Chillin'Competition

It is often overseen that there is a nexus between substantive competition law principles and procedural issues.

In this context, the current “resilience” of the forms-based approach in substantive competition law (see the recent Dole v. Commission case or the Expedia judgment) is likely to undermine the development of private enforcement.

If we follow §65 of the recent ECJ ruling in C-199/11, Europese Gemeenschap. v. Otis, national courts dealing with claims for damages in follow-on cases must comply with the agency’s prior decision, and admit the existence of an infringement akin to a fault.

Whilst it is true that, because of its obligation not to take decisions running counter to a Commission decision finding an infringement of Article 101 TFEU, the national court is required to accept that a prohibited agreement or practice exists, the existence of loss and of a direct causal link between the loss and the agreement or practice in question remains, by contrast, a matter to be assessed by the national court.

In this setting, the  main role of national courts is thus confined to estimating the harm inflicted on victims and to establishing causality (assuming §65 also applies to NCAs).

But how can they possibly do this if the decision simply talks of anticompetitive “object” in the abstract, and fails to scrutinize the impact of the impugned practice?

In my opinion, if (i) we are serious about private enforcement; and (ii) we read Europese Gemeenschap. v. Otis in a “task sharing” perspective, then agencies must provide a necessary estimation of the anticompetitive impact of the unlawful practices. Alternatively, if they rely on “object” arguments, they should at least offer to national courts full access to the evidence in their possession, so the later can make the math.

Jeroen Dijsselbloem triggered a spate  of criticisms yesterday when he mentioned that the Cypriot deal was a “template” for future EU bailouts.

If this is true, the Commission may one day be subject to the sort of haircut imposed on wealthy Russian mobsters Cypriot bank account holders.

Up to this point, this is still sci-fi competition law. But take a look:

1. Fines paid to the Commission in cases with subsequent appeals are provisionally held in specific deposit accounts with commercial banks and they cannot be used to finance any other EU activities.

2. In 2009, a Special report of the Court of Auditors mentioned that the volume of fines held in such account lied in the ballpark of €5 billion.

3. At the time, the Commission had accounts with Fortis, BBVA, ING Belgium, KBC, ING NL and Citibank. In a not so distant past, several of those banks were bailed out. And it cannot be excluded they’ll  have to be rescued again.

Interestingly, the 2009 Report warned at §47 that “this approach [i.e. leaving fines in such accounts] exposes the Commission to risk of loss in the event of banking failure. An optimum approach to better managing has not been established“.

I have no information on the status of this issue, but I understand that the Commission has been working on a better approach to address such risks (notably by using banks with good credit ratings…).

Yet, given the recent turn of events in Cyprus, I cannot help but thinking that one day the Commission could lose big money.

Not to think to the flood of legal consequences this may have, should the General court or the Court of Justice subsequently rescind (in part or full) the fines held in the Commission’s accounts.

On TV last week, I looked dumb reciting the obvious: in the EU, the law forbids RPM as an outright unlawful practice. So if it was proven that Apple is RPMing, then there could be trouble down the road.

Some voices blarred amongst some competition lawyers’ friends, as I had proferred accusation on Apple (I have not).

So I made some research in the WE. Upon inquiry, it seems that Apple’s tactics are more subtle. If I understand correctly, Apple tells its independent retailers that consumers can take a price up to a certain level (let’s say 500€), but no more. In turn, Apple sets in the contract a recommended maximum price of 500€. And then, it sells them the product at a price slighlty below this (let’s say 495€). On top of this, Apple would allegedly charge lower prices to its own retail distribution network.

On face value, such maximum prices are per se lawful. But the question is whether this can be akin to de facto RPM, given that with the high input price, Apple in essence gives little choice to its independent retailers but to apply the maximum price. Further evidence that this constitutes hidden RPM would stem from the fact  that Apple accords much lower prices to its own retail operations  (incl. over the Internet).

But there’s something puzzling with this theory of harm: why on earth would Apple seek to harm independent retailers? Possible options are (1) Apple engages into de facto RPM in countries where it does not have large retail operations of its own, so as to yield as much profit as possible; (2) Apple is reluctant to sell through independent retailers in countries where it has its own retail operations, but anticipates that with control over a “must store” product, it would be forced to supply.

In option 1, we are looking at a theory of anticompetitive exploitation, amenable to an infringement under the RPM framework, pursuant to 101 TFEU or to unfair pricing rules pursuant to 102 TFEU (if Apple is proven dominant).

In option 2, we are looking at a theory of anticompetitive exclusion, amenable to an infringement under article 102 TFEU (if Apple again is proven dominant), under the refusal to supply/price discrimination/margin squeeze doctrines.

A related puzzling thing is about retailers’ incentives to buy a product on which they make so little margin. But again, one may consider that they have incentives to do so at any rate, because this brings traffic towards their shop. And after all, each distributor is likely to believe that it is better to be the one to make the sale, rather than to leave it to another distributor.

All this, of course, should be backed by facts. The Commission is apparently looking into this, if I believe the latest news.

Those of you watching Belgian TV on Wednesday night (not many, I guess) might have have come accross a program on RTBF about competition policy as seen from the perspective of consumers. Prix trop élevés : arnaques bien ficelées?  (i.e. Too High Prices: a well set up robbery?; please excuse my French..).

The program features some big names, including our Friday slotee J.F Bellis, P. Nihoul and a certain Nicolas Petit (who’s becoming an ubiquitous TV presence; he’s becoming the Kim Kardashian of antitrust) 😉

Ckick here to watch the video:

http://www.rtbf.be/video/emissions/detail_questions-a-la-une?pid=10

To our lawyer readers: competition for rankings just got much tougher.

Today, Alfonso has become a contender for the 40 below 40 ranking.

Happy Bday mate.

Random thoughts following yesterday’s discussion:

• Google translate is an ordoliberal software
• Or … the systematic removal of “effect” from Treaty translations may be part of the settlement currently discussed with DG COMP (in a bid to please the ordos within the Commission)
• The bad news about inconsistencies in the various language versions of the horizontal cooperation guidelines and of the guidance paper? EU law not applied uniformly.
• The good news? Entitles to perform natural experiments, and test in real life the economic impact of distinct legal standards