Did you know that you can use EU and national competition rules to your advantage by intervening in merger investigations or bringing a complaint against competitors, customers or suppliers allegedly involved in anti-competitive or abusive practices? You can get the European Commission (Commission) or other relevant national competition authorities on your side to help tackle anti-competitive behaviour by players in your industry.
Let’s take a look at mergers…
Occasionally a deal is announced that will result in competitive and commercial risks for your company, for example, a merger between two of your major competitors. You might have concerns that the new merged entity will dominate the market making it difficult for you to compete. Or such a merger could result in the merging parties significantly increasing prices to the detriment of consumers.
You can intervene to oppose the proposed deal, and if you have sufficiently credible arguments corroborated with strong evidence (and ideally support from other players in the market), you can:
• scupper the deal – forcing the merging parties to abandon the transaction or forcing the competition authority to prohibit the deal;
• strategically position your company to purchase any divestments imposed by the competition authority in a conditional clearance decision;
• ensure the competition authority is looking at the markets and competitive dynamics in the right way (especially if the merging parties have failed to disclose important information about the deal) in order to set a good precedent for any future cases (useful where you may be contemplating a merger concerning the same markets); or
• simply make life difficult for the merging parties by pushing them into a lengthy and burdensome investigation.
Increasingly, merging parties are offering up wider and more substantial remedies to address a competition authority’s competition concerns, such that a third party can really take advantage of the process.
When should you strike?
You can intervene at numerous stages throughout a merger investigation, but the earlier the better.
For example, it is possible to engage with the Commission prior to any merger notification by submitting detailed briefing papers (supported by economic analysis where necessary), which can be highly effective in framing the debate (i.e. before the merging parties have had an opportunity to convince the Commission of their main pro-competitive arguments).
Alternatively, post-notification you can submit voluntary views following the Commission’s notice inviting comments or raise concerns when responding to the various Commission information requests.
Even after a decision has been made, it is still possible to challenge a merger. For example, the Commission’s decision to clear Sony’s acquisition of BMG was subject to a successful challenge by Impala (a trade association representing independent music companies) to the Court of First Instance, resulting in annulment of the clearance decision. As a result, Sony and BMG ended up having to twice notify the proposed merger to the Commission, as well as launch an appeal to the European Court of Justice. The challenge caused considerable delay to the transaction, and resulted in significant extra work for Sony and BMG.
How about Antitrust Complaints?
You can also bring a complaint against your competitors, customers and/or suppliers for breach of the competition rules on anti-competitive agreements (e.g. price fixing cartels, resale price maintenance, bid-rigging, etc.) or abuse of dominance (e.g. illegal loyalty rebates, discriminatory pricing, refusal to supply, tying, etc.). Complaints can be brought at any time, either formally or informally, and before a number of fora (e.g. national court, specialist competition tribunal, competition authority).
What are your chances of being successful?
Although not every alleged competition law complaint will necessarily be investigated due to limited resources, policy priorities or lack of real merit and significant effect on the market, if a complainant with a “legitimate interest” (i.e. a third party who would stand to suffer loss as a result of the alleged infringing behaviour) can demonstrate that its complaint is not merely motivated by commercial/strategic considerations alone or spurious or vexations complaints, but supported by concrete evidence, the rewards can be very attractive.
A competition authority could order the offending company to stop the infringing behaviour; declare a commercial agreement null and void; impose fines of up to 10 per cent. of the defendant’s group worldwide turnover (which can be enormous in the case of cartel activity); and/or grant interim measures. A third party that has suffered loss can then also bring private damages actions before the national courts or any relevant specialist competition tribunal.
The on-going abuse of dominance investigations into Google by the Commission are examples of the impact that complaints can have on competitors. The Commission’s first investigation into comparison shopping services was initially prompted by a complaint by Foundem, shortly followed by numerous further complaints. The investigation has now been underway for five years, with Google submitting three unsuccessful proposals to settle the case before the Commission eventually issued a formal Statement of Objections last year. This investigation has generated huge publicity around Google’s business practices, and resulted in substantial work for Google in cooperating with the Commission’s investigation. The Commission has also launched a second investigation into Google into its Android mobile operation system, following on from a complaint by FairSearch.
A few final thoughts…
Before deciding whether to intervene in a merger investigation or bring a competition law complaint, it is important to have a clear view and strategy. Ask yourself:
• What do you expect to achieve? An infringement/prohibition decision or an opportunity to purchase divested assets (i.e. in the case of a merger intervention)?
• Do you have substantive competition grounds on which to challenge the merger or the anti-competitive conduct? Can such grounds be supported by concrete evidence?
• Are you prepared to commit the necessary resources in terms of time, legal fees and econometric analysis (if necessary) to support your case?
• Is your complaint unlikely to impact your relationship with the competition authority? Is your “house in order”?
• Are there any public relations considerations that you need to take into account?
Whilst intervening in merger cases or bringing competition law complaints will involve time, money and effort, the long-term strategic and commercial advantages can very often outweigh any apparent short-term disadvantages.
If you would like advice on how to proactively protect your company you should consider engaging external advisers to ensure any intervention/complaint is raised in the correct forum and effectively managed to your commercial advantage.
Marta is a partner in our Competition practice who advises on the full spectrum of EU and UK competition law work.
© 2016 Compliments of Stephenson Harwood – a member of the EACCNY