Archive for December 2010
After a busy year, it is time for the authors of this blog to take a short break. Chillin’Competition will be closed until 3 January.
As usual, I attach a link here to Waldfogel’s seminal paper on the economics of Xmas presents.
PS: I feel today like saying thank you. To our readers, to my co-blogger Alfonso, but also to my colleagues at university, the BSC staff, and last but not least, to my terrific groups of students in Liege and Lille.
The GCLC’s 50th Lunch Talk will take place on 21 January and will be devoted to the General Court Judgment in
Michelin III Tomra v. Commission.
The registration form can be downloaded below.
(Note by Alfonso: Last week I announced that Pablo Ibañez, a great friend of ours, a co-author of mine, and a truly brilliant legal mind, would be writing a post on the Google investigation. Here it is. As lucid as always).
Thanks very much to Nicolas and Alfonso for giving me some space to share a few quick thoughts with their (numerous and growing in number) readers on the nascent Google case! I was looking forward to posting something as soon as I read the press release. For the many readers who do not know me, I am a Lecturer in Competition Law at the LSE (P.Ibanez-Colomo@lse.ac.uk).
My concern with the ongoing proceedings has less to do with the technicalities of the case, very well outlined by Alfonso a few days ago, and more with the future of Article 102 TFEU. More precisely, I wonder whether this investigation is in line with the spirit and purpose of the 2009 Guidance or whether it represents, again, a step back to the pre-Discussion Paper era.
Even though it is an imperfect document, the 2009 Guidance represented a great victory in at least two important respects: it promised consistency (i) across competition law provisions and (ii) within Article 102 TFEU itself. Put differently, the Guidance Paper gave us the hope that the standards of intervention would be the same regardless of the provision (in particular, Article 101 vs. 102 TFEU) or the formal label with which the case is brought. This means, for instance, that a ‘margin squeeze’ will from now on be treated as a ‘constructive refusal to supply’ (and, as a result, it will in most instances be necessary to establish that the access to the input in question is ‘indispensable’ within the meaning of the Bronner and Magill cases).
Why is the ongoing investigation in Google problematic from this perspective? Because the European Commission seems to suggest that it is justified to open an investigation on grounds that Google may be discriminating against its rivals in web searches.
- Is secondary-line discrimination a problem in and of itself under Article 102 TFEU? Clearly not, it would seem, in the light of the logic underlying the 2009 Guidance and the Non-Horizontal Merger Guidelines. What is more, secondary-line discrimination is not even an ‘enforcement priority’ for the European Commission (try to find the word ‘discrimination’ in the 2009 Guidance using Microsoft Windows’ built-in search engine!).
- Is a dominant undertaking obliged to provide non-discriminatory access to its inputs in the first place?
o Maybe, if, as in the case of a ‘margin squeeze’, the conditions set out in Bronner are fulfilled (i.e. if non-discriminatory access is indispensable to compete and non-discrimination is necessary to avoid foreclosure on the neighbouring market).
o Maybe, if it is a recently liberalised market (a decisive factor in the few precedents on secondary-line discrimination cases).
o Maybe, if there are concerns with market integration and nationality discrimination (the second crucial factor explaining the outcome of these precedents).
None of these ‘maybes’ seem to apply in the Google investigation. Suggesting that non-discriminatory access to Google (however powerful and dominant its search engine) is indispensable to avoid foreclosure in a neighbouring market is hardly a credible claim. In addition, Google has emerged as a market leader in a deregulated and fast-moving market.
In view of the above, I hope that, it the case is not dropped, the European Commission explains convincingly and at length (even though this seems to exclude the kind of reasoning displayed so far in ‘commitment decisions’) why secondary-line discrimination may in and of itself constitute an abuse of a dominant position in the specific circumstances of the Google proceedings (or, alternatively, that the conditions set out in Bronner are met). If this is not the case, the promise of the 2009 Guidance will not have been fulfilled (and this, only a year after its adoption).
To be honest, I also hope that, if the European Commission adopts a prohibition decision, Google decides not to appeal this decision before the General Court. I can already imagine the General Court stating, in a terse and unreasoned paragraph, that secondary-line discrimination is not a form of ‘competition on the merits’ and is therefore caught by Article 102 TFEU by its very nature (i.e. à la AstraZeneca).
Like last year, N. Charbit (concurrences) has managed to put together an impressive programme for the second edition of “New Frontiers of Antitrust“.
The conference will take place on Friday 11th February, at the House of Parliament in Paris.
See link hereafter for the programme. New Frontiers of Antitrust Paris 110211
Last week, I faced the very pleasant situation of having to lecture on horizontal cooperation agreements a day only after the adoption of the new horizontal framework by the Commission…
The good thing is that it gave me an opportunity to read the text from top to bottom.
So here’s my own assessment of this lenghty set of Guidelines. I like: (i) the introduction of a chapter on information exchange agreements; and (ii) the examples, which are very instructive and draw on national practice, §§107 and 109 notably (or the bottom-up learning effects that arise with decentralization)..
However, there’s a heap of less satisfactory things in the Guidelines. To structure things a little, I distinguish between formal (1) and substantive (2) issues.
1. Formal issues
Unpractical self-assessment method. The Guidelines stick to the good old Article 101(1)-Article 101(3) sequence. But why not endorse a simpler self-assessment method which involves:
- First step: screening of the agreement through incompatibility presumptions (hardcore provisions); followed by screening of compatibility presumptions (de minimis; market share thresholds; and conditions);
- Second step: detailed assessment of possible restrictive effects under 101(1); followed by detailed assessment of possible pro-competitive effects
Incorporation of the rules on environmental agreements within the standardisation section. Why are those agreements no longer worth a specific section?
Linguistic mistakes in French version. The concept of “vente groupée” used under the section on agreements on commercialization is confusing. The Commission and Court routinely refer it in relation to bundling under Article 102 and the EUMR (see Microsoft and Tetra Laval).
Perfunctory treatment of Article 101(3) arguments. The Guidelines often say that horizontal cooperation agreements bring significant efficiencies, pro-competitive effects, and so on. Yet, when it comes to providing guidance on efficiencies, the Guidelines dedicate little time and space to the issue (or they simply restate in substance what has been said under Article 101(1), check the section on standardization agreements). True though, one can find help in the
unhelpful Article 101(3) General Guidelines.
2. Substantive issues
Inconsistent, and old-fashioned analytical framework for collusion. There’s been a number of great books on tacit collusion in the past decade, and more importantly, good judgments and soft law instruments (the Airtours ruling, the Guidelines on horizontal mergers, the Article 102 Guidance Communication). All set out a modern, consensual framework for the assessment of collusion concerns which hinges on the proof of 4 cumulative conditions. Very remarkably – and to the exception of a footnote in the section of information exchanges – the new Guidelines suggest however to test tacit collusion through an impressionistic, structural, and reduced range of factors. The section on purchasing agreements which refers to commonality of costs and exchange of information (§§213-216) brings a glaring illustration of this. But the same applies to production (§§175-182) and commercialization (§§242-245) agreements. My question: are the dark times of the checklist approach back? Of course, this approach leaves more leeway to enforcement authorities, but it generates huge legal uncertainty + high type I errors risks. And it is wholly inconsistent with the approach taken under the EUMR, which pursuant to §21, has “certain common elements … pertaining to the potential restrictive effects, in particular as regards joint ventures“.
The §§ on FRAND terms are devoid of legal basis, and should be disregarded. To draw possibly on the expertise gathered in the Qualcomm and Rambus cases, the section on standardisation agreements devotes some wording to what is, and how to self-assess, a FRAND price. Now, under EU competition law, it is well settled that unilateral conduct falls short of an agreement under Article 101 TFEU. Assume that following the adoption of a standard, a party unilaterally decides to request terms which other parties challenge as unFRAND (the classic patent ambush story). In such a setting where firms antagonize, there is no, and there cannot be, an unlawful agreement under Article 101 TFEU. Since the Bayer and VW rulings, the fact that the parties have, in the past, co-operated in the SSO is no longer sufficient to trigger the applicability of Article 101 TFEU (those cases repealed the “contractual framework” doctrine inherited from the Ford case). And by the way, everyone knows this. To date, allegations of unFRAND terms have only been brought under Article 102 TFEU (notably by discontent parties which had participated to the standardization process).
PS: The new texts were given a number today. The R&D BER is Regulation 1217/2010 and the specialisation BER is Regulation 1218/2010.
PS2: The GCLC will have a conference on the horizontal package in February 2011.
Ronald Coase once said:
“One important result of this preoccupation with the monopoly problem is that if an economist finds something—a business practice of one sort or other—that he does not understand, he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be very large, and the reliance on a monopoly explanation, frequent.”
A quote worth ruminating, in light of the increased interest of antitrust agencies’ for unilateral conduct in dynamic industries.
Found on TOTM. The real source is Ronald H. Coase, “Industrial Organization: A Proposal for Research,” in Victor Fuchs, ed., Policy Issues and Research Issues in Industrial Organization (New York, NY: National Bureau of Economic Research, 1972), p. 69.
This week was full of news, some of which we didn´t echo here. This is a quick overview of what has happened since Monday:
The General Court issued two important competition-related judgments. In case T-141/08 the Court upheld the Commission´s decision sanctioning E.ON with a 38 million euro fine for the breach of a seal during a dawn-raid. Of a greater substantive interest is the Judgment in case T-427/08, discussed below.
On the “Google front”, the Conseil de la Concurrence issued the formal opinion commented here; the Commission took over the investigation of two additional complaints that been lodged before the Bundeskartellamt (which, as stated by the Commission´s spokespeople, won´t change the nature of the ongoing investigation). Unrelated to the investigation, but equally interesting, is a blog post written by Google´s Deputy General Counsel replying to a call for stricter antitrust scrutiny over Google´s acquisitions.
Gossip column: Nico was
undeservedly promoted to the category of Professor. Also, it became known yesterday that Damien Geradin, a longtime co-author of his, is leaving Howrey and joining Covington&Burling (and stay tuned: similar news will be coming soon..).
Case T-427/08, CEAHR v Commission
So much for the headlines, let´s move on to a most welcome substantive development from the General Court.
The complaint: The European Confederation for watch repairers associations lodged a complaint before the Commission alleging that watch manufacturers had engaged in agreements and/or concerted practices and/or abused their dominant position by refusing to continue to supply spare parts to independent repairers.
The Commission´s decision rejecting the complaint. Now, guess on what grounds the Commission rejected the complaint… yep: lack of Community interest. The rejection decision arrived at that conclusion noting that (i) the complaint concerned a market of limited size and economic importance; (ii) there was no evidence suggesting the existence of an infringement, and that it was likely that the selective distribution schemes were covered by the block exemption for vertical agreements; (iii) it had reached the prima facie conclusion that repair services and spare parts did not constitute independent relevant markets and rather had to be assessed within the wider market for luxury watches; (iv) the allocation of more resources to the investigation wasn´t likely to allow the Commission to identify an infringement; and (v) national authorities and courts are well placed to deal with such complaints.
The Judgment. The judgment starts by emphasizing that the Commission´s discretion in the examination of complaints is not unlimited, and undertakes the review, one by one, of the reasons put forward by the Commission to justifify the alleged lack of community interest. In doing so, the Court provides valuable guidance on various fronts.
(This will be a bit lengthy; if you´re interested, keep on reading) Read the rest of this entry »