August 22, 2011
The Challenge of Competitive Neutrality in Public Procurement and Competition Policy: The U.K. Health Sector as Case Study
Posted by D. Daniel Sokol
Simon Taylor (Wragge & Co.) describes The Challenge of Competitive Neutrality in Public Procurement and Competition Policy: The U.K. Health Sector as Case Study.
ABSTRACT: Competitive neutrality describes the aim of a level playing field in mixed public/private markets, where state-owned or quasi-public bodies line up to compete with private sector companies. These markets tend to be distorted as a result of structural advantages enjoyed by public providers and a failure by public buyers to ensure fair process. A range of policy tools can be employed to achieve competitive neutrality.
The OECD paper, Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options, of May 2011 looks at this problem. It advocates full implementation of the 2005 OECD Guidelines on Corporate Governance of State-owned Enterprises. This recommends measures designed to mitigate the conflict of interest in the state being both regulator and provider.
In the United Kingdom, the Office of Fair Trading ("OFT") published a working paper in July 2010, Competition in Mixed Markets: Ensuring Competitive Neutrality, which suggests a more uniform approach by government bodies, fairer procurement, and the full application of competition law to state-owned enterprises.
The European Commission published a Discussion on corporate governance and the principles of competitive neutrality for state owned enterprises" in September 2009. The Commission's paper focuses on the European Union ("EU") state aid rules and the exemption under Article 86(2) (now 106(2)) of the Treaty on the Functioning of the European Union ("TFEU")) to the application of competition and state aid rules to undertakings entrusted with the operation of services of general economic interest. It concludes that state aid rules enshrine competitive neutrality and give the European Commission the tools to ensure that this is achieved.
However, perhaps the most developed paper on the subject was the CBI paper from January 2006, A Fair Field and No Favours, Competitive Neutrality in UK Public Service Markets.
This article takes stock of the challenges presented by mixed markets and the competitive neutrality challenge with particular reference to the U.K. National Health Service ("NHS") and the Health and Social Care Bill ("Health Bill"). The Health Bill proposes to give Monitor, the regulator of NHS foundation trusts, certain economic regulatory powers and concurrent powers to enforce the Competition Act 1998 in relation to the U.K. health sector.
In the EU the Court of Justice Rules (Again) on Margin Squeeze
Posted by D. Daniel Sokol
Javier Ruiz-Calzado & Gianni De Stefano (Latham & Watkins) note that In the EU the Court of Justice Rules (Again) on Margin Squeeze.
ABSTRACT: On February 17, 2011, the Court of Justice handed down a judgment on a series of questions referred from the Stockholm District Court on the interpretation of Article 102 TFEU in relation to an alleged abuse of dominance in the form of a margin squeeze (the TeliaSonera judgment). The Court gave guidance on the factors that are a condition or relevant and on those that are not to determine whether a margin squeeze occurred, including the absence of any regulatory obligation on the undertaking concerned to supply ADSL services on the wholesale market in which it holds a dominant position. Further, the Court elaborated on the necessity to demonstrate that the practice produces an anticompetitive effect, at least potentially, on the retail market, and that the practice is not in any way economically justified.
In this regard, the Court clarified that the indispensability of the product offered upstream by the dominant operator is a factor for assessment of the effects and not a necessary condition of the abuse, thus differentiating the margin squeeze abuse from the refusal to supply abuse. In the TeliaSonera judgment, the Court of Justice complements and develops its previous findings in the Deutsche Telekom judgment of a few months earlier. This case law shows that the prize squeeze practices are more likely to be considered abusive and anticompetitive in the European Union ("EU") than in the United States.
August 21, 2011
Duking It Out in Antitrust Price-Fixing: Class Actions After Dukes
Posted by D. Daniel Sokol
Jay Himes & William Reiss (Labaton & Sucharow) describe Duking It Out in Antitrust Price-Fixing: Class Actions After Dukes.
n Wal-Mart Stores, Inc. v. Dukes, the United States Supreme Court rejected class certification in a gargantuan gender discrimination case against Wal-Mart. The primary issue, as the Supreme Court framed it, was whether the showing by the plaintiffs-present and former female employees-met Rule 23(a)(2)'s "commonality" requirement. More specifically, could the litigation be said to present "questions of law or fact common to the class" where the plaintiffs did not demonstrate an express Wal-Mart policy or practice of discriminating against women, but instead showed, at most, only that: (1) Wal-Mart granted discretion to thousands of store managers to make pay and promotion decisions in a subjective manner; and (2) the company's corporate culture and personnel practices made it "vulnerable" to gender discrimination. The Supreme Court's five-justice majority held that this was not enough to show commonality, and that the lower courts had, accordingly, erred in certifying a class. The four dissenting justices expressed the view that the majority's rejection of certification for lack of commonality "import[ed] into the Rule 23(a) determination concerns properly addressed in a Rule 23(b)(3) assessment," where "the questions of law or fact common to class members [must] predominate over any questions affecting only individual members."
Dukes may well have significant implications for Title VII civil rights class actions, particularly those in which circumstantial evidence is central to proving the discriminatory policy or practice. But the Court's ruling is unlikely to have a major impact in antitrust cases. If an antitrust complaint is sufficient to plead price-fixing or (less frequently) monopolization, there is inevitably a common question. Either the defendants conspired to fix prices, or the dominant player engaged in distribution or pricing conduct, that had downstream or upstream effects. Thus, the class certification battle is unlikely to be waged over commonality, but will instead take place under Rule 23(b)(3)'s predominance requirement, alluded to by the Dukes dissent. On these issues, Dukes, a 23(a)(2) ruling, offers no real guidance.