Archive for the ‘Antitrust Scholarship’ Category
An algorithm for competition law conferences
Last week was a very weird one. I spent almost as much time at competition law conferences than at the office. Here is a brief account of how the week went and of the thoughts that this conference overdose triggered:
As I have already mentioned on this blog, on Tuesday I participated at a workshop entitled “What is happening to Article 101 TFEU?” organized by Giorgio Monti at the European University Institute in Fiesole (as you know, Prof. Monti´s idea to hold this workshop was “inspired” by some discussions on this blog). The presentations by Giorgio Monti, Saskia King, Eric Gippini and Luis Ortiz and the discussion we had were all extremely interesting. I was overwhelmed by how smart (an genuinely nice and funny) the group was both during the workshop and outside of it. We tried to make sense out of the object/effect dichotomy and talked at length about what really is a restriction of competition as well as about the “deaths” of restrictions by effect and of Article 101(3). It´s a pity that only a small group could attend. On the plane back to Brussels, Eric, Luis and I mentioned that perhaps we could try to write a brief piece with our “non-mainstream” ideas some time soon. I´ll make sure that they don´t forget about it.
On Wednesday Charles River Associates (CRA) held its annual conference in Brussels. I attended most of the morning sessions and I have to say that the event was a great success. As excellent economists, these guys are conscious of the power of “FREE”. They deserve recognition for holding a free very high quality conference in Brussels.
Then on Thursday there was a lunch talk at the GCLC on the Menarini Judgment. I couldn´t attend, but all I hear is that the speakers were truly brilliant.
The reason I couldn´t attend the GCLC event is that at the same time I was speaking at yet another conference: the International Symposium on Competition Policy organized by the Centre for Parliamentary Studies. I was invited to this event following a recommendation from Nicolas (I really owe you one here, mate -please note the irony-). I was supposed to deliver the final keynote speech on “The future of EU Competition Policy“. I had prepared what I thought to be a fairly original and humorous prediction of what I think will certainly happen in the short term, of what should happen in the medium tem, and of what will inevitably happen in the long term. I´m not very sure that my messages will have the impact I´d hoped for: the audience was composed by two people from the Namibian competition authority, two members of the Malaysian competition Commission, a member of the Danish Ministry of Economic Affairs, a Scot from the Water Industry Commission, and my colleague Napoleón Ruiz who threatened me with taking pictures. Jokes aside, it was fun.
So many hours of sitting at these and other recent events made one thoughts spring to mind: I wouldn´t need the expertise of my friends at CRA to come up with an ad hoc algorithm or formula with which to predict how interesting a competition law conference is supposed to be. The general rule (subject, of course, to exceptions) is easy: the likelihood of getting to listen to new and interesting stuff is inversely proportional to the combination of three cumulative variables: the price of the event, the number of attendees, and the number and lenght of slide decks. It´s generally not a good sign if an event is pricy and crowded. The ones with a greater chance of not being interesting at all are those for which you have to pay in order to be a spayeaker (yes, there are plenty of those!). (Not that so many people care anyway, since some of these events are mainly about networking, a.k.a “free” drinks and nibbles + some gossiping).
That´s why the 1st Chillin´Competition Conference should also be free. We only have to figure out minor details, such us how to pay for it.. Here are some options: Voluntary contributions? Sponsoring? A lottery for a date with Nicolas?
Ideas welcome…
Microsoft/Skype- On how to unconditionally clear a monopoly in Phase I
My “learned” co-blogger (and NY-Times interviewee of the week) initiated a very interesting debate yesterday with regard to the Microsoft/Skype clearance decision. I must confess that I read the decision last evening on the plane back fromFlorence (more on that tomorrow) and, to be frank, I was astonished. Let me briefly, and not exhaustively, explain to you why:
As our usual readers know, I’ve a particular interest in looking at how competition authorities appraise network effects in competition cases (it was the topic of my LL.M dissertation and it’s also supposed to be the topic of a pending PhD project). Since the Microsoft/Skype merger involves two entities benefitting from huge network effects I regarded this decision as a must read.
Well, I was wrong; the decision is a must RE-READ: I had to read certain paragraphs several times in order to make sure that it wasn’t just that I was tired and couldn’t make sense out of it. After several re-reads, I reached the conclusion that, actually, parts of it don’t make any sense.
Nicolas said yesterday that “the decision clearly shows that a merger involving a large monopoly can get Phase I clearance”. I was not involved in this case and therefore I may be missing something but, if you ask me, the decision reads as if the Commission already knew that it wanted to clear the decision in Phase I and then tried to construct an assessment that would fit its pre-determined conclusion. Arguing in a convincing manner that the creation of a “large monopoly” such as the one at issue does not raise competitive concerns and is suitable for Phase I clearance is practically impossible. Nonetheless, that is what the decision has tried to do. And, inevitably, that leads to serious logical problems.
Even from the perspective of an outsider [PS. see note at the end of the post] it’s easy to detect many defects, but for the sake of brevity (notably because I have only allocated one hour of today’s afternoon to write down my notes about this) let’s focus just on one of the Commission’s errors. I have chosen to present you with an error concerning the market for consumer communications because it involves network effects (which is what initially got me interested) and horizontal effects, and because all of us as consumers are able to understand it better. The decision is equally, perhaps even more, questionable with respect to the assessment of vertical and conglomerate effects in the market for enterprise communications, but that part is harder to explain in a brief post; I might develop my views on this in a later post.
In what follows I´ll explain what the decision says in this regards and I will provide you with my very personal views on the Commission´s reasoning. I might be right, but I certainly may as well be wrong. If interested in taking a look at the substantive stuff in other to arrive to your own conclusions, click here:
Antitrust Compliance
The European Commission has just released a brochure entitled Compliance matters: What companies can do better to respect EU competition rules.
The foreword says that companies should “[l]ook at this brochure as a road safety brochure ahead of the holiday period“. Many of the companies reading this will be certainly comforted by the irony positive thinking underlying the reference to the holiday period ahead.
In essence, the Commission´s document contains the following messages: (i) breaching competition law isn´t cool and naughty companies can be punished; and (ii) companies should have tailor-made compliance programs.
When I received the brochure this morning I was curious to read the Commission´s advice on how firms could stay out of trouble. After a quick skim, I see that the closest to constructive advice on substantive matters is this profound passage:
“DON´T fix purchase or selling prices or other trading conditions; DON´T limit poduction, markets, technical development or investment; DON´T share markets or sources of supply; DON´T exchange individualised information on intended future prices or quantities or other strategic information.”
I have the feeling that most of the readers of the brochure already had some kind of intuition that they couldn´t do such things. Moreover, some of that advise is rather hard to put in practice (e.g. “limiting investment” : could bank’s refusal to grant credit be considered a breach of competition law?; “limiting production”: shall a company make some more of this product that isn’t selling too well?; “limiting a market”: how does one limit a market? ).
In any case, and leaving easy jokes aside, the Commission must be applauded for its attempt to foster a compliance culture. Other competition authorities such as the OFT and the Autorité de la Concurrence should also be commended for their efforts on this area. Moreover, the Commission has provided much general guidance elsewhere and it cannot be expected to do so on a brochure like this.
In fact, the message about the need for companies to have an effective and tailor made compliance program is welcome and important. The brochure basically sets out the fundamentals of compliance program design, and whereas it does not say anything groundbreaking it does a good job in explaining the basic stuff.
The Commission doesn´t seem to contemplate further incentives such as fine reductions for companies with established and appropriate compliance programs. The French competition authority has proposed fine reductions, but on an ex post basis and only in the framework of settlement proceedings. But why not take a bolder step? I tend to understand those who argue that it doesn´t make much sense to reward firms that have breached the law ignoring such programs, but what about those cases where the company has a clear policy and intention of complying with the law, but one or a few “rogue” executives act on their own? (we all know many instances where this has been the case). It all would come down to assessing what standard the firm had set and whether it complied, as a firm, with that standard. This point was also made by D. Geradin (with the support of J.Wileur and D. Malamataris ) on an interesting recent paper. Companies should not be rewarded for breaching the law, but it would be fair to limit the damage when it can be shown that a given company has done everything it could.
At the end of the day, the content of the Commission´s document is ok given what can be expected from a non-specialist brochure from the Commission. What is more worrysome is that I have seen (more than once) very similar “brochures” which had been sold to companies prêt à porter (not tailor made; i.e copy/paste jobs) and at ridiculous prices. I´m currently working on a couple of compliance programs, and, to be frank, general and vague programs aren´t useful for the companies nor for lawyers (unless billing is considered to be the sole parameter). On the contrary, ad hoc programs adapted to particular firms and markets are extremely useful for firms as well as extremely interesting for lawyers, since we get to be in touch with a wide array of strategies and practices in many different markets. A subversive thought springs to mind, shouldn´t clients also draft some compliance programs on professional service standards for some law firms?
From theory to practice
In the antitrust field, Prof. Barry Nalebuff will remain to posterity for being the one guy who challenged the caricatural Chicago view that there can be no exclusionary bundling (the “single monopoly profit” theorem).
But beyond this, he may also remain to posterity as being one of the founders of Honest Tea.
Turning business theory to practice, Barry Nalebuff co-founded a company that “creates and promotes delicious, truly healthy, organic beverages” (sic!).
Apparently, the idea came out of “a class discussion that involved a Coke vs. Pepsi case study“. And since then, they have achieved a truly impressive penetration on a market usually depicted as a fortress, given high barriers to entry.
With this background, Alfonso and I are currently contemplating a potential move on a less healthy, but equally delicious market segment of the drinks industry.
Very many thanks to my LLM student Stéphanie de Smedt for the pointer.
There’s no way, but the hard way
The Commission’s Draft Proposal for a New Regulation on Credit Rating Agencies (“CRAs”) is just out.
It enshrines a whole host of competition-related remedies (see text at the end of this post). Amongst the proposals on the table:
- A limitation of the duration of CRA-issuers business relationships to a maximum of 3 years (article 6b);
- Injunctions on outgoing CRAs to exchange information with incoming CRA (article 6b);
- A 10 years general ban on merger and acquisitions, that applies to CRAs holding a market share > 20% (article 6c);
- Remedies including fines, which bear intriguing resemblance to penalties for competition infringements.
The proposal however abandons the option of creating a publicly funded European rating agency, given “concerns relating to conflicts of interest and its credibility, especially if such CRA would rate sovereign debt”.
In light of this, a question springs to mind: if (i) the problems that plague the rating industry are competition related; and (ii) similar remedies can be ordered on the basis of the competition rules, why follow a cumbersome legislative approach, rather than using the good old, flexible Articles 101 and 102 TFEU?
The answer is relatively straightforward: the competition rules only kick in in the presence of a competition infringement in the form of an unlawful agreement or an abuse. To date, no such conduct has been reported in the ratings industry (that said, I have argued elsewhere that cooking an Article 101 or 102 TFEU case might not be that difficult).
Because all competition problems cannot be solved with the competition rules, there is thus a “gap” in the competition toolbox of the TFEU.
In some Member States, like the UK, this gap is filled with the possibility to launch “market investigations” and possibly order intrusive remedies where “any feature, or combination of features, of each relevant market prevents, restricts or distorts competition“.
It is certainly about time for the EU to enjoy similar powers. The sector inquiries found at Article 17 of Regulation 1/2003 only provide an imperfect substitute.
Otherwise, the EU might have no other choice but to follow the “hard way” with competition issues subject to political maneuvers of all sorts and endless, protracted negotiations (but true though, in Airbourne’s lyrics “there’s no way but the hard way“).
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11/11
Today is a day off in Belgium and France. A quick post though.
A group of Phd students from University College Dublin is organising a Postgraduate Workshop (in March 2012) on competition law enforcement.
Hereafter the link to the call for papers.
The Italian Way
A message of hope, for our Italian readers.
In Italy, competition experts face promising career prospects:
- Giulanio Amato, once Chairman of the Italian competition authority, twice held the position of Prime Minister – albeit for an ephemeral period;
- Mario Monti, once EU Commissioner for Competition is poised to become the next Italian Prime Minister.
On the EU and the sovereign debt crisis (because life isn’t just competition law)
We spend most of our time working on competition law matters – be it in academia or in private practice-, and we also spend part of our free time trying to look at competition law from a different angle on this blog. If we devote so much time to try to make sense –and sometimes fun- out of competition law it isn’t because we believe that competition law is more important than other stuff. For all its many virtues, it actually isn’t.
We started this because we thought there was something a bit different that could be done within our tiny and endogamic professional circle, and because we only feel comfortable speaking out loud about issues on which we feel we can add something coherent and hopefully useful (as you can imagine, writing every day what comes off the top of our heads without thorough reflection and in front of such an informed audience as you are means entails certain challenges and risk, notably the risk of making fools out of ourselves). In other words, we do this because we thought there was something meaningful –if only a tiny bit- that we could add to the area in which our professional lives are focused.
But even though our economist friends could argue that we are rationally choosing to exploit our competitive advantage, we can’t help thinking sometimes that maybe our priorities are somehow skewed. One example: while EU leaders were holding crucial talks in Brussels–just a few meters away from my office- on October 27th and 28th, we were writing here about the names of partners at an American firm as well as about the “slow death of Article 101(3)”. Wouldn’t it have made much sense for us to write about the slow death of the European project?
We are just as politics geeks and fervent EU supporters as we are competition law geeks; the difference is that we feel, or rather know, that you wouldn’t give a damn about our personal views on general issues on which our opinion is not different from anybody else’s; that’s why we’ve only gone off track on very rare occasions. There are times however where we feel that we have to give vent to some non-competition related thoughts.
There are some things we simply can’t understand. We don’t have solutions and are not going to fix the world, but since we need to let some steam off, we thought we’d use this platform.
If interested in knowing what we can’t understand, keep on reading. If not, we’ll be back tomorrow with the usual stuff, and apologies for going off-track.
The language of competition law
In a comment to a recent post we recently engaged in a discussion about the meaning of words and the importance of the proper use of terminology in light of the crucial meanings, nuances and attitudes that words often implicitly or explicitly convey. Words often “carry dynamite”, we said. A few days earlier, we had also written another post which -perhaps in a manifestation of wishful thinking- highlighted the fact that the Court had used the term “objective justification” in an area (Art. 101 TFEU) where it had never resorted to it before. In our view, words matter. A lot.
All this sprung a reflection about the importance of words and of languages when it comes to understanding, teaching or applying law in general, and competition law in particular:
The crucial influence of the use of certain words, metaphors or narratives has already been noted in the past by some of the most prominent antitrust scholars. Excellent examples of this can be found, amongst others, in the influential piece by late Prof. Areeda on “Essential Facilities: An Epithet in Need of Limiting Principles“; in “Antitrust Doctrine and the Sway of Metaphor” by Michael Boudin (who, btw, was my antitrust professor at HLS); or in Newberg´s “A Narrative Construction of Antitrust“.
One of our blogosphere colleages (Prof. Sokol) also wrote a post some time ago about The Language of Sex and Antitrust (if cheap advice on how to increase online readers is right, this is the link that most of you will be clicking…).
But beyond words, the language in which the law is conceived, drafted, learnt, taught, and interpreted or applied also makes a huge difference. I am not aware of the existence of any study on whether and how languages compete to shape the law, but it is undeniable that they do shape it, and that their influence can be much greater than that of words, because languages (i) are also vehicles for the diffusion of certain values; and (ii) because they are subject to very strong network externalities (if any enforcer is reading this, then languages -as beneficiaries of network externalities- may have just become a new antitrust suspect…).
Many of you may have first-hand experience of the fact that law is very often learnt, taught and understood differently depending on the language used. Nicolas and I, for instance, are currently working on competition law textbooks in our own languages, and it is not always easy to transform the input we normally receive (typycally in English) to our output. Mere translation is not always enough because the language strongly influences the way in which the information is rationalized. Examples abound:
Some posts ago we wrote about the future reform of the General Court and noted that more than 40% of référendaires (clerks) at the GC are of French nationality. This is obviously due to the fact that the official language at the Court is French, but, as we noted in that post, those numbers have implications far beyond the merely linguistic. In that case there are also cultural elements involved (in as much as the language may be associated to the values of a country), but the influence of the French values through the French language can be traced in many of the Courts attitudes and Judgments.
Now English has become the lingua franca (a fact of which this blog stands as evidence). This may have had some disadvantages for the English language (because being used by non-natives it risks deteriorating, as this blog also illustrates..), but overall it offers many advantages to anglosaxon values and ideas which enjoy an “unparalleled competitive advantage” (to use the words of the CFI´s Judgment in Microsoft). Ask the Financial Times or The Economist…
But competitive advantages arising from the use of language in competition law are not merely enjoyed by ideas and policies, but also by firms. One example of this could be the legal market, where anglosaxon firms enjoy a competitive advantage on the worldwide market just because they´re anglosaxon firms. I´m not necessarily criticizing this; my firm, for instance, also benefits from a competitive advantage derived from huge brand recognition in its main market. I do nevertheless have a problem with the legal market becoming a “luxury” market where brands matter more than quality and outcomes (and I know many examples where this is true in the EU competition law world), but this is another matter that perhaps we´ll deal with in another future post.
Help
Apologies for the self-promotion – it is actually not the purpose of this post – but next week, I have to give a speech on standardization a this conference.
To prepare for the conference, I have read a LOT of stuff including complex books on the ISO, patent law, etc.
Yet, there’s one little piece of information that I am still missing. I heard last week from a secret informant that there is currently a Dupont case in COMP’s pipeline, but I cannot find any trace of it. Any information on this case would be most helpful.
More generally, I welcome any input, remark, comments, sources on standardization. As usual, your help will be acknowledged in the first footnote of my paper.
Chillin'Competition 