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Our very own disclaimer
After reading the post written by Nicolas on Friday, I realized that we need a disclaimer too. Here it is:
The views reflected in our posts do not necessarily represent the views of Chilling Competition or of its authors. They merely reflect the thoughts that crossed our minds at the exact date and time that appears under each post. Those thoughts may actually be radically opposite to the ones that crossed our minds on the following second.
– If anyone feels offended or dislikes any of our posts, then we suggest that you assume that our opinion has evolved since the date of publication and that we have embraced more reasonable opinions.
– If, on the other hand, you like what we say, we recommend that you assume that since our opinions were sound, we will not have felt the need to change them.
I wish I was…
During a recent conversation with a Judge, he mentioned that he felt envious of competition agencies (we were talking about the European Commission) because they could easily behave in a “schizophrenic” way, taking one stance in one case and a completely different one in another. He argued that courts are much more concerned about respecting their own precedents (as I pointed out, there are also some nuances to this view) than competition authorities are. In my view, there is a lot of truth to this statement; competition enforcers do not feel bound by their decisional practice because the Court has endorsed the view that each case must be dealt with in light of its specific circumstances. Moreover, progressive interpretations of the law (notably with regard to unilateral behavior) show that some national competition authorities as well as the European Commission do not necessarily feel obliged to follow the case-law neither. To a certain extent, much of this could be understood, but only provided that adequate reasoning is offered to justify that the circumstances merit a change of approach. Sadly, this is not always the case (although, to be fair, the Courts are not a paradigm of transparency when they overrule their previous case-law neither). I´m sure you can think of quite a few examples of radical unexplained shifts.
This conversation made an idea spring to mind: we should ask you who or what (within the antitrust world; yeah, we know, that´s pretty limited, but..) do you wish you were?
Here are a couple of ideas to get the ball rolling:
– I wish I was one of those economists who can say “this is an economic model that we developed for this particular case“. I´m waiting for the day when I can say “this is a legal principle that we developed for this particular case“!.
– I wish I was NOT the lawyer (or rather the former lawyer, I suppose) of the Austrian company that has requested a preliminary ruling from the ECJ on whether having obtained wrong legal advice can exempt a company from responsibility…
Anyone else?
The B******t Test
As demonstrated by H.G. Frankfurt, we are surrounded by b******t.
One of the methods for spotting b******t it is the “not test“. As explained here and there, this test checks whether “it is possible to negate the statement and create a sentence that any sane person would utter in public“.
The “not test” has been applied by development economists to G20 declarations.
In concrete terms, the idea is to take a speech and turn its sentences to their opposite, i.e. turn all positive sentence to negative and vice versa. If the revised sentence makes sense and could equally be voiced by the speaker, then it enshrines worth content. If, on the other hand, the changed sentence makes no sense and would never possibly be pronounced by the speaker, then it is a vacuous statement which conveys b******t.
Now let’s see whether b******t is also pervasive in the antitrust field.
To apply the “not test“, I have chosen a policy speech of former Competition Commissionner Neelie Kroes. I apply it to bits and pieces of the speech which seem to convey opinions rather than descriptions. Instead of systematically using the “not” word, I occasionally apply antonyms.
“Together with the Court of Justice, the Commission has been an independent driving force to promote antitrust compliance to bring better products, greater choice, and lower prices to the citizens of Europe” gives => “Together with the Court of Justice, the Commission has been a biased inefficient force to promote antitrust compliance to bring better products, greater choice, and lower prices to the citizens of Europe” => b******t
“this is an impressive record, I still believe that more can be done” gives => “this is an unimpressive record, I believe that more cannot be done” => b******t
“Let me be very clear. These discussions are not about bargaining or negotiating. The Commission will not bargain about evidence or objections” gives => “Let me be very clear. These discussions are just about bargaining or negotiating. The Commission will bargain about evidence or objections” => no b******t
“We have a lot to be proud of. But as you can see, we are not resting on our laurels: our commitment to designing ever better competition policy and enforcement is as strong as it was fifty years ago” gives => “We have a lot to be ashamed of. And as you can see, we are
notresting on our laurels: our commitment to designing ever better competition policy and enforcement is as weak as ever” => definitely b******t
I leave it to our readers to draw their conclusions on this. But it seems we’d save a lot of time and paper if speeches were better drafted…
A disclaimer: this post was inspired by Alfonso’s last post + drinks yesterday with my LL.M students…
PS: I suppose only die-hard fans of AC/DC-like sound will know the LP that illustrates this post. Jackyl was a great band, and their titles are worth re-listening.
The laugh test
A prominent practitioner once explained to me the usefulness of the “laugh test” (a.k.a. “red face test”) in our profession. He said that lawyers often have to defend arguments about which they are not very confident, but that there should be a limit to the “originality” of these arguments. According to him, this limit could only be drawn with the aid of the laugh test.
The practical instructions are easy: whenever you come up with what you fear to be a far-fetched argument, ask yourself the following question: will the addressee of the argument in question have a laugh when she/he reads it? If the answer is no, you may as well give it a try. If the answer is yes, then you´re better off keeping it to yourself.
Sounds easy, right? If you´d read some decisions and submissions that I´ve been reading this week you´d realize that not everyone applies the laugh test properly!
Since I can´t talk about the examples that are currently on my desk, I will refer to a case that´s being heard today in the U.S. in which it appears legitimate to ask whether the laugh test has been applied or not.
Take a look at this piece (Price-fixing or good manners? Jury might decide) and reach your own conclusion 😉
Sunday Politics
A few days ago in Brussels, 26 Member States (“MS”) of the EU layed the foundations of a still-to-be drafted European Treaty.
Amongst the key measures to be included in the Treaty, a “golden rule” which will force MS to introduce in their Constitution the rule that budget deficits should not exceed 0.5% GDP. The European Court of justice will verify MS compliance with the golden rule.
With this forthcoming European measure, Sarkozy can put his main rival to the presidential election, François Hollande, into a corner. A few months ago, when the government tried to impose a golden rule domestically, the socialist candidate had proferred criticism. At the time, the socialists announced that they would not back a change of the Constitution to this effect. For those not versed in French constitutional law, amendments to the Constitution must be voted by a majority of 3/5 of the aggregate votes of both the Senate and the National Assembly (or by referendum). Currently, the National Assembly is dominated by the right wing and the Senate by the left wing…
But now that the measure has been endorsed by 26 MS, and that it will be imposed by a European Treaty, there’s little the socialists can criticize unless they want to be depicted as UK-Cameronesque politicians. No wonder why the socialists have been voiceless over the past few days. Sarkozy 1 – Hollande 0.
On closer analysis, the socialists’ “oppositional” options appear very meager. Sure, the socialists could be tempted to criticize the Treaty as insufficiently ambitious (e.g., on eurobonds or on the ECB mandate), and use this a a reason to refuse the ratification of the Treaty. Back in 2005, several socialists heavyweights (notably former Prime Minister Laurent Fabius) had actually used such rethorics to stand against the EU constitution. But the value of the argument is limited, given the reluctance of many other Member States (e.g., Germany) to more ambitious reforms.
The socialists could also play the good old nationalistic anthem. Challenging transfers of sovereignty to Brussels often has traction on the French political scene. My prediction: it is a matter of days before the Montebourg, Mélenchon, and Chevènement of this world announce that the forthcoming Treaty will rip off France’s fiscal sovereignty. I however doubt that Hollande, who is often presented as the spiritual son of Delors, could credibly side with them.
At any rate, what is close to certain is that the ratification procedure will again tear the socialist party apart. Sarkozy and his European colleagues just managed to revive the divisions that have plagued the socialist party before the referendum on the European Constitution. And with all this, I suppose that Hollande prays for a slow drafting process and a late ratification procedure, well after the presidential election of May 2012. Sarkozy 2 – Hollande 0.
Now here’s what could be the hat trick for Sarkozy. A quick Treaty drafting + ratification before May 2012 is unrealistic. But this does not prevent Sarkozy to launch a debate on the procedure to be followed for ratification during the presidential campaign, in a bid to expose the socialists’ internal divisions. There are indeed many procedural options on the table and experience suggests that they often give rise to fierce discussions in French politics. As hinted above, international treaties are normally subject to ordinary legislative procedure (Article 53 of the Constitution). Yet, if they entail amendments to the Constitution, an additional consultation must take place. The President must either request approval of the French citizens by Referendum, or, in the alternative, request the Senate + National Assembly to back the proposed modifications under a 3/5 majority rule (Article 89 of the Constitution). And even if the Treaty does not entail a change of the Constitution, the President can still hold a referendum on the Treaty, provided it has an “influence” on French institutions (Article 11 of the Constitution). A sovereignist left winger, Chevènement, just demanded the organisation of a referendum.
To date, Sarkozy still lags behind Hollande in the polls. But the shape of events to come is unpredictable, and the EU summit just gave Sarkozy a number of good cards to play.
PS1: Sarkozy could even score a 4th goal. With worrying threats on the French “triple A” rating, he could seek to anticipate on the future EU obligation, and already introduce the golden rule in the Constitution before the presidential election…
PS2: I was astonished by the lack of press information on the content of the agreement crafted in Brussels. A usual with EU affairs, I found a very good description of the agreement on the excellent blog of Jean Quatremer.
PS3: With this post, I am a little far from the core market of this blog. I even take a risky stint at French constitutional law. I thus apply for leniency with our readers, and already present my apologies for potential inaccuracies, errors, etc. The thing is that “we are just as politics geeks and fervent EU supporters as we are competition law geeks” like Alfonso said the other day, and I could not resist writing something on the EU summit.
Antitrust Compliance
The European Commission has just released a brochure entitled Compliance matters: What companies can do better to respect EU competition rules.
The foreword says that companies should “[l]ook at this brochure as a road safety brochure ahead of the holiday period“. Many of the companies reading this will be certainly comforted by the irony positive thinking underlying the reference to the holiday period ahead.
In essence, the Commission´s document contains the following messages: (i) breaching competition law isn´t cool and naughty companies can be punished; and (ii) companies should have tailor-made compliance programs.
When I received the brochure this morning I was curious to read the Commission´s advice on how firms could stay out of trouble. After a quick skim, I see that the closest to constructive advice on substantive matters is this profound passage:
“DON´T fix purchase or selling prices or other trading conditions; DON´T limit poduction, markets, technical development or investment; DON´T share markets or sources of supply; DON´T exchange individualised information on intended future prices or quantities or other strategic information.”
I have the feeling that most of the readers of the brochure already had some kind of intuition that they couldn´t do such things. Moreover, some of that advise is rather hard to put in practice (e.g. “limiting investment” : could bank’s refusal to grant credit be considered a breach of competition law?; “limiting production”: shall a company make some more of this product that isn’t selling too well?; “limiting a market”: how does one limit a market? ).
In any case, and leaving easy jokes aside, the Commission must be applauded for its attempt to foster a compliance culture. Other competition authorities such as the OFT and the Autorité de la Concurrence should also be commended for their efforts on this area. Moreover, the Commission has provided much general guidance elsewhere and it cannot be expected to do so on a brochure like this.
In fact, the message about the need for companies to have an effective and tailor made compliance program is welcome and important. The brochure basically sets out the fundamentals of compliance program design, and whereas it does not say anything groundbreaking it does a good job in explaining the basic stuff.
The Commission doesn´t seem to contemplate further incentives such as fine reductions for companies with established and appropriate compliance programs. The French competition authority has proposed fine reductions, but on an ex post basis and only in the framework of settlement proceedings. But why not take a bolder step? I tend to understand those who argue that it doesn´t make much sense to reward firms that have breached the law ignoring such programs, but what about those cases where the company has a clear policy and intention of complying with the law, but one or a few “rogue” executives act on their own? (we all know many instances where this has been the case). It all would come down to assessing what standard the firm had set and whether it complied, as a firm, with that standard. This point was also made by D. Geradin (with the support of J.Wileur and D. Malamataris ) on an interesting recent paper. Companies should not be rewarded for breaching the law, but it would be fair to limit the damage when it can be shown that a given company has done everything it could.
At the end of the day, the content of the Commission´s document is ok given what can be expected from a non-specialist brochure from the Commission. What is more worrysome is that I have seen (more than once) very similar “brochures” which had been sold to companies prêt à porter (not tailor made; i.e copy/paste jobs) and at ridiculous prices. I´m currently working on a couple of compliance programs, and, to be frank, general and vague programs aren´t useful for the companies nor for lawyers (unless billing is considered to be the sole parameter). On the contrary, ad hoc programs adapted to particular firms and markets are extremely useful for firms as well as extremely interesting for lawyers, since we get to be in touch with a wide array of strategies and practices in many different markets. A subversive thought springs to mind, shouldn´t clients also draft some compliance programs on professional service standards for some law firms?
From theory to practice
In the antitrust field, Prof. Barry Nalebuff will remain to posterity for being the one guy who challenged the caricatural Chicago view that there can be no exclusionary bundling (the “single monopoly profit” theorem).
But beyond this, he may also remain to posterity as being one of the founders of Honest Tea.
Turning business theory to practice, Barry Nalebuff co-founded a company that “creates and promotes delicious, truly healthy, organic beverages” (sic!).
Apparently, the idea came out of “a class discussion that involved a Coke vs. Pepsi case study“. And since then, they have achieved a truly impressive penetration on a market usually depicted as a fortress, given high barriers to entry.
With this background, Alfonso and I are currently contemplating a potential move on a less healthy, but equally delicious market segment of the drinks industry.
Very many thanks to my LLM student Stéphanie de Smedt for the pointer.
Antitrust litigation over the .XXX domain
An interesting piece of news was left out yesterday: an adult website company owner has filed an antitrust lawsuit against the International Corporation for Assigned Names & Numbers (ICANN) contending that website owners are “forced to pay excessive fees for .XXX defensive registrations” that may have little or no value.
We suppose you may not be aware of this, but the landrush period for the .xxx domain has been running since 8 November and until 25 November. General availability will commence on 6 December. This means that many companies are right now engaging in defensive registration in order to preserve their image by avoiding third parties from, for instance, registering a web with their brand name under the .XXX domain. As you know, that also happens often with regard to less problematic domains such as .com .net or .org. Why? One example: if you click on www.whitehouse.gov then you´re directed to where you want to go, but check out what happens if you click on www.whitehouse.net .
Antitrust concerns in relation to the ICANN aren´t new. Back in 2003 Professors Frookin and Lemley argued that the ICANN and its policies were contrary to antitrust law (Click here for their interesting paper ICANN and Antitrust).
The full case docket and legal filings are available here.
Boutique
On the market for antitrust economics consultancy, a bunch of solo practictioners have embraced the “boutique” business model:
- Some time ago, Juan Briones founded the firm e-Konomica (a strange name, true, for a field of business where free market economics are king);
- More recently, David Spector founded MAPP;
- And even more recently, Paul Höfer created AMC economics.
Chillin'Competition 