Source: http://martinned.blogspot.it/
Timestamp: 2017-10-20 01:20:55
Document Index: 311881052

Matched Legal Cases: ['§31', '§31', '§31', '§31', '§31', '§31', '§31', '§31', '§ 1', 'art. 49', 'art. 5', 'art. 12', 'art. 13', 'art. 108', 'art. 207', 'art. 114', 'art. 3', 'art. 207', 'art. 36']

Salomons II
Last July, I got quite miffed about the Competition Appeals Tribunal’s judgement in Akzo Nobel v. Competition Commission. I argued that the CAT had bent the rule of Salomon v. Salomon, which says that shareholders and the company they own are legally treated as distinct entities, past the point of breaking. For this reason, I recommended an appeal.
Apparently, so did Akzo’s solicitors, because in April the Court of Appeal ruled in its version of Akzo Nobel v. Competition Commission, deciding unanimously to dismiss the appeal.
While the Briggs, LJ.’s judgement for the Court is clearly better than the CAT’s, I’m not quite sure that I’m entirely convinced. While he stays light years away from the Single Economic Unit case law invoked by the CAT, when you get right down to it the result isn't so easily distinguished.
The logic of the Court of Appeal is quite straightforward:
The legally relevant criterion, from s. 86(1)(c) Enterprise Act 2002 is that Akzo Nobel must be “a person carrying on business in the United Kingdom”.
Firstly, it is important to note that that doesn’t have to be the same business as the business that is seeking to merge or acquire. All that is needed in order to establish jurisdiction is that Akzo Nobel carries on any kind of business in the UK.
The Akzo Nobel group “may fairly be described as carrying on business in the Netherlands and in the UK.” (par. 33)
The only question is by whom, i.e. by which legal person, this business is carried on.
Akzo Nobel NV, the Dutch parent company, is held to be managing the business “both strategically and operationally” (par. 36)
For this reason, Akzo Nobel NV is carrying on business in the UK, meaning that the Competition Commission is entitled to make an enforcement order against it.
In order to distinguish Salomon v. Salomon, Briggs, LJ. makes a distinction between a parent who does nothing more than “to exercise its rights as shareholder in the traditional fashion, leaving the entire management of the business to the subsidiary’s directors” (par. 37) and “the exercise of the strategic and operational management and control of a manufacturing and sales business” (par. 34).
Even on its face, this strikes a huge blow against the rule of Salomon v. Salomon, given that something akin to Akzo’s management structure is used by “most modern corporate groups” (par. 12). Are we really to believe that the parents of all those groups have a sufficient presence in the UK for the Competition Commission to go after them?
While the judge contrasts his test with the presence test advocated by Akzo, which Parliament could have but did not enact (par. 30), where he seems to have landed is that almost any international group that trades in the UK is “carrying on business” there, which is also not what Parliament enacted. Parliament could have easily extended the jurisdiction of the CC to all companies that trade in the UK, i.e. that buy or sell goods or services there, but it did not. To do so would have made the CC’s jurisdiction to make enforcement orders essentially equivalent to its jurisdiction to investigate. That would have been convenient for the CC, but it is not the law. (As the Judge admitted in par. 25.)
A potential tie-breaker is the purpose of s. 86(1), which is to establish possible connecting factors between the addressee of an enforcement order and the UK, so that the UK does not violate international comity in seeking to regulate behaviour outside its borders (par. 26). This is certainly true, as far as it goes, but in order to apply this tie-breaker the judge would have had to survey the general international understanding of comity, which he did not do.
Briggs, LJ. might have referred to internet regulation cases in the European Court of Justice, like the Google Adwords case or today’s Google Spain, or to the US Supreme Court’s case on the Alien Tort Statute last year in Kiobel v. Royal Dutch Petroleum, where the Supreme Court sharply limited the jurisdiction of US courts over torts outside its borders. In competition law specifically, there seems to be quite a bit of patience with extraterritorial decisions, but there are limits. The € 1.06 bn fine against Intel, for example, drew criticism from the US on comity grounds. (The judgement from the General Court is expected on 12 June.)
The same goes for the Commission’s decision to block the proposed merger between Honeywell and GE in 2001. (See also this research paper commissioned by the Commission.) If comity does not prevent the EU from blocking a merger between Honeywell and GE, presumably it does not prevent the UK from blocking the Azko/Metlac takeover either. But the Court of Appeals made no findings in this regard.
Returning to the rule of Salomon v. Salomon, there is one final question that troubles me: If Akzo Nobel N.V. is carrying on business in the UK because it “exercise[s] the strategic and operational management and control of a manufacturing and sales business” in the UK, where does that leave Mr. Salomon? As a shareholder/director, he surely did the same thing. So was he, as a private person, carrying on a business in the sense of s. 86 EA2002? To be sure, the criterion enacted there is particular to competition law, but that doesn’t mean the question isn’t important. If the shoemaker Mr. Salomon had lived in France while selling his shoes through his shop in the UK, would that have meant that Mr. Salomon himself – as opposed to his company – was carrying on business in the UK? Could the Competition Commission have prevented him from merging his business with the business of Mr. X, also resident in France with a shop in the UK? Given the Court of Appeal’s judgement, it seems clear that the CC could have. But I’m not sure where that leaves corporate legal personality.
Posted by martinned at Tuesday, May 13, 2014 1 comments
Labels: Competition Law, EU, Multilevel Governance, UK
Article 101 TFEU (ex Article 81 TEC) 1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings (...) which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply;
Article 102 TFEU (ex Article 82 TEC) Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (b) limiting production, markets or technical development to the prejudice of consumers;
Posted by martinned at Thursday, January 30, 2014 0 comments
Labels: Competition Law, NL
The Ferry post raised an interesting issue that I'd only casually discussed elsewhere: if we are going to weigh the damage done by collusion against one or more associated benefits, which benefits for which consumers do we get to include? Inconveniently, it seems like the answer is benefits for the same set of individuals who are the (ultimate) consumers of the product or service.
The Energy Pact Case
104 In Community competition law the concept of an `ancillary restriction' covers any restriction which is directly related and necessary to the implementation of a main operation (see, to that effect, the Commission Notice of 14 August 1990 regarding restrictions ancillary to concentrations (OJ 1990 C 203, p. 5, hereinafter `the notice on ancillary restrictions', point I.1), the notice on cooperative joint ventures (point 65), and Articles 6(1)(b) and 8(2), second paragraph, of Regulation No 4064/89). 105 In its notice on ancillary restrictions the Commission rightly stated that a restriction `directly related' to implementation of a main operation must be understood to be any restriction which is subordinate to the implementation of that operation and which has an evident link with it (point II.4).
Case T-112/99, Métropole. In its draft Position Paper , the ACM cites some more recent case law that concerns associations of undertakings, such as the Dutch Bar Association in Wouters and the international swimming association FINA in Meca Medina. In the former case, the Court said:
Posted by martinned at Tuesday, January 28, 2014 0 comments
Labels: Competition Law, Economics, EU, NL
Labels: Competition Law, Economics, NL, Rail
Something that made me mad in today's UK Supreme Court prisoner voting judgment. Per Lord Sumption:
115. From a prisoner’s point of view the loss of the right to vote is likely to be a very minor deprivation by comparison with the loss of liberty. There are no doubt prisoners whose interest in public affairs or strong views on particular issues are such that their disenfranchisement represents a serious loss, just as there are prisoners (probably more numerous) whose enthusiasm for active sports makes imprisonment a special hardship. The severity of a sentence of imprisonment for the convicted person will always vary with a wide variety of factors whose impact on him or her will inevitably be arbitrary to some degree. It has been said, for example, that disenfranchisement may bear hardly on someone sentenced to, say, a short period of imprisonment which happens to coincide with a general election. For some prisoners, this will no doubt be true. But I decline to regard it as any more significant than the fact that it may coincide with a special anniversary, a long anticipated holiday or the only period of fine weather all summer.
So much for a proper respect for democracy...
In order to heal the soul, here is a paragraph from Baroness Hale's judgement in the same case:
90. To take an obvious example, we would not regard a Parliament elected by an electorate consisting only of white, heterosexual men as uniquely qualified to decide whether women or African-Caribbeans or homosexuals should be allowed to vote. (...) Given that, by definition, Parliamentarians do not represent the disenfranchised, the usual respect which the courts accord to a recent and carefully considered balancing of individual rights and community interests (...) may not be appropriate.
Posted by martinned at Wednesday, October 16, 2013 0 comments
Labels: ECHR, UK
An increasing problem in the competition law world is the relationship between competition law and varying degrees of state action in other realms. In Europe, this problem is artificially easy because of the hierarchy of laws involved. In Deutsche Telekom and the other margin squeeze cases, the European Court of Justice relied on the principle of primacy to hold that competition law, which is written in the main body of the Treaties, trumps sectoral regulation, which isn’t. When there is no Community dimension, and outside the EU, the answer isn’t quite that straightforward.
To begin with the easy one: When EU competition law applies, i.e. when someone is naughty in a way that “may affect trade between Member States”, the only question is who’s to blame:
If the offending behaviour is mandated by EU sectoral legislation, the secondary legislation in question is null and void, something that can be established through the prejudicial question procedure or through an action for annulment, as the case may be.
If the offending behaviour is mandated by Member State sectoral legislation, the Member State is the culprit and it is up to the Commission to start an infringement procedure. In an appropriate case, the Member State legislation in question can also be slapped down by a national court, with or without a prejudicial question.
If, on the other hand, the relevant sectoral law merely permits the offending behaviour without mandating it, the onus is on the company to make sure it obeys both competition law and sectoral law, meaning that it can be punished for failing with regard to the former. This is what happened in the margin squeeze cases.
At the Member State level, when there is no Community dimension, saying that your naughtiness is expressly permitted by sectoral legislation is fundamentally a sound argument. Of course, in a given case the question remains whether this is a correct interpretation of the law, which will depend on which statute was enacted first, whether there is express saving language somewhere, the way the US Telecommunications Act expressly says that it is without prejudice to competition law, and it will depend on the various canons of interpretation.
In the British Albion Water competition law case, for example, Ofwat, which under the UK system is both the sectoral regulator and one of the possible competition authorities, argued that Welsh Water’s pricing structure (the so-called “costs principle”) was expressly permitted by section 66E WIA 1991, an argument that was obviously gratefully echoed by Welsh Water itself. The Competition Appeal Tribunal went along with that approach to some extent, but concluded that it was not enough to save Welsh Water from competition law liability under a margin squeeze theory. (Albion Water v. Water Services Regulation Authority, [2006] CAT 23, par. 920-980. Cf. also Ofwat’s decision, par. 324-331.)
The reason why all of this is interesting now is that the problem has cropped up in the US again. There, the situation is a mixture of the previous one. On the one hand, the relationship between competition law and sectoral regulation has a clear hierarchical dimension, because American competition law is enacted at the Federal level in the Sherman and Clayton Acts (15 USC 1-38), on the other hand, the Federal authorities are much more reluctant to have this law displace State law, the Supremacy Clause notwithstanding. The result is something of a half-way system, as summed up in the 1943 Supreme Court case of Parker v. Brown.
In Parker, the Court held that the competition laws don’t displace state law. The Court argued that the Federal legislator would not do something so drastic without explicitly saying so, and in this case it didn’t. (Nor did the sponsors of the Sherman Act.) If the states want to create a monopoly or a cartel somewhere, they are allowed to. At the same time, however, the Court didn’t take back its earlier holding that the States can’t shield private actors from antitrust liability. (Cf. Northern Securities Co. v. United States from 1904.) So all sectoral legislation that does not create an outright statutory monopoly or cartel winds up somewhere in the middle.
This can produce some pretty unsatisfying results in either direction. Earlier this year, in FTC v. Phoebe Putney Health System, the Court held unanimously (Justice Sotomayor writing for the Court) that some hospital shenanigans in rural Georgia were not shielded by Georgia’s health care legislation, because the naughtiness in question was not “clearly envisaged” by the legislator. This is odd because, as the Court summarises it,
the Law authorizes each county and municipality, and certain combinations of counties or municipalities, to create “a public body corporate and politic” called a “hospital authority.” §§31–7–72(a), (d).Hospital authorities are governed by 5- to 9-member boards that are appointed by the governing body of the county or municipality in their area of operation. §31–7–72(a).
Under the Law, a hospital authority “exercise[s] publicand essential governmental functions” and is delegated “all the powers necessary or convenient to carry out and effectuate” the Law’s purposes. §31–7–75. Giving morecontent to that general delegation, the Law enumerates 27powers conferred upon hospital authorities, including the power “[t]o acquire by purchase, lease, or otherwise and tooperate projects,” §31–7–75(4), which are defined to include hospitals and other public health facilities, §31–7–71(5); “[t]o construct, reconstruct, improve, alter, andrepair projects,” §31–7–75(5); “[t]o lease . . . for operationby others any project” provided certain conditions are satisfied, §31–7–75(7); and “[t]o establish rates and chargesfor the services and use of the facilities of the authority,”§31–7–75(10).
I find it difficult to see how that does not include the right to authorise a private actor to monopolise hospital services in a given county. In that regard, the standard applied by the 11th Circuit, who asked whether the hospital authority’s actions were “foreseeable” in the sense of “reasonably anticipated” by the legislator, makes more sense to me:
[I]t is not necessary, the court reasoned, for an anticompetitive effect to “be ‘one that ordinarily occurs, routinely occurs, or is inherently likely to occur as a result of the empowering legislation.’” (…) [Applying that standard], the court reasoned that the Georgia Legislature must have anticipated that the grant of power to hospital authorities to acquire and lease projects would produce anticompetitive effects because “[f]oreseeably, acquisitions could consolidate ownership of competing hospitals, eliminating competition between them.”
If you are going to protect the States’ right to organise regulated sectors in whatever way they please, you have to give a fair reading to their statutes. By applying the “presumption against state immunity” (p. 7) as drastically as it did, without properly considering what the Georgia legislature most likely intended, the Supreme Court made the state immunity doctrine a sham.
Even more recently, the 4th Circuit backed the FTC’s decision against the North Carolina State Board of Dental Examiners, who had set out to prevent non-dentists from offering teeth-whitening services. Here, the basic legal approach is eminently sensible; being a private body consisting predominantly of dentists, the state board is asked to show that their behaviour was “actively supervised by the State itself”. (Cf. the 1980 Supreme Court ruling of California Retail Liquor Dealers Association v. Midcal Aluminum.) Since it wasn’t, the state board was nailed to the wall by the FTC and the court.
But again I’m not completely convinced by how it goes on. The problem is what the 4th circuit and the FTC are doing with regular competition law. After all, just because the state immunity doctrine of Parker does not apply, does not mean that the state board is automatically at fault. You still have to tick all the usual competition law boxes. And the box that trips them up, I think, is the one that we Europeans would call “justification”, and which in the US goes to the question of whether the “restraint of trade” in question is “unreasonable”, I requirement that is read into the Sherman Act in order to keep it from invalidating every contract ever (15 USC 1).
In the US, in order to decide that question, the courts first consider whether a “per se rule” applies – or as it is called now: a quick-look test – or whether the case should be treated under the rule of reason. Quoting the 1984 Supreme Court case of NCAA v. Board of Regents of the University of Oklahoma, the 4th Circuit explained:
The rule of reason applies “if the reasonableness of a restraint cannot be determined without a thorough analysis of its net effects on competition in the relevant market.”
The court does some hand waiving to argue that the distinction doesn’t matter much, before observing that
the Supreme Court has cautioned that we should be hesitant to quickly condemn the actions of professional organizations because “certain practices by members of a learned profession might survive scrutiny . . . even though they would be viewed as a violation of the Sherman Act in another context.” Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 686 (1978).
So here’s my question: Where is this scrutiny? Immediately after this observation, the 4th Circuit quotes some more language that says the same, and then it “conclude[s] that substantial evidence supports the FTC’s factual findings regarding the economic effects of the Board’s actions and that those findings support the conclusion that the Board’s behavior violates § 1” (p. 31) and tells the state board to get the North Carolina state legislature to pass some legislation if there are legitimate public health concerns about non-dentists providing teeth whitening services (p. 32).
This seems wrong to me. Surely it should be lawful for a group of companies to form a cartel if the alternative is to allow a market failure – in this case a threat to public health – to persist? If the public health threat truly exists, the net economic answer would be that the restraint of trade is the lesser of two evils, meaning that a rule of reason approach would conclude that there is no violation of the competition laws. And so it follows that the state board should be allowed to prove that this public health threat is real. I appreciate that the court’s role is to “uphold [the FTC’s] factual findings if supported by substantial evidence” (p. 26), but then at the very least I’d like for the court to say what that substantial evidence is. Instead, all I have is this, where, in its final opinion, we find the FTC categorically rejecting such a justification without even examining the facts. Instead, it quotes the Professional Engineers case already quoted above by the 4th circuit, where the Supreme Court said:
The Sherman Act reflects a legislative judgment that ultimately competition will produce not only lower prices, but also better goods and services. (…) The assumption that competition is the best method of allocating resources in a free market recognizes that all elements of a bargain—quality, service, safety, and durability—and not just the immediate cost, are favorably affected by the free opportunity to select among alternative offers. (…) The fact that engineers are often involved in large-scale projects significantly affecting the public safety does not alter our analysis. Exceptions to the Sherman Act for potentially dangerous goods and services would be tantamount to a repeal of the statute. In our complex economy, the number of items that may cause serious harm is almost endless.
Yeah, that’s just wrong. If you want to rule out self-regulation in favour of bureaucratic micro-management, that’s fine, but then you don’t get to call your approach a “rule of reason”.
Posted by martinned at Thursday, July 04, 2013 0 comments
Labels: Competition Law, EU, Multilevel Governance, Subsidiarity, UK, US
Posted by martinned at Tuesday, July 02, 2013 0 comments
The Grand Chamber (Judge Juhász) reaffirmed that in competition law the actual facts on the ground are all that matter, regardless of anyone’s intentions. In this case, both the lawyers and the Austrian Kartellgericht said that the cartel in question was permitted, but that does not prevent the Austrian authorities from fining them anyway 15 years later. Bundeswettbewerbsbehörde and Bundeskartellanwalt v. Schenker et al. Cf. European Law Blog
The Grand Chamber (Judge Ó Caoimh) also gave the Czech Republic a € 250.000 lump sum fine for failure to comply with an – otherwise boring – infringement judgment. Commission v. Czech Republic
Guillermo Cañas’s attempt to marshal the forces of EU competition law against the world anti-doping agency WADA and against the ATP failed before the Court of Justice (Judge Bay Larsen) as it had before the Commission and the General Court. The problem continues to be that the applicant, having retired, no longer has an interest in fact in the dispute. Cañas v. Commission (FR)
In Impacto Azul Lda v. BPSA 9 et al., the Court (Judge Lõhmus) held that art. 49 TFEU allows national legislation that “excludes the application of the principle of the joint and several liability of parent companies vis-à-vis the creditors of their subsidiaries to parent companies having their seat in the territory of another Member State”, because the parent can easily contract around this.
The Court (Judge Rosas) agreed with AG Mengozzi that Luxembourg had discriminated impermissibly against foreign students in its system for financial aid. However, the way it got there was quite different. Giersch et al. v. Luxembourg Cf. Eutopia Law blog
Now that all the easy cases on mutual recognition of professional qualifications are dealt with, it’s time to move on to more difficult situations. In Nasiopoulos v. Ipourgos Igias kai Pronoias we have a German-trained Greek medical masseur-hydrotherapist (‘Masseur und medizinischer Bademeister’) who wants to work as a physiotherapist in Greece. While the Court (Judge Levits) agrees that that is a bit of a stretch, it thinks he should at least be allowed to practice that part of the profession that he is actually qualified for.
In the joined cases VG Wort v. Kyocera et al. and Fujitsu and HP v. VG Wort, the Court (Judge Malenovský) gave some guidance on art. 5(2)(b) and 6 of Directive 2001/29, the copyrights directive. As it turns out, printer manufacturers can be sued for some of the total “fair compensation” owed for all those naughty internet users printing off books in their attics, but not all of it.
The Court (Judge Jarašiūnas) signed off on a Maltese excise duty on mobile telephone use, concluding that neither art. 12 nor art. 13 of the Authorisation Directive applied to such a “consumption tax”. Vodafone Malta et al. v. Avukat Ġenerali et al.
AG Jääskinen, quoting pre-Supreme Court Louis Brandeis, argued that there is no general “right to be forgotten” under existing EU data protection law. The defendants wanted an allegedly incorrect search result deleted from Google. Google v. Agencia Española de Protección de Datos (AEPD) and Mario Costeja González Cf. UK Human Rights Blog and European Law Blog
AG Mengozzi has a state aid case in national court, where Deutsche Lufthansa complained about alleged state aid from Frankfurt-Hahn airport to Ryanair. As a result of this litigation, the Commission decided to get interested, with the result that the standstill clause of art. 108(3) TFEU came into effect. Given that the German court doesn’t necessarily agree that there is unlawful state aid here – the case was initially rejected by the Landgericht – the question is what the distribution of responsibilities and obligations is between the Commission, the national court and, potentially, the ECJ. Deutsche Lufthansa v. Flughafen Frankfurt-Hahn (NL, DE, FR)
For whatever reason, they let AG Kokott near one of those classic legal basis & common commercial policy cases. (Cf. my LL.M. thesis, long ago, here.) The case is about this Council of Europe convention. The Commission wants the EU to ratify it based on the normal rules of the common commercial policy under art. 207 TFEU, while the Council prefers a mixed agreement based on art. 114 TFEU. Curiously, the AG argues – correctly – that art. 3(2) TFEU codifies the ERTA doctrine, but then uses that to conclude that the EU’s competence in this area is not only exclusive, but also based on art. 207 TFEU. Commission v. Council
The General Court rejected two action for annulment in the Aluminium Fluoride cartel case. Most creatively, one of the applicants – ICF from Tunisia – tried to plead art. 36 of the Euro-Mediterranean agreement between the EU and Tunisia from 1998 as a grounds of invalidity. Unsurprisingly, the Court did not go for that one. ICF v. Commission (FR) and Fluorsid SpA and Minmet Financing v. Commission
Posted by martinned at Thursday, June 27, 2013 0 comments