Author Archive
The Friday Slot (2) – Bill Kovacic
For this second edition of the Friday Slot, Bill Kovacic (George Washington University, former FTC Commissioner and Chairman) has kindly accepted to answer to our questions. I suppose Bill needs no further introduction to most of our readers. Yet, for those of you who have never seen Bill “live”, I have to say he belongs to the top five speakers on the antitrust conference circuit. A biography is attached at the end of this post. Thanks again to him for taking the time to answer our questions (with, as you will see, a great sense of humour and humility).
Question 1: “Oscar” of the best antitrust law book? And of the best non-antitrust law book?
Here are two books which, owing to their age, may not be well known to new generations of competition economists and lawyers. For the best antitrust law book, read Ellis Hawley, The New Deal and the Problem of Monopoly (Princeton University Press 1966). Hawley provides essential background on the US antitrust system, and his discussion of antitrust in the 1930s has powerful relevance today. For the best non-antitrust law book, read Marver Bernstein, Regulating Business by Independent Commission (Princeton University Press 1955). Bernstein studies US experience with regulatory commissions, but his assessment has universal application. Most honorable mention for category two: Richard Harris & Sidney Milkis, The Politics of Regulatory Change – A Tale of Two Agencies (Oxford University Press, 2d Edition, 1996). Every newly appointed competition agency leader should read this book before the job begins.
Question 2: “Oscar” of the best case-law development in the past 5 years? “Oscar” of the worst case-law development?
My nominees for best and worst are FTC cases I worked on. The envelope with my answers can be opened five years hence.
Question 3: Let’s do it like economists => assume that you could change 3 rules, principles, judgments, institutions in the current US antitrust system. What would you do?
Three institutional changes to the US system:
First, reform the criteria that academics, government officials, journalists, and practitioners frequently use to grade competition agencies. Abandon performance measures that equate activity (cases filed, fines imposed, days in prison) with accomplishment. Define agency effectiveness by the economic outcomes achieved by litigation and non-litigation policy tools. When a competition agency official says “We’ve been very busy!,” respond “Have you been very effective?”
Second, bolster efforts by competition agencies and external researchers to measure the economic effects of antitrust policy. Evaluating outcomes is a difficult, necessary task. Distrust assertions that competition law is valuable economic policy, but there is no way to tell if it works.
Third, increase policy integration between the two federal antitrust agencies and among the federal authorities and the states. Create a US equivalent of the European Competition Network. Greater policy coherence at home is ever more important to influence norms abroad.
Sunday Politics
A few days ago in Brussels, 26 Member States (“MS”) of the EU layed the foundations of a still-to-be drafted European Treaty.
Amongst the key measures to be included in the Treaty, a “golden rule” which will force MS to introduce in their Constitution the rule that budget deficits should not exceed 0.5% GDP. The European Court of justice will verify MS compliance with the golden rule.
With this forthcoming European measure, Sarkozy can put his main rival to the presidential election, François Hollande, into a corner. A few months ago, when the government tried to impose a golden rule domestically, the socialist candidate had proferred criticism. At the time, the socialists announced that they would not back a change of the Constitution to this effect. For those not versed in French constitutional law, amendments to the Constitution must be voted by a majority of 3/5 of the aggregate votes of both the Senate and the National Assembly (or by referendum). Currently, the National Assembly is dominated by the right wing and the Senate by the left wing…
But now that the measure has been endorsed by 26 MS, and that it will be imposed by a European Treaty, there’s little the socialists can criticize unless they want to be depicted as UK-Cameronesque politicians. No wonder why the socialists have been voiceless over the past few days. Sarkozy 1 – Hollande 0.
On closer analysis, the socialists’ “oppositional” options appear very meager. Sure, the socialists could be tempted to criticize the Treaty as insufficiently ambitious (e.g., on eurobonds or on the ECB mandate), and use this a a reason to refuse the ratification of the Treaty. Back in 2005, several socialists heavyweights (notably former Prime Minister Laurent Fabius) had actually used such rethorics to stand against the EU constitution. But the value of the argument is limited, given the reluctance of many other Member States (e.g., Germany) to more ambitious reforms.
The socialists could also play the good old nationalistic anthem. Challenging transfers of sovereignty to Brussels often has traction on the French political scene. My prediction: it is a matter of days before the Montebourg, Mélenchon, and Chevènement of this world announce that the forthcoming Treaty will rip off France’s fiscal sovereignty. I however doubt that Hollande, who is often presented as the spiritual son of Delors, could credibly side with them.
At any rate, what is close to certain is that the ratification procedure will again tear the socialist party apart. Sarkozy and his European colleagues just managed to revive the divisions that have plagued the socialist party before the referendum on the European Constitution. And with all this, I suppose that Hollande prays for a slow drafting process and a late ratification procedure, well after the presidential election of May 2012. Sarkozy 2 – Hollande 0.
Now here’s what could be the hat trick for Sarkozy. A quick Treaty drafting + ratification before May 2012 is unrealistic. But this does not prevent Sarkozy to launch a debate on the procedure to be followed for ratification during the presidential campaign, in a bid to expose the socialists’ internal divisions. There are indeed many procedural options on the table and experience suggests that they often give rise to fierce discussions in French politics. As hinted above, international treaties are normally subject to ordinary legislative procedure (Article 53 of the Constitution). Yet, if they entail amendments to the Constitution, an additional consultation must take place. The President must either request approval of the French citizens by Referendum, or, in the alternative, request the Senate + National Assembly to back the proposed modifications under a 3/5 majority rule (Article 89 of the Constitution). And even if the Treaty does not entail a change of the Constitution, the President can still hold a referendum on the Treaty, provided it has an “influence” on French institutions (Article 11 of the Constitution). A sovereignist left winger, Chevènement, just demanded the organisation of a referendum.
To date, Sarkozy still lags behind Hollande in the polls. But the shape of events to come is unpredictable, and the EU summit just gave Sarkozy a number of good cards to play.
PS1: Sarkozy could even score a 4th goal. With worrying threats on the French “triple A” rating, he could seek to anticipate on the future EU obligation, and already introduce the golden rule in the Constitution before the presidential election…
PS2: I was astonished by the lack of press information on the content of the agreement crafted in Brussels. A usual with EU affairs, I found a very good description of the agreement on the excellent blog of Jean Quatremer.
PS3: With this post, I am a little far from the core market of this blog. I even take a risky stint at French constitutional law. I thus apply for leniency with our readers, and already present my apologies for potential inaccuracies, errors, etc. The thing is that “we are just as politics geeks and fervent EU supporters as we are competition law geeks” like Alfonso said the other day, and I could not resist writing something on the EU summit.
Judicial Review and Article 6(1) ECHR
With the Menarini judgment, the ECHR has demonstrated that it has nothing to envy to other Courts in terms of cryptic reasoning.
There are indeed two ways to read this judgment. If you follow what the Court says as a matter of principle, the EU judicial review system is not Article 6(1) compliant. Remember, the ECHR says that review courts should have full jurisdiction in competition matters. In the current state of affairs, the GC does not have full jurisdiction on all aspects of a case, and particularly not when it comes to “complex economic assessments“.
But if you read what the ECHR says on the facts, the EU judicial review system might well be Article 6(1) compliant. In casu, the Court considers that the Italian system of limited (or “weak“) judicial review is arguably akin to full jurisdiction (!) and thus compatible with the ECHR. This is obviously fictitious. On close examination, no such intense review exists under Italian law. Yet, the ECHR contends that the Italian review courts “ont pu examiner le bien-fondé et la proportionnalité des choix de l’AGCM et même vérifier ses évaluations d’ordre technique” (§64). With this ruling, the treshold for full jurisdiction comes real low…
Today, the ECJ just chose which of those two readings prevails in the EU. In its KME v. Commission ruling, handed down today, the Court states at §133 that:
“The review provided for by the Treaties thus involves review by the Courts of the European Union of both the law and the facts, and means that they have the power to assess the evidence, to annul the contested decision and to alter the amount of a fine. The review of legality provided for under Article 263 TFEU, supplemented by the unlimited jurisdiction in respect of the amount of the fine, provided for under Article 31 of Regulation No 1/2003, is not therefore contrary to the requirements of the principle of effective judicial protection in Article 47 of the Charter“.
I attach hereafter the slides presented by Marco Bronckers at today’s GCLC lunch talk: GCLC – Menarini 8 12 11REV
Google, Microsoft, Skype, et cætera
Confessing a lack of inspiration tonight, I paste hereafter a link to an interesting NYTimes paper on the ongoing Commission investigation against Google. Thanks to James Kanter for the opportunity to be interviewed.
The topic of this paper also gives me a nice pretext to remind our readers that the merger clearance decision in Microsoft/Skype was published a month ago. This decision is well worth reading. It makes a bunch of interesting points on several counts. Here’s a taste of them. First, the decision clearly shows that a merger involving a large monopoly can get Phase I clearance.
Second, it suggests that the tide has turned in so far as the Commission’s appraisal of ICT markets is concerned. On several occasions, the decision unambiguously depicts Microsoft as a vacillating player, in a sector (communications services) where the Facebook, Google and Apple of this world are poised to become – or are already – the market leaders.
Third, the §§ on the tying of Skype with Windows OS are not wholly consistent with the 2004 and 2009 decisions, where pre-installation was deemed problematic in itself, because of the lack of subsequent (switching) user behavior. Remember, those decisions relied on this theory that lazy users were often stuck with WMP and IE, for behavioral biases (the so-called “end-users’ inertia” at §870 of the 2004 decision). Here, the Commission stresses that pre-installation is unproblematic at any rate because consumers do not use whatever communication service found on Windows + there are many alternative means for rivals to reach out to consumers + Skype is already pre-installed on >50% of Windows PCs, but only a small share of Skype are registered and connected users.
Finally, the decision contains some nice wording on the flaws of standard antitrust analysis in dynamic markets. See for instance, §78, which calls for caution in applying conventional market share analysis to such sectors: “consumer communications services are a nascent and dynamic sector and market shares can change quickly within a short period of time. Furthermore, almost all communications services are offered free of charge”. See also §122: “Consumers are very sensitive to innovative services or products in consumer communications services. Providers of consumer communications services lose traction quickly if they are unable to offer users new and innovative functionality”.
Last Call – GCLC Lunch Talk on Menarini
On Thursday 8 December, the Global Competition Law Centre (GCLC) will hold its 55th Lunch Talk on the Judgment of the ECHR in Menarini Diagnostics SRL v. Italy.
Sir Christopher Bellamy QC (Linklaters) and Marco C.E.J. Bronckers (Leiden University and VVGBlaw) will share the stage.
Online registration at http://gclc.coleurope.eu/LunchTalk
The Friday Slot (1) – Ian Forrester
At Chillin’Competition, we have decide to emulate an unpopular practice of DG COMP. From now onwards, we will be launching Friday requests for informations (“RFIs”).
In line with the spirit of this blog, our RFIs will be a bit different from those of DG COMP. Our targets will be big names in the antitrust world who, in addition, are interesting people with a good sense of humor. Just like this blog, our questions will be partly professional and partly personal.
To start this new venture – in principle, the Friday slot will be opened twice a month – we have sent our first RFI to no other antitrust superstar than Mr. Ian Forrester (White and Case, full biography available at the end at this post)!
And guess what: Ian has accepted to address our questions very swiftly, and has provided remarkable, insightful, thought-provoking answers. Again, we are immensely grateful to Ian for the time he took to answers our questions. In exchange for his time, we offered him to baptise this new series of posts, and he offered the title “The Friday Slot” that appears on top of this post.
Question 1: “Oscar” of the best competition law book? And of the best non-competition law book?
The shortest and simplest book is by David Edward and Bob Lane: “European Community Law: An Introduction”. Competition law is not complex, though it can be made sophisticated. Proper analysis of the realities of the marketplace is where everything should start.
The items of competition law literature which I most regularly use are the reviews of competition law in the Oxford Yearbook of European Law since the first volume in 1981. Francis Jacobs was the first editor and for about fifteen years Chris Norall and I squeezed the juice from every development. We tried to avoid accepting the official propaganda and to enjoy advancing our particular theories. Then the reviews went through a period of being too comprehensive and too lengthily thorough, but now we are back on a good rhythm. The reviews are lively and opinionated, and you can disagree with them, but they ought not to be boring. Writing them has been hugely instructive for my colleagues (jacquelyn Anthony , Makis and a platoon of other talents) and me, a great way of learning, digesting and explaining. I often use the OYEL review as a way of reminding myself of what was important in a case. Sometimes that matches conventional wisdom and sometimes it doesn’t.
Question 2: “Oscar” of the best case-law development in the past year? “Oscar” of the worst case-law development?
The Oscar to the best case-law development could go to the Swiss watch parts case, where the Court overturned a Commission refusal of a complaint and took us back to simpler times when small folk could look to the protection of the competition rules. It is very rare for such challenges to succeed and the Court did a really careful job in writing its judgement.
Question 3: Let’s do it like economists => assume that you could change 3 rules, principles, judgments, institutions in the current EU competition system. What would you do?
Criminal liability; proof beyond a reasonable doubt; and judicial review as ferocious as the House of Lords.
Question 4: Average working time/week?
Excessive! I travel a lot, and when I am away the e-mails multiply, as do the messages from editors wanting manuscripts. But I am not complaining. It is fun to do interesting work in interesting places.
Question 5: Why do you work in competition law? How did you first get into it?
By accident. I was a customs specialist, then made a complaint for a friend’s uncle against a whisky producer (differential pricing): Bulloch/Distillers Co. Ltd. That was my first case in Luxembourg. Lord Bethell was the next, about the rights of complainants. Others followed. I never studied competition law, or indeed EEC law, at university, an educational void which is unlikely to be remedied. Read the rest of this entry »
Slides Evening Policy Talk – Bill Kovacic
Bill Kovacic was our guest yesterday at the GCLC.
He gave a superb presentation on the measurement of competition authorities’ performance. In so doing, he confirmed that he is the n°1 speaker on the conference circuit. A great speaker + a pure entertainer.
I attach his slides below.
A quote: in response to a question on why the CAs were so ineffective at communicating that they work in the public interest “we are in the business of instability”
Random News
Oops, the General Court did it again… Last week in EFIM v. Commission, the Court confirmed the Laurent Piau case-law: a collective dominant position under Article 102 TFEU covers situations of tacit collusion (here labelled, “tacit coordination“) and hinges on proof of (i) detection opportunities; (ii) retaliation mechanisms; and (iii) absence of countervailing power of actual and potential rivals. Interestingly, the Court made no reference to the notions of “collective entity“, “correlation factors” or “economic links“, used in previous cases. A welcome ruling. Yet, much remains to be done in relation to the concept of abuse of collective dominance.
A great hire by Compass Lexecon: Prof. Jonathan Baker just joined them as Senior Consultant. Prof. Baker has been the Chief Economist of the FCC and the FTC. But to me, J. Baker is one of the first economists who articulated a workable theory of unilateral effects in merger cases. For more, see his article with Timothy F. Bresnahan entitled, ” The Gains from Merger or Collusion in ProductDifferentiated Industries”, 33 J. INDUS. ECON. 427 (1985) and see link here (and in particular footnote 15).
On 12 December, the Brussels School of Competition will host a half-day conference on the proposed reform of Belgian Competition Law. See here for the programme. My assistant Norman Neyrinck and my friend Laurent de Muyter will speak at the conference. I cannot wait to listen to them.
An unconvenient truth: it is technically wrong to say that the default of a Eurozone State would trigger the end of the € as a currency. On this, journalists tend to oversimplify. Unless all failed States opt out of the Eurozone, the € will stay in business. And by the way, a defaulting State does not necessarily need to exit the Eurozone. True though, defaulting States may be tempted to exit so as to engage into competitive devaluation, and regain growth in the mid-term.
Finally, because I love self promotion, and also for my fan club – Alfonso, pls forward this asap to your colleague – a picture of me with a Chinese official who attended a lecture on EU competition law in Brussels 15 days ago.
From theory to practice
In the antitrust field, Prof. Barry Nalebuff will remain to posterity for being the one guy who challenged the caricatural Chicago view that there can be no exclusionary bundling (the “single monopoly profit” theorem).
But beyond this, he may also remain to posterity as being one of the founders of Honest Tea.
Turning business theory to practice, Barry Nalebuff co-founded a company that “creates and promotes delicious, truly healthy, organic beverages” (sic!).
Apparently, the idea came out of “a class discussion that involved a Coke vs. Pepsi case study“. And since then, they have achieved a truly impressive penetration on a market usually depicted as a fortress, given high barriers to entry.
With this background, Alfonso and I are currently contemplating a potential move on a less healthy, but equally delicious market segment of the drinks industry.
Very many thanks to my LLM student Stéphanie de Smedt for the pointer.
The Rick Perry Syndrome
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“Oops“, the Commission did it again…
Yesterday, in the S&P case, the Commission again closed abuse of dominance proceedings with an Article 9 decision. As already explained, Article 9 decisions have become the conventional procedure in Article 102 TFEU cases.
What is less conventional is that the lion’s share of recent Article 102 TFEU cases involves exploitative abuse allegations. Think of Rambus, S&P, IBM – where the Commission dumped bundling allegations to focus on excessive pricing – and the recent Apple-Samsung investigation.
As a matter of principle, I see no wrong to this. But, this raises several interesting questions, which cast doubt on a number of commonly accepted viewpoints.
First, is there a Rick Perry problem at the Commission? I mean how could our Commission friends forget that the Guidance Paper states that exploitation cases are no enforcement priority?
Second, does the focus on exploitation means that those cases are easier to manage than exclusion cases, in particular under the effects based approach (where proof of anticompetitive foreclosure involves proof of exclusionary effects + proof of subsequent exploitation).
A final remark. Exploitation cases are conceptually close to constructive refusal to supply cases (see what the Commission says in IBM, §3), and thus can be also deemed exclusionary cases. But the crux of the matter is that all exploitation practices necessarily foreclose someone. From an economic standpoint, the deadweight loss of monopoly that arises out of price hikes is nothing but the foreclosure of customers. Hence my question: is the distinction between exploitation/exclusion really useful?
Chillin'Competition 