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Friday, 15 October 2010

Competition Law and the NHS

I struggled some time ago with the NHS white paper, Equity and Excellence: Liberating the NHS, which proposes a new role for Monitor, as an economic regulator and competition authority for health services. To summarise, crudely, the government is proposing that all purchasing of NHS services will be done either by GP consortia or a new NHS Commissioning Board. Service providers will be either foundation trusts or the private sector. Monitor will be turned into the economic regulator for health and social care, with the responsibility to promote competition, with powers to enforce competition law, price regulation and supporting continuity of services. Monitor will license the providers of publicly funded NHS services in England.

In terms of competition law, Monitor will be like the other economic regulators and have a concurrent power with the OFT to apply competition law in this sector. The immediate thought that strikes me is that competition law only applies to undertakings and an undertaking is an entity engaged in economic activity which means offering goods and services on a market. The White Paper starts by committing the government to an NHS available to all, free at the point of use and based on need, not ability to pay. Whatever this might be characterised as, it does not look like economic activity, rather a service based on solidarity (and the FENIN case would seem to back this up). FENIN also makes the point that purchasing cannot be viewed independently of the ultimate use of the goods or services. So it looks as if, outside private sector providers, competition law cannot apply and, because this is EU law, it cannot be amended.

A similar issue arises in relation to mergers as it is envisaged that the OFT and the Competition Commission will have the responsibility for investigating mergers in the health and social care services. Here the problem is that a merger situation occurs when two or more enterprises cease to be distinct and an enterprise is defined as the activities of a business. This can no doubt be sorted out by amendment of the legislation and a similar procedure put in place as exists for media and water mergers to allow the regulator to comment on the merger, and this is recognised in the consultation documents. Although I do wonder what merger analysis will look like, as applied to institutions which are not carrying on economic activity in any straightforward sense.

Farewell to the Competition Commission?

In its so-called bonfire of the quangos yesterday, the government and the Business Secretary, Vince Cable, made it clear that they are planning to merge the Office of Fair Trading (OFT) and the Competition Commission (CC). A consultation paper on this plan will be published early in 2011. The announcement itself was surrounded by farce, as the Cabinet Office website crashed under the volume of business and the proposed OFT/CC merger does not obviously meet the criteria set out by the Cabinet Secretary, Francis Maude. It is not obviously going to save money, or large amounts of it, and this is certainly an area where we would not want to see a return to ministerial decision making. There are a number of tricky issues and they can be examined by dividing the CC's functions into three: mergers, market investigations and other activities.

On mergers, the complaint seems to be that the CC takes a long time to make decisions. Folding the CC into the OFT will not remove the need for in-depth examinations of difficult cases. What it means is that the OFT will have to create an equivalent to the Phase II procedure that is operated by the European Commission. Although the OFT will undoubtedly do its best, this cannot be a fresh look at a problem by a new set of eyes, there will always be a suspicion of confirmation bias here, as there is with the European Commission. In order to investigate difficult cases properly, the OFT will need more resources, not matter what sort of approach they take. One danger is that the pressure will be on the OFT to decide cases and there will be greater incentive to accept undertakings to solve the problems, rather than go for a prohibition and we might end up with a position like that in the EU, where there have been only two prohibition decisions since 2001 (by contrast the CC came up with nine in the last five years).

Although market investigations have not worked as originally envisaged, I doubt whether the merger of the two bodies will improve matters. There is again the issue of confirmation bias – now the OFT will do an in-depth investigation of an area where it has decided that there is a problem. As regards timing, it is tempting to say, "Do you want it done right or quickly?" If you are going to investigate complex industries with multiple parties involved, this is going to take some time. Delays do not all emanate from the public authorities – I'm sure not all companies perceive it as in their interest to have a market inquiry decided quickly. There is another point on market investigations: the OFT has the power to apply Article 101 and 102 TFEU and the Chapter I and II prohibitions, which the CC has never had. Presumably evidence could come to light in a market investigation by the OFT which could set it off on an investigation under these provisions as well. This is yet another incentive for companies to be, let us say, careful in relation to the information that they provide.

Finally, the CC has a number of other activities that it undertakes, albeit intermittently. Although I can see the jurisdiction for Energy Code Appeals going to the CAT, it would seem difficult to dump all the regulatory inquiries on the OFT, not least because it has no expertise in this area. It would be odd because the OFT is seen as roughly at the same level as the other regulators, such as Ofgem, rather than a reviewing body.

Even odder is that outside assessments of the CC's decision making are very positive about it. It has begun to lose decisions in front of the CAT but these are often on remedial issues, rather than the substance of the decision. Nor can you any longer claim an accountability problem – both the CC and the OFT are more open in their operations than most government departments! In any event, all the functions that the CC carries out will have to continue, albeit in a different form. So here is a change that doesn't obviously save money, won't lead to an improvement in the quality of decisions and doesn't make the system more accountable. That doesn't meant that the system can't be improved but, as they say in Birmingham when offering directions, "If I were you, I wouldn't start from here."

Thursday, 7 October 2010

Object agreements and information exchanges

Just back from a very good session at the British Institute of International and Comparative Law (BIICL) which featured excellent presentations on agreements with the object of restricting competition and information exchanges from: Christian Ahlborn (Linklaters), Matthew Bennett (OFT) and Cristina Caffarra (Charles River Associates), ably chaired by Christopher Vajda, QC. A lot of criticism directed at Case C-8/08 T-Mobile [2009] ECR I-4529 in particular the passage in para 43 where the ECJ says that "A concerted practice pursues an anti-competitive object for the purpose of Article [101] (1) where, according to the content and objectives and having regard to its legal and economic context, it is capable in an individual case of resulting in the prevention, restriction of distortion of competition." As Christian Ahlborn pointed out, if taken literally, this formulation would not leave any room for the effects cases. He did go on to point out that the English translation, of what was originally in German in AG Kokott's opinion is a poor one and suggests something wider than the original language. Whether this logic will be followed is another matter, and an alternative interpretation was put forward that really the case was about whether or not one infringement could lead to a finding of concerted practices and the quote should be read in that context.

On information exchanges, Matthew Bennett, talking in a personal capacity, outlined some of his own thinking in advance of an OFT discussion paper. (More detail can be found in a paper he did with Philip Collins in the August issue of European Competition Journal.) He argued that the most harmful exchange of information was disaggregated, confidential information on future intentions exchanged between competitors in private (and would most likely be in the object box), whilst past aggregated public information between companies was least likely to provide net harm. It was pointed out from the floor that it is possible to think of examples of where problems can be caused by available aggregated public information, so it is perhaps not a completely clean bill of health. In between these two areas Matthew Bennett thought that there was a grey area involving current pricing and public prices on which it would be hard for a competition authority to provide precise guidance but that perhaps the public/private distinction might provide some clarity.

The next BIICL competition event is on 15th November on hub and spoke arrangements: details on http://www.biicl.org/events/

Monday, 26 July 2010

Disqualification orders in competition cases

As part of my catching up process, I've been reading the OFT's revised guidance on disqualification orders for directors in competition cases (available at: http://www.oft.gov.uk/news-and-updates/press/2010/68-10). Some of the significant changes are that the OFT are now saying that they may, in exceptional cases, bring proceedings for a disqualification order, even if there has been no prior decision that there was a breach of competition law. In other words, the question of the breach of competition law will be argued in front of the, non-specialist, court. Secondly, proceedings for a disqualification order may be brought even if no financial penalty has been imposed. Thirdly, the OFT may also apply for such an order against a director who has ceased being a director because of a breach of competition law. Finally, the OFT says in its press release that it will be just as concerned to take action against those directors who ought to have known of the breach of competition law, not simply those who were responsible for the breach or had reasonable grounds to suspect that there was a breach.

It is welcome to see the OFT toughening its stance on a number of issues but, given that they have not yet used this power, a certain amount of scepticism is in order. The proposal to bring disqualification proceedings, even when there is no prior decision of a breach in competition law does seem odd. The OFT gives as examples cases where the undertaking is insolvent or in the course of being wound up, where there is an appeal simply on the quantum of a fine and where no action is taken because the undertaking is subject to a limited immunity from fines. As the OFT emphasises that action will only be taken in exceptional circumstances, this presumably means cases where the OFT feels that the director's behaviour has been very bad, but short of meeting the test for criminal liability (because you don't want to have to prove the case in two courts). This makes sense of the insolvency example, although not the immunity one, because presumably the OFT would want to order the undertaking to cease its behaviour, even if it could not impose a fine, and then follow up with disqualification proceedings. Although logical, it would seem to be a waste of resources to pursue an individual, when it was not worth making a decision on the undertaking's behaviour.

What seems to be going on here is an exercise in symbolic toughness, in order to try and improve the deterrent effect of the provisions. This is, indeed, state to be one of the reasons for bringing disqualification proceedings even if no financial penalty is imposed. The problem is that tough messages have to be backed up by tough action at some point. So far, the OFT has not had much luck outside the relative comfort zone of Competition Act proceedings.

Thursday, 15 July 2010

Returning

I'm back having surfaced from marking, exam boards and some holiday. Lots to catch up on.

Oh, and two very good conferences. One from CCP at East Anglia on vertical restraints http://www.uea.ac.uk/ccp/events/pastevents/2010annualconference

And one hosted by ACCAN (Australian Communications Consumer Action Network) (their first annual conference). Photos here http://s758.photobucket.com/albums/xx223/ACCANaust/2010%20National%20Conference%20and%20Consumer%20Congress/

All I can say is if you think consumer service for telecommunications is bad in the UK, be thankful you don't live in Australia.

Monday, 10 May 2010

British Airways price fixing trial collapses

The high profile criminal trial of four BA executives has collapsed today when the prosecution offered no evidence. The problem arose over disclosure of relevant material to the defence, to be precise some 70,000 e-mails in the hands of Virgin Atlantic, of which 12,000 were sent or received by the central prosecution witness. According to the Press Association, "The court was told the missing emails were in corrupted files which had been dismissed as irrelevant during the initial investigation. But last week it emerged the corrupted files could be repaired and contained the "large quantity" of emails."

To put it mildly, this is highly embarrassing for the OFT. The issue is whether this is one-off prosecutorial incompetence or represents a more systemic problem. Andreas Stephan of UEA wins the prediction guru prize (http://competitionpolicy.wordpress.com/2010/04/11/the-trial-that-will-make-or-break-the-uk-cartel-offence-begins-today-the-british-airways-four/#more-305), although probably not in the way he thought he would. More comments form him are promised once the UK has a government!

A link to the Press Association report is at: http://lawprofessors.typepad.com/antitrustprof_blog/ Daily Telegraph has a bit more: http://www.telegraph.co.uk/travel/travelnews/7705592/British-Airways-price-fixing-trial-collapses.html

Tuesday, 27 April 2010

Camelot, the Lottery and commercial services

Fans of the obscure jurisprudence surrounding Article 106 TFEU will be interested to note that the National Lottery Commission is consulting on a proposal by Camelot, the owners of the lottery infrastructure (terminals etc) to offer commercial services through this structure. Camelot wants, in particular, to run payment services through the infrastructure and this has reportedly caused a number of potential competitors to object, saying that Camelot could cross-subsidise its commercial operations and thus abuse its dominant position (See the Sunday Telegraph for 25th April). It will be very interesting to watch a national regulator navigate these murky waters!

Details of the consultation, but no substantive discussion of the competition law issues, which closed on 25th April, are here:  http://www.natlotcomm.gov.uk/CLIENT/content_inner.ASP?ContentId=419

OFT's first competition advice

The OFT has today (27 April), for the first time, given advice to two businesses on the competition law implications of a proposed collaboration agreement. Two grocery wholesalers, Makro Self-Service and Palmer & Harvey, received advice on a joint purchasing agreement which the OFT felt would secure better prices from common suppliers and would be unlikely to restrict competition in the market. The OFT did have a concern with certain exchanges of information between the parties, but the arrangements were altered to ensure that the data supplied was general and aggregated. A non-confidential version of the OFT's opinion will be published shortly.

This is a potentially very interesting development because, with the demise of the notification process for agreements, companies have had to depend on their own assessment, in the light of whatever guidance has been issued by the competition authorities. This is the first example of the OFT giving an opinion and it will be interesting to see if this process becomes more popular in the future.

Friday, 16 April 2010

Sky, Ofcom and pay TV

  

Attachments:

 


 

Sky has lodged an application with the CAT seeking to have Ofcom's decision on pay TV suspended until Sky's proposed appeal against this decision is heard. The hearing on interim relief will be hear on 23rd April. Details of the application are here: http://www.catribunal.org.uk/237-6095/1152-8-3-10-IR-British-Sky-Broadcasting-Limited-.html


 

Links to Ofcom's decision are here: http://www.ofcom.org.uk/consumer/2010/03/delivering-consumer-benefits-in-pay-tv/

Thursday, 15 April 2010

The Liberal Democrats, competition and regulation

Today it's the turn of the Liberal Democrats. They have two specific proposals for competition law. The first is to restore the public interest test in merger control so that regulators can consider a broader range of factors. This misses a key point in the Enterprise Act arrangements, namely that unelected regulators (the OFT and the Competition Commission) are quite good at deciding on competition matters, but don't have greater expertise on non-competition matters. Hence a regime for specified public interest matters, involving the Minister. This would take us back to the Fair Trading Act system, although without the politicians and, much as I have respect for members of the Competition Commission, letting them loose on non-competition factors could be quite worrying.

The second idea is to introduce a local competition test for all planning applications for retail developments, which is a development of the Competition Commission's remedy in the Groceries investigation. This is linked into establishing a local competition office within the OFT which will investigate anti-competitive practices at a local and regional level. I suspect that the OFT will be surprised to discover that it doesn't do this already!

The banks come in for a predictable bashing and those which have public support will be split into retail and investment banks.

In energy, rising block tariffs will apparently become compulsory. So that will help to make the industry more competitive – not.

Unfairness in water charging will be addressed by consulting on the implementation of the Walker review, there will be a crack down on wasting water (I think they mean leakage here) and compulsory smart meters will be installed in areas of water stress.

Tuesday, 13 April 2010

The Conservative Party, competition and regulation

Following yesterday's look at the Labour Party Manifesto, today I turn to the Conservatives.

They do not have anything to say about substantive competition law or, explicitly, about the institutions that enforce competition law. There is a statement that any quangos that do not perform a technical function or a function that requires political impartiality, or act independently to establish facts, will be abolished. This would seem to protect the Competition Commission from outright abolition, although not necessarily merger with the OFT.


 

They are proposing to remove Ofgem's competition and consumer protection powers and pass them to the OFT, leaving Ofgem free to execute energy policy for which Ministers will be unambiguously responsible. Assuming that you want Ofgem to carry on regulating the industry, and that competition law powers are a useful tool in that armoury, as is the case in some other regulated sectors, this proposal makes no sense. Since the consumer protection powers are tied into license conditions, it again isn't clear why transferring these to the OFT would lead to an improvement.

Like the Labour Party, the conservatives have plans for the banks. Competition will be increased in the banking industry, starting with a study of competition in the sector to inform their strategy for selling the government's stakes in the banks. They also want to pursue international agreement to prevent retail banks from engaging in activities which put the stability of the system at risk. This latter sounds nice, but formidably difficult to implement – not buying Greek bonds anyone?

The water industry will be reformed (no idea what this is supposed to mean – it's followed by comments about improving efficiency) and poorer households protected against excessive rises in water bills. Just what exactly did Ofwat think it was doing in the last price control?


 

So, in summary, not many changes proposed here, which is not a bad thing. Energy policy is more worrying and needs a closer look, and for that see Catherine Waddams at: http://competitionpolicy.wordpress.com/

Monday, 12 April 2010

Labour Party Manifesto, competition law and regulation

The Labour Party has launched its Manifesto today, so I thought I would take a look and see what it has to say about competition law and policy.
The first point is a non-barking dog; namely, that no change is mentioned in relation to the competition authorities or the substantive rules that they operate.

There is, arguably, one exception to this (which will teach me to just do a word search for "competition"), namely the proposal to extend the public interest test to proposed takeovers of infrastructure and utility companies which is hidden away in the section on proposals for renewing the national infrastructure. What this means is anybody's guess. To implement it, certain considerations would have to be specified for the purposes of s. 58 of the Enterprise Act, rather than just listing companies. Presumably, as in communications, you would want the opinion of the regulator as well. You would probably have to be careful to set up arrangements which did not impinge on free movement of capital in the EU. Having done all this, there is the not so minor issue of making the right decisions and the Labour Party does not have a glorious history here - Lloyds/HBOS anyone? So, really, waving the public interest flag just won't do here.

There are, also, proposals for increasing competition in the banking and energy industries.

In the banking sector it is proposed to break up the banks in which the government has a controlling stake (RBS and Lloyds), transform the Post Office into a People's Bank offering a full range of competitive, affordable products and introduce portable bank account and cash ISA numbers. In energy, they want to ensure greater competition in the energy supply market while at the same time ending fuel poverty and creating a fair energy system.

Although in principle greater competition in the UK banking system looks desirable, there are a lot of unanswered questions here. For example, how do you juggle breaking up banks with ensuring a return to the state for its investments? Do you really want the Post Office to enter, for example, the financing of small businesses? Both of these developments could also raise state aid questions and require approval from the European Commission. Similar points can be made in relation to energy. As Catherine Waddams has pointed out (in relation to the Conservative's document on energy policy on April 6th at http://competitionpolicy.wordpress.com/) trade-offs will need to be made between the different objectives of energy policy, something notably absent from a Manifesto which talks about "revolutionising Britain's energy system." For a non-party political take on problems in energy regulation see: http://www.communityni.org/group/next-generation-utilities-forum

Finally, there are apparently good and not so good regulators. Ofcom's independence is to be safeguarded, while the role of Ofwat is to be reviewed to ensure customers get the best deal and that their voice is heard in the process of price-setting. Ofwat presumably being surprised to hear that it did not listen to customers and hasn't got the best deal for consumers.

One should not expect too much from party manifestos, although given that such commitments may drive future policy decisions, they need to be subject to more critical scrutiny. I'll have a look at the other parties in these areas as the manifestos are published.

Monday, 29 March 2010

Back again

Apologies for the recent break in transmission, largely due to the demands of marking essays and lecturing administrative law.

In the meantime, Julie Clarke's netvibe which collates all sorts of competition law information looks very useful: http://www.netvibes.com/competitionlaw#General

The amount of information available is, however, slightly depressing!

Sunday, 24 January 2010

Quantifying damages in competition cases

DG Competition has just, as of 19 January, published an external study, done by Oxera, on quantifying the harm suffered by victims of competition law infringements (alternatively, "everything you always wanted to know about quantification but were afraid to ask". The document is available here: http://ec.europa.eu/competition/antitrust/actionsdamages/documents.html Faced with 179 pages of analysis or the housework, I'm afraid that I opted for the housework this weekend. However, I hope to return to this but if there is anyone with less competition law marking who would like to summarise it, be my guest.

This is a fun one, although not for the defendants. The case is Safeway v Twigger [2010] EWHC 11 Comm, decided on 15 January 2010 which arose out of the OFT's investigation into price fixing between the dairy processors and the supermarkets back in 2002-03. The OFT has issued a statement of objections, claiming a breach of the Chapter I prohibition. A number of those accused, including Safeway, entered into early resolution agreements with the OFT in order to resolve the case. For Safeway, the penalty is likely to be in the region of £10 million, including the discount for co-operation. Faced with this penalty, Safeway's, now under new ownership, decided to sue a number of its past employees and directors in order to obtain an indemnity against the penalty, as well as damages. The claim is that this group of people have acted in breach of their contracts, as well as in breach of their fiduciary duties, and negligently. The real target of this action, as the judge noted, would be the directors' and officers' liability insurance available to the defendants.

The defendants responded by arguing that this claim was barred as a matter of public policy for two reasons: it infringed the principle of public policy expressed in the maxim ex turpi causa non oritur actio, and in particular the rule that a person who commits an illegal or unlawful act cannot maintain an action for an indemnity against the liability which results from the act and it was fundamentally inconsistent with the United Kingdom competition regime established by the Competition Act 1998 and other statutes. This case dealt with the defendants' attempt to have the action struck out so the facts alleged by the plaintiff are assumed to be true. The defendants were able to satisfy the judge that a breach of the competition rules was sufficiently serious to engage the ex turpi causa principle, although the judgment contains an interesting discussion of the nature of such liability, but had more difficulty showing that the acts were those of the claimant, Safeway.


 

The problem here is that the defendants' actions were not obviously those of the company, for the purposes of the ex turpi causa rule. There was no decision of the board of directors or the shareholders in general meeting to pursue this course of conduct. As Flaux J put it this, "is wrongdoing for which the claimants have to take responsibility as a matter of law under the Competition Act." Therefore, he thought that the claimants has a real possibility of defeating the ex turpi causa defence at trial. As for the alternative claim, that this was contrary to the competition regime, he thought, "Parliament in both the 1998 Act and the 2002 Act was not intending to affect any common law remedies which an undertaking might have against its directors or employees which (unlike a claim for breach of statutory duty to which the defendants referred) arise wholly independent of the statute." As a result, he dismissed the striking out actions.


 

It strikes me that, if this is correct, then a couple of undesirable consequences flow from it. First, it moves the burden from the offending company to the insurers, albeit with quite a lot of transaction costs on the way. True, this claim will not always run, but it would seem plausible in the case of most companies with some spread of shareholding. Secondly, it would seem to reduce the incentive to enter into early resolution agreements or otherwise admit liability for the directors, as they may subsequently be hit with a claim and it might be more in their, and the insurance companies, personal interest to fight the liability issue. Alternatively, it could encourage them to be first in under leniency to try and obtain a 100% reduction. It's a difficult one, as neither party looks particularly meritorious, and the pre-existing law is difficult, to be polite. I suspect that we will here more about this.


 

Information about the OFT's case can be found here: http://www.oft.gov.uk/oft_at_work/markets/goods/dairy-products/

Thursday, 21 January 2010

Public interest mergers: BSkyB and ITV

On 21 January, the Court of Appeal (CA) decided BSkyB's appeal against the decision of the CAT upholding certain findings of the Competition Commission (CC) in its report on BSkyB's acquisition of a 17.9% share in ITV. The CC had found that the acquisition would have led to a substantial lessening of competition (SLC), although it would not have had an adverse effect on media plurality. To remedy the SLC, the CC recommended that BSkyB be required to reduce its shareholding to below 7.5%. The CAT upheld the CC's findings on the SLC and the remedy, but disagreed with it on the media plurality issue. Since it found that the remedies were unaffected by this conclusion, they remained.

In front of the CA BSkyB argued that the CAT should have applied a greater intensity of review to the CC's report than in normal judicial review proceedings and, if it had, it would have set aside the CC's analysis on key points. As regards media plurality, BSkyB argued that the CC had been correct and was joined in this by the Secretary of State and, unsurprisingly, the CC. This argument was opposed by Virgin Media.

On the judicial review point, BSkyB's argument was that the CAT should conduct its review with greater intensity because it was a specialist tribunal or, as he put it, "hyper-competent". The CA seemed unimpressed with this argument and, after pointing out that the application and intensity of review varies from case to case, relying on OFT v IBA Health [2004] EWCA Civ 142 and concluding by saying that the argument flew "in the face of the words" of the statute. Of course this is not the same as saying that the practice of the CAT is the same as the High Court in judicial review cases and there seems to be some evidence that the CAT is less deferential to the CC and the OFT than the High Court is when faced with challenges to analogous regulatory bodies (and yes, I know reasoning by analogy is dangerous).

Once this point fell, BSkyB's other arguments were in some difficulty. BSkyB made submissions on the standard of proof applied by the CC and the counter-factual analysis. After dissecting these, the CA concluded that, "this is not really a point of law, but an attempt to re-assess the evidence and to produce a different conclusion" and so rejected them. On the question of alternative remedies offered by BSkyB, notably a voting trust, the CA agreed with the CAT that the CC had not been irrational in rejecting these.

That left the media plurality point which, although it was not necessary for the case, everyone wanted decided. The problem here arose because s. 58 2C (a) of the Enterprise Act provided that there was a need to take into account whether or not there was a sufficient plurality of persons with control of media enterprises, while s. 58A (5) said that where two or more media enterprises would fall to be treated as under common ownership or control for the purposes of deciding whether or not they have ceased to be distinct enterprises, then they should be treated as under the control of one person. The problem this created in this case was that although BSkyB's shareholding was enough to ensure that this meant it and ITV were no longer distinct enterprises, in reality that level of shareholding only gave BSkyB control or influence over a limited range of issues. The CC took the view that it should take into account the quality of control, what it called "internal plurality" which meant that there was not a problem here, because BSkyB had only a limited influence. The CAT disagreed, saying that, in effect, BSkyB and ITV had to be treated as one because of s. 58 (5) and therefore there was a problem because the number of persons had been reduced. The CA regarded this as a finally balanced point of statutory construction, but ultimately came down on the CC's side saying that, "whereas in reckoning the number of controllers of media enterprises for the purposes of section 58(2C)(a) only one controller is to be counted in respect of both or all of the relevant enterprises (here Sky and ITV), nevertheless, when it comes to assessing the plurality of the aggregate number of relevant controllers and to considering the sufficiency of that plurality, the Commission may, and should, take into account the actual extent of the control exercised and exercisable over a relevant enterprise by another, whether it is a case of deemed control resulting from material influence under section 26 or rather one of actual common ownership or control."

The Court of Appeal's judgment is here: http://www.bailii.org/ew/cases/EWCA/Civ/2010/2.html

The CC's report is here: http://www.competition-commission.org.uk/inquiries/ref2007/itv/index.htm

CAT proceedings are here: http://www.catribunal.org.uk/238-656/1095-4-8-08-British-Sky-Broadcasting-Group-plc.html

Wednesday, 13 January 2010

European Commission: procedures in competition cases

DG Competition has just published three papers explaining how their procedures work in practice (available at: http://ec.europa.eu/competition/consultations/2010_best_practices/index.html). The papers are called "Best Practices in proceedings concerning Article 101 and 102 TFEU" (procedures), "Best Practices on submission of economic evidence" (evidence) and "Guidance on the procedure of Hearing Officers" (Hearing Officers). This is not just a publication but a consultation inviting comments. While economists will no doubt have a lot to say about the evidence paper, the first paper on procedures will be of the most general interest. "Best Practices" is perhaps a misleading title as, although this is a useful and relatively short guide to the way such proceedings are conducted, whether these are the "Best Practices" is another question altogether.

There is not much that is surprising, but two comments can be made on the procedures document. First, as it makes clear, this document has to be read in the context of the myriad other documents which relate to European Commission procedures; from Regulation 1/2003 to the various guidance documents put out by the Commission. Secondly, the one thing that the document does not do is to give even indicative timescales for when the Commission will reach a decision during the various stages of proceedings. The one exception to this is that the Commission will endeavour to inform complainants what it is going to do within four months. Everything else, in terms of the timing of Commission decisions, is left open.

Sunday, 10 January 2010

Follow on actions

Shortly before Christmas, the Competition Appeal Tribunal (CAT) decided the case of Enron Coal Services v English Welsh & Scottish Railway (EWS) [2009] CAT 36; the first follow on action to come to trial in the CAT. This was an action by Enron claiming damages from EWS for abuse of a dominant position in consequence of a finding by the Office of Rail Regulation (ORR) that EWS had abused its dominant position by, among other things, engaging in unlawful price discrimination against Enron (see http://www.oft.gov.uk/advice_and_resources/resource_base/ca98/decisions/ews-rail). EWS was, and still is, the major supplier of rail freight services in Britain. Enron was a coal supplier but also offered “end to end” (E2E) arrangements, from the purchase of coal through its shipping and delivery to the customer. Enron claimed that the behaviour of EWS had meant that they had lost a tender for hauling coal by rail to two power stations owned by East Midlands Electricity (EME), which EWS had won, worth around £19.1 million, and also a substantial chance of supplying coal to one of EME’s power stations as well. Enron claimed that EWS had overcharged it for its services and, as a result, it could not submit competitive tenders for EME’s business.

Although EWS accepted that it had acted unlawfully, it defended itself by arguing that Enron had failed to prove that the abuse had caused it to lose the tender.

The CAT took the view, based on Allied Maples Group v Simmons & Simmons [1995] 1 WLR 1602, that the claimant needed to show, first, on the balance of probabilities, what it would have done but for the infringement. Then, secondly, where the loss depends on what a third party would have done, the claimant had to satisfy the CAT that there was a real or substantial chance that the third party would have acted in the way asserted by the claimant. In the context of the case, Enron had to show that, but for the infringement, they would have submitted a bid to EME and sought to negotiate an E2E contract with EME and that there would have been a real chance of their being awarded the contract.

The CAT decided that Enron had failed to make its case on either point. On the first point, the CAT felt that the evidence before it was not consistent with the behaviour of a company in pursuit of an attractive business opportunity. On the second point, the CAT found that there was no real chance of Enron being awarded the contract for a variety of reasons, including the past history between EME and Enron and the lack of flexibility in Enron’s offer.

The CAT decision and, indeed, the litigation as a whole, is yet another cautionary tale for those bringing private actions to enforce competition law, even on the back of infringement decisions by competition authorities. To put it simply, it is one thing to show an infringement of competition law; it is another, not necessarily straightforward, thing to show that you have been damaged by that infringement.

Wednesday, 6 January 2010

For those who are struggling with the change in Treaty numbers post Lisbon, I have compiled a table of equivalences. It's in two parts: one for the Treaty on European Union (TEU) and one for the Treaty on the Functioning of the European Union (TFEU).

My apologies for the length of this and sincere thanks to Bonnie Calhoun of http://howcanidothat.blogspot.com














































Treaty on European Union (TEU) as amended by the Treaty of Lisbon: from 1st December 2009Treaty on European Union (TEU) or European Communities Treaty (EC) : from 1st May 1999 to 30 November 2009Treaty of Rome: from 1st January 1958 to 30 April 1999















Article 3 TEUArticle 2 ECArticle 2
Article 4, para 3Article 10 ECArticle 5
Article 6 TEUArticle 6 TEUNo equivalent
Article 19, para 1 TEUArticle 220 ECArticle 164
Article 19, paragraph 2, first subparagraph Article 221, para 1 ECArticle 165
Article 19, paragraph 2, secondsubparagraph
Article 224 EC The first sentence of the first subparagraphArticle 168a





























































































































































Treaty on the Functioning of the European Union (TFEU): from 1st December 2009European Communities Treaty: from 1st May 1999 to 30 November 2009Treaty of Rome: from 1st January 1958 to 30 April 1999









Articles 3-6 TFEU and Article 8 (para 2). Note also Protocol 27 on the internal market and competitionArticle 3Article 3
Article 14Article 16No equivalent
Article 18Article 12Article 6
Article 37Article 31Article 37
Article 93Article 73Article 77
Article 101Article 81Article 85
Article 102Article 82Article 86
Article 103Article 83Article 87
Article 104Article 84Article 88
Article 105Article 85Article 89
Article 106Article 86Article 90
Article 107Article 87Article 91
Article 108Article 88Article 92
Article 109Article 89Article 93
Article 119Article 4Article 3a
Article 251 now contains paras 2 and 3Article 221, paras 2 and 3Article 165
Article 254Article 224 (except first sentence of first subparagraph)Article 168a
Article 258Article 226Article 169
Article 259Article 227Article 170
Article 263Article 230Article 173
Article 265Article 232Article 175
Article 267Article 234Article 177
Article 268Article 235Article 178
Article 296Article 253Article 190
Article 340Article 288Article 215
Article 346Article 296Article 223
Article 352Article 308Article 235

Saturday, 2 January 2010

Competition law and the Lisbon Treaty

The Treaty of Lisbon which came into force on the 1st December 2009 amending the Treaty on European Union (TEU) and creating a new Treaty on the Functioning of the European Union (TFEU) has important implications for all those engaged in the study and practice of competition law. Some of this is necessary, but not very interesting, consequential changes to which we will all have to adapt. So, there are a new set of Treaty numbers to remember and we will no longer refer to the Court of First Instance, which has become the General COurt.

The more interesting question is whether or not these changes herald an increased emphasis on the internal market objectives for competition law as opposed to the "more economic" approach which the Commission has been pushing and which seems to represent the favoured consensus amongst competition law practitioners? There is certainly a change in the language of the Treaties. The old Article 3 (g) of the European Community Treaty, which talked about a system ensuring the competition in the internal market is not distorted and was often referred to in the case law, has been removed and replaced by Article 3 (1) (b) TFEU which talks about establishing the competition rules necessary for the functioning of the internal market. Article 3 of the new TEU says that the EU shall work for the sustainable development of Europe based on, among other things, a highly competitive social market economy, a concept which, at least from and English perspective, obscures more than it clarifies. The concept of a "social market economy" has been used in political science and economic literature to describe the German economy and often to contrast it with what is labelled the Anglo-American model of capitalism. Within this way of framing the issues, the focus would be on competition as a process and trying to ensure the commercial freedom of participants in a market, rather than focusing exclusively on the consumer welfare effects of a practice. So these changes could be seen as a move back to an approach to competition law which was characteristic of enforcement policy in the early years of the EU, focusing on preventing barriers between national markets emerging and protecting competitors to dominant companies.

The Treaty texts do not, however, all point in this direction. Article 119 TFEU says that an economic policy shall be adopted which is based on the principle of an open market economy with free competition, which certainly seems a different conception from a "social market economy." Protocol 27 to the Treaties states that the Member States consider that the internal market includes a system ensuring that competition is not distorted and the background to this Protocol was that it was inserted to respond to worries that deleting the reference to undistorted competition represented a significant shift in EU competition policy and therefore this Protocol was needed to demonstrate that no such change had been made.

It would be regrettable if the progress that has been made in the substantive, as opposed to procedural, reform of EU competition law was lost by the changes introduced by the Lisbon Treaty, particularly as there was little or no debate at the time about the possible implications of the changes. Although the financial crisis has damaged many peoples' faith in competitive markets, no alternative approach for organising economies has been suggested. One might perhaps paraphrase Winston Churchill and say that competition is the worst form of economic organisation except for all the others that have been tried!

A beginning

Since it is the New Year, I thought it was an appropriate, if trite, time to start this blog off. I will try and get to it at least once a week.