Archive for the ‘Guest bloggers’ Category
The Opinion of Advocate General Wathelet in the very interesting Greek lignite case came out yesterday. This is the second time in recent weeks that the AG’s Opinion makes an impact in the competition scene with a tightly argued proposal (the previous one was his Opinion in Teléfonica).
You might remember that sometime ago we held our first
and so far only ménage à trois debate precisely in relation to the General Court’s Judgment in the Greek lignite case:
[Guest post by Pablo Ibañez Colomo]
It would seem that the Spanish super-quango is more active than one would have assumed (in particular given what is currently going on within the tax authority of the country). The newly-created CNMC has fined four football teams (including Real Madrid and Barcelona) and the broadcaster Mediapro EUR 15 million for concluding exclusive licensing agreements for a period exceeding three years. Such terms contravened a previous decision adopted by the – then – CNC in 2010.
The case is interesting, first, because the Spanish government passed (in 2010, at pretty much the same time that the original decision was adopted) legislation that set a four-year term for exclusive licensing agreements between teams and broadcasters. One could claim that, insofar as the contentious agreements complied with the relevant sector-specific legislation, they were concluded in good faith. Accordingly, the fine would be unjustified. In light (pun intended) of Consorzio Industrie Fiammiferi (pun intended, I’m on fire!), it is clear, however, that this is not a valid defence. Legislation did not preclude undertakings from concluding agreements for a shorter period and thus from complying with Article 101 TFEU (which was clearly applicable in this case).
A second reason why the case is interesting is because it shows that the three-year limit for exclusive licensing agreements is now set in stone. There is no reason why this should be the case. A three-year term is not necessarily pro-competitive. It all depends on the context in which the licensing agreement is concluded. If the goal of this bright-line rule is (as I assume) to preserve the contestability of markets for the acquisition of television rights, then it may sometimes be too short. A new entrant (as BSkyB was back in the early 1990s) may need a longer period to reduce uncertainty and recoup its investments. By ruling out any flexibility, a rigid interpretation of Article 101(1) TFEU can very well have the perverse effect of protecting the incumbent. These are the problems of applying competition law as regulation, which I highlighted elsewhere, and of assuming that UEFA Champions League, Bundesliga and Premier League were rightly decided, in spite of the overwhelming evidence suggesting the opposite.
The following thoughts were inspired by Alfonso’s recent post on bundling allegations against Google. As usual, it is tightly argued and persuasive. I wish competition authorities took such points into consideration when assessing tying and bundling claims. My objections are of a different nature. The fact that I agree with most, if not all, of what he writes does not mean that his points would be conclusive or even relevant in practice after the Microsoft saga. More than anything, Alfonso’s post reminds one (or at least me) of the uncertainties that remain in the field of Article 102 TFEU even after the adoption of the Guidance Paper.
Alfonso starts by wondering whether the complaint brought by Google’s rivals involves a bundle in the first place. Following the GC judgment in the first Microsoft decision, I would be tempted to reply by saying that anything under the sun can be constructed as a bundle or, put differently, that the legal construction around third party claims need not make sense for Article 102 TFEU to apply. If a tying claim is valid even when nobody wants an operating system without a media player or a web browser, it probably follows that the plausibility of the bundling claim would not be – unfortunately, may I add – a conclusive aspect in the hypotheticals he discusses.
He goes on to argue that Google Play is not the only means through which one can download applications. I am sure more than a reader reacted to this argument in the same way I did. Could not one also claim that it is possible to download web browsers or media player and that the tying of these applications with an operating system are unproblematic as a result? Well, of course, but this fact did not prevent the Commission from taking action against Microsoft not once but twice. All that remedial action would require is an analysis of consumer behaviour allegedly inspired in behavioural economics (the flavour-of-the-month that I fear most, by the way).
If the above arguments are not decisive, we are left with the issue of foreclosure (the ‘everybody does it’ and the ‘business rationale’ arguments would not be relevant even before the wisest of competition authorities, as what matters in contemporary competition law, or so I want to believe, is not the motivation behind the behaviour, but its effects on the market). Besides the fact that foreclosure is plain irrelevant in tying cases according to the General Court, I will mention that, according to what I read the other day, Android’s market share is approaching 80%. This does not mean in any way that Android is dominant, let alone superdominant (and, again, very sensible arguments can be developed to show why this is not the case). But we all know strange things happen to law and policy when firms reach such market share levels.
What conclusions do I draw from the above? It seems to me that self-restraint is the only limit to the ability of the Commission to interfere with product design in high-technology industries. The second reflection relates to the behaviour of complainants. They cannot be blamed for taking advantage of the confusion created by the Microsoft saga around tying and bundling (i.e. for behaving opportunistically). One could even go as far as to claim that this saga created the expectation that the Commission will intervene when a firm’s market share approaches or exceeds 80%.
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
(Since this post is about awards, we thought a pic form last night’s grammys ceremony would be appropriate. I randomly came accross this one, but it risked being inappropriate, so we’ve decided to go for a more politically correct one).
This year the Editorial Committee at Concurrences has shortlisted 3 pieces written by people who have contributed to this blog, so we thought we’d ask you to please take a minute to give them your 5-star vote
The nominees are:
- On the category for Academic paper on Anticompetitive Practices: Pablo Ibañez Colomo (LSE), for Market Failures, Transaction Costs and Article 101(1) TFEU Case Law, You can read it and vote for it at: http://awards.concurrences.com/academic-articles-awards/article/market-failures-transaction-costs By the way, Pablo gave a lecture on this topic at the IEB in Madrid a few days ago; the slides are available here: Making sense of Article 101 TFEU
- On the category for Academic papers on Economics: Hans Zenger (CRA) for Loyalty Rebates and the Competitive Process : You can read it and vote for it at: http://awards.concurrences.com/academic-articles-awards/article/loyalty-rebates-and-the
- On the category for Business papers on Economics, myself, for Economics in competition law, You can read it and vote for it at (no need to read this one, you can skip it provided that you vote for it): http://awards.concurrences.com/business-articles-awards/article/economics-in-competition-law (actually, the nominated post does not rank among the ones I’m proudest of, but I’m nevertheless grateful for the nomination).
- We are told that Chillin’Competition has also been shortlisted as one of the top 30 professional publications that will be reviewed by Concurrence’s editorial board, which will then come up with a ranking (for more info, click here). You cannot vote for us here, but we’d be thankful if you could please exert any sort of coercion on the jury
[Our friends Christopher Brown (Matrix Chambers and Eutopialaw) and Scott Campbell (Stewarts Law LLP) have kindly offered us a very interesting post on the reform of private enforcement of competition law in the UK. To the best of my knowledge, this is the first written piece commenting on the substance of the proposed reform. With those proposed changes, the UK may be trying to position itself as the leading forum for private actions in Europe. An absolute must read].
A while back, one of us blogged on the UK Government’s consultation, launched in April 2012, on possible reform of the private actions regime in the UK. The consultation was wide-ranging and included several radical proposals designed to facilitate redress for victims of anti-competitive conduct – most notably, the introduction of an ‘opt-out’ collective actions mechanism. Reaction to the consultation from lawyers and business was extensive: the Government received 129 formal responses, and opinion was sharply divided on some issues.
It has inevitably taken some time for the Government to take on board the responses and consider the way ahead, but, since the publication last week of its response to the consultation, we now know what it intends to do. In summary, the Government proposes to
- Strengthen the private law jurisdiction of the specialist judicial body, the Competition Appeal Tribunal (CAT);
- Introduce a “limited” opt-out collective actions regime, with “safeguards” designed to prevent frivolous or unmeritorious claims being brought;
- Promote alternative dispute resolution (ADR); and
- Take some limited action designed to ensure that private enforcement complements public enforcement.
In this post, we take a look at the main proposals, considering some of the likely practical implications of the reforms in the event that they are passed into law.
1. Putting the CAT front and centre of private enforcement in the UK
The first broad proposal is one on which most respondents agreed, at least in broad outline: to make the CAT the ‘go-to’ venue for private competition litigation in the UK. Since acquiring its private law ‘follow-on’ jurisdiction upon the entry into force of the Enterprise Act in 2003, the Tribunal has seen relatively little action, and much of the action it has seen has been in the form of procedural skirmishes relating to the ambit of that jurisdiction (several of which have gone on appeal to the higher courts). In many cases, claimants have preferred to commence follow-on proceedings in the High Court instead.
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.
This third part of our inaugural ménage à trois discussion on the Greek lignite Judgment features (see part I and part II ) another good friend of this blog: Assimakis Komninos. Makis is a great guy, a partner at White & Case, and was a successful co-counsel in the case
we’re they are discussing, so he was an obvious candidate for our triad of guests. As you will see, Makis sides with Marixenia Davilla in praising the Judgment. In doing so, he replies to José Luis Buendía’s more critical views.
To illustrate Makis’ post we have chosen the image of another famous lignite-related (look at gift in the middle) ménage à trois. :)
First of all, it is such a great pleasure to be invited to comment on the Greek lignites case. I should disclose at the outset that I represented, as co-counsel, the Hellenic Republic in its intervention in support of PPC during the written proceedings stage.
My personal view is that the General Court did the right thing and annulled a decision that was going a step too far. There is no doubt also, in my view, that the Commission was using this as a kind of “test case” against a carefully selected target.
The intellectual starting point is, I think, the very nature of Article 106 TFEU. This is a rather curious provision and I certainly agree with José Luis that it is essentially about State measures, but the sure thing is that the Treaty fathers wanted to give it a carefully circumscribed scope. A systematic interpretation of the Treaty does not support that there is general prohibition of all State measures that may – even indirectly – impact on competition and business activities. Article 106 TFEU restricts the behaviour of Member States only by reference to the scope of some other Treaty provisions, such as Article 102 TFEU. This is the provision that the Commission chose to rely on by reference.
Then, if one reads the Commission’s decision, one fails to see how Article 102 TFEU would come into play here, albeit by reference. Would the theory of harm refer to a leveraging abuse, to a refusal to supply, to a failure to satisfy demand (exploitation), to discriminatory treatment on the part of PPC? Not clear at all. The Commission thought that it did not have to specify this. By the way, I am not suggesting that in Article 106 TFEU cases, the Commission need to show anti-competitive effects etc. This is not what I argue. Instead, I submit that the Commission should be able to demonstrate with a sufficient degree of intellectual clarity that the State measures are connected with a specific kind of actual or potential abusive behaviour by the undertaking in question. This is all the Court says and I fully agree with Marixenia.
With respect, I do not agree that the previous case law gave the Commission leeway in not being obliged to identify a specific kind of actual or potential abusive behaviour. On the contrary, if we look at RTT and even Connect Austria, while we see references to “equality of opportunity” and to RTT’s “obvious advantage over its competitors”, that by no means leads to the conclusion that the mere existence of inequality of opportunity is sufficient for an Article 106 TFEU violation. In both cases, the Court spoke about specific anti-competitive phenomena. In Connect Austria, the problem was that the undertaking in question was allowed (through the inequality of opportunity) to expand its dominant position onto a related market and, in RTT, the Court is very clear and explicit as to the kind of abuse of dominance that was at stake: “an abuse within the meaning of Article  is committed where, without any objective necessity, an undertaking holding a dominant position on a particular market reserves to itself an ancillary activity which might be carried out by another undertaking as part of its activities on a neighbouring but separate market, with the possibility of eliminating all competition from such undertaking”.
In the PPC case, the Commission seemed to build its case on the grounds that PPC’s lignite rights are not sufficiently counter-balanced by significant deposits of its competitors, even though lignite is not an essential input to compete downstream. I am actually being kind to the Commission, when I say this, because this theory is not clearly articulated within the txt of the decision. The Commission then identified a remedy: PPC’s competitors needed to gain access to 40% of the total exploitable lignite reserves. In a nutshell, the Commission was seeking to use competition law to unbundle the Greek electricity generation market. However, this instrumentalisation of the law, in order to redesign a market structure, lacked both a legal and a sound economic basis. Moreover, it would lead to a dangerous precedent by permitting the Commission to attack market structures it dislikes by invoking the vague concept of “inequality of opportunity”.
The Commission misinterpreted the case law and its decision deserved to be annulled. I do not think this is the end of Commission enforcement under Article 106 TFEU, as some commentators have argued. It will only have to do a better job next time and articulate also a clear theory of harm that refers to an actual or potential abuse of dominance by a public undertaking or an undertaking with special or exclusive rights, as a result of certain State measures.
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.
[Note by Nicolas and Alfonso: In the second of his guest posts on reform of UK competition law and enforcement, Christopher Brown looks at potential reform of private redress mechanisms]-
On 24 April 2012, just weeks after announcing the Government’s intentions in respect of reforms to the public enforcement regime, BIS launched a Consultation on reform to the private enforcement of competition law in the UK. Such reform might be said to be long overdue: it has been some five years since the OFT made recommendations to Government stressing the desirability of changes to facilitate private redress.
The Government’s stated objective is to encourage private-sector challenges to anti-competitive conduct to complement public enforcement. Elsewhere in the document, it is said that the aims of the reform proposals are (i) to increase growth, by empowering small firms to tackle anti-competitive behaviour which is stifling their business, and (ii) to promote fairness, by enabling those who have suffered loss as a result of such anti-competitive conduct to obtain redress. The principal proposed reforms are:
- to increase the role of the Competition Appeal Tribunal (CAT) as a forum for private actions, by allowing it to hear ‘standalone’ claims as well as ‘follow-on’ claims;
- controversially, to introduce an opt-out collective actions regime;
- to protect the leniency regime by preventing at least certain leniency documents from being disclosed to claimants bringing private law claims and protecting at least immunity applicants from joint and several liability.
These 3 proposed innovations are touched upon below.
(a) The role of the CAT
The proposals to make the CAT a major venue for private litigation based on competition law have been broadly welcomed. In its twelve years of existence, it has built up a strong reputation in its handling of appeals under the Competition Act 1998 (and other legislation) and follow-on private actions under section 47A of that Act. It is widely regarded as efficient, fair and competent. It makes eminent sense, in principle, for the CAT’s jurisdiction to be extended so as to make most efficient use of the resources at its disposal.
Some of the detailed proposals in relation to the CAT are, however, more controversial. In particular, the Government proposes the introduction of a “fast-track” system for claims brought by SMEs (which, as part of its growth agenda, the Government is very keen to support). The Government is particularly concerned that SMEs are in practice prevented, or substantially deterred, from seeking redress for loss caused to them as a result of competition law infringements. It points, with some justification, to the considerable cost of litigating in the UK and the length of time cases take to reach resolution. What they need, the Government seems to think, is a quick and easy way of getting their complaints in front of a court. The fast-track proposal is the Government’s suggested way of improving matters. So what is it?