Chillin'Competition

This is yet another post (like Wednesday’s) on the judicial review on administrative action. This time around, I write to celebrate the publication of Despoina (Deni) Mantzari‘s wonderful monograph on the topic and to invite you to come along to the book launch next week (2nd November, 6pm) at UCL Laws.

Information on the book launch, and on how to register, can be found here. We will be discussing Deni’s amazing achievement alongside the following confirmed speakers:

Peter Freeman, CBE, QC (Hon), (former Chairman of the UK Competition Appeal Tribunal)

Dr Andriani Kalintiri, (Senior Lecturer in Competition Law, King’s College London)

Joe Perkins, (Compass Lexecon, former Chief Economist at Ofgem)

Dr Christel Koop, (Reader in Political Economy, King’s College London)

Prof. Ioannis Lianos, (President of the Hellenic Competition Commission, UCL, Chair)

Advocate General Kokott’s Opinion in CK Telecoms came out last week. Her analysis departs markedly from the first instance judgment, which she proposes to set aside.

The various dimensions of the Advocate General’s analysis, taken together, would have a transformative impact on the judicial review of EU merger decisions.

The Opinion takes issue with the substantive and evidential aspects of the General Court’s scrutiny of the original decision. In fact, it refers to both across all grounds of appeal, as if they were two sides of the same coin and as if a substantive matter was an evidential one, and vice versa.

In paras 111 and 124, for instance, Advocate General Kokott argues that the General Court’s substantive analysis is erroneous, and claims that this incorrect analysis ultimately flows from the excessively demanding standard of proof imposed upon the Commission.

A close reading of the Opinion, however, suggests that, in reality, it is all about substantive law, not evidence. References to the applicable standard of proof (as in paras 111 and 124, both mentioned above) are little more than a digression.

The analysis that follows focuses on the core question, which is the legal assessment of mergers under the SIEC test.

The above said, I will also address other controversial, or heterodox, points of the Opinion. Seasoned competition lawyers know that Advocate General Kokott does not hesitate to depart from the case law and from conventional wisdom (i.e. the proverbial zeitgeist), occasionally quite markedly.

This Opinion is not an exception. So much so, in fact that, if the Court were to follow it, these aspects would take EU merger control to a new era.

Legal tests and effective judicial review under the SIEC standard: the question that remained unanswered

When is an impediment to effective competition ‘significant’?

CK Telecoms raised an unprecedented question: in the absence of dominance, when is an impediment to effective competition significant within the meaning of Regulation 139/2004?

The issue is particularly important in the context of horizontal mergers. These transactions entail, by definition, an impediment to effective competition (a source of competitive pressure disappears). As a result, their compatibility hinges exclusively on whether the impediment is significant.

Above all, CK Telecoms exposed the need for the Court of Justice to lay down a legal test to evaluate, case-by-case, this fundamental matter.

The need for an administrable (and reviewable) legal test

Effective judicial review of merger control decisions necessitates an administrable legal test with definite boundaries (that is, one that revolves around a set of clear and well-defined criteria that can be anticipated).

A ‘liquid’ test that lacks definite boundaries (in the sense that the boundaries vary from one case to another) cannot be subject to meaningful judicial review. Such a test would give the competition authority, in effect, the discretion to decide which mergers are compatible with the internal market. And (at least in the EU legal order) administrative authorities do not have any leeway on issues of law.

In its first instance judgment, the General Court addressed the above question directly, both by noting that the Commission’s (liquid) interpretation of the SIEC standard gives it de facto discretion over horizontal mergers and by proposing a legal framework revolving around two cumulative conditions to be satisfied in every instance.

Advocate General Kokott’s analysis

Advocate General Kokott rejects the General Court’s approach, and does so comprehensively. Little in fact, remains of the first instance judgment.

She argues, first, that an impediment to effective competition can be significant in circumstances other than those identified by the General Court (and thus that the legal test laid down at first instance would be overly reductionist and insufficiently accurate; see paras 72-80).

In addition (and this is one of the most interesting points raised in the Opinion, which would alone justify setting aside the first instance ruling), she takes the view that the General Court distorted the original meaning of the decision.

Third, the Opinion dismisses the idea that the Commission’s interpretation of the SIEC standard would give it de facto discretion in relation to horizontal mergers. It claims, in this regard (paras 63 and 111), that it has not been established that the Commission would systematically prohibit all horizontal mergers if its approach were endorsed.

The key legal issue (how is a significant impediment to effective competition evaluated in non-dominance cases) remains unanswered in the Opinion. Advocate General Kokott does not lay down an alternative framework.

The alternative test will have to await the Court of Justice’s judgment and/or the General Court’s ruling following a renvoi.

Heterodox aspects of the Opinion: a break from Tetra Laval

From full to limited review: importing common law standards?

Since the days of Tetra Laval, the standard of judicial review has been clear. Legal and factual issues are subject to full review, with the exception of ‘complex economic assessments’.

Advocate General Kokott proposes to move away from this standard and make limited review the default in merger control. In para 51 of the Opinion, she suggests that the judicial scrutiny of Commission decisions in the area of merger control is confined to manifest errors of assessment.

In Advocate General Kokott’s words: (‘[i]t follows that the review by the EU Courts of a Commission decision relating to concentrations is confined to ascertaining that the facts have been accurately stated and that there has been no manifest error of assessment‘).

This position is not only difficult to square with the relevant EU case law, but also with continental legal traditions. The Opinion is more aligned with the ‘judicial review standard’, which gives greater deference to administrative authorities and which is the norm in jurisdictions like the UK.

Standard of proof: is plausibility enough?

There is another aspect that is foreign to continental traditions but that is prominent in the Opinion, which is the discussion of the applicable standard of proof in merger control cases.

As noted, among others, by Eric Gippini Fournier, this question fascinates common law commentators, but is far less important (and relevant) in EU law.

Advocate General Kokott’s Opinion is remarkable not only because of the extensive discussion of the issue, but because of the meaning attached to the concepts. In particular, her analysis appears to equate ‘plausibility’ and ‘balance of probabilities’ (para 56).

This interpretation will not have been anticipated by many. It is perhaps the first time that the ‘balance of probabilities’ standard (which by definition implies a probability of >50%) is deemed satisfied when the plausibility threshold (which implies a considerably lower probability) is met.

Implications of the Opinion: a new relationship between authority and judge

Some of the aspects of the Opinion, when examined in isolation, may come across as somewhat puzzling. This is true, for instance, of the idea that a legal error is in reality a consequence of the standard of proof administered; or of the idea that the ‘balance of probabilities’ can be equated with ‘plausibility’.

When considered together, however, they make more sense. Whether it is about the legal characterisation of facts, evidence or the standard of review, judicial deference is the overarching theme. An authority-court relationship, in other words, that is more similar to that prevailing in common law systems.

The Mannheim Centre for Competition and Innovation has long had a most deserved reputation as one of the premier groups carrying out truly interdisciplinary research on issues at the interface of intellectual property, regulation and competition policy.

The Centre’s conferences have become a classic in our circles. This year’s event (10th and 11th November) promises to be even more special than the preceding ones. As you will see in the programme, it is devoted to Regulation 1/2003, both from a retrospective and a prospective standpoint.

I am honoured to have been invited to deliver one of the keynote speeches, which will revolve around remedies. The centre of gravity of competition policy is clearly shifting towards remedies, and there are reasons to discuss the extent to which we may need to adjust our legal framework to acknowledge this emerging reality.

Other keynote speakers are Mike Walker (CMA), Wouter Wils (European Commission) and Johannes Laitenberger (General Court). Alongside them, four amazing panels featuring leading civil servants, academics and practitioners.

If you would like to register, please do so here. It would be lovely to see some of you in Germany!

Issue 6 of this year’s volume of the Journal of European Competition Law & Practice came out a few days ago. Among others, it features an editorial of mine (available for free here), where I discuss one of the most interesting and potentially consequential trends of the past few years in the case law of the General Court.

In some recent judgments, Article 106 TFEU case law has occasionally found its way into some competition law rulings. Even though this trend has not caught the attention of many commentators, it has the potential to transform EU competition law in fundamental ways.

It cannot be emphasised enough that Article 106 TFEU does not apply to undertakings, but to Member States. One consequence that follows from this fact is that this case law cannot be transposed, as such, to cases dealing with the application of Articles 101 and 102 TFEU.

A second consequence is that Article 106 TFEU case law is by necessity stricter than its Article 101 and 102 TFEU counterpart. In particular, it makes sense to impose non-discrimination obligations, applicable across the board, on Member States, but not on private undertakings.

When the conduct of the latter is at stake, such non-discrimination obligations are only relevant, if at all, under very narrow circumstances. From selective distribution to exclusive dealing and refusal to deal, discriminatory conduct by private firms is pervasive and, most of the time, wholly unproblematic.

Cases like International Skating Union and Google Shopping are interesting in that they challenge this received wisdom (and well-established case law).

International Skating Union, for instance, relies primarily on MOTOE, even though the latter was never about the behaviour of private undertakings, but about legislation conferring an advantage to one firm over its rivals (and thus at odds with the principle of equality of opportunity).

In Google Shopping, the General Court draws from cases dealing with the principle of equal treatment as it applies to the EU legislature, and refers to it as if it could be directly transposed to the behaviour of dominant firms, which, as the law stands, are only subject to the principle under the very qualified scenarios identified by the Court of Justice in Deutsche Telekom.

It remains to be seen whether these ideas will be embraced by the Court of Justice. What matters is that, if the legal revolution ever comes to be, the transformation and its implications are openly acknowledged and discussed.

I have uploaded on ssrn a new paper (available here). It is forthcoming in the Oxford Journal of Legal Studies.

If you take a look at it, you will see that it is different from the sort of stuff I have generally written (it was probably about time to do something else). It is a tad more academic, and it is not on competition law, but on economic regulation (more precisely, on the EU telecommunications regime). Here is hoping that, in spite of all that, some of you will find it interesting.

I had two objectives in mind when writing the paper. First, present to a generalist audience the EU Regulatory framework for electronic communications. This regime is, in my view, one of the most impressive accomplishments of the Union.

The Framework is impressive not only because of what it achieved (it accompanied the liberalisation of telecoms activities) but because of the legal techniques on which it relies. It is a hybrid between competition law and regulation (just like the DMA) that was designed to adapt seamlessly to economic and technological change. Not enough people know how clever and carefully calibrated it is.

My second objective was to reflect on future-proof regulation more generally. Dealing with fast-moving industries (including telecoms and digital markets) is always a challenge for legislatures and agencies. Which is why regulation is designed to be future-proof.

Against the background of the European experience with the regulation of telecommunications activities, the main point my paper makes is that ensuring that regulation is future-proof is a challenge, but not for the reasons one may think.

The main challenge does not come from the design of the regime (in that respect, the EU Framework was most impressive), but from the fact that legislatures may not commit to future-proof intervention. The European experience shows that the temptation to avoid future-proof techniques and revert back to the old ways of regulating is always very strong.

Thus, with every new amendment of the EU Framework, the regime became a little less future-proof. Roaming charges is the perfect example. The EU legislature could not resist the temptation of dealing with the issue a l’ancienne, that is, by directly setting roaming charges (instead of following the cautious approach enshrined in the Framework Directive). Same with net neutrality, or with interconnection.

I end the paper asking whether future-proof regulation is an illusion, at least insofar as legislatures’ and agencies’ priorities change over time: in a way, it is an aspiration that hopes or assumes that everything around the regime might change, but that the principles underpinning it will not.

It would be wonderful to get your comments on this paper. And I take the opportunity to thank my colleagues at LSE Law School for their comments during a staff seminar and the competition law scholars who attended a Jean Monnet Workshop.

The 26th (!) edition of the EU and Spanish competition law course that I co-direct at the IEB in Madrid will run from January to March 2023. We are now accepting applications.

Like last year, the course will adopt a hybrid format (attendees can participate either in person or online). The course is taught partly in English and partly in Spanish. Lectures take place in the afternoon (16h to 20h CET) to facilitate the attendance of students joining from Latin America and the US.

As always, the course will feature an exceptonal line-up of international lecturers (83 in the past edition), including Judges from EU and national courts, officials from the European Commission, the Spanish CNMC and other national competition authorities, as well as top-notch academics, in-house lawyers and practitioners.

Students are typically officials from competition authorities, in-house lawyers as well as lawyers/economists in private practice. The course is designed to cater to all levels.

All relevant information (program, costs, sponsors, and list of lecturers in the past edition of the course) is available here:

IEB COMPETITION LAW COURSE 2023

In addition to the possibility of registering for the full course, it is also possible to register for individual modules or seminars. The modules and seminars in this 26th edition will be the following:

Introductory session (13 January- afternoon).

Module I – Cartels and procedure (16-18 January-afternoon). Coordinator: Isabel López Gálvez (CNMC)

Module II – Other agreements and restrictive practices: vertical and horizontal agreements (23-25 January- afternoon). Coordinator: Carmen Cerdá Martínez-Pujalte (CNMC)

Seminar 1- Recent Developments in EU Competition Law (3 February- afternoon). Coordinators: Fernando Castillo de la Torre (Legal Service, European Commission) and Eric Gippini-Fournier (Hearing Officer, European Commission)

Module III- Abuse of dominant positions (6-8 February- afternoon). Coordinator: Konstantin Jörgens (Garrigues)

Module IV – Merger Control (13-15 February- afternoon). Coordinator: Jerónimo Maillo (USP-CEU)

Seminar 2 – Judges and Competition Law (24 February- afternoon). Coordinator: Mercedes Pedraz (Magistrada, Audiencia Nacional)

Module V- Sector Regulation and Competition (27 February-1 March-afternoon). Coordinator: Pablo Ibáñez Colomo (LSE, College of Europe)

Module VI – Public competition law: State aid and Public undertakings (6-8 March- afternoon). Coordinators: José Luis Buendía (Legal Service, European Commission) and Jorge Piernas (Jean Monnet Chair, University of Murcia)

Seminar 3 – Competition Law in Hi-Tech Markets (24 March 2023- afternoon). Coordinators: Alfonso Lamadrid (Garrigues, College of Europe) and Nicholas Banasevic (Gibson Dunn).

We will also be holding three practical workshops dealing with inspections, distribution agreements and mergers.

For additional information please contact competencia@ieb.es