Competition law it the time of COVID-19: the Luxembourg Competition Authority rejects an application for interim relief against a testing center
The first post of 2021 is about the decision handed down by the Luxembourg Competition Authority (LCA) in the LNS case (no. 2020-NC-06, LaboratoireNational de Santé). In this case the LCA examined and rejected an application for interim relief against allegedly anticompetitive practices concerning Covid-19 testing in the middle of the pandemics.
The proceedings commenced on 14 September 2020 when Bionext,
a privately-held medical laboratory, filed a complaint with the LCA. By the complaint
Bionext reported a number of practices put in place by a competing public
undertaking, Laboratoire National de Santé (LNS), which appeared to breach
Article 102 TFEU and the corresponding national competition rules. More specifically,
Bionext pointed to the decision of the Luxembourg authorities to confer on LNS a
legal monopoly on some Covid-19 testing methods: the PCR tests for hospitals
and serological tests to be executed in the context of the government-backed massive
screening campaign. Following the granting of that legal monopoly, LNS would
have gained a strategic position in the market for the provision of biologic
and medical analysis. It was feared that the creation of the legal monopoly in
question would breach Article 102 TFEU and Articles 106 TFEU. Then, LNS would have
abused its power in this relevant market by engaging in cross-subdisation practices
and hoarding staff from other laboratories.
In addition to that, Bionext argued that LNS would have
infringed competition in the market for the provision of machines, reagents and
markers (inputs) for the performance execution of in-vitro diagnostics exams. Also
this market was dominated by LNS that would have abused such a dominant position
with pricing policies (excessive prices and margin squeeze) and non-pricing
policies (refusal to supply, abuse of confidential data).
In addition to reporting alleged anti-competitive
practices, Bionext asked the LCA to take interim orders against LNS. This application
was, however, dismissed on account that Bionext did not meet one of the
statutory requirements for the granting of interim relief, not showing a prima
facie competition infringement. Indeed, the applicant failed to prove that LNS
had a dominant position (in the market for biological and medical analysis) and
had abused it (in the market for the supply of inputs for diagnostics analysis).
The take-away lessons from the rejection decision of
the LCA can be summarised as follows:
First, only the anticompetitive conducts of
undertakings fall within the sphere of application of the competition rules and
within the regulatory jurisdiction of the LCA. Article 106 TFEU, instead, addresses
to Member States and bans them from enacting or maintaining measures contrary
to competition rules. This provision only applies to competition breaches that
are imputable to a measure adopted by a public authority acting as such rather
than as an undertaking. Therefore, the LCA has no power to enforce a violation
of Article 106 TFEU even if perpetrated in conjunction with a violation of
Article 102 TFEU.
Second, according to the principle of proportionality,
an interim order can be adopted when there is a matter of urgency. This requirement,
however, was unmet in LNS given that at the point in time in which
Bionext filed its complaint, the legal monopoly of the respondent was no longer
in place.
Third, LNS reminds that for interim relief to
be granted, a prima facie finding of a competition infringement is necessary. The
party that applies for it should submit sufficiently convincing facts and
circumstances supporting that finding. Bionext did not comply with this evidentiary
rule, having produced weak evidentiary pieces that some aspects were
contradicted by the facts submitted by LNS.
Fourth, consistently with the EU case law, the LCA
ruled out an anti-competitive excessive pricing practice where a dominant
undertaking charges higher prices as a reaction to higher costs. From the facts
of the case it appears that the LNS increased in the prices for reagents charged
on Bionext corresponded to the higher prices the dominant undertaking had to
pay to its suppliers.
Fifth, the refusal of LNS to deal with Bionext did not
amount to anti-competitive conduct as it was based on a legitimate justification.
As is known, a dominant undertaking may legitimately refuse to supply an
insolvent customer. In this case LNS ceased to deal with Bionext since August
2020 after the latter was in arrear with payments of previous supplies.
Sixth, the LCA considered whether the availability of confidential
data of its competitors to which LNS had access as public undertaking
constituted a competition infringement. The LCA considered that LNS is entrusted
with the nationwide management of inputs for the performance of diagnostics
exams and supplying of these items to the medical laboratories that are in need.
In that regard, the LCA likened LNS to a vertically-integrated organization that
is tasked with managing a network and uses such network to carry out its
economic activities. Relying on the decisional practice of the French competition
authority, the LCA held that for an abusive conduct to arise in this scenario,
it is necessary that the manager of the network effectively makes a commercial and
strategic use of confidential data it possesses because of its position. Having
access to such data is not sufficient to establish a competition breach. That said,
the LCA took the view that LNS used the confidential data about how many weakly
tests Bionext performed only to fulfil its task of national manager. In other
words, LNS employed the data only to determine the quantities of reagents and other
inputs to allocate to each medical laboratory. Hence, LNS did not use the confidential
data in an anti-competitive manner.
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