Archive for the ‘Case-Law’ Category
Recent Article 102 TFEU Case-law
Today, my ex-Howrey colleagues invited me to give a presentation on recent developments on EU competition law at Shearman & Sterling. I was very honoured.
It gave me the opportunity to read the recent judgments in Telefónica v Commission, Post Danmark and Tomra v Commission.
On my own arbitrary scale, the ranking of those judgments is as follows:
- CJEU, Post Danmark, C-209/10
- CJEU, Tomra v Commission, C 549/10 P
- GC, Telefónica v Commission, T-336/07
A word of explanation is in order: amongst those three judgments, the Grand Chamber of the Court should first be praised for its ruling in Post Danmark. The judgment dissipates the uncertainty generated by Compagnie Maritime Belge in clarifying that selective price cuts are presumably legal when prices > average incremental costs. But this is not all. The Court makes very explicit – and this is right in my opinion – that dominant firms can compete on the merits even if this forces rivals off the market (§22). In so doing, it recognises that not all foreclosure is unlawful, but only that “anticompetitive foreclosure” matters under Article 102 TFEU. Last, but not least, the judgment upholds the unnamed “Article 102(3) TFEU defense” that the Commission had plugged in §30 of its Guidance Paper (see §42).
The second judgment on my podium is Tomra. It comes second because the dicta that dominant firms should be able to compete on the merits for the entire market is wholly unfortunate (§42). It is first non-sensical from an economic standpoint. But as we wrote here, it is also inconsistent with the approach followed in other areas of competition law . A similar comment applies to the unconvincing assertion that a “suction effect” can be established without any need to run a price-cost analysis (§79). Not all in Tomra is bad though. In particular, the judgment encapsulates a subtle message of hope at §81 when it implies, a contrario, that the Guidance paper will have increased relevance in future Article 102 TFEU cases:
“As the Advocate General observes in point 37 of his Opinion, the Guidance, published in 2009, has no relevance to the legal assessment of a decision, such as the contested decision, which was adopted in 2006”
The worst of those three judgment is, by far and large, Telefónica v Commission. In this judgment, the General Court obediently implements the perplexing standards set by the Court in Konkurrensverket v TeliaSonera Sverige AB (C-52/09). To me, it is beyond common sense, conventional wisdom, reason, logic, honesty, intellectual sanity to consider that a dominant firm can abusively squeeze its rivals through high prices, meanwhile being under no duty to deal with them (see §180). In the language of driving metaphors (I love them), this is akin to forbidding someone from driving at 130 km/h, meanwhile explicitly entitling him to drive at 200 km/h.
I should, however, be very grateful to the Court. The release of those rulings comes at a perfect time, with our Brussels School of Competition conference on “Costs in EU competition law” scheduled on 9 May. The number of participants keeps increasing, and yesterday, the General Counsel of one of the 3 firms involved in those cases registered :).
Presidential Endives
Endives have been a highlight of this blog.
They have become a presidential topic.
Last week, in a large-audience TV programme, N. Sarkozy discussed – and actually lambasted – the decision of the French competition authority (FCA). This comment was in reaction to a question by a woman in the audience, who complained that the FCA decision prevented agricultural producers to coordinate selling prices.
Here’s N. Sarkozy’s answer (quick and dirty translation):
The FCA “went a little to far … I would like agricultural producers to be able to sell at prices above production costs … hence one must define, with other production groups, what is an average production price … and the competition authorities must not consider this average production price as a restriction of competition“.
In clear, the price of veggies should be defined collectively amongst producers at a level > costs, and the competition watchdogs should not challenge this.
But there comes my preferred part. To conclude N. Sarkozy added, referring to the FCA officials:
“They must have the intelligence of understanding that were are not talking about Microsoft and Apple“.
Check the video above or here between 2:00:45′ and 2:01:57′.
Students’ Bests (2)
I had forgotten this one. In response to the question what is a “restriction by object“, I got the following answer:
There is a restriction by object when, “following an individual and specific examination of the content and objective of that contractual clause and the legal and economic context of which it forms a part, it is apparent that, having regard to the properties of the products at issue, that clause is not objectively justified“.
Where things are a little tricky here is that this definition is not the product of this student’s imagination. Rather, this definition is a straightforward restatement of §47 of the ECJ’s ruling in Pierre Fabre Dermo-Cosmétique SAS.
I know Alfonso and Antoine Winckler have expressed mixed – or even hard – feelings about the judgment. But personally, I had not realised until now how confused this ruling was. In a single paragraph, the Court manages to conflate the notion of a “restriction by object” with that of a “restriction by effect” … together with the issue of “objective justification” which is normally understood to belong to Article 101(3) analysis. And in so doing, it rejuvenates the debate on whether the rule of reason system inhabits Article 101(1) TFEU.
In this post, I would like to try a somewhat improbable analogy. In the history of EU competition law, the ECJ’s trajectory is not dissimilar to that of Metallica, the famous heavy metal band.
In the 1980s and 1990s, both have released excellent pieces. Since the 2000s, however, their production has been no more than average, and at times even mediocre. The reason for this: both are stuck in time, incapable of embracing advances in modern musical and legal art.
A last point, worth mentioning. On my own personal grid, to be “good” a ruling must satisfy at least three conditions: maximise legal certainty; make sense from an economic perspective; use simple, clear language. There are examples of very good rulings in the ECJ’s case-law. Think of Woodpulp which fullfills all of those conditions. Why can’t we, in 2012, benefit from a similar degree of quality when it comes to judicial production?
Judicial Review and Article 6(1) ECHR
With the Menarini judgment, the ECHR has demonstrated that it has nothing to envy to other Courts in terms of cryptic reasoning.
There are indeed two ways to read this judgment. If you follow what the Court says as a matter of principle, the EU judicial review system is not Article 6(1) compliant. Remember, the ECHR says that review courts should have full jurisdiction in competition matters. In the current state of affairs, the GC does not have full jurisdiction on all aspects of a case, and particularly not when it comes to “complex economic assessments“.
But if you read what the ECHR says on the facts, the EU judicial review system might well be Article 6(1) compliant. In casu, the Court considers that the Italian system of limited (or “weak“) judicial review is arguably akin to full jurisdiction (!) and thus compatible with the ECHR. This is obviously fictitious. On close examination, no such intense review exists under Italian law. Yet, the ECHR contends that the Italian review courts “ont pu examiner le bien-fondé et la proportionnalité des choix de l’AGCM et même vérifier ses évaluations d’ordre technique” (§64). With this ruling, the treshold for full jurisdiction comes real low…
Today, the ECJ just chose which of those two readings prevails in the EU. In its KME v. Commission ruling, handed down today, the Court states at §133 that:
“The review provided for by the Treaties thus involves review by the Courts of the European Union of both the law and the facts, and means that they have the power to assess the evidence, to annul the contested decision and to alter the amount of a fine. The review of legality provided for under Article 263 TFEU, supplemented by the unlimited jurisdiction in respect of the amount of the fine, provided for under Article 31 of Regulation No 1/2003, is not therefore contrary to the requirements of the principle of effective judicial protection in Article 47 of the Charter“.
I attach hereafter the slides presented by Marco Bronckers at today’s GCLC lunch talk: GCLC – Menarini 8 12 11REV
Google, Microsoft, Skype, et cætera
Confessing a lack of inspiration tonight, I paste hereafter a link to an interesting NYTimes paper on the ongoing Commission investigation against Google. Thanks to James Kanter for the opportunity to be interviewed.
The topic of this paper also gives me a nice pretext to remind our readers that the merger clearance decision in Microsoft/Skype was published a month ago. This decision is well worth reading. It makes a bunch of interesting points on several counts. Here’s a taste of them. First, the decision clearly shows that a merger involving a large monopoly can get Phase I clearance.
Second, it suggests that the tide has turned in so far as the Commission’s appraisal of ICT markets is concerned. On several occasions, the decision unambiguously depicts Microsoft as a vacillating player, in a sector (communications services) where the Facebook, Google and Apple of this world are poised to become – or are already – the market leaders.
Third, the §§ on the tying of Skype with Windows OS are not wholly consistent with the 2004 and 2009 decisions, where pre-installation was deemed problematic in itself, because of the lack of subsequent (switching) user behavior. Remember, those decisions relied on this theory that lazy users were often stuck with WMP and IE, for behavioral biases (the so-called “end-users’ inertia” at §870 of the 2004 decision). Here, the Commission stresses that pre-installation is unproblematic at any rate because consumers do not use whatever communication service found on Windows + there are many alternative means for rivals to reach out to consumers + Skype is already pre-installed on >50% of Windows PCs, but only a small share of Skype are registered and connected users.
Finally, the decision contains some nice wording on the flaws of standard antitrust analysis in dynamic markets. See for instance, §78, which calls for caution in applying conventional market share analysis to such sectors: “consumer communications services are a nascent and dynamic sector and market shares can change quickly within a short period of time. Furthermore, almost all communications services are offered free of charge”. See also §122: “Consumers are very sensitive to innovative services or products in consumer communications services. Providers of consumer communications services lose traction quickly if they are unable to offer users new and innovative functionality”.
The Rick Perry Syndrome
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“Oops“, the Commission did it again…
Yesterday, in the S&P case, the Commission again closed abuse of dominance proceedings with an Article 9 decision. As already explained, Article 9 decisions have become the conventional procedure in Article 102 TFEU cases.
What is less conventional is that the lion’s share of recent Article 102 TFEU cases involves exploitative abuse allegations. Think of Rambus, S&P, IBM – where the Commission dumped bundling allegations to focus on excessive pricing – and the recent Apple-Samsung investigation.
As a matter of principle, I see no wrong to this. But, this raises several interesting questions, which cast doubt on a number of commonly accepted viewpoints.
First, is there a Rick Perry problem at the Commission? I mean how could our Commission friends forget that the Guidance Paper states that exploitation cases are no enforcement priority?
Second, does the focus on exploitation means that those cases are easier to manage than exclusion cases, in particular under the effects based approach (where proof of anticompetitive foreclosure involves proof of exclusionary effects + proof of subsequent exploitation).
A final remark. Exploitation cases are conceptually close to constructive refusal to supply cases (see what the Commission says in IBM, §3), and thus can be also deemed exclusionary cases. But the crux of the matter is that all exploitation practices necessarily foreclose someone. From an economic standpoint, the deadweight loss of monopoly that arises out of price hikes is nothing but the foreclosure of customers. Hence my question: is the distinction between exploitation/exclusion really useful?
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)?
“Canada Dry” Decisions
The ECJ ruling in Tele2 Polska is a joke (actually a bad one).
I’ve already blogged on the nefarious effects of this ruling. Today, I’d like to make a few more points.
Remember: the judgment states that National Competition Authorities (“NCAs”) cannot, under Regulation 1/2003, adopt declaratory decisions stating that there has been no breach of Article 101 and/or 102 TFEU (on the merits).
This judgment is likely to have far reaching consequences. As written in a paper below, and confirmed by a number of colleagues at the GCLC lunch talk yesterday, it means that NCAs cannot adopt individual exemption decisions under Article 101(3) TFEU.
Since the inception of Regulation 1/2003, however, many – including me – have repeatedly stated that decentralisation was all about empowering NCAs to take Article 101(3) TFEU decisions. More importantly, several NCAs have taken exemption decisions over the past 7 years. Is this decisional practice now unlawful?
The Commission’s response to this is that the ruling does not change much. Rather than taking a negative decision under 101(3) TFEU, the NCAs can still adopt decisions that “there are no grounds for action on their part” pursuant to Article 5 of Regulation 1/2003.
Now, is this really true? As noted by F. Zivy yesterday, could a NCA conceivably write in a decision: « The impugned practice infringes Article 101(1) TFEU. There is strong evidence that it is nonetheless justified under Article 101(3). But we are sorry, the only thing we can do is to say there are no grounds of action against this infringement”?
Or to be even more extreme: “The impugned practice constitutes an infringement of Article 101(1) TFEU. Hence, there are no grounds of action on our part“? Come on..
To me, decisions that there are no grounds of action are like Canada Dry to “negative decisions”: they look like negative decisions, they taste like them, but they are not like them.
In practice, rather than making such paradoxical statements, NCAs willing to exonerate anticompetitive agreements are likely to reason within Article 101(1) TFEU, under a “rule of reason“-like approach (which BTW has been consistently held alien to EU law by the ECJ).
A last remark: the judgment is primarily based on a litteral reading of Article 5 of Regulation 1/2003 which sets the powers of NCAs, and is supposed to be exhaustive. Article 5 says nothing of inapplicability decisions. hence, NCAs cannot take them.
Now, has the ECJ really read Article 5 of Regulation 1/2003?
I mean had it done so, it would have realised that this provision is all about the decisions taken for the application of Article 101 and 102 TFEU (“The competition authorities of the Member States shall have the power to apply Articles 81 and 82 of the Treaty in individual cases“). Hence, it is somewhat unavoidable that this provision is silent on negative decisions, that DO NOT apply Articles 101 and 102 TFEU.
Hereafter a paper that I have written with my assistant (in French) + the slides presented at the GCLC lunch talk yesterday.
Commentaire Tele 2 Polska – Petit et Lousberg – Final
Hearing in CISAC v. Commission (and more)
I was yesterday at the General Court with my LL.M. students from Liege. We attended the hearing in CISAC v. Commission.
Here’s a grab bag of ruminations on the CISAC case, and some information on the Court. Let’s start with the case.
I. CISAC v. Commission
In this case, the Commission argues that national collecting societies have entered into an unlawful concerted practice “‘by coordinating the territorial delineations of the reciprocal representation mandates granted to one another“. The evidence brought in support of this finding hinges primarily on proof of parallel conduct, through the adoption of similar reciprocal representation contracts by the collecting societies.
During the hearing, the Judges repeatedly questioned the Commission on why it had brought no other evidence of concerted practice, in particular, documentary evidence. The judges found that surprising, especially given that the Commission enjoyed the implicit support of two collecting societies, i.e. BUMA and SABAM.
The Commission awkwardly conceded that there could not be any evidence of this kind, because it was not necessary for the collecting societies to “agree” on the terms of the reciprocal representation contracts (I heard something like: “there was nothing to agree upon“).
If I understand correctly, those terms – and more generally, the monoterritorial agreements – had been applied previously in other types of contracts, and it was simply the most rational decision for each collecting society to replicate them individually in the impugned reciprocal contracts. In so saying, however, the Commission made a daft mistake. It implicitly admitted that the wide-ranging parallel adoption of dozens of similar reciprocal contracts had an explanation alternative to concertation (i.e. individual, rational behavior from collecting societies) … and that it had not discharged the burden of proof required under the Woodpulp case-law.
The main applicant’s lawyer rightly noted, moreover, that territorial exclusivity makes a lot of sense from a rational, individual standpoint.
II. Reform of the Court
Alfonso referred to the reform of the Court a few days ago. Here’s some fresh information on the reform.
The General Court and the Court of Justice now have an agreement to propose the appointment of 12 new judges +3 référendaires for each (and importantly, 12 cars (without a driver though)).
Those 12 new judges will surely be appointed under a rotation model, similar to the one that prevails at the Civil Service Tribunal. There will be new jobs for référendaires thus, in particular in fields such as competition law. As pointed out by Alfonso, being a French native speaker is a HUGE asset. In fact, in each cabinet, there’s generally at least on French speaking guy. And this is unlikely to change. I heard that the new selection panel – which assesses candidate judges – drafted a report stressing that new appointed judges should hold two skills: a very good French and a strong publication track-record. As a French speaking academic, I could simply commend the work of those authors. That said, I will never hold a such prestigious position :(, given (i) my insulation from the French legal system; and (ii) that I have not followed THE standard professional avenue to the ECJ, i.e. Council of State or Ecole de la magistrature.
More information:
- At the ECJ, a vice-president will be appointed. New (I heard five) AG’s positions will be created.
- Specific rules will be adopted in relation to the 5 judges chambers;
- Other aspects of the reform may entail suppressing the rapport d’audience, providing for an accelerated preliminary reference procedure (duration ❤ months), limiting the size of written pleadings, etc.
- It will be up to the heads of State to decide on this.
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 