Archive for the ‘Uncategorized’ Category
Collective Amnesia
The forgotten reason why national competition laws should – literally – not exist.
Article 3 TFEU: 1. The Union shall have exclusive competence in the following areas: (b) the establishing of the competition rules necessary for the functioning of the internal market;
Or why they should be abolished when the internal market will be effective (will it ever?).
Remedy
Assuming that the whole fuzz around the Google investigation is about tactics seeking to abusively deny search scale to rivals, the remedy to restore competition may not be where the Commission and parties are eyeing.
A less intrusive remedy for Google (and its rivals) exists: Unwind the commitment imposed on Microsoft in 2009 to pre-install competing browsers and in particular Mozilla which has Google as the default search engine.
With this Mozilla, and in turn Google, will lose some traction in search.
A possible alternative would be to force Google to install a “search engine ballot screen” in Chrome to overcome end users’ inertia when placing search words in the engine. One could also think of forcing Mozilla to have Bing as its default search engine for a certain share of the market. But this, clearly would be less acceptable to Google.
The bottom-line: there’s more than one option to improve competition in internet search.
NYT
Lucky me, I made it to the NYT again, on the Google investigation. See here.
To be honest, my quote is very lame.
I had a better one though. But it did not make it through.
James Kanter reveals it on twitter: ‘Enforcers risk becoming Don Quixote figures, tilting at windmills.‘
The point is: 4 years to solve a high-tech case under a settlement, come on…
4 years ago, Nokia was the worlwide leader in handsets. And Blackberry was the dominant smartphone player.
In those sectors, 4 years is an eternity…
And antitrust enforcers may not be far from Quixote, who fell into the illusion that he was fighting a cause that matters, i.e. fighting giants which in reality were innocuous windmills.
A question to our readers
Last week at the BSC, Benoit Durand and myself were asked a question that we could not answer.
Does any formal EU act govern the appointment, mission and duties of the Chief Economist? If so, is this act available and where?
Our best guess was that there must be something, as for the decision setting out the function and terms of reference of the hearing officer (see here). But given that we had never seen it, we guessed that it was not publicly available.
We promised we’d do our best this week to get ahold of it.
So if any reader has it or knows how to get it, please let us know.
The Case for some Formalism in Rules of Competition Law
Our economist friends often believe that legal formalism is useless.
I have personally complained about the bad influence that formalistic lawyers had in competition proceedings.
Now, “assume” an economist had written the Treaty rules on Competition. This would give something like:
- Article 101 TFEU: Anticompetitive coordination is unlawful.
- Article 102 TFEU: Anticompetitive foreclosure is unlawful.
With such loose rules, the economic cost of enforcing the law would skyrocket. And so would the economic cost of complying with the law.
The sole saving achieved would be the ink saved in printing and reprinting the Treaty.
Or why too little legal formalism is economically inefficient.
Twilight of the Idols
The Van den Bergh Foods case, aka the Ice Cream case, if often cited as one of the best Article 101 TFEU judgments ever handed down by the General Court.
Many praise its modern, unformalistic approach of vertical ties.
They like its focus on the economic magnitude of the foreclosure yielded by the freezer exclusivity clause.
I too have rallied this optimistic interpretation. In a case note published 10 years ago, I had laudated the General Court for its analysis.
As with novels, I should have applied the rule never read again.
Despite economic improvements in judicial reasoning, the Ice Cream judgment is fraught by several unfortunate logical shortcuts.
A quick reminder: the crux of the case was that Unilever, the largest player in the market (and the incumbent) had given freezer cabinets for free to retailers and forbidden them to store non-Unilever ice creams in those cabinets.
This, in the Commission’s view, yielded anticompetitive foreclosure, in particular in those shops where only one freezer cabinet could be stored because of space constraints.
Interestingly, the typical contract with retailers could be terminated flexibly, under a 2 months notice. Unilever thus made the rather convincing counter argument that as efficient rivals – those who could too offer cabinets for free – were not foreclosed from the market.
The GC and the Commission nonetheless based their case on the fact that despite open termination opportunities, there was a “reluctance” from retailers equipped with Unilever cabinets to terminate their contract. As a result of retailers’ reluctance, rival ice cream producers were harmed.
On cursory analysis, the “reluctance” story was reasonably plausible. But the problem is that the evidence adduced by the Commission and the GC to prove reluctance was quite weak.
Let’s take a look: the reluctance argument seems wholly based on the unproven assumption that retailers who would terminate their Unilever contract would no longer be able to procure Unilever products. Hence, retailers just decided to stay with the contract, as Unilever products were “must store” goods.
But on the facts, the decision and judgment did not exclude that retailers remained free to use a rival freezer and still procure from Unilever without terminating the contract in the first place. This, to me, is a major flaw of the decisions. Retailers could just have trashed the Unilever freezer or tell Unilever to recover it.
An alternative is that the Commission and the GC may have assumed that Unilever would have de facto stopped supplying it products to retailers using a rival freezer cabinet. But this would have been a stand-alone, separate infringement which would have deserved proof under the Brönner standard.
Surely, it may be that the Commission and the GC had in mind a “behavioral” reluctance theory, similar to those used in the Microsoft Media Player and Browser cases or in the ongoing Google investigation.
The idea would have been that retailers were content with their Unilever cabinet, and because of some statu quo bias or of hassle costs, they just reclined on changing freezers.
Again, however, no corroborating evidence of biases and retailers’ ineria appears in the decision and judgment.
A bit disappointing, for a judgment that has been elevated to the hall of fame of competition case-law. But overall, a good ruling.
Hiring
I am looking for a full or (or 2 half time) academic assistant(s), starting on 17 October 2013 at the University of Liege.
This position is for a period of one year.
If things go well, the contract may be turned into a PhD student position.
It offers teaching and publication opportunities.
If you are interested, please send me your CV at nicolas.petit@ulg.ac.be
Convergence Rule – A Spanish Example
The convergence rule of Regulation 1/2003 (Article 3(2) sets that:
“The application of national competition law may not lead to the prohibition of agreements, decisions by associations of undertakings or concerted practices which may affect trade between Member States but which do not restrict competition within the meaning of Article 81(1) of the Treaty, or which fulfil the conditions of Article 81(3) of the Treaty or which are covered by a Regulation for the application of Article 81(3) of the Treaty“.
Often, I have struggled to find concrete examples of such situations.
Our friend Miguel Troncoso Ferrer (Gomez Acebo Pombo) has offered us a very good illustration of this.
A recent amendment to the Spanish Hydrocarbons Act sets out a blanket prohibition of non-binding price recommendations in distribution agreements in the hydrocarbons industry.
This prohibition covers agreements below the 30% market share threshold.
It thus prohibits conduct which is covered by “a Regulation for the application of Article 81(3) of the Treaty“.
And this amendment purports to regulate competition (according to the Preamble of the new statute).
It thus violates EU law. The full analysis is available here: Analysis_On the compatibility with Eu Law of the new Section 43 A
In light of the Italian Matches case-law, publics authorities, national courts and firms can disregard this legislative provision.
@Alfonso: an apology. I did not mean to promote of a rival shop.
New job (2)
Nico just got a new job, as an advisor of the Belgian Competition Authority. Other good friends of this blog, like Laurent de Muyter and Charles Gheur, have also been appointed as advisors to the new authority:
This means that every once in a while Nico will now get to decide over real cases. 
!!
Now that he belongs to the authority I guess he won’t be able to comment academically about their cases, for there could be a conflic of interest… 🙂
Now seriously, congrats to Nico, Charles, Laurent and all other newly appointed advisors.
P.S. And yes, he did get a new car as well, but he doesn’t want to post the pic (I guess he’s afraid that his students will want to scratch it…)
Competition Law Everywhere
In Montenegro, where I spent my hols, the price of a liter of gasoline is €1.38.
This price is the same everywhere in the country. And it is the same in all petrol station networks.
Me find this reasonably cheap as compared to most Western EU countries. But me also find this price curiously uniform.
Two obvious explanations spring to my obsessed antitrust mind: 1. cartel; 2. government regulation.
There’s worse though: a well-known car rental agency has confronted me with a real life example of abusive unfair pricing.
If you don’t return the car with the initial quantity of oil, the car rental company charges three times the price per missing liter of gasoline (!) – unless you pay black cash, in which case they charge you €1.5/liter to refuel the car…
I fully grasp that car rental firms want to recover vehicles with a sufficient quantity of gasoline, so as to avoid the costs of refueling them constantly.
But the alternative would be to charge customers for the missing quantity of gasoline at a rate equal to 1.38€ liter + an average increment covering the cost incurred for refuelling the vehicles.
I have not done the math short of data on this (+ I was on hols), but the 3x price formula looks really excessive.
The bottom line: yet another tactic that seeks to exploit the lazy mind bias of locked-in consumers.
Chillin'Competition 