by Silke Heinz
On July 9, 2019, the Commission imposed a fine of €6.2 million on Sanrio, manufacturer of Hello-Kitty-products, for vertical sales restrictions (see press release here).
Sanrio licenses its brand and other IP rights for use in several Hello Kitty merchandising products in the EEA. In the (non-exclusive) licensing agreements in the EEA, Sanrio prohibited licensees to engage in cross-border sales of the licensed merchandise products, on the one hand by direct means (through clauses explicitly prohibiting these sales, obligations to refer orders for out-of-territory sales to Sanrio and limitations to the languages used on the merchandising products). On the other hand, Sanrio also implemented these prohibitions in an indirect way, i.e., through audits and the non-renewal of contracts if licensees did not comply with the out-of-territory restrictions. The Commission qualified the agreements as market partitioning within the EEA. Typically, market partitioning is viewed as an antitrust infringement by object or as hardcore restriction, which means that for example the vertical block exemption regulation cannot apply, and that relying on an individual exemption is very difficult.
Sanrio cooperated with the Commission and thus obtained a reduction of its fine by 40%. This was a cooperation outside of the leniency notice, which only covers horizontal cartels. In vertical cases, a procedure for cooperation with the Commission has been recently developed and takes place on a similar basis as under the cartel settlement notice. There is an overview on the procedure in a factsheet published on the Guess case (see here).
The case is another example that the Commission investigates and sanctions vertical infringements. This may on the one hand be due to the results of the e-commerce sector inquiry. On the other hand, the Commission seems to seek to take on cases in order not to leave this area of antitrust enforcement to the national competition authorities only. Silke Heinz was quoted to possible reasons and the background to this in Global Competition Review (see here).
by Marc Juncke
On July 2, 2019, the Federal Cartel Office (“FCO”) cleared the acquisition of paper dealer Papyrus (part of OptiGroup) by Papier Union (Inapa group) in second phase, with a combined market share of 40-50% in the printing paper market (see press release in German here).
Even though the shares triggered the presumption of single dominance under German law (40%, Section 18 GWB), the FCO did not expect the creation of single dominance, given that the largest competitor Igepa has an even slightly higher share. The FCO additionally relied on the following: the printing plants as customers operate multi-sourcing, can swiftly and easily switch suppliers, and competitors have sufficient capacity to satisfy additional demand. Finally, the FCO considered direct paper supplies by one paper manufacturer (Sappi) as relative competitive constraint to limit the merging parties’ scope of conduct.
The merging parties’ combined market shares and Igepa also exceed the presumption of collective dominance under German law (more than 2/3). The FCO found that it was not possible to show the creation of coordinated effects with the necessary likelihood, even though the planned merger would render the company and market structure more symmetric, which could facilitate implicit coordination. Pursuant to the FCO, the changing market conditions, the declining overall market size and the outside competition through direct supplies by Sappi spoke against coordinated effects. This shows that despite the collective dominance presumption, the FCO applies a significant evidentiary test in its review.
That the FCO considered the direct supplies, which it viewed as belonging to a separate product market, as a significant competitive constraint, is also interesting. This aspect may also be relevant in other distribution markets, in which there are direct supplies by manufacturers next to supplies by dealers.
by Roman Zagrosek
German Federal Cartel Office launches consumer protection sector inquiry into user reviews on the Internet (press release of 23.5.2019) (see here).
Online user reviews can refer to products such as sewing machines brand XY or service providers such as retailers and doctors. User reviews on online platforms distinguish between open and closed review systems. A characteristic feature of an open system is that users can also provide an online review if they have not purchased the product or service via the platform. A closed review system, on the other hand, requires a transaction on the platform.
With the sector inquiry, the FCO is using an instrument for consumer protection that has been available to the authority since mid-2017. After the areas Smart TVs (see here) and comparison portals (see here) it is the FCO’s third sector inquiry based on its new consumer protection competence.
In contrast to the sector inquiry based on competition law, the FCO’s measures on consumer protection are limited to the publication of a final report. It does not initiate any procedures, but merely identifies abusive practices.
The FCO is not the only European competition authority looking into the subject of online user reviews. As early as 2015, the Competition & Markets Authority (CMA) published a report on “Online Reviews and Endorsements” (see here). The CMA dealt extensively with the subject of “fake reviews” and described examples of abusive practices. The authority also stressed the importance of user reviews for consumers’ purchasing decisions. More than half of UK citizens would actively consider user reviews.
The issue of online user reviews is also discussed at EU level. With a new directive, the EU wants to strengthen the rights of consumers in the area of online commerce and ensure greater transparency in connection with online user reviews (see here). English version is available: https://www.consilium.europa.eu/media/38907/st08021-en19.pdf
In addition, the FCO is currently investigating in administrative proceedings whether Amazon is abusing is dominant position regarding product reviews on a possible market for marketplace services for online sales to consumers. (see here). Moreover, the FCO stated in its final report on the consumer protection sector inquiry in the area of comparison portals that user reviews regularly only came from users who successfully completed a transaction via the comparison portal (see here and see here) , exclusively in German). The FCO concluded that this restriction would make fake reviews more difficult, but it would also limit the “spectrum of reviews” of online user reviews.
The initiation of the sector inquiry on the subject of user reviews on the Internet is a further step which illustrates the FCO’s focus on the Internet industry and a topic which has relevance both in terms of competition law and consumer protection law. It would therefore be desirable for the investigation to also deal – like the CMA – with competition law aspects of user reviews (e.g., the pro-competitive effect), which can then be used in competition law proceedings where the authority has more extensive powers.
The next measures are likely that the FCO is going to send questionnaires to market participants and consumer protection organizations. The presentation of the results will be followed by a consultation phase during which interested market participants and other interested parties will have the opportunity to comment on the consultation paper. Subsequently, the FCO will publish a final report. Further measures, such as the remedying of any legal infringements by official measures, are not provided for by law.
There is no dedicated time frame for carrying out consumer protection sector inquiries. In comparison portals, the FCO needed approx. 19 months for the entire sector inquiry. In SmartTVs, the sector inquiry was initiated about 19 months ago and its conclusion is announced for 2019. Results in the form of a final report on the sector inquiry on user reviews on the Internet are therefore not expected before the end of 2020 or rather mid-2021.
by Silke Heinz
On June 4, 2019, the Düsseldorf Court of Appeals lifted the Bundeskartellamt’s prohibition decision of Booking.com’s “narrow” best price (or most favored nations, MFN) clauses in Germany. The court found that these clauses were necessary to ensure a “fair and balanced exchange of services between portal and hotels”. The decision may have a significant impact on the assessment of best price clauses by digital platforms in Germany. Silke Heinz wrote a post on Kluwer Competition Law Blog on the decision, see here.
by Silke Heinz
The German business magazine Wirtschaftswoche has published its 2019 ranking for top law firms Germany in the areasof white collar crime and of compliance. We are pleased that Heinz & Zagrosek is listed among the top compliance law firms, see here.
by Silke Heinz
On February 8, 2019, the BKartA decided that Facebook’s practice to collect and combine user data from third-party websites/apps, including from Facebook-owned services What’sApp and Instagram, without requesting user consent is an abuse of dominance. It ordered Facebook to terminate the infringement, as well as to suggest solutions for an opt-out system, so that users refusing consent can continue using Facebook (and can only be subject to very restricted data collection and combination). This is a far-reaching decision and aims right at Facebook’s business model. Silke Heinz comments on the decision in Global Competition Review, see here.
She has also published a blog on the decision on Kluwer Competition Law Blog, see here.
by Silke Heinz
Based on media reports, the Bundeskartellamt sent a letter to the European Commission opposing the planned merger, including with respect to the commitments the parties have offered. Silke Heinz is quoted on this in Global Competition Review, inter alia on the national competition authorities only having an advisory role in European Commission’s merger control proceedings. While they are heard, they cannot veto any Commission merger decisions. You can find the article here.
by Silke Heinz
Juve, the renowned German handbook for commercial law firms, lists Silke Heinz and Dr. Roman Zagrosek in the category leading names in antitrust law in 2019.
Heinz & Zagrosek ranks among Juve’s top 50 law firms in the field of antitrust law in Germany.
“We are pleased about the recognition and visibility of our antitrust practice” (Zagrosek).
by Silke Heinz
We have already featured the release of this report of September 4, 2018, dealing with the digital economy in our news section, see here [Link zur früheren Meldung auf unserer Webseite). In the meantime, Silke Heinz has summarized the 187 page report and analyzed some of the key messages it provides in a Kluwer Competition Law Blog, see here.
She comments on some of the proposed legislative changes, including the prohibition of unjustified prevention of multihoming and platform switching absent dominance and relative market power in markets characterized by high network effects and prone to tipping, and the changes to merger control rules to allow to prohibit large digital companies systematically buying start-ups as potential future rivals at an early stage of their development.
by Silke Heinz
On September 18, 2018, the European Commission has opened formal antitrust proceedings against German car manufacturers BMW, Daimler and VW, including VW, Porsche and Audi, for possible collusion to avoid competition on the development and roll-out of technology to clean the emissions of petrol and diesel passenger cars in the EEA (see press release here.
The Commission dropped other discussions among these manufacturers on technical cooperation from the scope of its investigation. Originally, in 2017 both the FCO and the European Commission reviewed information on the allegations, before the European Commission carried out inspections. Silke Heinz is quoted on the opening of proceedings in Global Competition Review, see here.
