Antitrust & Competition Policy Blog

CPI Antitrust Chronicle: Autumn 2015, Volume 10 Number 2 - The Huawei-ZTE Decision

In our previous issue we took a broad look at the intersection of antitrust and intellectual property. Now we're burrowing more deeply, looking at the ECJ's decision in Huawei v ZTE that attempts to establish an EU framework for SEP licensing negotiations—a decision made even more noteworthy as the two players are both Chinese tech giants. Our authors address whether the decision cleared the waters—or made them murkier.

The Huawei-ZTE Decision

1. Kyriakos Fountoukakos, Nick Root, Oct 27, 2015

   Huawei Technologies: More Certainty on SEP Injunctions, But Not the End of the Story

    

   It is, therefore, clear that there remains some scope for a divergence in the approach taken in different Member States. Kyriakos Fountoukakos & Nick Root (Herbert Smith Freehills LLP)

2. Dina Kallay, Oct 27, 2015

   The ECJ Huawei–ZTE Decision: En Route to Ending Hold-Out?

    

   The importance of the Decision lies in the procedural framework it provides for licensing negotiations. Dina Kallay (Ericsson)

3. James Killick, Stratigoula Sakellariou, Oct 27, 2015

   Huawei v ZTE – No More Need to Look at the Orange Book in SEP Disputes

    

   It is perhaps a sign of changing times that a key EU decision is being set for the first time by Chinese tech giants rather than U.S. ones. James Killick & Stratigoula Sakellariou (White & Case LLP)

4. Nicolas Petit, Oct 27, 2015

   Huaweï v ZTE: Judicial Conservatism at the Patent-Antitrust Intersection

    

   This short paper argues that Huaweï v ZTE is a conservative judgment—it only extends by a razor-thin margin the zone of antitrust liability for patent owners. Nicolas Petit (University of Liège)

5. Miguel Rato, Collette Rawnsley, Mark English, Oct 27, 2015

   Huawei: Establishing the Legal Standard for a FRAND Defense as a Basis for Resisting Requests for Injunctive Relief for Infringements of SEPs Under Competition Law

    

   The CJEU appears to have considered incorrectly that a request for an injunction is analogous to a refusal to license. Miguel Rato, Collette Rawnsley, & Mark English (Shearman & Sterling LLP)

Is it Time to Give Up on Antitrust Law for Pro Sports?

Geoffrey Christopher Rapp, University of Toledo College of Law asks Is it Time to Give Up on Antitrust Law for Pro Sports?

ABSTRACT: Professor Nathaniel Grow has produced a creative, thoroughly researched piece arguing that antitrust has failed in the context of professional sports and calling for the creation of a national-level federal regulatory agency to address anticompetitive conduct by the major leagues. I respond to his diagnosis of antitrust’s failings and to his prescription.

The Curiously Confounding Curt Flood Act

Nathaniel Grow, University of Georgia - Department of Insurance, Legal Studies, Real Estate describes The Curiously Confounding Curt Flood Act.

ABSTRACT: This article provides a novel textualist interpretation of the Curt Flood Act of 1998, a relatively little known statutory provision that partially repealed professional baseball’s controversial, judicially created antitrust exemption in only a single limited respect. Aside from allowing major league baseball players to file antitrust lawsuits against Major League Baseball, the Flood Act was intended — as Congress went to great lengths to emphasize throughout the legislative process — to remain neutral regarding the continued vitality and scope of baseball’s exemption in all other respects.

Despite these clear expressions of Congressional intent, however, most subsequent courts and commentators have surprisingly interpreted the CFA quite differently, concluding that the Flood Act in fact either expressly or implicitly endorsed broad antitrust immunity for professional baseball based on a single amorphous passage in the statute. The implication of this analysis is that the judiciary now lacks the power to modify or repeal baseball’s antitrust immunity, with the exemption instead having effectively been codified by Congress.

This article contends that future courts should reject the majority interpretation of the Flood Act and instead construe the law neutrally in most respects, as Congress intended. While other commentators have previously argued that the CFA should be read narrowly in light of its legislative history, this article advances a new textualist interpretation of the Flood Act. In particular, it asserts that when properly read, the Flood Act neither codifies baseball’s antitrust exemption nor reflects Congressional acquiescence in most aspects of the immunity. Therefore, the article concludes that the judiciary retains the power to reconsider baseball’s antitrust status, should a future court wish to do so.

Bank Competition, Borrower Competition and Interest Rates

Carlos Bellon, Universidad Carlos III de Madrid Bank discusses Competition, Borrower Competition and Interest Rates.

ABSTRACT: The effect bank competition has on interest rates should depend on the fact that borrowers compete against each other. The borrowing rate of a firm affects its ability to compete in the industrial marketplace, and ultimately, its ability to repay its loans. Thus, competition amongst borrowers acts as a limit to the amount of rents financial oligopolists can extract. I find evidence that firms that operate within areas of limited bank competition face higher rates than their peers. I also identify an innovative control group that can be used in tests of bank market structure.

Competition in Financial Services

Carolyn M. Evans, University of New South Wales (UNSW) Faculty of Law; ThinkEvans Pty Ltd, Deborah Healey, University of New South Wales (UNSW) - Faculty of Law, Marina Nehme, UNSW Australia and Rob Nicholls examine Competition in Financial Services.

Abstract: The Centre for International Finance and Regulation and UNSW Australia jointly funded this research under CIFR Project T20. The Centre for International Finance and Regulation is funded by the Commonwealth and NSW Governments and is supported by other Consortium members. The research question for this project was ‘What are the optimal competition law and policy settings that should apply to the financial services sector?’
The research question was driven by two Australian Government inquiries which will affect competition policy in the financial services sector: the Financial System Inquiry chaired by David Murray and the Competition Policy Review, chaired by Professor Ian Harper.
The project has three objectives.
The first is to investigate the nature of competition in certain sectors of the financial markets. Meeting this objective will provide Australian evidence on which decisions as to the competitive settings in the sector can, or should be, adjusted.
The second is to consider the mechanisms by which competition in the financial services sector can be promoted. This includes an analysis of the approaches used on an international basis for the promotion of competition in financial services. Meeting this objective will provide evidence on which decisions as to allocation of responsibility for promoting competition can be made.
The third is to consider the sector-specific competition settings in the financial sector, including the balance between competition and stability. As the global financial crisis did not provide Australia with direct experience of the practical limitations of this balance, the work investigates theoretical approaches and international experience. Meeting this objective will provide evidence for appropriate policy settings if there are to be any sector-specific competition policy exemptions.

Final Call for papers: Fourth Next Generation of Antitrust Scholars Conference at NYU School of Law on Friday, January 22, 2016

The fourth Next Generation of Antitrust Scholars Conference will be held at NYU School of Law on Friday, January 22, 2016. The conference is co-sponsored by NYU School of Law and the American Bar Association -- Section of Antitrust Law.  The purpose of this day-long conference is to provide an opportunity for antitrust/competition law professors who began their full time professorial career in or after September 2008 to present their latest research. Senior antitrust scholars and practitioners in the field will comment on the papers. Papers may be submitted to [email protected], which will then be circulated to our panel of referees for review.  The deadline for submission of papers is November 1, 2015. There is a strong preference for work that is unpublished and for which the comments from the conference can be incorporated into the work.

'The assessment of the effect on trade by the national competition authorities of the “new” Member States: Another legal partition of the Internal Market?

Marco Botta, Alexandr Svetlicinii, Maciej Bernatt, discuss 'The assessment of the effect on trade by the national competition authorities of the “new” Member States: Another legal partition of the Internal Market?' (2015) 52 Common Market Law Review, Issue 5, pp. 1247–1275

Abstract: Under Regulation 1/2003, NCAs of EU Member States must apply Articles 101–102 TFEU to anti-competitive conducts with an effect on intra-Community trade, and must notify the Commission of investigations and envisaged decisions based on Articles 101–102 TFEU. In the last decade, the NCAs of the “new” EU Member States have notified a lower number of envisaged decisions in comparison to “old” EU Member State; this has been explained by the institutional constraints of the individual NCAs. However, the paper shows that the NCAs of the “new” EU Member States have not been “less active” in terms of enforcement, but have adopted most of their decisions under the national competition rules.Also, there is significant divergence in the assessment of the effect on trade by the NCAs of the selected jurisdictions. Some NCAs have not taken account of the relevant ECJ case law and the 2004 Commission Notice on the effect.

Why a 'Large and Unjustified' Payment Threshold is Not Consistent with Actavis

Michael A. Carrier, Rutgers University School of Law - Camden explains Why a 'Large and Unjustified' Payment Threshold is Not Consistent with Actavis.

ABSTRACT: FTC v. Actavis was a landmark antitrust decision. In rejecting the “scope of the patent” test that had immunized settlements by which brand-name drug firms pay generic companies to delay entering the market (“exclusion payment settlements”), the Supreme Court made clear that such agreements “tend to have significant adverse effects on competition” and could violate the antitrust laws.

Some lower courts and defendants have sought to sow ambiguity in the post-Actavis caselaw by creating new thresholds and frameworks not articulated or envisioned by the Court. In particular, they have latched onto the discussion in Actavis of a “large and unjustified” payment. The district court in In re Loestrin 24 FE Antitrust Litigation, for example, imposed a framework that required analysis of (1) whether “there [is] a reverse payment” and (2) whether “that reverse payment is large and unjustified” before addressing (3) the rule of reason. The Loestrin court borrowed this framework from the district court in In re Lamictal Direct Purchaser Antitrust Litigation. And defendants have contended, for example, that “Actavis requires a plaintiff challenging a reverse-payment settlement . . . to prove, as a threshold matter, that the . . . payment was both large and unjustified” and that “under Actavis, [plaintiffs] have to prove that [a] payment was ‘large’ (as well as unexplained).”

This article offers three reasons why a requirement that a plaintiff demonstrate a large and unjustified payment before reaching the Rule of Reason is not consistent with Actavis. First, nearly all of the Court’s discussion of large and unjustified payments occurred in contexts having little to do with the antitrust analysis that future courts were to apply. Second, the Court instructed lower courts to apply the Rule of Reason, not a new framework with a threshold it never mentioned. And third, such a threshold is inconsistent with the Court’s (1) allowance of shortcuts for plaintiffs to show anticompetitive effects and market power and (2) imposition of the burden on defendants to show justifications for a payment.

Case Note: Successful Private Damages Case in Egypt: Hewala Factory v Egyptian Co for Float Glass

Mohamed Elfar, Queen Mary - University of London offer a Case Note: Successful Private Damages Case in Egypt: Hewala Factory v Egyptian Co for Float Glass.

ABSTRACT: In an important private damages decision under the Egyptian Competition Law, the court has granted the plaintiff damages for the harm sustained because of anticompetitive practices committed by a defendant. The court has also clarified numerous legal points such as limitation periods, refusal to supply and the relation between civil actions and criminal actions. This case note, addresses the main facts, findings and highlights the main observations and comments.

Competition and Price Discrimination: Evidence from the Parking Garage Industry

Haizhen Lin, Indiana University - Kelley School of Business - Department of Business Economics & Public Policy and Isabelle Yijia Wang, NERA Economic Consulting investigate Competition and Price Discrimination: Evidence from the Parking Garage Industry.

ABSTRACT: We study the relationship between competition and price discrimination through an empirical examination of hourly price schedules in the parking garage industry. We find that the degree of price schedule curvature decreases with competition, implying a greater proportionate drop in low‐end prices than in high‐end prices when competition intensifies. Our findings suggest that competition constrains a firm's capacity to exercise price discrimination, confirming the classic textbook theory. We also offer possible explanations for our findings, including a search cost explanation, for which we find some support in the data.

Reverse Payment Patent Settlements in the European Union and the United States

Damien Geradin, George Mason University School of Law; Tilburg University - Tilburg Law and Economics Center (TILEC), Douglas H. Ginsburg, U.S. Court of Appeals for the District of Columbia Circuit; George Mason University School of Law, and Graham Safty Reverse Payment Patent Settlements in the European Union and the United States provide comparative analysis of Reverse Payment Patent Settlements in the European Union and the United States.

ABSTRACT: In recent years, reverse patent settlement agreements — whereby a patent holder pays or gives other forms of value to an infringer in order to avoid or to settle patent litigation — have raised considerable debate in the pharmaceutical field in both the United States and the European Union, with the antitrust authorities and courts reaching different conclusions as to their compatibility with competition rules. In the United States, the Supreme Court addressed this matter in the Actavis case, in which it determined that reverse patent settlements should be assessed under the “rule of reason.” In contrast, the European Commission in its Lundbeck decision considered that reverse patent settlements were per object restrictions of EU competition law and therefore the effects of such agreements did not need to be analyzed. This decision is, however, being appealed before the General Court of the EU. In its more recent Servier decision, the Commission has modified its approach as, while it declared that the reverse patent settlements in question were per object restrictions, it also demonstrated that these agreements had anticompetitive effects. Against this background, we contrast the approaches taken in the US and the EU with respect to reverse patent agreements, and assess which approach makes the most sense. We also address a number of important questions, which are being looked at by lower courts in the US and may also be relevant in the EU.

Legal and Illegal Cartels in the European Cement Industry

Nikolaus Fink, Vienna University of Economics and Business and Stefan Frubing, Centre for European Economic Research (ZEW) study Legal and Illegal Cartels in the European Cement Industry.

ABSTRACT: Due to being much better documented, legal cartels have recently attracted the interest of many researchers who aim to understand the functioning of illegal cartels in detail. This paper contributes to the question of what we can learn from legal cartels by taking a closer look at the cement industry which has a rich history of both legal and illegal cartels. We undertake a cross-country comparison for Austria, Germany, Poland and Norway, providing narrative evidence for many traits of the cases based on a variety of detailed sources. We identify similarities between legal and illegal cartels in aspects such as monitoring efforts, information exchange, the importance of industry associations and the role of capacities, whereas we also find substantial differences in the allocation of clients, reactions to deviations and pricing schedules.

Canada is Awesome - and Not Just for Its Antitrust

I love Canada.  A few years ago I had an offer for a Canada Research Chair at UBC, where the incredibly smart and interesting Ralph Winter, Tom Ross and Nancy Galini teach at the Sauder School of Business.  The law school was not a right fit but there is lots to love in Canada:

1. Ed Iacobucci is now Dean at the University of Toronto law School - he is an impressive scholar in antitrust and corporate law and a highly competent administrator.

2. There are an abundance of impressive scholars at the University of Toronto doing interesting antitrust economics related work - Josh Gans, Mara Lederman, Ken Corts, Avi Goldfarb.  On the law side, University of Toronto boasts Ed, Michael Trebilcock and Ariel Katz.

3. Toronto and Vancouver are among the most interesting and fun to visit cities in the world.  They are also great restaurant cities.

4. The Canadian antitrust bar is on a per unit basis, the best in the world (small bar but a high quality bar).

5. The Canadian Competition Bureau is a world leader in thinking about antitrust compliance.

6. Most importantly, Netflix will stream Star Wars: The Force Awakens in Canada, not in U.S.

 

The Duration of the EC Merger Control Process: Determinants and the Impact of the 2004 Merger Regulation Reform

Sven Heim, Centre for European Economic Research (ZEW), Kai Huschelrath, Centre for European Economic Research (ZEW) and Ulrich Laitenberger, Centre for European Economic Research (ZEW) - Competition and Regulation Research Group; KU Leuven - Department of Managerial Economics, Strategy, and Innovation explore The Duration of the EC Merger Control Process: Determinants and the Impact of the 2004 Merger Regulation Reform.

ABSTRACT: The duration of merger proceedings held by competition authorities is an important determinant of the efficiency of the entire merger control process. We use a dataset of 2953 Phase I and 92 Phase II investigations completed by the European Commission (EC) between 1999 and 2008 to examine the key determinants of their duration. Differentiating between authority- and case-related drivers, we find that while the duration of Phase I investigations largely depends on the type of decision and use of simplified procedure, the duration of Phase II investigations is driven by factors such as industry knowledge, the duration of the preceding Phase I investigation, the origin of the notifying firm or the number of identified relevant markets. We also provide evidence that the significant increase in average duration identified after the 2004 merger regulation reform does not imply a decrease in administrative efficiency, as the probability of in-depth investigations was correspondingly reduced.

Exploitative Prices in European Competition Law

Antonio Robles Martin-Laborda, Universidad Carlos III de Madrid - Faculty of Social Sciences and Law examine Exploitative Prices in European Competition Law.

ABSTRACT: This chapter discusses whether purely exploitative prices (i.e., prices aimed at the mere exploitation of the buyers) should be included in the prohibition of unfair prices as an abuse of dominant position or, on the contrary, the latter should just cover exclusionary high prices. The vagueness of the case law of the European Court of Justice has enabled the coexistence of divergent interpretations and, accordingly, very different standards. The assumption of a price control function by a competition authority, and the subsequent prohibition of purely exploitative prices, are not supported by the main legal theories on competition law, and, according to mainstream economics, may impair the efficiency of markets. Purely exploitative prices are just maximizing-profit prices (i.e. monopoly prices), and, as long as they are inherent to the possession of a dominant position should not be regulated, apart from the case when dominance has been achieved through the market being a true natural monopoly or through state-granted monopoly rights; even then, the task of regulating the prices of monopolists – or removing such a legislative privileges – should be done ex ante and left to government or sector-specific regulators. In addition, neither the definition of unfair prices nor the test employed to determine their existence necessarily include exploitative prices. On the contrary, both of them suggest that an unfair price has to be a supra-monopoly price, whose object and effects would be exclusionary rather than exploitative.

Endogenous Firms' Organization, Internal Audit and Leniency Programs

Emilie Dargaud, French National Center for Scientific Research (CNRS) - Institute of Economic Theory and Analysis (GATE) and Armel Jacques, Universite de la Reunion theorize about Endogenous Firms' Organization, Internal Audit and Leniency Programs.

ABSTRACT: When multi-product firms make simultaneous price-fixing agreements on different markets, they may wish to compartmentalize their agreements managing them with different individuals in order to avoid the contagion of antitrust authority investigations. Sometimes the leniency programs are efficient to defeat this strategy and to induce CEO to launch internal investigations and report the obtained hard evidence to the antitrust authority. However these programs may have pro-collusive effects for centralized firms.

The Pros and Cons of Leniency and Criminalization Stockholm Friday 13 November

Pros and Cons 2015

We have a tradition of arranging seminars on major issues, where academics and practitioners meet in the same arena.

The seminars, which are open for competition authority employees, researchers, lawyers and competition consultants, have been appreciated for the open discussion among the participants and we hope that this year’s seminar will be no exception.

Seminar in Stockholm on Friday 13 November

This year’s seminar theme is The Pros and Cons of Leniency and Criminalization. The contributors will present their papers and leading officials from competition authorities around the world will act as discussants. The seminar takes place in Stockholm on Friday 13 November.

Preliminary Seminar Program

8.30	Registration
9.00	Introduction by the moderator Ingeborg Simonsson, Judge, Stockholm City Court, Division for competition law and intellectual property
9.15	Brent C. Snyder, Deputy Assistant Attorney General for Criminal Enforcement, US Department of Justice. Keynote speech: Safeguarding the Free Market Through Criminalization of Cartel Offenses
10.00	Coffee
10.30	Caron Beaton-Wells, Professor, Competition Law, Melbourne Law School: Leniency Policy and Criminal Sanctions in Anti-Cartel Enforcement: Happily Married or Uneasy Bedfellows? Discussant: Dr Katharina Krauß, Head of Unit, Special Unit for Combating Cartels, Bundeskartellamt
11.30	Andreas Stephan, Professor of Competition Law, University of East Anglia: The UK Steel Tanks Criminal Cartel Trial: Implications for Criminalisation and Leniency Discussant: Stephen Blake, Senior Director, Cartels and Criminal, Competition and Markets Authority
12.30	Lunch
13.45	Robert C. Marshall, Distinguished Professor of Economics, Penn State University: The Value of Leniency to Sophisticated Cartels Discussant: Isolde Goggin, Chairperson of the Competition and Consumer Protection Commission, Ireland
14.45	Coffee
15.15	Giancarlo Spagnolo, Professor, SITE - Stockholm School of Economics, U. of Rome II, EIEF, and CEPR: Leniency Inflation, Deterrence, and Criminalization Discussant: Maria Jaspers, Head of Unit, Cartels, DG Competition
16.15	Closing of seminar

Each speaker has 30 minutes for their presentations and the discussants have 15 minutes each, leaving 15 minutes for general discussion.

Please note that the program may be subject to change.

Venue

The seminar venue is Konferens Spårvagnshallarna at Birger Jarlsgatan 57 A in the centre of Stockholm. See map

Registration

Registrations are now open via the follwing link www.delegia.com/kkv-proscons2015

All matters regarding registration are handled by Meetagain,
[email protected]

Questions

If you have any questions, please do not hesitate to contact our head of the organizing committee Paola Liliana Montero Ledezma at [email protected]

The Brussels Court Judgement in Commission v Elevators Manufacturers, or the Story of How the Commission Lost an Action for Damages Based on its Own Infringement Decision

Jorge Marcos Ramos, University of Liege - School of Law and Daniel Muheme, University of Liege - School of Law analyze The Brussels Court Judgement in Commission v Elevators Manufacturers, or the Story of How the Commission Lost an Action for Damages Based on its Own Infringement Decision.

ABSTRACT: This paper explores the rationale underpinning the Brussels Court rejection of the Commission’s action for damages resulting from the elevators cartel. Although this claim seemed to be an easy exercise for the Commission, the judgement shows the difficulty that parties will encounter proving damages and causation under national law. Moreover, the intricacies of incomplete bid-rigging cartels that the national judge has to assess only complicates the task.

Market Structure, Growth and Competition in the Supermarket Sector in Latin America

Juan Delgado, Global Economics Group has a new paper on Market Structure, Growth and Competition in the Supermarket Sector in Latin America.

ABSTRACT: Supermarkets play a limited but increasingly important role in Latin-America groceries retail markets. Traditional grocery retailers still play a substantial role in most Latin American countries and the penetration of supermarkets is still behind the developed countries. Paradoxically, within the supermarkets sector, concentration is high and a small number of large players are present in several countries. As personal income increases, the size of the middle class grows and the logistics and transport infrastructure develops, supermarkets are expected to expand further becoming the main gatekeeper for most grocery products. As supermarkets penetration increases, there is generally a process of transfer of market power from manufacturers and producers to retailers. In Latin America, producers and manufacturers still have substantial market power (and, consequently, bargaining power) in several product markets. However, recent cases and commercial practices show that such bargaining power is eroding in favour of large supermarket chains, changing the competitive dynamics of retail markets.

Procedural Fairness in Competition Law Enforcement and the FTC Experience

Commissioner Terrell McSweeny gave a speech on Friday at Kings College on Procedural Fairness in Competition Law Enforcement and the FTC Experience.