Archive for November 2010
A thought to share:
In going through the RyanAir/AerLingus and Iberia/Vueling/Clickair cases – and following a discussion with David Hull yesterday – I have increased difficulties with the idea that low cost companies and flag carriers operate on the same relevant market.
Intuitively, I am prone to think that the demand served by low costs companies and flag carriers comprises several groups of customers, with different elasticities. In particular, low costs carriers likely face a bunch of captive customers, which would never switch to a flag carrier. In the same vein, flag carriers probably face a share of captive demand, which would never switch to a low cost carrier. I may be wrong out of sufficient technical knowledge, but it seems possible to argue that we have two distinct product markets (which, as the case may be, possibly exercise a competitive constraint on each other). My intuition is further confirmed by the fact that the features of low cost and flag carrier services are very different.
If I find time I’ll try to go through the decisions again, which might conceal the answer to this.
I have just finalized the programme of a major conference on Belgian Competition Law. This conference will take place on 11, 18 and 24 February, respectively in Liege, Charleroi and Brussels.
The purpose of the event is to provide an exhaustive overview of the first years of enforcement under the Belgian competition law passed in 2006.
To benefit from fresh input, I have applied the “below 40” rule. Most of the speakers are young practitioners. Hereafter, an overview of the programme:
- Le droit belge des ententes et de l’abus de position dominante, Damien Gérard (U.C.L.)
- Le droit belge des concentrations, Marc Abenhaïm (Van Bael & Bellis)
- Le droit processuel de la concurrence, Xavier Taton (U.L.B., Linklaters) et Joachim Marchandise (Linklaters)
- L’application du droit belge de la concurrence dans les secteurs libéralisés, Laurent de Muyter (Jones Day et U.Lg.)
- Le point de vue de l’autorité de contrôle, Laura Parret, Présidente de chambre au Conseil de la concurrence
Looks like we are going to have a lot of fun. A book will be given to registered participants on the day of the event. An official programme and a registration form will be posted here shortly.
In past decades, the Commission repeatedly insisted on the importance of competition policy for the purposes of achieving the Single Market.
A few weeks ago, the Commission adopted a Communication entitled “Towards a Single Market Act – For a highly competitive social market economy“. Quite strikingly, the word “competition” appears only 9 times in this document.
Of course, this document is not competition law related. Yet, it seems to place only little emphasis on competition in general, not to talk of competition policy. This ought to be contrasted with the earlier Report of Mario Monti which referred 69 times to competition, and pleaded amongst other things in favour of:
“a new approach to industrial policy which builds on a mutually reinforcing relation with single market and competition rules“.
As a matter of fact, the concept of competition seems primarily quoted in relation to the international competition faced by EU businesses, and the need to foster the competitiveness of European firms.
A little disappointing.
Btw: Mario Monti’s report has gone relatively unnoticed in the competition law community, and this is extremely unfortunate.
As noticed yesterday by Nicolas, the Commission´s stance with regards to 102 TFEU cases has certainly evolved under Almunia, in the sense that the Commission is nowadays more cautious in pursuing cases where it may lack sufficiently convincing evidence. Nico referred to this as ”the end of an enforcement paradigm”.
However, it seems like this approach could be confined to cases related to alleged abusive conduct. The reason: rumor has it that the Commission may be thinking about initiating a “test case”, in which it would attempt to prove a cartel by virtue of economic evidence. The Chief Economist and its team would be playing a major role in the case. Could this be the beginning of an enforcement paradigm?
Such approach is certainly not unheard of (it was in fact trendy in the 70s given the influence of the Chicago School), but managing to prove a cartel by resorting exclusively to economic analysis is far from being a piece of cake. Discussions on the possibility to follow this path have previously been held, for instance, within the framework of the OECD (a policy brief is available here). In the course of those discussions, the Commission acknowledged that its “past experience has shown that it is very difficult to base a decision imposing fines on undertakings relying exclusively or in a large extent on economic evidence” (see here).
If the opening of such case were to be confirmed, it could be a clear indicator of the fact that the Commission´s self-confidence is not at all at its lowest. Whereas I acknowledge that economics could possibly play a greater role regarding the detection of cartels (an interesting presentation by DG Comp´s staff on this issue is available here), I´m somehow more skeptical in relation to the sufficiency of economic evidence to prove their existence.
It´ll be interesting to see whether this rumour actually turns into a reality or not. And in case it does, would the Court be prepared to undertake a proper review of the Commission´s economic assessment in such a case?
PS. For anyone interested on these matters I recommend a brilliant article by G. Werden: “Economic Evidence on the Existence of Collusion: Reconciling Antitrust Law with Oligopoly Theory”, 71 Antitrust Law Journal 719 (2004).
In going through Damien Neven’s latest paper entitled “Economics at DG COMP” (with M. de La Mano, see link hereafter), it seems now clear that the tough, negative enforcement paradigm that prevailed under Aricle 102 TFEU in the Kroes years is over.
In recent years, the Commission has dumped several cases for lack of convincing evidence. The Qualcomm excessive pricing case and the Velux rebates case provide good illustrations of this.
In other cases, the Commission has renounced to follow a hard line, and negotiated a settlement with the parties. Rambus and Microsoft II (Browser) are the main cases here.
The tone of the new Almunia administration is far less agressive, and it seems that the adoption of prohibition decisions is no longer an enforcement priority. Interestingly, and contrary to what was argued by the former senior staff at the Commission, cases like Port of Helsingborg (rejection of complaints re. excessive and discriminatory pricing ) bring almost as much guidance as prohibition decisions.
The only area where I disagree with D. Neven and M. de La Mano’s paper is judicial review. The authors seem to consider that the General Court is ready to undertake serious economic assessments. The thing is, Judge Wahl told us the contrary a month ago at the GCLC annual conference. Plus this may be true in the area of merger control (Ryan Air v. Commission, and before Airtours, Tetra Laval, etc.), but is certainly less obious in other areas (Article 102 TFEU).
Not much to report today, so here’s a full account of my day (I admit this is of limited interest for our readers, but (i) I have little inspiration today, and (ii) it will at least prove that some academics do work).
5.00 am: wake up call.
6.00 am-10.30 am : draft a paper on the new EU framework on vertical restraints (which I co-write with my friend and colleague David Henry).
10.30 am-11.00 am: answer to emails and call with my secretary at university.
11.00 am-11.45 am: read a paper on trademarks and antitrust law.
12.30 am-2.30 pm: lunch with JJ Evrard, re. possible conference on trademarks and antitrust law in early March.
2.45 pm-3.30 pm: answer to emails.
3.30 pm-5.00 pm: review outline of Elise Provost doctoral thesis.
5.00 pm-5.30 pm: call with Elise.
5.30 pm-6.30 pm: prepare annual meeting of the GCLC scientific council.
7.00 pm-10.00 pm: annual meeting of the GCLC scientific council.
10.30 pm : s***t, I forgot to post shting on the blog…
Probably less than most private practitioners, but still a pretty busy day after all.
PS1: the dominant OS for PCs turned 25 a few days ago.
PS: We still have a few seats for tomorrow’s Evening Policy Talk with D. Neven. Please drop me a line if you want to participate.
Almost 9 years ago a U.S. district judge issued a divesture order that, to my knowledge, has not yet been executed. As reported by The Onion, District Judge Elliot Schofield ordered God to break up into smaller deities arguing that HE had “willfully and actively thwarted competition from other deities and demigods, promoting His worship with such unfair scare tactics as threatening non-believers with eternal damnation (…) In the process, He has carved out for Himself an illegal monotheopoly.”
For more info on this case see here http://www.theonion.com/articles/judge-orders-god-to-break-up-into-smaller-deities,404/
It is not the first time that God faces a trial in the US. Some time ago a State Senator from Nebraska lodged a suit againts God arguing that he was responsible for a wide array of catastrophes. You can read the actual suit here, it´s hilarious. http://www.wired.com/images_blogs/threatlevel/files/chambersversusgod.pdf
But legal threats not only come from the States. Within the EU an earthly subsidiary of the ABOVE-mentioned was also sanctioned for abusing its dominant position in the market for funeral services. See here http://www.concurrences.com/abstract_bulletin_web.php3?id_article=520
Strikingly, no one seems to have considered the possibility of challenging God under Article 106. Pursuant to the “automatic abuse” doctrine stated in Hofner-Elser it could be argued that God has attributed himself exclusive rights and is manifestly unable to satisfy demand or prevent catastrophes.
Moreover, and according to Stephen Hawking´s new book that posits that God is not necessary to explain the creation, the conditions laid down in Article 106(2) would not be satisfied! http://www.usatoday.com/tech/science/columnist/vergano/2010-09-06-hawking-book_N.htm
This post is about the long and winding road to the recognition that competition law sanctions are criminal in nature.
In his Opinion here in ArcelorMittal Luxembourg v. Commission, AG Bot argues that competition proceedings are
smoothly “quasi criminal“. See in particular §205:
Nous visons, en particulier, le respect des droits de la défense et celui du principe de la présomption d’innocence consacrés aux articles 47 et 48 de la charte. La Cour a itérativement admis que ces droits fondamentaux, garantis également à l’article 6 de la CEDH, doivent être observés dans toutes les procédures relatives à des violations des règles de concurrence susceptibles d’aboutir à des sanctions telles que des amendes ou des astreintes, même s’il s’agit d’une procédure ayant un caractère administratif. À cet égard, la Cour s’est expressément fondée sur la nature des infractions en cause ainsi que sur la nature et le degré de sévérité des sanctions qui s’y rattachent. Nous savons également que le respect de ces garanties revêt une importance d’autant plus fondamentale que nous sommes dans le cadre d’une procédure de nature quasi pénale, dans laquelle la Commission exerce des fonctions d’enquête, d’instruction et de décision et dispose, à cet égard, d’un large pouvoir d’appréciation.
See also §41:
Si cette procédure ne relève pas stricto sensu de la matière pénale, elle n’en revêt pas moins une nature quasi répressive.
For more, see the recent book edited by the GCLC, which comprises a chapter on this issue.
Thanks to my friend M. Abenhaïm (Van Bael & Bellis) for the pointer.
The Spanish Competition Authority decided last week to close the file related to the acquisition of joint control of Digital+ (the main satellite pay-tv platform in Spain) by Prisa (one of the largest media groups in Spain which prior to the merger enjoyed sole control of Digital+), Telefónica (you know this one) and Telecinco (a TV channel whose largest shareholder is Berlusconi´s Mediaset).
The CNC´s decision has made big news in the press in the past few days, and many have accused the Competition Authority of having been too sensitive to the government´s wish (yes, that was an euphemism) to avoid the bankruptcy of Prisa, which allegedly could have been declared had the merger not been authorized.
To make a long story short: The merger was initially notified to the European Commission, which, following the parties´request, decided to refer the case to the CNC. In its referral decision the European Commission expressed its fears that the merger could strenghten Telefonica´s position in broadband related markets. The CNC issued a Statement of Objections alleging that the merger could significantly impede effective competition. However, the Council of the CNC confirmed a change of views after the parties committed to modify the shareholders´agreements and other covenants in order to remove the veto rights that gave them the ability to exercise a decisive influence over Digital+. Technically, the operation would therefore cease to be a merger within the meaning of the competition rules (Prisa will retain sole control), so nothing to object…in principle.
The problem after the withdrawal of the notification in scenarios such as this one is that there could theoretically exist the risk that the parties who formally intented to exercise control could now do so informally. Query: How should a competition authority address these sort of situations?
From an ex ante perspective, the resort to the notion of de facto joint control may seem like too much of a long shot given its exceptional nature. And ex post control does not look like an easy path neither. In this case, the CNC has committed to remain vigilant with regards to any future agreements between these companies, but other operators (namely Mediapro) have argued that there is a most serious risk of coordination that will turn the audiovisual market in Spain into the least competitive in Europe. Mediapro has announced its intention to fight this decision on every possible ground and has asked for the European Commission´s immediate intervention. It will certainly be interesting to see how this evolves.
My take: a reliable indicator could be whether Digital+ will supply its channels to other competitors (which was, by the way, a commitment that apparently Telefonica was reluctant to accept).
Remember: comments are anonimous..
The University of Liege has teamed up with two other Belgian universities to offer an ambitious conference on Internet piracy. On our side, Prof. Alain Strowel and Véronique Delforge are the masterminds behind the project. See link hereafter.
I am in Lille today, lecturing on Article 102 TFEU. I read again the Guidance Communication in full. Overall, this is a good document. A few things that retained my attention this time, and that did not strike when I commented it a while ago in World Competition:
- At footnote 3, there is a reference to 101(3) TFEU, which lends support to the implicit existence of an 102(3) defense;
- §56 on tying would have benefited from illustrations;
- In line with the CFI ruling in MSFT, intellectual assets subject to IPRs are not subject to a particular refusal to deal standard;
- The market coverage of the allegedly abusive course of conduct brings relevant information (§20, to contrast with Tomra)
- Saying that there can be unlawful rebates absent a sacrifice is not wholly true (§37). According to the test devised at §§43-45, to be abusive, the rebate must entail a sacrifice, but on the contestable share.