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Archive for May 2015

AG Kokott in Post Danmark II: a legal test for quantity rebates

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I mentioned earlier this week that the legal test proposed by AG Kokott is likely to prove more controversial than the broad principles discussed in the opinion. I can think of at least two reasons for this. The test is, first, difficult to reconcile with some aspects of the relevant case law. In addition, it is based on an unstructured set of indicators that might prove difficult to apply by a national court. For the same reasons, it may not allow for the effective judicial review of administrative action.

The test proposed is difficult to reconcile with Hoffmann-La Roche and Michelin I

Are categories relevant in rebate cases?

AG Kokott states in paragraph 29 of the opinion that categories are ‘ultimately immaterial’ when determining whether a rebate scheme is abusive. This is a sensible argument – the Commission Guidance is based on a similar idea – but it is a normative claim, not a positive one. Formal categories (neatly presented by the GC in Intel) were relied upon in Hoffmann-La Roche, and the Court derived clear legal consequences from them.

I have the impression, moreover, that paragraphs 28 and 29 of the opinion are somewhat contradictory. AG Kokott relies upon formal categories to claim that loyalty rebates and target discounts are abusive by their very nature. If categories are deemed relevant to conclude that some practices are prima facie abusive, it is not easy to understand why they would be ‘ultimately immaterial’ when determining whether prima facie lawful conduct is in breach of Article 102 TFEU. The legal test should adapt to the categories crafted in the case law, not vice versa.

Quantity rebates in Hoffmann-La Roche

Since Hoffmann-La Roche, quantity rebates are deemed to have a valid economic justification. The underlying presumption is that they reflect the cost savings made by the dominant firm. Against this background, a legal test for quantity rebates should probably start by ascertaining whether the scheme under consideration is inconsistent with a cost saving rationale and thus abusive by its very nature. It would be for the competition authority or the private claimant to show that the scheme does not have a valid economic justification (the opposite is required from dominant firms once a prima facie abuse is established).

That a quantity rebate scheme is abusive by object could be established, for instance, when it is shown to be predatory within the meaning of AKZO (pricing below average variable cost can be safely presumed to be an irrational strategy for a firm to pursue). On the other hand, I fail to see why the factors identified by AG Kokott are inconsistent with a cost saving story. Why would the award of retroactive quantity rebates over a period of one year not be credible in an industry with high fixed costs?

The assessment of ‘all the circumstances’ in Michelin I

AG Kokott proposes to assess the lawfulness of quantity rebates in light of ‘all the circumstances’ relating to the scheme in question. This test is drawn from Michelin I, but it was not conceived for quantity rebates. The Court examined in that case the legal status of schemes that are not formally conditional upon exclusivity but that are not quantity rebates either. As a result, one cannot conclude, without more, that this test can or should be extended to other categories of rebates. Michelin II, which was not appealed before the ECJ, seems to be the only quantity rebates case to which reference is made in the opinion (at least in relation to this question; Portugal v Commission, also cited, was about exploitative discrimination).  Read the rest of this entry »

Written by Pablo Ibanez Colomo

28 May 2015 at 6:52 pm

Posted in Uncategorized

AG Kokott in Post Danmark II: issues of principle

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Happy Postbox

Some people like to see controversies around Article 102 TFEU as an epic battle between conflicting worldviews. Alas, everyday life is more pedestrian and less exciting. Fortunately, we are constantly reminded of it. These were my thoughts after reading AG Kokott’s opinion in Post Danmark II. It shows that the scope of disagreements about the appropriate legal treatment of unilateral practices tends to be greatly exaggerated.

AG Kokott’s opinion is indeed remarkable, first and foremost, because it reveals that there is much common ground. The points of contention exist and are undoubtedly important, but are technical in nature. They do not relate to a fundamental disagreement about the objectives of EU competition law, but to the way in which the principles underpinning the existing case law are to be interpreted and applied to specific factual scenarios.

On issues of principle, I am ready to guess that the vast majority of commentators will agree with AG Kokott’s understanding of the case law. What is more, I am convinced that they will praise the opinion insofar as it sheds light on certain crucial issues. On the test applying specifically to quantity rebates, my impression is that not everybody will agree. Certain aspects of the opinion are objectively difficult to reconcile with the relevant case law – in particular Hoffmann-La Roche, Michelin I and AKZO. It will not take long before commentators pinpoint these aspects. I will be discussing issues of principle in this first post and will leave the second question for another one.

Quantity rebates as an ‘abuse by effect’

It has become clear in recent years that there are two broad categories of potentially abusive practices. Some conduct is deemed abusive by its very nature (this category comprises, inter alia, exclusive dealing, loyalty rebates and tying). Other practices are only abusive where they have, or are likely to have, an anticompetitive effect. These include ‘margin squeezes’ and selective price cuts, in addition to refusals to deal. Unsurprisingly, AG Kokott comes to the conclusion that quantity rebates fall under the second category. The Court has consistently held since Hoffmann-La Roche that such rebates are an expression of competition on the merits.

AG Kokott proposes a true analysis of effects for quantity rebates

I have written elsewhere that the case-by-case analysis of rebates differs from the analysis of exclusionary effects in ‘margin squeeze’ and selective price cuts cases. The analysis of ‘all the circumstances’ in target rebate cases (think of Michelin I and British Airways) has so far focused on whether the scheme in question amounts in practice to a formal exclusivity obligation. This assessment differs from that sketched in Deutsche Telekom, TeliaSonera or Post Danmark I.

AG Kokott proposes a test for quantity rebates that is closer in nature to that underlying the latter three rulings. According to the opinion, the features of the relevant market would be an integral aspect of the analysis. Interestingly, AG Kokott cites Post Danmark I in support of this conclusion. There is every reason to welcome this clarification. Practices that are not abusive ‘by object’ are subject to an analysis of effects that is comparable to that found in the context of Article 101(1) TFEU and merger control. Only if the features of the relevant market reveal that exclusionary effects are likely will an abuse be established.

Substantive standard: ‘likelihood’ of exclusionary effects, not ‘risk’ or ‘capability’

As I said above, it has been clear for a while that some practices are only abusive if an anticompetitive effect can be shown. The substantive standard applying to the assessment of effects has remained elusive, however. In cases like TeliaSonera, the expressions ‘capable’ and ‘likely’ are seemingly used interchangeably by the Court, even though they do not have the same meaning (I remember Bill Allan making this point in a great lecture he delivered a while ago). AG Kokott puts an end to this confusion. The opinion argues that the relevant substantive standard is one of likelihood. More precisely, AG Kokott considers that a claimant would have to show that the exclusionary effects are ‘more likely than not’ to arise in the context in which the practice is implemented (para 81; Post Danmark I is cited, again, in support of the conclusion).

I welcome this point, which is a very sensible interpretation of Article 102 TFEU case law. Arguably, and more importantly, it is broadly in line with the substantive standards applying in the context of Article 101 TFEU (to ‘by effect’ restrictions) and merger control (think for instance of Tetra Laval). Across the board consistency in the interpretation of EU competition law is of the outmost importance and the opinion is a crucial step in this direction. It would be difficult to justify why restrictive effects on competition would be subject to a different substantive standard under Article 102 TFEU.

Is the ‘capability’ standard entirely irrelevant in Article 102 TFEU case law? I do not think so. Concerning practices that are deemed abusive ‘by object’, it is sufficient to show that they are capable of restricting competition. This is exactly the point made by the GC in Michelin II. The capability standard also applies to agreements that are shown to restrict competition by object within the meaning of Article 101(1) TFEU, as clarified by the ECJ in T-Mobile and again in Bananas.

Generalities on rebates and exclusive dealing

I am sure it has not escaped you that AG Kokott seems to suggest that target discounts are abusive by their very nature (para 28). This is not entirely uncontroversial. One could argue that it is at odds with what is formally stated in the relevant rulings. It is difficult to deny, on the other hand, that AG Kokott’s statement is an accurate depiction of the practical consequences of the case law.

The opinion also reiterates the fundamental reason why exclusive dealing and loyalty rebates are deemed abusive by their very nature. Paragraphs 28 and 29 insist on the presumption that such practices lack an economic justification and that they necessarily serve an exclusionary purpose. I have already explained at length why this presumption is difficult to reconcile with Delimitis, which is grounded on different premises. As I have so many other interesting things to say about Post Danmark II, I will not insist on that point!

Written by Pablo Ibanez Colomo

26 May 2015 at 2:16 pm

Posted in Uncategorized

Two important Opinions: AG Kokott on Post Danmark II (C-23/14) and AG Wahl on AC Treuhand (C-194/14 P)

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A few hours ago two important competition law-related Opinions were made public by the European Court of Justice. Both are remarkable and, interestingly, I would even dare to say –and note that this is not a criticism- that the direction of each of them could have been expected in the light of the track record of their respective authors, Mr. Wahl and Ms. Kokott. Similarly, I also have the sense that the Court might finally be inclined to follow only one of the two Opinions, I let you guess which.

That said, both Opinions raise most interesting questions regarding two very different issues, one of them novel (can a cartel “facilitator” be sanctioned under 101 TFEU despite not being a party to the agreement?) and one of them fairly old but always hot (what are the criteria to assess loyalty rebates by a dominant firm?; Is it mandatory to follow the “as-efficient competitor test”; Is there an appreciability threshold for such conduct to fall under 102 TFEU?).

Let’s look at them one at a time. I have more extensively summarized Kokotts Opinion (because I know you’re too lazy to read Opinions in full), but have included all key messages in bold for those lazy enough to not read even the blog posts 😉

AG Kokott on Post Danmark II (more on the fight for the soul of EU Competition Law)

The legal treatment to be applied to rebates on the part of dominant companies remains one of the most contentious issues in contemporary EU competition law and is in many ways the main battleground on the –legal or economic- soul of EU competition law. Discussions about it have abounded in recent times (see here for a summary), and have also occupied our attention (for Pablo’s views see here, here or here, and for my own views click here).

Kokott sends a clear message right from the start (para. 4), noting that the case comes at a particularly controversial time when many push for a more “economic approach”, and recommends that “in is replies, the signal effect of which is likely to be extended well beyond the present case (she refers to Intel in a footnote) the Court should not allow itself to be influenced so much by current thinking or ephemeral trends, but should have regard rather to the legal foundations on which the prohibition of abuse of a dominant position rests in EU Law”.

In her Opinion the AG first goes on to identify the general criteria that should be taken into account in order to assess rebates, referring first to the special responsibility of the dominant company (para. 24), underlining that the “quantitative” or “loyalty” labels are irrelevant, and that what is decisive is the possibility that they may lead to an exclusionary effect which is not economically justified (para. 29). AG Kokott then insists but that there is not a closed list of factors to be considered given that each rebate might have its peculiarities, but identifies some particular criteria, namely (a) the “criteria and rules governing the grant of the rebate” (paras. 36-41: referring to loyalty building/suction effects, which depend inter alia on retroactivity, the volume and time-span of the rebate, as well as intent -the latter is referred to as a “strong additional indication” as opposed to a “mandatory precondition”-; she also adds that the charging of “negative prices” should not be a precondition either (para. 41); and (b) the conditions of competition in the market and the position of the dominant company (see paras. 42-50, very closely linked to the facts of the case). She sums all this up in a “interim conclusion” (para. 55) stating that a rebate scheme operated by a dominant company will be abusive “where an overall assessment of all the circumstances of the individual case shows that the rebates are capable of producing an economically unjustified exclusionary effect, it being important to take into account in that regard, in particular, the criteria and rules governing the grant of the rebate, the conditions of competition prevailing on the relevant market and the position of the dominant undertaking on that market”. Nothing groundbreaking or too controversial here.

From para. 57 onwards she refers to the Commission’s Guidance on exclusionary abuses and its endorsement of the “as efficient competitor test” that the Institution imposed upon itself. She notes that such an administrative practice “is not, of course, binding on the national competition authorities and Courts”. Importantly, she says that “although the national authorities themselves are not precluded from following the Commission’s example and using the AEC test, they are none the less, from a legal point of view, bound only by the requirements arising from Article [102]” and that “[i]t is for the Court to define what those requirements are”. This isn’t groundbreaking at all either, but some might consider it controversial.

It is at this point that the most relevant stuff comes. In para. 61 the Opinion observes that Article 102 does not support the inference of any legal obligation requiring the use of the AEC test. It then observes that in previous cases (Telia Sonera or Post Danmark I), the ECJ has validated this test but not as an “absolute requirement” for all price-related cases. The AG remarks, first, that the said-case law is specifically concerned with other pricing practices that are by their nature closely related to the cost structure of undertakings and also, second, that the wording used by the Court in those cases made it clear that anticompetitive exclusion is not only that which affects equally efficient competitors (62-63).

With regard to rebates in particular the Opinion refers to the ECJ’s Judgment in Tomra (para. 92 later mentions that Tomra was rendered “at about the same time” as Post Danmark I) to support the contention that a cost-price assessment is not mandatory. Although she contemplates the possibility of establishing this requirement, she expresses “skepticism” towards any reorientation of the law (65) given that (i) “the added value of expensive economic analyses is not always apparent and can lead to the disproportionate use of resources” [economist will love this..] (66); (ii) “it is wrong to suppose that the issue of price-based exclusionary effects can be managed simply and in such a way as to ensure legal certainty by applying some form of mathematical formula based on nothing more than [business data] not uncommonly open to different interpretations” (67); and (iii) “the finding of an abuse requires taking into account all the relevant circumstances of the individual case in question and must not be confined to an examination of price and cost components alone” (68).

In para. 69 the Opinion explains that taking into account all circumstances + considering whether there is any objective justification for the rebate “adequately ensures that the legal requirements (…) do not disregard economic realities”.

Paras. 71 to 75 then develop some further objections to the AEC test, notably regarding the fact that when a dominant company is present the structure of the market often rules out the presence of equally efficient competitors (due e.g. to barriers to entry, economies of scale or network effects) which implies that “the competitive pressure exerted by less efficient undertakings must not be underestimated.

In the light of the above, Kokkot’s recommendation for the Court in para. 75 is to respond that Article 102 does not require the abusive nature of rebates to be established pursuant to an AEC test, but that national authorities and Courts are at liberty to avail themselves of a price/cost analysis unless, on account of the circumstances, it would be impossible for another undertaking to be as efficient as the dominant one.

Finally, the Opinion addresses the question about how “likely and serious” the exclusionary effect must be in order for Art. 102 to apply.  With regard to likelihood, it states that “hypothetical effects” are not enough because the rebate must be capable “not only in the abstract but also in practice of making it difficult or impossible for the dominant undertaking’s competitors to gain access to the market”; in its view, the provision is triggered in the face of “likely” effects, not of “very likely” or ·particularly likely” or “beyond reasonable doubt”. At most, the Opinion explains, the degree of likelihood may have a bearing on sanctions. With regard to seriousness (appreciability) she first observes that the doubts of the Danish Court may have to do with a deficient translation of the Judgment in Post Danmark I from French to Danish (the latter version referred to appreciable effects/elimination effects instead of exclusionary effects). In her view, likely exclusionary effects are enough, there not being a need to qualify it those effects as serious or appreciable; the Opinion then cites Tomra for support, and adds that a de minimis threshold doesn’t seem necessary given that there will already be a an assessment of all relevant circumstances and also given the fact that Art. 102 extends only to conduct that is likely to affect trade between Member States [I personally don’t think that this latter argument is valid, for the effect on competition and on trade between Member States are two different things assessed pursuant to different criteria; this, in my view, is quite clear in the case law on 101]

This very last section of the Opinion is what I find less satisfactory (many people will probably take issue with the previous stuff too) because it leaves a question unaddressed (in its defense, one that was not posed directly in the case, and one that I think is at the root of most major current substantive discussions: what is really anticompetitive exclusion/foreclosure? when is it enough to warrant intervention? is it about making life more difficult to competitors –and how much more?- or about their elimination –and to what extent-?) I’m not sure that the argument that “we will know after considering all circumstances” is enough. In practice the issue if often solved by prosecutorial discretion (the EC at least has chosen well its cases) but, query, is that the appropriate solution? Perhaps the question is not so relevant for loyalty rebates since –according to Michelin and Intel –the only two Judgments that, unless I’m wrong, contain the expression- they are considered restrictive “by object” (pending the objective justification assessment), but it is the key question to every other practices assessed under 102.

As for the rest of the Opinion, I think there is nothing new; it fits within the line of the established and controverted case-law on the issue that we have extensively discussed here. I suspect that (i) people with strong views on either sides will regard this Opinion as a lost opportunity for very different reasons; (ii) the ECJ is likely to endorse this view; and (iii) I also suspect AG Wahl might take a different view when he writes his Opinion in Intel. And speaking of AG Wahl:


AG Wahl on AC-Treuhand (or what is a restriction of competition?)

The second Opinion rendered today concerns a novel issue which AG Wahl proposes to address by returning to the fundamental –and unclear– concept of restriction of competition.

The case concerns an appeal against the General Court Judgment endorsing the Decision which –for the first time- sanctioned a company for its role as a “cartel facilitator” despite not being a player in the affected markets. In essence, the company’s role consisted in arranging and participating in meetings, gathering and circulating data, moderating tensions and fostering commitments in exchange for a remuneration.

The ground of appeal that is dealt with in the Decision raised two interesting questions, namely: (i) does Article 101 encompass this sort of conduct?; and (ii) subsidiarily, could the company be sanctioned in a manner compliant with the principle of legality considering that there was no previous case-law establishing that such conduct fell within the scope of Article 101?

In the view of AG Wahl, “in order to identify a restriction of competition it must be shown, following the pertinent economic analysis, [intermission, note the difference in the language compared to the previous commented Opinion] that the company at issue has renounced, totally or partially, by its conduct, to exert a pressure characteristic of effective competition on the rest of the operators in the market or markets affected to the prejudice of economic efficiency and consumer welfare” (para. 1, later paraphrased at various key paragraphs of the Opinion, notably 47, 50, 51, 62 and 69). In the light of this notion of restriction, and considering that AC Treuhand did not exert any competitive pressure on the other participants in the cartel prior to the agreement, it never ceased exerting any such pressure and therefore, according to AG Wahl, cannot be held directly responsible for the cartel. Consequently, he recommends the ECJ to annul the General Court’s Judgment.

I see the point, but at the same time I have doubts: didn’t the company participate in an agreement that had as its object the restriction of competition? Also, it is true that a wide interpretation of Art 101 to capture facilitators could potentially extend even to lawyers not doing their job properly; at the same time, however, organizing cartels should probably not be a legitimate business.
Btw, the  notion of restriction used here –despite the reference to economic analysis- seems close to that often criticized as ordoliberal; I’m not saying this pejoratively, I’m simply observing it.

According to the Opinion – which in para. 71 is quite blunt- if the Court were to endorse the view of the General Court and of the Commission, it would “profoundly disturb” the method of identification of anticompetitive conduct by disconnecting the conduct and the economic restriction in such a way that the definition of the relevant market and the identification of anticompetitive constraints therein would become completely superfluous. Again, I see AG Wahl’s major point, but I’m not really persuaded by the latter part of this particular argument, for market definition is already deemed superfluous when it comes to cartels…

The Opinion then goes on to consider the theoretical question of whether the company could be sanctioned as an “accomplice” (paras. 77-83). It notes that whereas this would seem convincing at first sight, the charges were not framed in that sense and, moreover, the concept of “accomplice” belongs to criminal law and is alien to administrative law, so resorting to it in a case like this would not make sense (para. 82).

In AG Wahl’s view, it is exclusively for the legislator to foresee a sanction for accomplices under EU Law. After stating this, at the very end of the Opinion, he sends a clear message that I, for one, am likely to quote in the future-: it is necessary to underline that the will of the Institutions of safeguarding the effectiveness of their policies must be conciliated with legality and legal certainty. As pointed out by an author (a footnote clarifies that the “author” is Pierre Pescatore) the effectiveness -effet utile- doctrine cannot lead the Court of Justice to interpret Treaty provisions so as to extend to the maximum the competences of the Institutions, but must permit to interpret the pertinent rules in the light of their objective and goal”. (Note that an English version of the Opinion is not yet available; this is my own translation).

The second question raised by the applicants was, in my view, equally interesting, but was not addressed in the Opinion (although I predict that it may be more relevant to the eventual Judgment…). Could the company be sanctioned for acting as a facilitator when the law was unclear –there was no precedent- as to whether it violated Art. 101? In practice the Commission has sometimes decided not to sanction a company resorting to this reasoning but it has done so on its own motion (see here). However, is there a legal obligation for the lege to be clear for the poena to be imposed? This is a question –or rather a problem- that, in reality, concerns not only this issue but the whole of competition law (with the exception of cartels, or at least of how the term “cartel” was traditionally understood). I will recall the answer that the General Court gave to an argument that also concerned the principle of legallity in Case T-167/08, Microsoft (compliance):

  1. “(…)the use of imprecise legal concepts within a provision does not prevent liability being established as against a person who contravenes it. As the Commission points out, if it were otherwise, an infringement of Article 101 or 102 TFEU – which are themselves drawn up using imprecise legal concepts, such as distortion of competition or ‘abuse’ of a dominant position – could not give rise to a fine without the prior adoption of a decision establishing the infringement“. 

I guess that says a lot about our discipline…

Written by Alfonso Lamadrid

21 May 2015 at 6:53 pm

Posted in Case-Law, Uncategorized

Post- and pre-conference thoughts

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Conference thoughtsI was delighted to attend a conference on Friday last week at the University of Leeds. Drs Pinar Akman and Peter Whelan put together a really interesting programme combining young academics (as I like to fancy myself) and experienced practitioners. Great chance (for me) to meet some people (long overdue in some cases) and to see some friends, including Nicolas (I should definitely take the Eurostar more often). I hope to be able to share the slides (mine and others’) very soon on the blog.

Pinar and Peter asked me to discuss the interface between competition law and sector-specific regulation. The topic brings together my doctoral dissertation (on technological convergence between media and telecommunications) and some ongoing issues that I follow with particular interest – in particular, the Google investigation and the broader Digital Single Market Strategy.

The commonalities across issues are clear, and the fundamental research questions remain the same they were 10 or 15 years ago. It is not a secret that there is big appetite for the regulation of convergent technologies – whether it is telecommunications networks, pay TV channels, search engines, or e-commerce) One of the key ideas of my talk was that, when the impulse to regulate is too strong, competition law may be the casualty, and this in two ways. Enforcement may shift towards a newly crafted sector-specific regime (as the one that is now envisaged for the so-called ‘digital platforms’, or the one set up by Ofcom in relation to pay TV in the UK). If the shift does not occur, the challenge for courts and authorities is to ensure that the integrity of the competition law system is not jeopardised.

Tomorrow I will be flying to Japan to take part in the 10th ASCOLA conference. It is the first time that I speak at one of their events and I really look forward to sharing my thoughts with the participants. The topic is on the regulation of abusive practices, about which I have written abundantly on the blog. I hope to persuade my fellow academics that it is about time to place the law (as opposed to economics and policy-making) at the very centre of discussions around Article 102 TFEU (and equivalent provisions in other regimes).

Talking conferences. Our friend David Mamane tells us about an upcoming one on the enforcement of EU competition law at the national level.

Written by Pablo Ibanez Colomo

19 May 2015 at 5:38 pm

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The Brussels School of Competition

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Over the past few years the Brussels School of Competition has established itself as one of the best places to study competition law in the EU. Very few programs feature a comparable line-up of  visiting professors (including a good number of Commission officials) and, above all, a comparable bunch of dedicated students. I have been lecturing there for the past 4 years, and I’ve always very much enjoyed it (not so much grading exams, which I need to do this weekend…) The reason I’m telling you all this is, first, that Nico has asked me to ;), and, second, because registrations are now open for the 2016 edition.

Aside from the main course, the BSC also organizes a number of events, somo of which have received our attention on this blog (see, for example, this post on commitment decisions).

In the coming weeks the BSC will be holding two particularly topical events:

– On 28 May 2015 the BSC and The Liège Competition & Innovation Institute (LCII) will host a half-day conference on Public Restrictions of Competition. The topics to be discussed include: a possible re-activation of Article 106 TFEU enforcement, State related restrictions of competition; new business models that undermine regulated sectors; the sharing economy; competitive neutrality frameworks; State owned enterprises, etc. One of the speakers, and possibly the most reputed lawyer in this field (a bias disclosure is in order), will be my boss/partner/friend, José Luis Buendía. Click here for the full programme and here to register online

– On 9 June 2015 the BSC would also like to invite you (well, you need to pay, but it’s very cheap…) to a Morning Briefing on “the sector inquiry in e-commerce: what competition agenda for the digital single market?” The speakers will be Thomas Kramler (who is heading the enquiry at DG Comp), Stephen Kinsella (from Sidley Austin) and Frank Wijckmans (Contrast). For more info, click here.

Written by Alfonso Lamadrid

13 May 2015 at 12:01 pm

Posted in Uncategorized

A transatlantic perspective on some of our recent debates

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McWane Bosley

In the past couple of months, Alfonso and I have offered different perspectives on topical issues. First, we discussed (too much and for too long) about the legal test that should apply to exclusive dealing. We then published a couple of posts (here and here) on the recent Bananas ruling of the ECJ. As in many other areas, it makes sense to take a look at how these matters are dealt with in the US. The comparative perspective is all the more interesting considering that the FTC has examined similar matters relatively recently.

Exclusive dealing in McWane

As many of you know, the US Court of Appeals for the Eleventh Circuit upheld last month the FTC’s order in McWane. The (other) Commission had found that the company had engaged in unlawful exclusive dealing. The Court of Appeals concluded that the findings about the impact of the practice on competition were supported by substantial evidence. So here it is: an exclusive dealing case that follows an effects-based approach and that is, in addition, decided against the dominant firm.

The legal approach endorsed by the Court of Appeals in McWane is familiar to EU lawyers. For instance, it is routinely followed in non-horizontal mergers, even when they involve a dominant firm (just think of Tetra Laval). Too many posts later, I have not yet found a compelling argument as to why the same legal test should not apply to exclusive dealing under Article 102 TFEU, and why the perpetuation of internal tensions in the EU competition law system is appropriate or sustainable. But rest assured that I will not insist!

McWane is a very useful read for another reason. Over the past few months, it has been assumed, too readily and too often, that an effects-based approach to Article 102 TFEU would require complex economic studies that would unduly delay the procedure and would make it very difficult to establish an infringement. McWane shows that these concerns are not justified. Not only was a violation established in the case, but the approach advocated by Commissioner Wright, who claimed that the FTC’s analysis was not sophisticated enough, did not carry the day.

Information exchanges in Bosley

Alfonso and I focused on different aspects of the Bananas case. I devoted my post to the qualification of the exchange as a restriction of competition by object. He expressed misgivings about the fine imposed in the case. Bosley suggests that the FTC would be in broad agreement with the two of us. The FTC claimed that the companies exchanged ‘competitively sensitive, non-public information’ about their business practices. The behaviour was challenged because it ‘served no legitimate business purpose’. This is precisely the approach that the Court of Justice has consistently followed when examining whether agreements restrict competition by object, including Bananas.

Interestingly, the FTC case was not closed with a fine, but through a consent agreement, whereby Bosley agreed not to exchange (or request) competitively sensitive information and to set up a compliance programme. This outcome provides support for Alfonso’s very sensible post. My only objection to it was in fact that his thoughts were relevant well beyond the relatively narrow area of information exchanges. His criticism of the case raised fundamental issues about the enforcement of EU competition law that would warrant careful consideration. There are indeed many practices that cannot be compared in any way to a cartel (or the ‘supreme evil of antitrust’, as he put it in the post) and that are nevertheless subject to fines (see above, for instance).

Written by Pablo Ibanez Colomo

11 May 2015 at 11:35 am

Posted in Uncategorized

Recent output by Nicolas

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Comeback kid

Nicolas, founder of Chillin’ Competition and co-blogger emeritus, has been very active lately. He has shared with us some of his recent output (this adds to his piece of self-preferencing, mentioned in one of Alfonso’s posts). He can be contacted at for further info. He also has a Twitter account: @CompetitionProf. The papers can be found here.

Have a great weekend!

Written by Pablo Ibanez Colomo

8 May 2015 at 2:21 pm

Posted in Uncategorized

The definitive article on two-sided markets, by me

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(1) Economic theories on multi-sided markets are now well established and, in fact, earned Prof. Tirole a Nobel Prize earlier this year; (2) Some of the most prominent ongoing cases, including the two concerning Google, go to the heart of antitrust issues in multi-sided settings; (3) In addition, the EU has been said to intend to regulate “platforms” (see here for a piece including some leaked documents). Not that anyone seems to know what a “platform” is exactly (since when is ignorance an impediment to introduce regulation?), but the Commission’s leaked documents make it clear “multi-sidedness” is what the Commission (or at least Commissioner Oettinger, a champion of smart regulation in the digital single market –like this?-) has in mind (the docs also refer to specific search engines, social networks, application stores and internet payment gateways as the quintessential examples of platforms in alleged need of regulation).

In my view, in spite of all these developments we lawyers have not yet reflected enough on how the application of competition law should be refined in this context.

As you may remember, I gave my views on the subject at the Swedish Competition Authority’s “Pros and Cons conference” (French speakers may think that I was the “con” among the pros, which is probably right….) (the slides are available here).

My speech at this event has now been beefed up and features in the latest issue of the Competition Law Journal, published by Jordan Publishing, at [2015] Comp Law 64; it is available here:

The Double Duality of Two Sided Markets_CLJ_Lamadrid

 [The title of the post was perhaps a bit of an overstatement, but since Chillin’Competition is not (yet) a regulated platform, I thought I could use some self-favouring 😉 ]

And on 4 June the European Commission has (at the behest of the UK’s CMA) very kindly invited me to talk about these issues in Uppsala at the annual gathering of the European Association of Competition Law Judges; it should be fun. The program for that event is available here: AECLJ Uppsala prov programme

Written by Alfonso Lamadrid

5 May 2015 at 3:46 pm

Supermarkets and competition law: lessons from Tesco’s recent troubles (and other news)

with 3 comments


Supermarkets are often presented as serial competition law offenders. Some commentators simply assume that it is a highly concentrated industry that makes supra-competitive profits. From this perspective, they would be the epitome of the tight (and evil) oligopoly. According to other accounts, however, high prices are not the problem, but excessively low ones. Some see with genuine concern that supermarket chains compete vigorously across some product categories. The exercise of unilateral market power vis-à-vis suppliers has emerged as a third popular topic in recent years. The idea that there is something wrong about retailers favouring their labels and/or with them competing vigorously with manufacturers at the downstream level has become a popular one.

It is hard to believe that these claims can all be true at the same time. The reality of the industry must be far more complex than commonly assumed. I thought of all of this when reading about Tesco’s recent troubles. The consensus among analysts is that a significant part of the company’s problems – currently the leading supermarket chain in the UK with a market share of around 29% – is the consequence of strong competition from hard discounters such as Aldi or Lidl. Incumbents have a hard time meeting the prices of the two German chains, which are relatively recent entrants in the British market.

Why do I say all this? Well, because sometimes there may be a gulf between popular belief and the reality of markets. The problems in the supermarket industry are assumed to be so rampant and fundamental that the European Parliament became involved and – in line with the growing tradition – sector-specific regulation addressing the perceived problems was discussed and contemplated. In such situations, the best competition authorities can do is assess rigorously whether such claims are really justified, even if it means not taking any measures in the end. In fact, I wrote a while ago that a major task of competition authorities is to lead by inaction, which means that sometimes their remit is to explain clearly to the wider public why concerns are not justified, why the market is working in the interest of consumers or why sector-specific regulation could have the perverse effect of stifling competition. This is how I interpret what the Commission did recently in relation to supermarkets.

The groceries sector is also interesting in that it shows that there are necessarily winners and losers when markets evolve. The fact that some companies are driven out of the market does not always mean that it is the consequence of anticompetitive conduct. The exclusion or marginalisation of some players may simply mean that the conditions of competition are changing. In this sense, indicators that rivalry among supermarket chains in the UK is fierce may be interpreted as suggesting that vertical integration is merely a logical reaction to the new conditions of competition, and not an unlawful strategy limiting – enter the buzzwords – choice and innovation.

As I was thinking about the above, I received an email from Caron Beaton-Wells (Professor of Law at the University of Melbourne) informing about the launch of a research project about the industry (Supermarket Project). I wish her and her team the best of luck and I look forward to the findings!

In other news, and to indulge in some self-preferencing: I am delighted to report that my co-blogger has (once again) been the sole non-partner listed in the 2015 edition of Chambers Europe. Congratulations on the richly deserved achievement! Knowing how Spanish law firms work, he should be able to repeat the feat a good number of years… 😉

Written by Pablo Ibanez Colomo

4 May 2015 at 4:13 pm

Posted in Uncategorized