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JECLAP Anniversary Conference: Registration Open!

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Registration for the JECLAP Anniversary Conference event is now open. You can sign up for it here.

Remember that the programme can be found here.

Gianny, myself and the rest of the editors look forward to seeing many of you there! Feel free to drop a line for any question you may have.

Written by Pablo Ibanez Colomo

6 September 2019 at 11:00 am

Posted in Uncategorized

AG Bobek in Case C-228/18, Budapest Bank (or the art of consolidating and clarifying the case law on restrictions by object)

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Budapest Bank

AG Bobek’s Opinion in Case C-228/18, Budapest Bank has just come out (see here). It is interesting, first and foremost, because of the clarifications it brings to the notion of restriction of competition by object.

The Opinion will be widely discussed for three reasons.

First, it provides a clear, lucid and comprehensive overview of the existing case law. It discusses every major aspect relating to the notion, and does so in an orderly (and occasionally outright funny) way that is easy to follow. It is a gift for the classroom, as I told a colleague right after reading it. Alfonso and I tried our best in an article that is cited by AG Bobek (see here), but I will from now on choose the Opinion over my own work for my students.

Second, the Opinion provides fundamental clarifications on the practical application of the notion (what needs to be considered in the analysis and what the parties need to show).

Third, the Opinion suggests that the case law will prove resilient. The principles to evaluate the object of agreements have been clear for a long time. This orthodoxy has been questioned in recent years: there are persistent myths about the notion (see here, here and here). So far, however, the Court has not departed from its consistent case law. It is less likely to do so after the Opinion and the structure and lucidity it brings.

The case is yet another one concerning credit cards, and more precisely multilateral exchange fees. The single most interesting aspect of the case is that the banks involved introduced a uniform fee for the two main credit card systems (Visa and MasterCard).

The orthodoxy consolidated

AG Bobek’s Opinion consolidates the case law in the two senses of the verb. Thus, (i) it discusses the disparate aspects of the notion in a single text that brings all the pieces together and, by doing so, (ii) it makes it stronger.

The Opinion addresses, one by one, the main principles:

First, AG Bobek explains that a restriction by object can never be established in the abstract (paras 45-48). This is something that we have regularly emphasised on the blog. Figuring out the object of an agreement is a case-specific inquiry that needs to consider the economic and legal context of which it is a part.

Very sensibly, the Opinion infers a two-step test from the case law (paras 41-43). The first step would be an evaluation of the content and nature of the agreement. The second step focuses on the relevant economic and legal context.

The second step takes account of, and is modulated by, the experience accumulated over the years (which may in turn be informed by economic analysis). A hard-core cartel that reaches an authority via a leniency application does not require the same degree of analysis as other practices.

Second, AG Bobek clarifies a major point: evaluating the economic and legal context of an agreement to establish its object is not the same as analysing its effects (paras 49-51). Identifying the object of an agreement is a different exercise. It is true that the same elements may be relevant at both the object and the effect stages. There is not, however, an overlap between them. The said elements fulfil a different purpose at each stage.

The conclusion that an agreement restricts competition by object follows, always and everywhere, the analysis of the nature and context of the agreement, not the other way around. Object restrictions are not abstract categories (indeed, treating them as categories in the first place is misleading, as I sought to explain here).

The evaluation of the relevant factors in the Opinion is exemplary (see in particular paras 63-73). First, AG Bobek considers the nature and content of the agreements at stake in the case and examines what the experience acquired over the years, and economic analysis, says about them.

Reasonably, AG Bobek comes to the conclusion that there is not enough experience (and, importantly, very little economic analysis) supporting the suggestion that an in-depth evaluation of the economic and legal context is not necessary.

Third, the evaluation of the object of the agreement is about establishing its objective purpose or economic rationale (paras 74-82). There is much confusion about this point, and it is important that AG Bobek clarifies that the question is less esoteric than it may seem: it is all about trying to understand what the agreeement is about (that is, what its economic rationale is).

In addition to providing several case law-based illustrations of this point, the Opinion hints at the crucial aspect of the inquiry: where an agreement is capable of having ambivalent effects on competition (where it is capable of producing positive and negative effects on competition), it is not restrictive by object (to use AG Bobek’s exact expression in para 81: any time an agreement appears to have ambivalent effects on the market, an effects analysis is required).

If this point is understood, everything else follows (thankfully for the general interest, the argument is presented very clearly in the Opinion; to further clarify the point, AG Bobek includes an intriguing metaphor involving a fish and a lily).

Fourth, and this is a related point, the pro-competitive aspects of an agreement are of course relevant to make sense of the object of an agreement (para 81). The moment the Court concludes in its analysis that an agreement is capable of generating pro-competitive gains (and thus ambivalent effects), it is not restrictive by object.

In that regard, AG Bobek explains that it is incorrect to claim that the pro-competitive aspects of an agreement are only relevant under Article 101(3) TFEU (I explained the issue and discussed the extensive case law at length here).

The orthodoxy clarified

The Opinion is particularly valuable in that it sheds light on the practical operation of the analysis of restrictions under Article 101(1) TFEU.

If one reads the case law (I particularly recommend, Delimitis, Asnef-Equifax and Cartes Bancaires) one realises that the analysis of whether the agreement is capable of generating pro-competitive gains is relatively brief or ‘abstract’ (to use the GC’s expression in MasterCard).

The threshold is low, one of plausibility (para 82). Put differently: once the Court is persuaded that the agreement is at least a plausible source of pro-competitive gains, it concludes that it is not restrictive by object. The pro-competitive gains need to be quantified at a later stage (under Article 101(3) TFEU, once anticompetitive effects are established).

By the same token, it is open to the parties in competition law proceedings to put forward evidence, supported by experience and/or economic analysis, suggesting that there is a plausible pro-competitive rationale for the practice.

This is, indeed, the analysis undertaken by the Court in Cartes Bancaires. You will remember (paras 74-75 of Cartes Bancaires) that the Court concluded that the contentious clauses in that case were a plausible mechanism to address free-riding. Once it reached this conclusion, the finding that the agreement did not have, as its object, the restriction of competition was inevitable.

Other aspects

There are other many interesting aspects about the Opinion. I will just mention a couple of them. The first is straightforward if one pays careful attention to the case law, but I do not believe it had been spelled out so clearly by an Advocate General before.

The need to consider the economic and legal context applies not only to the analysis of restrictions under Article 101 TFEU; it also applies under Article 102 TFEU. The analysis of abusive conduct, in other words, is contextual as well. I made this point at Oxford’s antitrust symposium a couple of years ago (see here).

This conclusion is clear in light of judgments like Michelin I or British Airways. I would say more: it cannot be otherwise. The meaning of ‘competition’ has to be the same under Articles 101 and 102 TFEU. And we know since Societe Technique Miniere that competition means ‘(actual or potential) competition that would have existed in the absence of the practice’.

And, finally, what I see as a minor point: AG Bobek holds, reasonably that a practice can be found to restrict competition both by object or effect. Finding that an agreement has both as its object and effect the restriction of competition is in fact something that the Commission routinely did in the early days of Regulation 17.

Written by Pablo Ibanez Colomo

5 September 2019 at 3:58 pm

Posted in Uncategorized

JECLAP Anniversary Conference (4 Oct): tickets out this Friday. Watch this space!

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Together with Gianni De Stefano, I am one of the proud Joint General Editors of the Journal of European Competition Law & Practice (JECLAP). It may seem like yesterday to some of us, but the journal has been around for 10 years now.

The editorial board decided to mark the occasion with an afternoon event to take place in a month time (4 October) in Brussels (Fondation Universitaire).

The idea is to bring together authors, editors and readers and look back to the past decade in light of some seminal articles. We have put together a great programme, which is awaiting a few final tweaks. You can find it below.

Interested in attending?

The tickets will be released via Eventbrite this Friday (6 September) at 11am Brussels time (10 am London time). Watch this space for the link!

JECLAP Anniversary Conference | 4 October 2019, Fondation Universitaire (Rue Egmont, 11)

13.00 | Registration

13.15-13.45 | A Decade of JECLAP and EU Competition Law, in conversation with the Founding Editors

13.45-15.00 | Cartels: from leniency to ex officio, from compliance to WhatsApp, from liability to economic screening

Chair: Gianni De Stefano (AkzoNobel)

Speakers: Speakers: Eric Barbier de la Serre (Jones Day), Paula Ramada (London Economics) and María Luisa Tierno Centella (European Commission)

15.00-16:15 | Article 102 TFEU and the route towards the effects-based approach

Chair: Moritz Lorenz (Arnecke Sibeth Dabelstein)

Speakers: Pablo Ibáñez Colomo (London School of Economics), Giorgio Monti (Tilburg University) and Ekaterina Rousseva (European Commission)

16.15-16.45 | Coffee and tea break

16.45-18.00 | The interplay between institutions, procedure and substance

Chair: Martin Farley (European Commission)

Speakers: Mark English (Quinn Emanuel), Andriani Kalintiri (City University) and Paul Nihoul (General Court) 

18.00-18.45 | Economist Notes, with Pascale Déchamps (Oxera), Giulio Federico (European Commission) and Lars Wiethaus (CRA)

18.45-20.00 | Drinks

Written by Pablo Ibanez Colomo

4 September 2019 at 5:17 pm

Posted in Uncategorized

The Suspension of the Bundeskartellamt’s Facebook Decision- Part I: What the Order Actually Says

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A comment on the suspension of the Bundeskartellamt’s Facebook decision seems like a perfect fit for the start of the new academic year at Chillin’Competition. The Order is truly a must read for anyone interested in competition law, particularly in digital markets. The fact that it’s written in German complicates that a bit. Let’s hope this helps. This post is lengthy, but that’s the price to pay for not reading the full original.  If short on time, go to the highlighted bits.

We already commented on this case at the time it was opened (see here) and decided (see here). Last week the Higher Regional Court of Düsseldorf suspended the decision pending a final decision on the case, expressing “serious doubts” as to its legality and using some pretty strong language. This development seems to have surprised many. Not so much us. If anything, we are pleased that it is very much in line with our understanding of the law, as consistenly expressed in this blog

After reading an excellent Twitter summary (here), I couldn’t help spending some of my last hours of holidays reading a pretty good Chrome translation (available here:) of the German original version and writing this post. The quotes used in this post are based on that automated translation (so please check against the original) and on the input of my colleague Konstantin Jörgens. To help find references, my comments also refer to the numbering of paragraphs in the translation (not present in the original). Note also that the Order discusses German law, but that it relies on principles common to EU Law (and makes an ironic(?) reference in passing to “the desired alignment of national competition law with that of the Union” (para. 29)).

The Court suspended the decision arguing that even a summary examination of the factual and legal situation leads to the conclusion that it will be set aside (para.25). Its (annotated) reasoning follows. [In Part II we will build on these elements to discuss why the Order is a perfect illustration of sensible and necessary judicial review, and by no means an obstacle to proper enforcement in digital markets].

Is there an exploitative abuse? Our first comment on this case said that “admittedly, and theoretically, the Bundeskartellamt could build an exploitative case alleging that Facebook sets infra-competitive privacy terms and conditions. However, this does not seem to be the reasoning underlying the investigation. Perhaps this has to do with the difficulties in determining which is the “competitive” level of privacy (…) possibly in the light of these difficulties the authority is prepared to take a shortcut, automatically equating an alleged “violation of data protection provisions” by a dominant company with an abuse of dominance.

The Court shares the same view, and that’s essentially why it suspended the decision. It underlines that an exploitative abuse may take place when a dominant company imposes business conditions that differ from those which would likely result from effective competition. In line with our first post, the Court understands that there is in theory no reason why one could not run an exploitative case in relation to privacy policies. Crucially, however, it rules that “the [Bundeskartelamt] did not carry out sufficient investigations into an “as if competition” and consequently did not provide any meaningful findings on the issue of which conditions of use would have formed in the competition (para. 27; the Order comes back to the counterfactual also later at para. 47). Facebook did not have to show what the competitive level of privacy would have been; it was for the Bundeskartellamt to look into it, but it didn’t.

Failure to assess the counterfactual, again. As repeatedly held by EU Courts, and as you will have read us write a thousand times, a proper counterfactual analysis is the best sanity check for any given theory of harm. Contortions to avoid the sanity check suggest that the authority itself is aware of the pitfalls of its case. A competition authority may have a margin of appreciation in conducting complex analysis, but for that very same reason it cannot entirely do away with them. This logic, by the way, is very much in line with the tendency we see in EU Courts (see e.g. here). Most of the discussion that follows, regarding causality, is also in essence about the counterfactual. In addition, the Court also faults the Bundeskartellamt’s assumption that users “prefer a fee-based network to a free but ad-supported one” because the authority “made no reliable and meaningful findings” (para. 78).

Assessing the consumer harm: data processing as a voluntary consideration for free and non-indispensable services. The Court observes that the data gathered by Facebook is duplicable and can also be made available to third parties  (para. 31). It also observes that the decision failed to address why “all” of the data collected by Facebook was excessive (para. 32), and that there is “no loss of control” on the part of users because the data processing took place in compliance with Facebook’s terms of use and with users’ consent. According to the Court, the fact that use of the network is conditional on consent to the processing of the data a issue “requires to  balance the benefits of using an ad-supported (and thus free) social network with the consequences of the use of the data” (para. 35 and later also at paras. 71 and 85, and more at length at 76) and users remain free to use or not use free-ad-supported Facebook depending on their values and preferences. The Court repeatedly stresses that in Germany there are more Facebook non-users than users, which shows that non-usage is evidently an option. As we said in our comment on the opening of the case, “Facebook is not an unavoidable trading partner and consumers are not locked in to it; if consumers don’t think it’s worth giving data in exchange for the service, they won’t join. So, again, we agree.

What’s essential to a business model? Our post commenting on the decision underlined that the Bundeskartellant did at least not target the processing of data generated by Facebook’s own website because “[t]his is an essential component of a social network and its data-based business model”. Setting the business model as a red line seemed sensible. But the Court here takes a wider –and arguably even more sensible- view of what is essential to Facebook’s business model (described at the very outset in paras. 8 and 9, as well as later in 35 and 71, as offering free services financed via tailored online advertising in exchange for users agreeing to the terms of service). Later at 93 the Court points to a “lack of reliable explanation on if and to which extent  the use of the added data boosts advertising revenues to finance the social network”.

What matters (in a sanctioning regime) is the company’s behavior, not users’ psychology. The Bundeskartellamt had argued that users do not read terms of service, but the Court dismisses this argument observing  that based on a realistic interpretation , this most probably is due to “indifference or convenience of the Facebook user and that no one had claimed there was any informational deficit on the part of Facebook (para. 37; at 71 the Court adds that “there is no evidence that Facebook obtains the consent of users through coercion, pressure, exploitation of lack of willpower or otherwise unfair means”). At 84-85 the Court explains that “whether the users act out of indifference or because they do not want to spend the necessary time and effort (…) does not matter” as their decision is ultimately “free, uninfluenced and autonomous”.

Not every legal violation is sufficient to give rise to an abuse. The Court does not agree with the Bundeskartellamt’s interpretation of the German case law. It discusses the Supreme Court’s rulings and explains that only unlawful behavior that has an effect on the protected goods of competition law (freedom of competition and openness of market access) can be equated to anticompetitive conduct. Our first post on the case presented it as part of the tendency “of extending the “special responsibility” of the dominant firm in order to comply with the law, and not just with competition law, with literally any legal provision”. Well, in a quote that deserves a proper translation, it argues that the “special responsibility” only regards competition, and does not extend to legal compliance by way of avoiding any possible violation of the law (paras. 44 and 46).

On Causality. In our comment on the opening of the case we noted that “the Press Release does actually say –or suggest- something which is arguably sensible (albeit contrary to Continental Can and Astra Zeneca) when explaining that it needs to check whether there is “a connection between such an infringement and market dominance”. Well, the Order deals at quite some length with this issue (I spare you the discussions on German case law), noting that a link of causality between dominance and the disapproved behavior (“or at least the anticompetitive effects of its behavior”) is required both under EU and German law (paras. 53-56). The Court observes that the suspected exploitative abuse does not result in a structural weakening of competition (para. 58) and that its effects on consumers are unrelated to dominance (para. 59).

Perfect understanding of “anticompetitive effects”. If you have read Pablo’s posts (e.g. here) or head me speak recently (e.g Lesson 7 here)  you will have heard that one of our recent obsessions has to do with the watering down of the notion of effects. Our contention is that according to the case law mere disparity of treatment is not enough, and that there can only be anticipative effects when rivals’ ability and incentive to compete are hindered. Here, the Court explicitly says precisely that, that“not every economic disadvantage inflicted on another company constitutes a hindrance in the antitrust sense. What is needed is an impairment of the competitive and entrepreneurial options for action and decision-making” (90). Amen.

Barriers and effects need to be convincingly shown, not simply assumed. In our comment on the decision we remarked the simplistic approach of assuming, without the necessary analysis, that “practices are problematic because they enable companies to improve their products and offer ads that are more relevant to users (…).But, unfortunately, there seems to be little appetite to deal with complexity and ambiguity these days, particularly when it comes to certain “online platforms”.

The Court in para. 93 argues that the idea that additional data increases barrier to entry because data is relevant to generate advertising revenue is “incomprehensible” and that this is a question that “requires closer examination and a detailed explanation /”a review and conclusive presentation by the antitrust authorities. That’s what’s missing” Why? Because, the Court explains, direct network effects mean that the value of the Facebook network increases as the number of users increases and the real barrier to entry lies in rival’s need to offer an equally attractive offer capable of gaining a sufficient number of users. The Court takes the view that the decision has not “substantiated and demonstrated” how the processing of the data at issue could affect market entry. It also observes a “lack of reliable explanation on the extent to which and in what scale the use of the data boosts advertising revenues to finance the social network”. This analysis was “indispensable” because the key to entry does not lie in obtaining the highest possible advertising revenues but a sufficient number of users. At the end of 93 the Court explains what type of analysis was required. The same is true about allegations of leveraging in other (not properly defined) markets, where the decision shows a “serious lack of reasoning” (para. 94) “lacking robust and comprehensible explanations” (para. 95).

A competition law problem? The conclusion to our first post on this case was that “there may be a market failure, but one that has to do with asymmetries of information, not market power. In other words, whether consumers know or not what terms and conditions they are accepting may be a public policy issue, but one that, in my humble view, is not for competition law to address”. The Court appears to share this belief. It explains that only with the help of the causality requirement “it is possible to avoid antitrust enforcement beyond the regulatory purpose of abuse control and to prevent the antitrust authority from prosecuting non-competition related infringements”(…) “unfairly disadvantageous terms (…) can also be based on informational market failure and the resulting systematic asymmetry of information to the detriment of customers) (para.61). The Court understands that “this possible alternative causation link justifies both the unlawfulness of the decision” (because the Bundeskartellamt bore “the burden of determination”/proof) (para. 76) and the legitimacy of consumer protection rules. Like. Earlier on the Court had made a point in this regard that we have also made before: the interests of those affected by the same behavior on the part of non-dominant firms are no less worthy of protection (para. 47), which is another reason not to leave these matters to competition law.


Stay tuned for Part II, with our comments on the reactions from other commentators and on what this development may/should mean for competition enforcement.


Written by Alfonso Lamadrid

3 September 2019 at 4:32 pm

Posted in Uncategorized

Persistent myths in competition law (IV): ‘the European Commission is a risk-averse institution’

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Having dealt with substantive questions, primarily relating to the notion of restriction by object (see here, here and here), it makes sense to continue this series by switching to a received idea of an institutional nature.

When presenting my research, it is not unusual for me to hear that the Commission ‘is a (very) risk-averse institution’, which, accordingly, would only intervene in clear-cut cases and this after choosing them carefully (perhaps too much).

This is the opposite of what one finds when examining systematically the Commission’s behaviour (which happens to be one of the research areas on which I focus).

And before I move on to explain why, allow me to clarify that I am convinced that, on balance, it is emphatically a good thing that a competition authority takes risks, and takes them often.

I struggle to see how the public interest would be advanced if the Commission only pursued the safest cases and were reluctant to explore new ideas or challenge existing doctrines.

On the other hand, one should be aware of the consequences of a relatively risk-prone attitude of the Commission. The higher the willingness to take risks, the more likely the errors (in law and in fact). And, by the same token, the more important full judicial review becomes.

Examples of the risk-prone attitude of the Commission

If one reviews the Commission’s administrative practice since the 1960s, it seems pretty clear that it has systematically explored the outer boundaries of the case law, sometimes departing from it (by applying a different doctrine, introducing a new one or by explaining why it is not applicable in the context of a particular case).

Off the top of my head, I can think, inter alia, of the following examples (I do not mention areas like State aid, but I have been able to identify a similar pattern there too):

Restrictions by object after Regulation 1/2003

Restrictions by object dominate the enforcement of Article 101 TFEU following the adoption of Regulation 1/2003. This is not only due to the prioritisation of clear-cut infringements by the Commission.

The Commission appears to have chosen to embrace a risky approach that occasionally departs from the logic of the case law. Cartes Bancaires is there for all to see. Even more interesting is ISU, where (as I explained here), it chose not to follow the most recent case law on the issue (Cartes Bancaires itself and Maxima Latvija).

And these are not the only examples. I have devoted many posts to explain why cases like Pay-TV and Lundbeck are controversial from this perspective (Lundbeck is interesting in that there was documentary evidence, back from 2004, showing that the Commission was aware that the practices were in a ‘grey area’, and thus of the risks involved in pursuing the case).

The analysis of effects under Articles 101 and 102 TFEU

Examining the effects of practices (whether under Articles 101 or 102 TFEU) can mean many different things. The analysis may vary greatly depending on what we mean by effect and on the degree of probability that is deemed sufficient to trigger intervention.

And I devoted my Chillin’ talk last year to the question. It is now possible to discern a definition and a methodology from the case law.

The important point here is that the Commission has showed a tendency, over the years, to depart from the notion of effect as defined by the EU courts.

The administrative practice that followed Delimitis is perhaps the best example in this sense. That landmark judgment clarified (once more) that a restriction in a firm’s freedom of action does not amount, in and of itself, to an anticompetitive effect. In addition, it laid down a test that revolved around foreclosure (defined as the ability of a rival to enter the relevant market).

In Langnese-Iglo and Scholler, the Commission did not follow Delimitis (as noted by commentators at the time). It chose instead to take the risk of committing to its traditional approach (under which a restriction in a firm’s freedom of action is sufficient to establish an anticompetitive effect).

One can identify a similar pattern in recent Article 102 TFEU decisions, of which Servier is a great example. More on this soon: it is a fascinating question that keeps me busy.

Refusals to deal

There is much talk these days about interim measures. It is said that, since IMS Health, the Commission has never adopted a decision of this kind. But it is not always explained why the decision was quashed by the (then) Court of First Instance.

IMS Health was just an interim measures decision, but the interim relief sought was far-reaching by any standard (it imposed an obligation that effectively altered a firm’s business model).

One could argue that the context was not ideal for the Commission to take the risk of embracing a heterodox reading of Magill, but the authority chose to give it a try.

The interim measures decision argued, controversially, that the Magill conditions were alternative, and not cumulative, and thus that an obligation to license could be imposed even absent evidence that a refusal would prevent the emergence of a new product.

No surprise that the Court of First Instance took the view that imposing a duty to license on an interim basis should not be based on a peculiar reading of the relevant case law.

The Commission took similar risks again in Microsoft. The Court of First Instance acknowledged in its judgment that the decision had not established an abuse in light of the conditions set out in Magill (in particular, the Commission had not attempted to show that the refusal prevented the emergence of a new product). This second time, however, the risk taken by the authority paid off.


I could go on for a while, but I will finish this overview with the case law on rebates. As we all know, the Court declared in Hoffmann-La Roche that rebates conditional upon exclusivity were abusive.

In the years that followed, the Commission progressively expanded the scope of the prohibition rule to encompass target rebates (in Michelin I and British Airways) and even standardised volume rebates (in Michelin II).

This risky approach was successful in the sense that the doctrine encompassed a wider range of potentially harmful conduct. On the other hand, it created a sense of legal uncertainty that prompted the Commission to review its approach to the enforcement of Article 102 TFEU.

The importance of judicial review

The willingness to take risk by stretching, or departing from, existing doctrines is not without consequences.

The interpretation of the law may become less consistent and intervention less predictable as a result – past cases would not provide reliable guidance on the outcome of future investigations and conflicting lines of case law may emerge.

The complex reality of Article 102 TFEU – and the subsequent attempt by the Commission to remedy the consequences of its own approach, mentioned above – speaks for itself. Perhaps the risks were justified to avert potentially harmful conduct by powerful undertakings, but the cumulative effect of individual decisions resulted in the absence of clear and meaningful boundaries between abusive and lawful conduct.

Against this background, judicial review is of paramount importance to preserve the general interest (including legal certainty) and explore why and when it is justified to depart from, or ignore, the prevailing legal doctrines.

I do not believe the law is cast in stone and should never be revisited. And I am sure none of our readers believe the role of judges is to ensure the law never changes.

The point is instead that existing doctrines have a point and a rationale – they are typically the product of careful thought by courts. Accordingly, the case law cannot be dismissed or stretched without an appropriate explanation (which, in turn, may or may not persuade the review courts).

Written by Pablo Ibanez Colomo

25 July 2019 at 2:19 pm

Posted in Uncategorized

The Amazon Investigation: A Prime Example of Contemporary Antitrust

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The Commission announced this week the formal opening of a case against Amazon (see here). It had also informally done something quite similar almost a year ago (see here), and that first news cycle triggered comments from Pablo that remain current and are even more valuable today. In parallel, the competition authorities from Germany, Austria and Luxembourg closed proceedings against Amazon after the company agreed to modify certain clauses.

The Commission’s case is plagued with interesting legal issues and questions that we look forward to exploring. It is a prime (pun intended) example of the issues raised in contemporary antitrust. I’ve received a few press inquiries about this and already had a chance to discuss the development almost live during a lecture at the College of Europe on “Multi-sided platforms: the lessons from the case law”, so I’ll build on what I explained there (off the top of my head, so this is all likely to evolve).

Bear in mind that we have no information as to whether the Commission’s factual suspicions are well-founded or not, so for the purposes of this post let’s simply assume that they are and focus on the law:

Duality at the core. The case against Amazon is premised on the observation that “Amazon has a dual role as a platform: (i) it sells products on its website as a retailer; and (ii) it provides a marketplace where independent sellers can sell products directly to consumers”. The Commission suspects that Amazon collects competitively sensitive information about marketplace sellers and, according to the press release, it “will focus on whether and how the use of accumulated marketplace seller data by Amazon as a retailer affects competition”.

Challenging vertical integration/a business model. Is the Commission challenging a business model or vertical integration itself? To the extent that one argues that the problem lies in “being umpire and having a team at the same time” (see here) in itself, then this would effectively constitute a challenge to a given (hybrid) business model more than to specific practices [on a different note, the referee/player metaphor was the one traditionally used to challenge the Commission’s own business/enforcement model]. 

If this is the Commission’s thinking (it may well not be), this could have very profound implications, as many companies other than Amazon (including e.g. large offline retailers with private label brands) rely on the same business model. This is particularly true given that the investigation is based not only on Article 102 but also on 101, so its ramifications could extend beyond dominant companies.

As we always say, competition law is business model agnostic. Amazon, for one, has suffered from this when it comes to platform bans (think about it, Coty is also a prime example of the idea that one cannot treat a firm that opts for selective distribution worse than a vertically integrated rival pursuing the same objectives). The use of a given business model, in itself, does not warrant antitrust intervention. It might, if it gives rise to anticompetitive effects in the sense of the case law. As Pablo explained in his post, vertical integration and lack of neutrality is often even procompetitive. Again, that doesn’t mean that specific practices may perhaps be legal/illegal, but one cannot simply presume legality/ illegality just by looking at the business model.

On the threshold of effects. If it’s all about the effects, what effects are we talking about? What legal standard should the Commission apply?

Is the theory then that merchants suffer a competitive disadvantage? The case law tells us that a mere disparity of treatment/competitive disadvantage is not enough to find an infringement (see e.g. Lesson number 7 here ;), MEO, Post Danmark I or Deutsche Telekom (para. 250 where the Court said that the existence of a margin squeeze/forcing rivals to price below cost is in itself, absent anticompetitive effects, insufficient to find an infringement).

Is the theory about unfair trading conditions? If one frames this as an exploitation/unfair conditions/excessive pricing case, one would need to look at whether the price paid by merchants is excessive having regard to the value of the service provided by Amazon’s Marketplace. And that may be pretty hard. Moreover, cases like TeliaSonera also involved unfair conditions and also require a showing of anticompetitive effects. As explained in the previous paragraph, this means something beyond a mere competitive disadvantage.

Isn’t this rather about conditions for access? The idea seems to be not only that Amazon is dominant but that merchants actually depend on Amazon to market their products (if not, it’s clear that there is no foreclosure, right?). In a way, you could say that data allegedly collected by Amazon is part of the price that a merchant pays to be able to sell its products in the marketplace (don’t critics of online platforms actually often repeat that people pay with data?). Amazon may need that data for different purposes, including ensuring that the overall platform/marketplace remains competitive (this is a fundamental point on which I would expect much of the legal discussion to focus). And this is in the nature of the hybrid business model, which has so far worked in this and other sectors. Would we be better off if Amazon re-adopted its previous model and closed the marketplace to third parties? And in that scenario, could a competition authority force Amazon to reopen it again under FRAND terms? The intuitively easy answers to the questions may be telling.

If one thinks about the case law (a big “if” these days), cases like Bronner, Commercial Solvents and Télémarketing all involved similar settings (vertically integrated rivals “favoring” their own services) and all of them require indispensability and the elimination of all competition. Bronner very much emphasizes this point beyond doubt (“self-favour” yourself and read it again).

Are merchants foreclosed/driven out of the market by Amazon’s alleged conduct? At first sight this would not appear to be the case given the continuous growth in merchant sales on the Amazon marketplace and the existence of other channels to market products. In fact, Amazon needs merchants and it is highly unlikely that its marketplace would thrive if merchants didn’t. An automatic assumption of foreclosure would imply presuming that Amazon is somehow an indispensable sales channel, which sounds like quite a stretch (and which, by the way, also appears to be at odds with brands’ appetite for platform bans). It will be interesting to see how the Commission approaches this question.

Increasing competition? If it were true that Amazon really uses merchant data to set its competitive strategy, I guess one could even argue that Amazon would be merely observing where there is scope for greater competition (in terms of price, output or quality) in order to adopt certain decisions, including whether to launch its own product. Under this optic, one could therefore argue that this practice (again, assuming it might exist) would actually enhance competition in every product category.

On similarities with other cases. This investigation is but one more step in a trend/line of thinking that started and peaked with the Google Shopping case (the judicial outcome of which could have a crucial impact on the Amazon case depending on time and on how Amazon plays this). Pablo accurately calls this “common-carrier antitrust”. The irony is that some of the people that propelled and still defend those theories are now faced with their boomerang effect (talk about dual roles…). Expect some creative contortions

Openings and closings. As some commentators have observed, the parallel closing of the German and Austrian cases shows that competition cases can also be quickly and effectively resolved, regardless of their merit, even absent interim measures. But, among other factors, that depends on whether what is at stake is an essential component of the business model or not. This may perhaps be one more reason to focus on cheap exclusion and not second guess business models (which is what some people are now openly advocating for).

To be continued…

Written by Alfonso Lamadrid

19 July 2019 at 1:06 pm

Posted in Uncategorized

Digital Service Taxes and State aid: Chillin’ in the media

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Online platforms are all over the news these days. Today we have learnt that the European Commission has opened a formal probe into Amazon’s practices. I could write a post, but I have the sense that the one I prepared on the preliminary investigation a while ago still captures well my thoughts on the case.

I would simply add a question for discussion: is the data supplied to Amazon by merchants not just an element of the cost of doing business via the marketplace (i.e. part of the price they pay to access the platform)? If so: is this aspect of the case not simply about alleged excessive pricing (with all the consequences and implications that follow)?

More to the point of today’s post, large tech companies have made the headlines on both sides of the Atlantic following the French Senate’s green light to the so-called Digital Services Tax (which, it seems, is known as ‘taxe Gafa’ in France).

I have been asked to share my views on the State aid dimension of this tax (a topic that Alfonso covered on the blog). Last week I was interviewed by Bloomberg Tax (see here), together with Alfonso’s partner José Luis Buendía Sierra.

On Monday of this week, I took part in a radio programme (Knowledge@Wharton), run by The Wharton School at Penn and offered via SiriusXM Radio. I was interviewed together with Ruth Mason (University of Virginia) and Andrea Matwyshyn (Penn State). It was fascinating, no less because this case has sparked an academic interest in EU State Aid Law in the US. You can access the interview here.

What are my views on the State aid dimension of the Digital Service Tax (or ‘taxe Gafa’)? From a substantive perspective, I believe it is difficult to argue that this tax is not vulnerable to challenge on State aid grounds.

If one pays attention to recent administrative practice, the most reasonable conclusion is that it is more likely than not that the Commission would conclude that it is caught by Article 107(1) TFEU. In this sense, the French Senate’s position, which insisted on the notification of the measure, comes across as sensible and prudent (and in the spirit of Articles 107 and 108 TFEU).

Does it mean that the measure is necessarily State aid? No. Even though it appears to be explicitly targeted at some firms (it is known as ‘taxe Gafa’ for a reason), one could try and make the argument that the targets are not in a comparable factual and legal situation as everybody else.

Perhaps. But there is, at present, no operational test to determine whether undertakings are in a comparable factual and legal situation. This is one of the fundamental issues I emphasised in my presentation at our State aid workshop a month ago. I struggle to see why and when two groups of undertakings are likely to be deemed in a comparable situation, and when they are not.

Against this background, my sense is that it would be desirable to get some guidance from the Court on this point. And perhaps this case (together with the pending disputes on the Polish Retail Tax and the Hungarian Advertising Tax) provide the ideal context to do so.

Written by Pablo Ibanez Colomo

17 July 2019 at 6:46 pm

Posted in Uncategorized