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A Brave New World: The Potential Intersection of Competition Law and Data Protection Regulation (by Orla Lynskey)

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Intro by Alfonso: Some days ago someone sent me a link to a an opinion issued by the European Data Protection Supervisor dealing with the interface between data protection, competition law and consumer protection.  I already expressed some views on this in a post published last year: Data protection and antitrust law (positing my view that there’s nothing new under the sun), but this time I thought it’d be interesting to have the view of someone who’s an expert not only in competition law, but also in data protection stuff. I found the ideal guest blogger to cover this issue: Orla Lynskey, a very good friend, and an extremely promising academic in the field of IT Law who’s been assistant at the College of Europe, competition lawyer at Howrey, case handler at DG Comp, holds a PhD in European Data Protection Law from Cambridge University and is now a lecturer at LSE focusing on data protection and competition law. I leave you with her:

 

In late March the European Data Protection Supervisor (EDPS), an agency which oversees compliance with data protection rules by EU institutions and advises on the development of data protection law within the EU, issued a preliminary opinion on the intersection of data protection, consumer protection and competition law. Both scholars and the EU institutions have been musing on the relationship between data protection and competition law over the past few years. However, despite this attention, it is not yet apparent whether, and if so how, these two fields actually intersect.

Kuschewsky and Geradin have recently published a paper on the impact of data protection in Commission investigations and in particular in dawn raids. The use of fundamental rights as a shield to secure procedural guarantees is now well integrated in competition law (think, for instance, of the integration of ne bis in idem in transnational competition procedures). This narrow intersection between data protection and competition law should therefore come as no surprise.

The EDPS report attempts to identify other areas in which parallels exist, or could potentially exist, between the two fields. For instance, the report highlights that if the new data protection regulation is adopted (a big if at the moment..), both data protection and competition law would apply to entities established in third-country whose actions have effects in the EU. These type of parallels are of course present however they merely help us to compare the regimes rather than get to grips with how they intersect. Moreover, some of the parallels identified are less credible than others. For example, I still fail to see anything beyond a very superficial similarity between ‘substitutability’ for the purposes of the HMT in competition law and the notion of ‘compatibility’ in the data protection principle of purpose limitation (according to which data processed for one purpose should not be processed for another secondary purpose which is incompatible with the initial purpose).

Beyond these micro-comparisons, in a second (earlier) paper Kuschewsy and Geradin had set out some ‘preliminary thoughts’ on the bigger issues at stake. In particular, they questioned whether EU competition law can limit the accumulation and processing of personal data and whether personal data could be deemed an essential facility. However, the EDPS report seems to be kick-starting a much more ambitious discussion than that initiated by Kuschewsy and Geradin. It appears to me that the EDPS is querying, albeit indirectly, whether the notion of consumer welfare should incorporate data protection considerations. By this, I mean that competition law would incorporate fundamental rights into its substantive analysis when conducting an investigation under Article 101 or 102 TFEU or examining a concentration under the EUMR. To be very clear, this would mean a departure from a purely economic analysis of consumer welfare. If Commissioner Alumnia’s speech on the matter is anything to go by, this is not something the Commission is expecting (‘although Coates refers to this potential intersection – but certainly does not endorse it – in his book on Competition Law and Regulation of Technology Markets’.

I realise that this would represent a radical departure from the status quo and as nobody seems to be willing to move beyond ‘preliminary’ thoughts on this matter, I am merely adding my own ‘preliminary’ observations to the mix (that is a disclaimer in case I change my mind tomorrow).

I see two arguments which support this shift in policy. First, the current consumer welfare standard seeks, inter alia, to facilitate consumer choice. In industries which are heavy on data aggregation – social networking sites, search engines, micro-blogging platforms etc – network effects based on personal data constitute a significant barrier to entry. The monopolisation of these industries, in turn, poses serious problems for the application of data protection rules. In the EU, all personal data processing must have a legitimate legal basis and the legal basis most frequently used by private sector entities is ‘individual consent’. This consent must be freely given, specific and informed. However, the argument has been made (for instance before the Irish regulator in the Europe-v-Facebook audit) that consent to processing by a monopoly cannot be ‘freely given’. While this argument would never fly in the US (for reasons which I shall not explain here), it may have some traction in the EU where data protection rules seek (to little avail) to rectify power asymmetries between the individual and the data controllers. Data protection advocates have long been arguing that competition law should help facilitate actual consumer choice.

More convincingly perhaps, since 2009 data protection has been recognised as a fundamental right in the EU legal order, independently of the right to privacy. As such, it is binding on the EU institutions when enacting legislation or adopting decisions. Failure to respect this right will lead to the invalidity of the measure at stake (as we saw last week when the Data Retention Directive was declared invalid on the basis of its incompatibility with this Charter right). This may well therefore be the trump card.

This being said, there are arguments to be made against the incorporation of data protection and fundamental rights considerations into the consumer welfare standard (and I am sure readers of this blog will be very happy to point them out to me!). The primary objections I can identify are threefold. First, intervention on these grounds looks like punishing dominance and might entail significant interference with the commercial freedom of companies concerned. This should ordinarily be the purview of regulation (although as Dunne noted recently in a JCLE article, ‘regulatory competition’ is on the rise in the EU through the rollout of commitment decisions). Second, it is arguable that this would be another example of the ‘instrumentalisation’ of competition law and that it would be detrimental to the internal coherence of the discipline to incorporate fundamental rights into the substantive analysis of competition law. I have a certain amount of this sympathy for this view. Third, it might be argued that data protection regulation should adequately protect the right to data protection of individuals. This is effectively what the Commission stated in the context of the GoogleDoubleclick merger and what the Court determined in the ASNEF Equifax case. However, these matters were determined pre-2009 and the constitutional landscape has changed significantly since then. Moreover, it would now seem a little disingenuous for the Commission to argue that competition law does not apply to regulated sectors.

In short, it seems to me that whether competition lawyers agree or not, this preliminary report may be the first baby step towards a more holistic approach to the protection of data protection within the EU. Arguments to the contrary are also welcome however (I can then include them in my work in progress paper!).

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Written by Alfonso Lamadrid

21 April 2014 at 10:40 am

Conflicts of Interest in EU Competition Law

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It’s been two months since Nicolas temporarily left this blog for a half a year stint at DG Comp’s Private Enforcement Unit.

In the course of this short period he’s managed to single handedly unblock negotiations on the Commission’s proposal for a Directive on Antitrust Damages, and he’s adapted very well to the fonctionnaire lifestyle (meaning that he’s now taking some days of holidays) ;)  (jokes aside, congrats to Eddy de Smijter and to the rest of the people involved in the negotiations about the Directive).

As he anticipated in his farewell post, Nico is maintaining all academic activities. Within that context, he’ll soon be participating at a conference on one of is favorite topics organized by his University. So, on 24 April the Liège Competition and Innovation Institute will be hosting a conferece in Brussels on Conflicts of Interest, Ethical Rules and Impartiality in EU Competition Policy .

Although Nicolas knows that I don’t share the same passion for the topic (or maybe precisely because he does?), he’s asked me to advertise the conference here. So voilà. It will feature representatives from the General Court, the European Commission, the OECD, the Belgian Competition Authority, as well as lawyers in private practice, The New York Times’ Brussels correspondent and ULG Professors and Researches, including Nico himself. Even Emilly O’Reilly (the current Ombudsman, whom you may remember from this) is on the tentative list of speakers.

Why do I say I don’t share the passion for the issue? Because whereas some improvements could possibly be made in the rules -mainly regarding their transparency-, I think we should be careful in not overshooting the mark. Otherwise we’d risk creating the impression that there’s a major endemic problem where I’m not at all sure there’s one (I, for one, I’m much more concerned about the Commission’s recruitment processes and about internal rules that oblige experienced people to rotate jobs too often or too soon). Anyone working in Brussels for some time will have worked with, against and before friends or professional acquaintances (sometimes the line is drawn too thinly). In my experience who you have on the other side doesn’t matter (at least for good: I do know of situations where lawyers’ friends deciding on cases have been unnecessarily harsh on them just to make a point and dispel any concerns, and that’s as unfair as the contrary) and there are enough checks and balances to avoid problems. The only positive consequence of working before people who know you is that they will perhaps trust you, provided that you have never proved not worthy of that trust (and competition law practice is also a game of repeated interactions), but I don’t see what’d be wrong about that.

As I told Nico back when he wrote his controversial piece on this subject, what’s different in our field is that our “relevant market” is very narrow; we’re not so many lawyers/economists repeatingly interacting among us and with the same academics, officials and judges. The only solution to the perceived problem, as framed, would be to have virginal public officials and lawyers who have not moved around jobs, who know no one, who haven’t studied at the same places, who haven’t worked with different people and who haven’t established a personal rapport with those in their field. In my view, at least, in that case the cure (assuming it were feasible, quod non) would be worse than the disease.

That said, considering the speaker line-up I’ve no doubt the conference will be most interesting.

 

Restrictions of competition by object under Article 101(1) TFEU: chapeau bas, Prof Wahl!

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Note by Alfonso: Advocate General Wahl’s Opinion in Groupement de Cartes Bancaires out on Friday, and its take at clarifying the object-effect conundrum is remarkable. Pablo Ibañez Colomo offers his views on the Opinion below:

Advocate General Wahl’s opinion in Groupement des Cartes Bancaires v Commission (published last Friday, and available in French and in Greek only for the time being) is a model of lucidity and flexible thinking. It is also very much in line with an article of mine on the subject, but that is plain irrelevant. What matters, and what makes this opinion remarkable, is that it manages to capture the logic underlying the existing case law addressing the boundaries between restrictions by object and by effect. Many commentators and some advocates general have tried in the past few years to identify the elusive factors that should be considered when establishing whether an agreement restricts competition ‘by its very nature’. Paragraph 56 of the opinion sets out a formula that is, in my view, more accurate and elegant than any previous attempt (the fact that I am forced to read it in French for the moment probably adds to the latter):

 ‘Ne devraient donc être considérés comme restrictifs de concurrence par objet que les comportements dont le caractère nocif est, au vu de l’expérience acquise et de la science économique, avéré et facilement décelable, et non les accords qui, au vu du contexte dans lequel ils s’insèrent, présentent des effets ambivalents sur le marché ou qui sont porteurs d’effets restrictifs accessoires nécessaires à la poursuite d’un objectif principal non restrictif de concurrence’.

In other words, what really matters is whether, given the context in which it is concluded, an agreement is a plausible source of efficiency gains. Thus only those agreements that have no credible redeeming virtues are understood to restrict competition by object. A careful reading of the relevant case law shows, in my view, that this is the ‘default methodology’ (which is the expression I use in my article) – or, if one prefers, ‘l’appréciation plus standardisée’ (as Advocate General Wahl writes in his opinion) – followed by the ECJ when it examines the nature of agreements under Article 101(1) TFE. The methodology changes, and rightly so, when market integration as an objective is directly at stake in a case (as is true of agreements restricting parallel trade).

From Societe Technique Miniere to Pronuptia and Delimitis, and from Remia to Wouters and Asnef-Equifax (to mention just a few landmark rulings), the ECJ has followed the same approach, which revolves around an analysis of the rationale behind the agreement. The Court typically seeks to identify the reasons why two or more firms would introduce some restraints in an agreement. If it appears that such restraints are a plausible means to achieve legitimate business objectives, it concludes that the agreement does not restrict competition by its very nature. In Groupement des Cartes Bancaires, the parties to the agreement claimed that it was intended to address free-riding issues and therefore that it did not have a restrictive object. In light of the relevant case law, the question in these proceedings is whether this story is a credible one given the nature of the agreement and the context in which it was concluded.

The opinion is notable for other reasons, of which I mention a couple:

- It is sometimes claimed that the category of ‘object restrictions’ captures those agreements that can be presumed to have anticompetitive effects (the famous speed-limit analogy and variations thereof). This interpretation of the notion is problematic insofar as it sits at odds with the principle, well established in the case law, whereby an agreement may restrict competition by its very nature irrespective of the effects it produces. Advocate General Wahl emphasises, in this same vein, the importance of distinguishing between the analysis of the nature of the agreement and the analysis of its effects. If the question of whether an agreement restricts competition by object depends on its presumed effects, the two would be confused. The rulings mentioned above indeed confirm that the two are separate steps and that the Court has been careful not to mix them (and has rightly reacted when the General Court has done so, as in Glaxo Spain – also discussed in the opinion).

- The opinion shows that, when confined to its role, the use of economic analysis can be very useful and, more importantly, wholly uncontroversial. Advocate General Wahl does not rely on economic analysis for normative purposes (that is, to state how the law should be, or to claim that the case law is misguided), but as a tool (among others) to make sense of a legal issue. Economics is used in the opinion, in other words, as a guide – a code – to decipher a complex reality. I hope this opinion contributes to a more fluid dialogue between disciplines. I was pleased and surprised to even find a reference to Rochet and Tirole’s ground-breaking work on two-sided markets – which, as you all know by now from Alfonso’s last post, is ‘the single most important and fascinating subject in contemporary antitrust (and beyond)’.

Lastly, I will also mention that writing this post brings very good memories of a great seminar (and even better post-seminar!) to which Luis Ortiz Blanco and Alfonso invited me last year and in which I had the chance to discuss these questions with some luminaries from the Commission.

 

Written by Alfonso Lamadrid

31 March 2014 at 12:26 pm

What makes a great teacher?

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(by Pablo Ibañez Colomo)

The post Alfonso published last Monday made me think. It was controversial, but also a goldmine of follow-on topics. Call me oversensitive, but I could not help thinking he was targeting law teachers when he regretted the fact that fresh young graduates tend to be very critical of the case law without having always reached conclusions on their own. After a bit of back and forth, I thought I would write a post on what I think makes a great teacher, thereby mirroring Alfonso’s own recent post on what makes a great lawyer.

I will start by quoting some giants in our field, pretty much like Alfonso did. The intellectual ant that I am likes to learn from them and always bears their lessons in mind. To make it balanced (and thus to please Alfonso’s desire for neutrality), I will choose a lawyer and an economist, the first from Harvard and the second from Chicago.

In the Harvard Law Review issue dedicated to the memory of Phillip Areeda, Justice Stephen Breyer explained that the greatest antitrust lawyer of all time ‘did far more than simply teach antitrust law. [His casebook] showed the specialists how to blend economics with law (“economics informs the law”, Phil said), as it teaches both subjects together in plain and simple English. It showed the profession how law and lawyers can benefit from a knowledge of other disciplines. It tied this recondite specialty back to general legal principle. And it placed dramatically before the students’ eyes a clear demonstration of the necessary connections between intelligent analysis, law, and the more striking beneficial effects for society that law, when practiced properly, can help us all achieve’.

The Journal of Political Economy, one of the top economic reviews, and edited at Chicago, dedicated an issue to the memory of George Stigler. Thomas Sowell offered a student’s view on the Nobel Prize winner (and another one of my all-time favourites). When discussing the way in which Stigler approached the teaching of the economic side of our discipline, Sowell explained that ‘[f]ew, if any, areas of economics have as much confusion, circular reasoning, definitional traps, and fervent nonsense as industrial organization. It was the perfect place for Stigler to conduct a Demolition Derby. Nor was he hesitant about the task. Theories like “monopolistic competition” and “countervailing power”, which were treated reverently at Harvard (where they originated), were eviscerated by Stigler’. According to Sowell, ‘[w]hat Stigler really taught, whether the course was industrial organization or the history of economic thought, was intellectual integrity, analytical rigor, respect for evidence – and skepticism toward the fashions and enthusiasms that come and go’.

What do we get from these quotes? I would say the following:

  • A great teacher knows the stuff inside out: It is true that not all great researchers are good teachers. But without being at the top of the discipline, it is impossible to be a great teacher.
  • A great teacher necessarily conveys a view of the world: Somebody who has thought long and hard about a particular discipline necessarily comes up with strong views about it. It is inevitable that this (non-neutral) view of the discipline is conveyed when teaching students. There is nothing wrong about it. I would even say that this is what ideal university teaching is all about. Students are interested not only in the substance, but in how somebody, detached from commercial interests and focused only on seeking the truth, sees the discipline.
  • A great teacher takes students very seriously: Students need to be stretched and learn to think for themselves, and this is in no way in contradiction with the above. I fully agree with Alfonso when he suggests that a teacher who indoctrinates students is an absolute failure. The challenge for a teacher is to make students discover and understand for themselves the logic underlying the discipline, the crucial transversal issues that cut across topics.
  • A great teacher does not take her/himself too seriously: The teaching of a particular discipline should be put in perspective. For many, if not the majority of students, a particular subject may never be useful in practice. Therefore, teaching should be oriented towards contributing to a well-rounded education. And those of us teaching competition law are immensely fortunate: when taught properly, it has an awful lot to offer to students, even if they go on to do something completely different.
  • A great teacher shows respect for ideas, not for institutions or authority: I would say this should be (and has been) the central contribution of universities to society. Truth is to be sought without prejudices and without respect for rank or authority. Nonsense is nonsense irrespective of whether it comes from a first year undergraduate or from the highest of courts. Law students in particular should learn that there is nothing mystical or sacred about our legal institutions, even if they are populated by very intelligent and experienced women and men (‘only a brilliant mind can make a brilliant mistake’, Stigler liked to say of past economists).

And now I leave you. I have to teach in an hour.

[Pictured above are two evil Chicagoans (Friedman and Stigler) after a discussion with a colleague].

Written by Alfonso Lamadrid

18 March 2014 at 5:09 pm

Antitrust quote of the other day and more on the evolution of the law

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laws-460x180

Our last post revolved around a well-known quote from Philip Areeda that explains the evolution of the law in terms of judicial inertia/judging by catchphrase. Areeda’s explanation has the virtue of verbalizing brilliantly in simple and intuitively correct terms a human factor that explains why some legal rules may at times evolve beyond the limits of their logic. [To be sure, as noted elsewhere his explanation certainly applies not only to theories that expand liability, but also to those that limit it; in fact, the example I used may arguably refer to the latter category].

In my view, the idea underlying Areeda’s theory explains many other behaviors and situations in areas beyond competition law. At the end of the day, it is about people adopting a simple pre-established view or prism that makes further reflection unnecessary which, in turn, makes the process of forming a view much easier. We do that all the time in many other fields, politics being one of them (if, for instance, one dogmatically assumes that State intervention is always bad (think of Tea Partisans…), then one has a simplistic solid view on many complex specific instances without the need for further reflection; yep, this is one of my recurring themes). Uncertainty and doubt feel troublesome, but certainties -even when mistaken- are comfortable, save a lot of effort and provide seemingly confident opinions.

Judges may at times certainly favor simple pre-defined solutions uncritically (Areeda blamed the fact that there were “too few judges experienced enough with the subject to resist” the temptation of applying previous rulings uncritically), but they’re not the only ones. Think, for instance, of a group which, by definition, is not experienced enough with the subject to resist the temptation to assume stuff uncritically: students.

In the past few days I’ve had various interactions with students from various backgrounds, and I have again been reminded of how new generations of competition lawyers almost universally coincide in the view that the case law and the decisional practice (particularly, but not exclusively, in the domain of Art. 102 TFEU) is fundamentally flawed, absurd, “ordoliberal” and almost crafted by lunatics. But once you scratch below this initial thought, it seems that for some resason students often feel it must necessarily be THE right answer even if they can’t always explain why (which is ironic when what’s criticized is the alleged lack of analytical content in current rules and doctrines). To be sure, I’m not saying that the case-law is perfect (which it probably isn’t, but one needs to understand it and to reflect on it in order to have ideas on whether and how it is to be improved), nor that this is the case of all students, nor that professors don’t do their job right (although not all of them are Areeda either), but I like it better when I see young lawyers who have reasoned doubts than when I see them with unreasoned certainties (I, for one, have very few competition law-related certainties; in fact, I’m not even sure of whether the criticism I’m expressing here is entirely justified). And false certainties may be more common in relatively complex yet non-scientific disciplines, like ours.

Drop by drop, this process whereby some people learn formed opinions instead of the tools with which to form them might also have a crucial impact on the evolution of the law. As new generations get to higher roles (clerks, then Judges, etc), their preconceptions may follow. And, as Areeda noted, it wouldn’t be until their expansion became ridiculous that the process of cutting back would begin (perhaps engendering an analogous process holding contrarian views).

Written by Alfonso Lamadrid

10 March 2014 at 9:02 pm

Pomposity v Social Value in Legal (and Antitrust) Scholarship

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I just saw this graph on Prof. Einer Elhauge’s LinkedIn account; the original source is Eric Posner’s blog (yes, the son of Richard Posner and a big name in his own right too).

I’d be curious to know about the underlying methodology (economic analysis seems to favor economy-related disciplines). It would seem as if an antitrust legal scholar had asked an economist to come up with a seemingly scientific study corroborating a given thesis. Not that this would ever happen in private practice…  :)

Written by Alfonso Lamadrid

9 January 2014 at 1:12 pm

New job

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One of us just got a new job (and a new car). More details tomorrow…

Written by Alfonso Lamadrid

9 September 2013 at 4:44 pm

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