Chillin'Competition

I have read with great interest the report on the Intel hearing that Trevor Soames shared via Chillin’ Competition. I now feel I have a good sense of what went on and, more importantly, of what is at stake.

Above all, the hearing has revealed the Court of Justice will be making a choice between legal consistency and continuity. It is not a secret that courts typically lean towards stability, and thus tend to favour the latter. More often than not, it is sensible to do so, primarily because it preserves legal certainty.

Sometimes, however, continuity can be the very source of legal uncertainty. Where the case law is plagued with inconsistencies, it may not be possible to tell in advance whether a practice is lawful or unlawful. In such circumstances, favouring continuity becomes counterproductive. It may indeed provide stability, but at the price of making the case law impenetrable. If legal certainty is to be achieved, it may be necessary to refine it.

As the law stands, exclusive dealing and loyalty rebates are prohibited as abusive by object under Article 102 TFEU. These practices are only acceptable where the dominant firm is in a position to provide an objective justification. I see the attraction of continuity, and I certainly understand the reluctance to depart from a line of case law that dates back to the 1970s. Thus, I would not be surprised if the Court of Justice went for stability in Intel.

The hearing has made apparent, on the other hand, that the prohibition by object of exclusivity and loyalty rebates is a source of legal inconsistencies. It is simply not possible to reconcile this line of case law with other rulings. This is the reason why rebate cases remain controversial almost 40 years after Hoffmann-La Roche, and the reason why the Commission reviewed its enforcement priorities a decade ago.

The existing legal inconsistencies have become, if anything, more apparent after Post Danmark II. This idea is clearly illustrated by comparing the legal treatment of standardised rebates schemes (at stake in Post Danmark II) with the legal treatment of exclusive dealing and loyalty rebates (at stake in Intel).

Consider the example of a standardised rebate scheme that only covers 1% of the market. Is this practice prohibited under Article 102 TFEU? Almost certainly not. The Court explained in Post Danmark II that a standardised rebate scheme is only abusive if it is likely to have exclusionary effects. The Court also mentioned the coverage of the practice as one of the factors that determines the likelihood of such effects. And it is very unlikely that a rebate scheme that covers 1% of the market will be exclusionary.

How about an exclusive dealing agreement that only covers 1% of the market? If the supplier is dominant, this agreement would be prima facie prohibited by object. It would be very unlikely to have exclusionary effects. As the case law stands, however, this fact is irrelevant. It would still be unlawful.

I gather from the reports of the hearing that many of the questions asked by the Advocate General and the judges focused on this inconsistency. This is not surprising. It is difficult to think of a reason why loyalty rebates, on the one hand, and standardised schemes, on the other, should be treated differently under Article 102 TFEU (most probably because there is not a single one). The case law (Michelin II, British Airways, Tomra) shows that loyalty and standardised rebates are similar in their nature, purpose and (pro- and anticompetitive) effects (so much so, in fact, that it is sometimes difficult to distinguish between them in practice).

Against this background, I feel that, in this particular instance, continuity appears to do clearly more harm than good, and that, accordingly, consistency should be favoured instead. What I do not know, alas, is whether the Court will come to the same conclusion.

Below is the second part of Trevor Soames‘ excellent, original and very detailed narration of the Intel Hearing held yesterday in Luxembourg. Chapter 1 deals with jurisdictional issues; Chapter 2 with rebates; Chapter 3 with procedural issues and Chapter 4 with fines. Enjoy!

Prior to the commencement of proceeding the Court asked the parties to address their oral pleadings to three questions, as follows “Pursuant to Article 61(2) of the Rules of Procedure, the parties are requested to focus their pleadings on the Commission’s jurisdiction over the agreements concluded between Intel and Lenovo for 2006 and 2007. The parties are also requested to state their views regarding the impact of the judgment in Post Danmark (C-23/14) on the characterisation as loyalty rebates applied to agreements concluded by Intel and on the procedural handling of the interview conducted by the Commission with Mr D.”

The following report seeks to reflect fairly and as precisely as possible what the different parties said, dealing with each of the issues in turn (although, for the sake of brevity, the closing speeches are not recorded here).  As there is no Rapport d’Audience and as a result non-parties have no access to a summary of the pleadings, the oral argument provides an important insight into what each side has said to the Court in this very important case on a number of key issues.  Also, and importantly, the questions posed primarily to the Commission and the extensive Q&A by AG Wahl in particular perhaps gives some insight into the direction of travel he may be following in the preparation of his Opinion.  Will that Opinion provide a much hoped for clarification in this important area of competition law as well as a correction to the much-criticised judgment of the General Court in Intel?  Will AG Wahl’s Opinion have the same importance and impact of a number of his other Opinions in the competition law arena, such as in Cartes Bancaires.  We will have to wait and see.  And, of course, even after the AG opines we will have to wait to see the extent to which the CJEU follows his advice.

The report therefore seeks to provide a logically structured yet still verbatim account of yesterday’s hearing, with some commentary and observation contained in the final part (which will come tomorrow).

Read the rest of this entry »

Our call for Chillin’Competition special envoys to the Intel hearing caught the attention of  Trevor Soames, who volunteered to cover it for the readers of this blog. It’s a luxury for us to post his chronicle of the hearing held today. Below is a first teaser. A more complete report is literally on its way from Luxembourg:

***

In a dramatic and sometimes stormy hearing today the Grand Chamber of the Court of Justice held an oral hearing on Intel’s appeal against the General Court’s decision upholding the Commission’s Article 82 infringement decision.  The strong bench was led by CJEU President Judge Koen Lenaerts, with former CFI da Cruz Vilaça as Juge Rapporteur and Nils Wahl as Advocate-General.

The Court asked the parties to focus their oral pleadings on three specific questions and thereafter Commission counsel was peppered with multiple follow up questions, initially from da Cruz Vilaça and then Nils Wahl.  Judge Eugene Regan also asked a single but incisive question.  The hearing overran its allotted time and raised a number of important issues.

One had the sense that the Advocate General is preparing to deliver a profoundly important Opinion shedding light on numerous controversial issues, including the validity of the General Court’s tripartite categorisation and its consistency (or not) with case law such as Post Danmark II, issues of jurisdiction and due process.

A full report will be published later today.

Counsel at the hearing were Nicholas Khan for the Commission supported by a distinguished team from the Legal Service led by Theofanis Christoforou and senior officials from DG Competition including DDG Cecilio Madero. Intel was represented by Daniel Beard QC and for the intervener ACT, Jean-François Bellis.

-The ECJ Intel hearing will take place next Tuesday (21 June). Chillin’Competition would like to be there, and since Pablo and I have real works to do we are looking for Special Envoy to cover it for us. We offer the blog to anyone who is able to attend and wants to comment it for our readers. As compensation, a few beers or a lunch. If interested, drop us a line ! Our offer is open to lawyers, students, clerks who may prefer anonymity, professional journalists or other anonymous contributors. It’s about time that someone writes something serious in here…

–Wouter Wils  just published a new piece discussing the past 20 years of leniency policy in the EU. It’s available here. Some might think it’s an obituary given recent concern about its future… 😉

-Speaking of leniency, an ECJ Judgment rendered last Friday (mitigating my most recent cartel litigation stats) concludes that the fact that the Commission is in possession of a document implies that it has knowledge of the content of that document (even if it hadn’t really understood it or realized about it), so the fact that a leniency applicant made it aware of elements the Commission wasn’t aware of cannot be rewarded. I’m not exaggerating, para. 72 of the Judgment says “it must be held that the Commission’s possession of evidence amounts to knowledge of its content, regardless of whether that evidence was actually examined and analysed by its services”. Well, that is the logic I apply each time I buy a book (assuming its possession will automatically mean knowledge of its content regardless of whether I analyse it), and my experience tells me that may not be right. Btw, that reasoning may open some interesting new doors (e.g. for determining what is a notification under State aid law or for companies accused of providing incomplete or incorrect info…).

-Many of you have asked in private about our opinion concerning competition issues in Microsoft’s acquisition of Linkedin. Not that I have given it much thought, but since Microsoft is a shareholder in Facebook, this could perhaps be a nice test case for Elhauge‘s “Horizontal Shareholding” theories.

-Instead of writing on this blog I have been commenting on others. For an interesting discussion on the notion of beneficiary/advantage in relation to a case in which I’m directly concerned (and on which my litigation stats crucially depend given that we are acting in 25 proceedings against a tax State aid decision recently annulled by the General Court and now appealed before the ECJ), see the comments to this post on European Law Blog (seems my last comment is still awaiting moderation).

-Pablo has been busy as well, speaking to judges in Madrid, to College of Europe students in Bruges, celebrating his birthday and his against all odds successful marriage proposal (congrats to him, not so much to her), etc. 😉

-And for those of you wondering what happened with Commissioner Vestager´s Twittelphant, it seems like after a premature celebration we might NOT be the winners (even after resorting to the dirty tactic of leveraging the blog’s market power). Since my son had already given it a name I will now have to get him another elephant!

Dear readers of Chilling Competition. We need you.

The world recently movilized because of a gorilla. Some time ago this blog also movilized to help in the search of a parrot lost by Trevor Soames (see here). Today we are asking you to change the fate of a knitted elephant.

Commissioner Vestager has knitted an elephant (some wondered what the Commission was doing these days 😉 ), and she has offered it to however gets the most retweets in the comment to her tweet. I saw this while boarding a plane and gave it a try. Granted, my response is not elephantastic but this blog needs a pet, so we need your help. In case it helps (playing the cuteness card…) my 21 month son Edu (who already helps me prepare hearings) would be its custodian.

So please help us by retweeting (and asking your family, friends to do it or by creating fake Twitter profiles 😉 ) this :https://twitter.com/lamadridalfonso/status/740808558611189760

A colleague just congratulated me for an article included in an ebook that was recently published on Competition and Platforms. Interestingly, I did not know that the book was out nor that it included my piece!

In any case I suggest you download it and take a look. It’s sponsored by our friends at CCIA and edited by a former colleague Aitor Ortiz (now at Competition Policy International). It compiles a number of interesting pieces on multi-sided markets.

Mine (“The double duality of two-sided markets”) was initially written as a speech for the Pros and Cons conference in Stockholm and was later published in Competition Law Journal, so it is also multi-published and multi-used. Talk of multi-homing….

The ebook is available here. It features the following pieces:

-Understanding Online Platform Competition: Common Misunderstandings By Daniel O’Connor

-The Move to Smart Mobile and its Implications for Antitrust Analysis of Online Markets By David S. Evans, Hermant K. Bhargava & Deepa Mani

– Failed Analogies: Net Neutrality vs. “Search” and “Platform” Neutrality By Marvin Ammori

-Antitrust Regulation and the Neutrality Trap: A plea for a Smart, Evidence-Based Internet Policy By Andrea Renda

-Multisided Platforms, Dynamic Competition, and the Assessment of Market Power for Internet-Based Firms By David S. Evans

-The Double Duality of Two-Sided Markets by me.

-Should Uber be Allowed to Compete in Europe? And if so, How? By Damien Geradin (Juan M. Delgado & Anna Tzanakis, ed.)

-Online Intermediation Platforms and Free Trade Principles – Some Reflections on the Uber Preliminary Ruling Case By Damien Geradin

-Competition Policy in Consumer Financial Services: The Disparate Regulation of Online Marketplace Lenders and Banks By Thomas P. Brown and Molly E. Swartz

-Legal Boundaries of Competition in the Era of the Internet: Challenges and Judicial Responses By Zhu Li

-Can Big Data Protect a Firm from Competition? By Anja Lambrecht & Catherine E. Tucker

These days seem to be short on news on the competition front, as confirmed by several calls I have received from journalists asking whether we knew why nothing seems to be happening and when we expect something to happen. Well, no clue.

But what worries me the most about this apparent inactivity (a mirage in many ways, as I know for a fact that some Comp units are swamped) is that arguably there will certainly be less decisions to appeal. This is not news, but a clear tendency in our field as a result of less leniency (arguably related to the Damages directive?), more settlements, more commitments, etc. You may remember that I discussed all of this in a post titled “The diluted legality of competition law“.

That is worrying for many reasons (one of them being that the law should be driven by Courts, not political specialized agencies, who are primarily responsible for setting enforcement priorities), but today I’ll be selfish and underline the one that bothers me personally: it means that we are losing the most interesting, most legal and most fun part of this job, litigation. 

Last week I made a joke about how I would work for free representing the supermodels targetted in a cartel probe [by the way, you should know that none of the supermodels who called me last week were interested in my work; it is frustating when people only judge one by the looks…;) ]

But last week I also intervened in hearings at the General Court (my colleagues also participated in a high-profile State aid one this Tuesday before the Grande Chambre of the ECJ) and I kept on thinking how I really would do that for free (Note for clients: please ignore this).

I’m particularly fortunate to be in a place where litigation is a great chunk of the work (I’m currently involved in more than 40 ongoing EU Court cases -admittedly many are joined- and in the past alone year intervened in, I think, 8 hearings) and there is nothing like it. Without a doubt, it is in Court, and drafting Court submissions where I’ve learnt the most. In fact, many of the best lawyers I know have significant litigation experience.

Inevitably, sometimes you win (this very same morning we entirely won 8 Joined cartel cases in which we represented the Commission before the General Court; since you won’t read the 116 page Judgment, here is the press release) and sometimes you lose. However frustating the defeat, I’ve thoroughly enjoyed every Court case in which I have worked. Some advice for young competition lawyers: when choosing a firm, make sure they are involved in many Court cases!

By the way, given the nowadays scarcer cartel appeals and the practical impossibility of succesfully appealing a merger decision (which I learnt the hard way), litigation is now likely to focus eminently on many state aid decisions and on a handful of abuse of dominance cases. Hopefully, the quite controversial addition of new judges to the General Court will imply a relaxation of the very strict rules of admissibility in State aid and a more thorough and detailed scrutiny of abuse of dominance decisions in which companies decide to trust Courts rather than conceding (on this latter question, see AG Wathelet’s “Commitment Decisions and the Paucirty of Precedent“).

I offer my services for free to defend any individual affected by this investigation:

Supermodels colluded to fix prices, regulators say 

Happy also to participate in the “beauty contests” that I suppose will be held to retain lawyers. 

I’m also available and willing to meet informally to discuss the case in pre-contractual engagements.

A few weeks ago some of my statements on the impact of the Commission’s Pay TV case featured in The Hollywood Reporter (see here).

In essence, I explained that in spite of appearances, this case is not about TV licensing but about the financing of film productions, and that if the case were to go forward, the fragile financing structure of European filmmaking would collapse.

Back in January we tried to make the same point to the Commission. At the oral hearing I shared my floor time with Rebecca O’Brien, producer of Ken Loach films, who explained (this has all been made public elsewhere) how delicate the financing ecosystem of independent filmmaking  is, and how the Commission’s case could put the EU industry at risk. She explained that without the current legal framework governing territorial exclusivity of films, Ken Loach’s films would simply not exist.

Well, yesterday Ken Loach’s new film won the Palme D’Or at Cannes. That’s a useful reminder of the importance of what we are talking about.

And Chillin’Competition was there to celebrate. This is one of the perks of our job. To see Pablo and myself marching on the red carpet (admittedly, I may have used too much facial make up….) 🙂

Following Alfonso’s cliffhanger, I guess it is my turn to share the good news with you: I have been appointed Visiting Professor at the College of Europe! I will be in charge of the seminar on Network Industries, which has been taught this year by Pierre Larouche and was run in the past by Damien Geradin. In practice, it means that I will be in Bruges a few times every year, and, of course, that I will get to see Alfonso and his family more often

As you may imagine, I am delighted about it. Bruges is a very special place for me. It is where I realised that I wanted to do a PhD (or rather, that the only thing I wanted to do is a PhD) and where I discovered a field that I loved and that came naturally to me (I chose not to study economics as an undergraduate, but I did not know that the most economic of legal disciplines would choose me).

You will hear alumni of the College say that it is a great experience for students (like Alfonso did here). And they are right. But I would say that it is even better as a first stop for aspiring academics. During my time as an assistant there, I had complete freedom to read, think and write. On the other hand, being in contact with top academics and practitioners helped me develop a good understanding of the legal system and an instinct for meaningful research questions. The prospect of being closer to (and part of) that unique atmosphere is very exciting.

Have a very good weekend!