Archive for the ‘Market News (and AT Implications)’ Category
European Commission prohibits Ryanair/Aer Lingus deal
Last Wednesday the Commission confirmed that it has decided to prohibit -for the second time- the proposed merger between Ryanair and Aer Lingus merger (click here for the press release). This is the fourth prohibition decision adopted under Commissioner Almunia, and the 24th in the history of EU competition law.
The decision has not yet been published. We had assumed that while we waited for it we could at least report on Michael O’Leary’s (Ryanair’s CEO) reactions. However, Mr. O’Leary has not made any public statements of the kind that we were expecting (remember his analogy between the European Commission officials and North Korean economists? 
Ryanair has issued a press release in which it argues that its offer “was supported by an historic and unprecedented remedies package that included not one, but two upfront buyers (BA/IAG & Flybe) to take over approximately half of Aer Lingus’ short-haul business (…) The transfer to these upfront buyers of Aer Lingus’ business on the 46 crossover routes identified by the EU Commission, together with the relevant slots, aircraft, personnel and branding, was ensured by binding, irrevocable commitments by those upfront buyers including Board approvals”. In Ryanair’s view, “[t]he history of the EU’s treatment of Ryanair’s two offers for Aer Lingus conclusively proves that this prohibition is a “political” decision to pander to the vested interests of the Irish Government (a minority 25% shareholder in Aer Lingus) and is not one that is based on a fair and reasonable application of EU competition rules or precedent airline merger approvals in Europe”.
We have no clue on whether the allegations over the political motivations of the decision are founded or not. But politics aside, this case resuscitates some tricky substantive/institutional questions. The nature and scope of the remedies proposed by Ryanair was indeed pretty substantial, and arguably unprecedented (Ryanair had even pledged to give 100 million to Flybe to ensure its sustainability) so, query:
Are EU merger control rules on when an up-front buyer is a suitable one sufficiently clear? What discretion should the Commission enjoy in this regard? Ryanair has announced that it will appeal the decision before the General Court, so we should expect to have some answers to these question soon.
Where’s the Law? (or Google and the European Commission)
I said to myself I would keep up the promise I made to Alfonso and continue writing in the blog until Nicolas is back or he recovers (which we hope will be very soon) and starts posting notes again (I failed to anticipate that he wouldn´t stop…)
More to the point: as a complete outsider, I find the lack of publicly available information on the European Google case frustrating, as it is fascinating on more than one level. I just thought that the best way I could rebel against this situation is by making my views on the ongoing proceedings publicly available.
The behaviour of the European Commission in the past few months is interesting (if not puzzling) in at least three important respects:
- The Commission has repeatedly asked Google to submit commitments. One could very well argue that nothing prevents the Commission from doing this. At the same time,this conduct is at odds with the logic of Article 9 of Regulation 1/2003. At least it shows (as if we did not know it already) that the ECJ judgment in Alrosa (as well as AG Kokott’s opinion) ignores how negotiations between firms and competition authorities are conducted in reality.
- A commitment decision is the only acceptable outcome for the Commission. In his public statements Commissioner Almunia suggests that the case will only be closed once the authority accepts the commitments submitted by Google. Put differently, we have reached a point where the case is not so much about an authority establishing an infringement by a firm but about a firm proposing a settlement that is acceptable for the authority.
- The Commission assumes that the alleged discriminatory conduct is an abuse of dominance: The whole case seems to be based on the premise that the fact for Google to favour its own services is an abuse of dominance within the meaning of Article 102 TFEU. Commissioner Almunia has even been explicit about this matter. This conclusion is very far from straightforward to reach. It is a factual scenario that can be approached in many different ways. It raises novel and complex questions to which different (and contradictory) lines of case law seem to apply .Unfortunately, the Commission has never even attempted to articulate the legal framework potentially applicable to this case. This would be most desirable, if only because it would make it possible to ascertain whether the Guidance Paper was just the expression of a moment of temporary folly, and not (as I assumed it would) a pre-commitment device designed to preserve long-run legal certainty.
I do not think an expert poker player would advise the Commission to take these moves. Even outsiders like me cannot avoid inferring from them that the (legal) case is probably weaker than the Commission appears to suggest. As an academic, it is the fact that the law has disappeared from the case that I find most worrying, in any event. The question of whether, and why, Google’s conduct would be abusive seems to be no longer of relevance for its outcome. In this sense, this case shows the dramatic impact that the abusive recourse to commitment decisions (in particular where, as is the case here, genuinely novel legal questions are at stake) can have on the evolution of our discipline.
Pablo
On competition and blogs
Competition seems to be moving moving to the blog arena.
Some of you may recall that a while ago we discussed the case of a Spanish professor who had been sued for accusing a Promusicae of anticompetitive behavior (see here). We are glad to report that the blogger has won the case, thereby establishing a good precedent to shield Nico and myself from possible similar attacks 
Another interesting blog-related development has taken in the U.S. In the context of a high-profile patent infringement case between Google and Oracle, district court judge Alsup has ordered these companies to diclose the identity of bloggers, journalists and consultants that they pay for favorable opinions or consultancy work (for more, see here or here).
This decision has been triggered by the revelation that Florian Müller a well-known IP blogger (from the blog FOSS Patents) had been hired by Oracle shortly after the trial begun.
This unprecedented move should cast light upon the problem related to the lack of transparency surrounding blog content. As the influence of certain blogs grows, it is necessary to start thinking whether the ethical rules governing traditional journalism should also apply in this area. It has certainly led Nicolas and myself to reflect on the way we want to do things.
In our case, we don’t pretend to be impartial informers. We are simply two young professionals who voice out subjective opinions in public to entertain and/or to spur some hopefully interesting debates. We see Chillin’Competition more like a diary than like a newspaper story or an academic paper, and therefore don’t feel under the pressure of being always perfectly informed, accurate, exhaustive and objective about what we write. Of course we try to do our best and to be as technically rigurous as possible, but we’re not afraid of posting first thoughts on some topics, even if our views may evolve afterwards (remember our disclaimer?)
The small dimension of the competition law community makes it practically unfeasible to continuously disclose personal links. We often know quite well, or are friends with, in-house counsel, external counsel, Commission officials, clerks or Judges involved in all sides of the cases on which we comment here. Disclosing friendship or other informal ties with the people involved in the cases on which we comment would be tremendously burdensome (and it would look a bit weird too…). As said above, we don’t pretend to be always objective. In fact, we generally try to be subjective, but we develop our reasons and we expose them to public criticism. For the time being, our policy is to indicate only the cases in which we are personally involved. Also, where we have written about a case and have later become involved in it, we have also publicly stated it. However, we are, as always, open to comments and suggestions on how to better do what we do.
Blogging law is getting increasingly complicated. Nico: we need a lawyer.
Oops!
Monsieur Petit seems to have abandoned this blog in order to share his thoughts on an exclusive basis with US media. On Wednesday he was quoted again in The New York Times, this time in relation to yet another a new investigation on Microsoft’s non-compliance with a Commission’s decision.
As you may know, the Commission issued a statement announcing an investigation over Microsoft’s possible non-compliance with the 2009 commitment decision which obliged it to include a brouser choice screen to enable users to pick a browser instead of using the pre-installed one (until then Internet Explorer).
Microsoft has also issued a statement apologizing and explaining that:
“We have fallen short in our responsibility to do this. Due to a technical error, we missed delivering the Browser Choice Screen (BCS) software to PCs that came with the service pack 1 update to Windows 7. The BCS software has been delivered as it should have been to PCs running the original version of Windows 7, as well as the relevant versions of Windows XP and Windows Vista. However, while we believed when we filed our most recent compliance report in December 2011 that we were distributing the BCS software to all relevant PCs as required, we learned recently that we’ve missed serving the BCS software to the roughly 28 million PCs running Windows 7 SP1″.
The Commission has anticipated that it might impose “severe” penalties.
Keith Hylton (Boston University) has stated that the Commission is overreacting because “there may be a few people on the planet, living deep in forests on the Marshall Islands, who are not already aware that Microsoft’s Internet Explorer is not the only browser available”.
The well-informed and ironic reader who has conveyed Mr. Hylton’s statement to us responds that “whoever at Microsoft was not aware that they had to include a browser choice screen in Windows must also live deep in the forests in the Marshall islands, and whoever told the Commission in December that such error had not happened must live in the woods next door”.
We lack any precise information about this investigation but it’s hardly conceivable that Microsoft would do this on purpose, so, just as Microsoft says, this is most certainly due to an unfortunate mistake.
In any event, this story shows that antitrust law does perhaps not worry some companies as much as we usually think. Most importantly, the fact that nobody had noticed until now that 28 million copies of Windows had been sold since February 2011 without the browser choice screen says something about how compliance with antitrust commitments is monitored…
Ruminations on the Google investigation
Over the past few months we have provided you with our views on the investigation undertaken by the European Commission with respect to Google. Here is an account of recent developments, thoughts, concerns, readings, ideas, and possible questions to be posed:
The developments. As you all may well know, the Commission has sent Google a preliminary assessment (a necessary formal step towards a commitment decision under Article 9 of Regulation 1/2003) and has requested Google to provide swiftly proposals of possible commitments that could address the concerns set out on that document. For the Commission’s statement identifying in broad terms the practices it objects to, see here.
In parallel, Google has lodged a complaint against Microsoft and Nokia. Google claims that “Nokia and Microsoft are colluding to raise the costs of mobile devices for consumers, creating patent trolls that side-step promises both companies have made. They should be held accountable, and we hope our complaint spurs others to look into these practices“. We have no additional information on this complaint and therefore do not have any opinion on whether it may be well-founded or not, but we regard it as something potentially interesting given that, until now, patent trolls had managed to stay more or less away from the antitrust spotlight in this bout of “patent wars” (note the IPCom settlement).
(By the way, the European Commission has excellent staff working on the unit dealing with cases related to IT, Internet and Consumer Electronics, but they must be incredibly swamped with so many complaints piling up on their desks).
The substantive concerns. We’ve already been quite vocal about our substantive concerns with regard to this case (note the caveat that we speak about matters of principle and on the basis of almost no case-specific information), so we won’t insist on them today.
The policy concern. We fully understand the policy rationale for changing the tone and attempting to address competition concerns in high-tech innovative markets swiftly and on the basis of “negotiated” solutions. However, the increasingly frequent recourse to such solutions also gives rise to several concerns. One of them is that commitment decisions do not contain a final position on the existence or non-existence of an infringement. If such decisions become the standard way of dealing difficult with cases –which would then be left substantively unresolved-, this would imply blurring the contours of the law. Laws should be clear. How can we expect the law on Article 102 to be clear when 14 out of the past 17 abuse of dominance cases were put to an end by virtue of brief and unconclusive commitment decisions? How does one strike the right balance between setting the law straight and addressing competitive concerns rapidly and effectively?
The doubt. (this one is not our’s but Pablo Ibañez’s): does publicly requesting a company to offer commitments fit with the letter and spirit of Article 9 of Regulation 1/2003?
The idea. We feel a bit frustrated by the fact that we’ve spent months thinking about this investigation having no information other than news clips and press releases. We’d love to see how the Commission has framed its concerns regarding Google under current competition law standards. We do not rule out the possibility that we may have been wrong all along, and maybe (although I have my doubts) having a look at the Commission’s preliminary assessment would convince us. How about requesting access to the non-confidential versions of the key documents in the file pursuant to Regulation 1049 as soon as the investigation is over? It could be an interesting exercise…
François Hollande and Competition Law
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).
Competition Press Clips (II)
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!
The Endive Brainstorming Room
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.
Yet another well-timed complaint against Google
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).
Ebooks and Resale Price Maintenance
Last week the European Commission announced the opening of formal proceedings to investigate whether international publishers may have engaged in anti-competitive agency agreements regarding the sale of ebooks (see Press Release). Dawn-raids in connection with this case were carried out last March.
Today´s edition of the Financial Times (edited by Pearson -a publisher affected by the investigation-) features a most interesting piece on a very related topic under the title Don´t make Amazon a monopoly.
Its author -John Gapper- argues that competition authorities in the US and the EU should not challenge the arrangements under which publishers set minimum prices for ebooks and preclude companies such as Amazon, Apple or Barnes&Noble from offering discounted prices. It explains that this is a textbook example of the situation that the US Supreme Court had in mind when it overturned Dr. Miles in its Opinion in Leegin, and submits that it would be paradoxical for competition rules to enable free riding-based discounting on the part of Amazon, thus enhancing its alleged “monopoly”.
This situation and the legal controvery surrounding it raises very interesting questions that go beyond the situation at issue and which have the potential to affect online distribution in general.
Does anyone have any strong views on this?
