Archive for the ‘Breaking – Antitrust – News’ Category
Apple´s offer to publishers & an overstatement on lawyers´(un)happiness
Today we´d like to point you to a couple of short and interesting pieces on which we would appreciate hearing your views:
As some of you may know, Apple recently announced that it will allow newspapapers, magazines and other publications to sell digital subscriptions of to iPhone, iPad and iTouch users (if you don´t, see here). An interesting post published yesterday on The Wall Street Journal Law Blog (see here) has highlighted the potential antitrust-related risks incurred by Apple with regards to some of the terms of its offer. One of the central issues essentially boils down to defining the relevant market affected by Apple´s offer: is there a relevant market for consumer tablet computers? A wider market for digital and print media outlets? Any opinions? And even case Apple were found dominant in a nascent market, should that warrant antitrust intervention?
A second interesting, and certainly controversial piece of reading, is this one. It´s an article written some years ago in The Sunday Times concerning lawyers´ dissatisfaction with their work. I have stated here some of my views on this topic, and I´ve even ventured some criticism on how things are often done (see here and here). However, I view this article as overstepping the mark and as a consequence it ends up depicting “City” lawyers -and, in a sense, the whole profession- in a way that makes lawyers appear as despicable inhuman beings. There are a number of cheap overstatements in this admittedly somewhat tongue in cheek article, but I´m sure it should elicit some reactions amongst our readership.
Mercato
With the beginning of the new year, there has been a significant number of moves in the EU antitrust law league (practitioners’ market).
Legal500, Chambers, GCR and others have failed to report them because they only focus on big fish. So here’s our report of recent associates moves:
- David Henry felt like talking German. He thus left Howrey LLP for McDermott Will and Emery, where he will work with P. Werner;
- Despite the exodus, Miguel Rato got a raise and thus stayed at Howrey LLP where he was promoted from Associate to Partner;
- Marc Abenhaim got bored of Belgian competition law and felt like living under tougher targets and deadlines. He left Van Bael & Bellis to Willkie Farr and Gallagher;
- John Wileur does not run against the grain. He thus moved from Howrey LLP to Covington & Burling;
- David Mamane probably got a raise too, and was promoted to Partner at Schellenberg Wittmer (Switzerland)
- Alexis Brunelle got bored of private practice and joined the Autorité de la concurrence as case handler (Rapporteur). The bad news about this move is that from now on, Alexis will have to blog undercover.
All those chaps share four common features:
- they are all supersmart young competition lawyers
- they are all friends of chillin’competition
- they are not full of themselves
- I have had at least once, a challenging, interesting conversation on a subject of substantive competition law (note: strangely enough, people seem increasingly reluctant to discuss such issues )
Please do not hesitate to report to us other moves which fit this profile, and apologies for those we missed.
(PS: Image possibly subject to copyrights: source here)
Shot Down in Flames
Yesterday, Commissioner Almunia shot down its first merger since in office. The Commission vetoed the proposed merger between Aegean Airlines and Olympic Air, considering it would result in a quasi-monopoly on the Greek air transport market.
In its press release, the Commission seeks to assuage concerns of over-enforcement. Here are some excerpts:
“The Commission has examined 11 mergers and many alliances in this sector since 2004 and this is only the second negative prohibition“.
“This is the first merger prohibition since the Ryanair/Aer Lingus case in 2007. In total 20 cases have been prohibited out of a total of more than 4,500 mergers reviewed“.
Such statements are the tree hiding the forest. With the GC’s confirmation of the Commission decision in Ryan Air/Aer Lingus and the very many decisions where the Commission requested heavy remedies, merger policy in the airlines sector is all but a soft one (possibly for good reasons).
Chillingleaks: European Commission investigates Telefónica and PT
It appears that DG Comp has initiated a formal investigation in relation to a possible non-compete agreement between Telefónica and Portugal Telecom. The two companies have now unofficially confirmed this news, which could become public in the next few hours.
People involved in the case have indicated that the agreement could have been entered into last July, at the time Telefónica bought PT´s shares in Vivo (a reminder: the Portuguese government had opposed this acquisition by virtue of its “golden share” in PT. Although the ECJ recently declared that the existence of such “shares” infringes the Treaty provisions on freedom of establishement, the golden share on PT is still there). The agreement is suspected to have consisted of a commitment not to compete in each other´s “home” market until December 2011.
Similar “ancillary restrictions” have also been subject to recent investigations by the Commission.
ChillinLeaks (or kind of)
There’s been a bunch of significant antitrust news in recent days.
Since they have already been revealed on other websites, they are not genuine ChillinLeaks.
- We learned today that the august Trevor Soames had left Howrey Brussels. We wish him luck for his new ventures. We do also wish luck to our good friend Miguel Rato who, in addition to being one of the brightest young competition lawyers in the market, was recently made partner there (and to other friends who have left/stay with the firm).
- Very many thanks also Geoffroy Van de Walle de Ghelcke who informed us that the European Google Antitrust Questionnaire had been posted on the Internet (and on the excellent antitrust review).
- Finally, I have been interviewed yesterday on Apple’s threats to remove free newpapers’ applications from AppStore . Apple apparently wants to push newspapers to sell (read in exchange for a price) online subscriptions for iPads exclusively through iTunes (and not for free through other platforms or in connection with paper subscriptions). The Belgian Minister for economic affairs – yes, there is a government in Belgium, though it is well beyond use-by date – has requested the Competition Directorate General to open an investigation for abuse of dominance. According to the Minister, this issue, which seems to arise in other Member States, should be dealt with at the European level. Until recently, Apple has enjoyed a relative degree of immunity in so far as EU competition law is concerned.
Horizontal Cooperation Agreements
Last week, I faced the very pleasant situation of having to lecture on horizontal cooperation agreements a day only after the adoption of the new horizontal framework by the Commission…
The good thing is that it gave me an opportunity to read the text from top to bottom.
So here’s my own assessment of this lenghty set of Guidelines. I like: (i) the introduction of a chapter on information exchange agreements; and (ii) the examples, which are very instructive and draw on national practice, §§107 and 109 notably (or the bottom-up learning effects that arise with decentralization)..
However, there’s a heap of less satisfactory things in the Guidelines. To structure things a little, I distinguish between formal (1) and substantive (2) issues.
1. Formal issues
Unpractical self-assessment method. The Guidelines stick to the good old Article 101(1)-Article 101(3) sequence. But why not endorse a simpler self-assessment method which involves:
- First step: screening of the agreement through incompatibility presumptions (hardcore provisions); followed by screening of compatibility presumptions (de minimis; market share thresholds; and conditions);
- Second step: detailed assessment of possible restrictive effects under 101(1); followed by detailed assessment of possible pro-competitive effects
Incorporation of the rules on environmental agreements within the standardisation section. Why are those agreements no longer worth a specific section?
Linguistic mistakes in French version. The concept of “vente groupée” used under the section on agreements on commercialization is confusing. The Commission and Court routinely refer it in relation to bundling under Article 102 and the EUMR (see Microsoft and Tetra Laval).
Perfunctory treatment of Article 101(3) arguments. The Guidelines often say that horizontal cooperation agreements bring significant efficiencies, pro-competitive effects, and so on. Yet, when it comes to providing guidance on efficiencies, the Guidelines dedicate little time and space to the issue (or they simply restate in substance what has been said under Article 101(1), check the section on standardization agreements). True though, one can find help in the unhelpful Article 101(3) General Guidelines.
2. Substantive issues
Inconsistent, and old-fashioned analytical framework for collusion. There’s been a number of great books on tacit collusion in the past decade, and more importantly, good judgments and soft law instruments (the Airtours ruling, the Guidelines on horizontal mergers, the Article 102 Guidance Communication). All set out a modern, consensual framework for the assessment of collusion concerns which hinges on the proof of 4 cumulative conditions. Very remarkably – and to the exception of a footnote in the section of information exchanges – the new Guidelines suggest however to test tacit collusion through an impressionistic, structural, and reduced range of factors. The section on purchasing agreements which refers to commonality of costs and exchange of information (§§213-216) brings a glaring illustration of this. But the same applies to production (§§175-182) and commercialization (§§242-245) agreements. My question: are the dark times of the checklist approach back? Of course, this approach leaves more leeway to enforcement authorities, but it generates huge legal uncertainty + high type I errors risks. And it is wholly inconsistent with the approach taken under the EUMR, which pursuant to §21, has “certain common elements … pertaining to the potential restrictive effects, in particular as regards joint ventures“.
The §§ on FRAND terms are devoid of legal basis, and should be disregarded. To draw possibly on the expertise gathered in the Qualcomm and Rambus cases, the section on standardisation agreements devotes some wording to what is, and how to self-assess, a FRAND price. Now, under EU competition law, it is well settled that unilateral conduct falls short of an agreement under Article 101 TFEU. Assume that following the adoption of a standard, a party unilaterally decides to request terms which other parties challenge as unFRAND (the classic patent ambush story). In such a setting where firms antagonize, there is no, and there cannot be, an unlawful agreement under Article 101 TFEU. Since the Bayer and VW rulings, the fact that the parties have, in the past, co-operated in the SSO is no longer sufficient to trigger the applicability of Article 101 TFEU (those cases repealed the “contractual framework” doctrine inherited from the Ford case). And by the way, everyone knows this. To date, allegations of unFRAND terms have only been brought under Article 102 TFEU (notably by discontent parties which had participated to the standardization process).
PS: The new texts were given a number today. The R&D BER is Regulation 1217/2010 and the specialisation BER is Regulation 1218/2010.
PS2: The GCLC will have a conference on the horizontal package in February 2011.
Wrapping up the week / Case T-427/08, CEAHR v Commission
This week was full of news, some of which we didn´t echo here. This is a quick overview of what has happened since Monday:
The European Commission adopted its new guidelines on horizontal agreements and, as anticipated on this blog -aren´t we good at this? -, appointed Kai Uwe Kühn as DG COMP´s Chief Economist.
The General Court issued two important competition-related judgments. In case T-141/08 the Court upheld the Commission´s decision sanctioning E.ON with a 38 million euro fine for the breach of a seal during a dawn-raid. Of a greater substantive interest is the Judgment in case T-427/08, discussed below.
On the “Google front”, the Conseil de la Concurrence issued the formal opinion commented here; the Commission took over the investigation of two additional complaints that been lodged before the Bundeskartellamt (which, as stated by the Commission´s spokespeople, won´t change the nature of the ongoing investigation). Unrelated to the investigation, but equally interesting, is a blog post written by Google´s Deputy General Counsel replying to a call for stricter antitrust scrutiny over Google´s acquisitions.
Gossip column: Nico was undeservedly promoted to the category of Professor. Also, it became known yesterday that Damien Geradin, a longtime co-author of his, is leaving Howrey and joining Covington&Burling (and stay tuned: similar news will be coming soon..).
Case T-427/08, CEAHR v Commission
So much for the headlines, let´s move on to a most welcome substantive development from the General Court.
The complaint: The European Confederation for watch repairers associations lodged a complaint before the Commission alleging that watch manufacturers had engaged in agreements and/or concerted practices and/or abused their dominant position by refusing to continue to supply spare parts to independent repairers.
The Commission´s decision rejecting the complaint. Now, guess on what grounds the Commission rejected the complaint… yep: lack of Community interest. The rejection decision arrived at that conclusion noting that (i) the complaint concerned a market of limited size and economic importance; (ii) there was no evidence suggesting the existence of an infringement, and that it was likely that the selective distribution schemes were covered by the block exemption for vertical agreements; (iii) it had reached the prima facie conclusion that repair services and spare parts did not constitute independent relevant markets and rather had to be assessed within the wider market for luxury watches; (iv) the allocation of more resources to the investigation wasn´t likely to allow the Commission to identify an infringement; and (v) national authorities and courts are well placed to deal with such complaints.
The Judgment. The judgment starts by emphasizing that the Commission´s discretion in the examination of complaints is not unlimited, and undertakes the review, one by one, of the reasons put forward by the Commission to justifify the alleged lack of community interest. In doing so, the Court provides valuable guidance on various fronts.
(This will be a bit lengthy; if you´re interested, keep on reading) Read the rest of this entry »
Word of warning
Today, the distance between Google and a competition law infringement has drastically narrowed down.
In a formal opinion (not a decision), the French NCA declared that Google occupies a dominant position on the search advertisement market. To tell the truth, this is far from surprising. Yet, this will certainly be bad news for Google, which has been willing to observe a low PR profile until recently.
Now, what’s more interesting is that the French NCA purports in its report to provide ex ante guidelines (“grille de lecture“, §297) on those of Google’s practices which may be deemed abusive under the competition rules. A good illustration of soft, indirect enforcement on the basis of consultative opinions.
Here are the possible abuses according to the French NCA :
- Elevation of barriers to entry on search and search advertisement markets (through content exclusivity, technical barriers, etc.)
- Leveraging of market position on search and search advertisement markets (through ranking manipulation, etc.)
- Unlawful discrimination in relation to the Adwords service
- Unbalanced revenue sharing mechanism in relation to the Adsense service
The French NCA further notes that competition law is the body of rules which should be solicited to allay concerns on those markets. In contrast, sector specific legislation is not needed.
Interestingly, the power of the French NCA to issue such opinions does not fall within the scope of the Commission’s monitoring powers under Regulation 1/2003. In other words, the Commission cannot influence the substantive conclusions of the French NCA under this procedure.
I plan to read the full opinion tomorrow. We’ll be posting on this regularly in the coming weeks.
European Commission vs Google
As anticipated, we will be devoting a series of posts to the investigation initiated by the Commission following allegations that Google discriminates against vertical search pages to the benefit of its own content.
The Commission’s announcement that it was formally initiating an investigation spurred all sorts of reactions. See here for Google´s reaction on its own blog and here for Microsoft´s.
I´m unfortunately not involved in the case, so I will express myself with no constraints. It will nevertheless be extremely interesting to hear from someone in the opposite situation: hopefully some of our colleagues in the blogosphere who are involved in it will eventually comment on the case.
Here are some general impressions which introduce various topics that we´ll be discussing in the coming weeks:
The inevitability of competition law: It was probably inevitable that Google would be facing such legal threats given its position as the de facto gatekeeper of the Internet, even if it has achieved its position via “superior product, business acumen or historic accident” or how we, more laconically, say here “competition on the merits”. A company certainly does something right when its name becomes a verb.
It was indeed predictable that antitrust authorities wouldn’t resist the temptation to act against them (in antitrust law, as in the laws of gravity, mass increases attraction). In fact, in a short period of time Google has faced investigations regarding its advertising agreement with Yahoo! (which could not be implemented precisely as a consequence of the antitrust concerns); the existence of interlocking directorates with Apple, and the GoogleBooks project. For my comments on the last two see here and here
In a sense, the investigation might even be good news for Google, since it affords it the chance to prove once and for all that it does not engage in unlawful behavior. Moreover, and in the case that Google did discriminate, the competition community would be provided with a great opportunity to shed light on the status of discriminatory practices under EU competition law and to make clear that not all discrimination is illegal. However, I´m also afraid of the truth that may lie in the aphorism “big cases make bad law”.
An attack against U.S. companies? Some have, once again, argued that this investigation is another illustration of the fact that U.S. firms constitute the Commission’s favorite target. Against such contention, one should note that also the complainants in this case have rather strong links with the US… If anything, what the investigation confirms (once more) is that the European Commission has certainly taken the lead, and a much harder stance, in the prosecution of unilateral conducts.
An anti-Google alliance?-. I was told this summer that several law firms in Brussels were closely working together with the aim of putting pressure on Google on as many angles as possible. If true, is this their first success?
If you can´t beat them..sue them! What this case does illustrate is that the resort to antitrust/competition law has certainly become one of the preeminent competitive tools at the service of competitors willing to obtain on a “court” what they weren’t able to do on the marketplace. Surely Microsoft learned this through its own suffering.
Market definition-. Last week we were discussing market definition teasers: what about online search advertising vs online advertising? what about online search vs a much wider content search market?
Is Google really dominant? The relevance of scale/network effects-. As in most major case of the past few years, allegations on the existence of network effects seems to instantly turn on competition watchdogs. Once again, a positive externality is viewed as a negative market failure justifying antitrust intervention and the instrumentalization of remedies in order to pursue regulatory goals Furthermore, can there be a dominant position as a result of network effects when, as often reminded by Google, “competition is just one click away”? To what extent is antitrust intervention in network/two-sided markets driven by old reflexes and insufficient understanding? This stuff (which is of particular interest to me) will also be covered on an specific post.
Should/ can we require neutrality from dominant companies? The conditions under which a dominant company is required to grant non-discriminatory access to its competitors under EU competition law are extremely narrow. There´s much to be said on this, but we leave the floor to Pablo Ibañez, a very good friend and one of the most brilliant and promising competition scholars, currently at LSE.
How can discrimination be proved/ remedied? Proving that Google´s algorithm is discriminatory appears to me like a herculean task. Not everyone sees this way, though (see here). As Nicolas mentioned on his post below, it is most likely that the Commission will be aiming for commitments on the part of Google, in which case it will be freed from this task. However, how could a commitment resolve the Commission’s doubts as to the existence of discrimination? Could we end up with another “must carry” remedy pursuant to which Google should advertise and link competitor search portals on a prominent part of its results page? Come on.
In sum, and in my view, the investigation implies departing from the Commission´s stated priorities when, moreover, there is no clear dominant position; there is no abusive conduct; how Google harms consumer welfare is certainly hard to see; and there does not seem to be an adequate remedy (which in itself should be an indication of the lack of a problem). A prediction: the Commission will most likely shelve the proceedings, the decision will be appealed by the complainants -who have the incentives and the means to go forward with this-, and we´ll find ourselves before another long legal battle before EU Courts…
*Sources: Every comment used for writing this post -both in favor of and againts Google- was found through Google. Something tells me that the Commission´s staff and, I would bet, the complainants too will resort to Google in order to obtain much of the information they will use in the course of the case (and eventually so would the Judges).
(Image possibly subject to copyright).
ChillinLeaks
We were the firsts to report on the replacement of N. Calvino and on the whole reshuffling of DG COMP a while ago.
We got a fresh hand on the draft horizontal guidelines, and provided some hints on their contents.
10 days ago, we were the ones to announce that the Commission is attempting to cook a cartel case on the exclusive basis of economic evidence.
Given our proven ability to chill competition on the market for breaking antitrust news, Alfonso and I have decided to formally start a ChillinLeaks column. We simply hope not to be accused of serious criminal offenses in Sweden.
Should you wish to contribute to the free flow of AT-related information, and send us revelations and stories for disclosure on this blog, please note that we apply the highest standard of confidentiality to our sources. You may also reach us by phone, should you prefer this communications means.
To inaugurate this new column, here’s the big news (still unofficial):
Kai-Uwe Kühn (University of Michigan) will be the next Chief Economist of DG COMP, and will replace D. Neven who’s supposed to step down shortly. Kühn is a specialist of collusion, collective dominance and hi-tech industries (read Microsoft and interoperability issues). He has consulted, if our information is correct, for CRA International. He holds a Phd in economics from Oxford University. Congrats to him.
Alfonso and Nicolas
(PS: Image possibly subject to copyrights. Source here)
Chillin'Competition 
