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The Interface between Competition and the Internal Market – Market Separation under Article 102 TFEU
1. the 102-abusive prices charged by academic publishers for their books;
2. the drain in State aids imposed on Belgian Universities;
=> this advertisement is my sole way to get a copy of this new book.
This book explores the interface between competition law and market integration in the application of Article 102 of the Treaty on the Functioning of the European Union (TFEU), focusing on the notion of market separation namely conduct that may hinder cross-border trade. The discussion reviews, among other things, the treatment of geographic price discrimination and exclusionary abuse, by which out-of-state competitors are affected.
Market separation cases are treated in the book as a case study for appraising the interface between competition and the Internal Market. On this basis, the book provides a comparative analysis of the Treaty requirements under Article 102 TFEU when applied in market separation cases and the Treaty requirements under the free movement provisions. In addition, it utilises market separation cases as a springboard for advancing an informed reformulation of the application of Article 102 TFEU when state action comes into play.
All in all, the analysis presented in the book deconstructs the elements for establishing market separation as an abuse of the dominant position. It shows that there is nothing that would justify a distinctive treatment of market separation under Article 102 TFEU, other than a principled understanding of Internal Market law as a whole: whatever understanding one reaches about the proper shape of the Internal Market, interrogation of the proper application of competition law comes after that and thus should be informed by this understanding.
On Thursday the European Court of Justice will deliver two very important competition Judgments in the Mastercard and Cartes Bancaires cases. We’ll be commenting on them asap (my paternity leave will unfortunately be over on that same day…).
For a reminder of the issues at stake in both cases, you can check out our previous comments on the General Court’s Mastercard Judgment (Mastercard: A priceless Art. 101(3) assessment) (I was actually proud of this post which I nevertheless swiftly relegated by sillier ones) as well as Pablo Ibañez’s take on AG Wahl’s Opinion in Cartes Bancaires (Restrictions of competition by object under Article 101(1) TFEU: chapeau bas, Prof Wahl!).
A reader of this blog sent me this morning the link to a post we wrote more than 2 years ago titled The post of a summer day , reproduced below.
A re-read of those lines shows that things have changed little in the course of that period:
Just like two summers ago, it’s unusually hot in Brussels, DG Comp’s officials have stampeded out of the city to conduct on-site beach inspections (not before sending a few requests for information), and, two years later, the Commission is still pondering what to do with Google.
Silly posts never get old.
Today is not only busy but also extremely hot in Brussels (no kidding). An ideal day for a fresh summer story.
Italian beach owners have called a lockout on 3 August to protest against the obligation imposed by the Services Directive to open up beach concessions to competition (for more, see here). Actually, it seems that the application of this Directive to beaches has been the source of some concern at the European Parliament (see here).
The reader who has sent us this information adds that the current lack of competition is evident to anyone visiting private beaches this summer. We have been provided with evidence that shows that the prices applied in Knokke (Belgium) are supra-competitive, and it seems that this is the case throughout the EU [which is why you should all spend yor holidays in Spain, where beaches are great and public ;) ].
A week ago another friend/reader from DG Comp wrote to us complaining about the every day cartels that he had identified in beaches, including the renting of hammocks, pedal boats and drinks.
All these reports have generated widespread concern at DG Comp. We are told that many officials have volunteered to conduct in-depth on-site investigations. Hords of DG Comp’s staff are leaving Brussels these days in order to conduct extenuating beach inspections which, in some cases, may last for over a month. They can be spotted at airports flying to almost every beach destination in Europe.
I had lunch at the Commission’s canteen today and was told by insiders that during August the Commission will be giving absolute priority to this sector investigation. In fact, and this is an exclusive from Chillin’Competition: we are told that Commissioner Almunia has decided to settle the investigation on Google in order to free resources for this programmed massive beach inspections. One of the officials heading an inspection team has sent us the pic that illustrates this post and that proves the Commission’s zealousness.
In a recent post on the diluted legality of competition law I voiced out the view that our discipline could partly be losing its last name, a development for which I blamed a number of factors. However, some developments in the past few weeks have led me to think that perhaps I missed a critical feature: the increasing involvement of politics in the application of the competition rules.
To be sure, since its inception and all along its development, antitrust law –as a public policy tool at the core of the economic Constitution of any State- has had as much of a tight link with politics as it has with economics. But whereas economics not only provides a justification for the existence of the rules but also plays an important role in the development of legal rules and in individual cases, politics had traditionally exerted its influence in the exercise of enforcement discretion, and arguably not so much in the development of the rules and the outcome of cases.
The link between politics and competition enforcement might have been more obvious at the national level, where national competition authorities often are attached (organically or otherwise) to the Government at issue, which often appoints its members in the light of political considerations. It’s against this backdrop that one has to interpret the European Commission’s recurrent calls for independence of national competition authorities (most recently on a Staff working paper issued last Wednesday).
I think it’s fair to say that the influence of politics on the European Commission’s application of the competition rules has been more tenuous. For the most part, EU competition law has developed under the auspices of a firm political view on the advantages of competition in a system of social market economy, but in isolation from short-sighted political interests/small politics. This is largely explained by the theoretical legal status of the Commission as a body independent from Member States, and by the practical status DG Comp as a quasi-specialized agency within the Commission that one was not to second-guess. However, there are signs that this might be changing. In recent times national politicians have increasingly given their views on how competition law should be applied (here is one very recent example), and so have members of the European Parliament and a number of EU Commissioners. Moreover, they are doing so not only when their national interests are at stake (political solutions have been and are all the more common in State aid cases and in some high-stakes mergers), but also concerning investigations of potential infringements.
There are several examples of this evolution. Most recently we have seen politicians –mainly Chancellor Merkel- vouching for the approval of the Telefónica/E-Plus deal (see here). But perhaps the best illustration of the trend can be found in the Google case, on which we have written extensively on this blog.
This is a case in which DG Comp has extracted (arguably using the commitment procedure and its impressive record in judicial review of 102 decisions to stretch the boundaries of current legal standards) a set of significant commitments on the part of Google (see my comments here), going beyond what US authorities did. This could be regretted by people interested in the clarity of the law, but would normally have been seen as a practical enforcement success on the part of the Commission. However, a number of motivated and well-funded complainants –led by some smart lawyers who know how to play with the system and who deserve credit for getting near what I would’ve thought was impossible- now start to seem capable of derailing the commitment procedure by politicizing it. First, the German and French ministers for economics wrote a most unusual joint letter to Vice-President Almunia asking for a tougher stance on Google. And now, a widely extended rumor has it that a few EU Commissioners are being persuaded not to approve any Article 9 decision during Mr. Almunia’s tenure. As you can imagine, not all Commissioners are persuaded with sophisticated legal arguments related to evidence on foreclosure and the such, some being more receptive to political lines alien to antitrust analysis, mainly “don’t let these guys off the hook because they don’t pay taxes in Europe and because the US spies on us”. Obviously, this has nothing to do with the law, or at least with competition law.
It’s difficult to guess how this will turn out. As recently explained in the FT (Alex Barkers’s coverage of EU competition issues is, by the way, excellent) “[s]ome people involved think the pressures make it more likely Mr Almunia will decide to launch a formal probe of Android”. And indeed, the Android investigation may be the second leg of this political game, and once again the Commission might be under enormous pressure to take a hardline. [By the way, if you’re interested in reading about the competition issues involved in the Android investigation, I would very much suggest you read the insightful pieces recommended by Kevin Coates here ;) as well as this interesting brand new piece on the matter (particularly enjoyed footnotes 26 and 127…) (thanks to Jorge Marcos –ULg- for drawing our attention to it)]
Much more could be said about the politicization –and possible transformation- of antitrust and I look forward to your comments, but I’ll close it off now (mainly because the Word Cup final is already on). Some of you will recall my piece on Antitrust and the Political Center, in which I outlined some views on how antitrust embodies a centrist political ideology and can contribute to the expansion of sensible political views internationally. Well, in my view, the same is not true the other way around; infusing minor, short-sighted, political goals into the application of competition law can only contribute to disfigure even more a branch of the law which –let’s not forget- is, on its sanctioning dimension, quasi criminal in nature.
The political agreement in having technical competition rules applied by independent agencies is now an established idea, heralded internationally by the European Commission. And it makes sense because in spite of its unquestionable benefits, competition law’s constituency is diffuse and unable to mobilize politicians in the right direction. If you ask me, competition law can better serve its goals when dissociated from small politics.
A look at my recent posts shows that I have developed a taste for pending issues, whether it is rulings of the ECJ or Commission decisions. Rather than doing something new, I thought I would repeat the trick (I tell myself that the number of comments received in previous posts justifies the non-move). Some will have thought ‘Post Danmark II’ when reading the title. True, there is a second Post Danmark case pending before the ECJ. The little information available on the Court website, suggests that it may be another milestone in Article 102 TFEU case law.
But Post Danmark II has long been old news for most if not all of us (not to mention that discussing this case would involve writing yet another post about rebates). Due to the limited supply of Article 102 TFEU cases, it makes (economic) sense to cherish and discuss every single judgment, even prior to their adoption. Thus from the list of pending preliminary references in competition law, I thought I would repeat the trick by doing something else instead, and rather mention briefly (and invite your comments on) the following:
- Eventech concerns the use of bus lanes by taxis in London. The question is more precisely about the application of Article 107(1) TFEU to regulations that exclude private hire cars (minicabs) from such lanes. The key issue relates to whether such regulations involve the use of State resources. The information that is publicly available suggests that the answer is a clear ‘no’. But given that the Court mentioned in Gibraltar that what matters for the purposes of Article 107(1) TFEU is not the ‘regulatory technique’ but the effects of a measure, one is no longer 100% sure about these things.
- A colleague who is interested in EU law but not in competition law asked me a few weeks ago about the FNV Kunsten Informatie en Media case. This one is about the application of competition law to collective labour agreements. The agreement in question is interesting in that it dealt with the working conditions of self-employed workers who were not subject to it. In spite of the obvious distortions it entails this looks, again, like a straightforward case. What makes it worthy of mention, from my perspective, is that the mechanism used in the agreement to fix wages is not fundamentally different from that underlying the so-called Spanish Google tax. You may remember from my post on the question that the Spanish government seeks to ensure that Google News and other aggregators compensate newspapers for the use of ‘non-significant excerpts’ (I know I repeat myself, but this is a concept that never fails to amaze me) by making it impossible for the latter to relinquish their right (that is, by preventing negotiations between individual newspapers and aggregators).
- There are also some pending cases in Luxembourg featuring Alfonso. But it is probably better to let him comment on those.
I gather from the comments to my last post that there is still at least one reader interested in discussing the issues raised by AG Wahl in Groupement de Cartes Bancaires. I could not think of a better excuse to write yet another post about some ongoing developments where the object/effect divide in Article 101(1) TFEU is relevant. This time, which will most probably leave all readers exhausted (more on exhaustion below), I will address some of the open questions raised by the investigation into pay-TV services launched by the Commission back in January.
AG Wahl emphasised in his opinion the importance of considering the context in which an agreement is concluded when determining whether it is restrictive of competition by object within the meaning of Article 101(1) TFEU. It follows from this principle that an agreement that would in principle violate the said provision by its very nature may not do so – and may even fall outside its scope altogether – in some circumstances.
The licensing of TV rights to broadcasters is a perfect example of an instance in which the context surrounding the agreement makes a real difference. It is well-established since Consten-Grundig that agreements giving ‘absolute territorial protection’ to a distributor are restrictive of competition by object. In Coditel II, however, the ECJ held that an exclusive territorial licence in favour of a broadcaster is not in itself contrary to Article 101(1) TFEU, even though it may amount to absolute territorial protection. Why? As the ECJ lucidly explained, what is true for physical goods is not necessarily true for intangible property. In this case, territorial exclusivity came within the scope of the intellectual property right (communication to the public) that was being licensed. The ‘exclusive right to authorise or prohibit any communication to the public’ (to use the wording of Directive 2001/29) can only be meaningfully exercised if the licensee is entitled to prevent others from broadcasting the work in the area subject to the agreement. In other words, and by reference to the expression used by the ECJ in Coditel II, this is an instance in which territorial exclusivity allows the copyright to perform its ‘essential function’ (that in fact is the very ‘object’ of the agreement). If the existence of the intellectual property right is not disputed, then it would be simply illogical to find that the licence is contrary to Article 101 TFEU by its very nature.
Coditel II, which makes perfect legal and economic sense (and which is yet another excellent example showing that the notion of restriction by object has never been interpreted or applied in a categorical or mechanical way by the ECJ), is now seemingly questioned by the Commission in the pay-TV investigation. Commissioner Almunia’s statement raises concerns about ‘provisions [that] ensure that the films licensed by the US studios are shown exclusively in the Member State where each broadcaster operates via satellite and the internet’. This sentence suggests that, in the Commission’s view, agreements that come within the scope of the right of communication to the public are contrary to Article 101(1) TFEU. This position seems to involve a departure from Coditel II and would as such amount to an expansion of the reach and scope of EU competition law, which has long remained deferential to intellectual property regimes and their internal trade-offs. It would also be based on an expansive reading of the notion of restriction by object.
Because the statement is very ambiguous, however, this is not entirely clear. The Commission, on the one hand, claims that some of these agreements give ‘absolute territorial protection’ to pay-TV operators (which would in turn mean that they are restrictive by object). The Commission, on the other hand, says that it is not ‘calling into question the possibility to grant licenses on a territorial basis, or trying to oblige studios to sell rights on a pan-European basis’. I guess we will have to wait and see how the case unfolds in the coming months. Ideally, the Commission would explain whether it takes the view that an exclusive licensing agreement that allows the copyright to perform its ‘essential function’ is restrictive by object simply because it prevents licensees in other territories from offering the same content.
It should be noted that in Premier League (the case without which this investigation cannot be understood) the ECJ was very careful not to question Coditel II. It made it clear beyond doubt that the ruling only concerned the circulation of physical goods (the decoding devices), as opposed to intangible property. It also pointed out that the general principle whereby an agreement granting absolute territorial protection is restrictive by object does not apply where ‘other circumstances falling within its economic and legal context justify the finding that such an agreement is not liable to impair competition’ (and went on to note that the FA Premier League had not put forward any arguments in this sense). This fundamental qualification is not mentioned in Commissioner Almunia’s statement. The fact that the boundaries of the ruling were so carefully defined by the ECJ suggests, in my view (and this irrespective of what we think of the outcome), that it sought to limit as much as possible its implications for exclusive territorial licensing (there is in fact a very marked difference between AG Kokott’s opinion and the judgment, which would go to confirm this reading).