Archive for the ‘Subversive Thoughts’ Category
Last Wednesday, 21st January, the General Court rendered an interesting Judgment in Case T-355/13, easyJet v Commission.
It is well-known that the European Commission has always enjoyed great discretion to reject, shelve or prioritize cases, traditionally under the widely used justification (sometimes pretext) of lack of Community/EU interest (as the case-law has, ever since Automec, acknowledged it may do). With the entry into force of Regulation 1/2003 the Commission was granted another two reasons to dismiss cases (not that it needed them); pursuant to Article 13 it could now dispose of complaints where “one authority is dealing with the case” already (13(1)) or where a complaint “has already been dealt with by another competition authority” (13(2)).
easyJet v Commission concerns the latter scenario.
The facts in a nutshell
In 2008 easyJet lodged three complaints against Schiphol airport with the Netherlands Competition Authority, based on national legislation governing aviation law and on competition law. The authority rejected the complaints by relying on the laws governing aviation (said to be inspired on the competition rules) and by resorting to its priority policy, which enables it to pick the cases with which it deals.
In 2011 easyJet lodged an abuse of dominance complaint with the European Commission. It acknowledged it had lodged similar complaints in the Netherlands and explained that these had never been assessed on the merits.
After two years (so much for the best practices), in 2013, the Commission rejected the complaint arguing, inter alia, that a national competition authority had already dealt with it.
In Wednesday’s Judgment, the Court rules:
1) That the Commission is entitled to reject a complaint which has previously been rejected by a competition authority of a Member State on priority grounds even if the latter has not examined the merits of the case. The Court explicitly endorses an interpretation whereby what’s important is that the national authority has “formally”, however superficially, “reviewed” the complaint (see, e.g. recital 27 of the Judgment).
2) That the above is valid also where, as in the case at hand, the national competition authority rejected the complaint in the course of an investigation conducted under separate provisions of national law (aviation law in casu) “on condition that the review was conducted in the light of the rules of EU Competition law” (see in this regard para. 46 of the Judgment).
In sum, the General Court rules that when a national competition authority rejects a case without having examined its merits, and without having undertaken an analysis on the basis of the competition law rules this is enough to consider that the said authority has “dealt with” the case within the sense of Article 13(2) of the Regulation.
A few comments
It is also widely acknowledged that judicial review in these cases –also starting with Automec- has been rather lenient. At one point some –like me- saw a possible change of trend in CEAHR, but hopes were later dispelled by Protegé (see here for our comments). This Judgment fits within the classic very deferential stream of case law in this domain.
Whereas it’s true that the facts of the case are very specific, my first inclination is not to share the Court’s reasoning; if you see it differently I’d be happy to discuss.
– First of all, I wonder how this all fits with a stream of case-law (actually cited in this very same Judgment), according to which “where the institutions have a broad discretion, respect for the rights guaranteed by the legal order of the European Union in administrative procedures is of even more fundamental importance; those guarantees include, in particular, the duty of the competent institution to examine carefully and impartially all the relevant aspects of the individual case”. (In the same sense see also the often forgotten recitals 79 to 83 of Automec itself). Given that the EU Courts require –at least in theory- that the Commission examine carefully all the relevant aspects of a case prior to rejecting it out of lack of priority, why doesn’t the GC require the same from national competition authorities prior to concluding that they have “dealt” with a case within the sense of 13(2)? Moreover, doesn’t the case law require that the guarantees provided by EU Law be also applied by national bodies when applying EU provisions?
– Secondly, I’m not sure the Commission needed this favor in a domain in which it effectively already enjoyed almost unfettered discretion. Indeed, it didn’t need to invoke Art. 13(2); had it simply said the case lacked EU interest it would have got away with it
– The risk, in my view, is that after this Judgments authorities will be able to dispose of cases out of prioritization reasons without having examined first the relevant aspects of the case, at was required –at least formally- by EU case law, just because another authority chose to do just that before.
In a way, the Judgment might accordingly make it much easier for authorities to play hot potato. Wanna-be complainants would be in between, in no man’s land, with the frustrating feeling that no one wants to even cursorily look at their case.
– The Commission would probably reply to the above that national Courts are still well placed to deal with complaints, that they’re moreover under the obligation to examine the merits of cases and that they have wider powers (such as that of awarding damages). Query: I wonder how the experience of losing a case that the Commission thought was obvious before a Belgian Court (see here) may have altered the Institution’s perception as to how well placed judges are to deal with competition cases. I also think that the Commission often trusts judges to deal with cases that would need an EU-wide consistent solution, ideally from an experienced specialized agency. For instance, the Commission very recently rejected a complaint against the UEFA Fair Play Rules alleging that Belgian Courts were well placed to deal with it (see here; query: is that really a case that should be dealt with by a national Court instead of by the European Commission?)
I’m typing live from the Swedish Competition Authority’s top-notch Pros and Cons conference, which in this 13th edition deals with the pros and cons of two-sided markets.
Despite the fact that the conference has been opened by myself and will be closed by Nicolas Petit, I promise this is a serious and highly reputed event.
In my intervention I have focused on what I’ve called the double duality of (practices carried out in) two-sided markets. A paper on the subject is in the pipeline (to be finished when work and baby allow), but most of the views I just developed are contained in this presentation (comments would be very welcome):
– I watched life –rather heard while working- the European Parliament hearings on the new Commissioner for Competition, Margrethe Vestager. She did so well that I couldn’t help thinking that perhaps she should have been given a more politically decisive portfolio (it also made me compare her with many politicians in my home country, but that’s another story).
– It’s been a while since our last quiz. I offer to pay lunch to whoever is able to tell us what was the new and special method for calculating fines that the General Court says to have used in this case (see in para. 5 the mysterious reference to “the Court’s choice of a methodology that diverges on purpose from the methodology laid down in the 2006 Guidelines”).
– Last Friday the Commission approved the acquisition of Whatsapp by Facebook (on which we had commented here). I’m looking forward to reading the decision, but from the press release I gather that the Commission has significantly refined the approach taken in Microsoft/Skype (e.g. no trace of the “inner circle” argument). Don’t know why that would have been necessary considering that, according to the General Court’s Judgment, that decision was irreproachable…
– Remember our discussion on the Groupe Gascogne Judgments (see here and here)? It has now been published on the Official Journal that Gascogne has introduced a damages action before the General Court…against the General Court: see here.
– If you have a minute (which I guess you do if you are reading this) read Kevin Coates’ new post: Gilding Refined Gold and Painting the Lily
– It is still possible to register to the Competition Day conference within the Brussels Technology Days series of events. I’ll be speaking on a panel discussing the Android proto-case together with Trevor Soames, Thomas Vinje and Neil Dryden. For more info, click here.
On the tax-related State aid investigations. Many newspapers opened this week with big headlines on the alleged news that the Commission had adopted a “preliminary decision” regarding the State aid probe into Apple (see e.g. here). I’m a bit intrigued by what’s behind this press campaign; the only news is that the Commission has published in the Official Journal decisions that had already been adopted before the summer. This sort of publication is never news, so why the fuss about it now is beyond me.
[It is, by the way, interesting to observe how some developments are “sold” twice, whilst others –including the closure of infringement proceedings against luxury watch manufacturers- go under the radar (disclaimer/advertising: my firm represented one of the main companies subject to that investigation)].
Given that I’ve lately been working on loads of tax-related State aid cases before the General Court I’ve developed a particular interesting in these matters. We might comment more in-depth on them in the future; for the moment, I’ll simply point out that by questioning not national taxation systems or tax rulings in general but rather APAs (advance price agreements) the Commission might be opening Pandora’s box (how many multinationals –including many EU ones- have similar arrangements?; could all of those now be challenged under State aid rules? ) For my previous comments on these issues, see here.
On the Google search investigation. The Google case has been on the news again, which, paradoxically, is no news. It’s been a while since we last commented on this investigation (partly because there wasn’t anything substantial on which to comment, and partly because the susceptibility around these issues is quite acute). One of the main contributors to this blog –Pablo Ibañez Colomo- gave his views to Global Competition Review a few days ago; Pablo explained that “[i]t is very controversial to argue that, as a rule, article 102 [prohibiting abuse of dominant position] requires all dominant companies to give access to their facilities – including operating systems or search engines – on non-discriminatory terms and conditions (…) I do not believe there is case law supporting this understanding of the provision.” According to Pablo, “there is the expectation that remedies are justified even if it is not clear why Google’s conduct is illegal”.
Last time I wrote about the case I made some comments on the politicization of competition law enforcement (see here). Since then, Vice-President Almunia has explained that politics are being left aside of the case (here, ehem). So, politics aside, let me focus on a purely legal point without discussing who’s right or wrong:
The complainant’s interesting main legal argument now seems to be that Google’s proposed commitments do not address the concerns set out in the Commission’s preliminary assessment (see, e.g. here). This a most interesting claim, and one on which many –including myself- can’t really comment because we haven’t read the preliminary assessment. In fact, no one other than Google was supposed to have seen it (according to the Manual of Procedure, “the complainant has no right to a hearing or to receive a (non-confidential) copy of the Preliminary Assessment or to have access to information”). In this case, however, the Hearing Officer granted a request for access on the part of some of the complainants (see the previous hyperlink for a source).
Now, consider the future implications of this move: in the past the Commission could overdo a bit its concerns in its preliminary assessments because, after all, they are not subject to the same requirements as the SO, would not be subject to any rebuttal on the part of its addressee, unlike SOs do not need the approval of the Commission’s President and, at most, could give the Commission a stronger hand in commitment negotiations (which, regardless of what Alrosa says, obviously exist). Now that the Commission is aware of the fact that preliminary assessments will/could be accessed by complainants, will it have to show more self-restraint? Will this have an impact on future commitment negotiations? Would these problems be avoided if the Commission was required to adopt a proper SO prior to entering into commitment negotiations?
On Android. I also saw some headlines this week anticipating, once more, the initiation of a formal investigation into Android. As frequent readers will recall, I’ve already written quite extensively about this (see here). On October 15th (the same day in which, by the way, the Commission will be making public an avalanche of decisions…) I’ll be speaking about it at a conference in Brussels, so in case anyone has thoughts about the case feel free to send them my way.
On the Euribor probe and the role of the Ombudsman. Last week, the fact that Crédit Agricole had resorted to the Ombudsman to complain about a possible bias on the part of the Commission also hit the news. CA’s claim has to do with the Commission having adopted a settlement decision finding a cartel infringement in relation to the Euribor prior to concluding the infringement proceedings against those who chose not to settle (see Gaspard Sebag’s piece for Bloomberg here). This obviously raises most interesting procedural questions, which I’d nevertheless tend to think pertain more to the realm of judicial review than to the Ombudsman. The piece includes a quote of mine which is a candidate for the prize of ‘dullest comment of the year in the press’: “It’s always uncomfortable to have to deal with the Ombudsman”. A deep thought that is… ;)
Wouter Wils (one the finest legal minds at the Commission, currently Hearing Officer and one of our Friday Slot interviewees -see here-) has today released an article that will certainly have a significant impact in the discussions on the convenience of following a “more economic approach” to abuse of dominance (and that is likely to be highly controversial, particularly among competition law economists).
We’ve recommended many other articles before, but this really is a must-read.
By the way, Wouter was inspired to write the article by Pablo Ibañez Colomo’s comment on the Intel Judgment in this blog and by the ensuing discussion (see here).
The piece (soon to be published in World Competition) is now available here:
We very much look forward to the debate that this piece will spur.
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:
(by Pablo Ibañez Colomo)
Voices that relativise the problems with Article 102 TFEU case law are not infrequent. It may be true that the case law is not beyond reproach in all respects, the argument goes, but perfection is not of this world. The fact that rulings are often criticised simply means that Article 102 TFEU is an inherently controversial provision and that the stakes in abuse cases are generally very high, not that there is something fundamentally wrong with the preferences expressed by EU courts. And in any event, the alternative, economics-based, approaches have their problems too. The current case law is just the expression of a legitimate choice.
There is of course some truth in this position. At the same time, I find a bit defensive and as such problematic because it can become an obstacle to an honest and constructive exchange of ideas. I can think of at least a fundamental aspect that is uncontroversially (or objectively, if one prefers) wrong with Article 102 TFEU case law. What makes it even more interesting is that it fails to attract the attention that, in my view, it deserves. We all know that exclusive dealing and loyalty rebates are (absent an objective justification) abusive under Article 102 TFEU. The assumption underlying this rule is discussed far less often and is crucial to understand the case law. In paragraph 77 of Intel, the Court repeats the old formula whereby the abovementioned practices, as opposed to quantity rebates, ‘are not based – save in exceptional circumstances – on an economic transaction which justifies this burden or benefit but are designed to remove or restrict the purchaser’s freedom to choose his sources of supply and to deny other producers access to the market’.
This statement, as a matter of economics, is incorrect. Contrary to what the Court holds, there are perfectly valid pro-competitive justifications for exclusive dealing and loyalty rebates. I am inclined to believe that everyone at DG Comp and the Legal Service agrees by now with this idea, which has long been part of the mainstream. Suffice it to check any textbook on industrial organisation or the economics of competition law. To mention the three I had in my office when preparing this post, take Carlton & Perloff; Bishop & Walker; or Niels, Jenkins & Kavanagh (Hans Zenger’s piece on loyalty rebates is great too). Given its peculiar cost structure, some of these justifications are of obvious relevance in the microprocessor industry.
Article 102 TFEU case law will not evolve until the ECJ acknowledges that a rule-based approach to exclusive dealing and loyalty rebates is grounded on a misguided economic assumption. Interestingly, a shift in this direction would not require a major revolution. The ECJ would just have to accept – finally – that what is true under Article 101 TFEU must by definition be true under Article 102 TFEU. In paras 10-12 of Delimitis the Court holds that there are perfectly valid justifications for exclusive dealing and – by extension – for loyalty rebates. As a result, they are not restrictive by object. Article 102 TFEU case law cannot be based on the opposite assumption (i.e. that these practices are anticompetitive by their very nature because they have no economic explanation other than the exclusion of competition). Paragraphs 89-91 of Intel show the difficulties into which EU courts run whenever the tension between these two lines of case law is raised (Van den Bergh Foods being another excellent example).
I am convinced that an effects-based approach would follow logically from the suggested shift. The additional arguments raised in subsequent cases to justify the current approach are not particularly persuasive. The fact that dominant firms have a ‘special responsibility’ that derives from their status does not mean that an effects-based approach to loyalty rebates and exclusivity is not conceivable. There are recent cases, like Post Danmark and TeliaSonera, where the ‘special responsibility’ of dominant firms is seen as compatible with requiring evidence of an anticompetitive effect.
Paragraph 77 of Intel also made me think of the relationship between law and economics in competition law. It is interesting that the General Court reiterates the Hoffmann-La Roche formula to make it clear that there is a long line of case law supporting its position. ‘Exclusive dealing and loyalty rebates have no pro-competitive justifications because we have always said they do not’, the judges appear to claim. What is an economic argument is dealt with, in other words, as a legal one. From an economic perspective, to be sure, the fact that EU courts have consistently relied on the same assumption does not make the latter any less incorrect.
The Intel judgment also made me think of something I often say. Economic analysis is sometimes presented as an exogenous force that has interfered with EU competition law since the 1990s. What wrong assumptions such as the one discussed in this post show is that this view is not accurate. Economics is hard-wired into competition law – it is an integral part of it. The only debate should be whether to rely on one’s more or less accurate intuitions (à la market definition in United Brands, for instance) or to trust instead the analytical tools developed over several decades by competent individuals devoting their professional lives to a systematic understanding of the economic side of the discipline.