Chillin'Competition

You may have noticed the blog has been less active in the past few weeks. If you had not realized but somehow suddenly felt more lucid, better informed and like you made more out of your time,  then that may explain it.

Our inactivity on the blog was due to a peak period at work (our respective peak periods have synchronized this time), and a few other things including:

-A firm presentation at the College of Europe titled “What you always wanted to know about life in private practice and were too afraid to ask?”. The slides (not really much content but some pretty good images, including the one above) are available here: What you wanted to know about life in private practice but… (2018)  😉 [Btw, the context was a recruiting exercise which, of course, is also open to other candidates. If interested, shoot me a line]

-Some General Court hearings in Luxembourg last week in relation to the cases we discussed here. The hearings featured the finest discussions on selectivity in State aid that I have heard so far (not at all thanks to me, but to the judges, to our opponents at the Legal Service and to my colleague José Luis Buendía). It was a good reminder of the perks of this job and of why litigating is the best part of it. It also reinforced my view that hearings should enjoy greater publicity (perhaps in the form of transcripts); my notes of the hearing are more useful than most articles on these issues. We would all learn more, many would look at the Court with greater sympathy (Judgments in their current format do not always reveal the underlying legal discussion and the judges’ work, let alone in a reader-friendly way), and lawyers could be valued by how they do their work rather by the firm at where they do it (for more on that, see and old post here). The best imperfect substitute we now have is MLEX, so you can read their pieces on those hearings here and here (if you are subscribed, that is).

-On Friday I also participated in a seminar on the main developments of 2017 in the competition sphere, where we discussed mainly Coty, Intel and Google Shopping. The programme is available here: Seminar February 2 2018. I discussed some legal (not factual) aspects of the Google Shopping case (essentially about the applicable legal standard, the precedent it sets for vertical integration in multi-sided markets and about the notion of effects/foreclosure used in the decision) but did not prepare a presentation (rather Googled live what I wanted to show the audience, including these excellent graphs on the difference between correlation and causation). We may perhaps touch on the other elements sometime soon.

-On Friday Pablo could not join us as he was discussing the same cases… but in Florence. His lecture was part of a training programme for Judges run at the European University Institute. See the programme here.

-Some days ago we also responded to a few questions about legal blogging and about how it fits with legal practice; in the unlikely event that may be of interest, it’s available on the “State of Competition” blog, here.

What we have not done:

-We have not yet commented on the Qualcomm decision (we have been advised to wait and read beyond the press release prior to commenting), nor about another important State aid ruling having to do precisely with selectivity.

-We have not yet discussed Pablo’s forthcoming intervention (21 February) at “Digital Platforms and the Widening EU/US Competition Law and Regulation Gap” in London. Chaired by Ioannis Lianos, it will also feature Brice Allibert (DG Comp), Oliver Bethel (Google), Cristina Caffarra (CRA) , Damien Geradin (Euclid), Bill Kovacic (see his interview with us here), Ioannis Kokkoris (Queen Mary University), Florence Thepot (University of Glasgow) and the inimitable Superwuster (aka Tim Wu) (Columbia). If you feel like signing up, take a look at the programme here:

-We forgot to tell you here about some events, including about the upcoming W@Competition’s 2^nd annual conference in Brussels on 1 March. The title “Is Disruptive Competition Disrupting Competition Enforcement”. The all-female list of nominees speakers includes phenomenal in-house lawyers, private practitioners, economists and enforcers. I will not be announcing any winners this year, so this time the whole event will be interesting. You can check it out and register here. Instead of meme-mugs for attendees, we suggest this gift.

We still haven’t commented on some of the major developments that took place in the last days of 2017 (some major ones have gone unnoticed for many -not for the Commission- due to the holiday period). But last things first:

Yesterday, the Court of Justice rendered its Preliminary Ruling in the Hoffman-La Roche case. This is a Grand Chamber ruling dealing, among others, with the notion of “restriction by object”.  This is THE Judgment of the year (mainly because it’s the only relevant one so far), but does contan some interesting food for blog.

AG acknowledgment and self-publicity. You might also remember that we discussed AG Saugmandsgaard Øe’s very good Opinion (its only flaw was a reference to our paper in footnote 96) in a previous post (available here).

Background. The case has to do with an agreement between Roche and Novartis reportedly aimed at reducing the demand of one pharma product for ophthalmologic purposes (the product is Avastin, developed by a Roche subsidiary, marketed by Roche and authorized for the treatment of tumorous diseases but also used in practice for eye diseases) in favor of another product (the higher-priced Lucentis, developed by the same Roche subsidiary, but licensed to and marketed by Novartis, authorized for the treatment of eye diseases).

Both companies were sanctioned in Italy for having engaged in a concerted practice intended to achieve an artificial differentiation between these products disseminate information giving rise to safety concerns (“manipulating the perception of the risk” based on an “alarmist interpretation of available data”  in relation to the use of Avastin in ophthalmology. Their appeals were dismissed in first instance, a further appeal before the Council of State has triggered the preliminary reference to the CJEU.

Can allegedly unlawful products be deemed a source of competitive constraints for market definition purposes? The first question addressed by the Court relates to whether a product that has not been authorized for the treatment of eye diseases forms part of the same relevant market as those products that have. Should a possible unlawful use be factored in?

The Court explains, first, that illegal manufacture or sales would prevent the products, “in principle”, from being regarded as substitutable or interchangeable “both on the supply side, because of the legal, economic and technical risks, as well as the risks of reputational damage, to which they expose the manufacturers and distributors of those products, and on the demand side, in particular due to the risk to public health that they cause among healthcare professionals and patients”. This is a not very nuanced formulation included in para. 52. Surely some unlawful goods may exert a competitive pressure in some markets. The Court’s statement would seem to make more sense in the regulated pharmaceutical sector than in other markets (think, e.g. about unlawful digital content in some sectors), but even there a manufacturers’ market power could conceivably be affected by unlawful products. Not factoring those constraints in as a matter of principle may, depending on the circumstances, add on to the harm that they cause to lawful products (not the case here, but the idea may cut both ways). Including those products in the market def. analysis when their usage exists, does not imply validating any unlawfulness but simply accounts for reality.

In any case, the Court then goes on to note that, in any event, nothing in EU law precludes pharma products to be used or repackaged for off-label use provided that certain conditions are met. It also explains that it is not up to competition authorities to determine whether those conditions have been met, but rather to take into account the results of any such examination and observes that at the time the decision was adopted no illegality had been established. Given the relation of substitutability between Lucentis and Avatin when used off label, the Court concludes that it was legitimate for the Italian authority to consider that they belong to the same relevant market.

On ancillarity. The parties argued that the restriction was ancillary to their licensing agreement. The Council of State asked the CJEU whether a restriction not envisaged in the licensing agreement may be considered ancillary thereto.

Following a brief excursus into the notion of ancillarity built on the Mastercard precedent (nothing new but a good summary in paras. 69-71), the Court observes (i) that the restriction “was not designed to restrict the commercial autonomy of the parties to the licensing agreement (…) but rather the conduct of third parties, in particular healthcare professionals” (para 72) and (ii) that the conduct was not “objectively necessary for the implementation of the [wider] agreement” (para. 73).

That last finding underscores an interesting –if arguably evident- point. People often struggle to identify the elements to determine whether a given restraint is objectively necessary for the implementation of a wider procompetitive or neutral agreement. Whereas the burden of proof is on the authority to show that the restriction exists under 101(1), when it comes to ancillarity authorities are likely to require evidence from the accused parties. But this is akin to establishing a negative fact (probatio diabollica); how can one prove what would have happened in the counterfactual scenario absent a given restraint? In my view, one need only provide some solid indications of objective necessity to force the authority to undertake this analysis (I have already touched on this towards the end of this post and this post, but will discuss in more detail soon) and, in the face of uncertainty, the presumption of innocence or presumption of legality applies (as it does, by the way, in this Judgment regarding pharma law).

In this Judgment the Court looks at a single indication: “that conduct was agreed upon several years after the agreement was concluded, and not in the agreement itself or upon its conclusions”. This is right and pretty common sense too. If a restraint has always existed and is part of the agreement, it will logically be more likely to be considered ancillary.

Fake news claims as a restriction by object. Finally, the ruling deals with the question of whether an agreement which concerns “the dissemination, in a context of scientific uncertainty on the matter, of information (…) with a view to reducing the competitive pressure (…) constitutes a restriction of competition by object”. Despite the clickbait title, this is more about unsubstantiated claims than fake claims (not necessarily always the same thing).

Paras.78-80 briefly set the scene legal scene on restrictions by object. The CJEU then engages in an explanation of the applicable pharma regulation and observes, first, that the requirements for steps to be taken regarding perceived risks concern only the market authorization holder, not other parties (para. 91; the Court also makes the point that the fact that there was an agreement between competing undertakings to disseminate such info “might constitute evidence that the dissemination of information pursues objectives unrelated to pharmacovigilance”).

Second, the Court notes that “given the characteristics of the medicinal products market, it is likely that the dissemination of such infraction will encourage doctors to refrain from prescribing that product, this resulting in the expected reduction in demand”. It concludes that in those circumstances (which assume failure to comply with the requirements of completeness and accuracy laid down in pharma regulation), an agreement that pursues the objectives of exaggerating a perception artificially and to emphasize risks in a context of uncertainty “must be regarded as being sufficiently harmful to competition to render an examination of its effects superfluous” (para 94).

As noted by Pablo in his comment on the AG’s Opinion, this case shows that, regarding the object/effect dichotomy, form is not enough; an inquiry into the economic function and rationale of the agreement in its legal and economic context (seen here in the analysis of pharma regulation) is a way of material assessment that is not incompatible with a finding of a “by object” restriction. The question posed in that previous post therefore remains: if the “object box” has proved to be over-inclusive and under-inclusive, should we amend it or dismiss it?

All the best for the New Year! For better or worse, it is time for the blog to resume its normal activity.

We have been assisted by a flurry of enforcement that took place in the last weeks of the year. I hear a decision in a major Article 102 TFEU has (finally!) been made public. I will pass on that one (for now), and will focus on another case (for which, by the way, there is no decision published yet).

A month ago, the Commission announced that it had found that the International Skating Union’s policies vis-à-vis participants in its competitions were in breach of EU competition law. Thanks to DG Laitenberger’s speech, we know that the Commission considers these policies to be restrictive of competition by object.

The press release expressed concern about the impact of the ISU’s policies on athletes’ freedom to take part in other competitions. According to the Commission, these policies (i) did not relate to legitimate sports-related objectives; (ii) enable the ISU to pursue its own commercial interest at the expense of athletes and potential rivals; and (iii) prevent the latter from organising competing championships.

As usual, I am not interested in the outcome of this specific case. I am ready to believe that ISU’s policies did not fulfil the conditions set out in Article 101(3) TFEU. More importantly, I do not really see the point of questioning this conclusion.

If I am intrigued, it is because of the policy dimension of the case, which got me thinking. In the process, I realised that I have, after all, a few wishes for the New Year.

Yet another ‘by object’ case: why do they dominate enforcement?

One of the most remarkable features of the Commission’s enforcement policy since the adoption of Regulation 1/2003 is that virtually all non-cartel prohibition decisions are qualified as ‘by object’ infringements (if you want the exact numbers, wait for my forthcoming book!).

The dominance of ‘by object’ cases is a phenomenon which, I believe, was first described and studied systematically by Damien Gerard in this great piece, one of my favourites (if you prefer PPTs, see here).

The overwhelming dominance of ‘by object’ cases is perfectly consistent with the ‘more economics-based approach’. In fact, one would expect ‘by object’ cases to feature prominently if enforcement is informed by economics. The most egregious violations of competition rules tend after all to be ‘by object’ infringements.

Of course, the ‘by object’ label may occasionally be applied to practices that do not really belong in that category (Cartes Bancaires is there to prove the point; and I cannot resist adding Lundbeck, about which I have made my views clear on this blog and the appeal of which is pending before the Court). In this regard, ISU is also interesting…

ISU’s policies as a ‘by object’ infringement

It is impossible to draw conclusions from just a press release, but, as I say, I am nevertheless intrigued by it. In light of what I read, the reasons why these policies were deemed to amount to a ‘by object’ violation of Article 101 TFEU are not immediately apparent.

What the press release tells us, in essence, is that the ISU imposed a set of non-compete obligations in a vertical relationship (between the ISU and the athletes).

And there is long line of case law that suggests that non-compete obligations in vertical relationships are not ‘by object’ infringements.

Remember Pronuptia: the ECJ held that the non-compete obligation is not caught by Article 101(1) TFEU in a franchising agreement – in that context, it is an ancillary restraint that is prima facie lawful. Think of Delimitis too: the Court made it explicit that an exclusivity obligation in a beer distribution agreement does not have as its object the restriction of competition.

Are the ISU’s policies different from these cases? Why? I really look forward to reading the decision. Here are some thoughts on this fundamental question.

As in Pronuptia and Delimitis, the relationship between athletes and sports associations is mutually beneficial. They need each other. Competitive athletes need rivals (I have written here before that even the Harlem Globetrotters need the Washington Generals). They also need a framework in which to compete and become known by the public. Sports organisations need, of course, participants.

Against this background: is an attempt to protect the investment made in the organisation of events blatantly anticompetitive? Is it not a reasonable attempt to address free-riding, as in Pronuptia?

Even State aid provides an interesting example in this regard: ISU’s policies made me think of training aid: I see analogies between the problems faced by employers (which tend to under-invest in the training of their employees as they fear free-riding by other employers) and those faced by sports organisations.

Why would these analogies not be relevant in this case? Is there something specific about skating or speed staking?

I will have to wait to get an answer to these questions. It is clear to me, in any event, that one of the factors mentioned in the press release is not suggestive, in and of itself, of the anticompetitive object of the policies.

The Commission mentions in the press release that the ISU sought to protect its commercial interests. Well, which firm does not? The franchisor in Pronuptia and the incumbent banks in Cartes Bancaires also intended to protect their commercial interest. In spite of this fact, the agreements were not deemed to have an anticompetitive object.

The question is not so much whether the ISU wanted to protect its commercial interest but whether the policies served a legitimate purpose, not necessarily sports-related (remember Pierre Fabre!). The case law suggests that tackling free-riding is a legitimate aim (that is, in my view, the key message in Cartes Bancaires).

The press release also points out that ISU’s commercial interest is pursued at the expense of athletes. Is it really the case, considering that it is a mutually beneficial arrangement? As in Pronuptia or Delimitis, athletes give up their commercial freedom, true, but they gain in other respects. Would athletes have been able to gain prominence in the first place without the ISU? As you see, the counterfactual chases us wherever we go.

ISU and the ‘by effect’ route

When reading the press release, I could not avoid the impression that the ‘by effect’ route would have been as easy as the ‘by object’ route. As far as I can gather, the case appears to be about a monopoly or quasi-monopoly. Add an exclusivity obligation to the quasi-monopoly position and restrictive effects become very likely, if not inevitable.

And I can think of a policy-related reason why it might have been desirable to take a ‘by effect’ route: there is virtually no guidance about how to conduct a ‘by effect’ assessment under Article 101 TFEU. It is not even 100% clear what we mean by the word effect in EU competition law (although we know more about the question than we tend to assume)

As I see it, these questions are important from a policy-making perspective. I hope the New Year will bring us some guidance in this regard (and there are cases in the pipeline which are ideal candidates).

And while we are at it: another area in which we need precious guidance is in relation to Article 101(3) TFEU. Prohibition decisions dealing with the third paragraph of the provision are good. But a ‘finding of inapplicability’ within the meaning of Article 10 of Regulation 1/2003 would be even better. That is my other wish for 2018. Don’t stop believin’.

Part I of this post explained our agreement with the bigger picture issues discussed in DG Laitenberger’s important speech at the CRA conference last week.

This second part focuses on more specific, seemingly fine print, issues on where our assessment may diverge or, rather, incorporates some nuances that we believe are important.

Accuracy vs Administrability (and on the length of investigations) The speech identifies a debate cast as an inevitable trade-off between accuracy and administrability (a language also used here) and suggests that there are ways to reconcile both objectives. The solution, according to the speech, could be found in presumptions and rebuttals. It is interesting to note that, according to the speech, partisans of accuracy would favor time-consuming and resource-intensive investigations, which arguably “risks the untimeliness and hence the non-effectivity of enforcement”. As the DG put it, “this is antitrust to the measured Louis Armstrong tune ‘We have all the time in the world’”. Later on the speech contains another reference to “concluding [cases] within a reasonable time”. These references –or the assumption that lengthy investigations- may ultimately be untimely and ineffective have many angles and have spurred some interesting ideas. We’ll be back on this soon.

On the Notion of Restriction of Competition – By Object. The speech used two examples of presumptions-rebuttals. The first one was that of the recent ISU (International Skating Union case), in which the Commission recently found an infringement by object. According to the speech “[o]ne can say that under Article 101 TFEU, if a restriction of competition is established by the enforcing authority, the absence of a justification by efficiencies is presumed. But this can be rebutted by the business investigated”.

There is an important nuance here.  If what the DG is saying is that establishing a restriction by object implies a presumption of the absence of a procompetitive justification which can then be rebutted (as the context to the phrase in the speech suggests), then what the DG is saying is fully in line with the interpretation of the law that we developed in our piece On the Notion of Restriction of Competition (recently cited by AG Saugmandsgaard Øe; see here). If that’s the case, this is a welcome evolution or an accurate, but rare, statement of the law as we see it. But, following that same logic, finding a restriction “by effect” doesn’t presume the absence of efficiencies; on the contrary, it accepts the plausibility of the efficiencies, which the company has to substantiate. In other words, “establishing a restriction” does not imply a rebuttable presumption of lack of efficiencies; establishing a “restriction by object” (after having examined the legal and economic context), does.

Implementing Intel going forward, in theory and in practice

The speech then referred to Intel as an example of the importance of presumptions and rebuttals. In reality, however, the speech was doing more than that: it was explaining, for the first time, how the Commission interprets the Intel Judgment (for our very own comments on the Judgment, see here, here and here, and for Nicolas Petit’s most recent piece on the subject, see here too).

In DG Comp’s view, the CJ in Intel confirmed the presumption that exclusivity rebates are anticompetitive, but clarified that a dominant company can rebut the presumption by showing that the conduct was not capable of resulting in foreclosure. According to the speech, only when a company puts forward “sufficiently serious and substantiated arguments” will the Commission assess whether the conduct is liable to foreclose “as efficient competitors”.

This triggers several comments:

On the Existence of a Presumption. First, it is noteworthy that the DG has decided to emphasize the role of the presumption against fidelity rebates when applying Intel. It is a welcome development that the presumption is considered to be rebuttable “at the level of the likelihood or not of anti-competitive effects”. As Pablo has explained, it was also an inevitable development in the light of other recent case law. At the end of the day, however, whether a presumption exists or not is of relative importance; relative in relation to the standard for rebuttal…

On the Standard for Rebuttal of the Presumption. According to the speech, “obviously, the required standard for rebutting the presumption would be meaningless if the dominant firm was able to put forward general theories and abstract arguments” (…) “the dominant firm must present case-specific arguments based on concrete evidence, and this must be done during the administrative procedure” (…).

The speech explains that it is only when the dominant firm “puts forward sufficiently serious and substantiated arguments and evidence” that the Commission “must undertake an analysis showing capacity of the conduct to foreclose as-efficient competitors” The DG calls this “placing the burden of the rebuttal on the dominant firm”, and adds that “when in doubt, the analysis has to be deepened, but the procedure is a two-way street”.

The reason Intel is important, in practice, is –as explained in our first post- because of the shift in the burden of proof; it meant that it was not upon the company to demonstrate that its conduct was objectively justified (for which it bears the burden) but, once the argument is made, for the Commission to show that it is likely to foreclose competition. And case are most often won and lost on the burden of proof.

But the Commission’s intention, it seems, is to argue that the burden remains with the company, now to present “concrete evidence” that is “sufficiently serious and substantiated”. The problem here is that one must be very careful not to conflate the burden of proof and the evidential burden; the two are very different things. These difficulties also emerge when discussing the counterfactual, as previously, albeit briefly, observed here.

In my view, it should be enough for dominant companies to identify the concrete (existing or practicable) evidence that would be required to establish lack of foreclosure of as-efficient competitors. It would then be up to the Commission to gather, produce, require this evidence, or to explain why it is irrelevant or insufficient (and, in the latter case, to explain what would be sufficient). This is because sometimes the firm will not be in possession of all the info, or the info will not be at its disposal and in any event there will always be uncertainty as to what the Commission may consider to be “sufficiently serious and substantiated”. This is a shared task, and the proposed solution should combine accuracy and administrability avoiding the extremes, and respecting the respective burdens. There is no reason why this exercise could not be carried out constructively and in good faith; it is all about doing the necessary to ascertain the relevant facts.This would also be fully in line with the “proof-proximity” principle, brilliantly explained by Cristina Volpin in this paper (another young academic, Andriani Kalintri, also has done excellent work clarifying the intricacies of evidential burdens, see here.)

In other words, the Commission cannot abdicate its responsibilities. The case law has repeatedly established that “the Commission must play its part, using the means available to it, in ascertaining the relevant facts and circumstances” (e.g. CJEU in Consten/Grunding or GC in E.ON) and that it is required to have at its disposal all the relevant data that must be taken into consideration in appraising a complex situation (the Tetra Laval standard). As a matter of fact, this very speech says in a different point that “we would not do our job properly if we were not to use all available sources of evidence”.

If this doesn’t convince you, look at the very recent CJEU Judgment in Frucona Košice Judgment (State aid, which means most have not read it) according to which “the information ‘available’ to the Commission includes that which seemed relevant to the assessment to be carried out in accordance with the case-law (…) and which could have been obtained, upon request by the Commission, during the administrative procedure (71). The CJEU then observed that the Commission had “failed to obtain” (80) “all the relevant information” (81) and confirmed the annulment of the Decision. Remarkably, that was a case in which the Commission also claimed (see its arguments before the GC) –unsuccessfully- that the burden was not incumbent upon it [for my view on the details and implication of this case you can….Garrigues paywall] 😉

The Elephant in the Room- The Guidance Paper. When it comes to abuse of dominance, there are currently two parallel levels, one is the law as set by EU Courts; the other is the Commission’s enforcement criteria as set by the Commission itself. The Intel Judgment has to do with the first of these levels. The Commission’s explanations as to how it intends to implement Intel, have to do with the second.

 As I said in my first hasty comment on the case, “in its Guidance Paper on exclusionary abuses the Commission already committed to a careful assessment of likely effects (and this regardless of whether the undertaking concerned submitted evidence challenging the capability of the conduct to restrict competition). The Commission did not consider then that such an approach would make enforcement impossible nor did it consider that it contradicted earlier case law. In my view, therefore, the Commission already self-committed to applying a standard that is even stricter than that required by the Court in today’s Judgment”.

Against this background, something that at first sight may seem remarkable about the Commission’s reaction to Intel is the absence of any reference to the Commission’s own Guidance Paper or to its content, precisely at the time when the CJEU would seem more favorable to it than ever.

On the other hand, however, the speech states that “the Commission will apply the most suitable tools to assess the specific case – including, where appropriate, analysing the “as efficient competitor test” when the dominant company provides the necessary information during the administrative procedure. We are confident that this will allow us to continue to focus on the most harmful cases, while concluding them within a reasonable time”. One could read this as anticipating that cases will continue to be prioritized in the light of the AEC test following the self-commitment made in the Guidance Paper. Only time will tell.

Once again, the CRA conference proved to be the second 😉 most successful competition conference in town (congrats again to Cristina Caffarra and her team). Director General Laitenberger delivered an important speech that struck some chords with us and that, as explained below, relates to much of what has been discussed on this blog. The speech is now online.

As you will see below, we very much agree with many of the big picture messages, but have some doubts or nuances regarding the important small print, particularly on the implementation of the Intel Judgment going forward.

Part I of this post will be devoted to the big picture. Part II discusses the fine print.

The Political Background

DG Laitenberger gets the big picture and the technical competition law stuff, and the speech was a very good reflection of that. The speech run an introductory thread through a number of societal issues, including growing inequality, citizens’ doubts as to the functioning of markets, the reassessment of beliefs and certainties in the wake of the economic crisis or the role of technology. On this latter point he referred to fake news, clickbait, to “echo chambers” and increased polarization. That is the current background leading to the question, “where does this leave competition law”?

In my introductory speech at the past Chillin’Competition conference I actually referred to most of those issues, to make the point that while (really) important things happen, we competition lawyers live in our bubble and within our very own echo chamber. My point was not to connect competition law to those challenges, but rather the contrary, a bit to appease my conscience for devoting so much time to competition law when there’s so much else to be done. The DG’s diagnosis of the current background was brief, but right, and, to me, uncontroversial. The link to competition law was perhaps less evident, but still.

The Wider Competition-Related Messages

1) DG Laitenberger said that “while the economy and the society change so much, the ground rules of EU competition law remain so stable. They were designed to apply to a wide range of scenarios. They have proven capable of navigating the last 60 years. I should think that they will be able to navigate the next 60 years. This is so because the nautical charts- the fine print- which underpin the direction are continuously refined and adjusted”.

I wholeheartedly agree, with only one nuance. The refinement and adjustment cannot be radical or motivated by considerations alien to the law and that change the discipline’s direction. As we have always repeated, the stability of the law has to do with its relative isolation from small politics and by the slow judge-made distillation of common sense infused with mainstream economics in the light of experience across all countries, sectors and products.

2) The DG went on to say that “I see some polarisation in the competition community as well. My thesis today is that we can work to move away from the more extreme interpretations of the charts. We can-and should- focus on building a more common understanding”.

Again, entirely agree. We have always favored a radically centrist view of competition law, with regard to many specific issues, even connecting it to the political center in the big picture.

In that regard, I also welcomed a reference in the speech to something that is not often said and that I believe is important and true, that “ultimately, with all its refinements and adjustments, the interpretation of the antitrust remit has been more stable on this side of the Atlantic than in the U.S.”

3) The end of the speech touched on “the role of competition law vis-à-vis other societal concerns”. Echoing Commissioner Vestager’s speech at our last conference, DG Laitenberger acknowledged that competition law can’t fix it all. He nonetheless explained also that “it is possible to have big-picture concerns- about fairness, or inequality of innovation. While applying rigorous enforcement at the same time. And it is possible that rigorous competition enforcement has beneficial effects on these big picture concerns- sometimes inevitably so (…) There is no reason to be shy about the overall impact of competition law (…)”.

Once again, agreed; in fact this is the very same point I made on this editorial piece for JECLAP about fairness. As developed therein, references to the “big picture” cannot expand the reach of the competition rules, but I also believe that a more fair society is a consequence of the right (“rigorous” in the words of the DG, a very important nuance) application of the competition rules.

We have just received this video with the highlights of the conference featuring interviews with some of our attendees including a journalist whose name I can’t recall now. the President of the blog’s fan club, a speaker from last year, a speaker from this year, and a soon-to-be-fired colleague of mine.

And for a very good summary of the conference by our friends at Gecic Law, click here! 

A few days ago the European Commission opened an investigation into an alleged abrewse of dominance to restrict beer imports into Belgium (see here).

Ale those of you that thought we would barley survive without endives will now hopfully realize that this blog is lager than one single product. At yeast, we now have a hopportunity to show that we can focus on the big pitcher.

To be sure, there have been plenty of cases concerning beer before and we have written a number of posts on this drink (see e.g. here and here). In that sense, this may seem like a déjà-brew.

Indeed, alcoholic beverages are perhaps the product that has contributed the most to EU case law and to competition law in particular. Sometimes they were the subject of cases and, even when they were not, their influence clearly emanates from the content of some decisions…

But… wheat a second…. Actually, we can’t comment on this case due to a conflict: AB Inbev was the sponsor of the brewtal open bar we held at our first Chillin’Competition conference. Anything we say could therefore be regarded as an attempt to persuade the Commission to leffe the company be and drop the investigation.

Instead of providing you with our views, we will therefore provide you with some reactions from people who typically seek reactions, the members of the “Brussels competition press corps”, who have a stella reputation as competition commentators and a thorough knowledge of the relevant market. Our sources include Aoife White and Gaspard Sebag (Bloomberg), Rochelle Toplensky (FT), Lewis Crofts and Matthew Newman (MLEX) and Nicholas Hirst (Politico).

Unfortunately, after a few drinks we don’t remember who said what, so we can’t really attribute any quotes, sorry.

According to one of our sources, the decision to open the case was adopted only in light of a special report from the Chief Economist. The aim of the report was to identify the product that enjoyed the highest consumption among officials. This was part of a strategy to first adopt a decision and then lodge a follow-on action for damages suffered by the Institution, much like what happened in the elevators case (see here).

Another Brussels-based journalist reports, on the contrary, that the case originates from an informal complaint by the College of Europe alumni association (based in Place Lux) that, reportedly, is preparing a billion euro class claim.

The “Brussels Bar Association” also claims to be thd representative of the main class affected by the case. We have no confirmation of whether they represent lawyers or actual bars.

Conversations between our sources and parties connected to the case nevertheless all converge in anticipating that defence arguments will be threefold, namely (i) -“Who ever reads the small print on beer cans??”; (ii) “Competition is just one Chimay away” and (iii) “Hasn’t anyone realized that water is more expensive in this country!?”.  Economists in turn, are wondering whether one should factor in hangovers and associated lack of activity to the consumer surplus/deadweight loss analysis.

The case is also expected to shed light on several procedural issues (“if you stop drinking, can you challenge jurisdiction?”). The investigation is nonetheless expected to leffe issue unresolved and to result in consumer uncertainty (“so where do I go to buy my Christmas Kriek supply – Lille or Eindhoven?”, is a question many are asking themselves in the wake of the Commission’s press release).

If any of you has any comments on the case, feel free to comment on this post.

Cheers!

The Court Judgment in Case C-230/16 is out (available in French and in English). And, in the spirit of times, here is an online channel providing the first comment on it.

The judgment follows faithfully AG Wahl’s Opinion, which came out in July (and which we discussed on the blog). It seems to be also in line with the position consistently expressed by the Commission since the Guidelines on vertical restraints.

The vast majority of our readers will remember that the case is about the legality of a ban on the use of online marketplaces by the members of a selective distribution system. The Court has ruled the following:

• Where the conditions of Metro I are fulfilled, a restraint aimed at preserving the luxury image of a product is presumptively lawful – in other words, it falls outside the scope of Article 101(1) TFEU altogether.
• A selective distribution system that provides for an online marketplace ban is not caught by Article 101(1) TFEU where the conditions of Metro I are fulfilled (that is, where the nature of the product requires the use of the system). Such a ban does not go beyond what is necessary to preserve the luxury image of the product.
• An online marketplace ban is not a hard-core restriction within the meaning of Article 4 of the Vertical Block Exemption Regulation if it does not limit passive sales and/or the customers to which the distributor can sell the product.
• The ruling in Pierre Fabre is confined to the specific circumstances of that case, i.e. an absolute ban on online sales (paras 33-34).

More important than the ruling are the implications than one can infer from it, which can be summarised as follows:

• The Court makes it clear beyond doubt that the object of an online marketplace ban is not the restriction of passive sales and/or the customers to which distributors can sell. This is in line with the position expressed by the Commission in the context of the e-commerce sector inquiry.
• By way of consequence: the Court strongly signals that an online marketplace ban is not a restriction by object within the meaning of Article 101(1) TFEU.
• What are the implications? The first implication is that a case-by-case analysis of effects would in any event be required for non-luxury goods. Byzantine discussions about whether Asics or Mizuno shoes qualify as luxury goods seem entirely irrelevant in this regard. The ‘by object’ shortcut would not apply, irrespective of the nature of the good.
• Insofar as an online marketplace ban is not a hard-core restraint within the meaning of the Regulation, the benefit of the block exemption applies irrespective of the nature of the product. Again, the ‘luxury or not luxury’ dilemma will be largely irrelevant in practice as a result.

I have summarised my understanding of the ruling in the table below:

Other comments

Copad was the key precedent all along

The Court approaches the question in the way I would have done it. As I mentioned in July, the key precedent was Copad, an intellectual property case. In Copad, the Court ruled that a trade mark licensor can invoke its rights to prevent a licensee from selling to non-members of a selective distribution system.

That ruling is based on a key premise: if companies cannot protect their intangible property (brand image, trade mark, goodwill) when dealing with third parties, they will refrain from licensing and from selling via independent distributors. Why would firms do something that would force them to lose control of the image they want to convey?

More importantly: why would EU law penalise firms that sell or produce via third parties and favour those that produce in-house? Copad and Coty suggest that EU law is agnostic about the business model that companies choose. There is no reason why vertical integration should be favoured over licensing and/or selling via third parties. And there are many good reasons why the latter should not be treated more strictly.

The protection of intangible property is important for all producers, not only the producers of luxury goods. Asics or Mizuno shoes may not be seen as a luxury product (it is all in the eye of the beholder). This, at the end of the day, does not really matter. What matters is that conveying a particular image may also be important for these companies.

Trade mark law seeks to protect all producers, not only producers of luxury goods. There is no reason why EU competition law should be different. Coty appears to be in line with this position.

The administrability trap in EU competition law

The ‘by object’ prohibition of online marketplace bans has been defended by many in the past few months. One of the arguments that has frequently been invoked is the ease of administration of a ‘by object’ rule. If we know that a practice can be bad for competition, is it not better to lay down a prima facie prohibition so we all know where we stand?

Coty shows that the Court was not impressed with these arguments. If everything were about the easy administration of a rule, then every practice would be prohibited by object, and this is clearly not the case.

What is more, this view ignores that prima facie legality rules are also easy to administer, and are an integral element of EU competition law.

Metro I, where the Court clarified that, in some circumstances, selective distribution systems are presumptively compatible with Article 101(1) TFEU (irrespective of the market share!) is a wonderful example. We know now that the legality rule may apply even when the agreement provides for an online marketplace ban.

 CoRe, CCIA and the VUB held a great conference about competition law in digital markets last week in Brussels. Asked to focus on multi-sided markets, my claim was that the case law already provides enough guidance for us to apply the law to multi-sided business models. I posited –once again- that the real problem we have in competition law is that we are forgetting about the law.

Contrary to what many tend to assume, in the EU we have actually made quite some progress, at least on the judicial front. In fact, my bet is that when the SCOTUS rules on Amex (a case which some expect will provide us with quasi divine guidance), it will say nothing new as regards what we already have in EU case law.

Courts do get it. I witnessed that first hand when I was the guest lawyer at this special seminar organized by the European Association of Competition Law Judges. The problems arise when we don’t listen.

Building on a previous paper (“The Double Duality of Two-Sided Markets“) and on ideas voiced out in other occassions my intervention focused on 6 lessons from the case-law. I would like to believe they result from an objective reading of the case-law (even if, to be sure, I do advise several clients operating multi-sided business models).

The lessons I extract from the case law are the following:

1. One cannot look at different sides of a multi-sided business model in isolation (partly discussed here);
2. The anticompetitive value that was typically attributed to network effects needs to be nuanced (an idea partly discussed here);
3. Cross-market anticompetitive effects require, as a minimum, a showing of anticompetitive foreclosure/elimination of effective competition in the target market (a point also made by Pablo here);
4. The assessment of pro-competitive effects must consider the benefits flowing to all sides of a multi-sided system (see here);
5. Multi-sidedness considerations are part of the legal and economic context to a given practice, not a side issue to examine in isolation as a last step in the analysis (idea anticipated here);
6. The key to competition law enforcement in multi-sided markets has to do with the analysis of the counterfactual (i.e. causality/attributability) (partly discussed here).

I think I will develop these ideas in a proper article. If anyone of you has any comments on these lessons (or on others), please send them my way!

For those lucky enough to be in London next week: Judge José Luis da Cruz Vilaça, President of  Chamber at the European Court of Justice, will deliver a lecture at King’s College London on 14 December. The event is organised by the Centre of European Law and will be chaired by Professor Alison Jones.

As most of our readers know, Judge da Cruz Vilaça has presided over the chamber that has delivered some of the most important recent rulings in our field. He has acted as rapporteur in Intel and Post Danmark II.

In case you were wondering: I am going! You can sign up for the event here.