Chillin'Competition

The Spanish Competition Authority decided last week to close the file related to the acquisition of joint control of Digital+ (the main satellite pay-tv platform in Spain) by Prisa (one of the largest media groups in Spain which prior to the merger enjoyed sole control of Digital+), Telefónica (you know this one) and Telecinco (a TV channel whose largest shareholder is Berlusconi´s Mediaset).

The CNC´s decision has made big news in the press in the past few days, and many have accused the Competition Authority of having been too sensitive to the government´s wish (yes, that was an euphemism) to avoid the bankruptcy of Prisa, which allegedly could have been declared had the merger not been authorized.

To make a long story short: The merger was initially notified to the European Commission, which, following the parties´request, decided to refer the case to the CNC. In its referral decision the European Commission expressed its fears that the merger could strenghten Telefonica´s position in broadband related markets.  The CNC  issued a Statement of Objections alleging that the merger could significantly impede effective competition. However, the Council of the CNC confirmed a change of views after the parties committed to modify the shareholders´agreements and other covenants in order to remove the veto rights that gave them the ability to exercise a decisive influence over Digital+.  Technically, the operation would therefore cease to be a merger within the meaning of the competition rules (Prisa will retain sole control), so nothing to object…in principle.

The problem after the withdrawal of the notification in scenarios such as this one  is that there could theoretically exist the risk that the parties who formally intented to exercise control could now do so informally.  Query: How should a competition authority address these sort of situations?

From an ex ante perspective,  the resort to the notion of de facto joint control may seem like too much of a long shot given its exceptional nature.  And ex post control does not look like an easy path neither. In this case, the CNC  has committed to remain vigilant with regards to any future agreements between these companies, but other operators (namely Mediapro) have argued that there is a most serious risk of coordination that will turn the audiovisual market in Spain into the least competitive in Europe. Mediapro has announced its intention to fight this decision on every possible ground and has asked for the European Commission´s immediate intervention. It will certainly be interesting to see how this evolves.

My take: a reliable indicator could be whether Digital+ will supply its channels to other competitors (which was, by the way, a commitment that apparently Telefonica was reluctant to accept).

Any opinions?

Remember: comments are anonimous.. 🙂

While reading last Friday an article written in a Spanish newspaper by Jesús Alfaro (who, by the way, has sometimes made comments on this blog), I came accross a reference to a Wall Street Journal piece that looked interesting.  I checked it and thought that it illustrates pretty well the way in which EU competition law is perceived by many in the US.  Check out this excerpt:

“So if you, as an executive, were to be so foolish as to ask your in-house counsel whether a particular action might run afoul of the EU’s increasingly complex and draconian competition regulations, both your question and your lawyer’s answer would become potential evidence against you.

Yet in the sort of intellectual somersault for which European competition law has become notorious, the Court declared that its ruling would not undermine businesses’ rights of defense. That’s because, according to the Court, “the rights of the defence is a fundamental principle of European Union law,” enshrined both in case law and in the Charter of Fundamental Right of the European Union.”

Aside from the fact that the second paragraph does not make much sense, the article reveals a misconception of EU competition law that I´ve observed many times in the recent past, particulalry on the other side of the pond. Antitrust/competition law is admittedly an area where legal certainty is sometimes the exception rather than the norm. However, are there really any reasons why EU competition law could be considered more of an”intellectual somersault” than its US counterpart?  I truly don´t see them.

As we announced last week , the Commission adopted its decision in the air freight cartel yesterday.

From a policy standpoint there´s one thing that strikes me:

The Commission has fined 11 companies, and all of them (except for Singapore Airlines) have been granted reductions pursuant to the Leniency Notice.  At the same time, the Commission has left out of the Decision a significant number of airlines which had been included as addressees of the Statement of Objections. “Coincidentally”, the ones left out are  the ones which had not asked for leniency (my guess is that many of them would´ve done it and didn´t because ten other airlines were ahead of them).

In my view there were many reasons for excluding some of the airlines from the decision. I´m also conscious that adopting a decision such as this one with regards to more than 20 companies would have implied a hell of a lot of work.  However, and from a policy standpoint, what message does the fact that only leniency appliccants have been sanctioned convey to future potential leniency applicants?  Isn´t  the Commission shooting its own foot?

(For full disclosure: I participated in the case in representation of a company which is not amongst the ones fined. It´s one of those for whose exclusion there were good reasons).