Relaxing whilst doing Competition Law is not an Oxymoron

Archive for July 2012

Can Do Better

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Whilst seating on the beach, I read last week’s (now) famous Economist piece on fines.

I was quite astonished to read that The Economist supports further increases in corporate fines. The conclusion of the paper speaks for itself: “To deter bad behaviour fines need to rise. The watchdog are biting, but some need sharper teeth“.

That said, I found the paper a little weak. Strangely enough, it says nothing of most issues that currently matter in respect of corporate fines:

  • No word on sanctions for individuals, in the form of director disqualification orders;
  • Some references to theoretical studies, including references to the economics of crime (G. Becker) and cartel overcharges (O’Connor & Helmers), but no word on principal-agent problems in large multinational corporations;
  • No word on the issue of fines in times of economic crisis;
  • No word on compliance programmes.

Is there a hidden agenda there or am I again reading newspapers like the devil reads the bible?

Arguably, those omissions may be explained by the fact that the paper is not antitrust-related only (quod non). The paper opens with some words on the economics of corporate fines, and follows with a brief discussion of the penalties inflicted to Barclays a few weeks ago. But after this, the meat of the paper really is a discussion of antitrust fines. And even if it were true that the paper takes a larger focus, it remains silent on a number of  key issues. Think, for instance, to the trade-off  that regulators are now facing, i.e. sanctioning banks with hefty fines v. ensuring banking stability with subsidies.

The bottom-line: The Economist can do better…

Written by Nicolas Petit

31 July 2012 at 7:32 am

Interviews with Commissioner Almunia

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By the time you read this Nicolas and I should hopefully be away on holidays. We have scheduled this “lazy” post  for those interested in watching the series of video-interviews with Commissioner Almunia published by the independent EU policy broadcaster viEUws.

In these interviews (you can click on the hyperlinks to watch the videos) Commissioner Almunia talks about the Google investigation, Microsoft’s lack of compliance with browser choice, Standard Essential Patents (Apple vs. Samsung, Motorola vs. Apple & Motorola vs. Microsoft), State aid & cross-border mergers in the European banking sector as well as about the Libor / Euribor case.

After the holidays we will do our best provide you with our very own interview with Joaquín Almunia. Any suggestions as to possible questions that you would like him to respond to?

Written by Alfonso Lamadrid

30 July 2012 at 12:01 am

Reform of UK competition law- Part 2: facilitating private redress

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[Note by Nicolas and Alfonso: In the second of his guest posts on reform of UK competition law and enforcement, Christopher Brown looks at potential reform of private redress mechanisms]-

On 24 April 2012, just weeks after announcing the Government’s intentions in respect of reforms to the public enforcement regime, BIS launched a Consultation on reform to the private enforcement of competition law in the UK.  Such reform might be said to be long overdue: it has been some five years since the OFT made recommendations to Government stressing the desirability of changes to facilitate private redress.

The Government’s stated objective is to encourage private-sector challenges to anti-competitive conduct to complement public enforcement.  Elsewhere in the document, it is said that the aims of the reform proposals are (i) to increase growth, by empowering small firms to tackle anti-competitive behaviour which is stifling their business, and (ii) to promote fairness, by enabling those who have suffered loss as a result of such anti-competitive conduct to obtain redress.  The principal proposed reforms are:

  • to increase the role of the Competition Appeal Tribunal (CAT) as a forum for private actions, by allowing it to hear ‘standalone’ claims as well as ‘follow-on’ claims;
  • controversially, to introduce an opt-out collective actions regime;
  • to protect the leniency regime by preventing at least certain leniency documents from being disclosed to claimants bringing private law claims and protecting at least immunity applicants from joint and several liability.

These 3 proposed innovations are touched upon below.

(a) The role of the CAT

The proposals to make the CAT a major venue for private litigation based on competition law have been broadly welcomed. In its twelve years of existence, it has built up a strong reputation in its handling of appeals under the Competition Act 1998 (and other legislation) and follow-on private actions under section 47A of that Act. It is widely regarded as efficient, fair and competent.  It makes eminent sense, in principle, for the CAT’s jurisdiction to be extended so as to make most efficient use of the resources at its disposal.

Some of the detailed proposals in relation to the CAT are, however, more controversial.  In particular, the Government proposes the introduction of a “fast-track” system for claims brought by SMEs (which, as part of its growth agenda, the Government is very keen to support).  The Government is particularly concerned that SMEs are in practice prevented, or substantially deterred, from seeking redress for loss caused to them as a result of competition law infringements.  It points, with some justification, to the considerable cost of litigating in the UK and the length of time cases take to reach resolution.  What they need, the Government seems to think, is a quick and easy way of getting their complaints in front of a court.  The fast-track proposal is the Government’s suggested way of improving matters.  So what is it?

Read the rest of this entry »

Written by Alfonso Lamadrid

27 July 2012 at 9:00 am

Posted in Guest bloggers

Reform of UK competition law- Part 1: public enforcement

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[Over the course of two posts, Christopher Brown (Matrix Chambers) blogs on the substantial reform agenda in the UK. The first post looks at the reform of the public enforcement regime; the second will consider the recent proposals to reform private enforcement].

As readers will probably know, back in March 2011 the UK Government, through the Department for Business, Innovation and Skills (“BIS”), launched a consultation on potential reform to the UK competition law landscape (see my earlier post here).  It contained a number of bold suggestions for redesigning the domestic regime.  After a 3-month consultation period and, seemingly, much head-scratching, BIS announced its concrete proposals for reform on 15 March 2012.  Those proposals are now contained in the Enterprise and Regulatory Reform Bill, which is currently making its way through Parliament.  Then, as if the Department didn’t have enough on its plate already, it launched a consultation on reform to private actions in the UK. In these posts, I touch on the main aspects of both proposals and offer some limited comments.

Reform of the public enforcement regime

Given space constraints, this section touches on just three of the reform proposals, relating to institutional architecture, enforcement model and the cartel offence.

Read the rest of this entry »

Written by Alfonso Lamadrid

26 July 2012 at 2:25 pm

Posted in Guest bloggers

The post of a summer day

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Today is not only busy but also extremely hot in Brussels (no kidding).  An ideal day for a fresh summer story.

Italian beach owners have called a lockout on 3 August to protest against the obligation imposed by the Services Directive to open up beach concessions to competition (for more, see here). Actually, it seems that the application of this Directive to beaches has been the source of some concern at the European Parliament (see here).

The reader who has sent us this information adds that the current lack of competition is evident to anyone visiting private beaches this summer. We have been provided with evidence that shows that the prices applied in Knokke (Belgium) are supra-competitive, and it seems that this is the case throughout the EU [which is why you should all spend yor holidays in Spain, where beaches are great and public 😉 ].

A week ago another friend/reader from DG Comp wrote to us complaining about the every day cartels that he had identified in beaches, including the renting of hammocks, pedal boats and drinks.

All these reports have generated widespread concern at DG Comp. We are told that many officials have volunteered to conduct in-depth on-site investigations. Hords of DG Comp’s staff are leaving Brussels these days in order to conduct extenuating beach inspections which, in some cases, may last for over a month. They can be spotted at airports flying to almost every beach destination in Europe.

I had lunch at the Commission’s canteen today and was told by insiders that during August the Commission will be giving absolute priority to this sector investigation. In fact, and this is an exclusive from Chillin’Competition: we are told that Commissioner Almunia has decided to settle the investigation on Google in order to free resources for this programmed massive beach inspections. One of the officials heading an inspection team has sent us the pic that illustrates this post and that proves the Commission’s zealousness.

Written by Alfonso Lamadrid

25 July 2012 at 6:34 pm

Posted in Jokes

We owe you an apology

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We apologize. We have always stood up for the proposition that whenever an error is made one has to publicly admit the blame, apologize and carry on.

We do not know how it happened, but we have fallen short in our responsibility to inform/entertain readers of this blog as we should have.

In sum, we are very sorry to have missed this story for over a month:

On June 25, the Federal Trade Commission closed its investigation into whether Church & Dwight Co., maker of Trojan-brand condoms and other consumer products, had attempted to monopolize the U.S. condom market. (see Closing Letter here).

Monopolize the U.S. condom market“; isn’t that something? We are told by insiders that the FTC had undertaken action on this market given its special characteristics. Aside from the well-known elasticity of the condoms market, there are apparently other features that incentivize market players to engage in hard-core practices/naked restraints. Some stakeholders are said to be disappointed by what they perceive as a premature climax.

Written by Alfonso Lamadrid

24 July 2012 at 10:54 am

Posted in Jokes

Fine and Punishment

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In the article that  kept me working during my otherwise summer holidays last year Luis Ortiz Blanco and myself wrote for the Fordham Conference held last September [the final version is published here; a draft version is available for free here] we quoted one of our “Friday Slotters”, Ian Forrester, (actually, he was the one who proposed “The Friday Slot” as a name for the section) saying that competition fines imposed by the Commission “exceed fines imposed by the public authority in any democracy of which I am aware for any offence“.

Some evolution is apparently taking place in this regard. Look, for instance, at the  $3 billion fine that GlaxoSmithkline has agreed to pay for promoting its best-selling antidepressants for unapproved uses and failing to report safety data. Take a look also at this very interesting graph, which points out at the largest corporate fines and settlements in the past seven years, and also presents the fine as a percentage of the yearly income of the sanctioned companies.

During a Paris-Brussels train trip last night I read an interesting piece on The Economist that deals precisely with the recent increment in corporate fines using international cartel fines (which reportedly “rose by a factor of one thousand between the 1990s and 2000s”) as the main example. 

The Economist‘s piece draws on economic research to justify the conclusion that “to deter bad behavior fines need to rise”.

You may recall that our guest Benoît Durand dealt with this same issue some posts ago and came to a contrary conclusion: that deterrence would be better served by envisaging individual sanctions (fines, disqualification and/or prison penalties) for the executives directly involved in cartel meetings. We haven´t really thought this through, but we’re not big fans of prison penalties, nor would we favor the imposition of disproportionate individual fines. A well designed disqualification sanction, however, would appear to us as a reasonable measure. Any views?

Written by Alfonso Lamadrid

23 July 2012 at 3:08 pm