European Union

Increasing process uncertainty in EU competition enforcement

The EU merger regulation (adopted in 1989, and amended in 2004) promised a one-stop shop for EU merger control. At the same time, the regulation that allows the enforcement of Articles 101 and 102 TFEU, amended in 2003, while empowering national competition authorities to apply those articles, also indicated that the European Commission ("EC") would continue to handle major cases whose effects were not limited to individual Member States, and more generally that the Commission would remain first among equals in EU antitrust enforcers. For much of the last twenty years, this has largely been the case, but recent trends show a picture that is more nuanced leading to greater regulatory uncertainty.

For conduct cases, we have seen cases in the online hotel booking sector handled by multiple national competition authorities where we would have expected the Commission to have taken the cases (and avoided the uncertainty that resulted). More recently we have seen cases taken by a national competition authority and the Commission in parallel, with a jurisdictional distinction being drawn based on the product or geographic market (or both); a thin argument that does not reassure as to a co-ordinated approach.

For mergers, the EC altered its interpretation of Article 22 of the Merger Regulation in 2021 to allow referrals of matters by national competition authorities even where the transactions did not meet national thresholds for notification. Using this new interpretation, the EC took action against the Illumina/Grail merger, and Illumina’s appeal of this new process was rejected by the General Court in 2022. Since then, several cases have been referred to the Commission under this new process, and we expect to see more.

However, the Commission’s jurisdiction in these cases extends only to the Member States making or joining the referral. What might happen in other Member States?

The Court of Justice of the European Union's ("CJEU") decision in Towercast shed light on this holding that mergers that were non-notifiable under EU or national laws could nevertheless be examined under Article 102 by national competition authorities or courts. We have already seen one competition authority – Belgium – apply the ruling to block a merger.

The EC itself has no Article 102 jurisdiction in these cases unless the merger regulation is amended – though the revised Article 22 procedure may reduce the Commission’s incentive to seek such an amendment.

Overall, then, the question of who will take jurisdiction – and under what rules – in a particular case is less clear than it was just a few years ago. The number of actual cases affected will be small, but the impact on the assessment of potential deals will be much broader.

New Guidelines on Exclusionary Abuses of Dominance

In March 2023, the EC announced that it will adopt new Guidelines on Exclusionary Abuses of Dominance in 2025 (“Guidelines”), which aim to reflect recent CJEU judgments and an effects-based approach to dominance.

Based on the Commission’s comments, we anticipate:

• A shift in focus towards the impact of the dominant undertaking’s conduct on the effective competitive structure and the extent of any detriment to consumers without requiring a showing of competitor exclusion or marginalisation. A less central role for the as-efficient competitor test, reflecting recent case law developments. In particular, the Advocate General argued in the Google Shopping case that less efficient competitors can still sometimes discipline dominant companies.
• Bronner-type indispensability was eliminated as a requirement for constructive refusal to supply, reflecting the Google Shopping and Lithuanian Railways decisions, enabling the EC to investigate unfair access conditions to non-indispensable inputs.
• The Guidelines will not cover exploitative conduct.

The Commission plans to publish a draft of the Guidelines for public consultation by mid-2024 and adopt them in 2025.

Significant Article 102 Cases Awaiting Adjudication

We expect to see a number of CJEU case decisions in 2024 in appeals from EC decisions:

• Intel, which found that Intel had excluded its competitors from the market for CPUs by paying manufacturers to halt the launch of competitor products and limit sales channels.
• Google Android, which found that Google had abused its position on the market for mobile operating systems by using contract clauses guaranteeing preinstallation of certain applications and unfairly restricting the terms around adapting Android’s underlying software.
• Google Shopping, which found that Google had abused its dominant position to self-preference its comparison-shopping service over others operating through Google.

The Digital Markets Act (“DMA”) is in effect and, in September 2023, the first six gatekeepers and 22 core platform services (“CPS”) were designated. 2024 will see further implementation of the DMA in the EU in several ways:

• The approach of the enforcer: The DMA is new to both companies and enforcers. There is no formal mechanism for pre-approval of gatekeepers’ compliance with their obligations, so the Commission’s enforcement approach will only become apparent after 6 March 2024, when compliance becomes mandatory.
• The approach of the Court: Certain gatekeepers are expressing concerns over at least aspects of their designations: Apple has appealed its App Store, Safari, and iOS designations; ByteDance its TikTok designation; and Meta its Marketplace and Messenger designations. It’s not clear if the Court will decide on any of these appeals in 2024, but it seems likely that there will be more court cases filed as companies and enforcers work through the implementation process.
• Definition of business users: Meta’s designation appeals and the iMessage market investigation raise questions regarding the definition of business users (i.e., when are platforms consumer-to-consumer). The answer(s) will set the scene for future gatekeeper and CPS designations.

Increasing Number of Foreign Investment Screening Regimes

In 2023, foreign investment controls continued to grow in significance for global deals, with parties taking active steps to coordinate and address risk as part of their global regulatory strategy. The importance of such strategic coordination will increase as foreign investment screening continues to grow.

Although the wave of new regimes we saw during the pandemic years has ebbed, jurisdictions including Belgium, Netherlands, Luxembourg, and Sweden introduced new screening mechanisms in 2023. In 2024, the Republic of Ireland and Bulgaria are expected to implement new foreign investment regimes that will mean global deals are likely to be subject to an ever-increasing volume of regulatory reviews.

In addition, many existing regimes, even those that are only a few years old, are being updated and refocused to address the most recent perceived threats, and policy statements from legislators and regulators continue to suggest a broadening scope of scrutiny that increasingly commonly includes ‘economic security’ considerations.

Changes to EU Foreign Investment Screening Regimes on the Horizon?

At the EU level, the ECJ made it clear (in its judgment in case no. C-106-22 - Xella) that national foreign investment screening regimes need to respect the fundamental freedoms guaranteed by EU law, raising uncertainty regarding whether and when intervention under foreign investment control regimes can be justified in relation to investments made by EU companies that may be ultimately controlled by non-EU investors. The Xella judgment weakens the position of national foreign investment screening authorities, although its long-term impact remains to be seen.

Although EU Member States are responsible for administering foreign investment screening at the national level, the EC has a central coordination function under the EU Foreign Direct Investment Screening Framework Regulation. The EC has an obligation to assess the functioning of the Screening Framework Regulation and has indicated that it is prepared to push to make significant legislative changes during 2024, with a view to strengthen the functioning and effectiveness of Member State screening regimes by establishing a minimum scope of screening, setting clearer processes, and setting clearer rules for which transactions would need to be passed through the coordination mechanism. In addition, the proposed changes would seek to address the uncertainty created by the Xella judgement, by explicitly extending the scope of the screening framework to cover indirect foreign investment through EU companies. Proposed legislative reforms were announced in January and are expected to be considered after the European Parliamentary elections, although the appetite of the future Parliament and Member States to agree to the proposals remains unclear at present.

A further notable area for potential reform includes the possible introduction of tools to screen outbound strategic investments in areas perceived to be at high risk of ‘leakage’ of potentially sensitive technologies, which would mark a significant development in the scale of the EU’s outbound investment and trade control strategy. A program of consultation and monitoring has been proposed for 2024, to evaluate the need for outbound investment screening tools.

After a moribund few years, and inevitable delays caused by Covid lockdowns, cartel enforcement has been picking up again, with no-poach arrangements getting significant scrutiny at the EU and national levels as well as in the UK. The inclusion of wage-fixing as a by- object infringement in the Commission’s horizontal guidelines, though not legally surprising, may signal increased interest by the European Commission in labor market cases. Indeed, the Director General for Competition, Olivier Guersent, recently confirmed that it has a number of open investigations into “no-poach” agreements.

The EU Foreign Subsidies Regulation (FSR) of 14 December 2022, took effect on 12 July 2023 and – as of 12 October 2023 - provides for mandatory notification to the European Commission of large concentrations and public procurement procedures in the EU to clear or remedy subsidies granted by non-EU countries (see our previous post). The Commission has been granted far fewer than the 145 staff it initially estimated it would need to enforce the FSR; and yet the number of transactions which have been notified or are in pre-notification (38 as of early December), suggests that the total number of filings will far exceed the 30 notified concentrations per year which the Commission had expected. In the coming months, the Commission may need to make use of the flexibility tools available to it as to the level of detail needed for notifications (e.g. waivers) to manage its workload.

Guidance on the interpretation of key concepts contained in the FSR (e.g., criteria used to assess distortions, what constitutes a non-problematic subsidy) is not expected for a few years. This will likely mean that parties will have to convince the Commission of the adequacy of a lighter notification by developing their own arguments and interpretations of the Regulation. The lack of published preliminary review decisions will also limit transparency, particularly in the early stages of the regime. Parties will need to engage with the Commission’s teams to bridge this information gap in the context of a particular transaction or tender.

Finally, the Commission has opened a number of anti-subsidy investigations into certain Chinese exports into the EU, showing that it will continue to enforce its trade instruments -- in these cases, the EU Anti-Subsidy Regulation -- and to provide insights about their interplay with the FSR.