“Competition is not only the basis of protection to the consumer, but is the incentive to progress”
- Herbert Hoover
We are delighted to present Issue 7 of the ThoughtLeaders4 Competition magazine: Year In Review: 2024 In Competition Law And Litigation. As our final issue of the year, we’d like to take this opportunity to thank all our valued event attendees, speakers, and partners for making 2024 such a successful year within the Competition community. We hope that you find the issue stimulating reading for the festive season.
Thank you to the authors of this issue’s articles and our valued Corporate Partners for their support. Wishing you all a very happy holiday season!
The ThoughtLeaders4 Competition Team
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CONTRIBUTORS
Zoë Mernick-Levene, RPC
Chloe Gibbs, Shieldpay
James Harvey, Economic Insight
David Arnett, Economic Insight
Greg Haber, Verita Global
Lianne Goddard, Epiq
Felix Hammeke, AlixPartners
Chris Doyle, CEPA
Simone Gambuto, Nunziante Magrone Law Firm
Mélanie Bruneau, K&L Gates
Nick Peristerakis, K&L Gates
Antoine De Rohan Chabot, K&L Gates
Leonardo Rocha e Silva, Pinheiro Neto Advogados
José Rubens Battazza Iasbech, Pinheiro Neto Advogados
Laura Whyatt, Dentons
Ellen Curran, Dentons
Dan Rupprecht, Sky Discovery
Dan Heinrichs, Sky Discovery
Jonny Ford, Linklaters
Alan Zheng, Linklaters
Barney Stannard, Travers Smith
Joseph Moore, Travers Smith
Tim Knight, Travers Smith
Murray Reeve, Sidley Austin
Alex Harper, Sidley Austin
Veronica Pinotti, White & Case
Martino Sforza, White & Case
Michela Francavilla, White & Case
Jan Kupčík, Schoenherr
Paweł Kułak, Schoenherr
Šimon Kopárek, Schoenherr
Jasper Haller, Compass
Lexecon
Soledad Pereiras, Compass
Lexecon
James Thomson, Mediatasks
CALM BEFORE THE STORM
COULD PPI
PREMIUM
FINANCE BE THE NEXT FRONTIER IN MASS TORT LITIGATION IN 2025?
Authored by: Chloe Gibbs (Commercial Director of Litigation) - Shieldpay
This year has seen financial institutions set aside millions in anticipation of a wave of mass tort claims surrounding mis-sold car finance, in the form of personal contract purchase (PCP) loans. Lloyds Banking Group alone has set aside £450m to deal with incoming claims and analysts suggest claims could cost other banks such as Barclays and Santander up to £357m and £1.1bn respectively.
Fast forward to the beginning of October and we see the FCA, the UK’s financial regulator, announcing a review into finance deals on motor and home insuranceexpressing concern that this “finance may not be providing fair value”. The scope of this review will include affordability and the commission structures surrounding these products.
So, could 2025 see the lid lifted on a whole new set of mass tort litigation involving millions and how will the legal sector respond?
Introduction
The Supreme Court’s decision in Plevin v Paragon Finance introduced the UK to the kind of mass tort cases that were previously the preserve of the US. In Plevin, the court ruled in favour of the claimant, opening the door to claims on as many as 64 million mis-sold PPI policies. Since then, the popularity of mass tort actions and the willingness of the courts to embrace them has only continued to grow in the UK.
The precedent set by the Supreme Court’s 2020 ruling in Merricks v Mastercard lowered the threshold needed to undertake collective actions as a means of redressing corporate malpractice.
A glance back across the pond at the US gives some indication of the scale that mass tort actions can achieve. To date the largest of such actions is the US tobacco lawsuit, settled for a staggering $206 billion.
These kinds of numbers represent not just a challenge for the legal teams involved, but also an administrative challenge for their firms. How can firms handle cases involving 64m potential claims? Managing this volume of payees and the associated compliance checks, not to mention distributing funds simultaneously in numerous time-zones and currencies will be a key challenge as mass tort claims scale in the UK.
To avoid being caught on the back foot by a potential glut of claims resulting from the FCA review, the legal sector should be putting strategies in place for these claims now.
An Evolving Legal Landscape
The movement towards collective legal action underscores the importance of ensuring that all individuals, regardless of their financial means, can hold powerful organisations accountable for their actions and seek appropriate remedies for grievances.
As the demand for these cases grows in the UK—especially if the FCA’s competition market study finds that consumers haven’t been receiving fair and competitive deals for their insurance—what mechanisms will be put in place to effectively run these claims from end-to-end to ensure an efficient and compliant customer journey?
While the courts, legal arguments and procedural mechanisms for bringing claims are still evolving, we can certainly expect to continue to see an uptick in mass tort group litigation in the UK.
For an opt-out claim to be certified by the Competition Appeal Tribunal (CAT), it must be framed as a competition law claim. Some of the claims currently being pursued are testing the limits of what constitutes a competition law claim. In 2023, this trend included a mass tort claim focused on environmental, social, and governance issues against one of the UK’s largest water companies, with several subsequent claims. The allegations centre on the company’s failure to adequately report sewage spills to regulators, allowing it to evade penalties and charge higher prices to customers, which is claimed to be an abuse of market dominance.
The Supreme Court’s recent refusal to give permission to appeal in the Mariana Dam case will mean it is the largest opt-in mass tort litigation to be brought before the English courts, with over 700,000 claimants seeking redress in the trial which is scheduled to last for 11 weeks beginning in October 2024.
At the time of writing, the Court of Appeal has handed down its judgment in a trio of cases relating to discretionary commission arrangements, ruling clearly in favour of consumers. This landmark ruling, likely to be appealed to the Supreme Court, concluded that the payment of undisclosed commissions to car dealers is dishonest and creates a clear conflict of interest. The FCA has said that it is carefully considering the ruling.
Automated Litigation?
Automation is impacting every industry out there, and the legal sector is no exception. Many firms are already looking at the opportunities presented by automation from contract management to onboarding clients. In a mass claims environment this can help to provide a consistent, accurate service to huge numbers of claimants while freeing legal teams to focus on key decisions.
Moving With The Times
Technology is going to be key to the UK legal sector as it looks to keep up with these developments.
Many of the law firms I speak to still have processes suited to cases with a limited number of claimants, which are not going to be fit for the purpose when dealing with many thousands of claimants. Processes based around spreadsheets for example, subject to human error and version control, are ill-equipped to adapt to the changing legal market.
Managing tort claims at scale is going to require dedicated software, designed with the twists and turns of commercial litigation in mind. Such solutions will offer security and data protection protocols that a spreadsheet simply doesn’t, as smarter ways of managing information. The best solutions will give firms a ‘single source of truth’ for claimants that can be relied upon.
Mass tort cases present particular challenges when it comes to funds distribution too. In these cases, every claim and every settlement is unique, adding an extra layer of complexity. If a mass tort on the scale of PPI is to follow in the wake of the FCA’s review, payment platforms will be indispensable to handling this complexity.
Conclusion
Looking ahead to 2025, it feels as though we’re on the cusp of mass litigation scaling up to become comparable with the kind of cases we see in the US. While there are many differences between the legal systems of the UK and the US, there are many learnings we can take from the US which will help shape a robust regime in the UK. The employment of dedicated specialists who have the capabilities to administer claims, verify claimants and effectively distribute, will be something UK firms need to consider as these types of claims rise. Mass claims in the UK are still in their infancy, and there needs to be a real push for firms to become operationally ready. As the scale increases, it is key that firms looking to improve their outdated workflows are plugged in to tech-driven solutions to ensure they meet the market’s demands.
60-SECONDS WITH:
Q What’s the strangest, most exciting thing you have done in your career?
A Moving to a new law firm (Leigh Day) to set up a brand new competition law practice and team, having only just started being a partner, then to launch a ‘novel’ first environmental competition claim. While also balancing working part-time and having a young family. Exciting, thrilling, and also a bit mad – only possible because my husband also took on his fair share of the parental ‘mental load’ and childcare.
Q What motivated you to pursue a career in law?
A I remember telling teachers I wanted to become a lawyer from about 6 years old. I think someone suggested it because I like(d) to argue and debate and challenge ideas (including authority figures). I read PPE at university, but after quite a few twists and turns, I became a lawyer and focused on competition litigation – which I love as it combines the law with small ‘p’ politics and economics, with a good dose of (litigation) finance in order to achieve hopefully some small element of justice in an imperfect world.
Q Imagine you no longer have to work. How would you spend your weekdays?
A Reading the newspapers (and probably still coming up with all sort of competition claim ideas) and starting loads of new house projects that involve paint and DIY and mess.
Q What piece of advice would you give to your younger self?
A Resilience – life can go up and down, but you do get wiser and stronger as you deal with its challenges.
Q What are the biggest challenges facing legal practitioners nowadays?
A How to make sure you are actively encouraging a team of all the talents.
Q What book do you think everyone should read, and why?
A Wolf Hall by Hilary Mantel. Thomas Cromwell is the ultimate lawyer who rises to the top.
Q Dead or alive, which famous person would you most like to have dinner with, and why?
A Leonard Cohen – the greatest song writer of all time, and the backdrop to all my key moments happy or sad. Seeing him at my first Glastonbury in 2008 (and Amy Winehouse the previous day) was perhaps the greatest live music experience of my life.
Q The greatest film of all time
A The greatest film of all time is… Mary Poppins. Julie Andrews, in glorious 1960s technicolour with the most amazing songs covering every major important issue of our time: parenting and family life (‘Wanted a nanny for two adorable children’, a ‘Man has dreams’), poverty and extremes of wealth (‘Feed the
Birds’, ‘Chim Chim Cher-ee’), economics 101 on finance and capitalism (‘A British Bank’ and ‘Fidelity Fiduciary Bank’), Feminism and politics (‘Sister Suffragette’) – plus dancing penguins, tea parties on the ceiling and kite flying. I know the whole film back to front and cry even now when Marry Poppins flies off at the end with her parrot umbrella.
Q What legacy would you hope to leave behind?
A More lawyers who can lead teams while openly (trying to) balance the demands of family life and feeling empowered that they have a future in the law.
Q What is the most significant trend in your practice today?
A The flood of competition claims is not stopping but I think we’ll see a move towards looking at non-tech claims.
Q What is the biggest life lesson you have learned?
A I’ll let you know in 40 years…
Q What is one goal you would like to achieve in the next year?
A
Improve my gardening.
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THE PROMISING DEVELOPMENT OF THE FINANCED ASSIGNMENT MODEL
IN THE ITALIAN PRIVATE ANTITRUST ENFORCEMENT
September 19, 2024, Advocate General SZPUNAR took the “unprecedented opportunity” to deliver its opinion on the compliance with EU law of the emergence of players on the judicial scene whose aim it is to combine assets based on claims for damages resulting from infringements of EU competition law1
AG Szpunar reminds us of important points: i) the crucial role played by private enforcement of competition law in the EU legal order, that stems directly not only from Directive 2014/104 (Article 2.4, Article 3(1) and Article 4) but also and most importantly from Article 101 TFEU, which has direct effect in itself (§89), ii) Article 47 of the Charter must be interpreted as a barrier to national law(s) or the interpretation of national law(s) which have the effect of
impeding or hindering the assignment and the bundling of antitrust claims, if other equivalent legal or contractual possibilities for consolidating claims for damages do not exist.
The Opinion focuses only on German law and its consistency with the Union, but it is important also because it clearly highlights worries that are widespread across jurisdictions.
On the one hand, there are concerns that assignment models may expose victims of antitrust infringement twice: because of the antitrust infringement, and because they may fall into the wrong hands of bundlers that have
1 See also Opinion of Advocate General Jääskinen in CDC HydrogenPeroxide (C-352/13, EU:C:2014:2443, point 29)
no skills, or have conflict of interest, returning pennies to them. Past experiences shared among victims made sometimes these concerns more than real.
On the other hand, often antitrust infringements cause diffused and dispersed damage across markets at different levels of value chains. Victims have little time, resources and incentives to recover them individually,
not to mention how much perseverance antitrust litigation needs, which leads to underenforcement. It is called brilliantly “rational apathy” (Opinion §123). That is why Article 2 of the directive, defining “action for damages”, means expressly an action under national law by which a claim for damages is brought before a national court i) by an alleged injured party, or ii) by someone acting on behalf of one or more alleged injured parties where Union or national law provides for that possibility, or iii) by a natural or legal person that succeeded in the right of the alleged injured party, including the person that acquired the claim.
Having experienced either the market failures caused by the information asymmetry and the vital need for bundling, I see a promising development in Italy, particularly in the damage claim that follows the Italian Competition Authority (“ICA”) decision on the carton board cartel (Decision).
the ICA has closed its investigation in case I/805 by finding two cartels, i.e.: (i) one relating to corrugated cardboard sheets (required to produce corrugated cardboard boxes/packaging), and (ii) the other on the market for the production and marketing of corrugated cardboard boxes/packaging. The ICA found that the two single, complex, and secret cartels, which existed on these markets between 2004-2017 and 2005-2017 respectively, were designed to partition the market, agree on sale prices and other commercial conditions, such as payments terms, in Italy. The ICA also found big rigging for specific, large customers, designed to sterilise the competitive effects of tenders, needlessly held by the buyers.
In view of the seriousness and length of the violations, the ICA decided to impose severe fines on the cartelists. The ICA investigation was marked by one immunity applicant and three other additional leniency applicants active on both markets, which have submitted detailed confessions as well as abundant documentary evidence.
The Decision is final. Italy rightly implemented Article 9 of the directive, thus an infringement of competition law found by an ICA final decision is deemed to be irrefutably established for the purposes of an action for damages brought before Italian courts. The is a decisive incentive to bring the action in Italy, limiting counter productive forum shopping in EU jurisdictions where the Decision would be only considered as prima facie evidence of the infringement, consequently assessed along with any other evidence adduced by the parties and turning, in sum, in a standalone action.
Moreover, there are only three specialised
chambers to litigate in Italy (Naples, Rome and Milan) and judges are increasingly getting used to those claims, in the long wave of the trucks and local cartels.
Decisively, the Italian Supervising Financial Authorities led filter their opinion that litigation finance is a form of financing activity solicitation that needs to be supervised, particularly when carried out for massive and bundled claim. Albeit surely costly, the latter approach is in the long run favoring the emergence of litigation funds duly authorised and heavily supervised by the Italian FSA, with the result of minimising the asymmetry information that holds back its development in other jurisdictions, causing market failure.
All the above-mentioned points were considered pivotal also by the most solid EU arrangers focused on follow-on cartel enforcement, bringing into Italy its skills in data settings and case management, a first of the season in Italy.
Lastly, the assignment model is a wellestablished enforcement tool in Italy, while class and representative actions are still ineffective. Courts may soon perceive the assignment model as a tool to reduce files before them, merging in few, more interesting litigation. I therefore won’t be surprised to find Italy among the most EU interesting jurisdictions to litigate antirust cases in the forthcoming future.
*The firm is actively involved in the I-805 Decision follow-on litigation in Italy.
When everything is at stake, rely on CRA
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Introduction
Between 2019 and 2023, the Administrative Council for Economic Defense (“CADE”) has judged fifty administrative proceedings related to anticompetitive conducts, which have resulted in the conviction (albeit partial) of 287 individuals and 252 entities1, culminating in fines that amount to R$ 2.26 billion (roughly US$ 396.7 million2).
Third parties harmed by anticompetitive conducts are not prevented by CADE’s investigations from claiming compensation for the damages caused by individuals and legal entities, under the terms of Article 47 of Law
RELEVANT ASPECTS TO THE PROCESSING OF ANTITRUST DAMAGES CLAIMS IN BRAZIL
No. 12.529/2011 (the “2011 Brazilian Competition Act”)3, and are encouraged to do so by CADE.
In various statements4, CADE’s Presidents have stressed the importance of private enforcement complementing public enforcement, as a way of protecting undistorted competition.
Despite the impressive number of cases ruled by CADE’s Tribunal and the number of individuals and entities punished, the number of lawsuits seeking redress for competition damages is still low, especially when compared to more advanced jurisdictions on the subject.5
1 Source: ”CADE em números”, available at: https://cadenumeros.cade.gov.br/QvAJAXZfc/opendoc.htm?document=Painel%2FCADE%20em%20N%C3%BAmeros. qvw&host=QVS%40srv004q6774&anonymous=true.
2 Exchange rate of October 29, 2024. US$ 1 = R$ 5.6988. Source: Central Bank of Brazil.
3 Art. 47: Those affected, by themselves or by the legal entities referred to in art. 82 of Law no. 8.078, of September 11, 1990, may go to court to defend their individual or homogeneous individual interests, to obtain the cessation of practices that constitute anticompetitive conduct, as well as to receive compensation for losses and damages suffered, regardless of the administrative inquiry or process, which will not be suspended by virtue of the filing of an action.
4 “This is an effort by this Council to encourage private enforcement, while preserving the necessary incentives for public enforcement. As much as the reparation of damages is undoubtedly fair, CADE’s failure to comply with the agreements made would mean economic short-sightedness regarding the negative effects on the future of the settlement programs and, consequently, on Brazilian society.” (Request for Access to Documents and Information for Damages Claims No. 08700.003997/2020-26, Presidential Order No. 167/2020, issued on October 5, 2020). The same understanding was reinforced in the following Presidential Orders related to the same type of procedure. See Presidential Orders Nos. 30/2021 (08700.001039/2021-00), 112/2021 (08700.004000/2021-36), 151/2021 (08700.004001/2021-81), 3/2022 (08700.005417/2021-16) and 2/2023 (08700.007823/2022-02).
5 DENTON AO, John W.H.; BRUNET, François; WILLIAMS, Sarina; INTHAVISAY, Caroline (org). Compendium Of Antitrust Damages Actions - 2nd Edition. Available for purchase at: https://www.concurrences.com/en/all-books/compendium-of-antitrust-damages-actions-2nd-edition. Accessed on June 12, 2024.
Authored by: Leonardo Rocha e Silva (Partner) and José Rubens Battazza Iasbech (Senior Associate) - Pinheiro Neto Advogados
In 2023, a study6 identified four (4) main bottlenecks to the greater dissemination of actions for reparation for competitive damages:
(i) Lack of a culture of claiming damages by consumers;
(ii) Uncertainty as to the statute of limitations (starting point and applicable period);
(iii) Difficulty in accessing evidence of unlawful conduct; and
(iv) Difficulty in proving the damages caused by unlawful competitive conduct.
This article discusses important decisions of the Superior Court of Justice (“STJ”) – which is the court competent to generate the uniformised interpretation of federal laws – on some issues that are common in lawsuits in which victims of anticompetitive conducts, especially cartels, seek compensation for damages suffered. The aim is to point out that there is a growing number of decisions, which can and should be used by those involved in such cases to evaluate their legal strategies.
In October 20227, the STJ analyzed whether an orange producer’s claim against the “Orange Juice Cartel” was time-barred, for damages allegedly suffered from the cartel, which had been investigated by CADE for almost 20 (twenty) years and closed through the conclusion of agreements (or settlement agreements) by all the companies investigated, so that there was no condemnatory decision against any defendant.
The STJ concluded that the limitation period is of three years and the starting period would not necessarily refer to CADE’s final decision, but to the knowledge of the harmful facts, which, in that case, would begin on the date the contracts with the cartelist companies were signed.
In that decision, there was a reference to the then Bill of Law No. 11.275/2018, which brought changes to the processing of competition damages claims. The bill was sanctioned as Law No. 14.470/2022, on November 16, 2022, and established that: (i) the statute of limitations will not run during the course of the administrative inquiry or administrative proceeding within CADE; (ii) the limitations period is of five (5) years; (iii) the initial term is the unequivocal knowledge of the illicit act, which will be considered the publication of the final judgment of the administrative proceeding by CADE’s Tribunal.
Qualitative Analysis Of Stj’s Decisions On Redress Of Antitrust Damages
The STJ also understood that for (i) follow-on actions (i.e. those based on condemnatory decisions by CADE’s Tribunal), the initial term would be the unequivocal knowledge of the wrongdoing, corresponding to the publication of the final decision by CADE’s Tribunal recognising the wrongdoing or decisions approving settlement agreements and leniency agreements, excluding cases that remain confidential; and (ii) stand-alone actions (i.e., those filed before CADE’s Tribunal has issued a definitive decision on the same facts), the initial term is the moment when the victim would have had - or when it could be assumed that it could have had - unequivocal knowledge of the illicit act. The STJ also stated that the publication of the approval of the leniency agreement or settlement agreement constitutes unequivocal knowledge of the illicit act, given that there is recognition of the illicit act by the signatory, excluding cases that have confidentiality.
Access To Evidence
In March 20189, the STJ handed down perhaps the most important decision for ensuring the proper functioning of the Brazilian Competition Defense System about the balance between public and private enforcements.
Damages Claims
Statute Of Limitations For Antitrust
The STJ has dealt with two main issues relating to the statute of limitations: (i) its time limit and (ii) its starting point.
In October 2023, the STJ8 pointed out that, prior to Law No. 14.470/2022, the general rule for non-contractual civil reparation, which is the case of competitive damages, was three (3) years. Currently, due to Law No. 14.470/2022, the term is of five (5) years, and this new term applies immediately, except for situations that have already been consolidated (if the decisions on the limitation period have already been “precluded, covered by res judicata or by the perfect legal act”) or to damages claims initiated before the new law came into force.
During the discovery phase of a damages claim, access was requested by the plaintiff to the evidence submitted to CADE by two defendants as part of the scope of their settlement agreements in an administrative proceeding related to an alleged cartel.
After CADE argued that the premature release of the documents would harm its leniency and settlement programs – important instruments for cartel detection –, the STJ concluded that documents presented as part of
6 RAGAZZO, Carlos; VELOSO, Isabel (org). Actions to Repair Competition Damages in Brazil [electronic book]: obstacles and suggestions. Rio de Janeiro: 2023. Available at: https://repositorio.fgv.br/server/api/core/bitstreams/86a5c6fd-910c-4818-82ff-72e5f2396e85/content. Accessed on: June 12, 2024.
7 STJ. Special Appeal nº 1.971.316/SP. Appellant: Antonio Claudemir Teles. Appellee: Sucocitrico Cutrale Ltda. Reporting Justice: Justice Luis Felipe Salomão. Fourth Panel, judged on 10/25/2022, DJe of 12/14/2022.
8 STJ. Special Appeal No. 2.095.107/SP. Appellant: Messer Gases Ltda. Appellees: Companhia Siderúrgica Nacional; Companhia Metalúrgica Prada; White Martins Gases Industriais Ltda. Interested parties: Administrative Council for Economic Defense; IBG Indústria Brasileira de Gases Ltda. Reporting Justice: Minister Ricardo Villas Bôas Cueva. Third Chamber, judged on October 3, 2023, DJe of October 6, 2023.
9 STJ. Motion for Clarifications on Special Appeal No. 1.554.986/SP. Appellant: Administrative Council for Economic Defense (CADE). Appellees:
Electrolux do Brasil S/A, Whirlpool S.A., Brasmotor S/A and Tecumseh do Brasil Ltda. Reporting Justice: Justice Marco Aurélio Bellizze. Third Chamber, judged on February 20, 2018, DJe of March 6, 2018.
leniency or settlement agreements should be kept confidential until CADE’s Tribunal final decision is issued in investigations.
Based on this decision, CADE issued two regulations (Resolution No. 21/2018 and Ordinance No. 869/2019), establishing the rules for sharing these documents with third parties who may have been harmed, thus reaching a balance between public and private enforcements.
This understanding was enshrined in the 2011 Brazilian Competition Act when Law No. 14.470/2022 came into force, as it stated that “the transfer of overpricing is not presumed in cases of anticompetitive conduct […], and the defendant who alleges it shall be responsible for proving it”.
In addition, Law No. 14.470/2022 established double compensation for damages caused in cartel cases, with this rule not applying to those who enter into a leniency agreement or a settlement agreement with CADE and whose compliance has been declared by CADE.
Damages Quantification and Pass-on Defense
The exact quantification of the damages caused by anticompetitive practices is a difficult process and tends to require the analysis of financial documents and complex economic studies.
Another factor to consider is that many cartels involve products that are normally used as inputs for the manufacture of other products (such as chemicals, cement, among others10).
Because of this, a price fixing cartel involving an upstream product can generate a cascading effect for all downstream products, if the price increase is passed on to the next stage of the production chain.
This issue was examined by the STJ in May 202211, concluding that expert evidence is appropriate in the discovery phase, so that it is possible to ascertain whether, in fact, any overpricing has been passed on to final consumers, although its quantification can occur in the award calculation phase.
Joint and Several Liability of Offenders
In March 202212, the STJ understood that it is “indispensable to use mechanisms to restrain abuses of market power”, such as the joint and several lability of those involved in cartel cases, in light of “the guiding principles of the economic order and consumer protection”, given “the nature of the cartel, the damages arising from such an unfair agreement and the provision expressly contained in Article 942 of the Civil Code and Article 100 of the [Consumer Protection Code]”.
Finally, as a way to increase the effectiveness of combating cartel conduct, Law No. 14.470/2022 removed joint and several liability for those who have entered into a leniency agreement or settlement agreement with CADE, as seen above.
Final Considerations
CADE has expanded its activities against anticompetitive conduct, especially in relation to cartels, imposing high fines and punishing companies, their executives and employees directly involved in the conduct under investigation.
In a context in which Law No. 14.470/2022 and the STJ’s decisions have contributed to overcoming challenges in damages claims for anticompetitive conducts, more lawsuits are expected to be filed, thus increasing the exposure of companies involved in anticompetitive conduct to ever greater compensations.
In this sense, it is imperative that companies adopt proactive measures, strengthening their compliance departments in order to prevent anticompetitive conducts from occurring.
11 STJ. Interlocutory
12
enforcement
Minister Francisco Falcão, Second Panel, judged on 28/3/2022, DJe of 31/3/2022.
10 WHISH, Richard; BAILEY, David. Competition Law. 9. ed. Oxford: Oxford University Press, 2018, p. [253]. “Experience shows that some industries are particularly prone to cartelisation: any review of
activity in this area will quickly reveal, for example, that this is true of the cement, chemical and construction sectors.”.
Appeal on Special Appeal No. 2.041.410/SP. Appelants: L.B.S. and V.C.S. Appellees: V.S de C.L. Interested party: C B F & B S de A. Reporting Justice: Justice Marco Aurélio Bellizze, Third Panel, judged on May 23, 2022, DJe of May 24, 2022.
STJ. Interlocutory Appeal on Special Appeal No. 1.011.234/RS. Appellants: Valnir Jose Dutra Da Silva and Dutra Auto Posto Ltda. Appellees: Santa Lucia Comercio e Pavimentações Ltda., Ivo Santa Luci and the Public Prosecutor’s Office of the State of Rio Grande do Sul. Interested parties: Maffini E Cia and others. Rapporteur:
60-SECONDS WITH:
GREG HABER
VICE PRESIDENT VERITA GLOBAL
Q What’s the strangest, most exciting thing you have done in your career?
A One of the strangest experiences “career-wise” was when I was a young attorney, and in a very high-profile, contentious and intense litigation, I physically broke up a fistfight at a deposition between two attorneys (each a Partner at their respective firm) on opposing sides of the litigation. Strange things indeed. As for exciting businesswise, I’ve been lucky enough to have successfully developed corporate divisions in the past, but where I am now is absolutely exhilarating. The opportunity to meet so many new, interesting and intelligent people, while working to help shape and leave an indelible imprint on the class action administration market in the UK and EU is energising and truly thrilling.
Q What motivated you to pursue a career in law?
A When I was a kid The New York Times had weekly section called “At the Bar”, which recounted tales of renowned (and some infamous) attorneys dealmaking in the boardroom, battling in the courtroom or performing other fascinating business and legal related exploits. I am a sucker for a good story and could see myself doing that one day, so I became a commercial litigation attorney. It didn’t stick.
Q Imagine you no longer have to work. How would you spend your weekdays?
A Lots of traveling with my family - I love seeing and learning new things. I would volunteer as a business-life coach. I enjoy helping people grow to reach beyond their potential and solving problems. And I’d definitely coach a high-school basketball team.
Q What piece of advice would you give to your younger self?
A Take bigger risks.
Q What are the biggest challenges facing legal practitioners nowadays?
A As a legal notice and settlement administrator, I focus on class actions. This industry is still nascent in the UK and the EU. Their collective (pun intended)
challenge is navigating legal systems that are not fully equipped procedurally and which lack extensive and clear regulations and jurisprudence to manage and adjudicate the diverse types of class matters that are being filed. Almost all the professionals in this space I encounter are embracing the exciting changes that class actions have brought to the legal landscape and are seeking to forge a path ahead that is efficient, effective and enduring.
Q What book do you think everyone should read, and why?
A Tough question. There simply isn’t one book for everyone and my interests are diverse. I usually read several books at a time, so I’ll just tell you what I’m reading now. Revenge of The Tipping Point by Malcom Galdwell – I highly recommend all his books for his deeply-researched, ingenious, unique and profound insights on people, thinking, psychology and trends; Paradise Bronx, by Ian Fraizer, which is a history of the Bronx, New York, where I grew up; I’m re-reading The Black Swan by Nassim Taleb, which is a classic on the impact of rare, unpredictable events and gaining an understanding of what we don’t know; and for fun, The Demon of Unrest, which is a historical fiction (my favourite genre) by Erik Larson.
Q Dead or alive, which famous person would you most like to have dinner with, and why?
A Being a New Yorker, I am not that impressed by fame, but I’ll go with Leonardo DaVinci. He was beyond brilliant, a visionary, creative genius, lived in an interesting and dynamic time, walked among monarchs and in the halls of power, was respected by all and possessed knowledge and insight about more things than one can even imagine. It would be a most interesting dinner, and since he was a Tuscan, I’m confident the food and wine would be superb.
Q The greatest film of all time is…
A Pulp Fiction. To paraphrase the film, that’s just a hard fact of life you are going to have to accept.
Q What legacy would you hope to leave behind?
A When it is all done, if people say – he was just a good guy – then I’ve accomplished a lot. Being known as honourable and kind, the type of person who treats others with the respect due to them and does the right thing, is a daily and life-long goal. Setting that example for my children is a motivating factor.
Q What is the most significant trend in your practice today?
A It is almost always technology related. How to harness technology, in particular AI, and how to use it appropriately to effectively manage and cull data and drive efficiencies. How to combat technologically fuelled fraud using AI. Data privacy and security concerns are paramount. We are constantly vigilant and in a slight state of paranoia when it comes to data privacy and security.
Q What is the biggest life lesson you have learned?
A Several come to mind. Don’t stress. Be mindful. Listen. Bet on yourself. If you work hard and smart, things tend to work out much better than expected. Never stop hustling and keep the momentum going. Have perspective and always maintain your sense of humour. Everything happens for a reason, but that reason may not be apparent in the moment, or ever.
Q What is one goal you would like to achieve in the next year?
A Start to really learn a new language. My vanity goal is to take a few classes at the Peloton studio in London and meet some of the instructors.
THE MORE THE MERRIER?
NAVIGATING SIMILAR AND OVERLAPPING CLAIMS IN THE COMPETITION APPEAL TRIBUNAL
Amid the flurry of collective proceedings being lodged in the Competition Appeal Tribunal post-Merricks, it is little surprise that several overlapping, similar and related claims have arisen. This article considers key developments in 2024 to the Tribunal’s approach to managing the legal and logistical challenges posed by this ever-growing web, including the Tribunal’s maturing approach to carriage disputes and emerging strategies for case management.
Putting Carriage Before Certification: A Confirmed Approach For Overlapping Claims
In February 2024, the Tribunal handed down its first judgment in a carriage dispute heard as a preliminary issue pre-certification.
Where two or more applications for substantially similar opt-out collective proceedings are brought before the Tribunal, the Tribunal will be unable to certify both applications – to do so could lead to “double recovery”: the same person would be part of two classes in respect of the same alleged damage. The Tribunal will therefore hear a “carriage dispute”, by which it will determine which of the applicants is most suitable to act as the class representative for the purposes of Rule 78(2)(c) of the Competition Appeal Tribunal Rules.
Since determining the first carriage disputes “rolled up” with certification in a single hearing in 2022,1 the Tribunal’s
practice has shifted to hearing carriage as a preliminary issue, finding that carriage can be fairly separated from certification and preferring this approach to avoid delay and save the costs of certification for the unsuccessful application.2 In 2023, this approach led to the amalgamation of two rival claims against Google in respect of advertising technology.
No such agreement was reached in the “hard -fought race” between proposed class representatives Ms Hunter and Mr Hammond in respect of their claims regarding Amazon’s alleged abuse of dominance in respect of its “Buy Box” option on Amazon Marketplace.3 The Tribunal found Mr Hammond’s application to be more suitable, preferring his expert methodology to that of Ms Hunter’s. The February 2024 judgment provides useful guidance:
Authored by: Laura Whyatt (Partner) and Ellen Curran (Associate) - Dentons
1 Evans v. Barclays Bank plc and Michael O’Higgins
Trucks
Stellantis
1. The Preliminary Issue Approach Is Here To Stay, But At What Cost? The Tribunal has confirmed hearing carriage before certification will be preferable in most cases. However, the short-term savings from avoiding duplicative certification efforts may have hidden cost. While the Tribunal has insisted that certification remains “an important, background, factor” and that there should be “no following wind” that succeeding on carriage will result in certification,4 it is near unavoidable that some certification issues will be highlighted in the course of examining competing applications. Proposed class representatives may be required to show their hand early in responding to arguments during a carriage dispute, whereas proposed defendants may be concerned that the Tribunal is more likely to certify a claim having been persuaded to select it as the frontrunner in the carriage dispute. So far, however, the Tribunal has rejected the argument that carriage and certification ought to be heard by a separate Tribunal, “save in wholly exceptional circumstances”.5
2. First Come Is Not Always Best Dressed. Consistent with the Tribunal’s previous approach, the first party to file will not be given automatic preference and the question of sequencing is “largely irrelevant” for claims at broadly the same stage.6 Indeed, the Tribunal found it appropriate that Ms Hunter did not seek to gain any advantage from having filed five months before Mr Hammond.7
3. Winner May Not Take All. Ms Hunter’s case was held to be “well put together” and has only been stayed, not dismissed (as may be appropriate in the case of a hopeless application). Should the “winner” stumble, defendants may still face renewed challenge from the stayed proceedings.
The Tribunal is set to grapple with a further carriage dispute in respect of rival claims against Amazon’s e-commerce practices in November 2024.8
The Same, But Different: Common Issues In Different Proceedings
It is an inevitable characteristic of competition litigation that claims relating to the same competition infringement will be brought by multiple claimants and/or by claimants operating at different levels of the same supply chain. This is all the more so as the opt-out collective actions regime has facilitated claims brought on behalf of consumers. This itself invites competing interests among claimants: direct purchasers will allege that loss sits with them, whilst indirect purchasers will seek to demonstrate pass-on to them.
The Tribunal is developing a variety of strategies to manage such claims and has been increasingly willing to develop bespoke case management solutions to deal with separate proceedings raising common issues.
specially selected key issues, such as overcharge and pass-on, for all litigating parties. A Claimant Protocol has been developed whereby the claimants are divided into lead, stayed and active (but not lead) claimants. The lead claimants and the defendants will advance “positive cases”, put together by their experts who will construct their cases on the back of specific data and information requests as led by the experts, rather than following a traditional disclosure exercise. Upon receipt of the positive cases, the lead parties will then prepare “negative”, essentially responsive cases, which are intended to set out why the other sides’ positive case cannot be relied upon.
The determination of the issues in this manner will have binding effect on all parties, including the claimants choosing to stay their cases.
The intention is that this will minimise risk of inconsistent outcomes on key issues and avoid parties at the “end of the queue” waiting years to reach a substantive hearing.10 These processes are designed to be entirely expertled, signalling the Tribunal is willing to move away from the usual order of proceedings where it sees economics as central to the case – and capable of being used to determine core issues that could incentivise settlement.
A “Positive” Way Forward
In January 2024, the Tribunal endorsed an “Issues-Based Approach” for managing the second wave of the Trucks litigation.9 Faced with nearly 100 separate proceedings in respect of the same substantive issues across England, Scotland and Northern Ireland, the Tribunal preferred an issuesbased approach to the traditional, sequential approach, in order to resolve
4 Hunter & Hammond at paragraph 11; Ad Tech at paragraph 25(2).
5 Ad Tech at paragraph 25(3).
6 Evans v Barclays Bank plc [2023] EWCA Civ 876 at paragraph 153.
7 Hunter & Hammond at paragraph 24.
8 1641/7/7/24 BIRA Trading Limited v (1) Amazon.com, Inc., (2) Amazon Europe Core S.À.R.L., (3) Amazon
Under The Same Umbrella
Another way the Tribunal has sought to manage common issues at different levels of the supply chain is through the introduction of the Practice Direction 2/2022 Umbrella Proceedings. The
Services Ltd. and (6) Amazon Payments U.K. Limited and 1644/7/7/24 Professor Andreas Stephan v Amazon.com, Inc.; Amazon Europe Core S.À.R.L.; Amazon Services Europe S.À.R.L; Amazon EU S.À.R.L; Amazon U.K. Services Ltd; Amazon Payments U.K.
practice direction was introduced to provide a framework for separate proceedings with common issues to be managed together for the purposes of resolving these “ubiquitous matters” to bind all parties to the Umbrella Proceedings. The regime bore fruit in 2024, with the first “host cases” in the Interchange Umbrella Proceedings progressing to an initial trial on liability in January 2024. In May 2024, the Tribunal designated the Merricks Collective Proceedings as an additional host case to the Interchange Umbrella Proceedings in respect of the common issue of pass-on of merchant interchange fees. The trial on pass-on in November 2024 will be the first test of the regime’s capacity to act as a single case management tool to promote consistency across private damages claims and collective proceedings.
Timing is Everything
How the Tribunal deals with common issues is tempered by the timing of the respective proceedings, with the Tribunal giving primacy to existing trial listings on three occasions in 2024.
1. Whistl and Bulk Mail claims against Royal Mail:11 The Tribunal was reluctant to adjourn the listing in the Whistl proceedings (a competitor claim alleging Royal Mail’s conduct caused Whistl to lose market share in the bulk mail market) to accommodate the later filed opt-out collective action on behalf of purchasers of bulk mail who allege a more competitive market would have led to lower prices, the Bulk Mail Claim, observing that to reschedule “when so much work has been put into [the Whistl claim] so far” would be a “very, very big ask” of both the parties and of the Tribunal’s
11 1584/5/7/23
resources to accommodate a suitable alternative listing – much less for a claim not yet certified.12 The question of what participation the Bulk Mail Claim should have in the Whistl trial will be determined in the course of 2025, postcertification.
2. Apple AppStore proceedings:13 Two collective proceedings have now been brought against Apple in respect of distribution of apps through the Apple App Store on behalf of consumers (Kent proceedings) and app developers (Ennis proceedings). With the Kent proceedings significantly more advanced and set for trial in January 2025, the Tribunal declined to alter the existing timetable and has decided Ennis’s claim, certified in September 2024, will be case managed separately.
3. Google Play Store proceedings:14 Epic Games’ claim for private damages and the Coll collective proceedings on behalf of consumers in respect of distribution of apps through the Google Play Store have been subject to a bespoke case management strategy, effectively linking up aspects of the proceedings including by way of mutual disclosure. In May 2024 it was decided that Epic will participate in the trial in the Coll proceedings, listed for October 2025 and the trial has been extended by a week to accommodate the hearing of related factual evidence for both proceedings, rather than be delayed altogether. With further collective proceedings being launched by proposed class representative Mr Rodger in August 2024 on behalf of app developers in respect of similar issues, the Tribunal will again need to turn its mind to effective case management of the three claims in 2025.
Looking Ahead
With the number of private damages claims and collective proceedings in the Tribunal showing no sign of abating, the Tribunal is under ever increasing pressure to deal with claims consistently and efficiently and to manage the competing interests of multiple claimants. In 2025, we will see which of the various case management strategies adopted this year achieve these aims such that they become precedent for future claims.
TEN YEARS OF THE DAMAGES DIRECTIVE THREE WAYS TO BETTER USE ECONOMIC ANALYSIS IN COURT
On 26 November 2014, the “Damages Directive” (officially, Directive 2014/104/ EU) came into force. It instructs EU member states how to ensure that litigation will reward victims of violations of Articles 101 and 102 TFEU with adequate damages. As member states enacted these rules, the number of court cases involving competition law damages in the EU increased significantly in the decade that followed. It also meant the question of how to quantify damages adequately took centre stage, which brought economic analysis and econometrics into the courtroom.
Claimants and defendants retain expert economists, whose role is to provide an estimate of damages, grounded in economic analysis.
Opposing experts rarely agree on damages, which to an extent is unsurprising.
With countless ingredients that go into empirical estimation (including the methodology, data variables considered, and so forth), it is virtually guaranteed that different economists will arrive at different estimates. However, some commentators have expressed dismay. They, at least implicitly, question whether economists fulfil their role in good faith, as the economic reports commissioned by the parties routinely produce results that are not just far apart from each other, but also favourable to the respective party.
instead relied on informal damages estimates performed by the judges themselves. This situation is concerning. The use of broad axe or Solomonic solutions runs counter to the basic purpose of the Damages Directive, which is to compensate victims of a competition law infringement for the actual harm suffered.
In reaction to wide disagreement and (seemingly) favourable estimates, a number of rulings in recent years dismissed the estimations put forward by the parties’ economic experts and
Damages estimation is not an exact science: it requires judgement calls, and different economists will come to different estimates of the damage incurred, even when acting in good faith and expressing independent opinions. In our view, the fact that two reports prepared by expert economist come to entirely opposite conclusions does not mean that courts should disregard them to produce their own estimates. On the contrary, courts can use these apparent contradictions to extract relevant insights on the analyses presented, discern their quality, and use them to get the most accurate outcome. This requires an effort from economists, their clients, the legal advisors, and the courts.
We have three recommendations to improve the use of economic evidence.
First, courts should establish (and parties should follow) processes that ensure the credibility of empirical economic work. Courts must be able to confirm the validity of the results presented in front of them and these should be relevant and robust. In order to do so, we suggest considering two practices borrowed from academia: mandatory disclosure; and pre-registration. Economists should disclose their methodologies and data in full, allowing other experts and courts to verify their findings. Mandatory disclosure, similar to the requirements in academic journals, would promote transparency and trust in the economic evidence presented. Furthermore, courts could adopt a “pre-registration” system, where economic experts draft a methodological paper that sets out the experts’ views on selecting econometric models to be estimated before even collecting the data.
This commitment allows the economic experts to dispel any suspicions that they have followed an opportunistic “trial and error” approach in the assessment.
And while pre-registration would not prevent an expert from changing their approach in light of new evidence, it would ensure that these changes are explicit and the experts must justify them.
Second, courts should require constructive dialogue between economists. Even when dealing with transparent reports, it may be difficult for the court to fully understand the reasons for the discrepancies and, more importantly, how to properly assess the decisions the experts have made and their implications. A useful approach to address this could be based on joint statements, where the experts from both sides set out what they agree and disagree on. Such statements force economic experts to
(i) Recognise the key assumptions they disagree on,
(ii) Make explicit the implications of each of those assumptions, and
(iii) Show transparently the reasons for the disagreements and their consequences. These joint statements also provide an opportunity to narrow down issues to the most relevant ones, reducing the attention experts and courts spend on areas of secondary importance, and putting the courts in the best possible position to critically review each expert’s evidence and, if necessary, request additional analyses.
Finally, courts should be able to challenge the economic experts. In order to do so, they should demand clarity. Economic evidence may look daunting, with equations and regression tables. But ultimately, the economic concepts involved are usually simple,
and experts should be able to state them in plain language. Reports should be written cleanly and succinctly, and their logic explained in straightforward terms in cross-examination. The economic reports should also include a detailed discussion of the validity of the data used in the analysis, and a transparent description of the judgement calls the expert have made on the sample to use, the variables to include, and the way they enter the econometric model. A credible econometric analysis must come with a comprehensive set of robustness checks that shows that small variations to any of these elements will not overturn the main results, and courts should be able to instruct experts to conduct additional robustness checks.
None of these proposals is entirely new, and some are already being practised in various legal regimes today. Moreover, parties might be able to implement some these recommendations unilaterally in order to improve the credibility of the economic evidence they are presenting. However, there is room for a comprehensive set of guidance for courts across Europe that reflects the experience of the past decade. As the Damages Directive turns 10 years old, the time may be ripe for a new set of guidelines from the Commission on the appropriate role of economics – and economists –in the courtroom.
LEARNING FROM THE PAST
ADVANCING CLASS ACTION COMMUNICATIONS FOR THE FUTURE OF THE COMPETITION APPEAL TRIBUNAL IN 2025
Authored by: James Thomson (Director) - Mediatasks
This year, the UK Competition Appeal Tribunal (CAT) made history by approving its first major class action settlement in the Gutmann vs. Stagecoach South Western Trains (SSWT) case.
This isn’t just a footnote in legal history— it’s a monumental turning point, especially for those of us invested in class action communications.
The Gutmann case illustrates a new benchmark in class action settlements, signaling a shift that legal professionals may find insightful for future cases.
The CAT’s approval underscores the rising significance of transparency and comprehensive communication strategies in the settlement process. There’s a clear shift towards demanding full disclosure and expert evidence, ensuring settlements are both fair and reasonable. Such transparency is designed to instill confidence among legal professionals and claimants alike.
Innovating Communication Strategies
In light of the Gutmann settlement and cases we’ve seen elsewhere, innovative communication strategies are more crucial than ever for enhancing claimant engagement and boosting settlement take-up rates. The structured settlement approach, in this case, offers valuable insights into how law firms might position their payouts for approval.
One key strategy involves leveraging technology to deliver precise and timely communications, ensuring claimants are well-informed about their rights and the settlement process.
As part of its observations on claimant engagement challenges, the CAT noted that “the majority of potential claimants will not claim.” This insight highlights an area where innovative technology can play a role in enhancing claimant engagement. By embracing technology, though, law firms can empower claimants and streamline the communication process, making it more efficient and effective.
Among marketing professionals, there’s little doubt that automated
communication systems can dramatically reduce apathy and increase take-up rates. Personalised updates and reminders, along with AI toolsets like our own, can guide claimants through the necessary steps to participate in the settlement. Additionally, creating a user-friendly membership site where claimants can easily access in-depth information and submit claims can significantly enhance engagement. This site should offer comprehensive resources, not just a list of FAQs, to truly demystify the process and encourage participation.
trained autonomous AI chatbots or dedicated helplines, such as our Pay As You Go (PAYG) Call Centres, these channels allow claimants to receive timely updates and have their questions answered. This ongoing communication fosters a sense of transparency and reliability, which is essential for maintaining claimant trust.
Gutmann case. The Tribunal’s emphasis on ‘self-certification’ showcases the importance of a communication strategy that empowers claimants and builds confidence in the settlement process.
Starting Early with Marketing to Build Awareness and Trust
Initiating marketing efforts early is not just important; it’s crucial for building awareness and trust. The Gutmann case illustrates the value of early claimant engagement, highlighting how proactive communication can better inform and prepare potential participants in a settlement. Early campaigns lay the groundwork for a successful communication strategy, highlighting the urgency of proactive communication in our field.
By reaching out to potential claimants well before settlement, law firms can educate them about the case’s details, the settlement’s merits, and the benefits of participation.
This proactive approach helps demystify the process, making it more accessible and less intimidating for claimants.
As Marcus Smith, President of the CAT, emphasised the need for an “all cards on the table” approach, firms providing potential claimants with expert analyses and reports can reinforce the legitimacy and fairness of the settlement, thereby enhancing their confidence in the process.
Additionally, early marketing efforts should focus on establishing reliable communication channels. Whether through newsletters, webinars, fully
Streamlining Communication Processes
Automation plays a pivotal role in reducing the manual workload associated with claim handling. By implementing automated systems, law firms can efficiently manage communications, ensuring claimants receive timely updates and reminders without extensive human intervention.
However, to maximise effectiveness in claimant communication, it’s essential to combine automated systems with skilled personnel and strategic advice.
Services that combine software, strategic know-how, and service expertise can significantly impact this. These solutions can facilitate a structured distribution plan, organising and categorising claims according to evidence and eligibility criteria. This helps ensure that settlements are distributed fairly and efficiently, aligning with the Tribunal’s emphasis on transparency and justice.
Providing clear, straightforward information about rights and settlement procedures builds trust and reliability, encouraging greater claimant participation and satisfaction. AI technology can significantly enhance these efforts by offering personalised and secure communication channels.
AI-driven platforms can tailor messages to individual claimants and address their specific concerns while maintaining confidentiality. This level of personalisation improves the claimant’s experience and reinforces their trust in the process.
In addition, AI can facilitate secure interactions, ensuring sensitive information is protected and reducing the risk of data breaches. By integrating AI into communication strategies, law firms can provide a seamless and secure experience for claimants, further strengthening the trust crucial for successful relationships.
Building Trust Through Transparent Communication
Transparency is the cornerstone of building trust in claimant communications, a principle strongly echoed in the CAT’s decision in the
Looking Ahead
As we look towards 2025, the potential of innovative communication strategies to “square the circle” of class action communications is more promising than ever. By embracing transparency, early marketing, and technological advancements, firms can set new standards in their Competition cases.
If you’re interested in exploring these strategies further, please reach out. We’re here to share insights and discuss how these approaches can be applied to your cases. Remember to check out my next piece in the competition magazine, where we’ll dive deeper into the exciting developments in the field.
Epiq
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Lauren McGeever Managing Director
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LIANNE GODDARD DIRECTOR OF CLIENT DEVELOPMENT
Q What’s the strangest, most exciting thing you have done in your career?
A I once owned a business that was facing administration, and we brought together a team of wonderful, committed employees under a unified vision and mission. As a result, we were able to not only recover but receive industry recognition as the best business in its category in the country, which led to a successful exit.
Q What do you find most rewarding in your career in law?
A Whilst I had no formal qualification in law, I have now worked for over 20 years in this industry, having supported lawyers in various sectors. This has proven to be rewarding for many reasons, namely because of the ability to accomplish many amazing things such as fighting against injustice and generally helping others. It is, without a doubt, the most meaningful and satisfactory work.
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A I would spend even more time raising awareness and money for the Motor Neurone Disease charity. It holds a dear place in my heart after recently losing my best friend, my father, to this cruel disease.
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Q What book do you think everyone should read, and why?
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A I would like to be instrumental in supporting our international clients and growing our team here in the U.K.
“Greenwashing” is increasingly attracting the attention of the public, policy makers, and regulators. The reasons for this include increasing consumer interest in buying sustainable products, and accusations of greenwashing against several highprofile companies.
Against this background, the introduction of the Digital Markets, Competition and Consumers Act (the Act), gives the CMA new powers to pursue businesses that engage in unfair commercial practices, including greenwashing.
With this in mind, this article outlines some of the on-going regulatory scrutiny of companies’ environmental claims, considers whether greenwashing raises competition as well as consumer issues,
and briefly considers whether public policy should treat environmental claims differently to any other misleading claim a company might make about its products and services.
2024, and relates to environmental claims made by three fashion brands (ASOS, Boohoo, and Asda). The investigation led to the three firms signing a formal agreement to “use only accurate and clear green claims” and committing to an agreed set of rules around environmental claims.1 At this stage there has been no admission of “any wrongdoing or liability” and the CMA’s press release states that “at present, only a court can decide whether a breach has occurred.”2 Other investigations by the CMA are ongoing.
In addition, to the CMA’s work, there are multiple examples of investigations into greenwashing, including:
On-Going Regulatory Scrutiny Of Environmental Claims
Since publishing its Green Claims Code in September 2021, the Competition and Markets Authority (CMA) has investigated multiple firms in relation to environmental claims. The first investigation concluded in March
• Several major car manufacturers have been investigated for cheating on emissions tests and selling vehicles that emit harmful levels of nitrogen oxides above legal limits. The Volkswagen group has paid out more than £26bn worldwide in fines, compensation, civil settlements, and buyback schemes; this includes a £193m settlement
Authored by: James Harvey (Director), Madeleine Matos (Principal) and David Arnett (Analyst) - Economic Insight
in the UK.3 Daimler (which owns Mercedes) reached a $1.5bn settlement with the authorities in the US, in addition to agreeing to pay $700m to settle a class action.4 Mercedes, Ford, Nissan-Renault and Peugeot-Citroën, will go to trial in the UK, following a High Court decision in February 2024. A number of other car manufacturers could also face claims in the near future.5
• Deutsche Bank are under investigation for misleading investors in Germany by marketing its funds as ‘greener’ than they actually are. The bank has already agreed to pay a $25m fine in the US to settle charges regarding similar accusations.6
• Three airlines (Delta Air Lines, KLM, and United Airlines) face class actions in the US that allege the firms made misleading environmental claims around carbon neutrality. These cases are still ongoing in US district courts.7
• Several major oil and gas companies are being sued in the US by the state of California relating to environmental claims that have been described as “untruthful, deceptive and/or misleading.”8 The state of California claims that the firms have caused tens of billions of dollars in damages and have deceived the public by downplaying the risks created by fossil fuels.9
• Tesla was accused of misleading consumers in the US on the estimated driving ranges of its electric vehicles. However, it was ruled that the individuals must pursue their claims in individual arbitrations (rather than a class action) because of the terms that the drivers agreed to when purchasing their vehicles.10
Greenwashing Is A Consumer Issue, But Is It A Competition Issue?
As noted above, the introduction of the Act gives the CMA new powers to pursue businesses that engage in unfair commercial practices. Under the Act, a commercial practice is considered unfair if it is likely to cause the socalled ‘average consumer’ to take a transactional decision that it would not have taken otherwise. Under this definition, it is obvious that making a misleading environmental claim could be considered unfair and so could be caught by the Act.
So, greenwashing is a consumer issue, but when might it be viewed as a competition issue – and relatedly when could greenwashing constitute a breach of competition law? This is not a question of academic interest only. For example, the Act did not ultimately provide for collective actions for breaches of consumer law, and so, for now, collective actions are only possible for breaches of competition law. Could we see ‘creative’ collective actions for breaches of competition law due to a company making misleading environmental claims? What would be the theories of harm?
The definition of an unfair commercial practice provides a way into answering these questions from the perspective of economics. If a misleading environmental claim caused consumers to make a different transactional decision in the factual compared to what they would have made in the counterfactual, then this could have various competitive effects. For example:
• Some consumers may have bought the company’s greenwashed product, when they would have instead bought a rival’s genuinely environmentally friendly alternative. If this happened, the rival would be harmed by the misleading environmental claim through ‘unfair’ competition that is not ‘on the merits’.
• The corollary of this is that consumer demand for the company’s product may be artificially high when it is greenwashed. Faced with higher demand, the company may have charged more for its product than it would have been able to if its product had not been greenwashed. If this happened, consumers would be harmed by the misleading environmental claim through paying ‘unfair’ prices.
There are other potential competitive effects of greenwashing that could harm the greenwashing company’s rivals: halo effects and reputational damage.
• Halo effects arise when, as a result of selling greenwashed products, the company attracts consumers to its ‘store’ and then sells other products that consumers would have otherwise bought elsewhere.
• Reputational damage arises when, as a result of selling greenwashed products, the company harms the reputation of products and firms that are genuinely sustainable (a point we return to below).
Depending on the severity of these effects, greenwashing could be viewed as an exploitative and/or exclusionary practice and so a breach of competition law if it is undertaken by a dominant company.
Can The Consumer And Competitor Harm Arising From Greenwashing Be Quantified?
If the existing or future legal framework allows consumers and rivals to claim for damages arising from greenwashing, are there sound methods for quantifying the harm to consumers and competitors in monetary terms? The short answer is ‘yes’, albeit with the usual caveats that apply to the quantification of the harm arising from other breaches of competition law, such as cartel damages cases.
For example, to calculate the extent to which consumers paid a higher price for the greenwashed product than they would have paid had it been accurately marketed, one could compare the price of the greenwashed product to the prices of similar products that were not marketed as being environmentally friendly.
The comparators could include the product in question before it was greenwashed.
An ideal comparator is one that (i) has identical characteristics to the greenwashed product (except that it is not greenwashed); and (ii) is sold in identical market conditions. If such a comparator exists, one could simply calculate the difference between the price of the greenwashed product and the price of the comparator product. However, if there are any differences between the greenwashed product and the comparators, it is important to account for these differences in order to achieve a more like-for-like comparison.
Those familiar with the techniques used to calculate cartel overcharges will recognise this type of approach as entirely standard.
Should Policy Treat Misleading Environmental Claims Differently To Any Other Misleading Claims?
The competitive effects outlined above would apply to any misleading claim made by a company, not only misleading environmental claims. Should policy treat misleading environment claims differently to any other misleading claims? Should more public resources go into deterring misleading environmental claims? Should the financial and reputational consequences for making misleading environmental claims be more severe?
One point of view is that policy should treat misleading environmental claims differently. The basic argument is that greenwashing could stunt the ability of market forces to be part of the solution to the environmental challenges facing the planet.
This stunting of market forces could create social costs that exceed the harm to the consumers and rivals of an individual greenwashed product. For example, suppose greenwashing undermined trust in other genuinely sustainable products and services – would you be willing-to-pay for a genuinely sustainable products if you cannot be sure that it is?
Whatever your point of view, it seems clear that the future design as well as the public and private enforcement of competition and consumer law will at the very least influence the attainment of the other goals of public policy, including the environmental ones.
THE EU FOREIGN SUBSIDIES REGULATION A YEAR IN REVIEW
Background
The EU’s objective to ensure a level playing field for all companies operating in the internal market while remaining open to trade and investment
The EU Foreign Subsidies Regulation (EU FSR) entered into full effect as of 12 October 2023, with an objective to review and address distortions and unfair advantages resulting from foreign subsidies and financial contributions granted by non-EU countries to companies engaging in an economic activity in the EU.
In order to assess those potential distortions of fair competition in the EU, the EU FSR imposes a mandatory notification and suspensory regime both for large M&A deals and major procurement projects in the European Union, which means that such transactions cannot close without the prior approval of the European Commission (EC). The EC can also investigate on its own initiative (i.e. ex officio investigations).
Scope and Main Features of The EU Foreign Subsidies Regulation
The EU FSR consists of three main pillars:
• An obligation for companies to notify to the EC any transaction involving a financial contribution by a non-EU government where (i) the acquired company, one of the merging parties or the joint venture generates an EU turnover of at least €500 million and (ii) the foreign financial contribution involved is more than €50 million in the last three years before the deal.
• An obligation for companies to notify to the EC any participation
in public procurement procedures, where (i) the estimated contract value is at least €250 million and (ii) the foreign financial contribution involved is at least €4 million per non-EU country; the EC may prohibit award of contracts in such procedures to companies benefiting from distortive subsidies.
• In addition, the EC can start investigations on its own initiative (ex-officio) if it suspects that distortive foreign subsidies may be involved. This includes the possibility to request adhoc notifications for public procurement procedures and smaller concentrations which would not otherwise have required notification.
In this context, the FSR grants the EC a wide range of investigative powers to gather the necessary information, including: (i) sending information requests to companies; (ii) conducting fact-finding missions within and outside the EU, and (iii) launching market investigations into specific sectors or types of subsidies.
Authored by: Mélanie Bruneau (Partner), Nick Peristerakis (Partner) and Antoine de Rohan Chabot (Counsel) - K&L Gates
If, following an investigation (either prompted by a notification or launched exofficio) the EC finds that a foreign subsidy exists and distorts the EU single market, it may balance its negative effects with its potential positive effects, e.g. on the development of the subsidised economic activity. If the negative effects outweigh the positive ones, the EC may impose structural or non-structural redressive measures, or accept commitments, to remedy the distortion (e.g. divestment of certain assets or prohibition of a certain market conduct).
that the foreign subsidies received by the buyer and the UAE sovereign wealth fund could have led to a distortion of competition in the EU post-transaction by artificially improving the capacity of the merged entity to finance its activities in the EU internal market and increased its indifference to risk. As a result, the merged entity could have engaged in investments, for instance in spectrum auctions or in the deployment of infrastructure, or acquisitions, thus distorting the level-playing field relative to other market players by expanding its activities beyond what an equivalent economic operator would engage in absent the subsidies.
On The Transactional Side: An Interesting Decision Which Led To A Conditional Clearance Subject To Remedies
The EC issued its first conditional clearance in September 2024 following an in-depth investigation of an acquisition under the FSR, being a foreign non-EU buyer. This decision constitutes the first major test case of a ‘problematic’ transaction, thus providing guidance on the type of remedies that the EC would be willing to accept to get a transaction through.
In this case, the transaction in question involved the acquisition of an Eastern European telecoms group by a United Arab Emirates (UAE) telecommunications company that is ultimately controlled by a UAE sovereign wealth fund.
Upon investigation, EC found that both the buyer and the UAE sovereign wealth fund received foreign subsidies from the UAE government, consisting notably in an unlimited State guarantee, as well as grants, loans and other debt instruments.
According to the EC, the foreign subsidies received by the buyer did not lead to actual or potential negative effects on competition in the actual acquisition process, as the buyer was the sole bidder for the target and had sufficient resources on its own to perform the acquisition, and the purchase price reflected the target’s market value. However, the EC found
To address the EC’s concerns, the buyer and the UAE sovereign wealth fund offered the following commitments, including (i) a removal of the unlimited state guarantee for the buyer, (ii) a prohibition on any financing from the buyer and the UAE sovereign wealth fund to the target’s activities in the EU, except for emergency funding and other transactions that take place on market terms, (iii) a requirement that the buyer informs the EC of all future acquisitions, even if they are not notifiable under the FSR and (iv) the appointment of an independent monitoring trustee who will oversee the above commitments.
The EC concluded that the transaction, subject to these commitments, would no longer raise competition concerns, provided that the commitments in question will remain valid for a period of 10 years, which can be extended by the EC for another 5 years, or further if both the EC and the buyer agree.
and staff training services. As a result of this investigation, the company ultimately withdrew its participation from the tender.
A couple months later, in April 2024, the EC launched two additional in-depth investigations into notifications made by two Chinese photovoltaic companies in the context of a public tender for the design, construction and operation of a photovoltaic park in Romania.
In both instances, the EC suspected that significant potential economic advantages resulting from subsidies received by these two companies in the previous three years may distort the internal market.
Again, these in-depth investigations led to these companies withdrawing their participation from the tender.
On The Public Procurement Side: Several Investigations Into Chinese Companies
In February 2024, the EC opened an in-depth investigation following the notification by a Chinese state-owned train manufacturer, concerning a public procurement procedure launched by the Bulgarian Ministry of Transport and Communications, relating to the provision of several electric “push-pull” trains as well as related maintenance
Already Two EC ExOfficio Investigations And The First Court Case
In April 2024, the EC launched its first ex officio investigation into Chinese suppliers of wind turbines, with a focus on the conditions for the development of wind parks in Spain, Greece, France, Romania and Bulgaria.
The EC also carried out unannounced inspections in April 2024 at the premises of a Chinese company active in the production and sale of security equipment in the Netherlands and Poland, on suspicion that this company may have received foreign subsidies that could distort the internal market pursuant to the FSR. The company sought to annul the EC’s inspection decision, but the General Court dismissed the application.
UNFAIR? DEFINITELY MAYBE
Authored by: Chris Doyle (Head of Telecoms) - CEPA
The sale of Oasis concert tickets on 31 August 2024 highlighted how dynamic pricing can be used to help drive revenues and manage demand. There has been much media commentary about the process and the CMA subsequently announced on 5 September 2024 that it would be reviewing the sale.1 The CMA is interested in understanding whether buyers were given clear and timely information, and whether consumer protection law was breached.
Dynamic pricing is where a seller adjusts prices according to changing market conditions, usually increasing the unit price of a good as supply falls relative to demand.
The practice is not automatically unlawful, but in some circumstances it may breach consumer protection or competition law in the UK.
As an economist and purveyor of popular music who participated in the Oasis sale and purchased three tickets, who has lectured and published about price discrimination and advised on pricing matters in a competition law context, the issues raised by dynamic pricing in this case are fascinating.
However, as has been reported by the BBC, there were ownership connections between Ticketmaster and other parties involved and this may have aligned incentives to apply dynamic pricing.2
Oasis announced on 27 August 2024 that they would be reforming and playing 14 gigs, which led to a media storm and huge demand for tickets. Ticketmaster organised the sale of tickets and claimed that the band’s management and promoters were responsible for the pricing scheme.
In this instance, dynamic pricing resulted in ticket sale prices more than doubling. Was this unfair? Definitely maybe. Buyers who wanted to buy tickets were required to register on the Ticketmaster site before sale commenced at 9am on 31 August. Each buyer was limited to a maximum of 4 tickets. Buyers interested in the five London shows had around 45,000 tickets to chase.3 Tickets for all 14 gigs in England and Ireland were offered on the same site, at the same time.
2 BBC (2024, 4/5 September) “Oasis ticket row: How Ticketmaster’s owner has grip on UK live music scene” at https://www.bbc.co.uk/news/articles/crmw0l30vk0o
3 Oasis announced on 4 September a further two Wembley shows following the ticketing furore, see https://www.mylondon.news/whats-on/music-nightlife-news/oasis-add-twowembley-dates-29870771
Once registered, eager would-be purchasers waited for sales to start at 9am and at that moment discovered their position in a virtual queue –determined by random selection. I started somewhere around 105,000th in the queue. I did not know how many people (or bots) were in the queue, but a tech minded 11yo showed me on his phone at about 10am a Livestream by a TikToker showing his queue place above 400,000!
Initially the queue moved painfully slowly, as presumably buyers at the front of the queue needed time to choose their seats from a wide range of options on the seating plan graphics. By around 12.30pm my position in the queue started to move up more quickly, as presumably the range of tickets had now dwindled and buyers were purchasing more quickly at the point of sale. What was also happening, though not known at the time, was the sale price had increased significantly and many buyers at the front of the queue were choosing to exit without purchase.
After almost five and half hours at 2.22pm I was at the front of the queue. What did I know at this point? I knew that by 11.54am the inventory of tickets was limited. I also knew that there must be some tickets available for my chosen concert.
how airline tickets and hotel rooms are sold and is commonly referred to as “Dynamic Pricing”. You will not be entitled to a refund or credit if (i) the Sale Price you paid for a Ticket was at any time before you purchased your Ticket less than the Sale Price you paid; or (ii) the Sale Price of any other Tickets to the relevant event (whether in the same price category or otherwise) is/are subsequently reduced after you purchase your Ticket.”
When the price was shown for my seat selections, it was at a level above that listed at the beginning of the process. My 11yo assistant TikTok expert excitedly said “press purchase” – and as they say, the rest was history. Was this a case of the sunk cost fallacy? Throwing good money (the value of the time spent waiting) after bad?
Three of us debated for several minutes whether we should buy at the time and concluded that, despite being relatively expensive, we were willing to pay the higher price. In short, we paid more than we expected to pay but paid below what we were prepared to pay at that time and in those circumstances.
But was it unfair? If we had known dynamic pricing was being applied would we have behaved differently? Possibly.
We might have walked away at the beginning having discovered our position in the queue at 9am. Would we have behaved differently if Ticketmaster had displayed the current market price in real time?
Possibly. Seeing an increase in price might have deterred our ongoing participation and provided more time for us to reflect on our purchase behaviour.
If our behaviour had been different in these alternative scenarios, it would imply we suffered from a bias known as the sunk cost fallacy. In other words, we probably paid too much because we erroneously accounted for our waiting time in the queue.
There was an element of us paying too much. Was it unfair? Definitely maybe.
What I did not know and had not read (and suspect most others in the queue were not aware of) was Section 4.3 of Ticketmaster’s Purchase Policy:4
“4.3 In many circumstances, Ticket prices are set at the time of the initial on-sale and stay the same until the event. However, some Tickets are “market-priced,” and so Sale Prices may increase or decrease at any time, based on demand. This is similar to
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NO-POACH AND WAGE-FIXING AGREEMENTS
IN CEE COMPETITION
AUTHORITIES’ PRACTICE
Introduction
One of the most prominent features of the current European antitrust landscape has been the increasing focus of competition authorities on anticompetitive agreements in labour markets. After cases, in which such agreements were assessed only as a part of a larger scheme or secondary to the main conduct, competition authorities including the ones from Central and Eastern Europe (CEE) have increased their focus on standalone nopoach and wage-fixing agreements.
As a starting point, some CEE competition authorities followed suit and, after European Commission’s Policy Brief on labour market agreements, issued their own policy documents addressing no-poach and wage-fixing agreements.
It is now clear that the authorities do not intend to stick to policy work only. While perhaps not as prominent as EC’s ongoing no-poach cases, the CEE competition authorities do not hold back. This article offers an overview of the current situation of enforcement in labour markets in CEE.
CEE Enforcement
National competition authorities from Central and Eastern Europe are often in a shadow of their larger, more established and renowned counterparts from Western Europe and, quite obviously, of the European Commission (EC). But particularly with respect to no-poach and wage-fixing agreements, the sentiment appears to be unjustified. There are authorities like Croatia that investigated a no-poach agreement already in 2015, but most importantly, a number of CEE national authorities has begun investigating labour market agreements in recent months. These include authorities from Czech Republic, Poland, Hungary, Romania and Slovakia. We aim to provide an overview of their recent cases below.
Authored by: Jan Kupčík (Attorney At Law), Paweł Kułak (Senior Attorney At Law), and Šimon Kopárek (Paralegal) - Schoenherr
Czech Republic
The Czech Competition Authority (CCA) is among the ones who released its own policy document on labour markets. Its information brief issued May 2023 outlined CCA’s view of nopoach and wage-fixing agreements.1 Shortly thereafter in Autumn 2023, the CCA announced that it concluded two preliminary investigations into potential anticompetitive provisions of ethical codes of two associations, namely the association of travel agents and the association of used cars dealers.
These codes required associations’ members to extensively apply employment non-compete clauses. While these clauses as such are fully legal, the CCA found that the standardisation of conduct among the associations’ individual members (who are mutual competitors) in the labour market as problematic. The CCA suggested that such conduct potentially constitutes a no-poach agreement concluded via associations’ decisions. The investigations were closed without initiating formal proceedings as both associations committed to erase the problematic provisions.2
A third and fourth case concerning a similar conduct were published in January 2024. This time, CCA investigated associations of personal sales and of providers of personnel services.
The ethical codes of both associations included provisions prohibiting members from systematic job offerings to other members’ employees and active solicitation of employees.
Again, the CCA did not see the need to initiate formal proceedings as both associations promptly removed the problematic provisions.3
Finally, in July 2024, the CCA initiated its first administrative proceedings against a no-poach agreement. While it has been confirmed that this case involves a human resources agreement, no additional details have been disclosed.4
PCA ruled in October 2022 that this agreement disrupted competition and penalised the parties involved.5
The second case concerned the area of speedway racing. Members of Polish Motor Union and Polish Speedway League agreed to set maximum wage rates for workers in the speedway racing industry.
PCA declared these agreements as anticompetitive by restricting salary growth, and imposed fines.6
In July this year PCA issued a policy document titled “Collusion and Abuse in the Labor Market”.7 The timing of the release coincided with publication of information about PCA’s ongoing investigation into logistics and transportation companies that provide services to major supermarket chains, and their possible no-poach agreement. As of now, the case is still ongoing.
Poland
Since 2019, the Polish Competition Authority (PCA) has been investigating collusion in Polish labour market, particularly targeting wage-fixing agreements. So far, two cases have resulted in fines and one investigation is ongoing. The first case in Poland involved agreements between basketball clubs and the Polish Basketball League during the 2019/2020 season, which was affected by the COVID-19 pandemic lockdown. The clubs coordinated their actions, including terminating contracts with players and agreeing not to pay the full salaries for the season. This coordination was intended to prevent players from moving between clubs.
Hungary
In December 2020, the Hungarian Competition Authority (HCA) fined the Association of Hungarian HR Consulting Agencies for anticompetitive practices that spanned over seven years. These practices included fixing minimum fees, restricting public contract bids that used other members’ employee data and no-poach and “no-touch” commitments. In relation to the no-poach clause, HCA considered it as ‘by-object’ market allocation,8 which was upheld by the Hungarian Supreme Court. Regarding the ‘no-touch’ practice, the court required further analysis.9
1 Úřad pro ochranu hospodářské soutěže. Competition Aspects of Agreements in the Labor Market (Infor-mation Sheet 2/2023). 2023. https://uohs.gov.cz/download. php?q=Informacni_listy/2023/Informacni_list_2023_02_nopoaching.pdf
2 Úřad pro ochranu hospodářské soutěže. Association of Czech Travel Agencies and the Association of Used Car Dealers of the Czech Republic. October 19, 2023. https://uohs.gov. cz/cs/informacni-centrum/tiskove-zpravy/hospodarska-soutez/3697-urad-vyresil-prvni-pripady-moznych-zakazanych-dohod-na-trhu-prace-zatim-bez-ulozeni-pokuty.html
3 Úřad pro ochranu hospodářské soutěže. UOHS Warned Professional Associations About Prohibited Practices Enshrined in Their Ethical Codes. January 19, 2024. https://uohs.gov. cz/cs/informacni-centrum/tiskove-zpravy/hospodarska-soutez/3789-uohs-upozornil-profesni-sdruzeni-na-zakazana-jednani-ukotvena-v-jejich-etickych-kodexech.html
4 Úřad pro ochranu hospodářské soutěže. Proceedings Relating to Alleged No-Poach Agreement. July 1, 2024. https://uohs.gov.cz/cs/informacni-centrum/tiskove-zpravy/ hospodarska-soutez/3936-urad-zahajil-dve-spravni-rizeni-v-oblasti-hospodarske-souteze.html
5 Office of Competition and Consumer Protection. Basketball Clubs Violated Competition - Decision of the President of the Office of Competition and Consumer Protection. October 25, 2022. https://archiwum.uokik.gov.pl/aktualnosci.php?news_id=19005
6 Office of Competition and Consumer Protection. Competition-Limiting Agreement in Speedway - Decision of President of UOKiK. June 7, 2023. https://archiwum.uokik.gov.pl/ aktualnosci.php?news_id=19643
7 Office of Competition and Consumer Protection. Collusions on the Labor Market: Stop, It Is Illegal. Ac-cessed 2024. https://uokik.gov.pl/en/collusions-on-the-labor-market-stop-it-isillegal
8 Gazdasági Versenyhivatal. The GVH Cracked Down on a Cartel and Imposed a Fine of HUF 1 Billion on HR Consultants. December 18, 2020. https://www.gvh.hu/en/ press_room/press_releases/press-releases-2020/the-gvh-cracked-down-on-a-cartel-and-imposed-a-fine-of-huf-1-billion-on-hr-consultants. 9 Kúria. Decision in Case No Kfv.II.37.762/2022/24 of June 7, 2023
Romania
Since January 2022, the Romanian Competition Council (RCC) has been investigating an alleged cartel of automotive engineering and technology providers in the labour market. The authority suspects that these companies imposed a no-poach agreement. Interestingly, the case was opened because of the information received on RCC’s whistleblowing platform.10
Outlook
The prevailing stance of CEE competition authorities towards nopoach and wage-fixing agreements is in line with EC’s policy brief and national policy document conclusions, i.e. assessing these agreements as generally ‘by-object’ agreements. However, at least the Croatian case shows that there are instances, when no-poach (and possibly also wagefixing) agreements are justified. However, the CEE authorities already showed their appetite to investigate labour market agreements and their strict attitude is likely to continue.
Slovakia
The Slovak Competition Authority (SCA) has become particularly active in labour markets recently. In May 2024, the SCA announced an investigation of Slovak association of entrepreneurs.11 Similar to the situation in the neighbouring Czech Republic, the investigation is focused on the no-poach provisions found in the association’s code of ethics. Additionally, in September, the SCA became the latest CEE NCA to release its own information brief on labour market agreements.12
Croatia
Long before it became popular (in 2015), the Croatian Competition Authority reviewed a contract between two IT service providers containing a no-poaching clause. This clause prohibited the recruitment, solicitation, or indirect hiring of employees. Given the scope of the clause and nature of services the authority determined considered the clause as an ancillary restriction, and therefore not deemed restrictive or prohibited.13 This case stands out as a rare instance where a no-poach agreement was deemed not to distort competition.
10 Romanian Competition Council. Investigation on the Labour Market Regarding Possible Anti-Competitive Practices. January 2022. https://www.consiliulconcurentei.ro/wp-content/ uploads/2022/01/investigatie-piata-muncii-ian-2022-English.pdf
11 Protimonopolný úrad Slovenskej republiky. PMÚ Initiated, for the First Time, Administrative Proceedings Regarding a Possible Cartel Agreement in the Labor Market. May 21, 2024. https://www.antimon.gov.sk/kartely-pmu-zacal-po-prvy-raz-v-ramci-svojej-cinnosti-spravne-konanie-vo-veci-moznej-kartelovej-dohody-na-trhu-prace/
12 Protimonopolný úrad Slovenskej republiky. PMÚ Took a Closer Look at Agreements in the Labor Market. Septem ber 18, 2024. https://www.antimon.gov.sk/pmu-sa-blizsie-pozrelna-dohody-na-trhu-prace/?csrt=4841848550135448555
13 Decision of Agencija za zaštitu tržišnog natjecanja n. UP/I 034-03/18-01/009, November 14, 2015
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THE REMEDIAL WILL-O’-THE-WISP?
INTERIM INJUNCTIONS FOLLOWING SPORTS DIRECT V NEWCASTLE UNITED
by: Jonny
Introduction
Failed applications for interim injunctions in competition law cases are not uncommon.1 A recent decision of the Competition Appeal Tribunal (“CAT”) in Sports Direct v Newcastle United (“Sports Direct”) has shone a light on the hurdles that face applicants seeking injunctions against alleged competition law infringements.
In particular, Sports Direct and a line of previous authorities highlight the uncertainty in determining whether a competition law infringement leads to a type of loss which is quantifiable in damages.
This uncertainty as to when losses will be quantifiable, means the inadequacy of damages is likely to be an issue for claimants in many cases and that substantial and credible arguments will need to be made concerning the nature of the claimant’s loss.
Although injunctions can be a powerful remedial device, particularly where conduct might have irretrievable effects on the market2 and where applications to a regulator for interim measures may not always succeed,3 parties seeking urgent relief against competition law harms should also consider broader mechanisms, including expedition of proceedings under the CAT’s procedural rules.
The Principles Applicable To Interlocutory Injunctions
In general, similar principles apply to injunctive relief in competition cases and non-competition cases. Both the High Court4 and CAT5 have a statutory power to grant injunctions,6 having regard to the same issues, namely:
1 To take a small set of examples, see Mehboob v Pakistan International Airline Corporation [2012] EWHC 4364 (Comm); Professional Golf Services Limited v Acushnet Europe Limited [2011] EWHC 2996 (Ch); Intecare Direct Limited v Pfizer Limited [2010] EWHC 600 (Ch).
2 One can envisage, for example, predatory conduct in highly dynamic markets prone to tipping for example.
3 As Whish and Bailey note: “Applications to the European Commission or the CMA for interim measures, though theoretically possible, are highly unlikely to be successful”: Richard Whish and David Bailey, Competition Law (10th ed, Oxford University Press, 2021), 338.
4 Civil Procedure Rules, Practice Direction 25A (Interim Injunctions)
5 Competition Act 1998, s 47A(3)(c). See also Competition Appeal Tribunal Rules (2015), rule 67 (“CAT Rules”).
6 As injunctions are a creature of equity, there remains scope for equitable considerations. For example, it is open for a party resisting an injunction to claim the party seeking an injunction does not have “clean hands” (for example because the party seeking the injunction had in fact engaged in a similar type of anti-competitive conduct in the status quo ante bellum). This was discussed (but not dispositive) in Sports Direct where there were submissions made regarding preexisting exclusivity arrangements involving Castore and
Authored
Ford (Partner) and Alan Zheng (Legal Advisor) - Linklaters
(i) whether there is a serious issue to be tried; and (ii) whether an injunction should be ordered on the balance of convenience, having regard to whether damages would be an adequate remedy.7
Background to Sports Direct v Newcastle United
The facts of this case involve a classic allegation of an abusive refusal to supply. The sporting goods retailer, Sports Direct sold the replica kit of various sports clubs in the UK and, “for decades”,8 sold Newcastle United’s replica kit.
On the eve of the 24/25 season, Newcastle United refused to supply Sports Direct with the replica kit for the upcoming season (purportedly due to Sports Direct’s discounting practices). Instead, Newcastle United entered into exclusivity arrangements with JD Sports (the “Exclusivity Agreement”). Sports Direct sought an interim injunction9 on the basis that Newcastle United’s conduct had no objective justification and therefore constituted an abuse of dominant position in the market for the wholesale supply of Newcastle United’s replica kit,10 or alternatively, that the defendant’s Exclusivity Agreement with JD Sports amounted to an agreement in breach of Chapter 1 of the Competition Act 1998.
Sports Direct framed the injunction in mandatory terms,11 specifically for Newcastle United to continue to supply Sports Direct by diverting a proportion of its kit to Sports Direct.
As part of its application, Sports Direct adduced expert evidence that damages would fall short of remedying the harm to customer perceptions of Sports Direct’s market positioning and credibility as the “home of football … where you can get any replica kit”12 and causing a “hole in the offering.”13 Furthermore, any damages would also fail to account for the “halo effect”, namely that customers would go into Sports Direct shops to buy the Newcastle United replica kit and ultimately spend on other items as well.14
The CAT unanimously concluded: first, there was no serious issue to be tried because, as Sports Direct put its case, it was not arguable that a dominant undertaking seeking to change its distribution model to cease to supply a single undertaking, constituted a per se abuse where there was insufficient evidence of Sports Direct’s expectations regarding the continuity of supply. Second, the CAT found that damages would be inadequate in addressing the claimed “loss of reputation”, being the “likelihood of repeat business for the purchase of the [replica kit]”.15
However, the CAT concluded that Sports Direct’s undertaking as to damages would be inadequate because the effect of the injunction would cause Newcastle United to repudiate the exclusivity terms in its contract with JD Sports (and “JD Sports pay handsomely
for this right”),16 which would cause significant disruption to the status quo, namely Newcastle United’s restructuring of its replica kit business.
On appeal, the Court of appeal reversed the CAT’s conclusion that there was no serious issue to be tried, but otherwise affirmed the CAT’s reasoning as to adequacy of damages and balance of convenience.17 As the Court of Appeal observed, “the damage to Newcastle United will be far more fundamental if the injunction is wrongly granted than the damage that will be done to Sports Direct if it misses one, or even two, season’s supply.”18
A Taxonomy Of Losses
Competition law-related losses fall on a spectrum based on ease of quantification. The readily quantifiable heads of loss relate to those things which are “purely financial”.19 Almost all competition law infringements would cause this kind of loss, and it is readily quantifiable because “all that the company would lose by such suspension of business would be the opportunity of obtaining the sums of money represented by that cut”.20
This category includes, firstly, direct or “immediate” lost profits related to any direct sales of products affected by the foreclosed input, such as the Newcastle United replica kit itself. Secondly, indirect losses, being the lost profits of other products which may have been purchased if customers had continued
Rangers: see Sports Direct.com Retail Limited v Newcastle United Football Company Limited, Transcript of Proceedings, pages 128-130, 137-142 (“Sports Direct, Transcript of Proceedings”).
7 American Cyanamid Co v Ethicon Ltd [1975] AC 396, 407-8 (Lord Diplock). See also special requirements for interim injunctions: CAT Rules (2015), rule 68(3); Competition Act 1998, s 47D(2)(a).
8 According to counsel for Sports Direct: Sports Direct, Transcript of Proceedings, 10.
9 The claimant’s injunction was pleaded as follows in the notice of a claim: to restrain the defendant from engaging in or implementing its breaches, namely, “continuing to abuse its dominant position by adopting a strategy of excluding Sports Direct from the market for the retail supply of the [defendant’s] replica kit; and continuing to breach the Chapter I prohibition by including unlawful exclusivity provisions in contracts governing the distribution and retail of the [Defendant’s] replica kit”.
10 The CAT assumed, for the purposes of the application, that Newcastle United was dominant in the wholesale market for the supply of the Newcastle United replica kit: SportsDirect. com Retail Limited v Newcastle United Football Company Limited [2024] CAT 24, [27] (“Sports Direct CAT Decision”).
11 The CAT followed National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] 1 WLR 1405, [20]-[21] (Lord Hoffmann) in holding that the precise label of an injunction as “mandatory” or “prohibitory” was not necessary.
12 President Marcus Smith paraphrasing counsel for Sports Direct’s submission: Sports Direct, Transcript of Proceedings, 58.
13 Sports Direct, Transcript of Proceedings, 64.
14 Sports Direct, Transcript of Proceedings, 57.
15 Sports Direct CAT Decision, [30(3)(iii)]: as the CAT noted: “if a supporter of Newcastle United FC were successfully to purchase NUFC Replica Kit from Sports Direct, that the chances of that supporter becoming a repeat customer of Sports Direct for purchases other than NUFC Replica Kit are material and extremely difficult to quantify.”
16 Sports Direct CAT Decision, [32(3)].
17 SportsDirect.com Retail Limited v Newcastle United Football Company Limited [2024] EWCA Civ 532, [35], [37] (Vos MR) (“Sports Direct EWCA Decision”).
18 Ibid, [42] (Vos MR).
19 To
to go to Sports Direct to purchase the Newcastle United replica kit (termed the “halo effect”). In Sports Direct, counsel for Sports Direct conceded that lost profits arising from direct product sales were quantifiable and the CAT found that the indirect lost profits were also quantifiable by reference to purchases of the replica kit in previous years.21
The less quantifiable category which, in Lord Diplock’s words, leads to “insuperable difficulties of estimation”,22 includes such heads of loss such as good will, reputational harm23 and distortions to competition. Outside of the obvious example of inadequacy of damages where a claimant has been irretrievably forced out of a particular market,24 the adequacy of damages is likely to remain a live question for claimants.
It must be recalled that difficulty in quantification does not necessarily equate to damages being inadequate. A claimant may have difficulty quantifying its financial loss, but the Court may not.25
However, even if a claimant can point to some head of loss that cannot be quantified, they could still lose at the balance of convenience step because the grant of an injunction results in unquantifiable harm which cannot be sufficiently addressed by the claimant’s undertaking as to damages. This is a live risk where injunctions are framed in mandatory terms and where, in weighing the respective harms to the claimant and respondent, it is apparent that the potential losses to the respondent are far more significant, as in Sports Direct.26
Refusal to supply can (and indeed often does) involve conduct by an alleged wrongdoer that takes the form of a contract with a third party. Accordingly, a court would need to weigh up the prejudice to the alleged wrongdoer if, for example, an injunction were ordered that resulted in a breach of its contract with a third party (for example, terms of exclusivity). The extent to which an undertaking as to damages might protect the defendant in the circumstances will not be easy to predict and this may weigh against the grant of an injunction.27
Given the above difficulties, practitioners could alternatively seek to use the fast-track procedure in the CAT and to seek to agree a tight litigation timetable.
Key Takeaways
The requirement that damages need to be deemed to be inadequate is likely to complicate applications for interim relief in many cases; however it is not an insurmountable obstacle as shown by the CAT’s and Court of Appeal’s conclusion in Sports Direct, that both direct and indirect losses of profits will be readily quantifiable.
21 Sports Direct CAT Decision, [30(2)].
22 Garden Cottage Foods Ltd v Milk Marketing Board [1984] 1 AC 130, 143 (Lord Diplock).
23 See, for example, the decision in SDI / Rangers [42], cited in Sports Direct, Transcript of Proceedings, 54.
Although the fast-track procedure may not always be available due to, for instance, the lack of complexity involved,28 it will be an important consideration for parties seeking expedited relief.
Finally, practitioners (particularly those resisting an injunction) should recall that an injunction application (regardless of its outcome) has a strategic dimension that warrants consideration. Given the timing of the application in Sports Direct, the CAT observed that result of the injunction application would effectively determine the position for the 2024/2025 season.29 An injunction application can inherently favour the applicant, by freezing the status quo.30 That strategic dimension is aptly captured by counsel for Newcastle United, who submitted, “what this application for an injunction does, par excellence, is entirely disrupt all of my clients’ plans for the launch of their nascent operation”.31
24 As noted by Richards J in AAH Pharmaceuticals Limited v Pfizer Limited [2007] EWHC 565 (Ch), [53]: “Mr Burnton submits that this is not a case for an injunction because he says that damages would adequately compensate Sockel for any loss it may suffer if, in fact, BSI has infringed its rights. He says that this is so even if the consequence of the infringement is that Sockel would be forced out of business and to cease trading. I do not for my part accept that … if Sockel is indeed entitled to continued supplies and the likely consequence of its being deprived of them would be that its business is wholly lost, then a award of damages at trial would be poor compensation.” See also Choice International Ltd v Post Office Ltd (unreported, 3 November 2016, Norris J).
25 In Intecare Direct Limited v Pfizer Limited [2010] EWHC 600 (Ch), [57], Roth J found that damages were not inadequate simply because Intecare was unable to quantify the possible losses it would face as a result of Pfizer’s policy that Intecare provide information on hospital contracts: “the ongoing effect may not be easy to quantify, but such exercises of quantification are regularly carried out by the courts.”
26 Sports Direct EWCA Decision, [38] (Vos MR). This also reflects the generalisation that “mandatory relief is more likely, if awarded incorrectly, to give rise to irremediable prejudice.”: see National Commercial Bank Jamaica Ltd v Olint Corp Ltd [2009] 1 WLR 1405, [19] (Lord Hoffmann).
27 Sports Direct CAT Decision, [7].
28 Cf CAT Rules (2015), rule 58(3)(c).
29 Sports Direct, Transcript of Proceedings, 2-3.
30 Such a freezing effect is not by operation of law, but due to the deterrent effect against conduct raised by the commencement of legal proceedings.
31 Sports Direct, Transcript of Proceedings, 28.
Since launching in Brussels and Paris in September 2023, BRG’s European Competition practice has now grown to over 50 professionals.
Aleksandra Boutin Managing Director Brussels
Marcella Fantini Managing Director Rome
David Parker Managing Director London
Xavier Boutin Managing Director Brussels
Greg Harman Managing Director London
Dante Quaglione Managing Director London & Rome
Adina Claici Managing Director Brussels
Kai-Uwe Kühn Managing Director Brussels
Mark Bosley Director London
Konstantin Ebinger Managing Director Brussels
Francesco Lo Passo Managing Director Rome
Jean-Gabriel Despeyroux Director Paris
Laurent Eymard Managing Director Brussels & Paris
Liberty Macebo Mncube Managing Director Johannesburg
Cyril Hariton Director Brussels
A BARRIER TO CERTIFICATION?
PCRS UNDER SCRUTINY TO PROVE THEY ARE PROTECTING THE CLASS
It has become a common view that it will seldom be possible for a defendant to defeat claims at the certification stage of collective proceedings. Attempts to oppose certification on the basis, for example, that the expert methodology for quantifying loss on a class-wide basis is unviable have failed, as the Courts have set a low bar, and have been prepared to give proposed class representatives (PCRs) ‘second goes’ if they fail to overcome it at first. One possible challenge to certification, only lightly travelled until recently, is whether the PCR should be authorised to represent the class. This has recently been explored in the Riefa v Apple case (CAT Case No. 1602/7/7/23), which looked at whether the PCR fulfilled her duty to act in the best interests of the class.
The Potential For Divergence Between The Interests Of The Funder And Those Of The Class
Collective proceedings, particularly opt-out claims, differ from most legal proceedings in that the individuals in whose interest proceedings have been brought are not party to, nor for the most part even cognisant of, the litigation.
In collective proceedings the class is removed from issues of central importance to the litigation, including around funding and settlement, which are made by the PCR on its behalf.
The PCR does not have the same direct interest in the outcome of the litigation as an ordinary claimant and faces the challenge of having to balance potentially competing interests on behalf
of an entire class; for example, when considering a settlement proposal, which awards different amounts to different sub-classes. It is for these reasons that in collective proceedings, the Tribunal has a more interventionist role than in most civil cases.
One key issue faced by the PCR is managing the funding required to bring forward the claim, which in practice will usually be provided by litigation funders. Whilst there are certainly common interests between the litigation funder(s), the solicitors and members of a represented class in bringing collective proceedings, their respective interests do not always converge. The class has an interest in preserving any damages awards for itself, whilst the solicitors’ and funders’ anticipated returns hinge on a proportion of that damages award going to the funder. Further, the solicitors and funder(s) have an interest in persuading the PCR to agree the funding arrangements they have helped procure, and pursuant to which they would be retained and remunerated, and in the litigation being progressed without delay.
Authored by: Barney Stannard (Partner), Joseph Moore (Partner), and Tim Knight (Senior Associate) - Travers Smith
Notwithstanding its interventionist role, the CAT has generally been reluctant to scrutinise the litigation funding behind a claim in detail at the certification stage, save where it has considered the funder’s return to be indefensibly high (see Gormsen v Meta & Ors [2024] CAT 11). But in the recent certification hearing in Riefa, the Defendants challenged whether the PCR had properly fulfilled her duties when negotiating the funding agreement. Buoyed by the PCR having erroneously stated in witness evidence that the terms of the litigation funding agreement provided for the funder to be paid out of unclaimed damages (rather than the aggregate damages award, prior to distribution to the class), the Defendants obtained an order to cross-examine the PCR, and submitted that certification should be refused, on the basis that the PCR had not properly understood the terms of the litigation funding agreement, or negotiated funding arrangements that properly protected the interests of the class.
The Importance Of The PCR Being Able To Evidence Acting In The Best Interests Of The Class
The CAT’s typical reluctance to probe funding matters too deeply at the certification stage is understandable. There is a well-developed market for litigation funding, which the CAT recognises is a crucial part of the collective proceedings regime.
It is of course the PCR, not the CAT, that has negotiated the terms of the litigation funding agreement, with sight of other available funding arrangements, and with close knowledge of the competing imperatives in securing funding.
In Riefa the Tribunal scrutinised one of the presuppositions of that restraint, which is that the PCR has acted diligently in negotiating with potential funders to secure a mutually beneficial bargain that protects the interests of the class. Where there is reason to doubt this, then Riefa suggests that the Tribunal will be prepared to examine matters more closely. Judgment in Riefa is awaited at the time of writing, and the outcome will be closely watched. Negotiating with multiple funders, securing independent advice on funding matters, and putting in place independent advisory panels of qualified lawyers with experience of collective proceedings are all, where practicable, recognised good practice, but there is as yet no clear guidance as to the extent to which the CAT expects PCRs to demonstrate having taken these (or similar) steps. It is hoped that Riefa will provide such guidance.
Concluding Remarks And Anticipated Future Developments
Following Riefa, parties seeking certification of collective proceedings should expect critical scrutiny of the steps the PCR has taken to protect the interests of the class. These challenges should be readily manageable, although for some claims they might add additional friction, and, at the limit, might discourage some marginal claims.
There are two anticipated developments on the horizon, that could reduce the risk of conflict between the interests of funders and the interests of the class. First, the Court of Appeal might determine that a funder cannot be paid prior to the distribution of damages to class members (this issue is on appeal from Gutmann v Apple Inc [2024] CAT 18), avoiding tensions over priority. Second, if the Civil Justice Council review of litigation funding culminates in the “reversal” of PACCAR, potentially as part of a broader package of regulation, such that funders are (once again) permitted to recover a share of the damages award, this should lead to the return to funding models in which the interests of the funder and the class are more obviously aligned.
60-SECONDS WITH:
Q What’s the strangest, most exciting thing you have done in your career?
A I spent two years working as an economist in the Ministry of Industry and Trade of the Government of Malawi as part of a fellowship scheme sponsored by the UK government. I don’t think any challenge I have encountered in my career since comes anywhere close to the difficulties I faced there. But it was also a very rewarding experience and taught me valuable skills that have helped me with my career since.
Q What motivated you to pursue a career in economics?
A I simply really enjoyed economics once I came across it in university, so there was never a question about doing anything else. The work as a competition economist allows me to apply that inner geek to some complex real world problems that have implications for people in their everyday lives. What’s not to like?
Q Imagine you no longer have to work. How would you spend your weekdays?
A I don’t think I would stop working, thought I would work a bit less. I would definitely try to revive some of the hobbies that have been squashed by the deadly work + kids combination, like basketball and cooking. And maybe I would go back to university to pursue a PhD in economic history.
Q What piece of advice would you give to your younger self?
A Don’t assume that someone else will have the right answer. I had a bad case of imposter syndrome early on in my career and it took me a while to overcome this and realise that more experienced people don’t necessarily
have the right answer – in particularly where you have done the legwork –and that you advance by working out things yourself.
Q What are the biggest challenges facing legal practitioners nowadays?
A I personally find it increasingly difficult to stay on top of the key developments in the competition space because of (a) the introduction of regulation of digital markets and (b) the increase in the number of private actions (collective proceedings in particular). Keeping up with the relevant case law is a challenge.
Q What book do you think everyone should read, and why?
A Thinking, Fast and Slow by Daniel Kahneman remains the book that had the biggest impact on my thinking as an economist. It has also popularised behavioural economics, which is now making its way into the world of competition law.
Q Dead or alive, which famous person would you most like to have dinner with, and why?
A Henry Kissinger. Before discovering economics I wanted to become a diplomat and had started to study international relations. Kissinger is probably the most influential person in the cold war period, and I would have love to pick his brain about how decision were made.
Q The greatest film of all time is…
A Life is beautiful by Roberto Benigni. If this doesn’t make you cry then nothing will.
Q What legacy would you hope to leave behind?
A It’s a bit too early to start thinking about legacy for me, but I certainly hope to be remembered as someone who cares about the people he works with and is part of a team that is recognised as top in class.
Q What is the most significant trend in your practice today?
A Collective proceedings/class actions have had a big impact on the demand for testifying experts. That has allowed us to grow our practice and also led to a number of new competitors entering the market. I suspect that there is much more of this to come.
Q What is the biggest life lesson you have learned?
A I have worked hard to teach myself to stay positive and look forward when things get tough for reasons that I cannot control. Venting frustrations is not getting you anywhere, so you may as well get on with it.
Q What is one goal you would like to achieve in the next year?
A I want to be cross-examined in a UK court. Being grilled by a barrister probably does not sound very appealing to most people, but it is a necessary step for my career aspirations as a testifying economic expert.
AN INCREASING ROLE FOR BEHAVIOURAL REMEDIES IN EU AND UK MERGER CONTROL?
Authored by: Murray Reeve (Counsel) and Alex Harper (Associate)1 - Sidley Austin
For deals that raise competition concerns, assessing the effectiveness of remedies is a central issue for both antitrust authorities and dealmakers.1
Authorities have a clearly-stated preference for structural remedies – i.e., divestments of viable businesses to credible third parties - on the theory that such divestments should be a lasting solution to the underlying cause of the potential competitive harm.
By contrast, dealmakers would typically prefer a behavioural remedy - such as commitments on pricing or continued supply - as these are generally less value-destructive.
However, for authorities, such behavioural remedies have two principal disadvantages - they require continual monitoring, which can be burdensome and they may be more likely to address only the effects of potential harms to competition, rather than the underlying cause of the potential harms.
the case that for deals that could be viewed as raising competition concerns, dealmakers should develop, at as early a stage as possible, a clear view of what structural remedy (if any) would cure the potential concerns. However, and importantly, the CMA will launch a review of its remedy practice in the New Year, including when behavioural remedies may be appropriate (including, in particular, in regulated sectors), and how (behavioural) remedies could be used to lock-in efficiencies and customer benefits that might offset anticompetitive effects.
The preference for structural remedies is explicit in the guidance published by both the European Commission (“EC”) and the Competition and Markets Authority (“CMA”).2 Whilst there appear to have been some recent departures from this seemingly settled orthodoxy, it remains
Horizontal Deals: The Rise of the “QuasiStructural” Remedy?
In the UK, the CMA appears to have accepted what (at their core) are behavioural remedies in two recent horizontal mergers.
1 Murray Reeve is a Counsel, and Alex Harper is an Associate, in the competition team at Sidley Austin, LLP in London. The authors would like to thank Dennisha Smith-Simpson for her assistance.
2 Paragraph 15 of the Commission Notice on Remedies states “commitments which are structural in nature, such as the commitment to sell a business unit, are, as a rule, preferable from the point of view of the Merger Regulation’s objective” and paragraph 3.5(a) of the CMA Merger Remedies Guidance states “Restoring this process of rivalry through structural remedies, such as divestitures […] are normally preferable to measures that seek to regulate the ongoing behaviour of the merger parties”.
• In Barratt/Redrow (2024), a deal that brought together two of the UK’s leading housebuilders, the CMA accepted behavioural remedies that consisted of commitments: (i) to appoint a third party agent to manage the sale of unsold properties in a particular UK town; and (ii) to ensure quality standards in development and related aftersales services.
• More recently, in its review of the proposed Vodafone/Hutchison joint venture, the CMA set out provisional remedies which included a suite of behavioural measures to address its horizontal theories of harm in the wholesale and retail parts of the UK mobile telecommunications market. The remedies include commitments by the parties to maintain their cheapest tariffs at £10 or below, to grant virtual mobile network operators access to additional network capacity, and to invest £11 billion in UK mobile network infrastructure the CMA has described these remedies as “locking-in” efficiencies and customer benefits of the merger.3
• Barratt/Redrow involved a seemingly weak theory of harm with time-limited impact. The CMA did not find concerns with the availability of new-home builders – i.e., the market for homebuilding would remain competitive. Rather, it was concerned about the impact on new house prices in certain limited areas of the UK, notwithstanding the influence on these prices of previously-owned homes in the relevant area, broader market factors (including mortgage rates) and the one-off nature of any ‘windfall’ from the sale of the relevant new homes. In short, therefore, the ‘quasi-structural’ nature of the remedy appears to reflect the rather esoteric nature of the theory of harm.
• The Vodafone/Hutchison deal is likewise unusual in that the sector is highly regulated and the CMA has provisionally found that the deal “could improve the quality of mobile networks and bring forward the deployment of next generation 5G networks and services”5 in the UK. The CMA’s provisional approach to remedies in the case finds parallels with developments in the EC’s reviews of telecoms mergers (in which a number of 4-to-3 deals have been permitted without structural remedies), and is in line with comments in the recent influential report to the European Commission on the future of European competitiveness by former European Central Bank President and Prime Minister of Italy, Mario Draghi in which it is suggested that the EU is above the “optimal number” of operators in the telecoms space and that remedies in merger control cases in the telecoms sector should focus on commitments to invest and launch new services rather than the transfer of assets6
and, accordingly, the working assumption for dealmakers more generally remains that structural remedies are likely to be required to address competition concerns in horizontal mergers both in the EU and UK.
In the last five years, the EC has only cleared two horizontal cases on the basis of purely behavioural remedies alone, both of which were likewise in the telecommunications sector4. However, closer inspection of the above CMA cases reveals very particular fact patterns, rather than evidence of a more permissive trend.
Although, over the last five years, the CMA has cleared four other deals that it considered raised horizontal competition issues based on behavioural remedies, all of these were in the highly regulated rail and telecommunications sectors that may be better suited to such remedies7 The particular circumstances of these cases therefore limit broader conclusions
Non-Horizontal Deals: A More Nuanced Approach?
By contrast, there has traditionally been more appetite for accepting behavioural remedies in non-horizontal deals. For example, the EC cleared high-profile deals such as Microsoft/LinkedIn (2016), Google/Fitbit (2020), Microsoft/Activision (2023), Meta/Kustomer (2023) and Broadcom/VMware (2023) based on packages of behavioural remedies such as interoperability commitments, licences, data access and technical separations of data between business divisions.
However, mindful of perceptions of under-enforcement in relation to nonhorizontal deals, the EC and CMA have conducted more intense reviews of nonhorizontal effects in a number of deals, and behavioural remedies have not been a cure-all solution, especially where the issues raised do not relate to access to data or interoperability in digital markets.
• Over the last five years, nearly 40% of deals raising vertical concerns that were cleared conditionally by the EC, required a structural remedy. For example, CMA CGM/ Bolloré Logistics (M.11143), Advent/ GFK (M.10860) and Philip Morris International/Swedish Match (M.10792) all required divestments of businesses. Equally, in 2024, the EC prohibited Booking.com’s proposed acquisition of eTraveli (a deal which faced non-horizontal concerns) after rejecting a suite of behavioural remedies.
3 Although Vodafone has agreed to divest spectrum to O2 on clearance, this arguably has some conceptual differences to a purely structural remedy involving the divestment of a whole viable business or substantial body of customers to directly reduce an undertaking’s presence in the relevant market. The CMA has finished consulting on the proposed remedies and must publish its final report by 7 December 2024.
4 Orange/Voo/Brutele (M.10663) and Vodafone/Certain Liberty Global Assets (M.8864).
5 See CMA Summary of Provisional Findings, paragraph 6 here.
6 See section 3.1 of full report here.
7 For example, Bouygues S.A. / Equans S.A.S., First Rail Holdings & Trenitalia UK / West Coast Partnership Rail Franchise, Abellio East Midlands Limited / East Midlands rail franchise. Paragraph 7.6 of the CMA’s Merger Remedies Guidance acknowledges that the presence of sectoral regulators can increase the likelihood of effective monitoring of behavioural undertakings.
• In the UK, the then CEO of the CMA publicly criticised the EC’s 2020 decision to clear Google/Fitbit on the basis of behavioural remedies. The CMA also initially blocked Microsoft/ Activision, a vertical transaction, before ultimately clearing a reformulated version of the deal, which involved a 15-year ex-EEA licence of Activision’s cloud gaming streaming rights to Ubisoft – i.e., a quasi-structural solution – together with a package of more behavioural measures focused on the implementation and management of the (quasi-structural) Ubisoft licence. Accordingly, other than this case, the CMA has not conditionally cleared any transactions with vertical issues in the last five years and, indeed, has prohibited cases where the CMA concluded that vertical issues arose, such as Meta/Giphy.
Therefore, whilst the picture in relation to non-horizontal deals is more mixed than horizontal deals, with greater scope for behavioural remedies in particular with the EC in relation to deals in the digital or telecoms sector, the scope for such remedies remains relatively limited and the ability successfully to offer behavioural remedies will be constrained by the ease of application, ease of monitoring, and effectiveness of the remedies to ensure independent competition.
used to lock-in efficiencies and customer benefits that might offset anticompetitive effects. However, in the same speech, Cardell cautioned that advisers and businesses should not view the approach in Vodafone/Hutchison as representing a sea-change in approach. The outcome of this review will be keenly awaited.
The views expressed in this article are exclusively those of the authors and do not necessarily reflect those of Sidley Austin LLP and its partners. This article has been prepared for informational purposes only and does not constitute legal advice. This information is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this without seeking advice from professional advisers.
Changes To Come?
The CMA’s Chief Executive (Sarah Cardell) announced in a speech on 21 November that the CMA will undertake a review of mergers remedies in the New Year8. This review will include an assessment of when behavioural remedies may be appropriate (including, in particular, in regulated sectors), and how (behavioural) remedies could be
8 See, Driving growth: how the CMA is rising to the challenge. A speech by Sarah Cardell, the CMA’s Chief Executive, delivered at the Chatham House Competition Policy 2024 conference, available here
THE DRAFT EC GUIDELINES ON THE APPLICATION OF ARTICLE 102 TFEU
TO ABUSIVE EXCLUSIONARY
CONDUCT BY DOMINANT UNDERTAKINGS
On 1st August 2024, the European Commission released for public consultation its draft Guidelines on the application of Article 102 TFEU to abusive exclusionary conduct by dominant undertakings (the “Draft Guidelines”).1
The Draft Guidelines aim to clarify the Commission’s approach to assessing potentially abusive exclusionary conduct by dominant firms under Article 102 TFEU, increasing transparency, predictability, and consistency in enforcement.
The main changes in the Draft Guidelines refer to (i) the criteria to establish dominance; (ii) a new more formalistic approach to establish if a conduct may constitute an exclusionary abuse; and (iii) the conditions for companies to successfully claim that an allegedly exclusionary conduct is objectively necessary or justified by efficiency reasons.
Criteria To Establish Dominance
The Draft Guidelines provide more detailed criteria for establishing dominance, including factors such as data-driven advantages and network effects, which are particularly relevant to digital markets. In addition, they contain an extensive chapter on collective dominance, which provides a detailed analysis of relevant case law.
effects-based approach undertaken in the Commission’s 2008 Guidance Paper on Enforcement Priorities for Exclusionary Abuses (“2008 Guidance Paper”).
The stated intention of the Commission is to base the Draft Guidelines on the EU courts case-law, without prejudice to the interpretation that the EU courts may give in future cases (as indicated in § 9 of the Draft Guidelines). However, the new categorisation and presumption-based approach might prove difficult to reconcile with the key concepts underlying the effect-based approach endorsed in several EU courts past judgments in line with the 2008 Guidance Paper (including among the most recent ones, Intel2, Google Shopping3 and others).
Conditions To Establish If A Conduct Constitutes An Exclusionary Abuse
The main proposed change in the Draft Guidelines is the attempt to streamline the Commission’s handling of abuse of dominance cases, by categorising practices and allocating different burdens of proof depending on their severity. Categorising conducts based on their formal characteristics represents a significant shift from the
Therefore, if the draft Guidelines will be adopted in the current text (or without significant changes in the approach), it will likely be object of proceedings before the EU courts, in order to clarify how the new approach shall be applied in practice.
Authored by: Veronica Pinotti (Partner), Martino Sforza (Local Partner), and Michela Francavilla (Associate)1 - White & Case
The Draft Guidelines indicate that to determine whether the conduct by dominant undertakings constitutes an exclusionary abuse, it is necessary to establish (i) whether the conduct departs from competition on the merits and (ii) whether it can produce exclusionary effects. In a remarkable detachment from the 2008 Guidance Paper, the focus is therefore shifted away from consumer harm. According to the Draft Guidelines, the Commission would no longer need to prove direct harm on consumers to find a conduct liable to produce exclusionary effects. However, as under the 2008 Guidance Paper, where it is demonstrated that conduct is liable to be abusive, it remains possible for the dominant company to show that the conduct is either objectively justified or “counterbalanced or even outweighed by advantages in terms of efficiency that also benefit consumers”.
2. Conducts that have no economic rationale other than restricting competition (so-called naked restrictions), which are subject to a stronger presumption, which can be rebutted only in “exceptional circumstances” (§60 letter c)). The draft Guidelines provide a nonexhaustive list of naked restrictions, including:
a) Payments by the dominant undertaking to customers that are conditional on the customers postponing or cancelling the launch of products that are based on products offered by the dominant undertaking’s competitors;
b) The dominant undertaking agreeing with its distributors that they will swap a competing product with its own under the threat of withdrawing discounts benefiting the distributors;
c) The dominant undertaking actively dismantling an infrastructure used by a competitor.
3. Conducts that are not deemed a naked restriction nor are subject to a specific legal test, which require the Commission to establish that they both (i) depart from competition on the merits and (ii) can have exclusionary effects.
exclude competitors that are at least as efficient as the dominant undertaking. Relevant factors continue to include elements like the position of the dominant undertaking, the conditions on the relevant market and the position of the dominant undertaking’s actual or potential competitors.
For the purpose of the above-mentioned cumulative conditions (i) and (ii) to establish if a conduct by a dominant company constitutes an exclusionary abuse, the Draft Guidelines provide for three main categories of conducts:
1. Conducts that subject to a specific legal test are presumed to be abusive once the conditions established by the test are fulfilled (i.e., exclusive dealing; tying and bundling; refusal to supply; predatory pricing; margin squeeze). However, this presumption can be rebutted by the dominant undertaking by submitting evidence that the conduct was not capable of producing exclusionary effects (e.g., when assessing certain pricing practices, a price-cost test is required to establish whether conduct of a dominant undertaking departs from competition on the merits and the result of that test can be relevant to assess the capability of such conduct to have exclusionary effects).
The Draft Guidelines vary the evidentiary burden required to establish that a conduct is capable of producing exclusionary effects, based on the type of conduct, the probability of it leading to exclusionary effects, and the pertinent circumstances. However, such attempt to streamline the Commission’s handling of abuse of dominance cases will likely have limited practical impact as the Commission will still have to analyze the evidence submitted by the parties to rebut the presumptions and show that the conduct does not constitute an abuse.
Under the Draft Guidelines, assessing the capability to have exclusionary effects will involve showing that the conduct could remove the commercial uncertainty relating to the entry or expansion of competitors that existed at the time of the conduct’s implementation (§62). As a result, it will not be relevant whether actual exclusionary effects were produced. In addition, as noted above, the evidentiary threshold does not require the Commission to demonstrate direct consumer harm, intent to exclude or even capacity to
Objective Necessity And Efficiency Defence
The Draft Guidelines further provide a description of justifications for any conduct potentially in breach of Article 102 TFEU. It must be objectively necessary to achieve a certain aim (objective necessity) (§168), like legitimate commercial considerations or technical justifications, or it must counterbalance or outweigh the negative effect of the conduct on competition (efficiency defence) (§169). To prove the latter, the undertaking needs to demonstrate that:
a) The efficiency gains likely result from the conduct counteract any negative effect;
b) Those gains have been, or are likely to be, brought about because of the conduct;
c) The conduct is necessary for the achievement of those efficiency gains; and
d) The conduct does not eliminate effective competition by removing all or most existing sources of actual or potential competition.
The burden of proof for an objective necessity or efficiency defence is entirely on the allegedly dominant company. However, according to the Draft Guidelines, for naked restrictions “it is highly unlikely” that such behaviour may be justified based on objective necessity or efficiency reasons.
1631/7/7/23 - PROFESSOR CAROLYN ROBERTS V (1) ANGLIAN WATER SERVICES LIMITED AND (2) ANGLIAN WATER GROUP LIMITED
1630/7/7/23 - PROFESSOR CAROLYN ROBERTS V (1) NORTHUMBRIAN WATER LIMITED AND (2) NORTHUMBRIAN WATER GROUP LIMITED
1629/7/7/23 - PROFESSOR CAROLYN ROBERTS V (1) YORKSHIRE WATER SERVICES LIMITED AND (2) KELDA HOLDINGS LIMITED
1628/7/7/23 - PROFESSOR CAROLYN ROBERTS V (1) UNITED UTILITIES WATER LIMITED AND (2) UNITED UTILITIES GROUP PLC
1603/7/7/23 - PROFESSOR CAROLYN ROBERTS V SEVERN TRENT WATER LIMITED AND SEVERN TRENT PLC
1601/7/7/23 - DR SEAN ENNIS V APPLE INC. AND OTHERS
1599/7/7/23 - DOUG TAYLOR V BLACK HORSE LIMITED AND OTHERS
1595/7/7/23 - ROBERT HAMMOND V AMAZON.COM INC. AND OTHERS
1582/7/7/23 - CHARLES ARTHUR V ALPHABET INC. & OTHERS
1572/7/7/22 - MR CLAUDIO POLLACK V ALPHABET INC., GOOGLE LLC, AND OTHERS
1527/7/7/22 - ALEX NEILL CLASS REPRESENTATIVE LIMITED V. SONY INTERACTIVE ENTERTAINMENT EUROPE LIMITED AND OTHERS
1523/7/7/22 - BSV CLAIMS LIMITED V. BITTYLICIOUS LIMITED AND OTHERS
1468/7/7/22 - MR. JUSTIN GUTMANN V. APPLE INC., APPLE DISTRIBUTION INTERNATIONAL LIMITED, AND APPLE RETAIL UK LIMITED
1443/7/7/22 - COMMERCIAL AND INTERREGIONAL CARD CLAIMS I LIMITED (“CICC I”) V. VISA INC. AND OTHERS
1433/7/7/22 - DR LIZA LOVDAHL GORMSEN V. META PLATFORMS INC., META PLATFORMS IRELAND LIMITED AND FACEBOOK
1336/7/7/19 - MR PHILLIP EVANS V BARCLAY BANK PLC AND OTHERS
THE DIGITAL MARKETS ACT AND ITS INTERSECTION WITH EDISCOVERY
IMPLICATIONS FOR COMPETITION LAW AND THE IMPORTANCE OF A MULTIDISCIPLINARY APPROACH
The Digital Markets Act (DMA) is a landmark regulation introduced by the European Union to address the dominance of “gatekeeper” tech companies. The DMA aims to ensure fair competition within digital markets by imposing stringent rules on how large platforms operate.
This legislation is poised to impact legal practices, particularly in the realms of competition law. eDiscovery (the process of identifying, collecting, and producing electronically stored information (ESI) for litigation or regulatory requests) will play a crucial role in enforcing the DMA’s provisions. Understanding the intersection of the DMA and eDiscovery is essential. Taking a multidisciplinary approach to achieve this end is equally important.
Regulatory Overview
The DMA, adopted by the European Union and mirrored in similar frameworks by the UK, targets tech companies that act as gatekeepers in digital markets. As outlined in the Digital Markets, Competition and Consumers Bill, the UK’s approach aims to empower the Competition and Market Authority (CMA) to enforce fair competition and prevent digital monopolies.
These gatekeepers, typically large platforms such as Google, Amazon, and Meta, are subject to obligations intended to curb their monopolistic tendencies. The core objective of the DMA is to prevent market abuse by:
• Banning unfair practices (selfpreferencing of their own services).
• Mandating transparency in data sharing and advertising practices.
• Promoting interoperability with smaller platforms and third-party services.
The DMA identifies “gatekeepers” based on specific thresholds, including
revenue, market capitalisation, and the number of active users. Once designated as gatekeepers, these companies must adhere to a set of obligations, with significant penalties for non-compliance, including fines of up to 10% of their global annual revenue.
eDiscovery And Its Role
The use of eDiscovery in DMArelated investigations is poised to be significant. The CMA, The Commission and other enforcement bodies will rely heavily on electronic data to uncover potential abuses by gatekeepers. From emails and internal communications to sales records and algorithmic data, vast amounts of ESI will need to be identified, preserved, and analysed.
Authored by: Dan Rupprecht (Managing Director) and Dan Heinrichs (Associate Director) - Sky Discovery
Key areas where eDiscovery will have an effect on
1. Data Access and Sharing: One of the DMA’s core provisions requires gatekeepers to ensure fair access to data, particularly for third-party service providers. eDiscovery tools can be used to identify instances where gatekeepers may have restricted or manipulated data access to harm competitors. This could involve analysing metadata, server logs, and data-sharing protocols to uncover noncompliance.
2. Self-Preferencing Investigations: Gatekeepers are prohibited from giving preferential treatment to their own services or products. eDiscovery technologies could be employed to trace decision-making processes, communications, and any internal strategies that indicate self-preferencing. In particular, documents or emails that show how algorithms were adjusted to favour in-house services over rivals will be critical.
3. Advertising and Data Monetisation Practices: The DMA also focuses on the transparency of digital advertising. eDiscovery tools can assist in tracking how advertising data is collected, stored, and sold, ensuring gatekeepers are not using privileged access to data to harm competition.
4. Algorithm Audits and ESI in Code Reviews: Gatekeepers’ algorithms are often at the heart of market abuse claims. eDiscovery applications can review source code, testing logs, and product development documentation, all of which can reveal whether gatekeepers have used their platforms to disadvantage competitors.
5. Cross-Border Compliance and Data Localisation Issues: With DMA enforcement expanding across multiple jurisdictions, especially in global contexts, issues around data localisation and cross-border data transfers become central. eDiscovery teams will need to navigate complex data protection laws (such as GDPR and UKGDPR) when conducting discovery in multinational investigations, ensuring that data is handled legally and appropriately.
Shift in Data Landscapes Through AI
All of these scenarios rely on the analysis of large sets of data to find evidence of compliance or non-compliance with the DMA. The rapid advancement of AI technology is increasing the speed of an already exponential growth in data across the world, particularly with the advent of Generative AI (GenAI). GenAI is producing vast amounts of additional data, including text, images, and audio. Forbes predicts that within the next four years, there will be 10 trillion AIgenerated images created worldwide1 The good news is that these fall within the traditional scope of eDiscovery, and eDiscovery professionals are well-versed in adopting new technologies for legal questions.
Alongside the human expertise needed to “find the needle in the haystack,” larger data volumes will necessitate new, more powerful technology to analyse.
Major software providers in the eDiscovery space are currently rolling out AI-backed tools to assess the relevance of documents to specific matters, reducing timescales for investigations from weeks to days.
Other companies are integrating the tools created by the very gatekeepers the DMA is aimed at into their eDiscovery workflows to solve previously manual processes, such as the review of images, in an automated fashion.
The Multidisciplinary Approach And What It Involves
The DMA presents new legal challenges that demand a multidisciplinary approach, particularly in how law firms handle eDiscovery obligations during investigations and compliance efforts. As the DMA’s enforcement unfolds, competition law practices
will need to collaborate closely with technical experts, such as data scientists, forensic technology experts, and IT specialists, to navigate the vast amounts of ESI presented. This highlights the need for a legal-technical synergy in ensuring compliance and enforcing fair competition.
Key disciplines involved in this approach include:
• Competition law specialists: Lawyers who are well-versed in the regulatory framework of the DMA, are responsible for advising clients on compliance and representing them in disputes or investigations.
• eDiscovery professionals: Experts in locating, preserving, and producing electronic data relevant to DMA investigations, which often involve vast quantities of emails, business records, and digital communications.
• Forensic technology teams: Experts responsible for ensuring that data retrieval, storage, and transfer are conducted in line with legal and regulatory requirements, particularly under the DMA and broader data protection laws like the GDPR.
The Digital Markets Act represents a pivotal shift in how competition is regulated in the digital space. As gatekeepers face increasing scrutiny, law firms with competition practices must be prepared to navigate complex investigations involving vast amounts of electronic data. eDiscovery expertise will be at the heart of this process, providing the tools necessary to uncover abuses, ensure compliance, and defend clients in litigation. The intersection of the DMA and eDiscovery underscores the importance of a multidisciplinary approach, where technical expertise in data analysis meets deep knowledge of competition law. By understanding how eDiscovery can be leveraged in this new regulatory landscape, law firms will be better positioned to serve their clients and uphold the principles of fair competition in the digital economy.
