Archive for the ‘Uncategorized’ Category
Information Exchange and Cartels – Dangerous Liaisons?
Are information exchanges really = cartels under EU competition law?
The issue has triggered many discussions on the blog lately. I just thought I’d post my own ruminations on this.
The Guidelines do not really say that information exchanges are cartels. Let’s take a close look. There are four references to cartels in the guidelines that concern information exchanges. The first one, which is general in scope, can be found at §9 and expressly says the contrary: “Although these guidelines contain certain references to cartels, they are not intended to give any guidance as to what does and does not constitute a cartel as defined by the decisional practice of the Commission and the case-law of the Court of Justice of the European Union”. The three other references, which can be found at §§59 and 74, do not quite say that information exchanges are cartels. It is stated there that exchange of information, in particular on future prices, “with the object of fixing, in particular, prices or quantities” will be “considered and fined as cartels”, which is quite different from saying that they are cartels (and which is in line with the existing case-law on “concerted practices”). Moreover, in so doing, the Guidelines accurately indicate that only a subset of information exchanges may be treated as cartels (am a “glass half-full”, optimistic person) . Those are information exchanges that have the object of fixing prices or quantities. It is thus incumbent on the Commission – or on the complainant, applicant, whatever – to prove that the information exchange has an anticompetitive object, which I understand here as purpose (or intention). Not all information exchanges are thus treated as cartels.
From an economic perspective, what the Guidelines say is not illegitimate. Moving beyond the possibly unfortunate semantics of the Guidelines (why not stick to the good old concept of a “hardcore restriction”), exchanges of information on future prices in the market place are, from an economic standpoint, quite a bad thing. First, such practices are known to facilitate tacit collusion on tight oligopolistic markets. Second, in many cases, exchanges of information on future prices are just the tip of the iceberg: they serve as the adjustment mechanism of an otherwise unproven, but explicit collusion.
Are the Guidelines really tougher on information exchange? On this blog and elsewhere, it has been argued that the reference to cartels could signal a tougher regime for information exchanges. On this, a counterintuitive reflection springs to mind: from a defense counsel perspective, equating information exchange on future prices with cartels may actually mark a relaxation of the legal regime applicable to such hardcore restrictions. Think about it: the culprits now can benefit from leniency and enjoy the penalty discounts afforded under the settlement notice. To me, this does not really sound like an aggravation of the legal regime applicable to exchange of future information (which as I said were treated in the case-law as egregious restrictions of competition).
Where the concerns really are. Don’t get me wrong: I am not a fan of the Guidelines’ infuriated semantics. But I think there are other, more important areas of concern in relation to information exchange. I regret in particular that the Guidelines espouse a checklist (or “laundry list”) approach to information exchanges, which provides little, if no, legal certainty to firms willing to self assess proposed agreements. To assess such agreements, firms must review a long range of factors of seemingly equal importance, and the calibration of pro v. anti-collusive factors is notoriously daunting. Given that the theory of harm ascribed to information exchange is tacit or overt collusion, the Guidelines should have subordinated a finding of incompatibility under Article 101(1)TFEU to proof of the 3 cumulative Airtours condition (there’s a discrete reference to Airtours at fn61). This would have been sensible from both a legal certainty and an economic standpoint. Moreover, this solution would have ensured legal consistency across the various areas of EU competition law.
Anti-doping and Antitrust
(Note by Alfonso:Pablo Ibañez Colomo is once contributing to our blog, and, as usual, he provides us with his original views. This time he resorts to a recent high profile doping case to highlight the common features between anti-doping and antitrust law. By the way: cycling is a very sensitive issue for me nowadays since the brand new bike that my friends recently got me for my birthday was stolen during the weekend..)
I have always been a cycling fan (and I am now the proud owner of a proper road bike, happy to report that London is a bike-friendly city—and not only because it does not rain that much). After this introduction you will not be surprised to learn that I have been closely following the doping case involving Alberto Contador, three-time winner of the Tour de France.
For those of you who are not familiar with the case, let me give a brief introduction. Two months after last year’s Tour de France, it was made public that Alberto Contador had tested positive for clenbuterol in the race. This looked like a borderline case from the beginning (it has been reported that the case was made public only because the information was leaked to a German journalist). Apparently, the amount of clenbuterol detected was really really small, and the possibility that the cyclist had ingested contaminated beef could not be ruled out at the outset (at the very least, it did not seem to be one of these improbable excuses advanced by athletes in similar circumstances). Against this background, the Spanish Cycling Federation cleared the cyclist. This decision has recently been appealed by the UCI (Union Cycliste Internationale) and the WADA (World Anti-Doping Agency) before the TAS (Tribunal Arbitral du Sport).
The more I read about this case, the more I thought about the analogies between anti-doping and antitrust in many respects. These are relatively young legal disciplines that are at the crossroads of administrative and criminal law, of private and public law and in which authorities still have a long way to go in many respects. Let me mention two aspects in which the analogy between the two fields is particularly marked:
(click here to continue reading)
ABA 2010 Antitrust Year in Review
The very active International Antitrust Law Committee of the American Bar Association (ABA) will present tomorrow, at the ABA’s Section of International Law Spring Meeting, a most interesting report that analyses and summarises the key antitrust developments that took place during 2010 in 49 jurisdictions around the world.
Check it out here: ABA 2010 Antitrust Year in Review.
The report (which has been coordinated by Susana Cabrera, Konstantin Jörgens and Álvaro González, friends and colleagues at Garrigues) really is an excellent tool for anyone interested in a quick but thorough update on international antitrust.
Microsoft´s complaint against Google
It´s been reported today that Microsoft has lodged a formal complaint with the Commission. So far the news have basically reported what was said in a blog post published last night by Microsoft´s General Counsel, so we´re going to try to be the first ones going a little beyond.
I´ve already stated my views on many of the issues which the complaint presumably deals with, but I will add here some ideas (and insist on others). As usual, a disclaimer is in order: my views are those of an outsider with no access to information other than that which is public.
This will, once again, be a bit lengthy, so, if interested, you can click here to keep reading.
ULg – New Full English Version of the LL.M. in EU Competition and IP Law
To many people, Liege is an old industrial city which has little to offer.
But Liège has a great geographical position. It is just a 100 kms away from Brussels. Thanks to this, it is close from many brainy competition (and IP) professionals. This is what prompted my predecessor Prof. Geradin to create a bilingual LLM in EU Competition and IP law.
Now that we have a 8 years track record, I think I can modestly pretend – pardon the bias – that we have the best, and most likely the cheapest – several hundred € – LL.M in competition (and IP) law of Europe :).
Obviously there’s a downside with cheap tuition fees: little money for my research centre. But there’s a big upside: in Liege, we are not bound to award degrees to poor LL.M students that should be failed. Put differently, our evaluation process is not influenced by the risk of losing money out of a decrease in prospective applications [on second thoughts, it may not be good advertisement to say publicly that we fail students: we do not fail that many].
Now, our LL.M has been increasingly successful in the past years, attracting students from everywhere in Europe and outside (Peru, China, Russia, etc.). I trust the many conferences we organize in Brussels and the opportunities for publication in e-competitions are interesting for prospective students.
This year, we’ll open a full-english version of the LL.M programme. It will be opened to students from far-away countries, who have no background and no professional interest in the French language. The programme of this English-based LL.M can be found hereafter.
RE: Information exchange=cartel?
Some days ago I wrote a post on the change of approach towards exchanges of information set out in the new EU horizontal guidelines, in which I challenged the assertion that this practices should (or could) be equated to cartels (an assertion which, as I see it, has come out of the blue) and expressed my concern over the possibility that the statements made by the Commission in that document could be interpreted in a excessively wild wide manner by overzealous enforcers.
Since then, I have received various comments on that post. Since we´ve always liked the idea of fostering as much interaction as possible on this blog and most of those comments are not visible here, I´ve decided to provide an overview of what some of them said (other must be kept confidential) and, where necessary, to reply to some of the questions they raise. I have checked with their authors and have only mentioned their names where theu have given their express consent.
This will be lengthy, so, if interested, click here to keep reading.
Internet Players v. Communications Carriers
Mammoth firms like Google, Facebook, Microsoft, Sun, IBM, etc. are not those threatening the future of the Internet.
Over the past decade, those firms have fueled growth and spurred innovation. In fortcoming years, they will likely continue to bring vibrant competition on Internet markets.
In his latest piece on the future of the Internet, Farhad Manjoo (Slate) incriminates another group of market players, the big American telcos:
This future [the future of the Internet] depends on fast and ubiquitous broadband, which, in the oligopolistic American telecom market, isn’t guaranteed to happen soon. Over the next few years, major American mobile carriers will adopt faster “4G” wireless Internet systems—but will they be fast, cheap, and reliable enough to spur the sort of innovation I’m describing? I don’t know. Honestly, I’m pessimistic.
And a question: with their increased, some would say obsessive, focus against Google, Microsoft, IBM, etc. are Western antitrust enforcers shooting the right target(s)?
Google Books Settlement Rejected
Some of you will recall that roughly a year ago I wrote a post on the Google Books settlement (“Google Books Settlement: It´s the search market stupid!”) in which I argued that the only competitive problem, if any, posed by the amended settlement related to the search market. [In that post we also directed you to the transcript and a very good summary of the fairness hearing (Part I ; Part II) which may allow you to better understand all subsequent developments].
Yesterday, Judge Chin, of the Southern District of New York, issued an opinion concluding that the Amended Google Books Settlement (“ASA”) is not fair, adequate or reasonable, precisely because it would further entrench Google´s maket power in the online search market. The Opinion is available here.
Judge Chin acknowledges that Google´s plan of creating a universal digital library would bring about great benefits for many, but concludes that the ASA “would simply go to far”. In his view, “it would permit the class action to implement a forward-looking business arrangement that would grant Google significant rights to exploit entire books, without permission of the copyright owners. Indeed, the ASA would give Google a significant advantage over competitors, rewarding it for engaging in wholesale copying of copyrighted works without permission, while releasing claims well beyond those presented in the case“.
From a reading of the opinion it is obvious that (i) Judge Chin has conferred significant relevance to the number and vociferousness of the objections presented to him, and has mainly based his Opinion upon them; and (ii) the decision is to a great extent motivated by concerns which are not directly antitrust-related, such as those over the adequacy of class representation (e.g. foreign authors), involuntary expropriation of copyrights by virtue of the “opt-out” mechanism, or the alleged improper use of the settlement of a class action to regulate a aspects of a “forward looking” business arrangement which had not been raised before the Court.
With regards to the antitrust concerns posed by the ASA, and after referring to the submissions made by several parties, Chin concludes that “Google´s ability to deny competitors the ability to search orphan books would further entrench Google´s market power in the online search market”.
Most, if not all, of the concerns outlined in the opinion would be addressed “simply” by switching from an opt-out to an opt-in model, although that would surely be detrimental to the scale and quality of the service provided and could perhaps even affect the viability of the project. Balancing all the interests at stake is certainly a daunting challenge.
There are no easy answers to the many fascinating issues that arise in connection with this case. In fact, its interest lies precisely on the fact that those issues can only be addresses by adopting a defined stance with regards to the core, almost ideological, debates underlying our discipline (amongst others, and to put a couple of them in their most basic terms: would we rather have a natural or de facto monopolist providing a service that no one else can provide, or would we rather prefer a counterfactual where we renounce to have that service for the sake of not having a monopolist controlling it? What room is there for fairness concerns in antitrust analysis?).
These are particularly complicated days at work, but you can expect a more detailed commentary of Judge Chin’s Opinion from us once things clear up a bit.
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PS. And speaking of Google, as announced here some days ago, on Friday I will be presenting a discussion on antitrust issues in cloud computing featuring Tero Louko (Google) and Carel Maske (Microsoft).
Other panels will feature Jennifer Vasta (Qualcomm), Thomas Kramler (European Commission), Luis Ortiz Blanco (Garrigues), Álvaro Ramos (Cisco), Miguel Rato (Shearman&Sterling), Pablo Hernández (SGAE) and Daniel Escoda (Telefónica).
AT Quote of the Day
Wanna look eloquent at your next antitrust conference? Here’s a good, catchy antitrust quote:
“While the law [of competition] may be sometimes hard for the individual, it is best for the race, because it insures the survival of the fittest in every department”.
A. Carnegie, Wealth, from the North American Review (June 1889 vol. 148, issue 391).
Information exchange=cartel?
Many have praised the inclusion of some guidance on exchanges of information within the new EU Guidelines on horizontal agreements. Personally, I agree with those arguing that guidance from the Commission was necessary, and I acknowledge that there are some useful (although arguably insufficient) orientations in the new guidelines. There is nonetheless an issue which may have not been adequately dealt with, and that I believe has very far-reaching implications. I´m referring to the idea of equating information exchanges with cartels (the title of the post probably gave you a hint):
Section 59 of the Guidelines states that “communication of information among competitors may constitute an agreement, a concerted practice, or a decision by an association of undertakings with the object of fixing, in particular, prices or quantities. Those types of information exchanges will normally be considered and fined as cartels“. No qualifications.
Sections 72-74 develop the idea: “Information exchanges betweeen competitors of individualised data regarding intended future prices or quantities should therefore be considered a restriction of competition by object. In addition, private exchanges between competitors of their individualised intentions regarding future prices or quantities would normally be considered and fined as cartels because they generally have the object of fixing prices or quantities”
– Where did this come from??
To my best knowledge (and please correct me if I´m wrong), information exchanges have only been treated by the EU Courts as cartels, or even as restrictions by their object, in two scenarios: (i) either they were an instrument intended to monitor or enforce a “proper” cartel; or (ii) they were conflated into a single and continuous infringement composed of various agreements and/or concerted practices pursuing a common goal (and, in practice, this situation generally arises where evidence is scarce and not enough to prove that the practice at stake was in its own right a cartel, or at least part of one).
That is, either they were purely ancillary to a cartel (first scenario), or they interacted with a wider agreement in the framework of a global plan having a single objective (second scenario). In other words, the European Courts have not validated the idea that stand-alone information exchanges shall be “considered and fined” as cartels.
In fact, it is significant to note that, unlike what happens in the rest of the document, no case-law is quoted in the Guidelines in support of these propositions (there is one cosmetic reference to the ECJ´s ruling in Glaxo, but it has nothing to do with the substance of what´s being discussed -it is cited as the source of the expression on the “legal and economic context”).
– Implications
Against this background, it is pretty clear that the legal approach towards exchanges of information has changed, and become wider and tougher. We´ve always lived with the idea that a thorough assessment of any information exchange was necessary prior to reaching any conclusion about its potential impact on competition, but apparently this isn´t so anymore.
The joint application of the ECJ´s Judgment in T-Mobile (which also enlarged the notion of concerted practices in an unprecedented and yet unclear way) with a wide interpretation of the statements contained in the Guidelines will certainly make it easier to label many things as a “cartel”. An example: if a company receives individual information on the future prices of its competitors it could be held liable for its participation in a cartel, even if it never used that information or even if the prices circulated amongst the competitors had priorly been given to their respective customers.
In practice, this opens the door for leniency applicants to come forward with evidence of information exchanges, and for the Commission to settle those cases under the procedure envisaged for cartels. With regards to sanctions, it means that companies that until now were participating in information exchange schemes have suddenly become members of a cartel, and are therefore subject to the huge fines, personal sanctions, and, in some jurisdictions, even criminal prosecution that is reserved for cartel cases.
– He who sows the wind will reap the whirlwind
The perils arising from such statement are not confined to the future decisional practice of the European Commission. After all, the European Commission is generally a very reasonable enforcer subject to the review of very reasonable Courts.
My main concern lies on the spill-over effects of the content of the Guidelines. The European Commission has a role as primus inter pares that carries with it a special responsibility. In this sense, it may not have been prudent to include this rather novel and ample statements because they run the risk of being overstretched by other enforcers. I fear that the Commission may be providing an “alibi” to enforcers willing to avoid the burden of undertaking sophisticated analyses. Hasn´t the Commission noticed that enforcement at the national level tends nowadays to automatically resort to the object category?
Justice Cardozo once warned about the dangers linked to legal principles expanding beyond the limits of their logic. This tendency not only applies to principles, but also to rules and, as acknowledged by Hovenkamp in his great book The Antitrust Enterprise , “in the short run rules weigh much more heavily than principles“. Considering that in the context of European competition enforcement system the statements included in the Commission´s guidelines automatically become quasi-rules for national competition authorities and courts, the risk of those statements expanding beyond the limits of their logic is blatant.
But the risk is not hypothetical. The Spanish Competition Authority adopted a decision last week in which it imposed a fine of 51 million euros on 8 companies active in the sale of hairdressing products for their participation on a stand-alone information exchange labeled as a “cartel” (even if the Spanish Competition Act contains a definition of the concept of cartel that is narrow enough to exclude many conducts that pursuant to an original interpretation of the Guidelines would consitute one).
Although I am unaware of the specificities of the case (my firm is not involved in it and the text of the decision has not yet been published) and it may well be that the exchange was a restriction of competition which deserved such a sanction, the press release already reveals that the risks to which I referred above are a reality.
Hold tight:
“It is established doctrine of the national and Community competition authorities that the exchange of information between competitors in relation to future information on prices and quantities amounts to a cartel and must be sanctioned as such”.
Let´s at least hope that the Commission becomes aware of these risks and decides to closely monitor the way in which other enforcers will interpret its guidelines.
Chillin'Competition 