Concurrences Revue des droits de la concurrence Competition Law Journal

New frontiers of antitrust Paris, 21 février 2014

Colloque l Concurrences N° 2-2014 www.concurrences.com

Nathalie Homobono I Directrice générale, DGCCRF, Paris Frédéric Jenny I Président, Comité concurrence, OCDE I Président, Comité international Concurrences I Professeur d’économie, Co-Directeur CEDE, ESSEC Joaquín Almunia I Vice-Président de la Commission européenne, en charge des affaires de concurrence Laurence Idot I Professeur, Université Paris II Panthéon-Assas, Membre, Autorité de la concurrence, Paris, Présidente, Comité scientifique Revue Concurrences Bill Kovacic I Professeur, George Washington Law School, Washington DC Chris Fonteijn I Président, Netherlands Authority for Consumers and Markets, La Haye Ali Nikpay I Avocat associé, Gibson Dunn, Londres Joshua Wright I Commissaire, Federal Trade Commission, Washington DC Thomas Graf I Avocat associé, Cleary Gottlieb Steen & Hamilton, Bruxelles Bruno Lasserre I Président, Autorité de la concurrence, Paris Peter Freeman I Président, Competition Appeal Tribunal, Londres Andreas Mundt I Président, Bundeskartellamt, Bonn Wouter Wils I Conseiller auditeur, Commission européenne, Bruxelles I Professeur associé, King’s College, Londres Mélanie Thill-Tayara I Avocate associée, Norton Rose Fulbright, Paris Howard A. Shelanski I Office of Information and Regulatory Affairs, Maison blanche, Washington DC Alexander Italianer I Directeur général, DG Concurrence, Bruxelles Matthew Readings I Avocat associé, Shearman & Sterling, Londres Anne Perrot I Économiste, MAPP Benoît Hamon I Ministre délégué à l’Économie sociale et solidaire Colloque

PARIS 21 février 2014 Demain la concurrence 8.30 - 19.00 Ministère de l’économie et des finances 139 rue de Bercy, Paris | M° Bercy Présentation Nathalie Homobono I Directrice générale, DGCCRF, Paris Frédéric Jenny I Président, Comité concurrence, OCDE I Président, Comité international Concurrences I Professeur d’économie, Co-Directeur CEDE, ESSEC

État de l’Union : L’antitrust en Europe en 2013-2014 Joaquín Almunia I Vice-Président de la Commission européenne, en charge des affaires de concurrence

Détection des pratiques anticoncurrentielles : Faut-il réformer les outils existants ou introduire de nouveaux outils ? Clémence, observation des marchés, récompenses financières… Laurence Idot I Professeur, Université Paris II Panthéon-Assas, Membre, Autorité de la concurrence, Paris, Présidente, Comité scientifique Revue Concurrences Bill Kovacic I Professeur, George Washington Law School, Washington DC Chris Fonteijn I Président, Netherlands Authority for Consumers and Markets, La Haye Cristina Caffarra I Vice-Président, Charles River Associates, Bruxelles – Londres Ali Nikpay I Avocat associé, Gibson Dunn, Londres

Brevets : Les autorités de concurrence sont-elles en mesure de corriger les dysfonctionnements du système ? Frédéric Jenny I Président, Comité concurrence, OCDE I Professeur d’économie, ESSEC Joshua Wright I Commissaire, Federal Trade Commission, Washington DC Hans W. Friederiszick I Directeur, ECA Economics, Berlin Thomas Graf I Avocat associé, Cleary Gottlieb Steen & Hamilton, Bruxelles

Règlement 1/2003 et Réseau européen de concurrence 10 ans après : Faut-il étendre la coopération au contrôle des concentrations et à l’advocacy ? Bruno Lasserre I Président, Autorité de la concurrence, Paris Peter Freeman I Président, Competition Appeal Tribunal, Londres Andreas Mundt I Président, Bundeskartellamt, Bonn Wouter Wils I Conseiller auditeur, Commission européenne, Bruxelles I Professeur associé, King’s College, Londres Mélanie Thill-Tayara I Avocate associée, Norton Rose Fulbright, Paris

Restructuration des entreprises en période de crise : Quel rôle pour le contrôle des concentations ? Mario Monti I Président, Sénateur, Rome Howard A. Shelanski I Office of Information and Regulatory Affairs, Maison blanche, Washington DC Alexander Italianer I Directeur général, DG Concurrence, Bruxelles Matthew Readings I Avocat associé, Shearman & Sterling, Londres Anne Perrot I Économiste, MAPP

L’action de groupe à la française comme outil de dissuasion et de répression des pratiques a nticoncurrentielles Benoît Hamon I Ministre délégué à l’Économie sociale et solidaire

Concurrences N° 2-2014 I Colloque 35 Demain la concurrence New frontiers of antitrust @ Colloque Paris, 21 février 2014

Frédéric Jenny [email protected] Président, Comité de la concurrence, OCDE Président, Comité international Concurrence Professeur d’économie et codirecteur, CEDE, ESSEC

This year’s New Frontiers of Antitrust Conference is for the most part devoted to the question of whether the tools of competition law enforcement need to be complemented, sharpened, upgraded, or even blunted.

After the now traditional “State of the Union”, presented by Vice President Almunia, the first roundtable discusses whether there is a need to develop new tools such as, for example, “economic screens” to detect anti-competitive horizontal practices or whether traditional instruments, such as leniency programs, are sufficient. The second roundtable discusses whether competition law enforcement is an adequate tool to fix a broken intellectual property system which is more and more frequently used strategically by patent applicants or patent holders to restrict or distort competition. The third roundtable addresses the question of whether new tools are required to avoid possible contradictory outcomes in the review of mergers which fall below European merger control thresholds but are reviewable in several Member States. In the fourth roundtable, there is a debate about whether merger control should be loosened in times of economic crisis.

Finally, Minister Benoît Hamon introduces “class action, French-style”, a new tool recently adopted in our country to reinforce the fight against anticompetitive practices as well as to compensate victims more efficiently and better.

Concurrences N° 2-2014 I Colloque 1 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust @ Colloque Paris, 21 février 2014

Nathalie Homobono [email protected] Allocution d’ouverture Directrice générale, DGCCRF, Paris

Abstract C’est avec un réel plaisir et une grande fierté que j’ouvre ce matin la ème5 Conférence New frontiers of antitrust. Par cette allocution introductive, Nathalie Homobono, Directrice générale de la DGCCRF ouvre la cinquième 1. Depuis 2009, Nicolas Charbit, Laurence Idot et le président Frédéric Jenny, édition de la conférence « Demain la concurrence » qui coresponsables de la revue Concurrences, organisent avec le succès que vous savez ce s’est déroulée le 21 février 2014 au Ministère de l’Economie à Bercy. Elle présente les différents personnalités réunies pour rendez-vous à dimension internationale autour de la concurrence. l’événement et les différents thèmes abordés lors de la journée. 2. Cette conférence permet de rassembler la grande famille des spécialistes et des experts de la concurrence venus de toute l’Europe mais aussi d’outre-Atlantique.

By this introductory speech, Nathalie Homobono, 3. Je me réjouis ainsi de la présence de deux personnalités américaines du monde de Managing director of the DGCCRF presents the fifth edition la concurrence, M. Howard Shelanski, conseiller pour l’antitrust à la Maison-Blanche of the “New Frontiers of Antitrust” conference that was held in the French Ministry of Economics in Paris, et le professeur Joshua Wright, commissaire à la Federal Trade Commission. Je salue the 21th February 2014. She introduces the differents également la présence de nombreuses personnalités du monde de la concurrence personnalities assembled for the occasion and the various en Europe : M. Joaquin Almunia, vice-président de la Commission européenne et topics covered by the event. commissaire en charge de la politique de concurrence, M. Mario Monti, sénateur, ancien commissaire en charge de la politique de concurrence, M. Peter Freeman, président de la Competition Commission, M. Andreas Mundt, président du Bundeskartellamt, M. Chris Fonteijn, président de la Netherlands Authority for Consumers and Markets, et M. Alexander Italianer, directeur général de la DG Concurrence.

4. Je suis particulièrement heureuse de vous accueillir tous ici au centre Pierre- Mendès-France dans l’enceinte du ministère de l’Économie, pour parler de concurrence. La politique de concurrence, qui est un outil au service de la compétitivité, est une composante importante de la politique économique et notre présence ici à Bercy le manifeste avec force.

5. Pierre Mendès France, grand inspirateur de la vie politique française, a œuvré à une époque marquée par la montée en puissance des travaux sur la politique de la concurrence et sur la lutte contre les cartels des industries du charbon et de l’acier. Ces travaux ont conduit à l’adoption du traité CECA en 1951 et du traité de Rome en 1957.

6. C’est le rôle crucial de la politique de la concurrence – dans la vision positive de la construction européenne – que nous devons avoir en mémoire aujourd’hui.

7. L’intitulé de cette conférence (“New frontiers of antitrust”) nous invite à aller toujours plus loin dans notre réflexion. La politique de concurrence est en effet porteuse de progrès et elle peut et doit contribuer à l’achèvement du marché intérieur européen.

8. Ces propos me permettent de me tourner naturellement vers le commissaire en charge de la concurrence, M. Joaquin Almunia, que je salue tout particulièrement et que je remercie de nous faire l’honneur de sa fidèle présence depuis cinq ans. Nous sommes tous impatients de l’entendre.

9. Il nous dressera le bilan de l’activité récente de la Commission européenne en matière d’antitrust et nous dira comment la politique de la concurrence participe à la relance économique en cette période de crise et comment elle permet de contribuer, à côté des autres politiques de l’Union, à retrouver une croissance durable, créatrice d’emplois et source d’innovation.

Concurrences N° 2-2014 I Colloque 2 New frontiers of antitrust I Paris, 21 février 2014 10. Nous connaissons ses convictions fortes en la matière : la politique de la concurrence, en lien avec une politique industrielle moderne, joue un rôle essentiel : elle permet de créer des opportunités pour que de nouvelles entreprises entrent sur le marché, pour que les autres innovent ou se renouvellent et que celles qui sont en difficulté puissent se transformer.

11. Ce sujet des entreprises en difficulté du fait de la crise sera traité dans la deuxième partie de cette conférence sous l’angle d’un des volets majeurs de la politique de la concurrence, à savoir le contrôle des concentrations, et du rôle que ce contrôle peut jouer dans la restructuration des entreprises.

12. Vous aborderez également d’autres sujets essentiels et passionnants : vous vous interrogerez sur la pertinence et l’efficacité des instruments de détection des pratiques anticoncurrentielles, et vous vous intéresserez aux problématiques relatives aux brevets et aux dysfonctionnements auxquels leur usage peut conduire.

13. Cet après-midi, vous vous demanderez si la manière dont chacun des États membres exerce son contrôle des concentrations est efficace ou s’il ne faudrait pas envisager un cadre plus harmonisé.

14. Le dernier thème de cette journée très riche sera celui de l’action de groupe que viendra nous présenter M. Benoît Hamon, ministre délégué chargé de la consommation.

15. Ce dernier thème a très largement mobilisé les équipes de la DGCCRF et je crois que nous pouvons nous féliciter de l’adoption toute récente de cette loi sur la consommation, qui introduit en droit français une procédure d’action de groupe pour les consommateurs victimes de litiges de consommation et les victimes de préjudices causés par des pratiques anticoncurrentielles.

16. Cette nouvelle procédure française fait écho à la recommandation européenne sur les actions de groupe, et au projet de directive que vous avez présenté en juin dernier, M. le commissaire. Cette initiative européenne, actuellement en phase de trilogue, pourrait être votée définitivement dans les mois qui viennent.

17. Ainsi, sur le front de l’action privée (le private enforcement), la politique de concurrence a bien progressé en 2013. C’est une satisfaction d’autant plus grande que cette question a été, vous le savez, un long sujet de débat depuis plusieurs années.

Mais laissons là les satisfécits et cédons la place à la disputatio.

Je vous souhaite des débats fructueux et animés…

Et vous remercie pour votre attention. n

Concurrences N° 2-2014 I Colloque 3 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust @ Colloque Paris, 21 février 2014

Joaquín Almunia [email protected] État de l’Union : L’antitrust Vice-president et commissaire à la Concurrence, Commission europeenne, Bruxelles en Europe en 2013-2014

Concurrence et croissance pour l’après-crise

Abstract 1. C’est un grand plaisir d’être de nouveau parmi vous à Paris, et ce, pour la cinquième fois. Je n’ai pas voulu manquer un seul de ces rendez-vous annuels depuis que je suis devenu commissaire en charge de la concurrence – c’est en fait ici que Dans son discours d’ouverture de la conférence “Demain la concurrence 2014” (Paris, 21 février 2014), Joaquín Almunia, j’ai donné en 2010 mon premier discours comme responsable dans ce domaine – et le Commissaire en charge de la politique de concurrence je tiens à remercier MM. Frédéric Jenny et Nicolas Charbit de m’avoir invité de rappelle l’importance de cette politique dans le contexte nouveau cette année. de l’après crise économque. Il décrit égalemet les actions de la Commission dans les secteurs-clés. 3. Avec la perspective de quatre années dans cette fonction, plutôt que de faire le point sur des affaires spécifiques et sur notre activité au quotidien, j’aimerais aujourd’hui aborder avec vous le thème plus général mais fondamental du lien entre In his keynote speech delivered at the “New Frontiers of concurrence et croissance. Antitrust 2014” conference in Paris, the 21th February 2014, Joaquín Almunia, Commissioner responsible for Competition 4. La politique de concurrence, dans toutes ses facettes, est non seulement un pilier Policy, reminds the importance of the Competition policy in the context of the « after » economic crisis. He describes in du marché intérieur, mais également un instrument indispensable pour améliorer details the European Commission’s actions in the key-sectors. la productivité de nos entreprises, encourager l’innovation, et ainsi relancer la croissance en Europe.

5. Malheureusement, il y a encore certaines voix qui ne partagent pas cette conviction ; on entretient parfois certains malentendus à propos de notre action, soit en la taxant d’“ultralibérale”, soit en la présentant comme contraire à l’intérêt de nos entreprises et à leur compétitivité dans l’économie mondiale.

6. Or, la politique de concurrence n’est pas une politique de laissez-faire, ni une politique défensive. C’est même tout le contraire : il s’agit d’une politique d’intervention de l’autorité publique pour corriger les dysfonctionnements du marché. Ce sont les responsables de la concurrence qui en ont l’initiative.

7. Plus de cinq ans après le début de la crise financière, on note une perte de confiance de la part des citoyens européens dans la capacité de l’économie de marché à satisfaire leurs besoins et à leur offrir des opportunités.

8. C’est une raison importante pour laquelle nous devons mobiliser toutes les politiques publiques pour renforcer et améliorer la stratégie de croissance et plus en particulier le fonctionnement du marché intérieur. La politique de concurrence en fait partie intégrante.

9. La politique de concurrence permet en effet de garantir que le marché fonctionne au bénéfice de l’ensemble de la société, et non au profit de quelques-uns. Elle oriente l’économie de marché, non pas vers l’exploitation de rentes, mais vers la productivité, l’investissement et l’innovation afin de répondre au mieux à la demande des consommateurs.

10. Il s’agit aussi d’une politique d’inclusion : elle a précisément pour but d’éviter l’exclusion d’acteurs plus petits ou nouveaux sur le marché. Elle vise à ce que toute entreprise puisse défier les positions établies selon ses propres mérites, dans l’intérêt collectif.

Concurrences N° 2-2014 I Colloque 4 New frontiers of antitrust I Paris, 21 février 2014 11. Durant cette période de crise profonde, on entend certaines 19. Ma préoccupation première est l’impact social de la crise. opinions en faveur de la remise en question de la politique de Le niveau de chômage reste à un niveau historiquement la concurrence. Les arguments employés ne s’adressent pas élevé dans l’UE avec 26 millions de chômeurs. Les jeunes et seulement aux aspects purement économiques, mais ils se d’autres groupes défavorisés sont particulièrement touchés, mêlent souvent avec d’autres critiques qui visent directement et la proportion de personnes menacées de pauvreté atteint le fonctionnement de nos institutions démocratiques, aussi désormais 25 % dans l’UE. Cela s’accompagne d’un bien au niveau national qu’européen. chômage structurel, inacceptable socialement et insoutenable économiquement, qui hypothèque le potentiel de croissance 12. Les tentations protectionnistes demeurent fortes chez de l’Europe. certains et les discours populistes sont fréquents. L’ensemble du projet européen, et pas seulement la politique de 20. Le malaise est fort. Nous devons offrir des perspectives concurrence, est visé. Le cadre national est parfois présenté et redonner confiance à nos concitoyens dans la capacité de comme un abri rassurant face à la crise. Cette tentation du l’Europe à rebondir. Cela est le message à passer aux élections repli est fondée, bien entendu, sur les menaces ressenties européennes qui se tiendront au printemps. Elles seront peut- ou imaginées venant de pays tiers, qui ne se plient pas aux être les plus décisives de notre histoire commune. mêmes normes environnementales ou sociales. 21. Les responsables publics et les institutions démocratiques 13. De plus, des obstacles persistent pour parachever le doivent redoubler d’efforts. Nous devons continuer à œuvrer, marché intérieur, notamment dans des secteurs clés comme à tous les niveaux – européen, national et local –, pour l’énergie, le numérique, les services ou les télécommunications. favoriser les conditions d’une croissance durable et créatrice Dans ce cas-là, les obstacles ne sont malheureusement pas d’emplois. virtuels, mais réels. 22. Dans ce contexte, le marché unique représente un atout 14. Soyons clairs. Je partage complètement les inquiétudes essentiel avec ses 500 millions de consommateurs. Nous ne concernant les conséquences de la désindustrialisation de pouvons nous permettre de faire marche arrière. Céder aux l’Europe, de la perte de compétitivité de nos entreprises vis- pressions protectionnistes serait vain et dangereux. à-vis de certains de nos partenaires non européens ou de l’inefficacité des marchés financiers. 23. Un marché unique suppose des règles communes, y compris en matière de concurrence et d’aides publiques. 15. Il faut s’attaquer vigoureusement à ces problèmes. Nous L’absence d’un tel cadre commun aboutirait au règne travaillons beaucoup à la Commission pour les surmonter. du “chacun pour soi” et à une course aux entraves et aux Mais il est clair que le protectionnisme ou le laxisme en matière subventions ruineuses. de concurrence sont des recettes obsolètes. L’expérience nous a montré que cela n’est pas seulement inefficace mais aussi 24. La réalisation d’un véritable marché unique exige, bien nuisible. entendu, avant tout une action législative pour supprimer les barrières réglementaires nationales et parvenir à une 16. Dans le contexte d’une économie mondiale toujours plus intégration économique en Europe. intégrée, il nous faut au contraire des réponses modernes en nous appuyant d’abord sur notre immense marché intérieur, 25. Mais l’expérience montre aussi que, malgré les efforts notre principal atout face aux difficultés économiques législatifs entrepris depuis les années 1980, de nombreux actuelles. obstacles demeurent dans certains marchés et que la politique de concurrence y est d’autant plus indispensable. 17. Il nous faut une approche dynamique et offensive, et non pas défensive, pour fonder les bases d’une croissance solide et durable dont la concurrence est l’un des ingrédients 2. Secteurs à fort potentiel indispensables. 26. Je pense en particulier aux secteurs dans lesquels la fragmentation en Europe et la subsistance de barrières I. Dans quel contexte nationales entravent le potentiel de croissance et notre sommes‑nous aujourd’hui ? compétitivité. 27. Les télécommunications sont par exemple l’un des 1. Situation secteurs dans lesquels le potentiel de croissance est en théorie très élevé. Or, les marchés des télécommunications en 18. Cinq ans après le début de la crise, nous voyons finalement Europe demeurent substantiellement fragmentés le long des quelques signes perceptibles de reprise dans les économies de frontières nationales, soumis à des règles nationales, contrôlés l’Union. Ces signes encourageants nous montrent que les par des régulateurs nationaux et l’allocation des fréquences efforts développés par de nombreux États membres pour se fait encore à l’échelon national. Chaque fois qu’un cas de réduire leurs déséquilibres macroéconomiques, conduire des fusion m’est soumis dans ce secteur, je dois malheureusement réformes structurelles ambitieuses et améliorer les conditions constater cette évidence et garder à l’esprit cette spécificité. de marché portent graduellement leurs fruits. Pourtant, la vigilance reste de mise.

Concurrences N° 2-2014 I Colloque 5 New frontiers of antitrust I Paris, 21 février 2014 28. Des efforts importants devront être entrepris pour 36. L’expérience montre que le bon fonctionnement construire un véritable marché unique des télécommunications des marchés qu’elle vise à établir est indispensable à où les opérateurs pourraient offrir leurs services à travers l’investissement en Europe et évite la désindustrialisation. toute l’UE, et ainsi accroître leur potentiel. 37. Certes, dans un marché véritablement concurrentiel, 29. Le commerce en ligne demeure lui aussi moins développé certaines entreprises peuvent disparaître, mais beaucoup en Europe que sur d’autres continents. Il n’est pas logique d’autres, plus efficaces et innovantes, peuvent ainsi s’établir, qu’au xxie siècle, les opérations transfrontalières au sein de se développer et créer de nouvelles activités et des emplois, l’UE soient encore freinées par l’inadaptation des systèmes renforçant ainsi la croissance et la compétitivité. de paiement sur internet ou la persistance de barrières liées aux systèmes nationaux de droits d’auteurs. 38. Il est évident que ce processus doit être accompagné de politiques sociales et de l’emploi adaptées, avec des systèmes 30. Un autre secteur stratégique dans lequel des frontières d’éducation et de formation performants. Ces politiques nationales persistent et où un véritable marché paneuropéen doivent faciliter la mobilité des travailleurs, améliorer leur contribuerait à la croissance est celui de l’énergie. employabilité tout en leur offrant une réelle protection en cas Malheureusement, ici aussi on est encore très loin d’un vrai de chômage. marché intérieur de l’énergie. Les consommateurs classent les marchés de l’électricité et du gaz dans la catégorie de 39. Nous avons aussi besoin d’un système financier efficace en ceux qui fonctionnent le moins bien en termes de choix, de mesure de mobiliser les fonds nécessaires pour de nouveaux comparabilité, de possibilités de changement de fournisseur projets d’investissements productifs et dans l’innovation. et de prix. Mais je ne vais pas ici développer mes idées là-dessus. Je reviens, donc, à la politique de concurrence. 31. Alors que la libéralisation a assuré une concurrence accrue sur les marchés en amont, la combinaison de facteurs nationaux tels que le choix des sources d’énergie primaire – qui d’après le traité appartient à la compétence exclusive II. Actions des États membres –, les coûts d’utilisation des réseaux ou les 40. Pour illustrer comment la politique de la concurrence diverses taxes et les impôts ont conduit à des prix nationaux contribue aux objectifs de croissance et de compétitivité, très différents et, dans beaucoup de cas, très élevés sur les permettez-moi un examen rapide de chacun des trois types marchés de détail, avec des effets négatifs sur la compétitivité d’interventions sur lesquels se fonde cette politique. de nos entreprises et le pouvoir d’achat des ménages.

32. Une véritable intégration européenne signifierait plus d’interconnexions et des investissements accrus, tout en 1. Aides d’État concevant l’impératif de la sécurité d’approvisionnement Je commencerai par le domaine des aides d’État. dans un cadre européen plutôt que national. 41. L’objectif de cette politique est clair. L’utilisation des aides publiques se révèle un atout lorsque celles-ci sont bien 3. Rôle de la concurrence ciblées, bien calibrées. 33. Bien entendu, dans ces secteurs clés comme dans d’autres, la politique de concurrence contribue à la réalisation du 42. Les pays européens doivent être encouragés à concevoir marché intérieur, car elle a pour objectif fondamental de bonnes mesures d’aides qui remédient aux défaillances du l’ouverture des marchés. marché, qui ne constituent pas une simple aubaine pour les entreprises, mais ont un réel effet incitatif, et ne créent pas de 34. Un véritable marché intérieur, combiné à une concurrence distorsion de concurrence. Nous devons tirer le meilleur parti effective, fait partie de l’équation économique gagnante pour de l’intervention publique. l’Europe. 43. Dans ces cas-là, beaucoup plus nombreux que certaines 35. La concurrence est essentielle à la croissance, car elle opinions le suggèrent, la Commission n’entrave pas l’action pousse à l’amélioration des gains de productivité, et ce, de des États membres. De fait, beaucoup de mesures d’aides trois manières : sont au-dessous de la règle de minimis ou exemptées de notification préalable et 95 % des mesures d’aides que nous g d’une part, elle stimule les entreprises à être plus examinons à Bruxelles sont autorisées. performantes pour garder une longueur d’avance sur leurs concurrents ; 44. Le chantier de la modernisation des aides d’État que j’ai lancé en mai 2012 consiste en une réforme en profondeur de g d’autre part, la concurrence permet aux entreprises les l’ensemble des règles et procédures, en vue de mieux aligner le plus efficaces dans un secteur de remplacer celles qui ne le contrôle des aides avec les grands objectifs de notre stratégie sont pas ; de croissance “Europe 2020”. g enfin, la concurrence pousse les entreprises à investir et à innover.

Concurrences N° 2-2014 I Colloque 6 New frontiers of antitrust I Paris, 21 février 2014 45. En même temps, dans une période marquée par rien n’indique que le niveau d’aides publiques en Europe est l’assainissement des finances publiques, cette réforme vise inférieur à celui qui existe chez nos partenaires commerciaux. à aider les États membres à mieux utiliser les ressources disponibles et à choisir les moyens les plus efficaces pour 53. Nos règles n’empêchent pas d’agir : elles orientent les soutenir la recherche et l’innovation, l’emploi, l’accès au aides publiques vers les bonnes priorités, conformément à financement des entreprises qui en ont besoin et la protection l’intérêt général européen. de l’environnement.

46. Nous venons ainsi d’adopter les lignes directrices pour 2. Fusions aider les États membres à promouvoir l’accès au capital-risque pour les PME et les entreprises innovantes, qui faciliteront 54. Je voudrais poursuivre mon propos avec le contrôle des l’octroi de ce type d’aides, ainsi que les lignes directrices concentrations. Là aussi, notre objectif est bien de préserver concernant le secteur de l’aviation. Nous travaillons aussi sur l’existence de marchés ouverts et concurrentiels en Europe. les nouvelles règles concernant l’environnement et l’énergie Je crois que le temps où cette politique était décrite comme ainsi que sur l’encadrement des aides pour la recherche et le empêchant l’émergence de champions européens est révolu. développement. Après les réformes introduites il y a plus de dix ans, ces arguments n’ont plus de justification. 47. En revanche, il faut éviter le gaspillage. En utilisant les instruments de la politique d’aides d’État, on doit décourager 55. La Commission n’interdit que peu d’opérations – quatre la mauvaise utilisation de l’argent des contribuables : je ces cinq dernières années sur les 1 750 transactions qui ont pense aux subventions qui évincent l’investissement privé, été notifiées –, et 5 % des transactions autorisées ont fait qui financent des projets qui auraient été menés de toute l’objet de conditions de cession pour remédier aux problèmes façon, sans argent public, par les entreprises bénéficiaires, ou de concurrence qui étaient identifiés sur certains marchés. à celles permettant à des entreprises inefficaces et non viables Les 95 % restants ont été autorisés sans modifications. de se maintenir artificiellement sur le marché au détriment de leurs concurrents. Cela retarde les ajustements nécessaires 56. Au travers de ce contrôle, nous nous assurons que la pour que l’économie européenne retrouve le chemin de la consolidation dans un secteur n’aboutit pas à des structures croissance. de marché dans lesquelles une ou plusieurs entreprises auraient un pouvoir excessif leur permettant d’augmenter les 48. L’un des volets de la modernisation en cours vise aussi à prix. Ce ne serait dans l’intérêt ni des entreprises clientes, ni concentrer notre contrôle sur les aides qui ont le plus d’impact des consommateurs, et serait à terme néfaste à la croissance. sur le marché intérieur. Nous allons donc simplifier la vie des Les bonnes opérations sont celles qui permettent la naissance administrations publiques : ainsi, avec le nouveau règlement d’un nouvel acteur plus efficace et plus innovant sur le général d’exemption par catégorie en préparation, nous marché, mais qui demeure soumis à la concurrence de ses allons porter les aides exemptées de notification d’environ un rivaux. tiers du total des montants d’aides accordées à environ deux tiers. 57. Bien entendu, nos appréciations dépendent de nombreux facteurs, et notamment des gains d’efficacité et de la réalité 49. Bien entendu, cela suppose que les États membres eux- du marché dans lequel les entreprises opèrent. À cet égard, mêmes respectent mieux les règles. Nous veillerons à ce que la subsistance de la fragmentation nationale de certains cela reste le cas. Le traité a confié à la Commission, dès le marchés que je regrettais tout à l’heure a un impact sur notre début de l’intégration européenne, la compétence exclusive évaluation de ces opérations. du contrôle des aides d’État. Donc, nous ne pouvons nous permettre de baisser la garde, car pour préserver l’intégrité du marché intérieur, il faut un arbitre indépendant des États 58. Dans le secteur des télécommunications, nous sommes en membres qui accordent les aides. train d’examiner deux transactions :

50. Un mot, enfin, sur le rapport entre les aides d’État et g l’une en Irlande : l’acquisition de O2 Ireland par le commerce extérieur. Les appels au relâchement de nos Hutchison ; règles au nom de la mondialisation traduisent une certaine naïveté. Le commerce entre pays européens n’est pas du tout g l’autre en Allemagne : l’acquisition de E-Plus – l’activité négligeable : les chiffres disent l’inverse ! de KPN en Allemagne – par Telefónica.

51. Flexibiliser le contrôle des aides publiques dans 59. Dans les deux cas, il s’agit d’opérateurs actifs dans l’UE aurait des conséquences très négatives. Et ce serait beaucoup d’États membres et dans d’autres pays au- particulièrement le cas dans une période où les marges delà de nos frontières, mais qui, dans les cas d’espèce, de manœuvre budgétaires sont très différentes d’un État opèrent respectivement sur le même marché national, où membre à l’autre. malheureusement des barrières à l’entrée significatives existent. 52. Le contrôle des aides d’État n’existe évidemment nulle part ailleurs dans le monde, puisqu’il n’existe aucun autre marché unique formé par vingt-huit États membres, mais

Concurrences N° 2-2014 I Colloque 7 New frontiers of antitrust I Paris, 21 février 2014 3. Antitrust et cartels 69. Le fait qu’une entreprise obtienne une position dominante par une croissance interne n’est pas répréhensible 60. Enfin, last“ but not least”, reste la contribution à la en soi, c’est même au contraire cette capacité d’investir et croissance et la compétitivité de notre travail en matière de d’innover des entreprises qui est l’un des moteurs de notre politique antitrust. croissance économique.

61. Les entreprises qui forment des cartels heurtent de front 70. Ce que nous poursuivons, il faut bien le répéter, ce n’est nos objectifs et nos principes. pas la dimension en tant que telle ni le succès, mais les abus de position dominante. Les comportements de ce type ont un 62. À chaque fois que nous démantelons un cartel ou impact sur la croissance, car ils font obstacle à l’apparition que nous empêchons d’en former par l’effet dissuasif des de nouveaux acteurs ou à l’expansion de concurrents parfois amendes, nous œuvrons pour une économie plus dynamique plus innovants et efficaces. et compétitive. C’est pourquoi la lutte contre les cartels est et restera une priorité de notre action. 71. Le cas qui me vient immédiatement à l’esprit pour expliquer la distinction entre position dominante et abus de 63. Cela dit, la Commission ne considère pas que toutes les cette position concerne notre enquête dans l’affaire Google, formes d’accords entre entreprises soient répréhensibles ; dans laquelle nous avons identifié quatre types de problèmes, certains accords peuvent même être bénéfiques à la et notamment le traitement préférentiel par Google de ses compétitivité. La coopération entre concurrents dans services de recherche spécialisée – par exemple, pour l’achat le domaine de la recherche et du développement peut en ligne ou la localisation de restaurants. par exemple leur permettre de mener des recherches 72. L’un des principaux objectifs de mon action dans cette fondamentales coûteuses avec de fortes retombées positives affaire est de parvenir à ce que, dans un avenir très proche, et des effets induits sur la croissance. les entreprises rivales développant des services concurrents puissent être visibles de manière comparable sans pour autant 64. De même, les accords verticaux conclus entre entreprises empêcher Google d’innover et de développer de nouveaux exerçant des activités à différents stades du processus de services. production peuvent renforcer leur efficacité et ne posent de problème de concurrence que dans des circonstances 73. C’est pourquoi, après des négociations difficiles et deux spécifiques. L’une d’entre elles est bien entendu l’existence séries de propositions successives depuis avril 2013 qui se sont de restrictions territoriales absolues. Ce type d’accord révélées insuffisantes, j’ai obtenu de Google des propositions entraîne des différences de prix artificielles entre des marchés d’engagements, sans précédent ailleurs dans le monde, qui nationaux cloisonnés, ce qui va à l’encontre de l’objectif me paraissent capables de résoudre ce problème pour les même d’un marché unique intégré. services actuels et à venir. Maintenant nous avançons, donc, à la prochaine phase de la procédure. 65. C’est pourquoi je viens de lancer une enquête sur les accords de licences entre plusieurs grands studios américains 74. Google a maintenant publié ces propositions, ce que et les plus grandes chaînes de télévision payantes en la Commission ne pouvait faire elle-même à ce stade de Europe. Nous allons examiner si ces accords empêchent la procédure. Cette procédure n’est pas terminée et il les radiodiffuseurs de fournir leurs services au-delà des appartiendra à la Commission de prendre, dans les mois frontières, malgré les développements technologiques qui viennent, une décision finale pour que ces propositions permettant aux citoyens de se connecter facilement où qu’ils deviennent des engagements légalement contraignants. soient en Europe. 75. Où en sommes-nous dans le processus ? Laissez-moi 66. Pour passer au secteur financier, nos enquêtes révèlent un vous rappeler que, depuis 2010, nous avons déjà consulté certain nombre de pratiques commerciales irresponsables. En les acteurs du marché de manière très approfondie pour décembre dernier, sept banques internationales et un courtier identifier les problèmes de concurrence soulevés par les ont reçu des amendes pour un montant total de 1,7 Md € pratiques de Google. Cette phase d’enquête initiale a été très pour la création de cartels sur les marchés des dérivés de taux large et exhaustive. d’intérêt. Cela fait partie de la réponse de la Commission européenne à ce que la presse appelle le “scandale du Libor”. 76. En ce qui concerne les propositions successives de Google, nous avons également obtenu des commentaires détaillés du 67. Des pratiques similaires ont été portées récemment à marché par deux fois. Nous avons à ce titre reçu et analysé, notre attention dans le marché des changes et nous veillerons à chaque fois, plus d’une centaine de contributions. C’est sur à faire toute la lumière sur ces pratiques avec la même énergie. la base de ces nombreuses consultations que j’ai pris position Car pour soutenir la reprise fragile que nous observons, nous pour considérer les propositions de Google comme étant avons besoin d’un autre type de secteur financier : plus sûr, capables de résoudre les problèmes de concurrence que nous plus transparent et plus axé sur le financement de l’économie avions identifiés. Mais cela n’est pas la fin de notre affaire. réelle. 77. Avant qu’une décision finale ne soit prise, nous enverrons 68. Notre action dans le domaine de l’antitrust vise, enfin, la des lettres motivées à chacun des dix-huit plaignants formels lutte contre les abus de position dominante. pour leur exposer les raisons qui nous conduisent à cette

Concurrences N° 2-2014 I Colloque 8 New frontiers of antitrust I Paris, 21 février 2014 position préliminaire. Ces plaignants pourront ainsi profiter 84. Au-delà du droit de la concurrence, d’autres aspects des pleinement du rôle privilégié que leur accorde le droit activités de Google peuvent donner lieu à des inquiétudes. européen par rapport à d’autres tiers. Chacun d’entre eux L’optimisation fiscale, la collecte et l’utilisation de données aura l’occasion d’analyser en détail notre raisonnement et de personnelles, l’utilisation de la propriété intellectuelle des nous faire valoir son point de vue. tiers : voilà autant de sujets qui devront probablement être mis à l’ordre du jour des autorités publiques. Certains le 78. Je crois que, contrairement à certaines opinions, la sont déjà. Mais il ne faut pas se tromper : une investigation procédure est tout à fait transparente et permet de tenir sur la base de l’article 102 du traité autour d’une série de compte des intérêts de tous. Mais il faut que nous prenions problèmes concrets ne peut pas, et ne doit pas, être utilisée position à un stade du processus. Il ne peut y avoir d’allers- pour résoudre toutes sortes de problèmes. retours permanents. 85. À cet égard, je voudrais répondre aux préoccupations de 79. Si, à la fin de ce processus, la Commission décide d’accepter certains éditeurs de presse qui souhaiteraient mieux contrôler les engagements de Google pour les rendre obligatoires, la façon dont leurs articles peuvent être utilisés par Google Google sera pour la première fois dans l’obligation d’assurer dans son service Google News, voire être rémunérés pour à ses concurrents les plus efficaces et innovateurs une place cette diffusion. visible dans ses résultats de recherche, comparable à la place qu’y occupent ses propres services. 86. Je peux tout à fait comprendre les problèmes générés par l’utilisation dans Google News des articles des journaux 80. D’une certaine façon, une décision avec des engagements européens. Mais cette problématique ne peut être résolue contraignants aura des effets similaires à ceux d’une régulation que de manière très partielle par le droit de la concurrence. des activités de Google. Si la décision est finalement adoptée, Les engagements obtenus à cet égard suppriment déjà la Google aura des contraintes très précises à respecter sur ce possibilité pour Google d’utiliser sa position de marché qui est affiché dans une partie de ses résultats de recherche. dans la recherche internet pour obtenir le droit d’utiliser le contenu de tiers dans d’autres services. En d’autres termes, 81. Mais il s’agit d’une régulation qui vise le problème de les éditeurs pourront refuser que leur contenu soit diffusé concurrence identifié, et rien d’autre. En particulier, il n’est dans Google News, sans que cela affecte leur diffusion dans ni envisageable ni souhaitable de réglementer l’algorithme de la recherche générale. Mais le droit de la concurrence ne peut classement de Google lui-même. Avec quels moyens et dans pas tout régir, en particulier la manière dont les différents quel but une autorité de concurrence pourrait-elle mettre en acteurs du marché se répartissent les revenus de la publicité. œuvre un tel projet ? 87. Tous ces éléments méritent d’être considérés avec 82. Je veux par ailleurs répondre aux critiques que j’ai attention, car il est de notre responsabilité de trouver une entendues concernant le système d’enchères prévu dans solution adéquate aux problèmes de concurrence posés, dans ces propositions. Contrairement à ce qui a pu être dit, il ne l’intérêt de tous et non pas de quelques-uns. sera pas toujours nécessaire pour les concurrents de Google de payer pour figurer à ses côtés au sein d’un service de recherche spécialisé. Il n’y aura paiement que lorsque Google III. Conclusion affichera ces liens dans un espace qui est normalement payant pour les sites promus par Google. Ce n’est rien d’autre que 88. Pour conclure, comme je l’évoquais au début de mon la reconnaissance de ce que Google sera contraint de céder intervention, la politique de concurrence et le marché un espace qu’elle aurait normalement vendu à ses propres intérieur sont des atouts qui peuvent nous donner un avantage clients. En revanche, lorsque Google affichera les liens vers compétitif décisif sur nos partenaires internationaux. les concurrents dans un espace de son site qui est gratuit, les concurrents n’auront, eux non plus, rien à payer et 89. Nous avons dans ce domaine des leviers puissants pour seront sélectionnés sur la base des résultats de la recherche soutenir et renforcer la reprise économique. Cela serait une organique. grave erreur de ne pas les utiliser à fond justement au moment où nos concitoyens et les entreprises du continent en ont le 83. J’entends aussi dire que la Commission s’engage dans un plus besoin. C’est pour cela que nous ne relâcherons pas nos “accord à l’amiable” avec Google qui conduirait à une forme efforts. d’abandon des charges ou à une clôture du dossier. Pas du tout. Exiger des engagements et les rendre contraignants, 90. Nous continuerons à mobiliser les différentes politiques et comme la Commission le fait souvent, ne revient pas à instruments européens, dont la politique de concurrence, vers “clôturer” une affaire. Si les engagements étaient acceptés, un même objectif : le retour vers une croissance soutenable et le comportement de Google serait bien au contraire contrôlé créatrice d’emplois. n par la Commission via son mandataire pendant toute la durée des engagements. L’expérience récente de Microsoft montre qu’un manquement à des engagements peut conduire à une sanction aussi lourde que le serait une amende imposée par la Commission au terme d’une procédure contentieuse.

Concurrences N° 2-2014 I Colloque 9 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust @ Colloque Paris, 21 février 2014

Laurence Idot* [email protected] Detection of anticompetitive Professeur, Université Paris II Panthéon-Assas Membre du Collège, Autorité de la concurrence practices: Should existing Présidente, Comité scientifique Revue Concurrence tools be revised or new tools Bill Kovacic [email protected] introduced? Leniency, market Professeur, George Washington Law School, Washington DC surveys, financial reward…

Chris Fonteijn** [email protected] Président, Netherlands Authority for Consumers and Markets, La Haye

Abstract Introduction

La première table-ronde de la conférence “Demain la concurrence” du 21 février 2014 à Paris, était dédiée à la détection des pratiques anticoncurrentielles. Bien que les autorités de concurrence paraissent dotés de Laurence Idot moyens d’investigation importants, auxquels s’ajoutent maintenant les programmes de clémence, les reflexions se Professeur, Université Paris II Panthéon-Assas poursuivent sur la nécessité de disposer de nouveaux outils, Membre, Autorité de la concurrence qui s’insèrent dans une politique de detection , non seulement Présidente, comité scientifique, Revue Concurrence reactive (par ex., systèmes de recompense pour prolonger les programmes de clémence), mais également proactive (recours à l’analyse économique des information’s).

This first roundtable of the conference 1. Le sujet de cette première table ronde peut de prime abord surprendre certains “New frontiers of Antitrust”, Paris, 21 February 2014, d’entre vous. Un premier regard sur l’activité des autorités de concurrence ces was dedicated to the detection of anticompetitive practices. Although competition authorities benefit significant dernières années donne plutôt le sentiment d’une grande efficacité. Nombre élevé de investigative resources, the discussions continue on the need to décisions, montant significatif des amendes infligées…, le système semble de prime dispose of new tools that fit the policy of detection. These tools abord fonctionner. Cette observation est confirmée par les statistiques publiées par must be not only reactive (eg., reward systems for extend la Commission européenne en matière de cartels1 et plus encore, car les pratiques leniency programs), but also proactive (using economic analysis of informations) anticoncurrentielles ne se limitent pas aux cartels, par les positions affirmées dans les rapports annuels des autorités2.

2. Un tel constat n’est pas surprenant. L’on n’a cessé depuis une quinzaine d’années de renforcer l’arsenal de détection des autorités de concurrence. En Europe, l’élément le plus marquant a été l’introduction de la procédure de clémence par la Commission en 1996, puis son perfectionnement et plus encore sa généralisation dans l’ensemble des États membres de l’Union.

De plus, de manière plus générale, chaque nouvelle réforme a conduit à un accroissement des pouvoirs d’investigation des autorités. Cela a été le cas avec le règlement no 1/2003 pour la Commission3, avec les grandes réformes de 2001 et de 2008 en France4. La dernière loi française adoptée la semaine dernière sur les droits des consommateurs en est l’exemple le plus récent puisque le législateur a

1 http://ec.europa.eu/competition/cartels/statistics/statistics.pdf. 2 V., pour les rapports annuels de la Commission européenne : http://ec.europa.eu/competition/publications/annual_report/ * L’auteur s’exprime à titre purement personnel. Le style oral index.html. de l’intervention a été conservé. 3 Règlement no 1/2003, chap. V, “Pouvoirs d’enquêtes”, art. 17 et s.

** Thank you to Siún O’Keeffe, Senior Strategy Advisor, and others at 4 V. les modifications apportées aux art. L. 450-1 et s. C. com. par la loi no 2001-420 du 15 mai 2001 sur les nouvelles régulations ACM for their advice and assistance in the writing of this article. économiques (art. 76 à 81) et la loi no 2008-776 de modernisation de l’économie du 4 août 2008 (art. 97).

Concurrences N° 2-2014 I Colloque 10 New frontiers of antitrust I Paris, 21 février 2014 sensiblement modifié l’article L. 450-3 C. com. en matière efficace que pour certaines configurations de cartels, de même d’enquêtes simples5. L’on pourrait également mentionner qu’elles sont désormais conscientes des risques d’utilisation l’exemple britannique puisque la nouvelle Competition stratégique du mécanisme, de l’existence de biais. and Markets Authority (CMA), qui entrera en fonctions le 1er avril 2014, vient de publier un document sur la manière De plus, au-delà des risques de détournement, dans les États dont elle utilisera ses pouvoirs d’infliger des sanctions en cas plus petits, la clémence ne s’est pas révélée nécessairement de non-respect des demandes de renseignements6. un mécanisme très efficace, pour de multiples raisons essentiellement de nature sociologique14. L’exemple français De plus, indépendamment des enquêtes individuelles, la le confirme d’une certaine manière. Il n’est pas certain que, en Commission européenne, suivie par quelques autorités l’absence du Réseau européen de concurrence, les demandes nationales7, a commencé à exercer un pouvoir qu’elle détenait de clémence auraient été très nombreuses15. depuis 19628, mais qu’elle n’avait pas utilisé : celui de réaliser des enquêtes sectorielles. Le sujet avait semblé suffisamment Enfin est-il besoin de rappeler que les demandes de important pour qu’une table ronde lui soit consacrée lors de clémence sont limitées aux cartels et que les pratiques notre première rencontre de 20109. anticoncurrentielles sont beaucoup plus diversifiées.

3. Pourtant, nous nous retrouvons aujourd’hui pour 6. Deuxième élément, les autorités de concurrence ont pris débattre à nouveau des outils de détection. Pourquoi ? conscience du fait que toute politique de concurrence devait Comment ? Par qui ? En d’autres termes : why, what, who ? avancer sur deux jambes et qu’en matière de détection des Telles sont les trois questions auxquelles il est possible pratiques anticoncurrentielles, il fallait avoir non seulement d’apporter quelques éléments de réponse en introduction à une démarche réactive, mais également une démarche 16 cette table ronde. proactive .

Ce n’est pas nouveau, du moins en Europe. Dès l’origine, les mécanismes de détection ont présenté ces deux faces. I. Pourquoi ? Même si l’on oublie l’ancienne procédure de notification des ententes aux fins d’exemption qui a permis à la Commission 4. Cette réflexion sur les nouveaux outils de détection européenne d’obtenir, sous l’empire du règlement no 17/62, un trouve son origine dans une double prise de conscience de certain nombre d’informations, les plaintes ont toujours joué nombreuses autorités. un rôle non négligeable. Certes, le rôle est variable suivant les pratiques et plus encore suivant les droits applicables. 5. Premier élément, quant à l’utilisation des programmes Mais si l’on prend l’exemple français, l’on constate qu’un de clémence, qui ont été l’innovation majeure des vingt nombre significatif d’affaires intéressantes, en particulier de dernières années, l’on est entré dans une phase de maturité10. pratiques unilatérales, trouvent leur origine dans des saisines Les limites du mécanisme apparaissent. Pour les “grandes” d’entreprises. autorités – autorités américaines11 et européennes12 –, même si les ententes ont donné lieu à des demandes de clémence, L’apparition et le développement des procédures de clémence l’événement déclencheur a été notamment le scandale dit ont fait quelque peu oublier le volet proactif. Pourtant, celui- 13 “du Libor”, et ses différents épisodes . Les autorités de ci a connu un nouveau développement avec l’utilisation des concurrence ont pu observer que la clémence n’était vraiment enquêtes sectorielles, ou études de marché.

5 Le projet de loi sur la consommation a été déposé à l’Assemblée nationale le 2 mai 2013, no 1015. La loi a été adoptée le 13 février 2014. Elle a été déférée au Conseil constitutionnel et promulguée postérieurement à la conference. V. loi n° 2014-344 du 17 mars 2014 relative à la consommation, JORF, 18 mars 2014. II. Comment ? 6 CMA, Administrative Penalties: Statement of Policy on the CMA’s Approach, CMA 4, Janv. 2014. 7. L’objectif de ce matin n’est pas de revenir sur la coopération internationale entre autorités de concurrence, 7 Au Royaume-Uni, le pouvoir de réaliser des market investigations a toujours été l’une des 17 caractéristiques de la Competition Commission. En revanche, en France, le procédé est qui est bien sûr fondamentale et ne cesse de se développer , plus récent, puisqu’il n’a été introduit qu’avec l’Autorité de la concurrence, qui se saisit mais d’envisager les outils en eux-mêmes. Si l’on part de l’idée d’office pour avis. Neuf enquêtes sectorielles ont été réalisées sur cette base. 8 Les enquêtes sectorielles étaient, en effet, prévues à l’art. 12 du règlement no 17/62 (JOCE 14 V. par ex., pour Israël, l’intéressante présentation faite par D. Gilo, à la session de l’OCDE no 13, 21 févr. 1962). d’octobre 2013, Ex-Officio Cartel Investigations and the Use of Screens to Detect Cartels, “Leniency v. Non-leniency based Investigations”, disponible sur le site de l’OCDE. 9 B. Lasserre, I. Forrester, N. Calvino, N. Petit, P. Freeman, A. Gee, C. Lousberg, Enquêtes sectorielles : Complément ou substitut de l’action des autorités de concurrence ? 15 V., sur les chiffres des demandes de clémence, les rapports annuels de l’Autorité. La plupart (Colloque New Frontiers of Antitrust, Paris, 15 février 2010), Concurrences no 2-2010, des demandes sont des demandes sommaires, qui suivent une demande principale faite à la art. no 31031, www.concurrences.com Commission européenne. 10 V. par ex., comme signe de cette maturité, la réflexion sur les clémences de deuxième rang 16 V. not. les notes présentées pour la session de l’OCDE, oct. 2013, Table ronde, Ex-Officio menée au sein de l’OCDE, table ronde, Leniency for Subsequent Applicants, oct. 2012. Cartel Investigations and the Use of Screens to Detect Cartels ; W. Kovacic, The Value Sur les résultats obtenus, v. la note du secrétariat de l’OCDE, DAF/COMP(2013)14 of Policy Diversification in Cartel Detection and Deterrence, DAF/COMP(2013)22 ; M. P. Schinkel, Balancing Proactive and Reactive Cartel Detection Tools: Some 11 V. not., G. J. Werden, S. D. Hammond, B. A. Barnett, Deterrence and Detection of Observations, DAF/COMP(2013)23. Cartels: Using All the Tools and Sanctions, Ant. Bull., 22 June 2011. 17 Pour les autorités des États membres de l’Union européenne, il faut, bien sûr, distinguer la 12 S. Williams, Is There a Magic Formula to Detect Cartels?, ICN, Cartel Workshop, Lisbon, coopération au sein du Réseau européen de concurrence et la coopération internationale. 2008. Sur cette dernière, dans le contexte des cartels, v. OCDE, Improving International 13 V. not, R. M. Abrantes-Metz, D. Daniel Sokol, The Lessons from Libor for Detection and Co‑operation in Cartel Investigations, DAF/COMP/GF(2012), notamment, la note du Deterrence of Cartel Wrongdoing », Harvard Business Law Review Online, 2012, no 3. secrétariat, DAF/COMP/GF(2012)16.

Concurrences N° 2-2014 I Colloque 11 New frontiers of antitrust I Paris, 21 février 2014 qu’une autorité de concurrence doit continuer à marcher sur conduit également les autorités de concurrence à revoir leurs ses deux jambes, il ne fait pas de doute qu’il faut agir sur méthodes de surveillance des marchés. Il ne suffit plus de lire les deux volets de la détection, à la fois, le volet réactif et le la presse écrite et en particulier la presse dite “économique”. volet proactif, tout en mettant entre les mains des autorités La surveillance des réseaux sociaux fournit par exemple une de concurrence une boîte à outils bien garnie et diversifiée. masse d’informations utiles. Il ne s’agit pas d’abandonner les outils existants, mais de les perfectionner, et d’en ajouter éventuellement de nouveaux. 11. Ce dernier exemple illustre le fait que, si tout commence par l’obtention de l’information, l’on ne peut s’arrêter à ce 8. A. Les axes de réflexion sont divers et portent, en premier stade. L’information doit ensuite être traitée et analysée. lieu, sur l’obtention de l’information. L’analyse peut être menée de manière diverse, mais en cette matière, l’analyse économique est bien évidemment 9. L’on peut tout d’abord tenter d’élargir les sources déterminante. Une session de l’OCDE a ainsi été consacrée d’information, qu’il s’agisse des sources d’information en 2013 à l’utilisation de ce que l’on appelle les screens pour internes aux entreprises ou externes. la détection des cartels26.

S’agissant des premières, l’un des outils nouveaux peu On peut définir les écrans, comme des méthodologies de utilisés jusqu’à présent réside dans les programmes de détection, fondées sur des analyses statistiques et économiques, récompense des individus, les reward schemes18. Au sein de destinées à aider les autorités de concurrence pour identifier l’Union européenne, seules à ma connaissance les autorités les marchés ou les secteurs dont les caractéristiques incitent britannique19 et hongroise20 utilisent cette technique en à des comportements de cartellistes. Les screens sont complément des programmes de clémence. L’autorité classés en différentes catégories : écrans structurels, écrans slovaque vient de proposer de l’introduire en décembre 201321. comportementaux… Ils peuvent au demeurant avoir d’autres En dehors de l’Union européenne, peut être mentionné utilisations que la détection des cartels et être utilisés dans l’exemple sud-coréen22. Le sujet semble âprement débattu toutes les composantes des politiques de concurrence27. aux États-Unis23. 12. B. Pour terminer sur ce point, il suffit de signaler que Pour les secondes, les sources externes, il semblerait que les chaque outil pris individuellement comporte des limites. autorités de concurrence utilisent davantage que dans le passé les informations émanant d’autres autorités ou institutions. Certains outils, comme les méthodes d’investigation policière, Il ne s’agit pas à ce stade de la coopération entre autorités soulèvent clairement la question de leur encadrement de concurrence, mais des échanges avec d’autres autorités de juridique – jusqu’où peut-on aller ? Ils ne sont concevables régulation, voire avec des juridictions nationales. et utilisés à ma connaissance que dans les États où les cartels sont des infractions pénales. En l’état actuel du système 10. Cet élargissement des sources influe nécessairement sur européen, il paraît difficile d’envisager une transposition dans les méthodes utilisées. Dans le domaine des cartels, certaines les États dans lesquels le système de mise en œuvre demeure autorités n’hésitent pas à utiliser des méthodes que l’on de type administratif. D’autres outils, comme les programmes 24 peut qualifier de policières (des écoutes par exemple) ou de récompense des individus, ne sont effectifs que s’ils sont à collaborer avec des autorités policières : collaboration du accompagnés de mesures complémentaires, notamment pour 25 DOJ et du FBI par exemple aux États-Unis . Mais au‑delà protéger les individus qui révèlent les informations28. des cartels, l’évolution de la diffusion de l’information Quant aux outils qui peuvent être qualifiés d’économiques, 18 G. Schnell, Bring in the Whistleblowers and Pay Them – The Next Logical Step in Advancing Antitrust enforcement, CPI., Nov 27, 2013. comme les screens, les données ne sont pas spécifiques. 19 V. le programme de récompense de l’OFT : www.oft.gov.uk/OFTwork/ En dehors du fait qu’ils nécessitent d’importantes ressources competition-act-and-cartels/cartels/rewards#.UxHGfChEpmA. La récompense peut aller dont les autorités ne disposent pas toujours, leur fiabilité jusqu’à 100 000 livres. Pour une utilisation, v. F. Murphy Et N. Hall, European Truck Industry dépend des données recueillies et de la robustesse des analyses. Cartel Investigations and Rewards for Information Highlight Enforcement Tools, 9 févr. 2011, disponible à l’adresse suivante : http://www.lexology.com/1324/author/Frances_Murphy. 20 Le programme a été introduit en 2010 et prévoit un montant de 1 % de l’amende infligée 13. En conclusion, et sans anticiper sur les débats qui vont qui est, par ailleurs plafonné. Ex-Officio Cartel Investigations and the Use of Screens to suivre, il semble qu’un consensus pourra sans doute être Detect Cartels, Note by Hungary, DAF/COMP(2013)14 obtenu sur plusieurs points : 21 V. ECN Brief, 1/2014, le résumé des modifications proposées à la loi slovaque par l’autorité de concurrence. g il faut plusieurs outils dans la boîte ; 22 OCDE, KOREA – Report on Competition Law and Institutions (2004), DAF/ COMP(2005)9. Un programme existe également à Singapour. g s’il y a des outils communs à toutes les pratiques 23 Sur le débat aux États-Unis, W. Kovacic, Bounties as Inducements to Identify Cartels, anticoncurrentielles, les cartels nécessitent des outils C.‑D. Ehlermann, I. Atanasiu (eds.), European Competition Law Annual 2006: Enforcement of Prohibition of Cartels, Hart Publishing, Oxford ; plus récemment, K. R. Sullivan, supplémentaires adaptés à leur caractère secret. K. Ball, S. Klebolt, The Potential Impact of Adding a Whistleblower Rewards Provision to ACPERA, The Antitrust Source : www.antitrustsource.com, Oct. 2011. 26 OCDE, Ex-Officio Cartel Investigations and the Use of Screens to Detect Cartels, oct. 2013. V., pour un résumé de l’ensemble des travaux, note du secrétariat, DAF/ 24 Sur l’expérience britannique, A. Nikpay, UK cartel enforcement – past, present, future, COMP(2013)14 ; l’étude de R. Abrantes-Metz, DAF/COMP(2013)20. Speech to the Law Society Anti-Trust Section, 11 Dec. 2012. 27 V. en particulier, la note du secrétariat, préc. 25 R. T. Hosko, Assistant Director, Criminal Investigative Division, Federal Bureau of Investigation, W. J. Baer, Antitrust Division, Assistant Attorney General, Joint Statement 28 V. en particulier, le débat aux États-Unis sur le whistleblowing, qui a conduit à l’adoption Before the Senate Judiciary Committee, Subcommittee on Antitrust, Competition Policy, par le Sénat, fin 2013 du Criminal Antitrust Anti-Retaliation Act of 2013 (S. 42), and Consumer Rights, Washington, D.C., Nov. 14, 2013 de manière à protéger les salariés.

Concurrences N° 2-2014 I Colloque 12 New frontiers of antitrust I Paris, 21 février 2014 III. Qui ? 14. Nous avons la chance d’avoir ce matin un panel très riche. Les intervenants sont suffisamment connus pour que je puisse me limiter à une brève présentation dans l’ordre de leur première intervention.

En cette matière, le droit antitrust américain continue à faire figure de pionnier. Bill Kovacic, qui a beaucoup réfléchi à ces questions à la Federal Trade Commission, puis maintenant dans d’autres enceintes, nous livrera le fruit de son expérience. Cela étant, il ne faut pas oublier que la détection doit s’insérer dans un système institutionnel et procédural. L’exemple des programmes de clémence l’a bien montré. Si l’on peut reprendre un outil qui a fait ses preuves, il faut ensuite l’adapter au contexte. C’est la raison pour laquelle nous reviendrons en Europe ensuite avec nos autres panelistes.

Nous bénéficierons tout d’abord de deux expériences d’autorités nationales de concurrence, pionnières en la matière.

Ali Nikpay, qui a rejoint en avril dernier Gibson Dunn, a, comme vous le savez tous, été pendant près de dix ans directeur à l’Office of Fair Trading, où il a été en dernier lieu responsable de la division des Cartels. C’est dire que l’on ne pouvait trouver mieux pour nous présenter l’expérience britannique.

Nous reviendrons ensuite sur le continent avec Chris Fonteijn, président de la nouvelle autorité néerlandaise, l’ACM, qui nous livrera les résultats des réflexions qu’ils ont lancées sur ce thème. M. Fonteijn, avant de rejoint l’ACM, avait dirigé un régulateur sectoriel, l’OPTA.

Mais comme vous le savez, l’analyse économique est omniprésente à tous les stades du raisonnement, y compris lors de la mise en œuvre du droit de la concurrence. Les économistes ont beaucoup travaillé sur les instruments de détection. Nous terminerons le premier tour de table avec un regard un peu différent, celui d’une économiste, Cristina Caffara, vice présidente et responsable du département concurrence du cabinet Charles River. n

Concurrences N° 2-2014 I Colloque 13 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

Detection of anticompetitive practices: Should existing tools be revised or new tools introduced? Leniency, market surveys, financial reward… Beyond leniency William Kovacic Professeur, George Washington Law School, Washington DC

1. The modern development of leniency as an anti-cartel 5. One technique is to introduce additional inducements device is one of competition law’s greatest innovations. Under for informants. Leniency is one form of payment. In the Anne Bingaman’s leadership in the 1990s, the Antitrust United States, leniency “pays” the informant by granting a Division of the U.S. Department of Justice replaced a weaker dispensation from criminal punishment. Leniency pays the amnesty policy with high-powered incentives for cartel informant for information, and the payment is made in the insiders to inform. As enhanced over the years, leniency form of immunity from criminal prosecution. bolstered DOJ’s anti-cartel program and inspired dozens of jurisdictions to adopt their own amnesty regimes. Massive 6. Some jurisdictions have taken the notion of paying increases in financial recoveries and (in the U.S.) criminal informants in another direction. In exchange for information sanctions attest to leniency’s significance. that leads to the detection and successful prosecution of a cartel, this reward mechanism provides a cash payment.29 2. Leniency’s apparent success raises the question of how Perhaps the most ambitious experiment with this approach much a competition agency should diversify its methods of is the U.S. Civil False Claims Act, which deals with cartel detection. The history of competition law helps answer procurement fraud and other forms of misconduct involving the question. The contest between prosecutors and cartelists the expenditure of public funds. Crucial to the effectiveness that began with enactment of the first antitrust laws in the of the Civil False Claims Act and similar reward mechanisms 30 late 19th century shows that firms do not inevitably surrender is the payment of a generous award for the informant. in the face of law enforcement advances. Business decision makers today face increasing hazards when joining cartels, 7. Imagine a cartel such as automobile parts or vitamins in but the rewards from successful collusion remain immense. which the damage from collusion ranges in the hundreds of If the prizes from collusion are great, firms will take grave millions of euros. Suppose the incentive mechanism promised to give an informant ten percent of all funds that the competition risks to gain them. agency ultimately recovers by reason of the informant’s cooperation. This would provide a powerful inducement for 3. It is a trap to underestimate the guile and inventiveness individuals who are close to the relevant information about the of businesses in responding to specific law enforcement cartel to reveal the cartel’s existence. By increasing incentives to techniques, or doubt their ability to find ways to turn disclose the existence of the cartel, the informing mechanism specific enforcement techniques to their advantage. could create internal instability that is the enemy of a cartel. Actual or prospective cartel members adapt and devise countermeasures. To overlook this dynamic adaptation is a 8. A second possible supplement to leniency is what might formula for an enforcement agency will fall behind. be called “better operations research.” By this approach, competition agencies, perhaps in association with external 4. Three strategies can provide useful supplements to academic research bodies, would examine the body of their leniency in an anti-cartel program. These are complements own experience with cartel enforcement. By studying past to, nor substitutes for, leniency. Their adoption can add cartel investigations and prosecutions, the agencies can better valuable diversification to the portfolio of enforcement tools identify behaviors that indicate the presence of a cartel. and, in some instances, may make leniency more effective. Diversification helps avoid pitfalls that come with relying 29 See W.E. Kovacic, Private Monitoring and Antitrust Enforcement: Paying Informants to on a single technique that is subject to evasion. To use an Reveal Cartels, 69 George Washington Law Review 766 (2001). arms race metaphor, the enforcement agency should develop 30 In the United States, where the government prosecutes a firm for misusing public funds (e.g., for rigging bids on a public tender), the informant is entitled to receive as much as a diverse array of techniques for dealing with a specific 35 percent of all funds the government acquires. Since the mid-1980s, this mechanism threat to the competitive process. In this sense, diversification has resulted in billions of dollars of recoveries to the national treasury and has yielded a substantial number of multi-million dollar awards to informants. An important overcomes the tendency that any single measure can be rationale for the substantial award allowance is that informing may make the individual defeated by those who would engage in collusion. unemployable in the same industry or in other industries.

Concurrences N° 2-2014 I Colloque 14 New frontiers of antitrust I Paris, 21 février 2014 9. The best recent example of this kind of research is long series of episodes in which a new technology threatens The Economics of Collusion, authored by Robert Marshall existing business models and market positions and spurs and Leslie Marx. These distinguished industrial organization incumbent firms to join forces to devise private measures or economists carried out a painstaking examination of the to solicit government bodies to suppress the new idea and its public records of cartel prosecutions in the European emergence over time. Union and in the United States. Marshall and Marx identify conduct that enables cartel members to perform the tasks of 14. A central aim of this tour through complements to forming a consensus, detecting cheaters, punishing cheaters, leniency is to underscore the continuing need for innovation and coping with external threats (from customers, suppliers, in public law enforcement. Private commerce features and entrants) to cartel effectiveness. Conduct useful in tremendous technological and organizational dynamism. performing these tasks includes the initiation of anti- To stay abreast of these developments, and to confront new dumping cases, extensive use of advance announcements of public and private threats to competition, public competition price increases by all cartel members, and inter-firm transfers authorities need to be innovative in seeking to improve their (e.g., product purchase agreements) among rivals, especially capacity to identify the sources of competitive failure and to at the end of the year, that serve to “true up” the market effective cures. Modern leniency programs reflect this type shares that the firms have agreed to covertly. of inventive, creative public administration. The approaches suggested here will help ensure that the portfolio of anti- 10. This kind of detailed operations research, building cartel policy instruments anticipates and counteracts the upon the work of Marshall and Marx and others, can adaptive efforts of firms to cooperate in using private and tell competition agencies what to look for in designing public measures to impede competition. n investigations. Competition agencies have accumulated a massive amount of valuable information about cartels, and the records of cartel cases (such as vitamins prosecution) are a treasure trove of information about how cartels overcome the challenges associated with running a collusive scheme.

11. From my time at the U.S. Federal Trade Commission and my work as a non-executive director of the United Kingdom’s Competition and Markets Authority, I am convinced that market studies can provide a third valuable complement to leniency in building an effective anti-cartel program. Market studies not only can illuminate private behavior that facilitates collusion, but, more important, can show how public policies frustrate entry and expansion that undermine cartels and otherwise improve economic performance. The prosecution of traditional antitrust cases—e.g., for unlawful private agreements or abuse of dominance—generally does not provide a suitable means for addressing public policies that suppress rivalry.

12. The market study is liberating in the sense that permits the agency to engage in a deeper, more meaningful examination of root causes, public and private, for poor market performance and to propose superior solutions to address them. As noted above, a market study sometimes will identify private behavior that impedes competition. In a significant number of instances, the problem resides in public policies or government behavior that suppresses rivalry government behavior or public policies that suppress rivalry. The market study can set a foundation for the competition agency to bring traditional antitrust cases, to advocate adjustments in government policies, or, in some jurisdictions (including the United Kingdom) to impose remedies directly as part of the market study mandate.

13. One informative example of the capacity of market studies to illuminate public policy barriers that shield incumbents from rivalry is US FTC’s examination of electronic commerce ten years ago. Drawing on public consultations and its own research, the FTC prepared a report that identified a mix of private behavior and public behavior that served to retard the implementation of e-commerce. This is the latest of a

Concurrences N° 2-2014 I Colloque 15 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

Detection of anticompetitive practices: Should existing tools be revised or new tools introduced? Leniency, market surveys, financial reward… The importance of innovation in the detection of anticompetitive practices Chris Fonteijn* Président, Netherlands Authority for Consumers and Markets, La Haye

between authorities. I highlight some of the areas in which I. Introduction the ACM is seeking improvements. In conclusion, I assert 1. Innovation in methods of oversight is a topic of great that we do not necessarily need more new detection tools but importance for the Netherlands Authority for Consumers rather innovative methods of using existing tools. and Markets (ACM). As a new multidisciplinary authority, the ACM is in itself an innovation. ACM’s primary goal is to increase consumer welfare by making markets work in the II. Traditional detection tools interest of consumers. One of the methods we use to achieve that goal is to detect problems, and to use our powers to fix them. In that context, detection of market problems, and 1. Tip-offs and signals especially anticompetitive practices, is of great importance and it is only by being innovative in our detection methods 4. The classical method of detecting a problem in a and in how we use them, that we can achieve our goal. market, or the reason behind a problem in the functioning of a market, is through tip-offs or signals from stakeholders, 2. Created on the 1st of April 2013, through the competitors, other national authorities, international fellow consolidation of the Netherlands Consumer Authority (CA), authorities or the general public. the Netherlands Independent Post and Telecommunication Authority (OPTA), and the Netherlands Competition 5. This type of information can come into the authority’s Authority (NMa), ACM is an independent organisation, possession in a variety of ways. It may be of sufficient weight with the powers and obligations of the three authorities to create a reasonable suspicion of an infringement and allow that it replaces.31 As a multidisciplinary authority, we are the authority to launch a fresh investigation. To give an testing how we can develop innovative methods in all three example, the fines imposed by the Netherlands Competition Authority on seven undertakings involved in the production areas, in order to identify market failures and cures for those of onion sets, in February 2013, were imposed for cartel failures. We are also looking for synergies; are our methods activity which first came to light as a result of anonymous of quantifying outcome when applying competition law also calls to the authority’s tip-off line.32 useful when we apply consumer protection law? Can we use regulatory data-gathering techniques in competition? 6. ACM is currently centralizing its information system on tip-offs and signals, to ensure that information received 3. The problems we uncover may concern anti-competitive through tip-offs from, and about, the market can all be practices, but it is our experience that market problems are gathered in one place. This centralization is both necessary often complex, sometimes involving government intervention and useful to prevent good information from going to waste, or crisis management. Complex scenarios require clever simply because the proper lens is not applied. By looking detection tools. In this article, I set out briefly the more at a case from different perspectives, we are in a position “traditional” detection tools used by the ACM before to analyse and discuss the most effective instrument to deal explaining in more detail some of the new tools we are using with a specific market problem. within ACM, namely social media and information exchange

* Thank you to Siún O’Keeffe, Senior Strategy Advisor, and others at ACM for their advice and assistance in the writing of this article.

31 A.T. Ottow, Erosion or innovation. The institutional design of competition agencies – 32 See Press release of the Netherlands Competition Authority, NMa imposes fines on A Dutch case study, (2014) Journal of Antitrust Enforcement, pp. 1-19; T. Van der Vijver producers of onion sets for cartel activities, 4 February 2013 (https://www.acm.nl/en/ and C. Ruers, Netherlands: The establishment of “super regulator” ACM” (2014) 1 Revue publications/publication/11141/NMa-imposes-fines-on-producers-of-onion-sets-for- Concurrences, No 1-2014 pp. 248-253. cartel-activities).

Concurrences N° 2-2014 I Colloque 16 New frontiers of antitrust I Paris, 21 février 2014 2. Leniency causing serious consequences for the individual whistleblower. ACM supports the goal of this initiative, which is to act as 7. Leniency is a highly effective tool for competition an incentive to report violations and increase protection for authorities. Over the last few years, there have been extensive whistleblowers. The plan does, however, raise some concerns. discussions about the Pfleiderer judgment and its effects on leniency.33 Pfleiderer and other judgments have led to the 12. Firstly, investigations about infringements should always proposed private enforcement legislation, which is currently be left to the relevant authorities. Research activities by wending its way through the European legislative system, an intermediary run the risk of disrupting an ongoing or and which I do not discuss here.34 Suffice to say that although imminent investigation by the authority. The success of an the legislation has not yet been passed, the rumours about investigation is often embedded in the element of surprise, the demise of leniency are overstated. There may have been which could be jeopardized by such intervention. dips at local level in leniency applications, but the leniency programme at ACM is alive and kicking.35 13. Secondly, there is a risk in obliging whistleblowers to first internally report the observed violations with the employer. 8. The ECN agreed on a revised Model Leniency Programme Employers could anticipate and destroy any evidence. in 2012. ACM, along with other NCA’s and particularly the This plan would only work where the employer is not directly French Autorité de la concurrence participated actively in involved with the infringement. However, this is rarely the its design.36 There are some slight differences between the case.37 Dutch approach to leniency, as laid down in the policy rules of the Dutch Minister of Economic Affairs, and that of the 14. Newly proposed U.S. legislation creates a civil remedy— European Commission and the Model. The Dutch Ministry the right to file a complaint with the U.S. Department of is now considering, with ACM, altering the Dutch leniency Labor regarding any suspected retaliation—for those who rules in order to make them fully in line with that of the cooperate in U.S. Department of Justice investigations European Commission and the Model Leniency Programme. relating to their employer’s criminal price-fixing or bid- rigging activity. 9. The existing differences include a small gap between the Dutch rules on second and subsequent leniency applicants, 15. The U.S. bill, if it becomes law, will protect people coming and the Commission’s rules. Another difference relates to forward with information, from retaliation, provided they the introduction of a system of stepped reduction, with were not personally involved in the alleged illegal conduct. bandwidths of 30-50%, 20-30%, and up to 20% for second, Although it could provide valuable protection in many cases, third, and fourth and following applicants, respectively. the bill does little to incentivize potential whistleblowers to Removing these small differences between the Dutch and the report illegal activity. Many would argue that there need European rules would make leniency applications easier, for to be financial incentives for the bill to have a meaningful companies facing cross-border leniency applications. impact on the individual reporting of cartel activity.38

16. The U.K. Competition and Markets Authority operates 3. Whistleblowers a confidential whistleblower program that offers financial rewards for information about cartel activity.39 ACM has 10. ACM frequently receives relevant information from third looked at this possibility. There are possibly legal problems parties about possible anti-competitive infringements. Even associated with paying whistleblowers. Would it lead to though ACM proactively performs research on violations, incentivizing the breach of confidentiality clauses? To what many of its cases are initiated by signals from whistleblowers. degree would we be able to use such information in a court ACM acknowledges the public interest in stimulating the case? There are cultural issues in the Netherlands as well. provision of information concerning market violations and We see that judges are very careful in assessing information actively supports such initiatives. gathered using leniency, let alone through paid whistleblowers.

11. The Dutch legislature is considering draft legislation that aims to create an intermediate party through which problems 4. Dawn raids and digital investigation with organizations and companies can be addressed, without 17. ACM may conduct unannounced visits to a company’s 33 Pfleiderer v. Bundeskartellamt, Case 360/09, Judgment of the European Court of premises, where it has a reasonable suspicion that there Justice, 14 June 2011. See P. Amador Sanchez, Spanning tussen de vertrowelijkheid van kartelrocedures en civile sachadevergoedingsacties, (2010) 12 Actualiteiten has been a breach of the competition law. Such a visit Mededingingsrecht pp.195-197. is commonly termed a dawn raid. The undertaking or 34 See “Actions for Damages” information on the website of the European Commission (http://ec.europa.eu/competition/antitrust/actionsdamages/proposed_directive_ 37 Letter from the Dutch Consultation Forum of Regulatory Bodies en.html). (Markttoezichthoudersberaad), 9 September 2013 (bijlage bij de brief van de minister van BZK ter aanbieding van ingewonnen adviezen over het initiatiefvoorstel [TK33.258, 35 Approximately 40% of ACM’s cartel cases are cases in which immunity is granted. nr. 16]) (http://www.eerstekamer.nl/overig/20131113/brief_van_het) See P. Lugard, De Toestand in de Mededingingsrechtelijke Wereld, (2014) 1 Markt & Mededinging (http://www.bjutijdschriften.nl/tijdschrift/marktenmededinging/2014/1/ 38 M. Sixon and D. Shulak, Senate unanimously passes bill adding whistleblower protection MenM_1387-6236_2014_017_001_001). in U.S. antitrust cartel investigations, Lexology, 7 November 2013, (http://www.lexology. com/library/detail.aspx?g=32d070b1-05ca-425b-a4cd-e4c438f8f795) 36 See Speech by B. Lasserre, The Future of the European Competition Network, Vth Intertic Conference on Antitrust Policy, 16 May 2013, p. 6, (http://www.autoritedelaconcurrence. 39 See https://www.gov.uk/government/uploads/system/uploads/attachment_ fr/doc/intervention_BrunoLasserre_ECN_rome_mai13.pdf). data:file/299411/Informant_rewards_policy.pdf.

Concurrences N° 2-2014 I Colloque 17 New frontiers of antitrust I Paris, 21 février 2014 individual subject to the raid has the right to legal advice in the banking sector, and they are very useful—for example, during the raid. During the raid, ACM may enter the business we have analysed possible causes of concentration in the premises, shop, employee’s cars, etc., and may inspect the mortgage market and are looking at entry barriers.42 ACM’s company’s administration and documents. ACM may also Streamlining legislation, if it is passed into law in 2014, will take statements from company owners and employees. Dawn empower ACM to conduct market studies and to compel raids may also be conducted on private premises, subject to market organisations to cooperate with ACM in answering permission from the Examining Magistrate, where there is its questions. a suspicion that there may be information relating to the suspected infringement available at these premises. 22. Market studies need to be used wisely—they are not fishing expeditions. There is no benefit to in overloading industry 18. The ACM may make copies of the material to be inspected, with questionnaires (it may even encourage collusion as including digital copies such as the information saved on competitors fill them in by checking their answers with each computers, servers, mobile telephones or USB sticks. Those other!). However, market studies can usefully be undertaken investigated are obliged to facilitate the investigation. In the event to identify the causes and complexities of problems in the that the investigation is obstructed, a fine of up to € 450.000, market. In some situations, cross-border market studies or 1% of the company’s turnover, may be imposed. The ACM may also be undertaken in cooperation with competition has the power to seal certain parts of the premises or the authorities in neighbouring states. information concerned; for breaking such a seal or interfering with this information, fines are applicable. The company, and those representing the company under suspicion have the right 6. Economic screens not to incriminate themselves. However, all documents, even those which may be self-incriminating, must be handed over, 23. There is some scepticism about the use of screens. excepting legally privileged documentation. I understand this scepticism, but I do not share it. We are not about to drop all of our leniency work in order to devote ourselves to screening. However, many aspects of screening 19. There have sometimes been queries from lawyers in the are simply matters of common sense—as screens highlight past regarding the competition authority’s right to search in industries with high levels of concentration. Screening can information that has been acquired during digital investigations.40 assist the authority proactively to identify possible market In order to solve this problem, ACM applied itself to consulting problems. with the relevant professionals. As a result, ACM was recently able to publish a new protocol on its procedure for 24. Screening can be bottom-up, looking at trends within the inspection of digital data. A draft version was distributed a particular sector or industry. One recent example is the among various market participants for consultation, and Libor analysis. Top-down screening, which studies more their comments were incorporated in the final version. In its sectors or even a whole economy, can also be used. There is procedure, ACM included several safeguards, which it an increasing volume of literature on the types of economic will observe when inspecting digital data. This procedure variables which can point to, or facilitate, anti-competitive also provides the individuals involved with a number of behaviour in a top-down study. Examples of such indicators verification tools to check whether these safeguards have include barriers to entry, actual entry and exit, concentration, been observed. ACM seeks to be as transparent as possible interaction, demand, stability and symmetry, an examination towards the individuals involved, taking into consideration of profits and prices, innovation, productivity, and other the effectiveness of the investigation. economic variables, such as market transparency and overcapacity. 20. A second new protocol deals with legal professional privilege. This protocol was also developed in public consultation 25. In 2012, the Netherlands Competition Authority with the relevant professionals. It makes transparent how published the results of its Competition Index study, a top- ACM deals with parties’ right to privileged correspondence down approach.43 Economic insights and economic theory with their lawyers in investigations. It permits a search of data are the building blocks for this Competition Index. Using from which potentially privileged material has been removed. data from publicly available sources such as the Netherlands The investigation can proceed efficiently, and parties have the Chamber of Commerce and Statistics Netherlands, we ran a 41 security of knowing that their rights are protected. screen on the Dutch economy. The results, though limited, were interesting; it is quite telling that sectors popped up such as flour-milling, in which problems later did emerge. Sectors 5. Market studies also emerged which later coincided with a leniency request. We ran the information with a three-year time-lag, and there 21. Market studies can be very useful in understanding an were other factors limiting the results. However, we came up industry. We have experience with various market monitors,

40 H.M.H. Speyart, De Werkwijze rechercheren van de NMa: het spanningsveld tussen 42 See ACM study Concurrentie op de Hypotheekmarkt, Monitor Financiële Sector rechtmatigheid en effectiviteit, (2010) 4 Actualiteiten Mededingingsrecht pp.81-91, and April 2013 (https://www.acm.nl/nl/publicaties/publicatie/11339/Strengere-eisen-aan- M. Van Heyningen and M. Schueler, Naschrift Toepassing van de Werkwijze NMa: analoog en banken-leiden-tot-hogere-winstopslag-op-hypotheken). digitaal rechercheren in de praktijk, (2010) 4 Actualiteiten Mededingingsrecht pp.92-96. 43 L. Petit, The Economic Detection Instrument of the Netherlands Competition Authority, 41 See https://www.acm.nl/en/publications/publication/12772/2014-ACM-Procedure-for-the- NMa Working Paper No. 9, March 2013. (https://www.acm.nl/en/publications/ inspection-of-digital-data and https://www.acm.nl/en/publications/publication/12771/2014- publication/7157/NMa-Working-Paper---The-Economic-Detection-Instrument-of-the- ACM-Procedure-regarding-the-legal-professional-privilege-of-lawyers. Netherlands-Competition-Authority).

Concurrences N° 2-2014 I Colloque 18 New frontiers of antitrust I Paris, 21 février 2014 with the following conclusions. Firstly, there is a need for ConsuWijzer also seeks to draw their attention to current enhanced detection techniques in this area. A possible source issues with an eye to prevention. It is of great importance for of these enhanced techniques could be other disciplines, ConsuWijzer that consumers are able to find the information such as criminology. A recent study suggests that there they need. is a statistical link between white-collar crime and cartel activity. Together with prominent Dutch universities, ACM 30. All consumer questions and complaints that ConsuWijzer is working on models which link certain behaviour of firms receives are registered, and generate valuable intelligence and individuals to the possibility of their them taking part for ACM about problems in terms of market failure and/ in a cartel. ACM is investigating whether it may be possible or collective infringements of consumer law—for example, to supplement our Competition Index with criminological in 2013, complaints received via ConsuWijzer led to ACM’s indications and thereby more effectively detect the risk of actions in the travel sector. 45 ACM is in a position to join up cartels in certain sectors. What could corporate crime mean its detection efforts across the board, for example combining for detection? a market study on home buying and selling services in the Netherlands, conducted by ACM’s Financial Sector Monitor, 26. It is good to have a proactive approach in order to screen with complaints from ConsuWijzer about online real estate markets for anticompetitive behaviour. Such a method sales, resulting in an agreement by the Dutch Association of reinforces the reactive detection methods, for instance Real Estate Agents to increase transparency on its online real 46 leniency. Moreover, it creates a deterrence effect. Finally, estate portal. bottom-up screening may complement top-down screening. The OECD has devoted some attention to this topic recently, and it is worthwhile looking at their conclusions.44 Generally 2. Social media and detection speaking, screens are seen as a useful addition to, though not a replacement for, more traditional detection techniques. 31. We have been looking at Facebook and Twitter and thinking about new ways to mine data. It may be possible 27. Tip-offs and signals, leniency, whistleblowers, market to combine information gathered using open source methods studies, economic screens, these are all methods of gathering with that already used in economic screens. We are already information. However, crucial to detect where a problem lies running analyses in certain cases, using Coosto, a social media monitor. Coosto is a web crawler tool that can be and what it consists of, is the placing of that information used to monitor social media, including Twitter and blogs. in context. The authority may be in possession of all the The new U.K. competition authority and other authorities facts, but that does not necessarily mean that the authority may be more advanced than ACM in this regard —the understands them. In the next section, I set out in more possibility of investing in big data has been mentioned.47 detail two new tools that ACM is using, not just to gather We are keen to learn from the experiences of others in the information, but also to understand better the information area of social media. that it has gathered. These are social media, and information exchange. 32. ACM is now active on Twitter, and has had over 1000 followers in its first six months of social media interaction. The speed with which Twitter brings a competition authority face to face with III. Detecting market problems stakeholders and their concerns involves a new dynamism using social media for the organization. If there is an unhappy complainant, looking for a listening ear on social media, they can find the 28. ACM obtains an increasing amount of market ACM, with little difficulty, and we can respond quickly. information through social media. We use an online portal to gather information from and for consumers. We are learning to mine information from social media, and we have 3. ACM agenda developed a new method of online consultation, which we hope will improve our contextual understanding of the issues 33. ACM operates in an era in which different opinions in we wish to prioritize at the authority in 2014 and 2015. society are voiced concerning the pros and cons of the free- market system, and where the protection of public interests must meet ever stricter requirements. To successfully operate in such a social context, ACM must be open to stakeholders 1. ConsuWijzer on all types of platforms, indeed openness is a core value for ACM. ACM wishes to be engaged in a permanent and 29. ACM’s online portal for consumer information, ConsuWijzer, provides ACM with real-time information 45 See for example ACM Press release, 27 May 2013 https://www.acm.nl/en/publications/ about the markets that it oversees. ConsuWijzer’s objective publication/11535/Points-for-attention-with-regard-to-price-transparency- enforcement-in-the-travel-sector/ is to promote consumer empowerment and assertiveness, 46 Dutch Association of Real Estate Agents increases transparency on biggest real estate for example, by providing tools, such as sample letters, portal, Press release of the Netherlands Competition Authority, 25 July 2013 (https:// which enable consumers to resolve problems themselves. www.acm.nl/en/publications/publication/11757/Dutch-Association-of-Real-Estate- Agents-increases-transparency-on-biggest-real-estate-portal). 44 OECD Roundtable on Ex-Officio Cartel Investigations and the Use of Screens to Detect 47 C. Maxwell, Enforcement of consumer and competition law- lessons in best practice and Cartels, 16 October 2013 (http://www.oecd.org/daf/competition/exofficio-cartel- cultural change, Speech, 31 January 2014 (http://www.oft.gov.uk/news-and-updates/ investigations.htm). speeches/2014/0114#.U0MXOpXNuUk).

Concurrences N° 2-2014 I Colloque 19 New frontiers of antitrust I Paris, 21 février 2014 constructive dialogue with its stakeholders in order to signal 1. Information exchange between broader social trends that affect the areas of its oversight. Social media play an important role in this process. national oversight authorities 38. The organizational efficiencies of having contacts among 34. On the 5th of February 2014, ACM launched an online enforcers are significant. At national level, ACM has specific consultation of its strategic agenda, in a multimedia project. powers to exchange information with other enforcers, such as ACM has set out six proposed themes to focus on for the the Tax Office. The Netherlands also has a “Consultation forum of period 2014-2015, and opened up this agenda for discussion regulatory bodies”, which gathers all the different economic with stakeholders. The themes selected for the Agenda 2014- supervisors, such as the Financial Authority, the Health Authority, 2015 are: the online consumer, the willingness to invest in the ACM, etc., together to discuss issues of mutual interest. energy networks and telecom networks, public procurement, health care consumers, switching barriers for consumers 39. The ACM Establishment Act formalizes ACM’s (particularly in health insurances and energy contracts), and right to exchange information. The former Netherlands entry to the banking industry. Competition Authority, the NMa, was already allowed to receive information from other national authorities, such as 35. Every week, different stakeholder groups are approached, the Tax Office. Now we are allowed specifically to transmit depending on the theme for consultation. The participants information to specifically named authorities. The national are however not restricted to these groups alone. ACM’s authorities to whom we can extend information are listed in ideas are made clear through simple animations, thereby a Ministerial Regulation—for example, the Tax Office, Public making the forum easily accessible for all interest groups. Prosecutor, and the Health Authority. We can hand over the necessary information that we have gathered. Two conditions 36. The strength of this modern form of consultation lies apply: one is that we have to ensure that the information is in its interactive character. Through the consultation on handled in confidentiality; the second is that the information its agenda, ACM not only encourages an online dialogue can only be used for the reason stated. So if for example ACM between stakeholders and ACM, but also among stakeholders. transmits information to the Public Prosecutor for use in a fraud ACM experts are nominated per topic, so that they can case, that information cannot be used in a murder case. interact with stakeholders, as individuals. The intelligence obtained through this online consultation process will be 40. In order to ensure due process, we have a track and trace used to determine ACM’s approach concerning the strategic system, so that if a document is used against a party, the themes. This is the first time we have experimented with this party will know where it came from. This enables documents’ form of consultation. We will evaluate the information we contents to be disputed, as well as how they were acquired, gain, and make the necessary improvements. should this be necessary for an undertaking’s defence. 41. An interesting case on the issue of information exchange between national authorities relates to the fines that the IV. Information exchange between Netherlands Competition Authority imposed for cartel authorities conduct in the road construction sector. In October 2010, the authority conducted an investigation on the basis of wiretaps 37. The second new tool we are using at ACM is information which were transmitted to the authority by the Dutch Public exchange between authorities, the development of which was Prosecutor. The Public Prosecutor had installed the taps to begun by the Netherlands Competition Authority. This tool investigate bribery and corruption of local public servants has developed from being a spinoff of the authority’s during tenders. The taps unintentionally also revealed price- international contacts to a central enforcement strategy both fixing conduct and led the Public Prosecutor to transmit the at national and international levels.48 We have informal and relevant transcripts of the taps to the authority. formal methods of exchanging information. The information 42. We were successful at interim stage in getting court can range from tip-offs to contextual information, to sharing permission to use the wiretap evidence in the competition working methods and to transmitting information formally case. However, when the issue came to full trial, ACM was less under mutually agreed protocols. We use information successful. The Court stated that ACM was not permitted exchange at national and at international level to detect market problems, as these generally straddle jurisdictional to use the wiretaps as evidence because ACM should have and programmatic boundaries.49 verified whether the transmission of the information from the Public Prosecutor’s Office was necessary and proportionate. Unfortunately, the Public Prosecutor had not motivated the decision to transmit sufficiently to allow such a verification.50 This case is currently on appeal before the Dutch Industry and Appeals Tribunal (the court of final instance for competition cases).51

48 See P. Amador Sanchez, G. Bakker, and A. Kleijweg, The art of enforcement: Cooperation 50 Case X v. ACM, Rotterdam District Court, Case No. ROT 12/1711, ROT 12/1712 en ROT with other institutions, a national competition authority’s perspective, H. Don, 12/1713, 13 June 2013 (http://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL J. De Keijzer et al (eds.), The Art of Supervision, Liber Amicorum Kalbflleisch, NMa :RBROT:2013:CA3079&keyword=%22CA3079%22). 2012, pp. 39-49. 51 See ACM Press release, ACM to appeal Court’s ruling against use of wiretap data, 18 July 49 See M.K. Sparrow, The Character of Harms: Operational Challenges in Control, 2013 (https://www.acm.nl/en/publications/publication/11727/ACM-to-appeal-Courts- Cambridge University Press, 2008. ruling-against-use-of-wiretap-data).

Concurrences N° 2-2014 I Colloque 20 New frontiers of antitrust I Paris, 21 février 2014 43. Respect of fundamental rights is important to ACM. 46. Information exchange also takes place within the Building relationships with other enforcement agencies at International Competition Network, albeit at a more informal national and international level is a powerful method of level. ACM has gathered and shared useful information enhancing the effects of enforcement. We will continue to on detection experiences and practices of authorities in seek methods of exchanging information within the legal countries as far off as Brazil, Australia and South Africa. limits. Indeed, we feel ourselves compelled to seek efficiencies in detection in this way, as government cutbacks increasingly infringe upon our budget. The administrative savings to be V. Opportunities for enhancement gained by using information already lawfully gathered by another government agency are considerable. 47. As mentioned above, innovation in detection is crucial if authorities are to stay one step ahead of those who wish to restrict competition on the market.56 ACM seeks continuously 2. Information exchange between to improve existing detection tools, and where appropriate, international authorities develop new ones. We are investing in innovation in detection methods. In this context, we are currently considering a 44. ACM exchanges information with its counterpart variety of possible measures to be further developed. These competition agencies in other EU Member States, using may involve online tools, new ways of reaching out to target the European Competition Network, in order to detect groups, the use of advertisements, the use of stakeholder anti-competitive behaviour. ACM and its predecessor, the cooperation initiatives, etc. Even if many of these ideas are Netherlands Competition Authority, make use of cross- still in the early stages of development, we are committed to a border investigations as provided for in Regulation 1/2003. long-term investment in developing this area. The underlying We have worked on several cases where we suspected philosophy throughout these initiatives, is the wish to remove cross-border anti-competitive activity. These joint psychological and physical thresholds that impede people investigations sometimes involved planning joint dawn from coming to us. We are convinced that there is still much raids with a neighbouring national competition authority. to win in this area. Information exchange took place using articles 12 and 22 of Regulation 1/2003. The national competition authorities 48. One of the long-term commitments in this area has been made use of each other’s offices and staff for detection and to the setting aside of budget at ACM, for the development interview individuals. Joint discussions took place on issues of a “detection lab.” The sort of initiatives we are looking such as the definition of the relevant markets in the cases, at are, for example, working on the issue of anonymity for and also on jurisdictional issues to avoid double jeopardy.52 informants and whistleblowers, to see if we could develop It may be that two authorities are investigating the same what we call a cat-flap facility, whereby information could activity, and the effects are in two states. This happened for be deposited digitally at the authority, similar to methods example in the shrimp cartel case.53 It may be that we are used by authorities in Germany and Denmark. Anonymity investigating different cartels involving similar behaviour or is of course a complex legal area. Some of our ideas are very perhaps the same parties. This happened in the flour milling much at development stage as we encourage our experts to case, where the parties had different cartels operating in the develop new detection ideas. ACM will host a conference on Netherlands, in Germany, and in Belgium.54 20 June this year, entitled “Innovations in Oversight,” and we are highly open to learning from the experiences of others 45. ACM is now adopting a new approach in the construction and sharing new ideas in this field. materials sector. This approach can also be used for other sectors where fine has followed fine, throughout the EU, seemingly to no avail. We are trying to develop new methods, VI. Conclusion involving dialogue with the sector itself, to see whether we can 49. Innovation in detection methods is a key to achieving efficient improve business practices, to foster a culture of compliance oversight of markets. ACM is ambitious in this field, as set out in this within the sector itself. Part of our approach is that we are article, with regard to social media and information exchange gathering authorities together from different European between authorities, at national and international level. We are states who share the problems with this sector. One of our open to new ideas, and to learning from other authorities, challenges in 2014 is to develop this new approach and but also to using the experiences of academics and experts in achieve some real changes in the targeted sector. 55 other fields to develop best practices in detection.

50. It is important to remember, however, that detection is not a goal in itself. Detection is a means to an end. In my 52 H. Don and S. O’Keeffe, Procedural puzzles and convergence, Concurrences N°2-2012 , pp. 35-40 view that end is to improve consumer welfare, by ensuring well-functioning competitive markets. We need to identify 53 Decision of 14 January, 2003, Case 2269, see http://www.nma.nl/Images/2269BLD_ tcm16-47110.pdf. The original fines were reduced by the appeal judge. market problems, and we need to use all of our resources 54 In December 2010, the NMa found fifteen flour producers from the Netherlands, Belgium to create options and opportunities for business and for the and Germany guilty of cartel activities. Their cartel had a market share of approximately consumer. n 90 per cent on the Dutch flour market, which has an annual turnover of roughly €250 million. See https://www.acm.nl/en/publications/publication/6740/NMa-revises- 56 W. Kovacic, The Value of Policy Diversification in Cartel Detection and Deterrence, fines-on-flour-producers. OECD Roundtable on Ex-Officio Cartel Investigations and the Use of Screens to Detect 55 See ACM press release, 11 April 2014 https://www.acm.nl/en/publications/ Cartels, 16 October 2013, at §23 (http://www.oecd.org/daf/competition/exofficio-cartel- publication/12849/ECN-Construction-Materials-Meeting-in-the-Netherlands/ investigations.htm).

Concurrences N° 2-2014 I Colloque 21 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust @ Colloque Paris, 21 février 2014

Douglas Ginsburg [email protected] Patents: Can antitrust Senior Circuit Judge, U.S. Court of Appeals for the District of Columbia Circuit, authorities contribute Professor of Law, George Mason University, Washington DC to fixing the dysfunctional patent system? Thomas Graf [email protected] Partner, Cleary Gottlieb Steen & Hamilton, Brussels

Frédéric Jenny [email protected] Introduction Président, Comité de la concurrence, OCDE, Président, Comité international Concurrence, Frédéric Jenny Professeur d’économie et codirecteur, CEDE, ESSEC Président, Comité de la concurrence, OCDE Président Comité international Concurrence Joshua Wright Professeur d’économie et codirecteur, CEDE, ESSEC [email protected] Commissaire, Federal Trade Commission, Washington DC Professor of Law, George Mason University, Washington DC

Abstract 1. A number of recent developments in intellectual property systems have had consequences on the intensity of competition on markets for goods and services. First, an ever increasing number of countries have adopted a patent law. Second, La deuxième table-ronde de la conférence “Demain la concurrence” du 21 février 2014 à Paris, était dédiée because of the internationalization of product markets, firms selling in a large aux “Brevets: Les autorités de concurrences sont-elles en number of countries have tended to seek patent in all the countries where they trade. mesure de corriger les dysfonctionnements du système?”. This has resulted in a massive increase in the number of requests for patents and an Cette table ronde qui part du constat de l’accroissement significatif des affaires qui sont à l’interface entre le droit de extension of the delay between the patent application and the grant or the denial la concurrence et celui de la propriété intellectuelle, analyse of a patent. In some sectors, such as the pharmaceutical sector, there has been a les pratiques au regard de la jurisprudence en matière significant decrease in the number of innovations coupled with the expiration of de droit de la concurrence pour établir si l’utilisation de a number of patents. The combination of these two factors has given an incentive ce droit offre des solutions efficaces pour combattre les pratiques anti-concurrentielles qui ont leur source dans des to patent holders to try by all means to prolong the life of their patents or to pay dysfonctionnement du système des brevets. off producers of generic products. Finally in some other sectors, the inclusion of patented processes in the development of standards has allowed the owners of essential patents to use procedural means to threaten license applicants and to force them to accept unfavorable license fees or conditions. This second roundtable of the conference “New frontiers of Antitrust” (Paris, 21 February 2014) was dedicated to the: 2. This roundtable acknowledges the fact that there is an increasing number of “Patents: Can antitrust authorities contribute to fixing the dysfunctional patent system?”. This roundtable acknowledges cases at the interface between competition and intellectual property on both sides of the fact that there is an increasing number of cases at the the Atlantic and discusses whether, and under which conditions, competition law can interface between competition and intellectual property on deal with the above mentioned practices and offer some protection against a patent both sides of the Atlantic and discusses whether, and under which conditions, competition law can deal with the practices system which is increasingly used strategically by economic actors to suppress both and offer some protection against a patent system which is innovation and competition on their markets. n increasingly used strategically by economic actors to suppress both innovation and competition on their markets.

Concurrences N° 2-2014 I Colloque 22 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

Patents: Can antitrust authorities contribute to fixing the dysfunctional patent system? Patent assertion entities and antitrust: A competition cure for a litigation disease? Joshua Wright* Douglas Ginsburg** Commissaire, Federal Trade Commission and Professor of Law, George Madison University,Washington DC; Senior Circuit Judge, U.S. Court of Appeals for the District of Columbia Circuit, and Professor of Law, George Mason University, Washington DC

1. Many in the intellectual property and antitrust fields 3. The adverse effect PAEs have upon innovation is are no doubt familiar with the patent assertion entities perceived at two levels. The first concern is that PAEs will (PAEs) business model. In brief, a PAE acquires patents— demand licensing fees from companies that do research and sometimes a large portfolio of patents—from research development (R&D) that arguably infringes a PAE’s patent, companies, operating companies, or individual inventors and as a result of which those companies will face increased monetizes those patents by collecting royalties from anyone costs because of the necessity either to pay a licensing fee it finds practicing one of the patents without a license. The or to litigate the validity of the PAE’s patent; as costs rise, of course, output, here in the form of innovation, declines. PAE compensates the patentee through the acquisition Second, some PAEs have directed their demand letters not price, a share of the royalties, or some combination of the to companies whose R&D may be infringing a patent but two. PAEs have been much in the news, however, because to businesses and even consumers who use products in of certain practices that imply their demand for royalties is which the patent is embodied. Probably the most notorious nothing more than extortion based upon the nuisance value example of this sort is the demand letter that MPHJ of a lawsuit the PAE might bring, or explicitly threatens to Technology Investments sent to hundreds of individuals and bring, if no agreement is reached with the party practicing small businesses demanding a licensing fee for the use of the the patent. patented technology by which a scanned document can be attached to an email message, a technology MPHJ’s lawyer 2. PAEs have attracted a good deal of attention from the claimed “99 percent of people are using.”59 antitrust bar and commentariat, who have had to become more knowledgeable about intellectual property in general 4. The PAE phenomenon has prompted suggestions over the last decade for reasons unrelated to the PAE that the antitrust laws be applied to limit the effect that phenomenon. Several such antitrust observers have been PAEs have upon innovation by the companies most quick to decry PAEs’ practices57 and, in one instance, to affected, typically those in the high tech sector. Because propose their “exterminat[ion],”58 on the ground that they of the centrality of innovation to competition, and the either reduce the return on and thereby diminish investment understanding that the purpose of antitrust law is to deter and sanction anticompetitive activity, it apparently seems to in innovation, which is a major driver of competition, or some commentators that anything having an adverse effect facilitate anticompetitive behavior by agreeing to assert an upon competition should be deemed a violation of antitrust operating company’s patents against its rivals, a practice law. The intersection of PAE and antitrust problems can be known as “privateering.” expressed, for example, as a matter of raising rivals’ costs. Conduct that has the purpose and effect of raising rivals’ * The views expressed here are the author’s and do not necessarily reflect those of the Commission or any other Commissioner. The author thanks Joanna Tsai for valuable costs without otherwise materially serving the economic comments on an earlier draft and Brady Cummins for research assistance. interest of the actor may be seen as exclusionary conduct in violation of Section 2 of the Sherman Act.60 This is a ** The author thanks Zander Li for research assistance. This article is based upon our analysis in J.D. Wright and D.H. Ginsburg, Patent Assertion Entities and Antitrust: particularly attractive theory of liability, we are told, insofar A Competition Cure for a Litigation Disease?, 79 Antitrust L.J. 201 (2014). as the patent in question is essential to a standard set by an industry technical organization.61 57 See generally M.A. Carrier, Patent Assertion Entities: Six Actions the Antitrust Agencies Can Take, CPI Antitrust Chron., Winter 2013, Vol. 1, No. 2, at 1, 11-12; I. Knable Gotts and S. Sher, The Particular Antitrust Concerns with Patent Acquisitions, Competition L. Int’l, Aug. 2012, at 30, 36; M.S. Popofsky and M.D. Laufert, Patent Assertion Entities and Antitrust: Operating Company Patent Transfers, Antitrust 59 J. Mullin, Meet the Nice-Guy Lawyers Who Want $1,000 per Worker for Using Scanners, Source, Apr. 2013, at 1-2, www.americanbar.org/content/dam/aba/publishing/ Ars Technica (Apr. 7, 2013, 9:00 PM), arstechnica.com/tech-policy/2013/04/meet-the- antitrust_source/apr13_full_source.authcheckdam.pdf; M.S. Popofsky and M.D. nice-guy-lawyers-who-want-1000-per-worker-for-using-scanners. Laufert, Antitrust Attacks on Patent Assertion Entities, 79 Antitrust L.J. (2014). 60 Popofsky & Laufert, PAEs & Antitrust, supra note 1, at 10-11. 58 T. Wu, How to Make War on Patent Trolls, New Yorker (June 3, 2013), www.newyorker. com/online/blogs/elements/2013/06/how-to-make-war-on-patent-trolls.html. 61 Id. at 5-6, 10-11.

Concurrences N° 2-2014 I Colloque 23 New frontiers of antitrust I Paris, 21 février 2014 5. Because a PAE acquires rather than creates patents and to PAEs.66 We conclude there is no evidence at this point sometimes acquires a large portfolio of patents, the possibility that PAEs create a new or unique antitrust problem, that of applying Section 7 of the Clayton Act also springs to the their business model warrants more or less scrutiny than antitrust mind. Consider: “Under [S]ection 7 of the Clayton others as a matter of antitrust analysis, or that competition Act, the antitrust agencies ask whether a transaction is likely to enforcement agencies would be coming to the aid of result in a substantial lessening of competition; the same is true consumers by devising creative extensions of or departures under analogous European Commission law. The important from the standard antitrust framework in order to address element in that inquiry is whether the acquisition gives the PAEs’ conduct and business arrangements. If and when PAEs present legitimate antitrust problems by acquiring or acquiring firm the ability and incentive to exercise market otherwise creating market power to anticompetitive ends, power (…) [T]he transfer of [essential patents] to non-practicing the standard antitrust framework is fully capable of reaching entities, for example, could confer both the incentive and ability to that conduct and providing adequate remedies. the non-practicing entity to exercise market power.”62 10. Some of the transactions of concern to proponents of 6. The concern here is that a PAE is more likely to bring an strict antitrust scrutiny of PAEs—including using PAEs to infringement action than is a company that itself engages in coordinate collusive agreements that violate Section 1 of the 63 research and development; such a company likely practices Sherman Act—are either clearly or likely unlawful under various patents and is therefore susceptible to potential standard antitrust analysis.67 Much of the proposed framing of counterclaims. A PAE cannot be deterred by the risk of a PAEs as an antitrust problem, however, stretches the standard counterclaim because it does not practice any patents. analysis beyond its limits in an attempt to discourage use of particular business model.68 Thus, we suggest caution before 7. All commentators seem to agree that something is changing substantive antitrust standards or enforcement seriously amiss in our system of litigation that makes it policies to reach PAEs rather than operating under the possible for a PAE to exploit the uncertainty of patents and reasonable presumption that inefficiencies associated with the high cost of a court contest.64 The question is whether PAEs are the result of a litigation problem. there is a problem that can be addressed by application of the antitrust laws. That is the question to which we now turn. 66 These deviations include Professor Tim Wu’s aforementioned proposal to exterminate PAEs; Fiona Scott Morton and Carl Shapiro’s proposal to incorporate in the standard analysis a rebuttable presumption that the PAE business model of asserting and licensing intellectual property rights is anticompetitive; Mark Lemley and A. Douglas Melamed’s proposal to I. Is there a PAE “antitrust” problem? redirect the Clayton Act 180 degrees from prohibiting the aggregation of patents that create market power toward instead preventing their disaggregation when it would exacerbate the double marginalization or “Cournot complements” problem; and suggestions that the FTC’s 8. A smorgasbord of legislative, regulatory, and policy authority under Section 5 of the FTC Act to prohibit “unfair methods of competition” would solutions has been proposed in the United States to address be an especially useful tool to reach PAEs, their business model in general, and certain of their activities in particular, in light of the more limited reach of the other federal antitrust laws. See the problem(s) putatively created by patent aggregators. Wright & Ginsburg, supra note 8 for full discussion and citations. The variety of the proposals raises the question: Just what 67 See T. Ewing and R. Feldman, The Giants Among Us, 2012 Stan. Tech. L. Rev. 1, kind of problem do patent aggregators pose? Some critics 26, stlr.stanford.edu/2012/01/the-giants-among-us (“[T]he extensive ties among appear to operate from the premise that the rise of the PAE is the various mass aggregators should raise questions and concerns about horizontal collusion.”); F.M. Scott Morton, Deputy Assistant Att’y Gen. for Econ. Analysis, the result of a litigation problem and has little to do with the Antitrust Div., U.S. Dep’t of Justice, Presentation at Searle Conference on Antitrust PAE business model.65 Others suggest that PAEs might raise Economics and Competition Policy, Patent Portfolio Acquisitions: An Economic Analysis 8 (Sept. 21, 2012), available at www.justice. gov/atr/public/speeches/ a competition problem and should therefore be addressed 288072.pdf (“The last business model I will address is a joint venture between the troll and by changing substantive antitrust standards. We focus here more than one [producing firm](…) Such a joint venture may be helping product market competitors effectively coordinate or collude to disadvantage a rival.”); J.D. Wright, Comm’r, upon the latter suggestion and ask whether PAEs require Fed. Trade Comm’n, Remarks at the Dechert Client Annual Antitrust Spring Seminar: special attention as an antitrust problem. What Role Should Antitrust Play in Regulating the Activities of Patent Assertion Entities? 21 n. 38 (Apr. 17, 2013), available at www.ftc.gov/public-statements/2013/04/ what-role-should-antitrust-play-regulating-activities-patent-assertion (“Critics have 9. Antitrust commentators have proposed several complained, for example, that some practicing entities transfer their patents to PAEs with instructions or incentives to litigate against their rivals while hiding the origins of departures—all in the direction of greater intervention— the patents, and that some PAEs demand payments from alleged infringers’ downstream from what we would describe as standard antitrust analysis, customers rather than from the infringing manufacturers.”). to address the perceived competition problems attributed 68 See F. Scott Morton and C. Shapiro, Strategic Patent Acquisitions, 79 Antitrust L.J. (manuscript at 1, 21), available at faculty.haas.berkeley.edu/shapiro/pae.pdf (“[T]he likely economic effects 62 Gotts & Sher, supra note 1, at 34. of the sale of a patent portfolio depend on the differences between the business model and the other assets owned by Firm A, which is selling the portfolio, and Firm B, which is buying the portfolio.”). 63 Indeed, it has been pointed out that PAEs accounted for more than 60 percent of all patent The authors proceed to analyze a number of transactions involving patent portfolios, using the infringement cases filed through December 1 of last year. C. Chien, Assistant Prof., Santa business model of the seller as a proxy for incentives to engage in anticompetitive behavior. Id. Clara Univ. Sch. of Law, Presentation at the FTC & DOJ Patent Assertion Entity Activities Similarly, Scott Morton, when she was the Antitrust Division’s chief economist, suggested that Workshop, Patent Assertion Entities 23 (Dec. 10, 2012), available at www.ftc.gov/sites/default/ a relevant consideration in Section 7 analysis is the “business model of the buyer.” Scott Morton, files/documents/public_events/patent-assertion-entity-activities-workshop/cchien.pdf. supra note 11, at 8. To be clear, we have no objection to considering a transacting firm’s business model in order to improve our understanding of the specific transaction and 64 For a variety of perspectives on PAEs, see J.D. Wright and D.H. Ginsburg, Patent its likely competitive effects. Scott Morton and Shapiro’s shorthand approach is particularly Assertion Entities and Antitrust: A Competition Cure for a Litigation Disease?, problematic, however, with respect to PAEs because specialization is the fundamental feature of 79 Antitrust L.J. 201 (2014). the PAE business model drawing intense scrutiny and our understanding of that business 65 See M.A. Lemley and A.D. Melamed, Missing the Forest for the Trolls, 113 Colum. L. Rev. model and of its competitive effects are still nascent. Indeed, as Lemley and Melamed have 2117, 2120-21 (2013) (“[P]atent assertions by practicing entities can create just as many correctly observed, many of the concerns commentators have raised about PAEs’ assertion problems as assertions by patent trolls (…) In addition, practicing entities are increasingly and licensing activities apply with equal or greater force to operating entities. Lemley & engaging in ‘patent privateering,’ in which product-producing companies take on many of the Melamed, supra note 9, at 2139 (“While patent assertions by trolls are often said to be more attributes of trolls. Put differently, while trolls exploit problems with the patent system, they costly than assertions by practicing entities, there are actually a number of factors that have are not the only ones that do so.”). precisely the opposite effect.”).

Concurrences N° 2-2014 I Colloque 24 New frontiers of antitrust I Paris, 21 février 2014 1. The evidence does not suggest exists cannot support an inference of harm to competition.72 For instance, Professors James Bessen and Michael Meurer an antitrust problem estimated the total accrued direct costs incurred by defendants in response to patent assertions by PAEs at $29 billion as of 11. The emerging consensus is that there is something both 2011,73 but the authors account for license fees and litigation as novel and sinister about intermediaries that profit from direct costs and thus welfare losses without regard to whether intellectual property by marketing rather than using it to the license fees (or litigation costs incurred in order to obtain 69 manufacture a product. From a historical perspective, those fees) represent the patent holders’ lawful returns for their however, “there is actually nothing new about the practice innovation.74 Such costs can certainly reduce the incentive to of extracting economic value from patents by selling off or innovate and act as a tax upon economic growth; as such, they licensing the rights.”70 No doubt opportunism in the market may well call for a policy response. But our interest here is in for technology can cause serious economic damage. This sort isolating whether the evidence suggests these social costs arise of opportunism also has a long history in the U.S. market from an antitrust problem. for technology.71 For our purpose of determining whether PAEs pose any competition issues requiring a particularized 15. There is also some evidence that most infringement response from antitrust law or are better characterized as claims made by PAEs are weak, possibly suggesting that PAE symptoms of litigation problems, it is important to begin by litigation is becoming a problem worthy of a policy response. assessing the available empirical evidence. One frequently cited study found that PAE claims litigated to judgment are successful only 8 percent of the time, as compared 12. Proponents of the view that PAEs pose a competition to 40 percent for claims made by other types of plaintiffs.75 problem generally point to three types of evidence: direct evidence of harm to competitors; PAE litigation win rates that 72 For example, representatives of practicing entities offer anecdotal accounts of expenditures on PAE litigation and the impact of those expenditures upon the firm’s are low relative to win rates of producing entities; and attempts operations. See, e.g., Transcript at 49, FTC & DOJ Patent Assertion Entity Activities to estimate the fraction of PAE revenues that are returned to Workshop (Dec. 10, 2012) (Remarks by Neal Rubin, Vice President Litig., Cisco Sys. Inc.), available at www.ftc.gov/sites/default/files/documents/public_events/Patent%20 inventors. The evidence in each category is scant and provides Assertion%20Entity%20Activities%20Workshop%20/pae_transcript.pdf (“[W]e are no significant support for the view that PAEs pose a competition now spending twice as much money defending those cases as we are prosecuting and filing the 1,000 plus patents we have all over the globe. Indeed, we’ve had to reduce our patent filings problem as understood by the antitrust laws. to in some sense compensate and pay for the defense costs of PAE litigation.”). In an effort to move beyond anecdotal data, Professors James Bessen and Michael Meurer estimated 13. With respect to evidence of harm to competitors, it the total accrued direct costs incurred by defendants in response to patent assertions by PAEs at $29 billion as of 2011. See J. Bessen and M.J. Meurer, The Direct Costs from may well be the case that PAEs impose significant costs NPE Disputes, 99 Cornell L. Rev. 387, 408 (2014). Others have pointed out conceptual upon practicing entities. Reviewing a license demand or and methodological flaws in this particular study including, perhaps most important, that an infringement claim for a single patent can cost several the authors account for license fees and litigation as direct costs and thus welfare losses without regard to whether the license fees (or litigation costs incurred in order to obtain hundred thousand dollars, while litigating an infringement those fees) represent the patent holders’ lawful returns for their innovation. See D.L. case to final judgment can cost millions of dollars. Firms may Schwartz and J.P. Kesan, Analyzing the Role of Non-Practicing Entities in the Patent System, 99 Cornell L. Rev. 425, 429-31, 440-55 (2014). Schwartz & Kesan also point out also incur costs to acquire patents for the purely defensive the Bessen & Meurer’s sample is likely to overestimate these direct costs. Id. at 434-38. reason of preventing them from falling into the hands of a 73 Bessen & Meurer, The Direct Costs from NPE Disputes, supra note 16 at 408. PAE. But the familiar distinction between competitors and 74 See D.L. Schwartz and J.P. Kesan, Analyzing the Role of Non-Practicing Entities in the Patent competition for antitrust lawyers and economists cautions us System, 99 Cornell L. Rev. 425, 429-31, 440-55 (2014). Schwartz & Kesan also point out the to tread carefully before inferring harm to competition and Bessen & Meurer’s sample is likely to overestimate these direct costs. Id. at 434-38. consumers from evidence of a distribution of costs within 75 J.R. Allison, M.A. Lemley and J. Walker, Patent Quality and Settlement Among Repeat Patent Litigants, 99 Geo. L.J. 677, 693-94 (2011) (“[N]o matter how the data are sliced, an economic system. After all, there are many reasons for product-producing entities are far more likely to win their cases than [are PAE]s.”). A study which a research firm’s costs may increase, and its rate of by PricewaterhouseCoopers, however, found a much higher success rate for PAEs generally. See PricewaterhouseCoopers, 2012 Patent Litigation Study 12 cha t 5b (2012), available innovation commensurately decrease, but that does not make at www.pwc.com/en_US/us/forensic-services/publications/assets/2012-patent-litigation- every increase in the cost of inputs “anticompetitive” in any study.pdf (finding the overall litigation success rate for PAEs was 24 percent, versus 38 percent for practicing entities, during the period 2006-2011). Other studies suggest sense known to antitrust law or economics. the share of all infringement lawsuits filed by PAEs has increased over time. C. Chien, Assistant Prof., Santa Clara Univ. Sch. of Law, Presentation at the FTC & DOJ Patent 14. In any event, there is as yet precious little reliable empirical Assertion Entity Activities Workshop, Patent Assertion Entities 23 (Dec. 10, 2012), available at www.ftc.gov/sites/default/files/documents/public_events/patent-assertion- data on the costs PAEs impose upon practicing entities and what entity-activities-workshop/cchien.pdf; see also S. Jeruss, R. Feldman and J. Walker, The America Invents Act 500: Effects of Patent Monetization Entities on US Litigation, 69 See J. Bessen, J. Ford and M.J. Meurer, The Private and Social Costs of Patent Trolls, 11 Duke L. & Tech. Rev. 357, 388 (2012) (“[L]awsuits filed by patent monetizers have Regulation, Winter 2011-2012, at 26; R.P. Merges, The Trouble with Trolls: Innovation, increased [in five years] from 22 percent of the cases filed to almost 40 percent of the cases Rent-Seeking, and Patent Law Reform, 24 Berkeley Tech. L.J. 1583, 1587-88 (2009), filed (…)”). We note that attempts to estimate changes in patent litigation activity before available at scholarship.law.berkeley.edu/facpubs/537; D.P. McCurdy, Patent Trolls Erode and after September 16, 2011, when the America Invents Act (AIA), Pub. L. No. 112-29, the Foundation of the U.S. Patent System, Sci. Progress, Fall-Winter 2008-2009, at 78, 125 Stat. 284 (codified as amended in scattered sections of 35 U.S.C.), went into effect available at www.scienceprogress.org/wp-content/uploads/2009/01/issue2/mccurdy.pdf. are complicated by the change in joinder rules made by that legislation. Specifically, the AIA raises the possibility of measurement error because the number of lawsuits filed may 70 N.R. Lamoreaux, K.L. Sokoloff and D. Sutthiphisal, Patent Alchemy: The Market increase without increasing the number of patent assertions. Jeruss, Feldman, and Walker For Technology in US History, 87 Bus. Hist. Rev. 3, 4 (2013). Regarding the use of show that the number of defendants sued by patent monetization entities decreased from intermediaries to license patent rights, the authors observe that “during most periods of 145 in 2010 to 109 in 2011, but their data do not distinguish between suits filed before US history, it was as common for inventors to profit from their creativity in this way as by and after the effective date of the AIA. Jeruss et al., supra at 380-81. See U.S. Gov’t starting their own firms or working as salaried employees in R&D labs” and that “the ability Accountability Office, GAO-13-465, Intellectual Property: Assessing Factors That Affect to find buyers quickly for patents was an important driver of inventive activity during the late Patent Infringement Litigation Could Help Improve Patent Quality 15 (2013), available nineteenth and early twentieth centuries, when patenting rates in the United States were at at www.gao.gov/assets/660/657103.pdf (“[T]he increase [in patent litigation] in 2011 historic highs.” Id. was due to the fact that plaintiffs had to file more lawsuits at the end of 2011 after AIA’s 71 Id. at 36 (“[I]t is not clear that the ‘troll’ problem is commensurately more serious than it was enactment in order to sue the same number of defendants or anticipated this change and in the earlier period.”). rushed to file lawsuits against multiple defendants before it was enacted.”).

Concurrences N° 2-2014 I Colloque 25 New frontiers of antitrust I Paris, 21 février 2014 The fact that PAEs succeed in patent litigation far less responded by adjusting the procedural framework in order frequently than do producing entities may suggest the current to take the profit out of the new form of abusive litigation. state of affairs is not an equilibrium because defendants and More precisely, the reforms have altered the incentives that other specialists have begun and will continue to adapt to deal had made the threat of litigation profitable.79 with the litigation threat from PAEs.76 Therefore, evidence of PAEs’ patent litigation activity does not, without more, suggest 19. If the business model of a PAE is in fact to bring antitrust intervention is necessary. (or threaten to bring) suit for the infringement of patents that are of doubtful validity in order to extract a settlement that 16. A final category of evidence offered by PAE skeptics is less than the cost the defendant would incur to defend the is the percentage of PAE revenues returned to inventors.77 suit, then it is appropriate to ask: What makes this possible? One study estimates that PAEs return to inventors As mentioned above, there is an irreducible degree of approximately 20 percent of the costs they impose upon uncertainty about the validity of a patent that has not been defendants.78 No study, however, purports to show that PAEs tested and upheld by a court. But if that is true, then it has reduce the return to inventors relative to an appropriate always been true. What has changed is not the irreducible counterfactual, i.e., relative to what inventors would receive minimum uncertainty but the degree of actual uncertainty if there were no PAE’s to monetize their intellectual property attending the patents upon which PAEs base their claims. rights. Such a showing could at least imply a reduction in incentives to innovate which might, in turn, give rise to 20. Since 2005, over 80 percent of infringement claims potential antitrust implications in some cases. Absent such asserted by PAEs have involved a patent issued for computer 80 a counterfactual, it is impossible to discern whether PAEs software. Either the standards by which patent examiners increase, decrease, or have no effect upon the rate of return issue software patents have become less rigorous, or the nature for innovative activity. We see no reason, however, to think of the software for which patents are claimed has evolved inventors would assign their patents to PAEs if doing so in a way that makes it more difficult to determine whether a patent is valid.81 In either event, it seems the ultimate would reduce their return on innovation. source of most of the litigation attributable to PAEs traces to the PTO’s issuance of questionable patents for software.82 17. What is the import of these stylized facts for antitrust In their dissenting opinion in CLS Bank International v. Alice analysis? Much of the evidence shows PAEs seem to Corp.,83 a case that invalidated particular software patents do no more than redistribute economic rents along the but left the standard for patenting software unsettled, Judges production chain. There is no evidence suggesting PAEs Richard Linn and Kathleen O’Malley called the attention of reduce the return to innovation relative to the appropriate Congress to this problem: “Congress can, and perhaps should, counterfactual. This is not to say that any PAE behavior develop special rules for software patents.”84 that increases the costs of practicing entities is or should be immune from antitrust scrutiny; it is not, and it should not be so. Conduct that raises rivals’ costs and harms competition can certainly violate the antitrust laws, and PAE conduct fitting this description should be subject to appropriate scrutiny. The evidence, however, does not suggest any need to depart from the established antitrust framework in order appropriately to address the activities of PAEs. 2. A litigation problem calls for a litigation solution

79 See, e.g., the enactment of the Class Action Fairness Act of 2005 (CAFA), the Private 18. This is not to say the activities of PAEs are not problematic Securities Litigation Reform Act of 1995 (PSLRA), or the California Medical Injury or do not call for law reform insofar as PAEs are exploiting Compensation Reform Act of 1975 (MICRA) by Congress. For a more detailed discussion, aspects of the litigation system to extract settlements based see Wright & Ginsburg, supra note 8. not upon the merits of their claims but rather upon the cost 80 C. Chien and A. Karkhanis, Presentation at the Patent and Trademark Office Software Partnership Roundtable at Stanford University: Software Patents & Functional Claiming of defending against them. The rise of PAEs, however, does 6 (Feb. 12, 2013), available at www.uspto.gov/patents/init_events/software_ak_cc_ not mark the first time lawyers have found a way to profit sw.pdf. from bringing or threatening to bring cases purely for their 81 See, e.g., S. McJohn, Scary Patents, 7 Nw. J. Tech. & Intell. Prop. 343, 366 (2009) (“[S] settlement value. Indeed, this has been a recurring problem, oftware (…) patent claims often use vague terms with meanings that change over time and in different applications.”); G Parchomovsky and M. Mattioli, Partial Patents, 111 though it has arisen in a variety of otherwise unrelated Colum. L. Rev. 207, 221 (2011) (“Citing software patents as uncertain in scope, often types of litigation. In each such instance, lawmakers have vague, obvious, sometimes profoundly difficult to analyze for infringement, and yet frequently litigated, critics have called on the Federal Circuit to dictate tighter standards for software patentability, or to abolish software patents altogether.”). 76 Lamoreaux et al., supra note 14, at 37 (“As in the late nineteenth century, one might expect defendants to revise their assessments of the probability of winning and start fighting more 82 See C. Shapiro, Patent System Reform: Economic Analysis and Critique, 19 Berkeley of these cases in court (…) [and to see] the emergence of a myriad of new entities that aim Tech. L.J. 1017, 1018 (2004) (“Complaints regarding the patent system typically allege to profit from bolstering the bargaining position of defendants.”). that the U.S. Patent and Trademark Office (USPTO) issues many questionable patents (…) In particular, critics have berated the quality of patents in the areas of computer software and 77 There is relatively broad recognition that PAEs have facilitated or conducted a sizeable Internet business methods.”). percentage of patent licensing transactions. See, e.g., A. Kelley, Practicing in the Patent Marketplace, 78 U. Chi. L. Rev. 115, 117 (2011). 83 717 F.3d 1269 (Fed. Cir. 2013) (en banc). 78 Bessen & Meurer, The Direct Costs from NPE Disputes, supra note 16, tbl. 5. 84 Id. at 1333 (Linn and O’Malley, JJ., dissenting).

Concurrences N° 2-2014 I Colloque 26 New frontiers of antitrust I Paris, 21 février 2014 The inhospitality tradition has even been applied before to II. The antitrust tradition the technology market, as evidenced by the rise and fall of the of inhospitality to new business infamous “Nine No-Nos,” which effectively banned several patent licensing practices now understood to be part of the models normal competitive process and contributors to economic 89 21. The rise of intermediaries in the technology market is growth. The Nine No-Nos were ultimately repudiated and replaced with a presumption that patent licensing is pro- not new and is not entirely unexpected given the resurgence 90 of small firms and inventors in that market over the past competitive. several decades.85 Neither is the rise of intermediaries that threaten legal action if a license fee cannot be agreed upon 24. At least two causes are common to the mistaken application of the inhospitality tradition in each of these a new development in the U.S. market for technology.86 examples—insufficient understanding of the economics PAE skeptics argue that the novel dimension that requires underlying the business practice and its competitive additional antitrust scrutiny is the rise of the particular form consequences combined with a reflexive tendency to enforce of economic organization PAEs represent, namely, an entity the antitrust laws against any new practice that is not well that owns, licenses, and litigates over patents at scale but does understood. Nobel laureate Ronald Coase’s admonition to not manufacture products.87 economists to avoid this tendency91 has not been made any less relevant by the technology available to today’s economic 22. Calls for greater antitrust scrutiny of new forms of modelers and econometricians. economic organization are not particularly new. Indeed, such calls to arms have a long history in the United States, 25. The inhospitality tradition has been applied to pricing and it is a history that signals caution when faced with an practices, contractual arrangements such as exclusive invitation to intensify antitrust scrutiny before there is a dealing and tying arrangements, and more broadly to proper theoretical and empirical diagnosis of the problem to modes of organizing economic activity, such as mergers be solved by such scrutiny. and franchising relationships. The evolution of antitrust thinking about franchising provides a particularly useful 23. Students of antitrust will be familiar with the long example of the dangers of inhospitality toward new forms list of business practices, forms of organization, and of business organization. The hostility to franchising arose contractual arrangements that were the target of antitrust’s precisely because franchising created value by spreading 88 inhospitality tradition until economic learning and across multiple firms with different, specialized, economic judicial experience taught that the underlying conduct functions various activities previously conducted within was a product of the normal competitive process rather a single firm. That came to be understood only over time. than a form of anticompetitive conduct. The evolution of Thus, while the average franchise lawyer was once required to antitrust thinking—about tying, territorial and customer be “educated in matters of antitrust (…) today one would not restrictions, price discrimination, maximum and minimum be wrong to describe antitrust law as being almost irrelevant resale price maintenance, exclusive dealing, and horizontal with respect to the franchise community.”92 Similarly, calls and vertical mergers—in each case has followed this pattern. for antitrust scrutiny of PAEs focus upon a novel form of business organization, viz., an intermediary specializing in the aggregation and enforcement of patents, as much as or more than they focus upon any practice in which PAEs commonly engage.

85 See, e.g., A. Arora & A. Gambardella, The Market for Technology, in 1 Handbook of the 89 See B.B. Wilson, Special Assistant to the Assistant Att’y Gen., Antitrust Div., Dep’t of Economics of Innovation 641, 667 (B.H. Hall and N. Rosenberg eds., 2010) (estimating Justice, Remarks at the Fourth New England Antitrust Conference: Patent and Know- the share of non-federal research and development expenditures by firms with more than How License Agreements: Field of Use, Territorial, Price and Quantity Restrictions 25,000 employees has fallen from about two-thirds in 1980 to one-third in 2005). (Nov. 6, 1970) (“[W]hat licensing practices does the Department of Justice consider to be clearly unlawful? I believe that I can identify at least nine.”). 86 Lamoreaux et al., supra note 14, at 21-22 (discussing late-19th century examples of threats aimed at railroads and western farmers and the responses to those threats). 90 See A.B. Lipsky, Jr., Current Antitrust Division Views on Patent Licensing Practices, 50 Antitrust L.J. 515, 517-24 (1981). Mr. Lipsky was then a Deputy Assistant Attorney 87 See, e.g., Ewing & Feldman, supra note 11, at 1, 42 (“These entities, which we call mass General in the Antitrust Division of the DOJ. See also U.S. Dep’t of Justice & Fed. Trade aggregators, do not engage in the manufacturing of products nor do they conduct much Comm’n, Antitrust Guidelines for the Licensing of Intellectual Property §2.1 (1995), research. Rather, they pursue other goals of interest to their founders and investors (…) Most available at www.justice.gov/atr/public/guidelines/0558.pdf. important, the basic business model of mass aggregation is troubling.”); Scott Morton, supra note 11, at 1 (“I will show that the antitrust analysis, undertaken from an economist’s 91 R.H. Coase, Industrial Organization: A Proposal for Research, in 3 Economic Research: perspective, depends on the business model of the buyer.”). Retrospect and Prospect 59, 67 (V.R. Fuchs ed., 1972) (“One important result of this preoccupation with the monopoly problem is that if an economist finds something—a 88 The phrase “inhospitality tradition” seems to have originated with D.F. Turner, Some business practice of one sort or other—that he does not understand, he looks for a monopoly Reflections on Antitrust, 1966 N.Y. St. Bar Ass’n Antitrust L. Symp. 1, 1-2 (“I approach explanation. And as we are very ignorant in this field, the number of ununderstandable territorial and customer restrictions not hospitably in the common law tradition, but practices tends to be rather large, and the reliance on a monopoly explanation, frequent.”). inhospitably in the tradition of antitrust law.”). On the inhospitality tradition today, see A.J. Meese, Reframing Antitrust in Light of Scientific Revolution: Accounting for 92 R.M. Barkoff, Antitrust Law Becoming Irrelevant to Franchise Lawyers?, N.Y. L.J., Transaction Costs in Rule of Reason Analysis, 62 Hastings L.J. 457, 466 (2010). July 28, 2008, at 1.

Concurrences N° 2-2014 I Colloque 27 New frontiers of antitrust I Paris, 21 février 2014 III. Conclusion 26. Our preliminary assessment is that the evidence currently available does not give any reason to view the inefficiencies associated with PAE litigation as a competition problem rather than a litigation problem, and one arising ultimately from the grant of dubious patents by the PTO. A litigation problem calls for a litigation solution––an adjustment to the procedural framework to reduce the return to abusive litigation––and a patent quality problem calls for reforms at the PTO.

27. While continued study of PAEs and of the incentives to pursue patent litigation may provide further clues as to which particular reforms offer the economy the highest rate of return, we view PAEs as symptoms of litigation and PTO problems, and not as the disease itself. The history of antitrust law is replete with examples of its misapplication to new business models and methods of organizing economic activity. Those historical missteps serve as important reminders that antitrust law is at its best when using economic tools and evidence to evaluate specific business practices and at its worst when adopting broad presumptions about business models and entire forms of economic organization. The now standard antitrust approach is more than adequate to handle any conduct by PAEs that might violate the antitrust laws. n

Concurrences N° 2-2014 I Colloque 28 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

Patents: Can antitrust authorities contribute to fixing the dysfunctional patent system? National courts and EU regulators: Institutional relations in the patent wars

Thomas Graf* Partner, Cleary Gottlieb Steen & Hamilton, Brussels

1. Standard essential patents (“SEPs”) have been the subject not merger specific and cleared the transaction.99 But it of European Commission (the “Commission”) attention subsequently opened investigations under Article 102 TFEU for some time. In Rambus, the Commission intervened in a against Samsung and Motorola for seeking injunctions based patent ambush case.93 In Qualcomm, it investigated royalty on SEPs in their patent disputes with Apple. In Samsung, it levels, but closed the case without conclusion after the main has market tested commitments that would curb Samsung’s protagonists settled.94 In IPCom, the Commission made sure ability to request injunctions for SEPs,100 and in Motorola it is that FRAND commitments followed the patents in question reportedly set to adopt an Article 7 infringement decision.101 after a sale.95 4. The Commission’s revised Horizontal Cooperation 2. These earlier cases focused on preventing SEP owners Guidelines did not take a position on injunctions for SEPs, from charging excessive royalties after the standard was even though comments on the draft Guidelines had noted adopted and once industry participants were locked into the issue during the consultation process. The Commission’s the standard. The Commission synthesized its learning from injunction investigations therefore break new ground. They these investigations in its revised Horizontal Cooperation raise important institutional questions about the relationship Guidelines that is published in 2011.96 As part of that between the Commission’s enforcement powers and the role revision, the Commission confirmed the so-calledex ante of Member State courts in providing judicial protection and principle for the calculation of FRAND royalty rates: resolving disputes, including on EU law matters. Can SEP A royalty is fair and reasonable if it corresponds to what the owners be subjected to EU competition law infringement patent owner could have charged before its patents became actions under Article 7 of Regulation 1/2003 for seeking part of the standard.97 judicial relief from Member State courts, and if so under what conditions? 3. More recently, the Commission has been investigating concerns about patent owners seeking injunctions for SEPs. 5. The thesis of this paper is that Article 7 infringement The issue first came up at the EU level in the context of proceedings against individual companies are not the right the Google/Motorola merger control proceedings because instrument for resolving market power concerns arising from Google, as part of that transaction, acquired Motorola injunction demands for SEPs. Such infringement proceedings Mobility’s sizable patent portfolio, which included a number create tensions with fundamental principles of law and are of mobile phone SEPs.98 The Commission concluded that inconsistent with the system of judicial protection on which concerns about injunctions for Motorola’s SEPs were the EU legal framework rests. This is not to say, however, that EU competition law has no role to play in SEP injunction cases. It is for Member State courts to apply EU competition law in this area. Member State courts are under an obligation by virtue of Article 4(3) TEU to deny injunction requests that would be inconsistent with EU competition law principles. * The author advises companies with interests in the issue. This article reflects solely the author’s own views. Such an approach reconciles EU competition law principles with the judicial role that Member State courts play within 93 Case COMP/38.636 Rambus, decision of December 9, 2009. the EU legal order. 94 Commission closes formal proceedings against Qualcomm, European Commission, MEMO/09/516, November 24, 2009. 95 Commission welcomes IPCom’s public FRAND declaration, European Commission, MEMO/09/549, December 10, 2009. The principle was reiterated in the Google/ 99 Google/Motorola Mobility, §§116, 139, 153-156 The Commission also pointed to evidence Motorola Mobility merger proceedings, Case COMP/M.6381 Google/Motorola Mobility, showing that Google’s objective in acquiring Motorola Mobility’s patent portfolio was Commission decision of February 13, 2012, §120. not to extract high license fees, but “to create patent balance in the smart mobile device 96 European Commission, Guidelines on the applicability of Article 101 of the Treaty on the industry and to preserve the ability of Android OEMs to compete and innovate free from the Functioning of the European Union to horizontal co-operation agreements, [2011] OJ C costs and uncertainties of litigation and litigation threats,” Google/Motorola Mobility, §118. 11/1. 100 Commission consults on commitments offered by Samsung Electronics regarding use of 97 Ibid., §289. standard essential patents, European Commission, IP/13/971, October 17, 2013. 98 Case COMP/M.6381 Google/Motorola Mobility, Commission decision of February 13, 101 Motorola Mobility Faces EU Curbs in Patent Clash With Apple, Bloomberg, February 7, 2012. 2014.

Concurrences N° 2-2014 I Colloque 29 New frontiers of antitrust I Paris, 21 février 2014 6. Ultimately, a holistic solution is needed to address market power concerns related to patents. The same concerns II. EU competition law limits, but as for SEPs may also arise for de facto essential patents or for does not exclude, the ability to patents that are the subject of anti-competitive contractual arrangements. The same legal principles should therefore obtain injunctive relief for SEPs apply to all injunctions that may conflict with Articles 101 10. A duty to license under EU competition law and and 102 TFEU, regardless of whether they involve SEPs or limitations on the ability to obtain injunctions can be seen not. Moreover, in addressing market power concerns arising as two sides of the same coin. There can be no injunction if from injunction demands, all relevant areas of EU law should there is a duty to license. But just as a duty to license only be considered, including, for example, free movement rules exists in “exceptional circumstances,”107 the loss of injunctive and EU law minimum requirements for national procedural relief is not absolute, but subject to conditions. rules. 11. A FRAND promise does not imply that a patent owner abandons its right to injunctive relief in all circumstances. I. What is the concern with A patent owner must, for example, have the ability to seek an injunction against a patent user that is unwilling to take injunctions for SEPs? a licence or that is financially unable to comply with the It is well recognized that standard setting can create market licence. The Commission recognise that competition law power for patent owners where there was none before.102 does not impose an absolute ban on injunctions for SEPs. Prior to standardization, different, alternative technologies may compete as solutions for a given technical problem. In a 12. In Google/Motorola Mobility, the Commission stated standard setting process, industry participants choose one that “the seeking or enforcement of injunctions on the basis of of these technologies to become part of the standard. If the SEPs is (...) not, of itself, anti-competitive. In particular, (...) it standard is successful and is adopted widely, inter-technology may be legitimate for the holder of SEPs to seek an injunction competition will be diminished and the standardized against a potential licensee which is not willing to negotiate in 108 technology will become dominant. good faith on FRAND terms.”

7. The Commission accepts the reduction of inter- 13. The Commission reiterated this principle in its public technology competition that standard setting may entail, statements on the Samsung and Motorola cases, noting but only on condition that the technologies embodied in the that “seeking and enforcing of an injunction for SEPs can standard are available to all interested parties.103 Participants constitute an abuse (...) where the holder of a SEP has given in the standard setting process must therefore commit, prior a commitment to license these patents on FRAND terms to adoption of the standard, to license at FRAND terms and where the company against which an injunction is sought 109 patents that are essential for practising the standard.104 has shown to be willing to enter into a FRAND licence.” The FRAND licensing obligation is thus a trade-off for the The Commission made clear that “a potential licensee which competitive restrictions that result from the standard setting remains passive and unresponsive to a request to enter into process. licensing negotiations or is found to employ clear delaying tactics cannot be generally considered as ‘willing.’”110 8. An unlimited ability to obtain injunctions for SEPs against users of the standard would conflict with that 14. This is consistent with the connection between the licensing obligation. If a patent owner has a duty to license obligation to license and the limitation of injunctions. If the vis-à-vis a counter-party, it cannot, at the same time, obtain counter-party is not willing to take a licence, then there cannot an injunction against that party since that would create a be an obligation to license and thus also no loss of the right to contradictory outcome. injunctive relief. A duty to license, and the associated protection from injunctions under Article 102 TFEU, represents a legal 9. This principle was expressed by the German privilege for would-be licensees. Counter-parties that wish to Bundesgerichtshof in its landmark Orange Book judgment, benefit from this privilege must therefore conduct themselves which was based on both German and EU abuse of in a manner that merits the benefit. They cannot, as the dominance rules.105 Orange Book concerned a de facto Commission notes, remain passive or act in bad-faith. standard, rather than a standard derived from a standard setting process, but the principle is the same: A patent owner 15. The German Bundesgerichtshof in Orange Book gave cannot take something, via injunction, with one hand, that it more substance to these principles by formulating a number would have to return with the other, via a licence.106 of conditions that defendants must meet to be shielded from

107 Joined Cases C-241/91 and 242/91 Magill [1995] ECR I-743; Case C-418/01 IMS Health 102 Horizontal Cooperation Guidelines, §266. [2004] ECR I-5039; Case T-201/04 Microsoft [2007] ECR II-3601. 103 Horizontal Cooperation Guidelines, §280. 108 Google/Motorola Mobility, §126. 104 Horizontal Cooperation Guidelines, §§285 and 287. “FRAND” stands for “fair, 109 Commission sends Statement of Objections to Motorola Mobility on potential misuse of reasonable, and non-discriminatory”. mobile phone standard-essential patents- Questions and Answers, European Commission, 105 Case KZR 39/06 Orange Book, judgment of the Bundesgerichtshof of May 6, 2009. Memo, May 6, 2013; Samsung – Enforcement of ETSI standards essential patents (SEPs), European Commission, MEMO/12/1021, December 21, 2012 (emphasis added). 106 The Bundesgerichtshof referred in this connection to basic principles of good faith (dolo petit, qui petit quod statim redditurus est), Orange Book judgment, §24. 110 Ibid.

Concurrences N° 2-2014 I Colloque 30 New frontiers of antitrust I Paris, 21 février 2014 patent injunctions. These conditions, in essence, require a disputes. Regardless of where one wants to draw the limits would-be licensee to: (i) make a binding, unconditional offer for SEP injunctions, it seems problematic to suggest that it to take a licence that the licensor cannot reasonably refuse; is unlawful for a company to ask a court where these limits and (ii) pay royalties into escrow if the would-be licensee are. Such a proposition creates tensions with fundamental already practices the patent.111 principles of law and the rules on liability for competitive restrictions emanating from State measures. 16. In the German injunction proceedings brought by Motorola against Apple, which are the subject of the Commission’s Motorola investigation, both the Landgericht 1. Tension with fundamental principles Mannheim and the Oberlandesgericht Karlsruhe applied the of law Orange Book principles to conclude that Apple was not a willing licensee and that therefore Article 102 TFEU did not 19. If there is no absolute ban on injunctions for SEPs, as 112 preclude Motorola from obtaining an injunction. One of the Commission recognizes, there must be a way to test in the key issues was that Apple was not prepared to accept court whether an injunction is available in a particular case. a termination clause that would have allowed Motorola to As the Commission noted in Google/Motorola, “courts are terminate the licence if Apple challenged the validity and the ultimate decision-makers on whether injunctions should be infringement of the SEPs at issue. The German courts found granted and any SEP holder needs to convince a court before it Apple’s position to be inconsistent with the holding of the can obtain an injunction.”116 Bundesgerichtshof in Orange Book that the counter-party cannot avoid an injunction by making a licence offer that is 20. Yet, suggesting that SEP owners risk liability under 113 conditioned on a finding of infringement. Article 102 TFEU if they go to court to test whether a counter-party is an unwilling licensee, in effect, denies SEP 17. The Commission, on the other hand, takes the view that owners the possibility to have the issue resolved. The risk of a counter-party should not be treated as an “unwilling” antitrust liability will deter them from putting the question to licensee, merely because it challenges the validity or the court in the first place. infringement of the patents at issue.114 The debate in the Commission’s injunction cases is therefore not about whether 21. Such a position therefore seems contradictory. It implies patent owners can obtain injunctions in principle, but under that courts are not, in fact, the “ultimate decision-makers” what conditions that ability should be limited. In effect, the on whether to grant an injunction. Instead, access to the Commission is using these cases as a means to challenge courts is prevented or limited based on conditions that are Member State court case law, notably German case law, formulated ex ante by an administrative enforcement body. with which the Commission does not agree. Indeed, the Commission has noted with reference to the Orange Book 22. This creates tensions with fundamental principles of judgment and the follow-on case law of lower German law. Both the Commission and the EU Courts recognise the courts that “an interpretation of that ruling whereby a willing importance of access to the courts as a fundamental right licensee is essentially not entitled to challenge the validity under EU law. In its report on the pharmaceutical sector and essentiality of the SEPs in question is potentially anti- inquiry, the Commission stated that “enforcing patent rights 115 competitive.” in court is legitimate and a fundamental right guaranteed by the European Convention on Human Rights”.117 The General Court confirmed in itsITT Promedia and Protégé judgments III. Do legal limits on injunctions that “access to the Court is a fundamental right and a general render an injunction request principle ensuring the rule of law”.118 in itself unlawful? 23. To be sure, fundamental rights are not absolute, and a company can waive its rights within certain limits. 18. The Commission’s attempt to define the legal limits for A FRAND promise could be understood as such a waiver. injunctions through the avenue of infringement proceedings FRAND promises are sometimes compared to arbitration under Article 7 of Regulation 1/2003 against individual clauses, by which companies forgo relief from state courts. companies raises questions about the relationship between the But the analogy is imperfect. Arbitration clauses only replace Commission’s enforcement powers and the role of Member one form of judicial relief with a different form. Moreover, State courts in providing judicial protection and resolving the parties retain the possibility to argue before state courts that a particular dispute is outside the scope of the 111 Orange Book, judgment of the Bundesgerichtshof of May 6, 2009, KZR 39/06, §29. arbitration clause. Injunction actions for SEPs are similar to 112 Motorola v. Apple, judgment of the Landgericht Mannheim of December 9, 2011, 7 O such a situation: The SEP owner in these actions essentially 122/11; Motorola v. Apple, judgment of the Oberlandesgericht Karlsruhe of January 23, 2012, 6 U 136/11. maintains that the counter-party is outside the scope of 113 Motorola v. Apple, judgment of the Oberlandesgericht Karlsruhe of January 23, 2012, the beneficiaries for whom the FRAND promise was given 6 U 136/11, §§27-29; Orange Book, judgment of the Bundesgerichtshof of May 6, 2009, KZR 39/06, §32. 116 Google/Motorola Mobility, §113. 114 Commission sends Statement of Objections to Motorola Mobility on potential misuse of 117 European Commission, Pharmaceutical Sector Inquiry, Final Report, July 8, 2009, mobile phone standard-essential patents- Questions and Answers, European Commission, p. 201. Memo, May 6, 2013. 118 Case T-111/96 ITT Promedia [1997] ECR II-313, §60; Case T-119/09 Protégé [2012] 115 Ibid. ECR II-2937.

Concurrences N° 2-2014 I Colloque 31 New frontiers of antitrust I Paris, 21 février 2014 because the counter-party is not holding up its end of the commentator has put it, “every national judge was henceforth bargain. Preventing SEP owners from testing such a position a European judge.”124 The EU legal order does not establish in court implies that the boundaries of the FRAND promise and does not require a fully built-out court system at the EU cannot be assessed independently by courts.119 level for the resolution of EU law disputes precisely because Member State courts take the role of a decentralized EU 24. The Motorola case is, if anything, even more problematic. judiciary.125 Here, as seen, the German courts considered the application of Article 102 TFEU and concluded, after a full hearing 28. The relation between Member State courts and the of both parties, that Article 102 TFEU did not preclude Commission is therefore not just one of entities situated the grant of an injunction in the particular circumstances at different regional levels. It is one that is also governed of the case. Yet, the Commission maintains that Motorola by the fundamental principle of the separation of powers. should not have relied on these judgments to request their The Commission, as an administrative body, cannot override enforcement. the function that Member State courts fulfil as constituent elements of the EU judicial system. Yet, by suggesting that 25. This amounts, in effect, to a proposition that a patent SEP owners act illegally if they ask courts to adjudicate on owner cannot trust an injunction judgment rendered in the availability of injunctive relief or request enforcement of its favour, but must second guess that judgment. Such a favourable judgments, the Commission creates a conflict with proposition not only seems an unrealistic demand to place this fundamental principle. before a party that just secured a judicial victory after full litigation. It also questions the role of courts in resolving disputes and creating legal certainty among the litigant 2. Who commits the restriction parties. If companies cannot trust and rely on court judgments, then a fundamental element of the judicial anyway? 120 system is compromised and legal certainty is undermined. 29. The Commission’s injunction cases also raise questions under EU competition law because it is not clear in what 26. The Masterfoods judgment of the Court of Justice sense the filing of an injunction request could be said to does not support a different conclusion for the injunction constitute a restriction of competition in the first place. It is 121 cases at issue here. The Court’s holding in Masterfoods of course true that if the injunction is granted and enforced, (that the Commission “cannot be bound” by a judgment of then the infringing product is removed from the market. But a national court) related to the competition law analysis the granting and enforcing is done by the state courts, not of exogenous conduct that took place outside the context the patent owner. The patent owner only requests these state of judicial proceedings, specifically commercial agreements measures. concluded between a supplier and its retailers.122 In contrast, in the injunction cases, the challenged conduct consists 30. It is an established principle of EU competition law of procedural steps taken within the context of judicial that requesting restrictive state measures does not in itself proceedings. The proposition is that a company may act constitute anti-competitive conduct. This is because, as unlawfully solely by pursuing the normal procedural path Advocate General Jacobs explained in Albany, “such action within the judicial system—filing an action and requesting by itself does not affect the competitive process or the freedom enforcement of a favourable judgment. This is qualitatively to compete of anyone”.126 Instead, any possible resulting different from the Masterfoods situation because it challenges restriction “is a consequence of subsequent State action”, not the integrity of the judicial process itself. company conduct.127 The responsibility for such measures therefore rests with the Member State whose authorities 27. The tension can also not be resolved by a reference to adopt these measures, not with individual companies the supremacy of EU law or the supra-national character requesting the measures. of the Commission as an EU Institution. This is because Member State courts are part of the EU institutional order 31. The Commission’s expressed concerns in the injunction too. The seminal Van Gend & Loos judgment of the Court of cases reflect this. As seen, the Commission’s real issue is with Justice, which declared EU law to be directly applicable by the “interpretation” of the willing licensee concept in German 123 Member State courts, made Member State courts, by that case law, for which the German courts bear responsibility, not finding, an integral part of the EU judicial branch. As one the individual litigants. To resolve that type of concern, the EU institutional framework offers alternative mechanisms. 119 Similarly, B. Vesterdorf, IP Rights and Competition Law Enforcement Questions, Journal of European Competition Law & Practice, 2013, pp. 109-111. 120 In Kühne & Heitz, the Court of Justice noted that “legal certainty is one of a number of general principles recognised by Community law” and that “finality” of a decision following “expiry of the reasonable time-limits for legal remedies or by exhaustion of those remedies, contributes to such legal certainty”, Case C-453/00 Kühne & Heitz [2004] ECR I-837, §24. 124 L. van Middelaar, The Passage to Europe, p. 50, Yale 2013. 121 Case C-344/98 Masterfoods [2000] ECR I-11369. 125 See too Recital 7 of Regulation 1/2003: “National courts have an essential part to play in 122 Ibid., §48. The judgment was, moreover, rendered prior to the adoption of applying the Community competition rules.” Regulation 1/2003, which reinforced the role of national courts in EU competition law proceedings and introduced specific instruments to resolve divergences in the application 126 Case C-67/96 Albany [1999] ECR I-5751, Opinion of Advocate General Jacoby, §292; of the law. Case C-35/99 Ardunio [2002] ECR I-1529, §§74-75. 123 Case 26/62 Van Gend & Loos [1993] ECR 1. ECR I 127 Ibid.

Concurrences N° 2-2014 I Colloque 32 New frontiers of antitrust I Paris, 21 février 2014 IV. There are alternatives for investigations.131 The German court’s request shows how potential conflicts of legal interpretation by national courts clarifying the law on injunctions and the Commission can be resolved in a manner that is consistent with the EU institutional framework. The ruling 32. The tensions raised by Article 7 infringement proceedings in that case will inevitably take precedence over any decision do not imply that EU competition law has no role to play in that the Commission might adopt in the injunction cases.132 SEP injunction cases. The basic principle that the Commission seeks to clarify is sound: If there is an obligation to license g Another possibility is for the Commission to issue under EU competition law, there should be no injunction. guidelines to clarify its legal position. While guidelines are not binding for national courts, they are apt to influence them. In 33. But those responsible for upholding that principle are fact, the German case law on termination clauses (which are the Member State courts in their function as elements of the the main bone of contention in the injunction cases) rests on EU judiciary and ultimate authors of any restriction that the recognition of the right to provide for termination of a results from an injunction. Member State courts are under an licence in the event of a validity challenge that is expressed obligation pursuant to Article 4(3) TEU to avoid measures in the Commission’s Technology Transfer Block Exemption that conflict with the Treaty objectives. They therefore must, Regulation and Guidelines.133 The Oberlandesgericht by virtue of that provision in conjunction with Articles 101 Karlsruhe in its Motorola v. Apple ruling specifically referred and 102 TFEU, deny injunctions that would create a conflict to the Commission’s rules for technology licensing to support 128 with EU competition law principles. its conclusion that a counter-party was not a willing licensee if it was not prepared to agree to such a termination clause.134 34. If the Commission believes that Member State courts The Commission’s revised Block Exemption Regulation and are not properly applying the limitations derived from Guidelines, which will enter into force in May, now remove EU competition law for injunctions, then it has a number termination clauses from the scope of the exemption, but it of possible means to address this, other than through seems questionable to apply such rule changes retroactively, infringement proceedings against individual companies: rather than prospectively.135 g The Commission has the right pursuant to Article 15(3) of g Finally, the Commission could bring infringement Regulation 1/2003 to intervene in national court proceedings proceedings under Article 258 TFEU against Member States and present its position on matters of EU competition whose courts do not properly limit injunctions. The Court law. That provision was specifically introduced to ensure of Justice has confirmed that Member States incur liability “consistency in the application of the competition rules”.129 for violations of EU law by their courts.136 The Commission There are no reasons to assume that intervening in national would therefore have the legal ability to address any problem litigations would be more cumbersome or less efficient at the root through infringement actions against non- than bringing infringement proceedings under Article 7 of compliant Member States. Regulation 1/2003. To the contrary, direct intervention in the offending proceedings would, in all likelihood, require less effort, since the Commission can focus on the legal issues, V. Application of EU competition and would be quicker than opening infringement proceedings rules outside court proceedings that take notoriously long to resolve. 35. For commercial conduct outside judicial proceedings that g As part of an intervention, the Commission can also propose conflict with EU competition law rules, Article 7 infringement to the national court to submit a reference for preliminary proceedings against individual companies remain relevant, ruling to the Court of Justice pursuant to Article 267 TFEU. both for violations under Articles 101 and 102 TFEU. Within the decentralized system of judicial review set up For example, the application of non-FRAND terms, such as by the EU legal order, preliminary reference rulings are excessive or discriminatory royalties, or tying SEPs with non- the natural and proper institutional instrument to resolve SEPs are open to challenge under Article 102 TFEU. divergences in the interpretation of the law.130 Such rulings 131 Case C-170/13 Huawei v. ZTE, judgment pending. have the added merit of creating a stronger precedent than 132 The draft commitments offered by Samsung expressly reserve the outcome in the Huawei v. any individual Commission infringement decision, let alone a ZTE matter. commitment decision, could. The importance of preliminary 133 Article 5(1)(c) Commission Regulation 772/2004 on the application of Article 81(3) ruling proceedings for the type of conflicts at issue here is of the Treaty to categories of technology transfer agreements, [2004] OJ L 123/1, and underscored by the reference that a German court recently Guidelines on the application of Article 81 of the EC Treaty to technology transfer agreements, [2004] OJ C 101/2, §113. submitted on its own initiative in the Huawei v. ZTE matter 134 Motorola v. Apple, judgment of the Oberlandesgericht Karlsruhe of January 23, 2012, on the very matters raised in the Commission’s injunction 6 U 136/11, §28. 135 Revised Technology Transfer Block Exemption Regulation and Guidelines, draft published 128 See too, S. Völker, “Promises, Promises... Law and Policy Consideration with Respect to on March 21, 2014. Curiously, the exemption of termination clauses is maintained the Application of Article 102 TFEU to the Pursuit of Injunctions Based on FRAND- for exclusive licences, Article 5(1)(b) Revised Technology Transfer Block Exemption Encumbered Standards-Essential Patents, 17th Annual EU Competition Law and Policy Regulation and Revised Technology Transfer Guidelines, §§133, 136-139. The Guidelines Workshop, 2012, p. 10. also continue to recognize the legitimacy of no-challenge clauses in settlement agreements, 129 Recital 21 of Regulation 1/2003. Revised Technology Transfer Guidelines, §243. 130 A conceptual alternative would be to allow appeals to the Court of Justice against 136 Case C-224/01 Köbler [2003] ECR I-239; Case C-173/03 Traghetti del Mediterraneo Member State judgments on points of EU law. But this is not foreseen by the EU Treaties. [2006] ECR I-5177; C-379/10 Commission v. Italy [2011] ECR I-180.

Concurrences N° 2-2014 I Colloque 33 New frontiers of antitrust I Paris, 21 février 2014 36. Curiously, the Commission in some public statements competition within the Community contrary to the provisions seems to suggest that it will defer to national courts on of the Treaty, in particular to those of Article 85 [now Article questions related to FRAND terms.137 This is surprising, 101].”143 Contractual arrangements for the exploitation or given the Commission’s past investigations of FRAND enforcement of patents may therefore infringe Article 101 issues and given that not all licence terms are necessarily TFEU and, if they do, injunction demands connected to reviewed by a court. Moreover, if the ultimate concern raised such infringing arrangements should be rejected. by injunction requests is that such requests could be used to extract non-FRAND royalties, as is sometimes suggested,138 then the focus presumably should be on the licencing terms VI. Towards a holistic that are in fact negotiated. It is also by no means evident that approach to patent issues under national courts are necessarily better equipped to deal with FRAND questions because limitations on disclosure and EU competition law discovery may prevent them from fully reviewing whether the 40. Ultimately, a holistic approach is needed to market applied terms are discriminatory or unreasonable. power concerns arising from the exercise of patent rights. The current focus on SEPs disguises to some extent that 37. Article 101 TFEU infringements, in turn, may arise, for similar concerns, as those identified in connection with SEPs, example, in connection with contractual arrangements among can also arise outside a standard setting context. There is companies that involve the joint purchase or exploitation of nothing inherently singular in SEPs. Indeed, several of the patents. In the case of the acquisition of the Novell patent key EU competition law concepts now applied in connection portfolio by the CPTN consortium, the Bundeskartellamt with SEPs were first developed in connection with non-SEPs. intervened based on German merger control rules to address As seen, the Bundesgerichtshof’s Orange Book ruling on concerns that the consortium could serve as a means to foreclose the limitation of injunctions, involved a de facto standard. 139 Linux. But the same rationale could presumably bring such Similarly, the Commission first developed principles on purchase consortia under the scope of Article 101 TFEU. the valuation of essential technology in the context of the Microsoft case, which subsequently shaped the Commission’s 38. Article 101 TFEU concerns may also arise in the case discussion on the valuation of SEPs in its Horizontal of contractual arrangements relating to the exploitation Cooperation Guidelines.144 and enforcement of patents via consortia or via so- called “privateering arrangements”. Under privateering 41. On the issue of injunctions specifically, the underpinning arrangements, manufacturers transfer some of their patents symmetry between a duty to license pursuant to Article 102 to a non-practicing patent assertion entity and participate in TFEU and the limitation on injunctions is not specific to SEPs. a share of the profits from the entity’s enforcement actions.140 The same logic must therefore apply for all patents for which Such arrangements may create anti-competitive effects by a duty to license exists under Article 102 TFEU, regardless of increasing the market power of patent portfolios, raising whether they read on formal standards or form part of a de facto royalty levels, and impeding innovation. This is because standard.145 Likewise, where the exercise of patents would they remove the competitive constraints associated with the conflict with Article 101 TFEU, for example, because it exploits risk of counter-suits (non-practicing entities are immune to market power created through anti-competitive agreements, counter suits). Moreover, if multiple patent owners enter into such as privateering arrangements, injunctions should not be arrangements with the same assertion entity, the size of its available, as is apparent from the Keurkoop ruling. patent portfolio is expanded, which renders defences against patent actions more difficult and costly.141 42. A holistic approach to patent related concerns also implies that other areas of the law should be considered 39. As the Court of Justice noted in Parke Davis, Article 101 alongside competition law in addressing such concerns. TFEU may apply “if the use of one or more patents, in concert In terms of procedure, one potential relevant issue is raised between undertakings leads to the creation of a situation” by limitations on disclosure and discovery under national that is incompatible with Article 101 TFEU.142 The Court, procedural rules that may hinder courts in determining moreover, held in Keurkoop that “the proprietor of an whether requested royalty rates are discriminatory or exclusive right may not rely on his right if the prohibition on unreasonable. General EU law principles require Member importation or marketing of which he wishes to avail himself States to implement procedural rules that enable an effective could be connected with an agreement or practice in restraint of enforcement of EU law.146

137 Samsung – Enforcement of ETSI standards essential patents, European Commission, 143 Case 144/81 Keurkoop [1982] ECR 2853, §26 MEMO, December 21, 2012: “Does the Commission take a position on what a reasonable royalty rate is? No. National courts or arbitrators are generally well equipped to do this.” 144 In Microsoft, the Commission formulated the principle that Microsoft could only charge for the “intrinsic value” of its interoperability technologies, but not the “strategic value” 138 See Case COMP/M.6381 Google/Motorola Mobility, Commission decision of February 13, derived from the essential character of these technologies, Case Comp/37.792 Microsoft, 2012, §107. decision of March 24, 2004, §1008, upheld by the General Court in Case T-167/08 Microsoft, judgment of June 27, 2012, not yet reported. This “intrinsic value” principle 139 Bundeskartellamt, press release of April 20, 2011. can be understood as a more generalized variant of the ex ante principle set out in the 140 M. Dolmans, Privateers and trolls join the global patent wars; can competition authorities Horizontal Cooperation Guidelines for the valuation of SEPs. disarm them?”, Computerrecht 2014/37. 145 Provided that the exacting conditions of the Court for a duty to license are met (Joined 141 This will be especially problematic where the privateering arrangements are set up by Cases C-241/91 and 242/91 Magill [1995] ECR I-743; Case C-418/01 IMS Health [2004] the patent owners to pursue non-member competitors. Such arrangements are akin to ECR I-5039; Case T-201/04 Microsoft [2007] ECR II-3601. collective boycotts. 146 Case 33/76 Rewe [1976] ECR 1989; Case 45/76 Comet [1976] ECR 2043; Case 222/84 142 Case 24/67 Parke, Davis & Co [1969] ECR 86, §7. Johnston [1986] ECR 1651; Case C-213/89 Factortame [1990] ECR I-2433.

Concurrences N° 2-2014 I Colloque 34 New frontiers of antitrust I Paris, 21 février 2014 43. In terms of substantive law, the EU free movement principles are relevant alongside competition rules. An VII. Conclusion injunction will inevitable restrict the free movement of goods 47. Subjecting patent owners to EU competition law that incorporate the patented technologies. While Article 36 infringement proceedings for requesting injunctions from TFEU allows Member States to justify free movement Member State courts creates tensions with fundamental restrictions on grounds of intellectual property protection, principles of law and the role of Member State courts as such restrictions may not go beyond what is “necessary” elements of the EU judicial system. The Commission could to protect the “specific subject matter” or “essence” of the avoid such tensions by relying on the institutional instruments 147 patent right in question. The proportionality test expressed that it has available to participate in and shape national court in this qualification has formed the foundation for the proceedings. Ultimately, Member State courts are responsible Court’s exhaustion doctrine that circumscribes the exercise for denying injunctions that would conflict with EU law. 148 of national patent rights. Relevant EU law areas that Member State courts should take into account include not only competition rules, but also free 44. The same proportionality principle arguably also calls for movement rules, and procedural requirements of EU law. a more granular limitation of particular types of remedial These rules offer the basis for developing a holistic standard relief, such as injunctions, in situations where the exercise for limiting injunctions that are incompatible with EU law of that remedy would be disproportionate. In general, the principles, regardless of whether the patents involved are right to exclude infringing products is part of the specific SEPs. n subject matter of the intellectual property right.149 But in the particular circumstances of a case, an injunction request may nonetheless represent a disproportionate restraint on trade.

45. Thus, in Allen and Hanburys, the Court of Justice held that a patent owner could not seek an injunction against imported products based on a UK patent that was subject to a so-called license of rights.150 An injunction would have been disproportionate because, as the Court noted, the license of rights had “appreciably altered” the substance of the patent rights.151

46 Just as in Allen and Hanburys, other circumstances that impact the interest of the patent owner might render injunctions disproportionate. Such circumstances could include, for example, the existence of a duty to license under EU competition law or patent exploitation models that focus on royalty collection, rather than practicing of the patents, such as the business models pursued by non-practicing entities. The proportionality principle inherent in free movement rules could therefore offer a basis for introducing a balancing test for injunction requests similar to the one set out by the US Supreme Court in its eBay judgment.152 This would make it possible to develop a harmonised minimum threshold for injunctions across all EU Member States that balances the interests of patent owners and patent users in a manner that protects competition and the free movement of goods.

147 Case 15/74 Centrafarm [1974] ECR 1147, §§8 and 12. 148 Case 15/74 Centrafarm [1974] ECR 1147; Case 187/80 Merck v. Stephar [1981] ECR 2063; Case 267/95 Merck v. Primecrown [1996] ECR 6285. 149 Case 15/74 Centrafarm [1974] ECR 1147, §9. 150 Case 434/85 Allen and Hanburys [1988] ECR 1245. 151 Ibid., §12. 152 eBay v. MercExchange, 547 U.S. 388 (2006), judgment of the US Supreme Court of May 15, 2006.

Concurrences N° 2-2014 I Colloque 35 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust @ Colloque Paris, 21 février 2014

Peter Freeman* [email protected] European Competition Chairman, Competition Appeal Tribunal, Londres Network 10 years after Bruno Lasserre & EC Regulation 1/2003: [email protected] Président, Autorité de la concurrence, Paris Can cooperation be extended Andreas Mundt [email protected] to merger control and Président, Bundeskartellamt, Bonn advocacy? Mélanie Thill-Tayara [email protected] Avocate associée, Norton Rose Fulbright, Paris Introduction Wouter Wils [email protected] Conseiller, auditeur, Commission européenne, Bruxelles Professeur associé, King’s College, Londres Bruno Lasserre Président, Autorité de la concurrence, Paris

Abstract 1. My presentation today will be delivered in English, in order to facilitate the discussion in this international panel and to allow for a more lively exchange of view. I apologize for prizing, in this particular instance, expediency over principle. La troisième table-ronde de la conférence “Demain la concurrence” du 21 février 2014 à Paris, était dédiée au “Règlement 1/2003 et Réseau européen de concurrence 10 2. Let me first thank the host and the organizers of this event. The topic we are ans après : Faut-il étendre la cooperation au contrôle des addressing today in our round-table is challenging. If I were to summarize our concentrations et à l’advocacy ?”. Les objectifs pour les auteurs de cette table ronde sont d’une part, d’analyser les objectives today, they would be the following: succès et les échecs de l’état actuel de la coopération entre les autorités dans les domaines du contrôle des concentrations et g to analyze the successes and failures of the current state of play as regard de l’advocacy; d’identifier les domaines nécessitant une plus grande coopération, et enfin de rechercher les outils les plus cooperation between authorities in the fields of merger control and advocacy; adaptés à cette coopération. g to identify the core issues for which there is a need for greater cooperation and consistency; and

This third roundtable of the conference “New frontiers g to discuss the type of tools which are best suited to achieve this result. of Antitrust” (Paris, 21 February 2014) was dedicated to “European Competition Network 10 years after & EC 3. The focal point of my introduction will relate to cooperation in the field of Regulation 1/2003: Can cooperation be extended to merger control and advocacy?”. The objectives for the authors of this merger control, an area in which the ECN, for historical reasons, has not extended roundtable are : to analyze the successes and failures of the its reach yet. Indeed, if European authorities have travelled rather rapidly along the current state of play as regard cooperation between authorities road to greater convergence in fighting antitrust infringements, they have remained in the fields of merger control and advocacy; to identify the core issues for which there is a need for greater cooperation more cautious in designing a common pattern on merger review. and consistency, and finally to discuss the type of tools which are best suited to achieve this result. 4. There is one major reason for the current state of play: with national control preceding EU-wide control,153 the logic in the field of merger control was and remains exactly opposite to the one at play in the antitrust field through the ECN: the organization of alternate competences takes precedence over the harmonization of substantive rules. The focus of Member States and EU legislators has thus been on devising an appropriate threshold for transactions with a “Community dimension,” while providing for sufficient flexibility through a referral system which allows for the most efficient allocation of cases, whether upwards to the Commission or downwards to NCAs.

* All views expressed are personal. 153 Germany and UK, 1973 ; France, 1977; compare with first EC Merger Regulation in 1989.

Concurrences N° 2-2014 I Colloque 36 New frontiers of antitrust I Paris, 21 février 2014 5. With this focus on vertical cooperation or at least vertical 2. The alignment of procedural agendas issues—i.e., cooperation between NCAs, but only in the context of a prospective referral—the topic of horizontal in the context of divergent national cooperation has probably not attracted enough attention frameworks in the European context. This is unfortunate because, as emphasized in the Monti report of 2010, mergers and 7. As in the antitrust field, the way merger control is set external growth of European firms make a significant up procedurally and institutionally is decided by Member contribution towards the establishment of a true single States. However, if Regulation 1/2003 has made some market. With multifilings in the EU still a common feature,154 forays into procedural aspects, the same does not hold for notwithstanding the possibility of referrals, discrepancies Regulation 139/2004. Accordingly, there are some procedural in national systems, both procedurally and substantively, differences which, while not insurmountable, may complicate can lead to sub-optimal outcomes. Accordingly, if recent effective cooperation. initiatives are to be welcomed, more needs to be done on both fronts, i.e., procedure (I.) and substance (II.). 8. A crucial issue concerns the discrepancies in clearance deadlines and more generally in procedural agendas amongst NCAs. Today, the Autorité de la concurrence operates under I. Procedural aspects of horizontal strict review periods, i.e., 25 days in Phase I and 90 days in Phase I, whereas review periods throughout the EU can be as cooperation in the field of merger long as 80 days in Phase I and 259 days in Phase II. Different control in Europe review periods reflect different internal organizations and processes amongst NCAs which cannot easily be aligned, even when parties take care to pre-notify well in advance. This 1. Building the tools for cooperation in turn can limit the scope for cooperation between an NCA which is pressed to issue a decision within tight deadlines and 6. Important steps have already been taken to increase an NCA which does not face similar constraints. A telling cooperation, consistency, and even convergence amongst example is the now infamous review of Eurotunnel’s bid to NCAs: acquire certain assets of SeaFrance, active on the markets for cross-channel transport. The Autorité and the OFT were g The setting up of a dedicated working group on mergers in both approached in Spring of 2012 by the notifying party, 2010 was a significant move, underlying the high value to be but whereas the Autorité issued its decision on 7 November derived from NCAs functioning as a network, as had already 2012, the Competition Commission, to which the case was been achieved in the antitrust field under Regulation 1/2003. referred by the OFT in October 2012, adopted its final report on 6 June 2013, seven months after the Autorité’s decision. g The adoption of best practices in November 2011 helped to fill the gap in the field of horizontal cooperation in the Other procedural discrepancies can limit cooperation: it context of multijurisdictional filings, by going further, where is the case of NCAs’ investigative powers, which may vary necessary, than the exchange of basic non-confidential to some extent from one legal regime to the next.Beyond information agreed by ECA members since 2002. It sets out procedural aspects, effective cooperation between NCAs also a non compulsory path for cooperation amongst concerned hinges on the extent to which they share a common analytical NCAs to ensure consistent or at least non conflicting framework and, put simply, speak the same language. outcomes when serious common issues arise, e.g., (i) the qualification of a given transaction as a concentration subject to notification, (ii) substantive aspects relating to II. Substantive aspects of market definition or the theory of harm, (iii) the design and implementation of remedies. NCAs will thus decide, on a horizontal cooperation in the field case-by-case basis, whether to liaise and discuss at certain of merger control in Europe key stages of their procedure—this is a win-win situation for parties and NCAs alike, ensuring consistency while allowing a timely assessment through the limitation of duplication 1. Bridging the gap: The shift towards of efforts, provided merging parties are proactive, provide consistent information in their submissions and do not the SIEC test and increased exchanges attempt to circumvent jurisdictions, e.g., by resorting to on substance amongst authorities staggered transactions. 9. The Merger Regulation provided for a new SIEC (“Significant Impediment to Effective Competition”) test in 2004. This test was not new to us in France, where it had already been applied for several years. However, it did spur NCAs to depart progressively from the dominance test to allow for a more effects-based analysis, as has been the case recently of Germany, Finland or Portugal. Today, all but one 154 Several hundred cases per year; source: Press release issued upon the publication of the Best Practices on Cooperation between EU National Competition Authorities in Merger NCA apply an SIEC or a corresponding SLC (“Significant Review (2011). Lessening of Competition”) test.

Concurrences N° 2-2014 I Colloque 37 New frontiers of antitrust I Paris, 21 février 2014 10. Building on this growing convergence on substance, the rules also at national level where a merger has cross border EU working group on mergers has proved a particularly effects, something which goes further than the parallel fruitful forum, allowing an informed discussion amongst CAs adoption of the SIEC test by nearly all NCAs. This is a and the dissemination of best practices on such substantive move I personally support: indeed, it would be much more aspects of merger control as market definitions, competitive transparent and clearer if we all switched to the same model, assessments, and the design of appropriate remedies. For especially where cross-border aspects exist. It would also example, discussions on the delimitation of local markets provide stability over time, while preserving decentralization. were held in 2012, in the context of which the Autorité presented its method and practices in several recent cases. 15. In conclusion, the application of the same substantive law Likewise, the focus in 2013 was on remedies, and the Autorité in the context of mergers subject to multiple notifications, shared in particular its experience in dealing with non- together with the alignment of timing and reinforced compliance by Groupe Canal + of its 2006 commitments. mechanisms for cooperation between NCAs, could pave the way for the establishment of mechanisms, as a last resort, 11. The development of national guidance in the field of aimed at reconciling decisions which are anticipated to be merger control is also essential to disseminate the benefits conflicting or inconsistent. These as well as other options are of this cross-fertilization between authorities. The model on explored in the report drafted by Fabien Zivy on behalf of the divestitures we published last July exemplifies the benefits to Autorité and which was recently submitted by the Autorité be drawn from inter-agency exchanges: it draws in particular to the French Minister of the Economy, Pierre Moscovici155. on existing documents published by the Bundeskartellamt The report establishes an ambitous agenda for reform and the European Commission, to systematize our approach, which is now in the public domain and will, hopefully, increase legal certainty for firms and ensure remedies are inform the priorities of the new European Commission, effectively implemented. when its mandate begins in November this year. The policy options set out in the report are naturally up for debate, but it is paramount that these issues be at least discussed and 2. Towards a fully harmonized somehow addressed. substantive test? 12. These developments are important. However, sharing the III. Conclusion same standard and increasing exchanges on substance may not always prove enough. 16. I cannot end this presentation without also mentioning advocacy as another field where the ECN can help 13. A case in point when looking at whether a more ambitious strengthening the cooperation between NCAs. substantive convergence is necessary is the Eurotunnel/ MyFerryLink case, mentioned earlier. The Autorité in France 17. So far, advocacy has been of little concern to the ECN, and the Competition Commission in the UK examined a feature that is at odds with the fact that all of its member the same merger, notified by the same undertakings, and agencies have been devoting much effort, on an individual analysed the potential effects on the same relevant markets. basis, to conducting sector enquiries, often in industries of However, while the Autorité authorised the merger subject to particular interest to European consumers. Indeed, advocacy behavioural remedies that addressed vertical and conglomerate is a powerful tool in the hands of a competition authority, effects, the Competition Commission concluded, on the basis alongside more traditionnal enforcement. of a different counterfactual, that additional remedies were required to address possible unilateral effects. In this dossier, 18. In this context, better coordination of advocacy activities informal and formal exchanges took place between the would offer strong leverage to all members of the antitrust two agencies in accordance with the current Best Practices. community across Europe. One striking example can be found However, they did not allow them to reach a fully convergent in the food sector: since 2005, no fewer than 13 agencies have analysis. One element of divergence in particular which might completed market enquiries, leading to the emergence of a have been mitigated had the two agencies applied the same pattern of highly interesting common findings. Of course, substantive rules related to the counterfactual used and the national agencies took into account each others’ reports, and stage at which the hypothetical scenarios of an alternative exchanged on methodological issues, on a case-by-case basis as well as at ECN level. But maybe coordination could take purchaser are considered in the analysis: while the Autorité place at an earlier stage, while plans to launch an inquiry on examined these alternatives in the context of the failing firm the same topic are being devised by several agencies. defence and therefore after assessing the operations’ impact on competition, the Competition Commission incorporated 19. It would also be an upgrade for the standing of advocacy these scenarios into the competitive assessment proper and in the ECN if joint sector inquiries could be conducted by made them part of its relevant counterfactual. groups of NCAs, in industries of particular interest, sharing similar features across borders. There is no doubt that the 14. A possible answer to substantive inconsistency lies in impact on public authorities and stakeholders would be the Monti report of 2010. The report had identified greater significantly enhanced and this would contribute to further convergence on how mergers are assessed as a key driver of further convergence within the internal market. It thus 155 The report is available at: http://www.autoritedelaconcurrence.fr/doc/cp_ advocated the application of substantive EU merger control concentrations_transfrontalieres.pdf

Concurrences N° 2-2014 I Colloque 38 New frontiers of antitrust I Paris, 21 février 2014 coordination of public debate within the EU. This is what we are for instance currently working on with our British colleagues with whom we are leading a joint work on open and closed systems. In light of the overall positive impact of such initiatives, it begs the question of whether specific provisions should be added under Regulation 1/2003 to harmonize the conditions under which sector inquiries are carried out, whether exclusively or as part of a joint initiative.

20. I will now give the floor to my esteemed co-panellists, who will each provide their specific viewpoint on the future of the ECN as regards merger control and advocacy: g Andreas Mundt will share with us his experience at the head of the Bundeskartellamt, assessing the benefits for competition authorities of stronger convergence in merger control and advocacy, in terms of effectiveness and consistency; g Peter Freeman, in his capacity today as chairman of the UK Competition Appeals Tribunal and formerly as chairman of the Competition Commission, will offer the perspective of a judge as well as an enforcer, looking notably at the tensions which may exist between national legal traditions and the extension of the ECN’s remit to merger and advocacy, and the way in which these can be surmounted; g Mélanie Thill Tayara will offer the practitioner’s perspective on potential developments within the ECN; g Wouter Wills will touch on the more procedural aspects and the question of the concrete new instruments which could sustain this extension of the ECN’s remit. n

Concurrences N° 2-2014 I Colloque 39 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

European Competition Network 10 years after & EC Regulation 1/2003: Can cooperation be extended to merger control and advocacy? Principle vs. pragmatism and hard cases make bad law Peter Freeman* Chairman, Competition Appeal Tribunal, Londres

5. First, it provides for the harmonised, if not uniform, I. Introduction application of a single set of substantive EU competition rules 1. The European Competition Network (“ECN”), by any to all cases falling within its ambit. National competition law reasonable measure, has been a great success. As the title cannot detract from or over-ride the application of EU law, of this session shows, it was established to give effect to the apart from a limited permission to apply stricter measures to new decentralised competition enforcement regime brought unilateral conduct. in by Regulation 1/2003 (“Reg 1/2003”),156 which it may be recalled provided for the designation of competent national 6. Second, it deals with issues over allocation of cases, competition authorities to apply Articles 101 and 102 in a where more than one authority might reasonably have a co-ordinated manner, abandoned the exclusive jurisdiction claim to take the case; in addition, sharing out of tasks, e.g. of the European Commission to grant exemption decisions on investigations, is done within its framework. under Article 101(3), abolished notifications for exemption, and by this and other measures attempted also to encourage 7. Third, and suffusing the other activities, it provides for the private enforcement of competition law in national the exchange of case specific information, subject to the courts. gateways and limitations laid down in Reg 1/2003. 8. Fourth, and even more pervasively, it provides a means 2. The contrast with the previous enforcement regime is of personal contact and familiarity which “oils the wheels” striking. Not only was the European Commission freed of the of more specific co-operation. Issues can be discussed and burden of considering hundreds of individual notifications, debated, working parties can examine things in detail, and but the previous tension over the effect of exemption people get to know each other as a result. decisions on national enforcement activity (exemplified in the enigmatic case of Wilhelm v. Bundeskartellamt157) was removed as were all the arguments about whether “comfort III. Private enforcement letters” were or were not binding. 9. To divert for a moment, Reg 1/2003 also contained 3. In seeking to build on this success and possibly expand measures to promote private enforcement and to clarify the scope and depth of the co-operation that the ECN has the relationship with public enforcement. These included brought, we should perhaps take a little care to look at why empowering national judges to apply EU competition law, the the ECN has worked so well and to consider how transferable codification of the so-called Masterfoods“ ” principles, and this success might be to other fields of competition measures to encourage the European Commission to respond enforcement activity. to questions from national judges and to appear as “amicus curia” in appropriate cases. This was an acknowledgment that, with the removal of the individual exemption decision, II. What the ECN does national courts would henceforth be free to apply Article 101 in toto. However, it may be remarked that these mechanisms 4. To my mind, the ECN does three main things. (I should have not worked outstandingly well; questions from national mention that my exposure to the workings of the ECN during judges have been relatively few (National Grid158 was an my time as Chairman of the UK Competition Commission exception), and amicus curiae appearances even fewer. There [“UKCC”] was limited by the fact that the UKCC was not is no real equivalent of the ECN for national courts, and designated as a competent authority under Reg 1/2003, and I although the Association of European Competition Judges attended by invitation only, as to which see below.) (with support from DG Comp) strives valiantly to make * All views expressed are personal. up for the deficit, up to now less than half of the Member States have participated. So if there is one area where the 156 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the aspirations of Reg 1/2003 remain to be fulfilled, it is private rules on competition laid down in Articles 81 [101] and 82 [102] of the Treaty. 157 Case 14/68, Walt Wilhelm and Others v. Bundeskartellamt [1969] ECR 1. 158 National Grid Electricity Transmission plc v. ABB Ltd and others [2011] EWHC 1717 (Ch).

Concurrences N° 2-2014 I Colloque 40 New frontiers of antitrust I Paris, 21 février 2014 actions in national courts; there are developments afoot, sense, it is entering into the territory covered by the UK’s obviously, but still plenty to do. market investigation regime, which seeks to identify and remedy features of a market that adversely affect competition. I have always regarded the UK’s regime as “hard” rather IV. Where is the ECN deficient? than “soft”, not least because the UKCC (and the new CMA that will succeed it) has the power itself to impose remedial 10. One should perhaps not become carried away by the measures including the divestment of assets or businesses. success of the ECN. There are some respects in which it Bringing this regime within the scope of the co-operation could be improved. These derive mainly from what otherwise under Reg 1/2003 would be a positive step. might be seen as its main strength, its legal grounding in Reg 1/2003. VI. The ECN and merger control 11. In terms of membership, it does not include the EFTA authorities, such as Norway. This is an anomaly, as the 16. Extending the ECN’s activities to embrace merger control wider, informal grouping known as the ECA (European is a much bigger subject, and to my mind a more problematic Competition Authorities) does, and the two groups sit one, not least because the current legal basis for the ECN’s somewhat oddly alongside each other—at least that was substantive work clearly does not extend to merger control. my personal observation. The ECN also does not include non-designated authorities, such as the UKCC, as I have 17. That is not to say that seeking to improve co-ordination already mentioned. It may be that the UKCC was the only and harmonisation of merger control within the EU is to be such excluded authority, and that problem has recently been discouraged; far from it, the benefits to cohesion of policy solved by the—perhaps rather drastic—measure of merging and clarity for business and consumers of a well functioning it with the Office of Fair Trading (“OFT”) to create a single competition policy apply as strongly here as elsewhere. authority that is designated. Indeed, the European Commission has only recently brought in further improvements designed to make the system work 12. Moreover, that does not resolve the other problem, which even more smoothly at EU level.159 These measures include: is that its application is confined (if that is the right word) to Articles 101 and 102. The UK’s market investigation regime g Extension of the simplified procedure to cover (which will survive the UKCC/OFT merger in even stronger “insignificant increment transactions” (and some other form), is not formally included in the co-operation. This adjustments to the operation of this procedure), which the denies other ECN members detailed understanding of the Commission anticipates will increase by 10% the number of substantive progress of UK market investigations. This might mergers falling within the simplified procedure. have made some formalistic sense when market investigations were conducted by a body (the UKCC) that was itself not an g Some adjustments to the Implementing Regulation, as ECN participant, but now that they are entrusted to the new regards the formalities for merger control filings, as well Competition and Markets Authority (“CMA”), which is, the as revised forms (including Form CO and Simplified Form position is simply anomalous. CO), standard texts for divestiture commitments and trustee mandates. 13. And the ECN’s activities and powers do not extend to merger control, which we discuss below. 18. The European Commission has also issued a consultation paper on further adjustments to the EUMR, including its possible extension to acquisitions of minority holdings short V. The ECN and advocacy of actual control.160

14. The title of this session encourages us to consider 19. However, in pursuing further change, we should be clear: a greater role for the ECN in advocacy. Advocacy in what is the objective and what are the practical possibilities? the traditional sense means the greater promotion of competition within government to prevent other valid policy 20. We should first of all bear in mind that, of all the different instruments from unnecessarily restricting the potential for parts of competition law, merger control has the closest competition to operate in the economy. This, I am sure, is a connection to national or public interest, and governments valid aim, although it may be easier to say than to achieve. from time to time interfere with a purely competition based But it involves, to my mind, no need to alter the legal basis assessment, because of over-riding national considerations underlying the work of the ECN. It is simply a task that (BSkyB,161 Lloyds/HBoS,162 etc). Also, Member States authorities can and should address, using the co-operation mechanisms that already exist. 159 Measures adopted on 5th December 2013, see http://europa.eu/rapid/press-release_IP- 13-1214_en.htm 15. Advocacy can also mean the use of so-called “soft” means 160 See http://ec.europa.eu/competition/consultations/2013_merger_control/ merger_control_en.pdf. of enforcement, that is to say measures other than the strict 161 British Sky Broadcasting Group Plc and Virgin Media, Inc. v. (1) Competition Commission enforcement of Articles 101 and 102 to encourage markets (2) Secretary of State for Business, Enterprise and Regulatory Reform [2008] CAT 25. to work better and businesses to compete in the interests of 162 Merger Action Group v. Secretary of State for Business, Enterprise and Regulatory Reform consumers and the better working of the economy. In this [2008] CAT 36.

Concurrences N° 2-2014 I Colloque 41 New frontiers of antitrust I Paris, 21 février 2014 have generally been reluctant to hand over the entirety of 25. The French Competition Authority has recently merger control to the European Commission, so a complete produced a report166 which goes into these issues in great transfer of all merger control to the Commission by national detail. This is not the place to examine this in depth, but let governments is therefore not at present a realistic possibility. me just consider briefly a few of the recommendations made Nor is a system of parallel competences, as is the case for in the report. Articles 101 and 102, easy to envisage, for the same reason. Instead, it is a question of where the line between national 26. First, the report recommends that the current threshold and EU control should be drawn. of notifiability in three Member States for a merger becoming subject to the EUMR should be reduced to two, a recommendation in which the report follows Professor Monti. 21. We need to see where the impetus for any move for This will no doubt be discussed very seriously; I would further change is coming from. I see two main sources: first, merely observe that, whilst any numerical threshold of this the natural wish to consolidate and build on the operation kind is by its nature arbitrary, a reduction to two might have of the EUMR now working for a decade in its most recent a wider scope than might appear, simply because the merger form; and second, from a couple of recent cases, one of control thresholds in some Member States are quite low, so which in particular seems to have aroused considerable that this might be a large expansion of EU jurisdiction “by interest in France, possibly because it involves that symbol of the back door”, as it were. To be fair, the report also proposes the ambiguity of Franco-British co-operation, the Channel measures to bring merger notification thresholds more into 163 Tunnel. line.

22. On the first, the desire to consolidate the EUMR, to 27. This recommendation is essentially directed to the first modify its more mechanistic features and to increase its question—i.e. where should the line be drawn? effectiveness and weight in global terms seems entirely natural and understandable. This desire is in part reflected in 28. The report also recommends something more related to the recommendations of Professor Mario Monti in his 2010 the second question, that is the abolition of all non-turnover report164 and in subsequent speeches by senior DG Comp based national tests for jurisdiction. Here we have to consider officials and by the Vice-President himself.165 the so-called “share of supply” test in the UK, which has been a feature of UK merger control since its inception in 1965. 23. Mechanisms to improve reference “down” to Member By this, a merger, regardless of the turnover involved, can be States under Article 9 and to refer “up” from one or more investigated if the share of supply of a particular description Member States are signs of this also. Nor is it unnatural to of goods or services resulting from the merger exceeds 25%, turn attention to those mergers which, although below the or the share above 25% increases. While this can give rise to uncertainty, it is fairly well understood in the UK at least, turnover thresholds that provide the jurisdictional cut-off and is regarded by the government (which consulted on this for the EUMR, nonetheless appear to have effects outside point as recently as 2012) as providing useful flexibility to one country. I find this trend entirely understandable, and see catch small but potentially anti-competitive mergers. I would no good reason to resist examining whether and if so how anticipate some lively discussion on this recommendation, at cross-border mergers within the EU territory can be more the very least. properly controlled, provided that the evidence shows there is a problem. 29. On the first question (where should the line be drawn?), I see the argument as in large measure political, and I believe 24. To my mind, there are two distinct, albeit related, this extends to the “three to two” recommendation mentioned questions. First, where should the line be drawn between EU above. This therefore seems to be a longer-term matter, which and national merger control? Second, does national merger can only come about as and when the necessary political control need to be harmonised, or at least better co-ordinated? agreement on this and possibly other changes to the EUMR Both of these are political as well as legal questions, raising has been reached. On the second question (co-ordination issues of the need for unanimity in the Council and the risk between national merger authorities), progress may be easier of unintended consequences. to achieve and it is clear there are some issues to consider, but I am less convinced of the need for major change.

30. Another of the report’s recommendations (again 163 The idea of a tunnel under the English Channel goes back to the late 18th century but following Professor Monti) is for the harmonisation of the it was not achieved until 1994. In 1924, the UK Chiefs of Staff Committee somewhat presciently observed that “if the Channel Tunnel were constructed, in all probability a large substantive test for merger control in national law, adopting proportion of cross-Channel steamer services would disappear” ( see A. McQueen, The Prime the formulation in the EUMR. It may be useful to examine Minister’s Ironing Board: True Story from the Government Archives, Little, Brown 2013, the evidence for there being a problem here, which seems to p. 108) me to centre largely on two recent cases. 164 M. Monti, A New Strategy for the Single Market (9 May 2010), available at: http:// ec.europa.eu/bepa/pdf/monti_report_final_10_05_2010_en.pdf. 165 J. Almunia, Vice-President of the European Commission responsible for Competition Policy, EU merger control has come of age, Speech delivered at “Merger Regulation in the EU after 20 years”, co-presented by the IBA Antitrust Committee and the European 166 Pour un contrôle des concentrations plus simple, cohérent et stratégique en Europe, Commission, Brussels, 10 March 2011. See also his more recent speech in November 2012: Report to the Minister of Economy and Finance 16th December 2013 under the http://europa.eu/rapid/press-release_SPEECH-12-773_en.htm. authorship of Mr Fabien Zivy.

Concurrences N° 2-2014 I Colloque 42 New frontiers of antitrust I Paris, 21 février 2014 31. I do not want to comment on the substance of either of and Stena/DFDS,173 29 June 2011), the UKCC and the Irish the two UK merger control decisions (Groupe Eurotunnel/ Competition Authority appear to have avoided disharmony. SeaFrance167 and Akzo Nobel/Metlac168) that are being But that seems to be all. discussed in the context of possible further co-ordination of national merger control. Both of the UKCC decisions 36. As a general principle, it seems entirely fair and reasonable in question have been the subject of appeals to the CAT, that different teams, from different authorities, even applying and in the case of Eurotunnel, the decision was remitted to similar methodology and legal criteria to the same merger the UKCC for reconsideration of its finding that a “merger situation, may come to different conclusions. And of course situation” existed. In the latter case, the CAT’s rejection of their methods may not be completely the same, and it would Akzo Nobel’s appeal is the subject of further appeal to the be hard to legislate for them to be so. At the risk of breaching Court of Appeal. So for that reason alone, it is difficult to my own self-denying ordinance, let me quote from the CAT’s base any firm conclusions on these decisions, other than to recent judgement in the Eurotunnel appeal, on the question note that each involved the UKCC coming to a different of whether it was rational for the UKCC to have come to decision, and an adverse one, from the decisions reached by a different view from the French Authority on the likely the French and German Competition Authorities respectively counter-factual situation: on the same merger. g “348. The Commission was aware from the FCA’s 32. What one can say, in the words of the great fictional comments on the Provisional Findings that the FCA had not detective Sherlock Holmes, is that what we should be noting been persuaded by DFDS that it would end its Dover-Calais is that the “dog did not bark in the night”169. Far from being service, if MyFerry were permitted to continue operations. The the latest in a long series of conflicting decisions, these two Commission discussed the matter in a telephone conversation cases are virtually the only instances in the past two decades with the FCA on 27th March 2013. It sought and obtained of divergence. Examination of the only other instance DFDS’s response to the FCA’s information requests, and (Panfish ASA/Marine Harvest NV, decisions of the UKCC170 considered in particular DFDS’s specific response to the FCA’s and French Conseil de la concurrence171) that springs to mind questions about its decision to launch on the Dover-Calais confirms the relativein significance of the issue of divergent route. The Commission considered the appropriate weight findings by national merger control authorities. to be given to the FCA’s finding on this issue, concluding as follows (at paragraph 8.75 of the decision): ‘(...) we do not 33. The Panfish case involved the merger of two Atlantic consider the FCA’s finding on this matter (...) to be relevant to salmon farming businesses. Both companies had extensive our consideration, as the FCA gathered evidence and carried interests in Scotland and Norway. The merger was approved out its analysis well before the impact of the [MyFerry] service by the UKCC (and by authorities in Norway, Spain and the on DFDS’s performance could be assessed. The FCA also USA), on the essential ground that although some customers told us that it had not carried out a detailed review of internal found Scottish salmon distinctive, not enough did to make documents and therefore based its views on a less extensive Scottish salmon a distinct market. Taking the market as fresh range of evidence.’” farmed salmon in the EEA, there were no grounds to prohibit the merger. The French Conseil also approved the merger, but g “349. We are satisfied that, in considering the evidence as it found Scottish (smoked) salmon had a particular cachet presented by (and to) the FCA, the Commission carried out in France, required the divestment of Panfish Scotland. a relevant and sufficient investigation in relation to the issues of DFDS’s exit from the Dover-Calais route. The fact that the 34. So far as I can recall, and I was there, this mild case of FCA reached a different conclusion on the evidence before it divergence aroused not one shred of interest or concern in has no bearing on that conclusion.”174 the UK. If the French authorities wished to take a different view on one aspect of the analysis, so be it; the companies 37. So, it may be the case that there is more heat than light being must take their chance. I do not see this case as in any way generated here. Of course, at the abstract level, it is possible justifying measures to harmonise national merger control. to criticise the existence of differing views on the same merger; and no doubt the merging parties felt very aggrieved that, 35. I have looked in vain for any other instance. Ferry having obtained the approval of one authority, their transaction mergers by their nature tend to be “cross-border,” and there was disapproved by a second; and a British one at that. But have indeed been a couple involving the Irish Sea. In two to base major legal reforms on this isolated instance really mergers involving Stena (Stena/P&O,172 22 August 2003, would be an example of “hard cases making bad law.”

167 Groupe Eurotunnel S.A. and Société Coopérative de Production SeaFrance S.A. v. 38. A more fruitful area of progress, and where I am sure Competition Commission [2013] CAT 30. there would be general support, would be in bringing the 168 Akzo Nobel N.V. v. Competition Commission [2013] CAT 13. procedures and timings of national merger control more 169 “Silver Blaze,” a Sherlock Holmes detective story written by Sir Arthur Conan Doyle and into line. Here I am in substantial agreement with the collected as The Memoirs of Sherlock Holmes. corresponding recommendations of the French Competition 170 Decision of 18 December 2006. 171 Decision of 20 October 2006. 173 Stena AB and DFDS A/S merger inquiry –A report on the completed acquisition by Stena AB from DFDS A/S of certain vessels and assets operated on the Irish Sea (29 June 2011). 172 Anticipated acquisition by Stena of certain assets operated by P&O on the Irish Sea – The OFT referred the matter to the UKCC under section 33 of the Enterprise Act 2002 on 174 Groupe Eurotunnel S.A. and Société Coopérative de Production SeaFrance S.A. v. 22 August 2003. Competition Commission [2013] CAT 30, at p. 120.

Concurrences N° 2-2014 I Colloque 43 New frontiers of antitrust I Paris, 21 février 2014 Authority’s report. This would involve matters such as when 43. If this is seen as evolutionary rather than revolutionary, a merger control process starts (bearing in mind that the UK and typically pragmatic in the Anglo-Saxon way, then so be does not operate a system of mandatory pre-notification) it. I think it is much better to be trying to solve practical and how long each stage should take. Further moves could problems on the ground, and to make the existing systems include informing other authorities if a merger is received work more smoothly, than to be seeking more drastic that affects their territory. On top of this could be measures measures on grounds that could be seen as doctrinaire. to encourage, or even require, the passing of information Above all, let any developments be based on good evidence about the progress of a case where it is being examined in of the existence of a serious problem. The fact that there is parallel by two or more authorities. This already happens national merger control law, applied by different authorities informally (see the Eurotunnel quote above) but this could be throughout the EU, and that a given number of mergers institutionalised. need to be processed in several countries is not to my mind a sufficient basis for change. 39. There may also be scope for more standardisation in the form in which information has to be compiled and notified in different Member States, similar to the work that has VII. Conclusion: been done to bring national requirements for “leniency” applications more into line, but I should be interested to The ECN going forward know how strong is the demand for this from the business community. 44. So, in conclusion, I think the success of the ECN over the past decade is very much to be welcomed; a perhaps 40. I do not, with the greatest respect to those who have unexpected degree of harmony has been achieved. It does suggested it, think that harmonising the substantive legal indeed provide a good basis for further co-operation, and it framework is a priority. By and large, all EEA authorities should find its voice and play a greater role in advocating the conduct merger control on a similar basis (although the benefits of competition and competition policy. There are “dominance” test is still applied in a few countries). But clearly ways in which national merger control could benefit for as long as different authorities look at the same case, from the kinds of co-operation now typical in general however closely aligned is their methodology, the possibility competition practice, and the ECN is the obvious forum for of a different result must exist, if the independence of the developing these. Hard co-operation should have a proper authority’s judgment is not to be impaired. legal basis, but if that is needed then, by all means, let it be discussed. But for so long as we have national competition authorities coming to their own judgments on mergers that 41. Another possible area for examination, also mentioned affect competition within their own territory, even if they in the recent report, is the definition of concentration, or in also have effects elsewhere, given also the occasional wish UK parlance, the merger situation. After all, in Eurotunnel, of national governments to intervene, then some occasional the FCA appears to have found the existence of a merger divergence of view between different countries is not only situation, but it is on that point alone that the case has been to be tolerated, but is a sign of health and vitality in the remitted to the UKCC by the CAT. And the UK is particularly system. n jealous of its provisions governing the acquisition of minority interests, as these provide flexibility that some other authorities would no doubt like to have, and the European Commission has already consulted on this point.175

42. How far all this would require new legislation is not clear. There is already an EU Merger Working Group within the ECN, which issued a useful “Best Practices” document in 2011176, and no doubt the soft co-operation I have discussed can continue in this context. Bringing procedures and timings into line would necessarily involve amendment to national law, so some EU law basis for this would probably be desirable, if not necessary, as it would if authorities were to be allowed to exchange hard information on current cases.

175 See European Commission Consultation, referred to above. 176 http://ec.europa.eu/competition/ecn/mergers.html.

Concurrences N° 2-2014 I Colloque 44 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

European Competition Network 10 years after & EC Regulation 1/2003: Can cooperation be extended to merger control and advocacy? Divergent decisions in national merger control: How can cooperation between national competition authorities be facilitated?

Andreas Mundt Président, Bundeskartellamt, Bonn

I. Introduction: Divergent national 2. Differences in the definition merger decisions of a concentration 4. Do differences in the definition of a concentration play 1. It is the right time to put a spotlight on divergent a role for divergent outcomes? This is not the case. Which merger decisions concerning the same mergers in different types of concentrations are caught by a national jurisdiction Member States, in particular Akzo/Metlac (2012, BKartA/ is a question as to whether a concentration has to be notified UK Competition Commission), Eurotunnel/SeaFrance in that Member State at all. Therefore, differences do not (2012-2013, Autorité de la concurrence/UK Competition pose any risk that investigations could result in diverging Commission) and Vienna Airport/Airport Bratislava outcomes in substance. For example, the Commission is (2006-2007, Austrian Bundeswettbewerbsbehörde/Slovak currently preparing a white paper on the extension of EU Competition Authority). While this is an important issue that merger control to non-controlling minority interests, in some needs to be discussed in some detail, it is clear that divergent aspects modeled on the German system. It is recognized that outcomes of parallel merger investigations in Europe—which it makes sense to extend merger control to non-controlling are indeed unfortunate, if they concern the same markets— minority interests, if there are cases that raise competition are limited to a very small number of cases. The issue needs issues and which are not caught by the existing merger to be addressed, but should not be exaggerated. regimes. However, it may not be necessary, in the wake of an EU reform, to introduce the same approach in all the 2. In the following, it will be discussed what are the reasons Member States. In Germany, the UK and Austria, the existing review of non-controlling minority interests works for different outcomes and what are the best solutions to reasonably well, but some other Member States, in particular avoid divergent decisions. Poland and Norway, had abolished their review of this category of transactions because the cases reviewed in those countries had not raised any competition issues. In particular II. What are the reasons for in the UK and Germany, the situation is very different, for different outcomes? example in the media (UK, Germany) and energy sectors (Germany). 1. Differences in the substantive tests 3. Differences in the procedural rules 3. There are differences between the SIEC-test (EU and a large number of Member States, e.g. France and Germany), 5. Procedural rules differ significantly between the national merger regimes, for example regarding the review system the SLC-test (e.g. UK) and the dominance test (e.g. Italy). (mandatory vs. voluntary notification), pre-notification However, in practice the convergence of the concepts applied contacts (de facto mandatory vs. voluntary), time limits, in the substantive assessment by the national competition information requirements (a lot of information upfront vs. authorities (NCAs) is very high throughout the EU. Still, in very limited information requirements at the stage of the some cases—e.g. in the Akzo/Metlac case—the differences notification with some additional questions if necessary). between the dominance test (at the time of the decision still These differences do not have an appreciable impact on applicable in Germany) and the SLC test may have played the outcome of the investigation. However, they have a role, but probably not in the other two cases mentioned important consequences for NCAs’ ability to cooperate in above. parallel merger cases. These aspects merit more attention.

Concurrences N° 2-2014 I Colloque 45 New frontiers of antitrust I Paris, 21 février 2014 The objective should be to find solutions that render III. How to avoid divergent national procedures more compatible, in particular in the case of parallel investigations that raise competition issues outcomes? (i.e. second phase cases and first phase investigations that are closed with remedies). Attempting to harmonize procedures appears to be unnecessary, and also overly ambitious with a 1. Stop-the-clock provision for parallel view to the institutional differences (between the NCAs) that in-depth investigations are often connected to some procedural differences. 9. The timing of investigations could be synchronized if stop-the-clock provisions for parallel merger investigations were introduced, either as national legislation or as a targeted 4. Differences in the timing element of EU legislation. This could enhance cooperation of investigations significantly. The EU Merger Working Group’s Best Practices (2011) already outline in detail how cooperation between 6. Timing in parallel merger investigations is crucial. Better NCAs can come to play at different stages of an investigation, cooperation between national competition authorities in in particular in parallel in-depth investigations. Stop-the- critical cases is only possible if merger investigations take clock provisions could indeed enable the NCAs to engage in place at the same time. Often merging parties prefer to notify closer cooperation. This approach would only apply where cases with significant delays to take advantage of staggered needed. Merger control proceedings where cooperation is not investigations. Merging parties have an important role to play. necessary would not be slowed down. The instrument would They can contribute to cooperation between NCAs if they apply in cases where mergers raise issues in several Member plan notifications in a way that allows NCAs to investigate in States and a parallel investigation with close cooperation is parallel. called for. In these cases, the stop-the-clock provisions would not lead to any effective delays, because the merging parties 7. A maximum time limit for merger investigations would were not able to close the deal before all the NCAs that not solve the problem. For example, one could assume investigated the transaction had cleared it. It would be very a maximum time limit of four months for a second phase surprising if NCAs that investigate in parallel and decide case without merger remedies. If the merging parties chose within the same timeframe issued conflicting decisions with to notify the merger to the first NCA in January and to the regard to their analysis of the same transaction and markets. second NCA in May or June, cooperation between the NCAs One could expect that this procedural fix should reduce would be difficult and the maximum time limits would not the scope for divergent outcomes of merger investigations help. substantially, if not completely.

8. It is interesting to note that in the three examples for divergent merger decisions mentioned above (Akzo/Metlac, 2. Facilitate referrals Eurotunnel/SeaFrance, and Vienna Airport/Airport Bratislava) to the EU Commission? the investigations could not run in parallel, inter alia, because in each of the merger cases, the transaction was notified to 10. Speeding up referrals makes sense, but this needs to be the second NCA with a significant time lag. Usually, the time achieved in both directions. Currently, the Commission’s difference is particularly notable, if one of the authorities proposals in the consultation paper focus on referrals to involved is subject to a voluntary notification system, i.e. the Brussels. This should be complemented by an equally fast UK authorities. For example, in the Akzo/Metlac case, the and lean procedure for referrals to Member States. BKartA had to decide the case before the end of April 2012 and the UK Competition Commission (i.e. the second phase 11. In the Zivy report, it is proposed to reduce the investigation in the UK) had not even started its investigation requirements for referrals initiated by the merging parties. (which was initiated on May 23, 2012). In the Eurotunnel The proposal is to reduce the number of Member States case, the timing difference was reduced by the fact that the where a merger has or can be notified from three to two. notification in France was not complete until four months However, it appears that shifting more merger cases to after the notification (notification in May, complete in Brussels is not the right response to the issue of divergent decisions. Better solutions are possible than an increase of September 2012). Still, the decision of the UK Competition centralization. Looking at the context of the political debate Commission dates from June 2013, about seven months after in Europe, an approach that is more in line with the principle the decision of the Autorité de la concurrence. Similar to of subsidiarity and strengthens the national level, seems to the Akzo/Metlac case, the investigation of the Competition be more appropriate with regard to the challenges Europe Commission had barely started (29 October 2012), when the faces today. In addition, referrals to Brussels only have an French Competition Authority took a decision (8 November added value if they reduce the burden for companies and 2012). Therefore, parallel notifications by the merging parties administrations. Comparing the Commission’s merger would help, but would not be sufficient to solve all the timing procedure with its national equivalents that are often problems. faster, more efficient and less burdensome, it makes sense that referrals can only be requested by the merging parties if they were otherwise subject to national merger control proceedings at least in three Member States.

Concurrences N° 2-2014 I Colloque 46 New frontiers of antitrust I Paris, 21 février 2014 3. Extend the scope of the ECN IV. Conclusion to merger control? 14. I think it is important to discuss the issue of divergent 12. Can divergent outcomes be avoided by learning from the decisions now, even if it is very uncertain at this stage whether experiences with the European Competition Network (ECN) it will be addressed in the ongoing merger reform project in the antitrust field? The ECN has been a major success of the EU Commission. The EU reform project currently and cooperation in the field of antitrust cases is working focuses on minority interests and referrals. In this context, well. However, antitrust investigations are not comparable to it was also proposed to move to the SIEC-test at the level merger cases, inter alia, because they follow a very different of the Member States to increase substantial convergence. timetable compared to merger investigations. Therefore, Amending the EU Merger Regulation on this point probably simply extending the scope of the European Competition needs further reflection but should not be ruled out. Network to the merger area will not work. Merger control is an extremely time sensitive business. There is no time slot for 15. In the meantime, soft convergence at the national level the Commission to play the same role as in the antitrust field can be another route to make progress. This has worked with regard to coherence. very well for the substantial assessment of mergers and the merger test. Many Member States have introduced the SIEC- 13. For example, in the merger area, it would be unacceptable test, for example Germany in June 2013. The majority of for NCAs to be obliged to submit their draft decision to Member States now apply the same test. Soft convergence the EU Commission and wait for thirty days before they could also work for flexible solutions to synchronize the time can take a final decision, as is the case in antitrust cases. line of merger proceedings, but one would have to start from It would also not make sense to vest the Commission with scratch. It seems that no jurisdiction in the EU currently the power to open merger proceedings in national cases provides for a stop-the-clock provision that would apply to and thereby to end NCA’s jurisdiction, as is foreseen in the parallel merger investigations. It could therefore take some antitrust field, where NCAs and the Commission in principle time before such changes could become effective throughout have parallel jurisdiction for the application of competition the EU. Introducing a targeted provision in the EU merger law. In contrast, in merger cases, there is a clear allocation control regulation in the context of the ongoing EU merger of jurisdiction, either to the EU or to the Member States. reform project could achieve this goal more quickly. n In addition, the introduction of the ECN’s coherence instrument would also lead to additional delay, due to the restart of the investigation at EU level. In antitrust cases, such a situation is quite awkward. In merger control, it would be even worse and should be avoided at any rate, since speed and effectiveness are essential.

Concurrences N° 2-2014 I Colloque 47 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

European Competition Network 10 years after & EC Regulation 1/2003: Can cooperation be extended to merger control and advocacy? Ten years of Regulation 1/2003: A retrospective

Wouter Wils* Conseiller-auditeur, Commission européenne, Bruxelles Professeur associé, King’s College, Londres

of experience with the application of Regulation 1/2003 in I. Introduction a year from now. On the other hand, much of the thinking Regulation 1/2003177 brought about a radical change in behind Regulation 1/2003 goes back to already fifteen years the way in which the EU antitrust prohibitions contained ago. Indeed, as described below, the basic ideas underlying in Articles 101 and 102 TFEU are enforced. The previous Regulation 1/2003 were already conceived inside the 180 enforcement regime, under Regulation 17,178 which dated European Commission in 1997. from 1962, was characterised by a centralised notification and authorisation system for Article 101(3) TFEU. Regulation 1/2003 abolished this system and replaced it by II. Genesis a system of decentralised ex post enforcement, in which the European Commission and the competition authorities of 1. Modernisation group the EU Member States (national competition authorities), forming together the European Competition Network, 3. The origin of Regulation 1/2003 lies in January 1997, pursue infringements of Articles 101 and 102 TFEU. when a group of approximately a dozen officials of the European Commission started meeting, at the initiative and 1. This article provides a brief reminder of the genesis of under the chairmanship of Gianfranco Rocca, then Deputy Regulation 1/2003, and a short overview of its main results, Director-General of the Commission’s Directorate-General as apparent ten years later. for Competition, in what was called the Modernisation Group (or rather “groupe de modernisation”, as everything 2. Regulation 1/2003, which was adopted by the Council happened in French).181 of the European Union on 16 December 2002, bears the number 1/2003 because it was the first regulation published 4. The starting point for the Modernisation Group’s in the Official Journal of the European Union in the year 2003, reflections was that the procedural rules for the application on 4 January 2003. According to its Article 45, it entered into of Articles 101 and 102 TFEU had been laid down in 1962 in force on the 20th day following that publication, but it only Regulation 17, which had never been reviewed since, whereas applied from 1 May 2004.179 There will thus only be ten years the EU had undergone substantial change, and would change further as a result of the planned accession of 10 Central * This article was written for the Conference “10 Years of Regulation 1/2003,” organised by and Eastern European countries, which would significantly Prof. Dr. Heike Schweitzer at the Mannheim Centre for Competition and Innovation on 7 June 2013, and was first published in Journal of European Competition Law & Practice. increase the workload of the Commission’s Directorate- I am grateful to Céline Gauer, Margaret Bloom, Laurence Idot and Daniel Dittert for helpful General for Competition, without an increase in resources comments on an earlier draft. All views expressed in this article are strictly personal, and should not be construed as reflecting the opinion of the European Commission or any of being envisaged. the above mentioned persons. Comments are welcome at [email protected]. 5. When examining what type of procedural rules would 177 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L1/1. be most appropriate in this new context, the Modernisation Articles 81 and 82 of the then EC Treaty have since (without any modification) become Group quickly came to the view that the centralised Articles 101 and 102 TFEU. In this paper I will systematically refer to the current notification and authorisation system for Article 101(3) numbers and name. For a detailed analysis of Regulation 1/2003, in comparison with the regime preceding it, see my Community Report in D. Cahill and J.D. Cooke (eds), TFEU, as created by Regulation 17, should be abandoned The Modernisation of EU Competition Law Enforcement in the EU – FIDE 2004 National and replaced by a directly applicable exception system. Reports (Cambridge 2004), pp. 661-736, and my book Principles of European Antitrust Enforcement (Hart 2005). 180 See text accompanying notes 5 to 7 below. 178 Council Regulation No 17 [1962] OJ 13/204 (Special English Edition 1959-62, p. 87). 181 See further S. Norberg, Making Virtue out of Necessity and at Same Time Strengthening 179 The latter date is also the date on which the number of EU Member States increased from European Competition Law Enforcement – How the White Paper on Modernisation 15 to 25. This is not a coincidence; indeed the perspective of this enlargement was the Reform came about, in M. Monti, N. von und zu Lichtenstein, B. Vesterdorf, J. Westbrook main impetus for the European Commission to start working in 1997 on new rules for the and L. Wildhaber (eds), Economic Law and Justice in Times of Globalisation – Festschrift implementation of Articles 101 and 102 TFEU; see below, text following footnote 5. for Carl Baudenbacher (Nomos 2007), 523.

Concurrences N° 2-2014 I Colloque 48 New frontiers of antitrust I Paris, 21 février 2014 The choice between these two enforcement systems had losing the substantial powers which it had been granted by been much discussed already at the time of the drafting of the Council in 1962.186 While occasionally the notification the Treaty provisions in the 1950s, and at the time of the system was criticised by some authors, nobody had made a adoption of Regulation 17 in the early 1960s. At that time, sustained argument for its abolition.187 Germany favoured a notification and authorisation system, while France favoured a directly applicable exception system. 9. Once the initial surprise had subsided, however, the The question was left open at the level of the Treaty. In its reactions to the White Paper were mostly (very) positive,188 proposal for what became Regulation 17, the Commission though with one exception and one qualification. opted for a centralised notification and authorisation system, and the Council eventually endorsed this choice in 10. The one exception was Germany, where in particular some Regulation 17. The analysis made by the Modernisation highly respected professors, mostly of an older generation, Group in 1997 was that the Commission and Council had and thus more likely to remember the discussions of the 1950s made the right choice in the conditions prevailing in 1962, but and early 1960s in which the German arguments in favour that, given the development of the EU and of competition of a notification and authorisation system had ultimately policy in the EU since that time, a directly applicable convinced the Commission and the Council at the time of exception system had now become preferable.182 Regulation 17, were strongly opposed to the abolition of the notification system.189 Moreover, the Bundeskartellamt had 6. Having obtained the agreement of Karel Van Miert, the in 1998 (without any knowledge of the work being done at Member of the European Commission then responsible for that time by the Modernisation Group inside the European competition policy, the Modernisation Group subsequently Commission) proposed to decentralise the notification went to work on the modalities of the change to a directly and authorisation system, thus sharing the work between applicable exception system, and examined, article by article, the European Commission and the national competition 190 the whole of Regulation 17, so as to identify any other authorities. changes or improvements that could be made. After two years and around fifty half-day or day-long meetings, a draft White 11. The one qualification concerned the reaction of industry Paper setting out the proposed reforms was produced.183 and the European Parliament, which expressed the fear that the decentralisation of the application of EU competition law would lead to a renationalisation of competition policy. 2. White Paper on modernisation, 12. This last concern explains the main addition, as compared legislative proposal and final compromise to the White Paper, which the European Commission included in the legislative proposal which it submitted to the Council 7. The European Commission adopted and published the in 2000.191 Article 3 of the proposed regulation excluded the White Paper on Modernisation in 1999.184 It advocated the application of national competition laws to all agreements or ending of the notification and authorisation system, and its concerted practices within the meaning of Article 101 TFEU replacement by a system of ex post enforcement, allowing and all abuses of a dominant position within the meaning of the Commission to refocus its action on combating the most Article 102 TFEU that affect trade between Member States, serious competition infringements, and allowing an enhanced thus ensuring the sole applicability of EU law. role for national competition authorities and national courts. It also proposed to strengthen the European Commission’s 13. This last proposal in turn caused significant opposition investigatory powers. from a number of Member States, and proved the most contentious point in the deliberations of the Council. 8. The publication of the White Paper on Modernisation The compromise which was ultimately found, and enacted in came as a complete surprise. Indeed, the work which the Article 3 of Regulation 1/2003, obliges national competition Modernisation Group had been doing over the two preceding authorities and national courts, when applying national years had been carefully kept secret, also inside the European 185 Commission. The general view at the time, both inside and 186 See C.D. Ehlermann, The Modernization of EC Antitrust Policy: A Legal and Cultural outside the European Commission, was that the Commission Revolution (2000) 37 Common Market Law Review 537. would never propose to replace Regulation 17, for fear of 187 See for instance the, at that time, very influential paper by B.E. Hawk, System Failure: Vertical Restraints and EC Competition Law (1995) 32 Common Market Law Review 973, which criticised the notification system at p. 984, but did not include its abolition 182 See further S. Norberg, as note 5 above, and G. Marenco, Does the Legal Exception System through a revision of Regulation 17 among the list of possible solutions at pp. 986-988; Require an Amendment of the Treaty? in C.D. Ehlermann and I. Atanasiu, European Competition see also the discussion of the notification system in the Commission’s Green Paper on Law Annual 2000: The Modernisation of EC Antitrust Policy (Hart 2001), 145, as well as, for a vertical restraints in EC competition policy, COM(96)721, and in the reactions to this systematic analysis of why the notification system made sense in 1962 but no longer today, my Green Paper, summarised in the Communication from the Commission on the application publications Notification, Clearance and Exemption in EC Competition Law: An Economic of the Community competition rules to vertical restraints (Follow-up to the Green Paper Analysis (1999) 24 European Law Review 139; The Modernisation of the Enforcement of on Vertical Restraints) [1998] OJ C365/3. Articles 81 and 82 EC: A Legal and Economic Analysis of the Commission’s Proposal for a New Council Regulation Replacing Regulation No 17, in B. Hawk (ed.), Annual 188 See for instance B. Hawk, EU “modernisation”: a latter-day Reformation (August/ Proceedings of the Fordham Corporate Law Institute 2000 (Juris 2001), 313; The Optimal September 1999) Global Competition Review 12. Enforcement of EC Antitrust Law (Kluwer 2002), Chapters 5 and 6, and Principles of 189 See for instance E.-J. Mestmäcker, The EC Commission’s Modernization of Competition European Antitrust Enforcement, as note 1 above, Section 1.1.3. Policy: a Challenge to the Community’s Constitutional Order (2000) 1 European Business 183 See further S. Norberg, as note 5 above. Organization Law Review 401. 184 White Paper on modernisation of the rules implementing Articles 85 and 86 of the EC 190 See White Paper, as note 8 above, footnote 48. Treaty [1999] OJ C132/1. 191 Proposal for a Council Regulation implementing Articles 81 and 82 of the Treaty, 185 See further S. Norberg, as note 5 above. COM(2000)582.

Concurrences N° 2-2014 I Colloque 49 New frontiers of antitrust I Paris, 21 février 2014 competition law to agreements or practices falling within 17. During the same period, the European Commission the scope of application of Articles 101 or 102 TFEU, to informed the Network of 228 investigations of its own, and apply also EU law.192 It further provides that the application adopted 88 final decisions.197 of national competition law may not lead to the prohibition of agreements or concerted practices affecting trade between 18. The national competition authorities have thus in Member States that are not prohibited under Article 101 quantitative terms become the primary public enforcers of TFEU, but it leaves Member States the freedom to apply on Articles 101 and 102 TFEU, adopting 88% of all decisions. Given their territory national laws that are stricter than Article 102 that the European Commission’s output has not declined,198 TFEU in prohibiting unilateral conduct.193 and that under Regulation 17 the number of cases in which the national competition authorities applied Articles 101 14. Another contentious issue in the deliberations of the and 102 TFEU was negligible, this means that the overall Council concerned the respective roles of the European number of decisions ordering termination of infringements Commission and the national competition authorities, and of Articles 101 or 102 TFEU, imposing fines or accepting the functioning of the European Competition Network. commitments has undergone an eightfold increase. Some national competition authorities, in particular the Bundeskartellamt, the national authority with the proudest 19. The list below shows per Member State, and in descending tradition of competition law enforcement, feared that the order, the number of envisaged final decisions submitted by Commission would play too dominant a role in the new the national competition authorities under Article 11(4) system. This issue was resolved through the adoption of of Regulation 1/2003 in the period from 1 May 2004 to the Joint Statement of the Council and the Commission on 31 December 2012, as well as the number of final decisions the functioning of the network of competition authorities, adopted by the European Commission in the same period: entered into the Council minutes at the time of the adoption 194 of Regulation 1/2003. The principles set out in this Joint France 90 Statement were later fleshed out in the Commission’s Notice on Commission 88 195 cooperation within the network of competition authorities, Germany 84 which was agreed with all national competition authorities. Italy 82 Spain 73 Netherlands 41 III. Results Denmark 39 Greece 32 Romania 23 (since EU accession on 1 January 2007) 1. National competition authorities and Slovenia 22 Hungary 21 the European Competition Network Sweden 17 UK 16 15. Ten years after the adoption of Regulation 1/2003, there Lithuania 15 can be no doubt that, as far as the national competition Portugal 15 authorities and the functioning of the European Competition Poland 12 Network are concerned, the new enforcement system has Slovakia 12 been a major success, beyond expectations. Belgium 10 Finland 10 16. From the start of the application of Regulation 1/2003 Czech Rep 8 on 1 May 2004 until 31 December 2012, the national Austria 6 competition authorities have informed the European Bulgaria 6 (since EU accession on 1 January 2007) Commission and their fellow national competition Latvia 4 authorities of 1344 investigations under Articles 101 and 102 Estonia 3 TFEU, and of envisaged final decisions ordering termination Ireland 2 of infringements, imposing fines or accepting commitments Malta 2 in 646 cases.196 Cyprus 1 Luxembourg 0 192 See also Judgment of the Court of Justice of 14 February 2012 in Case C-17/10 Toshiba, not yet published in ECR, §83. 20. This list makes visible that the national competition 193 See Communication from the Commission to the European Parliament and Council – Report on the functioning of Regulation 1/2003, COM(2009)206, Chapter 4; authorities with the largest output each adopt as many or Commission Staff Working Paper accompanying the Report on the functioning even more decisions than the European Commission. It also of Regulation 1/2003, SEC(2009)574, section 4.4; and I. Kokkoris, A Gap in the shows that generally the competition authorities of the larger Enforcement of Article 82 (British Institute of International and Comparative Law 2009). Member States adopt the highest number of decisions, with 194 Council Document 15435/02 ADD 1 of 10 December 2002, available at http:// 199 register.consilium.europa.eu; see Judgment of the General Court of 8 March 2007 in the notable exceptions of the United Kingdom and Poland. Case T-339/04 France Télécom v. Commission [2007] ECR II-521, §85, and Opinion of Advocate General Mazák of 16 December 2010 in Case C-360/09 Pfleiderer, not yet 197 See text accompanying notes 45 to 48 below. reported in ECR, §26. 198 See text accompanying notes 45 to 48 below. 195 [2004] OJ C101/43. 199 The UK government has recognised this as a problem: see Department for Business 196 These and other statistics can be found at http://ec.europa.eu/competition/ecn/statistics. Innovation & Skills (BIS), A Competition Regime for Growth: A Consultation on Options html. for Reform (March 2011), §5.6.

Concurrences N° 2-2014 I Colloque 50 New frontiers of antitrust I Paris, 21 février 2014 21. The differences between Member States also show g Second, in all Member States an appeal or application the potential for further increase, as national competition for judicial review can be brought against the decisions of authorities increase their output over time. The best example national competition authorities before a (higher) court of this is the Spanish competition authority: In the first three that acts as review court. Obviously, the more decisions years of application of Regulation 1/2003 (from 1 May 2004 to are adopted by national competition authorities, the more 31 December 2006), it accounted for 8 decisions out of the 172 appeals or applications for judicial review can be brought for all national competition authorities, ranking (shared) eighth before these review courts. It is probably in respect of this among the national competition authorities; in the following second role that Regulation 1/2003 has had its main impact three years (from 1 January 2007 to 31 December 2009), it on national courts. accounted for 20 out of 202 decisions, ranking fourth; and in the most recent three years (from 1 January 2010 to g Third, national courts deal with litigation between private 31 December 2012), it accounted for 45 out of 272 decisions, parties in which Articles 101 and 102 TFEU may be applied. ranking first.200 The impact of Regulation 1/2003 on the application of 22. The functioning of the European Competition Network Articles 101 and 102 TFEU in litigation between private has also been a clear success. Work sharing between parties has been as expected: As explained in the White Paper 206 the different competition authorities has generally been on Modernisation, under Regulation 17 the notification unproblematic, and the cooperation and coordination system and exclusive competence of the European mechanisms provided for in Regulation 1/2003 have generally Commission to apply Article 101(3) TFEU constituted an worked well. The application of Regulation 1/2003 has also obstacle to the application of Article 101 TFEU by national given rise to a significant degree of voluntary convergence of courts. Member States’ laws as to the procedures and sanctioning powers of national competition authorities, supported by the 23. The first impact of the change to a directly applicable policy work in the European Competition Network.201 exception system is in the area of contractual litigation, where Article 101 TFEU can be used as a shield to avoid contractual liability. Regulation 1/2003 has brought to an end 2. National courts the phenomenon of agreements falling under Article 101(1) TFEU and fulfilling the conditions of Article 101(3) TFEU Three different roles of national courts should be distinguished:202 but not covered by a block exemption being unenforceable simply because they had not been notified to the European g First, in some Member States the national competition Commission. In all situations where in a contractual dispute authority does not adopt decisions finding infringements before a national court the defendant invokes Article 101(2) of Articles 101 or 102 TFEU and imposing fines, but rather brings the case before a national court that acts as first- TFEU, the claimant can now fully rely on Article 101(3) instance decision-maker.203 When thus adopting decisions TFEU and the national court can itself decide on the 207 finding infringements of Articles 101 or 102 TFEU and/ matter. or imposing fines, these national courts act as national competition authorities,204 and their decisions are included 24. As to the use of Article 101 TFEU as a sword, in actions in the above statistics of national competition authorities’ for injunctive relief or for damages brought in national courts decisions.205 by victims of anti-competitive agreements, the abolition of the European Commission’s exclusive competence to apply 200 Indeed, the European Competition Network, with its statistics, creates a basis of Article 101(3) TFEU also has a beneficial effect in that it is comparison which may lead Member States and national competition authorities that perform relatively less well to take measures so as to increase their output; see BIS, as no longer possible, in particular in cases where injunctive note 23 above. relief is sought, for defendants to delay the national court 201 See Report on the functioning of Regulation 1/2003, as note 17 above, chapter 5; procedure by notifying the agreement to the European Commission Staff Working Paper, as note 17 above, chapter 5; 10th Anniversary of Regulation 1/2003: Convergence and Cooperation in the ECN, ECN Brief 05/2011, Commission. accessible at http://ec.europa.eu/competition/ecn/brief/05_2011/brief_05_2011.pdf, 5-6; ECN Working Group Cooperation Issues and Due Process, Investigative Powers Report and Decision-Making Powers Report (31 October 2012), accessible at http:// 25. Apart from this change, which merely aligned the legal ec.europa.eu/competition/ecn/documents.html; L. Idot, Regards sur le règlement situation as to Article 101 TFEU to the situation already no 1/2003, Études à la mémoire de Fernand-Charles Jeantet (LexisNexis 2010), 193; existing under Regulation 17 as to Article 102 TFEU, C. Lemaire and J. Gestalter, The Silent Revolution Beyond Regulation 1/2003, Global Competition Policy, October 2008 (2); and B. Lasserre, Effective Enforcement of Regulation 1/2003 did not contain any measure to encourage Competition Rules in Europe: The Leading Role of the European Competition Network, the bringing of actions in national courts seeking injunctive Studienvereinigung Kartellrecht, Kartellrecht in Theorie und Praxis: Festschrift für Cornelis Canenbley zum 70. Geburtstag (Beck 2012), 307. relief or damages for infringements of Articles 101 or 102 202 See Commission Notice on co-operation between the Commission and the courts of the TFEU. EU Member States in the application of Articles 81 and 82 EC, [2004] OJ C101/4, §2, and Staff Working Paper, as note 17 above, §269. 203 This is the case in Austria, Ireland, Denmark (only for [non-administrative] fines), Estonia (under the criminal procedure), Finland (only for fines), and Sweden (only if the imposition 206 As note 8 above, at §99-100. of a fine is sought); see Decision-Making Powers Report, as note 25 above, section 2.3. 207 See further The Modernisation of the Enforcement of Articles 81 and 82 EC: A Legal 204 See Article 35 of Regulation 1/2003, and Principles of European Antitrust Enforcement, and Economic Analysis of the Commission’s Proposal for a New Council Regulation as note 1 above, section 1.2.10. Replacing Regulation No 17, as note 6 above, at 352-353 and Principles of European 205 See text accompanying notes 20 to 23 above. Antitrust Enforcement, as note 1 above, section 1.1.4.1.

Concurrences N° 2-2014 I Colloque 51 New frontiers of antitrust I Paris, 21 février 2014 26. Independently from Regulation 1/2003, the European 3. European Commission Commission published in 2005 a Green Paper on Damages actions for breach of the EU antitrust rules,208 in which it 28. The impact of Regulation 1/2003 on the activity of the put up for discussion measures to encourage private actions European Commission has mostly also been as expected. for damages as an instrument for deterrence,209 inspired by the US conception of private antitrust enforcement.210 29. The European Commission has made good use of the The reactions to this Green Paper were mostly negative, and increased investigatory and sanctioning powers which it this has led to a change of orientation: The Commission obtained through Regulation 1/2003, such as the increased published in 2008 a White Paper on Damages actions for possibility to ask oral questions during inspections, breach of EU antitrust rules,211 which focuses no longer on the possibility to put seals,214 the possibility to inspect deterrence and private enforcement, but rather on the right private homes, the increased penalties for obstruction of of victims to obtain compensation for damage suffered investigations,215 and the higher level of periodic penalty as a result of antitrust infringements, leaving the task of payments for non-compliance with decisions.216 deterrence to public enforcement.212 30. The European Commission has also made use of the 27. Even if the 2008 White Paper has not (yet) been followed increased scope for prioritising its action.217 It has published by any EU legislation to facilitate private actions for a list of general prioritisation criteria in its Annual Report on damages, there appears to have been in the past decade a very Competition Policy 2005.218 significant increase in the number of actions for damages following infringement decisions taken by the European 31. As to the number of decisions adopted by the European Commission or national competition authorities.213 Commission, the White Paper on Modernisation had predicted that, following the abolition of the notification system, “the number of individual prohibition decisions can be expected to increase substantially.”219

32. The following overview of the number of decisions adopted by the European Commission in the last 25 years suggests that this prediction may have been too optimistic: 208 COM(2005)672 of 19 December 2005; see also D. Waelbroeck and D. Slater, The Commission’s Green Paper on Private Enforcement:“Americanization” of EC Competition Law Enforcement?, C.-D. Ehlermann and I. Atanasiu (eds), European Competition Law g For the years 1988 to 2003, when Regulation 17 was still Annual 2006: Enforcement of Prohibition of Cartels (Hart Publishing 2007), 425. applicable, the table below shows, for each year, the number 209 See idem, page 3: “(...) public and private antitrust enforcement (...) serve the same aims: to of decisions finding an infringement of Articles 101 or deter anti-competitive practices (...);” see also the comment by the then Director-General 102 TFEU, ordering its termination and/or imposing fines for Competition of the European Commission at the OECD Roundtable on private remedies in February 2006 (i.e. shortly after the publication of the 2005 Green Paper): (prohibition decisions), the number of exemption decisions “(...) compensation of victims should not be seen as an end in itself, but part of an overall under Article 101(3) TFEU subject to conditions or strategy to enhance deterrence;” OECD, Private Remedies, DAF/COMP(2006)34 of obligations (condition or obligation decisions), the total of 11 January 2008, at 271. these two types of decisions, the number of negative clearance 210 See generally my paper Should Private Antitrust Enforcement Be Encouraged in Europe? (2003) 26 World Competition 473; Principles of European Antitrust Enforcement, as note 1 decisions or exemption decisions without conditions or above, Chapter 4; W. Möschel, Should Private Enforcement of Competition Law Be obligations (exemption or negative clearance decisions), and Strengthened?, D. Schmidtchen, M. Albert and S. Voigt, The More Economic Approach the total of all three types of decisions:220 to European Competition Law – Conferences on New Political Economy 24 (Mohr Siebeck 2007), 101, and (2013) 6 Global Competition Litigation Review 1; P. Nebbia, Damages actions for the infringement of EC competition law: compensation or deterrence? (2008) European Law Review 23; K.S. Bernard, Private Antitrust Litigation in the European 214 See Commission Decisions of 30 January 2008 in Case COMP/39.326 E.ON Energie Union – Why Does the EC Want to Embrace What the US Federal Trade Commission is [2008] OJ C240/6 and of 24 May 2011 in Case COMP/39.796 Suez Environnement Trying to Avoid? (2010) 3 Global Competition Law Review 69; and Opinion of Advocate breach of seal, full text accessible at http://ec.europa.eu/competition/antitrust/cases/ General Jääskinen of 7 February 2013 in Case C-536/11 Donau Chemie, not yet published dec_docs/39796/39796_554_6.pdf; Judgments of the General Court of 15 December in ECR, §48. 2010 in Case T-14/08 E.ON Energie v. Commission [2010] ECR II-5761, and of the Court 211 COM(2008) 165 of 2 April 2008; see also F.W. Bulst, Of Arms and Armour – of Justice of 22 November 2012 in Case C-89/11 P E.ON Energie v. Commission, not yet The European Commission’s White Paper on Damages Actions for Breach of EC Antitrust reported in ECR; and A. Riley, Seal Breaking: Practical Compliance Lessons from Recent Law (2008) Bucerius Law Journal 81. Cases (2012) 3 Journal of European Competition Law & Practice 141. 212 Indeed, the 2008 White Paper states, at p. 3, that its “primary objective (…) is to improve 215 See Commission Decision of 28 March 2012 in Case COMP/39.793 EPH and Others the legal conditions for victims to exercise their right under the Treaty to reparation of all [2012] OJ C316/8, as well as note 38 above. damage suffered as a result of a breach of the EC antitrust rules. Full compensation is, 216 See Commission Decisions of 12 July 2006 and of 27 February 2008 in Case therefore, the first and foremost guiding principle. (…) Another important guiding principle COMP/37.792 Microsoft [2008] OJ C138/10 and [2009] OJ C166/20, and Judgment of of the Commission’s policy is to preserve strong public enforcement of Articles 81 and 82 the General Court of 27 June 2012 in Case T-167/08 Microsoft v. Commission, not yet by the Commission and the competition authorities of the Member States.” The European published in ECR. Commission has thus returned to the classic, time-honoured conception of the different roles of public enforcement and private actions for damages, not just in the area of 217 See generally my paper Discretion and Prioritisation in Public Antitrust Enforcement, in antitrust but in the law more generally, as notably set out by John Locke in 1690 in his Particular EU Antitrust Enforcement (2011) 34 World Competition 353. Second Treatise on Civil Government, Chapter II; see further my paper The Relationship 218 SEC(2006)761, June 2006, at 26-27. See also Commission Notice on the handling of between Public Antitrust Enforcement and Private Actions for Damages’ (2009) 32 World complaints by the Commission under Articles 81 and 82 of the EC Treaty, [2004] OJ Competition 3. C101/65. 213 See already in 2007: Response of Monckton Chambers to the OFT’s 219 White Paper, as note 8 above, at §87. Discussion Paper “Private actions in competition law: effective redress for consumers and business,” accessible at http://www.oft.gov.uk/shared_oft/ 220 All figures are based on my own counting of the decisions as reported consultations/Private-responses/Monckton.pdf, §5: “(...) there is considerable evidence on the European Commission’s competition website http://ec.europa.eu/ that companies are now seeking—and obtaining—compensation following an infringement competition/index_en.html. Re-adoptions of decisions annulled by the EU Courts are decision taken by the OFT or the Commission.” not included.

Concurrences N° 2-2014 I Colloque 52 New frontiers of antitrust I Paris, 21 février 2014 Prohibi- Condi- Total Exemp- Total Prohibition Commitment Total tion de- tion or tion or decisions decisions cisions obliga- negative tion de- clea- 2004 11 0 11 cisions rance deci- 2005 7 2 9 sions 2006 6 5 11 1988 13 5 18 6 24 2007 12 1 13 1989 3 5 8 2 10 2008 8 1 9 1990 6 2 8 6 14 2009 6 5 11 1991 6 3 9 3 12 2010 7 6 13 1992 17 3 20 4 24 2011 4 2 6 1993 2 3 5 1 6 2012 3 4 7 1994 7 7 14 8 22 Average 7 3 10 1995 3 0 3 2 5

1996 4 3 7 8 15 33. The figures in both tables above show significant variations 1997 2 0 2 9 11 from year to year. If one looks at the averages, however, the figures are stable: whereas under Regulation 17, the European 1998 10 1 11 6 17 Commission adopted on average 7.5 prohibition decisions 1999 7 0 7 17 24 and 2 exemption decisions with conditions or obligations per year, the Commission has under Regulation 1/2003 adopted 2000 5 0 5 4 9 on average 7 prohibition decisions and 3 commitment decisions per year. 2001 17 0 17 4 21

2002 10 0 10 7 17 34. While these figures show no weakening of enforcement action by the European Commission, they raise the question 2003 9 0 9 7 16 why the substantial increase predicted in the White Paper on Average 7. 5 2 9.5 6 15.5 Modernisation has not happened.224

35. As the figures above show, under Regulation 17 the European Commission adopted on average 6 exemption g For the years 2004-2012, under Regulation 1/2003,221 the or negative clearance decisions per year, for which there table below shows, for each year, the number of decisions is no equivalent under Regulation 1/2003.225 Apart from finding an infringement of Articles 101 or 102 TFEU, these formal exemption or negative clearance decisions, the ordering its termination and/or imposing fines (prohibition European Commission also dealt with other notifications decisions), the number of decisions making commitments through informal comfort letters.226 The resources saved as binding pursuant to Article 9 of Regulation 1/2003 a result of the disappearance of this notification-related (commitments decisions),222 and the total of these two types work have apparently not allowed a significant increase in of decisions:223 prohibition and commitment decisions.

36. A first possible explanation is that the overall resources 221 Even if Regulation 1/2003 only applied as from 1 May 2004, the figures include the whole which the European Commission devotes to the enforcement year 2004. of Articles 101 and 102 TFEU might have gone down.227 222 See generally J. Almunia, Remedies, commitments and settlements in antitrust, Given that, as a result of Regulation 1/2003, many more SPEECH/13/210 (8 March 2013); my papers Settlements of EU Antitrust Investigations: Commitment Decisions under Article 9 of Regulation No. 1/2003 (2006) 29 World resources are now devoted to the enforcement of Articles 101 Competition 345 and The Use of Settlements in Public Antitrust Enforcement: Objectives and 102 TFEU at the level of the national competition and Principles (2008) 31 World Competition 335; and F. Wagner-von Papp, Best and even authorities, it could be argued that it might be rational for Better Practices in Commitment Procedures after Alrosa: The Dangers of Abandoning the “Struggle for Competition Law” (2012) 49 Common Market Law Review 929. the European Commission to devote fewer resources to this 223 Again all figures are based on my own counting of the decisions as reported task. I am not aware of the European Commission having on the European Commission’s competition website http://ec.europa.eu/ deliberately done so. Inside the European Commission, competition/index_en.html. Re-adoptions of decisions annulled by the EU Courts are not included. No column is added for non-infringement decisions pursuant to Article 10 224 See (text accompanying) note 43 above. of Regulation 1/2003 (findings of inapplicability), as the Commission has not adopted any such decisions. This is neither surprising nor problematic. As indicated in recital 14 225 See note 47 above as to non-infringement decisions pursuant to Article 10 of of Regulation 1/2003, Article 10 is only meant to be used in exceptional cases, and no Regulation 1/2003. such cases have arisen; see Staff Working Paper, as note 17 above, §112-114; see further 226 See White Paper, as note 8 above, §34. also The Optimal Enforcement of EC Antitrust Law, as note 6 above, section 6.2.2.3; Principles of European Antitrust Enforcement, as note 1 above, section 1.2.3; and Opinion 227 They risk in any event going down in the near future, as part of the general reduction of Advocate General Kokott of 28 February 2013 in Case C-681/11 Schenker and Co and of the European Commission’s staff by 5%; see Conclusions of the European Council Others, not yet reported in ECR. (Multiannual Financial Framework), EUCO 37/13 (8 February 2013), §99.

Concurrences N° 2-2014 I Colloque 53 New frontiers of antitrust I Paris, 21 février 2014 there is however no fixed amount of resources devoted to the in Article 102 TFEU cases, the European Commission has enforcement of Articles 101 and 102 TFEU. The European developed a practice of including in its decisions, in addition Commission’s Directorate-General for Competition is not to the analysis and reasoning legally required to find an only responsible for the enforcement of Articles 101 and 102 infringement of Article 102 TFEU, a further analysis as to TFEU but also for merger control and state aid control, and the economic effects of the practices at issue, in particular the there is no fixed allocation of resources between these three effects on consumers.233 Obviously, such additional analysis areas of activity. Given the European Commission’s exclusive consumes additional resources.234 competences and the notification systems in the areas of merger control and state aid control, there is an inherent risk 40. Taking together the figures for the European Commission that these two areas of activity will always take priority over and the national competition authorities, however, there can the enforcement of Articles 101 and 102 TFEU, for which the be no doubt that Regulation 1/2003 has led to a spectacular Commission has a large discretion whether or not to act.228 increase in the enforcement of Articles 101 and 102 TFEU,235 and that Regulation 1/2003 has thus been a great success. n 37. A second possible explanation for the absence of an increase in the number of decisions adopted by the European Commission is that the European Commission may spend a substantial amount of resources on its coordination tasks under Regulation 1/2003, monitoring the enforcement of Articles 101 and 102 TFEU by the national competition authorities and the national courts. In its Report on the functioning of Regulation 1/2003, the European Commission indicated that its Directorate-General for Competition had developed a practice of submitting (oral or written) observations to the national competition authorities in many cases.229

38. A third possible explanation is that, as a result of increased prioritisation, the European Commission may deal to a larger extent with cases that are inherently more complex and thus consume more resources.230

39. A fourth possible explanation is that, even if the cases dealt with are not inherently more complex, the European Commission may spend more resources on dealing with them. This may be due to two factors. First, the European Commission has increased the levels of internal quality control, in particular with the creation in 2003 of the office 233 See Commission Decision of 29 March 2006 in Case COMP/38.113 Prokent/Tomra, [2008] OJ C219/11, full text at http://ec.europa.eu/competition/antitrust/cases/ of the Chief Economist inside the Directorate-General dec_docs/38113/38113_250_8.pdf; Commission Decision of 13 May 2009 in Case for Competition.231 Obviously, increased quality control COMP/37.990 Intel [2009] OJ C227/13, full text accessible at http://ec.europa.eu/ 232 competition/antitrust/cases/dec_docs/37990/37990_3581_18.pdf; Judgment of the entails increased use of resources. Secondly, in particular General Court of 9 September 2010 in Case T-155/06 Tomra v. Commission [2010] ECR I-4361,§289-290; Guidance on the Commission’s enforcement priorities in applying Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings [2009] OJ C45/7; J. Kay, European monopoly laws are already fair and stringent, Financial Times, 4 October 2005, accessible at http://www.johnkay.com/2005/10/04/ european-monopoly-laws-are-already-fair-and-stringent; and L.L. Gormsen, Are Anti- competitive Effects Necessary for an Analysis under Article 102 TFEU (2013) 36 World Competition 223.

234 See also S. Voigt, “More Economic” Does Not Necessarily Mean “Better” – Perils and Pitfalls of the “More Economic Approach” as Recommended by the European 228 See my paper Discretion and Prioritisation in Public Antitrust Enforcement, in Particular Commission, D. Schmidtchen, M. Albert and S. Voigt (eds), The More Economic EU Antitrust Enforcement (2011) 34 World Competition 353. Approach to European Competition Law – Conferences on New Political Economy 24 (Mohr Siebeck 2007), 97 at 99; L. Idot, Modern industrial economics revisited – Comments 229 Communication from the Commission to the European Parliament and Council – Report on Daniel Rubinfeld, Michele Polo and Oliver Budzinski, in J. Drexl, W. Kerber and on the functioning of Regulation 1/2003, COM(2009)206 of 29 April 2009, §28, and R. Podszun (eds), Competition Policy and the Economic Approach – Foundations and Commission Staff Working Paper accompanying the Report on the functioning of Limitations (Edward Elgar 2011), 139 at 141-142; J. Drexl, On the (a)political Regulation 1/2003, SEC(2009)574 of 29 April 2009, §257. character of the economic approach to competition law, J. Drexl, W. Kerber and R. Podszun (eds), as just above, 312 at 322; D. Zimmer, Law and Economics im Recht der 230 See (text accompanying) notes 41 and 42 above. Wettbewerbsbeschränkungen, Studienvereinigung Kartellrecht, Kartellrecht in Theorie und 231 See http://ec.europa.eu/dgs/competition/economist/role_en.html. An important quality Praxis – Festschrift für Cornelis Canenbley zum 70. Geburtstag (Beck 2012), 525 at 533; control function is also performed by the European Commission’s Legal Service; see L. Ortiz Blanco and A. Lamadrid de Pablo, Expert Economic Evidence and Effects-Based http://ec.europa.eu/dgs/legal_service/index_en.htm. While the Legal Service has always Assessments in Competition Law Cases, M. Merola and J. Derenne (eds), The Role of the existed, its role appears to have expanded in practice, as reflected by the near doubling in Court of Justice of the European Union in Competition Law Cases (Bruylant 2012), 305; size of its Competition Team in the past decade. J. Steenbergen, Has Competition Analysis Become Too Sophisticated for Its Own Good?, 19th St. Gallen International Competition Law Forum (7-8 June 2012), accessible at 232 See also my paper The Combination of the Investigative and Prosecutorial Function http://papers.ssrn.com/abstract=2179905; and S. Bishop, Snake-Oil with Mathematics and the Adjudicative Function in EC Antitrust Enforcement: A Legal and Economic is Still Snake-Oil: Why Recent Trends in the Application of So-Called “Sophisticated” Analysis (2004) 27 World Competition 201 at 222; and Principles of European Antitrust Economics is Hindering Good Competition Policy Enforcement (2013) 9 European Enforcement, as note 1 above, §619. Apart from being costly, systematic and extensive Competition Journal 67. quality control also risks having a deresponsibilizing effect, thus perversely lowering quality. 235 See (text accompanying) note 22 above.

Concurrences N° 2-2014 I Colloque 54 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

European Competition Network 10 years after & EC Regulation 1/2003: Can cooperation be extended to merger control and advocacy? Cooperation within the European Competition Network: State of play report and reflections on anticompetitive practices and merger control

Mélanie Thill-Tayara* Partner, Norton Rose Fulbright, Paris

1. Nearly ten years after Regulation 1/2003 on the in the number of penalties;239 however, it is worth examining implementation of the European rules on anticompetitive the place of the rights of defence of businesses in this vast practices came into effect on 1 May 2004,236 the time has enforcement structure. come to take stock of the instruments of cooperation set up between the national competition authorities (“NCAs”) 5. Although institutionalised by Regulation 1/2003, the within the European Cooperation Network (“ECN”). ECN remains relatively vague and nontransparent, disclosing only scant information in the occasional newsletter and 2. While the authorities may feel that cooperation has various publications issued by its working groups. worked well, businesses, which might have hoped that their rights would have been better protected, would probably give 6. The ECN largely focuses on its advocacy role, aimed at getting the Member States to harmonise their national laws so it mixed reviews (I.). that European competition law is applied more consistently. 3. The same may be said about merger control regimes: 7. The most important actions taken by the ECN in recent despite the creation of a specialised ECN working group in years include: 2010 (EU Merger Control Working Group237) and the adoption 238 in November 2011 of Best Practices aimed at getting the g the Model Leniency Programme, adopted by the ECN in NCAs to cooperate in reviewing cases, businesses continue 2006 and revised in November 2012, aimed at harmonising to face divergent rules and procedures that can harm their NCAs’ leniency procedures. To date, all NCAs of the interests and sometimes lead to conflicting decisions. A prime EU Member States have adopted a leniency programme, example of this is the recent MyFerryLink decision, a case except Malta, which is likely to do so shortly;240 that underscores the need for not only improved cooperation among authorities but alos a comprehensive review of merger g the series of recommendations published by the ECN control regimes within the European Union (“EU”) (II.). in December 2013, intended to supplement the procedural arsenal of the least-well-endowed NCAs by taking the systems with the broadest scope as a reference point, particularly I. Ten years of Regulation 1/2003 with respect to investigative powers, enforcement powers, have yielded mixed results and powers to impose sanctions, collect digital evidence, adopt interim measures, make commitment decisions and 4. The European Commission (“Commission”) boasts impose remedies. about the ECN’s success in antitrust procedures, which has resulted in the emergence of many new cases and an increase 8. Such advocacy should not, however, be carried out at the expense of the rights of defence of businesses. An increase * Mélanie Thill-Tayara would like to thank Arnaud Sanz, Senior Associate, Norton Rose in the powers of the NCAs should be considered only if it is Fulbright LLP, for his assistance in writing this article. accompanied by a corresponding and proportionate increase 236 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the in procedural guarantees, in order to prevent abuses. rules on competition laid down in Articles 81 and 82 of the Treaty (now Articles 101 and 102 of the Treaty on the Functioning of the European Union [TFEU]), Official Journal 239 W.P.J. Wils (Hearing Officer at the Commission), Ten Years of Regulation 1/2003-A of the European Union (OJEU), 4 January 2003, L 1/1. Retrospective, Journal of European Competition Law & Practice, 9 July 2013; A. Italianer 237 This working group is made up of representatives of the Commission and the NCAs of (Director General for Competition, European Commission), The ECN, convergence and the EU Member States, as well as observers from other NCAs of the European Economic enforcement of EU competition law: achievements and challenges, Speech delivered in Area. Vilnius, Lithuania on 3 October 2013. 238 Best Practices on Cooperation between EU National Competition Authorities in Merger 240 The Maltese authority (MCCAA) submitted its draft leniency regulations to public Review, 8 November 2011. consultation from 14 June to 9 August 2013.

Concurrences N° 2-2014 I Colloque 55 New frontiers of antitrust I Paris, 21 février 2014 9. These waves of harmonisation have only further connection with, or in contemplation of, legal proceedings exacerbated inequalities between the NCAs, which have and for the purposes of those proceedings;242 acquired more and more procedural clout, and businesses, whose rights still vary widely in scope from Member State to g by contrast, in Germany,243 only documents prepared for a Member State. business’s defence after an investigation procedure is initiated are legally privileged, i.e. excluding documents intended solely 10. We therefore feel that guarantees ought to be put in place to provide legal or strategic advice outside of any procedure; to restore a fair balance between the rights of businesses and the prerogatives of the NCAs, be it in the conduct of g in Italy,244 the national judges apply the same rule competition investigations (1.) or in the use of negotiated as the EU case law. Accordingly, legal privilege covers procedures (2.). all correspondence prior to or after the initiation of an administrative procedure, provided there is a relationship to the subject matter of that procedure;245 1. Limitations on NCA investigative powers are not specific enough g in France, the law246 does not place any material limitation on the scope of lawyer-client correspondence covered 11. Although designed to level-up NCAs’ investigative by legal privilege, which should therefore be absolute, powers, the ECN’s December 2013 Recommendation on notwithstanding the French Supreme Court’s case law, Investigative Powers, Enforcement Measures and Sanctions which, wrongly, has attempted to restrict such privilege to in the Context of Inspections and Requests for Information those documents necessary for the “[translation] exercise of includes limitations on the powers of the NCAs. However, it the rights of defence.”247 This case law limitation appears to states that such limitations are to be “strictly circumscribed” be not only contra legem but also difficult to apply in practice, and must not extend beyond the relevant legislation and case as the substance of such documents is not precisely defined. law on legal professional privilege and the right not to self- incriminate applicable in each jurisdiction. 15. Moreover, the Member States and the Commission do not accord the same personal scope to legal privilege, 12. Even though such limitations are obviously a good start, depending on whether the exchange was with an external they are undeniably insufficient. The ECN should indeed also lawyer or with the business’s in-house counsel. For example: ensure that the NCAs do not use their powers in such a way that they exceed the investigation’s purpose as authorized, g for the French Competition Authority (the “FCA”) and nor infringe other fundamental rights such as the right to the Commission, communications and documents from privacy, data protection or banking secrecy. Besides, a true in‑house counsel are not to be protected by legal privilege;248 effective remedy should be introduced in every Member State, as well as at the EU level, so that the legality of inspections g conversely, in Belgium, a 5 March 2013 ruling by the may be appealed as such, separately from the appeal on the Brussels Court of Appeal in Belgacom extended legal merits of the fining decision, which is the case in France and privilege protection to legal opinions drafted by in-house the United Kingdom, but not—for instance—in Belgium, counsels who are members of the Belgian institute for Finland, Hungary and Poland (where inspections can only in‑house counsels,249 thus expressly excluding investigations be appealed together with a fining decision, as it is the case at relating to strictly national procedures from application of 250 251 the EU level). the Akzo case law;

242 Section 30 of the Competition Act (1998); see also A guide to the OFT’s investigation 13. In addition, without a standard EU-wide definition of legal procedures in competition cases, OFT, October 2012, §7.2, p. 18. privilege, the protection that businesses have when this concept 243 Investigative Powers Report, ECN, 31 October 2012, §2.5, p. 18. is set out in such general terms is clearly far from optimal. 244 Ibid. 14. Not all Member States protect legal privilege in case 245 CJEC, 18 May 1982, AM & S Europe Limited v. Commission (C-155/79, §23). of NCA investigations,241 and when they do, the range of 246 Article 66-5 of the Law of 31 December 1971 reforming certain judiciary and legal professions: “In all matters, whether in the area of advice or that of defence, written opinions documents covered can vary considerably. For example: sent by a lawyer to his/her client or intended for the latter, correspondence between a client and a lawyer or between said lawyer and other lawyers, with the exception, for the latter, of correspondence marked ‘Official,’ meeting notes and, more generally, all documents held in g in England and Wales, many communications may be the file are covered by professional secrecy.” protected, provided they can be proven to belong to one of 247 By way of illustration, Cass. crim., 8 April 2010, Société GTM génie civil et the following categories: (i) communications between a client services (No. 08-87.416); Cass. crim., 30 November 2011, Société Nycomed France and a professional legal adviser for the purpose of giving (No. 10‑81.749) ; Cass. crim., 14 December 2011, Société nationale des chemins de fer français (No. 10-85.294); Cass. crim., 24 April 2013, Société Biotronik France or receiving legal advice, or (ii) communications made in (No. 12‑80.346); Cass. crim., 24 April 2013, Société Medtronic France (No. 12-80331). 248 In French law, Article 66-5 of the Law of 31 December 1971 applies solely to the 241 In Austria, legal privilege cannot be enforced against officials of the Bundeswettbewerbsbehörde protection of lawyer professional secrecy, whereas EU case law expressly excludes in‑house in connection with a strictly national investigation procedure (ECN Investigative Powers counsel from the benefit of legal privilege (CJEC, 14 September 2010, Akzo Nobel Report, 31 October 2012, §2.5, p. 18). However, some authors are more nuanced and wonder Chemicals Ltd and Akcros Chemicals Ltd v. Commission, C-550/07 P, §44ff). whether the legal privilege provided under Austrian penal law could be extended to such procedures (see The Private Competition Enforcement Review, 6th edition, 2013, p. 38; 249 Law of 1 March 2000 creating an Institute for In-House Counsels, M.B., 4 July 2000, p. 23252. Private Antitrust Litigation: Jurisdictional comparison, p. 11). In any event, when acting on 250 CJEC, 14 September 2010, Akzo Nobel Chemicals Ltd and Akcros Chemicals Ltd behalf of the Commission under Article 22, §2, of Regulation 1/2003 or of an NCA v. Commission (C-550/07 P, §44ff). whose national law provides for legal privilege protection, the Austrian authorities ought to be required to comply with that national law. 251 Brussels Court of Appeal, 5 March 2013, Belgacom SA (No. 3011/MR/3).

Concurrences N° 2-2014 I Colloque 56 New frontiers of antitrust I Paris, 21 février 2014 g a position similar to that of the Brussels Court of Appeal standard form,254 businesses are still required to send their was adopted by the Netherlands Supreme Court in a decision summary files separately to all the NCAs involved. At such a on 15 March 2013 with respect to in-house counsels who are preliminary stage, it is not always easy to identify the NCAs members of the local law society.252 that will have jurisdiction to consider the practices concerned, particularly as regards multi-layered, complex infringements 16. A number of issues are raised by such a lack of that may, in whole or in part, give rise to the concurrent harmonisation: jurisdiction of one or more NCAs (for example, where there are overall cartels covering multiple states). As the authorities g Considering the flow of information between the NCAs do not systematically reach a finding of a single,“ complex within the ECN, it seems shocking that NCAs that do not and continuous infringement” in such cases, businesses may afford adequate protection to businesses may, if need be, take refuge behind the non bis in idem principle, which will provide information to other NCAs that would not have had not always apply.255 the right to that information under their own national laws; 22. It is therefore unfortunate that there is no one stop shop, g The investigative powers of NCAs that do not guarantee which could have remedied this problem, whereas businesses legal privilege protection should not be increased under any are required to react swiftly to obtain immunity. circumstances. 23. This shortcoming is especially problematic because the 17. In view of the current state of national regulations, ECN members have only agreed on the main principles all one can do is therefore ask the ECN to precisely define of leniency, and have not harmonised the fundamental legal privilege and prohibit any NCA that does not afford conditions for granting immunity or a reduction of fine, 256 such protection from providing information covered by conditions in respect of which each NCA remains sovereign. legal privilege to another NCA, so that the breach of such The heterogeneity of the applicable regimes is creating legal privilege remains confined to its territory. uncertainty for businesses, which may be granted different reductions—or even no reduction at all—depending on the 257 18. Meanwhile, the right not to self-incriminate, while state. seemingly guaranteed by all Member States, varies in scope from country to country. For example, in some legal 24. The same thing can be said about other negotiated systems,253 this right, unfortunately, does not extend to procedures, which also suffer from a lack of harmonisation: requests for information (“RFIs”), which some competition authorities are using more and more extensively. It is not g with regard to the European commitment procedure, unusual for some RFIs to contain questions suggesting Regulation 1/2003 indicates in its recitals that a commitment the existence of anticompetitive practices and requiring, decision by the Commission does not affect the NCAs’ power for example, that the business explain why such or such an to punish the practices concerned on the basis of Articles 101 258 agreement should, in its opinion, benefit from an exemption and 102 TFEU. Whether this provision is compatible under Article 101(3) TFEU. with the uniform application of EU law as contemplated in Article 16(2) of Regulation 1/2003 is debatable, as it does not 19. It would therefore be desirable for the ECN to clarify seem consistent for an NCA to be able to punish a business the conditions of enforceability of this right in the case of 254 All members of the ECN accept summary applications subject to certain language RFIs in order to reduce the risk of abuse by competition restrictions. authorities. 255 For example, in the consumer detergents sector, the company Henkel attempted to rely on the non bis in idem principle to challenge a penalty imposed on it by the FCA for a cartel on the French market (No. 11-D-17, 8 December 2011), contending that such a cartel overlapped, at least partially, with practices punished a few months earlier by the 2. Divergent negotiated procedures Commission (Decision of 13 April 2011 – COMP/39579), although the latter did not reach a finding of a single, complex and continuous infringement. The Paris Court of Appeal, however, excluded the application of the non bis in idem principle, finding the 20. Notwithstanding the introduction of a “model” leniency object of the practices, the products involved, the geographic area, the implementation programme, negotiated procedures are still a long way from period and the companies involved to be distinct, “regardless of the existence, even if it being uniform among the Member States and could benefit were proved, of possible relationships between the way the cartels prosecuted at these different levels unfolded.” The Court thus found that, having taken care to obtain confirmation from from more protective provisions for businesses to make them the Commission that the facts involved were actually separate and distinct, the FCA “was more efficient and obviate the risk of divergence within the not required to determine whether the prosecuted cartel was part of or not part of a larger EU- wide practice that it did not have the jurisdiction to consider, prosecute and impose penalties ECN. on in the European Commission’s stead, nor (a fortiori) to find potential relationships between the infringement prosecuted at the national level and the one prosecuted at the 21. For example, although the revised model leniency European level” (Paris CA, 30 January 2014 – RG No. 2012/00723). programme may be lauded for extending the summary 256 For example, in Germany, the initiator of a cartel and a business that took steps to compel another business to participate in the cartel are excluded from the benefit of leniency, application system to all leniency applicants (whatever their whereas in the United Kingdom, France and Spain, only this last case is excluded from standing before the Commission) and for introducing a the benefit of leniency. Along the same lines, like the Commission, Slovakia accepts hypothetical leniency applications, whereas most NCAs do not. 252 Supreme Court of the Netherlands, 15 March 2013, Delta et al. (No. 12/02667). 257 In the French-German flour cartel, the FCA granted total fine immunity to the Werhahn Group (Decision No. 12-D-09 of 13 March 2012 relating to practices in the flour sector), 253 Particularly in EU, Lithuanian and Latvian law (Investigative Powers Report, ECN, whereas the Bundeskartellamt states that it only granted a fine reduction (press release of 31 October 2012, §4.2.2, p. 31). A contrario, in Germany, businesses suspected of 27 May 2013 concerning the decision issued on 19 February 2013 in the milling sector). anticompetitive practices are not required to respond to requests for information from the Bundeskartellamt when the response might expose them to penalties. 258 Regulation 1/2003, Recitals 13 and 22.

Concurrences N° 2-2014 I Colloque 57 New frontiers of antitrust I Paris, 21 février 2014 for anticompetitive practices when the concerns identified by the Commission are supposed to have been remedied by the II. Control of cross-border proposed commitments; concentrations: Yes to g businesses also have major concerns about the settlement cooperation, but not unless procedure, because the settlement regime involves an there is harmonisation admission of guilt, before the Commission and in certain Member States, for participation in the condemned 27. The combination of procedures for multijurisdictional anticompetitive practice.259 A business that opts for this filings in the event of cross-border mergers is a complex issue procedure before the Commission or an NCA runs the risk which businesses face regularly. that other competition authorities will use the admission as the basis for conducting parallel procedures and potentially 28. Without a one stop shop, when EU thresholds are not imposing additional penalties.260 Various avenues for reform met, businesses must go through many long, cumbersome are available to limit this risk: and costly processes whose outcome is made all the more uncertain by the fact that the merger control regimes of (i) harmonise the fundamental conditions for settlement the EU Member States are still far from harmonised. so that, as in France, the procedure does not amount to an The MyFerryLink case put the spotlight once again on the admission of guilt, irrespective of the competition authority risks that can arise when several NCAs are charged with with whom it is implemented, reviewing the same transaction (1.).

(ii) or, at least, specify the conditions under which the NCAs 29. These difficulties, although rare, require an in-depth and the Commission are authorised to exchange information reflection on how to conciliate the merger control regimes in about a settlement, and the type of information that may be the EU and strengthen cooperation between the NCAs to exchanged, drawing, for example, on the framework set out prevent this type of slippage (2.). for leniency cases in the Commission Notice on cooperation within the Network of Competition Authorities.261 1. Status report: A pernicious lack 25. In the light of this assessment, the competition authorities of harmonisation should attach more importance to the rights of businesses, which 30. Efforts have been made in the last ten years to achieve would also contribute to a more uniform application of EU law a certain convergence between national laws of the EU within the ECN with respect to anticompetitive practices. Member States for merger control. 26. Similarly, there remains quite a significant work to do 31. However, despite the initiatives of the EU Merger Working before uniformity among the Member States is achieved in Group, which has overseen merger matters in the ECN merger control, an area where the absence of harmonisation since 2010, including the adoption in November 2011 of Best can be especially problematic when different NCAs have to Practices262 to facilitate the handling of multijurisdictional deal with the same cross-border concentration. To solve those mergers, the following differences still co-exist within the EU: problems, the NCAs will have to cooperate more effectively on cases but also follow a common set of rules to avoid any g 263 risk of divergence. mandatory and voluntary notification regimes;

g systems in which notification is suspensive and others in which the transaction may be carried out without waiting for NCA approval;264

259 For example, in Belgium, Germany and the United Kingdom, settlement includes admission of guilt by the business, which is not the case, at least in law, for the “non- contestation des griefs” procedure in France. As for Italy, the texts do not provide for such 262 Best Practices on Cooperation between EU National Competition Authorities in Merger a procedure. Review, 8 November 2011. 260 Articles 11 and 12 of Regulation 1/2003. See also Antitrust Manual of Procedures, March 263 In the United Kingdom, the Office of Fair Trading may, however, decide to review a 2012, Chapter 3 – “Cooperation with National Competition Authorities in EU and transaction that is not notified within four months of the date on which its completion exchange of information in ECN.” was made public. 261 Section 2.3.3 of the Commission Notice on cooperation within the Network of 264 For example, in the United Kingdom, Hungary and Italy (suspension may, however, be Competition Authorities (OJEU of 27 April 2004, C 101/48). requested by the Italian authority for phase 2).

Concurrences N° 2-2014 I Colloque 58 New frontiers of antitrust I Paris, 21 février 2014 g very disparate national notification thresholds, both in risk cannot be excluded and has already played out in the terms of formulation (turnover and/or market share265) and past,273 including in the recent MyFerryLink case. level and in terms of the identification of businesses included in the calculation (acquirer, target and/or seller);266 35. Just as a reminder, in June 2012, the Commercial Court of Paris selected Eurotunnel from four potential buyers to g different accepted meanings of the concept of notifiable acquire three vessels and other assets (brand, client listing “concentration” (in particular, certain Member States subject list, etc.) belonging to the ferry company SeaFrance, which acquisitions of non-controlling shareholdings and even non- had been placed in liquidation. independent joint ventures to merger control267), 36. The transaction was reviewed by both the French and g significant differences between notification formats and British competition authorities for merger control clearance. the scope of the information required from the parties;268 The transaction first received clearance from the FCA in November 012,274 although it was subject to behavioural g notification timetables that vary widely from state to state, commitments from Eurotunnel related to pricing in order to both in terms of the duration of the procedures (which in limit risks identified in respect of vertical and conglomerate practice can last one week to several months) and in terms effects between Eurotunnel’s rail and maritime transport of their constituent steps (in particular, some states do not activities in the “short sea” area of the Channel,275 which was provide for a pre-notification phase, while others tend to found to be the relevant geographic market. make extensive use of this preliminary stage269); 37. However, this did not prevent the UK Competition g different competitive analysis tests: while most EU Commission (“CC”) from reaching a totally different decision 276 Member States have adopted a test similar to the “significant seven months later (in June 2013), even though it analysed impediment of effective competition” (SIEC) test270 applied the same geographic market as the FCA and applied the same by the Commission, or the fairly similar “substantial lessening analytic test (SLC): although it approved the transaction, the of competition” (SLC) test,271 others continue to consider CC prohibited Eurotunnel from operating ferry services at the transactions solely on the basis of whether they are likely to Dover port for 10 years, unless it divested itself of two of the lead to the creation or strengthening of a dominant position.272 three former SeaFrance vessels and refrained from operating ferry services at Dover with any vessel. An extreme remedy, to 32. The divergences sometimes give rise to unreasonable say the least, which took much of the shine off the transaction. constraints on businesses’ structural projects, even when the transaction may have a limited impact on competition. 38. The nuance, which made all the difference in this case, laid in the choice of “counterfactual” grounds used by 33. This lack of harmonisation presents a considerable challenge the CC to assess the transaction’s impact on competition. that would be best tackled in a comprehensive manner in order Whereas the FCA had considered two alternative points of to simplify and facilitate the task of businesses and also remedy comparison—the first being the competitive situation that the problem of legal uncertainty that persists in the EU. existed just before the assets were acquired by Eurotunnel (when SeaFrance had already ceased all activities) and the 34. NCAs rarely adopt conflicting decisions on the same next being the competitive situation that existed before transaction, insofar as they generally conduct their analyses SeaFrance exited the market—the CC, relying on its with respect to different geographic markets. However, this guidelines, chose to compare the situation resulting from the acquisition by Eurotunnel with the situation that might have 265 Especially in Spain, Portugal and the United Kingdom. arisen had another operator acquired the SeaFrance assets. 266 In particular, in Poland, for acquisitions of sole control, the turnover thresholds must This third option, however, had been dismissed by the FCA be calculated by taking into account not just the acquirer’s but also the seller’s turnover. as too hypothetical. In Germany, an acquisition of a 25% interest (even if it is a non-controlling interest) requires that the thresholds be calculated taking into account not only the acquirer’s and the target’s turnover but also the turnover of the parent companies with at least a 25% 273 In particular, see Pan Fish/Marine Harvest, initially cleared by the French Minister of the interest (even if it is a non-controlling interest) in the target. Economy in phase 2 subject to divestiture commitments concerning salmon production sites in Scotland, subsequently cleared by the UK Competition Commission without 267 For example, in Germany and Austria. commitments on the basis that the transaction was not likely to lessen competition (see France’s contribution dated 28 June 2011 to Working Party No. 3 of the OECD – 268 In particular, whereas the format used in France is very similar to the CO Form used by Directorate for Financial and Enterprise Affairs, Competition Committee [DAF/COMP/ the Commission, Germany requires a relatively small amount of information (transaction WP3/WD(2011)42], pp. 6-7). See also the AkzoNobel/Metlac transaction, cleared in description and basic information about the businesses involved: name and type of Germany, Austria, Brazil, Columbia, Cyprus, Pakistan, Russia and Turkey, but prohibited business, place of registration, activities, turnover, market shares in Germany only in in the United Kingdom by the Competition Commission on 21 December 2012 in a markets for which the parties’ combined share is at least 20%, and where an interest is decision upheld by the Competition Appeal Tribunal on 21 June 2013 [No. 1204/4/8/13] acquired in a business, a breakdown of interests already held in the target business and (European Competition Law Review 2013, Akzo – what a carry on… extra-territoriality, those the acquirer intends to acquire). corporate veils and SLC). The latter decision is currently the subject of an appeal, still 269 For example, in Poland, although it is possible to contact the president of the OCCP before pending, before the Court of Appeal. notifying a transaction, there is no formal pre-notification procedure. On the other hand, in 274 Decision No. 12-DCC-154 of 7 November 2012 relating to the acquisition of sole control France, pre-notification is increasingly taking the form of a “blank” notification and often of assets of SeaFrance by the Eurotunnel Group. results in long exchanges with the FCA that can sometimes resemble the first phase of a review. 275 As pointed out by the FCA, the “short sea” area of the Channel consists of short-haul 270 Particularly, in Belgium, Croatia, Denmark, Spain, Estonia, the Netherlands. Poland, routes between England and France or Belgium, including the Pas-de-Calais routes Portugal, the Czech Republic, Romania, Slovakia, Slovenia and Sweden, and in Germany (between Calais and Dunkirk, on one side, and Dover and Folkestone, on the other) and since the reform of its merger control regulation (effective 30 June 2013). the Ostend-Ramsgate and Dieppe-Newhaven routes. 271 France, Hungary, Italy, United Kingdom. 276 Competition Commission, Report of 6 June 2013, Groupe Eurotunnel S.A. and 272 Particularly Austria, Bulgaria and Cyprus. SeaFrance S.A. merger inquiry.

Concurrences N° 2-2014 I Colloque 59 New frontiers of antitrust I Paris, 21 février 2014 39. This difference in approach led the CC to find that there Member States, and by limiting the information required was a risk of horizontal unilateral effects, even though this when the transaction does not raise competition concerns. risk had been excluded by the FCA a few months earlier. When forms are being simplified, however, care should be taken to ensure that the NCAs end up with all the information 40. But the divergences did not stop there. Upon appeal they need for their transaction analysis; otherwise, they may of the CC’s decision, the Competition Appeal Tribunal seek to make repeated requests for additional information; (“CAT”) raised new questions in its judgment of 4 December 2013,277 this time tackling the very concept of concentration. g A limit could be placed on how long procedures last, at Recalling that a transaction cannot be reviewed under English least for cross-border transactions, to avoid situations where law unless it gives rise to the transfer of an “enterprise,” the different NCAs hand down conflicting decisions several CAT noted that the existence of such a transfer was debatable months apart. given, among other things, the status of the new Eurotunnel employees assigned to operate the ships. Because they had 45. These avenues for reform are in line with some of the ceased to be employees of SeaFrance several months before recommendations278 proposed in December 2013 by the the acquisition of SeaFrance’s assets, the CAT questioned the former head of the FCA’s legal department (Fabien Zivy) very existence of a transfer of human assets and considered in response to the mission entrusted to the authority in it possible that only bare assets, and not an enterprise, might October 2013 by the Minister of the Economy. Those have, in the end, been transferred to Eurotunnel. The CAT recommendations included in particular: therefore decided to send the case back to the CC in order to clarify the matter. The CC may ultimately be motivated g Harmonising the types, but not the levels, of notification to revise its assessment and find that the transaction was not thresholds, keeping only those expressed as turnover (because of even reviewable under UK merger control law. their objective nature) and eliminating market share (or production or supply share) thresholds, which are hard to estimate and 41. This latter issue does not, however, appear to have posed create uncertainty regarding transaction reviewability; any difficulties for the FCA. g Making the substantive rules of EU law apply where 42. Such divergences explain why MyFerryLink caused a concentrations are subject to notification in at least two sudden surge in awareness among the different stakeholders Member States. However, it would be desirable for this of the need to thoroughly rethink the control of cross-border proposal to cover not only the rules relating to competitive concentrations, and led the French Minister of the Economy analysis but also the very concept of notifiable concentration, to order a report from the FCA on 9 October 2013 so as to preferably modelling it on the European system in order to search reform options to resolve these types of issues and overcome differences specific to certain Member States, enhance coordination among the NCAs. particularly as regards the review of non-controlling minority shareholdings and non-full function joint ventures (at least 2. Points to consider in view of a potential whilst these transactions are not subject to notification to the reform Commission); g Introducing a “model” form containing a body of 43. To be completely effective, thinking on the control of standardised information for cross-border concentration multijurisdictional concentrations in the EU should focus on notifications, if not an ECN “single notification” system, be two objectives. it to a sort of “single inbox” at the ECN level (which would require creating a truly structured ECN) or via a mechanism 44. First, businesses need their cases to be handled in a for allocating a case to a single (“lead”) NCA that would straightforward and timely manner. A comprehensive reform handle it for all the NCAs involved, provided it is clear that of the substantive and procedural rules of control of the the transaction’s centre of gravity is in one of the Member Member States seems appropriate: States where it is reviewable. Such mechanism could be drawn on the rules permitting the allocation of an antitrust case to g The conditions triggering concentration control (concept an NCA,279 provided that the allocation procedure does not of concentration and thresholds) could first be standardised result in a more complex or lengthier procedure;280 to make it easier for businesses to identify their notification obligations. This will definitely not be easy as it will entail g For cross-border concentrations, restricting the duration dealing with the political and economic stakes particular to of national procedures to a common maximum time limit. each Member State; It would however be possible to go further and wish for Member States’ notification timetables and steps in national g The NCAs could apply harmonised competitive analysis procedures to be identical; methods to lessen the risk of divergence; 278 Option Droit & Affaires, Suppl. No. 198, 8 January 2014, p. 10. g The notification processes could be simplified by 279 Commission Notice on cooperation within the Network of Competition Authorities standardising the forms so that they are common to all ECN (§31ff) (OJEU of 27 April 2004, C 101/43). 280 As opposed to the two-month period provided in the Commission Notice on cooperation 277 CAT, 4 December 2013, Groupe Eurotunnel e.a. v. Competition Commission within the Network of Competition Authorities with respect to anticompetitive practices (No. 1216/4/8/13 and No. 1217/4/8/13). (§18).

Concurrences N° 2-2014 I Colloque 60 New frontiers of antitrust I Paris, 21 février 2014 g Asking the NCAs to implement a truly simplified (iii) by harmonising the possibility for the competition notification form and procedure, if not a simple administrative authorities to exchange information collected during reporting system, for transactions that are not likely to raise a transaction review and use it to apply EU law, while competition concerns in their territory. respecting the rights of the parties,

46. All of these measures would be consistent with the (iv) by allowing for immediate recourse to a conciliation objective of the Commission’s “REFIT” programme, which committee bringing together the NCAs involved and assisted, aims to simplify EU legislation, facilitate its implementation if necessary, by the Commission, if there is a risk that a cross- and ease the burden on businesses.281 border concentration review which has not been entrusted to a “lead” authority culminates in divergent decisions. 47. However, all of these changes, as desirable as they may be, probably would not be sufficient to eliminate the risk of 52. While these proposals appear to provide some interesting NCAs’ reaching conflicting decisions concerning one and the avenues for reflection, Regulation 139/2004 would have to be same transaction. adjusted and amended to include precautionary measures in order to implement them: 48. For example, in MyFerryLink, the conflicts between the French and British decisions had more to do with each g The option of referring the case to the Commission at NCA’s subjective approach to the case (both in considering the pre-notification phase should remain exclusively with the concept of enterprise and in applying the SLC test) than the notifying parties as the latter will not necessarily want with the existence of separate and distinct rules of control. their cases to be handled by the Commission. Furthermore, the referral procedure continues to be too long and complex, 49. It is therefore unlikely that the conflicts between these which merely deters businesses from using it other than in decisions would have been avoided had the merger control extreme cases where their transactions are subject to multiple regimes been harmonised. national notifications and where referral is ultimately easier than getting involved in a large number of parallel national 50. This case illustrates the importance of implementing procedures. In this regard, the simplification of the referral a comprehensive procedure for cooperation among the request form (“RS”) that was introduced in December 2013 NCAs—if not, in extreme cases, entrusting a one stop shop (instead of eliminating this form completely, as might have with the handling of cross-border concentrations that do not been hoped) is definitely a step in the right direction, but it is reach an EU dimension. This role of one stop shop could be still far from a cure-all. In particular, extending the referral played by the Commission on referral, at the request of the option to the scenario where two Member States have parties or the NCAs, as early as the pre-notification phase jurisdiction to review the transaction could be inefficient if, as (or, at least, after notification) if there is a risk of divergence Article 4(5) of Regulation 139/2004 provides, the states retain or, as the case may be, by a special section within the ECN. the right to oppose the parties’ request for referral without, moreover, having to provide the least justification for doing 51. In this respect, the recommendations propose to create: so. At a minimum, it would be fair to require, for such a veto to be legitimate, that the state involved demonstrate that the g a mechanism to prevent inter-regulator conflicts by giving concentration would likely lead to a significant lessening businesses the possibility of requesting pre-notification of competition in a separate and distinct market within its referral of their cases to the Commission for cross-border territory and must therefore be reviewed, in whole or in part, concentrations where at least two NCAs (instead of three, by that state. as currently provided for in Article 4(5) of Regulation 139/2004282) have jurisdiction to review the transaction—at g As for cooperation mechanisms, one may wonder exactly least, in cases involving interconnection markets (transport, what improvements would be useful in comparison to the Best networks, etc.); Practices of November 2011, which already provide that:283 g a real network of European competition authorities when (i) cooperation may assist NCAs in forming a view as to dealing with cross-border concentrations: whether a transaction qualifies for notification, in analysing the transaction’s impact on competition and in designing (i) by formalising, in a manner transparent to the parties, appropriate remedies if the markets affected cover more than the system of mutual information between the European one Member State; competition authorities for the notification of such transactions, (ii) provided that they have due regard for the confidentiality (ii) by allowing the competition authorities with competent of the parties, the NCAs are encouraged to apprise each other jurisdiction to assist in reviewing the transaction, in keeping of the transactions they are reviewing, as soon as at the with the type of cooperation that currently exists between the notification stage and at each step of their review, and to discuss NCAs and the Commission, their jurisdictional and/or substantive analyses with each other. The Best Practices even specify that such cooperation can 281 Commission press release of 2 October 2013: REFIT – Fit for growth – Commission cover all aspects of the analysis, such as market definition, takes ambitious next steps to make EU law lighter (IP/13/891). 282 Council Regulation (EC) 139/2004 of 20 January 2004 on the control of concentrations 283 Best Practices on Cooperation between EU National Competition Authorities in Merger between undertakings (OJEU of 29 January 2004, L 24/1). Review, 8 November 2011 (§3.2, 4.1 to 4.3).

Concurrences N° 2-2014 I Colloque 61 New frontiers of antitrust I Paris, 21 février 2014 assessment of competitive effects, efficiencies, theories of 56. In this respect, the imposition of a maximum limit on competitive harm, and the empirical evidence needed to the duration of national procedures could supplement the implement those theories, as well as proposed commitments. establishment of precise rules of cooperation incorporating the following: 53. The cooperation recommended in the Best Practices was clearly not enough to reach a consensus in MyFerryLink, and g Strict timelines for the exchange of information between whether things would have turned out differently had these the NCAs at each step of the review from transaction pre- recommendations taken the form of a mandatory procedure notification onward; binding on the NCAs is debatable. g The option for the Commission to review the case, as 54. At a minimum, strengthening inter-NCA cooperation already exists for anticompetitive practices for which the would require creating a true business secrecy protection Commission can decide to open a procedure by declining for the notifying parties. In this respect, the waiver system NCAs jurisdiction in certain situations,284 although it should recommended by the ICN and appended to Best Practices not be allowed without the notifying parties’ prior consent. seems a bit of wishful thinking since businesses attach great Such an option could particularly be provided for in the importance to the confidentiality of their information and event of gridlock on the conciliation committee proposed by will rarely agree to give the NCAs a blank signature to Mr. Zivy; disclose it to each other. Mergers are a strategic issue for businesses and it is therefore important for them to maintain g Precise and formal guarantees to assure the parties that control over the information that is provided to the NCAs, cooperation will be transparent to them and that their which means knowing in advance exactly what information information will remain confidential. the NCAs will be able to exchange. As countries differ in what they consider to be covered by business secrecy, a definition 57. Undeniably, such a reform represents a significant would need to be adopted, in concert with businesses, that is undertaking that will require the active participation of universal, clear and precise. the 28 Member States, if not—for most of the proposed changes—their unanimous agreement in order to adopt a new 55. In addition, the matter of the timing of such cooperation regulation or a directive, in consultation with all the other should also be resolved so that it does not result in long, stakeholders (competition authorities, businesses, lawyers, drawn-out procedures. For example, in MyFerryLink, the professional associations or other interested parties). Debate FCA came to a decision in November 2012, and it was will no doubt be lively, as some NCAs have already expressed necessary to wait until June 2013 to obtain a decision from reservations about a comprehensive review. the Competition Commission. One may fear that more effective cooperation between the FCA and the Competition 58. Such a project, which requires a strong political stance Commission might have drawn out the French procedure at the highest levels, could most definitely be included in the unnecessarily, which, in light of the social stakes involved, objectives for the Commission’s next term. could have been prejudicial. 59. Let us hope that these initial suggestions will help to fuel reflection and contribute to the emergence of a new era in the control of cross-border concentrations within the EU. n

284 Under Article 11(6) of Regulation 1/2003 and in the Commission Notice on Cooperation within the Network of Competition Authorities (§50ff) (OJEU of 27 April 2004, C 101/43), which considers five scenarios: (i) NCAs envisage conflicting situations in the same case, or (ii) decisions in conflict with EU case law, or (iii) an NCA is unduly drawing out proceedings in a case, or (iv) the Commission wishes to develop European competition policy in particular when a similar competition issue arises in several Member States or to ensure effective enforcement of EU law, or (v) the NCAs concerned do not object.

Concurrences N° 2-2014 I Colloque 62 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust @ Colloque Paris, 21 février 2014

Alexander Italianer [email protected] Restructuring firms in the Directeur général, DG Concurrences, Bruxelles context of crisis: What role Anne Perrot [email protected] for merger policy? Économiste, MAPP, Paris

Matthew Readings [email protected] Partenaire, Shearman & Sterling, Londres

Howard A. Shelanski [email protected] Office of Information and Regulatory Affairs, Maison-Blanche, Washington DC Introduction

Anne Perrot Économiste, MAPP, Paris

1. The crisis has raised a series of issues related to the role of competition policy Abstract and, more specifically, that of state aids and merger control.

La deuxième table-ronde de la conférence “Demain la 2. This round table will explore in what respect the various issues involved in merger concurrence” du 21 février 2014 à Paris, était dédiée à la “Restructuration des entreprises en période de crise : Quel rôle review are (or are not) impacted by a context where firms suffer from a bad economic pour le contrôle des concentations ?”. L’objectif de cette table context. ronde est d’analyser dans quelle mesure le contexte économique défavorable peut impacter le contrôle des concentrations. 3. The banking sector is obviously particularly at the core of these questions, due to its “systemic” properties: the risk of default of a given bank could impact the whole banking system, which may in turn have devastating consequences on the whole (real) economy. Therefore, we will have a particular focus on the banking system, in This last roundtable of the conference “New frontiers of Antitrust” (Paris, 21 February 2014) was dedicated to the the light of various cases that highlight the specific issues of merger control in times “Restructuring firms in the context of crisis: What role of crisis and its possible interactions with the control of state aids. for merger policy? ». The objective of this roudtable is to explore in what respect the various issues involved in merger review are (or are not) impacted by a context where firms 4. The panelists of this round table come from different jurisdictions that may have suffer from a bad economic context. different points of view on these issues, which will allow a lively debate.

5. We have the honour to welcome at this round table:

g the Senator Mario Monti, who will give us his views on these various issues, both from a European and Italian perspective;

g Howard Shelanski, who now works within the Office of Information and Regulatory Affairs at the White House in Washington;

g Alexander Italianer, director general of the DG COMP; and

g Mathew Readings, lawyer at Shearman & Sterling in London.

6. The organization of this round table will be as follows. On each particular question, one of the panelists will take the lead and present his views for 10 minutes, then two other panelists will react for 5 minutes. At the end of the round table, we will give a bit more time to Mario Monti, who will put these various questions in the perspective of the evolution of merger control and its ability to adapt to changing economic environement.

Concurrences N° 2-2014 I Colloque 63 New frontiers of antitrust I Paris, 21 février 2014 7. The RT will address successively the following questions : g Should competition authorities change the way they implement merger policy—in times of crisisin terms of market definition, failing firm argument, design of remedies, taking consideration efficiencies, etc.? (Lead speaker: Alexander Italianer; other panelists: Howard Shelanski, Matthew Readings.) g Are there different approaches in different jurisdictions? A case study with EU/UK and the banking system: the case of Llyods/HBOS (Lead speaker: Matthew Readings; other panelists : Howard Shelanski, Mario Monti.) g Is there a need for a new orientation of merger policy, due to the crisis? Should competition policy be implemented more softly in times of crisis? Should other goals be assigned to merger review? Etc. A broader view on competition policy and its objectives. (Lead speaker: Howard Shelanski; other panelists: Mario Monti, Alexander Italianer.) g Has merger review succeeded to deal with the crisis context? What about the way the financial sector has been treated? What role can play competition policy in a broader sense in the set of economic policies in times of crisis? (Mario Monti; debate: other speakers, floor). n

Concurrences N° 2-2014 I Colloque 64 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

Restructuring firms in the context of crisis: What role for merger policy? Merger policy in times of economic crisis

Howard A. Shelanski Office of Information and Regulatory Affairs, Maison-Blanche, Washington DC

1. I wish in the brief time I have this afternoon to make gives way to something more like industrial policy as a matter several points about merger policy in times of economic of economic or political necessity. Economic crisis present crisis. hard realities and difficult judgment calls.

2. I think as a general matter that competition agencies 7. When competition enforcement does cede to industrial should remain vigilant and review mergers just as carefully policy in a given economic sector, merger policy becomes during times of crisis as they do in good economic times. more like regulation than like antitrust. And here I think I have written about this an article in 2010, Enforcing it is important for merger policy to incorporate two of the competition during an economic crisis. I will not go through most critical characteristics of good regulatory process: all the arguments from that article here, but will briefly transparency and public participation. Such characteristics highlight three reasons that I think merger standards should are also important to good merger enforcement, and I wish endure even as an economy faces difficulties. to note the important reforms that then-Commissioner Monti introduced at DG Competition in late 2002, and 3. First, crisis often present pressing, short-term needs that which eventually led to the 2004 European Commission affect defined sets of people such as particular businesses, Merger Regulation (ECMR). segments of the labor market, or given set of consumers. The demands of special interest groups are thus likely to 8. Why is it so important that transparency and public become politically significant during crisis. The result can be participation be a part of merger policy, especially during policies that benefit such defined special interests even if they economic crisis? It is precisely because of the hazards that do not benefit society as a whole. Allowing mergers to save arise when competition enforcement retreats and is replaced, particular businesses that are struggling during crisis might at least partially and temporarily, by sectoral industrial therefore be good for the employees and owners of those policy. Industrial policy can bring stability in particular businesses even while imposing higher costs, reduced choice, circumstances; but it can also restructure markets, create and delayed innovation on everyone else. barriers to entry, alter the path of innovation, and affect long-term consumer welfare. As mentioned above, industrial 4. Second, relaxed merger standards during crisis run the policy driven by economic crisis might have such harmful risk of achieving short-term benefits while creating longer- effects simultaneously with resolving relatively short-run term harm. The merger that saves firms today might lead problems. The short-run stabilization might potentially be to less competitive markets for years to come. Finally, very important, but of perhaps much less effect than the history (at least the history of the United States) shows that restructured market that will follow for a much longer term. business interests have often used times of crisis to achieve goals that they otherwise would not be allowed to pursue 9. It is therefore critical that all stakeholders have notice that and, importantly, that have little to do with resolving the usual merger standards will not apply, of what actions policy economic crisis at hand. makers are considering for particular firms or industries, and of what facts and analysis decisions are based on. 5. Even during times of crisis, therefore, there is a critical role for merger policy: ensuring that the costs and benefits 10. Notice provides transparency, and can greatly improve of consolidation among (or acquisitions of) struggling firms policy outcomes when such notice is combined with are carefully analyzed and weighed when policy makers meaningful opportunity for public participation. By decide how to respond to systemic economic difficulties. “meaningful,” I am referring to public participation that has Vigilant merger policy can help determine whether particular a genuine possibility of changing the outcome of a policy transactions are at all relevant to resolving a crisis, and can process. While such ability to affect outcomes is important ensure that decision makers are aware of the cost/benefit in such things as merger settlements, it is even more critical tradeoffs that such transactions might entail. when economic crisis has made merger review more a part of industrial policy than case-by-case enforcement. 6. Thus, merger analysis has an important role even when policy makers determine that it is necessary to allow some 11. The benefits of a transparent, participatory regulatory consolidation that in normal times the law would prohibit. process are clear. Policy makers test their propositions and Indeed, there may well be times when competition policy evidence in front of an audience of stakeholders of all

Concurrences N° 2-2014 I Colloque 65 New frontiers of antitrust I Paris, 21 février 2014 perspectives. The result can be better information, a better understanding of how implementation of a policy will actually work “on the ground,” and better avoidance of unintended consequences. For this reason, regulatory process is one of the most important issues in negotiations around the world on trade and investment partnerships (discuss TTIP example).

12. In the fast-moving environment of economic crisis, it is especially important to obtain such feedback about general changes in merger enforcement and manifestations of those changes in the context of specific consolidations.

13. So what is the role of merger policy in times of economic crisis? Its main role is to hold steady and apply the same rigorous analysis of transactions as in good economic times. When a merger that might otherwise be blocked under a more regulatory, industrial policy response to the crisis, that analysis plays a critical role: it can be part of the public notice about the policy decision, can enhance the transparency and quality of the decision-making process, and can be part of the basis on which public comment in term informs and affects how we address merger activity during difficult economic times. n

Concurrences N° 2-2014 I Colloque 66 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

Restructuring firms in the context of crisis: What role for merger policy? EU merger control in times of crisis: Versatility in orthodoxy

Alexander Italianer Directeur général, DG Concurrences, Bruxelles

1. When discussing the relationship between merger prices of the semi-finished products and raw materials they policy and crisis, it is difficult to do justice to the title of the need for production, leaving the consumer to foot the final conference New Frontiers of Antitrust. On this particular bill. topic, there are few new approaches to present or pioneering policies to discuss. For one, Europe is recovering. Europe is 7. The Commission does not believe that merger rules need climbing out of the crisis and is on its way to recovery. The to be relaxed. The merger regulation is flexible enough to debate about the crisis is, hopefully, a debate about the past. take the economic crisis into account. The merger regulation allows the Commission to bear economic realities in mind on 2. Second, the Commission’s approach to mergers has been a case-by-case basis. It also makes it possible to consider the consistent during the crisis. EU rules are perfectly adequate to possible evolution of relevant markets. deal with the effects of the crisis, and so the Commission has resisted calls to be flexible towards anti-competitive mergers 8. One example is the Commission’s approach towards the because of difficult economic circumstances. The economic possible bankruptcy of one of the merging parties. If a merger upturn has vindicated this policy. If the Commission would creates a dominant player, the Commission may oppose that have allowed dominant, uncompetitive companies to form, merger or parts of the merger. But what if it turns out that, then the consumer would be stuck with them now, just as without the merger, one of the merging companies would the economy is improving. Such companies would have disappear? In that case, the remaining partner could still hampered further recovery, and would have left customers become a dominant player, with or without the merger. As with higher prices, less choice and less innovation. this would happen anyway, there may no longer be a reason to oppose the merger. 3. Relaxing merger control rules is not the answer. EU merger control rules are already even-handed, in good as 9. In cases like these, the Commission carries out a well as bad times. The Commission intervenes only in around counterfactual analysis. Subject of this analysis are not only five per cent of cases. In most of these cases, a solution is the competitive conditions which will result from the merger, found for competition problems, and remedies are accepted but also possible scenarios for what will happen if the merger to ensure that the markets in question remain competitive. does not go ahead. The key question to ask here is whether it is the merger that causes anti-competitive effects to occur, 4. The Commission blocks extremely few cases: just two or whether these would have happened anyway. Recently, the merger cases in 2013 and only four transactions in the last Commission has asked this particular question twice. five years, which is less than one a year on average. 10. First, during the investigation of the proposed acquisition 5. It is not true that the merger regulation prevents the of a Shell refinery in Hamburg-Harburg by Swedish industrial creation of European champions. Provided there are no oils manufacturer Nynas. The Commission’s analysis showed competition problems, the Commission does not stand that, without the transaction, the target refinery would have in their way. In the last few years, there have been several closed down and would have exited the market. This meant mergers that created large European companies. An example a reduction in the number of competitors in the market, is the acquisition by French companies Alstom and Schneider which would have occurred anyway and was not caused by of Areva’s transmission and distribution business, which the merger itself. created European champions in the electrical equipment sector (2010). Others are the merger of Iberia and British 11. The Commission had additional reasons to approve the Airways (2010) and the merger of FIAT/Chrysler (2010), all merger. The closure of the Harburg refinery would have of which created large, viable European players. reduced production capacity below European demand, which would then have had to be met by imports. This, in 6. Far from blocking the rise of European champions, turn, would have raised prices for consumers. On the other the merger regulation protects European companies from hand, the investigation showed that Nynas was planning the harm that flows from excessive market power. Without to modernize the plant and increase its efficiency. The full merger control, companies would suffer from the higher competitive analysis of this merger, including the relevant

Concurrences N° 2-2014 I Colloque 67 New frontiers of antitrust I Paris, 21 février 2014 counterfactual and likely efficiencies, showed that consumers 18. What these companies are really asking is for the were better off with, than without the merger. Commission to adopt broader definitions that are not supported by any Commission findings, in the hope that 12. A second example of a failing firm occurred in the case fewer concerns will be found. Obviously this cannot be done. of the proposed takeover of Olympic Airways by its rival The Commission cannot allow anti-competitive mergers to Aegean, which only two years earlier still had been rejected go ahead, under the argument that they face competition by the Commission. When it was examined for the second from other regions of the world and that European customers time, conditions had changed. The serious deterioration of have other choices, if the investigation has in fact shown that the Greek economy since the beginning of the crisis had led concumer choice is limited to European manufacturers, or to a significant decrease in passengers on the routes where even restricted to the national market. both airlines were present, and that Olympic has stopped operating on many routes. As Olympic had no prospect of 19. Finally, the crisis cannot be used as an excuse to scrap becoming profitable in the coming years, Olympic and its or postpone remedies already agreed to. Some companies assets would exit the market without the merger. claim that they can no longer afford the remedies, but here the Commission maintains a strict but fair approach, and for 13. Here again, it was not the merger that caused the loss of good reason. In the case of Fortis/ABN AMRO, for instance, competition between the two airlines, and so it was approved the Commission insisted that the remedies given by the by the Commission. parties before the financial crisis would also be implemented during the crisis. This ensured that the Dutch SME banking 14. Besides the failing firm defence, another tool that has market stayed competitive during the crisis, and in the years proved its worth in the crisis is the Commission’s ability to that followed. allow a merger to go ahead prior to formal approval—what is known as derogation of the stand-still obligation. In the 20. While the Commission does not believe in letting crisis, there were instances where the implementation of a parties of the hook, it is willing in justified cases to take merger was particularly urgent. An example is the acquisition economic realities into account and find pragmatic solutions of the Belgian and Luxembourg operations of Fortis by BNP for problems, providing these do not jeopardise effective Paribas in 2008. The management of certain faulty assets competition. A good example is Finnish steel maker demanded speedy action, so in this case the parties were Outokumpu’s recent acquisition of Inoxum, ThyssenKrupp’s allowed to take certain risk management measures prior to stainless steel business. This merger created a global leader formal endorsement. in stainless steel. To prevent Outokumpu from dominating the European market for certain stainless steel products, the 15. So in general, EU merger control rules are effective, Commission only cleared the transaction after Outokumpu reasonable and flexible enough to deal with the effects of the committed to sell an important stainless steel plant located at crisis. Nevertheless, others have asked the Commission to Terni (Italy) to a competitor. adapt merger control rules in three specific ways: by taking public interest into account, by changing the approach to 21. Unfortunately, due to a cyclical downturn in the steel market definitions, or by waiving remedies for companies in industry, potential buyers offered prices far below the trouble. previously estimated value of the assets. Outokumpu was allowed more time to find a buyer, but the Commission 16. The Commission does not consider so-called public interest grounds a good excuse for allowing anti-competitive rejected requests to waive or modify the remedy as this would mergers to go ahead. The merged companies will still exist have been detrimental to competition and disruptive for the once the crisis is over, along with any market distortions they divestment process. In the end, Outokumpu proposed that will have caused, which means that consumers and businesses ThyssenKrupp buy back the Terni plant. The Commission will suffer the consequences of weak enforcement long after closely monitored the case throughout, and found that the economy recovers. An example of a public interest there were no grounds to reject the purchase simply because intervention at national level that illustrates this point may be ThyssenKrupp had been the seller in the initial merger the Lloyds/HBOS case in the United Kingdom. This merger transaction. So, the Commission approved ThyssenKrupp’s was allowed to go ahead with a reference to public interest, purchase of the Terni plant. However, to ensure that Terni but since then there have been repeated calls to increase can develop as a strong competitor, ThyssenKrupp had to competition in the UK retail banking market. sever all links with Outokumpu and sell off its shareholdings.

17. The Commission rejects the claim that it defines its 22. Fear is a bad counsellor. Merger rules have not been geographic markets too narrowly. Because they are operating relaxed out of fear of the crisis. If the Commission would globally, some companies believe that the Commission should have weakened enforcement efforts, European businesses and take worldwide markets into account rather than European consumers would still be suffering the consequences, perhaps or regional ones. However, “defining a market” basically for a long time to come. The Commission applies rules means to identify the alternative products or suppliers the strictly when it encounters competition concerns, but the customers could turn to when faced with a price increase. merger regulation has proven itself reasonable and flexible If products produced outside Europe are not available to enough to deal with the crisis. A Greek airline, a German European consumers and businesses, then they are not a refinery and a Belgian bank are living proof that this is the competitive alternative, and not part of the relevant market. case. n

Concurrences N° 2-2014 I Colloque 68 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust Paris, 21 février 2014

Restructuring firms in the context of crisis: What role for merger policy? Restructuring firms in the context of crisis: What role for merger policy? – A UK perspective

Matthew Readings and George Milton* Respectivement, partenaire et associé, Shearman & Sterling, Londres

I. Introduction g Is the current level of interaction between merger policy and state aid optimal? Is there more scope to apply merger 22. This article considers the role of merger policy towards remedy principles in the context of state aid restructurings restructuring firms in the context of crisis. It contrasts the (e.g. where the divested business is a carve-out and/or there European Commission’s application of the EU Merger is a limited pool of divestment buyers) so as to create more Regulation (EUMR) during the 2007-2008 financial crisis viable and effective competitors? with the UK position, where an additional ground for public interest intervention under domestic merger control law was introduced specifically to enable the Lloyds TSB/HBOS II. Application of the EU merger merger to be approved by the relevant government minister rules in the context of the 2007- and override concerns raised by the first-tier UK competition regulator in a number of retail banking markets. It will be 2008 financial crisis seen that the merger’s adverse competitive effects remain 24. It is clear that EU merger policy was not specifically unresolved, with the branch divestiture required under the relaxed or amended in connection with the restructurings285 state aid restructuring plan yet to be successfully implemented, prompted by the financial crisis of 2007-2008. The existing and the issue of market concentration in retail banking very rules and procedures contained within the EUMR’s much back on the UK competition enforcement and political mandatory and suspensory notification regime, alongside agenda. the state aid approvals of rescue packages and subsequent restructurings, proved flexible enough to cope with the 23. This comparison gives rise to the following questions, on exigencies of the day and did not require amendment to which this article offers views: permit necessary actions to be taken by the Commission that were beyond the scope of the existing framework. In g Should enforcement of merger policy in the EU be this regard, the following features of the EU merger regime softened or suspended in times of economic crisis—either in may be cited as favourable evidence of the Commission’s terms of the substantive intervention test or in the design of enforcement record during this time. remedies? Does the financial sector merit special treatment in this regard, given the potential systemic risk to the entire 1. Quick decisions and derogations economy? from the suspension obligation, where g What mechanisms are available under the EUMR to necessary allow efficient and proportionate enforcement of the merger control regime in times of crisis? 25. There are two significant cases in the financial sector where the Commission showed itself willing to complete g Is there a case to expand the use of derogations under its review prior to expiry of the normal deadline and, the EUMR to mitigate the impact of the mandatory and where appropriate, grant derogations from the suspension suspensory regime in crisis situations where there is not only obligation under Article 7(3) EUMR: urgency but also a prima facie substantive competition issue? 285 This term is arguably broad enough to encompass nationalisations (e.g. in the UK, the nationalisations of Bradford & Bingley, Northern Rock and RBS) as well as mergers g Would EU merger policy be improved by permitting public between independent firms. Nationalisations are typically not caught by EU merger control, although the position can be different if the acquired firm is not operated post- interest considerations to be considered by the Commission merger as a separate commercial entity with decision-making powers that are independent under the EUMR in appropriate cases (e.g. to maintain the of other state-controlled undertakings; see e.g. Case COMP/M.5508 SoFFin/Hypo Real Estate, the acquisition of the German financial institution Hypo Real Estate AG stability of the financial system)? by Germany’s state-owned Financial Market Stabilisation Fund (SoFFin), the first bank nationalisation to be notified to the Commission during the financial crisis; see also * The authors are grateful to Gabriella Griggs for her assistance in the preparation of this the Commission’s Consolidated Jurisdictional Notice under Council Regulation (EC) article. All views expressed are the authors’ own. No 139/2004, §52-53.

Concurrences N° 2-2014 I Colloque 69 New frontiers of antitrust I Paris, 21 février 2014 g Santander’s acquisition of certain Bradford & Bingley in a Lloyds TSB/HBOS-type merger that may be notified to assets was notified to the Commission on 12 November 2008 the Commission in the future, i.e. where there is both urgency and cleared unconditionally on 17 December, although the and a prima facie competition concern. Whilst it remains to transaction itself had completed on 29 September. As the be seen whether the Commission would be willing to grant published derogation decision shows, the Commission a derogation in such circumstances, the BNP Paribas/Fortis received a reasoned request for a derogation—and completed precedent does give some indication of how pragmatic the its assessment of whether to grant the request—on the same Commission is capable of being. Further, outside the financial day that the UK government received Santander’s bid for sector, the Commission has very occasionally granted a the assets (it also happened to be a Sunday), indicating the derogation in cases where it identified potential competition degree to which the Commission is capable of demonstrating concerns, or could not exclude that concerns may arise speed and flexibility in times of crisis.286 during the investigation process following notification.289 g In BNP Paribas/Fortis, the transaction was conditionally 28. Therefore, there is a question over how willing the cleared ten working days before expiry of the normal deadline, Commission would be to grant a derogation under Article 7(3) again showing the Commission’s willingness to expedite its in the context of a crisis merger giving rise to a prima facie procedures where necessary—including in remedy cases.287 competition concern. On the basis of its decisional practice to Prior to the conditional clearance decision, the Commission date, the starting presumption must be that the Commission had granted the parties’ request for a derogation under would generally not grant a derogation in such circumstances. Article 7(3) to allow BNP Paribas to take “risk management However, should the Commission ever find itself persuaded measures” in respect of the acquired assets pending the of the need to set aside prima facie competition concerns outcome of the Commission’s review (including setting up pending the outcome of its review (and such decisions are a Steering Committee over whose decisions BNP Paribas necessarily to be taken on a case-by-case basis), it is already would have a veto, thereby affording it decisive influence). equipped to perform this balancing assessment under the These measures were deemed “reasonably necessary to EUMR; the Commission is merely obliged under Article 7(3) safeguard or restore the viability of the Fortis Entities and to “take into account inter alia (...) the threat to competition thereby contribute to ensuring financial stability” and thus posed by the concentration” (emphasis added) in deciding deserving of a derogation from the normal rules. whether to exercise its discretion and grant the derogation. Further, the derogation can be made subject to conditions and obligations, which one would expect to be more or 26. For crisis mergers that require a derogation from the less onerous depending on the seriousness of the potential standstill obligation, the factors that determine whether the competition concern.290 request will be granted in practice are: g whether there is genuine urgency, in the sense that one or more of the parties is experiencing severe financial difficulties 2. No “public interest” test: The (and, in the case of mergers between financial institutions, standard competition analysis applies there is a risk of an adverse impact on the wider financial system and thus a systemic risk for the entire economy); 29. There is no public interest test available to the Commission in a merger review under the EUMR, unlike a UK merger g whether the implementation is limited to actions that are review under the Enterprise Act 2002 (EA02) which is subject strictly necessary to prevent harm caused by the EUMR to the possibility of a “public interest intervention” by the standstill obligation to one or more of the merging parties Secretary of State in limited circumstances, as discussed and/or to third parties (and, if applicable, to maintain below. Under the EU regime, a standard competition financial stability); and analysis is applied, i.e. whether the merger will give rise to a “significant impediment to effective competition.”291 As BNP g whether the merger raises prima facie competition Paribas/Fortis shows, crisis mergers are not subject to a lesser standard of competition scrutiny—nor, arguably, should concerns. they be—and the Commission will seek remedies (including

27. In relation to the last factor, it is clear from the derogation 289 None of the published Article 7(3) decisions where a derogation was granted involved decision itself and the subsequent offer of remedies in BNP prima facie competition concerns. In Case COMP/M.3275 Shell España/Cepsa/SIS JV, Paribas/Fortis that, at the time when it was presented with the Commission granted the derogation request but noted that “it cannot be excluded at this stage that competition concerns may arise during the investigation process following the derogation request, the Commission did not see the notification” (§20). The transaction was eventually referred back in full to the Spanish case as one that would be likely to require remedies288— competition authority under Article 9 EUMR. In Case COMP/M.4151 Orica/Dyno, potential competition concerns were identified in the EEA, but a partial derogation suggesting that such a derogation may be less forthcoming regarding certain tangible and intangible assets in non-EEA countries (Papua New Guinea, Indonesia, Chile, Peru and South Africa) was granted to avoid “specific and 286 Case COMP/M.5363 Santander/Bradford & Bingley Assets. exceptional harmful effects.” The derogation was made subject to a number of conditions, primarily involving ring-fencing arrangements but also with an explicit commitment by 287 Case COMP/M.5384 BNP Paribas/Fortis. The Commission’s concerns centered on credit the acquirer to unwind the acquisition of the non-EEA assets should the Commission cards as a payment instrument as well as on the provision by the parties of credit to issue a prohibition decision. The Commission eventually approved the merger in Phase I consumers through the cards. BNP Paribas committed to divest its Belgian consumer subject to conditions. credit business in order to secure clearance in Phase I. 290 See e.g. the Article 7(3) decision in Case COMP/M.4763 Cerberus/Torex (appointment of 288 The derogation was granted on 27 October 2008, whereas the transaction was notified an independent observer and a hold separate manager, and a commitment not to exercise on 29 October and remedies were subsequently offered on 26 November. In its derogation any voting rights pending the outcome of the Commission’s decision). decision, the Commission stated (at §39) that “the transaction is not likely, prima facie, to significantly impede effective competition within the EEA.” 291 Article 2(2) EUMR.

Concurrences N° 2-2014 I Colloque 70 New frontiers of antitrust I Paris, 21 février 2014 divestitures) in the normal way if this is determined to be that he intended to make a reference to the then second-tier necessary in order to restore effective competition. The fact UK regulator, the Competition Commission (CC), on the that the scope of the Commission’s review is limited in this basis that the merger may be expected operate against the way has not in practice given rise to a perceived enforcement public interest in media plurality. After a period of negotiation deficiency. and consultation on remedies, News Corp withdrew its offer of remedies, following which the Secretary of State made a reference to the CC for an in-depth investigation into the 3. Article 21(4) legitimate interests merger’s effect on media plurality. News Corp abandoned its bid shortly afterwards. 30. Article 21(4) EUMR permits Member States to intervene on non-competition grounds in a merger review being 32. The general consensus among commentators is that carried out by the Commission in order to “take appropriate Article 21(4) does not allow Member States to clear a merger measures to protect legitimate interests.” Legitimate interests on the basis of legitimate interest(s) where the Commission specified in this Article include public security,292 plurality of has blocked it on competition grounds. Therefore, even if the media293 and prudential rules. Other legitimate interests financial stability were to be notified to the Commission as have to be notified to the Commission prior to the measures a legitimate interest under Article 21(4), and recognised as being taken and the Commission must indicate whether it such (which to date it has not been, including in relation to recognises the interest as legitimate within 25 working days the UK—as discussed further below), it would not appear of being notified; in this regard, the measures must also be possible for a Member State to override the Commission’s compatible with the general principles and other provisions competition concerns and thereby avoid a prohibition of EU law. decision, or indeed the initiation of Phase II proceedings, given that the duration of an in-depth Commission investigation 31. The Commission is not itself authorised under the would generally not be compatible with consummation of a EUMR to make use of the Article 21(4) mechanism, nor crisis merger (hence, by way of example, the timing of the 296 are the legitimate interests which may be raised by Member UK government’s intervention in Lloyds TSB/HBOS). States capable of being weighed alongside or factored into the competition analysis, which is the exclusive domain of 33. As for whether the EUMR should be amended to permit the Commission and the cornerstone of the EUMR’s “one- public interest considerations to be taken into account by the stop-shop” principle.294 Rather, the Article 21(4) mechanism Commission in times of crisis, there does not seem to be a allows Member States to impose additional conditions and convincing justification for doing so—including in relation to requirements on a proposed merger on non-competition the financial sector where, given its importance to the wider grounds, or block it, even if the Commission has cleared economy, such arguments are more likely to be made during the merger from a competition perspective. For example, times of crisis. The cases where such issues are most likely News Corp’s bid for the 60% of BSkyB which it did not to arise would often fall outside the scope of the EUMR, already own was notified to the Commission, which cleared given their national nexus, and accordingly be reviewable at the transaction unconditionally, but the UK intervened to the national level where there is greater ability to take public 297 protect media plurality.295 Following advice from Ofcom interest issues into account. Moreover, it is unclear how (the UK’s sectoral regulator with responsibility for media the Commission itself would be able to assess public interest and telecommunications), the Secretary of State announced issues pertaining to a particular Member State. Any such amendment would likely need to operate in a similar fashion 292 See e.g. Case COMP/M.4561 General Electric/Smiths Aerospace. With regard to mergers to the ”referral back” mechanisms in Article 4(4) or Article 9 in the defence sector, a Member State is entitled under Article 346 of the Treaty on the EUMR (e.g. via additional criteria that permitted the Functioning of the European Union (TFEU; formerly Article 296 of the EC Treaty) to “take such measures as it considers necessary for the protection of the essential interests parties or Member States to request a referral back from the of its security,” which can include instructing companies not to notify under the EUMR Commission on grounds of the public interest as well as or insofar as the merger concerns military equipment—although the non-military aspects instead of the existing competition-based criteria). However, still have to be notified and approved in the normal way; see e.g. Case COMP/M.528 British Aerospace/VSEL. This provision does not afford a carte blanche to a Member this still implies the possibility of an overriding decision by State. Article 348 qualifies Article 346 by providing that “[i]f measures taken in the the Member State, which would amount to a fundamental circumstances referred to in Articles 346 (...) have the effect of distorting the conditions of competition in the internal market the Commission shall, together with the State concerned, alteration to the EUMR’s “one-stop-shop” principle. examine how these measures can be adjusted to the rules laid down in the Treaties” and the To introduce such an amendment would appear unnecessary, Commission may also “bring the matter directly before the Court of Justice” if it considers as it ignores both the flexibility of the Commission’s existing that a Member State is making improper use of its powers under Article 346. procedures and effects-based analysis, as well as the state 293 See e.g. Case COMP/M.5932 News Corp/BSkyB. aid regime where timely intervention to rescue struggling 294 Case COMP/M.6166 Deutsche Börse/NYSE Euronext is a significant financial services industries is already possible, with subsequent restructurings merger decision where the Commission maintained a straight course in the face of intense lobbying pressure urging it to take into account wider considerations and facilitate the to remedy any distortion to competition where necessary— creation of a “European champion” better able to compete with exchanges located outside and to the extent that a merger review has not already the EEA. A strict competition analysis was carried out and the transaction was prohibited despite the offer of remedies which were deemed insufficient to restore the loss of (actual addressed this issue. (There is a separate and legitimate and potential) competition. The decision was described in protectionist terms by the chief executive of Deutsche Börse as “a black day for Europe and for its future competitiveness 296 For further discussion, see for example C. Pouncey and I. Bukovics, Merger Control, on global financial markets” ( Financial Times, Deutsche Börse-NYSE merger blocked, Credit-Crunch Style: UK Government Intervention in the Lloyds/HBOS Merger, 1 February 2012). E.C.L.R. 2009, 30(2), pp. 67-73. 295 Case COMP/M.5932 News Corp/BSkyB; European Intervention Notice given pursuant to 297 Other national merger control regimes in the EU where public interest considerations can section 67 Enterprise Act 002 – Anticipated Acquisition of British Sky Broadcasting plc be taken into account include Cyprus, France, Germany, Ireland, Italy, the Netherlands, by News Corporation. Portugal and Spain.

Concurrences N° 2-2014 I Colloque 71 New frontiers of antitrust I Paris, 21 février 2014 question of whether state aid restructuring plans could make defence in their unsuccessful first merger attempt in 2011, greater use of merger remedy principles, discussed further which was prohibited by the Commission after an in-depth below in relation to the Lloyds TSB/HBOS case.) investigation. Despite the parties’ claim that absent a takeover Olympic would be forced to exit the market in the near future due to financial difficulties, the Commission found 4. Effects-based analysis and that the evidence at that time did not show that Olympic was severely under-performing against its business plan and the appropriate counterfactua its budget; nor was there evidence that its parent company 34. Whilst there is no public interest test that would allow was seriously considering withdrawing financial support or the Commission to balance a merger’s anti-competitive that it had exhausted other options such as restructuring. 301 effects with the public interest in, say, financial stability, the The Commission therefore rejected the failing firm defence. EUMR does allow the Commission to take into account When the merger was re-notified in 2013, however, the the prevailing market environment when determining the Commission accepted that each element of the failing firm defence was satisfied, due to the deterioration in the financial appropriate counterfactual against which to judge the 302 competitive effects of a merger (including, at the extreme, position of Olympic and the economic situation in Greece. the “failing firm” defence—discussed below). The grant of Commenting on the decision, Vice President Almunia noted that “[i] compatible state aid is also taken into account as part of t was not obvious that an acquisition that received a negative decision almost three years ago could today be cleared the relevant factual background to a proposed merger. In the on the basis of a new notification,” but the restated failing firm event that state aid has been granted which might benefit arguments left “no doubt” that the criteria were met.303 the merging parties, the Commission has to consider the impact of these measures on the financial strength and future 37. The failing firm defence is also recognised at the market position of the parties and their consequences for the UK level, although as with the Commission it is rare for this maintenance of effective competition.298 In BNP Paribas/ defence to be argued successfully before the UK competition Fortis, for example, the Commission took into account the authorities. In the 2008 dairy merger between Long Clawson aid granted to Fortis and found that the state measures in and Millway, for example, the CC accepted that Millway met question were not such, in combination with other elements the failing firm criteria so that the counterfactual for the of the market situation, as to confer on the merged entity a analysis of the merger was Millway’s exit from the market. privileged position to compete in the market as a result of the Millway would be unable to meet its financial obligations, a aid granted.299 restructuring of the business was not possible and there were no alternative buyers that would have resulted in a less anti- competitive outcome than the acquisition by Long Clawson. 5. Failing firm defence Despite a loss of competition due to the reduction in the number of large Stilton producers from three to two, the CC 35. The failing firm defence is formulated slightly differently concluded that the loss of competition was not substantial according to jurisdiction but at its core is the concept that, compared to the situation in the absence of the merger.304 if one of the merging parties is failing and its assets are expected to exit the market in the absence of the merger, 38. The question arises as to whether a more lenient failing any reduction in competition post-merger should not be firm test should be applied during a crisis. Arguably not; as attributable to the merger. The Commission’s position is set shown above, the current rules and procedures are already out in its Horizontal Merger Guidelines300 which state that flexible enough to take into account the prevailing market for the failing firm defence to be successful the following conditions. Consistent with other aspects of the merger regime, cumulative criteria must be satisfied: in the interests of legal certainty and credible enforcement there does not seem to be a convincing justification for a g the acquired undertaking would in the near future be crisis-specific failing firm defence. With particular regard to forced out of the market because of financial difficulties if mergers involving financial institutions, it may be even harder not taken over; to argue successfully that the third failing firm criterion is satisfied, given the anticipation of government intervention, g there is no less anti-competitive alternative purchaser; and for example in the form of state aid, to rescue a key bank whose collapse could have systemic repercussions for the g absent the merger, the assets of the failing firm would wider financial system and thus (potentially) the entire inevitably exit the market. economy.

36. The Greek airline merger case of Olympic/Aegean 39. This is precisely the situation that arose in relation to is illustrative of the Commission’s stringent application the Lloyds TSB/HBOS merger. Following its review of the of the above criteria. The parties argued the failing firm competition aspects, the then first-tier UK competition

298 Judgement of the Court of First Instance of 31 January 2001, RJB Mining v. Commission, 301 Case COMP/M.5830 Olympic/Aegean Airlines. T-156/98, ECR p. II-337, §114-125. 302 Case COMP/M.6796 Aegean/Olympic II. 299 Case COMP/M.5384, §133-142. 303 Joaquín Almunia Statement on the Aegean/Olympic Air merger, SPEECH/13/800, 300 Commission Notice – Guidelines on the assessment of horizontal mergers under the 9 October 2013. Council Regulation on the control of concentrations between undertakings (2004), 2004/C 31/03, §89-91. 304 CC Final Report, Long Clawson Dairy Limited/Millway, 14 January 2009.

Concurrences N° 2-2014 I Colloque 72 New frontiers of antitrust I Paris, 21 février 2014 regulator, the Office of Fair Trading (OFT), concluded that and economic growth).307 However, the Commission found it was “impossible to contemplate that HBOS would have been that only collateral savings were verifiable and, even then, allowed to fail” and assessed the merger’s competitive effects they would be significantly lower than the claimed amount. on the basis of a two-stage counterfactual that, absent the In light of the near-monopoly arising from the merger in a merger, HBOS would remain in the market but with a degree number of relevant markets, the Commission found that the of state support (in the first stage, HBOS would benefit from efficiencies that were verifiable, merger-specific and likely to some form of rescue package; in the second, HBOS would benefit customers were most likely limited and not sufficient no longer benefit from state support and either remain to counteract the predicted increase in trading fees.308 independent or in the hands of a “no overlap” purchaser). The OFT found that “the application of the failing firm defence g More recently, in UPS/TNT, the Commission took in this case is not appropriate given that it is not realistic to issue with UPS’ claim that the merger would give rise to consider that HBOS would have been allowed to fail (or that very significant cost savings of some EUR 400-550 million its assets would have been allowed to exit the market).”305 per year and, while accepting that some savings would be Despite this assessment, the UK government took decisive generated, found that they would not outweigh the price steps to ensure that the merger was completed as swiftly as increases predicted by the price concentration analyses possible, which had a number of ramifications (considered conducted by both the parties and the Commission.309 further in section III below).

6. Efficiencies III. UK case study: Lloyds TSB/HBOS

40. The Commission is also able to take into account 1. Government-brokered merger efficiencies put forward by the merging parties that offset any 42. The current system of merger control in the UK— anti-competitive effects that may arise as a result of a merger. primarily contained in the EA02—eliminates virtually all For example, profit-maximising firms may be incentivised to political involvement and consideration of non-competition pass on a proportion of any cost reduction to customers via issues from the formal merger review process. Unlike the lower prices post-merger. For this defence to succeed, three EUMR, however, UK merger control does permit certain criteria must be met: public interest considerations to become relevant to the outcome of the competition review. The EA02 provides a g the efficiencies must be merger specific; mechanism whereby a government minister may intervene g consumers must benefit; and in a merger (whether it falls within the jurisdiction of the EUMR or the EA02) on specified public interest grounds.310 g the efficiencies must be sufficiently certain and substantial to counteract any anti-competitive effects.306 Prior to the Lloyds TSB/HBOS merger, the only public interest considerations that had been specified were national security and media plurality. 41. The Commission’s decisional practice since the introduction of the Horizontal Merger Guidelines does not suggest that the efficiency defence is likely to be of 43. In the event of a public interest intervention, the normal any particular benefit for crisis mergers that raise serious rules no longer apply: the OFT—or from 1 April 2014, the 311 competition concerns. More generally, while there are signs Competition and Markets Authority (CMA) —is no longer that efficiencies are being given more detailed attention able to decide itself whether to refer a merger to the CC/CMA by the Commission than in the past (as the cases below panel for an in-depth review; and the final decision (including indicate), merging parties will continue to face considerable on remedies) is no longer within the ambit of the CC/CMA hurdles when bringing an efficiency defence. In the absence panel. Instead, the role of the OFT/CMA is merely advisory; of other defence arguments, efficiencies alone will continue it reports to the minister, with whom rests the final decision to be unlikely to overturn a unilateral effects finding (indeed, on whether to refer a merger to the CC/CMA panel. This both the cases discussed below are prohibitions). allows the minister to override the OFT/CMA’s competition concerns, by deciding not to refer a merger (i.e. clear it) on g In Deutsche Börse/NYSE Euronext, the parties argued that the basis that any anti-competitive outcome identified by the the transaction would benefit the users of the parties’ cash OFT/CMA is justified by one or more relevant public interest and derivatives exchanges on the basis that (i) it would reduce considerations. (If the minister does make a reference, the CC/ the costs of operating on these platforms for users, (ii) users CMA panel carries out its own investigation and reports would have to pledge less collateral to clear transactions, and to the minister on whether the merger operates, or may be (iii) users would benefit from greater liquidity and, therefore, 307 Case COMP/M.6166 Deutsche Börse/NYSE Euronext, §1145-1160. lower implicit trading costs. The parties further argued that the liquidity effects of the notified transaction would spill over 308 Ibid., §1335-1342. to benefit firms and consumers throughout the economy (e.g. 309 Case COMP/M.6570 UPS/TNT Express. via reduced cost of capital, greater resources for both public 310 Under section 42 EA02, the Secretary of State may issue an intervention notice to the OFT if he believes that it is or may be the case that one or more public interest consideration is and private investment, greater employment, innovation relevant to the consideration of the relevant merger situation. A public interest consideration is a consideration which is specified in section 58 EA02. Under section 58(3), the Secretary 305 OFT Report to the Secretary of State on the anticipated acquisition by Lloyds TSB plc of of State may by order modify section 58 in order to specify a new consideration. HBOS plc, 24 October 2008, §59. 311 As of 1 April 2014, the competition powers of the OFT and CC have been transferred to the 306 Horizontal Merger Guidelines, §76-88. CMA, although the two-tier system for mergers (and market investigations) has been retained.

Concurrences N° 2-2014 I Colloque 73 New frontiers of antitrust I Paris, 21 février 2014 expected to operate, against the public interest, taking account 46. The provision is admittedly very limited in scope315 and, of any adverse effect on competition and the public interest as noted in the impact assessment, whilst it could in principle consideration, and whether any remedies are appropriate. be applied to any merger where the relevant sector has a The minister will then decide whether or not to make an direct impact on financial stability more widely, it is expected adverse public interest finding and what, if any, remedies are to be used primarily for mergers in the financial sector where appropriate. As with the OFT/CMA’s report, the minister is there is a genuine risk of systemic contagion.316 In addition, bound by the CC/CMA panel’s findings on the competition several other national merger control regimes in the EU issues but not in relation to the public interest consideration. contain similar provisions, so the UK is hardly alone in this Therefore, a merger could be blocked on public interest regard. This said, the events that followed this particular grounds even where there is no adverse competition finding.) merger make it more difficult, with the benefit of hindsight, to view the government’s intervention entirely favourably. 44. In 2008, the Government, the Bank of England, the Financial Services Authority (the then financial services regulator) and Her Majesty’s Treasury brokered a merger between Lloyds TSB 2. Grant of state aid and HBOS in order to rescue HBOS (and provide reassurance to its depositors) which was perceived to be at risk of collapse amid 47. It soon became apparent that the problem in the UK the acute lack of confidence afflicting the financial markets at that financial sector was not lack of confidence in the markets but time. The transaction fell outside the jurisdictional scope of the rather banks being severely undercapitalised, exacerbated EUMR (presumably on the basis of the “two-thirds rule” in the case of HBOS by its high risk lending practices and in Article 1 EUMR, given the UK nexus of the parties’ EU excessive use of leverage.317 A series of support packages businesses) and within the scope of the EA02. were then granted. Firstly, there was a £17 billion capital injection into HBOS in January 2009, designed to facilitate 45. The merger was understood to raise prima facie the takeover by Lloyds TSB,318 giving the UK State 43.5% competition issues, particularly in the area of personal ownership of the combined Lloyds TSB/HBOS entity, Lloyds current accounts (PCAs). To ensure that the merger would be Banking Group (LBG). It was then announced on 7 March consummated as quickly as possible (i.e. without the risk and 2009 that LBG would take part in the UK’s Asset Protection uncertain outcome of a protracted CC investigation), the Scheme and the UK would participate in a share offer of UK government took control of the process away from the £4 billion, which was completed in June 2009. The UK’s national competition authorities. This was achieved in two participation in a capital raising share offer of £20.5 billion stages: firstly by the Secretary of State for Business issuing capital, subsequently announced on 3 November 2009 an intervention notice on the day the merger was announced, as an alternative to LBG’s participation in the UK Asset in which he stated that in his view the stability of the UK financial system, which he considered may be relevant to Protection Scheme, was also found to constitute a state aid review of the merger, should be specified as a new public element, since the government facilitated the placing of the interest consideration under the EA02;312 and secondly by the shares. introduction of legislation formally creating the additional public interest intervention ground, that of “maintaining 48. As a result, the purported rationale for the merger (to the stability of the UK financial system.”313 This allowed preserve financial stability) was shown to be somewhat the Secretary of State to review the public interest issue spurious, as state aid had to be granted to LBG (and thus, alongside the competition concerns raised by the OFT and, implicitly, HBOS) notwithstanding the merger (and in line having carried out a balancing test, decide whether to clear with the OFT’s counterfactual for HBOS absent the merger). the merger (i.e. to override the OFT’s recommendation that In addition, according to some commentary, it may not the merger be referred to the CC). He did so on 31 October, have been necessary for Lloyds TSB itself to receive state stating “that the merger will result in significant benefits to the aid absent the merger. Indeed, Eric Daniels, then CEO of public interest as it relates to ensuring the stability of the UK LBG, explicitly stated this in his evidence to the Treasury financial system and that these benefits outweigh the potential Committee on the Banking Crisis.319 In other words, it cannot for the merger to result in the anti-competitive outcomes be discounted that the merger may have increased the overall identified by the OFT.”314 cost to the public purse.

312 Under section 42(7) EA02, the Secretary of State is entitled to issue an intervention notice 315 It does not allow the government to raise UK financial stability as a legitimate interest which mentions a public interest consideration that has not been finalised provided that under Article 21(4) EUMR or as an intervention ground in merger cases that have an EU the Secretary of State takes measures to ensure that it is finalised as soon as practicable. dimension but have been referred back (in whole or in part) to the UK under Articles 4(4) or 9 EUMR. 313 The Enterprise Act 2002 (Specification of Additional Section 58 Consideration) Order 2008 (SI 2008/2645) took effect on 24 October 2008. 316 Explanatory Memorandum to the Enterprise Act 2002 (Specification of Additional Section 58 Consideration) Order 2008 No. 2645, Impact Assessment. 314 In its report to the Secretary of State of 24 October 2008, the OFT found that the transaction was likely to materially harm competition in the areas of PCAs, SME lending and mortgages 317 The Fourth Report of the Parliamentary Commission on Banking Standards, which in the UK, in particular in Scotland. The combined shares were estimated to be 33% in PCAs examined the governance of HBOS in the years preceding the takeover, is entitled: “An (with an increment of 14%), 20-30% in SME lending (30-40% in Scotland) and 20-30% in accident waiting to happen:” The failure of HBOS. mortgages (with an increment of 5-15%). By contrast, in the prior attempted merger between 318 As noted in the Commission’s decision on the restructuring plan for LBG, “LBG’s need for Lloyds and Abbey National, which was prohibited by the CC in 2001, the combined PCA share State aid is largely due to the acquisition of HBOS and the latter’s specific difficulties.” See would have been 27% (with an increment of 5%). An unincorporated association called the State aid No. N 428/2009 – United Kingdom Restructuring of Lloyds Banking Group, §39. Merger Action Group appealed the Secretary of State’s decision to the Competition Appeal Tribunal (CAT) on 29 November 2008 on the basis that the merger should have been referred 319 Minutes of Evidence, 11 February 2009: “Q1924 Chairman: Do you think you would still to the CC and, in particular, that the Secretary of State’s discretion in assessing the merger was have had to take government money, irrespective of whether you had taken HBOS or not? fettered. The CAT dismissed the claim. See Merger Action Group v. Secretary of State for Business Mr Daniels: No, we would not have had to have taken government money had we not bought Enterprise and Regulatory Reform [2008] CAT 36. HBOS.”

Concurrences N° 2-2014 I Colloque 74 New frontiers of antitrust I Paris, 21 février 2014 3. State aid restructuring 52. The significance of these concerns was reflected by the fact that only two formal bids were eventually received: one from 49. The Commission’s State aid decision on the restructuring NBNK, an investment vehicle set up for the specific purpose plan for LBG required, inter alia, the divestiture of at least of acquiring Verde; the other from the Co-operative Bank, 600 branches “to address the impact of LBG’s State aid which was selected as the divestiture buyer. Embarrassingly, on competition in the UK retail markets.”320 It is notable after a £1.5 billion regulatory capital shortfall was discovered that under state aid restructuring principles, divestiture in its own balance sheets, the Co-operative abandoned its bid proposals such as this constitute “compensatory measures” in April 2013.323 An initial public offering (IPO) of TSB is to remedy a “distortion to competition” arising from the now expected to occur sometime in 2014, with LBG selling grant of aid. This may imply a lesser standard than in the down a stake of between 30-50% initially and reducing its context of a merger remedy. Under the approach set out in stake in subsequent tranches.324 the Commission’s Remedies Notice, for example, the remedy would have had to “eliminate the competition concerns 53. Arguably, the on-going difficulties arising from the entirely,” be “comprehensive and effective from all points of implementation of the divestiture raise the question of view,” and “capable of being implemented effectively within whether remedy design principles could have been applied a short period of time.” Moreover, in merger cases where the to a greater extent to ensure the timely creation of a viable divestment business is a carve-out and/or there is a limited and effective challenger bank–in particular, via a more pool of suitable buyers, there is an increased likelihood stringent assessment of both the package’s viability and that the Commission will make the process more onerous its attractiveness to potential buyers, as well as a stricter for the merging parties by imposing an “up-front buyer” timescale for implementation. requirement (i.e. the parties agree not to close until a binding agreement has been entered into with a buyer that has been approved by the Commission).321 4. ICB recommendations

50. By contrast, the LBG divestiture package (known as 54. The September 2011 final report of the Independent Verde) must amount to a PCA market position of only Commission on Banking (ICB), chaired by Sir John Vickers, 4.6%—significantly less than the increment in PCA market focussed on the establishment of ring-fencing for deposit- share arising from the original merger (14%). Moreover, the taking and proprietary trading activities for banks, but it also Verde assets comprise a mixture of former Cheltenham & discussed market concentration in UK retail banking and Gloucester branches (acquired in 1997) and Lloyds TSB recommended that the government use the LBG divestiture branches in Scotland, repackaged under the TSB brand, as an opportunity to ensure the emergence of a strong new which had not been used in the UK for some 18 years until challenger bank, in particular by ensuring that the resultant its re-introduction to the UK high street in September 2013. entity has (i) a funding position at least as strong as its peers, Further, in order to avoid strengthening the position of the including as evidenced by its loan-to-deposit ratio relative existing players, the buyer’s PCA market share may not to its peers, and (ii) a PCA market share of at least 6%.325 exceed 14% after the purchase. This placed a significant However, the UK government said it considered the LBG restriction in practice on the number of potential suitable divestiture as a purely commercial matter and did not intend buyers. Finally, the timescale for the planned divestiture to use its shareholding in LBG to deliver the enhancement (30 November 2013) was significantly longer than would recommended by the ICB.326 Given the bespoke government typically be permissible in a merger context—and even this intervention in 2008 to facilitate the original merger, it would proved impossible to meet. appear relatively uncontroversial for the present government to implement the modest ICB recommendation to take 51. In other words, the package was a carve-out, not an a more pro-active role in how the branches are divested— existing, standalone business, and there were important issues particularly in light of the protracted difficulties that have to be addressed relating to both its ability to exert an effective been experienced thus far. This would also be in line with the competitive constraint after the sale and attractiveness to current calls for more competition in the UK retail banking potential buyers. Indeed, the OFT advised the government in sector (discussed below). September 2013 that “the divestments will only have a limited impact on overall structure in PCAs and SME banking” and 323 The rescuer itself proved to be in need of rescuing and another, albeit smaller, crisis situation was averted when two hedge funds led a radical restructuring of the Co- highlighted three areas of concern with regard to Verde’s operative’s debt at the end of 2013. ability to compete: (i) the services agreement with LBG 324 Similarly, the implementation of the State aid restructuring plan for RBS (State aid may impair its independence; (ii) its financial position and No. N 422/2009 and N 621/2009 – United Kingdom restructuring of Royal Bank of profitability may dampen its ability to compete and grow; Scotland following its recapitalisation by the State and its participation in the Asset Protection Scheme) has also faced significant difficulties. The sale of around 300 branches and (iii) the initial market share range falls below the range to Santander failed in October 2013 as a result of anticipated difficulties integrating the which had previously been observed in effective competitors IT systems. The current plan is for the assets to be spun-off via an IPO in 2015 under the in PCA markets.322 revived Williams & Glyn’s brand (which has not been used since the 1970s). 325 Independent Commission on Banking: Final Report and Recommendations, 12 September 2011, §8.31. The UK’s implementation of the key proposals in the Vickers report will 320 State aid No. N 428/2009 – United Kingdom Restructuring of Lloyds Banking Group, occur via the Financial Services (Banking Reform) Act 2013. The UK government has said §76. that it considers these reforms to be in line with the proposals in the October 2012 report 321 Commission Notice on remedies acceptable under Council Regulation (EC) No 139/2004 of the EU high-level group on reforming the structure of the EU banking sector, chaired and under Commission Regulation (EC) No 802/2004, §9 and 54-55. by Erkki Liikanen. 322 Letter from OFT to the Rt Hon George Osborne MP, 11 September 2013. 326 Banking reform: delivering stability and supporting a stable economy, 14 June 2012.

Concurrences N° 2-2014 I Colloque 75 New frontiers of antitrust I Paris, 21 février 2014 5. Possibility of intervention under the 57. For example, the leader of the UK opposition party, Ed Miliband, recently weighed in with a more draconian UK markets regime promise that, if the Labour Party wins the next UK parliamentary election, it would require the CMA to 55. The UK competition authorities are unique among report within six months (rather than in the 18-24 month their EU counterparts in being able to intervene directly timeframe set out in statute331) not on whether to facilitate in (and restructure) markets which are perceived to be not the emergence of “at least two new sizeable and competitive operating competitively—without the need to show any banks” but how to do so.332 Implementing such a policy breach of either Articles 101 or 102 TFEU and/or their would clearly give rise to a number of problems, not least in UK equivalents. Following a first-phase “market study,” a that it implies the CMA’s report would have been pre-judged reference can be made to a second-tier panel for a detailed and thus capable of being appealed. It would be a retrograde “market investigation.” The test for intervention under step for the outcome of a competition review to be capable the EA02 is low—the panel merely needs to conclude that of being determined by politicians in this manner (absent the there is an adverse effect on competition (AEC), meaning limited public interest considerations in the mergers context that any feature, or combination of features, of a market in discussed above)—this is precisely what the EA02 regime was the UK prevents, restricts or distorts competition.327 To the designed to change. extent that an AEC is identified, extremely wide-ranging and onerous market-wide remedies can be imposed to address the 58. More substantively, whilst the present article does AEC (including not only behavioural remedies such as price not attempt to cover the issue of competition in UK caps, transparency measures and changes to contractual terms, but also structural remedies, i.e. divestments).328 retail banking markets in any detail, it is notable that the market structure for PCAs does not of itself appear to be indicative of a significant competition problem (certainly by 56. The OFT carried out a PCA market study in 2008 and has comparison to other industries): there are five large providers issued a number of follow-up reports on its active monitoring (Barclays, HSBC, LBG, RBS and Santander), several smaller in this area. Although it continues to have concerns about the players (Co-operative Bank, Nationwide Building Society functioning of this market, the OFT has so far decided not to and National Australia Group Europe, which includes make a reference for an in-depth market investigation, due to the significant changes pending in the PCA market, including Clydesdale Bank and Yorkshire Bank), new entrants (Metro the LBG and RBS divestitures as well as the implementation Bank and M&S), anticipated entry (Virgin Money and Tesco of new measures to facilitate current account switching, Bank), numerous smaller banks/building societies as well as transparency initiatives and the FCA’s role (since 1 April internet-only providers (e.g. First Direct)—not including the 2013) in stimulating effective competition resulting from pending LBG and RBS divestiture businesses. In any event, its stronger competition remit.329 The ICB recommended it is not obvious that a perceived competition problem can that the OFT consider making a reference by 2015 if it be solved by increasing the number of players, when in fact had not already done so, if sufficient improvements in the the real causes may relate to e.g. informational issues and market have not occurred that time.330 There is a continued customer inertia. As the founder and former chairman of perception in some quarters that UK retail banking markets Metro Bank has observed, “more banks does not mean more competition, if they continue to offer customers the same are not operating competitively and that this is in large 333 part due to the level of market concentration (to which the products and services at roughly the same price.” Whatever Lloyds TSB/HBOS merger undoubtedly contributed). Amid the merits of a market investigation reference, the success of growing expectations that another PCA market study will be the LBG and RBS divestitures is one of several factors that launched in 2015 by the CMA, the successor regulator to the will likely determine whether such a reference is made. OFT and CC, there are signs that this topic may become one of the key battlegrounds in the 2015 parliamentary elections. IV. Conclusion 327 Section 134 EA02. 328 See e.g. the CC’s final reports in relation to BAA airports (30 March 2007) and aggregates, 59. We have seen how application of the EU merger control cement and ready mix concrete (18 January 2012). At the EU level, the Commission is able rules (in conjunction with the state aid regime) seemingly to carry out a sector inquiry under Article 17 of Regulation 1/2003 and need not have any evidence of an infringement of EU competition law before commencing the study. proved itself fit for purpose in coping with restructurings Unlike the UK regime, however, the Commission’s powers in this regard are essentially in the context of the 2007-2008 financial crisis. Unlike its limited to information gathering, typically followed by the publishing of a final report UK counterpart, EU merger policy was not softened or and recommendations; the sector inquiry powers themselves do not allow for direct intervention in the form of behavioural or structural remedial action. At the end of the suspended. Instead, it was very much “business as usual,” process, the Commission may make specific proposals for legislative/regulatory reform including with respect to the financial sector, notwithstanding (as happened in the energy sector, for example) and, if the sector inquiry has uncovered evidence of anti-competitive agreements/conduct, initiate investigations against specific its systemic importance to the entire economy, and companies under Article 101/102 TFEU (as happened in the pharmaceutical sector, for example). 331 Section 137 EA02. The current time limit for in-depth market investigations carried out by the CC is 24 months; the time limit is to be reduced for the CMA to 18 months, 329 Personal current accounts in the UK: An OFT market study (July 2008); Personal current extendable by up to six months if there are special reasons for doing so. accounts in the UK: A follow up report (October 2009); Personal current accounts in the UK: Progress update (September 2010); Personal current accounts in the UK Progress 332 Speech by Ed Miliband MP, One Nation Economy, 17 January 2014. The speech also update (March 2011); OFT decision not to make a market investigation reference to the suggested that banks with a market share exceeding unspecified thresholds would be Competition Commission of the market for personal current accounts in the UK (14 May investigated, and that mergers leading to these thresholds being exceeded would be 2013). prohibited. 330 Independent Commission on Banking: Final Report and Recommendations, 12 September 333 Financial Times, Ed Miliband should support banks of the future, not those of the past, 2011, §8.94. 22 January 2014.

Concurrences N° 2-2014 I Colloque 76 New frontiers of antitrust I Paris, 21 février 2014 appropriate use was made of the existing mechanisms 63. Further, this continues to be a live issue in the UK, available under the EUMR, in particular the possibility of partly due to the difficulties faced in implementing the derogations from the standstill obligation under Article (3) state aid restructuring plan and partly due to the current EUMR and use of the “failing firm” defence in appropriate dissatisfaction on the part of regulators, politicians and the cases, to deliver effective and proportionate enforcement. As general public with the level of competition in UK retail such, the experience during the financial crisis does not seem banking markets. This is particularly so given that market to indicate any need to amend the EUMR to allow public concentration is perceived to have increased in recent years interest considerations (e.g. the stability of the financial (especially in PCAs as a result of the Lloyds TBS/HBOS system) to be considered by the Commission in appropriate merger) and is alleged to be a significant contributing factor cases, leaving aside the practical difficulties of how such a to the competition problem (despite structural indicators national public interest test would be applied in practice by a that arguably suggest the contrary). Of course, in the event regulator with an EU-wide remit. that competition concerns in this area persist after the LBG and RBS divestitures have been implemented, there will be 60. This said, the Commission has yet to be tested with a crisis a possibility of intervention via the market investigation merger in the financial sector involving serious competition regime, which does not require any breach of competition concerns. Mergers in certain other areas of the economy, law to have occurred. As noted, however, the UK is unique such as the automotive sector,334 may have the potential to among its EU counterparts in this regard; in similar impact the wider economy, but they cannot be said to have circumstances other regulators would need to rely solely the same potential for systemic risk as those in the financial on ex post enforcement mechanisms under Articles 101 or sector. The nearest analogy to a Lloyds TSB/HBOS scenario 102 TFEU and/or national equivalents in order to address at the EU level is arguably the BNP Paribas/Fortis case, residual competition problems arising from a crisis merger, to but the latter merger was not brokered to avoid the need the extent that a merger review and/or state aid restructuring for state aid (rather, the aid had already been granted) and plan had failed to do so. n the significance of the competition concerns was not fully apparent until the formal investigation had commenced.

61. At the UK level, the Lloyds TSB/HBOS case illustrates the potential pitfalls associated with political intervention in times of economic crisis in cases that raise competition issues. Amending the UK merger control regime allowed the government to push through the Lloyds TSB/HBOS merger on the grounds of a bespoke public interest consideration, despite the OFT’s competition concerns, but the merged entity required government support in any event. In addition, whilst HBOS would certainly have required a bail-out, Lloyds TSB may not, implying that the overall cost to the public purse from the grant of state aid may have been less had the normal competition process been allowed to run its course.

334 In Case COMP/M.5518 Fiat/Chrysler, for example, the parties requested a derogation under Article 7(3) on the basis that the standstill obligation “would threaten Chrysler’s ability to maintain its activities, which would affect its dealers and suppliers, and ultimately the entire US car industry.” The request was granted as, inter alia, “no threat to competition (...) can currently be identified” (§29).

Concurrences N° 2-2014 I Colloque 77 New frontiers of antitrust I Paris, 21 février 2014 New frontiers of antitrust @ Colloque Paris, 21 février 2014

Benoît Hamon Ministre délégué à l’Économie sociale et L’action de groupe à la solidaire, Paris française comme outil de dissuasion et de répression des pratiques anticoncurrentielles

1. C’est donc à moi qu’il revient de clôturer cette journée d’échanges, que l’on me Abstract dit très riche, et que je constate à très haut niveau. Qu’il me soit permis de saluer ici Mario Monti, ancien président du Conseil, sénateur à vie, mais aussi Bruno Lasserre, Dans ce discours de clôture de la conférence “Demain la président de l’Autorité de la concurrence, à vie lui aussi… De saluer la participation concurrence” du 21 février 2014 à Paris, Monsieur Benoît Hamon, Ministre délégué à l’économie sociale et solidaire se ce matin du vice-président de la Commission européenne, en charge de la politique prononce sur l’action de groupe à la française comme outil de de la concurrence, Joaquín Almunia, et la présence de la directrice générale de la dissuasion et de répression des pratiques anticoncurrentielles. DGCCRF, Nathalie Homobono… Pardon de ne pas marquer une reconnaissance singulière de chacun, les conférenciers du jour sont nombreux, mais ce premier “name dropping” permettait d’appuyer l’assurance de la fierté qui est mienne de clôturer cette journée. In this closing speech of the conference “New frontiers of Antitrust”, Paris, 21 February 2014, M. Benoît Hamon, «Ministre délégué à l’économie sociale et solidaire» describes 2. Demain la concurrence ? Avant de regarder vers demain, je vais vous inviter à he class action «French-style» as a tool of deterrence and une courte rétrospection. repression of anti-competitive practices. 3. En plein premier conflit mondial, dont nous commémorerons le centenaire cette année, Lénine définissait l’impérialisme, dans son ouvrageL’impérialisme, stade suprême du capitalisme, comme, je cite, “le capitalisme arrivé à un stade de développement où s’est affirmée la domination des monopoles et du capital financier”.

4. En multipliant le recours aux statistiques, Lénine montrait que l’impérialisme a surgi comme le développement et la continuation directe des propriétés essentielles du capitalisme arrivé à un stade de son développement où certaines de ses caractéristiques fondamentales ont commencé à se transformer en leurs contraires. Ce qu’il montrait d’essentiel d’un point de vue économique dans ce processus, c’est la substitution des monopoles capitalistes à la libre concurrence capitaliste.

5. La libre concurrence, c’est un trait essentiel du capitalisme et de la production marchande en général ; le monopole, c’est exactement le contraire de la libre concurrence. Et pourtant, Lénine montrait comment, en quarante ans, le capitalisme, en poussant la concentration de la production et du capital, a fait surgir le monopole : les cartels, les trusts et, fusionnant avec eux, les capitaux d’une dizaine de banques brassant des milliards. Il démontrait que le monopole est le passage du capitalisme à un régime supérieur.

6. Deux écoles de pensée s’affrontaient alors au sein de l’Internationale socialiste : l’une prônait la collectivisation des monopoles et l’abolissement de la propriété privée ; l’autre, une intervention plus marquée de la puissance publique dans l’économie, notamment pour lutter contre la rente et la domination des trusts. Révolution ou Réforme. C’est l’une des lignes de fractures entre les communistes et les socialistes. Cela ne vous a pas échappé, je suis socialiste. Et je renvoie donc à l’histoire celles et ceux qui pourraient encore s’étonner de voir un gouvernement socialiste vouloir lutter contre la rente en renforçant l’effectivité du droit de la concurrence.

7. La concurrence, ce n’est bien sûr pas une fin en soi. C’est un outil, parmi d’autres, pour une juste allocation des ressources, en faveur de l’innovation, de la croissance, de l’emploi et, donc, de l’inclusion sociale. Je ne l’oppose pas aux autres

Concurrences N° 2-2014 I Colloque 78 New frontiers of antitrust I Paris, 21 février 2014 outils, et surtout pas aux outils de la politique industrielle. Je 15. Car si l’action publique mise en œuvre par les autorités ne considère pas non plus que tous les secteurs de l’économie de concurrence conduit à la condamnation des entreprises doivent être ouverts à la concurrence, mais à la condition auteurs de cartels, les décisions de ces autorités n’ont pas pour sine qua non que les secteurs non ouverts soient des secteurs objet d’indemniser le consommateur du préjudice subi, mais socialisés : je pense à la Sécurité sociale notamment. Je crois visent à sanctionner une pratique qui nuit à la collectivité. en l’articulation de tous ces leviers ensemble, et pas dans un sens inversement proportionné. 16. Si, au global, la perte pour les consommateurs peut être très élevée, la perte individuelle que supporte chaque 8. Vous le savez, la semaine dernière, le Parlement a consommateur est généralement trop faible pour qu’il engage adopté la loi relative à la consommation, et notamment seul une action en réparation, eu égard à la complexité et l’une de ses mesures phares, l’instauration en France au coût des procédures au regard de la faiblesse du gain de l’action de groupe. Elle permettra la réparation des escompté. Ce décalage entre l’ampleur des dommages causés préjudices patrimoniaux subis par les Français à la suite de par l’entente et les obstacles à une juste réparation vient manquements de professionnels à leurs obligations légales ou d’ailleurs alimenter chez les consommateurs un sentiment contractuelles. Ce texte est actuellement soumis à l’examen d’impuissance et de défiance, qui nuit au bon fonctionnement du Conseil constitutionnel. Je ne peux que former le vœu de l’économie que l’examen du juge constitutionnel valide les options prises par le Gouvernement. C’est donc avec la réserve qui 17. En réduisant l’asymétrie entre la capacité d’agir sied au commentaire avant la promulgation d’une loi que je des entreprises, souvent de grands groupes, et celle des m’exprimerai aujourd’hui. consommateurs, par nature isolés, l’action de groupe assurera un accès plus effectif à la justice, et une juste réparation des 9. Je ne détaillerai pas ici le mécanisme que nous avons défini dommages subis. après une longue concertation : d’abord, cette assemblée le connaît sans doute aussi bien que moi, et ce n’est pas ici mon 18. Et, enfin, troisième raison : l’action de groupe contribuera propos. Mon propos, c’est de dire pourquoi j’ai considéré, à renforcer l’efficacité de la régulation concurrentielle, en avec le président de la République et le Premier ministre, qu’il faisant du consommateur/victime un véritable acteur et un était temps de mettre enfin en œuvre une action de groupe allié des autorités publiques dans la lutte contre les pratiques dans le domaine de la concurrence. J’y vois au moins trois anticoncurrentielles, notamment les cartels qui sont les plus raisons. dommageables.

10. Première raison : le champ concurrentiel s’est 19. En effet, au-delà de sa fonction première de réparation, considérablement élargi dans notre pays, notamment à la l’action de groupe constituera une arme de dissuasion suite du mouvement de déréglementation qui a touché les supplémentaire, dans la mesure où elle augmente industries de réseau. substantiellement le risque financier pour l’auteur de l’infraction. Il est à ce titre notable que, selon John Connor, 11. Cette liberté a pour contrepartie une responsabilité plus les amendes infligées par les autorités de concurrence grande vis-à-vis des clients. La concurrence ne profitera américaines aux participants au cartel des vitamines en véritablement aux Français que pour autant que les firmes 1999 ne représentaient, en moyenne, qu’entre 43 et 55 % du respectent les règles du jeu concurrentiel et ne s’engagent pas surprofit total réalisé par le cartel aux États-Unis. dans des pratiques anticoncurrentielles. 20. C’est d’ailleurs plus généralement un objectif que le 12. Les cartels, ententes entre entreprises concurrentes sur Gouvernement assigne à l’action de groupe, que d’être la fixation du prix de vente et la détermination de quotas dissuasive plutôt qu’un outil de judiciarisation des rapports de production ont pour conséquence une hausse moyenne économiques. des prix de 25 % selon les études de l’économiste américain John Connor. Or, cette hausse ne s’accompagne d’aucune 21. En définitive, les actions de groupe, pourront tout à la fois contrepartie réelle en termes de progrès économique et participer à la réhabilitation de la place dévolue aux victimes, d’efficacité. Les consommateurs sont ainsi spoliés, soit en l’espèce les consommateurs ayant subi un dommage du en étant contraint de payer plus cher le produit objet de fait d’une pratique anticoncurrentielle, et concourir à la l’entente, soit en renonçant à l’acheter. préservation de l’ordre public concurrentiel.

13. L’action de groupe va donc permettre au consommateur 22. Il était donc plus que temps de la mettre enfin en place, de récupérer la perte qu’il aura subie du fait de la hausse cette action de groupe, maintes fois promises… et toujours des prix, soit 25 % du prix de vente du produit en question. enterrées… jusqu’à ce jour. n C’est de la rente captée par les cartels qui sera rendue aux Français, au pouvoir d’achat, à la consommation.

14. Deuxième raison : c’est une question de redistribution de la rente, mais c’est aussi une question de justice, et de justice sociale.

Concurrences N° 2-2014 I Colloque 79 New frontiers of antitrust I Paris, 21 février 2014 jurisprudentielle etlégislative estcouvertejurisprudentielle paronze chroniques thématiques. denotes doctrinaux, desynthèse oudetableauxforme d’articles jurisprudentiels. L’actualité l’Union européenne delaconcurrence. etinterne Lesanalyses defond sonteffectuées sous Concurrences

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