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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.
Assorted links
- Wouter Wils has a new paper on recidivism. I understand it will appear in World Competition. A question: Does Wouter have an exclusive supply agreement with Kluwer?;
- At the GCLC we are DESPERATELY looking for a Commission official to come present the best practices on the conduct of proceedings in antitrust cases (101 and 102 TFEU) at a forthcoming lunch talk;
- I gave a presentation on standardisation agreements, IP and competition law. See link thereafter for the ppt. Droit des brevets et droit de la concurrence – Accords de normalisation A paper is in the making;
- A good New Yorker paper on why the current laudative discourse on small business is misguided;
- And a rumination/question: what makes it that in some markets, the supplier pays for distribution (publisher-search engines, airlines-travel agents), and in other markets, the supplier sells to distributors (consumer goods-supermarkets)?
On the EU and the sovereign debt crisis (because life isn’t just competition law)
We spend most of our time working on competition law matters – be it in academia or in private practice-, and we also spend part of our free time trying to look at competition law from a different angle on this blog. If we devote so much time to try to make sense –and sometimes fun- out of competition law it isn’t because we believe that competition law is more important than other stuff. For all its many virtues, it actually isn’t.
We started this because we thought there was something a bit different that could be done within our tiny and endogamic professional circle, and because we only feel comfortable speaking out loud about issues on which we feel we can add something coherent and hopefully useful (as you can imagine, writing every day what comes off the top of our heads without thorough reflection and in front of such an informed audience as you are means entails certain challenges and risk, notably the risk of making fools out of ourselves). In other words, we do this because we thought there was something meaningful –if only a tiny bit- that we could add to the area in which our professional lives are focused.
But even though our economist friends could argue that we are rationally choosing to exploit our competitive advantage, we can’t help thinking sometimes that maybe our priorities are somehow skewed. One example: while EU leaders were holding crucial talks in Brussels–just a few meters away from my office- on October 27th and 28th, we were writing here about the names of partners at an American firm as well as about the “slow death of Article 101(3)”. Wouldn’t it have made much sense for us to write about the slow death of the European project?
We are just as politics geeks and fervent EU supporters as we are competition law geeks; the difference is that we feel, or rather know, that you wouldn’t give a damn about our personal views on general issues on which our opinion is not different from anybody else’s; that’s why we’ve only gone off track on very rare occasions. There are times however where we feel that we have to give vent to some non-competition related thoughts.
There are some things we simply can’t understand. We don’t have solutions and are not going to fix the world, but since we need to let some steam off, we thought we’d use this platform.
If interested in knowing what we can’t understand, keep on reading. If not, we’ll be back tomorrow with the usual stuff, and apologies for going off-track.
Patent wars (+ Faull&Nikpay)
It has been reported today that the European Commission is concerned about the use that is being made of patents essential to the 3G mobile communications standard in the context of the ongoing legal battles surrounding the smartphone technology markets.
The Commision has confirmed that it has addressed requests for information to both Samsung and Apple, but it has not yet provided any further details. A legal filing by Apple in the U.S. nevertheless reveals that this preliminary investigation on the part of the Commission may be targetting a possible abuse of FRAND (Fair Reasonable And Non Discriminatory) licensing agreements on the part of Samsung, which in the recent past has initiated a large number of proceedings against Apple in several jurisdictions.
This is not the first antitrust investigation regarding anticompetitive behavior related to enforcement, use and misuse of patents undertaken by the EU Commission (think, for instance, about the Qualcomm or Astra Zeneca cases), and it certainly won´t be the last. Patent wars may be a newcomer in the antitrust world, but they´re here to stay.
By the way, I´m very fortunate to be -together with Miguel de la Mano (Deputy Chief Economist at DG Comp and currently Acting Chief Economist at the UK´s Competition Commission), Hans Zenger (CRA), and Renato Nazzini (LMS and Southampton University)- part of the team that is currently should be drafting the chapter on Article 102 for the next edition of the Faull&Nikpay (which, as you know, is one of our favorite books), and given the rise of IP-related abuse of dominance cases we´re planning to devote a specific section to these issues.
Have a nice weekend!
(Image possibly subject to copyright)
Perfect competition
At university, I teach a course entitled “basic economics of competition law“.
Last week, I told my LL.M. students that there are only few real life examples of the perfect competition model.
I also told them that the “perfect competition” entry in Wikipedia only mentioned street food in Asia.
If I had to think personnally of additional illustrations, the only examples that sprung to my mind were:
- Le Carré in Liège => the city centre area where students get d***k on the WE
- The Kebab street close to the Grand Place in Brussels => the city centre area where people rush at night after they got d***k
Since then, one of my LL.M. students has apparently updated the Wikipedia entry :).
Our second birthday!
On 20 October 2009, Chillin´Competition opened for business.
In the two years that have gone by since then, this blog has taken up a considerable part of our “free time”, but it has taught us a lot and it has rewarded us with a great deal of satisfaction as it has introduced us to many new friends and opportunities. As we replied in an email to one of you last week, as most parents we´re very proud of our baby, but we are ambitious parents and we want it to get better and better in every possible way.
One year ago, we confessed to be “frankly surprised by the reach of this tool” because we´d had nearly 70.000 visits and an average of 350 visits a day. As of today, we´ve had 177.000 visits and our daily average has constantly increased to the extent that this week we´ve had over 1 , 000 visits a day. Over 450 of you receive our daily posts via subscriptions or via our LinkedIn group.
Over the lifetime of the blog, we have been lucky enough to receive some really excellent input, from both guest contributors and from you in the form of your comments.
W hen we stated out, we couldn’t have imagined the interest that Chillin’ Competition would generate. Thanks so much!!
Nicolas & Alfonso
Chillin'Competition 