Chillin'Competition

The Journal of European Competition Law & Practice (of which I am the Joint General Editor alongside Gianni De Stefano) will be publishing a Special Issue devoted to the Google Shopping judgment.

We have already received a number of fascinating proposals, and we would very much welcome more of them. You should email me (P.Ibanez-Colomo@lse.ac.uk) by Friday of next week (3 December) if interested in contributing.

The proposal should take the form of an abstract of max. 250 words in which you outline:

• The aspect of the judgment on which you would like to focus; and
• The contribution your piece is expected to make.

If you submit an abstract, we expect the final article (of around 7,000-10,000 words) to be submitted by mid-January (the idea is to make sure that the Special Issue remains topical). And, as usual, please clarify in your proposal whether you have any conflicts of interests.

We will select abstracts to maximise diversity and balance in the Special Issue. We would be particularly keen to publish new voices and perspectives.

In line with the above, we will be prioritising pieces that add value and enrich our understanding of law, economics and/or policy (and that do so by focusing on one particular aspect or dimension of the judgment).

In the same vein, we will not publish pieces that are eminently descriptive or that amount in essence to a case note covering the various issues raised by the judgment – we would love the Special Issue to work as a coherent whole and to avoid repetition.

We will contact all authors whose abstract has been selected in due course (if there was any doubt, do not hesitate to contact me with any questions, as some of you have already done).

Have a wonderful weekend!

As is always the case, it was a real pleasure to share my thoughts on the application of EU competition law to sports at the Institut d’études européennes. My slides can be accessed here (as usual, I have nothing to disclose).

One of the reasons why this topic is so interesting is that it forces us to think by reference to first principles. It is also one that challenges conventional wisdom. For instance, sporting activities provide many examples showing that a price-fixing agreement between competitors is not necessarily a restriction by object (let alone a cartel).

I would summarise the thrust of my presentation as follows:

Co-opetition in sports and system management through governing bodies

Participants in a championship or tournament (whether individuals or teams) are not competitors in the usual sense. They are more appropriately characterised as co-opetitors. Unlike the usual firms, a participant in a sporting competition needs its rivals. Without rivals, it is worth nothing.

Each of the participants is, in fact, a member in a joint venture that contributes an input to a good that is more than simply the sum of its parts. The UEFA Champions League, just to mention an example, is not merely a collection of matches, and the interest of the matches depends on them being part of a wider championship.

Two corollaries follow from the above. First, the word cartel seems inappropriate in this context. Any restraints imposed in this economic and legal context seem markedly different from the sort of naked restraints we witness around cartels.

Second, the creation of some governing structure seems indispensable for the appropriate organisation and coordination of competitions. The world around us confirms this conclusion. In this regard, I noted that the relationship between participants and governing bodies is not fundamentally different from the relationship that exists between franchisors and franchisees, or manufacturers and selective distributors.

Sporting activities that take place under the umbrella of an organisation is best understood as a system in which the governing body defines the appropriate balance between cooperation and competition among participants (for instance, how rivalry is limited in the name of competitive balance and ultimately the excitement that comes with the uncertainty about the outcome of a match or championship).

The application of EU competition law to sport: principles and common misconceptions

Some of the most recent developments get to the heart of the governing bodies’ activities. The case law of the Court is sufficiently developed to provide concrete answers to the issues raised. However, there are some common misconceptions that keep coming back.

Since Meca Medina, there should be little doubt that rules that are inherent to a legitimate objective fall outside the scope of Article 101(1) TFEU altogether. What if the rule goes beyond what is necessary? Meca Medina, again, provides the answer: in para 47, the Court explained that such a rule might have restrictive effects on competition and thus might be caught by Article 101(1) TFEU. In any event, an evaluation of its impact would be a precondition for the application of that provision.

Unfortunately, there is a tendency to conclude that, where a rule is not ancillary, it automatically amounts to a restriction of competition. Similarly, it is occasionally claimed that a rule that has an economic objective (say, protect an organisation’s economic interest) is ipso facto caught by Article 101(1) TFEU. The ISU case shows the extent to which these ideas (difficult to reconcile with the case law) return every now and then.

Having the cake and eating it: ISU, the Super League, and the lessons from Cartes Bancaires and Pronuptia

The central question that is common to ISU and Super League is as simple as it is exciting: is it anticompetitive for a governing body managing the system to limit competition to itself?

In essence, these cases are about participants that are interested in benefitting from the existing system while exploring opportunities elsewhere. Some participants do not want to sacrifice the positive aspects that come with participation in the incumbent championship even when they decide to take part in rival organisations. The good old (and very human) temptation to have the cake and eat it.

EU competition law has been here before and has addressed similar matters. In Cartes Bancaires, the Court ruled that a restraint aimed at fighting free-riding is not restrictive by object. In other words, measures that aim at ensuring the appropriate management of a system (and prevent imbalances within the system) are not in breach of Article 101(1) TFEU by their very nature.

In Pronuptia, the Court ruled that a franchisor may, without infringing Article 101(1) TFEU, take measures aimed at ensuring that the system and the underlying formula do not benefit competitors (or does not benefit the franchisee itself, which may be precluded from setting up a rival shop while benefitting from the system). Nothing fundamentally different, in other words, from the issues raised by the cases mentioned above.

I look forward to your comments, which will definitely improve the paper on which I am working. Thanks to all those who attended, whether in person or virtually!

It was inevitable that the Google Shopping judgment would require the General Court to engage with an illustrious principle of the case law: Article 102 TFEU is only concerned with the exclusion of rivals that are as efficient as the dominant firm.

As the Court put it in para 22 of Post Danmark I ‘not every exclusionary effect is necessarily detrimental to competition […]. Competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation‘.

The corollary to this principle is that only anticompetitive effects that are ‘attributable‘ to the dominant firm’s conduct can trigger the application of Article 102 TFEU. Post Danmark II made an explicit reference to attributability (para 47). Crucially, this point is acknowledged in para 441 of Google Shopping (‘in order to find that Google had abused its dominant position, the Commission had to demonstrate the – at least potential – effects attributable to the impugned conduct of restricting or eliminating competition‘).

Showing that the effects are attributable to the dominant firm’s behaviour (that is, establishing a causal link between the conduct and its impact) demands, by definition, identifying a counterfactual. There is no way around it (I have come to understand that this idea is controversial in some quarters; it is a topic for another post, but I will definitely address it).

The Google Shopping judgment reveals that the principle tends to be conflated with related matters. Two conflations deserve to be discussed:

• The principle is sometimes interpreted as meaning that the Commision (or any other authority or claimant) needs to show that specific rivals are as efficient as the dominant firm. I do not believe that interpretation is correct, and I struggle to find support for it in the case law.
• The principle is occasionally used as synonymous with the ‘as efficient competitor’ test. They are different, and the former should not be reduced to the latter.

The principle in practice: what needs to be proved?

In para 514 of the judgment, the General Court explains that one of the interveners argued that the Commission had not established the anticompetitive effects of the practice as it had ‘failed to show that comparison shopping services competing with Google that had experienced difficulties were as efficient as Google or that they had exerted significant competitive pressure on prices or innovation‘.

The General Court rejects the argument as described above. There seems to be no basis for it in the case law. What cases like Post Danmark I and II demand is that a causal link be established between the practice and the effects. If the effects are not attributable to the dominant firm, but to other factors, then there is no abuse (think by analogy of the ‘failing firm defence’ in merger control).

Put differently: the implementation of the principle demands comparing the conditions of competition with and without the practice. It does not demand, however, establishing the relative relative efficiency of rivals in a reality that has already been ‘contaminated’ by the practice. It would not be possible to establish a causal link in such circumstances.

Suppose that a practice denies rivals a minimum efficient scale. It should not be possible for the dominant firm to then claim that rivals are less efficient and therefore that the practice is not abusive. If such an argument were accepted, then effects that are attributable to the dominant firm’s behaviour would fall outside the scope of Article 102 TFEU. The General Court makes a point along similar lines in para 540.

Instead, the question should rather be whether rivals being denied a minimum efficient scale is attributable to the behaviour of the dominant firm or to other factors. Simply put, the appropriate benchmark should be the world in the absence of the practice.

The principle and the ‘as efficient competitor test’

There is a point in the judgment that is arguably more controversial. In paras 538 and 539, the General Court appears to conflate the principle as described above and the ‘as efficient competitor test’ as used in relation to pricing abuses (such as margin squeezes and rebates).

It is sufficient to read the relevant passages in Post Danmark I (then reiterated in Intel) to realise that the Court of Justice lays down a principle that is broader than the ‘as efficient competitor test’. It is emphasising that exclusion that is not attributable to the dominant firm’s behaviour does not amount to an abuse of a dominant position within the meaning of Article 102 TFUE.

This principle can find many incarnations and can be implemented in a number of ways. The ‘as efficient competitor test’ is just one of them, and one that is particularly apt in relation to price abuses: if it turns out that a ‘margin squeeze’ would not require rivals to sell below cost, any exclusion would not be attributable to the dominant firm, but to the fact that the former are less efficient.

The wording of the judgment, which seemingly conflates principle and test, can be interpreted as meaning that only pricing abuses are concerned with as efficient competitors. According to this interpretation, the principle would not apply to practices such as tying or exclusive dealing. Which takes me to the last point.

Is the principle only relevant for pricing abuses? How could it be so?

According to a current of opinion, the principle laid down in Post Danmark I would indeed only be relevant in relation to pricing abuses. I struggle with this interpretation of the case law, but insofar as it has been debated, it is worth discussing.

There are several reasons why the principle laid down in Post Danmark I is applicable across the board. To begin with, the Court (both in Post Danmark I and Intel) did not confine it to pricing abuses. It was a general pronouncement. What is more, it made an explicit reference to other parameters of competition, namely ‘choice, quality or innovation‘.

The most powerful reason, in any event, is that confining the principle to pricing abuses would lead to outcomes that seem difficult to defend from an intellectual standpoint. Taken to its logical consequences, such an interpretation of Article 102 TFEU would mean that it is necessary to establish a causal link between practice and effects in relation to rebates and mixed bundling, but not in relation to exclusive dealing and tying.

If this interpretation of the case law were accepted, the two sets of practices would be subject to different analytical framework for a purely arbitrary reason (the fact that one set of practices relies on pricing mechanisms) even though they are interchangeable (and have the same object and effect).

I really look forward to your comments on this point (or indeed any of the preceding ones).

The General Court’s judgment in Google Shopping (available here) is finally out. There is much to unpack, and much that will be debated in the coming days and weeks. In this regard: the Journal of European Competition Law & Practice is planning a Special Issue devoted to the judgment. More details will follow in due course, but we will be open to proposed submissions, as we want to make sure that the issue is as balanced and diverse as possible.

The above said, it is immediately possible to get a clear idea of the logic underpinning the judgment. It is remarkable in a number of ways, which, if appealed and confirmed by the Court of Justice, may lead to a substantial expansion of the scope of Article 102 TFEU.

The rationale behind the judgment can be summarised as follows:

• The General Court’s develops a principle of equal treatment, which is inferred from the case law applicable to public undertakings (and public bodies) and is now expanded to other dominant firms (para 155).
• There is an element of ‘abnormality’ in the differential treatment of a search engine’s affiliated services, on the one hand, and third party ones, on the other (paras 176, 179 and 616).
• Google’s search engine is a ‘quasi-essential facility’; in any event, it is not necessary to establish that the platform is indispensable within the meaning of the Bronner case law.

Equal treatment, abnormality and competition on the merits

When reading the judgment, one cannot avoid the impression that the General Court viewed the practice at stake in the case as inherently suspicious, that is, as a departure, by its very nature, from competition on the merits. To quote the judgment itself: ‘the promotion on Google’s general results pages of one type of specialised result – its own – over the specialised results of competitors involves a certain form of abnormality‘ (para 176).

The judgment concludes that the behaviour at stake is ‘abnormal’ for two separate reasons.

First, the General Court infers, from the case law, a general principle of ‘equal treatment’, which would demand, also in the context of Article 102 TFEU, that like situations be treated alike unless objectively justified (para 155). This paragraph is remarkable. The Court judgments cited relate to the behaviour of public authorities. The General Court appears to imply that dominant firms are also subject to the same principle (in Deutsche Telekom, the Court of Justice did not go this far, and confined the obligation of equal treatment to instances where the input is indispensable).

It is interesting (in particular for those who study telecommunications regulation) that the General Court refers, in support of its position, to Regulation 2015/2120, which enshrined the principle of network neutrality in the EU legal order. While net neutrality applies to Internet Service Providers, the General Court is of the view that the Regulation ‘cannot be disregarded when analysing the practices of an operator like Google on the downstream market‘ (para 180). Once the principle of neutrality introduced at one level of the value chain, it was bound to be expanded elsewhere (firms that lobbied for net neutrality rules have been reminded in this judgment that we should all be careful what we wish for).

Second, the judgment explains that the conduct is inconsistent with the ‘role and value‘ of a search engine, which, in the words of the General Court ‘lie in its capacity to be open to results from external (third-party) sources and to display these multiple and diverse sources on its general results pages, sources which enrich and enhance the credibility of the search engine as far as the general public is concerned, and enable it to benefit from the network effects and economies of scale that are essential for its development and its subsistence‘ (para 178). In this sense, it is argued, a search engine differs from the infrastructures or input at stake in precedents like Bronner or IMS Health.

Paragraph 178 of the judgment will be discussed at length by commentators. The General Court goes as far as to suggest that favouring the firm’s own services is ‘not necessarily rational‘ for a search engine (or rather, that it is only rational for a dominant firm protected by barriers to entry). Alas, it is sufficient to take a look at the wider world to realise that the conduct at stake in the case is pervasive, even in industries where dominance is rare (such as supermarkets, which, one would assume, are also interested in offering the most attractive products to end-users but have long engaged in similar self-preferencing).

More generally, digital platforms (and search engines are not an exception) are partially open and partially closed. In this sense, the fact that some features in a platform are not open to third parties does not necessarily go against its interests (or is not necessarily irrational). In the same vein, business models evolve, and may become relatively more open (or relatively more closed) over time (think of Apple, which has followed the opposite path).

Indispensability and the Bronner conditions

The General Court also advances two arguments in support of its conclusion that the Bronner conditions (in particular, indispensability) are not applicable in the case.

First, the judgment introduces a doctrine of ‘quasi-essential facilities’. More precisely, the General Court notes that ‘Google’s general results page has characteristics akin to those of an essential facility‘. Even though several judgments are cited (para 224), there are no precedents supporting this position. It is, therefore, an innovation that would need to be confirmed by the Court if the judgment is appealed. It would seem that a facility is ‘quasi-essential’ where it cannot be duplicated (even if not objectively necessary to compete for firms on an adjacent market, which is the crucial consideration).

Second, the General Court engages with the Slovak Telekom judgment, which clarified that indispensability is an element of the legal test where an authority or court would have to ‘force’ a dominant undertaking to deal with third parties with which it has chosen not to deal.

In this regard, the judgment tries to distinguish between a refusal in the traditional sense and the behaviour at stake in the case. However, the General Court seems to concede that formal differences between the two are not decisive. The arguments against requiring indispensability in the case are ultimately drawn from the opinions of the Advocates General in TeliaSonera and Bronner. These opinions are cited (at para 239) in support of the proposition that exclusionary discrimination is a separate form of abuse.

A close look at these opinions shows that only Advocate General Mazak’s analysis in TeliaSonera is capable of substantiating the conclusion drawn from it in the judgment. Advocate General Jacobs’ in Bronner indeed mentions discrimination, but is clearly referring to exploitative conduct and therefore does not answer the question (the same is true, by the way, of the reference to discrimination in Irish Sugar).

In any event, Advocate General Mazak’s Opinion would still fail to address the criterion introduced by the Court in Slovak Telekom: would the key question not be whether intervention forces a firm to deal with rivals? If so, does it matter whether we call it discrimination or otherwise? One should not forget, in this sense, that Slovak Telekom came after the Opinion and that the latter was not followed by the Court in TeliaSonera, which struck a different balance.

The General Court dismisses the idea that a remedy forcing a firm to deal with rivals means that indispensability should be an element of the legal test. It does so in the following terms:

‘244. However, the obligation for an undertaking which is abusively exploiting a dominant position to transfer assets, enter into agreements or give access to its service under non-discriminatory conditions does not necessarily involve the application of the criteria laid down in the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569). There can be no automatic link between the criteria for the legal classification of the abuse and the corrective measures enabling it to be remedied. Thus, if, in a situation such as that at issue in the case giving rise to the judgment of 26 November 1998, Bronner (C‑7/97, EU:C:1998:569), the undertaking that owned the newspaper home-delivery scheme had not only refused to allow access to its infrastructure, but had also implemented active exclusionary practices that hindered the development of a competing home-delivery scheme or prevented the use of alternative methods of distribution, the criteria for identifying the abuse would have been different. In that situation, it would potentially have been possible for the undertaking penalised to end the abuse by allowing access to its own home-delivery scheme on reasonable and non-discriminatory terms. That would not, however, have meant that the abuse identified would have been only a refusal of access to its home-delivery scheme‘.

Your thoughts on the above would be very much welcome. My impression is that the paragraph fails to engage with the question, which remains unanswered. The General Court explains, in essence, that, in a case like Bronner, the dominant firm may have breached Article 102 TFEU in a different way, and that remedying the additional abuse may or may not have required the firm to deal with third parties (think of an exclusivity obligation). That seems correct and unquestionable.

However, the fact remains that indispensability would have been an element of the legal test in relation to the refusal. Whether or not there might have been an additional abuse does not alter this conclusion. And, as the Court explains in Slovak Telekom, the reason why indispensability would have been an element of the legal test in relation to the refusal is because intervention would interfere with the firm’s freedom of contract and would amount to forcing it to deal with rivals.

The General Court’s interpretation of Slovak Telekom will give rise to some controversy and will be widely discussed. This is only normal, as there is much uncertainty around the meaning of the case law. Paragraph 246 shows the extent to which the relationship between remedy and legal test needs to be clarified. As cases like Bronner show, they are two sides of the same coin: it is artificial to distinguish between both. When pondering whether a refusal to deal should be abusive, we are acutely aware that intervention would involve mandating a firm to deal with rivals (and we are cautious about such a remedy). It is difficult to pretend otherwise.

Since this post is already too long, I will be addressing other questions (in particular in relation to effects) in other entries. If there was any doubt: still nothing to disclose.

I very much look forward to seeing many of you on Tuesday of next week (16 November, 7pm) in Brussels. I am proud to have been invited by Denis Waelbroeck and Jean-Francois Bellis to discuss recent developments in relation to the interface between competition law and sports. I will be doing so in the context of the legendary mardis du droit de la concurrence.

Information on how to register for the session can be found here. The information will be delivered in hybrid format. Should you have any questions on the registration process and/or on access to the event, do not hesitate to contact Françoise Vanden Broeck via Francoise.Vanden.Broeck@ulb.be.

The application of competition law provisions to sporting activities could not be more topical, with two pending rulings. One is a preliminary reference concerning the ongoing dispute between the UEFA/FIFA and the Super League (see here). The other one is the ISU case, concerning the lawfulness of some rules laid down by the International Skating Union (see here).

The cases are not only topical but also fascinating from a legal standpoint. Evaluating the compatibility of these rules with Articles 101 and 102 TFEU forces us to engage with traditional doctrines such as ancillary restraints and classics of the case law from Gottrup-Klim to Cartes Bancaires.

I plan on expanding the thoughts on this and this posts in a paper to be published after the presentation. Your insights, in what promises to be a great discussion, will definitely improve it.

A bientôt in Brussels!