Archive for the ‘Uncategorized’ Category
Penguin Dinner 2
This really addictive game will learn you how to allocate scarce resources efficiently, how to make economies of scale, and how to increase labour productivity.
Beware, your own productivity might in turn decrease dramatically. Found on the hilarious blog optimum (in French).
A question to our readers
For weeks now, I have unsucessfully been looking for a specialist of horizontal cooperation agreements under EU competition law.
Could someone help? I need to find a person able to deal with the various types of cooperation agreements.
You can throw names as comments to this post, or if you want full confidentiality, email me at nicolas.petit@ulg.ac.be. I would be immensely grateful for some help.
Oligopolistic collective dominance: the BCA’s Telefonica decision
Some weeks ago, the Basque Competition Authority (“BCA”) issued a decision which has gone largely unnoticed outside of Spain, but which is definitely worth commenting here. To my knowledge, this decision is the first ever to sanction an abuse of a purely oligopolistic collectively dominant position.
In essence, the decision concludes that Telefónica de España SAU (“TSAU”, a subsidiary of Telefónica SA) abused of its dominant position in retail fixed telephone market, and, more interestingly, that Telefónica Móviles (“TME”, another subsidiary of Telefónica SA) also abused of the collective dominant position it held together with Vodafone and Orange in the Spanish retail mobile telephone market.
The BCA considers that TME, Vodafone and Orange constituted a “tight oligopoly”, and pursuant to a thorough examination of market conditions at the moment where the investigated infringements took place, it concludes that the Airtours conditions for a finding of collective dominance are fulfilled. The BCA further refers to the existence of empiric evidence of parallelism of prices and other commercial conditions adopted by the members of the oligopoly. Moreover, citing the CFI’s Judgment in TACA, the decision rebuts the contention that a certain degree of internal competition (allegedly illustrated by the high degree of portability) is incompatible with a finding of collective dominance.
With regards to the abusive conduct, and also in a nutshell, the BCA asserts that both TSAU and TME charged discriminatory tariffs to calls destined to users of the Euskaltel mobile network. The decision concludes that such conduct breached Article 2 of the Spanish Competition Act, and imposes TESAU and TME fines of nearly 3 and 1 million euros respectively.
A few brief comments:
Firstly, it’s interesting to remark that the Comisión Nacional de la Competencia had attempted to affirm its jurisdiction to deal with this case, but the organism in charge of addressing jurisdictional disputes between the CNC and regional authorities ruled in favor of the Basque Authority in light of the strictly local effects of the conduct under analysis. My guess is that had the CNC investigated the case, its outcome would have certainly been quite different.
Secondly, collective dominance is one of the favorite topics of Nicolas and myself, but also of Javier Berasategi, the author of the Telefónica decision, see here (his first work on the subject while a student in Bruges) and here (English version of a recent and extensive report on tacit collusion in the daily distribution of consumer goods which relies heavily on Nicolas’ work). It seems as if this or a similar decision had been under gestation for quite some time.
Finally, independently of whether one believes or not on the necessity of having several regional competition authorities in one Member State, it seems fair to acknowledge that in the past few years, under the Presidency of Berasategi, the Basque Competition Authority has brought forward very interesting cases on which it has adopted brave and innovative but always technically sound decisions.
Only a few days after the Telefónica decision was issued, Berasategi stepped down from the Presidency of the Basque Authority to start a new project in private practice. Congratulations for the good work, and the best of luck in his new venture!
(Image possibly subject to copyrights: source here)
The Geographics of Brussels Competition Law Firms
I visited today the offices of Altius, one of the top Belgian law firms. I was really amazed. Their offices are located at Tour et Taxis, and I must say this is a truly awesome spot for a law firm: very classy building mixing old and modern art; many restaurants, cafes, travel agencies and other service providers on the site; close to the train station and a mile away from the highway to Brussels international airport.
Against this background, I understand less the comparative advantage of settling on Avenue Louise, as most business law firms do when they do launch a practice in Brussels:
- It is more expensive than other areas
- Heavy trafic jam in the morning and afternoon
- There’s no metro station to get there (only a tram, which often finds itself struck in the trafic)
- It is far from the highway entry/exit points
- Buildings are generally huge towers which all look alike
Of course, there are nice shops in the neighborhood of Avenue Louise. Yet, as a law firm manager, you may actually view this as a counteradvantage, in that it will distract staff and associates during lunch breaks. Moreover, most of those shops sell expensive goods and services (jewelry, luxury suits, etc.). Even if competition lawyers earn a very decent life, I am not sure they purchase luxury shoes every day.
In fact, the only decisive thing about Avenue Louise is that it is near the bois de la cambre, which makes it a cool place for running lawyers.
A number of other firms (e.g., Stibbe, Howrey, Cleary) have actually decided to settle elsewhere than on Av. Louise.
Below, a few other pictures of Tour et Taxis.
Antitrust Movies
Two new leniency videos, respectively by the Swedish and Dutch competition authorities. I actually prefer the second one, which looks more dramatic and glamorous. Yet, the first one may reach out to a bigger audience. Its characters are ordinary sales persons tempted by cartel activity. The second one abuses the cliché of CEOs smoking cigars and drinking cognac in luxurious venues.
Thanks to Christian Bergqvist (Copenhagen Law School) for the pointer.
Misc.
I’ll keep it short for today.
A reminder: next week the GCLC will have its next lunch talk on the Commission’s proposed best practices in antitrust proceedings.
An info: the slides of the IEJE conference on the Lisbon Treaty are available here.
Competition Law and Sport (II) – Football: State aids and salary caps
Last Wednesday UEFA published an interesting report which provides thorough and useful information about the financial status of European football clubs. A quick look at the report reveals at least a couple of issues that bear a strong relationship with competition law:
Firstly, UEFA’s report advocates the need for “financial fair play” (in essence: more transparency and financial responsibility) in order to address a problem highlighted in Platini’s foreword: “[t]he many clubs across Europe that continue to operate on a sustainable basis (…) are finding it increasingly hard to coexist and compete with clubs that incur costs and transfer fees beyond their means and report losses year-after-year”.
According to the report, most European football clubs face recurrent losses. The most important leagues, both on the sporting level and economically wise, are the ones with the greater aggregated debt: Premier League Clubs have a net debt of approximately 4000 million euros, followed by Spanish First Division Clubs with a debt of nearly 1000 million.
The inevitable question is: how do clubs operate in spite of such losses? In many instances shareholder’s contributions do the job, but in many other situations clubs subsist thanks to public intervention, which in some cases could qualify as State aid. In the sports sector, as in any other, State aid can appear under multiple guises (e.g. direct subsidization; sponsorship under non-market conditions; non-collection of tax or social security debts; aid for the construction of sports infrastructure; etc). One would expect the European Commission to intervene increasingly more in this sector or, alternatively, to lay down specific rules for the assessment of State aid in the world of sports.
Secondly, the report insists on the fact that the financial perspectives of European clubs presage an even worse future. The report seems to blame the constant increase in player’s salaries, which amount to more than 60% of clubs’ expenses, a proportion that is steadily rising. It is on the basis of this and similar data that UEFA has for some time been proposing to establish a salary cap in European football. The compatibility of a salary cap with EU competition law is unclear. In fact, it was listed as one of the “main pending and undecided issues” in Annex I to the White Paper on Sport: sport and EU competition rules.
All the above seems to confirm something I mentioned on a previous post: the world of sports will be an important and growing source of interesting and complex competition-related issues in the very near future.
Drawing Inferences from S&D Law
Many thanks for your answers. Some readers got it right, others not. To be fair, the question was poorly formulated, and many alternative explanations could apply.
Scott Summer from the Money Illusion provides the answer, and comes back on the question:
I teach at an institution that is well above average, and here is what I have found. Almost every single student comes into EC101 knowing the impact of supply and demand shocks. Tell them a frost hits the Florida orange crop, and they can explain what happens to the price of oranges. Tell them millions of Chinese start buying cars and they can tell you what happens to the price of oil.I also find that almost no student comes into my class knowing how to interpret price and quantity data. And what is worse, they leave the course equally ignorant. I often ask the following question to upper level econ or MBA students who have already taken principles:Question: A survey shows that on average 100 people go to the movies when the price is $6 and 300 people go when the price is $9. Does this violate the laws of supply and demand?Very, very few can answer this question, especially if you ask for an explanation. Even worse, I think there is a perception that there is something ‘tricky’ about this question, something unfair. In fact, it is as easy a question as you could imagine. It’s basic S&D. It’s merely asking students what happens when the demand for movies shifts. I cannot imagine a less tricky question, or a more straightforward application of the laws of supply and demand. In the evening hours the demand for movies shifts right. Price rises. Quantity supplied responds. What’s so hard about that? And yet almost no student can get it right. Our students enter EC101 knowing one of the two things they need to know about S&D, and they leave knowing one of the two things they need to know about S&D. Maybe instead of having them memorize mind-numbing lists of “5 factors that shift supply,” and “5 factors that shift demand,” we should just tell them to read something that will explain what economics is all about, something that portrays economists as detectives trying to solve the identification problem, something like Freakonomics.
(Image possibly subject to copyrights: source here)
Basic but Tricky Econ. Question
Question: A survey shows that on average 100 people go to the movies when the price is $6 and 300 people go when the price is $9. Does this violate the laws of supply and demand?
Any idea?
Chillin'Competition 
