Luxembourg

Philippe-Emmanuel Partsch

Arendt & Medernach

This chapter gives an overview of Luxembourg competition law, a subject which is relatively new but of growing importance.

Legal framework

The Competition Act

Luxembourg competition rules are laid down in the Loi du 17 mai 2004 relative à la concurrence (Competition Act). These provisions are inspired by articles 81 and 82 of the EC Treaty and Regulation (EC) 1/2003. European Court of Justice (ECJ) case law is also expressly acknowledged as a source of interpretation of the Competition Act. However, it should be emphasised that for situations which occurred before the entry into force of the Competition Act, the former 1970 Competition Restrictive Practices Act may be applicable (Decision No. 2007-FO-02 Carlo Schmitt v OEIPA).
As regards administrative organisation, the Competition Act established the Competition Inspectorate (created to avoid giving the Competition Council both the power to investigate and to decide on cases) and the Competition Council (independent administrative body, Luxembourg authority in the European Competition Network that is competent to enforce the Competition Act with respect to the prohibition of cartels and abuses of a dominant position).
In parallel, important sectors of the economy (telecommunications, energy, financial services, transport, etc) benefit from sophisticated regulation by specially designated bodies, in order to increase transparency and market confidence in those sectors. In this respect, for example, the Institut Luxembourgeois de regulation (ILR) has been created and is in charge of tackling anti-competitive behaviour in various sectors (see for an illustration of its role Decision No. 2008-AA-01 Entreprise des Postes et Télécommunications).

The Competition Act reform project

Having detected the first problems in applying the Competition Act, the Luxembourg authorities decided that the time for a first assessment had come. Accordingly, the minister of the economy submitted a draft bill proposing substantial revisions of the 2004 Competition Act.
The main proposals in this draft bill are the following:
• mainly for human resources reasons, the reform envisages making the procedure more efficient by abolishing the Competition Inspectorate;
• in relation to procedural issues, the removal of the Competition Inspectorate may speed up the proceedings as the proposal provides that:
• the Competition Council can start a procedure ex officio;
• the issuing of a statement of objections will be within the competence of the Competition Council;
• fining procedures will be clarified; and
• leniency rules will be introduced following the 2006 European Commission guidelines.

Moreover, new functions will be attributed to the new Competition Council, such as the following:
• an advisory power;
• the possibility to carry out sector inquiries and market studies; and
• the possibility for the Competition Council to be consulted about any legislative project regarding competition law or commercial matters having an impact on competition issues.

The draft is currently awaiting the opinion of different interest groups and may be adopted before the end of 2008.

General Luxembourg trend: fight against inflation

On 29 February 2008 the Luxembourg minister of the economy and the minister for small and medium-sized enterprises made public a ‘state of play’ of the action plan against excessive inflation of the Luxembourg government, in which competition law seems to play a crucial role.
The Luxembourg government adopted its action plan following an opinion of the Luxembourg Tripartite Coordination Committee. In this opinion some concrete proposals were formulated in order to reduce Luxembourg inflation, three of which are worthy of mention from a competition law perspective.
Firstly, the Tripartite Coordination Committee has proposed to assess the importation practices (such as territorial exclusivity clauses in distribution agreements) and supply policy of Luxembourg undertakings as to their compliance with EC competition rules. The minister of the economy is currently investigating whether these practices are compliant with EC competition rules and has addressed a formal letter to several multinationals requesting further explanation.
Secondly, the Tripartite Coordination Committee also proposed the Luxembourg government to implement a ‘policy of making competition more dynamic’ in order to fight against inflation through the creation of better synergies between the two Luxembourg competition authorities, the Competition Council and the Competition Inspectorate. As previously stated, the draft bill provides for a better synergy between both authorities.
Thirdly, in its opinion of April 2006, the Luxembourg Tripartite Coordination Committee has promoted the conclusion of ‘voluntary price agreements’. A first voluntary price agreement, the Fair Price Charter, has been signed between the Luxembourg government, the Professional Association for Commerce, Transport and Services, the Handcraft Association and the Professional Association of Hotels and Restaurants on 29 February 2008.

Case law

Procedural infringements

Prohibition of self-incrimination in cartel investigation procedures

In November 2007, the Luxembourg administrative tribunal (No. 22405) rejected an action for annulment filed against a decision adopted by the Competition Inspectorate. Among other pleas, the claimant argued that the decision was in breach of its right of defence ‘nemo tenetur se ipsum accusare’ (right against self-incrimination). Indeed, in relation to competition law, such a right has been consecrated by the ECJ in the Orkem case (case 374/87 Orkem ECR 3283, para 35), in which the Court ruled that ‘the Commission may not compel an undertaking to provide it with answers which might involve an admission on its part of the existence of an infringement which is incumbent upon the Commission to prove’.
In addressing the breach of this principle, the Luxembourg tribunal referred to the SGL Carbon case (C-301/04, ECR, pI-5915) to affirm that the obligation had also to be respected by the Competition Inspectorate. However, the remainder of the arguments of the tribunal appear to be quite superficial. Indeed the tribunal did not really enter into the details of the facts, only saying that this right only grants the addressee the right to refuse to answer and does not preclude the inspectorate from addressing certain questions to the applicant. It then considered in a single paragraph, without further explanations, that the mere fact of enjoining an undertaking to answer questions did not constitute a breach of such a right of defence and thus did not really tackle the problem, avoiding, according to some commentators, entering deeply into the facts and the details of the questions which arose.

Material infringements

First decision

The Competition Council has handed down a decision in a case between a professional association of car assessment experts, OEIPA and Mr Carlo Schmit, a Luxembourg car assessment expert (Decision No. 2007-FO-02 Carlo Schmitt v OEIPA).
OEIPA refused to allow the latter to become a member because he would not have fulfilled the membership conditions. Carlo Schmit challenged the membership conditions before the Luxembourg competition authorities as being contrary to the prohibition of cartels and as being an abuse of a dominant position.
The Competition Council found the EC competition provisions not applicable and assessed the case under the 1970 Luxembourg competition provisions exclusively. It did not find any infringement of these provisions.

Abuse of dominance

As far as the abuse of a dominant position was concerned, the Competition Council pointed out that OEIPA did not carry out any economic activity and, hence, did not constitute in itself an undertaking subject to the prohibition of abuse of a dominant position. It is worth emphasising here that the Competition Council could, however, have assessed the existence of a potential abuse of collective dominance by the OEIPA members, which represent collectively 47 per cent of the Luxembourg market for car assessment services.

Cartel practices

With respect to the alleged cartel practices, the Competition Council qualified the refusal by OEIPA as a decision of an ‘association of undertakings’, which, according to EC and Luxembourg competition rules, can be considered as an agreement between undertakings subject to the prohibition of cartels. The Competition Council found this decision, however, not to be restrictive of competition because the practice did not totally exclude Carlo Schmit from the market, and the practice does not conflict with the public interest.
Here the Competition Council seems to take a very narrow view given that the EC concept of restriction of competition does not require a total exclusion from a given market, contrary to what the Competition Council seems to suggest. Only practices that do not appreciably restrict competition remain outside of the scope of the EC competition rules. In its 2001 de minimis notice the European Commission has set market share thresholds under which an appreciable restriction of competition is in principle excluded. For agreements between competitors this threshold is an aggregate market share of 10 per cent held by the parties to the agreement. In the case at hand, the members of OEIPA had an aggregate market share of about 47 per cent, which significantly exceeded the 10 per cent de minimis threshold. Under such circumstances, it is not excluded that an exclusionary practice, such as the refusal of an expert to become a member of OEIPA, constitutes an appreciable restriction of competition, in particular when La Luxembourgeoise, one of the largest Luxembourg car insurance companies, had decided to work with OEIPA experts only.
The Competition Council reasoned further that granting Carlo Schmit access to mandates from La Luxembourgeoise was not something that was required by the public interest. A cartel is indeed only illegal under article 1.1 of the 1970 Competition Restrictive Practices Act if it is contrary to the public interest. This condition could have as a consequence that a cartel practice would be illegal under EC competition law, but still be valid under Luxembourg competition law because of insufficient prejudice to the public interest. In this respect, it must be noted that the application of national law cannot uphold a cartel agreement that is invalid under EC competition law (ECJ, 13 February 1969 in Case 14/68, Walt Wilhelm) if trade between EC member states is affected, which may have been the case here. Most probably this is the last case that will be assessed under the 1970 Competition Restrictive Practices Act. Since the 2004 Luxembourg Competition Act does not require a competition law infringement to prejudice the public interest, this problem is unlikely to occur in the future.

Second decision

On 5 September 2007 the Competition Council handed down a second decision in a case between a professional association of car damage experts, OEIPA, and Le Foyer Assurances SA, one of the principal car insurances companies in Luxembourg (Decision No. 2007-FO-03, OEIPA v Le Foyer Assurances SA).
Le Foyer puts the Informex system used for car damage assessment purposes at the disposal of car damage experts mandated by it. This system is marketed by the Belgian company Informex SA, which was established by 41 Belgian and seven non-Belgian insurance companies including Le Foyer, as well as by 31 natural persons that are active in the car damage assessment sector. The system allows experts to assess more easily the cost for the reparation of car damage, centralising in a single instrument price data about more than 500 car models. Le Foyer charges an installation and connection fee of e260, as well as a fee per individual assessment processed through this system.
OEIPA filed a complaint to the Competition Council arguing that Le Foyer abused its alleged dominant position on the car insurance market by imposing the use of the Informex system on the neighbouring market of car damage assessment services. Since other car insurance companies also allegedly impose the use of this system, OEIPA argued further that Le Foyer, together with other car insurance companies, jointly abused their dominant position or had entered into an illegal cartel agreement.
The Competition Council found the EC competition provisions not applicable and assessed the case under the Luxembourg competition provisions exclusively. The Competition Council did not find any infringements of these provisions.
It found Le Foyer, having a market share of 33 per cent of the car insurance market, not to be in a dominant position. Moreover, it seemed to follow from the information at the disposal of the Competition Council that Le Foyer did not oblige the mandated experts to use the system in question. In this respect, the Competition Council indicated that a market share of 60 or 70 per cent presumes the existence of a dominant position (which is less strict than the ECJ and Commission approach). It further held that a market share of 31 to 32 per cent, such as the market share of Le Foyer on the market concerned, in principle excludes the existence of a dominant position. The case law of the ECJ and the Court of First Instance (CFI), as well as the European Commission, is more nuanced on this point. Indeed, according to the EU case law and decisional practice, market shares of 50 per cent and more are considered to be strong prima facie evidence of dominance. Market shares between 25 and 40 per cent are indicative of a firm not occupying a dominant position, but do not exclude dominance (see also the European Commission’s guidelines on the assessment of horizontal mergers), contrary to what the Competition Council suggested in its decision. Indeed, market shares can still lead to dominance in markets where barriers to entry are high, or where the rest of the market is highly fragmented, etc. It happens that only the latter element was taken into consideration by the Competition Council.
As far as the joint dominant position is concerned, the Competition Council correctly pointed out, among other matters, that Le Foyer and La Luxembourgeoise, the main competitor of Le Foyer, did not pursue a common strategy, a constitutive element of a joint collective dominance. Indeed, the main competitor of Le Foyer did not use the Informex system at all.
Finally, the Competition Council did not find any indication as to the existence of an illegal cartel agreement entered into by the different car insurance companies using the Informex system. On the facts it appears that several Luxembourg car insurance companies impose the Informex system on the experts mandated by them. The Competition Inspectorate, vested with investigatory powers in order to detect competition law infringements, suggested that the joint venture between several car insurance companies and some non-Luxembourg companies, such as Le Foyer, could constitute a cartel agreement. The Competition Council did not follow the Competition Inspectorate on this point. The French Competition Council did, however, not exclude this position in a decision of 12 May 1987 with respect to a similar system. In that decision the French Competition Council considered the promotion of such a system by several car insurance companies to amount to a cartel agreement, which could be justified for efficiency reasons.
It is further noteworthy that in relation to these two decisions, the Competition Council interprets very narrowly the notion of ‘effect on trade between EC member states’ as described in the European Commission’s 2004 guidelines.
Indeed, in the OEIPA v Schmitt case, the market share of OEIPA for car assessment services of about 47 per cent significantly exceeds the 5 per cent threshold put forward by the European Commission in its 2004 guidelines in order to assess the effect on trade between EC member states in the case of anti-competitive agreements, such as a decision of a professional association. Additionally, in the OEIPA v Le Foyer case, the Competition Council might not have sufficiently taken into account that the EC competition provisions also apply to anti-competitive practices that do not actually affect trade between EC member states but may potentially do so with a sufficient degree of probability (see also European Commission’s 2004 guidelines on the effect on trade between EC member states and the ECJ and CFI cases referred to). In this respect, the Competition Council did not consider some important elements, such as the fact that, given the particular geographical situation of Luxembourg, it is not unlikely that cars covered by Luxembourg car insurance get damaged in neighbouring EC member states (France, Germany and Belgium) and that the damage should be assessed in these countries by a foreign expert, who is not necessarily willing to use the Informex system or to pay for it. This might be particularly true for French and German experts since the Informex system used in Luxembourg is a database of prices that are applicable in Belgium, which are not necessarily the applicable prices on the French and German markets. Furthermore, in another decision of 5 September 2007 the Competition Council has, in a case relating to the same market, revealed that several foreign experts are members of a Luxembourg professional association of car damages experts, which is an indication that the importance of the Luxembourg market for foreign experts is not marginal.

Interim measures

On 22 January 2008 the president of the Competition Council handed down for the first time a decision imposing interim measures (Decision No. 2008-AA-01 Entreprise des Postes et Télécommunications).
In this decision, taken under article 11 of the Competion Act, the Competition Council found that there was a prima facie breach of competition rules on the basis of a presumed abuse of dominance by the Entreprise des Postes et Télécommunications (EPT) and therefore imposed interim measures. One of the interim measures related to the probable abusive bundling operated by the EPT, the leading company on the internet services provision market in Luxembourg, which planned to offer an Integral package including internet and the IPTV pack which, according to the decision, would leave other competitors not able to match such offers struggling to compete. The EPT has brought an action for annulment against this decision and the proceedings are currently before the administrative courts.

Court decisions

On 30 April 2008 the Luxembourg administrative tribunal (cases numbers 22862, 22958 and 23252) confirmed the imposition of fines and periodic penalty payments on three companies which had refused to submit appropriate information to the Competition Inspectorate in the course of a cartel investigation (in the tiling market).

Mergers

There is still no merger control regime in Luxembourg. However, some private and institutional voices call for a proposal creating such a control regime. It seems one proposal is to provide a ‘facility’ for the undertakings to submit their projects to the competition authority for review. The undertaking would notify, on a voluntary basis, its agreement to the authority and the authority would render a negative clearance to the notifying undertaking under certain conditions to be defined.
Another option would be to make mandatory a notification to the competition authorities only for acquisitions and other transactions which affect the national market brought about, for example, by the substantial holdings of financial vehicles located in Luxembourg but controlling undertakings only active abroad.

An extract from The European Antitrust Review 2009