Archive for November 2012
Yesterday again, I found myself pondering: how did I get so busy?
Sure, my lawyer friends would find my schedule laughable. And a bunch of them have actually told me they envy my freedom, and the time I spend abroad.
Yet, all the commuting my activities involve is beyond reason. Take a look:
- Monday: Paris, Brussels, Liege, Brussels (roughly 600 kms)
- Tuesday: Brussels, Lille, Brussels (approx. 300 kms)
- Wednesday: Brussels, Liege, Brussels (approx. 220 kms)
- Thursday: Brussels, Luxemburg, Brussels (approx. 420 kms)
- Today: Brussels, Liege, Brussels (approx. 220 kms)
All this by car, of course, meaning that I have (i) spent a fortune in oil; (ii) significantly harmed the environment; and (iii) been away from my computer for long hours (this is the excuse for the low posting frequency lately).
Sandwiched into those insane hours on the road, I have had to teach for 15 hours, to deal with a raft of organisational issues (we have a conference on antitrust fines on Monday), and to prepare a talk on the June Microsoft compliance case (I attach the presentation at the end of this post).
The bottom-line: some days I happen to dream about a teaching position in Brussels.
I’ll give you a sneak peek into how the editorial process of this blog works:
I frankly wasn’t planning on posting anything on the blog for the rest of the rather busy week. But then I attended a conference, and an idea spurred to mind: why not write a post on how a few -not all-competition conferences (topics and speakers) are starting to make us feel inside a time loop, sort of like in the Groundhog day movie…
Maybe not, I thought later; perhaps some of the
usual suspects frequent speakers in the conference market wouldn’t like it (there are categories among these: (i) those who never refuse invitations out of politeness -which I find laudable- and who are also tired of speaking always about the same stuff, however convenient; and (ii) those who pay for speaking slots -which I understand less- and who wouldn’t appreciate the comment). Moreover, we had also bragged about how we would do something different announced our own conference and have not yet arranged it, so it’s probably wise not to write on this. So, as you see, I’m not. 😉
But now Gianni de Stefano (from Latham and antitrustitalia) sends us a GCR piece titled: “Spain fines antitrust complainant” joking that we should write about it. And he’s right, we could not let this pass by without a post…
You see, I don’t want to write too much Spain-related stuff, and so a few days ago I resisted the temptation of writing anything about prioritization and allocation of resources when the CNC sanctioned 5 distributors of Magic cards with 7,000 euros (one party received a 148 euro fine, another a 748 euro fine; the highest fine was 3,424 euros). I won’t comment on this either (as if it was necessary…). But this silence exhausted my self-restraint capacity.
So let’s focus on yesterday’s news. What happened is the following: the association of canned fish producers [yes, those responsible for the death of the sole responsible of Spain’s victory in the 2010 World Cup: Octopus Paul –evidence of the murder available here-] lodged a complaint against mussels producers alleging that the latter had entered into price-fixing agreements. The CNC sanctioned mussels producers with 1.7 million. So far so good (except for mussels producers). The fact of the matter is that within the framework of the investigation the CNC discovered that the complainants had themselves decided to react to the cartel by agreeing on a collective boycott. And now the complainants have received a 2.1 million fine. Once again, no comment. [Query: could you complain about a cartel and ask for leniency regarding another reprisal cartel?]
Actually, there’s one comment. If the accusations are true there is nothing to object to the CNC’s decision. But I have been involved in a few other cases where the complainants were also the instigators of the agreements complained of, but they weren’t sanctioned. Curiously enough, in all of these cases the complainants were not companies, but individuals, labor unions or public bodies. There is probably a reason for this: sanctioning companies has the political advantage that when they get
pi.. crossed they don’t do this…
P.S. The food sector has given us so much food for
jokes thought that the European Commission’s statement that there are no particular competition problems (after having set up a task force, drafted this report, and done all this) was a surprise to us.
This third part of our inaugural ménage à trois discussion on the Greek lignite Judgment features (see part I and part II ) another good friend of this blog: Assimakis Komninos. Makis is a great guy, a partner at White & Case, and was a successful co-counsel in the case
we’re they are discussing, so he was an obvious candidate for our triad of guests. As you will see, Makis sides with Marixenia Davilla in praising the Judgment. In doing so, he replies to José Luis Buendía’s more critical views.
To illustrate Makis’ post we have chosen the image of another famous lignite-related (look at gift in the middle) ménage à trois. 🙂
First of all, it is such a great pleasure to be invited to comment on the Greek lignites case. I should disclose at the outset that I represented, as co-counsel, the Hellenic Republic in its intervention in support of PPC during the written proceedings stage.
My personal view is that the General Court did the right thing and annulled a decision that was going a step too far. There is no doubt also, in my view, that the Commission was using this as a kind of “test case” against a carefully selected target.
The intellectual starting point is, I think, the very nature of Article 106 TFEU. This is a rather curious provision and I certainly agree with José Luis that it is essentially about State measures, but the sure thing is that the Treaty fathers wanted to give it a carefully circumscribed scope. A systematic interpretation of the Treaty does not support that there is general prohibition of all State measures that may – even indirectly – impact on competition and business activities. Article 106 TFEU restricts the behaviour of Member States only by reference to the scope of some other Treaty provisions, such as Article 102 TFEU. This is the provision that the Commission chose to rely on by reference.
Then, if one reads the Commission’s decision, one fails to see how Article 102 TFEU would come into play here, albeit by reference. Would the theory of harm refer to a leveraging abuse, to a refusal to supply, to a failure to satisfy demand (exploitation), to discriminatory treatment on the part of PPC? Not clear at all. The Commission thought that it did not have to specify this. By the way, I am not suggesting that in Article 106 TFEU cases, the Commission need to show anti-competitive effects etc. This is not what I argue. Instead, I submit that the Commission should be able to demonstrate with a sufficient degree of intellectual clarity that the State measures are connected with a specific kind of actual or potential abusive behaviour by the undertaking in question. This is all the Court says and I fully agree with Marixenia.
With respect, I do not agree that the previous case law gave the Commission leeway in not being obliged to identify a specific kind of actual or potential abusive behaviour. On the contrary, if we look at RTT and even Connect Austria, while we see references to “equality of opportunity” and to RTT’s “obvious advantage over its competitors”, that by no means leads to the conclusion that the mere existence of inequality of opportunity is sufficient for an Article 106 TFEU violation. In both cases, the Court spoke about specific anti-competitive phenomena. In Connect Austria, the problem was that the undertaking in question was allowed (through the inequality of opportunity) to expand its dominant position onto a related market and, in RTT, the Court is very clear and explicit as to the kind of abuse of dominance that was at stake: “an abuse within the meaning of Article  is committed where, without any objective necessity, an undertaking holding a dominant position on a particular market reserves to itself an ancillary activity which might be carried out by another undertaking as part of its activities on a neighbouring but separate market, with the possibility of eliminating all competition from such undertaking”.
In the PPC case, the Commission seemed to build its case on the grounds that PPC’s lignite rights are not sufficiently counter-balanced by significant deposits of its competitors, even though lignite is not an essential input to compete downstream. I am actually being kind to the Commission, when I say this, because this theory is not clearly articulated within the txt of the decision. The Commission then identified a remedy: PPC’s competitors needed to gain access to 40% of the total exploitable lignite reserves. In a nutshell, the Commission was seeking to use competition law to unbundle the Greek electricity generation market. However, this instrumentalisation of the law, in order to redesign a market structure, lacked both a legal and a sound economic basis. Moreover, it would lead to a dangerous precedent by permitting the Commission to attack market structures it dislikes by invoking the vague concept of “inequality of opportunity”.
The Commission misinterpreted the case law and its decision deserved to be annulled. I do not think this is the end of Commission enforcement under Article 106 TFEU, as some commentators have argued. It will only have to do a better job next time and articulate also a clear theory of harm that refers to an actual or potential abuse of dominance by a public undertaking or an undertaking with special or exclusive rights, as a result of certain State measures.
For this second part of our first ménage à trois discussion we are proud to present you with José Luis Buendía’s view of the Greek Lignite Judgment in response to Marixenia Davilla’s earlier post. Aside from being the head of Garrigues’ Brussels office -where I happen to work-, José Luis is widely regarded as “Mr Article 106”. He also masters the art of illustrating all hiw views with metaphores and parables. Continue reading and you’ll see what we mean….
[For a contrarian view of José Luis’ arguments check our Makis Komninos post (which we will publish here tomorrow)].
It is a real pleasure to be invited to contribute to this blog. This is even more the case given the topic, the format, and the identity of my nice and learned counterparts – Marixenia and Assimakis. Even if I don’t share their enthusiasm about this judgment, it is clear that they have done an excellent job as lawyers. So, congratulations to them and to their colleagues who worked om the case.
Contrary to them, despite having been in the past an EC official, I have not had any involvement in this particular case. I am nevertheless very interested in it, since I am working on a new edition of my book on Article 106. Moreover as I have explained in a recent article, unfortunately there are not so many Article 106 cases to comment. So I am glad to have this opportunity.
This case made me think of François Truffaut’s film Jules et Jim about a genuine ménage à trois. The Catherine of the movie (Jeanne Moureau) had – simultaneously – a husband and a lover. As Marixenia rightly implies in her interesting comment, Article 106 also has simultaneous links with State aid on the one hand and with antitrust on the other hand. In my view the problem with the judgment is to assume that Article 106 is only married with antitrust and faithful to it. It is not. Article 106 is about State measures and is therefore essentially different from antitrust.
It is for this reason that, in my opinion, this judgment is not really consistent with the previous case law that it claims to be following. Indeed, previous judgments, like RTT, considered that the mere granting of an exclusive right to a public undertaking previously enjoying a dominant position was in itself contrary to Article 106 combined with Article 102 TFEU. This conclusion was based on the effects of the State measure creating the extension of a dominant position from one market to another one (effects that were similar to those of an abuse). The said conclusion did not require any actual abusive behavior.
In today’s judgment the General Court reads the previous case law in a different manner and finds that it does require the existence of an abusive behavior, at least a potential one. Since the EC decision did allegedly not established the abuse but relied only on the effects, it was according to the Court in breach of the Treaty. This reasoning seems to me clearly contradictory with the case law.
This reasoning seems also a little bit abstract. Indeed, the judgment itself concedes that the mere possibility of a future potential abuse would have been enough to satisfy the legal test. However, since according with the judgment, the decision did not explore this issue in an explicit manner, it had to annul it. It seems however obvious to me that a State measure extending the dominant position from one market to a neighbor one has, at the very least, the potential to lead to abusive behaviors. So, the Court seems to say that it is only the lack of an explicit reference to this obvious consequence that leads to the annulment.
I assume that the Commission may appeal the judgment before the Court of Justice in order to clarify the application of Article 106 with regard to special or exclusive rights. I also think that in the future the Commission should be more active and more coherent in the application of this provision.
In any event, I also know that my Greek friends would have a view different from mine, so I really look forward to the continuation of the debate.
Heard through the grapevine. At a recent conference, someone close to the General Court mentioned that the average total cost of a judgment would be in the ballpark of €240,000 (!). Don’t know how this figure was calculated, but this ain’t cheap justice to me.
I remind our readers that the average duration of competition proceedings before the Court is 50 months.
A few posts ago we decided to follow the Commission’s example and launched a reform aimed at working less. Our plan is to do so by opening this blog to comments on recent Judgments on the part of three experts: one writes a “standard post” on the Judgment, and two others comment on it. As anticipated, our first ménage à trois deals with the Greek Lignite case (concerning the inteface between Arts. 106 and 102 TFUE). Our three inaugural guests are three good friends of this blog: two of them (Marixenia Davilla -Shearman&Sterling- and Makis Komninos -White&Case- and were actually involved in the case (on the winning side) and the third (José Luis Buendía -Garrigues-) is the author of the bible on Article 106 (of which a new edition is on the pipeline). Marixenia has written an excellent post to get the ball rolling. Comments will follow soon. Enjoy!
First things first…Many thanks to Chillin’ Competition for
ambushing giving me the opportunity to participate in my first ever platonic ménage a trois. This is so exciting that I am contemplating making an addendum to my curriculum. I am certain it will boost my chances of being promoted before I turn 50.
Let’s move on to the juicy stuff now, namely, the PPC judgment rendered by the General Court on 20 September 2012. Having worked on this case whilst at Howrey (RIP), I am particularly pleased to see PPC winning a very difficult battle.
This case concerns Article 106 TFEU, a provision that cannot be implemented on its own, but must be combined with another EU law provision, in this case Article 102 TFEU. Article 106 can also be described as a sort of
transgender hybrid enforcement tool, existing in limbo somewhere between antitrust and state aid law, without really being any of the two. Commission decisions under Articles 106/102 are addressed to member states, but are not state aid decisions. They make findings regarding actual or potential abuse of dominance, yet the level of analysis required in such cases to prove an infringement is notably lower compared to that required for establishing a “pure” abuse of dominance under Article 102. Pursuant to Article 106(1)/102 case law, the Commission is not required to show that the company in question abused its dominance, but that it can be led to committing an abuse merely by exercising the state measure in question. In other words, Article 106 is not a bird, is not a plane, but does (still) fly, and has been a pretty handy weapon for the Commission, particularly in cases concerning network industries.
But the fun does not end there. The case law developed in relation to Articles 106(1)/102 predominantly comprises preliminary rulings by the Court of Justice, which are neither consistent with each other, nor that easy to categorise. That said, a broad categorisation is possible, and in PPC’s case the Commission relied upon the so-called “inequality of opportunity” case law (Raso and Others, France v Commission, GB-Inno-BM, and Connect Austria). According to the Commission, based on that case law, there is no need to identify a specific type of abuse; suffice to show that the state measure in question leads to an inequality of opportunity between market operators.
Haha, piece of cake! Prove that, dear Commission official, and you’re done, you can close the shop and go on holiday!
This interpretation is somewhat unsatisfactory. In its appeal against the contested decision of March 2008 PPC invited the General Court to clarify this issue, and the latter
bravely took on that challenge.
In a previous post we explained why, in our view, the criticism that DG Comp only targets U.S. companies does not make much sense (see here) .
But now we have discovered -with the help of the above pic (thanks to Gil Ohana for sending it to us!)- that antitrust enforcement concerning U.S. corporations may be based on a big misunderstanding rooted on different terminology. Whereas in Europe we’re suspicious of any reference to dominance , in the States this term does not have the same connotations. By bragging about their dominance on the market (like S&M does in the photo), some firms might be unvoluntarily attracting antitrust scrutiny. The bottomline: there are no U.S. dominant firms, only marketing tricks.
[Yes, I know, this “theory” doesn’t pass the laugh test, but the pic is good anyway].
A piece of important advice: don’t make the same mistake I made, and don’t google SM domination (at least while at the office…). Really, don’t!