Archive for the ‘Breaking – Antitrust – News’ Category
Cases that never will be (I) – Hynix (Case T-148/10)
Last week one of the most knowledgeable people in the EU competition law world (Commission official whose name I can’t disclose) tipped me to a new series of blog posts:
His words were “someone should one day write on a blog the story of competition cases that could have had a significant impact on the law had they not been withdrawn”. Since the number of competition law bloggers is not that high (even though it’s rapidly increasing…), and since I was the addressee of the message, I sort of got the point.
Actually, I very much like the idea of writing about cases that never were or, rather, that never will be.
There are a few candidate cases to be discussed; a non-exhaustive tentative list of non-cases could include: Siderca, Chi Mei, Suez-Environment, Formula One, Oulmers, BIC Deutschland, Balog or Van der Weerd. [Additional suggestions would be welcome].
Today we’ll start with Hynix (Rambus), a case in which the hearing was scheduled for 2 July but that was withdrawn a few days ago following a settlement.
The Judgment that will never come to light in this case would have constituted a most important precedent in relation to some important general enforcement issues, as well as in relation to an eventual judicial review of the current investigations concerning Google or Samsung.
A bit of background:
In 2002 Hynix filed a complaint alleging that Rambus had engaged in deceptive conduct in a standard setting procedure in relation to DRAM chips by not disclosing the existence of the patents and patent applications which it later claimed were relevant to the adopted standard, and that it had later charged excessive royalties for the use of those patents (i.e. royalties higher than those that it would have been able to claim had it not engaged in deceptive conduct). This is what is generally referred to as “patent ambush”.
The case was interesting because the deceptive conduct at issue had made Rambus acquire dominance (it preceded dominance), and the charging of high royalties could be regarded as the natural consequence of such dominance. Given that EU law does not target “monopolization” practices (those use to achieve dominance), the Commission had attempted to close this enforcement gap by targeting exploitative pricing under Art. 102 under the argument that dominance had been unlawfully attained. This was a brave and controversial move on the part of the Commission.
On 27 July 2007 the Commission adopted a statement of objections setting out its concerns. Rambus responded to the SO and a hearing was held.
Almost two years later, however, Rambus submitted preliminary commitments, those were later market-tested, revised, and eventually made binding on December 2009 (in a nutshell, Rambus committed (i) not to charge royalties for the two standards adopted while Rambus engaged in the deceptive conduct; (ii) to set a maximum royalty of 1,5% for the later generation of standards and to offer thus maximum rate to all market participants). (Note that the commitments concerned only future payments, not those already made).
As you know, in a case like this (or in a case like Google’s), once the Commission accepts commitments it must (a) adopt an Article 9 decision making them binding; and (b) adopt a decision rejecting any complaints stating that there are no longer grounds for action.
Hynix appealed both of these decisions.
In essence, Hynix argued that the Commission violated Article 9 of Regulation 1/2003 by choosing the procedure envisaged in that article where its concerns related to a serious violation of Art. 102.
In its SO, the Commission had envisaged a finding that the charging by Rambus of capped royalties is incompatible with Article 102 (82 back then). However, the corollary of the commitment decision was to make royalty caps binding, thus endorsing their legality.
The Judgment that will never on this case would have shed light on some of the hottest current topics in EU competition law (abuse of dominance in high-tech sector, misuse of patents, the circumstances in which the Commission can or cannot adopt commitment decisions…). In the past we have devoted lots of ink pixels to discussing these issues, and it’s a pity for the law that questions like the following will, for the time being, remain unaddressed:
What constitutes an abusive practice with respect to standardization, in particular so far as concerns patent ambushing?
Were commitments in the form of future royalty caps sufficient to eradicate the competitive problems found by the Commission?
What guiding principles (beyond Alrosa) are to be taken into account when assessing the appropriateness and adequacy of commitments?
Can the Commission address what it had perceived as a serious violation by means of a commitments decision? In that context, may the Commission adopt remedies which are only prospective in nature? Is the Commission entitled to have recourse to a commitment (Article 9) decision after having adopted a Statement of Objections? And in this case, can a Statement of Objections be considered as a valid “preliminary assessment” for the purposes of Art. 9 of Regulation 1/2003?
Preliminary thoughts on Google’s proposed commitments
As long anticipated, here are some comments on the proposed commitments in the Google case (I graciously granted myself an extension, like the one other third parties have received; it actually is convenient because I can comment on others’ comments as well).
Four caveats are in order:
- The views expressed below are written against the background of the Commission’s concerns as set out in the press release and the Q&A doc. accompanying the market testing of Google’s proposal. The relevant question to keep in mind is whether the proposed commitments –in their current form- are apt to address the concerns identified by the Commission in its preliminary assessment, not whether they are apt to lead to candy world for satisfy the wishes of all third parties.
- My views are necessarily incomplete and they’re also work in progress. I’ve only read the limited publicly available information and have not had access to any confidential info or documents that might be contained in the case-file. Moreover, I have allocated two flights time to draft this (and I should ideally also do some billable work, you see), so I’ll (i) update and improve this document on the basis of any new thoughts or possible feedback and (ii) refine my thoughts for a forthcoming piece on Oxford’s Journal of Competition Law and Practice
- My views are mine (sounds like a tautology, but don’t always take this for granted in our area of work…); some of my colleagues and clients may well have different opinions.
- I haven’t worked nor for Google nor for any of the 17 complainants.
In case I haven’t yet got you tired before even starting, here is a methodological explanation. This will be a five-pronged analysis; I will very succinctly summarize (i) DG Comp’s concerns; (ii) my take on the substantive concerns; (iii) the content of the proposed commitments; (iv) third-party criticism of the proposal (notably that read here, here, here or here) (I actually read some favorable comments as well); and (v) my take on the proposed commitments. And this for each of the four concerns flagged by the Commission (although only the two first ones raise interesting issues).
The structure will make this post longer. In order not to cram the page, click if interested.
Breaking News: Google’s proposed commitments are out
Google’s proposed commitments have just been made public. You can read them here: http://ec.europa.eu/competition/antitrust/cases/dec_docs/39740/39740_8608_5.pdf
And here’s DG Comp’s interesting Q&A memo on the market test.
I’ve only skimmed through them, but they are not as densely worded as I thought + they include quite useful screenshots. By the way, the Commission should get some market testing-advertising revenues too: the screenshots contain some good avertising of Digital SRL cameras (see capture above; btw, pay special attention to (i) the “sponsored” label at the top and the box that appears when you hover on it; and (ii) the line at the very bottom: “Search on Site 1, Site 2 or Site 3”; we’ll come back to these), of restaurants in Mountain View, and of President Obama.
The complainants have asked for an extended review period -3 months instead of 1-. Due to various reasons these are particularly busy days on our side, but we’ll try to to provide you with a summary and our first comments asap.
European Commission prohibits Ryanair/Aer Lingus deal
Last Wednesday the Commission confirmed that it has decided to prohibit -for the second time- the proposed merger between Ryanair and Aer Lingus merger (click here for the press release). This is the fourth prohibition decision adopted under Commissioner Almunia, and the 24th in the history of EU competition law.
The decision has not yet been published. We had assumed that while we waited for it we could at least report on Michael O’Leary’s (Ryanair’s CEO) reactions. However, Mr. O’Leary has not made any public statements of the kind that we were expecting (remember his analogy between the European Commission officials and North Korean economists? 🙂
Ryanair has issued a press release in which it argues that its offer “was supported by an historic and unprecedented remedies package that included not one, but two upfront buyers (BA/IAG & Flybe) to take over approximately half of Aer Lingus’ short-haul business (…) The transfer to these upfront buyers of Aer Lingus’ business on the 46 crossover routes identified by the EU Commission, together with the relevant slots, aircraft, personnel and branding, was ensured by binding, irrevocable commitments by those upfront buyers including Board approvals”. In Ryanair’s view, “[t]he history of the EU’s treatment of Ryanair’s two offers for Aer Lingus conclusively proves that this prohibition is a “political” decision to pander to the vested interests of the Irish Government (a minority 25% shareholder in Aer Lingus) and is not one that is based on a fair and reasonable application of EU competition rules or precedent airline merger approvals in Europe”.
We have no clue on whether the allegations over the political motivations of the decision are founded or not. But politics aside, this case resuscitates some tricky substantive/institutional questions. The nature and scope of the remedies proposed by Ryanair was indeed pretty substantial, and arguably unprecedented (Ryanair had even pledged to give 100 million to Flybe to ensure its sustainability) so, query:
Are EU merger control rules on when an up-front buyer is a suitable one sufficiently clear? What discretion should the Commission enjoy in this regard? Ryanair has announced that it will appeal the decision before the General Court, so we should expect to have some answers to these question soon.
Where’s the Law? (or Google and the European Commission)
I said to myself I would keep up the promise I made to Alfonso and continue writing in the blog until Nicolas is back or he recovers (which we hope will be very soon) and starts posting notes again (I failed to anticipate that he wouldn´t stop…)
More to the point: as a complete outsider, I find the lack of publicly available information on the European Google case frustrating, as it is fascinating on more than one level. I just thought that the best way I could rebel against this situation is by making my views on the ongoing proceedings publicly available.
The behaviour of the European Commission in the past few months is interesting (if not puzzling) in at least three important respects:
- The Commission has repeatedly asked Google to submit commitments. One could very well argue that nothing prevents the Commission from doing this. At the same time,this conduct is at odds with the logic of Article 9 of Regulation 1/2003. At least it shows (as if we did not know it already) that the ECJ judgment in Alrosa (as well as AG Kokott’s opinion) ignores how negotiations between firms and competition authorities are conducted in reality.
- A commitment decision is the only acceptable outcome for the Commission. In his public statements Commissioner Almunia suggests that the case will only be closed once the authority accepts the commitments submitted by Google. Put differently, we have reached a point where the case is not so much about an authority establishing an infringement by a firm but about a firm proposing a settlement that is acceptable for the authority.
- The Commission assumes that the alleged discriminatory conduct is an abuse of dominance: The whole case seems to be based on the premise that the fact for Google to favour its own services is an abuse of dominance within the meaning of Article 102 TFEU. Commissioner Almunia has even been explicit about this matter. This conclusion is very far from straightforward to reach. It is a factual scenario that can be approached in many different ways. It raises novel and complex questions to which different (and contradictory) lines of case law seem to apply .Unfortunately, the Commission has never even attempted to articulate the legal framework potentially applicable to this case. This would be most desirable, if only because it would make it possible to ascertain whether the Guidance Paper was just the expression of a moment of temporary folly, and not (as I assumed it would) a pre-commitment device designed to preserve long-run legal certainty.
I do not think an expert poker player would advise the Commission to take these moves. Even outsiders like me cannot avoid inferring from them that the (legal) case is probably weaker than the Commission appears to suggest. As an academic, it is the fact that the law has disappeared from the case that I find most worrying, in any event. The question of whether, and why, Google’s conduct would be abusive seems to be no longer of relevance for its outcome. In this sense, this case shows the dramatic impact that the abusive recourse to commitment decisions (in particular where, as is the case here, genuinely novel legal questions are at stake) can have on the evolution of our discipline.
Pablo
Xmas at work
The big news this week was Almunia’s declaration that settlement talks with Google were making progress.
And that the Commission was still following the same four leads it was following 7 months ago:
- Preferential placement of Google’s vertical search services on general search results;
- Unpreferential placement of third party content on Google’s vertical search services;
- Exclusivity agreements for the delivery of Google search advertisements on other websites; and
- Restrictions in the portability of advertising campaigns rom its platform AdWords to the platforms of competitors.
But what really struck me is the following. Almunia declared that he “expect[ed] Google to come forward with a detailed commitment text in January 2013″.
The other day in a post, I expressed compassion for Microsoft’s antitrust lawyers. Today, all my thoughts are with the poor Google’s lawyers. They likely will spend an awful a busy Xmas break preparing Almunia’s Xmas gift.
Yet another reason why I am glad to no longer work for Biglaw.
Xmas at work? Not for me!
Breaking news – Chillin’ leaks
Following the political turmoil caused by Mario Monti’s announced resignation, and in order to achieve a compromise solution to Italy’s political deadlock, Silvio Berlusconi has been nominated as the new Italian Judge before the European Court of Justice.
In a press release issued a few minutes ago, the Italian Government states that:
“Berlusconi is the ideal candidate for the job: there is no other Italian citizen with more experience in Court proceedings, and his contribution to European criminal law is beyond question“.
Chillin’Competition has learnt that Mr. Berlusconi has already initiated the recruiting process for his new clerks. We have had exclusive access to a picture taken outside the villa where the interviews are being held; the picture conveys the sense of excitement and urgency prevalent among candidates to the job (see here).
The content of the tests remains confidential, but our sources tell us that there will be no written part.
Chillin’Competition’s Christmas contest
This is obviously a joke, but it’s also the opening post for a new game. Some of you certainly are (or should) be familiar with sites such as The Onion (Spaniards woud rather follow Elmundotoday). We want to play after them. That’s why we are setting up a contest for the funniest competition law fake news 😉
We are giving out a special pack of Christmas delicacies from my family’s bakery to the person who sends us the funniest fake news. We donñt care about length: they can be one page, one line, even just a headline could do the trick.
We’ll hold a public vote next Friday.
You can get some inspiration from some of our previous fake news, such as: Reactions to the endives cartel; The post of a fresh summer day; or An Antitrust Challenge to God.
ECJ’s Judgment in Case C-457/10 P Astra Zeneca
[There are too many things going on this week on which we would like to comment (not least yesterday’s record fine in the CRT cartel) and we hear that next week may be even more interesting… We had another post planned for today, but current news rule, and we wanted to provide you with the first comment of today’s Judgment in AstraZeneca. So, here’s a subjective and hastily written summary + comments. It might be a living-post, meaning that it might be updated as further thoughts come to mind. Anyone who might want to use this to draft client alerts: please consider this as a Sint Nicholas gift 😉 ]
It could make sense to hold a ménage à trois discussion on this Judgment; candidates are welcome…
Today the European Court of Justice (“ECJ”) issued its long-awaited Judgment in the AstraZeneca (“AZ”) case. The ECJ has upheld the 2010 Judgment from the General Court, which in turn had endorsed the Commission’s 2005 infringement decision.
Background
As most of you know, the Commission had found that AZ abused its dominant position by (a) making misleading representations to patent offices of several Member States with a view to extending the period of patent protection for its product Losec (an omeprazole-based medicinal product used in the treatment of gastrointestinal conditions); and (b) requestintg the deregistration of market authorisations for Losec capsules in Denmark, Norway and Sweden. These conducts were ultimately aimed at keeping manufacturers of generic products at bay, as well as at preventing parallel trade.
In 2010 the General Court dismissed most of AZ’s arguments, but reduced the fine from € 40.25 million to € 12.25 million on the grounds that the Commission had not proved that AZ’s conduct had prevented parallel imports of Losec in Norway and Denmark. AZ appealed this Judgment, and in doing so brought before the ECJ some issues which are of crucial relevance to the very notion of abusive conduct.
Today’s Judgment
– Market definition is discussed in paras. 31-60. I had started to summarize it, but it would take too long. Unless you represent AZ you can skip (lots of factual stuff, there’s nothing that will rock your world)
– The first abuse
The logic in the GC’s Judgment was that AZ deliberate (intention plays a key role here) submission of misleading information to public authorities with a view to obtaining the grant of an exclusive right to which it was not entitled falls outside the scope of competition on the merits, and therefore within the category of abusive conduct.
AZ and EFPIA argued that AZ had simply failed to disclose to patent offices its bona fides and allegedly reasonable interpretation of the patent rules, and that this could not be equated with “objective misleading”. In their view, even if AZ’s interpretation ultimately proved wrong, it was not aimed at misleading. The applicants claimed that pursuant to the GC’s standard, dominant companies would have to be infallible in their dealings with regulatory authorities, which, in turn, would impede and delay patent applications in the EU. [i.e. the basic trick of trying to scare the Court alleging that hell will break loose; as if it had since the Decision was issued in 2005….]
The ECJ’s Judgment -like the GC’s- is solidly grounded on Hoffman la Roche’s rather unhelpful definition of abuse as conduct different from “competition on the merits”. It does not require the abusive conduct to flow directly from the exercise of the undertaking’s dominanat position; on the contrary, it assumes that the presence of a dominant company already implies that the degree of competition in a market is hindered (the clearest formulation of this idea appears in para. 150, with respect to another ground of appeal), and that therefore it has a special responsibility to ensure that competition is nor further undermined.
The ECJ does a good job in setting out the objective reasons why AZ’s conduct was consciously motivated by the desire to mislead public authorities in order to maintain its dominant position (see paras. 79-93). The Court notes in paras. 94-100 that if AZ’s interpretation had been reasonable (as AZ claimed), then it should have disclosed the relevant information informing its interpretation (the Judgment doesn’t put it this way, but the idea seems to be that the intentional failure to disclose that info provides a valuable indication of the merits that AZ seemed to attribute to its own reasoning). Para 98 makes it clear that even if you have a “legally defensible interpretation” this is not excuse resorting to highly misleading representations with the aim of leading public authorities into error.
In para 99 the Court responds to the “hell will break loose argument” (see my second word crossing above) stating that the GC did not require infallibility in patent applications (“it thus cannot be inferred from that Judgment that any patent application made by such an undertaking which is rejected on the grounds that it does not satisfy the patentability criteria automatically gives rise to liability under Article 102“), and that the Judgment is confined to the specific circumstances of the case. There’s a difference between requiring infalibility and reprehending someone who obviously and intentionally fails to act right.
The Court then deals with the argument that AZ’s conduct (its apliccation for SPCs) was labelled as abusive regardless of its lack of effects. It states that the “examination by the General Court is not in any way based on the assumption that the practice in question constitutes an abuse in itself regardless of anticompetitive effects” (para. 106). The ECJ confirms that AZs misleading interpretations were liable to lead the public authorities to grant it a right to which it was not entitled, and that this in fact happened in several Member States (paras. 107 and 108). In para. 110 the Court makes it clear that even if the effects of the abuse were also felt at a period in which AZ was not dominant anymore, this is irrelevant for the assessment of the legallity of a practice carried out while AZ was dominant. The Court also upholds the GC’s conclusion that AZ did not achieve its goal in some Member States its conduct was “very likely to result in the unlawful SPCs” (para. 111).
The ECJ makes it cleat that in Art 102 cases there is no “requirement that current and certain anticompetitive effects be shown“. Citing para. 64 of TeliaSonera the ECJ states that “although the practice of an undertaking in a dominant position cannot be characterised as abusive in the absence of any anti-competitive effects on the market, such an effect does not necessarily have to be concrete, and it is sufficient to demonstrate that there is a potential anti-competitive effect” (para. 112) (unlike in TeliaSonera, there is no reference to the exclusion of “as efficient competitors”, but this is probably due to the different factual settings in the two cases).
Antitrust Rumours
Heard three weeks ago in Hong Kong: our antitrust master, our antitrust icon, our antitrust god Prof. Richard Whish – who will be leaving King’s College London in August 2013 – would be a strong contender for a high-level position at the forthcoming Hong Kong Competition Authority.
Heard last week in Brussels: people close from the Court case have leaked to Chillin’Competition that the draft ruling in Intel v. Commission (T-286/09) will likely be an outstanding piece of nonsense ordoliberalism. Not yet out, and we already have a candidate for the worst 102 judgment of 2012. Wow!
On how to find the perfect couple (2012 Nobel Prize in Economics)
As announced yesterday by the Swedish academy, the recipients of the 2012 Nobel Prize in Economics are Angela Merkel and the German Government Al Roth and Lloyd Shapley.
Their research has mainly focused on the stable allocation of resources in markets where prices are inexistent. They focused on two-sided markets where monetary exchanges would be inappropriate (i.e. patients-kidney donors or the two individuals in a marriage) and figured out the way to strike non improvable (stable) matches.
As we wait for Nico to come up with a Chuck Norris joke on this, we can point you to Al Roth’s blog . In yesterday’s entry he said that his daily post could be delayed, and on Sunday Roth had written a post on the correlation between national chocolate consumption and per-capita Nobel prizes (Belgium is the exception that confirms the rule) 😉 (there is, however, a correlation which seems even stronger than the chocolate one: if you’re a US citizen, a Harvard Professor, and your research is on game theory then it’s pretty clear that you’ll get a Nobel sooner or later!).
We could also recommend you to read Shapley’s seminal paper on Long term competition (a game theoretic approach) (if you do, please tell us what it says, because we can’t really read equations!).
Now, since you probably won’t read neither Roth’s blog nor Shapley’s 1992 paper, and since the only think in this post that caught your attention was that they figured out the best way to find the perfect match in marriage, that’s where we will focus on:
In a 1962 paper Shapley and Gale assumed a market in which men propose to women (a debatable assumption as it is a bit male-chauvinist and also leaves out people who wish to stay single, gay and bisexual people and a bunch of other “real life stuff”), in which each individual has views about what their ideal couple should be like, but in which those views do not lead to perfect matching [otherwise a bunch of us would be matched to Monica Bellucci or Bar Refaeli, and that can’t work; or could it?? (note to my girlfriend: this is only a joke mandated by our editorial line; don’t worry)]. Shapley and Gale stood up for the proposition that an stable result could only be attained if women applied a “deferred acceptance” strategy. This would work as follows:
First, men would propose to their favorite woman. This means that Monica and Bar (which is how Nico and I call them in private) would have multiple choices but that other women would have less or zero choice, which (even if certainly acceptable by some of us) is unfortunately not stable. Instead of accepting their favorite “candidate”, they argue that women should “pocket” the strongest offer without accepting it and reject all others. Rejected men would then make a second proposal, which would allow women to stick to their previous pick or to replace it by one of the new candidates. Shapley and Gale proved that, if repeated enough times [1st round Monica Bellucci, 2nd round Bar Refaeli… 1456th million round Snowwhite’s evil stepmother –with two notable exceptions-] the algorithm will lead to stable non-improvable matches.
Sure this doesn’t seem to “match” the real world and, although intellectually interesting, its practical application seemed doubtful (and discouraging!). But Roth figured out that Shapley’s algorithm could have enormous practical applications on students-schools, patient-donors, and doctors-hospitals. A great example where the intelectual beauty of economics results in very practical solutions to real problems that truly affect peoples lives. In sum, a very deserved prize.
Chillin'Competition 
