Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Archive for October 2011

The slow death of Article 101(3)

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Yesterday we attended the first session of the annual conference of the Global Competition Law Center (of which, btw, Nicolas is the director). As expected, the conference was extremely interesting, and gave us plenty of ideas for future posts. Here´s one.

Our friend Damien Gerard made a very good presentation in which, following a historical approach, he presented several paradoxes of the modernisation of EU competition law. After he concluded, I posed a question to the panel, asking whether the interplay of the three dimensions of modernisation that Damien mentioned (substantive, procedural and institutional) may have had the effect -or perhaps the object..- of killing Art. 101(3).  The comments that followed showed that this is a widespread concern.

Let me now explain to you how I view this, and why the usual question (who did it?) has no clear answer. My take is that all the usual suspects bear some responsibility:

In the early days of the classic case law, EU Courts paid great attention to Art. 101(3) because they were conscious of the crucial role that the drafters of the Treaty had attributed to this provision. But it wasn´t their task to apply it. They saw it as something too complex and abstract, so they washed their hands off: they left  its application up to the Commission and decided to apply a light standard of review. That is, in fact, where the “manifest error of appraisal”  test of judicial review was born for EU competition law.

For many years, the Commission exercised its monopoly over the application of 101(3). Those were, in a way, the “golden days” of this provision (even though there were some obvious disfunctionalities as a consequence of the centralized system). With the entry into force of Regulation 1/2003 this whole situation changed. The Commission shifted its priorities to focus on the “most serious infringements” which, as a matter of fact, are also the “most obvious” ones. It therefore also washed its hands and left the cases where Art. 101(3) would be relevant to national competition authorities (NCAs) and national courts.

But NCAs and national courts also regard the application of 101(3) as something which is too complex, and, let´s face it, the Commission´s Guidelines on Art. 101(3) are far from being decisively helpful. Couple that with the feeling that undertaking an effects analysis under 101(1) is also too burdensome, as well as with the fact that NCAs have, logically, their own priorities, and what you get is a situation where at the national level there are essentially only “object cases” where 101(3) assessments are reduced to an absolute minimum under the argument that “object restrictions” are hardly redeemable (which, btw, is at odds with all case law departing from European Night Services) There are no available stats on this, but I bet they would be mindblowing.

The Commission hasn´t done much to solve this situation. It has failed to provide case by case guidance, and has instead focused on sanctioning cartels, abuses of dominance (mostly in network industries) and in releasing general guidance; moreover, where an issue appears as uncertain, the usual solution is to adopt a commitment decision. Not really helpful. Furthermore, the Commission has contributed to fostering the confusion by enlarging (with the help of EU Courts) the “object” category (e.g. with regard to information exchanges).

EU Courts, on their part, could also be charged as accomplices. Three pieces of incriminating evidence are (i) the enlargement of the “object” category in T-Mobile; (ii) the ruling in Tele 2 Polska precluding NCAs from adopting negative decisions; (iii) the adoption of distinct standards for the review of 101(3) assessments: would the overly simplistic Premier League Judgement, where the Court says, without providing much support for its assertion, that the exclusivity arrangements at issue do not meet the conditions of Art 101(3) (see para 145 of the Judgment) comply with the Court´s tough stance against the Commission in Glaxo Spain?

What does this imply for competition law:

In my view, this situation is dramatic for EU competition law (well, as dramatic as a legal matter in the competition law field can get, which, to be frank…).  The interplay of all the factors above has led to an overly simplistic view of competition law, to a shifting of the burden of prove, and to even more arbitrariness and uncertainty.

 PS. The painting illustrating the post is “Prometheus bound” by Rubens. As Art. 101(3) in the world of competition law, Prometheus was “credited with -or blamed for- playing a pivotal role in the early history of mankind“. As you know, immortal Prometheus was punished by Zeus to a -quite nasty- eternal punishment: he was bound to a rock where his liver was eaten daily by an eagle,  only to regenerate and be eaten again the following day. Mithology has it that Hercules finally slayed the eagle and freed Prometheus. Will anyone eventually free Art.101(3)?

Written by Alfonso Lamadrid

28 October 2011 at 12:31 pm

JD

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Jones Day Paris announced recently that they had hired Eric Barbier de la Serre (formerly Latham & Watkins, Brussels).

He will join there Eric Morgan de Rivery, who is the resident partner in charge of competition cases.

I knew, as many, that Jones Day applied strict standards when it comes to appointing new partners. But that strict???

I mean, unless you are (i) a superstar antitrust lawyer; and (ii) you’re called  “Eric ___ de____”, the odds that you’ll make partner in Paris seem pretty low.

The bottom line: when it comes to HR, Jones Day clearly is no joker.

Written by Nicolas Petit

27 October 2011 at 7:00 am

Posted in Life at Law Firms

XV edition of the EU & Spanish Competition Law Course

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Some of you may recall from previous posts that both Nicolas and I are heavily involved (although in this case I clearly beat him..) in the organization of an excellent competition law course that Luis Ortiz Blanco has been directing for 15 years in Madrid. Actually, that´s where we met four or five years ago. 

We are of course biased, but we must say that the line-up of more than 70 guest speakers who come every year from all over Europe to lecture in Madrid is a true Who´s Who of EU competition law experts. Moreover, the 115 hours of scheduled classes allow for a more detailed coverage than that offered by many other competition law courses on the market. About half of the course is lectured in English.

The final program for each module and seminar has not yet been decided, but the overall structure and dates have been set, so I´ve included the info below. Anyone interested can register both for the full program or just for specific module/s or seminar/s.  If any of you would like more information you can contact me at alfonso.lamadrid@garrigues.com

The 2012 program will be structured as follows:

– An introductory session -in which Nicolas will play a very prominent role- will take place on January 13.

– A module on cartels (coordinated by Jerónimo Maíllo; San Pablo CEU University) will be held on January 16-18.

– A module on other restrictive agreements and practices (coordinated by Juan Andrés García Alonso; Peugeot) will take place on January 23-25.

– On February 3 there will be a seminar on recent developments in relation to Art. 101 (coordinated by Fernando Castillo de la Torre and Eric Gippini Fournier, both from Legal Service of the European Commission).

– A module on abuse of dominance coordinated by myself will be held on February 6-8.

A seminar on recent developments in abuse of dominance and merger control (8 hours)  jointly coordinated by  Cecilio Madero (Deputy Director General at DG COMP) and by myself will be held on February 24.

A module on merger control coordinated by Jerónimo Maíllo will be held on February 13-15.

– A module on the application of competition and state aid rules to public entities coordinated by José Luis Buendía (Garrigues) and Jorge Piernas (EUI) will take place on March 1-2.

– A seminar on competition law in regulated markets coordinated by myself will be held on March 12-14; and

– A seminar on competition law and IP  coordinated by Álvaro Ramos (Legal Director at Cisco) will take place on March 23.

Written by Alfonso Lamadrid

26 October 2011 at 4:50 pm

Posted in Our Organizations

“Canada Dry” Decisions

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The ECJ ruling in Tele2 Polska is a joke (actually a bad one).

I’ve already blogged on the nefarious effects of this ruling. Today, I’d like to make a few more points.

Remember: the judgment states that National Competition Authorities (“NCAs”) cannot, under Regulation 1/2003, adopt declaratory decisions stating that there has been no breach of Article 101 and/or 102 TFEU (on the merits).

This judgment is likely to have far reaching consequences. As written in a paper below, and confirmed by a number of colleagues at the GCLC lunch talk yesterday, it means that NCAs cannot adopt individual exemption decisions under Article 101(3) TFEU.

Since the inception of Regulation 1/2003, however, many – including me – have repeatedly stated that decentralisation was all about empowering NCAs to take Article 101(3) TFEU decisions. More importantly, several NCAs have taken exemption decisions over the past 7 years. Is this decisional practice now unlawful?

The Commission’s response to this is that the ruling does not change much. Rather than taking a negative decision under 101(3) TFEU, the NCAs can still adopt decisions that “there are no grounds for action on their part” pursuant to Article 5 of Regulation 1/2003.

Now, is this really true? As noted by F. Zivy yesterday, could a NCA conceivably write in a decision:  « The impugned practice infringes Article 101(1) TFEU. There is strong evidence that it is nonetheless justified under Article 101(3). But we are sorry, the only thing we can do is to say there are no grounds of action against this infringement”?

Or to be even more extreme:  “The impugned practice constitutes an infringement of Article 101(1) TFEU. Hence, there are no grounds of action on our part“? Come on..

To me, decisions that there are no grounds of action are like Canada Dry to “negative decisions”: they look like negative decisions, they taste like them, but they are not like them.

In practice, rather than making such paradoxical statements, NCAs willing to exonerate anticompetitive agreements are likely to reason within Article 101(1) TFEU, under a “rule of reason“-like approach (which BTW has been consistently held alien to EU law by the ECJ).

A last remark: the judgment is primarily based on a litteral reading of Article 5 of Regulation 1/2003 which sets the powers of NCAs, and is supposed to be exhaustive. Article 5 says  nothing of inapplicability decisions. hence, NCAs cannot take them.

Now, has the ECJ really read Article 5 of Regulation 1/2003?

I mean had it done so, it would have realised that this provision is all about the decisions taken for the application of Article 101 and 102 TFEU (“The competition authorities of the Member States shall have the power to apply Articles 81 and 82 of the Treaty in individual cases“). Hence, it is somewhat unavoidable that this provision is silent on negative decisions, that DO NOT apply Articles 101 and 102 TFEU.

Hereafter a paper that I have written with my assistant (in French) + the slides presented at the GCLC lunch talk yesterday.

Commentaire Tele 2 Polska – Petit et Lousberg – Final

24October2011_GCLC_Vebic&Tele2Polska

GCLC 24-10-2011 amended

GCLC_Tele2 and VEBIC_slides only

Written by Nicolas Petit

25 October 2011 at 9:56 am

Perfect competition

with 5 comments

At university, I teach a course entitled “basic economics of competition law“.

Last week, I told my LL.M. students that there are only few real life examples of the perfect competition model.

I also told them that  the “perfect competition” entry in Wikipedia only mentioned street food in Asia.

If I had to think personnally of additional illustrations, the only examples that sprung to my mind were:

  • Le Carré in Liège => the city centre area where students get d***k on the WE
  • The Kebab street close to the Grand Place in Brussels => the city centre area where people rush at night after they got d***k

Since then, one of my LL.M. students has apparently updated the Wikipedia entry :).

Written by Nicolas Petit

24 October 2011 at 9:30 am

Posted in Uncategorized

Our second birthday!

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On 20 October 2009,  Chillin´Competition opened for business.

In the two years that have gone by since then, this blog has taken up a considerable part of our “free time”, but it has taught us a lot and it has rewarded us with a great deal of  satisfaction as it has introduced us to many new  friends and opportunities.  As we replied in an email to one of you last week, as most parents we´re very proud of our baby, but we are ambitious parents and we want it to get better and better in every possible way.

One year ago, we confessed to be “frankly surprised by the reach of this tool” because we´d had nearly 70.000 visits and an average of 350 visits a day.    As of today, we´ve had 177.000 visits and our daily average has constantly increased to the extent that this week we´ve had over 1 , 000 visits a day. Over 450 of you receive our daily posts via subscriptions or via our LinkedIn group.  

Over the lifetime of the blog, we have been lucky enough to receive some really excellent input, from both guest contributors and from you in the form of your comments.  

W hen we stated out, we couldn’t have imagined the interest that Chillin’ Competition would generate. Thanks so much!!  

Nicolas & Alfonso

Written by Alfonso Lamadrid

21 October 2011 at 1:29 pm

Posted in Uncategorized

Hearing in CISAC v. Commission (and more)

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I was yesterday at the General Court with my LL.M. students from Liege. We attended the hearing in CISAC v. Commission.

Here’s a grab bag of ruminations on the CISAC case, and some information on the Court. Let’s start with the case.

I.     CISAC v. Commission 

In this case, the Commission argues that national collecting societies have entered into an unlawful concerted practice “‘by coordinating the territorial delineations of the reciprocal representation mandates granted to one another“. The evidence brought in support of this finding hinges primarily on proof of parallel conduct, through the adoption of similar reciprocal representation contracts by the collecting societies.

During the hearing, the Judges repeatedly questioned  the Commission on why it had brought no other evidence of concerted practice, in particular, documentary evidence. The judges found that surprising, especially given that the Commission enjoyed the implicit support of two collecting societies, i.e. BUMA and SABAM.

The Commission awkwardly conceded that there could not be any evidence of this kind, because it was not necessary for the collecting societies to “agree” on the terms of the reciprocal representation contracts (I heard something like: “there was nothing to agree upon“).

If I understand correctly, those terms – and more generally, the monoterritorial agreements – had been applied previously in other types of contracts, and it was simply the most rational decision for each collecting society to replicate them individually in the impugned reciprocal contracts.  In so saying, however, the Commission made a daft mistake. It implicitly admitted that the wide-ranging parallel adoption of dozens of similar reciprocal contracts had an explanation alternative to concertation (i.e. individual, rational behavior from collecting societies) … and that it had not discharged the burden of proof required under the Woodpulp case-law.

The main applicant’s lawyer rightly noted, moreover, that territorial exclusivity makes a lot of sense from a rational, individual standpoint.

II.     Reform of the Court

Alfonso referred to the reform of the Court a few days ago. Here’s some fresh information on the reform.

The General Court and the Court of Justice now have an agreement to propose the appointment of 12 new judges +3 référendaires for each (and importantly, 12 cars (without a driver though)).

Those 12 new judges will surely be appointed under a rotation model, similar to the one that prevails at the Civil Service Tribunal. There will be new jobs for référendaires thus, in particular in fields such as competition law. As pointed out by Alfonso, being a French native speaker is a HUGE asset. In fact, in each cabinet, there’s generally at least on French speaking guy. And this is unlikely to change. I heard that the new selection panel – which assesses candidate  judges – drafted a report stressing that new appointed judges should  hold two skills: a very good French and a strong publication track-record. As a French speaking academic, I could simply commend the work of those authors. That said, I will never hold a such prestigious position :(, given (i) my insulation from the French legal system; and (ii) that I have not followed THE standard professional avenue to the ECJ, i.e. Council of State or Ecole de la magistrature.

More information:

  • At the ECJ, a vice-president will be appointed. New (I heard five) AG’s positions will be created.
  • Specific rules will be adopted in relation to the 5 judges chambers;
  • Other aspects of the reform may entail suppressing the rapport d’audience, providing for an accelerated preliminary reference procedure (duration ❤ months), limiting the size of written pleadings, etc.
  • It will be up to the heads of State to decide on this.
PS=> hereafter a picture of my LL.M studs with Judge Jean-Jacques KASEL (Court of Justice of the EU).

Written by Nicolas Petit

20 October 2011 at 9:45 am

Posted in Case-Law