Archive for the ‘Case-Law’ Category
From Judge Bork himself:
“The typical law partnership provides perhaps the most familiar example [of agreement on prices and markets]. A law firm is composed of lawyers who could compete with one another, but who have instead eliminated rivalry and integrated their activities in the interest of more effective operation. Not only are partners and associates frequently forbidden to take legal business on their own …, but the law firm operates on the basis of both price-fixing and market-division agreements. The partners agree upon the fees to be charged for each member’s and associate’s servicse (which is price fixing) and usually operate on a tacit, if not explicit, understanding about fields of specialization and primary responsibility for particular clients (both of which are instances of market division)” The Antitrust Paradox, 1978, p.265.
Bork used this example to criticize the blanket per se prohibition of price-fixing and market division schemes. Cartels formed amongst lawyers yield redeeming efficiencies (the combination of complementary skills, notably) + there are many law firms and all compete fiercely. Hence, output restriction is not a tenable hypothesis.
This later point ties in well with C‑226/11 Expedia Inc. v. Autorité de la concurrence, a judgment poised to earn a “worst antitrust development Oscar”. Bork’s example casts a bright light on the judgment non-sense: in this case, the Court held at §37 that conduct with marginal market coverage (<10%) ought to be deemed to have appreciable anticompetitive effects as long as it can be categorized as a restriction by object:
“It must therefore be held that an agreement that may affect trade between Member States and that has an anti-competitive object constitutes, by its nature and independently of any concrete effect that it may have, an appreciable restriction on competition“
In other words, a price-fixing scheme that covers 5% of the market is per se illegal under Article 101(1) TFEU. Again, a dispairing judgment…
With the anticipated settlement in the Google search case (amongst other things), journalists keep asking whether this represents a major win for the Commissioner. Like I have said before, the best way to address this question consists in assessing the substantive merits of the case. The settlement certainly represents a major win if one believes that the case is meritless (I have argued this elsewhere). The FTC’s decision to do nothing on search supports this theory.
In contrast, this settlement is not a major win if one believes that the case is strong, and that the Commission could have easily pushed for an Article 7 decision (I have also made arguments to this effect, given the loose substantive and judicial review standards promoted by the EU courts in abuse cases).
But there’s one thing which may have dissuaded the Commissioner and his administration from using the conventional Article 7 track (remember, he actually voiced his disinterest for the Article 7 procedure and pleaded that fast moving markets need fast enforcement mechanisms (read Article 9): the protracted duration of such proceedings. The Commissioner’s mandate expires somewhere in the Fall of 2014. Under an Article 7 procedure, he might no longer have been in office to sign the prohibition decision. In short, to put the Google case on his hunt list, Almunia needed a settlement.
But is it really true that it takes so much time to adopt an Article 7 prohibition decision in an abuse case? After all, we are now 3 years and 2 months after the initial complaints in the Google case (they date back to February 2010), and the supposed celerity of Article 9 decisions seems all the more relative.
I made a quick check on the duration of Article 7 proceedings in abuse cases since 2005 (using COMP’s case search tool):
- Intel, 9 years following complaint
- Microsoft, 6 years following complaint
- Astra Zeneca, 7 years following complaints
- Tomra, 6 years since complaints
- GVG/FS, 4 years following complaint
- Wanadoo, 4 years following investigation
- Telefonica, 4 years following complaint
- Telekomunikacja Polska, 3 years following investigation
- Clearstream, 3 years following investigation
Two things stand out of this review: 1. Article 7 decisions can be adopted in 3-4 years; 2. cases with formal complainants are much longer than cases without.
Against this backdrop, the Commission could thus not have conceivably adopted an Article 7 decision before the term of Almunia’s mandate.
So if the Commission is ever to settle with Google, this will clearly be a big win for Commissioner Almunia.
PS: for a funny paper on Google
death inactive account manager service, see here.
PS2: for yet another ordinary interview of the author of this post in the press, see here.
My back of the envelope analysis of the Commission’s prohibition decision in UPS/TNT, following yesterday’s GCLC lunch talk.
Some facts first - With this decision, the Commission prohibited a merger to duopoly in the express mail business. The Commission found that the merger would have given rise to an overly powerful n°2 – DHL being the leading player – and to the disappearance of a “maverick“, TNT (a so-called “gap case” ). Whilst efficiencies were deemed sufficient to outweigh the restrictive price effects on a number of geographic markets, the balancing test in central and eastern European markets yielded a negative outcome. The parties did not manage to convince the Commission that their “last minute” proposed remedies package (divestiture of parts of TNT’s business to La Poste + 5 years’ access to UPS/TNT’s aircraft fleet) would allay its concerns. The Commission had thus no other choice but to block the merger. The deadline for appeal exprises next week. My feeling – based on smoke signals – is that the parties will appeal before the General Court. Unfortunately, the decision is not yet published. But the Commission has published a press release and a comprehensive MEMO on the decision.
On a possible toughening of EU merger policy - Contrary to what has been written in the press, the case does not suggest a harder merger policy. The headcount of prohibited mergers for Almunia currently lurks at 4, where Van Miert and Monti respectively had shot down 9 and 8 mergers. Rather, this decision shows that merger scrutiny remains effective, even in a period of merger morass and of depressed capital markets.
On the alleged protectionist instrumentation of EU merger policy - In the US, journalists were prompt to compare the EU with China, arguing that “the Commission uses antitrust enforcement to curb the efforts of American companies to expand in their countries”. To me, this is ill-thought: the prohibition decision also protects FedEx, a US company, from the fierce competition of DHL and UPS .
On the missed opportunity to “industrialise” EU merger policy – The Commission refused to view La Poste as a “suitable purchaser” for the parties’ proposed divestiture. From an industrial policy angle, one may argue that the Commission has thereby counter productively prevented the rise of a second European giant in the parcels business, besides DHL (Deutsche Post). Now, it is well known that the Commission also seeks to open postal markets to competition. A further strenghtening of La Poste may have undermined the Commission’s parallel liberalisation agenda.
On the perils of economic analysis in EU merger policy – Let’s be frank: in this case, the parties awkwardly offered to the Commission the rope to hang them. To prove that the disappearance of TNT would lead to price increases, the Commission relied on the price concentration study initially provided by UPS and TNT. It seems the Commission just had to tweak some numbers, and what looked like a minor positive correlation according to the parties became a significant impediment to effective competition (the parties did not deny the existence of a price effect, but they argued that it was de minimis in magnitude) which could only be offset by redeeming efficiencies. In other words, by pushing this price concentration study forward, the parties lifted the burden of proof away from the Commission, and placed themselves immediately in the uncomfortable position of having to argue efficiencies. The bottom line: economic analysis can backfire.
On the interpretation of the “efficiency defense” in EU merger policy - This case is probably one of the first merger cases in which the Commission accepted that – at least on some markets – cost efficiencies would be passed on to customers. So far, the Commission had often accepted the existence of efficiencies, yet rejected them as either insufficient in magnitude or on the ground that they would not be transferred to customers. This is a very positive evolution in merger policy.
On the fallacious distinction between fixed and variable costs in the context of the “efficiency defense” – The Commission rebuffed the administrative efficiencies (overheads) advanced by the parties on the ground that they constitute fixed cost efficiencies, i.e. one-offs which have no impact on prices charged to customer. To me, this is bad policy. Whilst firms do not seek to recoup ALL their fixed costs in their short term prices, most firms try to recoup some of their fixed costs in their short term prices. So if, with a merger gives rise to fixed costs reductions, then there is less to recoup on customers in the short term. The bottom-line: fixed costs efficiencies have an influence on short term pricing. Moreover, “one-offs” fixed cost efficiencies have an additional beautiful feature: they are “structural” efficiencies that benefit to consumers forever, regardless of market evolution (growth or decline). They are thus more plausible, and likely to unravel, than “conjonctural” variable costs efficiencies.
On the interface between EU merger policy and Article 102 TFEU - To reject the proposed remedy package, the Commission speculated that La Poste would likely not develop its own aircraft fleet, so that after the expiration of the 5 years’ access remedy, it would not exert significant competitive pressure on the integrators (DHL, UPS/TNT and FedEx). This is not very convincing, for both factual and legal reasons. First, La Poste has already started a process of vertical integration. Second, after the expiry of the 5 years commitment, the Commission remains able to maintain an access remedy under the Article 102 TFEU essential facilities doctrine.
On conflicts of interests in EU merger policy – Rumour has it that at the hearing, the parties infuriated a big fish from DG COMP. The reason? The official who previously held his position had dared appearing as consultant for the parties.
On the scope of the UPS/TNT decision - The Decision concerns only 29 countries in the EEA, and not 30. The explainer it that the Commission did not manage to get any significant data on Liechtenstein, so it decided to drop this country from its investigation.
For more on this, see A. Lofaro’s excellent RBB Brief here.
The ppts of the speakers at yesterday’s lunch talk will shortly be made available on the GCLC’s website.
And thanks to Stephan Simon for suggesting to title the event after AC/DC’s “TNT“, rather than after Queen’s “Another one bites the dust“.
Note by Alfonso: As some you may have noticed, I’ve taken an unusually long blogging break from which I’m now back. As every time I’m out of combat, Pablo Ibañez Colomo (who, by the way, has recently been fast-track tenured -major review- at LSE and has just received a major review teaching prize; congrats!) comes up with a replacement post that’s better of what I would’ve written (we have a luxury bench at Chilin’Competition…). A few days ago Pablo sent us this post on France Telecom that we(I)’ve been slow to publish due to the easter holidaus and to to the frenchy’s posting frenzy We leave you with Pablo:
Some readers wll remember that during my short-lived tenure as a substitute blogger a few months ago, I wrote about a pending State aid case involving France Telecom. I guess that at least a fraction on those readers will be interested in knowing that the Court of Justice delivered its Judgment in the case on
Unsurprisingly, the judgment is in line with AG Mengozzi’s (very sensible) opinion. The General court annuled the Commission’s decision on grounds that the Commission had not identified a clear link between the advantage deriving from a shareholder loan offer in favour of France Telecom and the State resources allegedly involved by virtue of the measure. As I argued in my previous post, the Court of Justice takes the view that the General Court’s interpretation of Article 107(1) TFEU would leave outside the scope of the provision measures suh as guarantees departing from market conditions (see paras 107-111). Such measures do not immediately place a burden on the budget of the State, but a ‘sufficiently concrete risk of imposing an additional burden on the State in the future‘. According to the Court, it is sufficient to identfy such a ‘sufficiently concrete risk‘ for State aid rules to come into play.
The broader picture is aguably more interesting than the outcome of this case. As I mentioned in the previous post, the Court of Justice has sided with the Commmission (thereby departing from the analysis of the General Court and the theses advanced y Mmember States) in some key cases revolving around the notion of selectivity. France Telecom, arguably the single most important case of the past years on the notion of State resources, seems to confirm this trend. The old principles of Article 107(1) TFEU case law, if anything, seem more solid following these high-profile disputes
[Please read this post with caution] Heard from a seasoned German-speaking Member of the Court of justice of the EU.
The fuzz about the object-effect dichotomy that has kept generations of EU competition lawyers busy would be a moot issue. We dumd: last year, at the GCLC, we devoted a full conference and book to this issue.
This is because this distinction arguably does not exist [following Hans, Petra and Rainer's clarifications, I suspect this eminent person meant is "not really relevant"] in the German-language version of the Treaties. Hence the Court’s reluctance to consider effects in antitrust cases.
Puzzled by this assertion, I ran my investigation. At this juncture, I must mention that I am a complete German illiterate.
So here we go: I first consulted the wording of Article 101(1) of the Treaty in German:
“(1) Mit dem Binnenmarkt unvereinbar und verboten sind alle Vereinbarungen zwischen Unternehmen, Beschlüsse von Unternehmensvereinigungen und aufeinander abgestimmte Verhaltensweisen, welche den Handel zwischen Mitgliedstaaten zu beeinträchtigen geeignet sind und eine Verhinderung, Einschränkung oder Verfälschung des Wettbewerbs innerhalb des Binnenmarkts bezwecken oder bewirken, insbesondere”
Then I asked Google to translate this text to English:
“(1) The internal market incompatible and all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object the prevention, restriction or distortion of competition within the internal market and in particular those”
No trace of the word “effect“.
I did the same in French:
“(1) Le marché intérieur incompatibles et interdits tous accords entre entreprises, toutes décisions d’associations d’entreprises et toutes pratiques concertées qui sont susceptibles d’affecter le commerce entre États membres et qui ont pour objet d’empêcher, restreindre ou de fausser la concurrence au sein du marché intérieur et en particulier ceux”
Again, no trace of the word “effect“.
A weird finding. All the more so given that the official Treaty translation explicitly talks of “effect“.
So here I am, pondering whether I am making this up or if, as this distinguished Court Member hinted, there is a linguistic reason for the absence of serious effects analysis in the Court’s case-law.
Now, if the other language versions of the Treaty talk of “effect“, which version of the Treaty is the right one?
Gee, me completely lost in translation.
PS1: On this, I’d advise Google to manipulate its translation service, and reintroduce the “effect” word in all Treaty translations.
See below for more evidence (a print of my screen).
Our friend Christian Bergqvist has offered us a most interesting post on the national sequel of the CJEU judgment in Post Danmark. Christian is an associated professor at the University of Copenhagen/Faculty of Law. He holds a PhD in competition law and has specialized in particular on dominant firm conduct and the interplay of Article 102 TFEU and sector specific regulation. For more, see here.
PS: for a good reminder of the ruling and of its implications for future competition policy, I advise the reading of the excellent piece of E. Rousseva and M. Marquis (which suggests (in my view rightly) that the Court eventually embraced the Commission’s approach set forth in the Guidance paper).
About a week ago, on Friday 15 February, the Danish Supreme Court delivered its ruling in Post Danmark vs Konkurrenceraadet. This judgment settles the national case behind the (fabulous) 2012 CJEU ruling Post Danmark (C-209/10). Given the strong pronouncements made by the CJEU it does not come as a surprise that the Danish Supreme Court eventually decided to quash the challenged (national) decision on grounds of an incorrect material test. Rather than concluding that discriminatory conduct was per se able to exclude a competitor, the Danish Competition and Consumer Authority, should have conducted an “equally efficient competitor test”, or something close (the latter being my interpretation). Absent this, nothing conclusive could be decided on the existence of an abuse.
The ruling of the Supreme Court leaves little space for ambiguity. Yet, the final word might not have been said on the matter. First, the Danish Competition and Consumer Authority can at least theoretically reopen the case and conduct a proper analysis. This, however, looks quite unlikely. Second, back in 2009, the alleged “victim” of the exclusionary behavior (Forbruger-Kontakt) had successfully filed an action for damages, and was subsequentely awarded DKK 75 million (app. EUR 10 million). Unsurprisingly, Post Danmark has appealed this decision to the Danish Supreme Court, which is yet to decide on the matter.
This short post seeks to offer some thoughts on this issue. Prior to this, I provide some background information on the initial EU case.
[There are too many things going on this week on which we would like to comment (not least yesterday's record fine in the CRT cartel) and we hear that next week may be even more interesting... We had another post planned for today, but current news rule, and we wanted to provide you with the first comment of today's Judgment in AstraZeneca. So, here's a subjective and hastily written summary + comments. It might be a living-post, meaning that it might be updated as further thoughts come to mind. Anyone who might want to use this to draft client alerts: please consider this as a Sint Nicholas gift ]
It could make sense to hold a ménage à trois discussion on this Judgment; candidates are welcome…
Today the European Court of Justice (“ECJ”) issued its long-awaited Judgment in the AstraZeneca (“AZ”) case. The ECJ has upheld the 2010 Judgment from the General Court, which in turn had endorsed the Commission’s 2005 infringement decision.
As most of you know, the Commission had found that AZ abused its dominant position by (a) making misleading representations to patent offices of several Member States with a view to extending the period of patent protection for its product Losec (an omeprazole-based medicinal product used in the treatment of gastrointestinal conditions); and (b) requestintg the deregistration of market authorisations for Losec capsules in Denmark, Norway and Sweden. These conducts were ultimately aimed at keeping manufacturers of generic products at bay, as well as at preventing parallel trade.
In 2010 the General Court dismissed most of AZ’s arguments, but reduced the fine from € 40.25 million to € 12.25 million on the grounds that the Commission had not proved that AZ’s conduct had prevented parallel imports of Losec in Norway and Denmark. AZ appealed this Judgment, and in doing so brought before the ECJ some issues which are of crucial relevance to the very notion of abusive conduct.
- Market definition is discussed in paras. 31-60. I had started to summarize it, but it would take too long. Unless you represent AZ you can skip (lots of factual stuff, there’s nothing that will rock your world)
- The first abuse
The logic in the GC’s Judgment was that AZ deliberate (intention plays a key role here) submission of misleading information to public authorities with a view to obtaining the grant of an exclusive right to which it was not entitled falls outside the scope of competition on the merits, and therefore within the category of abusive conduct.
AZ and EFPIA argued that AZ had simply failed to disclose to patent offices its bona fides and allegedly reasonable interpretation of the patent rules, and that this could not be equated with “objective misleading”. In their view, even if AZ’s interpretation ultimately proved wrong, it was not aimed at misleading. The applicants claimed that pursuant to the GC’s standard, dominant companies would have to be infallible in their dealings with regulatory authorities, which, in turn, would impede and delay patent applications in the EU.
[i.e. the basic trick of trying to scare the Court alleging that hell will break loose; as if it had since the Decision was issued in 2005....]
The ECJ’s Judgment -like the GC’s- is solidly grounded on Hoffman la Roche’s
rather unhelpful definition of abuse as conduct different from “competition on the merits”. It does not require the abusive conduct to flow directly from the exercise of the undertaking’s dominanat position; on the contrary, it assumes that the presence of a dominant company already implies that the degree of competition in a market is hindered (the clearest formulation of this idea appears in para. 150, with respect to another ground of appeal), and that therefore it has a special responsibility to ensure that competition is nor further undermined.
The ECJ does a good job in setting out the objective reasons why AZ’s conduct was consciously motivated by the desire to mislead public authorities in order to maintain its dominant position (see paras. 79-93). The Court notes in paras. 94-100 that if AZ’s interpretation had been reasonable (as AZ claimed), then it should have disclosed the relevant information informing its interpretation (the Judgment doesn’t put it this way, but the idea seems to be that the intentional failure to disclose that info provides a valuable indication of the merits that AZ seemed to attribute to its own reasoning). Para 98 makes it clear that even if you have a “legally defensible interpretation” this is not excuse resorting to highly misleading representations with the aim of leading public authorities into error.
In para 99 the Court responds to the “hell will break loose argument” (see my second word crossing above) stating that the GC did not require infallibility in patent applications (“it thus cannot be inferred from that Judgment that any patent application made by such an undertaking which is rejected on the grounds that it does not satisfy the patentability criteria automatically gives rise to liability under Article 102“), and that the Judgment is confined to the specific circumstances of the case. There’s a difference between requiring infalibility and reprehending someone who obviously and intentionally fails to act right.
The Court then deals with the argument that AZ’s conduct (its apliccation for SPCs) was labelled as abusive regardless of its lack of effects. It states that the “examination by the General Court is not in any way based on the assumption that the practice in question constitutes an abuse in itself regardless of anticompetitive effects” (para. 106). The ECJ confirms that AZs misleading interpretations were liable to lead the public authorities to grant it a right to which it was not entitled, and that this in fact happened in several Member States (paras. 107 and 108). In para. 110 the Court makes it clear that even if the effects of the abuse were also felt at a period in which AZ was not dominant anymore, this is irrelevant for the assessment of the legallity of a practice carried out while AZ was dominant. The Court also upholds the GC’s conclusion that AZ did not achieve its goal in some Member States its conduct was “very likely to result in the unlawful SPCs” (para. 111).
The ECJ makes it cleat that in Art 102 cases there is no “requirement that current and certain anticompetitive effects be shown“. Citing para. 64 of TeliaSonera the ECJ states that “although the practice of an undertaking in a dominant position cannot be characterised as abusive in the absence of any anti-competitive effects on the market, such an effect does not necessarily have to be concrete, and it is sufficient to demonstrate that there is a potential anti-competitive effect” (para. 112) (unlike in TeliaSonera, there is no reference to the exclusion of “as efficient competitors”, but this is probably due to the different factual settings in the two cases).
For this second part of our first ménage à trois discussion we are proud to present you with José Luis Buendía’s view of the Greek Lignite Judgment in response to Marixenia Davilla’s earlier post. Aside from being the head of Garrigues’ Brussels office -where I happen to work-, José Luis is widely regarded as “Mr Article 106″. He also masters the art of illustrating all hiw views with metaphores and parables. Continue reading and you’ll see what we mean….
[For a contrarian view of José Luis' arguments check our Makis Komninos post (which we will publish here tomorrow)].
It is a real pleasure to be invited to contribute to this blog. This is even more the case given the topic, the format, and the identity of my nice and learned counterparts – Marixenia and Assimakis. Even if I don’t share their enthusiasm about this judgment, it is clear that they have done an excellent job as lawyers. So, congratulations to them and to their colleagues who worked om the case.
Contrary to them, despite having been in the past an EC official, I have not had any involvement in this particular case. I am nevertheless very interested in it, since I am working on a new edition of my book on Article 106. Moreover as I have explained in a recent article, unfortunately there are not so many Article 106 cases to comment. So I am glad to have this opportunity.
This case made me think of François Truffaut’s film Jules et Jim about a genuine ménage à trois. The Catherine of the movie (Jeanne Moureau) had – simultaneously – a husband and a lover. As Marixenia rightly implies in her interesting comment, Article 106 also has simultaneous links with State aid on the one hand and with antitrust on the other hand. In my view the problem with the judgment is to assume that Article 106 is only married with antitrust and faithful to it. It is not. Article 106 is about State measures and is therefore essentially different from antitrust.
It is for this reason that, in my opinion, this judgment is not really consistent with the previous case law that it claims to be following. Indeed, previous judgments, like RTT, considered that the mere granting of an exclusive right to a public undertaking previously enjoying a dominant position was in itself contrary to Article 106 combined with Article 102 TFEU. This conclusion was based on the effects of the State measure creating the extension of a dominant position from one market to another one (effects that were similar to those of an abuse). The said conclusion did not require any actual abusive behavior.
In today’s judgment the General Court reads the previous case law in a different manner and finds that it does require the existence of an abusive behavior, at least a potential one. Since the EC decision did allegedly not established the abuse but relied only on the effects, it was according to the Court in breach of the Treaty. This reasoning seems to me clearly contradictory with the case law.
This reasoning seems also a little bit abstract. Indeed, the judgment itself concedes that the mere possibility of a future potential abuse would have been enough to satisfy the legal test. However, since according with the judgment, the decision did not explore this issue in an explicit manner, it had to annul it. It seems however obvious to me that a State measure extending the dominant position from one market to a neighbor one has, at the very least, the potential to lead to abusive behaviors. So, the Court seems to say that it is only the lack of an explicit reference to this obvious consequence that leads to the annulment.
I assume that the Commission may appeal the judgment before the Court of Justice in order to clarify the application of Article 106 with regard to special or exclusive rights. I also think that in the future the Commission should be more active and more coherent in the application of this provision.
In any event, I also know that my Greek friends would have a view different from mine, so I really look forward to the continuation of the debate.
A few posts ago we decided to follow the Commission’s example and launched a reform aimed at working less. Our plan is to do so by opening this blog to comments on recent Judgments on the part of three experts: one writes a “standard post” on the Judgment, and two others comment on it. As anticipated, our first ménage à trois deals with the Greek Lignite case (concerning the inteface between Arts. 106 and 102 TFUE). Our three inaugural guests are three good friends of this blog: two of them (Marixenia Davilla -Shearman&Sterling- and Makis Komninos -White&Case- and were actually involved in the case (on the winning side) and the third (José Luis Buendía -Garrigues-) is the author of the bible on Article 106 (of which a new edition is on the pipeline). Marixenia has written an excellent post to get the ball rolling. Comments will follow soon. Enjoy!
First things first…Many thanks to Chillin’ Competition for
ambushing giving me the opportunity to participate in my first ever platonic ménage a trois. This is so exciting that I am contemplating making an addendum to my curriculum. I am certain it will boost my chances of being promoted before I turn 50.
Let’s move on to the juicy stuff now, namely, the PPC judgment rendered by the General Court on 20 September 2012. Having worked on this case whilst at Howrey (RIP), I am particularly pleased to see PPC winning a very difficult battle.
This case concerns Article 106 TFEU, a provision that cannot be implemented on its own, but must be combined with another EU law provision, in this case Article 102 TFEU. Article 106 can also be described as a sort of
transgender hybrid enforcement tool, existing in limbo somewhere between antitrust and state aid law, without really being any of the two. Commission decisions under Articles 106/102 are addressed to member states, but are not state aid decisions. They make findings regarding actual or potential abuse of dominance, yet the level of analysis required in such cases to prove an infringement is notably lower compared to that required for establishing a “pure” abuse of dominance under Article 102. Pursuant to Article 106(1)/102 case law, the Commission is not required to show that the company in question abused its dominance, but that it can be led to committing an abuse merely by exercising the state measure in question. In other words, Article 106 is not a bird, is not a plane, but does (still) fly, and has been a pretty handy weapon for the Commission, particularly in cases concerning network industries.
But the fun does not end there. The case law developed in relation to Articles 106(1)/102 predominantly comprises preliminary rulings by the Court of Justice, which are neither consistent with each other, nor that easy to categorise. That said, a broad categorisation is possible, and in PPC’s case the Commission relied upon the so-called “inequality of opportunity” case law (Raso and Others, France v Commission, GB-Inno-BM, and Connect Austria). According to the Commission, based on that case law, there is no need to identify a specific type of abuse; suffice to show that the state measure in question leads to an inequality of opportunity between market operators.
Haha, piece of cake! Prove that, dear Commission official, and you’re done, you can close the shop and go on holiday!
This interpretation is somewhat unsatisfactory. In its appeal against the contested decision of March 2008 PPC invited the General Court to clarify this issue, and the latter
bravely took on that challenge.
A while ago we wrote a post on The Slow Death of Article 101(3) TFEU, where we said that in recent European Commission, practice, only once the challenged agreeement was not deemed to be a restriction by “object”, and that only in that case the Commission had carried out a serious Article 101(3) assessment. This was the Mastercard Interchange fees case, and last May the General Court rendered its Judgment on it (btw, we have no interest whatsoever on this case).
Over time we have realized that the longer and more serious a post is, the less you guys read it (and this one will be quite lenghty). So, of the many complex and interesting issues raised by this case, we will only comment on a general point regarding the Court’s assessment of the interchange fee arrangements under Art. 101(3). Given that almost no Decision or Judgment delves into 101(3) analyses these days, the General Court’s assessment is priceless for anyone interested in exploring how this key provision is to be interpreted. In this sense, it’s surprising that the Judgment hasn’t received more attention.
I confess that I undertook the reading of the Judgment with a clear confirmation bias: I was looking for evidence that would support my point that it’s incredibly difficult to successfully argue that a given agreement can benefit from the legal exemption provided by 101(3). To my (positive) surprise, I found out that despite applying the “manifest error of assessment” standard of review, the General Court actually did carry out an assessment of the evidence put forward by Mastercard which is well more detailed than what I expected (see paragraphs 207-237). Right or wrong, it was acceptably thorough, specific, and even revealed that the Court had managed to understand the so-called Baxter model put forward by the applicants.
The Court’s application of the first condition of Article 101(3) nonetheless raises some interesting and debatable issues that relate to the fundamentals of Art.101(3), which are partly discussed below. I take responsibility for the opinions below, but I have
taken a free ride benefitted from educative discussions with two of my favorite legal minds: Luis Ortiz (who has authored the best study on how Art. 101(3) is to be applied) and Eric Gippini (whose great Friday Slot interview is available here) (to make sure, they don’t necessarily agree with the views developed below)
Click here if you’re interested in reading more (spoiler alter: dense stuff ahead)