Chillin'Competition

If you thought nothing else bad could happen in 2020, well… you were wrong. We thought a bit of humor could do us all well, and if there is one good thing about the competition field, it is that it offers plenty of opportunities to laugh about ourselves.

So… following the success of our 2016 competition memes contest and of our 2018 classical memes competition, we are now launching the 2020 Competition Memes Competition. It will feature some of the worst jokes you have ever seen.

We have assembled a team of reputed specialized journalists with vast experience in bad jokes to serve on the Jury, namely Lewis Crofts (Mlex), Foo Yun Chee (Reuters), Javier Espinoza (Financial Times), Thibault Larger (Politico) and Aoife White (Bloomberg).

Candidate submissions can include memes, gifs, classical memes, captions, or pretty much any other blog-friendly format that you please. You can send your contributions to chillingcompetition@gmail.com

Over the coming weeks we will be sharing on the blog a selection of the best memes received. We will announce the winners by 17 December.

Below you can find the first batch, just to get the ball rolling:

For around 10 years (between 2004 and roughly 2014) the competition community spent countless hours discussing how commitment decisions could pursue stretched theories of harm and obtain remedies that went well beyond what would have been possible in standard infringement decisions. By the way, I gave an overview of all this in this 2014 presentation (Lamadrid- Overview of competition decisions).

Commitment decisions (after Alrosa) probably made us all think that intervention under competition law could reach where it had not reached before. The Commission was able to intervene very effectively in many markets with forward-looking, far-reaching remedies agreed by the parties. This improved the functioning of many markets and arguably reduced clarity in the law. We became accustomed to remedies that were not necessarily proportionate to the concerns triggering investigations.

In the past few years, however, recourse to commitment decisions has become relatively rare. A positive aspect of the new enforcement trend was that infringement decisions and subsequent Court judgments would provide greater clarity on the law. Perhaps we did not anticipate that greater clarity as to where real boundaries lie might also lead to frustration which, in turn, would propel calls to replace the law and bypass Courts, but that is another story (or is it?)

Coincidentally, as the use of commitment decisions started to decline, the debate completely shifted. We suddenly discussed less about the far-reaching scope of competition law, and more about the alleged insufficiency of competition law. There may not be causality, but there is certainly some correlation. [Btw, it’s amazing how the world, incluiding competition law, has changed in these past 6 years].

One of the main reasons that made Art. 9 commitments less popular is that they could not lead to the imposition of fines, let alone huge fines. But, contrary to what used to be the case, proponents of more aggressive antitrust enforcement now argue that large fines are meaningless and don’t do the job, and that it’s only remedies that matter. From this perspective, at least, perhaps commitment decisions did the trick after all?

Others, including myself, were not necessarily in favor of commitment decisions becoming the standard enforcement tool because that would lead to all actors operating in the shadow of the law, not really knowing what the real law was. Commitment decisions, however, were case-specific, evidence-based, preliminary assessments, followed existing procedures and entailed a somewhat “participative” process, including negotiations with the affected companies and market tests). The Commission was also very smart in using commitment decisions while ensuring legal certainty in parallel infringement decisions (see e.g. the Samsung and Motorola decisions on SEPs, or the Visa and Mastercard decisions on MIFs). One could argue that commitment decisions already addressed some of the concerns voiced out against the new tool under consideration (a single instrument combining the NCT and the ex ante regulatory instrument).

Some might also argue that commitment decisions were also too slow. But were they? It would be interesting to explore the reasons why some cases dragged on for longer, and whether that may have been related to external factors and third-party strategies.

It might also make sense to spend some time negotiating remedies in advance, rather than impose impractical remedies that might then need to be continuously reviewed and updated. As the Commission itself explained, “due to the more consensual mode of concluding the case, the commitment path may result in more efficient proceedings and more effective remedies; it allows for a more fine-tuned tailoring of the commitments and swifter implementation”. In a way, this was participatory antitrust avant la lettre.

Be that as it may, the welcome revival of interim measures should dispel or alleviate timing concerns. The recent Broadcom case is the perfect example.

The history of EU enforcement under Article 9 is, from the authority’s standpoint, an unquestionable story of success. It allowed for rapid, strong and far-reaching intervention subject to fewer constraints than in standard cases. By the Commission’s own admission, having companies give their views in the process also ensured that remedies were workable and reduced the risk of disproportionate / undesired outcomes. Perhaps commitments were not entirely satisfactory for anyone (authorities and rivals could want more, affected companies would want less) but that is probably why the tool resulted in an equilibrium that worked well. Commitment decisions did require the Commission to show that it could build a prima facie credible case (credible enough, at least, to force a company to make concessions to avoid the risks and harms that come with prolonged investigations), but that was not a problem, rather a safeguard to mitigate discretion.

Take a look again at the theories of harm pursued in Art. 9 cases and at the remedies that the Commission was able to obtain (summarized in slides 6-7 of the 2014 presentation). Does it feel like there was an enforcement gap? There also does not seem to be any dissatisfaction as to the outcomes that were secured by virtue of commitment decisions.

The Commission’s successful intervention in the Broadcom case shows that commitment decisions (combined with interim measures in the face of genuine risks of irreparable harm) could actually be the old new competition tool that many were looking for.  I guess sometimes we want new things, perhaps forgetting that what we already have might be even better.

[Disclosure: I have no professional interests in, and no detailed knowledge of, the Broadcom case. I do have clients that could be affected by the new digital enforcement tool under consideration (full disclosures are available in my posts on those, see notably here). Like practically all competition practitioners, I also have a very large number of clients that could be potential addresses of commitment and/or interim measures decisions].

The 24th (!) edition of the competition law course that I co-direct at the IEB in Madrid will take place online. The course (taught partly in Spanish and partly in English) will run from January to March 2021. All lectures take place in the afternoon (16h to 20h) in order to help make it compatible with other professional or academic activities.

 As always, it will feature a great line-up of international lecturers that include Judges, officials from the European Commission and other national competition authorities as well as top-notch academics, in-house lawyers and practitioners. This includes Pablo, who will coordinate two modules and take care of the introductory session. Students are tipically officials from competition authorities, in-house counsel wishing to get a deeper understanding of competition law as well as young lawyers/economists. The course is designed to cater to all levels.

While the pandemic will not allow us to travel to Madrid, the online format will enable us to access a wider pool of interested professionals. The full course has a cost of 2,000 euros, and it is also possible to register for individual modules or seminars.

This is the general* program

(*There will be detailed individual programs for every module and seminar, each of which will feature a variety of experts)

Introductory session (15 January- afternoon). Cani Fernández (President, CNMC) and Pablo Ibañez Colomo (LSE, CoE)

Module I – Cartels and procedure (18-20 January-afternoon). Coordinator: Isabel López Gálvez (CNMC)

Module II – Other agreements and restrictive practices: vertical and horizontal agreements (25-27 January- afternoon). Coordinator: Carmen Cerdá Martínez-Pujalte (CNMC)

Seminar 1- Recent Developments in EU Competition Law (5 February 2021). Coordinators: Fernando Castillo de la Torre and Eric Gippini-Fournier (Legal Service, European Commission)

Module III- Abuse of dominant positions (8-10 February- afternoon). Coordinator: Pablo Ibáñez Colomo (LSE, CoE)

Module IV – Merger Control (15-17 February- afternoon). Coordinator: Jerónimo Maillo (USP-CEU)

Seminar 2 – Competition Law in Hi-Tech Markets (26 February). Coordinator: Nicholas Banasevic (DG Comp, European Commission)

Module V- Sector Regulation and Competition (1-3 March-afternoon). Coordinator: Pablo Ibáñez Colomo (LSE, CoE)

Module VI – Public competition law: State aid and Public undertakings (8-10 March 2021- afternoon). Coordinators José Luis Buendía (Garrigues) and Jorger Piernas (University of Murcia)

Seminar 3 – Private enforcement of the competition rules (19 March 2021). Coordinator: Mercedes Pedraz (Magistrada, Audiencia Nacional)

We will also be holding three practical workshops dealing with inspections, distribution agreements and mergers.

If you want to know more, please drop us a line at competencia@ieb.es

Until today, I had avoided commenting publicly on the ex ante regulatory instrument that the Commission is considering for “platforms acting as gatekeepers”. There were three reasons for this. First, unlike the New Competition Tool, I did not see this initiative as a threat to competition law as we know it. Second, I do understand that there is a certain public anxiety about digital markets (to some degree justified, to some degree exaggerated by interested stakeholders), and a margin for regulation to legitimately address that anxiety and improve things. Third, my opinions could be legitimately criticized as biased because an important part of my work is to advise and represent companies targeted by this initiative. My thinking was that there were already enough people with professional interests making noise in all directions for me to contribute to the cacophony.

Alas, my reasoning on those three fronts has changed after reading the bold leaked drafts that circulate widely since last week. First, I now see a risk that the ex ante rules might have a much greater impact on competition law than I had anticipated. Second, it seems that the current plans might not always be addressed at the issues causing public anxiety, but to a large extent target issues at the core of pending competition cases. Third, I will not falsely pretend my opinions are neutral, but I hope they might add some value to the debate. Experts working against my clients have also  authored some of the influential reports that the leaked documents cite as evidence supporting the need for intervention and, to be sure, I don’t think their views should be disqualified. In addition, given that the rules appear to be crafted to affect only a remarkably limited number of services, it is likely that a majority of stakeholders will feel relieved and/or might not have incentives to voice out concerns, so you might not be exposed to many contrarian views. And even if you are, a lot of the commentary out there seems somewhat radical.

As in other matters, there is excessive polarization here, and even a tendency to look at things through myopic and binary (progressive vs conservative) lenses. Some partisans of regulation invoke “progressive” attitudes as a reason to favor these initiatives. Others claim that they oppose them in line with “conservative” principles. In reality, though, this debate has very little to do with politics. There are media companies who support Trump, Brexit and deny climate change that also support these initiatives (provided they only target their rivals, of course). There are also conservatives who want more regulation and antitrust intervention (even if arguably not always for the right reasons; e.g. at a recent antitrust hearing a Republican Congressman claim Google should be regulated because it favours WHO health advice over Trump’s…). And then there is a vast majority of other perfectly reasonable companies or stakeholders who have legitimate commercial/professional interests in these initiatives passing, or not passing, regardless of politics.

Instead of simply shouting “this is great” or “this is rubbish”, I’ll try to reason my concerns through. Confronting (hopefully) reasonable views should (hopefully) contribute to progress. The public debate should not belong only to those shouting the most (and you should see my Twitter feed…). I said before that we can do better, and I will try to play my part by being assertive, but as constructive as possible. It is not easy to decide where to start, but here are some questions:

1-.Why The Focus on 4 Key Services?  The current drafts indicate that the broader options have already been discarded, and that the plan is to focus only on 4 companies “key services”, namely “online intermediation services (market places, app stores and social networks), (ii) online search engines, (iii) operating systems and (iv) cloud services”. Queries: What were the criteria to concentrate on these? Can other “information society services” be excluded from the potential scope of application of the rules, even in the presence of “gatekeeping” features?  Are these the services of the economy where consumers are getting the worst deal in terms of price/innovation/quality/R&D investment? Are these the services with the greatest risk of consumer lock-in or with the highest switching costs? Are these services that have escaped competition law scrutiny? Or are these the intermediary services that have succeeded in creating greater opportunities for third party business users? 

2-. Unavoidable = Indispensable = Market Power? Perhaps the questions above are irrelevant, because the drafts show that the concern is that some services may be “de facto unavoidable for business users”. That does not necessarily mean the initiative is less legitimate, but it raises questions worth asking. Queries:

·   The assessment of market power depends on the competitive constraints faced by the company under examination. Under this alternative standard, however, “gatekeepers” subject to these rules would be identified judging solely from the perspective of whether (all? some? how many?) business partners have (other? equally convenient?) alternatives, regardless of the possible exercise of market power. Should that be the right approach? Should we adapt our thinking about identifying market power, or should we only make a carve-out for these 4 services? And if the concern is not market power but the “economic dependency” of certain users, can the proposed remedies go beyond that and constrain, for instance, product design decisions?

·   Does “de facto unavoidable” mean the same as indispensable within the meaning of EU Law, also beyond competition? Consider, for example, paragraph 55 of the recent CJEU Airbnb ruling. Would accomodation intermediaries, for example, be covered by these ex ante rules in spite of the Court’s observations? 

.   Rather than simply identifying “key services” and designating them as “gatekeepers” (which could arguably risk looking like reverse-engineering), would it make sense to craft some sort of normative or objective criteria to decide whether a given service might have “gatekeeper status” (e.g. on the basis of market shares, shares of traffic or other objective parameters)? What would be the process to identify the services with gatekeeper status? Would companies have opportunities to make their views known? Should there be consultations like in telecom?  How often would this status be reviewed?

3-.A Gap in Competition Law or An Overlap With Competition Law? I had the impression that the ex ante rules would cover matters falling outside the scope of competition law, and that this is what could lend legitimacy to the initiative (competition law is not everything after all). I was wrong. The list of “black” and “grey” practices in the leaked documents cover three categories: (i) data practices; (ii) self-preferencing; and (iii) tying and bundling. The practices in the list pretty much coincide with the same very practices that the Commission and NCAs have recently investigated, or are currently investigating, in cases concerning mainly Amazon, Apple, Booking, Facebook, Google and Microsoft. 

This means that (unless the EU Courts rule otherwise), this is all conduct that currently falls within the scope of the competition rules. Some of the practices in the draft lists in fact contain the actual wording of some of the examples included in Art. 102; others reproduce the wording and terminology used in recent decisions. Queries: To the extent that the rules would apply to practices falling within the scope of the competition rules, and only to companies that the Commission believes are dominant, then would this initiative fill a gap? Or would it rather replace case-by-case evidence-based assessments by outright bans when it comes to a handful of companies? Given the clear overlaps, wouldn’t it make sense for the enforcement of these rules to sit with DG Comp in order to ensure consistency with existing enforcement tools and with a possible NCT?

4-. Why Now? The Commission has spent years building cases, presumably challenging what it considers to be the most egregious instances of “black-listed” conduct. It is perfectly reasonable for the Commission to build its legislative proposal on “evidence derived from competition enforcement practice” as the drafts seek to do. But shouldn’t we then wait until those cases are over? The Commission has often said that what lends legitimacy to the fact-finding and enforcement process is judicial review. And EU Courts have now been called to render Judgments assessing the effects of some of these practices on the basis of actual evidence. Queries: Would upcoming Judgments concerning practices in the black list be rendered irrelevant before they are decided? Would that be that an unintended consequence? Would that be good thing? Would we accept this process in all areas of the law, or should we have an exception for matters that affect only a few companies? Would regulation be better or worse if it were also informed by the findings of the Courts in relation to the cases brought by the Commission? 

5-. Harmonization as the Goal? According to the leaked documents, “the objective of the intervention is to harmonise rules in Member States relating to unfair behaviour in gatekeeper platforms”. Query: To the extent that competition laws, unfair competition laws, the P2B Regulation, and other initiatives at the national or EU level would remain in place, would the ex ante rules harmonize national legislation or would they rather be adding one more tool to the toolkit?

6-.What About the NCT? If these rules were to enter into force, an NCT would arguably not add much value with respect to these 4 “key services”. Most people thought, however, that these were precisely the services that an NCT would target. Query: Does this mean that the NCT will be deployed mostly in relation to other services?

7- The “black list”. The list is “based on CNET/GROW” evidence gathering. The legitimacy of the initiative would arguably be enhanced if that evidence were identified and made public. As explained above, it would appear that most of the practices in the black list target conduct at the core of recent or pending cases. It is commonly accepted that many of those practices (e.g. MFNs) are competitively ambiguous; they might have pro- or anti-competitive implications depending on the circumstances. Not even complainants in “self-preferencing” cases argued that self-preferencing should be prohibited in all circumstances. The drafts recognize that this practice is widespread and states that “in offline situations, such behaviour is not generally considered anticompetitive”. Queries: Should practices like self-preferencing be treated differently in offline vs online situations? Are practices included in the black list because (a) there is evidence that procompetitive aspects disappear, or are always outweighed, (only) in relation to these 4 key services/companies?; or (b) we can’t be bothered to assess this question in relation to the 4 key services/ companies? 

8-. The added value of the “grey list”? The grey list contains a list of practices “where intervention by the competent regulator is required”. Query: Would intervention in these cases take place through standard procedures (e.g. a competition investigation?) subject to established standards? The merit of a grey list may arguably streamline and accelerate the process and could provide some sort of ex ante guidance, but then again, which would be the competent regulator? Given the clear overlaps with possible competition cases (and the need for coordination with national authorities), wouldn’t it be preferable for DG Comp to be in charge of enforcing the rules? That would also enable the Commission to coordinate with national authorities through tested channels like the ECN.

9-. Are you trying to say that there is nothing to do and that we should never regulate? Not at all. There is probably merit in the idea of having some sort of ex ante rules. The digital economy, like any sector of the economy, needs rules. Like in any sector of the economy, rules should be objective, not subjective, and a result of careful evidence-based reflection. Rules do not need to be only (or mostly) about efficiency, there are certainly other higher values. Rules can and should change, they can be creative; they can go against precedents and even be harsh when needed. But they should ideally be sensible, they should benefit the most (not the few), and they should be crafted to pursue their goals while minimizing the risk of undesirable outcomes. Leaving room for nuance and flexibility is often wise, particularly in the case of forward-looking rules. It would be a mistake to craft these rule to target only specific practices seen so far, because these will also be the applicable rules for future platforms. As Pablo explained in a previous post, building on the experience acquired in telecoms, a business-neutral, principles-based regime and the possibility of case-by-case assessments would seem much more flexible, adaptable and sensible than the alternative “black list” approach.

The American Bar Association’s Antitrust Law Section now has a weekly podcast program, called Our Curious Amalgam. I was the guest in an episode released yesterday where we discuss the General Court’s Apple Judgment. Coincidentally, the episode was released as I was participating in a hearing at the Grand Chamber of the CJEU where we also discussed fiscal State aid (fifth and hopefully final hearing in the Santander-World Duty free saga…). The podcast is available here.

We recorded this podcast over my summer holidays, and I made sure to listen to quite a few episodes before. It was a great use of time. Each podcast is about 20-25 minutes. They cover everything related to antitrust, consumer protection, data, and privacy and there are very insightful conversations freely available to anyone interested.

To catch new episodes that drop on each Monday, you can subscribe “Our Curious Amalgam” on Google Podcasts, Apple Podcasts, and Spotify.

Many thanks to Matthew Hall, Christina Ma and John Roberti for the invitation and the chat!

[In the course of the coming weeks we will be publishing a number of guests posts on different topics (feel free to send ideas our way!). We start this series of guest posts with a contribution from Daniel Beard QC and Jack Williams on discrimination concerns underlying new regulatory initiatives]

Language is both beguiling and dangerous.  Being an author would be no fun if it were otherwise.  But being an author and being a regulator are very different jobs.  Sometimes compelling words and rhetoric can distract from the regulatory job at hand. The political force of a cri de coeur risks losing sight of the raison d’être.

The mood of regulators and governments across the EU is that, in relation to digital technology and the operation of competition law, something must be done.  All sorts of interesting suggestions are being made, from new governmental inquiry units and changes in merger scrutiny to whole new competition tools. 

Amongst the myriad reports and studies one thing comes out loud and clear: discrimination is bad. It is particularly bad where the discrimination is by a dominant undertaking in a digital industry characterised by high entry costs, low marginal costs, and network effects. Indeed, it is so obviously bad that a new ex ante regulatory regime is needed so we can make sure it never happens in the first place.

The level of support for this idea is striking. Perhaps it comes from the language itself: who is going to say that preventing “discrimination” is wrong?  After all, when we first think about the notion of discrimination, we do not think about digital service self-preferencing; we think, for example, about powerful struggles for freedom from race or gender inequality.  Legal battles to protect people from discrimination on the basis of the colour of their skin or their sex, religion, physical ability or sexual orientation have been long and hard fought. It is easy, and obviously right, instinctively to think discrimination wrong when that is our starting point.

Yet, transferring the concept of discrimination away from recognised status cases involving individuals, the analysis becomes problematic and the effective use of ex ante tools even harder to gauge. There are three types of issue: substantive difficulty; procedural complexity; and fairness.

Substantively, discrimination analysis can confuse as much as enlighten. If you want to change the way that electricity transmission pricing works, can you treat low carbon, renewables and traditional generators in the same way? The electricity they produce is the same.  The way they do it is not.  Does that mean that you say all the generators are similar? If they are comparably similar, is there a justification for different treatment?  The test in such economic cases is whether you are treating like cases differently (or different cases the same way) without justification.

The problem is that the same essential considerations are used for assessing whether the cases are alike and whether there is a justification for differential treatment. What is really being asked is whether the particular benefits of renewable generators mean that arrangements for charging them differently from, for example, gas fired plant is reasonable overall.  It is an assessment of priorities and objectives within the sector. Labelling the issue as discrimination does not itself assist the substantive analysis of whether the changes properly pursue the legitimate aims of the sectoral regulation. Indeed, using the language of discrimination in economic contexts may ultimately distract from the key policy issues which a measure is trying to address.

It might well be because discrimination assessments outside recognised status cases are hard that until recently we had not seen as many cases as we might otherwise expect applying Articles 101(c) or 102(c) TFEU.  Broadly, those provisions prevent agreements or provisions by dominant entities applying different conditions to equivalent transactions – stopping discrimination.  Aside from various music collecting societies cases these apparently very powerful tools have not historically been wielded frequently.  Plainly things have changed more recently with cases such as MEO, Google Shoppingor Royal Mail v Ofcom.  Yet none of those cases is an advert for the clarity and simplicity of using discrimination as a key tool.

Ex ante non-discrimination provisions are applied to regulate utility industries.  Where a legacy incumbent inherits a system monopoly such that they have significant market power, non-discrimination requirements are a standard feature of the regulatory regimes. Those requirements often focus on criteria and terms for access to established networks: what information has to be provided for a connection? How are connections to be made and paid for?

However, there is a real difference in assessing discrimination – and justification – where networks have built through investment and competition (rather than bequeathed), where the nature of the services being provided by the dominant entity are changing, and where the criteria for assessment have to consider different business models and types of demand.  The substantive difficulties involved in applying discrimination outside status cases are all the greater in dynamic rather than mature industries. And that is in addition to setting the thresholds for what sorts of entity are going to be subject to the ex ante tools in the first place. 

In addition to these substantive concerns about using discrimination as a key tool, there is the second problem of a new regulatory process introducing complexity and inertia. Experience shows that building a novel regulatory infrastructure can itself create another layer of definitional disputes and uncertainties. 

Sponsoring lawyers and compliance departments to be involved in extensive exchanges with regulators is an excellent means of shifting resources from technology developers to professional services providers.  But it is far from clear that social utility and consumer welfare is enhanced by such a process.  It can increase the risk of undue intervention by regulators. It can encourage undue conservatism on the part of operators.  In a fast-moving industry a complex regulatory process can be a real impediment to innovation. 

Such a regime may offer particular protection to a cautious undertaking.  After all, if it can reach agreement with a regulator on an ex ante approach, the prospects of ex post fines under existing rules must diminish. Affecting the dynamism and risk taking of large companies can damage innovation.   It cannot be assumed that the best and fastest development always comes from start-ups or scrappy mavericks.   Does having a prior regulatory clearance mechanism mean better outcomes for consumers or simply a slower digital industry in Europe? 

Then there is a third issue: fairness. It is perhaps not going to cause people to rally to the barricades (or blogs) where the new process is directed primarily at large multinational firms, but the rule of law should not pick and choose. 

If companies are required to pre-justify conduct, that is effectively a shift in the burden of proof: they are being required to prove what they are doing is acceptable rather than a regulator having to show the contrary later.   There is a reason the burden is placed on regulators.  It is not just to make their life hard.  It is because it is generally accepted to be unfair to assume that someone is doing wrong unless they can show otherwise. The use of presumptions against people is something to be cautious about.  The fact that they would be used in the complex and confusing territory of discrimination assessments might make that all the more concerning. 

Whatever course is to be taken on ex ante regulation it needs to recognise that big themes and buzz words do not equal good law. We must not get carried away with an easy reliance on prejudicial language.  Perhaps we need to be more discriminating on discrimination in order to decide what new tools we really need.

You may have seen in the news today (Mlex also anticipated it a couple of weeks ago) that Facebook has appealed two European Commission requests for information (RFIs), and that it has now obtained an interim suspension from the President of the General Court (see here).

Neither myself nor my firm have any business interest in this case. I have no detailed information, and therefore no views, on whether Facebook’s appeals are well-founded or not, but I am most interested in the legal questions it raises:

As long-time readers of this blog may remember, some years ago we devoted a number of blog posts to the issue of the legal limits on RFIs. That was partly because I was the lawyer in one of the cases in the cement saga (where the RFI was ultimately annulled by the CJEU and the Commission’s investigation was subsequently closed). Whereas other cases in that saga focused on proportionality and insufficient reasoning, our case revolved around the notion of “‘necessity”. Together with then AG Wahl’s Opinions in Heidelberg and other parallel cases, that case still stands as the main precedent regarding the necessity criterion in Art. 18 of Regulation 1/2003.

In a nutshell, and as I have told Global Competition Review today, the Commission enjoys wide investigative powers and it is certainly entitled to use them in full to confirm any reasonable suspicions of an infringement. The Courts will not get in the way of the Commission gathering sufficient evidence to show a competition infringement, but they might well intervene if the information requested lacks a connection with the presumed infringement, or if the Commission does not have concrete indicia constituting reasonable grounds for suspicion.

In these particular cases, the General Court might have to verify (i) whether the information requested might reasonably help the Commission establish an infringement; (ii) whether there were sufficient safeguards in place to mitigate any privacy concerns linked to the use of broad search terms (the ones regularly used in inspections should generally also be sufficient here).

Facebook must surely know that winning on a “non-necessity” argument will not enable it to shield relevant evidence, so its move could well be motivated by concerns unrelated to the competition investigation.

For more details on the interpretation of the notion of “necessity” in RFIs you can check out our previous posts, available here, here and here. A few years ago I tried to summarize those and explain the legal issues at play in this presentation at the Brussels School of Competition:

Lamadrid_ The Cement Judgments and their impact on future RFIs

Whereas further clarity on the law will be nice to have, the timing of Facebook’s application is somewhat inconvenient; one of my summer plans is to finalize reviewing the proofs of the chapter on RFIs I have co-written for the upcoming edition of the procedural bible, and we will now have to fit this in…

The General Court annulled earlier today the Commission’s Apple decision (the full Judgment is available here). This has come as a surprise for many, perhaps not so much to those of us who attended the oral hearing (see here). It may also not have been much of a surprise for readers of this blog following the latest trends in EU judicial review (see below).

This Judgment cannot be examined in isolation. The reasons for, and the implications of, this annulment can be better understood by examining the case within a wider context:

The context of other Judgments on tax rulings. The identity of the company affected and the amounts at stake made this the most visible of the recent cases in which the Commission has challenged tax rulings under State aid rules. That increases the PR repercussions of the defeat. From a strictly legal standpoint, however, the Apple case is not necessarily more relevant than the Fiat and Starbucks Judgments rendered in September 2019 (we commented on those here).

The Apple ruling, like those in Fiat and Starbucks, confirms that it is possible for the Commission to target tax rulings under State aid rules. All three cases bypassed the thorny issue of selectivity and focused the debate on the existence of an advantage. All three cases recognize that the Commission is entitled to rely on the arm’s length principle and on the OECD’s work to determine the existence of an advantage by reference to ordinary taxation. The three Judgments send a consistent message that the Commission’s policy is not wrong as a matter of principle, but that the devil lies in the details, and that it is for the Commission to assess those details.

The context of the wider case law on fiscal State aid. My more detailed technical views on that are outlined here.

The context of EU judicial review. The Apple Judgment will attract more attention than other annulments, but in reality, it is not in any way groundbreaking from a legal standpoint. The reasons, and the reasoning, leading to today’s annulment are exactly the same as the one that has led to the recent annulment of other decisions, including in Frucona Kosice, FC Barcelona, Real Madrid, Naviera Armas, Valencia and Elche cases, among others. In recent years the Courts have consistently insisted on the Commission’s obligation to actively and impartially gather and assess all the relevant evidence in relation to issues where the burden of proof is incumbent upon it. It was all there. Apple had probably won before entering the courtroom.

You might think this is easy to say in retrospect, but we already anticipated all of this here and here. At the time, we said that “it won’t be difficult for the Commission to continue to win cases if it incorporates this logic into its day-to-day. If that does not happen, we are likely to witness a series of annulments based on this logic (…) My bet is that I will be making a few future cross references back to this prediction”. Here’s one more cross reference, probably not the last one.

A paradoxical result? Our previous post on Fiat and Starbucks noted that “paradoxically, the Commission [might have] to do a greater job when Member States do worse. In other words, the Commission cannot simply assume that because the Member State acted in a seemingly arbitrary manner the outcome was wrong.  As Vice President van der Woude noted at the Apple hearing last week, one cannot fully exclude that there may have been a happy coincidence. The message, again, is that nothing is evident and that the Commission cannot take things for granted”.

In the case of the Apple ruling, in sum, the Commission took the view that the existence of a seemingly arbitrary process created a presumption of a selective advantage (i.e. a derogation from normal market conditions), which would place the evidentiary burden on Ireland/Apple to show that the advantage did not exist. Today’s Judgment does not hide the Court’s dislike of that particular negotiation process, but considers that this does not enable the Commission to simply presume the existence of an advantage. The Court’s press release itself states that “the General Court regrets the incomplete and occasionally inconsistent nature of the contested tax rulings”, only to then clarify that “the defects identified by the Commission are not, in themselves, sufficient to prove the existence of an advantage”.

3 Lessons from the Judgment.

1) The Apple Judgment again shows that the EU Courts are ready to give the Commission room for maneuver, provided that it does a thorough job in its assessment of all the relevant circumstances when it bears the burden of proof;

2) Very often, it’s all about the burden of proof. Infringements are established, not presumed. And be mindful that this is a case involving an administrative infringement by Ireland, not Apple; these principles apply even with greater strength in relation to quasi-criminal infringements by undertakings;

3) The EU system of administrative enforcement combined with independent judicial review works, regardless of the identity and nationality of the companies involved and of the economic or political interests at play.

What now? There is nothing humiliating in losing cases; that is a natural part of the work of any authority. The Judgment is more of a problem for the Commission’s PR policy than it is for the Commission’s wider strategy regarding tax rulings.  There is no legal obstacle for Commission to challenge tax rulings under State aid rules; it only needs to do its work thoroughly and with no shortcuts, no matter how tempting or seemingly justified. The Commission may even win other pending cases on this very same area. My bet is also that the chances of success of a Commission appeal would may not be high (an unlikely re-run of the investigation would arguably offer higher chances of success, but resulting in less eye-catching figures).

Like what has (and will) happen in antitrust cases, this defeat may however be used to push for regulation as an alternative. Like in the case of antitrust, this is even if there is arguably no real blind spot under the Commission’s enforcement powers. Unlike in the case of antitrust, regulation in the tax domain might be more desirable.

[Disclosure: I have nothing to disclose. I represented companies in some of the precedents quoted in the Judgment, and I currently represent a large number of companies in dozens of fiscal State aid cases pending before the EU Courts. All of those cases are unrelated to the issues raised in the Apple case]

I recently published these 10 questions on the proposed new competition tool (“NCT”). That post spurred some debate, and very mixed views, here and elsewhere. The comments we received were thoughtful, and we thought they merited a follow-up.

[Disclaimer: As a practicing lawyer, I work for many companies that could be potentially affected (for better or for worse) by an eventual NCT. These include a considerable number of companies active in the sectors where the CMA has conducted market investigations, including retail banking, energy, airports and cement. I also work for companies active in digital, telecom, sports, financial services, retail, food, payments and many others where network effects are at play. The identity of many of them can be consulted in the curia website here]

Legal basis. This was one of the main points in my post, but it has only triggered reactions in private. In the competition field (and in national competition regimes) we are not used to these debates, but they are the one crucial legal issue when it comes to EU legislative initiatives. There seems to be a consensus that Art. 103 TFEU cannot be a legal basis for conduct falling outside Arts. 101 and 102 TFEU. This is apparently why the Commission contemplates relying also on an internal market legal basis. This is what was done re the Damages Directive, and it made perfect sense there (the idea was to harmonize competition law across the EU to ensure the uniformity and effectiveness of the rules). This same combined legal basis could arguably be sufficient  if the proposal were justified only as an “internal market tool”, but I’m not sure it does the trick for a “competition” tool that goes beyond Arts. 101 and 102 (where is the centre of gravity?). In my view, if we really want to enlarge the toolkit to cover “monopolization”, that would arguably need an amendment to the Treaty. Admittedly, the Commission could follow the indications of Protocol 27 to the Treaty and resort to Art. 352 TFEU, as it did at the time of adoption of the Merger Regulation. 

The object or effect of bypassing Court standards. My previous post expressed a concern that the NCT could have the object or effect of bypassing Court standards. To be sure, I am not saying the Commission is proposing the NCT to avoid established legal standards and its burden of proof (even if this would arguably be in line with the suggestions in the Special Advisers Report). My point is rather that, regardless of intentions, to the extent there might be an overlap between the scope of the NCT and that or Articles 101 and 102, then that will inevitably lead to bypassing those standards. That is my chief concern and, again, it has nothing to do with the Commission’s intentions, which I am sure are primarily concerned with the protection and, on this occasion, creation of competition. As the Commission often emphasizes, in competition law it is not intentions that matter.

Commissioner Vestager assured last week that the NCT “would let us investigate markets, in the same rigorous way that we already look into individual cases – with the same exacting standards of proof, the right for the companies involved to defend themselves, and the need for the decisions that we take to stand up in court”. Those are important and welcome words. I guess the question then is: what is it that would need to be proved?

Need of the tool to prevent market tipping. It has been argued that we need the NCT to anticipate market tipping. We are, however, assured that under an eventual NCT this assessment would of course be thoroughly analyzed and evidence-based. In our view, the case law has developed flexible standards and leaves ample room for prospective examinations (“capable of”, “likely to”, “potential effects”). To be fair, I have not seen examples of agencies having rightly predicted that tipping would occur (and remember prominent economists saying this is impossible), but the Commission successfully predicted where tipping would not occur despite powerful network effects (Microsoft/Skype re video calls on PCs).

Restrictive case law? A reader noted that if would be a good thing for the Commission to bypass “restrictive Court precedent”. Our view is that the EU case law is not in any way restrictive. As we noted in the previous post, for decades commentators have consistently criticized EU case law as too hostile to dominant firms (e.g. here). The Commission’s track record in unilateral conduct cases before the Courts is, if anything, impressive. It might arguably lose future cases, but that’s the name of the game; it would be strange to put on the bandage before the wound.

Think of the German Facebook case last week: when Facebook won, people argued this showed the shortcomings of competition law and the need for regulation. Now that Facebook has lost, the message is that of course the case was sound and solidly builds on existing standards. Different views on this are legitimate, but I’m not sure one can hold both views at the same time (heads, I win; tails, you lose).

Others have it too; the Commission’s special responsibility. You may be familiar with the argument that when one has a “special responsibility”, it does not really matter that others may do the same; perhaps you can’t (I use this with my eldest son too…). The recurrent argument to appease concerns about a potential NCT is that others already have it. And indeed, Romania, Iceland, Greece, South Africa, Mexico and the UK do have tools similar to those being considered by the Commission. There is certainly nothing wrong with the Commission following in those footsteps, but there are institutional differences that arguably matter, even if only as a matter of optics. The Commission’s political nature might be relevant to this discussion.

There is also the risk that this may encourage other countries without the Commission’s checks and balances to incorporate a similar tool. There are countries where powerful stakeholders might be able to secure an antitrust exemption in their favour and to guide intervention against business that they dislike. The risk of this happening could become more serious absent clear red lines and the requirement to find an infringement. By the way, our posts on Siemens/Alstom (here and here) are also relevant to this discussion (this is about principles, not manichean pro vs anti enforcement labels).

External pressures. Every year the Commission gets hundreds of formal and informal complaints alleging infringements. One can safely assume that the Commission will be subject to pressures to act against non-infringements, based on the mere observation that a given market does not perform appropriately. Can you imagine the public and private pressures that would be exerted on the Commission to make use of this tool in particular cases to advance private interests under the guise of progressiveness? By the way, this type of pressure on theories of harm and on remedies has contributed significantly to the length of competition investigations; could the same happen here?

On confidence (discretionalists vs legalists). We do not doubt the possible good intentions underlying the proposal. In our view, however, it seems to be premised on a great degree of confidence that one can, for example, (i) anticipate what markets can be expected to tip; (ii) determine the reasons for that tipping and whether it is, on balance, problematic; (iii) devise some sort of public intervention that will prevent/correct tipping; (iv) do this in a proportionate way that does not compromise welfare enhancing elements or incentives. I get that people may see shortcomings in legal rules that I don’t, but is this confidence in our economic knowledge and ability justified in the light of the available evidence? Legal rules are also safeguards against overconfidence.

Competition law, in sum, has never been a tool for the optimization/fine-tuning of market outcomes in light of more or less idealized benchmarks (one would need a lot of confidence to do that). That is why, as explained in our earlier post, a NCT could have an impact on the nature of the discipline. Whether we may want that or not is a different story, but we understand the reflection is necessary.

Last week the European Commission launched a public consultation in relation to a proposed “new competition tool”. The impact of this “tool” on competition law and policy would be impossible to overstate. It would be likely to change competition law as we know it, and as developed over decades of thinking, debate, precedent and experience.

The goal of the tool is to identify “structural risks” that cannot be addressed under Articles 101 and 102, and under the merger rules. These include markets that risk tipping, unilateral practices by non-dominant firms or oligopolistic market structures. In the face of those risks, and even absent any infringement, the Commission could then impose behavioural or structural remedies (e.g. divestments, break-ups and other line of business restrictions). The Commission explains that the scope of this tool would not necessarily be limited to digital markets. 

This new initiative would have been unthinkable only a few months ago. But then again, we live in a strange new world. Let me give you just one additional example: in a report also published last week, the Austrian competition authority proposed to “reverse the burden of proof” in cases where “official investigations rapidly come up against natural or technical limits” (!).  As explained here, and by more authoritative people than myself, this was, and should still be, something “hard to conceive, at least in free democratic societies”. I have trouble accepting that these ideas might be the new normal.

The proposal of a new competition tool also raises too many important questions; here are just a few as an appetizer. We will have time for more in the future. [Disclosure: Just like virtually every competition lawyer/economist, I have a large number of clients that would be potentially affected by this proposal, and they might have different views about it; these are just my own].  Please feel free to engage with these questions, particularly if you have different views.

1. Would there be an overlap between the new tool and Articles 101 and 102? The justification for the tool is that there may be concerns that “the EU competition rules cannot tackle or cannot address in the most effective manner”. Is the idea to cover alleged “gap” cases only, or also concerns that could be addressed under competition law but that it would be harder to prove under an infringement procedure (e.g. because there are clear evidentiary standards)? Overlaps could be problematic (see the next question below). And if the Commission wants to avoid potential overlap, then it should make clear the type of “concerns” that fall outside the scope of the competition rules (e.g. self-preferencing absent indispensability?) I doubt one may want to do that.
2. The key question, and the limitations of the legal basis: Would the tool have the object or the effect of bypassing the intervention standards set by the EU Courts in relation to Articles 101 and 102? This is, in my mind, the real question. To the extent that there may be a material overlap, this would become inevitable. As explained here and here, I think it would be unwise to ignore the lessons learnt over the years (I don’t buy, and will actively combat, the new argument that “judges don’t get it”). But my point today is a different one: there is no legal basis for the Commission to bypass the content of Articles 101 and 102 as interpreted by the EU Courts. The Commission has explained that the competition legal basis for the proposal would be Article 103 TFEU. This provision only enables the adoption of legislation to “give effect to the principles set out in Articles 101 and 102”, “ensure compliance with the prohibitions” or “define the scope of the provisions”.  Any new tool based on Art. 103 TFEU would need to be consistent with the provisions of the Treaty as interpreted by the Courts (regarding, for example, the burden of proof, the notions of restriction of competition, dominance, anticompetitive effects…). The Treaty provisions deal with restrictions of competition, but can arguably not be the legal basis for measures that seek to create new competition. 
3. Do we want to bring the definition of the substantive scope of the competition rules to the realm of politics? Competition law has historically been judge-made law, in the belief that this would ensure its flexibility, adaptability, and its isolation from small politics. Until now, only the Commission and the Courts have played a role in defining the material scope of the competition rules. Legislative initiatives under Art. 103 TFEU were limited to merger rules and procedural matters. Again, the times they are-a changin’. This may (for better or for worse) cross what until now was a red line, potentially changing the discipline. It may seem the Commission is obtaining new powers, but it may be at the risk of losing its preeminent role in defining the rules.
4. Is there really a blind spot in competition law? We dealt with that in a recent post. There are few, if any, areas of the law as flexible and malleable as competition law. Are there really gaps? I, for one, trust in the ability of the Commission to bring, and win, cases where a real problem exists. Have DG Comp’s existing sectoral powers let us down? Remarkably, not so long ago the sentiment was that competition law was unduly harsh to dominant firms (I didn’t buy that then, and I don’t buy the opposite now). That competition law may not reach where some people would like it to doesn’t mean there is a gap. Having to analyze practices on a case by case basis is not a flaw, but the only way to get it right.
5. Can the pace of competition enforcement give rise to irreversible consequences? Two questions here: is there any case where we know that earlier intervention would have made a change? If you think about it, even the tech cases that have taken a number of years (e.g. Google Shopping) were ultimately precautionary in nature (i.e. concerned about likely potential effects). If the decision had really come too late, it should have been easy to make a case about actual effects. Also, can we all agree that  competition authorities need more resources and that this would also help speeding up cases? 
6. Are remedies the problem? You may have lately heard on the conference circuit that cases are good but remedies are horrible. It’s clear why one would say that, but it can be a legitimate view. The way we see it, though, remedies, and their outcome, often tell you a lot about how solid a case really is. Imagine a fictional case where there would be no causality between the conduct found as abusive and its alleged effects (for example, because the domco’s market share was due to superior quality). If you impose a remedy targeting that conduct, the remedy will of course not have any impact. Arguably, the remedy’s failure would simply expose that the conduct wasn’t a problem  in the first place. If one believes that the theories of harm underlying  a decision are sound, and we believe that a compliant remedy is insufficient, why don’t we simply draft decisions differently? 
7. How to ensure the proportionality of intervention? Under current EU competition law (and except in Art. 9 commitment scenarios) remedies need to be proportionate to undoing the consequences of an alleged infringement. Some people believe that the advantage of the new tool is that it would enable the Commission to impose more far-reaching remedies because, as there would be no infringement, there would be no need to ensure proportionality to it. This is a curious logic: since a company did nothing wrong, it can be treated worse. Where would then lie the proportionality limits? The Inception Impact Assessment explains that “these remedies would increase costs for the companies concerned. The proportionality of the costs incurred would be ensured by the fact that such remedies have to be limited to ensuring the proper functioning of the market under scrutiny”. You can judge for yourselves whether that dispels concerns.
8. What impact on international convergence? The EU competition law system of objective, expert-based and fair enforcement has been a model to other jurisdictions and has inspired many important legislative initiatives around the world. The creation of new standards, the imposition of remedies absent an infringement and the wide margin to identify the situations in need of intervention could also be replicated in other jurisdictions with arguably less guarantess. Be careful what you wish for. The CMA experience is cited as the basis for this new tool, but not all jurisdictions have the UK’s checks and balances. There are in any case lessons from the experience there. The UK has chosen not to use that tool for tech issues when it could have, believing that other tools would be preferable. Why? Where has the CMA done a better job in a market than DG Comp? Was it because the CMA could act faster or because of something else?
9. Would the new tool be of a “non punitive” nature? The Inception Impact Assessment insists that the options considered would entail no finding of infringement, no fines, no damages claims. Why that emphasis? There may be an assumption that a new regulatory tool would be able to do away with some burdens, including the burden of proof. The “advantage” of the new tool is that one could impose even stricter remedies, without having to establish any wrongdoing. That seems like a win-win for some. But think about it again: companies may face stricter remedies than under quasi criminal competition law, with less procedural rights, and even if they haven’t done anything wrong. This doesn’t mean there is no punishment; it means there would be punishment without the crime and without limiting principles. Would a new tool compliant with the standards that the ECHR sets for liberal democracies? How would we be able to challenge other countries if they start adopting adopting harsh remedies (against companies or individuals) absent wrongdoing but in response to perceived threats?
10. Do we really want this to be the new normal? The “new tool” would not be a mere technical refirenement; it goes much beyond that. We can no doubt make improvements, but we should be extremely careful not to cross red lines. In competition law (and perhaps even more in competition economics) we have become accustomed to the absence of bright lines and we dislike restrictions, but the law does by nature set some limits to what we all can do (and this goes both for companies and public authorities). Legal rules are but the wise restraints that make us free. It may be frustrating, but we know from experience that it is much better than discretion. This doesn’t mean we should necessarily be satisfied with the “status quo” (without some friction there may not be progress), but we shouldn’t compromise basic principles in the search for solutions. The European Union leads with values, and the balance of justice that makes us proud depends on our taking an evidence led approach to competition law subject to clear standards and thorough judicial review.