Some interesting competition law cases in EU and Latvia from 2009

1. Recent competition law
developments: EU and Latvia
Debora Pāvila
Jūlija Jerņeva
Riga, 5 March 2010

2. Contents
1. Overview of the year 2009: Latvia
2. Horizontal agreements
3. Vertical agreements
4. Abuse of dominant position
5. Mergers
6. Procedural issues: will the Intel case
bring more clarity?

3. Overview of 2009 – Latvia
Types of cases 2009 2008 2007 2006
Abuse of
dominant position
19 (3v) 18 (5v) 13 (2v) 11 (4v)
Prohibited
agreements
9 (6v) 18 (7v) 12 (5v) 10 (5v)
Mergers 12 (1v) 57 (5v & 2p) 82 (3v & 1p) 28 (4v)

4. Horizontal
agreements
• Akzo case
• Hoechst case
• KME Germany case
• Latvian cases: overview

5. Akzo case: 100% share ownership
• Case C-97/08: Choline chloride cartel
• “100% share ownership creates a presumption that the
parent company controls the subsidiary and exercises
decisive influence over its commercial policy and is
therefore jointly and severally liable”
• “Where a parent company holds 100% of the capital of
a subsidiary it is for the parent company to produce any
evidence relating to the economic, legal and
organisational links between the subsidiary and itself
which in its view are such as to rebut the presumption
that they do not constitute a single economic entity”

6. Hoechst case: liability of the seller of the
shares
• Case T-161/05: Monochloroacetic Acid cartel
• Hoechst sold business to Clariant which then
made a leniency application and was granted
immunity
• Hoechst argued that due to transfer of business
either:
– Clariant was liable for fine; or
– Hoechst should also benefit from immunity

7. T-Mobile Netherlands case
• Case C-8/08 (preliminary ruling)
• Single meeting between competitors (to discuss the reduction of a
standard dealer remuneration)
• “It is not necessary for there to be actual prevention, restriction or
distortion of competition or a direct link between the concerted
practice and consumer prices. An exchange of information
between competitors is tainted with an anti-competitive object if the
exchange is capable of removing uncertainties concerning the
intended conduct of the participating undertakings.”
• “The national court is required, subject to proof to the contrary,
which it is for the undertakings concerned to adduce, to apply the
presumption of a causal connection, according to which, where
they remain active on that market, such undertakings are
presumed to take account of the information exchanged with
their competitors. That presumption forms an integral part of
applicable Community law”

8. Latvian cases: overview
• Aizputes Ceļinieks & Ceļu, tiltu būvnieks (road
construction)
– Decision dated: 14.05.2009
– Type of case: price fixing
• Public procurement: two agreements with SIA „Komunālā
pārvalde”; Vecliepāja & Jaunliepāja agreements (with
identical price adjustment clauses)
• Exchange of information on planned increase of prices
after the conclusion of the agreements
• Fine: LVL 69’733 ca EUR 99’222

9. Latvian cases: overview
• Tyre mounting and repair case
– Decision dated: 27.06.2009
– Fine: LVL 8’360 ca EUR 11’734
– Type of case: price fixing
• No direct fixing of prices, but sufficient exchange of
information
• Creation of artificial transparency on the market

10. Latvian cases: overview
• Balticovo et al. (eggs’ cartel case II)
– Decision dated 11.12.2009
– Fine: LVL 109’162 ca EUR 153’231
– Exchange of information about:
• output
• costs
• sales volume
• prices (including export prices)
• debtors, clients
• insurance (prices and conditions)
• sales of real estate

11. Latvian cases: overview
• Plus Punkts, Narvesen Baltija and Preses
Apvienība
– Decision dated 16.12.2009
– Fine: LVL 103’100 ca EUR 144’722
– Agreements with Tele2 provided for:
• Maximum retail price of pre-paid mobile telephony cards
• Precluded the retailers from charging the consumers a
“service fee”
– The retailers:
• Almost simultaneously asked to remove these clauses
• Started applying the same “service fee”

12. Vertical agreements
• Introduction
• Draft Commission
Regulation and Draft
Guidelines on Vertical
Restraints
• Latvian cases: Samsung

13. Introduction
• Vertical agreements = supply and distribution
agreements
• Anti-competitive effects depend on the degree
of market power of the parties, extent of
competition faced
• Art 101(1) [ex 81(1)] and Art 101(3) [ex 81(3)]
• Block exemptions as safe harbours ONLY

14. Draft Regulation and Guidelines on
Vertical Restraints I
• Regulation 2790/1999 (the VRBE) expires on 31 May
2010
• Draft Regulation available at:
http://ec.europa.eu/competition/consultations/2009_vert
ical_agreements/draft_regulation_en.pdf
• Draft Guidelines available at:
http://ec.europa.eu/competition/consultations/2009_vert
ical_agreements/draft_notice_en.pdf

15. Draft Regulation and Guidelines on
Vertical Restraints II
• Major changes:
– Supplier + buyer market share test (up to 30%
for each) INSTEAD of the supplier market share
test alone
– More attention to on-line sales restrictions
• Other points of interest
– Agreements between retail chains and suppliers
– Definition of ‘agreement’
– RPM

16. Draft Regulation and Guidelines on
Vertical Restraints III
• Cumulative market share test
– Narrowing of the scope of application of the
BE
– Questionable relevance of the buyer’s
market power in the downstream market
• Single branding and exclusive distribution
agreements
• Input procurement
– Impractical self-assessment for suppliers

17. Draft Regulation and Guidelines on
Vertical Restraints IV
• Online sales
– Inherent problem of online sales for exclusive
distribution systems
– Still generally regarded as ‘passive’ sales, i.e.,
restrictions thereof fall outside the BE
– Unclear meaning of “specifically targeted online
advertisement”
– Allowed restrictions (‘brick and mortar shop’,
quality standards for Internet site) are very
limited
– Is the distinction between ‘active’ and ‘passive’
sales appropriate for online sales at all?

18. Draft Regulation and Guidelines on
Vertical Restraints V
• Specific agreements between retail chains and
suppliers:
– Upfront access payments = fees charged for access
to retailer’s distribution network
– Category management = supplier entrusted with
marketing of a category of products
• Exempted below the market share thresholds
BUT what happens above the thresholds?

19. Draft Regulation and Guidelines on
Vertical Restraints VI
• Notion of ‘agreement’
– Unilateral action vs. tacit acquiescence
– Bayer (T-41/96; C-2/01P & C-3/01P)

20. Draft Regulation and Guidelines on
Vertical Restraints VII
• RPM (retail price maintenance):
– Still a “hardcore restriction”
– More detailed analyses of the competitive
effects
– Is this good enough?
– The Latvian case: Hanzas Maiznīcas

21. Latvian cases: Samsung
• Samsung Electronics Baltics
– Decision dated 30.10.2009
– Fine: LVL 4’099’943 ca EUR 5’833’693 (total: LVL
6’080’715 ca EUR 8’652’078)
– Geographic market: Latvia, Lithuania, Estonia
– Agreements:
• Price fixing
• Market sharing

22. Abuse of dominant
position
• Microsoft: PC operating
systems case
• RWE Group: German gas
supply case
• Rambus: ambush patent
case
• Intel: rebates case
• Latvian cases: overview

23. Microsoft: PC operating systems case
• Case COMP/39.530
• Automatic tying of 'Internet Explorer' web browser
to the 'Windows' computer operating system
– deprives consumers of choice
– results in fewer innovative products on the market
• January 2009: the Commission’s preliminary view
that the company abused its dominant position in
the market for client PC operating systems through
the tying of Internet Explorer to Windows

24. Microsoft: PC operating systems case
• As of March 2010: browser “Choice screen”
– "Choice Screen" enables users (from EEA) of Windows
XP, Windows Vista and Windows 7 to choose in an
informed and unbiased manner which web browser(s)
they want to install in addition to, or instead of,
Microsoft's web browser
– Same applies to users, who receive an automatic update
– Available for 5 years
• 16 December 2009: Commission’s commitment
decision

25. Microsoft: PC operating systems case
• Mr. Nitot, president of Mozilla Europe
(27.10.2009): “In 17 countries of Europe,
Firefox is now the dominant browser, and the
browser is particularly popular in Eastern
Europe”
• Firefox was launched in 2004, i.e. when
Microsoft was allegedly foreclosing the market

26. RWE Group: German gas supply case
• Case COMP/39.402
• RWE may have abused the dominant position on its
gas transmission network to restrict its competitors'
access to the network
• Types of abuses:
– Capacity management: systematically keeping the transport
capacity on its gas network for itself
– Margin squeeze: setting transmission tariffs at an artificially
high level with the effect of preventing even a competitor as
efficient as RWE from competing effectively on the downstream
gas supply markets or limiting competitors' or potential entrants'
ability to remain in or enter the market

27. Margin squeeze: no discrimination
B C
Purchase price (PP) 40 40
Minimum manufacturing costs (MinC) 40 40
Maximum competitive retail price (MaxC) 100 100
Profit (P = MaxC – PP – MinC) 20 20
Sparkling wine manufacturer: B
(group company with A)
Sparkling wine manufacturer: C
Wine material manufacturer: A

28. Margin squeeze: no discrimination
B C
Purchase price (PP) 60 60
Minimum manufacturing costs (MinC) 40 40
Maximum competitive retail price (MaxC) 100 100
Profit (P = MaxC – PP – MinC) 0 0
Sparkling wine manufacturer: B
(group company with A)
Sparkling wine manufacturer: C
Wine material manufacturer: A

29. RWE: commitments
• RWE committed to divest its entire Western
German high-pressure gas transmission network,
including the necessary personnel and ancillary
assets and services
• Competition Commissioner Neelie Kroes
commented: "This very substantial set of remedies
will fundamentally change the landscape of
German gas markets…RWE will no longer be able
to use the control of its network to favour its own
gas supply affiliate over its competitors."

30. Rambus: patent ambush
• Case COMP/38.636
• Type of abuse:
– allegedly intentional deceptive conduct, resulting in
– potentially abusive royalties for the use of certain patents
as
• US courts dismissed the claim: FTC had not
proven that absent the incriminated conduct
Rambus’ technology would not have been
standardised
• Patent ambush and royalties: to be or not to be?

31. Intel: rebates case
• Case COMP/37.990
• Financial consequences:
– Fine: € 1.06 billion (largest fine on single firm, but
only(?) 4.15% of the turnover)
– Settlement with AMD: $ 1.25 billion to be paid
• Facts:
– Dominant position by Intel between October 2002-
December 2007
– Relevant market: x86 Central Processing Units
(CPU) worldwide market (at least 70% market share)

32. Intel: types of abuses
1. Wholly or partially hidden rebates to computer
manufacturers on condition that they bought all, or
almost all, their x86 CPUs from Intel
2. Direct payments to Europe’s largest PC retailer
(MSH) on condition that it stocked only computers
with x86 CPUs
3. Direct payments to computer manufacturers to
stop or delay the launch of specific products
containing a competitor’s x86 CPUs and to limit
the sales channels available to these products

33. Latvian cases: overview
• Riga Free Port case
– Decision dated 20.03.2009
– Fine LVL 45’000 ca EUR 63’166
• VIASAT and TV3 case
– Decision dated: 18.06.2009
– Fine LVL 87’000 ca EUR 122’122
• Alpha Express case
– Decision dated 22.10.2009
– Fine LVL 8’679 ca EUR 12’182

34. Latvian cases: overview
• 2009 commitments cases:
– Forum Cinemas case (18.06.2009)
– Preses Serviss case (04.02.2009)
– Latvenergo case (20.11.2009)
– Nasdaq OMX Riga case (18.12.2009)

35. Mergers
• Electrabel: de facto control
• Qualcomm: third party
appeal of clearance
• Schneider: action for
damages against the
Commission
• Latvian cases: Ostas flote

36. Electrabel: de facto control
• Case No. COMP/M.4994
• Transaction cleared in April 2008
• EUR 20 million fine for acquisition of de facto
control already in December 2003
• Appeal lodged before the CFI

37. Qualcomm: third party appeal of
clearance
• Case T-48/04
• Third party appeal of clearance of acquisition
by DaimlerChrysler Services and Deutsche
Telekom of joint control over Toll Collect
• Appeal dismissed

38. Schneider: action for damages
against the Commission
• Case C-440/07P
• Schneider ordered by Commission to divest of
Legrand; Commission decision was thereafter
annulled
• Schneider claimed EUR 1’700 million in
damages
• CFI awarded EUR 420k
• ECJ set aside the CFI judgment

39. Latvian cases: Ostas flote
• Decision dated: 14.01.2010
• Fine: LVL 27’250 ca EUR 38’773
• Failure to notify acquisition of 50% (joint
control)

40. Procedural issues: will
the Intel case bring
more clarity?
• Intel: the power of
context?
• Standard of proof
• Right of defence
• Some case-law

41. Intel: the power of context?
• Intel’s chief executive wrote in e-mail message to a
colleague that Dell was “the best friend money can
buy”
– "Yeah, I said some of those things, but they are taken
broadly out of context. When the full nature of the emails
is exposed, [it will be clear that] there is another way to
interpret them.“
• Massive amount of information
– 141 companies questioned
– 21 dawn raids
– Several hundred thousand pages (500 million pages?)

42. Standard of proof
• Confirmation bias: a search for evidence that
confirms rather than challenges one’s beliefs
• European and national procedural rules:
applying mutatis mutandis, ignoring or taking
into the account?

43. Right of defence
• Extensive evidence gathering powers
– On-site inspections
– Requests for information
– Power to take statements and to interview
• Judicial review possibilities
• Control over the file (confidential information, (not)
including the gathered evidence to the file,
redacted files)
• Reliance on complainants
• “Blind” search and interviews... No sufficient
information before the “statement of objections”?

44. Some case-law
• Joined cases T-68/89, T-77/89 and T-78/89,
Società Italiana Vetro SpA, Fabbrica Pisana
SpA and PPG Vernante Pennitalia SpA v
Commission
• Type of case: cartel
• Issues:
– Deleting words
– Excluding certain evidence

45. Some case-law
• Case T-342/99, Airtours plc v Commission
• Type of case: merger
• Issues:
– Inconsistency with previous opinions
– Misreading of evidence

46. Some case-law
• Case T-5/02, Tetra Laval BV v Commission
• Type of case: merger
• Issues:
– Accuracy of economic evidence
– “Convincing” evidence

47. Thank you!
Tallinn Tartu Riga Vilnius
Ahtri 6a, 10151
Tallinn, Estonia
Kaluri 2, 51004
Tartu, Estonia
Vesetas iela 7, LV-1013,
Riga, Latvia
Konstitucijos av. 7, LT-09308
Vilnius, Lithuania
Tel. +372 626 4300 Tel. +372 730 1610 Tel. +371 6732 0000 Tel. +370 5 248 7337
Fax +372 626 4306 Fax +372 730 1620 Fax +371 6732 0065 Fax +370 5 248 7338
tallinn@varul.com tartu@varul.com riga@varul.com vilnius@varul.com
Debora Pavila Julija Jerneva
Partner, Attorney-at-law Partner, Attorney-at-law
+371 2914 9110 +371 2913 1597
Debora.Pavila@varul.com Julija.Jerneva@varul.com