Relaxing whilst doing Competition Law is not an Oxymoron

Archive for February 11th, 2011

Advocate General Kokott reinvents (k)opyright

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Once again it´s a luxury to have Pablo Ibañez Colomo as a guest blogger at Chillin´Competition.  He has some strong views on the Opinion delivered last week by AG Kokott on the “Greek decoders case” that we thought should be of great interest to you. Here they are:

Thanks very much to Alfonso and Nicolas for allowing me to share some of my thoughts with their readers!

I read yesterday Advocate General Kokott’s opinion in Joined Cases C‑403/08 and C‑429/08, already referred to by Alfonso a couple of days ago. Following a wholly unprecedented line of reasoning, the opinion seems to propose to overrule the principle, laid down in Coditel I, according to which the exhaustion doctrine does not apply to the exploitation of the copyright in the form of a communication to the public. The logic underlying this well-established rule is so sensible and obvious that I have little doubt that this opinion has been received as a complete surprise by all EU lawyers.

The fact that such a proposal is clearly unsound (both from a legal and an economic perspective) made me reflect on more general questions relating to the art of judging, with regards, in particular, to economic law issues, such as competition law or copyright.

The importance of FORMAL economic analysis (and the risks of DO-IT-YOURSELF economics): Controversy surrounding the use of economic principles in legal matters is sometimes presented as a debate on whether or not economic tools should be relied upon by judges and policy-makers. I have long insisted that the true question is in fact whether FORMAL economic tools should inform the law or whether, instead, we should accept that judges and policy-makers follow their rudimentary economic intuitions (i.e. DO-IT-YOURSELF economics). Put differently: economic analysis is simply unavoidable in some legal areas (and this includes, to be sure, competition law), and to the extent that it is so there seems to be no reason to refuse following mainstream economic tools.

Advocate General Kokott may be opposed to the use of formal economic tools, but this does not mean that she is able to avoid analysing the economic foundations of copyright when proposing a legal rule. The opinion tries to identify the rationale underlying Coditel I, and because no formal, standardised economic tools are relied upon, it fails in its attempt. For instance, the opinion distinguishes between services that are consumed only once (such as a meal or a haircut) and those that can be consumed ad infinitum. According to the opinion, there would be no reason not to apply the exhaustion doctrine to the latter. In doing so, the Advocate General misses completely the logic underlying Coditel I, which relates to the fact that a broadcast, unlike a book or a CD, is—as explained, by the way, in any basic economics textbook—an example of a public good (i.e. it is non-rival in use and, to the extent that the encryption technology is by-passed, non-excludable).

The importance of factual and sectoral knowledge: It is surprising to see that the bold reasoning displayed in the opinion does not take account of the far-reaching implications of the rule proposed and, more precisely, on how it would alter the way in which television rights are bought and sold.

In particular, it is surprising to note that the opinion never really asks why television rights for sports events are systematically licensed on an exclusive basis (and why, conversely, books and CDs are widely circulated and are rarely offered by a single retailer by means of an exclusive distribution agreement). In this sense, the opinion simply ignores the fact that competition between broadcasters to show the same game at the same time in a given territory may, in the circumstances of the case, empty the right of communication to the public of all of its economic value. Which broadcaster would pay to the FA Premier League knowing that its exclusivity could not be effectively enforced?

This is all the more surprising if one considers that these same issues were carefully identified and understood 30 years ago in Coditel I and Coditel II. In fact, the opinion of the Advocate General in the latter case already displayed a good understanding of these issues and the clear differences between the right of communication to the public and the right of reproduction.

Written by Alfonso Lamadrid

11 February 2011 at 8:39 pm