Archive for the ‘Antitrust Scholarship’ Category
Ugly -at first sight- but interesting (on nullity under EU competition law)
Some time ago Nicolas Charbit (Concurrences) asked Luis Ortiz Blanco and myself to write a foreword for a special issue of e-Competitions on “Nullity/Voidness”.
Yes, at first I had the same reaction you just had; kinda “What?? Wasn’t there a less sexy topic? I bet they asked us because no one else wanted to do it!”. But we accepted the offer (partly because it was for Concurrence, and partly because we still haven’t learnt to say no). Then we started thinking about it. For some time our only thought was mainly “damn, damn, damn, why did we accept to do this?“.
But when we really undertook to work on this foreword (the weekend before the tenth deadline expired), we realized the reason why the theme of nullity does not rank high in the list of preferred topics of EU competition law commentators. Reflecting upon it requires an excursion into “terra incognita”. Making sense out of the various intellectual riddles that arise with regard to nullity/voidness requires not only a knowledge of competition law principles, but also a mastering of general principles of contract law, as well as of comparative law, that are all too rare in our narrow discipline. In other words, we found out that the topic demands not a foreword but a doctoral dissertation. In spite of the appearances, it’s as interesting as it is important.
In our view, the most interesting issues concern so-called “fruit agreements”, that is, agreements distinct from the one found in breach of the competition rules but that are instrumental to realise the profits sought therewith (e.g. the agreements between a company participating in a cartel and its customers). It is clear that a given anticompetitive clause within an agreement shall be deemed void. It is also well-established that the nullity of such given clause can possibly extend the nullity to the rest of the agreement of which it is part provided that the two are not severable, and that whether a given clause is severable from an agreement is to be decided by national courts in the light of the applicable legislation in each Member State and of the specific features of each agreement. And whereas the practical application of these principles may give rise to divergent results, the situation –at the level of EU law principles- is fairly satisfactory.
What is less satisfactory is the uncertainty surrounding the validity of agreements which do not directly breach the competition rules but which stem –and actually put into practice- another agreement that does. The case law of the European Courts states, on the one hand, that the “the nullity referred to in Article [101](2) (…) is capable of having a bearing on all the effects, either past or future, of the agreement” (Courage v Crehan, para. 22) and, on the other hand, that “[t]he consequences of such nullity for other parts of the agreement, and for any orders and deliveries made on the basis of the agreement, and the resulting financial obligations are not a matter for community law. Those consequences are to be determined by the national court according to its own law” (Kerpen & Kerpen, para. 12). In other words, EU law purports to deal with the nullity of the effects of the anticompetitive agreement, but not with the vehicles (ensuing contracts) that carry out such effects. Does this make sense?
Those interested in finding out our view on this issue, and on a few others, can read the full foreword here: Foreword eCompetitions Nullity/Voidness (It’s only 5 pages long; not long enough to bore you to death).
The rest of the special issue is available here.
Have a great weekend!
7th Junior Competition Conference – Call for speakers
In our last post we stated that one of our goals for the future is to contribute to increasing the visibility of young lawyers. Here’s a way to start:
We would like to draw your attention to the Seventh Junior Competition Conference. The editors of the Competition Law Journal have informed us that the Conference will take place on Friday 25 January 2013 and will be dedicated to reform of the system of private enforcement in the UK; for further details please click here.
If you would like to speak at the conference, please contact Vian Quitaz – vjquitaz@hotmail.com – with an expression of interest and a short outline of your proposed topic.
A separate announcement will be made in due course for those interested in attending the Conference.
The editors of the Journal look forward to hearing from you!
And speaking of younger generations, we recommend you take a look at this: Tournament of Jokes: Generational Tension in Large Law Firms
Merging competition authorities and sector regulators; a good idea?
The Spanish Government has just sent to Congress a draft law that proposes the creation of the National Competition and Markets Comisión (Comisión Nacional de la Competencia y los Mercados). The Spanish Association for the Defence of Competition has just posted a link to the text of the draft law on its webpage ( thanks to Antonio Creus and Luis Ortiz for the pointer!).
The first draft of this law was not very well received (this is an understatement) by the current competition authority nor by the telecomm, energy and postal regulators, which issued fairly critical reports (available here). That first draft also raised falgs in Brussels, to the extent that the Euopean Commission publicly manifested its concern that the envisaged authority would lack the necessary independence (see pages 22-23 of this document). The proposal -which will most certainly materialize soon- does however raise interesting questions worth exploring.
Let’s leave aside the more practical issues as well as those purely national in order to focus on the big picture. Until now, the Member States of the European Union had generally opted for guaranteeing the competitiveness of certain network markets by resorting to dual institutional models featuring (i) an independent competition authority in charge of, well, you know, all the stuff that competition authorities do; and (ii) independent sector regulators entrusted with ex ante regulatory tasks. The dual model certainly has overall been decently effective, even though it has not always yielded perfect results; in some occassions, has led to contradicory decisions and legal uncertainty.
The preamble of the Spanish draft law states that the time is ripe to break apart with the prevailing institutional architecture. Looking at other States of the EU it observes two incipient trends whereby multiple specific/sector regulators are either (a) folded into one sole multi-market regulator (which allegedly takes advantage of economies of scale, minimizes the risk of regulatory capture and ensures a consistent approach to the regulation of network industries; this is the case of the German Bundesnetzagentu)or (b) merged with the competition authority. To my knowledge, the only example of the latter “trend” has been that of the NMa in the Netherlands.
I haven’t yet analyzed this new draft in detail but, whereas I don’t exclude that it might possibly be a good idea, I confess that I’m a bit concerned about this new institutional framework. Aside from the fact that it compels us to update our textbook on EU and Spanish competition law (excuses for postponing it seem to be over..damn!), my main concern -already voiced out in a previous post-is that blurring the frontiers between the applicable standards, attitudes and instruments used under competition law (a sanctioning system with criminal features) and those characterizing sector regulation risks affecting the way competition law is enforced, and could result in a lowering of standards.
We believe this is an interesting debate, and are willing to “market test” these institutional mergers by opening up this floor to anyone with strong views on these issues (pseudonyms are accepted). If that’s your case, please drop us a line at nicolas.petit@ulg.ac.be or alfonso.lamadrid@garrigues.com
And, by the way, I can’t miss the opportunity to do some additional advertising on the seminar on competition and regulation in network industries that I will be coordinating in Madrid in February, and in which we will cover all this stuff in depth.
On how to find the perfect couple (2012 Nobel Prize in Economics)
As announced yesterday by the Swedish academy, the recipients of the 2012 Nobel Prize in Economics are Angela Merkel and the German Government Al Roth and Lloyd Shapley.
Their research has mainly focused on the stable allocation of resources in markets where prices are inexistent. They focused on two-sided markets where monetary exchanges would be inappropriate (i.e. patients-kidney donors or the two individuals in a marriage) and figured out the way to strike non improvable (stable) matches.
As we wait for Nico to come up with a Chuck Norris joke on this, we can point you to Al Roth’s blog . In yesterday’s entry he said that his daily post could be delayed, and on Sunday Roth had written a post on the correlation between national chocolate consumption and per-capita Nobel prizes (Belgium is the exception that confirms the rule) 😉 (there is, however, a correlation which seems even stronger than the chocolate one: if you’re a US citizen, a Harvard Professor, and your research is on game theory then it’s pretty clear that you’ll get a Nobel sooner or later!).
We could also recommend you to read Shapley’s seminal paper on Long term competition (a game theoretic approach) (if you do, please tell us what it says, because we can’t really read equations!).
Now, since you probably won’t read neither Roth’s blog nor Shapley’s 1992 paper, and since the only think in this post that caught your attention was that they figured out the best way to find the perfect match in marriage, that’s where we will focus on:
In a 1962 paper Shapley and Gale assumed a market in which men propose to women (a debatable assumption as it is a bit male-chauvinist and also leaves out people who wish to stay single, gay and bisexual people and a bunch of other “real life stuff”), in which each individual has views about what their ideal couple should be like, but in which those views do not lead to perfect matching [otherwise a bunch of us would be matched to Monica Bellucci or Bar Refaeli, and that can’t work; or could it?? (note to my girlfriend: this is only a joke mandated by our editorial line; don’t worry)]. Shapley and Gale stood up for the proposition that an stable result could only be attained if women applied a “deferred acceptance” strategy. This would work as follows:
First, men would propose to their favorite woman. This means that Monica and Bar (which is how Nico and I call them in private) would have multiple choices but that other women would have less or zero choice, which (even if certainly acceptable by some of us) is unfortunately not stable. Instead of accepting their favorite “candidate”, they argue that women should “pocket” the strongest offer without accepting it and reject all others. Rejected men would then make a second proposal, which would allow women to stick to their previous pick or to replace it by one of the new candidates. Shapley and Gale proved that, if repeated enough times [1st round Monica Bellucci, 2nd round Bar Refaeli… 1456th million round Snowwhite’s evil stepmother –with two notable exceptions-] the algorithm will lead to stable non-improvable matches.
Sure this doesn’t seem to “match” the real world and, although intellectually interesting, its practical application seemed doubtful (and discouraging!). But Roth figured out that Shapley’s algorithm could have enormous practical applications on students-schools, patient-donors, and doctors-hospitals. A great example where the intelectual beauty of economics results in very practical solutions to real problems that truly affect peoples lives. In sum, a very deserved prize.
More on Karate Competition Law
In the light of the current thresholds governing the grant of IP rights, we could have claimed a copyright for the term “Karate Competition Law” coined by Nicolas. Judging by the number of times that I’ve heard it since that post was published, I’m sure we (meaning him) would have made much more money than the …let me check… $ 10.33 that we made in July via advertising [P.S. this post was written in August and saved for a busy week].
Why did this come to mind? Because I just came accross the US Federal Trade Commission’s elegant formulation of what “karate competition law” is. In its Intel Complaint (for our previous and rather simple post on it, see here), the FTC asserted that:
“where a respondent that has monopoly power engages in a course of conduct tending to cripple rivals or prevent would-be rivals from constraining its exercise of that power, and where such conduct cumulatively or individually has anticompetitive effects or has a tendency to lead to such effects, that course of conduct falls within the scope of Section 5″.
Section 5 has been the primary tool to which US authorities have resorted in their attempts to fill in the perceived gaps of the Sherman Act. Some argue that there’s no EU competition law equivalent to Section 5 of the FTC Act. However, I’m not so sure that we need any equivalent instrument. Whether one likes it or not, as thing currently stand– and obviously leaving aside the dominance/monopoly threshold- I don’t think that the reference in Section 5 to “unfair methods of competition” or the above-quoted passage of the Intel Complaint encompasses much more than the wording of Article 102. “such abuse may, in particular, consist of (…) b) limiting production, markets or technical development to the prejudice of consumers” .
The General Court’s interpretations of this provision in Microsoft, Astra Zeneca Judgments appears to endorse this wide view of Art. 102.b) [arguably previous Judgments from the ECJ such as AKZO, Compagnie Maritime Belge or even Tetra Pak also opted for a quite wide construction of Art. 102]. Interestingly, whereas the case-law and precedents are endorsing a wide view of the protective scope of Art. 102, the effects of the effects-based approach on practical enforcement push in the opposite direction. Self regulation, I guess.
PS. With this I’m not criticizing the use of Section 5 by the FTC. I, for one, am a fan of the FTC’s theory in the Ethyl (Du Pont de Nemours) case, in which the FTC prosecuted unilateral practices by non-dominant firms that were used to facilitate parallel pricing. What I’m saying (and I use the first person here because Nicolas might disagree) is that European judges seem to have construed wider “standard provisions”. For instance, even the situation at issue in Ethyl could have been approached under Art. 102 under the Irish Sugar notion of individual abuses of a collectively dominant position.
SMP
During the WE, I read Pascal Lamy’s excellent note entitled “The Future of Europe in the New Global Economy“.
There are dozens of good points in this note.
In particular, I really liked Lamy’s rebuttal of the argument that European high salaries are the cause of our competitiveness deficit.
As he rightly argues, “when we look at salaries, we have to set them against worker productivity“. And on this, there is still a profound gap between the EU and other trade blocks like China and India.
Lamy, however, makes a more surprising point. He contends that in the global trade arena, EU firms should strive for what he calls “non-price competitiveness“.
So far, so good… But in his own words, non-price competitiveness covers:
“those characteristics that cause a product to stand out positively among its competitors, regardless of price. In particular, it comprises know-how, quality and innovation, which allow a company to sell the same products as its competitors but at twice the price“.
And Lamy further adds, that non-price competitiveness has this good that it:
“shields manufacturers from having to worry about fluctuating global prices and competitor attacks“.
In my own professional language, I call this “market power“.
So here’s a nut to crack: can market power be the way forward for the EU in terms of achieving a comparative advantage on the international trade scene?
Best book review ever
As you know, Nicolas is one of the co-authors of a new book on EU Competition Law and Economics.
Oxford University Press has sent me a review copy. I was intending to write a serious review, but now I’ve watched a youtube-review of the book that is much better than anything I could ever write.
Those interested can watch it here: Youtube review of EU Competition Law and Economics
My favorite comments” “it is not too heavy”, “it’s got a useful index at the back” and “it has lots of footnotes” . I also enjoyed the way the reviewer pronounces the authors’ names, including Nikos Petite and Demien Geraden (although, to be fair, in Damien’s case I think it must be a Youtube dialect; here’s a precedent). 😉 He does better with Anne Layne-Farrar’s name.
P.S. This reviewer has featured in previous post here at Chillin’Competition. In fact, he had two nominations to our Antitrust Oscars.
P.P.S. By the way, Val Korah has also written a review of this book in World Competition which Nico is described as an “eminent professor” and a “partner at a famous law firm” (?!).
Monday Read
Our colleague Christian Bergqvist, Associate Professor at Copenhagen University has offered us a working paper version of his piece on the “Use and Abuse of EU Competition Law”. See link at the end of this post.
In brief, Christian reviews the case-law under 101, 102 and the EUMR, searching whether the rules have been twisted, bent or manipulated to achieve objectives alien to the protection of competition.
A very interesting read. Christian is looking for comments on his work. You may directly write to him at: CBE@jur.ku.dk
Politically incorrect: the political process through an antitrust lens
Since I joined Chillin’Competition almost 2 years ago I always had the intention to write a couple of long and well thought out posts on antitrust and politics. One would attempt to apply antitrust principles and rules to political markets (one day we should also try to do that with the legal market too!), and the other would ideally explore the political content of antitrust in different jurisdictions. Undertaking such exercises would have the virtue of linking two of my preferred subjects, and -I’m pretty sure- would also yield some interesting results. However, I never found the time to develop these ideas and, since it is unlikely that I will find it soon, I’ve decided to hastily sketch what I had in mind without developing it further despite the obvious risk of sounding obvious. Let’s start with one question: what can antitrust tell us about the dynamics of political systems?
If you compare the “political market” to any traditional market (at the end of the day, parties/firms compete for the favor of voters/consumers), you will inevitably arrive to the conclusion that it would be an ideal market for antitrust enforcement. Think about it, the political systems in most developed countries are duopolies (the U.S. is a clear example or partisan parity with shifting temporary monopolies), oligopolies (also with temporary and assailable monopolies) and even permanent monopolies.
These concentrated market structures with transient or permanent monopolies can give rise to several concerns which are familiar to any antitrust lawyer. Political parties (be it the one in government or the one in government in combination with other major parties) unilaterally or collectively act to protect an individual or collective dominant position. Most often this is done by deciding to implement certain electoral rules that foreclose entry or growth by third parties.
Public choice theory has dealt ad nauseam with the issue of self-interested lawmakers (i.e. the foxes guarding the henhouse). That’s what this is about too. Political parties are the ones in charge of adopting the rules that govern the functioning of the political market (how parties are financed, how electoral regimes work -i.e. how parties are rewarded-, how third-party entry in the political market can take place, etc.) and other related markets (such as media-related ones). These situations are not strangers to antitrust analysis; just think of well-known EU competition law cases concerning regulatory professional bodies such as Wouters or Piau. The main difference between those precedents and the situation at issue in political markets is that the consequences of the latter are much more significant and potentially harmful.
The idea of applying antitrust principles to examine the political process is by no means original. Some well-known scholars have already done it in the past, generally in relation to gerrymandering practices (see, among others, Issacharoff´s Gerrymandering and Political Cartels or the great amicus curiae that Einer Elhauge submitted to the U.S. Supreme Court, also in a gerrymandering case (available here).
To be sure, political parties are exempt from the application of antitrust rules, and there might be good reasons for this. However, in view of current enforcement trends that have extended antitrust liability to collective bargaining agreements by workers’ unions and even to governmental bodies -see here for a Spanish precedent-, one can’t help wonder whether political parties are really shielded from the potential application of antitrust rules.
[This may sound subversive, but, we’ve consistently proposed to extend the reach of the antitrust rules to those who appeared to be exempt from them…. remember our post suggesting an antitrust challenge to God? ] 😉
In any event, even if antitrust standards aren’t applicable, they are useful to help us realize -regardless of whatever political beliefes one may have- about legal but undue practices carried out by incumbents with the aim of thwarting political competition. I’m sure most of you can quickly come up with a good bunch of examples…
Competition Plagiarism?
A few weeks ago we posted a story about the “competition pills” that the Spanish Competition Authority (CNC) is distributing (see here). We remarked the “originality” of this promotional campaign. Yesterday, one of our readers (thanks, Luca!) posted a comment in which he questions such originality; the comment reads as follows:
“This is scandalous!! Plagiarism!!
They’ve copied the idea, the packaging, the leaflet, the design – literally, everything except the color, red instead of deep blue – from a record by Spiritualized of 1997 – “Ladies and Gentlemen, we’re floating in space”.
Am I the only one old enough to remember this masterpiece?
Still I’d be curious to know who’s the psychedelic case handler at the CNC who came up with the idea”.
Since our readers’ wishes are our commands, we are launching a quest to find the musically literate CNC official/s who came up with this idea, and we want to interview her/him/them here (about music, copyright and the promotion of competition).
The customary beer tasting reward applies to whoever gives us any information that may help us in our quest.
Chillin'Competition 