Welcome to this month’s edition of the Sidley Antitrust Bulletin — thoughts on topics that are top of mind for Sidley’s Antitrust team and why they matter to you. In the UK, the Competition and Markets Authority (CMA) recently issued guidance setting out its policy for environmental sustainability agreements. The U.S. agencies also continued to move previously announced priorities forward. The U.S. Department of Justice (DOJ) focus on information exchanges continues, as it filed a complaint against a consulting firm engaged in benchmarking, and the U.S. Federal Trade Commission (FTC) interest in labor issues was advanced as it entered into a memorandum of understanding with the Department of Labor (DOL) that sets out how the two agencies plan to work together to promote competition in labor markets. The European Commission (EC) recently prohibited a deal, and, in Luxembourg, the European General Court (GC) dismissed an appeal against geoblocking practices in the online video games sector. Interested? Keep reading.…
Our Take on Top-of-Mind Global Antitrust Issues
CMA publishes Green Agreements Guidance: On October 12, 2023, the CMA published guidance explaining how competition law applies to environmental sustainability agreements between firms operating at the same level of the supply chain. The CMA’s aim is to ensure that competition law does not impede legitimate cooperation between businesses that is necessary for the protection or promotion of environmental sustainability. Examples of legitimate collaborations under the guidance include where a company would otherwise suffer a first mover disadvantage if it switched to a more sustainable but costlier input, and pooling resources to achieve more environmentally sustainable outcomes more quickly and on a suitable scale. The guidance supplements the CMA’s guidance on horizontal agreements published earlier this year. For further analysis, see our Sidley Update here.
Why it matters: The guidance provides businesses operating in the UK with more clarity about what is legal when collaborating toward environmental sustainability goals and establishes an open-door policy for informal guidance. This guidance is narrower in scope than the equivalent EU guidance, which encompasses activities that pursue broader societal goals such as supporting economic, environmental, and social development. On the other hand, the CMA is taking a more permissive approach in the context of agreements helping to combat climate change, to reflect the special category of threat that this presents.
DOJ brings information exchange complaint against a data consultant: On September 28, 2023, the DOJ filed a complaint against data and consulting firm Agri Stats for its role in facilitating the exchange of competitively sensitive information among major meat processors. The DOJ alleges that Agri Stats gathers detailed information on a company's operating and processing costs, production volumes, and pricing, then issues industrywide reports that provide anonymized metrics to subscribing meat processors. The DOJ argues that the provision of these “unique insights” into competitors’ businesses weakens competition in the industry and ultimately increases prices for purchasers and consumers. In recent years, Agri Stats has been involved in multiple litigations and investigations in the various meat markets, in which its role was scrutinized for the facilitation of information exchange within price fixing and supply reduction claims. In those cases, Agri Stats argued that its benchmarking service helps companies operate more efficiently and keep production costs low, which results in lower prices for consumers. Interestingly, Agri Stats was dismissed from conspiracy claims on summary judgment in a series of cases involving the poultry industry.
Why it matters: As the FTC and DOJ have rescinded the safe harbors previously in place for information exchange, these types of challenges are likely to become more common. Companies that participate in trade associations or use benchmarking should be aware of this heightened interested in activities relating to information exchange.
FTC signs memorandum of understanding (MOU) with DOL signaling continued scrutiny of competition in labor markets: On September 21, 2023, the FTC announced a MOU with the DOL outlining ways the two agencies can work together to promote competition in labor markets. The MOU identifies the FTC’s and DOL’s shared areas of concern, including collusive behavior, the use of certain business models designed to evade accountability, the use of noncompete and nondisclosure provisions, and the impact of labor market concentration on workers. It also facilitates future cooperation between the agencies on efforts to protect workers from anticompetitive practices. The agreement describes how the agencies intend to share information, cross-train staff, and partner on their investigative efforts. Speaking at a conference just a day after the MOU was signed, FTC Chair Lina Khan argued that economic consolidaton had damaged labor markets and harmed U.S. workers.
Why it matters: As reported in the June edition of the Sidley Antitrust Bulletin, labor considerations continue to be a top enforcement priority for the FTC and the DOJ. As part of President Joe Biden’s 2021 executive order on competition, which encourages interagency collaboration, the FTC-DOL MOU builds on other recent agency initiatives designed to promote competition in labor markets, such as the 2022 MOU with the National Labor Relations Board and a policy statement on protecting gig economy workers. The recent MOU and Chair Khan’s statement align closely with the draft merger guidelines that advocate for stricter enforcement to protect competition in labor markets.
EC blocks Booking.com acquisition of eTraveli: On September 25, 2023, the EC prohibited the proposed acquisition of Flugo Group Holdings AB (eTraveli), an online travel agency (OTA) primarily active in flight services, by Booking Holdings (Booking), an OTA primarily active in hotel services. The EC was concerned that the acquisition of eTraveli would have strengthened Booking’s allegedly existing dominant position in the hotel OTA market, which the EC said would have allowed Booking to expand its travel services ecosystem by generating significant additional traffic to Booking’s platform. Under the EC’s theory, this would have made it harder for OTAs to compete with Booking and would have resulted in higher cost for hotels and possibly consumers. The EC rejected Booking’s proposed remedies. Booking will reportedly appeal the EC’s decision.
Why it matters: There have been only 33 prohibition decisions since the establishment of the EU merger control regime in 1990. This most recent prohibition decision signals an increased focus of the EC on nonhorizontal transactions and represents the first time the EC prohibited a transaction using an innovative theory of harm based on “ecosystem effects.” The EC considered the transaction’s overall effects on Booking’s ecosystem, which comprises multiple travel booking services revolving around its existing core business, hotel OTA services. Interestingly, the transaction was unconditionally cleared by both the CMA and the U.S. FTC.
European General Court (GC) confirms that gaming copyrights illegally partition the EU’s internal market: On September 27, 2023, the GC rejected an appeal of a 2021 fine the EC imposed on a videogame platform operator, Valve, for the restriction of cross-border sales within the EU. Valve, in agreement with five video game publishers, had created game activation keys and territory control functions so that gamers were prevented from activating a game outside a specific EU member state. The GC confirmed the EC’s conclusion that the activation keys and control functions prevented price competition within the EU and served to protect high prices of video games in certain member states by preventing parallel imports from other member states. Although publishers were free to assert the national nature of the copyrights for games, Valve was doing so in a way that was deemed irreconcilable with the EU internal market.
Why it matters: The Valve case serves as a reminder that companies should take care in designing any distribution system that includes restrictions that partition the EU internal market. EU competition law pursues the wider objective of achieving an integrated EU internal market, which enhances competition in the EU. Suppliers and distributors of copyright-protected works whose compliance with national copyright laws is designed in such a way as to completely eliminate cross-border trade within the EU, whether technically or contractually, may risk infringing EU competition law.
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