Archive for November 2009
Almunia appointed Competition Commissioner
It’s official. As Nicolas anticipated last week, Joaquin Almunia will be the next Competition Commissioner.
Mr. Almunia is surely one of Spain’s most able politicians. He has earned wide recognition all throughout Europe because of his handling of the economic crisis as the Commissioner in charge of Economic Affairs, and he is also a well respected political figure at the national level despite many years under the spotlight (at 34 he was the youngest Minister of the first Gonzalez government; he held Ministerial offices for 9 years; later on he became the leader of the socialist party and ran for Prime Minister in 2000). By now his CV has widely circulated elsewhere, so there’s no point in insisting on that.
Apparently some are concerned about the fact that a socialist and former trade unionist will be taking over the Competition portfolio. In my view, at this point in time such concerns lack any basis, the consensus on the role of undistorted competition being widespread in both aisles of the political spectrum. Moreover, there is evidence of Commissioner Almunia’s longstanding commitment with strong and independent competition law enforcement.
Indeed, the fact that Mr. Almunia ran for Prime Minister against Aznar in 2000, means that his profile and policies were very carefully scrutinized at the time. Interviews, documents and press clips of the 2000 campaign provide nowadays very interesting information about his views on different issues. Not only do we know that he’s an opera fan and a supporter of Athletic de Bilbao (not doing bad so far this season), but, more interestingly, a review of those materials tells us that the promotion and defense of competition ranked, even then, at the top of his political priorities.
During the electoral campaign, then candidate Almunia explicitly distanced himself from the attitude towards public intervention prevailing in other Member States governed by socialist parties. He proposed to accelerate liberalization of the electricity, gas and telephone markets, and advocated for continuing the process of privatizations. He further affirmed that his policies defended ‘free competition, free market and the battle against oligopolies’ more than anyone else’s.
Such affirmations seemed not to be mere ‘lip service’, the urgent adoption of a new Competition Act being one the the top 10 priorities in his political program for the general elections (something quite unusual in Spanish politics).
Finally, l will recall one interesting episode, now almost forgotten, but which, at the time, received ample media attention:
At the end of February 2000, Mr. Almunia was speaking before an audience of businessmen about his economic program, and insisted on the necessity to grant the Competition Authority (then Tribunal de Defensa de la Competencia) greater powers enabling it to ‘act independently, without waiting for the Government to take the initiative’. At that moment, he was interrupted by the President of the employers association (late Jose Maria Cuevas, a very influential figure back then), who manifested its disbelief:
‘I start to doubt that not even you believe you will be elected Prime Minister because the last thing that anyone who wants to govern would do would be to grant more powers to the Tribunal de Defensa de la Competencia (…) If you really want to govern tell us what the f&%k you plan on doing with the Competition Authority’.
Almunia’s response:
‘I find it surprising that you want a Tribunal de Defensa de la Competencia kneeled before the government (…) That would introduce skepticism where there should be illusion’.
In sum, a decade ago Mr. Almunia stood up for independency in competition enforcement and made competition one of his political priorities. This record and his experience at the EU level make him, in theory, one of the best Competition Commissioners we could be hoping for. We wish him and his team the best of lucks.
BTW, while searching for info on this topic I found out that the news about appointment made its way into a website on ‘celebrity news, all the time’ under the heading ‘Antitrust Gossip’ (!) Is competition law getting glamorous??
(Image possibly subject to copyrights: source here)
2009 Worst Antitrust Law Development Prize
The end of the year is approaching fast. I copy, again, our call for suggestions re. the worst 2009 development in antitrust law. To date, I have received several submissions, and I would like to thank those of you who referred cases and quotes. For those who have not yet sent me an email, please note that I commit to treat confidentially all referred items and will under no circumstance disclose the identity of referrers.
With the awards season coming to a close, it is perfect timing to introduce the prize for the worst antitrust law development of the year. For the first time this year, this prize will reward a ruling, article, speech, career-move, research issue, policy initiative, or any other thing that has been undertaken, said or written that is stupid, infamous, crazy.
The prize will be awarded by the end of December 2009. Please refer to me anything that could qualify for it. I will keep all the info absolutely confidential, and will set up a jury of lawyers to award the prize (Alfonso and myself will be part of it). If you’d like to join, please let me know.
To give you an example: in 2005, a Dutch judge stated in 2005 that the Commission had exclusive competence to exempt an agreement under Article 81(3) EC (Rechtbank Zwolle-Lelystad, 4 April 2005, case n° 106345 / KG ZA 05-92, Walstock / Polar Electro). Surely, a strong candidate for this prize, had it been awarded in 2005.
Slides of the GCLC Lunch Talk on Airlines Mergers
I attach below the slides presented by Daniel Boeshertz (DG COMP) on the recent enforcement trends in the Commission’s review of airlines mergers.
GCLC – Boeshertz – Recent Trends in the Commission’s Review of Airlines Mergers (26 11 09)
Next Commissioner for Competition
Jean Quatremer, on his excellent blog Les Coulisses de Bruxelles, report that Joaquín Almunia stands first in the race for the Competition portfolio in the next Commission. J. Almunia currently holds the portfolio of European Commissioner for Economic and Monetary Affairs. His résumé can be found here. N. Kroes will certainly be reappointed as Commissioner in charge of trade policy.
No doubt my co-blogger Alfonso, a Spanish citizen, will comment on this should Almunia’s appointment be confirmed.
Lost in Prioritization?
A quick personal thought. On face value, the current prioritization policy followed by the Commission is slightly confusing. Earlier in the year, the Commission adopted a guidance communication on enforcement priorities under Article 82 EC, which does not cover exploitative abuses, thereby sending the signal that such types of abuses are not really a prime candidate for Article 82 EC enforcement. In line with this, the Commission announced yesterday that it dropped its investigation in the Qualcomm case.
I find it quite problematic to reconcile this prioritization trend with the annoucement, on 19 November, that the Commission sent a Statement of Objections to Standard and Poor’s for alleged unfair pricing for the use of International Securities Identification Numbers (ISINs)…
A plausible explanatory factor: in the field of Article 82 EC, prioritization is currently made on a sectoral basis. Under this interpretation, the Standard and Poor’s case illustrates, in the aftermath of the financial crisis, that the Commission arguably intends to closely scrutinize financial services. This is consistent with the recent announcement of the opening of formal proceedings against Thomson Reuters concerning use of Reuters Instrument Codes.
(Image possibly subject to copyrights. Source here)
Commission closes Formal Proceedings against Qualcomm
Confirming my speculations a few weeks ago, the Commission announced today that it would not invest any further resources in investigating the Qualcomm case.
I paste hereafter the press release in full (MEMO/09/516 Date: 24/11/2009)
“The European Commission has decided to close formal antitrust proceedings against Qualcomm Incorporated, a US chipset manufacturer, concerning an alleged breach of EC Treaty rules on abuse of a dominant market position (Article 82). The investigation was opened on 1 st October 2007 (see MEMO/07/389 ).
The European Commission is committed to fight against illegal behaviour by dominant companies in key innovative sectors like telecoms and IT when an abuse of their market power would deny consumers the benefits of competition and choice.
The Qualcomm case has raised important issues about the pricing of technology after its adoption as part of an industry standard. In practice, such assessments may be very complex, and any antitrust enforcer has to be careful about overturning commercial agreements.
The Commission has investigated whether the royalties that Qualcomm has been charging since its patented technology became part of Europe’s 3G standard are unreasonably high.
The Commission committed time and resources to this investigation in order to assess a complex body of evidence, but has not as yet reached formal conclusions.
All complainants have now withdrawn or indicated their intention to withdraw their complaints, and the Commission has therefore to decide where best to focus its resources and priorities. In view of this, the Commission does not consider it appropriate to invest further resources in this case”.
See here, here and here for more.
(Image possibly subject to copyrights: source here)
The New Faces of Europe
The appointment of Herman Van Rompuy and Catherine Ashton as the visible faces of the EU has come as a surprise both within and outside Europe. The public reaction –or rather the media reaction- following the announcement has criticized their appointment on the basis of their ‘low profile’ and lack of EU-related experience, has highlighted the fact that neither of them has ever been elected to public office, and has even focused –not very kindly- on their physical appearance (!).
Although this blog doesn’t deal primarily with European politics, this is an issue which surely deserves a comment. Moreover, it reveals an endemic problem which, amongst other implications, also affects the ability of DG Comp to perform its role adequately. I do not host any criticism towards Mr. Van Rompuy or Mrs. Ashton. In fact, the contrary would be odd, since so far I know very little about them, about their previous accomplishments or about the agendas they intend to pursue. No elements can so far rebut the presumption that these are able people who may defeat the low expectations which seem to have followed their appointment. We should hopefully recall that similar criticisms arouse when Delors was appointed, and he certainly prevailed over skeptics.
My first concern is purely political (and leaves aside the Belgian problem of having to wake up, again, without a Prime Minister). The rationale of many commendable policies and actions in the European field has been to reinforce the EU’s legitimacy, to enhance transparent and democratic decision-making and, in essence, to approach it to the citizen. This was also one of the reasons for deciding in the first place to name one visible permanent President of the European Council. However, even a passionate pro-European can’t help but wonder whether we are asking the citizens too much when we intend them to feel attached to a project whose new faces are unknown not only to them but also to many of the leaders who have appointed those people. This is no doubt a rather interesting way of reinforcing the link between the citizens and the European institutions.
My second and main concern is a different one, and relates to a worrying tendency that is by no means new in the European environment, but which seems to be getting more acute with time. It seems that in order to be promoted to any higher post subject to political approval a ‘flexible’ profile is often a pre-requisite (it should go without saying that there are also numerous exceptions to this rule). Many are conscious that a meteoric career at the institutions partly depends on one’s willingness not to step on anyone’s foot, to bend or accommodate to national political pressures, and to always consider the political implications (i.e. the interest of larger Member States) relating to any action or decision, sometimes at the expense of more important considerations.
Such dynamic also has an impact on the DG-Comp and on its ability to undertake cases in the light of their economic relevance or pursuant to the need of establishing precedents and providing guidance on technically complex matters. Many of our readers are probably familiar with the experience of presenting a reasonable problem to the Commission and being rejected because of the presumable lack of political support on the part of specific powerful Member States. Ironically such refusals may eventually be effected under the cover of an alleged ‘lack of Community interest’.
The problem is therefore much larger than this isolated appointment episode, which only evidences the prevailing attitude. It is certainly no easy task to achieve consensus between 27 national political interests, but this should be no excuse for implying that consensus requires converging on the minimal common denominator. That, I believe, is comfortable, irresponsible and short-sighted politics. The European project was grounded on the vision and will of true statesmen who held political views and aspirations much higher than those currently prevailing. At a time when Europe needs to define its future role in the world stage, when audacious politics are needed more than ever, that’s when we –by failing to demand our leaders to abandon self-complacency and to act boldly as needed- are screwing it all up.
On the Negative Side-Effects of Economies of Scale
The mainstream theory goes like this: scale effects, or scale economies, are a source of productive efficiency. In increasing output, firms active in sectors with high fixed costs (FC) manage to lower average total costs (ATC). This is because FC can be spread over a larger quantity of output. When firms with high fixed costs produce a lot, the share of the FC that bears on each produced unit (the average fixed cost, AFC) decreases, and in turn, so does the ATC .
Now, besides this, achieving economies of scale may have adverse, long-run, side-effects on productive efficiency. Because the fixed resources are more intensively used – think of a truck, a network, an engine, that is intensively solicited to deliver greater output – a number of new costs might in turn be incurred as a result of the decision to increase production scale. The truck, network, engine might suffer technical damage, dysfunction, require more maintenance, etc. as a result of its increased use. It may have to be replaced more rapidly. There are also opportunity costs arising from the decision to use existing capacity to produce more.
What is relatively interesting is that scholars often talk of economies of scale as something plainly positive. The negative side-effects of economies of scale might however be significant. I am not cognizant of any literature on this (and have not done the research yet), but would welcome references on this.
(Image possibly subject to copyrights. Source here)
New Blog
Welcome!
4th international competition conference – Friday, 27 November 2009 – Brussels
The Brussels Bar, Dutch Speaking Section is proud to announce the fourth edition of its International Competition Conference. This year’s conference will be held on 27 November 2009 and once again brings together an exceptional group of speakers and panelists. The morning session will be devoted to the current and future law on distribution agency and licensing agreements. During the afternoon, various workshops will discuss topical enforcement issues.
Chillin'Competition 
