Chillin'Competition

Next Friday (11 March) the XIX edition of the “Curso de Derecho de la Competencia” that Luis Ortiz Blanco and I direct in Madrid will come to a close with a seminar on competition advocacy, compliance and self-assessments.

The line-up of speakers, this time mainly public officials and in-house lawyers, is  once again unbeatable, thanks to the work of Juan Andrés García Alonso.

Speakers include:
Cecilio Madero (Deputy Director General, DG Comp) Antonio Maudes Gutiérrez (CNMC), María Sobrino Ruiz (CNMC), Mark Rollinger (General Counsel, Peugeot), Paolo Palmigiano (General Counsel EMA, Sumitomo Electric Industries), Jorge Viera (Herbert Smith), Carlos Pascual (KPMG) Steve Leroy (Vice President Legal, AB InBev), Juan José Gisbert-Gutiérrez (Michelin) and Juan Andrés García Alonso (Grupo
PSA).

More information is available here: IEB 2016 – Seminar IV – Advocacy, compliance and self assessments

The German Competition Authority announced this morning that it has opened an abuse of dominance investigation on Facebook “on suspicion of having abused its market power by infringing data protection rules”.

According to its Press Release, the theory of harm is that Facebook may have exploited its arguable dominant position in “the market for social networks” by adopting terms of service on the use of user data “in violation of data protection provisions”.

In order for users to access the social network, users must accept Facebook’s terms of service. To me, this sounds perfectly normal, but the press release underlines that “there is considerable doubt as to the admissibility of this procedure, in particular under applicable national data protection law”. But the authority’s preliminary reasoning seems to be that users would not accept those terms of service should the company enjoy a lesser degree of market power.

The President of the Bundeskartellamt has stated that “Dominant companies are subject to special obligations. These include the use of adequate terms of service as far as these are relevant to the market (….) it is essential to also examine under the aspect of abuse of market power whether the consumers are sufficiently informed about the type and extent of data collected.”

This is a first, and it is a relevant one. A few comments off the top of my head:

-Wasn’t this clear already? This development fits, as you know, within a trend to try to squeeze privacy considerations into the realm of competition law. This is something that we have discussed abundantly (see e.g. here or here) and that I, for one, think has been appropriately settled by both the ECJ (Asnef Equifax, para 63 “any possible issues relating to the sensitivity of personal data are not, as such, a matter for competition law, they may be resolved on the basis of the relevant provisions governing data protection”) and the Commission decisions in Google/DoubleClick or Facebook/Whatsapp (para. 164: “privacy-related concerns flowing from the increased concentration of data within the control of Facebook as a result of the Transaction do not fall within the scope of the EU competition law rules but within the scope of the EU data protection rules.”)

-The ever growing responsibility of the dominant firm. It also is part of another tendency, that of extending the “special responsibility” of the dominant firm in order to comply with the law, and not just with competition law, with literally any legal provision. We have discussed this in the past too, in relation to the ECJ’s Judgment in Astra Zeneca (see here) as well as with the “scraping” allegations levied against Google (see here).

-Isn’t the imposition of “unfair trading conditions” expressly mentioned in Article 102. a)?  It is. And it is also widely acknowledged that privacy can be one parameter of competition. So, admittedly, and theoretically, the Bundeskartellamt could build an exploitative case alleging that Facebook sets infra-competitive privacy terms and conditions. However, this does not seem to the reasoning underlying the investigation. Perhaps this has to do with the difficulties in determining which is the “competitive” level of privacy. If it is difficult to determine when a price is ‘excessive’, imagine when it comes to this question. This line of analysis does not sound to be a particularly promising one (without having spent a fortune in expert analysis I suspect that plenty of services with much less market power than Facebook have much lower privacy standards….). Possibly in the light of these difficulties the authority is prepared to take a shortcut, automatically equating an alleged “violation of data protection provisions” by a dominant company with an abuse of dominance.

-Omniscient and omnipotent competition authorities. So essentially, this investigation sends the message that competition authorities can now police any breach of the law by dominant companies. Competition authorities should therefore be not only experts in competition, but in any other branch of the law?  Good luck with that. This may give the Commission equally absurd ideas; it could, for instance, now challenge tax advantages alleging that those were only received because of the economic pre-eminence of some companies….

-If the conduct already breaches other rules, why bother with competition law? Competition authorities have scarce resources. If it is already a given that a conduct breaches other provisions (this seems to be the premise to the investigation), then why bother doing through the hurdles of a 102 case?

 –The challenges of establishing dominance in the face of unhelpful precedents. Leaving wider issues aside, and moving on to dominance, the case seems to be premised on the arguable dominance of Facebook. But, in the light, among others, of the General Court’s Judgment in Case T-79/12 and of the Commission’s decision in Facebook/Whatsapp, the German authority seems poised to have a tough time. Those precedents make it clear that dominance in these markets may be very hard to establish, particularly since social networks are very dynamic, services are provided for free, the role of network effects is mitigated, there are no economic or technical barriers for users to switch, etc. (for my comment on Case T-79/12, see here). [It would also be interesting to see the assessment of the competitive constraints posed by others in these markets (e.g. Google was considered to exert strong pressures in MSFT/Skype despite its 0-5% market share -decision, paras 124 et seq, and para 70 of the Judgment.- )].

-On the connection (or lack thereof) between dominance and the abuse. The Press Release does actually say –or suggest- something which is arguably sensible (albeit contrary to Continental Can and Astra Zeneca) when explaining that it needs to check whether there is “a connection between such an infringement and market dominance”.

 –Wrongly paternalistic competition law? When commenting on the debate on digital platforms (the video of my intervention at the European Parliament is now available here) and on the antitrust/privacy interface, I have always said that in the face of privacy-related concerns what public authorities should do is make sure consumers are in a position to make informed choices. Competition law is there to preserve choices, and here consumers have it. Facebook is not an unavoidable trading partner and consumers are not locked in to it; if consumers don’t think it’s worth giving data in exchange for the service, they won’t join. There may be a market failure, but one that has to do with asymmetries of information, not market power. In other words, whether consumers know or not what terms and conditions they are accepting may be a public policy issue, but one that, in my humble view, is not for competition law to address.

P.S. I was supposed to be discussing this precise topic on Saturday at this AIJA conference on media and technology, but I have had to ask my colleague Sam Villiers to replace me. Chillin’Competiiton will nonetheless be represented by Pablo.

On Friday (4 March) Pablo and I will be coordinating a seminar on competition law in media and technology focused on access to digital content and on the legal issues surrounding open and closed systems. The seminar is part of the wider IEB Course. The programme is the following:

16.00-17.50: Access to digital content and competition law

Ben Van Rompuy  (Senior Researcher , T.M.C. Asser Instituut)

Alexandre de Streel (Professor of European Law, University of Namur; Director, Research
Centre for Information, Law and Society)

Pablo Ibanez Colomo (Associate Professor, London School of Economics; star of the viral Youtube video “Running in [he doesn’t let me say more….]”)

Chair: Jesús Alfaro (Professor, Universidad Autónoma; Counsel, Linklaters)

18.00-19.30 Open and closed systems under competition law

Sebastian Lecou (Economist, Autorité de la Concurrence)

Andrew Leyden (Associate, Cleary Gottlieb Steen & Hamilton)

Juan Delgado (Director, Global Economics Group)

Chair: myself

For more info, click here: Programa IEB 2016 – Seminario III – Competition Law in the Technology Se…  or drop me a line at alfonso.lamadrid@garrigues.com

This is my fourth post of the day on interesting highlights that we should have covered. It only makes sense that it deals with exhaustion…

***

If interested in patent issues related to antitrust you should pay attention to a decision issued a few days ago by the U.S. Federal Circuit in Lexmark v Impression products on patent exhaustion/ “first sale” doctrine (interestingly holding that the Supreme Court’s decision in Quanta, among others, had not overruled the Federal Circuit’s earlier decisions on the effect of foreign and conditional sales; for interesting amicus curiae from the AAI and others defending the opposite, see here). Its potential antitrust implications are significant. For interesting discussions on the case (I’ve ran out of blogging time by now), see here, here or here.

[Sponsored Ad: if interested about the antitrust/patent interface, then do attend the LCII conference on patent- hold up next week  organized by Nicolas Petit, who is currently doing quite a lot of patent-related work; see here for his latest paper]

And now that I mention IP and exhaustion I realize we never discussed on the blog the very interesting issues at stake in the Commission’s investigation into geo-blocking arrangements in the Sky-Hollywood Studios/ Pay-TV investigation in which I am representing the UK’s independent producers (the oral hearing took place last month).

Without disclosing anything I should not, let me just anticipate (or rather, bet) that exhaustion –or rather, non-exhaustion, will be the key to that case.

Pablo commented last week on the Streetmaps/Google Judgment issued a couple of weeks ago and written by Peter Roth. I thought Pablo’s points were, as always, very interesting, but I confess I had not yet read the Judgment. Now that I have, here are some of my impressions:

In spite of what many think, there are very sensible Judges out there who can do a great job dealing with complex competition law issues. The Judgment is a pleasure to read; it is comprehensive, concise, honest (e.g. “both [economic experts] have undoubted expertise in this field, but I found that each displayed a tendency to become an advocate for the party by which he was instructed” (…) “I find it somewhat surprising that there should be such a sharp clash between the experts, each with a duty to assist the court”), clear, nuanced, solidly based on precedent and evidence, very well and very transparently reasoned (which is what I expect, and often fail to get, from a Judgment); I wish EU Courts always wrote like that. Actually, I wish I wrote like that.

The issues covered in the Judgment are very similar, if not idenical, to some of the ones currently examined by the Commission; other than in our posts and in the case study I ran last year at the BSC 😉 I had never read such an accurate description of the arguments at play in the Google case.  And the Judgment goes to the crux of the issue: how to deal with conduct that is procompetitive in the market of the dominant player but that is alleged to harm competition in an adjacent one?

Mr. Roth first assesses the matter of foreclosure in the adjacent market; as explained in Pablo’s earlier post, he first explains that the likely effect should be “appreciable” (which is not an unimportant statement), and then goes on to assesses in great detail evidence and expert testimonies (which included a hot tub session), which leads him to conclude that the “appreciable effect” was not “reasonably likely”. Some may perhaps disagree with the finding, but I don’t believe anyone can criticize the detail and transparency of the reasoning.

In Roth’s words: “that is sufficient to dispose of the allegation of abuse. However, in case I should be wrong in that conclusion, and as it was extensively argued, I proceed to consider the issue of objective justification”.

And he goes on to undertake the most serious, objective and persuasive objective justification assessment I have read, thoroughly assessing possible “less restrictive alternatives”, after having importantly noted (at 149) that “the question of alternatives obviously cannot be  considered only with respect to competitive impact. Proportionality is inherently a matter of fact and degree. Where the efficiency is a technical improvement, proportionality does not require adoption of an alternative that is much less efficient in terms of greatly increased cost or which imposes an unreasonable burden”.

The bottomline: in case you had not noticed it, this one is clearly among the best written competition law Judgments I have read. 

But don’t take what I say for granted, I strongly suggest that you read it too and check it yourselves. It’s available here.

This is today’s second post on interesting highlights that we had not yet covered. In this one I will very briefly deal State aid cases decided at the end of 2015.

***

In my previous post I referred to a case in which the Commision got an arguably unnecessary blow.  A stream of cases where the Commission got away with something surprising is that related to the digital switchover in Spain decided on November 26th (disclosure: we represent several companies and public entities in those cases). For a comment in the State Aid Hub, see here.

The whole case boils down to the Commission and the General Court agreeing that ensuring that the TV signal reaches the 2,5% of Spanish citizens living in “remote and less urbanized areas” (to quote the decision’s title) otherwise not covered by the market (the market failure uncontested) is not a Service of General Economic Interest. So much for Protocol 26, for the Commission’s lip service to SGEIs, and also for Member State’s ability to choose how to provide a SGEI (which is now conditioned to “technologic neutrality”).  The case is also interesting when compared to others in which the Commission acknowledges, for instance, that ensuring broadband access in Paris is a SGEI…

It is noteworthy that in its Press Release the Court did not refer to the areas/population affected by the measures (I insist, the 2,5% of population living in remote and less urbanized areas).

There is much more to be said about these cases, but I will comment again on these cases once we have won the 4 ECJ appeals lodged a few days ago 😉

***

We nonetheless fared better in another State aid case related to the so-called “tax lease” (disclosure, in that saga of cases we are also representing the applicants/investors in 22 pending cases before the General Court against the same decision). The Judgment of the General Court of December 17^th in the pilot case concerning the appeal by the Kingdom of Spain confirms the theory of selectivity with which we previously won the “Spanish financial goodwill cases” and pursuant to which investors should not have been identified as the beneficiaries of the alleged aid (for our comment on that one, see here).

The Judgment does a very good job explaining why that theory not only is perfectly sensible, but also that it was always there regardless of the Santander/Autogrill Judgments (read, in particular paras. 143 to 180). In the Court’s view, the decision’s error regarding selectivity also contaminates its conclusions regarding the distortion of competition and the effect on inter-state trade.

The Commission is likely to appeal, if only because of the spill-over effects this could have in its recent tax-ruling investigations. So, again, we’ll be able to say more once the ECJ Judgments are out. By the way, the many cases pending before the General Court raise a number of other most interesting issues (e.g. can a State aid decision declare private contracts void?), so keep an eye open for those too.

[Sponsored Ad: we will be lecturing on State aid litigation next week in a 3 day State aid seminar taking place in Madrid; see here: IEB State aid Seminar 2016

P.S. By the way, the last three cases to which I have referred were all adopted under Commissioner Almunia (in the case of the financial goodwill, only the third decision, issued just days before the annulment; the previous two were adopted under Kroes), all targeted Spain, two of them were annulled and the other –although endorsed by the General Court- is, without exaggeration, the worst I have ever seen in my experience. The fact that these decisions adopted under his mandate were all unfounded clearly shows that the criticism according to which Almunia would have favored Spanish companies is also unfounded.

We never said a word about the annulment, back in December, of the Commission’s airfreight decision.

I worked on that case before the Commission (for an addressee of the SO later not included in the decision) and shortly before the Judgment went out I was asked by Nicholas Hirst (Politico) whether I thought the decision could be annulled. I confess I didn’t think it was possible, that it was a solid one, not the least because there were 14 leniency applicants. And then the General Court annulled it.

But the real surprise came not with the news, but when reading the Judgment(s). Some people tend to think that a Judgment that quashes a Commission decision must necessarily be a good thing, because after all strict judicial review is a good thing. If you ask me, and to put it mildly, the Judgments don’t make sense (and I bet that a few of the winning lawyers share this view).

The only reason why the decision is annulled is because the Court sees incongruence between the grounds and the dispositive parts. The grounds were –like it or not- clear, and the alleged problem was that when imposing fines –in the operative part- the Commission distinguished, the periods for which it had the power to impose those fines (in the air transport world the Commission’s powers changed over time).

To me, the content of the decision was perfectly clear. How that can be a problem liable of leading to the decision’s annulment is beyond me. In any event, this might not be of much, or any, practical significance, as the Commission can easily amend the supposed error in a new decision. The Commission does get it wrong sometimes (for an example of this, check out my next post on recent State aid cases), but the fact that it got the blow in a case where it might not have deserved it is a bit puzzling.

Other recent relevant cartel cases involve leniency issues (namely the ECJ’s Judgments in DHL and Galp), but we’ll leave that for a future post.

Sponsored Ads:

(a) those interested in learning about procedural issues from the finest, funniest and most handsome experts should attend this upcoming module at the Brussels School of Competition 🙂 

(b) those interested in cartels law should attend ERA’s upcoming workshop on recent developments;

On Friday we will be holding a  seminar in Madrid (in the framework of the competition law course I co-direct together with Luis Ortiz Blanco) to discuss enforcement and challenges in the application of the competition rules. The programme is the following:

16-17: Enforcement and challenges regarding the application of the competition rules in the Information Communication and Technology sector

Nicholas Banasevic (Head of Unit, DG Comp)                                                                                            Margarita Fernández (HP)                                                                                                                                Moderator: Alfonso Lamadrid  (Garrigues)

17.20-18.20  Enforcement and challenges regarding the application of the competition rules in the Energy sector

Philip Kienapfel (Deputy Head of Unit, DG Comp)                                                                                      Andrew Ward (Cuatrecasas)                                                                                                                             Moderator: Lewis Crofts (MLex)

18.30-19.30 Challenges in the judicial application and review of the competition rules

Milan Kristof (Référendaire, ECJ)                                                                                                                  Santiago Soldevila (Magistrado, Audiencia Nacional; former Judge, EU General Court)                         Moderator: Luis Ortiz Blanco (Garrigues)

19.30-20: Reflexiones sobre la política de la Comisión Europea como autoridad de competencia

Cecilio Madero  (Deputy Director General for Antitrust, DG Comp)

More information is available here:

Programa IEB 2016 – Seminario II – Enforcement and Challenges in the application of the Competition Rules

Last Tuesday I intervened at the GCLC’s annual conference, focused on the notion of restriction of competition.

What follows is an abridged version of my intervention (that does not include some of the worst jokes). Pablo, who gave me significant input and appears as co-author in the slides, and myself will be writing a joint piece on the subject soon.

***

One remarkable thing that conferences organized by practitioners have with European Commission initiatives is that they all seem to be aimed at working less. We don’t want fines, we don’t want abuse of dominance cases, less focus on key industries, less interventionism, etc. And now we want to clarify what a restriction of competition is?  If competition law is fun (and if we all make a living) it is because it is open ended and evolutive. So in a way these attempts at clarification could be regarded either as a collective suicide or a collective attempt at output limitation [I illustrated the point with a gif of the collective suicide squad from “The Life of Brian” that some considered a bit gore…] Even Commissioner Vestager observed this yesterday.

My role in this collective suicide is to comment on what has been discussed these past couple of days and try to extract, from a legal viewpoint, common threads and lessons.

I had many comments on what has been discussed here, but no common thread. But then last night at the speakers dinner Masssimo Merola gave a brief speech and said that yesterday he had realized about both what he knew and what he did not know. I thought voilà, there’s my structure. So let’s focus on those two questions: what is it that we know, and what is it that we don’t know.

***

If 50 years into EU Competition policy and centuries after the common law doctrine of restraints of trade was developed a bunch of experts are getting together for two days to ask ourselves something as basic as what is a restriction of competition, an outside observer would immediately think that instead of a bunch of experts we’re a bunch of ignorants!

If we are here enquiring about the notion of restriction, that is because the wording of Articles 101(1) and 102 TFEU do not provide an operational test.

Indeed, if anything that limits competition or commercial freedom were to be legally considered as a restriction in the sense of 101(1), then everything would be caught by 101. As also noted by Sir C. Bellamy yesterday, restraint is the essence of every contract…. particularly marriage.

In my view, there is no point in trying to figure out what a restriction is by looking at the literal wording of Article 101(1) and 102 TFEU. It is a hopeless exercise to find an operational test from such vague provisions. They were intended to be open, adaptable, judge made. That is why I like to say that competition law is a distillation of common sense infused with mainstream economics.

It was said yesterday that there is no room in 101(1) for “consumer harm” and that perhaps we need to re-write article 101. But I think that provision was drafted the way it was precisely so that it would encompass everything: consumer harm and the contrary. It is not because there is no explicit reference in the letter of the provision to consumer harm that the case law cannot evolve in that direction, as it arguably has.

But do we really not know what a restriction is? If the conference has taught us anything is that the problem is not one of the concept in itself, but one of methodology, and even of terminology.

What is a restriction of competition in colloquial and in economic terms is perfectly clear (as clearly explained by Jorge Padilla): it’s a reduction of competitive constraints. The problems rather lie in how a legally relevant restriction is established (Do we look at the short or the long term? Process or outcome? How do we look at the positive effects of a restriction, or an apparent restriction? Can we tell a restriction following a quick look (by object) or do we have to examine in detail all circumstances relevant to its effects (by effect)?)

***

Instead of trying to draw lessons with a top-down approach, I propose to analyse what has been said in the conference in a different way: bottom-up.

Let’s focus then on what we know and on what that tells us:

What we know

If we look beyond case-specific often conflicting discussions on the notion of restriction and we pay attention to what the Court has actually clarified over the years, we believe it is fair to say that we actually know a great deal about the sort of conduct that amounts to a restriction of competition.

It is true that the case law is uneven, and that some issues are yet to be clarified, so let’s focus only in those areas where there really is a significant consensus.

• First, and most important of all, the case law is very useful to understand what a restriction of competition is not.

Read the rest of this entry »

The European Internet Foundation invited me to participate at a dinner-debate on digital platforms held last Tuesday at the European Parliament. It’s the second time that I go to the Parliament to discuss this sort of issues (the first time was this one) and, for someone who, like me, has an odd frustated political vocation, that is always an interesting experience.

It felt partly like a déjà vue , but it was fun. The main innovation in my speech as opposed to my previous interventions on the subject was a change in the jokes used (the new ones weren’t better, though), but essentially the ideas I developed there are the same ones that I set out here as part of our inter-platform dialogue with the DisCo blog.

The type of audience that was present on Tuesday (MEPs, representatives of the industry and policy experts) also led me to emphasize a message: that the passage of laws is not more important than the outcome of their enforcement. 

A video about the event is already available here. I understand that the complete recording of all interventions will soon be made available here.

By the way, in case you haven’t read it, last week the European Parliament adopted a resolution on the annual report on competition policy. I like how it “welcomes the new Commissioner’s refusal to bow to political pressure” and then goes on to give directions on what to do regarding specific companies and markets… There are nevertheless some interesting ideas in it.

—

P.S. The next “public appearance” will take place tomorrow in Madrid:  Seminar on recent developments in competition law (EN_ESP) 29 Jan (this time on the notion of “single and continuous infringement”).