Advocacy is one of the key missions of competition authorities. The benefits of competition are not always well understood, or are not necessarily given the same prominence as other interests in policy debates. What is not emphasised enough is that these same authorities have an equally important role to play when it comes to dismissing unsubstantiated concerns. There are some issues that – sometimes due to effective lobbying – give rise to a great deal of controversy but that turn out to be wholly unproblematic upon closer scrutiny. It would be desirable if, when dealing with these concerns, authorities were explicit about the reasons why they conclude that action is unwarranted and contributed to public discussions by explaining why what looks like a blatantly anticompetitive strategy is sometimes a subtler manifestation of competition on the merits. This is what I call negative competition advocacy.
Recent developments provide a couple of emblematic examples of the areas where negative advocacy is most needed. One is about net neutrality, arguably the catchiest slogan of the decade (which, moreover, was coined and popularised by a most charismatic academic). I have not yet come across a theory that provides a convincing case for net neutrality (which, in essence, means that all Internet services should be treated equally). Unfortunately, sector-specific regulation is not always adopted for the right reasons. What seems clear, on the other hand, is that the concerns underlying net neutrality (in particular, that telecommunications operators block or discriminate against competing services) are, by and large, a non-issue from a competition law perspective. Therefore, I am not surprised that the Commission closed, earlier this month, an investigation into ‘Internet connectivity services’ (which Commissioner Almunia linked to the net neutrality debate in his speeches). After the unannounced inspections carried out in July 2013, the authority has come to the conclusion that ‘the observed practices do not appear to breach EU antitrust law’. I only regret that the press release does not explain more about the reasons behind the decision.
Another issue that makes the headlines every now and then is the use of private labels by supermarket chains (as net neutrality, it is a discrimination-related concern). For some reason, the idea that grocery stores sell products under their own brand and give these brands more favourable treatment is perceived to be deeply problematic (this is at least the impression one gets when reading newspapers). Authorities should explain clearly that there is nothing wrong, per se, in such practices. The speech delivered by the Director General for Competition on 2 October is a very good example of the way forward. Alexander Italianer presented the findings of a year-long study on retail competition in the grocery sector. The study came with good news. Contrary to the widespread view, it would seem that competition is working fine on the whole in these markets. The Director General unambiguously stated that private labels ‘do not appear to hamper choice and innovation’, at least so in ‘moderately concentrated retail markets’. I hope these words (and, more importantly, the hard evidence backing them) will be taken into consideration at the national level, where regulatory instincts (and the lobbying that comes with them) are sometimes very strong.
More examples where negative advocacy could be useful? Think of Apple’s recent decision to stop selling Bose products from its stores. It looks like a refusal to deal. Even worse, it is a disruption that follows Apple’s acquisition of Beats, one of Bose’s competitors. Is this problematic from a competition law standpoint? Not really. I quote Alexander Italianer: ‘practices such as these are only a matter of competition law, if they have an impact on the overall functioning of the market. For instance, if a retailer twists the arm of a supplier in individual bilateral negotiations, then he may well be in the wrong, but it falls beyond the scope of competition enforcement’.
Congratulations to Jean Tirole on the Nobel Prize! I cannot imagine anybody being unhappy or disappointed about this year’s pick. Even though he is just 61, I am ready to say the prize comes a little late. I confess I have been waiting for this moment since at least 2009, when it went to Elinor Ostrom and Oliver Williamson. The upside of waiting a few more years is that the award comes solo this time, comme il le fallait.
He is one of these economists who does not need an introduction. He is the author of The Book on Industrial Organisation (le Tirole) and has made fundamental contributions in the field. For instance, his 2003 landmark paper (with Jean-Charles Rochet) on two-sided markets has proved to be enormously influential, as Groupement des Cartes Bancaires and MasterCard show. Competition in Telecommunications, written jointly with the late Jean-Jacques Laffont, is one of my favourite books, and is a good introduction to his work on regulation. I guess I could keep going for a while (for instance, I remember discussing his work on open source software with a colleague the other day).
The best way to start the first post I write after my ‘formal’ induction into the blog is, I tell myself, by referring to one I wrote back in July, and which concerned the preliminary references in Eventech and Kunsten Informatie and Media. The two AG opinions came out during the Court’s hyperproductive month of September. While I still think the two cases are relatively straightforward in terms of substance, it makes sense to write a couple of notes on Eventech (in the form of two separate posts).
You may remember that the key question in that case was whether regulation allowing black cabs (the iconic London taxis) to use bus lanes and excluding the so-called minicabs (private hire vehicles) entails the use of State resources. The answer, in my view, is an obvious no. It is in fact a good textbook example showing that advantages within the meaning of Article 107(1) TFEU are not always granted through the use of State resources. The position taken by AG Wahl therefore comes as no surprise to me. It is rather the orderly analysis of the question that inspired me to write this post.
When going through it, I thought, first, of AG Jacobs’ classic opinion in PreussenElektra. It seems difficult to believe, but many of the issues that now seem straightforward were far from established when that opinion was written back in year 2000 (which, or so I like to think, is not such a long time ago). If a masterful analysis was necessary to put some order into a set of scattered and seemingly contradictory precedents, this must mean that State aid has come of age only relatively recently.
Second, I thought that I had never seen such a careful dissection of the different ways in which State resources may be involved in a case. Eventech had raised several arguments trying to link the regulatory advantage to the use of resources by the State. For instance, the firm argued that black cabs can be said to be exempted from fines for using the bus lanes, which, in turn, leads to a loss of revenue for the State. The opinion is valuable not because this argument, or similar ones, were particularly powerful or persuasive, but due to the way in which they are examined by AG Wahl. To this day, I still have misgivings about the treatment of some issues in landmark cases like Sloman Neptun. From this perspective, the opinion sets a model for the future, in particular to the extent that the Court had seemingly never been confronted with some factual scenarios that were relevant in this case.
I will write something in the coming days about the advantage aspect of Eventech. Before that, I will end on a personal note. I took an Uber cab this summer for a fairly long ride and one of the many questions with which I pestered the driver had to do with this case. Interestingly, he was of the opinion that the regulatory regime in place makes sense. He said that traffic would be unmanageable in London if minicabs were allowed to use bus lanes. And he thought he would rather be subject to lighter regulatory obligations, even if it means giving up some privileges. Thoughtful and sensible, I would say.
As I said in my farewell post to Nicolas, I don’t think it’s good for this blog to be run only by a practitioner like myself, so we have a “new” luxury addition to the team.
As of today, Pablo Ibáñez Colomo, who’s already been writing here for the past few months, has finally cracked and will join Chillin’Competition as editor. Most readers of this blog already know Pablo. He’s an Associate Professor of Law at the London School of Economics; prior to that was a teaching assistant at the College of Europe for three years (I was actually his student there), completed his PhD at the European University Institute in Florence (he was also Visiting Researcher at Stanford during his research period) and, among other things, is also one of the authors of the best competition law textbook ever written (in Spanish).
More importantly, like Nicolas, Pablo is also a reputed young and independent academic, a brilliant guy, a very good friend, a person whose ideas often differ from mine. On top of that, and in case you haven’t realized yet, he’s probably even geekier than Nicolas and myself :)
P.S. We will also be accepting more “guests posts”, so feel free to contact us (firstname.lastname@example.org and P.Ibanez-Colomo@lse.ac.uk) in case you have an urge to get anything off your chest.
- I watched life –rather heard while working- the European Parliament hearings on the new Commissioner for Competition, Margrethe Vestager. She did so well that I couldn’t help thinking that perhaps she should have been given a more politically decisive portfolio (it also made me compare her with many politicians in my home country, but that’s another story).
- It’s been a while since our last quiz. I offer to pay lunch to whoever is able to tell us what was the new and special method for calculating fines that the General Court says to have used in this case (see in para. 5 the mysterious reference to “the Court’s choice of a methodology that diverges on purpose from the methodology laid down in the 2006 Guidelines”).
- Last Friday the Commission approved the acquisition of Whatsapp by Facebook (on which we had commented here). I’m looking forward to reading the decision, but from the press release I gather that the Commission has significantly refined the approach taken in Microsoft/Skype (e.g. no trace of the “inner circle” argument). Don’t know why that would have been necessary considering that, according to the General Court’s Judgment, that decision was irreproachable…
- Remember our discussion on the Groupe Gascogne Judgments (see here and here)? It has now been published on the Official Journal that Gascogne has introduced a damages action before the General Court…against the General Court: see here.
- If you have a minute (which I guess you do if you are reading this) read Kevin Coates’ new post: Gilding Refined Gold and Painting the Lily
- It is still possible to register to the Competition Day conference within the Brussels Technology Days series of events. I’ll be speaking on a panel discussing the Android proto-case together with Trevor Soames, Thomas Vinje and Neil Dryden. For more info, click here.