Author Archive
ABA 2010 Antitrust Year in Review
The very active International Antitrust Law Committee of the American Bar Association (ABA) will present tomorrow, at the ABA’s Section of International Law Spring Meeting, a most interesting report that analyses and summarises the key antitrust developments that took place during 2010 in 49 jurisdictions around the world.
Check it out here: ABA 2010 Antitrust Year in Review.
The report (which has been coordinated by Susana Cabrera, Konstantin Jörgens and Álvaro González, friends and colleagues at Garrigues) really is an excellent tool for anyone interested in a quick but thorough update on international antitrust.
Microsoft´s complaint against Google
It´s been reported today that Microsoft has lodged a formal complaint with the Commission. So far the news have basically reported what was said in a blog post published last night by Microsoft´s General Counsel, so we´re going to try to be the first ones going a little beyond.
I´ve already stated my views on many of the issues which the complaint presumably deals with, but I will add here some ideas (and insist on others). As usual, a disclaimer is in order: my views are those of an outsider with no access to information other than that which is public.
This will, once again, be a bit lengthy, so, if interested, you can click here to keep reading.
RE: Information exchange=cartel?
Some days ago I wrote a post on the change of approach towards exchanges of information set out in the new EU horizontal guidelines, in which I challenged the assertion that this practices should (or could) be equated to cartels (an assertion which, as I see it, has come out of the blue) and expressed my concern over the possibility that the statements made by the Commission in that document could be interpreted in a excessively wild wide manner by overzealous enforcers.
Since then, I have received various comments on that post. Since we´ve always liked the idea of fostering as much interaction as possible on this blog and most of those comments are not visible here, I´ve decided to provide an overview of what some of them said (other must be kept confidential) and, where necessary, to reply to some of the questions they raise. I have checked with their authors and have only mentioned their names where theu have given their express consent.
This will be lengthy, so, if interested, click here to keep reading.
Google Books Settlement Rejected
Some of you will recall that roughly a year ago I wrote a post on the Google Books settlement (“Google Books Settlement: It´s the search market stupid!”) in which I argued that the only competitive problem, if any, posed by the amended settlement related to the search market. [In that post we also directed you to the transcript and a very good summary of the fairness hearing (Part I ; Part II) which may allow you to better understand all subsequent developments].
Yesterday, Judge Chin, of the Southern District of New York, issued an opinion concluding that the Amended Google Books Settlement (“ASA”) is not fair, adequate or reasonable, precisely because it would further entrench Google´s maket power in the online search market. The Opinion is available here.
Judge Chin acknowledges that Google´s plan of creating a universal digital library would bring about great benefits for many, but concludes that the ASA “would simply go to far”. In his view, “it would permit the class action to implement a forward-looking business arrangement that would grant Google significant rights to exploit entire books, without permission of the copyright owners. Indeed, the ASA would give Google a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission, while releasing claims well beyond those presented in the case“.
From a reading of the opinion it is obvious that (i) Judge Chin has conferred significant relevance to the number and vociferousness of the objections presented to him, and has mainly based his Opinion upon them; and (ii) the decision is to a great extent motivated by concerns which are not directly antitrust-related, such as those over the adequacy of class representation (e.g. foreign authors), involuntary expropriation of copyrights by virtue of the “opt-out” mechanism, or the alleged improper use of the settlement of a class action to regulate a aspects of a “forward looking” business arrangement which had not been raised before the Court.
With regards to the antitrust concerns posed by the ASA, and after referring to the submissions made by several parties, Chin concludes that “Google´s ability to deny competitors the ability to search orphan books would further entrench Google´s market power in the online search market”.
Most, if not all, of the concerns outlined in the opinion would be addressed “simply” by switching from an opt-out to an opt-in model, although that would surely be detrimental to the scale and quality of the service provided and could perhaps even affect the viability of the project. Balancing all the interests at stake is certainly a daunting challenge.
There are no easy answers to the many fascinating issues that arise in connection with this case. In fact, its interest lies precisely on the fact that those issues can only be addresses by adopting a defined stance with regards to the core, almost ideological, debates underlying our discipline (amongst others, and to put a couple of them in their most basic terms: would we rather have a natural or de facto monopolist providing a service that no one else can provide, or would we rather prefer a counterfactual where we renounce to have that service for the sake of not having a monopolist controlling it? What room is there for fairness concerns in antitrust analysis?).
These are particularly complicated days at work, but you can expect a more detailed commentary of Judge Chin’s Opinion from us once things clear up a bit.
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PS. And speaking of Google, as announced here some days ago, on Friday I will be presenting a discussion on antitrust issues in cloud computing featuring Tero Louko (Google) and Carel Maske (Microsoft).
Other panels will feature Jennifer Vasta (Qualcomm), Thomas Kramler (European Commission), Luis Ortiz Blanco (Garrigues), Álvaro Ramos (Cisco), Miguel Rato (Shearman&Sterling), Pablo Hernández (SGAE) and Daniel Escoda (Telefónica).
A sexy case
A good friend who has asked us to keep his identity confidential informs us of a possible new case in the Netherlands.
An online retailer (willie.nl) has asked the Dutch Competition Authority (NMa) to investigate the conduct of two wholesalers which would have ceased supplying it with erotic toys and costumes. willie.nl attributes this decision to the fact that it deviated from recommended sales prices. Apparently, the NMa has replied that more hard evidence is needed
The news has also appeared in the Dutch business press.
Nicolas is in Amsterdam today carrying out a field investigation.
(After an intense fight with my inner self I´ve decided to omit links and pictures this time).
The US Senate´s Antitrust Agenda (and a false debate)
Herb Kohl, the Democratic Senator chairing the US Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights announced yesterday the Subcommittee´s agenda for the next session of Congress.
The leitmotiv of the agenda is the idea that vigorous antitrust enforcement plays a vital role in ensuring consumer welfare. In particular, it appears that the Senate has its eyes set on the freight railroad industry; prescription drugs; gasoline, natural gas and oil markets; agriculture; media/Cable/satellite; airline competition; the broadband industry; and health care organizations.
In addition to those, some of the items in this agenda might affect EU competition law:
First, Kohl insists on the necessity of a statutory prohibition of resale price maintenance, arguing that the Supreme Court´s decision in Leegin “has the potential to seriously harm discount pricing and retail competition“.
Second, there is a specific mention to online markets and internet search issues. The Senate appears to be ready to conduct hearings on Google´s allegedly discriminatory practices in parallel to the investigation conducted by the European Commission (which we´ve covered here, here, or here), and, in clear reference to the Google/ITA Software controversy, also asserts its willingness to “closely examine the impact of further acquisitions in this sector“. It could be interesting to see how these two investigations overlap and affect each other.
Thirdly, and somehow related to the last point, is the Senate´s committment to “continue to examine closely how U.S. multinational companies have been affected by different antitrust regimes in various countries“. This is also a debate with which we´ve dealt before and that, to be frank, still perplexes me. I will explain why in a second.
But first, let´s make clear that, to be sure, Kohl´s agenda appears to be fair in referring to the varios viewpoints that have been expressed on this issue. The document reads as follows:
“Complying with the antitrust laws of different countries, which often have differing substantive and procedural rules, is increasingly becoming a burden on U.S. businesses. Over the past several years, foreign and in particular European regulators have been aggressive in their review of American companies’ business practices. Some have argued that these same foreign regulators have unfairly used their power to discriminate and hinder American corporations. On the other hand, many times those bringing complaints regarding the business practices of American companies to foreign antitrust enforcement agencies have been other American companies. Further, advocates of aggressive international enforcement argue that this enforcement is warranted. Exploring the validity of these claims will be an important priority for the Subcommittee”.
It´s shocking to see how widespread this idea that the Commission only targets US firms is, and how little factual support it has. Here are some reasons why I think that this whole debate should be a non-issue:
– It is a fact that in recent years the European Commission´s stance in some areas, particularly on abuse of dominance cases, has been tougher than that of US agencies (especially under the Bush administration). You may or may not agree with the Commission´s viewpoints ( I, for one, certainly don´t share a lot of the reasoning behind the Microsoft cases and the Google investigation), but it´s clear to me that if US firms are the main targets of such investigations it´s mainly because in most cases US firms are the dominant players worldwide. In fact, I wish more European firms were in a position to be subject to similar investigations in the US…
– European companies have to live with the precedents set by the Commission and the EU Courts and shape their strategy according to it. Consequently, if the law were really irrational or established excessively low thresholds for competition law intervention, as some claim, that would mainly be to the detriment of the competitiveness of EU companies.
– In spite of what the record fines on abuse of dominance cases may suggest, the reality is that fines on foreign companies, and US companies for that matter, represent a very small percentage of the total fines imposed by the Commission.
– In contrast to the above, fines on non-US firms represent nowadays the lion´s share of the the total fines imposed by US agencies. An illustration: it has been reported that in the past few years 80% of the fines above $ 10 million have been imposed on foreign firms.
– On the merger side, everyone recalls all the fuzz related to the prohibition decision in GE/Honeywell. But has anyone checked how many other acquisitions by US companies have been prohibited by the European Commission?
– Lastly, if many US antitrust lawyers believe that the Commission only goes after US companies that may be due to the fact that they only mostly pay attention to cases concerning US companies. One should remember, for instance, that the Commission has not only sanctioned Microsoft and Intel for abusive conduct, but also Tomra, Astra Zeneca, Deutsche Telekom, Telefónica, British Airways, to name only a handful of the most recent ones.
Information exchange=cartel?
Many have praised the inclusion of some guidance on exchanges of information within the new EU Guidelines on horizontal agreements. Personally, I agree with those arguing that guidance from the Commission was necessary, and I acknowledge that there are some useful (although arguably insufficient) orientations in the new guidelines. There is nonetheless an issue which may have not been adequately dealt with, and that I believe has very far-reaching implications. I´m referring to the idea of equating information exchanges with cartels (the title of the post probably gave you a hint):
Section 59 of the Guidelines states that “communication of information among competitors may constitute an agreement, a concerted practice, or a decision by an association of undertakings with the object of fixing, in particular, prices or quantities. Those types of information exchanges will normally be considered and fined as cartels“. No qualifications.
Sections 72-74 develop the idea: “Information exchanges betweeen competitors of individualised data regarding intended future prices or quantities should therefore be considered a restriction of competition by object. In addition, private exchanges between competitors of their individualised intentions regarding future prices or quantities would normally be considered and fined as cartels because they generally have the object of fixing prices or quantities”
– Where did this come from??
To my best knowledge (and please correct me if I´m wrong), information exchanges have only been treated by the EU Courts as cartels, or even as restrictions by their object, in two scenarios: (i) either they were an instrument intended to monitor or enforce a “proper” cartel; or (ii) they were conflated into a single and continuous infringement composed of various agreements and/or concerted practices pursuing a common goal (and, in practice, this situation generally arises where evidence is scarce and not enough to prove that the practice at stake was in its own right a cartel, or at least part of one).
That is, either they were purely ancillary to a cartel (first scenario), or they interacted with a wider agreement in the framework of a global plan having a single objective (second scenario). In other words, the European Courts have not validated the idea that stand-alone information exchanges shall be “considered and fined” as cartels.
In fact, it is significant to note that, unlike what happens in the rest of the document, no case-law is quoted in the Guidelines in support of these propositions (there is one cosmetic reference to the ECJ´s ruling in Glaxo, but it has nothing to do with the substance of what´s being discussed -it is cited as the source of the expression on the “legal and economic context”).
– Implications
Against this background, it is pretty clear that the legal approach towards exchanges of information has changed, and become wider and tougher. We´ve always lived with the idea that a thorough assessment of any information exchange was necessary prior to reaching any conclusion about its potential impact on competition, but apparently this isn´t so anymore.
The joint application of the ECJ´s Judgment in T-Mobile (which also enlarged the notion of concerted practices in an unprecedented and yet unclear way) with a wide interpretation of the statements contained in the Guidelines will certainly make it easier to label many things as a “cartel”. An example: if a company receives individual information on the future prices of its competitors it could be held liable for its participation in a cartel, even if it never used that information or even if the prices circulated amongst the competitors had priorly been given to their respective customers.
In practice, this opens the door for leniency applicants to come forward with evidence of information exchanges, and for the Commission to settle those cases under the procedure envisaged for cartels. With regards to sanctions, it means that companies that until now were participating in information exchange schemes have suddenly become members of a cartel, and are therefore subject to the huge fines, personal sanctions, and, in some jurisdictions, even criminal prosecution that is reserved for cartel cases.
– He who sows the wind will reap the whirlwind
The perils arising from such statement are not confined to the future decisional practice of the European Commission. After all, the European Commission is generally a very reasonable enforcer subject to the review of very reasonable Courts.
My main concern lies on the spill-over effects of the content of the Guidelines. The European Commission has a role as primus inter pares that carries with it a special responsibility. In this sense, it may not have been prudent to include this rather novel and ample statements because they run the risk of being overstretched by other enforcers. I fear that the Commission may be providing an “alibi” to enforcers willing to avoid the burden of undertaking sophisticated analyses. Hasn´t the Commission noticed that enforcement at the national level tends nowadays to automatically resort to the object category?
Justice Cardozo once warned about the dangers linked to legal principles expanding beyond the limits of their logic. This tendency not only applies to principles, but also to rules and, as acknowledged by Hovenkamp in his great book The Antitrust Enterprise , “in the short run rules weigh much more heavily than principles“. Considering that in the context of European competition enforcement system the statements included in the Commission´s guidelines automatically become quasi-rules for national competition authorities and courts, the risk of those statements expanding beyond the limits of their logic is blatant.
But the risk is not hypothetical. The Spanish Competition Authority adopted a decision last week in which it imposed a fine of 51 million euros on 8 companies active in the sale of hairdressing products for their participation on a stand-alone information exchange labeled as a “cartel” (even if the Spanish Competition Act contains a definition of the concept of cartel that is narrow enough to exclude many conducts that pursuant to an original interpretation of the Guidelines would consitute one).
Although I am unaware of the specificities of the case (my firm is not involved in it and the text of the decision has not yet been published) and it may well be that the exchange was a restriction of competition which deserved such a sanction, the press release already reveals that the risks to which I referred above are a reality.
Hold tight:
“It is established doctrine of the national and Community competition authorities that the exchange of information between competitors in relation to future information on prices and quantities amounts to a cartel and must be sanctioned as such”.
Let´s at least hope that the Commission becomes aware of these risks and decides to closely monitor the way in which other enforcers will interpret its guidelines.
Upcoming competition law seminars in Madrid
The level of the Annual EU and Spanish Competition Law course directed by Luis Ortiz in Madrid keeps getting better each year (and it´s now on its 14th edition..). It really is hard to find a program with so many excellent speakers participating on it. Let me give you an example:
The seminar which took place last week was coordinated by Cecilio Madero (Director General at DG COMP), and focused on novelties in the areas of mergers and abusive conduct. Amongst the speakers were Per Helmström (Head of Unit at DG COMP), Nicholas Banasevic (Deputy Head of Unit), Milan Kristof (Référendaire at the ECJ), Ainhoa Veiga (Partner, Araoz y Rueda), Antonio Guerra (Counsel, Uría Menéndez), Juan Jiménez-Laiglesia (Partner, DLA Piper) and Miguel Odriozola (Partner, Clifford Chance).
Yesterday and today another bunch of top-notch speakers such as José Luis Buendía (Partner, Garrigues), Piet Jan Slot (Professor, Leiden University), Jerónimo Maillo (San Pablo CEU University), Carlos Urraca (Legal Service, European Commission), Joaquín Fernández (Head of Unit, DG COMP) or Jorge Piernas (EUI), amongst others, have been dealing with state aids and other public interventions.
Here comes the advertising: If you´re sorry you missed those, and fancy the idea of spending a spring weekend in Madrid you can still register for the last two seminars:
– On the 18th of March I will be coordinating a seminar on the application of competition law to network industries. It will feature:
Jarleth Burke (Partner at Jones Day, London) who will be speaking about the regulation and competition law in the telecoms sector;
Júlia Samsó (Latham&Watkins, London), who will deal with the specificities of the energy sector;
Jasper Sluijs (Tilburg Law and Economics Centre), an expert on network neutrality issues;
Myself, for an overview of the challenges posed by network effects and network industries.
– On the 25th of March there will be another seminar on IP and Competition law coordinated by Alvaro Ramos (Senior corporate counsel at Cisco). Its three sessions will deal with
“Excessive pricing and copyrights” with Daniel Escoda (Telefónica), and Pablo Hernández (SGAE);
“Standards and Competition Law” with Jennifer Vasta (Senior Legal Counsel, Qualcomm); Miguel Rato (Partner, Shearman&Sterling) and Álvaro Ramos;
“Competition Law in Cloud Computing“, with Jean Yves Art (General Counsel EMEA Microsoft), Tero Louko (Antitrust Counsel, Google), and Luis Ortiz Blanco (Partner, Garrigues).
There are very few seats left, but if anyone´s interested in registering (half prize for those coming outside of Spain) or obtaining more info, you can write here competencia@ieb.es
Conflicting views on the Google/ITA Software deal
Last week I mentioned here the White Paper issued by the American Antitrust Institute on Google´s proposed acquisition of ITA Software. As you will recall, the AAI concluded that the deal would give rise to competitive concerns that made antitrust intervention necessary. As practically all Google-related debates, this one is fast getting huge, and extremely interesting.
On the one hand, the anti-Google “Fair Search” coalition has created a web page stating all the reasons why the deal would harm consumers in every conceivable way. You may or may not agree with it, but one must admit that they´re doing a pretty good job in speading their message around (this is a consequence of what I meant when I said here that Google has tough and very powerful competitors, who have the incentives and the means to present a fierce battle in as many fronts as possible).
We´ve given you the link to the AAI´s White Paper and to the Fair Search web page, both of which favor close scrutiny of this transaction. The picture would not be complete if we didn´t direct you to some of the arguments explaining why the acquisition of ITA by Google would actually be procompetitive. Daniel Crane, a Professor at Michigan Law School, has just written a guest post on the blog Techcrunch.com in which he does that exactly; he also sends a very clear message: “Let´s calm down on the Google-ITA deal” (thanks go to George Pedakakis for pointing us to it).
Crane´s main point is that “Google’s competitors naturally fear Google’s emergence as a formidable rival in travel search, but that is hardly a reason to block the transaction. Indeed, it’s a reason to approve the deal. The most likely scenario is that Google’s acquisition of ITA would allow Google a quick and efficient entry point into travel search that would expand consumer options and increase rather than decrease competition“. His post also responds to the main allegations put forward by those opposing the deal.
Now that you´ve a complete picture of the main positions in this debate we´d be happy to know about any thoughts our readers may have on this matter. Anyone?
Unrelated: We are also reporting more and important moves in the Brussels legal market: a bunch of great associates have also left Howrey to join Shearman&Sterling. Amongst them are some of the brightest young lawyers around (some of whom are also very good friends of ours), such as Mark English, Elvira Aliende, Louise Rabeux, or Marixenia Davilla.
And a chillin´leak: Julian Joshua is apparently headed to Steptoe & Johnson
It´s shocking to see how what until very recently was a top-notch practice at Howrey´s has disintegrated so quickly. Looking at the positive side: there will be more empty tables at L´arte di, which is were we constantly ran into each other at lunchtime..
Weekend reading and a confession
For those of you who can get some time off to do some reading this weekend, this is a real must: Why (Ever) Define Markets? , by Louis Kaplow.
PS. I was reading last week a piece on the identity of the real people behind many tweets, facebook status updates and posts attributed to celebrities, politicians and others. It made us reflect and feel bad for not having been completely open to our readers. We too have a ghost writer who does most of the work for us. He´s quite shy, but as a exception, has admitted to have a picture taken: here he is.
Chillin'Competition 
