referral and review powers andCommission strictly pursues allegations of gun jumping
In its judgment of 13 July 2022 (Case T-227/21), the ECJ ruled in the Illumina/GRAIL merger case that the European Commission had the power to examine the concentration in question in response to Member State referral requests under Article 22 of the Merger Regulation (EUMR), even though it did not meet the EUMR thresholds and did not have to be notified nationally in the Member State(s) that had made the referral request. Article 22 EUMR Regulation covers concentrations which affect trade between Member States and threaten to significantly affect competition within the territory of the applicant, without being reflected in turnover.
Background: On 19 July 2022 the Commission then announced it had sent a Statement of Objections to Illumina in which it took the preliminary view that Illumina had carried out the takeover of GRAIL before the Commission's in-depth investigation had been completed and had thus infringed the standstill obligation (Link). The Commission had opened the investigation procedure regarding the two US-based companies in July 2021, after agreeing to a referral request from – eventually – six EU and EEA Member States in April 2021. Illumina considered the Commission not competent and took the case to the EGC, where the company now lost. The court case should be seen in the context of the Guidance on the application of the referral mechanism set out in Article 22 of the Merger Regulation (EUMR) published by the Commission only in March 2021 (Link). In this Guidance, the Commission declares itself competent to accept referral requests from Member States if the conditions of Article 22 EUMR are met, even if the concentration is not notifiable under the national merger control provisions of the pertinent Member State(s). The ECJ has now confirmed this approach. However, it can be expected that Illumina will appeal this ruling.
► State Aid: Approval of German Scheme to support energy- and trade intensive companies – Amendments of the Temporary Crisis Framework
A large number of German energy-intensive and trade-intensive companies can count on state aid in the current energy crisis.
In the context of Russia’s invasion of Ukraine, Germany will support German energy- and trade-intensive companies in all sectors listed in Annex I of the State Aid Guidelines on Climate, Environmental protection and Energy Aid (CEEAG) through a scheme approved on 14 July 2022 (Link). On the basis of this scheme, aid with a total volume estimated at 5 billion EUR, is to be granted in the form of direct subsidies due to additional costs arising from a severe increase in natural gas and electricity prices.
In addition, on 20 July 2022 (Link), the Commission adopted and published an amendment to the Framework the scheme was approved under “the Temporary Crisis Framework”, adopted in March (we reported: Link). The amendment extends the existing support options and adds, for example, the option of Member States to set up schemes on simplified tender procedures for investments in the field of renewable energies and to set up schemes to support investments to phase out from fossil fuels.
► State Aid: Commission approves 41 hydrogen IPCEI projects – “IPCEI Hy2Tech “
The Commission has approved the Hydrogen IPCEI (Import Project of Common European Interest), which Germany played a key role in initiating, thereby clearing the way for funding projects in this area.
The Commission published its approval decision on 15 July 2022, which includes a planned public funding totalling 5.4 billion EUR (Link). This is the first approval decision based on the new revised IPCEI Communication of late 2021 (we reported Link). The so-called “IPCEI Hy2Tech”, jointly developed by 15 Member States, includes 41 projects from 35 companies, including eight small and medium-sized enterprises (SMEs’) and start-ups. The approved projects cover technologies concerning hydrogen generation, fuel cells, storage and transport technologies and the use of hydrogen, especially in the mobility sector.
► Political agreement on Regulation on competition-distorting subsidies from third countries – Taxonomy: No Objection of Parliament to include gas and nuclear as sustainable economic activities
Political decisions made in Strasbourg and Brussels lead to important changes in the area of third-country subsidies and the Taxonomy.
Firstly, on 30 June 2022, the EU Parliament and the Member States reached their agreement on a regulation on subsidies which are granted by third countries and distort competition. Background: In order to counteract existing regulatory gaps with regard to subsidies from non-EU states, which have hardly been controlled so far, the European Council called on the Commission to create new tools in March 2019. According to the Commission, political agreement has now been reached on the resulting draft regulation (Link). The regulation includes requirements under which public procurement procedures and mergers must be notified, as well as the authorisation to investigate all other market situations with the possibility to require ad hoc notifications. In addition, the Commission is to be given sanction tools such as fines or prohibitions. The regulation will enter into force as soon as it is formally adopted by the Council and the Parliament and published it in the Official Journal; it will then be directly applicable throughout the EU six months after entry into force.
Secondly, on 6 July 2022 (Link), the European Parliament decided not to reject the Commission’s draft of a Taxonomy Complementary Delegated Act of 31 December 2021 (we reported: Link). Even though a simple majority of MEPs voted against the bill (328 MEPs voted against, 278 voted in favour and 33 abstained), the necessary absolute majority of at least 353 MEPs could not be reached. The deadline for raising objections by the Parliament and the Council, which had been extended in the meantime, has expired by now without such objections on 11 July 2022, therefore the delegated act will thus enter into force and apply as of 1 January 2023.
► Antitrust: Dawn Raids even in times of crisis
Even in times of crisis, companies must continue to expect unannounced inspections by the competition authorities in case of allegations of anti-trust behaviour.
For instance on 6 July 2022, the Commission announced it had carried out unannounced inspections (so-called dawn raids) in two Member States at the premises of two companies, accompanied by the relevant national competition authorities (Link). According to the Commission the inspections took place in context of an alleged agreement or concerted practice to share national markets for online delivery of food, groceries and other consumer goods in the EU.
The anticompetitive exchange of information among (potentially) competing companies remains highly risky for companies under antitrust law.
On 12 July 2022, the Commission announced it had imposed fines totalling 31.5 million EUR on Crown and Silgan (Link). The Commission found that from March 2011 to September 2014, a continuous infringement existed, on the one hand consisting of the exchanges of data on their sales of metal closures and, on the other hand, of the coordination between the undertakings with regard to the imposition of a surcharge and a shorter minimum durability recommendation for metal cans and closures coated with BPA-free lacquers. The press release again highlights the Commission's strict approach to assessing an exchange of information when it alleges that the companies made “regular exchanges (…) of detailed data on their most recent past annual sales” of the cartel-involved products “to their individualised customers in Germany”. This “high level of transparency” had provided “each company with a solid basis for its future commercial strategy regarding a large number of German customers”.
In this case the Commission took action at the request of the German Federal Cartel Office (FCO), since prior to the 9th amendment of the German Act against Restraints of Competition there was no possibility for the FCO to impose sanctions on subsidiaries which were dissolved or restructured before the investigation was completed. The decision was made as part of a settlement that allowed both parties to receive a 10 percent reduction of the fine. Crown received a further 50 percent reduction under the 2006 Leniency Notice.
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The Chatham Partners’ EU/COMP-team is specialized in complex issues in the areas of EU and German competition, State aid and public procurement law and has extensive practical experiences in these fields.
We would like to thank Sonja Maria Brücker for her valuable support in the compilation of this newsletter.
