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Archive for June 2021

2nd Edition of the Rubén Perea Award | How to participate

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We are delighted to announce the Second Edition of the writing award in the memory of Rubén Perea. If you are a young competition lawyer under 30 (whether you work as a practitioner, official, academic or in any other capacity) we very much encourage you to apply. If you are reading this and do not fulfil the criteria: it would be great if you could ensure that your junior colleagues are made aware of the opportunity.

As last year, the winning paper will be published in a Special Issue of the Journal of European Competition Law & Practice, together with a selection of the very best submissions received (see here for the Special Issue and here for the announcement of this year’s winner and finalists).

Who can participate?

You may participate if you have not reached the age of 30 by the submission date (i.e. if you were born after 15 September 1991). Undergraduate and postgraduate students, as well as scholars and practitioners are all invited to participate.

What papers can be submitted?

You may submit a single-author unpublished paper which is not under consideration elsewhere. The paper may be specifically prepared for the award, or one originally drafted as an undergraduate or postgraduate dissertation.

The paper must not exceed 15,000 words (footnotes included; no bibliography needed).

Submissions will have to observe academic conventions. Prior to submission, make sure your paper follows the JECLAP House Style rules, which can be found here. If you do not find exactly what you are looking for, please follow OSCOLA’s rules (see here).

How to submit?

A paper, will have to be submitted via this link: https://mc.manuscriptcentral.com/jeclap.

IMPORTANT: As you go through the submission process, make sure that in Step 5, you answer YES to the question ‘Is this for a special issue’? and indicate it is for the Rubén Perea Award.

What is the deadline?

Papers will have to be submitted by 23.59 (Brussels time) of 15 September 2021.

Written by Pablo Ibanez Colomo

17 June 2021 at 10:16 am

Posted in Uncategorized

Why the DMA is much more than competition law (and should not be treated as such), by Agustín Reyna

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[Chillin’Competition is publishing a series of posts featuring the views of various experts and stakeholders in relation to the European Commission’s proposal for a Digital Markets Act. We have received several contributions and will also be inviting some experts to ensure a plurality of informed views from a variety of perspectives. For our previous posts on the DMA see here (by Pablo), here (by me), here (by Cani Fernández, originally published in JECLAP), and here (by Tim Lamb, Facebook). Today we bring you some reflections by Agustín Reyna, Director of Legal and Economic Affairs at BEUC, The European Consumer Organisation)]

Following a non-football(istic) exchange via twitter (see here), Alfonso invited me to share some thoughts about why I think it is neither necessary nor desirable for the Digital Markets Act (DMA) to allow for an efficiency defence in the compliance process with the do’s and don’ts included in Articles 5 and 6 of the Commission’s proposal. However, before sharing our reasons, I think it is important to briefly reflect about three elements closely related to this discussion: the nature and objective of the DMA; its legal basis and, its interplay with competition law.

Nature and objectives of the DMA                                                                                                                                               

The DMA’s objective is to ensure contestable and fair markets in the digital sector by laying down a list of obligations and prohibitions that would apply to designated gatekeepers in relation to a list of core platform services (CPSs). While it is possible to argue  – especially amongst those who consider that EU competition law is much more than allocative efficiency (see our thoughts on this issue here) – that the DMA shares the similar objectives as competition law, the way of achieving these objectives is different. Competition law addresses, case-by-case, business conduct that disrupts competition in the internal market by applying the rules laid down in Articles 101 and 102 TEFU whereas the DMA seeks to pre-empt certain practices or impose specific obligations with a view to increasing market contestability, reducing entry barriers, stimulating innovation from rivals and companies who depend on the gatekeeper to reach consumers and, ultimately, to ensure consumers enjoy a healthy digital environment (we wrote more about this here and here). Whether a company designated as a gatekeeper could have breached Article 102 TFEU, or not, is simply irrelevant for the DMA because, by its very essence and nature, the DMA is not competition law.

The DMA is (pre-emptive) regulation under Article 114 TFEU

Article 114 TFEU has allowed the EU to intervene by means of approximation of laws in multiple sectors and areas of law from horizontal consumer protection law to energy, telecom and pharmaceutical legislation. As such, the choice of Article 114 TFEU as a legal basis does not depend on the sector that is regulated but on whether the measure is necessary to achieve the objective of “establishing or ensuring the functioning of the internal market” in the terms of Article 26 TFEU. Even if one could argue that the use of Article 114 TFEU can be at times arbitrary due to the broad scope of intervention of Article 26 TFEU, I think there is a clear case for 114 TFEU as the legal basis of the DMA for three good reasons. First, the companies to be designated as gatekeepers are providing cross-border services and as such are likely to impact the functioning of the internal market. Second, the proposal introduces proxies in the designation of gatekeepers that would exclude purely domestic scenarios (i.e. requiring presence in at least 3 Member States) therefore ensuring to capture cross-border practices. And third, all parties concerned namely the gatekeepers, business users and end-users would benefit from a set of common rules regulating the provision of services to consumers in different countries contributing to the well-functioning of the internal market by on one side facilitating cross-border operations and, on the other side, reducing risks of fragmentation. 

Interplay with EU competition law

The DMA does not replace competition law. It rather complements it by pre-empting certain practices by companies some of which might also be prohibited under Article 101 or 102 TFEU. Furthermore, as mentioned above, dominance in the competition law sense is not a requirement for the application of the DMA, which follows a different path to designate gatekeepers (based on the combination of pre-established quantitative and qualitative criteria). It is, however, known that many of the companies to be designated gatekeepers have been, or are currently, subject to competition law proceedings. While it could be considered that there is a risk of friction between the two regimes, one needs to be mindful of the fact that once the DMA comes into force, competition agencies would have to take into account the DMA as part of the legal context in each specific case, thus reducing the risk of inconsistent outcomes.  

Why should efficiency defence not be allowed under the DMA?

While assessing compliance with competition law an efficiency defence is relevant, I do not think the same should apply to the DMA for the following reasons:

  • The DMA, unlike Article 102 TFEU, provides for well-defined obligations which would apply to well-defined gatekeepers in clearly identified services or markets (CPSs) to deal with clearly identified problems. Any possible trade-offs between efficiencies and the DMA objectives would have to be taken into account by the European legislation when designing the obligations of Articles 5 and 6.  This means that each obligation would have already internalised such efficiencies. Therefore, there is no reason why further flexibility should be introduced.
  • Since the DMA is not competition law and has a different legal basis (Article 114 TFEU), there is no need to apply competition law principles in terms of either substance or procedure. Think for example of consumer protection rules, which have been harmonised at EU level on the basis of Article 114 TEFU. The enforcement of these rules does not give any scope to companies to argue why a certain unfair term or practice is beneficial (or efficient) for consumers.
  • In the hypothetical scenario where there would be a competition case involving one of the designated gatekeepers on the basis of Articles 101 or 102 TFEU (or the national equivalent), the scope to bring efficiency defences would be framed by whether the concerned practices were covered or not by the DMA. This is something that would have to be taken into account in any case even before the opening of proceedings by the competition authority.
  • More practically, not allowing efficiency defences will make the DMA swiftly applicable and therefore operational as soon as the parties are designated as gatekeepers – or shortly thereafter – subject to specifications if needed for those obligations included in Article 6. Permitting gatekeepers to claim efficiencies would imply delaying the application of the rules when, as said before, this is simply not needed because any possible efficiencies would have been considered by the legislator when defining the scope of each obligation.  

To conclude, I do not see the legal or procedural need to add a new layer of complexities in the DMA by allowing efficiency defences. The DMA is much more than competition law. It is (and should become once adopted by the legislator) regulation precisely defining the limits of what gatekeepers can or cannot do when operating their CPSs in the internal market, in the same old-fashioned way other pieces of EU law in other sectors have defined the boundaries of private initiatives to safeguard clearly defined public policy goals. Competition law will continue to apply in tandem with the DMA. However, taking into account that competition law cannot provide all the answers (e.g. regarding scope of intervention) in the most optimal timeframe (e.g. the Android case is a good example, the case started in March 2013, the decision was adopted in July 2018 and only last week the remedies were amended in a positive manner), there are good reasons for the legislator to step in.

The DMA has the potential to become a blueprint for regulating digital markets, but its success will depend on its swift and effective application and enforcement. The very same companies that would be regulated by the DMA have asked for many years for legal certainty about what they can or cannot do. And this is exactly what the DMA is aiming at.

Written by Alfonso Lamadrid

16 June 2021 at 4:31 pm

Posted in Uncategorized

The Legal Question(s) That All Platform Competition Cases Have In Common

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Previous posts –mostly by Pablo– have already discussed many of the recent or ongoing platform-related cases (including Apple’s Epic lawsuit, the Commission’s investigations into App Store rules for music streaming apps and Amazon’s marketplace, the Google Shopping and Android decisions, the Italian Android Auto decision or the German Booking.com case). We have also discussed cases involving non-digital platforms, like Amex, Cartes Bancaires, Mastercard or Budapest Bank.

When you read the information that is publicly available about these cases or, even better, Pablo’s comments, you immediately realize that they share many commonalities. That might explain why Pablo’s views on all those cases are consistent, regardless of the companies affected by each investigation (and for that reason, somewhat of an anomaly among antitrust influencers).

Now, the usual disclosure: I am involved in several of the cases identified in the first paragraph, which is why I do not comment about them on the blog. In this post I will try to show that there is a fundamental legal debate that cuts across all of these various cases, and on which my position is also the same regardless of whether they may affect my clients, their competitors, or other parties.

Within the non-legal community, attention often focuses on questions on market definition and competitive relationships. This is understandable given (i) the very narrow market definitions in these cases, and (ii) that most commentators have a more defined view on the competitive relationship between many of these companies whereas they do not have a view on competition between, say, chemical by-products. This question is certainly of great interest, but it is a very context and fact-dependent one. The relevance of market definition questions in all these cases is no doubt a commonality, but it is one not exclusive to platform cases and, despite technical challenges (e.g. market definition in multi-sided or zero-price markets, multi-homing, etc), it is more an economic than a legal one.

What I have in mind now is a different commonality, or rather set of related commonalities:

First, all of the platform-cases identified in the first paragraph of this post concern vertical intra-platform rules. We know from our experience with vertical restraints that these are generally deemed not restrictive of competition when they enhance inter-brand (in this case inter-platform competition). This argument, of course, only works when we define a market in which platforms compete amongst themselves, which is not the fashionable thing to do and, as explained above, may or may not be the right thing to do depending on the case. This explains why, dominance thresholds aside, market definition is pivotal in these cases, but this is only part of what I wanted to discuss.

Second, while the platform-cases identified in the first paragraph of this post concern different practices/rules and different business models, all of them are about platform rules that restrain freedom of action on at least one side of the platform, generally to protect or maximize the value of the platform itself (think, for instance, of the justifications based on combating free riding common to all the MFN, app store, and payment system cases identified in the first paragraph of this post). This is unsurprising, as the very role of any platform sponsor is precisely to create value by harnessing positive externalities and preventing negative externalities via the design of platform rules.

This commonality also has a great impact on the legal analysis. As the Court has consistently emphasized in recent years, the question of whether a restriction exists in the first place, or whether such restriction is justified is independent of market definition, and it is also not one that can be addressed (one way or another) in the abstract. Answering this question in each case requires a comprehensive and context-dependent and multi-sided analysis, because very often the same practices will restrain competition on one side and will stimulate competition on the other. It is generally understood that practices enhancing a platform’s value may, depending on the circumstances, benefit not only the platform’s sponsor, but also consumers and business users in the aggregate. But sorting out and balancing the direct effects of a practice on multiple interdependent markets is complicated in practice. The recurring question then is how the legal arguments are framed  who needs to prove what, and at what stage? That was the key question in the US Amex case, it was the key question in the EU payment system cases (Cartes Bancaires, Mastercard, Budapest Bank), and, for the reasons recently explained by Pablo here and here, it arguably should have been the key question in other platform cases including ISU and the German Booking.com case. Concerns about carrying this burden are precisely what explains the remarkable proposals to shift the burden of proof in platform cases, which have now made it to the DMA proposal. Like in the case of market definition, this is a question that will systematically arise in these cases, so it is certainly a meaningful legal commonality but, again, this is only part of what I had in mind.

The observation that triggers this post has to do with the very meaning of the notion of anticompetitive effects:

Third, if you think about it, all of the cases identified in the first paragraph of this post seek to fine-tune (sometimes second-guessing) different platform arrangements in situations where there is no apparent risk of anticompetitive foreclosure. Few would argue, for example (and I will leave my cases aside, because my belief that they are the best examples might not be objective) that Amex, Visa or Mastercard foreclosed anyone, that Amazon is likely to exclude or marginalize merchants or that Apple will ever have the hope of driving Epic or Spotify out of the market.

Most business users benefit from the opportunities offered by these platforms (otherwise platforms would not prosper), but would like to enjoy better conditions (can’t blame them; who wouldn’t?). This is why the concern in these cases is often about competitive (dis)advantages, fairness, or about the situation of specific business users, and not so much about actual or potential foreclosure (as understood in the case law). This is also why, as observed by the DMA’s Impact Assessment Report, some Member States wish to address these situations via laws on abuse of economic dependency. And this is also why the DMA Explanatory Memorandum (p.8) argues that competition law “is not sufficient to deal with all the problems associated with gatekeepers, given that [practices will not be captured] if there is no demonstrable effect on competition within clearly defined relevant markets”.

At the end of the day, regardless of market definition, regardless of business models, and regardless of the specific theory of harm, all of the platform-cases identified in the first paragraph are mostly about the optimal distribution of rents (or, as Pablo put it here, a fight for a larger slice of the pie). Commentators that strongly support some of these cases, and who observe that these have been transplanted into the DMA’s proposed obligations, have also identified the reallocation of rents as one of the DMA’s key goals (which necessarily means that the same applies to the cases from which these obligations originate). Depending on your views and perhaps also on your business interests this may be a positive or a negative development (we can leave that debate for another day), but it does mark an important paradigm shift in competition law. This question appears to have featured prominently and very explicitly in the Epic v Apple trial, but perhaps has not received enough attention and reflection in the EU. Hence this post.

Written by Alfonso Lamadrid

7 June 2021 at 6:03 pm

Posted in Uncategorized