Archive for the ‘Case-Law’ Category
Competition Law and Sport (IV)- The US Supreme Court’s decision in American Needle v NFL
On May 24th the US Supreme Court issued its most important antitrust decision of the term in the case confronting American Needle and the NFL. As we expected, the Court unanimously rejected the NFL’s contention that its 32 teams should be treated as a “single entity” for antitrust purposes.
The last opinion authored by Justice Stevens reverses a previous decision by the 7th Circuit and holds that NFL’s teams “are still separate, profit-making entities, and their interests in licensing team trademarks are not necessarily aligned”. The Court rejected a formal analysis by ruling that the single entity created by the NFL to manage teams’ IP rights was merely an instrument at the service of its teams.
In essence, the Supreme Court’s Judgment preserves the status quo, thus fully subjecting agreements entered into by sport leagues to a rule of reason analysis. However, some have pointed out that American Needle could have wider implications affecting other ventures between competitors outside the sports world.
The Supreme Court showed some sympathy to the idea that leagues have a “legitimate and important” interest in “maintaining a competitive balance among athletic teams.” Nevertheless, the weight that shall be accorded to such interest in balancing the pro and anti-competitive features of a given agreement remains unclear. In any case, the Supreme Court appears to legitimize competitive balance as a potential redeeming virtue for Section 1 purposes. Whether Article 101 TFEU allows or not to consider similar interests remains highly controversial. What’s your take?
New GC Ruling – EMC v. Commission
Database
Article 15(2) of Regulation 1/2003 requires Member States to forward to the Commission a copy of any written judgment of national Courts deciding on the application of Articles 101 or 102 TFEU. These judgments must be sent “without delay after the full written judgment is notified to the parties”.
Since the entry into force of Regulation 1, the Commission has published a database of the judgments it has received from the Member States. A year ago, during the review of the functioning of Regulation 1, stakeholders have criticized the database, as “far from complete“. The Commission has itself acknowldedged that “overall, options for ensuring a more efficient and effective way of providing access to national court judgments should be contemplated” (§291 of Commission Staff Working Paper, Report on the functioning of Regulation 1/2003 {COM(2009)206 final}).
I checked the database today. “Far from complete” exhibits a flavour of euphemism. The most recent Belgian judgments in the database date back to 2007. In France, it seems Courts have not ruled on Articles 101 and 102 TFEU since 2008. In the UK, the Courts have not dealt with EU competition rules since 2005…
Very unsatisfactory, and probably one of the most blatant failures of Regulation 1. I thought I would just help in publishing here a judgment of 6 May 2010, handed down by the Brussels Court of Appeal in a margin squeeze case. See below.
Competition Cassandras
There is a popular mantra in modern EU competition law. Competition enforcement ought to be case-driven, and substantive guidance to firms shall stem from individual decisions. At last week’s GCLC Lunch Talk, D. Schnichels repeatedly said that to justify that – 18 months following a wide-ranging sector inquiry – the Commission had not yet provided guidance to pharma firms over a number of disputed practices. Cases are in the pipe-line, and guidance will come, soon or later.
This has numerous shortcomings. First, until a final decision is adopted with respect to each and every practice, firms are left in a sea of doubt. Some may believe that the practice is not covered by the EU competition rules until a case has been completed (under-fixing problem) . An obvious example is abuse of collective dominance. Other firms, on the contrary, may be willing to comply, but cannot optimally observe the rules absent substantive guidance on the applicable principle. An obvious example is patent settlements (reverse payments).
Second, with the influence of economic analysis, cases become increasingly market-specific. The methodology, theories of harm and reasoning enshrined in decisions is growingly topical. As a result, individual decisions have only little normative value.
Regulation 1 provides a solution to (part of) this problem: under §38 of the Recital of the Regulation, the Commission may provide guidance to firms. To date, however, the Commission has been reluctant to issue such letters. The official reason for this lies in the alleged risk of reintroducing, through the backdoor, a notification procedure similar to the one that existed under Regulation 17/62. The unofficial, but more convincing, reason is that guidance letters generate less press exposure – and political returns – than negative decisions.
Anyway, contrary to the arguments invoked by some EU Commission Cassandras against guidance letters, the UK Office of Fair Trading just proved that issuing a guidance letter is perfectly compatible with a system of ex post enforcement, and does not entail the resurection of ex ante notification.
(Image possibly subject to copyright: source here)
Competition Law and Sport (III)-Sale of Football TV Rights: One size fits all?
The rise of the three-year rule to dogma status may be explained by the “complex economic assessments” involved in establishing rigorously the anticompetitive effects of agreements on a case-by-case basis…
PS. Thanks go to Pablo Ibañez for very valuable discussions on this issue.
Duty to deal
Yesterday, Ofcom (the UK electronic communications regulators), decided to force Sky Sports to offer its TV packages Sports 1 and 2 to other TV retailers – for example, cable, terrestrial and IPTV – at a wholesale price set by Ofcom.
No doubt this decision will trigger massive controversy, in an area where exclusivity has long been hailed as THE sole efficient business model. I can certainly see an “output enhancing” effect on users (increased availability to customers). The remedy may thus be good in terms of allocative efficiency. In addition, one can anticipate a downward effect on prices for the acquisition of sports rights. Purchasers will bid lower, for fear of having to share their sports rights later.
My gut feeling: in light of the obscene amounts lately paid by TV channels for sports rights, and of the possibly detrimental snow-ball effects this may have in the long term on sports clubs, Ofcom’s decision does not look too bad.
Thanks to E. Provost for the pointer.
I chose the picture as a reference to the famous Aspen Skiing case.
(Image possibly subject to copyrights: source here)
PS: I am told by a good friend, Chris Brown, that “OFCOM has not in this decision imposed a duty to deal. Sky already dealt with rivals, including Virgin Media (the subject of a previous dispute), so you can already watch Sky Sports on platforms other than Sky’s; what OFCOM has forced Sky to do in this decision is to reduce the wholesale price it charges to Virgin and others by roughly 25%“.
Oligopolistic collective dominance: the BCA’s Telefonica decision
Some weeks ago, the Basque Competition Authority (“BCA”) issued a decision which has gone largely unnoticed outside of Spain, but which is definitely worth commenting here. To my knowledge, this decision is the first ever to sanction an abuse of a purely oligopolistic collectively dominant position.
In essence, the decision concludes that Telefónica de España SAU (“TSAU”, a subsidiary of Telefónica SA) abused of its dominant position in retail fixed telephone market, and, more interestingly, that Telefónica Móviles (“TME”, another subsidiary of Telefónica SA) also abused of the collective dominant position it held together with Vodafone and Orange in the Spanish retail mobile telephone market.
The BCA considers that TME, Vodafone and Orange constituted a “tight oligopoly”, and pursuant to a thorough examination of market conditions at the moment where the investigated infringements took place, it concludes that the Airtours conditions for a finding of collective dominance are fulfilled. The BCA further refers to the existence of empiric evidence of parallelism of prices and other commercial conditions adopted by the members of the oligopoly. Moreover, citing the CFI’s Judgment in TACA, the decision rebuts the contention that a certain degree of internal competition (allegedly illustrated by the high degree of portability) is incompatible with a finding of collective dominance.
With regards to the abusive conduct, and also in a nutshell, the BCA asserts that both TSAU and TME charged discriminatory tariffs to calls destined to users of the Euskaltel mobile network. The decision concludes that such conduct breached Article 2 of the Spanish Competition Act, and imposes TESAU and TME fines of nearly 3 and 1 million euros respectively.
A few brief comments:
Firstly, it’s interesting to remark that the Comisión Nacional de la Competencia had attempted to affirm its jurisdiction to deal with this case, but the organism in charge of addressing jurisdictional disputes between the CNC and regional authorities ruled in favor of the Basque Authority in light of the strictly local effects of the conduct under analysis. My guess is that had the CNC investigated the case, its outcome would have certainly been quite different.
Secondly, collective dominance is one of the favorite topics of Nicolas and myself, but also of Javier Berasategi, the author of the Telefónica decision, see here (his first work on the subject while a student in Bruges) and here (English version of a recent and extensive report on tacit collusion in the daily distribution of consumer goods which relies heavily on Nicolas’ work). It seems as if this or a similar decision had been under gestation for quite some time.
Finally, independently of whether one believes or not on the necessity of having several regional competition authorities in one Member State, it seems fair to acknowledge that in the past few years, under the Presidency of Berasategi, the Basque Competition Authority has brought forward very interesting cases on which it has adopted brave and innovative but always technically sound decisions.
Only a few days after the Telefónica decision was issued, Berasategi stepped down from the Presidency of the Basque Authority to start a new project in private practice. Congratulations for the good work, and the best of luck in his new venture!
(Image possibly subject to copyrights: source here)
Search engine
This is not a post about Google.
I had not noticed this earlier, but DG COMP has a new search engine for antitrust, merger and State aid cases. It looks very user friendly and will be undeniably of great help to most competition law practitioners and academics. A welcome initiative.
Outcome discrimination
A Microsoft-related post to compensate for the disappearance of the post uploaded earlier.
Recital 13 of Regulation 1/2003 provides that:
“Commitment decisions are not appropriate in cases where the Commission intends to impose a fine“. The ratio of this rule has to do with the fact that commitments only have corrective effects for the future. Unlike fines, they fail entirely to punish past anticompetitive conduct – behavior that has actually caused harmful effects – and are thus inappropriate in case of lasting competition law infringement.
Think of Microsoft II where the Commission accepted commitments. Take a breath. Now think of Microsoft I: same type of alleged anticompetitive conduct, same company, but in this case a staggering 497 million € fine (for two infringements though). My question: can in such situations the Commission’s discretion over the outcome of a case be challenged on grounds of unlawful discrimination? Although I doubt it, I find the point quite interesting (I allude to it in my last concurrences paper).
Windows
This is not a post on Microsoft.
In a move to make their films available early through various channels (DVD, VoD, etc.), movie distributors – big fishes like Disney – have sought to reduce the x-months exclusivity enjoyed by theatres over the first release of movies (the so called theatrical “window”).
Historically, movie distributors had been reluctant to do this, because the release of movies on a wide number of physical (DVDs) or digital (Internet) formats rang the opening hour of piracy. Moreover, the theatres’ temporal monopoly over the distribution of movies led to fat prices for consumers, and thus appreciable margins for the movie distributors (which normally receive a % on each ticket sold).
Movie distributors are manifestly changing their minds. A plausible explanation of this is that distributors increasingly perceive the theatrical window’s lenghty exclusivity as a key explanation for movie piracy. In addition, in times of crisis, consumers may prefer to stay home to watch movies, so the revenue generated by theatrical distribution decreases as compared to other formats. Think, for a second, to the situation of a budget-constrained family man. To him, watching a movie home is akin to a fixed cost. It is incurred once (renting the DVD) and can be spread over the various members of the family. By constrast, watching a movie in a cinema is a variable cost, which increases with the number of family members brought to the theatre.
So much for the theory. Why a post on this issue? On the occasion of the release of “Alice in Wonderland“, cinema chains have tried to undermine the distributors’ attempts to shrink the theatrical exclusivity window. To this end, they have engaged into the most brazen form of anticompetitive conduct: boycott. In the UK, it has for instance been reported that the three big cinema chains – Odeon, Vue and Cineworld – initially threatened to boycott Alice in Wonderland. The same has also happened, and may still be happening, in a number of European countries (Belgium, the Netherlands).
Under EU competition law standards, such boycott practices may be challenged on two possible grounds. First, they constitute a refusal to purchase movie distributors’ services (or they entail the termination of long lasting commercial relationships) and may thus be tantamount to an unlawful abuse pursuant to Article 102 TFEU (or its national equivalent). Assuming – I sound like an economist – that the theatres hold a dominant position (individual or collective), the interesting issue lies in the fact that theatres do not try to harm competition on a secondary upstream market as in classical “essential facility” cases (where upstream, or downstream, foreclosure is the concern). As a result, the Magill/IMS/Microsoft case-law which requires the elimination of competition on a secondary market should thus not apply to cinema chains practices. Yet, I am tempted to argue that there could nonetheless an abuse pursuant to Article 102 TFUE. In coercing distributors to maintain the current release windows through boycott, theatres artificially forestall the early entry of alternative viewing modes on the market. This in turn is prejudicial to “consumer welfare” in the meaning of competition law since it limits consumer choice and impedes the development of new markets. The increased emphasis of “consumer welfare” under Article 102 TFUE brings support to this interpretation.
Second, such practices may be tantamount to an infringement of Article 101 TFUE (or the national equivalent), provided the cinema chains have jointly decided to boycott movie distributors – again I sound like an economist. EU competition law has a strong enforcement record against collective boycotts. Back in 1974, the Commission held in Papiers peints de Belgique that “collective boycott is amongst the most egregious violations of competition rules”.
Apologies for the long post, but I find the issue fascinating. Thanks to T. Hennen for the pointer.
(Image possibly subject to copyrights: source here)
Chillin'Competition 
