1. Recent competition law developments: EU and Latvia Debora Pāvila Jūlija Jerņeva Riga, 5 March 2010

2. Contents 1.Overview of the year 2009: Latvia 2.Horizontal agreements 3.Vertical agreements 4.Abuse of dominant position 5.Mergers 6.Procedural issues: will the Intel case bring more clarity?

3. Overview of 2009 – Latvia Types of cases2009200820072006 Abuse of dominant position 19 (3v)18 (5v)13 (2v)11 (4v) Prohibited agreements 9 (6v)18 (7v)12 (5v)10 (5v) Mergers12 (1v)57 (5v & 2p)82 (3v & 1p)28 (4v)

4. Horizontal agreements Akzo case Hoechst case KME Germany case Latvian cases: overview

5. Akzo case: 100% share ownership Case C-97/08: Choline chloride cartel “100% share ownership creates a presumption that the parent company controls the subsidiary and exercises decisive influence over its commercial policy and is therefore jointly and severally liable” “Where a parent company holds 100% of the capital of a subsidiary it is for the parent company to produce any evidence relating to the economic, legal and organisational links between the subsidiary and itself which in its view are such as to rebut the presumption that they do not constitute a single economic entity”

6. Hoechst case: liability of the seller of the shares Case T-161/05: Monochloroacetic Acid cartel Hoechst sold business to Clariant which then made a leniency application and was granted immunity Hoechst argued that due to transfer of business either: –Clariant was liable for fine; or –Hoechst should also benefit from immunity

7. T-Mobile Netherlands case Case C-8/08 (preliminary ruling) Single meeting between competitors (to discuss the reduction of a standard dealer remuneration) “It is not necessary for there to be actual prevention, restriction or distortion of competition or a direct link between the concerted practice and consumer prices. An exchange of information between competitors is tainted with an anti ‑ competitive object if the exchange is capable of removing uncertainties concerning the intended conduct of the participating undertakings.” “The national court is required, subject to proof to the contrary, which it is for the undertakings concerned to adduce, to apply the presumption of a causal connection, according to which, where they remain active on that market, such undertakings are presumed to take account of the information exchanged with their competitors. That presumption forms an integral part of applicable Community law”

8. Latvian cases: overview Aizputes Ceļinieks & Ceļu, tiltu būvnieks (road construction) –Decision dated: 14.05.2009 –Type of case: price fixing Public procurement: two agreements with SIA „Komunālā pārvalde”; Vecliepāja & Jaunliepāja agreements (with identical price adjustment clauses) Exchange of information on planned increase of prices after the conclusion of the agreements Fine: LVL 69’733 ca EUR 99’222

9. Latvian cases: overview Tyre mounting and repair case –Decision dated: 27.06.2009 –Fine: LVL 8’360 ca EUR 11’734 –Type of case: price fixing No direct fixing of prices, but sufficient exchange of information Creation of artificial transparency on the market

10. Latvian cases: overview Balticovo et al. (eggs’ cartel case II) –Decision dated 11.12.2009 –Fine: LVL 109’162 ca EUR 153’231 –Exchange of information about: output costs sales volume prices (including export prices) debtors, clients insurance (prices and conditions) sales of real estate

11. Latvian cases: overview Plus Punkts, Narvesen Baltija and Preses Apvienība –Decision dated 16.12.2009 –Fine: LVL 103’100 ca EUR 144’722 –Agreements with Tele2 provided for: Maximum retail price of pre-paid mobile telephony cards Precluded the retailers from charging the consumers a “service fee” –The retailers: Almost simultaneously asked to remove these clauses Started applying the same “service fee”

12. Vertical agreements Introduction Draft Commission Regulation and Draft Guidelines on Vertical Restraints Latvian cases: Samsung

13. Introduction Vertical agreements = supply and distribution agreements Anti-competitive effects depend on the degree of market power of the parties, extent of competition faced Art 101(1) [ex 81(1)] and Art 101(3) [ex 81(3)] Block exemptions as safe harbours ONLY

14. Draft Regulation and Guidelines on Vertical Restraints I Regulation 2790/1999 (the VRBE) expires on 31 May 2010 Draft Regulation available at: http://ec.europa.eu/competition/consultations/2009_vert ical_agreements/draft_regulation_en.pdf http://ec.europa.eu/competition/consultations/2009_vert ical_agreements/draft_regulation_en.pdf Draft Guidelines available at: http://ec.europa.eu/competition/consultations/2009_vert ical_agreements/draft_notice_en.pdf http://ec.europa.eu/competition/consultations/2009_vert ical_agreements/draft_notice_en.pdf

15. Draft Regulation and Guidelines on Vertical Restraints II Major changes: –Supplier + buyer market share test (up to 30% for each) INSTEAD of the supplier market share test alone –More attention to on-line sales restrictions Other points of interest –Agreements between retail chains and suppliers –Definition of ‘agreement’ –RPM

16. Draft Regulation and Guidelines on Vertical Restraints III Cumulative market share test –Narrowing of the scope of application of the BE –Questionable relevance of the buyer’s market power in the downstream market Single branding and exclusive distribution agreements Input procurement –Impractical self-assessment for suppliers

17. Draft Regulation and Guidelines on Vertical Restraints IV Online sales –Inherent problem of online sales for exclusive distribution systems –Still generally regarded as ‘passive’ sales, i.e., restrictions thereof fall outside the BE –Unclear meaning of “specifically targeted online advertisement” –Allowed restrictions (‘brick and mortar shop’, quality standards for Internet site) are very limited –Is the distinction between ‘active’ and ‘passive’ sales appropriate for online sales at all?

18. Draft Regulation and Guidelines on Vertical Restraints V Specific agreements between retail chains and suppliers: –Upfront access payments = fees charged for access to retailer’s distribution network –Category management = supplier entrusted with marketing of a category of products Exempted below the market share thresholds BUT what happens above the thresholds?

19. Draft Regulation and Guidelines on Vertical Restraints VI Notion of ‘agreement’ –Unilateral action vs. tacit acquiescence –Bayer (T-41/96; C-2/01P & C-3/01P)

20. Draft Regulation and Guidelines on Vertical Restraints VII RPM (retail price maintenance): –Still a “hardcore restriction” –More detailed analyses of the competitive effects –Is this good enough? –The Latvian case: Hanzas Maiznīcas

21. Latvian cases: Samsung Samsung Electronics Baltics –Decision dated 30.10.2009 –Fine: LVL 4’099’943 ca EUR 5’833’693 (total: LVL 6’080’715 ca EUR 8’652’078) –Geographic market: Latvia, Lithuania, Estonia –Agreements: Price fixing Market sharing

22. Abuse of dominant position Microsoft: PC operating systems case RWE Group: German gas supply case Rambus: ambush patent case Intel: rebates case Latvian cases: overview

23. Microsoft: PC operating systems case Case COMP/39.530 Automatic tying of 'Internet Explorer' web browser to the 'Windows' computer operating system –deprives consumers of choice –results in fewer innovative products on the market January 2009: the Commission’s preliminary view that the company abused its dominant position in the market for client PC operating systems through the tying of Internet Explorer to Windows

24. Microsoft: PC operating systems case As of March 2010: browser “Choice screen” –"Choice Screen" enables users (from EEA) of Windows XP, Windows Vista and Windows 7 to choose in an informed and unbiased manner which web browser(s) they want to install in addition to, or instead of, Microsoft's web browser –Same applies to users, who receive an automatic update –Available for 5 years 16 December 2009: Commission’s commitment decision

25. Microsoft: PC operating systems case Mr. Nitot, president of Mozilla Europe (27.10.2009): “In 17 countries of Europe, Firefox is now the dominant browser, and the browser is particularly popular in Eastern Europe” Firefox was launched in 2004, i.e. when Microsoft was allegedly foreclosing the market

26. RWE Group: German gas supply case Case COMP/39.402 RWE may have abused the dominant position on its gas transmission network to restrict its competitors' access to the network Types of abuses: –Capacity management: systematically keeping the transport capacity on its gas network for itself –Margin squeeze: setting transmission tariffs at an artificially high level with the effect of preventing even a competitor as efficient as RWE from competing effectively on the downstream gas supply markets or limiting competitors' or potential entrants' ability to remain in or enter the market

27. Margin squeeze: no discrimination BC Purchase price (PP)40 Minimum manufacturing costs (MinC)40 Maximum competitive retail price (MaxC)100 Profit (P = MaxC – PP – MinC)20 Sparkling wine manufacturer: B (group company with A) Sparkling wine manufacturer: B (group company with A) Sparkling wine manufacturer: C Wine material manufacturer: A

28. Margin squeeze: no discrimination BC Purchase price (PP)60 Minimum manufacturing costs (MinC)40 Maximum competitive retail price (MaxC)100 Profit (P = MaxC – PP – MinC)00 Sparkling wine manufacturer: B (group company with A) Sparkling wine manufacturer: B (group company with A) Sparkling wine manufacturer: C Wine material manufacturer: A

29. RWE: commitments RWE committed to divest its entire Western German high-pressure gas transmission network, including the necessary personnel and ancillary assets and services Competition Commissioner Neelie Kroes commented: "This very substantial set of remedies will fundamentally change the landscape of German gas markets…RWE will no longer be able to use the control of its network to favour its own gas supply affiliate over its competitors."

30. Rambus: patent ambush Case COMP/38.636 Type of abuse: –allegedly intentional deceptive conduct, resulting in –potentially abusive royalties for the use of certain patents as US courts dismissed the claim: FTC had not proven that absent the incriminated conduct Rambus’ technology would not have been standardised Patent ambush and royalties: to be or not to be?

31. Intel: rebates case Case COMP/37.990 Financial consequences: –Fine: € 1.06 billion (largest fine on single firm, but only(?) 4.15% of the turnover) –Settlement with AMD: $ 1.25 billion to be paid Facts: –Dominant position by Intel between October 2002- December 2007 –Relevant market: x86 Central Processing Units (CPU) worldwide market (at least 70% market share)

32. Intel: types of abuses 1.Wholly or partially hidden rebates to computer manufacturers on condition that they bought all, or almost all, their x86 CPUs from Intel 2.Direct payments to Europe’s largest PC retailer (MSH) on condition that it stocked only computers with x86 CPUs 3.Direct payments to computer manufacturers to stop or delay the launch of specific products containing a competitor’s x86 CPUs and to limit the sales channels available to these products

33. Latvian cases: overview Riga Free Port case –Decision dated 20.03.2009 –Fine LVL 45’000 ca EUR 63’166 VIASAT and TV3 case –Decision dated: 18.06.2009 –Fine LVL 87’000 ca EUR 122’122 Alpha Express case –Decision dated 22.10.2009 –Fine LVL 8’679 ca EUR 12’182

34. Latvian cases: overview 2009 commitments cases: –Forum Cinemas case (18.06.2009) –Preses Serviss case (04.02.2009) –Latvenergo case (20.11.2009) –Nasdaq OMX Riga case (18.12.2009)

35. Mergers Electrabel: de facto control Qualcomm: third party appeal of clearance Schneider: action for damages against the Commission Latvian cases: Ostas flote

36. Electrabel: de facto control Case No. COMP/M.4994 Transaction cleared in April 2008 EUR 20 million fine for acquisition of de facto control already in December 2003 Appeal lodged before the CFI

37. Qualcomm: third party appeal of clearance Case T-48/04 Third party appeal of clearance of acquisition by DaimlerChrysler Services and Deutsche Telekom of joint control over Toll Collect Appeal dismissed

38. Schneider: action for damages against the Commission Case C-440/07P Schneider ordered by Commission to divest of Legrand; Commission decision was thereafter annulled Schneider claimed EUR 1’700 million in damages CFI awarded EUR 420k ECJ set aside the CFI judgment

39. Latvian cases: Ostas flote Decision dated: 14.01.2010 Fine: LVL 27’250 ca EUR 38’773 Failure to notify acquisition of 50% (joint control)

40. Procedural issues: will the Intel case bring more clarity? Intel: the power of context? Standard of proof Right of defence Some case-law

41. Intel: the power of context? Intel’s chief executive wrote in e-mail message to a colleague that Dell was “the best friend money can buy” –"Yeah, I said some of those things, but they are taken broadly out of context. When the full nature of the emails is exposed, [it will be clear that] there is another way to interpret them.“ Massive amount of information –141 companies questioned –21 dawn raids –Several hundred thousand pages (500 million pages?)

42. Standard of proof Confirmation bias: a search for evidence that confirms rather than challenges one’s beliefs European and national procedural rules: applying mutatis mutandis, ignoring or taking into the account?

43. Right of defence Extensive evidence gathering powers –On-site inspections –Requests for information –Power to take statements and to interview Judicial review possibilities Control over the file (confidential information, (not) including the gathered evidence to the file, redacted files) Reliance on complainants “Blind” search and interviews... No sufficient information before the “statement of objections”?

44. Some case-law Joined cases T-68/89, T-77/89 and T-78/89, Società Italiana Vetro SpA, Fabbrica Pisana SpA and PPG Vernante Pennitalia SpA v Commission Type of case: cartel Issues: –Deleting words –Excluding certain evidence

45. Some case-law Case T-342/99, Airtours plc v Commission Type of case: merger Issues: –Inconsistency with previous opinions –Misreading of evidence

46. Some case-law Case T-5/02, Tetra Laval BV v Commission Type of case: merger Issues: –Accuracy of economic evidence –“Convincing” evidence

47. Thank you! TallinnTartuRigaVilnius Ahtri 6a, 10151 Tallinn, Estonia Kaluri 2, 51004 Tartu, Estonia Vesetas iela 7, LV-1013, Riga, Latvia Konstitucijos av. 7, LT-09308 Vilnius, Lithuania Tel. +372 626 4300Tel. +372 730 1610Tel. +371 6732 0000Tel. +370 5 248 7337 Fax +372 626 4306Fax +372 730 1620Fax +371 6732 0065Fax +370 5 248 7338 tallinn@varul.comtartu@varul.comriga@varul.comvilnius@varul.com Debora PavilaJulija Jerneva Partner, Attorney-at-law +371 2914 9110+371 2913 1597 Debora.Pavila@varul.comJulija.Jerneva@varul.com