Never mind! (Case T-119/09, Protégé v Commission)
In December 2010 we wrote a post on the General Court’s Judgment in Case T-427/08, CEAHR v Commission. Our post interpreted the Judgment as effectively limiting the Commission’s discretion to reject complaints.
That post concluded with the following opinion: “this is a most welcome judgment. Indeed, whereas previous case law imposed upon the Commission the burden of “considering attentively all the matters of fact and of law which the appliccant brought to its attention”, the General Court has, by virtue of its in-depth review, turned those words -until now a mere formality- into a real, practical, obligation”.
But now we’ve read last Thursday’s Judgment in Case T-119/09, Protégé v Commission (concerning an appeal against a decision rejecting an abuse of dominace -sham litigation- complaint against Pernod Ricard) (available here, but only in French) (how wouldn’t we read a competition Judgment in which the relevant market is the one for Irish whiskey?) and I’ve realized that perhaps we were wrong.
The Protégé Judgment makes it clear that the strict analysis of the Commission’s exercise of its discretionary powers carried out in CEAHR was an exception. Certainly Protégés theory of harm doesn’t appear to be a particularly solid one to say the least (in this sense, the contested Decision and the Judgment are quite understandable). What is surprising is not the outcome of the case, not even the GC’s reasoning; what strikes me is that the Judgment does not make a single reference to the former precedent in CEAHR. In our view, by completely ignoring CEHAR the GC might have effectively overruled it.
The overruling becomes more explicit with regard to one particular point. You may recall the suggestion in paras. 155 and 174 of CEAHR that when an alleged infringement affects several Member States there could be a sort of presumption of “EU” (why do we still say “Community” when we talk about this topic?) interest. In Protégé the GC makes it very clear that this is not the case.
In sum, we are still governed by Automec. The Commission can very much decide what’s interesting and what’s not provided that it doesn’t mess up big time incur in a manifest error of appraisal in dealing with the factual elements that it may put forward to justify a rejection.
By the way, we have heard through the gravepine that the upcoming hearings on the De Beers distribution case may feature some interesting discussions on the notion of Community EU interest. We’ll stay alert.
So, to those who read our post on CEAHR: never mind. To the Commission: false alarm.
Politically incorrect: the political process through an antitrust lens
Since I joined Chillin’Competition almost 2 years ago I always had the intention to write a couple of long and well thought out posts on antitrust and politics. One would attempt to apply antitrust principles and rules to political markets (one day we should also try to do that with the legal market too!), and the other would ideally explore the political content of antitrust in different jurisdictions. Undertaking such exercises would have the virtue of linking two of my preferred subjects, and -I’m pretty sure- would also yield some interesting results. However, I never found the time to develop these ideas and, since it is unlikely that I will find it soon, I’ve decided to hastily sketch what I had in mind without developing it further despite the obvious risk of sounding obvious. Let’s start with one question: what can antitrust tell us about the dynamics of political systems?
If you compare the “political market” to any traditional market (at the end of the day, parties/firms compete for the favor of voters/consumers), you will inevitably arrive to the conclusion that it would be an ideal market for antitrust enforcement. Think about it, the political systems in most developed countries are duopolies (the U.S. is a clear example or partisan parity with shifting temporary monopolies), oligopolies (also with temporary and assailable monopolies) and even permanent monopolies.
These concentrated market structures with transient or permanent monopolies can give rise to several concerns which are familiar to any antitrust lawyer. Political parties (be it the one in government or the one in government in combination with other major parties) unilaterally or collectively act to protect an individual or collective dominant position. Most often this is done by deciding to implement certain electoral rules that foreclose entry or growth by third parties.
Public choice theory has dealt ad nauseam with the issue of self-interested lawmakers (i.e. the foxes guarding the henhouse). That’s what this is about too. Political parties are the ones in charge of adopting the rules that govern the functioning of the political market (how parties are financed, how electoral regimes work -i.e. how parties are rewarded-, how third-party entry in the political market can take place, etc.) and other related markets (such as media-related ones). These situations are not strangers to antitrust analysis; just think of well-known EU competition law cases concerning regulatory professional bodies such as Wouters or Piau. The main difference between those precedents and the situation at issue in political markets is that the consequences of the latter are much more significant and potentially harmful.
The idea of applying antitrust principles to examine the political process is by no means original. Some well-known scholars have already done it in the past, generally in relation to gerrymandering practices (see, among others, Issacharoff´s Gerrymandering and Political Cartels or the great amicus curiae that Einer Elhauge submitted to the U.S. Supreme Court, also in a gerrymandering case (available here).
To be sure, political parties are exempt from the application of antitrust rules, and there might be good reasons for this. However, in view of current enforcement trends that have extended antitrust liability to collective bargaining agreements by workers’ unions and even to governmental bodies -see here for a Spanish precedent-, one can’t help wonder whether political parties are really shielded from the potential application of antitrust rules.
[This may sound subversive, but, we’ve consistently proposed to extend the reach of the antitrust rules to those who appeared to be exempt from them…. remember our post suggesting an antitrust challenge to God? ] 😉
In any event, even if antitrust standards aren’t applicable, they are useful to help us realize -regardless of whatever political beliefes one may have- about legal but undue practices carried out by incumbents with the aim of thwarting political competition. I’m sure most of you can quickly come up with a good bunch of examples…
The Friday Slot (11) – Bernard van de Walle de Ghelcke
It’s been a while since we last had someone on the Friday Slot. For this new start, Bernard van de Walle de Ghelcke (Linklaters) has accepted to answer our questions. I met Bernard when I started as the bag-carrier at the GCLC, and we then worked together when he latter served as President. Bernard is a “gentleman” competition lawyer, a thorough expert of Regulation 1/2003 and on top of this someone who has relentlessly worked to foster debate on competition issues. Think of his role at the GCLC or at the head of the main Belgian competition gazette. He also has a strong track record of being able to communicate his passions to other. In addition to the many students he introduced to EU law at the College of Europe, his son is a young, enthusiastic antitrust lawyer at a Brussels law-firm.
1. “Oscar” of the best competition law book? And of the best non-competition law book?
I have always “Bellamy and Child” close to hand (and “the” Kerse for Antitrust procedure). However it is striking how increasingly textbooks seem to lose importance. One looks “life” at the case law as well as to recent specialized publications. As a practitioner our workload does not allow much academic reading unfortunately and we have to focus on the literature needed for a specific case. As regards competition law theory I often go back to the masterpiece “Politique de la Concurrence de la CEE” by the late Jacques A. Vandamme. It was early days of EC competition law but all the founding principles are there.
Outside competition law there are so many … I still consult De Page, Droit civil belge, Van Ryn & Heenen, Principes de droit commercial belge and W. Van Gerven’s “Algemeen deel” in Beginselen van Belgisch privaatrecht. As I am very interested in EU institutional law, K. Lenaerts’ “Constitutional Law of the European Union” is a must as well as the Wyatt and Dashwood “European Union law”.
2. “Oscar” of the best case-law development in the past year? “Oscar” of the worst case-law development?
Best : the Court of Justice case law applying fundamental rights (Kadi) …. Worst : the same case law where it is timid or dismissive and fails to take all consequences.
The case law on parental liability is very troubling.
3. Let’s do it like economists => assume that you could change 3 rules, principles, judgments, institutions in the current EU competition system. What would you do?
- I know it is not realistic and maybe against a trend but separate investigation, prosecution and decision for antitrust enforcement. This is the only decent system in an “état de droit”. Or why did we have Montesquieu for ?
- Force the Commission to also adopt positive decisions.
- Revisit the whole system and test it as to what competition law enforcement does for competitivity, industrial policy, employment and welfare.
Change of Times
In contemporary antitrust law, price-fixers have enjoyed a somewhat “gentlemanesque” image.
Price-fixers, as the story goes, would typically be well-instructed managers, who would convene in the smoked-filled rooms of luxury hotels, drink Cognac and exchange views about prices, politics and philosophy.
But since yesterday, the masks have fallen, revealing the true face of XXIst century price fixers.
According to this website, and as reported by the Handelsblatt:
“the Steel managers who were fixing prices and dividing up the railway track market took Deutsche Bahn employees to brothels after talking business over dinner, spending more than €71,000 on “entertaining” over five years“.
The bottom-line (courtesy of a good friend met yesterday at RBB’s party): “Germans always put business before pleasure“.
Compliance
Is the Office of Fair Trading racing for the prize of the most business-friendly competition authority in Europe?
I know this reads a bit controversial, but many have had the impression that, in recent years, the OFT was on a soft enforcement course, preferring to focus on high-level policy work, than on running – and terminating – cases.
A few days ago, the OFT issued a document entitled “OFT’s guidance as to the appropriate amount of a penalty“.
In this document, the OFT announces – with many caveats though – that firms that have compliance programme can benefit from mitigating circumstances.
Concretely, the OFT may offer a 10% haircut on the anticipated fine.
Here’s the text of the Guidelines:
§2.15 “Mitigating factors include: […] adequate steps having been taken with a view to ensuring compliance with Articles 101 and 102 and the Chapter I and Chapter II prohibitions”
And footnote 26: “The starting position with regard to competition law compliance activities will be neutral but the OFT will consider carefully whether evidence presented of an undertaking’s compliance activities in a particular case merits a discount from the penalty of up to 10 per cent. Thus, the mere existence of compliance activities will not be treated as a mitigating factor. However, in an individual case, evidence of adequate steps having been taken to achieve a clear and unambiguous commitment to competition law compliance throughout the organisation (from the top down) – together with appropriate steps relating to competition law risk identification, risk assessment, risk mitigation and review activities – will likely be treated as a mitigating factor. The business will need to demonstrate that the steps taken were appropriate to the size of the business concerned and its overall level of competition risk. It will also need to present evidence on the steps it took to review its compliance activities, and change them as appropriate, in light of the events that led to the investigation at hand“
I have expressed elsewhere my intuitive concerns about the sophistic argument that agencies should reward compliance programmes with discounts on fines, so as to induce firms to set up such programmes. Here’s what springs to mind:
First, it is somewhat odd to provide financial incentives to promote compliance with the law, or to be more accurate to reward the initiative of trying to comply with the law (in reality, the caught firm did not comply). If we push this logic to its end, agencies should then reward infringing companies if they can prove that they have hired lawyers to obtain regular competition advice.
Second, rewards on compliance programmes could have perverse effects, with firms adopting compliance programmes as a damage limitation mechanism, which limits the cost of punishment if they ever get caught. In other words, the reward on the existence of a compliance programme acts like an insurance policy, which in turns reduces firms risk aversion to antitrust infringements.
Third, a well-designed compliance programme can adversely promote the risk of antitrust infringement, if clever managers understand better how to exploit the loopholes and deficiencies of the antitrust enforcement system. Why reward this?
Finally, compliance programmes have benefits at any rate, and there’s no need for an additional fining stimulus to encourage their adoption. Compliance programmes promote awareness to what constitutes an antitrust infringement within firms, and to how much it costs to commit one. They thus decrease the probability of antitrust infringement in the first place, and with it the risk of antitrust penalties. Moreover, with better trained in-house lawyers and business executives, the legal costs of outsourcing of competitive assessments to external lawyers may decrease.
My bottom-line: rather than tinkering with the fining system to foster compliance, let’s just turn to individual sanctions (director disqualification and prison sentences).
Conference – EU Competition Law and Financial Markets
On 22 November 2012, the Brussels School of Competition (BSC) and the Liege Competition and Innovation Institute (LCII) will hold in Brussels a joint conference on Competition Law and Financial Markets.
Issues covered span the emerging role of competition law amidst large scale price fixing allegations in the financial industry, open and fair access to financial infrastructure, competition in credit rating services, the trade-off between competition enforcement and financial stability, the impact of prudential rules, etc.
No State aid on the menu, there’s been far too many events devoted to this topic in recent months.
To discuss those issues, we have invited a range of triple A experts, including EU Commission and ECB officials, industry representatives, lawyers as well as leading academics.
More info on the programme can be found here. The registration form is accessible via this hyperlink.
Wake Up and Smell the Competition: Hong Kong’s New (Caffeinated?) Competition Law
[As Nico mentioned on his last post, he’ll soon be travelling to Hong Kong to participate at a conference on 21st century competition authorities. The timing is not accidental: at the beginning of the summer Hong Kong adopted its first comprehensive competition law. We have invited a friend of this blog, Sandra Marco Colino, currently an Assistant Professor at The Chinese University of Honk Kong to share her views on this new law. Sandra has a PhD on competition law issues from the EUI, and prior to moving to Hong Kong was a lecturer at the University of Glasgow. We leave you with her post on caffeine and competition law in Hong Kong].
It was close to midnight on June 14, 2012 when Hong Kong’s Legislative Council finally adopted the region’s first ever cross-sector Competition Ordinance (hereinafter ‘the Ordinance’). Rather geekishly, I remember exactly where I was the following morning when I first heard the long-awaited news: sipping my first espresso “ristretto” of the day at a café in the heart of the city’s financial district (strong coffee is a delightfully resilient habit I picked up in Florence). The news came almost two years after the Bill was originally tabled, and the debate
surrounding the legislative proposal has not been for the faint-hearted. Although preliminary studies indicated that the local community would welcome the introduction of the law, businesses and stakeholders repeatedly voiced their concerns about the threat it could pose to Hong Kong’s open economy. For many years, initiatives to regulate competition seemed to be frustrated before they even developed into concrete proposals as a consequence of a predominant mistrust towards any form of market intervention.
As I read through the text of the new Ordinance while enjoying my coffee, I couldn’t help wondering whether the twists and turns of the lingering ‘to antitrust, or not to antitrust’ discussion would have left a decaf taste on the law. As originally drafted in the summer of 2010, the Ordinance does indeed tackle anti-competitive agreements (the ‘first conduct rule’) and the abuse of a substantial degree of market power (the ‘second conduct rule’). For the time being, only anti-competitive mergers in the telecommunications industry may fall within the scope of the legislation. As regards institutional enforcement, an independent Competition Commission and Competition Tribunal will be set up to conduct investigations and decide whether there has been a breach.
Overall therefore, the general framework of the new legislation follows long-established principles of modern antitrust regimes. But when fleshing out the nitty-gritty, already in October 2011 the government had been forced to water down the original text of the Bill to respond to critics. For instance, it vowed distinguish between ‘hardcore’ and ‘non-hardcore’ violations
under the first conduct rule, the former comprising those restrictions of competition that are considered anti-competitive by object under Article 101(1) TFEU (price fixing, market sharing, output restrictions). In addition, it agreed to reduce the maximum pecuniary penalty to 10 percent of local turnover for each year of infringement, up to a maximum of three years. Moreover, the Competition Commission’s ability to impose fines in the original infringement notice would be removed from the Bill. The government also promised to introduce a de minimis threshold for the application of the first conduct rule for all agreements among undertakings with an aggregate turnover of HKD 100 million or less in the preceding financial year. Importantly, it gave consideration to the possibility of precluding private parties from bringing claims before the Competition Tribunal altogether.
The Ordinance, as adopted in June, includes most of these mitigating alterations, with two clarifications: the de minimis threshold (set at a combined worldwide turnover of HKD 200 million) will only be applicable in the absence of ‘serious anticompetitive conduct’; and ‘follow-on’ private rights of action have finally been granted to those who have suffered loss or damage as a consequence of an antitrust violation, once a breach of the Ordinance has been established.
My initial thoughts? Clearly, some concerns do spring to mind associated to the devil that might be in the detail. Nonetheless, with the adoption of the Ordinance Hong Kong has certainly taken a colossal and much-needed step towards the building of a palisade against the dangers of unrestrained market power. The strength of that palisade will, of course, very much depend on the implementation of the rules, unlikely to materialise before the end of 2013. For the time being, it appears that the Ordinance may indeed have sufficient caffeine to awaken competition in Hong Kong.
Misc.
A hotch potch of AT-related news, including some self propaganda:
- The next GCLC lunch talk will be devoted to the Microsoft compliance case, following the General Court’s judgment in Case T-167/08. Speakers are Eric Barbier de la Serre (Jones Day) and Thomas Kramler (COMP). See link hereafter for registration form: 61st GCLC Lunch Talk – Registration form
- The next GCLC annual conference will take place on 8 and 9 November, and will be devoted to “Competition law in times of economic crisis”. The final agenda is in the making.
- I will be speaking at a conference in Hong Kong on 19 October 2012. Just cannot wait to be there. See here for the conference website and hereafter for the programme: Leaflet_2012_9_4. My speech will be about challenges for 21st century competition authorities. If you have any suggestions of topics, items, or remarks to convey at the conference, please do not hesitate to drop a line;
- Our good friend Ewoud Sakkers from COMP is taking a one year sabbatical. He will be thinking and writing at Yale law school. May he also take some good rest while there;
- Marek Martyniszyn, a Senior Research Fellow at the Institute for Consumer Antitrust Studies (Loyola University Chicago) has posted online an interesting book review of the liber amicorum in honour of Professor Jacques Bourgeois.
Antitrust Comics
It is a well-known fact that competition lawyers increasingly compete in court with economists (at least in the US).
But they may now have to compete with comics artists.
Some background: earlier in 2012, the DoJ filed suit against Apple and 5 e-books publishers for alleged violations of Section 1 of the Sherman Act.
Later in 2012, three publishers got off the hook, settling the case with the DoJ.
But the feud goes on between Apple, two publishers and the DoJ.
In this context, Bob Kohn, a media expert, has refiled a 25 pages request to participate as amicus curiae in the form of a comics. See link hereafter: 104906877-Kohn-Amicus (2)
The result is amazing, and possibly more convincing that the initial submission. Kohn even managed to quote judicial precedents.
So here goes the question: besides mock trial sessions, should law schools introduce drawing courses in their curriculums?
PS: the above pic is taken from the last strips I read. The Boys is dark, violent and very politically incorrect. A must read.
PS2: thanks to David Mamane (Schellenberg Wittmer) for the pointer.
Entry
With the fallout of the financial crisis, very few law firms have opened offices in Brussels in recent years.
To my best knowledge, the latest one would be Wilson Sonsini.
Several big US law firms without AT capabilities in Brussels thus keep referring work to EU law firms.
This decision clearly can be questioned under a simple cost/benefit analysis. Setting-up an office in Brussels seems to represent little costs, and can surely bring good money. All the more so given the thriving state of antitrust enforcement in the EU, irrespective of the crisis.
This may be what has prompted Baker Botts to launch today a Brussels practice.
Congrats and best of lucks to both Paul Lugard and Catriona Hatton for this new venture!
BTW, Baker Botts is known for being strong in the oil business, as well as for having taken over a large chunk of ex-Howrey lawyers in the US.
