Showing papers in "Journal of European Competition Law & Practice in 2015"

Intel v Commission: Keep Calm and Carry on!

Abstract: Few competition law cases have excited as much attention as the General Court’s Intel judgment of 12 June 2014, in which it upheld the Commission’s finding that Intel had infringed Article 102 and the fine of E1.06 billion that it had imposed on it. The judgment has been greeted with huge hostility. At a recent conference I heard a senior economist refer to it as a ‘return to the Dark Ages’; a session at the GCR conference in Brussels in November will include a session on ‘sifting the wreckage of the Intel General Court judgment’; Jim Venit’s commentary on the judgment is entitled ‘All Steps Backward and No Steps Forward’. One law firm’s briefing declares that the judgment ‘bans’ rebate schemes that may be beneficial to consumers and may chill legitimate business behaviour; another says that the judgment creates more legal uncertainty, which is not easy to reconcile with the common criticism that it reverts to a form-based system that automatically prohibits exclusivity rebates: if that is the case, it makes the law more certain, not less. The judgment is also said to widen the gap between what the Commission intended to achieve by its Guidance on Article 102 Enforcement Priorities and the jurisprudence of the Courts in Luxembourg. Of course there have also been more measured commentaries on Intel, not least by Paul Nihoul in this journal who helpfully examines why the EU courts do not adopt the same line as the Federal Courts in the US in their application of section 2 of the Sherman Act. Wouter Wils has argued powerfully that Intel is both legally and economically sound, and that the so-called ‘more economic approach’ to the enforcement of Article 102 is unsound. The debate now moves to the Court of Justice. Intel’s grounds of appeal have recently been published in the Official Journal: it argues that the General Court erred in law by concluding that the rebates in question were inherently capable of restricting competition; it was wrong to proceed on the basis of ‘abstract considerations rather than likely or actual effects’; and it should have taken into account a number of factors such as the market coverage of the practices, their duration, falling prices and a lack of foreclosure, as well as the conclusions that should properly have been drawn from the Commission’s analysis of the ‘as-efficient competitor’ test in its decision. Other grounds of appeal address, among other issues, extraterritorial jurisdiction and the level of the fine. It can hardly be an exaggeration to suggest that the Court of Justice’s judgment in Intel will be one of the most important on competition law for many years, and it will certainly be eagerly anticipated. My expectation is that the

Google and the (Ever-stretching) Boundaries of Article 102 TFUE

Abstract: The Google search investigations in the USA and the EU have attracted much attention. Findings adverse to Google on dominance and abuse may stretch the boundaries of Article 102 TFUE beyond its already wide scope. If this is to be done, it matters greatly that the process is as transparent and rigorous as possible so as not to undermine the legitimacy of EU competition law enforcement. The author discusses the alleged vertical search and content scraping abuses as well as the alleged abuses on the advertising side of the market examining under what circumstances the conducts under review could constitute an abuse of a dominant position.

Actions for Damages in the Netherlands, the United Kingdom, and Germany

Abstract: The European Commission (‘EC’) has stated that ‘the vast majority’ of large antitrust damages actions are currently being brought in the Netherlands, Germany, and the United Kingdom. This survey will discuss developments in the case law with regard to claims for damages based on (alleged) competition law infringements for these three jurisdictions in the period July 2013–July 2014. A distinction will be made between claims for damages based on antitrust decisions by the EC or national competition authorities (‘follow-on damages claims’) and claims that are not based on decisions from competition authorities (‘standalone damages claims’). The larger actions for damages are mostly follow-on damages claims. Examples of large pending follow-on damages claims include: the air cargo, elevator, and sodium chlorate claims in the Netherlands; the carbonless paper, hydrogen peroxide, and car glass claims in Germany; and the gas-insulated switchgear, copper tubes, and candle wax claims in the United Kingdom. This survey does not intend to provide an exhaustive overview, but instead describes the main developments in the three jurisdictions.

Challenges Ahead of Leniency Programmes: The Brazilian Experience

Abstract: Over the last decade, the cartel enforcement landscape has significantly changed in Brazil: in 2000, new investigative tools were granted by Congress (dawn raids and leniency agreements), and since 2003 the Brazilian antitrust authorities have promoted a hierarchy of antitrust enforcement that placed hard-core cartel prosecution as the top priority. Brazil now has an increasing number of cartel investigations, including alleged international cartels, record fines for cartel offences, individuals being held criminally accountable, and increasing cooperation among criminal and administrative enforcers, with the change in perception by criminal prosecutors and judges as to the seriousness of cartels. This article focuses on the Brazilian experience regarding the implementation of its Leniency Program. Over 40 leniency agreements have been executed since 2003, most of them related to alleged international cartels. The effectiveness of the program is built mainly on three pillars: fear of detection (with increasing number of dawn raids and wiretaps, as a result of the cooperation with criminal authorities), threat of severe sanctions (with record fines and jail sentences), and efforts to promote transparency.

Collective Redress: Will Portugal Show the Way?

Abstract: Portugal is a small country by European standards and, with the financial and economic crisis, it has not always been in the limelight, for positive reasons, in the last years. Here is one area in which, however, this small country, with unlimited access to the gigantic ocean resources, could show the path, or at least, a possible path, to the rest of Europe. That path concerns collective redresses in damages competition proceedings. When the decision was made not to include provisions on collective redress in the EU Antitrust Damages Actions Directive, it became clear that each Member State would have to find its own way of interpreting the principle of effectiveness and its implications for actions relating to mass damages arising from antitrust infringements. And it is good that things turned out the way they did, because the approach which would have been possible at the EU level, as the Commission’s broader 2013 Recommendation shows, would have imposed conditions which might have seriously stifled the possibility of achieving full reparation of damages to consumers through collective enforcement. The choice for the optin system, in particular, would inevitably mean that a great number of consumers would not be represented, favouring the non-reparation of damages to those who are least informed, more prone to inertia and more in need of protection. While research seems to growingly point to the economic and sociopolitical justification of opt-out mechanisms, as long as certain safeguards are in place, very few Member States have as yet made this option. Examples that stand out, in varying degrees, are the Netherlands, Portugal and, more recently, the UK, and Belgium. On the whole, however, it seems fair to say that the laws of the Member States have not yet made it possible for companies to be ordered to fully compensate consumers for the damages caused by anticompetitive practices. Despite the many decisions taken by the European Commission and the NCAs which could have led to follow-on consumer redress, there are very few cases in the EU as a whole which can be pointed to as examples thereof. Two successful cases related to a very limited number of injured parties—the Austrian driving schools cartel case (District Court of Graz, file no. 4 C 463/06 h) and the UK’s JJB Sport case (CAT, case no. 1078/7/9/07), the latter concluded with a settlement. More often, attempts at such actions are wholly unsuccessful, usually not passing the stage of admissibility—such as the French mobile telephony case (Paris Commercial Court, 6 December 2007, UFC Que Choisir v Bouygues Telecom), the Spanish Telefonica case (Madrid Commercial Court No. 4, 7 November 2012, Ausbanc v Telefonica) or the Italian Microsoft case (Milan Tribunal, 20 December 2010, upheld by Milan Court of Appeals, 3 May 2011). This may change. On 12 March 2015, the Portuguese Competition Observatory, a non-profit association of academics from a number of Universities, filed a mass damages claim against Sport TV, which until recently held the monopoly in the provision of paid premium sports channels in Portugal (Lisbon Judicial Court, case no. 7074/15.8T8LSB). The action seeks to compensate over 600,000 clients for damages allegedly resulting from a number of anticompetitive practices, but also to compensate those who were excluded from the benefit of these channels due to the inflation of prices and all Portuguese pay-tv subscribers, between 2005 and June 2013 (over 3 million at the end of the period), who suffered from a reduction of competition on this market as a result of increased transparency and reduced incentive to competition arising from the practices of the company jointly controlled by the pay-tv market leader. Partly following an abuse of dominance decision by the Portuguese Competition Authority, confirmed by the courts, the action can lead to reparations in the tens of millions. In that case, the claim was made possible by the Portuguese (1995) actio popularis law, in which standing is given to any injured consumer or consumer association, with little in the way of certification and no financial resources requirements, very limited court fees and safeguards set up primarily through the vigilance of the Court and the Public Prosecutor. Beyond attracting claimants to Portugal, that claim may turn into a case-study for the EU as a whole. For

The E-Commerce Sector Inquiry: Can It Stop National Competition Authorities from Adopting an Overly Restrictive Approach?

Abstract: On 6 May 2015, the European Commission (the ‘Commission’) launched a competition inquiry into the European Union’s (‘EU’) e-commerce sector (the ‘Sector Inquiry’). According to Margrethe Vestager, the EU Commissioner in charge of Competition Policy: ‘European citizens face too many barriers to accessing goods and services online across borders. Some of these barriers are put in place by companies themselves. With this sector inquiry my aim is to determine how widespread these barriers are and what effects they have on competition and consumers. If they are anti-competitive we will not hesitate to take enforcement action under EU antitrust rules.’ The Sector Inquiry intends to complement the actions launched within the framework of the Commission’s Digital Single Market (‘DSM’) Strategy, which consists of a number of proposals, the most prominent being (i) facilitating cross-border e-commerce, (ii) enhancing telecoms infrastructure and promoting innovative digital services, and (iii) creating conditions for European companies to embrace the opportunities offered by the digital revolution and to defend their commercial position. The Sector Inquiry’s inclusion in the DSM strategy sheds light on the reasons behind the Commission’s decision to launch the Sector Inquiry. A real DSM cannot be achieved in the EU if cross-border e-commerce is perceived as being substantially constrained. Another reason underlying the Commission’s launch of the Sector Inquiry concerns the market trends in e-commerce. The Commission has observed that although e-commerce is developing and has spread rapidly in the past few years, cross-border on-line sales in the EU have only increased slowly. It is estimated that around half of consumers in the EU shopped on-line in 2014, but only 15 per cent of them purchased a product or a service from a vendor located in another EU Member State. According to the Commission, this is not only due to differences in language and the preferences of consumers, but can also be attributed to the existence of two types of barriers that allegedly hinder cross-border e-commerce, namely regulatory barriers and perceived obstacles to cross-border online trade erected by companies. The latter barriers, in the Commission’s view, would include imposing contractual restrictions in supply and distribution agreements that would prevent retailers from selling goods or services online to customers located in another EU country. As a result, the Commission considers the EU Single Market could risk being fragmented into national markets and

The Commission's E-Commerce Sector Inquiry: Analysis of Legal Issues and Suggested Practical Approach

Abstract: On 6 May 2015 the European Commission launched a sector inquiry into the e-commerce sector. The investigation will focus on identifying and addressing barriers to cross-border e-commerce in digital content and tangible goods. In particular, the inquiry will target restraints in distribution agreements and unilateral conduct by companies having a strong market position. The EU digital single market (“DSM”) is a key priority for the Juncker Commission, and the sector inquiry is part of the DSM initiatives. This article will consider the application of EU competition rules in the context of the sector inquiry, and provide guidance to potential targets on the relevant legal issues and the likely areas of Commission focus. The article first outlines different online sales models for tangible goods and digital content. It then considers whether Article 101 TFEU is applicable to these models. The next section discusses existing Article 101 enforcement action and proposes an alternative framework to apply Article 101 TFEU to contractual arrangements which are common in e-commerce. Finally, the article considers the possible use of Article 102 as an enforcement instrument in this context. Our conclusion is that the existing precedents and guidance are ill-suited to address competition issues in e-commerce, as they were established in a “brick-and-mortar” world. Furthermore, the divergent approach to online sales in the context of existing enforcement actions at the national level, is problematic. The Commission’s inquiry will be be an excellent opportunity to clarify these issues in a way that ensures consistency across platforms and business models.

Access to File under European Competition Law

Abstract: The present survey focuses on recent judgments that deal with the right of damage claimants to access the Commission’s file in cartel cases and with the type of information the Commission may include in the public version of its cartel decisions. On the first point, access to the file through the EU Transparency Regulation remains an uphill battle for cartel damage claimants. The General Court confirmed the general presumption that access to the file would undermine the protection of commercial interests or the purpose of the Commission’s investigations and the Ombudsman found that refusing access to the file on that basis does not amount to maladministration on the part of the Commission. The EU Damages Directive that was adopted last year provides the most efficient and reliable avenue for cartel damage claimants to obtain access to the Commission’s file. On the second point, the General Court effectively legitimised the Commission’s new policy on publication of cartel decisions. Damage claimants should now expect longer and more detailed public versions of cartel decisions that should contain more information relating to the operation of the sanctioned cartel and serve as a better source of evidence in actions for damages before national courts.

Keep Calm—Yes; Carry on—No! A Response to Whish on Intel

Abstract: In November 2014 Professor Richard Whish published an editorial in this journal entitled ‘Intel v Commission: Keep Calm and Carry on!’ Whish makes two arguments: first, that the reaction to Intel from those who believe the ruling is a step backwards has been over-excited; and second, that—more or less—the General Court got it right. I agree with the first argument—although, to be fair, it applies on both sides of the debate. But in my view, the principles of substantive assessment for rebates set out by the General Court are not appropriate in more ways than Whish suggests. The Court of Justice will no doubt remain calm; but the seriousness of the responsibility it carries cannot be over-stated—both in Intel and in Post-Danmark II, the first ever reference in a rebates case. In talking about Intel we are talking about (i) exclusivity rebates (there is no controversy regarding the ‘naked practices’) and (ii) the three-fold classification as outlined in Whish’s and Paul Nihoul’s articles in this journal. Whish makes four substantive points—three supportive of the judgment and one critical. I agree with the one that is critical—that the General Court was wrong to reject coverage as relevant, for the reasons Whish gives. I will respond to each of the three supportive arguments briefly before moving to the challenges that lie ahead for the Court of Justice. The first point is that Intel does not say loyalty rebates are ‘per se’ illegal for a dominant firm, because it is open to the firm to show objective justification. But practically speaking, objective justification in this context means efficiencies, and these are interpreted narrowly by the Commission and Courts—efficiencies directly created through increased share of purchases. This is not a funnel for wider arguments about the consumer welfare effects of rebates. Can those efficiencies be made out? In reality, probably not. Most of these schemes are operated in high fixed cost industries, as ways of encouraging greater levels of purchase which will help spread those fixed costs over a wider revenue base. That may answer Richard Whish’s question as to why Intel did not argue efficiencies in that narrow sense (although they did make the wider argument—as noted by Nick Banasevic and Per Hellstrom in this journal). Given that reality, while the approach may not be strictly per se illegality, it is not far off. There is a relevant link here to the first category. Contrary to common belief Intel category 1 does not state that volume rebates are presumed lawful. It states that volume rebates justified by efficiencies are presumed lawful. If the point just made about efficiencies is correct, then this also deprives Intel category 1 of much usefulness. Whish’s second point is that the General Court was right to reject the ‘as-efficient competitor (AEC) test’ as relevant in this context. The argument is that rebates are not a price-based abuse; the problem is one of exclusivity. See also Paul Nihoul’s article—it is seen as a ‘tie’. I will return to the merits of this but the most immediate point is that the area in which the Court will need to consider it is wider than exclusivity. With a somewhat impractical first category and a narrow second (exclusivity) category, the third category becomes the most important in practice, taking in not just target but also volume rebates. Yet the European Courts have also taken a strict approach to the third category—see the ‘tendency to restrict’ formulation endorsed in British Airways, Tomra and (by the General Court) in Michelin II. This is closer to object restriction than to the balanced ‘rule of reason’ analysis it is presented as in the Intel rubric. Who has created this approach? This goes to Richard Whish’s third point which is that there is no conflict with the Guidance Paper because the Guidance Paper is about priorities. I respectfully disagree. The Court endorsed the Commission’s old approach. The Guidance Paper represented the culmination of a substantive shift in that approach that began with the 2005 discussion paper (see also Damien Geradin’s 2009 Intel article in this journal). Giorgio Monti argued in a 2009 Intel article in this journal that there were then two standards. That has not changed, in my view, with the General Court’s judgment.

The Use of Economics in the Anti-Monopoly Law of China

Abstract: Advances in the implementation of the Anti-Monopoly Law (‘AML’) of China have been remarkable since its enactment in August 2008. The Chinese competition authorities—MOFCOM, NDRC and SAIC—have been increasingly active in recent years, handling cases that have drawn widespread local and international attention. As the authorities gradually accumulate case work experience and capacity, their analyses and decisions are likely to become more sophisticated. For example, MOFCOM appears to increasingly use economic analysis in assessing complicated mergers. In line with the growth of public enforcement by competition authorities, private actions under the AML before the Chinese courts have also progressed rapidly. The Chinese courts have heard and ruled on a number of high-profile private disputes involving both large domestic and international companies. Recent judgments suggest that the courts have started to show the capability and the willingness to engage in economic debates and to deal with the evidence put forward by the parties’ economic experts. Notably, the judgment by the Supreme People’s Court of China (‘the SPC’) in Qihoo 360 v Tencent, published in October 2014, highlights the importance of economic evidence before the Chinese courts in private AML disputes. In this landmark case— the first case under the AML to go to the SPC—the court adopted an effects-based economic framework in ruling on a complex abuse of dominance dispute. This Judgment sends a promising signal that economic reasoning and evidence will be taken seriously in future Chinese court cases. However, despite the attempts by the courts, and to some extent the competition agencies, to increase transparency, official decisions generally reveal limited information about the substantive discussions and practical considerations that drive the decision-making processes behind competition investigations. It is therefore unsurprising that antitrust practitioners and interested parties, particularly those located outside China, often find it hard to understand how economic analysis is used in practice in Chinese antitrust matters. In this article, we draw on our experience of advising MOFCOM and notifying parties in merger cases, and of giving expert testimony before the Chinese courts in private litigation, to shed light on the use of economics in antitrust matters in China. We first provide an overview of antitrust enforcement and the use of economic analysis by the authorities and the courts in China. We then discuss some lessons from two recent cases, namely, the proposed joint venture between Wilmar and Kemira in China that was cleared by MOFCOM unconditionally in June 2014, and the Qihoo 360 v Tencent litigation that