Google & Competition Law V

Another addendum: In a paper posted earlier this month, University of Chicago law school lecturer David Evans considers the "Antitrust Economics of Free":

Antitrust Economics of Free

This article examines antitrust analysis when one of the possible subject products of an antitrust or merger is ordinarily offered at a zero price. It shows that businesses often offer a product for free because it increases the overall profits they can earn from selling the free product and a companion product to either the same customer or different customers. The companion product may be a complement, a premium version of the free product, or the product on the other side of a two-sided market. The article then shows how antitrust and merger analysis should proceed when the subject is either the free product or the companion product. A key point is that the existence of a free good signals that there is a companion good, that firms consider both products simultaneously in maximizing profit, and that commonly used methods of antitrust analysis, including market definition, probably need to be adjusted to properly analyze two inextricably linked products. When antitrust or merger analysis involves a free product, the analysis of consumer welfare and injury also needs to account for customers of both the free product and its companion product since any change in market conditions for customers of one product affects the customers of the other product. Much of the analysis of the article is also relevant to other common situations in which price is set less than marginal cost.

Interestingly, Evans cites an American case where the court accepted the very argument that I considered in my original posts: that it is not possible to have an antitrust market for something that is given away for free. The case is Kinderstart v. Google, 2007 WL 831806 (N.D. Cal.). I'll have to take a look at that one...

Cypriot Lawfare

I am fascinated by the ECtHR's rulings in Xenides-Arestis v. Turkey and Loizou v. Turkey. It is clearly my fault for not noticing them before, since the case is exceedingly intriguing. There is much talk about lawfare these days, especially in the US where they don't seem to be all that fond of the idea of rights for terrorists (or prisoners, generally), but this one has to take the cake. And yet, it is still impossible to sort out whether such a thing is legitimate and otherwise desirable.

The case is relatively simple: In 1974, Turkey invaded Cyprus in order to protect the rights of Turkish Cypriots (allegedly, of course), causing a de facto division of the island in a Greek zone and a Turkish zone that lasts to this day. As a matter of international law, the Greek-speaking government in Nicosia is the legitimate, lawful government of the entire island, and in that capacity it has handled Cyprus' accession to the EU. (I had the honour of supervising an undergraduate thesis by Ms. Fetine Yildirimturk in 2009, which discussed some of the issues caused by the fact that North-Cyprus is part of the EU, yet isn't.)

A practical result of all this is that many Greek-Cypriots who own immovable property in the North have been unable to even visit their land and homes for 37 years now. In many cases, their houses have been taken over by Turkish-Cypriots, causing all sorts of problems for innocent British tourists looking to buy a second home somewhere sunny. In Apostolides v. Orams & Orams, for example, the British defendants were sued in British court by the Greek-Cypriot original owner of their North-Cypriot vacation home. The ECJ ruled that, even though a Greek-Cypriot judgement cannot be enforced in North-Cyprus, that does not mean that it cannot be enforced in the UK. In other words, any damages award that the Greek-Cypriot courts impose can be enforced against the defendant's property anywhere in the EU under the standard rules of Regulation 44/2001. But of course, that only helps if the North-Cypriot property is bought by an EU citizen. What if it continues to be possessed by a Turkish-Cypriot, with no assets in the EU?

Well, in that case the Greek-Cypriot would-be plaintiff has no alternative but to turn to the European Court for Human Rights. After all, Turkey is a party to the Convention, including Protocol 1 which protects the right to property. So if the Turkish army is occupying North-Cyprus, and physically preventing Greek-Cypriots from enjoying their property, Turkey is violating art. 1 of Protocol 1. And under art. 13 and 41 of the Convention, that means that Turkey either has to arrange for an effective remedy under domestic law, or it has to pay just satisfaction, i.e. damages.

In 2005, the ECtHR ruled exactly that, a ruling that resulted in the creation of a Turkish-Cypriot Immovable Property Commission, charged with settling the claims of Greek-Cypriots. According to their website, they have so far paid out a total sum of GBP 58,3 million.

Imagine the possibilities! Israel having to buy back half of their country from the original Palestinian owners... (Not to mention the Syrians who used to live in the Golan Heights.) Sudeten Germans looking for reparations. (OK, bad example, that one has already been sorted out long ago, although President Klaus did briefly make an issue out of it when he was looking for reasons to delay ratifying the Lisbon Treaty & the EU Charter of Fundamental Rights.) Then there is North- and Sourth-Sudan, the Caucasus, the possibilities are infinite. And in every case, it is difficult to say that the claim is illegitimate. It is simply unusual, because it uses a private law frame to look at something profoundly public law: the law of occupation.

Of course, in the case of Cyprus the whole thing isn't really all that expensive, because Turkey occupied exactly that part of the island that was predominantly Turkish already. (Not to mention that presumably land values aren't that high.) But in other settings one can imagine that occupation could become quite expensive in this way, once the initial decision has been made to allow such claims. (Note that the ECtHR does not do exemplary/punitive damages. In jurisdictions that do, this kind of claim can easily get much more expensive.) Much as we understand why Israel isn't interested in making peace with Syria or the Palestinians, at least not at the terms on offer, it is difficult to see how this justifies an indefinite interference with the property rights of any number of Syrian and Palestinian citizens. In effect, this would lead to the result that Israel would have to rent an enormous amount of land in order to be allowed to continue to occupy it, even if that occupation is otherwise lawful under the laws of war. Wouldn't that be fun?

Last Year in Luxembourg

Useful for those who read Dutch: The Annual Report of the Dutch representation at the ECJ in Luxembourg, discussing all the cases in 2010 to which the Netherlands was a party or an intervenor. It's not very exciting, but it is a useful place to look up what a case was about again.

This Week in Luxembourg

The appeal in the state aid case of Kronoply and Kronoplex is a bit messy. The applicants at first instance were found by the General Court to have standing as non-addressee interested parties, but that court denied their application on the merits: The Commission was right not to raise objections to a case of state aid. Even though the Commission won, it appealed the admissibility finding. Without the original applicants participating in the appeal, the Grand Chamber nonetheless upheld the General Court’s judgement.

The Grand Chamber went where no other EU Institution had dared to go before: It imposed normal internal market rules on notaries. Commission v. Greece, Commission v. Germany, Commission v. Austria, Commission v. Portugal, Commission v. Luxembourg, Commission v. France, and Commission v. Belgium. When I did my stage in Brussels in 2006, the notaries were exempt from the services directive in all drafts, because apparently their powerful lobby made them untouchable.

The First Chamber held that art. 6(1)(1) of Decision 3/80 of the EU-Turkey Association Council (p. 184 here) has direct effect, meaning that the Netherlands have to continue to pay the full amount of disability payments to the plaintiffs-appellees. UWV v. Akdas et al.

The environmental lobby pretty much lost the case concerning the new Eemshaven and Rotterdam power plants in the Netherlands. The ECJ obviously confirmed the usual rule about directives whose transposition period is not yet over, such as Directive 2008/1, but refused to find direct effect for art. 4 of Directive 2001/81. The plaintiffs will have to make do with art. 6 of that Directive. Joined cases Stichting Natuur en Milieu et al. v. Groningen and Stichting Natuur en Milieu et al. v. Zuid-Holland (2x)

The Commission lost an infringement case against Spain, because it failed to prove that the offending public works contracts actually concerned “works” in the sense of the relevant directives. Commission v. Spain

AG Mengozzi is faced with what the US Supreme Court always conveniently calls “some appropriate measure of costs”: Which is more important in predatory pricing cases: marginal costs or average costs? The AG dodges the issue by focusing instead on another aspect of the case: Post Danmark may not cross-subsidise between ordinary mail business and its direct mail business, at least not as long as the former is subject to a universal service obligation, with all the concomitant benefits and obligations. Post Danmark v. Konkurrenceradet (NL, DE, FR)

AG Jääskinen proposed that the Court should sign off on the Belgian external scheme for dealing with complaints against suppliers of non-universal postal services. He argued that this scheme does not violate Directive 97/67, as the Belgian court had suggested. Express Line v. Belgisch Instituut voor postdiensten en telecommunicatie (NL,DE, FR)

AG Kokott considered the nullity of a contract concerning illegal state aid. She concluded that nullity is not the consequence of the illegality of the government guarantee in question, unless the recipient of the guarantee (i.e. the institution providing the loan) is itself the beneficiary of the illegal aid. Obviously, it will usually be the case that the beneficiary of the aid is the recipient of the money. Residex v. Rotterdam (NL, DE, FR)

Apparently, Germany refused to cooperate with a Court of Auditors investigation into “administrative cooperation in the field of value added tax”, and AG Trstenjak now argued that that was unlawful. Commission v. Germany

In Batchelor v. Commission, the General Court rejected the Commission’s invocation of the internal use (dialogue with the MS) and commercial secrets exceptions. The UK may not use its own threat that it will cause problems in case of disclosure as evidence of the fact that disclosure will undermine the decision-making process.

P.S. The archive of these emails is here.

Lancer de Nains II

On the Volokh Conspiracy, guest-blogger Neomi Rao has a series of posts about different concepts of dignity. In today's post, she discusses the Conseil d'État's dwarf tossing case:

In a much-discussed French case, Mr. Wackenheim, a dwarf, made his living by allowing himself to be thrown for sport. The mayors of several cities banned dwarf tossing events. Mr. Wackenheim challenged the orders on the grounds that they interfered with his economic liberty and right to earn a living. The case went to the Conseil d’Etat (the supreme administrative court), which upheld the bans on the grounds that dwarf throwing affronted human dignity, which was part of the “public order” controlled by the municipal police. The Wackenheim case demonstrates how a substantive understanding of dignity can be used to coerce individuals by forcing upon them a particular understanding of dignity irrespective of their individual choices.

European politicians have presented similar justifications for banning the burqa or full veil. French President Sarkozy has supported the ban because the burqa “runs counter to women’s dignity.” In Spain a legislator called the burqa a “degrading prison.” The debate focuses little on what Muslim women think about the full veil or why some of them wear it in public. Instead of associating dignity with religious choice, those who would ban the veil treat dignity as a different social ideal—one that measures up to majority standards of individual self-expression.
(...)
The issue is not whether laws prohibiting dwarf throwing, burqa wearing, prostitution, or pornography may be desirable social policy. Rather these examples demonstrate that the conception of dignity used to defend such policies is not that of human agency and freedom of choice, but rather represents a particular moral view of what dignity requires. These laws do not purport to maximize individual freedom, but instead regulate how individuals must behave in order to maintain dignity (and in the case of criminal prohibitions, stay out of jail).
(...)

Google & Competition Law IV

Just a quick addendum to last year's posts about Google's Competition Law problems: In a paper posted on SSRN last month, Argenton & Prüfer present some microeconomic analysis of the market for search engines. I'm not sure that I agree entirely with their analysis, but the basics are certainly worth while. Here is the abstract:

Search Engine Competition with Network Externalities
The market for Internet search is not only economically and socially important, it is also highly concentrated. Is this a problem? We study the question whether "competition is only a free click away". We argue that the market for Internet search is characterized by indirect network externalities and construct a simple model of search engine competition, which produces a market share development that fits the empirically observed development since 2003 well. We find that there is a strong tendency towards market tipping and, subsequently, monopolization, with negative consequences on economic welfare. Therefore, we propose to require search engines to share their data on previous searches. We compare the resulting "competitive oligopoly" market structure with the less competitive current situation and show that our proposal would spur innovation, search quality, consumer surplus, and total welfare. We also discuss the practical feasibility of our policy proposal and sketch the legal issues involved.

This Week in Luxembourg

Römer is one of those cases that can cause ripples well beyond its actual subject matter. Technically, it is a case about pension rights and civil partnerships, but in practice the only thing anyone will take away from it is that it supports gay rights. (The judgement doesn’t even say the applicant is gay. All it does is reference “his companion”.) The result is that Hamburg is not allowed to discriminate between married couples and civil partnerships. (Cf. Directive 2000/78, the general equal treatment in employment directive.) Cf. bbc.co.uk

In the interesting case of Ving Sverige, the question is whether certain advertisements by budget airlines, travel operators, etc. qualify as an invitation to purchase in the sense of Directive 2005/29. The Court’s answer strongly suggests that they do, meaning that the companies in question might have a problem with such provisions as art. 7(4)(c) of the Directive, given that they are often somewhat optimistic about the price at which the product in question can actually be obtained.

In a culturally sensitive case, the Second Chamber ruled that Lithuania was entitled to insist that names be entered according to Lithuanian spelling, as opposed to the Polish spelling preferred by the (Polish) plaintiffs. AG Jääskinen (DE, FR) had argued earlier that the plaintiffs should lose under Directive 2000/43, but should prevail to some extent under art. 21 TFEU, but the Court disagrees. Runevič-Vardyn (With a v instead of a w, and with the diacritic on the c instead of the Polish-form cz.)

The Third Chamber ruled that art. 22(2) of the Brussels Convention Regulation 44/2001 does not apply to cases where the company-defendant raises disputes the validity of an act of one of its own organs as a reason why a contract cannot be enforced. When you argue ultra vires as a shield, you’re going to have to argue it in the court that has jurisdiction under the normal rules. Berliner Verkehrsbetriebe (BVG) v. JPMorgan Chase

The Polish telecoms regulator got away with a bit of translation difficulty in Polska Telefonia Cyfrowa v. Prezes Urzędu Komunikacji Elektronicznej. A National Regulatory Agency is entitled to refer to a Commission Guideline even when that Guideline has not been translated, notwithstanding art. 58 of the Act Concerning the Conditions of Accession.

The Aarhus Convention wins again. This time, the Bund für Umwelt und Naturschutz Deutschland obtained standing through Directive 2003/35 when German law denied them the right to demand an environmental impact study – cf. Directive 85/337 - for a new coal-powered energy plant. Bund für Umwelt und Naturschutz Deutschland v. Bezirksregierung Arnsberg

Luxembourg got shot down in their attempt to challenge the airport charges directive 2009/12. The directive creates special rules for airports that are either larger than 5 million passenger movements per year or the largest in their MS. Luxembourg felt, understandably, that this was unfair towards their national airport, which is much smaller than 5 million passenger movements. The Third Chamber did not think, though, that this injustice rose to such a level that it violated the principles of equal treatment or proportionality. Luxembourg v. Parliament and Council

In the Air Passengers’ Rights case of Eglitis and Ratnieks v. Latvijas Republikas Ekonomikas ministrija, there is a lot of reasonableness all around, but not a lot of actual guidance. The question concerns art. 5(3) of the Regulation, which states that no compensation has to be paid if the cancellation is due to “extraordinary circumstances which could not have been avoided even if all reasonable measures had been taken.”

AG Kokott waded into the grey area between the EU’s JHA legislation and the MS’ autonomy in areas of criminal law. In the joined cases of Gueye and Salmerón Sánchez (NL, DE, FR), she examined the position of the victim in domestic abuse cases. She argues that under art. 2 and 3 of Framework Decision 2001/220/JHA the victim has to be heard about any restraining order. However, this does not mean that it is unlawful for a restraining order to be an automatic consequence of conviction.

P.S. The archive of these emails is here.

Lijfsdwang

This is fun... In Stichting Brein v. X and Y last month, the court in The Hague imposed "lijfsdwang", i.e. civil detention, as an enforcement mechanism against two incorrigible IPR violators. They have to spend a day in jail for every 10 illegal copies they are caught with, with a maximum of 10 days per bust, and a maximum of 10 days per month. (That is to say that they won't have to spend more than 10 days in jail in any given month. The number of days imposed can be more.)

As far as I know, civil detention is exceedingly rare in the Netherlands. (And elsewhere.) I guess the Copyrights people are getting desperate.

This Week in Luxembourg

During the Court’s Easter Recess, it did hand down one judgement: In the PPU case of Hassen El Dridi alias Soufi Karim, the First Chamber held that the MS are not permitted to make simple illegality a criminal offense. The Court held that Directive 2008/115 fully harmonises this area of the law, and that making all illegal residents criminals offends the requirement of proportionality of art. 15 and 16 of the Directive.

Surprisingly, the Polish courts needed to be told that, while art. 5 of Regulation 1/2003 orders the national competition authorities to apply EU competition law, it does not authorise them to find that there has been no breach. I would have thought that it is fairly intuitive that the NCAs can find an infraction, but cannot shield a company from the Commission’s wrath. In this case, the question concerned alleged abuse of dominance by Telekomunikacja Polska. Prezes Urzędu Ochrony Konkurencji i Konsumentów v. Tele2 Polska

In McCarthy, the applicant failed to use her dual Irish/British citizenship to get around the immigration rules. A dual citizen who has never exercised their free movement rights, i.e. who has always lived one of the MS of which they are a citizen, cannot normally rely on EU law vis-à-vis their own government, since their legal issues constitute a purely internal situation.

The Third Chamber ruled in European Communities v. Région Bruxelles-Capitale about who gets to represent the Council in court when the Council has a dispute with the city regarding fees for planning permission. Note that this is old news, since the problem in question has been fixed in the Lisbon Treaty. (Cf. art. 335 TFEU and the old art. 282 EC.) The Court, like AG Crúz Villalon, felt that the Council was entitled to take point in this case.

Deutsche Telekom lost its directory assistance case before the ECJ (cf. art. 25 of Directive 2002/22). It has to share with other directory assistance providers not only the data it possesses on its own subscribers, but also the data it possesses on subscribers of third-party telecom companies. Privacy law, particularly art. 12 of Directive 2002/58, does not generally change this. Deutsche Telekom v. Germany

In Ze Fu Fleischhandel and Vion Trading v. Hauptzollamt Hamburg-Jonas, the German tax authorities (and Courts) are in all sorts of trouble over limitations periods, legal certainty and proportionality in relation to the recovery of an improperly granted export refunds from 1993, which is of course before the enactment of Regulation 2988/95, which would otherwise take care of this problem. (cf. art. 3)

In MSD Sharp & Dohme and in Novo Nordisk v. Ravimiamet, the Third Chamber gave some guidance as to the boundaries of permissible medicinal advertising under Directive 2001/83.

AG Bot argues that art. 22a of Directive 89/552, as inserted by Directive 97/36 (“Member States shall ensure that broadcasts do not contain any incitement to hatred on grounds of race, sex, religion or nationality.”), requires the MS to also prevent broadcasts which glorify a terrorist organisation. Mesopotamia Broadcast and Roj TV v. Germany (DE, FR)

Lausanne