EU/Competiton: Industry and Consumer goods

Newsletter 9/2020

In a reasoned statement of objections of 21.08.20, the Norwegian Competition Authority raised its concerns against the (horizontal) Gresvig / Sport 1 merger in the Norwegian sports retail sector, notified 21.04.20. Gresvig and Sport 1 is the two of the three largest sports retails chains in Norway. In several minor cities in Norway, the merger may lead to only one sports retail chain being present post closing. Two key arguments of the parties are (i) the competitive pressure from e-commerce, and (ii) the general restructuring of the sports retail business in Norway also seeing a shift from general chains to wholly-owned stores (i.e. high-end brands approaching end-customers via wholly-owned stores or selective distribution including e-commerce rather than the traditional ‘brick-and-mortar’ sports outlet model). The parties may still propose remedies.

The Commission opened 11.08.20 an in-depth investigation to assess whether EUR 95 million of public support granted by Poland to chemical company LG Chem Group (“LG Chem”) for investing in the expansion of its battery cell production facility for electric vehicles (EV) in the Dolnoślaskie region in Poland is in line with EEA rules on regional State aid. In 2017, LG Chem decided to invest more than EUR 1 billion in the expansion of its production capacity of lithium-ion cells and battery modules and packs for EVs in its existing plant in the Dolnoślaskie region of Poland. In 2019, Poland notified the Commission of its plans to grant EUR 95 million of public support for the expansion. EEA State aid rules, in particular the 2014 Regional State Aid Guidelines, enable EEA countries to support economic development and employment in disadvantaged regions and to foster regional cohesion. The measures need to fulfil certain conditions to make sure that they have the intended positive effect. This includes that the support must incentivise private investment, be kept to the minimum necessary, must not lure away investment from a region in another EEA country which is at least as disadvantaged (“anti-cohesion effect”) and must not be directly causing the relocation of activities (such as jobs) to the country granting the support from elsewhere in the EEA. Visit the case dossier here.

In a decision of 17.08.20 the Commission approved the proposed acquisition of Nets’ account-to-account payment business by Mastercard. Mastercard is a US-based technology company operating in the global payments industry. Mastercard’s main activities include the ownership and operation of payment card schemes and provision of switching services for card transactions. Mastercard is also active in alternative payment solutions. Nets’ account-to-account payment business is a business unit within Nets, a payment solution provider headquartered in Denmark. It provides payment services and technology solutions, mainly in the Nordic region, as well as in the Single Euro Payments Area.  The Commission’s investigation focused on the markets for the provision of account-to-account core infrastructure services “A2A CIS” and account-to-account payment services “A2A payment services”, where the activities of the Mastercard and the target business mainly overlap in the EEA. A2A CIS allow to process payments, including real-time payments, directly from one bank account to another, without the need for a card. They can be provided either as a software-only solution or as a managed solution consisting of the provision of the A2A core infrastructure (including the software, together with the hardware and the telecommunication networks and processes), as well as the management and operation of the infrastructure. The Commission found that the transaction, as originally notified, would have raised competition concerns in the EEA market for A2A CIS in relation to managed solutions. In this market, both companies have strong positions and the transaction would have led to the strengthening of the leading player, Mastercard. The Commission also found that the parties closely compete with each other, having been shortlisted by customers in a higher number of EEA tenders compared to other players. Finally, the Commission’s investigation revealed that the parties face a limited number of credible competitors in the provision of A2A CIS managed services, whereas the market for the provision of A2A CIS software-only solutions is generally more competitive. The Commission was therefore concerned that the proposed acquisition would harm competition and lead to higher prices and less choice in the market for the provision of A2A CIS as managed services. To address the Commission’s concerns, Mastercard and Nets offered to transfer to a suitable purchaser a global license to distribute, supply, sell, develop, modify, upgrade or otherwise use Nets’ Realtime 24/7 technology, with which the target business currently competes in A2A CIS tenders. In particular, the purchaser will have access to the licensed technology on an exclusive basis in the EEA and, on a non-exclusive basis, outside of the EEA. The transfer also includes all necessary personnel and services, such as consultancy services and transitional support services, including access to all necessary components and capabilities  to provide managed services based on Nets’ Realtime 24/7 technology. The concentration was subsequently approved. The concentration was initially notified on a national level – including in Norway – albeit later referred to the Commission. Visit the case dossier here.

Disclosure requirements have been imposed on all grocery store chains in Norway in respect of acquisitions relating to the distribution and sale of groceries, regardless of the general threshold in Norwegian rules on merger control. The reason for imposing such requirements is that also smaller acquisitions falling below merger notification thresholds, may cause harm to competition at the local or national level. Norgesgruppen acquired 16.01.18 the premises of a grocery store at Sædalssvingene in Bergen, Norway. Both then and now, Coop operates a grocery store at that location. According to the disclosure requirements, Norgesgruppen should have informed the Competition Authority of the acquisition within three working days after the conclusion of the agreement. The acquisition was, however, only notified to the Authority on 17.04.18. Consequently, Norgesgruppen was fined MNOK 20 in a decision of 27.08.20.

The UK Brexit transition phase ends 31.12.20, and there are no current indication that the transition phase will be extended. Through 2020, the UK has – from an internal market perspective – been a complete member of all provisions and schemes similarly to that of an EU member state. However, if the UK leaves the EU 31.12.20 with no new trade agreement, the “hard Brexit” discussed in 2018-2019 will, in practice, occur 31.12.20 – – and the UK will trade on WTO terms as of 01.01.21. The EU/UK negotiations on a new trade agreement have not been suspended, however, all major (sensitive) issues seem still to be on the table. The Commission’s chief negotiator, Michel Barnier, had the following observation mid August “…too often this week, it felt as if we were going backwards more than forwards… Today, at this stage, an agreement between the United Kingdom and the European Union seems unlikely.” In other words, a 31.12.20 “hard Brexit” seems likely. The Commission published an updated “Brexit Readiness” checklist in August 2020. The new guidance reflects the status of the negotiations – and that an ambitious trade agreement is impossible – by stating that “…changes are inevitable, regardless of the outcome of the ongoing EU-UK negotiations, and risk compounding the pressure that businesses are already under due to the COVID-19 outbreak”. The checklist provides an overview of the main areas of change that will take place in any event as of 01.01.21. The basic checklist can be visited here, and the sectoral stakeholder ‘readiness notices’ published by the Commission services (all updated in 2020) can be visited here.