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Streetmap v Google: lessons for pending Article 102 TFEU cases (including Google itself)

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Streetmap

On Friday last week, the High Court of England and Wales ruled on the dispute between Streetmap and Google (see here). It is a really interesting read, and one that shows that – whether or not one agrees with the outcome – courts can deal effectively with complex competition law matters (I am told that I should not jump to conclusions too readily: apparently Mr Justice Roth, author of the decision, is an active member of the Association of European Competition Law Judges and attended in that capacity the seminal lecture on two-sided markets that Alfonso gave in Uppsala 😉 ).

The obvious appeal of Streetmap v Google is that it raises pretty much the same issues that the Commission will have to address in its own – and pending – Google case (see here and here). In essence, Streetmap argued that Google’s prominent presentation of its mapping services amounted to an abuse of a dominant position. As many people have argued, the combination of Google Maps and the search results is a form of abusive ‘bundling’.

Mr Justice Roth did not seem very impressed with the arguments brought by Streetmap. He concluded that Google’s practice was not reasonably likely to have an appreciable anticompetitive effect and that, in any event, it was objectively justified. I, on the other hand, am very impressed with the decision. Mr Justice Roth’s analysis is penetrating and creative. Here and there, I have found arguments about which I had not thought before.

The decision provides particularly interesting lessons for Google and other ongoing Article 102 TFEU cases. I can think of the following:

  • Effects need to be showed for some practices, not simply assumed. Post Danmark II made it clear that, as far as some practices are concerned, a likely anticompetitive effect must be shown. In such cases, assuming that the practice is capable of having such an effect is not enough. It would be necessary to examine the features of the relevant market and how, in that context, the practice would lead to foreclosure. Mr Justice Roth applies this principle and concludes – rightly in my view – that Google’s conduct is a ‘by effect’ practice.
  • There must be a causal link between the abuse and the anticompetitive effect. This is one of the fundamental aspects of the ongoing Google case, and one that is often ignored. In fast-moving markets, the exclusion of rivals is not necessarily the consequence of an abusive practice. Rivals may not be able to adapt to changes in consumer demand. Their business model may be the relic of a past era. As a result, they would have been driven out of the market irrespective of the behaviour of the dominant firm (the counterfactual, again!).
    Post Danmark II was clear in stating that a ‘by effect’ practice is only contrary to Article 102 TFEU where the ‘anti-competitive effects’ are ‘attributable’ to the dominant firm (para 47, emphasis added). Mr Justice Roth applies this principle and appears to take the view that Streetmap’s decline is not attributable to Google’s practice. He seems to suggest that it would have happened anyway.
    The Commission faces a major challenge in this regard in the pending Google case. Assuming there has been a decline in the traffic towards some price comparison websites, the Commission would have to show, to the requisite legal standard, that this is the consequence of Google’s practices – as opposed to the consequence of the evolution of markets and, in particular, the rise of Amazon, eBay and others.
  • There is confusion about the legal test that should apply to Google. Unsurprisingly, Streetmap argued that Google’s practice was a form of bundling. This position is controversial (see here). These days, consumers expect more than the proverbial ten blue links when they perform a search on Google. Consumers’ assumption is that, where relevant, other affiliated services (including maps, images and youtube videos) will also be displayed.
    Is it possible to argue, against this background, that Google’s practice is a form of abusive bundling and/or that the practice is not objectively justified? The Commission conceded in its Guidance that two products are distinct only where ‘a substantial number of customers would purchase or would have purchased the tying product without also buying the tied product from the same supplier’.
    Where, conversely, consumers would only obtain the tying product with the tied product, the practice is most probably objectively justified and as such a source of efficiency gains that benefits consumers.
    Will the Commission depart from the Guidance in Google? What are the implications? Nicolas Petit has recently written an interesting paper on the impact of the Guidance on administrative discretion. The conclusion that would follow logically from Nico’s paper is that the Commission cannot depart from the approach to tying and bundling sketched in the document. I have written elsewhere that the Guidance is a pre-commitment device – a promise to act in a certain way – that cannot simply be disregarded.
  • The rejection of the de minimis doctrine does not mean that it is not necessary to show an effect. In Post Danmark II, the Court of Justice refused to set a de minimis thresholdSome people interpreted this passage of the ruling as meaning that there is no need to show an anticompetitive effect in the context of Article 102 TFEU. This position is not correct, as I explained elsewhere. What the Court held in Post Danmark II is that, where an anticompetitive effect is shown, this effect will be appreciable. In any event, the anti-competitive effect – and the causal link between the practice and the effect – will have to be established, and not simply assumed.
    Mr Justice Roth adds an interesting twist to this question. He claims that the conclusion of the Court in Post Danmark II is only valid where the abuse and the exclusionary effects take place on the same market. In the case of leveraging, it would be necessary to show that the anticompetitive effects on the non-dominated markets are appreciable. Not everybody will agree with this position, but the underlying reasoning and approach are, in my view, correct.

 

Written by Pablo Ibanez Colomo

17 February 2016 at 8:23 pm

Posted in Uncategorized

Summertime developments in EU competition law (tax rulings, cement, Section 5 of the FTC Act and more on Google)

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Lots of things happened while this blog was closed for holidays; here are a some comments on a selected few of those developments:

The news: On 20 July the European Parliament issues its Draft Report on tax rulings unusually pre-concluding that “without prejudice to the outcome of the Commission’s ongoing state aid investigations” there has been a breach of State aid rules (MEPs appear to be getting into a habit of giving ex ante opinions in competition cases…) and –perhaps more understandably- suggesting the Commission to adopt guidelines on State aid and transfer pricing.  A comment (and a bet): We have commented on these cases before, but this time I’m willing to bet a round of beers on the prediction that the Commission will not order any recovery in these cases and will rather use them to send a signal for the future. Any takers?  [By the way, those interested in the subject should attend the Brussels School of Competition’s Morning Briefing about State aid and Tax Rulings on 16 October].

The news: On Friday 31 July the Commission announced the closure of its longstanding investigation into the cement sector explaining that the evidence gathered was not “sufficiently conclusive”. A comment: As you might also remember some companies (including my client in the case) appealed the information requests sent out by the Commission. As explained in the Judgment, as part of the judicial proceedings in our specific case we managed to have access to, and to exceptionally lodge observations on, the Commission’s evidence at a pre-SO phase (for my comments on these Judgments, click here). Some parties appealed the General Court Judgments (not all, for, understandably, practical realities often trump theoretical interest) and the ECJ may say interesting things, so keep an eye open for those.

The news: On August 13 the U.S Federal Trade Commission issued a Statement of Enforcement Principles that will guide its application of Section 5 of the FTC Act, a provision against “unfair methods of competition” that goes beyond the prohibitions in the Sherman or Clayton Acts. Essentially, the FTC has committed to align the enforcement of Section 5 with that of the Sherman Act, effectively adopting a rule of reason analytical framework. Comment 1: the Statement explains that the FTC is “less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm”. Well, isn’t that stating the obvious? Also, the language (“is less likely”) shows some convergence at both sides of the Atlantic when it comes to sort-of-soft law: the FTC seems to have learnt from DG Comp’s guidance in this respect… Comment 2: I always thought that Section 5 was the U.S. way of making up for a sometimes inconvenient strict interpretation of the antitrust rules that does not cover practices that could be challenged with a wider, also sensible interpretation. Just to give you to examples: the Ethyl case, concerning a Section 5 challenge against facilitating practices could perhaps have been brought under Section 2 if US antitrust law had a notion of individual abuse of collective dominance like we do in the EU following the Irish Sugar Judgment. Also, the Intel case under Section 5 would seemingly also have been equally possible to challenge if we had a more nuanced approach to refusals to deal concerning interoperability.

The news: Google’s  lawyers didn’t rest during the holidays either. A few days ago Google sent its response to the Commission’s Statement of Objections (and its General Counsel wrote a blog post about it, available here). All this generated yet another news cycle; journalists don’t get tired of this story, as don’t lawyers, who keep jumping in at the smell of possible blood. The non-comment: We have no real new info on the case so we have no comment beyond the many written in the past.

And now, a quick look to the future and to some forthcoming events:

  • On Friday, 4 September, the Liège Innovation and Competition Institute is holding, in Brussels, an interesting event on the Huawei/ZTE Judgment (for my hasty first comments and some interesting, more well thought-out comments by others, see here).
  • On September 29 a new edition of the 9 month LL.M course will start at the Brussels School of Competition. Registrations are still open and the program is available here.
  • And on Thursday 24 September ERA and the European Data Protection Supervisor will be hosting a must-attend event (at least for me since I’m chairing part of it) titled Competition Law rebooted: Enforcement and personal data in digital markets“. For more, see here.

Impossible is nothing (or some thoughts on the statement of objections in Google)

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Impossible is nothing

Today, just a few hours after the Commission sent a statement of objections to Google, I have received a book I ordered a couple of weeks ago, called Do Great Cases Make Bad Law? What a wonderful coincidence. The author addresses the question, profound and fascinating, in light of 22 landmark US Supreme Court rulings. This is definitely a research exercise one could replicate by examining Article 102 TFEU case law and administrative practice.

The statement of objections in Google has just been sent, but the case has already secured its place in the hall of fame. After more than four years speculating about the legal aspects of the case, the documents issued yesterday by the Commission (see here and here) finally give a more accurate idea of the reasons why the authority has taken the preliminary view that Google has breached EU competition law. The memo is remarkable in many respects. As Alfonso explained earlier this week, it makes little sense to take a guess at this stage, but, from what I can read, the case could transform the way we think about Article 102 TFEU. The underlying issues are so fundamental, and some of the tentative theories of harm so unprecedented, that its consequences are, at least potentially, far-reaching.

What is particularly interesting is that the underlying issue is a basic one. It is in fact strange that it has not been addressed many times already. The case seems to revolve around whether, and if so, under what circumstances, a dominant firm is entitled to discriminate in favour of its own services. The Commission memo seems to take the view that, indeed, such behaviour may violate Article 102 TFEU, but it is not very clear about the conditions under which this may be the case (which is not surprising; after all, it is just a memo). In any event, one can think of three possible legal approaches to the question:

Discrimination is prima facie prohibited absent an objective justification: At times, the memo suggests that favouring one’s services is abusive by its very nature. This would make Google a by-object case. Absent an objective justification, discriminating in favour of an affiliate would be prohibited under Article 102 TFEU. According to the Commission, the prominence and growth of Google’s service since 2008 do not reflect its relative quality or its relative relevance for end-users. The document suggests, in other words, that it is not the outcome of competition on the merits.

I have explained elsewhere that it is controversial to state that dominant firms are under a general duty not to discriminate against rivals. Discrimination of the kind outlined in the memo is ubiquitous (supermarkets may give more prominence to their brands, media groups favour their own outlets and electronic equipment is often designed in a way that it only works with affiliated products). More importantly, such discrimination is more often than not pro-competitive. Trying to thrive in the marketplace by exploiting one’s advantages is what competition is all about. Similarly, it is a banality to state that markets sometimes work better when different activities are integrated. I do not know whether the Commission intends to follow a by-object line of reasoning, but it is easy to think of the far-reaching consequences for the future of Article 102 TFEU if it does. The scope of the provision would expand very significantly. Just think of the many practices that could be labelled (or re-labelled) as exclusionary discrimination.

Discrimination is abusive if it leads to anticompetitive foreclosure: The Non-Horizontal Merger Guidelines are based on an idea that contradicts the above approach. Following a vertical merger, the new entity may have an incentive to favour its own services. This is not problematic in and of itself, even when one of the merging parties holds a dominant position (and Alfonso knows a thing or two about this). Favouring an affiliate by restricting access to inputs or outlets is only an issue if it leads to ‘anticompetitive foreclosure’. This is an approach that could also be followed in Google. It would not be entirely uncontroversial – I spare you the details of why I am not entirely convinced – but it would have the advantage of consistency. Like issues would be treated alike across competition law provisions. Arguably, it would also be the logical approach for the Commission to endorse. After all, the Guidance is a pre-commitment device intended to confine administrative action to instances where anticompetitive foreclosure is likely. In this sense, it is remarkable that the word ‘foreclosure’ is not used in the memo. Not even once. The rhetoric of foreclosure is equally difficult to find in the document. This conspicuous absence raises a number of questions. Does the Commission believe that the Guidance is not relevant in Google? Is the Guidance no longer a reliable indicator of the Commission’s approach to the enforcement of Article 102 TFEU?

Discrimination is abusive if it harms consumers and innovation: The memo suggests that foreclosure is not the only source of anticompetitive effects that can trigger the application of Article 102 TFEU. The Commission seems to imply that, even in the absence of anticompetitive foreclosure, administrative action could be justified if it can be shown that discrimination harms consumers and competitors’ incentives to innovate. If the Commission chooses to follow this third approach, it would be venturing into unchartered territory. Instead of inferring harm to consumers and innovation (these effects are typically assumed to result from the exclusion of rivals), harm would be established in a direct way. I can think of several reasons why, in theory, it would make sense to do so. The questions I have in this regard are more practical than theoretical, however. For instance, I wonder whether it would be possible for the Commission to provide cogent and convincing evidence of harm to innovation (as opposed to discussing the plausible mechanisms through which innovation could be negatively affected). Similarly, I am not sure whether a dominant company would be able to challenge or disprove claims that a practice is harmful to innovation.

As usual, we very much welcome your views on the above.

Written by Pablo Ibanez Colomo

16 April 2015 at 8:33 pm

Posted in Uncategorized

Anything is possible (on the anticipated Google SO)

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It has been reported today (see here) that Commissioner Vestager may announce tomorrow that the Commission will be addressing Google a Statement of Objections.

This move, that many (including ourselves) would not have anticipated only a few months ago, has been the subject of rumors for some weeks. We have been asked about our opinion a myriad times these past days, and, frankly, we cannot say much more than what we have said in our many posts on the subject (too many to be linked to now), all written in the light of the very scarce publicly available information.

The good news of this whole story is that the law may now take center stage. I wrote recently that this was a perfect case study to discuss the limits of Article 102 (see the end of this post for my own recent case study on the subject for the Brussels School of Competition), but it is also a perfect case study on the huge importance of non-legal factors in competition cases in which the law is unclear (as it’s arguably always the case, save in -some- cartel cases) (for our previous reflections on this, see here or here).

The decision to pursue the case, at least for now, is likely to bring to the fore some fascinating legal questions. The arguments of both parties are by know well known, but it will be interesting to see how the Commission will frame its theory of harm. The stakes couldn’t be higher for Google, for the complainants resorting to competition law as a major competitive tool, and for the Commission, which was left in an uncomfortable position by the last minute decision to halt the commitment negotiations, which generally has the winning hand in these cases and which has, until know, always succeeded in all its 102 cases, including all previous high-stakes tech ones.

Whereas the parties’ submissions will, in principle, not be made public, their arguments have recently been publicly championed by commentators who give us a good taste of what is to come. The latest round of comments has been made by two reputed experts who have held some of the highest possible roles in the competition community, namely President of the General Court (Bo Vesterdorf) and Emeritus editor of Chillin’Competition (Nicolas Petit).

Mr. Vesterdorf’s piece (based on research done for Google but expressing his own views) has very recently received a reply from Nicolas (his research has been financed by iComp, a complainant in the case, but he also expresses his own views). We suggest that you read both.

Pablo and myself -who, believe or not, for better or worse, and despite the hours invested, must certainly be among the few who haven’t made any money out of this case in over 4 years…- are most curious about the many conceivable scenarios that now open up, but we won’t give our take on what is to happen. Why? Because as the recent evolution of the case shows, in proceedings with so many non-legal ancillary factors, predictions are doomed to fail; anything is possible.

Written by Alfonso Lamadrid

14 April 2015 at 11:36 pm

Posted in Uncategorized

Non-working papers (on two-sided markets, object/effect, cartel evidence and Google)

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writingI recently had to devote most of my non-billable work to finishing a few publications (the fact that after a few missed deadlines I was almost under death threat from editors also played a role) and preparing some courses. As if there weren’t better things to do with one’s time…

Anyway, since I did the work, I thought that it could perhaps be useful to post it or refer to it here, both to justify myself and in case any of you might find them interesting or have comments. These “non-working” papers include:

– A paper on “The Double Duality of Two-Sided Markets” which, to a large extent, is a beefed up version of my speech (the ppp is available here) at the Swedish Competition Authority’s Pros and Cons Conference back in November. The editors of Competition Law Journal have kindly offered to publish it, so it will appear there soon. The paper posits that competition law enforcement regarding multi-sided platforms may have not always accounted for the ambiguity of business practices carried out in these settings and attempts to identify the causes at the root of this problem and to propose some solutions. In essence, my take is that multi-sided platforms raise old questions but with renewed intensity, and that this must force us to go back to basics and recall some general principles that we should never lose sight of.

– A presentation on the Cartes Bancaires Judgment (here: Some additional reflections on Cartes Bancaires_Lamadrid ). It’s titled “some additional reflections” because it followed previous interventions at a seminar on the part of Javier Ruiz Calzado (Latham&Watkins; his very good ppp is also available here: Cartes Bancaires_Ruiz Calzado ) and Nicholas Khan, from the European Commission’s Legal Service. It was a privilege to share the panel with them.

– An absurdly lengthy not so succint paper I’ve co-written with my colleague Ana Balcells on cartel evidence in Spain: La prueba de los cárteles en España (Lamadrid_Balcells), forthcoming in JM Beneyto y J Maillo (Dirs): La lucha contra los cárteles en España, Aranzadi, 2015.

– Also, a few days ago the founder of this blog, Nicolas Petit, asked me (with a most kind anticipation of less than 24 hours…) to conduct a case study on the Google investigation at the Brussels School of Competition. It was a very interesting exercise. I only directed the debate asking questions and linking issues together and it was the students who brilliantly taught themselves and arrived to their own conclusions (I’m being nice to them because I told them that suscribing to the blog is a prerequisite for passing, so I assume they’re reading this). The legal issues underpinning the case (which have not always received the necessary attention) are very well-suited to reflect about some basic concepts of Article 102. In fact, Pablo also did this with his students at LSE a few days ago. Just in case any of you is interested in conducting a similar exercise, here is the (very hastily drafted) list of questions I used: Google Case study – BSC_Lamadrid.

Written by Alfonso Lamadrid

19 February 2015 at 3:01 pm

Forget about the European Parliament: foreclosure is the crucial aspect of the Google case

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Foreclosure - Price reduced

I tried (hard) to write something about the European Parliament’s non-legislative resolution on various aspects of the digital economy, including search engines (in plural). But I could not. I kept thinking about foreclosure. My fixation with the concept is most probably due to the fact that I am slowly becoming an old curmudgeon. The self-serving answer with which I fool myself (quite successfully for the time being, may I add) is that all the fuss about the EP’s resolution (largely irrelevant) is a distraction from the crucial aspect of the Google case.

In the Guidance, the Commission committed to give priority to cases leading to anticompetitive foreclosure. This is a very sensible position. The experience accumulated over the years (just think of Michelin II, British Airways or the Microsoft saga) shows that potentially abusive practices do not always harm the competitive process. As a result, it makes sense to ensure that the limited resources of the Commission are devoted to cases where negative effects are likely. Equally sensibly, it is explained in the Guidance that ‘if the conduct has been in place for a sufficient period of time’ the authority would consider ‘evidence of actual foreclosure’.

After 4 years (I know because the investigation is about as old as my tenure at LSE), I am ready to guess that, if Google’s alleged discriminatory conduct were really exclusionary, there would already be overwhelming evidence in this sense. If there is not, that fact alone should be a sufficient reason to close the investigation. Surprisingly, foreclosure has so far been mentioned only very sparingly in the context of the case. As an academic, I would want debates in future months to address this question.

In particular, it would be desirable if the Commission clarified whether the investigation is really driven by foreclosure concerns. The statements made by the former Vice-President suggest that evidence of exclusionary effects is not a precondition for intervention. Concerns with innovation as such or with choice as such (that is, not resulting from rival foreclosure) could, it would seem, trigger administrative action under Article 102 TFEU. In other words, intervention would be justified not so much because the alleged discriminatory strategies are likely to harm the ability and the incentive of Google’s rivals to compete but because they would limit choice for consumers or reduce companies’ incentives to innovate.

Relying on innovation and/or choice alone in Google would entail a paradigm shift in enforcement. This is not necessarily bad per se. After all, ideas and priorities evolve. Flux is competition law’s second name. However, if the case is no longer about foreclosure as such, the Commission should be crystal clear about the matter and acknowledge it openly. The consequences of a paradigm shift cannot be ignored and should not be taken lightly. In spite of the growing popularity of the concept (more about it in the coming weeks), I have not seen anything close to a fully-fledged and internally coherent analytical framework based on choice. Very much the same could be said in relation to innovation. Relying on a standard that lacks clear boundaries would harm legal certainty and would make it difficult for firms to anticipate the outcome of administrative action. These are, let us not forget it, the reasons why the Guidance was adopted in the first place and why it was made to revolve around foreclosure.

And now from foreclosure to disclosure, which is quickly becoming as popular as choice and innovation: nothing to disclose.

Pablo

Written by Pablo Ibanez Colomo

5 December 2014 at 10:05 am

Posted in Uncategorized

Playing for the gallery- On the European Parliament’s resolution on the unbundling of Google

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I’m typing on Sunday morning, on my plane back from Stockholm, right after reading the excellent pieces by The Economist on market power in the digital age (the image above comes from it), which summarizes many of the things we have been discussing here for quite a while in relation to the Google case (too many links to cite them here), the Microsoft/Skype Judgment (here), to the practical articulation of the economic theories on two-sided markets (here among others) and the interface between competition law and privacy (here and here). If you haven’t read it yet, we suggest you to do it here.

The Economist pays particular attention to what has been the talk of the town these days, European Parliament’s approval of a resolution that suggests the Commission “to consider proposals with the aim of unbundling search engines from other commercial services”. I’d told myself some time ago that I would reduce my coverage of Google related news (despite the increased number of visits they attract to the site) because I had the impression that it had ceased being about the law (admittedly, I´m not sure it ever was), but since everyone’s taking about it, and since I have been asked for my views on this quite a few times (Reuters actually published some of them in this piece), here you have them:

On the politicization of competition law. I very much like politics, and I very much like competition law, but I don´t like them together, at least when it comes to individual cases. In previous posts I have written about competition law and big politics (see here for “Antitrust and the Political Center” and here for a follow-up CPI interview on it) as well as, more recently, about competition law and “small politics” (see “On Competition Law and Politics”). When the new Commission structure was unveiled, we also wondered whether it meant that competition law would become more permeable to other policy areas (see here). Interestingly, last week I read that Commissioner Vestager had talked to Henry Vane at GCR about how she was concerned about lack of democratic accountability in competition law and believed that “building bridges with European Parliament is key”. I was intrigued by these words, and am curious as to how this will play out in practice.

On separation of powers (and Montesquieu’s death). My initial reaction was of surprised by the superficiality of the exercise; I thought it was remarkable that that 384 MEPs have voted for this resolution without undertaking any prior inquiry and without apparent due reflection on an issue that would require very careful scrutiny (unbundling cannot be taken lighltly; think of the debates about the energy and telecom sectors, where the remedy is far less controversial than it would in a rapidly moving industry). On second thought, I realized that that is not even the real issue: the true problem is that something is wrong with separation of powers (even in the peculiar EU context) when the legislative branch steps into the application of the rules and puts pressure on the executive -acting as quasi judiciary- to interpret and enforce the rules in a given way.

I, for one, am much more comfortable leaving competition law enforcement in the hands of perhaps less accountable, but independent, well trained and specialized DG Comp officials, who are, for good reasons, the ones empowered to apply the rules.

A bias against US companies? We’ve discussed this before in some depth (see here). Aside from the irony in politicians in the US telling politicians here not to politicize the debate (not the first time, though; see here), I find that particular criticism without merit. The EU doesn’t play industrial policy with competition law. If you look at the fines imposed in the EU and the US for antitrust violations, you’ll see that whilst most fines imposed in the EU affect EU firms, those imposed in the US are imposed on non-US firms. In my view, MEPs were certainly sought to protect certain interests, but not those of the EU versus those of the US.

As I told Reuters last week, the investigations don´t have to do with nationality bias but rather relate to the fact that “in most cases U.S. firms are the allegedly dominant players worldwide. I wish more European firms were in a position to be subject to similar investigations in the U.S.” I was glad to see The Economist making the exact same recommendation in their piece (“Europe’s leaders should ask themselves why their continent has not produced a Google or a Facebook.”)

The underlying strategy. Despite the significant media attention, I doubt that many people have taken this “suggestion seriously”. The way to spin it will be to say that even if a break-up seems excessive, the resolution shows that Google’s, sorry, search engines’ dominance has become too much of a problem. This is yet another smart move on the part of Google’s complainants (which, as I’ve always said, have played the game exceptionally well), but I guess I can’t say the same for the Parliament.

Overdoing criticisms might give one visibility, but only at the expense of credibility. The Parliament has always been on a quest for more recognition and powers, and, frankly, these things don’t help.

Written by Alfonso Lamadrid

1 December 2014 at 6:30 pm

Of Politics and Competition Law (and on the Google cases too)

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In a recent post on the diluted legality of competition law I voiced out the view that our discipline could partly be losing its last name, a development for which I blamed a number of factors. However, some developments in the past few weeks have led me to think that perhaps I missed a critical feature: the increasing involvement of politics in the application of the competition rules.

To be sure, since its inception and all along its development, antitrust law –as a public policy tool at the core of the economic Constitution of any State- has had as much of a tight link with politics as it has with economics. But whereas economics not only provides a justification for the existence of the rules but also plays an important role in the development of legal rules and in individual cases, politics had traditionally exerted its influence in the exercise of enforcement discretion, and arguably not so much in the development of the rules and the outcome of cases.

The link between politics and competition enforcement might have been more obvious at the national level, where national competition authorities often are attached (organically or otherwise) to the Government at issue, which often appoints its members in the light of political considerations. It’s against this backdrop that one has to interpret the European Commission’s recurrent calls for independence of national competition authorities (most recently on a Staff working paper issued last Wednesday).

I think it’s fair to say that the influence of politics on the European Commission’s application of the competition rules has been more tenuous. For the most part, EU competition law has developed under the auspices of a firm political view on the advantages of competition in a system of social market economy, but in isolation from short-sighted political interests/small politics. This is largely explained by the theoretical legal status of the Commission as a body independent from Member States, and by the practical status DG Comp as a quasi-specialized agency within the Commission that one was not to second-guess. However, there are signs that this might be changing. In recent times national politicians have increasingly given their views on how competition law should be applied (here is one very recent example), and so have members of the European Parliament and a number of EU Commissioners. Moreover, they are doing so not only when their national interests are at stake (political solutions have been and are all the more common in State aid cases and in some high-stakes mergers), but also concerning investigations of potential infringements.

There are several examples of this evolution. Most recently we have seen politicians –mainly Chancellor Merkel- vouching for the approval of the Telefónica/E-Plus deal (see here). But perhaps the best illustration of the trend can be found in the Google case, on which we have written extensively on this blog.

This is a case in which DG Comp has extracted (arguably using the commitment procedure and its impressive record in judicial review of 102 decisions to stretch the boundaries of current legal standards) a set of significant commitments on the part of Google (see my comments here), going beyond what US authorities did. This could be regretted by people interested in the clarity of the law, but would normally have been seen as a practical enforcement success on the part of the Commission. However, a number of motivated and well-funded complainants –led by some smart lawyers who know how to play with the system and who deserve credit for getting near what I would’ve thought was impossible- now start to seem capable of derailing the commitment procedure by politicizing it. First, the German and French ministers for economics wrote a most unusual joint letter to Vice-President Almunia asking for a tougher stance on Google. And now, a widely extended rumor has it that a few EU Commissioners are being persuaded not to approve any Article 9 decision during Mr. Almunia’s tenure. As you can imagine, not all Commissioners are persuaded with sophisticated legal arguments related to evidence on foreclosure and the such, some being more receptive to political lines alien to antitrust analysis, mainly “don’t let these guys off the hook because they don’t pay taxes in Europe and because the US spies on us”. Obviously, this has nothing to do with the law, or at least with competition law.

It’s difficult to guess how this will turn out. As recently explained in the FT (Alex Barkers’s coverage of EU competition issues is, by the way, excellent) “[s]ome people involved think the pressures make it more likely Mr Almunia will decide to launch a formal probe of Android”. And indeed, the Android investigation may be the second leg of this political game, and once again the Commission might be under enormous pressure to take a hardline. [By the way, if you’re interested in reading about the competition issues involved in the Android investigation, I would very much suggest you read the insightful pieces recommended by Kevin Coates here 😉 as well as this interesting brand new piece on the matter (particularly enjoyed footnotes 26 and 127…) (thanks to Jorge Marcos –ULg- for drawing our attention to it)]

Much more could be said about the politicization –and possible transformation- of antitrust and I look forward to your comments, but I’ll close it off now (mainly because the Word Cup final is already on). Some of you will recall my piece on Antitrust and the Political Center, in which I outlined some views on how antitrust embodies a centrist political ideology and can contribute to the expansion of sensible political views internationally. Well, in my view, the same is not true the other way around; infusing minor, short-sighted, political goals into the application of competition law can only contribute to disfigure even more a branch of the law which –let’s not forget- is, on its sanctioning dimension, quasi criminal in nature.

The political agreement in having technical competition rules applied by independent agencies is now an established idea, heralded internationally by the European Commission. And it makes sense because in spite of its unquestionable benefits, competition law’s constituency is diffuse and unable to mobilize politicians in the right direction. If you ask me, competition law can better serve its goals when dissociated from small politics.

Written by Alfonso Lamadrid

14 July 2014 at 4:58 pm

The Spanish Google tax, or (twice) the perfect cartel

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(again by Pablo Ibañez Colomo, who’s covering up for me this week)

It is always tempting for firms in sectors in decline to collude. But a cartel may not always be feasible or successful. Sometimes, major competitors have no interest in playing the game (this may be so for various reasons; competitors may have a different cost structure, may be more efficient or use a different technology). The next trick is well known. If private collusion does not work, turn to the State to enforce an official cartel or to (bluntly) eliminate competition from other players. You want a well-functioning and sustainable cartel? Make sure that anti-dumping duties are imposed on your heartless competitors from other parts of the world.

Montebourg, who has become an endless source of competition-related stories, has been quite open (I admit he is very candid, both in the English and the Spanish sense of the word) about his dislike for Free Mobile and has even taken active steps to make its life more difficult. The operator has emerged as a phenomenal maverick, bringing much needed dynamism to the French mobile market. But apparently prices are too low for Monsieur le Ministre’s taste and French consumers, as responsible and forward-looking citizens of the Republic, should pay more for their calls (he has in fact referred to the ‘excesses of low-cost’). Needless to say, the three incumbent mobile operators are not particularly unhappy about the whole deal.

The proposed Google tax in Spain provides yet another example of State-enforced collusion, albeit a more subtle one (which is not difficult given that our dear Arnaud is leading the way in the abovementioned example). Traditional newspapers struggle to survive in Spain. Advertising revenues have been in steep decline for years and media groups are heavily indebted. The solution? Charge Google, which has become the default cash-cow (and access-cow), for the use of non-significant excerpts (which, I would mention in passing, sounds oxymoronic from a copyright law perspective).

For the Google tax to work in the interest of traditional newspapers, all media, including Internet-based papers (which have become very popular in Spain) need to play by the rules. How can this be achieved? Centralise the negotiation of the compensation and, more important, make it impossible for newspapers to opt-out of the regime. That is correct. A key feature of the proposed legislation, as I understand it, is that Internet-based papers will benefit from the system even if they do not want to (and some of them have already been quite open about their opposition). The government seeks to create, in other words, a watertight cartel protecting old media models from competition and slowing down their (inevitable) decline. Who knows, maybe the new Spanish super-quango will do something about it (this is a joke).

Why do I say that this proposed legislation is twice the perfect cartel? Those who are interested, as I am, in media law and freedom of expression issues, will have quickly understood. Governmental action cannot be expected to be subject to effective scrutiny and criticism (which, going back to yesterday’s post, is a precondition for progress to occur) when the media need legislative and financial protection to survive (centralising the negotiation of the compensation makes traditional newspapers even more vulnerable to pressures from the executive).

Written by Alfonso Lamadrid

19 March 2014 at 12:55 pm

Breaking news: European Commission will accept Google’s commitments

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Vice-President Almunia has just made it clear that the Commission will accept the third version of Google’s proposed commitments. In his words,  “the new proposal obtained from Google after long and difficult talks can now address the Commission’s concerns. Without preventing Google from improving its own services, it provides users with real choice between competing services presented in a comparable way; it is then up to them to choose the best alternative. This way, both Google and its rivals will be able and encouraged to innovate and improve their offerings. Turning this proposal into a legally binding obligation for Google would ensure that competitive conditions are both restored quickly and maintained over the next years.”

The Commission’s press release is available here.

What happens now is that the Commission will send complainants a letter (pursuant to Article 7(1) of Regulation 773/2004 informing them that the Commission has obtained what it considers adequate commitments and that in its view there are no longer grounds to pursue the case. They will then have a chance to complain again. The Commission will then adopt a number of decisions: one under Art. 9 of Regulation 1/2003 in order to make those commitments binding, and a number of decisions rejecting all complaints received. I suppose that Google’s very active and well funded rivals will want to appeal those decisions before the General Court (with, I believe, arguable chances of success after the Court’s recent ruling in Microsoft/Skype, which was extremely favorable to Google for reasons that I might explain in a later post). This is, by the way, the outcome we always predicted.

In my personal opinion, this is a wise move on the part of the European Commission. However, it’s unlikely that the Institution will receive much praise: some will say that it demanded too much from Google (particularly given the US precedent), many others will say it’s been too lenient, some will say the investigation took too long, others will claim that it was incomplete. The fact that they will be criticized from both sides may actually suggest that perhaps the Commission has done something right.

As you know, I was never a big fan of the case (see here, here or here among others), but I always saw the proposed commitments (even in their first version) as a balanced attempt at putting and end to it getting the Commission what it wanted without introding too much in Google’s innovative business model. For my analysis of those commitments (as forecasted, despite some improvements the essence doesn’t appear to have varied since then) see here and here.

It will be interesting to discuss this development in the course of the upcoming AIJA conference on antitrust and technology in Bruges this weekend.

Written by Alfonso Lamadrid

5 February 2014 at 3:00 pm