Archive for the ‘Subversive Thoughts’ Category
In the competition law world there would appear to be too many prizes, awards and things of that sort. If you or your firm haven’t received an award, or at least a nomination, in the past few days, then either you’re a loser or your firm should increase its sponsoring budget :) (before anyone reacts, I’m kidding).
Someone should one day do an awards ranking and give a prize to the worst one. In the meanwhile, we at Chillin’Competition recently created the Stupidity of the Day Award, which is a purely merit-based award given to the person who contributes to the development of competition law and policy with the… most original thought.
Our first proud recipient was the then French Minister for Industry (appointed today Minister for the Economy and New Technologies (!); this is not an April Fools’ Day joke), Arnaud Montebourg, who said that the European Commission lives in a “legal delirium” and “makes up rules that don’t exist in the Treaties in order to perpetuate its powers” and that Vice-President Almunia is an “obsolete liberal integrist”.
And our second winner is….. Arnaud Montebourg again! He’s a goldmine. Look at this excerpt from a recent interview (Le Figaro, 3 février 2014)
“Quand je reçois l’Autorité de la concurrence, je lui dis : vous êtes contre les ententes. Moi, je les organise ! Qui a raison? Vous êtes nommé, je suis élu, donc c’est forcément moi !”
Translation: “When I receive the competition authority I tell them; you’re against agreements between companies. I arrange them! Who’s right? You were appointed, I was elected, so I’m certainly the one who’s right!”
(Thanks a lot to Benoît Durand (RBB) for this little gem!)
When one reads these things a thought comes to mind. Some say the problem with competition policy is that it doesn’t have constituents pushing for it; well, I don’t know; this might be politically incorrect (as if the rest of this post weren’t), but sometimes I’m glad that (for the most part) politicians keep their hands off it. This last thought gives me a new chance to once again promote my priZeless piece Antitrust and the Political Center and the follow-up interview).
It’s been two months since Nicolas temporarily left this blog for a half a year stint at DG Comp’s Private Enforcement Unit.
In the course of this short period he’s managed to single handedly unblock negotiations on the Commission’s proposal for a Directive on Antitrust Damages, and he’s adapted very well to the fonctionnaire lifestyle (meaning that he’s now taking some days of holidays) ;) (jokes aside, congrats to Eddy de Smijter and to the rest of the people involved in the negotiations about the Directive).
As he anticipated in his farewell post, Nico is maintaining all academic activities. Within that context, he’ll soon be participating at a conference on one of is favorite topics organized by his University. So, on 24 April the Liège Competition and Innovation Institute will be hosting a conferece in Brussels on Conflicts of Interest, Ethical Rules and Impartiality in EU Competition Policy .
Although Nicolas knows that I don’t share the same passion for the topic (or maybe precisely because he does?), he’s asked me to advertise the conference here. So voilà. It will feature representatives from the General Court, the European Commission, the OECD, the Belgian Competition Authority, as well as lawyers in private practice, The New York Times’ Brussels correspondent and ULG Professors and Researches, including Nico himself. Even Emilly O’Reilly (the current Ombudsman, whom you may remember from this) is on the tentative list of speakers.
Why do I say I don’t share the passion for the issue? Because whereas some improvements could possibly be made in the rules -mainly regarding their transparency-, I think we should be careful in not overshooting the mark. Otherwise we’d risk creating the impression that there’s a major endemic problem where I’m not at all sure there’s one (I, for one, I’m much more concerned about the Commission’s recruitment processes and about internal rules that oblige experienced people to rotate jobs too often or too soon). Anyone working in Brussels for some time will have worked with, against and before friends or professional acquaintances (sometimes the line is drawn too thinly). In my experience who you have on the other side doesn’t matter (at least for good: I do know of situations where lawyers’ friends deciding on cases have been unnecessarily harsh on them just to make a point and dispel any concerns, and that’s as unfair as the contrary) and there are enough checks and balances to avoid problems. The only positive consequence of working before people who know you is that they will perhaps trust you, provided that you have never proved not worthy of that trust (and competition law practice is also a game of repeated interactions), but I don’t see what’d be wrong about that.
As I told Nico back when he wrote his controversial piece on this subject, what’s different in our field is that our “relevant market” is very narrow; we’re not so many lawyers/economists repeatingly interacting among us and with the same academics, officials and judges. The only solution to the perceived problem, as framed, would be to have virginal public officials and lawyers who have not moved around jobs, who know no one, who haven’t studied at the same places, who haven’t worked with different people and who haven’t established a personal rapport with those in their field. In my view, at least, in that case the cure (assuming it were feasible, quod non) would be worse than the disease.
That said, considering the speaker line-up I’ve no doubt the conference will be most interesting.
The European Commission has in recent years been very active applying State aid rules to tax provisions and regimes. The first paper I ever wrote back in 2004 (don’t read it, it was initially done for a tax course and I was a 20 year old student…) dealt with those issues; now, ten years later, I’ve taken interest again on this subject and am currently involved in a handful of cases dealing with the taxation/State aid interface before the General Court.
The fact is that the Commission has recently undertaken a more proactive and prominent role in resorting to State aid rules to public initiatives that, in its view, facilitate aggressive tax planning. Those of you attending the 2014 Competition Forum back in February will recall that the Commission held a panel on “Taxation and Competition Policy”, in which it inquired about the role of State aid investigations in tackling tax evasion, tax fraud and aggressive tax planning (a video recording of the discussion as well as the transcripts of the speeches are available here).
Against a background of lack of political consensus on how to deal with harmful tax competition and what is seen as tax avoidance, the Commission is keen on being regarded as a proactive authority (it’s not the first time that competition policy is used to achieve results that couldn’t be attained by governments and legislators).
As part of this effort, the Commission has sent information requests to various Member States in order to assess the compliance of tax ruling practices (advanced binding decisions in fiscal matters which may allow for special treatment for some particular companies) and patent box regimes (incentives designed to encourage companies to make profits from their patents) with state aid rules. Yesterday the European Commission went through the trouble of issuing a Press release aimed at naming and shaming Luxembourg for having failed to provide information (specifically, the names of thelargest 100 companies benefitting from the patent box regime) , invoking fiscal secrecy.
I was quoted yesterday in a Bloomberg piece in relation to this news, so I though it’d be interesting to
recycle my thoughts explain my views in a bit more detail here:
This is a highly sensitive area where publicly visible messages (such as yesterday’s press release) may send powerful signals and give rise to concern on the parts of governments and companies, and where playing to the gallery might therefore be considered useful at times. That’s part of the game and shouldn’t surprise anyone.
But if we’re realistic, we should realize that (for as long as fiscal policy remains within the realm of nation States), there’s a limit to what can be achieved with State aid rules, and that it’s doubtful that the current investigation, focused on patent box regimes and tax rulings, will yield any meaningful results:
- Patent box regimes have been authorized in several Member States, and the Commission has consistently accepted that they do not confer the selective advantages that would qualify them as State aid.
- With regard to tax rulings –and whereas I’m not aware of the details of the investigation- even in the event that the Commission were to find incompatible State aids, this would only have the effect of suppressing divergent tax treatment within the Member State at issue (the Commission can only identify as aid deviations from “the system of reference” provided by the State’s standard tax regime ). This would therefore not at all address the main, big picture, concern linked to divergent treatment across, and beyond, different Member States.
It’d nevertheless be interesting to follow developments on this area. The amounts that could be in play for many companies would make any antitrust fine look insignificant. Anyone in need of a lawyer? ;)
(again by Pablo Ibañez Colomo, who’s covering up for me this week)
It is always tempting for firms in sectors in decline to collude. But a cartel may not always be feasible or successful. Sometimes, major competitors have no interest in playing the game (this may be so for various reasons; competitors may have a different cost structure, may be more efficient or use a different technology). The next trick is well known. If private collusion does not work, turn to the State to enforce an official cartel or to (bluntly) eliminate competition from other players. You want a well-functioning and sustainable cartel? Make sure that anti-dumping duties are imposed on your heartless competitors from other parts of the world.
Montebourg, who has become an endless source of competition-related stories, has been quite open (I admit he is very candid, both in the English and the Spanish sense of the word) about his dislike for Free Mobile and has even taken active steps to make its life more difficult. The operator has emerged as a phenomenal maverick, bringing much needed dynamism to the French mobile market. But apparently prices are too low for Monsieur le Ministre’s taste and French consumers, as responsible and forward-looking citizens of the Republic, should pay more for their calls (he has in fact referred to the ‘excesses of low-cost’). Needless to say, the three incumbent mobile operators are not particularly unhappy about the whole deal.
The proposed Google tax in Spain provides yet another example of State-enforced collusion, albeit a more subtle one (which is not difficult given that our dear Arnaud is leading the way in the abovementioned example). Traditional newspapers struggle to survive in Spain. Advertising revenues have been in steep decline for years and media groups are heavily indebted. The solution? Charge Google, which has become the default cash-cow (and access-cow), for the use of non-significant excerpts (which, I would mention in passing, sounds oxymoronic from a copyright law perspective).
For the Google tax to work in the interest of traditional newspapers, all media, including Internet-based papers (which have become very popular in Spain) need to play by the rules. How can this be achieved? Centralise the negotiation of the compensation and, more important, make it impossible for newspapers to opt-out of the regime. That is correct. A key feature of the proposed legislation, as I understand it, is that Internet-based papers will benefit from the system even if they do not want to (and some of them have already been quite open about their opposition). The government seeks to create, in other words, a watertight cartel protecting old media models from competition and slowing down their (inevitable) decline. Who knows, maybe the new Spanish super-quango will do something about it (this is a joke).
Why do I say that this proposed legislation is twice the perfect cartel? Those who are interested, as I am, in media law and freedom of expression issues, will have quickly understood. Governmental action cannot be expected to be subject to effective scrutiny and criticism (which, going back to yesterday’s post, is a precondition for progress to occur) when the media need legislative and financial protection to survive (centralising the negotiation of the compensation makes traditional newspapers even more vulnerable to pressures from the executive).
Our last post revolved around a well-known quote from Philip Areeda that explains the evolution of the law in terms of judicial inertia/judging by catchphrase. Areeda’s explanation has the virtue of verbalizing brilliantly in simple and intuitively correct terms a human factor that explains why some legal rules may at times evolve beyond the limits of their logic. [To be sure, as noted elsewhere his explanation certainly applies not only to theories that expand liability, but also to those that limit it; in fact, the example I used may arguably refer to the latter category].
In my view, the idea underlying Areeda’s theory explains many other behaviors and situations in areas beyond competition law. At the end of the day, it is about people adopting a simple pre-established view or prism that makes further reflection unnecessary which, in turn, makes the process of forming a view much easier. We do that all the time in many other fields, politics being one of them (if, for instance, one dogmatically assumes that State intervention is always bad (think of Tea Partisans…), then one has a
simplistic solid view on many complex specific instances without the need for further reflection; yep, this is one of my recurring themes). Uncertainty and doubt feel troublesome, but certainties -even when mistaken- are comfortable, save a lot of effort and provide seemingly confident opinions.
Judges may at times certainly favor simple pre-defined solutions uncritically (Areeda blamed the fact that there were “too few judges experienced enough with the subject to resist” the temptation of applying previous rulings uncritically), but they’re not the only ones. Think, for instance, of a group which, by definition, is not experienced enough with the subject to resist the temptation to assume stuff uncritically: students.
In the past few days I’ve had various interactions with students from various backgrounds, and I have again been reminded of how new generations of competition lawyers almost universally coincide in the view that the case law and the decisional practice (particularly, but not exclusively, in the domain of Art. 102 TFEU) is fundamentally flawed, absurd, “ordoliberal” and almost crafted by lunatics. But once you scratch below this initial thought, it seems that for some resason students often feel it must necessarily be THE right answer even if they can’t always explain why (which is ironic when what’s criticized is the alleged lack of analytical content in current rules and doctrines). To be sure, I’m not saying that the case-law is perfect (which it probably isn’t, but one needs to understand it and to reflect on it in order to have ideas on whether and how it is to be improved), nor that this is the case of all students, nor that professors don’t do their job right (although not all of them are Areeda either), but I like it better when I see young lawyers who have reasoned doubts than when I see them with unreasoned certainties (I, for one, have very few competition law-related certainties; in fact, I’m not even sure of whether the criticism I’m expressing here is entirely justified). And false certainties may be more common in relatively complex yet non-scientific disciplines, like ours.
Drop by drop, this process whereby some people learn formed opinions instead of the tools with which to form them might also have a crucial impact on the evolution of the law. As new generations get to higher roles (clerks, then Judges, etc), their preconceptions may follow. And, as Areeda noted, it wouldn’t be until their expansion became ridiculous that the process of cutting back would begin (perhaps engendering an analogous process holding contrarian views).
In 1989 late Philip Areeda (picture above) wrote one of the most influential and cited antitrust pieces in the history of the discipline: Essential Facilities: An Epithet in Need of Limiting Principles, 58 Antitrust L.J. 841. I recall my first reading of this article as student at the College of Europe and how I truly enjoyed it (at roughly the same time I remember having felt the same about Joseph Weiler’s The Transformation of Europe) (yes, those were two good indicators of geekishness). From time to time I’ve gone back to that piece from Areeda, and as a fan of pendulum-based evolutional/historical theories, I’ve quite often cited one particular excerpt therein; here it is:
“As with most instances of judging by catch-phrase, the law evolves in three stages: (1) An extreme case arises to which a court responds. (2) The language of the response is then applied -often mechanically, sometimes cleverly- to expand the application. With too few judges experienced enough with the subject to resist, the doctrine expands to the limits of its language, with little regard to policy. (3) Such expansions ultimately become ridiculous, and the process of cutting back begins“.
I think this captures the evolutionary process of the law in many other areas of law in general and of competition law in particular. To mention only one among many possible examples, I used it some days ago to explain the evolution of the notion of the “single and continuous infringement” under Art. 101 TFEU.
There’s an interesting additional thought in relation to this quote. A few years after this piece was published the ECJ ruled on Magill, and I think it’s not at all unreasonable to say that Areeda’s piece was pondered by the Judges in that case (see, and cast your vote, here). Now, if you think about it, Areeda in many ways anticipated how the evolution of the law on refusal to supply would discur in Europe:
(1) Magill was a extreme case to which the Court responsed with a reasoning that was very much tailored to the facts at issue (a point often forgotten); (2) The language of the response was then applied -possibly mechanically, as an illustration of judidicial inertia (not to be confused with stare decisis)- to other factual settings and, with too few judges experienced enough with the subject to dare to nuance it (?), the Magill criteria consolidated in cases like Bronner and IMS. (3) Their consolidation as the sole relevant criteria ultimately became perhaps unreasonable and inconvenient, which led to an attempt to nuance them [the Commission's -in my view very reasonable- claim in the first Microsoft Decision that “there is no persuasiveness to an approach that would advocate the existence of an exhaustive checklist of exceptional circumstances and would have the Commission disregard a limine other circumstances of exceptional character that may deserve to be taken into account when assessing a refusal to supply.” (para. 555)].
As you know the the General Court did not follow the Commission on that particular point, not because it disagreed, it just didn’t need to rule on that point because it thought the Magill criteria were in any event fulfilled. That was done with the aim of minimizing the chances of getting quashed in an appeal and at the cost of some legal contortionism. In my view, it would have been desirable for the Court to assess whether all “extraordinary circumstances” to identify a refusal to suppy could or not be subsumed within the Magill criteria. Instead the Court gave a practical illustration of how its hammer can make square pegs fit round holes (an exercise that was repeated a few months later in BUPA re the Altmark criteria).
For a most interesting discussion on the legal contortions in Microsoft featuring some of the people who were actually associated to the case see the 16 comments to Nicolas’ post on The Magill-IMS Re-animator.
A few hours ago Facebook announced its purchase of WhatsApp, which has been -more or less- valued at over 13 billion euros, one of the most expensive tech aquisitions ever.
As any well-informed competition lawyer may have learnt from recent case-law, this may seem like a risky investment: WhatsApp operates in a dynamic market, in which barriers to entry are said to be almost inexistent, in which there are no technical or economic obstacles to switching to a competing provider (particularly for small groups of people), in which services are mostly provided for free, and in which, despite the lack interconnection, having the largest network with hundreds of millions of users does not give rise to network effects providing a competitive advantage….
If such reasoning were right, it’d be hard to see why anyone would invest over $40 per user of a 55 employees company.
Bitter ironies aside, this deal raises another interesting question: given WhatsApp’s limited turnover I guess it’s likely that the deal will fall outside EU merger notification thresholds. Now, should it? I don’t have a stance on this, but now that there are so many ongoing discussions about the reform of the scope of the Merger Control Regulation, it could perhaps be useful to reflect on whether turnover thresholds are well-suited to reach mergers in the era of free services, in which turnover may not always be good proxy to competitive significance. Think of the possibility that depending on market definition, these transactions could only have to be notified in jurisdictions contemplating market share thresholds (which I’ve always criticized but that remain in place in Spain and Portugal); does that make sense? To be sure, I’m not saying this merger raises any substantive competition concerns; my point is a more general one unrelated to the specificities of any particular case.
Some of you might remember one of ours posts titled State aid conferences: that’s where the fun is! (Michael O’Leary and Kim Jong Il make for a great marketing combination and attracted quite a few readers) [Btw, today’s picture features another “peculiar” character; see below for an explanation].
In reality, and jokes aside, State aid is a field where much is currently happening, and that most antitrust lawyers often fail to follow and even perceive as distant. Let me explain why that may not make much sense:
Off the top of my head, I would say that around 40% of DG Comp’s decisional output and resources are devoted to State aid. In economic terms, State aid issues generally have much greater repercussions than most antitrust cases (to put just one example, the guys at my office are advising Spain on how to use some tenths of billions granted by the European Council to restructure the financial sector). The substantive issues are no less interesting, complex, and challenging as the one’s posed by antitrust law.
On the other hand, to be sure, political interference is much more frequent, intense, and often less camouflaged (politicians, very particularly French and British ones, seem to be the ones realizing about the impact of these rules) than in antitrust. You might have read this morning about the French Industry Minister, Arnaud Montebourg, openly attacking both State aid rules in general and Vice-President Almunia in particular. In the Minister’s words, the Commission lives in a “legal delirium” and “makes up rules that don’t exist in the Treaties in order to perpetuate its powers”. He also referred to the Commissioner an “obsolete liberal integrist” and asserted that he has the backing of 11 Member States to “revise and liberalize State aid”. For once I will be the controversial one here instead of Nico, and I’ll refer to Monsieur Montebourg as the first recipient of the “Thicko of the day” award (pictured above proudly receiving his trophy) :)
Despite all the above (the fun, the legal complexity and the political and economic importance), State aid is not paid the attention it deserves by practicing lawyers. Why? Easy: because those most directly affected often seem to be public authorities (many companies haven’t yet understood the opportunities and the risks associated to these rules), and those don’t pay as high bills as private companies do. (I guess efficiency and profit-maximizing related incentives also give rise to market failures/externalities).
Whereas I agree with the idea that State aid DNA shares more chromosomes with internal market rules than with antitrust law, there are some common feature between the two disciplines. Aside from the fact that they were placed in the same chapter of the Treaty –which led to their enforcement being entrusted to the same body: DG Comp-, State aid law is also always constantly in the making and questioning itself, which is what initially seduced me from antitrust.
An example: on January 17th the European Commission launched a consultation paper on the very the notion of aid. Think about it; no one would dare of doing the same in antitrust, even if very few people (perhaps with the exception of the influential Giuliano Marenco) have a comprehensive theory to explain what a restriction of competition actually is (an idea I also stated here and here).
There’s loads of “low-hanging fruit” in this domain. If you’re interested in an overview of the legal issues involved in determining what an State aid really is, I very strongly encourage you to read Andrea Biondi’s recent piece: State aid is falling down, falling down: An analysis of the case law on the notion of aid (very recently published in Common Market Law Review).
In the past few weeks I’ve taken a few initiatives to compensate for our State aid deficit. On a personal level, I got heavily involved together with José Luis Buendía in drafting and lodging no less than 12 State aid appeals concerning a particularly controverted and interesting decision (little did I know that I’d have to do that in the course of the Christmas holidays; btw, the experience left me wondering how we could manage in the pre e-Curia days). On a blog-related level, we’ve just asked a couple of the best minds in the field to become regular contributors to Chillin’Competition. We hope to be able to announce their coming on board soon.