Chillin'Competition

Remedies are now at the forefront of legal and policy discussions. As discussed here, this reality reflects a shift in the centre of gravity of enforcement (in the EU and beyond). The administrative priorities of authorities and the economic features of digital markets demand the administration of obligations that are regulatory in nature (such as the functional or structural unbundling of activities, access obligations and the determination of wholesale and retail prices).

A bare bones cease-and-desist order does the job in oligopolistic markets, but is often unable to deliver in industries (such as digital) that feature monopolies or quasi-monopolies across one or several levels of the value chain.

Authorities and commentators are catching up with this emerging landscape. For a long time, remedies were, at best, an afterthought (and not just in the literature). There is therefore every reason to welcome the structured conversation on the topic that is organically taking place.

The recent Report on the ex post evaluation of EU antitrust remedies, produced for the Commission, exemplifies the new trend. In addition, scholarship addressing remedy design and implementation is growing and taking fascinating new directions every time.

Is there room for restorative remedies in EU antitrust law?

Interestingly, the rise of remedies as a central theme in the EU antitrust arena has revealed that some basic issues are yet to be addressed systematically. Surprising as it may sound, something as fundamental as the very purpose of enforcement is not fully clear. For instance, many of the most recent contributions to the literature assume as self-evident that the point of remedies is (or can be) restorative in nature.

What authors mean by restorative is not always clear (there is a ‘thick’ and a ‘thin’ version of the concept, as I explain in the article cited above). The above said, the concept means, at a minimum, that remedial action should recreate the conditions of competition that existed prior to the infringement. Even in its more modest incarnation, therefore, restorative intervention would go beyond merely bringing the infringement to an end. It would require turning back the clock to where things were in terms of structure and competition dynamics.

If one reads carefully the EU case law, however, there is precious little support for the idea that restorative remedies can be imposed in EU antitrust law. One could take the argument further: the judgments that are typically relied upon to substantiate the claim suggest, if anything, that restorative intervention is, as the law stands, outside the reach of courts and authorities (at least so when they enforce Articles 101 and 102 TFEU).

This conclusion is particularly apparent from AKZO, which, paradoxically, is frequently mentioned in support of the proposition that remedial action can be restorative. As part of the remedy package in the case, the dominant firm was required to refrain from engaging in selective price-cutting.

The purpose of this measure was not to restore the conditions of competition that existed prior to the abuse. The Court (see para 155) is even explicit about the fact the remedy did not seek to re-allocate to ECS the customers it had lost to AKZO (which would have made it restorative in nature). The more modest ambition of the obligation was simply to bring the infringement to an effective end and prevent the abuse from taking place again.

Another common ruling that is mentioned in support of restorative intervention in EU antitrust law is Ufex, where the Court of Justice held that where the ‘anti-competitive effects continue after the practices which caused them have ceased’, the Commission ‘remains competent’ to ‘to act with a view to eliminating or neutralising’ them.

The best way to make sense of this passage is to take a look at the precedent to which it refers, namely Continental Can. This venerable classic of EU competition law concerned the abusive acquisition of a rival. In the specific circumstances of the case, the infringement could only be brought to an effective end by mandating a divestiture. The intervention was a mere adaptation of the nature of the infringement (a one-off) and its effects (which were not a one-off and thus lasted until intervention took place).

We are yet to see a judgment of the Court of Justice addressing the question of whether remedial intervention can go beyond merely bringing the infringement to an end. A good opportunity would have been Lithuanian Railways, as the one of the alternatives identified by the Commission in its decision was the restoration of the railway track. However, the remedy was not challenged by the dominant firm in its appeal (and, when contested before the General Court, the dominant firm did not claim that such a remedy exceeded the scope of the authority’s powers under Regulation 1/2003).

Should remedies be restorative in nature?

The fact that, as the law stands, there is little support for restorative intervention does not mean that such measures are necessarily beyond the reach of antitrust courts and authorities. Similarly, it does not rule out the possibility that the Court will accept them in the future. It simply means that one cannot take for granted that restorative remedies are feature of the system (or that a court or a competition authority are not acting decisively when they choose not to impose such measures).

It also means, more to the point, that it is necessary to have a conversation about their desirability. The arguments in favour of restorative remedies are well-known and definitely have force to them. In markets that change rapidly and that naturally tends towards concentration, merely bringing the infringement to an end may achieve little in some instances. If the role of antitrust law is to be taken seriously, the argument goes, it means that restorative intervention is a necessity, at least in some instances.

Arguments against this form of intervention are no less powerful. The single most persuasive one has to do, as usual, with the sheer complexity that comes with the design and implementation of restorative measures. We have witnessed in the past few years that getting remedies right in the digital arena is a complex task, even for the most sophisticated and well-resourced of authorities.

It is not clear that adding more demands to the already stretched antitrust institutions will be beneficial for the system. In this sense, I have always been of the view that creating the expectation that competition law can achieve more than it realistically is able to deliver is particularly harmful to its credibility (and its status in the EU legal order at large).

There is another factor to consider in this debate, which is equality of treatment. Would restorative remedies be imposed in some cases but not others? If so, on what basis? Could the matter be left to the discretion of the court or authority? One should not forget, in this sense, that the principle of equal treatment in the context of remedial action has featured prominently in the case law (most notably in the old ice cream cases, Langnese-Iglo and Schöller)

What matters, as I say, is to get the conversation started and discuss meaningfully the pros and cons of restorative intervention. Your comments, as ever, would be most welcome.

The Digital Markets Act has been up and running for a while. We have witnessed, over the past year, the designation (and non-designation) of operators as gatekeepers, as well as the first judgments interpreting the Regulation. With this week’s non-compliance decisions against Apple and Meta, the regime may be entering a fascinating new era.

At JECLAP, we feel that the time is right to take stock of the evolution of the Digital Markets Act in the form of a Special Issue. It has been a lifetime since we last published on the regime (the Regulation itself had not even been adopted at the time).

JECLAP welcomes the submission of abstracts for consideration on the substantive, institutional and procedural aspects of the DMA, including (but not limited to) the following:

• The criteria for the designation of firms as gatekeepers.
• Emerging interpretation of the various substantive obligations (Articles 5 to 7).
• Judicial review of administrative action in the DMA.
• Procedural aspects.
• Interaction with competition law.
• Private enforcement of the DMA.
• Comparative perspectives.

If you have an idea for a paper, please email Gianni De Stefano (Gianni.De-Stefano@ec.europa.eu) or myself (P.Ibanez-Colomo@lse.ac.uk) by Friday 9 May with your proposal.

This proposal should take the form of an abstract of not more than 250 words in which you outline:

• The issue you would like to address;
• The angle you intend to take;
• The contribution your piece is expected to make; and
• Whether you have any actual or potential conflicts of interest (more information on what and when to disclose can be found here).

If your abstract is accepted (we will let you know as soon as possible), we expect the final article (ideally of around 7,000-10,000 words) to be submitted by mid-July at the latest.

As always, we will select abstracts to maximise diversity and balance in the Special Issue. We are, as ever, keen to give a voice to new authors and innovative approaches. If there was any doubt: we welcome legal and economic perspectives (and certainly papers that combine both).

In the meantime, do not hesitate to get in touch with any questions or suggestions!

On 1 April 2020, almost 5 years ago, we lost Rubén Perea, a truly extraordinary young man who was about to start a career in competition law. We decided to set up an award to honour his memory, and to recognize the work of other promising competition lawyers/economists under 30. EVP Teresa Ribera has kindly agreed to deliver this award. As of this year, we also welcome EU Law Live as a partner in this initiative.

Today, we are announcing the winner and runners-ups of the 5th edition of this award. Thanks a million also to all those who submitted their work for this award. We received a large number of very good submissions and the Jury had a pretty tough time selecting the finalists.

And the winner of this year’s Rubén Perea Award is…

Pablo González Casín for his paper “Airline Cooperation and Competition Law: A Transatlantic Perspective. An analysis of Case Law and Unrealized Scenarios“.

The Jury also selected four other papers of particularly high quality. JECLAP will publish these papers in a special issue. These are:

• “From Economic Security to Legal Uncertainty: Exploring the Impact of the FDI Screening Regulation and Foreign Subsidies Regulation on Mergers and Acquisitions in the EU” (by Enrico Zonta)
• “Demand in Mobile Application Markets and the Role of Top Charts Ranking” (by Benedetta Gianola)
• “Optimal Fines in EU Competition Law – an Economic Analysis“ (by Adnan Tokić)
• “Smokescreens of Digital Markets – Choice Manipulation and the Illusion of Consent“ (by Naimy Paul)

Our warmest congratulations go to Pablo and to the four finalists.

This year’s jury included various experts, some of whom were also friends, former teachers or colleagues of Rubén, namely Petra Nemeckova, Gianni De Stefano, Lena Hornkohl, David Pérez de Lamo, Nicolas Fafchamps and Eugenia Brandimarte. Our gratitude goes to all of them for devoting part of their time to this project.

Advocate General Rantos rendered his Opinion in Teva last week. The factual background is not new: it involves pay-for-delay arrangements, with which the Court of Justice has dealt regularly in recent years (including the Servier saga, discussed here and here). The action against the original Commission decision in Teva was dismissed by the General Court (see here). and the appellants – Teva and Cephalon – request that the first-instance judgment be set aside.

The case law on pay-for-delay has made important contributions to the assessment of the object of agreements under Article 101(1) TFEU. Above all, this steady stream of judgments has led to the adoption of a legal test that has been systematically applied since Generics. The test captures the substantive approach followed by the Court in the preceding the years.

As the Opinion of Advocate General Rantos shows, some questions keep coming back, even though – one might reasonably argue – they were already implicitly (if not explicitly) addressed in the previous case law. In this sense, the appeal provides the Court with an opportunity to clarify some issues at the margins.

The Court’s contextual approach to restrictions by object

The case law of the past decade makes it clear that the Court’s approach to the analysis of restrictions by object is contextual. Restrictions by object, in other words, are not abstract categories that can be mechanically applied to agreements. Whether or not a practice is, by its very nature, contrary to Article 101(1) TFEU must take into account the economic and legal context surrounding it. Only in such a way is it possible to establish whether the behaviour can be explained other than as a means to restrict competition.

The Court’s contextual approach is not an analysis of effects

In spite of the consistency of the Court’s position, it is not infrequent to read that the contextual approach to restrictions by object amounts, in essence, to evaluating the effects of the practice. According to this view, the current case law would conflate the object and effect stages of the analysis.

As explained elsewhere, there is a fundamental difference between ascertaining the object of an agreement in light of the relevant economic and legal context and assessing its effects on competition. The Teva case itself shows that the object stage is about making sense of the rationale behind the practice, that is, what explains the agreement between the parties. This assessment cannot be undertaken in the abstract. By necessity, it must consider the circumstances surrounding it. Doing so does not mean, however, that it must venture into effects territory.

An indispensable step of the analysis in pay-for-delay cases, which the Court explained at length in Servier, involves asking whether the parties to the agreement are actual or potential competitors (if there is no actual or potential competition to restrict in the first place, the agreement cannot be inherently anticompetitive). Semantic issues aside (see para 52 of the Opinion), this step does not entail an evaluation of the restrictive effects of agreements in light of the relevant counterfactual (as already clarified in Lundbeck).

The appellants in Teva, the Opinion suggests, sought to argue that the General Court engaged in an analysis of effects (thereby erring in law).

Advocate General Rantos relies on the existing body of law to explain that the General Court did not seek to ascertain the impact of the practice, but rather make sense of the ‘interests and incentives of the parties concerned, in order to ascertain whether the commercial transactions contained in the settlement agreement could have any explanation other than the commercial interest of the appellants not to engage in competition on the merits’ (para 56, emphasis in the original).

In other words, the General Court did nothing other than ascertain whether the Commission had correctly identified the object of the agreement in the relevant economic and legal context, as required by the case law.

The Court’s contextual approach does not entail a reversal of the burden of proof

Pursuant to the Court’s contextual approach, the authority or claimant have the burden of showing that the practice has no explanation other than a restrictive one. If there is no other plausible way to make sense of the behaviour, it will be deemed to restrict competition by object.

This test does not entail in any way a reversal of the burden of proof. It is not for the parties to the agreement to provide a plausible non-restrictive explanation for their conduct, but for the claimant or authority to show that such a plausible explanation does not exist.

While the above point seemed clear, one of the arguments in the appeal in Teva appears to be that the General Court’s assessment amounted to a reversal of the burden of proof. Advocate General Rantos explains (paras 59-64) why this argument does not reflect the reality of the case law (and, indeed, the analysis actually undertaken at first instance).

More than anything, the appellants’ argument is a valuable reminder that there is a difference between the legal burden of proof (what the authority or claimant needs to show to establish an infringement) and the evidential burden of proof (the evidence that the parties need to provide to challenge the arguments made by the authority or claimant).

It is uncontroversial to state that the parties to an agreement have the evidential burden of putting forward a plausible non-restrictive explanation for their conduct. It does not follow from this fact, however, that the legal burden of proof is reversed in any way.

In a similar vein, Advocate General Rantos rejected claims that the General Court had set a test that was impossible for the parties to meet. The parties need not show that an alternative explanation for the agreements is ‘certain’ (para 64). It is sufficient to show that it is plausible. The plausibility of the alternative explanation, however, cannot be merely pretextual (in the sense that it must be properly substantiated) and must be informed by the specificities of the case.