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.
Having to spend a couple of quieter than usual days sick at home, I decided to catch up and so some summer reading on some recent European Commission’s publications.
As you know, DG Comp is quite prolific from a literary viewpoint (I’m not saying that this is because anyone there may have free time). Aside from an extraordinary number of soft law instruments it has also tried new genders, such as show-off comics, and regularly issues other
seldomly read stuff.
A first point to be made –and oddly enough I’ve just realized about it- is that the Competition Policy Newsletter has disappeared for good. I don’t know what has led to its termination, but it’s a pity; the articles featured in it often offered interesting insights on how some cases were viewed from the inside. The publication has been replaced by the Competition Policy Brief, which mainly deals with policy issues; not really the same concept.
A great candidate for an article on the Competition Policy Newsletter would have been the case on spare pieces of luxury watches shelved yesterday by the Commission, which did not find an infringement. This marked the first and only time that the Commission has used the claw-back clause provided for in Article 11(6) of Regulation 1; it took the case from a national competition authority (the Spanish) that was on the verge of sanctioning it and now it has concluded that there is no infringement. [For advertising disclosure purposes: we were active in both the national and EU phases of the case representing a number of the companies investigated].
I’ve also done some catching up on actual decisions. We keep on complaining that the Commission adopts fewer infringement (Art 7) decisions in non-cartel cases than it should and that we lack guidance, but then very few people read the scarce ones there are. How many people have, for instance, read Telefónica/Portugal Telecom, which raises very interesting and never discussed points on the self-assessment of restrictive agreements? The very recently published Motorola decision is also an interesting read for those geeky enough.
Then I skimmed trough the latest set of documents published by DG Comp in relation to the 10th anniversary of Regulation 1/2003, namely the Communication on Ten Years of Antitrust Enforcement under Regulation 1/2003: Achievements and Future Perspectives and the accompanying Staff Working Documents (here and here) Aside from interesting stats on enforcement, these documents contain a cautionary discussion on institutional issues related to national competition authorities (in relation, mainly, to their independence vis à vis political authorities, the necessary appointment of members of the authority on the basis of merit, “amalgamation of competences” risking “a weakening of competition enforcement”). I wonder if they had any specific NCA in mind… Some of the understatements in these papers make evident a couple of problems; for instance, when the Commission says that the “mechanism by which the Commission is informed of national courts judgments (…) has not worked optimally”, what it means to say is that national courts have completely ignored this mechanism in practice.
But what those documents are mainly about –and they’re right on point- is in identifying procedural divergences across Member States as the next obstacle to tackle. This is a recurrent issue on which I’ve insisted every time I had the chance (both in lectures and papers like this one –the others are in Spanish-). At the present moment, and due to the principle of procedural autonomy, very significant differences remain regarding, for instance, inspection powers, discretion to take on cases, powers to impose structural remedies, regulation of commitment decisions, leniency rules, existence of cartel settlements, procedural rights and calculation of fines. This leads to the result that the application of the same –EU competition- rules is very likely to lead to very different outcomes depending on the authority dealing with the case (and rules on jurisdiction often make it difficult to predict who that would be). To me, this is legally the big, fat, painted elephant in the EU competition enforcement room (hence the pic –taken at a Banksy show- at the top of the post)
Lastly, I also read a few speeches by high officials at DG COMP. In preparation for a paper which will touch a bit on commitment decisions and on the technology sector, I read a speech by Vice President Almunia on commitment and settlement decisions in which –this grabbed my attention- he referred to the e-books case explaining that the Commission “accepted commitments in a nascent and extremely dynamic market which called for quick and decisive action”. Why is that so, you may ask. The response is contained in para. 90 of the Staff document on the 10 years of Regulation 1 referred to above: at the beginning of a special section on IT, Internet & Consumer Electronics, the Commission states that “these are industries characterized with strong network efforts [it seems quite likely that they meant to say effects, not efforts] which enable the lock-in of customers and further strengthening of dominant positions. Vigilance on the part of competition authorities is thus warranted”. So, we’re told that nascent and extremely dynamic markets call for quick and decisive action because of the risks generated by network effects. The thing is that I sort of recall having read something different somewhere…
In the course of his time off blogging, Nicolas has remained pretty productive on the academic front. Here are the abstracts and links to some of his latest work:
1. A sequel to the World Cup, with a short paper on the UEFA Financial Fair Play Regulation. In brief, he expressess doubts that the FFPR recently introduced by UEFA will promote competition in the football industry. According to Nico’s view, the FFPR is likely to create an ‘oligopoleague’ of football clubs that will freeze the market structure, to the detriment of the smallest clubs. The conclusion is that the FFPR may well constitute an unlawful agreement under Article 101 TFEU. The paper can be downloaded here.
2. A paper arguing that the TeliaSonera judgment on price squeezes has been in part repealled by subsequent case-law. The paper resorts to a short numerical example to show the flaw of finding a price squeeze in the presence of positive margins. The final version of this paper was published in the “Revue du Droit des Industries de Réseaux“, a new journal on the regulation network industries. See here: Price Squeezes with Positive Margins – Economic and Legal Anatomy of a Zombie (Final)
3. A presentation on the General Court’s Judgment in Intel, where he argueS that the Guidance Paper is not yet dead. In his view, the impact of Intel is confined to leveraging rebates – ie retroactive rebates – which are subject to a quasi per se illegality standard. As for the other rebates – eg incremental rebates – they remain subject to a rule of reason standard, though the assessment method need not be quantitative. The General Court also has generalized the Article 102(3) defense in abuse of dominance cases, though it is complex to see if this will be practical. The paper concludes with an optimistic note on the future of the Guidance Paper, and discusses the more philosophical point of whether Article 102 should seek to protect competitive OUTCOMEs or rather the PROCESS of competition. Nicolas submits that if 102 protects the PROCESS of competition, this should not dispense agencies and complainants to bring a certain degree of economic evidence in support of their allegations. See here: Intel v Commission – ABC Seminar – 10 07 14
4. A presentation on “Problem Practices”, ie practices that do not fall neatly within the conventional antitrust prohibitions: planned obsolescence strategies, most unfavored customer clauses, IP tracking- pricing, etc. He gave a speech on this at the CCP (University of East Anglia) Annual conference on Problem Markets arguing that existing EU rules can be flexibly stretched to capture such practices, and that we do not need a Section 5-type provision in our legal framework. In other words, he submits that there is no gap within the EU competition toolbox. See here: Problem Practices – CCP
5. A presentation on the principles of effectiveness and procedural autonomy in EU competition law given before an audience of judges at EUI as part of a seminar hosted by Giorgio Monti. See here: The Principles of Equivalence and Effectiveness -Petit
Nicolas is currently writing papers developing the content of presentations 3 and 4, so he’ll be grateful to anyone interested in sharing thoughts on those.
In the past few days there have been some remarkable competition-developments coming from EU Courts, the last of which took place only minutes ago in the Greek lignite case (if you’re only interested in that one you can go directly to the bottom of the post). This is just a quick overview of some of those recent developments:
Some were anecdotal, such as President Barroso giving testimony as a witness before the General Court.
Others are relevant mainly for cartel geeks, such as the GC’s granting reductions of fines in 3 paraffin wax cartel related cases, in which it also (a) carried out a particularly detailed review of the exercise of decisive influence between a parent and its subsidiary (Sasol, available here); (b) observed a violation of the principle of equal treatment and, most unusually, found an infringement of the principle of proportionality in the calculation of the basic amount of a fine (but only due to the peculiar circumstance that the Commission had partly taken into accout the turnover of a company that had merged, in the course of the cartel, with another company participating in the infringement; see the Judgment in Esso, available here); and (c) shed some light on the assessment of the exercise of decisive influence in JV settings (in RWE, available here).
That challenges against the proportionality of fines imposed within the 10% limit are unlikely to be successful was confirmed by last week’s Judgment from the ECJ in the Telefónica case. Telefónica had challenged the GC’s Judgment upholding the controversial decision sanctioning it for a margin squeeze abuse. The ECJ’s Judgment contains nothing of particular interest (aside from an interesting explanation of why the General Court’s review is fully compatible with the requirements stemming from the ECHR). The case will mostly be remembered because of Advocate General’s Wathelet’s Opinion both on the issue of proportionality as well as on the qualities of the appeal lodged by Telefónica, which we’re told broke a record as the lenghtiest in the history of the ECJ. (For those of you who are wondering whether limitations on the number of pages didn’t apply, you should know that there’s a way to bypass them, which I won’t explain here in the interest of the efficient use of Court’s resources…).
And, finally, most interesting news came from Luxembourg minutes ago, as the ECJ has annulled the General Court’s Judgment in the Greek lignite case concerning the joint application of Articles 106 and 102 TFEU. As you may recall, some time ago we held a most interesting ménage à trois debate on the GC’s Judgment with Marixenia Davilla (see here), José Luis Buendía (see here) and Makis Komninos (see here). The ECJ and the Advocate General have followed the approach that José Luis had forecasted (the Mr. 106 nickname has a justification).
The Judgment is much more important than many may realize at first sight. The main issues raised by the case are covered in our previous posts, so I refer you to those. Observe only that the Judgment goes pretty far -in the right direction, I would argue- in ruling (in para 46) that “[a]ll that is necessary is for the Commission to identify a potential or actual anti‑competitive consequence liable to result from the State measure at issue. Such an infringement may thus be established where the State measures at issue affect the structure of the market by creating unequal conditions of competition between companies, by allowing the public undertaking or the undertaking which was granted special or exclusive rights to maintain (for example by hindering new entrants to the market), strengthen or extend its dominant position over another market, thereby restricting competition, without it being necessary to prove the existence of actual abuse“.
The Judgment would insuflate some life to Art. 106 which, as I said last week, has a tremendous potential which still today remains largely unused. This would nonetheless largely depend on politics at the incoming Commission and on the Commission’s discretion, and, judging by history, I’m not opimistic. As the GC reminded us with another Order last month declaring an appeal inadmissible (here), “the Commission’s refusal to act under Article 106(3) TFEU following the filing of a complaint by an individual against a Member State does not constitute a challengeable act“. This ruling is based on the max.mobil case-law, which I’ve always seen as unfortunate and in need of repeal.
In some previous posts we’ve commented on the interface between the competition rules and data protection/privacy regulation, which is one of the trendiest topics in international antitrust these days.
As you may recall, the European Data Protection Supervisor recently held a high level workshop (high level but for my intervention on it, that is) on Privacy, Competition, Consumers and Big Data. On Monday, the EDPS made available on its website a report summarizing what was discussed in the workshop (conducted under Chatham House rules). The EDPS’ summary is available here: EDPS Report_Privacy, competition, consumers and big data.
For more, you can re-read Orla Lynskey’s A Brave New World: The Potential Intersection of Competition Law and Data Protection Regulation as well as the interesting comment by Angela Daly on my latest post on the issue.
The German Monopolkommission has also addedd its voice to the debate by issuing a recent report (“A competitive order for the financial markets“) which contains a section on data-related questions regarding the internet economy. The Press Release (in English here) expressess some concerns but notes that, according to the report, “an extension of the competition policy toolkit does not (yet) seem advisable on the basis of current knowledge and understanding“.
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.