Saturday, 22 December 2007
Thursday, 20 December 2007
Lawyers and economists did discuss together competition and regulatory issues and, after the unavoidable skirmishes and an invitation to economists to "take responsibility for decisions", the dialogue was fruitful for all.
The topics discussed varied a lot, from mergers between not-for-profit firms (to be treated more leniently by regulators?) to private enforcement of competition law (impossible to find an agreement) to the long lost soul of article 82 (found in the Archives of the 1950s negotiations around the text of the Treaty of Rome, by a researcher from the University of East Anglia).
Of course, our work on Net Neutrality was presented too.
It is not possible to report here on all papers presented there. Maybe in future posts, the authors will like to give some details.
In the meantime, another TILEC event has taken place, i.e. the second roundtable of the "Economic Impact Group" of the CoPECL network. The aim of the group is the economic analysis of the forthcoming "European Contract Law", currently in the making. The meeting was held in Barcelona and scholars from a number of Universities in Europe were present to discuss whether the rules chosen by comparative lawyers to constitute "European" contract law are sound according to economic analysis.
A website with more info will see the light very soon.
To all: Happy Christmas and a great 2008!
Wednesday, 5 December 2007
My idea is to blog from there, whenever interesting points arise during the discussion. Let's see if and how it works out.
Monday, 29 October 2007
A few years later, the European Commission finds that Microsoft infringed article 82, the CFI upholds the decision and some people try to recycle that slogan once again.
But something in the air has changed.
Immediately after the judgment, not less than the Economist ("Brussels rules OK") depicted European regulators as the ones playing a role in the global economy, while Uncle Sam stays at the window.
Now, discussing the Intel issue, also the NYT has contrasted the dismissive behaviour of the FTC towards big companies with the actions of European, Japanese and Korean authorities.
Is it not time for a new slogan?
Friday, 5 October 2007
Meanwhile, we managed to present it again at the IvIR (Instituut voor InformatieRecht) in Amsterdam and at the Conference of the Canadian Association of Law and Economics in Toronto.
Monday, 1 October 2007
For information and the registration procedure, please see http://www.tilburguniversity.nl/tilec/events/folder2007.pdf .
Friday, 28 September 2007
Topics discussed ranged from predatory pricing to market manipulation to competition of competition laws.
Besides the academic value of the presentations, some interesting soundbites:
I could survive sweeping generalisation with an audience of only economists.
Let's assume away the problem.
Unmodelled things? Irrelevant.
If you can't make your point in one hour, you cannot make it in one hour and half.
Thursday, 20 September 2007
Friday, 14 September 2007
The Court was split 5-4, along the (by now) familiar ideological line drawn by the recent appointment of the two new judges.
Our group, too, was split on the evaluation of the judgment. To mention just a few points that came up in the discussion: (*)
1. Civil law uneasiness: some in the group expressed their uneasiness with such an important decision being taken with almost half of the Court openly against it. McCormick was quoted: "The practice of keeping judicial argument over right and wrong behind closed doors [exists and is defended] so that the courts eventual judgment shall contribute rather to faith in the relative certainty of the law than to the revelation of its relative uncertainty."
2. On the substance of the case: economic theory is not conclusive on the welfare effects of RPM. Economic evidence is tiny and only a few empirical studies have been conducted, with divergent results. There is however a very clear risk of RPM: it can profitably be used to facilitate and reinforce horizontal cartels. All this seems to support the position that an outright per se illegality is inappropriate.
3. The new rule of reason approach is likely to produce very high costs for companies and for the legal system. RPM is likely to be often anticompetitive, hence for those cases the new rule is a net increase in the judicial costs. Moreover, the often prohibitive costs of lawsuits may discourage complaints against anticompetitive RPM clauses. In other words, while the risk of false positives is drastically reduced, the risk of false negatives seems now significant.
4. There was a certain consensus in the group that a statutory (as opposed to judicial) change from per se to rule of reason, could have provided a more satisfactory (and perhaps cost-saving) solution. A statute could have lifted the ban while at the same time filling the "void" with a (rebuttable) presumption of illegality above a certain market share, safe harbours for firms without market power, a transitory period to adjust to the new approach. A similar outcome can be achieved also by court decisions, but, probably, at much higher cost.
(*) This is just an informal summary and is not meant to represent the official views of the group
Friday, 6 July 2007
Monday, 30 April 2007
Since a couple of years already, big names of the Telecom and Cyber legal world have been kept busy with the issue whether network operators should be allowed to discriminate, one way or another, among packets of data. An interesting example of the debate is the blog-style echange of opinions between a supporter and an opponent of net neutrality regulation. A group of heavyweight economists has also intervened, by signing a brief position paper opposing regulation on the matter.
Should intelligence (hence control) shift from the edges of the network to its core? Who should build the infrastructure for next-generation Internet? What will the Internet of the future look like: more as a global public network or as a bunch of privately-owned ones more or less interconnected with each other?
Leaving aside those fundamental questions for a moment, we might want to consider also a few more down to earth issues: how to make sure that market power over a bottleneck facility does not lead to abuses? How should regulators intervene (if at all) to make sure that innovation is not stifled? How to prevent that access to valuable content or applications gets blocked because of commercial (or other) reasons? Is it possible to offer prioritised services to real-time applications (online games) without making access to non-real-time ones a painful experience?
After the TILEC report (pdf) of last year on the economics of net neutrality, and after Milton Mueller's visit in February, a TILEC trio (Pierre Larouche, Ilse vd Haar and myself) is currently working on the possible European answer to some of the questions above: whether net neutrality is an actual issue to begin with, whether and in what the discussion differs from the American one, what tools already exist to help tackling the identified problems.
In a short while, we should be able to post our paper here and on SSRN.
Tuesday, 27 March 2007
Shortly after the decision of the European Court of Justice in Placanica, the EFTA Court gave its decision in Case E-1/06 on March 14th. In considering the legality of the Norwegian legislation in question, the EFTA Court interprets particular aspects of the case-law of the ECJ in considerable detail.
The case arose out challenges to the Norwegian Act No 90 of 29 August 2003 Relating to Amendments to the Gaming and Lottery Legislation which sought to grant an exclusive right for the operation of gaming machines to the state-owned gambling operator, Norsk Tipping. Gaming machines in Norway have been subject to a licensing regime whereby they are operated by private operators on behalf of humanitarian and socially beneficial organisations, whom receive a proportion of the revenue. Since all parties agreed that the legislation amounted to a restriction to the free movement of services and the freedom of establishment, the case concentrates upon the justifications used to uphold the restrictive measures.
Among the objectives of the legislation was that of limiting the reduction in revenue which would result from the envisaged reduction in the number of gambling machines. Having recalled standing case-law to the effect that the financing of good causes cannot amount to an objective justification to a restriction on the free movement of services (para. 36), the Court noted that the introduction of the monopoly was primarily for reducing the risk of gambling addiction (para. 37). An exclusive right system would allow for this while limiting the consequent reduction in revenues. Since this limitation exercise was an ancillary objective, the overall legitimacy of the legislation remained intact (para. 40) as the restriction was justifiable on the grounds of reducing addiction and crime.
In considering whether the restrictions were consistent and suitable for the purpose (para. 42-46) the Court highlighted the need to consider the particular characteristics of the form of gambling in question, and in light of the legislation in question, the degree of addictiveness. Given the prevalence of gambling addiction in Norway which results from slot machines the Court felt that this form of gambling was not comparable with other forms offered by Norsk Tipping. Consequently, the marketing and development of other forms of gambling by the state body was deemed irrelevant for the assessment of this gambling machine specific legislation. The ECJ has yet to make a distinction in its case-law between the differing characteristics of different forms of gambling, and how this could affect the consistency, and thus proportionality of restrictions.
In assessing the necessity of the restriction the Court considered the test to be whether the introduction of the monopoly would lead to ‘a more effective achievement of the aims set than other less restrictive measures.’ (para. 49). However this part of the proportionality test relates to whether a less restrictive but equally effective provision could be used to achieve the legislative objective. By assessing this on the basis of a more effective achievement of the objectives, the Court would appear to alter the criterion by which the national measure is to be assessed. Arguably, the assessment used rests upon the effectiveness of the measure and not its restrictiveness and nor that of any alternatives.
Wednesday, 21 March 2007
On March 6th the Grand Chamber of the European Court of Justice gave its judgment in the Placanica case (Joined Cases C-338/04, C-359/04 and C-360/04). The gambling (regulation) community had set its sights upon this case as a means of offering some clarity to the ECJ’s earlier case-law. Given that this case will prove decisive for the approach Brussels will take regarding this sector, state monopolists and private operators alike have been waiting with baited breathe for this judgment.
Since this is the first posting on the TILEC Blog concerning gambling, it is worth noting the following highlights from the ECJ’s earlier gambling related case-law. In Schindler (Case C-275/92) the ECJ recognized gambling constitutes a service, thus falling under the scope of Article 49EC (paras. 25-29). While discussing the possible justifications for restrictions to the freedom to provide services the ECJ noted that lotteries have a ‘peculiar nature’, which is based upon:
- Moral, religious and cultural aspects of lotteries;
- The high risk of crime and fraud which accompanies lotteries;
- Damaging individual and social consequences which may arise from the fact that lotteries amount to an incitement to spend;
- Lotteries contribute to the financing of ‘benevolent or public interest activities’.
With regards to the last factor the ECJ noted that while this could not amount to an objective justification to support a restriction it was ‘not without relevance’. Nevertheless these four factors provided Member States with a considerable degree of latitude to restrict gambling activities as they deemed fit (paras. 59-61).
The freedom to provide gambling services reappeared in Läärä (Case C-124/97) where the ECJ concluded that the assessment of particular national legislation can only be made by reference to the objectives of the provisions in question (para. 36). Different ‘systems of protection’ adopted by other Member States have no role to play in such assessments; which would appear to contradict more general case-law relating to the avoidance of double regulatory burdens. Two cases Zenatti (Case C-67/98) and Anomar (Case C-6/01) saw limited developments in the ECJ’s approach; however the most important developments, prior to Placanica, appeared in Gambelli (Case C-243/01) and Lindman (Case C-42/02).
For two principal reasons Gambelli is important. Firstly, by referring to the suitability of restrictions on the supply of gambling, the ECJ noted that such restrictions must be suitable for achieving the legislative aim. Any restrictive measures therefore had to be ‘consistent and systematic’ (para. 67) with the aim. Thus public order concerns could not enable Member States to maintain restrictions on the supply of gambling if at the same time state monopolies encouraged residents to gamble. Secondly, the ECJ recognised the importance of controls and supervision which occur in the supplier’s home Member State and required the authorities in the destination Member State to take these into consideration (para. 73).
Finally, the decision in Lindman gains its significance from the fact that the ECJ raised the importance of proving causal relationships between the concern which Member States sought to guard against and the actual dangers which their residents face (para. 26). The extent to which this amounts to an evidentiary burden is unclear, but it serves to steer Member States away from relying upon very abstract terms, such as ‘crime and fraud’, without substantiating such claims.
With all spectrums of the gambling regulation debate claiming that the Gambelli case supported their view, that of Placanica diminishes the margin of discretion which Member States enjoy in regulating gambling. Placanica does not sow the seeds for the demise of state monopolies, nor does it require the liberalisation, deregulation or harmonization of national gambling markets. However, it does provide for a level playing field for national and non-national operators where competition for the market is allowed. Concurrently Member States are required to be consistent in the execution regulatory policies if they wish to bar service providers established in other Member States from accessing their markets. The remainder of this entry will provide an overview as to how Placanica achieves this.
Having recalled its earlier (abovementioned) case-law including the fact that Member States are free to establish the objectives of their gambling policies and the level of protection sought, the ECJ considered the nature of the Italian licensing regime which was in place. With regard to licensing gambling providers, the ECJ stated that the fact that licenses were limited in number was in itself insufficient to justify a restriction to the freedom of establishment and the free movement of services (para. 51). The ECJ then explicitly separated the objective of reducing the number of gambling opportunities from that of channeling gambling into a controlled environment away from crime and fraud (para. 52.). Should the first objective have been the sole objective then it would be inconsistent for the state to allow gambling opportunities to increase. However, the objectives of the Italian legislation were to eradicate crime and fraud, and thus a policy of controlled expansion was deemed permissible. Such controlled expansion allowed for advertising, an extensive range of games and the use of new distribution methods, even where restrictions were in place upon the cross-border supply of gambling services (paras. 52-55). Perhaps as a reflection of Lindman the ECJ notes the Italian government’s evidence which portrays the significant size of the illegal gambling market in Italy. A larger illegal market could thus allow Member States more leeway in expanding state offerings of gambling services while restricting the cross-border provision of such services.
The ECJ then considered the tender procedures by which the limited number of licenses was awarded. In this regard it was found that by imposing a blanket exclusion on operators who are quoted on regulated markets in other Member States the Italian legislation was disproportionate. Such an arbitrary exclusion went beyond what was necessary to secure that this sector is free of crime and fraud in Italy (para. 62). This exclusion, which arose from shareholder transparency requirements amounted to an infringement of Articles 43 and 49 EC. This bodes well for some degree of recognition of home state control of gambling providers and the avoidance, or at least the reduction, of double regulatory burdens. Yet the degree to which Member States open themselves up to this depends upon the objectives of their policies, and the degree to which they seek to uphold such protection.
Will Placanica fuel for European Commissioner McCreevy’s drive to ensure a level playing field for all gambling service providers? My money is on that it will, and that the regulation of gambling will remain a burning issue for sometime to come.
Monday, 5 March 2007
Basing his reasoning on the authority of Proust (not a ECJ precedent, but Marcel Proust himself), the Advocate General has concluded that there is no direct effect. Therefore, absent implementation, the Czech Authority was entitled to impose interconnection obligations without following the procedure set out in the framework (in particular, market definition and assessment).
Below, the resolutive quote:
"En réalité, le seul véritable voyage, ce ne serait pas d’aller vers de nouveaux paysages, mais d’avoir d’autres yeux, de voir l’univers avec les yeux d’un autre".
Thursday, 1 March 2007
I have two quick comments.
The first is that, until now, only very few TLDs have been created (except those representing countries) and they have not been particularly succesful with customers, who continue to register their websites under .com and/or their national TLD. I am thus wondering whether an additional restriction is likely to have any significant impact on this situation in practice. Moreover, a controversial TLD such as .xxx has already been vetoed by governments without any provision on public policy being in place. Yet, I agree that codifying a principle by virtue of which any government would be able to impose a world-wide veto (albeit only on TLD strings) is a rather scary perspective.
My second thought has to do with my old fixation for introducing more competition in the Domain Name System (DNS). More competition is beneficial for consumers and innovation, but it would help also in the case at hand. With more competing private sector operators and ICANN restricted to a technical role, it would become more difficult to impose such world-wide bans. Of course, any State would remain capable of blocking at its borders anything it does not like, but at least it will not be able to impose it on the whole of the Internet.