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2nd Edition of the Rubén Perea Award | How to participate

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We are delighted to announce the Second Edition of the writing award in the memory of Rubén Perea. If you are a young competition lawyer under 30 (whether you work as a practitioner, official, academic or in any other capacity) we very much encourage you to apply. If you are reading this and do not fulfil the criteria: it would be great if you could ensure that your junior colleagues are made aware of the opportunity.

As last year, the winning paper will be published in a Special Issue of the Journal of European Competition Law & Practice, together with a selection of the very best submissions received (see here for the Special Issue and here for the announcement of this year’s winner and finalists).

Who can participate?

You may participate if you have not reached the age of 30 by the submission date (i.e. if you were born after 15 September 1991). Undergraduate and postgraduate students, as well as scholars and practitioners are all invited to participate.

What papers can be submitted?

You may submit a single-author unpublished paper which is not under consideration elsewhere. The paper may be specifically prepared for the award, or one originally drafted as an undergraduate or postgraduate dissertation.

The paper must not exceed 15,000 words (footnotes included; no bibliography needed).

Submissions will have to observe academic conventions. Prior to submission, make sure your paper follows the JECLAP House Style rules, which can be found here. If you do not find exactly what you are looking for, please follow OSCOLA’s rules (see here).

How to submit?

A paper, will have to be submitted via this link: https://mc.manuscriptcentral.com/jeclap.

IMPORTANT: As you go through the submission process, make sure that in Step 5, you answer YES to the question ‘Is this for a special issue’? and indicate it is for the Rubén Perea Award.

What is the deadline?

Papers will have to be submitted by 23.59 (Brussels time) of 15 September 2021.

Written by Pablo Ibanez Colomo

17 June 2021 at 10:16 am

Posted in Uncategorized

Why the DMA is much more than competition law (and should not be treated as such), by Agustín Reyna

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[Chillin’Competition is publishing a series of posts featuring the views of various experts and stakeholders in relation to the European Commission’s proposal for a Digital Markets Act. We have received several contributions and will also be inviting some experts to ensure a plurality of informed views from a variety of perspectives. For our previous posts on the DMA see here (by Pablo), here (by me), here (by Cani Fernández, originally published in JECLAP), and here (by Tim Lamb, Facebook). Today we bring you some reflections by Agustín Reyna, Director of Legal and Economic Affairs at BEUC, The European Consumer Organisation)]

Following a non-football(istic) exchange via twitter (see here), Alfonso invited me to share some thoughts about why I think it is neither necessary nor desirable for the Digital Markets Act (DMA) to allow for an efficiency defence in the compliance process with the do’s and don’ts included in Articles 5 and 6 of the Commission’s proposal. However, before sharing our reasons, I think it is important to briefly reflect about three elements closely related to this discussion: the nature and objective of the DMA; its legal basis and, its interplay with competition law.

Nature and objectives of the DMA                                                                                                                                               

The DMA’s objective is to ensure contestable and fair markets in the digital sector by laying down a list of obligations and prohibitions that would apply to designated gatekeepers in relation to a list of core platform services (CPSs). While it is possible to argue  – especially amongst those who consider that EU competition law is much more than allocative efficiency (see our thoughts on this issue here) – that the DMA shares the similar objectives as competition law, the way of achieving these objectives is different. Competition law addresses, case-by-case, business conduct that disrupts competition in the internal market by applying the rules laid down in Articles 101 and 102 TEFU whereas the DMA seeks to pre-empt certain practices or impose specific obligations with a view to increasing market contestability, reducing entry barriers, stimulating innovation from rivals and companies who depend on the gatekeeper to reach consumers and, ultimately, to ensure consumers enjoy a healthy digital environment (we wrote more about this here and here). Whether a company designated as a gatekeeper could have breached Article 102 TFEU, or not, is simply irrelevant for the DMA because, by its very essence and nature, the DMA is not competition law.

The DMA is (pre-emptive) regulation under Article 114 TFEU

Article 114 TFEU has allowed the EU to intervene by means of approximation of laws in multiple sectors and areas of law from horizontal consumer protection law to energy, telecom and pharmaceutical legislation. As such, the choice of Article 114 TFEU as a legal basis does not depend on the sector that is regulated but on whether the measure is necessary to achieve the objective of “establishing or ensuring the functioning of the internal market” in the terms of Article 26 TFEU. Even if one could argue that the use of Article 114 TFEU can be at times arbitrary due to the broad scope of intervention of Article 26 TFEU, I think there is a clear case for 114 TFEU as the legal basis of the DMA for three good reasons. First, the companies to be designated as gatekeepers are providing cross-border services and as such are likely to impact the functioning of the internal market. Second, the proposal introduces proxies in the designation of gatekeepers that would exclude purely domestic scenarios (i.e. requiring presence in at least 3 Member States) therefore ensuring to capture cross-border practices. And third, all parties concerned namely the gatekeepers, business users and end-users would benefit from a set of common rules regulating the provision of services to consumers in different countries contributing to the well-functioning of the internal market by on one side facilitating cross-border operations and, on the other side, reducing risks of fragmentation. 

Interplay with EU competition law

The DMA does not replace competition law. It rather complements it by pre-empting certain practices by companies some of which might also be prohibited under Article 101 or 102 TFEU. Furthermore, as mentioned above, dominance in the competition law sense is not a requirement for the application of the DMA, which follows a different path to designate gatekeepers (based on the combination of pre-established quantitative and qualitative criteria). It is, however, known that many of the companies to be designated gatekeepers have been, or are currently, subject to competition law proceedings. While it could be considered that there is a risk of friction between the two regimes, one needs to be mindful of the fact that once the DMA comes into force, competition agencies would have to take into account the DMA as part of the legal context in each specific case, thus reducing the risk of inconsistent outcomes.  

Why should efficiency defence not be allowed under the DMA?

While assessing compliance with competition law an efficiency defence is relevant, I do not think the same should apply to the DMA for the following reasons:

  • The DMA, unlike Article 102 TFEU, provides for well-defined obligations which would apply to well-defined gatekeepers in clearly identified services or markets (CPSs) to deal with clearly identified problems. Any possible trade-offs between efficiencies and the DMA objectives would have to be taken into account by the European legislation when designing the obligations of Articles 5 and 6.  This means that each obligation would have already internalised such efficiencies. Therefore, there is no reason why further flexibility should be introduced.
  • Since the DMA is not competition law and has a different legal basis (Article 114 TFEU), there is no need to apply competition law principles in terms of either substance or procedure. Think for example of consumer protection rules, which have been harmonised at EU level on the basis of Article 114 TEFU. The enforcement of these rules does not give any scope to companies to argue why a certain unfair term or practice is beneficial (or efficient) for consumers.
  • In the hypothetical scenario where there would be a competition case involving one of the designated gatekeepers on the basis of Articles 101 or 102 TFEU (or the national equivalent), the scope to bring efficiency defences would be framed by whether the concerned practices were covered or not by the DMA. This is something that would have to be taken into account in any case even before the opening of proceedings by the competition authority.
  • More practically, not allowing efficiency defences will make the DMA swiftly applicable and therefore operational as soon as the parties are designated as gatekeepers – or shortly thereafter – subject to specifications if needed for those obligations included in Article 6. Permitting gatekeepers to claim efficiencies would imply delaying the application of the rules when, as said before, this is simply not needed because any possible efficiencies would have been considered by the legislator when defining the scope of each obligation.  

To conclude, I do not see the legal or procedural need to add a new layer of complexities in the DMA by allowing efficiency defences. The DMA is much more than competition law. It is (and should become once adopted by the legislator) regulation precisely defining the limits of what gatekeepers can or cannot do when operating their CPSs in the internal market, in the same old-fashioned way other pieces of EU law in other sectors have defined the boundaries of private initiatives to safeguard clearly defined public policy goals. Competition law will continue to apply in tandem with the DMA. However, taking into account that competition law cannot provide all the answers (e.g. regarding scope of intervention) in the most optimal timeframe (e.g. the Android case is a good example, the case started in March 2013, the decision was adopted in July 2018 and only last week the remedies were amended in a positive manner), there are good reasons for the legislator to step in.

The DMA has the potential to become a blueprint for regulating digital markets, but its success will depend on its swift and effective application and enforcement. The very same companies that would be regulated by the DMA have asked for many years for legal certainty about what they can or cannot do. And this is exactly what the DMA is aiming at.

Written by Alfonso Lamadrid

16 June 2021 at 4:31 pm

Posted in Uncategorized

The Legal Question(s) That All Platform Competition Cases Have In Common

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Previous posts –mostly by Pablo– have already discussed many of the recent or ongoing platform-related cases (including Apple’s Epic lawsuit, the Commission’s investigations into App Store rules for music streaming apps and Amazon’s marketplace, the Google Shopping and Android decisions, the Italian Android Auto decision or the German Booking.com case). We have also discussed cases involving non-digital platforms, like Amex, Cartes Bancaires, Mastercard or Budapest Bank.

When you read the information that is publicly available about these cases or, even better, Pablo’s comments, you immediately realize that they share many commonalities. That might explain why Pablo’s views on all those cases are consistent, regardless of the companies affected by each investigation (and for that reason, somewhat of an anomaly among antitrust influencers).

Now, the usual disclosure: I am involved in several of the cases identified in the first paragraph, which is why I do not comment about them on the blog. In this post I will try to show that there is a fundamental legal debate that cuts across all of these various cases, and on which my position is also the same regardless of whether they may affect my clients, their competitors, or other parties.

Within the non-legal community, attention often focuses on questions on market definition and competitive relationships. This is understandable given (i) the very narrow market definitions in these cases, and (ii) that most commentators have a more defined view on the competitive relationship between many of these companies whereas they do not have a view on competition between, say, chemical by-products. This question is certainly of great interest, but it is a very context and fact-dependent one. The relevance of market definition questions in all these cases is no doubt a commonality, but it is one not exclusive to platform cases and, despite technical challenges (e.g. market definition in multi-sided or zero-price markets, multi-homing, etc), it is more an economic than a legal one.

What I have in mind now is a different commonality, or rather set of related commonalities:

First, all of the platform-cases identified in the first paragraph of this post concern vertical intra-platform rules. We know from our experience with vertical restraints that these are generally deemed not restrictive of competition when they enhance inter-brand (in this case inter-platform competition). This argument, of course, only works when we define a market in which platforms compete amongst themselves, which is not the fashionable thing to do and, as explained above, may or may not be the right thing to do depending on the case. This explains why, dominance thresholds aside, market definition is pivotal in these cases, but this is only part of what I wanted to discuss.

Second, while the platform-cases identified in the first paragraph of this post concern different practices/rules and different business models, all of them are about platform rules that restrain freedom of action on at least one side of the platform, generally to protect or maximize the value of the platform itself (think, for instance, of the justifications based on combating free riding common to all the MFN, app store, and payment system cases identified in the first paragraph of this post). This is unsurprising, as the very role of any platform sponsor is precisely to create value by harnessing positive externalities and preventing negative externalities via the design of platform rules.

This commonality also has a great impact on the legal analysis. As the Court has consistently emphasized in recent years, the question of whether a restriction exists in the first place, or whether such restriction is justified is independent of market definition, and it is also not one that can be addressed (one way or another) in the abstract. Answering this question in each case requires a comprehensive and context-dependent and multi-sided analysis, because very often the same practices will restrain competition on one side and will stimulate competition on the other. It is generally understood that practices enhancing a platform’s value may, depending on the circumstances, benefit not only the platform’s sponsor, but also consumers and business users in the aggregate. But sorting out and balancing the direct effects of a practice on multiple interdependent markets is complicated in practice. The recurring question then is how the legal arguments are framed  who needs to prove what, and at what stage? That was the key question in the US Amex case, it was the key question in the EU payment system cases (Cartes Bancaires, Mastercard, Budapest Bank), and, for the reasons recently explained by Pablo here and here, it arguably should have been the key question in other platform cases including ISU and the German Booking.com case. Concerns about carrying this burden are precisely what explains the remarkable proposals to shift the burden of proof in platform cases, which have now made it to the DMA proposal. Like in the case of market definition, this is a question that will systematically arise in these cases, so it is certainly a meaningful legal commonality but, again, this is only part of what I had in mind.

The observation that triggers this post has to do with the very meaning of the notion of anticompetitive effects:

Third, if you think about it, all of the cases identified in the first paragraph of this post seek to fine-tune (sometimes second-guessing) different platform arrangements in situations where there is no apparent risk of anticompetitive foreclosure. Few would argue, for example (and I will leave my cases aside, because my belief that they are the best examples might not be objective) that Amex, Visa or Mastercard foreclosed anyone, that Amazon is likely to exclude or marginalize merchants or that Apple will ever have the hope of driving Epic or Spotify out of the market.

Most business users benefit from the opportunities offered by these platforms (otherwise platforms would not prosper), but would like to enjoy better conditions (can’t blame them; who wouldn’t?). This is why the concern in these cases is often about competitive (dis)advantages, fairness, or about the situation of specific business users, and not so much about actual or potential foreclosure (as understood in the case law). This is also why, as observed by the DMA’s Impact Assessment Report, some Member States wish to address these situations via laws on abuse of economic dependency. And this is also why the DMA Explanatory Memorandum (p.8) argues that competition law “is not sufficient to deal with all the problems associated with gatekeepers, given that [practices will not be captured] if there is no demonstrable effect on competition within clearly defined relevant markets”.

At the end of the day, regardless of market definition, regardless of business models, and regardless of the specific theory of harm, all of the platform-cases identified in the first paragraph are mostly about the optimal distribution of rents (or, as Pablo put it here, a fight for a larger slice of the pie). Commentators that strongly support some of these cases, and who observe that these have been transplanted into the DMA’s proposed obligations, have also identified the reallocation of rents as one of the DMA’s key goals (which necessarily means that the same applies to the cases from which these obligations originate). Depending on your views and perhaps also on your business interests this may be a positive or a negative development (we can leave that debate for another day), but it does mark an important paradigm shift in competition law. This question appears to have featured prominently and very explicitly in the Epic v Apple trial, but perhaps has not received enough attention and reflection in the EU. Hence this post.

Written by Alfonso Lamadrid

7 June 2021 at 6:03 pm

Posted in Uncategorized

Against the Fragmentation of EU Competition Law: A Proposal for Reform

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Not so long ago it seemed like we had arrived to the end of history in competition law. The level of substantive convergence at the international level was remarkable and unique by reference to most other areas of the law. The level of substantive convergence within the EU (and the EEA more generally) was even more impressive. All national competition authorities and judges understood and respected the European Commission’s role as primus inter pares, the Commission exercised this role flexibly but responsibly, and politicians had not yet shown an interest in transforming the discipline.

But things have changed, and EU competition law enforcement is now facing a fragmentation threat. This post seeks to (A) demonstrate the existence of this threat; (B) identify the reasons why the existing safeguards may not be working; and (C) throw out there a proposal intended to spur some debate

A) Is there a risk of fragmentation of EU competition law?

Let me give you some very recent examples (for full disclosure: I have worked on some of them so I tend to view them critically, but I will leave aside the question of whether individual cases are right or wrong and, instead, will focus on the wider trend):

  • Last week the German, French and Dutch Government asked for “leeway” to craft and apply different national competition rules going beyond EU law. In parallel, several other Member States (like Italy or Sweden) are considering the adoption of additional national rules inspired by the DMA.
  • Also last week Germany already announced new investigations under its reformed Competition Act, which the European Commission itself has consistently invoked (e.g. here, p. 111) as a source of potential fragmentation so troubling that it would justify the adoption of the DMA.
  • A couple of weeks ago the German Supreme Court confirmed the prohibition of Booking.com’s narrow MFN clauses, a conduct accepted by competition authorities in other EU jurisdictions. In spite of the risk of divergent interpretations of EU law, this is a case where the European Commission had not intervened and where the German Supreme Court decided not to submit a preliminary reference to the CJEU.
  • Earlier this month the Italian Competition Authority adopted its Android Auto decision which, as discussed by Pablo, has little to do with EU case law as we know it (the decision in fact admits –para 315– that it relies on a “gatekeeper” theory of harm that cannot be traced back to the case law but to recent reports…).
  • A few months ago the European Commission recently opened a formal investigation into Amazon but carved out Italy from the legal effects of the initiation of proceedings, thereby enabling parallel proceedings to take place at the EU and national level in relation to the very same conduct.
  • Last October the Polish Competition Authority imposed the highest fine ever imposed under competition law (6.7 billion on Gazprom, a figure slightly higher than that imposed by the Commission) without, as explained by EVP Vestager, ever informing the European Commission about its intentions.

B) Why aren´t the existing safeguards working?

Most people would agree that regulatory fragmentation is a serious problem. The DMA proposal, in fact, is based on the premise that this is a serious problem threatening the proper functioning of the internal market. The concern is not new; the uniformity in the application of EU competition law has always been a priority; ensuring effectiveness and uniformity were in fact the two drivers behind the adoption of Regulation 1/2003 and of the ECN+ Directive.

To be sure, differences and divergent outcomes are partly inevitable in a decentralized system, and there should be some margin for authorities to innovate and even perhaps explore the boundaries of the law. But if we truly believe in an internal market governed by common rules, there need to be limits or safeguards. And while we currently do have tools and safeguards to ensure the uniformity in the application of the rules, these do not appear to be working as intended. Until now, those tools were mainly:

  • The obligation to apply EU law in parallel with national law whenever there is a likely effect on trade between Member States (an obligation that may arguably not have been strictly complied with in the German Facebook case or in the Polish Gazprom case). This is a problem that has also been discussed by Wouter Wils in this interesting paper. As Wouter explains, the Commission could theoretically take action against Member States breaching EU Law on this point but, for various reasons, that is extremely unlikely.
  • The obligation not to prohibit under national law conduct that would not be prohibited under EU Law (an obligation diluted by the possibility for Member States to apply stricter national laws in relation to unilateral conduct under Article 3 of Regulation 1/2003; a crack in the system of increased interest to Member States, as illustrated by the joint German/French/Dutch position paper from last week);
  • The possibility for the European Commission to comment on draft national decisions under Art. 11(4) of Reg. 1/2003. This, however, is something that the Commission often does cautiously, mostly orally, and always confidentially, even vis-à-vis the parties to each case. In addition, the Commission does not have sufficient resources to deal with almost 100 draft decisions every year. The Commission, moreover, has political and legal priorities of its own, and it is also an enforcer of the of the very same rules it is called upon to interpret (and so has a stake in the interpretation of such rules). There might be a certain tension between the missions of advancing a certain interpretation of the law and promoting its uniform and consistent interpretation. There are recent examples of cases where the Commission intervened at the national level to advance an interpretation of the law that was later (too late?) corrected by the CJEU (e.g. compare para. 82 of Budapest Bank with the Commission’s amicus curiae observations here). To be sure, this is no criticism; it is simply a natural result of a system in which the Commission is placed in a privileged, yet tough, spot (and, as we often hear nowadays, dual roles may result in conflicts of interests). At the end of the day, in my view, the Commission may not always be in a position to privilege the uniform application of the law over other perhaps equally legitimate interests.
  • The possibility for the European Commission to resort to Article 11.6 of Reg. 1/2003 to open proceedings and deprive NCAs of their competence. As the Commission has explained (here, Chapter 3, Section 5), the Commission would do this when, for example, where “network members envisage a decision which is obviously in conflict with consolidated case law”, or where “there is a need to adopt a Commission decision to develop European competition policy in particular when a similar competition issue arises in several Member States”. The examples identified above, and the experience of the past 17 years, also confirm that the Commission is very unlikely to make use of this power.
  • The main tool conceived to ensure the uniform interpretation of EU law (the preliminary reference procedure) is not available to national competition authorities, because these are not “Courts” (see here). This is of course correct as the law currently stands but, in a way, it is also an anomaly. There is arguably no other area of the law where a public authority can impose cuasi criminal sanctions pursuant to a direct application of EU law, but cannot request guidance from the EU Courts. In practice, this means that, in the best case scenario, decisive questions will only be raised before the EU Courts several years into an investigation and only once an administrative decision is final (like in the German Facebook case). This is far from ideal.

C) A proposal for (some) improvement

Unfortunately, growing political interest in competition enforcement means that Member States will continue to maintain enforce and enact national competition rules going beyond EU competition law as regards unilateral conduct. Again, this is the very risk that the Commission invokes to justify the adoption of the DMA but, as explained here, the content of the DMA Proposal does not prevent, but rather encourages, fragmentation. I suspect, however, that some stakeholders will prefer a legally vulnerable EU instrument if that means strong national powers.

Beyond harmonization, improvements could also come from a more effective use of the powers that Reg. 1/2003 vests on the Commission but, for the reasons explained above, the Commission may not be ideally placed to put the uniformity of the law above all other relevant interests.

My proposal would be to preserve the Commission’s powers, but to give national competition authorities the power to consult also an independent and well-resourced judicial body interested only in the correct application of the law, namely the General Court.

Enabling NCAs to pose questions to the General Court would, in my view (i) lead to the creation of a new and welcome body of authoritative guidance not constrained by the limitations inherent in actions for annulment; (ii) avoid legal disputes dragging on for years without the possibility to get to Luxembourg; (iii) ensure that the case law can come in time and decide on present, not past issues (we are still discussing Intel’s rebates); (iv) liberate Commission resources, which could be devoted to running more cases; (v) make a good use of the increased resources of the General Court; and (vi) free up CJEU resources at a time when its workload continues to increase.

There has been a debate for quite some time about whether to grant the General Court the power to render preliminary rulings in certain areas. As a matter of fact, the Treaties already open the door to this possibility. Article 256(3) TFEU provides that “the General Court shall have jurisdiction to hear and determine questions referred for a preliminary ruling under Article 267, in specific areas laid down by the Statute [of the Court of Justice]”. The transfer of this competence has, however, never materialized, possibly due to the CJEU’s arguably understandable reluctance to have a “first instance” Court deliver a final interpretation on the law of the land. There are, I think, ways of alleviating such concerns in addition to those already envisaged in Art. 256.

For example, one could conceive a system under which the General Court would issue Opinions (as opposed to “preliminary rulings”) on those questions. These could even be delivered by a judge appointed as Advocate General (the possibility of appointing AGs among the judges is also already envisaged in the existing rules). These Opinions would only be delivered in the context of administrative proceedings. Since the administrative decision resulting from those could always be appealed before national Courts, the latter would still enjoy the possibility of requesting a preliminary ruling from the Court of Justice. This, in turn, would enable the Court of Justice to retain the last word and correct the General Court’s approach if necessary. If not, the CJEU could simply validate the GC’s Opinion, possibly via an expedited procedure resulting in an Order.

In my view, some kind of solution along these lines would be good for the law, for NCAs, for the General Court, for the CJEU and for all those interested in an effective, uniform and faster application of the law. This proposal could be a small step in the direction outlined by General Court President van der Woude at our last conference (see here, min. 25-28.42), but a great leap for substantive competition law.

Written by Alfonso Lamadrid

31 May 2021 at 11:07 am

Posted in Uncategorized

The Italian Competition Authority in Enel v Google: will Bronner and Magill survive common carrier antitrust?

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Hit the road with Android Auto's new look

Earlier this month, the Italian Competition Authority (AGCM) adopted a remarkable decision, which deserves close attention, in a dispute involving Enel (the Italian incumbent in the electricity sector) and Google. You will find the decision here (in Italian) and a press release (in English) here.

The decision stands out from others in the digital sphere in that it is expressly framed as an outright refusal to deal. While in other cases it is genuinely open to question whether the ‘exceptional circumstances’ tests laid down in Magill and Bronner are applicable, there is no doubt on this point in Enel v Google. The complainant requested access to Android Auto and the authority applies the case law on refusals to deal.

That Magill and Bronner provide the relevant tests is also clear in light of Slovak Telekom. Intervention in Enel v Google amounts to requiring the defendant to redesign its product. On this point, the decision goes beyond an obligation to negotiate access with a would-be rival, which is the typical remedy in a refusal to deal case. The Italian authority has asked Google to release a version that can accommodate the functionalities of Enel’s product.

What is the case about? Android Auto and Enel’s JuicePass

The case is about Android Auto, which is an application that gives access to some of Android’s features on a car’s dashboard. Thus, instead of accessing these features (say, Google Maps) via the smartphone, they can be accessed, more conveniently, via the car’s own display.

Enel’s complaint concerned Google’s refusal to allow one of its applications (JuicePass) to feature on Android Auto. JuicePass provides assistance to drivers of hybrid and electric vehicles: more precisely, the application allows car users to search for charging stations, book charging slots and pay for the electricity.

According to the complaint, Google’s refusal to allow JuicePass into the Android Auto ecosystem amounts to an abuse of a dominant position. The claim raises a number of interesting issues. I will only focus on two of them: whether Android Auto can be said to be indispensable and whether the refusal would result in the elimination of all competition on the adjacent market. These are the two key conditions that are common to Bronner and Magill (and which are notoriously difficult to establish in practice).

Establishing the indispensability in the case would involve showing that it is not possible to compete on an adjacent market without featuring in Android Auto and that there are not any economically viable alternatives to the said application. The elimination of all competition condition, as the law stands, demands evidence of the certainty, or quasi-certainty, of anticompetitive effects absent access.

The reasoning in the decision is interesting in two major respects. First, the adjacent market is never defined by the authority. It identifies a ‘competitive space’ (‘spazio competitivo‘) instead. Second, the interpretation of the indispensability condition is not obvious to square with the definition provided in the case law (in particular IMS Health, which is the most explicit on the point).

This approach, which departs from that followed in Magill and Bronner, seems to mark the comeback of a doctrine of ‘convenient facilities’ (as opposed to essential). If one pays attention to the remedy, on the other hand, it becomes apparent that the decision is unprecedented in another fundamental respect: the duties imposed on Google go beyond an access obligation. These questions are examined in turn.

Indispensability in Enel v Google: towards tailored access to ‘convenient facilities’?

A look at the facts in Enel v Google suggests that access to Android Auto is not indispensable within the meaning of Magill and Bronner. After all, the application (JuicePass) can be readily downloaded and used (and has been readily downloaded and used since it was launched) on smartphones (via both Play and AppStore). Insofar as there are alternatives around Android Auto, a plain reading of the case law would reveal that the indispensability condition is not met.

The Italian authority hints at a different interpretation of the condition. According to the decision, the indispensability element of the test is met because access to JuicePass via smartphone is not comparable to access via Android Auto. This is so, according to the authority, for safety and/or convenience reasons (using JuicePass on the smartphone is said not to be as safe as using the car’s dashboard; and stopping the car to use the application would not be convenient).

It is difficult to square this understanding of the notion of indispensability with Bronner, which makes it explicit that the condition is not met where there are alternatives around an infrastructure, irrespective of whether they are ‘less advantageous’. The decision, in this sense, is indicative of the return of a ‘convenient facilities’ doctrine that would substantially lower the threshold for intervention in refusal to deal cases. Indispensability, under this new approach, means the ability to use apps in an ‘easy and safe way’ (‘in maniera facile e sicura‘).

The passage addressing the remedies suggests that the indispensability condition is also expanded in a different direction: Google has been required to ensure that JuicePass has access on the terms and conditions that Enel deems indispensable. From this perspective, the decision marks a move from an objective understanding of the notion to a subjective interpretation: what is indispensable depends on what each specific firm demands and deems necessary.

Will Bronner and Magill survive common carrier antitrust?

Many disputes in digital markets concern the terms and conditions of access to an input or platform. Therefore, it was only a matter of time before the Bronner and Magill case law would be directly challenged in an outright refusal to deal case: it is not a secret that indispensability is very difficult to establish in practice and thus acts as a limit to how much digital ecosystems can be refashioned by competition authorities.

Given the obvious and substantial tension between the Italian authority’s decision and the relevant case law, there is a chance that the issue is eventually brought before the Court of Justice, which has recently reaffirmed the principles of Bronner and Magill (including the importance of preserving firms’ incentives to invest and innovate) in Slovak Telekom.

It remains to be seen whether the case law, including Magill and Bronner, survives common carrier antitrust. In this regard, it is interesting to note that Enel v Google applies, avant la lettre, some of the concepts underpinning recent legislative proposals (and in particular the notion of gatekeeper). Future law, rather than existing law, appears to drive and shape enforcement. Fascinating times indeed.

As usual, I have nothing to disclose.

Written by Pablo Ibanez Colomo

27 May 2021 at 5:28 pm

Posted in Uncategorized

The German Federal Court of Justice rules on MFNs: object, ancillarity and the fragmentation of the EU legal order

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Solving mass data fragmentation problem should be a top CIO priority | CIO

The post published on Monday (see here) sought to explain the tensions that tend to emerge in relation to the interpretation of Article 101(1) TFEU. The experience of the past few years shows that the analysis of the objective necessity of a practice and/or of the ancillarity of some clauses are occasionally conflated with the evaluation of the restrictive object of an agreement.

As the ISU judgment shows, it is sometimes claimed that, unless an agreement is objectively necessary to attain a pro-competitive aim, it is restrictive by object. This interpretation of Article 101(1) TFEU is at odds with decades of consistent case law, but it is still relatively commonplace. I was reminded of this understanding of the provision when the German Federal Court of Justice announced its ruling on Most Favoured Nation Clauses (MFNs) earlier this week.

The document of the judgment is not yet available, but a press release explains the key points here. The case concerned the so-called ‘narrow’ MFNs. Even though these clauses have less restrictive potential than the so-called ‘wide’ ones, the German BGH ruled that they are restrictive of competition under Article 101(1) TFEU and do not fulfil the conditions set out in Article 101(3) TFEU.

While we wait for the judgment, there are three salient aspects of the press release that are worth discussing at this stage:

  • First, how the case was framed and approached, which is most unusual in contemporary competition law: at least in light of the press release, it looks like the discussion revolved around the application of the ancillary restraints doctrine and of Article 101(3) TFEU.
  • Second, the BGH may have departed from the case law of the Court of Justice on a key point: contrary to what the press release appears to suggest, the pro-competitive aspects of an agreement are relevant (and must be considered) under Article 101(1) TFEU.
  • Third, the BGH did not refer the case to the Court of Justice for a preliminary ruling. To the extent that the judgment may have departed from the case law on the abovementioned point, it raises the issue of the fragmentation of the EU legal order.

Ancillarity, object and Article 101(3) TFEU

The press release issued by the BGH suggests that the compatibility of narrow MFNs with Article 101 TFEU revolved around two questions: whether the clauses can escape the prohibition in accordance with the ancillary restraints doctrine and whether they fulfil the conditions defined in Article 101(3) TFEU.

There are two key intermediate steps that are nowhere to be found in the press release: first, whether the narrow MFNs are restrictive of competition by object and, second, whether they have, or are likely to have, anticompetitive effects. The judgment jumps (or so it seems from the information available) from ancillarity to Article 101(3) TFEU.

This approach comes across as unusual for a number of reasons. To begin with, the BGH seemingly accepted that ‘narrow’ MFNs may be explained as a means to address free-riding. This point would have been central to the assessment of whether the clauses are restrictive of competition by object. Suffice it to remember that free-riding considerations determined the outcome in, inter alia, Cartes Bancaires.

There are, however, no traces of the question of whether ‘narrow’ MFNs amount to a restriction by object in the press release. There is a chance that, just as in ISU, the ancillary restraints doctrine was conflated with the evaluation of the object of the clauses.

Judgments like Cartes Bancaires and Budapest Bank show that the above are two separate inquiries. More precisely, the fact that the ancillary restraints doctrine does not apply in a given case does not mean that the agreement is necessarily restrictive of competition, let alone by object. It simply means that the assessment under Article 101(1) TFEU has to move to the object and, if needed, the effect stages.

The case law makes it clear that an agreement may escape the ‘by object’ qualification irrespective of whether it is objectively necessary within the meaning of the ancillary restraints doctrine. There was no objective necessity test in Delimitis, Asnef-Equifax or Cartes Bancaires. However, in all these cases, the Court expressly ruled that the object of the agreement was not anticompetitive and that an analysis of its effects was necessary.

The BGH judgment, just like ISU and the CMA decision in Ping (to mention another salient example in which the same error of law was committed), suggests that some ideas about the operation of Article 101(1) TFEU are not easily abandoned, even when they are clearly at odds with the case law. Several factors may potentially explain this reality. In this sense, the judgment suggests that how cases are framed and argued before courts may well contribute to it.

The role of pro-competitive effects under Article 101(1) TFEU

The press release is notable in that it appears to suggest that, according to the BGH, the pro-competitive aspects of the MFN clauses (namely, the fight against free-riding) can only be considered under Article 101(3) TFEU, where they would be weighed against any anticompetitive effects.

On this point (and while we wait for the judgment), it is important to emphasise that, after Generics, there should be no doubt that the pro-competitive aspects of an agreement are relevant under Article 101(1) TFEU. More precisely, the Court made it clear that, as elements of the economic and legal and economic of an agreement, they ‘must’ be considered under the first paragraph of the provision (Generics, para 103).

What is more, the Court expressly ruled that the above should not be construed as meaning that there is such thing as a rule of reason under Article 101(1) TFEU (Generics, para 104). Thus, and contrary to what the press release appears to suggest, there was a role for the pro-competitive aspects of ‘narrow’ MFNs under Article 101(1) TFEU in the case (just as there was in Cartes Bancaires and Budapest Bank) and that such role does not necessitate any balancing assessment.

Suffice it to remember, in this regard, the centrality of the pro-competitive aspects of the agreement in Budapest Bank. The fact that the agreement is capable of leading to pro-competitive or at least ambivalent gains is, the Court confimed, a key consideration to establish a restriction of competition under Article 101(1) TFEU (Budapest Bank, paras 82-83).

The risk of legal fragmentation and the role of the Court of Justice

Regulation 1/2003 sought the decentralisation of EU competition law. The flurry of enforcement across the EU attests to the resounding success of this landmark piece of legislation. At the same time, some developments show that with decentralisation comes (inevitably) a real risk of legal fragmentation.

The risk of the fragmentation of the EU legal order originates from two main sources. On the one hand (the BGH judgment hints at this) some interpretations of Articles 101 and 102 TFEU are not abandoned, even when they are at odds with a plain reading of the case law.

There are, on the other hand, developments at the national level that are exploring (when not stretching) the outer boundaries of the EU legal order. Just last week, for instance, the Italian Competition Authority adopted a decision in a dispute involving Enel and Google that substantially expands the ‘exceptional circumstances’ case law (see here) and ventures into uncharted territory.

It was always clear that, in a decentralised model, the Court of Justice would play a central role in preserving the uniformity of the EU legal order. The evolution of the enforcement regime suggests that, as things stand, it will be called upon to intervene more frequently that some might have anticipated in the wake of the adoption of Regulation 1/2003.

Written by Pablo Ibanez Colomo

20 May 2021 at 3:16 pm

Posted in Uncategorized

Chillin’Competition DMA Symposium (IV): Initial Reflections on the Draft Digital Markets Act, by Tim Lamb

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[Chillin’Competition will be publishing a series of posts featuring the views of various experts and stakeholders in relation to the European Commission’s proposal for a Digital Markets Act. We have received several contributions and will also be inviting some experts to ensure a plurality of informed views from a variety of perspectives. For our previous posts on the DMA see here (by Pablo), here (by Alfonso) and here (by Cani Fernández, originally published in JECLAP). Today we bring you some reflections by Tim Lamb, Director of Competition at Facebook]

The proposal for a Digital Markets Act (DMA) signals a new approach to the regulation of digital services in the European Union. In the best case scenario, the DMA could establish targeted obligations for true bottlenecks in the digital economy that will help to preserve and re-distribute value for consumers and business users.  That is a scenario that could be welcomed and for that to materialise the new regulation would need to pay particular attention to core virtual infrastructure, such as app stores, operating systems or productivity software.

The DMA will unquestionably apply to Facebook, Google, Microsoft, Apple, Amazon and could potentially to others such as Booking.com, SAP, Zalando, Deutsche Telekom, Schibsted and Orange in one form or another.  These companies have to accept that and understand the implications for their respective consumer and business offerings and products.  Critically, for companies to be able to understand the potential implications of the DMA, the proposal will need to ensure that it contains understandable and actionable obligations.

As it stands right now, the draft DMA is the crystallization of a growing drumbeat over the past few years pressing for new rules to address perceived concerns expressed in many conferences, regulator reports and academic papers. The drumbeat and the draft DMA itself contain an underlying assumption that the extensive powers already conferred on authorities under existing competition laws are insufficient to address a range of perceived harms.

While there are frequent debates as to whether the European Commission (the Commission) has the right tools to exercise its competition functions, there may be something different this time around.  A central tenet of the current debate is the desire for a lower threshold for regulatory intervention and a material lowering of the evidentiary standards. 

As a result, the draft DMA is advancing a form of quasi-competition regulation which is untethered from traditional competition law concepts such as dominance, detailed case by case assessments, economic analysis and an assessment of efficiencies. That untethering gives rise to three key implications that I wish to explore here.

● First, while competition law is generally concerned with market power and business conduct, the draft DMA has a keen desire to intervene in core product design.  Yet that should call for a sharp focus on the consumer experience of those products which appears lacking in the draft DMA. 

● Second, the prohibitions in the draft DMA have very few meaningful or identifiable limiting principles and risk capturing conduct that is both pro-consumer and pro-competitive.  Such an outcome would be undesirable and careful thought should be given as to how to mitigate such risks.

● Third, innovation is a key driver of long-term economic growth. Yet the draft DMA’s proposals will very likely reduce, not increase, the ability and incentive for firms to develop innovative products for consumers. 

The suggestions contained in the article are designed to strengthen the draft DMA. The full article is available here:

Written by Alfonso Lamadrid

19 May 2021 at 10:21 am

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The ISU case and the SuperLeague: on ancillarity, object and burden of proof in the General Court’s judgment (Case T‑93/18)

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The world of sport was shaken a few weeks ago when a number of clubs announced a breakaway tournament, the SuperLeague. The follow-up suggests that the consequences for sport will not be immediate (and might never be manfiested). From a competition law perspective, however, the implications may not take long to unfold: it appears that last week, a Spanish judge has referred some questions to the Court of Justice for a preliminary ruling concerning the compatibility of UEFA and FIFA regulations with EU competition law (see here).

The submission, arguably inevitable, could not be more timely: the ISU judgment (see here) was rendered by the General Court in December of last year and has since been appealed to the Court of Justice (see here). Some of the fundamental issues raised by the two cases are identical.

In essence, ISU was about a non-compete obligation imposed on athletes taking part in competitions organised by the International Skating Union and its members. The practical consequence is that participants in competitions not authorised by the ISU would face a lifetime ban (with all the dramatic consequences that follow).

The similarities are obvious with any disciplinary action that football governing bodies might take against teams having taken part in the organisation of the SuperLeague (or at least those that have not given up on the idea).

Interestingly, the public perception was not the same. While there was a great deal of sympathy vis-a-vis athletes facing a ban from the ISU, many thought football governing bodies would be right to take disciplinary action against the teams forming a breakaway league.

From a competition law perspective, howevever, I fail to see any differences between the two. In both cases, there is a (de iure or de facto) non-compete obligation imposed by the association setting up the tournament. Accordingly, whether or not the said obligation amounts to a restriction of competition (by object or effect) should be assessed in accordance with the same principles.

Which takes me to the General Court’s judgment in ISU. I already explained, when the Commission decision came out (see here), that I struggle to see how a non-compete obligation such as the one at stake in the case can be seen as a restriction by object. Moreover, I explained why a finding of a ‘by object’ infringement in the case is difficult to reconcile with, inter alia, Cartes Bancaires and Maxima Latvija (the first crucial in relation to free-riding considerations and the second on non-compete obligations).

That post still reflects my views on the case. I fail to see why an association investing in the development of a competition and giving visibility to athletes would be infringing Article 101 TFEU, by object, when taking measures against free riding by competing organisations.

Alas, the General Court came to a different conclusion. The first instance judgment, however, seems to be at odds, in some crucial respects, with the case law on restrictions by object. In this sense, it provides a test for the case law developed in the past few years and illustrates where the potential difficulties might arise in practice in the coming years.

The points on which to focus (and the issues in which there seems to be some tension between the General Court judgment and the established case law), are the following:

  • First, the conflation of the ancillary restraints doctrine (whereby some agreements escape Article 101(1) TFEU altogether) and the question of whether a practice is restrictive by object.
    • Contrary to what the judgment appears to suggest, a disproportionate measure is not necessarily restrictive by object.
    • The General Court relies on case law dealing with ‘by effect’ infringements to assess the restrictive object of an agreement; there is therefore a mismatch between the case law cited and the conclusions drawn from it.
  • Second, the allocation of the burden of proof.

Ancillary restraints and restrictions by object: why they tend to be conflated (or object and effect in Ordem dos Técnicos Oficiais de Contas

The judgment is valuable in that it reveals that there are two tests that tend to be conflated in practice: the ancillary restraints doctrine, on the one hand, and the assessment of whether an agreement is restrictive by object, on the other.

Under the ancillary restraints doctrine, the question is whether some clauses are ancillary to a pro-competitive transaction and thus whether they fall outside the scope of Article 101(1) TFEU altogether. Where a restriction is found to be ancillary, there is no restriction of competition, whether by object or effect.

The ancillary restraints doctrine has an illustrious history in EU competition law: salient examples include Metro I (on selective distribution) and Pronuptia (on franchising). When it comes to non-compete obligations, Remia is an excellent example.

These cases define the conditions under which the clauses are ancillary and thus escape the prohibition altogether. Typically, these conditions include a proportionality assessment: only where the measure is proportionate does it escape Article 101(1) TFEU. What if one or several of the conditions, including proportionality, are not fulfilled? In that case, it would still be necessary to assess whether the agreement is restrictive by object or effect.

This is the stage at which errors arise. Every now and then, courts and authorities wrongly conclude that, because the ancillary restraints doctrine is not applicable (for instance, because the measures go beyond what is necessary), the agreement is restrictive by object. In other words: the test under the ancillary restraints doctrine and the assessment of the restrictive object of the agreement are sometimes conflated.

A clear example of this conflation is provided by Ping (see here for my analysis). In that case, the UK CMA concluded that the clauses in the agreement were restrictive by object insofar as they were not objectively necessary to attain the pro-competitive aims of the agreement. In other words: the CMA conflated objective necessity and restrictive object. The CAT identified this error of law on appeal (see here).

I notice a similar conflation in the ISU case. It is well-established case law that, in certain circumstances, sporting rules fall outside the scope of Article 101(1) TFEU altogether. In cases like Meca Medina, the Court of Justice referred to key ancillary restraints judgments such as Wouters and Gottrup-Klim. More precisely, the Court ruled, in para 47 of Meca Medina, that any restrictions must be proportionate for them to fall outside Article 101(1) TFEU.

It does not follow from that case law, however, that the agreement is necessarily a restriction by object if it goes beyond what is necessary to attain a legitimate objective. Quite the opposite, in fact. More precisely, para 47 of Meca Medina expressly refers to the potential restrictive effects of the agreement (as opposed to its object) where the clauses in question are found to be disproportionate.

There is clear tension between this line of case law and paras 100-114 and of the ISU judgment, where the General Court suggests, in contradiction with the abovementioned rulings, that a measure that pursues a legitimate objective is restrictive by object if it goes beyond what is necessary (see in particular paras 103 and 110). In the same vein, Wouters and Meca Medina are not capable of substantiating the conclusions drawn from them.

Similarly, the General Court makes abundant references to Ordem dos Técnicos Oficiais de Contas. This judgment is relied upon to justify a finding of a restriction by object, even though (just as Meca Medina) the Court did not treat the restraints in that case as ‘by object’ infringements (in fact, the Court of Justice expressly ruled that they did not amount to a ‘by object’ prohibition).

That judgment exemplifies, perhaps better than any other, that, contrary to what the General Court suggests, measures that go beyond what is necessary to attain a pro-competitive aim (for instance, because they provide for penalties that are too severe) are not necessarily restrictive by object.

Conflating the ancillary restraints doctrine (or, more generally, objective necessity) and the question of whether an agreement is restrictive by its very nature could have major consequences in practice. It would substantially expand the ‘by object’ category and would thus run counter to the principle whereby that category is to be interpreted restrictively.

I guess this point will be central in the assessment before the Court of Justice.

Burden of proof and restrictions by object: what the authority needs to prove

If I look back at the landmark cases of the past few years, it appears that the rules governing the allocation of the burden of proof are at the heart of most disputes. It would seem that, very often, administrative action is quashed for reasons pertaining to the allocation of the burden of proof. From State aid to merger control, the issue cuts through key judgments.

ISU might well be the next on the list. It is unquestionable that the Commission bears the burden of showing that an agreement amounts to a restriction by object. One would be forgiven for reaching a different conclusion when reading ISU. The judgment goes over the content of the non-compete obligations and their objectives, and rules that they go beyond what is necessary (even if the legitimate objectives were to be accepted).

What seems to be missing, however, is the following step (that is, the evaluation of the evidence showing, to the requisite legal standard, that the object of the agreement is restrictive of competition). That step is crucial: it is still necessary for an authority to show that the contentious measures are caught by Article 101(1) TFEU by their very nature.

Contrary to what one may infer from ISU, it is one thing to rule out some potential justifications for the agreement and another one to evaluate whether the agreement in question is restrictive by object. The second does not follow, logically and inevitably, from the former. As already pointed out, this second step was missing in the judgment.

Here and there, the judgment gives the impression that it is for the parties to show that the agreement is not restrictive by object. This conclusion is inescapable when one reads the evaluation, by the General Court, of the objectives pursued by the contentious rules (paras 84-89). The tension between the judgment and the rules governing the allocation of the burden of proof also transpires from an analysis of paras 110-114.

The General Court, while accepting that the economic nature of the restraints cannot be a reason to conclude that their object is anticompetitive, relies on Ordem dos Técnicos Oficiais de Contas to rule that the ISU did not behave in a manner consistent with its duty to ensure undistorted competition. As pointed out above, it is sufficient to take a look at the Ordem dos Técnicos Oficiais de Contas judgment to realise that this fact alone is insufficient to substantiate the claim that an agreement is restrictive by object.

It remains to be seen how these points will be addressed by the Court in the appeal. In any event, ISU provides an excellent illustration of the areas, concerning the interpretation of Article 101(1) TFEU, in which tension between the case law and the administrative practice are likely to arise.

I very much look forward to your comments (as ever, nothing to disclose).

Written by Pablo Ibanez Colomo

17 May 2021 at 2:19 pm

Posted in Uncategorized

Apple, common carrier antitrust and anticompetitive effects: a follow-up

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As an academic, I sometimes feel that ideas of principle are not discussed often enough. One misses, every now and then, deep exchanges on substantive issues. Sometimes there is so much noise around these debates that, even when they take place, they are silenced or not sufficient attention is paid to them. Therefore, I very much welcome Damien Geradin‘s post discussing my views on the ongoing Apple investigation (see here).

When I read it, I felt that it provided a wonderful occasion to discuss the case law on anticompetitive effects. By the way, much of what follows was already addressed at length in my paper on the notion of effects, which I am proud to be publishing with the Journal of Competition Law and Economics (coincidentally co-edited by Damien himself).

I will start this post by clarifying that, contrary to what Damien appears to suggest, I do not believe that the Statement of Objections issued by the European Commission is a ‘rather reckless’ move. There is nothing reckless or unusual in opening an investigation.

My own research has shown me that the European Commission regularly tests the outer boundaries of the law, and occasionally interprets Treaty provisions in a way that is not immediately obvious to reconcile with the case law. We have seen examples this very week, with the annulment, by the General Court, of the Commission decision in Amazon’s tax ruling case (see here).

There is nothing reckless in that. Quite the opposite. If you ask me, an authority that dares take risks when enforcing the law is one of the treasures of the EU competition law system (just compare and contrast with the systemic underenforcement of antitrust provisions in the US).

The practical implication, however, is that some Commission decisions will fail to persuade the EU courts and thus will occasionally be annulled. I have written that the annulment of a Commission decision is nothing more than the sound of the system working. It means that both the EU courts and the authority are serving the public interest by doing what is expected from them.

Here’s hoping the competition law community will stop using sensational vocabulary (e.g. defeat, blow) when administrative action is quashed and take it for what it is: a manifestation of the routine operation of the law and its institutions.

Most of the points addressed by Damien in his post concern the notion of anticompetitive effects. He mentions most of the key cases, which helps structure the discussion. I will focus on this aspect of the post. If there was any doubt, I am interested in the law and have nothing to disclose in this or indeed any other case (on this point, by the way, I am particularly grateful to Damien for the clarity of his disclosure).

Losing customers to a dominant firm is not in itself evidence of anticompetitive effects: I explained in my post (and in the comments section) that evidence that rivals have lost, or are likely to lose, customers to the dominant firm (or, as a commentator – Charlie – and Damien coincide in putting it, ‘some diversion to Apple’) is insufficient to show anticompetitive effects within the meaning of Article 102 TFEU. Anticompetitive effects under that provision (and Article 101 TFEU) necessitate more than evidence in this sense.

I would not have anticipated that this point would be controversial. After all, we have a case (Post Danmark I) expressly addressing it. The facts of the case reveal that the new entrant had lost two customers to the dominant firm. This fact, alone, was deemed insufficient to justify a finding of effects.

The Court examined the nature of the practice and the features of the relevant market (paras 38-39) and concluded that, in spite of losing some customers to the dominant firm, the new entrant was willing and able to fight back (it maintained its distribution network and was even able to gain its two customers back after a while).

Against this background, it seems clear to me that, under the Court’s interpretation of Article 102 TFEU, the inquiry should revolve around the actual or potential impact of the practice on rivals’ ability and incentive to compete: so long as they are likely to remain willing and able to compete on the merits (and thus place pressure on the dominant firm), the practice will fail to have effects.

As in Post Danmark I, evidence that the new entrant maintained (or will likely maintain) its assets and means to compete is particularly valuable. Other factors in this regard have been identified in subsequent cases: for instance, the coverage of a practice has emerged as a crucial consideration since Post Danmark II and Intel.

A competitive disadvantage is not in itself evidence of anticompetitive effects: Damien refers to Deutsche Telekom in his discussion. It is particularly useful in the context of the Apple investigation. After all, a ‘margin squeeze’ is the prime example of a raising rivals’ costs strategy. The crucial point in Deutsche Telekom is that, according to the Court, evidence of a ‘margin squeeze’ is, in and of itself, insufficient to show anticompetitive effects (paras 250-253).

In other words: evidence that a practice would disadvantage rivals to such an extent that it would force them to sell at a loss does not suffice to establish anticompetitive effects. Something more, to be determined by paying attention to the nature of the practice and the features of the relevant market (e.g. whether there are alternatives to the incumbent’s network), is necessary.

Anticompetitive effects need to be considered by reference to the market as a whole: Generics, mentioned by Damien too, provides a valuable clarification. In that case, the Court ruled that anticompetitive effects involve harm to competition that goes beyond harm to individual rivals (para 172). In other words: the mere fact that a particular firm no longer has (or will likely no longer have) the ability and incentive to compete is insufficient to trigger Article 102 TFEU. Again, the factors mentioned above would need to be considered.

On business models and competition law: I will say a final word about business models. I noted in my post a change of attitude in this regard by the Commission: from reluctance, absent exceptional circumstances, to challenge business models to the relatively frequent enforcement of Article 102 TFEU in relation to them. It is yet another example of EU competition law becoming increasingly proactive.

Damien rightly mentions Microsoft as an example in which a business model was changed. The case illustrates, better than any other, the point above. The threshold for intervention in Microsoft is consistent with the exceptionality of cases challenging business models under traditional competition law. After all, a variation on the Magill/IMS Health test was applied in the case (requiring evidence, in particular, of indispensability within the meaning of Magill).

Times seem to be changing. Rather than judging whether the move is good or bad, it is important to consider the consequences that follow. In this sense, my post mentions that business model cases are trickier for competition authorities, in particular because establishing a restriction against the relevant counterfactual is considerably more complex.

Written by Pablo Ibanez Colomo

14 May 2021 at 2:42 pm

Posted in Uncategorized

Why Article 102 TFEU is about equally efficient rivals: legal certainty, causality and competition on the merits

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As I mentioned last week, some of the most basic tenets of the post-modernisation consensus are being questioned (as much as the post-modernisation consensus itself). The idea that the vast majority of practices should only be prohibited following a case-by-case analysis of their likely effects is one of them.

More to the point, it has also become relatively frequent to challenge the idea that Article 102 TFEU is concerned with competitors that are as efficient as the dominant firm (at least so as a matter of principle).

This principle tends to be associated with the modernisation of the EU competition law system and the ‘more economics-based approach’. However, it has long been part of the case law. An explicit reference to equally efficient rivals can be traced back to the seminal AKZO ruling of 1991, where the Court explained that below-cost pricing is potentially exclusionary insofar as it is capable of foreclosing firms that are as efficient as the dominant player. In subsequent cases, the principle has been confirmed by the Court, perhaps more emphatically in Post Danmark I and Intel.

Two conclusions can be drawn from the case law. First, the idea that Article 102 TFEU is only concerned about the exclusion of equally efficient rivals is broader than the ‘as efficient competitor test’. The latter (‘AEC test’) is merely a manifestation of the broader principle. Accordingly, whether or not the AEC test is applied, Article 102 TFEU will still be concerned with the exclusion of equally efficient rivals. Similarly, the inquiry (is the practice likely to exclude equally efficient rivals?) is the same, irrespective of the instrument used.

Second, the principle is relevant across all parameters of competition. Because the AEC test and the broader principle tend to be conflated, there is a tendency to think that the latter applies only to price-based competition. However, the case law is unequivocal in this regard. In Post Danmark I, the Court made it clear that principle made it clear that Article 102 TFEU is not concerned with the exclusion of less efficient rivals in terms of, inter alia, ‘price, choice, quality or innovation’.

As we undergo times of change, it makes sense to look back and explain the logic of the case law. The hearing in Qualcomm (which took place last week) and the (UK) Royal Mail ruling have brought the discussion to the fore again. The analysis seems useful for two reasons. First, it is important to distinguish between the (narrow) AEC test and the broader principle, as the conflation of the two is relatively frequent. Second, it is an aspect of the case law that wonderfully exemplifies the extent to which law and economics go hand in hand.

The essence of the case law can be summarised as follows:

Competition on the merits: Article 102 TFEU seeks to ensure that firms remain willing and able to compete on the merits. The exclusion of firms that are less efficient is the very manifestation of the process that EU competition law is intended to preserve: it is the logical and expected outcome of a system based on undistorted competition. Protecting inefficient firms would alter the competitive process as much as a subsidy intended to keep a firm artificially afloat.

EU competition law protects a process, it does not engineer market structures: In the same vein, the point of Article 102 TFEU (and EU competition law) is not to design markets in accordance with a preconceived vision. Similarly, it is not for a competition authority to decide how many players should compete on the market (and for how long or with which assets). The protection of the competitive process as enshrined in the Treaty is far more modest in its ambitions: instead of determining outcomes and engineering market structures, Article 102 TFEU is there to ensure that rivals that have the ability to do so can thrive in spite of the presence of a dominant firm.

Causality: It is clear from the case law (think in particular of Post Danmark II), that any actual or potential effects must be attributable to the behaviour of the dominant firm. In other words, the Court makes it necessary for an authority or claimant to establish a causal link between the latter and the former. Where a firm is less efficient than the dominant player, any actual or potential effects cannot be attributed to the dominant firm, but to the fact that it is less attractive in terms of quality, price or any other parameter of competition. In other words, the causal chain would break in such a scenario.

Legal certainty: The case law suggests a final rationale. A dominant firm should be in a position to anticipate when it is in breach of Article 102 TFEU. For instance, a dominant firm knows its costs. Accordingly, it is aware of when it is pricing below cost (and thus where an equally efficient rival would be selling at a loss). Similarly, it can evaluate whether a rebate scheme is capable and/or likely to exclude a competitor that is at least as efficient as itself. On the other hand, a dominant player cannot be expected to be aware of the cost structure of a less efficient rival and, by the same token, it would not be able to tell in advance whether or not it is in breach of the law.

While some aspects of the case law are yet to be addressed, the principle has consistently been confirmed over the years. As we rethink EU competition law, the fundamental question we should be asking is whether there are compelling reasons to depart from it, and interpret Article 102 TFEU along different lines. I very much look forward to your comments on this point.

Written by Pablo Ibanez Colomo

10 May 2021 at 10:06 am

Posted in Uncategorized