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Recent Judgments of the EU Courts

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In the past few days there have been some remarkable competition-developments coming from EU Courts, the last of which took place only minutes ago in the Greek lignite case  (if you’re only interested in that one you can go directly to the bottom of the post). This is just a quick overview of some of those recent developments:

Some were anecdotal, such as President Barroso giving testimony as a witness before the General Court.

Others are relevant mainly for cartel geeks, such as the GC’s granting reductions of fines in 3 paraffin wax cartel related cases, in which it also (a) carried out a particularly detailed review of the exercise of decisive influence between a parent and its subsidiary (Sasol, available here); (b) observed a violation of the principle of equal treatment and, most unusually, found an infringement of the principle of proportionality in the calculation of the basic amount of a fine (but only due to the peculiar circumstance that the Commission had partly taken into accout the turnover of a company that had merged, in the course of the cartel, with another company participating in the infringement; see the Judgment in Esso, available here); and (c) shed some light on the assessment of the exercise of decisive influence in JV settings (in RWE, available here).

That challenges against the proportionality of fines imposed within the 10% limit are unlikely to be successful was confirmed by last week’s Judgment from the ECJ in the Telefónica case. Telefónica had challenged the GC’s Judgment upholding the controversial decision sanctioning it for a margin squeeze abuse. The ECJ’s Judgment contains nothing of particular interest (aside from an interesting explanation of why the General Court’s review is fully compatible with the requirements stemming from the ECHR). The case will mostly be remembered because of Advocate General’s Wathelet’s Opinion both on the issue of proportionality as well as on the qualities of the appeal lodged by Telefónica, which we’re told broke a record as the lenghtiest in the history of the ECJ. (For those of you who are wondering whether limitations on the number of pages didn’t apply, you should know that there’s a way to bypass them, which I won’t explain here in the interest of the efficient use of Court’s resources…).

And, finally, most interesting news came from Luxembourg minutes ago, as the ECJ has annulled the General Court’s Judgment in the Greek lignite case concerning the joint application of Articles 106 and 102 TFEU. As you may recall, some time ago we held a most interesting ménage à trois debate on the GC’s Judgment with Marixenia Davilla (see here), José Luis Buendía (see here) and Makis Komninos (see here). The ECJ and the Advocate General have followed the approach that José Luis had forecasted (the Mr. 106 nickname has a justification).

The Judgment is much more important than many may realize at first sight. The main issues raised by the case are covered in our previous posts, so I refer you to those. Observe only that the Judgment goes pretty far -in the right direction, I would argue- in ruling (in para 46) that “[a]ll that is necessary is for the Commission to identify a potential or actual anti‑competitive consequence liable to result from the State measure at issue. Such an infringement may thus be established where the State measures at issue affect the structure of the market by creating unequal conditions of competition between companies, by allowing the public undertaking or the undertaking which was granted special or exclusive rights to maintain (for example by hindering new entrants to the market), strengthen or extend its dominant position over another market, thereby restricting competition, without it being necessary to prove the existence of actual abuse“.

The Judgment would insuflate some life to Art. 106 which, as I said last week, has a tremendous potential which still today remains largely unused. This would nonetheless largely depend on politics at the incoming Commission and on the Commission’s discretion, and, judging by history, I’m not opimistic. As the GC reminded us with another Order last month declaring an appeal inadmissible (here), “the Commission’s refusal to act under Article 106(3) TFEU following the filing of a complaint by an individual against a Member State does not constitute a challengeable act“.  This ruling is based on the max.mobil case-law, which I’ve always seen as unfortunate and in need of repeal.

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Written by Alfonso Lamadrid

17 July 2014 at 11:41 am

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

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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.

Written by Alfonso Lamadrid

14 July 2014 at 4:58 pm

Breaking news- The Intel Judgment is out: the European Commission wins

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Minutes ago the General Court released its Judgment in Intel v Commission (T-286/09) dismissing the appeal in its entirety and upholding the 1.06 billion euros fine.

 As I noted to Bloomberg some time ago, the ECJ’s Tomra Judgment had paved the way for the Commission’s victory in this case with regard to the substantive arguments at issue.  Indeed, the Judgment resorts to Tomra in several occassions to support the key proposition that once a loyalty mechanism is demonstrated there is no need to demonstrate effects by means of an as efficient competitor (AEC) test (see mainly para. 145; I’ve spotted a few other references to Tomra in paras: 72, 73 , 77, 78, 91, 97, 103, 117, 119, 120, 132, 153, 176, 182, 184, 193, 527 or 998, plus a few more to AG Mazak’s Opinion in that case)

The General Court has also ruled out the procedural concerns previously identified by the Ombudsman, ruling that there was no procedural irregularity, and that even if there had been one it wouldn’t have affected the outcome of the case (paras. 601-664).

The Judgment has not yet been made public   is available here. [Note: this post was initially written in the light of the Court's Press release and was subsequently updated  following a first very quick look at the actual Judgment]. I’ve only had the chance to skim through it quickly, but a quick look is enough to reveal the Judgment’s likely impact on the law on abuse of dominace and to anticipate that this ruling will no doubt stir many debates in the coming weeks and months.

The Court has found that the rebates are issue were “exclusivity rebates” and declared that these, “when granted by an undertaking in a dominant position are, by their very nature, capable of restricting competition and foreclosing competitors“. The Judgment states that in the face of such rebates it is not necessary to show effect on a case-by-case basis, and that “the Commission was not required to make an assessment of the circumstanced of the case in order to show that rebates actually or potantially had the effect of foreclosing competitors from the market“. Against this background the Court explicitly rejects the applicability of the “as efficient competitor test“.  A similar approach is undertaken with regard to the conditional payments granted to several computer manufacturers.

Key to the Court’s reasoning is the idea that a foreclosure effect occurs not only where access to the market is made impossible for competitors. Indeed, it is sufficient that that access be made more difficult”. (paras 88 and 149). According to para 150 the as efficient competitor test “only makes it possible to verify the hypothesis that access to the market has been made impossible and not to rule out the possibility that it has been made more difficult”.

In para 152 the Court distinguishes Intel from previous cases where the as efficient competitor test had been a key criterion (namely TeliaSonera, Deutsche Telekom and Post Danmark) by observing that “those cases concerned margin squeeze practices or low price practices)” which means that a price-cost comparison was needed. According to this para. “[a] price cannot be unlawful in itself. However, in the case of an exclusivity rebate, it is the condition of exclusive or quasi-exclusive supply to which its grant is subject rather than the amount of the rebate which makes it abusive”. In para. 153 the Court again resorts to Tomra (“which postdates” the above mentioned Judgments) to support its view that no effects assessment is needed.

The Judgment deals directly with the alleged incompatibility of this approach and the Commission’s Guidance paper. In paras. 154-161 the Court explains essentially that it is “not necessary to consider whether the contested decision is in line with the Article 82 Guidance” (157) because the latter only set priorities for cases initiated following its adoption whereas the Intel investigation was already at an advanced stage by then (paras. 155-156). According to the Court, the as efficient competitor test envisaged in the Guidance paper was only relied upon by the Commission “for the sake of completeness”.

In spite of the clear statement of principle regarding the no need to prove effects, the Court has also engaged in a detailed case by case review of both the rebates and the conditional payments and concluded that “even supposing that the Commission was required to show on a case by case basis that the exclusivity rebates and payments granted to Dell, HP, Lenovo and Media-Saturn were capable of restricting competition, the Commission demonstrated that capability to the requisite legal standard in its analysis of the facts of the case”.

This “just in case” review is what explains the  lenght of the Judgment (283 pages in English). It also places the Commission in a much better position regarding an eventual appeal, for even if the ECJ were to quash the GC’s conclusions that effects didn’t have to be established (the upcoming Post Danmark II Preliminary Ruling will tell us whether that is or not likely to happen), the factual assessment of the case -beyond the scope of review of the ECJ- would be most likely to stand.

Even if somehow expected, this is a very important victory for the Commission. The main question relates to how this Judgment will impact future post-Guidance paper enforcement.

 

Written by Alfonso Lamadrid

12 June 2014 at 9:43 am

Chillin’Competition faces a legal challenge

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Chillin’Competition has encountered its first serious legal problem after a third party requested us to remove some content.

As usual readers will remember, we took particular interest in the French endives cartel case. A number of posts were devoted to endives (the best troublesome ones are here and here). Oddly enough those posts still rank among our most read, to the extent that when you type “Chilling competition” in Google’s search box the word “endives” quickly appears next to it. This is a testimony to how bad the rest of our posts must be as well as to the bizarre taste of our audience (and I thought no one liked endives…). In our defense, the endives cartel also earned some air time at the French Presidential debate. (I don’t know what’s with this vegetable, but Belgian endives were also a major feature of the U.S. 1989 Presidential campaign -see here-).

Since then we hadn’t paid any more attention to endives, even though every time there’s an infringement concerning food some readers sent press clips to us with all sort of weird post suggestions (a message to them: we are grateful, but there’s no need to do that anymore, really).

But two recent legal developments occurring within the lapse of two days have changed the landscape, and have exposed Chillin’Competition to legal risks.

-          On 13 May the ECJ delivered its ruling in the Google Spain case, holding (I will oversimplify) that there exists a certain right to be forgotten under the Directive on the processing of personal data even in relation to information which is true and was legally published.

-          And on 15 May (hold tight) the Paris Court of Appeal annulled the decision of the Autorité de la Concurrence sanctioning the endive cartel. No kidding; see here.

Following these developments, an organisation called “Les amis des endives” (French for Endive’s Friends) has requested us to withdraw all our posts regarding the endive cartel. They allege that the informations are inadequate and no longer relevant. For the record, this association has nothing to do –that we know- with the EndiveLover Twitter account).

I initially thought it was a joke. Then I thought that the Judgment doesn’t support their claim. First because, (I may get in trouble for saying this) endives aren’t natural or legal persons (arguably endive producers are, even if tasteless and heartless). Second, because -contrary to what many people seem to think- the Judgment only refers to “results displayed following a search made on the basis of a person’s name”, and people that get to our posts don’t do searching specifically for endives. Third, because –reading particularly para 80 of the Judgment- I get the impression that its establishing a lex specialis for search engines only, and perhaps only for Google (which once again gets treated as the SGEI of the new century). Lastly, I thought the information shouldn’t be withdrawn because of “historical statistical, scientific purposes” (para 92 of the Judgment).

In order to be on the safe side, I asked a team of eminent avocats about their view: Do endives have the right to be forgotten? Should our posts on endives be consigned to oblivion?

Grace Aylward (our endive expert; she’s the one who informed us about both the decision and its annulment) says: “I thought that when I grew up and became a Lawyer I could dislike whichever vegetables I wanted. Obviously I was wrong. I just hope I don’t start receiving endive hearts in the post.

Orla Lynskey (privacy and competition expert at LSE) “the ruling does not apply to publishers. It applies to search engines (and most probably could be limited to Google). Even if they do fall within the scope of the DP rules (which is very unlikely to be the case if the piece only mentions legal persons), this does not automatically entitle them to have the original link removed. You need to pass the buck to Google to determine whether the processing is incompatible with the DP rules and the public interest test for removal is met”.

I think they’re just bitter” says Mark English (a.k.a the guy who started wrapping his iPod in ham) (mate: you should think about your own right to have this forgotten; just sayin’…).

Other lawyers consulted coincide on the view that the Judgment doesn’t give mushroom to such requests and that this one in particular is nuts; if you see it differently, please lettuce know.

 

P.S . For the avoidance of doubt: this was a joke. Sadly, other absurd/ridiculous scenarios such as UKIP and the Front National winning the EU elections in England are France are not.

 

Written by Alfonso Lamadrid

26 May 2014 at 6:09 pm

Wrapping up the week (on SEPs, Uber, Tesla, lawyer moves and legal rankings)

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This week’s blogging inactivity has had a lot to do with a pile of new and old work, the fact that I’m moving houses and have the in-laws here (a painful process; the moving, I meant), the fact that I devoted some time to watching two Spanish teams get to the Champions League’s final (I guess Germans and English will now put increased pressure on the ongoing State aid investigation) and the fact that we had some farewell events for one of my closest friends and colleagues (this guy, who is moving to the Commission).

So, here’s a quick overview of some stuff we couldn’t cover:

- The news of the week was the adoption by the Commission of decisions in two much talked about SEPs cases. The Commission made binding the commitments proposed by Samsung (see here for our initial comment on these) and -as we anticipated last week- adopted a decision declaring an infringement on the part of Motorola, which did not receive a fine. The Commission has sough to introduce some clarity on a matter in which the industry couldn’t agree by providing a safe harbour for standard implementers/willing licensees. We might discuss these more in depth in the coming weeks. For the time being, the Commission’s FAQ’s are available here . The Commission’s decisions might have brought additional clarity to the industry, but they also will have side-effects on conference organizers and on certain academics, lawyers and officials, all of whom will now have to find a new topic to talk about  :) [Btw, WordPress' new smiley faces are much uglier than the older ones..]

- I also see that the controversy surrounding Uber continues.  To date I don’t think  anyone has brought up a potentially very interesting EU competition law aspect to the case (other than the cartel accusation launched by Neelie Kroes in her most unusual blog post). It’s always surprised me how little we take advantage of the potential of EU law to challenge public restraints on competition…

- On a sort of related note, I was glad to read that 3 FTC staff directors have decided to intervene (albeit informally by means of a blog post; does everybody do blog-policy these days??) against unjustifiable prohibitions on Tesla to sell directly to final customers (that story would merit an ad hoc post) (btw, some people wrongly blame antitrust law for those restrictions: see here).

- There were recent moves at Covington&Burling, this time on the opposite direction as the most recent ones. The firm has hired one of our Friday Slotters (Johan Ysewyn) as well as re-hired Peter Camesasca, who was working with his own firm at Samsung during the course of the above mentioned investigation on SEPs.

- [Sort of self promotion alert] Chambers& Partners rankings came out last week and for some odd reason I seem to be the only ranked associate for EU Competition Law under a certainly narrow “associates to watch” category. Since some of you have sent emails in private commenting on this, I’ll repeat my response in public: I’m not going to lie saying that it bothers me, but off the top of my head I could think of a good pile of names to include there (I won’t list them here because my list -like any list- would also be subjective, potentially discriminatory and based on very imperfect information). In addition to that, (i) I always said these things are to be taken with many pinches of salt, and I of course maintain that; (ii) being there might have to do with being at a smaller place with a lot of exposure to clients (who moreover were kind enough to seemingly do positive reviews) and perhaps (I don’t know) with the non-merits based visibility given by this blog; and (iii) my firm’s overall positioning in the ranking is not yet where it should.

In any event, I’m not even sure this is something to be proud of: I guess it only means that I’m the poorest guy in the list…

 

Motorola won’t be fined in SEPs case, sources say

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To be frank, I didn’t have anything to post today. I’m halfway writing lengthy posts on the Uber controversy (which I’m a bit hesitant to publish), on AG Wahl’s Opinion in Cartes Bancaires, on the French Nespresso case and on the new Damages Directive, but haven’t found the time to finish any. I also had an idea for a possible lame joke to post, but I think it’s way too lame even for this blog’s standards. On top of that, I’m asked (ordered) to go to IKEA later, and having to take care of the blog is no longer a valid excuse chez moi

Fortunately, Aoife White (Bloomberg) just saved my blogging day:

She tells me that credible sources anticipate that Motorola won’t be fined in the decision that the European Commission will apparently be adopting next Wednesday. Aoife explained that some people find this exceptional, and asked for my views to include a quote in her piece, available here: http://www.bloomberg.com/news/2014-04-25/motorola-mobility-said-likely-to-escape-eu-fine-in-patent-case.html

Here’s the text of the email I’ve just sent Aoife (who has no objection to me recycling it into a post):

 

“If the news were confirmed, I would view this as a very sensible decision on the part of the Commission.

The law on abuse of dominance is often nebulous, even more so in a novel context such as the one involving SEPs, which the Commission has moreover distinguished from precedents on “sham litigation” (ITT/Promedia). In these circumstances, the imposition of substantial fines could have raised issues as to its compatibility with general principles that require certainty in the law if a penalty is to be imposed.

A declaratory decision with no fines would enable the Commission to clarify the law and set a precedent without punishing actions that took place against an unclear legal background.

This would not at all be a first; the Commission has in the past imposed no fines, or only symbolic fines, in cases where at the time when the conduct took place the law wasn’t clear on whether it could constitute an infringement.  In abuse of dominance cases, this has happened, for instance, in relation to the discriminatory sale of tickets for the 1998 Football World Cup case (2000), regarding Deutsche Post’s interception of cross-border mail (2001) and, more recently, in the Clearstream case (2009).

This may be only for geeks, but the explanatory memorandum accompanying the draft of Regulation 1/2003 also explained that the mere clarification in the public interest of new legal questions could justify the adoption of purely declaratory decisions.

Interestingly, however, EU Courts have nevertheless consistently rejected the argument that the novelty of an abuse could be invoked as a ground to seek a reduction of a fine imposed by the Commission (e.g. in Irish Sugar or Deutsche Bahn)”.

 

Written by Alfonso Lamadrid

25 April 2014 at 5:19 pm

WhatsApp, Facebook?

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Picture1

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.

Written by Alfonso Lamadrid

21 February 2014 at 3:31 pm

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