Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Case T-235/18, Qualcomm v European Commission (Part I: Procedure)

with 2 comments

On 15 June the General Court (“GC”) annulled the Commission’s decision imposing a close-to-1-billion euro fine on Qualcomm in relation to alleged exclusivity payments made to Apple in breach of Article 102 TFEU. [For some helpful background on the Commission’s decision see this guest post from Max Kadar that we published in 2020].

I have no involvement in the case (beyond good friends on both sides), but I followed it closely and attended the public part the oral hearing. As I told many colleagues then, I left with the impression that Qualcomm could win based on a mix of interrelated procedural and substantive arguments.

The case is unique for various reasons. First, it concerns a single agreement with a single customer, Apple, which happens to be the largest company in the world. Second, the case appears to have been very largely based on information and documents provided by Apple itself (see e.g. ¶222). Third, it is quite extraordinary to see a full annulment in an abuse of dominance case. Fourth, it is a rare case where the procedural errors identified by the Court take center stage and have a material impact on the outcome of the case.  

At the same time, however, my view is that this Judgment does not materially move the law in any way, certainly not in a way that may hinder the Commission’s ability to bring and win future cases. The Judgment simply requires the Commission to fulfill its (post-Intel) obligations regarding both procedure and substance. There is no attempt to create new law, no extravagance, no adjectives, no unnecessary obiter dicta; just a clear, logical and thorough application of the law to a unique set of facts. For those reasons, I very much doubt the Commission will contemplate an appeal.

This first post deals with procedure; I will discuss substance and other general comments in a second post.

Procedure

The Judgment is a must-read for anyone interested in competition procedure. It contains interesting discussions on admissibility of evidence, the practical application of measures of organization of procedure, and the Commission’s procedural obligations; it also provides details on Qualcomm’s smart move of resorting to a Section 1782 discovery request to obtain the evidence that might have been decisive to win the case:

On Section 1782. This is a provision that authorizes U.S. Courts to order persons in the US to provide information or documents “for use in a proceeding in a foreign or international tribunal.” It has attracted EU competition attention before, mainly when AMD tried to use it to gather information to boost its complaint against Intel (see here). [Side note: only two days before the Qualcomm Judgment the US Supreme Court severely restricted the use of this provision in arbitration proceedings; the SCOTUS has done much worse lately, though)]. Qualcomm brought its Section 1782 application after the Decision was adopted, in anticipation of judicial proceedings (see ¶140).

Rights of defence: Minutes and meeting notes. The CJEU already clarified in Intel that the Commission is required to take minutes of all meetings with third parties, and that Article 19 of Reg. 1/2003 makes no distinction between formal and informal meetings. In the Qualcomm case, the Commission argued that it is only required to draft “succinct notes” of meetings where parties provide inculpatory or exculpatory evidence. The Commission also acknowledged that:

  • it had regrettably and inadvertently failed to provide any notes of one meeting and 3 conference calls (two competitors and two customers) prior to the adoption of the Decision (¶166; by the way, the last sentence in that paragraph may help you identify the most important of those third parties);
  • it had held another meeting and another conference call with a third party which were never disclosed to Qualcomm and for which, regrettably, no notes existed. It appears that the Commission acknowledged this meeting in the context of litigation before the GC after Qualcomm learnt about it via Section 1782 discovery proceedings (see ¶231 in combination with ¶¶121, and 241-243). The identity of that party is confidential, but para. 234 appears to give a hint and reduce options to essentially two.
  • before the opening of proceedings there had been a meeting with an anonymous third-party informant who provided inculpatory evidence; the Commission had taken no records of this meeting, which was only disclosed to Qualcomm during the litigation proceedings following a GC inquiry (¶¶269-273).

The Qualcomm Judgment clarifies that conference calls and meetings all fall within the scope of Art. 19 of Reg. 1/2003 (which is hardly controversial), and also that minutes must give meaningful “indications of the content of the discussion” (¶190), and “indicate the information gathered” (¶200). The Judgment acknowledges the recent case law indicating that Art. 19 does not apply to interview held before the formal opening of proceedings (¶276, citing the questionable judgment in Casino, currently under appeal). Regardless of that, the GC finds in this case that Commission’s obligations to ensure companies’ rights to access the file cannot be bypassed by resorting to the use of inculpatory information provided orally and require the Commission to draw notes and place them in the file (¶279).

Impact of procedural breaches on the outcome of the case. Pursuant to the case law cited at ¶160, procedural breaches may infringe rights of defence where a company shows that it would have been better able to defend itself absent the procedural error. [Longtime readers may remember that we had a panel debating these issues: “And so what? Procedural violations in EU competition law”: at our 2018 conference].

In Intel the Commission’s failure to take adequate minutes did not result in a violation of rights of defence. In Qualcomm the GC does consider that this error warrants the decision’s annulment. Why? First, because of the identity of the parties at issue (notably the one customer and the allegedly foreclosed rivals; ¶¶203-207). Second, because the sparse notes, or the absence of any notes, made it impossible to ascertain the possible relevance of the meetings (¶¶207-209, also 256-259 and 291-294). Third, because all these contacts related to the case and to Qualcomm’s business practices (¶¶210-211 and 239-245, 290).

Fourth, (and pay attention, because this is what ties procedure with substance and what may largely explain the outcome of the case), the Court repeatedly insists that the likely relevance of those meetings is also confirmed by “the content of the contested decision and the specific circumstances of the present case” (213; other references to the specific circumstances of the case can be found at ¶¶202, 221, 223, 224, 252, 266, 288, 291-292, 295-296). Despite redactions, ¶¶216-218, 223-224 and 263, 265 might help you understand what the Court has in mind; essentially: it cannot be ruled out that Apple the customer and competitors could have provided info as to whether competitors could truly have satisfied Apple’s requirements absent the exclusivity provisions. As discussed below, it turns out they could not have satisfied those requirements; it would appear that the Commission was somehow misled into believing otherwise, or in any event failed to verify it adequately. We will come back to this when we discuss substance.

Differences between the SO and the Decision. While the SO related to an alleged abuse on the markets for UMTS and LTE chipsets, the Decision’s scope was narrowed down to LTE chipsets alone. While this was to Qualcomm’s benefit, the narrower scope of the case meant that the evidence put forward by Qualcomm to deny that its practices were capable of foreclosing competitors (a critical margin analysis concerning both the UMTS and the LTE chipset markets) was no longer relevant (the GC notes that the decision itself also relied on a revised version that was no longer relevant; ¶328).

Following a summary of the case law on the relevance of SOs (¶¶307-310), the GC preliminarily notes that (i) abandoning objections does not imply a procedural error (¶¶313-314), and (ii) the Commission was not required to provide Qualcomm with the opportunity to comment on the reasons leading to that view (only on the matters of fact at law at the basis of that decision) (¶315). The GC, however, observes that “the possibility for an undertaking to submit that conduct is not capable of restricting competition, and in particular, of having foreclosure effects by relying on an economic analysis such as the critical margin analysis (…) is of no practical effect if the scope of the conduct concerned is modified by the Commission after the [SO] (…)” (¶352, developed in ¶¶333-337). The GC rules that the principle of observance of the rights of defence requires the Commission to bring to companies’ attention any modification of the scope of its objections that may be relevant for them to be able to make their views effectively and, where necessary, to adapt their analysis and evidence (¶¶338-340).

Comments

If you made it this far down the post, you will have realized that the case concerns a pretty unique set of facts. The Judgment shows, once again, that the GC takes rights of defence seriously. What is remarkable is that the GC goes beyond the usual slap on the wrist and finds that procedural irregularities suffice to annul the decision in its entirety. The GC does not attribute any relevance to the number of procedural errors nor to their seriousness; instead, it finds that the link between these procedural errors and the decision’s theory of harm makes the infringement of Qualcomm’s rights of defence particularly problematic.

Looking forward, it will not be difficult for the Commission to avoid repeating these errors. I see nothing in the Judgment that would place a heavy or disproportionate burden on the Commission’s case management; the Judgment is not too demanding, nor is it too harsh.

In my personal view, this Judgment should mainly be taken as a call for greater awareness. We come from a time when reliance on cooperation/negotiation proceedings (commitments, settlements, cooperation procedures, etc) may have relaxed attitudes vis-á-vis procedural matters, fundamental rights and rights of defence. That this relaxation may happen naturally (and not be matter of bad faith) is only one more reason to make an extra effort to prevent it. This Judgment reminds us, perhaps at the right time (I also have the DMA in mind now), that procedure and rights of defence should not be afterthoughts, for they are what make public enforcement sound, effective and legitimate.

Written by Alfonso Lamadrid

27 June 2022 at 6:59 pm

Posted in Uncategorized

3rd Edition of the Rubén Perea Award – How to Participate

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We are delighted to announce the Third Edition of the writing award in the memory of our friend and colleague, Rubén Perea Molleda. As in previous editions, the winning paper will be published in a special issue of the Journal of European Competition Law & Practice, together with a selection of the very best submissions received (have a look at the special Issues of March 2021 and April 2022).

The winners of the two previous editions received their awards from Executive Vice-President Vestager on 22 March 2022. EVP Vestager will also deliver the award to the winner of the upcoming 3rd edition.

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 1992). Undergraduate and postgraduate students, as well as scholars and practitioners are all invited to participate. If you are too old reading this and do not fulfil the criteria, please feel free to promote this opportunity among your junior colleagues or students.

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 originally drafted as an undergraduate or postgraduate dissertation.

The paper must not exceed 15,000 words (footnotes included; no bibliography needed).

Prior to submission, please make sure your paper follows the JECLAP House Style rules, which can be found here.

How to submit?

Please submit the paper via this link: https://mc.manuscriptcentral.com/jeclap.

IMPORTANT: As you go through the submission process, make sure that in Step 5, you answer YES to the question ‘Is this for a special issue’? and indicate that it is for the Rubén Perea Award.

What is the deadline?

Papers will have to be submitted by 23.59 (Brussels time) of 15 September 2022.

Written by Alfonso Lamadrid

13 June 2022 at 1:19 pm

Posted in Uncategorized

NEW PAPER | Competition law and sports governance: disentangling a complex relationship

with 6 comments

I have uploaded on ssrn (see here) a new paper, which deals with the application of Articles 101 and 102 TFEU to sporting activities. There is no need to point out how topical and important the issue has become, given that the Court hearings in International Skating Union and Super League are around the corner.

The paper builds on some posts shared on the blog (see here and here) and, in particular, a seminar delivered in the context of the mardis du droit de la concurrence at ULB.

It would be wonderful to hear your views on the piece, the main points of which can be summarised as follows:

First, it would be incorrect to see participants in a sports tournament (such as a football team) exclusively as competitors. The worth of participants depends on their ability to rival each other. In addition, cooperation between them allows them to offer something (a tournament, a championship) that is more than the sum of its parts (a collection of disparate games).

The consequence, for the purposes of competition law, is that organised sport is best understood as a joint venture in which participants both compete and cooperate (‘co-opete’) under the umbrella of a governing body. From this perspective, they are analogous to franchising and selective distribution systems.

Second, frictions of a horizontal and a vertical nature are bound to arise in organised sports. Frictions are said to be vertical when they involve governing bodies and individual participants. As recent cases show, opportunism is a potential source of vertical frictions.

Some participants may be tempted to undermine the joint venture (for instance, by setting up competing tournaments) while simultaneously trying to benefit from it. This behaviour is common, and a fact of business life. EU competition law has form dealing with opportunistic conduct (think of cases like Remia or Cartes Bancaires).

Third: what cases like Remia and Cartes Bancaires tell us is that measures aimed at tackling opportunistic behaviour (for instance, a seller setting up shop next door to the business it has just sold) are not restrictive of competition by object.

However, these measures may have anticompetitive effects. Ordem dos Técnicos Oficiais de Contas provides a comprehensive framework for the assessment of the restrictive impact of regulatory measures such as those laid down by sports governing bodies.

Fourth, controversies in the most recent cases can be primarily explained by a tendency to conflate (i) the question of whether an agreement is objectively necessary and (ii) that of whether it has a restrictive object.

Fifth, and in the same vein: some of the most recent developments appear to have introduced a fundamental transformation. What used to be a safe harbour (a set of conditions under which the agreement escapes the prohibition altogether) is now being transformed into strict requirements that sporting organisations need to satisfy to avoid a finding of infringement.

This transformation from safe harbour to minimum requirements seems to be the consequence, at least in part, of the influence of Article 106 TFEU case law. MOTOE has been cited as a precedent in support for this stricter stance vis-a-vis sports governing bodies.

However, these references to MOTOE miss a crucial aspect of this case: the preliminary reference from the Greek court concerned the lawfulness of national legislation under Article 106 TFEU. The case was not about the legality of regulations set by an autonomous body. Accordingly, MOTOE is only of limited relevance (if at all) in the latter scenario (at stake in the most recent developments).

The application of Article 106 TFEU standards into the case law would fundamentally change the approach of competition authorities to sports governance. Inevitably, competition authorities would be frequently asked to strike the right balance between cooperation and competition. Legal considerations aside, this shift would have major consequences from a policy-making standpoint.

Finally, I draw some lessons for some of the most interesting pending issues in sports regulation, including the following:

  • Salary caps, which limit how much teams can spend, do not seem to be restrictive by object; what is more (and as per Wouters and Meca Medina), they do not necessarily have anticompetitive effects. The object of salary caps is to enhance competitive balance betwen the joint venture (see, by analogy, Cartes Bancaires, where the contentious clauses were a response to a similar concern).
  • Transfer restrictions, which would limit whether, and how, often, some teams can hire players from other participants, would not be restrictive of competition by object either. Again, the object would be to preserve competitive balance and accurately reflect interdependence.
  • Finally, competition law is agnostic about open and closed championships. Nothing in the case law suggests that Articles 101 and 102 TFEU mandate a particular model. A system of promotion of relegation, which is a key feature of the European sports model, does not flow inevitably from EU competition law.

Please do not hesitate to reach out and share your thoughts with me (via the blog or email).

And: I have nothing to disclose.

Written by Pablo Ibanez Colomo

8 June 2022 at 9:38 am

Posted in Uncategorized

On Case C-377/20, Servizio Elettrico Nazionale (III): as efficient competitor principle and effects

with 2 comments

Following the first two instalments on the Court’s judgment in Servizio Elettrico Nazionale (see here and here), I turn to two questions that have given rise to much commentary in the past few years. The first relates to the meaning and scope of the ‘as efficient competitor’ principle. The second concerns the issue of anticompetitive effects, which can be broken down into two sub-questions: one of which is the relevance of actual effects and the second the threshold of effects.

The ‘as efficient competitor’ principle applies to pricing and non-pricing practices

The Court has consistently held, over the past 10 years, that Article 102 TFEU is (at least as a matter of principle) about equally efficient rivals (see here and here for a discussion of this aspect of the case law). This principle is to be distinguished from the narrow ‘as efficient competitor’ test, which may (or may not) be relevant in a narrow set of pricing cases.

The ‘as efficient competitor’ principle captures and crystallises several features of the case law, namely (i) the need to show a causal link between the alleged abuse and any actual or potential effects (attributability); (ii) the importance of legal certainty and predictability and (iii) the role of the competitive process as a means to preserve firms’ incentives to create, invest and innovate.

From this perspective, the exclusion of less efficient rivals is nothing but the natural and expected outcome of the competitive process, and not one that would justify intervention under Article 102 TFEU (if anything, the exclusion of inefficient competitors is to be encouraged under that provision, at least as a matter of principle).

Even though the above has been abundantly discussed for the past decade (Post Danmark I was delivered almost exactly 10 years ago), some commentators have continued to argue that the ‘as efficient competitor’ principle was only relevant in relation to pricing practices.

This argument never came across as particularly persuasive. Following Servizio Elettrico Nazionale, it can be put to rest. This case is ostensibly about non-pricing conduct, and the ‘as efficient competitor’ principle features prominently throughout the judgment.

The role of actual effects in the analysis

Servizio Elettrico Nazionale clarifies the role of actual effects in the analysis. Since Article 102 TFEU (and EU competition law at large) is concerned with both actual and potential effects on competition, this issue was far from settled.

Can actual, observable market developments invalidate the analysis of the potential impact of a practice on competition? Would accounting for actual effects not negate the idea that an infringement can be established on the basis of a prospective analysis alone?

The Court’s answer to this question is as clear as it is uncontroversial. First, it holds that, indeed, actual effects can be taken into consideration in the analysis (para 56). It is difficult to see how the judgment could have concluded otherwise (it would have amounted to saying that key evidence about the impact of a practice can be ignored).

Second, the Court notes that actual effects on competition are not sufficient, in and of themselves to conclude that the practice was incapable of having restrictive effects on competition in the relevant context (para 57).

Again, the latter conclusion seems inevitable. I do not believe I have read or heard claims that the absence of actual effects can, alone, rule out the application of Article 102 TFEU. Evidence in this sense would need to be completed by reference to, inter alia, the features of the relevant market, the coverage of the practice and the extent of the dominant position.

The fluctuating threshold of effects and the importance of context

A careful reading of the case law reveals that the threshold of effects varies from one practice to another. The threshold of effects is not the same when the dominant firm prices below average variable costs (there, plausibility is enough) and in cases like Intel and Post Danmark II (there, the analysis demands a more in-depth inquiry, to be conducted in light of the five factors identified by the Court).

The bar is even higher in refusal to deal cases a la Bronner or IMS Health (where elimination of all competition, and in some cases even direct evidence of consumer harm, is required to establish an infringement).

The nature of the practice seems to explain the fluctuating threshold of effects. It is low when the very object of the conduct is anticompetitive (or where it is inherently against competition on the merits) and it is higher when the practice is of an ambivalent (or presumptively lawful) nature.

This background is useful to make sense of the analysis in Servizio Elettrico Nazionale. When the Court engages with the facts of the case, it very strongly hints at a low threshold of effects, close to the plausibility threshold that would apply in the context of predatory pricing within the meaning of AKZO (see in particular para 99).

Is there a contradiction or a tension with some of the most recent rulings? I do not believe so. In Servizio Elettrico Nazionale, the Court simply adjusts its analysis to the nature of the behaviour (the use of information that had not been acquired on the merits) and the wider context (a recently liberalised market where competition is fragile). Just as it has done in the past and I believe should.

I very much look forward to your comments.

Written by Pablo Ibanez Colomo

26 May 2022 at 11:10 am

Posted in Uncategorized

On Case C-377/20, Servizio Elettrico Nazionale (II): does the replicability test really work?

with 6 comments

This post is the second instalment of the series dedicated to the Court of Justice’s ruling in Servizio Elettrico Nazionale (see here for the first instalment). This time, I turn to what is potentially the judgment’s main innovation: the replicability test.

The Court suggests in its ruling that a large fraction of the case law, from rebates to refusal to deal and margin squeeze, can be analysed under the umbrella of replicability. The idea of an all-encompassing framework to scrutinise potentially abusive conduct has always been attractive. This judgment’s is certainly not the first attempt and is unlikely to be the last.

Alas, creating an all-encompassing framework is as tempting as it is difficult. Servizio Elettrico Nazionale goes to show, in this vein, that capturing the essence of the case law under a single test will always be a major challenge. It seems to me, after a careful reading of the judgment, that the replicability test does not quite work (probably not even in its own terms).

I have the impression that replicability will be remembered alongside its illustrious predecessors such as the ‘no-economic sense’ and the ‘profit sacrifice’ tests (that is, as an approach that is sometimes useful and potentially illuminating but that might lead to enforcement errors if applied mechanically or across the board).

There are three main reasons why I have come to this conclusion:

  • The case law that the Court cites in support of the test (including TeliaSonera and Bronner) is not exactly about the replicability of the practice, but about something else.
  • The meaning and scope of the replicability test fluctuates: para 78 suggests that it is about the practice, but the analysis that follows suggests it is about something else (the assets, or the effects).
  • The reasoning applying to the specifics of the case does not seem to fit the replicability test as defined in para 78.

TeliaSonera and Bronner are not about the replicability of the practice (nor is the AEC test)

As mentioned in my previous post, para 78 sets out the replicability test: under this framework, behaviour that cannot be replicated by an equally efficient rival is not in keeping with competition on the merits, and this insofar as the said behaviour flows from the firm’s dominant position.

The ‘as efficient competitor’ test is not about replicability

The Court goes on to support its claim in light of a broad range of precedents, in particular TeliaSonera and Bronner. According to the judgment, the ‘as efficient competitor’ test is essentially about whether an equally efficient firm would be able replicate the conduct implemented by the dominant firm.

This interpretation of the test is not easy to reconcile with TeliaSonera (paras 41-43, cited in the judgment). That judgment shows that the ‘as efficient competitor’ test is not about the practice, but the effects of the practice: more precisely, it seeks to ascertain whether an equally efficient firm would be able to offer its products or services otherwise than at a loss.

Put differently: the point of the test is not to assess the replicability of the practice, but whether, given the practice, an as efficient competitor would have the ability to compete on the market where the effects are manifested (which, by the way, is not necessarily the market in which the practice is implemented, as one might infer from para 78).

The refusal to deal case law is not about replicability, but indispensability

The same is true as far as non-pricing practices are concerned. Para 83 of Servizio Elettrico Nazionale interprets Bronner as revolving around replicability, and more precisely around whether the dominant firm’s assets can be replicated by an equally efficient rival.

However, Bronner (and Magill and IMS Health) is not about replicability, but about indispensability. It may sound similar, but it is not quite the same thing. According to Bronner, the question is not whether an equally efficient rival can build a replica of the dominant firm’s infrastructure, but whether the infrastructure is indispensable to compete on the relevant adjacent market.

Accordingly, an infrastructure may well be impossible to replicate and still not be indispensable. As explained by the Court in Bronner and IMS Health, if it is possible to enter the adjacent market by other means, even if less advantageous, the indispensability condition would not be met. Whether or not the infrastructure could be replicated is not a relevant, let alone decisive, consideration in this regard.

This point is crucial, as there seems to be a growing tendency to equate indispensability and replicability, even though the latter does not necessarily imply the former.

What is the replicability test about? The practice or the assets?

If one reads para 78 of Servizio Elettrico Nazionale, there seems to be little ambiguity about the nature of the replicability test: it is about the practice, and about whether it can be implemented by an equally efficient competitor.

The issue becomes less clear, however, when one takes a look at para 83 (which refers to Bronner and the exceptional circumstances test). This paragraph suggests that the replicability test relates to the infrastructure (or assets), not the behaviour (that is, the refusal to give access to the infrastructure).

The question is further complicated if one considers margin squeeze conduct. In a margin squeeze setting, replicability cannot be about the practice (since the practice is implemented on a market other than the one where it displays its effects) or the assets (since the relevant question is not whether the infrastructure can be replicated, but whether the spread between wholesale and retail prices allows equally efficient rivals to compete on the adjacent market).

The fact that the meaning (even the relevance) of replicability seems to fluctuate from one paragraph to the next suggests that, as much as we would want it to, one size does not fit all. It also means, by the same token, that the replicability test most probably does not work as an overarching framework.

The case seems to be decided on grounds other than replicability

Arguably, the single most reliable indicator suggesting that the replicability test may not work as an overarching framework is that the dispute itself is ultimately decided on grounds other than those laid down in para 78.

As already mentioned, para 78 refers to a practice that flows from the dominant position (implying, as explained in the previous instalment, the need to show a link between the dominant position and the practice). Para 101, however, suggests that the crucial consideration is another one, namely the fact that the firm has a unique status and set of assets as a former legal monopoly.

In the following paragraph (102), the Court holds that the replicability of the assets by other means is not a relevant consideration. This point, wholly sensible in the context of the case, is not easy to reconcile with para 83 and the refusal to deal case law: under the Bronner doctrine, there would be no abuse if there are other means, even if less advantageous, to compete on the adjacent market where the refusal displays its effects.

As can be seen, the case is not decided on replicability grounds in the end, but based on the fact that the dominant firm’s unique assets had not been obtained on the merits (but rather as a by-product of the exclusive rights granted by the State) and that, as a former monopoly, the undertaking had a particularly stringent duty not to impair the competitive process.

On those (somewhat narrower) grounds, the judgment is as illuminating as it is uncontroversial. A most useful addition to the growing case law applying to incumbents in liberalised markets.

I very much look forward to your comments.

Written by Pablo Ibanez Colomo

18 May 2022 at 4:19 pm

Posted in Uncategorized

On Case C-377/20, Servizio Elettrico Nazionale (I): overarching framework or case-specific judgment?

with 6 comments

The Court of Justice delivered its judgment in Servizio Elettrico Nazionale last week (see here for the French version). Because the questions asked by the Italian Consiglio di Stato were so broad, some hoped that the ruling would provide an overarching framework applying to potentially abusive practices (what we might call an arrêt de principe).

Having read the judgment, it seems more likely that the analysis is tailored to the specifics of the case and will not apply to other cases (what we might call an arrêt d’espèce). Seen from this (more modest) perspective, both the analysis and the outcome at which the Court hints make perfect sense.

The case concerns a textbook example of abuse, if there is one. An incumbent that uses the assets it owes to its status as a former monopoly (as opposed to its investments or innovation) to favour its own activities is prima facie in breach of Article 102 TFEU. It is a quasi-Article 106 TFEU scenario. Thus, there would be every reason to be as strict as the Court has always been in cases involving exclusive or special rights.

The outcome suggested by the Court is supported by an analytical framework that works well in the specific context of the case. On the other hand, this framework does not appear to capture the case law in its full complexity. As a result, there is a chance that it will not be the reference that some hoped would become. I can think of two main reasons in this sense.

The first reason is that the scope of Article 102 TFEU is broader than one might infer from the judgment. The scenarios identified in it do not encompass all instances in which Article 102 TFEU can come into play. The Court is careful to use language that suggests that its framework is not exhaustive (see para 76, where the French version uses the word ‘notamment‘ and the Italian one ‘in particolare‘). These nuances, however, may be lost in future interpretations of the ruling.

If nuance is indeed lost, the framework applied in the judgment may lead to the underenforcement of Article 102 TFEU. Some behaviour that amounts (and has been found in the past to amount) to an abuse of a dominant position would escape the prohibition.

In Servizio Elettrico Nazionale, the Court of Justice identifies two instances in which conduct implemented by dominant firms departs from competition on the merits:

This is so, in the first place, where the practice has no plausible purpose other than the restriction of competition (para 77). As is well known, practices are deemed abusive where they have an anticompetitive object. The Court refers in this regard to pricing below average variable costs, which is the most eloquent example. The practice at stake in Lithuanian Railways (the destruction of the dominant firm’s own property with the sole aim of restricting competition) is another one.

According to the judgment, a practice also departs from competition on the merits where it cannot be replicated by an equally efficient competitor, and this insofar as it flows from the exploitation by the dominant firm of its position (para 78).[1]

These passages may be interpreted as suggesting that, in an Article 102 TFEU case, an authority or claimant would need to show that the practice at stake (i) departs from competition on the merits, either because (ii.a) it has an anticompetitive object or because (ii.b) it cannot be replicated by an equally efficient competitor.

As I understand the case law, it seems clear to me that an abuse can be established in circumstances other than those described in the preceding paragraph. Suffice it to mention the following three points in support of this idea.

There should be little doubt, to begin with, that there is no need for an authority or claimant to show that a practice is not in keeping with competition on the merits. That is, after all, the very point of the ‘special responsibility’: conduct that would otherwise be unproblematic can be prohibited precisely because it is implemented by a firm that enjoys a dominant position.

The very finding of dominance, in other words, dispenses from the need to establish that the behaviour is somehow improper or abnormal. For instance, the unconstrained exercise of a firm’s duly earned intellectual property rights is the purest expression of competition on the merits. As such, it is in principle unproblematic. However, there are (exceptional) circumstances in which Article 102 TFEU imposes a duty to license a firm’s intangible property.

In a different vein, paras 76-78 (in particular para 78) may be interpreted as suggesting that the abusive conduct somehow needs to flow from the dominant position. There is consistent case law, dating back to the very early days (Continental Can), which shows that, as the law stands, there is no need to establish a link between the dominant position and the practice.

Finally, it is clear from the case law that an abuse can be established even when the contentious practice can be replicated by an equally efficient firm. ‘Others also do it‘ has never worked as a defence in the context of Article 102 TFEU (and I do not believe it should). If this ‘replicability test’ had applied in the Microsoft I case, for instance, the firm would have escaped the prohibition (at least as far as the Media Player aspects of the decision are concerned).

***

Second, and somewhat paradoxically, the scope of Article 102 TFEU is also narrower than suggested by the Court. I would be most interested to hear your views on the scope of para 78. Having read it a few times in French and Italian, this key paragraph appears to suggest that behaviour that involves the use of assets or resources that cannot be replicated by an equally efficient rival is not in keeping with competition on the merits.

If this is indeed the correct reading of para 78, it seems difficult to reconcile with other aspects of the case law. The unique assets or resources enjoyed by a dominant firm may be the fruit of its inventive and creative efforts. If this is so, any advantages resulting from them would be the very manifestation of competition on the merits, rather than the opposite (just think of the exercise of duly earned intellectual property, which I mentioned above).

The implication of a literal reading of para 78 is that every time a dominant firm exploits a competitive advantage flowing from assets or resources that its rivals do not have, it would not be competing on the merits. It is not surprising that there is no basis for this position in the case law: it would paradoxically disincentivise the very behaviour that Article 102 TFEU seeks to promote and preserve.

One can also read para 78 as applying to the specific circumstances of the case. In Servizio Elettrico Nazionale, the dominant firm was exploiting assets that were unique, but not as a result of its efforts (that is, they had not been acquired on the merits). Rather, they were the product of the dominant firm’s status as a former monopoly.

If para 78 is confined to these circumstances (that is, if it is read as applying to the cas d’espèce), it makes perfect sense (and I tell myself that it is perhaps what the Court had in mind).

I will follow up with a few posts on other aspects of this fascinating ruling. The next one, on whether, and to what extent, the framework crafted by the Court captures the essence of the case law on which it is based. In the meantime, I very much look forward to your comments on this first entry.


[1] The French version of para 78 reads as follows: ‘Il en va de même, ainsi que l’a relevé M. l’avocat général aux points 69 à 71 de ses conclusions, d’une pratique insusceptible d’être adoptée par un hypothétique concurrent qui, bien qu’aussi efficace, n’occupe pas une position dominante sur le marché en cause, car cette pratique repose sur l’exploitation de ressources ou de moyens propres à la détention d’une telle position‘.

Written by Pablo Ibanez Colomo

16 May 2022 at 4:31 pm

Posted in Uncategorized

The Role of the EU Courts- A View from the Bar

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A few weeks ago I participated at the Global Competition Law Centre’s Annual Conference, on a panel devoted to discussing the role of the EU Courts in competition cases together with General Court President Marc van der Woude and Judge Ingeborg Simonsson. My task was to talk about the role of EU Courts and judges from the point of view of lawyers. I guess this was much more comfortable than listening to what judges think about lawyers…

As I explained then, my views on this subject are necessarily informed and deformed by my own experience in quite a few cases before the EU Courts, both challenging and defending Commission decisions. Since the GCLC will be editing a book with speaker contributions, I thought it could make sense to post a summary of my general thoughts so that I can gather and incorporate additional feedback from the readers of this blog. So here they are.

In many ways, the view of lawyers about the role and the performance of Courts is quite straightforward: If we win a case, it’s our merit and the Court only fulfilled its role. And if we lose, then it’s the Court’s fault for failing to play its role.

That is only partly a joke, because we lawyers, but also other stakeholders, including in academia and in the press, tend to assess the performance of the EU Courts in quantitative terms. Too often we associate effective or thorough judicial review with annulments or with other observable metrics (number of cases decided, number of cases annulled, amount of fines confirmed or annulled, or average duration of cases). But all those are very superficial ways to measure performance.

So the key question that we should be asking is what is really the role of the Courts, and what can we reasonably expect from them? Once we have identified this benchmark, we can then enquire as to their performance and discuss the challenges they face.

A. What is the role that we expect the EU Courts to play in the field of competition law, and what are the hallmarks of effective judicial review?

In my view, the first and most important task of the EU Courts is to preserve the rule of law and the legitimacy of the EU competition enforcement system. Competition law is not only about policy, or economics or outcomes; it is primarily law, and it is for the Courts to ensure that its interpretation and enforcement are in line with fundamental rights and general principles of law that also apply in other domains. There are certain principles like, for example, the presumption of innocence, the rules on the burden of proof, or the principle of proportionality, that cannot be bypassed or sacrificed at the altar of expediency, because they are core rule of law requirements, and because there is too much at stake.

The second task of the Courts, very much linked to the first, is to contribute to a stable, consistent and predictable legal framework. The rule of law also requires legal certainty: to play by the rules, you need to know what the rules are. As much as we might enjoy the dynamic nature of competition law, and the case-by-case discussion, we need to build on a common and stable analytical framework that we can anticipate. This is important for companies required to self-assess their conduct, but also for repeat players like the European Commission, which needs to base its decisions on a clear and established analytical framework. It is of course desirable for the law to move and evolve, but wide pendulum swings do not benefit anyone.

At the same time, we also need to be realistic. We lawyers expect the Courts to state what the law is, but we often fail to realize that the Courts do not always have this possibility, as Courts are subject to their own constraints: they are called to decide on specific cases, on the basis of the arguments raised by the parties either under a review of legality or in reply to questions crafted by a national court in the context of a specific controversy.

The EU Court’s third main task, in my opinion, is to constrain administrative discretion while enabling effective enforcement. Courts do not only need to protect general principles of law and fundamental rights and lay down a stable and predictable framework, they also have the complex duty of doing this while not preventing sound and effective enforcement. In other words, the application of the law must not be arbitrary, discretional and based on mere hypothesis, but constraints need to be reasonable.

B. Measured against those benchmarks, how have the EU Courts fared so far?

First, there can be little doubt that the EU Courts have preserved the rule of law and the legitimacy of the EU competition enforcement system. Regardless of whether we as lawyers win or lose, the system does work.

I believe that there is a general feeling that, subject perhaps to exceptions, judicial review at the EU level has become more thorough and meaningful. Regardless of outcomes, the EU Courts have (i) recalibrated the standard of review following KME/Chalkor, marginalizing marginal review; (ii) placed a renewed emphasis on the right allocation of the burden of proof and the presumption of innocence (cases like Intel or Apple); and (iii) been acutely aware of the need to protect fundamental rights (I have in mind the very recent case law on ne bis in idem, Consob on the protection against self-incrimination, many cases, like Casino, on the right to a private domicile, or the Order in Facebook Ireland in relation to the right to privacy. Speed-Pro is perhaps a highlight in this trend).

EU Courts have also seen their role evolve as competition law became increasingly more about negotiations with the surge in settlement, cooperation and commitment decisions and the consequent decrease of litigation. In my view, the Courts have been up to the task, paying particular attention to new procedural questions regarding the presumption of innocence (ICAP, Pometon), non-discrimination (Timab), third parties’ rights and the principle of proportionality (Canal +), or the need to balance rights of defence and other considerations (Lantmännen Agroetanol). The Courts have made clear that negotiated solutions need to be guided, and can only be overridden, by procedural considerations and general principles of law.

Second, have the EU Courts contributed to a stable and predictable legal framework? I think we have made significant progress, particularly in the areas where preliminary references have been more common, but also in those where annulment proceedings have been more frequent in recent years, like State aid.

Absolute legal certainty may not be a reasonable aspiration, but I believe that there has been a meaningful incremental evolution in our understanding of some key notions. We now have a better idea, or a clearer framework to determine what is or what is not a restriction by object (Cartes Bancaires or Budapest Bank), what is not a SIEC (CK Telecoms), the criteria that are relevant to assess foreclosure in unilateral cases (Intel, Post Danmark cases). Preliminary rulings have also been particularly helpful (think of Slovak Telecom, Budapest Bank, Generics, Sumal, Volvo, bpost and Nordzucker).

There remains, in my view, room for improvement. We can currently more or less connect the dots across different cases, but we still lack a coherent and systematic framework in some respects, particularly in the field of Article 102, where some fundamental issues remain in dispute. At the same time, again, we need to be realistic; progress is incremental, and this is a good thing; if it were not, we would risk pendulum swings, which is precisely what we need to avoid.

Third, have the EU Courts succeeded at constraining discretion while enabling effective enforcement? In the past, many lawyers complained that judicial deference towards the Commission made it impossible for companies to successfully appeal Commission decisions in certain areas. Many practitioners will disagree with me, but I never bought that. Today, even if the ratio of annulments remains low, some commentators have argued that a few recent annulments would pretty much make competition enforcement impossible. I personally do not buy that either. I guess this position might make me unpopular on both sides, which is probably also how the Court must feel most of the time.

The one remarkable trend that I see in judicial review in recent years is the emphasis on the need to take the burden of proof and the principle of presumption of innocence seriously and avoid shortcuts. This is how I read Cartes Bancaires, and Budapest Bank on the “by object” shortcut, or the Court of Justice’s Judgment in Intel (which I believe is in many ways their equivalent for Article 102), Servier in relation to market definition, or the Starbucks, Apple and Amazon State aid cases when it comes to the criterion of advantage in State aid. The most recent General Court Intel Judgment raised some important issues in this regard. I will expand on those in a separate blog post.

C. What are the new generation challenges for the EU Courts in the field of competition law?

Challenges to the rule of law. Unfortunately, we live at a time when challenges to the rule of law are becoming common. There is perhaps a feeling that the law places uncomfortable constraints that ties our hands when facing certain problems. Sometimes we see a temptation to avoid constraints to pursue a certain view of the public good, including proposals to reverse the burden of proof, stretch legal bases, shield some decisions from judicial review or “take antitrust away from judges”. In my view, we need to remain vigilant here. The law is about constraints, and constraints are uncomfortable, but they are the wise restraints that make us free. There are a few vital red lines that we should not cross.

Keeping the law relevant in the DMA world. Under the DMA we will not need to be concerned about market definition, market power, counterfactuals, effects, efficiencies, proportionality, the competitive process and consumer welfare. It will all be about remedy design and outcomes. At first sight this does not leave much room for the law, lawyers and Courts. Creating a regulatory system from scratch is not easy, and it will be a challenge for Courts to keep the law relevant and make this system compatible with general principles of law and draw the necessary limits to administrative discretion.

Maintaining predictability and consistency in an increasingly fragmented landscape. A major challenge for the future will be to offer a stable EU law framework in an increasingly decentralized and fragmented landscape, at a time when much of what we knew is in dispute, where several Member States are experimenting with new theories, and where politicians are increasingly interested in competition law. While some degree of experimentation may be positive, major substantive divergences threaten the very idea of the internal market. As I have explained before, the problem here is that the Court’s current reactive tools are rather limited and, absent some changes, may not be sufficient.

Consistency. It might be important to make an extra effort to ensure consistency across competition law provisions, across time, between Courts (for example, between preliminary rulings and Judgments in annulment cases) and within Courts (frequent customers of the Courts, including some Commission lawyers, feel frustrated when they feel they receive different messages from different Chambers).

Evidence requirements. Evidential requirements on both the Commission and private parties need to be realistic and proportionate to the information that can be available to each party depending on their means and powers of investigation at their disposal. In my mind, the helpful clarifications on the allocation burden that one can see in recital 166 of the recent General Court Intel judgment (along the lines of the proof proximity principle) are also a step in the right direction.

Need for speed. Commentators frequently complain that it takes too long to find out what the law is. I can see how this is an issue, but at the same time it takes a while to go through all the motions of a case giving all parties sufficient time to make their case, study, organize and digest a hearing, write a thorough Judgment and translate it. Discovering the law often takes time and I, for one, much prefer thorough judicial review over quick and hasty review. There is, however, scope to strike a better balance, and the Courts are making an effort, even awarding damages in cases where judicial proceedings take too long. I have little doubts that the situation will continue to improve.

Written by Alfonso Lamadrid

11 May 2022 at 6:21 pm

Posted in Uncategorized

LSE Short Course on State Aid and Subsidies Regulation (May-June)

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The Short Course on Advanced EU Competition Law is off to a great start. We have a full house and a wonderful mix of officials, practitioners and academics. The discussions on the first day were, as expected, high level and enriching.

The Short Course on State aid and subsidies regulation follows the same format (4 hours of online teaching over four Fridays). It will run from 27th May and there are still a few places available. With the UK Subsidy Control Act 2022 finally receiving royal assent, and with discussions ongoing around the EU’s Foreign Subsidies Regulation, I thought some of you might be interested in taking part in it.

If you have any questions about the course, do not hesitate to contact my colleague Amanda Tinnams (A.Tinnams@lse.ac.uk). And remember that the course comes with a certificate and CPD points!

Written by Pablo Ibanez Colomo

4 May 2022 at 12:09 pm

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UPDATED PROGRAMME: Conference at the London School of Economics (12th May, Old Theatre)

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We really look forward to seeing many of you at the conference organised by the LSE Law School in two weeks’ time (12th May, LSE’s Old Theatre). Remember that you can register for free here and that you can reach my colleagues with any inquiries via law.events@lse.ac.uk.

You will find an updated version of the programme below. The key novelty you will spot: John Newman (Deputy Director of the Bureau of Competition, Federal Trade Commission; on leave from the University of Miami School of Law) will be sharing some thoughts (in his personal capacity) during the lunch break at LSE’s Shaw Library. We are excited that the audience will get a flavour of the US experience and perspective.

See you very soon for what promises to be a great in-person (finally!) event.

Programme

9:15-9:30 | Welcome

David Kershaw (Dean and Professor, LSE Law School).

9:30-11:00 | Looking ahead: policy matters

Andrea Coscelli (Chief Executive, Competition and Markets Authority);

Cani Fernández (President, Comisión Nacional de los Mercados y la Competencia); and

Andreas Mundt (President, Bundeskartellamt).

In conversation with Thorsten Käseberg (Visiting Professor, LSE Law School and Head of Competition Policy, German Ministry for Economic Affairs and Climate Action).

11:00-11:15 | Break

11:15-12:45 | Looking ahead: substantive matters

Fernando Castillo (Principal Legal Adviser, European Commission);

Heike Schweitzer (Professor, Humboldt University of Berlin); and

Fabienne Siredey-Garnier (Vice-President, Autorité de la concurrence).

In conversation with Pablo Ibáñez Colomo (Professor, LSE Law School).

12:45-14:30 | Lunch (LSE Shaw Library)

With John Newman (Deputy Director of the Bureau of Competition, Federal Trade Commission).

14:30-15.45 | Coordination and enforcement in the new landscape

Sarah Cardell (General Counsel, Competition and Market Authority);

Niamh Dunne (Associate Professor, LSE Law School); and

Damien Gerard (Prosecutor General, Belgian Competition Authority).

15:45-16:00 | Break

16:00-17:15 | Lessons from other regulatory regimes

Claudia Berg (General Counsel, Information Commissioner’s Office);

Martin Cave (Visiting Professor, LSE Law School and Chair, Ofgem); and

Lindsey Fussell (Group Director Networks & Communications, Ofcom).

17:15-18:30 | Drinks (LSE Shaw Library)

Written by Pablo Ibanez Colomo

28 April 2022 at 12:53 pm

Posted in Uncategorized

REGISTRATION OPEN: Conference at the London School of Economics (12th May, Old Theatre)

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LSE Law School is proud to announce its 12th May conference, which will bring together top officials and academics to discuss the future of competition law and regulation. You can check the programme, with all confirmed speakers, below.

Registration (for free) is open here. The event will take place in the venerable Old Theatre (at the heart of the LSE campus) and we will continue the conversation over lunch and drinks at the no less venerable Shaw Library. If you have any questions about it, please get in touch. You can also reach my colleagues via law.events@lse.ac.uk.

Programme

9:15-9:30 | Welcome

David Kershaw (Dean and Professor, LSE Law School).

9:30-11:15 | Looking ahead: policy matters

Andrea Coscelli (Chief Executive, Competition and Markets Authority);

Cani Fernández (President, Comisión Nacional de los Mercados y la Competencia); and

Andreas Mundt (President, Bundeskartellamt).

In conversation with Thorsten Käseberg (Visiting Professor, LSE Law School and Head of Competition Policy, German Ministry for Economic Affairs and Climate Action).

11:15-11:30 | Break

11:30-13:00 | Looking ahead: substantive matters

Fernando Castillo (Principal Legal Adviser, European Commission);

Heike Schweitzer (Professor, Humboldt University of Berlin); and

Fabienne Siredey-Garnier (Vice-President, Autorité de la concurrence).

In conversation with Pablo Ibáñez Colomo (Professor, LSE Law School).

13:00-14:15 | Lunch (LSE Shaw Library)

14:15-15.30 | Coordination and enforcement in the new landscape

Sarah Cardell (General Counsel, Competition and Market Authority);

Niamh Dunne (Associate Professor, LSE Law School); and

Damien Gerard (Prosecutor General, Belgian Competition Authority).

15:30-15.45 | Break

15:45-17:00 | Lessons from other regulatory regimes

Claudia Berg (General Counsel, Information Commissioner’s Office);

Martin Cave (Visiting Professor, LSE Law School and Chair, Ofgem); and

Lindsey Fussell (Group Director Networks & Communications, Ofcom).

17:00-18:30 | Drinks (LSE Shaw Library)

Written by Pablo Ibanez Colomo

22 April 2022 at 12:35 pm

Posted in Uncategorized