By Odysseas G. Repousis
In October last year, the UK Court of Appeal overturned the English High Court’s prior block on a class action lawsuit brought on behalf of four million iPhone users against Google. The claims arise out of the notorious ‘Safari Workaround’, which, for several months in 2011 and 2012, allegedly allowed Google to track cookies on Apple handset devices without the user’s knowledge or consent.
Whilst the Court of Appeal’s judgment is not the end of it, as it merely means that the case may now proceed to the merits, it is nonetheless a ground-breaking ruling that sets a precedent for similar privacy cases and also tests the limits of data privacy class actions in the UK and beyond.
The UK class action has its genesis on the discovery in early 2012 of the ‘Safari Workaround’, and the subsequent regulatory action that was taken against Google by the Federal Trade Commission (FTC).
Unlike most other internet browsers, Apple’s Safari, was set by default to block third party cookies (i.e. data sent from websites or domains recording the user’s browsing activity). There were however certain exceptions to these default settings, which were in place until March 2012, when the software was updated. Therefore between 2011 and March 2012, those exceptions allegedly enabled Google to access iPhone users’ Safari browsing history without their knowledge or consent. This reportedly enabled Google to collect information “as to the order in which and the frequency with which websites were visited … users’ internet surfing habits and location, but also [information] about such diverse factors as their interests and habits, race or ethnicity, social class, political or religious views or affiliations, age, health, gender, sexuality, and financial position”. In turn, Google would allegedly offer the data it had collected to subscribing advertisers. This is what came to be known as the ‘Safari Workaround’.
In August 2012, Google agreed to pay a US$22.5 million civil penalty to settle charges brought by the FTC. The basis for the penalty was that Google had misrepresented to Safari users that it would not track their browsing activity by placing tracking cookies and would not serve targeted advertisements to those users. On 11 November 2013, Google also agreed to pay US$17 million to settle consumer-based actions brought against it by attorneys general representing 37 US states and the District of Columbia. Several class actions were also filed in the US and were later consolidated. In 2016, Google agreed to settle those by paying US$5.5 million to educational institutions or non-profits organisations (however, the terms of this settlement remain in dispute).
The first UK claim was filed in June 2013 by three individuals. In that case, which is known as the Vidal-Hall case, the claimants claimed damages for distress as a result of Google’s breaches of the UK Data Protection Act1998 (Data Protection Act). That claim was allowed, and Google’s appeal was dismissed.
The UK class action was filed in May 2017. This class action is brought by Richard Lloyd, a former director of consumer group Which?, on behalf of four million UK iPhone users, who were allegedly affected by the ‘Safari Workaround’. Specifically, the allegation is that by bypassing the privacy settings on Apple handsets, Google gathered personal data, and used that data for targeted advertising without the users’ consent. The class action is therefore a claim for damages for the loss of control over personal data.
Whilst the factual matrix of the UK class action and of Vidal-Hall is similar, there is one crucial difference between the two actions: in Vidal-Hall, the three individual claimants claimed damages for distress as a result of Google’s breaches of the DPA. In the class action, the class representative, Mr. Lloyd, claimed “a uniform amount by way of damages on behalf of each person within the defined class without seeking to allege or prove any distinctive facts affecting any of them, save that they did not consent to the abstraction of their data”. That amount has yet to be fully quantified but could reportedly be as high as £750 for each class member.
A key question that was therefore at issue was whether, as a matter of UK law, a claim for a tariff award was improper in circumstances where the facts and damages pleaded in the class action were not individualized.
First instance: No claim for damages without individualized proof of loss or distress
In deciding the matter, the English High Court (per Warby J), determined that the members of the class had failed to show that they suffered ‘damage’ as a result of Google’s infringement of the Data Protection Act. Specifically, section 13 of the Data Protection Act provided that “[a]n individual who suffers damage by reason of any contravention by a data controller of any of the requirements of this Act is entitled to compensation from the data controller for that damage”. The “real and substantial issue between the parties” was therefore “whether the impact of the Safari Workaround on the Representative Claimant and the other Class members” amounted to ‘damage’ within the meaning of the Data Protection Act. In Vidal-Hall, the Court of Appeal had determined that non-material damage, in the form of distress and anxiety, fell within the scope of section 13 of the Data Protection Act. However, the class action did not depend upon “any identifiable individual characteristics of any of the claimants, or any individual experiences of or concerning the Safari Workaround” and there was “no allegation that any individual suffered any distress or anxiety, however slight”. In other words, the question was whether the class representative (and the individual members of the class) could bring a claim for damages “on a uniform per capita basis” without proof or particularization of pecuniary loss, distress, anxiety, embarrassment, or any other individualized allegation of harm.
The High Court answered this question in the negative holding that the claim did not disclose a basis for seeking compensation under the Data Protection Act. In the alternative, the High Court held that the class action ought to be dismissed because the members of the class did not have the “same interest” and/or it could not be supposed that the breach of duty or the impact of it was uniform across all members of the class. In the further alternative, the High Court determined that the action should not be allowed to continue as a matter of discretion because it would have been very difficult to verify the affected members of the class, and there was
“an obvious risk” that compensation would go to persons who did not suffer damage. Therefore, in the High Court’s view, the class action ought not be allowed to “consume substantial resources in the pursuit of litigation on behalf of others who have little to gain from it, and have not authorised the pursuit of the claim, nor indicated any concern about the matters to be litigated”.
Appeal: Loss of control over personal data is compensable even absent proof of loss or distress
The main issue that was raised on appeal was whether the English High Court was right to hold that the members of the class could not recover uniform per capita damages for the infringement of their data protection rights without proving pecuniary loss or distress. Delivering the opinion of the Court, Voss LJ held that “key to these claims” was “the characterisation of the class members’ loss as the loss of control or loss of autonomy over their personal data”. And even if personal data is not technically regarded as property in English law, it is clear that browser generated information has economic value: it can be collected and sold to advertisers who wish to target individual consumers with their advertising. This “confirms that such data, and consent to its use, has an economic value”. On that basis, the Court of Appeal held that damages could in principle be awarded for loss of control of data even if there was no proof of pecuniary loss or distress.
Once it was determined that the members of the class all had something of value – their browser generated information – taken from them without their knowledge or consent, the matter of commonality was more straightforward. In the words of the Court of Appeal, the “class are all victims of the same alleged wrong, and have all sustained the same loss, namely loss of control over their” browser generated information. That the members of the class sought to recover uniform per capita damages did not mean that they did not have the “same interest”. Rather, as the Court of Appeal explained, “[i]f individual circumstances are disavowed”, – as was the case here – the class representative “could, be entitled to claim a uniform sum in respect of the loss of control of data sustained by each member of the represented class”. That sum would “be much less than it might be if individual circumstances were taken into account, but it will not be nothing” – it is merely the lowest common denominator. The Court of Appeal was therefore convinced that the members of the class had the “same interest” and were identifiable. As to the matter of discretion, the Court of Appeal held that the class action was the only way in which these claims could be pursued. It would therefore be wholly disproportionate to block the action on the basis that it would be costly and would use up the English Court’s valuable resources. Such a result would leave the members of the class without a remedy.
In light of the above, the Court of Appeal overturned the High Court judgment and allowed the case to proceed to the merits.
Concluding remarks: What lies ahead?
The Court of Appeal’s judgment in Richard Lloyd v Google LLC is no doubt a milestone in data privacy actions. It clarifies the law applicable to class actions pursued on the basis of alleged data protection violations. It also sheds light on the heads of compensable damage for serious infringements of data protection laws.
Most importantly, this judgment comes at a time when the full scope, extent and application of the EU’s General Data Protection Regulation (GDPR) and the UK’s Data Protection Act 2018 (which complements the GDPR’s application in the UK and updates the Data Protection Act 1998) remain to a large extent uncharted. And whilst it is highly likely that the Court of Appeal’s judgment will be of important precedential value, it remains to be seen to what extent it will influence similar actions under the GDPR. Suffice it to note that the GDPR itself, in somewhat promethean manner, provides that “non-material damage” includes “loss of control over personal data”.
 Richard Lloyd v Google LLC  EWHC 2599 (QB), Judgment, Oct. 8, 2018, para. 13 (Noting that “Google’s activities in relation to the Safari Workaround were discovered by a PhD researcher, Jonathan Mayer … and publicised in blog posts and, on 17 February 2012, in the Wall Street Journal”).
  EWHC 2599 (QB), paras. 8-19.
 Ibid., para. 11.
 FTC, Google Will Pay $22.5 Million to Settle FTC Charges it Misrepresented Privacy Assurances to Users of Apple’s Safari Internet Browser, Aug. 9, 2012, https://www.ftc.gov/news-events/press-releases/2012/08/google-will-pay-225-million-settle-ftc-charges-it-misrepresented.
  EWHC 2599 (QB), para. 13.
 Richard Lloyd v Google LLC  EWHC 2599 (QB), Judgment, Oct. 8, 2018, para. 13 (Noting that “Google’s activities in relation to the Safari Workaround were discovered by a PhD researcher, Jonathan Mayer … and publicised in blog posts and, on 17 February 2012, in the Wall Street Journal”).
 The Google Cookie Class Action Lawsuit is In re: Google Inc. Cookie Placement Consumer Privacy Litigation, Case No. 17-1480, in the U.S. Court of Appeals for the Third Circuit; https://topclassactions.com/lawsuit-settlements/privacy/912971-5-5m-google-cookie-class-action-settlement-tossed-3rd-circ/
 Vidal-Hall v Google Inc  EWHC 13 (QB), Judgment, Jan. 16, 2014, para. 5.
 Google Inc v Vidal-Hall  EWCA Civ 311, Judgment, Mar. 27, 2015.
 Richard Lloyd v Google LLC  EWHC 2599 (QB), Judgment, Oct. 8, 2018, para. 3.
 Ibid., para. 26.
 Ibid., para. 48.
 Ibid., para. 49.
 Ibid., para. 26.
 Ibid., para. 23.
 Ibid., paras. 54-81.
 Ibid., paras. 82-105.
 Ibid., para. 95.
 Ibid., para. 104.
 Richard Lloyd v Google LLC  EWCA Civ 1599, Judgment, Oct. 2, 2019, para. 4.
 Ibid., para. 45.
 Ibid., para. 46.
 Ibid., para. 75.
 Ibid., para. 77.
 Ibid., para. 86.
 See GDPR, Recital 85 and Art. 82.1. The Court of Appeal found this “helpful although not decisive”. See  EWCA Civ 1599, paras. 64-65.
By Jonathan Cardenas
On September 19, 2018, the UK House of Commons Treasury Committee (the “Committee”) published a Report on Crypto-assets (the “Report”), which provides regulatory policy recommendations for the UK Government, the UK Financial Conduct Authority (the “FCA”) and the Bank of England. The Report forms part of the Committee’s Digital Currencies Inquiry, which was launched in February 2018 to examine the potential impact of distributed ledger-based digital currencies on the UK financial system and to prepare a balanced regulatory response from the UK Government. This article briefly summarizes the Committee’s UK regulatory policy recommendations.
- Crypto Asset Risk
The Committee’s regulatory policy recommendations are structured around a variety of risks that crypto assets pose to crypto asset investors. These risks include: high price volatility; loss of investment due to fraud and/or third-party hacking of crypto asset exchanges; loss of access to crypto asset exchange accounts and/or digital wallets due to unrecoverable lost passwords; price manipulation due to poor market liquidity and relatively low trading volumes; potential facilitation of money laundering and terrorist financing; and, macro risk to UK financial stability. Mindful of these risks, the Committee notes that crypto assets presently fall outside the scope of FCA regulation merely because the “transferring, buying and selling of crypto assets, including the commercial operation of crypto asset exchanges” do not meet legal definitional criteria to be considered as either a “specified investment” under the Financial Services and Markets Act 2000 (Regulated Activities) Order (the “Regulated Activities Order”), or as “funds” or “electronic money” under applicable payment services and electronic money regulation, as referenced in expert witness reports provided to the Committee.
- Initial Coin Offerings
Consumer fraud in the context of initial coin offerings (“ICOs”) is a topic of special concern to the Committee. The Committee recognizes that there is currently “little the FCA can do to protect individuals” from fraudulent ICOs as a result of a regulatory loophole that permits ICOs to escape FCA jurisdiction. Since most ICOs do not directly promise financial returns, but rather, offer future access to a service or utility, they do not fall squarely within UK law definitions of “financial instrument,” as referenced in expert witness reports provided to the Committee, and therefore are not FCA regulated.
The Committee concurs with the view of U.S. Securities and Exchange Commission Chairman Jay Clayton that ICOs should not escape the ambit of securities regulation merely because they change the form, and not the actual substance, of a securities offering. The Committee also concurs with the view expressed in an FCA warning that consumers should be prepared to lose their entire investment in early stage ICO projects due to the FCA’s lack of jurisdiction and consequent inability to protect consumers. As a result, the Committee recommends that the Regulated Activities Order be updated, as a matter of urgency, in order to bring ICOs within the scope of FCA jurisdiction.
- Crypto Asset Exchanges
The facilitation of money laundering and terrorist financing through crypto asset exchanges is another area of major concern addressed by the Committee. Crypto asset exchanges are not currently required to comply with anti-money laundering (“AML”) rules under UK law because their activities are not specifically captured by the language of UK AML regulation, including, most notably, the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. Although current UK AML regulation does not target crypto asset exchange activity, crypto asset exchanges do fall within the scope of the European Union’s 5th Anti-Money Laundering Directive (the “5th AML Directive”). As a consequence, the Committee recommends that the UK Government either (1) transpose the 5th AML Directive into UK law prior to the UK’s planned exit from the EU, or (2) replicate relevant provisions of the 5th AML Directive in UK law as quickly as possible.
- Regulatory Implementation
The Committee proposes two ways of introducing crypto asset regulation in the UK: (1) by amendment of existing financial services regulation or, (2) by adoption of new regulation tailored specifically to crypto assets.
Amending the existing financial services regulatory framework would involve classifying crypto asset activity as a regulated activity within the Regulated Activities Order. Doing so would enable the FCA to regulate crypto asset activities by, for example, mandating that licenses be obtained in order to carry out specified crypto activities in the UK. This approach has previously been used in the context of peer-to-peer lending, and is regarded as the fastest way of providing the FCA with the powers needed to regulate crypto asset activities and protect UK consumers.
Adopting a new regulatory framework separate from pre-existing financial services rules would allow for a more flexible and tailored approach to crypto asset regulation, but would also require substantially more time to formulate and finalize.
Given the rapid growth of crypto asset markets and the expanding set of risks faced by UK consumers, the Committee recommends that the UK Government regulate crypto asset activities by expanding the scope of the Regulated Activities Order, rather than by adopting a separate body of rules. The Committee also recommends that the UK Government examine the exact type of crypto asset “activity” that would be included in an amended Regulated Activities Order, as well as the ramifications of doing so.
The Committee notes that although the global regulatory response to crypto assets is in early stages, the UK is in a position to learn from the experience of other jurisdictions given the fact that the UK has not yet introduced any specific type of crypto asset regulation. As a result, the Committee encourages UK regulators to engage with their international counterparts in order to ensure that best practices are applied in the UK.
 Disclaimer: The views and opinions expressed in this article are those of the author alone. The material in this article has been prepared for informational purposes only and is not intended to serve as legal advice.
 UK House of Commons Treasury Committee, Crypto-assets, Twenty-Second Report of Session 2017-19, 19 September 2018. Available at: https://publications.parliament.uk/pa/cm201719/cmselect/cmtreasy/910/910.pdf.
 UK House of Commons Treasury Committee, Digital Currencies inquiry: Scope of the inquiry, 2017. Available at: https://www.parliament.uk/business/committees/committees-a-z/commons-select/treasury-committee/inquiries1/parliament-2017/digital-currencies-17-19/.
 UK House of Commons Treasury Committee, Evidence – Financial Conduct Authority (DGC0028): Financial Conduct Authority’s written submission on digital currencies, April 2018. Available at: http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/treasury-committee/digital-currencies/written/81677.pdf.
 UK House of Commons Treasury Committee, Evidence – Financial Conduct Authority (DGC0028): Financial Conduct Authority’s written submission on digital currencies, April 2018.
 UK House of Commons Treasury Committee, Crypto-assets, 19 September 2018, at para 87.
 UK House of Commons Treasury Committee, Oral evidence: Digital Currencies, Statement of David Geale, Q 193, HC 910, 4 July 2018. Available at: http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/treasury-committee/digital-currencies/oral/86572.html.
 U.S. Securities and Exchange Commission, Statement on Cryptocurrencies and Initial Coin Offerings, December 11, 2017. Available at: https://www.sec.gov/news/public-statement/statement-clayton-2017-12-11.
 Financial Conduct Authority, Consumer warning about the risks of Initial Coin Offerings (‘ICOs’), 9 December 2017. Available at: https://www.fca.org.uk/news/statements/initial-coin-offerings.
 The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (S.I. 2017/692), 26 June 2017. Available at: http://www.legislation.gov.uk/uksi/2017/692/made.
 Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU, OJ L 156, 19.6.2018, p. 43–74. Available at: https://eur-lex.europa.eu/legal-content/en/TXT/?uri=CELEX%3A32018L0843.
 See Financial Conduct Authority, The FCA’s regulatory approach to crowdfunding (and similar activities), Consultation Paper 13/13, October 2013. Available at: https://www.fca.org.uk/publication/consultation/cp13-13.pdf.
By Giuseppe Colangelo
The judgment of the European Court of Justice (CJEU) in Huawei/ZTE (Case C-170/13) marked a milestone in the patent war which has characterized standardization activities in the last decade. The CJEU identified the precise steps which standard essential patents (SEPs) owners and users have to follow in negotiating fair reasonable and non-discriminatory (FRAND) royalties. Compliance with this code of conduct will shield IPRs holders from the scrutiny of competition law and, at the same time, will protect implementers from the threat of an injunction and the consequent disruptive effect on sales and production.
In primis, the patent holder must inform the SEPs user about the alleged infringement and make a specific and written FRAND offer, provided the latter has shown willingness to obtain a license on fair and reasonable terms. The exact amount of the royalty and the way in which it has been calculated should be specified in the offer. In case of refusal, the implementer must promptly propose a counter-offer that complies with FRAND requirements. If such counter-offer is also rejected, the alleged infringer must provide appropriate security to continue using the patents, either by providing a bank guarantee or by placing the requisite amount on deposit. In addition, the parties have the option to request that the royalty level be set by an independent third party decision without delay. Patent owners will instead be granted an injunction if the implementer, while continuing to use the patent in question, have not diligently responded to the first licensing offer, in accordance with recognized commercial practices in the field and in good faith, which is a matter that must be established on the basis of objective factors and which implies that there are no delaying tactics. Furthermore, with regard to liability for past acts of use, the CJEU also explained that Article 102 TFEU does not prohibit the SEPs owner from bringing an action for the award of damages or the rendering of accounts. The above requirements and considerations do not, however, deprive the potential licensee of the right to challenge the validity and essentiality of the patent at issue.
Despite the CJEU’s efforts, many shadows still loom on the horizon of the EU standard-setting community. In such a complex context, the recent activity by certain national courts in filling the gaps left by the CJEU and shedding light on some of the thorniest questions is undoubtedly welcome, and deserves the utmost consideration. Among these decisions, the UK judgement Unwired Planet v. Huawei recently delivered by Mr. Justice Birss is of utmost importance.
The UK dispute Unwired Planet v. Huawei
Unwired Planet, a U.S. based patent assertion entity that holds a worldwide patent portfolio which includes numerous SEPs to various telecommunications standards, claimed that Huawei was an unwilling licensee. Huawei counterclaimed that Unwired Planet was abusing its dominant position by offering to license its entire global portfolio (SEPs and non-SEPs) and by demanding royalty rates higher than FRAND ones.
On 5 April 2017, the High Court of England and Wales delivered its judgement.
Justice Birss addressed several important topics. First, Birss stated that only one set of licensing terms can be ultimately considered FRAND in a given set of circumstances. From this perspective, the judge disregarded the view of those authors, U.S. judges (e.g. Robart in Microsoft v. Motorola) and perhaps even the CJEU in Huawei, according to whom FRAND may well comprise a range of terms. Indeed, although the Huawei case did not deal with FRAND pricing, yet it acknowledged that parties can make divergent FRAND offers and counter-offers, thereby confirming that there is no unambiguous FRAND point and that several distributional FRAND prices exist.
Furthermore, as a consequence of the single FRAND rate, Birss found that, during the negotiation, the parties could make offers that would not be FRAND. An obligation focused only on making FRAND offers is considered unrealistic since a process of fair negotiation will usually involve some compromise between the parties’ rival offers: if the standard setting organization demands that offers made by a patentee must themselves consist of FRAND terms, then that would condemn patentees to always end up with negotiated rates below a FRAND rate. Therefore, according to the UK Court, it makes much more sense to interpret the FRAND obligation as applicable primarily to the finally agreed terms rather than to the offers.
It seems that Birss aimed to reduce the relevance of the Huawei decision (and of the competition law, in general) also relatively to another point. After recalling the purpose of a FRAND commitment and its alleged contractual nature, the UK judgment concluded that the contractual commitments submitted to the standard setting organization (ETSI) are stricter than antitrust provisions. Indeed, since competition law fines only excessive prices, a rate can be in line with antitrust rules even if it is higher than the FRAND benchmark. In sum, according to the English Court, FRAND commitments can be enforced under contract law without recourse to competition law.
Turning to the process of negotiating FRAND licenses, with respect to the type of behavior that can be considered FRAND, the Court stated that making extreme offers and taking an intransigent approach is not FRAND. In this regard, Huawei was considered unwilling because it insisted on having an offer for just a UK license (instead of a worldwide one).
Moreover, Birss provided useful insights about the determination of FRAND rates. An appropriate way to establish the FRAND royalty would be to determine a benchmark rate governed by the value of the patentee’s portfolio: counting patents and making reference to existing comparable licenses are key steps of the determination process. In the High Court’s words, a patentee who refuses to accept those terms would be in breach of its FRAND undertaking. With respect to the non-discrimination element, the Court rejected a “hard-edged” approach capable of applying to reduce a royalty rate (or adjust any license term in any way) which would otherwise have been regarded as FRAND. On the contrary, the Court endorsed a “general” approach, which requires that rates cannot differ based on the licensee but only on the value of the portfolio licensed.
The UK judgement demonstrates that after Huawei there are still several pending questions. It is not surprising that the European Commission has recently intervened to announce a Communication in order to fill the gaps by complementing existing jurisprudence through best practice recommendations.
  E.W.H.C. 711 (Pat).
 European Commission, Roadmap towards a Communication on ‘Standard Essential Patents for a European digitalised economy’, 2017, 2, available at https://ec.europa.eu/info/law/better-regulation/initiatives/ares-2017-1906931_en.
The Competition Appeal Tribunal awards competition damages in UK’s first final judgment on a stand-alone action
By Valerio Cosimo Romano
On 14 July 2016, the UK Competition Appeal Tribunal (CAT) ordered MasterCard to pay Sainsbury’s £68.6m plus interest for infringing competition law in the setting of UK multilateral interchange fees (MIFs) for its credit and debit cards. This judgment is the first final one on stand-alone damages actions in the UK. In addition, it is the first UK case substantively dealing with the pass-on defence.
Interchange fees are transaction fees charged by the bank from which consumers receive their MasterCard (the “issuing bank”) to the bank which permits the merchant to accept a card (the “acquiring bank”). When a customer of the issuing bank makes a purchase, the issuing bank forwards the full transaction amount minus an interchange fee to the acquiring bank, which in turn retains a charge for its services and forwards the resulting amount to the merchant. The issuing and acquiring bank may either agree on the respective amount of the fees, or they can make use of a certain value set by MasterCard under its UK MIF scheme.
In a lengthy opinion, the CAT ruled that the setting of the UK MIF between 2006 and 2015 amounted to a breach of competition law. It found that it amounted to an agreement or agreements between undertakings with the effect of restricting competition on the affected markets, namely the acquiring market, the issuing market, and the market between payment systems. The Court held that, absent MasterCard’s scheme, bilaterally negotiated fees would have resulted in lower costs for merchants. In its defence, MasterCard claimed that the UK MIF scheme could benefit from the exemption for pro-competitive agreements provided for by Article 101(3) TFEU. However, the CAT found that none of the four cumulative conditions for obtaining an exemption under Article 101(3) TFEU had been met.
Further, MasterCard submitted to the Court an illegality defence against Sainsbury’s. In the defendant’s contentions, Sainsbury’s claim ought to be barred by the fact that Sainsbury’s Bank, a company linked with Sainsbury’s, had taken part in the setting of the UK MIF. The argument was rejected by the CAT, which ruled that Sainsbury’s and Sainsbury’s Bank were not part of a single economic unit and that, in any event, no significant responsibility could be imputed to Sainsbury’s Bank in relation to MasterCard the infringement of competition law.
Lastly, defendant argued that Sainsbury’s was not entitled to recover the full value of the claim as it had passed the increased fees to its customers by increasing the prices of its products. The CAT dismissed this claim since no identifiable increase in retail price could be established, nor could MasterCard identify any class of claimant, downstream of Sainsbury’s, to whom the overcharge has been passed on.
This judgment will prove useful for other claimants bringing actions related to interchange fees and, more broadly, for those bringing stand-alone damages actions. It also provides a useful guideline on pass-on defence under English law.
By Gabriele Accardo
On 26 April and 24 May 2016, the Competition and Market Authority (CMA) has fined fridge suppliers Ultra Finishing Limited (Ultra) and Foster Refrigerator (Foster) a division of ITW Ltd (full non-confidential decision available here), in connection with the restrictions imposed on their dealers to offer online discounts, in breach of competition rules. The CMA issued separate statements of objections to Ultra, and ITW, early in 2016.
Each was alleged to have introduced a “minimum advertised price” (MAP) for internet sales, which effectively limited the ability of retailers of their products to make online sales below a specified price level. The CMA alleged that both cases were a form of resale price maintenance (RPM) and infringements of competition law.
In particular, both companies operated a MAP policy and threatened dealers with sanctions including threatening to charge them higher cost prices for their respective products or stopping supply if they advertised below that minimum price.
The CMA found that such MAP policies constituted RPM because, by restricting the price at which goods were advertised online, they prevented dealers from deciding the resale price for those goods.
The CMA found that there is a clear link between the advertised price and the resale price when goods are purchased online.
By Nikolaos Theodorakis
Google secured a legal victory on February 12, as a London court ruled that a clickable map display box on the company’s search page did not harm competition. In essence, the court rejected Streetmap’s allegations that the thumbnail display resulted in granting preferential treatment for Google Maps.
A London High Court handed down the judgment following a two-week preliminary trial in November. Streetmap, a UK provider, accused Google that it abused its power via bundling Google Search with Google Maps. In fact, Streetmap alleged that its traffic drastically dropped following Google’s action to automatically display a clickable thumbnail map once someone searches for a specific address or venue. This practice began in 2007, and Streetmap associated it with a huge loss of traffic and, consequently, profit. It claimed that its market share significantly shrunk, and is not on the verge of collapsing, as a result of Google’s policy.
Streetmap argued that, by using the thumbnail display, Google did not compete on the quality of its map service and that it should have displayed third-party maps in its search results. Google counter-argued that it bears no obligation to incorporate other maps in its results. It argued that in fact, thumbnail maps benefit consumers and form an integral part of its search service. Such conduct improves the quality of its service and makes Google more appealing to customers. It also argued that thumbnail maps do not amount to bundling or unjustified discrimination.
Mr. Justice Roth ruled that Google’s introduction of the new-style Maps OneBox in 2007 was “not reasonably likely appreciably to affect competition in the market for online maps” and that Google’s conduct was “objectively justified”. The judge found that, assuming that Google held a dominant position, it did not commit an abuse. His argument was that “…on consideration of all the evidence that the introduction of the new-style Maps OneBox in June 2007 did not in itself have an appreciable effect in taking customers away from Streetmap.” Further, “if contrary to my primary finding, it was likely to have such an effect, Google’s conduct in that regard was objectively justified.”
The judge also held that Streetmap did not appear to regard the thumbnail maps as a threat to its ability to compete for several years. Since the party most closely involved in the market, and hence most at risk, did not pursue a case earlier, they are unlikely to be actually affected by Google’s policy. In other words, if Streetmap was actively affected by the thumbnail map practice, it would have reacted sooner.
In reaction to the decision, Google said that the court recognized that the company is trying to improve the quality of its services and that the decision altogether promotes innovation. Streetmap, on the other hand, argued that the subject matter of the case belongs to a new field of competition law that merits further legal exploration. Streetmap further suggested that the judge did not apply the appropriate tests to determine whether there has been an effect in the relevant markets and if Google rightfully did so.
In terms of future steps, Streetmap plans to turn to the Court of Appeal since the High Court judge dismissed its entire claim and declined permission to appeal the judgment. The company asked for 35 days to bring the case before the Court of Appeal and further challenge the case.
In particular, Streetmap wishes to appeal the judgment on two grounds: first, Streetmap claims that the decision is unfavorable for small businesses since it raises the threshold of information required to prove causal effect. If the standard of proof rises from probability to appreciable effect, then a complainant needs to have information that will, under normal circumstances, only be known to the dominant company. In other words, raising the burden of proof will make it more difficult to establish a violation. Second, Streetmap suggests that Google is not compliant vis-à-vis its legal obligations since it did not conduct a UK test when introducing Google Maps to examine what would the effects be on the market. Instead, it relied on the effects its service had on the U.S. market, which does not necessarily reflect the UK market reality.
This case settles Google’s obligations in connection with its dominant position in the mapping context, at least for now. On a relevant note, Google is facing two ongoing antitrust investigations with the European Commission: one into allegations that the company gives preference to its own services in search results, and the other into alleged restrictions on its mobile-operating system, Android.
 Link to the case available here: http://www.bailii.org/ew/cases/EWHC/Ch/2016/253.html
National Competition Authorities take position on regulatory measures for online transport platforms
By Gabriele Accardo
In May 2015, the European Commission committed to assess the role of online transportation platforms, such as Uber, as it launched a public consultation to better understand the social and economic role of platforms, market trends, the dynamics of platform development and the various business models underpinning the platforms. According to the Commission, knowledge gained through this exercise will also contribute to various legislative initiatives—including online platforms regulation—which the Commission plans to launch to boost the Digital Single Market.
Currently there is a heated discussion as to whether online platforms should be subject to regulation at all.
While the European Commission may still take some time to elaborate on the contributions to the public consultation and eventually to state whether and to what extent some form of regulation may be warranted, recently, two national competition authorities, namely the UK Competition and Market Authority (CMA) and the Italian Competition Authority (ICA), made their view public.
The Position of the ICA
On September 29, 2015, the ICA issued an opinion on the legality of activities carried out by companies like Uber, which are carried out by either professional (e.g. Uber Black) or non-professional (e.g. Uber Pop) drivers through digital platforms accessible by tablets and smartphones.
The ICA first noted that it is not clear yet whether acting as an intermediary between the owner of a vehicle and a person who needs to make a trip by managing IT resources, is merely a transport service or, must be considered to be an electronic intermediary service or an information society service, as defined by Article 1(2) of Directive 98/34/EC.
The ICA noted that the Court of Justice of the European Union shall rule on this specific issue, and that until then it cannot be ruled out that the activity falls within the second category (i.e. an electronic intermediary service), which is not regulated, and therefore totally legitimate.
That said the ICA made the following findings, taking into account the characteristics of the activities carried out by Uber.
First, the ICA recognized that even traditional taxi services are more and more adopting technologies similar to those embraced by Uber. Yet, the ICA stressed that services such as Uber ensure a greater ease of use of the mobility service, a better response to a public need for which there is no current offering, and the ensuing reduction of the costs for users of such services. Last but not least, to the extent that it discourages the use of private means of transportation, Uber-like services also contribute to the decongestion of urban traffic.
Second, with regards to the activity of UberBlack or UberVan, i.e. transport services carried out by professional drivers, the ICA considers the current regulation (Italian Law No. 21 of 1992 concerning the non-linear public transport of people) as restrictive of competition insofar as its provisions restrict the geographic scope of the activity of vehicles to the municipality that has granted them a license, and further require that after each trip, each car must return to the base.
Third, with regards to the services such as those provided by UberPop, consisting of acting as an intermediary between the owner (non-professional driver) of a vehicle and a person who needs to make a journey within a city, the ICA observed that the Court of Milan ordered the blocking of UberPop throughout the national territory allegedly because this services would breach the rules regulating the taxi industry and may be characterized as an act of unfair competition. In that respect, the Court held that UberPop’s activity cannot be carried out to the detriment of people’s safety, in terms of cars used for the service, the suitability of drivers, as well as insurance coverage.
Yet, the ICA held that, even so, any form of regulation of such new services, if at all necessary, should be the least invasive as possible. In that respect, the ICA eventually singled out measures such as a registry for online platform providing such services and the provision of certain requirements for drivers.
The Position of the CMA
The position held by the UK Competition and Market Authority is even firmer than that of its Italian counterpart.
Preliminarily, while it recognized that “private hire vehicles” need the protection of appropriate regulation, the CMA considered that consumers also benefit from effective competition exerting downward pressure on prices and upward pressure on service quality and standards.
The CMA takes the view that innovative services (which include app-based booking systems) may drive efficiencies through which it is possible to offer benefits such as lower prices and greater responsiveness to demand. The introduction of new services also has an inherent benefit in the form of greater choice for consumers.
From a general stand point, the CMA thus considers that competition should only be compromised or restricted by regulatory rules to the extent that doing so is absolutely necessary for consumer protection. Above all, regulation should not favor certain groups or business models over others and any measures that restrict the choices available to consumers should be minimized.
The CMA focused on a number of regulatory proposals (made by the Authority Transport for London or “TfL”) that might have the greatest impact on competition.
5-minute wait requirement. TfL proposes that operators must provide booking confirmation details to the passenger at least 5 minutes prior to the journey commencing.
According to CMA, this proposal reduces the competitiveness of alternative services than black cabs by artificially hampering the level of service that new services can provide.
Approval for changes to operating models. TfL proposes that operators will be required to seek TfL approval before changing their operating model. The CMA considers that ex ante regulation of business models is liable to reduce incentives for innovation (a key competitive parameter) and by extension to restrict competition.
Mandatory pre-booking facilities. In the CMA’s view, mandating ancillary functions (such as a facility to pre-book up to seven days in advance) can place undue burdens on some providers, leading to increased costs for private hire vehicles and thus distorting competition, as those unable or unwilling to provide these functions will be excluded from the market. The CMA notes that in instances where consumers find ancillary facilities useful, they are likely to be provided by a competitive market where different offerings proliferate.
Fixed landline telephone requirement. Similarly, the CMA believes that TfL’s proposal whereby operators must have a fixed landline telephone number which must be available for passenger use at all times, could raise barriers to entry (entrants would have to provide both a number and staff to handle calls) as well as restricting innovation (including platform-based business models) and could therefore lead to reduced competition between private vehicle operators. Moreover, it is not clear that it is necessary to make this functionality mandatory, as consumers may not value having a landline number to contact to choose private hire vehicle operators that provide one.
Requirement to specify the fare in advance. Another proposal that the CMA rejects is mandating operators to specify the fare for each journey prior to the commencement of that journey. According to the CMA, the supply of a precise and fixed fare at the time of booking would effectively prohibit innovative pricing models that could be more efficient than pre-calculated fares (e.g. by varying according to supply and demand). This would remove another parameter of competition among private hire vehicle operators.
Drivers to only work for one operator at a time. TfL further proposed a requirement that licensed private hire vehicle drivers can only work for one operator at a time, claiming that this is necessary to reduce the risk of drivers working excessive hours for a number of different operators.
The CMA notes that this proposal may not be suitable or necessary to meet the stated objective. First, TfL’s proposal seems to address only excessive hours among drivers working for multiple operators, and not the risk of excessive hours among drivers working for a single operator, or the danger of black cab drivers working excessive hours.
More interestingly, the CMA believes that ‘multi-homing’ (i.e. the ability of drivers to work for multiple platforms) can allow drivers to switch their supply to where it is needed in the market. Mandatory single-homing can create a strong network effect, as it gives drivers the incentive to only work for the platform with the most customers. The consequence could be fewer private hire vehicle operator platforms, or even a single dominant platform, with the potential for all the consumer harm that platform dominance might bring.