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Relaxing whilst doing Competition Law is not an Oxymoron

Archive for December 2013

Exclusionary Effects in Google: Are They Relevant at All for the Outcome of the Case?

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[Thanks to Alfonso and Nicolas for allowing me to post yet more thoughts on the Google investigation]

We have now entered the fourth year of the investigation into Google’s practices (and this without even a statement of objections being issued). The latest statements by the Commissioner suggest that the final decision will most probably not be issued any time soon. Because the proceedings are taking (objectively speaking) so long, one is tempted to think that, were Google’s practices truly exclusionary, negative effects in the marketplace would have already materialised. Arguably, the time elapsed since the opening of the investigation is long enough to establish whether the initial concerns were justified.

As a complete outsider, I do not have the means to know whether action by the Commission is based on figures suggesting the likely exclusion of rival services. But I know that I make compulsive use of Amazon (the immense success of which is no secret to anyone), that I regularly check reviews on Tripadvisor (which seems to be a healthy business with a growing number of unique visitors) and that, every now and then, I use Expedia (which is facing increased competition, including from Tripadvisor). As everybody else, I read newspapers mostly online, and I notice that the above and other search-related services advertise their sites prominently through the media. And I also know that some firms are alive enough to claim before the Commission that the concessions offered by Google are insufficient.

If it were really based on the exclusionary effects of Google’s practices on competing services (or if the Guidance were to be taken as the expression of a serious long-term commitment), the likelihood of these effects would be the central aspect of the investigation. However, I am again – I cannot help it – under the impression that the outcome of the case depends on other factors. As is true of the legal framework (Where’s the Law?) under which they are (if at all) being assessed, the likely effects of the alleged practices seem plain irrelevant in this regard. The only question that seems to matter –and this is a real pity, given the exciting and novel issues raised – is whether the commitments offered by Google are acceptable for the Commission.

Happy 2014 everyone!

Pablo

Written by Alfonso Lamadrid

30 December 2013 at 4:16 pm

Posted in Uncategorized

Paper on Injunctions for FRAND-pledged SEPs and Article 102 TFEU

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The “smartphone war” has reached the Court of Justice in Luxemburg (and before it the Commission).

With it a whole host of funny acronyms have made a foray in EU competition law = FRAND, SEPs, NPEs, etc.

But more importantly, the smartphone war raises many interesting questions on the appropriate legal standard under Article 102 TFEU.

I just posted a paper on ssrn.com about it:

This paper discusses the legal test under which owners of Standard Essential Patents (SEPs) who have pledged to grant licences to those SEPs on Fair Reasonable and Non-Discriminatory (FRAND) terms can be held guilty of an abuse of a dominant position under Article 102 of the Treaty on the Functioning of the European Union (TFEU) by seeking, or threatening to seek, injunctions against unlicensed implementers of their technology. 

To that end, we use the theoretical framework described in a previous paper on rule-making in EU competition law (Petit, 2012). First, we sift through the various tests of abuse potentially applicable in positive EU competition law (I). Second, we show that an objective criterion should command the selection of a test of abuse, and suggests using the notion of ‘consistency’ (II). Third, we rank the applicable tests of abuse on grounds of consistency (III). Fourth, our paper generalizes those results to propose a framework for the assessment of new forms of conduct under Article 102 TFEU (IV).

Link here and comments welcome.

 

 

 

Written by Nicolas Petit

27 December 2013 at 11:55 am

Posted in Uncategorized

Words of Warning (to lawyers)

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Note to readers: this will be controversial. 

Disclaimer: the content of this post represents my sole opinion only, and does not reflect the official views of this blog or of Alfonso Lamadrid (who likes to be more politically correct than myself)

Lawyers arguing in Luxemburg are p*****g off the Members of the Court.

Mistress AG Sharpston made this very clear in a recent editorial in the Journal of European Competition Law & Practice (2013) 4 (6): 453-454:

Finally, you the reader of this editorial—the advocate pleading competition cases before the EU courts, or the in-house adviser analysing the merits of challenging a Commission decision or lodging an appeal—can also make a major contribution towards ensuring that the courts function effectively and smoothly and can deliver effective judicial review. Please (I beg you) consolidate your arguments and only run with the points that have some real substance to them. Don’t put in an application with six grounds of appeal, each divided into several sub-points (you know, and I know, that not all are of equal merit!). Please plead succinctly and clearly (think of translation!) and please don’t throw in an additional 600 pages of annexes in case something there might help to swing the case your way. And, by the way: please don’t appeal a clearly hopeless case to the Court of Justice just to show the client that you’ve tried everything you can. We too are worried about our workload—particularly the part of that workload that consists of wholly unmeritorious or manifestly inadmissible appeals—and we are looking at ways to streamline how we deal with such cases. You have been warned. Ensuring effective judicial protection against the background of increasing workload and financial constraints is a real challenge. It can be achieved; but everyone needs to play their part“.

You read well: you have been warned.

Now, how bout’ the sanction? After all, the rethorics of fear cannot work effectively, if not accompanied by subsequent implementation (for more evidence, see the recent purge in North Korea). In the antitrust field, our friend Wouter Wils would say that enforcement cannot be optimal without a credible (probable) sanction.

With notable exceptions (CISAC), judgments like Dole, Tomra or Telefonica say it all.

Most of the applicant’s arguments are purged swept aside, without being subject to the simplest discussion.

Now who’s the culprit?

  • A milky business-model based on billable hours, information asymetries and moral hazard between principal (client) and agent (lawyer)?

or

  • A political judicial institution of non specialist judges, who exhibit interest for principled issues only and a correlative sense of contempt disinterest for factual and technical issues?

PS: Not everyone in Luxembourg seems to side with the official party line AG Sharpston. In his opinion under TelefonicaAG Whatelet also complained of overlenghty submissions. Yet, he reviewed the parties’ arguments. See hereafter.

“7. Force est de constater que: i) le pourvoi, formulé de façon confuse et peu structurée, est extrêmement long – la traduction française de la requête ne comptant pas moins de 133 pages, et ce en interligne simple, pour 492 points (8) – et répétitif, en présentant plusieurs centaines de moyens, branches, griefs, arguments et éléments d’arguments (ce qui constituerait, selon la Commission, un record dans l’histoire contentieuse de l’Union); ii) le pourvoi vise presque systématiquement à obtenir un nouvel examen des faits, sous le couvert d’allégations selon lesquelles le Tribunal aurait appliqué un «critère juridique erroné»; iii) les moyens sont souvent présentés comme de simples affirmations dénuées de toute motivation, et iv) les requérantes, d’une part, critiquent souvent la décision litigieuse et non l’arrêt attaqué et, d’autre part, lorsque leurs critiques s’adressent effectivement à l’arrêt attaqué, elles n’identifient pratiquement jamais les passages ou les points précis de cet arrêt qui contiendraient de prétendues erreurs de droit.

8. Ces constatations et la difficulté, voire l’impossibilité, pour la Commission d’exercer ses droits de la défense ont inspiré l’exception d’irrecevabilité qu’elle a soulevée à l’encontre de l’ensemble du pourvoi. Même si je peux avoir quelque sympathie pour cette exception d’irrecevabilité – et d’ailleurs de nombreuses parties du pourvoi me paraissent manifestement irrecevables – il n’en demeure pas moins que le pourvoi en tant que tel ne peut être déclaré irrecevable dans son intégralité, dans la mesure où quelques-uns des moyens ou arguments du pourvoi (même si c’est à l’aune d’aiguilles dans une botte de foin) remplissent les exigences de recevabilité. Ces aiguilles soulèvent en outre des questions de principe, parfois inédites, concernant notamment l’obligation du Tribunal d’exercer un véritable contrôle de pleine juridiction”.

Written by Nicolas Petit

24 December 2013 at 12:26 pm

Antitrust Land

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Congratulations to Pablo González de Zárate Catón, a former LLM student at the University of Liege (2012-2013) now at Clifford Chance, who just published his LLM dissertation in the College of Europe Research Papers in Law series.

The dissertation was truly excellent. The introduction tells it all (a taste hereafter):

Let us imagine a city, Antitrust Land, divided in two parts by a river. The growth of the city depends on its capacity to attract visitors. One part of the city attracts a lot of visitors (cartelists) since it is very well connected in terms of access (leniency programmes) and is therefore very rich. Everybody looks happy about that part of the city: the Mayor (the European Commission), since the whole country talks nicely about its access infrastructures, and tourist services (law firms), as they make a lot of money with visitors. This part of the city is called Public Enforcement Town and its citizen is the abstract consumer.

The other part of the city is called Private Enforcement Town, where the concrete consumer lives. It is surrounded by mountains. As a result of this, it is clearly not as wealthy as the other one since visitors hardly ever pass by. Besides, the level of income greatly varies from one neighbourhood to another one as some parts of the town are better connected due to their own cableways. These three neighbourhoods are called United Kingdom, Germany and the Netherlands. At some point, somebody realizes that a bridge linking  both parts (disclosure of leniency materials) of the city could contribute to attract tourists to Private Enforcement Town and therefore to boost its economic growth. Nevertheless, tourist services are clearly against and they say that Private Enforcement Town is so ugly that tourists will immediately leave the city and never be back. They also say that with that bridge in the future nobody will be tempted to come to Antitrust Land.

The question is not as simple as ‘bridge: yes or no?’. If yes, it must also be decided its location. It could link the heart of both parts (total disclosure of leniency documents) or it could be built in the surroundings of the city (disclosure of preexisting documents).

What should the Mayor do?

Click here to download Pablo’s dissertation.

Written by Nicolas Petit

23 December 2013 at 12:00 pm

A thought on the failing division defense, industrial policy, and commitments

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The EU Commission has often been – in our view incorrectly – criticized for its blindness to industrial policy considerations.

Caution: propaganda With my assistant Norman, we wrote a lenghty paper explaining how such considerations can, and should, play a – circumscribed – role in EU antitrust law.

A recent case suggests that industrial policy arguments are not devoid of all traction.

In Nynas/Shell’s Harburg Refinery, the Commission cleared the acquisition of distressed oil refineries by Nynas (a nice an EU firm) on the basis of the failing division defense.

Interestingly, the reasoning seems based on the conjecture that absent the merger, the refineries would be shut down. As a result, there would be “reduce[d] production capacity in Europe for a number of specific oil products”. And the closure of those refineries would expose European consumers to the full exploitative might of Ergon, a bad US importer.

Of course, the reasoning remains competition based. The Commission stresses that absent the merger, prices would likely increase. And assumes that with the merger, prices will not.

But this is only true if Nynas keeps the refineries in business.

My question then is: shouldn’t failing division defenses be systematically accompanied with a commitment from the acquiring firm to keep (all or part of) the acquired assets in operation?

After all, some companies do purchase fledging entities to shut them down, and meanwhile acquire technology, know-how, other intangible assets. This may be part of a strategy to actually gain control over supply and reduce capacity (think of Mittal Steel).

Written by Nicolas Petit

19 December 2013 at 4:26 pm

Posted in Uncategorized

DG Comp releases a show-off comic

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Those of you who have been following this blog for a while might remember our series of posts about antitrust-related entertainment (videos, comics,  etc).

Well, a couple of hours ago Aoife White (Bloomberg) sent us the ultimate comic, one that has actually been done by DG Comp.

I was planning to write a few jokes about it even before having read it (my first idea was a fake news story, along the lines of “Belgian association of comic drawers sues DG Comp for giving away comics for free at Christmas time”) but I’ve just read the actual comic (it’s 9 pages and takes 3 minutes, no more), and I wouldn’t know where to start!

The story is about a busy, handsome (I guess, although I’m not really an expert on the beauty of drawn men) and passionate DG Comp official who wants to pick up a girl at an airport with the chat-up line “I work at DG Comp” and then starts showing off about how important his job is.

And I’m not kidding.

It’s available here: DG Competition Comic

“I work at DG Comp”, the ultimate pick-up line…

Written by Alfonso Lamadrid

18 December 2013 at 6:04 pm

Posted in Uncategorized

A thought on Microsoft/Nokia

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As you know, a few days ago the European Commission unconditionally authorized the Microsoft/Nokia deal. I’m looking forward to reading the decision, which isn’t yet public. Whereas I expect to see nothing odd in there, a doubt did spring to mind when reading the press release last week.

When explaining its approach to the concern that Nokia could become a troll-like entity, the Commission’s Press Release says the following:

The Commission considers that any possible competition concerns, which might arise from the conduct of Nokia, following the transaction, in the licensing of the patent portfolio for smart mobile devices which it has retained falls outside the scope of the EU Merger Regulation. The Commission cannot take account of such concerns in the assessment of the current transaction. Indeed, Nokia is the seller whereas the Commission’s investigation relates to the merged entity. However, the Commission will remain vigilant and closely monitor Nokia’s post-merger licensing practices under EU antitrust rules, in particular Article 102 (…)”. (Emphasis added).

Please correct me if I’m wrong, but isn’t that a wrong/arguable over-simplification? (although, to be sure, it wouldn’t be a crime for a press release to over-simplify). Does merger control really relate solely to the merged entity to the exclusion of other actors in the market? Isn’t it rather about the effect that the transaction may have on the structure of the market? I mean, can’t the Commission assess the effects that a concentration would cause on the market power of parties to the transaction as well as on that of third parties? Perhaps the press release only intended to refer to the Commission’s remedial powers, and not to its assessment powers, but even assuming that, the short explanation may be incorrect. Although infrequent, third party post-merger conduct may be potentially relevant in deciding a case.

Look, for instance, at recital 25 of the horizontal merger guidelines “under certain circumstances, concentrations involving the elimination of important competitive constraints that the merging parties had exerted upon each other, as well as a reduction of competitive pressure on the remaining competitors, may even in the absence of a likelihood of coordination (…) result in a significant impediment to effective competition”.

Don’t get me wrong: I’m not challenging the outcome of the Decision (it seems prima facie reasonable for the theory of harm at issue in that case to be monitored ex post), but, in my view, the explanation would have had to do with “causality” (à la Tetra Laval or GE/Honeywell), not with the scope of merger control. Perhaps this would seem to make no practical difference in principle (as we’ve learnt recently, in real life ends justify means, and reasonings aren’t really worth paying attention to), but inconsistencies in the formulation of policy positions might eventually come at a cost.

P.S. Following the advice of some of you, last night I created a Twitter account: @LamadridAlfonso; it’d now be nice to know how to use it and what for!

[Image possibly subject to copyright]

Written by Alfonso Lamadrid

17 December 2013 at 5:03 pm