We are pleased to provide you with this Quarterly EU & Competition Newsletter, which summarises selected key highlights and recent developments in Finnish and EU competition law during the last quarter of 2022. We hope our newsletter will help you stay on track and welcome you to contact us for any questions or comments.
ANTITRUST & MERGERS
Commission prohibited acquisition of GRAIL by Illumina
In a much-debated decision, the European Commission on 6 September 2022 prohibited the U.S. life sciences firm Illumina, a supplier of NGS systems for genetic and genomic analysis, from acquiring its customer GRAIL, a biotechnology company. The case was referred to the Commission under Article 22 of the EU Merger Regulation and the proposed transaction was not notifiable in the referring Member States (and was not notified in any other Member States).
According to the Commission’s investigation, the vertical acquisition would have reduced choice in the market for blood-based early cancer detection tests and stifled innovation. The Commission found that Illumina would have been incentivised to foreclose GRAIL’s rivals dependent on Illumina’s technology from access the input needed for their own tests. This would have put GRAIL in an advantaged position in comparison to its competitors.
The Commission was concerned that Illumina would remove access from GRAIL’s competitors to its NGS technology, or disadvantage them in other ways, and consequently gain control over the promising market for early cancer-detection. Illumina’s proposed remedies did, according to the Commission, not address the identified competition concerns in an adequate manner, as the remedies did not remove Illumina’s ability and incentives to remove GRAIL’s rivals. Thus, the acquisition would have had a detrimental effect on competition. The proposed remedies included a licence that would have allowed access to some of Illumina’s patents and a commitment for Illumina to enter into agreements with GRAIL’s rivals, allowing them to enjoy access to Illumina’s NGS systems until 2033.
Following the European Commission’s prohibition, Illumina will have to divest Grail. Illumina had completed the deal in August 2021 while the Commission’s review was still ongoing, which resulted in an order to keep GRAIL separate from Illumina and to appoint independent managers to run GRAIL until the investigation was finished.
In parallel, the Commission is assessing whether Illumina breached the standstill obligation inherent to the merger control regime by implementing the acquisition prior to obtaining the Commission’s approval.
For more information, please see:
Commission prohibits acquisition of GRAIL by Illumina (europa.eu)
The General Court has largely confirmed that restrictions imposed by Google to strengthen the position of its search engine were unlawful
The General Court has largely confirmed the European Commission’s decision, pursuant to which anticompetitive contractual restrictions imposed by Google on Android mobile devices and network operators to strengthen the position of its search engine were unlawful. The Google search engine has a dominant position on the market, and the European Commission fined Google for abuse of this dominant position in July 2018.
According to the Commission, Google abused its position by imposing three different restrictions. Firstly, Google imposed an obligation on mobile device manufacturers under distribution agreements to pre-install the Google Search and Chrome browser applications in the devices in order to obtain a licence from Google to use its application store Google Play Store. Secondly, mobile device manufacturers could only obtain the operating licences that were needed for the pre-installation of the applications Google Play Store and Google Search if they agreed not to sell devices with such versions of the Android operating system that Google had not approved. Lastly, manufacturers of mobile devices and mobile network operators were granted a share of Google’s advertising revenue if they undertook not to pre-install a general competing search engine on a predefined portfolio of devices.
According to the General Court, the restrictions aimed at strengthening Google’s already dominant position for search engines, and this constituted an infringement of Article 102 TFEU and Article 54 of the Agreement on the EEA. The General Court imposed a significant fine of EUR 4,125 billion on Google to reflect the duration and gravity of the infringement.
The General Court’s press release is available here: The General Court largely confirms the Commission’s decision that Google imposed unlawful restrictions on manufacturers of Android mobile devices and mobile network operators in order to consolidate the dominant position of its search engine (europa.eu)
Link to the judgment, case T-604/18: CURIA – List of results (europa.eu)
The European Commission has updated its eLeniency online platform
The European Commission has updated its eLeniency online platform, which provides companies involved in cartel and settlement proceedings with easy and secure access to leniency and settlement documents online. The update allows for effective interaction between the parties and adapts the tool to modern working methods. The tool was first introduced in 2019 as a one-way tool and the use of the tool is voluntary, but since its introduction, the online tool has largely replaced the previous practice of giving oral opinions at the Commission’s premises in Brussels.
Before the update of the eLeniceny, documents under special protection, such as statements by undertakings, have been accessible exclusively on the Commission’s premises. The new two-way version of eLeniency allows the Commission to present documents online in an easy and secure manner. The parties no longer need to come to the Commission’s premises to access or obtain information and files relating to leniency proceedings. The updated platform offers the same guarantees of confidentiality and legal protection as the traditional procedure on the Commission’s premises, all data displayed through the platform is protected and copying, printing or downloading functions are disabled.
The Commission’s press release is available here: Antitrust: Commission upgrades eLeniency tool (europa.eu)
The Market Court imposes fines of almost EUR 5 million on Finnish Real Estate Management Federation and real estate management companies for a cartel
In December 2022 the Finnish Market Court imposed penalty payments for nationwide collaboration in price-fixing totalling EUR 4,93 million on the Finnish Real Estate Management Federation (the “Federation”) and six companies in the real estate management sector represented on the Board of the Federation.
According to the FCCA’s investigation, the Federation and the companies involved in the price-fixing had during the years 2014-2017 agreed on the prices of real estate management services in an attempt to increase the price level of real estate management activities in violation of the Competition Act. According to the FCCA, the Federation and the companies involved also agreed that certain new tasks of real estate management companies following from legislative reforms would be charged from customers as additional services not included in the basic scope of the real estate management contracts. The discussions on the illegal harmonisation and price increases were mostly held at Board meetings and seminars.
According to the FCCA, the illegal activities aimed at raising prices, the collusion on prices had taken place nationwide and the collaboration had been long-lasting, systematic, and economically significant. The FCCA requested the Market Court to impose a fine of EUR 22 million for the illegal price-fixing. The Market Court concluded that the activities of the Federation and the companies involved had not been as extensive and intense as the FCCA had claimed. Consequently, the fine was decreased to EUR 4,93 million in total.
The Market Court’s decision (in Finnish): MAO:H409/2022
Amendments to the Competition Act regarding merger notification thresholds and changes to the notification form for acquisitions
The Finnish Government submitted a Government Bill to the Finnish Parliament in September 2022, suggesting that the notification threshold for mergers and acquisitions be lowered following an earlier proposal by the Finnish Competition and Consumer Authority (“FCCA”) in the summer of 2021. The changes have entered into force on 1 January 2023.
The proposed changes to the Competition Act will lead to more acquisitions being reported and investigated. The aim is to strengthen competition by preventing harmful market concentration and price increases for consumers.
Following the amendments, the FCCA will now investigate acquisitions where the parties’ combined turnover in Finland exceeds EUR 100 million and the turnover of each of at least two parties in Finland exceeds EUR 10 million.
The FCCA was not granted the right to review transactions that fall below the turnover thresholds, as contemplated in the earlier proposal by the FCCA in June 2021.
At the previous notification thresholds, the FCCA handled approximately 30 notifications annually. According to estimations, the number of notifications will approximately double as a result of the amendment. According to the grounds for the proposal, the amendment is estimated to prevent some four to six additional acquisitions that are harmful to competition every year (compared to the previous regime), which is claimed to result in direct consumer benefits of between EUR 50 million and EUR 67 million.
The Ministry of Economic Affairs and Employment has also prepared an amendment to the notification form for mergers and acquisitions. One of the purposes of this amendment is to reduce the administrative burden on companies to notify transactions that are unlikely to raise competition concerns. The amendment to the notification form also entered into force on 1 January 2023.
The Court of Justice clarified the criteria according to which a public contract can be awarded to an in-house entity
On Thursday 22 December, the Court of Justice of the European Union gave its judgment in joined cases C-383/21 and C-384/21, Sambre & Biesme and Commune de Farciennes. In the reference for a preliminary ruling, the Belgian Supreme Administrative Court asked, in essence, under which circumstances a contracting authority is deemed to exercise control over an entity similar to that, which it exercises over its own departments. The fulfillment of this criterion means that the procurement directives are not applicable to the contracts awarded to such entity.
In the case at hand, the municipality of Farciennes and its partly owned limited-liability cooperative society (Sambre & Biesme) made a framework agreement concerning the construction of an eco-district comprising about 150 public and private housing units in Farciennes. On the basis of the framework agreement, Sambre & Biesme decided not to issue a public call for tenders for certain project management assistance, legal advice and environmental services, e.g. asbestos surveying services, but to purchase these services from IGRETEC, which is a limited liability cooperative society set up by several municipalities. The members of IGRETEC include more than 70 municipalities, including Farciennes, and more than 50 other public authorities. Sambre & Biesme purchased a single share in IGRETEC (for a purchase price of EUR 6.20) in order to benefit from its services. At the relevant time, a further connecting factor between the three entities was that a councillor of the Municipality of Farciennes was also a director of Sambre & Biesme and a member of IGRETEC’s Board of Directors.
The Court of Justice found, on the basis of the facts described in the reference for the preliminary ruling, that IGRETEC was not an in-house entity of Sambre & Biesme because of the lack of representation of the latter in the decision-making bodies of IGRETEC. From a general point of view, the following points in the judgment are particularly interesting:
- Paragraphs 1–4 of Article 12 of Directive 2014/24 concern separate situations where a public contract falls outside of the scope of the Directive. To each of these situations, different criteria apply (p. 78 of the Judgment).
- The Judgment relies heavily on the wording of Article 12 of Directive 2014/24. The Court of Justice states that Article 12 clarifies and confirms previous case law (pp. 66 and 68). Basically, this means that, since the adoption of Directive 2014/24/EU, the in-house criteria are exhaustively set out in Article 12, the wording of which is the starting point for the interpretation of the in-house exception.
- As regards paragraph 3 of Article 12, the Court of Justice states that the criteria concerning joint control in the legal person, i.e. (i) representation in the decision-making bodies of the controlled legal person, and (ii) joint decisive influence over the strategic objectives and significant decisions of the controlled legal person, are separate and cumulative (p. 70). The same applies, without doubt, to criterion (iii) concerning absence of conflicting interests.
- Concerning criterion (ii) in point 3) above – even if it may be argued that the Court of Justice did not specifically address this issue – it seems that there is not any specific requirement on the number of shares a contracting authority should own in the controlled legal person as long as the contracting authorities together have joint decisive influence in the controlled legal person.
Link to the judgment: CURIA – List of results (europa.eu)
Reference to a tenderer’s trademark in a tender invitation was unlawful according to the Market Court
The City of Espoo (the contracting entity) announced, by means of an EU contract notice published in August 2021, the procurement of machines, equipment and tools for technical manual work for an open-ended contract period. In its procurement decision of 11 November 2021, the contracting entity selected Ab Bäck & Co Oy’s offer. The estimated total value of the procurement (excluding VAT) was EUR 3,000,000. The contracting entity required that the fixed machine tools include a Lupax operating licence control or similar. Lupax is the winning bidder’s brand or model for the start-up permit system.
The contracting entity argued that it did not intend that the start-up authorisation system on the equipment should be of a specific brand, but that the start-up authorisation system must meet the requirements mentioned in the tender documents. However, the contracting entity did not even argue that it would not have been in a position to set out the definitions and technical specifications describing the object of the procurement without reference to a specific manufacturer, a product of a particular origin or a trademark.
The Market Court found in its decision MAO:H236/2022 that pursuant to Section 71, Subsection 3 of the Act on Public Procurement and Concession Contracts, the technical description of the object of the procurement may not mention a particular manufacturer or products of a certain origin or refer to a trademark, except in exceptional circumstances where it is not otherwise possible to describe the subject matter of the procurement with sufficient precision and clarity. Consequently, referring, inter alia, to the manufacturer or the trademark is therefore a measure of last resort where no other means of identifying the characteristics of the subject-matter of the acquisition is available. The Market Court found that the only way to remedy the contracting entity’s incorrect conduct is to organise a new tendering procedure.
The Market Court’s decision (in Finnish): MAO:H236/2022
New form for reporting suspected illegalities in public procurement
In spring 2022, the FCCA introduced a new tip-off service through which anyone can report a suspected illegal direct procurement or other unlawful procurement. The new tip-off form is designed to provide the FCCA with more detailed information about the suspected illegalities. These tips constitute an important source of information for monitoring public procurement, and tips can be submitted anonymously if necessary. The FCCA reviews the information provided and considers based on the content whether it is necessary to open investigations. Measures are taken primarily in direct procurement cases, which lack justification under the Act on Public Procurement and Concession Contracts (1397/2016).
The report on supervision of public procurement is available here (in Finnish): Raportti valvonnan tuloksista
The Commission approved EUR 5 billion State aid scheme to municipal energy companies
In the current turmoil on the European energy markets, energy companies have faced unprecedented liquidity needs which were totally unexpected before Russia’s invasion of Ukraine. In order to enable municipalities to provide liquidity support to their electricity companies, the Municipal Guarantee Board notified to the European Commission an aid scheme which is based on the Commission’s Temporary Crisis Framework for State aid measures to support the economy following Russia’s war against Ukraine.
Under the notified aid scheme, municipalities and Municipality Finance Plc may grant loans up to EUR 5 billion on preferential terms to municipal electricity companies that are in urgent need of liquidity because of sharply increased collateral requirements in the current turmoil on the energy markets. In December, the duration of the aid scheme was extended until 31 December 2023 and its scope was extended to cover all additional costs due to the Russian aggression against Ukraine, notably, the need to increase primary fuel storages and to replace Russian energy sources, as well as the increase of sales receivables. In addition to loans, the amended aid scheme includes a possibility for municipalities to guarantee loans taken by municipal electricity companies from any credit institution.
Waselius & Wist advised the Municipal Guarantee Board in the notification procedure and negotiations with the Commission.
The Commission’s press release: State aid (europa.eu)
News on the extension of the aid scheme: Waselius & Wist advised in the extension of the EUR 5 billion State aid scheme to municipal energy companies approved by the European Commission | Waselius & Wist (ww.fi)
Further information on the aid scheme (in Finnish): Kunnallisten energiayhtiöiden maksuvalmiutta turvaavat tukiohjelmat – Kuntien takauskeskus
The Commission approved EUR 80 million recapitalisation measure to support Meyer Turku Oy
The Commission amended the Temporary Crisis Framework for State aid measures to support the economy following Russia’s war against Ukraine on 28 October 2022. Among others, the Commission included a possibility to grant, in specific circumstances, solvency support to companies which are severely affected by the current crisis, and which cannot be sufficiently recapitalised via private sources alone.
Excluding the energy sector, this was the first case where the Commission found that a recapitalisation measure is in line with the principles set out in the Temporary Crisis Framework. In particular, the Commission considered that the aid was proportionate and limited to the amount necessary. Further, the safeguards in place were appropriate to ensure that the aid does not unduly distort competition in the Single Market.
Waselius & Wist advised the Ministry of Economic Affairs and Employment in the notification procedure and negotiations with the European Commission.
News on our website: Waselius & Wist advised the Ministry of Economic Affairs and Employment in a groundbreaking State aid notification procedure | Waselius & Wist (ww.fi)
The Commission’s press release: State aid (europa.eu)
The General Court confirmed the European Commission’s decision to order recovery of the loans granted by the City of Helsinki to Helsingin Bussiliikenne Oy
In this case, an action for annulment of the Commission’s decision to order recovery of state aid granted to Helsingin Bussiliikenne Oy was dismissed by the General Court.
Helsingin Bussiliikenne Oy (“Old HelB”) was established in 2005 by merging two companies owned by the City of Helsinki: HKL-Bussiliikenne Oy and Suomen Turistiauto Oy. Between 2002 and 2012, the City of Helsinki took various measures in favour of HKL-Bussiliikenne and Old HelB. In 2002, HKL-Bussiliikenne was granted a fleet loan of EUR 14,5 million to finance the acquisition of bus fleet. Old HelB took over the fleet loan upon its establishment in 2005. In connection with its establishment, the City of Helsinki granted Old HelB a capital loan amounting to almost EUR 15,9 million to refinance certain debts of HKL-Bussiliikenne and Suomen Turistiauto. In addition, on 31 January 2011 and 23 May 2012, the City of Helsinki granted two new subordinated loans to Old HelB, amounting to EUR 5,8 million and EUR 8 million, respectively.
Shortly after this, the competitors Nobina Sverige AB and Nobina Oy filed a complaint with the Commission, claiming that the state aid had been paid in violation of state aid rules. Old HelB was sold to one of the applicants in 2015, and the merged companies continued conducting business under the name Helsingin Bussiliikenne Oy (“New HelB”). The acquisition covered the entire business of Old HelB.
The most interesting question in the case was whether the recovery order should be extended to a company that in 2015 purchased all the assets of Old HelB, which had received the illegal aid during the years 2002–2012. In this regard, the General Court confirmed the Commission’s finding of economic continuity. Consequently, the new owner, who paid EUR 24 million for the assets, is now secondarily responsible for the repayment of the aid of up to 54 million plus interest.
The General Court found that the Commission had infringed the new owner’s procedural rights since it did not invite the new owner to submit comments on the case before ordering the recovery of the aid. However, The Court of Justice held that it was not proved that in the absence of such irregularity the decision might have been substantively different. Therefore, the procedural irregularity did not entail the annulment of the decision.
The case numbers are T-597/19, City of Helsinki v Commission and T-603/19, Helsingin Bussiliikenne Oy v Commission, and the links to the General Court’s judgement can be found here: CURIA – Documents (europa.eu) T-597/19 and CURIA – Documents (europa.eu) T-603/19
The EU Digital Markets Act entered into force in November 2022
The EU Digital Markets Act entered into force in November 2022 and introduced new rules for large online platforms, which aim to ensure a fair and open Digital Single Market. The EU Digital Markets Act becomes applicable six months after its entry into force, i.e. as of 2 May 2023. The Digital Markets Act is primarily supervised by the European Commission, which also designates companies that meet the criteria laid down in the regulation as gatekeepers.
The Digital Markets Act imposes on large companies providing core platform services certain prohibitions and obligations, which they must comply with in their day-to-day operations. The aim is to ensure that the digital market is not fully concentrated in the hands of the largest platform companies.
The European Commission will designate companies that are obliged to comply with the new prohibitions and obligations in their own core platform services. Such core platform services include search engines, social networking services, number-independent interpersonal communications services, and various online intermediation services, such as marketplaces. For example, gatekeepers must ensure the compatibility of the basic functions of different instant messaging services, such as sending messages and making a voice call between different communication services. Gatekeeper companies will also not be allowed to favour their own services and products, for example, in the order of search results.
The European Commission’s press release is available here: Digital Markets Act (europa.eu)