Monday, 21 December 2020 15:58

Press Release – Ex-officio investigation in the printed press distribution market

Subject: Ex-officio investigation in the printed press distribution market for possible infringement of articles 1 & 2 of law 3959/2011 and/or articles 101 & 102 TFEU, as well as the ex-officio investigation ordered in the context of HCC’s Decision no. 659/2018.

Following the Press Release of the Hellenic Competition Commission (HCC) dated 13-11-2020[1],it should be first pointed out that the originally scheduled meeting of the Plenary Session of the HCC, for 29-12-2020, is rescheduled due to the extraordinary measures taken to deal with the pandemicfor 13-01-2021. In view of the above meeting andin order to further elaborated on the content of the Press Release dated on 13-11-2020, the following are noted:

  1. In the context of the ex-officio investigation in the printed press distribution market for possible infringement of articles 1 & 2 of law 3959/2011 and/or articles 101 & 102 TFEU,

The Statement of Objections (SO) of the Rapporteur recommends, the finding of infringements by Argos of articles 1 & 2 of Law 3959/2011, as well as 101 & 102 TFEU, in relation to the following categories of practices:

  1. Practices that are related to the distribution network of Argos (Articles 1 of Law 3959/2011 - 101 TFEU)

According to the Statement of Objections, the distribution system of Argos has the characteristics of a selective distribution system, as quality criteria are applied for the selection of the cooperating distributors, and at the same time, it has exclusive distribution and exclusive customer concession characteristics. According to the SO, the following anti-competitive practices of Argos against the sub-distributors and sub-agents are identified:

  1. market / customer allocation within the selective distribution network, in the form of restrictions set to authorized sub-distributors and sub-agents on the supply of final points of sale, the exclusive concession of members of the network and/or geographical areas to other authorized sub-distributors/ sub-agents and respectively, the restriction of reciprocal/mutual supplies between sub-distributors / sub-agents,
  2. imposition of "specific brand promotion" clauses / non-compete clauses, and
  3. setting of a minimum profit margin at the vertical level.

According to the SO, the above restrictive practices are complementary, as each of them aims to “address”free-competition effects, through the distribution of markets / customers and the elimination of intra-brand and inter brand competition within the printed press distribution network. Therefore, these practices constitute a single and continuing infringement that extends continuously during the period from August 2017 until at least the time of writing of the SO by the Rapporteur.

                        B .Exclusivity clauses imposed by Argos de jure or/and de facto on the one hand to the publishing companies and on the other to the distributors (sub-distributors and sub-  agents) (Articles 2 of Law 3959/2011 - 102 TFEU).    

From the investigation conducted by the Authority, it appears that Argos imposes since August 2017, when it acquired a monopoly position in the printed press distribution market due to the closure of the other distribution agency “Europe S.A”, onwards, exclusivity clauses towards the publishing companies, either through contractual terms or in practice.

Furthermore, the above investigation also shows that Argos has for years imposed contractual clauses of exclusive cooperation with the distributors of its network and has even threatened them with sanctions, excluding in practice, any sort of cooperation with third parties (besides Argos), active among others in the press distribution sector. Argos in its contracts with sub-agents, restricts their distribution of printed press thatArgositself does not distribute, setting as a necessary condition its previous special and written consent, under the threat of sanctions.

Consequently, even the slightest possibility of Argos facing competitive pressures is eliminated through the above-mentioned practices. Also, by concluding exclusive cooperation agreements with sub-distributors / sub-agents, Argos excludes any possibility of access to its network to third parties, as the members of the Argos network, sub-distributors and sub-agents are prevented from their direct cooperation with interested publishing companies regarding the distribution of their products, without the involvement of Argos or with its limited involvement.

The above practices (exclusivity clauses towards publishing companies on the one hand, and distributors on the other), also have a complementary relationship between them and constitute, according to the SO, a single and continuous infringement that extends continuously during the period from August 2017 until at least the time of the drafting of the SO.

Furthermore, the SO examines the extent to which the following alleged infringements from a) to e) can be also considered assessed in the framework of anti-competitive practices as a result of abuse of dominance by ARGOS, without, nevertheless proving infringement of articles 2 of law 3959/2011 and 102 TFEU.

In particular:

  • Excessive pricing

After examining the price-cost ratio of each service provided by Argos in the context of its new commercial and pricing policy (NEP 2019), in order to identify any disproportion between, the costs of the dominant company and the price for the distinct services it provides, as well as to examine if the prices charged for these services are “unreasonable”, it appears that the price charged by Argos for each of the above services (even for the services of selective and wide administration of deliveries as well as the administration of returns, which come at higher charges) is not set at levels that make it “unreasonable”. This conclusion is supported by the comparison of critical charges with cases of overcharging in EU case law, where pricing has been characterized as excessive in cases where the final price (or total service revenue) is 40%[3], or 100%[4] higher (i.e. often, up to double) in relation to the cost of the services supplied.

As there is no excessive disproportion between the costs and the charged prices of Argos, according to the SO, the conditions of the first part of the United Brands’s decision test, which requires the achievement of “excessive profit” by the investigated company, are not met.  Given that the two parts of the above test are cumulative[5],[6],there is no need to consider the second part of the test for excessive pricing. Based on the above, according to the SO, the imposition of “unfair” or “unreasonable” prices by Argos cannot be sufficiently substantiated by law.

  • Delays in the payment of publishing companies

According to the SO, no abusive discrimination was proven due to late payments of specific publishing companies by Argos,since cases of payment delays, and debts of Argos in general, are identified without discrimination to many publishers, including former and current shareholders of Argos. These delays and debts are observed indiscriminately throughout the same corresponding time intervals and are related to the identified liquidity problems of the company.

  • Withholding of insurance contributions

Following the investigation of the Directorate-General of Competition, even if withholding of insurance contributions can be assessed in the light of the rules of free competition law, for example as a condition which could impede the smooth functioning of the market or the sale of products and / or of the services by causing financial liquidity problems to the publishing companies, according to the SO, it is assessed that this does not constitute abuse of dominance by Argos. Any creation of liquidity problems to the publishing companies from the above practice, even in all of them, would be meaningless, especially if we take into account that Argos derives direct benefits from the smooth operation of these companies.

  • Discretionary treatment through NEP 2019 - withholding of insurance contributions - preferential credit terms - issuance of allegedly inaccurate circulation certificates

The investigation of the DG shows that Argos implements in a uniform and universal way its new commercial and pricing policy (NEP 2019), regardless of the relationship of the respective publishing company with Argos (i.e. regardless of its status as a shareholder or not), and based on objective criteria, i.e. the category of the publication, its frequency of circulation, the size / number of the circulation and its sales.

Respectively, the investigation of the DG doesn’t reveal any discriminatory treatment, through the withholding of insurance contributions, of specific publishing companies, namely between publishers who are (former or current) shareholders of Argos and other publishers. In addition, the investigation does not reveal that certain publishers have agreed or been given preferential credit terms over others. In this regard, there is no selective practice of altering the ranking of the number of sales of publications in the circulation bulletin published by Argos,in order to influence the distribution of advertising expenditure funds.

  • Possible unjustified refusal to sell through refusal of distribution / incomplete distribution of forms - unilateral imposition of unreasonable terms of transaction

The investigation of the DG did not substantiate any direct or indirect refusal to distribute specific publications. In particular, the allegations brought to the attention of the Authority donot meet the conditions required to substantiate a refusal to sell, within the meaning of free competition law, while the rest of the conditions for substantiating the infringement are not satisfied to the extent required by evidence.Moreover, individual cases of insufficient distribution can be justified by objective reasons, while many are due to human error, by individuals not belonging to the personnel of Argos. The investigation of the DG shows that Argos maintains mechanisms to control the correct distribution of printed publications.

In any case, according to the Rapporteur’ s SO, there are no indications that individual incidents, given their nature, extent and number,can eliminate effective competition in the market where publishers operate or harm the consumers.

 

II. With regard to the ex-officio investigation ordered in the context of HCC’s Decision (no.659/2018),

The SO recommends, the non-finding of infringement of articles 1 or/and 2 of law 3959/2011, as in force, by the companies inspected in this regard.

In particular, it does not appear that the acquisition / possession of indirect de facto joint control, over Argos according to the provisions of the above Decision[7], by ALTER EGO and three more shareholders, constitutes an infringement of article 1 of law 3959/2011[8]. In addition, there is no evidence of adoption of exclusionary conduct, in the light of article 2 of law 3959/2011 (vertical foreclosure), causally linked with the possession of indirect de facto joint control by the four shareholders, according to HCC’s Decision no.659/2018, for example, through the manifestation of conduct which consists in the exploitation of their (controlling) participation in the share capital of Argos which is active in the downstream market, in order to weaken the position of their competitors in the market of printed press.

In view of all the above, the Rapporteur’s SO, suggests the following:

  • Infringement of articles 1 of law 3959/2011 and 101 TFEU by the company Argos in relation to the vertical restrictions imposed on the network of sub-distributors and sub-agents and imposition of a fine, for the period from 10.8.2017 until at least the time of the SO drafting.
  • Infringement of articles 2 of law 3959/2011 and 102 TFEU by the company Argos, in relation to the imposition of exclusivity terms against the publishing companies and their distributors andimposition of a fine, for the period from 10.8.2017 until at least the year of the SO drafting, for the reasons set out in the SO.
  • Obligation of the company Argos to cease the infringements found of articles 1 of law 3959/2011 and 101 TFEU, as well as of articles 2 of law 3959.2011 and 102 TFEU and to omit them in the future.
  • Deletion of the contractual terms of exclusivity from the contracts on the one hand with the publishing companies, which remain in force until the time of the SO drafting, and on the other hand with the sub-distributors and sub-agents of Argos.
  • Invalidity of the clauses regarding the “promotion of a specific brand / non-compete clauses”, which are included in the contracts of Argos with the sub-distributors and sub-agents.
  • Invalidity and termination from the cooperation agreements with the sub-distributors and sub-agents of Argos, of the clauses that directly or indirectly restrict the supply of press products by the authorized sub-distributors and sub-agents of the Argos network to the points of sale, members of the network, but also among them, as well as of the clauses that set minimum prices at a vertical level.
  • To threaten the company Argos with a fine, when the HCC confirms with its decision the continuation or reiteration of the infringements found.

It is recalled that the Plenary Session of the HCC, with its Decision no. 687/2019[9], had decided to take interim measures against Argos, presuming a violation of the abusive exploitation of the dominant position of Argos in the printed press distribution market. To take the decision of interim measures, the HCC limited itself to the presumption of the existence of an infringement, since the interim measures are primarily aimed at ensuring the effectiveness of the issued decision. However, in the context of the main proceedings, which may lead to a decision on the imposition of sanctions, the HCC bears the burden of proof for the alleged infringements in order to impose sanctions, and in this respect should be fully convincedtaking into account all evidence of the case that the alleged infringements have taken place[10]..

In any case, it is pointed out that the SO is not binding for the HCC, which will decide, taking into account the facts of the investigation and the views of the parties involved.

[1]See in this respect : https://www.epant.gr/enimerosi/deltia-typou/item/1156-deltio-typou-eisigisi-epi-tis-aftepaggeltis-erev­na­s-stin-agora-dianomis-entypou-typou.html andhttps://www.epant.gr/en/enimerosi/press-releases/item/1157-press-relea­se-statement-of-objections-following-an-ex-officio-investigation-in-the-market-of-press.html.

[2]It should be noted that, according to relevant EU case law, the HCC refrains from finding a breach of Articles 101 and 102 TFEU. See case C‑375/09, Tele2 Polska, 31.

[3]See case 26/75, General Motors Continental NV vs Commission, Collection (Special Greek Edition) 1975 p. 425.

[4]See case 27/76, United Brands Company and United Brands Continental BV vs Commission, Collection (Special Greek Edition) 1978 p 75. In this decision the Court of EU adopted a double cumulative two-stage test to determine cases of excessive pricing. Accordingly, in order to establish excessive pricing, it must be assessed, on the one hand, whether there is an excessive disproportion between the costs actually incurred by the dominant undertaking and the price actually demanded from it (a comparison from which the profit margin is derived) and, if so, to consider whether the price charged was unreasonable, either by itself or in comparison with competing products. Since the two parts of the above test are cumulative, it is enough for the Competition Authority to conclude that one of them is not met, in order to draw a final conclusion for the non-existence of abuse of dominance.

[5]See decision of European Commission of 23.07.2004 (COMP/A.36.568/D3-Port of Helsingborg), par. 142 and 147 and HCC decision 502/2010, 144.

[6]See HCC’s Decision under no. 489/VI/2010, par. 63.

[7]See in this respect https://www.epant.gr/enimerosi/deltia-typou/item/761-deltio-typou-egkrisi-sygkentrosis.html

[8]See article 7 par. 3 L. 3959/2011.

[9]See in this respect the Notice of the HCC of 16/05/2020, available at its webpage:https://www.epant.gr/enimerosi/nea/item/920-anakoinosi-dimosiefsis-apofasis.html as well as the relevant press release of HCC on the 4th of June 2020, which is available at its internet page: https://www.­epant­.gr­/enimerosi/deltia-typou/item/730-deltio-typou-ekdosi-apofasis-epi-tis-aftepaggeltis-lipsis-asfalistikon-met­r­on.html.

[10]The publication of the HCC Decision, following the SO over the evaluation of compliance of Argos, after HCC’s Decision no. 87/2019, will soon follow. See in this respect and https://www.epant.gr/enimerosi/deltia-typou/item/932-deltio-typou-elegxos-symmorfosis-argos.html.

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