For the first time in 18 years, the European Commission (“Commission”) has imposed interim measures on a company, ordering it to cease and desist certain practices pending the outcome of its antitrust investigation (or for a period of 3 years if the investigation is not concluded earlier). The Commission is currently investigating whether certain of Broadcom’s contractual requirements and IP-related strategies in the markets for chipsets for TV set-top boxes and fibre and xDSL modems constitute an abuse of dominance.
The Commission’s interim measures order Broadcom to stop applying certain contractual clauses contained in some of its existing customer agreements, including clauses containing exclusive or quasi-exclusive purchasing obligations, and to refrain from applying provisions with similar effects in future contracts. Broadcom has published a statement announcing its intention to appeal the decision and in the interim, comply with the Commission’s order.
Change in EU enforcement trends?
This development signals a change in enforcement trends with the Commission showing its willingness to revive the use of interim measures to address what it considers to be a risk of irreparable harm to competition pending the adoption of a decision on the merits. If upheld on appeal, it is likely to have implications, in particular in digital markets, where there have been calls from regulators and expert commentators at EU and national level for greater up-front intervention.
A recently commissioned expert report (the Furman Report) for the UK Competition and Markets Authority (“CMA”), also supports the use of interim measures in an increasingly digital and global world, where cases are likely to be complex and markets can “tip to a winner” before a competition authority completes its investigation. In this context, the Furman report proposes the streamlining of the CMA’s processes to facilitate greater and quicker use of interim measures.
Several European national competition agencies have also had recourse to this instrument during their investigations. For example, since the beginning of 2009, the French competition authority has ruled on 44 requests for interim measures and has granted interim measures in 8 cases, including in the Google Ads case, where it imposed interim measures on Google concerning the objective, transparent and non-discriminatory application of the Google Ads rules. The adoption of the ECN+ Directive in January 2019 – to be implemented by 2021 - also provides national competition authorities with the possibility to impose interim relief, even in the absence of a complaint by a company.
Criteria and Process for Interim Measure decision
In relation to the Commission’s practice, the requirements for the adoption of interim measures are laid out under article 8 of Regulation 1/2003, which codifies the relevant jurisprudence of the European Court of Justice. Pursuant to article 8, the Commission, acting on its own initiative, may order interim measures subject to the fulfillment of the following conditions:
- evidence, "at first sight," of a competition law infringement; and
- urgency due to the risk of serious and irreparable damage to competition.
As regards evidence of a competition law infringement, based on the wording of the Regulation and relevant case law, it will normally suffice for the Commission to show the appearance or probability of an infringement. With respect to the standard for showing damage, it is likely to be regarded as “irreparable” if it leads to market changes that are very difficult to reverse. Additionally, it is worth noting that damage to individual undertakings cannot form the basis of a decision on interim measures, unless it impacts competition in general.
In terms of procedure, the Commission must observe the basic procedural safeguards, namely the formal opening of the investigation and the adoption of a statement of objections setting out the grounds leading to the adoption of interim measures, against which the affected party can exercise its rights of defense. The statement of objections will also indicate the type of measures to be adopted. The party under investigation also has a right to a hearing, which can take place after it submits written observations on the Commission’s statement of objections. Shortly after the hearing, the Commission will draft the final decision to be adopted subject to the feedback from the Advisory Committee, which is composed of officials from national competition agencies. The affected company can challenge the final decision imposing interim measures and ask for interim relief against those measures before the General Court of the EU.
Interim measures have received considerable criticism, mainly due to their far-reaching and potentially irreversible effects on the company under investigation, given the length of antitrust investigations, and especially in cases where the Commission ultimately abandons the investigation, or its decision is overturned by the Court. On the other hand, critics also argue that the effectiveness of interim measures is hampered due to the tedious procedure that needs to be followed for their adoption, which can last up to several months and slow down the main investigation.
It remains to be seen whether the case of Broadcom will set the example for further application of this instrument or whether the Commission may seek to amend the rules for the imposition of interim measures in order to address potential shortcomings with regard to the length and efficiency of the process.