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Archive for December 2022

Procedural Fairness and the DMA: Some Comments on the Draft Implementing Regulation

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The European Commission recently released a 10-page, 12 article, draft Implementing Regulation on “detailed arrangements” for the conduct of proceedings under the Digital Markets Act (“DMA”). The Commission is inviting comments until 6 January. Here are some of mine:

1. On the importance of procedural fairness under the DMA. Under the DMA administrative action and discretion will not be as constrained by substantive rules as it is in other settings, including under competition law. In my view, the increased margin for administrative discretion requires the reinforcement of traditional procedural safeguards, not their relaxation. Procedural safeguards are not there to protect gatekeepers (or third parties), but to uphold the rule of law, and to protect the Commission too. Strong procedural safeguards would legitimize the DMA’s enforcement and ensure legally sound outcomes. When it comes to due process requirements, the EU should not be satisfied with minimum standards of protection.

2. The overarching tension between “expediency” and procedural safeguards. The draft reveals a constant tension, visible practically in every provision, between “the possibility for individuals to exercise their rights of defence and the expediency of the proceedings” (Article 10(1)). In my view, however, it is evident that these two interests do not rank at the same level. Rights of defence trump “expediency” considerations. According to the Oxford dictionary, by the way, “expediency” refers to “an action [that] is useful or necessary for a particular purpose, although it may not be fair or right”.

The CJEU has made very clear that:

the aim of promptness – which the Commission, at the stage of the administrative procedure (…) must seek to achieve – must not adversely affect the efforts made by each institution to establish fully the facts at issue, to provide the parties with every opportunity to produce evidence and submit their observations, and to reach a decision only after close consideration of the existence of infringements and of the penalties (see, with respect to the reasonable period referred to in Article 5(3) of the ECHR, Wemhoff, paragraph 17, and, with respect to Article 6(1) of the ECHR, Neumeister, paragraph 21)” (emphasis added).

A strong procedural framework would, moreover, not compromise the DMA’s objectives. Particularly in an ex ante system, one could expect enforcement to be exceptional, and necessarily limited in scope. Would it not make sense to adopt every precaution to ensure the “fairness” of those proceedings?

3. Omissions in the draft. The draft is silent on many respects (including, for example, with respect to the role of third parties, specification decisions under Article 6, certain aspects market investigations, coordination with national competition authorities, etc). I presume that some of that will eventually feature in a DMA ManProc. Some of those omissions may be understandably justified by the fact that Article 46 DMA empowers the Commission to adopt implementing acts covering only certain matters. While it is good to see that the Commission is strict about legal basis (ehem…), some further reflection on how to deal with existing shortcomings in the design and transparency of the DMA’s procedural rules would be most welcome. The Implementing Regulation could provide the Commission with an opportunity to correct or mitigate issues left out, or created, by the legislative procedure.

4. The “succinct” right to be heard. The draft envisages that addressees of preliminary findings should have the right to provide their views “succinctly”, “in writing” and “within a time-limit that should be set by the Commission with a view to reconciling the efficiency and effectiveness of the procedure, on the one hand, and the possibility to exercise the right to be heard, on the other” (recital 3).  But parties do not have a right to defend themselves “succinctly”; parties accused of an infringement have the right to defend themselves, whether succinctly or not.

5. Oral Hearings. In antitrust proceedings undertakings have a “right to an oral hearing” (Article 12 of Regulation 773/2003). This is not capricious; it is an essential procedural safeguard. The draft Implementing Regulation, however, does not envisage oral hearings, and it is not clear why (the answer, I suppose, is that adhering to procedural safeguards takes time). In my view, this is problematic. To be sure, there is established case law making clear that the right to a fair hearing does not necessarily imply a right to be heard orally, but it may in some settings. In CONSOB, for example, the ECtHR found that an administrative enforcement system (on securities regulation) not allowing for the holding of an oral hearing (even when the facts were contested and companies faced a risk of severe penalties) did not fully satisfy the minimum requirements of fairness and objective impartiality deriving from Article 6 ECHR.

In the recent Android judgment (admittedly, not my favorite ruling), the GC also held that “[h]aving regard to the importance, in the context of a punitive procedure in which an abuse of a dominant position is to be penalised, of holding an oral hearing, that procedure is necessarily vitiated by the failure to hold such a hearing, irrespective of whether (…) that that failure might have influenced the course of the proceedings and the content of the contested decision (…)”.

6. Access to the file. According to the draft Implementing Regulation, while addressees of preliminary findings “should always obtain from the Commission the non-confidential versions of all documents mentioned in the preliminary findings, the Commission should be able to decide on a case-by-case basis on the appropriate procedure for access to further documents in the file” (recital 3). This idea is developed in Article 8 of the draft Implementing Regulation. A few comments:

— Like in competition proceedings, undertakings would only have access to the file following the notification of preliminary findings. I suppose this means that designation decisions (which would not be preceded by preliminary findings) will only rely on the evidence transmitted by the would-be-gatekeeper. This is because designation decisions could arguably not be based on evidence previously unknown to the undertaking (e.g. information submitted by third parties) without breaching Articles 6 ECHR/ 41CFR.

— Pursuant to Article 8 (2) and (3) of the draft, access to documents is not automatic, and is in principle limited to “the documents mentioned in the preliminary findings as well as a list of all documents in the Commission’s file”; it would then be for the undertaking to duly substantiate why it would need access to specific documents in that list. The problem here is that this system might not enable undertakings to identify potentially exculpatory or otherwise helpful documents. Access to a document cannot, in my view, be dependent on whether the Commission chooses to refer to it in its preliminary findings or not, nor on the title that the Commission may choose for it. Established case law makes clear that ““it cannot be for the Commission alone to decide which documents are of use for the defence” (e.g. Solvay, para. 81; see also Qualcomm, paras. 199, 202-216).

7. Deadlines and extensions. Pursuant to Article 10(1), the Commission will set time limits having due regard to all relevant elements of fact and law and interests concerned, “in particular the possibility for individuals to exercise their rights of defence and the expediency of the proceedings”. Article 10(2), in turn, provides that, faced with extension requests, the Commission (who within the Commission if not a Hearing Officer?) shall assess “whether the requested extension is liable to endanger compliance with the applicable procedural time limits laid down in [the DMA]”. My comment 2, above, is transposable here.

8. Confidentiality. Article 7, on the identification and protection of confidential information, and Article 8, on access to the file, mainly codify current practice under competition law, including on how to resolve disputes as to confidentiality. It all looks good to me, except for the absence of any role for Hearing Officers (see below). Importantly, under Article 7(5), any comments on consultations by third parties (e.g. on remedies, non-compliance or systematic non-compliance decisions) will not be considered confidential. This might arguably save more time and administrative resources than many other of the proposals featured in the draft.

9. Hearing Officer. According to the Commission, the post of the Hearing Officer was introduced to “enhance impartiality and objectivity in competition proceedings before the Commission”. By the same token, the fact that the draft Implementing Regulation envisages no role for Hearing Officers implies that DMA proceedings would be less impartial and less objective than competition ones.

The argument that granting Hearing Officers a role would compromise speed is, in my view, spurious. First, the Commission recognizes that Hearing Officers are there “to contribute to the objectivity, transparency and efficiency” of proceedings”. Second, Hearing Officers’ role in merger proceedings does not appear to have been an obstacle to comply with tight deadlines. Third, their role under the DMA is particularly necessary precisely because time pressures may create the temptation for enforcers to be more “efficient” when it comes to respecting procedural safeguards.

10. Format and length of documents:

–Article 3(4) provides that the information submitted to the Commission “shall be presented in a clear, well-structured and intelligible manner”. Amen! This requirement should arguably feature in the Treaties and be tattooed in the forearms of every lawyer (and maybe, perhaps one day, extended to public documents too…).

–Annex II of the draft sets format and page limits (essentially 50 pages to discuss each core platform service “according to any plausible alternative delineation” in notifications, 25 pages for rebuttals, 30 pages for reasoned requests for suspensions and exemptions, and 50 pages for replies to preliminary findings. Not that I particularly care about page limits (shorter is often better and more effective), but will preliminary findings, for example, be subject to similar page limits? If not, would this create equality of arms issues?

–Also, since these limitations would appear to be inspired by the page limits applied by the EU Courts: do you know of any application or appeal that has ever been declared inadmissible by the EU Courts due to lack of compliance with page limitations? Well, there is a reason why you don’t, and it also has to do with fundamental rights.

–Article 4 of the draft Implementing Regulation states that the Commission will only allow derogations to page limits upon reasoned request and to the extent that the undertaking “substantiates that it is objectively impossible to deal with particularly complex legal or factual issues within the relevant page limits”. Read again: “objectively impossible”. To be granted an extension, one would need to prove a negative. “Objective impossibility” may appear to be somewhat of a high bar in this context; in fact, it is arguably objectively impossible for undertakings to meet.

11. Rebutting the gatekeeper presumption (a welcome backtracking?).  Pursuant to the DMA, undertakings who meet the quantitative thresholds in Article 3(2) will be presumed to meet the qualitative thresholds warranting a gatekeeper designation that are set out in Article 3(1). Oddly, the DMA provides that a gatekeeper presumption can only be rebutted by reference to the quantitative thresholds (DMA recital 23 and Article 3(5)). In my previous post on DMA procedure, I already expressed doubts about the legality of that limitation. The draft Implementing Regulation appears to be mindful of this problem:

Article 3(3) of the draft provides that the notifying parties wishing to rebut the gatekeeper presumption “shall (…) clearly identify to which of the three cumulative requirements set out in Article 3(1) its arguments relate (…)”. (?!) It would appear that, unlike the DMA itself, the Implementing Regulation would enable parties to develop their arguments by reference to the qualitative requirements ultimately justifying designations, instead of on the quantitative proxies. This is logical and welcome, and seemingly the opposite of what the DMA provided.

12. The “yes, but the DMA is not competition law” argument. You may perhaps be inclined to dismiss some of the comments above on the grounds that I’m looking at all this through a competition lawyer’s lenses when, in reality, the DMA is a different animal. But the very same reasons that justify the existence of certain procedural safeguards in competition law proceedings are equally, if not more, relevant under the DMA. Procedural guarantees and rights of defence do not depend on whether a given legal regime constitutes competition law or not; they depend on other factors, including the severity of the sanctions at stake, the institutional set-up and the jurisdiction’s commitment to the rule of law.

This is all for now. I hope these are constructive, as I acknowledge that it is a challenge for the Commission to set up a completely new procedural framework from scratch, in a rush, and based on the DMA’s text. Other comments may follow if time allows (but, to be honest, I hope to be doing other things during the Christmas period).

Happy holidays to all!

[P.S. I work for companies likely to be designated as gatekeepers, including for some directly targeted by the DMA. The views expressed in this post are strictly my own and have not been requested, nor paid for, by any client. At the time of publication, I have not discussed this post with any of my clients].

Written by Alfonso Lamadrid

22 December 2022 at 9:46 am

Posted in Uncategorized

LSE Short Courses 2023: Advanced EU Competition Law (April-May) | State Aid and Subsidies Regulation (May-June)

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The third edition (!) of the two Short Courses I organise at LSE Law School, one on Advanced EU Competition Law (April-May) and one on State Aid and Subsidies Regulation (May-June), will run again in 2023. These courses are part of the activities around the Jean Monnet Chair that I proudly hold.

The first two editions were a great experience. It was wonderful to discuss recent developments in law and policy with engaged professionals (civil servants, private practitioners, advanced students and even some academics) from around the world.

The two courses (16 hours each) run online and take place on Friday afternoon over four weeks (4 hours every Friday). They are also limited to around 25 participants to maximise interaction (and with a full house last year, interaction was definitely maximised).

With the two fields in a state of flux, this third edition could not be more timely. EU competition law is undergoing fundamental transformations (EU merger control, vertical agreements, abuse of dominance). State aid and of subsidies regulation will see the first steps of two major pieces of legislation (the EU Regulation applying to foreign measures and the brand new UK regime) in 2023.

The idea is to give you an updated account of the most recent developments and help you navigate them by putting them in the broader context and providing an analytical framework.

For detailed information on each of the two courses (including on the schedule of the sessions and on how to register), please click on the relevant webpage below:

Advanced EU Competition Law (Friday 21st April 2023, 28th April 2023, 5th May 2023 and 12th May 2023).

This course is designed with experienced competition lawyers and economists in mind (both working as officials and in private practice). It goes beyond the basics and provides the tools to think about the most recent case law and administrative practice. We will do so by reference to the fundamentals of the field. The short course is structured around four sessions on agreementsabusive practicesmergers and digital markets.

State Aid and Subsidies Regulation (Friday 19th May 2023, 26th May 2023, 2nd June 2023 and 9th June 2023).

Very few European institutions offer a dedicated module on State aid (let alone subsidies regulation). This short course is designed to fill this gap by providing a coherent and comprehensive framework. It welcomes participants who wish to expand the range of their expertise as well as postgraduate students who want to develop an understanding of the field. This short course covers the EU and UK regimes.

Both Short Courses will be delivered online again this year. The times remain unchanged: sessions will take place on Friday afternoon (2pm-6pm London time).

An LSE Certificate will be available upon completion, along with CPD points for practitioners.

If you have any questions about the organisational aspects of the two courses, do not hesitate to contact my colleague Amanda TinnamsA.Tinnams@lse.ac.uk.

Written by Pablo Ibanez Colomo

20 December 2022 at 1:29 pm

Posted in Uncategorized

AG Rantos in Super League and ISU: towards continuity and consistency in the case law

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Advocate General Rantos’ much awaited Opinions in ISU and Superleague were released earlier today (see here for the first and here for the second).

For experienced competition lawyers, the legal interpretation suggested in both Opinions does not come as a surprise. Advocate General Rantos proposes, in essence, to follow the case law. Accordingly, he invites the Court to set aside the General Court’s judgment in ISU, which, as explained here, departed from the said case law in some important respects.

Advocate General Rantos is also explicit about the rules laid down by the UEFA and the FIFA. He strongly implies that they are not in breach of Articles 101 and 102 TFEU insofar as they appear to be ancillary to a legitimate aim. This is true, in particular, of both of the pre-authorisation requirement to set up a rival tournament (such as the Superleague) and of the sanctions (or the threat thereof) that may come with the breach of this requirement.

The two Opinions taken together make three fundamental points about the relationship between competition law and sports governance:

  • First, the so-called conflicts of interest (that is, a governing body that has the power to authorise or prohibit competing ventures) are not, in and of themselves, problematic under competition law.
  • Second, the ancillarity of a restraint and the object of the said restraint are two separate stages of analysis that must not be conflated.
  • Third, the protection by a sports association of its economic interests is not anticompetitive in and of itself.

In any event, the two Opinions are a tour de force that provide a comprehensive analysis of the case law on object restrictions and on ancillarity: from vertical agreements (such as Maxima Latvija) to horizontal co-operation agreements (such as GøttrupKlim).

This overview shows that the issues underlying ISU and Superleague are relevant well beyond sports. Because the Opinions effectively address some common misunderstandings and remind us of the logic underpinning the relevant case law, they will provide helpful guidance in future non-sports cases.

International Skating Union: back to orthodoxy

The General Court’s judgment had given rise to some controversy insofar as it appeared to deviate from the relevant case law. Advocate General Rantos proposes to follow the orthodoxy. Doing so, in the specific circumstances of the case, means concluding that the rules at stake are not restrictive by object (and setting aside the first instance judgment).

Most readers will remember that the ISU case is, in essence, about a set of eligibility rules applicable to athletes taking part in competitions organised by the skating federation. These rules (of which there were variations over the years) amounted in practice to a non-compete obligation: taking part in unauthorised competitions came with sanctions for these athletes.

Advocate General Rantos rectifies the General Court’s analysis in a number of important ways. He points out, first, that the discretionary nature of the rules cannot lead to the conclusion that the object is anticompetitive. If anything, discretion might say something about the effects of the federation’s rulebook. The same is true of the severity of the penalties.

Second, Advocate General Rantos notes that the cases that were at the heart of the General Court’s analysis (OTOC and MOTOE) are not capable of substantiating the conclusions drawn from them at first instance.

In the first of these rulings (OTOC), the Court expressly held that the contentious rules were not restrictive by object; the second (MOTOE) was about State regulation, rather than a decision by an association of undertakings.

Third, and perhaps more importantly, the Opinion addresses the conflation, by the General Court, of two separate stages of analysis: objective necessity, on the one hand; and restrictive object, on the other. As explained by Advocate General Rantos, Meca Medina dealt with the ancillarity of sporting rules, and at no point did the Court hold that disproportionate rules are necessarily restrictive of competition.

Rules that do not satisfy the objective necessity test may or may not restrict competition. A conclusion in this sense requires, however, a case-by-case evaluation of their anticompetitive effects.

Superleague: the orthodoxy confirmed

The Superleague case concerns different angles of the same set of regulations laid down by FIFA and UEFA. The most relevant ones, in theory and practice, are those that have to do with the need to gather prior approval to organise a competition and the (threat of) sanctions for setting up a breakaway tournament.

In relation to these rules, Advocate General Rantos clearly suggests that they do not have a restrictive object. They appear to relate to legitimate sports-related objectives and therefore their adoption can be rationalised on pro-competitive grounds. As in ISU, the fact that the application of the criteria allow for some discretion or are not transparent and reviewable does not mean that their object is anticompetitive.

In addition, the Opinion lays down a comprehensive framework to evaluate whether or not the rules fall outside the scope of Article 101(1) in light of the ancillary restraints doctrine. Advocate General Rantos identifies four stages of analysis in this regard.

First, the objectives to which the rules relate must be legitimate. In the specific circumstances of the case, Advocate General Rantos has few doubts about the fact that the underlying objectives are not only legitimate, but relate directly to the so-called European model of sport.

Second, the rules must be inherent to the objectives pursued by the agreement (or decision by an association of undertakings). In this regard, Advocate General Rantos is explicit about the fact that both a pre-authorisation system and sanctions scheme appear to be objectively necessary to attain the objectives sought by FIFA and UEFA.

Third, the practical opeation of the rules. Advocate General Rantos engages with the closed nature of the Superleague and explains that, to the extent that it could undermine the legitimate sporting objectives sought, the non-recognition of the breakaway tournament seems inherent to the operation of the structure created by FIFA and UEFA.

Finally, proportionality. Even if it is ultimately for the referring court to deal with the matter, Advocate General Rantos signals strongly that sanctions against football clubs taking part in the Superleague (as opposed to the players themselves) would be proportionate. Crucially, he notes, again, that MOTOE is not the benchmark against which this criterion is to be assessed.

The analysis under Article 102 TFEU is not fundamentally different. It may be worth mentioning that, in the Advocate General’s view, the infrastructure around FIFA and UEFA would not quality as an ‘essential facility’ and that, even if it were qualified as such, a refusal to share it with breakaway teams could be objectively justified.

Written by Pablo Ibanez Colomo

15 December 2022 at 8:36 pm

Posted in Uncategorized

Structured Legal Tests, Effective Judicial Review and Missing the Trees for the Forest

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Issue 7 of this year’s volume of the Journal of European Competition Law & Practice was published a few days ago. It comes with several exciting pieces, including a fascinating one on cartels (see here) by Carolina Abate (OECD) and Alexis Brunelle (Autorité de la concurrence). Carolina and Alexis take an interdisciplinary perspective on cartel formation and suggest that male dominated informal networks (the proverbial ‘boys’ clubs’) could explain cartel conduct.

This time around, I contributed an editorial to the issue (the editorial is available for free here). It addresses a question that has kept me busy in the past few months, namely judicial review in EU competition law and how it relates to substantive law.

We all agree that effective judicial review is an imperative in competition law regimes. What is less appreciated is that effective judicial review does not necessarily emerge in every system. It is the consequence of conscious choices made by courts, which allow for the meaningful scrutiny of administrative action.

In particular, whether or not judicial review is effective depends on how substantive law is interpreted. The EU courts have consistently expressed a preference for structured legal tests, which define a fixed set of conditions against which the lawfulness of Commission decisions can be assessed.

From the early days to the most recent developments, examples abound in the case law. The tests laid down in AKZO and Airtours are examples that come to mind immediately. The trend has continued to this day. It is sufficient to think of the five factors identified by the Court of Justice in Intel to realise the extent to which EU judges are attached to legal tests with definite boundaries.

This preference is easy to rationalise. Effective judicial review is difficult when tests are ‘liquid’ and/or unstructured (that is, when the applicable conditions are allowed to vary from one case to the next). In such instances, the control of administrative action would inevitably be confined to manifest errors. The law, in effect, would be delegated to the authority.

The above said, I can see the appeal of ‘liquid’ or unstructured legal test. They allow for greater flexibility and sometimes might be more accurate. If a practice is very obviously unlawful, is it really necessary to show that every single one of the conditions is met?

This position, the point of which I see, risks missing the trees for the forest. The conditions set out in legal tests are typically the crystallisation of decades of experience, not capricious hurdles.

For instance, we have long understood (and the Court has emphasised the point since Delimitis) that a practice is incapable of having actual or potential anticompetitive effects if the coverage is insignificant. Therefore, it would make little sense to ignore this factor (or pretend it is not relevant) in a particular case.

I see the value of flexibility and accuracy. This said, competition law is so exciting precisely because it requires authorities and courts to balance these aspirations with the need to ensure that the system is administrable and predictable. We should therefore aspire to minimise enforcement errors, but we will never be able to avoid them altogether (and that, if there was any doubt, is fine).

I would very much welcome your comments.

Written by Pablo Ibanez Colomo

9 December 2022 at 12:49 pm

Posted in Uncategorized

Solid vs liquid legal tests in EU merger control: my thoughts at the Fiscalía Nacional Económica’s Competition Day

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Chile’s Fiscalía Nacional Económica needs no introduction. It is an inescapable reference in the competition law landscape. It was a real pleasure to take part in their Annual Competition Day, in an event that symbolically marked the end of Ricardo Riesco‘s successful tenure as Fiscal.

Francisca Levin, head of the merger division at the Fiscalía, run a panel on recent developments in the field, in which Ryan Danks (US Department of Justice) and myself shared our thoughts on a number of merger-related issues.

You can find a transcript of the whole exchange (in Spanish) here. You will see that we covered a great deal of ground, from the jurisdictional to the substantive (these are particularly interesting times for EU merger control).

The question that piqued Francisca’s and Ryan’s interest was the debate about the nature and scope of the SIEC test (this, in fact, is something that has recently been front and centre of discussions in Chilean competition law).

I tried to frame the legal issue as involving a choice between solid and liquid legal tests.

I explained that there are essentially two schools of thought regarding the scope of the SIEC test in EU merger control. Beneath the technicalities, this is the existential issue at stake in CK Telecoms.

One school of thought prefers what I term ‘liquid’ legal tests, that is, legal tests that lack definite boundaries and that do not prescribe a set number of conditions to consider in a given case. There are, instead, a number of factors that may or may not be relevant in a particular context.

The other school of thought prefers ‘solid’ legal tests, which define a fixed number of criteria against which the legality of administrative action is assessed, and which do not vary. As a result, agency leeway is more constrained.

The former approach favours accuracy and flexibility; the latter, predictability and administrability.

Which of the two will ultimately be embraced is, I told Francisca and Ryan, one of the most exciting pending issues before the Court of Justice.

Written by Pablo Ibanez Colomo

2 December 2022 at 12:47 pm

Posted in Uncategorized