Archive for the ‘Lunch talks and other events’ Category
My back of the envelope analysis of the Commission’s prohibition decision in UPS/TNT, following yesterday’s GCLC lunch talk.
Some facts first - With this decision, the Commission prohibited a merger to duopoly in the express mail business. The Commission found that the merger would have given rise to an overly powerful n°2 – DHL being the leading player – and to the disappearance of a “maverick“, TNT (a so-called “gap case” ). Whilst efficiencies were deemed sufficient to outweigh the restrictive price effects on a number of geographic markets, the balancing test in central and eastern European markets yielded a negative outcome. The parties did not manage to convince the Commission that their “last minute” proposed remedies package (divestiture of parts of TNT’s business to La Poste + 5 years’ access to UPS/TNT’s aircraft fleet) would allay its concerns. The Commission had thus no other choice but to block the merger. The deadline for appeal exprises next week. My feeling – based on smoke signals – is that the parties will appeal before the General Court. Unfortunately, the decision is not yet published. But the Commission has published a press release and a comprehensive MEMO on the decision.
On a possible toughening of EU merger policy - Contrary to what has been written in the press, the case does not suggest a harder merger policy. The headcount of prohibited mergers for Almunia currently lurks at 4, where Van Miert and Monti respectively had shot down 9 and 8 mergers. Rather, this decision shows that merger scrutiny remains effective, even in a period of merger morass and of depressed capital markets.
On the alleged protectionist instrumentation of EU merger policy - In the US, journalists were prompt to compare the EU with China, arguing that “the Commission uses antitrust enforcement to curb the efforts of American companies to expand in their countries”. To me, this is ill-thought: the prohibition decision also protects FedEx, a US company, from the fierce competition of DHL and UPS .
On the missed opportunity to “industrialise” EU merger policy – The Commission refused to view La Poste as a “suitable purchaser” for the parties’ proposed divestiture. From an industrial policy angle, one may argue that the Commission has thereby counter productively prevented the rise of a second European giant in the parcels business, besides DHL (Deutsche Post). Now, it is well known that the Commission also seeks to open postal markets to competition. A further strenghtening of La Poste may have undermined the Commission’s parallel liberalisation agenda.
On the perils of economic analysis in EU merger policy – Let’s be frank: in this case, the parties awkwardly offered to the Commission the rope to hang them. To prove that the disappearance of TNT would lead to price increases, the Commission relied on the price concentration study initially provided by UPS and TNT. It seems the Commission just had to tweak some numbers, and what looked like a minor positive correlation according to the parties became a significant impediment to effective competition (the parties did not deny the existence of a price effect, but they argued that it was de minimis in magnitude) which could only be offset by redeeming efficiencies. In other words, by pushing this price concentration study forward, the parties lifted the burden of proof away from the Commission, and placed themselves immediately in the uncomfortable position of having to argue efficiencies. The bottom line: economic analysis can backfire.
On the interpretation of the “efficiency defense” in EU merger policy - This case is probably one of the first merger cases in which the Commission accepted that – at least on some markets – cost efficiencies would be passed on to customers. So far, the Commission had often accepted the existence of efficiencies, yet rejected them as either insufficient in magnitude or on the ground that they would not be transferred to customers. This is a very positive evolution in merger policy.
On the fallacious distinction between fixed and variable costs in the context of the “efficiency defense” – The Commission rebuffed the administrative efficiencies (overheads) advanced by the parties on the ground that they constitute fixed cost efficiencies, i.e. one-offs which have no impact on prices charged to customer. To me, this is bad policy. Whilst firms do not seek to recoup ALL their fixed costs in their short term prices, most firms try to recoup some of their fixed costs in their short term prices. So if, with a merger gives rise to fixed costs reductions, then there is less to recoup on customers in the short term. The bottom-line: fixed costs efficiencies have an influence on short term pricing. Moreover, “one-offs” fixed cost efficiencies have an additional beautiful feature: they are “structural” efficiencies that benefit to consumers forever, regardless of market evolution (growth or decline). They are thus more plausible, and likely to unravel, than “conjonctural” variable costs efficiencies.
On the interface between EU merger policy and Article 102 TFEU - To reject the proposed remedy package, the Commission speculated that La Poste would likely not develop its own aircraft fleet, so that after the expiration of the 5 years’ access remedy, it would not exert significant competitive pressure on the integrators (DHL, UPS/TNT and FedEx). This is not very convincing, for both factual and legal reasons. First, La Poste has already started a process of vertical integration. Second, after the expiry of the 5 years commitment, the Commission remains able to maintain an access remedy under the Article 102 TFEU essential facilities doctrine.
On conflicts of interests in EU merger policy – Rumour has it that at the hearing, the parties infuriated a big fish from DG COMP. The reason? The official who previously held his position had dared appearing as consultant for the parties.
On the scope of the UPS/TNT decision - The Decision concerns only 29 countries in the EEA, and not 30. The explainer it that the Commission did not manage to get any significant data on Liechtenstein, so it decided to drop this country from its investigation.
For more on this, see A. Lofaro’s excellent RBB Brief here.
The ppts of the speakers at yesterday’s lunch talk will shortly be made available on the GCLC’s website.
And thanks to Stephan Simon for suggesting to title the event after AC/DC’s “TNT“, rather than after Queen’s “Another one bites the dust“.
At the GCLC, we have just scheduled a promising lunch talk on the Commission’s UPS/TNT Decision on 4 April.
Our speakers are Stephan Simon (DG COMP), Winfred Knibbeler (Freshfields Bruckhaus Deringer) and Andrea Lofaro (RBB Economics).
For registation see here.
For more, see Andrea’s excellent RBB Brief hereafter: RBB_B41_Brief_V3.
Last Friday I was invited to speak on these issues at a GCLC lunch talk on “
I might develop the content of my presentation in a series of forthcoming posts, but today we’ll simply provide you with the presentations projected at the lunch talk.
I had the impression that the audience was a bit surprised at my rather unusual power point, which you can see here:
GCLC_Google_Lamadrid (looks better if you play the slide show; also, it’s password protected, so click “read-only”).
As I explained at the event, I decided to run the risk of projecting this ppp when I learnt that Google had pledged before the FTC not to ask for injunctions aimed at protecting its intellectual property Actually, I’m much more scared of my firm’s format-strict marketing department….
P.S. A necessary and fair disclosure. The power point I had in mind became real thanks to Enrique Colmenero, a terribly nice and smart guy, a techie and an entrepeneur who is now fortunately working with me on a few tech-related cases.
Heard at today’s GCLC lunch talk, seemingly in defense of Google’s search manipulation tactics: Bing is also linking preferentially to its own related services (maps, etc.). So the complainants, and Microsoft in the first place, should take a pass.
On further thoughts, this is a pretty weak argument.
First, the idea underpinning this argument seems to be that Google’s strategy is standard industry practice. And the upshot would be that Google’s conduct has a rational business justification. But the fact that a course of conduct is frequent within an industry, and that it has been replicated by rivals, does not make it presumably lawful. Many drivers breach the law by speeding everyday, yet this is no reason to hold their conduct lawful. Similarly, the fact that conduct is rational is not a cause of antitrust immunity. Collusion is often rational, yet it is strictly forbidden.
Second, this argument actually works in favour of Microsoft’s allegations. It is precisely because preferential placement of links on search engines has the ability to steal competitors’ market share – and in turn to foreclose – that Microsoft uses this strategy. But Microsoft does this to penetrate the market and/or avoid market marginalisation. And there’s no cause for concern here: given Bing’s very low market share, the preferential placement of links at best yields minor foreclosure effects. You may call this procompetitive foreclosure. In contrast, Google has a paramount market position. Hence its conduct is likely to exert anticompetitive foreclosure effects.
On the link between the magnitude of dominance and the intensity of anticompetitive effects, see §20 of the Guidance paper:
“in general, the higher the percentage of total sales in the relevant market affected by the conduct, the longer its duration, and the more regularly it has been applied, the greater is the likely foreclosure effect”
And on the fact that not all foreclure is unlawful, see §22 of the CJEU ruling in Post Danmark:
“not every exclusionary effect is necessarily detrimental to competition“
Finally, the argument surmises that competition law should treat market players equally. But in this industry, Google
is seems dominant, Bing not. Those two firms are thus in distinct situations, and the argument again does not fly. It is indeed well settled that pursuant to Article 102 TFEU, dominant firms are subject to a “special responsibility” (whatever this means) possibly for the reason set out in my second point. Like it or not, competition law imposes higher constraints on dominant firms than on non-dominant firms.
The sole possible way to make sense of this argument boils down to a moral issue, best expressed in the maxim: “nemo auditur propriam turpitudinem allegans”. But it is well known that this argument has no traction in competition law, which has no moral content, a point forcefully made by Bork – a late pro-Google advocate – in his early Antitrust Paradox. And this, in any case, would not bar the Commission from taking over the investigation on its own motion.
Overall, by trying to counter argue that Bing also manipulates search results, Google is falling into the well-known Tu Quoque fallacy.
PS: the Lunch Talk was great. We heard two economists, Anne Perrot and Cedric Argenton, speaking very clearly to lawyers. We also watched a lawyer, Alfonso, morphing into a complete hi-tech geek. The introduction of his presentation was simply hilarious. I rarely laughed so much at a conference. The slides will appear on the blog very soon.
PS2: link to the above pic here.
Just in case you haven’t yet registered….
Lunch Talk Series – Searh Engines and Competition Law- Friday 8 February 2013
12:00 – 12:30: Sandwich lunch and socializing
12:30 – 13:45: Presentations and comments
- Mr Cédric ARGENTON, TILEC – Tilburg University
- Mr Alfonso LAMADRID, Garrigues
- Ms Anne PERROT, MAPP
13:45 – 14:00: Q&A
Please register online at: http://63rdgclclunchtalk.eventbrite.com
Registration is open until 6 February 2013.
Standard rate: 35 EUR (VAT incl.) – free seats available for sponsors.
Global Competition Law Centre
College of Europe, Bruges
As Pablo noted yesterday, my blogging urgers trump doctor’s recommendations; I figured that if Cervantes could write Don Quijote with one hand I could at least try typing a couple of posts on competition law single handedly..
We’ve undertaken a search for the most relevant competition law events to be held in February, and decided to advertise the results here. Coincidentally (or not) the events shown below are related either to friends or to us. We are aware that promoting one’s own stuff has for some become a risky business, but oh well…
On 1 February 2013 we will be holding a seminar on recent developments in relation to Article 101 within the framework of the IEB course in Madrid. Eric Gippini Fournier and Fernando Castillo de la Torre have come up with a great line-up of speakers: Viktor Bottka (Legal Service); Pablo Ibañez Colomo (LSE) and Luis Ortiz Blanco (Garrigues) will be dealing with object/effect issues; Cani Fernández (Cuatrecasas), Marisa Tierno Centella (DG Comp until recently, now CNC) and Fernando Castillo will speak about sanctions (fines, leniency and private enforcement); Lorena Boix (DG Connect), Helena Larsson Haug (DG Comp) and Ainhoa Veiga (Araoz&Rueda) will focus on online distribution and distribution of digital works. For further info you can drop me a line (firstname.lastname@example.org)
On Friday 8 February at 12.00 h. there will be a Global Competition Law Centre lunch talk in Brussels on “
On a larger scale, on 22 February 2013 our friends at Concurrences will be holding the New Frontiers of Antitrust 2013 conference at the Assamblée nationale in Paris. This conference has earned its place among the top competition law events of the year. Even though it’s not cheap, it’s always packed, so that should tell you something about the quality of the sessions. For info and registration see here. As you will see in the program, the interface between data protection and competition law will be one of the main topics dealt with; we’ll provide you with some personal views on this
I attach below the presentation I gave today at the GCLC annual conference. It deals with the nexus between competition enforcement and industrial policy.
A rough 45 pager, co-penned with my assistant Norman Neyrinck, was circulated to the participants.
BTW, I am contemplating moving to Prezi, and leave the conventional PowerPoint world. Anyone with feedback on this?
At today’s GCLC lunch talk on transfer of technology agreements, a number of thoughts sprung to mind. Here they are.
- As part of our professional ethics, we competition lawyers should stop saying that IP confers a form of “monopoly” on its owner. Like property rights over tangible goods, IP – I talk here essentially of patents – confers property. A patent confers property over the usage of technical specifications, full stop. But – and this is a big But – IP does not imply, as the term monopoly suggests, the absence of alternative technical specifications. On many markets, several IP compete for a given product, service, functionality.
- Aren’t we over-regulating the issue of standard-essential patents? There’s no robust evidence that patent thickets are a widespread + harmful phenomenon. However, as a result of the mass-mediatization of several cases, and of the possible inability of the Commission to deal with those cases swiftly and thoroughly, we are heading towards the adoption of general rules in a range of soft law instruments. Last year, we got a new section on standardisation in the Guidelines on Horizontal Cooperation Agreements. The upcoming revised TTBER and its set of accompanying Guidelines may just bring about more rules. As a matter of principle, I would question such an approach, absent empirical case-related evidence.
- The use of “double negatives” in the list of hardcore restrictions should be avoided. D. Woods said the Commission would make some thinking on this. And I trust most EU competition law students would be grateful if the Commission made progress on this.
- The SEP=SMP shortcut is misconceived. It fails to grasp that several standards, or non-standardized technologies can compete for a given functionality, product, service. Moreover, standardization is a repeated game, so any attempt by a SEP holder to raise fees may be sanctioned at a later stage by other standard participants. And finally, SEP holders must often obtain licences from other SEP holders.
- A speaker made the point that it would be counterintuitive if participants to patent pools had to pay experts to determine on an ongoing basis whether the patents are valuable (or not) and in turn should (or not) stay in the pool. It is indeed a little weird to pay someone and entrust him with the mission, and power, to kick you out. And there are other risks: conflict of interest, bribes, etc. But aren’t most trade associations paid by their members, and yet keep a right to exclude participants if the membership conditions are no longer met?
- A popular policy argument to discard the need (and legitimacy) of antitrust intervention is that contemplated market failures are caused by regulatory frameworks. And the argument logically follows that regulatory defects should be solved by bringing changes to the regulatory framework, not by applying the competition rules. This argument has been made in virtually all sectors of the economy that have attracted antitrust scrutiny in the past decades, e.g. pharma, financial markets, telecoms, etc. I have, myself, made this point in a number of papers, but I have second thoughts on it now. Whilst I still believe that pieces of legislation adopted under a fully democratic procedure should not be undermined by ex post bureaucratic competition enforcement, I am also a pragmatist. In this respect, I tend to consider that antitrust enforcement may bring quicker, and better fixes, than protracted regulatory action (for instance, a reform of the IP system in the case of patent thickets). Plus antitrust enforcement is more reversible than regulatory action (in case of mistake). And finally reforms of regulatory regimes just have corrective effects for the future, and do not address existing problems…