Antitrust Bites – Newsletter

ICA publishes notice defining the exercise of new powers provided by the Asset Decree on fact-finding investigations

In Bulletin No. 19 of 13 May 2024, the ICA published the "Notice on the application of Article 1, paragraph 5, of Decree-Law No. 104 of 10 August 2023," which defines the rules governing the Authority’s new powers concerning fact-finding investigations introduced by Law Decree No. 104/2023 (the Asset Decree).

Article 1, paragraph 5, of Law Decree No. 104/2023 provides that if, following a fact-finding investigation conducted pursuant to Article 12, paragraph 2, of Law 287/1990, the ICA identifies competition problems that hinder or distort the proper functioning of the market, resulting in consumer harm, it can impose necessary and proportionate structural or behavioural measures on the undertakings to eliminate the distortions of competition. In the context of the fact-finding investigations, the undertakings can present commitments that the ICA can make mandatory after assessing their suitability and following market consultation. As specified in the notice, the legislation doesn’t define a new type of fact-finding investigations. It rather allows the ICA to employ new powers in a typically investigative procedure. The procedure, due to the new provision, might include a second remedial phase aimed at eliminating distortions of competition.

The notice distinguishes several procedural phases:

• The first phase is the initiation of the fact-finding investigation. When the ICA intends to proceed with a fact-finding investigation, it adopts a decision to be published in the bulletin and on the ICA’s official website, setting forth the essential elements of the investigation.
• If the related conditions are met, the Authority can exercise the powers provided by Article 14 (paragraphs 2 – 2 quater and 7 septies) of Law 287/1990. These powers include:
  • requesting information;
  • hearing anyone having relevant information for the investigation;
  • arranging for opinions, economic and statistical analyses, and consulting experts on any element relevant to the investigation; and
  • exercising its investigative powers.

The ICA can also conduct public consultations on specific topics of interest and publish a preliminary report illustrating the results of the fact-finding investigation carried out up to that point.

• If, at the conclusion of the fact-finding investigation, the ICA doesn’t find competition problems (and therefore the conditions provided by the Asset Decree for the opening of the remedial phase are not fulfilled), the investigation concludes.
• Conversely, if the ICA identifies competition issues, the remedial phase is initiated by means of the publication of a "deliberation of the investigative findings" indicating:
  • the competition concerns identified by the ICA;
  • the possible types of measures that the Authority deems prima facie suitable to overcome the competition concerns;
  • the undertakings potentially subject to the measures;
  • the deadline, of at least 45 days, for the submission of written statements, documents, and requests for hearings, as well as for the submission of any commitments.
• In the case of commitments offered by the involved undertakings (ie the undertakings identified as such in the deliberation of the investigative findings), the ICA can make them mandatory if they’re not manifestly unsuitable for removing the obstacles or distortions of competition identified in the fact-finding investigation.
• In the different case where the ICA rejects the commitments presented by the involved undertakings, or if commitments are not offered, the ICA can impose structural or behavioural measures, which are notified to the involved undertakings and published by means of a resolution. The measures are subject to public consultation so the involved undertakings and interested subjects can submit written observations (within the timeframe indicated in the resolution and in any case not less than 30 days from its publication).
• The involved undertakings are promptly informed of the outcome of the consultation; they can submit written statements and documents and request to be heard through a specific request to be submitted within ten days from the notification of the resolution.

 

Interpreting the notions of ‘average consumer’ and ‘aggressive commercial practice’: AG Emiliou's conclusions

On 25 April 2024, Advocate General (AG) Emiliou delivered his opinion in Case C-646/22. The opinion concerned a request for a preliminary ruling by the Council of State to clarify the notion of “average consumer.” It also concerned the conditions under which a commercial practice of bundling financial products and insurance policies can be qualified as “aggressive.”

The main proceedings concern the Italian Competition Authority’s (ICA) decision to sanction a finance company for having adopted an (allegedly) “aggressive” commercial practice. The practice involved cross-selling, when concluding personal financing contracts, insurance products not linked to the financial product. Although it was not a precondition for granting the financing, the ICA considered that customers were “made to take out” the insurance policy, on the basis that the insurance policy and the credit product were proposed to the customer concurrently and the contracts relating to the respective products were signed by the customers at the same time. This qualification was contested by the finance company, according to which the ICA didn’t provide actual evidence of the aggressive nature of the practice in light of its specific features and the relevant circumstances.

The referring court asked how the concept of the “average consumer,” which Directive 2005/29/EC identifies as the benchmark for assessing the potentially unfair nature of a commercial practice, is to be interpreted. It also asked whether a commercial practice whereby the trader not only sells two products in combination, but presents the information to customers in such a way as to lead them to believe that they must buy the products together (known as “framing”) can be considered “per se” (ie in all cases) aggressive.

According to the AG, in the context of the application of the Directive, the “average consumer” is not necessarily a rational individual who takes steps to obtain and process all relevant information provided to them to make informed decisions, in line with the homo oeconomicus model. This notion is flexible enough to allow a consumer to be considered an individual with “limited rationality,” who acts without obtaining all relevant information or is unable to rationally process the information provided. National authorities and courts, in assessing the unfairness of a commercial practice, are not called upon to determine what the economic conduct of a rational consumer would be. But they must consider what the “typical reaction of the average consumer in the case in point” would have been. This conclusion is supported by the very rationale of the directive, which is to provide “a high level of protection to consumers.”

With reference to the second question, the AG clarified that the assessment of a commercial practice as aggressive must be based on the “factual context, taking account of all its features and circumstances.” Given that the aggressive nature of a commercial practice normally depends on a contextual assessment, some practices could be considered aggressive per se; but these practices would be the exception and not the rule. The directive sets out a sort of blacklist of practices that might be considered aggressive. They don’t include the case where a trader sells products in combination, at the same time presenting information to customers in such a way as to lead them to believe they have to buy the products together. According to the AG, this practice cannot be assessed as aggressive per se. But the competent authorities must analyse its aggressive character in the light of the features of the case. This is especially so when, for reasons related to the complexity of the sector in which the trader operates, the average consumer must be considered an individual of limited rationality.

 

Booking designated as a gatekeeper under the Digital Markets Act, and Market Investigation started into X

On 13 May the European Commission designated Booking as a gatekeeper for its online intermediation service under the Digital Markets Act (Regulation (EU) No. 2022/1925 – DMA). The decision is the result of a thorough review process initiated following notifications received on 1 March 2024, from Booking, X, and another company regarding their potential gatekeeper status.

According to Article 3 of the DMA, a company is designated as a gatekeeper if it serves as a gateway for business users to reach end users. As Booking meets this criterion, the Commission has decided to designate it as a gatekeeper. As a gatekeeper, Booking will have to submit a detailed report on the measures taken to comply with the DMA obligations and an information notice on the techniques applied for consumer profiling.

In parallel, the Commission has initiated a market investigation to assess whether X, a company providing an online social networking service, should also be designated as a gatekeeper. In the notification received on 1 March 2024, X presented arguments to demonstrate that, exceptionally, despite meeting all the thresholds for classification as a gatekeeper, it doesn’t meet the requirements because of the specific circumstances related to the operation of its core platform service. The investigation will focus on the arguments provided by the company.

 

European Commission publishes Competition Policy Brief on Antitrust Law in Labour Markets

On 3 May 2024, the European Commission published the “Competition Policy Brief: Antitrust in Labour Markets” on the subject of restrictive labour market agreements, such as wage-fixing and no-poach agreements. Given the absence of precedents on the topic, this policy brief aims to establish the criteria that must be used to evaluate if these agreements infringe Article 101(1) TFEU, which prohibits agreements that restrict or distort competition.

In wage-fixing agreements, employers agree to fix wages or other types of compensation. In no-poach agreements, employers agree not to hire employees of other parties to the agreement or not to solicit another employer’s employees by actively approaching them with job offers. All of these agreements have a negative impact on the market as they’re likely to reduce employee compensation, firm productivity, market dynamism and innovation, and increase prices to the detriment of consumers.

The Commission believes that these agreements fall under the prohibition of Article 101(1) TFEU, since wage-fixing agreements qualify as a form of purchase price fixing, and no-poach agreements qualify as a form of market or supply-source sharing. These types of agreements are considered restrictive by object and are therefore considered infringements without the need to examine their effects on the market.

To assess whether these agreements are infringements by object, the Commission evaluated them against a set of criteria set out by the European Court of Justice.

The Commission analysed:

• the content of the agreement
• the objectives pursued and, finally
• the legal and economic context

Firstly, the Commission deemed that the content of the agreements was comparable to that of buyers’ cartels, which have already been classified in the past as restrictive of competition by object. Secondly, it held that the objective of the agreements was to fix purchase prices and to share supply sources. It also decided that the additional lawful aims of these labour market agreements, such as the protection of employee training investments and of non-patent IP rights, could be pursued through less restrictive means that wouldn’t fall under Article 101(1) TFEU (for example, non-disclosure agreements and obligations to stay with an employer for a minimum amount of time). Finally, when analysing the economic and legal context, the Commission deemed that this evaluation must be conducted on a case-by-case basis but that, in any case, it can be limited to what’s strictly necessary to determine if a specific agreement reveals a sufficient degree of harm to competition.

In general, if the relevant conditions are met, the agreements under consideration could be considered lawful if they qualify as ancillary restraints of a main agreement or fall under the exemption provided for in Article 101(3) for agreements whose pro-competitive effects outweigh their restrictive effects on competition. However, the Commission believes it’s improbable that wage-fixing and no-poach agreements can benefit from such exemptions since they’re unlikely to have a positive impact on competition and there are usually less restrictive ways of achieving their objectives.

 

AG Spuznar’s Conclusions: FIFA regulations on relations between players and clubs may contradict EU Law

On 30 April 2024, AG Spuznar delivered their opinion in Case C-650/22, originated from a referral for a preliminary ruling from the Court of Appeal of Mons (Belgium). The inquiry seeks to determine whether FIFA’s regulations governing contractual relationships between players and clubs are compatible with EU competition law and the principle of free movement of persons.

The case originates from incidents involving a former professional footballer. In 2014, the club he was part of terminated his contract, citing breaches by the player and seeking termination without just cause. FIFA’s regulations on the status and transfers of players provides that, in the event of termination without just cause, the defaulting party must pay compensation, for which the new club hiring the player is jointly liable. Additionally, sporting sanctions can be imposed on any club found responsible for inducing a player to leave their previous club without just cause, with the new club presumed responsible unless proven otherwise. The existence of a contractual dispute also prevents the issuance of the international transfer certificate (ITC) by the original club, without which the player cannot be registered with a new sports association.

According to the former player, these regulations made it difficult to find new clubs willing to sign him, given the risk of the new club being jointly liable for the compensation owed to the previous club. Consequently, the player initiated legal action to seek compensation for damages and lost earnings, leading to the judicial proceedings that prompted the preliminary question at issue.

Regarding the compatibility of these regulations with Article 101 of TFEU, AG held that FIFA’s rules “by their very nature” limit the possibility for players to switch clubs and of new clubs to hire them. Considering that recruiting talented players is a crucial parameter of competition among professional football clubs, and that players are “the most important factor of production,” according to AG there are “strong indications that there is a restriction of competition by object.” Only if the Court of Justice determines that FIFA’s rules result in a restriction by effect – rather than by object, as AG suggests – should it then be examined whether these provisions are justified by legitimate objectives in the public interest. In this regard, AG stated that the criterion to be used for this assessment should be substantially similar to the criterion set forth by Article 45 of TFEU aimed at justifying a restriction on the free movement of workers.

As for the principle of the free movement of workers, AG asserted that there can be “little doubt as to the restrictive nature of all the contested provisions,” given their effect of preventing players from transferring to clubs in other Member States after a contract termination without just cause. AG Spuznar emphasized that, for the restriction to be justified, the various requirements of Article 45(3) of TFEU must be met, which he finds lacking for at least some of the contested FIFA rules.