OFT offers financial incentives for information regarding cartel activity

29 February, 2008

The OFT has today announced a policy under which it will pay financial incentives of up to £100,000 in return for information which helps it to identify and take action against illegal cartels. Read more.

See also here.

Microsoft fined for 1.5 billion EUR tomorrow?

26 February, 2008

“Feb. 25 (Bloomberg) — European Union regulators may fine Microsoft Corp. for failing to comply with a 2004 antitrust order to charge “reasonable” fees for patent licenses on operating system software, three people familiar with the matter said.

The fine may be announced as soon as Feb. 27, said the people, who declined to be identified because the decision isn’t public. Microsoft said in a Jan. 24 U.S. regulatory filing that the penalty may be as much as 1.5 billion euros ($2.2 billion).” See more.

 It would be  miassive fine, but let’s wait until tomorrow.

European Parliament calling for an investigation of large supermarkets

20 February, 2008

Several members of the European Parliament called (1) “upon DG Competition to investigate the impacts that concentration of the EU supermarket sector is having on small businesses, suppliers, workers and consumers and, in particular, to assess any abuses of buying power which may follow from such concentration”. Moreover they requested  (2) “the Commission to propose appropriate measures, including regulation, to protect consumers, workers and producers from any abuse of dominant position or negative impacts identified in the course of this investigation”. See here.

Although the members of parliament (MEPs) recognised that not all of the Member States have legislation on large retailers, they asked for the above mentioned actions. Moreover they even got to worry that “squeezes on suppliers have negative knock-on effects on both quality of employment and environmental protection”.

Probably some of these concerns have a solid foundation supported by evidence, but the issue might get complicated. DG Competition is not like the Office of Fair Trading or the Hungarian NCA, the Gazdasági Versnyhivatal. DG Comp is not responsible for enforcing consumer protection legislation. So the first request above would have been better placed if it was addressed to either the European Commission  or to an other DG that might be more concerned about consumer protection instead of consumer welfare. Moreover regarding the first request, abusing buyer power seem to be a concern in EU competition law only if it is an abuse of a dominant position (that has a special meaning in competition law) or if it can somehow fit into the other provisions on competition.

Regarding the second request the core of the problem is the same, namely that it is hard to see on which relevant markets might large retailers be in a dominant position according to Article 82 (some special circumstances might come up and support maybe regional dominance somewhere).

And lastly, environment protection and quality of employment are legitimate concerns, but not under competition law (environment protection could have relevance, but only limited, but the case for employment protection is more weak).

Hungary does have a legislation on large retailers, the Act on Trade. Although the NCA was concerned and opposed the legislation at the time of adoption, but nevertheless it  became responsible for enforcing it. In principle the act prohibits the abuse of significant market power but that is not equated with a dominant position in the competition act. There is a procedure ongoing against TESCO under the Act on Trade for a suspected abuse of significant market power.

Change of business model by Microsoft

19 February, 2008

Earlier this year I wrote that a Hungarian leading figure of Microsoft told a smaller audience that Microsoft wanted to change its business model. (See here.)

26Econ.com writes the followings on the blog:

“Yesterday I went to a law and economics conference about intellectual property. It was co-sponsored by Microsoft, and one thing that surprised me was that two of the seven papers presented were about open source. I also found the attitude of the Microsoft people at the conference to be refreshing. They were open-minded and willing to discuss, without pushing their point of view too hard. Somehow I’d expected Microsoft to be less human. I was pleasantly surprised.” See here.

Things start to happen, it seems.

Recently on Global Competition Policy(GCP) – Pharma dawn raids, etc.

17 February, 2008
The EC’s Sector Inquiry on Pharmaceuticals

Since the entry into force of Regulation 1/2003 on May 1, 2004, the Commission has already launched four comprehensive sector inquiries on the basis of Article 17. Why have sector inquiries become so fashionable?

Comment on the EC’s Pharmaceutical Dawn Raids

That the EC has a keen interest in understanding the pharmaceutical industry’s competitive dynamics is hardly exceptional. But the way in which the inquiry commenced has left many wondering why the need for such extreme measures.

The EC’s Investigation into the Pharmaceutical Sector: Trouble Ahead at the IP/Competition Intersection?

The Commission’s sector-wide investigation moves competition law to the center of the generics debate and raises thorny issues on the relationship between the competition and IP rules.

The EC Sector Inquiry Regarding Pharmaceuticals: Some Thoughts from a U.S. Perspective

When a major competition authority such as the European Commission launches an inquiry into a sector of the economy with no suggestion of specific wrongdoing, it raises a couple of intriguing points.

Non-contractual liability of the European Community in competition matters: The aftermath of the CFI judgment of 11 July 2007 in Case T-351/03, Schneider v. Commission

Schneider III has made real a possibility which was only theoretical before: that the Commission can be held responsible for damages caused by its wrongful decisions in competition.

Leniency and vertical agreements

13 February, 2008

E-Competition at Concurrences writes: 

“The Hungarian Competition Authority invokes cartel rules and leniency policy with regard to an exclusive distribution agreement in the healthcare sector (Kortex/Olympus)

On 18 December 2007, the Hungarian Competition Authority (“GVH”) fined Kortex Mérnöki Iroda Kft. (“Kortex”), a company specialised in the construction of hospitals and the distribution of medical equipment, HUF 77m (approximately € 300,000) for concluding an anti-competitive agreement with Olympus Hungary Kft. (“Olympus Kft.”), the distributor of Olympus medical devices in Hungary. At the same time, the GVH exonerated Olympus Kft. from paying a fine under its leniency policy. The decision raised questions about the delimitation between horizontal and vertical agreements.” … For more click here.

Report by the House of Lords – Full unbundling supported

12 February, 2008

The Single Market: Wallflower or Dancing Partner? Inquiry into the European Commission’s Review of the Single Market

The report also examined unbundling in the energy sector.

A number of our witnesses supported the findings of the European Commission’s Energy Sector Inquiry. In particular, the Office of Gas and Electricity Markets (Ofgem) and Centrica drew attention to a range of significant problems, highlighted in the Inquiry, that were preventing effective competition emerging. These included: market concentration; collusion between incumbents to share markets; vertical integration; lack of access to infrastructure; lack of or delayed investment; and a lack of market transparency that is preventing new entrants from assessing the scope for profitable entry.

The Commission has proposed a 3rd package of energy legislation. A number of witnesses, including Ofgem, the former DTI and HM Treasury, support the need for further legislation, particularly to mandate ownership unbundling, as discussed in more detail below (paragraphs 86–89). However, the view was not shared by all. Some respondents cautioned against the enactment of new laws before reviewing, and ensuring compliance with, existing legislation.

With the exception of Gaz de France (Q 178), all respondents were in favour of a greater separation of transmission and supply interests. The majority favoured full ownership unbundling, including National Grid who have direct experience of both models in the UK. National Grid argue that the ownership unbundling method has delivered significant benefits in the UK in terms of levels of investment, removing network congestion, nondiscriminatory third party access, reliability and transparency. National Grid cautioned against promotion of the ISO model for which they point out there is limited precedent within gas markets.

Having considered the evidence, we are of the opinion that full ownership unbundling more satisfactorily removes the incentives for discriminatory and uncompetitive behaviour by the network operator. To deliver just some of the benefits of ownership unbundling, the ISO model requires a level of regulation and monitoring which simply is not in place in a number of Member States.”