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Competition Law Update Pat Treacy Partner 25 March 2015.

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Presentation on theme: "Competition Law Update Pat Treacy Partner 25 March 2015."— Presentation transcript:

1 Competition Law Update Pat Treacy Partner 25 March 2015

2 Competition law update – 25 March 2015 A reminder of the basics Recent developments: 1.Essential patent enforcement and Article ‘Pay for delay’ and patent settlement agreements 3.Most favoured nation/ price parity clauses 4.On-line sales restriction 5.Recap on new de minimis notice and TTBER 6.Effect of new damages directive What to expect in 2015 Agenda

3 Competition law update – 25 March 2015 Agenda A reminder of the basics Recent developments: 1.Essential patent enforcement and Article ‘Pay for delay’ and patent settlement agreements 3.Most favoured nation/ price parity clauses 4.On-line sales restriction 5.Recap on new de minimis notice and TTBER 6.Effect of new damages directive What to expect in 2015

4 Competition law update – 25 March 2015 A reminder of the basics UK and EU law To promote and maintain market competition to benefit consumers Regulating: anti-competitive agreements abuses of market power mergers European Commission and national competition authorities 4 4

5 Competition law update – 25 March 2015 Agreements Chapter I / Article 101 TFEU prohibitions Focus: bi- or multilateral conduct: 101(1) – significant restriction on competition 101(2) – automatically void 101(3) – unless exempted (block exemptions for common arrangements; or individual exemption) Agreements = written, verbal, gentlemen’s agreements, understanding and concerted practices NAOMI: if the parties’ market shares are < 10% on any relevant market – but not hard core restrictions (market-sharing; price fixing) Watch out for RPM, price fixing, market sharing, bid rigging 5

6 Competition law update – 25 March 2015 Dominance/abuse Chapter II / Article 102 TFEU prohibitions Focus: unilateral conduct dominance – normally market share greater than 40% and abuse – conduct which harms consumers ‘Objective justification’: conduct will not be an abuse Watch out for unfair trading terms, predatory pricing, limiting production, tying 6

7 Competition law update – 25 March 2015 Consequences Agreement / provision could be void Possible fines of up to 10% of turnover Possible damages actions Director’s disqualification (UK) Criminal sanctions for serious breaches (UK) 7

8 Competition law update – 25 March 2015 Mergers EU Merger Regulation 139/2004 ‘Community dimension’: must pre-notify Amendments to the notification procedures came into effect on 1 January 2014 Widens the scope of the simplified merger review procedure Reduces the amount of information needed to notify – pre-notification process streamlined Enterprise Act 2002 No obligation to pre-notify But the deal can be unwound (4 months) Substantial lessening of competition 8

9 Competition law update – 25 March 2015 Agenda A reminder of the basics Recent developments: 1.Essential patent enforcement and Article ‘Pay for delay’ and patent settlement agreements 3.Most favoured nation/ price parity clauses 4.On-line sales restriction 5.Recap on new de minimis notice and TTBER 6.Effect of new damages directive What to expect in 2015

10 Competition law update – 25 March 2015 Competition and Markets Authority The new UK competition regulator From 1 April 2014 Taken over the competition law functions of the UK Office of Fair Trading and the Competition Commission Expected to be more interventionist 10

11 Competition law update – 25 March Essential patent enforcement and Article 102 Advocate General Opinion in Huawei v ZTE (C-170/13) – November 2014: reference from Dusseldorf Regional Court regarding the circumstances in which a prohibitory injunction may be granted AG Wathelet noted: that a presumption of dominance could be rebutted with “specific, detailed evidence”; and the need to balance the SEP-right holder’s right to protect its IP and its right of access to the courts against implementers’ right to freely conduct their business Steps which an SEP holder must take before bringing an action for infringement: Alert the other party of the infringement (unless it is established that the other party is fully aware of the issue); and Put forward a written licence offer on FRAND terms Offeree must: respond in a diligent and serious manner; and be objectively ready, willing and able to conclude a licensing agreement 11

12 Competition law update – 25 March ‘Pay for delay’ – recent cases Lundbeck and others (citalopram) Infringement decision issued by the Commission in June 2013 Agreements concerning anti-depressant citalopram. The agreements provided for “substantial payments and other inducements” from Lundbeck to the generic manufacturers Appealed by Lundbeck Servier and others (perindopril) Infringement decision issued by the Commission in July 2014 Patent settlement agreements with generic competitors to delay generic entry of the drug perindopril Certain technology acquisitions by Servier also deemed to have infringed Article 102 Appealed by Servier 12

13 Competition law update – 25 March ‘Pay for delay’ and patent settlement agreements Addition to Guidelines under the new TTBER What is a settlement agreement for the purposes of the Guidelines? settles a “bona fide legal disagreement” in relation to technology rights: “bona fide” – “honest and sincere” (perhaps “genuine” is better?) genuine disagreement – about what (validity and/or infringement, but not licence terms?); or avoids one party exercising “its intellectual property rights to prevent the other party from exploiting its own technology rights”: seems very broad freedom to operate type licence not technology transfer licence Note: Guidelines do not apply to settlements where no licence is granted 13

14 Competition law update – 25 March ‘Pay for delay’ and patent settlement agreements What are ‘pay-for-delay’ settlements? licence of disputed IP rights “significant value transfer” from licensor to licensee (beyond the grant of licence itself?) value transfer is in return for a limitation on entry to the market of licensee licensor and licensee are actual or potential competitors (presumably in the relevant market?) Note: “The Commission will be particularly attentive to the risk of market allocation/market sharing” 14

15 Competition law update – 25 March 2015 Guidelines give 3 examples of when no-challenge clauses in settlement agreements could be anti-competitive 1.Where an intellectual property right was granted following the provision of incorrect or misleading information” (i.e. AstraZeneca) “following” – means as a result of? “provision of incorrect or misleading information” – by or on behalf of the applicant or licensor? 2.“If the licensor, besides licensing the technology rights, induces, financially or otherwise, the licensee to agree not to challenge the validity of the technology rights” note: “besides licensing the technology rights” 3.“If the technology rights are a necessary input for the licensee’s production” would always apply? 2. ‘Pay for delay’ and patent settlement agreements 15

16 Competition law update – 25 March Most favoured nation (aka: ‘price parity’) clauses What are they? 1)‘narrow’: party A (e.g. insurer) promises to offer its goods/services to party B (e.g. price comparison website) on price parity (at least as good/better terms) with the best terms offered by party A itself 2)‘wide’: party A promises to offer party B prices on parity with other third parties and party A’s own prices National competition authorities taking a restrictive approach to MFN clauses: in particular, the online hotel bookings market has come under the scrutiny of multiple competition authorities (e.g. in Austria, France, Germany, Hungary, Italy, Switzerland and the UK) 16

17 Competition law update – 25 March Most favoured nation (aka: ‘price parity’) clauses Recent investigations September 2014: Competition Appeal Tribunal upheld Skyscanner’s appeal against the OFT’s decision of January 2014 (where it accepted commitments from hotel online booking providers (Booking.com and others) )  Competition and Markets Authority currently investigating suspected breaches of competition law in the online hotel bookings sector December 2014: European Commission announced it has been co-ordinating national investigations by the French, Italian and Swedish authorities into Booking.com’s commitments to drop its ‘wide’ MFNs What does it all mean?: MFNs = a hot topic across Europe national authorities aware of pan-European developments. Potentially will be influenced by counterparts’ approaches MFNs in e-commerce should be used with caution. But context is still key 17

18 Competition law update – 25 March Restrictions on online sales Amazon MFN clause investigation, OFT and German regulator Restrictions on sale of product offered through Amazon cheaper elsewhere Amazon agreed to remove policy Mobility Scooters, OFT, CE/ Restrictions on advertising prices lower than recommended rates Restrictions on online sales and advertising of prices online Most recently, infringement decision in March 2014 issued against Pride Mobility Products and another and certain of their retailers OFT: “Enforcement action will be taken against arrangements that restrict the freedom of retailers to advertise their actual selling prices online” 18

19 Competition law update – 25 March Restrictions on online sales Restrictions on retailers’ use of third party platforms (per se platform bans) Casio Investigation, German court and Adidas Investigation, Federal Cartel Office Both cases found an infringement of competition law The qualitative factors necessary for a selective distribution system were not made out The benefits of selective distribution systems were acknowledged Adidas agreed to remove a restriction that prevented its resellers from selling products via internet auction sites and online market places Adidas has also dropped its limit on resellers using Adidas brand terms as search words for search engine advertising 19

20 Competition law update – 25 March Recap on new de minimis notice and TTBER New de minimis notice Adopted by Commission in June 2014 Sets out safe harbour for minor agreements from Article 101 prohibition on anti-competitive agreements No change to market share thresholds Instead of listing agreements that fall outside the safe harbour (as per the 2001 Notice), focus is on agreements constituting restrictions by ‘object’ or listed as ‘hard core’ within current/future block exemptions Any restriction by object = automatically assumed to have an appreciable restriction on competition, regardless of whether there are concrete market effects (adopting CJEU definition in Expedia, (C-226/11)) Commission Staff Working Document also published – contains findings of object restrictions to date  subject to updating; non-definitive list 20

21 Competition law update – 25 March Recap on new de minimis notice and TTBER Revised Technology Transfer Block Exemption (TTBER) Came into force on 1 May 2014 Applies to licences which relate to patents, know-how, designs and/or software copyright Commission Guidelines on the application of TTBER 21

22 Competition law update – 25 March Recap on new de minimis notice and TTBER Hardcore: passive sales Excluded: grant backs Excluded: terminate-on- challenge Guidance: settlement agreements 22 Overview of changes in the TTBER

23 Competition law update – 25 March 2015 Grant-back provisions Grant-back of “non-severable” improvements previously covered by the safe harbour Clauses that force a licensee to license back any improvements no longer covered by the safe harbour Aim is to ensure that there are incentives for follow-on improvements 5. Recap on new de minimis notice and TTBER 23

24 Competition law update – 25 March 2015 No-challenge clauses No-challenge clauses remain excluded restrictions (EU competition policy: generally good to remove invalid IP from the market) Change: Termination-on-challenge clauses now also treated as excluded restrictions if they are part of a non-exclusive licence 5. Recap on new de minimis notice and TTBER 24

25 Competition law update – 25 March 2015 Technology pools Commission has acknowledged the pro-competitive effects of technology pools (particularly in the context of standardisation) The new Tech Transfer Guidelines provide a safe harbour for the creation of and licensing from technology pools 5. Recap on new de minimis notice and TTBER 25

26 Competition law update – 25 March 2015 Previous Tech Transfer Guidelines adopted a liberal approach New stricter approach – e.g. parties in litigation with each other are regarded as competitors, and any subsequent licence-grant is to be reviewed under the stricter list of hardcore terms 5. Recap on new de minimis notice and TTBER 26

27 Competition law update – 25 March 2015 Conclusions Overall approach: licensing is generally pro-competitive and should be encouraged, but no immunity from competition law New TTBER = an evolution rather than a revolution New TTBER is more sceptical of certain protections for licensors New TTBER appears to seek to encourage follow-on innovation and disruptive challenges to existing technologies 5. Recap on new de minimis notice and TTBER 27

28 Competition law update – 25 March Effect of new damages directive Directive 2014/104/EU on competition damages actions – published in the Official Journal on 5 December 2014 Member states will have until December 2016 to implement into national law Aims to help claims for damages in competition cases Harmonises rules of member states. Key areas: disclosure of evidence final decisions of national competition authorities binding on national court clear limitation periods established – at least 5 years; to be suspended during competition authority investigations or any consensual dispute resolution process passing on defence promotion of settlements leniency safeguards 28

29 Competition law update – 25 March Effect of new damages directive Effects = new rules are broadly in line with those in the UK may encourage claims due to clarification of laws harmonisation of rules across Europe means, in theory, potential reduction in forum-shopping; however, this is dependent on uniform implementation entities found by national competition authorities to have infringed competition law will face greater risks of follow-on action The UK is also pressing ahead with collective actions in the CAT (Consumer Rights Bill, now in pre-Royal Assent ping pong stage – expected to enter into force in October 2015) 29

30 Competition law update – 25 March 2015 Agenda A reminder of the basics Recent developments: 1.Essential patent enforcement and Article ‘Pay for delay’ and patent settlement agreements 3.Most favoured nation (/price parity) clauses 4.On-line sales restriction 5.Recap on new de minimis notice and TTBER 6.Effect of new damages directive What to expect in 2015

31 Competition law update – 25 March 2015 What to expect in 2015 Rise of private actions in competition law: already seen an increase encouraged by competition authorities (cf. New damages directive and Consumer Rights Bill) Financial Conduct Authority will get full competition powers from 1 April 2015 – increased risk of investigations Continued probe into online markets: echoed in CMA’s annual plan for 2015/2016 SEPs: Watch out for the CJEU’s judgment in Huawei Technologies 31

32 Thank you Bristows LLP 100 Victoria Embankment London EC4Y 0DH T +44(0) F +44(0)


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