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Archive for August 11th, 2020

The legal test and the remedy are not two separate steps; they are two sides of the same coin

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Following two of my latest posts – a though experiment on smartphones and cameras, and an update on Slovak Telekom[1]– some of you have contacted me about the central argument I develop in them.

My main point in both is that the remedy is not an afterthought that is irrelevant when establishing an infringement. The remedy – or, more precisely, what a finding of liability would entail – is central to determine whether there is a breach in the first place.

This statement is true as a matter of positive law – Van den Bergh Foods encapsulates the essence of the case law – and is also true from a normative standpoint – as the post on smartphones and cameras sought to explain.

The messages I have received following these posts are certainly sensible. How can the remedy determine the applicable legal test? Is it not getting the case backwards? Should we not establish an infringement first and then figure out the way to remedy it?

These questions, no doubt reasonable, are based on a fundamental assumption, which is that the finding of an infringement and a remedy are two separate steps, independent of one another.

I do not believe this assumption reflects the reality of the interaction between legal tests and remedies. More importantly, I do not believe the Court treats the infringement and the remedy as separate steps. They are rather two sides of the same coin.

The remedy reliably tells us what a case is about, and what the legal test is

A finding of infringement and a remedy are so closely intertwined that the single most reliable way to tell whether there is a competition law breach is to inquire about how to bring the alleged breach to an end.

In other words: to understand what a firm has done (and whether what it has done is prohibited), the best approach is to ask the claimant what the alleged infringer would need to do to comply with the law.

This point can be illustrated by reference to refusal to deal scenarios. These cases are not always easy to spot, and the lines are sometimes blurred between them and other legal categories, including tying and ‘margin squeeze’.

How to tell apart one category from the other? Inquire what the endgame would be. If the endgame is one in which a court or authority mandates (directly or indirectly, implicitly or explicitly) shared access to an input or an infrastructure, then the case raises the issues that are typical of refusal to deal cases. For the same reason, indispensability would be an element of the legal test.

Suppose, conversely, the remedy is a different one. For instance, an obligation on the firm not to require exclusivity from its customers. If so, we would be in Hoffmann-La Roche and Intel territory (where nobody has ever thought of making indispensability an element of the legal test).

These statements are hardly revolutionary. It is, in essence, what the Court held in Van den Bergh Foods and then in TeliaSonera. In Van den Bergh Foods, the firm argued that indispensability was an element of the legal test. Both the General Court and the Court of Justice, in light of the endgame, concluded that the case belonged in the Hoffmann-La Roche/Intel family, and rejected the argument.

The remedy is routinely considered when calibrating the legal test

The history of competition law also teaches us that the remedy (that is, what the case would involve in practice) has been routinely considered when designing the appropriate legal test.

In particular, courts tend to craft strict legal tests where a finding of infringement would demand the administration of a regulatory-like remedy (such as mandating access obligations and setting the terms and conditions under which access is to be granted).

Again, this idea is hardly revolutionary, and is part of our law. Why is indispensability part of the legal test in refusal to deal cases? Magill and Bronner seem to reflect a deep awareness of the implications of a finding of infringement.

Think of Magill. Again, the question is: what is the endgame of ruling that a refusal to license copyright-protected information is abusive? Imposing a duty to license on the right holder. By definition, there is a tension between such an endgame and the logic of intellectual property systems (the very point of which is the right to refuse to license).

It is not a surprise, against this background, that the Court confined to ‘exceptional circumstances’ the instances in which Article 102 TFEU can be relied upon to impose a duty to license (thereby minimising the tension with intellectual property systems).

The uncertainties and complexities of administering a remedy have also been mentioned as factors to consider when crafting a legal test. In his celebrated article on essential facilities, Phillip Areeda – the ultimate centrist in our field – expressed the view that ‘[n]o court should impose a duty to deal that it cannot explain or adequately and reasonably supervise’ and went on to warn against the imposition of regulatory-like obligations.

The EU experience shows that competition authorities do not fare much better than courts when it comes to the administration of these proactive remedies. The failure of the media player remedy in Microsoft I often comes up in these discussions. The principles-based approach to the question in Google Shopping and Android, and the resulting state of limbo (which appears to continue), another one.

Big Tech and legal tests: the question that will not go away

The discussion above gives, hopefully, a sense of what is going on, from a legal standpoint, in relation to Big Tech. Many of these cases demand regulatory-like intervention, and this, more frequently and more intensely than in the past.

It would seem that some competition authorities are more confident than they used to about their ability to redesign products and to tweak business models (other authorities, like the CMA, are more cautious, as the Final Report on digital advertising shows).

This increased confidence tends to trickle down into the interpretation of competition law provisions. The link between the nature of the remedy and the legal test, which acted as a limit on intervention, is now questioned (with the institutional implications that follow, in particular in a decentralised system). Fascinating, and potentially transformative, times.


[1] Speaking of which, AG Saugmandsgaard Øe’s Opinion is out on 9 September.

Written by Pablo Ibanez Colomo

11 August 2020 at 5:33 pm

Posted in Uncategorized