Archive for July 2012
[Note by Nicolas and Alfonso: In the second of his guest posts on reform of UK competition law and enforcement, Christopher Brown looks at potential reform of private redress mechanisms]-
On 24 April 2012, just weeks after announcing the Government’s intentions in respect of reforms to the public enforcement regime, BIS launched a Consultation on reform to the private enforcement of competition law in the UK. Such reform might be said to be long overdue: it has been some five years since the OFT made recommendations to Government stressing the desirability of changes to facilitate private redress.
The Government’s stated objective is to encourage private-sector challenges to anti-competitive conduct to complement public enforcement. Elsewhere in the document, it is said that the aims of the reform proposals are (i) to increase growth, by empowering small firms to tackle anti-competitive behaviour which is stifling their business, and (ii) to promote fairness, by enabling those who have suffered loss as a result of such anti-competitive conduct to obtain redress. The principal proposed reforms are:
- to increase the role of the Competition Appeal Tribunal (CAT) as a forum for private actions, by allowing it to hear ‘standalone’ claims as well as ‘follow-on’ claims;
- controversially, to introduce an opt-out collective actions regime;
- to protect the leniency regime by preventing at least certain leniency documents from being disclosed to claimants bringing private law claims and protecting at least immunity applicants from joint and several liability.
These 3 proposed innovations are touched upon below.
(a) The role of the CAT
The proposals to make the CAT a major venue for private litigation based on competition law have been broadly welcomed. In its twelve years of existence, it has built up a strong reputation in its handling of appeals under the Competition Act 1998 (and other legislation) and follow-on private actions under section 47A of that Act. It is widely regarded as efficient, fair and competent. It makes eminent sense, in principle, for the CAT’s jurisdiction to be extended so as to make most efficient use of the resources at its disposal.
Some of the detailed proposals in relation to the CAT are, however, more controversial. In particular, the Government proposes the introduction of a “fast-track” system for claims brought by SMEs (which, as part of its growth agenda, the Government is very keen to support). The Government is particularly concerned that SMEs are in practice prevented, or substantially deterred, from seeking redress for loss caused to them as a result of competition law infringements. It points, with some justification, to the considerable cost of litigating in the UK and the length of time cases take to reach resolution. What they need, the Government seems to think, is a quick and easy way of getting their complaints in front of a court. The fast-track proposal is the Government’s suggested way of improving matters. So what is it?
[Over the course of two posts, Christopher Brown (Matrix Chambers) blogs on the substantial reform agenda in the UK. The first post looks at the reform of the public enforcement regime; the second will consider the recent proposals to reform private enforcement].
As readers will probably know, back in March 2011 the UK Government, through the Department for Business, Innovation and Skills (“BIS”), launched a consultation on potential reform to the UK competition law landscape (see my earlier post here). It contained a number of bold suggestions for redesigning the domestic regime. After a 3-month consultation period and, seemingly, much head-scratching, BIS announced its concrete proposals for reform on 15 March 2012. Those proposals are now contained in the Enterprise and Regulatory Reform Bill, which is currently making its way through Parliament. Then, as if the Department didn’t have enough on its plate already, it launched a consultation on reform to private actions in the UK. In these posts, I touch on the main aspects of both proposals and offer some limited comments.
Reform of the public enforcement regime
Given space constraints, this section touches on just three of the reform proposals, relating to institutional architecture, enforcement model and the cartel offence.
Today is not only busy but also extremely hot in Brussels (no kidding). An ideal day for a fresh summer story.
Italian beach owners have called a lockout on 3 August to protest against the obligation imposed by the Services Directive to open up beach concessions to competition (for more, see here). Actually, it seems that the application of this Directive to beaches has been the source of some concern at the European Parliament (see here).
The reader who has sent us this information adds that the current lack of competition is evident to anyone visiting private beaches this summer. We have been provided with evidence that shows that the prices applied in Knokke (Belgium) are supra-competitive, and it seems that this is the case throughout the EU [which is why you should all spend yor holidays in Spain, where beaches are great and public ;) ].
A week ago another friend/reader from DG Comp wrote to us complaining about the every day cartels that he had identified in beaches, including the renting of hammocks, pedal boats and drinks.
All these reports have generated widespread concern at DG Comp. We are told that many officials have volunteered to conduct in-depth on-site investigations. Hords of DG Comp’s staff are leaving Brussels these days in order to conduct extenuating beach inspections which, in some cases, may last for over a month. They can be spotted at airports flying to almost every beach destination in Europe.
I had lunch at the Commission’s canteen today and was told by insiders that during August the Commission will be giving absolute priority to this sector investigation. In fact, and this is an exclusive from Chillin’Competition: we are told that Commissioner Almunia has decided to settle the investigation on Google in order to free resources for this programmed massive beach inspections. One of the officials heading an inspection team has sent us the pic that illustrates this post and that proves the Commission’s zealousness.
We apologize. We have always stood up for the proposition that whenever an error is made one has to publicly admit the blame, apologize and carry on.
We do not know how it happened, but we have fallen short in our responsibility to inform/entertain readers of this blog as we should have.
In sum, we are very sorry to have missed this story for over a month:
On June 25, the Federal Trade Commission closed its investigation into whether Church & Dwight Co., maker of Trojan-brand condoms and other consumer products, had attempted to monopolize the U.S. condom market. (see Closing Letter here).
“Monopolize the U.S. condom market“; isn’t that something? We are told by insiders that the FTC had undertaken action on this market given its special characteristics. Aside from the well-known elasticity of the condoms market, there are apparently other features that incentivize market players to engage in hard-core practices/naked restraints. Some stakeholders are said to be disappointed by what they perceive as a premature climax.
In the article that
kept me working during my otherwise summer holidays last year Luis Ortiz Blanco and myself wrote for the Fordham Conference held last September [the final version is published here; a draft version is available for free here] we quoted one of our “Friday Slotters”, Ian Forrester, (actually, he was the one who proposed “The Friday Slot” as a name for the section) saying that competition fines imposed by the Commission “exceed fines imposed by the public authority in any democracy of which I am aware for any offence“.
Some evolution is apparently taking place in this regard. Look, for instance, at the $3 billion fine that GlaxoSmithkline has agreed to pay for promoting its best-selling antidepressants for unapproved uses and failing to report safety data. Take a look also at this very interesting graph, which points out at the largest corporate fines and settlements in the past seven years, and also presents the fine as a percentage of the yearly income of the sanctioned companies.
During a Paris-Brussels train trip last night I read an interesting piece on The Economist that deals precisely with the recent increment in corporate fines using international cartel fines (which reportedly ”rose by a factor of one thousand between the 1990s and 2000s”) as the main example.
The Economist‘s piece draws on economic research to justify the conclusion that “to deter bad behavior fines need to rise”.
You may recall that our guest Benoît Durand dealt with this same issue some posts ago and came to a contrary conclusion: that deterrence would be better served by envisaging individual sanctions (fines, disqualification and/or prison penalties) for the executives directly involved in cartel meetings. We haven´t really thought this through, but we’re not big fans of prison penalties, nor would we favor the imposition of disproportionate individual fines. A well designed disqualification sanction, however, would appear to us as a reasonable measure. Any views?
Monsieur Petit seems to have abandoned this blog in order to share his thoughts on an exclusive basis with US media. On Wednesday he was quoted again in The New York Times, this time in relation to
yet another a new investigation on Microsoft’s non-compliance with a Commission’s decision.
As you may know, the Commission issued a statement announcing an investigation over Microsoft’s possible non-compliance with the 2009 commitment decision which obliged it to include a brouser choice screen to enable users to pick a browser instead of using the pre-installed one (until then Internet Explorer).
Microsoft has also issued a statement apologizing and explaining that:
“We have fallen short in our responsibility to do this. Due to a technical error, we missed delivering the Browser Choice Screen (BCS) software to PCs that came with the service pack 1 update to Windows 7. The BCS software has been delivered as it should have been to PCs running the original version of Windows 7, as well as the relevant versions of Windows XP and Windows Vista. However, while we believed when we filed our most recent compliance report in December 2011 that we were distributing the BCS software to all relevant PCs as required, we learned recently that we’ve missed serving the BCS software to the roughly 28 million PCs running Windows 7 SP1″.
The Commission has anticipated that it might impose “severe” penalties.
Keith Hylton (Boston University) has stated that the Commission is overreacting because “there may be a few people on the planet, living deep in forests on the Marshall Islands, who are not already aware that Microsoft’s Internet Explorer is not the only browser available”.
The well-informed and ironic reader who has conveyed Mr. Hylton’s statement to us responds that “whoever at Microsoft was not aware that they had to include a browser choice screen in Windows must also live deep in the forests in the Marshall islands, and whoever told the Commission in December that such error had not happened must live in the woods next door”.
We lack any precise information about this investigation but it’s hardly conceivable that Microsoft would do this on purpose, so, just as Microsoft says, this is most certainly due to an unfortunate mistake.
In any event, this story shows that antitrust law does perhaps not worry some companies as much as we usually think. Most importantly, the fact that nobody had noticed until now that 28 million copies of Windows had been sold since February 2011 without the browser choice screen says something about how compliance with antitrust commitments is monitored…
Last Friday the European Commission confirmed that it has addressed a Statement of Objections to four traders of North Sea Shrimp over a suspected cartel. We learnt the news through one of the sites that we check several times a day: www.seafoodsource.com; see here).
Some of you have conveyed to us the suspicion that, in reality, DG Comp has sent this SOs in an attempt to force us to write about it. According to this theory, the guys at
Bubba Comp, DG Gump. DG Comp were worried about our silent week and decided to resort to the big guns: a food case. Judging by precedents (notably our well known endive saga), they knew that we wouldn’t let it pass by without a comment.
As credible as this theory may sound…. the sending of these SOs at this time of the year is in reality a classic piece of July desk clearing on the part of the Commission. Getting one of these right before the holidays is one of the occupational hazards of being a competition lawyer in private practice in Brussels (the other one coming the run up Christmas).
In any event, we should not be making jokes about this. It is a serious matter. Nicolas – a renowned shrimp consumer may moreover be a victim of this alleged shrimp conspiracy- One nonetheless wonders: have they caught the big fish? It certainly isn’t small fry!
PS. A Chillin’Leak: We have been told by very reliable sources that the Commission found the evidence for this case during a “fishing expedition”.
Last week we broke two records.
First, we broke our inactivity record. Christmas holidays aside I believe this was the first “blank week” in the two years of existence of this blog. The reason: I took a week off (some days of calm before a storm, or at least that was the idea…it didn’t quite work) and asked Nicolas to take care of the blog. You saw how diligent he was. In any event, we hope you were entertained by the comments to the last of our posts (they were practically posts in themselves, and from extremely qualified commentators).
Second, in spite of this inactivity we were rewarded by readers, by reaching 310,000 visits we overpassed Nicolas’ former blog The Antitrust Hotch Potch in terms of historical number of readers. For the sake of transparency: our 20,000 visits during June yielded $ 3.60 of revenues, unfortunately not enough for the two monthly beers we had hoped for
One more thing: A few days ago I had a conversation with Conor Maguire (who is doing a great job at Brussels Matters) about what we try to do at Chilling’Competition, how we try to do it, and where we get our ideas from. He mentioned in passing that he had liked one post where we acted as intermediaries for the sale of a competition lawyer’s car and one in which I ”advertised” my parents’ hotel. This conversation, as well as the fact that you tend to click more on gossip links than on serious ones (stats don’t lie!) spurred an idea: to act as an intermediary for the sale of my co-blogger’s former house. I already showed you his desk one (see here), but those of you
curious enough potentially interested can check out the whole house and ad here. (Btw, the pic at the top of this post is that of the house’s terrace).
The usual incentive applies: anyone who contributes to an aventual sale of Nicolas’ house will be rewarded with 3% of the price of the house… in Belgian beers.