Alfonso and I have just completed a paper on the notion of restriction of competition, which is available for download here. I am quite happy that we finally got around writing something together after such a long time. And it has been fun. It has been one of these papers that does not take you exactly where you expected.
As we were diving into the case law we realised, once again, that the Court is not given the credit it deserves. The case law is remarkably rich and consistent. It provides precious guidance, which, unfortunately, is sometimes ignored. We have the impression that there is still considerable noise in the context of discussions around the notion of restriction of competition.
When we first drafted the introduction, we pointed out that it was hopeless to provide a definition of the notion of restriction of competition. When the first version was completed, we felt confident enough to revisit that claim. The Court has laid down all the necessary elements to identify what amounts to a restriction, whether by object or by effect. These elements are summarised in the flowcharts that you will find below, which can be downloaded here and here.
In essence, a practice that is deemed restrictive is one that is presumed to have a net negative impact on competition. In other words, it is a practice whose anticompetitive effects are presumed to weigh more that the pro-competitive gains that result from it.
As a rule, practices that restrict competition by object are those that are deemed to lack pro-competitive virtues. As a result, they can be safely presumed to have a net negative impact on competition. As shown in Chart 1, the Court typically starts the analysis by asking whether a given practice is plausibly pro-competitive (you will remember that this is the factor that made all the difference in Cartes Bancaires).
‘By effect’ practices, on the other hand, are those that are plausibly pro-competitive. As a result, their net impact on competition may be positive or negative depending on the economic and legal context. We summarise the steps of the effects analysis in Chart 2.
We are grateful to the people who took the time to send comments on the paper. Do not hesitate to send them our way.
Chart 1: Assessing the restrictive nature of a practice
Chart 2: Assessing the likely restrictive effects of a practice
The European Commission held a successful event yesterday to present and discuss the findings of the Preliminary Report on the e-commerce sector inquiry (you can watch the recording here). Thomas Kramler (Head of the Digital Single Market Task Force in charge of the inquiry) has kindly agreed to write for the readers of Chillin’Competition about the ongoing inquiry. We leave you with him. [And please note that, as always, the views expressed are his own and do not necessarily reflect those of the European Commission].
On 15 September 2016 the Commission published the preliminary report on the e-commerce sector inquiry. The report is based on around 1800 replies by manufacturers, retailers, marketplaces and copyright holders active in e-commerce. 8000 distribution contracts have been gathered by the Commission in the course of the exercise.
So for whose benefit (cui bono) is the e-commerce sector inquiry?
– The Commission
The priorities of EU competition policy cannot be decoupled from the broader EU policy goals such as the establishment of an internal market (see Protocol 27 to the TFEU). Ensuring better access for consumers and businesses to goods and services via e-commerce across the EU is a key goal of the Commission’s Digital Single Market strategy.
The e-commerce sector inquiry allows the Commission to identify potential competition concerns in e-commerce markets and to accordingly prioritise follow-up enforcement. Such enforcement should contribute to removing obstacles to cross-border e-commerce in line with the mentioned goals of the Digital Single Market Strategy.
The Commission has consciously not prioritised cases on vertical restraints in the past 10 years, because the applicable rules (case law, Vertical BER and Guidelines) have been relatively clear and straightforward. With the growth of e-commerce, however, questions on the interpretation of the rules have arisen within the European Competition Network (ECN). The results of the sector inquiry will provide useful factual background for an informed debate on e-commerce related issues within the ECN.
The results of the e-commerce sector inquiry will also be a catalyst for a debate on the Vertical BER and Guidelines in view of their upcoming evaluation and next review.
Last but not least the results of the sector inquiry provide facts and figures which are useful background for the debates on legislative Commission initiatives relating to copyright (for example the proposed “portability regulation“) and the proposed geo-blocking regulation.
The Commission is very much aware that a sector inquiry imposes a huge burden on businesses. On the other hand the e-commerce sector inquiry provides the opportunity for companies to review/audit existing contractual relationships and if necessary bring distribution contracts into line with EU competition law. I would image that a pending sector inquiry makes it is easier for in-house lawyers to convince management that such a review/audit is necessary and worth it .
The sector inquiry therefore should provide an incentive for companies to focus on compliance outside the context of a specific antitrust investigation.
Furthermore the sector inquiry allows companies to voice concerns about enforcement trends or unclear rules without being in the spotlight of an antitrust investigation.
– Law firms
Certainly a sector inquiry is welcome by law firms as is generates additional work. These windfall gains aside, I would think that the e-commerce sector inquiry helps to focus clients’ attention on compliance and therefore also provides opportunities for law firms to raise awareness about EU competition law with them.
The e-commerce sector inquiry should also kick-start a dialogue among practitioners and with competition authorities on the workability of the current EU competition rules on e-commerce and on the need for further guidance on specific topics. To this end the Commission has launched a public consultation on the preliminary report which is open until 18 November 2016.
Overall the e-commerce sector inquiry is a valuable exercise that should provide useful background facts, spur the discussion on how to approach restrictions of competition in e-commerce in the EU and allow for informed policy making in the future.
The beginning of the academic year marks the beginning of class teaching but also the beginning of conferences. A few of them will definitely keep me as busy as I am at present with my lectures. As there is a chance that you might be interested in some of them, here is a summary of what is going on. We will of course be uploading the slides in due course.
A 2-in-1 trip to Florence (14 and 15 October): There is always a good reason to travel to Florence, even if, as this time, conferences will keep me busy most of the time. On Friday 14 October, I will be discussing innovation-related issues with Frédéric Jenny and Vincent Verouden at the EUI (ENTraNCE Annual Conference). The following Saturday, I will be speaking at the 20th Annual Conference of the IBA on a panel chaired by Kyriakos Fontoukakos and Julián Peña (see here for the programme).
Bruxelles: ma ville? I am far more often in Brussels than in my hometown of Madrid. As I love the city, this is never an issue. On 26 October, there is a morning briefing on Lundbeck organised by the Brussels School of Competition. The two other discussants are Luc Gyselen and David Hull. The event is open to everyone, so do not hesitate to sign up!
Other events: As Alfonso mentioned last month, Hart organises a conference on State aid with some luminaries of the field. There is also a bumper crop of events coming from ERA (see here, here and here). Last, but not least, my favourite co-blogger will be travelling to my city to discuss geo-blocking at the ITechLaw Annual Conference.
The slides of the conference Competition and Regulation in Digital Markets held at the University of Leeds on 9 September are now available here.
You will see some very interesting materials there (not my slides, which are a slightly modified version of my earlier presentations on the same topic: big data) [yawn intermission]. At least
some of the jokes in my intervention (pictured below) were new…
Actually, if it weren’t for the minor issue that that the jokes aren’t really funny I would consider joining Chicago Antitrust Professor Randy Picker in his stand-up comedy events.
By the way, an interesting development regarding the topic of my presentation took place last Friday, when the European Data Protection Supervisor published a new “Opinion on coherent enforcement of fundamental rights in the age of big data“.
The Opinion interestingly acknowledges that “it would be inappropriate for one area of regulation to look to another area to compensate for its own weaknesses. Authorities in each area have limited tools at their disposal, for example competition enforcement can only address abuse of dominance, cartel behaviour and mergers which are not in the consumer interest; abusive conditions of service are not necessarily an antitrust issue”.
At the same time, however, it holds the (now more nuanced) view that “data protection authorities can help shed light on how and to what extent the control of personal data is so crucial for companies in markets. The synergies between the fields of law, which have been discussed intensively in the recent years, could propel closer cooperation between authorities, especially where there is neither guidance nor case law. It is not a question of ‘instrumentalising’ another area of law but rather of synchronising EU policies and enforcement activities, adding value where a supervisory authority lacks expertise or legal competence in analysing“. The EDPS therefore offers “the expertise of independent data authorities in advising on how to assess the significance for consumer welfare in such proposed acquisitions“.
One may or may not agree with the EDPS’s views on this matter (and you know my take), but it him and his team deserve credit for having made a popular issue out of this, thereby reviving some of the old -and most important- debates in EU competition law.
I have just uploaded a new paper on appreciability and de minimis in Article 102 TFEU. See here for the pre-edited version, accessible via SSRN, and here for the edited version, which is coming out in the Journal of European Competition Law & Practice. As usual, I would very much welcome your comments: P.Ibanez-Colomo@lse.ac.uk.
A practice may violate Article 102 TFEU without it being necessary to show that it has a serious or appreciable impact on competition. I do not believe there is anything controversial in this position. It makes little sense to speak of de minimis abuses where a firm is dominant. After all, Völk made an explicit reference to the ‘weak position’ of the parties to the agreement. This fact alone rules out the relevance of the doctrine in instances where a firm’s share is at least above 40% and, typically, 50%.
However, the rejection of the de minimis doctrine in the context of Article 102 TFEU has given rise to controversy. I do not believe it is justified to criticise the Court’s position. More importantly, I do not believe that this line of criticism is about the de minimis doctrine at all.
I have come to realise that there is confusion about the meaning of de minimis in abuse of dominance cases. Some commentators appear to suggest that, because it is not necessary to establish the serious and appreciable nature of an exclusionary effect, every practice is abusive. For instance, a practice that covers just 1% of the market would be contrary to Article 102 TFEU.
In my view, this interpretation of the case law is inaccurate. As I explain in the paper, it is the consequence of the confusion around three separate but related notions, which should not be conflated: (i) appreciability; (ii) likelihood and (iii) effect.
The rejection of the de minimis doctrine does not say anything about what an anticompetitive effect is, and does not rule out the need to establish the likelihood of such an effect.
I explain these ideas by reference to Article 101 TFEU case law. In my view, it is reasonable to assume that the meaning of de minimis and appreciability is the same across provisions. What are the lessons to learn from Article 101 TFEU case law?
- The fact that a firm has significant market power does not mean that its practices necessarily have anticompetitive effects. Take a simple example. Two parties to a distribution agreement may have a market share exceeding the 30% threshold set out in the Vertical Block Exemption Regulation. If it is not restrictive by object, this distribution agreement is not necessarily caught by Article 101(1) TFEU. The same is true in the context of Article 102 TFEU. If the practice is not abusive by its very nature, it is not always prohibited. A case-by-case assessment of its impact on competition would be required.
- If a practice is unlikely to have restrictive effects on competition, it is not prohibited. ‘By effect’ conduct is only caught by Article 102 TFEU if it is likely to have an anticompetitive impact. In other words, and as explained by Advocate General Kokott, it is necessary to show that it is ‘more likely than not’ to have such an effect. As a result, a practice that only covers 1% of the market will typically fall outside the scope of Article 102 TFEU. The fact that it is not necessary to show the serious or appreciable nature of an effect is irrelevant in this regard.
- Not every disadvantage to rivals is necessarily an anticompetitive effect. What amounts to an anticompetitive effect is independent from its serious or appreciable nature, and should not be conflated with it. A close reading of the case law suggests that not every disadvantage to rivals necessarily amounts to an exclusionary effect. For instance, the Court has already ruled that selective price cuts and ‘margin squeeze’ practices are not necessarily abusive. In Post Danmark I, it held that pricing below ATC but above AVC is unlikely to have exclusionary effects.
exhausting, never-ending, coma-inducing, comprehensive and certainly influential posts on Post Danmark II (see here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, here, and here) [the fever has passed and he has moved on to a new obsession, Lundbeck (mercy, please!)😉 rightly emphasized the importance of establishing in any situation a link of causality. Events such as a market share increase may well be attributable to the superior quality of a product but also to non-merit based actions.
When this morning we awoke to a sudden increase in traffic on the blog we first thought that it was attributable to the great interest of our most recent posts. Wrong. The real reason was the traffic diverted to Chillin’Competition by Politico’s Playbook.
Today’s issue of the must-read daily briefing of EU news included a link to our interview with Judge Marc van der Woude (just appointed Vice-President of the General Court; congratulations!) (btw, this in turn has led to quite a few people discovering THE RAID).
And in passing, the Playbook (Ryan Heath) referred to “groovy antitrust blog Chillin’Competition”😎
Most kind! Politico now joins a rare short-list of people who think Pablo is groovy (a list that until today included only a Greek lawyer). My situation is worse, as not even my wife would remotely think that…
P.S. Busy day at work; tomorrow we’ll be back with something more substantial (and groovy).
When asked about what it takes to be a good lawyer (you know my take on that one), the former Chairman of my firm likes to say that lawyers must absolutely read newspapers. I think that he might have had in mind the pre-online era press, but anyway, he had a point. This post is about some things I read in the press over the past couple of days.
During a very long night flight on Saturday night I was able to read something not work related, namely the last issue of The Economist and the book How Children Succeed: Grit, Curiosity, and the Hidden Power of Character. I very much recommend the latter, but for the purposes of this post (and since this blog is not about important matters), I will comment only on the former:
The Economist issue places the spotlight on the role played by a handful of very large corporations in today’s economy, arguing that their rise threatens both competition and the legitimacy of businesses (see here). Not surprisingly, after citing interesting figures on increased levels of concentration in the economy, the piece turns its eyes to antitrust. I have often agreed with the way that newspaper has considered antitrust as a means of ensuring “radical centrist” policies (see here and particularly here) to which equality of opportunity is key, but this time I think they may have got it wrong.
The Economist claims that “prudent policy makers must reinvent antitrust for the digital age” and welcomes efforts to prevent “tech firms from unfairly privileging their own services on platforms they control” praising the Commission’s pursuit of Google (a couple of paragraphs earlier it criticizes the Institution for using State aid to go after Apple).
In my view, what prudent policy makers should do is not meddle with a stable –if somehow inconsisent- set of judge made case law that applies across the spectrum to all sectors. It is a defining feature of antitrust law –for the good- that its adaptability comes precisely from its relative isolation from small politics (as I too often say here, it is a distillation of common sense infused with mainstream economics). Also, and as The Economist knows and often claims, legal certainty does have great value, also in economic terms, so changing the rules in the middle of the game might have a cost.
I share the newspaper’s credo of equality of opportunity, but they may have fallen into the tempting trap of equating that with some vague sense of perhaps-not-so-thought-through neutrality. Such reflexes, which are common, nevertheless comfort us in the decision to devote our upcoming Chilling Competition conference precisely to the role of neutrality in competition law. There are plenty of issues in need of fewer assumptions and greater and finer discussions. Even the press, by the way, is also finding out about the perils of ill-conceived neutrality (re, for instance, Brexit or Trump; see e.g. here).
On top of that, I’m not so convinced that some of our current “policy makers” are ideally-suited to “reinvent antitrust”.
Let me give you an example of why I’m saying this, and one that also features in the news today:
As I skimmed this morning through the Financial Times (admittedlty in search of this story quoting my views on State aid law and Brexit) I came across a piece in which the FT criticizes the Commission’s copyright reform initiatives (“The EU takes a backward step on digital copyright”).
As you know, the Commission plans “forcing” news publishers to demand a fee from news agreggators when they show snippets of content. When that happened in Spain (and the Commission took no action; the national competition authority did say something, though) aggregators closed their sites, with the result that news publishers received much less traffic and even claimed that the shutting down of those aggregators could amount to an abuse of dominance.
The Financial Times – a would-be beneficiary of the initiative- argues today that “the kindest interpretation one can place on these proposals is that the commission has simply misunderstood the marketplace. A more cynical view is that it has caved in to fierce lobbying by a number of powerful European publishers”.
When the Spanish law was enacted, the world’s leading IP scholar Mark Lemley said on Twitter: “Quite possibly the dumbest law enacted anywhere this century”. I’m just not sure that putting an EU seal on it may be good thing. In addition, and regardless of political and IP-issues, this initiative raises interesting antitrust issues too: the world’s leading an obscure antitrust scholar said on Chillin’Competition, this initiative could be regarded as the public creation of a watertight cartel.
In sum, if some of our policy makers don’t respect competition law, I’m not that sure that they are well-suited to “reinvent it”. I,for one, like it as it is.
P.S. It did not feature that much in the news, but new judges were sworn in at the General Court yesterday (and Marc Jaeger has been re-elected President). New judges include Paul Nihoul and Alexander Kornezov, a contemporary of Pablo at the College of Europe (which will force Pablo to re-assess his precociousness, professionally speaking)