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Global Antitrust Review Issue 7, 2014 The Interdisciplinary Centre for Competition Law and Policy (ICC) GLOBAL ANTITRUST REVIEW ISSUE 7, 2014 ICC Global Antitrust Review A PUBLICATION OF THE INTERDISCIPLINARY CENTRE FOR COMPETITION LAW AND POLICY (ICC) Editors Dr Kadir Bas ([email protected]) Andriani Kalintiri ([email protected]) Eda Sahin ([email protected]) Assistant Daniele D’Alvia Editors Advisory Mr David Bailey, UK Competition Appeal Tribunal Board Mr Christopher Brown, Barrister, Matrix Chambers Mr Manish Das, Freshfields Bruckhaus Deringer Prof Ariel Ezrachi, Oxford University Prof Ioannis Lianos, University College London (UCL) Dr Okeoghene Odudu, Cambridge University All inquiries to: Global Antitrust Review (GAR) Interdisciplinary Centre for Competition Law and Policy (ICC) 67-69 Lincoln’s Inn Fields London WC2A 3JB United Kingdom Tel: + 44 (0)207 882 8122 Fax: + 44 (0)207 882 8223 Email: [email protected] www.icc.qmul.ac.uk Prospective contributors should consult the ‘Guidelines for Authors’ before submitting their articles. © Individual contributors and the ICC, 2014 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form, or by any means, electronic, mechanical photocopying, recording, or otherwise, without the prior permission of the ICC. ICC GLOBAL ANTITRUST REVIEW ISSUE 7, 2014 ICC GLOBAL ANTITRUST REVIEW ISSUE 7, 2014 EDITORIAL BOARD’S MESSAGE 5 ARTICLES Antitrust Paternalism in the ‘Smartphone Wars’ BRANDON D. CHAN 7 The Real Shortcoming of the UK Cartel Offence: A Lack of ELÉONORE MAY 53 Public and Political Support MICHELS Directive 2014/104/EU: In Search of a Balance between the Protection of Leniency Corporate Statements and an CATERINA MIGANI 81 Effective Private Competition Law Enforcement The inadequacy of the European Commission’s Remedies for Microsoft’s Tying Practices in the Microsoft Cases: AYSHA SANAD 113 Casting Doubt on the Suitability of the Commission’s Approach for an Information Technology Economy State Aid in the Banking System: A Viable Solution to the JULIA FLAVIE 137 ‘Too big To Fail’ Problem? COLLINET The Assessment of Selective Distribution Systems Post- CRISTIANA DE FAVERI 163 Pierre Fabre ESSAYS Frederich Hayek’s Contribution to Antitrust Law and its THIBAULT SCHREPEL 199 Modern Application Antitrust Supervision of the Regulatory Activities of Public LUCIE KUNCOVÁ 217 Bodies: One Step Forward, Two Steps Back? CASE NOTE Hospital Exclusivity Contracts: The Impact of Kini v SHIVANGHI SUKUMAR 243 Hiranandani Hospital Global Antitrust Review 2014 5 EDITORIAL BOARD’S MESSAGE In line with the GAR’s commitment to provide a forum for academic debate on matters of international competition law and policy, the 2014 volume consists of contributions discussing a diverse selection of prominent and controversial topics. The exponential growth of information technology in the past decade lies behind the issues discussed in two articles selected for this volume. The competition implications of the ‘smartphone wars’ are the subject of an excellent contribution which advocates for a move towards antitrust paternalism as a solution to the problem. From a different perspective, an article on the remedies imposed by the European Commission in the Microsoft I and II cases criticises their adequacy and stresses the importance of remedy designing as part of developing a coherent competition policy for information technology markets. On a rather procedural note, the 7th volume also deals with questions of competition enforcement. The UK cartel offence is the subject of a very instructive article which identifies the lack of public and political support as its real shortcoming. Furthermore, in view of the recent adoption of the Damages Actions Directive, striking a proper balance between protecting leniency corporate statements and ensuring the effectiveness of private competition enforcement is the difficult question analysed in another informative article included in this volume. In addition to this variety of topics, the role of State aid in the banking sector is also considered in a contribution that examines the use of State aid bailouts as a way of keeping ‘too big to fail’ financial institutions afloat either independently or in conjunction with the Single Resolution Mechanism. Finally, this year’s selection of articles includes an interesting contribution on the potential implications of the Pierre Fabre judgment for the competition analysis of selective distribution systems. This volume is complemented by two enlightening essays, one on Frederich Hayek’s contribution to antitrust law and one on the antitrust supervision of the regulatory activities of public bodies. Finally, this issue concludes with an interesting comment discussing the possible consequences of a recent Indian case on the assessment of hospital exclusivity contracts under Indian competition law. As always, we would like to especially thank both the referees for their time and constructive comments and Prof. Maher Dabbah, the director of the ICC, for his Global Antitrust Review 2014 6 endless support in our efforts. Moreover, we would like to acknowledge Dr Maria Ioannidou’s valuable assistance in preparing this year’s issue. We hope you will enjoy this volume, and we already look forward to receiving excellent contributions from all interested young scholars for the next one. The GAR Editorial Board December 2014 Global Antitrust Review 2014 7 Antitrust Paternalism in the ‘Smartphone Wars’ BRANDON D. CHAN* The ‘smartphone wars’ denotes a series of aggressive patent infringement claims brought globally by technology giants notably Apple, Samsung, Motorola, HTC and Nokia against each other as they battle for market share in this lucrative industry. This article revisits the perennial patent hold-up problem where at the heart of these claims lies the potentially anti-competitive application for an injunction that seeks to prevent the use of standard essential patents (SEPs) in the manufacture of smartphone products. The stakes are arguably high as the grant of injunctive relief by the courts is apt to produce an exclusionary effect on competitors in the market. An interlocking issue involves the prior agreement by patent holders to license their SEPs to any entity on fair, reasonable and non- discriminatory terms (FRAND). However, in view of the elusive determination of FRAND, this article argues for a move towards antitrust paternalism as a solution that will end the smartphone wars. As the smartphone wars approaches a finale, the European Court of Justice now stands on the verge of a landmark antitrust ruling in Huawei v ZTE. I. Introduction The ongoing smartphone wars have attracted great interest and controversy amongst key players in the technology industry, IP practitioners, judges and antitrust regulators at both ends of the transatlantic divide. The most recent skirmish involves the European Commission’s (Commission) conclusion of a competition challenge following Google Inc.’s Motorola Mobility’s attempt to seek an injunction against Apple Inc. due to an alleged infringement of the standard essential patent.1 In addition, ZTE Corporation, a Chinese telecommunications * LLB (London), LL.M (University College London), LL.M (Queen Mary, University of London), C.L.P. (Malaya), L.P.C. (London). The author is the recipient of the Queen Mary School of Law Prize Award for the best student in Competition law LL.M specialism, 2013/2014 edition. Antitrust Paternalism in the ‘Smartphone Wars’ 8 giant files a new antitrust complaint with the Commission against Vringo Inc., challenging the latter’s licencing practices following the failure of the parties to agree a FRAND rate.2 Indeed, in the European Union (EU), this continuous series of patent infringement claims brought by these technology giants has attracted substantial competition concerns both from the Commission, Europe’s powerful antitrust regulator, and the Court of Justice of the European Union as the injunctions threaten to impede innovation and inhibit competition. On a wider jurisprudential basis, the legal battle for patent supremacy has also attracted the interests of IP practitioners and competition lawyers as this phenomenon characterises the classic interface between intellectual property and competition law. For decades, legal scholars and judges have often debated the merits of the intellectual property law framework especially patent law in granting exclusivity to the patentee to utilise and exploit its patent for profits.3 This interface gains its dynamic feature when one considers the often-perceived contradictory objectives of competition law which proscribes monopoly of businesses to the detriment of consumers. As competition law seeks to protect the competitive structure of the market,4 it seems conflicting that there exists at the same time a legal regime which not only encourages but grants exclusivity to an undertaking to exploit its patent rights. With such rights in place, competition is potentially inhibited as patentees are in a position to extract exorbitant royalty rates or simply refuses to license the patents to its competitors. On its face, such exclusive rights facilitate the patentee in wiping out potential competition amongst its rival competitors. Although the drive towards innovation is an important value that has often been cited as the primary justification for having a legal regime protecting patents, also known to be ‘hard’ intellectual property rights, the extent to which exclusivity actually
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