Archive for 2011
IMEDIPA Conference on Competition Law and Policy
The 5th International IMEDIPA Conference on Competition Law and Policy will be held in Athens on May 27th -28th under the auspices of the Hellenic Competition Commission and the Competition Authority of Cyprus.
Aside from the venue, this Conference has many other attractives: a very comprehensive program, an impressive line-up of speakers, and a very affordable price (which is quite rare in the world of competition law conferences).
The program and registration information are available here.
(Thanks to George Pedakakis for the pointer!)
Subversive thoughts (1) – Fines, Leniency and the Search for an Optimal Detection Policy
A somewhat heretical idea sprung to mind yesterday. The mainstream will not like it (fortunately disputes with the mainstream are not any longer settled by recourse to bonfires).
(Note to our readers: the mainstream comprises adepts of Chicago School thinking and Public Choice theory. It combats, with caricatural arguments, all attempts to intensify competition enforcement. As if we were subject to Pavlovian conditioning, all too often we lawyers side with the mainstream, thereby failing to remember that competition enforcement is a genuinely good thing).
But let´s get back to this idea: to improve cartelists incentives to report infringements to agencies, why not allocate the entire amount of the fines (or a significant proportion thereof) to the whistle blower?
As long as the ring leader(s) is (are) excluded from a such reward, I see no obvious perverse effects to the proposal.
Surely, it sounds quite immoral to reward financially what is plain and simple betrayal. But on the other hand, it is fair and efficient that society rewards those firms that exhibit the strongest desire to comply with the law.
Also, one cannot rule out that clever firms involved in multiple cartels will coordinate leniency applications so that each participant benefits at least once from the reward (some sort of market sharing on leniency applications). Yet, this hypothesis rests on restrictive factual assumptions. More importantly, given that the fine will likely change from one cartel to the other, cartelists will not withdraw equal benefits from leniency applications. In turn, this will undermine their incentives to join/observe the coordination.
Finally, some could be warry for the EU budget to which competition fines contribute. Again, the objection is not decisive. This is because competition fines do not increase the EU budget but finance it. Technically, they are deducted from MS contributions, who pay less when competition fines are high. The sole and whole issue there is thus distributional: shall we transfer the product of fines from MS to whistle blowers? I am not sure of the answer, but I am incline to believe that competition fines are just a drop in the sea of MS contributions.
Those thoughts came yesterday whilst I was preparing a lecture on public and private enforcement for the LL.M students of the University of Gent (see ppt. below). I am very grateful to Prof. Govaere for her kind invitation.
5 May 2011 – Public and Private Enforcement of Competition Law
Next GCLC Lunch Talk – EU and National Leniency Applications – 27 May
Our next lunch talk will be devoted to the interplay between national and EU leniency procedures.
It will take place on 27 May at The Hotel in Brussels. For this event, we’ll follow a somewhat specific format, with 4 speakers and a roundtable discussion.
Registration form can be downloaded below.
Chillin´Competition Group on LinkedIn
We are that close to becoming IT geeks.
We have just created a Chillin´Competition group on LinkedIn! (you can click here to join it). The above picture is the group´s image.
In addition to the existing CompetitionProf Twitter account (see sidebar on this page), this will improve the ability of our readers/friends to meet and interact with us/each other.
This blog currently has more than 3000 visits a week, but we can only put a face to the people that contact us by email and to the 75 readers who have so far suscribed to the blog (by the way, in case you haven´t noticed, there is a “Suscribe” link on the right side of the screen). We also hope that by having a little more information on who you are, we will be able to improve the contents of this blog with “more targeted” posts. In turn, this will entitle us to obliterate our competitors chill competition even further.
Looking forward to linking up with you there
Nicolas & Alfonso
The end of the US Microsoft case
13 years ago the US Department of Justice together with several States filed a suit against Microsoft that marked the beginning of what still remains as the most significant case in contemporary antitrust, and one that led to many changes in the way we approach high-tech markets, and antitrust enforcement in general.
The history of the US v. Microsoft antitrust battles is too rich in details to be summarized here, but those interested in a great brief explanation should watch this video in which Phil Malone (who was one of the leading prosecutors for the Antitrust Division -and also my Professor at Harvard Law School- makes this long story short).
But now more than ever, all of that pertains to history. The oversight mandated by the 2001 settlement (reached right after the DC Circuit Corut reversed part of the District Corut´s decision which had ruled for the Governmment) will expire on May 12th. However, the last oversight hearing before Judge Colleen Kollar-Kotelly occurred on April 27th and marks, in practice, the end of the story. In the words of Judge Kollar-Kotelly, the effective end of the Microsoft case “will close an important chapter in the history of antitrust law“.
I missed this in the selection of news that had taken place during our days off, and I have, very rightly, been “reprehended” for this omission by Craig Farringer, Assistant Attorney General for the District of Columbia, and one of the members of the so-called “California Group”. (as some of you will recall, several States decided in November of 2001 that they did not want to accept the settlement proposed by Microsoft; this lead to a full evidentiary remedy hearing which resulted in the California Group Final Judgment). Craig Farringer (who also had extremely nice words for this blog, for which we´re grateful) has sent us a picture of some California Group lawyers and experts taken moments after the status conference outside the Prettyman courthouse in Washington. Here it is:
(Pictured from left to right is Adam Miller of California, the now famous technical expert Craig Hunt, Layne Lindebak of Iowa, Stephen Houck (who signed the original complaint lodged by the States in 1998), economics expert Chuck Clarke, and Craig Farringer).
Our congratulations to all those who worked on the case, be it for the DOJ, for the States, for Microsoft or for other third parties involved in the case.
And, by the way, on this side of the Atlantic the General Court has scheduled for May 24th the hearing on Microsoft’s appeal against the Commission´s findings of non-compliance with the 2004 decision, which led to an additional 899 million euro fine.
Competition Law and Sport (VII) Belgian Competition Authority investigates Pro League rules
Back in November we devoted another of our posts on competition law and sport to a couple of cases on which I have been/am imvolved. The core issue in one of those cases -currently pending before the Court of Arbitration for Sport- relates to whether, or under which circumstances, a total or partial closure of a league, the decision to eliminate some of its members, or a modification of the promotion/relegation rules governing the functioning of a given league (in that case, the basketball Euroleague) might constitute a restriction of competition attributable to the league itself or to those of its members having voted for the new rules.
Some of our readers have contacted us to inquire about our thoughts on a new belgian case that contradicts the idea (apparently shared by some officials within DG COMP) that such decisions cannot give rise to any competition concerns. Indeed, some weeks ago the Belgian Competition Authority formally expressed its concerns with the modification of the relegation rules of the Belgian football league (Pro League). (See here for the Press Release).
I won´t enter fully into the debate given that I´m not aware of the specificities of the case, and because my objectivity and freedom to express an opinion are somehow compromised. Nonetheless, I think it´s interesting to remark that this is not the first time that competition rules have affected similar decisions. There is an interesting precedent in relation to rugby leagues in Australia , and in the US it has been taken for granted that, absent antitrust exemptions, decisions on the shrinking of a league or even on the relocation of clubs/franchises would fall under the scope of the antitrust laws (a clear illustration of this was the 1991 proposal for a Fairness in Antitrast in National Sports (FANS) Act. (I often wonder if they hire someone specifically to come up with “original” acronyms over there…)
It´s clear to me that decisions of the sort of those outlined above fall in principle under the scope of Art. 101(1). Accordingly, any assessment on their legality should maily focus on the application of the criteria laid down by the ECJ in para. 42 of the Meca Medina Judgment and on whether the four Art. 101(3) conditions are satisfied.
We´ll keep you posted on any developments.
Competition Law and Sport (VI) The NFL Lockout
Our “competition law and sport” series (see posts I, II, III, IV, and V) was born out of our belief that the application of competition law to the world of sports has a tremendous potential that still today remains to a great extent unexplored in the EU. As I´ve said before, not only are sports-related cases some of the most visible ones at the EU level (for the general public Bosman is very likely the best known ECJ Judgment of all times), but given the peculiar features of the activities and markets at stake they also raise particularly interesting issues that push competition law outside of its comfort area, some of which we´ve previously discussed here.
In the US they were much quicker than us to realize that. In fact, the application of the antitrust laws has shaped much of the current organization of professional sport. A good and very hot illustration of this influence is the controversy surrounding the NFL lock out, which was recently challenged on antitrust grounds by several NFL players, including superstars Tom Brady, Peyton Manning and Drew Brees (Read their complaint here). The players also asked for an injunction to freeze the lock out that was finally granted last Monday.
Background and issues in a nutshell: the activities of all major leagues have enjoyed until now some degree of inmunity to the application of antitrust laws. The clearest example is baseball, which enjoys a controverted antitrust exemption that was ratified by the Supreme Court in Flood v Kuhn (1972) on the basis of a really absurd reasoning that put a curious interpretation of stare decisis before sound legal reasoning and common sense. Other sports have not been treated with so much deference, and so they have resorted to collective bargaining so as to escape the application of the Sherman Act. That was the case of the NFL, which, until now, had always negotiated all sorts of issues with the players union (NFLPA).
On March 11th, and in light of the unlikelihood of reaching a satisfactory deal on how to divvy up the $ 9.3 billion that the NFL makes, franchise owners announced a lock out (which, amongst others, implies no salary, no hiring, and no access to training facilities) (btw, it seems that the NFL´s tactics are somehow similar, and coincidental in time, to those of the Republican party..) and players decided to decertify their union and cease the collective bargaining process in order to deactivate the non-statutory exemption and lodge an antitrust complaint (see the link above for the content of the complaint).
The complaint challenges the compatibility with Section 1 of the Sherman Act some of the NFL´s basic arrangements, namely those related to salary caps, drafting of new players and free agent restraints, as well as of the lock out itself.
On Monday, Judge Nelson (District Court for the District of Minnesota) issued an order granting an injunction which freezes the lock out (finding that players/plaintiffs have a fair chance of prevailing and that absent the injuction they would suffer irreparable harm). The order, however, does not deal with the merits of most of the players´claims, and rather states that “[r]esolution of the issue of whether the exemption precludes relief on the NFL’s various Player restraints must await another day”. (Click here to read the order).
If the litigation were to reach an outcome in the form of an Opinion on the merits (which is not so obvious in light of the White v NFL precedent and of the ongoing court-ordered mediation talks) that would mean that a court would undertake a competitive assessment of several practices that have never carefully scrutinized so far. This could most certainly have an impact on the debate surrounding the possible implementation of salary caps and other similar arrangements in European sports and particularly on their assessment under EU competition rules. We´ll deal with those in future posts.
Jonathan Levin wins John Bates Clark Medal
One of our friends/readers -and former Stanford affiliate- has pointed us to some other news that we missed in the past few days:
The John Bates Clark medal -a sort of Nobel Prize for economists under 40 (in fact, a significant majority of its awardees have later received the Nobel)- has been awarded to Jonathan Levin .
For those who don´t know him, Levin is a Stanford Professor who has written extensively on industrial organization and whose research interests are now mainly focused on the internet and online markets. For a list of his publications and ongoing research check out his impressive CV.
Other curious facts: Levin is the son of Yale University President Richard Levin, and earned his PhD at the MIT, where he belonged to the same PhD class as the two other most recent awardees of the Bates Clark medal: Emmanuel Saez and Esther Duflo.
We´re back. And a few things happened while we were away
We´re back on track. Since, strangely enough, the world didn´t stop turning in our absence, there have been a number of interesting developments worth noting. Some of them will be the object of specific posts in the coming days, but, for the moment, here´s a choice of three: one from the EU, one from the US, and one from a third jurisdiction (Mexico), which are related to matters that have recently been/will soon be discussed on this blog:
Europe: Last Tuesday Commissioner Almunia delivered a speech at the GCLC´s Fifth Evening Policy Talk (by the way, the director of the host institution, who happens to be my co-blogger, Monsieur Petit, was absent; how rude is that?? 😉
Commissioner Almunia spoke about the “resilience and adaptability” of the competitition rules; he highlighted the four commitment decisions adopted by the Commission in the energy sector, pointed out that competition enforcement can achieve objectives other than the efficiency of markets (resorting to the example of facilitating generic entry into pharma markets), and insisted on the necessary complementarity of regulation and competition (with his eyes set on financial markets).
In addition, and very interestingly, Mr. Almunia announced plans to aim for a “better targetting” of State aid control, noting that the Commission´s services currently have too much on their plate. It will be most interesting to see the practicalities of how the Commission intends to “refocus” its resources on the State aid field. In the coming days one of the greatest experts on State aid matters will express his views on these plans on Chillin´Competition.
United States: More Google News (and this time we’re far from being the first ones commenting on them…). On earlier posts we referred to the controversy surrounding the Google/ ITA software deal. Some days ago the parties entered into a consent decree which imposes a set of detailed “regulatory” conditions upon Google’s future operation of ITA that would resolve all of the DOJ’s competitive concerns. Those concerns essentially related to the possibility of other flight search companies being foreclosed from access to QPX (ITA’s airfare pricing and shopping software). A press release from the DOJ briefly describes the conditions imposed by the consent decree in the following terms:
Under the proposed settlement, Google will be required to continue to license ITA’s QPX software to airfare websites on commercially reasonable terms. QPX conducts searches for air travel fares, schedules and availability. Google will also be required to continue to fund research and development of that product at least at similar levels to what ITA has invested in recent years. Google will also be required to further develop and offer ITA’s next generation InstaSearch product to travel websites, which will provide near instantaneous results to certain types of flexible airfare search queries. InstaSearch is currently not commercially available, but is in development by ITA.
To prevent abuse of commercially sensitive information, Google will be required to implement firewall restrictions within the company that prevent unauthorized use of competitively sensitive information and data gathered from ITA’s customers. The proposed settlement delineates when and for what purpose that data may be used by Google. Google is also prohibited from entering into agreements with airlines that would inappropriately restrict the airlines’ right to share seat and booking class information with Google’s competitors. Finally, the proposed settlement provides for a formal reporting mechanism for complainants if Google acts in an unfair manner.
(For a more detailed explanation on these conditions read the Proposed Final Judgment. Other documentation related to the case can be found here).
The consent decree is subject to the US District Court for the District of Columbia’s approval, and must now go through a 60 day comment period. As all Google-related stuff, the consent decree has instantly spurred different sorts of enthusiastic reactions. Google is excited because the deal is now “cleared for take off”, and rivals are happy too because one of the conditions imposed by the consent decree effectively creates a mechanism for the continued scrutiny of a narrow part of Google’s activities. Any reactions from our readers?
International antitrust: The impact of competition law is becoming increasingly more noticeable in Latin America. The Mexican Federal Competition Commission (COFECO) imposed a record MXN12 billion (USD 1 billion= 865 million euros) penalty on Telcel (a subsidiary of America Movil, owned by Carlos Slim). The sanction was announced some days ago, but it was only yesterday that COFECO gave details about its decision, explaining that Telcel had charged interconnection fees to terminate calls on the Telcel network that were above the implied charges for calls made within its own network, or even above the final charges Telcel makes to its own customers. The fact that Telcel was a repeat offender motivated the levying of the maximum possible sanction (i.e. 10% of Telcel´s turnover in the preceeding year). We don´t have much more info on this, but since I´ve been asked to write about it in the Mexican press, it´s quite likely that we´ll discuss the case more in depth in the near future.
Welcome back!
Time out
Chillin´Competition is asking for a time out. After some hectic weeks (during which we´re satisfied to have managed to keep the blog updated daily) we´ve decided to take some days off. Nicolas is currently missing in action somewhere in Indochina, and I should also be flying off to Spain in the coming days.
We´ll resume business as usual on April 25th.
Cheers!
Chillin'Competition 