Relaxing whilst doing Competition Law is not an Oxymoron

My feedback on the Ex Ante Regulatory Instrument for online platforms

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Short TED Talk Video: “The secret to giving great feedback ...

[I also provided feedback on Monday on the Ex Ante Regulatory Instrument for online platforms (see here). The main point I make, as you will see below, is that, if this regulation is adopted, it should follow the model of the EU Regulatory Framework for electronic communications. It would be paradoxical if the regime applying to online platforms would be more rigid, less adaptable and less able to cope with economic and technological developments than the one conceived for copper wires back in 2002]

As an independent academic, I welcome the opportunity to provide feedback on the Ex Ante Regulatory Instrument (the ‘Instrument). In accordance with the ASCOLA declaration of ethics, I am happy to clarify that I have nothing to disclose.

There is a range of options considered in the Inception Impact Assessment (‘IIA’). Of these, I will focus on policy option 3, which is the adoption of an ex ante regulatory framework applying to online platforms.

It would be particularly important to draw the lessons from the EU Regulatory Framework for electronic communications (on which I teach and conduct research). The Commission was aware at the time (1999-2002) that telecommunications activities were subject to rapid change and that the regulatory regime had to be flexible enough to adapt to the economic and technological evolution of the industry. There would every reason to craft the Instrument in accordance with the same principles. Not only is change rapid and unpredictable in digital markets; the issues and concerns are much more diverse than in telecommunications.

Accordingly, option 3a (a ‘blacklist approach’) comes across as one that is not suited to digital markets. Any perceived benefits of the approach would be clearly outweighed by the known drawbacks.

The experience of the EU Regulatory Framework shows that it is virtually impossible to anticipate the needs of regulation in evolving industries. Accordingly, capturing, at the time of drafting the instrument, all necessary forms of intervention is unlikely. A more flexible menu of remedies, that allows the regulatory authority to tailor intervention to the demands of each market and to innovate where necessary (as some authorities did with functional separation in the telecommunications sector) is more appropriate.

One should also take into account that unwarranted intervention has major costs for society and as such goes against the public interest. The sort of obligations that are outlined in the IIA (such as a blanket prohibition on self-preferencing) are not neutral on firms’ incentives and can be expected to have an impact on stakeholders’ decisions. Accordingly, requiring such an obligation where negative effects are implausible or unlikely inflicts a net cost on society.

Finally, this regulatory approach makes legislative change more difficult. Once enshrined in an instrument, remedies imposed may prove difficult to amend, whether this is to expand the scope of intervention or to reduce it. A principles-based regime, which leaves the matter to a case-by-case assessment is more appropriate.

Option 3b (case-by-case intervention) is closer to the flexible model. Such a regime would follow the approach already taken in the EU Regulatory Framework for electronic communications:

First, it would be expressly biased against intervention. Remedial action would only be warranted where deemed justified to achieve the objectives of the regime. Similarly, it should not go beyond what is necessary. Particularly far-reaching remedies altering a business model or the structure of an industry would need to meet distinctly strict criteria.

Second, the regime, as already explained, should be flexible and adaptable.

Third, it should be neutral: the regime should not favour some business models over others, in the same way the telecommunications framework is technologically neutral.

Fourth, it should devise a legal test analogous to the three-criteria test in telecommunications. It would define, on a case-by-case basis whether regulatory intervention on a market adjacent to a platform is warranted to preserve competition and innovation. The question that should be asked is whether effective competition on a given market is likely to be preserved in the absence of regulatory obligations imposed at the level of the platform. Similarly, remedies should be rolled back when no longer needed.

Written by Pablo Ibanez Colomo

1 July 2020 at 11:04 am

Posted in Uncategorized

My feedback on the New Competition Tool

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Short TED Talk Video: “The secret to giving great feedback ...

[You will find below the feedback I gave to the Commission on the New Competition Tool – you can do so here until the end of today. I would emphasise two aspects about the feedback. First, the importance of the expert consensus to protect the public interes. Second, that it should not be enough to identify competition law problems (perfect markets do not exist, and many potentially problematic features also yield pro-competitive benefits). Under the NCT, the Commission should also show how intervention is likely to improve the functioning of markets and that there is no less restrictive alternative. I look forward to your thoughts].

As an independent academic, I welcome the opportunity to provide feedback on the New Competition Tool (‘NCT’). In accordance with the ASCOLA declaration of ethics, I am happy to clarify that I have nothing to disclose.

Scope of application

If a legislative effort of this magnitude is undertaken, it seems desirable that its scope is as broad as possible. As the experience of other jurisdictions shows, the digital sector is not the only where structural risks and/or obstacles to competition might arise. In the same vein, there would be little reason to confine intervention to a dominance-based test. Option 3, as a sector-neutral, cross-industry tool, seems appropriate.

Goals and relationship with other instruments

The goals of the NCT would need to be spelled out with clarity. The initiative would be easier to justify if it were confined to targeting actual gaps that Articles 101 and 102 TFEU would not be in a position to address. Conversely, the NCT cannot be a means to circumvent substantive standards that apply in the context of these two provisions (see below). The Inception Impact Assessment (‘IIA’) is not wholly unambiguous in this regard.

Expert consensus and experience

It would be essential to ensure that intervention is driven by experience and the expert consensus. Remedial action that is not grounded on a robust body of peer-reviewed literature would not be guaranteed to serve the public interest, might be vulnerable to instrumentalisation and would not allow the targets of intervention to exercise their rights of defence in a meaningful way. In particular, the criteria to establish the likelihood of a market tipping should be as robust (and as grounded on experience and the consensus of experts) as the criteria to establish a collective dominant position within the meaning of Airtours.

The substantive test

The IIA is silent about the substantive test. It should be clear and predictable and ideally accompanied by a set of guidelines. The Commission would have the burden of (i) identifying the competition problems to the requisite legal standard and (ii) showing how intervention is likely to improve the conditions of competition. Requiring the Commission to show (i) but not (ii) would not guarantee that intervention advances the public interest, as the same features that are deemed problematic in some markets also have the potential to yield pro-competitive outcomes. If the latter (ii) is ignored and an adequate balancing is not undertaken, intervention may yield losses for competition in the short and/or long run. Similarly, remedies cannot be treated as an afterthought left to the discretion of the Commission once concerns are identified. The proposed intervention is central to the analysis and the nature of the assessment required.

Standards of intervention under step (i)

The standards of intervention cannot be lower than those enshrined in the case law under Articles 101 and 102 TFEU. In particular, it would not be sufficient to show that there is a ‘risk’ of anticompetitive outcomes or that such outcomes are plausible. Such a threshold of intervention would in effect justify intervention in virtually any instance. In line with the applicable case law (and given that they are potentially pro-competitive or at least ambivalent), it would be necessary to show that anticompetitive outcomes are more likely than not to result from the features considered.

Standards of intervention under step (ii)

The Commission would need to show that remedial action is, on balance, pro-competitive (in the sense that the gains outweigh the losses) and that there is no less restrictive alternative. This exercise is important considering that the NCT could in theory support a wide array of remedies, ranging from information obligations to structural divestitures and interoperability obligations altering fundamentally the functioning of markets. Thus, the more intrusive the remedy, the higher the demands placed on the Commission.

Written by Pablo Ibanez Colomo

30 June 2020 at 10:36 am

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The Proposed New Competition Tool: A Follow-Up

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follow up

I recently published these 10 questions on the proposed new competition tool (“NCT”). That post spurred some debate, and very mixed views, here and elsewhere. The comments we received were thoughtful, and we thought they merited a follow-up.

[Disclaimer: As a practicing lawyer, I work for many companies that could be potentially affected (for better or for worse) by an eventual NCT. These include a considerable number of companies active in the sectors where the CMA has conducted market investigations, including retail banking, energy, airports and cement. I also work for companies active in digital, telecom, sports, financial services, retail, food, payments and many others where network effects are at play. The identity of many of them can be consulted in the curia website here]

Legal basis. This was one of the main points in my post, but it has only triggered reactions in private. In the competition field (and in national competition regimes) we are not used to these debates, but they are the one crucial legal issue when it comes to EU legislative initiatives. There seems to be a consensus that Art. 103 TFEU cannot be a legal basis for conduct falling outside Arts. 101 and 102 TFEU. This is apparently why the Commission contemplates relying also on an internal market legal basis. This is what was done re the Damages Directive, and it made perfect sense there (the idea was to harmonize competition law across the EU to ensure the uniformity and effectiveness of the rules). This same combined legal basis could arguably be sufficient  if the proposal were justified only as an “internal market tool”, but I’m not sure it does the trick for a “competition” tool that goes beyond Arts. 101 and 102 (where is the centre of gravity?). In my view, if we really want to enlarge the toolkit to cover “monopolization”, that would arguably need an amendment to the Treaty. Admittedly, the Commission could follow the indications of Protocol 27 to the Treaty and resort to Art. 352 TFEU, as it did at the time of adoption of the Merger Regulation. 

The object or effect of bypassing Court standards. My previous post expressed a concern that the NCT could have the object or effect of bypassing Court standards. To be sure, I am not saying the Commission is proposing the NCT to avoid established legal standards and its burden of proof (even if this would arguably be in line with the suggestions in the Special Advisers Report). My point is rather that, regardless of intentions, to the extent there might be an overlap between the scope of the NCT and that or Articles 101 and 102, then that will inevitably lead to bypassing those standards. That is my chief concern and, again, it has nothing to do with the Commission’s intentions, which I am sure are primarily concerned with the protection and, on this occasion, creation of competition. As the Commission often emphasizes, in competition law it is not intentions that matter.

Commissioner Vestager assured last week that the NCT “would let us investigate markets, in the same rigorous way that we already look into individual cases – with the same exacting standards of proof, the right for the companies involved to defend themselves, and the need for the decisions that we take to stand up in court”. Those are important and welcome words. I guess the question then is: what is it that would need to be proved?

Need of the tool to prevent market tipping. It has been argued that we need the NCT to anticipate market tipping. We are, however, assured that under an eventual NCT this assessment would of course be thoroughly analyzed and evidence-based. In our view, the case law has developed flexible standards and leaves ample room for prospective examinations (“capable of”, “likely to”, “potential effects”). To be fair, I have not seen examples of agencies having rightly predicted that tipping would occur (and remember prominent economists saying this is impossible), but the Commission successfully predicted where tipping would not occur despite powerful network effects (Microsoft/Skype re video calls on PCs).

Restrictive case law? A reader noted that if would be a good thing for the Commission to bypass “restrictive Court precedent”. Our view is that the EU case law is not in any way restrictive. As we noted in the previous post, for decades commentators have consistently criticized EU case law as too hostile to dominant firms (e.g. here). The Commission’s track record in unilateral conduct cases before the Courts is, if anything, impressive. It might arguably lose future cases, but that’s the name of the game; it would be strange to put on the bandage before the wound.

Think of the German Facebook case last week: when Facebook won, people argued this showed the shortcomings of competition law and the need for regulation. Now that Facebook has lost, the message is that of course the case was sound and solidly builds on existing standards. Different views on this are legitimate, but I’m not sure one can hold both views at the same time (heads, I win; tails, you lose).

Others have it too; the Commission’s special responsibility. You may be familiar with the argument that when one has a “special responsibility”, it does not really matter that others may do the same; perhaps you can’t (I use this with my eldest son too…). The recurrent argument to appease concerns about a potential NCT is that others already have it. And indeed, Romania, Iceland, Greece, South Africa, Mexico and the UK do have tools similar to those being considered by the Commission. There is certainly nothing wrong with the Commission following in those footsteps, but there are institutional differences that arguably matter, even if only as a matter of optics. The Commission’s political nature might be relevant to this discussion.

There is also the risk that this may encourage other countries without the Commission’s checks and balances to incorporate a similar tool. There are countries where powerful stakeholders might be able to secure an antitrust exemption in their favour and to guide intervention against business that they dislike. The risk of this happening could become more serious absent clear red lines and the requirement to find an infringement. By the way, our posts on Siemens/Alstom (here and here) are also relevant to this discussion (this is about principles, not manichean pro vs anti enforcement labels).

External pressures. Every year the Commission gets hundreds of formal and informal complaints alleging infringements. One can safely assume that the Commission will be subject to pressures to act against non-infringements, based on the mere observation that a given market does not perform appropriately. Can you imagine the public and private pressures that would be exerted on the Commission to make use of this tool in particular cases to advance private interests under the guise of progressiveness? By the way, this type of pressure on theories of harm and on remedies has contributed significantly to the length of competition investigations; could the same happen here?

On confidence (discretionalists vs legalists). We do not doubt the possible good intentions underlying the proposal. In our view, however, it seems to be premised on a great degree of confidence that one can, for example, (i) anticipate what markets can be expected to tip; (ii) determine the reasons for that tipping and whether it is, on balance, problematic; (iii) devise some sort of public intervention that will prevent/correct tipping; (iv) do this in a proportionate way that does not compromise welfare enhancing elements or incentives. I get that people may see shortcomings in legal rules that I don’t, but is this confidence in our economic knowledge and ability justified in the light of the available evidence? Legal rules are also safeguards against overconfidence.

Competition law, in sum, has never been a tool for the optimization/fine-tuning of market outcomes in light of more or less idealized benchmarks (one would need a lot of confidence to do that). That is why, as explained in our earlier post, a NCT could have an impact on the nature of the discipline. Whether we may want that or not is a different story, but we understand the reflection is necessary.

Written by Alfonso Lamadrid

29 June 2020 at 11:21 am

Posted in Uncategorized

AG Pitruzzella in Case C-132/19 P, Canal+: on the nature of commitment decisions

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Groupe Canal+ — Wikipédia

There is so much going in the discipline that we often lose sight of the pending cases before the EU courts. For over a month I have been meaning to say a word about AG Pitruzzella’s remarkable Opinion in Canal+.

The case would be of interest if only because it is about the status of commitment decisions in EU competition law. These decisions have been a major instrument in policy-making. However, they rarely ever reach the Court.

What this case shows is that, over 15 years since Regulation 1/2003 entered into force, and almost exactly 10 years since the Court ruling in Alrosa, there are some misunderstandings about the nature of the instrument.

AG Pitruzzela’s Opinion adds clarity about the status of commitment decisions in the EU legal order and introduces a refinement which, in my view, addresses the one issue that is common to Alrosa and Canal+: the impact of these decisions on third parties.

Pay-TV, Generics and ‘insurmountable barriers to entry’: the case that never was

Canal+ is a spin-off of the Pay-TV investigations against Sky UK and the Hollywood major studios. The single most interesting aspect of the case had to do with the clauses prohibiting Sky from making available, via the Internet, licensed content to customers located outside the UK.

The key point of law was whether such clauses could be deemed to restrict competition by object under Article 101(1) TFEU.

After Generics, we have the vocabulary to ask the legal question properly: is the copyright regime an ‘insurmountable barrier’ preventing licensees from (lawfully) offering content outside the area covered by the agreement? If it is, there would be no restriction (by object or effect); if it is not, the said agreement would be a blatant infringement.

Alas, the case never took off. The firms involved in the Pay-TV case offered commitments to the Commission, which brought the investigation to an end.

The challenge by Canal+

Canal+ challenged the commitment decision involving Paramount before the General Court. The most interesting aspect of this action for annulment is that the firm appeared to question the interpretation of Article 101(1) TFEU given by the Commission.

Article 9 of Regulation 1/2003, as interpreted in Alrosa, suggests this is not a straightforward legal route: a commitment decision is a vehicle through which the Commission exercises its discretion to prioritise cases; not one through which competition law provisions are interpreted.

The nature of commitment decisions has two consequences: judicial review is limited and confined to manifest errors of assessment (as it should be when policy choices by an administrative authority are at stake).

Second, a commitment decision is not a statement of the law and does not rule on whether Articles 101 and/or 102 TFEU have been infringed. The Commission must simply identify its concerns following a preliminary assessment.

Against this background, it is unsurprising that the General Court dismissed Canal+’s action. At the same time, the case was a valuable reminder that the nature of commitment decisions, even after Alrosa, may not always be well understood.

AG Pitruzzella’s Opinion

Commitment decisions and Article 101(3) TFEU

A central question addressed by AG Pitruzzella is whether the preliminary assessment must include an overview of the conditions set out in Article 101(3) TFEU.

In other words: must the concerns be limited to a finding of a prima facie infringement (Article 101(1) TFEU), or must the Commission also evaluate in its preliminary assessment whether a potential restriction might in fact be justified under Article 101(3) TFEU?

The Advocate General repeatedly emphasises the nature of commitment decisions and the fact that, as a result, at no point is the existence of an infringement addressed as such (see in particular para 66).[1] For the same reason, the theory underpinning action by the Commission need not be as solid as it would in the context of an infringement decision (para 67).

The Advocate General concluded, in light of the above, that the analysis of the economic and legal context by the Commission was in line with what is expected from it in a commitment decision (where, as pointed out in the Opinion, the authority must simply find a ‘potential infringement’).

Concerning the question of whether the preliminary assessment must comprise an evaluation of the conditions set out in Article 101(3) TFEU, on the other hand, the AG Pitruzzella departs from the Commission’s position (which was, in turn, accepted by the General Court).

Thus, the preliminary assessment must consider the two stages of Article 101 TFEU, and not simply the first paragraph. While I was persuaded by the Commission’s reasoning, the outcome suggested in the Opinion comes across as reasonable. Arguably, raising concerns about a practice implicitly assumes that the conditions set out in Article 101(3) TFEU are not fulfilled.

The protection of third parties’ interests

The Opinion addresses, next, an issue that has become apparent in proceedings before the Court. A firm, whether it is De Beers or Paramount, can accept commitments with major consequences for third parties, and this through the use of an instrument that seeks to achieve procedural economy and is subject to limited judicial review.

In this regard, the Advocate General concludes that the Commission breached the principle of proportionality by not duly taking into consideration third parties’ rights affected by the decision (and, by the same token, that the General Court had erred in law).

There are two aspects of the reasoning that deserve to be highlighted. On the one hand, AG Pitruzzella notes that the Commission’s interpretation of Alrosa (and more precisely of the principle of proportionality) was particularly restrictive (para 120).

On the other, he emphasises the implications that commitments could have on firms affected by them. AG Pitruzzella rejects the idea that third parties could effectively protect their rights by bringing an action against the firms accepting the commitments.

The Opinion focuses not so much on what third parties could theoretically achieve at the national level, but on what one can realistically expect to happen in light of the principles applying to the relationship between EU and national institutions.

In this regard, AG Pitruzzella notes that a national judge, following Gasorba, will be constrained in her assessment of the compatibility of the agreement with Article 101 TFEU (para 127). For this reason, the third party could be subject to a ‘double sword of Damocles’.

This aspect of the Opinion, by taking a ‘law in action’ approach to the operation of commitment decisions in its institutional framework, invites the Court to interpret Article 9 of Regulation 1/2003 in a way that minimises some of its potential unintended consequences.

[1] ‘En premier lieu, il convient de préciser ce que recouvre la notion de “préoccupations en matière de concurrence” et quel est, en conséquence, la portée du contrôle juridictionnel que doit exercer la Cour. À cet égard, il faut garder à l’esprit que, puisque la décision d’accepter les engagements ne requiert pas qu’une infraction soit constatée, le niveau d’approfondissement de l’enquête et de la motivation auquel la Commission est tenue est moins élevé que celui qui lui est imposé dans le cas ordinaire d’une procédure de constatation d’une pratique anticoncurrentielle illicite […]’. 

Written by Pablo Ibanez Colomo

26 June 2020 at 3:34 pm

Posted in Uncategorized

The Ithaca Competition Summit moves to 2021

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Earlier this year we said a word about the Ithaca Competition Summit. You will not be surprised to learn that, unfortunately, and very much to the regret of Peter Alexiadis, it will not take place, as scheduled, in August of this year.

The event will have to wait for another year. As some participants mentioned, however unfortunate, this change of plans is at least very much in keeping with the venerable tradition of taking a bit longer than usual to get to Ithaca.

If you want a flavour of what the programme will look like, you can find what Peter put together here.

I will just mention that it features the President of the General Court, three heads of national competition authorities, the current as well as the three preceding chief economists at DG Comp, in addition to many amazing academic and practitioners (and, for some reason, yours truly).

Watch this space!

Written by Pablo Ibanez Colomo

24 June 2020 at 5:48 pm

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EU Energy Law: an audio-visual e-book (by Leigh Hancher et al)

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The Robert Schuman Centre - YouTube

Our friend Leigh Hancher needs no introduction. She has long been one of the pre-eminent State aid and energy lawyers.

I have always admired the energy law hub at the EUI’s Robert Schuman Centre, in which she has always played a key role. The team’s expertise, research and ability to take part in major policy discussions are most impressive.

As part of her activities at the Robert Schuman Centre, Leigh has put together (with Anne-Marie Kehoe and Kaisa Huhta) something that I had not seen before: an audiovisual e-book. Take a look at it here. You will see it is an combination of podcasts and videos coherently presented via a set of slides.

It is a really great way to share knowledge (and something I will definitely use – and might try to replicate – at LSE and the College of Europe). Enjoy!

Written by Pablo Ibanez Colomo

19 June 2020 at 12:33 pm

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AG Kokott in Case C-591/16 P, Lundbeck: the counterfactual that does not dare speak its name?

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AG Kokott’s Opinion in Lundbeck came out earlier this month. Because it was delivered after Generics, most of the issues raised by the case were already settled when issued. In particular, the legal tests to establish potential competition and whether an agreement amounts to a restriction by object have been clarified.

In many respects, Lundbeck is more straightforward than Generics, which in turn makes it easier to apply the tests to the facts of the case. This said, I would note that AG Kokott does not make use of the distinction between genuine and non-genuine settlements. This distinction, introduced in Generics, could be relevant in Lundbeck. The available facts suggest the agreements were a sham (and thus a blatant object infringement).

When reading the Opinion, I told myself that the Court may perhaps have to identify in the future some instances in which intellectual property rights are insurmountable barriers to entry. Such instances must surely exist (in the same way it is clear that, in the specific context of the Lundbeck case, the process patents were in no way an insurmountable barrier).

The counterfactual at the ‘by object’ stage: on names and substance

A central issue that has been settled in the meantime – albeit not in Generics – is that the evaluation of the counterfactual is relevant at the ‘by object’ stage (see here). In Budapest Bank (paras 82-83), the Court held that the conditions of competition that would have prevailed in the absence of the agreement are a factor to consider in this regard.[1]

Interestingly, AG Kokott does not refer to, or discuss, Budapest Bank (only AG Bobek’s Opinion, but not in relation to the counterfactual). What is more, she does not seek to take a definitive stance on this issue, which is left open (para 139).

In any event, she notes in the Opinion that, irrespective of the name that we attach to it, the General Court had indeed evaluated the conditions of competition that would have prevailed in the absence of the agreement. In fact, one of the main points I noted about the first instance judgment is that the GC had denied the relevance of the counterfactual while at the same time conducting an extensive evaluation of the issue. As mentioned, AG Kokott seems to share the same view (see para 139).[2]

AG Kokott’s brief analysis raises three main questions . The first is whether it matters that the evaluation of the conditions of competition that would otherwise have existed is called counterfactual. I do not think so. Whether this assessment is called counterfactual or given another name (say, rose, or tomato), what it entails in substance is now clear. This, I guess, is what matters.

The second is whether there are any advantages in not calling a spade a spade. I cannot think of any. Which takes me to the third question: why, then, the reluctance to use the c-word at the ‘by object’ stage? The most reasonable explanation is probably that, in the eyes of some, considering the counterfactual amounts to evaluating the effects of the agreement. I believe we have been here before. Remember the idea that the pro-competitive effects could not be considered at the ‘by object’ stage? Fortunately we have Budapest Bank now, which shows this fear is not warranted.

What is the role of the counterfactual at the ‘by object’ stage?

The counterfactual at the ‘by object’ stage may be relevant in two ways. First, it may show that the agreement is not capable of restricting competition that would otherwise have existed. This point was elegantly addressed by AG Kokott in her Opinion in Generics, where she referred to GC rulings like E.On Ruhrgas (in addition to the Court judgment in Toshiba). If it turns out there are insurmountable barriers to competition, for instance, it may be the case that the conditions of competition would have been the same with and without the agreement (and therefore there is no restriction, whether by object or effect, as explained in para 58 of AG Kokott’s Opinion in Generics).

Second, it may be the case that the agreement is capable of improving the conditions of competition and is thus not a ‘by object’ infringement. For how can one claim that an agreement that is plausibly pro-competitive has as its ‘precise purpose’ the restriction of competition? This is the key contribution made by the Court in Budapest Bank, although the point was already implicit in Generics (remember the Court considered arguments about the alleged improvements entailed by the agreement).

Why the appelants’ interpretation of the counterfactual seems at odds with the case law

If you read the Opinion, you will see that the appellants in Lundbeck argued that, if the counterfactual had been analysed properly, it would have revealed that generic producers would not have entered the market, and that the absence of entry would have been attributable to Lundbeck’s patents, not to the agreement (para 136).

These arguments seem difficult to square with the case law. As the Court explained in Generics, it is not necessary to show that entry would be certain for potential competition to exist. In the same vein (as held in T-Mobile), an agreement is restrictive by object where it is capable (as opposed to likely, or certain) of restricting competition.

In a case like Lundbeck, it seems enough to show that the originator and the generic producers were potential competitors (and thus that the agreements were capable of restricting competition that would otherwise have existed). Absent any arguments that the settlements were capable of having pro-competitive effects (which the parties did not put forward, as noted in paras 142-143 of the Opinion), no further evaluation was necessary at the ‘by object’ stage.

Read the rest of this entry »

Written by Pablo Ibanez Colomo

16 June 2020 at 3:12 pm

Posted in Uncategorized

Can This Be the New Normal? 10 Questions on the Proposed New Competition Tool

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Last week the European Commission launched a public consultation in relation to a proposed “new competition tool”. The impact of this “tool” on competition law and policy would be impossible to overstate. It would be likely to change competition law as we know it, and as developed over decades of thinking, debate, precedent and experience.

The goal of the tool is to identify “structural risks” that cannot be addressed under Articles 101 and 102, and under the merger rules. These include markets that risk tipping, unilateral practices by non-dominant firms or oligopolistic market structures. In the face of those risks, and even absent any infringement, the Commission could then impose behavioural or structural remedies (e.g. divestments, break-ups and other line of business restrictions). The Commission explains that the scope of this tool would not necessarily be limited to digital markets. 

This new initiative would have been unthinkable only a few months ago. But then again, we live in a strange new world. Let me give you just one additional example: in a report also published last week, the Austrian competition authority proposed to “reverse the burden of proof” in cases where “official investigations rapidly come up against natural or technical limits” (!).  As explained here, and by more authoritative people than myself, this was, and should still be, something “hard to conceive, at least in free democratic societies”. I have trouble accepting that these ideas might be the new normal.

The proposal of a new competition tool also raises too many important questions; here are just a few as an appetizer. We will have time for more in the future. [Disclosure: Just like virtually every competition lawyer/economist, I have a large number of clients that would be potentially affected by this proposal, and they might have different views about it; these are just my own].  Please feel free to engage with these questions, particularly if you have different views.

  1. Would there be an overlap between the new tool and Articles 101 and 102? The justification for the tool is that there may be concerns that “the EU competition rules cannot tackle or cannot address in the most effective manner”. Is the idea to cover alleged “gap” cases only, or also concerns that could be addressed under competition law but that it would be harder to prove under an infringement procedure (e.g. because there are clear evidentiary standards)? Overlaps could be problematic (see the next question below). And if the Commission wants to avoid potential overlap, then it should make clear the type of “concerns” that fall outside the scope of the competition rules (e.g. self-preferencing absent indispensability?) I doubt one may want to do that.
  2. The key question, and the limitations of the legal basis: Would the tool have the object or the effect of bypassing the intervention standards set by the EU Courts in relation to Articles 101 and 102? This is, in my mind, the real question. To the extent that there may be a material overlap, this would become inevitable. As explained here and here, I think it would be unwise to ignore the lessons learnt over the years (I don’t buy, and will actively combat, the new argument that “judges don’t get it”). But my point today is a different one: there is no legal basis for the Commission to bypass the content of Articles 101 and 102 as interpreted by the EU Courts. The Commission has explained that the competition legal basis for the proposal would be Article 103 TFEU. This provision only enables the adoption of legislation to “give effect to the principles set out in Articles 101 and 102”, “ensure compliance with the prohibitions” or “define the scope of the provisions”.  Any new tool based on Art. 103 TFEU would need to be consistent with the provisions of the Treaty as interpreted by the Courts (regarding, for example, the burden of proof, the notions of restriction of competition, dominance, anticompetitive effects…). The Treaty provisions deal with restrictions of competition, but can arguably not be the legal basis for measures that seek to create new competition. 
  3. Do we want to bring the definition of the substantive scope of the competition rules to the realm of politics? Competition law has historically been judge-made law, in the belief that this would ensure its flexibility, adaptability, and its isolation from small politics. Until now, only the Commission and the Courts have played a role in defining the material scope of the competition rules. Legislative initiatives under Art. 103 TFEU were limited to merger rules and procedural matters. Again, the times they are-a changin’. This may (for better or for worse) cross what until now was a red line, potentially changing the discipline. It may seem the Commission is obtaining new powers, but it may be at the risk of losing its preeminent role in defining the rules.
  4. Is there really a blind spot in competition law? We dealt with that in a recent post. There are few, if any, areas of the law as flexible and malleable as competition law. Are there really gaps? I, for one, trust in the ability of the Commission to bring, and win, cases where a real problem exists. Have DG Comp’s existing sectoral powers let us down? Remarkably, not so long ago the sentiment was that competition law was unduly harsh to dominant firms (I didn’t buy that then, and I don’t buy the opposite now). That competition law may not reach where some people would like it to doesn’t mean there is a gap. Having to analyze practices on a case by case basis is not a flaw, but the only way to get it right.
  5. Can the pace of competition enforcement give rise to irreversible consequences? Two questions here: is there any case where we know that earlier intervention would have made a change? If you think about it, even the tech cases that have taken a number of years (e.g. Google Shopping) were ultimately precautionary in nature (i.e. concerned about likely potential effects). If the decision had really come too late, it should have been easy to make a case about actual effects. Also, can we all agree that  competition authorities need more resources and that this would also help speeding up cases? 
  6. Are remedies the problem? You may have lately heard on the conference circuit that cases are good but remedies are horrible. It’s clear why one would say that, but it can be a legitimate view. The way we see it, though, remedies, and their outcome, often tell you a lot about how solid a case really is. Imagine a fictional case where there would be no causality between the conduct found as abusive and its alleged effects (for example, because the domco’s market share was due to superior quality). If you impose a remedy targeting that conduct, the remedy will of course not have any impact. Arguably, the remedy’s failure would simply expose that the conduct wasn’t a problem  in the first place. If one believes that the theories of harm underlying  a decision are sound, and we believe that a compliant remedy is insufficient, why don’t we simply draft decisions differently? 
  7. How to ensure the proportionality of intervention? Under current EU competition law (and except in Art. 9 commitment scenarios) remedies need to be proportionate to undoing the consequences of an alleged infringement. Some people believe that the advantage of the new tool is that it would enable the Commission to impose more far-reaching remedies because, as there would be no infringement, there would be no need to ensure proportionality to it. This is a curious logic: since a company did nothing wrong, it can be treated worse. Where would then lie the proportionality limits? The Inception Impact Assessment explains that “these remedies would increase costs for the companies concerned. The proportionality of the costs incurred would be ensured by the fact that such remedies have to be limited to ensuring the proper functioning of the market under scrutiny”. You can judge for yourselves whether that dispels concerns.
  8. What impact on international convergence? The EU competition law system of objective, expert-based and fair enforcement has been a model to other jurisdictions and has inspired many important legislative initiatives around the world. The creation of new standards, the imposition of remedies absent an infringement and the wide margin to identify the situations in need of intervention could also be replicated in other jurisdictions with arguably less guarantess. Be careful what you wish for. The CMA experience is cited as the basis for this new tool, but not all jurisdictions have the UK’s checks and balances. There are in any case lessons from the experience there. The UK has chosen not to use that tool for tech issues when it could have, believing that other tools would be preferable. Why? Where has the CMA done a better job in a market than DG Comp? Was it because the CMA could act faster or because of something else?
  9. Would the new tool be of a “non punitive” nature? The Inception Impact Assessment insists that the options considered would entail no finding of infringement, no fines, no damages claims. Why that emphasis? There may be an assumption that a new regulatory tool would be able to do away with some burdens, including the burden of proof. The “advantage” of the new tool is that one could impose even stricter remedies, without having to establish any wrongdoing. That seems like a win-win for some. But think about it again: companies may face stricter remedies than under quasi criminal competition law, with less procedural rights, and even if they haven’t done anything wrong. This doesn’t mean there is no punishment; it means there would be punishment without the crime and without limiting principles. Would a new tool compliant with the standards that the ECHR sets for liberal democracies? How would we be able to challenge other countries if they start adopting adopting harsh remedies (against companies or individuals) absent wrongdoing but in response to perceived threats?
  10. Do we really want this to be the new normal? The “new tool” would not be a mere technical refirenement; it goes much beyond that. We can no doubt make improvements, but we should be extremely careful not to cross red lines. In competition law (and perhaps even more in competition economics) we have become accustomed to the absence of bright lines and we dislike restrictions, but the law does by nature set some limits to what we all can do (and this goes both for companies and public authorities). Legal rules are but the wise restraints that make us free. It may be frustrating, but we know from experience that it is much better than discretion. This doesn’t mean we should necessarily be satisfied with the “status quo” (without some friction there may not be progress), but we shouldn’t compromise basic principles in the search for solutions. The European Union leads with values, and the balance of justice that makes us proud depends on our taking an evidence led approach to competition law subject to clear standards and thorough judicial review.

Written by Alfonso Lamadrid

11 June 2020 at 11:34 am

Posted in Uncategorized

Substantive Legal Tests and Standard of Proof: Rules Lost in Translation? (by Andriani Kalintiri)

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Evidence Standards in EU Competition Enforcement

The CK Telecoms (Three/O2) judgment has revived the interest in issues relating to the standard of proof in EU merger control (and competition law at large). It adds valuable insights on the question. As I read it for the first time, I was, yet again, reminded that there is some tendency by commentators to conflate two separate questions: (i) the standard of proof and (ii) the substantive legal test (and more precisely the applicable threshold of effects – capability, likelihood, certainty).

Our friend Andriani Kalintiri (King’s College London) knows these issues inside out, which is why I immediately thought of inviting her to present them in a post. The judgment, by the way, is very much in line with her own take on the standard of proof.

I leave you with her analysis, which hopefully will complement mine. If hungry for more, take a look at her superb book, from which I have learnt a great deal (on evidence, presumptions and judicial review). It is particularly timely now that discussions on presumptions and the burden of proof are all the rage. Thanks again, Andriani!

There is only one way to start this post. First, with a heartfelt ‘thank you’ to Pablo and Alfonso for the kind invitation! And second, with a confession: that the ‘misconception’ this note hopes to illuminate and caution against – i.e. the tendency to conflate substantive legal tests and standards of proof – has been the cause of many headaches during my research! Indeed, in the EU Courts’ antitrust and merger judgments, one often comes across various references to the ‘plausible’, ‘potential’, ‘probable’, ‘likely’ or ‘actual’ effects that a practice or arrangement must give rise to, in order to be prohibited. Are these references, I was wondering, indications of the applicable ‘standard of proof’ or of something else, and why?


To answer this, let me begin with a simple yet important reminder: competition enforcement takes place under conditions of ignorance and uncertainty (as does law enforcement in general). In an ideal world, courts, authorities, and businesses would possess perfect information and would always make correct decisions about the proper meaning of the antitrust and merger rules and their application. In real life, however, information is incomplete and resources, time and our cognitive capacity are limited. Yet, decisions must still be made, and the rules must be enforced.

Among other mechanisms, legal tests and standards of proof are what allows ‘the show to go on’. On the one hand, the legal tests developed by the EU Courts specify the scope of the vaguely worded antitrust and merger rules by setting out the conditions that must be satisfied for a practice to be prohibited – for instance, where the conduct has caused harm or where there is a stronger or lesser chance of such harm occurring. On the other hand, the standard of proof indicates the threshold, falling short of certainty, that the party with the burden of persuasion must surpass for the evidence to be accepted as proof of an allegation.


­In practice, however, these two thresholds are commonly conflated – for instance, it is sometimes said that different ‘standards of proof’ apply to different types of unilateral conduct. Based on what I have said, a key – albeit not the only – explanation for this tendency may be already obvious: that when we think about competition legal tests and standards of proof, we consciously or subconsciously employ probabilistic language – i.e. we use words such as ‘plausible’, ‘potential’, ‘probable’, ‘likely’ and so on, in relation to both of them. For instance, we may say that a practice will be prohibited when it is ‘probable’ or ‘likely’ to foreclose competition. Or that an allegation is proved when it is ‘more likely than not’.

Despite any illusion of unity though, there are important differences between the two. For one, they serve distinct functions in that they answer different questions. The key question competition legal tests are ultimately preoccupied with is: ‘what level of harm is required for a conduct to be deemed unlawful?’ On the other hand, standards of proof address a different issue – i.e. ‘what level of evidence is sufficient for an allegation to be accepted as true in the eyes of the law?’

Most importantly, the considerations that inform their design – i.e. what the substantive legal test and the standard of proof should be – are different, too. As a starting point, both aim to minimise false convictions and false acquittals since either error entails costs. While, however, these costs are not entirely disassociated (at least in the longer term), they are not identical either – and nor are the factors that underpin their balancing. This discussion is particularly complex, but in rough terms the following may be noted.

As far as ‘erroneous’ legal tests are concerned, their primary costs are chilling procompetitive behaviour and encouraging anticompetitive conduct (including in both instances, the respective harm to competition and consumers). Their balancing in designing the ‘optimal’ legal test – and threshold of effects – largely depends on the nature of the conduct in question in the light of current knowledge about it, and the cost of enforcement as well as business compliance. This explains why the substantive legal test varies practice to practice – cartels, for instance, are not treated in the same way as refusals to supply, for which the required threshold of effects is much higher, given the implications for firms’ incentives to innovate.

By contrast, the primary costs of an ‘erroneous’ standard of proof are the undue interference with the freedom and rights of the defendant and of harm to society. Their balancing in designing the ‘optimal’ standard of proof largely depends on fairness considerations linked to the seriousness of the consequences involved for the person concerned and the specific features of the enforcement model, including any inequality of arms. This explains why the standard of proof is ‘static’ – the same standard of proof (i.e. ‘firm conviction’) applies to cartels and refusals to supply, and rightly so, since the consequences for the undertakings involved and the nature of the enforcement proceedings are the same.


This discussion is not purely academic for several reasons, but I will confine myself to two.

First, conflating substantive legal tests and standards of proof may lead to confused discussions about what these are or should be. Two examples illustrate this risk. On the one hand, recent reports on digital competition policy suggested, among others, modifications in the burden and standard of proof; more accurately though, these proposals arguably concern the substantive legal test, and should be assessed as such.[1] On the other hand, in merger control it is often argued that the applicable standard of proof is – and should be – the ‘balance of probabilities’ due to the absence of fines and the prospective nature of the analysis. As I have explained elsewhere though, the case law suggests – and rightly so, in my opinion – a much higher standard of proof. The recent judgment in CK Telecoms seems to confirm this: as the General Court noted, ‘the standard of proof (…) is therefore stricter than that under which a significant impediment to effective competition is “more likely than not”, on the basis of a “balance of probabilities” (…)’, although it is ‘it is less strict than a standard of proof based on “being beyond all reasonable doubt”’ (para 118).

Second, substantive legal tests and standards of proof are equally important to the correctness and legitimacy of enforcement. Indeed, ‘correct’ legal tests may not compensate for shortcomings in the design of the standard of proof. Think, for instance, of cartels – the fact that they are rightly subject to a ‘by object’ prohibition could not ‘save the day’, if the standard of proof were too low – say, equivalent to the balance of probabilities (or similar threshold of belief) given the operation of the presumption of innocence. The opposite is also true: ‘high’ standards of proof may not rectify inappropriately formulated substantive legal tests. Think, for instance, of Google Shopping Service: even if the Commission has successfully established a ‘firm conviction’ that the elements of the substantive legal test – as it understands it – are met in the light of the evidence, this will not mean much, if the latter is eventually found to be incorrect.


Ultimately, it is important to appreciate that substantive legal tests and standards of proof are different rules. Of course, the stricter the substantive legal test, the more difficult it will be to discharge the standard of proof – and vice versa, the stricter the standard of proof, the more difficult it will be to prove in specific cases the constituent elements of the substantive legal test. However, they remain distinct yet equally important for an authority’s decision to be not only lawful but also legitimate. In this regard, the discussion is not about semantics – rather, words such as ‘plausible’, ‘potential’, ‘possible’, ‘probable’, ‘likely’ and so on, may lead to very different perceptions of the applicable threshold of effects or standard of proof, depending on what they actually refer to, and we should thus use them more consciously and accurately to avoid confusion and misunderstandings.

And a final remark, for the avoidance of any doubt: I have no interest to disclose – other than a deep academic fascination with the topic!

[1] For example, in the Report on Competition Policy for the Digital Era, it is noted (p 4) that ‘(…) competition law should try to translate general insights about error costs into legal tests. The specific characteristics of many digital markets have arguably changed the balance of error cost and implementation costs, such that some modifications of the established tests, including allocation of the burden of proof and definition of the standard of proof, may be called for.’

Written by Pablo Ibanez Colomo

8 June 2020 at 5:27 pm

Posted in Uncategorized

Rubén Perea Award for young competition lawyers: how to participate

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As promised, we are coming back with the conditions to take part in the award set up in the memory of Rubén Perea. We encourage you to participate, and we call on university professors and senior lawyers/economists to encourage their students and younger colleagues to apply.

Who can participate?

You may participate if you have not reached the age of 30 by the submission date (i.e. if you were born after 15 September 1990). Undergraduate and postgraduate students, as well as scholars and practitioners are all invited to participate.

The Award

The winning paper will be published in the Journal of European Competition Law and Practice. The winner will be announced on Chillin’Competition, and will have the opportunity to present the work in a guest post. If the circumstances allow it, an award will be presented at the next Chillin’Competition conference.

What papers can be submitted?

You may submit a single-author unpublished paper which is not under consideration elsewhere. The paper may be specifically prepared for the award, or one originally drafted as an undergraduate or postgraduate dissertation.

The paper must not exceed 15,000 words (footnotes included); authors: do not fall into the trap of believing that more is necessarily better (the opposite is often true).

Submissions will have to observe academic conventions. It is strongly recommended that you follow the OSCOLA referencing guide (the citations of CJEU judgments should follow the ECLI method). Submissions should include a brief abstract in the form of three or four bullet points, as all papers published in the Journal of European Competition Law & Practice.

You may want to take a look at this paper to get an idea of the overall format and citation style followed by the Journal. [Warning, this is self-preferencing by Pablo aimed at increasing traffic to his papers]

What is the deadline?

Papers will have to be submitted by 23.59 (Brussels time) of 15 September 2020.

How to submit?

A paper, together with a cover letter, will have to be submitted via this link:

The cover letter must simply indicate that the paper is submitted for the Rubén Perea Award.

The Jury

The jury will include a representative of the Journal of European Competition Law & Practice (Gianni de Stefano), two promising young practitioners and friends of Rubén (Lena Hornkohl and David Pérez de Lamo), an academic/enforcer/former practitioner and former teacher of Rubén (Damien Gerard) and a representative of Chillin’Competition/Garrigues (myself). The papers will be anonymised before they are sent out to the jury.

Written by Alfonso Lamadrid

5 June 2020 at 2:04 pm

Posted in Uncategorized