The Competition Bulletin is pleased to welcome the second in our series of blogs by Oxera Consulting on key economic concepts for competition lawyers. In this blog, Tuomas Haanperä, a Senior Consultant, discusses the economic issues surrounding follow-on damages claims in margin squeeze cases (where a dominant firm has charged a combination of retail and wholesale prices that prevents other, ‘squeezed’, rivals from competing). This topic was recently discussed at the Oxera Economics Council, a forum of prominent European economic thinkers and academics that meets twice a year to discuss current economic policy topics. Continue reading
Category Archives: Abuse
Competition round-up: Summer 2013
It is time for what has become the Competition Bulletin’s regular half-yearly update of EU and UK competition law developments. (For our previous round-ups see here).
Thinking big Continue reading
Filed under Abuse, Agreements, Conflicts, Damages, Free movement, IP, Mergers, Penalties, Pharmaceuticals, Policy, Procedure, Procurement, Round-Up, State aid, Telecoms
UK government proposes “streamlining” regulatory and competition appeals
The UK government on Wednesday published a consultation on streamlining regulatory and competition appeals. The press spin was that the proposals are all about preventing “armies of lawyers” from blocking consumer-friendly measures. In reality, although it is true that the proposals are designed in part to put a lid on litigation, the consultation contains a series of thoughtful suggestions – many of which are likely to attract widespread support.
Take, for example, the suggestion that there should be greater consistency in the available appeal routes. Someone at the Department for Business, Innovation and Skills has had fun mapping out the existing appeal routes for different decisions in the regulated sectors. The resulting table speaks for itself (figure 3.5 of the consultation):
Private enforcement: the Commission speaks at last
The trio of documents published by the Commission last week mark an important moment in private competition enforcement in the EU. After years of debate and consultation, it is now clear that, whilst the Commission is determined to take some important steps to assist claimants in private actions, it is not prepared to bring about the sorts of fundamental changes which would be needed to realise the full potential of private enforcement.
The three documents each deserve close scrutiny. This blog is intended only to provide a broad overview. Continue reading
Filed under Abuse, Agreements, Damages, Policy, Procedure
Price-fixing by the State: a minimum unit price for alcohol
For a number of years concerns have been expressed over excessive levels of alcohol consumption and the effect this has on both public health and public order. There is a clear relationship between the price of alcohol and the amount of alcohol consumed. On 3 May 2013, the Court of Session ruled that a 50 pence per unit minimum alcohol price which had been imposed by the Scottish Parliament was compatible with EU law. In this blog I argue that, in reaching his conclusion, Lord Doherty misapplied the proportionality test. Continue reading
Filed under Abuse, Agreements, Free movement
The Sins of the Son or Daughter
Things occasionally have an air of unerring certainty about them. It will rain on the May Day bank holiday weekend. Tottenham will be pipped to fourth place in the Premier League on the last day of the season. Attempts to challenge a Commission finding that a group of companies constitute a single economic entity will fail. So it has proved for Eni SpA, in its failed appeal against the judgment of the General Court in Case T-39/07 Eni v. Commission [2011] ECR II-0000, GC. Continue reading
Filed under Abuse, Agreements
To fight or not to fight: pharmaceutical patent settlements
On 19 April 2013, the OFT announced that it had issued a Statement of Objections following its investigation into patent litigation settlement agreements (PLSAs) in the pharmaceutical sector. The underlying factual complaint related to GlaxoSmithKline’s alleged conduct in defence of one of its blockbuster drugs, Seroxat, which is a prominent anti-depressant (paroxetine). The central allegation is that GSK concluded PLSAs with three generics companies – Alpharma Limited (Alpharma), Generics (UK) Limited (GUK) and Norton Healthcare Limited (IVAX) – which had sought to compete with their own paroxetine medicines. It is alleged that at particular points between 2001 and 2004, GSK sought to challenge its competitors’ entry into the market by threatening or instigating patent litigation. It then concluded the agreements which offered financial sums in exchange for the generics’ commitment not to supply paroxetine independently for a relevant period within the patent protection of Seroxat – although they were able to do so before this protection had ended. Continue reading
Filed under Abuse, Agreements, IP, Pharmaceuticals
The economics of pass-on
The Competition Bulletin is pleased to announce that Oxera Consulting will be contributing a short series of blogs on key economic concepts for competition lawyers. Robin Noble, Oxera Associate Director and an expert economist on commercial and competition law damages actions, is our first guest blogger. His post discusses the issue of pass-on—ie, the extent to which the purchaser of a cartelised product passes on the overcharge, and therefore its losses, to its own downstream customers. Robin can be contacted at robin.noble@oxera.com.
Introduction
Pass-on is a key issue in virtually all cartel damages claims in the EU. It can make or break a claim: assuming that pass-on is a valid defence to a damages claim, complete pass-on means a claimant cannot claim for any absorbed overcharge, the main head of loss in these actions.
This post focuses on two points. First, it provides a brief summary of the key insights provided by economic theory; second, it discusses two important real-world issues: cost plus pricing, and price-pointing. Continue reading
Filed under Abuse, Agreements, Damages
Albion v Dwr Cymru: Incompetence and counterfactuals
The Competition Appeal Tribunal today delivered that rarest of beasts: a judgment awarding damages in a follow-on claim. After its decade-long fight, Albion Water has been awarded around £2 million for Dŵr Cymru’s abuse of dominant position in relation to the price it was prepared to charge Albion for the use of its water pipes.
The 130-page judgment consists largely of a detailed analysis of the counterfactual – i.e. what would have happened, and what profits would Albion have made, if Dŵr Cymru had not behaved abusively. It is, however, worth highlighting two points which will be of more general interest. Continue reading
Anticompetitive behaviour by professional regulators – Wouters naturalised
The ECJ’s judgment in Case C-309/99 Wouters – that the Dutch legal regulator was an association of undertakings for the purposes of competition law, but that its prohibition on partnerships between lawyers and accountants nevertheless fell outside Article 101(1) having regard to its context and objectives – was a controversial one.
To some it suggested the emergence in European competition law of a “rule of reason”. Professor Whish preferred to treat it as an example of a standalone doctrine of “regulatory ancillarity” that enabled the courts to overlook the incidentally anticompetitive effects of primarily regulatory measures. Whatever the explanation, it was clear that the ECJ had introduced a doctrine which cut across the express wording of Article 101(1) and allowed measures of certain types to benefit from an unwritten exemption. It was unclear whether that doctrine was a new beginning or an evolutionary dead-end. Continue reading
Collective Actions: loss in complex cases
The big news from last week’s UK announcement on reforming private competition enforcement is that the government plans to introduce opt-out class actions for competition claims.
The proposals incorporate various “safeguards” designed to ensure that the perceived excesses of US class actions do not become a problem here. Some of the safeguards are really no more than statements of the obvious – no-one can be surprised that we will not have US-style triple damages, or that law firms won’t be able to bring a claim without even having a claimant. On the other hand, some safeguards – such as the prohibition on contingency fees – will surely serve to limit the usefulness of UK class actions.
Financing aside, the big unanswered question is how attractive claimants will find such class actions (or “collective actions”, as the government prefers to call them, emphasising the differences with the US). Continue reading
Filed under Abuse, Agreements, Damages, Policy, Procedure
Back to school for the OFT?
On 25 October 2012 the Office of Fair Trading announced that it had written to the head teachers of almost 30,000 State schools to draw attention to the high price of school uniforms. The high price is caused in part by 74% of schools requiring parents to purchase uniforms from a single, named retailer or from the school itself. This has created a captive market for chosen suppliers, allowing them to charge an additional £52 million per year (see para 2.3 of the OFT’s 2006 school uniforms review).
The October 2012 letter advises schools either to cease specifying from whom uniforms may be obtained, or to award the right to supply on a basis that takes into account the cost to parents. The letter does not specify what the OFT will do if the schools fail to comply, but I want to suggest that action against the schools is possible under the Competition Act 1998. Continue reading
Competition round-up: January 2013
As today is the first day of the new court term, I thought it would be a good moment for a round-up of last term’s competition cases – and, of course, the customary plug of our own blogs.
If there was a theme to the Michaelmas term, it was the highs and lows of follow-on claims. Few pieces of legislation can have attracted so much judicial attention in so short a time as s.47A of the Competition Act 1998. It has now gone as far as the Supreme Court, which confirmed in BCL Old Company Ltd v BASF plc [2012] UKSC 45 that the rules governing limitation periods for bringing follow on claims in the CAT are not so unpredictable as to breach European principles of legal certainty (a topic which I blogged on here). Continue reading
Filed under Abuse, Agreements, Damages, Penalties, Pharmaceuticals, Policy, Procedure, Round-Up, Telecoms
A Bitter Pill: AstraZeneca in the CJEU
The Court of Justice of the European Union (CJEU)’s much anticipated early Christmas present for generic producers has arrived in the form of its judgment in the AstraZeneca case (Case C-457/10 P AstraZeneca AB and AstraZeneca plc v European Commission, 6 December 2012). The decision upheld that of the General Court and the Opinion of Advocate General Mazák, and suggests that the pharmaceutical industry may soon be faced with emboldened competition authorities.
At issue was the Commission’s finding of abuse of dominance (under Article 102 TFEU) for two abuses of the patent system by AstraZeneca (AZ). Firstly, the Commission found that AZ had made “misleading representations” to national patent offices in several Member States which enabled it to extend patent protection of one of its headline gastrointestinal treatments longer than should have been possible. Secondly, the selective deregistration of an older form of the drug had deprived generic producers of the simplified procedure for obtaining a marketing authorisation for their products under Article 4(3)(8)(a)(iii) of Directive 65/65. Continue reading
Filed under Abuse, Pharmaceuticals
BCL No.2: The Supreme Court addresses time limits in follow-on claims
The White Paper which first proposed follow-on damages claims promised a “swift” and “streamlined” procedure. The idea was that when a regulator had made an infringement finding, there would be a simple way for victims to claim damages without having to prove the infringement afresh.
In reality, however, many follow-on actions have been bogged down by procedural skirmishes. The Court of Appeal has ruled on the need for the facts alleged in a follow-on claim to be part of the infringement actually found. It has ruled on the extent to which findings of fact in an infringement decision are binding in the follow-on action.
And it has on three occasions turned its attention to the time limits for bringing follow-on claims in the Competition Appeal Tribunal. Continue reading
Filed under Abuse, Agreements, Damages, Procedure
Competition law and the National Health Service
On 16 August 2012 the Office of Fair Trading revealed that eight NHS trusts had been engaged in the exchange of commercially sensitive information. The information related to the price each would charge self-paying patients, or patients’ insurers, for treatment in a hospital operated by an NHS trust when that treatment was privately funded. The file was closed when the OFT received assurances that the information exchange had ceased and that the parties would provide their staff with training on competition law compliance.
In the press release the OFT said: “We urge all Trusts to take steps to ensure they are compliant with competition law when engaging in commercial activity.” This of course begs a question: when are NHS bodies engaged in commercial activity? This question becomes more pressing from April 2013, when Monitor, at present the independent regulator for NHS foundation trusts, gains power under sections 72 and 73 of the Health and Social Care Act 2012 to apply competition law in the health sector. Continue reading
Filed under Abuse, Agreements, Policy
Competition round-up: Summer 2012
As most of us are now returned from our summer holidays, I thought I’d take advantage of the ‘back to school’ feeling with a round-up of the most significant competition cases since Easter. This also provides a good excuse to highlight the best blogs from the Competition Bulletin’s first couple of months.
I’ll start with a case that should, but probably won’t, make the law reports: the decision of the Appeal Panel of the Rugby Football Union, which held in an appeal by London Welsh that the RFU rules on primacy of tenure are contrary to Articles 101 and 102 TFEU and therefore void. The case is notable not only for the finding itself, but also because it was heard and decided so quickly – arguments which would take days in the High Court (and probably weeks in the CAT) were heard over the course of a day, and the 38-page judgment completed the following day. James Segan blogged on the case here.
There has been much good news for claimants in follow-on damages claims. Continue reading
Filed under Abuse, Agreements, Damages, Free movement, IP, Mergers, Penalties, Procedure, Round-Up, Telecoms
Regulating charges for special police services
Police services are generally performed for the benefit of the public at large and provided for out of public funds. However, the police also have the power (under s.25 of the Police Act 1996) to provide “special police services” for which they can levy a charge. To take Northumbria Police as an example, charges can range from £57.98 per hour for a constable to £90.68 for a superintendent.
The principal line of defence against such a charge is typically to argue that the service is an ordinary police service, rather than a special service. Such an argument succeeded in the recent case of Leeds United Football Club Ltd v The Chief Constable of West Yorkshire Police [2012] EWHC 2113 (QB), in which Mr Justice Eady held that even if the need for police services arises from a private event, that policing does not constitute a special service when it is performed on land that is not owned, leased or controlled by the event organiser.
A further line of defence, potentially of much broader interest, is to attack the level of the charges on the grounds that they are contrary to competition law. That was the stance taken by Wigan Athletic FC in an earlier case against Greater Manchester Police ([2007] EWHC 3095 (Ch)). The issue was not, however, resolved, and the applicability of competition law to special police services therefore remains an open question. Continue reading
Cardiff bust-up: abuse of dominance, follow-on claims and exemplary damages
In 2 Travel Group PLC (in liquidation) v Cardiff City Transport Services Limited [2012] CAT 19 the Tribunal has made the first ever domestic award of exemplary damages for breach of competition law. The case is a significant landmark, but involves no radical development of the law; it is certainly not a declaration of “open season” for exemplary damages claims.
The Claimant, 2 Travel, was a struggling South Walian bus company. The Defendant traded as “Cardiff Bus” and, true to its name, was the major player in the Cardiff bus market.
In 2004, war broke out on the city streets. 2 Travel launched a new, “no frills” bus service in Cardiff. Cardiff Bus retaliated with force. It laid on “battle buses” (a term used, rather infelicitously, in its own internal documents), which were carefully planned to arrive just before 2 Travel’s buses and snatch 2 Travel’s potential customers. The militarism of Cardiff Bus’s response extended even to internal recruitment of drivers for the covert war against 2 Travel with a spoof of the famous First World War poster of Lord Kitchener: “Your Company Needs YOU”. 2 Travel’s Cardiff venture failed, and in 2005 the company entered liquidation. Continue reading
“Imprecise legal concepts” are no excuse
The second chapter of the Microsoft saga unfolded on 27 June 2012, when the General Court largely upheld the €899 million periodic penalty payment imposed on Microsoft for failing to share adequate interoperability information with its competitors. However, it also offered some comfort to proprietors of intellectual property rights, with the Court seemingly retreating from some of the more expansive views expressed in Microsoft I.
See Case T-167/08 Microsoft Corp. v European Commission.
The case follows the Commission’s 2004 decision that Microsoft had abused its dominant position by withholding interoperability information, upheld by the General Court in Microsoft I. As part of the remedy, Microsoft was required to provide access to the information on reasonable and non-discriminatory (“FRAND”) terms, to allow interoperability between the dominant Windows architecture and rival servers. It failed to do so, and in February 2008 the Commission imposed the penalty which is the focus of Microsoft II.
The judgment is important for two reasons. Continue reading
Competition law achieves fair play
The London Welsh decision provides a rare but telling example of competition law marching its way onto the field of professional sport.
London Welsh won rugby union’s Championship in the 2011-12 season. This would, in ordinary circumstances, have entitled them to be promoted to the Premiership, which is club rugby’s highest division. The RFU, however, operates “minimum standards criteria” for the Premiership, which require any club eligible for promotion from the Championship to have “primacy of tenure” over their home ground. London Welsh did not have primacy of tenure and so their bid for promotion was refused by the RFU.
All, so far, the stuff of an unexceptionable sporting decision. There was, however, a small complication: there were three clubs already in the Premiership which also did not have primacy of tenure (London Wasps, Saracens and London Irish). A special three-club exemption operated for those clubs. The exemption was not, however, open to London Welsh, or to any other club which might qualify for promotion from the Championship. Continue reading
Filed under Abuse, Agreements
Ex ante and ex post regulation following Telefónica
Hats off to Spain for having the nerve to suggest that it might have been a better target for the Commission’s attention than Telefónica, the former monopoly telecoms provider recently fined over €150 million for committing a margin squeeze in the Spanish broadband market (see case T-398/07 Kingdom of Spain v Commission).
The case is the latest in a line which tests the boundary between ex ante regulation (obligations imposed on particular undertakings by national regulatory bodies) and ex post competition law (in this case, the general prohibition against abuse of dominance). Continue reading
