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Intel and the fight for the soul of EU competition law

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Wouter Wils (one the finest legal minds at the Commission, currently Hearing Officer and one of our Friday Slot interviewees -see here-) has today released an article that will certainly have a significant impact in the discussions on the convenience of following a “more economic approach” to abuse of dominance (and that is likely to be highly controversial, particularly among competition law economists).

We’ve recommended many other articles before, but this really is a must-read.

By the way, Wouter was inspired to write the article by Pablo Ibañez Colomo’s comment on the Intel Judgment in this blog and by the ensuing discussion (see here).

The piece (soon to be published in World Competition) is now available here:

The judgment of the EU General Court in Intel and the so-called ‘more economic approach’ to abuse of dominance

We very much look forward to the debate that this piece will spur.

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Written by Alfonso Lamadrid

19 September 2014 at 2:45 pm

10 Comments on the ECJ’s Judgment in Case C-67/13 P, Groupement des Cartes Bancaires

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September 11 2014 was a big day for antitrust at the European Court of Justice. The Court delivered two important Judgments in the Mastercard and Cartes Bancaires cases, and heard oral arguments in Huawei/ZTE. We’ll comment on the latter in due course, and will be devoting our next posts to discussing the content and implications of the two Judgments. Let’s start with Cartes Bancaires, which is the one with greater potential future implications (as already noted by Pablo in the post below).

This can be an analytically complex subject and there’s much to discuss, so allow me to skip the basics and the summary of the Judgment that you can find here (a copy-pasted version will also appear in some newsletters…) Here are my 10 initial reactions to the Judgment. These are not at all definitive positions but rather preliminary thoughts that I’m hastily posting now with the hope that I’ll be able to polish them in the course of follow-up discussions. For the lazy ones, and given that the full text may be lengthy and dense (for a change), all the main messages appear in bold.

1) The Judgment is to be welcomed mainly as a statement, or cautionary message, from the Court in reaction to an often discussed trend on the excessive use and abuse of the “object shortcut” (how many recent EU and national 101 “effects” cases do you know of?)

In the ECJ’s words (para 58) “[t]he concept of restriction of competition `by object’ can be applied only to certain types of coordination between undertakings which reveal a sufficient degree of harm to competition that it may be found that there is no need to examine their effects otherwise the Commission would be exempted from the obligation to prove the actual effects on the market of agreements which are in no way established to be, by their very nature, harmful to the proper functioning of normal competition”.

It seems almost as if the GC had asked to be quashed when writing in its Judgment in this case (para. 124) that “the concept of infringement by object should not be given a strict interpretation”. The ECJ sensibly lambasts this statement in para. 58 (admittedly, though, this may have been a problem of bad drafting on the part of the GC; read in context, the statement seems to have intended to refer to the fact that “object restrictions” are not limited to a closed list of “suspect” hardcore restrictions, which –had it been stated that way- would’ve made perfect sense; AG Wahl also seems to have observed this as evident from para. 67 of his Opinion).

This is not without importance, for the “object” category has arguably been expanded beyond the limits of its logic (remember Areeda’s quote?) not only by the European Commission, but arguably also by the ECJ itself in T-Mobile (see below) and, less visibly, but more excessively and perhaps more importantly, by national competition authorities (as AG Wahl also observed in para. 59 of his Opinion: “caution is all the more necessary because the analytical framework that the Court is led to identify will be imposed both on the Commission and on the national competition authorities, whose awareness and level of expertise vary”). For my previous comments in this regard –in relation to info exchanges- click here.

2) Until now, the ECJ had endorsed an arguably wide interpretation of the notion of restriction by object, placing however the emphasis on the need to conduct a proper 101(3) analysis in any event. This is what the Court has done since Matra, did recently in Pierre Fabre and, most obviously, in Glaxo Spain, although to no avail because –as you may not yet know- the Commission recently decided to drop this case because it allegedly lacks EU interest; this is after 14 years of proceedings, two Court Judgments, a declaration from the ECJ that dual pricing constitutes a restriction by object and also despite the ECJ’s mandate for the Institution to conduct a 101(3) assessment. No wonder they have tried to keep it under the radar… We’ll comment on this case in the future (Disclaimer: my firm represents the European Association of Euro-Pharmaceutical Companies, which has recently appealed the Commission’s decision to drop the case under a quite innovative legal reasoning]. Given the little practical impact of its previous stance and the slow death of Article 101(3), it seems reasonable for the Court to have decided to move beyond it.

3) AG Wahl had rightly observed in his Opinion, “the present case gives the Court another opportunity to refine its much debated case-law on the concept of restriction by object. Query: has the Judgment finally shed light on how to resolve the object/effect conundrum? As developed below, I’m afraid not much.

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Written by Alfonso Lamadrid

17 September 2014 at 6:02 pm

Groupement des Cartes Bancaires and the resilience of the case law on restrictions by object

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[Note by Alfonso: I devoted part of the weekend to drafting a comment on the recent Court Judgment in GCB, but Pablo Ibañez Colomo has proved quicker. Here's his reaction to the Judgment; mine will follow].

The ECJ judgment in Groupement des Cartes Bancaires will be discussed at length in the coming months (maybe more so than MasterCard). The outcome is unsurprising (at least in my view). The Court, as AG Wahl, applies the principles stemming from a well-established line of case law, which has proved to be remarkably resilient. It should now be clear beyond doubt that relying on pigeon holes or formal categories to identify object restrictions can often be misleading. What matters is the rationale behind the agreement (as inferred from its wording and the economic context), and not so much whether it includes a particular restraint. Thus even an agreement providing for price-fixing may not be restrictive by object (in para 51 of the judgment the Court is careful not to refer to any form of price-fixing between competitors, but to naked price-fixing cartels and their functional equivalents). Conversely, an agreement that does not fit within the ‘suspect’ categories may also be restrictive by its nature – this is how I understand Allianz Hungaria, and the reason why it makes sense to me.

It should also be clear after Groupement des Cartes Bancaires that identifying the object of an agreement and establishing its restrictive effects are two separate steps. The first one may at times require a careful and lengthy analysis of the relevant legal and economic factors that explain the logic and purpose of a restraint. However, this fact does not mean, as has sometimes been claimed (in light of what now seems to be a misinterpretation of T-Mobile), that it is tantamount to establishing the restrictive effects of the agreement. The ECJ finds that the GC did not distinguish between the two steps. Claiming that an agreement is capable of having restrictive effects is not the same thing as saying that it is, ‘by its nature’, contrary to Article 101(1) TFEU (see para 69). Additional questions around this point will soon be addressed in academic articles and discussed at conferences. I am ready to guess that the formula chosen by the Court (‘sufficient degree of harm to competition’) will give rise to speculation about its exact scope and meaning (I have my answer, but it would be the nth time I write about it in the blog). It is also necessary to read some paragraphs (49-51, for instance) together with the judgment in Expedia, where it was clarified that ‘by object’ agreements that have an effect on trade between Member States appreciably restrict competition.

There is another aspect that is not strictly related to the substantive analysis but that will have piqued the interest of some people. The ruling could be used in textbooks to illustrate the principles of judicial review in EU competition law. The Court is very explicit and structured in this regard. First, it sets out the legal criteria for the assessment of the object of an agreement and comes to the conclusion that the GC had erred in law by applying a different set of principles. Secondly, it examines the legal characterisation of the agreement as restrictive ‘by nature’ and finds an additional error in law. It would seem from the judgment itself that the analytical clarity with which judicial review is conducted is a ramification of KME and Chalkor. In fact, the ECJ holds that the GC had not complied with the standard of review set out in the case law (para 91).

Groupement des Cartes Bancaires is likely to have consequences for some cases pending before the Commission and the GC. I thought ‘pay for delay’ when I read the bits about the relevance of ‘experience’ and about BIDS. I thought ‘pay TV investigation’ when I read that, in order to determine whether an agreement is restrictive by object, ‘it is […] necessary to take into consideration the nature of the goods or services affected, as well as the real conditions of the functioning and structure of the market or markets in question’. In spite of its relevance for the case, this issue was never considered by the ECJ in Murphy. It had not been raised by the parties. In the context of formal proceedings before the Commission, it would inevitably have to be addressed. I have recently published a paper discussing how this factor could influence the outcome of the investigation.

Interesting times ahead!

Pablo

Written by Alfonso Lamadrid

15 September 2014 at 3:53 pm

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.

Written by Alfonso Lamadrid

17 July 2014 at 11:41 am

Intel v Commission and the problem with wrong economic assumptions

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(by Pablo Ibañez Colomo)

Voices that relativise the problems with Article 102 TFEU case law are not infrequent. It may be true that the case law is not beyond reproach in all respects, the argument goes, but perfection is not of this world. The fact that rulings are often criticised simply means that Article 102 TFEU is an inherently controversial provision and that the stakes in abuse cases are generally very high, not that there is something fundamentally wrong with the preferences expressed by EU courts. And in any event, the alternative, economics-based, approaches have their problems too. The current case law is just the expression of a legitimate choice.

There is of course some truth in this position. At the same time, I find a bit defensive and as such problematic because it can become an obstacle to an honest and constructive exchange of ideas. I can think of at least a fundamental aspect that is uncontroversially (or objectively, if one prefers) wrong with Article 102 TFEU case law. What makes it even more interesting is that it fails to attract the attention that, in my view, it deserves. We all know that exclusive dealing and loyalty rebates are (absent an objective justification) abusive under Article 102 TFEU. The assumption underlying this rule is discussed far less often and is crucial to understand the case law. In paragraph 77 of Intel, the Court repeats the old formula whereby the abovementioned practices, as opposed to quantity rebates, ‘are not based – save in exceptional circumstances – on an economic transaction which justifies this burden or benefit but are designed to remove or restrict the purchaser’s freedom to choose his sources of supply and to deny other producers access to the market’.

This statement, as a matter of economics, is incorrect. Contrary to what the Court holds, there are perfectly valid pro-competitive justifications for exclusive dealing and loyalty rebates. I am inclined to believe that everyone at DG Comp and the Legal Service agrees by now with this idea, which has long been part of the mainstream. Suffice it to check any textbook on industrial organisation or the economics of competition law. To mention the three I had in my office when preparing this post, take Carlton & Perloff; Bishop & Walker; or Niels, Jenkins & Kavanagh (Hans Zenger’s piece on loyalty rebates is great too). Given its peculiar cost structure, some of these justifications are of obvious relevance in the microprocessor industry.

Article 102 TFEU case law will not evolve until the ECJ acknowledges that a rule-based approach to exclusive dealing and loyalty rebates is grounded on a misguided economic assumption. Interestingly, a shift in this direction would not require a major revolution. The ECJ would just have to accept – finally – that what is true under Article 101 TFEU must by definition be true under Article 102 TFEU. In paras 10-12 of Delimitis the Court holds that there are perfectly valid justifications for exclusive dealing and – by extension – for loyalty rebates. As a result, they are not restrictive by object. Article 102 TFEU case law cannot be based on the opposite assumption (i.e. that these practices are anticompetitive by their very nature because they have no economic explanation other than the exclusion of competition). Paragraphs 89-91 of Intel show the difficulties into which EU courts run whenever the tension between these two lines of case law is raised (Van den Bergh Foods being another excellent example).

I am convinced that an effects-based approach would follow logically from the suggested shift. The additional arguments raised in subsequent cases to justify the current approach are not particularly persuasive. The fact that dominant firms have a ‘special responsibility’ that derives from their status does not mean that an effects-based approach to loyalty rebates and exclusivity is not conceivable. There are recent cases, like Post Danmark and TeliaSonera, where the ‘special responsibility’ of dominant firms is seen as compatible with requiring evidence of an anticompetitive effect.

Paragraph 77 of Intel also made me think of the relationship between law and economics in competition law. It is interesting that the General Court reiterates the Hoffmann-La Roche formula to make it clear that there is a long line of case law supporting its position. ‘Exclusive dealing and loyalty rebates have no pro-competitive justifications because we have always said they do not’, the judges appear to claim. What is an economic argument is dealt with, in other words, as a legal one. From an economic perspective, to be sure, the fact that EU courts have consistently relied on the same assumption does not make the latter any less incorrect.

The Intel judgment also made me think of something I often say. Economic analysis is sometimes presented as an exogenous force that has interfered with EU competition law since the 1990s. What wrong assumptions such as the one discussed in this post show is that this view is not accurate. Economics is hard-wired into competition law – it is an integral part of it. The only debate should be whether to rely on one’s more or less accurate intuitions (à la market definition in United Brands, for instance) or to trust instead the analytical tools developed over several decades by competent individuals devoting their professional lives to a systematic understanding of the economic side of the discipline.

Pablo

Written by Alfonso Lamadrid

16 June 2014 at 11:43 am

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

Umbrella pricing- Case C-557/12 Kone, or when effectiveness may go too far with little effective consequences

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Last Thursday the ECJ delivered its –once again remarkably brief (4 pages)- Judgment in Kone, Case C-557/12. In her widely discussed Opinion in this case Advocate General Kokott had raised the stakes, pointing out that “[t]he Court’s Judgment in this case will without doubts be groundbreaking in the context of the further development of European competition law and, in particular, its private enforcement” (perhaps a bit of an overstatement if you ask me).

The question at issue was whether a national legal system can exclude the possibility that compensation may be sought in relation to damages suffered due to the overprice (legally) charged by non-cartelists who independently and rationally adapted to the cartel by increasing their own prices. The umbrella metaphor signifies that those companies can profitably increase under the cover of their competitors’ cartel.

The Judgment is remarkable because –following AG Kokott’s recommendation- it somehow endorses the “umbrella pricing/damages” theory by ruling that Member States cannot exclude it “categorically”. In the Court’s words:

 “[t]he full effectiveness of Article 101 TFEU would be put at risk if the right of any individual to claim compensation for harm suffered were subjected by national law, categorically and regardless of the particular circumstances of the case, to the existence of a direct causal link while excluding that right because the individual concerned had no contractual links with a member of the cartel, but with an undertaking not party thereto, whose pricing policy, however, is a result of the cartel that contributed to the distortion of price formation mechanisms governing competitive markets”. (Para.33).

A brief background note

The preliminary reference had reached the ECJ because Austria Courts had previously ruled that the “umbrella pricing” theory would not be sufficient to establish a “causal link”. The referring Court cited a legal doctrine that holds sway in Germany and Austria according to which any claimant must establish the infringement of a “protective provision”. According to that doctrine, the decisive factor is whether the provision infringed by the person responsible for the loss had as its object the protection of the injured person’s interest. In this sense, it was generally considered in Austria that “umbrella pricing” theories were out of the scope of the protective provision given that the loss they could cause involved no relationship of unlawfulness and was rather “merely a side-effect of an independent decision that a person not involved in that cartel has taken based on his own business considerations”.

The Judgment’s reasoning in a nutshell

The Judgment (i) recalls the direct effect of the competition rules and that its effectiveness requires that any individual shall be able to claim damages for loss caused to him by a conduct restrictive of competition (paras 20-22); (ii) stresses the role of damages claims as a possibility that “strengthens the working of EU competition rules” (para 23); (iii) reminds that in the absence of harmonization the principle of procedural autonomy applies (meaning that whereas EU Law imposes the necessary “existence” of a right to claim damages national laws must govern the “exercise” thereof) (para. 24); (iv) observes that the principle of procedural autonomy is subjected to compliance with the principles of equivalence and effectiveness (paras 25-26); (v) states that “umbrella pricing” is “one of the possible effects of the cartel, that the members thereof cannot disregard” (paras. 27-30); and (vi) concludes that excluding the link of causality between the cartel and umbrella pricing categorically, for legal reasons and regardless of the circumstances would run counter the effectiveness of EU competition rules (paras. 31-35).

A handful of follow-up thoughts

I haven’t yet given much thought to this, but here are some preliminary -almost instinctive- reactions that might perhaps contribute to sparking some debate:

-          From the viewpoint of general EU Law the Judgment fits within a consistent body of case-law endorsing an indirect harmonization of civil procedural rules by virtue of an ample reading of the principle of effectiveness that narrows the scope of the principle of procedural autonomy.

-          The key assumption or stance underlying the Judgment is that there is a certain causal relationship between the cartel and the umbrella pricing in which the former acts as a facilitator or enabling mechanism for the latter (e.g. (a) “it is not disputed by the interested parties (…) that a phenomenon such as umbrella pricing is recognized as one of the possible consequences of a cartel”; (b) “even if the determination of an offer price is a purely autonomous decision, taken by the undertaking not party to a cartel, it must none the less be stated that such decision has been able to be taken by reference to a market price distorted by that cartel and, as a result, contrary to the competition rules”); and, more clearly, (c) the suffering of loss in “umbrella pricing” settings “is one of the possible effects of the cartel”).

To me this causal relationship would seem intuitively hard to establish, and I wouldn’t have bet on the Court taking it for granted (with the sole supporting arguent that the intervening parties in the case had not disputed that umbrella pricing is, very theoretically, a possible consequence of a cartel). In any event, those familiar with the Court’s case-law in other areas may observe that the ECJ might arguably have embraced a much narrower interpretation of the causality link in other areas, such as that of non-contractual liability of EU Institutions, where a “direct causal link” is required…

-          Effectiveness trumps it all? The deviation from the general principle of procedural autonomy and the arguably flexible interpretation of the “causality” requirement might once again be explained by the perceived need to safeguard the effectiveness of the competition rules (read paras. 32 and 33 of the Judgment). Effectiveness has –rightly- been the core concern at the root of the case law on damages actions (Courage and Crehan, Manfredi, City Morors, Pfleiderer, Otis or Donau Chemie). However, one often has the impression that we hail the effectiveness of these rules too much in order to deviate from general principles of law to a greater extent than we do it with other legal regimes, particularly when dealing with cartels (para. 32 of Kokkot’s Opinion makes this last point more evident). I recently made the same point regarding the Court’s minimalistic interpretation of the limiting principles of necessity and proportionality in these cases for the sake of effectiveness

-          At the level of incentives, what signal would this Judgment send to non-cartelists operating in a seemingly cartelized market? [admittedly not an easy group to target] How about “hey, raise your prices in the shadow of the cartel: you’ll reap the profits plus your rivals will have to pay extra for it”?

- It’s remarkable that, to my knowledge, this is an issue that hasn’t received that much attention in the U.S. in spite of private enforcement being much more developed. In fact, distric courts have tended to view this theory as too speculative or conjectural, observing that independent pricing decisions (which may be affected by several and complex factors) break the chain of causation.  [e.g. Antoine Garabet, M.D., Inc. v. Autonomous Techs. Corp., 116 F. Supp. 2d 1159, 1167-68 (C.D. Cal. 2000)].

-          The Judgment will be welcomed by many lawyers (because we now have an apparent better chance at overcoming the causality hurdle) and particularly economists (for whom, paradoxically, the endorsement of the umbrella theory could bring in a rain of new work) (I get metaphorical at lunchbreaks)

-          At the end of the day, and in spite of all the above, I doubt this Judgment will have very significant practical implications. The only thing  the Court really says is that national legislations cannot exclude the “umbrella theory” categorically and regardless of the specific circumstances of the case. However, it does in no way require national Courts to accept this theory when they examine the causal link originating responsibility in a given case. The causal relationship still will need to be proved in the light of the specific circumstances of the case and, well, good luck with that.

 

Written by Alfonso Lamadrid

11 June 2014 at 3:20 pm

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