Relaxing whilst doing Competition Law is not an Oxymoron

Archive for August 2017

Impulse Ice Cream: while we wait for Intel, the CMA shows the way

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Impulse Ice Cream

The CMA found the ideal timing for the publication of its decision in the Impulse Ice Cream case: it came out when ice cream consumption peaks (mid-August) and right before the Intel judgment (when, incidentally and among other things, ice cream consumption starts to decline and coffee consumption starts to go up).

Following its investigation of the question, the CMA concluded that there were no grounds for action against Unilever under Article 102 TFEU and its national equivalent. When I write that the CMA shows the way with this decision, it is not because of the outcome (I have already explained that the outcome of individual cases does not matter to me).

What I find interesting is how the authority approached a potential infringement both from a policy and a substantive perspective. There are many lessons to draw from both:

  • From a policy-making standpoint, the decision is a valuable reminder that ‘no infringement’ decisions and ‘no grounds for action’ decisions are essential in any competition law system. What an authority does not do is as important as what it does.
  • From a substantive standpoint, the CMA shows that an effect-based approach can be conducted effectively and that it is a valuable means to make the best use of (and not to drain, as some like to claim) an authority’s resources.

Allow me to discuss them in more detail.

The importance of ‘no infringement’ and ‘no grounds for action’ decisions in policy-making: we should have many more of them

We live in strange times. Some people like to believe that competition law (like rock ‘n’ roll) can save the world. Some people think that every concern justifies intervention.

Competition law is valuable for society at large because of the lessons learned over decades of enforcement. Experience shows that, while competition law is indispensable in a social market economy, it cannot save the world (this is also true of rock ‘n’ roll, by the way). Experience also shows that sometimes intervention may not achieve anything meaningful and can sometimes be counterproductive (in the sense that it may harm the competitive process and ultimately consumers).

It is very important that competition authorities regularly convey these two messages to the business community and the wider public. Explaining why not everything is a competition law concern, and that intervention is sometimes counterproductive is likely to reduce the appetite for sweeping (and typically unreflective) regulation. My sense is that it will also protect competition authorities against demands for tailor-made action (which sometimes requires a fresh, untested and/or incoherent theory of harm).

The best instruments to show the world that competition law cannot and should not try to get to El Dorado are ‘no infringement’ and/or ‘no grounds for action’ decisions. In this regard, Impulse Ice Cream is a model: it is succinct yet sufficiently detailed to understand why, in light of the case law and administrative practice of the European Commission, Unilever’s practices were unlikely to have exclusionary effects.

The effects-based approach is administrable and can save resources to an authority

Those who oppose the effects-based approach like to claim that it is unmanageable: their hyperbolic stories describe armies of economists engaged in impossibly complex calculations and unable to come to meaningful conclusions. It would no longer be possible, the argument goes, to know whether something is lawful or unlawful, and dominant companies would be able to exploit this uncertainty to avoid intervention. And, if there was any doubt, courts would be overwhelmed with numbers and welfare estimations.

The CMA’s decision shows that these claims do not stand up to serious scrutiny (to tell the truth, I suspect that many commentators do not even take the claims seriously; it is just an irresistible rhetorical point). In about 4 pages, the authority applies the framework laid down in Post Danmark II and concludes that there was no point in keeping the case open and thus devoting some of its limited resources to it.

I will take just one of the practices examined by the authority to show how the effects-based approach works in the real world (spoiler: it does not involve infinite rows of sleepless econometricians). The CMA raised concerns, inter alia, about some ‘large’ package deals offered by Unilever to supermarkets (the decision refers to ‘buy 8 [packages] get 4 free’ or ‘buy 12 get 6 free’).

Unilever is probably dominant on the relevant market, and some of its products are must-haves. In spite of these factors, the CMA concluded that exclusionary effects were unlikely to result from the large package offers. As explained in the decision, the firm gave these offers in February or March, where ice cream consumption is typically low, and were available for just one month. In addition, the purchasing decisions made during winter and early spring were deemed unlikely to affect purchasing decisions during the summer months; instead, such decisions were found to be determined by other considerations.

These conclusions are not only sensible, but also in line with the case law. Needless to say, nothing of what the CMA does is out of the reach of a generalist court. Far from that. A court applying Delimitis or Maxima Latvija to a dispute is more than able to consider the same factors in an Article 102 TFEU case. There seems to be no reason why what is considered acceptable and administrable in the context of Article 101 TFEU is not acceptable and administrable in abuse cases. This is something that is implicit in some of the most recent rulings of the Court.

Any lessons for Intel?

Before I forget: Impulse Ice Cream is relevant for the (never-ending) discussions around Intel in one important respect. The case provides yet another example that the tripartite division between quantity rebates, loyalty rebates and ‘third category’ rebates is, insofar as it exists, neither meaningful nor workable.

Why do I say that? As I started reading the decision, I thought ‘it looks to me like a set of quantity rebates, as the discounts are given with respect to each of the orders; this would make them prima facie lawful’. The officials at the CMA (who obviously have more information) characterised it instead as a ‘third category’ rebate scheme. As sensibly explained in the decision, the characterisation of the practices, in any event, matters less than their impact on the competitive process. This point is buried in a footnote, but it is key.

I will say more: the boundaries of each category are so blurred, and all rebate practices are so similar in their nature and potential effects, that I fail to see what the tripartite division achieves, other than creating confusion and opening the door to arbitrary decision-making. We need legal categories, that is out of the question, but legal categories need to make sense. We will get to know next week whether the Court agrees with me on this one!

Written by Pablo Ibanez Colomo

28 August 2017 at 9:28 pm

Posted in Uncategorized

Upcoming events

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Although with a bit of a delay, here are some events organized by friend of this blog in the coming weeks and that might be of your interest:

On 8 September the 11th Junior Competition Conference will take place at the Competition Appeal Tribunal in London. This is an event organized by the editors of the Competition Law Journal and that we have always supported. For details on how to register, click here.

On 15 September the University of  Leeds will be hosting a conference titled Competition Law in a Global Context: Analysing the Trans-Atlantic Divide with a very promising program. The conference will be preceded by Pinar Akman’s inaugural the day before (see here).

On 25 September LeadershIP will put together a conference in Brussels to discuss  recent international developments having to do with IP issues. More information is available here.

Written by Alfonso Lamadrid

18 August 2017 at 11:20 am

Posted in Uncategorized

My first piece as joint general editor of the Journal of European Competition Law & Practice

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I am delighted to have joined the Journal of European Competition Law & Practice as joint general editor (together with my friend Gianni De Stefano, from Hogan Lovells; and an impressive team of editors). JECLAP has become a reference in a short time, and I am really excited to become involved in this venture (I just regret that I will not overlap with Judge Nihoul, who is stepping down).

I reproduce below my first piece published in my new capacity. The journal version is available here. I look forward to your comments, and to your submissions too (I have published in the journal a couple of times and can tell you first hand that JECLAP has the swiftest and most professional process I have seen around; I can also tell you that I will make sure it stays this way!).

I leave you with the editorial:

Changing Times for JECLAP, Changing Times for Competition Law

In less than 10 years, JECLAP has established itself as one of the (if not the) leading competition law journals in Europe. Thus, I felt honoured (and, why not say it, also somewhat overwhelmed) when I was asked to replace Paul Nihoul as one of the general editors—together with Gianni De Stefano. Needless to say, I gladly accepted. Inevitably, doing so made me think about changes in the enforcement of EU competition law since JECLAP’s creation, and about the role that the journal can play in these changing times.

This editorial is prepared at a time when EU competition law is undergoing a noticeable evolution. When JECLAP was founded in 2010, it looked like we were close to reaching the ‘end of history’ in the field. A landmark moment was the adoption of the Commission Guidance Paper on Article 102 TFEU enforcement—which was in fact the subject of an article by Giorgio Monti in the first issue. It looked like efficiency and consumer welfare were just about to become the keystones around which the interpretation and application of EU competition law would revolve.

Things look very different 7 years later. We have witnessed the emergence of new analytical frameworks and new ideas. Concepts like choice and, more recently, fairness, have found their way in academic and policy discussions. Paul Nihoul himself has in fact been one of the most vocal proponents of choice as a guiding principle in EU competition law (see for instance ‘Choice vs Efficiency’, JECLAP (2012) 3(4): 315–316). What these developments show is that the efficiency-based framework has failed to win the hearts and minds of many lawyers. The consensus around consumer welfare that exists on the other side of the Atlantic has not materialised in Europe, and perhaps never will.

In addition, new developments in the field are pushing the boundaries of EU competition law. Looking back at the past decade, it looks like authorities in Europe have become less reluctant to interfere with the exploitation of intellectual property rights, to mention one example. Pay-for-delay settlements in the pharmaceutical sector, and the use of injunctions in the context of standard-essential patents (both abundantly discussed in the pages of JECLAP) are clear milestones in this sense. Similarly, discussions relating
to the use of big data and the impact of algorithms on firms’ ability and incentive to engage in collusive and/or discriminatory conduct have moved to the centre stage.

What is, and can be, the role of JECLAP in reaction of these developments? Allow me to share a few thoughts with you.

Place the law at the centre of the analysis: If EU competition law is fascinating, this is in part because it is at the intersection of many disciplines. The downside is that, for that very reason, we run the risk of ignoring that enforcement and policy-making is achieved through the law. It is my hope that JECLAP will contribute to ensuring that the law remains at the centre of discussions. This can be achieved in many ways. One way is to keep up to date with legal developments and putting them in their economic, regulatory and technological context—whether through current intelligence pieces or through the excellent surveys that have greatly contributed to the journal’s name.

I also hope JECLAP will engage critically with new approaches to the interpretation and enforcement of EU competition law. As has been recently argued in these same pages, there is no reason to rule out fairness as a guiding principle for enforcement. At the same time, it is necessary to bear in mind that high-level objectives need to be made operational. If a principle is not, or cannot, be broken down into a set of practicable legal
tests (that is, if it lacks a concrete content that can be anticipated in advance by stakeholders), it may open the door to arbitrary decision-making—and arbitrary decision-making is inherently unfair.

Economics? More of it! This said…: Economic tools are widely used in EU competition law. In fact, never in the history of the discipline has its use been more frequent and pervasive. On the other hand, it is impossible to ignore that the rise of economics has been received with scepticism, if not overt resistance, by some lawyers. Several factors can explain this reaction. The perceived ‘imperialistic’ inclinations of economics—that is, the tendency of economists to apply their approaches and techniques to phenomena that are studied by the other social sciences—is one of them. In this sense, it is hoped that
JECLAP will continue to bridge the divide by encouraging the dialogue between lawyers and economists.

It is also hoped that JECLAP will help understand that economic analysis makes some fundamental contributions to the discipline that are often ignored. Economics in competition law is not just about defining overarching benchmarks (namely efficiency and consumer welfare) and about econometric forecasting. It is also valuable as—if not primarily—a means to define boundaries on administrative action and, by the same token, as a tool that contributes to the clarity and predictability of the law.

A platform to deal with new (and old) ideas: It is exciting to see there is no shortage of new ideas in competition law, and JECLAP editors would like the journal to contribute to their production and dissemination. On the other hand, we would like to encourage discussions that do not miss the forest for the trees and that address transversal issues that are of the utmost relevant in practice. These are the sort of questions that require the combined skills of practitioners—who have a nose for relevant issues—and academically minded lawyers—who have developed the ability to see the big picture.
JECLAP has been and should continue to be the preeminent forum for these exchanges.

In this sense, and as I write this editorial, I can think of some questions of fundamental importance that have not yet been clarified. For instance, there is still uncertainty as to what is exactly meant by an ‘anticompetitive effect’ in the case law. The same is true of other fundamental concepts, including that of counterfactual—which is central to ongoing cases relating to the exploitation of intellectual property rights (just think of Lundbeck and Servier). Readers are hereby invited to contribute to these.

JECLAP is a success story. I have no choice but to work hard, together with the rest of the team, to ensure the success lasts many more years!

Written by Pablo Ibanez Colomo

14 August 2017 at 7:34 pm

Posted in Uncategorized