Month: July 2023

The new Regulation establishing additional procedural rules relating to the application of Regulation (EU) 2016/679 proposed by the European Commission on July 4, 2023 (“Regulation”) aims to streamline cooperation between data protection authorities (“DPAs”) when enforcing the General Data Protection Regulation (“GDPR”) in cross-border cases^[1] .  

The Regulation lays down procedural rules for the handling of complaints and the conduct of investigations, in complaint-based and ex officio cases by supervisory authorities in the cross-border enforcement of the GDPR.

The Regulation will include concrete procedural rules, including the obligation for the lead data protection authority to send a “summary of key issues” to its counterparts. This summary must include the main points covered by the investigation, as well as its opinion on the case.

This Regulation will:

• Reduce disagreements and facilitate consensus between authorities from the earliest stages of the process;
• Clarify the information that individuals need to provide when filing a complaint, and ensure that they are properly involved in the process;
• Clarify the procedural rights of companies when a DPA investigates a possible breach of the GDPR;
• Resolve cases more quickly (swifter remedies for individuals, legal security for businesses).

The Regulation provides rules to harmonize procedural rules in cross-border cases in the following areas:

• Rights of complainants:

• Harmonization of requirements for a cross-border complaint to be admissible, removing the obstacles arising from the different rules applied by DPAs;
• Common rights given to complainants ensuring them that they will be heard in the event that their complaints are rejected in whole or in part;
• If the complaint is investigated, the proposal governs the way in which they are involved in the investigation.

• Rights of parties under investigation (data controllers and data processors):
  • Right to be heard at key stages of the procedure;
  • Clarification of the administrative file and the parties’ right of access to it.

• Streamlining cooperation and dispute resolution:
  • DPAs will be able to give their opinion at an early stage of investigations and make use of all the cooperation tools provided for by the GDPR (e.g., joint investigations, mutual assistance);
  • The Regulation will increase influence of DPAs on cross-border issues (early consensus-building during the investigation and reduction of later disagreements);
  • The Regulation details rules to facilitate swift completion of the GDPR dispute resolution mechanism and provide common deadlines for cross-border cooperation and dispute resolution.

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[1] The notion of “cross-border processing” is defined in Article 4 (23°) of the GDPR and covers:

a. processing of personal data which takes place in the context of the activities of establishments in more than one Member State of a controller or processor in the Union where the controller or processor is established in more than one Member State;

b. processing of personal data which takes place in the context of the activities of a single establishment of a controller or processor in the Union but which substantially affects or is likely to substantially affect data subjects in more than one Member State. 

In a judgment dated April 20, 2023, aff. C-25/21, the Court of Justice of the European Union (hereinafter “CJEU”) ruled on the binding effect of final decisions by national competition authorities, when implementing consecutive private actions (“follow-on actions”), when these do not fall within the scope of the “Damages Directive”. To ensure a high evidential value, the CJEU requires that “the nature of the alleged infringement which is the subject of those actions, as well as its material, personal, temporal and territorial scope, coincide with those of the infringement found in that decision”.

In this case, the oil company Repsol has been condemned twice by the Spanish competition authorities, based on Article 101 of the TFEU and Spanish national law. The first decision was rendered in 2001 by the Spanish Competition Court and confirmed in 2007 by a ruling of the Spanish Supreme Court. The second decision was rendered in 2009 and confirmed in 2015. In both rulings, the company was accused of indirectly fixing the retail price of fuel through its contractual relations with certain Spanish service stations.

As a result, the owners of a service station, who had signed exclusive fuel supply contracts from 1987 to 2009, brought an action for annulment of the contracts concluded with Repsol, and a claim for damages to compensate for the harm allegedly caused. In order to demonstrate the existence of the infringement in question, the plaintiffs rely on the 2001 and 2009 decisions.

The referring court hearing the case states that, under Article 2 of Regulation 1/2003, the burden of proving an infringement of the TFEU lies with the party alleging it. It goes on to state that, according to national case law, no binding effect is conferred on a final decision of a national competition authority. Unless it can be shown that the infringement contested in that decision and the one which is the subject of the follow-on action are the same, and provided that the claimant has indeed been the victim of that infringement.

However, the referring court considers that “to deny any binding effect to the final decisions of the national competition authority would have the effect of maintaining in force contracts which infringe Article 101 of the TFEU.” It therefore decided to stay proceedings and refer two questions to the CJEU for a preliminary ruling.

The first question concerns the evidential value of decisions by the national competition authority, in the event that the contractual relationship at issue in the follow-on action falls within the same scope as the national authority’s decision. In such a case, is it possible to consider that proof of the anti-competitive practice has been established, with the burden of proof shifting to the defendant to prove otherwise.

Firstly, the CJEU looks at the temporal and material applicability of article 9 paragraph 1 of Directive 2014/104/EU entitled the “Damages Directive”. This article provides that “an infringement of competition law found by a final decision of a national competition authority or by a review court is deemed to be irrefutably established for the purposes of an action for damages brought before their national courts under Article 101 or 102 of the TFEU or under national competition law”. 

Two points are addressed by the CJEU concerning the scope of application of the “Damages Directive”. Firstly, with regard to its material scope, the Directive applies to actions for damages only. Consequently, no action for nullity can be brought on this basis.  Secondly, regarding the temporal scope, the CJEU points out that it must be established whether the provision concerned is substantive or procedural (judgment of June 22, 2022, Volvo and DAF Trucks, C267/20‑, EU:C:2022:494, paragraph 38).  In the first case, the provision would apply to events occurring after December 27, 2016, the date on which the transposition period left to the Member States expires. In the second case, the provision would apply to proceedings initiated as from December 26, 2014 (judgment of June 3, 2021, Jumbocarry Trading, C39/20‑, EU:C:2021:435, point 28).

Unsurprisingly, the Court points out that Article 9(1) of the Directive relates to the existence of one of the constituent elements of civil liability and is therefore of a substantive nature. Consequently, Article 9(1) cannot be applied in the present case to actions for damages brought following decisions by national competition authorities.  These actions became final before the expiry of the maximum transposition period.

It is therefore necessary to look at the national regulations interpreted by the national courts, in the light of Article 2 of Regulation 1/2003. The CJEU goes on to stress the importance of the principle of effectiveness. According to this principle, national rules must not “make in practice impossible or excessively difficult to exercise rights conferred by EU law.”

In this case, the CJEU considers that the Spanish national rules, insofar as they lead to a total absence of probative effect of the final decisions of the competition authorities, render “the exercise of the right to compensation for infringements of Article 101 of the TFEU excessively difficult.” The Court explains that competition law cases require “a complex factual and economic analysis”.

Thus, the Court points out that in such cases, it is important to guarantee the full effectiveness of Articles 101 and 102 of the TFEU. It is therefore necessary to consider that the finding of an infringement of competition law by a decision of the national competition authority establishes the existence of that infringement, until proof to the contrary is adduced. To this end, it specifies that the nature of the infringement mentioned in the follow-on action, “as well as its material, personal, temporal and territorial scope,” must correspond to those of the infringement found in that decision.

With this decision, the Court of Justice has lightened the burden of proof for victims of pre-Directive events. In this case, it is sufficient for the plaintiffs to prove that the contracts concluded with Repsol are the same as those sanctioned by the competition authorities. It is then up to the defendant to prove the contrary.

The second question asks whether, if it is established that the contractual relationship between the service station and Repsol is affected by the decisions of the national competition authorities, the sanction is necessarily to declare the agreement null and void.

The Court of Justice replied in the affirmative but clarified its answer. It points out that the national court must draw all the consequences of Article 101(2) of the TFEU. Accordingly, it must declare all contractual stipulations incompatible with Article 101(1) of the TFEU null and void by operation of law. However, the Court specifies that the entire agreement will be declared null and void only if the elements in breach of the TFEU cannot be separated from the agreement.

In the end, this decision is unlikely to change the practice of French courts. Indeed, it is quite rare for national courts to go against decisions of competition authorities. This decision serves as a reminder of the importance of distinguishing between the substantive and procedural provisions of the Damages Directive, while easing the burden of proof for victims who do not benefit from the Directive.

In a ruling of June 8, 2023 (C570/21), the CJEU confirms that a person who has entered into a credit agreement for both professional and extra-professional purposes, jointly with their spouse can be considered a consumer within the meaning of Directive 93/13 when the professional purpose is so limited that it does not predominate in the agreement; this being determined by quantitative and qualitative criteria.

In the case at hand, a mixed credit agreement was concluded between a married couple and a bank, with the amount intended for the repayment of debts of the husband’s company on one hand, and for the repayment of household debts and the financing of renovations in the couple’s home on the other hand. The conclusion of this credit agreement was subject to the repayment of the professional debts. The applicants contested a clause in the credit agreement, concerning the valuation of the monthly repayments on the loan, arguing that it was an abusive clause under Directive 93/13 on unfair terms in contracts between professionals and consumers, as it had not been individually negotiated.

The referring court questions whether, in this context, the applicant could be considered as a “consumer” within the meaning of the directive, given the existence of a connection between the professional activity and the contract, albeit not a predominant one, and that, without a professional use of the credit, it would not have been possible to grant the credit for a non-professional purpose. In other words, what are the relevant criteria for determining whether a person qualifies as a consumer?

On the first preliminary question, the CJEU concludes that Article 2(b) of Directive 93/13 defining “consumer” must be interpreted as including “a person engaged in business activity who entered into an agreement concerning a loan indexed to a foreign currency together with a joint-borrower who is not engaged in business activity, which loan is intended to be used partly for the business purposes of one of the borrowers and partly for purposes unconnected with his or her business activity, and not only where business use is so marginal as to be negligible in the overall context of the agreement.”

The Court recalls the principle that when interpreting a provision of EU law, one must consider its wording, as well as its context and the objectives pursued by the relevant regulation. Thus, by referring to the wording of Article 2(b) of Directive 93/13, the Court first establishes that the status of consumer must be determined in the light of a functional criterion, i.e., by assessing whether the contractual relationship falls within the scope of activities outside the exercise of a profession. Secondly, the Court assesses the context and objectives of the provision: as it applies to any contract between a professional and a consumer that has not been individually negotiated, the CJEU concludes that it is in fact the quality of the contracting parties that must be assessed, and not whether they are acting in the course of their professional activity or not. This is particularly relevant since the directive aims to redress the imbalance in which the consumer finds themselves, requiring a broad understanding of the concept., Additionally, for the sake of coherence in EU law, the Court considers the interpretation of the concept contained in other regulations, noting that the definitions are “broadly equivalent”, and that their recitals can therefore help to clarify the legislator’s intention. In particular, recital 17 of Directive 2011/83, which states that “where the contract is concluded for purposes partly within and partly outside the person’s trade and the trade purpose is so limited as not to be predominant in the overall context of the contract, that person should also be considered as a consumer. ” The Court adds that this analysis is even more relevant as it is corroborated by recital 18 of Directive 2013/11 and recital 13 of Regulation no. 524/2013 (even though these acts post-date the facts of the dispute). Finally, while the Gruber judgment, under the Brussels Convention, assesses the notion of consumer according to whether the professional use is marginal to the point of having a negligible role in the overall context of the transaction at issue, the court rejects this strict interpretation and refuses to apply it here. It therefore concludes that if the professional purpose is so limited that it does not predominate in the overall context of this contract, the applicant may be considered a consumer, despite the dual purpose of the credit agreement.

On the second question, the CJEU considers that in order to determine whether the professional purpose is so limited that it does not predominate in the contract, “the referring court is required to take into consideration all the relevant circumstances surrounding that contract, both quantitative and qualitative.” The Court recommends a global approach, factoring in all the elements of the case (terms of the contract, nature of the goods or services covered by the contract, purpose). It establishes several criteria, neither exhaustive nor exclusive: on the one hand, a quantitative criterion, the distribution of the borrowed capital between professional and non-professional activities, and on the other hand, non-quantitative criteria: the fact that only one of the borrowers is pursuing a professional purpose, or the fact that the lender has made the credit conditional on a partial allocation of the amount to the repayment of professional debts.

In addition, the applicant requested the effects of the present decision to be limited in time, but the CJEU refused, pointing out that this is only possible where two criteria are met – the good faith of the interested parties and the risk of serious disturbance – which were not present in the case in point.

Cour de Cassation, Ch. Com. May 17^th, 2023, n°21-24.809

Determining the notice period following the brutal termination of an established business relationship cannot take into account factors occurring after the date of notification of such termination.

In this case, the company TNT has entrusted the performance of transport and delivery services for international shipments to the company MATIM, a company specialised in the transport of goods in Morocco.

In 2009, TNT and MATIM signed an agreement for the aforementioned services, which provided a 45-day notice period in the event of termination.

In 2016, FEDEX acquired the shares of TNT, and the following year, launched a call for tender to select its next delivery service provider in Morocco.

The participation to this call for tender required candidates to sign a non-disclosure agreement. As it wished to apply, MATIM signed this agreement on October 2^nd, 2017, which contained, in view of its relationship with TNT, a clause under which MATIM accepted the consequences of an early termination of their contractual relationship, this agreement constituting the starting point for the notice period relating to such termination.

By letter dated January 15^th, 2018, TNT informed MATIM of the rejection of its application and indicated that this letter triggered the starting point of the 45-day notice period.

Feeling victim of a fictitious call for tenders, MATIM summoned TNT in order to pay it the sum of €7,776,000 as compensation for the brutal breach of established commercial relations on the basis of article L.442-6 I 5° of the French Commercial Code, in addition to pay the moral prejudice suffered, the reimbursement of the bank guarantees taken out by its manager and the costs of the proceedings.

As a preliminary point, it should be emphasized that in this case, article L.442-6 I 5° of the French Commercial Code was the one applicable in its previous version (amended by decree no. 2019-359 of April 24, 2019, and now the new article L.442-1 II of the French Commercial Code).

The International Commercial Division of the Paris Court of Appeal, by his ruling rendered on July 18^th, 2019, (RG no. 19/14727) has adjudicated in favour of MATIM while reducing the damages claims to TNT.

The Court of Appeal has pointed out that in the event of the termination of established business relationships that, “the sufficient notice period is assessed taking into account the duration of the commercial relationship and the other circumstances at the time of notification of the termination“, and that the “main criteria to be taken into account are economic dependence, the length of the relationship, sales volume and sales growth, specific investments made and not amortized, exclusive relationships and the specificity of the products and services in question“.

The appeal judges considered that the starting period of the notice period ran from the signing of the non-disclosure agreement on October 2^nd, 2017, and not from the letter of January 15^th, 2018. In fact, the Court considered that MATIM could not have been unaware of TNT’s desire to question the service agreement between them, and that it had expressly agreed, by signing the non-disclosure agreement relative to the call for tender, to this act being the starting point for the notice period. In fact, TNT gave MATIM 5 months’ notice from October 2017.

To calculate the notice period, the Court of Appeal weighed up two aspects of the effects of terminating this contractual relationship.

On the one hand, the Court of Appeal considered the economic dependence of MATIM, which achieves approximately 70% of its business with TNT, its contractual exclusivity and its two-year contractual and post-contractual non-competition obligation with TNT, as well as the significant investments made by MATIM for the deployment of services in Morocco, all of which were assessed within the context of a highly competitive market.

On the other hand, the Court also took into consideration the fact that even if MATIM had “lost a large part of its customers, employees and work tools, […] it was able to reorganise, find other outlets and adapt its business. It has now regained 75% of its former customers and is developing a promising business with the TOTAL group“, it has reinvented itself and “is now operating under the name ‘MTI Express‘,” and has “developed a business competing with that of TNT. […] and highlights the “pricing agreements negotiated with the market’s leading carriers, such as DHL, UPS, Aramex and Chronopost, as well as [its total] independence from them.“

In view of these factors, which demonstrate not only the impact of the severance of this relationship but also MATIM’s successful conversion and current profits, the Court of Appeal has determined the notice period at 12 months, including the 5 months’ notice already done. TNT was ordered to pay €1,052,513 for the remaining 7 months’ notice, which had not been served.

The Cour de Cassation overturned the decision on the grounds that the Court of Appeal, in considering MATIM’s successful conversion following the termination of the business relationship, “relied on factors subsequent to the notification of the termination of business relationship in order to assess the length of notice to which MATIM was entitled”.

As a result, the Cour de Cassation has ruled that only factors prior to the notification of the termination of business relationship can be taken into consideration when calculating the required notice period.

The parties are referred to the Paris Court of Appeal.

On April 17, 2023, the European Commission (the “EC” hereinafter) published in the Official Journal of the European Union (the “OJEU” hereinafter) Regulation n°2023/822 extending Regulation n°461/2010 of May 27, 2010 (the “MVBER” hereinafter)[1] and a communication amending the accompanying guidelines[2] .

Reminder

The block exemption of vertical agreements in the motor vehicle sector is governed by:

• Regulation n°2022/720 of May 10, 2022 (formerly Regulation n°330/2010) on the application of Article 101§3 of the Treaty on the Functioning of the European Union (the “TFEU” hereinafter) to categories of vertical agreements and concerted practices (the “VBER” hereinafter), applicable to distribution agreements for new motor vehicles; and
• The MVBER, applicable to agreements for the distribution of spare parts for motor vehicles and agreements for the provision of repair and maintenance services for such vehicles.

Background

On December 2018, the EC launched the process of reviewing the MVBER and its guidelines since they were due to expire on May 31, 2023. On May 28, 2021, the EC published an evaluation report and a work document presenting the results of the evaluation of the MVBER and its guidelines.

The evaluation report shows that pressure from the growing importance of vehicle-generated data, the reduction of greenhouse gas emissions and the evolution of post-covid mobility patterns calls for the MVBER to be adapted to the motor vehicle sector. However, the EC points out that these factors will only lead to changes in the motor vehicle sector in several years so that to date, there have been no significant developments justifying a major revision of the MVBER and its guidelines.

In its evaluation report, the EC concludes that the MVBER is still useful and needs to be extended, and that the accompanying guidelines need to be updated to account for the potential importance of accessing vehicle-generated data as a competitive factor.

Following the publication of the draft regulation extending the MVBER for five years and the draft communication amending the accompanying guidelines of the MVBER, the EC opened a public consultation from July 6, 2022 to September 30, 2022.

Extension of the MVBER for a further five years and updating of the accompanying guidelines to factor in the importance of vehicle-generated data

On April 17, 2023, the EC published Regulation n°2023/822 in the OJEU, extending the MVBER by five years to expire on May 31, 2028. Apart from the period of application of the MVBER, its content remains unchanged.

On the same day, the EC also published in the OJEU a communication amending the guidelines accompanying the MVBER (“the Communication” hereinafter).

In its Communication, the EC now considers that vehicle-generated data may constitute an essential input, being a competitive factor and as such, essential to the repair and maintenance services of independent operators. 

As a reminder, the withholding of essential inputs may be considered to constitute an anticompetitive agreement falling within the scope of Article 101§1 TFEU when one of the parties acts in such a way as to evict certain independent operators by sharing certain essential inputs for the repair and maintenance services.

In addition, the EC states in its Communication that when a party is considering, for security grounds, the withholding of an essential input, it must consider whether the withholding of this information is a  means to address the security concerns at issue and must consider whether less restrictive measures would suffice.

Finally, the Communication specifies that the withholding of an essential input such as vehicle-generated data may constitute an abusive practice under Article 102 TFEU when the dominant supplier does not communicate it to independent operators.

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[1]       Regulation (EU) n°461/2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices in the motor vehicle sector.

[2]       Commission notice – Supplementary guidelines on vertical restraints in agreements for the sale and repair of motor vehicles and for the distribution of spare parts for motor vehicles (2010/C 138/05).

ECJ, June 29, 2023, Case C-211/22

In a ruling on June 29, 2023, the European Court of Justice (ECJ) confirms that the mere fact that a vertical agreement fixing minimum resale prices is likely to fall into the category of “hardcore restrictions” within the meaning of Regulation no. 330/2010 on vertical restraints does not dispense with the need to verify whether it presents a sufficient degree of harmfulness to competition, in order to qualify it as a “restriction of competition by object” within the meaning of Article 101 par. 1 of the Treaty on the Functioning of the European Union.

Super Bock is a Portuguese beverage producer. In order to distribute its products to hotels, restaurants and cafés, the company has entered into distribution contracts with independent distributors. In 2019, the Portuguese Competition Authority fined Super Bock 24 million euros for imposing fixed or minimum prices on its distributors. Specifically, Super Bock provided its distributors with lists of minimum resale prices and distribution margins, either verbally or in writing. Distributors generally applied prices accordingly and provided Super Bock with data relating to the resale of Super Bock’s beverages, in terms of quantity and amount. Whenever distributors deviated from the communicated prices, retaliatory measures were implemented, such as the removal of financial incentives (discounts) or in terms of stock procurement and replenishment. Following an appeal, the Lisbon Court of Appeal submitted a set of questions to the ECJ, including (i) whether the agreement constituted a restriction of competition by object, and (ii) whether it constituted an agreement within the meaning of Article 101 par.1 of the Treaty on the Functioning of the European Union (TFEU). The ECJ’s answers on these two points are the main highlights of the judgment under review.

(i) Qualification as a restriction of competition by object

The main interest of the Super Bock ruling lies in the classification as a restriction of competition by object of a vertical agreement fixing resale prices, which is a hardcore restriction of competition under Regulation n°330/2010 on vertical agreements (the Regulation), applicable in this case in the presence of a distribution contract between a supplier and its distributors. 

As a reminder, Article 101 par.1 of the TFEU prohibits agreements which have as their “object or effect” the restriction of competition. Restrictions by object are those which, by their very nature, have the capacity to restrict competition, so that it is not necessary to examine their effects. To maintain these agreements , it will therefore be necessary to prove that they can be exempted, either by means of an individual exemption (Article 101 par. 3 TFEU), or by means of an exemption regulation. Article 4 a) of the Regulation stipulates that the fixing of minimum resale prices constitutes a hardcore restriction of competition, so that the benefit of the exemption for an agreement containing such a restriction is lost.

In this case, the ECJ points out that the concept of restriction of competition by object must be interpreted restrictively. The ECJ then provides an analytical grid, indicating that to qualify a restriction as a restriction by object, it is necessary to focus on the content of its provisions, the objectives to be achieved, and the economic and legal context in which the agreement operates.

More specifically, on the subject of resale price maintenance – and this is the main point of interest of this ruling – the ECJ emphasizes that, although the Regulation withdraws the exemption for agreements involving resale price maintenance or minimum price maintenance, it does not provide that this hardcore restriction constitutes a restriction of competition by object. Consequently, the courts or authorities must carry out the analysis described above to qualify the agreement as a restriction of competition by object, even in the presence of a hardcore restriction. However, it should be stressed, that the Court indicates that the presence of a hardcore restriction may be considered in the legal context as part of the analysis grid described above.

In other words, the presence of a hardcore restriction does not absolve the authorities from assessing the harmfulness of the agreement in the light of the factors described above.

(ii) Qualification as an “agreement”

Secondly, the ECJ also clarifies the concept of “agreement” within the meaning of Article 101 par.1 TFEU, which prohibits “agreements” which have the object or effect of restricting competition.
The ECJ reiterates the Court’s consistent case-law that an agreement exists when companies have expressed their joint intention to behave on the market in a particular way. This agreement may result from clauses in distribution contracts, but also from the behaviour of the parties, in particular the acceptance by  distributors to comply with  resale prices as set by suppliers.

A unilateral pricing policy cannot constitute an agreement under Article 101 par.1 TFEU. For example, sending out minimum price lists and setting up a price police with a system of reprisals do not necessarily mean that there is an anticompetitive agreement, and may be the result of purely unilateral behaviour on the part of the supplier. 

On the other hand, the ECJ states that when this apparently unilateral behaviour on the part of the supplier is accompanied by compliance with prices by distributors, or when their determination is sought by distributors which, while complaining to the supplier about the prices indicated, do not set other prices, then there could be acceptance on the part of distributors and therefore an agreement within the meaning of Article 101 par.1 TFEU.

Lastly,  the ECJ also ruled (i) on the subject of proof of a competitive agreement, confirming that proof of such an agreement can be provided by means of direct evidence or by means of a body of evidence, and (ii) on the concept of affecting trade between Member States, confirming that trade between Member States can be affected even when the agreement under review does not cover the entire territory of a Member State, but concerns almost all of it.