Chillin'Competition

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On the application of competition law to State measures and on the apparent inapplicability of Art. 101(3). (ECJ’s Judgment in Joined Cases C‑184/13 to C‑187/13, C‑194/13, C‑195/13 and C‑208/13)

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Over the weekend I was able to catch up with some readings (notably on two-sided markets in anticipation of this conference), but also on recent case-law that I hadn’t yet had the chance to read. Thanks to this exercise I was able to become aware, among other things, of the content of an ECJ Judgment of 4 September 2014 on which I have read no comment whatsoever. This may be understandable because the case only deals with interesting legal issues, and not with high-stakes matters where the law is seemingly absent, which are lately the only ones grabbing commentators’ attention…

The Judgment at issue – Anonima Petroli Italiana (“API”)- is a preliminary ruling responding to questions posed by an Italian Court in relation to an Italian law pursuant to which the price of road haulage services for hire and reward cannot be lower than minimum operating costs, which are in turn fixed by a body composed mainly of representatives of the economic operators concerned.

The Italian Court asked, in essence, whether any such legislation was compatible with Article 101 read in conjunction with Article 4(3) TEU as well as with the Treaty provisions on free movement of services.

As some of you may recall, the possibility of applying Article 101 to State behavior  pursuant to its joint application with other Treaty rules was born in Inno Attab in 1977 [btw, I just found this little jewel commenting on the earlier case law on the subject]. The reasoning used back then by the Court was that Art. 4(3) TEU (at the time 10 TCE) prohibited Member States from depriving Treaty rules of their effet utile; given that former Article 3.g) (deleted from the Lisbon Treaty at the behest of Mr. Sarkozy; remember?) established undistorted competition as one of the goals of the EU, it was held that Member States could not adopt measures depriving competition rules of their effect utile. This doctrine was considered potentially huge at the time, but never lived up to its promise due in part to the restrictive interpretation endorsed by the Court in the November Revolution of 1993 in the Reiff, Ohra and Meng cases), according to which a State measure could not by itself run counter the Treaty rules in the absence of a certain behavior on the part of the undertakings (unlike, by the way, what happens with Art. 106 as recently re-stated in the Greek Lignite case).

The ECJ’s recent Judgment concludes that by delegating the power to fix minimum tariffs on a committee composed of a majority of representatives of the economic operators who are not bound to observe public interest criteria in their (non-reviewable) decisions, the legislation at issue runs counter the effet utile of Article 101 by preventing undertakings from setting lower tariffs (the Court doesn’t however clarify whether the restriction is “by object” or “by effect”).

My 3 comments:

  • The Judgment shows that this doctrine is well alive, even if it isn’t kicking, and this regardless of the elimination of former Article 3.g). A lot could be done with this doctrine if competition authorities took it seriously. But instead of using the well-developed tools at their disposal (like this one or like Art. 106), competition authorities are busy stretching the interpretation of others (like the one of selectivity in State aid, as seen in the recent openings of proceedings in relation to tax rulings).
  • Regarding possible justifications, that the ECJ seems to apply the “objective justification” test developed in Wouters, Meca Medina, etc. very naturally and not as anything exceptional, very particularly when it deals with conduct adopted by regulatory or quasi regulatory authorities (albeit not only in those cases, as shown by Pierre Fabre). Some of you may legitimately observe that this fits oddly with the Judgment in Irish Beef, where the ECJ held that “[i]t is only in connection with Article [101(3)] that [other legitimate interests] may, if appropriate, be taken into consideration for the purposes of obtaining an exemption from the prohibition laid down in Article[101(1)]”.
  • Quite strikingly, the ECJ does not include a single mention to Article 101(3) (and this despite the fact that the questions referred to it cited Article 101 in its entirety and not to 101(1) alone). It basically states that since the measure falls within 101(1) TFEU then Article 101 prohibits it. In my view, under normal circumstances, and in proper application of the Court’s case law, the Court should have said that it was up to national Courts to assess whether the conduct at issue could benefit from Article 101(3), the assessment of which is mandatory. This error bypassing of Article 101(3), not only at the practical but also at the theoretical level (and on the part of the only institution that took it seriously in the wake of Regulation 1), further confirms the point I made some time ago (and have subsequently cited many times) about the slow death of this provision.
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Written by Alfonso Lamadrid

27 October 2014 at 6:48 pm

Posted in Uncategorized

Negative competition advocacy, or the importance of leading by inaction

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Nothing

Advocacy is one of the key missions of competition authorities. The benefits of competition are not always well understood, or are not necessarily given the same prominence as other interests in policy debates. What is not emphasised enough is that these same authorities have an equally important role to play when it comes to dismissing unsubstantiated concerns. There are some issues that – sometimes due to effective lobbying – give rise to a great deal of controversy but that turn out to be wholly unproblematic upon closer scrutiny. It would be desirable if, when dealing with these concerns, authorities were explicit about the reasons why they conclude that action is unwarranted and contributed to public discussions by explaining why what looks like a blatantly anticompetitive strategy is sometimes a subtler manifestation of competition on the merits. This is what I call negative competition advocacy.

Recent developments provide a couple of emblematic examples of the areas where negative advocacy is most needed. One is about net neutrality, arguably the catchiest slogan of the decade (which, moreover, was coined and popularised by a most charismatic academic). I have not yet come across a theory that provides a convincing case for net neutrality (which, in essence, means that all Internet services should be treated equally). Unfortunately, sector-specific regulation is not always adopted for the right reasons. What seems clear, on the other hand, is that the concerns underlying net neutrality (in particular, that telecommunications operators block or discriminate against competing services) are, by and large, a non-issue from a competition law perspective. Therefore, I am not surprised that the Commission closed, earlier this month, an investigation into ‘Internet connectivity services’ (which Commissioner Almunia linked to the net neutrality debate in his speeches). After the unannounced inspections carried out in July 2013, the authority has come to the conclusion that ‘the observed practices do not appear to breach EU antitrust law’. I only regret that the press release does not explain more about the reasons behind the decision.

Another issue that makes the headlines every now and then is the use of private labels by supermarket chains (as net neutrality, it is a discrimination-related concern). For some reason, the idea that grocery stores sell products under their own brand and give these brands more favourable treatment is perceived to be deeply problematic (this is at least the impression one gets when reading newspapers). Authorities should explain clearly that there is nothing wrong, per se, in such practices. The speech delivered by the Director General for Competition on 2 October is a very good example of the way forward. Alexander Italianer presented the findings of a year-long study on retail competition in the grocery sector. The study came with good news. Contrary to the widespread view, it would seem that competition is working fine on the whole in these markets. The Director General unambiguously stated that private labels ‘do not appear to hamper choice and innovation’, at least so in ‘moderately concentrated retail markets’. I hope these words (and, more importantly, the hard evidence backing them) will be taken into consideration at the national level, where regulatory instincts (and the lobbying that comes with them) are sometimes very strong.

More examples where negative advocacy could be useful? Think of Apple’s recent decision to stop selling Bose products from its stores. It looks like a refusal to deal. Even worse, it is a disruption that follows Apple’s acquisition of Beats, one of Bose’s competitors. Is this problematic from a competition law standpoint? Not really. I quote Alexander Italianer: ‘practices such as these are only a matter of competition law, if they have an impact on the overall functioning of the market. For instance, if a retailer twists the arm of a supplier in individual bilateral negotiations, then he may well be in the wrong, but it falls beyond the scope of competition enforcement’.

Pablo

Written by Pablo Ibanez Colomo

21 October 2014 at 8:40 am

Posted in Uncategorized

A Nobel moment

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Jean Tirole

Congratulations to Jean Tirole on the Nobel Prize! I cannot imagine anybody being unhappy or disappointed about this year’s pick. Even though he is just 61, I am ready to say the prize comes a little late. I confess I have been waiting for this moment since at least 2009, when it went to Elinor Ostrom and Oliver Williamson. The upside of waiting a few more years is that the award comes solo this time, comme il le fallait.

He is one of these economists who does not need an introduction. He is the author of The Book on Industrial Organisation (le Tirole) and has made fundamental contributions in the field. For instance, his 2003 landmark paper (with Jean-Charles Rochet) on two-sided markets has proved to be enormously influential, as Groupement des Cartes Bancaires and MasterCard show. Competition in Telecommunications, written jointly with the late Jean-Jacques Laffont, is one of my favourite books, and is a good introduction to his work on regulation. I guess I could keep going for a while (for instance, I remember discussing his work on open source software with a colleague the other day).

Written by Pablo Ibanez Colomo

14 October 2014 at 11:47 am

Posted in Uncategorized

On bus lanes and State resources: AG Wahl in Eventech

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The best way to start the first post I write after my ‘formal’ induction into the blog is, I tell myself, by referring to one I wrote back in July, and which concerned the preliminary references in Eventech and Kunsten Informatie and Media. The two AG opinions came out during the Court’s hyperproductive month of September. While I still think the two cases are relatively straightforward in terms of substance, it makes sense to write a couple of notes on Eventech (in the form of two separate posts).

You may remember that the key question in that case was whether regulation allowing black cabs (the iconic London taxis) to use bus lanes and excluding the so-called minicabs (private hire vehicles) entails the use of State resources. The answer, in my view, is an obvious no. It is in fact a good textbook example showing that advantages within the meaning of Article 107(1) TFEU are not always granted through the use of State resources. The position taken by AG Wahl therefore comes as no surprise to me. It is rather the orderly analysis of the question that inspired me to write this post.

When going through it, I thought, first, of AG Jacobs’ classic opinion in PreussenElektra. It seems difficult to believe, but many of the issues that now seem straightforward were far from established when that opinion was written back in year 2000 (which, or so I like to think, is not such a long time ago). If a masterful analysis was necessary to put some order into a set of scattered and seemingly contradictory precedents, this must mean that State aid has come of age only relatively recently.

Second, I thought that I had never seen such a careful dissection of the different ways in which State resources may be involved in a case. Eventech had raised several arguments trying to link the regulatory advantage to the use of resources by the State. For instance, the firm argued that black cabs can be said to be exempted from fines for using the bus lanes, which, in turn, leads to a loss of revenue for the State. The opinion is valuable not because this argument, or similar ones, were particularly powerful or persuasive, but due to the way in which they are examined by AG Wahl. To this day, I still have misgivings about the treatment of some issues in landmark cases like Sloman Neptun. From this perspective, the opinion sets a model for the future, in particular to the extent that the Court had seemingly never been confronted with some factual scenarios that were relevant in this case.

I will write something in the coming days about the advantage aspect of Eventech. Before that, I will end on a personal note. I took an Uber cab this summer for a fairly long ride and one of the many questions with which I pestered the driver had to do with this case. Interestingly, he was of the opinion that the regulatory regime in place makes sense. He said that traffic would be unmanageable in London if minicabs were allowed to use bus lanes. And he thought he would rather be subject to lighter regulatory obligations, even if it means giving up some privileges. Thoughtful and sensible, I would say.

Pablo

Written by Pablo Ibanez Colomo

13 October 2014 at 12:25 pm

Posted in Uncategorized

A new kid on the blog: Introducing Pablo Ibañez Colomo

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As I said in my farewell post to Nicolas, I don’t think it’s good for this blog to be run only by a practitioner like myself, so we have a “new” luxury addition to the team.

As of today, Pablo Ibáñez Colomo, who’s already been writing here for the past few months, has finally cracked and will join Chillin’Competition as editor. Most readers of this blog already know Pablo. He’s an Associate Professor of Law at the London School of Economics; prior to that was a teaching assistant at the College of Europe for three years (I was actually his student there), completed his PhD at the European University Institute in Florence (he was also Visiting Researcher at Stanford during his research period) and, among other things, is also one of the authors of the best competition law textbook ever written (in Spanish).

More importantly, like Nicolas, Pablo is also a reputed young and independent academic, a brilliant guy, a very good friend, a person whose ideas often differ from mine. On top of that, and in case you haven’t realized yet, he’s probably even geekier than Nicolas and myself :)

P.S. We will also be accepting more “guests posts”, so feel free to contact us (alfonso.lamadrid@garrigues.com and P.Ibanez-Colomo@lse.ac.uk) in case you have an urge to get anything off your chest.

Written by Alfonso Lamadrid

8 October 2014 at 11:48 am

On Nicolas Petit leaving Chillin’Competition and on reasons to continue it

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(Cautionary note:  as this post is rather lengthy and rather personal, you won’t lose too much if you skip it).

Last Friday Nico announced that he was quitting Chillin’Competition, so this blog loses its founder and main figure (although it’s true that there weren’t so many).

In order to dispel the rumors that seem to be going around I’ll address them directly: no, it’s not a hoax; no we haven’t fought (in fact we had lunch together today, as witnessed by some prominent Commission officials, one of whom even said that it was good to see that we were still talking to each other despite the rumors…); no he didn’t have an affair with my wife (at least not that I know of) nor me with his girlfriend (apparently because I’m not attractive enough), and no, his move is not due to political pressures from his home country after our posts on Arnaud Montebourg (see here and here) provoked the French Government’s collapse.

So, yes, Nico is leaving the platform he created back in September 2009 (I only joined a few weeks later –on 8 October 2009-, initially as a guest, and I’m still grateful for his invitation for me to join, particularly because back then he was already well known and I was a very young associate at a Spanish law firm whom he really didn’t know that much). For some reason it worked, and in the course of these 5 years –time flies- we have written no less than 960 posts(!) and had 800,000 visits. His creature fared well.

Nicolas and I certainly didn’t have the same views on some substantive issues and we naturally did have divergences, all of them because he always wanted me to be more politically incorrect  and I always told him not to play the enfant terrible. But I think the mix contributed to this blog being less one-sided and hopefully more interesting.

As for the real reasons behind this decision, he can explain better, but I think he summed it up well when he said that “the thrill is gone”. His quitting the blog fits within a reshuffling of priorities that also includes his resignation as Director of the Global Competition Law Center. As I’m writing I’ve just recalled that, interestingly, both of these moves were already anticipated in a post he wrote 3 years ago listing possible things to quit fromin order to refocus a little on things that really matter”.

As he said in his farewell post, we had been discussing this for a while. I even wrote here back in July thatyou should expect some significant changes in Chillin’Competition after the summer holidays” . To tell the truth, at the time I was thinking of quitting myself.

I saw plenty of reasons to do it. For one, finding the time to think things through and write properly about them was becoming impossible, with the result that our publications weren’t nearly as good as we’d like them to be and wouldn’t reflect well on us. On top of that, which has been a constant over these years, I felt that what used to be a fun exercise now had become an obligation, that I was running out of ideas worth your and my time, and that what used to be a fresh approach to things wasn’t really anymore. No less important, what I enjoy is actual lawyering, and was –and still am- quite weary of being seen more as a blogger than as a lawyer, even if a bit of that is, I guess, inevitable. And most important of all, my first son was about to be born (Edu came on August 30th) and I want to save all my non-working time for him. As you can see, and as this esteemed guy observed back then over a beer or two, it really sounded like I’d made up my mind. [Actually, all this is starting to sound compelling again!]

This is all to say that when Nicolas gave me some of the same arguments in support of his contemplated move, I understood him perfectly. And the fact that he’d already quit posting 6 months ago whilst at DG Comp certainly broke the inertia and made the decision easier for him.

At the same time, it also made me reconsider my own position. For one, I thought it’d be a pity for the two of us to leave and let the blog die; not because it has any social value –which it obviously hasn’t and we surely could do more useful things with our time- but because, after all, we’ve had fun doing it, we’re even told that at times our writings may have even had an influence in the application/interpretation of the law (which, if true, I’m not sure is positive for the law, though) and it has also enabled us to meet very interesting people.

Many advised us to continue with the blog because it is good as a matter of “visibility”. Indeed, when we have asked for advice about terminating it, many –particularly lawyers- replied that we shouldn’t do it because it gives us visibility, as if that were per se a good thing. To that I consistently responded that visibility cuts both ways, that any stupidity we might write would also be very visible, that sometimes it’s preferable to remain silent and look stupid than to open one’s mouth to confirm that appearances don’t lie, and that it’s a bit of a problem that our most visible work is precisely that which –unlike real work- is done hastily and not always upon careful reflection.

I confess that the main reason why I’ll remain writing here even with Nicolas gone, at the least for as long as the baby is still a baby (I see too many people in this job with skewed priorities), is one of intellectual hygiene. For some reason I can only think properly about something when I write or teach about it. So even if it may be uncomfortable to commit to finding the time and the ideas to write here, and even if I’ll have to remain being careful with balancing it with my real job, I guess this is a good way of forcing myself out of the comfort zone to continue learning.

Since I don’t think it’s good for the blog to be run only by a practitioner like myself, a new addition to the team will be announced in the coming hours. Your ideas and suggestions on the way to go will also be very welcome.

A last note: Nicolas is quitting regular posting but I hope that he’ll be willing to contribute from time to time. We will also continue to work together in the Brussels School of Competition, the Madrid course and possibly in some other projects under the Chillin’Competition brand. And you won’t get rid of ads, because I’ve promised him to continue advertising all his events and publications here.

In sum, thanks so much, Nico, and you know you’ll always be most welcome if you ever want to return chez toi.

Written by Alfonso Lamadrid

6 October 2014 at 5:46 pm

Exit

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téléchargement

To all readers,

After a long period of silence – part of it was Commission-imposed – the shareholders of chillincompetition have decided to transform this blog.

From today onwards, the blog moves from joint to sole control. In plain words, I quit, and leave the blog in Alfonso’s hands.

We discussed this together, but the reasons for exit are compelling.

Paraphrasinging BB King: “The Thrill is gone, it’s gone away for good“.

Alfonso’s challenge is now to find a new “bad cop“, to keep a sane degree of political incorrectness on this platform.

Thanks to all for the support in the past years.

And to my good pal Alfonso: “And now that it’s all over, All I can do is wish you well

Written by Nicolas Petit

3 October 2014 at 10:50 am

Posted in Uncategorized

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