My ULg students took their oral exam last week. It went fairly well for most of them.

That said, as usual during exams, I heard a bunch of puzzling things. In response to a question on alternatives to fines for competition infringements, I got the following answers:

• Dissolution of the infringing company  (or the “slayer” remedy) =>think of the consequences in industry-wide cartels;
• Bringing the infringing company under Commission control (or the “bureaucratic” remedy) => science fiction or just augmented reality?
• Divulge all patents and other trade secrets to other market participants, with the particular illustration of Coca-Cola abusing a dominant position (or the “an eye for an eye” remedy) => you steal market share, we steal your IPRs.

I forgot, I also had a very candid answer when I asked what could be done to foster private enforcement =>make justice free and forbid legal professionals from making money out of cases…

PS: I am the culprit. I spent countless hours encouraging them to be creative.

For this fourth edition of the Friday Slot, Prof. Richard Whish has taken the time to address our questions. As everyone knows, Prof. Whish is the author of the ultimate EU competition book, a book with a big B which is a model of clarity and accuracy. Amongst other things, in this  ITW, Prof. Whish takes distance with the dominant view on Tomra and TeliaSonera and alludes to encounters with mutant economists. Thanks to him for accepting to appear in the Friday Slot. A great honour for chillin’competition.

“Oscar” of the best competition law book?  And of the best non-competition law book?

Well, obviously I cannot say Whish on Competition Law! I greatly admire Oke Odudu’s The Boundaries of EC Competition Law for incisive and original thinking and for in-depth research. On procedure there is nothing to match the series of essays written by Wouters Wils and published in a series of books since 2002.  As for other books, where to start! I suppose if it had to be just one I would go for George Eliot’s Middlemarch for a view of all things English (good and bad). I am not aware of a finer character in literature than Dorothea Brooke.

“Oscar” of the best case-law development in the past year? “Oscar” of the worst case-law development?

I very much liked the judgment of the Court of Justice in TeliaSonera, a view that is not widely shared, it would seem. To suggest that a margin squeeze cannot be an abuse in the absence of a duty to deal, to my mind, would emasculate Article 102 and to limit it to the control of monopoly rather than dominance.

Let’s do it like economists => assume that you could change 3 rules, principles, judgments, institutions in the current EU competition system. What would you do?

I wish that we could start over again on refusal to supply and on rebates. I am not a critical as some commentators about the current law in these areas, but I do think that it is difficult to explain quite how we got to where we now are. I have difficulties with Commercial Solvents, which is where the law on refusal to deal started: to what extent was the Court really concerned that Commercial Solvents had discontinued a customer who had become dependent upon it? The national laws on economic dependency do not, to my mind, qualify as ‘competition’ laws, but their existence has percolated into the competition rules.  As for rebates, some of the judgments contain statements that suggest per se illegality, which cannot be correct. Tomra and Intel will be very important judgments on this: to what extent, I wonder, will the Commission’s Guidance document have an influence on the Courts dealing with those appeals?

A different point is that I think that changes are needed at the General Court as to the way that it conducts its review of Commission decisions: I am not thinking so much of the intensity of the review as the actual procedure.

Average working time/week?

I have just reread what Ian Forrester said in response to this question, and find that my answer is exactly the same. I quote him:

‘Excessive. I travel a lot, and when I am away the e-mails multiply, as do the messages from editors wanting manuscripts. But I am not complaining. It is fun to do interesting work in interesting places’.

Precisely!!

Why do you work in competition law? How did you first get into it?

When I was asked at school what I wanted to do at university I said ‘Economics’. My (very traditional) school thought that this was madness, and assured me that I should do law. I did so, and basically hated it, although I did quite well. When I went on to do a postgraduate degree I took a course called ‘Monopolies, Mergers and Restrictive Trade Practices’ (created by Sir Jeremy Lever), and that was when my career started – the point being, of course, it is law with economics.

Most interesting, intense or funny moment of your career?

I do not remember any interesting, intense or funny moments in my career …

Actually, I think that laughter is the most important safety valve that we have when dealing with high pressure, looming commitments and major responsibilities. I am rarely serious for more than about ten minutes at a time, which probably means that some people do not take me entirely seriously.

Your role model (if any) in the competition community? And outside of it?

As a young academic in the UK there would have been very little guidance on competition law and policy if it had not been for Valentine Korah at UCL. And she demonstrated to me, and many others, that an academic competition lawyer can have a major influence on the development of policy. A different point is that I have met so many highly intelligent, and very interesting and fun, people, literally all over the world though competition law. This gets us back to the answer to question 4.

What do you like the least about your job?

I will just quote Ian Forrester again:

‘The e-mail deluge, which never diminishes; airport security checks’.

What do you like the most about your job?

That is simple: the students that come to King’s to do the LLM or a PhD. They come, literally, from all over the world – after they leave the invitations to weddings, conferences etc. come in, and the hospitality is invariably wonderful.

What you like the most about economics in competition law?

When the law and economics come together and make sense.

What you like the least about economics in competition law?

Daft theories which fly in the face of reality. Economists with six hands (on the one hand, on the other hand, and on the other hand …)

What career/personal achievement are you most proud of?

Helping students to have the career in competition law that they want.

A piece of “counterfactual” analysis: what would you do if you weren’t in your current position?

When I still had a reasonable voice I would have loved to be a singer – opera if possible, otherwise lieder. Today – gardening for conservation (my garden is devoted to birds and butterflies).

Besides being a “competition geek” (sorry for this one, but we all are), what are your hobbies?

See the answer to question 13? I have recently planted 400+ trees, and have another piece of land that is twice as large where the planting possibilities are very exciting. Travel is wonderful (except that I always end up missing the garden). I cannot stop myself from going to India – I have just come back from my 40^th visit. I also love watching opera in the great opera houses of the world – Andrea Chenier in Vienna last Saturday was wonderful.

Favorite movies?

Too many! Brief Encounter (Noel Coward); The Leopard (Visconti); Pasolini (except for Salo, which is unbearable); Almodovar; Bombay (Rani Matnam); and, of course, Mamma Mia, which is fantastic on a long-haul flight after two gins.

Favorite music style in general?

Wagner; Strauss (Richard!).

Your favorite motto?

Try to be like Dorothea Brooke (I made that up).

Websites that you visit the most (besides Chillin’Competition)?

DG COMP; OFT, CC; ICN; CAT – how sad! And the BBC (usually to ‘listen again’ to Radio 3).

A piece of advice for junior competition professionals?

There are (at least) two sides to every story; be patient; work hard; behave with the utmost integrity; don’t be arrogant. And laugh.

I´m flying to Madrid today to speak tomorrow at a seminar coordinated by Eric Gippini and Fernando Castillo de la Torre (both from the European Commission´s Legal Service) within the XV European and Spanish Competition Law Course directed by Luis Ortiz.

The day program for tomorrow features (i) a discussion on “Investigative meaures and fundamental rights” with Ralf Sauer (European Commission´s Legal Service), Salomé Santos (British Foods), Rafael Baena (Ashurts) and Diego Castro Villacañas (Spanish Competition Authority); (ii) a panel on the functioning of the European Competition Network and the evolution of the decentralized enforcement system during 2011 with Ewoud Sakkers (Head of Unit at DG Comp), Rafael Allendesalazar (MLAB) and Diego Castro Villacañas (CNC); and (iii) a debate on novelties and case-law developments with regard to vertical agreements with Andrés Font (Gibson Dunn), Bernard Mongin (European Commission´s Legal Service) and myself.  All the panel discussions will be moderated by Eric and Fernando.  Registrations are now closed, but if any of our Spain-based readers is interested in attending you can drop me a line and we can try to arrange it.

Not that I´m objective, but coming to Madrid for this is always great fun. I´ll tell you a secret: one of the greatest attractives of coming to speak at this course are the post-conference dinner+drinks social events (in fact, Nicolas is still on a diet since his last visit two weeks ago; he´s back on Tuesday, so he´ll have to quit soon). The pic illustrating this post is actually from the entrance of the place where such events generally kick-off. (It´s also probably one of the places where I spend more time when I´m around, right after the office and home).

On February 24th there will be another seminar on “Recent Developments on Abuse of Dominance and Merger Control” coordinated by Cecilio Madero (Deputy Director General at DG Comp) and myself. Amongst other topics, this seminar will feature an interesting discussion on the prohibition decision adopted by the Commission in the Deutsche Borse/NYSE Euronext merger. The program for this seminar will soon be out. We´ll keep you posted.

(As you will recall from last week, with occassion of the Chinese New Year we are publishing a year-in-review trilogy by our friend and “China correspondent” Adrian Emch. This is part two of Adrian´s review of 2011.  Enjoy!)

The investigation by the National Development and Reform Commission (NDRC) into the practices of China Telecom and China Unicom had a significant impact inChina. It was one of these cases that people outside the antitrust community actually notice.

The reasons for the high-profile nature of the case may be manifold. For one, most consumers in China will have been a customer of one of the two, in one way or another. Two, the fact that an NDRC official talked to the press while the investigation was ongoing and said that the fine could amount to 1 to 10% of the companies’ annual turnover might have contributed to drawing attention to the case.  But, three, perhaps most significantly, the media’s focus on this case may stem from the fact that China Telecom and China Unicom are state-owned enterprises (SOEs), and very powerful ones at that.  Therefore, it is possible that the main reason for their interest in the case is the surprise, or even disbelief, that someone like NDRC’s antitrust officials would dare take on the two SOEs.

Hence, perhaps the most fundamental underlying question in the China Telecom and China Unicom case is whether and to what extent the Anti-Monopoly Law (AML) applies to SOEs – in law and in practice.  For the international audience, the answer to this question is important: if the AML were in practice not to apply to SOEs, then the targets of the agencies would be private Chinese companies and foreign companies.  For the former, many of them are young companies, which generally do not enjoy much support by the State.  So their market position inChina’s “transitional” economy may not be too prominent, as a general rule.  Which would leave …foreign companies as enforcement targets.

The fear that the AML would be used as a weapon against foreign companies was there from the very beginning of its enforcement.  So let’s take a good look to check whether or not this fear was justified.

For this analysis, it makes sense to distinguish three different areas of the law: agreements, abuse of dominance, and merger control.  For agreements, first, the situation is straight-forwarded.  The cases were essentially about cartels, and a majority of them were local cartels arranged through trade associations such as the price-fixing of sterilization products for tableware in Xiamen, the price-fixing by the paper industry association in Fuyang, or the market-partitioning by a construction equipment industry association in Lianyungang.  The exception in the agreements area is the Unilever case, where a fine was imposed on only one of the four companies whose activities were under scrutiny (two of which Chinese): Europe-headquartered Unilever.

Second, in my view, the abuse of dominance area saw the biggest surprises.  The targets under the abuse of dominance rules were mostly Chinese companies, both privately-owned (ie, Baidu, Shanda) and state-owned companies (ie, China Netcom, China Mobile, Hubei Salt).  Most of these cases were private actions before courts, with a few exceptions.  Interestingly, to the best of my knowledge, all of these actions were ultimately dismissed or settled; as far as I know, there has not been a judgment finding an abuse of dominance under the AML. (Meanwhile, an investigation that SAIC was rumoured to be conducting against a Europe-based multinational does not appear to have led anywhere.)

Perhaps most importantly, NDRC started tackling SOEs.  Even before the China Telecom and China Unicom case, NDRC published a decision against the local salt distributor in Hubei province, which had an “exclusive right” (as within the meaning of Article 106 TFEU) to distribute edible salt at the wholesale level in the entire province.  The issue NDRC had was that the salt company bundled the sale of edible salt with cloth washing powder.  However, NDRC only warned, but did not fine, the salt company for a variety of reasons, namely the company’s willingness to cooperate during the investigation and to take back unwanted washing powder from retailers, the limited sales volume and value involved (only 200 pieces of powder, worth RMB 20,000 – around EUR 2,500), and the company’s formal commitment to cease the infringement and subject itself to temporary monitoring by the authority.

So, overall, it would be definitely wrong to say that the abuse of dominance rules have been targeted at foreign firms in a discriminatory way.  Still, this area of the law is clearly a work in progress: if the China Telecom and China Netcom investigation were to end in a settlement – which most observers think is the most likely outcome – then this would be already the second time (after the Hubei Salt case and, perhaps, a similar investigation in Jiangsu) that commitments are used to terminate an investigation against an SOE.  The message sent by NDRC to market players could be that SOEs are subject to the AML from the substantive point of view but, procedurally, commitments are enough to put the investigation to an end.

In the merger area, close to 400 transactions have been notified to MOFCOM since the AML came into force in August 2008. The largest part of notifications was cleared unconditionally. MOFCOM imposed conditions in ten cases, and blocked one (and a few cases were withdrawn).  Of these 11 cases with “adverse” decisions, only two involved Chinese companies.  On the one hand, the target of Coca-Cola’s attempted takeover in 2008/9 was Huiyuan Juice.  That company is incorporated in the Cayman Islands and listed in Hong Kong but, as a practical matter, is considered a Chinese company. However, precisely, prohibiting a foreign company to acquire a “Chinese” company awoke fears of discriminatory application of the AML.  MOFCOM responded to these concerns by shedding light on the reasons for the Huiyuan decision – conglomerate effects, it said – and by explaining that the fact that remedies were imposed basically only on foreign deals was because the companies involved had strong market positions, implying that the situation may not be the same for Chinese companies.  Which may be true for many private companies inChina. But the many cases brought against SOEs under the abuse of dominance provisions suggest the same is not necessarily true for state-owned companies.

To this extent, it was definitely newsworthy to see that, in the General Electric/Shenhua transaction in November 2011, MOFCOM for the first time imposed remedies in a deal involving a Chinese company – even a large SOE.  As background, the transaction concerned the establishment of a joint venture between subsidiaries of General Electric and the Shenhua Group, a Chinese energy giant.  The goal was that General Electric would grant the JV a license of its technology that converts solid coal into coal gas to be used to generate power, among other applications. Post-transaction, the JV would engage in technology licensing in China. As Shenhua is the largest producer of the special-property coal needed for that process, MOFCOM seems to have been concerned in particular about potential tying by Shenhua of its special-property coal with the JV’s technology, thereby excluding competitors in the technology licensing market.

As in the abuse of dominance area, the glass in the merger area is half empty and half full. True, the General Electric/Shenhua decision was addressed to a Chinese SOE (in addition to a foreign company), and MOFCOM was reported to have unconditionally cleared two high-profile acquisitions of well-known Chinese brands by foreign companies – that is, the “Coca-Cola/Huiyuan situation” so to speak – towards the end of 2011 (Yum!/Little Sheep and Nestlé/Hsu Fu Chi).  But, at the same time, no transaction between exclusively Chinese companies has ever been subject to an “adverse” decision.  (Incidentally, MOFCOM itself had complained that the restructuring of the telecoms sector, in particular China Unicom acquiring China Netcom was not notified to it under the merger control rules). The guess here is that, as a part of the Chinese government is understood to have encouraged (or may perhaps even have “ordered”) this transaction, MOFCOM would be reluctant to “second-guess” it.

Interestingly, the application of competition law to Chinese is also a hot topic … in the EU.  In China National Blue Star/Elkem, DSM/Sinochem and China National Agrochemical Corporation/Koor Industries/Makhteshim Agan Industries, the European Commission examined whether Chinese SOEs constitute a single “economic entity” for the purposes of EU merger control (with the obvious implications for both notifiability and competitive assessment).  So far, the Commission has not taken a firm position. Incidentally, if all Chinese SOEs (or at least those owned by the central government) together were a single “undertaking,” then China Unicom’s alleged failure to file the China Netcom acquisition could actually make sense: seen in that light, this could be an intra-group transaction, not subject to merger control in China.  Anyway, I am going astray; perhaps more of this some other time.

To conclude, overall, the AML has not turned out to be the instrument to go after foreign companies, as some observers had feared. Generally speaking, there are indications that the law is being applied in a measured way and, to a certain but not full extent, equally to all market players. Clearly, though, the practice until now does not allow the brushing aside of allegations that SOEs are a bit more equal than others – both in the abuse of dominance and merger context. The China Telecom and China Netcom case could be important, as it might set the direction into which AML enforcement will be going.

A non competition related post.

Yesterday, Belgium was on strike (and so was lazy Alfonso, who did not post on the blog).

Guess what, this was a Monday. That is the day after Sunday, which itself is the day after Saturday.

Intriguing. I cant help but thinking that strikes are often a far cry from their purpose,  i.e. genuine social protest, and in turn that they are a convenient means to make week-ends longer (or earlier).

The low turnout in the streets yesterday actually confirms this (in particular when the temperature comes close to 0°C).

I made a quick and dirty research on strikes in Belgium over 2011:

• The 4 March general strike took place on…. a Friday
• The 13 May strike in railways took place on … a Friday

I’d be interested to see a more comprehensive body of evidence, but my gut feeling is that there are many other examples.

The next question, obviously,  is, how to handle this? After all, in several Member States the freedom to strike is  protected by the law.

My take: maintain the freedom to strike, but prohibit 1-day strikes on Fridays and Mondays.

After reading the post written by Nicolas on Friday, I realized that we need a disclaimer too. Here it is:

The views reflected in our posts do not necessarily represent the views of Chilling Competition or of its authors. They merely reflect the thoughts that crossed our minds at the exact date and time that appears under each post. Those thoughts may actually be radically opposite to the ones that crossed our minds on the following second.

- If anyone feels offended or dislikes any of our posts, then we suggest that you assume that our opinion has evolved since the date of publication and that we have embraced more reasonable opinions.

- If, on the other hand, you like what we say, we recommend that you assume that since our opinions were sound, we will not have felt the need to change them.

Revenge: where and what was that?

Alfonso pays a lunch.

We have already talked of the Commission’s somewhat confusing disclaimers in official documents.

Think of §3 of the Guidance Communication on exclusionary abuses under Article 102 TFEU : “This document is not intended to constitute a statement of the law“

Or of the good old “The opinions expressed in this document are those of the author and do not represent the views of the European Commission nor of its services“.

Antitrust lawyers often make jokes about the Commission for those disclaimers. But should they?

During the consultation process on the settlement notice, a famous law firm inserted this courageous, delicious footnote in its position paper:

 “These comments do not represent the views of the Firm or of its clients.”

So whose views are these? Please help me, because I am lost.

I am even more puzzled given that a few lines above, the same document explicitly mentioned that:

“These comments are offered by the Brussels office of __ & __ LLP in response to the Commission’s invitation to comment.”

Given our track record on this blog, we cannot be suspected of trying to stigmatize this particular law firm. We have very good friends there and they are all stellar professionals.

This is just to show that no one’s perfect in this business, and that it is quite easy to make fun of those who make fun.

PS: Thanks to my assistant N. Neyrinck for the pointer.

PS2: In a paper written with my esteemed colleague Miguel Rato (Shearman & Sterling), we stressed that regardless of those disclaimers, oral statements may to some extent limit the enforcement discretion of the Commission and, as a result, be relied upon by affected parties to challenge a formal Commission decision. In Case T-25/99, Roberts and Roberts v. Commission, the GC for instance reviewed the substance of a public speech given by a Commission official on specific aspects of the application of competition law to pub contracts (§§128-129).

PS3: Picture taken from a very good LP, if you do like post grunge music.

Congrats to Tatiana Siakka, David Mamane, Andrey, and Lorenzo Climenti!  (Nico: you can afford 4 beers, right?)

Here is an explanation extracted from their answers:

Title 7 within Law 2 of the Fifth Partida, entitled “Of the shortages and bids that merchants create between themselves through oats and guilds” was the legal provision prohibiting traders from engaging in price-fixing and output restriction.

The Code was elaborated in Spain (Castile), but it was in force in Latin America until the modern codification movement (1822–1916). Until the beginning of the 19th century, they were even in effect in the parts of the United States, such as Louisiana, California or Nevada, that had previously belonged to the Spanish empire and used civil law. Furthermore, they served as the legal foundation for the formation of the governing juntas that were established in both Spain and Spanish America after the imprisonment of King Fernando VII during the Peninsular War.

Below you will find a scanned version of the relevant part by courtesy of José Luis Buendía.

[The text appears in Spanish and Latin. Since the short bios available at Brussels-based law firms suggest that all competition lawyers are fluent in practically every language, we trust that many of you will be able to understand it ]

P.S. Could someone please edit wikipedia´s entry for History of Competition Law?

If we asked you what was the first antitrust legislation ever in force in part of the territory of what is now the United States you would probably respond that it was the Sherman Act.

This answers is wrong.

What then was the first antitrust law ever in force in America??

We can give you two hints: (i) it was drafted in the 13th century; (ii) the person who promoted its drafting is one of the 23 lawmakers depicted in the marble bas-reliefs of the House of Representatives chamber of the United States Capitol.

Our quizz will be open for 24 hours. You can submit your answers either as comments to this post (they won´t be made public until tomorrow) or via email to alfonso.lamadrid@garrigues.com (I anticipate that I won´t be able to reply; actually, the reason why we´re posting a quizz is because these are busy -and fun- times at work).

Those who get the answer right are entitled to a free beer.

P.S. Since, as you know, “free” products are rarely ever free, the beer will be paid by Nicolas, who doesn´t yet know about it