Chillin'Competition

The French Presidential election was held yesterday and, as you know, François Hollande won.

There is significant expectation as to the changes that the result of this election might entail for the rest of the European Union.  Now, should we expect any changes in the competition law domain?

Nicolas Sarkozy did have an undeniable impact on competition law. First he managed to delete from the Lisbon Treaty the reference to the objective of ensuring “free and undistorted competition“ in the EU (see here and here) and then he taught us the difference between endive growers, Apple and Microsoft (an explanation that, as you may remember, prompted our friend Mark English to stop wrapping his iPhone in ham).

Those interested in Hollande’s views on competition law should read his replies to Concurrences’ interview (in French, though).

A few days ago it was reported that the Danish presidency had proposed that 12 extra Judges to the General Court be appointed pursuant to a “lottery system”. At first we thought it was an April’s fools joke, but no, it’s actually a true story.

We have already expressed here some of our opinions with respect to the debate concerning the reform of the General Court. In our view, people matter more than institutional arrangements; or, in other words, if Member States appoint the right Judges then the backlog and most other problems could be effectively solved. Many Member States have already done so and, needless to say, there are currently a number incredibly good and productive Judges at the General Court.

And speaking of judicial nominations, EU Governments are meeting this week to vote on the appointments or re-appointments of a number of Judges and Advocates General at the upper ECJ.

It has been reported elsewhere that EU Governments will reappoint Judges Arabadjiev, Arestis, Berger, Bonichot, Fernlund, Jarasiunas, Levits, Malenovsky, Prechal and Von Danwitz as well as AG Bot, and that the new faces will be Judge Da Cruz Villaça (Portuguese; former President of the GC and very familiar with competition law issues) and Advocates General Nils Wahl (Swedish; former Judge at the GC and another very good competition expert) and Melchior Wathelet (Belgian; lawyer and economist from the University of Liège with a Harvard LL.M; also former Judge at the ECJ).

What we believe no one else has yet reported is that the UK has formally nominated a renowned competition lawyer, Christopher Vajda QC, as the new British Judge at the ECJ. The letter sent to the Council by the UK´s permanent representation officially informing them of the proposal (and including Mr. Vajda’s CV and list of publications) is publicly available here.

Some months ago we wrote a post explaining that some news stories are read differently from the perspective of an antitrust geek. Let’s continue with that series:

- In the above-mentioned post we reported on the use of novel anti-competitive practices in the US pizza market (remember the guy who planted live mice on competing pizza parlors?). That story was an illustration of how dirty  tough competition law can be when it comes to food (as I’m writing I keep on telling to myself: “don’t make an endive joke; don´t”, so: no endive joke here). But the economic downturn seems to have further complicated things. The New York Times recently published a brilliantly written and quite humorous piece on the origins and effects of the price war that is currently taking place in the streets of Manhattan. The article forecasts that we may even end up having free pizza.

- Few consumers would object to free pizza. We have a weird love for free stuff (Brussels is, btw, a great city for gratuity lovers: you could perfectly survive without spending a cent of food just by attending receptions and cocktails; there are people who qualify as professionals at doing this). But a recent Judgment from the 15th Chamber of the Paris Commercial Courts has confirmed once again that, although we like “free”, we don´t understand the competitive implications of free products/services. The Judgment in Bottin v Google -a great candidate to the 2012 worst antitrust law development prize- has completely ignored that providing a free service in one side of a two-sided market cannot be akin to predatory pricing, without at least considering pricing on the other side of the market. An unofficial English version of the Judgment has been generously issued for free by the association of complainants against Google iComp. Considering that other people provide transalations for a price, we hope iComp is not also fined for predatory practices because of this free translation! (In iComp’s defense, one could claim that there is also an obvious business motive underlying the provision of this free service.  But then a cynic could respond asking whether horizontal cooperation specifically aimed at hurting a specific undertaking -even through the use of legal actions- could not qualify as an illegal anticompetitive practice itself?).

- Not only pizza makers and search engines face tough competition. BBC reports that a London-based minicab firm Addison-Lee has asked its drivers to drive in the “bus lanes” as a sign of protest against the rules that reserve the use of these lanes to licensed black taxis and buses. The company argues that  ”the current bus lane legislation is anti-competitive and unfairly discriminates against the millions of passengers that use Addison Lee“. Drivers in Brussels must have objections to the legality of the whole traffic code; otherwise it’s impossible to understand why they drive the way they do.

- Nicolas’ piece on Credit Rating Agencies seems to have inspired some: As reported by mlex, asset managers have filed an antitrust complaint against Standard & Poors in Switzerland.

-And speaking of mlex (which, as we have said here before, does a terrific job and has almost turned into an essential facility for anyone in the business), we have just found out that one of their excellent writers, Lewis Crofts, does not only cover competition law issues for MLex but is also an accomplished novelist (click here for his personal website). His novel “The Pornographer of Vienna” tells the story of a painter who was famous for his sexually explicit depictions of the Viennese underworld. Those who read it will find some familiarity with the competition law world.

P.S. I really tried, but I just can’t help it: putting mice in competing pizza places is pretty bad, but putting endives on your rival’s pizzas would really be too much!

This is big news.

Click here to download the document: Antitrust ManProc, March 2012

Concurrences and George Washinton Law School presented their Antitrust Writing Awards on Tuesday night in D.C.

The list of winners is available here.

Bill Kovacic was in charge of announcing the winners. We weren’t there, but we can imagine him saying something like: “And the  award to the best academic paper on unilateral conduct goes to…….. Nicolas Petit, for “Credit Rating Agencies, the Sovereign Debt Crisis and Competition Law“!l

Yep, Nicolas is the proud winner of the award to the best academic article on unilateral conduct. His piece was also the most publicly voted one (the readers of this blog probably have something to do with that, so thanks on his behalf).

I want to congratulate not only Nicolas, but also all other winners as well as all the authors of all the other articles that had been selected for the competition.

Moreover, we want to congratulate the organisers: Concurrences (in the person of Nicolas Charbit) and George Washinton Law School. The creation of these awards is a fantastic initiative; we hope that they’re here to stay.

A few non-politically correct comments now:

1: To a certain extent Nicolas deserves credit for this prize. Nonetheless, any impartial observer should rapidly realize that I -in my capacity as the manager of Nico’s brilliantly conceived campaign- am the one responsible for his victory.. ;) We’ll ask a credit rating agency who deserves more credit  (wow, this is incredibly bad even for my standards…).

2: The picture illustrating one of our “campaign” posts was premonitory.

3: This must be the first time in a decade or so that a Frenchman wins any competition (except, certainly, for this one)  In fair reciprocity (some background here), I -as a Spaniard- should write a piece hinting that Nicolas owes his victory to doping (which, by the way, was definetely the case since he finished it during a trip to Scotland; this is how his desk must have looked like).

4: How much sense does it make for a paper on “collective” dominance to be awarded the prize to the best article on “unilateral” conduct??   Just kiddin’ here: the core of the paper apparently deals with individual abuses of collective dominance, so it makes perfect sense.

5: You caught me: I just wrote “apparently”. I guess I’ll now have to read  Nicolas’ paper.

P.S. One suggestion for the organizers of the Writing Awards: since client alerts and articles published in newsletters are elegible for the prizes in the “Business” category, why not extend it to blog posts? We also need incentives to compete!

Blogging about competition law is getting dangerous!!

We have just learnt through Competition Policy International that a Professor at the Instituto de Empresa has been sued for defamation because he wrote on his blog that music group Promusicae’s copyright policy is contrary to the competition rules !!

The full story is available here.

I’ll better not comment in order to avoid the risk of being sued too.

Could anyone recommend us a good lawyer, just in case?

Apparently someone at the French Competition Authority liked the series on the endives cartel (see here and here):

The Autorité de la Concurrence has imposed a fine of 242.4 million euros on flour makers.

Isn’t it obvious that this is a poor attempt to provoke us to write a new -and more appetizing- series on croissants?

Nice try, but they’ll have to do butter.

Yesterday we said we were surprised by the number of people who had suggested us to comment on the fine imposed on French endive growers. Our post on this issue has given rise to very profound competition law related thoughts.

This is why we have created The Endive Brainstorming Room.

In addition to Hans Zenger’s brilliant comment on endives and Giffen goods (see the comments to yesterday’s post), over the past few hours several people have conveyed to us their views on endives:

- Well-known Commission official:

“I think the typically insightful analysis on your blog of the endives cartel has left a couple of important questions unanswered:

First, given that endives figured large on the menu at Garenmarkt a full 20 years ago, I think we should be looking at the possible 102 aspects and not only the 101.  There’s clearly some durable market power at work here.  The only plausible explanation of this continuing position of dominance must be exclusionary conduct as against those vegetables that are not utterly unpleasant.

Second, I think this cuts to the heart of the consumer welfare problem in antitrust.  Surely consumer welfare is enhanced by endives being priced at as high a possible level, thereby reducing demand? Is the cartel therefore not welfare enhancing?”

- Raymond Radiguet:

“Alfonso and Nicolas use this blog to promote vegetables other than endives, which is fine with me. However, the claim that no one likes endives is so obvious that it is simply hilarious“.

- Current students at the College of Europe:

One student says “there is a maverick around here: last week (during dinner on Wednesday 29) a law professor was heard stating “I like endives; it’s a pity that they are not as bitter as they used to be”. “Seed selection should be blamed for this”, he added.

Another student tells us that in reality endives are not dominant: “at most, they are part of a duopoly; I would argue that endives and frites are collectively dominant“.

A third ELEA student commented that ” ‘Roulade de jambon avec endives’ sounds good but tastes horrible“.

- The anonymous lawyer who has found the solution to the debt crisis:

First email: “Great post! So the French are enforcing competition law in the agricultural sector. Cripes – whatever next?! Will DG COMP pay OPEC a visit in Vienna??

Second email (2 minutes later): “Thinking about it, that would be a way to solve Europe’s debt problem – fine all OPEC countries 10% of their turnover! This is brilliant! I’ve found the solution to the crisis!!!!”

If you have any additional reflections on the relationship between endives and competition law/economics that you just can’t keep for yourself, please share them with us.

The French Autorité de la Concurrence has imposed a fine of 3,6 million euros on four French endive growers for their participation in an endive cartel.

The news has attracted the interest of our readers, who have sent us several emails suggesting a post on this story. The interest of our readers on endives has matched that raised in the past by the Dutch investigation on erotic toys and costumes. Weird.

The news has spurred interesting reactions from some experts. “This case proves that what competition law/economics considers in the interests of consumer welfare (low prices, lots of endives) does not necessarily equate to what society (or the students at the College of Europe in Bruges) would consider consumer welfare!”, says Grace Aylward.

Some background: Grace studied as the same time as me in Bruges, and we both share the suspicion that all of the French and Belgian stocks of endives are regularly served to the students at the College of Europe. There is no other plausible explanation as to why endives featured in the menu every other day.

Consulted about this phenomenon, Napoleón Ruiz (who also claims to have been affected by overfeeding of endives in Bruges) said to Chillin’Competition that “the decision of the Autorité de la Concurrence will have the effect of enhancing the dominant position of endives at the menu of the College’s canteen“.

“They are disgusting; I can’t stand them” said Mark English.

Mr. English directed us to another competition lawyer Alex Papanikolaou (“ask Alex; he was a real canteen presence”, he said). Mr Papanikolaou seems to share the opinion of his peer: “Hard to believe people would buy and consume these things at any price, let alone at cartelized prices“, he says.

A legal director at a high-tech company who requested anonimity said “they are as bitter as the country where they’re grown. Anyone buying them deserves the overprice”.

A partner at a Spanish firm says “the Bundeskartellamt should imitate the French Authority and investigate manouvres by German growers of cucumber to impede imports of Spanish cucumber. Why focus on endives when you have cucumbers?”

Please comment on this post if you also have an strong opinion on this investigation.

P.S. For further information on endives click here. For the role of Belgian endives in US politics click here (I’m not joking; and I bet this is the link that you’ll click the most). For recipees featuring endives, click here.

It has been reported by Reuters that Microsoft and other companies are behind a new complaint against Google before the European Commission. Microsoft has denied having lodged any formal complaint. Regardless of whether Microsoft is involved or not, the news raises some thoughts:

Timing:

Once again, this complaint seems to have been strategically timed. Rumor had it that the European Commission would be adopting a preliminary position on the ongoing investigation by mid-March. No matter the merits of the complaint, whoever is behind it deserves credit for outstanding timing; they know how to play the game.

It reminds me of a well-known scene of my favorite movie saga, when in The Godfather III (yes, my taste for movies is absolutely mainstream) Al Pacino screams “Just when I thought I was out, they pull me back in!” (doesn’t he look a bit like Sarkozy in the pic above?) (it also brings to mind the “Yet another on-time flight from Ryanair” pre-recorded phrase that follows that “sweet” melody that you get when you land..).

In our previous posts on this pending case we have always highlighted the good timing of complainants (see here). Also, last April Nicolas wrote here that the “chief, and maybe sole merit [of Microsoft`s complaint] is to throw some mud at Google in the press, at a moment when (i) Google has been reported to be close to a settlement with the Commission; and (ii) Google has suffered a major setback last week, when its settlement with US publishers and authors was annulled by a NY judge” (this opinion by Nicolas was also reported in the press).This time, the complaint not only comes a few days before the Commission is expected either to drop the case or send an Statement of Objections. It also comes a few days after Microsoft lodged another complaint against Motorola (only a week after the Commission and the DOJ gave green light to its acquisition by Google). Per Hellstrom and his unit must be swamped with so many complaints being brought in relation to IT markets.

Substance:

The new complaint apparently focuses on a new function recently introduced by Google (“Search, Plus Your World”) that integrates information (photos, news and comments) from Google’s social network (Google+) within Google’s search results. Those opposing the new function apparently claim that it constitutes anticompetitive tying on the part of Google. This would be intended to reinforce allegations that Google uses its search engine to promote its own services.

According to the Commission’s initial Press Release, the alleged conduct subject to investigation is “unfavourable treatment of [other search service providers'] services in Google’s unpaid and sponsored search results coupled with an alleged preferential placement of Google’s own services” . Following the initiation of the investigation by the Commission there have been various attempts at enlarging its scope.

In the past both Nicolas and myself have been very critical with the allegations against Google (we have no direct/indirect involvement whatsoever in the case and only comment on info that is in the public domain, so we may lack relevant information). For our previous comments on this case, see here, here, here and here; see also here for a guest post by Pablo Ibañez Colomo on this same issue. We understand that the Commission had no choice but to investigate it thoroughly, given that an eventual rejection of the complaints would with all certainty be challenged in Court. Nonetheless, we are concerned that a case against Google would imply either a significant lowering of standards of intervention or the acceptance of the theory of “Karate Competition Law“.

I’m not aware of any evidence pointing out to the fact that Google does or doesn’t discriminate, but let’s move away from the facts, let’s leave aside important issues such as the question of whether Google is dominant and the ease of switching to competing services, and let’s focus on a matter of legal principle: can we require absolute neutrality from a company, even if it is dominant?

The mere term “discrimination” carries extremely negative connotations (if you look at is as “differentiation” it sort of looks a bit more acceptable). It also implies some sense of inherent unfairness. Nonetheless, there is a significant difference between what is unfair and what is questionable under the antitrust rules. Many things in life are unfair, but I can’t complain saying that they’re illegal; or can I?

As we have both written in previous posts, discrimination does only run afoul of the antitrust rules provided that it gives rise to foreclosure (i.e. elimination of competition) (as with most antitrust debates, the best way to find a solution is often to go back to basics). Foreclosure is is the usual standard of intervention and we see no compelling reason for abandoning it in this particular case. Let’s apply this criterion to the reported new complaint: is the fact that information from Google+ will appear in the results enough to eliminate competition from, let’s say, Facebook? It seems like a very long shot.

Given the above, and in light of the limited information at our disposal, we tend not to see any grounds for intervention.

Some suggested readings:

I spent a few hours of the weekend in the train from Brussels to Luxembourg (I would have gone by car, but I never told you that my car got burn by skinheads who felt like burning a trash can right next to my parked car..). The train takes ages, but it allows for some good reading time. The subject of this trip’s readings (aside from an incredibly good novel in Spanish) was precisely search neutrality.The three pieces I read are highly recommendable:

- If Search Neutrality is the Answer; What is the Question? (by G. Manne and J. Wright);

- “Non-Discrimination in Communications and IT Regulation: Understanding the Rise of a Transformative Principle” (forthcoming; can’t say who the author is because the paper is currently undergoing a blind-peer review).

- Search Neutrality as an Antitrust Principle (by D. Crane).