Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

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

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‘If the gloves don’t fit, acquit!’, by Denis Waelbroeck

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Gloves

[As promised yesterday, I am back with a post with materials from our ‘workshop’ on EU courts and competition law. I am delighted that this first post of the series features Denis Waelbroeck‘s intervention. I feel immensely fortunate to have been Denis’s student and teaching assistant in Bruges. As someone who cares deeply about the EU and its institutions, it was only natural to have him with us for the occasion. He chose an important, original and timely topic – and before I forget: the title of the post was suggested by Alfonso!]

I thought that– in these five minutes you have given me – I might say a word about the EU Courts’ judicial review in competition cases, but would do so from another angle than the one which has been very much at the centre of discussions post-Menarini.

There are indeed two distinct problems in my view with the “too complex to review” case-law:

  • One is the Menarini problem – or the “Article 6 ECHR issue,” with the Commission being prosecutor and judge, and the need as a result to have a “full jurisdictional review” – that problem is well rehearsed and extensively discussed in Fernando and Eric’s excellent new book.
  • there is however in my mind a second issue, which has caught less attention and that relates to the predictability of the law.

To put it bluntly, if the Court says : “this issue is too complex for me to understand and to control“, then the question is: why is it too complex for the Court but not “too complex” for companies to understand ? Or to put is differently : if the law is “not clear“, can you really punish parties for infringing it ?

This raises in other words an “Article 7 ECHR issue. As we know, Article 7 ECHR effectively translates into European law the old Latin rule that “nulla poena sine lege certa” (“No punishment without a clear law“) (see also Article 49 Charter).

The old Romans indeed wisely held that before imposing sanctions, the law should be “clearer than the day” (Justinian Code book IV, vol XX, I, 1-258).

In other words, if the Court finds that the law is “too complex” to be applied by it, then – in my mind – this has serious consequences :

  • First, you cannot impose sanctions on a party for not complying with a law which the Court itself finds “too difficult to understand“.
  • Second, you cannot give the Commission the “benefit of the doubt[1]. Rather, if someone should have the “benefit of the doubt“, it is the accused and not the enforcer (to put it in Latin again : “in dubio pro reo“)[2].
  • And still for the same reasons, if the law is not clear, not only there can be no sanction, but there can in my view be no fault giving rise to liability and damage actions.

The Swiss Bundesverwaltungsgericht has made this point nicely in its Swisscom judgment of 24 February 2010 (see 9. Wettbewerbskommission, B.2050/2007, point 4.5.1) where it ruled that the Swiss equivalent of Article 102 TFEU lacked, in and of itself, the predictability necessary for the imposition of penalties.

And also in the United States, fines will be imposed for per se violations, i.e. for cartels, but not for the more contentious infringements under Section 2 of the Sherman Act for instance. (See US DOJ Report on “Competition and Monopoly : single-firm conduct under Section 2 of the Sherman Act” of September 2008 – https://www.justice.gov/sites/default/files/atr/legacy/2009/05/11/236681.pdf).

Now, as we know, the European Courts have taken on the contrary the view that “the use of imprecise legal concepts within a provision does not prevent liability being established against a person who contravenes it. As the Commission point out, if it were otherwise, an infringement of Articles 101 or 102 TFEU – which are themselves drawn up using imprecise legal concepts, such as distortion of competition or “abuse” of a dominant position, could not give rise to a fine without the prior adoption of a decision establishing the infringement” (GC, 27 June 2012, Microsoft, T-167/08, EU:T:2012:323, para. 91).

In view of the general principle of legal certainty, I wonder whether this is the right approach.

But to make myself very clear: my point is not to criticise “modernisation“, I am all for “economic based approach“, but my only point is that if it implies that the law becomes “too complex” to be reviewed, then the competition authority should look at it differently : then its role is not so much to impose sanctions. Then the authority in fact becomes a regulator for the future. That is no less important and no less useful. But it changes obviously significantly the nature of the rule.

So I would like to submit that this is an important dimension which requires further thinking and discussions.

 

[1]                Systematic approach of the European Courts, see e.g. GC, 30 January 2007, France Telecom (Wanadoo), T-340/03, ECR, EU:T:2007:22, paras 129 and 153.

[2]            Ammianus Marcellinus relates in his Rerum Gestarum how Numerius stood on trial before Emperor Julian. His prosecutor, Delphidius, “a passionate man” seeing that there was not sufficient proof against the accused, exclaimed vehemently “Ecquis, florentissime Caesar, nocens esse poterit usquam si negare sufficiet? (Oh, illustrious Caesar! If it is sufficient to deny what hereafter will become of the guilty?“) to which the Emperor replied “Ecquis, ait innocens esse poterit si accusasse sufficiet?” (“If it is sufficient to accuse, what will become of the innocent?“).

Written by Pablo Ibanez Colomo

18 July 2017 at 7:30 pm

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One week, three colleges (Bruges, King’s, Pembroke): my trips in June – before it’s too late

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Prembroke

For some reason, I found myself presenting at many more conferences than I thought I would during June. Oh, well. Perhaps some fresh air was not a bad idea after a few months typing. I had a particularly intense week that started in Bruges, continued in London and finished in Oxford. Before it is too late (if it is not already), I thought I would share some materials (including the pics!).

Wednesday 21 June: In Bruges, I had the pleasure of presenting at the symposium organised by the students of the Law & Economics specialism (ELEA in Bruges jargon). Other speakers included Mike Walker (CMA), Luca Prete (Chambers of AG Wahl), Alex de Streel (Namur and CERRE) and Miguel Rato (Quinn Emanuel).

My presentation was on product design. You can find it here. We had great fun, and the event was a good reminder of how lucky I am to teach in Bruges: we went beyond the allocated time and the students wanted to go on with the discussion. At some point, I was clearly the one who wanted a break and a glass of white (and it does not happen often)!

Baskaran

Friday 23 June: Friday took me to King’s College London. As every year for the past three, I acted as a judge in the Herbert Smith Freehills Competition Law Moot. Congratulations to Hong Kong University (and its coach, the great Thomas Cheng), for their second victory in a row! And thanks to Baskaran Balasingham (you will find him above, next to Alison Jones) for sending the picture.

Saturday 24 and Sunday 25 June: And finally, Oxford, where I shared, in the context of the legendary antitrust symposium, some thoughts on the analysis of the counterfactual in EU competition law. The atmosphere of this symposium is truly unique, and the setting (Pembroke College) does not do any harm. The Oxford competition law people (Ariel, Julian, Maria) are, I guess, very proud of their creature.

Here is the presentation I gave. The paper based on the talk will be coming out in the Journal of Antitrust Enforcement. At Oxford, my problem was the opposite than the one I had in Bruges: I wish I had had much more time to go in detail over Maria’s and Ioannis’s excellent comments!

As you know, the marathon continued, in Brussels, the following week, in the form of our ‘workshop’ (in Alfonso’s jargon) on judicial review. More on this tomorrow!

Written by Pablo Ibanez Colomo

17 July 2017 at 7:39 pm

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On companies funding legal research: beyond the sound and the fury

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Placebo cover

Wow! As soon as the Google decision came out, the atmosphere got very nasty (so much so, in fact, that it occasionally bordered on the comical). And just when I thought things were calming down, the so-called Campaign for Accountability released its bomb: a database of research work directly or indirectly, actually or potentially, financed by Google. The effect of this sensational piece was later amplified when the Wall Street Journal and The Times chose to run their own stories on the same topic.

Any attentive reader of these stories cannot avoid the impression this whole fuss is probably not driven by a genuine concern with academic integrity. More plausibly, it is about some companies fighting a proxy war with Google. Oracle is one of the firms behind the famous Campaign and the Wall Street Journal – it is not a secret – is one of the newspapers reportedly seeking to obtain antitrust immunity to gain bargaining power vis-à-vis Facebook and Google.

Like Google, it looks like these companies (and/or the groups of which they are part) are trying to advance their corporate interests in the way that they see fit. Like Google, they are all perfectly entitled to do so.

The trouble with proxy wars is that the victims are third parties, not those fighting them. In this case, the victims could be academics and the credibility of legal research at large. Such may be the outcome if the agenda continues to be dictated by people who, I strongly suspect, do not care about research and academics, but about corporate profits (which, again, they are perfectly entitled to pursue).

We have reached the point where legal academics (and only legal academics) should take ownership of the issue and agree on some common standards regarding, inter alia, disclosures and conflicts of interests. Economists and physicians have been here before – and we European lawyers are probably lagging behind. I understand that several initiatives are under way, and I can only welcome these. I will do my part from the blog and elsewhere (more on this soon).

The positive impacts on common standards on conflicts of interest. I can only see upsides in agreeing on common standards among academics. As I explained back in January, some stakeholders like to exploit the absence of such standards to cast doubt on all research that disagrees with their view of the world. ‘You disagree with me? You must be hiding something, or you must be preparing the ground to get rich at some undefined point in the future’.

I understand that for some lawyers it is genuinely difficult to believe that there are people out there who, like myself, are just interested in ideas (and can make a decent living by teaching alone). Others, however, understand this very well, and still try to discredit people who disagree with them in good faith. Once common standards are agreed upon, innuendo and unfounded suspicion will be much less powerful and much less toxic.

One size does not fit all academics. My research has never been funded by corporate actors. And never will. My stance is more instinctive than the outcome of a reasoned decision. One could argue, entirely reasonably, that there is nothing wrong or unethical in capitalising on one’s knowledge and insights. This is probably true, but it will not make me change my mind.

Other academics whom I deeply respect and admire have produced research funded by corporate actors. I have no issue with that at all. There is not a single, right way to be an academic. This is, in fact, one of the reasons why I love my job. My colleagues at LSE, as well as academics in the EU competition law community, have all very different outlooks on work and life. The working environment at a university is, I am ready to guess, much richer and more diverse than at most other places (in particular, and Alfonso will not disagree, law firms).

Corporate-funded research can be done well. Many people are anxious about Google’s wealth and ability to influence the adoption of policies that are in its interest – such as net neutrality. I fully understand this position. I, for one, am particularly concerned about campaign funding and its impact on the democratic process.

This said, I believe it would be wrong to demonise all corporate-funded research. If it is done well (and it is, unfortunately, not always done well), there are mechanisms to zealously preserve academic independence and raise the standards of a discipline. Just think of the wonderful environment that, virtually out of scratch, Jean-Jacques Laffont and Jean Tirole created in Toulouse.

This success story, which has led to the production of ground-breaking and universally acclaimed work, cannot be fully understood without the role of corporate funds. It is in part thanks to this funding that Toulouse is able to compete head-to-head with much wealthier institutions based in the English-speaking world – including one that I happen to know well.

This is all for now. I am ready to move on and talk about the law!

Written by Pablo Ibanez Colomo

14 July 2017 at 4:17 pm

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Follow-up to our workshop on EU Courts and competition law

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As you know, yesterday we held our workshop on EU Courts and Competition Law: Myths, Gaps and Challenges.

Our speakers were, as expected, absolutely fantastic and we were able to have the sort of interesting debates that we were aiming for. We are immensely grateful both to the main speakers as well as to the attendees.

A selection of photos from the workshop is available here.

The book by Fernando and Eric received unanimous praise; if you still don´t have it, that can be fixed by clicking here.

By the way, the proof that there is no protocol for book endorsements is available here…

Pastries from my family’s bakery were also a success, also as expected. Since I am on advertising mood, and for the sake of fostering online commerce, you can buy them here  😉  If Chillin’Competition is dominant I guess we just got in trouble…

Written by Alfonso Lamadrid

4 July 2017 at 11:08 am

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EU Courts and Competition Law: Myths, Gaps and Challenges- 3 July 2017- The Final Programme

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Please find below the final programme for our forthcoming workshop next Monday.  Each speaker will discuss a specific topic for 5 minutes. We will then have 20-25 minutes per round to engage in a discussion with all attendees. We are very much looking forward to it!

Remember that it will take place at the Fondation Universitaire, Rue D’ Egmont 11, Brussels, from 15.00 to 19.00 h. 

INTRODUCTION TO THE WORKSHOP- Alfonso Lamadrid

PRESENTATION OF Evidence, Proof and Judicial Review in EU Competition Law-  Advocate General Nils Wahl

FIRST ROUND (moderated by Pablo Ibañez Colomo)

  • Alfonso Lamadrid: “Of facts and law: what is the role of the Courts in competition cases?”
  • Denis Waelbroeck: “Margin of appraisal and Article 7 ECHR”
  • Trevor Soames: “Will the deference previously given by the General Court to the EU Commission’s decisions where its reasoning could be labelled as comprising matters of complex economic assessment post Menarini, KME and Chalkor be rolled back?”
  • Jean-François Bellis: “Why do so many defendants choose to settle rather than appeal?”

SECOND ROUND (moderated by Fernando Castilllo)

  • José Luis Buendía: “Burden of proof and State aid litigation: from Myth to Logos”
  • Eric Gippini Fournier: “It’s the dominance, stupid!…and some other thoughts”
  • Pinar Akman: “The Objectives of Article 102 TFEU and the case law”.

COFFEE AND REINOSA BREAK (you will understand once you are there…)

THIRD ROUND (moderated by Eric Gippini)

  • Sir Nicholas Forwood: “Do the procedure and case handling practices of the GC need review if they are to provide effective “full review” in complex competition cases?”
  • Nicholas Khan: “Confidentiality in the context of litigation before the EU Courts”
  • Fernando Castillo: “Over the past 20 years, no witnesses have been called to testify in a competition case. Is the Galp judgment a game-changer?”
  • Pablo Ibáñez Colomo: “What is effective judicial review?”

FOURTH ROUND (moderated by Alsonso Lamadrid)

  • GC Judge Krystyna Kowalik-Bańczyk: “The scope of reforming powers of the General Court as far as sanctions are concerned”
  • Thomas Graf: “Could the Courts do more to develop the coherence and predictability of competition rules?”
  • Anne-Lise Sibony: “The prospects for behavioural antitrust in the EU, with a focus on litigation”
  • Advocate General Nils Wahl: “Why I don’t like Ctrl+C”

Written by Alfonso Lamadrid

28 June 2017 at 5:33 pm

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Google Shopping Decision- First Urgent Comments

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google-shopping

 

Today is an important day for EU competition law. For various reasons I have not commented publicly on Google’s cases for over two years now (for our previous extensive coverage, see here) The most recent of those reasons is that whereas I used to be a neutral observer (like Pablo still is) I have recently started advising Google in some competition matters, although as of today not directly on the Shopping case.

Today seems like an appropriate day to break that silence. Pablo and I were both invited by CCIA to participate in a press briefing call in which we explained the case and gave our views about it to a bunch of journalists. In anticipation of that call I hastily drafted the urgency thoughts that are the basis of this post. By the way, Pablo and I will again be speaking about this case on 11 July at this forthcoming Queen Mary University of London event, and, for the sake of neutrality, he will be the one covering the case here and elsewhere afterwards.

DISCLAIMER: Before you continue reading, please bear in mind that, even if I’m not working on this case, and even if my views have not changed, I am certainly not neutral (as I once was). So please take what I say with as many pinches of salt you wish and judge it only by its merits. To be sure, my preliminary opinions might very well not coincide with Google’s, as it may have other views and certainly has other lawyers who will surely have more views.

What the case is about

The case is not about manipulation or skewing of organic search results, as some have wrongly stated. It is about the display of product results and product ads. And it is only about the so-called comparison shopping market, of which most EU consumers had probably never heard about. The very assumption that such a market exists is far from straightforward, but there are other more profound and far-reaching concerns that we will try to very quickly outline in this post.

Google provides a free search service to consumers and it monetizes this service via advertisements. Today’s decision states that Google cannot favor its own product ads –the very same ones that make its services possible- over those of competitors. This is remarkable and wholly unprecedented.

To illustrate what this means, a useful analogy may be to think about a newspaper (a business models that is also funded via ads). What the Commission is doing is the equivalent of asking this newspaper to carry/publish the advertising service of competing newspapers and in equal conditions whatever that means (same placement, length or size, possibly even almost for free) and without getting the revenue. Another valid analogy is that of a supermarket obliged not to favor its own products, even if it is not the only supermarket around. The implications for vertically integrated companies in virtually every industry are potentially enormous.

Searching for the harm

Searching for the harm to competition and consumers is particularly challenging here. The Commission stated today that Google deprives consumers of choice to buy and compare prices online. That is the very fundamental idea at the foundation of the case. In my view, however, consumers could hardly have more choice when it comes to comparing prices and buying online. Whatever Google does cannot affect that. If you now want to buy any product you can search in Google, but you can also do so via apps, all merchant sites, platforms like Amazon, ebay, visit directly price comparison websites, outlets like Zalando, etc. Consumers have choice within Google and outside of Google. Even if Google price comparison results are more visible on a Google site, there is nothing precluding consumers from visiting any other site.

Tellingly, the Commission is indeed not claiming that there is direct harm to consumers but only assuming that somehow consumers will suffer from a decrease of traffic of price comparison websites even if the latter are not foreclosed. The Commission is thus equating any sort of alleged competitive advantage or disadvantage with anticompetitive effects; in my view, this is a very loose notion of consumer harm and a very long shot.

The facts and the evidence

In order to build this case the Commission focuses on a very small number of shopping comparison sites (aggregators) and concludes that they constitute a relevant market of their own. In my personal opinion this is quite counterintuitive and problematic. First, because it ignores hundreds of other aggregators. Second, because it also ignores that consumers do not only buy online through price comparison sites; indeed, the decision remarkably ignores the role of merchant platforms that also enable consumers to compare prices and buy. The players active in online sales, be it Google, Amazon, ebay, Zalando, any store or any individual merchant or manufacturer all face fierce competition. Third, the decision ignores that even if Google’s results enjoyed better display, consumers are not locked in, they can and do visit other websites other than Google before buying on the internet. The Commission says there is a link between visibility in Google and number of clicks received, but, again, this ignores the fact that consumers do not just buy online via Google. Even if Google’s results were more visible, there is nothing precluding consumers from visiting another site. There are certainly no technical or economic barriers for that, and this is what matters according to the most recent case law Third, and importantly, the Commission’s concern in this case is that some price comparison websites have lost traffic. In that case the Commission would have to prove with convincing evidence that this loss of traffic is due to Google’s display of product ads. This is certainly not easy, as there are many other more plausible, and indeed more likely, explanations (like the fact that consumers now prefer to buy directly on the merchants’ sites, in apps or in other platforms). The UK High Court and Justice Roth understood this perfectly in the Streetmaps Judgment with regard to a very similar theory of harm (see here).

The Law

But what I mostly care about is the law. Commissioner Vestager –whom you know is well-liked by this blog- explained today that DG Comp has reviewed 5.2 Terabytes of information. I do not doubt for a second that the smart people in the case team dealing with the case worked hard and thoroughly, but 5.2 Terabytes of information is meaningless if the law is then discussed quickly in just a few paragraphs and if the legal test is wrong.

From a legal standpoint, this case is unprecedented; there has never been a case like this, in Europe or anywhere else, and the implications are incredibly far-reaching. This is perhaps why for many years the Commission tried to avoid an infringement decision and rather preferred to settle with Google.

The first reason why the case is unprecedented is because it establishes the principle that a company may not favor its own services over those of competitors. Companies everywhere –dominant or not- logically favor their own services when they buy and sell goods or services even if this does not result in foreclosure. Vertical integration is everywhere, and it is in the very nature of multi-sided platforms.  Hampering their ability to promote their services (in spite of no evidence of rival foreclosure) implies not allowing them to decide how to best provide their services. Legally, a firm can only be obliged to deal with or assist competitors when this is indispensable for competition to exist in a different market. This is the test that has consistently been used in EU Law. But the Commission considers this case law not to be applicable and wants to extend the scope of the law. The implications are incredibly far-reaching (actually, I think I said that already…)

Indeed, the Press Release suggests that the Commission does not argue indispensability, but merely that Google grants itself a convenient advantage. So the Commission does not label Google as an essential facility (because that would be pretty hard to do given the high legal standard), but it does treat Google as if it were, thus bypassing that legal standard. I fail to see how what is the logic or consistency of this reasoning against the backdrop of the relevant case law. In my view, and not having yet read the decision, this suggests a possible bypassing of established legal rules and standards with ad-hoc case specific theories and remedies, thereby risking turning the prohibition of abuses of dominance into the realm of the arbitrary.

The second reason why the case is unprecedented is because the alleged abuse is at its core a product improvement. The combination of specialized and general results (what Google is accused of) is something that is also done by other search engines, including Microsoft’s Bing and Yahoo! Everyone does it because it is best for users to get a direct response (if you search for an address, you get a map; if you search for a product, you are taken directly to the product, not to another intermediary). A product improvement that disadvantages rivals is not anticompetitive. Or at the very least one would have to trade off pro and anticompetitive effects, which is something that I very much doubt the Commission has done, essentially because no one knows how to do it. And in the face of doubt a sanction is not appropriate. This wall very well explained in Streetmaps and it was understood by all other competition authorities who have had the chance to examine these practices.

The remedy

The Fine: The Commission has imposed today the largest fine ever imposed on a single company doubling the previous record. What is remarkable is that this fine has been imposed after years of negotiating commitments (which are only possible in cases where “the Commission does not intend to impose a fine”), in relation to conduct that had never been found unlawful, that is actually considered lawful in other jurisdictions, that no lawyer would have anticipated to be unlawful and that takes place in a relatively small and competitive market. In previous cases, the Commission declined to impose a fine when its case was novel and had no precedents. This is actually the first case in which conduct that was found suitable for a commitment decision receives a fine (see the Motorola/Samsung and Mastercard/Visa precedents).

Future compliance: I do not know how this is framed in the decision. The Commission has stated today that it has not given any precise indications and that it is up to Google to come up with a solution that does not have the same effect.

In competition cases remedies need to fit the Commission’s theory of harm. In this case, however, there is no clear remedy fitting the unprecedented theory set out in the decision. Having ordered a remedy in the decision would have probably exposed the flaws in its reasoning. Possibly to avoid that risk the Commission has stated that it is up to Google to craft a remedy that is neutral –whatever that means- and that removes the problem. I preliminarily see two problems here:

  • The first is, how can Google remove effects that it arguably did not cause in the first place? If Google is right and the loss of traffic on the part of the companies considered by the Commission is attributable to something other than Google’s conduct, how can Google fix that? And how can the Commissioner assess whether the remedy is effective? It would seem as if the Commission were requiring Google to artificially maximize the traffic received by some specific category of its rivals (price aggregators) which certainly would not be neutral.
  • The second problem is wider. The Commission says whatever Google does must be neutral, but it does not define what neutral means. This undefined notion is particularly problematic when applied to a business which by definition has to rank search results.

Admittedly, Google could simply decide to shut down the service and not offer product results in Europe. This would be perfectly plausible and legal, and is actually what Google did with Google News in Spain back in the day, only to show that this benefited no one.

Effect on other Google products.

The Commission has stated that this decision is now a precedent and the starting point to look at other Google’s services. Firstly, this implicitly means that there was no earlier precedent and thus confirms the novel nature of the case.  Secondly, the Commission could have run a case comprising all verticals, but it didn’t, and it must be because it thought this was the easiest to run for some reason. That may have to do with market definition, or because evidence in other verticals did not match the theory. If the Commission decided not to run those cases, it must be for a reason. My personal view is that this technique of picking the preferred sample to then extrapolate results would not be an acceptable shortcut.

Conclusion. In order to make this case possible the Commission first had to change the stance it held for years during the commitment negotiations and now has had to craft a new legal theory without clear legal foundations, prohibit a conduct validated in every other jurisdiction, assume dominance against the indications of the case law, define a relevant market ignoring the main actors active in online shopping, ignore the fact that consumers are not locked-in Google, assume that the loss of traffic of some specific companies is due to Google not considering other plausible scenarios and avoid spelling out a remedy. In my non-neutral view, it is a remarkable decision indeed.

Written by Alfonso Lamadrid

27 June 2017 at 8:18 pm

Posted in Uncategorized