Author Archive
Ebooks and Resale Price Maintenance
Last week the European Commission announced the opening of formal proceedings to investigate whether international publishers may have engaged in anti-competitive agency agreements regarding the sale of ebooks (see Press Release). Dawn-raids in connection with this case were carried out last March.
Today´s edition of the Financial Times (edited by Pearson -a publisher affected by the investigation-) features a most interesting piece on a very related topic under the title Don´t make Amazon a monopoly.
Its author -John Gapper- argues that competition authorities in the US and the EU should not challenge the arrangements under which publishers set minimum prices for ebooks and preclude companies such as Amazon, Apple or Barnes&Noble from offering discounted prices. It explains that this is a textbook example of the situation that the US Supreme Court had in mind when it overturned Dr. Miles in its Opinion in Leegin, and submits that it would be paradoxical for competition rules to enable free riding-based discounting on the part of Amazon, thus enhancing its alleged “monopoly”.
This situation and the legal controvery surrounding it raises very interesting questions that go beyond the situation at issue and which have the potential to affect online distribution in general.
Does anyone have any strong views on this?
Economic advice for Christmas shopping
This morning, as I was doing a some last-minute airport shopping for a “Secret Santa” gift for my firm´s Christmas dinner in Brussels tonight, I received an email announcing that Frontier Economics has released a paper on the economics of Christmas. It wasn´t so useful for me because I had severe budget constraints, but it has the sort of fun approach that we like, and we thought you might find it useful or at least entertaining. As they explain on their web page:
It’s easier to think of economists as the prophets of trading doom than as Santa’s little helpers – too busy telling everybody what’s happening to productivity, energy demand and like-for-like sales to provide any insights into the annual exchange of goodwill and good-or-ill gifts to family and friends. So Frontier Economics has been scouring the academic literature of behavioural economics for tips to make that last struggle with your present list a little easier…
If interested in economic advice for Christmas shopping, click here: Present values- The economics of Christmas.
And if you´re one of those who likes to “shop around” for the best deals, you can also check out Waldfogel´s seminal paper on this matter (which Nicolas already recommended last year) and The New York Times´ collection of stories about the economics of Christmas.
By the way, this week is a nervous time for competition lawyers all over Brussels waiting to see if their Christmas break will be wiped out by unexpected Christmas gifts from the Commission!
P.S. This morning we crossed the 200.000 visits threshold. Once again, thank you for taking the time to read us!
An algorithm for competition law conferences
Last week was a very weird one. I spent almost as much time at competition law conferences than at the office. Here is a brief account of how the week went and of the thoughts that this conference overdose triggered:
As I have already mentioned on this blog, on Tuesday I participated at a workshop entitled “What is happening to Article 101 TFEU?” organized by Giorgio Monti at the European University Institute in Fiesole (as you know, Prof. Monti´s idea to hold this workshop was “inspired” by some discussions on this blog). The presentations by Giorgio Monti, Saskia King, Eric Gippini and Luis Ortiz and the discussion we had were all extremely interesting. I was overwhelmed by how smart (an genuinely nice and funny) the group was both during the workshop and outside of it. We tried to make sense out of the object/effect dichotomy and talked at length about what really is a restriction of competition as well as about the “deaths” of restrictions by effect and of Article 101(3). It´s a pity that only a small group could attend. On the plane back to Brussels, Eric, Luis and I mentioned that perhaps we could try to write a brief piece with our “non-mainstream” ideas some time soon. I´ll make sure that they don´t forget about it.
On Wednesday Charles River Associates (CRA) held its annual conference in Brussels. I attended most of the morning sessions and I have to say that the event was a great success. As excellent economists, these guys are conscious of the power of “FREE”. They deserve recognition for holding a free very high quality conference in Brussels.
Then on Thursday there was a lunch talk at the GCLC on the Menarini Judgment. I couldn´t attend, but all I hear is that the speakers were truly brilliant.
The reason I couldn´t attend the GCLC event is that at the same time I was speaking at yet another conference: the International Symposium on Competition Policy organized by the Centre for Parliamentary Studies. I was invited to this event following a recommendation from Nicolas (I really owe you one here, mate -please note the irony-). I was supposed to deliver the final keynote speech on “The future of EU Competition Policy“. I had prepared what I thought to be a fairly original and humorous prediction of what I think will certainly happen in the short term, of what should happen in the medium tem, and of what will inevitably happen in the long term. I´m not very sure that my messages will have the impact I´d hoped for: the audience was composed by two people from the Namibian competition authority, two members of the Malaysian competition Commission, a member of the Danish Ministry of Economic Affairs, a Scot from the Water Industry Commission, and my colleague Napoleón Ruiz who threatened me with taking pictures. Jokes aside, it was fun.
So many hours of sitting at these and other recent events made one thoughts spring to mind: I wouldn´t need the expertise of my friends at CRA to come up with an ad hoc algorithm or formula with which to predict how interesting a competition law conference is supposed to be. The general rule (subject, of course, to exceptions) is easy: the likelihood of getting to listen to new and interesting stuff is inversely proportional to the combination of three cumulative variables: the price of the event, the number of attendees, and the number and lenght of slide decks. It´s generally not a good sign if an event is pricy and crowded. The ones with a greater chance of not being interesting at all are those for which you have to pay in order to be a spayeaker (yes, there are plenty of those!). (Not that so many people care anyway, since some of these events are mainly about networking, a.k.a “free” drinks and nibbles + some gossiping).
That´s why the 1st Chillin´Competition Conference should also be free. We only have to figure out minor details, such us how to pay for it.. Here are some options: Voluntary contributions? Sponsoring? A lottery for a date with Nicolas?
Ideas welcome…
Microsoft/Skype- On how to unconditionally clear a monopoly in Phase I
My “learned” co-blogger (and NY-Times interviewee of the week) initiated a very interesting debate yesterday with regard to the Microsoft/Skype clearance decision. I must confess that I read the decision last evening on the plane back fromFlorence (more on that tomorrow) and, to be frank, I was astonished. Let me briefly, and not exhaustively, explain to you why:
As our usual readers know, I’ve a particular interest in looking at how competition authorities appraise network effects in competition cases (it was the topic of my LL.M dissertation and it’s also supposed to be the topic of a pending PhD project). Since the Microsoft/Skype merger involves two entities benefitting from huge network effects I regarded this decision as a must read.
Well, I was wrong; the decision is a must RE-READ: I had to read certain paragraphs several times in order to make sure that it wasn’t just that I was tired and couldn’t make sense out of it. After several re-reads, I reached the conclusion that, actually, parts of it don’t make any sense.
Nicolas said yesterday that “the decision clearly shows that a merger involving a large monopoly can get Phase I clearance”. I was not involved in this case and therefore I may be missing something but, if you ask me, the decision reads as if the Commission already knew that it wanted to clear the decision in Phase I and then tried to construct an assessment that would fit its pre-determined conclusion. Arguing in a convincing manner that the creation of a “large monopoly” such as the one at issue does not raise competitive concerns and is suitable for Phase I clearance is practically impossible. Nonetheless, that is what the decision has tried to do. And, inevitably, that leads to serious logical problems.
Even from the perspective of an outsider [PS. see note at the end of the post] it’s easy to detect many defects, but for the sake of brevity (notably because I have only allocated one hour of today’s afternoon to write down my notes about this) let’s focus just on one of the Commission’s errors. I have chosen to present you with an error concerning the market for consumer communications because it involves network effects (which is what initially got me interested) and horizontal effects, and because all of us as consumers are able to understand it better. The decision is equally, perhaps even more, questionable with respect to the assessment of vertical and conglomerate effects in the market for enterprise communications, but that part is harder to explain in a brief post; I might develop my views on this in a later post.
In what follows I´ll explain what the decision says in this regards and I will provide you with my very personal views on the Commission´s reasoning. I might be right, but I certainly may as well be wrong. If interested in taking a look at the substantive stuff in other to arrive to your own conclusions, click here:
Do economists do it with models?
Things are busy at work, and I just remembered that I told Nicolas I would take care of posting something today. When such things happen we generally resort to either (a) announcing a conference; or (b) posting a quick joke.
In this case, if I had chosen a) the post would´ve looked too short; but if I´d chosen b) I would be missing an opportunity for self promotion to announce an interesting event. Solution: let´s do both:
(a) Conference announcement: As anticipated last week, Giorgio Monti has put together a most interesting workshop that will be held next Tuesday (6 December) at the European University Institute. The program -which features Giorgio Monti (EUI), Saskia King (LSE), Luis Ortiz Blanco (Garrigues), Eric Gippini-Fournier (European Commission´s Legal Service) and myself- is available here: What is happening to Article 101 TFEU?
(b) Joke of the day: Economists don´t do it with models. The picture above (which I first saw in a ppp by Fréderic Jenny at Fordham last September) stands for the proposition that economists do it with models “because there´s no shortage of demand for the curves that they supply“.
Nonetheless, as you all know, economic theory can be used to defend one thing and its contrary. That is why there´s an alternative economic theory that explains why economists don´t do it with models. If you want to know about it, click here.
Antitrust Compliance
The European Commission has just released a brochure entitled Compliance matters: What companies can do better to respect EU competition rules.
The foreword says that companies should “[l]ook at this brochure as a road safety brochure ahead of the holiday period“. Many of the companies reading this will be certainly comforted by the irony positive thinking underlying the reference to the holiday period ahead.
In essence, the Commission´s document contains the following messages: (i) breaching competition law isn´t cool and naughty companies can be punished; and (ii) companies should have tailor-made compliance programs.
When I received the brochure this morning I was curious to read the Commission´s advice on how firms could stay out of trouble. After a quick skim, I see that the closest to constructive advice on substantive matters is this profound passage:
“DON´T fix purchase or selling prices or other trading conditions; DON´T limit poduction, markets, technical development or investment; DON´T share markets or sources of supply; DON´T exchange individualised information on intended future prices or quantities or other strategic information.”
I have the feeling that most of the readers of the brochure already had some kind of intuition that they couldn´t do such things. Moreover, some of that advise is rather hard to put in practice (e.g. “limiting investment” : could bank’s refusal to grant credit be considered a breach of competition law?; “limiting production”: shall a company make some more of this product that isn’t selling too well?; “limiting a market”: how does one limit a market? ).
In any case, and leaving easy jokes aside, the Commission must be applauded for its attempt to foster a compliance culture. Other competition authorities such as the OFT and the Autorité de la Concurrence should also be commended for their efforts on this area. Moreover, the Commission has provided much general guidance elsewhere and it cannot be expected to do so on a brochure like this.
In fact, the message about the need for companies to have an effective and tailor made compliance program is welcome and important. The brochure basically sets out the fundamentals of compliance program design, and whereas it does not say anything groundbreaking it does a good job in explaining the basic stuff.
The Commission doesn´t seem to contemplate further incentives such as fine reductions for companies with established and appropriate compliance programs. The French competition authority has proposed fine reductions, but on an ex post basis and only in the framework of settlement proceedings. But why not take a bolder step? I tend to understand those who argue that it doesn´t make much sense to reward firms that have breached the law ignoring such programs, but what about those cases where the company has a clear policy and intention of complying with the law, but one or a few “rogue” executives act on their own? (we all know many instances where this has been the case). It all would come down to assessing what standard the firm had set and whether it complied, as a firm, with that standard. This point was also made by D. Geradin (with the support of J.Wileur and D. Malamataris ) on an interesting recent paper. Companies should not be rewarded for breaching the law, but it would be fair to limit the damage when it can be shown that a given company has done everything it could.
At the end of the day, the content of the Commission´s document is ok given what can be expected from a non-specialist brochure from the Commission. What is more worrysome is that I have seen (more than once) very similar “brochures” which had been sold to companies prêt à porter (not tailor made; i.e copy/paste jobs) and at ridiculous prices. I´m currently working on a couple of compliance programs, and, to be frank, general and vague programs aren´t useful for the companies nor for lawyers (unless billing is considered to be the sole parameter). On the contrary, ad hoc programs adapted to particular firms and markets are extremely useful for firms as well as extremely interesting for lawyers, since we get to be in touch with a wide array of strategies and practices in many different markets. A subversive thought springs to mind, shouldn´t clients also draft some compliance programs on professional service standards for some law firms?
Antitrust litigation over the .XXX domain
An interesting piece of news was left out yesterday: an adult website company owner has filed an antitrust lawsuit against the International Corporation for Assigned Names & Numbers (ICANN) contending that website owners are “forced to pay excessive fees for .XXX defensive registrations” that may have little or no value.
We suppose you may not be aware of this, but the landrush period for the .xxx domain has been running since 8 November and until 25 November. General availability will commence on 6 December. This means that many companies are right now engaging in defensive registration in order to preserve their image by avoiding third parties from, for instance, registering a web with their brand name under the .XXX domain. As you know, that also happens often with regard to less problematic domains such as .com .net or .org. Why? One example: if you click on www.whitehouse.gov then you´re directed to where you want to go, but check out what happens if you click on www.whitehouse.net .
Antitrust concerns in relation to the ICANN aren´t new. Back in 2003 Professors Frookin and Lemley argued that the ICANN and its policies were contrary to antitrust law (Click here for their interesting paper ICANN and Antitrust).
The full case docket and legal filings are available here.
Some interesting and recent stuff
There has been some interesting stuff going on in the past few days that we haven´t been able to cover. Here’s a brief (and subjective) account of some recent antitrust related news:
– Bill Gates has been (and at the time of writing he may well still be) testifying in a Utah Court in the framework of a case initiated by Novell. Novell is arguing that Microsoft encouraged them to develop WordPerfect software for Windows, only to later withdraw its support because WordPerfect competed with other Microsoft products. Judge Motz, who is presiding over the case, has reportedly expressed skepticism that Novell’s claims have merit.
– Chinese authorities confirmed that there is currently an ongoing investigation concerning a possible abuse of dominance on the part of two State-owned companies (China Telecom Corp. and China Unicom). The antitrust branch within the NDRC is investigating whether these two companies -allegedly dominant in the market for broadband internet services- may have been charging their competitors higher fees for broadband access while offering favorable prices to non-competitors. This is to our knowledge the first high profile abuse of dominance investigation since the Antimonopoly Law was enacted in 2008. The fact that it is targeting two State owned companies makes it particularly interesting. We’ll be asking our “Chinese correspondent” to keep an eye open for any possible developments.
– Here´s one that I´m following with particular interest: NBA players hired the very well known antitrust lawyer David Boies to represent them in their battle against franchise owners that has led to the NBA lockout. The players have now filed two class action lawsuits (one in Minessota and one in California, which are considered to be favorable venues) asking for treble damages (that is, triple the amount of the more than $ 2 billion they would´ve made this season). The lawsuits argue that the lockout “constitutes an illegal group boycott, price-fixing agreement, and/or restraint of trade in violation of the Sherman Act” an hat the owners´ final offer for a new collective bargaining agreement would have “wiped out the competitive market for most NBA players”. (For our comments on the very similar NFL precedent see here).
– Giorgio Monti (Professor at the European University Institute in Florence and author of one of our favorite competition law textbooks) read our posts on Pierre Fabre and on the future of Article 101 and invited us to participate at a workshop in Fiesole on January 5th. Should be very interesting; we’ll give you more details in the coming days.
– Antitrust students at Berkeley have started their own Berkeley Global Antitrust Blog. Best of lucks to them!
-Finally, last week we received a couple of emails from readers that reveal that my co-blogger Nicolas is apparently becoming a celebrity. One reader told us about the fact that there is a Nicolas Petit street in Luxembourg, and another reader sent us a picture that shows that a young competition lawyer has a picture of Brad Pitt Nicolas above her desk (!)
See pic below for evidence. We´ll keep the identity of Nico´s fan secret in order to avoid any incidents with Ms. Petit ; )
On the EU and the sovereign debt crisis (because life isn’t just competition law)
We spend most of our time working on competition law matters – be it in academia or in private practice-, and we also spend part of our free time trying to look at competition law from a different angle on this blog. If we devote so much time to try to make sense –and sometimes fun- out of competition law it isn’t because we believe that competition law is more important than other stuff. For all its many virtues, it actually isn’t.
We started this because we thought there was something a bit different that could be done within our tiny and endogamic professional circle, and because we only feel comfortable speaking out loud about issues on which we feel we can add something coherent and hopefully useful (as you can imagine, writing every day what comes off the top of our heads without thorough reflection and in front of such an informed audience as you are means entails certain challenges and risk, notably the risk of making fools out of ourselves). In other words, we do this because we thought there was something meaningful –if only a tiny bit- that we could add to the area in which our professional lives are focused.
But even though our economist friends could argue that we are rationally choosing to exploit our competitive advantage, we can’t help thinking sometimes that maybe our priorities are somehow skewed. One example: while EU leaders were holding crucial talks in Brussels–just a few meters away from my office- on October 27th and 28th, we were writing here about the names of partners at an American firm as well as about the “slow death of Article 101(3)”. Wouldn’t it have made much sense for us to write about the slow death of the European project?
We are just as politics geeks and fervent EU supporters as we are competition law geeks; the difference is that we feel, or rather know, that you wouldn’t give a damn about our personal views on general issues on which our opinion is not different from anybody else’s; that’s why we’ve only gone off track on very rare occasions. There are times however where we feel that we have to give vent to some non-competition related thoughts.
There are some things we simply can’t understand. We don’t have solutions and are not going to fix the world, but since we need to let some steam off, we thought we’d use this platform.
If interested in knowing what we can’t understand, keep on reading. If not, we’ll be back tomorrow with the usual stuff, and apologies for going off-track.
28th Annual AmCham EU Competition Conference
Next Wednesday (November 9), the American Chamber of Commerce to the European Union will be holding a most interesting conference in Brussels.
This event may have gone unnoticed for some of you, but we think it´s interesting enough to bring it to your attention (it´s also good way for us to show that we don´t discriminate the links displayed on our blog in favor of our own events…).
The AmCham Conference will feature one panel on the role of EU Courts, one on fining policies, and one on procedural rights. The line up of speakers is also impressive (and includes some friends and readers of this blog). For more details, the program is available here.
Those interested in registering can still do so via this link.
Chillin'Competition 