Chillin'Competition

On 11 January the General Court handed down its Judgment in the Topps case, concerning alleged anticompetitive practices in relation to collectible football stickers and trading cards. As some of you have noted, the subject-matter of the case makes it a must-cover for us.

We will say a few words on the Judgment (not that it is particularly remarkable, but given the scarcity of competition cases we can’t afford not to look at it; we want to collect posts on all of them) and leave the important stuff (i.e. the anecdotal facts) for the end. I have in any event marked in bold the truly important content of the Judgment.

Topps’ appeal targeted a Commission decision rejecting a complaint against Panini, FIFA, UEFA and a number of other national football federations. Following a preliminary inquiry the Commission rejected this complaint on the grounds that there was no EU interest and that there was a very limited likelihood of establishing an infringement so that pursuing an investigation would be disproportionate.

The Judgment deals with some procedural issues of no apparent interest before delving into substance.

Regarding market definition, the applicant argued that the Commission had committed a manifest error in holding that it was likely that relevant markets were not confined to, first, World Cup collectibles sold to children aged 6 to 14 and, second, Euro collectibles sold to children aged 6 to 14 [as if there were no geeky collectors after 14…]. The Commission reached that conclusion on the basis of several arguments challenged by the applicant, among which was the claim that it was not obliged to have recourse to the SSNIP test. Topps seemed to contend that since Panini’s collectibles were roughly 20%-50% more expensive than other collections and that price increases resulted in greater profits, this would necessarily imply that they were not substitutable with other collectibles. The Court nevertheless rejects this argument. There is nothing groundbreaking on this part of the Judgment. It confirms that the SSNIP test is not the only method available to the Commission, which may legitimately use others and goes on to validate its assessment of the facts at issue. Very unfortunately, the Court says that “it is not even necessary to adjudicate on the possibility of applying the SSNIP test to children”. We would have loved to read that discussion; perhaps we could have added the infant fallacy to the “cellophane fallacy” and “toothless fallacy”. Here goes a missed opportunity…

Regarding a possible infringement of Article 101. Topps claimed, first, that the parties had entered into long-term exclusive agreements with Panini that resulted in total foreclosure in the market for collectibles of the World and Euro tournaments. The Commission, however, took the view that their duration was not unreasonably long (“typically” relating to one tournament; the Judgment, by the way, contains a prior discussion on the meaning of “typically) and that the evidence suggested competition in the (most likely) relevant markets and not the foreclosure of Panini’s competitors. The Court also observed that agreements of over 4 years could potentially be justified or have little relevance when related to short events taking place every 4 years.

Ass regard the argument that Panini had imposed exclusivity obligations on retailers (due to a letter noting that retailers carrying non-official products would not be considered), the Court notes (i) that the claim is based on the wrong premise of unduly narrow relevant markets; (ii) that it only affected World Cup 2010 collectibles and only in Cyprus [By the way, an arguably important fact omitted in the Judgment is that Spain won that World Cup…] and that therefore there was no generalized exclusivity and no foreclosure.

Regarding a possible breach of Art.102.  

On dominance. The Court endorses the Commission’s conclusions of the unlikelihood of finding dominance on the part of Panini noting once again that the complaint relied on the premise of a narrow market definition, and that once that market is enlarged it shows lively competition. Very interestingly, the Judgment notes that sales of football collectibles in Italy fell “following the enthusiasm for the collections relating to the Dragon Ball universe based on the eponymous manga”.

The Court also dismisses the idea of upstream dominance, thus validating the Commission’s conclusion that IP rights held by FIFA, UEFA and national associations are not indispensable for creating collectibles related to international tournaments. The Court noted that the lack of those rights did not preclude some collections by Panini and Topps in the past and underlined that, in any event, a claim of dominance based on this circumstance once again assumed a too narrow market definition.

On the alleged refusal to deal. The Court observes that Topps was not refused the IPRs at issue but was rather invited to some tenders, that on other occasions it merely sent a letter without any follow-up, and that the IMS conditions are not met, as the emergence of a new product was not prevented (the Court validates the Commission’s assessment that video trading cards and cards “made with pieces of match worn shirts” [?!] did not constitute new products but rather new features of existing ones). It further observes that it had not been demonstrating that the IPRs at issue were necessary to bring these to the market and that, in any event, numerous competitors are active in a correctly defined market, thereby suggesting the absence of foreclosure.

On the alleged excessive prices. The first Judgment discussing excessive prices in the wake of the Commissioner’s seminal speech at the… ehem…equally seminal Chillin’Competition conference (also attended by the Judge in charge of this case; see below) dismisses the claim simply by saying that the data available does not show that the price of World Cup and Euro collectibles is higher than that of other football collections neither in absolute terms nor compared with its cost of production.

Anecdotal facts

-The first (prohibition/fine) decision under Regulation 1/2003 was also about collectible cards (Pokémon) and actually targeted Topps; see here. The Judgment issued last week refers to that decision observing that the arguments developed by Topps were “diametrically opposed to those developed by Topps at the time” [by the way, perhaps this was the case, but when the Commission does that the Court simply says that it is not bound by its precedents…]

– This is the first competition Judgment in which Ian Forrester has acted as “rapporteur”.

– The Commission may not see collectible cards as an enforcement priority, but other competition authorities are still there, ready to act. I remember a Spanish precedent from not so long ago in which the national competition authority gave an example of prioritization and allocation of resources when sanctioning 5 distributors of Magic cards with 7,000 euros (one party received a 148 euro fine, another a 748 euro fine; the highest fine was 3,424 euros). I remember an official defending the investigation saying that geeks also had the right to consumer welfare…Indeed, but they paid twice, the first time as victims of the cartel and the second one as taxpayers financing a full-blown investigation that resulted in such fines.