Competition Outlook 2018

With this newsletter, the Noerr Antitrust & Competition Group is delighted to provide you with an outlook on relevant topics, which we expect to play an important role in German, European and international antitrust law debates this year.
In the following, we shed light on topics such as “The Digital Single Market”, “Big Data: Caught between Competition and Data Protection Agencies?” and “Innovation as a key aspect when applying antitrust rules”. These are only a few of the most important topics for 2018 we would like to present to you in the following paragraphs.

The pivotal year for the Digital Single Market (“DSM”) and new challenges for the enforcement of antitrust law

The DSM strategy has an ambitious scope, covering a wide range of critical issues cutting across different areas of the EU policy and law in general, including data protection, intellectual property, information and communications technology, consumer protection and, definitely, competition. The increased digitalisation raises the question whether antitrust law as it stands is still fit for the purpose or whether there is a need for action. In 2018, the European institutions will focus most of their resources on implementing the DSM proposals; as a follow-up, this may lead the European Commission’s Directorate General for Competition to identifying business practices pointing to potential competition concerns. Accordingly it may be expected that the EU watchdog will continue its enforcement activities to focus on cases related to e-commerce, IP and platforms to underline the importance of EU competition rules for the DSM.

Increasing focus on algorithms by Competition Authorities

In 2018, the European Commission will focus more than ever on the increasing use of algorithms for independent price adjustment (dynamic pricing). There are already a number of cases where companies use algorithms as a means for their anti-competitive actions. However, it remains to be seen how the Competition Authorities will treat cases which are less obvious. This concerns especially highly complex algorithms and algorithms which adjust prices in accordance with competitors without any agreement or coordination between companies. Read more about it here.

Big Data: Caught between Competition and Data Protection Agencies?

„Big Data“ is most likely going to make headlines in 2018 as an essential part of current issues of antitrust law. Data-based business models are one of the key factors of success and competitiveness in many industry sectors.

The European Commission, National Competition Authorities as well as national Data Protection Agencies are keeping a close eye on the analysis, survey and processing of personal data especially with regard to the transparency of this process. Network effects and access to competition-relevant data are of particular importance.

In particular in the light of the entry into force of the European General Data Protection Regulation we will likely see an increasing number of cases on European and national level when it comes to the effects of Big Data on competition, for example in the context of market entry barriers. Read more about it here.

Finally a more predictable enforcement environment for SEPs?

The European Commission's newly published communication on standard essential patents (“SEPs”) establishes a starting point for the future litigating and licensing of SEPs by partially creating a more predictable legal environment for all  parties involved. The communication endorses the CJEU’s judgment in Huawei v ZTE in 2015 that injunctive relief can be invoked by the SEP’s owners against a party that refuses to take up a license on FRAND terms, subject to the principle of proportionality. In addition, the communication lists several steps in terms of timing and procedure on how the licensing negotiations should be concluded. The communication is not a binding statement of law but merely a guidance proposed by the European Commission and its final interpretation remains in the domain of the national and EU Courts. However, it will surely be often deployed by SEP holders and implementers when negotiating licences and/or when engaged in litigation. As, at the same time, the communication does not answer all relevant questions in a sufficient manner, we expect to see a lot of intensive SEP litigation also in the future.

EU Directive on antitrust damages plus possible Brexit: Benefits for Germany

The private enforcement of antitrust damages is likely to continue being a high priority in 2018. In the coming months we will see an increase in the number of private follow-on damage claims, thanks to the implementation of the EU Antitrust Damages Directive, which removed main obstacles to effective compensation of damages. This year will also show the first results of the on-going Brexit negotiations. The UK’s withdrawal from the EU may bring about –at least in midterm – a shift for competition ligation away from the UK to other jurisdictions of the continent, most likely Germany, which is considered an appealing alternative for many international claimants.

More efficient and stringent public enforcement of EU competition law by the National Competition Authorities (“NCAs”)

In 2018 NCAs are expected to engage with an even more stringent public enforcement of EU competition law. The NCAs have taken the lead when it comes to public enforcement of competition law in the field of vertical restraints and this trend is expected to grow even further this year. In the light of the valuable findings of the e-commerce sector inquiry conducted by the European Commission, the NCAs are expected to develop a very active decision practice in the near future. Well-resourced NCAs are also expected to investigate aspects of the activities of so-called Big Tech firms in light of an alleged abuse of a dominant position. The recent investigation on Facebook by the German Federal Cartel Office may be viewed as a warning sign in this regard.

Russian competition regulators at the cutting edge of the Digital Economy

Also the Russian Federal Antimonopoly Service (“FAS”) is expected to frequently deal with antitrust violations committed by using digital technologies in 2018. This has already started, as shown by the recent investigations that the FAS is running. Of particular interest is the investigation on a Russian subsidiary of LG Electronics, which is suspected of having used algorithms with a view to coordinating prices among resellers of their smartphones. The FAS has already acknowledged that the current law has not been fully adapted to the digital economy, therefore further developments in this area are expected.

 

Innovation: A key aspect for Competition Authorities

Innovation, both to improve existing products and to develop new products, is a key element of competition. This issue was addressed by the European Commission in recent merger control decisions such as Dow/DuPont, ChemChina/Syngenta and Bayer/Monsanto. In 2018, innovation will remain in the focus of the European Commission’s attention not only as a significant factor for the assessment of mergers and acquisitions, but it will have major implications in antitrust law in general: Competition Authorities will consider the role of innovations on markets within their effects-based competition analysis in an increasing manner in the coming years.

Is there a need for a “more sustainable approach” in EU competition law?

There is an obvious tension between sustainability initiatives, which often require the cooperation or at least a coordinated approach of competitors and antitrust law, which aims at ensuring that companies act independently on the market. Given the restrictive approach of Competition Authorities regarding issues such as the exchange of commercially sensitive information, some companies refrain from participating in joint initiatives altogether, in order to avoid antitrust law exposure. For example, in the Netherlands, the Competition Authority has repeatedly found that sustainability initiatives based on broad public support and which were backed by the government were infringing competition law. The current surge in policy initiatives – in particular regarding the development of sustainable technologies – will therefore confront Competition Authorities more often with the task to balance sustainability and competition.