Author Archive
Fine and Punishment
In the article that kept me working during my otherwise summer holidays last year Luis Ortiz Blanco and myself wrote for the Fordham Conference held last September [the final version is published here; a draft version is available for free here] we quoted one of our “Friday Slotters”, Ian Forrester, (actually, he was the one who proposed “The Friday Slot” as a name for the section) saying that competition fines imposed by the Commission “exceed fines imposed by the public authority in any democracy of which I am aware for any offence“.
Some evolution is apparently taking place in this regard. Look, for instance, at the $3 billion fine that GlaxoSmithkline has agreed to pay for promoting its best-selling antidepressants for unapproved uses and failing to report safety data. Take a look also at this very interesting graph, which points out at the largest corporate fines and settlements in the past seven years, and also presents the fine as a percentage of the yearly income of the sanctioned companies.
During a Paris-Brussels train trip last night I read an interesting piece on The Economist that deals precisely with the recent increment in corporate fines using international cartel fines (which reportedly “rose by a factor of one thousand between the 1990s and 2000s”) as the main example.
The Economist‘s piece draws on economic research to justify the conclusion that “to deter bad behavior fines need to rise”.
You may recall that our guest Benoît Durand dealt with this same issue some posts ago and came to a contrary conclusion: that deterrence would be better served by envisaging individual sanctions (fines, disqualification and/or prison penalties) for the executives directly involved in cartel meetings. We haven´t really thought this through, but we’re not big fans of prison penalties, nor would we favor the imposition of disproportionate individual fines. A well designed disqualification sanction, however, would appear to us as a reasonable measure. Any views?
Oops!
Monsieur Petit seems to have abandoned this blog in order to share his thoughts on an exclusive basis with US media. On Wednesday he was quoted again in The New York Times, this time in relation to yet another a new investigation on Microsoft’s non-compliance with a Commission’s decision.
As you may know, the Commission issued a statement announcing an investigation over Microsoft’s possible non-compliance with the 2009 commitment decision which obliged it to include a brouser choice screen to enable users to pick a browser instead of using the pre-installed one (until then Internet Explorer).
Microsoft has also issued a statement apologizing and explaining that:
“We have fallen short in our responsibility to do this. Due to a technical error, we missed delivering the Browser Choice Screen (BCS) software to PCs that came with the service pack 1 update to Windows 7. The BCS software has been delivered as it should have been to PCs running the original version of Windows 7, as well as the relevant versions of Windows XP and Windows Vista. However, while we believed when we filed our most recent compliance report in December 2011 that we were distributing the BCS software to all relevant PCs as required, we learned recently that we’ve missed serving the BCS software to the roughly 28 million PCs running Windows 7 SP1”.
The Commission has anticipated that it might impose “severe” penalties.
Keith Hylton (Boston University) has stated that the Commission is overreacting because “there may be a few people on the planet, living deep in forests on the Marshall Islands, who are not already aware that Microsoft’s Internet Explorer is not the only browser available”.
The well-informed and ironic reader who has conveyed Mr. Hylton’s statement to us responds that “whoever at Microsoft was not aware that they had to include a browser choice screen in Windows must also live deep in the forests in the Marshall islands, and whoever told the Commission in December that such error had not happened must live in the woods next door”.
We lack any precise information about this investigation but it’s hardly conceivable that Microsoft would do this on purpose, so, just as Microsoft says, this is most certainly due to an unfortunate mistake.
In any event, this story shows that antitrust law does perhaps not worry some companies as much as we usually think. Most importantly, the fact that nobody had noticed until now that 28 million copies of Windows had been sold since February 2011 without the browser choice screen says something about how compliance with antitrust commitments is monitored…
Enforcement menu: shrimps
Last Friday the European Commission confirmed that it has addressed a Statement of Objections to four traders of North Sea Shrimp over a suspected cartel. We learnt the news through one of the sites that we check several times a day: www.seafoodsource.com; see here).
Some of you have conveyed to us the suspicion that, in reality, DG Comp has sent this SOs in an attempt to force us to write about it. According to this theory, the guys at Bubba Comp, DG Gump. DG Comp were worried about our silent week and decided to resort to the big guns: a food case. Judging by precedents (notably our well known endive saga), they knew that we wouldn’t let it pass by without a comment.
As credible as this theory may sound…. the sending of these SOs at this time of the year is in reality a classic piece of July desk clearing on the part of the Commission. Getting one of these right before the holidays is one of the occupational hazards of being a competition lawyer in private practice in Brussels (the other one coming the run up Christmas).
In any event, we should not be making jokes about this. It is a serious matter. Nicolas – a renowned shrimp consumer may moreover be a victim of this alleged shrimp conspiracy- One nonetheless wonders: have they caught the big fish? It certainly isn’t small fry!
PS. A Chillin’Leak: We have been told by very reliable sources that the Commission found the evidence for this case during a “fishing expedition”.
On inactivity, records, and Chillin’Competition becoming a real estate portal
Last week we broke two records.
First, we broke our inactivity record. Christmas holidays aside I believe this was the first “blank week” in the two years of existence of this blog. The reason: I took a week off (some days of calm before a storm, or at least that was the idea…it didn’t quite work) and asked Nicolas to take care of the blog. You saw how diligent he was. In any event, we hope you were entertained by the comments to the last of our posts (they were practically posts in themselves, and from extremely qualified commentators).
Second, in spite of this inactivity we were rewarded by readers, by reaching 310,000 visits we overpassed Nicolas’ former blog The Antitrust Hotch Potch in terms of historical number of readers. For the sake of transparency: our 20,000 visits during June yielded $ 3.60 of revenues, unfortunately not enough for the two monthly beers we had hoped for 😦
One more thing: A few days ago I had a conversation with Conor Maguire (who is doing a great job at Brussels Matters) about what we try to do at Chilling’Competition, how we try to do it, and where we get our ideas from. He mentioned in passing that he had liked one post where we acted as intermediaries for the sale of a competition lawyer’s car and one in which I “advertised” my parents’ hotel. This conversation, as well as the fact that you tend to click more on gossip links than on serious ones (stats don’t lie!) spurred an idea: to act as an intermediary for the sale of my co-blogger’s former house. I already showed you his desk one (see here), but those of you curious enough potentially interested can check out the whole house and ad here. (Btw, the pic at the top of this post is that of the house’s terrace).
The usual incentive applies: anyone who contributes to an aventual sale of Nicolas’ house will be rewarded with 3% of the price of the house… in Belgian beers.
Case C-128/11 UsedSoft v Oracle
Note by Alfonso: The Court of Justice has published yesterday its long-awaited decision in UsedSoft v. Oracle. Even though the matters are issue are mainly IP-related (they concern the application of the so-called “exhaustion doctrine” to computer programs), they have important competition law implications. Marcos Araujo (a friend of ours and a partner at Garrigues) has followed closely this case as well all others concerning the intersection of IP and competition law. We’ve asked him to provide us with his first views on this very fresh Judgment. Here they are:
In a Grand Chamber judgment, the ECJ has taken a determined stance in favour of THE free movement of goods and the exhaustion doctrine. Today’s Judgment has dismissed not only Oracle’s arguments, but also those raised by the Commission and by the various intervening Member States, and has affirmed vigorously the right of licence holders to “resell” their rights of use of computer programs, supporting intermediaries and end customers in the way.
The case had attracted much attention given the contradictions in this area of European Law, which on the one hand declares that the sale of computer programs exhausts the rights of the owner (art. 4.2 of Directive 2009/24) and therefore that the program can freely be re-sold, and, on the other hand, states that the provision of services over the Internet does not cause exhaustion of rights (Recital 29, Directive 2001/29). In this situation, software companies which license (and arguably do not “sell”) software over the internet may claim that their IP rights should not be deemed to become “exhausted”, as they would be providing a service rather than selling a product.
Intel Hearing at the General Court today
The Court hearing in the Intel case started today in Luxembourg.
Aoife White from Bloomberg has written a piece on it in which she quotes my view that, following the Tomra Judgment, Intel’s chances of having the fine annulled or reduced appear to lie more on procedural than on substantive grounds.
Thanks to a a very kind Luxembourg-based reader of this blog we can make the Court’s report for the hearing available to you: Intel Report Hearing
Tacit cartels
A year and a half ago we anticipated that there was a rumor that the European Commission was thinking about attempting to prove a cartel by resorting to indirect economic evidence instead of to “smoking-gun” sort of evidence. See here. We said back then that economic analysis may be very useful for the purpose of identifying cartels, but that it may not be sufficient to prove their existence.
A few developments have taken place since we wrote that post. To mention only three: (i) the case -concerning cement producers- was indeed formally opened; (ii) I became involved on it as one of the lawyers for one of the investigated companies, which is why I’ve never referred to it again on this blog; and (iii) a number of affected companies -including our client- appealed the Commission’s decision requesting the said companies to dig their own grave provide the millions of data necessary to cook the economic evidence.
We won’t talk about this ongoing investigation nor about the pending Court cases. What we want to bring to your attention is that the Competition Commission of India (CCI) has already made a very similar move by sanctioning (with $ 1.26 billion) 11 cement producers for an alleged cartel on the basis of circumstantial economic evidence. See the press release here.
The CCI’s case is built on the observation of price paralellism, increases in price following certain meetings, low levels of capacity utilization, dispatch paralellism and the earning of super-normal profits.
As I told my new Korean friends last Tuesday, competition law is becoming a discipline with no center. It’s therefore safe to guess that we will be seeing many additional test-cases initiated in jurisdictions other than the US and the EU.
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Another different but very important news: more than a month has gone by since WordPress selected us for a pilot project pursuant to which AdWords are now displayed on Chillin’Competition. We are very happy to report that the approximately 25.000 visits that we’ve had since then have almost made us rich. We have so far earned 9,80 euros!!! In another month we’ll save enough money to pay a couple of beers 😉
Case T-167/08, Microsoft v European Commission
I’ve just returned to Brussels after spending a great day of immersion into Korean culture in Frankfurt. The Korean Fair Trade Commission invited me to speak about international cartels to approximately 100 Korean executives of Korean companies operating in Europe within the framework of an Anti-Cartel Workshop [check out the program: Anti-cartel workshop :)] I had a great time in our very unorthodox and fun session as well as in the different social events with which they treated me afterwards. To all of them: 감사합니다 !! We have more things to tell you about this event and about recent trends in cartel case-law, but, first, let’s deal with today’s big news:
This morning the General Court issued its judgment with regard to the periodic penalty payment of 899 million euros that the Commission imposed on Microsoft for not complying adequately with the Commission’s 2004 infringement decision and, in particular, with the obligation to provide interoperability information under reasonable and non-discriminatory conditions. (Click here to read the Judgment).
We believe this post is the first hastily written analysis of the Judgment. Apologies for the long post, but this time we think we have something interesting to say.
[btw, you might recall that in previous posts we talked about the Hearing in this case (here), and even provided you with the report for the hearing (see here)].
I have only had time to skim through the Judgment, but here’s how I think its main points can be interpreted: Read the rest of this entry »
Competition enforcement in Spain
A member of the Board of the Spanish Competition Authority said a few weeks ago that the institution is on the verge of a dismantling process. The statement was made in relation to a draft law that aims at merging the competition authority with sector regulators in order to create synergies, avoid inconsistencies and save some money (the latter being, of course, the current overarching principle of all Spanish policies).
Although I could see some usefulness in discussing some of the proposed changes, most Spanish practitioners, the members of the CNC, and the current sector regulators are not big fans of the current hastily drafted draft Law. We personally tend to share some concerns with regard to the current version of the project.
I have not always agreed with the CNC’s way of doing some things, but disagreeing with them is part of my job. Overall, however, the CNC has done a good job, and it has certainly increased the public awareness about competition law in Spain to unprecedented levels. Attempting to save some pennies by reshuffling an efficient (and “profitable”) organization may not be a smart move.
At the political level there’s the question of whether this reform should be one of the countries’ priorities right now. From a strictly legal point of view, blurring the frontiers between the applicable standards, attitudes and instruments used in competition enforcement (a sanctioning system with criminal features) and those characterizing sector regulation can be -if not well thought out- very problematic.
We’ll develop our views in a few days (consider this as an appetizer); for now, it suffices to observe that the uncertainty brought by the prospect of immediate changes (which are also reportedly aimed at expected to affect the members of the Board) is significantly affecting enforcement. Whereas in the past we branded the CNC as “overzealous“, the tide has now turned and the Spanish watchdog seems to be on a sleeping mode waiting mood. (yes, we like complaining no matter what).
The latest investigation concerns bullfighters. No kidding: see here.
As if I hadn’t heard enough clichés about Spain over the past few weeks!
Random thoughts on life at law firms
Our most recent posts speak for themselves: both Nico and myself are currently quite absorbed by work and have struggled to find the time to write some sensible and substantive stuff here (we’ll be back to substance next week) nor to attend the various social competition law events taking place these days. [Query: if everyone is partying or writing blogs, who works here??!] . However, the “hecticness” of these past few days has spurred some random thoughts with regard to life at law firms (the fact that for the first time ever I have to alter my summer holiday plans because of work has also contributed to some intense reflection). Here they are, in the hope that they give rise to some debate: Read the rest of this entry »
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