Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Microsoft v Commission (T-167/08) – The Magill-IMS Health Re-Animator?

with 16 comments

I was about to fall asleep reading the Microsoft judgment of last week (T-167/08), when I stumbled into paragraph 139.

This paragraph implicitly reverses the CFI’s Microsoft I ruling on the legal standard of abusive refusal to supply (CFI, Case T-201/04, Microsoft Corp. v Commission, ECR [2007] II-3601).

Remember, in this judgment the CFI had departed from the IMS Health and Magillnew product” condition.

It had held that:

“§647. the circumstance relating to the appearance of a new product, as envisaged in Magill and IMS Health . . . cannot be the only parameter which determines whether a refusal to license an intellectual property right is capable of causing prejudice to consumers within the meaning of [Article 102(b) TFEU]”.

The CFI further added that it was sufficient for the Commission to prove that the refusal to supply interoperability information gave rise to a “limitation […] of technical development”.

This new concept was (and still is) rightly criticized by scholars and practitioners as a loose, elusive and murky legal standard. Many expressed regrets over the disappearance of the simple three-pronged  Magill-IMS Health test. Others argued that the CFI’s “technical development” standard was wholly inapplicable, and advised to rely on the Magill and IMS Health judgments of the upper ECJ. Finally, some practitioners (amongst others, D. Waelbroeck) talked of a lex specialis Microsoft.

Interestingly, the latest Microsoft judgment no longer talks of the “limitation of technical development“.

Rather, in what reads like an obiter dictum, the GC explicitly refers to the “new product” condition, and quotes IMS Health as the sole source of precedent on refusals to supply involving IPRs.

Ҥ139. In that regard, it should be recalled that, in order for the refusal by an undertaking which owns a copyright to give access to a product or service indispensable for carrying on a particular business to be regarded as abuse, it is sufficient that three cumulative conditions be satisfied, namely that that refusal is preventing the emergence of a new product for which there is a potential consumer demand, that it is unjustified and that it is such as to exclude any competition on a secondary market

Of course, the Court would not acknowledge that it applied a wrong legal standard in 2007.

It thus goes on to state at §140 that those three conditions were met in the Microsoft I case (they were not).

That said, paragraph 139 marks a welcome evolution of the case-law on abuse.

Written by Nicolas Petit

5 July 2012 at 6:15 pm

Posted in Case-Law, Uncategorized

16 Responses

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  1. You read judgments like the devil reads the bible…the Court explicitly (and rightly) CONFIRMS the Microsoft I ruling.

    Bo

    5 July 2012 at 6:33 pm

  2. Let me respectfully disagree, and use your own words. All too often with GC’s rulings, the devil is in the detail (and not amongst the writers of this blog). On refusal to supply, the Court implicitly (and rightly) strays from the Microsoft I ruling.

    Nicolas Petit

    6 July 2012 at 10:03 am

    • Thanks for commenting here, Bo.

      Nico, you’re a brave guy. Arguing about the Microsoft I Judgment with one of the people that drafted it is quite a challenge!

      In my view, if paragraph 140 explicitly says that in Microsoft I the three conditions were met, it’s hard to say that the Court is not confirming Microsoft. Bo’s point is therefore quite sensible.

      Nonetheless, I see Nicolas’ point too. In paragraphs 139-140 the ruling does not present the Microsoft I judgment as one that introduced a novelty -a lowering of the standards- in the case-law, but rather as one that merely stuck to the 3 Magill/IMS conditions. I don´t think this is exactly so, since Microsoft I enlarged the previous criteria, at least “in casu”. The fact that the Court does not acknowledge that Microsoft I constituted an evolution may reveal some uneasyness with the decision. It may also be the consequence of the GC preferring not to quote itself but rather the ECJ; but if the GC were confident it could quote itself too, as if often does.

      I don´t entirely rule out that this may be reading too much into the new ruling, but it’s an interesting thought nevertheless.

      In any event, I think we’re discussing judicial psychology here. By re-stating (rightly or wrongly) that Microsoft I complied with the 3 critera, the GC is confirming that the interpretation in that Judgment is, unless the ECJ ever says otherwise, valid for the future.

      Alfonso Lamadrid

      6 July 2012 at 11:10 am

  3. I may be the devil, but we should not be blinded by faith, and trust everything that’s written in the Court’s judgments.

    Take a look again: The Court says at §140 that in MSFT I, “it has been found that … the three cumulative conditions were satisfied”.

    But take a look again. Neither §§711 and 712 of the MSFT I ruling – which are quoted as reference in the new judgment – say that the 3 Magill-IMS Health conditions were met. What §§711-712 say is that “exceptional circumstances” were present because, and this is implicit, there had been a “limitation of technical development” (a concept which was the standard controversially introduced in MSFT I to bypass the Magill-IMS Health new product requirement).

    Plus §140 does not pass the b******t test: could they really write that in MSFT I, the three cumulative conditions were not met?

    So yes, formally, the Court confirms MSFT I, but in substance, it reverses it. In other words, the Court says one thing and the other at the same time.

    Nicolas Petit

    6 July 2012 at 11:36 am

  4. The truth is that the 2007 judgment departs the 2007 judgment. It both departs from, and confirms, Magill-IMS. It’s a bit like particle physics. Para. 665 has always been my favourite:

    The Court concludes from all of the foregoing considerations that the Commission’s finding to the effect that Microsoft’s refusal limits technical development to the prejudice of consumers within the meaning of Article 82(b) EC is not manifestly incorrect. The Court therefore finds that the circumstance relating to the appearance of a new product is present in this case.

    Bagnole

    6 July 2012 at 3:52 pm

  5. Absolutely right! This §665 is a great illustration of the Court applying a distinct legal standard, yet saying that it sticks to precedent. A bit like in the new MSFT case…

    Nicolas Petit

    6 July 2012 at 4:28 pm

  6. What is new or exceedingly vague with the “limitation of technical development” standard. Is has been in Art 82/102 from the outset, verbatim. And the Court just confirmed in MS III that such general concepts are enforceable.

    Bo

    6 July 2012 at 5:34 pm

  7. Sure thing, so let’s do away with all the legal standards developed throughout decades in the 102 case-law (e.g., the ATC-AVC test for predatory pricing, the Bronner test for refusals to supply, the UB test for excessive pricing), and simply assess conduct out of the wording of the Treaty (with very well calibrated concepts such as limitation of output, markets, etc.)… Sounds like a good plan indeed.

    Nicolas Petit

    6 July 2012 at 5:54 pm

  8. Leaving the irony aside, I fully agree with you that we should indeed NOT do away with the legal standards developed through decades of case law; although there are others out there who may wish to do so, and instead adopt an entirely new so called “effects-based approach”, with little or no legal predictability.

    Bo

    7 July 2012 at 4:37 pm

    • Agreed too, with a qualification. The lack of predictability of the effects-based approach is exaggerated. First, there can be, and there are, well-defined, clear and predictable legal standards that are “effects-based”-inspired. Think of all the work the Commission has done to define such general standards in the Guidance paper, or to the legal standards defined by the CFI in Airtours (re. tacit coordination), in Van den Bergh Foods (re. foreclosure), etc. It is thus wrong to run the argument that effects-based analysis is antinomic with legal certainty. Judges and competition authorities can craft general and workable legal tests that seek to establish risks of anticompetitive effects.

      Second, existing legal standards that are forms-based are themselves wholly devoid of legal predictability. Take the law on conditional rebates. It is so murky, that unless you view everything as per se unlawful, it is impossible to distinguish an abusive rebate scheme from a pro-competitive one. In reality, forms-based standards (rather than effects-based ones) are those that have little if no legal predictability. They are so broad, loose and elastic that they are fully uncertain, and can give rise to arbitrary decisions.

      And finally, I do not view the effects-based approach as the new-black. Take Consten & Grundig. Or take Völck. In those early cases the Court has manifested a desire to apply effects-based analysis in EU competition law. And since then, it has rightly done so virtually everywhere, but in Article 102 cases.

      Thanks for your comments.

      Nicolas Petit

      8 July 2012 at 6:24 pm

  9. This is an interesting discussion, which makes it difficult not to add a few thoughts:

    – I fully agree with Nicolas when he says that the debate about the need for an ‘effects-based approach’ to Article 102 TFEU is above all an issue of legal certainty and consistency.

    – I do not agree where he seems to suggest that the ‘effects-based approach’ is alien to Article 102 TFEU case law. There are very good examples in case law where such an approach was endorsed. Bronner and AKZO are two that come to mind immediately. Post Danmark is an excellent recent one. I’d say that the problem with Article 102 TFEU case law is not that it follows one approach or the other, but that it follows the two at the same time (pretty much like the Microsoft I judgment, which blatantly departed from Magill while endorsing it).

    Bagnole

    10 July 2012 at 2:34 pm

  10. My two cents of a wholly unconstructive nature: Microsoft I is an aberration: the purported reasoning is unclear, if one can be discerned it lacks logic, and it contributed a great deal to legal uncertainty in this area. Its genesis was also a well-documented mess that has done little to contribute to the GCs standing.
    I for one long for a supreme court that would call a spade a spade and establish clear legal standards – even misguided ones as in Tomra.

    Mouse

    11 July 2012 at 10:05 am

  11. @Pablo => agreed on Bronner, AKZO and Post Danmark, but they are all judgments from the upper ECJ, not GC’s judgments. In contrast to the ECJ, the first instance review Court seems very shy, or even averse, to the introduction of the effects-based approach. The legal service has a strong responsibility in this, and I am very sure that many officials at DG COMP are most unhappy with what their “institutional” lawyers argue in court.

    I must also add that there is a inconsistency issue that arises in the case-law, with some cases being very effects-based driven (Post DK), and others endorsing a full forms-based reasoning (Tomra).

    Nicolas Petit

    11 July 2012 at 4:46 pm

  12. I come late to this discussion, but I have two things to say:
    1. Am I the only one to see the difference between “sufficient” (in the sentence that so excites Nico) and “necessary”? Even leaving aside the other paragraphs mentioned here, how could this ever be read as a new test, wishful thinking aside?
    2. Nico’s last post shows how risky it is to comment based on speculation. I don’t know what is an “institutional” lawyer (I don’t know what “form-based” means, either; people seem to use this as synonym for “whatever I don’t like”); but I do know how arguments made by the Commission in court are developed, how differences of view are arbitrated, and how these cases were argued on both sides. You would be surprised, and you would most certainly not write what you wrote.

    Anonymous Spaniard (you know who)

    17 July 2012 at 2:28 pm

    • @Anonymous, if you want to learn more about the meaning of those concepts, then you really should come to the GCLC lunch talk tomorrow: http://www.coleurope.eu/template.asp?pagename=gclclunchtalk&sub=20120722?

      I fail to grasp the rethorical analogy that “whatever I don’t like” is form based. I like the forms based prohibition of hardcore cartels. I don’t like the Tele2 Polska and Pfleiderer ruling, but I don’t blame it on the forms based approach.

      Finally, I remain puzzled by the argument – if any – that implies that if you work outside the Commission, your writings are based on speculation. And by the way, it is not based on speculation, it is just the talk of the town, based on leaks from the inside.

      Thanks for contributing anyway! Always good to have the insider’s perspective.

      Nicolas Petit

      17 July 2012 at 11:30 pm

  13. Ex post evidence, from our lunch talk two days ago. All speakers but the COMP official mentioned that there is a divide between the LS and COMP.

    The COMP official actually did not deny.

    And a bunch of civil servants sitting in the audience had funny faces when the point was made.

    Nicolas Petit

    20 July 2012 at 2:43 pm


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