Chillin'Competition

In going through Damien Neven’s latest paper entitled “Economics at DG COMP” (with M. de La Mano, see link hereafter), it seems now clear that the tough, negative enforcement paradigm that prevailed under Aricle 102 TFEU in the Kroes years is over.

In recent years, the Commission has dumped several cases for lack of convincing evidence. The Qualcomm excessive pricing case and the Velux rebates case  provide good illustrations of this.

In other cases, the Commission has renounced to follow a hard line, and negotiated a settlement with the parties.  Rambus and Microsoft II (Browser) are the main cases here.

The tone of the new Almunia administration is far less agressive, and it seems that the adoption of prohibition decisions is no longer an enforcement priority. Interestingly, and contrary to what was argued by the former senior staff at the Commission, cases like Port of Helsingborg (rejection of complaints re. excessive and discriminatory pricing ) bring almost as much guidance as prohibition decisions.

The only area where I disagree with D. Neven and M. de La Mano’s paper is judicial review. The authors seem to consider that the General Court is ready to undertake serious economic assessments. The thing is, Judge Wahl told us the contrary a month ago at the GCLC annual conference. Plus this may be true in the area of merger control (Ryan Air v. Commission, and before Airtours, Tetra Laval, etc.), but is certainly less obious in other areas (Article 102 TFEU).

Neven & de la Mano 2010

This post is about the long and winding road to the recognition that competition law sanctions are criminal in nature.

In his Opinion here in ArcelorMittal Luxembourg v. Commission, AG Bot argues that competition proceedings are smoothly “quasi criminal“. See in particular §205:

Nous visons, en particulier, le respect des droits de la défense et celui du principe de la présomption d’innocence consacrés aux articles 47 et 48 de la charte. La Cour a itérativement admis que ces droits fondamentaux, garantis également à l’article 6 de la CEDH, doivent être observés dans toutes les procédures relatives à des violations des règles de concurrence susceptibles d’aboutir à des sanctions telles que des amendes ou des astreintes, même s’il s’agit d’une procédure ayant un caractère administratif. À cet égard, la Cour s’est expressément fondée sur la nature des infractions en cause ainsi que sur la nature et le degré de sévérité des sanctions qui s’y rattachent. Nous savons également que le respect de ces garanties revêt une importance d’autant plus fondamentale que nous sommes dans le cadre d’une procédure de nature quasi pénale, dans laquelle la Commission exerce des fonctions d’enquête, d’instruction et de décision et dispose, à cet égard, d’un large pouvoir d’appréciation.

See also  §41:

Si cette procédure ne relève pas stricto sensu de la matière pénale, elle n’en revêt pas moins une nature quasi répressive.

For more, see the recent book edited by the GCLC, which comprises a chapter on this issue.

Thanks to my friend M. Abenhaïm (Van Bael & Bellis) for the pointer.

In Tomra sytems and others v. Commission the General Court explained that there is no de minimis abuse:

“the foreclosure by a dominant undertaking of a substantial part of the market cannot be justified by showing that the contestable part of the market is still sufficient to accommodate a limited number of competitors. … the customers on the foreclosed part of the market should have the opportunity to benefit from whatever degree of competition is possible on the market and competitors should be able to compete on the merits for the entire market and not just for a part of it.”

This is not entirely new. Yet, taken to extremes, this reasoning entails that a firm unlawfully abuses when it forecloses 1% of the market (as rivals cannot compete for the entire market). Also, this means that a dominant firm cannot offer exclusivity (or other ties) to any of its existing customer base.

This principle is clearly at odds with §145 of the Discussion Paper, where the Commission rightly noted, in relation to single branding that:

“The potential negative effects will in general depend on the size of the tied market share”

But this is also at odds with the de minimis doctrine under Article 101 TFEU, where exclusivity agreements fall short of Article 101 when the market share of the producer and purchaser is<15%. The de minimis doctrine considers that there is nothing to care about when an agreement ties les than 15% of a market.

Of course, the EU case-law outranks those instruments. Yet, Tomra is not fully in line with the GC’s own precedents  such as Van den Bergh Foods Ltd. v . Commission, T-65/98  (in particular its §160 which seemed to imply – a contrario – that a 6% foreclosure would have been de minimis).

(Picture possibly subject to copyrights – am a great fan of this band)

In reading a French Phd dissertation, I just found a strange case, which dates back to 2005 and was decided by the French NCA.

The facts: a cistercian congregation located on the Island of St Honorat owned a monopoly over maritime transport services between the continent and the island. The congregation had apparently refused to authorize third parties to provide additional transport services, thereby stiffling competition. The French NCA dismissed allegations of unlawful abuse. It found that the limitation of tourists was justified by the necessity to preserve the quietness of the monks.  See Cons. Conc. 8 novembre 2005, n° 05-D-60, relative à des pratiques mises en oeuvre par la congrégation cistercienne de l’Immaculée Conception, la société Planaria, l’État et la commune de Cannes.

We have already commented the Court’s 2009 ruling in Glaxo.

In going through the judgment  this morning, I got shocked again.

Frankly speaking, this judgment is a mascarade. What the Court has thrown in this judgment is a straightforward statement that it has no interest in substantive competition law issues. To justify this, the Court dissimulates itself behind (i) the black letter, old-Treaty wording (name it judicial textualism); and (ii) its existing case law (name it judicial conservatism).

Look closely at §§59-63. In fact, it takes the Court just a few lines  to quash the CFI’s ruling, which raised a novel – and worth discussing – question of substantive competition law (i.e. the role of consumer welfare under Article 101 TFEU) . Here is what the Court says in this case:

1. We’ve said that a practice restricting parallel trade is a restriction by object a million times (§59)

2. This applies to pharmaceuticals. The AG has said so (!), and we made a case in pharma a while ago. (§§60-62)

3. The wording of the Treaty does not talk of consumer welfare. Competition is thus protected as such.

4. **** off

A discussion of the very issue (regardless of its outcome) would have been – at the very least – welcome. I believe, indeed, that the role of the ECJ is not only (1) to scrutinize cases (judicial review) but (2) to take stances on novel issues and set substantive standards (rule making).

Two final remarks:

1. In the EU, executive and legislative institutions can be prosecuted for failure to act. Why is the Court immune from such proceedings?
2. Lately, the Court has delivered remarkable judicial output in other fields (e.g.   institutional law, the four freedoms, etc.) Why has substantive competition law been left unaffected by this evolution?

(Image possibly subject to copyrights: source here)