Thursday, March 21, 2013

This Week in Luxembourg

The Grand Chamber (Judge Arabadijev) annulled the General Court’s state aid judgment in French Republic et al. v. Commission. Siding with the Commission, the Court criticised the General Court’s standard for the connection between the state resource and the advantage at issue, as well as its analysis of the nature of the alleged advantage. The case now goes back to the General Court so that it can deal with France’s other arguments. Bouygues Télécom and Commission v. France Cf. e-comm blog and The Antitrust Hotch Potch

Belgium created a new and innovative fee for mobile telecoms operators, and the Court (Judge Jarašiūnas) approved. The operators’ challenge under art. 3 and 12-14 of the Authorisation Directive was rejected. Belgacom et al. v. Belgium

As expected, the Court (Judge Bonichot) shot down the Hungarian rule for counting the number of days a 3rd country national spends in the EU under the local border traffic Regulation. The Court held that every time a person crosses the border the count starts anew. Szabolcs-Szatmár-Bereg Megyei Rendőrkapitányság Záhony Határrendészeti Kirendeltsége v. Shomodi

The Court rejected an Austrian attempt to exempt small airport extensions from the rules on environmental impact assessments. Salzburger Flughafen v. Umweltsenat

In RWE Vertrieb v. Verbraucherzentrale Nordrhein-Westfalen, the Court (Judge Safjan) had some fun trying to figure out the interplay between the unfair consumer contracts directive and the sectoral regulation for the gas sector. Can an energy company just unilaterally increase your prices? The Court concluded that it can, as long as the whole thing is transparent, based on clear principles, etc. Cf. Recent Developments in European Consumer Law

AG Bot levelled significant criticism at the General Court’s handling of the second Kadi case in 2010, concluding for a variety of reasons that that judgment should be annulled, and that the General Court should have taken a more modest approach in its judicial review, both when it comes to the intensity of scrutiny, and to the scope of law involved. Commission et al. v. Kadi Cf. Eutopia Law BlogVerfassungsblog, EJIL: Talk! and one of Kadi's lawyers on the brand new European Sanctions Blog

AG Kokott considered the doctrine of standing under art. 263 TFEU in the Spanish state aid case of Telefonica v. Commission (NL, DE, FR, ES). The General Court had dismissed the case by order on the grounds that the plaintiff was not individually concerned while this case was not caught by the new exception for regulatory acts which do not entail implementing measures. The AG agrees that Telefonica does not have standing, but only because a state aid decision requires implementing measures.

That AG also argued that the Spanish special tax on the windfall profits associated with the free allocation of emissions rights was permissible under the relevant Directive, Directive 2003/87, unless it acted to disincentivise energy efficiency. Iberdrola v. Administración del Estado

For reasons to do with their opt-in, the UK are challenging the legal basis of the Council’s Decision establishing a mandate for the EU in the EEA Joint Committee, so that Regulation 883/2004 might be extended to the EEA. The “procedural legal basis” is, undisputedly, art. 218(9) TFEU, but the UK is challenging the choice of art. 48 TFEU as the “substantive” legal basis. Instead of the free movement of workers law, the UK prefers immigration law as a basis. AG Kokott disagrees. UK v. Council

AG Mengozzi considered a Belgian case where the plaintiff tried to use Directive 2006/114 on misleading advertising to go after an arguable case of domain name hijacking. The AG proposed, not very helpfully, that registering such a domain was not captured by the directive, but that using it might be, and that the national court should sort out the rest. Belgian Electronic Sorting Technology v. Peelaers and Visys (NL, DE, FR)

AG Mengozzi also handed down an opinion in the case of K. (It’s not otherwise very interesting, but the way in which the Finnish method for citing cases resulted in the most Kafkaesque of case names proved impossible to resist.)

In Alopka et al. v. Ministre du Travail, de l’Emploi et de l’Immigration (FR), AG Mengozzi reaffirmed the Ruiz Zambrano line of case law. Unlike in many other genuine enjoyment cases, where the plaintiff was unsuccessful because Ruiz Zambrano was distinguished, here it looks like the precedent is directly on point.

In the state aid case of HGA et al. v. Commission, AG Bot said that the General Court got it wrong to attach as much importance as it did to the question of the aid was requested by a given recipient. However, he argues that the judgment should nonetheless be upheld, because the remaining reasoning is sufficient to bear the conclusion that the Commission’s decision is correct. Joined Cases Regione autonoma della Sardegna (T-394/08), SF Turistico Immobiliare Srl (T-408/08), Timsas Srl (T-453/08) and Grand Hotel Abi d’Oru SpA (T-454/08) v European Commission

Following the recent decisions on the merits by the General Court in the first REACH cases against the European Chemicals Agency (ECHA), AG Cruz Villalon now handed down the first opinions in appeals against the General Court orders dismissing other REACH suits. He concluded that the General Court was wrong to hold that the suits were not aimed at a challengeable act, that they were out of time and that that belatedness was not the consequence of an excusable error. Polyelectrolyte Producers Group and SNS v. ECHA

AG Sharpston took the Aarhus issues regarding the distinction between legislative and administrative acts, first discussed in Flachglas Torgau (where she also wrote the opinion), to the next level. I’m not sure what the logic of her proposed answer is, except that it seems to turn the Solange rule back on Germany. Deutsche Umwelthilfe v. Germany

Everyone’s favourite MEP, Sophie in ‘t Veld, achieved a small win against the Commission. She sued over the Commission’s refusal to give her all the documents relating to the draft international Anti-Counterfeiting Trade Agreement (ACTA) that she asked for, and the General Court (Judge Dehousse) now granted her access to some of the missing ones. In ‘t Veld v. Commission Cf. EU Law Blog

ITER may well be the single coolest thing going on in Europe right now, and today it was on the receiving (and winning) end of a public procurement suit. It turns out you cannot ask for the annulment of “tous les actes adoptés subséquemment” (par. 48-50), and otherwise nothing very interesting seems to have happened; the applicant’s bid was quite rightly thrown out in pre-screening. Nexans France v. Entreprise commune européenne pour ITER et le développement de l’énergie de fusion (FR)

Following some creativity with import licenses for bananas, the Commission allowed a remission of duties in respect of the customs agent, who had not obviously erred, but not in respect of the trader, the applicant, who were held to have been negligent. The General Court (Judge Schwarcz) now annulled that decision, holding that insufficient evidence as to negligence had been adduced. Van Parys v. Commission (yes, that Van Parys)

Thursday, March 14, 2013

Today in Luxembourg

While I missed it in the email version of this post, the big case is apparently the Spanish evictions case of Aziz v. Caixa d’Estalvis de Catalunya, Tarragona i Manresa (Catalunyacaixa), where the Court (Judge Tizzano) held that the way in which many Spanish mortgage loan contracts arrange for enforcement is unfair under Directive 93/13, meaning that hundreds of thousands of Spanish people have been evicted unlawfully. Cf. Coulisses de Bruxelles

In competition law, there is evidence of a worrying trend towards competition authorities preferring to examine whether an agreement is anticompetitive “by object” before moving on to an effects based test, rather than the other way around, as legal and economic commentators would generally prefer it. In Allianz Hungária et al. v. Gazdasági Versenyhivatal the Court (Judge Ilešič) gives some guidance on the meaning of “by object” in a case that should easily pass any effects-based test. Cf. Hans Vedder on European Law Blog

In environmental law, the Supreme Court of Austria checked with the Court (Judge Bay Larsen) whether an Environmental Impact Assessment under Directive 85/337 is meant to assess impacts to the “substance” of assets or to their value. The result is a fun bit of sparring with what economists call value in use and value in trade. In reply to the second question, the Court explains that a failure to do an EIA does not automatically give rise to civil liability of the state. Leth v. Austria Cf. UK Human Rights Blog, European Law Blog and ECJBlog

Even though managers and owners of SMEs don’t usually deal with banks “in the course of their trade or profession”, they still don’t qualify as consumers for the purposes of articles 5(1)(a) and 15(1) of Regulation 44/2001. Česká spořitelna, a.s. v. Feichter Cf. Recent Developments in European Consumer Law Blog

In the copper fittings cartel case, the appeal of Viega was rejected. Viega v. Commission (DE, FR)

Most interesting for me is this week’s opinion by AG Jääskinen in ÖBB-Personenverkehr, although ultimately the case is less about railway regulation than about the effect of Regulations in EU law. The Regulation in question is Regulation 1371/2007 on passenger rights. The Austrian regulator, the Schienen-Kontrol Kommision, found that ÖBB’s compensation terms were not compliant, and substituted its own scheme. The AG now argues that they were not allowed to do that absent national law authorisation, given that other national law remedies exist.

AG Bot is OK with the Bulgarian approach to handling disputes that arise under Regulation 73/2009, the CAP procedure Regulation. It is permissible for Bulgaria to have them all handled in Sofia, as long as this does not create an excessive burden on (potential) plaintiffs. Agrokonsulting-04-Velko Stoyanov v. Izpalnitelen direktor na Darzhaven fond „Zemedelie” Razplashtatelna agentsia (NL, DE, FR)

In the General Court, President Jaeger granted an order suspending the operation of the Commission’s Decision in the Carglass cartel case until the General Court has decided whether the Commission had erred in declining to keep certain information confidential. Pilkington Group v. Commission

In other cartel news, the General Court (Judge Martins Ribeiro) upheld the Commission’s decision in the bananas cartel case against Dole, whereas Fresh Del Monte had its liability reduced from € 14,7 million to € 8,82 million. (The total fine for Internationale Fruchtimport Gesellschaft Weichert & Co is still € 14,7 but Fresh Del Monte is only jointly and severally liable for € 8,82 million of it.)

Wednesday, March 13, 2013

Tacit Collusion

Nicolas Petit’s new(-ish) article on tacit collusion is a wonderful piece of scholarship. Unfortunately, it is also wrong. To be clear, it is not the economics that I have a problem with. The author’s understanding of the relevant industrial organisation literature seems to be more or less unimpeachable. In fact, it’s not even really the legal analysis that is problematic. Instead, the key flaw is in the paper’s essential policy assumption. All the other problems of the article proceed from that one flaw.

The flaw in question is one that we might plausibly dub The MEP’s Fallacy, because it is Members of the European Parliament who suffer from it more than anyone else. The Fallacy is the thought that: a) there is a problem, and b) I can fix it, lead inevitably to the conclusion that: c) I should fix it.

Not all problems that can be fixed at the EU level should be fixed there.

Something similar goes for competition law: Not all problems that can be resolved through competition law, should be. This is not just a question of the goals of competition law, but also one of its suitability for pursuing various goals, not to mention wider legal principles.

In this  particular case, I’m afraid I have to join the other side of the debate discussed by Nicolas (I’ve never met him in person, but we’ve been in touch in various ways, so I feel confident that he’d be OK with me calling him that): I am fundamentally uneasy with the notion of using art. 101 TFEU for types of collusion that are not in some sense based on an agreement. It appears to me that "agreement” is the core actus reus of that provision,  just like “abuse” is for art. 102. It is the overt act that - in this case non-criminal - liability attaches to.

That reminds me, as an aside: How can the Dutch competition authority give six people a fine of € 120.000 each without having to satisfy the standard of art. 6 ECHR? We all know that the normal competition enforcement procedure - as used by the Commission and by most Member States - only barely satisfies that provision, and that is when it is applied to companies. (Let's face it: every company that brings an action for annulment against a competition decision adressed to it will argue that the whole procedure is in violation of art. 6. We all know that those arguments never succeed, but we also know that that is more for pragmatic and stare decisis reasons than for reasons of honest merit.)

Saying that competition fines are not criminal only gets you so far. At some point that just isn't  credible anymore, and as far as I'm concerned that line lies somewhere between giving Microsoft a € 561 million fine and giving a private person a fine of € 120.000, and perhaps even on the other side of that Microsoft fine.

Anyway, too much creativity with the actus reus is equivalent to prosecuting someone for manslaughter because they drove 150 kph and someone might well have died. Much as there is some room for creativity with regard to intent, by including dolus eventualis, there has to be a link to someone dying or almost dying. Without that, the charge would just be completely unmoored from the actual offence.

In competition law, the issue is not usually one of intent. But there is some scope for creativity with regard to the "agreement"-element. Art. 101 already suggests as much, by listing as possible acti rei:
  • - agreements between undertakings,
  • - decisions by associations of undertakings, and
  • - concerted practices
As Nicolas explains, however, the Court of Justice drew some clear lines here. These lines are - contrary to his assertion - in no way unintelligible or regrettable as long as one bears in mind that the problem is how to prove a concerted practice, rather than what kind of concerted practice falls within the scope of art. 101. After all, the word "concerted" implies some meeting of minds, which is enough - conceptually - to make concerted practices similar in nature to explicit agreements and decisions by associations; the actus reus is clearly the same in all cases. But as prof. Posner pointed out in the passage quoted in fn. 140, the proof is categorically different. There would normally be no "smoking gun". Instead, the relevant proof would focus on what decision makers knew and expected about each other's decisions. (Note the similarity here with the Cournot and Bertrand models. In fact, despite Nicolas' analysis I am still not entirely clear why a Cournot market would not imply tacit collusion.) Because of this proof problem, it might be safer to limit concerted practices to those cases where, evidence-wise, the balance between Type-I and Type-II errors is not too eggregious. And that is all the Court seems to have done.

In Posner's words:
The biggest problem in applying [art. 101] to tacit collusion is that of proof: How can the existence of noncompetitive pricing be established without any proof of acts of agreement, implementation, or enforcement? Without denying that these will be extremely difficult cases, one can point to several types of evidence that should convince the trier of fact that sellers are guilty of tacit collusion as that term is used here.
The Court in Suiker-Unie et al. v. Commission (1975):
And, 13 years later in Woodpulp II, the Court was even more cautious with regard to these evidentiary problems:
71 In determining the probative value of those different factors, it must be noted that parallel conduct cannot be regarded as furnishing proof of concertation unless concertation constitutes the only plausible explanation for such conduct. It is necessary to bear in mind that, although [art. 101] prohibits any form of collusion which distorts competition, it does not deprive economic operators of the right to adapt themselves intelligently to the existing and anticipated conduct of their competitors (see the judgment in Suiker Unie, cited above, paragraph 174).
"Regarded" and "plausible" suggest that this is a statement about how cases are to be brought and proved, not about the underlying concepts. Conceptually, I would argue that any kind of "conscious parallelism" is captured by art. 101 TFEU. (Contrary to Nicolas, I regard "conscious parallelism" as an eminently useful label, because more than "tacit collusion" it neatly makes clear what exactly the offending action is. The elements are: a) parallel behaviour that is, b) consciously so. In the term "tacit collusion", the word "collusion does all the work, thus begging the question what that word actually means.) I would define conscious parallelism, conceptually, as any kind of behaviour that succeeds in reducing competition by taking advantage of each decision maker's understanding of every other decision maker's reasoning. Clearly, this is essentially the same as Nicolas's tacit collusion. (Cf. his very helpful diagram on p. 24.) However, in collusion cases as in abuse of dominance cases, competition law doctrine has to be developed with an eye to the relative probability of Type-I and Type-II errors, and their relative cost to society. When it comes to tacit collusion, we want to avoid mistaking success for monopolisation, or a social-welfare enhancing coordination for a collusion-facilitating agreement. For this reason, the Court's approach seems quite sensible, although I would have preferred it if they had not been quite so categorical in ruling out the possibility of a successful tacit collusion case under art. 101 TFEU.

Relying on art. 102 TFEU, on the other hand, seems highly problematic from a conceptual point of view, because it is difficult to see how a single oligopolistic firm is "dominant", while I have no idea what "collective dominance" means outside the context of "groups of firms that were legally distinct, but subject to a unified economic management, including vertically related companies (mother and subsidiaries)", i.e. “undertakings [that] present themselves on the market as a single entity and not as individuals”. (These quotes are taken originally from an article by prof. Joliet from 1974 and from the Commission's Decision in the Italian Flat Glass case, respectively.) In other words, while there is some room for creativity with respect to the concept of "one or more undertakings" which hold(s) a single "position" in the market, I would think that this concept cannot be stretched to the point where it includes companies that are clearly perceived as competitors by their customers.

And much as dr. Petit seems to think that the mere fact that tacit collusion ought to be subject to regulatory intervention means that either art. 101 or art. 102 has to give way, as noted above that is not the case. He is completely right to reject what he calls "moral justifications" for tacit collusion (p. 19 of his article). Competition authorities and regulators are rarely confronted with anything other than regulatory subjects who engage in rational market conduct, and this has never been held to undermine the moral case for intervention, although it might impact the question of the size of penalties. However, this does not mean that existing competition law should be extended past its breaking point.

Instead, there are two solutions that should be preferred for those cases that cannot reasonably be brought within existing law. On the one hand, there are the market investigations that he mentions, as they are carried out in the UK by the Competition Commission under part 4 of the Enterprise Act 2002. S. 131(1) says:
The OFT may, subject to subsection (4), make a reference to the Commission if the OFT has reasonable grounds for suspecting that any feature, or combination of features, of a market in the United Kingdom for goods or services prevents, restricts or distorts competition in connection with the supply or acquisition of any goods or services in the United Kingdom or a part of the United Kingdom.
(Ministers have the same power under s. 132.)

When an adverse effect on competition has been established by the CC, it can take any of a wide range of measures - at a sector-wide level - to remedy the problem. It seems eminently advisable to create such a power for the Commission as well, if necessary with a veto power for the Council and the Parliament through comitology. As far as I can tell, Nicolas agrees.

To the extent that this is still not enough, there is only one option remaining: sectoral regulation through the legislature. (What Bergqvist calls "industrial policy". His article offers a more in-depth discussion of the interaction between competition law and sector-specific legislation.) It seems to me that under the general common market rules, the EU legislature has wide-ranging powers to create a sector-specific framework to enhance social welfare by combating tacit collusion. This power may not reach as far as structural remedies, but it certainly suffices to go after any number of facilitating factors. This road seems by far preferable to the competition law path, not only because it is more legitimate, but also because it allows for more sector-specific knowledge to be brought to bare on the problem, and because it avoids the problem of a regulator working within an artificial, and artificially narrow framework. Instead, in this way the solution can be designed on a blank sheet.

To a hammer, all problems look like a nail. Let's make sure that the same isn't true for the carpenter.

Saturday, March 09, 2013

This Week in Luxembourg

In ITV v. TVCatchup, the Court (Judge Malenovský) once again endeavours to bring (TV) copyright into the internet age. It argues that the copyright Directive 2001/29 does not give ITV the right to forbid TVCatchup from live streaming its broadcasts over the internet to people who are already allowed to see them on TV. (Because they live in the UK, have a TV license, etc.)  Cf. IPKat and ECJBlog

Following last week's Ettwein, this week normal order is restored as far as EU-Swiss relations go. For the last 12 years, Zürich airport has suffered from not being in the EU, while its approaches are. The fact that there is an EU-CH Air Transport Agreement has not helped. Switzerland tried diplomacy, but they also sued in the General Court to annul Commission Decision 2004/12. And lost. And now they lost on appeal as well. Switzerland v. Commission (NL, DE, FR) Cf. European Law Blog

Those who are interested in REACH, and in waste that ceases to be waste, may read Lapin elinkeino-, liikenne- ja ympäristökeskuksen liikenne ja infrastruktuuri -vastuualue v. Lapin luonnonsuojelupiiri ry (Judge Bonichot) For more REACH, see below.

Surprisingly, Goldbet Sportwetten v. Sperindeo (NL, DE, FR) is not actually about gambling. Instead, it concerns the relationship between a European order for payment under Regulation 1896/2006 and the normal rules of jurisdiction under Regulation 44/2001. According to AG Bot, it is all very simple: once you dispute an order for payment, the debt is no longer undisputed, meaning that the normal procedure applies. However, doing so does not count as making an appearance in the normal procedure so as to give a different court jurisdiction under art. 24 of Regulation 44/2001.

AG Sharpston explained that putting photovoltaic cells on someone's house is an economic activity for VAT purposes to the extent that you're using that installation to feed electricity back into the network for consideration. Obviously, this is a good thing rather than a bad thing for the homeowner, because this means that the VAT on the cost of the installation may be recovered. Finanzamt Freistadt Rohrbach Urfahr v. Unabhängiger Finanzsenat Außenstelle Linz

In the General Court, Poland sued over ETS and lost.

Moreover, there were four unsuccessful actions for annulment against the European Chemicals Agency (ECHA) under the REACH Regulation, the first four of their kind to make it to a full judgement, with the only previous case law being orders dismissing cases as inadmissible. In each case, ECHA argued unsuccessfully:

  • that the legal act in question was not intended to produce legal effects vis-à-vis third parties, since it was merely an "agreement of the Member State Committee",
  • that the act was not of direct concern to the applicants, (cf. the orders in Borax Europe v. ECHA and Etimine v. ECHA from 2011), and
  • that the act did not fall in the category of "a regulatory act which does not entail implementing measures" under art. 263(4) TFEU.

On substance, however, the applicants lost each time. The judgements, by the Judge who will presumably be the REACH-judge from now on, Judge Dittrich, are: Rütgers et al. v. ECHA, Cindu Chemicals et al. v. ECHA, again Rütgers et al. v. ECHA, and Bilbaína de Alquitranes et al. v. ECHA