• 05/03/2019

    Kristall Bäder AG – Investment aid to upgrade a local swimming pool

    The Commission’s Kristall Bäder decision concerns funds granted for a swimming pool complex as State aid. It is an example for the intricacies of the market economy operator (MEOP) test, the possibilities to compensate services of general economic interest (SGEI) and a chance to ponder what might ultimately make the difference to the locally isolated Swimming Pool Dorsten case [press release].

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    • 05/03/2019

    Real Madrid and other Spanish clubs: State aid

    Real Madrid Football has become an interesting case of study to understand the criteria development of the EU Commission in this matter, since it issued two very different decisions. We will briefly explain in this article how it changed over the years. Read more →

    • 05/03/2019

    The fine line between legitimate joint lobbying activities and anti-competitive practices

    In a remarkable judgment of 22 June 2018, the Belgian Supreme Court confirmed an earlier Brussels Court of Appeal judgment that stated that joint lobbying activities did not infringe competition laws. With these judgments, the Belgian Supreme Court and the Brussels Court of Appeal overruled the Belgian Competition Authority’s (“BCA”) decision.

    This blog article summarises first, the opposing views by, on the one hand, the BCA and on the other hand, the Court of Appeal and the Supreme Court. Second, it briefly explains the facts of this case and third, the BCA’s decision. Finally, it discusses the judgments of the Court of Appeal and the Supreme Court.

    Opposing views

    The Belgian Supreme Court stated in its judgment that: “the Court of appeal excluded the presence of restrictive competition practices, since the concertation between the parties had as an object lobbying activities in the institutionalised framework of public standardisation and certification bodies to which they were expressly invited to defend their interests and that nothing establishes that the concertation went beyond this object in view of influencing the procedure of standardisation and certification itself”.

    Consequently, the Belgian Supreme Court confirmed the Court of Appeal’s judgment in this case, whereas the BCA had originally found that the joint lobbying efforts of several companies and associations in the cement industry with the Belgian regulatory authorities had constituted a concerted practice restricting competition by object.

    The facts

    A Dutch producer of concrete, ORCEM, wanted to enter the Belgian market. However, ORCEM produced concrete in a slightly different way than the traditional Belgian producers. Traditional concrete contains cement, water and sand, ground or crushed stone; while ORCEM replaced cement with ground granulated blast furnace slag (“LMA”). Belgian and European standards at that time did not permit the use of LMA for the production of cement and concrete. Therefore, ORCEM asked, on the one hand, for technical approval from the Belgian Union for Technical Approval in the Construction Sector (“BUtgb/UBAtc”) and, on the other hand, a quality label with the Belgian office for standardisation (“NBN”). This Belgian office was also involved in the review of the applicable standards for concrete and cement. The relevant approval standardisation and certification processes were delayed and ORCEM was convinced this was due to the lobbying practices undertaken by some traditional cement producers and associations.

    Belgian Competition Authority Decision

    The BCA agreed with ORCEM and decided that the traditional cement producing companies, as well as some associations of undertakings active in the sector, had delayed ORCEM’s market entry by their participation in the relevant advice and decision-making bodies. The anti-competitive practices in this case had the object of delaying the market entry of concrete produced with ground granulated blast furnace slag instead of cement of type CEM III and protecting the producers of cement of type CEM III. This protectionism had at least the following potential effects: (i) Partitioning the Belgian market for grey cement.; (ii) Reducing choice for consumers of ready-mixed concrete.; (iii) Creating or reinforcing barriers to entry on the whole or part of the Belgian grey cement market and artificially delaying the drop in demand for grey cement CEM III for making concrete.; (iv) Delaying the market entry of a new competing product, namely ground granulated blast furnace slag, with a risk of maintaining high prices for ready-mixed concrete.

    The BCA decided that the undertakings’ and the associations’ activities within the advice and decision-making bodies went further than normal lobbying practices. Their role was not limited to influencing the relevant bodies, as they participated themselves in determining the normative framework. Consequently, it had imposed a fine of 14.7 million EUR on these companies and associations.

    Brussels Court of Appeal and Supreme Court

    The Court of Appeal took exactly the opposite view to the BCA. It took decision-making power in the relevant bodies as a relevant criterion in its assessment, which seems to be in line with European case law[1] and stated that the BCA’s decision’s addressees had no decision-making power or a majority in the relevant bodies. Therefore, no anti-competitive practices had occurred in this case. In its judgment, the Court of Appeal also applied the Commission’s Horizontal Guidelines[2] and stated that the certification and standardisation practices respected the European requirements regarding openness, objectivity, transparence and non-discrimination. For these reasons, the Court of Appeal held that the lobbying practices did not infringe the competition rules.

    The Supreme Court confirmed the Court of Appeal’s judgment and consequently the large fines imposed by the BCA were annulled.

    The lesson for undertakings

    This case law shows that undertakings should note that there is a fine ‘line’ between legitimate and anti-competitive lobbying practices. Undertakings must carefully ensure that they stick to “normal” lobbying practices, which the Commission’s Green Paper on Transparency defines as “all activities carried out with the objective of influencing the policy formulation and decision-making processes […]”.[3] On the basis of the Belgian case law discussed here, it seems that having decision-making power or a majority in the relevant decision-making bodies is a relevant criterion to decide whether the line between legitimate and anti-competitive lobbying practices is crossed.

    [1] Case T-432/05, EMC Development AB v. Commission, 12 May 2010, §81-82.

    [2] Commission, Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, 14 January 2011, §281-283.

    [3] Commission, Green Paper European Transparency Initiative, 3 May 2006, COM(2006) 194 final.; Brussels Court of Appeal, Holcim v BCA, 30 June 2016, §91.

     

     

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    • 26/02/2019

    The Commission authorised Sweden´s measure amounting to 16.5 million EUR for the Uppsala Arena project (SA. 33618 of 2 May 2013)

    Introduction

    In December 2011, the Swedish Government notified the Commission a measure for a new multi-purpose arena in Uppsala involving the grant of financial support to a privately-owned company in order to facilitate its construction and operation. The aid would amount to a total of approximately 16.5 million EUR (150 million SEK). The Commission initiated the procedure laid down in Article 108 (2) TFEU.

    The notification emphasized that the arena should be designed to cater for several types of sport (ice hockey, basketball etc.), cultural and entertainment events (concerts etc.), conferences and trade fairs with a capacity to accommodate up to 10 000 visitors. The arena would also house a gym and several restaurants. Three separate privately-owned companies were involved in the set-up of project, an Arena Company, a Property Company and an Events Company.

    The structure of the project

    According to the notification, the grant was to be received by the Property Company, not formed at the time of notification. The Arena Company would manage and coordinate the arena project until the Property Company and Events Company had been established at a later stage .

    The Property Company would perform the construction and be the owner of the arena building. Moreover, the Property Company would lease the land-site from the municipality and pay a rent to the municipality. The municipality was not intended to own any part of the arena project nor influence the activities of the Property Company as such. Instead, in return for its grant the municipality was to receive an option to purchase the Property Company.

    The Events Company, was planned to be in charge of the operation of the arena. To ensure that the arena would be used by schools, sports clubs and the general public as well as enable for the municipality to host own events, the municipality would enter into a lease agreement with the Events Company.

    The Swedish Government´s point of view

    The Swedish Government assumed that the funding amounted to state aid and argued that it should be considered compatible under Article 107 (3) (c) TFEU. It was submitted that the project would satisfy a well-defined common interest of providing the general with sports and cultural events which the market would not fulfill without the aid in question. In addition, it was argued that the public co-funding of 23 per cent of the total project budget was limited to what was strictly necessary and proportionate.

    State aid or not?  

    The Commission concluded that the requirement of measure granted through state resources and attributable to the state (via the municipality), were clearly fulfilled. The municipality would, as a public authority and part of the state, itself contribute with a direct grant, pay rent for use of the arena and provide the land where the arena would be built.

    Regarding the grant of 16.5 million EUR to the Property Company for the construction of the arena, the Commission concluded that the grant constituted an economic advantage to the company. Thus, the grant constituted state aid to the Property Company. In respect of the site leasehold, the Commission noted that the rent corresponded to comparable rent levels for other sports facilities in the region. The terms of the lease would therefore not contain any additional aid to the Property Company. The Commission did not exclude the possibility that an economic advantage also would be given to the Events Company as the operator of the arena or to the undertakings that would rent the arena for use.

    Compatible with the internal market pursuant to Article 107 (3) (c) TFEU

    Given the conclusion that to at least the grant of 16.5 million EUR to the Property Company would constitute state aid, the Commission performed a balancing test assessing whether the aid was compatible under Article 107 (3) (c) TFEU, i.e. would pursue a policy objective of common interest, as well as whether it was necessary and proportional and did not cause undue distortion of competition.

    In its assessment the Commission took particular consideration of the fact that the construction of venues for sport and other public events and supporting activities which benefit the general public can be considered as a state responsibility. By pursuing the arena project that responsibility would be fulfilled and a policy of objective common interest was achieved. The Commission further acknowledged that the need for additional capacity in the city of Uppsala would not be met only by expansion of existing arenas and that the market would not fulfill the need for the additional capacity.

    Further, the state aid investment was considered as been ensured to be limited to the strictly necessary to realise the project and to achieve the public benefits thereof. Due to the possibility of hosting international events in the arena, an effect on competition and trade between member states could not be completely excluded. However the municipality’s involvement in the arena project was not considered to cause undue distortion of competition and trade between Member States mainly because of the “local character” of most of the activities to be carried out in the arena.

    Consequently, the Commission held that the aid was compatible with the internal market pursuant to Article 107(3) (c) TFEU.

    See Commission Decision of 2 May 2013 on State aid SA.33618 (2012/C).

    As per January 2019, no arena has been built in Uppsala. According to a document presented by the municipality on 28 December 2018 (reg nr KSN-2018-2867), the delay is due to lack funding in addition to the municipality’s grant. The municipality is said to revise its plans for an arena.

     

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    • 21/09/2018

    Retail Price Maintenance – Antitrust Alliance Map

    By clicking below, you will find a general description and relevant case law of retail price maintenance in the Antitrust Alliance jurisdiction:

    ATA map regarding retail price maintenance  

     

     

     

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    • 22/08/2018

    State aid and outdoor advertising: the municipality of Zwolle vs JCDecaux case

    The municipality of Zwolle (the Municipality) is of the opinion that outdoor advertising giant JCDecaux pays too little for the exclusive right to exploit advertising objects in the outdoor space in Zwolle. In its interim rulings of March 14, 2018 and July 18, 2018, the District Court of Overijssel (the Court) addresses the question whether JCDecaux may have received unlawful state aid and, if so, what this means for the existence of the exclusive right. Insofar as the Municipality indeed would have a claim against JCDecaux, which an expert still has to determine, the Court ruled that in any case such claim is partly time-barred.


    The case


    State aid

    First of all, the Court notes that according to Article 107, paragraph 1, TFEU, state aid is involved if (i) an undertaking receives a (ii) selective advantage, which is (iii) provided by the state or is financed through state resources, thereby (iv) distorting competition and (v) affecting trade between Member States.

    Next, the Court states that the present case revolves around the question whether JCDecaux has received and continues to receive an advantage (element ii). JCDecaux had argued in this context that with its acquisition of Wall Netherlands, the predecessor of the contract, any advantage had been passed on to the shareholders of Wall Netherlands. After all, the return on the contract between the Municipality and Wall was discounted in the purchase price that JCDecaux paid. The Court rejects this defense because JCDecaux is the primary beneficiary of the alleged state aid. The passing on of the alleged advantage is not considered relevant.

    Because of the different viewpoints of the parties involved, the Court does not consider itself able to determine whether JCDecaux has indeed received an advantage and, if so, to which amount. Therefore, an expert report is ordered. In anticipation of this, a number of other issues are already dealt with. In this respect, the Court presumes that JCDecaux has received unlawful state aid.


    Appropriate measures and the principle of legitimate expectation

    The Court points out that the Municipality is obliged to take appropriate measures in order to eliminate the consequences of unlawful aid. Contrary to what JCDecaux had stated, the Municipality is under no obligation to consult the Commission first. Nor does the Municipality violate the principle of legitimate expectations with its recovery action. With reference to the Alcan judgment (recital 25) of the Court of Justice (ECJ), the Court states that a diligent businessman is supposed to make sure that the aid is granted in accordance with the applicable European law.


    Nullity contract and conversion

    The Municipality argued that the contract concluded with JCDecaux is partially null and void. This was disputed by JCDecaux. With reference to the Residex judgement (recitals 46-48) of the ECJ, the Court states that there is no obligation to declare an agreement containing unlawful state aid null and void in full. The situation prior to the granting of state aid may also be restored by requiring the beneficiary to repay the advantage enjoyed with interest. The Court considers this to be less onerous in the present case than the integral nullity advocated by JCDecaux.

    The foregoing means that the disputed contract can be partially annulled in accordance with Article 3:40, paragraph 2 of the Dutch Civil Code. The provisions thus declared null and void can subsequently be converted into valid provisions on the basis of Article 3:42 of the Dutch Civil Code by incorporating market-based fees. According to the Court, the null and void provisions have never been legally valid. Instead, the converted provisions applied from the moment of entering into the contract.


    Limitation period of the claims of the Municipality

    Since the fees for the exclusive right were owed annually, the five year limitation period with regard to the converted market-based payments started in accordance with Article 3:308 of the Dutch Civil Code after the expiration of each calendar year. Now that the Municipality has interrupted the limitation period of the annual claims for the first time in 2017, the possible claim of the Municipality is partly time-barred. The Municipality’s argument that the application of this Dutch limitation rule is in conflict with EU law, is rejected by the Court.


    Comment

    The average market operator will rub his eyes in disbelief that the government can reconsider contracts just like that. But it is not the first time this happens. See, for example, the blogs: State aid and expropriation: the Harlingen case and Compensation for expropriation and State aid: the Nedalco case. Undertakings therefore do well not to lose sight of the state aid rules when entering into agreements with the government. They are in fact required to check whether the State aid rules are properly complied with. As a consequence they are usually not protected by the principle of legitimate expectations.

    It is also noticeable that the Court is not prepared to investigate whether JCDecaux has indeed passed on the alleged advantage to the shareholders of Wall Netherlands. The question is whether the Court’s approach is justified. Among other things, the Service stations near the border judgement (recital 66) of the ECJ, shows that it is also necessary to pay attention to indirect advantages.

    Finally, it is also remarkable that the Court does not need many words to consider the limitation period of 5 years for periodic claims stipulated by Article 3: 308 of the Dutch Civil Code to be in accordance with EU law. Under Article 17 of Reg. 2015/1589, the Commission’s powers to recover aid become time-barred only after a ten-year period. It is not clear why in the interim judgment no attention is paid to this.

    Anyway, the last word has certainly not been said. We will undoubtedly hear more about this case.

    Eric Janssen, lawyer for state aid law

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    • 30/07/2018
    The Antitrust Alliance at a glance: An overview.

    The Antitrust Alliance at a glance: An overview.

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    • 11/07/2018

    Utility companies face fines for non-compliance with the mandatory merger control

    Two Danish utility companies have received fines of DKK 8 million in total for implementing a notifiable merger in 2012 without filing the compulsory merger notification. The case is an obvious reminder of how important it is to focus on competition rules in connection with mergers, acquisitions, sell-offs, joint ventures and similar transactions – also within the utility sector.

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    • 12/06/2018

    Selective distribution: Rejection of repairer was a violation of competition rules

    Nissan’s rejection of admitting Daugaard Biler as an authorised repairer was a violation of the competition rules according to the Danish Maritime and Commercial Court’s judgment of 20 March 2018. A fundamental breach of the car distribution agreement in a combined distribution and repairer agreement did not entitle Nissan to reject Daugaard Biler as an authorised Nissan repairer.

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    • 12/06/2018

    The ECJ: Termination of cooperation agreement was not unlawful gun jumping

    In a judgment of 31 May 2018, the European Court of Justice (ECJ) found that KMPG DK’s termination of a cooperation agreement with KPMG International prior to the Competition Council’s approval of a merger with Ernst & Young was not gun jumping contrary to the competition rules’ prohibition against pre-implementation.

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