Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Of Politics and Competition Law (and on the Google cases too)

with 6 comments

In a recent post on the diluted legality of competition law I voiced out the view that our discipline could partly be losing its last name, a development for which I blamed a number of factors. However, some developments in the past few weeks have led me to think that perhaps I missed a critical feature: the increasing involvement of politics in the application of the competition rules.

To be sure, since its inception and all along its development, antitrust law –as a public policy tool at the core of the economic Constitution of any State- has had as much of a tight link with politics as it has with economics. But whereas economics not only provides a justification for the existence of the rules but also plays an important role in the development of legal rules and in individual cases, politics had traditionally exerted its influence in the exercise of enforcement discretion, and arguably not so much in the development of the rules and the outcome of cases.

The link between politics and competition enforcement might have been more obvious at the national level, where national competition authorities often are attached (organically or otherwise) to the Government at issue, which often appoints its members in the light of political considerations. It’s against this backdrop that one has to interpret the European Commission’s recurrent calls for independence of national competition authorities (most recently on a Staff working paper issued last Wednesday).

I think it’s fair to say that the influence of politics on the European Commission’s application of the competition rules has been more tenuous. For the most part, EU competition law has developed under the auspices of a firm political view on the advantages of competition in a system of social market economy, but in isolation from short-sighted political interests/small politics. This is largely explained by the theoretical legal status of the Commission as a body independent from Member States, and by the practical status DG Comp as a quasi-specialized agency within the Commission that one was not to second-guess. However, there are signs that this might be changing. In recent times national politicians have increasingly given their views on how competition law should be applied (here is one very recent example), and so have members of the European Parliament and a number of EU Commissioners. Moreover, they are doing so not only when their national interests are at stake (political solutions have been and are all the more common in State aid cases and in some high-stakes mergers), but also concerning investigations of potential infringements.

There are several examples of this evolution. Most recently we have seen politicians –mainly Chancellor Merkel- vouching for the approval of the Telefónica/E-Plus deal (see here). But perhaps the best illustration of the trend can be found in the Google case, on which we have written extensively on this blog.

This is a case in which DG Comp has extracted (arguably using the commitment procedure and its impressive record in judicial review of 102 decisions to stretch the boundaries of current legal standards) a set of significant commitments on the part of Google (see my comments here), going beyond what US authorities did. This could be regretted by people interested in the clarity of the law, but would normally have been seen as a practical enforcement success on the part of the Commission. However, a number of motivated and well-funded complainants –led by some smart lawyers who know how to play with the system and who deserve credit for getting near what I would’ve thought was impossible- now start to seem capable of derailing the commitment procedure by politicizing it. First, the German and French ministers for economics wrote a most unusual joint letter to Vice-President Almunia asking for a tougher stance on Google. And now, a widely extended rumor has it that a few EU Commissioners are being persuaded not to approve any Article 9 decision during Mr. Almunia’s tenure. As you can imagine, not all Commissioners are persuaded with sophisticated legal arguments related to evidence on foreclosure and the such, some being more receptive to political lines alien to antitrust analysis, mainly “don’t let these guys off the hook because they don’t pay taxes in Europe and because the US spies on us”. Obviously, this has nothing to do with the law, or at least with competition law.

It’s difficult to guess how this will turn out. As recently explained in the FT (Alex Barkers’s coverage of EU competition issues is, by the way, excellent) “[s]ome people involved think the pressures make it more likely Mr Almunia will decide to launch a formal probe of Android”. And indeed, the Android investigation may be the second leg of this political game, and once again the Commission might be under enormous pressure to take a hardline. [By the way, if you’re interested in reading about the competition issues involved in the Android investigation, I would very much suggest you read the insightful pieces recommended by Kevin Coates here ;) as well as this interesting brand new piece on the matter (particularly enjoyed footnotes 26 and 127…) (thanks to Jorge Marcos –ULg- for drawing our attention to it)]

Much more could be said about the politicization –and possible transformation- of antitrust and I look forward to your comments, but I’ll close it off now (mainly because the Word Cup final is already on). Some of you will recall my piece on Antitrust and the Political Center, in which I outlined some views on how antitrust embodies a centrist political ideology and can contribute to the expansion of sensible political views internationally. Well, in my view, the same is not true the other way around; infusing minor, short-sighted, political goals into the application of competition law can only contribute to disfigure even more a branch of the law which –let’s not forget- is, on its sanctioning dimension, quasi criminal in nature.

The political agreement in having technical competition rules applied by independent agencies is now an established idea, heralded internationally by the European Commission. And it makes sense because in spite of its unquestionable benefits, competition law’s constituency is diffuse and unable to mobilize politicians in the right direction. If you ask me, competition law can better serve its goals when dissociated from small politics.

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Written by Alfonso Lamadrid

14 July 2014 at 4:58 pm

6 Responses

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  1. OK, it’s not a comment to this interesting entry, but it’s related, I guess. When it comes to Google most people think of the search engine and in this regard the following question pops up: what made Eur-Lex decide to put robots.txt on their site so that anything in eur-lex suddenly becomes lost to the search engines of this world? Of course, this doesn’t just affect Google but it does make one wonder what the European Union is on to when it comes to the internet? Does anyone have a clue for the reasons that underlie this decision (other than the obvious reason that the EU exercises some emanation of its right to be forgotten, which would be funny in a way)?

    More related to this topic: even specialised and (formally) independent authorities are subject to influences that have nothing to do with undistorted competition. wanting to establish oneself as a tough authority that uncovers ‘big’ and ‘important’ cartels and imposes ‘fines that matter’ can tempt even the most politically insensitive authority to come dangerously close to the boundaries of competition law. Then again, when I discuss competition law enforcement with my wife who is a criminal law judge, she always wonders about the serious sanctions that are imposed on the basis of something that boils down to ‘you shall not restrict competition’.

    This is particularly problematic when the legislator barely has an idea of what competition is, how it can be measured and how it can be restricted. What then is the mandate given to the competition authority in charge of the enforcement? Having a background in environmental law, I feel that a comparison with this system can help. In environmental as well as competition law, there is a significant role for the executive, acting on a basis of a mandate set by the legislature. The main difference is that the mandate set by the environmental legislature is one where the latter has made an informed choice for a certain level of environmental protection in relation to the other objectives that are involved (traditionally economic growth) on the basis of loads of impact studies and environmental risk analyses. I haven’t come about many such debates surrounding the EU competition rules or the competition rules in the Netherlands. I know that the recent amendments of the German Act against restrictions of competition involved such informed debates. So to my mind the first thing that needs to happen is to politicize competition law. Not at the executive level, but at the legislative level.

    Hans

    15 July 2014 at 10:58 am

  2. It now seems that politicians have figured out a way of politicizing the quest against Google also at the legislative level:

    http://pctechmag.com/2014/07/germany-cartel-office-says-google-could-be-regulated-as-utilities/

    Alfonso Lamadrid

    15 July 2014 at 2:58 pm

  3. It was appropriate that you wrote this blog during the World Cup. As we know from football, it can seem easier to play the man rather than the ball. Similarly it can be tempting, but wrong, to dismiss as “politicisation” when national and European politicians, and even other Commissioners, express concerns about perceived errors in such an important case. There is an unprecedented number and range of complainants for an individual investigation, including the first antitrust complaint by BEUC. The substance of their submissions merits more serious attention.
    The Compeition Commissioner is himself a politician, and that is not meant as a criticism. However he has had a great deal to say in the press about the progress of this case and his frequent contacts with Google, which gave rise to widespread concerns that the complainants’ substantive arguments might not be receiving equal consideration. The complainants that I have spoken to would much prefer to see this case decided transparently (including an oral hearing) on the basis of law and economics but cannot be criticised for becoming anxious that the “checks and balances” were being overridden in the rush to obtain a package of commitments, however unsatisfactory. And despite your comment that they are “significant”, the commitments are indeed wholly unsatisfactory which is why the company offering them is so keen to have them approved while the purported beneficiaries are asking to be spared that kindness.
    Nevertheless I welcome your initiative to provoke a more public debate. And in the interests of transparency I am happy to declare, as I always am, that I have a clear interest as my firm represents at least two of the complainants. I didn’t notice any declaration by the author but do he or his firm have any connection with any of the companies involved in this affair?

    Stephen Kinsella

    15 July 2014 at 5:08 pm

    • Many thanks for the comment, Stephen. It’s a privilege to have you commenting on this, and it’s also much better for readers the blog to have all views. I also hope you appreciated the compliment in the post.

      As to your question, none of the people who have written about the Google case on this blog (that is Nicolas Petit, Pablo Ibanez and myself) have any professional interest whatsoever in it. Every time I’ve written about a case in which i was involved (which for obvious reasons has been exceptional) I’ve of course disclosed it. I do, as you know, nevertheless have friends and appreciated professional acquantainces working on all sides of the case.

      That means I’m not conflicted (I have in the past worked in other unrelated cases against some of the complainants, but I’m sure they could forgive that) should you want to recommend me to any current or future complainant, which I suppose is why you were asking ;) The same goes for Google, by the way. If I ever am hired for this case I’ll give it it due publicity, don’t worry.

      Since it’s nevertheless true that most people commenting on the case may not have voiced out views which are in line with yours, in the interest of the public debate I’ll be most happy to open up this platform to you any time to have your view on the legal -non political- aspects of the case.

      Alfonso Lamadrid

      15 July 2014 at 7:29 pm

  4. Thanks Alfonso. Of course I accept that you have no personal involvement and would have declared it if so.

    Like you, I am far more interested in the substance which is why I had questioned the “politicisation” angle. I had also taken issue with your categorisation of Google’s commitments (in their 3rd iteration and counting) as “significant”. I do indeed agree with you they would appear to go further than was obtained in the US. But let’s not forget FTC Commissioner Rosch’s damning assessment of that outcome: “after promising an elephant more than a year ago, the commission instead has brought forth a couple of mice”.

    I recognise it will be difficult to persuade you of the hollowness of the commitments by advocacy alone. Were the Commission to permit it, I would gladly share with you the Preliminary Assessment, the pre-rejection letters and responses etc. I would be particularly keen to show you the evidence provided by Google to demonstrate the effectiveness of the latest commitments, but unfortunately, based on our limited access to the file, there doesn’t appear to be any. That is why we had wanted a proper market test of those commitments on the basis that they either represent no real change to version 2 and so should be rejected or they represent a substantial change and require a thorough objective assessment.

    I know your blog is read widely. Perhaps if this gets picked up by Google or its advisors they would like to join the debate and they could start by sharing any evidence they have provided to the Commission to demonstrate that the commitments will cure the problem of diversion of traffic and revenues which was criticised in the Preliminary Assessment. In fact, given this theme of transparency, I see no reason why the parties could not agree to organise their own “oral hearing” in Brussels in early September at which all these issues could be openly debated and tested.

    Stephen Kinsella

    16 July 2014 at 3:08 pm

  5. Most interesting proposal. If you and/or Google want to use this blog as an intermediation mechanism I’d be happy to bill you all on FRAND conditions.

    Btw, we already invented the multi-sided format some time ago: http://chillingcompetition.com/2012/09/26/how-to-work-less-chillin-competition%C2%B4s-menages-a-trois/

    Alfonso Lamadrid

    16 July 2014 at 5:01 pm


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