Archive for the ‘Subversive Thoughts’ Category
I wish I was…
During a recent conversation with a Judge, he mentioned that he felt envious of competition agencies (we were talking about the European Commission) because they could easily behave in a “schizophrenic” way, taking one stance in one case and a completely different one in another. He argued that courts are much more concerned about respecting their own precedents (as I pointed out, there are also some nuances to this view) than competition authorities are. In my view, there is a lot of truth to this statement; competition enforcers do not feel bound by their decisional practice because the Court has endorsed the view that each case must be dealt with in light of its specific circumstances. Moreover, progressive interpretations of the law (notably with regard to unilateral behavior) show that some national competition authorities as well as the European Commission do not necessarily feel obliged to follow the case-law neither. To a certain extent, much of this could be understood, but only provided that adequate reasoning is offered to justify that the circumstances merit a change of approach. Sadly, this is not always the case (although, to be fair, the Courts are not a paradigm of transparency when they overrule their previous case-law neither). I´m sure you can think of quite a few examples of radical unexplained shifts.
This conversation made an idea spring to mind: we should ask you who or what (within the antitrust world; yeah, we know, that´s pretty limited, but..) do you wish you were?
Here are a couple of ideas to get the ball rolling:
– I wish I was one of those economists who can say “this is an economic model that we developed for this particular case“. I´m waiting for the day when I can say “this is a legal principle that we developed for this particular case“!.
– I wish I was NOT the lawyer (or rather the former lawyer, I suppose) of the Austrian company that has requested a preliminary ruling from the ECJ on whether having obtained wrong legal advice can exempt a company from responsibility…
Anyone else?
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?
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.
The slow death of Article 101(3)
Yesterday we attended the first session of the annual conference of the Global Competition Law Center (of which, btw, Nicolas is the director). As expected, the conference was extremely interesting, and gave us plenty of ideas for future posts. Here´s one.
Our friend Damien Gerard made a very good presentation in which, following a historical approach, he presented several paradoxes of the modernisation of EU competition law. After he concluded, I posed a question to the panel, asking whether the interplay of the three dimensions of modernisation that Damien mentioned (substantive, procedural and institutional) may have had the effect -or perhaps the object..- of killing Art. 101(3). The comments that followed showed that this is a widespread concern.
Let me now explain to you how I view this, and why the usual question (who did it?) has no clear answer. My take is that all the usual suspects bear some responsibility:
In the early days of the classic case law, EU Courts paid great attention to Art. 101(3) because they were conscious of the crucial role that the drafters of the Treaty had attributed to this provision. But it wasn´t their task to apply it. They saw it as something too complex and abstract, so they washed their hands off: they left its application up to the Commission and decided to apply a light standard of review. That is, in fact, where the “manifest error of appraisal” test of judicial review was born for EU competition law.
For many years, the Commission exercised its monopoly over the application of 101(3). Those were, in a way, the “golden days” of this provision (even though there were some obvious disfunctionalities as a consequence of the centralized system). With the entry into force of Regulation 1/2003 this whole situation changed. The Commission shifted its priorities to focus on the “most serious infringements” which, as a matter of fact, are also the “most obvious” ones. It therefore also washed its hands and left the cases where Art. 101(3) would be relevant to national competition authorities (NCAs) and national courts.
But NCAs and national courts also regard the application of 101(3) as something which is too complex, and, let´s face it, the Commission´s Guidelines on Art. 101(3) are far from being decisively helpful. Couple that with the feeling that undertaking an effects analysis under 101(1) is also too burdensome, as well as with the fact that NCAs have, logically, their own priorities, and what you get is a situation where at the national level there are essentially only “object cases” where 101(3) assessments are reduced to an absolute minimum under the argument that “object restrictions” are hardly redeemable (which, btw, is at odds with all case law departing from European Night Services) There are no available stats on this, but I bet they would be mindblowing.
The Commission hasn´t done much to solve this situation. It has failed to provide case by case guidance, and has instead focused on sanctioning cartels, abuses of dominance (mostly in network industries) and in releasing general guidance; moreover, where an issue appears as uncertain, the usual solution is to adopt a commitment decision. Not really helpful. Furthermore, the Commission has contributed to fostering the confusion by enlarging (with the help of EU Courts) the “object” category (e.g. with regard to information exchanges).
EU Courts, on their part, could also be charged as accomplices. Three pieces of incriminating evidence are (i) the enlargement of the “object” category in T-Mobile; (ii) the ruling in Tele 2 Polska precluding NCAs from adopting negative decisions; (iii) the adoption of distinct standards for the review of 101(3) assessments: would the overly simplistic Premier League Judgement, where the Court says, without providing much support for its assertion, that the exclusivity arrangements at issue do not meet the conditions of Art 101(3) (see para 145 of the Judgment) comply with the Court´s tough stance against the Commission in Glaxo Spain?
What does this imply for competition law:
In my view, this situation is dramatic for EU competition law (well, as dramatic as a legal matter in the competition law field can get, which, to be frank…). The interplay of all the factors above has led to an overly simplistic view of competition law, to a shifting of the burden of prove, and to even more arbitrariness and uncertainty.
PS. The painting illustrating the post is “Prometheus bound” by Rubens. As Art. 101(3) in the world of competition law, Prometheus was “credited with -or blamed for- playing a pivotal role in the early history of mankind“. As you know, immortal Prometheus was punished by Zeus to a -quite nasty- eternal punishment: he was bound to a rock where his liver was eaten daily by an eagle, only to regenerate and be eaten again the following day. Mithology has it that Hercules finally slayed the eagle and freed Prometheus. Will anyone eventually free Art.101(3)?
Case C-439/09: Is it just us, or is the ECJ naming the “EU rule of reason”?
Last Thursday, the ECJ issued its Judgment in Case C-439/09, Pierre Fabré Dermo Cosmétique v. Président de l´Autorité de la Concurrence. Little attention has so far been paid to this Judgment which, to me, appears as having more substance than it meets the eye. Let´s see:
In 2009, the French Conseil de la Concurrence adopted a decision sanctioning Pierre Fabré (“PF”) for including a de facto ban on the sale of its cosmetics and personal care products via the internet in its selective distribution contracts. In reality, PF´s contracts obliged its distributors to sell its products in the physical presence of a person with a degree in pharmacy. The Conseil considered that this constituted a restriction of passive sales in so far as it precluded online sales. PF appealled the decision and the Cour d´Appel de Paris addressed a reference for a preliminary ruling to the ECJ.
What meets the eye:
The specific and obvious discussion at stake relates to whether the exception contained in Art. 4 c) of Regulation 2790/1999 (now replaced by the same Art. of Regulation 330/2010 ) [pursuant to which ” the exemption to the prohibition laid down in Article 101(1) TFEU is not to apply to vertical agreements which, directly or indirectly, in isolation or in combination with other factors under the control of the parties, have as their object (…) c) the restriction of active or passive sales to end users by members of a selective distribution system operating at the retail level of trade, without prejudice to the possibility of prohibiting a member of the system from operating out of an unauthorised place of establishment“) (emphasis added)] justifies a requirement such as that included in PF´selective distribution contracts. The solution adopted by the Court is that, given that companies will allways enjoy the possibility of benefiting from an individual exemption pursuant to Art. 101(3) TFEU, it is not necessary to give a broad interpretation to the provisions bringing agreements within block exemption regulations.
In sum, the ECJ ruled that in case of doubt Block Exemption Regulations are not to be interpreted broadly, and that in such circumstances the competitive assessment of the agreements at issue shall be carried out within the framwork of Article 101(3). You may or may not agree, but it is reasonable enough.
What doesn´t meet the eye:
As we said above, there might be more about this Judgment than meets the eye. Perhaps we´re wrong; the fact that this Judgment has grabbed no one else´s attention does not mean we´re smarter (which is definately not the case), but simply that we may not be right. Let us explain ourselves:
(Click here to continue reading)
Chillin´Competition: The Conference
As our usual readers know by now, this blog was born out of the conviction that it was possible to do and say some things differently within our small competition law world. We have intended to do that on the blog, and now we want to extend this attitude to a conference -the 1st Chillin´Competition conference- which will be somehow different from what you may be used to. We can´t say much more for now (except that it will be held in Brussels), but details will follow soon.
We want you to be involved to the greatest extent possible, and therefore we would like you to please send us your ideas on possible topics and speakers: we´re looking for excellent and open minded practitioners, officials or academics who might give brilliant, fresh and even humorous views on competition law issues. We already have ideas on a number of people who fit that description, and some of them have already expressed their willingness to participate in this initiative. Please send us your suggestions either publicly by commenting on this post or in private at nicolas.petit@ulg.ac.be and alfonso.lamadrid@garrigues.com
Thanks!
Tough Competition
Competition is tough nowadays, even in competition law blogging!
Check this out:
Some weeks ago, when introducing “THE RAID”, we wrote the following:
“In Chilling Competition we have devoted a number of posts to antitrust-related movies (see our previous posts on: “First ever Hollywood competition law movie?”; “More competition-related entertainment“; “OFT goes to Hollywood”, and, very specially, our nominations to the “Antitrust Oscars”). Given that all of those posts received a crazy amount of visits, we can reasonably presume that you too like this sort of videos.”
This afternoon, one of our readers sent us a link to CPI´s September Antitrust Chronicle, where we see that CPI has created its “First CPI Film Festival”. Does this sound familiar?
Not only the concept “sort of” ressembles our “Antitrust Oscars”, but the films are also the same ones that we had referred to in our previous posts, and that you had referred to in previous comments.
It´s nice to know that even though CPI Blogs o´Blogs has tipically “boycotted” our posts (with one exception; Nico had already referred to this in the past), their ideas and tastes are so strikingly similar to ours!
Our competition lawyers mindsets lead us to the conclusion that there´s not much that can be done here since this situation can be regarded as either
a) a case of Conscious Parallelism (CPI) in an oligopolistic setting where CPI´s conduct can be qualified as a follow-the-leader reaction? 😉
or
b) a situation in which the content of our most visited posts must be regarded as an essential facility that needs to be shared with competitors.
Chillin'Competition 