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DG Laitenberger’s CRA Speech (Part II- Implementing Intel, in Theory and in Practice)

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Part I of this post explained our agreement with the bigger picture issues discussed in DG Laitenberger’s important speech at the CRA conference last week.

This second part focuses on more specific, seemingly fine print, issues on where our assessment may diverge or, rather, incorporates some nuances that we believe are important.

Accuracy vs Administrability (and on the length of investigations) The speech identifies a debate cast as an inevitable trade-off between accuracy and administrability (a language also used here) and suggests that there are ways to reconcile both objectives. The solution, according to the speech, could be found in presumptions and rebuttals. It is interesting to note that, according to the speech, partisans of accuracy would favor time-consuming and resource-intensive investigations, which arguably “risks the untimeliness and hence the non-effectivity of enforcement”. As the DG put it, “this is antitrust to the measured Louis Armstrong tune ‘We have all the time in the world’”. Later on the speech contains another reference to “concluding [cases] within a reasonable time”. These references –or the assumption that lengthy investigations- may ultimately be untimely and ineffective have many angles and have spurred some interesting ideas. We’ll be back on this soon.

On the Notion of Restriction of Competition – By Object. The speech used two examples of presumptions-rebuttals. The first one was that of the recent ISU (International Skating Union case), in which the Commission recently found an infringement by object. According to the speech “[o]ne can say that under Article 101 TFEU, if a restriction of competition is established by the enforcing authority, the absence of a justification by efficiencies is presumed. But this can be rebutted by the business investigated”.

There is an important nuance here.  If what the DG is saying is that establishing a restriction by object implies a presumption of the absence of a procompetitive justification which can then be rebutted (as the context to the phrase in the speech suggests), then what the DG is saying is fully in line with the interpretation of the law that we developed in our piece On the Notion of Restriction of Competition (recently cited by AG Saugmandsgaard Øe; see here). If that’s the case, this is a welcome evolution or an accurate, but rare, statement of the law as we see it. But, following that same logic, finding a restriction “by effect” doesn’t presume the absence of efficiencies; on the contrary, it accepts the plausibility of the efficiencies, which the company has to substantiate. In other words, “establishing a restriction” does not imply a rebuttable presumption of lack of efficiencies; establishing a “restriction by object” (after having examined the legal and economic context), does.

Implementing Intel going forward, in theory and in practice

The speech then referred to Intel as an example of the importance of presumptions and rebuttals. In reality, however, the speech was doing more than that: it was explaining, for the first time, how the Commission interprets the Intel Judgment (for our very own comments on the Judgment, see here, here and here, and for Nicolas Petit’s most recent piece on the subject, see here too).

In DG Comp’s view, the CJ in Intel confirmed the presumption that exclusivity rebates are anticompetitive, but clarified that a dominant company can rebut the presumption by showing that the conduct was not capable of resulting in foreclosure. According to the speech, only when a company puts forward “sufficiently serious and substantiated arguments” will the Commission assess whether the conduct is liable to foreclose “as efficient competitors”.

This triggers several comments:

On the Existence of a Presumption. First, it is noteworthy that the DG has decided to emphasize the role of the presumption against fidelity rebates when applying Intel. It is a welcome development that the presumption is considered to be rebuttable “at the level of the likelihood or not of anti-competitive effects”. As Pablo has explained, it was also an inevitable development in the light of other recent case law. At the end of the day, however, whether a presumption exists or not is of relative importance; relative in relation to the standard for rebuttal…

On the Standard for Rebuttal of the Presumption. According to the speech, “obviously, the required standard for rebutting the presumption would be meaningless if the dominant firm was able to put forward general theories and abstract arguments” (…) “the dominant firm must present case-specific arguments based on concrete evidence, and this must be done during the administrative procedure” (…).

The speech explains that it is only when the dominant firm “puts forward sufficiently serious and substantiated arguments and evidence” that the Commission “must undertake an analysis showing capacity of the conduct to foreclose as-efficient competitors” The DG calls this “placing the burden of the rebuttal on the dominant firm”, and adds that “when in doubt, the analysis has to be deepened, but the procedure is a two-way street”.

The reason Intel is important, in practice, is –as explained in our first post- because of the shift in the burden of proof; it meant that it was not upon the company to demonstrate that its conduct was objectively justified (for which it bears the burden) but, once the argument is made, for the Commission to show that it is likely to foreclose competition. And case are most often won and lost on the burden of proof.

But the Commission’s intention, it seems, is to argue that the burden remains with the company, now to present “concrete evidence” that is “sufficiently serious and substantiated”. The problem here is that one must be very careful not to conflate the burden of proof and the evidential burden; the two are very different things. These difficulties also emerge when discussing the counterfactual, as previously, albeit briefly, observed here.

In my view, it should be enough for dominant companies to identify the concrete (existing or practicable) evidence that would be required to establish lack of foreclosure of as-efficient competitors. It would then be up to the Commission to gather, produce, require this evidence, or to explain why it is irrelevant or insufficient (and, in the latter case, to explain what would be sufficient). This is because sometimes the firm will not be in possession of all the info, or the info will not be at its disposal and in any event there will always be uncertainty as to what the Commission may consider to be “sufficiently serious and substantiated”. This is a shared task, and the proposed solution should combine accuracy and administrability avoiding the extremes, and respecting the respective burdens. There is no reason why this exercise could not be carried out constructively and in good faith; it is all about doing the necessary to ascertain the relevant facts.This would also be fully in line with the “proof-proximity” principle, brilliantly explained by Cristina Volpin in this paper (another young academic, Andriani Kalintri, also has done excellent work clarifying the intricacies of evidential burdens, see here.)

In other words, the Commission cannot abdicate its responsibilities. The case law has repeatedly established that “the Commission must play its part, using the means available to it, in ascertaining the relevant facts and circumstances” (e.g. CJEU in Consten/Grunding or GC in E.ON) and that it is required to have at its disposal all the relevant data that must be taken into consideration in appraising a complex situation (the Tetra Laval standard). As a matter of fact, this very speech says in a different point that “we would not do our job properly if we were not to use all available sources of evidence”.

If this doesn’t convince you, look at the very recent CJEU Judgment in Frucona Košice Judgment (State aid, which means most have not read it) according to which “the information ‘available’ to the Commission includes that which seemed relevant to the assessment to be carried out in accordance with the case-law (…) and which could have been obtained, upon request by the Commission, during the administrative procedure (71). The CJEU then observed that the Commission had “failed to obtain” (80) “all the relevant information” (81) and confirmed the annulment of the Decision. Remarkably, that was a case in which the Commission also claimed (see its arguments before the GC) –unsuccessfully- that the burden was not incumbent upon it [for my view on the details and implication of this case you can….Garrigues paywall] 😉

The Elephant in the Room- The Guidance Paper. When it comes to abuse of dominance, there are currently two parallel levels, one is the law as set by EU Courts; the other is the Commission’s enforcement criteria as set by the Commission itself. The Intel Judgment has to do with the first of these levels. The Commission’s explanations as to how it intends to implement Intel, have to do with the second.

 As I said in my first hasty comment on the case, “in its Guidance Paper on exclusionary abuses the Commission already committed to a careful assessment of likely effects (and this regardless of whether the undertaking concerned submitted evidence challenging the capability of the conduct to restrict competition). The Commission did not consider then that such an approach would make enforcement impossible nor did it consider that it contradicted earlier case law. In my view, therefore, the Commission already self-committed to applying a standard that is even stricter than that required by the Court in today’s Judgment”.

Against this background, something that at first sight may seem remarkable about the Commission’s reaction to Intel is the absence of any reference to the Commission’s own Guidance Paper or to its content, precisely at the time when the CJEU would seem more favorable to it than ever.

On the other hand, however, the speech states that “the Commission will apply the most suitable tools to assess the specific case – including, where appropriate, analysing the “as efficient competitor test” when the dominant company provides the necessary information during the administrative procedure. We are confident that this will allow us to continue to focus on the most harmful cases, while concluding them within a reasonable time”. One could read this as anticipating that cases will continue to be prioritized in the light of the AEC test following the self-commitment made in the Guidance Paper. Only time will tell.

Written by Alfonso Lamadrid

19 December 2017 at 4:12 pm

Posted in Uncategorized

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