Chillin'Competition

I spoke yesterday in Brussels at an event organized by CEPS (Centre for European Policy Studies) under the title “What is a platform and should they be regulated?”.

I will not develop my views here now because (i) I don’t have the time, and, most importantly, (ii) we will very soon be engaging in an “inter-platform dialogue” on this subject with the blog run by our friends (and conference sponsors) at CCIA.

In the meantime, and as a teaser, my presentation is available here: CEPS_Regulating Platforms_Lamadrid , and a short video interview is available here [Youtube, as an “evil platform” seems to have altered the content of the video, as I’m clearly way better looking live 😉  ]

For quite some time now readers of this blog have asked us to write some posts explaining the legal market to those wishing to work in it, and even to offer career advice to young lawyers. We haven’t done that because we, obviously, are not really in a position to give career advice to anyone (much less are we capable of making sense out of the legal market !).

But then we thought we know someone who could do just that. So we have asked Steve Meier, quite possibly the best headhunter  recruiter you’ve never heard of (considering his trade, the fact that you may not have heard of him reveals a level of discretion that is an excellent sign). In a series of four guest posts Steve will be sharing his views on how young (and not so young) lawyers can successfully navigate the Brussels legal market. We leave you with him. Please feel free to post your own views or questions as comments to these posts.

***

Hi everyone, and thanks to Chillin’Competition for this opportunity.

We consider that lawyers can be grouped into four (admittedly broad) bands:

• newly qualified (“NQ”) to about two years of post-qualification experience (“PQE”)
• 2PQE to 5PQE;
• 5PQE to 8PQE; and
• more than 8PQE.

Let me take a moment to mention that some firms are moving away from rigid banding to more merit-based systems where top-performing attorneys are rewarded with higher compensation and/or greater responsibilities.  Nonetheless, the majority of firms still use banding, and reference to it can provide useful guidance to help you benchmark yourself to your contemporaries. You might have a look at the overview of Brussels lawyer profiles located on the “Working with Us” page of our website by clicking here.

In this post we will focus on the first band and on recruiting issues affecting the most junior lawyers.

Avoid working with recruiters.

First and foremost, anyone with less than about two years of post-qualification experience should generally not work with recruiters – even us!

Other recruiters will never tell you this; I just did.

Working with recruiters before you have a couple of years of post-qualification experience can be detrimental to your career, not least because it can actually keep you from getting your all-important first job.  Some recruiters (see “Introducing  .  .  .  Shotgun Sam“) will promise you everything, but they ultimately deliver much less than promised.  They will tell you that you cannot possibly find work without their “help” or that they have direct access to key decision-makers at every law firm.  Be wary!

The truth is that Brussels is a highly competitive market, with many more talented and smart young lawyers than there are roles to fill.  You might think that it does no harm to work with a recruiter or that working with one may give you the inside track or provide some other advantage.  There are at least two reasons why that is untrue:  i) most firms are loathe to pay a recruiter’s fee for a very junior and generally unproven candidate; and ii) a recruiter can do nothing that you cannot do for yourself.  Indeed, a partner of a large firm, one of the big “names” in the Brussels competition market, told me years ago, “If young lawyers don’t have the initiative to apply to us directly, they’ll never succeed here.”

As a practical illustration, you might consider the following scenario: imagine that a recruiter submits your details to virtually every firm in the market; imagine further that, for whatever reason, your application gets no traction.  After a few frustrating months you decide to take matters into your own hands.  You may be unaware of this, but the recruiter is deemed to “own” your candidacy for a period of up to twelve months, and consequently the opportunity to look for a job yourself during that time is severely limited.  Even if one or another of those firms might be inclined to give you a try on the basis of a direct application, the previous involvement of the recruiter will make them think twice.  As a young lawyer looking to get your foot in the door and to prove yourself, in this scenario it would have been much better for you to have made direct applications in the first place.  Things evolve at firms:  although there may be no suitable role today, there may be one in six months, and nothing keeps you from reapplying as circumstances change; however, a recruiter’s previous involvement will almost always keep you out of the running.

Do not fear trainee contracts.

Until you have proven yourself in practice with a couple of years of experience under your belt, firms will want an opportunity to determine whether you are right for a career in private practice (let’s face it, not everyone is).  The interview process can reveal only so much about you and your suitability for the job.  The fact is that more and more firms are hiring young attorneys on a “look-see” basis, deciding only after six or twelve months of working together on a fixed-term or trainee basis whether they want to hire the attorney permanently; even firms that hire permanent associates do so subject to at least a six- or twelve-month probation period.  That being so, you should give consideration to job offers even if they are trainee contracts.  If you do a great job, trainee contracts can lead to great permanent positions!

Seek honest career advice and guidance.

Even though we believe that young attorneys should not work with recruiters, reputable recruiters can be a source of career advice and guidance.  For our part, we are always happy to give advice to promising young lawyers.  We can give you our view of market opportunities, point you in the right direction, or even help with your CV (see “How to Prepare a More Effective CV“).  I was once a young lawyer and I wish that I had had someone to talk to about the market and my place in it.

Avoid market churners.

Read the rest of this entry »

There is a fundamental aspect of Post Danmark II that, I realise, is still poorly understood. I know I have already written quite a bit about the judgment, but it makes sense to say a word about it before the discussion loses topicality.

In paras 70-73 of Post Danmark II, the Court refused to set a de minimis threshold in the context of Article 102 TFEU. This is sensible and, may I add, wholly uncontroversial. When a firm holds a dominant position, anything that it does is potentially exclusionary (in the sense that it ‘is liable’ to have anticompetitive effects).

By the same token, when it is shown that a practice implemented by a dominant firm is likely to have exclusionary effects, it is by definition the case that these effects will be appreciable. Again, I fail to see anything controversial in this regard. Suffice it to think, by analogy, of an exclusive distribution agreement implemented by a supplier with a 35% market share. If this agreement is found to have restrictive effects on competition within the meaning of Article 101(1) TFEU, these effects will be appreciable.

Where does the misunderstanding come from?

The Court refuses to set a de minimis threshold, true, but this fact does not mean that dominant firms’ practices are always abusive. This key aspect of the judgment is not very well understood. As I explained during my talk, Post Danmark II is clear in saying that the exclusionary effects of standardised rebate schemes need to be established. It is simply not enough to assume that this practice can have exclusionary effects.

What is the practical consequence? Standardised rebate schemes may fall outside the scope of Article 102 TFEU if, for instance, the dominant firm is not an unavoidable trading partner, or if the relevant market is not conducive to foreclosure. If the practice is unlikely to have exclusionary effects, it will not be caught by Article 102 TFEU. The fact that the Court refused to set a de minimis threshold is entirely compatible with a finding that the practice is not abusive.

The analogy with Article 101 TFEU.

Allow me to go back to the example I used above to illustrate my point. An exclusive distribution agreement where the supplier has 35% of the market falls outside the scope of the de minimis Notice (the market share is above 15%). It also falls outside the scope of the Block Exemption Regulation (the market share is above 30%). Does this mean that the agreement is necessarily caught by Article 101(1) TFEU? No. Provided that it is not ‘by object’, its likely restrictive effects on competition will have to be established (and not simply assumed) under Article 101(1) TFEU. This point is eloquently explained by the Commission in the Guidelines on vertical restraints (para 96, if you are curious). Well, the same is true in the context of Article 102 TFEU (as far as ‘by effect’ practices, like standardised rebate schemes, are concerned).

Expedia and Tomra: two provisions, a single logic.

As I pointed out in my first reaction on the ruling, the statements about de minimis found in Post Danmark II are only truly relevant for ‘by object’ practices, that is, for those practices that are deemed abusive irrespective of their impact on competition. This category includes, as the law stands, exclusive dealing and loyalty rebates.

The authority or the claimant would not have to show that exclusive dealing is likely to have exclusionary effects on competition to establish an abuse. In this sense, it is different from the standardised rebate schemes examined in Post Danmark II. If evidence of the likely exclusionary effects is not necessary in the case of exclusive dealing, it would not be a valid defence to argue that the practice is de minimis. This is the point made by the Court in Tomra, which from a positive perspective seems uncontroversial too.

One may dislike this outcome, but is it any different from what we observe in the context of Article 101(1) TFEU? Remember Expedia, where the Court held that agreements between undertakings that (i) restrict competition by object and (ii) have an effect on trade between Member States are never de minimis. Expedia and Tomra can be said to follow the same logic. Where a practice is deemed anticompetitive ‘by object’, the appreciability of the effects becomes irrelevant.

Today is “Love your lawyer day”.

As explained by the American Bar Association here, this day is necessary given that: “(i) Lawyers have consistently been the target of verbal bashing, derogatory portrayals and literature is rife with lawyer bashing dated back hundreds of years; (ii) A 2013 Pew Research Center survey found lawyers last among ten professional categories for “contributions to society”; (iii)  According to a 2014 Gallup survey, the public perception of lawyers on honesty and ethics is an unsatisfactory 21%; and  (iv) The portrayal of lawyers in American popular culture, including on television and cinema, is largely negative, which promotes a negative stereotype of lawyers in society”.  

In order to conmemorate the day, we are willing to offer a couple of rounds of beers or two tickets for the Chillin’Competition conference to whoever can tell the best joke about lawyers on the comments to this post. The winning joke will be that with more thumbs up by next Friday 🙂 

For some posts from the past on the profession, you can read our “Is associate lawyer the unhappiest job?” or my take on “What makes a great lawyer“.

I spoke yesterday at this event in Madrid about the legal challenges brought by the sharing economy, and about how these can help us improve existing regulation in many markets. This is a topic that elicits very conflicting and sometimes passionate views, but, as I explained, without frictions between reality and the law there would be no progress (and much worse, no lawyers).

The topic is not directly related to competition law, although it has much to do with EU Law and with the interaction between the law and the competitive process. It also has some links (althoguh less than it may seem) with a topic I will be discussing in Brussels in a few days: should online platforms be regulated?

My presentation was in Spanish, but I’m so proud of the ppt I used (the result of an unevenly shared effort with my friend Enrique Colmenero) that I can´t help posting it here. You will see an app that we have created with am interface that might seem familiar and that enables you to find different categories of lawyers near you 😉

You can check it out here: Sharing Economy _A.Lamadrid

The news has been out already for a while (thanks, Gianni!). Paul Nihoul, Professor of Law at the University of Louvain, has been proposed by the Belgian Government as a candidate for the General Court (he would join on 1 September 2016). Warmest congratulations from Chillin’ Competition!

I have known Paul since 2010. He was a member of my thesis jury and we have remained in touch since (last time in Japan for the ASCOLA conference). I would emphasise a personality trait that will no doubt assist him in his duties at the General Court. Paul is genuinely open to views that are different to his and is an excellent listener. His reaction when he read a blog post of mine that contradicted his views illustrates this very well. He was the one to take the initiative and contacted me to understand my position. He then invited me to contribute with a dissenting piece to a volume he is editing on the topic! This is definitely the openness one hopes to find in a judge.

I will also mention that his students have very good memories of him as a teacher (as I have wonderful memories of the day of my PhD defence). Many of his students from Louvain come to the LSE for an LLM, and it is fairly clear that it was Paul who sparked their interest in Competition Law. The ability to attract talented young students to our discipline is something for which we should all be grateful!

I was delighted to give a presentation on Post Danmark II in the Lunch Talk organised by the GCLC in Brussels earlier today. My slides can be found here. I am really grateful to the organisers and to Denis Waelbroeck, who chaired the session, for the invitation. The discussion with Nicholas Khan (European Commission) was really interesting.

Several participants in the Lunch Talk were of the view that some passages in Post Danmark II are not clear. In my presentation, I chose to avoid discussing individual paragraphs and focused instead on the aspects of the ruling that I find to be clearer and less subject to interpretation. The key points I made can be summarised as follows:

• The days of Michelin II and British Airways are over:
  • A two-step test: The single most important contribution of Post Danmark II relates to the factors to consider when establishing the abusive nature of rebate schemes that are not conditional upon exclusivity. In Michelin II and British Airways, the assessment of ‘all the circumstances’ revolved around whether the practices had a ‘loyalty-inducing’ (or ‘fidelity-building’) effect. In the world of Post Danmark II, this is no longer enough (at least as far as standardised rebate schemes are concerned). The ruling sets out a two-step test that makes it necessary to consider both (i) the nature and the operation of the rebate scheme and (ii) the features of the relevant market, the regulatory context and the extent of the dominant position (paras 29-30).
  • ‘Loyalty-inducing’ rebates are not abusive by object: In Michelin II, the GC took the view that ‘loyalty-inducing’ rebates are abusive by object (para 241). Similarly, in British Airways, the GC held that the scheme at stake in the case served an exclusionary purpose (para 288). After Post Danmark II it is clear that these schemes are only caught by Article 102 TFEU insofar as they are likely to have an exclusionary effect on competition. Thus, they do not fall within the ‘by object’ category.
• Towards the analysis of effects: Michelin II and British Airways were controversial cases because the impact of the practices on competition was not considered in the analysis. The exclusionary effects of the schemes were simply assumed to derive from their ‘loyalty-inducing’ nature. By contrast, the analysis of effects is an integral element of the legal test set out in Post Danmark II. The factors considered by the Court include the (i) extent of the dominant position; (ii) the coverage of the practice; (iii) the regulatory context and (iv) whether the dominant firm is an unavoidable trading partner. I pointed out that there are clear similarities between these factors and those sketched by the Commission in its Guidance. The threshold of effects (i.e. likelihood) is also the same.
• Open questions: The most obvious question raised by Post Danmark II is whether the same analytical framework applies to target rebate schemes. It is difficult for me to think of a reason why it should not. The second question is whether the ‘by object’ category is appropriate for exclusive dealing and loyalty rebates. The exclusionary potential of these practices, when implemented by dominant firms, is undeniable. The issue is instead whether it is appropriate to simply assume the exclusionary effects of these practices if this is not sufficient under the test set out in Post Danmark II. After all, rebates (including standardised schemes) are problematic from a competition law perspective when they come close in their nature and operation to exclusivity obligations. Why, then, should they be treated differently?

by Alfonso Lamadrid and Sam Villiers

You may remember that earlier this year we commented on AG Wahl’s Opinion in AC-Treuhand (C-194/14 P) (see here) and anticipated that, in spite of its thought provoking reasoning, it was likely not to be followed by the Court. Well, the ECJ’s Judgment was released on Thursday, and, as expected, the General Court’s Judgment was upheld.

To briefly recap, the case involved a Zurich-based consultancy (AC-Treuhand) which was hired by cartelists to arrange and participate in meetings, gather and circulate data, moderate tensions and foster commitments, in exchange for remuneration [Note: If any other facilitator reads this post, please remember our hotel offer]

The General Court held that the company infringed Art. 101(1) TFEU for its role as a cartel “facilitator”, despite not being active in the affected markets (tin stabilisers and ESBO/esters sectors). [Parental advisory: We thought about using this image to illustrate what a facilitator does, but then chickened out; if you access it, it’s under your own responsibility]

The first—and most important—ground of appeal (of four) asserted by AC-Treuhand in its appeal was that the General Court was wrong to hold that (i) the conduct of a consultancy firm which provides services to a cartel falls within the ambit of Art. 101(1), and (ii) that that interpretation was reasonably foreseeable at the time of the infringement.

On this first point, departing from the approach of AG Wahl (summarised in our previous post; see hyperlink above) the ECJ embraced an expansive notion of Art. 101(1). The Court stated that there is nothing in the wording of Art. 101 indicating that the prohibition is only directed at parties active in the affected markets (para. 27), and that it is well-established that even passive participation may be caught by Art. 101 (para. 31). The Court went on to state, at para. 35, that “it is apparent from the Court’s well established case-law that the text of Article 81(1) EC refers generally to all agreements and concerted practices which, in either horizontal or vertical relationships, distort competition on the common market, irrespective of the market on which the parties operate, and that only the commercial conduct of one of the parties need be affected by the terms of the arrangements in question…”

The Court also unsurprisingly relied upon the overarching aims of Article 101 to justify its stance, underlining, in para. 36, that “[t]he interpretation of that provision advocated by AC‑Treuhand would be liable to negate the full effectiveness of the prohibition laid down by that provision, in so far as such an interpretation would mean that it would not be possible to put a stop to the active contribution of an undertaking to a restriction of competition simply because that contribution does not relate to an economic activity forming part of the relevant market on which that restriction comes about or is intended to come about.”

As you may recall, Wahl, in recommending the ECJ to annul the GC judgment, stated that “in order to be a party to a cartel (“the undertaking in question must also be under normal market conditions, a competitive constraint for the other cartel members. It is only where the undertaking in question represents a competitive pressure worth constraining that it is capable of constituting such a constraint”) (para. 51). In his view, since AC-Treuhand was not active in the market, it could not have represented a competitive constraint, and could therefore not have restricted competition in the sense of Art. 101.

Wahl’s arguments—which are set out in more detail in the previous post—concerning this first ground of appeal make sense, and would probably have been endorsed if EU competition law were a discipline like any other.

The reason why we anticipated that his Opinion would not be followed is that EU Competition law has often not been treated like other areas of the law. Be it because of its economic roots, be it because of the width of its main provisions, or be it because of it forming part of the similarly peculiar system that is EU law, EU competition law has been treated as a different animal. It is a sphere where full effectiveness, effet utile, is the main concern, and where wide interpretations prevail. Indeed, the vague wording of the provision never prevented it from encompassing not explicitly typified conduct (starting with vertical agreements).

Indeed, as we observed in a previous post (with some steamy drafting…) EU Courts have made it clear that “in the nebulous field of competition law the principle of legality has more vaporous contours”. That previous post focused on a GC statement that said that “(…) the use of imprecise legal concepts within a provision does not prevent liability being established as against a person who contravenes it. As the Commission points out, if it were otherwise, an infringement of Article 101 or 102 TFEU – which are themselves drawn up using imprecise legal concepts, such as distortion of competition or ‘abuse’ of a dominant position – could not give rise to a fine without the prior adoption of a decision establishing the infringement“. 

Although it is highly unlikely that the Treaty drafters had an AC-Treuhand type situation in mind when drafting the competition provisions, and even if the legal logic underlying AG Wahl’s Opinion is hardly disputable, we can also agree with the ECJ that there also seems to be no reason, under either the precise wording of Article 101(1) or taking into consideration the ‘spirit’ of the competition rules, why the actions of AC-Treuhand should not be caught within the embrace of Article 101(1).  After all, it participated in an agreement which met all the requirements to fall under 101. A different interpretation would seem to preclude, for instance, the liability of associations of undertakings when not directly active in the market.

As for the second limb of its first ground of appeal, AC-Treuhand argued that it was not ‘reasonably foreseeable’ that its conduct would fall within the Art. 101(1) prohibition, infringing the principle that offenses and penalties must be defined by law. In response, the Court makes clear that foreseeability depends on many factors (“content of the text in issue, the field it covers and the number and status of those to whom it is addressed”), but also that a law may be foreseeable even if legal advice is required to assess potential consequences of the given conduct, particularly in the area of professional services where the Court suggests that an elevated standard of care in evaluating legal risk applies (para. 42). That raises interesting issues that deserve a post of their own. To be continued…

On Thursday last week AG Wahl delivered his Opinions (in this post we will only discuss one) in the appeals against the General Court’s Judgments endorsing a Commission’s decision requesting information to a number of cement producers. The case is one of maximum importance on the procedural front, and the ECJ’s Judgment is set to clarify what the Commission can and cannot do with regard to information requests.

As you might recall, I (who –disclosure- acted as a lawyer for one of the companies appealing in first instance) already commented on the General Court’s Judgments here.

The Opinion proposes to annul the GC’s Judgments and the Decision. As para. 173 states, in AG Wahl’s view the decision was unlawful because “it contained an insufficient statement of reasons regarding the purpose of the request, it did not fulfill the requirement of necessity, and it misinterpreted the notion of “information” within the meaning of Article 18 of Regulation No 1/2003”. In the AG’s view, “each of these legal errors is, by itself, sufficient for the annulment of the whole decision”.

At first sight, anyone not having read the Opinion in detail may be tempted to think he arrives to this conclusion on a basis of a too strict or rigorous test. Not at all. I’m happy to offer a beer (an AB InBev one, since they are a conference sponsor) to anyone who can point to a single paragraph in the Opinion that does not strike the right balance between the powers that the Commission needs to have to carry out its job properly and the rights of investigated companies. What is extreme in this case is not the Opinion, but rather the challenged decision.

In addressing the specific situation of the case, AG Wahl also addresses the underlying general issues related to the broad question he says the case poses in para. 1 of the Opinion ( “What are the conditions for, and limits to, the Commission’s power to require, by way of decision, undertakings to supply information in the context of investigation relating to possible breaches of EU competition rules?”)

The Opinion starts off with a background introduction to the legal regulation of requests for information under Regulation 1 (para. 22 to 28). It refers to established case-law and reads in a way that reminds one of the underlying idea in Deutshe Bahn: the Commission enjoys great powers for good reasons, but it is precisely because of that that EU Courts must be careful to police any improper use thereof.

Paras. 31 to 55 of the Opinion deal with the issue of whether the statement of reasons in the RFI was sufficient or not. Para. 33 makes it clear that in the AG’s view the case-law on inspections applies mutatis mutandi, which to me is pretty uncontroversial. In para. 36 it recalls that the General Court itself said that the statement of reasons in the decision had been drafted in “very general terms which would have benefitted from greater detail and [warrant] criticism in that regard” (at the oral hearings I attended the General Court had been quite critical on this point, more than the judgments show). The AG demonstrates some fair flexibility towards the Commission in paras. 41 to 45, where he admits that the statement of reasons could also, in theory, be found in the decision opening proceedings (43) or even “indirectly or implicitly” in the questions asked. In this case, however, he observes that the questions were “extraordinarily numerous and cover very diverse types of information” and made it “extremely difficult to identify a connecting thread”. I would suggest you read para. 46 of the Opinion to see some examples of the questions we had been asked; you’ll be amazed. Quite rightly, and in one of the key recitals of the Opinion (47), AG Wahl states that if the connecting thread was “a complete mapping of the undertakings’s revenue and cost structure to enable the Commission to analyse it by econometric methods (comparing it with those of other companies active in the cement industry), [which is exactly what this exercise was about!] it could be questioned whether such a broad and all-encompassing request for information is at all appropriate under Article 18”, noting that perhaps a sector investigation would have been more appropriate. Amen.

Para. 50 is also interesting in as much as it says that a different, stricter, lever of precision should be required from statements of reasons in advanced stages of the investigation. In 51 he finds it “unexcusable” that in spite of all the info provided to the Commission over years the companies were “left in the dark” regarding the precise scope of the investigation, and in 52 he observes that the scarcity of information on the suspected infringements also makes judicial review more difficult.

Paras. 56 to 66 are also perfectly sensible, to the extent that they are even not so interesting. In them he says that the GC was right in holding that the Commission did not need to justify why it sent the RFI by decision instead of by simple request or why it was setting the time-limits it set.

Paras. 70 to 95 of the Opinion, dealing with the “necessity” of the information are in my view the key and most interesting ones:

Read the rest of this entry »

I’m typing as I listen to Commissioner Vestager live at the press conference announcing the decisions considering the tax rulings granted by the Netherlands and Luxembourg to Starbucks and Fiat as illegal State aid.

I have just read the press release and, whereas it might not seem to be saying much on the legal issues, it actually does trigger a few thoughts; for now let me just address one:

Does selectivity have anything to do with ideal economic reality?

According to the press release, the rulings at issue are considered “selective” (a necessary requirement for State aid to exist) because they endorsed “artificial and complex methods” and “do not reflect economic reality”.

Under EU law, at least until now, selectivity was assessed by comparing whether a public measure treats some companies differently than others by deviating from the ordinary way of doing things.

Never before -and we have done quite a lot of tax State aid cases- have I seen a measure considered selective on the basis of a comparison not with how things are normally done , but with an ideal reconstructed method of how things should have been done.

To be continued…