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Abstract:
This paper presents a perspective on remedies in network industries that is informed by American and European experiences with antitrust law and sector-specific regulation. In the United States and the European Union, the topic of remedies in network industries cuts across antitrust law and sector-specific regulation, including telecommunications. The legal and economic understandings of a remedy are not always synonymous. In both legal systems, a remedy is the corrective measure that a court or an administrative agency orders following a finding that one or several companies had either engaged in an illegal abuse of market power (monopolization in the US and abuse of dominance in the EC) or are about to create market power (in the case of mergers). With the exception of merger control where remedies seek to prevent a situation from occurring, legal remedies are retrospective in their orientation. They seek to right some past wrong. They may do so through the payment of money (whether that is characterized as the payment of damages, fines, or something else). Or they may seek to do so through a mandated change in market structure (structural remedies), as in the case of divestiture, or in the imposition of affirmative or negative duties (behavioral remedies).

The economic meaning of a remedy emphasizes market failure. The market failure may result from the unchecked exercise of market power, or from the uncompensated generation of an external cost or benefit, or from an insufficiency of information with which to make efficient choices concerning consumption, production, or investment. Whereas lawyers think of a remedy as what to do after a finding of illegal conduct, economists think of a remedy as what to do after a finding of market failure. The two approaches overlap perfectly if legislators and courts make liability rules that are triggered only after a finding of market failure.

The difference between the legal and economic conceptions of remedy highlights another important distinction, namely, the difference between ex ante and ex post interventions in the market. Under the ex post approach, a remedy is imposed if and only if an illegal conduct is first proven. And it is the government or a private plaintiff that bears the burden of proving their case. This arrangement describes the operation of monopolization law under the US Sherman Act or the concept of abuse of a dominant position in the EU.

Ex ante remedies are generally imposed through sector-specific regulation, though such remedies may also be imposed on the basis of antitrust rules. This is, for instance, the case where remedies are imposed as a condition for clearance of a merger between telecommunications operators. In both the US and the EU, antitrust enforcement authorities have used merger control procedures as a way to extract significant concessions from the merging entities. As far as institutional design is concerned, remedies in network industries can thus come from two main sources: ex ante or ex post enforcement, and/or sector-specific regulation.

Against this background, this paper seeks to explore the issues of remedies and institutional design of regulation in a comparative manner by reference to US and EU law. Part 2 analyzes the US model and Part 3 the EU model. Part 4 contains a conclusion.

Section 2.1 provides illustrations of ex ante and ex post remedies in American telecommunications. As will be seen, the reliance on antitrust consent decrees makes the border between ex ante and ex post remedies thin as such decrees can be seen as an amalgam between the ex ante and the ex post approaches. Section 2.2 argues that, over the last two decades, antitrust law has evolved into another form of regulation as it now relies on numerous policy statements and guidelines that resemble the type of prospective rulings made by regulatory agencies. Section 2.3 outlines the risk that the approach followed by the FCC in its Local Competition Order and recently vindicated by the Supreme Court in the Verizon case could affect the development of antitrust-based remedies in network industries. Finally, Section 2.4 argues that, by attempting to impose the TELRIC model to US trading partners, the US Trade Representative has turned itself into a telecommunications regulator. We also argue that this process lacks legitimacy and could have an unintended boomerang effect on US telecommunications operators.

Twenty years ago, it was clearly the case that its embrace of economic analysis made antitrust law intellectually dominant over industry-specific regulation in the United States. The diffusion of ideas flowed from antitrust to the regulatory agencies. Then something happened, and the direction of policy innovation reversed. Today, American antitrust law and its notions of feasible remedies in network industries are influenced by the theories of market failure predicated on network effects.

So it is now natural to ask, How will the Supreme Court's 2002 Verizon decision on TELRIC pricing affect the development of antitrust law concerning Microsoft? The influence may prove to be substantial. There is an obvious relationship between an ex ante regulation requiring unbundling of network elements and an ex post antitrust rule penalizing the failure to offer a product or functionality on an unbundled basis. The latter is the antitrust doctrine concerning tying arrangements, which was so contentious in the Microsoft case. When read together, Verizon and Microsoft have potentially broad implications for antitrust remedies relating to bundling and unbundling of products having substantial sunk costs and network complementarities. In the intellectual property area, we can expect to see more monopoly-preservation tying cases, relying on David Sibley's theory of partial substitutes, employed in the Microsoft case. These cases will immerse the litigants and the courts in TELRIC-like questions of the pricing of the tying product on an unbundled basis.

Section 3.1 explores ex ante and ex post remedies in telecommunications in the European Union. As in the US, we will see that the border between ex ante and ex post remedies is thin and that some remedies appear as an amalgam between these two kinds of remedies. Section 3.2 argues that, as in the US, EC antitrust law has taken a regulatory tone with the multiplication of notices and guidelines, which resemble the prospective rulings made by regulatory agencies. Section 3.3 shows that antitrust concepts and principles play a central role in the new EC framework on electronic communications. Finally, Section 3.4 observes that, unlike the US Trade Representative, DG Trade does not behave like a telecommunications regulator. However, the enlargement process allows the EC to progressively expand the number of nations to which its regulatory principles in the area of telecommunications and in other network industries will apply.

There are several similarities in the approaches followed by the US and the EC in their remedial efforts. First, the US and the EC have relied on a combination of ex ante and ex post remedies to control market power in the telecommunications. Yet, both regimes have also developed hybrid remedies, which represent an amalgam between the ex ante and the ex post approaches. For instance, as illustrated by the MFJ, consent decrees have been used by the Antitrust Division as a way to regulate the telecommunications sector. In both US and EC, the remedies imposed as a condition for merger clearance often take the form of long lists of behavioural requirements, which can be hardly distinguished from prospective regulatory requirements. Although we agree that antitrust rules be used to maintain a competitive market structure, we question the use of antitrust remedies to reshape the telecommunications sector or achieve specific regulatory objectives. Very often, operators are under no position to negotiate, and the clearance process turns into a game of regulatory extortion.

Second, the growing amalgam between antitrust and regulation can also be illustrated by the increasing reliance by antitrust authorities on guidelines, policy statements, notices, and other tools containing abstract statements of the way these authorities plan to address anti-competitive conduct, which may arise in the future. In this context, they very much act like a bureaucracy adopting prospective rulings than as antitrust authorities deciding cases on the basis of past events. In the future, antitrust could be much less of a litigation practice, than a regulatory compliance exercise whereby adepts go through checklists of predetermined regulatory interpretations.

There are also significant differences between the US and EC regimes of remedies in telecommunications. First, regulatory remedies have generally been more intrusive in the US than in the EC. The combination of the 1996 Telecommunications Act and the FCC's implementing orders has produced an extremely dense regulatory framework regulating certain categories of operators' behaviours in the most excruciating detail. Although the EC regulatory framework adopted in the EC in the 1990s was also heavy-handed, the new regulatory framework has clear deregulatory features, as it relies on a market-by-market system of sunset clauses and allows regulation only when antitrust law remedies are not sufficient to address the identified market failure(s). The new EC regulatory framework no longer imposes remedies on predetermined categories of operators, but on operators holding SMP, this latter concept corresponding to the notion of dominance under EC competition law. The EC system seems thus better equipped to limit the imposition of ex ante remedies to circumstances where market failures can be identified. No other circumstance should warrant ex ante regulatory intervention.

Second, in recent years, antitrust rules have played a greater role in the EC than in the US in telecommunications. Although the US government has not initiated any major telecommunications antitrust lawsuit since the MFJ, the European Commission has launched proceedings to address a variety of anticompetitive behaviours in telecommunications. Moreover, although it is true that US antitrust increasingly takes a regulatory tone, antitrust principles have not much penetrated sector-specific regulation. On the contrary, there is a risk that regulatory models developed by the FCC (such as the controversial TELRIC pricing methodology) could influence the design of antitrust remedies in the future. By contrast, EC antitrust principles play a crucial role in the new regulatory framework on electronic communications: key regulatory decisions, such as market definition, identification of SMP operators, and the adoption of remedies must be adopted in conformity with antitrust principles. There is also a clear understanding in the EC that sector-specific regulation is to progressively give way to antitrust law.

antitrust, competition, regulation, telecommunications

Abstract:
This paper seeks to draw some insights from the landmark Supreme Court judgment in Trinko with a view to enlightening the current debate taking place in the EU over the proper scope of application of Article 82. Trinko is a particularly relevant judgment for EC competition lawyers since it addresses two extremely important questions related to the application of this provision of the Treaty. The first question relates to the extent to which dominant firms in possession of essential products or services should be mandated to give access to these inputs to their competitors. This question, which is at the core of the recent Microsoft decision and IMS judgment, does not find an obvious economic response. While granting access to "essential facilities" will stimulate competition in a secondary market (thereby contributing to allocative efficiency), it risks reducing the incentives for essential facility holders to invest. This issue also raises questions about the proper role of the competition authorities and the courts. Mandatory access involves complex price-related questions for which these institutions seem poorly equipped. The second question relates to the interface between competition law and sector-specific remedies. In many key sectors of the economy, which can be referred to as network industries, these two categories of remedy co-exist, thus raising problems of overlap or even conflicts. Trinko addresses this issue by saying that there is no space for competition law remedies once a sector-specific regime has been established. This approach seems to conflict with the Commission's decision in Deutsche Telekom, which rules that the presence of a regulatory remedy does not prevent the application of EC competition rules.

Antitrust, competition, Microsoft, monopolies, abuse of dominance, regulation, essential facilities

Abstract:
This paper sets out our comments to DG Competition's discussion paper on the application of Article 82 of the Treaty to exclusionary abuses (the "Discussion Paper," hereinafter). We have focused our comments on the implications that the analytical framework proposed in Section 5 and the antitrust rules described in Sections 6-10 of the Discussion Paper could have on the development and growth of the high-tech and innovation industries (the so-called "dynamically competitive" industries) in the European Union.

The important contribution of these industries to the European economy has recently been acknowledged by the European Commission in its i2010 strategy. This strategy sees growth and employment in the information, communication and technology (ICT) industries as crucial for the achievement of the goals set out in the Lisbon agenda.

It is widely accepted that the growth and development of these industries requires, among other things, a stable regulatory framework that does not penalize successful firms for its own sake and promotes creativity and innovation. According to the Kok Report, prepared in response to an initiative of the European Council, "companies will only invest in innovation and R&D if they have the certainty that they will be able to reap the rewards of that investment." Because it can affect the return to innovation and investment, competition policy can have a significant impact on the development of the ICT sector and other dynamically competitive industries in Europe. To illustrate this impact, consider a few examples:

First, a tight policy regarding excessive prices will have similar effects on the introduction of an upper bound to profits. Given that profits are uncertain ex ante, a firm would only be willing to invest if the expected return on its investment exceeds the cost of capital by a significant measure. The introduction of an upper bound to prices and hence to profits may thus cause a reduction in investment and a loss of welfare.

Second, a strict policy in connection with tying and bundling may force a dominant firm that finds it efficient to integrate two previously separated features into a single product to actually produce separate versions of the product: one with both features and two with each feature separately. This may have negative implications for product innovation: the cost of developing products through technological integration grows exponentially with the number of "unbundled" versions mandated by law. As a result, innovation may be artificially stifled and the competitive process unjustifiably thwarted.

Third, competition policy interventions compelling dominant firms to license their intellectual property may disrupt the innovation process. Economists have shown that (1) compulsory licensing reduces the incentives for the whole industry to innovate in the long run; while (2) it has an ambiguous welfare effect in the short-term. Forced access may increase competition in the short term, but it may also (a) facilitate the entry of inefficient producers; (b) promote licensing arrangements that discourage potential entrants to develop products that are sufficiently different from those of the dominant company, thus reducing product variety in the marketplace; and (c) encourage licensing arrangements that help companies coordinate their respective commercial policies, leading to higher prices.

The nature and magnitude of the impact of competition policy on investment and innovation in general, and on the ICT in particular, depends crucially on the precise rules applied to the assessment of the business practices of dominant firms. This is why the Discussion Paper is so important. It "sets out possible principles for the Commission's application of Article 82 of the Treaty to exclusionary abuses" and "presents the analytical approach that could be used by the Commission" in assessing the business practices of firms with market power. Whether the application of Article 82 of the Treaty in the years to come promotes R&D investment and innovation and thus contributes to the achievement of the ambitious goals of the Lisbon agenda will largely depend on the principles and analytic approach finally adopted by DG Competition and the Commission.

The remainder of this paper is structured in five sections. In section 2, we provide an overview of the importance of the ICT sector for the European economy (employment, productivity and growth) and compare its performance with the ICT sectors of the United States and Japan. We conclude that a healthy ICT sector plays a key role for the growth of the economies of the Member States. Europe's comparatively poor growth and employment record over the last decade can be explained in part by its relatively weak commitment to the development of a strong ICT industry.

In section 3, we briefly review the main economic characteristics of dynamically competitive industries, such as the ICT industry. We focus on those features that have significant implications for the analysis of competition. Subsequent implications are discussed in section 4. Section 5 presents the core contribution of this paper. In this section we evaluate the various statements contained in the Discussion Paper. In doing so, we take into consideration the special characteristics of the dynamically competitive industries and the implications of those characteristics for antitrust law. Section 6 presents a brief conclusion.

Commission, discussion paper, competition, dynamic industries, efficiency, abuse of dominance, rebates, tying, bundling, refusal to supply, information technology, exclusive dealing, foreclosure, aftermarkets, innovation, investment, antitrust, dynamic competition, network effects, dominance, R&D

Abstract:
The first prong of Article 82 of the EC Treaty, which prohibits abuses of a dominant position, requires, prior to the identification of abusive behaviour, evidence that the firm under scrutiny enjoys a dominant position. Surprisingly, this issue seems to be sometimes overlooked. Enforcers, practitioners and scholars have recently paid greater attention to the concept of abuse than to the question of dominance when discussing Article 82 EC. This should not, however, be interpreted as a sign that the law of dominance is clear. Quite to the contrary, the concept of dominance raises a wide array of questions which are discussed in the sections that follow.

abuse of dominance, antitrust, EC competition law, market definition, barriers to entry, vertical integration, network effects, essential facilities, collective dominance, buyer power, economies of scale, economies of scope

Abstract:
Standard-setting activities, which aim to achieve device interoperability and product compatibility, play a fundamental role in fostering innovation and competition in a variety of markets. Such activities, typically carried out by armies of engineers, would generally not be expected to fascinate lawyers and economists. But they do - and they have recently received much attention as a result of high-profile cases, complaints lodged with competition authorities, and attempts by members of Standard-Setting Organizations ("SSOs") to have their rules and procedures modified to prevent allegedly anti-competitive outcomes. There seems to be a growing perception, largely fed by certain interest groups, that current standard-setting procedures generally based on the so-called FRAND licensing regime unduly allow opportunistic holders of Intellectual Property ("IP") embedded in a standard to extract excessive royalties from their licensees.

Against this background, the objective of this paper is to demonstrate that the existing FRAND regime works. Ongoing proposals to alter it by tilting the bargaining position of licensors, in particular that of pure innovators, in favour of licensees are not only unnecessary, being based on false premises, but would also prove detrimental to investment and innovation. Fortunately, these attempts, and in particularly those to amend the rules and procedures of SSOs', have so far been unsuccessful. They remain nevertheless a constant threat.

This paper is divided in seven parts. Part II describes the main features of standard-setting processes, their significance and the strategic battles that may affect them. Part III focuses on the FRAND licensing regime traditionally prevalent in SSOs. Under this regime, owners of IPR that are essential to the standard typically commit to license such patents on "fair, reasonable and non-discriminatory terms". This Part begins by describing the scope of FRAND commitments. It then reviews the various meanings that have been attributed to the concept of FRAND and argues that a "FRAND royalty" cannot be determined in the abstract. Finally, the argument is made that, contrary to what has been suggested by a number of authors, by giving a FRAND commitment an owner of essential IPR cannot be deemed to have waived its fundamental right to seek injunctive relief in case its rights are infringed. Part IV reviews a number of academic studies which argue that the current FRAND regime has proved inadequate to prevent the emergence of a raft of perceived problems: anti-commons, patent thickets, patent hold-up, patent hold-outs, royalty stacking. It is shown that these studies have been seriously challenged and are subject to significant limitations. Moreover, it is argued that they fail to provide any empirical evidence of the problems denounced. Part V examines various proposals that have been made to reshape the FRAND regime. It shows that these proposals, most of which endorse - in one way or another - a compulsory regime of ex ante licensing, would create insurmountable practical difficulties and could raise serious competition law concerns. Part VI considers the applicability of Article 82 of the EC Treaty to claims of excessive-pricing in the IP and standard-setting context. It shows that, should they be pursued, such claims would raise numerous conceptual and practical difficulties. Determining the competitive price of a tangible good is a notoriously complex undertaking, hence the European Commission's understandable reluctance to pursue excessive pricing cases except in a narrow set of circumstances. The potential for error will only be compounded when one deals with intangible assets. For these reasons, determination of appropriate royalty levels for valuable IP should be left to the market. Finally, Part VII contains a short conclusion.

standard setting, standardization, intellectual property, abuse of dominance, FRAND, patent hold-up, patent thicket, anti-commons, royalty stacking, innovation, excessive prices, royalty rates, licensing, patent, patent ambush, antitrust, competition, disclosure, ETSI, mobile communications

Abstract:
Fines represent the principal tool in the European Commission's enforcement of EC competition law. Unlike in the United States where there is a formidable congeries of weapons against undertakings which breach anti-trust law, there are no criminal penalties, such as imprisonment for individuals in the EC. Moreover, private enforcement of EC competition law is still minimal. Thus, fines represent the main tool to remedy and deter violations of competition law. The European Court of Justice indicated in Musique Diffusion France (Pioneer), that the underlying rationale for the imposition of fines is to ensure the implementation of Community competition policy. The meting out of fines, therefore, serves two objectives (i) the suppression of illegal activity and (ii) the prevention of recidivism. During the first three decades in which the Commission imposed fines for breaches of EC competition law, the Commission was criticized for the obfuscation surrounding how it determined a given fine. During this period, there were no guidelines providing a reference point from which the Commission could impose fines leading to a lack of transparency in the fining process. There was thus a tendency to litigate before the courts in the expectation that the fine would be reduced. In addition, fines were generally fixed at such a low level that it was questionable whether they had any deterrent effect.

There has been a recent evolution in Commission fining policy, however. First, the promulgation of both the Commission Guidelines on fines in 1998, which aims to make decisions over fines more transparent and impartial. Second, the toughening of the fines, which is particularly evident when one notes the condign fines of 462 million euros and 497 million euros imposed on Hoffman-La-Roche and Microsoft. Third, the development of the leniency notice, which provides an incentive for cartel members to admit to their anti-competitive conduct. Since the adoption of the 1998 Guidelines, the majority of the fines imposed by the Commission have been for cartel activity. The Commission has, however, shown an increasingly heavy-handed approach towards other infringements of Article 81 EC and abuses of a dominant position under Article 82 EC. Yet, it is not quite sure that these evolutions have reached their objectives as both the constituent elements of the 1998 Guidelines and the fining decisions, which are based on the 1998 Guidelines, are vague. This has left much room for conjecture as to how the Commission reached the final fine. The corollary of this is that there has been, as in the period preceding the 1998 Guidelines, a steady yet significant number of parties litigating before the courts. It is also still open to debate whether the fines imposed by the Commission are stringent enough. The Microsoft decision bears testimony to this. This raises the issue of whether the EC should not turn to other forms of penalties, such as criminal penalties. This path is already being followed in some Member States (e.g., UK), but seems unlikely to be followed in the EC. The Commission can neither impose fines nor criminal sanctions on individuals in light of the wording of Article 81 EC. On the other hand, Article 83(1) EC stipulates that the Council "give effect to the principles set out in Articles 81 and 82". This could be interpreted as encompassing sanctions on individuals as the effect of this would be to enhance the deterrent effect of the cartel prohibition. Article 23(5) of Regulation 1/2003 states, however, that decisions are not to be of a criminal law nature.

The main purpose of the article is to provide a detailed analysis of the parameters taken into account by the Commission when imposing a fine, as well as the parameters used by the Court of First Instance when reviewing fines imposed by the Commission. In order to do this, we have reviewed all the Commission decisions and CFI judgments dealing with fines, which have been adopted since the publication of the 1998 guidelines. For each Commission and CFI judgment, we have identified the factors that have been taken into account to determine/review the fines imposed for infringements of EC competition law. The results of our analysis are summarized into two tables (one for the Commission decisions and one for the CFI judgments), which allow the reader to find for each case the factors that have been taken into account to determine/review the fines. This is the empirical side of the paper. While most of the papers analyzing the fining policy of the Commission discuss factors, such as the gravity or duration of an infringement, the presence of various mitigating circumstances, in a rather general or theoretical fashion, this paper provides precise data as to the elements that are most/least likely to be considered in the determination/review of fines. Thus, our table on the Commission decisions will, for instance, allow the reader to know in which cases, a cartel member was the leader and/or imposed coercive measures on other cartel members and to what extent this was considered as an aggravating circumstance. In turn, our table on the CFI judgments will allow the reader to identify the various reasons why, in a given case, the fine imposed by the Commission was reduced before the CFI.

Another aim of the paper is to give a critical look at the Commission decisions imposing fines to see whether the reasoning on which there are based is coherent. As will be seen, it is often difficult to understand the logic of the fines imposed by the Commission. Identical factual scenarios will be treated differently, while different factual scenarios will be offer the same treatment. By contrast, we will not deal with theoretical issues, such as the optimal level of the fines or whether criminalization of competition law violations is desirable as there is abundant literature on this.

antitrust, competition, cartels, fines, deterrence, fines, abuse of dominance

Abstract:
Margin squeeze in the telecommunications sector has become a central concern among national regulatory authorities, national competition authorities, national courts, and the European Commission. In recent months, competition law proceedings have been launched in several Member States, including Denmark, France, Italy, the Netherlands, and the United Kingdom. Most recently, on 16 November 2004, the Italian competition authority imposed a 152 million euros fine on Telecom Italia on the ground that it had engaged, inter alia, in a margin squeeze abuse. The need to prevent margin squeeze has also become a leitmotiv for NRAs in their capacity as regulators of wholesale and/or retail telecommunications prices. Thus, from an obscure issue that belonged to the realms of academic discussion, margin squeeze has become an intensely-debated practical issue in the area of telecommunications.

Margin squeeze cases are the product of increased competition in the post-liberalization telecommunications sector. They also represent an important and necessary tool in the commercial strategies of new entrants that seek to compete with incumbent operators. While new entrants have made significant inroads in several telecommunications markets, many still claim that their growth is constrained by exclusionary practices carried out by the incumbents. Margin squeeze allegations feature prominently in this regard.

Simply expressed, a margin squeeze amounts to a reduction by a dominant operator of the margin between wholesale and retail prices so as to make entry difficult or to encourage exit. This can be done by raising wholesale prices, lowering retail prices, or doing both. While margin squeeze has been frequently alleged in recent years, findings of abuse have thus far been rare. This may be partly due to the difficulty of demonstrating a margin squeeze abuse, but doubtless also reflects the fact that incumbents have dramatically reduced wholesale and retail prices in recent years, for entirely legitimate reasons.

This paper looks at two instruments that can be used to prevent and/or sanction abuses of market power in telecommunications: sector-specific regulation, which is usually based on national regulatory frameworks transposing EC legislation, and national and/or EC competition law. While each instrument has advantages and disadvantages, their interaction often raises fundamental issues, which we seek to address in this paper.

antitrust, competition, abuse of dominance, margin squeeze, predatory pricing, cross-subsidies, regulation, telecommunications, excessive pricing, vertical integration, interconnection

Abstract:
Price discrimination is one of the most complex areas of EC competition law. There are several reasons for this. First, the concept of price discrimination covers many different practices (discounts and rebates, tying, selective price cuts, discriminatory input prices set by vertically-integrated operators, etc.) whose objectives and effects on competition significantly differ. From the point of view of competition law analysis, it is thus not easy to classify these practices under a coherent analytical framework. Second, there is a consensus among economists that the welfare effects of the (various categories of) price discrimination are ambiguous. It is hard to say a priori whether a given form of price discrimination increases or decreases welfare. The response to this question may indeed depend on which type of welfare standard (total or consumer) is actually pursued. Moreover, even if one agrees on a given standard, the welfare effects of discriminatory prices generally depend on factual issues, such as whether it increases or decreases total output. Third, the exact scope of Article 82(c), the only Treaty provision dealing with discrimination, is not entirely clear. While the European Commission (hereafter, the Commission) and the Community courts have applied Article 82(c) to many different practices, there are good reasons to believe that this provision should be applied to a limited set of circumstances, most forms of discrimination being adequately covered by Article 82(b) or other provisions of the Treaty.

Against this background, the main objective of this paper is to throw some light on the compatibility of price discrimination with EC competition law. In order to do so, this paper does not seek to propose a grand unifying theory that would provide a single test offering a way to distinguish between practices compatible and incompatible with the EC Treaty. Instead, we offer an analytical framework which distinguishes between different categories of price discrimination depending on their effects on competition. Different tests may thus be needed to assess the compatibility of the practices belonging to these categories with EC competition law. Another objective of the paper is to show that Article 82(c) should only be applied to the limited circumstances where a non-vertically integrated dominant firm price discriminates between customers with the effect of placing one or several of them at a competitive disadvantage vis-a-vis other customers (secondary line price discrimination). In contrast, Article 82(c) should not be applied to pricing measures designed to harm the dominant firm's competitors (first line price discrimination) or to fragment the single market across national lines. As will be seen, relying on Article 82(c) to condemn such practices goes against the letter and the spirit of this provision and may also apply a wrong test to such practices. It is also not necessary since other Treaty provisions can be used to achieve this objective.

Price discrimination, efficiency, antitrust, EC competition law, consumer welfare, abuse of dominance, monopolization discounts, rebates, selective price cuts, tying

Abstract:
Excessive pricing is an area of competition law which differs significantly from most others. First, the notion of excessive pricing has failed to stimulate much economic analysis in Europe. This is in great part due to the fact that most studies on the economics of abusive pricing have focused on exclusionary pricing behavior, as such abuses are more frequent than exploitative ones. Moreover, excessive pricing is an antitrust offence only in a limited number of jurisdictions. There is also a widely accepted view that competition authorities are ill-suited to carry out price controls, a task which should be better left to sector-specific regulators. Because they intervene on an ad hoc basis, i.e. to sanction specific anti-competitive behavior, competition authorities cannot easily transform themselves into price regulators. Price regulation is a long-term effort which requires quasi-permanent supervision.

Against this background, the purpose of this paper is to review the case-law of the EU and of some of its Member States dealing with the control of excessive prices. This paper will also discuss current enforcement trends by the European Commission and National Competition Authorities, including recent cases and policy pronouncements by senior competition law officials. As will be seen, there is a growing consensus among competition agencies that controlling prices should be limited to exceptional circumstances. Moreover, where such circumstances justify them, given the inherent risks of costly mistakes and unintended adverse effects, price controls should be based on a sound economic analysis of market circumstances and carried out with the utmost caution.

Dominance, market power, excessive pricing, competition law, price regulation, innovation, antitrust, European Union, abuse, monopoly, investment, incentives

Abstract:
In the last two decades, the reliance upon “licensing” strategies as a source of revenue for intellectual property (“IP”) rights holders has seen a dramatic increase. Put simply, in return for an adequate remuneration (typically a royalty, but there may be other forms of consideration), innovators (licensors) grant to other firms (licensees) the right to use their proprietary technology to manufacture products for sale in downstream markets. IP licensing strategies are not only pursued by organizations without manufacturing capabilities (e.g., university research centres). IP holders active in downstream product markets (hereafter, “vertically-integrated” firms) may be licensing their technologies to reap additional profits from their research and development (“R&D”) expenditures, but also to obtain access to other firms' technologies through cross-licensing agreements.

Licensing agreements typically benefit licensors and licensees. The licensee gains access to new technologies, which it will use to improve its manufacturing operations or embed in its products to increase their functionalities. The licensor accrues revenues from his initial R&D expenditures that can be invested in the development of new technologies, which will in turn lead to additional revenues, hence creating a virtuous circle of innovation. Licensing agreements are generally heavily negotiated between licensors and licensees, which in the vast majority of the cases reach mutually satisfactory agreements.

Yet, tensions may arise between licensors and licensees over the terms of their IP licensing deals. The diverging incentives of licensors (eager to obtain a fair level of compensation for the investments made in developing their IP) and licensees (eager to minimize the cost of acquiring proprietary technologies) may generate disputes over royalty levels and other forms of consideration. Such disputes are particularly likely to arise when licensing agreements have the potential to be worth hundreds of millions of Euros and small variations in terms and conditions can be financially significant for both parties. Potential licensees may also insist on obtaining a license on terms that are identical, or at least equivalent, to those obtained by licensees with which they compete. Licensors may, however, resist such requests insofar as differing licensing terms are justified by the particular circumstances of each specific agreement.

Additional tensions may arise when the IP in question is essential to a standard. Some have argued that once a proprietary technology has become part of a standard, its owners will be able to extract royalties in excess of those they could have charged before the adoption of such standard (the so-called “hold up” theory). Although, as will be seen, this theory has clear limitations it has contributed to the belief that royalty rates charged by IP holders are too high. Another claim that has been made is that in circumstances where a standard comprises essential IP held by numerous patent holders, the aggregation of the rates charged by such holders (even if individually reasonable) may lead to a royalty burden of a level such that the standard will be too costly to implement (the so-called “royalty stacking” theory). The proponents of such theories argue that some form of control should be placed on the royalties that can be charged by essential patent holders.

While differences of views between licensors and licensees are generally ironed out through negotiations, there will be situations where licensees may be tempted to rely on competition rules to seek redress against what they perceive as unfair licensing terms. Against this background, this paper explores the extent to which Article 82(a) and 82(c) of the EC Treaty, which respectively prohibit as abusive for dominant firms from “directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions” to their customers, and to “applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage”, can be relied on by licensees unhappy with the deals they have obtained from licensors. These issues are particularly important at a time where economic growth is increasingly dependent on innovation.

This paper is divided in five parts. Part II discusses the specific challenges raised by market definition and the assessment of dominance in high-technology markets with a specific focus on technology licensing. Part III discusses the application of Article 82(a) EC to licensing agreements. It explains the significant conceptual and practical difficulties of applying this provision of the Treaty in the field of technology licensing and argues that competition authorities should refrain from seeking to control prices or rates in dynamic industries. Part IV explores the issue of price/rate discrimination in IP licensing agreements. It argues that while non-vertically integrated licensors have no incentives to discriminate against their licensees, vertically-integrated firms have strong incentives to offer more favourable licensing terms to their downstream operations that to other downstream firms with which they compete. The case is made that the enforcement of Article 82 EC in this field should therefore focus on preventing vertically-integrated firms from raising their downstream rivals' costs through discriminatory licensing fees. Part V contains a short conclusion.

patents, licensing, price discrimination, exploitation, abuse of dominant position, royalties, EC law, competition, royalty-stacking, hold-up

Abstract:
Many competition lawyers and economists argue that the prime of objective of competition law regimes is to promote economic efficiency. Yet, few of these regimes define what should be understood by economic efficiency. For instance, although this concept is referred to in an increasingly larger number of regulations, guidelines, etc., EC competition law does not offer any precise definition of economic efficiency. The problem is made more serious by the fact that economists do not necessarily agree on the meaning of efficiency and that, in a given proceeding, the economic consultants of both parties will often disagree over the efficiency or inefficiency of a given practice or behaviour.

This issue has become of considerable importance as economic analysis is now at the core of competition law analysis. Economic analysis does not only play a role in determining the types of agreements/mergers that create competition law concerns, but also the types of justification that can be used to justify such agreements/mergers. When asked to examine a restrictive agreement or a merger, the test to be performed by competition authorities essentially amounts to determining whether the negative effects of the agreement/transaction on competition is more than compensated by "efficiencies" taking the form of the production of new and/or better products, the realization of economies of scale or scope, etc. Such a balancing test will not necessarily be easy as parties to a proceeding will generally try to inflate the "negative" or "positive" effects of the agreement/merger in question. It should thus not come as a surprise that, in some recent documents, the Commission has tried to clarify, which type of efficiencies can be legitimately claimed by private parties.

Efficiency claims are also made in the context of the control of market dominance. First, there are circumstances in which dominant firms will try to justify a conduct that would otherwise be abusive by efficiency considerations. As will be seen below, it is clear that some practices such as rebates or tying can generate efficiencies, although such efficiencies will not necessarily be taken into account by the Commission and the European courts, which tend to consider such practices as per se contrary to Article 82 of the Treaty. Market-opening reforms in network industries are based on the idea that State monopolies were "inefficient" and that a competitive market structure would deliver better results in terms of lower prices, better quality and higher consumer satisfaction. Efficiency claims are also made with reference to the regulatory strategies that need to be designed in order to control the market power of incumbents. While, for instance, incumbents will claim that a given pricing methodology (e.g., ECPR) should be adopted to maintain their incentives to invest, new entrants will say that another pricing methodology (e.g., LRIC) is preferable because it facilitates entry on the market.

Against this background, this paper seeks to clarify the meaning, scope, and validity of "efficiency claims" in EC competition law, as well as the importance of efficiency considerations in sector-specific regulation.

Efficiency, competition, antitrust, mergers, vertical restrictions, horizontal restrictions, welfare standards, abuse of dominance, economic regulation

Abstract:
European Community law has played a pivotal role in opening to competition economic sectors previously under the control of public monopolies. As with other sectors such as telecommunications, air transport, electricity, gas, and rail, the postal sector has succumbed to the wave of liberalisation. Liberalisation in the postal sector has forced stagnant state-owned monopolies to modernise themselves in order to compete with new entrants which are nibbling at the fringes with innovative business strategies.

As is the case in network industries, the postal sector is subject to market failures. It finds itself in a position whereby the postal incumbents for letter mail usually remain protected by exclusive rights while the same entities are increasingly competing on the international mail, parcel and logistics markets. This situation has the potential to have a detrimental effect on consumer welfare. In order to prevent the postal incumbents using their market power, remedial action is necessary to allay such fears. Another market failure requiring intervention relates to universal service. There are indeed areas in which postal services will not be provided by the market because they are not profitable. Hence, universal services need to be defined and mechanisms have to be developed to fund these obligations without, however, distorting competition. In this paper, we will focus on the first category of market failures, i.e. the bottlenecks that may prevent competition in the postal sector. There are two regulatory instruments to impose remedies in network industries, sector-specific regulation and competition law. In this paper, we explore how these two approaches have been used to facilitate the arrival of competition in the postal sector. Until recently, the Community institutions have been reluctant to use regulatory intervention and competition law to challenge the public monopoly models. Regulatory requirements have, however, been imposed through Directive 97/67 and, over the last few years, competition rules have been applied much more rigorously in the postal sector, with the result that there is an increasing corpus of case law.

Postal, antitrust, competition, regulation, EU

Abstract:
Intellectual property rights (hereafter, "IPR") are legitimate exclusive rights, which confer upon their owners two basic prerogatives: the right to prevent any third party from applying or using the subject-matter of the IPR and, correlatively, the right to set the conditions of a licence in consideration for use of the IPR and as a reward for the innovative contribution contained therein. These exclusive rights are recognized in all patent laws as well as in the TRIPS agreement. Relying on the EC Treaty rule on abuse of a dominant position (Article 82 EC), the European Court of Justice (hereafter, the "ECJ") indicated in Magill and IMS that in certain exceptional circumstances IPR holders may be forced to grant a licence to other firms. The European Commission (hereafter, the "Commission") relied on this line of case law to mandate Microsoft in its March 2004 Decision to license its interoperability information to its competitors on the downstream market for work-group servers. This decision of the Commission was recently confirmed by the Court of First Instance of the EC (hereafter, the "CFI"), hence signaling that the first prerogative attached to the holding of an IPR, i.e. the right to exclude, could be subject to limitations under EC competition rules. More recently, the European Commission has taken an interest in the level of royalties that are charged by IP holders. The Commission adopted in February 2008 a decision imposing a fine of 899 million euros on Microsoft for non-compliance with its obligation to licence its downstream competitors under its March 2004 Decision. This decision required Microsoft to licence its interoperability information on reasonable and non-discriminatory terms. This aspect of the decision effectively placed limits on the second prerogative attached to the possession of an IPR, i.e. the right to set the conditions attached to the granting of a licence. The bone of contention between the Commission and Microsoft related to the royalties Microsoft wanted to charge its competitors for the licence in question. The Commission rejected Microsoft's initial demand of a royalty rate of 3.87% of a licensee's product revenues for a patent licence and of 2.98% for a licence giving access to the secret interoperability information. Under the pressure of periodic penalty payments for non-compliance, Microsoft eventually agreed to provide a licence giving access to the interoperability information for a flat fee of 10,000 euros and an optional worldwide patent licence for a reduced royalty rate of 0.4% of licensees' product revenues.

Yet, Microsoft has not been the only high-technology firm targeted by Commission investigations. In August 2007, the European Commission sent a Statement of Objections to Rambus on the ground that it infringed Article 82 EC by claiming unreasonable royalties for the licensing of certain patents for "Dynamic Random Access Memory" chips (DRAMs) subsequent to a so-called "patent ambush". In October 2007, the European Commission also decided to open formal antitrust proceedings against Qualcomm following complaints lodged by Ericsson, Nokia, Texas Instruments, Broadcom, NEC and Panasonic, alleging that Qualcomm's licensing terms and conditions are not Fair, Reasonable and Non-Discriminatory ("FRAND") and, therefore, may breach EC competition rules. These last cases are particularly important as they are linked to the way in which firms seek to fund their research and development ("R&D") efforts and, in particular, to the funding of innovation through technology licensing. In the last two decades, the reliance upon "licensing" strategies as a source of revenue for IPR holders has seen a dramatic increase. Put simply, in return for an adequate remuneration (typically a royalty, but there may be other forms of consideration), innovators (licensors) grant to other firms (licensees) the right to use their proprietary technology to manufacture products for sale in downstream markets. IPR licensing strategies are not only pursued by organizations without manufacturing capabilities (e.g., university research centers). IPR holders active in downstream product markets (hereafter, "vertically-integrated firms") may be licensing their technologies to reap additional profits from their R&D expenditures, but also to obtain access to other firms' technologies through cross-licensing agreements.

Licensing agreements are widely seen as pro-competitive. They typically benefit both licensors and licensees. The licensee gains access to new technologies, which it can use to improve its manufacturing operations or embed in its products to increase their functionalities. The licensor accrues revenues from his initial R&D expenditures that can be invested in the development of new technologies, which will in turn lead to additional revenues, hence creating a virtuous circle of innovation. Licensing agreements are generally heavily negotiated between licensors and licensees, which in the vast majority of the cases reach mutually satisfactory agreements. Yet, tensions may arise between licensors and licensees over the terms of their IPR licensing deals. Such tensions are particularly likely to arise when licensing agreements have the potential to be worth hundreds of millions of Euros and small variations in terms and conditions can be financially significant for both parties. Against this background, the objective of this paper is not to offer a comprehensive discussion of the complex relationship between IPR and competition law or even of the application of competition rules to licensing arrangements. Instead, it seeks to address what seems to be a growing reliance on competition rules to control the level of royalties IPR owners are entitled to charge their licensees. In order to keep the discussion brief, this paper's focus will be relatively narrow. First, this paper focuses on the application of EC competition rules, and in particular Article 82 EC, to IPR licensing agreements. Cases decided or investigations launched under Section 2 of the Sherman Act or other US antitrust law provisions are not reviewed. Second, this paper focuses on competition law issues arising from the licensing of IPR that are essential to an industry standard.

This paper is divided into five parts. Following this introduction, Part II briefly explains the importance of standardization and the so-called FRAND regime, which applies to licensing agreements covering patents that are essential to a given industry standard. Then, Part III addresses the issues of market definition and the assessment of dominance in high-technology industries, which raise a number of complex issues that need to be considered carefully. Part IV analyses various licensing practices that may allegedly amount to abuses of a dominant position with a specific focus on price discrimination and what EC law refers to as "excessive" pricing. Finally, Part V contains a brief conclusion in which it is argued that technology markets are particularly complex and competition rules must thus be applied cautiously in such sectors as the risks of false positives are high and the impact of such risks on innovation can be large. Thus, in the absence of exclusionary practices - either at the upstream or downstream levels - competition law has little or no role to play when it comes to assessing the level of royalties agreed between licensors and licensees.

Intellectual Property Rights, IPR, European Commission, Standards, Standard Setting Organizations, SSO, TRIPS, CFI, Microsoft, Licensing, FRAND, Vertical Integration, Market Dominance

Abstract:
Article 230 EC allows any natural or legal person to “institute proceedings against a decision addressed to that person or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to the former”. Private parties thus frequently rely on this provision to challenge acts adopted by the European Commission (hereafter the “Commission”) in accordance with the powers granted to it in the field of competition law. While this particular subject has generated extensive scholarly analysis, the last decade of reforms of EC competition law – often cited as the “modernisation” process – makes it particularly necessary to re-examine this topic. Two major developments in the field of competition law give rise to novel and complex questions with regard to judicial review pursuant to Article 230 EC.

First, the reforms introduced by virtue of the modernisation of the implementation of EC competition rules have generated a proliferation of new acts whose legal character (and therefore by implication the possibility to challenge these new acts before the European Court of Justice – hereafter, the “ECJ” – and the Court of First Instance – hereafter, the “CFI”) is not necessarily clear. This is the case, for example, of the multitude of soft law instruments (notices, guidelines, etc.) which the Commission adopted with a view to clarifying its decisional practice, as well as new binding acts envisaged by Regulation 1/2003 such as findings of inapplicability and decisions to remove a case from a National Competition Authority.

Second, the increased emphasis on the use of economic analysis following the successive reforms of the rules pertaining to horizontal and vertical agreements and merger control has transformed competition law into a technically complex subject matter whereby economists are stealing a lead over lawyers. The corollary of this development could be to limit the scope of judicial review exercised by generalist EC and national courts. Indeed, faced with having to make complex evaluations involving the weighing up of anti-competitive restrictions and efficiency gains, the generalist judge could quickly find himself lost. Therefore, the more opaque and complex a particular case is, the wider the Commission’s discretion in its decision making becomes. Certain recent judgments of the CFI concerning the annulment of Commission prohibition decisions in merger control, however, put this danger into perspective.

Apart from the above-mentioned developments, it is equally worth highlighting the proliferation of litigation running in parallel to annulment actions. Such litigation calls for, first and foremost, a re-examination and revision of the fines imposed by the Commission under Articles 81 and 82 EC. Subsequent to successful annulment actions, such litigation also encompasses actions for compensation of the losses incurred by the firm(s) subjected to unlawful Commission decisions. The recent case Holcim v. Commission or the request lodged by Mytravel after the Airtours judgment illustrate the development of such litigation in the field of competition law.

Against this background, the developments that follow intend to provide a critical analysis of annulment actions against Commission decisions in the field of competition law in the aftermath of the modernisation process. This study is made up of seven parts. Part II identifies those acts that can be the subject of an annulment action within the meaning of Article 230 EC. Part III reviews and analyses the rules laying down who is entitled to initiate an annulment action. Part IV recalls the modalities for an annulment action. Part V evokes the parallel actions (revision of fines) and subsequent actions for indemnity following an annulment action. Part VI evaluates the effectiveness of the Community annulment action procedure in the light of the principles laid down by the CFI and ECJ as regards judicial review. Part VII provides a brief conclusion.

judicial review, remedies, antitrust, competition law, EC, standing, European Commission, litigation, enforcement, damages

Abstract:
Over the last twenty years, governments in many parts of the world have engaged in the liberalization of network industries (telecommunications, postal services, energy, and transport). This liberalization process, which was first observed in the United States in the late 1970s and in the United Kingdom in the early 1980s, became a central preoccupation of the European Commission at the end of the 1980s. Since then, the European Commission has initiated liberalization reforms in a range of sectors with some success. Some sectors, such as telecommunications and air transport, are now fully liberalized and are becoming increasingly competitive. Others sectors, such as energy (gas and electricity), postal services, and rail transport, are not yet fully liberalized, but the market opening dynamic is now well under way. The liberalization process has not been without difficulties, however, and many challenges still lie ahead. Against this background, the objective of this paper, prepared in support of my inaugural lecture as Professor of Competition Law and Economics at the Faculty of Law of Tilburg University and a senior member of TILEC, is to give a brief overview of the liberalization process and the results it has achieved, as well as to address some of the main challenges that still lie ahead.

This paper is organized as follows. Part I explains why for almost a century firms involved in network industries generally took the form of State monopolies, as well as why this model of organization became subject to question in the late 1970s and was thus progressively replaced by a model based on market opening and competition. Part II explains that to be successfully completed the liberalization process should rely on three pillars: the removal of exclusive rights, the adoption of a regulatory framework and the setting-up of independent regulatory authorities. Part III analyses the current state of liberalization in the different network industries. Part IV explores three significant changes in the organization of network industries and on market structures: the vertical unbundling between infrastructure and services, the breaking down of the barriers between network industries, and the progressive withdrawal of the State in such industries. Part V reviews the various bottlenecks, which still prevent competition to take place on some markets. Part VI discusses the issue of whether one should be able to do away with sector-specific regulation at one stage. Finally, Part VII contains a short conclusion and some proposals for moving ahead.

network industries, liberalization, competition, antitrust, telecommunications, energy, postal, rail, agencies, regulation, bottlenecks, price control, deregulation, public undertakings

Abstract:
In today's technology-driven world, industry standardization, component interoperability, and product-compatibility have become critical to promoting innovation and competition. Standards are typically created by voluntary organizations (generally referred to as standard-setting organizations (SSOs)) composed of participants from a given market or industry (electronic components, communications, etc.). They meet to discuss, analyze, refine, and ultimately adopt mutually acceptable standards, which ensure competing and complementary products and components are compatible and can interoperate with one another. SSOs have thus gained importance over the years in technology-driven sectors.

standards, standardization, FRAND, licensing, royalties, cross-licensing, patents, caps, proportionality, hold-up

Abstract:
Some scholars have questioned the process by which cooperative standards are typically set, worrying about the potential for anticompetitive market power to come hand in hand with pro-competitive interoperability. To combat the perceived problems of ex post opportunism, the suggested solutions have focused on promoting procedures to facilitate ex ante competition. Since standards are generally desirable and competition often exists beforehand, many have argued that we need only formalize the ex ante competitive status quo to avoid any ex post market power trouble. Options proposed in the literature include ex ante auctions to be held during the standard definition phase or binding ex ante licensing commitments made before any vote on technologies occurs. We evaluate the various policy changes suggested with a particular eye to their unintended consequences and costs. Certainly the ex ante proposals would hold some appeal, if ex ante competition generally did not exist in their absence, but we find that they are problematic in important ways. We argue that not only are they not needed, they would tend to create more harm than good if implemented.

antitrust, intellectual property, standard-setting, standard-setting organizations, SSO, FRAND, competition law

Abstract:
Debate over the standard setting process has been heated of late, with many calls for policy reform to correct perceived anticompetitive dangers. In this article, we discuss the standard-setting processes and the FRAND licensing regime traditionally prevalent in standard setting bodies. Under this regime, owners of IPR that are essential to a standard typically commit to license such patents on "fair, reasonable and non-discriminatory terms and conditions" (so called FRAND). A number of theories posit problems with FRAND, in particular that it is subject to ex post problems, after a standard is set. Proponents of these theories therefore argue for ex ante solutions to be implemented. We evaluate the logic behind the claims of ex post market power, including patent hold up, opportunistic behaviour, and royalty stacking. We then assesses the limits of the suggested policy reforms meant to address ex post market power problems. We find that, while several of the proposals contain some attractive elements, most would be difficult, if not impossible, to implement in practice and, more seriously, would entail a number of unattractive unintended consequences.

Abstract:
The European Union (hereafter, the "EU") has recently undergone its fifth and most expansive enlargement. As a result of the Accession Treaty of 16 April 2003, ten countries joined the EU on 1 May 2004: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, the Slovak Republic, and Slovenia. This group comprises a mixed bag of countries including Central and Eastern European countries (the "CEECs"), Baltic countries, and Mediterranean countries. While the CEECs and the Baltic countries share a common past characterised by the rise of Communism after the Second World War, Cyprus and Malta were never part of the Soviet empire. Moreover, these last two countries have long been associated with the Union, whereas the relationship of the former communist countries with the EU is more recent.

Against this background, this paper analyses the development of competition law regimes in the new Member States. This development has taken place as a direct consequence of the Association/Europe agreements, which were signed between these countries and the EU (and which contain competition rules equivalent to those found in the EC Treaty), and the accession process (which required that these countries implement EC competition rules in their domestic law). These agreements and the accession process have been very effective tools to stimulate the development of competition law regimes in the new Member States, but at the time of entry of these countries in the EU several important challenges remain. First, enforcement remains a problem in most new Member States. As will be seen below, this is due to a variety of structural weaknesses (lack of resources, poor understanding of competition law by companies, etc.), which will not necessarily be easy to resolve. Second, accession arrives at a time of major reforms of EC competition law (modernisation, increased reliance on economic analysis, etc.), which will put further pressure on the scarce resources of the competition authorities of the new Member States. It will also force them to invest significant intellectual capital in the understanding of such reforms, as well as their implementation in their enforcement processes.

EC, competition, antitrust, new Member States, institutional building, European enlargement

Abstract:
This paper reviews the main aspects of the 1997 EC postal directive in the light of the case law of the European Court of Justice and the decisional practice of the European Commission. Reference is also be made to the Commission notice on the application of the competition rules to the postal sector. The paper first outlines the main objectives of the directives, i.e. the strengthening of the public postal service via a Community definition of universal service and the progressive liberalisation of postal services through a limitation of the scope of reserved services. It then examines the regulatory requirements imposed on postal operators in order to achieve the objectives referred to above and reviews the proposals recently put forward by the Commission to amend the postal directive.

Postal services, liberalization, competition, antitrust, regulation, European Union

Abstract:
Firm structure and the degree of vertical integration lie at the core of a key intellectual property concern currently under debate: "patent trolls." While court opinions and competition agency decisions have focused on "non-practicing" patent holders as the source of anticompetitive exclusion and hold up problems, this view of upstream specialists is far too narrow. In fact, patents in the hands of non-practicing entities can increase competition, lower downstream prices, and enhance consumer choice. We explain why and argue for more business-model-neutral policy when it comes to patent licensing. Clearly, patents are a complex subject that cannot be portrayed as either all good or all bad; tradeoffs will always be involved. Without a better understanding of the many complicated effects of patents in high technology markets, we run the very real risk of misguided policy decisions.

Abstract:
The paper seeks to provide a discussion of the competition law issues raised by access to premium content (essentially blockbusters and football rights) by content delivery operators with a special emphasis on new media platforms. A significant amount of literature has been published on the application of competition rules to premium content rights agreements, but the specific obstacles encountered by new media platforms have been relatively unexplored. This paper seeks to fill this gap in the literature.

The European Commission (hereafter, the Commission) has recognised in its decisions that premium content is an "essential input" for operators active in the delivery of audio-visual content. There is indeed no substitution possible with other less attractive forms of content. In fact, premium content such as major football events represents "stand-alone" driver content for pay-TV operators. Absent access to such content it is very difficult for a content delivery operator to gain or retain market shares. Access to premium content is thus a matter of life or death for such operators.

Yet, getting access to premium content is not an easy matter. First, premium content is scarce as there are only a few blockbusters and a limited number of premium sport events every year. Moreover, premium content rights contracts usually involve some form of exclusivity pursuant to which dominant pay-TV operators often manage to monopolize such rights for several years at the expense of weaker competitors. The combination of scarcity and exclusivity has translated into a spiralling of the costs involved in buying premium content. For instance, while in 1992, broadcasters paid 434 million euros for the TV rights of the English Premier League, in 2000, they paid 2,6 billion euros for only three seasons.

The lack of access to premium content represents a significant handicap for new entrants, such as new media platforms. If these platforms want to gain market share, they need to show programmes, which are able to compete with the content shown by dominant pay-TV operators. Access foreclosure to premium content would thus not only prevent new entries from taking place in the highly concentrated pay-TV market, but would also affect technological developments and consumer choice as the latter would be prevented from watching their favourite programmes on the platform of their choice. Thus, in a number of policy speeches, Commission officials have insisted on the importance that new media platforms gain access to premium content.

The main argument followed throughout the paper is that, while recent Commission decisions contain remedies, which will help new media platforms to gain access to premium content, such remedies are insufficient to create a level playing field in the market for the acquisition of such content. Numerous anti-competitive practices continue to plague this market and further competition law intervention is thus required.

Media, Internet, ads, content, TV channels, antitrust, competition, abuse of dominance, collusion

Abstract:
In this paper we analyse institutional issues of common interest to the National Regulatory Authorities (NRAs) and the European Agencies (EAs) created under the impulsion of EC law. Both sets of bodies are examined through the lenses of three institutional regulatory parameters, i.e. (i) the jurisdictional level at which agencies should be placed (EU vs. national), (ii) the degree of homogeneity/heterogeneity that is desirable among agencies, and (iii) the state of compliance with principles of good governance. On the basis of this analysis, we argue that there is some scope for significant reforms. While the creation of NRAs and EAs can be seen as a positive development of EC law, the methods of functioning of these agencies and the way they are organised could largely be improved, in particular with regards to principles of good governance.

Agencies, regulation, European Union, governance, accountability

Abstract:
This paper seeks to shed some light both on how economy-wide and infrastructure or sector-specific components of the regulatory framework should be designed and on what the respective roles of such components should be to maximize the efficiency of economic regulation in telecommunications. It attempts to derive some lessons from the experience of four countries - the United States, New Zealand, Chile, and Australia - which have chosen to put different emphasis and given different roles to those different elements of the regulatory framework. Each of the four country model is evaluated on its ability to achieve key objectives of telecommunications regulation, which are presented in the following section. Then, the paper compares the experiences of the four countries in order to draw lessons on how economy-wide and infrastructure or sector-specific rules and institutions should de designed to ensure the maximum efficiency of the regulatory framework applicable to telecommunications.

Telecommunications, regulation, antitrust, competition, Australia, United Kingdom, New Zealand

Abstract:
Over the last few years, the European Commission and the competition authorities of a number of (Member) States have been busy investigating transactions leading to the buying/selling of premium content rights. These cases have been triggered by several factors.

First, premium content (essentially Hollywood movies and football games) has become of critical importance for all media operators. There is a consensus to say that the showing of premium content is what drives audience and thus the fees generated by subscriptions or advertising. The development of the pay-TV industry over the last two decades has been linked to the ability of pay-TV channels to show what would not be available elsewhere, such as, for instance, recent blockbusters or live football games. Many also believe that the development of new services, such as the showing of media content over 3G could be linked to the acquisition by 3G operators of premium content rights. Absence of access to premium content could thus lead existing pay-TV operators to exit the market, as well as prevent new operators from entering the market.

Second, competition authorities have identified a series of practices linked with the buying and selling of premium content, which could generate serious restrictions of competition. The collective selling of football rights, for instance, may impede competition between sellers of such rights. Similarly, the exclusivity that is generally linked with the buying/selling of premium content rights may also produce serious foreclosure effects on the market for the delivery of content, in particular where the exclusivity concerns a large quantity of rights for a long-period of time. Competition authorities have also expressed concern that mergers between media operators could create foreclosure effects by allowing the merged firm to monopolize all valuable rights.

Against this background, the objective of this paper is to provide a brief overview of the various competition law problems that could be raised by the offering of premium content or, more generally, of media content by vertically-integrated incumbent telecommunications operators. As will be seen below, as new entrants, incumbent telecommunications incumbents may find it hard to have access to premium content rights, especially when such rights have been monopolized by one or several pay-TV operators. On the other hand, once they have acquired such rights their vertical integration, as well as the fact they engage in a variety of activities on some of which they are dominant may be the source of specific problems. This is why this paper focuses on incumbent operators, rather than any telecommunications operator.

Until recently, telecommunications incumbents had shown only a limited interest in distributing media content over their wires. Technical limitations made the distribution of movies or football games difficult. Moreover, until the mid-nineties, most vertically-integrated operators enjoyed comfortable monopoly profits, which did not make the search for new sources of revenues so compelling. The delivery of premium content was thus essentially left to pay-TV operators distributing their products through cable or satellites, or free-to-air TV which could finance the acquisition of a limited amount of such content through advertising revenues. The technical limitations impeding the showing of media content over telecommunications networks have, however, largely disappeared through digitization (which allows all types of platforms to deliver content), but also the development of ADSL, which allows telecommunications operators to deliver movies and other forms of content requiring a large band. At the same time, the growing competition faced by incumbent operators following the liberalization of telecommunications networks and services makes the search for new sources of revenues a high priority. The changes in technological and market circumstances have thus triggered a great deal of interest among telecommunications operators for the acquisition and subsequent distribution of media content.

This paper comprises VII parts. Part II discusses the question of market definition in the media industry. Part III analyses the various obstacles telecommunications operators may face when they decide to enter the media content delivery market. Part IV reviews the strategies that can be developed by telecommunications incumbents wishing entering the content delivery market to acquire media content. Part V reviews the various competition law problems that may be raised by the fact incumbent telecommunications operators are generally vertically-integrated and offer a variety of services on some of which they hold a dominant position. Part VI examines the various remedies which can be used to stimulate competition in premium media content delivery markets. Finally, Part VII contains a brief conclusion.

competition, antitrust, telecommunications, media, premium content, merger, foreclosure, exclusivity, long-term contracts, sports rights, movie rights

Abstract:
The Supreme Court's 2006 eBay ruling marked a turning point in injunctive relief policy. Unfortunately, there seems to be considerable confusion about the implications of the decision. Some authors, concerned over patent holdup and excessive royalty rates, interpret the eBay decision as giving a green light to district courts to deny injunctive relief to non-manufacturing patent owners. Using an error cost framework, we examine the theory and evidence behind patent holdup concerns as they relate to injunctive relief policy. We find that the holdup theory justifying categorical limitations on injunctive relief rests upon overly narrow assumptions. As a result, categorical limitations are likely to result in substantial false positives, where patent holders with no designs of patent holdup are nonetheless denied injunctive relief. Instead of advocating categories of denial, we argue that the majority opinion in eBay can and should be read as a return to a balancing test, where costs and benefits are weighed carefully before granting or denying a patent injunction.

injunctive relief, patent holdup, patent injunction, IP policy, standard setting, patent compensation, eBay, royalty rates

Abstract:
Over the past few years, there has been an unprecedented degree of interest among competition authorities, scholars, Standard-Setting Organizations (hereafter, SSOs) and trade associations with respect to the level of royalties that are charged by holders of intellectual property rights (IPRs). For instance, in the past two years, the US Department of Justice (DoJ) granted business letter clearance to two SSOs - VITA and IEEE - to implement new IPR policies designed to control the IPR costs. In April 2007, the DoJ and the Federal Trade Commission (FTC) jointly released a report on Antitrust Enforcement and Intellectual Property Rights. But the interest is not limited to the United States. The European Commission is currently investigating the compatibility of certain licensing regimes and conduct within SSOs against EC competition law. Reflecting the debate at the policy level, scholars have produced a large body of legal and economic literature on IPR and standardization issues, including patent hold-up (where the patent holder exploits ill-gotten market power in excessive licensing fees) and royalty stacking (where multiple patents must be licensed and thus the royalty rates stack up to excessive amounts).

Against this background, this paper addresses the issue of whether something has gone wrong with royalties in high technology industries. This paper seeks to answer this question first by looking at a number of concrete scenarios where firms holding IPRs seek to obtain a return on their patent portfolios by licensing them. As will be seen, the behaviour of these firms essentially depends on whether they are vertically-integrated or non vertically-integrated. Vertically-integrated firms engage in research and development activities, patenting at least some of their inventions, and also manufacturing products based on their own innovations and the innovations produced by others. Non vertically-integrated firms, in contrast specialize in one or the other layers of production. Pure upstream firms conduct research and development activities and patent their innovations, but they do not engage in manufacturing. Downstream firms specialize in manufacturing, but do not engage in R&D.

intellectual property, IP, antitrust, competition, royalties, royalty stacking, hold-up, patent, licensing, vertical integration, innovation

Abstract:
Among the countries that have fully liberalized their telecommunications sector, some have chosen to rely mainly on sector-specific rules often (but not always) applied by sector-specific institutions, while others have focused mainly on economy-wide antitrust rules and institutions to control market power in that sector. This note describes the choices made in that respect by Australia, Chile, New Zealand, the UK and the US. It then attempts to draw lessons from the experiences of those countries on whether antitrust or sector-specific processes appear to deal with key regulatory issues most quickly and effectively. A second note will discuss the same question in more details focusing specifically on the regulation of interconnection. Finally, a third note will discuss whether choosing the "right" balance between antitrust and sector-specific regulation appears to translate into a higher degree of competitiveness in the various segments of the telecommunications market.

telecommunications, antitrust, competition law, regulation, interconnection, Australia, United Kingdon, United States, New Zealand, Chile, dominance

Abstract:
Regulatory reformers in the United States call for decentralization in the name of 'federalism'. In Europe, a similar sentiment advances under the banner of 'subsidiarity'. One of the underlying and critical theoretical premises of these two movements is the suggestion that 'regulatory competition' among horizontally arrayed governments will generate pressures for improved governmental efficiency in the regulatory realm. Critics have suggested that rather than welfare-enhancing competitive pressures, divergent regulatory standards may instead trigger a welfare-reducing 'race toward the bottom'. In this article we argue that both race-toward-the-bottom and regulatory competition theories are overstated from a descriptive point of view and unsatisfactory from a normative perspective. Regulatory theory must reflect the diversity and complexity of the world. Optimal governance thus requires a flexible mix of competition and cooperation between government actors as well as between governmental and non-governmental actors, along both horizontal and vertical dimensions. This enriched model of 'regulatory co-opetition' recognizes that sometimes regulatory competition will prove to be advantageous but in other cases some form of collaboration will produce superior results. In a world that is pluralistic, not simplistic, a combination of regulatory competition and cooperation will almost always be optimal.

Abstract:
This note analyses the competitiveness of different segments of the telecommunications markets in the five countries (United States, United Kingdom, Australia, New Zealand, and Chile) shows that those countries that have relied on a proper balance between antitrust and sector-specific regulation have, on the whole, more competitive telecom markets. The market for fixed local services is, however, a separate case. There, the balance between antitrust and sector-specific regulation matters much less than the fact that prices have in many instances been set below costs with the result that the potential for competition in the provision of fixed local services does not exist.

antitrust, competition law, telecommunications, prices, competitiveness, United States, United Kingdom, Australia, New Zealand, Chile

Abstract:
The EC competition law regime, with the European Commission ("the Commission") at the apex of its enforcement structure, has steadily evolved to become one of the most mature regimes in the world. Its core provisions, namely Articles 81 and 82 EC, do not, however, explicitly indicate whether they find extraterritorial application or not. Based on the principles of nationality and territoriality, the extraterritorial application of Articles 81 and 82 EC is therefore ensured through the use of three legal constructs, namely the "economic entity" doctrine, the "implementation" doctrine and the "effects doctrine". The former two doctrines are established doctrines of EC law, as recognized by the European Court of Justice ("ECJ"). In the absence of formal recognition by the ECJ, however, it remains unresolved whether the "effects doctrine" enjoys the same status. In the vast majority of cases, however, the fact that the "effects doctrine" has not been formally recognized by the ECJ will have no bearing on the ability to assert subject-matter jurisdiction over non-EU undertakings located outside the EU. The economic entity and implementation doctrines should be more than adequate in this respect.

The assertion of extraterritorial jurisdiction can lead to what some nations regard as an impingement on their sovereignty a corollary of which is the promulgation and/or activation of blocking statutes on their part. Moreover, review by different antitrust authorities of anti-competitive conduct can lead to undesirable outcomes, such as divergent results. In order to temper the effects of the unilateral assertion of extra-territorial jurisdiction, comity principles have come to the fore. Primary Community legislation is silent on the principle of comity, however. Comity does form an integral part of the EU's bilateral antitrust cooperation agreements with the US, Canada and Japan. Unfortunately, comity provisions in those agreements remain weak. Beyond those arrangements comity is only deemed to come into play in those circumstances in which the conduct in question is compelled in the relevant third country. Indeed, one can go so far as to say that where there is a real conflict between competition authorities each will very likely seek to claim an overriding interest in enforcement and disregard comity.

Against the backdrop of comity's lack of mandatory effect, and in order to achieve more effective antitrust enforcement on a European and global level, the Commission has placed itself at the heart of a network of cooperative arrangements. It cooperates closely with Member State national competition authorities ("NCAs") through the European Competition Network ("ECN") and is party to a series of cooperative arrangements with third countries. In addition, the Commission is closely involved in multi-national antitrust fora which provide for a platform for discussion of practical competition policy enforcement and policy issues, for disseminating best practice and encouraging procedural and substantive convergence. Avoidance of conflict is another reason for entering into cooperative arrangements. Conflict does, however, continue to subsist not for want of cooperative effort but invariably on account of stark differences in the manner allegedly anti-competitive conduct is appraised. In this respect witness the Commission's decisions in Microsoft and GE/Honeywell with regard to refusal to license and tying, and conglomerate effects respectively. In the greater scheme of things, however, such conflicts are rare occurrences and cooperation between the EU and US, for example, has been a great success.

In view of the above, the purpose of this paper is to provide the reader with a brief overview of the EC competition law regime (Part II) and to demonstrate how its provisions are used to assert subject-matter jurisdiction over non-EU undertakings located outside the EU which engage in alleged violations of EC competition law (Part III). The subject of comity will then be looked at with the discussion essentially focusing on the comity provisions found in the EU/US cooperation agreements (Part IV). The EU's internal and external cooperative arrangements will then be looked at (Part V). Finally, a short conclusion will be provided (Part VI).

Extraterritoriality, Competition, Antitrust, Committee, Jurisdiction, European Union, Globalization, Cartels, Mergers

Abstract:
Royalty stacking, the most recent incarnation of the complements problem identified in the early 1800s by French engineer Augustine Cournot, has received considerable attention. The potential for royalty stacking within standard setting efforts arises from the fact that downstream manufacturing companies can face multiple upstream gatekeepers, each of whom must grant a license to their "essential" patents before the downstream firms can legally commercialize the standard. Some authors have claimed that in high-tech industries - which are frequently characterized by cumulative innovation, dispersed ownership of patents, and cooperative standard setting efforts - the cost of obtaining all necessary licenses is too high, such that innovation has been thwarted and consumers have been harmed. In this paper, we assess the case for royalty stacking within standards and find the evidentiary support weak at best. We note that the relevant question is not whether royalty stacking is possible, as the theoretical arguments behind it have withstood the test of time, but whether it is common enough and costly enough in actuality to warrant policy changes. The available evidence suggests not, implying that any policy changes aimed at solving royalty stacking are likely to cause more (unintended) harm than they cure.

Royalty Stacking, Patent Thicket, Patent Holdup, Anticommons, Innovation, Patent Licensing

Abstract:
This paper seeks to study the institutional aspects of the regulatory reforms undertaken in the telecommunications sector in the European Union. It discusses the core functions of the telecommunications regulatory authorities established by the Member States, as prescribed by EU law, as well as to provide an overview of the main institutional features of such bodies. It also attempts to speculate on how the status and role of NRAs will evolve as telecommunications markets become more competitive and regulatory intervention declines. In this regard, particular attention will be drawn to the 1999 Communications Review, a major policy document that was made public by the Commission in November 1999.

Telecommunications, competition antitrust, regulation, agencies, European Union

Abstract:
Over the last ten years, the European Commission has been trying to increase competition in the postal sector. In order to achieve this goal, as well as other objectives such as the enhancement of the quality of postal services in the EU and the maintenance of universal service, the Commission adopted a first postal directive in 1997. Directive 97/67 sought to progressively reduce the scope of the postal incumbents' reserved area, but also imposed a range of regulatory obligations on postal operators. This directive was amended by Directive 2002/39, which further reduced the scope of the reserved area and clarified a certain number of regulatory provisions. The Commission is expected to issue its proposal for a third postal directive by the end of this year, initiating the process of full accomplishment of the internal market for postal services by the original target date of 2009 as indicated in the 2002 directive.

While Directives 97/67 and 2002/39 have certainly contributed to open the postal sector to competition, the level of competition achieved in this sector is quite uneven. Some segments of the postal market are now subject to intense competition. Yet, others are still largely controlled by postal incumbents. The level of competition within one market segment can also considerably vary among Member States. While some Member States have completely liberalized their postal sector by going further than the requirements contained in the postal directives, others decided not go further than these requirements.

Experience teaches that creating competition in freshly liberalized industries is not easy. Incumbents will generally retain considerable market power for a number of years after liberalization. Telecommunications incumbents, for instance, still largely hold strong market positions although the sector has been fully liberalized for almost ten years. In addition, the Commission has recently acknowledged that liberalization efforts in the gas and electricity markets had failed to reach their targets. Similar findings can be made in the postal and transport sectors.

Several factors contribute to the difficulty of creating competition in these industries. Incumbents generally hold a number of significant advantages compared to new entrants, such as considerable expertise, an established brand name, the ability to achieve economies of scale (due to size) or scope (due to vertical/horizontal integration), as well as special connections with public authorities, which often remain shareholders of these firms. Another potential barrier to entry in these industries (which are often referred to as "network industries") comes from the fact that incumbents will typically hold elements of network infrastructure, which are needed by new entrants to compete on the market.

Controlling incumbents' market power is thus a central concern in liberalized industries, such as the postal sector. Such control can be achieved through two complementary tools. First, sector-specific regulation can be used to address market failures, such as, for instance, the presence of bottlenecks. Competition rules can also be used to control market power, notably by preventing incumbents to abuse of their dominant position on some markets. Such rules may also deal with a range of other anti-competitive practices, such as restrictive agreements between competitors or the granting of illegal State aids. While competition rules play a fundamental role with respect to the creation, strengthening or maintenance of competitive market structures in the postal sector, the primary focus of this paper will be on ex ante regulation. There is indeed considerable debate regarding the regulatory framework, which should be provided for in the forthcoming postal directive.

While some operators are calling for the strengthening of the existing regulatory framework applicable to the postal industry, others have been arguing in favor of a light-handed approach to regulation. Pursuant to this view, the forthcoming postal directive should only provide for minimal regulatory requirements, market power being essentially controlled through the enforcement of competition rules. Few would disagree with the overall goal of reducing regulation to its strict minimum, but it is subject to question whether the postal sector is competitive enough to roll back sector-specific regulation. This paper defends the view that sector-specific regulation has still a major role to play in the postal sector and that deregulation is premature.

This paper is divided in five parts. Following this introduction, Part II explains that sector-specific regulation and competition law are complementary tools and that both have a critical role to play to allow for the creation of a competitive postal market. Part III offers some principles for the new postal directive. It critically reviews the claim made by some that postal regulation should follow a light-handed approach and, in particular, that no ex ante access to the postal network regime is needed. Part IV argues that even in the presence of ex ante regulation, competition rules should continue to play a significant role. Ex ante regulation and competition law are complements, not substitutes. Finally, Part V contains a short conclusion.

postal, post, competition, regulation, monopoly, access, network, universal service, liberalization, sector-specific regulation

Abstract:
RAND commitments — i.e., promises to license on reasonable and non-discriminatory terms — play a key role in standard setting processes. However, the usefulness of those commitments has recently been questioned. The problem allegedly lies in the absence of a generally agreed test to determine whether a particular license satisfies a RAND commitment. Swanson and Baumol have suggested that the concept of a 'reasonable' royalty for purposes of RAND licensing must be defined and implemented by reference to ex ante competition. In their opinion, a royalty should be deemed reasonable when it approximates the outcome of an ex ante auction process where IP owners submit RAND commitments coupled with licensing terms and selection to the standard is based on both technological merit and licensing terms. In this paper we investigate whether the ex ante auction approach proposed by Swanson and Baumol is likely to deliver efficient outcomes, both from static and dynamic standpoints. We find that given the peculiar characteristics of some of the industries where standardization takes place, in particular the many different business models adopted by innovating companies in those industries, the ex ante auction approach proposed by Swanson and Baumol may not always deliver the right outcomes from a social welfare viewpoint.

RAND, Licensing, Ex Ante Auctions, Reasonable Royalties

Abstract:
In its submission to the recent OECD Roundtable on Bundled and Loyalty Discounts and Rebates (the "OECD Roundtable on rebates"), Korea observed that "loyalty discounts are getting growing attention both academically and practically" and that "this issue was now on top of the agendas of many seminars and workshops on competition law, with many papers devoted to the theme." It then explained that this trend was attributable to the fact that loyalty discounts has become an important marketing tool, which raised several competition issues in the process.

While discounts or rebates - this paper will generally refer to rebates - have been used by businesses for centuries to sell greater amounts of products to customers, it is true that the compatibility of rebates with competition law has become a particularly acute issue in recent years. There are several reasons for this. These last few years have witnessed several major court judgments in the European Union (the "EU") and the United States (the "US"), which have been abundantly commented upon, hence explaining the large number of papers and seminars devoted to the subject. But, more generally, the assessment of rebates seems to be one of the most unsettled areas of competition law.

In the EU, for instance, the decisional practice of the European Commission and the case-law of the Community courts have been harshly criticized as being unnecessarily strict, following a form-based approach that is poorly in line with economics. While these decisions have been sometimes misinterpreted, it is true that they were generally unhelpful in large part due to the fact they focused on the wrong questions. As a response to such criticisms (and more general criticisms about the manner in which Article 82 EC was implemented), the European Commission published in December 2005 a Discussion Paper, which promotes an effects-based approach to the assessment of rebates. While US courts have generally applied an effects-based approach to the assessment of rebates, the case-law is still unsettled, notably in the area of bundled rebates. This certainly led Korea to conclude its OECD submission by stating that "even in jurisdictions such as the US or the EU which have accumulated a considerable amount of enforcement experience regarding loyalty discounting often do not have a clear analysis method regarding this practice."

While this observation is in many ways true, there are, however, encouraging signs that EU and US law are converging, and will increasingly do so, around a set of sound legal and economic principles to assess guidelines. Both the EU and the US contributions to the recent OECD Roundtable on rebates emphasize the importance of relying on objective economic criteria for the assessment of rebates. While the views of the European Commission and the US antitrust agencies still diverge on some issues, there seems to be a consensus that a price-cost test should play an important role in screening rebates that can (i.e., are able to) foreclose a dominant firms' rivals to supply one or several customers. There is also a consensus that such tests should only be a component of a broader test that should also determine whether the rebates in question substantially foreclose the relevant market and, in such cases, whether the foreclosure effect can be compensated by efficiencies. While price-cost tests help determining whether the rebates granted can have the effect of foreclosing competitors because the dominant firm's customers cannot turn to alternative suppliers without incurring substantial switching costs, it should also be demonstrated that these customers represent a substantial share of the market to which equally efficient rivals can turn, depriving them of the possibility to profitably enter and/or expand. Moreover, both EU and US law recognize the importance of taking into account in the assessment process the various efficiencies that can be generated by loyalty rebates and the extent to which they can counterbalance foreclosure effects.

Against this background, this paper aims at providing a framework - based on sound legal and economic principles - designed to help competition authorities and courts to separate pro-competitive loyalty rebates from anti-competitive ones. It starts with the widely acknowledged view that in the vast majority of cases dominant firms grant rebates to their customers for legitimate reasons, i.e. not to exclude competitors but to engage in legitimate forms of price competition and to realize a variety of efficiencies, as discussed below. In fact, rebates are not only used by dominant firms, but also by firms without any market power and thus unable to exclude competitors. This paper also takes as a starting point the view - which is recognized in the vast majority of antitrust regimes - that the goal of competition law is not the protection of competitors, but the protection of competition. Hence, rebates that cause less efficient firms to lose market share should not be banned as they lack anti-competitive effects. As will be seen below, these rebates enhance consumer welfare as they ensure that customers are served by the most efficient firms and benefit from their more competitive offers.

Loyalty rebates, competition, antitrust, effects-based test

Abstract:
In December 2002, President Bush established the Presidential Commission on the United States Postal Service for the purpose of proposing how government provision of mail delivery services might be reformed or transformed. The Commission reported in July 2003 that the Postal Service should not be privatized but rather should remain a public entity that would increasingly be run like a commercial enterprise. In 2004, however, the Supreme Court moved the Postal Service farther away from being a true commercial enterprise when it held in the Flamingo Industries case that the agency is immune from antitrust law. In this article, we argue that the Postal Service already operates like a commercialized governmental enterprise and that pursuing that path even further would increase rather than decrease the problems faced by the U.S. postal sector. Although we support privatization, that option may not be politically feasible. Consequently, we examine how postal reform might proceed incrementally in the form of an improved government agency. That approach would entail two broad principles for postal reform. The first is to define the Postal Service's mission in terms of remedying conditions of market failure. That goal encompasses universal service, quality of service, and reasonableness of rates. The second broad principle is to avoid competitive distortions through the pricing and product offerings of the Postal Service. This principle entails avoiding government production in markets that are or can be served satisfactorily by private firms, as well as avoiding discrimination among mailers and among competitors in secondary markets. We then present specific recommendations that would advance these two broad goals if the Postal Service remains an agency of the federal government. Those recommendations encompass costing, universal service, rate design and mail classification, the postal monopoly, and market entry and exit — as well as legislative reversal of Flamingo Industries.

Abstract:
In a companion note (Antitrust vs. Sector-specific Regulation in Telecom: What Works Best?), we argued that while the full liberalization of telecommunications markets provides scope for relying to a large extent on general antitrust rules and institutions as instruments of economic regulation, some sector-specific rules and specialized implementing institutions are still likely to be needed - at least for some time after liberalization - in a number of areas, including interconnection. In the present note, we look in more details at the regulation of interconnection drawing from the experience of New Zealand which fully liberalized its telecommunications markets in the late 1980's and relied primarily on antitrust instruments to regulate interconnection until 2001 when it introduced a new regime with heavier emphasis on sector-specific regulation.

telecommunications, antitrust, interconnection, regulation, competition law, access pricing, New Zealand, LRIC, ECPR, Internet, broadband

Abstract:
The creation of a growing number of agencies at the EU level is one of the most significant developments in the administrative structure of the EU. These agencies play a useful role as they allow the Commission to decentralize a number of scientific, technical, or observatory functions to specialized bodies. Yet, the effectiveness of these agencies is hampered by several problems. First, because of the non-delegation doctrine adopted by the European Court of Justice in Meroni, it is not possible for the EU legislative authorities to delegate true regulatory powers to these agencies. European Agencies are thus often limited to executive functions. Second, the setting up of these agencies has followed a piecemeal approach. The creation by the EU of a series of uncoordinated, ad-hoc agencies contributes to the view that EU institutions are complex and impenetrable. Moreover, the lack of procedural requirements applicable across agencies creates a lack of clarity as to the procedural guarantees enjoyed by citizens affected by the actions of European Agencies. Third, European Agencies often fail to comply with principles of good governance, such as the principles of independence, accountability, transparency, and participation. This paper argues that the EU could learn a great deal by looking at the US experience with regulatory agencies, which is over a century old. In particular, it argues that the European Court of Justice should take a more relaxed view of delegation. Delegation of regulatory powers to agencies is desirable in a modern administrative state, and the EU should be no exception. It also claims that the EU would greatly benefit from expanding the rights of individuals affected by agency decisions to have such decisions reviewed in court. Finally, this paper argues that the EU would benefit from the adoption of a European version of the APA.

independence, transparency, participation, accountability, good governance, administration, judicial review, revolving door, public policy, EU, US government, judiciary, cost-benefit analysis

Abstract:
In a recently published article ("Article 82: Excessive pricing - An outline of the legal principles relating to excessive pricing and their future application in the field of IP rights and industry standards", Competition Law Insight, 4 July 2006, p. 3), Marcus Glader and Sune Chabert Larsen ("the authors") briefly reviewed the current legal standards for excessive pricing under article 82 EC. The authors then proposed a perfunctory framework under which those principles should be applied in the complex field of IP rights incorporated into industry standards. We disagree with the positions put forward by the authors, not least because they rest on several faulty premises regarding the economics of technology licensing, as well as on misunderstandings concerning the notion of licensing under Fair, Reasonable and Non-Discriminatory ("FRAND") terms in the standards development context, and its connection - if any - with Article 82 EC.

We show that, contrary to the authors' view, FRAND commitments cannot constitute the basis for an excessive pricing test and are not an adequate, relevant or useful instrument for the application of Article 82 EC. We also show that patent counting is an inappropriate benchmark for measuring royalty levels which finds no support in EC competition law (or US antitrust law for that matter). Should it ever be adopted, it would be a serious disincentive to innovation.

Article 82, patent counting, standards, IP, patents, competition law, numerical proportionality

Abstract:
In this paper, we critically examine the theory of regulatory competition. The departure point of this theory is that governments compete for factors of production - and also to attract habitants - when they regulate. Thus, regulation should satisfy citizen preferences if competition is effective. In general, it is argued that decentralized regulation produces more efficient results, because at the level of local government competition is greater. We discuss the main lines of this theoretical perspective and point to their normative implications. We then criticize the oversimplification of the theory and suggest an alternative approach, namely 'regulatory co-opetition'. This approach considers three main dimensions of competition and cooperation, including 'extra-governmental', in which nongovernmental actors also play a role. We argue that this multi-dimensional approach clarifies the complexity of actual regulatory strategies, in which different combinations of competition and cooperation are present in relationships between different actors involved in the regulatory arena. Each dimension influences the regulatory behavior of actors, creating pressures and opportunities.

Regulatory competition, regulatory co-opetition, decentralization, nongovernmental actors

Abstract:
This paper analyses whether, following the adoption of the Fourth Protocol to the General Agreement on Trade in Services (the so-called "agreement on basic-telecommunications"), the WTO is well equipped to prevent anti-competitive practices in telecommunications. The paper first analyses the respective advantages of general competition rules and of sector-specific rules to control market power in telecommunications. It then presents an overview of the rules that can be found in the WTO framework. WTO Members have so far failed to agree on general competition rules. By contrast, the vast majority of the Members that are part to the Agreement on Basic Telecommunications have also agreed to a set of sector-specific rules designed to provide safeguards against anti-competitive practices in the telecommunications sector that are contained in the so-called Reference Paper. The paper then analyses whether the Reference Paper is an adequate document and the extent to which it could be strengthened and addresses the question of whether, assuming that the Reference Paper could be strengthened, there would remain a need for general competition rules at the WTO level. In its conclusions, the paper makes some suggestions. First, it argues that, while the Reference Paper is a step in the right direction, it could, however, be strengthened to reach a better balance between three main objectives: precision, simplicity, and flexibility. In most cases, this would mean increasing the degree of precision of the provisions of the Reference Paper, as the current document tends to be very general. However, in order not to loose too much flexibility, increased precision may at times be obtained, not by specifying substantive provisions in great details, but by offering Members some choices between different, well defined solutions, or by strengthening procedural rather than substantive rules. Second, it argues that, even if the Reference Paper could be strengthened along the aforementioned lines, a case could still be made for adopting a WTO Agreement on Trade and Competition Policy. Such an agreement could be helpful to prohibit some anti-competitive behaviour that would still remain un-addressed in the Reference Paper and to protect operators against anti-competitive behaviours beyond the narrow scope of telecommunications activities. The paper argues, however, that if such additional competition provisions were to be adopted, they should focus on improving market access.

Antitrust, WTO, regulation, telecommunications, competition

Abstract:
This paper provides a short overview of the regulatory challenges created by multi-utilities, i.e. companies involved in more than one utility sector. It discusses whether the sector-specific regulatory arrangements traditionally adopted by governments to regulate utilities offer a satisfactory oversight of multi-utility undertakings. Some aspects of the existing regulatory frameworks may need to be strengthened or adapted to take into account the growing presence of multi-utilities. Greater reliance on economy-wide regulatory regimes and institutions, such as competition rules and authorities, may also be rendered necessary.

Multi-utilities, network industries, convergence, competition, antitrust, regulation

Abstract:
This paper seeks to examine the relationship between trade liberalization and environmental protection with an eye toward alleviating conflicts between these important policy goals and making them more mutually reinforcing, especially in the context of regional trade agreements. Part I spells out and categorizes the various concerns that the parallel pursuit of trade liberalization and environmental protection has raised. Part II suggests a taxonomy of the responses that can be used to address the concerns outlined in Part I. The nature and characteristics of these tools and strategies vary considerably, consistent with the diverse set of trade/environment tensions to which they respond. Such tools range from a laissez-faire approach to differences in environmental standards among jurisdictions in a free trade regime to total harmonization of environmental regulations. Part III applies the theoretical framework outlined in Parts I and II to two regional trade agreements, the European Community (the EC) and the North American Free Trade Agreement (the NAFTA). It examines the extent to which the trade and environment concerns discussed in Part I have arisen in these two agreements, as well as the degree to which the responses discussed in Part II have been used to address these concerns. Part IV discusses the extent to which the experience of regional trade systems could be used to deal with trade and environment issues arising in the context of the World Trade Organization (the WTO). Finally, Part V offers some general conclusions.

Trade, environmental protection, race to the bottom, harmonization, competitiveness, EU, NAFTA

Abstract:
As Einer Elhauge and I noted in the preface to our recently published casebook, modern antitrust law is global antitrust law. This is not so much the case because large corporations are subject to global antitrust rules, but because their behavior is being reviewed under the antitrust rules of an ever growing number of jurisdictions. While the last six decades have seen repeated unsuccessful attempts to develop global antitrust rules, the 1980s and 1990s have witnessed significant growth in the number of countries adopting antitrust law statutes and setting up specialized antitrust agencies and/or courts. Thus, some 100 countries currently have antitrust rules in place, and the process has not ended yet. On August 1, 2008, China's Anti-Monopoly Law (hereafter, the "AML") entered into force and various factors indicate that China will become a significant actor on the global antitrust scene.

As a result, a typical merger between large U.S. corporations now ordinarily requires approval not just in the United States ("U.S."), but also in the European Union ("EU"), Canada, Brazil, South Africa, Russia, Korea, and the numerous other jurisdictions which have merger control rules and in which the activities of such corporations may produce market effects. Similarly, international cartels may trigger administrative, civil or even criminal investigations not only in the United States, but also in a range of other jurisdictions. The Microsoft case also bears testimony to the fact that firms engaging in certain practices, such as refusal to license or tying, may end up being condemned for abuse of dominance under the antitrust laws of different nations and, as a result, face a variety of remedies that are not necessarily consistent. Thus, businessmen, lawyers and policy-makers can no longer content themselves with understanding only the antitrust law of their nation. They must also be conversant with the other regimes that form part of the overall legal framework that regulates competitive behavior.

While I, like many other scholars, have supported and even to some extent contributed to the development and adoption of antitrust law regimes in a growing number of jurisdictions, my increased level of involvement in recent years in cases dealing with the application of antitrust laws and the participation of authorities of several jurisdictions has permitted me to gain first hand experience of some of the pitfalls of the process of "decentralized globalization" of antitrust, which has taken place in the last few decades as a result of the concomitant failure of nations or international organizations to develop a global antitrust law regime and the decision of many nations to adopt their own antitrust laws. While the notion of "decentralized globalization" may sound like an oxymoron, it represents an attempt to describe the fact that antitrust is today a global phenomenon, not through the adoption of supranational rules such as in areas pertaining to environmental protection, labor rights, or human rights, but through the adoption of national rules often varying in scope, objectives, methods, and the manner in which they are enforced.

There is no doubt that the adoption of antitrust rules in a larger number of nations generates benefits as it allows, for instance, these nations to protect their citizens against international cartels or excessive market concentration This process has, however, also given rise to challenges for global corporations, some of which are well known. The "decentralized globalization" of antitrust increases: (i) the cost of doing business and the complexity of large-scale antitrust investigations, which now often have a multi-jurisdictional component; (ii) the risk of contradictory decisions where a firm's behavior is reviewed by different antitrust authorities under different sets of rules; and (iii) the likelihood that some decisions be guided by protectionist motives.

The objective of this paper is to raise awareness of a particular problem, which relates to the fact that in a world where a conduct of a given is subject to different antitrust regimes, the most restrictive antitrust regime always wins, i.e. the firm in question will be required to ensure that its conduct conforms to whichever regime is most restrictive, hence leading to global antitrust over-enforcement. As will be seen, this issue, which I referred to as the "Strictest Regime Wins" problem, may lead to situations where the decision of an antitrust authority in one jurisdiction (for instance, taking a negative decision on a conduct that is otherwise considered to be pro-competitive) may deprive consumers in other jurisdictions of various efficiencies that are well-recognized by their own antitrust authorities. This paper also draws attention to a number of procedural issues, which may negatively impact the ability of corporations investigated in foreign jurisdictions to defend their case.

Against this background, this paper is divided into five parts. Part II describes the process of "decentralized globalization" alluded to above. Part III discusses the various benefits brought about by the adoption of antitrust regimes in an increasingly large number of nations, but also the challenges that this has created for multinational corporations. Part IV focuses on the problem of global antitrust over-enforcement described above. Finally, Part V provides for a short conclusion.

Abstract:
This paper seeks to provide a critical assessment of the efforts made by the EC to stimulate the development of competition laws in the Mediterranean countries with which it is engaged in partnership agreements. It reviews the content of the competition provisions of the association agreements, as well as their effectiveness. In then examines the regular calls for convergence on the EC competition law model to which Mediterranean countries are object. There is indeed room for debate regarding the opportunity, as well as the nature of such convergence. The paper concludes that a deep convergence approach, whereby the non-candidate Partner countries would transpose EC competition rules in their domestic legal order, would provide many benefits for both the EC and these countries.

Antitrust, competition, development, infrastructure

Abstract:
While the granting of rebates is a common commercial practice largely used by dominant and non-dominant firms, the assessment of rebates is one of the most complex and unsettled areas of competition law. In the EU, the decisional practice of the European Commission and the case-law of the Community courts have been harshly criticized as unnecessarily strict, following a form-based approach that sits uneasily with modern economic theory. In response, DG COMP published in December 2005 a Discussion Paper that promotes an effects-based approach to the assessment of rebates. This approach was recently confirmed in the Guidance Paper of the Commission on Article 82 EC published by in December 2008. US courts have generally shown greater deference to conditional rebates adopted by dominant firms, but the case-law remains unsettled, notably in the area of bundled rebates. Against this background, this paper proposes an analytical framework, based on a three-step test, designed to separate pro-competitive rebates from anti-competitive ones. A particular emphasis will be placed on the treatment of single product retroactive rebates, which create complex issues.

rebates, discounts, antitrust, competition, foreclosure, efficiencies, Article 82, Section 2, bundled rebates

Abstract:
The main objective of this paper is thus to examine the state of adoption and implementation of competition rules in the 12 Mediterranean countries (the "Euromed countries") engaged in association agreements with the EC in the framework of the Barcelona Declaration of November 1995. Indeed, these agreements not only contain trade related provisions, but also include competition rules. Moreover, independently of the association agreements, some Euromed countries have decided to adopt domestic competition law regimes. A related objective of this paper is to discuss why adoption of competition law regimes is important in emerging economies, in particular as a necessary component of the market-opening reforms undertaken by a number of Euromed countries in the area of network industries (telecommunications, postal services, energy, and transport). Competition rules have played a very important role in the liberalisation process in the EC. There is every reason to believe that competition rules could play a similarly important role in the Euromed countries that have engaged in the liberalisation of their network industries.

Antitrust, regulation, competition, development, network industries

Abstract:
The development of sound regulatory regimes, including institutions, norms and processes, is critical to ensure the effective and sustainable delivery of infrastructure services, promote private participation in such services, and facilitate workable competition in such services.

In order to help its client countries to improve the quality of infrastructure regulation in its client countries, the World Bank is exploring the feasibility of establishing principles of infrastructure regulation, which bodies involved in regulatory processes would be encouraged to adopt, and against which their performance could be assessed by third parties.

Against this background, the objective of this report, which has been prepared by the author for the World Bank, is to identify a set of sound principles of regulation of infrastructure, as well as to examine the extent to which these principles are supported by international practice.

World Bank, development, utility, regulation, telecommunications, energy, infrastructure, investments

Abstract:
On 21 September 2009, the European Commission published a provisional non-confidential version of its 13 May 2009 Decision in which it condemned Intel to a record fine of € 1.06 billion on the ground that it had granted conditional rebates and payments to a number of OEMs and a large retailer of consumer electronics purchasing its x86 CPUs, and that it had paid OEMs to delay, cancel or in some other way restrict the commercialization of specific AMD-based products.

This paper shows that the Commission Decision contains a number of flaws. They include the facts that the Decision: (i) relies in substance on a per se prohibition of conditional rebates recognized by the formalistic case-law of the Community courts, notwithstanding that the Commission had clearly indicated in various important policy documents, including its Guidance Paper on Article 82 EC, its intention to move away from this approach for an effects-based analysis; (ii) states, contrary to sound policy, that it need not conduct an “as efficient competitor” test, but conducts a misguided one anyway; (iii) insufficiently supports its speculative theory that the OEMs’ purchasing policy was influenced by their understanding of Intel’s alleged intention to reduce or eliminate their rebates should they buy x86 CPUs from AMD; (iv) fails to demonstrate its contention that Intel’s rebates harm competition and consumers; and (v) conducts an excessively restrictive analysis of the efficiencies created by Intel’s rebates.

The Intel decision thus stands for the dangerous proposition that any dominant firm is at risk under Article 82 EC if there exists evidence that employees of a customer believe that reducing present purchases from it could have repercussions with regard to the availability and terms of future purchases, even if the belief is ambiguous, equivocal or contrary to written assurances of the firm or its executives, and without any showing of foreclosure. While the foregoing may be considered as an overstatement and that an “agreement” on conditions (not a mere unilateral belief on the part of the customer) is necessary to find a violation, the Commission accords itself so much latitude on how it collects, interprets and weighs evidence that the distinction is illusory.

The compatibility of the Commission Decision with EC competition law will now be examined by the Court of First Instance of the European Communities to which Intel lodged an appeal. Because of the wide-ranging implications of this Decision, not only for Intel but for all large corporations having to negotiate price incentives with their customers, it is to be hoped that the Court of First Instance of the EC will review this decision carefully and hold the Commission to the same rigorous standards it has applied in the merger control area.

An important question (that will not be addressed by the Court of First Instance, but which is nevertheless relevant from a policy standpoint) is whether antitrust intervention was at all needed in a market characterized by increasing output, decreasing prices and sustained innovation. These characteristics alone should raise serious doubt about claims of anti-competitive foreclosure and consumer harm, especially when they are made by competitors. These characteristics also question the Commission’s wisdom of investing large enforcement resources in what turned to be a long and protracted investigation. As this paper will demonstrate, the market for x86 CPUs was competitive and there is no convincing evidence that Intel’s conduct was anti-competitive and foreclosed AMD and harmed consumers.

Intel, European case law, conditional rebates, Article 82 EC, foreclosure, consumer harm

Abstract:
On December 15, 2005, the European Commission ('Commission') released a controversial Discussion Paper on Article 82 EC, the provision of the EC Treaty dealing with abuses of a dominant position. This policy document triggered a long and protracted debate not only among competition law experts but also within the Commission itself. The Commission’s plan to distance itself from a 'form-based' approach to the enforcement of Article 82 EC, which sits uneasily with modern economic principles, towards an 'effects-based' approach more in line with such principles was welcomed. Some aspects of the Discussion Paper were criticized nonetheless as being unclear, impracticable, or still overly restrictive. Following the Discussion Paper and the ensuing academic debate on Article 82 EC, the Commission published (on 3 December 2008) its somewhat shorter and more wieldy 'Guidance on the Commission’s Enforcement Priorities in Applying Article 82 EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings' (“Guidance Paper”), which essentially sets out the Commission’s enforcement priorities with respect to exclusionary abuses. In line with the approach already taken in the fields of Article 81 EC and merger control, the Commission, through its Guidance Paper, has vowed to take a more effects-based approach to exclusionary abuses by dominant undertakings. This is illustrated by the admissibility of familiar economic concepts such as the efficiency defense and the introduction of the 'equally efficient competitor' test. The core premise of Commission intervention now rests on a finding that a dominant undertaking has engaged in conduct that is likely to lead to anticompetitive foreclosure, i.e. exclusionary conduct that is liable to cause consumer harm. Though there is much merit in the commission’s new approach to exclusionary conduct it is open to debate whether it goes far enough. One of the limitations of the Guidance Paper is that it fails to provide for 'safe harbours'. For instance, pricing schemes that do not exclude equally efficient competitors because the price set by the dominant firm is above its costs may nevertheless be considered abusive in some circumstances. Hence, (postal) operators whose prices are above their costs cannot be sure that their pricing is not incompatible with Article 82 EC. The Guidance Paper also contains some lacunae as it does not address for instance exploitative behavior or price discrimination that are particularly contentious issues under EC competition law. Finally, the nature of the Guidance Paper is ambiguous. The Guidance Paper is not intended to be a statement or interpretation of the law, but instead lays out the Commission’s 'enforcement priorities' with respect to Article 82 EC. This raises the issue whether the Commission is bound to apply the principles developed in the Guidance Paper or whether it can apply the more restrictive and formalistic principles contained in the Community courts’ case-law. In the context of the postal sector the advent of the Guidance Paper is particularly propitious in light of the crucial changes that are taking place. The recently promulgated Third Postal Directive ('Postal Directive') provides the legal basis for the full market opening of the postal sector, which is to be accomplished by 31 December 2010. A corollary of the abolition of any remaining, exclusive or special rights is that new possibilities for increased competition in the postal sector will be created. At the same time, however, the removal of the reserved sector is likely to increase the frequency of claims by entrants that incumbent postal operators are engaging in abusive behavior to maintain their market power in liberalized markets. With this in mind, the Guidance Paper provides dominant (postal) undertakings with a set of parameters within which they can assess conduct addressed in it i.e. exclusive dealing, tying and bundling, predatory practices, and refusal to supply. The paper is structured as follows. First, the paper reviews the approach taken by the Guidance Paper with respect to the assessment of dominance. Second, it examines the test that the Guidance Paper intends to apply to determine whether a given practice amounts to anticompetitive foreclosure. Third, it explores the approaches proposed by the Guidance Paper when addressing the various categories of abuse that may be committed by dominant firms, particularly postal operators. Finally, a short conclusion is provided.

postal, competition, antitrust, liberalisation, abuse of dominance, rebates, refusal to supply, predation, tying, European Union, access to network

Abstract:
Standard-setting activities play a fundamental role in fostering innovation and competition in a variety of markets. Typically carried out by armies of engineers, they would generally not be expected to fascinate lawyers and economists. But they do - and they have recently received much attention as a result of high-profile cases, complaints lodged with competition authorities and attempts by members of standard-setting organizations to have their rules and procedures modified to prevent allegedly anti-competitive outcomes. This article aims to disprove the growing perception, largely fed by certain interest groups, that current standard-setting procedures generally based on the so-called fair, reasonable and non-discriminatory ("FRAND") licensing regime unduly allow opportunistic holders of Intellectual Property ("IP") embedded in a standard to extract excessive royalties from their licensees. First, we demonstrate that the existing FRAND regime works and that recent proposals to alter it by tilting the bargaining position of IP licensors in favour of licensees are driven by a war of business models. It is shown that such proposals are not only unnecessary, being based on false premises, but would also prove detrimental to investment and innovation. Second, we argue that excessive pricing cases under Article 82 EC should not be pursued except in a very narrow set of circumstances. Given the potential for error of any attempt to determine the competitive price of intangible assets, decisions on the appropriate royalty levels of valuable IP should be left to the market.

standard-setting, exploitative abuse, patent hold up, royalty stacking, FRAND

Abstract:
The Supreme Court's 2006 eBay ruling marked a turning point in injunctive relief policy. Unfortunately, there seems to be considerable confusion about the implications of the decision. Some authors, concerned over patent holdup and excessive royalty rates, interpret the eBay decision as giving a green light to district courts to deny injunctive relief to “non-manufacturing patent owners.” Using an error-cost framework, we examine the theory and evidence behind patent holdup concerns as they relate to injunctive relief policy. We find that the holdup theory justifying categorical limitations on injunctive relief rests upon overly narrow assumptions. As a result, categorical limitations are likely to result in substantial “false positives,” where patent holders with no designs of patent holdup are nonetheless denied injunctive relief. Instead of advocating categories of denial, we argue that the majority opinion in eBay can and should be read as a return to a balancing test, where costs and benefits are weighed carefully before granting or denying a patent injunction.

K20

Abstract:
The main objective of this article is to shed light on the compatibility of price discrimination with EC competition law. We offer an analytical framework which distinguishes between different categories of price discrimination depending on their effects on competition. Our framework suggests that different tests are needed to assess the lawfulness of price discrimination practices under EC competition law. A related objective of the article is to show that Article 82(c), the main Treaty provision dealing with price discrimination, should only be applied to the limited circumstances where a non-vertically integrated dominant firm price discriminates between customers with the effect of placing one or several of them at a competitive disadvantage vis-a-vis other customers (secondary line injury price discrimination). In contrast, Article 82(c) should not be applied to pricing measures designed to harm the dominant firm's competitors (first line-injury price discrimination) or to partition the single market across national lines.

Abstract:
This paper reviews the various areas of tension between competition and environmental protection. It examines the compatibility with EC competition rules of the environmental agreements, certain behaviours of dominant undertakings carrying out environmental activities, the exclusive rights granted to certain undertakings entrusted with environmental protection missions, and the State aids granted for environmental protection. This paper concludes that the European Commission, which is entrusted with the application of competition rules in the European Union, has sought, and generally managed, to find a balance between environmental protection and competition policy objectives.

Competition, antitrust, environmental protection, European Union