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European Commission prohibits Ryanair/Aer Lingus deal

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Last Wednesday the Commission confirmed that it has decided to prohibit -for the second time- the proposed merger between Ryanair and Aer Lingus merger (click here for the press release). This is the fourth prohibition decision adopted under Commissioner Almunia, and the 24th in the history of EU competition law.

The decision has not yet been published. We had assumed that while we waited for it we could at least report on Michael O’Leary’s (Ryanair’s CEO) reactions. However, Mr. O’Leary has not made any public statements of the kind that we were expecting (remember his analogy between the European Commission officials and North Korean economists?  🙂

Ryanair has issued a press release in which it argues that its offer “was supported by an historic and unprecedented remedies package that included not one, but two upfront buyers (BA/IAG & Flybe) to take over approximately half of Aer Lingus’ short-haul business (…) The transfer to these upfront buyers of Aer Lingus’ business on the 46 crossover routes identified by the EU Commission, together with the relevant slots, aircraft, personnel and branding, was ensured by binding, irrevocable commitments by those upfront buyers including Board approvals”. In Ryanair’s view, “[t]he history of the EU’s treatment of Ryanair’s two offers for Aer Lingus conclusively proves that this prohibition is a “political” decision to pander to the vested interests of the Irish Government (a minority 25% shareholder in Aer Lingus) and is not one that is based on a fair and reasonable application of EU competition rules or precedent airline merger approvals in Europe”.

We have no clue on whether the allegations over the political motivations of the decision are founded or not. But politics aside, this case resuscitates some tricky substantive/institutional questions. The nature and scope of the remedies proposed by Ryanair was indeed pretty substantial, and arguably unprecedented (Ryanair had even pledged to give 100 million to Flybe to ensure its sustainability) so, query:

Are EU merger control rules on when an up-front buyer is a suitable one sufficiently clear? What discretion should the Commission enjoy in this regard? Ryanair has announced that it will appeal the decision before the General Court, so we should expect to have some answers to these question soon.

Written by Alfonso Lamadrid

1 March 2013 at 4:51 pm

Sunday Politics

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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.

Written by Nicolas Petit

11 December 2011 at 8:56 pm

Posted in Uncategorized

The end of the US Microsoft case

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13 years ago the US Department of Justice together with several States filed a suit against Microsoft that marked the beginning of what still remains as the most significant case in contemporary antitrust, and one that led to many changes in the way we approach high-tech markets, and antitrust enforcement in general.

The history of the US v. Microsoft antitrust battles is too rich in details to be summarized here, but those interested in a great brief explanation should watch this video in which Phil Malone (who was one of the leading prosecutors for the Antitrust Division -and also my Professor at Harvard Law School- makes this long story short). 

But now more than ever, all of that pertains to history. The oversight mandated by the 2001 settlement (reached right after the DC Circuit Corut reversed part of the District Corut´s decision which had ruled for the Governmment) will expire on May 12th. However, the last oversight hearing before Judge Colleen Kollar-Kotelly occurred on April 27th and marks, in practice, the end of the story. In the words of Judge Kollar-Kotelly, the effective end of the Microsoft case “will close an important chapter in the history of antitrust law“.

I missed this in the selection of news that had taken place during our days off, and I have, very rightly, been “reprehended” for this omission by Craig Farringer, Assistant Attorney General for the District of Columbia, and one of the members of the so-called “California Group”.  (as some of you will recall, several States decided in November of 2001 that they did not want to accept the settlement proposed by Microsoft; this lead to a full evidentiary remedy hearing which resulted in the California Group Final Judgment).  Craig Farringer (who also had extremely nice words for this blog, for which we´re grateful) has sent us a picture of some California Group lawyers and experts taken moments after the status conference outside the Prettyman courthouse in Washington. Here it is:

 (Pictured from left to right is Adam Miller of California, the now famous technical expert Craig Hunt, Layne Lindebak of Iowa, Stephen Houck (who signed the original complaint lodged by the States in 1998), economics expert Chuck Clarke, and Craig Farringer).

Our congratulations to all those who worked on the case, be it for the DOJ, for the States, for Microsoft or for other third parties involved in the case.

And, by the way, on this side of the Atlantic the General Court has scheduled for May 24th the hearing on Microsoft’s appeal against the Commission´s findings of non-compliance with the 2004 decision, which led to an additional 899 million euro fine.

Written by Alfonso Lamadrid

2 May 2011 at 4:20 pm

Upcoming competition law seminars in Madrid

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The level of the Annual EU and Spanish Competition Law course directed by Luis Ortiz in Madrid keeps getting better each year (and it´s now on its 14th edition..). It really is hard to find a program with so many excellent speakers participating on it.  Let me give you an example:

The seminar which took place last week was coordinated by Cecilio Madero (Director General at DG COMP), and focused on novelties in the areas of mergers and abusive conduct. Amongst the speakers were Per Helmström (Head of Unit at DG COMP), Nicholas Banasevic (Deputy Head of Unit), Milan Kristof (Référendaire at the ECJ), Ainhoa Veiga (Partner, Araoz y Rueda), Antonio Guerra (Counsel, Uría Menéndez), Juan Jiménez-Laiglesia (Partner, DLA Piper) and Miguel Odriozola (Partner, Clifford Chance).

Yesterday and today another bunch of top-notch speakers such as José Luis Buendía (Partner, Garrigues), Piet Jan Slot (Professor, Leiden University), Jerónimo Maillo (San Pablo CEU University), Carlos Urraca (Legal Service, European Commission), Joaquín Fernández (Head of Unit, DG COMP) or Jorge Piernas (EUI), amongst others, have been dealing with state aids and other public interventions.

Here comes the advertising: If you´re sorry you missed those, and fancy the idea of spending a spring weekend in Madrid you can still register for the last two seminars:

– On the 18th of March I will be coordinating a seminar on the application of competition law to network industries. It will feature:

Jarleth Burke (Partner at Jones Day, London) who will be speaking about the regulation and competition law in the telecoms sector;

Júlia Samsó (Latham&Watkins, London), who will deal with the specificities of the energy sector;

Jasper Sluijs (Tilburg Law and Economics Centre), an expert on network neutrality issues;

Myself, for an overview of the challenges posed by network effects and network industries.

– On the 25th of March there will be another seminar on IP and Competition law coordinated by Alvaro Ramos (Senior corporate counsel at Cisco).  Its three sessions will deal with

Excessive pricing and copyrights” with Daniel Escoda (Telefónica), and Pablo Hernández (SGAE);

“Standards and Competition Law” with Jennifer Vasta (Senior Legal Counsel, Qualcomm); Miguel Rato (Partner, Shearman&Sterling) and Álvaro Ramos;

Competition Law in Cloud Computing“, with Jean Yves Art (General Counsel EMEA Microsoft), Tero Louko (Antitrust Counsel, Google), and Luis Ortiz Blanco (Partner, Garrigues).

There are very few seats left, but if anyone´s interested in registering (half prize for those coming outside of Spain) or obtaining more info, you can write here  competencia@ieb.es

Written by Alfonso Lamadrid

4 March 2011 at 6:00 pm

Competition Law and Sport (IV)- The US Supreme Court’s decision in American Needle v NFL

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On May 24th the US Supreme Court issued its most important antitrust decision of the term in the case confronting American Needle and the NFL. As we expected, the Court unanimously rejected the NFL’s contention that its 32 teams should be treated as a “single entity” for antitrust purposes.

The last opinion authored by Justice Stevens reverses a previous decision by the 7th Circuit and holds that NFL’s teams “are still separate, profit-making entities, and their interests in licensing team trademarks are not necessarily aligned”. The Court rejected a formal analysis by ruling that the single entity created by the NFL to manage teams’ IP rights was merely an instrument at the service of its teams.

In essence, the Supreme Court’s Judgment preserves the status quo, thus fully subjecting agreements entered into by sport leagues to a rule of reason analysis. However, some have pointed out that American Needle could have wider implications affecting other ventures between competitors outside the sports world.

The Supreme Court showed some sympathy to the idea that leagues have a “legitimate and important” interest in “maintaining a competitive balance among athletic teams.” Nevertheless, the weight that shall be accorded to such interest in balancing the pro and anti-competitive features of a given agreement remains unclear. In any case, the Supreme Court appears to legitimize competitive balance as a potential redeeming virtue for Section 1 purposes. Whether Article 101 TFEU allows or not to consider similar interests remains highly controversial. What’s your take?

Written by Alfonso Lamadrid

14 June 2010 at 8:18 pm