Corporate Counsel Daily, EC clears JD Sports acquisition of Courir, fines Czech, Austrian state railways $53 million, (Oct 23, 2024)

By Justin Marcus Smith, J.D.

The state railways fine announcement said the EC has established a two-way encrypted communications system for whistleblowers to report anticompetitive behavior.

The European Commission identified potentially anticompetitive issues with a proposed merger of sports apparel retailers that could be avoided with limited divestitures. The EC also found actionable collusion, subject to hefty fines, between the incumbent Czech and Austrian state-owned railways to exclude a private company attempting to compete in the Czech long-distance rail transport market.

Courir acquisition. The EC approved the JD Sports Fashion Plc Group (JD Sports) acquisition of Groupe Courir SAS (Courir) under the EU Merger Regulation. However, approval of the merger is contingent on full compliance with the parties’ commitments and approval of the terms of sale of certain Courir store divestitures.

The EC said its investigation found the JD Sports transaction, as proposed, would have left insufficient alternate competitors to exert competitive pressure on the merged entity and reduced competition in retail markets for leisure and performance sports footwear and apparel in Portugal and some French local markets.

To address EC concerns, the parties agreed to divest all Courir stores in Portugal and several stores in certain areas of France. The EC approved Snipes, a direct retail competitor for leisure sports goods, to buy the divested Courir stores; however, the EC has yet to approve the terms of sale. The EC commission otherwise concluded the transaction-with-divestiture would not raise competitive concerns based on “positive feedback received during the market test[.]”

The EC described JD Sports as operating worldwide both online and with over 3,300 physical stores. It identified Pentland Group Holdings Limited as JD Sports’ owner. The EC described Courir as operating over 300 stores in Belgium, Denmark, France, Luxembourg, the Netherlands, Portugal, and Spain, and that it also sells online in all EU countries but Malta. Equistone owns Courir.

State railways fines. Separately, the EC fined two incumbent state-owned railway companies, České dráhy (Czech Railways, or Čd) and Österreichische Bundesbahanen (Austrian Federal Railways, or ÖBB), a total of €48.7 million (roughly $53 million) for jointly preventing a relatively new entrant, RegioJet, from accessing used wagons (passenger rail cars), thereby restricting passenger rail competition.

The EC said the railways investigation found Čd and ÖBB colluded to maintain their market position and impede RegioJet’s expansion in Czechia and on the international rail route between Prague and Vienna. The EC characterized the circumstances as a breach of Article 101 of the Treaty on the Functioning of the European Union (TFEU). More specifically, the EC found Čd and ÖBB coordinated their actions to prevent RegioJet from acquiring ÖBB’s desirable wagons, which were already approved for operation in Czechia, by doing the following:

• Collusively timing ÖBB used wagon sales to stop RegioJet from acquiring them;

• Rigging the sales procedures so Čd could buy the ÖBB wagons instead;

• Agreeing on another buyer, not RegioJet, of ÖBB wagons at times or instances where Čd did not want to buy wagons;

• Exchanging confidential information about their bids and interests of other bidders.

The EC reported it imposed fines of €16.7 million (about $18 million) on ÖBB and €31.9 million (about $34.4 million) on Čd pursuant to its 2006 Guidelines on fines. The EC said it paid particular attention to the “serious nature of the infringement, its geographic scope and its duration.” ÖBB received a 45% fine reduction for its cooperation in providing timely evidence “to prove the existence of the cartel.” Čd did not enjoy any leniency reduction. The EC said such fines are typically paid into the general EU budget. That helps defray Member States’ contributions.

The EC reminded that any person or company affected by anticompetitive behavior, like that ascribed to the state railways here, may bring the matter before the courts of the Member States and seek damages. The EC touted that its final decisions are binding proof of illegal behavior in cases before national courts. The EC said it has set up an anonymous whistleblower tool based on a two-way encrypted messaging system to encourage reporting of anticompetitive behavior.

Companies: Groupe Courir SAS; JD Sports Fashion Plc Group; České dráhy; Österreichische Bundesbahnen

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