EU/Competition – Legal Update

► EU-Sanctions against Russia and Belarus – as of now

Due to Russia's military aggression against Ukraine, the Council adopted a fourth package of sanctions against certain economic sectors and individuals on 5 March 2022.

This package for example includes the prohibition of all transactions with certain state-owned enterprises like Rosneft, Transneft, Gazprom Neft, Kamaz, Roste or the United Shipbuilding Corporation and the prohibition of the provision of any credit rating services, as well as access to any subscription services related to credit rating activities to Russian persons or entities. The new measures are also expanding the list of individuals connected to Russia’s defence and industrial base. On these individuals tighter export restrictions are imposed regarding dual-use goods as well as goods and technology which might contribute to Russia’s technology enhancement of its defence and security sector. The package of sanctions also includes the prohibition of new investments in the Russian energy sector, a comprehensive export restriction on equipment, technology, and services for the energy industry. In addition, it contains further trade restrictions concerning iron and steel, as well as luxury goods like jewellery, electrical goods, high-priced vehicles and works of art.

Furthermore, the Council decided to sanction key oligarchs, lobbyists, and propagandists such as Roman Abramovich as well as key companies in the aviation, military and dual use, shipbuilding and machine building sectors such as Rosneft Aero.

The European Commission had already decided on three sanction packages before. In these, it had imposed restrictive measures against individuals and organisations (asset freezes and travel bans), had restricted economic relations with the areas of Donetsk and Luhansk and had ordered sanctions in the financial sector (restriction of access to EU capital markets, ban on transactions with the Russian central bank, ban on providing investments in Russia), the energy sector (export ban on refinery technology, ban on investments in the Russian energy sector), the transport sector (closure of EU airspace to Russian aircrafts), the defence sector (export ban on dual-use goods) and other sectors.

Regarding recent alleged war crimes of Russian troops in Ukraine, representatives of the Council and the EU Member States announced the adoption of further measures in early April 2022.

► Adoption of a Temporary Crisis Framework to support the economy in context of Russia’s invasion of Ukraine

On 23 March 2022, the European Commission adopted a Temporary Crisis Framework to enable the Member States to support the economy as a result of Russia’s invasion of Ukraine (press release). The Commission recognises that Russia’s military aggression will have, or already has, serious negative effects on the supply of agricultural products, the energy market, and other sectors (including the financial economy). With this Temporary Framework the Commission identifies scope for action within existing State Aid rules and complements the existing instruments for State Aid (for example: “Toolbox” in the energy sector, Aids to compensate for the damage directly caused by an exceptional occurrence according to Article 107 (2)(b) TFEU).

According to the Commission, the EU economy in all Member States is experiencing a serious disturbance in a wide range of economic sectors, in accordance with Article 107 (3)(b) TFEU, as a result of the Russian aggression. Hence the Commission considers State Aid of up to EUR 400,000 granted to affected companies until the 31 December 2022 to be compatible with the internal market. For companies active in agriculture, fisheries or aquaculture the Aids must be limited to EUR 35,000. In order to avoid liquidity problems, the commission will also authorise, under certain conditions, the granting of subsidised State guarantees and loans with subsidised interest rates.

For additional costs due to exceptional gas and electricity price increases, companies will be able to receive compensations up to EUR 2 million. For energy-intensive companies that suffer significant operating losses due to increased energy costs, aid of up to EUR 25 million or EUR 50 million per company is possible, depending on the sector.

As in the Corona pandemic, the Temporary Framework provides guidance on how to structure State aid programmes. However, Member States are not exempted from the obligation to notify aid programmes to the commission. Aid may therefore not be granted until final approval by the Commission.

► Statement of the European Competition Network on the application of competition law in connection with the war in Ukraine

(Also) in times of the current situation triggered by the Ukraine war, antitrust issues increasingly arise for companies when they want to – or have to – enter into cooperation with other companies. Now a framework is being established:

On 21 March 2022, the competition authorities in the EU, i.e., the European Commission and the national competition authorities, and the EFTA authority, which together form the European Competition Network (ECN), have issued a joint statement, in which they commented on the application of antitrust law in context of the war in Ukraine.

Herein, the ECN recognises that the impact of war and/or of sanctions in the internal market may lead to companies having to address severe disruptions. This could make cooperation necessary in order to ensure the purchase, supply and fair distribution of scarce products and inputs; or to reduce severe economic consequences including those resulting from compliance with sanctions imposed by the EU. The ECN states that such cooperation would either not constitute a restriction of competition or lead to efficiencies that would most likely justify such a restriction, so that as a result they would be in accordance with antitrust law. The competition authorities would therefore, according to the ECN, not actively intervene strictly necessary and temporary initiatives aimed at avoiding the disruptions in the internal market caused by the crisis. At the same time, the ENC encourages companies to approach the competition authorities in case of doubt and underlines that the competition authorities will not hesitate to take action against companies that take advantage of the crisis to form cartels.

Unlike the ECN joint statement by the European competition authorities on the coronavirus crisis in March 2020, the German Federal Cartel Office (FCO; Bundeskartellamt) has not (yet) published the current statement on its website.

►Dawn Raids in the automotive sector and Dawn Raids at German natural gas companies

Companies cannot rely on the competition authorities to refrain from searches or inspections due to Corona. On the contrary, the unannounced inspections by the European Commission are picking up speed again.

On 15 March 2022 the Commission announced, that it had conducted unannounced inspections at the premises of companies and associations of the automotive sector in several Member States on the same day and parallel, had sent out formal requests for information to multiple companies of the automotive sector. The Commission stated that it is investigating suspicions of cartel agreements (Article 101 TFEU) with regard to the collection, treatment and recovery of end-of-life vehicles and vans, which are considered waste. Once again, the automotive industry is in focus of the Commission, which has already conducted numerous proceedings in relation to various facts and components and imposed fines amounting to billions of euros (see the statistics of the Commission).

At the end of March 2022, the Commission further confirmed that on 29 March 2022 it had carried out unannounced inspections at the premises of several companies in Germany active in the supply, transmission, and storage of natural gas. According to the Commission, the inspections were triggered by concerns that the companies under review may have violated the prohibition of abuse of a dominant position (Article 102 TFEU).

Inspections do not constitute a "guilty verdict" for the companies concerned but are important components for the Commission to obtain evidence in antitrust proceedings. The conduct of dawn raids also does not initiate a legal deadline for the issuing of a decision. In principle, the Commission does not disclose which companies were affected and by whom or by what the proceedings were initiated. Media reports however indicate that the German Gazprom companies were affected by the inspections on 29 March 2022.

In its press releases on the two proceedings, the Commission also pointed out that it had carried out the inspections "in compliance with all coronavirus health and safety protocols" "to ensure the security of those involved".

► European Court of Justice: ruling on copyright compensation for private copies in the cloud

On 24 March 2022 the European Court of Justice (ECJ) ruled that compensation must also be paid to the copyright holders for private copies in the cloud. This decision is based on private copies that Austrian users had stored with the cloud provider Strato (Case C-422/20 – Austro-Mechana, press release). The Austrian copyright collecting society (Austro-Mechana) had brought a claim for payment of renumeration against Strato. The court of first instance dismissed the claim. The court of second instance expressed doubts as to whether the EU Copyright Directive covered private copies in the cloud at all.

This was affirmed by the ECJ. The storage of private copies of copyrighted work is also covered by the relevant rules of the EU Copyright Directive. However, this does not necessarily mean that the providers of cloud storage services are obligated to pay fair compensation. National law must, nevertheless, ensure fair compensation to the rightholders for these private copies.

The ECJ emphasised that Member States such as Austria (as well as Germany), which have implemented the private copying exception in their national law, must ensure that rightholders receive fair compensation for the fact that their protected work has been reproduced by end-users living in the Member State. In determining the compensation, the Member States have a wide margin of discretion as to form, details, and amount, taking into account the particular circumstances of each case. In principle, the person carrying out private copying is liable to finance the fair compensation. Considering the practical difficulties, however, the levy can also be charged on to those who have digital reproduction equipment devices and media and who make that equipment available to private users or provide copying services for them. According to this, in the case of cloud storage, it is compatible with EU law if the fair compensation is ensured by the interaction of a levy on producers or importers of servers on the one hand and mobile phones, computers and tablets (as reproduction devices) on the other.

In Germany, no private copying levy is currently charged for private copies that are backed up via cloud services. The ECJ ruling suggests, that this practice is not in accordance with European law. The German copyright collecting services have recognised this issue. In March 2021, the German Central Office for Private Transfer Rights (Zentralstelle für Private Überspielungsrechte - ZPÜ) requested studies on this matter. This is a first indication that the ZPÜ is preparing to release a tariff to charge cloud services providers or producers of servers needed for this purpose.

► Purchasing cooperation „Die Freien Brauer“ approved by FCO

Co-operations with other companies are subject to particular uncertainties under competition law. Once again, the FCO has now approved a co-operation and given further indications for a permissible co-operation.

On 24 march 2022, the FCO announced that it had no objections to the intentions of the breweries organised in “Die Freien Brauer GmbH & Co. KG“ (“Die Freien Brauer“) to jointly examine and negotiate general purchasing conditions with food retailers.

According to the press release (available in German only), the FCO based its judgement on the fact that these breweries are small, regionally active family businesses. In this way they would (only) better compete with the market and make up for certain existing competitive disadvantages compared to large breweries. The FCO states that the cooperation primarily represents a kind of joint 'outsourcing' of the legal examination of the general terms and conditions of purchase. The FCO based all this on a Germany-wide market, stated that the market shares of the breweries concerned were below 5% and pointed out that specific conditions such as prices or price components as well as sales volumes 'shall' continue to be negotiated individually.

Even though the details of the proceedings have not been published yet, it is reasonable to assume that this case marks a change in the FCO’s approach in the brewery sector.

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The Chatham Partners’ EU/COMP-team is specialized in complex issues in the areas of EU and German competition, State aid and public procurement law and has extensive practical experiences in these fields.