Chillin'Competition

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OECD Competition Open Day

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oecd

The first OECD Competition Open Day will be held at the OECD Headquarters in Paris on Wednesday 27 February 2019 from 09:30 to 18:15. The programme is available via this link: Open Day Programme. 

The event is open to all and will cover hot issues, including vertical restraints in e-commerce, non-price competition in digital markets, excessive prices in pharma and gun jumping-pre-closing exchanges of information.

And it’s also a great excuse to visit Paris..

You can register here

 

Written by Alfonso Lamadrid

25 January 2019 at 4:32 pm

Posted in Uncategorized

The Canal+ Judgment (T-873/16), and the end of the Pay-TV Case (or the illusion of precedent)

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the end

On 12 December 2018 the General Court rendered its Judgment in Canal+. The case concerned an appeal against the Art. 9 decision that made binding the commitments offered by Paramount in the Hollywood Studios/Pay-TV case. The latter is a case I followed with particular interest and on which I certainly am not objective, as [disclosure alert] I have represented PACT, the association of UK independent cinema and TV producers.

The case will presumably be over very soon, as all investigated parties have now offered commitments. First, it was Paramount (two and a half years ago and due, apparently, to financial reasons); then it was Disney (which was in a strong position in the case as it had got rid of satellite restrictions before the probe started but nevertheless offered commitments “coincidentally” at the same time as the Commission authorized its acquisition of Fox in Phase I); Sky and all other Hollywood majors have now followed.

Interestingly, the latest round of commitments offer was announced only a few days after the General Court’s Judgment in Canal + “established” (see below) that the clauses under investigation constituted restrictions by object.

The Commission can claim a clear victory, putting an end to a case that otherwise had no clear end in sight, and obtaining concessions that go well beyond what an infringement decision could have attained. But beyond winners and losers, what does this mean for the law?

Now that the case is over and there is even a Court Judgment avant la lettre, the law should be clear, right? Many might believe that even if the parallel legislative attempt to curb online geoblocking restrictions has failed, competition law can kick in and, once again, fill the apparently regulatory void. Well, not so fast.

Some reflections:

-First, and as a preliminary point, the Studios are of course in their right to offer commitments, and these may well be in their best interest. There’s nothing to criticize in this, and no clear legal grounds to do so even if one wanted to (which is why I never entirely understood the Canal+ appeal, although I might well be missing something). Commitments are not law and in fact have little to do with the law, so no comments on these.

-Second, beyond other interesting issues, the main legal question that the case presented has not been resolved. The cross-border “passive sales” that the agreements allegedly restrict are unlawful. They amount to a copyright infringement. This makes the Pay TV case stand apart from Murphy and more traditional parallel trade cases. For the same reason, it raises a number of fundamental questions that did not arise in those cases. Does a transmission that infringes copyright amount to “competition” within the meaning of Article 101(1) TFEU? If an agreement prohibits a cross-border transmission that would have been unlawful anyway under copyright law, can it be said to restrict competition that would otherwise have existed (i.e. against the counterfactual)? My sense is that the Commission was aware of this aspect of the case and the legal difficulties to which it gives rise (which perhaps explains the long time elapsed since the oral hearing), having lost a number of cases on very similar grounds (O2, E.On Ruhrgas, European Night Services or Nungesser to name a few).

-Third, now you may be wondering: but what did the General Court have to say about this argument in the context of the Canal + appeal? After all, as just explained, the Court has quashed quite a few EC decisions on this point, right? [btw, we still need to comment on the last case where this has happened only weeks ago, T-684/14, Krka- Servier]. Well, the Court said nothing. But in its defense, the truth is that, despite its prominence in academic debates, apparently the argument was not presented before it. Take a look at Canal+’s grounds of annulment. One can only speculate that this may be explained Canal+ greater interest in satellite than in online communications. The General Court ruled on this plea and endorsed a conclusion that the Commission had never formally adopted. And this while ruling on an action brought by a third party, without having heard the arguments of others (although to be fair, the setting was not for the Court to decide). The relevant IPR-related arguments re online communications do not feature in the Judgment and don’t seem to have been considered at all. At most, the analysis of the General Court clarifies that the Commission’s preliminary assessment was not manifestly incorrect. In other words, the Canal+ Judgment is therefore more an illusion of a precedent than a real precedent. That seems well suited to a case concerning cinema.

For some reason, the appeal challenged the Commission’s preliminary finding that the clauses constituted restrictions by object. The Commission never actually found a restriction by object, it had simply taken that preliminary view in the SO and in a commitment decision, which by nature does not declare the existence of an infringement.

-Fourth, the EC itself has publicly stated that the case was specifically about the agreements between the Hollywood majors and Sky, and that it would somehow not affect independent producers. From a purely selfish perspective, it would have been nice to have some sort of creative formal carve out for indies (whose business model would be severely compromised), but the absence of a declaration of infringement and the multiple statements from high-ranking Commission representatives create the legitimate expectation that independent producers have nothing to fear about the legality of their agreements (or at least not until the Commission adopts a prohibition decision or until the ECJ otherwise rules on the matter).

-Fifth, there is an intellectual consolation to this strange open ending. Over two years ago, when the Commission accepted Paramount’s commitments, I wrote here that –in my view- this would legally preclude the imposition of fines on all other investigated companies for exactly the same practices. This is because, as you know, commitments are only appropriate in cases where the Commission does not intend to impose fines. There has never been a case or cases involving the same practices where the Commission accepted commitments and imposed fines for the same conduct during the same period covered by the commitments ( see here for a comment on this point). As we had anticipated, there have been no fines in this case either.

Written by Alfonso Lamadrid

23 January 2019 at 5:34 pm

Posted in Uncategorized

14th Annual GCLC Conference: Remedies in EU Competition Law (31 Jan-1 Feb)

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gclc

One of the best traditions of the Brussels competition law community is around the corner: the 14th Annual GCLC Conference will take place on 31 January and 1 February at the Residence Palace.

The conference has all the bits that have turned it into a must-go event: a topical theme of major theoretical and practical relevance; and an impressive line-up of speakers. The updated programme is available here.

Chillin’Competition will be represented at the conference. I am honoured to have been invited to speak in the last session, where I will go back to one of my favourite themes: regulatory vs antitrust remedies. I will address the policy implications of remedies.

SPECIAL OFFER: The organisers are kind enough to offer a free spot to the first Chillin’ reader sending an email to remedies.gclc@gmail.com (thanks so much!). The subject of the email should be: ‘Chillin’ @GCLC’.

We look forward to seeing many of you there!

Written by Pablo Ibanez Colomo

22 January 2019 at 10:00 am

Posted in Uncategorized

The hard questions in the Lundbeck appeals: will Article 101 TFEU radically change?

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lundbeck star

The hearing in Lundbeck will take place on Thursday of next week. Readers of the blog know that this is a case that I have been following with keen interest (see for instance here). It raises some fundamental questions about the interpretation of Article 101 TFEU.

As I explained in the past, the Commission decision in Lundbeck departed in some respects from the relevant case law (and, indeed, from the authority’s own past administrative practice). The ECJ will now have to decide whether this interpretation is upheld, thereby leading to a transformation of the nature and scope of Article 101 TFEU.

These fundamental issues will become much more apparent, I believe, in the context of the appeal. Before the General Court, issues of law and fact, generally become so intertwined that it is difficult, in practice, to tell one apart from the other – or to fully appreciate the consequences of the underlying interpretation of a given provision. In this sense, the appeal is good news for the competition law community.

The areas in which Article 101 TFEU may (radically) change after Lundbeck are the following:

  • The notion of competition within the meaning of Article 101 TFEU.
  • The change in the understanding of the notion of potential competition, which would become a subjective concept (as opposed to the objective concept it has so far been).
  • The relationship between competition law and intellectual property.

The notion of competition within the meaning of Article 101 TFEU

In Société Technique Minière, the Court declared that the notion of competition within the meaning of Article 101 TFEU must be understood as such competition that ‘would occur in the absence of the agreement in dispute’.

As subsequent judgments would consistently confirm, the analysis of restrictions does not occur in the abstract. It needs to consider whether, in the economic and legal context in which it is implemented, the agreement restricts competition that would otherwise have existed.

It is explicit in Société Technique Minière that this analysis applies both to restrictions by object and by effect (see p. 250 of the Reports, top paragraph). The Commission Guidelines on Article 101(3) TFEU are equally explicit on this point (see paragraph 18).

What are the consequences of this interpretation of the notion of competition?

The fundamental consequence of Société Technique Minière and subsequent case law is that, if an agreement does not restrict competition that would otherwise have existed, it falls outside the scope of Article 101(1) TFEU (that is, it does not restrict competition, whether by object or effect).

For instance, the Court explained in Société Technique Minière, an agreement would not restrict competition (whether by object or effect) if it is ‘really necessary’ to enter a new market. The Commission elaborates on this example in its Guidelines on vertical restraints. An agreement protecting a distributor from both active and passive sales is in principle restrictive by object. That is not the case, however, where the agreement is objectively necessary to achieve market entry. In such a case, it falls outside the scope of Article 101(1) TFEU altogether (see paragraph 61 of the Guidelines).

Lundbeck gives rise to a similar question. What if market entry is made impossible by virtue of the intellectual property regime? Can there be a restriction of competition if the only way for generic producers to enter the market is to infringe a patent? This is a central question in the case, and one that is somewhat obscured by its complex facts.

In light of Société Technique Minière and subsequent case law, the answer to these questions is clear. In such a scenario, the agreements at stake in Lundbeck would not restrict competition that would otherwise have existed. Accordingly, there would be no restriction, whether by object or effect.

The Commission, however, proposed a new interpretation of Article 101(1) TFEU in its Lundbeck decision. It suggested that an agreement can restrict competition by object even when it would entail the breach of a patent.

The ECJ, in its Lundbeck appeals, will decide whether to depart from a consistent line of case law.

The notion of potential competition as an objective (as opposed to subjective) concept

A related question in the Lundbeck appeals relates to the notion of potential competition. Is a firm a potential competitor if market entry requires breaching an intellectual property right? Until the Lundbeck case, there was little doubt that unlawful entry on the market did not count as potential competition.

E.On Ruhrgas is an eloquent example in this regard. The General Court concluded that an agreement does not infringe Article 101(1) TFEU where market entry is made impossible by virtue of the regulatory framework – in that case, the regulatory framework created a de facto monopoly. In such circumstances, it is the regulatory framework, not the agreement, which restricts competition.

The Commission also shared this view. In the 2004 version of its Guidelines on technology transfer agreement (the version published prior to Lundbeck, that is), the authority explained, in paragraph 29, that there is potential competition if market entry would have been possible ‘in the absence of the agreement and without infringing the intellectual property rights of the other party’ (emphasis added).

Lundbeck departs from these principles. How? By embracing a subjective approach to the analysis of potential competition. In Société Technique Minière, European Night Services and E.On Ruhrgas, to name a few, the notion of potential competition was an objective concept, in the sense that market entry was assessed in light of objective factors – that is, whether such entry possible and likely, given the economic and legal context.

In Lundbeck, by contrast, the economic and legal context (in other words, objective considerations) are not decisive. Subjective considerations (in other words, firms’ perceptions about the likelihood of market entry) can lead to the conclusion that two firms are potential competitors. Accordingly, potential competition may exist even when it would require infringing a presumptively valid patent.

As can be seen, Lundbeck advocates a major shift in the analysis of potential competition. Will it win the day? An analysis of the case law reveals that the ECJ clearly prefers objective approaches to the definition of legal concepts. In particular, the subjective intent of the parties is neither a sufficient nor a necessary condition to establish a restriction of competition. Similarly, the notion of aid within the meaning of Article 107(1) TFEU is an objective one.

The relationship between competition law and intellectual property

Finally, Lundbeck also marks a new relationship between competition law and intellectual property. As mentioned above, EU law does not question the existence of intellectual property rights; it only questions the way in which they are exercised.

Accordingly, EU law does not second-guess intellectual property systems, or whether the underlying ideas are worthy of protection. Thus, Articles 101 and 102 TFEU are applied without questioning the validity of the rights at stake in a case. All cases in which intellectual property is relevant, including Consten-Grundig, Coditel II or BAT (Toltecs-Dorcet) confirm this point.

By suggesting that a firm is a potential competitor even when market entry requires the infringement of a presumptively valid patent, Lundbeck alters this balance between competition law and intellectual property. According to this new balance, EU law would question the very existence of intellectual property rights (for instance, whether they are valid, or whether the underlying ideas are worthy of being protected). The consequence of the EU legal order would inevitably be significant.

[IMPORTANT: I did not want to end this post without mentioning the passing of Gil Carlos Rodriguez Iglesias. Gil Carlos led the Court of Justice at a key moment in time – Opinion 1/94 is just an example that springs to mind immediately. More importantly, he is fondly remembered by everybody who worked with him. Alfonso and I send our deepest condolences to his family and close friends. May he rest in peace.]

Written by Pablo Ibanez Colomo

18 January 2019 at 2:06 pm

Posted in Uncategorized

A year in review: competition law developments in 2018 (seminar in Madrid, 25 January)

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Cibeles

Fernando Castillo and Eric Gippini, two good friends of the blog, organise every year a seminar in Madrid in which they discuss recent developments relating to the application of Articles 101 and 102 TFEU.

This year, the seminar will take place on 25 January (Friday) and, as usual, it features top Commission officials and practitioners. For some reason, I have been invited to discuss the market integration objective alongside Jorge Padilla (can’t wait).

If you happen to be around, do sign up for it. The event is invariably of the highest level (and great fun too).

More info on the event and on how to register can be found here. The location, by the way, could not be better (and more convenient): IEB, calle Alfonso XI, 6 (28014 Madrid) – literally around the corner from the spots you see in the pic above.

The programme is the following:

16:00 – 18:00: First panel
Recent developments in the Pharmaceutical sector
Borja Martínez (KPMG)
Blaz Visnar (DG COMP, European Commission)
Irene Moreno-Tapia (Cuatrecasas)
Paul Hutchinson (RBB Economics)

Chair: Fernando Castillo de la Torre (Legal Service, European Commission)

18:30 – 20:30: Second and third panels
Negotiated procedures: Settlements / Commitments
Henning Leupold (Legal Service, European Commission)
Frances Dethmers (Allen & Overy)

The market integration objective in EU competition law
Jorge Padilla (Compass Lexecon)
Pablo Ibañez Colomo (LSE and College of Europe)

Chair: Eric Gippini Fournier (Legal Service, European Commission)

If you have any questions about the event, do not hesitate to send an email to: competencia@ieb.es.

We look forward to seeing many of you there!

 

 

 

Written by Pablo Ibanez Colomo

16 January 2019 at 11:35 am

Posted in Uncategorized

NEW PAPER on State aid post-Brexit (with Vincent Verouden)

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Two spheres

As all of you know, the vote on the Agreement for the Withdrawal of the UK from the EU will take place in Westminster later today.

I could not think of a better way to mark the event than by sharing a Brexit-related paper.

The paper, co-authored with Vincent Verouden, is already available on ssrn (click here to access it).

As you will see, our piece examines the application of State aid rules in the UK after Brexit (if it indeed takes place). First, it shows why some form of control in this sense seems not only desirable but inevitable (given how close and how intertwined the economies of the UK and the rest of the EU are). Second, it discusses the various enforcement models that can be put in place, with a particular emphasis on the EEA system. Finally, it examines the institutional framework put in place by virtue of the Withdrawal Agreement and takes a look at what the future relationship between the EU and the UK may look like in this regard.

Vincent and I would very much welcome your comments and questions on the piece!

In accordance with ASCOLA’s declaration of ethics, I am happy to clarify that I have nothing to disclose.

Written by Pablo Ibanez Colomo

15 January 2019 at 3:26 pm

Posted in Uncategorized

Ahead of Siemens/Alstom, the competition law community should do more to defend the European Commission (and our law-based system)

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law

Readers of the blog know that I am sometimes critical of the European Commission. I regard it as my obligation. Since I am fortunate enough to devote my professional life to study the behaviour of competition authorities (and the evolution of the legal system), I have a duty to share my findings, wherever they take me.

Every now and then, however, people get confused about what drives my criticism. Make no mistake: if I am sometimes critical of the European Commission, this is because I believe in the crucial role of competition law in a social market economy and because I care about the system (its internal consistency, its predictability and the aspects that could be improved).

And because I care, I find it unacceptable when governments resort to all forms of lobbying to twist the arm of the European Commission in sensitive cases. The pending merger in Siemens/Alstom is one where the pressure is about to reach unbearable levels.

A few days ago, the French Minister for Economic Affairs claimed that it would be an economic and political mistake (no less) to block Siemens/Alstom. His arguments are the same tired ones (national champions and all the rest) that were advanced, back in the day, by Arnaud Montebourg, this blog’s favourite French (ex-)Minister.

Bruno Le Maire’s statements add to a plea, by 19 EU Member States, in favour of à la carte antitrust (see here). According to the reform suggested in a ministerial meeting, EU competition law would only apply to the baddies. The goodies, on the other hand, would not be subject to the rules, or would benefit from exemptions so they can become competitive at the global level.

One could say many things about these statements. One could say, for instance, that, if the approach they advocate were to be implemented, it would be the end of competition law as we know it. The French Minister’s arguments could very well be used to justify hard-core cartels: if a merger to monopoly should be allowed to go through in the name of the ‘competitiveness’ of domestic companies (whatever that means), why not allow EU firms to cartelise their activity and extract rents from companies based elsewhere?

One could also say that these statements are incredibly short-sighted and nothing sort of an own goal. If the EU system is the global reference, and if the European Commission is the leading authority in the world, this is because EU competition policy is enforced through law, not discretion or arbitrary distinctions between goodies and baddies.

If, as proposed by 19 EU Member States, the application of EU competition law were influenced by the firms’ place of establishment (or by their status as goodies or baddies), the system would lose its hard-won credibility. Such a move would play in the hands of those who argue (with no evidence so far) that EU competition law is tilted against foreign, in particular US, firms.

But there is something else that I would like to add to the above. I am always surprised that the competition law community does not do more to defend the European Commission, and our law-based system, in these circumstances. I tell myself that we should perhaps be more vocal.

One thing is to disagree with the Commission about whether Intel requires the application of the AEC test in every single rebates case, or about the legal test that should apply to constructive refusals to deal. And another thing is to question the very foundations of the system. When the latter are at stake, it makes sense to forget disagreements about particular points of law or policy (no matter how strong) and side with the Commission.

A consensus seems to be emerging across the political spectrum about the need for a well-functioning competition law regime. In particular, there is an understanding that the careful scrutiny of horizontal mergers, such as Siemens/Alstom, is indispensable (there are reasons to believe that the enforcement of merger control has been somewhat lenient vis-à-vis these transactions in the past couple of decades).

In these circumstances, and now that momentum is building, it would be terrible (for the economy, for consumers, and for our community) if competition law mutated into some sort of Frankenstein driven by political expedience (as opposed to rigorous legal and economic analysis grounded on consensus positions).

It is true that some have been vocal. At the risk of doing injustice to others, John Fingleton, for instance, has been vocal against proposed changes to UK merger control (see for instance here). It would be wonderful if others followed this example.

Written by Pablo Ibanez Colomo

10 January 2019 at 9:00 pm

Posted in Uncategorized