Archive for April 2014
Motorola won’t be fined in SEPs case, sources say
To be frank, I didn’t have anything to post today. I’m halfway writing lengthy posts on the Uber controversy (which I’m a bit hesitant to publish), on AG Wahl’s Opinion in Cartes Bancaires, on the French Nespresso case and on the new Damages Directive, but haven’t found the time to finish any. I also had an idea for a possible lame joke to post, but I think it’s way too lame even for this blog’s standards. On top of that, I’m asked (ordered) to go to IKEA later, and having to take care of the blog is no longer a valid excuse chez moi…
Fortunately, Aoife White (Bloomberg) just saved my blogging day:
She tells me that credible sources anticipate that Motorola won’t be fined in the decision that the European Commission will apparently be adopting next Wednesday. Aoife explained that some people find this exceptional, and asked for my views to include a quote in her piece, available here: http://www.bloomberg.com/news/2014-04-25/motorola-mobility-said-likely-to-escape-eu-fine-in-patent-case.html
Here’s the text of the email I’ve just sent Aoife (who has no objection to me recycling it into a post):
“If the news were confirmed, I would view this as a very sensible decision on the part of the Commission.
The law on abuse of dominance is often nebulous, even more so in a novel context such as the one involving SEPs, which the Commission has moreover distinguished from precedents on “sham litigation” (ITT/Promedia). In these circumstances, the imposition of substantial fines could have raised issues as to its compatibility with general principles that require certainty in the law if a penalty is to be imposed.
A declaratory decision with no fines would enable the Commission to clarify the law and set a precedent without punishing actions that took place against an unclear legal background.
This would not at all be a first; the Commission has in the past imposed no fines, or only symbolic fines, in cases where at the time when the conduct took place the law wasn’t clear on whether it could constitute an infringement. In abuse of dominance cases, this has happened, for instance, in relation to the discriminatory sale of tickets for the 1998 Football World Cup case (2000), regarding Deutsche Post’s interception of cross-border mail (2001) and, more recently, in the Clearstream case (2009).
This may be only for geeks, but the explanatory memorandum accompanying the draft of Regulation 1/2003 also explained that the mere clarification in the public interest of new legal questions could justify the adoption of purely declaratory decisions.
Interestingly, however, EU Courts have nevertheless consistently rejected the argument that the novelty of an abuse could be invoked as a ground to seek a reduction of a fine imposed by the Commission (e.g. in Irish Sugar or Deutsche Bahn)”.
Intel Judgment: Coming out soon
It has been reported (I learnt it thanks to MLex) that the Intel Judgment will be delivered on 12 June.
If you want to freshen up your recollection of the legal issues at stake, here is the summary of the arguments at stake elaborated by the Court itself: Intel Report Hearing
Even if I think the General Court would like to have an opportunity to make a point on judicial review by quashing an Art. 102 decision, my guess is that this won’t be the occassion. My knowledge of the case is limited, but my impression is that the Commission’s work was particularly thorough and that it stands on solid ground, even more so after the ECJ’s Judgment in Tomra.
You may nevertheless recall that a year and a half ago Nicolas made a similar (controversially rumour-based) forecast although accompanied by an anticipated criticism.
Even though the Intel case has understandably been the focus of all attention (the 1.06 billion fine surely caught the attention of the media), it’s not the only the most potentially legally relevant rebates case pending before EU Courts.
‘Stealth Licensing’ – Are Antitrust Law and Trade Regulation Squeezing Patent Rights ?
Monsieur le Professeur Nicolas Petit has just published a piece titled “Stealth Licensing”- Or Antitrust Law and Trade Regulation Squeezing Patent Rights. In this paper he illustrates his points by resorting to metaphors on black swans and butterflys (read the last sentence in the 3rd paragraph below), which is a good indication that he may well have definetely lost it 😉
In Nico’s view (and from now I’m pasting the paper’s abstract): a “stealth licensing” paradigm is emerging across the globe. It can be seen through subtle interventions from policy makers, judicial organs and administrative agencies. Those interventions seek to facilitate compulsory licenses outside the TRIPS agreement exceptions and/or to water down those exceptions. Altogether, they ramp up pressure on patent owners to give away their freedom – it is actually a “right” – to exploit their innovations as they see fit. The paper submits that stealth licensing is a significant phenomenon that adversely impacts the social welfare functions of the patent system. It risks undermining investment in technology, technology creation and the dissemination functions of the patent system at a critical juncture in time, as new critical technologies like green technology, the internet of things, machine to machine technology, smart medical devices or biotechnologies are being called for, and rolled out, across the globe. Moreover, stealth licensing is occurring despite the fact that both private and public investment in R&D is critical to help developed economies back on the path to growth, competitiveness, employment and prosperity.
This paper the concept and policy of “stealth licensing”. To that end, it first surveys the literature on the social functions of the patent system, and in particular, on the role of patents to incentivise (risky) R&D efforts and to disseminate successful technological innovations (I). In this context, it recalls that whilst divided on the exact function of patent law, scholars broadly concur that patents have social utility. The paper then shows the emergence a “stealth licensing” paradigm adversary to the social functions of the patent system. To aid understanding, it starts with a definition of the concept of “stealth licensing” (II). It then describes its emergence in international trade regulation where a “flexible” interpretation of the TRIPS compulsory licensing exceptions is making way (III); and in antitrust law, where a distinct though equally problematic “undercover” licensing paradigm is gaining prominence (IV). Finally, it explains the perils of squeezing patent rights through stealth licensing with two metaphors: that of a black swan (V) and that of a butterfly (VI).
A Brave New World: The Potential Intersection of Competition Law and Data Protection Regulation (by Orla Lynskey)
Intro by Alfonso: Some days ago someone sent me a link to a an opinion issued by the European Data Protection Supervisor dealing with the interface between data protection, competition law and consumer protection. I already expressed some views on this in a post published last year: Data protection and antitrust law (positing my view that there’s nothing new under the sun), but this time I thought it’d be interesting to have the view of someone who’s an expert not only in competition law, but also in data protection stuff. I found the ideal guest blogger to cover this issue: Orla Lynskey, a very good friend, and an extremely promising academic in the field of IT Law who’s been assistant at the College of Europe, competition lawyer at Howrey, case handler at DG Comp, holds a PhD in European Data Protection Law from Cambridge University and is now a lecturer at LSE focusing on data protection and competition law. I leave you with her:
In late March the European Data Protection Supervisor (EDPS), an agency which oversees compliance with data protection rules by EU institutions and advises on the development of data protection law within the EU, issued a preliminary opinion on the intersection of data protection, consumer protection and competition law. Both scholars and the EU institutions have been musing on the relationship between data protection and competition law over the past few years. However, despite this attention, it is not yet apparent whether, and if so how, these two fields actually intersect.
Kuschewsky and Geradin have recently published a paper on the impact of data protection in Commission investigations and in particular in dawn raids. The use of fundamental rights as a shield to secure procedural guarantees is now well integrated in competition law (think, for instance, of the integration of ne bis in idem in transnational competition procedures). This narrow intersection between data protection and competition law should therefore come as no surprise.
The EDPS report attempts to identify other areas in which parallels exist, or could potentially exist, between the two fields. For instance, the report highlights that if the new data protection regulation is adopted (a big if at the moment..), both data protection and competition law would apply to entities established in third-country whose actions have effects in the EU. These type of parallels are of course present however they merely help us to compare the regimes rather than get to grips with how they intersect. Moreover, some of the parallels identified are less credible than others. For example, I still fail to see anything beyond a very superficial similarity between ‘substitutability’ for the purposes of the HMT in competition law and the notion of ‘compatibility’ in the data protection principle of purpose limitation (according to which data processed for one purpose should not be processed for another secondary purpose which is incompatible with the initial purpose).
Beyond these micro-comparisons, in a second (earlier) paper Kuschewsy and Geradin had set out some ‘preliminary thoughts’ on the bigger issues at stake. In particular, they questioned whether EU competition law can limit the accumulation and processing of personal data and whether personal data could be deemed an essential facility. However, the EDPS report seems to be kick-starting a much more ambitious discussion than that initiated by Kuschewsy and Geradin. It appears to me that the EDPS is querying, albeit indirectly, whether the notion of consumer welfare should incorporate data protection considerations. By this, I mean that competition law would incorporate fundamental rights into its substantive analysis when conducting an investigation under Article 101 or 102 TFEU or examining a concentration under the EUMR. To be very clear, this would mean a departure from a purely economic analysis of consumer welfare. If Commissioner Alumnia’s speech on the matter is anything to go by, this is not something the Commission is expecting (‘although Coates refers to this potential intersection – but certainly does not endorse it – in his book on Competition Law and Regulation of Technology Markets’.
I realise that this would represent a radical departure from the status quo and as nobody seems to be willing to move beyond ‘preliminary’ thoughts on this matter, I am merely adding my own ‘preliminary’ observations to the mix (that is a disclaimer in case I change my mind tomorrow).
I see two arguments which support this shift in policy. First, the current consumer welfare standard seeks, inter alia, to facilitate consumer choice. In industries which are heavy on data aggregation – social networking sites, search engines, micro-blogging platforms etc – network effects based on personal data constitute a significant barrier to entry. The monopolisation of these industries, in turn, poses serious problems for the application of data protection rules. In the EU, all personal data processing must have a legitimate legal basis and the legal basis most frequently used by private sector entities is ‘individual consent’. This consent must be freely given, specific and informed. However, the argument has been made (for instance before the Irish regulator in the Europe-v-Facebook audit) that consent to processing by a monopoly cannot be ‘freely given’. While this argument would never fly in the US (for reasons which I shall not explain here), it may have some traction in the EU where data protection rules seek (to little avail) to rectify power asymmetries between the individual and the data controllers. Data protection advocates have long been arguing that competition law should help facilitate actual consumer choice.
More convincingly perhaps, since 2009 data protection has been recognised as a fundamental right in the EU legal order, independently of the right to privacy. As such, it is binding on the EU institutions when enacting legislation or adopting decisions. Failure to respect this right will lead to the invalidity of the measure at stake (as we saw last week when the Data Retention Directive was declared invalid on the basis of its incompatibility with this Charter right). This may well therefore be the trump card.
This being said, there are arguments to be made against the incorporation of data protection and fundamental rights considerations into the consumer welfare standard (and I am sure readers of this blog will be very happy to point them out to me!). The primary objections I can identify are threefold. First, intervention on these grounds looks like punishing dominance and might entail significant interference with the commercial freedom of companies concerned. This should ordinarily be the purview of regulation (although as Dunne noted recently in a JCLE article, ‘regulatory competition’ is on the rise in the EU through the rollout of commitment decisions). Second, it is arguable that this would be another example of the ‘instrumentalisation’ of competition law and that it would be detrimental to the internal coherence of the discipline to incorporate fundamental rights into the substantive analysis of competition law. I have a certain amount of this sympathy for this view. Third, it might be argued that data protection regulation should adequately protect the right to data protection of individuals. This is effectively what the Commission stated in the context of the GoogleDoubleclick merger and what the Court determined in the ASNEF Equifax case. However, these matters were determined pre-2009 and the constitutional landscape has changed significantly since then. Moreover, it would now seem a little disingenuous for the Commission to argue that competition law does not apply to regulated sectors.
In short, it seems to me that whether competition lawyers agree or not, this preliminary report may be the first baby step towards a more holistic approach to the protection of data protection within the EU. Arguments to the contrary are also welcome however (I can then include them in my work in progress paper!).
The General Court on the scope of the Commission’s powers to request information
On Friday 14 March the General Court issued seven Judgments in cases T-292/11, T-293/11, T-296/11, T-297/11, T-302/11M T-305/11 and T-306/11. We represented one of the seven applicants (needless to say, the opinions below are exclusively my own, and in no way can be attributed to my client or my colleagues).
I had already anticipated those Judgments noting that -irrespective of who the prevailing parties were- they would be of great interest and procedural relevance. [The Judgments came out while I was lecturing on competition procedure at the Brussels School of Competition, so I discussed them almost live].
The cases concerned seven appeals lodged by cement companies against massive -arguably unprecedented- requests for information, and they are important because the Court was asked to clarify whether there are any real limitations to the Commission’s investigative powers.
There have been two groups of Judgments:
-In six cases the applicants grounded their appeal on the lack of motivation of the information request. In those cases the GC has ruled (a) that although “it is true that “the presumed infringements [were] set out in very general terms which might well have been made more precise”, they have the minimum degree of clarity in order to be able to be considered to be consistent with the requirements of EU law; and (b) that even if “the size of the workload caused by the volume of information and the very high degree of precision in the response format imposed by the Commission cannot be reasonably disputed”, that workload was not disproportionate in the light of the necessities of the enquiry and the extent of the presumed infringements.
[Intermission: Too often, when the Court decides to dismiss an application it practically denies any reason to every argument made by the applicant). This wasn’t the case here, and the Court was objective and transparent enough to acknowledge that there could be problems, but that they were overridden by effectiveness considerations. I like it better this way].
-The content of the Judgment in the seventh case (T-296/11 in which we acted for the applicant) is different, as explained in the Court’s press release http://curia.europa.eu/jcms/upload/docs/application/pdf/2014-03/cp140035en.pdf
Instead of focusing our arguments on lack of motivation (which we thought would at most have only given us a temporary victory), we had posited that the criterion of “necessity” in Art. 18 of Regulation 1/2003 should be interpreted not in light of what the Commission intends or hopes to find, but in the light of the elements that the Commission has and that raise the suspicion triggering the investigation. We claimed that otherwise the criterion of necessity would be devoid of any practical significance.
The GC has accepted the theory (as it did in Prysmian and Nexans -now pending before the ECJ- regarding inspections). According to the GC, the Commission is not obliged to disclose to the companies the preliminary evidence at its disposal, but it must have enough evidence to justify the information request (paras. 38-40).
In this particular case, and since the Court acknowledges we had “put forward factors capable of casting doubt on the sufficiently serious nature of the evidence concerned”, the Commission was very exceptionally asked to produce a summary of its file. Luis Ortiz Blanco and myself were asked to go to Luxembourg to access it and make observations without being allowed to disclose anything not even to our client [I’m not disclosing anything confidential because this is all explained in paras. 23-26 of the Judgment]. This is what explains that a great part of the Judgment is redacted as confidential.
Obviously I can’t say or even hint at anything that’s not been disclosed in the non-confidential version of the Judgment. Essentially, the Court explains that in the light of the Commission’s file the Institution could have validly addressed the exhaustive and exhausting information request to the applicant. The reasoning (mainly contained in para 59) is that even if we did offer an alternative interpretation of the elements in the file, the Commission cannot be asked at a preliminary stage to have evidence so consistent as to be sufficient to establish an infringement; it’s enough to have evidence that -at a preliminary stage and absent third party contextualization- would have arouse a reasonable suspicion.
The lines of what’s reasonable are of course blurry, and the Court’s approach is -rightly or wrongly- deferential to the Commission and to the need of safeguarding the effectiveness of its investigations, particularly at an early stage. Some may fear that if Courts started annulling requests for information (or Phase I clearance decisions, to pick a “random” example) then the floodgates would open. However, failing to annul those categories of decisions systematically and regardless of their merits or lack thereof those may also be akin to conferring carte blanche on the Commission, and that (regardless of the unquestionable good intentions of the Institution) might also have drawbacks.
Tacit collusion to fight predatory pricing
I have thoroughly enjoyed teaching for the first time in the Executive LLM programme recently launched by the LSE. As is usually the case, one learns a lot from students. When discussing oligopolies and tacit collusion, Lars mentioned the creation of a Market Transparency Unit for Fuels (all capital letters, it’s after all a German authority) by the Bundeskartellamt. According to the authority, this initiative will make it easier to address ‘illegal predatory strategies and other forms of market power abuse’. Impeccable move. There is certainly nothing better than tacit collusion to fight predatory pricing!
On problematic markets, a new competition law app and a great book
You know the drill: busy day= quick advertising.
– On June 12-13 2004 the University of East Anglia (Norwich) will be holding a conference on “Problem markets” (according to the organizers, this refers to markets that are “too hot for regulators to handle, with nobody quite sure why or what should be done about it“).
One of the speakers will be an also problematic (the definition above applies, except for he “too hot” bit) French Professor now turned temporary DG Comp staffer who founded this blog and who goes by the name of Nicolas Petit. In addition, there will also be a number of big names among the speakers 😉 For further details, click here.
– I’ve been contacted by the developers of a new app called “Comp law” that provides access to updated versions of the main legal documents of daily use (in the antitrust, state aid and merger control domains) in a smartphone-user friendly format; it also includes other stuff, such as a merger control calendar which takes into account Commission holidays (which I guess should be particularly useful for the holiday planning of Commission officials dealing with mergers…). It’s available at the AppStore and costs € 1,79 (for the moment it’s only available for iOS).
– The 3rd edition of Faull & Nikpay’s The EU Law of Competition is now out. It is without a a doubt one of the must-have books in EU competition law, and most likely the most comprehensive one. Indeed a great book (with over 1.2 million words according to the publicity we’ve seen).
Btw, and since we’re on advertising mood, my other must-have books are this one, this one, this one, this one (undergoing updating works), and, of course, this one (for Frenchies) and this one Before you click on any of these, be aware that the selection may not be strictly neutral…
On Mexico’s controversial antitrust innovations
As I mentioned some posts ago, over the past few months I’ve been paying increased attention to competition law issues arising in Latin America. Until now I hadn’t shared here any views about what’s going on there, but this time the issue merits a comment, not the least because it calls into question the much talked about process of international substantive (or at least legislative) convergence in our field.
As you may know, Mexico is currently considering a reform to its competition law system. This is a move that many considered necessary; respected publications such as The Economist or even the influential book How Nations Fail had insisted in recommending Mexico to boost its competition law system and target market concentration as a way to increase growth and reduce inequality. But whereas few would challenge Mexico’s need for vigorous competition policy, many in the antitrust community are voicing out concerns in relation to some of the envisaged reforms.
For the most part, Mexico’s contemplated Competition Act is in line with other competition regimes around the world, including the EU’s. The proposed reform, however, includes some novel and unusual provisions, concepts and remedies that have given rise to concern, namely:
(i) several provisions (arts. 52, 55 and 57) that would turn the erection of “barriers to competition” (a term not defined in the draft Law) into a new self-standing violation of competition law (one that would seemingly be added to the prohibition on restrictive agreements and abuse of dominance); and
(ii) a provision (art. 94) that would grant the authority powers to “determine the existence of barriers for free competition” and order “corrective measures deemed necessary” for the purpose of eliminating them (“the measures may include the elimination of barriers to free competition, regulation of essential inputs or divesture of assets, rights, partnership interests or shares in Economic Agents in the proportion required (…) The measures concerning the existence of an essential input shall include modes of access to it, price or tariff controls, technical and quality conditions and time schedules”. This last provision reportedly attempts to mirror (although with some diferencies) the UK’s market investigation system.
Unsurprisingly, strong varied opinions have been published in various forums.
One of the best pieces written so far on the subject (and one that has the virtues –for us- of departing from the EU system and of being written in English) has been co-authored by our friend Assimakis Komninos (who has contributed to this blog in the past) and Anne Perrot (with whom I had the pleasure of sharing a panel last year). The Komninos-Perrot piece has been echoed not only in Spanish language press, but also in places like the Financial Times. It’s worth a read, and it’s available here: MexicoEurope(Komninos&Perrot)
For those of you who are interested in more and can read Spanish, I would recommend this document, featuring opinions from various experts.
P.S. Unrelated to the reform, but nevertheless interesting: a former member of the Mexican competition authority recently told me about a Mexican case that perfectly illustrates both the need for competition advocay in the country as well as how strictly the concept of “policing” a cartel has been interpreted. This 2010 COFECO decision refers to an official agreement subscribed by the municipal authorities of a given city with “tortilla producers”; the municipality divided the city into various areas, each one of which was exclusively assigned to a particular producer (delivery motorcycles all were painted in a color corresponding to the area in which they could operate). The task of ensuring compliance with this market sharing arrangement was entrusted to the municipality’s police. No kidding. And if you think this would not happen in Europe, read again our previous post on Monsieur Arnaud Montebourg.
And the Stupidity of the Day Award goes too….
In the competition law world there would appear to be too many prizes, awards and things of that sort. If you or your firm haven’t received an award, or at least a nomination, in the past few days, then either you’re a loser or your firm should increase its sponsoring budget 🙂 (before anyone reacts, I’m kidding).
Someone should one day do an awards ranking and give a prize to the worst one. In the meanwhile, we at Chillin’Competition recently created the Stupidity of the Day Award, which is a purely merit-based award given to the person who contributes to the development of competition law and policy with the… most original thought.
Our first proud recipient was the then French Minister for Industry (appointed today Minister for the Economy and New Technologies (!); this is not an April Fools’ Day joke), Arnaud Montebourg, who said that the European Commission lives in a “legal delirium” and “makes up rules that don’t exist in the Treaties in order to perpetuate its powers” and that Vice-President Almunia is an “obsolete liberal integrist”.
And our second winner is….. Arnaud Montebourg again! He’s a goldmine. Look at this excerpt from a recent interview (Le Figaro, 3 février 2014)
“Quand je reçois l’Autorité de la concurrence, je lui dis : vous êtes contre les ententes. Moi, je les organise ! Qui a raison? Vous êtes nommé, je suis élu, donc c’est forcément moi !”
Translation: “When I receive the competition authority I tell them; you’re against agreements between companies. I arrange them! Who’s right? You were appointed, I was elected, so I’m certainly the one who’s right!”
(Thanks a lot to Benoît Durand (RBB) for this little gem!)
When one reads these things a thought comes to mind. Some say the problem with competition policy is that it doesn’t have constituents pushing for it; well, I don’t know; this might be politically incorrect (as if the rest of this post weren’t), but sometimes I’m glad that (for the most part) politicians keep their hands off it. This last thought gives me a new chance to once again promote my priZeless piece Antitrust and the Political Center and the follow-up interview).
Conflicts of Interest in EU Competition Law
It’s been two months since Nicolas temporarily left this blog for a half a year stint at DG Comp’s Private Enforcement Unit.
In the course of this short period he’s managed to single handedly unblock negotiations on the Commission’s proposal for a Directive on Antitrust Damages, and he’s adapted very well to the fonctionnaire lifestyle (meaning that he’s now taking some days of holidays) 😉 (jokes aside, congrats to Eddy de Smijter and to the rest of the people involved in the negotiations about the Directive).
As he anticipated in his farewell post, Nico is maintaining all academic activities. Within that context, he’ll soon be participating at a conference on one of is favorite topics organized by his University. So, on 24 April the Liège Competition and Innovation Institute will be hosting a conferece in Brussels on Conflicts of Interest, Ethical Rules and Impartiality in EU Competition Policy .
Although Nicolas knows that I don’t share the same passion for the topic (or maybe precisely because he does?), he’s asked me to advertise the conference here. So voilà. It will feature representatives from the General Court, the European Commission, the OECD, the Belgian Competition Authority, as well as lawyers in private practice, The New York Times’ Brussels correspondent and ULG Professors and Researches, including Nico himself. Even Emilly O’Reilly (the current Ombudsman, whom you may remember from this) is on the tentative list of speakers.
Why do I say I don’t share the passion for the issue? Because whereas some improvements could possibly be made in the rules -mainly regarding their transparency-, I think we should be careful in not overshooting the mark. Otherwise we’d risk creating the impression that there’s a major endemic problem where I’m not at all sure there’s one (I, for one, I’m much more concerned about the Commission’s recruitment processes and about internal rules that oblige experienced people to rotate jobs too often or too soon). Anyone working in Brussels for some time will have worked with, against and before friends or professional acquaintances (sometimes the line is drawn too thinly). In my experience who you have on the other side doesn’t matter (at least for good: I do know of situations where lawyers’ friends deciding on cases have been unnecessarily harsh on them just to make a point and dispel any concerns, and that’s as unfair as the contrary) and there are enough checks and balances to avoid problems. The only positive consequence of working before people who know you is that they will perhaps trust you, provided that you have never proved not worthy of that trust (and competition law practice is also a game of repeated interactions), but I don’t see what’d be wrong about that.
As I told Nico back when he wrote his controversial piece on this subject, what’s different in our field is that our “relevant market” is very narrow; we’re not so many lawyers/economists repeatingly interacting among us and with the same academics, officials and judges. The only solution to the perceived problem, as framed, would be to have virginal public officials and lawyers who have not moved around jobs, who know no one, who haven’t studied at the same places, who haven’t worked with different people and who haven’t established a personal rapport with those in their field. In my view, at least, in that case the cure (assuming it were feasible, quod non) would be worse than the disease.
That said, considering the speaker line-up I’ve no doubt the conference will be most interesting.
Chillin'Competition 