Last week I wrote a post about the Groupe Gascogne Judgment (and other stuff) which has elicited some interest. Somehow oddly, I will now present counter-arguments against all those who… actually agreed with me.

Given that I wrote about the Judgment within minutes of its publication I obviously hadn’t thought the issue through. My initial reaction was (and regarding these points it still is) that by endorsing the De Grüne Punkt solution (i.e. choosing actions for damages as the procedural path to compensate breaches to the right to be judged within a reasonable time) instead of the Baustahlgewebe one (under which the ECJ itself would reduce a fine on account of the said breach when ruling on an application brought before it), the Court of Justice was adopting the less practical solution, and one that could provoke strange situations. Some of you have developed this last point in several comments to that post.

Now, after some reflection (although not much, to be frank) I think I may see what the Court and one of the commentators to the post meant, even if the Judgment’s reasoning may perhaps not have been crystal clear (please note the understatement).

In my post I only gave one view, and I believe that it’s good that readers also get to see the contrarian arguments. Not that I’m second guessing myself, but I don’t like it when we criticize Judgments/decisions without trying to understand first the reasons underlying the choice of a given approach (believe it or not Judges, clerks and Commission officials are actually clever enough not to be producing absolute nonsense all the time, as some lawyers like to claim). In other words, in some cases they may choose the wrong solutions (particularly if they ever rule against me in one of my cases -not that this actually would ever happen-; please note the implicit advertising claim), but there are always reasons for every approach they chose, and it’s healthy for us to try to identify them and debate them on their merits.

Cutting to the chase: it could be argued that endorsing Baustahlgewebe would have implied creating a specific regime that could only address the problem (a) only in competition cases [given that it is the sole area where the Commission enjoys the power to impose sanctions; in all other cases (frozen assets, for instance) actions for damages would be the only practicable solution], and (b) only in cases where a given company were to lose a first instance appeal before the General Court.  Also, c) an assessment of damages by the ECJ would require it to rule on factual issues (namely harm quantification), when its jurisdicion is limited by the Treaty to points of law only. Furthermore, d) by providing that excessive delay in itself may open the door for an action for damages/a remedy, the ECJ could be effectively avoiding the possibility that “victims” might go to the ECHR (according to the ECHtR’s case law, there’s no “victim” in the sense of Art. 34 of the ECHR when the national legal system already envisages a remedy/compensation for the breach).

I can see how all these might have resonated within a Court like the ECJ. And it is probably true that Gascogne may be more “legally perfect”, albeit arguably at the cost of practicality and risking the odd situations pointed out in the previous post.

In spite of those perfectly valid arguments, I think I liked other solutions better, for instance:

a) one under which both Courts could assess the existence of excessive delays without it being necessary for parties to bring an additional action (the Commission, in fact, has done this in several past cases, and Courts could too). This is not legally unorthodox; it would not not be a matter of damages as such, but a reason to mitigate an initial sanction made more burdensome by the passing of time in the absence of judicial review. A solution of this sort is common to many national criminal law systems and is justified not on the actual damages suffered, but rather on the fact that there was an additional element (excessive time) subsequently added to the intended outcome of condemnation (i.e. the sanction). To counter-argue again against myself: admittedly, the quasi criminal nature of competition law may not be criminal enough for these purposes.

or

b) a compromise, middle-way and probably less legally controversial solution under which the ECJ would be competent to declare a violation of the right to a fair proceeding by account of excessive delays on the part of the GC (as it arguably did in this specific Judgment). Only quantification would then be left to the GC itself should the party wish to lodge an additional action for damages. For full disclosure: this is an alternative solution that we’re actually advocating before the ECJ in a pending case. But it’s reasonable, isn’t it?  😉

On second thoughts, the recent bad case law on the notion of “restriction by object” may incidentally, and unexpectedly, fetter the margins of the Commission, and in particular its ability to handle all cases under the obese Article 9 procedure.

As hinted recently by DG Italianer in a most interesting speech, cases such as Irish Beef (C-209/07), Expedia (C-226/11), Slovak Banks (C-68/12) and Allianz Hungary (C‑32/11) all suggest that agreements which are devoid of the “obvious” capacity to harm competiton are nonetheless “restrictions by object” because they are “serious” violations of the law.

In other words, those infringements are restrictions by object because they are sinful – in competition cases, the Court says “by nature injurious to the proper functioning of normal competition” – so sinful that they should be prosecuted even absent anticompetitive intent or effects.

This line of judicial precedents brings restrictions of competition close to the notion of “infractions objective” known in criminal law. Take murder: you can be convicted of homicide even if you unsuccessfully or unwittingly try to kill someone (in some legal orders, it is even illegal to shoot a dead body). Closer to competition law, take insider trading. You can be sentenced even if you use insider information unknowingly or ineffectively.

The bottom line: such infringements are so morally sinful that they should be prosecuted just for the sake of it. Regardless of their impact. Regardless of their motives. Full stop.

Now, let us revert to competition law. If the concept of a restriction by object means infringements that are morally sinful or morally so “serious” that they should be unlawful for the sake of it, then the Commission should no longer be free to settle such cases and decline to reach a finding of infringement.

This is the rule applied in most criminal law systems, where in principle the gravest infringements (eg crimes such as homicide, rape, etc.) cannot be subject to settlements.

The same should apply in competition proceedings. Restrictions by object ought to be treated under Article 9.  If restrictions by object are that bad, then the sole procedural way to handle them is under Article 7 . Full stop.

The Commission’s decision in Microsoft/Skype contradicts its previous Article 102 decisions in Microsoft I (WMP) and Microsoft II (Internet Explorer).

Read §152 of Microsoft/Skype :

“consumers do not simply use whatever communications product is provided with Windows. The consumers use multiple communications services on multiple platforms, such as Apple iOS and Android, which include their own built-in communications services (Facetime and Google Talk). The parties further submit that some online communications applications such as Facetime and Viber are not even made available for the Windows platform, and yet they are very successful”.

This § tramples on the theory of harm used by the Commission to nail Microsoft in 2004 and 2009:  ie that lazy consumers do not use more than one software (no multi-homing), and that they tend to stick to the the default software preinstalled on the platform (users inertia).

Now, the § reproducted above misquotes the Commission’s decision.

In reality, § 151 starts with: “In addition, the parties claim that consumers do not simply use whatever communications product is provided with Windows” blablabla.

But is this really the parties talking here?

Take a look at the full section of the decision:

“151. With regard to a possible tying between Skype and Microsoft’s products, the Commission considers that most of the arguments mentioned above in order to demonstrate the absence of incentives for a strategy of degradation of interoperability (in particular the necessity for Microsoft to maintain and enhance the value of the Skype brand) are also relevant to the assessment of the strategy of tying. 152. In addition, the parties claim that consumers do not simply use whatever communications product is provided with Windows. The consumers use multiple communications services on multiple platforms, such as Apple iOS and Android, which include their own built-in communications services (Facetime and Google Talk). The parties further submit that some online communications applications such as Facetime and Viber are not even made available for the Windows platform, and yet they are very successful.153. Moreover, consumers increasingly prefer services that offer online communications as part of a broader user experience such as Facebook, the recent Google+ and Gmail, which all run on Windows. 154. Competitors would therefore have many possibilities to market and many different means available to attract consumers. 155. In the course of its investigation, the Commission has not received any substantiated replies demonstrating  that Microsoft has incentives to tie Skype and Microsoft’s products”.

Read in context, §151 sounds like Commission’s thinking.

There is no rebuttal, no discussion of the parties’ submission. And §151 is planted in the middle of bunch of other Commission arguments, all supportive of the view that there is no risk of bundling.

Now, it would have looked bad for the Commission to say black in 2004 and 2009, and then reverse to white in 2011.

So our Commission friends probably decided to use the parties as scapegoats, and (i) conveniently avoid the blame of inconsistency in decision making; or more plausibly, (ii) the pain of explaining why users of communications services are geeks shopping for software, distinct from the lazy users of media players and browsers.

Improper decision drafting…

PS: stay tuned, my little finger tells me that Alfonso will report on this case very soon.

Joint Ventures and EU Competition Law by Luis Silva Morais

This book examines the treatment of joint ventures (JVs) in EU Competition Law, and at the same time provides a comparison with US law. It starts with an analysis of the rather elusive concept of JV, encompassing both concentrative JVs (subject to merger control) and non-concentrative JVs. Although focused on possible definitions of joint ventures in terms of competition law, it also includes a broader perspective (going beyond competition law) on the different legal models of structuring cooperation links between undertakings.

At the core of the book is an attempt to build an analytical model for the assessment of JVs in terms of antitrust law, especially as regards Article 101 of the TFEU. The analytical model used proposes a set of sequential analytical levels, taking into account structural factors and specific factors related to the main constituent elements of the functional programmes of JVs. The model is applied to a substantive assessment of four main types of JVs identified on the basis of their prevailing economic function: research and development JVs; production JVs; commercialization JVs; and purchasing JVs. Also covered are particular situations of joint ownership of undertakings falling short of joint control.

In the concluding part of the book recent developments in JV antitrust law are put into context within the wider reform of EU Competition Law. The book is also comprehensively updated with the latest developments concerning the reform of the EU framework of horizontal cooperation between undertakings that took place at the end of 2010.

Luis Silva Morais is a Professor at the University of Lisbon Law School (FDL) and holds a Jean Monnet Chair of EU Law (Competition and Economic Regulation). He is a founding partner of ‘Luis Silva Morais – Law Firm’ (based in Lisbon). He has been Vice-President of the Privatization Advisory Board of the Portuguese Ministry of Finance (2001-11), Member of the Board of the Portuguese Insurance and Pension Funds Supervisory Authority-ISP (1998-2001) and currently chairs the Research Centre on Regulation and Supervision of the Financial Sector of FDL in scientific partnership with the Bank of Portugal and the ISP. He is a member of several arbitral courts.

November 2013 586pp Hbk 9781841137933 RSP: £95 / €123.50

20% Discount Price: £76 / €98.80 (+ Postage and Packing)

Order Online

http://www.hartpub.co.uk/BookDetails.aspx?ISBN=9781841137933

If you would like to place an order you can do so through the Hart Publishing website (link above). To receive the discount please type the reference ‘ CC B ’ in the voucher code field and click ‘apply’.

Competition Laws, Globalization and Legal Pluralism – China’s Experience By Qianlan Wu

Building upon a theoretical framework and empirical research, this book provides a thought-provoking analysis of the interests, strategies and challenges that China has faced in developing its Anti-Monopoly Law (AML) in the context of economic globalization.

The book comprises three main parts: Part I reviews the directions of convergence of global competition law; Part II provides a contextual analysis of China’s market governance and its strategic interests; and Part III examines the latest enforcement of the Anti-Monopoly Law by focusing on the interactions between global actors and China, the relationships between Chinese competition and sectoral regulators, and the enforcement of global competition law norms in the Chinese context.

This book is one of the first to provide a critical understanding of China’s experience as a new competition regulator, set against the background of the plural sources of global competition laws.

Qianlan Wu is a Lecturer in Law and Senior Fellow of the China Policy Institute in the School of Contemporary Chinese Studies, University of Nottingham, UK. Dr Wu holds a PhD in Law from London School of Economics and Political Science and an LLM from the University of Edinburgh, UK.

November 2013   242pp     Hardback     9781849464321     RSP: £55 / €71.50

20% Discount Price: £44 / €57.20 (+ Postage and Packing)

Order Online

http://www.hartpub.co.uk/BookDetails.aspx?ISBN=9781849464321

If you would like to place an order you can do so through the Hart Publishing website (link above). To receive the discount please type the reference ‘CCB’ in the voucher code field and click ‘apply’.

In reading Commissioner Almunia’s latest speech, I thought to myself: did he changed jobs?

Or is he already campaigning for a position as Internal Market Commissioner ahead of the European elections?

I mean half of the speech is devoted to the banking union and other regulatory issues in the banking sector.

I also read Commissioner Almunia’s antepenultiam speech on the digital economy.

And here I thought to myself: some things never change.

In particular, the sticky, erroneous perception that patents are akin to monopoly.

The reasoning is not straightforward. It comes in two stages.

Stage 1. Introduce an exotic concept (here “gatekeeper“):

“We can distinguish different types of gatekeepers in the online world: search engines, patent holders, network operators, and operating systems”.

Stage 2. Equate the new concept with “dominance”:

“One of the priorities of competition control is to ensure that dominant firms and gatekeepers do not abuse their positions”

A reminder: this is nothing new. In 2004, Microsoft had already been labelled a gatekeeper.

There’s competition law everywhere,

Even in the stockpile of US diplomatic cables revealed by Wikileaks.

A document published by Wikilieaks reveals that in 2009, the US were concerned of the influence of the EU on the shaping of competition policies in Africa (through the Africomp programme).

“The United States may wish to consider becoming a donor member of AFRICOMP in terms of providing in-kind donations in the form of expert advice. Such advice could support the development of effective competition policies in Africa and ensure that European views on competition policy are not the only ones heard by AFRICOMP”

Thanks to my assistant Norman (and now fellow blogger) for the pointer.

And today, the best of the CJEU’s recent output: AG Wathelet’s Opinion in Telefonica v. Commission, C‑295/12 P (in French):

24. Un argument est souvent soulevé à l’encontre de l’approche préconisée dans les présentes conclusions, à savoir que Tribunal ne doit ou ne peut pas «s’immiscer» dans la fixation de l’amende, et de ce fait dans la politique de la concurrence, qui relève de la seule responsabilité de la Commission. Je ne partage pas ce raisonnement dès lors que le Tribunal ne se prononce que sur une affaire particulière. La Commission garde donc toutes ses compétences pour définir et appliquer sa politique générale dans d’autres dossiers.

125. Je déduis de ce qui précède et plus particulièrement sur la base des points 62 de l’arrêt Chalkor/Commission, précité, et 129 de l’arrêt KME Germany e.a./Commission, précité, que, à mon sens, lors de son contrôle, le Tribunal ne saurait s’appuyer sur la marge d’appréciation dont dispose la Commission ou la seule erreur manifeste d’appréciation qu’elle aurait commise en ce qui concerne le choix des éléments pris en considération lors de l’application des critères mentionnés dans les lignes directrices de 1998 ou l’évaluation de ces éléments, pour renoncer à exercer un contrôle approfondi tant de droit que de fait ou ne pas exiger que la Commission explique le changement de sa politique d’amende dans une affaire spécifique.

126. En tout état de cause, selon la jurisprudence de la Cour – même si le Tribunal peut à la limite, le cas échéant, se référer «au ‘pouvoir d’appréciation’, à la ‘marge d’appréciation substantielle’ ou à la ‘large marge d’appréciation’ de la Commission [ce que selon moi il ne devrait plus faire], de telles mentions [ne peuvent] pas empêch[er] le Tribunal d’exercer le contrôle plein et entier, en droit et en fait, auquel il est tenu» (63) (c’est moi qui souligne).

127. Au point 78 de son arrêt Chalkor/Commission, précité, la Cour juge que «le Tribunal ne s’est pas limité à ce contrôle de conformité aux lignes directrices, mais a contrôlé lui-même, au point 145 de l’arrêt attaqué, l’adéquation de la sanction».

128. La Cour a aussi rappelé dans l’arrêt SCA Holding/Commission (64) que «le Tribunal est compétent pour apprécier, dans le cadre du pouvoir de pleine juridiction qui lui est reconnu par les articles 172 du traité CE [désormais article 261 TFUE] et 17 du règlement n° 17 [article 31 du règlement n° 1/2003], le caractère approprié du montant des amendes. Cette dernière appréciation peut justifier la production et la prise en considération d’éléments complémentaires d’information dont la mention dans la décision n’est pas comme telle requise en vertu de l’obligation de motivation prévue à l’article 190 du traité [désormais article 296 TFUE]» (c’est moi qui souligne).

129. Le Tribunal doit donc estimer par lui-même si l’amende est adéquate et proportionnée et est obligé de constater par lui-même que tous les éléments pertinents aux fins du calcul de l’amende ont été effectivement pris en considération par la Commission, étant entendu que le Tribunal doit également être à ce titre en mesure de revenir aux faits et aux circonstances avancés par les requérants devant lui (65).

My assistant Norman has just started a blog on competition and IP law (in French).

To all the readers of this blog who understand French: subscribe to his feed!

I am sure you’ll find it surprising and insightful.

Congrats to Norman for growing the competition blogging family.