Archive for January 2010
Revelation
The brilliant, prolific, US judge and scholar Richard Posner recently had a revelation. See here. Not a philosophical U-turn, but close.
Found on D. Gutierez’s blog.
(Image possibly subject to copyrights: source here)
For real?
Just found now, whilst doing research on energy markets:
“The European Court has stated that dominance can be presumed, in the absence of evidence to the contrary, where a company has a market share persistently over 50%. EU competition law takes a 25% share of the market as evidence of Significant Market Power“.
Not seen it? Read again (this time in bold):
“The European Court has stated that dominance can be presumed, in the absence of evidence to the contrary, where a company has a market share persistently over 50%. EU competition law takes a 25% share of the market as evidence of Significant Market Power“.
Shocking misreading of the EU case-law and almost certainly a crap erroneous statement from an economic standpoint.
Now, let’s just put theory into practice and follow Prof Simon’s recommendation. This shameful, unfortunate, interpretation of the case-law can be found in a Report entitled “Conditions for truly competitive Gas markets in the EU” prepared by Energy Markets Ltd. (2005) for the British Department of Trade and Industry (see p.12).
(Image possibly subject to copyrights: source here)
PS1: Trying to turn the findings of my Phd into empirical recommendations, I am currently drafting a paper on abuse of collective dominance in the energy sector. Obviously, input, views, comments, feelings, are most welcome.
Death of an Antitrust Dogma?
Yesterday, the US AAG for Antitrust C. Varney murdered a widespread antitrust dogma:
“Defining markets and measuring market shares may not always be the best place to start” (see also here)
In many competition law regimes, market definition is indeed perceived as:
“a necessary precondition for the assessment of the effect of a concentration” (source: Case T-2/93, Air France v. Commission [1994] ECR I-1375, §143).
Of course, it is common in EU law to leave market definition opened, on the ground that regardless of the market’s exact boundaries, the merging parties’ market shares will not create or strenghten a dominant position.
This being said, many competition authorities nonetheless review this issue systematically, whilst they could screen anticompetitive concerns more rapidly. This burdensome analytical framework is particularly inefficient in cases where:
- The agency can immediately ferret out risks of competitive harm, because the key economic elements of a particular theory of harm are absent. This happens, for instance, in oligopolistic dominance cases, where tacit collusion is unlikely because the market is not transparent, or because oligopolists are asymetric;
- The agency can immediately establish that the merger raises serious doubts. This may happen, for instance, in cases where the merger involves the acquisition of a disruptive maverick player or where, thanks to sophisticated economic tools, the direct assessment of market power is possible (i.e. merger simulation on oligopolies with differentiated products).
Notwithstanding this, Varney’s assault on market definition analysis should not be interpreted as meaning that no preliminary work on market definition is required. In both scenarios 1 and 2, the competition authority should follow a “first-look” market definition analysis so as to identify – at least approximately – those firms which are likely to compete with the merged entity. To take again the above example of a merger involving a disruptive maverick, a gross market definition is necessary to establish that the maverick firm was, prior to the merger, competing head to head with – and threatening the business interests of – the acquiring firm. Similarly, in the above mentioned oligopolistic dominance example, the competition authority needs to frame the market, if only to establish that it faces a tight oligopoly where the conditions for tacit collusion ought to be tested.
A final remark: Varney’s statement holds the potential to lighten the evidentiary burden imposed on US antitrust authorities. Let’s just hope that the agencies will seek to use the newly freed-up administrative resources to improve their analytical framework, at the stage of the assessment of the theories of harm. This is particularly important in light of the fact that recent theories of harm in merger control are (i) increasingly intrusive: they may lead to forbid mergers with just a harmful effect on some customers (see TOTM excellent post on this); (ii) speculative: think for instance of behavioral, conduct-based, speculations in the context of vertical/conglomeral mergers; and (iii) and complex to test: think of merger simulation techniques, econometric analysis, diversion measurements, etc.
PS1: Whilst writing this post, I consulted the excellent book of Alistair Lindsay “The EC Merger Regulation: Substantive Issues”, Thomson – Sweet & Maxwell. I really recommend this book. It is the only EU merger related book that focuses only, and with great detail, on the substantive issues of EU merger analysis. My concern, however, is that the book is simply unaffordable (170£). My edition dates back to 2003. No chance I am going to change it any time soon for the 3rd edition of 2009. The bottom-line: not unlike some conference organizers, publishers should price discriminate and grant discounts to university researchers and students.
PS2: Varney’s speech was delivered in the context of the US agencies’ ongoing consultation process re. the 1992 merger guidelines.
(Image possibly subject to copyrights: source here)
Dissertation Summaries (15) – LLM in IP and Competition Law 2009-2010
European Competition Policy and the Lisbon Treaty: Dawn of a new era or business as usual?– Patrick Vincent (P.Vincent@student.ulg.ac.be)
In the post-Lisbon Treaty era, the reference to “free and undistorted competition” previously enshrined in Article 3(g) EC has disappeared from the forefront of the EU treaties. The present dissertation seeks to assess whether the elimination of this provision – and its replacement by a Protocol appended to the Treaty – is likely to affect the effectiveness of European competition policy. Whilst scholars are divided on this issue, there nonetheless seems to be a growing concern that European competition policy might as a result be increasingly influenced by external, public-policy, considerations, which to date have played a marginal role in the Commission’s orthodox enforcement policy. To test the veracity of this proposition, the present dissertation will review a number of concrete practical issues (environmental agreements, etc.), where considerations alien to core competition concerns might be invoked by stakeholders.
Bad Legal Advice and the “Shaming” of Colleagues with Poor Performance
Prof W. Simon (Stanford Law School) has a controversial, amusing, piece on academics providing legal advice. In essence, Simon argues that the incentives’ structure and informational opacity surrounding academics’ advisory work leads to “bad legal advice“. In his paper, Simon seeks to provide empirical evidence of this. To this end, he actually trashes three US colleagues, who allegedly delivered bad advice in a case he was involved in.
To correct this market failure, Simon suggest a remedy consisting in increasing transparency and publicly “shaming” colleagues (disclosing their names) with poor performance. Prof. Green (Fordham University)wrote a strong rebuttal.
I paste hereafter Simon’s conclusion.
The Limits of Antitrust Metaphors
I had not spoted this before, but this is a good one. To describe the practices at the heart of the Microsoft II case – the recently settled alleged abusive tying of Internet Explorer with Windows OS – N. Kroes declared that MSFT’s conduct is:
“As if you went to the supermarket and they only offered you one brand of shampoo on the shelf, and all the other choices are hidden out the back, and not everyone knows about them. What we are saying today is that all the brands should be on the shelf“.
The problem here? This colourful metaphor entirely misses its purpose. Rather than conveying the message that there was a competition problem in the market, it stresses that the issue primarily pertains to (poor) consumer information.
Half Day Conference – IP and Comp. issues arising from the Google Book Settlement – 12 February, Brussels
The Google Book Settlement is not only a US, intellectual property, issue. Its consequences may be felt in Europe and elsewhere in the world, and cover other areas, such as privacy, cultural policy, and competition law.
This is why my research institute (IEJE, University of Liege) has decided to hold, on 12 February in Brussels, a half-day conference entitled “The Google Book Settlement – The Challenge of Building a Digital Library that Benefits All”. This conference is a joint effort of the IEJE and the Centre for Innovation and Intellectual Property of the St Louis Faculties in Brussels.
Important Appointments
Congratulations to Thibaud Vergé who has just been appointed Chief Economist of the French Competition Authority. Thibaud Vergé is a very strong economist who, amongst other things, co-authored influential pieces on vertical agreements with Patrick Rey. See here.
In addition to this, Carlos Martinez-Mongay (Spanish, previously head of unit in DG Ecofin) and Olivier Guersent (French, previously head of DG Competition’s Cartels Directorate) are poised to become heads of the cabinets of J. Almunia (competition) and M. Barnier (internal market and financial services).
(Image possibly subject to copyrights: source here)
EU Competition Celebrities Confess
From a purely academic point of view, it may be regretted that the judgment was not brought on appeal before the ECJ so Europe’s highest Court could have its final say in the case. However, sooner or later, either through a direct action or through a reference for a preliminary ruling under Article 234 EC, the ECJ may find the occasion to examine and decide on the delicate balance that must be struck between IPRs and competition law.
Regarding the tying part in the judgment, it is probably the case that less people are worried about the consequences of the judgment, even though, also in this respect, it is necessary to bear in mind that the risks entailed in overstretching the concept of tying can become a serious constraint for what otherwise would be valuable development and innovation to the benefit of consumers. As Advocate General Francis Jacobs once put it, competition law is not there to protect competitors but competition and the consumers.
Mario Monti, former competition Commissionner is also reported to have said that the Microsoft case:
“was “certainly” his most difficult case; […] “Not for its technical complexity, but because of the rather drastic trade-off to be made after the long investigation. After three days of intensive negotiations with the CEO to achieve a settlement, a good phase in the mutual negotiations, we concluded that we were interested […] to achieve a precedent“. ( Source: M-Lex, 14 September 2009, “Monti warns of threat to competition policy ‘from within’”, D. LUMDSEN).
This lends credit to the unofficial, “off the record“, story that Monti and Vesterdorf have not been entirely free to call the shots, and that they might have even been placed in a minority position at some stage.
(Image possibly subject to copyrights. Source here)
My Slides – IEB/Universidad Complutense Programme – Madrid
I attach the slides I presented in Madrid. The first set of slides is an introduction to EU competition law. The second set of slides deals with the concepts of agreements, concerted practices and decisions of associations of undertakings.
General introduction – xiii_curso_de_derecho_de_la_competencia_ieb (1
BTW: Iberia is amongst the least professional and reliable airlines. My flight, which was supposed to leave Madrid yesterday at 7.15 pm, eventually left at 3.15 am. I arrived at home this morning around 7.00 am…. This is not the first time I have problems with this company. I filed a formal complaint. Let’s see how things turn out.
(image possibly subject to copyrights: see here)
Chillin'Competition 
