Déjà vu? Microsoft announces Skype’s integration in Windows
On 15 August Microsoft announced on a blog post that Skype will come installed by default in Windows 8.1, and that it will be prominently displayed in its “Start” Menu (see Skype-right from (the) “Start”)
The news appears to have surprised many, who have publicly wondered whether Microsoft is actively looking for antitrust trouble (see notably here, here, or here).
And, of course, given my involvement in Skype-related competition matters, when I returned from my summer holidays I had a good number of emails from students, journalists, lawyers, friends and even family who were sending me the news and asking for an opinion. Since it would not be practical to reply to all those emails separately, I have decided to do it here.
[A disclaimer first: as frequent readers of this blog know I represent the two companies who chose to challenge the Commission’s decision authorizing the Microsoft/Skype deal. This means that I certainly am not an impartial observer, but it does not mean that the views set out here are to be attributed to my clients or my firm; they are exclusively mine. These views also refer to a conduct which is post-decision and therefore not the subject of the pending case].
My first comment is: Did anyone really not see this coming?
During the past few months Microsoft has pervasively integrated Skype with most of its products. Skype is now closely integrated with, for instance, Office, Office 365, Outlook, Outlook.com (formerly Hotmail), Windows Phone 8, Xbox, Lync (as announced only minutes after our Court hearing ended), and it was only a matter of time that it would come pre-installed in Windows. In the meanwhile, Skype’s only meaningful competitor in the consumer world (WindowsLiveMessenger) has disappeared and its users have been migrated to Skype. As a result, Skype’s user base has skyrocketed since the merger (going from approx. 150 to over 300 million unique monthly users), and rapidly growing.
[By the way, all this obviously voluntarily enhances the already powerful network effects at play in the only communication markets where interconnection is not mandatory, with obvious consequences]
Microsoft’s decision to bundle Skype pervasively with other Microsoft products, including – as just announced – Windows, may actually have come as a surprise to the European Commission. In its Microsoft/Skype decision, the Commission concluded that Microsoft would not have the incentive to tie Skype to other Microsoft “leading/dominant” products (e.g., para 155). No kidding.
Now let’s cut to the chase, can the integration of an application with a dominant operating system run afoul of the competition rules?
The European Commission itself has held various seemingly contradictory views over time. Microsoft, too, appears to have opposite views on this question. Let me explain this:
In the light of the spirit and the letter of the Microsoft’s 2004 infringement decision, the 2007 Microsoft Judgment, the 2009 Microsoft commitment decision, Skype’s integration with Windows would likely raise some antitrust flags (notably concerning the market for video calls, given that currently over 3 out of 4 video calls are made using PCs). As you know, in all of those precedents, the Commission and the General Court observed that pre-installation resulted in an unparalleled distributional advantage that could not be offset by the downloading of competing applications.
The Microsoft/Skype 2011 decision, however, arrived at exactly the opposite conclusion. The comments voiced out in the past few days in the media seem to have overlooked the fact that the Microsoft/Skype Decision – despite denying Microsoft’s incentives to tie Skype to its products – did actually address the possibility that Skype could be tied to Windows, and that it ruled out any competition concerns. The Decision acknowledged that pre-merger Skype was already present on approximately 60% of Windows PCs pursuant to agreements with OEMs, but alleged that there was data -not cited- showing that in practice pre-installation resulted only in a small share of Skype users (para 162). In other words, the Commission considered that pre-installation does not offer that much of a competitive advantage because users could easily and freely download Skype and other competing applications.
Query: does anyone see any inconsistencies between the Commission’s approaches to downloading? The Commission is certainly entitled to change approaches, but since the reasons for this change were not set out in the Decision, it’s difficult to identify with clarity what the Commission’s current approach to pre-installation vs. downloading is.
If you want to play more “find the differences”, try comparing the Commission’s prospective analyses and approaches to technical tying/bundling (and, for that matter, to interoperability degradations too) in Intel/McAfee (2011) and Microsoft/Skype (2011).
And whereas the Commission’s shifting viewpoints are remarkable, what is more striking is that Microsoft is, as of today, advocating two opposite legal standards, one for itself and another for Google:
As you may remember, back in April the FairSearch coalition (led in this case by Microsoft and Nokia) lodged a complaint against Google arguing that Google is abusing Android’s alleged dominance in the market for mobile operating systems by bundling certain “core Apps” with its operating system.
[The way I see it, in the case of Android the dominance and the bundlling are much more doubttful, but that is another story, and one interesting enough -I’ve just realized- to deserve some specific comments in the coming days].
So, in one case Microsoft is claiming that the pre-installation of Google apps on Android phones constitutes an abuse of a dominant position in the market for mobile OSs (no matter if users are free to download any competing application; btw, Skype for Android has no less than 100 million users!), but, at the same time, having Skype pre-installed in the dominant PC OS poses no problem (precisely because users are free to download other applications).
Anyone else sees any issue conflict?
A competition authority closed for business
A friend kindly pointed us to this “We’re-at-the-beach-so-dont-bother-looking-for-us-sign” with a comment: “Transparency and vacation should be the unrenounceable principles of any public authority“.
A press campaign against EU institutions?
There appears to be a summer campaign orchestrated by European media against EU officials.
First it was the Belgian press reporting that DG Comp had been tricked by an Aprils Fools Day hoax (see our Monday post on this story).
Today we have received a a shocking piece of investigative journalism published in The Telegraph (actually, we have realized that it was published more than 2 years ago, but hey, don’t let facts ruin a good story!) informing that EU officials crowd “love hotels” in their lunch breaks. According to the article, 80% of the clients of at least one of such establishments were “Eurocrats” committing adultery.
One cannot but wonder, how on earth do they distinguish adulterous EU officials from other clients?? 
P.S. You might legitimately observe that this is not very much related to competition law. In my defense: it’s summer time, it’s unusually sunny in Brussels and I want to leave the office soon, so rather than writing a brainy post I’ve opted for a “quicky” (just like EU officials usually do, according to The Telegraph’s piece….) 😉
April Fools Day hoax triggers a DG Comp request for information (no kidding)
On April 1st 2013 a Belgian website (Pagtour.net) published the news that there was a project to expand Charleroi’s airport with a second runway (see here).
The piece explained that secret plans to expand the airport had been found in a secret chest, and that they had been drawn up by a secret Commission whose members only drank Spa water and met at restaurants specialized in fish and zinc. It was -some would say obviously- an April’s fools day hoax (or, as they’re called here, a “poisson d’avril” (April’s fish).
However, as reported in a bunch of Belgian news outlets (see l’Echo, le Soir, la RTBF, msn actualité 7sur7, la DH, le Morgen, RTL, La libre,) DG COMP apparently swallowed the fish whole (!!)
Belgian authotities are reported to have received a request for information dated on 31 July (just like April’s fools hoaxes are done on April 1, the EC’s jokes information requests in the EU are sent out on 31 July to spoil some poor lawyers’ and company employees’ vacations..) asking about the reported plans , and referring to the hoax piece at issue as a source 🙂
The Commission is reported to have stated today that information requests are supposed to be of a confidential nature.
—
Many of you may not know that there’s actually (or, rather, there was until 2011; pity) an established tradition of antitrust-related April Fools Day jokes published by the American Antitrust Institute. They’re all available here, my favorite ones being:
– Antitrust Controlled by Jerks, Says New Evolutionary Biology Report (I bought that one; thought it made a lot of sense..)
and
– As US Attorney General Gonzales Confidentially Reports, There’s Nothing Funny About Antitrust
By the way, what has happened with the joke on Charlerois is not a first; some journalists in the States also picked up the AAI hoax on President Bush’s proposal to merge antitrust agencies with the Department for Homeland Security..
Ethical Rules in Competition Cases
Earlier in the year, I got nuts. I published in Concurrences and ECLR a short paper on conflicts of interests in EU competition law (see link at the end of this post).
It created a stir. I was even told to go back to law studies…
Since then, I have on several occasions thought to myself: should I return to law school? did I get it wrong? I mean I have lost quite some social capital in the process.
And the paper did not generate much debate, as if the issue was after all moot.
With hindsight, however, I guess I would do it again.
My evidence? Two recent news shared on social networks by our friend and colleague Prof. A. Alemanno:
- A scandal involving a quasi-homonymous. This player works for Clifford Chance. He is also a member of the Ethical Committe of the Commission. And he has been recently suspected of dirty lobbying on behalf of the tobacco industry in the so-called Dalligate. The Commission has officially responded to allegations of unethical conduct with a
jokepowerful argument: this player works for a law firm. He is thus a lawyer, not a lobbyist. Get lost. - A Politico paper calling the US Supreme Court to adopt its own ethical code. The Scotus has no such thing. It applies mutatis mutandis the Code of Conduct for US judges. All the general arguments set forth in the op-ed apply equally to the EU institutions.
Now, for the sake of mistake avoidance, I have to add a few more things to this post: not all layers of the competition Eurocracy have failed to legally combat the plague of conflicts of interest.
The ECJ and DG COMP have set up very good, specific ethical rules. They must be praised for this.
In contrast, some other key organs of the decision making process in competition cases remain devoid of a dedicated ethical code (e.g. the Commission’s Legal Service, clerks at the ECJ and GC).
Surely, the general Statute that regulates the career of EU civil servants applies to those organs, as a sort of fallback regulatory regime.
But along the lines of the Politico paper, this is less than ideal in terms of transparency and democratic accountability.
Moreover, and as argued in my paper, most of those rules are not easily accessible to the public.
Finally, the name and background of lawyers, officials, etc. working on competition cases remains often unknown to the outer world.
For my paper see: Petit_2013_34_ECLR_Issue_6_Print (in English)
Krugman
Had not spotted this one.
Krugman on market concentration (referring to an interesting study):
“We don’t talk much about monopoly power these days; antitrust enforcement largely collapsed during the Reagan years and has never really recovered. Yet Barry Lynn and Phillip Longman of the New America Foundation argue, persuasively in my view, that increasing business concentration could be an important factor in stagnating demand for labor, as corporations use their growing monopoly power to raise prices without passing the gains on to their employees“.
Am intrigued.
I see the link between excessive concentration and high profits.
But I am less comfy with the nexus between excessive concentration and stagnating labor demand.
The point is: I am not sure that less industrial concentration would bring about more jobs.
And I don’t really get it how more competition would, as such, induce corporations to pass-on profits to employees.
Review of China’s Anti-Monopoly Law – The First Five Years (Adrian Emch & David Stallibrass, eds.))
On the occasion of the publication of “China’s Anti-Monopoly Law – The First Five Years”, our friend Adrian Emch (Hogan Lovells Beijing) has offered us two presents: 1. A hardcopy of the book; 2. A book review by no other person than Professor Bill Kovacic! Yes, you read well, Bill Kovacic himself. This is the second time Bill appears on Chillin’Competition. Thanks to him and to Adrian for doing us this honour.
Review of China’s Anti-Monopoly Law – The First Five Years (Adrian Emch & David Stallibrass, eds. Wolters Kluwer, 2013)
By William E. Kovacic, George Washington University Law School (c)
On August 1, 2008, China’s new competition law system opened for business. Three agencies — the Ministry of Commerce (MOFCOM), the National Development and Reform Commission (NDRC), and the State Administration for Industry and Commerce (SAIC) — began to implement China’s Anti-Monopoly Law (AML), and their work in the past five years has reshaped the global practice of competition law.
The fifth anniversary of the AML is a most suitable occasion for some stock-taking. The first five years have provided considerable experience with public and private enforcement. China’s immense and expanding economy ensures that firms engaged in global trade must take the AML seriously. Particularly for merger control, China is quickly acquiring the capacity to influence international competition law norms through the application of its own law.
The development of competition law in China has created a hunger for knowledge among academics, practitioners, and public officials about the AML’s origins, content, and application. This interest has inspired the publication of a fast-growing body of books on China’s antimonopoly system. A number of these volumes are exceptionally strong,[1] and other promising contributions are on the way.[2]
Amid the excellent modern commentary on the AML, China’s Anti-Monopoly Law – The First Five Years now stands atop the ladder. All observers with an interest in China’s competition law system will find that this book greatly enriches their understanding of China’s competition law system.
For several reasons, First Five Years will receive, and deserves, a broad readership. Five features of the book stand out. The first is the consistently superior quality of an exceedingly ambitious project. The book includes 27 essays authored by a total of 41 authors. In many instances, an undertaking of this scale suffers from unevenness in quality across the contributions. Reasonable expectations might lead a publisher to be pleased if half of the papers are superb, the rest are merely average, and only a handful are entirely forgettable. Through the skill and effort of its editors, Adrian Emch and David Stallibrass, First Five Years performs extremely well from the first essay through the last. This is a formidable achievement. The perspectives in each chapter typically are candid, fresh, and insightful. The extensive participation of Chinese authors, either writing their own chapters or collaborating with foreign specialists, ensures that the essays accurately portray China’s AML system’s broad conceptual architecture and its technical details. Foreign competition law experience is related in a manner that is meaningful to the Chinese context.
A second impressive contribution is the book’s examination of the institutional foundations of the Chinese competition law system. The first four chapters of the book are rich in history and political science, and they are worth the price of admission, alone. Huang Jong and Richean Zhiyan Li describe how the fragmentation of enforcement power among MOFCOM, NDRC, and SAIC have impeded the development of a “coherent antitrust policy.[3] Hao Qian sets out the antecedents of the AML and explains why China chose to distribute enforcement authority among three agencies.[4] Wendy Ng considers the aims that appear to have guided public enforcement against the backdrop of goals – a diverse array of objectives featuring some fundamental internal contradictions – that motivated the AML’s adoption.[5] Deng Fei and Gregory Leonard study how China’s economic conditions inform the AML’s application.[6] As a group, these introductory chapters supply necessary and enlightening context for understanding the AML’s current, and they set a valuable foundation for seeing how the Chinese system might evolve in the future.
A third noteworthy element of First Five Years is its insightful treatment of important developments in doctrine and policy. The examination of traditional enforcement focal points typically goes beyond a mere recital of activity and present informative interpretations of actions or omissions in the public enforcement program. Good examples include the chapters on refusals to deal (and the lack of effort to date to apply this concept to expand competition in sectors controlled by state-owned enterprises);[7] vertical restraints;[8] supplier cartels and information exchanges among rivals;[9] dominant firm pricing strategies having exclusionary or exploitative effects;[10] and merger control and the treatment of joint ventures.[11] The book’s treatment of these subjects is remarkably current, given the lag the inevitably occurs between the completion and publication of manuscripts.
“Member State” aid
Let’s start this post with a disclaimer, just as our good Commission friends:
Disclaimer: I am a nobody on State aid law. I do not teach State aid. And I do not publish on State aid.
With this initial caveat, here is a rumination triggered by a discussion with a colleague:
The rationale for State aid control is disputed in the scholarship. On the one hand, some say that the DNA of State aid control is to limit “subsidies race” amongst Member States. Under this approach the effect of State aid on market competition is irrelevant. What matters is that State subsidies distort the natural allocation of resources in the internal market (e.g., investments). Our friend Jose Luis Buendia Sierra – aka “Mr State aid” down here in Brussels – is one of the proponents of this approach. A variant of this approach consists in viewing State aid as a tool of budgetary discipline.
On the other hand, some consider that State aid control seeks to eliminate the distortions of market competition caused by selective State subsidies. The idea is that when aid is granted to a market player and not to its rivals, the former benefits from an underserved competitive advantage (e.g. free fresh cash). Under this approach, the effect of State aid on market competition is of utmost relevance. To assess whether the aid is lawful or unlawful, one needs to run a full-blown competitive analysis, similar to that undertaken under Article 101 and 102 TFEU (market definition, competitive assessment, theories of harm, efficiencies, etc.). This approach is generally the one supported by competition economists. This is why it is generally called the “economic approach” of State aid. Damien Neven, the former Chief Economist of DG COMP, has explicitly endorsed this approach.
For quite some time, I have been a buyer of the second explanation. After all, rules on competition should be applied consistently. So why draw differences accross 101, 102 and 107 TFEU?
But today, I had a revelation.
The wording of the Treaty on the Functioning of the European Union TFEU does not support the “economic approach“.
Take a look: Article 107 TFEU only covers “aid granted by a Member State or through State resources“.
If State aid was designed to eliminate distortions of competition in relevant markets, the instrument should also apply to State aid granted by non Member States – which it does not – just as Article 101 and 102 TFEU catch all conduct with anticompetitive effects in the EU, even if adopted by non EU firms.
In other words, under the economic approach, the nationality of the subsidising Member State should be irrelevant in the analysis, just as it is in standard antitrust proceedings. What should matter is that anticompetitive aid has been granted to a firm – EU or non EU – that does business in Europe. Full stop.
But the Treaty talks of aid granted by “Member States” only.
Of course, there might be a jurisdictional explanation to the fact that the Treaty only catches what I’ll call “Member State aid“.
Yet, to our knowledge, the Court could have decided to transpose Woodpulp and Gencor in State aid matters on the textual ground that Article 107 TFEU also talks of “aid granted through state resources” without explicitly requiring state resources to have EU origins.
The bottom line: with globalisation, non EU governments can freely dope national operators that do business in the EU, and distort competition in EU markets. This is prejudicial to EU domestic operators. The EU institutions don’t like people to say that. But this finding is inevitable. After all, if the EU institutions believe that France and Belgium can distort competition by granting subsidies in the EU, then the same reasoning should apply to firms financed by Chinese and Qatari subsidies (including sovereign funds).
The law as it stands thus creates a massive “discrimination à rebours“.
The European citizens (in France and Belgium at least) are well aware of this.
Their qualms with the process of EU integration – and more generally with globalisation – is in part attributable to the inability of Europe to protect them against the “unfair competition” of giant superpowers such as China or of wealthy oilocracies like Dubaï or Qatar.
The EU elites autism to this issue is a cause of (personal) concern, in particular with the upcoming EU elections next year.
Operation Ghostfruit
What if Google and Apple waged war at each other?
I mean real war, not patent war.
In one of the best tech columns of the year, F. Manjoo and M. Yglesias (Slate) take a try at wargaming.
Manjoo plays Google. Yglesias plays Apple. And the outcome is spectacular. A must read.
The story has several antitrust angles:
- Google’s “operation ghostfruit” shares analogies with the Commission’s “search bias” theory of harm;
- Google’s dominance is certainly undisputable in the narrow, antitrust sense. But it is far less clear from a business perspective. If anything, the story shows that a company deemed dominant by antitrust standards – i.e. in a given relevant market – can be seriously threatened by a company active in a wholly distinct market. Put simply, the battlefield in the high tech sector is not an antitrust relevant market. It is the sector as a whole. And companies that sell distinct unsubstitutable products may well – and do – engage in competition. A further reason to abandon market definition in high tech industries, and switch to novel concepts (the “relevant sector”)?;
- Dominant firms may rationally try to exclude non competing firms;
- Antitrust agencies (and governments) are instrumentalised by dominant firms to exclude other companies;
- Microsoft is no longer a player
Chillin'Competition 