Author Archive
Two-sided markets in merger and abuse of dominance cases
When you have a 8 9 10 to 9 ? job it’s often quite hard to do things on the side, and, between us, it may not make much sense that many of them are work-related. Only this month, and in addition to ordinary work -which included 5 Court deadlines- and blog posting, I had to lecture in Madrid about 102 (intro, tying and refusal to deal in 3 hours), participate in the panel on interop at AIJA’s antitrust and tech conference on a Saturday morning, finish and present a paper on evidence in cartel cases, and lecture -next Friday- for 6 hours at the Brussels School of Competition on procedure. And since I thought it would be the quietest month in sight, I took a week off for my postponed Christmas holidays (not very smart, no). Overall I spent almost as much times in planes (11 flights this month) as in the office, and had to compensate at the cost of sleeping hours.
Why should you care about all this? You shouldn’t; this is all to explain why during this whole month I kept on swearing myself that -blogging aside- I would refuse any non-work projects for the next few months. Well, said and not done:
On 3 April ERA will be hosting an afternoon workshop on Two sided markets in merger and abuse of dominance cases here in Brussels. They couldn’t have chosen a more interesting topic, so I gladly accepted to chair it. Not only is the subject matter a fascinating one, it will also be dealt with by two great panellists: Thomas Graf (Cleary Gottlieb) and Lars Wiethaus (E.CA Economics).
The program is available here: Two Sided Markets in Merger and Abuse of Dominance Cases (ERA)
WhatsApp, Facebook?
A few hours ago Facebook announced its purchase of WhatsApp, which has been -more or less- valued at over 13 billion euros, one of the most expensive tech aquisitions ever.
As any well-informed competition lawyer may have learnt from recent case-law, this may seem like a risky investment: WhatsApp operates in a dynamic market, in which barriers to entry are said to be almost inexistent, in which there are no technical or economic obstacles to switching to a competing provider (particularly for small groups of people), in which services are mostly provided for free, and in which, despite the lack interconnection, having the largest network with hundreds of millions of users does not give rise to network effects providing a competitive advantage….
If such reasoning were right, it’d be hard to see why anyone would invest over $40 per user of a 55 employees company.
Bitter ironies aside, this deal raises another interesting question: given WhatsApp’s limited turnover I guess it’s likely that the deal will fall outside EU merger notification thresholds. Now, should it? I don’t have a stance on this, but now that there are so many ongoing discussions about the reform of the scope of the Merger Control Regulation, it could perhaps be useful to reflect on whether turnover thresholds are well-suited to reach mergers in the era of free services, in which turnover may not always be good proxy to competitive significance. Think of the possibility that depending on market definition, these transactions could only have to be notified in jurisdictions contemplating market share thresholds (which I’ve always criticized but that remain in place in Spain and Portugal); does that make sense? To be sure, I’m not saying this merger raises any substantive competition concerns; my point is a more general one unrelated to the specificities of any particular case.
Antitrust and Tech Seminar Materials
A few days ago I participated at a very interesting AIJA seminar in Bruges on Antitrust and Technology. All panel discussions were great, but I’m particularly grateful to Pablo Ibañez (LSE) and Kevin Coates (DG Comp) for their participation in the panel I moderated on interoperability issues, which was truly excellent (and not because of me).
The presentations projected at the conference have been made available at AIJA’s website (I include the hyperlinks below for your convenience):
- Technology Licensing and the New TTBER
Dominic Muyldermans – Exclusion of termination for challenge of IP
Olivier Sasserath – Exclusion of the exclusive grant-back obligations
Anna Vernet – update after public consultation
Stefan Vollering – Big Change on a Minor Issue
- Keynote speech – With great power comes great responsibility
Dr Philip Marsden – With great power comes great responsibility
- Caught in the antitrust web -Regulating internet services
Gerardo Faundez – Travel as evolving market
Thomas Graf – The EU Google Investigation
Silke Hossenfelder – German Antitrust Cases in the Internet Economy
Sebastian Jungermann – Regulating internet services
- Patent litigation and settlements -The limits of settlements and Pay-for-delay
Tamar Dolev-Green – Pay-for-delay
Kyriakos Fountoukakos – Patent litigation settlements
Simone Gambuto – latanoprost-pfizer saga in Italy
- Patent strategies and abuse of dominance What are the antitrust boundaries
Miguel Rato and Nicolas Petit – Abuse in Technology Enabled Markets
Maria Troberg – Patent Strategies and abuse of Dominance
Jan Peter Van der Veer – An economic perspective on patent strategies
- Competition law and interoperability
Pablo Ibanez Colomo – Interoperability issues under EU Competition Law
Alfonso Lamadrid – Interoperability
(Image quite possibly subject to copyright)
Nico’s temporary good bye
As Nicolas announced on Sunday, he has just joined DG Comp and won’t be posting for 6 months. I’ve only a couple of things to say:
– To the European Commission (which offered him a job and will now keep his mouth shut and his pen down): very cunning…
– To Nicolas: you’ll be missed and, despite some possible changes, this blog will stick to its original purpose: providing the competition law community with lame jokes and dodgy legal analysis
A high-level football (soccer) quarrel
On December 17 Ombudsman Emily O’Reilly stated that there could be an appearance of “conflict of interest” on the fact that the European Commission had taken too long to open a State aid investigation affecting, among others, Athletic de Bilbao, the team apparently supported by Vice-President Almunia.
No kidding, look:
“The Commission has failed to act on this complaint for more than four years. Not only is this bad administration, but to the European public it can look like a conflict of interest given the Commissioner’s strong links to one of the football clubs in question. In my inquiry, I have not looked into the merits of the allegations concerning the breach of State Aid rules. I trust, however, that the Commission will decide to open an investigation tomorrow in order to investigate the facts and dispel any suspicions.” (see here)
The day following this a bit absurd unusual reproach, the Commission did open an investigation which, by the way, had the effect of suddenly and exponentially multiplying the number of State aid experts in my home-country.
And last week we learnt –thanks to Lewis Crofts and MLex– that the Commissioner –who by now must be, understandably, fed up of being spied upon and even of having Spanish press report on personal matters- immediately responded to Ms. O’Reilly, explaining that:
“I am also a Spanish citizen, a member of the Spanish Socialist Workers’ Party, a keen opera-goer, I enjoy cinema and I use the Internet every day (…). These elements are however irrelevant when it comes to the commission adopting decisions on State aid regarding Spanish cases, or granted by center-left governments, or benefiting cinema or culture in general, or to tackling antitrust issues with Microsoft and Google”.
It is certainly quite unusual in the EU context to point out at “apparent biases” in the way Ms. O’Reilly did, and it makes it more striking that the bias in this case consisted in supporting a given football club.
For instance, we’d absolutely never dare to suggest or imply that it may be relevant to the investigation that Ms. O’Relly is Irish and that Irish football teams haven’t fared well against Spanish teams (with the last Irish defeat occurring in the course of the procedure before the Ombudswoman’s office!) 🙂
By the way, an “interesting” fact for competition geeks: Ms. O Reilly previously worked at Magill and RTE, two of the parties to the well-known Magill case.
P.S. For the record, we predicted this State aid to football clubs mess almost 4 years ago (see here).
Recent developments in abuse of dominance and merger control
Next Friday we’ll be holding the annual seminar on Recent developments in abuse of dominance and merger control within the framework of the course that Luis Ortiz and myself direct in Madrid. Starting at 16.00, this seminar will feature:
Cecilio Madero (Deputy Director General, DG Comp): Introduction and overview.
Nicholas Banasevic (Head of Unit, DG Comp): Competition law and Intellectual Property: Recent developments.
UPDATE. The intervention on Recent developments in merger control has been cancelled.
Milan Kristof (Référendaire at the European Court of Justice): Recent developments in the case law of EU Courts.
For more info you can contact the course’s secretary at competencia@ieb.es or drop me a line at alfonso.lamadrid@garrigues.com (I will be travelling for the next 30 hours (including 3 very tedious transfers…) so don’t expect a rapid response from me).
On information requests and their limits
The latest entry in 21st Century Competition (Kevin Coates’ very good blog; btw, pictured above is a capture of his work keyboard) explains that the Commission has improved its habits regarding information requests and that there may still be some margin for further improvement.
Kevin’s views are, as always, sensible and well explained [he also has good taste for recommending other people’s writings; see here in relation to the ongoing Android investigation]. They also bring a thought to mind: is self-restraint the only limitation -other than the general principle of proportionality- that the Commission faces in relation to its powers to gather information?
Together with my colleagues Luis Ortiz and Napoleón Ruiz (no kiddin’) I am arguing in a case that is currently pending before the General Court (T-296/11) that this shouldn’t be the case [btw, I’m not disclosing anything not public given that an interim measures order was already published].
Article 18 of Regulation 1/2003 provides that the Commission may require undertakings “to provide all necessary information“. In our view, however, this provision should not be interpreted as granting the Commission absolute discretion.
If our interpretation is correct and the Commission does not enjoy carte blanche in this regard, then the criterion of necessity in Article 18 should be interpreted in an objective manner; otherwise it would be rendered meaningless, with the ensuing risk of fishing investigations. We posit that the objective element of reference could only be given by the indications of the existence of an infringement that are already in the Commission’s power, and not just by reference to the subject-matter and purpose of the investigation. The recent and most interesting Prysmian and Nexans Judgments (in relation to inspections) would seem to lend support to this idea.
This interesting question, however, won’t remain open for long. The General Court is set to deliver its Judgments on a few parallel cases on 14 March (with the exception of ours, which had a very interesting post-hearing procedural peculiarity on which I can’t yet comment). We’ll provide you with our views on these Judgments as soon as they’re out.
Breaking news: European Commission will accept Google’s commitments
Vice-President Almunia has just made it clear that the Commission will accept the third version of Google’s proposed commitments. In his words, “the new proposal obtained from Google after long and difficult talks can now address the Commission’s concerns. Without preventing Google from improving its own services, it provides users with real choice between competing services presented in a comparable way; it is then up to them to choose the best alternative. This way, both Google and its rivals will be able and encouraged to innovate and improve their offerings. Turning this proposal into a legally binding obligation for Google would ensure that competitive conditions are both restored quickly and maintained over the next years.”
The Commission’s press release is available here.
What happens now is that the Commission will send complainants a letter (pursuant to Article 7(1) of Regulation 773/2004 informing them that the Commission has obtained what it considers adequate commitments and that in its view there are no longer grounds to pursue the case. They will then have a chance to complain again. The Commission will then adopt a number of decisions: one under Art. 9 of Regulation 1/2003 in order to make those commitments binding, and a number of decisions rejecting all complaints received. I suppose that Google’s very active and well funded rivals will want to appeal those decisions before the General Court (with, I believe, arguable chances of success after the Court’s recent ruling in Microsoft/Skype, which was extremely favorable to Google for reasons that I might explain in a later post). This is, by the way, the outcome we always predicted.
In my personal opinion, this is a wise move on the part of the European Commission. However, it’s unlikely that the Institution will receive much praise: some will say that it demanded too much from Google (particularly given the US precedent), many others will say it’s been too lenient, some will say the investigation took too long, others will claim that it was incomplete. The fact that they will be criticized from both sides may actually suggest that perhaps the Commission has done something right.
As you know, I was never a big fan of the case (see here, here or here among others), but I always saw the proposed commitments (even in their first version) as a balanced attempt at putting and end to it getting the Commission what it wanted without introding too much in Google’s innovative business model. For my analysis of those commitments (as forecasted, despite some improvements the essence doesn’t appear to have varied since then) see here and here.
It will be interesting to discuss this development in the course of the upcoming AIJA conference on antitrust and technology in Bruges this weekend.
Oops! Anecdotal evidence on the assessment of evidence
As I mentioned on a previous post, for quite some time now I have been attempting (or rather planning) to finish a lengthy piece about evidence in cartel cases. Any of you weird enough to also find these things interesting –or who are otherwise obliged to follow the developments in this area- might have also noticed an increased willingness on the part of EU Courts to engage in a critical analysis of factual elements regarding evidence.
One illustration of this intermittent but commendable approach can be seen in a recent Judgment in case T-379/10. The Judgment concluded that the Commission did not have sufficient and reliable evidence to find that there had been a particular infringement (an agreement on minimum prices for low end ceramic products for the French market in 2004 by the members of an association –AFICS-).
In paras. 110-121 of the Judgment the Court motivates its conclusion, assessing one by one each of the four items of evidence put forward by the Commission. In a nutshell, it rules that (i) a third party’s reply to the SO wasn’t valid evidence because it had not been disclosed during the administrative procedure; (ii) that leniency statements by another party, given that they are contested, are not “on their own” sufficient proof of the infringement; (iii) that a chart provided together with a leniency application wasn’t enough, because it was “undated and contains nothing that might link it to the AFICS meeting of 25 February 2004 or to any anti-competitive discussions (…) In particular, the chart does not mention the names of competitors or any minimum or maximum prices which those competitors should apply”; and (iv) that yet another party’s leniency application, despite confirming exchanges of minimum prices within AFICS during 2002-2004, disputed the recollection of facts related to the specific meeting of February 2004. [Keep this last bit in mind; we’ll come back to it in a sec].
Few national Courts would have engaged in a similar assessment. The easy way out would’ve been to say that (ii) and (iv) corroborated each other and were moreover corroborated by (iii), and possibly also by (i). Since the appraisal of factual evidence is not a matter of law (however malleable this may be), that assessment would have most likely not been appealed before the ECJ. The GC nevertheless did not take this safe shortcut, and it should be commended for that rigorous approach. I wish all Courts did the same.
There is a problem, though. This sort of assessment occurs in some cases but not in others. For the most extreme example possible (I’m not aware that this has ever happened before), see…. the very same infringement!! Yep, in two other parallel Judgments issued on the same day, by the same Judges and in relation to the same facts (case T-373/10, paras. 286-296; and T-364/10, para 324), the General Court declares that that very same alleged infringement (really, the same one, the agreement on minimum prices at the meeting of February 24 2004) had been properly found by the Commission.
And the reasoning to do so resorts pretty much to the shortcut I described above; i.e. that (ii) and (iv) corroborated each other. What is more, the party that made the leniency statements that I referred to above as item (iv) actually received a 6% fine reduction for having contributed to proving that infringement (yes, the one that had not been proved in the parallel case!).
So we have two different solutions to the same exact issue. Not sure about how this gets fixed now (I understand there are pending appeals against these Judgment).
I have some friends who like to claim that no one reads Judgments anymore, but I thought that was only endemic outside the Court itself… 😉 In the Court’s defense, however, I guess this -among other things- is what may happen when the workload is very significant and Member States don’t agree on increasing resources (i.e. the number of Judges).
Have a great weekend!
State aid: you don’t know what you’re missing (+ thicko of the day award)
Some of you might remember one of ours posts titled State aid conferences: that’s where the fun is! (Michael O’Leary and Kim Jong Il make for a great marketing combination and attracted quite a few readers) [Btw, today’s picture features another “peculiar” character; see below for an explanation].
In reality, and jokes aside, State aid is a field where much is currently happening, and that most antitrust lawyers often fail to follow and even perceive as distant. Let me explain why that may not make much sense:
Off the top of my head, I would say that around 40% of DG Comp’s decisional output and resources are devoted to State aid. In economic terms, State aid issues generally have much greater repercussions than most antitrust cases (to put just one example, the guys at my office are advising Spain on how to use some tenths of billions granted by the European Council to restructure the financial sector). The substantive issues are no less interesting, complex, and challenging as the one’s posed by antitrust law.
On the other hand, to be sure, political interference is much more frequent, intense, and often less camouflaged (politicians, very particularly French and British ones, seem to be the ones realizing about the impact of these rules) than in antitrust. You might have read this morning about the French Industry Minister, Arnaud Montebourg, openly attacking both State aid rules in general and Vice-President Almunia in particular. In the Minister’s words, the Commission lives in a “legal delirium” and “makes up rules that don’t exist in the Treaties in order to perpetuate its powers”. He also referred to the Commissioner an “obsolete liberal integrist” and asserted that he has the backing of 11 Member States to “revise and liberalize State aid”. For once I will be the controversial one here instead of Nico, and I’ll refer to Monsieur Montebourg as the first recipient of the “Thicko of the day” award (pictured above proudly receiving his trophy) 🙂
Despite all the above (the fun, the legal complexity and the political and economic importance), State aid is not paid the attention it deserves by practicing lawyers. Why? Easy: because those most directly affected often seem to be public authorities (many companies haven’t yet understood the opportunities and the risks associated to these rules), and those don’t pay as high bills as private companies do. (I guess efficiency and profit-maximizing related incentives also give rise to market failures/externalities).
Whereas I agree with the idea that State aid DNA shares more chromosomes with internal market rules than with antitrust law, there are some common feature between the two disciplines. Aside from the fact that they were placed in the same chapter of the Treaty –which led to their enforcement being entrusted to the same body: DG Comp-, State aid law is also always constantly in the making and questioning itself, which is what initially seduced me from antitrust.
An example: on January 17th the European Commission launched a consultation paper on the very the notion of aid. Think about it; no one would dare of doing the same in antitrust, even if very few people (perhaps with the exception of the influential Giuliano Marenco) have a comprehensive theory to explain what a restriction of competition actually is (an idea I also stated here and here).
There’s loads of “low-hanging fruit” in this domain. If you’re interested in an overview of the legal issues involved in determining what an State aid really is, I very strongly encourage you to read Andrea Biondi’s recent piece: State aid is falling down, falling down: An analysis of the case law on the notion of aid (very recently published in Common Market Law Review).
In the past few weeks I’ve taken a few initiatives to compensate for our State aid deficit. On a personal level, I got heavily involved together with José Luis Buendía in drafting and lodging no less than 12 State aid appeals concerning a particularly controverted and interesting decision (little did I know that I’d have to do that in the course of the Christmas holidays; btw, the experience left me wondering how we could manage in the pre e-Curia days). On a blog-related level, we’ve just asked a couple of the best minds in the field to become regular contributors to Chillin’Competition. We hope to be able to announce their coming on board soon.
Chillin'Competition 