Brussels Regulatory Brief: April 2023

ANTITRUST AND COMPETITION

The European Commission Releases the Article 102 TFEU Package to Ensure Greater Legal Certainty on Exclusionary Abuses of Dominance

Article 102 of the Treaty on the Functioning of the European Union (TFEU) prohibits abusive behaviour of dominant undertakings within the internal market in so far as it may affect trade between member states. The abuse of dominance can materialise in: (i) exclusionary abuses, where a dominant company prevents a competitor from entering or expanding into a given market (e.g., by exclusivity clauses, loyalty rebates or refusal to deal); and (ii) exploitative abuses, where a dominant company uses its market power to harm the consumers instead of the competitors (e.g., by imposing unfair trading conditions such as excessive prices). Exclusionary abuses represent by far the most common category of abuses of a dominant position that the European Commission (Commission) has pursued over the last fifteen years, as shown by the 27 decisions issued by the Commission on exclusionary conduct. 

On 27 March 2023, the Commission released the so-called Article 102 package (Package). The Package includes: (i) a public consultation with a view to adopting guidelines on exclusionary abuses of dominance (Public Consultation); (ii) a communication (Amending Communication) amending its 2008 guidance on enforcement priorities in applying Article 102 TFEU to abusive exclusionary conduct (2008 Guidance); and (iii) a policy brief (Policy Brief). The Package aims at increasing legal certainty to the benefit of consumers, companies, national competition authorities and courts. 

Already the 2008 Guidance had set out the enforcement priorities with regard to exclusionary abuses and moved the Commission’s framework of analysis away from a form-based per se approach to favour a more economic effect-based approach that requires the assessment of the potential anticompetitive effects of a conduct. The Commission has now decided to consolidate the case law via the adoption of new guidelines on exclusionary abuses (Guidelines). The Commission expects to publish a draft of the Guidelines by mid-2024 and to adopt the final guidelines in the fourth quarter 2025. Once adopted, the Commission will withdraw the 2008 Guidance as amended by the Amending Communication.

Pending the adoption of the new Guidelines, the Commission issued the Amending Communication and the Policy Brief, which further explains the background of the launch of the Guidelines initiative, as well as the changes to the 2008 Guidance. The key amendments to the 2008 Guidance are, among others: 

• Foreclosure: The Commission clarified that the concept of anticompetitive foreclosure also refers to a conduct that is capable of weakening the market structure and not only to a conduct that can lead to the full exclusion of competition. 
• As-efficient competitors (AEC): The Commission considers the so-called efficient competitor test as optional and not as necessary to prove abusive conduct. In its Policy Brief, the Commission states that the suitability of an AEC test in rebate cases should be assessed on the basis of the type of rebates at stake. 
• Constructive refusal to supply: The Commission may investigate cases where a dominant firm imposes unfair access conditions to a particular input (so-called “constructive refusal to supply”), even if there is no evidence that such input is indispensable.

The Package represents a key policy development in the area of abuse of a dominant position since the 2008 Guidance. The full ramifications of the changes introduced by the Amending Communication and the Policy Brief in the EU and national decisional practice remain to be seen.

DIGITAL AFFAIRS

IOSCO and FSB Publish Their Respective Work Programs for 2023-2024

IOSCO’s work program builds on the ongoing work of the organisation stemming from its prior 2021-2022 work program, as well as from new work streams emerging from the board prioritization discussions of October 2022, based on IOSCO’s 2023 Risk Outlook. 

IOSCO will focus on five priorities this year:

Strengthening Financial Resilience

IOSCO has identified private finance as a new priority for this year, based on the risks and vulnerabilities identified in the 2023 Risk Outlook, and due to the growth of private finance activities and its increasing role in funding the real economy. Moreover, IOSCO will focus on delivering on its commitments made under the FSB’s 2023 Non-Banking Financial Intermediation work plan, set out in FSB’s latest non-bank financial intermediation (NBFI) progress report (e.g., improving the resilience of money market funds and short-terms funding markets, addressing structural liquidity mismatch in open-ended funds, and promoting greater inclusion and use of liquidity management tools).

Supporting Market Effectiveness

IOSCO will work on publishing a consultation report on market outages, as well as a consultation report on post-trade risk services and on publishing the final report on the targeted implementation review of the principles for the regulation and supervision of commodity derivatives markets, amongst other activities.

Addressing New Risks in Sustainability and Fintech

IOSCO aims to support the development of sustainable and innovative capital markets, while enhancing investor protection, maintaining market integrity, and reducing systemic risk. In this context, amongst other activities, the IOSCO Board will conclude its analysis of the ISSB standards and will assess whether they are in line with the IOSCO criteria for endorsement by mid-2023. IOSCO will also issue a consultation report with recommendations for the regulation of crypto and digital assets by mid-2023 and a consultation report with recommendations for the regulation of DeFi in Q3 2023.

Protecting Investors

Amongst other projects, IOSCO will focus on the delivery of the final report on conduct related issues in Index Provision to the IOSCO Board in Q2 2023.

Promoting Regulatory Cooperation and Effectiveness

IOSCO aims for facilitating regulatory cooperation among securities regulators, and encouraging the adoption of best practices, as well as strengthening compliance with the enforcement of securities laws and regulations.

Concerning the FSB, the international standard-setter’s priority areas and new initiatives for 2023 include:

Supporting Global Cooperation on Financial Stability

The FSB will continue to integrate the monitoring of vulnerabilities associated with NBFI, technological innovation and climate change. Moreover, it will put forward and run a global bank stress test.

Enhancing the Resilience of NBFI

The FSB work includes: (i) assessing vulnerabilities associated with non-bank leverage, including completing a deep dive on forms of leverage that are harder for authorities to monitor; and (ii) conducting follow-up policy work on addressing liquidity mismatch in open-ended funds, including revisions to the FSB 2017 recommendations, amongst other activities.

Digital Innovation

The FSB aims to enhance digital innovation while still monitoring and controlling its risks. In this context, it will monitor and analyse the implications of crypto-assets for financial stability and the emerging themes or material incidents in the sector, as well as publishing its recommendations on global stablecoin arrangements and recommendations for crypto-asset activities and markets and follow-up on the implementation of the latter in FSB and non-FSB jurisdictions. 

Addressing Financial Risks From Climate Change

The FSB will report on progress in achieving consistent climate-related financial disclosures, in coordination with the ISSB, IOSCO and other standard-setters. 

Enhancing Cross-Border Payments

FSB will implement the prioritisation plan and engagement model for the next phase of work under the G20 roadmap for enhancing cross-border payments. 

ECONOMIC AND FINANCIAL AFFAIRS

EU Institutions Reached a Political Agreement on the Anti-Coercion Instrument

On 28 March 2023, the Council of the European Union (Council) and the European Parliament (Parliament) reached a provisional political agreement on the proposal for a regulation on the protection of the European Union and its member states from economic coercion by third countries (Anti-Coercion Instrument). This is a new tool aimed at deterring third countries from using economic coercion against EU countries, e.g., by restricting or threatening to restrict trade or investment.  

While the Anti-Coercion Instrument is designed to de-escalate and prompt discontinuation of specific coercive measures through dialogue as a first step, it also envisages potential EU countermeasures. Measures that could be applied to the third country as a response to economic coercion include, among others, the imposition of trade restrictions, such as increased customs duties, import or export licences, or restrictions in the field of services and public procurement.

The provisional political agreement notably covers key principles concerning the list of possible countermeasures, reparations for the injury caused by the economic coercion, timeframes for EU action and decision-making arrangements, and in particular the Council’s role in determining whether the European Union or its member states are a target of economic coercion. 

The principles outlined in the provisional political agreement need to be translated into the legislation at technical level for approval in a final political trilogue, which will take place at a later date. Once the Anti-Coercion Instrument is officially adopted by both institutions, it will enter into force 20 days after its publication in the Official Journal of the European Union.

ENERGY

European Green Deal: European Union Agrees Stronger Legislation to Accelerate the Rollout of Renewable Energy

On 30 March 2023, the Commission welcomed the provisional political agreement (Agreement) reached between the Parliament and the Council to strengthen the renewable energy directive (RED). The Agreement raises the EU's overall renewable energy consumption target for 2030 to a minimum of 42.5%, up from the current 32% target. Negotiators also agreed that the European Union would aim to reach 45% of renewables by 2030. 

The Agreement includes targets and measures to support the uptake of renewables across various sectors of the economy, with the focus on transport, industry, buildings, heating and cooling sector. The purpose of the specific sector sub-targets is to speed-up the integration of renewables in sectors where incorporation has been slower. 

The measures include i.a.:

• A binding target of 14.5% reduction of greenhouse gas intensity in transport by 2030 (or a binding share of at least 29% of renewables within the final consumption of energy in the transport sector by 2030);
• A binding combined sub-target of 5.5% for advanced biofuels (generally derived from non-food-based feedstock) and renewable fuels of non-biological origin (mostly renewable hydrogen and hydrogen-based synthetic fuels) in the share of renewable energies supplied to the transport sector;
• An indicative target (1.6% of annual increase in renewable energy use) and a binding target to reach 42% of renewable hydrogen in total hydrogen consumption in industry by 2030;
• An indicative target of at least a 49% renewable energy share in buildings in 2030;
• A gradual increase in renewable targets for heating and cooling, with a binding increase of 0.8% per year at national level until 2026 and 1.1% from 2026 to 2030; and
• Provisions to support energy system integration via electrification and waste heat uptake, as well as an enhanced system of guarantees of origin to improve consumers' information.

The Agreement also aims for easier and faster permitting procedures for renewable energy projects and promotes cross-border cooperation on renewables with the aim to make the European Union independent from fossil fuels. Renewable energy deployment will also be presumed to be of ‘overriding public interest’, which will limit the grounds of legal objections to new installations.

In terms of next steps, the Agreement will need to be formally adopted by the Parliament and the Council. Once this process is completed, the new directive will enter into force. EU member states shall then transpose the directive by 31 December 2024 at the latest.

ENVIRONMENTAL AFFAIRS

Commission Proposes Minimum Standards for Substantiating and Communicating Green Claims 

On 22 March 2023, the Commission published a proposal for a directive on green claims (Proposal). Under the Proposal, companies would in the future need to comply with minimum norms on substantiating and communicating claims about environmental sustainability.

First, businesses will need to have claims regarding their own or their products' sustainability independently verified and substantiated with scientific evidence. 

Second, businesses will need to communicate their claims clearly. To this end, the Commission wants to prohibit claims or labels that use aggregate scoring of the product's overall environmental impact, unless this is specifically permitted by EU law, and will require claims comparing products or organisations to be based on equivalent information and data. The Proposal will also ban new public labelling schemes at national level and only allow new private labelling schemes which have undergone prior approval confirming that they are more environmentally ambitious than existing schemes. In addition, all environmental labels must comply with detailed rules on reliability and transparency, as well as undergo independent verification and regular review.

The Proposal covers all voluntary environmental claims about the impact, aspects, or performance of a product, service, or the trader itself. It targets explicit claims such as "T-shirt made of recycled plastic bottles", "CO2 compensated delivery”, or “packaging made of 30% recycled plastic”. Claims covered by existing EU legislation, such as the EU ecolabel or the organic food logo would continue to be governed by the respective specific legislation and are exempt from the scope of the Proposal.

The European Parliament and the Council of the European Union will now scrutinise the Proposal. Interested businesses can provide feedback on the Proposal via the Commission’s website until 27 June 2023. The Commission will summarise and share the feedback with the Parliament and the Council with the aim of feeding into the legislative debate.

State Aid: Commission Updates Guidance Templates to Support Green Initiatives

On 4 April 2023, the Commission published updated State aid guidance templates in several areas to assist EU member states. Several templates were adjusted to the new 2022 Guidelines on State aid for Climate, Environmental protection and Energy, the revised State aid Framework for Research, Development and Innovation, the new Temporary Crisis and Transition Framework, and the endorsed amendment to the General Block Exemption Regulation. The amended templates involve the following:

• Energy and hydrogen infrastructure;
• Energy from renewable sources, including renewably sourced hydrogen production, as well as investment/operating aid for the reduction and removal of greenhouse gas emissions including through support for renewable energy and energy efficiency;
• District heating and/or cooling, generation and distribution infrastructure;
• Energy efficiency in buildings;
• Electric recharging stations and hydrogen stations for road vehicles;
• Acquisition of zero and low-emission road vehicles;
• Other low emission transport modes;
• Innovative processors and semiconductor technologies; and
• Cloud capabilities.

The updated State aid guidance templates will assist member states in creating measures to be included in their national Recovery and Resilience Plans (RRPs) under the Recovery and Resilience Facility (RRF). The RRF redistributes up to €723.8 billion in loans and grants to fund reform and investment packages outlined in member states’ RRPs. 

The RRF was designed to provide financial aid to member states by supporting coordinated planning and financing of cross-border and national infrastructure, as well as energy projects and reforms, in response to the economic and social effects of the COVID-19 pandemic, with an aim to make the European economy more resistant to future events. In February 2023, the RRF Regulation was amended to incorporate REPowerEU chapters in national RRPs. The Commission has asked member states to submit their modified RRPs by 30 April 2023.

Commission Opens Consultation on the Four Remaining Environmental Objectives of the EU Taxonomy 

The Commission opened a four-week-public consultation on its newly published draft of the Environmental Delegated Act regarding the four remaining environmental criteria under the EU taxonomy, i.e.: (i) sustainable use and protection of water and marine resources; (ii) transition to a circular economy; (iii) pollution prevention and control; and (iv) protection and restoration of biodiversity and ecosystems. 

The Commission is concretely proposing: (i) six new activities for the water and marine resources objective; (ii) twenty-one new activities for the circular economy objective; (iii) six new activities for the pollution objective; and (iv) two new activities for the biodiversity objective.

Moreover, the Commission also took the opportunity to present specific amendments to the Taxonomy Climate Delegated Act, and more specifically, amendments related to the environmental objectives of climate change mitigation and adaptation as well as targeted amendments to the Taxonomy Disclosures Delegated Act.

In this context, the Commission is proposing: (i) eighteen amended and seven new activities for the climate change mitigation objective; (ii) fifteen amended and six new activities for the climate change adaptation objective; and (iii) amendments to the pollution "do no significant harm" criteria.

Stakeholders could provide feedback until 3 May 2023. The Commission is set to publish the adopted Delegated Act on 30 June 2023.

The Commission also pointed out that stakeholder’s suggestions on which new activities could be included in the EU taxonomy or on other potential amendments to the technical screening criteria of existing activities do not fall under the scope of this public consultation, thus, such suggestions will have to be communicated through a Stakeholder Request Mechanism, soon to be established.