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Archive for February 21st, 2017

The German government intends to exempt cartels in the press sector: bad news for competition law, bad news for free speech

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Rupprecht Podszun, Professor of Competition Law at the University of Dusseldorf, has recently published two posts outlining the reforms to the German competition law system proposed by the government. You really should take a look at them here and here.

As has been widely reported, part of the changes introduced in Germany are intended to capture concentrations in online markets. In any event, the single most significant (and no less than shocking) aspect of the reform is an almost blanket exemption from the application to the press sector of the national equivalent of Article 101 TFEU.

In case you were not aware, you read well. If this proposal goes through, German competition law would no longer apply to, inter alia, plain vanilla cartels among press publishers in the country.

This is a worrying development, for many reasons. First and foremost, it shows that the consensus in favour of the protection of the competitive process is fragile, even in the country with the oldest and most developed system in Europe. Unfortunately, many stakeholders see competition law as a tolerable annoyance during normal times. These same stakeholders are always ready to claim that there are exceptional circumstances that justify setting up cartels and legal monopolies. Even worse, many (perhaps most) politicians appear happy to give in if they believe it is in their (short-term) interest.

Will this development change something?

One could argue that the exemption of the press sector from German competition law will change little after all. Article 101 TFEU would continue to apply to publishers insofar as the agreements they conclude are capable of affecting trade between Member States. And the most problematic agreements, such as cartels (a precondition of which is substantial market power), will almost certainly meet this condition.

Suppose German publishers form a cartel to extract rents from online platforms (which, I suspect, is part of the overall plan). For this cartel to work properly, nearly all (if not all) publishers need to play the game (the Spanish ‘Google tax’ was an embarrassment, but the legislator at least understood this point). And such an agreement would certainly have an effect on trade between Member States.

The Bundeskartellamt does not have the power to exempt agreements caught by Article 101 TFEU (the limited scope of Article 5 is a clever feature of Regulation 1/2003). As a result, any industry-wide agreement would be vulnerable to challenge before a court, or before the European Commission. And if the agreement in question is a blatant cartel, I guess neither a court nor the Commission would have much choice. It might not be easy and there might be considerable external pressure, but the credibility of the whole system (which is a remarkable achievement of the European Union) would be at stake.

Bad news for free speech and pluralism

Some readers may argue that the above is irrelevant, as media pluralism and free speech are far more important than competition law. I agree. In fact, media regulation will always be one of my main areas of interest. But even from that perspective, I struggle to see how allowing cartels in the press sector can be good.

Fiercely independent newspapers that proudly defend their editorial line are essential in a democracy. Can the press fulfil its fundamental mission if it cosies up with politicians and exchanges favours with them? An unholy coalition between newspapers and politicians is certainly not better than an instance in which the independent press is criticised by those in power – which is undesirable, but criticism is at least an indicator that journalists are doing their job.

We competition lawyers know that, in an age of rapid technological change, the cartelisation of the press is unlikely to achieve anything meaningful. At best, it can only delay the inevitable transformation of the industry. The press is important for reasons that go beyond purely economic ones, but this does not mean that the sector is not subject to basic principles of economics.

Written by Pablo Ibanez Colomo

21 February 2017 at 11:37 am

Posted in Uncategorized