Chillin'Competition

This 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.

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.

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 😉

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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 17^th 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.

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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