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Archive for the ‘Subversive Thoughts’ Category

The Diluted Legality of Competition law

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In the past days a Commission official who ranks among my preferred legal minds expressed her/his though that our discipline may not be as legal as we often think. The thought, formulated on the fly  (don’t click, very bad joke) (I told you..) , was triggered by the observation that whereas the law and legal reasoning should be cuasi cartesian, logic, certain, it’s nevertheless very often impossible to predict the outcome of a given case. [This may remind some of a Holmes’ quote: “prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law”].

Then on Monday a lawyer in the audience (not me, really) made a similar remark (this time at a conference in London regarding a certain case I discussed on my previous post, coincidentally published that day). The idea expressed there was that the Commission could have taken exactly the opposite conclusion it took in the face on the very same facts at issue, and it would very presumably also have been endorsed by the Court.

And a few minutes ago a colleague sent me an email discussing the spill-over effects that Alrosa has had in competition enforcement.

As much as I don’t like to admit it, all those are right and share a common theme. I guess Competition Law may indeed be partly losing its last name. I suppose an element of this could be found in other areas of law, but my feeling is that the issue is more acute in our field:

Is it because of the simplicity and vagueness of our main working provisions and the terms they use? (as I observed here, the Court itself recently acknowledged that “Article 101 or 102 TFEU are drawn up using imprecise legal concepts, such as distortion of competition or ‘abuse’ of a dominant position” ).

Is it because of the transformation of the discipline by the incorporation of economic analysis to the assessmente of legallity of market practices? (on that, you know my views). It has become popular to bash ordoliberals, but they crucially emphasised the need to preserve the competitive process through law-making, as opposed to unconstrained policy choices, and this is a lesson we may be forgetting.

Is it because of the Court’s inclination to show deference to (what they see as, and often are) specialized agencies?

Is it because of developments like Alrosa, that enable a disconnect between the problem and the solution and, in a way, may legitimize the abuse of an institutional dominant position?

Is it because of the number of the unavoidable yet more-or-less-reliable proxies (market definition, market shares, cost-assessments, object short-cuts, etc..) we use and the little certain tools we have?

Is it because law and policy-making are inextricably intertwined in our field? (in the sense that policy choices are often expressed through the choice of cases).

As with anything else, the answer is very likely cumulative and complex, but the fact is that competition law may have become a discipline where the authority’s self restraint, negotiations in the shadow of the law, disclaimers in lawyers’ risk assessments, administrative/judicial discretion, and therefore uncertainty, play a larger role than perhaps they should.

The fact that the law needs to be interpreted, or even the fact that legal reasoning can be played with has upsided (allowing me to earn a living or making the profession interesting are just two examples), but I can’t help feeling that there is something not right about it.

P.D. These are, as always, thoughts in progress. If you don’t agree with them, remember our disclaimer.

 

Written by Alfonso Lamadrid

15 May 2014 at 2:09 pm

Wrapping up the week (on SEPs, Uber, Tesla and lawyer moves)

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This week’s blogging inactivity has had a lot to do with a pile of new and old work, the fact that I’m moving houses and have the in-laws here (a painful process; the moving, I meant), the fact that I devoted some time to watching two Spanish teams get to the Champions League’s final (I guess Germans and English will now put increased pressure on the ongoing State aid investigation) and the fact that we had some farewell events for one of my closest friends and colleagues (this guy, who is moving to the Commission).

So, here’s a quick overview of some stuff we couldn’t cover:

– The news of the week was the adoption by the Commission of decisions in two much talked about SEPs cases. The Commission made binding the commitments proposed by Samsung (see here for our initial comment on these) and -as we anticipated last week– adopted a decision declaring an infringement on the part of Motorola, which did not receive a fine. The Commission has sough to introduce some clarity on a matter in which the industry couldn’t agree by providing a safe harbour for standard implementers/willing licensees. We might discuss these more in depth in the coming weeks. For the time being, the Commission’s FAQ’s are available here . The Commission’s decisions might have brought additional clarity to the industry, but they also will have side-effects on conference organizers and on certain academics, lawyers and officials, all of whom will now have to find a new topic to talk about  🙂 [Btw, WordPress’ new smiley faces are much uglier than the older ones..]

– I also see that the controversy surrounding Uber continues.  To date I don’t think  anyone has brought up a potentially very interesting EU competition law aspect to the case (other than the cartel accusation launched by Neelie Kroes in her most unusual blog post). It’s always surprised me how little we take advantage of the potential of EU law to challenge public restraints on competition…

– On a sort of related note, I was glad to read that 3 FTC staff directors have decided to intervene (albeit informally by means of a blog post; does everybody do blog-policy these days??) against unjustifiable prohibitions on Tesla to sell directly to final customers (that story would merit an ad hoc post) (btw, some people wrongly blame antitrust law for those restrictions: see here).

– There were recent moves at Covington&Burling, this time on the opposite direction as the most recent ones. The firm has hired one of our Friday Slotters (Johan Ysewyn) as well as re-hired Peter Camesasca, who was working with his own firm at Samsung during the course of the above mentioned investigation on SEPs.

 

 

And the Stupidity of the Day Award goes too….

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In the competition law world there would appear to be too many prizes, awards and things of that sort. If you or your firm haven’t received an award, or at least a nomination, in the past few days, then either you’re a loser or your firm should increase its sponsoring budget 🙂   (before anyone reacts, I’m kidding).

Someone should one day do an awards ranking and give a prize to the worst one. In the meanwhile, we at Chillin’Competition recently created the Stupidity of the Day Award, which is a purely merit-based award given to the person who contributes to the development of competition law and policy with the… most original thought.

Our first proud recipient was the then French Minister for Industry (appointed today Minister for the Economy and New Technologies (!); this is not an April Fools’ Day joke), Arnaud Montebourg, who said that the European Commission lives in a “legal delirium” and “makes up rules that don’t exist in the Treaties in order to perpetuate its powers” and that Vice-President Almunia is an “obsolete liberal integrist”.

And our second winner is….. Arnaud Montebourg again! He’s a goldmine. Look at this excerpt from a recent interview (Le Figaro, 3 février 2014)

“Quand je reçois l’Autorité de la concurrence, je lui dis : vous êtes contre les ententes. Moi, je les organise ! Qui a raison? Vous êtes nommé, je suis élu, donc c’est forcément moi !”

Translation: “When I receive the competition authority I tell them; you’re against agreements between companies. I arrange them! Who’s right? You were appointed, I was elected, so I’m certainly the one who’s right!”

(Thanks a lot to Benoît Durand (RBB) for this little gem!)

When one reads these things a thought comes to mind. Some say the problem with competition policy is that it doesn’t have constituents pushing for it; well, I don’t know; this might be politically incorrect (as if the rest of this post weren’t), but sometimes I’m glad that (for the most part) politicians keep their hands off it. This last thought gives me a new chance to once again promote my priZeless piece Antitrust and the Political Center and the follow-up interview).

Written by Alfonso Lamadrid

2 April 2014 at 3:59 pm

Conflicts of Interest in EU Competition Law

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It’s been two months since Nicolas temporarily left this blog for a half a year stint at DG Comp’s Private Enforcement Unit.

In the course of this short period he’s managed to single handedly unblock negotiations on the Commission’s proposal for a Directive on Antitrust Damages, and he’s adapted very well to the fonctionnaire lifestyle (meaning that he’s now taking some days of holidays) 😉  (jokes aside, congrats to Eddy de Smijter and to the rest of the people involved in the negotiations about the Directive).

As he anticipated in his farewell post, Nico is maintaining all academic activities. Within that context, he’ll soon be participating at a conference on one of is favorite topics organized by his University. So, on 24 April the Liège Competition and Innovation Institute will be hosting a conferece in Brussels on Conflicts of Interest, Ethical Rules and Impartiality in EU Competition Policy .

Although Nicolas knows that I don’t share the same passion for the topic (or maybe precisely because he does?), he’s asked me to advertise the conference here. So voilà. It will feature representatives from the General Court, the European Commission, the OECD, the Belgian Competition Authority, as well as lawyers in private practice, The New York Times’ Brussels correspondent and ULG Professors and Researches, including Nico himself. Even Emilly O’Reilly (the current Ombudsman, whom you may remember from this) is on the tentative list of speakers.

Why do I say I don’t share the passion for the issue? Because whereas some improvements could possibly be made in the rules -mainly regarding their transparency-, I think we should be careful in not overshooting the mark. Otherwise we’d risk creating the impression that there’s a major endemic problem where I’m not at all sure there’s one (I, for one, I’m much more concerned about the Commission’s recruitment processes and about internal rules that oblige experienced people to rotate jobs too often or too soon). Anyone working in Brussels for some time will have worked with, against and before friends or professional acquaintances (sometimes the line is drawn too thinly). In my experience who you have on the other side doesn’t matter (at least for good: I do know of situations where lawyers’ friends deciding on cases have been unnecessarily harsh on them just to make a point and dispel any concerns, and that’s as unfair as the contrary) and there are enough checks and balances to avoid problems. The only positive consequence of working before people who know you is that they will perhaps trust you, provided that you have never proved not worthy of that trust (and competition law practice is also a game of repeated interactions), but I don’t see what’d be wrong about that.

As I told Nico back when he wrote his controversial piece on this subject, what’s different in our field is that our “relevant market” is very narrow; we’re not so many lawyers/economists repeatingly interacting among us and with the same academics, officials and judges. The only solution to the perceived problem, as framed, would be to have virginal public officials and lawyers who have not moved around jobs, who know no one, who haven’t studied at the same places, who haven’t worked with different people and who haven’t established a personal rapport with those in their field. In my view, at least, in that case the cure (assuming it were feasible, quod non) would be worse than the disease.

That said, considering the speaker line-up I’ve no doubt the conference will be most interesting.

 

Written by Alfonso Lamadrid

1 April 2014 at 11:49 am

On DG Comp’s fight against tax competition and tax planning

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The European Commission has in recent years been very active applying State aid rules to tax provisions and regimes. The first paper I ever wrote back in 2004 (don’t read it, it was initially done for a tax course and I was a 20 year old student…) dealt with those issues; now, ten years later, I’ve taken interest again on this subject and am currently involved in a handful of cases dealing with the taxation/State aid interface before the General Court.

The fact is that the Commission has recently undertaken a more proactive and prominent role in resorting to State aid rules to public initiatives that, in its view, facilitate aggressive tax planning. Those of you attending the 2014 Competition Forum back in February will recall that the Commission held a panel on “Taxation and Competition Policy”, in which it inquired about the role of State aid investigations in tackling tax evasion, tax fraud and aggressive tax planning (a video recording of the discussion as well as the transcripts of the speeches are available here).

Against a background of lack of political consensus on how to deal with harmful tax competition and what is seen as tax avoidance, the Commission is keen on being regarded as a proactive authority (it’s not the first time that competition policy is used to achieve results that couldn’t be attained by governments and legislators).

As part of this effort, the Commission has sent information requests to various Member States in order to assess the compliance of tax ruling practices (advanced binding decisions in fiscal matters which may allow for special treatment for some particular companies) and patent box regimes (incentives designed to encourage companies to make profits from their patents) with state aid rules. Yesterday the European Commission went through the trouble of issuing a Press release aimed at naming and shaming Luxembourg for having failed to provide information (specifically, the names of thelargest 100 companies benefitting from the patent box regime) , invoking fiscal secrecy.

I was quoted yesterday in a Bloomberg piece in relation to this news, so I though it’d be interesting to recycle my thoughts explain my views in a bit more detail here:

This is a highly sensitive area where publicly visible messages (such as yesterday’s press release) may send powerful signals and give rise to concern on the parts of governments and companies, and where playing to the gallery might therefore be considered useful at times. That’s part of the game and shouldn’t surprise anyone.

But if we’re realistic, we should realize that (for as long as fiscal policy remains within the realm of nation States), there’s a limit to what can be achieved with State aid rules, and that it’s doubtful that the current investigation, focused on patent box regimes and tax rulings, will yield any meaningful results:

–       Patent box regimes have been authorized in several Member States, and the Commission has consistently accepted that they do not confer the selective advantages that would qualify them as State aid.

–       With regard to tax rulings –and whereas I’m not aware of the details of the investigation- even in the event that the Commission were to find incompatible State aids, this would only have the effect of suppressing divergent tax treatment within the Member State at issue (the Commission can only identify as aid deviations from “the system of reference” provided by the State’s standard tax regime ). This would therefore not at all address the main, big picture, concern linked to divergent treatment across, and beyond, different Member States.

It’d nevertheless be interesting to follow developments on this area. The amounts that could be in play for many companies would make any antitrust fine look insignificant. Anyone in need of a lawyer? 😉

The Spanish Google tax, or (twice) the perfect cartel

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(again by Pablo Ibañez Colomo, who’s covering up for me this week)

It is always tempting for firms in sectors in decline to collude. But a cartel may not always be feasible or successful. Sometimes, major competitors have no interest in playing the game (this may be so for various reasons; competitors may have a different cost structure, may be more efficient or use a different technology). The next trick is well known. If private collusion does not work, turn to the State to enforce an official cartel or to (bluntly) eliminate competition from other players. You want a well-functioning and sustainable cartel? Make sure that anti-dumping duties are imposed on your heartless competitors from other parts of the world.

Montebourg, who has become an endless source of competition-related stories, has been quite open (I admit he is very candid, both in the English and the Spanish sense of the word) about his dislike for Free Mobile and has even taken active steps to make its life more difficult. The operator has emerged as a phenomenal maverick, bringing much needed dynamism to the French mobile market. But apparently prices are too low for Monsieur le Ministre’s taste and French consumers, as responsible and forward-looking citizens of the Republic, should pay more for their calls (he has in fact referred to the ‘excesses of low-cost’). Needless to say, the three incumbent mobile operators are not particularly unhappy about the whole deal.

The proposed Google tax in Spain provides yet another example of State-enforced collusion, albeit a more subtle one (which is not difficult given that our dear Arnaud is leading the way in the abovementioned example). Traditional newspapers struggle to survive in Spain. Advertising revenues have been in steep decline for years and media groups are heavily indebted. The solution? Charge Google, which has become the default cash-cow (and access-cow), for the use of non-significant excerpts (which, I would mention in passing, sounds oxymoronic from a copyright law perspective).

For the Google tax to work in the interest of traditional newspapers, all media, including Internet-based papers (which have become very popular in Spain) need to play by the rules. How can this be achieved? Centralise the negotiation of the compensation and, more important, make it impossible for newspapers to opt-out of the regime. That is correct. A key feature of the proposed legislation, as I understand it, is that Internet-based papers will benefit from the system even if they do not want to (and some of them have already been quite open about their opposition). The government seeks to create, in other words, a watertight cartel protecting old media models from competition and slowing down their (inevitable) decline. Who knows, maybe the new Spanish super-quango will do something about it (this is a joke).

Why do I say that this proposed legislation is twice the perfect cartel? Those who are interested, as I am, in media law and freedom of expression issues, will have quickly understood. Governmental action cannot be expected to be subject to effective scrutiny and criticism (which, going back to yesterday’s post, is a precondition for progress to occur) when the media need legislative and financial protection to survive (centralising the negotiation of the compensation makes traditional newspapers even more vulnerable to pressures from the executive).

Written by Alfonso Lamadrid

19 March 2014 at 12:55 pm

Antitrust quote of the other day and more on the evolution of the law

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Our last post revolved around a well-known quote from Philip Areeda that explains the evolution of the law in terms of judicial inertia/judging by catchphrase. Areeda’s explanation has the virtue of verbalizing brilliantly in simple and intuitively correct terms a human factor that explains why some legal rules may at times evolve beyond the limits of their logic. [To be sure, as noted elsewhere his explanation certainly applies not only to theories that expand liability, but also to those that limit it; in fact, the example I used may arguably refer to the latter category].

In my view, the idea underlying Areeda’s theory explains many other behaviors and situations in areas beyond competition law. At the end of the day, it is about people adopting a simple pre-established view or prism that makes further reflection unnecessary which, in turn, makes the process of forming a view much easier. We do that all the time in many other fields, politics being one of them (if, for instance, one dogmatically assumes that State intervention is always bad (think of Tea Partisans…), then one has a simplistic solid view on many complex specific instances without the need for further reflection; yep, this is one of my recurring themes). Uncertainty and doubt feel troublesome, but certainties -even when mistaken- are comfortable, save a lot of effort and provide seemingly confident opinions.

Judges may at times certainly favor simple pre-defined solutions uncritically (Areeda blamed the fact that there were “too few judges experienced enough with the subject to resist” the temptation of applying previous rulings uncritically), but they’re not the only ones. Think, for instance, of a group which, by definition, is not experienced enough with the subject to resist the temptation to assume stuff uncritically: students.

In the past few days I’ve had various interactions with students from various backgrounds, and I have again been reminded of how new generations of competition lawyers almost universally coincide in the view that the case law and the decisional practice (particularly, but not exclusively, in the domain of Art. 102 TFEU) is fundamentally flawed, absurd, “ordoliberal” and almost crafted by lunatics. But once you scratch below this initial thought, it seems that for some resason students often feel it must necessarily be THE right answer even if they can’t always explain why (which is ironic when what’s criticized is the alleged lack of analytical content in current rules and doctrines). To be sure, I’m not saying that the case-law is perfect (which it probably isn’t, but one needs to understand it and to reflect on it in order to have ideas on whether and how it is to be improved), nor that this is the case of all students, nor that professors don’t do their job right (although not all of them are Areeda either), but I like it better when I see young lawyers who have reasoned doubts than when I see them with unreasoned certainties (I, for one, have very few competition law-related certainties; in fact, I’m not even sure of whether the criticism I’m expressing here is entirely justified). And false certainties may be more common in relatively complex yet non-scientific disciplines, like ours.

Drop by drop, this process whereby some people learn formed opinions instead of the tools with which to form them might also have a crucial impact on the evolution of the law. As new generations get to higher roles (clerks, then Judges, etc), their preconceptions may follow. And, as Areeda noted, it wouldn’t be until their expansion became ridiculous that the process of cutting back would begin (perhaps engendering an analogous process holding contrarian views).

Written by Alfonso Lamadrid

10 March 2014 at 9:02 pm