MEO – Serviços de Comunicações e Multimedia S.A. v. Competition Authority (C-525/16) case

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 by Nuno Calaim Lourenço, Managing Associate at SRS Advogados

On 19 April 2018, the European Court of Justice (ECJ) delivered its judgment in the MEO – Serviços de Comunicações e Multimedia S.A. v. Competition Authority (C-525/16) case. The judgment provides important criteria of analysis with regard to the constituent elements of an abuse of a dominant position by discrimination, under the regime of Article 102 (c) of the Treaty on the Functioning of the European Union (TFEU) and advances the proposition that such conduct is not subject to a per se prohibition rule. The judgment clarifies, in particular, that in the case of second-degree price discrimination (directed at customers in a downstream market with whom the dominant undertaking does not compete) an infringement of competition rules only occurs if the discrimination entails actual or potential anti-competitive effects that may distort competition between downstream operators. In other words, it is the effective competitive disadvantage that results from discrimination, which must be demonstrated by reference to the actual circumstances of the case, including the impact on the costs, income and profitability structures of the affected party – rather than the practice of discrimination considered in abstract – which constitutes the criterion for the existence of an abuse. Although it does not create any ‘safe harbours’, this important clarification allows dominant companies greater flexibility in adapting their pricing policies to different market realities and does not coerce them into applying uniform tariffs.
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Competition law and tofu – the denomination of products

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 by Filipa Afonseca, member of CEDU

Competition law does not have a strict goal that is objectively qualifiable and quantifiable. This is an old debate, but it has subtly brought new life to the discussion about the functions of competition law. So, what does it have to do with veganism and vegetarianism? Everything, as shown by the Tofu Town’s ruling of the CJEU, Case C-422/16, of 14th June 2017.

The issue was that the 100% plant-based products of Tofu Town were marketed under the denomination of “milk”, “yoghurt” or “cheese”. The Court of Justice ruled favorably on the German company Verband’s argument that such expressions are reserved for products of animal origin, so that even an auxiliary expression such as “oat milk” or “soy yoghurt” would not exempt the risk of consumer confusion. According to the Court, consumers’ expectations could be affected as well as concluding that the proper identification of a product is a form of fair competition in the European Union.

In fact, this argument is not new. It reminds us of the well-known distinction of whisky and wine in the Port Charlotte case, in which the Court stated that white Oport wine does not run the risk of being confused with whiskey.

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Sitchting Brein v. Ziggo BV and XS4ALL Internet BV – after all the The Pirate Bay does communicate to the public

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by Ana Margarida Pereira, lawyer at CCM and member of CEDU

The concept of ‘communication to the public’ within the meaning of Article 3(1) of Directive 2001/29/EC of the European Parliament and of the Council of 22 May 2001 on the harmonisation of certain aspects of copyright and related rights in the information society has been much discussed by the Court of Justice[i]. One of the most recent developments, and in my opinion the one which has the most impact in the information society, is the Case C-610/15, Sitchting Brein v. Ziggo BV and XS4ALL Internet BV.

The Court decided that making available and managing on the internet a sharing platform which by means of indexation of metadata relating to protected works and the provision of a search engine allows users of that platform to locate those works and to share them in the context of a peer-to-peer network constitutes a ‘communication to the public’, within the meaning of Article 3(1) of Directive 2001/29/EC.
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E pur si muove! After all, we do have a highest level of protection of fundamental rights… (about the Taricco saga)

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 by Alessandra Silveira, Editor 
 and Sophie Perez Fernandes, Junior Editor

On 5 December 2017, the European Court of Justice (ECJ) ruled again on the Taricco saga. The interpretation set out in the judgment in Taricco I gave rise to heated debate, particularly within the Italian legal community, since the compatibility of the interpretative solution set out therein was called into question in the light of supreme principles of the Italian constitutional order, particularly the principle of legality in criminal matters [Article 25(2) of the Italian Constitution], the disregard of which would allegedly violate the constitutional identity of the Italian Republic.

At the origin of the judgment in M.A.S. and M.B. (or Taricco II) is thus the interpretation laid down in Taricco I regarding Article 325 TFEU, the provision concerning the obligations on Member States to combat fraud affecting the financial interests of the Union. In Taricco I, the ECJ held it to be incompatible with EU law, in particular with Article 325 TFEU, a national regime on limitation periods for criminal offenses which has the effect that facts constituting serious fraud affecting the financial interests of the Union would escape criminal punishment, in the framework of a de facto impunity.

The contentious point was that, within the Italian legal system, and with support of constitutional case-law, the legislation governing limitation periods of criminal offences is characterised as being substantive (rather than procedural) in character and is, therefore, subject to the principle of legality in criminal matters laid down by Article 25(2) of the Italian Constitution. Since the Italian constitutional order would ensure (according to the Italian Constitutional Court) a higher level of protection of fundamental rights than the one guaranteed under EU law, the Italian Constitutional Court held that both Article 4(3) TEU (respect for national constitutional identities) and Article 53 CFREU (principle of the highest level of protection of fundamental rights) would allow national courts not to comply with the obligation laid down by the ECJ in Taricco I (see commentary here).

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The concept of undertaking strikes back – the activity of religious orders and congregations

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by Ana Filipa Afonseca, member of CEDU

The Court of Justice, final interpreter of the Treaties, has dealt with a broad spectrum of concepts of undertaking, making certain decisions somewhat perplexing to lawyers unsuspicious of the particularity of the concept of undertaking in the context of competition rules. These decisions are still the living proof that competition is at the heart of legal (and political) modeling process of European integration.

On the other hand, regarding the field of state aids, in the Congregación de Escuelas Pisa’s ruling, Case C-74/16, 27th June 2017, the Court of Justice had the important and difficult task of deciding whether the activities carried out by Spanish religious establishments were of economic nature. With this assumption, the Congregación de Escuelas Pías had received an illegal fiscal exemption and this measure is a forbidden state aid in the terms of the Article 107(1).

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COTY: a luxury case

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by Joana Whyte, Associate Lawyer at SRS Advogados and member of CEDU


Coty
[i] is a much awaited case among competition law practitioners and scholars. This judgement of the Court of Justice of the European Union (CJEU) is expected to be a landmark for the luxury goods industry and will determine how the industry can protect their brands and whether restrictions on certain internet sales can be lawfully upheld.

The judgment will also be of extreme importance for Amazon and similar online marketplaces (such as eBay) who are concerned that internet sales bans will impede the growth of their businesses.

Coty Germany is one of Germany’s leading suppliers of luxury cosmetics who sells luxury cosmetic brands via a selective distribution network, on the basis of a general framework distribution agreement uniformly applied throughout Europe. The agreement is supplemented by other more specific contractual clauses designed to organise the said network.

Parfümerie Akzente has, for many years, distributed Coty Germany’s products as an authorised retailer, both at brick and mortar locations and over the internet. Internet sales are made partly through its own online store and partly via the “amazon.de” platform.

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Taricco continues – between constitutional national identity and highest level of protection of fundamental rights, where does effectiveness of EU law stand?

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 by Alessandra Silveira, Editor 
 and Sophie Perez Fernandes, Junior Editor

In September 2015, and in the wake of the case-law set in Fransson, the European Court of Justice (ECJ) detailed in Taricco the scope of the Member States’ obligations to combat VAT fraud (see comment here). The ECJ is now faced with the repercussions of said judgment as the Corte costituzionale [the Italian Constitutional Court (ICC)] questions the compatibility of the solution established therein with supreme principles of the Italian constitutional order.

As is well known, the Taricco case called into question the Italian regime on limitation periods for criminal offenses. The national provisions in question were such that, given the complexity and duration of criminal proceedings, defendants accused of VAT evasion constituting serious fraud affecting the EU’s financial interests were likely to enjoy de facto impunity as a result of the expiration of the limitation period. Having established that the Italian regime in question was not in conformity with EU law, the ECJ interpreted Article 325 TFEU as having “the effect, in accordance with the principle of the precedence of EU law, in their relationship with the domestic law of the Member States, of rendering automatically inapplicable, merely by their entering into force, any conflicting provision of national law”. Therefore, national courts were to “ensure that EU law is given full effect, if need be by disapplying those provisions (…), without having to request or await the prior repeal of those articles by way of legislation or any other constitutional procedure”. The ECJ significantly added that, if a national court decides to disapply the national provisions at issue, “it must also ensure that the fundamental rights of the persons concerned are respected” as penalties might be applied to them, which, in all likelihood, would not have been imposed under those national provisions. In this regard, the ECJ did not consider that such a disapplication of national law would infringe the rights of the accused as guaranteed by Article 49 CFREU on the principles of legality and proportionality of criminal offences and penalties.

The Taricco judgment caused some stir within the Italian legal community. A few days after the delivery of the judgment, the Corte d’appello di Milano (Court of Appeal of Milan), instead of applying the solution formulated therein in a case pending before it concerning serious fraud in relation to VAT, stayed the proceedings to raise a question of constitutionality before the ICC, which would be followed months later by the Corte suprema di cassazione (Court of Cassation). Both courts have doubts as to the compatibility of the case-law established in Taricco with supreme principles of the Italian constitutional order and with the requirement to respect inalienable human rights as laid down by the Italian Constitution, with particular reference to the principle of legality in criminal matters [Article 25(2) of the Italian Constitution]. Hearing such concerns, the ICC sought a preliminary reference from the ECJ (here and here) according to an expedited procedure, the application of which was deferred (here). Advocate-General Yves Bot recently rendered its Opinion (here).

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Portuguese Constitutional Court’s decision n.º 591/2016, of 9 November 2016 or when the Constitutional Court looked to EU law legal aid matters: figuring out the treasure’s map…

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by Joana Covelo de Abreu, Junior Editor

The dispute in the main proceedings

On 9th November 2016, the Portuguese Constitutional Court issued decision n.º 591/2016, concerning an incidental and concrete constitutionality control presented before this court.

In the litigation, a legal person presented before the competent national administrative authority (Instituto da Segurança Social, I.P. – Centro Distrital de Braga) a request for legal aid, which was refused without further consideration since article 7(3) of the Portuguese legislation (Lei n.º 34/2004) is clear when it states that “legal persons operating for profit and individual establishments of limited liability do not have the right to legal aid”[i].

Not accepting that decision, the legal person presented an action before the national first instance court where pleaded for the unconstitutionality of the mentioned article 7(3) of Portuguese legislation (Lei n.º 34/2004) and, simultaneously, for the infringement of article 47 of the CFREU.

The court ruled against the legal person because there was a “clear impracticability” in the litigation, understanding among others that the national legislation was not unconstitutional since article 20 of the Portuguese Constitution demands concretization approaches and, for that matter, the limitation steaming from the national legislation was not compromising the Constitution’s setting since other legal mechanisms could be used by the litigator so that it could react under financial stress.

However, the national court did not mention anything concerning EU law and the interpretation national legal rules should meet under EU general principles.

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The latest on the Zambrano front – the Chavez-Vilchez judgment

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by Sophie Perez Fernandes, Junior Editor

Back in 2011, the ECJ delivered a pivotal decision in the Zambrano case. With reference to the Rottmann case, the ECJ held that “Article 20 TFEU precludes national measures which have the effect of depriving citizens of the Union of the genuine enjoyment of the substance of the rights conferred by virtue of their status as citizens of the Union.”

By this criterion are included within the scope of application of EU law situations which, a priori, fall within the competence of the Member States (the so-called purely internal situations). The Zambrano-criterion indeed allows EU citizens to rely on their status as EU citizens against their own Member States of nationality even when they have not exercised their rights of free movement. The immediate consequence of the Zambrano ruling was to preclude Member States (in casu, Belgium) from refusing third country national parents of minor EU citizens a right of residence in the Member State of residence and nationality of those children in so far as such decisions would result in the children having to leave the territory of the Union as a whole.

The subsequent case-law gave a rather narrow interpretation to the criterion, as can be confirmed by the judgments delivered in McCarthy, Dereci, Iida, O and S, Ymeraga, Alokpa and NA. The ECJ held the Zambrano-criterion as a specific criterion as it relates to “very specific situations” in which a right of residence may not, exceptionally, be refused to a third country national without the EU citizenship enjoyed by (minor) Member States nationals being (fundamentally) undermined. It thus follows that any right of residence conferred on third country nationals pursuant to Article 20 TFEU are rights derived from those enjoyed by the EU citizen of which they are members of the family and have, in particular, “an intrinsic connection with the freedom of movement and residence of a Union citizen”.

Without calling into question or reversing this line of jurisprudence, the ECJ seems however willing to revive the Zambrano-criterion in more recent cases, addressing some issues so far left in the open. In CS and Rendón Marín, though admitting the possibility of limiting the derived right of residence flowing from Article 20 TFEU to third country nationals (limitation based on grounds of public policy or public security), the ECJ framed the scope of such a limitation, making its application conditional on a case-by-case analysis and upon respect for fundamental rights as protected by the CFREU, namely Articles 7 and 24(2) CFREU. The ECJ further clarified the scope of the Zambrano-criterion as the ultimate link with EU law for the purposes of the protection of fundamental rights in the Chavez-Vilchez judgment delivered last week.
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Neutrality or covert discrimination? A brief review of the decisions of the Achbita and Bougnaoui cases

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by Cláudia Moreira, masters student at University of Minho

The ban on wearing religious symbols, like the hijab or headscarf, the niqab and burka, is nowadays at the centre of controversies over which limits can be legitimately established for religious manifestations. In recent years, there have been many European countries which, given the strong Islamic presence in their territory, have understood that they should find legal solutions to the heated discussions about the use of women’s religious clothing. Belgium was the first European country in 2010 to ban the wearing of the burka in public spaces. It was followed by France, which, even though it had already adopted a law banning the use of religious clothing or symbols in public schools in 2004, based on the State secularity principle, only more recently extended the ban to the use the burka and niqab in public spaces.

The wide discretion that the European Court of Human Rights (ECHR) has been providing to Member States, in cases concerning religious symbols[i] and their usage limitation may, as well asserted Martinez-Tórron[ii], be the result of the ‘fear’ of propagating of radical ideals, which are harmful to European freedom. This fear, however, does not legitimize the adoption, under false aegis of principles, such as justice or equality of measures restricting religious manifestations.

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