Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Case C-525/16, Meo – Serviços de Comunicações e Multimédia: a major contribution to Article 102 TFEU case law

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Image result for MEO — Serviços de Comunicações e Multimédia

Love them or hate them, the EU competition law community should be grateful to collecting societies. Their activities have ensured a steady supply of preliminary references since the very early days. It looks like things are unlikely to change soon.

Yesterday’s judgment in Meo is the latest – but will certainly not be the last – of these preliminary rulings. The case concerned a relatively narrow issue: the interpretation of Article 102(c) TFEU in the context of exploitative discrimination.

You certainly remember that Article 102(c) TFEU concerns the application of ‘dissimilar conditions to equivalent transactions’ by dominant firms. According to the letter of the Treaty, the prohibition applies only insofar as it places some firms ‘at a competitive disadvantage’.

Reasonably – and as expected – the Court has held in Meo that the ‘competitive disadvantage’ cannot simply be assumed, or taken as a self-evident consequence of the behaviour of the dominant firm. Effects in this sense will have to be established on a case-by-case basis.

In any event, the contribution of Meo to the case law goes well beyond the legal status of exploitative discrimination. The Court has clarified some fundamental questions about which we lack meaningful guidance.

Not every disadvantage amounts to an anticompetitive effect: In para 26 of the judgment, the Court holds that ‘the mere presence of an immediate disadvantage affecting operators who were charged more, compared with the tariffs applied to their competitors for an equivalent service, does not, however, mean that competition is distorted or is capable of being distorted’.

Simply put: the Court clarifies that not every disadvantage resulting from the behaviour of a dominant firm amounts to an anticompetitive effect within the meaning of Article 102 TFEU. This clarification is no less than crucial, both in the context of exclusionary and exploitative practices.

The Court has put to rest, for good, the idea that practices (any practice) by a dominant firm cannot fail to have anticompetitive effects. According to this interpretation, anything that makes rivals’ or customers’ life more difficult would be abusive. Post Danmark I already dismissed this interpretation of Article 102 TFEU; Meo is the last nail in the coffin.

This is a point that Alfonso and I already emphasised in our piece on the notion of restriction of competition. A restrictive effect cannot be everything, it only exists when a practice harms firms’ ability and incentive to compete.

There is no de minimis threshold under Article 102 TFEU, true. However, not every practice has an effect: In Post Danmark II, the Court held that there is no such thing as a de minimis threshold below which anticompetitive effects can be excluded under Article 102 TFEU.

Some people interpreted this point as meaning that, since there is no de minimis in Article 102 TFEU, any practice has an anticompetitive effect. The Court dismisses this view. What Post Danmark II means, Meo explains, is that, because we are dealing with a dominant firm, exclusionary effects cannot be ruled out ex ante. However, these effects will still need to be established in concreto.

As the Court puts it in para 29 of the judgment: ‘[…] in order for it to be capable of creating a competitive disadvantage, the price discrimination referred to in subparagraph (c) of the second paragraph of Article 102 TFEU must affect the interests of the operator which was charged higher tariffs compared with its competitors’.

Final thoughts: The case law makes more sense after Meo. The analysis of effects is a meaningful one under Article 102 TFEU, as it is under Article 101 TFEU and merger control. Crucially, some of the issues it addresses will, before too long, be addressed by the EU courts.

Written by Pablo Ibanez Colomo

20 April 2018 at 1:28 pm

Posted in Uncategorized

#ChillinCompetitionFineArt (II)

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Here is the second wave of contributions for our Chillin’Competition Fine Art awards (for wave one, see here). We have received many more that we will be publishing in the next few days. We’ve had a good laugh. Thanks very much and keep them coming!

11. “Did someone say dawn raid?

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12. “New emails just before holidays

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13. “Propose some commitments you say?”

 comm

 

14. “One party refuses to settle

ref

 

15. “Access to documents”

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16.”Sent the final version and realized he forgot the last edits”

forg

 

17.”Client sent suggested edits

Client sent suggeeted edits.png

 

18.”Before the dawn raid, after the SO

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19.”Lawyers in search of efficiencies

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20. “Please! I’m telling you it was fair competition

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21. “Received an RFI on December 23rd

RFI

 

22. “And that’s a potential anticompetitive effect!

poten.PNG

Written by Alfonso Lamadrid

16 April 2018 at 10:11 am

Posted in Uncategorized

#ChillinCompetitionFineArt

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Following the success of our Meme Competition last year (see here), we are launching a Fine Arts Competition. The challenge is to come up with a painting that reflects an aspect of the daily life of people working in our field. The 5 winners will receive a special prize. You can submit your ideas until May 30th, emailing them to chillingcompetition@gmail.com. We will be publishing a weekly selection every Thursday Monday. Enjoy!

The examples that follow are the result of today’s coffee-time brainstorming at the office…

  1. “A clarification of previous case law”.Resultado de imagen de cuadrosdocentes

2. “New lawyer joining the case team

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3. “So, the meeting at DG Comp went well…

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4. “When everyone suspects who it was that asked for leniency

Resultado de imagen de cuadrosdocentes evaluacion educacion fisica

5. “Inability to Pay

Resultado de imagen de art beggar

6. “Phase II is over…

Phase II

7. “So, who said this was legal?

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8. “Look! There really is a third paragraph!

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9.”How I imagine my opposing counsel

Resultado de imagen de cuadro docente

10. “How my opposing counsel sees himself”

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Written by Alfonso Lamadrid

10 April 2018 at 4:41 pm

Posted in Uncategorized

Brexit and Energy Markets @LSE – 12 April: Last chance to register (for free!)

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Brexit

I am proud that the LSE (Wolfson Theatre, New Academic Building) is hosting a conference on Brexit and Energy Markets (the 2nd of its kind), organised by the awesome Leigh Hancher and Adrien de Hauteclocque.

It will take place on Thursday of next week (12 April).

I have just been told that, there are a few places available. You can register (for free!) here.  A pdf of the programme, in turn, can be found here. Students interested in energy issues would be most welcome to attend.

More info on the event? Please see below:

This conference, a follow-on from our first initiative in March 2017, aims to consider the wide-ranging impact of Brexit on the UK and EU energy markets, from a legal and economic perspective, and assess the developments and challenges which have emerged over the past year.

  • How might a self-determined UK attempt to establish itself in the energy market outside of the EU?
  • What will be the effect on electricity and gas trading?
  • How will the UK’s exit impact EU market integration initiatives, such as market coupling, cross-border capacity mechanisms, and the development of network codes?
  • How might it affect the EU ETS?
  • What are the repercussions of the UK leaving the Euratom Treaty?
  • The UK has promised that it will not shirk from it’s commitment to plans for an integrated all-island single electricity market in Ireland (I-SEM). But how will this work? How might this play out from a regulatory perspective?

These questions and more will be addressed through in-depth discussions at the conference.

Written by Pablo Ibanez Colomo

6 April 2018 at 9:30 am

Posted in Uncategorized

Restrictions by object in ISU: why has the Commission not drawn the lessons from Cartes Bancaires and Maxima Latvija?

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Ice Skating Lessons

The Commission usually takes some time to publish its decisions. This is not necessarily a bad thing, at least for the purposes of this blog. We now have the chance to discuss a few decisions that have (finally) come out, and complement (or complete) our first thoughts on them.

I will start with ISU, about which I wrote earlier this year. The non-confidential version of the decision can be found here.

In my previous post, I asked myself whether the practice at stake was really a restriction by object. You will remember that the Commission took issue with a set of rules adopted by the International Skating Union. These rules sought to constrain athletes’ ability to take part in competitions run by rival organisations.

The Commission concluded that the rules, which are (in essence) a vertical restraint providing for a non-compete obligation, amount to a ‘by object’ infringement. Now we know the reasoning behind this conclusion.

There is something remarkable about the decision. If you take a look at it, you will realise that the Commission does not seem to incorporate the lessons of the most recent – and directly relevant – Court rulings, namely Cartes Bancaires and Maxima Latvija.

To prove my point, I propose a simple exercise: apply to the facts underpinning Cartes Bancaires and Maxima Latvija the reasoning found in ISU. You will come (inevitably) to the conclusion that the practices at stake in these two cases were restrictive by object.

In ISU, the Commission concludes that the eligibility rules are a ‘by object’ infringement for three main reasons:

  • The objective and subjective purpose of the rules was to preclude other organisations from running competing events.
  • The International Skating Union sought to protect its own economic interest through the rules.
  • The eligibility rules were not related to a legitimate sporting objective.

Remember Maxima Latvija? In that case, the ‘anchor tenant’ of a shopping centre was given the power to veto the renting of other premises in the mall to third parties. The objective purpose of such a rule is clearly to avoid competition – and the Court ruling is based on this premise. In this sense, the case is no different from ISU.

And the anchor tenant, by restricting competition to itself and limiting the shopping centre’s freedom of action, was certainly trying to protect its own commercial interests (by the way: which firm doesn’t?).

In spite of the above, the Court ruled in Maxima Latvija that the practice was not restrictive by object.

Remember Cartes Bancaires? Essentially, the contentious rules sought to penalise one category of competitors. The objective purpose of these rules was to hinder these firms’ ability to compete. What is more, there was direct evidence in the case suggesting that the subjective intent of the rules was indeed to restrict competition and thus to protect the economic interest of another category of firms.

If one were to follow the reasoning in ISU, these two factors would be sufficient to conclude that the practice was restrictive by object. But you all know that the Court came to the opposite conclusion in Cartes Bancaires.

Cartes Bancaires is important for another major reason. The Court made it quite clear that a practice that seeks to address a genuine free-riding concern is not a ‘by object’ infringement. In other words: the fact that some firms seek to protect their economic interests is not in itself an issue (again, which firm does not seek to advance its economic interest by means of an agreement within the meaning of Article 101 TFEU?). The issue is instead whether the firms seek to address a market failure or simply extract rents (as in a cartel agreement).

The Court concluded that the measure was plausibly pro-competitive (and thus not ‘by object’) in Cartes Bancaires. And the free riding argument is also compelling in ISU, as I mentioned last time (but the issue does not seem to be given the relevance it deserves in the decision).

Against this background, the question that I find intriguing is why the Commission has not followed the case law on restrictions by object in ISU.

This question is intriguing in this particular case because establishing the restricting effects of the eligibility rules was a ‘home run’ for the Commission. Given the position of the International Skating Union, it could not have been much easier to conduct an effects analysis (as the Commission does in the case).

Had the Commission followed the ‘by effect’ route alone, the case would have been entirely uncontroversial. I would say more: the analysis of the Commission in the ‘by effect’ section shows that the case makes enormous sense from a prioritisation perspective too.

Why, if it was not at all necessary (and was in fact potentially counterproductive), did the Commission insist on qualifying the rules as a ‘by object’ infringement in ISU?

The most convincing explanation is that the Commission, as a repeat player, is interested not only in reaching the desired outcome in individual cases but in shaping the law in a particular way. In this sense, ISU provided an excellent opportunity to advance its interpretation of the notion of restriction by object in the wake of Cartes Bancaires.

I have to say I am not particularly surprised by this. I have spent the past couple of years reading pretty much every Commission decision, and this is a consistent pattern of behaviour across the board (Article 101 TFEU, Article 102 TFEU and merger control).

Examples? Just think of how the Commission interpreted Delimitis in Scholler and Langnese-Iglo (Valentine Korah, in her unique style, wrote at the time – mid-1990s – that Delimitis appeared ‘not to have been read’).

More examples? The Court emphasised, from the outset, that ‘competition’ for the purposes of Articles 101 and 102 TFEU means ‘competition that would have existed in the absence of the practice’. However, the Commission failed to consider the counterfactual in several landmark decisions that were annulled as a result.

In fact, if you read ISU, you will identify several controversial statements in this regard. For instance, the Commission asserts that the members of the International Skating Union – that is, the national associations – are potential competitors. However, this remarkable statement is not substantiated – as if the lessons from European Night Services, CISAC or E.On Ruhrgas (‘real, concrete possibilities’) had not been learnt.

Conclusions?

What do we make of the failure to incorporate some of the crucial insights from Cartes Bancaires? It is neither good nor bad. It is a reality and a feature of the EU competition law system we have to acknowledge and with which we have to live.

We have acquired sufficient experience over the years to know that the Commission is likely to behave in this way – across provisions and over the years. I would say that, first and foremost, it is useful for the authority to be aware of this reality, so as to anticipate when and why administrative decisions are more likely to be annulled.

Written by Pablo Ibanez Colomo

4 April 2018 at 9:53 pm

Posted in Uncategorized

Ithaca Competition Summit (23-24 August 2018): REGISTRATION NOW OPEN

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Vathy

The programme for the 1st Ithaca Competition Summit is now closed, and is available in pdf format here. As you will see, there are very few events with such an amazing line-up – and definitely none that takes place in western Greece during the summer.

Spread over two half-days, the event is intended to give room for extra-curricular activities in and around Ithaca. But there will be time for intense discussions too: speakers will be presenting a set of papers that will come out in a special issue of the Journal of European Competition Law & Practice.

If you are interested, you can register in the following Eventbrite page. Prices are merely intended to cover the costs. If you access the page, you will see there are two ticket categories:

  • General admission tickets, at a price of EUR 160.
  • A special price for current students in EU or Competition Law, at a (bargain) price of EUR 40.

You better run: there is only room for 120 attendants!

Want to know how to get to Ithaca? Check the programme above. If you have any other questions, you can send an email to Ithaca.Summit@gmail.com.

Written by Pablo Ibanez Colomo

29 March 2018 at 8:23 am

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Horizontal mergers and innovation: why I agree with Tommaso Valletti

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Tommaso

It is only fair that I start this post by thanking those who have congratulated me on my recently announced promotion – including Alfonso, who could not have used nicer words.

Now that the announcement is behind us, it makes sense to go back to what really matters: weekly blogging. Few things have given me more satisfaction in my academic career.

And what a better way to do so than to comment on a recent speech of an academic-in-exile. Tommaso Valletti is one of the most articulate, thoughtful and entertaining speakers around. So when he takes part in a conference, we can be pretty sure something exciting and topical will have been discussed.

Last week he addressed one of the big issues of the day: the introduction of innovation considerations in merger control – and more precisely horizontal mergers.

In essence, Tommaso argued that there is nothing new, unusual or exceptional in recent mergers (such as Dow/DuPont) that have looked at the effects on innovation. In this sense, recent criticism of the Commission practice would not be justified.

I agree with this point of view. These cases – as far as I can tell – are competition law as usual. What is more – and perhaps more importantly – there is nothing parameter-specific about innovation. If cases like Dow/DuPont are criticised many cases concerning parameters other than price could also be criticised, and for the same reasons.

The Commission need not show harm to innovation – or any other parameter – in EU competition law

There is a key point which, I believe, has never been given the importance it should have – which is why I think it makes sense to insist on it.

A lot of criticism of the Commission practice seems to be based on the assumption that the Commission, when evaluating the likely effects of a merger, needs to show, to the requisite legal standard, its impact on innovation – or price, or quality, or output.

This assumption is not supported by the case law (the opposite is true, in fact). The Commission can show that a transaction will give rise to a significant impediment to effective competition without – just to mention an example – quantifying the price increases in the post-merger scenario.

It is clear from the relevant rulings that an impediment to effective competition can be established by proxy – in light of the nature of the product, the features of the relevant market and so on.

In other words: if it can be shown that a significant source of competitive pressure will disappear after the merger, and that nothing suggests that this loss of competitive pressure will be corrected by the behaviour of competitors, suppliers and/or customers, a finding of significant impediment to effective competition will naturally follow.

Thus, the Commission does not need to enter into discussions about whether the rate of innovation will go up or down after the merger. All that it would have to show is that two competitors were exercising significant competitive pressure on each other. Just remember the GC judgments after Ryanair/Aer Lingus and Deutsche Borse/NYSE Euronext are challenged.

A proxy is a proxy is a proxy

If the above is – I think – clear from the Guidelines on horizontal mergers and the case law, why so much controversy?

This controversy is in part explained by the fact that the Commission may take action without there being a market in the strict sense of the word. According to some views, this shift would represent a major development in merger control. There would be a difference between intervening in cases where competitive pressure does not revolve around a distinct product that can be readily identified.

Again, I am not sure I am convinced. We have always known that the definition of the relevant product and geographic market is not an end in itself – it is just a tool (or proxy) to identify the competitive pressure faced by firms.

If that is the case, it is difficult to argue that the definition of the relevant market is, as a matter of law, a prerequisite for intervention. In other words, there has never been anything sacred about market definition.

If the degree of competitive pressure can be identified by means of other proxies – research poles, or capabilities and so on – this should be perfectly acceptable. This, I believe, is one of the key points that Tommaso Valletti is making. And it is not even a new one: the Guidelines on horizontal co-operation agreement have suggested that these alternative proxies can always be used.

As can be seen, I fail to see what is really new under the sun.

Well, perhaps there is something new. The argument some stakeholders are making, which amounts to suggesting that a reduction of competitive pressure is not necessarily problematic in innovation-intensive industries.

That claim is not implausible and is worth debating. But the EU merger control regime is already equipped to deal with it. The efficiency defence is the appropriate forum in which to advance such claims. Would it be difficult, if not impossible, for them to suceed in practice? Of course. But such difficulty is in line with the exceptionality of the claim itself.

Written by Pablo Ibanez Colomo

23 March 2018 at 8:58 am

Posted in Uncategorized