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Archive for February 2016

On IP exhaustion (patents + Pay TV)

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exhaustionThis is my fourth post of the day on interesting highlights that we should have covered. It only makes sense that it deals with exhaustion…

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If interested in patent issues related to antitrust you should pay attention to a decision issued a few days ago by the U.S. Federal Circuit in Lexmark v Impression products on patent exhaustion/ “first sale” doctrine (interestingly holding that the Supreme Court’s decision in Quanta, among others, had not overruled the Federal Circuit’s earlier decisions on the effect of foreign and conditional sales; for interesting amicus curiae from the AAI and others defending the opposite, see here). Its potential antitrust implications are significant. For interesting discussions on the case (I’ve ran out of blogging time by now), see here, here or here.

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And now that I mention IP and exhaustion I realize we never discussed on the blog the very interesting issues at stake in the Commission’s investigation into geo-blocking arrangements in the Sky-Hollywood Studios/ Pay-TV investigation in which I am representing the UK’s independent producers (the oral hearing took place last month).

Without disclosing anything I should not, let me just anticipate (or rather, bet) that exhaustion –or rather, non-exhaustion, will be the key to that case.

Written by Alfonso Lamadrid

24 February 2016 at 3:27 pm

Posted in Uncategorized

More on Google (Streetmaps)

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google-maps-logo

Pablo commented last week on the Streetmaps/Google Judgment issued a couple of weeks ago and written by Peter Roth. I thought Pablo’s points were, as always, very interesting, but I confess I had not yet read the Judgment. Now that I have, here are some of my impressions:

In spite of what many think, there are very sensible Judges out there who can do a great job dealing with complex competition law issues. The Judgment is a pleasure to read; it is comprehensive, concise, honest (e.g. “both [economic experts] have undoubted expertise in this field, but I found that each displayed a tendency to become an advocate for the party by which he was instructed” (…) “I find it somewhat surprising that there should be such a sharp clash between the experts, each with a duty to assist the court”), clear, nuanced, solidly based on precedent and evidence, very well and very transparently reasoned (which is what I expect, and often fail to get, from a Judgment); I wish EU Courts always wrote like that. Actually, I wish I wrote like that.

The issues covered in the Judgment are very similar, if not idenical, to some of the ones currently examined by the Commission; other than in our posts and in the case study I ran last year at the BSC 😉 I had never read such an accurate description of the arguments at play in the Google case And the Judgment goes to the crux of the issue: how to deal with conduct that is procompetitive in the market of the dominant player but that is alleged to harm competition in an adjacent one?

Mr. Roth first assesses the matter of foreclosure in the adjacent market; as explained in Pablo’s earlier post, he first explains that the likely effect should be “appreciable” (which is not an unimportant statement), and then goes on to assesses in great detail evidence and expert testimonies (which included a hot tub session), which leads him to conclude that the “appreciable effect” was not “reasonably likely”. Some may perhaps disagree with the finding, but I don’t believe anyone can criticize the detail and transparency of the reasoning.

In Roth’s words: “that is sufficient to dispose of the allegation of abuse. However, in case I should be wrong in that conclusion, and as it was extensively argued, I proceed to consider the issue of objective justification”.

And he goes on to undertake the most serious, objective and persuasive objective justification assessment I have read, thoroughly assessing possible “less restrictive alternatives”, after having importantly noted (at 149) that “the question of alternatives obviously cannot be  considered only with respect to competitive impact. Proportionality is inherently a matter of fact and degree. Where the efficiency is a technical improvement, proportionality does not require adoption of an alternative that is much less efficient in terms of greatly increased cost or which imposes an unreasonable burden”.

The bottomline: in case you had not noticed it, this one is clearly among the best written competition law Judgments I have read. 

But don’t take what I say for granted, I strongly suggest that you read it too and check it yourselves. It’s available here.

Written by Alfonso Lamadrid

24 February 2016 at 1:00 pm

Posted in Uncategorized

Recent (and key) State aid judments: on SGEIs and tax selectivity

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curia2bcool

This is today’s second post on interesting highlights that we had not yet covered. In this one I will very briefly deal State aid cases decided at the end of 2015.

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In my previous post I referred to a case in which the Commision got an arguably unnecessary blow.  A stream of cases where the Commission got away with something surprising is that related to the digital switchover in Spain decided on November 26th (disclosure: we represent several companies and public entities in those cases). For a comment in the State Aid Hub, see here.

The whole case boils down to the Commission and the General Court agreeing that ensuring that the TV signal reaches the 2,5% of Spanish citizens living in “remote and less urbanized areas” (to quote the decision’s title) otherwise not covered by the market (the market failure uncontested) is not a Service of General Economic Interest. So much for Protocol 26, for the Commission’s lip service to SGEIs, and also for Member State’s ability to choose how to provide a SGEI (which is now conditioned to “technologic neutrality”).  The case is also interesting when compared to others in which the Commission acknowledges, for instance, that ensuring broadband access in Paris is a SGEI…

It is noteworthy that in its Press Release the Court did not refer to the areas/population affected by the measures (I insist, the 2,5% of population living in remote and less urbanized areas).

There is much more to be said about these cases, but I will comment again on these cases once we have won the 4 ECJ appeals lodged a few days ago 😉

***

We nonetheless fared better in another State aid case related to the so-called “tax lease” (disclosure, in that saga of cases we are also representing the applicants/investors in 22 pending cases before the General Court against the same decision). The Judgment of the General Court of December 17th in the pilot case concerning the appeal by the Kingdom of Spain confirms the theory of selectivity with which we previously won the “Spanish financial goodwill cases” and pursuant to which investors should not have been identified as the beneficiaries of the alleged aid (for our comment on that one, see here).

The Judgment does a very good job explaining why that theory not only is perfectly sensible, but also that it was always there regardless of the Santander/Autogrill Judgments (read, in particular paras. 143 to 180). In the Court’s view, the decision’s error regarding selectivity also contaminates its conclusions regarding the distortion of competition and the effect on inter-state trade.

The Commission is likely to appeal, if only because of the spill-over effects this could have in its recent tax-ruling investigations. So, again, we’ll be able to say more once the ECJ Judgments are out. By the way, the many cases pending before the General Court raise a number of other most interesting issues (e.g. can a State aid decision declare private contracts void?), so keep an eye open for those too.

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P.S. By the way, the last three cases to which I have referred were all adopted under Commissioner Almunia (in the case of the financial goodwill, only the third decision, issued just days before the annulment; the previous two were adopted under Kroes), all targeted Spain, two of them were annulled and the other –although endorsed by the General Court- is, without exaggeration, the worst I have ever seen in my experience. The fact that these decisions adopted under his mandate were all unfounded clearly shows that the criticism according to which Almunia would have favored Spanish companies is also unfounded.

Written by Alfonso Lamadrid

24 February 2016 at 12:39 pm

Posted in Uncategorized

The General Court’s annulment of the airfreight cartel decision

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 airplane

We never said a word about the annulment, back in December, of the Commission’s airfreight decision.

I worked on that case before the Commission (for an addressee of the SO later not included in the decision) and shortly before the Judgment went out I was asked by Nicholas Hirst (Politico) whether I thought the decision could be annulled. I confess I didn’t think it was possible, that it was a solid one, not the least because there were 14 leniency applicants. And then the General Court annulled it.

But the real surprise came not with the news, but when reading the Judgment(s). Some people tend to think that a Judgment that quashes a Commission decision must necessarily be a good thing, because after all strict judicial review is a good thing. If you ask me, and to put it mildly, the Judgments don’t make sense (and I bet that a few of the winning lawyers share this view).

The only reason why the decision is annulled is because the Court sees incongruence between the grounds and the dispositive parts. The grounds were –like it or not- clear, and the alleged problem was that when imposing fines –in the operative part- the Commission distinguished, the periods for which it had the power to impose those fines (in the air transport world the Commission’s powers changed over time).

To me, the content of the decision was perfectly clear. How that can be a problem liable of leading to the decision’s annulment is beyond me. In any event, this might not be of much, or any, practical significance, as the Commission can easily amend the supposed error in a new decision. The Commission does get it wrong sometimes (for an example of this, check out my next post on recent State aid cases), but the fact that it got the blow in a case where it might not have deserved it is a bit puzzling.

Other recent relevant cartel cases involve leniency issues (namely the ECJ’s Judgments in DHL and Galp), but we’ll leave that for a future post.

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Written by Alfonso Lamadrid

24 February 2016 at 12:21 pm

Posted in Uncategorized

Streetmap v Google: lessons for pending Article 102 TFEU cases (including Google itself)

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Streetmap

On Friday last week, the High Court of England and Wales ruled on the dispute between Streetmap and Google (see here). It is a really interesting read, and one that shows that – whether or not one agrees with the outcome – courts can deal effectively with complex competition law matters (I am told that I should not jump to conclusions too readily: apparently Mr Justice Roth, author of the decision, is an active member of the Association of European Competition Law Judges and attended in that capacity the seminal lecture on two-sided markets that Alfonso gave in Uppsala 😉 ).

The obvious appeal of Streetmap v Google is that it raises pretty much the same issues that the Commission will have to address in its own – and pending – Google case (see here and here). In essence, Streetmap argued that Google’s prominent presentation of its mapping services amounted to an abuse of a dominant position. As many people have argued, the combination of Google Maps and the search results is a form of abusive ‘bundling’.

Mr Justice Roth did not seem very impressed with the arguments brought by Streetmap. He concluded that Google’s practice was not reasonably likely to have an appreciable anticompetitive effect and that, in any event, it was objectively justified. I, on the other hand, am very impressed with the decision. Mr Justice Roth’s analysis is penetrating and creative. Here and there, I have found arguments about which I had not thought before.

The decision provides particularly interesting lessons for Google and other ongoing Article 102 TFEU cases. I can think of the following:

  • Effects need to be showed for some practices, not simply assumed. Post Danmark II made it clear that, as far as some practices are concerned, a likely anticompetitive effect must be shown. In such cases, assuming that the practice is capable of having such an effect is not enough. It would be necessary to examine the features of the relevant market and how, in that context, the practice would lead to foreclosure. Mr Justice Roth applies this principle and concludes – rightly in my view – that Google’s conduct is a ‘by effect’ practice.
  • There must be a causal link between the abuse and the anticompetitive effect. This is one of the fundamental aspects of the ongoing Google case, and one that is often ignored. In fast-moving markets, the exclusion of rivals is not necessarily the consequence of an abusive practice. Rivals may not be able to adapt to changes in consumer demand. Their business model may be the relic of a past era. As a result, they would have been driven out of the market irrespective of the behaviour of the dominant firm (the counterfactual, again!).
    Post Danmark II was clear in stating that a ‘by effect’ practice is only contrary to Article 102 TFEU where the ‘anti-competitive effects’ are ‘attributable’ to the dominant firm (para 47, emphasis added). Mr Justice Roth applies this principle and appears to take the view that Streetmap’s decline is not attributable to Google’s practice. He seems to suggest that it would have happened anyway.
    The Commission faces a major challenge in this regard in the pending Google case. Assuming there has been a decline in the traffic towards some price comparison websites, the Commission would have to show, to the requisite legal standard, that this is the consequence of Google’s practices – as opposed to the consequence of the evolution of markets and, in particular, the rise of Amazon, eBay and others.
  • There is confusion about the legal test that should apply to Google. Unsurprisingly, Streetmap argued that Google’s practice was a form of bundling. This position is controversial (see here). These days, consumers expect more than the proverbial ten blue links when they perform a search on Google. Consumers’ assumption is that, where relevant, other affiliated services (including maps, images and youtube videos) will also be displayed.
    Is it possible to argue, against this background, that Google’s practice is a form of abusive bundling and/or that the practice is not objectively justified? The Commission conceded in its Guidance that two products are distinct only where ‘a substantial number of customers would purchase or would have purchased the tying product without also buying the tied product from the same supplier’.
    Where, conversely, consumers would only obtain the tying product with the tied product, the practice is most probably objectively justified and as such a source of efficiency gains that benefits consumers.
    Will the Commission depart from the Guidance in Google? What are the implications? Nicolas Petit has recently written an interesting paper on the impact of the Guidance on administrative discretion. The conclusion that would follow logically from Nico’s paper is that the Commission cannot depart from the approach to tying and bundling sketched in the document. I have written elsewhere that the Guidance is a pre-commitment device – a promise to act in a certain way – that cannot simply be disregarded.
  • The rejection of the de minimis doctrine does not mean that it is not necessary to show an effect. In Post Danmark II, the Court of Justice refused to set a de minimis thresholdSome people interpreted this passage of the ruling as meaning that there is no need to show an anticompetitive effect in the context of Article 102 TFEU. This position is not correct, as I explained elsewhere. What the Court held in Post Danmark II is that, where an anticompetitive effect is shown, this effect will be appreciable. In any event, the anti-competitive effect – and the causal link between the practice and the effect – will have to be established, and not simply assumed.
    Mr Justice Roth adds an interesting twist to this question. He claims that the conclusion of the Court in Post Danmark II is only valid where the abuse and the exclusionary effects take place on the same market. In the case of leveraging, it would be necessary to show that the anticompetitive effects on the non-dominated markets are appreciable. Not everybody will agree with this position, but the underlying reasoning and approach are, in my view, correct.

 

Written by Pablo Ibanez Colomo

17 February 2016 at 8:23 pm

Posted in Uncategorized

Enforcement and challenges in the application of the competition rules

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madrid-ville

On Friday we will be holding a  seminar in Madrid (in the framework of the competition law course I co-direct together with Luis Ortiz Blanco) to discuss enforcement and challenges in the application of the competition rules. The programme is the following:

16-17: Enforcement and challenges regarding the application of the competition rules in the Information Communication and Technology sector

Nicholas Banasevic (Head of Unit, DG Comp)                                                                                            Margarita Fernández (HP)                                                                                                                                Moderator: Alfonso Lamadrid  (Garrigues)

 

17.20-18.20  Enforcement and challenges regarding the application of the competition rules in the Energy sector

Philip Kienapfel (Deputy Head of Unit, DG Comp)                                                                                      Andrew Ward (Cuatrecasas)                                                                                                                             Moderator: Lewis Crofts (MLex)

18.30-19.30 Challenges in the judicial application and review of the competition rules

Milan Kristof (Référendaire, ECJ)                                                                                                                  Santiago Soldevila (Magistrado, Audiencia Nacional; former Judge, EU General Court)                         Moderator: Luis Ortiz Blanco (Garrigues)

19.30-20: Reflexiones sobre la política de la Comisión Europea como autoridad de competencia

Cecilio Madero  (Deputy Director General for Antitrust, DG Comp)

More information is available here:

Programa IEB 2016 – Seminario II – Enforcement and Challenges in the application of the Competition Rules

Written by Alfonso Lamadrid

15 February 2016 at 12:15 pm

Posted in Uncategorized

Football, TV rights and the ‘single buyer rule’: in a world of commitment decisions, bad policy dies hard

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Bundesliga

Many people love to discuss whether competition law is, or should be, about consumer welfare. Not me. I have never understood people’s mystical fascination with this question. In my view, it is essentially a distraction that is – most of the time – boring and irrelevant. The vast majority of cases can be decided without resorting to consumer welfare considerations. And the issues that really matter in EU competition law do not really need raising abstract questions about consumer welfare or, more generally, the goals of EU competition law.

Every now and then, however, there is an extreme case. Sometimes, things go so wrong that it is relevant to discuss the role of consumers – and their interests – in EU competition law. The Commission policy on the sale of football TV rights is my favourite example in this sense. I find it fascinating for two reasons: Premier League is a decision that not only ignores the features of the relevant markets but is expressly designed to harm consumers.

The star commitment in Premier League was to ensure that at least one package of the TV rights to the English football championship would go to an operator other than Sky (this is the so-called ‘single buyer rule’). The Premier League had already accepted to sell the rights to the championship in several packages. However, simply giving the opportunity to more than one player to buy the TV rights was not sufficient. It was necessary to force, through Article 101 TFEU, a competitive outcome in which there would be at least two broadcasters offering simultaneously this content.

The fundamental problem with the ‘single buyer rule’ is that it is an artificial attempt to change the nature of competition in the relevant market, and as such it is bound to fail. It requires all sorts of distortions to be a meaningful remedy. In the UK, Ofcom has done a good job at introducing additional distortions that have allowed BT to challenge Sky’s position in the UK. But we know that regulatory distortions are never for free.

The second problem is that it penalises consumers in an almost comical way. It is essentially a remedy that requires football fans to subscribe to two different television services to have full access to the televised games of the championship.

I have written about this on the blog already. The reason why I do so again is because I understand that the Bundeskartellamt is keen to introduce the ‘single buyer rule’ in relation to the sale of the TV rights to the Bundesliga (I would in fact be grateful for more info about this, as it is not obvious to find!).

What the news about the licensing of the TV rights to the Bundesliga show is that, in spite of all of the above criticisms, the ‘single buyer rule’ has acquired a life of its own. It seems to have emerged as a default remedy in cases concerning the licensing of TV rights, even though it was adopted in a very peculiar context. This is one of the consequences of the rise of commitments decisions. Some remedies become part of the acquis for no compelling reason. They are simply required without ever discussing whether they are necessary and/or proportionate.

Ben Van Rompuy and Alexandre de Streel have accepted my invitation to talk about these matters in a seminar organised in the context of the EU and Spanish Competition Law Course run by Luis Ortiz Blanco and Alfonso in Madrid.It will take place on 4 March I really look forward to that!

Written by Pablo Ibanez Colomo

11 February 2016 at 1:02 pm

Posted in Uncategorized