Competition Commissioner Vestager on exploitative abuses

This morning Commission Vestager made a speech entitled “Protecting consumers from exploitation” in which she discusses  whether the Commission should “intervene directly to correct excessively high prices, and other ways that businesses exploit their customers.” It has been a long time since a Commission talked about exploitative abuses and Commission investigations into exploitative prices are very rare. The question for practitioners is whether this signals a renewed Commission interest for running such cases and, if so, whether investigations into exploitative prices are desirable.

Competition practitioners and scholars are generally skeptical about exploitative cases. First, these cases are difficult to run as there is no easy way to determine when a price is exploitative. Second, in most circumstances excessive prices are self-correcting in that they will attract new entry and increased competition will reduce prices. Finally, there is a danger that controlling prices will stifle innovation. The Commissioner is well aware of these challenges and acknowledges them in her speech. Commissioner Vestager’s speech should be read as indicating that while there may be circumstances where the Commission may step in to protect consumers against excessive prices, the Commission should be cautious in its assessment.

From a litigation standpoint, additional Commission decisions finding excessive prices could be a source of class actions. Such actions are still rare in Europe essentially for procedural reasons, but several Member States (the UK, Belgium, France, etc.) have adopted legal regimes making them possible. In this respect, a 19 billion-pound class action lawsuit was initiated in July 2016 against MasterCard Inc., following an ECJ decision that the processing fees the company had charged for cross-border transactions were excessive.

 

 

 

Weird case where Belgian competition authority reviews an arbitral award

I came across the interesting, but rather odd case, involving the Belgian Court of Arbitration for sports and the Belgian Competition Authority.

The facts are as follows. The Belgian football federation has a committee awarding licenses. To obtain a license football clubs need to meet various conditions, including proof of their financial stability for the season to come. The White Star is a Brussels-based football team that won the second division championship in 2015-16 and should therefore have played in the first division in 2016-17. The problem is that its financial situation was so dire that it did not meet the licensing conditions set by the Belgian football federation.

White Star appealed the decision before the Belgian Court of Arbitration for sports, which is the organ of appeal “imposed” by the federation. It rendered its award in May 2016. The award annuled the decision of the license committee of the Belgian federation, but refused to grant the license because the White Star did not meet the condition of financial stability. The White Star then decided to knock on the door of the Belgian Competition Authority to obtain provisional measures that would allow it to play in the first division championship in 2016-17 (and which would therefore effectively annul the award). Specifically, White Star argued that the refusal to grant a license to a football team amounted to a breach of competition law (refusing a license indeed leads to the exclusion of a “competitor”). This new effort proved again to be in vain in that the Competition Authority found that there was no prima facie evidence of a breach of competition law.

The interesting aspect of the case was that the Belgian Competition Authority did not hesitate to look into the validity of the arbitral award despite the submissions made by the Football Federation and Belgian Court of Arbitration for sports, according to which in Belgian law the only means to challenge an arbitral award (in this case the refusal to grant a license) is to initiate annulment proceedings before the Court of First Instance. Hence, the action initiated by White Star was inadmissible. In its decision, which is in French, the Belgian Competition Authority rejected that view finding in the process that the members of the Belgian Court of Arbitration for sports represented “undertakings” within the meaning of competition law (!), although it acknowledged that there was no sufficient evidence to recognize the tribunal arbitral itself was an undertaking or an association of undertakings …

The Authority considered that it is in charge of enforcing “public order” rules (i.e., competition rules) and that Belgian Court of Arbitration for sports was bound by such rules and that it should have applied them ex officio. The Authority therefore considered that it was competent to review the award and to set it aside if it had found that there was prima facie evidence of a breach of competition law, which – as noted above – was not the case here. Hence, the request for preliminary measures requested by White Star was rejected.

Private Antitrust Enforcement: A New Era for Collective Redress?

This paper by Sofia Pais just came out.

Abstract:

It will be argued in this article that the EU Recommendation on common principles for collective redress might have limited impact on the field of competition law due to: several uncertainties regarding the legal standing in class actions; difficulties in their funding; and the risk of forum shopping with cross-border actions. Nevertheless, Belgium and Great Britain have recently introduced class actions into their national legal systems and addressed some of the difficulties which other Member States were experiencing already. It will also be suggested that the Portuguese model – the ‘Popular Action’ – and recent Portuguese practice may be considered an interesting example to follow in order to overcome some of the identified obstacles to private antitrust enforcement.

 

Is Switzerland a good seat for foreign antitrust claims?

Lawyers at Froriep argue here that it is the case. They list the reasons as follows:

  • Antitrust claims are fully-arbitrable under Swiss law (at least when raised defensively, which is generally the case);
  • Switzerland has taken a pro-arbitration stance on the interpretation of arbitration clauses (hence making it likely that antitrust claims will be seen as falling with the scope of such clauses);
  • The Swiss Supreme Court has found that the non-application or incorrect application of a foreign antitrust statute (in that case, EU competition law) does not constitute a breach of Swiss public policy (i.e. Eco-Swiss does not apply);
  • The standard of review applied by the Swiss Supreme Court to petitions for setting aside arbitral awards is limited in scope;
  • Treble/punitive damages are available (which is rarely the case in other continental jurisdictions); and
  • As Switzerland is not part of the EU, the decisions of Swiss arbitral tribunals are not subject to the review of the EU courts and the competition authorities.

ICC YAF: Distribution Law and Arbitration / 4 November 2016

There are many points of contact between competition law and distribution law.

For those interested in distribution law and arbitration, you can find here the programme of an interesting conference jointly organised by the ICC Young Arbitrators Forum (ICC YAF), the University of Turin, the Piedmont and Aosta Valley Section of the Italian Society for International Organization (SIOI) and the Moot Alumni Association Turin (MAAT). It will take place in Torino on 4 November 2016.

Unwired Planet v. Huawei (High Court of England & Wales)

Very interesting trial started last Monday at the High Court in London. This is the FRAND trial part of the patent litigation case between Unwired Planet, a patent assertion entity (PAE) that bought standard-essential patents (SEPs) from Ericsson, and Huawei, a large manufacturer of smartphones and telecommunications infrastructure.

Mr Justice Colin Birss will have to deal with a range of very interesting issues, including whether Unwired Planet:

  • holds a dominant position on one or several markets and thus whether Article 102 TFEU applies.
  • illegally started injunction proceedings without complying with the licensing framework set out in the European Court of Justice in its 2015 Huawei/ZTE judgment.
  • illegally required that Unwired Planet to license its SEP portfolio on a global scale.

In addition, Mr Justice Colin Birss will have to determine whether the royalties asked by Unwired Planet are FRAND.

Google and Samsung settled with Unwired Planet before the beginning of the trial.

If you are interested in the application of EU competition rules to PAEs, you may wish to have a look at my paper here.

 

 

 

 

 

 

Antitrust damages actions – Commission publishes study on obtaining and assessing economic evidence for passing-on of overcharges

This study can be found here.

Executive summary:

This Study is intended to provide judges, and other practitioners who are not economic experts, with practical guidance on obtaining and assessing economic evidence in relation to pass-on in the context of competition law infringements. Drawing on relevant economic theory and quantitative methods, as well as relevant legal practice and rules, it sets out a framework for evaluating the plausibility of claims, for quantifying the effects of pass-on, and, accordingly, for assessing the total extent of the harm suffered by a claimant. EU Directive 2014/104 establishes that any person who has suffered harm caused by a competition law infringement may claim full compensation for that harm. This includes the possibility of indirect claims, which arise when those that are not directly affected by such an infringement (notably, indirect purchasers) are nevertheless harmed as a result of changes in the behaviour of directly affected firms (the direct purchasers) as well as, potentially, other intermediate firms. There are three distinct elements that make up the recoverable harm potentially suffered by a claimant.

First, there is the increase in the claimant’s costs (“the overcharge”) that may be brought about by the infringement: in legal terms, actual harm or direct loss (damnum emergens). Such harm may arise directly or because of “upstream” pass-on by a direct or indirect purchaser that supplies the claimant.

Second, the adverse impact of the overcharge on the claimant may be reduced if it passes on some or all of that overcharge to its own customers, by means of a price increase. This is the “passing-on” effect. Whilst such “downstream” pass on reduces the actual harm suffered by the claimant in question, it will do so at the expense of causing harm further downstream. Indeed, the pass-on effect at one level of the supply chain implies an overcharge of the same magnitude at the next level downstream; they are two sides of the same coin. In litigation, pass-on can, therefore, serve as a “sword”, where an indirect purchaser alleges that an overcharge has caused it harm because of upstream pass-on. It can also be used as a “shield”, where a defendant alleges that downstream pass-on by a claimant has reduced the actual harm the latter has suffered.

Third, to the extent that a claimant suffers a loss of sales volumes as a consequence of pass-on, it will lose the profit margins associated with those sales. This so-called “volume effect” constitutes recoverable loss of profit (lucrum cessans) in legal terms and forms part of the overall damage calculation. Whenever a firm increases its prices, it will almost invariably suffer such a loss of sales volumes. It is the extent of this prospective loss, which hinges on the sensitivity (or elasticity) of a firm’s demand to price increases, that tempers the extent of passing-on in the first place.