Antitrust Law Daily Wrap Up, ANTITRUST NEWS: European Commission Report Describes Competition Policy, Emphasizes Its Importance to EU Single Market, (May 31, 2013)

By Tobias J. Gillett, J.D., LL.M.

The European Commission (EC) has issued its 2012 report on competition policy, describing actions the EC took to restrain anticompetitive conduct and explaining how robust competition enforcement helps ensure the sound functioning of the European Single Market.

“Without an effective EU competition policy, the Single Market cannot reach its full potential,” the report observes. “There would be nothing to prevent private barriers to trade and competition from replacing the public barriers that free movement rules have dismantled over more than half a century.”

Financial sector. The EC pursued a competition policy that would support “a fairer and more transparent financial sector,” according to the report. The EC established a state aid regime to control government bailouts of banks during the financial crisis and to ensure support of banks on the same conditions across the Single Market. The regime conditioned government support on the banks’ agreement to restructure. As part of a broader effort involving the European Central Bank and the International Monetary Fund, state aid control helped restructure the banking sectors of Ireland, Portugal, and Greece.

The bank restructuring focused on “the imperative of ensuring viable business models that support the real economy,” seeking to ensure the long-term viability of the banks while returning funds to the taxpayers in the medium term. In addition, the EC pursued investigations of the manipulation of Libor, Euribor, and Tibor benchmark rates and the market for credit default swaps. The EC also prohibited a proposed merger between Deutsche and New York Stock Exchange Euronext, and pursued enforcement actions against Visa and MasterCard over alleged anticompetitive conduct related to the multilateral interchange fees (MIFs) they charge retailers for credit card transactions.

State aid reform. In 2012, the EC began enforcing a new framework on state aid for Services of General Economic Interest (SGEIs), “services that would not be provided by market forces alone or at least not in a form that would be available to all.” The new rules assist states in designing more efficient and effective SGEIs, and target SGEIs that receive large government funds and are thus more likely to distort competition, according to the report.

On May 8, 2012, the EC commenced State Aid Modernisation, “a reform of the whole of state aid policy” intended to be mostly in place by the end of the term of the current European Parliament. The reform seeks to prioritize enforcement on cases with a significant impact on the Single Market and to ensure that public budgets are spent on “real market failures,” projects that would not have been carried out without state aid, among other aims.

Network industries. The EC also focused on promoting competition in network industries, including the energy, telecommunications, and postal services industries. In 2012, the EC emphasized antitrust enforcement in eastern European markets, a departure from a previous focus on western European markets following a 2005 inquiry into gas and electricity markets. The EC pursued enforcement actions against the incumbent Czech electricity supplier, an entity that permits trading electricity in Romania and its parent state-owned enterprise that controls the power grid in the country, and gas supplier Gazprom for abuse of their dominant positions, market foreclosure, and other anticompetitive conduct. The EC also adopted state aid rules to permit states to compensate certain sectors for costs related to greenhouse gas emissions trading.

The Commission targeted barriers to competition in the telecommunications industry. The report noted that, although telecommunications incumbents no longer hold monopolies, the former monopolists still hold strong market positions, and aspects of the telecommunications market remain “predominantly national.” The EC pursued antitrust cases against Telefonica, Slovak Telecom, and Portugal Telecom, and investigated how five large telecom operators and the mobile sector association GSMA formulated standards for mobile communications services. It also issued new guidelines for state aid for broadband infrastructure, in particular to reach remote, sparsely populated, and rural areas.

In working to ensure efficient cross-border postal services, the EC adopted decisions approving state aid to UK Post Office Limited and to La Poste in France. However, the EC concluded that Deutsche Post and the Belgian Post “had received an amount of aid that exceeded the level of compensation required for the provision of the SGEIs,” although it approved French and Greek support to their respective postal operators. The EC also prohibited a proposed acquisition of the TNT cross-border parcel service by UPS that would have reduced the number of pan-European express parcel-transport networks from four to three.

Knowledge economy. Focusing on preserving innovation and competition in digital industries, the Commission considered the issue of potential misuse of standard-essential patents in the course of approving the acquisition of Motorola by Google. The EC also opened three proceedings on possible abuses of standard-essential patents by Samsung and Motorola. In addition, the EC approved Universal’s takeover of EMI’s recorded music division following “substantial commitments” from Universal and required Apple and e-book publishers to make legally binding commitments to resolve proceedings challenging alleged collusion between Apple and the publishers to adopt an agency model for distributing e-books. Other digital sector cases included an investigation into Google’s possible abuse of its dominant position through several search and advertising practices, and a decision finding that Microsoft failed to include a browser choice screen in its Windows 7 Service Pack 1 that it committed to include in 2009.

In 2012, the EC continued to advance the follow-up to an inquiry into the pharmaceutical sector, the results of which were published in July 2009. The EC sent statements of objections to more than 14 companies in two major cases involving possible anticompetitive agreements and unilateral practices, the Citalopram case and the Perindopril case. The Commission also issued its third monitoring report on patent settlements in the pharmaceutical sector, which concluded that, “while the overall number of concluded settlements significantly increased, the proportion of settlements that may be problematic for competition fell by half as compared to the levels observed at the time of the sector inquiry.”

News: Antitrust