Archive for December 2011
Microsoft/Skype- On how to unconditionally clear a monopoly in Phase I
My “learned” co-blogger (and NY-Times interviewee of the week) initiated a very interesting debate yesterday with regard to the Microsoft/Skype clearance decision. I must confess that I read the decision last evening on the plane back fromFlorence (more on that tomorrow) and, to be frank, I was astonished. Let me briefly, and not exhaustively, explain to you why:
As our usual readers know, I’ve a particular interest in looking at how competition authorities appraise network effects in competition cases (it was the topic of my LL.M dissertation and it’s also supposed to be the topic of a pending PhD project). Since the Microsoft/Skype merger involves two entities benefitting from huge network effects I regarded this decision as a must read.
Well, I was wrong; the decision is a must RE-READ: I had to read certain paragraphs several times in order to make sure that it wasn’t just that I was tired and couldn’t make sense out of it. After several re-reads, I reached the conclusion that, actually, parts of it don’t make any sense.
Nicolas said yesterday that “the decision clearly shows that a merger involving a large monopoly can get Phase I clearance”. I was not involved in this case and therefore I may be missing something but, if you ask me, the decision reads as if the Commission already knew that it wanted to clear the decision in Phase I and then tried to construct an assessment that would fit its pre-determined conclusion. Arguing in a convincing manner that the creation of a “large monopoly” such as the one at issue does not raise competitive concerns and is suitable for Phase I clearance is practically impossible. Nonetheless, that is what the decision has tried to do. And, inevitably, that leads to serious logical problems.
Even from the perspective of an outsider [PS. see note at the end of the post] it’s easy to detect many defects, but for the sake of brevity (notably because I have only allocated one hour of today’s afternoon to write down my notes about this) let’s focus just on one of the Commission’s errors. I have chosen to present you with an error concerning the market for consumer communications because it involves network effects (which is what initially got me interested) and horizontal effects, and because all of us as consumers are able to understand it better. The decision is equally, perhaps even more, questionable with respect to the assessment of vertical and conglomerate effects in the market for enterprise communications, but that part is harder to explain in a brief post; I might develop my views on this in a later post.
In what follows I´ll explain what the decision says in this regards and I will provide you with my very personal views on the Commission´s reasoning. I might be right, but I certainly may as well be wrong. If interested in taking a look at the substantive stuff in other to arrive to your own conclusions, click here:
Google, Microsoft, Skype, et cætera
Confessing a lack of inspiration tonight, I paste hereafter a link to an interesting NYTimes paper on the ongoing Commission investigation against Google. Thanks to James Kanter for the opportunity to be interviewed.
The topic of this paper also gives me a nice pretext to remind our readers that the merger clearance decision in Microsoft/Skype was published a month ago. This decision is well worth reading. It makes a bunch of interesting points on several counts. Here’s a taste of them. First, the decision clearly shows that a merger involving a large monopoly can get Phase I clearance.
Second, it suggests that the tide has turned in so far as the Commission’s appraisal of ICT markets is concerned. On several occasions, the decision unambiguously depicts Microsoft as a vacillating player, in a sector (communications services) where the Facebook, Google and Apple of this world are poised to become – or are already – the market leaders.
Third, the §§ on the tying of Skype with Windows OS are not wholly consistent with the 2004 and 2009 decisions, where pre-installation was deemed problematic in itself, because of the lack of subsequent (switching) user behavior. Remember, those decisions relied on this theory that lazy users were often stuck with WMP and IE, for behavioral biases (the so-called “end-users’ inertia” at §870 of the 2004 decision). Here, the Commission stresses that pre-installation is unproblematic at any rate because consumers do not use whatever communication service found on Windows + there are many alternative means for rivals to reach out to consumers + Skype is already pre-installed on >50% of Windows PCs, but only a small share of Skype are registered and connected users.
Finally, the decision contains some nice wording on the flaws of standard antitrust analysis in dynamic markets. See for instance, §78, which calls for caution in applying conventional market share analysis to such sectors: “consumer communications services are a nascent and dynamic sector and market shares can change quickly within a short period of time. Furthermore, almost all communications services are offered free of charge”. See also §122: “Consumers are very sensitive to innovative services or products in consumer communications services. Providers of consumer communications services lose traction quickly if they are unable to offer users new and innovative functionality”.
Last Call – GCLC Lunch Talk on Menarini
On Thursday 8 December, the Global Competition Law Centre (GCLC) will hold its 55th Lunch Talk on the Judgment of the ECHR in Menarini Diagnostics SRL v. Italy.
Sir Christopher Bellamy QC (Linklaters) and Marco C.E.J. Bronckers (Leiden University and VVGBlaw) will share the stage.
Online registration at http://gclc.coleurope.eu/LunchTalk
The Friday Slot (1) – Ian Forrester
At Chillin’Competition, we have decide to emulate an unpopular practice of DG COMP. From now onwards, we will be launching Friday requests for informations (“RFIs”).
In line with the spirit of this blog, our RFIs will be a bit different from those of DG COMP. Our targets will be big names in the antitrust world who, in addition, are interesting people with a good sense of humor. Just like this blog, our questions will be partly professional and partly personal.
To start this new venture – in principle, the Friday slot will be opened twice a month – we have sent our first RFI to no other antitrust superstar than Mr. Ian Forrester (White and Case, full biography available at the end at this post)!
And guess what: Ian has accepted to address our questions very swiftly, and has provided remarkable, insightful, thought-provoking answers. Again, we are immensely grateful to Ian for the time he took to answers our questions. In exchange for his time, we offered him to baptise this new series of posts, and he offered the title “The Friday Slot” that appears on top of this post.
Question 1: “Oscar” of the best competition law book? And of the best non-competition law book?
The shortest and simplest book is by David Edward and Bob Lane: “European Community Law: An Introduction”. Competition law is not complex, though it can be made sophisticated. Proper analysis of the realities of the marketplace is where everything should start.
The items of competition law literature which I most regularly use are the reviews of competition law in the Oxford Yearbook of European Law since the first volume in 1981. Francis Jacobs was the first editor and for about fifteen years Chris Norall and I squeezed the juice from every development. We tried to avoid accepting the official propaganda and to enjoy advancing our particular theories. Then the reviews went through a period of being too comprehensive and too lengthily thorough, but now we are back on a good rhythm. The reviews are lively and opinionated, and you can disagree with them, but they ought not to be boring. Writing them has been hugely instructive for my colleagues (jacquelyn Anthony , Makis and a platoon of other talents) and me, a great way of learning, digesting and explaining. I often use the OYEL review as a way of reminding myself of what was important in a case. Sometimes that matches conventional wisdom and sometimes it doesn’t.
Question 2: “Oscar” of the best case-law development in the past year? “Oscar” of the worst case-law development?
The Oscar to the best case-law development could go to the Swiss watch parts case, where the Court overturned a Commission refusal of a complaint and took us back to simpler times when small folk could look to the protection of the competition rules. It is very rare for such challenges to succeed and the Court did a really careful job in writing its judgement.
Question 3: Let’s do it like economists => assume that you could change 3 rules, principles, judgments, institutions in the current EU competition system. What would you do?
Criminal liability; proof beyond a reasonable doubt; and judicial review as ferocious as the House of Lords.
Question 4: Average working time/week?
Excessive! I travel a lot, and when I am away the e-mails multiply, as do the messages from editors wanting manuscripts. But I am not complaining. It is fun to do interesting work in interesting places.
Question 5: Why do you work in competition law? How did you first get into it?
By accident. I was a customs specialist, then made a complaint for a friend’s uncle against a whisky producer (differential pricing): Bulloch/Distillers Co. Ltd. That was my first case in Luxembourg. Lord Bethell was the next, about the rights of complainants. Others followed. I never studied competition law, or indeed EEC law, at university, an educational void which is unlikely to be remedied. Read the rest of this entry »
Slides Evening Policy Talk – Bill Kovacic
Bill Kovacic was our guest yesterday at the GCLC.
He gave a superb presentation on the measurement of competition authorities’ performance. In so doing, he confirmed that he is the n°1 speaker on the conference circuit. A great speaker + a pure entertainer.
I attach his slides below.
A quote: in response to a question on why the CAs were so ineffective at communicating that they work in the public interest “we are in the business of instability”
Chillin'Competition 