Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Upcoming events

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Although with a bit of a delay, here are some events organized by friend of this blog in the coming weeks and that might be of your interest:

On 8 September the 11th Junior Competition Conference will take place at the Competition Appeal Tribunal in London. This is an event organized by the editors of the Competition Law Journal and that we have always supported. For details on how to register, click here.

On 15 September the University of  Leeds will be hosting a conference titled Competition Law in a Global Context: Analysing the Trans-Atlantic Divide with a very promising program. The conference will be preceded by Pinar Akman’s inaugural the day before (see here).

On 25 September LeadershIP will put together a conference in Brussels to discuss  recent international developments having to do with IP issues. More information is available here.

Written by Alfonso Lamadrid

18 August 2017 at 11:20 am

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My first piece as joint general editor of the Journal of European Competition Law & Practice

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JECLAP

I am delighted to have joined the Journal of European Competition Law & Practice as joint general editor (together with my friend Gianni De Stefano, from Hogan Lovells; and an impressive team of editors). JECLAP has become a reference in a short time, and I am really excited to become involved in this venture (I just regret that I will not overlap with Judge Nihoul, who is stepping down).

I reproduce below my first piece published in my new capacity. The journal version is available here. I look forward to your comments, and to your submissions too (I have published in the journal a couple of times and can tell you first hand that JECLAP has the swiftest and most professional process I have seen around; I can also tell you that I will make sure it stays this way!).

I leave you with the editorial:

Changing Times for JECLAP, Changing Times for Competition Law

In less than 10 years, JECLAP has established itself as one of the (if not the) leading competition law journals in Europe. Thus, I felt honoured (and, why not say it, also somewhat overwhelmed) when I was asked to replace Paul Nihoul as one of the general editors—together with Gianni De Stefano. Needless to say, I gladly accepted. Inevitably, doing so made me think about changes in the enforcement of EU competition law since JECLAP’s creation, and about the role that the journal can play in these changing times.

This editorial is prepared at a time when EU competition law is undergoing a noticeable evolution. When JECLAP was founded in 2010, it looked like we were close to reaching the ‘end of history’ in the field. A landmark moment was the adoption of the Commission Guidance Paper on Article 102 TFEU enforcement—which was in fact the subject of an article by Giorgio Monti in the first issue. It looked like efficiency and consumer welfare were just about to become the keystones around which the interpretation and application of EU competition law would revolve.

Things look very different 7 years later. We have witnessed the emergence of new analytical frameworks and new ideas. Concepts like choice and, more recently, fairness, have found their way in academic and policy discussions. Paul Nihoul himself has in fact been one of the most vocal proponents of choice as a guiding principle in EU competition law (see for instance ‘Choice vs Efficiency’, JECLAP (2012) 3(4): 315–316). What these developments show is that the efficiency-based framework has failed to win the hearts and minds of many lawyers. The consensus around consumer welfare that exists on the other side of the Atlantic has not materialised in Europe, and perhaps never will.

In addition, new developments in the field are pushing the boundaries of EU competition law. Looking back at the past decade, it looks like authorities in Europe have become less reluctant to interfere with the exploitation of intellectual property rights, to mention one example. Pay-for-delay settlements in the pharmaceutical sector, and the use of injunctions in the context of standard-essential patents (both abundantly discussed in the pages of JECLAP) are clear milestones in this sense. Similarly, discussions relating
to the use of big data and the impact of algorithms on firms’ ability and incentive to engage in collusive and/or discriminatory conduct have moved to the centre stage.

What is, and can be, the role of JECLAP in reaction of these developments? Allow me to share a few thoughts with you.

Place the law at the centre of the analysis: If EU competition law is fascinating, this is in part because it is at the intersection of many disciplines. The downside is that, for that very reason, we run the risk of ignoring that enforcement and policy-making is achieved through the law. It is my hope that JECLAP will contribute to ensuring that the law remains at the centre of discussions. This can be achieved in many ways. One way is to keep up to date with legal developments and putting them in their economic, regulatory and technological context—whether through current intelligence pieces or through the excellent surveys that have greatly contributed to the journal’s name.

I also hope JECLAP will engage critically with new approaches to the interpretation and enforcement of EU competition law. As has been recently argued in these same pages, there is no reason to rule out fairness as a guiding principle for enforcement. At the same time, it is necessary to bear in mind that high-level objectives need to be made operational. If a principle is not, or cannot, be broken down into a set of practicable legal
tests (that is, if it lacks a concrete content that can be anticipated in advance by stakeholders), it may open the door to arbitrary decision-making—and arbitrary decision-making is inherently unfair.

Economics? More of it! This said…: Economic tools are widely used in EU competition law. In fact, never in the history of the discipline has its use been more frequent and pervasive. On the other hand, it is impossible to ignore that the rise of economics has been received with scepticism, if not overt resistance, by some lawyers. Several factors can explain this reaction. The perceived ‘imperialistic’ inclinations of economics—that is, the tendency of economists to apply their approaches and techniques to phenomena that are studied by the other social sciences—is one of them. In this sense, it is hoped that
JECLAP will continue to bridge the divide by encouraging the dialogue between lawyers and economists.

It is also hoped that JECLAP will help understand that economic analysis makes some fundamental contributions to the discipline that are often ignored. Economics in competition law is not just about defining overarching benchmarks (namely efficiency and consumer welfare) and about econometric forecasting. It is also valuable as—if not primarily—a means to define boundaries on administrative action and, by the same token, as a tool that contributes to the clarity and predictability of the law.

A platform to deal with new (and old) ideas: It is exciting to see there is no shortage of new ideas in competition law, and JECLAP editors would like the journal to contribute to their production and dissemination. On the other hand, we would like to encourage discussions that do not miss the forest for the trees and that address transversal issues that are of the utmost relevant in practice. These are the sort of questions that require the combined skills of practitioners—who have a nose for relevant issues—and academically minded lawyers—who have developed the ability to see the big picture.
JECLAP has been and should continue to be the preeminent forum for these exchanges.

In this sense, and as I write this editorial, I can think of some questions of fundamental importance that have not yet been clarified. For instance, there is still uncertainty as to what is exactly meant by an ‘anticompetitive effect’ in the case law. The same is true of other fundamental concepts, including that of counterfactual—which is central to ongoing cases relating to the exploitation of intellectual property rights (just think of Lundbeck and Servier). Readers are hereby invited to contribute to these.

JECLAP is a success story. I have no choice but to work hard, together with the rest of the team, to ensure the success lasts many more years!

Written by Pablo Ibanez Colomo

14 August 2017 at 7:34 pm

Posted in Uncategorized

Some thoughts on Cyril Ritter’s ‘Corporate funding for antitrust academics can be a problem’

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As promised, I am back with some thoughts on Cyril Ritter’s recent post on corporate funding of academic research in antitrust. I will point out, to begin with, that the contribution is most welcome. I would like academics to discuss the issue of corporate-funded research as openly and courageously as Wouter Wils discussed the issue of prosecutorial bias in his magisterial 2004 piece on the combination of functions within the Commission.

I do not have major disagreements with Cyril. What is more, he makes some important points with which I agree wholeheartedly. I just have some comments here and there. This is arguably inevitable, as his was a short blog post, not a dissertation.

‘Corporate funding changes the tone of academic discourse’

Cyril argues that corporate-funded research can have the effect of moving the efforts of academics away from basic research and towards the discussion of case-specific issues or concerns.

I agree with Cyril that there is not enough research on fundamental questions and there is certainly too much of an overflow of articles discussing individual cases or discrete sub-sets of cases. And I am ready to concede that corporate funds may exacerbate this trend – whether it is the main cause of the phenomenon is a different question.

I have long seen the trend with concern and will lead by example. If anyone among our readers is considering a PhD: forget about pay-for delay or SEPs. Think about a dissertation on fundamental, horizontal issues that will stand the test of time!

Even if I agree with the above, a reader of Cyril’s post may get the impression that corporate-funded articles are always one-sided advocacy tracts. It would not have hurt to clarify in the post that this is not necessarily the case. Corporate-funded research can be as rigorous in style and substance as research funded via tuition fees and/or the public purse. Again, the example of Toulouse is one that comes to mind.

The ‘subtle’ and ‘insidious’ effects of corporate-funded research

Cyril points out that corporate-funded research may have effects that go beyond the funding of a specific piece. The same effects may be expected of consulting relationships entertained by academics. As a result of these ‘subtle’ and ‘insidious’ effects, academic work may be biased in favour of the interests of the firms funding the research or consulting work.

For the most part, I fully agree. Cyril describes phenomena that have already been identified in the relevant literature, and it is important to engage with them.

As an academic, I am far less persuaded by one of the risks he identifies, however. According to Cyril, academics may be reluctant to change their minds and contradict the viewpoints already expressed in corporate-funded work.

People who are reluctant to change their mind in public belong with druids and preachers, not with academics. The whole point of research as an intellectual exercise is to advance knowledge. Advancing knowledge involves, by definition, refining prior positions and occasionally abandoning them altogether.

I would say more: the harder one thinks about an issue, the more likely a change of mind becomes. A giant like Keynes was famous for the fluidity of his positions. ‘When events change, I change my mind. What do you do?’, Paul Samuelson said, when a journalist pointed to inconsistencies in the successive editions of his legendary textbook about the desirable rate of inflation.

I can also think of some giants in our field. When the latest edition of Whish & Bailey’s textbook came out, I noted in the blog that the position in relation to exclusivity agreements under Article 102 TFEU had evolved. If you read my blog post, you will not be able to find the slightest hint of criticism about this change of mind. On the contrary, I celebrated it as evidence suggesting that ours is a discipline in constant flux.[1]

I understand that the above may not be obvious to non-academics. This fact may explain, for instance, why many in the EU competition law community entertain bizarre ideas about the ordoliberals. Some view ordoliberalism as some sort of cult in which a fixed set of fossilised ideas are worshipped. Nothing could be further from the truth. Ordoliberals disagreed among themselves at discrete points in time, and their views have evolved over the years, as Peter Behrens and Heike Schweitzer have brilliantly explained.[2]

Collective action and corporate funding: what about capture?

Even though Cyril acknowledges that the issue is more complex in practice, a reader may conclude from his piece that corporate-funded research typically, or as a rule, advocates positions opposed to those of competition authorities. Corporations would be in the anti-intervention camp, and public authorities in the pro-intervention camp. As a result, corporate-funded research may create a climate that is hostile to action by competition authorities, thereby harming the public interest.

However (and Cyril points this out at the beginning of his piece), it is not unusual to see corporations siding with public authorities in the pro-intervention camp. By the same token, there is no shortage of corporate funds for research advocating action by competition agencies. Suffice it to think of patent hold-up and the many companies that have funded pieces explaining why it is a real problem requiring some form of intervention.

If one takes this factor into consideration, the issues discussed by Cyril could be developed further. Instead of creating a climate contrary to intervention, corporate-funded research may very well lead to unwarranted action. Why? Companies in the pro-intervention camp may be able to exploit to their advantage the cognitive biases that Wouter Wils masterfully described in the abovementioned piece.

The risk of agency capture by ‘purchasers’ of regulatory intervention is well identified in the literature. It is also known that what is in the interest of companies advocating intervention is not necessarily in the interest of competition and consumers – in fact, it often has the effect of harming both competition and consumers. As Cyril rightly explains, powerful special interests can organise themselves better than larger groups, such as end-users.

There are other factors that may actually enhance the prominence of pro-intervention views. As a reader pointed out in their reaction to Cyril’s post, proactive enforcement is ultimately in the interest of practising competition lawyers. In addition, pro-intervention views may be more popular in academic circles than views advocating restraint and/or arguing that there is nothing new under the sun. I was sharing this impression last month over coffee with a senior academic.

These quibbles aside, Cyril should be congratulated for enriching the debate and taking it to another level. Thanks so much!

[1] One should note, in addition, that Richard worked as a law firm partner for a number of years. This is an example suggesting that the risk identified by Cyril may not materialise in practice, or that the phenomenon may be less pervasive than he appeared to suggest in his post.

[2] I am proud to disclose that Heike was my PhD supervisor in Florence and that I was Peter’s assistant in Bruges.

Written by Pablo Ibanez Colomo

28 July 2017 at 8:50 am

Posted in Uncategorized

AG Wahl in Case C-230/16, Coty: four lessons in common sense (by Pablo)

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Common sense

The much-awaited opinion in Coty is finally out. When reading it, one cannot avoid wondering whether all the excitement was justified. AG Wahl’s take on the issue is so full of common sense that the outcome he suggests to the Court comes across as the logical one.

The Oberlandesgericht in Frankfurt raised two key questions. The first was whether the protection of the brand image of a product is a legitimate requirement that justifies the setting up of a selective distribution system. The second is whether an online marketplace ban amounts to a restriction of competition by object within the meaning of Article 101(1) TFEU – and, by the same token, a hard-core restriction within the meaning of the Vertical Block Exemption Regulation.

AG Wahl takes the view that a selective distribution agreement aimed at preserving the brand image of a product falls outside the scope of Article 101(1) TFEU altogether if the conditions set out by the Court in Metro I are fulfilled. In addition, AG Wahl holds that an online marketplace ban is the sort of restraint that is acceptable in the context of a selective distribution agreement – and as such not restrictive by object. According to the Opinion, any such ban is comparable to the sort of restraints found in the off-line world and which the Court has already ruled are compatible with Article 101(1) TFEU.

AG Wahl also concludes that an online marketplace ban is not a hard-core restriction under Articles 4(b) and/or 4(c) of the Block Exemption Regulation. This is important insofar as it means that such a ban benefits from the exemption without it being necessary to engage in a case-by-case inquiry about whether the conditions laid down in Metro I are fulfilled.

More than the outcome, which does little more than follow the principles laid down in prior case law (full of common sense too), it makes more sense to say a word of the lessons that we can draw from the opinion.

Lesson 1: Selective distribution is primarily about preserving the brand image of a product

The protection of the brand image of the manufacturer is the primary reason behind the use of selective distribution systems. This is particularly obvious in the case of luxury products. It would make little sense for producers to resort to third-party distributors if doing so would jeopardise the image and aura of prestige of their goods. See in this sense para. 43 of the Opinion: ‘Brands, and in particular luxury brands, derive their added value from a stable consumer perception of their high quality and their exclusivity in their presentation and their marketing. However, that stability cannot be guaranteed when it is not the same undertaking that distributes the goods’.

Against this background, it is only reasonable to hold that any restraints aimed at preserving the brand image of the products are not as such restrictive of competition, whether by object or effect. Any such restraints are objectively necessary for the existence of selective distribution systems in the first place (the counterfactual all over again!).

This idea is not new. As AG Wahl holds, it was already in the case law. It is an idea that is also present in the case law relating to franchising – in Pronuptia, the Court held that restraints aimed at preserving the reputation and uniform brand image  of a product are not caught by Article 101(1) TFEU. AG Wahl applies a reasoning that is similar to the one found in the latter; see again para 43: ‘The rationale of selective distribution systems is that they allow the distribution of certain goods to be extended, in particular to areas geographically remote from the areas in which they are produced, while maintaining that stability by the selection of undertakings authorised to distribute the contract goods’.

Lesson 2: Competition is not synonymous with ‘price competition’. It is much more than that

The Opinion is also a valuable reminder that firms do not only compete on price, but also, inter alia, on quality and innovation. This is a key point that the Court understood very well in its lucid Metro I and Metro II judgments. If it was already clear in the late 1970s and early 1980s that firms do not only compete on price, this fact is all the more apparent in 2017 – I am reminded of this every time I am in a classroom full of 20-somethings that have a marked preference for pricey Apple products.

Accordingly, it is plain irrelevant to argue that online marketplaces intensify price competition among retailers. The Court and the Commission have always understood that, while selective distribution systems restrict intra-brand price competition, they promote competition in other parameters. They encourage producers to compete on the quality of their products and they provide an incentives for retailers to improve the shopping experience of end-users. Why would a restraint that is known to have such positive effects be restrictive by object?

AG Wahl summarises these issues particularly eloquently in para 46 of the Opinion: ‘It should be borne in mind that the compatibility of selective distribution systems with Article 101(1) TFEU ultimately rests on the notion that it may be permissible to focus not on competition “on price” but rather on other factors of a qualitative nature. Recognition of such compatibility with Article 101(1) TFEU cannot therefore be confined to goods which have particular physical qualities. What matters for the purpose of identifying whether there is a restriction of competition is not so much the intrinsic properties of the goods in question, but rather the fact that it seems necessary in order to preserve the proper functioning of the distribution system which is specifically intended to preserve the brand image or the image of quality of the contract goods’.

Lesson 3: The scope of Pierre Fabre is confined to outright bans on online sales

Even if the above seemed clear for a long time (I have always told my students that the whole point of selective distribution is to preserve the brand image of a product) Pierre Fabre created some confusion. This is so because the Court appeared to suggest that the protection of the prestigious image of a product is not a legitimate requirement justifying the sort of restraints found in a selective distribution system.

AG Wahl argues – and I agree – that such statement must be confined to the specific circumstances of that case (para 78). In other words, he takes the view that the Court examined whether the protection of the brand image could justify an outright ban on online sales. Thus, Pierre Fabre was not making any general statements about the former. As explained in the opinion, any other reading of that ruling would contradict a consistent line of case law that acknowledges the role of selective distribution in the protection of the brand image of the producer (para 85).

Lesson 4: Competition law and intellectual property law go hand in hand

The single most important and relevant precedent for Coty was not a competition law case, but an intellectual property one. In Copad, the Court held that the licensor of a trade mark may impose restraints on a licensee aimed at protecting the brand image of its products. Accordingly, it may require the licensee to sell the product to members of the selective distribution network.

If one accepts that Copad is good law – and it is – then it is difficult to see how the Court can take a different view in relation to a contractual clause that has the same purpose. As explained by AG Wahl in paras 88 and 89 of the Opinion, any other outcome would lead to an inconsistency that would not be easy to justify.

Written by Pablo Ibanez Colomo

26 July 2017 at 6:33 pm

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Important- Save the Date for The Ultimate Competition Law Event- 25 October 2017

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3rd Chillin'Competition Conference

Our next and third annual Chillin’Competition conference will be taking place on Wednesday 25 October 2017.  We have confirmed the date with a surprise guest (we cannot tell you more, but just a hint: she is Danish and, among other things, knits elephants).

We want to make this a uniquely interesting, fun, relaxed and disruptive conference, and we are already thinking about new formats and ideas, so:

If you’d like to help us sending ideas or proposals our way (on new formats, themes, etc), please do so!  A good idea will get you a guaranteed seat…

If you’d like to attend, save the date! At the beginning of September we will publish a tentative programme as well as information on how to register. Remember that last year all seats were gone in 6 minutes (if you think that was fast you should have seen some of the attendees at the open bar after the conference…).

-If you’d like to sponsor it, drop us a line. 

 

Written by Alfonso Lamadrid

25 July 2017 at 4:24 pm

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Corporate funding for antitrust academics can be a problem, by Cyril Ritter

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[Cyril Ritter, an ‘academically-minded Commission official’ (Chillin’ Competition) has recently written a post addressing one of the issues of the day. Interested as I always am in his views, I was delighted when he told us that he was keen to ‘multicast’ his views to make them available on our blog. I am sure there will be reactions to this piece — I myself have some comments, that I will be posting at some point in the coming days. Enjoy!]

Please note that the following are Cyril’s personal views

The topic of corporate funding for academic articles — and the possibility of academic bias — have been the subject of many recent press articles (here and here), blog posts (hereherehere and here), reports (here and here) and academic articles (herehereherehere and here, for example). This debate is playing out on both sides of the Atlantic, mostly in the areas of antitrust, intellectual property, and internet regulation.

Corporate funding has been linked to ethical issues in medical research, food safety and nutrition, financial regulation, and other fields. There is no reason to believe that antitrust law and economics are necessarily immune to such concerns.

The response from some antitrust academics has been to make a series of arguments that are not particularly consistent with each other: (a) the funding doesn’t matter, only the ideas and arguments matter; (b) the campaign for better disclosure of corporate funding is itself driven by corporate funding from the other side, with a particular agenda in mind; (c) there is no evidence of academic bias; (d) there is no bias when academics express their sincere views; (e) at the same time, let’s aim for better disclosure of funding — but not all types of funding.

To be fair, antitrust agencies sometimes have relationships with academics as well, either as advisers or to produce studies, or by hiring academics in part-time or short-term positions. And corporate funding for academics can take place on both sides of an argument (antitrust defendants and antitrust complainants, licensors and licensees, content providers and platforms, infrastructure owners and “over the top” providers, etc).

The one constituency which is systematically under-represented in academic debates is consumers. This is probably another manifestation of the collective action problem: more concentrated interests are better at defending themselves, while larger groups — whose members have more diffuse interests — have more difficulty organising and financing efforts to push their interests. Given that many European academics’ salaries are paid by taxpayers, one would expect them to work in the public interest, instead of working for particular corporate interests (I am indebted to Ioannis Lianos for this idea).

Read the rest of this entry »

Written by Pablo Ibanez Colomo

24 July 2017 at 9:54 am

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FCP Annual Training on Competition Law and Economics: Second Edition 2017-2018

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FCP

One of the activities of our friends from the Florence Competition Programme in Law & Economics (coordinated by Giorgio Monti) is the annual training on competition issues that is designed for members of competition authorities and public officials interested in the most recent developments in the field (and open, to be sure, to practising lawyers and economists!)

They tell us that registration for the second edition of the training is still open until the end of this month. More information on the programme and the faculty can be found here and in the video below.

 

Written by Pablo Ibanez Colomo

20 July 2017 at 1:53 pm

Posted in Uncategorized