September 11 2014 was a big day for antitrust at the European Court of Justice. The Court delivered two important Judgments in the Mastercard and Cartes Bancaires cases, and heard oral arguments in Huawei/ZTE. We’ll comment on the latter in due course, and will be devoting our next posts to discussing the content and implications of the two Judgments. Let’s start with Cartes Bancaires, which is the one with greater potential future implications (as already noted by Pablo in the post below).
This can be an analytically complex subject and there’s much to discuss, so allow me to skip the basics and the summary of the Judgment that you can find here (a copy-pasted version will also appear in some newsletters…) Here are my 10 initial reactions to the Judgment. These are not at all definitive positions but rather preliminary thoughts that I’m hastily posting now with the hope that I’ll be able to polish them in the course of follow-up discussions. For the lazy ones, and given that the full text may be lengthy and dense (for a change), all the main messages appear in bold.
1) The Judgment is to be welcomed mainly as a statement, or cautionary message, from the Court in reaction to an often discussed trend on the excessive use and abuse of the “object shortcut” (how many recent EU and national 101 “effects” cases do you know of?)
In the ECJ’s words (para 58) “[t]he concept of restriction of competition `by object’ can be applied only to certain types of coordination between undertakings which reveal a sufficient degree of harm to competition that it may be found that there is no need to examine their effects otherwise the Commission would be exempted from the obligation to prove the actual effects on the market of agreements which are in no way established to be, by their very nature, harmful to the proper functioning of normal competition”.
It seems almost as if the GC had asked to be quashed when writing in its Judgment in this case (para. 124) that “the concept of infringement by object should not be given a strict interpretation”. The ECJ sensibly lambasts this statement in para. 58 (admittedly, though, this may have been a problem of bad drafting on the part of the GC; read in context, the statement seems to have intended to refer to the fact that “object restrictions” are not limited to a closed list of “suspect” hardcore restrictions, which –had it been stated that way- would’ve made perfect sense; AG Wahl also seems to have observed this as evident from para. 67 of his Opinion).
This is not without importance, for the “object” category has arguably been expanded beyond the limits of its logic (remember Areeda’s quote?) not only by the European Commission, but arguably also by the ECJ itself in T-Mobile (see below) and, less visibly, but more excessively and perhaps more importantly, by national competition authorities (as AG Wahl also observed in para. 59 of his Opinion: “caution is all the more necessary because the analytical framework that the Court is led to identify will be imposed both on the Commission and on the national competition authorities, whose awareness and level of expertise vary”). For my previous comments in this regard –in relation to info exchanges- click here.
2) Until now, the ECJ had endorsed an arguably wide interpretation of the notion of restriction by object, placing however the emphasis on the need to conduct a proper 101(3) analysis in any event. This is what the Court has done since Matra, did recently in Pierre Fabre and, most obviously, in Glaxo Spain, although to no avail because –as you may not yet know- the Commission recently decided to drop this case because it allegedly lacks EU interest; this is after 14 years of proceedings, two Court Judgments, a declaration from the ECJ that dual pricing constitutes a restriction by object and also despite the ECJ’s mandate for the Institution to conduct a 101(3) assessment. No wonder they have tried to keep it under the radar… We’ll comment on this case in the future (Disclaimer: my firm represents the European Association of Euro-Pharmaceutical Companies, which has recently appealed the Commission’s decision to drop the case under a quite innovative legal reasoning]. Given the little practical impact of its previous stance and the slow death of Article 101(3), it seems reasonable for the Court to have decided to move beyond it.
3) AG Wahl had rightly observed in his Opinion, “the present case gives the Court another opportunity to refine its much debated case-law on the concept of restriction by object”. Query: has the Judgment finally shed light on how to resolve the object/effect conundrum? As developed below, I’m afraid not much.
Click here to continue reading:
[Note by Alfonso: I devoted part of the weekend to drafting a comment on the recent Court Judgment in GCB, but Pablo Ibañez Colomo has proved quicker. Here's his reaction to the Judgment; mine will follow].
The ECJ judgment in Groupement des Cartes Bancaires will be discussed at length in the coming months (maybe more so than MasterCard). The outcome is unsurprising (at least in my view). The Court, as AG Wahl, applies the principles stemming from a well-established line of case law, which has proved to be remarkably resilient. It should now be clear beyond doubt that relying on pigeon holes or formal categories to identify object restrictions can often be misleading. What matters is the rationale behind the agreement (as inferred from its wording and the economic context), and not so much whether it includes a particular restraint. Thus even an agreement providing for price-fixing may not be restrictive by object (in para 51 of the judgment the Court is careful not to refer to any form of price-fixing between competitors, but to naked price-fixing cartels and their functional equivalents). Conversely, an agreement that does not fit within the ‘suspect’ categories may also be restrictive by its nature – this is how I understand Allianz Hungaria, and the reason why it makes sense to me.
It should also be clear after Groupement des Cartes Bancaires that identifying the object of an agreement and establishing its restrictive effects are two separate steps. The first one may at times require a careful and lengthy analysis of the relevant legal and economic factors that explain the logic and purpose of a restraint. However, this fact does not mean, as has sometimes been claimed (in light of what now seems to be a misinterpretation of T-Mobile), that it is tantamount to establishing the restrictive effects of the agreement. The ECJ finds that the GC did not distinguish between the two steps. Claiming that an agreement is capable of having restrictive effects is not the same thing as saying that it is, ‘by its nature’, contrary to Article 101(1) TFEU (see para 69). Additional questions around this point will soon be addressed in academic articles and discussed at conferences. I am ready to guess that the formula chosen by the Court (‘sufficient degree of harm to competition’) will give rise to speculation about its exact scope and meaning (I have my answer, but it would be the nth time I write about it in the blog). It is also necessary to read some paragraphs (49-51, for instance) together with the judgment in Expedia, where it was clarified that ‘by object’ agreements that have an effect on trade between Member States appreciably restrict competition.
There is another aspect that is not strictly related to the substantive analysis but that will have piqued the interest of some people. The ruling could be used in textbooks to illustrate the principles of judicial review in EU competition law. The Court is very explicit and structured in this regard. First, it sets out the legal criteria for the assessment of the object of an agreement and comes to the conclusion that the GC had erred in law by applying a different set of principles. Secondly, it examines the legal characterisation of the agreement as restrictive ‘by nature’ and finds an additional error in law. It would seem from the judgment itself that the analytical clarity with which judicial review is conducted is a ramification of KME and Chalkor. In fact, the ECJ holds that the GC had not complied with the standard of review set out in the case law (para 91).
Groupement des Cartes Bancaires is likely to have consequences for some cases pending before the Commission and the GC. I thought ‘pay for delay’ when I read the bits about the relevance of ‘experience’ and about BIDS. I thought ‘pay TV investigation’ when I read that, in order to determine whether an agreement is restrictive by object, ‘it is […] necessary to take into consideration the nature of the goods or services affected, as well as the real conditions of the functioning and structure of the market or markets in question’. In spite of its relevance for the case, this issue was never considered by the ECJ in Murphy. It had not been raised by the parties. In the context of formal proceedings before the Commission, it would inevitably have to be addressed. I have recently published a paper discussing how this factor could influence the outcome of the investigation.
Interesting times ahead!
Putting an end to all rumors and speculations the European Commission confirmed yesterday the names of the members of the upcoming Juncker Commission (European Parliament confirmation is still pending and may be tricky for some). It’s now public that once Vice President Almunia leaves office on 31 October the competition portfolio will go to Danish Commissioner Margrethe Vestager.
As widely reported, Ms. Vestager is a 46 year old politician, mother of three, until recently Deputy Prime Minister in charge of economic affairs in Denmark (previously she was also Minister for Education and for Ecclesiastical issues) who has built a very solid reputation both in Denmark and in European circles.
As you may have read, President Juncker has introduced structural innovations in the Commission’s work, creating project groups under a hierarchical system under which Commissioners will report to a Vice President. The Commissioner for Competition will not hold a Vice Presidency this time but will liaise with other Commission Vice Presidents and contribute to their projects. The Mission Letter given by President elect Juncker to Ms. Vestager (available here) insists on the fact that Commissioner Vestager “will, in particular, contribute to projects steered and coordinated by the Vice-President for Jobs, Growth, Investment and Competitiveness, the Vice-President for the Digital Single Market and the Vice-President for Energy Union. As a rule, you will liaise closely with the Vice-President for Jobs, Growth, Investment and Competitiveness in defining the general lines of our competition and state aid policies and the instruments of general scope related to them”.
Juncker’s Mission Letter to Vestager also asks the new Commissioner to focus on “[m]obilising competition policy tools and market expertise so that they contribute, as appropriate, to our jobs and growth agenda, including in areas such as the digital single market, energy policy, financial services, industrial policy and the fight against tax evasion. In this context, it will be important to keep developing an economic as well as a legal approach to the assessment of competition issues and to further develop market monitoring in support of the broader activities of the Commission”.
Query: does all this suggest that competition law will be playing more of an instrumental role and would be more permeable to influences from other policy areas? Not that the instrumental role of competition policy is new, particularly in the wake of the Lisbon Treaty, but this is a move that may satisfy the various politicians who have expressed concerns in the course of the present mandate, and that could fit within a “politicization” trend that we’ve discussed here before. I was also surprised to read in the letter that competition law will be mobilized to fight tax evasion (see here for our preliminary –soon to be developed- take on this).
Another most important point. I’ve also skimmed through the new Commissioner’s twitter account (here) only to find out –despite my poor Danish- that she’s got a good taste for pizza (see here for a tweet from last week displaying a picture of easily identifiable Mamma Roma’s great material eaten in between talks with Juncker).
Ms. Vestager will take office in November 2014 and will also have to face a number of pending issues. Most attention in this regard has focused on the Google investigation (by the way, the Wall Street Journal quoted some of my views on this matter a couple of days ago- full text available here). Commissioner Almunia now seems to have accepted that he won’t be able to finish the case during the rest of his time in office, which is something that many –including myself- would have thought impossible only a few weeks ago.
But despite the media focus, not everything done by Almunia has had to do with Google. This is now the time for observers to review what has been done under his mandate, and the Commissioner himself has started to do just that. Speaking yesterday at Georgetown he did a first balance of his time in office (the speech “Looking back on 5 years of competition enforcement in the EU” is available here). And tomorrow he’ll be participating at a roundtable at Fordham’s annual antitrust conference that will also take stock of what has been done in the course of his mandate; the roundtable will be chaired by my partner Marcos Araujo and will also feature U.S. Assistant Attorney General Baer, Christine Varney and Ian Forrester.
We’ll report on that discussion asap. For now, I’m going to take advantage of the fact that my 10 days old baby is asleep to read and comment on the important MasterCard and Cartes Bancaires Judgments rendered by the ECJ only minutes ago…
Platforms like this blog are supposed to be 2-sided markets where the service is provided to users for free and paid-for by revenues obtained in the other side of the market, notably via advertising. We may be among the few economic illiterates that haven’t devised a way to monetize at all our advertising and, instead, have traditionally advertised anything that friends do (plus the books and journals of which Nicolas gets a copy; e.g. see the post below this one). In that spirit:
On 26 September the Competition Law Scholars Forum (CLASF) will be holding its 23rd workshop in Madrid under the title Competition Law in Leisure Markets. The program, which includes discussions on Google, ebooks, football and even bullfighting, is available here.
By the way, one of the organizers of this event –Prof. Barry Rodger- has just released a competition law textbook (co-written with Angus MacCulloch) titled “Competition Law and Policy in the EU and UK”. The book will be supported by the Who’s Competing blog. Here’s the flyer: Competition Law & Policy Flyer
On 30 September AntitrustItalia will be hosting a discussion on the Intel Judgment in Brussels featuring Manuel Kellerbauer and Luigi Malferrari, both from the Commission’s Legal Service. Click here for more info.
The university where I studied (which thanks to Prof. Jerónimo Maillo has always paid a great and uncommon attention to competition issues) will be holding an International Conference, also in Madrid, under the title “The Fight against Hard Core Cartels: Trends, Challenges and Best International Practices” on 27-28 November. The call for papers is available here: Call for PapersThe Fight Against Hard Core Cartels
Unfortunately I won’t be able to attend it because on 28 November I’ll be enjoying the warmness of Stockholm at the Swedish Competition Authority’s Pros and Cons Conference, which this time will be centered on Two-sided markets. The title of my presentation will be “The double duality of two-sided markets (on competition law and complexity)”. Now I only have to figure out what the heck to say.
The Interface between Competition and the Internal Market – Market Separation under Article 102 TFEU
1. the 102-abusive prices charged by academic publishers for their books;
2. the drain in State aids imposed on Belgian Universities;
=> this advertisement is my sole way to get a copy of this new book.
This book explores the interface between competition law and market integration in the application of Article 102 of the Treaty on the Functioning of the European Union (TFEU), focusing on the notion of market separation namely conduct that may hinder cross-border trade. The discussion reviews, among other things, the treatment of geographic price discrimination and exclusionary abuse, by which out-of-state competitors are affected.
Market separation cases are treated in the book as a case study for appraising the interface between competition and the Internal Market. On this basis, the book provides a comparative analysis of the Treaty requirements under Article 102 TFEU when applied in market separation cases and the Treaty requirements under the free movement provisions. In addition, it utilises market separation cases as a springboard for advancing an informed reformulation of the application of Article 102 TFEU when state action comes into play.
All in all, the analysis presented in the book deconstructs the elements for establishing market separation as an abuse of the dominant position. It shows that there is nothing that would justify a distinctive treatment of market separation under Article 102 TFEU, other than a principled understanding of Internal Market law as a whole: whatever understanding one reaches about the proper shape of the Internal Market, interrogation of the proper application of competition law comes after that and thus should be informed by this understanding.
On Thursday the European Court of Justice will deliver two very important competition Judgments in the Mastercard and Cartes Bancaires cases. We’ll be commenting on them asap (my paternity leave will unfortunately be over on that same day…).
For a reminder of the issues at stake in both cases, you can check out our previous comments on the General Court’s Mastercard Judgment (Mastercard: A priceless Art. 101(3) assessment) (I was actually proud of this post which I nevertheless swiftly relegated by sillier ones) as well as Pablo Ibañez’s take on AG Wahl’s Opinion in Cartes Bancaires (Restrictions of competition by object under Article 101(1) TFEU: chapeau bas, Prof Wahl!).