A publication, an information and an explanation
My paper on competition authorities’ enforcement discretion has just been published in Concurrences. Amongst the various papers I published to date, I am really proud of this one. The reason? It embodies all the things which make research, and academic life, a thrilling job:
- It forced me to conduct research on a largely unchartered topic, and to propose an original – at least I believe – conceptual framework;
- I benefited from strong empirical input received from more than a dozen national reporters;
- The LIDC annual congress – for which I prepared the paper – was a great moment in a wonderful town. I met loads of fascinating people during the congress;
- We eventually managed, on the basis of this paper, to draft public policy proposals, which were eventually sent to competition authorities.
As to the information: the next LIDC congress will take place in Bordeaux (France), from 30 September to 3 October. To all those interested in learning how competition law and a Lafite Rotschild combine, I recommend the conference. A specific website has been created to advertise the conference.
Finally as the explanation: the past days have been increasingly busy. This explains the belated posting activity on the blog.
Conference – Google Book Settlement – 12 February 2010
We still have several seats for the conference on the Google Book Settlement next week! A new version of the programme is attached below.
IEJE-St Louis – Conference – Google Book Settlement – 12 February 2010
P. Pescatore
With great sadness, we learned yesterday that Pierre Pescatore passed away. P. Pescatore was a former Judge at the European Court of Justice, Professor at the University of Liege (ULg) and co-founder of the Institute for European Legal Studies (IEJE). With his death, the legal community loses one of the building blocks ofEuropean law. P. Pescatore, who helped drafting the 1957 EC Treaty personified what we generally label the “founding fathers“. Our thoughts and condolences go to Prof. Pescatore’s family.
Competition Law and Sport (I) – American Needle v. NFL
A few days ago, shortly before its infamous and dangerous ruling in Citizens United, the US Supreme Court heard the oral arguments in American Needle v. NFL. American Needle is the latest antitrust case to have made it to the Court’s docket, and it has the potential to be the single most important decision in the history of sports law in the US.
The application of competition law to the sports sector is a fascinating theme yet to be fully explored in Europe and which, moreover, has been haunting me for a while now. I will therefore develop some reflections on this topic in soon to come posts, but for the time being American Needle seems a very good starting point.
The facts in a nutshell: American Needle, a manufacturer of sportswear had traditionally enjoyed a non-exclusive license to manufacture and distribute products including NFL’s teams names and logos. In 2000 the NFL changed its policy and decided to grant a exclusive license to Reebok. American Needle responded by challenging the agreement between the NFL and Reebok on the grounds that it violated Section 1 of the Sherman Act.
The applicability of antitrust law to exclusivity arrangements in the sports sector is not a novel issue, and similar claims have arisen regarding sports equipment standards. However, the debate at stake in American Needle goes well beyond a mere contractual dispute and has more profound implications.
Part of NFL’s defense consists in arguing that sport leagues constitute single entities, which pursuant to the Copperweld doctrine, would imply that no agreement (“contract, combination or conspiracy’ in the sense of the Sherman Act) can be found within the said leagues. The NFL’s argument brings to the fore an interesting debate: given that Copperweld’s single entity doctrine relates to the relationship between a parent company and a wholly owned subsidiary, could such doctrine be applied to sports leagues? How divergent are the interests of the members of such peculiar organizations? Can a league be deemed to be a single entity only with respect to certain aspects of its functioning?
In the past, the applicability of the single entity argument with regards to sporting leagues had been rejected practically every time it was brought up before a Court. However, in American Needle the 7th Circuit adopted a new stance by accepting the NFL’s arguments and declaring that this is a matter that “should be addressed not only one league at a time, but also one facet of a league at a time”. This statement was used for the purpose of affirming the District Court’s decision, which had held that the fact that teams had traditionally licensed their trademarks jointly through a company called NFL Properties meant that on this particular aspect they acted as a single entity. Such reasoning raises an interesting question: is a traditional business practice enough to determine that franchises within a league do form a permanent single-entity? How integrated must the conduct of the members of a joint venture be in order to exempt them from potential antitrust liability by virtue of the single entity doctrine?
Moreover, as a way to support the proposition that the NFL acts as a single entity regarding licensing of trademarks, both the District Judge and the 7th Circuit emphasized the efficiencies arising from joint licensing. Once again, this argument seems flawed: there are other markets where joint licensing/selling is common and generates efficiencies, but it doesn’t follow that those efficiencies justify granting single-entity status to the ‘intermediary’. On the contrary, the fact that efficiencies may arise is precisely what determines that such practices are to be subject to a rule of reason analysis instead of to a per se rule, and is a key factor to be considered when engaging in that analysis (see BMI v. CBS).
The approach of focusing closely on the competitive impact on the restraint rather than on the single-entity issue seems more appealing to me. Such approach was used by the 1st Circuit in Fraser v. Major League Soccer, an opinion written by Judge Boudin (which, by the way, served as inspiration for his exam at Harvard last semester). An opinion authored by Justice Sotomayor before being appointed Supreme Court Justice (Major League Baseball Properties v. Salvino) also implicitly undertook a similar approach.
A reading of the transcripts of the recent hearing suggests that the Court may be inclined to accept the Solicitor General’s view, grounded on the precedent in NCAA v. Board of Regents, that leagues may be entitled to single-entity treatment with respect to the issues where cooperation is required to organize the essential aspects of the league’s operations, but not in relation to additional business activities such as licensing of trademarks.
As illustrated by the number of amicus curiae briefs submitted to the Supreme Court, the stakes are very high. If the NFL’s argument were upheld, that would bring about radical changes in the way professional sport in the US now operates (for instance, collective bargaining agreements to deal with issues such as salary caps for players wouldn’t be needed in order to immunize the agreement from antitrust scrutiny), and even possibly in the manner in which the Sherman Act is applied to certain joint ventures.
The Court’s ruling is expected by late June. In the meanwhile, for a couple of very good articles analyzing the case and its possible implications, see here and here
(Image possibly subject to copyrights: source here)
First Issue of the ECN Brief
This brief brings an appropriate response to some of the flaws which were identified during the review of Regulation 1/2003. At first glance, the first brief contains plenty of useful information on the activities of National Competition Authorities. It will be published five times a year. A subscription service is available here.
Thanks to Sonia Jozwiak for the pointer (and congrats to her as well as her colleagues who have brought this useful project to life).
BEREC
A new creature is born : since 28 January 2010, the Body of European Regulators for Electronic Communications (“BEREC”) is formally and operationally part of the EU institutions’ food chain.
See here for the Press Release and here for more information.
Thanks to E. Provost for the pointer.
(Image possibly subject to copyrights: source here)
Revelation
The brilliant, prolific, US judge and scholar Richard Posner recently had a revelation. See here. Not a philosophical U-turn, but close.
Found on D. Gutierez’s blog.
(Image possibly subject to copyrights: source here)
For real?
Just found now, whilst doing research on energy markets:
“The European Court has stated that dominance can be presumed, in the absence of evidence to the contrary, where a company has a market share persistently over 50%. EU competition law takes a 25% share of the market as evidence of Significant Market Power“.
Not seen it? Read again (this time in bold):
“The European Court has stated that dominance can be presumed, in the absence of evidence to the contrary, where a company has a market share persistently over 50%. EU competition law takes a 25% share of the market as evidence of Significant Market Power“.
Shocking misreading of the EU case-law and almost certainly a crap erroneous statement from an economic standpoint.
Now, let’s just put theory into practice and follow Prof Simon’s recommendation. This shameful, unfortunate, interpretation of the case-law can be found in a Report entitled ”Conditions for truly competitive Gas markets in the EU” prepared by Energy Markets Ltd. (2005) for the British Department of Trade and Industry (see p.12).
(Image possibly subject to copyrights: source here)
PS1: Trying to turn the findings of my Phd into empirical recommendations, I am currently drafting a paper on abuse of collective dominance in the energy sector. Obviously, input, views, comments, feelings, are most welcome.
Death of an Antitrust Dogma?
Yesterday, the US AAG for Antitrust C. Varney murdered a widespread antitrust dogma:
“Defining markets and measuring market shares may not always be the best place to start” (see also here)
In many competition law regimes, market definition is indeed perceived as:
“a necessary precondition for the assessment of the effect of a concentration” (source: Case T-2/93, Air France v. Commission [1994] ECR I-1375, §143).
Of course, it is common in EU law to leave market definition opened, on the ground that regardless of the market’s exact boundaries, the merging parties’ market shares will not create or strenghten a dominant position.
This being said, many competition authorities nonetheless review this issue systematically, whilst they could screen anticompetitive concerns more rapidly. This burdensome analytical framework is particularly inefficient in cases where:
- The agency can immediately ferret out risks of competitive harm, because the key economic elements of a particular theory of harm are absent. This happens, for instance, in oligopolistic dominance cases, where tacit collusion is unlikely because the market is not transparent, or because oligopolists are asymetric;
- The agency can immediately establish that the merger raises serious doubts. This may happen, for instance, in cases where the merger involves the acquisition of a disruptive maverick player or where, thanks to sophisticated economic tools, the direct assessment of market power is possible (i.e. merger simulation on oligopolies with differentiated products).
Notwithstanding this, Varney’s assault on market definition analysis should not be interpreted as meaning that no preliminary work on market definition is required. In both scenarios 1 and 2, the competition authority should follow a “first-look” market definition analysis so as to identify – at least approximately – those firms which are likely to compete with the merged entity. To take again the above example of a merger involving a disruptive maverick, a gross market definition is necessary to establish that the maverick firm was, prior to the merger, competing head to head with – and threatening the business interests of – the acquiring firm. Similarly, in the above mentioned oligopolistic dominance example, the competition authority needs to frame the market, if only to establish that it faces a tight oligopoly where the conditions for tacit collusion ought to be tested.
A final remark: Varney’s statement holds the potential to lighten the evidentiary burden imposed on US antitrust authorities. Let’s just hope that the agencies will seek to use the newly freed-up administrative resources to improve their analytical framework, at the stage of the assessment of the theories of harm. This is particularly important in light of the fact that recent theories of harm in merger control are (i) increasingly intrusive: they may lead to forbid mergers with just a harmful effect on some customers (see TOTM excellent post on this); (ii) speculative: think for instance of behavioral, conduct-based, speculations in the context of vertical/conglomeral mergers; and (iii) and complex to test: think of merger simulation techniques, econometric analysis, diversion measurements, etc.
PS1: Whilst writing this post, I consulted the excellent book of Alistair Lindsay “The EC Merger Regulation: Substantive Issues”, Thomson – Sweet & Maxwell. I really recommend this book. It is the only EU merger related book that focuses only, and with great detail, on the substantive issues of EU merger analysis. My concern, however, is that the book is simply unaffordable (170£). My edition dates back to 2003. No chance I am going to change it any time soon for the 3rd edition of 2009. The bottom-line: not unlike some conference organizers, publishers should price discriminate and grant discounts to university researchers and students.
PS2: Varney’s speech was delivered in the context of the US agencies’ ongoing consultation process re. the 1992 merger guidelines.
(Image possibly subject to copyrights: source here)
Dissertation Summaries (15) – LLM in IP and Competition Law 2009-2010
European Competition Policy and the Lisbon Treaty: Dawn of a new era or business as usual?– Patrick Vincent (P.Vincent@student.ulg.ac.be)
In the post-Lisbon Treaty era, the reference to “free and undistorted competition” previously enshrined in Article 3(g) EC has disappeared from the forefront of the EU treaties. The present dissertation seeks to assess whether the elimination of this provision – and its replacement by a Protocol appended to the Treaty – is likely to affect the effectiveness of European competition policy. Whilst scholars are divided on this issue, there nonetheless seems to be a growing concern that European competition policy might as a result be increasingly influenced by external, public-policy, considerations, which to date have played a marginal role in the Commission’s orthodox enforcement policy. To test the veracity of this proposition, the present dissertation will review a number of concrete practical issues (environmental agreements, etc.), where considerations alien to core competition concerns might be invoked by stakeholders.
Nicolas Petit
Alfonso Lamadrid
