Archive for the ‘Case-Law’ Category
Reforming the EU General Court
Last week, the European Commission adopted a formal position on the reform of EU Courts. The document refers to both the ECJ and the General Court, but for the moment we will focus on the latter as the main subject of the proposed reform.
The Commission´s position advocates for the appointment of 12 new Judges to the General Court (which would make a total of 39) as well as for the creation of at least two new specialised chambers (one of which would most likely be devoted to competition cases). These reforms are aimed at addressing the enormous workload that the General Court currently faces (with over 600 new cases registered every year and ever growing delays).
The Commission´s proposal -which to a great extent endorses that of the President of the ECJ, Mr. Skouris- has now been circulated to the Parliament and to the Council.
Unsurprisingly, the most contentious issue that has arisen in the context of the ongoing discussions between Member States relates to the designation and nationalities of the new Judges. As you know, the method for the designation of Judges falls entirely upon Member State, which have always acted on the basis of informal consensus. The Commission, fully aware of the fact that abandoning the principle of equal representation would be tough to swallow for some Member States, has attempted to tackle the issue by proposing two alternative methods of designation (see recitals 42-50 of the document that appears in the link above). In our view, the merits of the candidates should weigh much more than their nationality, and therefore the second option proposed by the Commission appears to be preferrable.
We feel nonetheless, that several important issues remain unaddressed:
First, whereas the nationality of the Judges may certainly be important, there is another very relevant nationality factor at the General Court that has so far gone unnoticed.
What would you say is the percentage of French référendaires (clerks) at the General Court? Under a system of equal representation, the answer should be approximately 4%. In real life, that number is however…..40%!
We know some truly excellent French référendaires, and of course French is the working language at the Courts, but, as a mater of principle, when it comes to judging shouldn´t quality and credentials matter more than language abilities? (I´m using “we”, but maybe Nico, being a froggy French citizen sees things differentlly…) 😉
Secondly, there is nothing the Commission can do about designations of candidates at the national level. The Committee envisaged in Art. 255 TFEU has certainly helped by acting as minimum filter in the most flagrant cases. Nonetheless, some Member States may still be tempted by the possibility of appointing candidates on grounds other than those strictly technical (although the second option proposed by the Commission has the virtue of perhaps shifting those incentives).
In our view, Member States should ideally follow the Dutch example (we believe that other Member States are already doing it). They arranged a merit-based competition and eventually appointed two outstanding Judges such as Sacha Prechal (ECJ) and Marc van der Woude (GC).
Hammering out Public Restrictions of Competition
Article 101 and 102 TFEU have little grip against public restrictions of competition.
Of course, Article 4(3) TEU, read in conjunction with Articles 101 and 102 TFEU may provide a legal basis to challenge public restrictions of competition in the context of infringement proceedings. But to date, the Commission has been understandably reluctant to take Member States to Court. And to the best of our knowledge, the Italian matches case-law (ECJ, Consorzio Industrie Fiammiferi (CIF), C-198/01), which compels NCAs to declare such measures inapplicable, has been little applied in practice.
With this background, it will often fall on “positive integration” measures (read EU regulations) to remove public restrictions of competition. In connection with this, my research assistant Norman Neyrinck recently informed me of an interesting ECJ ruling that I had overseen.
In Société fiduciaire nationale d’expertise comptable v. Ministre du Budget, des comptes publics et de la fonction publique (C-119/09) the Court found that Directive 2006/123 on services in the internal market (AKA the “Bolkestein Directive“) “ought be interpreted as precluding national legislation which totally prohibits the members of a regulated profession, such as the profession of qualified accountant, from engaging in canvassing“.
This is likely to have profound practical implications, given the wide substantive scope of the services directive. Other regulated professions (legal services?) may no longer apply bans on advertising to their members.
And this is likely to also have important cultural consequences. See video hereafter:
Tougher Competition Law
The day before yesterday, in Joined Cases C‑403/08 and C‑429/08 (Premier League), the Court of Justice :
(i) failed to understand what a public good is;
(ii) further expanded the “object” box.
And a proposition: would I be a monopolistic supplier (like FAPL), I’d sell to one buyer only in the EU, at a very high price. Or I’d sell to all of them, at a very high, similar price (to limit arbitrage).
This case has been presented as a victory for market integration. I am afraid this is more of a knock-out.
On Cartels and Beers
Yesterday´s post was about Services of General Economic Interest and Sausages. Today´s deals with cartels and beers.
Some days ago we anticipated that we would comment on the latest cartel Judgment issued by the General Court in Case T-235/07, Koninklijke Grolsch v Commission in relation to the Dutch Beer Cartel, which was sanctioned by the Commission back in 2007. When we announced that we would comment on it we hadn´t yet read the Judgment but rather the Court´s press release about it, but the notice about the annulment of a Commission´s decision is something that always turns us on attracts our interest).
Those interested in an objective summary of the relevant facts and of the GC´s reasoning can read the Court´s Press Release. Those interested on some not objective opinions can keep on reading:
In our opinion, the annulment of the decision as regards Grolsch is, in a sense, quite logical: that is what happens when you conflate distinct legal entities into one (a temptation too often seen in EU competiton law) and distinct infringements into one single and continuous infringement (also quite usual) and then mix it all together. But there are two interesting aspects of the case that are worth commenting.
One is the manner in which the GC dismisses the validity of the evidence concerning the parent´s company possible participation in the infringement: After noting that the majority of the evidence put forward by the Commission related in reality to the participation of Grolsch´s subsidiary, the Court was left with a couple of evidentiary items that could be used to support the accusation against the parent company (see recital 61 of the Judgment). The GC however dismisses those elements in an interesting manner (in recitals 62-71 of the Judgment). In essence, the GC decomposes the elements of the single and continuous infringement into three, and, departing from the Commission´s summary description of each of those components, it attempts to check whether the evidence can fit into any of them (this is an interesting, and welcome, deconstruction exercise that I´d never seen before regarding “single and continuous infringements). The GC then underlines that some of the evidence (documents found at Heineken relating to telephone conversations with one of the parent company´s employees) did not fit into the description provided by the Commission and therefore dismissed it. The Court was then left with one piece of evidence (notes taken at a meeting by that same employee of the parent company), but this evidence was also considered insufficient on the basis of another interesting reasoning (see recitals 65-66). In essence, the GC´s stance is that a complex concertation necessarily involves regular contacts throughout a long period of time, and that a single element cannot prove the participation of one company over the whole of this period. Does this imply a raise in the evidentiary standard for complex and long infringements?
The other aspect worth mentioning is the Commission´s lapsus (probably due to a certain overconfidence) , that has cost the EU budget 31.66 million euros. As it is clear from the Judgment, the participation of Grolsch´s subsidiary in the infringement was clear and there was enough evidence to prove it. If the Commission had addressed the decision to both the parent company and the subsidiary (as it normally does, and as it did in this case with regard to all other groups of companies involved) the sanction would´ve been upheld. Ooops.
According to one of our favorite sources: beveragedaily.com, the Commission is pondering whether to appeal the Judgment before the ECJ.
More on cartels and beers:
On 10-13 October the International Competition Network will be holding a Cartel Workshop in Bruges (Nicolas is attending, and I wouldn´t mind accompanying him if someone at DG COMP considers me -when I wear my blogger hat- as a stakeholder and kindly sends an invitation…). If any of our readers is attending the conference, I will now disclose one of Bruge´s most precious secrets: the most amazing beer that I´ve ever had can only be found in Bruges at a place called DeGarre. 
This is a traditional place for students of the College of Europe (because, you know, there are so many other things to do in Bruges…). Luis Ortiz Blanco also traditionally invites the students attending his seminar at the College for some beers at the end of the academic year. You really shouldn´t miss it.
PS. And speaking about the ICN´s Workshop, we very much recommend you to check out their blog at www.icnblog.org . It really is a great source of information on international antitrust.
The Spanish CNC at the avant-garde of competition enforcement?
Some posts ago we referred here to the Spanish Competition Authority’s decision sanctioning the main Spanish electricity companies with fines totaling some 61 million euros as a good illustration of how quantity and quality may not necessarily go hand in hand with regard to competition law enforcement in Spain.
(Btw, the comments to our previous post express interesting views on the CNC´s attitude and offers possible explanations to its causes. In the days after that post was published several other pieces on the CNC´s performance also appeared elsewhere).
As anticipated then, I believe that the “innovative” theories put forward by the CNC on its decision (which include “sham litigation” and a version of what Nicolas has labeled as “Karate competition law“) merit a comment on this blog, so here go some brief remarks on the decision:
(Before getting started, a disclaimer is in order: my firm is representing one of the entities sanctioned by the CNC. Accordingly, and although I am expressing my very personal views, you are at liberty to take them with a pinch of salt). Those interested in a summary overview of the facts and of the CNC’s official position, check out the CNC´s Press Release here.
Even though the decision declares that companies are responsible for two infringements I will merely focus on the one that can be of greater interest to our readers:
According to the CNC, this infringement consisted of a strategy (note: not a conduct, but a strategy revealed by circumstantial evidence) aimed at hindering customers from changing of electricity supplier at a moment in which deregulation was taking place. One –the main- component of this strategy was an agreement adopted by electricity companies within the framework of their association to appeal a Ministerial Order on the grounds that it contravened data protection rules by not envisaging the right of companies to refuse to provide certain personal data. The other alleged elements consisted of a temporal “cutt-off” of operations relating to applications to move to the free market (which both the Ministry and the Energy Regulator consider justified) as well as of a refusal to meet the requests of one supplier (that had previously been sanctioned by the CNC on a different decision).
(Click here if you’re interested in a comment on the issues that perplex me the most) Read the rest of this entry »
The Perverse Effects of the Court’s Ruling in Tele2 Polska
In its recent Tele2 Polska ruling, the Court deprived the National Competition Authorities “NCAs” of the ability to take “negative decisions” (C-375/09, Prezes Urzędu Ochrony Konkurencji i Konsumentów contre Tele2 Polska sp. z o.o., 3 May 2011).
Negative decisions – until now, I used to call them positive decisions… – acknowledge in their operative part that there is no infringement of the competition rules, and provide reasons for this. Under Article 10 of Regulation 1/2003, for instance, the Commission can take “inapplicability” decisions (to date, the Commission never adopted any). To take a hypothetical example, in a positive negative decision, a NCA would conclude that firm X conduct does not constitute an abuse of dominance, absent an abusive course of action.
Now, in Tele2 Polska, the Court was asked to determine whether NCAs can take such decisions. For wholly disputable reasons I believe – flawed understanding of the concept of effectiveness of EU competition law, dubious literal reading of Article 5, inconsistency with VEBIC, long-term legal uncertainty effects, etc. – the Court held that NCAs were deprived of this decisional prerogative. As observed by my assistant, Charlotte Lousberg, this suggests that a number of NCAs have lived in a state of illegality for the past 7 years.
But this is not the primary point of this post. Rather, I would like to stress here a number of perverse effects which the ruling may have on the way NCAs conduct their decisional business.
As explained by Wouter Wils in a great paper (Wils, W. P. J. (2004), The Combination of the Investigative and Prosecutorial Function and the Adjudicative Function in EC Antitrust Enforcement: A Legal and Economic Analysis, World Competition, 27 (2), pp. 201 – 224), officials can be subject to a variety of biases, including hindsight bias, i.e., the need to justify past efforts. More generally, officials are rational individuals who seek to maximize the returns of their professional activities (for legitimate career advancement purposes, etc.).
Now, in the real life, it cannot be excluded that following a lengthy, costly investigation, officials will eventually come to the view that a case has no merit (after all, bright competition lawyers might, for once, convince the NCA that the case is worthless). However, with Tele2 Polska, the officials’ investigative efforts can no longer translate into some sort of observable decisional output.
I believe that this may alter officials’ incentives structures, now unable to craft negative decisions, and justify past activities, in meritless cases.
This is first true at the very outset of competition procedures (e.g., when the NCA receives a complaint). Officials might now be increasingly reluctant to “take” complex, difficult cases, including cases which raise novel questions of law, whose outcome is uncertain. NCAs might in turn prioritize their enforcement resources on “easy” cases, regardless of the public interest.
But this is also true during the procedure, if officials realize that the case is going nowhere. In such a setting, officials (who can no longer push for a negative decision) might nonetheless seek to “get something out” of the case, and resort, to this end to other enforcement instrument, which generate some decisional output, but require little proof and reasoning => think of Article 9, commitments’ decisions.
Just random Friday ruminations. There will be more to come on this in July.
There´s always a first time (Parent company escapes liability for the conduct of a wholly-owned subsidiary; case T-185/06)
Some weeks ago, in one of our competition law quizzes we asked the following question:
” When was the last time that a company was able to rebut the presumption on the exercise of decisive influence applicable to 100% owned subsidiaries?”
Until this morning, the correct answer was: never.
The General Court has just issued a Judgment as a consequence of which, for the first time ever, a parent company has escaped liability for the anticompetitive conduct of a wholly owned subsidiary despite the Commission´s attempt to apply the Stora presumption. (The English version of Judgment is not yet available; click here for the Spanish version).
Remarkably, the General Court does not provide any guidance on the type of evidence that could be put forward in the future by parties attempting to rebut the presumption. That is because the Court did not engage in a substantive balancing exercise of the elements adduced by the applicant and by the Commission; on the contrary, its Judgment concludes that the Commission failed to address adeuately the applicant´s arguments and thereby breached its duty to provide sufficient motivation to its decisions.
In a way, the General Court is sending the Commission the same message that the Court of Justice addressed to the General Court in its Judgment on the General Química case.
In my view, this is a step in the right direction, but there´s still way to go…
Are above-cost selective price cuts abusive? AG Mengozzi´s Opinion in Post Danmark (Case C-209/10)
Yesterday, Advocate General Mengozzi delivered an interesting Opinion in the Post Danmark v Konkurrenceradet case (C-209/10) (Not yet available in English).
This case has its origin on a preliminary reference submitted by the Danish Hojesteret which asks the ECJ whether it can be concluded that a dominant company which sets selectively low but non-predarory prices to be applied to three large customers of its main competitor can be held to have abused its dominant position when there is no evidence of any strategy aimed at excluding its competitor. The Danish Court also asked about the relevant additional elements that must be taken into consideration before concluding that selective above-cost pricing is illegal.
One of the main remarkable aspects of this Opinion is that it names Nicolas as authorized doctrine (this reflects the current level of antitrust doctrine.. ) 😉 But we´ll come back to that later.
Mengozzi´s Opinion is interesting in several respects. If you´re interested on a fairly detailed and hastily written identification of its highlights, click here to keep reading.
(Warning: as many cost-related discussions this one can be a bit tedious for some lawyers).
Microsoft v. Google – Karate Competition Law?
The blog post that announced MSFT’s complaint identifies a half dozen of allegedly problematic practices, but keeps off from characterizing any of those practices as an abuse of dominance, under the qualifications of EU competition law. Rather MSFT seems to portray Google’s strategy as a bunch, collection, network of tactics which altogether have an unlawful, anticompetitive foreclosure effect. Read Brad Smith’s own words: “Google has engaged in a broadening pattern of walling off access to content and data that competitors need to provide search results to consumers and to attract advertisers”.
Based on my own, little experience of competition cases, this is not unprecedented in Article 102 TFEU complaints.
That said, there’s a beautiful legal question behind this. Assume that none of the allegations meets, in and of itself, the conditions for an unlawful abuse. Can the Commission still find an infringement of Article 102 TFEU out of the “cumulative effect” of a string of practices, which as a whole foreclose rival market players? In the language of Kyokushin Kaikan, should Article 102 TFEU apply only to headkick knockouts, or also – as is the case in many martial arts – cover knockouts achieved through a series of side and low kicks.
Take for instance allegations 1 (impediments to proper Youtube indexing on rival search engines), 2 (hurdles to the display of Youtube content on rival smartphones) and 3 (unavailability of orphan books for rival search engines). None of those allegations seems to involve an indispensable input, as explained previously on this blog. Hence, none of them should give rise to a stand-alone finding of unlawful abuse.
However, can the refusal to provide access to a bundle of important – yet not indispensable – inputs be tantamount to an abuse of a dominant position?
From an economic perspective, the answer ought to be affirmative if it is proven that this “multi-input” refusal to deal has foreclosure effects of the same magnitude as a “single input” refusal to deal (involving indispensable content). From a legal standpoint, one may nevertheless criticize a dangerous lowering of the threshold for intervention in Article 102 TFEU cases.
At any rate, some inspiration on this may be drawn from karate the case-law on Article 101 TFEU, which accomodates a reasoning of this kind through concepts such as “cumulative effects” or the “complex infringement” doctrine.
Information Exchange and Cartels – Dangerous Liaisons?
Are information exchanges really = cartels under EU competition law?
The issue has triggered many discussions on the blog lately. I just thought I’d post my own ruminations on this.
The Guidelines do not really say that information exchanges are cartels. Let’s take a close look. There are four references to cartels in the guidelines that concern information exchanges. The first one, which is general in scope, can be found at §9 and expressly says the contrary: “Although these guidelines contain certain references to cartels, they are not intended to give any guidance as to what does and does not constitute a cartel as defined by the decisional practice of the Commission and the case-law of the Court of Justice of the European Union”. The three other references, which can be found at §§59 and 74, do not quite say that information exchanges are cartels. It is stated there that exchange of information, in particular on future prices, “with the object of fixing, in particular, prices or quantities” will be “considered and fined as cartels”, which is quite different from saying that they are cartels (and which is in line with the existing case-law on “concerted practices”). Moreover, in so doing, the Guidelines accurately indicate that only a subset of information exchanges may be treated as cartels (am a “glass half-full”, optimistic person) . Those are information exchanges that have the object of fixing prices or quantities. It is thus incumbent on the Commission – or on the complainant, applicant, whatever – to prove that the information exchange has an anticompetitive object, which I understand here as purpose (or intention). Not all information exchanges are thus treated as cartels.
From an economic perspective, what the Guidelines say is not illegitimate. Moving beyond the possibly unfortunate semantics of the Guidelines (why not stick to the good old concept of a “hardcore restriction”), exchanges of information on future prices in the market place are, from an economic standpoint, quite a bad thing. First, such practices are known to facilitate tacit collusion on tight oligopolistic markets. Second, in many cases, exchanges of information on future prices are just the tip of the iceberg: they serve as the adjustment mechanism of an otherwise unproven, but explicit collusion.
Are the Guidelines really tougher on information exchange? On this blog and elsewhere, it has been argued that the reference to cartels could signal a tougher regime for information exchanges. On this, a counterintuitive reflection springs to mind: from a defense counsel perspective, equating information exchange on future prices with cartels may actually mark a relaxation of the legal regime applicable to such hardcore restrictions. Think about it: the culprits now can benefit from leniency and enjoy the penalty discounts afforded under the settlement notice. To me, this does not really sound like an aggravation of the legal regime applicable to exchange of future information (which as I said were treated in the case-law as egregious restrictions of competition).
Where the concerns really are. Don’t get me wrong: I am not a fan of the Guidelines’ infuriated semantics. But I think there are other, more important areas of concern in relation to information exchange. I regret in particular that the Guidelines espouse a checklist (or “laundry list”) approach to information exchanges, which provides little, if no, legal certainty to firms willing to self assess proposed agreements. To assess such agreements, firms must review a long range of factors of seemingly equal importance, and the calibration of pro v. anti-collusive factors is notoriously daunting. Given that the theory of harm ascribed to information exchange is tacit or overt collusion, the Guidelines should have subordinated a finding of incompatibility under Article 101(1)TFEU to proof of the 3 cumulative Airtours condition (there’s a discrete reference to Airtours at fn61). This would have been sensible from both a legal certainty and an economic standpoint. Moreover, this solution would have ensured legal consistency across the various areas of EU competition law.
Chillin'Competition 