Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Archive for November 2011

Random News

leave a comment »

Oops, the General Court did it again… Last week in EFIM v. Commission, the Court confirmed the Laurent Piau case-law:  a collective dominant position under Article 102 TFEU covers situations of tacit collusion (here labelled, “tacit coordination“) and hinges on proof of (i) detection opportunities; (ii) retaliation mechanisms; and (iii) absence of countervailing power of actual and potential rivals. Interestingly, the Court made no reference to the notions of “collective entity“, “correlation factors” or “economic links“, used in previous cases. A welcome ruling. Yet, much remains to be done in relation to the concept of abuse of collective dominance.

A great hire by Compass Lexecon: Prof. Jonathan Baker just joined them as Senior Consultant. Prof. Baker has been the Chief Economist of the FCC and the FTC. But to me, J. Baker is one of the first economists who articulated a workable theory of unilateral effects in merger cases. For more, see his article with Timothy F. Bresnahan entitled, ” The Gains from Merger or Collusion in ProductDifferentiated Industries”, 33 J. INDUS. ECON. 427 (1985) and see link here (and in particular footnote 15).

On 12 December, the Brussels School of Competition will host a half-day conference on the proposed reform of Belgian Competition Law. See here for the programme. My assistant Norman Neyrinck and my friend Laurent de Muyter will speak at the conference. I cannot wait to listen to them.

An unconvenient truth: it is technically wrong to say that the default of a Eurozone State would trigger the end of the € as a currency. On this, journalists tend to oversimplify. Unless all failed States opt out of the Eurozone, the € will stay in business. And by the way, a defaulting State does not necessarily need to exit the Eurozone. True though, defaulting States may be tempted to exit so as to engage into competitive devaluation, and regain growth in the mid-term.

Finally, because I love self promotion, and also for my fan club – Alfonso, pls forward this asap to your colleague – a picture of me with a Chinese official who attended a lecture on EU competition law in Brussels 15 days ago.

Written by Nicolas Petit

30 November 2011 at 7:28 pm

Do economists do it with models?

leave a comment »

Things are busy at work, and I just remembered that I told Nicolas I would take care of posting something today. When such things happen we generally resort to either (a) announcing a conference; or (b) posting a quick joke. 

In this case, if I had chosen a) the post would´ve looked too short; but if I´d chosen b) I would be missing an opportunity for self promotion to announce an interesting event. Solution: let´s do both:

(a) Conference announcement: As anticipated last week, Giorgio Monti has put together a most interesting workshop that will be held next Tuesday (6 December) at the European University Institute.  The program -which features Giorgio Monti (EUI), Saskia King (LSE), Luis Ortiz Blanco (Garrigues), Eric Gippini-Fournier (European Commission´s Legal Service) and myself- is available here: What is happening to Article 101 TFEU? 

(b) Joke of the day: Economists don´t do it with models. The picture above (which I first saw in a ppp by Fréderic Jenny at Fordham last September) stands for the proposition that economists do it with models “because there´s no shortage of demand for the curves that they supply“.

Nonetheless, as you all know, economic theory can be used to defend one thing and its contrary. That is why there´s  an alternative economic theory that explains why economists don´t do it with models. If you want to know about it, click here.

Written by Alfonso Lamadrid

28 November 2011 at 9:47 pm

Posted in Events, Jokes

Antitrust Compliance

with 4 comments

The European Commission has just released a brochure entitled Compliance matters: What companies can do better to respect EU competition rules.

The foreword says that companies should “[l]ook at this brochure as a road safety brochure ahead of the holiday period“. Many of the companies reading this will be certainly comforted by the  irony  positive thinking underlying the reference to the holiday period ahead.

In essence, the Commission´s document contains the following messages: (i) breaching competition law isn´t cool and naughty companies can be punished; and (ii) companies should have tailor-made compliance programs.

When I received the brochure this morning I was curious to read the Commission´s advice on how firms could stay out of trouble. After a quick skim, I see that the closest to constructive advice on substantive matters is this profound passage:

 “DON´T fix purchase or selling prices or other trading conditions; DON´T limit poduction, markets, technical development or investment; DON´T share markets or sources of supply; DON´T exchange individualised information on intended future prices or quantities or other strategic information.”

I have the feeling that most of the readers of the brochure already had some kind of intuition that they couldn´t do such things. Moreover, some of that advise is rather hard to put in practice (e.g. “limiting investment” : could bank’s refusal to grant credit be considered a breach of competition law?;  “limiting production”: shall a company make some more of this product that isn’t selling too well?; “limiting a market”: how does one limit a market? ).

In any case, and  leaving easy jokes aside, the Commission must be applauded for its attempt to foster a compliance culture. Other competition authorities such as the OFT and the Autorité de la Concurrence should also be commended for their efforts on this area. Moreover, the Commission has provided much general guidance elsewhere and it cannot be expected to do so on a brochure like this.

In fact, the message about the need for companies to have an effective and tailor made compliance program is welcome and important. The brochure basically sets out the fundamentals of compliance program design, and whereas it does not say anything groundbreaking it does a good job in explaining the basic stuff.

The Commission doesn´t seem to contemplate further incentives such as fine reductions for companies with established and appropriate compliance programs. The French competition authority has proposed fine reductions, but on an ex post basis and only in the framework of settlement proceedings. But why not take a bolder step?  I tend to understand those who argue that it doesn´t make much sense to reward firms that have breached the law ignoring such programs, but what about those cases where the company has a clear  policy and intention of complying with the law, but one or a few “rogue” executives act on their own? (we all know many instances where this has been the case). It all would come down to assessing what standard the firm had set and whether it complied, as a firm, with that standard. This point was also made by D. Geradin (with the support of J.Wileur and D. Malamataris ) on an interesting recent paper. Companies should not be rewarded for breaching the law, but it would be fair to limit the damage when it can be shown that a given company has done everything it could.

At the end of the day, the content of the Commission´s document is ok given what can be expected from a  non-specialist brochure from the Commission. What is more worrysome is that I have seen (more than once) very similar “brochures” which had been sold to companies prêt à porter (not tailor made; i.e copy/paste jobs) and at ridiculous prices.  I´m currently working on a couple of compliance programs, and, to be frank, general and vague programs aren´t useful for the companies nor for lawyers (unless billing is considered to be the sole parameter).  On the contrary, ad hoc programs adapted to particular firms and markets are extremely useful for firms as well as extremely interesting for lawyers, since we get to be in touch with a wide array of strategies and practices in many different markets.  A subversive thought springs to mind, shouldn´t clients also draft some compliance programs on professional service standards for some law firms?

Written by Alfonso Lamadrid

25 November 2011 at 12:01 am

From theory to practice

leave a comment »

In the antitrust field, Prof. Barry Nalebuff will remain to posterity  for being the one guy who challenged the caricatural Chicago view that there can be no exclusionary bundling (the “single monopoly profit” theorem).

But beyond this, he may also remain to posterity as being one of the founders of Honest Tea.

Turning business theory to practice, Barry Nalebuff co-founded a company that “creates and promotes delicious, truly healthy, organic beverages” (sic!).

Apparently, the idea came out of “a class discussion that involved a Coke vs. Pepsi case study“. And since then, they have achieved a truly impressive penetration on a market usually depicted as a fortress, given high barriers to entry.

With this background, Alfonso and I are currently contemplating a potential move on a  less healthy, but equally delicious market segment of the drinks industry.

Very many thanks to my LLM student Stéphanie de Smedt for the pointer.

Written by Nicolas Petit

24 November 2011 at 8:47 am

Antitrust litigation over the .XXX domain

with one comment

An interesting piece of news was left out yesterday: an adult website company owner has filed an antitrust lawsuit  against the International Corporation for Assigned Names & Numbers (ICANN) contending that website owners are “forced to pay excessive fees for .XXX defensive registrations” that may have little or no value.

We suppose you may not be aware of this, but the landrush period for the .xxx domain has been running since 8 November and until 25 November. General availability will commence on 6 December.  This means that many companies are right now engaging in defensive registration in order to preserve their image by avoiding third parties from, for instance, registering a web with their brand name under the .XXX domain. As you know, that also happens often with regard to less problematic domains such as .com .net or .org.  Why? One example: if you click on www.whitehouse.gov then you´re directed to where you want to go, but check out what happens if you click on www.whitehouse.net .

Antitrust concerns in relation to the ICANN aren´t new. Back in 2003 Professors Frookin and Lemley argued that the ICANN and its policies were contrary to antitrust law (Click here for their interesting paper ICANN and Antitrust).

The full case docket and legal filings are available here.

Written by Alfonso Lamadrid

22 November 2011 at 1:42 pm

Some interesting and recent stuff

leave a comment »

There has been some interesting stuff going on in the past few days that we haven´t been able to cover. Here’s a brief (and subjective) account of some recent antitrust related news:

– Bill Gates has been (and at the time of writing he may well still be) testifying in a Utah Court in the framework of a case initiated by Novell. Novell is arguing that Microsoft encouraged them to develop WordPerfect software for Windows, only to later withdraw its support because WordPerfect competed with other Microsoft products. Judge Motz, who is presiding over the case, has reportedly expressed skepticism that Novell’s claims have merit.

– Chinese authorities confirmed that there is currently an ongoing investigation concerning a possible abuse of dominance on the part of two State-owned companies (China Telecom Corp. and China Unicom). The antitrust branch within the NDRC is investigating whether these two companies -allegedly dominant in the market for broadband internet services- may have been charging their competitors higher fees for broadband access while offering favorable prices to non-competitors. This is to our knowledge the first high profile abuse of dominance investigation since the Antimonopoly Law was enacted in 2008. The fact that it is targeting two State owned companies makes it particularly interesting. We’ll be asking our “Chinese correspondent” to keep an eye open for any possible developments.

– Here´s one that I´m following with particular interest: NBA players hired the very well known antitrust lawyer David Boies to represent them in their battle against franchise owners that has led to the NBA lockout. The players have now filed two class action lawsuits (one in Minessota and one in California, which are considered to be favorable venues) asking for treble damages (that is, triple the amount of the more than $ 2 billion they would´ve made this season). The lawsuits argue that the lockout “constitutes an illegal group boycott, price-fixing agreement, and/or restraint of trade in violation of the Sherman Act” an hat the owners´ final offer for a new collective bargaining agreement would have “wiped out the competitive market for most NBA players”.  (For our comments on the very similar NFL precedent see here).

Giorgio Monti (Professor at the European University Institute in Florence and author of one of our favorite competition law textbooks) read our posts on Pierre Fabre and on the future of Article 101 and invited us to participate at a workshop in Fiesole on January 5th. Should be very interesting; we’ll give you more details in the coming days.

– Antitrust students at Berkeley have started their own Berkeley Global Antitrust Blog. Best of lucks to them!

-Finally, last week we received a couple of emails from readers that reveal that my co-blogger Nicolas is apparently becoming a celebrity. One reader told us about the fact that there is a Nicolas Petit street in Luxembourg, and another reader sent us a picture that shows that a young competition lawyer has a picture of Brad Pitt Nicolas above her desk (!)

See pic below for evidence. We´ll keep the identity of Nico´s fan secret in order to avoid any incidents with Ms. Petit ; )

Written by Alfonso Lamadrid

21 November 2011 at 8:39 pm

The Rick Perry Syndrome

with one comment

 //////////////

Oops“, the Commission did it again…

Yesterday, in the S&P case, the Commission again closed abuse of dominance proceedings with an Article 9 decision. As already explained, Article 9 decisions have become the conventional procedure in Article 102 TFEU cases.

What is less conventional is that the lion’s share of recent Article 102 TFEU cases involves exploitative abuse allegations. Think of  Rambus, S&P, IBM  – where the Commission dumped bundling allegations to focus on excessive pricing – and the recent Apple-Samsung investigation.

As a matter of principle, I see no wrong to this. But, this raises several interesting questions, which cast doubt on a number of commonly accepted viewpoints.

First, is there  a Rick Perry problem at the Commission? I mean how could our Commission friends forget that the Guidance Paper states that exploitation cases are no enforcement priority?

Second, does the focus on exploitation means that those cases are easier to manage than exclusion cases, in particular under the effects based approach (where proof of anticompetitive foreclosure involves proof of exclusionary effects + proof of subsequent exploitation).

A final remark. Exploitation cases are conceptually close to constructive refusal to supply cases (see what the Commission says in IBM, §3), and thus can be also deemed exclusionary cases. But the crux of the matter is that all exploitation practices necessarily foreclose someone. From an economic standpoint, the deadweight loss of monopoly that arises out of price hikes is nothing but the foreclosure of customers. Hence my question: is the distinction between exploitation/exclusion really useful?

Written by Nicolas Petit

19 November 2011 at 2:42 pm

Posted in Case-Law