Author Archive
Summertime developments in EU competition law (tax rulings, cement, Section 5 of the FTC Act and more on Google)
Lots of things happened while this blog was closed for holidays; here are a some comments on a selected few of those developments:
–The news: On 20 July the European Parliament issues its Draft Report on tax rulings unusually pre-concluding that “without prejudice to the outcome of the Commission’s ongoing state aid investigations” there has been a breach of State aid rules (MEPs appear to be getting into a habit of giving ex ante opinions in competition cases…) and –perhaps more understandably- suggesting the Commission to adopt guidelines on State aid and transfer pricing. A comment (and a bet): We have commented on these cases before, but this time I’m willing to bet a round of beers on the prediction that the Commission will not order any recovery in these cases and will rather use them to send a signal for the future. Any takers? [By the way, those interested in the subject should attend the Brussels School of Competition’s Morning Briefing about State aid and Tax Rulings on 16 October].
–The news: On Friday 31 July the Commission announced the closure of its longstanding investigation into the cement sector explaining that the evidence gathered was not “sufficiently conclusive”. A comment: As you might also remember some companies (including my client in the case) appealed the information requests sent out by the Commission. As explained in the Judgment, as part of the judicial proceedings in our specific case we managed to have access to, and to exceptionally lodge observations on, the Commission’s evidence at a pre-SO phase (for my comments on these Judgments, click here). Some parties appealed the General Court Judgments (not all, for, understandably, practical realities often trump theoretical interest) and the ECJ may say interesting things, so keep an eye open for those.
–The news: On August 13 the U.S Federal Trade Commission issued a Statement of Enforcement Principles that will guide its application of Section 5 of the FTC Act, a provision against “unfair methods of competition” that goes beyond the prohibitions in the Sherman or Clayton Acts. Essentially, the FTC has committed to align the enforcement of Section 5 with that of the Sherman Act, effectively adopting a rule of reason analytical framework. Comment 1: the Statement explains that the FTC is “less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm”. Well, isn’t that stating the obvious? Also, the language (“is less likely”) shows some convergence at both sides of the Atlantic when it comes to sort-of-soft law: the FTC seems to have learnt from DG Comp’s guidance in this respect… Comment 2: I always thought that Section 5 was the U.S. way of making up for a sometimes inconvenient strict interpretation of the antitrust rules that does not cover practices that could be challenged with a wider, also sensible interpretation. Just to give you to examples: the Ethyl case, concerning a Section 5 challenge against facilitating practices could perhaps have been brought under Section 2 if US antitrust law had a notion of individual abuse of collective dominance like we do in the EU following the Irish Sugar Judgment. Also, the Intel case under Section 5 would seemingly also have been equally possible to challenge if we had a more nuanced approach to refusals to deal concerning interoperability.
–The news: Google’s lawyers didn’t rest during the holidays either. A few days ago Google sent its response to the Commission’s Statement of Objections (and its General Counsel wrote a blog post about it, available here). All this generated yet another news cycle; journalists don’t get tired of this story, as don’t lawyers, who keep jumping in at the smell of possible blood. The non-comment: We have no real new info on the case so we have no comment beyond the many written in the past.
And now, a quick look to the future and to some forthcoming events:
- On Friday, 4 September, the Liège Innovation and Competition Institute is holding, in Brussels, an interesting event on the Huawei/ZTE Judgment (for my hasty first comments and some interesting, more well thought-out comments by others, see here).
- On September 29 a new edition of the 9 month LL.M course will start at the Brussels School of Competition. Registrations are still open and the program is available here.
- And on Thursday 24 September ERA and the European Data Protection Supervisor will be hosting a must-attend event (at least for me since I’m chairing part of it) titled Competition Law rebooted: Enforcement and personal data in digital markets“. For more, see here.
Thanks a million & Chillin’Competition Conference
Chillin’Competition has just reached its millionth visit, so thanks a million!
It’s amazing to see that the readership keeps growing daily after almost 5 years and over 1,000 posts. In fact, it seems that in 2015 we’ll even double the visits we had in 2014. As difficult to understand as this may be, it certainly encourages us to keep the blog alive.
Reaching this milestone has spurred some thinking on the much-talked-about-but-never-held-Chillin’Competition conference. We can now safely announce that we will be holding it in mid-November. We have a first draft ideal program and will be contacting speakers in the coming days. In order to make it a free-access conference and to pay for logistic costs we will need some corporate sponsors; so if anyone feels generous and would like to contribute to making the event possible, please drop us a line.
Thanks again!
P.S. We’ll be closing the shop during August, so enjoy the summer and hope to see you here soon.
Mixed bag of a practitioner’s thoughts
–On being a Commission lawyer for once. A couple of weeks ago I spent some days in Luxembourg to participate in 4 cartel hearings in which, for a change, I was the European Commission’s lawyer. The experience was extremely interesting, and fun too (despite some repetitions…); being on the other side of things makes apparent some things that often go unnoticed, like how hard it really is to draft a rock-solid decision, connect all evidential dots in some cartel cases and think about the myriad things that could possibly be challenged by us lawyers. I was also impressed by Court’s detailed knowledge of very factual issues and by my co-agents encyclopedic knowledge of cartel precedents. It’s challenging to have as clients some of the foremost experts on the subject (like Fernando Castillo, Viktor Bottka and Carlos Urraca), but it’s quite comforting to be sitting, for once not opposite, but next to them in Court.
-I have just received an email advertising an article titled “How to become the highest paid partner at your law firm”. It includes healthy advice and sensible reflection, such as this quote: “[t]he highest-paid attorneys are those who work like dogs, bill lots of hours, are prodigious rainmakers and focus on high-rate practices”. For some reason I have a tendency to defend my profession, but pieces like this project an image of big-law lawyering that makes it not always easy.
– Last night I also read that the Judge handling the follow-on suit in the air cargo case was recused for having complained about his luggage being lost by one of the targeted airlines in a recent trip (apparently he complained to the President of the airline and mentioning his role in the damages claim) (see here). No comment.
– For reasons that will be explained in our next post, Pablo and I are looking around for big rooms for rent in Brussels and prices are absurd and I see little plausible alternatives to at the very least some good old tacit collusion…
– On the Spanish competition authority. The Spanish Competition authority has not fared tremendously well in Court lately. The latest news is that the Supreme Court even has doubts that its creation and the merging of regulators was compatible with EU Law and has sought a preliminary ruling from the ECJ on this point.
– On paid-for posting. In the past month we have received several requests to write posts in exchange for money. This is not new, but the number of requests is. As a lawyer, I’m not offended at all by those requests even if we have systematically turned them down. I could even accept writing for one of my clients provided that I could clearly disclose my interest and the fact that it is work that I’m doing (after all, that’s what I do for a living), and I certainly do not write on issues that can negatively affect an already existing client, but I’m in the business of selling legal services, not blog posts. As for Pablo, he would not accept money even for writing his real own views when those coincide with those of the firm willing to pay. I hope the policy is clear…
ECJ’s Judgment of today in case C- 170/13, Huawei v ZTE
For a number of years many in our peculiar little world have been pretty obsessed with standard-essential patents, due to a great extent to the economic significance of the legal fight at the heart of the so-called smartphone wars.
A bit more than a year ago the Commission made binding the commitments proposed by Samsung (see here for our initial comment on these) and adopted a decision declaring an infringement on the part of Motorola, which did not receive a fine. The Commission tried to introduce clarity in a mudded area in which there were no clear precedents and in which the industry couldn’t agree by providing a safe harbour for standard implementers/willing licensees; the Commission did so by means of two individual cases, one establishing the principle (Motorola), and one articulating it in practice (Samsung).
As these cases were ongoing the European Court of Justice received a preliminary reference from the Düsseldorf District Court (Landgericht Düsseldorf), concerning the very same issues, with the difference that the Court was not being asked about fact-specificities, but about the general, broader, principles and concepts at issue. The referring Court even explicitly opposed the so-called Orange Book standard to the Commission’s reasoning in Motorola and Samsung noting that they would seemingly lead to opposite results in casu. At the time some wondered whether the Commission had done well in deciding its cases prior to the ECJ’s ruling.
The underlying national case was one in which Huawei had sought an injunction against ZTE after the two companies failed to reach a licensing agreement on FRAND terms for a patent essential to the LTE wireless broadband technology standard.
Last November AG Wathelet issued an Opinion in the case in which he essentially concurred with the Commission’s views.
That highly anticipated ruling was rendered only a couple of hours ago (see here), and it has clearly endorsed the Commission’s action in this area.
The questions posed by the referring Court were carefully drafted and structured and sought detailed guidance from the ECJ on very specific points. The ECJ’s ruling nevertheless responds to them altogether (§ 44), given that they all seek to ask one question: when is the seeking of injunctions by an undertaking with a SEP that it has committed to license to third parties on FRAND terms an abuse of dominance?
The Court starts off citing the classic case-law on definition of abuse (§ 45) and recalls the fact that exercising the rights that form part of an IPR cannot in itself constitute an abuse of dominance; an abuse will only exist in exceptional circumstances (§§ 46-47). It then goes on to identify the exceptional circumstances in the case, after noting (§ 48) that they are different from the ones found in the case-law on refusal to supply IPRs.
According to the Judgment, those exceptional circumstances in the situation at issue are (i) the indispensability of the patent (§§ 49-50); and (ii) the fact that SEP status was only achieved in return for an irrevocable undertaking to licence on FRAND terms (§§ 51-52). The Court takes the view that since these circumstances “create[s] legitimate expectations on the part of third parties that the proprietor of the SEP will in fact grant licences on such terms, a refusal by the proprietor of the SEP to grant a licence on those terms may, in principle, constitute an abuse within the meaning of Article 102 TFEU” (§53).
How do we then determine what FRAND terms are? The Court insists on the need of striking “a fair balance between the interests concerned” (a wording that sounds reminiscent of Orange Book, even if the approach in the latter Judgment is then not followed) (§ 55). In this regards, the Court acknowledges that the need to enforce IP rights provides a range of legal remedies including the right of access to Courts (§ 57), and that therefore “in principle, the proprietor may not be deprived of the right to have recourse to legal proceedings to ensure effective enforcement of its exclusive rights (…)” (§ 58).
The Court’s approach is that the irrevocable offer to grant licences on FRAND terms) cannot “negate the substance of [those] rights”, but that “it does, none the less, justify the imposition on that proprietor of an obligation to comply with specific requirements when bringing actions against alleged infringers for a prohibitory injunction or for the recall of products” (§ 59).
The Judgment then goes on to identify those “specific requirements”, namely that in order to escape 102 liability:
(1) The SEP holder must give notice or hold prior consultations –even if the SEP has already been used by the infringer- or, in other words, it must “alert the alleged infringer of the infringement complained about by designating that SEP and specifying the way in which it has been infringed” (§§ 60-62; in the latter of these paras. the Court explains the need for this requirement, which has to do with the number of SEPs in a product and the fact that a party may not be aware about possible infringements);
(2) Following the expression of the alleged infringer’s willingness to conclude a licensing agreement on FRAND terms, the proprietor is to present “a specific, written offer for a licence on FRAND terms, in accordance with the undertaking given to the standardisation body, specifying, in particular, the amount of the royalty and the way in which that royalty is to be calculated” (§ 63). The Court explains in 64 that this requirement in reality seems to already stem from the commitment to standardization body to grant licences on such terms (§ 64). The Court does not venture into the discussion of what is fair or not, but notes that the proprietor knows the content of other licensing contract and can (should) operate guided by the principle of non-discrimination (§ 64).
(3) It would then be for the alleged infringer “to respond to that offer, in accordance with recognised commercial practices in the field and in good faith, a point which must be established on the basis of objective factors and which implies, in particular, that there are no delaying tactics” (§ 65) [Comment: This is perhaps the most unclear part of the Judgment]. In this sense, the alleged infringer will only be able to bring an abuse of dominance claim against the injunction if it has submitted to the proprietor of the SEP in question, promptly and in writing, a specific counter-offer that corresponds to FRAND terms (§ 66) [Comment: I understand how the Court favours defining FRAND terms on the part of the holder by reference to non-discriminatory conditions, but it is unclear to me what FRAND terms are from the perspective of the alleged infringer].
The Court also adds that when the alleged infringer is using the teachings of the SEP prior to concluding an agreement, it should, “from the point at which its counter-offer is rejected, to provide appropriate security, in accordance with recognised commercial practices in the field” which must include, among others, the numbers of past acts of use (of which it must be able to render account) (§ 67).
(4) In case of no agreement after this round of offer and counter-offer, “the parties may, by common agreement, request that the amount of the royalty be determined by an independent third party, by decision without delay” (§ 68). [Comment: the Judgment reads “may”, but it sort of reads as intending to be saying “shall”; also, query: what are the implications of the “by common agreement” qualification?
(5) The Court also takes into account the public interest in having invalid or non-truly-essential patents identified as well as the right to effective judicial protection and states, in a nutshell, that the alleged infringer shall not be banned from challenging the validity, essential nature of the patents and /or their actual use (§ 69). [Comment: once again the Judgment resorts to soft wording (i.e “an alleged infringer cannot be criticized for…”) when it seems to mean something clearer (i.e. “the alleged infringer must be free to…”)]
More comments:
– Interestingly, whereas the Judgment reads as if these were 5 cumulative conditions, as I read them I got the impression that requirements 4 and 5 were not given the same relevance. As observed in the comments above, the drafting seems to be softer, alluding to facultative possibilities or elements that “may” be taken into consideration, as opposed to 1, 2 and 3 that “must” be required. This impression seems to be confirmed by § 71, which in summarizing the Court’s response does only refer to requirements 1 to 3.
In many ways, it would seems as if the Court had included (4) and (5) as a way of endorsing the Commission’s approach in Motorola and particularly in Samsung.
An open question that remains relates to requirement (4) and the relevance of third party determination given the wording used (i.e. “may”, “by common agreement”, etc).
– Remarkably, there is nothing on the Judgment about the alleged applicability of the ITT Promedia standard for “sham litigation”. As visible from the above, the Court does not approach the case in terms of shams (nor of refusal to supply), but in terms of self-imposed constraints on the right of access to Courts (one more example of the “estoppel abuse” theory identified by Kevin Coates?)
– Also of interest is the Court’s response to Question 5, in which it clarifies that all the above applies only to actions that can prevent products manufactured by competitors to appear or remain on the market (§§ 73-74) and not to other actions (such as those seeking the rendering of accounts in relation to past acts of use of that SEP or an award of damages in respect of those acts of use).
– I’m not sure that the Court has responded to everything in the manner wished by the referring Court (notably, what’s FRAND remains unclear), but I’m pretty sure that it is a strong endorsement to the Commission, the only noteworthy addition being perhaps the reply to question 5.
Competition & e-commerce + Competition law & personal data (save the dates)
Given that my most recent posts have been substantive and lengthy, I think I’ve earned myself a lazy short self-serving post today:
Two events have just been announced concerning some of the trendiest topics in competition law these days, so save the dates:
– On Monday 13 July the Spanish Association for the Digital Economy (Adigital) will be holding a talk about Competition law and e-commerce featuring Thomas Kramler (head of the DG Comp task force in charge of the sector inquiry and one of the greatest experts in competition digital markets) and myself (not head of anything). All info is available here.
– After the summer, on 24 September the European Data Protection Supervisor and the Academy of European Law (ERA) will be hosting a most interesting conference titled “Competition Law rebooted: Enforcement and personal data in digital markets“. I will be sharing a panel with Jorge Padilla and Orla Lynskey. For more info click here.
In the coming days I will also be participating in other fascinating events, including 8 hours of lectures with consecutive translation into Mandarin in Bruges, 4 cartel hearings in Luxembourg, a peculiar race in Brussels that you should join if you’re around, and swimming baby lessons, but I’m guessing I will not be attracting much public to any of these…
On precedent in competition cases, and on the US Supreme Court
As I wrote almost 4 years ago (On the EU and the sovereign debt crisis- Because life isn’t just competition law), discussing about EU competition law considering everything that’s going on these days feels a bit weird; it’s as if in the midst of the Titanic’s sinking we –competition lawyers- were only discussing about the colors of the paper wall of one of its most luxurious ball rooms…
Anyway:
Some years ago, as part of PhD courses, I wrote a pretty lengthy research paper on the value of precedent in EU Law for Professor Gil Carlos Rodríguez Iglesias, the former President of the ECJ. The topic was most interesting. For some time I entertained the idea of turning it into a proper article on the subject and then doing a spin-off for competition cases alone. I now acknowledge I most likely won’t have the time to do that (although I encourage any of you looking for thesis topics to give it a try), but the interest remains.
This is to explain why something the US Supreme Court said in its recent Opinion in a patent case, Kimble v Marvel, caught my attention (the case, concerning a licensed Spiderman product that lets children “and young-at-heart adults” to shoot “webs” from a device held in the palm of the hand; [sounds pretty cool, no?]) reaffirms a precedent –Brulotte– pursuant to which a patentee cannot collect royalties on sales made after expiration of the patent). Actually, many of the things I read there caught my attention, and for different reasons:
As serious antitrust experts, you would mainly be interested in the SCOTUS’ acknowledgment that stare decisis is nuanced in antitrust cases (no news, but it’s always interesting to read it so explicitly). The Opinion -written by Justice Kagan- contains a very interesting discussion about the value of stare decisis (“stand by things decided”) even when it may lead to “sticking to some wrong decisions”. Remarkably, at one point it says the following:
“If Brulotte were an antitrust rather than a patent case, we might [address the issues] as Kimble would like. This Court has viewed stare decisis as having less-than-usual force in cases involving the Sherman Act. See, e.g., Khan, 522 U. S., at 20–21. Congress, we have explained, intended that law’s reference to “restraint of trade” to have “changing content,” and authorized courts to oversee the term’s “dynamic potential.” Business Electronics Corp. v. Sharp Electronics Corp., 485 U. S. 717, 731–732 (1988). We have therefore felt relatively free to revise our legal analysis as economic understanding evolves and (just as Kimble notes) to reverse antitrust precedents that misperceived a practice’s competitive consequences. See Leegin, 551 U. S., at 899–900. Moreover, because the question in those cases was whether the challenged activity restrained trade, the Court’s rulings necessarily turned on its understanding of economics. See Business Electronics Corp., 485 U. S., at 731. Accordingly, to overturn the decisions in light of sounder economic reasoning was to take them “on [their] own terms.” Halliburton, 573 U. S., at ___ (slip op., at 9)”.
This paragraph confirms, once again, that antitrust is an odd legal animal and that general legal principles often apply to it with a twist. It also confirms that antitrust is a discipline in permanent evolution, which is why many of us enjoy it (and even write blogs about it).
But perhaps more importantly, the reflection that this paragraph triggers is that the “changing content” of antitrust as opposed to other disciplines means that it is a product of common sense distilled from decades of experience on individual cases and of established economic thinking rather than a product of political preferences embodied in a statute. Changes in competition law are (most often) dictated by logic applied by technical bodies and judges, not by political agendas. I made already many of those points here.
It is important not to forget this at a time when some, at least in the EU, are talking about changing/adapting the content of the competition rules (i.e. to replace those decades of distilled thinking by a more hands-on approach on the part of legislators, which would imply the adoption of rules guided by the political concerns of the day and not by the evolution of technical knowledge).
As not-so-serious readers of this blog, you’ll probably also be interested by the language used both in the Opinion and in the dissents. Justice Kagan describes the product at issue as “a toy that allows children (and young-at-heart adults) to role-play as “a spider person”, when describing IP protection explains that “Patents endow their holders with certain superpowers, but only for a limited time”, and after referring to a “web of precedents” reasons that “as against this superpowered form of stare decisis, we would need a superspecial justification to warrant reversing Brulotte.” In sum, the Opinion concludes that “what we can decide, we can undecide. But stare decisis teaches that we should exercise that authority sparingly. Cf. S. Lee and S. Ditko, Amazing Fantasy No. 15: “Spider Man”, p. 13 (1962) (“[I]n this world, with great power there must also come—great responsibility”)”. And these are only some examples (our great intern, Pablo, found many others J)
P.S. And speaking of the US Supreme Court, this past week it featured in the news for reasons other than antitrust and superpowers. As you know, in an Opinion authored by Justice Kennedy (of which many have highlighted the last paragraph), the SCOTUS declared bans on gay marriage unconstitutional. This Opinion and the dissents (particularly the controversial ones by Scalia and Thomas) have once again revealed how fascinating those characters are (admittedly, in Europe we have recently learnt that it is not only there that Courts fight internally…).If you have a few minutes, I would very much recommend reading this on Scalia’s dissent, this on Thomas dissent, and, above all, Richard Posner’s brilliant take on the whole thing. [By the way, if you’re interested in knowing what insult Scalia would have for you, click here] I was fortunate enough to take US Constitutional Law with Michael Klarman (who that year won the prize for the best rated professor at Harvard Law School) and possibly the best thing about the lectures were the myriad anecdotes he told about the Justices. Anyone interested in these should read this extraordinary book. Anecdotes aside, and whereas there are a bunch things I don’t like about the Supreme Court, there are a couple that I wouldn’t mind importing to the EU; one is the drafting style and the other is the fact that submissions, transcripts and recordings of hearings are publicly available (
On Human Resources at the European Commision
The European Commission is a great Institution. When I was an EU law student I used to revere it, and now, after knowing much more about its inner workings, my views are much more nuanced, but still overall very positive, particularly in comparison with what goes on at the national level. Still, it is the EU Institution that should be giving impulse to the EU project, a mission that it has not always accomplished in recent times. And in our field, it is the Commission that calls the shots.
Some readers of this blog have remarked that I tend to be “too” Commission friendly. Some friends at the Commission see it otherwise. I see those opposing views as a good thing (for my views on the importance/difficulty of not taking the same side on every issue, see here).
Frequent readers of the blog may also remember me saying multiple times that the human factor is very often what determines whether institutional arrangements work or nor. An organization or Institution without the right people is very unlikely to function as it should. Today I want to insist on that point.
[Those interested in reading more can click here]
On dawn raids and the ECJ’s Judgment in Deutsche Bahn (Case C-583/13 P)
Last week the ECJ rendered its Judgment in Deutsche Bahn, a case that was already discussed in this blog at the time Advocate General Wahl issued its Opinion
For background on the case, comments on the Opinion, and interesting readers’ comments, see our previous post). Those already knowledgeable of the case and of the issues it raises can jump directly to the second half of the post, in which we discuss the ECJ’s ruling and give our views.
(This is a bit lengthy, but I bet you’ll find a couple of interesting points)
The facts. For those too lazy to read the Judgment or our prior comments, the case is, in a nutshell, about an inspection carried out without judicial authorization in the course of which the Commission found documents related to a possible different infringement in relation to which the Commission had received a prior complaint (apparently, and this is key, inspectors had also been briefed about that complaint, although the Commission says this was only for background purposes). Since the subject matter of that evidence was out of the scope of the inspection decision, the Commission adopted a second inspection decision on the fly [old/bad joke alert!]. Those as well as a third inspection decision were later appealed before the General Court.
[By the way, the substance of the case would have also been interesting. The first suspected infringement was about whether Deutsche Bahn could offer preferential treatment to its subsidiaries; does that sound familiar? The case was nevertheless eventually closed pursuant to commitments (see here) which, as it happens, closed the case but did not clarify the law].
The General Court’s Judgment (see here) unsurprisingly confirmed the Commission’s wide inspection powers, stating that there was no need for the Commission to obtain judicial authorisation prior to a raid and that documents discovered (genuinely) by accident which indicated a separate infringement could be used as evidence of that infringement, as long as the proper procedural requirements were respected.
AG Wahl’s Opinion nicely summarized the relevant case law on inspections, and essentially took the view that whereas the Commission shall have a certain leeway when it comes to inspection powers, those already ample powers are to be used prudently, and their misuse must be subject to effective judicial review.
Firstly, with regard to the alleged necessity of prior judicial authorization, Mr. Wahl considered that ex post judicial review on the part of EU Courts already offers an adequate level of protection of fundamental rights, and observed that in Delta Pekarny (a recent case in which the ECtHR ruled that fundamental rights were infringed) the ECtHR decision could be explained by the fact that the inspection decision was not subject to any—either ex ante or ex post—judicial review. Secondly, on “surprise” discoveries, the AG took a different view from the General Court and took issue with the fact that the Commission had informed inspectors about the “second” infringement. AG Wahl suspected the “only plausible explanation […] is that information on the DUSS suspected infringement was given to the Commission staff so that they could ‘keep their eyes peeled’ for evidence related to the second complaint” (para 77). This means that the Commission effectively circumvented Art 20(4) of Reg 1/2003, either deliberately or through negligence. Whereas in Dow Benelux, the Court ruled that there is no reason why the Commission should disregard documents pointing to a different infringement if it was genuinely found by accident, AG Wahl noted in para. 82 that “[t]his is clearly not the type of conduct which the Court meant to allow under its Dow Benelux case-law. There is, in my view, no difference between a case in which the Commission launches an inspection without a valid decision and one in which the Commission proceeds on the basis of a valid decision, but searches for information relating to another investigation, not covered by that decision”.
The ECJ’s Judgment:
On whether a judicial authorization is necessary:
In a prelude of what is to come, the ECJ analyzes the case law of the ECtHR concerning the fundamental right to the inviolability of the home, observing (i) that it states expressly that absence of prior judicial authorization nay be counterbalanced by a post inspection review covering both questions of fact and of law; and (ii) that the EU legal system is premised on that basis, and that its legality under the ECtHR is ensured by the fact that EU Courts carry out an in-depth review of law and fact (unsurprisingly, the ECJ cites KME and Chalkor in support of this declaration). Judicial authorizations are only necessary, pursuant to Art. 20(6) and (7) of Regulation 1, when the undertaking opposes the inspection, which was not the case here.
The ECJ also goes on to explain why this system is also compliant with the fundamental right to effective judicial review, thus dismissing the applicant’s second ground of appeal.
On the “not-so surprise” findings:
The debate before the ECJ focused on whether the Commission had had valid reasons for telling its officials about the existence of suspicious concerning the second infringement prior to the inspection, as declared by the General Court, but as disputed by the applicant and the AG.
I didn’t take for granted that the ECJ would have dealt with the issue given that –as argued by the Commission- it could be characterized more like a question of fact than of law, and as you know issues of fact cannot be reviewed by the ECJ. Nonetheless, the ECJ states very very succinctly in para. 54 that DB “is arguing that the GC erred in law by holding that the Commission had valid reasons to tell its officials about the existence of suspicions concerning [the second infringement] before the first inspection”. The ECJ does not explain why the claim is really a legal and not a factual one (interestingly, the whole incident does not appear in the factual introduction to the Judgment…) but right away asserts the admissibility of the plea [perhaps to reassure some as to the appropriateness of the judicial review carried out by EU Courts in this area??? 😉 ] (to better understand this, we suggest you read our comments below).
As to the merits, the ECJ recalls the relevant case law in the field, emphasizes that the Commission can only search for documents coming within the scope of the subject-matter of the inspection as defined in the decision (para. 60), recalls that pursuant to Dow Benelux the Commission can start new investigations if it comes across new evidence genuinely by surprise (para 59) , but concludes –siding with the AG- that although inspectors need to be provided with background info about a case, “all that information must nevertheless relate solely to the subject-matter of the inspection ordered by the decision” (para. 62). The Court then concludes that the first inspection was vitiated by an irregularity “since the Commission’s agents, being previously in possession of information unrelated to the subject-matter of that inspection, proceeded to seize documents falling outside the scope of the inspection as circumscribed by the first decision” (para. 66). The ECJ decided to give itself final Judgment under Art. 61 of the Statute of the Court and annulled the second and third inspection decisions instead of sending the case back to the GC.
Our comments
–The Judgment is solidly built on the case law of the ECtHR, which is abundantly cited, as well as on AG Wahl’s Opinion, which is also repeatedly cited. It is no surprise that procedural standards have progressively aligned with those set out by the ECtHR, whose great influence in Luxembourg is already now undeniable and increasingly more visible, even pre-EU membership to the Convention.
-As we said in our previous post, we agree with the idea that it would be excessive to necessarily require prior judicial authorization, when ex post judicial review is available, but, in our view, the key issue is that of the quality of the judicial review itself. The ECJ actually cites case law of the ECtHR saying exactly that, “that the key issue is the intensity of the review covering all material matters of fact and law and providing an appropriate remedy if an activity found to be unlawful has taken place (…)” (para. 41 of the Judgment). The ECJ then assumes that since judicial review extends to both matters of law and fact, and includes the power to assess evidence and annul decisions, it is intense enough. In my view, however, scope and intensity are two different things, and the ECJ does not really talk about intensity. Admittedly, the intensity of judicial review is hard to assess, it is more a matter of attitude than of law (as I explained here; in Spanish, sorry…).
– With regard to the misconduct of the investigation:
(i) it may be just me, and I see how this is arguable, but I think it is possible that the Court may have blurred the lines between what is an issue of law and fact amenable to appeal before the ECJ as a way to appease concerns about the intensity of the review required by the ECtHR; if so, that would be an interesting development;
(ii) on the merits, the Judgment endorses a strict approach towards the Commission’s misuse of the very ample powers that it enjoys and that EU Courts recognize –and typically uphold- with no problem. The thing is that when one has such great powers, there is really no need to use shortcuts or engage into arguable practices; the Commission could have avoided this whole problem by adopting two different decisions, or by referring to the two suspected infringements in the same one. Why it did not do that is not easy to understand;
(iii) at the end of the day, in my view, the Judgment is more remarkable for its sensible approach and general message than for its practical consequences (not only was the situation at issue very specific but also I, for one, have first-hand recent experience confirming that the Commision had already learnt the lesson prior to the Judgment being rendered..)
P.S. I offer a couple of rounds of beers to anyone who can tell good inspection anecdotes in the comments to this post (hearsay is admitted) 🙂
Of metaphors, airplanes and the publication of decisions
Metaphors are quite common in antitrust, and there is more to their use than meets the eye, as famously developed in Boudin’s “Antitrust and the Sway of Metaphor“. A while ago Nicolas wrote about the limits of antitrust metaphors, and now @Berlaymonster (a good reason to have Twitter) has spotted an antitrust/airplane metaphor that really went wrong:
And speaking of airplanes, almost 5 years ago I wrote a post about the adoption of the Commission’s air freight cartel decision (for disclosure/advertising: I was involved in that case representing a client who was an addressee of the Statement of Objections but was eventually left out of the Commission’s decision). Following the adoption of the decision it took the Commission 5 years to publish a non-confidential version, and this publication took place coinciding with the oral hearings before the General Court in the case. This delay was pretty controversial and even considered excessive by some national Courts, which have ordered the disclosure of a mostly un-edited version of the decision to a closed group under certain conditions, thus giving rise to a most interesting legal debate.
Not being involved in these follow-on actions I have not followed the cases in detail, but the point I want to make today is a more general one about how practical arrangements concerning the publication of decisions (some perhaps inherent to the procedures currently in place, which Comp cannot ignore in individual cases) can frustrate, or at least contradict, wider policies, notably: is the fact that it might take 5 years for the non-confidential version of a decision to be published consistent with the Commission’s goal of furthering follow-on actions?
And this is not just a matter of publication timing; there’s some element of policy in it as well. Any of you who might have had the curiosity to take a read at recent cartel settlement decision (e.g. the Swiss franc interest rate derivatives cartel decision available here) will have realized about the… frugality of the factual and legal assessment (in the example I’m giving you the description of the infringement is done in merely one paragraph, the full text of the decision is exactly 20 pages and contains no detail at all). Why? Because as we said long ago at the time the settlement procedure was created, the main benefits of the system would not lie in the 10% reduction but (a) in the possibility to “negotiate” (a term that the Commission dislikes) the scope and duration of the infringement; and (b) not less importantly, the fact that a full-fledged detailed fact-intense x-hundred page decision would not be adopted. Fair enough, there may well be good reasons to do this but query: how well does that fit with the Commission’s excellent job of boosting follow-on actions on the policy front?
Having said that, there is even a possible inconsistency within the inconsistency. Sometimes the Commission contends that lack of info in the decisions is justified by the need to protect leniency applicants. But then in some cases (I have this one in mind) it has decided, years after the publication of a first succint decision, to publish longer, more detailed, versions including leniency materials; but query: is this consistent with the policy of protecting leniency applicants?
Admittedly, the Commission has the very difficult task of balancing partly conflicting interests, but, last query, wouldn’t it be better to have a consistent policy rather than saying one thing or the contrary depending on the case?
Comments welcome…
The Association of European Competition Law Judges
Lack of recent blogging activity on my side has to do with the complexities of juggling a particularly busy period at work (currently writing from Luxembourg, again) with parenting a little man, half-training for a triathlon next Saturday (this guy tricked me…) and participating at a couple of very interesting, but not so well-timed, conference appearances. It is about the latter that I wanted to write.
On Wednesday I participated as chair/speaker at ERA’s workshop on competition law in banking and financial services in Brussels [The slides used by all speakers will be uploaded in this post asap]. As all ERA events, it was most interesting.
But on Friday I had the great privilege of being the guest lawyer (literally) at the conference organized by the Association of European Law Judges, the European Commission and Uppsala University in Sweden (pictured above). It is remarkable, and probably unparalleled in any other field, to see a very large number of judges from practically every Member State and with all sorts of different backgrounds getting together to discuss issues such as, in this occassion, multi-sided markets. As I told them, it is quite refreshing to speak at a gathering where attendees are only interested in an honest discussion about the law (and know that there is life and law beyond two provisions in a Treaty). I explained that, by contrast, many other conferences in our field are two-sided and consist of practitioners paying to be listened to by potential clients and competitors… The judges in Uppsala grasped complex stuff, exchanged ideas and were a genuinely nice group of people. I was so impressed that I thought they deserved a mention here, and so do DG Comp’s policy guys, who significantly contribute to making these events possible to the benefit of all of us working in this field. My humble contribution consisted of a tuned-for-judges version of my now stump speech on two-sided markets (my slides are available here: Lamadrid_AECLJ Uppsala
And by the way, in case you haven’t noticed, Chillin’Competition is about to reach its first million visits. Pablo and I are have some ideas on how to celebrate it, but suggestions are welcome!
P.S. Happy birthday to Pablo; as a gift, I promise him a couple of upcoming posts on more substantive stuff
Chillin'Competition 