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On Privacy, Big Data and Competition Law (Post 1/2)

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As I self-advertised in my previous post, I participated yesterday at the European Data Protection Supervisor’s impressive workshop on Privacy, Consumers, Competition and Big Data, where, by the way, this blog received a few mentions.

My impression is that it provided a useful opportunity for various actors to reflect together on the nature, potential and limitations of each discipline in the wake of the EDPS preliminary opinion on these issues.

The workshop touched on competition issues several times. On the EU side, Kris Dekeyser gave the Commission’s view, and on the private side I was honored (and, frankly, a bit surprised) to be the sole EU competition lawyer speaking.

Julie Brill (FTC Commissioner; her speech is available here) and Pamela Jones Harbour (former FTC Commissioner now in private practice) also shared their views on the US approach to these issues.

I was asked to explain to a non-expert audience (by non-experts I mean those who retain the ability to realize sometimes that the king may sometimes be naked…) the notion of market power, why it is important for the application of our rules, how it is assessed in practice, and what are the particular challenges posed by digital markets and big data in this regard.

I’ll spare you the content on my intervention on the most basic issues; suffice it to say that I pointed out that the traditional means to define markets and market power are far from perfect in many ways, but that they’re not supposed to be used mechanically and in the abstract, that the Commission may depart from standard assessment tools to capture the dynamics of competition in any given sector, and that it enjoys wide discretion to act flexibly in this regard.

Moving on to the more interesting stuff. Following a conventional explanation of the main peculiar features of technology/digital markets and of their mixed competition law implications I gave my (non data protection expert) views on the big relevant issues addressed in the workshop, namely (A) What are the implications of data and big data for market definition and market power assessments and (B) Should privacy data protection standards be incorporated to substantive assessment under the competition rules

Today we’ll discuss A, and tomorrow [on Friday] we’ll deal with B, so:

What are the implications of data and big data for market definition and market power assessments?

(i)                 Data is without doubt an increasing important asset/input, and it should no doubts be acknowledged as such. As some of you may remember, some time ago I commented on an article that essentially posited this idea, which I consider to be fairly uncontroversial. In this sense, I’ve no objection to the idea that, depending on the circumstances, data-related issues may give rise to competition concerns.

At the same time, however, data is an important asset or even crucial asset, but no more; and I don’t see why competition law would be required to adapt its rules to when applying them to data-heavy markets.

(ii)               I see one exception to the above. As I explained in a recent post, our current turnover thresholds are not well-suited to capture mergers in the subsidized side of two-sided markets (which may often be markets where non-traded data is important). Only jurisdictions envisaging market share thresholds (often criticized, also by me) may be competent to assess these transactions. Facebook’s very recent decision to try to have the EU review the acquisition of Whatsapp is to be read within this context. I don’t know what the solution is, but it’s worth a thought.

(iii)             Some (including Pamela Jones Harbour in her dissent to the FTC’s Google/Double Click decision) have advocated for a definition of relevant markets for “data used for x [in that case targetted advertising] purposes”. I’m not persuaded by this proposal (except perhaps when the data is subject to trade) because I’m not sure the intermediate data market is a meaningful market in the sense of competition law. If the alleged problem is that the use of data might have consequences in some markets, then my take is that it makes more sense to assess those markets directly.

(iv)             Regarding the big substantive issue, which is related to scale, aggregation, network effects playing to the benefit of allegedly dominant firms, I essentially said that:

  • far from being an obvious competitive problem this also has mixed implications, for data can also be a source of very significant efficiencies (and big data a source of big efficiencies) in many and important fronts;
  • it is true that access to data may in some circumstances be a barrier to entry and even a very important one depending on the facts (I also noted that barriers to entry are not in themselves a problem requiring intervention because competition law is about conducts and not structure);
  • many people throw out “essential facility” as a buzzword in this context to support the contention that some firms should be mandated to share data. In my view the term is used too loosely. As I explained, the identification of an essential facility is subject to an extremely high legal burden (indispensability, elimination of competition in a downstream market…) which makes it difficult to think of instances where it could be satisfied;
  • some people had formulated the idea that network effects and scale determine that users may be locked-in to a given provider and therefore have no meaningful choice as to the privacy policy applied to them. On this point I recalled, among others, that the recent Microsoft/Skype Judgment (yeah, I’m already starting to quote it) seems to close the doors to any argument based on laziness/stickiness when switching is technically and economically feasible.

(v)              I also observed that the main issue where competition law and data protection policies may converge relates to data portability. In cases where it is shown that scale is of the essence, then practices that could deny rivals a minimum viable scale could fall within the scope of the competition rule (in fact, Google’s proposed commitments -see here and here- already incorporate a section on the portability of data for AdWords campaigns). On the regulatory front, the proposed new EU regulation on data protection (currently stuck at the Council) also incorporates a right to data portability. Btw, some of the major companies cited in these discussions already have tools to facilitate portability (see here or here)

(vi)          My last comment on this point was that privacy policies can also be a parameter of competition (even if admittedly many users currently appear to confer more importance to other parameters).

Apologies for making it so schematic, but having quite some work to do I’ve chosen to basically to a transcript of my notes, plus this is already lengthy enough for a post.

On the next post I’ll state my views on whether non-economic privacy considerations should be included as part of the consumer welfare standard.

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Written by Alfonso Lamadrid

3 June 2014 at 3:00 pm

Wrapping up the week (on SEPs, Uber, Tesla, lawyer moves and legal rankings)

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This week’s blogging inactivity has had a lot to do with a pile of new and old work, the fact that I’m moving houses and have the in-laws here (a painful process; the moving, I meant), the fact that I devoted some time to watching two Spanish teams get to the Champions League’s final (I guess Germans and English will now put increased pressure on the ongoing State aid investigation) and the fact that we had some farewell events for one of my closest friends and colleagues (this guy, who is moving to the Commission).

So, here’s a quick overview of some stuff we couldn’t cover:

- The news of the week was the adoption by the Commission of decisions in two much talked about SEPs cases. The Commission made binding the commitments proposed by Samsung (see here for our initial comment on these) and -as we anticipated last week- adopted a decision declaring an infringement on the part of Motorola, which did not receive a fine. The Commission has sough to introduce some clarity on a matter in which the industry couldn’t agree by providing a safe harbour for standard implementers/willing licensees. We might discuss these more in depth in the coming weeks. For the time being, the Commission’s FAQ’s are available here . The Commission’s decisions might have brought additional clarity to the industry, but they also will have side-effects on conference organizers and on certain academics, lawyers and officials, all of whom will now have to find a new topic to talk about  :) [Btw, WordPress' new smiley faces are much uglier than the older ones..]

- I also see that the controversy surrounding Uber continues.  To date I don’t think  anyone has brought up a potentially very interesting EU competition law aspect to the case (other than the cartel accusation launched by Neelie Kroes in her most unusual blog post). It’s always surprised me how little we take advantage of the potential of EU law to challenge public restraints on competition…

- On a sort of related note, I was glad to read that 3 FTC staff directors have decided to intervene (albeit informally by means of a blog post; does everybody do blog-policy these days??) against unjustifiable prohibitions on Tesla to sell directly to final customers (that story would merit an ad hoc post) (btw, some people wrongly blame antitrust law for those restrictions: see here).

- There were recent moves at Covington&Burling, this time on the opposite direction as the most recent ones. The firm has hired one of our Friday Slotters (Johan Ysewyn) as well as re-hired Peter Camesasca, who was working with his own firm at Samsung during the course of the above mentioned investigation on SEPs.

- [Sort of self promotion alert] Chambers& Partners rankings came out last week and for some odd reason I seem to be the only ranked associate for EU Competition Law under a certainly narrow “associates to watch” category. Since some of you have sent emails in private commenting on this, I’ll repeat my response in public: I’m not going to lie saying that it bothers me, but off the top of my head I could think of a good pile of names to include there (I won’t list them here because my list -like any list- would also be subjective, potentially discriminatory and based on very imperfect information). In addition to that, (i) I always said these things are to be taken with many pinches of salt, and I of course maintain that; (ii) being there might have to do with being at a smaller place with a lot of exposure to clients (who moreover were kind enough to seemingly do positive reviews) and perhaps (I don’t know) with the non-merits based visibility given by this blog; and (iii) my firm’s overall positioning in the ranking is not yet where it should.

In any event, I’m not even sure this is something to be proud of: I guess it only means that I’m the poorest guy in the list…

 

‘Stealth Licensing’ – Are Antitrust Law and Trade Regulation Squeezing Patent Rights ?

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Monsieur le Professeur Nicolas Petit has just published a piece titled “Stealth Licensing”- Or Antitrust Law and Trade Regulation Squeezing Patent Rights. In this paper he illustrates his points by resorting to metaphors on black swans and butterflys (read the last sentence in the 3rd paragraph below), which is a good indication that he may well have definetely lost it   ;)   

In Nico’s view (and from now I’m pasting the paper’s abstract): a “stealth licensing” paradigm is emerging across the globe. It can be seen through subtle interventions from policy makers, judicial organs and administrative agencies. Those interventions seek to facilitate compulsory licenses outside the TRIPS agreement exceptions and/or to water down those exceptions. Altogether, they ramp up pressure on patent owners to give away their freedom – it is actually a “right” – to exploit their innovations as they see fit. The paper submits that stealth licensing is a significant phenomenon that adversely impacts the social welfare functions of the patent system. It risks undermining investment in technology, technology creation and the dissemination functions of the patent system at a critical juncture in time, as new critical technologies like green technology, the internet of things, machine to machine technology, smart medical devices or biotechnologies are being called for, and rolled out, across the globe. Moreover, stealth licensing is occurring despite the fact that both private and public investment in R&D is critical to help developed economies back on the path to growth, competitiveness, employment and prosperity.

This paper the concept and policy of “stealth licensing”. To that end, it first surveys the literature on the social functions of the patent system, and in particular, on the role of patents to incentivise (risky) R&D efforts and to disseminate successful technological innovations (I). In this context, it recalls that whilst divided on the exact function of patent law, scholars broadly concur that patents have social utility. The paper then shows the emergence a “stealth licensing” paradigm adversary to the social functions of the patent system. To aid understanding, it starts with a definition of the concept of “stealth licensing” (II). It then describes its emergence in international trade regulation where a “flexible” interpretation of the TRIPS compulsory licensing exceptions is making way (III); and in antitrust law, where a distinct though equally problematic “undercover” licensing paradigm is gaining prominence (IV). Finally, it explains the perils of squeezing patent rights through stealth licensing with two metaphors: that of a black swan (V) and that of a butterfly (VI).

For a link to all of Nicolas’ previous articles available on SSRN, click here.
On a related note, I’m told that, in addition to other interesting articles, the April issue of European Competition Journal  features a couple of pieces that partly discuss Nicolas’ prior writins on Standard Essential Patents. I was also told that if I wrote this here he’d get a free copy of the issue…
And if you want to register to attend the conference on Conflicts of Interest, Ethical Rules and Impartiality in EU Competition Policy that Nico has put together and that will take place on Thursday  (you already know my views on this subject), you can do so here.

Written by Alfonso Lamadrid

22 April 2014 at 6:32 pm

Today 10 years ago: behind the scenes of the Commission’s (first) Microsoft decision

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Ten years ago today, on 24 March 2004, the European Commission adopted its landmark Microsoft decision.

Whether one likes it or not, the 2004 Microsoft decision is arguably the most prominent decision ever adopted by the Commission; it contributed to place DG Comp at the forefront of worldwide competition enforcement, particularly in IT markets.It also started a series of Microsoft’s contributions to the EU Budget (see here for our suggestions on what could be done with the 2 billion Microsoft has paid in fines over recent year ;) ). In many ways, it marked a turning point in EU competition enforcement.

Some of you may not remember that in the days prior to the decision it all seemed like the Commission and Microsoft would strike a deal. Microsoft’s Ballmer (whose birthday is also today) flew to Brussels probably with the expectation of an amicable hand shake with the then Commissioner Mario Monti. But negotiations derailed…

The whole, very detailed and must-read account of what happened in those days was published in the Financial Times in 2006, in the days prior to the Court hearings in Luxembourg. Tobias Buck wrote a great series of two articles in which he describes the sequence of events in quite some detail and in a novelesque manner.

As any good narration, it contains an interesting character depiction of the main actors of the story, including Mario Monti (“an ascetic man who spoke with professorial precision and never departed from his written brief“), Steve Ballmer (“a ruddy-complexioned, beefy-handed extrovert known for having the loudest voice in any room he occupied and possessor of an enthusiasm and self-belief that tended to drive all before it“), Brad Smith (Msft’s General Counsel, “a cheerful 48-year-old who graduated summa cum laude from  Princeton [who was] described by a Commission official as  the archetypal “problem solver”), Cecilio Madero (now Deputy Director General at Comp, but back then the Head of Unit leading the charge in the case, whose “energy inspired the team of young officials working under him“), Philip Lowe (“a wiry Briton with a penchant for German poetry” who was “keen to be involved” and who took a more “flexible and creative approach“; he just retired a few months ago) and the “three officials – none of them much older than 30 when they started on the case, that formed the core of the investigating team“: Jean Huby (“a young Frenchman  whose quick mind and aggressive style in turn impressed and infuriated the  Microsoft team“, who “had the habit of organising 2am  conference calls” and who went on to be CEO at Areva Wind, now at MAKE), Oliver Sitar (“who left the team after Mr Monti’s decision for a spell at a New York film school” and who later retuned to the Commission and now deals with other issues) and Nick Banasevic (“a soft-spoken British economist who joined from the Commission’s  foreign affairs directorate and is the only one still working on the case”; the “still” in that phrase was written 8 years ago, but Nick is currently the Head of Unit in charge of internet and consumer electronics, and, in many ways, is “still” working on the case and on its ramifications.

For the complete FT behind the scenes story, click here (Part I: How Microsoft and Brussels Squared Up) and here (Part II: When Microsoft and Brussels went separate ways).

For a list of other anniversaries, check AP’s Today in History

Written by Alfonso Lamadrid

24 March 2014 at 1:18 pm

Supermarket power

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Some of the tastiest issues in current competition law arise in the food sector. In fact, as you’ll see in a second, some of those issues are the same ones that we often face in other dynamic two-sided markets that generally attract more public attention.

At Chillin’Competition we’ve always paid our fair share of attention to food distribution and groceries (in fact our first posts on endives still ranks among out most read ever  (actually, when you search for Chilling Competition on Google the word endives appears immediately in the autocomplete box, which may seem a bit odd). Today, we’re happy to include a “sponsored link” to the work done on this subject by a good friend of ours.

Javier Berasategi (former lawyer at Stanbrook in Brussels, former President of the Basque Competition Authority –yes, there is one-, surfer, runner, alpinist and overall a quite unique guy now running a solo legal practice) has authored an also quite unique work on supermarket power. As always, it’s original, thought provoking and perhaps a bit controversial.

But regardless of whether one agrees or not with the analysis and the suggestions in it, its approach is certainly interesting; here’s the abstract:

“This paper analyses the sources of supermarket power vis-à-vis shoppers and independent brands. This power transforms leading supermarkets into vertically-integrated competitive bottlenecks that are able to restrict competition between brands (including their own ones) and reduce consumer welfare. However, competition enforcement has failed to address their bottleneck role and the negative consequences of their practices on dynamic competition (i.e., a market where the competitive process fosters innovation, quality and variety), the ultimate goal of competition policy. This paper proposes complementary regulatory and competition remedies to ensure that access to supermarket platforms and competition within them promotes fair dealing, consumer welfare and economic growth. It draws inspiration from the remedies enforced in other competitive bottlenecks such as CRSs, mobile communication networks, internet service providers, internet search engines and credit card networks”.

[It's interesting that the paper brings together groceries and tech stuff, particularly following Nicolas Sarkozy's cautionary words about the perils of comparing endives to Apple (see here). Although, to be fair, Kevin Coates had done a similar link before with his "exploding banana hypothesis" (I'm saying this to force him to explain it on 21st Century Competition ...)].

The report, titled Supermarket Power: Serving Consumers or Harming Competition, is available here  Take a look, it’s only slightly above 350 pages.

Further work on this subject will also be made available through a new website: http://www.supermarketpower.eu/en/

P.S. The picture may be subject to copyright, but I deserve full credit for having found an image of a supermarket actually called power.

Written by Alfonso Lamadrid

4 March 2014 at 5:47 pm

What makes a great lawyer?

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In the course of a conversation last weekend someone asked me about who I thought were the best competition lawyers in Brussels. Not that I’m going to share my thoughts on that here because it wouldn’t be elegant to use the blog for self-publicity ;)  it would be unfair as, aside from the subjectivity inherent to the reply, I’ve only been exposed to the work of a limited number of people. Our conversation then shifted to what is it that makes a great lawyer, and that’s something that I thought could make an interesting subject for a blog post (it’d been a while since we didn’t post random ruminations).

 

To be sure, there’s no perfect lawyer for all situations, areas of practice and clients, but in any event the ideal recipe should probably incorporate a balanced doses of multiple ingredients, most of which aren’t taught, or at least not at law schools, and often not even at most law firms:

 

Typical (bad) legal education mainly centers on developing and evaluating brain power. In my own country as well as in other continental systems this too often means plain memory. In anglosaxon systems (and to some extent in the German system too, or so I’m told) logic, analysis and writing receive more attention. And once you’re out of university some people will measure how of a good lawyer you are internally in terms of billable hours (we’ve already dealt with that at length before), and externally in terms of which firm employs you and your hourly rate (in my experience very imperfect proxies too).

 

But, in reality, there are a wide array of intangible abilities or skills that are extremely hard to assess and even to perceive, but that, fortunately, can be developed and that are, in my view, what make the difference. I refer to things like empathy, integrity, creativeness, common sense, communication and people skills, diligence and responsibility, perfectionism, the ability to question everything starting with oneself, availability, hunger/ambition (to learn and to improve), commitment (often confused with the belief that success deserves absurd sacrifices), marketing and selling, loyalty, reliability, curiosity, passion, experience, good judgment,  ability to prioritize (which has always made me distrust advice from lawyers who seem not to get priorities in their own life straight; or maybe I’m the erred one??), attention to detail, the ability not to lose the forest for the trees, having a practical business-oriented mind, being motivational and fair to colleagues, calmness, prudency, confidence (in your ability to improve, not the false security of thinking you already master everything), and I’m sure I’m forgetting many others.

 

Of course, there are many people that make partner at BigLaw firms without many of these, in which case some will consider that they are “successful”, “rich” and “hence” great lawyers. I would disagree because, lawyering being a service, excellent lawyering should be measured by its impact on others, not on the lawyer.

 

As I said earlier, to me, the ideal probably lies in a right combination of the skills outlined above, or perhaps in their relentless pursuit. But if I had to choose the single most important ability to have in a lawyer, I’d say the ability to understand people.

 

By people I mean clients, colleagues, decision-makers (judges, authorities, etc), opponents as well as the processes and interactions within and among them. And by understanding I mean trying to work inside their mind to know or guess -sometimes even to help them know or guess- what they want, what moves them and how they are likely to move and be moved. Knowing the law will provide you with a basic knowledge of the common framework you all move in, but then you need a lot of listening and a bit of intuition.

 

The above is only my Saturday morning take at a question without an answer, and, frankly, it’s highly unlikley that an ultra-specialized 30 year old lawyer who chose EU competition law for a career will get it right… So, it’s your turn: what is it that makes a great lawyer?

P.S. Pictured above is Atticus Finch, the legal hero from To Kill a Mockingbird, who recurrently tops up every list of fictional lawyers. His domination is so uncontestable that the ABA had to come up with this list of  The 25 Greatest Fictional Lawyers (Who Are Not Atticus Finch)

Written by Alfonso Lamadrid

3 March 2014 at 1:00 pm

On information requests and their limits

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The latest entry in 21st Century Competition (Kevin Coates’ very good blog; btw, pictured above is a capture of his work keyboard) explains that the Commission has improved its habits regarding information requests and that there may still be some margin for further improvement.

Kevin’s views are, as always, sensible and well explained [he also has good taste for recommending other people's writings; see here in relation to the ongoing Android investigation]. They also bring a thought to mind: is self-restraint the only limitation -other than the general principle of proportionality- that the Commission faces in relation to its powers to gather information?

Together with my colleagues Luis Ortiz and Napoleón Ruiz (no kiddin’) I am arguing in a case that is currently pending before the General Court (T-296/11) that this shouldn’t be the case [btw, I'm not disclosing anything not public given that an interim measures order was already published].

Article 18 of Regulation 1/2003 provides that the Commission may require undertakings “to provide all necessary information“. In our view, however, this provision should not be interpreted as granting the Commission absolute discretion.

If our interpretation is correct and the Commission does not enjoy carte blanche in this regard, then the criterion of necessity in Article 18 should be interpreted in an objective manner; otherwise it would be rendered meaningless, with the ensuing risk of fishing investigations. We posit that the objective element of reference could only be given by the indications of the existence of an infringement that are already in the Commission’s power, and not just by reference to the subject-matter and purpose of the investigation. The recent and most interesting Prysmian and Nexans Judgments (in relation to inspections) would seem to lend support to this idea.

This interesting question, however, won’t remain open for long. The General Court is set to deliver its Judgments on a few parallel cases on 14 March (with the exception of ours, which had a very interesting post-hearing procedural peculiarity on which I can’t yet comment). We’ll provide you with our views on these Judgments as soon as they’re out.

Written by Alfonso Lamadrid

6 February 2014 at 6:48 pm

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