Relaxing whilst doing Competition Law is not an Oxymoron

Archive for February 2011

The Law of Unintended Consequences

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With rising fines for antitrust violations, there’s been a lot of fuzz about the adequacy of the current EU penalty system.

The EU fines system is generally lambasted on two counts. First, it would be inefficient because the average level of fines currently slapped by competition authorities would still be far below the optimal deterrence level. Second, it would be unfair because it targets companies as a whole, rather than the individuals which have secretly engaged into unlawful conduct. In so doing, administrative fines would thus harm a range of third parties (shareholders, workforce, etc.) which have nothing to do with the infringement. Interestingly, increasing fines to satisfy the efficiency concern would further exacerbate the unfairness concern.

The upshot of this has been a renewed interest for alternative penalties (director disqualification, individual fines, etc.). In a recent paper published in ECLR, our esteemed colleague Prof. Alan Ryley (City University London) puts forward a creative, and somewhat radical proposal:

Thirdly, the expulsion of aliens from EU territory: Most international business executives need to be able to travel into the European Union, the world’s largest single market. Prohibition from entering EU territory for a term of years would make it difficult for them to act as senior level executives, as well as significantly damaging their reputations.

Now a question: beyond preventing business executives from making Xmas shopping in Paris and London – which I do not view as a particularly strong deterrent – I fail to see how this could really dissuade guilty alien executives to operate cartels within the EU. Paradoxically, those executives will be increasingly incentivized to negotiate cartels targeted at the EU outside of the European territory, with the unintended side-effect that the Commission’s will face mounting difficulties to gather evidence of unlawful conduct.

The full reference of Prof. Riley’s excellent paper is “The modernisation of EU anti-cartel enforcement: will the Commission grasp the opportunity?”, E.C.L.R. 2010, 31(5), 191-207, 2010.

Thanks to my assistant N. Neyrinck and my student B. Boggaerts for the pointer.

The picture above is taken from one of the worst French movies ever.

Written by Nicolas Petit

15 February 2011 at 9:46 pm

100,000 visits!

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We crossed the 100,000  threshold yesterday!

I seize this opportunity to recap. several notable evolutions that have taken place on this blog lately:

  • Since Alfonso came back, we have now between 375 and 500 visits a day;
  • Readers increasingly post comments on chillin’competition. We are nowhere as compared to other megablogs, but the trend is encouraging;
  • We have reorganized the “categories” section on the right of the blog;
  • We have opened the blog to external contributors (Pablo Ibanez, Philipp Werner, Napoleon Ruiz);
  • We got a first hand on several big news and we leaked them :);

Thanks to all our readers for the support. Alfonso and I are going out for drinks this week.

Written by Nicolas Petit

13 February 2011 at 5:04 pm

Posted in Uncategorized

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

New Paper

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A poorly informed friend just told me over the phone that he was concerned by my low publishing record in recent weeks.

To prove him wrong, I am proud to announce the publication of a new paper entitled “Behavioral Economics and Abuse of Dominance: A Fresh Look at the Article 102 TFEU Case-law” (pdf available at the end of this post).  The paper appears in the Osterreischische Zeitschrift für Kartellrecht (Dezember 2010 /Nr. 6, Seiten 201-236, p.203), and was co-drafted by my assistant Norman Neyrinck. This paper is an upgraded version of a GCLC working paper.

N. PETIT & N. NEYRINCK Behavioral Economics and Abuse of Dominance- A fresh look at the Article 102 TFUE Case-Law

Written by Nicolas Petit

10 February 2011 at 8:14 am

Recent publications

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In the past few days there have been several publications on which we hadn´t had the chance to comment:

Some days ago the European Commission published  a document stating its position regarding the nowadays common claims on inability to pay made by undertakings on which a fine has been imposed. Interestingly, the document was published on a Commission´s site on transparency, but not on DG Comp´s website.

Last week, DG COMP also launched the public consultation on collective redress  (thanks to P. Sabbadini for immediately pointing us to this). 

On the European Courts side (and aside from an arguably insufficient but nevertheless welcome fine reduction that some colleages of mine got in the Spanish raw tobacco case), Advocate General Kokott issued a very important Opinion in the Greek decoders case (the one concerning Karen Murphy, the owner of the Red White & Blue pub in Portsmouth,  who cancelled her licence with BSkyB -who holds the right to broadcast live Premier League games in the UK-, and instead signed up with a Greek provider and imported its decoders). The matter eventually arrived at the ECJ by way of a reference for a preliminary ruling. In her Opinion, AG Kokott considers that “territorial exclusivity agreements relating to the transmission of football matches are contrary to EU law“. Were the Court to follow its Advocate General, its Judgment would constitute a  revolution  that would shock the world of sports in a way only comparable to the Bosman Judgment, not to mention its potential implications for the cinema and TV industries in general.  We´ll post a comment on the Opinion here as part of our “Competition Law & Sport” series as soon as we get the time to read it and think it through.

And speaking of publications, there´s a new journal which might be of interest to many of us: the Journal of Universal Rejection They will reject absolutely everything submitted to them   🙂

Written by Alfonso Lamadrid

9 February 2011 at 6:09 pm


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With the beginning of the new year, there has been a significant number of moves in the EU antitrust law league (practitioners’ market).

Legal500, Chambers, GCR and others have failed to report them because they only focus on big fish. So here’s our report of recent associates moves:

  • David Henry felt like talking German. He thus left Howrey LLP for McDermott Will and Emery, where he will work with P. Werner;
  • Despite the exodus, Miguel Rato got a raise and thus stayed at Howrey LLP where he was promoted from Associate to Partner;
  • Marc Abenhaim got bored of Belgian competition law and felt like living under tougher targets and deadlines. He left Van Bael & Bellis to Willkie Farr and Gallagher;
  • John Wileur does not run against the grain. He thus moved from Howrey LLP to Covington & Burling;
  • David Mamane probably got a raise too, and was promoted to Partner at Schellenberg Wittmer (Switzerland)
  • Alexis Brunelle got bored of private practice and joined the Autorité de la concurrence as case handler (Rapporteur). The bad news about this move is that from now on, Alexis will have to blog undercover.

All those chaps share four common features:

  1. they are all supersmart young competition lawyers
  2. they are all friends of chillin’competition
  3. they are not full of themselves
  4. I have had at least once, a challenging, interesting conversation on a subject of substantive competition law (note: strangely enough, people seem increasingly reluctant to discuss such issues )

Please do not hesitate to report to us other moves which fit this profile, and apologies for those we missed.

(PS: Image possibly subject to copyrights: source here)

Written by Nicolas Petit

8 February 2011 at 11:22 am

Hungry for More?

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Apologies for the long post, but I have several remarks to add to my former post under Tomra v. Commission:

  • Priority-setting – As most of you know, this judgment confirmed a Commission Decision of 2006, in which Tomra, a producer of reverse vending machines used for recycling, had been found guilty of abusive conduct under Article 102 TFEU. The abusive practices consisted in a system of exclusivity agreements, quantity commitments and last but not least individualised retroactive rebate schemes. The Commission slapped a €24 millions on Tomra. Albeit small in nominal value as compared to other cases, this represents the largest fine ever in turnover proportion, in an Article 102 TFEU case. This is clearly significant, given that Tomra is only the 57th largest company in Norway. At our lunch talk two weeks ago, Alan Ryan compared Tomra to “an SME”. From an enforcement-priority perspective, the question arises as to why the Commission decided to go after a case that looks very local in nature, and that involves a relatively narrow market. A plausible answer is that having been faced with outraged scholarly comments after Michelin I, II and British Airways, the Commission sought to develop a new approach to abusive rebates through a “test case”. On substantive grounds, this new approach had been articulated in papers written by F. Maier Rigaud and others. It was furthered in the 2005 Discussion paper and paved the way to the Guidance Communication on Enforcement priorities. Back in the day, Commission officials even talked of a “textbook” rebates case. It was followed by the hard-hitting decision in Intel. For more on this, see here.
  • The Role of Intent – The GC’s ruling confirms that intent-related evidence is admissible evidence in abuse of dominance cases (§§33-40). In my opinion, the GC is right on this one. There is indeed a place for intent-related evidence in the effects-based era. Internal documents and other empirically observable facts (aggressive acquisition/litigation strategies) are instrumental when it comes to articulating a theory of harm (a scenario of anticompetitive conduct). That said, intent-related evidence must not, and should not suffice to reach a finding of abuse (as Posner made clear in the US Olympia case). This is probably what the judges sought to recall in holding that “they are just merely relevant facts that put the applicants’ practices in context, but have no impact on the finding of an infringement” (§40) (but this is latter contradicted at §215).
  • Forms-based Arguments – A large proportion of the judgment is devoted to the examination of arguments (§§88-197) whereby the parties challenged the Commission’s qualitification of the impugned practices as “retroactive” rebates schemes or even as “agreements“. Given the remarkable stability of the case-law on this (i.e. the formal qualification of the practice is irrelevant, de facto exclusivity is a cause of concern), I found the discussion old-fashioned and I am not sure this was the strongest litigation argument developped by the applicants.
  • Likely Anticompetitive Effects – The applicants argued that the Commission had unlawfully focused on the “content” of the agreements, and not on their economic “context” to prove likely anticompetitive effects (§200). The Court disagrees with the argument on factual grounds (§217). It observes additionally that the Commission had also sought to bring evidence of actual anticompetitive effects, even if this was not requested under the case-law (§219). Finally, it seems to blame the parties for failure to articulate an efficiency defense (§224). I have searched for some wording on counterfactual analysis… Nothing. In contrast, the Court alludes in passing to the “suction effect” which was THE key concept of the “more economic approach” in the area of rebates (§218).
  • The Test for Anticompetitive Rebates – This is probably one of the least satisfactory aspects of the judgment. One of the main merits of the Discussion Paper and of the Guidance Communication was to devise a clear, logical test for rebates (the so-called “implied predation test”). Against this background, the applicant argued that the Commission had not implemented a rigorous quantitative price-costs analysis (§§247-249) and, in particular, had not shown that Tomra’s prices were capable of being negative. The GC ruling wholly dismisses such arguments (with the limited exception of §267). Not unlike in a box-ticking exercise, the GC seems to consider that it is possible to assess a rebate scheme’s exclusionary potential on the basis of a range of qualitative considerations, such as whether the rebate (i) is retroactive ; (ii) individualised; and (iii) applied to large customers. This approach shares very many analogies with the nefarious “checklist” methodology followed in merger control until 2004.
  • Actual Anticompetitive Effects – The most worrying part of the ruling can be found under §§286-290. In its decision, the Commission scrutinized the actual effects of Tomra’s practices on the market. The Commission found amongst other things that the higher the tied market share, the more stable Tomra’s market share, and the weaker its competitors. In addition, the Commission found that Tomra’s prices did not fall, despite the rebates. Finally, the Commission considered that the bankruptcy of Prokent, one of Tomra’s rivals, supported its finding of anticompetitive effects. The applicants challenged those findings, arguing on the facts that most of the Commission’s analysis was false, and empirically contradicted by other pieces of market-based evidence. Moreover, Prokent left the market when the alleged anticompetitive practices ceased. The answer of the GC on this is remarkably straightforward: I cannot care less. The Commission was arguably under no legal obligation to scrutinize actual effects. The fact that the Commission went further than requested cannot be held against its decision, even if it is wrong and that a proper “actual effects” analysis would contradict its findings of likely anticompetitive effects. In the Court’s view, the examination of actual effects is complementary and optional (§288). This is because, irrespective of actual effects, there can be an abuse as long as the impugned conduct is “capable” of restricting competition. In practice, this case-law deprives dominant firms from the ability to challenge the “actual effects” analysis of the Commission to escape a finding of abuse. The only circumstance where such a defense would work involves decisions where the Commission would take an Article 102 TFEU decision solely on the basis of an “actual effects” analysis, and would not test the “likely effects” of the impugned practice. Given the low evidentiary threshold to bring proof of likely effects, such decisions are unlikely to be frequent (see our comment above).  

Written by Nicolas Petit

7 February 2011 at 8:06 pm

Posted in Case-Law

More competition related entertainment

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Our readers are proposing some additional nominations as well as the creation of a new categores for comic books and online games. We are obedient guys and we do what we´re asked, so we´re now beyond movies and looking for nominations on competition entertainment…

Best animated feature

A brief history of the creation of the FTC

Best online game

A visit to the mall, by the FTC

Best competition law comics

Two mangas by the Competition Commission of Singapore: Foiled (Abuse of dominance) and Fixed (price fixing)

O Cartel da Limonada, by the Brazilian Ministry for Justice

Io Non Abbocco, by the Italian Competition Authority

La Breve Storia di Borgo Allegro, by the Italian Competition Authority

Una Brutta Sorpresa, also by  the Italian Competition Authority (I´m sure they work on other stuff too over there)

The info on the comics is available at the ICN Blog (thanks a lot to Kartellblog for the pointer!).  I´ve actually found quite interesting info in there.  An example: anyone interested in doing competition law research in Fiji?

Written by Alfonso Lamadrid

3 February 2011 at 9:43 pm

Antitrust Oscars

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The significant rise in visits experienced by the blog in the past week (we had close to 3000 visits) has opened our eyes to a reality: there´s a lot of people with free time out there! That’s why, considering that nominations for the oscars were made public last week, determined to fill your spare time with entertainment, and in the spirit of that weird phrase that appears on our header¨”Relaxing whilst doing Competition Law is not an oxymoron“, we´ve put together for you a list of nominees for the best antitrust-related videos on youtube. All of them are really worth watching (although you know that THE RAID is clearly our favorite..)

Suggestions for additional nominations and/or categories are accepted. Vote for your favorite!

Best film by a competition authority

Leniency in cartel cases, by the Dutch Competition Authority.

Be the first to tell; a film on leniency, by the Swedish Competition Authority.

Best antitrust lawyer starred videos

ABA Antitrust Section kicks off year 2010/2011

Best competition law book review

Great video-reviews of the EC Competition Law Handbook 08/09 and of EC Merger Control. Really worth watching; I keep telling Nicolas that this is how he should do his reviews..) They are full of highlights.

Best non-fiction films

The lysine cartel : The real story on which the movie The Informant was based (my favourite scenes are on minutes 1.44  and 2.46). For an interview with the real Mark Whitacre see here

Bill Gates´deposition before the DOJ in the Microsoft trial. In youtube you can find the whole series (for season 1 see here), and also a compilation of greatest hits (the videos give, I think, an unfair portrayal of him so, to balance things here is his great commencement speech at Harvard). Btw, Microsoft´s Steve Ballmer has also starred a short film which escapes any definition

Best politician starred video

Chuck Norris´ Neelie Kroes´ statement (some of the best lines in the history of competition movies) after fining Intel 1 billion euros: “Intel´s latest advertising campaign proposes Intel as the sponsors of tomorrow; well, now they are  the sponsors of the European tax payer” and  “My vision of tomorrow for Intel, here and now; obey the law“.

The Lisbon Treaty and Competition Policy: A Story of Two Views, by Nicolas Sarkozy and Tony Blair (from 0.40 onwards).

Best non-English speaking video

Apparently (¿?) this video deals with leniency

Best educational video “for dummies”

What is a cartel? (Unfortunately we could not nominate it for the category on best special effects)

¿Por qué la competencia importa?

Best critical video on antitrust

Don´t trust antitrust: the incredible bread machine (watch from minute 2 onwards).

An extra

A video not on competition law, but on competition in law (on 0.37 law school is compared to a situation where “you take a group of alcoholics and then open the bar for three years”, and law students are defined as “insecure, grade obsessed, status obsessed people). It also features Elizabeth Warren, one of the best professors I´ve ever seen in a classroom.

Written by Alfonso Lamadrid

2 February 2011 at 2:00 am

Brussels Urban Legends – Guest Post by P. Werner

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We are delighted to publish a post written by our friend and former colleague, Philipp Werner (McDermott Will & Emery in Brussels). Philipp devotes a considerable amount of his time to State aid issues. In his post, he kills a Brussels urban legend, and illustrates how State aid principles may be exported to other areas of EU competition law. We academics call this “cross-fertilization”.

Down here in Brussels, the talk of the town is that State aid law would not part of competition law. This, arguably, is because State aid law (i) often involves discretionary political bargains; and (ii) only occasionally draws on the insights of economic theory.

At best, any such contentions are Brussels’ urban legends. State aid law is just as rigorous (or not) as other areas of competition law. While political considerations may play a role in some of the biggest State aid cases, I doubt that this fundamentally differs from other areas of competition law (think of the Microsoft decisions or of mega-merger cases involving US firms). In addition, those who – like Nicolas – are interested in the economics underpinning competition law will find refined economic analysis in many State aid cases. To take only an example of this, State aid lawyers grapple almost daily with law&econ issues such as the market economy investor principle (MEIP). For more on this, check “The economic analysis of State aid: some open questions” or the 2009 “Study on counterfactual scenarios to restructuring state aid“.

Now, quite to the contrary, State aid law may constitute a source of guidance for other areas of competition law, where legal issues remain unsettled. Take the issue of access of third parties to the antitrust authority´s case file. Third parties willing to bring private damages actions in national courts may request, before the antitrust authority, to access to the leniency applications. Advocate General Mazak has recently delivered a somewhat Solomonic opinion in the Pfleiderer case (C-360/09) on this issue. On of the issues here is Regulation No 1049/2001 regarding public access to documents, and more specifically Article 4 (2) of Regulation No 1049/2001, which provides that “The institutions shall refuse access to a document where disclosure would undermine the protection of commercial interests of a natural or legal person, including intellectual property, court proceedings and legal advice, the purpose of inspections, investigations and audits, unless there is an overriding public interest in disclosure.”

Interestingly, this issue is well settled in State aid cases, and could arguably provide a good point of reference under Article 101 TFEU. In Technische Glaswerke Ilmenau GmbH (C-139/07 P), the ECJ ruled that there is a general presumption that disclosure of documents in the administrative file undermines the protection of the objectives of investigation activities. As a result, the Commission must not show, in principle, for every single document that the exception of Article 4 (2) of Regulation No 1049/2001 applies. The ECJ acknowledges that this does not exclude the right of an interested party to demonstrate that a given document disclosure of which has been requested is not covered by that presumption.

Looking forward to reading your views/ comments on this.

(Image possibly subject to copyrights: source here)

Written by Nicolas Petit

1 February 2011 at 8:00 am