CROATIAN COMPETITION AGENCY

Transcription

1 CROATIAN COMPETITION AGENCY Case No.: UP /I / /023 Case: CCA vs. Europlakat d.o.o. 1 Type of case: Competition abuse of dominant position Type of decision: Competition commitments decision 1. SUMMARY The Croatian Competition Agency (hereinafter: CCA), at 116 th session, held on 6 September 2012, accepted commitments proposed by undertaking Europlakat d.o.o., Croatia by means of application of new Price list with its buyers as of 1 January 2013 which comprises of price list for the lease of billboard and city light advertising surfaces, rules and procedures regarding the order of posters, price list of printing as other service of non-binding character, technical standards and general terms and conditions of above mentioned undertaking and which, compared to the price list of 2010 Europlakat determined in a way by: - introducing separate price lists for advertising according to type of advertising surface (billboard, city light), where the price of advertising remained the same in relation to the Price list of 2010, - introducing category of handling costs which includes costs of overall logistics of distribution throughout the Republic of Croatia until the preparation of posters for wet adhesion in the same amount for all buyers, irrespective whether the buyer is simultaneously using the service of printing via Europlakat, - introducing category of additional costs which are calculated to the buyer when buyer delivers posters on its own, exclusively in relation to quality check and technical compatibility of posters in line with industrial standards of Europlakat, - determining deadlines and rebates for delivery of materials for printing, i.e. already printed posters for all buyers, - determining the price level of printing in relation to the quantity of ordered posters, - reducing the price for poster printing for billboard advertising surface from 20 to 100 units compared to the Price list of 2010, - reducing the price for poster printing for city light advertising surface to 50 units compared to the Price list of Furthermore, the CCA ordered Europlakat to publish new Price list on its websites and to inform the CCA about any change in Price list until 31 December The CCA takes the view that the commitments in their final form are sufficient to eliminate the negative effects and are adequate for a restatement of effective competition. 2. LEGAL AND FACTUAL FRAMEWORK On 8 July 2010 the CCA received anonymous initiative where it was essentially stated that Europlakat, as the most important undertaking of outdoor advertising in the Republic of Croatia is abusing its dominant position by bringing a new price list of advertising, general terms and 1 d.o.o. = limited liability company

2 conditions and by concluding the contract for print of posters with two certain undertakings, has put other undertakings engaged in poster printing in competitive disadvantage since they must pay unrealistically high costs of distribution and processing of posters. After the preliminary assessment, the CCA started formal proceedings ex officio by adopting Decision on initiation of proceedings of 27 February 2012 in order to determine whether undertaking Europlakat distorted competition by abusing its dominant position in the relevant market of outdoor advertising in the Republic of Croatia, due to the existence of sufficient circumstantial that this undertaking is applying unequal, discriminatory and non-transparent conditions related to the costs of processing and distribution of posters contained in the new price list of that undertaking in force as of 1 January THE PARTY Europlakat, with its seat in Zagreb, Zagorska 2 is an undertaking which performs activity of outdoor advertising in the Republic of Croatia. Europlakat is the owner of 100 per cent of share capital of undertaking Metropolis Media d.o.o., with its seat in Zagreb, Zagorska 2, the undertaking which also performs the activity of outdoor advertising in the Republic of Croatia. Europlakat is the member of regionally present Europlakat group, whose owners are French JCDecaux (world s second largest and the biggest European system for outdoor advertising), APG (the biggest Swiss company for outdoor advertising), and Ankünder from Graz (one of the biggest Austrian companies for outdoor advertising). 4. LEGAL PROVISIONS The CCA applied provisions of the Competition Act (OG 122/03, hereinafter: Competition Act 2003), the Competition Act (OG 79/09, hereinafter: Competition Act 2009, Competition Act), Regulation on the definition of relevant market (OG 9/11) as well as the provisions of General administrative procedures Act (OG 47/09) in the part not regulated within the Competition Act. Acting on the basis of the initiative, the CCA conducted preliminary assessment in the relevant market by applying at that moment valid Competition Act In the course of assessment in the relevant market in this case, the new Competition Act came into force as of 1 October In line with article 75 of Competition Act 2009, requirements for the opening of proceedings where CCA is in charge and which were received by 30 September 2010, as well as proceedings which were initiated until 30 September 2010, will be brought to an end by provisions of previously valid Competition Act However, because at the present case the preliminary assessment in the relevant market was made ex officio, i.e. there is no request from party pursuant to provisions of Competition Act 2003, and due to the fact that the proceedings were not initiated by the decision pursuant to provisions of Competition Act 2003, the present case was initiated ex officio by the decision by applying valid Competition Act and therefore the present decision was brought by applying valid Competition Act. 2

3 The CCA applied following criteria from the Community acquis: - Communication from the Commission Guidance on the Commission s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings (OJ C 045, of 24 February 2009) - Commission notice - Guidelines on Vertical Restraints (OJ C 130/01, of 19 May 2010) - Commission notice on the definition of relevant market for the purposes of Community competition law (OJ C 372 of 9 December 1997). The CCA also examined examples from comparative practice, i.e. decisions of European commission (COMP/M RTL/Veronica/Endemol, 1995; COMP/M.1401 Recoletos/Unedisa, 1999; COMP/M.1574 Kirch/Mediaset, 1999; COMP/M.2529 JCD / RCS / PUBLICTRANSPORT/IGP; decision of 14 September 2001). The CCA examined two decisions brought by body for the protection of competition of the Republic of Slovenia from 2006 and 2011 relating to the market of outdoor advertising (examination of concentration of undertakings Europlakat d.o.o. and Metropolis Media d.o.o., number: / , decision of 4 October 2006 and determining the abuse of dominant position of undertaking Europlakat d.o.o., number: / , decision of 23 February 2011). Furthermore, the CCA examined research by the body for the protection of competition of United Kingdom and two decisions brought by it in 2010 and 2012 (OFT Market Study: Outdoor Advertising, February 2011; examination of concentration JCDecaux UK Ltd. / Concourse Initiatives Ltd. and Media Initiatives Ltd., ME/53503/11, decision of 19 March 2012, examination of concentration JCDecaux UK Ltd. / Titan Outdoor Advertising Ltd., ME/4470/10, decision of 5 May 2010). 5. DATA COLLECTION During the preliminary assessment in the relevant market pursuant to the provisions of Competition Act 2003 the CCA asked for statements, data and relevant documentation from Europlakat and other outdoor advertisers, market participants, from two printing offices mentioned in anonymous initiative and other printing offices, market participants, and also from ten most important buyers from Europlakat. On 15 November 2010 a notice was published on the Internet website of the CCA inviting all undertaking who are engaged in poster printing for the outdoor advertising on advertising surfaces of big formats in the Republic of Croatia inviting them to submit their observations in 30 days about problems they are facing in the relevant market, with which undertakings who are providing the services of outdoor advertising in the Republic of Croatia are they collaborating, do the undertakings who are engaged in outdoor advertising refuse to collaborate with them and for what reason and the description of experiences related to mentioned business collaboration. Within this deadline the CCA did not receive any observation. During the assessment in the relevant market Europlakat submitted its statements on several occasions stating that it is applying new price list for its services as of 1 January 2010 by which it introduced, along with already present service of outdoor advertising, the service of poster printing. 3

4 The CCA had examined mentioned price list and determined that Europlakat differentiates two types of services: 1. exclusively the service of advertisement, and 2. service of advertisement together with the service of poster printing. The price of service of advertisement is composed of: a) the price for lease of advertisement space b) the price of processing and distribution of posters The price of service of advertisement with the service of printing is composed of: a) the price of lease of advertisement space b) the price of poster printing Service of poster printing, pursuant to conditions from the price list, Europlakat is offering to its buyers as related service, i.e. as a package together with the lease of advertisement space. In that case, as it stems out from the Europlakat s price list, the buyers are paying the price for the lease of advertisement space and the price of poster printing. On the other hand, buyers can use the service of advertisement as a sole service, i.e. they can use the service of poster printing from other printing offices according to their choice, but in that case Europlakat charges, along with the price of lease of advertisement space, also the price of costs of processing and distribution of posters. It is evident from the price list that services can be used individually and collectively, which Europlakat s buyers have also confirmed. Therefore, it stems out that Europlakat does not condition taking lease of advertisement space by using the service of poster printing. However, it stems out from the price list that those buyers which take exclusively the advertisement space in the lease, pay also the costs of processing and distribution, while the buyers who are using the lease of advertisement space together with poster printing are not paying those costs. Conversely, Europlakat stated during these proceedings that buyers are paying the costs of processing and distribution also in the case when they use services of poster printing via Europlakat, but since it is within the business cooperation agreed that printing offices are also, along with the poster printing, bearing the costs of services of processing and distribution of posters, the price of those services is included in the price of poster printing. In its further statements, Europlakat quotes, in relation to business cooperation with four printing offices, that it is achieving contractual cooperation with only one of them, while it is indirectly cooperating with the other three. The CCA took insight in submitted Annex 1 of the contract concluded by Europlakat and printing office and it stems out that the printing office contractual partner of Europlakat, is a member of the consortium consisting of additional three printing offices. Printing offices in Annex 1 named as members of consortium stated that they are not part of consortium, nor they are contractors of contract of consortium. It stems out also from Annex 1 that the printing office contractual partner of Europlakat had committed to take activities regarding the preparation of posters, but not to provide other services of processing and distribution of posters for Europlakat. In relation to the distribution of posters Europlakat stated that this activity for it is performed by its contractual partners which are specialized for distribution. In favor for that it submitted concluded contracts for business cooperation. 4

5 With its subsequent statements Europlakat submitted Annex 2 and 3 to the basic contract which it concluded with the same printing office contractual partner. From submitted Annex 2 it stems out that the printing office contractual partner of Europlakat is committing to take the costs of processing, preparation and distribution of posters within the framework of business cooperation which is the basis of the contract while those services will still be provided by Europlakat. Besides that, Annex 2 regulated that Europlakat, due to difficulties in business conditions caused by economic crisis and recession on the global and national market, and with the aim to continue their business cooperation and to maintain liquidity of counterparty, in relation to the obligation to take costs of process, preparation and the distribution of posters, allows grace period until 31 December 2010 to the printing office, with the condition to record the value of service which will be paid until 31 December 2012 at latest, together with accrued interest for the billing period. Europlakat concluded Annex 3, along with the printing office which is already its contractual partner (with which it concluded basic contract and Annexes 1 and 2), also with the other printing office, and with Annex 3 it is determined that the Europlakat s claim towards the first printing office on the basis of processing, preparation and distribution of posters, and the claim of other printing office towards Europlakat on the basis of poster printing, will be mutually invoiced based on audit on 31 December 2011 together with accompanying statutory interests. Out of ten contacted buyers of Europlakat only one stated that the price list of Europlakat is unfavorable for the buyers given that with that price list an additional cost of distribution and processing of posters is introduced if the buyer does not want to simultaneously use the service of poster printing at the same undertaking. The CCA determined from received statements of other outdoor advertisers that the services of processing and distribution for outdoor advertisers are performed by printing offices, craftsmen or by themselves and that the costs of those services toward the undertakings which are performing it are borne by themselves. However, in the end the costs of those services are borne by final buyers, since outdoors advertisers calculate those costs in the price of the lease. Three printing offices stated that they consider that the effect of cooperation between Europlakat and certain printing offices on their business is manifested in the decrease of turnover and price, the growth of competition and the decrease in need for outdoor advertising on advertising surfaces of big formats, that it creates unfair competition and monopolistic position which is directly manifested in their financial results. After the start of formal proceedings, the CCA asked for additional data and statements from Europlakat and from sixteen undertakings, printing offices and outdoor advertisers. From received statements, data and documentation it stemmed out that Europlakat, from the beginning of application of price list, i.e. from 1 January 2010, through its cooperators was performing the services of preparing, processing and distribution also in the case when the buyer, along with lease of advertising space, was using the service of poster printing, despite that the performing of contractual service of preparing was the obligation of partner printing office, while for the bearing of costs for the services of preparation, processing and distribution Europlakat allowed grace period to its partner printing offices, although those costs were not paid. 5

6 Out of three printing offices which earlier stated about negative effect of collaboration between Europlakat and certain printing offices, two stated and clarified their earlier statements. One cited that it is directly collaborating with Europlakat regarding poster printing for a number of years, but that its turnover with Europlakat is significantly decreasing from 2009, and that it also lowered prices of its services as a consequence of reduced demand on the market and of adjustment to the price of the competition. The other printing office clarified that Europlakat put it in a worse position because of the fact that the buyers of services of Europlakat were forced to pay additional cost if they do not use the service of poster printing via Europlakat, but it had at the same time cited that the competition significantly improved from the second half of 2011 in the sense of increased level of competition. 6. RELEVANT MARKET The CCA, when carrying out the analysis and determination of the relevant market was using, along with submitted data from the participants on the market, also a practice from different countries, and it took insight in the decisions and researches of bodies for the protection of competition of Republic of Slovenia, United Kingdom and the European commission, especially in relation to the way of determining relevant market and in the findings related to advertising industry in general. The CCA identified the relevant market as a market for outdoor advertising (in the Roadside segment) which implies outdoor advertising on the roads, facades of buildings, scaffoldings and ad showcases on the stations of public transport in the whole territory of the Republic of Croatia. Conducted analysis showed that Europlakat is achieving a dominant position in the market of outdoor advertising in the Republic of Croatia given that it achieves the most important market share in the period from 2008 until 2010 (50 60 per cent in 2008 and per cent in 2009 and 2010), especially regarding capital connection with undertaking Metropolis Media d.o.o., and according to criteria of achieved revenues, the number of advertising formats and barriers to entry to the relevant market. In this case a related market is determined as a market for poster printing of big formats in the territory of the Republic of Croatia. It is determined with the analysis of data, which are related to a five-year period from 2006 until 2010, that the market in question is characterized by the trend of reorganization and consolidation, and as a turning period according to the market trends is the period from 2009 until Printing offices which are, either directly capitally or personally connected, either indirectly connected in terms of cooperation with Europlakat, are covering per cent of the relevant market in Equally, in the period until the end of 2010, printing offices which are directly cooperating with Europlakat are two out of three most important printing offices in the market, in terms of realized revenues of that activity. 7. ANALYSIS OF THE PROPORTIONALITY OF THE PROPOSED COMMITMENTS By letter of 31 May 2012 Europlakat informed the CCA that it has an intention to take over commitments pursuant to Article 49 of the Competition Act and it submitted concrete proposal of commitments on 20 July 2012 in a way that it submitted a proposal of new Price list, which would be composed of the price list for the lease of billboard and city light advertisement surfaces, rules and procedures regarding the order of posters, the price lists of printing offices 6

7 as an additional service of non-binding character and technical standards and general terms and conditions of the above mentioned undertaking. With such proposal, unlike the Price list of 2010, Europlakat would not charge additional costs to the buyers which are not using the services of poster printing in relation to the buyers who are, simultaneously with the service of advertisement, also using the service of poster printing. The costs of overall logistics of distribution throughout the Republic of Croatia until the preparation of posters for wet adhesion Europlakat suggested determining in the same amount for all buyers, while buyers who are not using the service of poster printing would pay additionally only the quality check and technical compatibility of posters. Furthermore, it suggested lowering the price for poster printing in the lower part of identified scale, i.e. from 20 to 100 pieces for billboard advertisement surfaces and up to 50 pieces for city light advertisement surfaces. The CCA evaluated proposed commitment from Europlakat to change its Price list of 2010 in a way to adjust it with the competition regulations as a proportionate with possible negative effects of application of stated Price list to the competition and it took into consideration that it is a voluntary measure. Besides that, Europlakat s proposal of commitments will lead to faster restatement of effective competition in the relevant market, without long-term proceedings. Also, Europlakat informed the CCA about its intent for the commitments before the delivery of Statement of objection, within 3 months from the day since the CCA brought the Decision on the initiation of proceedings. When analyzing the proportionality of Europlakat s commitments the CCA took into account that, as of 1 January 2010 when Europlakat started with application of Price list of 2010 the conditions in the relevant market has undoubtedly changed, the market is characterized by the decline in total value of the market from 2008 and by the decline in demand for services. Realized revenue of Europlakat has almost halved in absolute terms from 2008 until The market of poster printing of big formats since 2006 is characterized by dynamism in the sense of reorganization and consolidation of participants of that market, which is especially accentuated in turning period between 2009 and It is the dynamism of the market of poster printing and frequent changes which are characterizing it that comes in favor for expediency of the commitments proposed by Europlakat that will lead to faster restoration of effective competition in the market of printing of posters of big formats, without long-term proceedings. On 30 July 2012, a notice pursuant to Article 49 paragraph 5 of the Competition Act was published on the Internet website of the CCA summarizing the case and the commitments and inviting interested third parties to submit their observations on the commitments. Within given deadline, i.e. until 20 August 2012, the CCA did not receive any observation from interested third parties. 8. DECISION OF THE COMPETITION COUNCIL On the basis of submitted data and determined facts in this case, the Competition Council, at 116 th session, held on 6 September 2012 examined this case and decided to accept proposed commitments from Europlakat pursuant to Article 49 of the Competition Act as sufficient to eliminate negative effects and which will lead to restatement of competition. Proposed commitments became binding for Europlakat on the date of issue of the CCA Decision. 7

8 After the fulfillment of the order from the CCA s Decision, the Competition Council brought the decision that there are no more grounds for the conduct of proceedings. However, if pursuant to Article 49 paragraph 7 of the Competition Act in the supervision of commitments from Article 49 paragraph 1 of the Competition Act the CCA determines that the undertaking does not comply with determined commitments from Article 49 paragraph 3 of the Competition Act, such conduct will be considered as an infringement of the Competition Act and it will be determined within the separate Decision by which it will revert to prohibition and impose the fine for the infringement concerned in line with the provisions of the Competition Act. 9. APPEAL There is no possibility of an appeal against the CCA decision, however the party has the right to file administrative dispute before the competent Administrative Court against the decision of the CCA within 30 days from the date of decision delivery. 8