Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Registrations Now Closed

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All tickets released for the Chillin’Competition 2018 Conference were gone in 4 minutes. Thanks so much for the interest! We hope you won’t be disappointed; the food at least should be good 😉

There are already another 250 people on the waitlist, and we also need to reserve seats for our sponsors, so unfortunately we need to close registrations now.

But there is still one way for you to make it: you can always persuade one of our sponsors (soon to be announced) to register you with their reserved seats…

 

 

 

Written by Alfonso Lamadrid

19 October 2018 at 10:28 am

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Chillin’Competition 2018- REGISTRATIONS NOW OPEN!

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You can register via this link.

Written by Alfonso Lamadrid

19 October 2018 at 8:59 am

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Reminder: Registration for the 2018 Chillin’Competition Conference Opens Tomorrow at 10.am CET

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Registrations will open up tomorrow morning at 10.am via a link that will be made available on the blog.

This is the final programe (minus the surprises).

THE CHILLIN’COMPETITION CONFERENCE 2018

9.00-9.30- Registration

9.30-9.45- Opening remarks featuring some substance and a few bad jokes (but that’s when we’ll be handing out the special conference goodies, so better be there!)

Alfonso Lamadrid (Garrigues and Chillin’Competition)

9.45- Panel 1: Competition law in its economic and political context

Isabelle de Silva (Autorité de la Concurrence)
John Fingleton (Fingleton Associates)
Luis Garicano (IE Business School)
Philip Marsden (CMA and College of Europe)
Tommaso Valletti (European Commission)

Moderator: Lewis Crofts (MLex)

11.15- KEYNOTE SPEECH by Commissioner Margrethe Vestager

11.45-12.15: Coffee Break

12.15- Panel 2: And so what? Procedural violations in EU Competition Law

Jérémie Jourdan (White & Case)
Stephen Kinsella (Sidley)
Jenny Leahy (Freshfields)
JĂŒrgen Schindler (Allen & Overy)
Wouter Wils (European Commission and King’s College London)

Moderator: Kyriakos Fountoukakos (Herbert Smith)

13.30- Syrian Lunch by “We Exist”

14.45- Panel 3- Market Power Revisited

Avantika Chowdhury (Oxera)
Kirsten Edwards-Warren (Compass Lexecon)
Eliana Garcés (The Brattle Group)
Bojana Ignjatovic (RBB Economics)
Oliver Latham (CRA)

Moderator: Alexandre de Streel (Université de Namur)

16-16.30- Coffee Break

16.30-17.45- Ted@Chillin’Competition (“Concepts”)

Pablo Ibåñez (LSE and Chillin’Competition)
Andriani Kalintri (City Law School)
Catriona Hatton (Baker Botts)
Robert O’Donoghue QC (Brick Court Chambers)
Denis Waelbroeck (Ashurst and Université Libre de Bruxelles)
Johan Ysewyn (Covington)

17.45-18- Break

18-19.15- Ted@Chillin’Competition (“Concepts”) cont’d

Christian Ahlborn (Linklaters)
Peter Alexiadis (Gibson Dunn)
Fiona Carlin (Baker McKenzie)
Sarah Long (EUCLID Law)
Rich Pepper (Cleary Gottlieb)
Randy Picker (University of Chicago)

19.15-? Drinks

Written by Alfonso Lamadrid

18 October 2018 at 12:54 pm

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Materials from the Ithaca Competition Summit

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Vathy

Not even two months have passed, but it already feels like a different (let’s call it golden) age.

On 23 and 24 August, around 90 pioneers, led by Peter Alexiadis, gathered in Vathy for the 1st Ithaca Competition Summit. I have wonderful memories of those days (and I think I speak on behalf of the rest of the attendees). The place is really stunning – I am not saying this to be nice to Peter, who, I think, would rather not have the word spread – and the academic side of things was, as expected, of the highest level.

Here are some of the materials used in the conference – remember they will come out in a special issue of the Journal of European Competition Law & Practice.

Session 1: Enforcement & Review in Competition Matters

Session 2: Behavioural Practices – Evolving Standards

Session 3: Merger Policy – Current and Emerging Trends

Session 4: Regulatory Policy Meets Antitrust Paradigms

 

Written by Pablo Ibanez Colomo

11 October 2018 at 2:54 pm

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My contribution to ‘Shaping competition policy in the era of digitisation’, available on ssrn

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Contribution

The European Commission had the great idea of inviting contributions to its conference on ‘Shaping competition policy in the era of digitisation’. I seized the opportunity and submitted mine.

If you are interested in them, the piece is available on ssrn (see here). As usual, I would welcome your comments.

What is the essence of my contribution? Well, I made four major points:

EU competition law is adequately equipped to deal with the challenges raised by digital platforms: The concerns identified by the Commission (leveraging, lock-in and so on) are not new, and are not exclusive to digital platforms. Past practice shows that the EU competition law system can deal effectively with them.

More crucially, I explain in the paper that there is no solid evidence suggesting that there is something specific about digital platforms that justifies a sectoral approach, or a carve-out. Similarly, there seems to be no reason to reinterpret existing competition law concepts. I fully understand the anxiety of some stakeholders, but it would not be a good idea to formulate policy on the basis of anxiety.

Some enforcement approaches pose significant risks, and more precisely:

  • The abuse of the ‘by object’ approach: The ‘by object’ approach to enforcement should only be relied upon where justified (both under Articles 101 and 102 TFEU). Competition authorities should avoid using this approach for conduct with ambivalent effects on competition.
  • The assessment of effects should be meaningful: one of my main concerns about enforcement in digital markets is that the assessment of effects becomes a formality, as opposed to a meaningful inquiry into the impact of a practice on firms’ ability and incentive to compete. As the case law shows, not every competitive disadvantage amounts to an anticompetitive effect, and not every practice that makes rivals’ life more difficult is necessarily in breach of competition rules.
  • Ad hoc decision-making should be avoided: this is a point that could not be emphasised enough. We all know that the outcome of cases is often context-dependent. However, it should always be possible to infer principles from individual decisions, and to understand how these decisions fit in the system as a whole (how they relate to the precedents and with the horizontal principles of the case law). Ad hoc decisions that are relevant only in the specific circumstances of the case would make intervention impossible to anticipate. I do not believe this is an outcome anyone desires.

In a similar vein, I explain there is no basis for some popular ideas or principles:

  • Vertical integration should not be seen, in  and of itself, with suspicion: It has become relatively commonplace to hear that vertical integration is a problem in itself – some go as far as to advocate the break-up of digital platforms. There is no basis for this idea, which contradicts the experience acquired over decades (as captured, for instance, in the Commission’s Non-Horizontal Merger Guidelines).
  • Common carrier obligations should be seen as remedies, not principles: This idea goes back to the point I made in my post on the Amazon probe. Discrimination (such as favouring an affiliate) is not, and has never been, a problem in itself (there is no basis in the case law for this idea). What is more, it has sometimes allowed for the emergence of new products and benefitted citizens in the process. The fact that a platform operator treats more favourably its own service is not as such evidence that the competitive process is not working, or that intervention is necessary. Again, the Commission’s Non-Horizontal Merger Guidelines capture the essence of this idea well.
  • There is no basis for favouring open vs closed systems, or vice versa (or to think that moving in one direction or the other is invariably good).
  • Innovation considerations should not replace robust effects analysis: In its third panel of the conference, the Commission intends to discuss questions such as ‘copycat’ products and their impact on innovation.
    • My main concern (explained at length in this article) is that innovation considerations may be used as a substitute for a robust assessment of the impact of the practice on competition (what I call the direct introduction of innovation considerations). Such a move would not only be at odds with the case law, but would lack a basis in mainstream economics (to be clear: the analysis in cases like Dow/DuPont is entirely uncontroversial from my perspective, as I explained here).
    • My secondary concern relates to the consistency of EU competition policy. In other areas, the Commission has taken action to ensure that copycat products (which is another name for generic drugs) are able to enter the market quickly and effectively. Action relating to ‘copycats’ in digital markets should be consistent with this policy (it would not be obvious to see why ‘copycats’ are encouraged as pro-competitive in one sector and discouraged as anticompetitive in another sector).

Finally, I claim that action in digital makets should make use of the whole range of legal tests available:

It would be inappropriate to apply a case-by-case effects analysis to every practice. The case law provides filters and proxies, and it makes sense to use them. For instance, some practices are deemed prima facie lawful. Other practices are subject to what I call an ‘enhanced effects analysis’, under which action requires evidence of, at least, indispensability (think of Commercial Solvents or IMS Health).

These ideas are captured in the figure below:

Legal tests

When is it appropriate to consider that a practice is prima facie lawful? When it is objectively necessary to attain a pro-competitive aim and as such incapable of restricting competition. You will all remember these are the reasons why franchising agreements, for instance, fall outside the scope of Article 101(1) TFEU altogether.

Some practices in digital markets may be new, or not obviously comparable to those already deemed prima facie lawful. As a result, it is necessary to ensure that firms are able to advance arguments showing that, because the practice is objectively necessary, it is not capable of restricting competition. Since Intel, there is no doubt that the possibility exists under Article 102 TFEU – we have known since Murphy that the possibility existed under Article 101(1) TFEU.

When is it appropriate to apply the enhanced effects analysis? When remedial action in a case would require a firm to alter the design of its product and/or change its business model (as in Commercial Solvents or CBEM-Telemarketing, both of which required indispensability).

 

Written by Pablo Ibanez Colomo

1 October 2018 at 1:36 pm

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The Challenge of Digital Markets: First, Let Us Not Forget the Lessons Learnt Over the Years (a JECLAP editorial with Gianni De Stefano)

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JECLAP

[An advance version of a piece jointly written with the better general editor of JECLAP, Gianni De Stefano, has recently become available online (see here). It is on online markets, and it gives you a flavour of how I will be responding to the Commission’s consultation. In short: my main fear, shared by Gianni, is that, when it comes to digital markets, we develop amnesia and we forget the very sensible principles that are enshrined in the case law and that are as valid today as they were when they were introduced. We hope you enjoy it. And please let us know your thoughts!]

Pleas for the reinvention of EU competition law in the digital age have become popular – so much so that they feature in the generalist press (and the pages of this journal). It is regularly claimed that efficiency and/or consumer welfare are poor guides to address the emerging challenges for the discipline. A whole new approach to competition law (labelled ‘New Brandeis’) defines its identity around this key tenet.

Such claims are also made in relation to specific practices or markets. The rise in the use of algorithms, some commentators argue, is a new threat that requires the refinement of existing doctrines. Similar arguments have been advanced in relation to the prominence of online platforms, which are deemed too mighty to leave legal principles untouched.

There is no reason to exclude digital markets from the reach of EU competition law. What is more, some of the economic dynamics of online markets may, in some circumstances, justify vigorous intervention. This said, it is far from clear whether there is something truly unique about the digital world that warrants a fundamental
rethink of the law as it stands.

This editorial suggests that the main risk for EU competition law, at this juncture, is not so much its alleged failure to adapt to new circumstances, but its tendency to forget the lessons learnt over the years.

A blank-slate approach to enforcement that ignores precedents and falls into the trap of well-known fallacies inevitably leads to enforcement errors – both type I and type II.

An overview of recent cases gives an idea of the sort of lessons that cannot be emphasised enough when applying EU competition law in digital markets.

One of these lessons is that price is not the only parameter that matters in EU competition law. More and more, firms compete on other parameters – such as quality and innovation. Some of the most successful technology giants have been able to achieve a strong position while keeping prices significantly above those of rivals.

What are the practical consequences of the above? It means, essentially, that conduct may have a significant impact on prices and still be lawful – even prima facie compatible with Article 101 TFEU and/or 102 TFEU.

This conclusion became apparent in the context of last year’s judgment in Coty. The argument against online marketplace bans is superficially persuasive. By limiting the ability of distributors to appear on major platforms like Amazon or eBay, such bans limit the intensity of intra-brand competition, thereby bringing up prices.

In its Metro I judgment of 1977, the Court pointed out that selective distribution, by its very nature, leads to less intense intra-brand rivalry on prices. In spite of this fact, it held that, under certain circumstances, this distribution method falls outside the scope of Article 101(1) TFEU altogether.

The Court acknowledged – in this and subsequent judgments – that, while restricting the intensity of price rivalry, selective distribution promotes competition in other ways, for instance by allowing a specialist trade capable of providing specific services, or, more generally, rapid market entry and expansion by manufacturers.

A second key lesson learned after years of enforcement is that restrictions of competition cannot be examined from an ex post perspective alone. As far back as 1966 – in SociĂ©tĂ© Technique MiniĂšre – the Court clarified that competition must be understood as such competition that would have existed in the absence of the practice.

This is an aspect that is also central in selective distribution cases – including Coty – and cases relating to other vertical restraints – such as franchising.

One of the fundamental questions in Coty was whether the protection of the luxury image of a product justified the creation of a selective distribution system. The Court of Justice answered in the affirmative, even though it leads to ex post restrictions – such as an online marketplace ban.

The logic underlying the Coty ruling seems clear. Had a manufacturer been unable to protect its brand image, it would not have resorted to a selective distribution system in the first place. In other words, the transaction would not have taken place in the absence of clauses seeking to achieve that objective. In relation to franchising, the Court understood that, if effective contractual mechanisms to protect the franchisor’s know-how and reputation were not available, such a method of distribution would simply not exist.

This is an issue that has featured prominently in cases relating to credit card arrangements – including MasterCard and the damages litigation that followed.

Courts understand, on both sides of the Channel, that it is not sufficient to point to the allegedly high prices that, seen ex post, a practice produces. Coming back to the expression used in the European Night Services judgment of 1998, it is necessary to consider whether there would have been ‘real, concrete possibilities’ for the parties to the agreement to achieve the same objective in its absence.

The third lesson is that legal tests should be shaped in a way that incorporate the above insights. Conduct, in EU competition law, falls somewhere in a spectrum that ranges from the prima facie unlawful to the prima facie lawful, with practices requiring a case-by-case assessment falling in between.

Prima facie unlawful practices are presumed to have net negative effects on competition. Prima facie lawful practices, on the other hand, can be safely presumed to be pro-competitive without it being necessary to engage in the case-by-case assessment that is required for other conduct.

Many enforcement errors would be avoided if courts and authorities, when evaluating the lawfulness of a new practice, considered where, and why, it falls in the abovementioned spectrum. Understanding the rationale behind the legal treatment of comparable practices is likely to achieve much in terms of consistency.

To conclude, the real threat of digital markets is that they may lead to the incorrect conclusion that innovation is also required in relation to legal analysis. The opposite is true. The legal edifice built incrementally over the years, broad and rich in insights, remains not only a useful guide to sound and consistent enforcement, but a valuable safeguard against enforcement errors.

Written by Pablo Ibanez Colomo

28 September 2018 at 11:12 am

Posted in Uncategorized

On the Amazon probe: neutrality everywhere (or the rise of common carrier antitrust)

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Amazon probe

Commissioner Vestager announced, last week, the launch of a preliminary probe into some of Amazon’s practices. According to the information that has been made available, the probe has been triggered by Amazon’s use of data coming from merchants using its marketplace.

Because the users of the marketplace are also Amazon’s competitors, the practice would create an uneven playing field that would be tilted to Amazon’s advantage (Amazon would benefit from all the insights coming from the data). As far as I can gather, this is what the case is about.

As soon as the probe was announced, I received a call from Bloomberg’s Aoife White (see here). I told Aoife that this trend seems to mark the rise of what I called ‘common carrier antitrust’ (the concept did not make it, alas, into the piece).

What do I mean by that? I mean that vertically-integrated online platforms are expected not to discriminate against rivals that are also their customers.

The wind seems to be blowing in a clear direction: we may be reaching the point where it is problematic, in and of itself, that an online platform’s affiliate is treated more favourably than third parties. This trend has been going on for a while: it is not by chance that Neutrality Everywhere? was the topic of our 2nd Chillin’ Conference.

If discrimination indeed becomes an antitrust problem in and of itself, online platforms may soon be subject, across the board, to the same sort of access, non-discrimination and accounting separation obligations to which incumbent telecoms operators are already subject (i.e. common carrier).

Is common carrier antitrust new? Is it business as usual?

This trend, if it wins the day, will change the shape and scope of EU competition law. So in short: no, I do not think it is exactly business as usual.

  • In essence, common carrier antitrust involves the extension to all dominant companies of some principles that originally applied in a relatively narrower context.
  • Strict common carrier obligations make sense in the context of Article 106 TFEU (companies that benefit from exclusive or special rights). GT-Link is a wonderful example in which strict non-discrimination obligations are uncontroversial.
  • It is not unreasonable to extend common carrier principles to dominant companies that control an indispensable input (as in Commercial Solvents and Telemarketing). This is a point that was also made by the Court of Justice in Deutsche Telekom (see paras 230-233).
  • The Amazon probe is one of many recent examples that signal the likely expansion of common carrier obligations in relation to non-indispensable inputs – Google Shopping is probably in the mind of everyone reading this; but Android, at its heart, is also about a vertically-integrated firm favouring its affiliates through various contractual devices. The Internet Explorer case was closed in a very ‘common carrier’ way: a must-carry obligation placing Microsoft’s and competing web browsers on an equal footing vis-Ă -vis the platform (operating system).
  • Amazon might (only might, we do not even have a formal investigation) signal a step forward in the expansion of common carrier antitrust. If discrimination is deemed problematic in and of itself – that is, absent actual or potential foreclosure, then the practice would have become prohibited by its very nature (that is, by object). The same would happen, for all practical purposes, if the threshold of effects were set at a low level.
  • If so, the case would mark the expansion of common carrier antitrust all the way through the legality spectrum: the scope of common carrier antitrust would have extended from Article 106 TFEU firms –> to indispensable inputs –> to dominant firms (subject to an effects analysis) –> to dominant firms (by object).

If we accept that there is, in some respects, a friction between common carrier antitrust and the case law, the next question is whether this trend, under which discrimination may end up being perceived to be a problem in and of itself, is desirable.

My view is that we should have an open and explicit debate about the merits and consequences of common carrier antitrust (for competition law and for markets), and about the range of legal tests that can be used to address discriminatory conduct. It would be a bad idea to just pretend that it is business as usual.

In this regard, I guess my point of view is well known:

  • EU competition law never saw vertical integration, or favouring an affiliate in a vertical integration setting, as a problem in itself. On the contrary. It has long been accepted as undisputed that discrimination by vertically-integrated firms is not only pervasive but is often actually pro-competitive.
  • In many instances, discrimination (which manifests itself in many ways) paves the way for competition; sometimes, it is what makes competition possible in the first place. Some products and some innovations exist only as a result of a vertically-integrated firm favouring an affiliate.
  • I can think of many examples, some of which I discussed with Aoife:
    • HBO, which has transformed TV for the (much) better, is a child of discrimination. Cable companies expected to attract subscribers to a nascent technology by keeping attractive programming to themselves, and by giving it more favourable treatment within the platform.
    • Supermarkets favouring their private labels has not only done wonders for the competitive process, but has also brought prices down and improved the shopping experience of ordinary people.
    • I have discussed the example of the Tour de France on the blog. The Tour de France was created by a newspaper to attract new readership. The point of creating the event was to favour its affiliate so it could give better and more exhaustive coverage.

Some people may argue that the Amazon probe is addressing Amazon’s incentive to favour its own service. Commentators have spoken, in this regard, of a ‘conflict of interest’ (that is, an incentive to foreclose), which would be the real problem (see here, for instance).

Again, the said conflict of interest cannot be – at least, it has never been – a problem in and of itself. And this in spite of the fact that the incentive to foreclose will in many cases be real and difficult to dispute.

Why do firms refuse to license their intellectual property rights? Because they have an incentive to keep the downstream activity for themselves (i.e. they have an incentive to favour their own downstream services over those of rivals). There is probably not a much better example of a conflict of interest.

Taken to its logical consequences, the claim that the conflict of interest is in itself a problem, would mean that dominant firms should not be entitled to refuse to give access to their own tangible or intangible property.

And, of course, that would be a major departure from competition law as we know it – if there is something that we know for sure is that, no matter how undisputed the conflict of interest, only in exceptional circumstances are firms required to license their intellectual property under Article 102 TFEU.

***

I guess the many words I have written above can be summarised fairly easily: common carrier antitrust would entail, in some respects, a departure from EU competition law as we know it.

If this is the direction of travel, let us have a long deep thought about the major consequences that come with this new way of conceiving competition law. In this sense, the consultation launched by the European Commission on this question comes across as the right thing to do (and note that you still have time to submit your views).

Written by Pablo Ibanez Colomo

25 September 2018 at 10:29 am

Posted in Uncategorized