When is Price Discrimination Anticompetitive? Case C-525/16 MEO v Portuguese Authority ECLI:EU:C:2018:2700

This post reviews the recent MEO decision of the CJEU (Case C-525/16 MEO v Portuguese Authority ECLI:EU:C:2018:2700, available at http://curia.europa.eu/juris/document/document.jsf?text=&docid=201264&pageIndex=0&doclang=en&mode=lst&dir=&occ=first&part=1&cid=826760). You will excuse me for the length of the analysis below, but I do believe this is an important discussion that merits attention. Facts of the Case GDA is the sole body responsible for the collective management of the rights of artists and performers in Portugal. Among the undertakings which pay rights to GDA are television channels such as MEO. Between 2010 and 2013, GDA charged different tariffs to different television channels. The tariffs charged by GDA to MEO were the result of an arbitration decision, which was the required mechanism to deal with failures to arrive at an agreement when rights are negotiated. In 2014, MEO lodged a complaint with the Portuguese national competition authority (NCA) alleging that GDA had abused its dominant position by: (i) charging excessive prices; (ii) applying to MEO different terms and conditions from those which it…

Chris Fonteijn, Ilan Akker and Wolf Sauter  ‘Reconciling competition and IP law: the case of patented pharmaceuticals and dominance abuse’,  in Gabriella Muscolo and Mariaanna Tavassi (eds.) The Interplay between Competition Law and Intellectual Property – An international perspective (Kluwer Law International, Forthcoming)

The paper – a draft of which can be found here – discusses how competition law may be applied with regard to abuses of dominance involving patented pharmaceuticals. It argues that the pay for delay cases in both the US and the EU are only the first step in exploring the application of competition law to such products. The paper then examines abuses of the patent system with the aim to exclude competitors and, second, whether excessive prices can be sanctioned as regards IP-protected pharmaceutical products. The paper is structured as follows: Section II investigates the interaction between IP and competition law. This has been covered extensively in previous emails, so I will merely summarise the basic points. Inasmuch as IP law creates temporary monopolies, this would seem to create a tension with competition law, but this tension is merely apparent. Both competition and IP law ultimately seek to promote consumer welfare, and the protection granted by IP law does not amount…

Elisabetta Maria Lanza and Paola Roberta Sfasciotti ‘Excessive Price Abuses: The Italian Aspen Case’ (2018) Journal of European Competition Law & Practice 9(6) 382

This paper – which can be found here – is of particular interest because the authors were the case handlers in this case, which is one of the (very) few recent cases on excessive pricing. The paper begins with a discussion of why enforcement against excessive pricing is frowned upon by competition agencies (and absolutely discarded in the US). First, there may be a negative impact on investment caused by limits to a company’s freedom to set prices, which may limit its ability to recover capital invested in research. Second, in normal conditions regulatory intervention is unnecessary: the market will self-correct, because excessive prices will stimulate the entry of competitors into the market. Third, as a rule competition authorities seek to avoid having to decide what is the ‘correct’ or ‘fair’ price, since this would require a judgement which is closer to the competences of a sectoral regulator. Fourth, the analysis of situations of excessive pricing faces significant difficulties in…

Ioana Marinescu and Herbert Hovenkamp ‘Anticompetitive Mergers in Labour Markets’ (forthcoming) Indiana Law Journal (2018)

The paper – which can be found here – looks at mergers that facilitate anticompetitive wage and salary suppression from an antitrust perspective. It also looks at other potentially anticompetitive practice in labour markets, so the paper’s title is misleading. The paper’s fundamental argument is that that antitrust law is under-enforced as regards mergers affecting employment markets, and that this is important for several reasons. First, the share of the gross domestic product (GDP) going to labour has been declining at an alarming rate, and this seems to be correlated with an increase in market concentration. Second, US antitrust law does not condemn unilateral price setting by dominant firms – including the setting of wages. A second best solution to the problem of suppressed wages can therefore be found in merger law, which can interdict wage-suppressing mergers before they occur. Third, antitrust law is properly directed at all output reducing practices, and there is certainly no principled reason for excluding…

Suresh Naidu, Eric A. Posner, and E. Glen Weyl ‘Antitrust Remedies for Labor Market Power’ Harvard Law Review (forthcoming)

The paper – which can be found here –  criticises the historic imbalance between product and labour market antitrust enforcement, which has no basis in economic theory: from an economic standpoint, the dangers to public welfare posed by product and labour market power are exactly the same. It is argued that antitrust agencies should take more seriously the danger that mergers may lead to labour market power as well as product market power. The paper is organised as follows: The introduction tries to explain why antitrust has traditionally ignored labour markets. Four explanations are advanced: (i) while economic theory treats product and labour markets similarly, legal theory has placed more emphasis on product markets as a result of a focus on consumer welfare; (ii) it was assumed that labour markets are reasonably competitive, and that labour market power was not an important social problem; (iii) the traditional legal approach to protecting workers, which took place “outside” antitrust law, may have…

Thibault Schrepel ‘The “Enhanced No Economic Sense’ Test: Experimenting with Predatory Innovation’ (forthcoming on the NYU Journal of Intellectual Property and Entertainment Law).

The paper – which can be downloaded here – seeks to deal with a significant challenge for competition law, which has become more prominent with the proliferation of high tech markets: several practices, and particularly non-price strategies, fall outside the scope of competition law because mechanisms for assessing their legality are not adequate. The author’s ambition is to contribute to the literature by advancing a new test, called the “enhanced no economic sense” test, to be applied to non-price strategies. The paper proceeds in three steps: The first part presents the enhanced no-economic sense test. This test is based on the simple idea that a practice should be regarded as anti-competitive if it only makes sense from an economic point of view because of its tendency to eliminate or to restrict competition. Unlike the ‘profit sacrifice test’, the no-economic sense test allows for the condemnation of practices that do not lead to the infringer. The test follows four steps: Step…

Nicolas Petit ‘Technology Giants, the Moligopoly Hypothesis and Holistic Competition’

The gist of the argument in this paper – which can be found here – is intriguing, and plausible: tech giants do not compete within itemized relevant markets where they are monopolists. Instead, they are conglomerates that compete three-dimensionally as oligopolists across industries, which is what the author meant by a moligopoly. This blindness of antitrust to competition across markets is likely to lead to mistakes, and should be rectified. The paper is structured as follows: Section I sets out the moligopoly hypothesis and tests it by reference to empirical data. The author begins by reviewing how the competition law literature’s default position is to characterise the tech giants as dominant firms. Competition law focuses on one industry segment – i.e. a “relevant market” – where the investigated tech giants often enjoy unassailable clout, and where substitution by actual or potential rivals is unlikely. For example, Google’s competitive stronghold is search, Apple’s core is its unique ecosystem, Facebook’s moat is…

Ioannis Lianos & Pierre Regibeau “Vexatious”/”Sham” Litigation: When can it Arise and How can it be Reduced?’ (2017) Antitrust Bulletin 62(4) 643-689

It is possible that companies may, through regulatory and litigation processes, be able to exclude or marginalize their competitors from the market and therefore charge higher prices, limit output, maintain the status quo price, or diminish innovation. But while these strategies may offer a cheap mechanism for non-price predation, litigation and regulatory process have been set up to protect public goods regardless of the risk that their use may negatively impact competition. Furthermore: ‘assessing on a case-by-case basis the welfare effects of each use of the regulatory and litigation process through some form of sophisticated cost benefit analysis would be too burdensome and would generate too much uncertainty, chilling the legitimate use of such governmental processes and thus frustrating their aims. For this reason, in practice, the use of the regulatory and/or litigation process stays presumptively outside the scope of competition law, through the operation of some form of antitrust immunity, in both the U.S. and in Europe, this being…

Angela Daly ‘Beyond Hipster Antitrust:  A Critical Perspective on the European Commission’s Google Decision’ (2017) European Competition and Regulation Law Review 1(3) 188

The argument of this article – which can be found here – is straightforward: “competition law as it stands is not well-equipped to address (all of) the problems a very large concentration of private power such as Google poses to Internet users. However, unlike the ‘antitrust hipsters’, it is argued that reform to competition law is insufficient – other areas of law and regulation may be more appropriately employed to ensure user autonomy in these circumstances.” The paper begins with an extremely cursory analysis of the Commission’s decision in the Google case. Since the decision is not yet published, the paper relies on comments from the Competition Commissioner that there was an abuse because Google: “promoted its own comparison shopping service in its generic search results, and demoted the results of its competitors, with the effect that competitors were ‘denied… the chance to compete on the merits and to innovate’ and European consumers were ‘denied… a genuine choice of services…

Michael A. Carrier ‘Sharing, Samples, and Generics: An Antitrust Framework’ (2017) Cornell Law Review 103(1) 1

This paper – which you can find here – looks at a specific type of obstacle to generic entry: refusals by originators to share samples of branded medicines. As is often the case in this sector, this practice takes advantage of the existing regulatory scheme, in this case in the US. This strategy involves risk-management programs known as Risk Evaluation and Mitigation Strategies (“REMS”). Pursuant to legislation, REMS are required when a drug’s risks (such as death or injury) outweigh its rewards. According to the author, brands have used this regime, intended to bring drugs to the market, to block generic competition. The paper is structured as follows: Part I provides a background on REMS, offering a history and overview of these programs before examining the concerns they raise regarding blocking generic entry. The FDA has defined REMS as “required risk management plans that use risk minimization strategies beyond the professional labeling to ensure that the benefits of certain prescription drugs outweigh…